Lucian Bebchuk and Robert Jackson are celebrating--as if it were good news--Hillary Clinton's endorsement of their proposed "SEC rulemaking that would require public companies to disclose their political spending to their shareholders." As usual, they fail to acknowledge the highly partisan nature of the proposed rule making, the reasons it is supported exclusively by Democrats (and a tiny handful of Wall Street RINOs), or the way the proposal would drag the SEC further into the cesspool of Washington politics. Why this persistent radio silence?
For a more rebuttal of Bebchuk and Jackson on the political issue, see Jim Copland's "Reply to Bebchuk and Jackson":
Professors Lucian Bebchuk and Robert Jackson argue that the Securities and Exchange Commission (SEC) should engage in rulemaking to consider rules mandating new corporate political-spending disclosures, but their rationale is inconsistent with the agency’s statutory purpose of protecting investors, improv- ing market efficiency, and facilitating capital formation. Corporations’ political expenditures are tiny in relation to corporate budgets and clearly immaterial, in and of themselves, to investors’ financial interests. Bebchuk and Jackson’s argu- ment that corporate political spending is more related to agency costs than to corporate leaders’ legitimate desire to ameliorate the potential adverse impacts of government action on businesses’ earnings, and that such agency costs could helpfully be reduced by further disclosures, is highly speculative. Instead, evi- dence strongly suggests that special-interest groups with viewpoints adverse to corporate interests have attempted to leverage existing disclosures to chill cor- porate political participation. Finally, shareholder proposals involving corpo- rate political spending and political-spending disclosure have been overwhelmingly sponsored by some of these same special-interest groups and universally rejected by shareholders at large, when opposed by boards of directors.
See also Bradley A. Smith and Dickerson, Allen, The Non-Expert Agency: Using the SEC to Regulate Partisan Politics (March 26, 2013). Forthcoming, 3 Harv. Bus. L. Rev. (2013). Available at SSRN: http://ssrn.com/abstract=2239987:
Abstract: Over the past 15 years advocates of campaign finance reform, frustrated by the structure and design of the Federal Election Commission, have attempted to offload the duties of campaign finance regulation to other federal agencies, most notably the Internal Revenue Service but also the Federal Communications Commission and, most recently, the Securities Exchange Commission.
Smith and Dickerson refrain from getting into the "theoretical merits" of the issue, but let's not give Bebchuk and Jackson a free ride on that subject. Instead we turn to Michael Guttentag's On Requiring Public Companies to Disclose Political Spending (May 16, 2014). Columbia Business Law Review No. 3, 593 (2014); Loyola-LA Legal Studies Paper No. 2014-25. Available at SSRN: http://ssrn.com/abstract=2438078:
Abstract: Mandatory disclosure is a central feature of securities regulation in the United States, yet there is little agreement regarding precisely how the Securities and Exchange Commission (“SEC”) should determine what public companies are required to disclose. The current debate about whether the SEC should require the disclosure of political spending by public companies is but one example of this lack of consensus.
Just to drive the point home: "the evidence does not support requiring public companies to disclose political spending."
In sum, this is a highly political rule making proposal that would have profound partisan implications. The people who support it intend to use it to defund the right. If the SEC were to adopt it, the Democrats should add Bebchuk and Jackson to their Hall of Fame.