The Untenable Case for Keeping Investors in the Dark

Harvard Business Law Review, Vol. 10, pp. 1-48, 2020

Harvard Law School John M. Olin Center Discussion Paper No. 1025

54 Pages Posted: 10 Nov 2018 Last revised: 18 May 2020

See all articles by Lucian A. Bebchuk

Lucian A. Bebchuk

Harvard Law School; European Corporate Governance Institute (ECGI); National Bureau of Economic Research (NBER)

Robert J. Jackson, Jr.

New York University School of Law

James David Nelson

University of Houston Law Center

Roberto Tallarita

Harvard Law School

Date Written: February 1, 2019

Abstract

This Article seeks to contribute to the heated debate on the disclosure of political spending by public companies. A rulemaking petition urging SEC rules requiring such disclosure has attracted over 1.2 million comments since its submission seven years ago, but the SEC has not yet made a decision on the petition. The petition has sparked a debate among academics, members of the investor and issuer communities, current and former SEC commissioners, and members of Congress. In the course of this debate, opponents of mandatory disclosure have put forward a wide range of objections to such SEC mandates. This Article provides a comprehensive and detailed analysis of these objections, and it shows that they fail to support an opposition to transparency in this area.

Among other things, we examine claims that disclosure of political spending would be counterproductive or at least unnecessary; that any beneficial provision of information would best be provided through voluntary disclosures of companies; and that the adoption of a disclosure rule by the SEC would violate the First Amendment or at least be institutionally inappropriate. We demonstrate that all of these objections do not provide, either individually or collectively, a good basis for opposing a disclosure rule. The case for keeping political spending under the radar of investors, we conclude, is untenable.

Keywords: political spending, SEC, disclosure, transparency

JEL Classification: G3, G34, G38, K2, K22

Suggested Citation

Bebchuk, Lucian A. and Jackson, Jr., Robert J. and Nelson, James David and Tallarita, Roberto, The Untenable Case for Keeping Investors in the Dark (February 1, 2019). Harvard Business Law Review, Vol. 10, pp. 1-48, 2020, Harvard Law School John M. Olin Center Discussion Paper No. 1025 , Available at SSRN: https://ssrn.com/abstract=3281791 or http://dx.doi.org/10.2139/ssrn.3281791

Lucian A. Bebchuk (Contact Author)

Harvard Law School ( email )

Cambridge, MA 02138
United States
617-495-3138 (Phone)
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HOME PAGE: http://www.law.harvard.edu/faculty/bebchuk/

European Corporate Governance Institute (ECGI) ( email )

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National Bureau of Economic Research (NBER) ( email )

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Robert J. Jackson, Jr.

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
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James David Nelson

University of Houston Law Center ( email )

4170 Martin Luther King Blvd.
Houston, TX 77004
United States

Roberto Tallarita

Harvard Law School ( email )

Griswold Hall
1525 Massachusetts Avenue
Cambridge, MA 02138
United States

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