The Citizens United website marked the anniversary with a remarkably balanced video about the case, giving critics of the ruling a lot of air time. The video suggested, without quite saying so directly, that the ruling led to the Democrats' heavy defeat in Congressional elections last November. The implication: corporate donations to Republicans turned the tide. More tellingly, it asserted that the decision meant President Obama would face the toughest campaign in history when he seeks re-election in 2012. Whatever the impact of the decision on the political process, the decision raises corporate governance issues that have not gone away.
To blunt the impact of the ruling, Lucian Bebchuk of Harvard Law School and Robert Jackson at Columbia have mounted what might be called the corporate governance defence. Corporations may have free speech, but the processes by which they decide what to say are a matter of corporate governance, they say. Boards of directors are fiduciaries for shareholders and decisions by boards could still be governed by processes involving even the legal rights – right established in law, by legislators – that constrain how boards act. Shareholders may well disagree with what the board decides. Bebchuk and Jackson point out that until now courts have found that political donations by companies, which have faced limits for the past century, have been treated as business decisions, as they would normally be made to achieve outcomes that would favour the company's business. Such choices are covered in corporate law by the so-called "business judgement rule" that limits shareholders' rights to sue directors over the decisions they reach, even if they turn out to be mistakes. But Bebchuk and Jackson, in an article for the Harvard Law Review, think political donations might be treated differently: "political speech decisions are fundamentally different from, and should not be subject to the same rules as, ordinary business decisions," they contend. They suggest that lawmakers could still adopt rules that:
- Give shareholders a voice: "provide shareholders a role in determining the amount and targets of corporate political spending";
- Give outside directors control: "require that political speech decisions be overseen by independent directors";
- Provide an opt-out: "allow shareholders to opt out of – that is, either tighten or relax – either of these rules"; and
- Demand disclosure: "mandate disclosure to shareholders of the amounts and beneficiaries of any political spending by the company, either directly or indirectly through intermediaries."
Theirs is not the only view, however. Larry Ribstein at the University of Illinois accepts that the court "did not wholly preclude regulation of corporate governance processes that produce corporate speech". But he contends that regulation of the corporate governance processes for authorising corporate speech still face significant first amendment obstacles. "These problems with the corporate governance rationale for regulating corporate speech suggest that protection of shareholders' expressive rights may be trumped by society's interest in hearing corporate speech and the First Amendment's central goal of preventing government censorship," he writes.
The Supreme Court ruling concerned political donations, yes, but it drew on a wide canvas, much wider than the one originally brought by Citizens United. There might well be other challenges to laws telling corporations what they may and may not say. Commercial speech – advertising and the like – has long operated under a variety of laws that prevent false claims for products. Corporate financial and non-financial disclosure is both required and constrained in law. Few legal scholars seem to think these limits on free speech would even be brought under the umbrella of the Citizens United decision, however sweeping it may have been. But for all practical purposes no one is seriously asking the question anymore about whether corporations are the sort of persons the founding fathers had in mind when they drafted the first amendment and wrote:
There weren't very many corporations in those days, of course. But there's a lot of case law since then that establishes that the legal person of the corporation is a person, come what may.
Shareholder value, stakeholder rights: It's worth considering, however, that the corporate governance defence that Bebchuk and Jackson promote depends upon a particular and fairly absolutist view of the role of boards. They say boards work in shareholders' interests. No further discussion. Supporters of a stakeholder-based approach to corporate governance contend that board have obligations to others who might be affected by the corporation's decisions. If you take away the link to shareholder supremacy, do you take away the corporate governance defence?
Source documents: The working paper "The First Amendment and Corporate Governance," by Larry Ribstein of the University of Illinois College of Law, is a 27-page pdf file. The pre-publication draft of the article "Corporate Political Speech: Who Decides?," by Lucian Bebchuk and Robert Jackson, runs to 42 pages.