Earlier today, the House Financial Services Committee approved a bill that would require companies to obtain investor approval before spending more than $50,000 per year in general corporate funds on political activities. 

H.R. 4790, the “Shareholder Protection Act of 2010,” was inspired by the Supreme Court’s Citizens United decision in January, which lifted restrictions on independent expenditures by companies. The bill, which was introduced by Rep. Michael Capuano, a Democrat from Massachusetts, would require issuers to obtain shareholder authorization each year for “expenditures on political activities,” which include independent expenditures, contributions to political parties or committees, and contributions to trade associations or other tax-exempt organizations.

The 35-28 committee vote was primarily along party lines, as Republicans argued that it would be a burden on corporations and hinder free speech. The U.S. Chamber of Commerce urged lawmakers to reject the bill. The panel rejected an amendment from Rep. Michael Castle of Delaware to allow states to opt of compliance, according to news reports. 

Capuano's bill would require corporate proxy statements to provide "a description of the specific nature of any expenditures for political activities proposed to be made by the issuer for the forthcoming fiscal year . . . and including the total amount of such proposed expenditures." Companies would have to obtain approval from a majority of their shares outstanding. 

H.R. 4790 wouldn’t cover spending on corporate lobbyists, communications to shareholders, or separate corporate entities (such as a political action committee) that use segregated funds for political purposes.

The bill would also direct the SEC and the national exchanges to adopt listing standards to require corporate boards to approve individual political expenditures than exceed $50,000. In addition, companies would have to disclose on their websites the votes of each director on those expenditures within 48 hours of the vote, and file quarterly reports with the SEC.

Capuano's bill would go beyond the reforms sought by many activist investors. While many activist funds favor more robust corporate disclosure on political spending, they have not endorsed annual shareholder votes.

The bill's prospects for becoming law don't appear strong. Earlier this week, Senate Democrats failed to obtain enough support to overcome a Republican filibuster against a narrower bill, the “DISCLOSE Act” that seeks to require companies to disclose the funding sources for political advertisements.