Saturday, November 6, 2010

A Minimal Discussion of Integral Players

Based on the purpose of a corporation and it’s, for the most part, undisputed duty to maximize shareholder profits, one will be surprised to find a small portion of the Citizens United v. Federal Election Commission (FEC) dedicated to the discussion of shareholder protection. 130 S.Ct. 876 (2010). A corporation is essentially a sum of all of its total parts—the shareholders. Each individual shareholder has his or her own thoughts, feelings, and opinions concerning politics. It seems rather counterintuitive for a minimal focus to be given to the most integral parts of a corporation—its shareholders.

The Court addresses the issue of shareholder interest by presenting the Government contention “that corporate independent expenditures can be limited because of its interest in protecting dissenting shareholders from being compelled to fund corporate political speech.” Id. at 911. This contention is followed by a stated belief that this particular interest “would allow the Government to ban the political speech even of media corporations.” Id. (citing Id. at 905–06). I am of the impression that such a conclusion, a ban on the political speech of media corporations, is an impractical assessment. But this argument must be qualified; it is dependent upon a “media corporation” meaning companies that produce news media—newspaper, television stations (CNN, MSNBC, etc.), news talk radio.

I find this argument to be unfounded because of the purpose of “media corporations.” A media corporation, in my view, is to present news, which may include political campaign coverage or debates on the issue. The shareholders of such a corporation are aware of the various contents, as well as political material, that may arise due to the character of the corporation itself. The knowledge and obviousness factor present with a media corporation should be seen to distinguish the various shareholder interests. Corporation “New Age Tupperware” (NAT) (for the busy, traveling dieter) shareholders would not be able to locate a similar purpose, or character, referenced above. The shareholder of NAT would not assume, or be able to predict, that the interests that they have invested into the corporation will end up contributing to an oppositional video to the “rubber stamp” candidate, whose views are aligned with their own. My assessment of the situation, based on this assumption of a “media corporation,” would invalidate the belief that the government interest asserted above would lead to a complete ban, even on media corporations. Thus, the minimal attention given the shareholder protection and interest is even more counterintuitive.

The minimally addressed issue of shareholder protection is given further thought in the dissent. The focus is turned on the use of the PAC in minimizing the risk posed to the “political convictions” of shareholders. “The PAC mechanism . . . helps assure that those who pay for an electioneering communication actually support its content and that managers do not use general treasuries to advance personal agendas.” Id. at 977. My question to this assertion is what safeguards are introduced that can prevent subverting shareholder monies into PAC funds? What corporate regulations are in place to ensure that the PAC does not simply exist as a way to circumvent the law?

In conclusion, shareholder protection is almost a non-existent concern throughout the voluminous discussion of Citizens United, yet I believe, as I assume many others do as well, that such a fundamental characteristic of the corporate structure should have been given more focus. The question I pose through my above referenced argument is: Does the inadequate look at shareholder protection, and interests, in Citizens United compromise the validity of the outcome?

3 comments:

  1. In the aftermath of Citizen United you may ask yourself what entity has spent the most money on political campaigns. Surprisingly, it is not the big corporations directly. No entity spends more on politics than the U.S. Chamber of Commerce–not even the political parties themselves. Responding to Citizens United the Chamber immediately announced a 40 percent boost in its political spending operations. How much money you ask? It has been estimated that the Chamber will spend $75 million on political campaigns in 2010.
    Who is giving the Chamber most of this money? The major donors include Goldman Sachs, Edward Jones, Alpha Technologies, Chevron, Texaco and Aegon. These seven corporate donors gave the chamber about two-thirds of its total donations.
    So what is the problem? The Chamber does not have filter between their foreign donations and their advertising payments. This impact was felt in the recent mid-term elections. In 58 of the 74 races in which power changed hands, the candidate who benefitted from the most outside spending also won their election. Welcome to the new world of politics.

    ReplyDelete
  2. The interests of the individual shareholders may not be specifically addressed in the case but does this mean that their specific interests are not protected. I do not believe so. Directors of corporations, making decisions on behalf of the shareholders, still have to use their best business judgment. If they are supporting a particular campaign, they are doing so in order to maximize profits for the corporation, not their personal interests. However, in a finding that shows the contribution was personal, as opposed to for the best interests of the company, the directors will be liable for violating their fiduciary duties.

    ReplyDelete
  3. The ethical problem often still exists, however, when directors contribute to political campaigns in an effort to maximize profits or minimize losses. Take Justice Benjamin and Massey Energy for example. The contributions by Massey to Benjamin were likely an effort to minimize Massey's losses, thus maximizing shareholder wealth. But, is buying a favorable WV Supreme Court of Appeals decision good business judgment?

    ReplyDelete