Media Watch: Law Professors Tell Us How It Should be

Harvard Professor Lucian Bebuchuk and Columbia Law Professor Robert Jackson Jr. had an interesting article in the NY Time’s Dealbook on corporate disclosure of political expenditures.  Touting their new study, “Shining Light on Corporate Political Spending,” Bebuchuk and Jackson fail to cut paper in their attempts to come up with a legitimate reason for enacting expensive regulatory reforms:

Shareholders have grown increasingly interested in receiving information about the money corporations spend on politics. In response to their demands, about 60 percent of the companies in the Standard & Poor’s 100-stock index have adopted voluntary disclosure policies.

Opponents of mandatory disclosure rules are likely to use this development to buttress their position. They will argue that information about political spending should be left to private ordering, allowing companies to choose the level and type of disclosure that best suits their needs.

In a previous article, “Letting Shareholders Know How Their Money is Spent,” Bebuchuk asserts:

Our study documents that investors have expressed significant interest in receiving information about the political spending of public companies. Disclosure of such information has in recent years been a more frequent subject of shareholder proposals at public companies than any other corporate governance issue.

And:

Why is information about political spending useful to shareholders? The interests of directors and executives with respect to such spending may frequently diverge from those of shareholders. Moreover, because of the expressive significance of political spending, shareholders may attach greater importance – beyond the amounts spent – to political spending that deviates from their preferences. Disclosure is indispensable to addressing these concerns.

The truth is that this information is already available.  As acknowledged by Bebchuk:

Furthermore, although direct corporate spending on politics does appear in public records, collecting the information necessary to identify the amount or targets of a public company’s spending would require a review of a wide range of disparate sources. Indeed, this task is sufficiently demanding that there is no organization or data set that provides information about the aggregate political spending of a particular public company.

If an investor feels that corporate money is being used in an inappropriate manner, the investor already has the ability to find this information.  So what purpose would burdening companies with disclosure regulation serve?

Already acknowledging that individual investors might not agree with the stance their company takes in politics and that the information is publically available, it is clear Bebchuk and Jackson’s goal is to open public corporations to activist investors.  By and large, activist investors serve little purpose beyond meddling in the affairs of corporations at the expense of other shareholders.

The truth is that corporate disclosure is just another attempt to bring progressive intimidation down on public companies.  Corporations act in the best interest of business, providing value to shareholders and at the end of the day, investors gain nothing from meddling into this area of business operations.

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