The Senate’s failure to advance a constitutional amendment to reverse Citizens United leaves campaign finance reform stranded, even though most citizens want to stop corporate chief executives from spending their companies’ cash in political races. Meanwhile, the Supreme Court’s 5 to 4 decision from 2010 has turned every corporate treasury in the United States into a potential political slush fund. Rivers of special-interest “dark money” and super-political action committee cash are inundating Washington like Rock Creek after a thunderstorm.
But perhaps all is not lost. Even if citizens cannot keep executives from spending corporate money in elections, surely shareholders can stop it. After all, it’s their money, right?
Indeed, it is.
In fact, Supreme Court Justice Anthony M. Kennedy’s majority opinion in Citizens United essentially invites a shareholder solution. The premise of the decision was that government cannot block corporate political spending because a corporation is simply an association of citizens with free-speech rights, “an association that has taken on the corporate form,” as Kennedy put it. But if that is true, it follows that corporate managers should not spend citizen-shareholders’ money on political campaigns without their consent.
Kennedy wrote that, if shareholders oppose political expenditures made by management, they will be able to correct the situation “through the procedures of corporate democracy.” This will be easy to do, he predicted, because all political spending will be thoroughly disclosed online: “With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters.”
Yet this is not the law, and it is nothing like reality. Shareholders remain in the dark because nothing requires executives to disclose their political spending. Congress has deadlocked on the Disclose Act, and the Securities and Exchange Commission refuses to move on new disclosure rules regarding campaign spending.
Executives are spending millions of dollars in partisan campaigns in the name of their shareholders, but, in many cases, the shareholders have no say, if they even know it’s happening. Last week, a technological error caused the Republican Governors Association to inadvertently reveal the names of dozens of “corporate members” of its “Republican Governors Public Policy Committee,” a “secretive 501(c)(4),” as the New York Times called it, which is not obligated to disclose its donors. The leak revealed that Aetna, Coca-Cola, Exxon Mobil, Microsoft, Pfizer, UnitedHealth Group and Wal-Mart had each chipped in $250,000 at the “Statesmen” level, with dozens of other major corporations participating as well. These companies have millions of shareholders of all political persuasions.
Our best hope for change is with the state governments that regulate corporate entities throughout the year and receive regular filings from them. I am introducing legislation in January that will require managers of Maryland-registered corporations who wish to engage in political spending for their shareholders to post all political expenditures on company Web sites within 48 hours and confirm that any political spending fairly reflects the explicit preference of shareholders owning a majority interest in the company.
Further, if no “majority will” of the shareholders can form to spend money for political candidates — because most shares are owned by institutions forbidden to participate in partisan campaigns — then the corporation will be prohibited from using its resources on political campaigns.
This may be the key provision. The majority of shares of Fortune 500 firms are owned by institutional investors, such as retirement and pension funds, mutual funds, insurance companies, universities, foundations, charities and other nonprofits. These entities are prevented from engaging in partisan political activity, either by their fiduciary responsibilities, their tax status, federal or state laws or contract. Moreover, even on issues in which the money managers for these institutions might be able to vote on proxy resolutions, the actual owners of the shares — people like you and me — have no voice in the process.
It is fanciful to argue that a corporation’s political spending reflects the political beliefs of the shareholders. What unites shareholders invested in McDonald’s or General Motors or hundreds of other corporations is not our political beliefs but our financial investments. If we share any political belief at all, it is probably this one: No corporation speaks for us politically, and no corporation should purport to do so and spend our money on political candidates without our knowledge and our consent.
Millions of American shareholders have a right to choose for ourselves which candidates to support. My legislation seeks to secure that right for the shareholders of Maryland corporations.
The writer, a Democrat, represents Montgomery County in the Maryland Senate and is a professor of constitutional law at American University.