Memo to SEC: Make corporations disclose political contributions!

Memo to SEC: Make corporations disclose political contributions!

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According to Justice Anthony Kennedy, who delivered the opinion for the Court, “With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters. Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are ‘in the pocket’ of so-called moneyed interests.”

The problem with this particular assumption, which economists call perfect information, is that corporations are, surprise surprise, not legally obligated to share information on political spending with their shareholders or the public. In August 2011, a group of high-profile law professors filed a petition with the Securities and Exchange Commission, calling on the agency to require public companies to disclose what corporate resources they spend on political activities because “most political spending remains opaque to investors in most publicly traded companies.”

Why do companies spend money on politics? The answer seems obvious: they want to generate profits. They are seeking advantages like reduced trade barriers, government contracts, easier regulatory inspections, and lower tax rates. For more on this point, see my colleague Tom Ferguson’s recent paper with Paul Jorgensen and Jie Chen, which reveals how “Too Big to Fail” Wall Street firms and telecom companies have captured the GOP and the Democrats, respectively. (As an aside, isn’t it odd that the same companies orchestrating the expansion of the surveillance state are so concerned about their own privacy?)