September 23, 2009
Supreme Visions of the Corporation
Posted by Usha Rodrigues

I sheepishly confess that I have just now got around to reading the Citizens United oral argument.  For those not in the know, it's about the constitutionality of imposing limits on what kinds of speech corporations can fund.  Specifically, Citizens United is a nonprofit corporation that was prevented from purchasing advertisements for Hillary the Movie by the FEC in the 30 days prior to the last Democratic primary.  Larry Ribstein and Steve Bainbridge have already blogged about it, as no doubt have many con law/First Amendment types. The New York Times just published an editorial yesterday, though, so maybe this post isn't too tardy.

I'm immersed in corporate law, so reading the transcript was like lifting my head out of the water and seeing how the rest of the legal world thinks about corporations.  Here's my admittedly caricatured version of the different versions of the corporation discussed by justices and advocates (with the actual quotations in the accompanying parenthetical):

Ginsburg: Corporations aren't people too. ("A corporation, after all, is not endowed by its creator with inalienable rights").

Ginsburg: Furriners own shares of corporations.  So do furrin governments.  ("Nowadays there are foreign interests, even foreign governments, that own not one share but a goodly number of shares.")

Ginsburg: Who speaks for the shareholders? Not the CEO or the directors.  ("Who is the 'you?'  I mean...those are the directors, the CEO, not the shareholders?  We don't know what they think.")

Scalia: Small corporations are people, too ("The local hairdresser, the local auto repair shop, the local new car dealer -- I don't know any small business in this country that isn't incorporated, and the vast majority of them are sole-shareholder-owned."  Note: I think most mom-and-pops are actually sole proprietorships or, increasingly, LLCs.) 

Sotomayor: There are corporations and there are corporations.  (Sotomayor has gotten a lot of flak for her  question, which commentators have distilled into "maybe we should hold that SCOTUS precedent was wrong and corporations aren't really people".  But if you read the transcript, what she really says is, we could make a broader argument, but Citizens United isn't a business corporation "and actually doesn't even involve the traditional nonprofit organization? It involves an advocacy corporation that has a very particular interest.")

Kagan: Corporations use other people's money for their own interests. ("the distortion of the electoral process...occurs when corporations use their shareholders' money who may or may not agree.")

Kagan: Corporations buy politicians all the time ("when corporations play in the political process, they want winners, they want people who will produce outcomes for them, and they know that the way to get those outcomes, the way to get those winners is to invest in incumbents, and so that's what they do.")

Kagan: Corporations are purely economic actors. ("an individual can be the wealthiest person in the world but few of us ...are only our economic interests. We have beliefs, we have convictions; we have likes and dislikes. Corporations engage the political process in an entirely different way and this is what makes them so much more damaging.")

Roberts: Corporations are conflicted.  ("A large corporation just like an individual has many diverse interests. A corporation may want to support a particular candidate, but they may be concerned just as you say about what their shareholders are going to think about that." )

Kagan: Shareholder maximization.  ("corporations have actually a fiduciary obligation to their shareholders to increase value. That's their single purpose, their goal.")

Scalia: Corporate veil?  What corporate veil? ("There is no distinction between the individual and the corporate interest.  And that is true for the vast majority of corporations.")

Roberts: Shareholders monitor the corporations they own ("isn't it extraordinarily paternalistic for the government to take the position that shareholders are too stupid to keep track of what their corporations are doing and can't sell their shares or object in the corporate context if they don't like it? ")

Kagan: Individuals don't own corporations anymore.  Institutional investors do.  There's no monitoring. ("In a world in which most people own stock through mutual funds, in a world where people own stock through retirement plans in which they have to invest, they have no choice, I think it's very difficult for individual shareholders to be able to monitor what each company they own assets in is doing.")

Waxman: Corporations have a lot of money. ("the idea is to prevent the great companies, the great aggregations of wealth from using corporate funds directly or indirectly to send members of the legislature to these halls in order to vote for their protection and the advancement of their interests as against those of the public. ")

Scalia: Corporations are the little guy. ("These are not aggregations of great wealth. You are not talking about the railroad barons and the rapacious trusts of the Elihu Root era; you are talking mainly about small business corporations. ")

These different visions of the corporation interest me because of my present project.  And also because they are, as Steve points out, out of step with corporate scholarship.

And also because it makes me happy whenever anyone talks about corporate law.



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