Opaque Transparency: Outside Spending and Disclosure by Privately-Held Business Entities in 2012 and Beyond
52 Pages Posted: 28 Sep 2013 Last revised: 10 Oct 2015
Date Written: September 26, 2013
A common assumption of lawmakers and judges is that publicly-held corporations dominate the production of corporate political speech. Advocates of corporate political speech disclosure reform have targeted publicly-held firms for enhanced campaign finance disclosure with almost laser-like focus, and while those efforts have achieved some successes, they have overlooked something important: Privately-held, for-profit business entities engage in significant election-related spending.
In this Article, I analyze data on outside spending from the treasuries of for-profit business entities in the 2012 federal election – the very spending unleashed by Citizens United v. FEC. I find that the majority of reported outside spending came from privately-held, not publicly-held companies, including a significant proportion of unincorporated business entities such as LLCs, and that more than forty percent of spending by privately-held businesses was characterized by opaque transparency: Though fully disclosed under existing campaign finance disclosure laws, something about the origin of the money was obscured. This happened when political expenditures were spread among affiliated business-donors, typically donating similar amounts to the same recipient(s) on similar dates, and when for-profit business entities were used as shadow money conduits.
I also argue that, due to differences between access-oriented and replacement-oriented electoral strategies, for-profit businesses engaged in outside spending in a federal election are likely to be experiencing insider expropriation. The expropriation of a business entity’s political voice by a controlling person is another potential way in which voters are misled in our current disclosure regime.
In light of these spending patterns, and evidence of insider expropriation of the political voice of many privately-held business donors, I argue that privately-held business entities that engage in federal election-related spending should be compelled to reveal the individual(s) who control them. I argue in favor of a control-oriented, rather than an ownership-oriented disclosure requirement, offer a set of key principles for balancing the informational interests of voters with First Amendment considerations, and propose a streamlined controlling-person standard. Compelled disclosure of the identity of individuals who control election spending by privately-held business entities will advance voters’ interests in learning “where political campaign money comes from,” promote First Amendment values, and possibly even enhance management accountability to owners at politically-active privately-held companies.
Keywords: corporate political speech, campaign finance disclosure, First Amendment, voters' informational interests, corporations, unincorporated business entities, limited liability companies, limited partnerships, limited liability partnerships, empirical research, interest group electoral strategies
JEL Classification: D21, D23
Suggested Citation: Suggested Citation