Requires shareholders to approve corporate political expenditures

Title of bill

An act to amend the business corporation law, in relation to requiring shareholders to approve corporate political expenditures

Purpose or general idea of bill

To require shareholders to approve of corporate political expenditures and to create transparency between corporate political activities and shareholders.

Summary of specific provisions

Section 1 amends the business corporation law by adding a new section 631.

Paragraph (a) of this section defines political expenditure.

Paragraph (b) defines the method by which shareholders would approve political expenditures by corporations.

Paragraph (c) states that shareholder consideration of political expenditures shall occur at an annual or special meeting.

Paragraph (d) requires that corporations give notice of the political expenditure by electronic transmission to each shareholder that has requested notice within 48 hours after making such expenditure. Notice of the expenditure shall also be posted on the corporation's website.

Paragraph (e) states the annual reports must contain a list of all political expenditures made during the reporting period.

Paragraph (f) states that if a shareholder disagrees with a political expenditure he or she may receive from the corporation upon request a pro rata rebate in an amount of the percentage of the expenditure equal to the percentage of ownership the shareholder has in the corporation.

Paragraph (g) states that if a majority of a corporation's shares are owned by those who cannot take political positions, then the corporation shall not make political expenditures.

Section 2 states that this act shall take effect on the ninetieth day after it shall have become law.

Justification

In 2010 The United States Supreme Court opened the gates in allowing corporations and unions the ability to spend unlimited amounts of money on campaign ads and other political tools. By doing this, the Supreme Court gave special interest groups and lobbyists greater power, which only further undermines the influence of the average American voter.

In writing the majority ruling in the decision of Citizen United, Supreme Court Justice Anthony M. Kennedy invited the idea of creating a shareholder solution to the ruling of the court. This piece of shareholders to have a greater influence in how corporations conduct their political activities. Justice Kennedy stated that while the government cannot block corporate political spending, corporations shouldn't be able to block citizen-shareholders' money on political campaigns without their consent. By enabling shareholders to hold the authority on how corporations conduct political activities, the issue of the Citizens United ruling can be fixed to some extent, through "corporate democracy."

This legislation would create a sense of transparency between the actions of corporate managers and shareholders with regards to political activities, and give shareholders a greater role in how companies operate. At the same time, it would limit corporations, whose shares are owned by entities that cannot take political positions, from making political expenditures, essentially ensuring that these entities remain politically objective. Such entities consist of public pension funds, universities, etc. This legislation is modeled after part 3 of the "Shareholders United Act", introduced by Maryland State Senator Jamin B. Raskin.

Prior legislative history

New Bill.

Fiscal implications

To be determined.

Effective date

This act shall take effect on the ninetieth day after it shall become a law.