This legislation would require corporations formed under the business corporation law, the cooperative corporation law, the not-for-profit corporation law, the railroad law, the transportation corporations law, the banking law, and the limited liability corporations law to obtain prior shareholder approval before making any political donations in New York.
The sponsor's memo states that the legislation is in response to the United State's Supreme Court decision in Citizen's United v. Federal Election Commission.
Using this Supreme Court decision as a rationale for this legislation is misplaced and indicates a misunderstanding of the decision. The result of the holding in Citizens United v. Federal Election Commission is to permit independent campaign expenditures by corporations, and did not create a change in New York Law that necessitates placing a new restriction on the ability of business entities to make any political expenditure.
Corporations are affected by state legislation and regulations and ought to have the right to participate in the political process.
The degree to which shareholders are involved in political spending by the entities in which they hold shares should be an issue for shareholders, not legislators, to decide. In fact, numerous proposals related to political spending are considered by shareholders each year. To mandate shareholder votes relating to political spending in New York is unworkable, and designed simply to deter business involvement in the political process. The vast majority of shareholders in many of the Corporations subject to this proposal would have no relationship with New York State, and in many instances a large percentage of shareholders are institutions, not individuals. Requiring even an annual approval vote of a budget for political expenditures will likely result in reduction in corporate participation in the political process, in that the Corporation would have to know which issues and races it intended to weigh in on as far as a full year in advance, when many of the issues and candidates may not yet be known.
In one recent report, shareholder proposals on political contributions were the fourth most common category of proposal voted on during the 2013 proxy season. Tellingly, as a category, these proposals received about 33 percent shareholder approval, indicating relatively limited support by actual shareholders. (See Alliance Advisors' “Proxy Season Preview: 2014 Shareholder Initiatives.")
Moreover, the bills requirements for disclosures regarding corporate campaign contributions and independent expenditures are duplicative of existing Board of Elections' reporting requirements.
New York already imposes unique restrictions on corporate political activity not applicable to other participants in political advocacy, creating an unequal playing field. This legislation would do more of the same, impose duplicative administrative burdens on business, and impose legislative mandates in an areas that should be left to shareholder decisions.
For these reasons, The Business Council opposes approval of S.177.