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The US Securities and Exchange Commission (SEC) has given the thumbs up for shareholders to decide whether to investigate “viewpoint discrimination” at PayPal after the firm’s proposal to hand out fines for spreading misinformation backfired.
In a letter signed on April 10, the securities regulator sided with a conservative NGO saying that shareholders should be given the opportunity to vote on whether they want to learn more about PayPal’s business practices related to viewpoint discrimination.
The proposal, filed by the National Center for Public Policy Research (NCPPR), asks PayPal’s board of directors to conduct an investigation into how it oversees “risks related to discrimination against individuals based on their race, colour, religion (including religious views), sex, national origin, or political views, and whether such discrimination may impact individuals’ exercise of their constitutionally protected civil rights”.
The move comes after PayPal announced last October that it would change its terms of service in a way that allows the firm to fine its users up to $2,500 for spreading misinformation.
The fintech giant quickly walked back on the proposal after public backlash, which pointed out that the drafting of the policy gave PayPal sole discretion regarding what constitutes misinformation.
Shortly after the fiasco, NCPPR director Scott Shepard and around 60 conservatives signed a letter saying that such incidents “illustrate the dangerous weaponisation of the financial sector against Americans’ constitutionally protected freedoms”.
They criticised the fintech giant for arbitrarily freezing the accounts of the Free Speech Union and its British founder Toby Young for alleged COVID-19 vaccine misinformation.
They also noted that even after the walk back on the change, PayPal can still impose fines on users for engaging in prohibited activities such as “the promotion of hate, violence, racial or other forms of intolerance that is discriminatory”.
PayPal sought to cast aside the shareholder proposal saying that it “deals with matters relating to the company’s ordinary business operations”.
The fintech argued that certain tasks are so fundamental to the management’s ability to run a company on a day-to-day basis that they could not practically be subject to direct shareholder oversight.
It also argued that the proposal aims to micromanage the company.
But the SEC agreed with the NCPPR that the proposal goes beyond ordinary business matters, which means that PayPal shareholders will have the chance to vote on their upcoming May 24 annual meeting on whether or not to commission a report on the risks of discrimination and its impact on civil rights.
“Our proposal’s concern is not with the company’s ordinary business activities, but with the company’s contribution to emerging and fundamental societal problems related to the de-banking of individuals on arbitrary and discriminatory grounds,” the NCPPR said.
The NCPPR argues in an increasingly polarised political age, businesses face risks based on the politics of both those they do business with and those they choose not to serve.
The NCPPR said that “it is undeniable that [these risks] are significant — and are growing in their significance — in our society today”.
The rise in PayPal account freezes has been a concern in Europe too.
Last November, the Polish consumer watchdog opened a probe after it found that the fintech’s user agreement is phrased so imprecisely that it gives PayPal the sole discretion to interpret the rules and decide to block an account or issue a hefty fine.
PayPal is also subject to a US lawsuit in California for freezing an account for as long as six months for alleged violations of its 65-page user agreement.
PayPal is nonetheless not the only company that has found itself in the crosshairs of the NCPPR’s shareholder activist programme.
The conservative group has also challenged Apple, Google, Netflix and Walmart over their diversity, equity and inclusion (DEI) policies and one of its stated aims is to fight viewpoint discrimination and “other woke policies infiltrating American corporations”.
