```

[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4790 Reported in House (RH)]

                                                 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. Sanchez of California, Ms. Shea-Porter, 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

                           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.

 

    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 
2010''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) Corporations make significant political contributions 
        and expenditures that directly or indirectly influence the 
        election of candidates and support or oppose political causes. 
        Decisions to use corporate funds for political contributions 
        and expenditures are usually made by corporate boards and 
        executives, rather than shareholders.
            (2) Corporations, acting through their boards and 
        executives, are obligated to conduct business for the best 
        interests of their owners, the shareholders.
            (3) Historically, shareholders have not had a way to know, 
        or to influence, the political activities of corporations they 
        own. Shareholders and the public have a right to know how 
        corporations are spending their funds to make political 
        contributions or expenditures benefitting candidates, political 
        parties, and political causes.
            (4) Corporations should be accountable to their 
        shareholders in making political contributions or expenditures 
        affecting Federal governance and public policy. Requiring the 
        express approval of a corporation's 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 is amended by inserting after 
section 14B the following new section:

``SEC. 14C. SHAREHOLDER APPROVAL OF CERTAIN POLITICAL EXPENDITURES AND 
              DISCLOSURE OF VOTES OF INSTITUTIONAL INVESTORS.

    ``(a) Shareholder Authorization for Political Expenditures.--Any 
solicitation of any proxy or consent or authorization in respect of any 
security of an issuer shall--
            ``(1) contain a description of the specific nature of any 
        expenditures for political activities proposed to be made by 
        the issuer for the forthcoming fiscal year not previously 
        approved, to the extent the specific nature is known to the 
        issuer and including the total amount of such proposed 
        expenditures; and
            ``(2) provide for a separate shareholder vote to authorize 
        such proposed expenditures in such amount.
    ``(b) Requirements for Expenditures.--No issuer shall make any 
expenditure for political activities in any fiscal year unless--
            ``(1) such expenditure is of the nature of those proposed 
        by the issuer pursuant to subsection (a)(1); and
            ``(2) authorization for such expenditures has been granted 
        by votes representing a majority of outstanding shares pursuant 
        to subsection (a)(2).
    ``(c) Fiduciary Duty; Liability.--A violation of subsection (b) 
shall be considered a breach of a fiduciary duty of the officers and 
directors who authorized such an expenditure. The officers and 
directors who authorize such an expenditure without first obtaining 
such authorization of shareholders shall be jointly and severally 
liable in any action brought in any court of competent jurisdiction to 
any individual or class of individuals who held shares at the time such 
expenditure was made for an amount equal to 3 times the amount of such 
expenditure.
    ``(d) Definition of Expenditure for Political Activities.--As used 
in this section:
            ``(1) The term `expenditure for political activities' 
        means--
                    ``(A) an independent expenditure, as such term is 
                defined in section 301(17) of the Federal Election 
                Campaign Act of 1971 (2 U.S.C. 431(17));
                    ``(B) an electioneering communication, as such term 
                is defined in section 304(f)(3) of such Act (2 U.S.C. 
                434(f)(3)) and any other public communication (as such 
                term is defined in section 301(22) of such Act (2 
                U.S.C. 431(22))) that would be an electioneering 
                communication if it were a broadcast, cable, or 
                satellite communication; or
                    ``(C) dues or other payments to trade associations 
                or other tax exempt organizations that are, or could 
                reasonably be anticipated to be, used or transferred to 
                another association or organization for the purposes 
                described in subparagraph (A) or (B).
            ``(2) Such term shall not include--
                    ``(A) direct lobbying efforts through registered 
                lobbyists employed or hired by the issuer;
                    ``(B) communications by an issuer to its 
                shareholders and executive or administrative personnel 
                and their families; or
                    ``(C) the establishment and administration of 
                contributions to a separate segregated fund to be 
                utilized for political purposes by a corporation.
    ``(e) Disclosure of Votes.--Every institutional investment manager 
subject to section 13(f) shall report at least annually how it voted on 
any shareholder vote pursuant to subsection (a), unless such vote is 
otherwise required to be reported publicly by rule or regulation of the 
Commission. Not later than 6 months after the date of enactment of this 
section, the Commission shall issue rules and regulations to implement 
this subsection. Such rules shall require that such report be made not 
later than 30 days after such a vote and 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, no person 
may bring any civil, criminal, or administrative action against any 
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 because of 
expenditures for political activities made by that issuer. This 
subsection shall not apply to any institutional investment manager, or 
any employee, officer, or director thereof, unless the institutional 
investment manager makes disclosures in accordance with regulations 
prescribed by the Commission.''.

SEC. 4. REQUIRED BOARD VOTE ON CORPORATE EXPENDITURES FOR POLITICAL 
              ACTIVITIES.

    (a) Required Vote.--The Securities Exchange Act of 1934 is amended 
by adding after section 16 the following new section:

``SEC. 16A. REQUIRED BOARD VOTE ON CORPORATE EXPENDITURES FOR POLITICAL 
              ACTIVITIES.

    ``(a) Listing on Exchanges.--Effective 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 (b).
    ``(b) Requirement for Vote in Corporate Bylaws.--The corporate 
bylaws of an issuer shall expressly provide for a vote of the directors 
of the issuer on any individual expenditure for political activities 
(as such term is defined in section 14C(d)(1)) in excess of $50,000, or 
any expenditure that makes the total amount spent by the issuer for the 
particular election (as such term is defined in section 301(1) of the 
Federal Election Campaign Act of 1971 (2 U.S.C. 431(1))) $50,000 or 
more. An issuer shall make publicly available the individual votes of 
the directors required by the preceding sentence within 48 hours of the 
vote, including in a clear and conspicuous location on the Internet 
website of the issuer.''.
    (b) No Effect on Determination of Coordination With Candidates or 
Campaigns.--For purposes of determining whether an expenditure for 
political activities by an issuer under the Securities Exchange Act of 
1934 is an independent expenditure under the Federal Election Campaign 
Act of 1971, the expenditure may not be treated as made in concert or 
cooperation with, or at the request or suggestion of, any candidate or 
committee solely on the grounds that any director of the issuer voted 
on the expenditure as required under section 16A(b) of the Securities 
Exchange Act of 1934 (as added by subsection (a)).

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:
    ``(r) Reporting Requirements Relating to Certain Political 
Expenditures.--
            ``(1) Quarterly reports.--Not later than 180 days after the 
        date of enactment of this subsection, the Commission shall 
        modify its reporting rules under this section to require 
        issuers to disclose quarterly any expenditure for political 
        activities (as such term is defined in section 14C(d)(1)) made 
        during the preceding quarter and the individual votes by board 
        members authorizing such expenditures as required under section 
        16A(b). Such a report shall be filed with the Commission and 
        provided to shareholders and shall include--
                    ``(A) the date of each expenditure;
                    ``(B) the amount of each expenditure;
                    ``(C) if the expenditure was made for or against a 
                candidate, the name of the candidate, the office sought 
                by and the political party affiliation of the 
                candidate; and
                    ``(D) the name or identity of trade associations or 
                other tax-exempt organizations which receive dues or 
                other payments as described in section 14C(d)(1)(B).
            ``(2) 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 its annual report to 
        shareholders an annual summary of all expenditures for 
        political activities (as such term is defined in section 
        14C(d)(1)) made during the preceding year in excess of $10,000.
            ``(3) Disclosure of materials purchased by political 
        expenditures.--The Commission shall, by rule, require each 
        issuer to obtain and disclose in the reports required under 
        this section, any materials created with or purchased by any 
        expenditure for political activities (as such term is defined 
        in section 14C(d)) made by the issuer. Such rule shall also 
        require that each issuer disclose such materials in a clear and 
        conspicuous location on the Internet website of the issuer 
        within 48 hours of obtaining the materials.
            ``(4) Public availability.--The Commission shall ensure 
        that, to the greatest extent practicable, the quarterly reports 
        required by this subsection are publicly available through the 
        Commission website and through the EDGAR system in a manner 
        that is searchable, sortable, and downloadable, consistent with 
        the requirements of section 24.''.

SEC. 6. REPORTS.

    The Securities and Exchange Commission shall annually assess the 
compliance of public corporations and their management with the 
requirements of the amendments made by this Act, and shall transmit to 
Congress an annual report of its findings. The Comptroller General of 
the United States shall periodically evaluate and report to Congress on 
the effectiveness of the Securities and Exchange Commission's oversight 
of the reporting and disclosure requirements of the amendments made 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.
                                                 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 require shareholder 
   authorization before a public company may make certain political 
                 expenditures, and for other purposes.

_______________________________________________________________________

                           September 22, 2010

  Reported from the Committee on Financial Services with an amendment

                           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
```