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.
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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
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