San Jose bans ‘foreign-influenced corporations’ from political donations

San Jose leaders want to make sure that money spent on local elections comes from Americans — and they have passed a landmark campaign finance policy that seeks to do just that.

The San Jose City Council yesterday unanimously approved prohibiting “foreign-influenced corporations” from making political contributions in city races in hopes that election results reflect the will of residents, rather than wealthy international moguls and associated companies. It will go into effect in 30 days — just one month before the March 5 primary elections.

“Here in Silicon Valley, there’s a lot of corporations that seek to influence policies,” Councilmember Sergio Jimenez told San José Spotlight. “We want to make sure that they aren’t trying to influence politicians in a negative way, especially if that influence is coming from abroad.”

The policy closes an unintended loophole. Federal and state laws already prohibit foreign individuals — other than green card holders — governments, companies and other groups from making contributions or independent expenditures to candidates. However, foreign companies with domestic subsidiaries can contribute as long as the donations are made by a U.S. citizen or permanent resident.

Foreign individuals can also have influence through American-based companies when they own stocks in the company. And with more than 40% of U.S. stocks owned by foreign investors, it’s possible that foreign dollars are shaping local elections, according to Ron Fein, legal director for nonpartisan nonprofit organization Free Speech for People.

That is especially true in the heart of Silicon Valley, where tech companies and shareholders have a vested interest in shaping which leaders represent their cities and counties. Companies can influence election results with hefty campaign spending through direct donations to candidates or political action committees — though it may be curbed with this policy.

San Jose defines foreign influence as more than 1% ownership by an individual foreign national or more than 5% ownership by multiple foreign nationals. This prevents nearly every member of the S&P 500 from making political expenditures in city elections, including Silicon Valley tech giants Apple, Alphabet (Google) and Meta, according to Free Speech for People.

Officials have passed similar policies in St. Petersburg, Florida and Seattle, Washington. States including California, Washington, Hawaii and New York are also considering implementing similar campaign finance policies — as well as Congress.

“Across the country, legislators are working to advance this critical reform to address the threat of foreign corporate money in our elections and to defend our democracy,” John Bonifaz, president of Free Speech For People, said in a statement. “We congratulate San Jose for leading the way in addressing this threat and in protecting its elections.”

The local policy has caught the attention and support of nationally known experts in constitutional law, campaign finance and corporate governance. Professor Laurence Tribe of Harvard Law School applauded San Jose for passing the policy and “sparking an admirable effort to guard our political systems from the dangers posed by foreign corporate spending.”

“If foreign investors do not have a constitutional right to spend money to influence federal, state, or local elections, then they do not have a constitutional right to use the corporate form to do indirectly what they could not do directly,” Tribe wrote in a letter to councilmembers.

Jimenez, along with Councilmembers David Cohen and Pam Foley, introduced the policy nearly two years ago. It received support from Free Speech for People, the South Bay Labor Council and Working Partnerships USA.

Maria Noel Fernandez, executive director of Working Partnerships USA, said the policy is a “crucial victory” in protecting local democracy.

“In the 2020 San Jose mayoral race we saw the toxic consequences of big money in politics,” Fernandez said in a statement. “Today’s success is a reflection of the leadership of people that united against that and took collective action to safeguard our democracy.”

Contact Jana at [email protected] or follow @Jana_Kadah on X, formerly known as Twitter.