If there was an award for “political law issue of the year,” corporate political disclosure would be a front-runner.  About a year ago, the Securities & Exchange Commission (“SEC”) asked the Office of Information and Regulatory Affairs (“OIRA”)—housed within the Office of Management and Budget as part of the Executive Office of the President—to add to the semi-annual, federal-government-wide “Unified Agenda” a potential rule requiring public companies to disclose to shareholders the use of corporate resources for political activities.  The decision to include the issue on the Unified Agenda, a move heralded by reform groups, was a first step in formally proposing a rule requiring such disclosure.  The decision was prompted by a rulemaking petition from academics which ultimately garnered hundreds of thousands of favorable (though largely cookie-cutter) comments gathered by labor unions and members of the campaign finance reform community.

At the time, we cautioned that the placement of the proposal on the Unified Agenda did not obligate the agency to act, but simply preserved the SEC’s ability to take action if it ultimately chose.  We noted that the presence of statutorily-required rulemakings and a history of SEC Unified Agenda items that saw no further action raised doubts about whether the SEC would actually propose a rule.

The SEC’s decision last week to drop the issue of corporate political disclosure from its list of regulatory priorities for 2014 might therefore come as no surprise.  At least in the short-term, the SEC is unlikely to force public companies to disclose their political activities.

Corporations concerned about forced disclosure, however, should hesitate before breathing a sigh of relief.  The SEC could still decide to address the issue at some point.  Moreover, efforts to encourage the SEC to take action were merely one tactic in a multi-front campaign to compel corporations to disclose their political activities:

  • For years, activist shareholders have been (largely unsuccessfully) filing proposals that would require corporations to disclose this information.  Indeed, Institutional Shareholder Services, a prominent proxy advisory firm, recently amended its proxy voting policies to provide that it would now consider whether companies provide disclosure about trade associations when ISS evaluates how it will recommend that its clients vote with respect to political spending shareholder proposals.  This change is significant because it is an implicit endorsement of one of the key objectives of some activists in the space, namely, enhancing disclosure about participation in trade associations.  This change is likely to provide more impetus for public companies to include information about trade associations in their political spending disclosures.
  • Litigation has also been pursued.  Early this year, the New York State Common Retirement Fund (the public employees’ pension fund in New York State) sued Qualcomm in Delaware Chancery Court, seeking to compel production of Qualcomm’s internal books and records concerning political expenditures.  (Covington represented Qualcomm in that litigation, which was ultimately dismissed.)

With the SEC taking a pass (for now), activists will likely begin to increasingly focus their disclosure efforts on one or more of these other avenues.

Photo of Zachary G. Parks Zachary G. Parks

Zachary Parks advises corporations, trade associations, campaigns, and high-net worth individuals on their most important and challenging political law problems.

Chambers USA describes Zachary as “highly regarded by his clients in the political law arena,” noting that clients praised him as their “go-to outside…

Zachary Parks advises corporations, trade associations, campaigns, and high-net worth individuals on their most important and challenging political law problems.

Chambers USA describes Zachary as “highly regarded by his clients in the political law arena,” noting that clients praised him as their “go-to outside attorney for election law, campaign finance, pay-to-play and PAC issues.” Zachary is also a leading lawyer in the emerging corporate political disclosure field, regularly advising corporations on these issues.

Zachary’s expertise includes the Federal Election Campaign Act, the Lobbying Disclosure Act, the Ethics in Government Act, the Foreign Agents Registration Act, and the Securities and Exchange Commission’s pay-to-play rules. He has also helped clients comply with the election and political laws of all 50 states. Zachary also frequently leads political law due diligence for investment firms and corporations during mergers and acquisitions.

He routinely advises corporations and corporate executives on instituting political law compliance programs and conducts compliance training for senior corporate executives and lobbyists. He also has extensive experience conducting corporate internal investigations concerning campaign finance and lobbying law compliance and has defended his political law clients in investigations by the Federal Election Commission, the U.S. Department of Justice, Congressional committees, and in litigation.

Zachary is also the founder and chair of the J. Reuben Clark Law Society’s Political and Election Law Section.

Zachary also has extensive complex litigation experience, having litigated major environmental claims, class actions, and multi-district proceedings for financial institutions, corporations, and public entities.

From 2005 to 2006, Zachary was a law clerk for Judge Thomas B. Griffith on the United States Court of Appeals for the District of Columbia.