Network News

X My Profile
View More Activity
2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

A way for corporations to contribute to political campaigns and preserve democracy at the same time

In January, the Supreme Court ruled in a 5 to 4 decision, Citizens United v. the Federal Election Commission, that corporations and unions essentially enjoy the same First Amendment protection of free speech as do individuals, because the groups are assemblages of individuals.

The decision means that now, corporations and unions can express their free speech by donating directly to political candidates.

The decision has, to put it mildly, stirred controversy.

In a poll conducted last month by The Washington Post and ABC News, an overwhelming majority of both parties opposes the idea of corporations and unions being able to spend as much as they want on political campaigns. But there were those who took issue with the way we asked the questions in our poll.

Plenty of talking heads and liberal commentators have declared the Supreme Court's decision the beginning of the end of democracy, saying that corporations will use their vast wealth to buy politicians who make laws favorable to them. President Obama even broke protocol by blasting the decision during his State of the Union address while the members of the court were sitting right in front of him. And some members of Congress have vowed to find a work-around to the court's decision, which pretty much would kick sand in the face of the Founding Fathers.

And it's worth noting that most of the left-wing commentators don't seem too upset that labor unions, which still wield considerable influence, can now give money to a candidate.

But is there a way that the court's decision can be taken advantage of by corporations without destroying our form of democracy?

Perhaps. Let shareholders vote on whether corporations donate to political candidates.

We expect corporations to act like responsible citizens without extending them all the rights afforded a citizen. Consider: We expect corporations not to pollute, not to make dangerous products, not to gouge consumers, to be good neighbors (help pay for infrastructure), to lead the way in new technologies that actually could harm their bottom line in the name of global goodness (i.e., expecting an oil company to pursue wind power), to pay fair wages and to pay their taxes, all traits of a good citizen.

Yet, plenty of people get exorcised when the Supreme Court says that, in addition to the responsibilities of a citizen, corporations and unions should enjoy the rights of a citizen, which includes contributing to a candidate of their choice. In essence, until the January decision, corporations were denied their First Amendment right to free speech in political campaigns.

And who could deny that corporations have as much if not more at stake in elections that individual citizens? Suppose Candidate X and Candidate Y are running for office. Candidate X supports raising tariffs on products manufactured by foreign countries that a particular company uses. Candidate Y opposes such tariffs. The new tariffs would add considerably to the company's cost of producing its product, making it less profitable and probably raising the cost to consumers. Why on Earth wouldn't the company want to contribute money to the campaign of Candidate Y to help defeat Candidate X and his high-tariff ways?

My good friend Nell Minow, executive editor and co-founder of the Corporate Library, probably the best good-governance watchdog of boardrooms and directors in the country, testified before Congress on this very issue last week. Nell is a lot smarter on corporate governance than I am and she is disappointed by the Supreme Court's ruling. But her testimony includes many points she and I can agree on, even if she may not support my eventual destination.

In her testimony, Nell pointed out that, even now, corporations can launder their political donations. She said:

"Corporations are currently not required to disclose their political spending in a comprehensive manner. ... Indeed, often directors of the company do not know how this money is allocated. ... We need clear, accessible, comprehensive disclosure without loopholes and we need every member of the board to sign their names to show that they have been fully informed and have approved the expenditures."

Good. Transparency is something we can agree on. Shareholders and directors should be able to find out in a quick, clear fashion where money from a company's general treasury is going.

And Nell, maybe without meaning to, helped lay the groundwork for my proposal. She said:

"We need clear authority for shareholders to be able to submit binding resolutions on the disclosure and direction of corporate funds used for political purposes, whether lobbying or support of – or opposition to – candidates or issues, so that a majority vote is controlling."

That is the heart of my idea: Allow corporations to donate to political candidates, or spend to defeat others, but only if authorized by some form of binding shareholder vote.

If you hold shares of stock in a company, you're probably used to getting proxy material in the mail, asking for your vote on slates of boards of directors. That's one way to get a shareholder vote. In 1955.

These days, we have that Internet thing and numerous privacy/safety protocols that would ensure, to a reasonable extent, a shareholder's vote on a corporate issue could be recorded instantly and honestly.

Let's say a company is terrified of Candidate X's high-tariff platform. It wants to donate, say, $50,000 to the company of Candidate Y, the opposing candidate.

The company would send each shareholder a secure e-mail explaining the company's rationale for the expenditure and its argument for why the shareholder should vote "yes." Depending on which technology you use, perhaps the shareholder would be sent to a password-protected company site to read the argument for donation and cast a vote.

I recognize that not everyone has Internet access or chooses to engage with their investments over the Internet. Fine. For those, the mail will suffice. Corporations wouldn't have to wait until the last minute to donate to a candidate.

If you chose not to vote on the company's plan to spend money to back a candidate, then you yield your say to those who do vote, just like with a directors' vote.

At this point, Nell would say to me: But, Frank: 70 percent of stock is managed by intermediaries, big pension funds, mutual funds, hedge funds, bank trusts, endowments and other big non-individuals.

Fine. Then each of those institutional shareholders has the obligation to disseminate the company's proposal to contribute money to a campaign to their individual stakeholders and let them vote.

This can be done. It would cost a company something, but it would be democratic. Yes, corporations and unions spend tons of money on lobbying; that's effective only after a candidate is elected. The Supreme Court ruling opens the way for stakeholders in the system -- in this case, corporations and unions -- to have their say in a candidate before they reach office. And that's very American.

Follow me on Twitter at @theticker

By Frank Ahrens  |  March 18, 2010; 10:30 AM ET
Categories:  Corporations , The Ticker  | Tags: Citizens United, Nell Minow, Supreme Court, campaign spending, corporate spending on political candidates, first amendment  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Stocks seek direction following inflation, jobs data
Next: Warren Buffett has cameos in new Geico ads

Comments

Albeit an apparent First Amendment issue (whoever deemed it so) I stand strongly against an organization/corporation having any Human Being/USA Constitutional/First Amendment credentials. I find it very difficult to envision the Founding Fathers imagining the freedom of speech a compelling judicial issue for our future. The Court has made a major error and needs to retract it ASAP

Posted by: kidvid | March 18, 2010 12:13 PM | Report abuse

Oddly enough, I just finished my proxy voting for CitiGroup's annual meeting over the interwebs. Schwab set it up--you log-in with a PIN, and get straight to the voting.

One of the resolutions was for CitiGroup to be a politically-neutral company. The Board recommended a vote against this resolution, and against every other resolution that might fall under the category of "good corporate governance" (i.e. shareholder approval for executive compensation, etc). I voted for all the "good governance" resolutions, and against every director, but my trifling amount of shares are not going to have much of an impact.

Anyway, I think it would be difficult to get shareholders to vote on individual decisions re: contributions or other political activities, so the best way to go is a blanket ban on political activities. I'm sure corporatists would argue that this will cost the corporation money in the short and long run, but as a shareholder, I'm more interested in CitiGroup not being involved at all in the political process than I am in Citi adding to its bottom line. Maybe that will cost *me* money in terms of the value of the stock, but the non-monetary benefits make it worth it.

Posted by: bucky_katt | March 18, 2010 3:02 PM | Report abuse

I don't remember checking inn, but I'm certain to check out. Once you're in, you're inn for life. I won't let them cheat you woman. You are going to make a lot or you aren't. There are always new ways to spend it and old ways to keep it family business. The option is more monkey business. Make the kids banana splits for breakfast. I have a crazy operation planed this morning. Real trust is worth more than fame, so keep it UC.

Posted by: tossnokia | March 19, 2010 4:48 AM | Report abuse

For more details on the proposal that shareholders should have a vote on corporate political spending, please see the Brennan Center's January 2010 report, "Corporate Campaign Spending: Giving Shareholders A Voice" here:
http://www.brennancenter.org/content/resource/corporate_campaign_spending_giving_shareholders_a_voice/

Posted by: CiaraTorres-Spelliscy | March 19, 2010 11:06 AM | Report abuse

"The decision means that now, corporations and unions can express their free speech by donating directly to political candidates."

"And it's worth noting that most of the left-wing commentators don't seem too upset that labor unions, which still wield considerable influence, can now give money to a candidate."

Ahrens is absolutely, one hundred percent false here. Citizens United did not touch the prohibition on monetary or in kind donations directly to candidates. Corporations now may simply use general treasury funds to do express advocacy for or against candidates. They may not even directly coordinate these communications with the candidates.

Frank: please fact-check and, in the future, refrain from circulating these over-generalizing, misleading and potentially harmful statements to the public.

Posted by: rachel20 | March 22, 2010 10:51 AM | Report abuse

The comments to this entry are closed.

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company