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U.K. Law Does Not End Corporate Political Spending

U.K. Law Does Not End Corporate Political Spending

A finance professor analyzed a key British law on corporate funding of political parties and found that the law did not cause corporations to end political spending. However, the law did modify the spending behavior of some companies.

The research addresses the call for a shareholders protection act following the U.S. Supreme Court’s decision in Citizens United v. Federal Election Commission, which allows publicly traded corporations to use unlimited sums of money to fund political advertisements in federal election campaigns without disclosure or shareholder consent.

The 2000 and 2006 Amendments to Companies Act of the United Kingdom allow shareholders a say in future corporate political spending and require companies to report political spending to shareholders in annual reports. They also require political parties to report the source of their funding to the voting public.

Fogel and her colleague found that the U.K. Companies Act had not deterred corporate political spending. However, the act did modify the spending behavior of some companies. Some companies in the study sample stopped spending on politics altogether, and political budgets sought by managers and approved by shareholders were typically modest.

‘We believe [American] shareholders need new protections from managers spending corporate money on politics,’ Fogel said.’Implementing a U.K. Companies Act-styled disclosure requirement through U.S. securities laws or regulations is one way to achieve transparency for political spending by publicly traded corporations.’

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