Assemblymember Alex Lee (D-San José) has introduced AB 83 to protect the integrity of California’s democratic self-governance by prohibiting foreign influenced corporations from either contributing to candidates, parties, or committees (including super PACs) or engaging in their own direct election spending in the state.
The US Supreme Court’s 2010 ruling in Citizens United v. FEC has created a massive loophole for foreign interests to acquire stakes in U.S. corporations and use that leverage to influence or control corporate political activity.
While existing federal statute prohibits a foreign government, foreign political party, foreign-incorporated corporation, or individual foreign national who is not lawfully admitted for permanent residence from spending money on federal, state, or local elections, federal law does not address the issue of political spending by U.S. corporations that are partially owned by foreign investors.
A U.S. corporation that is owned or controlled by a foreign entity is not itself a “foreign principal” so long as the corporation is organized under U.S. laws and has its principal place of business in the United States. This massive loophole has enabled foreign interests to acquire stakes in U.S. corporations and then use that leverage to influence or control corporate political activity including campaign contributions, contributions to super PACs, and independent expenditures.
“Foreign investment in U.S. companies has increased dramatically to own 40% of all U.S. corporate equity, far greater than from about 5% in 1982,” said Assemblymember Alex Lee. “Our reform to stop foreign money from exerting influence on California elections is needed to plug this giant loophole in Citizens United.”
Major foreign investors (including money from government-owned oil wealth funds) own substantial positions in politically active U.S. companies. For example, Norges Bank, the central bank of Norway, has a stake in more than 9,000 companies worldwide and on average holds 1.4% of the US’s publicly traded companies including Microsoft, Facebook, and Netflix. In 2014, fossil fuel giant Chevron, of which Norges Bank is among its top stockholders, spent nearly $3 million to influence a Richmond City Council election.
Recently, when Elon Musk acquired Twitter and took it private, Prince Alwaleed bin Talal bin Abdulaziz of Saudi Arabia agreed to convert his shares of Twitter, worth nearly $2 billion, and became Twitter’s second largest shareholder after Musk. He now owns approximately 4% of Twitter.
Similar legislation has been passed in Seattle in 2020 and has been introduced in the US Congress and in Hawaii, Massachusetts, Minnesota, New York, and Oregon. In March 2022, the City of San José voted to write an ordinance to prohibit foreign-influenced corporations or donors from contributing to local elections.
A corporation would be deemed “foreign influenced” if:
- 1% of shares are owned by a single foreign investor
- 5% of shares are owned by multiple foreign investors
- A foreign entity participates in decision-making with respect to state or local political spending
The bill is co-authored by Assemblymember Ash Kalra (D-San José) and co-sponsored by Free Speech For People, Money Out Voters In (MOVI), and Center for American Progress (CAP).