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
Date Written: February 1, 2019
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: Suggested Citation