Shareholder Protection Act of 2017
This bill amends the Securities Exchange Act of 1934 to require shareholder authorization with respect to certain political expenditures by an issuer.
A violation of this requirement shall be considered a breach of fiduciary duty, and the officers and directors who authorized the expenditure shall be subject to joint and several liability.
The Securities and Exchange Commission must direct the national securities exchanges and associations to prohibit the listing of any equity security of an issuer whose corporate bylaws do not require a board vote with respect to political expenditures in excess of $50,000. An issuer must, within 48 hours, make publicly available the individual votes of each board member with respect to such expenditures.
The bill establishes various reporting requirements.
[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 376 Introduced in House (IH)]
<DOC>
115th CONGRESS
1st Session
H. R. 376
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.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 9, 2017
Mr. Capuano (for himself, Mr. Brendan F. Boyle of Pennsylvania, Mr.
Connolly, Mr. Conyers, Mr. Cummings, Mr. Deutch, Mr. Ellison, Ms.
Lofgren, Mrs. Carolyn B. Maloney of New York, Mr. McGovern, Ms. Moore,
Ms. Norton, Ms. Pingree, Mr. Sarbanes, Ms. Schakowsky, Ms. Slaughter,
Ms. Titus, Ms. Tsongas, Mr. Yarmuth, Mr. Quigley, Mr. Keating, Ms.
Castor of Florida, and Ms. Eshoo) introduced the following bill; which
was referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
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.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Shareholder Protection Act of
2017''.
SEC. 2. FINDINGS.
Congress finds that--
(1) corporations make significant political contributions
and expenditures that directly or indirectly influence the
election of candidates and support or oppose political causes;
(2) decisions to use corporate funds for political
contributions and expenditures are usually made by corporate
boards and executives, rather than shareholders;
(3) corporations, acting through boards and executives, are
obligated to conduct business for the best interests of their
owners, the shareholders;
(4) historically, shareholders have not had a way to know,
or to influence, the political activities of corporations they
own;
(5) shareholders and the public have a right to know how
corporate managers are spending company funds to make political
contributions and expenditures benefitting candidates,
political parties, and political causes;
(6) corporations should be accountable to shareholders in
making political contributions or expenditures affecting
Federal governance and public policy; and
(7) requiring a corporation to obtain the express approval
of 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 (15 U.S.C. 78a et seq.) is
amended by inserting after section 14B (15 U.S.C. 78n-2) the following:
``SEC. 14C. SHAREHOLDER APPROVAL OF CERTAIN POLITICAL EXPENDITURES AND
DISCLOSURE OF VOTES OF INSTITUTIONAL INVESTORS.
``(a) Definitions.--In this section--
``(1) the term `expenditure for political activities'--
``(A) means--
``(i) an independent expenditure (as
defined in section 301(17) of the Federal
Election Campaign Act of 1971 (52 U.S.C.
30101(17)));
``(ii) an electioneering communication (as
defined in section 304(f)(3) of that Act (52
U.S.C. 30104(f)(3))) and any other public
communication (as defined in section 301(22) of
that Act (52 U.S.C. 30101(22))) that would be
an electioneering communication if it were a
broadcast, cable, or satellite communication;
or
``(iii) dues or other payments to trade
associations or organizations described in
section 501(c) of the Internal Revenue Code of
1986 and exempt from tax under section 501(a)
of that Code that are, or could reasonably be
anticipated to be, used or transferred to
another association or organization for the
purposes described in clauses (i) or (ii); and
``(B) does not include--
``(i) direct lobbying efforts through
registered lobbyists employed or hired by the
issuer;
``(ii) communications by an issuer to its
shareholders and executive or administrative
personnel and their families; or
``(iii) the establishment and
administration of contributions to a separate
segregated fund to be utilized for political
purposes by a corporation; and
``(2) the term `issuer' does not include an investment
company registered under section 8 of the Investment Company
Act of 1940 (15 U.S.C. 80a-8).
``(b) Shareholder Authorization for Political Expenditures.--Each
solicitation of proxy, consent, or authorization by an issuer with a
class of equity securities registered under section 12 of this title
shall--
``(1) contain--
``(A) a description of the specific nature of any
expenditure for political activities proposed to be
made by the issuer for the forthcoming fiscal year that
has not been authorized by a vote of the shareholders
of the issuer, to the extent the specific nature is
known to the issuer; and
``(B) the total amount of expenditures for
political activities proposed to be made by the issuer
for the forthcoming fiscal year; and
``(2) provide for a separate vote of the shareholders of
the issuer to authorize such expenditures for political
activities in the total amount described in paragraph (1).
``(c) Vote Required To Make Expenditures.--No issuer shall make an
expenditure for political activities in any fiscal year unless such
expenditure--
``(1) is of the nature of those proposed by the issuer in
subsection (b)(1); and
``(2) has been authorized by a vote of the majority of the
outstanding shares of the issuer in accordance with subsection
(b)(2).
``(d) Fiduciary Duty; Liability.--
``(1) Fiduciary duty.--A violation of subsection (c) shall
be considered a breach of a fiduciary duty of the officers and
directors who authorized the expenditure for political
activities.
``(2) Liability.--An officer or director of an issuer who
authorizes an expenditure for political activities in violation
of subsection (c) shall be jointly and severally liable in any
action brought in a court of competent jurisdiction to any
person or class of persons who held shares at the time the
expenditure for political activities was made for an amount
equal to 3 times the amount of the expenditure for political
activities.
``(e) Disclosure of Votes.--
``(1) Disclosure required.--Each institutional investment
manager subject to section 13(f) shall disclose not less
frequently than annually how the institutional investment
manager voted on any shareholder vote under subsection (a),
unless the vote is otherwise required by rule of the Commission
to be reported publicly.
``(2) Rules.--Not later than 6 months after the date of
enactment of this section, the Commission shall issue rules to
carry out this subsection that require that a disclosure
required under paragraph (1)--
``(A) be made not later than 30 days after a vote
described in paragraph (1); and
``(B) 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, if an
institutional investment manager makes the disclosures required under
subsection (e), no person may bring any civil, criminal, or
administrative action against the 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 due to an expenditure for political activities
made by the issuer.''.
SEC. 4. REQUIRED BOARD VOTE ON CORPORATE EXPENDITURES FOR POLITICAL
ACTIVITIES.
The Securities Exchange Act of 1934 (15 U.S.C. 78 et seq.) is
amended by adding after section 16 (15 U.S.C. 78p) the following:
``SEC. 16A. REQUIRED BOARD VOTE ON CORPORATE EXPENDITURES FOR POLITICAL
ACTIVITIES.
``(a) Definitions.--In this section, the terms `expenditure for
political activities' and `issuer' have the meaning given the terms in
section 14C.
``(b) Listing on Exchanges.--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
(c).
``(c) Requirement for Vote in Corporate Bylaws.--
``(1) Vote required.--The bylaws of an issuer shall
expressly provide for a vote of the board of directors of the
issuer on--
``(A) any expenditure for political activities in
excess of $50,000; and
``(B) any expenditure for political activities that
would result in the total amount spent by the issuer
for a particular election (as defined in section 301(1)
of the Federal Election Campaign Act of 1971 (52 U.S.C.
30101(1))) in excess of $50,000.
``(2) Public availability.--An issuer shall make the votes
of each member of the board of directors for a vote required
under paragraph (1) publicly available not later than 48 hours
after the vote, including in a clear and conspicuous location
on the Internet website of the issuer.
``(d) No Effect on Determination of Coordination With Candidates or
Campaigns.--For purposes of the Federal Election Campaign Act of 1971
(52 U.S.C. 30101 et seq.), an expenditure for political activities by
an issuer shall not be treated as made in concert or cooperation with,
or at the request or suggestion of, any candidate or committee solely
because a member of the board of directors of the issuer voted on the
expenditure as required under this section.''.
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:
``(s) Reporting Requirements Relating to Certain Political
Expenditures.--
``(1) Definitions.--In this subsection, the terms
`expenditure for political activities' and `issuer' have the
same meaning as in section 14C.
``(2) Quarterly reports.--
``(A) Reports required.--Not later than 180 days
after the date of enactment of this subsection, the
Commission shall amend the reporting rules under this
section to require each issuer with a class of equity
securities registered under section 12 of this title to
submit to the Commission and the shareholders of the
issuer a quarterly report containing--
``(i) a description of any expenditure for
political activities made during the preceding
quarter;
``(ii) the date of each expenditure for
political activities;
``(iii) the amount of each expenditure for
political activities;
``(iv) the votes of each member of the
board of directors authorizing the expenditure
for political activity, as required under
section 16A(c);
``(v) if the expenditure for political
activities was made in support of or opposed to
a candidate, the name of the candidate and the
office sought by, and the political party
affiliation of, the candidate; and
``(vi) the name or identity of trade
associations or organizations described in
section 501(c) of the Internal Revenue Code of
1986 and exempt from tax under section 501(a)
of such Code which receive dues or other
payments as described in section
14C(a)(1)(A)(iii).
``(B) Public availability.--The Commission shall
ensure that, to the greatest extent practicable, the
quarterly reports required under this paragraph are
publicly available through the Internet website of the
Commission and through the EDGAR system in a manner
that is searchable, sortable, and downloadable,
consistent with the requirements under section 24.
``(3) 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 the annual report of
the issuer to shareholders a summary of each expenditure for
political activities made during the preceding year in excess
of $10,000, and each expenditure for political activities for a
particular election if the total amount of such expenditures
for that election is in excess of $10,000.''.
SEC. 6. REPORTS.
(a) Securities and Exchange Commission.--The Securities and
Exchange Commission shall--
(1) conduct an annual assessment of the compliance of
issuers and officers and members of the boards of directors of
issuers with sections 13(s), 14C, and 16A of the Securities
Exchange Act, as added by this Act; and
(2) submit to Congress an annual report containing the
results of the assessment under paragraph (1).
(b) Government Accountability Office.--The Comptroller General of
the United States shall periodically evaluate and report to Congress on
the effectiveness of the oversight by the Securities and Exchange
Commission of the reporting and disclosure requirements under sections
13(s), 14C, and 16A of the Securities Exchange Act, as added 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.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
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