The guilty verdict for Virginia ex-governor Bob McDonnell on charges of public corruption is a major headline of today.  I've been thinking a lot about corruption for the past few months, so here are a few thoughts:

-Corruption is in the eye of the beholder. My Essay turns on the proximity of time of two donations and legislative action.  In the most notable case, a member of the House introduced a bill the day after receiving a $1000 donation.  Readers' reactions to the story fall into two distinct camps.  One: OMG! I can't believe that!  Two: So what?  Why does that necessarily mean there's corruption?  In answer I say:

-Timing does matter.  From the WaPo:

[Prosecutors] backed up his story by using other evidence to weave a strong circumstantial case that an agreement had been reached between the businessman and the first couple based on the close timing of Williams’s gifts and loans and efforts by the McDonnells to assist Williams and his company.

In one instance, McDonnell directed a subordinate to meet with Williams on the same night he returned from a free vacation at his lake house. In another, six minutes after e-mailing Williams about a loan, McDonnell e-mailed an aide about studies Williams wanted conducted on his product at public universities.

-definitions are the name of the game.  The Supreme Court's 2014 McCutcheon decision narrowed the definition of corruption to only cases of quid pro quo corruption--cases where there's an actual exchange.  The McDonnell defense apparently conceded that there was an exchange, but contested whether the quo in question--events at the governor's mansion, setting up meetings for the donor--counted as "official acts."  This is a broad definition.

-Don't lie.

-Corporations are always going to participate in political life.  We expect them to lobby for positions favorable to their firms.  See here for a recent WSJ article on disclosure of political spending, with quotations from some sterling law professors, including friends-of-Glom Mike Guttentag and Steve Bainbridge, who quite rightly observes that the risk is that managers spend the corporation's money "on their own preferences, as opposed to what's good for the company." 

-So in corporate governance terms the question is how to sort the "good" spending that is for the benefit of the company from the "bad" spending that is driven by idiosyncratic managerial preference and doesn't do the corporation any good.  But in political governance terms, the question is how to regulate even "good" corporate spending that we find to be corrupting. I at least don't have a good idea of how to draw that line.  The Court says trading donations for access is fine, and so are donations that secure a candidate's gratitude.  My hunch is a lot of people might call those corruption.  But corporations need to be able to explain to candidates how the government's rules and regulations affect their business.  I'm certainly not confident that the average politician knows much of anything about any particular issue. 

So where does that leave me?  Still wondering about corruption, and eager to get back to corporate and securities law, that's where!

Corporate Governance, Crime and Criminal Law, Wisdom and Virtue | Bookmark

TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8345157d569e201b7c6da22d3970b

Links to weblogs that reference Random Thoughts on Politics and Money: