California Legislation

The 2016 election showed that foreign interference in our elections is a serious problem. The news that at least one Russian company bought political ads on Facebook shows one way that foreign interests can use corporations to influence elections. But Facebook and Twitter are not the only way that foreign interests can use American companies to influence U.S. elections.

Under current law, it is illegal for a foreign government or individual to spend money to influence state elections. The Supreme Court has upheld this law. But there is a loophole in the current law: if a corporation is registered in the United States, but it has significant foreign ownership, it can still spend money, or launder the money through a “super PAC,” to spend it in state and local elections.

The “Stop Foreign Influence in California Elections Act” prohibits foreign-influenced corporations from contributing to candidates, parties, or committees (including super PACs) or from engaging in their own direct election spending. Significant foreign ownership is defined as any business that meets one of the following conditions:

• A foreign owner holds, owns, controls, or has beneficial ownership of one percent or more of the business;
• Multiple foreign owners hold, own, control, or have beneficial ownership of five percent or more of the business;
• A foreign owner participates directly or indirectly in the business entity’s decision-making process with respect to political activities;

On April 28, 2022, AB 1819 was passed out of the Elections Committee.

On December 16, 2022, a similar bill, AB83, was introduced.

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Report by John C. Coates, Ron Fein, Kevin Crenny & L. Vivian Dong

Since the Supreme Court’s 2010 Citizens United decision invalidated restrictions on corporate political spending, considerable public and policymaker interest has developed in the potential for U.S. elections to be influenced by foreign interests through U.S. corporations. On the one hand, existing federal law (the Federal Election Campaign Act) already prohibits political spending in federal, state, or local elections by corporations that are incorporated outside the U.S., or which have their principal place of business abroad. On the other hand, current law still allows substantial avenues for foreign influence over corporate political spending by U.S.-incorporated and -based corporations.

Lawmakers in Congress and members of the Federal Election Commission have expressed interest in addressing this phenomenon. As of yet, federal reform proposals have failed to advance. A more likely near-term prospect for new policy measures is at the state and local level. Local governments (notably in St. Petersburg, Florida) are now contemplating measures to address this concern.

This paper focuses on ownership of significant blocks of stock as a potential mechanism for foreign influence over corporate political spending. We found that roughly one in eleven (9%) companies in the S&P 500 has one or more foreign institutions each owning five percent or more blocks of stock, nine have foreign institutions with ten percent or more blocks, five have a foreign institution with more than fifteen percent, and three have foreign institutions with more than 20% blocks. Three firms have multiple foreign institutional blockholders. This is the first recent empirical analysis of the level of foreign institutional blockholder ownership of publicly traded corporations.

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A report from the Center for American Progress, written by senior fellow Michael Sozan, highlights the problem of political spending by foreign-influenced corporations. The report—which cites Free Speech For People’s pioneering legislative work in places like Seattle, St. Petersburg, and Massachusetts—proposes banning political spending by partially-foreign-owned corporations, using the same thresholds for foreign ownership as the Seattle and Massachusetts legislation that we helped develop.