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

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.

    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. 2. SHAREHOLDER APPROVAL OF CORPORATE POLITICAL ACTIVITY.

    The Securities Exchange Act of 1934 is amended by inserting after 
section 14 the following new section:

``SEC. 14A. SHAREHOLDER APPROVAL OF CERTAIN POLITICAL EXPENDITURES.

    ``(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, 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) Restriction on 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 shareholder or class of shareholders for 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) contributions to any political party, 
                committee, or electioneering communication, as such 
                term is defined in section 304(f)(3)(A) of the Federal 
                Election Campaign Act of 1971 (2 U.S.C. 434(f)(3)(A)); 
                and
                    ``(C) dues or other payments to trade associations 
                or other tax exempt organizations that are, or could 
                reasonably be anticipated to be, used for the purposes 
                described in subparagraph (A).
            ``(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, administration, and 
                solicitation of contributions to a separate segregated 
                fund to be utilized for political purposes by a 
                corporation.''.

SEC. 3. DISCLOSURE OF PROXY VOTES BY INSTITUTIONAL INVESTORS.

    Section 13(f) of the Securities Exchange Act of 1934 (15 U.S.C. 
78m(f)) is amended by redesignating paragraph (5) as paragraph (7) and 
inserting after paragraph (4) the following:
            ``(5) Disclosure of votes.--Each institutional investment 
        manager subject to this subsection shall include in the reports 
        required under this subsection, at least annually, a statement 
        of how it voted on any shareholder vote provided for under 
        section 14A(a) that occurred since the manager's last such 
        statement, 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 
        paragraph, the Commission shall issue rules and regulations to 
        implement this paragraph.
            ``(6) 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.''.

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 14A(d)(1)) in excess of $50,000. 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:
    ``(m) Reporting Requirements Relating to Certain Political 
Expenditures.--
            ``(1) In general.--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 14A(c)(1)) made during the 
        preceding quarter and the individual votes by board members 
        authorizing such expenditures. Such a report shall be filed 
        with the Commission and provided to shareholders and shall 
        include--
                    ``(A) the date of the expenditures;
                    ``(B) the amount of the expenditures;
                    ``(C) the name or identity of the candidate, 
                political party, committee, or electioneering 
                communication, as such term is defined in section 
                304(f)(3)(A) of the Federal Election Campaign Act of 
                1971 (2 U.S.C. 434(f)(3)(A)); and
                    ``(D) if the expenditures were made for or against 
                a candidate, including an electioneering communication, 
                the office sought by the candidate and the political 
                party affiliation of the candidate.
            ``(2) 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 in a manner that is searchable, sortable, 
        and downloadable, consistent with the requirements of section 
        24.''.

SEC. 5. REPORT.

    The Comptroller General of the United States shall annually conduct 
a study on the compliance with the requirements of this Act by public 
corporations and their management, as well as the effectiveness of the 
Securities and Exchange Commission in meeting the reporting and 
disclosure requirements of this Act. Not later than April 1 of each 
year, the Comptroller General shall submit to Congress a report of such 
study.

SEC. 6. 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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