Today, California Assemblymember Alex Lee (D-San José) introduced AB 1819, the “Stop Foreign Influence in California Elections Act.” The bill prohibits foreign influenced corporations from contributing to candidates, parties, or committees (including super PACs) as well as from engaging in their own direct election spending.
Foreign influenced corporations are defined by any business that meets one of the following conditions:
- A foreign owner (including a foreign corporation or a foreign investor abroad) holds, owns, controls, or has beneficial ownership of one percent or more of the business
- Multiple foreign owners hold, own, control, or have beneficial ownership of five percent or more of the business
- A foreign owner participates directly or indirectly in the business entity’s decision making process with respect to political activities
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 has created a massive loophole for foreign interests to acquire stakes in U.S. corporations and then use that leverage to influence or control the corporate political activity, including campaign contributions, contributions to super PACs, and independent expenditures.
Meanwhile, foreign investment in U.S. companies has increased dramatically in recent years. In 1982, foreign investors owned about five percent of all U.S. corporate equity (public and private). By 2019, foreign investors owned 40% of U.S. equity.
“President George Washington, in his Farewell Address, warned of the insidious wiles of foreign influence as one of the biggest threats to a republic government,” said Assemblymember Alex Lee. “Our reform to stop foreign-influenced corporations from exerting influence in California’s elections is crucial to protecting the integrity of our democratic self-government.”
In 2020, the Canadian Government’s public utility, Hydro-Quebec, spent nearly $10 million to oppose a ballot measure in Maine, setting up its own state ballot question committee and funneling money from Canada through its wholly owned subsidiary in the U.S. The political expenditure has ignited bipartisan concern in Maine about the role of foreign-influenced corporations in Maine elections.
Other major foreign investors (including money from government-owned oil wealth funds) own substantial positions in politically active U.S. companies. 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, which Norges Bank is among its top stockholders, spent nearly $3 million to influence a Richmond City Council election. Norges also wielded its power to pressure the companies it invests in to put more women on their boards.
The bill is co-sponsored by Free Speech For People, Money Out Voters In (MOVI), and Center for American Progress (CAP) and supported by CAIR-CA and Courage California. Similar legislation was passed in Seattle in 2020 and has been introduced in the US Congress and in Hawaii, Massachusetts, Minnesota, New York, and Oregon.
“Foreign-influenced corporations spend millions of dollars in our elections,” says Alexandra Flores-Quilty, the Campaign Director of Free Speech For People. “Their dollars overwhelm the voices and votes of Americans. This poses a critical threat to the integrity of our elections and democracy. Assemblymember Lee’s legislation will help put elections back into the hands of voters by banning foreign-influenced corporations from political spending.”
“With the introduction of this people-powered legislation, Assemblymember Lee has taken a big step toward protecting California’s elections and ballot initiatives. This pro-democracy bill would stop foreign-influenced U.S. corporations from spending unlimited money to warp California’s self-government, as such corporations did in the recent Proposition 22 battle,” said Michael Sozan, senior fellow at the Center for American Progress. “The Center for American Progress looks forward to working with Assemblymember Lee and other lawmakers to pass this much-needed legislation.”