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Torres-Spelliscy on Citizens United v. FEC

By Lawrence Solum

Ciara Torres-Spelliscy (Brennan Center for Justice) has posted Corporate Campaign Spending: Giving Shareholders a Voice on SSRN. Here is the abstract:

The Supreme Court has radically altered the legal landscape for politics with the 5-4 decision in the case Citizens United v. FEC, handed down on January 21, 2010. Turning back decades of statutory law, the Court has elevated the First Amendment rights of corporations to speak during elections, and has created a new paradigm for how political campaigns may be funded. The way that corporations ?speak? is by spending money, usually to purchase advertisements that most individuals could not afford to finance.

Now that the Court has held that publicly-traded corporations have the same First Amendment protections as individuals, limitations on Congress? ability to regulate their spending will be severely constrained. That means that corporate treasury money ? including the funds invested by individuals, mutual funds, pension funds and other institutional investors ? can be spent on politics without alerting investors either before or after the fact. Under current laws regulating corporations, there is nothing that requires corporations to disclose to shareholders whether funds are being used to fund politicians or ballot measures, or how the political money is being spent. Moreover, shareholders have no opportunity to consent to the political use of corporate funds.

This does not have to be the case. Britain has an alterative approach. In the U.K., companies disclose past political expenditures directly to shareholders. And more importantly, shareholders must authorize corporate political spending before a corporation uses shareholder funds on political spending.

This report argues for the United States to change its securities laws in the wake of Citizens United to (1) provide notice to shareholders of any and all corporate political spending and (2) to require shareholder authorization of future corporate political spending.

Full post as published by Legal Theory Blog on February 17, 2010 (boomark / email).