Fact Sheet: Stopping Political Spending by Foreign-Influenced U.S. Corporations
Fact Sheet: Stopping Political Spending by Foreign-Influenced U.S. Corporations
Bright-line foreign-ownership thresholds would close the loophole on inappropriate election and ballot-related spending by foreign-influenced American corporations.
This is an update to a fact sheet published on November 21, 2019.
Laws are needed to prevent American-based corporations with appreciable levels of foreign ownership from spending money from their corporate treasuries to sway U.S. elections or ballot initiatives. As discussed in a 2019 Center for American Progress report,1 a U.S. corporation should be deemed “foreign influenced” and prohibited from election and ballot-related spending if the corporation meets one of the following criteria:
- A single foreign shareholder owns or controls 1 percent or more of the corporation’s equity.
- Multiple foreign shareholders own or control—in the aggregate—5 percent or more of the corporation’s equity.
- Any foreign entity participates in the corporation’s decision-making process about election-related spending in the United States.
This fact sheet discusses the ongoing problem of political spending by foreign-influenced U.S. corporations and emphasizes the need for lawmakers to establish foreign-ownership thresholds such as those listed above to limit such spending.
Ending Foreign-Influenced Corporate Spending in U.S. Elections
Political spending by foreign-influenced U.S. corporations has increased in recent years
- Federal law—and judicial decisions interpreting that law—make clear that foreigners are forbidden from spending money to influence U.S. elections.2 Yet the U.S. Supreme Court’s misguided 2010 decision in Citizens United v. Federal Election Commission opened up a loophole that allows foreign entities to influence U.S. elections through investments in politically active U.S.-based corporations, as then-Justice John Paul Stevens warned in his dissenting opinion in Citizens United.3 These foreign entities can include Russian oligarchs, the Saudi royal family, European financiers, or Chinese corporate conglomerates, among others.
- Foreign investors own increasing shares of U.S. corporate stock, growing from only 5 percent in 1982 to approximately 40 percent in 2020.4
- The United States’ largest corporations are spending hundreds of millions of dollars directly from their corporate treasuries to influence elections—not counting their separate corporate political action committees or personal donations by executive and employees. Much of this spending is through dark money channels that opened after Citizens United decision.
- In many instances, foreign-influenced U.S. corporations are wholly owned subsidiaries of foreign corporations, such as BP and Shell Oil. In other cases, U.S. corporations are partially foreign-owned. For example, Saudi Arabia has owned approximately 10 percent of U.S.-based Uber and has a seat on its board,5 while American-based Lyft has seen appreciable ownership and control by Chinese and Japanese conglomerates.6 In 2020, Uber and Lyft joined forces with other companies to spend a record-breaking $200 million-plus on a ballot initiative to defeat a pro-worker California law.7
- The goals of foreign interests can easily diverge from U.S. interests—for example, in the areas of tax, trade, national security, and labor law. Corporate directors and managers view themselves as accountable to their shareholders, including foreign shareholders. As the then-CEO of U.S.-based Exxon Mobil Corp. unabashedly stated, “I’m not a U.S. company and I don’t make decisions based on what’s good for the U.S.”8
Momentum for foreign-ownership thresholds exists at federal, state, and local levels
- CAP’s proposed foreign-ownership thresholds would prohibit foreign-influenced U.S. corporations from spending money to sway the outcomes of elections or ballot measures. Of the 111 corporations that CAP’s 2019 report studied among the S&P 500 stock index, 74 percent exceeded the 1 percent threshold for a single foreign owner, and 98 percent exceeded the 5 percent aggregate foreign-ownership threshold. Among smaller publicly traded corporations, only 28 percent exceeded the 5 percent aggregate foreign-ownership threshold.9
- Corporate governance experts and regulators agree that these thresholds capture the level of ownership necessary to influence corporate decision-making.10 Even the conservative former chairman of the U.S. House Committee on Financial Services, then-Rep. Jeb Hensarling (R-TX), and the Business Roundtable, which represents corporate CEOs, agree that 1 percent is the threshold at which a single shareholder is able to influence corporate decisions.11 This policy is also deemed constitutional by respected legal scholars and regulators.12
- There is significant momentum for this reform at the federal, state, and local levels. In Congress, Sen. Elizabeth Warren (D-MA) and Rep. Jamie Raskin (D-MD), with more than two dozen co-sponsors, have filed bills to effectuate this policy.13 In 2020, Seattle passed this policy into law.14 In 2022, the San Jose City Council in California voted to advance this policy.15 In 2022, the New York State Senate passed this policy on a bipartisan vote, and the bill is now pending in the state Assembly.16
- This policy has become only more imperative in the wake of Russia’s war in Ukraine. Russian billionaires, including many sanctioned Russian oligarchs, own significant shares of American corporations.17 For example, Russian oligarchs or billionaires have enjoyed appreciable ownership of many well-known American corporations, such as Facebook, Twitter, and Airbnb, in recent years.18
- The pro-Donald Trump rally on the morning of the January 6, 2021, insurrection was bankrolled by organizations such as the Republican Attorneys General Association (RAGA).19 In recent years, many of the nation’s largest foreign-influenced corporations contributed millions of dollars to RAGA, including AT&T, Comcast, and Citigroup.20
With billions of dollars in secret dark money being spent in U.S. elections, voters are demanding commonsense solutions to protect their voices in the nation’s democracy. Lawmakers should enact reform to help ensure that corporate CEOs who are accountable to their foreign investors are not influencing U.S. elections.
- Michael Sozan, “Ending Foreign-Influenced Corporate Spending in U.S. Elections” (Washington: Center for American Progress, 2019), available at https://www.americanprogress.org/article/ending-foreign-influenced-corporate-spending-u-s-elections/.
- Legal Information Institute; “52 U.S.C. § 30121(a) – Contributions and donations by foreign nationals,” available at https://www.law.cornell.edu/uscode/text/52/30121 (last accessed April 2022); Bluman and Steiman v. Federal Election Commission, memorandum opinion, U.S. District Court for the District of Columbia, No. 10-1766 (August 8, 2011), available at https://www.bloomberglaw.com/public/desktop/document/Bluman_v_Federal_Election_Commission_Civil_No_101766_BMK_RMURMC_2?1565223708.
- Citizens United v. Federal Election Commission, 558 U.S. 310 (January 21, 2010), available at https://www.supremecourt.gov/opinions/09pdf/08-205.pdf.
- Steve Rosenthal and Theo Burke, “Who’s Left to Tax? US Taxation of Corporations and Their Shareholders” (Washington: Urban-Brookings Tax Policy Center, 2020), p. 2, available at https://www.law.nyu.edu/sites/default/files/Who%E2%80%99s%20Left%20to%20Tax%3F%20US%20Taxation%20of%20Corporations%20and%20Their%20Shareholders-%20Rosenthal%20and%20Burke.pdf.
- Eric Newcomer, “The Inside Story of How Uber Got Into Business With the Saudi Arabian Government,” Bloomberg, November 3, 2018, available at https://www.bloomberg.com/news/articles/2018-11-03/the-inside-story-of-how-uber-got-into-business-with-the-saudi-arabian-government.
- Zoe Henry, “Alibaba’s 9 most high-profile investments in US start-ups,” CNBC, October 14, 2016, available at https://www.cnbc.com/2016/10/14/alibabas-9-most-high-profile-investments-in-us-start-ups.html; Toru Hatano, “Rakuten books $240m write-down as Mikitani exits Lyft’s board,” Nikkei Asia, September 1, 2020, available at https://asia.nikkei.com/Business/Technology/Rakuten-books-240m-write-down-as-Mikitani-exits-Lyft-s-board.
- Suhauna Hussain, Johana Bhuiyan, and Ryan Menezes, “How Uber and Lyft persuaded California to vote their way,” Los Angeles Times, November 13, 2020, available at https://www.latimes.com/business/technology/story/2020-11-13/how-uber-lyft-doordash-won-proposition-22.
- Steve Coll, Private Empire: ExxonMobil and American Power (New York: Penguin Books, 2012), p. 71.
- Sozan, “Ending Foreign-Influenced Corporate Spending in U.S. Elections.”
- John C. Coates IV, Statement submitted to Massachusetts House of Representatives regarding an act to limit spending by foreign-influenced corporations, Harvard Law School, May 14, 2019, pp. 2–3, available at https://freespeechforpeople.org/wp-content/uploads/2019/05/2019-Coates-MA-FIC-20190514-PDF-final.pdf; Laurence H. Tribe, Statement in support of St. Petersburg, Florida legislation, Harvard Law School, October 25, 2016, p. 4, available at https://freespeechforpeople.org/wp-content/uploads/2016/10/7.-Prof.-Laurence-Tribe-Letter-of-Support.pdf.
- House Committee on Financial Services, Transcript of Committee debate and markup of Financial CHOICE Act, H.R.10, 115th Cong., 1st sess. (May 3, 2017), on file with author. N. Peter Rasmussen, “Responsible Shareholder Engagement and Long-Term Value Creation,” Business Roundtable, November 2, 2016, previously available at https://www.businessroundtable.org/archive/resources/responsible-shareholder-engagement-long-term-value-creation.
- See Laurence H. Tribe, Statement submitted to San Jose City Council regarding recommended campaign finance ordinance, Harvard Law School, March 21, 2022, available at https://sanjose.legistar.com/View.ashx?M=F&ID=10646879&GUID=004D90F1-27F7-4551-98CC-E82408F24FFC; Ellen L. Weintraub, “Taking On Citizens United,” The New York Times, March 30, 2016, available at https://www.nytimes.com/2016/03/30/opinion/taking-n-citizens-united.html.
- Anti-Corruption and Public Integrity Act, S. 5070, Section 721, 116th Cong., 2nd sess. (December 19, 2020), available at https://www.congress.gov/bill/116th-congress/senate-bill/5070/text?q=%7B%22search%22%3A%5B%22warren%22%5D%7D&r=2&s=2; Get Foreign Money Out of U.S. Elections Act, H.R. 6283, 117th Cong., 1st sess. (December 14, 2021), available at https://www.congress.gov/bill/117th-congress/house-bill/6283?q=%7B%22search%22%3A%5B%22raskin+get+foreign+money+out%22%2C%22raskin%22%2C%22get%22%2C%22foreign%22%2C%22money%22%2C%22out%22%5D%7D&s=1&r=1.
- Annie Palmer, “Blow to Amazon as Seattle passes new political spending restrictions,” CNBC, January 13, 2020, available at https://www.cnbc.com/2020/01/13/blow-to-amazon-as-seattle-passes-new-political-spending-restrictions.html.
- Grace Hase, “San Jose looking to limit foreign influence on city elections,” The Mercury News, March 22, 2022, available at https://www.mercurynews.com/2022/03/22/san-jose-looking-to-limit-foreign-influence-on-elections/.
- Democracy Preservation Act, S.1126B, 2021-2022 New York State Senate legislative session (January 10, 2022), available at https://www.nysenate.gov/legislation/bills/2021/s1126.
- See, for example, David Hodges, “Russian oligarchs invest millions in North Carolina companies,” WBTV, March 8, 2022, available at https://www.wbtv.com/2022/03/08/russian-oligarchs-invest-millions-north-carolina-companies/.
- Mike Bird and Stefano Pozzebon, “Meet the Russian oligarchs who own the West’s most famous brands,” Business Insider, February 5, 2015, available at https://www.businessinsider.com/russian-oligarchs-that-own-western-companies-2015-2; David Corn, “How a Russian Billionaire With a Criminal Past Became a Major Investor in Lyft,” Mother Jones, March 6, 2020, available at https://www.motherjones.com/politics/2020/03/how-a-russian-billionaire-with-a-criminal-past-became-a-major-investor-in-lyft/.
- Peter Stone, “Group’s 6 January donation shows Trump’s grip on attorneys general,” The Guardian, November 24, 2021, available at https://www.theguardian.com/us-news/2021/nov/24/republican-attorneys-general-funding-6-january-rally-trump.
- Maxine Joselow, “Top companies are undermining their climate pledges with political donations, report says,” The Washington Post, February 23, 2022, available at https://www.washingtonpost.com/politics/2022/02/23/top-companies-are-undermining-their-climate-pledges-with-political-donations-report-says/; Center for Political Accountability, “Hollow Policies: When Corporations’ Political Spending and Emissions Goals/Policies Conflict” (Washington: 2022), available at https://www.politicalaccountability.net/wp-content/uploads/2022/03/Hollow-Policies.pdf.
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