Corporate Governance

Corporate Governance

The subject of corporate political speech is controversial, but the principles underlying it are rather simple. Corporations have the right to spend money on political speech because corporations are voluntary associations of individuals. When John has the right to spend his money on political speech, and Jane has the right to spend her money on political speech, it makes no sense to argue that John and Jane should not have a right to spend their money on political speech together. Corporate political speech is no different except that it typically involves a far greater number of people than John and Jane, but size shouldn’t be an issue. Just as political parties and non-profit advocacy groups have the right to speak on political issues, so too do corporations and unions.

Although this principle is simple and consistent, it has only recently been acknowledged in law as the result of two Supreme Court rulings from 2010:  Citizens United v. Federal Election Commission and SpeechNow.Org v. Federal Election Commission. Following these rulings, those wishing to silence corporate voices have been forced to abandon attempts to legislate away these associations’ rights, and have adopted a new tactic of “activist investing.”

Activist investing is the process whereby politically concerned individuals and groups purchase a minimum number of shares in a company, not solely or principally with the intention of maintaining those shares for their wealth-generating potential, but instead to attempt to force corporate votes on political initiatives concerning labor relations and political spending. Accommodating these activists could hurt a corporation’s bottom line, and the mere threat posed by their presence could lead to corporate self-censorship that harms the societal discourse surrounding political issues by silencing business organizations and industry advocates. With more than half of Americans owning shares of publicly traded companies, and many more owing their income to corporate employment (and, by extension, a healthy corporate balance sheet), corporations represent a vital economic viewpoint. Americans are entitled to have their political choices informed by a broad range of interests, including those of corporations.

Put simply, shareholder activists are asking corporations to surrender their constitutional rights because these activist investors oppose what they presume will be the existing political interests of these businesses. As a result, corporations may voluntarily choose not to participate in the political process, but both corporate managers and engaged citizens should be concerned about this outcome. Bullying certain voices out of the political discussion is never a good idea, and neglecting to speak out on important issues may lead corporations, and therefore their shareholders and employees, to suffer from bad laws that could have been improved by political participation from corporate interests.

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Articles of Note

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