Corporate Political Speech: Who Decides?

42 Pages Posted: 1 Sep 2010 Last revised: 14 Dec 2010

See all articles by Lucian A. Bebchuk

Lucian A. Bebchuk

Harvard Law School; European Corporate Governance Institute (ECGI); National Bureau of Economic Research (NBER)

Robert J. Jackson, Jr.

New York University School of Law

Date Written: September 1, 2010

Abstract

As long as corporations have the freedom to engage in political spending - a freedom expanded by the Supreme Court’s recent decision in Citizens United v. FEC - the law will have to provide rules governing how corporations decide to exercise that freedom. This paper, which was written for the Harvard Law Review’s 2010 Supreme Court issue, focuses on what rules should govern public corporations’ decisions to spend corporate funds on politics. Our paper is dedicated to Professor Victor Brudney, who long ago anticipated the significance of corporate law rules for regulating corporate speech.

Under existing corporate-law rules, corporate political speech decisions are subject to the same rules as ordinary business decisions. Consequently, political speech decisions can be made without input from shareholders, a role for independent directors, or detailed disclosure - the safeguards that corporate law rules establish for special corporate decisions. We argue that the interests of directors and executives may significantly diverge from those of shareholders with respect to political speech decisions, and that these decisions may carry special expressive significance from shareholders. Accordingly, we suggest, political speech decisions are fundamentally different from, and should not be subject to the same rules as, ordinary business decisions.

We assess how lawmakers could design special rules that would align corporate political speech decisions with shareholder interests. In particular, we propose the adoption of rules that (i) provide shareholders a role in determining the amount and targets of corporate political spending; (ii) require that political speech decisions be overseen by independent directors; (iii) allow shareholders to opt out of - that is, either tighten or relax - either of these rules; and (iv) mandate disclosure to shareholders of the amounts and beneficiaries of any political spending by the company, either directly or indirectly through intermediaries. We explain how such rules can benefit shareholders. We also explain why such rules are best viewed not as limitations on corporations’ speech rights but rather as a method for determining whether a corporation should be regarded as wishing to engage in political speech. The proposed rules would thus protect, rather than abridge, corporations’ First Amendment rights.

We also discuss an additional objective that decisional rules concerning corporations’ political speech decisions may seek to serve: protecting minority shareholders from forced association with political speech that is supported by the majority of shareholders. We discuss the economic and First Amendment interests of minority shareholders that lawmakers may seek to protect. We suggest that decisional rules addressing political spending opposed by a sufficiently large minority of shareholders are likely to be constitutionally permissible, and we discuss how such rules could be designed by lawmakers.

Keywords: Public Corporation, Political Contributions, Campaign Finance, Citizens United

JEL Classification: G3, G38, K2, K22

Suggested Citation

Bebchuk, Lucian A. and Jackson, Jr., Robert J., Corporate Political Speech: Who Decides? (September 1, 2010). Harvard Law Review, Vol. 124, pp. 83-117, 2010., Harvard Law and Economics Discussion Paper No. 676, Available at SSRN: https://ssrn.com/abstract=1670085

Lucian A. Bebchuk (Contact Author)

Harvard Law School ( email )

Cambridge, MA 02138
United States
617-495-3138 (Phone)
617-812-0554 (Fax)

HOME PAGE: http://www.law.harvard.edu/faculty/bebchuk/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Robert J. Jackson, Jr.

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

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