IB 

Union Calendar No. 362 

111TH CONGRESS 

2D SESSION H. R. 4790 

[Report No. 111–620, Part I] 

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 

SEPTEMBER 22, 2010 

Reported from the Committee on Financial Services with an amendment 

[Strike out all after the enacting clause and insert the part printed in italic] 

SEPTEMBER 22, 2010 

Additional sponsors: Mr. FRANK of Massachusetts, Mr. MCGOVERN, Ms. 

MOORE of Wisconsin, Mr. ROTHMAN of New Jersey, Mr. GARAMENDI, 

Mr. GUTIERREZ, Ms. KILROY, Mr. LARSON of Connecticut, Mr. 

PASCRELL, Mr. CUMMINGS, Mr. HEINRICH, Ms. WATERS, Mr. WEINER, 

Mr. GRIJALVA, Mr. CONYERS, Mr. GENE GREEN of Texas, Mr. HODES, 

Mr. LYNCH, Mrs. NAPOLITANO, Mr. OLVER, Mr. SARBANES, Ms. WOOLSEY, Mr. BLUMENAUER, Mr. FOSTER, Mr. HINCHEY, Ms. KILPATRICK of 

Michigan, Ms. HIRONO, Ms. LINDA T. SA ́NCHEZ of California, Ms. SHEAPORTER, Ms. DELAURO, Mr. HALL of New York, Ms. WATSON, Mr. 

WELCH, Ms. EDWARDS of Maryland, Mr. JACKSON of Illinois, Mr. 

PERLMUTTER, Mr. POLIS of Colorado, Mr. SHERMAN, Mr. CLAY, and Ms. 

NORTON


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SEPTEMBER 22, 2010 

Committee on House Administration discharged; committed to the Committee 

of the Whole House on the State of the Union and ordered to be printed 

[For text of introduced bill, see copy of bill as introduced on March 9, 2010] 

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. 


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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’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds the following: 

8 (1) Corporations make significant political con9 tributions and expenditures that directly or indirectly 

10 influence the election of candidates and support or 

11 oppose political causes. Decisions to use corporate 

12 funds for political contributions and expenditures are 

13 usually made by corporate boards and executives, 

14 rather than shareholders. 

15 (2) Corporations, acting through their boards 

16 and executives, are obligated to conduct business for 

17 the best interests of their owners, the shareholders. 

18 (3) Historically, shareholders have not had a 

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

20 of corporations they own. Shareholders and the public 

21 have a right to know how corporations are spending 

22 their funds to make political contributions or expend23 itures benefitting candidates, political parties, and 

24 political causes. 


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1 (4) Corporations should be accountable to their 

2 shareholders in making political contributions or ex3 penditures affecting Federal governance and public 

4 policy. Requiring the express approval of a corpora5 tion’s shareholders prior to making political contribu6 tions or expenditures will establish necessary account7 ability. 

8 SEC. 3. SHAREHOLDER APPROVAL OF CORPORATE POLIT9 ICAL ACTIVITY. 

10 The Securities Exchange Act of 1934 is amended by 

11 inserting after section 14B the following new section: 

12 ‘‘SEC. 14C. SHAREHOLDER APPROVAL OF CERTAIN POLIT13 ICAL EXPENDITURES AND DISCLOSURE OF 

14 VOTES OF INSTITUTIONAL INVESTORS. 

15 ‘‘(a) SHAREHOLDER AUTHORIZATION FOR POLITICAL

16 EXPENDITURES.—Any solicitation of any proxy or consent 

17 or authorization in respect of any security of an issuer 

18 shall— 

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

20 of any expenditures for political activities proposed to 

21 be made by the issuer for the forthcoming fiscal year 

22 not previously approved, to the extent the specific na23 ture is known to the issuer and including the total 

24 amount of such proposed expenditures; and 


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

2 authorize such proposed expenditures in such amount. 

3 ‘‘(b) REQUIREMENTS FOR EXPENDITURES.—No issuer 

4 shall make any expenditure for political activities in any 

5 fiscal year unless— 

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

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

8 and 

9 ‘‘(2) authorization for such expenditures has been 

10 granted by votes representing a majority of out11 standing shares pursuant to subsection (a)(2). 

12 ‘‘(c) FIDUCIARY DUTY; LIABILITY.—A violation of sub13 section (b) shall be considered a breach of a fiduciary duty 

14 of the officers and directors who authorized such an expend15 iture. The officers and directors who authorize such an ex16 penditure without first obtaining such authorization of 

17 shareholders shall be jointly and severally liable in any ac18 tion brought in any court of competent jurisdiction to any 

19 individual or class of individuals who held shares at the 

20 time such expenditure was made for an amount equal to 

21 3 times the amount of such expenditure. 

22 ‘‘(d) DEFINITION OF EXPENDITURE FOR POLITICAL

23 ACTIVITIES.—As used in this section: 

24 ‘‘(1) The term ‘expenditure for political activi25 ties’ means— 


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

2 term is defined in section 301(17) of the Federal 

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

4 431(17)); 

5 ‘‘(B) an electioneering communication, as 

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

7 Act (2 U.S.C. 434(f)(3)) and any other public 

8 communication (as such term is defined in sec9 tion 301(22) of such Act (2 U.S.C. 431(22))) that 

10 would be an electioneering communication if it 

11 were a broadcast, cable, or satellite communica12 tion; or 

13 ‘‘(C) dues or other payments to trade asso14 ciations or other tax exempt organizations that 

15 are, or could reasonably be anticipated to be, 

16 used or transferred to another association or or17 ganization for the purposes described in subpara18 graph (A) or (B). 

19 ‘‘(2) Such term shall not include— 

20 ‘‘(A) direct lobbying efforts through reg21 istered lobbyists employed or hired by the issuer; 

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

23 shareholders and executive or administrative per24 sonnel and their families; or 


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1 ‘‘(C) the establishment and administration 

2 of contributions to a separate segregated fund to 

3 be utilized for political purposes by a corpora4 tion. 

5 ‘‘(e) DISCLOSURE OF VOTES.—Every institutional in6 vestment manager subject to section 13(f) shall report at 

7 least annually how it voted on any shareholder vote pursu8 ant to subsection (a), unless such vote is otherwise required 

9 to be reported publicly by rule or regulation of the Commis10 sion. Not later than 6 months after the date of enactment 

11 of this section, the Commission shall issue rules and regula12 tions to implement this subsection. Such rules shall require 

13 that such report be made not later than 30 days after such 

14 a vote and be made available to the public through the 

15 EDGAR system as soon as practicable. 

16 ‘‘(f) SAFE HARBOR FOR CERTAIN DIVESTMENT DECI17 SIONS.—Notwithstanding any other provision of Federal or 

18 State law, no person may bring any civil, criminal, or ad19 ministrative action against any institutional investment 

20 manager, or any employee, officer, or director thereof, based 

21 solely upon a decision of the investment manager to divest 

22 from, or not to invest in, securities of an issuer because 

23 of expenditures for political activities made by that issuer. 

24 This subsection shall not apply to any institutional invest25 ment manager, or any employee, officer, or director thereof, 


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1 unless the institutional investment manager makes disclo2 sures in accordance with regulations prescribed by the Com3 mission.’’. 

4 SEC. 4. REQUIRED BOARD VOTE ON CORPORATE EXPENDI5 TURES FOR POLITICAL ACTIVITIES. 

6 (a) REQUIRED VOTE.—The Securities Exchange Act of 

7 1934 is amended by adding after section 16 the following 

8 new section: 

9 ‘‘SEC. 16A. REQUIRED BOARD VOTE ON CORPORATE EX10 PENDITURES FOR POLITICAL ACTIVITIES. 

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

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

13 the Commission shall, by rule, direct the national securities 

14 exchanges and national securities associations to prohibit 

15 the listing of any class of equity security of an issuer that 

16 is not in compliance with the requirements of any portion 

17 of subsection (b). 

18 ‘‘(b) REQUIREMENT FOR VOTE IN CORPORATE BY19 LAWS.—The corporate bylaws of an issuer shall expressly 

20 provide for a vote of the directors of the issuer on any indi21 vidual expenditure for political activities (as such term is 

22 defined in section 14C(d)(1)) in excess of $50,000, or any 

23 expenditure that makes the total amount spent by the issuer 

24 for the particular election (as such term is defined in sec25 tion 301(1) of the Federal Election Campaign Act of 1971 


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1 (2 U.S.C. 431(1))) $50,000 or more. An issuer shall make 

2 publicly available the individual votes of the directors re3 quired by the preceding sentence within 48 hours of the vote, 

4 including in a clear and conspicuous location on the Inter5 net website of the issuer.’’. 

6 (b) NO EFFECT ON DETERMINATION OF COORDINA7 TION WITH CANDIDATES OR CAMPAIGNS.—For purposes of 

8 determining whether an expenditure for political activities 

9 by an issuer under the Securities Exchange Act of 1934 is 

10 an independent expenditure under the Federal Election 

11 Campaign Act of 1971, the expenditure may not be treated 

12 as made in concert or cooperation with, or at the request 

13 or suggestion of, any candidate or committee solely on the 

14 grounds that any director of the issuer voted on the expendi15 ture as required under section 16A(b) of the Securities Ex16 change Act of 1934 (as added by subsection (a)). 

17 SEC. 5. REPORTING REQUIREMENTS. 

18 Section 13 of the Securities Exchange Act of 1934 (15 

19 U.S.C. 78m) is amended by adding at the end the following: 

20 ‘‘(r) REPORTING REQUIREMENTS RELATING TO CER21 TAIN POLITICAL EXPENDITURES.— 

22 ‘‘(1) QUARTERLY REPORTS.—Not later than 180 

23 days after the date of enactment of this subsection, the 

24 Commission shall modify its reporting rules under 

25 this section to require issuers to disclose quarterly 


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1 any expenditure for political activities (as such term 

2 is defined in section 14C(d)(1)) made during the pre3 ceding quarter and the individual votes by board 

4 members authorizing such expenditures as required 

5 under section 16A(b). Such a report shall be filed 

6 with the Commission and provided to shareholders 

7 and shall include— 

8 ‘‘(A) the date of each expenditure; 

9 ‘‘(B) the amount of each expenditure; 

10 ‘‘(C) if the expenditure was made for or 

11 against a candidate, the name of the candidate, 

12 the office sought by and the political party affili13 ation of the candidate; and 

14 ‘‘(D) the name or identity of trade associa15 tions or other tax-exempt organizations which re16 ceive dues or other payments as described in sec17 tion 14C(d)(1)(B). 

18 ‘‘(2) ANNUAL REPORTS.—Not later than 180 

19 days after the date of enactment of this subsection, the 

20 Commission shall, by rule, require each issuer to in21 clude in its annual report to shareholders an annual 

22 summary of all expenditures for political activities 

23 (as such term is defined in section 14C(d)(1)) made 

24 during the preceding year in excess of $10,000. 


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1 ‘‘(3) DISCLOSURE OF MATERIALS PURCHASED BY

2 POLITICAL EXPENDITURES.—The Commission shall, 

3 by rule, require each issuer to obtain and disclose in 

4 the reports required under this section, any materials 

5 created with or purchased by any expenditure for po6 litical activities (as such term is defined in section 

7 14C(d)) made by the issuer. Such rule shall also re8 quire that each issuer disclose such materials in a 

9 clear and conspicuous location on the Internet website 

10 of the issuer within 48 hours of obtaining the mate11 rials. 

12 ‘‘(4) PUBLIC AVAILABILITY.—The Commission 

13 shall ensure that, to the greatest extent practicable, 

14 the quarterly reports required by this subsection are 

15 publicly available through the Commission website 

16 and through the EDGAR system in a manner that is 

17 searchable, sortable, and downloadable, consistent 

18 with the requirements of section 24.’’. 

19 SEC. 6. REPORTS. 

20 The Securities and Exchange Commission shall annu21 ally assess the compliance of public corporations and their 

22 management with the requirements of the amendments 

23 made by this Act, and shall transmit to Congress an annual 

24 report of its findings. The Comptroller General of the 

25 United States shall periodically evaluate and report to ConVerDate Mar 15 2010 23:19 Sep 22, 2010 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6203 E:\BILLS\H4790.RH H4790

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1 gress on the effectiveness of the Securities and Exchange 

2 Commission’s oversight of the reporting and disclosure re3 quirements of the amendments made by this Act. 

4 SEC. 7. SEVERABILITY. 

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

6 this Act, or the application of such provision or amendment 

7 to any person or circumstance is held to be unconstitu8 tional, the remainder of this Act, the amendments made by 

9 this Act, and the application of such provision or amend10 ment to any person or circumstance shall not be affected 

11 thereby. 


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Union Calendar No. 362 

111TH CONGRESS 

2D SESSION H. R. 4790 

[Report No. 111–620, Part I] 

A BILL 

To amend the Securities Exchange Act of 1934 to 

tures, and for other purposes. company may make certain political expendirequire shareholder authorization before a public 

SEPTEMBER 22, 2010 

Reported from the Committee on Financial Services with 

an amendment 

SEPTEMBER 22, 2010 

Committee on House Administration discharged; comState of the Union and ordered to be printed mitted to the Committee of the Whole House on the 


hsrobinson on DSK69SOYB1PROD with BILLS