Thursday, September 10, 2009

Campaign Finance, Corporate Personality & Corporate Law

Based on the oral argument in the Citizens United case (which I previewed here and which is summarized nicely here), it appears that the Supreme Court is likely to overrule the precedents establishing governmental authority to regulate political speech by corporations. If so, under the Buckley v. Valeo framework, it will still be possible to limit corporate campaign contributions in the same way that individual campaign contributions can be subject to reasonable limits, but there will be no more limiting independent expenditures of general corporate treasury funds.

Perhaps the most interesting suggestion during the oral argument came from the Court's newest member. Justice Sotomayor mused that maybe the real problem is rooted in the old decisions finding that corporations have constitutional rights. (Justice Ginsburg gestured in the same direction.) Although I'm sympathetic to the goal of upholding campaign finance regulation, I think there's no realistic chance that such precedents will be re-examined.

Nor is it even clear that they should be. A corporation is an artificial entity, it is true, but so are all sorts of other organizations, including the ACLU, the NAACP, the NRA, etc., each of which pretty clearly needs to have some constitutional rights in order to protect the rights of its members. So artificiality per se is not a basis for denying (all) constitutional protections. And if the problem is that corporations are often in the business of earning profits, that point is both over and under-inclusive. Corporations can be organized as non-profits, while natural persons as sole proprietors or in partnerships can be in business.

Accordingly, the problem does not seem to be the attribution of rights to corporations as such. There are, instead, two main reasons to treat very large corporations differently when it comes to free speech. First, some of them amass such large fortunes that they can then use to swamp other voices. And second, the corporations then may end up using corporate funds in ways that do not reflect the political views of shareholders. I think it extremely unlikely that the Supreme Court will credit the first ground. As Justice Kennedy apparently noted during the oral argument, this rationale does seem inconsistent with the following maxim fromBuckley: "the concept that government may restrict the speech of some elements of our society in order to enhance the relative voice of others is wholly foreign to the First Amendment."

CJ Roberts expressed skepticism of the second argument, but even if it fails before the SCOTUS (which it probably will), it may suggest a partial way around the Court's ruling, namely corporate governance. Absent anything to the contrary in the corporate charter or by-laws, courts will typically uphold, as within the purview of management, decisions to spend corporate treasury funds on political speech. But nothing in corporate law--or the First Amendment--prevents the inclusion in corporate governing documents of something like the following: "General treasury funds shall not be used to fund political campaigns aimed at electing or defeating candidates or ballot initiatives."

In principle, shareholders might want such a provision. After all, money spent on political speech is money diverted from corporate capital (and thus share price) or dividends. However, corporate governance makes it hard for shareholders to organize and furthermore, there is a competing mechanism: Most political speech by corporations will be aimed at electing candidates or promoting platforms that benefit the corporation. The reason we worry about corporate political speech is not so much that we fear that Microsoft will try to elect pro-choice or pro-life candidates but that we fear that Microsoft will try to elect candidates who favor weak antitrust enforcement. So, even if corporate democracy were thriving, the incentives would not likely lead to my shareholder solution. So much the worse for democracy more broadly.

Posted by Mike Dorf

8 comments:

Garth Sullivan said...

i think it is quite clear that corporations are not "persons" endowed with inalienable rights under the constitution and thus restrictions on what they can and cannot say or do are not limited by first amendment restrictions on the government to regulate speech.

it is true that there are many non-profit corporations formed specifically to engage in political speech and it is also true that as a matter of public policy they should be given broad latitude to engage in it, but there is no support in the plain text or legislative history that corporations were ever intended to be granted the same rights as human beings.

as justice hugo black noted, there is no basis for concluding corporations are entitled to any constitutional rights as persons pursuant to the constitution.

furthermore, this healthcare debate is a text book example of how the large sums of money spent by corporations has corrupted our political process to the point where pundits are openly wondering if our government still represents people and not corporate interests.

Robert said...

Thanks for the thoughtful post, Mike. Three quick thoughts (quick since I'm in transit!), which I hope might be apt:

1) This ain't gonna happen at present, but I sure wish - as I've wished for over ten years now - that Buckly itself could be reexamined. I think it begs the question for the SC to claim that an egalitarian take on speach is foreign to the 1A. Seems to me that it's best read as being at the very core of the 1A, the latter being in my view best viewed as aimed at fostering a truly deliberative democracy.

2) I wonder whether any remotely plausible argument might be made to the effect that the 1A and 5A values against compelled speach militate against the way that the conservatives on the court are leaning. Of course there's no state action when a majority or dominant minority of SH in a corp cause the corp to "say" things that other SH don't believe, and of course in theory dissenting SH can disinvest, but ...

3) It seems to me to bear at least passing notice that the usual argument given by economists and finance types for corporate personality is entirely financial in nature. It's that separating firm assets from investor's privately held assets for purposes of assigning priorities in b'ruptcy (which the corp's being a "person" does) renders credit less expensive. Presumably the conservative justices have other reasons for favoring 1A protection for corp "persons," but it's interesting, I suppose, that they'd have to be very different indeed from the usual economic ones.

Thanks again!,
Bob

Joe said...

Corporations don't have the same rights as natural persons. For instance, corporations don't have privileges and immunities of citizenship. Gilded Age courts also selectively applied other rights to them as well.

Corporations also deserve to have some free speech rights. For instance, if someone denounces Nike, including a politician, why shouldn't it defend itself or help put forth a video (as here) for another candidate?

The health care debate is of limited value here. In fact, the indirect speech at times clouds the true parties as Rachel Maddow has pointed out. PACs, supported in part (legally) by corporations, with nice sounding names might be trusted more than something sponsored by a big corporation.

But, in contrary mode, it is arguable that the 1A should be read along side others. Freedom of association doesn't mean public business associations can discriminate against women. So, some equal protection limit here, particularly as to corporations, make sense.

I also think Prof. Dorf is right to focus on the big for profit corporations. "Corporation" by itself is overbroad. This very case points to the certain absurdities -- a Hillary video?

Sen. McCain putting unions and corporations on the same level also underlines that some middle ground against blunderbuss legislation can be found.

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TBS said...

Do all of the people here who believe corporations should not be granted free speech rights believe that NAACP v. Button, holding that the corporation known as the NAACP, had free speech rights, should be overruled? Or just corporations that say things you don't like? Here is Button, written by Brennan, who is a "conservative" now.
http://supreme.justia.com/us/371/415/case.html

Timothy said...

Sorry--joining this conversation late, but just want to add that I can think of no better device than corporate personhood to achieve certain highly desirable economic goals. It makes perfect sense that a corporation can own property, sue or be sued. But I have an equally strong intuition that a corporation should not be able to marry, say, or adopt children. Do First Amendment rights more relevantly resemble the former examples or the latter?

In any case, the First Amendment long antedates the (modern) corporate form so there is unlikely to be a very good originalist argument for what the Court seems prepared to do.

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