A Call for a New Kind of Corporate Governance after Citizens United

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Fall 2012; Source: Democracy Journal

Few people seem to endorse, much less politically support the Citizens United decision of the U.S. Supreme Court, which turned the flow of corporate capital for electoral campaigns into a raging torrent, but the preferred strategy for undoing Citizens United is less clear.

Congress has rejected a bill that would have called for limited disclosure of donations to independent political committees such as 501(c)(4) social welfare organizations, though the Federal Election Commission seems to have concluded that the notion of (c)(4) donor secrecy wasn’t quite what the Commission intended or wanted. However, even if (c)(4)s lose their donor secrecy rights, donor transparency might not undo the imbalance in money in politics that has transformed elections from an exercise in democracy to a gambler’s casino.

The problem, according to John Bonifaz, the co-founder and director of Free Speech For People, is not one of disclosure, but the nature of corporations. He believes that constitutional rights – for example, the free speech in the form of campaign contributions that the court attached as one of the main justifications for the Citizens United decision – should be restricted to “natural persons,” meaning, contrary to the statement of a major political figure, corporations are not people.

If we read Bonifaz’s arguments correctly, the notion of corporate “personhood” deprives the individual shareholder “owners” of corporations of their rights. Kent Greenfield, the author of this Democracy Journal article, suggests that shareholders, employees, consumers, and other corporate “stakeholders” have very little real control over their corporations. The free speech being exercised through corporate political donations is really “the speech of a tiny sliver of the financial and managerial elite.” But Greenfield doesn’t agree with Bonifaz that the problem is corporate personhood, but rather he believes in the need to redesign the governance of corporations.

Greenfield contrasts the U.S. governance model, which vests huge control in a small coterie of managers, with the European model of corporate governance, which has more mechanisms for consultation with employees, including the requirement that half of the senior board of large companies be elected by employees rather than shareholders. He suggests that the effort to change corporate personhood, which would require a constitutional amendment, is less than satisfactory. “My argument,” Greenfield says, “is simply that progressives should consider a new kind of regulatory effort – building a public-interest element into corporate governance itself, creating the possibility that businesses become a more positive social force on their own.”

The idea is to make corporations responsive to their employees, their customers, and their stakeholders, to put a broad range of stakeholders rather than just shareholders in control.

Greenfield suggests many positive benefits from the increased democratization of corporate governance, but how does this relate to the Citizens United problem? In Greenfield’s words, “As the governance of corporations begins to take account of the interests of their stakeholders, the public voice of corporations would reflect the voices of those myriad stakeholders. Corporate involvement in the political process would be less of a concern, because it would be more reflective of the range of stakeholders contributing to company success… There is nothing inherently undemocratic in corporate speech, unless corporations themselves are undemocratic.”

Do you buy the idea that corporations can be democratized and, through their political contributions, better reflect the opinions and values of a broad range of stakeholders beyond a narrow managerial elite? Or is Greenfield pursuing a pipedream that won’t work, necessitating Bonifaz’s strategy of a constitutional amendment to end the notion of corporate personhood? –Rick Cohen

  • Bill Huddleston

    A Way to Combat Citizens United without a Constitutional amendment.

    The real issue is money in politics, and there’s actually a fairly straightforward way to address this. (Note, I did not say easy).

    The single biggest reason that political campaigns need money is to buy airtime on TV and radio, even in this age of Internet. By definition, the public airwaves are public and are regulated by the Federal Communications Commission. By legislation private companies (e.g. broadcasters) are allocated a particular part of the spectrum and allowed to use that for their TV or radio broadcasts, with at this point an extremely minimal requirement to broadcast a certain number of public service announcements in a given period.

    The solution would be to expand and modify the requirement for public service announcements to include free airtime for major Presidential candidates in the primary season, and then for their respective nominees. For example, 60 hours of free airtime during a primary season, and then 100 hours of free airtime from Labor Day to election day, with the stipulation that no spot can be shorter than 5 minutes. It would help level the playing field, and it would get back to a 21st definition of “the commons” that our Founding Fathers understood so well.

    Bill Huddleston
    The CFC Coach

  • Peter Schurman

    You write: “If we read Bonifaz’s arguments correctly, the notion of corporate “personhood” deprives the individual shareholder “owners” of corporations of their rights.”

    As a colleague of Bonifaz’ at http://FreeSpeechForPeople.org , I can say with confidence that this statement is incorrect. The individual shareholders in a corporation retain all of their rights as individuals, including property rights exercised via the corporation.

    The key point, however, is that the corporation _itself_ does not have constitutional rights, such as the “free speech” right that the U.S. Supreme Court wrongly granted to corporations in Citizens United.

    A corporation is an artificial entity, created by people and the state by means of a corporate charter, endowing the corporation with great privileges including limited liability, perpetual life, and the ability to aggregate vast wealth. But constitutional rights, such as free speech, properly belong only to natural persons, and not to corporations.

    Constitutional rights are the sacred bedrock of America. They are only for people.

    – Peter Schurman
    Campaign Director
    Free Speech For People

  • Purnima Chawla

    Corporations are not people in the legal sense. We use a whole different set of laws for corporations, including tax and liability laws. In fact, we specifically have laws to shield the people who “run” corporations from liabilities incurred by corporations. We go out of our way to separate corporations from individuals. Then how does it make sense to treat corporations as people in this one regard?