Washington, D.C. — The Supreme Court’s 2010 decision in Citizens United is infamous for laying waste to corporate political spending restrictions. But a new report from the Center for American Progress argues that the ruling has been misused by for-profit corporations to make political contributions without legal authority to do so.
After Citizens United, corporate boards immediately began spending corporate treasury funds in candidate elections. But they never had this authority, the report argues, because the right to spend funds is rooted in the U.S. citizenship of a corporation’s shareholders. By contrast, the board’s authority comes from the shares themselves.
When a corporation considers the political speech rights of its U.S.-citizen shareholders, it gathers exactly one citizen’s worth of rights from each of them. In that context, a shareholder with one share has the same rights as a shareholder with 100,000 shares. In any vote relating to exercising First Amendment political speech rights in candidate elections, then, the proper distribution of power is not one share, one vote, but rather one U.S.-citizen shareholder, one vote.
That means major shareholders—even if they are all American citizens—do not have more political rights than any other U.S.-citizen shareholder. And foreign-national shareholders have no U.S. political spending rights at all.
As a result, throughout the post-Citizens United era, whenever for-profit corporate boards and management have spent corporate funds on candidate elections, they have been usurping constitutional rights belonging to their individual U.S.-citizen shareholders and handing them over to large shareholders and foreign nationals.
“Since Citizens United, corporate boards have been unfairly depriving shareholders of their political rights,” said Tom Moore, a senior fellow at CAP and co-author of the report. “A wave of shareholder lawsuits may well stop the steal.”
This report challenges this practice and lays out a road map that both individual U.S.-citizen shareholders and the government can use to put a stop to it. A wide scope of U.S.-citizen shareholders can bring legal challenges against corporate boards and management that are exercising shareholder political rights without legal authority.
The report urges regulatory agencies, legislatures, and courts to consider regulations, statutes, and judicial decisions that will enforce this interpretation. They should require the procedures of corporate democracy to properly account for for-profit corporations’ U.S.-citizen shareholders when those corporations seek to assert political speech rights under Citizens United. These new procedures for corporate democracy would apply to virtually every for-profit corporation.
Read the report: “Citizens United Gave Corporations, But Not Their Boards, the Authority To Spend in Candidate Elections” by Tom Moore and Alexandra Thornton
For more information on this topic or to speak with an expert, please contact Sam Hananel at [email protected].