Monday, January 25, 2010
What next after Citizens United?
Immediately after last week's decision in Citizens United, President Obama called on Congress to do something (he did not say what) to undo the Court's decision and stop the feared influx of corporate special-interest money. Now given as how he is a former con law professor, I presume he realizes that this was a constitutional decision protecting corporate speech rights that Congress cannot directly undo by re-regulating corporate speech.
So can Congress or states do anything to limit corporate expenditures on political and election speech?
In a comment to my earlier post, Andrew Siegel wonders whether states could tighten their corporate statutes to define what corporations can do, expressly excluding electioneering. It seems to me the answer is no. Justice Kennedy considered the argument that corporate form carries state-conferred advantages so that the state could condition or limit speech to those who receive that benefit; he rejected the argument out of hand, saying that states could not condition the benefit on a surrender of free-speech rights. My guess is that position (sounding somewhat in an unconstitutional conditions mold) would carry in a challenge to any state effort to do what Andrew suggests.
In a different comment, Jeff Lipshaw suggests that states could find ways to empower shareholders to determine whether expenditures for speech (election or otherwise) are permitted. Jeff suggests that corporate codes could establish a default rule on the permissibility of electioneering (speech permitted unless the shareholders otherwise provide or speech prohibited unless shareholders otherwise provide), then leaving it to shareholders to agree to what that corporation will do. Jeff and I also agree that the statutory default probably has to be an opt-out; that is, the code must provide that the corporation can engage in electioneering unless the shareholders vote otherwise. This is consistent with what (I argue) the First Amendment requires in other areas. If so, I cannot imagine any First Amendment problem here. Indeed, as Jeff says, this has the benefit of empowering the "human constituencies" that make-up the corporation and that underlie the argument that they should be permitted to speak through the corporate form.
As a third possibility, perhaps states can do something to empower individual shareholders (as opposed to as a group, as in Jeff's proposal). For example, maybe state law could require that every individual (or institutional) shareholder be given the opportunity to opt-out of (or opt in to) electioneering expenditures with his shares. In other words, if Shareholder A does not want to fund electioneering but the remaining shareholders do, the corporation can engage in election speech, but somehow must segregate the money used for campaign speech so as not to include A's money. This basically gives shareholders statutory opt-out rights equal to those that union members and dues-payers have under the First Amendment. And it forces corporations to organize their accounts the same way unions do. This may be administratively unwieldy. It also may be functionally the same as a PAC requirement (electioneering money in separate entity, funded only by those who expressly agree) that the Court struck down.
An interesting related question would be whether Congress (rather than the states) could do this and, if so, under what power. Commerce, I suppose--regulating the composition and internal rules of entities engaged in interstate commerce--although it may run into the "corporations law is historically a state thing." A § 5 argument would be really interesting--Congress is seeking to "enforce" the First Amendment by protecting shareholders' free-speech interests, albeit with a more-tailored regulation that still permits the corporation-as-corporation to speak. Congruent-and-proportional? This is tricky, since the conduct prohibited by this statute--permitting corporations to compel unwilling shareholders to fund the association's electioneering speech--does not itself violate the Constitution (for lack of state action). It starts to sound a bit like Morrison.
Fourth, Heather Gerken argues that the decision may push reform in a new direction of "harnessing" the power of money. For example, she supports matching rules for small donors, which convert a $20 donation into a $100 or $200 donation, giving candidates an incentive to pursue smaller donors. Rather than leveling the expressive playing field by silencing some voices, government can level by enhancing the power of other voices. This suggests a greatly fluidity between expenditures and contributions.
Finally, I wonder if we might not start to move the whole way into full public funding of campaigns. That would not eliminate independent expression of the type at issue in Citizens United, including speech by corporations. But it would eliminate corporate (as well as individual) donations to candidates, since candidates would not need to spend (and indeed would be prohibited from spending) money beyond the public-funding pool--thus they also would not need to raise money. I ultimately doubt this is realistic, but it would be the cleanest system we could achieve.
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Nice summary. I don't know how a corporation can segregate individual "opt-out" shareholders' funds, either as a practical matter or in concept. In concept, once it's in the corporation, the corporation owns the money. The shareholder owns a share. It's not the shareholders' cash; that's why cash-rich corporations become takeover targets! As a practical matter, money is fungible. Do you impose tracing of funds? See the Section 11 securities cases on this mess (in that case, the tracing of fungible shares).
Posted by: Jeff Lipshaw | Jan 25, 2010 9:22:54 AM
Another possibility, in the big picture, is to push the line between government owned enterprises/governments and merely regulated enterprises. Govermental entities have less freedom to speak on their own behalf that private entities. But, in many cases (e.g. regulated utilities) the distinction between a government owned entity and a regulated entity can be pretty modest.
For example, the classic case of concern about corporate influence is the case of the "military industrial complex." Yet, since this is a monopsomy situation, nationalizing defense contractors to make them government owned, or majority government owned enterprises (something we have more examples of post-financial crisis than before) wouldn't necessarily be that problematic.
We've seen just the opposite trend in the local government area where home owner's associations and other private common interest communities have displaced the formation of new municipalities, which was the common pattern in an earlier era. This trend was driven, in substantial part, by the increasing constitutional regulation of governmental entities that flowed from partial incorporation of the Bill of Rights, and these entities have, mostly with little court contest, regulated expression in ways that government entities could not.
A different approach would be to regulate political speech by corporate entities through securities law, holding them to the higher standards of accuracy and transparency that applies to financial disclosures by these entities, on the theory that any speech by a publicly held entity has interstate commerce shareholder value implications. This flows from the notion that the critique of corporate political speech includes as one of its premises the concern that it is deceptive or distortive relative to "the truth."
In practice, held to this higher standard, many corporate entities would determine that discretion is the better part of valor and choose not to participate in corporate political speech even though it could do so if this speech was truthful at a securities fraud standard.
Posted by: ohwilleke | Jan 25, 2010 1:20:50 PM
In a new article in the Harvard Journal of Law & Public Policy, I argue that public financing is dead or largely irrelevant. I think provisions that provide "rescue" funds to outspent candidates are now unconsitutional and that makes the whole exercise futile.
If you are concerned with equalizing political resources, I suppose that Heather Gerken's proposal may work although I doubt that matching funds that would quintuple a $20 donation would ever be politically feasible.
I am not sure that Citizens United is going to lead to new floods of corporate and union money because I think that much of that money was already being spent in other ways. There will be many companies who will be reluctant to become involved because of feared shareholder or consumer backlash.
The significance of CU, I think, is that it reaffirms (with Davis and WRTL II) that a majority of the Court believes that you can't level the playing field by supressing or penalizing speech.
Posted by: Rick Esenberg | Jan 30, 2010 8:55:54 AM