Leonardo da Vinci, “Study in Perpetual Motion” Forster Codex (1495-97)
Module II – Corporations and Policy
Chapter 5
Corporation as Constitutional “Person”
•History of corporation as “person”
Bar
exam
Corporate
practice
Law
profession
Citizen of
world
Corporations:
A Contemporary Approach
• Long-time recognition by SCOTUS
• Economic rights  political rights
•Corporation as political actor
• Bellotti (state referendum); Austin (state
election expenditures)
• Citizens United (federal election expenditures);
Bullock (state)
•Supreme Court’s views of “corporation”
• Creature of state law: social institution
• Association: property view
• Person: natural rights
Chapter 5
Corporation as “Person”
Slide 2
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“Don’t worry about the rich;
they’ll take care of themselves.
They always have.”
Harry Truman
Corporations:
A Contemporary Approach
Chapter 5
Corporation as “Person”
Slide 3
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Corporation as “Person”
Timeline (1787 – 1977)
1800
1850
Corporations:
A Contemporary Approach
1900
1950
Chapter 5
Corporation as “Person”
2000
Slide 4
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Corporation as “Person”
Timeline (1977 – present)
1980
1990
Corporations:
A Contemporary Approach
2000
Chapter 5
Corporation as “Person”
2010
Slide 5
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Tillman Act (1907)
as amended by LMRA (1947)
2 USC § 441b(a): It is unlawful for … any
corporation whatever, or any labor
organization, to make a contribution or
expenditure in connection with any election
at which presidential … electors or a Senator
or Representative in … Congress are to be
voted for, or in connection with any primary
election or political convention or caucus
held to select candidates for any of the
foregoing offices, or …
for any officer or any director of any
corporation … to consent to any contribution
or expenditure by the corporation …
prohibited by this section.
Corporations:
A Contemporary Approach
Chapter 5
Corporation as “Person”
Slide 6
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Corporation as political actor …
1. First Nat’l Bank of Boston v. Bellotti (US 1978)
2. Austin v. Michigan Chamber of Commerce (US 1990)
3. FEC v. Massachusetts Citizens for Life, Inc. (US 1986)
4. Citizens United v. FEC (US 2010)
5. American Tradition P-ship v. Bullock (US 2012)
Corporations:
A Contemporary Approach
Chapter 5
Corporation as “Person”
Slide 7
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For-profit corporations …
Massachusetts
Michigan
(Bellotti)
(Austin)
PUBLIC
Shareholders
Shareholders
State
referendum
PAC
Banks / business
State law: No $$,
corporations
unless affect business
Corporations:
A Contemporary Approach
For-profit
corporations
Chapter 5
Corporation as “Person”
PUBLIC
State
candidates
State law: No $$
(contributions
or expenditure)
Slide 8
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Bellotti (1978)
MAJORITY
Powell, Blackmun, Burger
Stewart, Stevens
DISSENT
White, Brennan,
Marshall, Rehnquist
Austin (1990)
MAJORITY
Marshall, Brennan (Souter), Rehnquist
White, Blackmun, Stevens
DISSENT
Scalia, Kennedy, O’Connor
Not-for-profit corporations …
Members
PUBLIC
Federal Law
(Mass. Citizens for Life)
State
candidates
All
corporations
Corporations:
A Contemporary Approach
Chapter 5
Corporation as “Person”
FECA: No $$
(contributions
or expenditure)
Slide 10
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• Issue
Citizens United v. FEC
– Narrow construction (non-
(US 2010)
electioneering, movie, non-profit)?
– Overrule Austin?
• Holding
– Corporation = person
– Can’t single out speaker (PAC
alternative not enough)
– But can require disclosure
• Analysis
–
–
–
–
Distortion of corp $ not enough
No appearance of corruption
Not needed to protect SHs
No indication disclosure chills
Corporations:
A Contemporary Approach
Chapter 5
Corporation as “Person”
Slide 11
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Citizens United v. FEC
(US 2010)
Individual
Political
Association
Political
Non-profit
Closely-held
For-profit
Publicly-held
For-profit
Anthony Kennedy
Corporations:
A Contemporary Approach
Chapter 5
Corporation as “Person”
Slide 12
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So what’s a
corporation anyway?
Corporations:
A Contemporary Approach
Chapter 5
Corporation as “Person”
Slide 13
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Corporations and other associations, like
“ingratiation
and access . . . are not corruption. The
individuals, contribute to the marketplace
of ideas
appearance of influence or access … will not cause
the electorate to lose faith in our democracy.
The authorized spokesman of a corporation is a human being, who
on by
behalf
of the
beings who have formed that
… it is far fromspeaks
clear that
the end
ofhuman
the
association-just
the spokesman of an unincorporated association
18th century corporations
wereas
despised.
speaks on behalf of its members.
Although they make enormous contributions to our
society, corporations are not actually members of it.
They cannot vote or run for office. The financial
… smaller or nonprofit corporations
cannot legal
raisestructure, and instrumental
resources,
a voice to object when [wealthy]orientation
corporations
of corporations raise legitimate
are cooperating with the Government.
concerns about their role in the electoral process.
When corporations use general treasury
funds to praise or attack a particular
little evidence of abuse that cannot be candidate for office, it is the shareholders,
corrected by shareholders “through the as the residual claimants, who are
procedures of corporate democracy.” effectively footing the bill.
Corporations:
A Contemporary Approach
Chapter 5
Corporation as “Person”
Slide 14
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MATCHING
Bellotti (1978)
What is for-profit corporation?
1.
2.
3.
4.
Corporations are persons;
corporations need not “stick to
business”
Corporations are “creatures of state
law,” but state must have reason to
regulate
Corporations are creatures of state
law, and that means “government
giveth, government taketh away”
Corporations are voluntary
associations, who have as much
right to free speech as individuals
Lewis Powell
Byron White
Wm Rehnquist
Austin (1990)
Thurgood Marshall
Antonin Scalia
Citizens United (2010)
1 – LP / 2 – TM, JPS / 3 – WR / 4 - AS
Anthony Kennedy
John Paul Stevens
MORE MATCHING
Bellotti (1978)
Effect of corporate political speech?
1.Corporations afford the public access
to information and add to marketplace
of ideas.
2.Corporate communication doesn’t
further self-realization
3.Corporate voice has not been shown
to be distorting, overwhelming or
corrosive.
4.Corporate expenditures/contributions
can unfairly influence elections
Lewis Powell
Byron White
Wm Rehnquist
Austin (1990)
Thurgood Marshall
Antonin Scalia
Citizens United (2010)
1 – LP, AK / 2 – TM, JPS / 3 – LP, AK / 4 – TM, JPS
Anthony Kennedy
John Paul Stevens
YET MORE MATCHING
Bellotti (1978)
Regulate corporate speech?
1.
2.
3.
Government must have compelling
interest to regulate corporate
speech, just like individual speech
Too much speech can’t be bad;
should avoid government
censorship of corporate speech
Government has a compelling
interest to prevent corruption,
through corporate political war
chests
Lewis Powell
Byron White
Wm Rehnquist
Austin (1990)
Thurgood Marshall
Antonin Scalia
Citizens United (2010)
1 – LP, AK / 2 – LP, AK / 3 – TM, JPS
Anthony Kennedy
John Paul Stevens
LAST MATCHING
Bellotti (1978)
Internal corporate governance?
1.
2.
3.
4.
Shareholders unhappy with their
corporation’s speech can always
resort to “corporate democracy”
For-profit corporations, unlike nonprofit political associations,
may not reflect shareholders’ views
Ideological and political activities
are not proper for business
corporations
Shareholders know management
will sometimes be political and
ideological, part of maximizing
shareholder profits
1 – LP, AK / 2 – BW, JPS / 3 – BW / 4 - AS
Lewis Powell
Byron White
Wm Rehnquist
Austin (1990)
Thurgood Marshall
Antonin Scalia
Citizens United (2010)
Anthony Kennedy
John Paul Stevens
• Question: Do corporate politics,
governance and value relate to each
other in S&P 500 before and after
Citizens United?
• Answer: After the shock of Citizens
United, corporate lobbying and PAC
activity jumped, in both frequency
and amount,
– firms politically active in 2008 had lower
value in 2010 than other firms, consistent
with politics at least partly causing and not
merely correlating with lower value.
– The results are inconsistent with politics
generally serving shareholder interests,
and support proposals to require
disclosure of political activity to
shareholders.
Corporations:
A Contemporary Approach
Chapter 5
Corporation as “Person”
John Coates (HLS)
Slide 19
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The end
Corporations:
A Contemporary Approach
Chapter 5
Corporation as “Person”
Slide 20
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