Corporate Political Speech: Who Decides?
Lucian A. Bebchuk
Harvard Law School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI)
Robert J. Jackson Jr.
Columbia Law School
September 1, 2010
Harvard Law Review, Vol. 124, pp. 83-117, 2010.
Harvard Law and Economics Discussion Paper No. 676
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.
Number of Pages in PDF File: 42
Keywords: Public Corporation, Political Contributions, Campaign Finance, Citizens United
JEL Classification: G3, G38, K2, K22
Date posted: September 1, 2010 ; Last revised: December 14, 2010