Yesterday, AB 1819, the “Stop Foreign Influence in California Elections Act” passed out of the Elections Committee and is now headed to the Appropriations Committee. The bill prohibits foreign influenced corporations from contributing to candidates, parties, or committees (including super PACs) in order to protect the integrity of California’s self-governance.
Foreign investments in US companies have skyrocketed 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 including foreign governments. Governments throughout the world 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. Saudi Arabia also announced earlier this year they plan to invest about $10 billion into companies, more than doubling its assets by 2025.
While existing federal law 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.
The US Supreme Court’s 2010 ruling in Citizens United v. FEC, allowing corporations to make political expenditures from their general treasury funds, 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. AB 1819 would close that loophole and ensure that California elections are free from foreign influence.
“The former CEO of US-based ExxonMobil once infamously said, ‘I'm not a US company, and I don’t make decisions based on what’s good for the US,’ said Assemblymember Alex Lee. “Our reform to stop foreign-influenced corporations from exerting influence in California’s elections is a major move to plug a giant loophole in Citizens United.”
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. Last month, the City of San José, the tenth largest city in the country, voted to move forward on a similar proposal that would require corporations to certify they aren’t influenced by foreign interests before making contributions to campaigns or independent expenditure committees.
A corporation would be deemed “foreign influenced” if:
- One percent of shares are owned by a single foreign investor
- Five percent 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-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.
"We are honored to support Assemblymember Lee’s bill, AB1819, which will prevent foreign actors from wielding influence over California elections through their ownership stake in US corporations,” said Courtney Hostetler, Senior Counsel for Free Speech For People. “By advancing this model legislation out of committee today, the California Assembly Committee on Elections has taken an important step toward protecting the state’s elections from foreign influence. We look forward to supporting Assemblymember Lee and his colleagues as the bill continues to advance through the California legislature.”
"The Legislature took an important step today towards protecting Californians from foreign influence in our elections,” said Michele Sutter, Co-Founder of MOVI, Money Out Voters In, the California sponsors of AB 1819. “US election law is very clear that there should be zero foreign money in US elections. AB 1819 will bring California into compliance with federal law."