Bill Text: CA SB121 | 2013-2014 | Regular Session | Amended
Bill Title: Corporations: political activities: shareholder disclosure.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2014-02-03 - Returned to Secretary of Senate pursuant to Joint Rule 56. [SB121 Detail]
Download: California-2013-SB121-Amended.html
BILL NUMBER: SB 121 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 1, 2013
INTRODUCED BY Senator Evans
JANUARY 18, 2013
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
SB 121, as amended, Evans. Corporations: political activities:
shareholder disclosure.
Existing law, the General Corporation Law, provides for the
regulation of corporations. Under existing law, the board of
directors of a corporation is required, except as specified, to send
an annual report to shareholders containing, among other things, a
balance sheet as of the end of that fiscal year and an income
statement and a statement of cashflows for that fiscal year.
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
reasonably believes it has one or more shareholders
located in this state and that makes a contribution or expenditure,
as defined, 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
issue a report on the political expenditures of the corporation in
the previous fiscal year, and to notify shareholders not less than 24
hours prior to each political contribution during the fiscal year,
by specified means, including posting the report and notification on
the corporation's Internet Web site, if any.
This bill would provide for a civil cause of action for damages by
specified shareholders against a corporation for willful or reckless
violations of the bill's provisions and would specify a prevailing
shareholder's remedies. 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 influence the use of their invested funds 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
inform shareholders and the public with regard to how corporations
are spending funds to make political contributions and expenditures
benefiting candidates, political parties, and political causes.
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 ACTIVITY
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) (1) "Contribution" or "expenditure" includes any monetary and
nonmonetary political contributions and expenditures not deductible
under Section 162(e)(1)(B) of the Internal Revenue Code of 1986 (26
U.S.C. Sec. 162(e)(1)(B)), including, but not limited to,
contributions to, or expenditures on behalf of, political candidates,
political parties, political committees, and other political
entities organized and operating under Section 527 of the Internal
Revenue Code of 1986 (26 U.S.C. Sec. 527), any portion of any dues or
similar payments made to any tax exempt organization that is used
for an expenditure or contribution that, if made directly by the
corporation, would not be deductible under Section 162(e)(1)(B) of
the Internal Revenue Code of 1986, any contribution or expenditure,
as those terms are defined in Section 302 of the Federal Election
Campaign Act of 1971 (2 U.S.C. Sec. 431), and any contribution or
expenditure as defined under the Political Reform Act of 1974 (Title
9 (commencing with Section 81000) of the Government Code).
The terms also include any direct or indirect payment,
distribution, loan, advance, deposit, or gift of money, or any
services, or anything of value, except a loan of money by a national
or state bank made in accordance with the applicable banking laws and
regulations and in the ordinary course of business, to any
candidate, campaign committee, or political party or organization, in
connection with any election to any office.
(2) The terms "contribution" or "expenditure" do not include any
of the following:
(A) Communications by a corporation to its stockholders and
executive or administrative personnel and their families or by a
labor organization to its members and their families on any subject.
(B) Nonpartisan registration and get-out-the-vote campaigns by a
corporation aimed at its stockholders and executive or administrative
personnel and their families or by a labor organization aimed at its
members and their families.
(C) The establishment, administration, and solicitation of
contributions to a separate segregated fund to be utilized for
political purposes by a corporation, labor organization, membership
organization, cooperative, or corporation without capital stock.
(c) "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.
(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
federal Securities Exchange Act of 1934, as amended (15 U.S.C. Secs.
78m(a) and 78o(d)).
(f) "Shareholder" has the same meaning as set forth in Section
185.
751. (a) A corporation that reasonably believes it has
one or more shareholders with legal residency
who reside in California and that engages in
political activity shall do all of the following:
(1) Issue a report on the political expenditures of the
corporation in the previous fiscal year. The report shall include all
of the following:
(A) A description of the political activities.
(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 title and
summary 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) If the corporation maintains an Internet Web site, the
corporation shall post the report required by paragraph (1) on its
Internet Web site.
(3) Notify its shareholders not less than 24 hours prior to each
political contribution during the fiscal year. Notification shall be
made by mail, email, posting on its Internet Web site, or any other
means regularly used in its course of business.
(b) A public corporation is deemed to have complied with paragraph
(1) of subdivision (a) if it includes the report required by that
paragraph in its annual report to shareholders under a separate
caption entitled "Political Activity Report," and if the annual
report is provided to shareholders within 90 days of the fiscal
yearend.
(c) 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 subject to Section 751 shall maintain
records of its political activities, including the report required by
subdivision (a) of Section 751, 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.
753. No provision of Section 751 shall be construed to relieve a
corporation of its obligations under existing law,
including, but not limited to, the following: state or
federal law.
(a) Section 604, or a successor statute or regulation.
(b) A 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 federal
Securities Exchange Act of 1934, as amended (15 U.S.C. Sec. 78l), the
proxy rules promulgated under that act.
754. (a) A willful or reckless violation of Section 751 by a
corporation shall create a civil cause of action for damages against
the corporation that may be brought by any shareholder of the
corporation who held a share in the corporation at the time of the
political contribution or expenditure. A prevailing shareholder shall
be entitled to the information that was not reported or disclosed in
compliance with Section 751, as well as reasonable attorney's fees
and costs.
(b) The remedies provided in this section are in addition to any
other rights or remedies available under any other provision of law.
(c) A claim brought under this section shall be brought not later
than two years after the accrual of the cause of action.
755. 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.
