Bill Text: CA AB919 | 2009-2010 | Regular Session | Amended
Bill Title: Corporations: political activities: shareholder
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Engrossed - Dead) 2010-06-16 - In committee: Set, second hearing. Failed passage. [AB919 Detail]
Download: California-2009-AB919-Amended.html
BILL NUMBER: AB 919 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 17, 2010
AMENDED IN SENATE MAY 19, 2010
AMENDED IN SENATE JUNE 22, 2009
AMENDED IN ASSEMBLY JUNE 1, 2009
AMENDED IN ASSEMBLY APRIL 13, 2009
INTRODUCED BY Assembly Member Nava
FEBRUARY 26, 2009
An act to add Chapter 7.5 (commencing with Section 750) to
Division 1 of Title 1 of the Corporations Code, relating to
corporations.
LEGISLATIVE COUNSEL'S DIGEST
AB 919, as amended, Nava. Corporations: political activities:
shareholder objections.
Existing law provides a shareholder dissenter's rights with
respect to specified corporate transactions, including mergers and
sales of assets, if a shareholder does not vote in favor of the
transaction and notifies the corporation, as specified, that the
shareholder dissents, and requires the corporation to pay the
dissenting shareholder cash in the amount of the fair market value of
the shareholder's dissenting shares, as specified, in lieu of the
other consideration that a nondissenting shareholder is entitled to
receive.
The Political Reform Act of 1974 provides for the regulation of
political campaign financing, including the reporting and disclosure
of campaign contributions and expenditures. Under the act, elected
officers, candidates for elective office, and campaign committees are
required to file periodic campaign statements that disclose
specified information for specified reporting periods, including the
amount of contributions received and the identities of donors.
This bill would require a corporation, as defined, that makes a
contribution or expenditure to, or in support of, or in opposition
to, a candidate, ballot measure campaign, or a signature-gathering
effort on behalf of a ballot measure, political party, or political
action committee to report those contributions or expenditures to
shareholders by specified means, including posting the report on the
corporation's Internet Web site, if any, and to refund to an
objecting shareholder , in the form of a dividend, a pro
rata share of the dollar value of those contributions or
expenditures, based on the shareholder's share ownership. The bill
would define, among other terms, "objecting shareholder" and
"political activity" for these purposes.
This bill would provide for a civil cause of action, including
recovery of reasonable attorney's fees, by a shareholder against a
corporation for violations of the bill's provisions. The bill would
require a corporation to maintain records that include copies of the
reports on its political activities for 5 years, and to make copies
of these reports available to the Secretary of State upon request.
The bill would also state findings and declarations of the
Legislature.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) Corporations make substantial political contributions and
expenditures to support and oppose candidates, ballot measures,
political parties, and political causes. However, decisions to use
corporate funds for political contributions and expenditures are
usually made by corporate boards and executives, rather than the
shareholders who own the corporations.
(b) Shareholders have a right to know how corporations are
spending shareholder funds to make political contributions and
expenditures to support or oppose candidates, ballot measures,
political parties, and political causes.
(c) Most shareholders have no means by which they may learn of,
influence, or object to the political activities of the corporations
in which they have invested. Moreover, most shareholders have no
means by which they may demand reimbursement or demand that their
invested funds not be used to make political contributions or
expenditures to support candidates, ballot measures, political
parties, or political causes to which the shareholders are opposed.
(d) By limiting the extent to which corporate political
contributions and expenditures may be regulated, the United States
Supreme Court, through its decision in Citizens United v. Federal
Election Com'n (2010) 130 S.Ct. 876, has increased the need for
greater accountability of corporations to their shareholders with
regard to political contributions and expenditures.
(e) The Citizens United decision was handed down in January 2010,
but the debate over whether the invested funds of shareholders should
be used for political activities without their consent is not a new
one. In 1905, President Theodore Roosevelt said, "All contributions
by corporations to any political committee or for any political
purpose should be forbidden by law; directors should not be permitted
to use stockholders' money for such purposes."
(f) It is the intent of the Legislature in enacting this act to
protect California shareholders from having portions of
their investments used for political activities that the
those shareholders do not support. This
measure provides this protection by requiring corporations to
disclose political activities during the previous year and by giving
California shareholders the right to opt out of having their pro rata
portion of corporate funds used for political activity in the
current year.
SEC. 2. Chapter 7.5 (commencing with Section 750) is added to
Division 1 of Title 1 of the Corporations Code, to read:
CHAPTER 7.5. POLITICAL OBJECTIONS OF SHAREHOLDERS
750. As used in this chapter, the following terms have the
following meanings:
(a) "Ballot measure" means a constitutional amendment or other
proposition that is submitted to a popular vote at an election by
action of a legislative body, or that is submitted or is intended to
be submitted to a popular vote at an election by initiative,
referendum, or recall procedure, whether or not it qualifies for the
ballot.
(b) "Corporation" means any of the following:
(1) A publicly held corporation with shareholders.
(2) An entity in which a corporation with shareholders has an
equity interest.
(3) The parent corporation of a subsidiary or affiliate of a
corporation with shareholders.
(c) "Objecting shareholder" means a shareholder who informs the
corporation that the shareholder does not wish the pro rata
value of the shareholder's shares to be used opposes
the use of moneys from the corporation's treasury for political
activities.
(d) "Political activity" means a contribution or expenditure made
to, or in support of, or in opposition to, a candidate, ballot
measure campaign, signature-gathering effort on behalf of a ballot
measure, political party, or political action committee.
(e) "Public corporation" means a corporation that is required to
file periodic reports pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (15 U.S.C. Secs. 78m(a),
78o(d)).
(f) "Shareholder" has the same meaning as set forth in Section
185.
(f) "Shareholder" means one who is a holder of record of shares,
as defined in Section 184, that are of a class of shares that has
voting rights, and whose principal address is within this state.
751. A corporation that has shareholders with legal
residency principal addresses in California and
that engages in political activity shall do all of the following:
(a) (1) Within 30 days after the close of the corporation's fiscal
year, the corporation shall prepare a report entitled "Political
Activity Report" describing all political activity by the corporation
during that fiscal year and provide a written copy of the report to
the corporation's California shareholders. The report shall include
all of the following:
(A) A description of the political activities, the intended
results of those activities, and the anticipated benefits of those
activities to the corporation's shareholders.
(B) The name of the person, candidate, committee, or political
party, or a description of the political cause, to which each
contribution or expenditure was made.
(C) The aggregate amount of the contribution or contributions and
expenditure or expenditures for each candidate, ballot measure
campaign, signature-gathering effort on behalf of a ballot measure,
political party, or political action committee.
(D) If a contribution or expenditure was made in support of or in
opposition to a candidate, the office sought by the candidate and the
political party affiliation of the candidate.
(E) If a contribution or expenditure was made for or against a
ballot measure, a description of the ballot measure and a statement
as to whether the contribution or expenditure was made in support of
or in opposition to the ballot measure.
(2) A public corporation is deemed to have complied with this
subdivision if it includes the report required by paragraph (1) in
its annual report to shareholders under a separate caption entitled
"Political Activity Report," if the annual report is provided to
shareholders within 90 days of the fiscal yearend.
(3) If the corporation maintains an Internet Web site, the
corporation shall post the report required by this subdivision on its
Internet Web site.
(b) This section shall not apply to a corporation's use of
segregated accounts, political action committees, or political
committees, as long as the funds in those accounts or committees come
from shareholders, board members, or employees of the corporation
who, as individuals, choose to contribute to those accounts or
committees.
752. (a) A corporation required to submit a report pursuant to
Section 751 shall notify each shareholder, in writing, using the same
mailing used for the Political Activity Report, that the shareholder
has the right to object to the use of corporate funds
equaling the pro rata value of the shareholder's shares for
political activities for the fiscal year that directly follows the
year to which the Political Activity Report pertains. The written
notification shall inform the shareholder of the appropriate
procedure for objecting.
(b) The corporation shall give each shareholder a minimum of 60
days following receipt of the notification required by subdivision
(a) to file a notice that he or she is objecting. A shareholder who
fails to file a notice of objection within the timeframe established
by the corporation shall be deemed to have consented to the use of
corporate funds equaling the pro rata value of the
shareholder's shares for political activities.
(c) At the end of the fiscal year in which a shareholder has
objected pursuant to subdivision (b), the corporation shall calculate
the objecting shareholder's pro rata share of the total dollar value
of the political activities in the previous fiscal year, and shall
return that amount to the shareholder in the form of a dividend. The
objecting shareholder's pro rata share shall be determined by
dividing the total dollar value of the political activities in the
previous fiscal year by the number of outstanding shares, and
multiplying the result by the number of shares held by the objecting
shareholder on the date the determination is made. The
corporation may choose any date during the year to determine the
ownership of the shares .
(d) Only shares owned by an objecting shareholder at the time of
the objection calculation pursuant to
subdivision (c) shall be used in the fiscal yearend calculation
pursuant to subdivision (c).
(e) A corporation shall not be required to provide the
notice of objection notification pursuant to
subdivision (a) to a shareholder who does not own shares
at the beginning of the fiscal year and subsequently
purchases shares after that date. on the date the
notification is given.
753. (a) A corporation subject to Section 751 shall maintain
records of its political activities, including the report required by
subdivision (a), for a minimum of five years.
(b) Upon a request by the Secretary of State, a corporation shall
file with the Secretary of State a copy of each report produced
pursuant to subdivision (a) of Section 751.
754. No provision of Section 751 or 752 shall be construed to
relieve a corporation of its obligations under existing law,
including but not limited to, the following:
(a) Section 604, or a successor statute or regulation.
(b) Any state or federal statute or regulation that regulates the
solicitation of proxies.
(c) With respect to a corporation with an outstanding class of
securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (15 U.S.C. Sec. 78l), the proxy
rules promulgated under that act.
755. (a) A violation of Section 751 or 752 by a corporation shall
create a civil cause of action for damages against the
corporation , or to enjoin further violation and order
payment pursuant to this chapter, that may be brought by any
shareholder of the corporation.
(b) Reasonable attorney's fees and costs may be recovered by the
shareholder for any action brought pursuant to this section.
(c) The remedies provided in this section are in addition to any
other rights or remedies available under any other provision of law.
756. The provisions of this chapter are severable. If any
provision of this chapter or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.
