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

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