The Recent Supreme Court Ruling on Corporate Speech
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1. The Corporate Consequences of the Supreme Court’s Decision – Via Harvard Law School
Last week, the US Supreme Court ruled that the Congressional limit on corporations and labor unions advertising for and against political candidates violates free speech principles.
Constitutional law scholars, the media and the public will debate whether corporations are entitled to free speech protections and Congress may revisit campaign contribution limits and public funding.
But the potential corporate, business and economic consequences of the decision, assuming it stands, are profound. Conservative and business media have thus far favored the decision as helpful to business; but it’s not at all clear that it is favorable to the economy. It’s likely to hurt the dynamism of the American economy, perhaps severely.
Upstarts do not have money yet to finance their own political campaigns, they are disorganized, and they don’t yet know the ropes in Washington and the state legislatures. They are new, weak, and inexperienced.
Consider whether it would have been easy for upstarts with weak funding to emerge to counter-balance, for example, efforts IBM would have been able to make under this new regime to suppress new competitors decades ago? Could Bill Gates, or Steve Jobs in his garage, really have matched IBM in campaign funding back then?
The ruling will also strengthen further the hands of managers and directors inside large American companies. They, after all, are the ones who decide whether to contribute to political campaigns, not shareholders.
Corporate and securities law in the US already strongly favors managers over shareholders.
But even if there are whiffs of populism in the air today, none of it threatens core capitalist institutions. With the corporate campaign finance ruling, it’s even less likely to do so. In that dimension, the Court’s decision is good for American capitalism.
Consistency is of course the hobgoblin of little minds (adored by little statesmen and philosophers and divines). We probably want our judges to be little statesman — not brilliantly imaginative rulebreakers. Legal opinions are supposed to be consistent with precedent and the law. In this case, though, the Supreme Court was dealing with three different and conflicting strands of law and precedent: (1) the many laws and past court rulings restricting corporate political involvement, (2) the precedent that political spending is equivalent to First-Amendment-protected speech, (3) laws and precedent that establish corporations as persons.
The Court majority chose to jettison (1) and stick with (2) and (3). I’m in no position to say the justices were wrong as matter of law. But as a matter of policy and common sense, it’s clearly (3) that’s most problematic. If corporations are persons, they are — if they behave as Milton Friedman wanted them to — persons with mental and emotional impairments so severe that any decent judge would feel entirely justified in declaring them incompetent.
Against the opposition of their four colleagues, five right-wing Supreme Court justices have now guaranteed that big corporations can spend unlimited funds on political advertising in any political election. In an opinion written by Justice Anthony Kennedy and joined by Chief Justice John Roberts and Justices Samuel Alito, Antonin Scalia, and Clarence Thomas, the Court overruled established precedents and declared dozens of national and state statutes unconstitutional, including the McCain-Feingold Act which forbade corporate or union television advertising that endorses or opposes a particular candidate.
This appalling decision, in Citizens United v. Federal Election Commission, was quickly denounced by President Obama as “devastating”; he said that it “strikes at our democracy itself.” He is right: the decision will further weaken the quality and fairness of our politics.
The Supreme Court’s decision frees corporations and unions to disseminate their views about political candidates through independent expenditures that are not coordinated with candidates or their parties, and applies with equal force to nonprofit advocacy groups, such as Citizens United, and large, for-profit corporations. The decision leaves in place the federal prohibition on corporate and union contributions to political campaigns.
Finally, the decision creates new corporate governance issues by shifting efforts to restrict corporate political speech from Congress to the boardroom. In Citizens United, the Supreme Court rejected the government’s argument that corporate political speech can be banned in order to protect dissenting shareholders from being compelled to fund political speech with which they disagree. In the aftermath of Citizens United, it can be expected that shareholders in some corporations will attempt to adopt measures restricting corporate participation in the electoral process and mandating disclosure of corporations’ political activities.