II 

112TH CONGRESS 

1ST SESSION S. 1360 

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 SENATE OF THE UNITED STATES 

JULY 13, 2011 

Mr. MENENDEZ (for himself, Mr. BLUMENTHAL, Mr. LAUTENBERG, Mr. 

WHITEHOUSE, Mr. BROWN of Ohio, and Mrs. FEINSTEIN) introduced the 

following bill; which was read twice and referred to the Committee on 

Banking, Housing, and Urban Affairs 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Shareholder Protection 

5 Act of 2011’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds the following: 


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1 (1) Corporations make significant political con2 tributions and expenditures that directly or indi3 rectly influence the election of candidates and sup4 port or oppose political causes. Decisions to use cor5 porate funds for political contributions and expendi6 tures are usually made by corporate boards and ex7 ecutives, rather than shareholders. 

8 (2) Corporations, acting through their boards 

9 and executives, are obligated to conduct business for 

10 the best interests of their owners, the shareholders. 

11 (3) Historically, shareholders have not had a 

12 way to know, or to influence, the political activities 

13 of corporations they own. Shareholders and the pub14 lic have a right to know how corporations are spend15 ing their funds to make political contributions and 

16 expenditures benefitting candidates, political parties, 

17 and political causes. 

18 (4) Corporations should be accountable to their 

19 shareholders in making political contributions or ex20 penditures affecting Federal governance and public 

21 policy. Requiring the express approval of a corpora22 tion’s shareholders prior to making political con23 tributions or expenditures will establish necessary 

24 accountability. 


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1 SEC. 3. SHAREHOLDER APPROVAL OF CORPORATE POLIT2 ICAL ACTIVITY. 

3 The Securities Exchange Act of 1934 (15 U.S.C. 78a 

4 et seq.) is amended by inserting after section 14B (15 

5 U.S.C. 78n–2) the following: 

6 ‘‘SEC. 14C. SHAREHOLDER APPROVAL OF CERTAIN POLIT7 ICAL EXPENDITURES AND DISCLOSURE OF 

8 VOTES OF INSTITUTIONAL INVESTORS. 

9 ‘‘(a) DEFINITIONS.—In this section— 

10 ‘‘(1) the term ‘expenditure for political activi11 ties’— 

12 ‘‘(A) means— 

13 ‘‘(i) an independent expenditure, as 

14 such term is defined in section 301(17) of 

15 the Federal Election Campaign Act of 

16 1971 (2 U.S.C. 431(17)); 

17 ‘‘(ii) an electioneering communication, 

18 as such term is defined in section 

19 304(f)(3) of such Act (2 U.S.C. 434(f)(3)) 

20 and any other public communication (as 

21 such term is defined in section 301(22) of 

22 such Act (2 U.S.C. 431(22))) that would 

23 be an electioneering communication if it 

24 were a broadcast, cable, or satellite com25 munication; or 


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1 ‘‘(iii) dues or other payments to trade 

2 associations or organizations described in 

3 section 501(c) of the Internal Revenue 

4 Code of 1986 and exempt from tax under 

5 section 501(a) of such Code that are, or 

6 could reasonably be anticipated to be, used 

7 or transferred to another association or or8 ganization for the purposes described in 

9 clauses (i) or (ii); and 

10 ‘‘(B) does not include— 

11 ‘‘(i) direct lobbying efforts through 

12 registered lobbyists employed or hired by 

13 the issuer; 

14 ‘‘(ii) communications by an issuer to 

15 its shareholders and executive or adminis16 trative personnel and their families; or 

17 ‘‘(iii) the establishment and adminis18 tration of contributions to a separate seg19 regated fund to be utilized for political 

20 purposes by a corporation; and 

21 ‘‘(2) the term ‘issuer’ does not include an in22 vestment company registered under section 8 of the 

23 Investment Company Act of 1940 (15 U.S.C. 80a– 

24 8). 


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1 ‘‘(b) SHAREHOLDER AUTHORIZATION FOR POLIT2 ICAL EXPENDITURES.—Each solicitation of proxy, con3 sent, or authorization by an issuer with a class of equity 

4 securities registered under section 12 of this title shall— 

5 ‘‘(1) contain— 

6 ‘‘(A) a description of the specific nature of 

7 any expenditure for political activities proposed 

8 to be made by the issuer for the forthcoming 

9 fiscal year that has not been authorized by a 

10 vote of the shareholders of the issuer, to the ex11 tent the specific nature is known to the issuer; 

12 and 

13 ‘‘(B) the total amount of expenditures for 

14 political activities proposed to be made by the 

15 issuer for the forthcoming fiscal year; and 

16 ‘‘(2) provide for a separate vote of the share17 holders of the issuer to authorize such expenditures 

18 for political activities in the total amount described 

19 in paragraph (1). 

20 ‘‘(c) VOTE REQUIRED TO MAKE EXPENDITURES.— 

21 No issuer shall make an expenditure for political activities 

22 in any fiscal year unless such expenditure— 

23 ‘‘(1) is of the nature of those proposed by the 

24 issuer in subsection (b)(1); and 


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1 ‘‘(2) has been authorized by a vote of the ma2 jority of the outstanding shares of the issuer in ac3 cordance with subsection (b)(2). 

4 ‘‘(d) FIDUCIARY DUTY; LIABILITY.— 

5 ‘‘(1) FIDUCIARY DUTY.—A violation of sub6 section (c) shall be considered a breach of a fidu7 ciary duty of the officers and directors who author8 ized the expenditure for political activities. 

9 ‘‘(2) LIABILITY.—An officer or director of an 

10 issuer who authorizes an expenditure for political ac11 tivities in violation of subsection (c) shall be jointly 

12 and severally liable in any action brought in a court 

13 of competent jurisdiction to any person or class of 

14 persons who held shares at the time the expenditure 

15 for political activities was made for an amount equal 

16 to 3 times the amount of the expenditure for polit17 ical activities. 

18 ‘‘(e) DISCLOSURE OF VOTES.— 

19 ‘‘(1) DISCLOSURE REQUIRED.—Each institu20 tional investment manager subject to section 13(f) 

21 shall disclose not less frequently than annually how 

22 it voted on any shareholder vote under subsection 

23 (a), unless the vote is otherwise required by rule of 

24 the Commission to be reported publicly. 


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1 ‘‘(2) RULES.—Not later than 6 months after 

2 the date of enactment of this section, the Commis3 sion shall issue rules to carry out this subsection 

4 that require that a disclosure required under para5 graph (1)— 

6 ‘‘(A) be made not later than 30 days after 

7 a vote described in paragraph (1); and 

8 ‘‘(B) be made available to the public 

9 through the EDGAR system as soon as prac10 ticable. 

11 ‘‘(f) SAFE HARBOR FOR CERTAIN DIVESTMENT DE12 CISIONS.—Notwithstanding any other provision of Federal 

13 or State law, if an institutional investment manager makes 

14 the disclosures required under subsection (e), no person 

15 may bring any civil, criminal, or administrative action 

16 against the institutional investment manager, or any em17 ployee, officer, or director thereof, based solely upon a de18 cision of the investment manager to divest from, or not 

19 to invest in, securities of an issuer due to an expenditure 

20 for political activities made by the issuer.’’. 

21 SEC. 4. REQUIRED BOARD VOTE ON CORPORATE EXPENDI22 TURES FOR POLITICAL ACTIVITIES. 

23 The Securities Exchange Act of 1934 (15 U.S.C. 78 

24 et seq.) is amended by adding after section 16 (15 U.S.C. 

25 78p) the following: 


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1 ‘‘SEC. 16A. REQUIRED BOARD VOTE ON CORPORATE EX2 PENDITURES FOR POLITICAL ACTIVITIES. 

3 ‘‘(a) DEFINITIONS.—In this section, the terms ‘ex4 penditure for political activities’ and ‘issuer’ have the same 

5 meaning as in section 14C. 

6 ‘‘(b) LISTING ON EXCHANGES.—Not later than 180 

7 days after the date of enactment of this section, the Com8 mission shall, by rule, direct the national securities ex9 changes and national securities associations to prohibit the 

10 listing of any class of equity security of an issuer that 

11 is not in compliance with the requirements of any portion 

12 of subsection (c). 

13 ‘‘(c) REQUIREMENT FOR VOTE IN CORPORATE BY14 LAWS.— 

15 ‘‘(1) VOTE REQUIRED.—The bylaws of an 

16 issuer shall expressly provide for a vote of the board 

17 of directors of the issuer on— 

18 ‘‘(A) any expenditure for political activities 

19 in excess of $50,000; and 

20 ‘‘(B) any expenditure for political activities 

21 that would result in the total amount spent by 

22 the issuer for a particular election (as such 

23 term is defined in section 301(1) of the Federal 

24 Election Campaign Act of 1971 (2 U.S.C. 

25 431(1))) in excess of $50,000. 


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1 ‘‘(2) PUBLIC AVAILABILITY.—An issuer shall 

2 make the votes of each member of the board of di3 rectors for a vote required under paragraph (1) pub4 licly available not later than 48 hours after the vote, 

5 including in a clear and conspicuous location on the 

6 Web site of the issuer. 

7 ‘‘(d) NO EFFECT ON DETERMINATION OF COORDINA8 TION WITH CANDIDATES OR CAMPAIGNS.—For purposes 

9 of the Federal Election Campaign Act of 1971, an expend10 iture for political activities by an issuer shall not be treat11 ed as made in concert or cooperation with, or at the re12 quest or suggestion of, any candidate or committee solely 

13 because a member of the board of directors of the issuer 

14 voted on the expenditure as required under this section.’’. 

15 SEC. 5. REPORTING REQUIREMENTS. 

16 Section 13 of the Securities Exchange Act of 1934 

17 (15 U.S.C. 78m) is amended by adding at the end the 

18 following: 

19 ‘‘(r) REPORTING REQUIREMENTS RELATING TO CER20 TAIN POLITICAL EXPENDITURES.— 

21 ‘‘(1) DEFINITIONS.—In this subsection, the 

22 terms ‘expenditure for political activities’ and 

23 ‘issuer’ have the same meaning as in section 14C. 

24 ‘‘(2) QUARTERLY REPORTS.— 


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1 ‘‘(A) REPORTS REQUIRED.—Not later than 

2 180 days after the date of enactment of this 

3 subsection, the Commission shall amend the re4 porting rules under this section to require each 

5 issuer with a class of equity securities reg6 istered under section 12 of this title to submit 

7 to the Commission and the shareholders of the 

8 issuer a quarterly report containing— 

9 ‘‘(i) a description of any expenditure 

10 for political activities made during the pre11 ceding quarter; 

12 ‘‘(ii) the date of each expenditure for 

13 political activities; 

14 ‘‘(iii) the amount of each expenditure 

15 for political activities; 

16 ‘‘(iv) the votes of each member of the 

17 board of directors authorizing the expendi18 ture for political activity, as required under 

19 section 16A(c); 

20 ‘‘(v) if the expenditure for political ac21 tivities was made in support of or opposed 

22 to a candidate, the name of the candidate 

23 and the office sought by, and the political 

24 party affiliation of, the candidate; and 


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1 ‘‘(vi) the name or identity of trade as2 sociations or organizations described in 

3 section 501(c) of the Internal Revenue 

4 Code of 1986 and exempt from tax under 

5 section 501(a) of such Code which receive 

6 dues or other payments as described in 

7 section 14C(a)(1)(A)(iii). 

8 ‘‘(B) PUBLIC AVAILABILITY.—The Com9 mission shall ensure that, to the greatest extent 

10 practicable, the quarterly reports required 

11 under this paragraph are publicly available 

12 through the Web site of the Commission and 

13 through the EDGAR system in a manner that 

14 is searchable, sortable, and downloadable, con15 sistent with the requirements under section 24. 

16 ‘‘(3) ANNUAL REPORTS.—Not later than 180 

17 days after the date of enactment of this subsection, 

18 the Commission shall, by rule, require each issuer to 

19 include in the annual report of the issuer to share20 holders a summary of each expenditure for political 

21 activities made during the preceding year in excess 

22 of $10,000, and each expenditure for political activi23 ties for a particular election if the total amount of 

24 such expenditures for that election is in excess of 

25 $10,000.’’. 


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1 SEC. 6. REPORTS. 

2 (a) SECURITIES AND EXCHANGE COMMISSION.—The 

3 Securities and Exchange Commission shall— 

4 (1) conduct an annual assessment of the com5 pliance of issuers and officers and members of the 

6 boards of directors of issuers with sections 14C, 

7 16A, and 13(r) of the Securities Exchange Act, as 

8 added by this Act; and 

9 (2) submit to Congress an annual report of con10 taining the results of the assessment under para11 graph (1). 

12 (b) GOVERNMENT ACCOUNTABILITY OFFICE.—The 

13 Comptroller General of the United States shall periodically 

14 evaluate and report to Congress on the effectiveness of the 

15 oversight by the Securities and Exchange Commission of 

16 the reporting and disclosure requirements under sections 

17 14C, 16A, and 13(r) of the Securities Exchange Act, as 

18 added by this Act. 

19 SEC. 7. SEVERABILITY. 

20 If any provision of this Act, an amendment made by 

21 this Act, or the application of such provision or amend22 ment to any person or circumstance is held to be unconsti23 tutional, the remainder of this Act, the amendments made 

24 by this Act, and the application of such provision or 


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1 amendment to any person or circumstance shall not be af2 fected thereby. 

Æ 


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