The Supreme Court ruled 5 to 4 yesterday that a state cannot prevent business executives from spending corporate funds to propagate personal and political views unrelated to their companies' business purposes.
The First Amendment to the Constitution was not meant to abridge "speech indispensable to decision-making in a democracy" simply because "the speech comes from a corporation rather than an individual," Justice Lewis F. Powell Jr. wrote in the opinion for the court.
In the main dissenting opinion, Justice Byron R. White said the decision raises "considerable doubt" that the court would uphold laws in 31 states the restrict corporate political activities. Most of the laws ban corporate contributions to candidates for the state offices.
White said the ruling also "clearly raises great doubt" that the court would uphold the Corrupt Practices Act, the 1907 law with which Congress made it a crime for a corporation, a national bank or a labor union to contribute money in connection with congressional or presidential elections.
In an initial reaction, Charles N.Steele, associate general counsel of the Federal Election Commission, told a reporter he didn't share White's pessism about how the court would rule on the federal law. The majority "reaffirmed" a distinction between corporates spending on election issues and corporate election-campaign contributions, he said.
Common Cause senior vice president Fred Werthelmer expressed a similar view, but said that the court's "just plain wrong" decision "sets the stage for massive corporate expenditures in initiative campaigns throughout the country and seriously undermines the integrity of the initiative process."
A spokesman for the AFL-CIO termed the decision "a victory for the best freedom of speech that money can buy."
The Chamber of Commerce of the United States praised the ruling. It "clears business of the charge that the appearance or possibility of corruption will inevitably result if business speaks out on public issues," said President Richard L. Lesher.
Other major organizations with stakes in the decision, including the Democratic and Republican national committees, had no immediate comment.
The decision was the first to confront the issue whether a corporation - defined by Chief Justice John Marshall in 1819 as "an artificial being,invisible, intangible, and existing onlyin contemplation of law" - has a protected liberty to engage in political activities.
Although the court has decided numerous cases involving the federal anticorruption law, its rulings have never questioned the law's constitutionally.
Yesterday, the court acted on a challenge to a Massachusetts corrupt-practices law. justice Powell's 29-page majority opinion and Justice White's 20-page dissent were marked by sharply worded charges and countercharges.
The case also produced an unusual alignment. It came as no big surprise that Chief Justice Warren E. Burger joined Powell, or that Justices William J. Brennan Jr. and Thurgood Marshall joined White.
But Burger's most constant ally, Justice William H. Rehnquist, dissented in a esven-page opinion with occasional near-populist overtones.
"A state grants to a business corporation the blessings of potentially perpetual life and limited liability to enhance its efficiency as an economic entity," he wrote.
"It might reasonably be concluded that those properties, so beneficial in the economic sphere, pose special dangers in the political sphere," Rehnquist said.
The Massachusetts law makes it an offense for banks or corporations - but not for labor unions, business and real estate investment trusts, and certain other entities - to make contributions "for the purpose of . . . influencing or affecting the vote on any question submitted to the voters" unless the question is one "materially affecting" it.
The law specifically excludes from questions "materially affecting" corporations those concerned entirely with "the taxation of the income, property or transactions of individuals . . . "
In the November 1976 general election, a question on the ballot was whether to amend the state constitution to permit the legislature to impose an individual income tax (the voters defeated the proposed amendment).
Before the election, two banks and three corporations wanted to spend money to publicize their opposition to the proposal.
The commonwealth's highest court unanimously ruled against them, holding that the state legislature "clearly identified . . . the parameters of corporate free speech" when it restricted that speech on general political issues to those that materially affect its business, property or assets.
In the opion overturning the state court, Justice Powell wrote, "If the speakers here were not corporations, no one would suggest that the state could silence their proposed speech . . . The inherent worth of the speech in terms of its capacity for informing the public does not depend upon the identity of its source, whether corporation, association, union, or individual." He added:
"In the realm of protected speech, the legislature is constiutionally disqualified from dictating the subjects about which persons may speak and the speakers who may address a public issue. If a legislature may direct business corporations to 'stick to business,' it also may limit other corporations - religious, charitable, or civic - to their respective 'business' when addressing the public."
The state contended that its restriction on corporate speech was necessitated by compelling governmental interests: sustaining the activity of human persons in the electoral process, and protecting the rights of share-holders whose views different from management's.
But the state didn't show "that the relative voice of corporations has been overwhelming or even significant in influencing referenda in Massachusetts," Powell said.
As for shareholders, Powell said, they may ultimately decide, "through the processes of corporate democracy, whether their corporation should engage in debate on public issues."
"Not a single shareholder" joined the state in defending the law or objected "to the right asserted by the corporations to make the proscribed expenditures," he noted.
In addition to Chief Justice Burger, Powell was joined by Justices Potter Stewart, Harry A. Blackmum and John Paul Stevens.
Justice White, in the principal dissenting opinion, rejected the majority contention that the First Amendment forbids state interference with corporate managers who use not only their own money but also a corporation's "to circulate fact and opinion irrelevant to the business placed in their charge."
He termed it "inexplicable" that the majority, in "a drastic departure" from prior decisions, substututes its judgement for the state's "in t.e context of the political arean where the expertise of legislators is at its peak and that of judges at its very lowest."
Corporate outlays for political causes "lack the connection with individual self-expression which is one of the principal justification for the constitutional protection of speech," White said.
Protesting one of the most important decisions on the status of the corporation since the court declared it to be a "person" in 1836, White said corporations "control vast amounts of economic power which may, if not regulated, dominate notonly the economy, but also the very heart of out democracy, the electoral process."
He said that Massachusetts was entitled to view corporate political expenditures "as seriously threatening the role of the First Amendment as a guarantor of a free marketplace of ideas."
In 1978, White noted, a state initiative in Montana to require legislature approval of sites for nuclear power plants was opposed by corporations that contributed $144,000, compared with $451 collected by supporters. The measure was defeated.