[House Report 111-620]
[From the U.S. Government Publishing Office]
111th Congress Rept. 111-620
HOUSE OF REPRESENTATIVES
2d Session Part 1
======================================================================
SHAREHOLDER PROTECTION ACT OF 2010
_______
September 22, 2010.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Frank of Massachusetts, from the Committee on Financial Services,
submitted the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 4790]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred the
bill (H.R. 4790) to amend the Securities Exchange Act of 1934
to require shareholder authorization before a public company
may make certain political expenditures, and for other
purposes, having considered the same, report favorably thereon
with an amendment and recommend that the bill as amended do
pass.
CONTENTS
Page
Purpose and Summary.............................................. 4
Background and Need for Legislation.............................. 5
Hearings......................................................... 6
Committee Consideration.......................................... 6
Committee Votes.................................................. 7
Committee Oversight Findings..................................... 13
Performance Goals and Objectives................................. 13
New Budget Authority, Entitlement Authority, and Tax Expenditures 14
Committee Cost Estimate.......................................... 14
Congressional Budget Office Estimate............................. 14
Federal Mandates Statement....................................... 15
Advisory Committee Statement..................................... 15
Constitutional Authority Statement............................... 15
Applicability to Legislative Branch.............................. 15
Earmark Identification........................................... 15
Section-by-Section Analysis of the Legislation................... 16
Changes in Existing Law Made by the Bill, as Reported............ 17
Dissenting Views................................................. 21
Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Shareholder Protection Act of 2010''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) Corporations make significant political contributions and
expenditures that directly or indirectly influence the election
of candidates and support or oppose political causes. Decisions
to use corporate funds for political contributions and
expenditures are usually made by corporate boards and
executives, rather than shareholders.
(2) Corporations, acting through their boards and executives,
are obligated to conduct business for the best interests of
their owners, the shareholders.
(3) Historically, shareholders have not had a way to know, or
to influence, the political activities of corporations they
own. Shareholders and the public have a right to know how
corporations are spending their funds to make political
contributions or expenditures benefitting candidates, political
parties, and political causes.
(4) Corporations should be accountable to their shareholders
in making political contributions or expenditures affecting
Federal governance and public policy. Requiring the express
approval of a corporation's shareholders prior to making
political contributions or expenditures will establish
necessary accountability.
SEC. 3. SHAREHOLDER APPROVAL OF CORPORATE POLITICAL ACTIVITY.
The Securities Exchange Act of 1934 is amended by inserting after
section 14B the following new section:
``SEC. 14C. SHAREHOLDER APPROVAL OF CERTAIN POLITICAL EXPENDITURES AND
DISCLOSURE OF VOTES OF INSTITUTIONAL INVESTORS.
``(a) Shareholder Authorization for Political Expenditures.--Any
solicitation of any proxy or consent or authorization in respect of any
security of an issuer shall--
``(1) contain a description of the specific nature of any
expenditures for political activities proposed to be made by
the issuer for the forthcoming fiscal year not previously
approved, to the extent the specific nature is known to the
issuer and including the total amount of such proposed
expenditures; and
``(2) provide for a separate shareholder vote to authorize
such proposed expenditures in such amount.
``(b) Requirements for Expenditures.--No issuer shall make any
expenditure for political activities in any fiscal year unless--
``(1) such expenditure is of the nature of those proposed by
the issuer pursuant to subsection (a)(1); and
``(2) authorization for such expenditures has been granted by
votes representing a majority of outstanding shares pursuant to
subsection (a)(2).
``(c) Fiduciary Duty; Liability.--A violation of subsection (b) shall
be considered a breach of a fiduciary duty of the officers and
directors who authorized such an expenditure. The officers and
directors who authorize such an expenditure without first obtaining
such authorization of shareholders shall be jointly and severally
liable in any action brought in any court of competent jurisdiction to
any individual or class of individuals who held shares at the time such
expenditure was made for an amount equal to 3 times the amount of such
expenditure.
``(d) Definition of Expenditure for Political Activities.--As used in
this section:
``(1) The term `expenditure for political activities' means--
``(A) an independent expenditure, as such term is
defined in section 301(17) of the Federal Election
Campaign Act of 1971 (2 U.S.C. 431(17));
``(B) an electioneering communication, as such term
is defined in section 304(f)(3) of such Act (2 U.S.C.
434(f)(3)) and any other public communication (as such
term is defined in section 301(22) of such Act (2
U.S.C. 431(22))) that would be an electioneering
communication if it were a broadcast, cable, or
satellite communication; or
``(C) dues or other payments to trade associations or
other tax exempt organizations that are, or could
reasonably be anticipated to be, used or transferred to
another association or organization for the purposes
described in subparagraph (A) or (B).
``(2) Such term shall not include--
``(A) direct lobbying efforts through registered
lobbyists employed or hired by the issuer;
``(B) communications by an issuer to its shareholders
and executive or administrative personnel and their
families; or
``(C) the establishment and administration of
contributions to a separate segregated fund to be
utilized for political purposes by a corporation.
``(e) Disclosure of Votes.--Every institutional investment manager
subject to section 13(f) shall report at least annually how it voted on
any shareholder vote pursuant to subsection (a), unless such vote is
otherwise required to be reported publicly by rule or regulation of the
Commission. Not later than 6 months after the date of enactment of this
section, the Commission shall issue rules and regulations to implement
this subsection. Such rules shall require that such report be made not
later than 30 days after such a vote and be made available to the
public through the EDGAR system as soon as practicable.
``(f) Safe Harbor for Certain Divestment Decisions.--Notwithstanding
any other provision of Federal or State law, no person may bring any
civil, criminal, or administrative action against any institutional
investment manager, or any employee, officer, or director thereof,
based solely upon a decision of the investment manager to divest from,
or not to invest in, securities of an issuer because of expenditures
for political activities made by that issuer. This subsection shall not
apply to any institutional investment manager, or any employee,
officer, or director thereof, unless the institutional investment
manager makes disclosures in accordance with regulations prescribed by
the Commission.''.
SEC. 4. REQUIRED BOARD VOTE ON CORPORATE EXPENDITURES FOR POLITICAL
ACTIVITIES.
(a) Required Vote.--The Securities Exchange Act of 1934 is amended by
adding after section 16 the following new section:
``SEC. 16A. REQUIRED BOARD VOTE ON CORPORATE EXPENDITURES FOR POLITICAL
ACTIVITIES.
``(a) Listing on Exchanges.--Effective not later than 180 days after
the date of enactment of this section, the Commission shall, by rule,
direct the national securities exchanges and national securities
associations to prohibit the listing of any class of equity security of
an issuer that is not in compliance with the requirements of any
portion of subsection (b).
``(b) Requirement for Vote in Corporate Bylaws.--The corporate bylaws
of an issuer shall expressly provide for a vote of the directors of the
issuer on any individual expenditure for political activities (as such
term is defined in section 14C(d)(1)) in excess of $50,000, or any
expenditure that makes the total amount spent by the issuer for the
particular election (as such term is defined in section 301(1) of the
Federal Election Campaign Act of 1971 (2 U.S.C. 431(1))) $50,000 or
more. An issuer shall make publicly available the individual votes of
the directors required by the preceding sentence within 48 hours of the
vote, including in a clear and conspicuous location on the Internet
website of the issuer.''.
(b) No Effect on Determination of Coordination With Candidates or
Campaigns.--For purposes of determining whether an expenditure for
political activities by an issuer under the Securities Exchange Act of
1934 is an independent expenditure under the Federal Election Campaign
Act of 1971, the expenditure may not be treated as made in concert or
cooperation with, or at the request or suggestion of, any candidate or
committee solely on the grounds that any director of the issuer voted
on the expenditure as required under section 16A(b) of the Securities
Exchange Act of 1934 (as added by subsection (a)).
SEC. 5. REPORTING REQUIREMENTS.
Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) is
amended by adding at the end the following:
``(r) Reporting Requirements Relating to Certain Political
Expenditures.--
``(1) Quarterly reports.--Not later than 180 days after the
date of enactment of this subsection, the Commission shall
modify its reporting rules under this section to require
issuers to disclose quarterly any expenditure for political
activities (as such term is defined in section 14C(d)(1)) made
during the preceding quarter and the individual votes by board
members authorizing such expenditures as required under section
16A(b). Such a report shall be filed with the Commission and
provided to shareholders and shall include--
``(A) the date of each expenditure;
``(B) the amount of each expenditure;
``(C) if the expenditure was made for or against a
candidate, the name of the candidate, the office sought
by and the political party affiliation of the
candidate; and
``(D) the name or identity of trade associations or
other tax-exempt organizations which receive dues or
other payments as described in section 14C(d)(1)(B).
``(2) Annual reports.--Not later than 180 days after the date
of enactment of this subsection, the Commission shall, by rule,
require each issuer to include in its annual report to
shareholders an annual summary of all expenditures for
political activities (as such term is defined in section
14C(d)(1)) made during the preceding year in excess of $10,000.
``(3) Disclosure of materials purchased by political
expenditures.--The Commission shall, by rule, require each
issuer to obtain and disclose in the reports required under
this section, any materials created with or purchased by any
expenditure for political activities (as such term is defined
in section 14C(d)) made by the issuer. Such rule shall also
require that each issuer disclose such materials in a clear and
conspicuous location on the Internet website of the issuer
within 48 hours of obtaining the materials.
``(4) Public availability.--The Commission shall ensure that,
to the greatest extent practicable, the quarterly reports
required by this subsection are publicly available through the
Commission website and through the EDGAR system in a manner
that is searchable, sortable, and downloadable, consistent with
the requirements of section 24.''.
SEC. 6. REPORTS.
The Securities and Exchange Commission shall annually assess the
compliance of public corporations and their management with the
requirements of the amendments made by this Act, and shall transmit to
Congress an annual report of its findings. The Comptroller General of
the United States shall periodically evaluate and report to Congress on
the effectiveness of the Securities and Exchange Commission's oversight
of the reporting and disclosure requirements of the amendments made by
this Act.
SEC. 7. SEVERABILITY.
If any provision of this Act, an amendment made by this Act, or the
application of such provision or amendment to any person or
circumstance is held to be unconstitutional, the remainder of this Act,
the amendments made by this Act, and the application of such provision
or amendment to any person or circumstance shall not be affected
thereby.
Purpose and Summary
The Shareholder Protection Act of 2010 (H.R. 4790) is a
response to the U.S. Supreme Court's decision in Citizens
United v. Federal Election Commission, 558 U.S. 50 (2010).\1\
In Citizens United, the Court held that corporations have a
First Amendment right to spend unlimited amounts of general
treasury funds on political expenditures and electioneering
communications. The ruling invalidated longstanding provisions
in U.S. election laws and raised fresh concerns about corporate
influence in our political process.
---------------------------------------------------------------------------
\1\Available at http://www.supremecourtus.gov/opinions/09pdf/08-
205.pdf.
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To address those concerns, the Shareholder Protection Act
gives shareholders of public companies the right to vote on the
company's annual budget for political expenditures. The bill
makes that right enforceable through actions for breach of
fiduciary duty against officers and directors who authorize
political expenditures that are not in the nature of those set
forth in the annual budget. The bill also requires a board vote
on certain individual political expenditures, including those
exceeding $50,000. The bill enhances transparency by requiring
public companies to make quarterly and annual reports regarding
their political expenditures, and by requiring institutional
investment managers to publicly report their proxy votes on
political expenditures within 30 days.
Background and Need for Legislation
U.S. election laws have long prohibited corporations from
using general treasury funds to pay for independent
expenditures that advocate the election or defeat of political
candidates. On January 21, 2010, the U.S. Supreme Court
invalidated those provisions in Citizens United. In its 5-to-4
decision, the Court held in effect that corporations have a
First Amendment right to spend unlimited amounts of money from
their general treasuries to influence Federal elections through
independent expenditures and electioneering communications. In
arriving at its decision, the Court overturned precedents that
had limited corporate influence in politics for decades.\2\
---------------------------------------------------------------------------
\2\For example, see Austin v. Michigan Chamber of Commerce, 494
U.S. 652 (2000), and McConnell v. Federal Election Commission, 540 U.S.
93 (2003).
---------------------------------------------------------------------------
The case arose when Citizens United, a non-profit
corporation, sought injunctive and declaratory relief against
enforcement of the Bipartisan Campaign Reform Act (BCRA). BCRA
prohibited corporations and labor unions from using general
treasury funds--as opposed to funds segregated in political
action committees or PACs--either for ``electioneering
communications'' or for express advocacy in favor of or in
opposition to a candidate. Citizens United had produced a 90-
minute film entitled Hillary: The Movie, which was critical of
presidential candidate Hillary Clinton. Citizens United wanted
to advertise and broadcast the film on cable television, but
feared that doing so would subject it to civil and criminal
penalties under BCRA. It therefore sought judicial protection.
The Supreme Court sided with Citizens United, struck down
the statutory provisions at issue, and established the broad
principle that, under the First Amendment, independent
corporate expenditures on political advocacy may not be
prohibited.
The decision generated significant controversy. Many
criticized it as a major setback in the effort to ensure that
corporations do not unduly influence the electoral process.
Some commentators suggested that short of public financing of
political campaigns or a constitutional amendment, little could
be done legislatively to undo Citizens United. In testimony
before the House Judiciary Committee, however, Professor
Laurence Tribe observed that ``despite the blow they [the
majority of justices] struck against the interests of ordinary
citizens and genuine self-government, they did not entirely
foreclose meaningful avenues of legislative relief short of
constitutional amendment.''\3\
---------------------------------------------------------------------------
\3\Prepared Testimony of Laurence H. Tribe, House Judiciary
Committee, February 2, 2010, available at http://judiciary.house.gov/
hearings/pdf/Tribe100203.pdf
---------------------------------------------------------------------------
In keeping with Professor Tribe's comment, Members of the
House and Senate introduced a number of bills that through
various means sought to mitigate the impact of Citizens United
on political campaigns and to curb the influence of
corporations on our elections. Among them is H.R. 4790.
H.R. 4790 has two goals: (1) it gives shareholders of
public companies more control over a company's political
expenditures, and (2) it subjects those expenditures to greater
transparency. In terms of shareholder control, H.R. 4790
requires a public company's proxy solicitations to include a
description of the nature and amount of political expenditures
planned for the ensuing fiscal year. The bill prohibits
companies from making any political expenditures unless they
are consistent with the types of expenditures described in the
proxy materials and unless they have been approved by a
majority shareholder vote. The bill makes officers and
directors jointly and severally liable for breach of fiduciary
duty if they authorize political expenditures without
shareholder approval, and it provides for treble damages.
The bill also requires a board vote on any individual
political expenditure exceeding $50,000, or any expenditure
causing the total amount spent in an election to exceed
$50,000. Those votes must be posted on the issuer's website
within 48 hours.
H.R. 4790 promotes transparency in several ways. The bill
requires public companies to make quarterly public disclosure
of all expenditures for political activities during the
preceding quarter, along with the individual votes of board
members authorizing such expenditures. Those reports must
include copies of any materials created or purchased with
political expenditures, and must be posted on the company's
website within 48 hours. In addition, public companies will be
required to include in their annual reports a summary of all
political expenditures over $10,000.
The bill requires institutional investment managers to
report at least annually on how they voted on a public
company's proposed political expenditures. Those reports must
be made within 30 days and placed on the EDGAR system as soon
as practicable.
The bill defines ``political expenditures'' as independent
expenditures, electioneering and other public communications,
and payments to trade associations to fund political activity.
Direct lobbying, communications by issuers to shareholders, and
establishment of political action committees are excluded from
the definition.
Hearings
The Subcommittee on Capital Markets, Insurance, and
Government Sponsored Enterprises held a hearing entitled
``Corporate Governance After Citizens United'' on March 11,
2010. At the hearing, the following witnesses testified:
Professor John C. Coffee, Jr., Adolf A.
Berle Professor of Law, Columbia Law School
Mr. Karl Sandstrom, Of Counsel, Perkins Cole
Ms. Ann Yerger, Executive Director, Council
of Institutional Investors
Professor J.W. Verret, Assistant Professor
of Law, George Mason University School of Law
Ms. Nell Minow, Editor and Co-Founder, The
Corporate Library
Professor Michael Klausner, Nancy and
Charles Munger Professor of Business and Professor of
Law, Stanford Law School
Mr. Jan Baran, Partner, Wiley Rein LLP
Committee Consideration
The Committee on Financial Services met in open session on
July 28, 2010, and on July 29, 2010, ordered H.R. 4790, the
Shareholder Protection Act of 2010, as amended, favorably
reported to the House by a record vote of 35 yeas and 28 nays.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. A
motion by Mr. Frank to report the bill, as amended, to the
House with a favorable recommendation was agreed to by a record
vote of 35 yeas and 28 nays (Record vote no. FC-143). The names
of Members voting for and against follow:
RECORD VOTE NO. FC-143
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... X ........ ......... Mr. Bachus....... ........ X .........
Mr. Kanjorski.................. X ........ ......... Mr. Castle....... ........ X .........
Ms. Waters..................... X ........ ......... Mr. King (NY).... ........ ........ .........
Mrs. Maloney................... X ........ ......... Mr. Royce........ ........ X .........
Mr. Gutierrez.................. X ........ ......... Mr. Lucas........ ........ X .........
Ms. Velazquez.................. ........ ........ ......... Mr. Paul......... ........ X .........
Mr. Watt....................... X ........ ......... Mr. Manzullo..... ........ X .........
Mr. Ackerman................... X ........ ......... Mr. Jones........ ........ ........ .........
Mr. Sherman.................... X ........ ......... Mrs. Biggert..... ........ X .........
Mr. Meeks...................... X ........ ......... Mr. Miller (CA).. ........ X .........
Mr. Moore (KS)................. X ........ ......... Mrs. Capito...... ........ X .........
Mr. Capuano.................... X ........ ......... Mr. Hensarling... ........ X .........
Mr. Hinojosa................... ........ ........ ......... Mr. Garrett (NJ). ........ X .........
Mr. Clay....................... ........ ........ ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. X ........ ......... Mr. Gerlach...... ........ X .........
Mr. Baca....................... X ........ ......... Mr. Neugebauer... ........ X .........
Mr. Lynch...................... ........ ........ ......... Mr. Price (GA)... ........ X .........
Mr. Miller (NC)................ X ........ ......... Mr. McHenry...... ........ X .........
Mr. Scott...................... X ........ ......... Mr. Campbell..... ........ X .........
Mr. Green...................... X ........ ......... Mr. Putnam....... ........ X .........
Mr. Cleaver.................... X ........ ......... Mrs. Bachmann.... ........ X .........
Ms. Bean....................... X ........ ......... Mr. Marchant..... ........ ........ .........
Ms. Moore (WI)................. X ........ ......... Mr. McCotter..... ........ X .........
Mr. Hodes...................... X ........ ......... Mr. McCarthy..... ........ X .........
Mr. Ellison.................... X ........ ......... Mr. Posey........ ........ X .........
Mr. Klein...................... X ........ ......... Ms. Jenkins...... ........ X .........
Mr. Wilson..................... X ........ ......... Mr. Lee.......... ........ X .........
Mr. Perlmutter................. X ........ ......... Mr. Paulsen...... ........ X .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ ........ X .........
Mr. Foster..................... X ........ .........
Mr. Carson..................... X ........ .........
Ms. Speier..................... X ........ .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... ........ X .........
Mr. Adler...................... X ........ .........
Ms. Kilroy..................... X ........ .........
Mr. Driehaus................... X ........ .........
Ms. Kosmas..................... X ........ .........
Mr. Grayson.................... X ........ .........
Mr. Himes...................... X ........ .........
Mr. Peters..................... X ........ .........
Mr. Maffei..................... X ........ .........
----------------------------------------------------------------------------------------------------------------
During consideration of the bill, the following amendments
were disposed of by record votes. The names of Members voting
for and against follow:
An amendment by Mr. Grayson (and Mr. Capuano), no. 1a, to
the amendment offered by Mr. Capuano, no. 1, a manager's
amendment, was agreed to by a record vote of 34 yeas and 25
nays (FC-136):
RECORD VOTE NO. FC-136
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... X ........ ......... Mr. Bachus....... ........ X .........
Mr. Kanjorski.................. X ........ ......... Mr. Castle....... ........ X .........
Ms. Waters..................... X ........ ......... Mr. King (NY).... ........ ........ .........
Mrs. Maloney................... X ........ ......... Mr. Royce........ ........ X .........
Mr. Gutierrez.................. X ........ ......... Mr. Lucas........ ........ X .........
Ms. Velazquez.................. ........ ........ ......... Mr. Paul......... ........ X .........
Mr. Watt....................... X ........ ......... Mr. Manzullo..... ........ ........ .........
Mr. Ackerman................... X ........ ......... Mr. Jones........ ........ ........ .........
Mr. Sherman.................... X ........ ......... Mrs. Biggert..... ........ X .........
Mr. Meeks...................... X ........ ......... Mr. Miller (CA).. ........ X .........
Mr. Moore (KS)................. X ........ ......... Mrs. Capito...... ........ X .........
Mr. Capuano.................... X ........ ......... Mr. Hensarling... ........ X .........
Mr. Hinojosa................... ........ ........ ......... Mr. Garrett (NJ). ........ X .........
Mr. Clay....................... ........ ........ ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. X ........ ......... Mr. Gerlach...... ........ X .........
Mr. Baca....................... X ........ ......... Mr. Neugebauer... ........ X .........
Mr. Lynch...................... ........ ........ ......... Mr. Price (GA)... ........ X .........
Mr. Miller (NC)................ X ........ ......... Mr. McHenry...... ........ X .........
Mr. Scott...................... X ........ ......... Mr. Campbell..... ........ ........ .........
Mr. Green...................... X ........ ......... Mr. Putnam....... ........ X .........
Mr. Cleaver.................... X ........ ......... Mrs. Bachmann.... ........ X .........
Ms. Bean....................... X ........ ......... Mr. Marchant..... ........ ........ .........
Ms. Moore (WI)................. ........ ........ ......... Mr. McCotter..... ........ X .........
Mr. Hodes...................... X ........ ......... Mr. McCarthy..... ........ X .........
Mr. Ellison.................... X ........ ......... Mr. Posey........ ........ ........ .........
Mr. Klein...................... X ........ ......... Ms. Jenkins...... ........ X .........
Mr. Wilson..................... X ........ ......... Mr. Lee.......... ........ X .........
Mr. Perlmutter................. X ........ ......... Mr. Paulsen...... ........ X .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ ........ X .........
Mr. Foster..................... X ........ .........
Mr. Carson..................... X ........ .........
Ms. Speier..................... X ........ .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... ........ X .........
Mr. Adler...................... X ........ .........
Ms. Kilroy..................... X ........ .........
Mr. Driehaus................... X ........ .........
Ms. Kosmas..................... X ........ .........
Mr. Grayson.................... X ........ .........
Mr. Himes...................... X ........ .........
Mr. Peters..................... X ........ .........
Mr. Maffei..................... X ........ .........
----------------------------------------------------------------------------------------------------------------
An amendment by Ms. Jenkins, no. 2, striking section
14A(d)(C) (relating to the definition of `expenditure for
political activities') was not agreed to by a record vote of 25
yeas and 37 nays (Record vote no. FC-137):
RECORD VOTE NO. FC-137
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... X ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Castle....... X ........ .........
Ms. Waters..................... ........ X ......... Mr. King (NY).... ........ ........ .........
Mrs. Maloney................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. Lucas........ X ........ .........
Ms. Velazquez.................. ........ ........ ......... Mr. Paul......... X ........ .........
Mr. Watt....................... ........ X ......... Mr. Manzullo..... ........ ........ .........
Mr. Ackerman................... ........ X ......... Mr. Jones........ ........ ........ .........
Mr. Sherman.................... ........ X ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... ........ X ......... Mr. Miller (CA).. X ........ .........
Mr. Moore (KS)................. ........ X ......... Mrs. Capito...... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... ........ ........ ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... ........ ........ ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Gerlach...... X ........ .........
Mr. Baca....................... ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Lynch...................... ........ ........ ......... Mr. Price (GA)... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. McHenry...... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... X ........ .........
Mr. Green...................... ........ X ......... Mr. Putnam....... X ........ .........
Mr. Cleaver.................... ........ X ......... Mrs. Bachmann.... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Marchant..... ........ ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. McCarthy..... X ........ .........
Mr. Ellison.................... ........ X ......... Mr. Posey........ X ........ .........
Mr. Klein...................... ........ X ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Lee.......... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Foster..................... ........ X .........
Mr. Carson..................... ........ X .........
Ms. Speier..................... ........ X .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... X ........ .........
Mr. Adler...................... ........ X .........
Ms. Kilroy..................... ........ X .........
Mr. Driehaus................... ........ X .........
Ms. Kosmas..................... ........ X .........
Mr. Grayson.................... ........ X .........
Mr. Himes...................... ........ X .........
Mr. Peters..................... ........ X .........
Mr. Maffei..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Carson, no. 5, regarding liability
amount equal to 3 times expenditure, was agreed to by a record
vote of 33 yeas and 30 nays (Record vote no. FC-138):
RECORD VOTE NO. FC-138
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... X ........ ......... Mr. Bachus....... ........ x .........
Mr. Kanjorski.................. X ........ ......... Mr. Castle....... ........ X .........
Ms. Waters..................... X ........ ......... Mr. King (NY).... ........ ........ .........
Mrs. Maloney................... X ........ ......... Mr. Royce........ ........ X .........
Mr. Gutierrez.................. X ........ ......... Mr. Lucas........ ........ X .........
Ms. Velazquez.................. ........ ........ ......... Mr. Paul......... ........ X .........
Mr. Watt....................... X ........ ......... Mr. Manzullo..... ........ X .........
Mr. Ackerman................... X ........ ......... Mr. Jones........ ........ ........ .........
Mr. Sherman.................... X ........ ......... Mrs. Biggert..... ........ X .........
Mr. Meeks...................... X ........ ......... Mr. Miller (CA).. ........ X .........
Mr. Moore (KS)................. X ........ ......... Mrs. Capito...... ........ X .........
Mr. Capuano.................... X ........ ......... Mr. Hensarling... ........ X .........
Mr. Hinojosa................... ........ ........ ......... Mr. Garrett (NJ). ........ X .........
Mr. Clay....................... ........ ........ ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. X ........ ......... Mr. Gerlach...... ........ X .........
Mr. Baca....................... X ........ ......... Mr. Neugebauer... ........ X .........
Mr. Lynch...................... ........ ........ ......... Mr. Price (GA)... ........ X .........
Mr. Miller (NC)................ X ........ ......... Mr. McHenry...... ........ X .........
Mr. Scott...................... X ........ ......... Mr. Campbell..... ........ X .........
Mr. Green...................... X ........ ......... Mr. Putnam....... ........ X .........
Mr. Cleaver.................... X ........ ......... Mrs. Bachmann.... ........ X .........
Ms. Bean....................... X ........ ......... Mr. Marchant..... ........ ........ .........
Ms. Moore (WI)................. X ........ ......... Mr. McCotter..... ........ X .........
Mr. Hodes...................... X ........ ......... Mr. McCarthy..... ........ X .........
Mr. Ellison.................... X ........ ......... Mr. Posey........ ........ X .........
Mr. Klein...................... X ........ ......... Ms. Jenkins...... ........ X .........
Mr. Wilson..................... X ........ ......... Mr. Lee.......... ........ X .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... ........ X .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ ........ X .........
Mr. Foster..................... ........ X .........
Mr. Carson..................... X ........ .........
Ms. Speier..................... X ........ .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... ........ X .........
Mr. Adler...................... X ........ .........
Ms. Kilroy..................... X ........ .........
Mr. Driehaus................... X ........ .........
Ms. Kosmas..................... X ........ .........
Mr. Grayson.................... X ........ .........
Mr. Himes...................... X ........ .........
Mr. Peters..................... X ........ .........
Mr. Maffei..................... X ........ .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Castle, no. 6, relating to exemption
under state law, was not agreed to by a record vote of 25 yeas
and 38 nays (Record vote no. FC-139):
RECORD VOTE NO. FC-139
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... X ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Castle....... X ........ .........
Ms. Waters..................... ........ X ......... Mr. King (NY).... ........ ........ .........
Mrs. Maloney................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. Lucas........ X ........ .........
Ms. Velazquez.................. ........ ........ ......... Mr. Paul......... X ........ .........
Mr. Watt....................... ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Jones........ ........ ........ .........
Mr. Sherman.................... ........ X ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... ........ X ......... Mr. Miller (CA).. X ........ .........
Mr. Moore (KS)................. ........ X ......... Mrs. Capito...... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... ........ ........ ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... ........ ........ ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Gerlach...... X ........ .........
Mr. Baca....................... ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Lynch...................... ........ ........ ......... Mr. Price (GA)... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. McHenry...... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... X ........ .........
Mr. Green...................... ........ X ......... Mr. Putnam....... X ........ .........
Mr. Cleaver.................... ........ X ......... Mrs. Bachmann.... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Marchant..... ........ ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. McCarthy..... X ........ .........
Mr. Ellison.................... ........ X ......... Mr. Posey........ X ........ .........
Mr. Klein...................... ........ X ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Lee.......... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Foster..................... ........ X .........
Mr. Carson..................... ........ X .........
Ms. Speier..................... ........ X .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... ........ X .........
Mr. Adler...................... ........ X .........
Ms. Kilroy..................... ........ X .........
Mr. Driehaus................... ........ X .........
Ms. Kosmas..................... ........ X .........
Mr. Grayson.................... ........ X .........
Mr. Himes...................... ........ X .........
Mr. Peters..................... ........ X .........
Mr. Maffei..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Hensarling, no. 8, relating to the
effective date, was not agreed to by a record vote of 26 yeas
and 37 nays (Record vote no. FC-140):
RECORD VOTE NO. FC-140
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... X ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Castle....... X ........ .........
Ms. Waters..................... ........ X ......... Mr. King (NY).... ........ ........ .........
Mrs. Maloney................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. Lucas........ X ........ .........
Ms. Velazquez.................. ........ ........ ......... Mr. Paul......... X ........ .........
Mr. Watt....................... ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Jones........ ........ ........ .........
Mr. Sherman.................... ........ X ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... ........ X ......... Mr. Miller (CA).. X ........ .........
Mr. Moore (KS)................. ........ X ......... Mrs. Capito...... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... ........ ........ ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... ........ ........ ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Gerlach...... X ........ .........
Mr. Baca....................... ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Lynch...................... ........ ........ ......... Mr. Price (GA)... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. McHenry...... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... X ........ .........
Mr. Green...................... ........ X ......... Mr. Putnam....... X ........ .........
Mr. Cleaver.................... ........ X ......... Mrs. Bachmann.... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Marchant..... ........ ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. McCarthy..... X ........ .........
Mr. Ellison.................... ........ X ......... Mr. Posey........ X ........ .........
Mr. Klein...................... ........ X ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Lee.......... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Foster..................... ........ X .........
Mr. Carson..................... ........ X .........
Ms. Speier..................... ........ X .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... X ........ .........
Mr. Adler...................... ........ X .........
Ms. Kilroy..................... ........ X .........
Mr. Driehaus................... ........ X .........
Ms. Kosmas..................... ........ X .........
Mr. Grayson.................... ........ X .........
Mr. Himes...................... ........ X .........
Mr. Peters..................... ........ X .........
Mr. Maffei..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment in the nature of a substitute by Mr. Castle,
no. 9, was not agreed to by a record vote of 25 yeas and 38
nays (Record vote no. FC-141):
RECORD VOTE NO. FC-141
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... X ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Castle....... X ........ .........
Ms. Waters..................... ........ X ......... Mr. King (NY).... ........ ........ .........
Mrs. Maloney................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. Lucas........ X ........ .........
Ms. Velazquez.................. ........ ........ ......... Mr. Paul......... X ........ .........
Mr. Watt....................... ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Jones........ ........ ........ .........
Mr. Sherman.................... ........ X ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... ........ X ......... Mr. Miller (CA).. X ........ .........
Mr. Moore (KS)................. ........ X ......... Mrs. Capito...... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... ........ ........ ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... ........ ........ ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Gerlach...... X ........ .........
Mr. Baca....................... ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Lynch...................... ........ ........ ......... Mr. Price (GA)... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. McHenry...... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... X ........ .........
Mr. Green...................... ........ X ......... Mr. Putnam....... X ........ .........
Mr. Cleaver.................... ........ X ......... Mrs. Bachmann.... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Marchant..... ........ ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. McCarthy..... X ........ .........
Mr. Ellison.................... ........ X ......... Mr. Posey........ X ........ .........
Mr. Klein...................... ........ X ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Lee.......... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Foster..................... ........ X .........
Mr. Carson..................... ........ X .........
Ms. Speier..................... ........ X .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... ........ X .........
Mr. Adler...................... ........ X .........
Ms. Kilroy..................... ........ X .........
Mr. Driehaus................... ........ X .........
Ms. Kosmas..................... ........ X .........
Mr. Grayson.................... ........ X .........
Mr. Himes...................... ........ X .........
Mr. Peters..................... ........ X .........
Mr. Maffei..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Garrett, no. 10, relating to public
plan transparency, was not agreed to by a record vote of 25
yeas and 38 nays (Record vote no. FC-142):
RECORD VOTE NO. FC-142
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... X ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Castle....... X ........ .........
Ms. Waters..................... ........ X ......... Mr. King (NY).... ........ ........ .........
Mrs. Maloney................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. Lucas........ X ........ .........
Ms. Velazquez.................. ........ ........ ......... Mr. Paul......... X ........ .........
Mr. Watt....................... ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Jones........ ........ ........ .........
Mr. Sherman.................... ........ X ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... ........ X ......... Mr. Miller (CA).. X ........ .........
Mr. Moore (KS)................. ........ X ......... Mrs. Capito...... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... ........ ........ ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... ........ ........ ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Gerlach...... X ........ .........
Mr. Baca....................... ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Lynch...................... ........ ........ ......... Mr. Price (GA)... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. McHenry...... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... X ........ .........
Mr. Green...................... ........ X ......... Mr. Putnam....... X ........ .........
Mr. Cleaver.................... ........ X ......... Mrs. Bachmann.... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Marchant..... ........ ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. McCarthy..... X ........ .........
Mr. Ellison.................... ........ X ......... Mr. Posey........ X ........ .........
Mr. Klein...................... ........ X ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Lee.......... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Foster..................... ........ X .........
Mr. Carson..................... ........ X .........
Ms. Speier..................... ........ X .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... ........ X .........
Mr. Adler...................... ........ X .........
Ms. Kilroy..................... ........ X .........
Mr. Driehaus................... ........ X .........
Ms. Kosmas..................... ........ X .........
Mr. Grayson.................... ........ X .........
Mr. Himes...................... ........ X .........
Mr. Peters..................... ........ X .........
Mr. Maffei..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
The following other amendments were also considered:
An amendment by Mr. Capuano, no. 1, a manager's amendment,
as amended by the Grayson amendment, no. 1a, was agreed to by a
voice vote.
An amendment by Mr. Grayson (and Mr. Capuano), no. 3,
relating to disclosure of materials purchased by political
expenditures, was agreed to by a voice vote.
An amendment in the nature of a substitute by Mrs. Biggert,
no. 4, was not agreed to by a voice vote.
An amendment by Mr. Capuano, no. 7, relating to the annual
nature of the proxy requirement, as modified, was agreed to by
a voice vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee held a hearing and made
findings that are reflected in this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
H.R. 4790 is a response to the decision of the U.S. Supreme
Court in the Citizens United case and has two goals: (1) giving
shareholders of public companies more control over a company's
political expenditures, and (2) subjecting those expenditures
to greater transparency.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
September 14, 2010.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4790, the
Shareholder Protection Act of 2010.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Susan Willie.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 4790--Shareholder Protection Act of 2010
H.R. 4790 would require corporations that are registered
with the Securities and Exchange Commission (SEC) to provide
shareholders an opportunity to vote on the corporation's
proposed expenditures for certain political activities for the
upcoming year. Further, the bill would prohibit security
exchanges from listing stocks of corporations that do not
require the board of directors to approve political
expenditures over $50,000 or any expenditure that would cause
the amount spent on political activities to exceed $50,000 in a
fiscal year. The SEC would be required to develop regulations
to enforce the new requirements and to prepare an annual report
that assesses compliance.
Based on information from the SEC, CBO estimates that
developing and enforcing the new requirements in H.R. 4790
would not significantly increase spending subject to
appropriation. Enacting H.R. 4790 could increase collections of
civil and criminal penalties, thus increasing federal revenues
and direct spending; therefore, pay-as-you-go procedures apply.
However, CBO estimates that such collections and spending would
not be significant in any year.
The requirements on corporations would impose
intergovernmental and private-sector mandates, as defined in
the Unfunded Mandates Reform Act (UMRA). In addition, the bill
would impose reporting requirements on investment managers and
preempt state securities laws. Based on information from the
SEC, CBO estimates that the costs of complying with those
mandates would be small.
H.R. 4790 also would prevent public or private investors
from seeking damages from investment managers on grounds that
the manager made investment decisions based on a corporation's
political activities. Because of uncertainty about the number
of such claims that would be filed, CBO cannot estimate the
cost of that mandate and, consequently, cannot determine
whether the aggregate costs of intergovernmental or private-
sector mandates in the bill would exceed the annual thresholds
established in UMRA ($70 million and $141 million,
respectively, in 2010, adjusted annually for inflation).
The CBO staff contacts for this estimate are Susan Willie
(for federal costs) and Elizabeth Cove Delisle and Brian Prest
(for the intergovernmental and private-sector impact). The
estimate was approved by Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional Authority of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
general welfare of the United States) and clause 3 (relating to
the power to regulate interstate commerce).
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
H.R. 4790 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Section-by-Section Analysis of the Legislation
Sec. 1. Short title
This section designates the short title of the bill as the
``Shareholder Protection Act of 2010.''
Sec. 2. Findings
This section sets forth several findings that support
giving shareholders the right to vote on corporate political
expenditures and making those expenditures more transparent.
Sec. 3. Shareholder approval of corporate political activity
This section amends the Securities Exchange Act of 1934
(Exchange Act) to require a separate shareholder vote on
political expenditures by public companies. Proxy solicitations
must include a description of the specific nature and the total
amount of the proposed expenditures for political activities to
be made for the upcoming fiscal year, except for previously
approved expenditures. Public companies may not make political
expenditures unless they are in the nature of those described
in the shareholder proxy and authorized by votes representing a
majority of outstanding shares.
This section makes officers and directors jointly and
severally liable for breach of fiduciary duty if they authorize
expenditures in violation of the section. This liability is for
three times the amount of any unauthorized expenditure and is
owed to any shareholders who held shares at the time the
unauthorized expenditures were made.
In addition, this section defines the term ``expenditure
for political activities'' to include independent expenditures
as defined by the Federal Election Campaign Act (FECA);
``electioneering communications'' and other ``public
communications'' (such as printed materials) as defined by
FECA; and dues or other payments to trade associations or other
tax-exempt organizations that ``are, or could reasonably be
anticipated to be,'' used or transferred to another association
or organization for independent expenditures or electioneering
communications. The term, however, excludes direct lobbying
efforts through registered lobbyists; communications to
shareholders, executives, and administrative personnel and
their families; and funding related to the establishment and
administration of political action committees.
This section of the bill also amends the Exchange Act to
require institutional investment managers to disclose at least
annually how they voted on corporate political expenditures.
Those reports must be made within 30 days after the votes are
taken and made available through the EDGAR system as soon as
practicable. The U.S. Securities and Exchange Commission (SEC)
must issue rules within six months of enactment to implement
this disclosure requirement.
This section also creates a safe harbor from any civil,
criminal, or administrative action against any institutional
investment manager based solely upon the investment manager's
decision to divest from, or not to invest in, securities of a
company because of political expenditures made by that company.
The safe harbor is unavailable, however, unless the investment
manager complies with any disclosure obligations applicable
under the SEC's rules.
Sec. 4. Required board vote on corporate expenditures for political
activities
This section amends the Exchange Act to require the SEC,
within 180 days of enactment, to issue rules directing national
securities exchanges and associations to prohibit the listing
of any securities of companies that do not expressly provide
for a board of directors vote on certain political
expenditures. Board votes are required on any individual
expenditure for political activities in excess of $50,000, or
on any expenditure causing the total amount spent in an
election to exceed $50,000. Companies must make the individual
votes of the directors publicly available within 48 hours, and
must post the votes clearly on the company's website.
This section also clarifies that a director's vote on a
political expenditure does not affect whether or not the
expenditure is deemed to be an independent expenditure within
the meaning of FECA.
Sec. 5. Reporting requirements
This section requires the SEC, within 180 days of
enactment, to amend its reporting rules so that public
companies must disclose to shareholders, on a quarterly basis,
any political expenditures made during the preceding quarter
and the individual votes of board members authorizing such
expenditures. These reports must include the date and amount of
each expenditure; the name, party, and office of any candidate
who was the subject of an expenditure; and the identity of any
trade association or other organization that received dues or
other payments.
The SEC must ensure that the quarterly reports are publicly
available through the SEC's website and through the EDGAR
system. Companies must include in those reports any materials
created or purchased with political expenditures, and must post
those materials on their websites within 48 hours.
Section 5 also requires the SEC to issue rules obligating
public companies to include in their annual reports a summary
of all political expenditures over $10,000.
Sec. 6. Reports
This section requires the SEC to make an annual assessment
of compliance with the Act by public companies and their
managements, and to report its findings to Congress. It also
requires the Comptroller General to periodically evaluate and
report to Congress on the SEC's oversight of the reporting and
disclosure requirements in the Act.
Sec. 7. Severability
This section clarifies that if any provision of the bill is
held to be unconstitutional, then the remainder of the bill is
not affected.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):
SECURITIES EXCHANGE ACT OF 1934
TITLE I--REGULATION OF SECURITIES EXCHANGES
* * * * * * *
PERIODICAL AND OTHER REPORTS
Sec. 13. (a) * * *
* * * * * * *
(r) Reporting Requirements Relating to Certain Political
Expenditures.--
(1) Quarterly reports.--Not later than 180 days after
the date of enactment of this subsection, the
Commission shall modify its reporting rules under this
section to require issuers to disclose quarterly any
expenditure for political activities (as such term is
defined in section 14C(d)(1)) made during the preceding
quarter and the individual votes by board members
authorizing such expenditures as required under section
16A(b). Such a report shall be filed with the
Commission and provided to shareholders and shall
include--
(A) the date of each expenditure;
(B) the amount of each expenditure;
(C) if the expenditure was made for or
against a candidate, the name of the candidate,
the office sought by and the political party
affiliation of the candidate; and
(D) the name or identity of trade
associations or other tax-exempt organizations
which receive dues or other payments as
described in section 14C(d)(1)(B).
(2) Annual reports.--Not later than 180 days after
the date of enactment of this subsection, the
Commission shall, by rule, require each issuer to
include in its annual report to shareholders an annual
summary of all expenditures for political activities
(as such term is defined in section 14C(d)(1)) made
during the preceding year in excess of $10,000.
(3) Disclosure of materials purchased by political
expenditures.--The Commission shall, by rule, require
each issuer to obtain and disclose in the reports
required under this section, any materials created with
or purchased by any expenditure for political
activities (as such term is defined in section 14C(d))
made by the issuer. Such rule shall also require that
each issuer disclose such materials in a clear and
conspicuous location on the Internet website of the
issuer within 48 hours of obtaining the materials.
(4) Public availability.--The Commission shall ensure
that, to the greatest extent practicable, the quarterly
reports required by this subsection are publicly
available through the Commission website and through
the EDGAR system in a manner that is searchable,
sortable, and downloadable, consistent with the
requirements of section 24.
* * * * * * *
SEC. 14C. SHAREHOLDER APPROVAL OF CERTAIN POLITICAL EXPENDITURES AND
DISCLOSURE OF VOTES OF INSTITUTIONAL INVESTORS.
(a) Shareholder Authorization for Political Expenditures.--
Any solicitation of any proxy or consent or authorization in
respect of any security of an issuer shall--
(1) contain a description of the specific nature of
any expenditures for political activities proposed to
be made by the issuer for the forthcoming fiscal year
not previously approved, to the extent the specific
nature is known to the issuer and including the total
amount of such proposed expenditures; and
(2) provide for a separate shareholder vote to
authorize such proposed expenditures in such amount.
(b) Requirements for Expenditures.--No issuer shall make any
expenditure for political activities in any fiscal year
unless--
(1) such expenditure is of the nature of those
proposed by the issuer pursuant to subsection (a)(1);
and
(2) authorization for such expenditures has been
granted by votes representing a majority of outstanding
shares pursuant to subsection (a)(2).
(c) Fiduciary Duty; Liability.--A violation of subsection (b)
shall be considered a breach of a fiduciary duty of the
officers and directors who authorized such an expenditure. The
officers and directors who authorize such an expenditure
without first obtaining such authorization of shareholders
shall be jointly and severally liable in any action brought in
any court of competent jurisdiction to any individual or class
of individuals who held shares at the time such expenditure was
made for an amount equal to 3 times the amount of such
expenditure.
(d) Definition of Expenditure for Political Activities.--As
used in this section:
(1) The term ``expenditure for political activities''
means--
(A) an independent expenditure, as such term
is defined in section 301(17) of the Federal
Election Campaign Act of 1971 (2 U.S.C.
431(17));
(B) an electioneering communication, as such
term is defined in section 304(f)(3) of such
Act (2 U.S.C. 434(f)(3)) and any other public
communication (as such term is defined in
section 301(22) of such Act (2 U.S.C. 431(22)))
that would be an electioneering communication
if it were a broadcast, cable, or satellite
communication; or
(C) dues or other payments to trade
associations or other tax exempt organizations
that are, or could reasonably be anticipated to
be, used or transferred to another association
or organization for the purposes described in
subparagraph (A) or (B).
(2) Such term shall not include--
(A) direct lobbying efforts through
registered lobbyists employed or hired by the
issuer;
(B) communications by an issuer to its
shareholders and executive or administrative
personnel and their families; or
(C) the establishment and administration of
contributions to a separate segregated fund to
be utilized for political purposes by a
corporation.
(e) Disclosure of Votes.--Every institutional investment
manager subject to section 13(f) shall report at least annually
how it voted on any shareholder vote pursuant to subsection
(a), unless such vote is otherwise required to be reported
publicly by rule or regulation of the Commission. Not later
than 6 months after the date of enactment of this section, the
Commission shall issue rules and regulations to implement this
subsection. Such rules shall require that such report be made
not later than 30 days after such a vote and be made available
to the public through the EDGAR system as soon as practicable.
(f) Safe Harbor for Certain Divestment Decisions.--
Notwithstanding any other provision of Federal or State law, no
person may bring any civil, criminal, or administrative action
against any institutional investment manager, or any employee,
officer, or director thereof, based solely upon a decision of
the investment manager to divest from, or not to invest in,
securities of an issuer because of expenditures for political
activities made by that issuer. This subsection shall not apply
to any institutional investment manager, or any employee,
officer, or director thereof, unless the institutional
investment manager makes disclosures in accordance with
regulations prescribed by the Commission.
* * * * * * *
SEC. 16A. REQUIRED BOARD VOTE ON CORPORATE EXPENDITURES FOR POLITICAL
ACTIVITIES.
(a) Listing on Exchanges.--Effective not later than 180 days
after the date of enactment of this section, the Commission
shall, by rule, direct the national securities exchanges and
national securities associations to prohibit the listing of any
class of equity security of an issuer that is not in compliance
with the requirements of any portion of subsection (b).
(b) Requirement for Vote in Corporate Bylaws.--The corporate
bylaws of an issuer shall expressly provide for a vote of the
directors of the issuer on any individual expenditure for
political activities (as such term is defined in section
14C(d)(1)) in excess of $50,000, or any expenditure that makes
the total amount spent by the issuer for the particular
election (as such term is defined in section 301(1) of the
Federal Election Campaign Act of 1971 (2 U.S.C. 431(1)))
$50,000 or more. An issuer shall make publicly available the
individual votes of the directors required by the preceding
sentence within 48 hours of the vote, including in a clear and
conspicuous location on the Internet website of the issuer.
* * * * * * *
DISSENTING VIEWS
The following represents the views of the Republican
Members of the Committee on the following issues, consistent
with H.R. 4790, Shareholder Protection Act of 2010.
The Majority's designation of H.R. 4790 as the
``Shareholder Protection Act'' is a misnomer. The bill,
conceived of as a legislative response to the January 21, 2010
Supreme Court decision in Citizens United v. Federal Election
Commission, 558 U.S. 50 (2010), is less about protecting
shareholders and more about favoring the free speech rights of
some groups (labor unions) over others (corporations). Under
the legislation, public companies would have to prepare
political expenditure plans, present the plan to and seek
approval from the board, prepare the proxy, and schedule a
shareholder vote well in advance of the end of each fiscal
year. H.R. 4790 would deny public corporations the flexibility
to engage in the political process, and prejudice their ability
to advocate for or against legislative or regulatory
initiatives while still allowing unions to freely engage in
these activities.
Corporate boards and management have fiduciary duties to
the company and to the shareholders, yet H.R. 4790 would
hamstring these obligations and weaken corporations. If H.R.
4790 is enacted, public corporations will be forced to predict
all political expenditures for an upcoming fiscal year many
months in advance to ensure that shareholders approve of the
plan before the end of the company's fiscal year. This will
severely limit the free speech of all corporations by
prohibiting them from reacting to new or unexpected issues that
impact their business, ultimately eroding shareholder value.
The Majority confidently asserts that H.R. 4790 would not
impose additional costs on public companies because
corporations would simply add another line to their annual
proxy statement. However, to properly align this new
shareholder vote with the political calendar, a corporation
would need to schedule this vote at the end of its fiscal year,
not, as the Majority suggests, at its annual meeting, which is
typically held during the first quarter of each year.
Corporations would then have to prepare and distribute a
separate proxy statement for shareholders to express their
approval or disapproval of the proposed political expenditures.
It is an open question whether the U.S. Securities and Exchange
Commission (SEC) has the requisite expertise to provide
guidance to issuers as to what are ``expenditures for political
activities.'' It is unclear how a corporation would go about
proposing the ``specific nature'' of political expenditures to
satisfy the requirements of this bill, especially given the
fluidity of the political and electoral process.
By giving shareholders veto power over all political
expenditures, this legislation also undermines the longstanding
``business judgment rule,'' which insulates the decisions of a
corporation's board of directors from legal second-guessing as
long as the board has engaged in a ``rational or good faith
effort to advance corporate interest.'' The bill could open the
door to requiring shareholder approval of other matters
historically entrusted to corporate boards' discretion, such as
charitable donations or advertising expenses. Moreover, H.R.
4790 would preempt state corporate law and make expenditures
which shareholders have not approved a violation of the
corporation's fiduciary duty to its shareholders. This is a
serious departure from the long-established primacy of state
corporate law. As former Supreme Court Justice Lewis Powell
wrote in CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69
(1987), ``no principle of corporation law and practice is more
firmly established than a State's authority to regulate
domestic corporations, including the authority to define the
voting rights of shareholders.''
Section 4 of H.R. 4790 creates a new provision in the
Securities Exchange Act of 1934 to require all issuers to
disclose the votes of individual directors and force the U.S.
equity exchanges to delist public companies that do not
disclose their board votes. Such a requirement is not found in
any state corporate law for any board decision. Board roll call
votes are not required to declare bankruptcy, sell the
corporation or its assets, accept a buyout, or oppose a
takeover, which are all more significant events for any
publicly traded company than whether to make a specific
political expenditure.
As troubling is a provision added during the Committee
markup that would award triple damages to a shareholder if an
officer or director authorizes a political expenditure without
first obtaining the approval of a majority of shareholders. The
damages awarded would be triple the amount of the political
expenditure. In effect, these damages are exemplary and
punitive. This provision is therefore inconsistent with the
original intent of the Securities Exchange Act of 1934, which
makes no mention of exemplary or treble damages. Neither
statute nor case law supports any instance in which a
shareholder has been allowed to recover treble damages as a
result of the actions of a director or officer, and there is no
historical support for awarding treble damages in the context
of authorizing expenditures for advertisements. While treble
damages are awarded in antitrust and RICO cases, those cases
are aimed at punishing criminal behavior. As noted above,
awarding treble damages in this context goes against the
original intent of the '34 Act, and inappropriately penalizes
conduct when the wrong alleged is a civil injury, not a crime
or misdemeanor.
The ``Shareholder Protection Act'' applies to corporations,
but notably, it does not apply to unions. There is no provision
in Federal law that allows union members to vote to either
approve or disapprove their union's political expenditures.
Unions are the single largest contributor to political
campaigns in the country. Unions and their political action
committees claim to have spent nearly $450 million in the 2008
presidential race, and have accounted for approximately 40% of
campaign-related spending this year, as opposed to
corporations, which account for less than 15%. Unions
reportedly ``plan an enormous spending spree to help ensure
Democratic control of Congress'' after this fall's elections.
On June 26, 2010 Larry Scanlon, political director for the
American Federation of State, County, and Municipal Employees
(``AFSCME''), acknowledged the benefits conferred by the
Citizens United decision on organizations like his when he said
that ``the Citizens United case has taken the lid off, and so
we can use our soft money for express advocacy directly.''
Three unions alone--AFSCME, the AFL-CIO, and the Service
Employees International Union--expect to spend more than $150
million in the 2010 mid-term elections.
To provide union members with the ability to decide whether
their union dues should be used for political purposes or not,
Republicans strongly supported Representative Hensarling's
amendment prohibiting H.R. 4790 from taking effect until H.R.
5860, the ``Union Member Protection Act,'' is first enacted.
H.R. 5860 applies the framework established in H.R. 4790 to
unions, creating parity by giving actual union members (not
just fee-paying nonmembers) a vote on their union's political
contributions. Unfortunately, the Majority voted almost
entirely along party lines to reject this equitable application
of the Citizens United decision to labor unions and publicly
traded companies despite clear guidance from the Court that
both were covered by its decision.
The Committee ordered H.R. 4790 favorably reported without
holding a single legislative hearing to examine its far-
reaching impact on corporate governance and its chilling effect
on political free speech. The ``Shareholder Protection Act'' is
a flawed response in search of a problem that does not exist.
Republicans believe that the House should reject this ill-
considered legislation and send it back to the Committee on
Financial Services for a more thorough review of its potential
unintended consequences.
Spencer Bachus.
Scott Garrett.
Kevin McCarthy.
Jeb Hensarling.
Peter King.
J. Gresham Barrett.
Randy Neugebauer.
Judy Biggert.
Tom Price.
Lynn Jenkins.
Ron Paul.
Mike Castle.