I 

111TH CONGRESS 

2D SESSION H. R. 4790 

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 

MARCH 9, 2010 

Mr. CAPUANO (for himself, Mr. ACKERMAN, Mr. FILNER, Mr. GRAYSON, Mr. 

HIMES, Mr. HOLT, Mrs. MALONEY, Mr. PALLONE, Mr. PETERS, and Ms. 

ROYBAL-ALLARD) introduced the following bill; which was referred to the 

Committee on Financial Services, and in addition to the Committee on 

House Administration, for a period to be subsequently determined by the 

Speaker, in each case for consideration of such provisions as fall within 

the jurisdiction of the committee concerned 

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 2010’’. 


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1 SEC. 2. FINDINGS. 

2 Congress finds the following: 

3 (1) Corporations make significant political con4 tributions and expenditures that directly or indi5 rectly influence the election of candidates and sup6 port or oppose political causes. Decisions to use cor7 porate funds for political contributions and expendi8 tures are usually made by corporate boards and ex9 ecutives, rather than shareholders. 

10 (2) Corporations, acting through their boards 

11 and executives, are obligated to conduct business for 

12 the best interests of their owners, the shareholders. 

13 (3) Historically, shareholders have not had a 

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

15 of corporations they own. Shareholders and the pub16 lic have a right to know how corporations are spend17 ing their funds to make political contributions or ex18 penditures benefitting candidates, political parties, 

19 and political causes. 

20 (4) Corporations should be accountable to their 

21 shareholders in making political contributions or ex22 penditures affecting Federal governance and public 

23 policy. Requiring the express approval of a corpora24 tion’s shareholders prior to making political con25 tributions or expenditures will establish necessary 

26 accountability. 


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1 SEC. 2. SHAREHOLDER APPROVAL OF CORPORATE POLIT2 ICAL ACTIVITY. 

3 The Securities Exchange Act of 1934 is amended by 

4 inserting after section 14 the following new section: 

5 ‘‘SEC. 14A. SHAREHOLDER APPROVAL OF CERTAIN POLIT6 ICAL EXPENDITURES. 

7 ‘‘(a) SHAREHOLDER AUTHORIZATION FOR POLITICAL

8 EXPENDITURES.—Any solicitation of any proxy or consent 

9 or authorization in respect of any security of an issuer 

10 shall— 

11 ‘‘(1) contain a description of the specific nature 

12 of any expenditures for political activities proposed 

13 to be made by the issuer for the forthcoming fiscal 

14 year, to the extent the specific nature is known to 

15 the issuer and including the total amount of such 

16 proposed expenditures; and 

17 ‘‘(2) provide for a separate shareholder vote to 

18 authorize such proposed expenditures in such 

19 amount. 

20 ‘‘(b) RESTRICTION ON EXPENDITURES.—No issuer 

21 shall make any expenditure for political activities in any 

22 fiscal year unless— 

23 ‘‘(1) such expenditure is of the nature of those 

24 proposed by the issuer pursuant to subsection (a)(1); 

25 and 


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1 ‘‘(2) authorization for such expenditures has 

2 been granted by votes representing a majority of 

3 outstanding shares pursuant to subsection (a)(2). 

4 ‘‘(c) FIDUCIARY DUTY; LIABILITY.—A violation of 

5 subsection (b) shall be considered a breach of a fiduciary 

6 duty of the officers and directors who authorized such an 

7 expenditure. The officers and directors who authorize such 

8 an expenditure without first obtaining such authorization 

9 of shareholders shall be jointly and severally liable in any 

10 action brought in any court of competent jurisdiction to 

11 any shareholder or class of shareholders for the amount 

12 of such expenditure. 

13 ‘‘(d) DEFINITION OF EXPENDITURE FOR POLITICAL

14 ACTIVITIES.—As used in this section: 

15 ‘‘(1) The term ‘expenditure for political activi16 ties’ means— 

17 ‘‘(A) an independent expenditure, as such 

18 term is defined in section 301(17) of the Fed19 eral Election Campaign Act of 1971 (2 U.S.C. 

20 431(17)); 

21 ‘‘(B) contributions to any political party, 

22 committee, or electioneering communication, as 

23 such term is defined in section 304(f)(3)(A) of 

24 the Federal Election Campaign Act of 1971 (2 

25 U.S.C. 434(f)(3)(A)); and 


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1 ‘‘(C) dues or other payments to trade asso2 ciations or other tax exempt organizations that 

3 are, or could reasonably be anticipated to be, 

4 used for the purposes described in subpara5 graph (A). 

6 ‘‘(2) Such term shall not include— 

7 ‘‘(A) direct lobbying efforts through reg8 istered lobbyists employed or hired by the 

9 issuer; 

10 ‘‘(B) communications by an issuer to its 

11 shareholders and executive or administrative 

12 personnel and their families; or 

13 ‘‘(C) the establishment, administration, 

14 and solicitation of contributions to a separate 

15 segregated fund to be utilized for political pur16 poses by a corporation.’’. 

17 SEC. 3. DISCLOSURE OF PROXY VOTES BY INSTITUTIONAL 

18 INVESTORS. 

19 Section 13(f) of the Securities Exchange Act of 1934 

20 (15 U.S.C. 78m(f)) is amended by redesignating para21 graph (5) as paragraph (7) and inserting after paragraph 

22 (4) the following: 

23 ‘‘(5) DISCLOSURE OF VOTES.—Each institu24 tional investment manager subject to this subsection 

25 shall include in the reports required under this subVerDate Nov 24 2008 22:32 Mar 10, 2010 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H4790.IH H4790

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1 section, at least annually, a statement of how it 

2 voted on any shareholder vote provided for under 

3 section 14A(a) that occurred since the manager’s 

4 last such statement, unless such vote is otherwise re5 quired to be reported publicly by rule or regulation 

6 of the Commission. Not later than 6 months after 

7 the date of enactment of this paragraph, the Com8 mission shall issue rules and regulations to imple9 ment this paragraph. 

10 ‘‘(6) SAFE HARBOR FOR CERTAIN DIVESTMENT

11 DECISIONS.—Notwithstanding any other provision of 

12 Federal or State law, no person may bring any civil, 

13 criminal, or administrative action against any insti14 tutional investment manager, or any employee, offi15 cer, or director thereof, based solely upon a decision 

16 of the investment manager to divest from, or not to 

17 invest in, securities of an issuer because of expendi18 tures for political activities made by that issuer.’’. 

19 SEC. 4. REQUIRED BOARD VOTE ON CORPORATE EXPENDI20 TURES FOR POLITICAL ACTIVITIES. 

21 (a) REQUIRED VOTE.—The Securities Exchange Act 

22 of 1934 is amended by adding after section 16 the fol23 lowing new section: 


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

3 ‘‘(a) LISTING ON EXCHANGES.—Effective not later 

4 than 180 days after the date of enactment of this section, 

5 the Commission shall, by rule, direct the national securi6 ties exchanges and national securities associations to pro7 hibit the listing of any class of equity security of an issuer 

8 that is not in compliance with the requirements of any 

9 portion of subsection (b). 

10 ‘‘(b) REQUIREMENT FOR VOTE IN CORPORATE BY11 LAWS.—The corporate bylaws of an issuer shall expressly 

12 provide for a vote of the directors of the issuer on any 

13 individual expenditure for political activities (as such term 

14 is defined in section 14A(d)(1)) in excess of $50,000. An 

15 issuer shall make publicly available the individual votes of 

16 the directors required by the preceding sentence within 48 

17 hours of the vote, including in a clear and conspicuous 

18 location on the Internet website of the issuer.’’. 

19 (b) NO EFFECT ON DETERMINATION OF COORDINA20 TION WITH CANDIDATES OR CAMPAIGNS.—For purposes 

21 of determining whether an expenditure for political activi22 ties by an issuer under the Securities Exchange Act of 

23 1934 is an independent expenditure under the Federal 

24 Election Campaign Act of 1971, the expenditure may not 

25 be treated as made in concert or cooperation with, or at 

26 the request or suggestion of, any candidate or committee 


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1 solely on the grounds that any director of the issuer voted 

2 on the expenditure as required under section 16A(b) of 

3 the Securities Exchange Act of 1934 (as added by sub4 section (a)). 

5 SEC. 5. REPORTING REQUIREMENTS. 

6 Section 13 of the Securities Exchange Act of 1934 

7 (15 U.S.C. 78m) is amended by adding at the end the 

8 following: 

9 ‘‘(m) REPORTING REQUIREMENTS RELATING TO

10 CERTAIN POLITICAL EXPENDITURES.— 

11 ‘‘(1) IN GENERAL.—Not later than 180 days 

12 after the date of enactment of this subsection, the 

13 Commission shall modify its reporting rules under 

14 this section to require issuers to disclose quarterly 

15 any expenditure for political activities (as such term 

16 is defined in section 14A(c)(1)) made during the 

17 preceding quarter and the individual votes by board 

18 members authorizing such expenditures. Such a re19 port shall be filed with the Commission and provided 

20 to shareholders and shall include— 

21 ‘‘(A) the date of the expenditures; 

22 ‘‘(B) the amount of the expenditures; 

23 ‘‘(C) the name or identity of the candidate, 

24 political party, committee, or electioneering 

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1 tion 304(f)(3)(A) of the Federal Election Cam2 paign Act of 1971 (2 U.S.C. 434(f)(3)(A)); and 

3 ‘‘(D) if the expenditures were made for or 

4 against a candidate, including an electioneering 

5 communication, the office sought by the can6 didate and the political party affiliation of the 

7 candidate. 

8 ‘‘(2) PUBLIC AVAILABILITY.—The Commission 

9 shall ensure that, to the greatest extent practicable, 

10 the quarterly reports required by this subsection are 

11 publicly available through the Commission website in 

12 a manner that is searchable, sortable, and 

13 downloadable, consistent with the requirements of 

14 section 24.’’. 

15 SEC. 5. REPORT. 

16 The Comptroller General of the United States shall 

17 annually conduct a study on the compliance with the re18 quirements of this Act by public corporations and their 

19 management, as well as the effectiveness of the Securities 

20 and Exchange Commission in meeting the reporting and 

21 disclosure requirements of this Act. Not later than April 

22 1 of each year, the Comptroller General shall submit to 

23 Congress a report of such study. 


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1 SEC. 6. SEVERABILITY. 

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

3 this Act, or the application of such provision or amend4 ment to any person or circumstance is held to be unconsti5 tutional, the remainder of this Act, the amendments made 

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

7 amendment to any person or circumstance shall not be af8 fected thereby. 

Æ 


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