Call for corporate transparency well-intentioned, impractical
According to the New York Times, in a bold and controversial decision, Securities and Exchange Commission (SEC) officials indicated they would consider looking into altering their policies to require publicly traded companies to disclose political donations on their financial statements.
The SEC’s consideration, according to the Times, is the result of an influx of calls to the SEC from Democratic elected officials and shareholder activists.
Requiring public companies to disclose information regarding campaign contributions would provide greater transparency to the users of the financial statements. It will provide the public with the necessary insight into the organization and a better idea of where the company’s money is going.
However, this idea would require funding, it would take time to implement and could come at a greater cost to the public companies.
Requiring companies to disclose a greater amount of information would require more oversight. It would cost the company more to prepare their already regulated disclosures. It would cost them even more for external auditors to inspect the information compiled in the financial statements to provide reasonable assurance on the assertions made by management.
But even adding campaign contributions to financial statements does not automatically derive a benefit to users. Financial statement users and accountants base their decisions by weighing the cost against the benefit. Unfortunately, the cost of requiring contributions on financial statements would outweigh the petitioners’ perceived benefits.
Campaign finance is undoubtedly a complex and convoluted world.
It is a world full of loopholes and questionable ethics where companies donate billions of dollars all across the country and spend with little oversight. Lawmakers, trade associations, members of the Federal Election Commission and political watchdog groups have been debating campaign finance since the Supreme Court ruled that money equals speech in Buckley v. Valeo in 1976.
Now the scale of campaign finances include political action committees — of varying strengths and political clout — that raise the flow of campaign funds into the trillions. It is only ironic that most of these groups complain about the federal government’s$16 trillion deficit.
The truth of the matter is that a company, regardless of its worth, has the right to use said worth to campaign for or against whatever they wish. Though this right has been argued, legislated and mediated to kingdom come, the SCOTUS ruling on Citizens United v. FEC is still the law of the land and money still equals speech.
While campaign finance reform requires aggressive attention, imposing that duty on the SEC is simply meaningless. It undermines the purpose of financial statements and the SEC’s function behind assuring their transparency and credibility. Though the system of money buying political power needs to be reformed, nobody should use the SEC to accomplish it.