State Senator Michael Gianaris and Assemblymember Latrice Walker are championing the Democracy Preservation Act to prohibit spending by foreign-influenced corporations in New York State elections.  The bill would prohibit companies with 1% or more stake owned by a single foreign investor or 5% or more owned by multiple foreign investors from making political contributions in New York’s state and local campaigns.  It would also prohibit such an entity from funding independent expenditures or political action committees.

The Senate bill number is S1126 and the Assembly bill number is A7458.

On June 3, 2021, it passed in the New York State Senate, with bipartisan support. If passed in the Assembly and signed into law, New York would be the first state to ban multinational corporate money in elections.

The Democracy Preservation Act was built on the groundwork laid by similar legislation passed in Seattle, Washington and St. Petersburg, Florida, which Free Speech For People helped to draft.

Watch: Videos About This Legislation

FSFP's History with Challenging Foreign Influence in Elections

We played a critical role in helping draft, provide legal support, and advocate for the nation’s first two enacted laws that limit political spending by partially-foreign-owned corporations in Seattle, Washington and St. Petersburg, Florida. Both of these laws inspired Gianaris’ New York State bill S1126. The goal of this type of legislation is to plug the loophole that Citizens United created for corporations partly or wholly owned by foreign interests. Even if a company was founded in the United States and keeps its main offices here, companies are responsive to their shareholders, and significant foreign ownership affects corporate decision-making.

The New York bill follows the Seattle model to limit political spending by corporations owned 1% by one foreign investor, or 5% by multiple foreign investors. These thresholds reflect levels of ownership that are widely agreed (including by entities such as the Business Roundtable) to be high enough to influence corporate governance.

As the Center for American Progress has noted: Foreign interests can easily diverge from U.S. interests, for example, in the areas of tax, trade, investment, and labor law. Corporate directors and managers view themselves as accountable to their shareholders, including foreign shareholders. As the former CEO of U.S.-based Exxon Mobil Corp. stated, “I’m not a U.S. company and I don’t make decisions based on what’s good for the U.S.”

watch our video, to learn more

Previous New York Legislation Relating to Foreign Influence in Elections

In 2020, State Senator Michael Gianaris introduced a similar bill S7578, which went further than a bill that Governor Andrew Cuomo had introduced that same year.

“Unlimited corporate expenditures have a pernicious effect on our elections and the Democracy Preservation Act will make substantial inroads in fighting the influence of big corporations,” Gianaris told WhoWhatWhy. “Enactment of this bill would ensure that New York’s elections are decided by its people, not by big corporations.”

Read our blog post from February 12, 2020.

Report: Ending Foreign-Influenced Corporate Spending in U.S. Elections

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.

Report: Quantifying Foreign Institutional Block Ownership at Publicly Traded 
U.S. Corporations

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.

FSFP Coates-Fein-Crenny-Dong PNG

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.

Download the Report