The Maryland Legislature is considering a bold new campaign finance reform bill to ban political spending by foreign-influenced corporations (corporations owned in significant part by foreign investors).
We thank Delegate Julie Palakovich Carr and Senator Clarence Lam for their leadership in sponsoring this legislation.
This ordinance builds on Free Speech For People’s work developing similar legislation in Seattle, Washington, which passed in January 2020, and St. Petersburg, Florida, which passed in November 2017, as well as proposed legislation in Massachusetts.
Why Maryland should ban political spending by foreign-influenced corporations
- 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 aren’t the only way that foreign interests can use American companies to influence U.S. elections.
- Under current law, it’s illegal for a foreign government or individual to spend money to influence state elections. The Supreme Court has upheld this law.
- But there’s 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.
- This bill would help plug that loophole by making it illegal for a company that is owned 5% by multiple foreign owners, or 1% by a single foreign owner, from spending money directly or giving it to a super PAC to spend in state or local elections.
- We need limits on political spending by corporations with significant foreign ownership to help protect democratic self-government.
Click here to read expert testimony by Free Speech For People Counsel, Courtney Hostetler, presented to Maryland lawmakers on January 28, 2020.
For information and testimony regarding the constitutionality of this type of legislation, see our page on challenging foreign influence.
Ending Foreign-Influenced Corporate Spending in U.S. Elections, Center for American Progress (Nov. 21, 2019)
Quantifying Foreign Institutional Block Ownership at Publicly Traded U.S. Corporations 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.