Leonardo da Vinci, “Study in Perpetual Motion” Forster Codex (1495-97)
Chapter 5Corporation as Constitutional “Person”
Corporations:A Contemporary Approach
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•History of corporation as “person”• 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
Module II – Corporations and Policy
Citizen of world
Citizen of world
Law profession
Law profession
Corporate practice
Corporate practice
Bar examBar
exam
“Don’t worry about the rich; they’ll take care of themselves.
They always have.”
Harry Truman
Corporations:A Contemporary Approach
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Dartmouth C
ollege (U
S 1819)
Bank of A
ugusta v.
Earle
(US 1839)
Southern R
y. v.
Greene (U
S 1910)
GM Leasing v.
US (U
S 1977)
Okla P
ress
Publ v
. Wallin
g (US 1946)
Santa Clara
County
v. Southern
Pac R
R (US 1888)
1800 19501900 20001850
Fourteenth A
mendment (1873)
Corporations:A Contemporary Approach
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Corporation as “Person” Timeline (1787 – 1977)
Tillman A
ct (1
907)
Fed Electi
on Campaign A
ct (1
971/1974)
US Consti
tution (1
787)
Labor Management R
elations A
ct (1
947)
FEC v. M
CFL (US 1986)
First N
at’l Bank v
. Bello
tti (U
S 1978)
Am Tra
dition v,
Bullo
ck
(U
S 2012)
McConnell v
. FEC (U
S 2003)
Austin v.
Mich
igan CC (U
S 1990)
1980 201020001990
Corporations:A Contemporary Approach
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Corporation as “Person” Timeline (1977 – present)
Bipartisan C
ampaign Reform
Act
(2002)
Citizens U
nited v.
FEC (U
S 2010)
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.
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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
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For-profit corporations …
Corporations:A Contemporary Approach
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Banks / business corporations
Shareholders
Statereferendum
State law: No $$, unless affect business
Massachusetts(Bellotti)
Michigan(Austin)
For-profit corporations
PUBLIC
Statecandidates
State law: No $$ (contributions
or expenditure)
PUBLICShareholders
DISTIN
GUISH
PAC
Bellotti (1978)MAJORITY
Powell, Blackmun, BurgerStewart, Stevens
DISSENTWhite, Brennan,
Marshall, Rehnquist
Austin (1990)MAJORITY
Marshall, Brennan (Souter), RehnquistWhite, Blackmun, Stevens
DISSENTScalia, Kennedy, O’Connor
Not-for-profit corporations …
Corporations:A Contemporary Approach
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Federal Law(Mass. Citizens for Life)
Allcorporations
Statecandidates
FECA: No $$ (contributions
or expenditure)
PUBLICMembers
Citizens United v. FEC(US 2010)
• Issue– Narrow construction (non-
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
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Citizens United v. FEC(US 2010)
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Individual
Political Association
Political Non-profit
Closely-heldFor-profit
Publicly-heldFor-profitAnthony Kennedy
So what’s a corporation anyway?
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Corporations and other associations, like individuals, contribute to the marketplace of ideas“ingratiation and access . . . are not corruption. The
appearance of influence or access … will not cause the electorate to lose faith in our democracy.
… smaller or nonprofit corporations cannot raise a voice to object when [wealthy] corporations are cooperating with the Government.
little evidence of abuse that cannot be corrected by shareholders “through the procedures of corporate democracy.”
… it is far from clear that by the end of the 18th century corporations were despised.
The authorized spokesman of a corporation is a human being, who speaks on behalf of the human beings who have formed that association-just as the spokesman of an unincorporated association 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 resources, legal structure, and instrumental orientation of corporations raise legitimate concerns about their role in the electoral process.
When corporations use general treasury funds to praise or attack a particular candidate for office, it is the shareholders, as the residual claimants, who are effectively footing the bill.
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MATCHING
What is for-profit corporation?
1. Corporations are persons; corporations need not “stick to business”
2. Corporations are “creatures of state law,” but state must have reason to regulate
3. Corporations are creatures of state law, and that means “government giveth, government taketh away”
4. Corporations are voluntary associations, who have as much right to free speech as individuals
Byron White
Thurgood Marshall Antonin Scalia
Lewis Powell Wm Rehnquist
Anthony Kennedy John Paul Stevens
Bellotti (1978)
Citizens United (2010)
Austin (1990)
1 – LP / 2 – TM, JPS / 3 – WR / 4 - AS
MORE MATCHING
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-realization3.Corporate voice has not been shown to be distorting, overwhelming or corrosive.4.Corporate expenditures/contributions can unfairly influence elections
Byron White
Thurgood Marshall Antonin Scalia
Lewis Powell Wm Rehnquist
Anthony Kennedy John Paul Stevens
Bellotti (1978)
Citizens United (2010)
Austin (1990)
1 – LP, AK / 2 – TM, JPS / 3 – LP, AK / 4 – TM, JPS
YET MORE MATCHING
Regulate corporate speech?
1. Government must have compelling interest to regulate corporate speech, just like individual speech
2. Too much speech can’t be bad; should avoid government censorship of corporate speech
3. Government has a compelling interest to prevent corruption, through corporate political war chests
Byron White
Thurgood Marshall Antonin Scalia
Lewis Powell Wm Rehnquist
Anthony Kennedy John Paul Stevens
Bellotti (1978)
Citizens United (2010)
Austin (1990)
1 – LP, AK / 2 – LP, AK / 3 – TM, JPS
LAST MATCHING
Internal corporate governance?
1. Shareholders unhappy with their corporation’s speech can always resort to “corporate democracy”
2. For-profit corporations, unlike non-profit political associations, may not reflect shareholders’ views
3. Ideological and political activities are not proper for business corporations
4. Shareholders know management will sometimes be political and ideological, part of maximizing shareholder profits
Byron White
Thurgood Marshall Antonin Scalia
Lewis Powell Wm Rehnquist
Anthony Kennedy John Paul Stevens
Bellotti (1978)
Citizens United (2010)
Austin (1990)
1 – LP, AK / 2 – BW, JPS / 3 – BW / 4 - AS
John Coates (HLS)
• 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.
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The end
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