article: 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. 3. SHAREHOLDER APPROVAL OF CORPORATE POLITICAL ACTIVITY. The Securities Exchange Act of 1934 is amended by inserting after section 14B the following new section: ``SEC. 14C. SHAREHOLDER APPROVAL OF CERTAIN POLITICAL EXPENDITURES AND DISCLOSURE OF VOTES OF INSTITUTIONAL INVESTORS. ``(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 not previously approved, 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) Requirements for 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 individual or class of individuals who held shares at the time such expenditure was made for an amount equal to 3 times 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) an electioneering communication, as such term is defined in section 304(f)(3) of such Act (2 U.S.C. 434(f)(3)) and any other public communication (as such term is defined in section 301(22) of such Act (2 U.S.C. 431(22))) that would be an electioneering communication if it were a broadcast, cable, or satellite communication; or ``(C) dues or other payments to trade associations or other tax exempt organizations that are, or could reasonably be anticipated to be, used or transferred to another association or organization for the purposes described in subparagraph (A) or (B). ``(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 and administration of contributions to a separate segregated fund to be utilized for political purposes by a corporation. ``(e) Disclosure of Votes.--Every institutional investment manager subject to section 13(f) shall report at least annually how it voted on any shareholder vote pursuant to subsection (a), 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 section, the Commission shall issue rules and regulations to implement this subsection. Such rules shall require that such report be made not later than 30 days after such a vote and be made available to the public through the EDGAR system as soon as practicable. ``(f) 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. This subsection shall not apply to any institutional investment manager, or any employee, officer, or director thereof, unless the institutional investment manager makes disclosures in accordance with regulations prescribed by the Commission.''. 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 14C(d)(1)) in excess of $50,000, or any expenditure that makes the total amount spent by the issuer for the particular election (as such term is defined in section 301(1) of the Federal Election Campaign Act of 1971 (2 U.S.C. 431(1))) $50,000 or more. 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: ``(r) Reporting Requirements Relating to Certain Political Expenditures.-- ``(1) Quarterly reports.--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 14C(d)(1)) made during the preceding quarter and the individual votes by board members authorizing such expenditures as required under section 16A(b). Such a report shall be filed with the Commission and provided to shareholders and shall include-- ``(A) the date of each expenditure; ``(B) the amount of each expenditure; ``(C) if the expenditure was made for or against a candidate, the name of the candidate, the office sought by and the political party affiliation of the candidate; and ``(D) the name or identity of trade associations or other tax-exempt organizations which receive dues or other payments as described in section 14C(d)(1)(B). ``(2) Annual reports.--Not later than 180 days after the date of enactment of this subsection, the Commission shall, by rule, require each issuer to include in its annual report to shareholders an annual summary of all expenditures for political activities (as such term is defined in section 14C(d)(1)) made during the preceding year in excess of $10,000. ``(3) Disclosure of materials purchased by political expenditures.--The Commission shall, by rule, require each issuer to obtain and disclose in the reports required under this section, any materials created with or purchased by any expenditure for political activities (as such term is defined in section 14C(d)) made by the issuer. Such rule shall also require that each issuer disclose such materials in a clear and conspicuous location on the Internet website of the issuer within 48 hours of obtaining the materials. ``(4) 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 and through the EDGAR system in a manner that is searchable, sortable, and downloadable, consistent with the requirements of section 24.''. SEC. 6. REPORTS. The Securities and Exchange Commission shall annually assess the compliance of public corporations and their management with the requirements of the amendments made by this Act, and shall transmit to Congress an annual report of its findings. The Comptroller General of the United States shall periodically evaluate and report to Congress on the effectiveness of the Securities and Exchange Commission's oversight of the reporting and disclosure requirements of the amendments made by this Act. SEC. 7. 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.
summary: Shareholder Protection Act of 2010 - (Sec. 3) Amends the Securities Exchange Act of 1934 to require that any solicitation of a proxy, consent, or authorization with respect to any security of an issuer: (1) describe the specific nature and total amount of expenditures proposed for political activities for the forthcoming fiscal year; and (2) provide for a separate shareholder vote to authorize such proposed expenditures. Prohibits an issuer from making an expenditure for political activities in any fiscal year unless: (1) such expenditure meets the requirements of this Act; and (2) authorization for such expenditure has been granted by votes representing a majority of outstanding shares. Deems a violation of such prohibition a breach of the fiduciary duty of the officers and directors who authorized the expenditure. Subjects officers and directors who authorize the expenditure without prior shareholder authorization to joint and several liability to any individual shareholder or class of individuals who held shares at the time of such expenditure for three times the expenditure's amount. Requires institutional investment managers to disclose annually in mandatory reports how they voted on corporate political expenditures. Requires the Securities and Exchange Commission (SEC) to promulgate regulations requiring: (1) investment managers to report how they voted within 30 days after the vote; and (2) the report to be made available to the public through the EDGAR system. Prohibits any person from bringing any civil, criminal, or administrative action against an institutional investment manager, or any of its employees, officers, or directors, based solely upon the investment manager's decision to either divest from, or not to invest in, the securities of an issuer based upon political expenditures made by that issuer. Applies this prohibition only to an institutional investment manager, or its employees, officers, or directors, that makes such disclosures in accordance with SEC regulations. (Sec. 4) Requires the SEC to direct the national securities exchanges and national securities associations to prohibit the listing of any class of equity security of an issuer whose corporate bylaws do not expressly provide for a vote by its board of directors on any individual expenditure: (1) for political activities in excess of $50,000; or (2) that makes the total expenditures by the issuer for a particular election $50,000 or more. Requires an issuer to make the individual votes of the directors regarding any such expenditure publicly available within 48 hours. (Sec. 5) Directs the SEC to: (1) require issuers to disclose expenditures for political activities made during the preceding quarter, along with specified details, and the individual votes by board members authorizing such expenditures; (2) make such reports publicly available on its SEC website and through the EDGAR system; and (3) require each issuer to include in its annual report to shareholders a summary of all expenditures for political activities made during the preceding year in excess of $10,000. Directs the SEC to require each issuer to: (1) obtain and disclose in its mandatory reports any materials created with or purchased by any expenditure for political activities; and (2) disclose such materials in a clear and conspicuous location on its Internet website within 48 hours of obtaining the materials. (Sec. 6) Directs the SEC to assess and report to Congress annually on the compliance of public corporations and their management with the requirements of this Act. Requires the Comptroller General to evaluate and report periodically to Congress on the effectiveness of the SEC's oversight of its reporting and disclosure requirements.