36 Pages Posted: 1 Apr 2013 Last revised: 4 May 2013
Date Written: March 30, 2013
Corporate political activity raises a hard and important question for corporate law: who decides when the corporation should speak and what it should say? In several cases, the Supreme Court has provided a clear answer: shareholders, acting through the procedures of corporate democracy. While this holding has attracted substantial academic and public criticism alongside calls for widespread reforms to corporate law, the securities laws, and the Constitution, there has been no comprehensive examination of the normative merits of the Supreme Court’s vision. Building on key insights from modern finance theory, public choice theory, and democratic theory, this Article presents three plausible justifications for the privately ordered corporate political activity contemplated in Citizens United and Bellotti: (i) reducing both pecuniary and moral agency costs; (ii) mitigating welfare-decreasing rent-seeking and reverse rent-seeking (i.e., political extortion); and (iii) beginning the process of democratizing corporate political activity by removing a problematic second layer of representative government from the political process. Such a structure would also have an important expressive effect concerning shareholders’ moral agency.
Keywords: corporate political activity, corporate political speech, corporate personhood, shareholder empowerment, shareholder bylaws, corporate bylaws, citizens united, bellotti, rent-seeking, political extortion, moral agency, corporate democracy, shareholder democracy
JEL Classification: D61, D62, D72, G11, K22
Suggested Citation: Suggested Citation
Kesten, Jay, Democratizing Corporate Political Activity (March 30, 2013). FSU College of Law, Law, Business & Economics Paper. Available at SSRN: https://ssrn.com/abstract=2242107 or http://dx.doi.org/10.2139/ssrn.2242107