BILL NUMBER: SB 982 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Evans
JANUARY 23, 2012
An act to add Chapter 7.5 (commencing with Section 750) to
Division 1 of Title 1 of the Corporations Code, relating to
corporations.
LEGISLATIVE COUNSEL'S DIGEST
SB 982, as introduced, Evans. Corporations: political activities:
shareholder disclosure.
Existing law, the General Corporation Law, provides for the
regulation of corporations. Under existing law, the board of
directors of a corporation is required, except as specified, to send
an annual report to shareholders containing, among other things, a
balance sheet as of the end of that fiscal year and an income
statement and a statement of cashflows for that fiscal year.
The Political Reform Act of 1974 provides for the regulation of
political campaign financing, including the reporting and disclosure
of campaign contributions and expenditures. Under the act, elected
officers, candidates for elective office, and campaign committees are
required to file periodic campaign statements that disclose
specified information for specified reporting periods, including the
amount of contributions received and the identities of donors.
This bill would require a corporation, as defined, that has
shareholders located in this state and that makes a contribution or
expenditure to, or in support of, or in opposition to, a candidate,
ballot measure campaign, or a signature-gathering effort on behalf of
a ballot measure, political party, or political action committee to
issue a report on the planned political expenditures of the
corporation in the forthcoming fiscal year as well as expenditures in
the previous fiscal year by specified means, including posting the
report on the corporation's Internet Web site, if any.
This bill would provide for a civil cause of action for damages by
a shareholder against a corporation for violations of the bill's
provisions. The bill would require a corporation to maintain records
that include copies of the reports on its political activities for 5
years, and to make copies of these reports available to the Secretary
of State upon request. The bill would also state findings and
declarations of the Legislature.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) Corporations make substantial political contributions and
expenditures to support and oppose candidates, ballot measures,
political parties, and political causes. However, decisions to use
corporate funds for political contributions and expenditures are
usually made by corporate boards and executives, rather than the
shareholders who own the corporations.
(b) Shareholders have a right to know how corporations are
spending shareholder funds to make political contributions and
expenditures to support or oppose candidates, ballot measures,
political parties, and political causes.
(c) Most shareholders have no means by which they may learn of,
influence, or object to the political activities of the corporations
in which they have invested. Moreover, most shareholders have no
means by which they may influence whether their invested funds not be
used to make political contributions or expenditures to support
candidates, ballot measures, political parties, or political causes
to which the shareholders are opposed.
(d) By limiting the extent to which corporate political
contributions and expenditures may be regulated, the United States
Supreme Court, through its decision in Citizens United v. Federal
Election Com'n (2010) 130 S.Ct. 876, has increased the need for
greater accountability of corporations to their shareholders with
regard to political contributions and expenditures.
(e) The Citizens United decision was handed down in January 2010,
but the debate over whether the invested funds of shareholders should
be used for political activities without their consent is not a new
one. In 1905, President Theodore Roosevelt said, "All contributions
by corporations to any political committee or for any political
purpose should be forbidden by law; directors should not be permitted
to use stockholders' money for such purposes."
(f) It is the intent of the Legislature in enacting this act to
inform shareholders and the public of how corporations are spending
funds to make political contributions and expenditures benefitting
candidates, political parties, and political causes.
SEC. 2. Chapter 7.5 (commencing with Section 750) is added to
Division 1 of Title 1 of the Corporations Code, to read:
CHAPTER 7.5. POLITICAL ACTIVITY
750. As used in this chapter, the following terms have the
following meanings:
(a) "Ballot measure" means a constitutional amendment or other
proposition that is submitted to a popular vote at an election by
action of a legislative body, or that is submitted or is intended to
be submitted to a popular vote at an election by initiative,
referendum, or recall procedure, whether or not it qualifies for the
ballot.
(b) "Corporation" means any of the following:
(1) A publicly held corporation with shareholders.
(2) An entity in which a corporation with shareholders has an
equity interest.
(3) The parent corporation of a subsidiary or affiliate of a
corporation with shareholders.
(c) "Political activity" means a contribution or expenditure made
to, or in support of, or in opposition to, a candidate, ballot
measure campaign, signature-gathering effort on behalf of a ballot
measure, political party, or political action committee.
(d) "Public corporation" means a corporation that is required to
file periodic reports pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (15 U.S.C. Secs. 78m(a),
78o(d)).
(e) "Shareholder" has the same meaning as set forth in Section
185.
751. A corporation that has shareholders with legal residency in
California and that engages in political activity shall do all of the
following:
(a) (1) Issue a report on the planned political expenditures of
the corporation in the forthcoming fiscal year as well as
expenditures in the previous fiscal year. The report shall include
all of the following:
(A) A description of the political activities.
(B) The name of the person, candidate, committee, or political
party, or a description of the political cause, to which each
contribution or expenditure was made.
(C) The aggregate amount of the contribution or contributions and
expenditure or expenditures for each candidate, ballot measure
campaign, signature-gathering effort on behalf of a ballot measure,
political party, or political action committee.
(D) If a contribution or expenditure was made in support of or in
opposition to a candidate, the office sought by the candidate and the
political party affiliation of the candidate.
(E) If a contribution or expenditure was made for or against a
ballot measure, a description of the ballot measure and a statement
as to whether the contribution or expenditure was made in support of
or in opposition to the ballot measure.
(2) A public corporation is deemed to have complied with this
subdivision if it includes the report required by paragraph (1) in
its annual report to shareholders under a separate caption entitled
"Political Activity Report," if the annual report is provided to
shareholders within 90 days of the fiscal yearend.
(3) If the corporation maintains an Internet Web site, the
corporation shall post the report required by this subdivision on its
Internet Web site.
(b) This section shall not apply to a corporation's use of
segregated accounts, political action committees, or political
committees, as long as the funds in those accounts or committees come
from shareholders, board members, or employees of the corporation
who, as individuals, choose to contribute to those accounts or
committees.
752. (a) A corporation subject to Section 751 shall maintain
records of its political activities, including the report required by
subdivision (a), for a minimum of five years.
(b) Upon a request by the Secretary of State, a corporation shall
file with the Secretary of State a copy of each report produced
pursuant to subdivision (a) of Section 751.
753. No provision of Section 751 shall be construed to relieve a
corporation of its obligations under existing law, including but not
limited to, the following:
(a) Section 604, or a successor statute or regulation.
(b) Any state or federal statute or regulation that regulates the
solicitation of proxies.
(c) With respect to a corporation with an outstanding class of
securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (15 U.S.C. Sec. 78l), the proxy
rules promulgated under that act.
754. (a) A violation of Section 751 by a corporation shall create
a civil cause of action for damages against the corporation that may
be brought by any shareholder of the corporation.
(b) The remedies provided in this section are in addition to any
other rights or remedies available under any other provision of law.
755. The provisions of this chapter are severable. If any
provision of this chapter or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.