SEC Issues Feasibility Report on Company-Giving Disclosure

The Securities and Exchange Commission has weighed in on a controversial legislative proposal that would require public companies to tell shareholders what charities the corporations support and to name the largest recipients.

In a 39-page report sent privately to Rep. Paul Gillmor, who introduced the proposal in 1997 and asked the commission to review it, the commission says that public companies are capable of such disclosures. But, the report says, it is unclear whether investors need to know the information, and what exactly the costs and benefits of such disclosure would be.

Mr. Gillmor, an Ohio Republican, says that he would have liked more unqualified support from the commission. But, he says, the report answers the question posed by the proposal’s critics: Is corporate disclosure of charitable gifts too onerous for companies?

“Mainly what I was looking for in the S.E.C. report was for them to poke a hole in the hot-air balloon that says this kind of disclosure is not feasible, and that’s what I got,” says Mr. Gillmor. He adds that the report is “a good answer to companies that say it would be tremendously costly, tremendously complex.”

The report evaluates Mr. Gillmor’s latest proposal on corporate philanthropy, H R 887, which he introduced in March. The bill is the latest version of a similar piece of legislation that Mr. Gillmor introduced in 1997 (The Chronicle, November 13, 1997).

Also in 1997, he introduced a companion bill that would require companies to give shareholders a major say in deciding which charities receive corporate contributions. He asked the commission, the federal agency that monitors corporate transactions, to study the feasibility of the proposals and issue a report to Congress.

The commission published public comments it received on the measures (The Chronicle, January 15, 1998), but it never issued a report, and both bills were dropped. But when Mr. Gillmor earlier this year introduced the new bill — which does not include provisions for investors to share in decision making — he once again asked the commission to study the disclosure issue.

In response, the commission examined the disclosure practices of 91 of the nation’s top revenue-producing companies as ranked by Fortune magazine in 1996, plus 20 other public companies selected at random.

It found that many of the companies track charitable gifts in order to take tax deductions, and that some already voluntarily disclose their giving information. Thus, the report concludes, the disclosure requirements in Mr. Gillmor’s bill “would be feasible.”

But the report also says that the commission does not intend to take any position regarding the legislation, or to examine whether a corporation’s charity information is relevant to investors.

The commission, however, calculated the amount of paperwork it would take companies to comply with one of the proposed rules — annually providing a list of grants to shareholders.

Based on at least partial grants lists submitted by 17 companies, the commission determined that if corporations were required to report only those gifts of $5,000 or more, a maximum of 19 pages per company would be needed for such disclosure. A threshold of $25,000 would reduce the maximum number of pages to six. The proposed law would leave it to the commission to decide the reporting threshold.

The House Committee on Commerce is expected to hold a hearing on the bill in the fall. A copy of Mr. Gillmor’s bill is available from the Library of Congress’s Web site at http://thomas.loc.gov.