Another Wrinkle: Does anti-speech activism cannibalize shareholder value?

We lawyers can have odd taste in bedtime reading. For instance, I recently came across a law review article by Vice Chancellor Leo Strine, a judge of the Delaware Court of Chancery and widely-admired corporate law expert.

Vice Chancellor Strine’s argument is not directed specifically at questions of corporate political activity, but many of his arguments provide much-needed clarity to that ongoing debate. The article is (relatively) brief and deserves to be read in full.

The article responds to a “reform” proposal that would provide shareholders with greater opportunities to directly dictate corporate policy, by allowing direct votes to change corporate charters. Strine’s article opposes this reform from a “traditionalist” viewpoint.(As a sitting judge, Strine is somewhat constrained in airing, as such, his personal views).

Several points stick out:

Filed Under: Blog, Corporate Governance, Corporate Governance Press Release/In the News/Blog, Disclosure, Disclosure Press Release/In the News/Blog, External Relations Sub-Pages

Big Apple unions may challenge City disclosure law

A coalition of unions may be gearing up to fight a recent New York City campaign regulation. According to City Hall, a recent ballot measure would require outside groups, including unions, to disclose “every dollar spent advocating for or against candidates.” 

To require disclosure of all expenditures, without even a de minimis exemption for minor expenses, imposes an enormous burden on the ability of unions, corporations, and advocacy groups to participate in the political process.  Simply put, disclosure of minutiae is expensive. Any well-run organization monitors its income and spending, but having to classify every penny as either a political expenditure or otherwise – and risk state intervention and sanction over minor expenses – imposes heavy organizational costs without doing anything to “clean up” elections.

Filed Under: Blog, Disclosure, Disclosure Press Release/In the News/Blog

Proxy fight, or proxy war?

In a widely-watched development, the Securities and Exchange Commission’s legal staff recently issued a “no-action letter” to Home Depot. The likely result is that Home Depot’s shareholders will have an opportunity to vote on a proposal authored by self-described “socially responsible” investment house NorthStar Asset Management.

According to NorthStar’s attorney, the proposal has “at its core the notion of shareholder approval of electioneering contributions.” This approval would take the form of an annual “advisory” shareholder vote on Home Depot’s electioneering contributions.

The SEC’s letter is brief, and gives little insight into the Staff’s reasoning, but the attached materials make for interesting reading.

NorthStar argues that shareholders have “few choices if they do not support the electioneering spending policies of a company.  They can seek to vote the board out of office, or they can sell their shares. Many commentators have noted that this new development [corporate electioneering spending in the wake of Citizens United] endangers the corporate governance process by potentially politicizing the relationship between shareholders and their companies…”

But won’t an annual vote on election spending have precisely such a politicizing result?

Filed Under: Blog, Corporate Governance, Corporate Governance Press Release/In the News/Blog, External Relations Sub-Pages

Kendall fumbles Fiesta Bowl argument

Doug Kendall, writing in the Huffington Post, attempts a defense of Arizona’s flawed tax financing system—without ever addressing the system itself.

As Kendall sees it, state Sen. John McComish (R-Ariz.) has two problems. First, he’s the plaintiff in McComish v. Bennett, the constitutional challenge to an Arizona law that rescues tax-funded candidates from being outspent by their traditionally-funded opponents. Second, Sen. McComish “was forced to file an amended financial disclosure report, acknowledging that he had accepted from Fiesta Bowl officials a gift of more than $500 in value involving a trip to the Big 12 Championship in Dallas in 2009, and had not disclosed this fact as required by Arizona law.”

Of course, these two things have nothing to do with each other. There are laws regulating campaign finances, and there are separate laws regulating gifts to sitting legislators. Sen. McComish’s transgression has nothing to do with campaign finance law, or the case currently before the Supreme Court. Moreover, other members of the Arizona Legislature committed the same offense despite having availed themsleves of public financing.  (You can find a sortable list of legislators who accepted tax funding here.)

Filed Under: Blog, Disclosure, Disclosure Press Release/In the News/Blog, Arizona

The Center for Competitive Politics is now the Institute for Free Speech.