Title: Shareholder Protection Act
Policy area: Finance and Financial Sector

Summary:
Shareholder Protection Act
This bill requires shareholder authorization of 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. An issuer must require a board vote with respect to political expenditures in excess of $50,000 and, within 48 hours, make publicly available the individual votes of each board member.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4491 Introduced in House (IH)]

<DOC>






116th CONGRESS
  1st Session
                                H. R. 4491

  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

                           September 25, 2019

 Mr. Malinowski (for himself and Mr. Cleaver) 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''.

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 the 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 before making political contributions or 
        expenditures will establish necessary accountability.

SEC. 3. SHAREHOLDER APPROVAL OF CORPORATE POLITICAL ACTIVITY.

    (a) In General.--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, administration, 
                        and solicitation 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 that is 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 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 may make an 
expenditure for political activities in any fiscal year unless that 
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) by an 
        issuer shall be considered to be a breach of a fiduciary duty 
        of any officer or director of the issuer who authorized the 
        expenditure for political activities described in that 
        subsection.
            ``(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--
                    ``(A) any action brought in a court of competent 
                jurisdiction to any person or class of persons that 
                held shares at the time the expenditure for political 
                activities was made; and
                    ``(B) an amount that is equal to 3 times the amount 
                of the expenditure for political activities.
    ``(e) Disclosure of Votes.--
            ``(1) Disclosure required.--Each institutional investment 
        manager that is 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 180 days 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 the date 
                on which a vote described in that paragraph is held; 
                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 of the institutional investment 
manager, 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.''.
    (b) Technical and Conforming Amendment.--Section 3(a)(8) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(8)) is amended by 
striking ``The term'' and inserting ``Except as otherwise expressly 
provided, the term''.

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

    The Securities Exchange Act of 1934 (15 U.S.C. 78a 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--
            ``(1) the term `election' has the meaning given the term in 
        section 301 of the Federal Election Campaign Act of 1971 (52 
        U.S.C. 30101); and
            ``(2) the terms `expenditure for political activities' and 
        `issuer' have the meanings 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 any expenditure for political activities--
                    ``(A) in an amount that is more than $50,000; and
                    ``(B) that would result in the total amount spent 
                by the issuer for a particular election to be more than 
                $50,000.
            ``(2) Public availability.--An issuer shall make the votes 
        of each member of the board of directors of the issuer 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 
        meanings given the terms 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 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 of the issuer 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 in 
                        opposition 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 that 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 of 1934, 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 of 1934, 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.
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