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March 7, 2013
Testimony before the Education, Health, and Environmental Affairs Committee
Position: Maryland PIRG supports SB 772 and all bills that encourage greater accountability and transparency in campaign finance.
Comments: SB 772 requires that corporations and businesses operating in Maryland provide an opportunity for their shareholders to vote on any political spending by the company.
Such requirements protect shareholders, whose business interests the corporations and managers are meant to represent. It provides a check on the power of managers making contributions based on their own preferences rather than on what will best serve shareholders. Importantly, it also explicitly states that shareholders may bring a civil action against a company that fails to obtain shareholder approval for political spending, and holds corporate directors both jointly and personally liable for adhering to the law.
Controversial political spending can impact a company’s profits, and not always for the better. At the moment, shareholders often do not even know when their corporation is making political contributions or what candidates and ballot questions it is supporting. Even if they do find out about corporate spending in politics, if they disagree with it, they currently have few options other than to sell their shares.
Furthermore, a study done by researchers at the University of Minnesota’s Carlson School of Management found that large corporate political expenditures correlate with lower shareholder value and less effective management. Instead, managers are advancing political agendas of their own, rather than representing the interests and beliefs of their shareholders.
Shareholders have a right to know how a company is spending money in politics and to have the final say over the decision to do so.
Shareholder approval also benefits the public. Until we are able to pass an amendment that limits corporate and secret spending in our elections, ensuring greater oversight for that spending can mitigate the damage done by big, dark money. And by providing an extra hurdle to be overcome before making political contributions, shareholder approval acts can also decrease the amount of political spending done by corporations.
While a shareholder approval law has not been passed in the U.S., it has been in the U.K. The law there is similar to the measures presented in SB 772 and requires that proposed political spending be presented to shareholders in their annual meeting and voted upon.
And a similar law has been introduced on the federal level: the Shareholder Protection Act. In the wake of the Citizens United decision, which overturned years of legal precedent in granting corporations First Amendment rights to spend in political campaigns, measures like this to restore the power of individuals are more important than ever.
This bill presents an important opportunity for Maryland to take the lead in the U.S. in fighting for the public interest over narrowly interpreted corporate interests.
Conclusion: Maryland PIRG strongly supports SB 772 and urges the committee to make a favorable report.
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