Corporate Power Ratchet: The Courts' Role in Eroding 'We the People's' Ability to Constrain Our Corporate Creations

58 Pages Posted: 27 Oct 2015 Last revised: 24 Feb 2017

See all articles by Leo E. Strine

Leo E. Strine

Government of the State of Delaware - Supreme Court of Delaware; Harvard Law School; University of Pennsylvania Law School

Date Written: 2016

Abstract

At the beginning of our nation and throughout much of our history, corporations, as the creation of society, were seen as distinctive from human citizens. Human beings were born with certain inalienable rights that government could not take away. By contrast, corporations were the opposite of Lockean-Jeffersonian citizens, in the sense that they had only such rights as society gave them. Under this understanding, society could charter corporations and benefit from their wealth-creating potential while reserving for itself the right to limit corporate activities through externality-reducing legislation and other means so as to protect the public interest.

But, in recent decades, the interactive effect of federal jurisprudence is eroding the ability of society to constrain its own corporate creations. First, recent Supreme Court decisions like Citizens United have freed corporations to use treasury funds to make unlimited political expenditures. This is likely to make politicians more responsive to moneyed interests, including both corporations and the economic elites who control them. Corporations have exercised their newfound ability to use treasury funds to influence the political process, often in the form of untraceable “dark money.” Second, the Supreme Court’s decisions in other areas have dampened the political influence of minorities and less-affluent citizens. For example, Shelby County struck down important elements of the Voting Rights Act, despite the fact that the Act, like the McCain-Feingold Act struck down in Citizens United, had overwhelming bipartisan support. Similarly, the Court has not intervened in cases involving voter identification laws and extreme gerrymandering, legislative action that is likely to diminish the voting power of less affluent voters. And at the same time, as the Court has freed corporations to act on the political process without stockholder consent, it continues to subject labor unions to more election spending restrictions than corporations, diminishing the voice of workers as compared to moneyed interests. Third, recent Supreme Court decisions like National Federation of Independent Business v. Sebelius and Hobby Lobby have made it more expensive for Congress to adopt regulatory and social welfare legislation, and have also suggested that expansions of the social security net will be struck down as unconstitutional. Fourth, although it might be thought that these shifts in jurisprudential direction might result in a more favorable environment for executive branch regulators, who have been able to put in place measures to regulate corporate behavior, the reality has been on balance otherwise. Although there has been lipservice to deferential review, federal judges have overturned important corporate regulatory measures, in decisions that can be seen as involving a substitution of the judiciary’s own policy views over the judgment made by the regulator selected by Congress. Taken together, the decisions of the Roberts Court and other like-minded federal judges have had the practical effect of increasing the power of corporations to influence the electoral and regulatory process, diminishing the ability of human citizens to constrain their corporate creations in the public interest, and reducing the practical ability of Congress and executive agencies to adopt and implement externality regulations and new social welfare regulation. The result has been to alter the relationship between society and the corporations that it has created.

Finally, the article considers whether this pattern of decisions is the result of jurists applying precedent and exercising judicial restraint. Because the decisions involve a conscious decision by judges to depart from precedent and to overturn the decisions of the political branches, these decisions are properly regarded as involving judges willing to break new ground, depart from traditional principles of judicial restraint, and move the law in a direction they think better for society.

Keywords: Citizens United, constitutional law, First Amendment, election law, political spending, corporate law, moneyed interests, dark money, administrative law, public law, agency rulemaking

JEL Classification: G34, K22, K23, P16

Suggested Citation

Strine, Leo E., Corporate Power Ratchet: The Courts' Role in Eroding 'We the People's' Ability to Constrain Our Corporate Creations (2016). Harvard Civil Rights-Civil Liberties Law Review (CR-CL), Vol. 51, P. 423, 2016; U of Penn, Inst for Law & Econ Research Paper No. 15-37. Available at SSRN: https://ssrn.com/abstract=2680294

Leo E. Strine (Contact Author)

Government of the State of Delaware - Supreme Court of Delaware ( email )

820 N. French Street
P.O. Box 1997
Wilmington, DE 19801
United States

Harvard Law School ( email )

1563 Massachusetts Ave
Cambridge, MA 02138
United States

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States

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