Allison Herren Lee speaks during a House Financial Services Committee hearing in Washington, D.C., Sept. 24, 2019.
Photo: Andrew Harrer/Bloomberg News
The Securities and Exchange Commission has by and large maintained a reputation as an apolitical protector of investors. That may change as Democrats gear up to use even the SEC as a cudgel to impose their political and cultural agenda on corporate America.
Start with climate. The SEC on Monday began soliciting comment on how public companies should disclose climate risks. Acting Chair
Allison Herren Lee
says this information could be “material”—i.e. relevant to a company’s financial performance and risk—since “climate presents heightened risks for marginalized communities, linking it to racial justice concerns.”
Note how climate is a racial issue which somehow becomes a business duty. Some companies voluntarily disclose climate data they consider material to their particular business. But such information isn’t universally relevant. Investors might want to know CO2 emissions for fossil-fuel producers in jurisdictions with carbon taxes, but this doesn’t affect the financial performance of most companies.
If shareholders believe a company’s policies on climate, racial politics or other ESG (environmental, sustainability and governance) issues are important, they can pass a proxy resolution mandating more disclosure. Yet most such resolutions fail, garnering 27% shareholder support on average in 2019.
Last year Amazon activist investors submitted a resolution requiring the company to detail how it is mitigating environmental damage that affects “communities of color.” It got 6%. Amazon proxy resolutions related to facial recognition (31%), hate speech (35%) and gender/racial pay equity (15%) also failed.
Ms. Lee also wants to mandate that public companies report political spending. The Federal Election Commission already reports corporate donations to candidates and parties. But Democrats want businesses to disclose their contributions to trade groups, conservative think tanks and outfits like the American Legislative Exchange Council. The goal is to suppress corporate political advocacy by exposing companies to political and media harassment, but they haven’t been able to pass legislation. Now Democrats on the SEC seem poised to do so by fiat.
Why is a company’s political giving material? Ms. Lee says companies often state “they support climate-friendly initiatives” and make “noteworthy pledges to alter their political spending practices in response to racial justice protests” but then contribute to conservatives. Aha, they give to the opposition. Can’t have that.
“Without political spending disclosure requirements,” Ms. Lee explains, investors can’t “adequately test these claims.” Her innuendo is that companies are misleading investors—meaning companies could be sued as well as smeared if they donate to conservatives.
Ms. Lee plans to revisit reforms by former Chairman
Jay Clayton
that require investment advisers, including asset managers, to ensure they are voting in the financial best interest of their customers. Advisers must “understand how to weigh competing concerns of all types in deciding whether and how to cast votes on behalf of their clients,” she says.
Translation: Investment advisers should prioritize environmental and social goals over their clients’ financial well-being. “Climate change and other ESG factors, particularly racial injustice and economic inequality, require us all to come together and see the bigger picture in order for each of us individually to carry out our missions effectively,” she says.
Gary Gensler,
President Biden’s appointee to lead the SEC, didn’t even try in his confirmation hearing to assuage Republicans worried about this politicization of corporate disclosure. Get ready for financial regulation to become a another weapon of woke politics.
Wonder Land: In an era of social media’s emotions, progressive politics is about saving us from constant apocalypse. Images: AFP via Getty Images Composite: Mark Kelly
The Wall Street Journal Interactive Edition
