January 24, 2010
Citizens United: First Corporate Thoughts
Posted by Usha Rodrigues

Many have already weighed in on Citizens United v. FEC, mostly focusing on the big First Amendment implications. Steve Bainbridge and Larry Ribstein have characteristically trenchant takes on the important corporate speech issue.  But I'm a private law type who's a bit ashamed to confess she hasn't read a Supreme Court opinion in at least a year.  So I thought in keeping with my oral argument post, I'd offer some corporate first thoughts on the big opinion.

1. Confusion about what corporations "really" are

The justices are all over the place on what corporations are and what they do. Stevens even says that "business corporations have been effectively delegated responsibility for ensuring society's economic welfare" (88--internal citations omitted).  Really?  By whom?  I don't see this as the role of corporations...

Much of the confusion seems to stem from the fact that the term "corporation" signifies markedly different kinds of organizations.  Big public corporations raise issues of separation of ownership from control.  One of Stevens' main hooks is the need for for restraint on corporations' ability to spend unwilling shareholders' dollars.  The shareholder protection rationale has real traction in the public company context, and I find Kennedy's reliance on the protections of shareholder democracy laughable (34). He observes that "Shareholder objections raised through the procedures of corporate democracy...can be more effective today because modern technology makes disclosures rapid and informative." (39)

Huh? As Stevens observes, most investors don't owns shares of individual companies--our household does, but apparently we're a rarity.  And even we have the bulk of our holdings (meager as they are) in mutual funds or ETFs.  How will I know whether companies in my mutual funds are funding ads for a candidate I don't like instead of putting money in my pocket?  I don't even know which companies I own.  Even if I do somehow learn about this misdirection of my money, my only real voice would be selling the shares--or exiting the mutual fund that owned the company.  I don't see how Kennedy's "modern technology" helps me use the engine of corporate democracy to voice protest in any effective way; anyone who thinks differently has never opened the proxies that arrive at their doorstep.  Point for Stevens.

And yet, what about the "mom and pops" Scalia invoked in oral argument, the closely held corporations that  far outnumber the publicly held corporations?  Here, as Kennedy points out, we have no concern about shareholder protection; the shareholders are in charge, and if the corporation makes a donation, it's because the board (the voice of the majority shareholders, at least) okay'ed it.  Stevens says Mom and Pop Shareholder are free to donate using independent expenditures-- or give straight to the candidate herself, for that matter.  They just can't use the corporate form.  Well, but then Mom and Pop have to get more money out of the corporation to spend on their political activism, either raising their salary or increasing dividends (the less attractive option), and they might not want to do that just so that they can get money to spend on the campaign.  Especially since (see below) it might well be in the corporation's interest to do so.  Point Kennedy.

Finally, there are nonprofits.  Yes, as I tell my 1Ls every year to cajole them into taking Corporations, nonprofits are corporations, too.  In fact, litigant Citizens United is a nonprofit.  Nonprofits don't have owners.  They are thus a very different animal from both the public corporations and the mom and pops discussed above.  (Indeed, I'm groping my way towards an argument that the nonprofit form is so unique that it creates a different kind of good--but that's a topic for another post).  People don't contribute to nonprofits expecting to get money back.  They contribute because they support the cause (among other reasons, again for another day).  So Stevens' shareholder protection argument fails entirely here.  Point for Kennedy. 

2. What did the Founders think of corporations?  

Scalia says they liked them.  At least, he says that freedom of speech includes the freedom to speak in association with others, and corporations are just associations of individuals.  He gets a bit tangled about whether the number of corporations extant in 1791 or 1800 matters, but then he makes an interesting point: "Most of the Founders' resentment toward corporations was directed at the state-granted monopoly privileges that individually chartered corporations enjoyed."  (50).  Modern corporations, incorporated under the states' general incorporation statutes, don't have that special-privilege monopolist feel and the framers wouldn't mind them--except, perhaps, that kook Thomas Jefferson (who just wanted us all to be gentleman farmers) (those of us that qualified, anyway).  Modern corporations are more like the religious, educational, and literary corporations that were incorporated under general incorporation statutes in the Founders' time. And who ever met a literary corporation they didn't like?

Stevens, on the other hand, argues that: "members of the founding generation held a cautious view of corporate power and a narrow view of corporate rights." (69).  Thomas Jefferson (that crackpot!) wrote: "I hope that we shall...crush in [its] birth the aristocracy of our monied corporations which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country."  Stevens quotes historians that characterize the era as one that disfavored corporations, and thought of them as "soulless" and "evil." (67). 

What the founders thought of corporations is an interesting question, and I'm not sure who wins.  I do know Stevens is right about this: "The truth is we cannot be certain how a law such as BCRA s. 203 meshes with the original meaning of the First Amendment."  (70)

3. What counts as corruption?

Kennedy draws a line between quid pro quo corruption (I'll fund you if you do this for me) and "access and ingratiation."  Stevens doesn't buy it.  Both opinions seem to be struggling with the basic point that money matters in elections.  At the very least spending money on behalf of a candidate --particularly, Stevens argues, when your funds allow for negative campaigning that the candidate can distance himself from--buys you goodwill.  The thing that he doesn't acknowledge in his shareholder protection argument is that, if money buys access buys policies that benefit the corporation, that may well be something that a shareholder would want.  It's an investment in politics.  Point for Kennedy.

And yet we forbid corporations from doing things that are "good for the corporation" all the time --e.g., bribing public officials.  Stevens says it's hard to draw the quid pro quo line when candidates "express appreciation" for ads these independent organizations air for their support. (80) And that even if it isn't buying votes, it looks like it, and that's avoiding that appearance is good enough to count as a legitimate state interest.  To me this is a question of 1) how much you think money matters in elections (I think a lot) and 2) no matter how you come out on 1), whether permitting corporations to fund electioneering ads makes it seem like money matters, and therefore should be verboten.  I don't know how to score this one, but it sounds like Stevens has the better argument in terms of precedent.

4. Are Supreme Court opinions always this mean? 
For those of you who don't want to plow through the 99 pages of opinion, there's a lot of ink spilled over whether the Court is hewing to or rejecting its prior precedent, stretching to address a constitutional issue they don't have to, etc.  You know, the procedural questions that get us lawyers so excited.  I can't really speak to the merits of these questions, but they inspire some world-class snark from the bench.

5. Finally, I can't resist closing with the majority's speculation that "Soon it may be that Internet sources, such as blogs and social networking Web sites, will provide citizens with significant information about political candidates and issues." (35).  We're one step ahead of you here at the Glom, Justice Kennedy, at least where business, law, economics, and society are concerned.

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