Leonardo da Vinci Study in Perpetual Motion Forster

Leonardo da Vinci, “Study in Perpetual Motion” Forster Codex (1495 -97)

Module II – Corporations and Policy Chapter 5 Corporation as Constitutional “Person” • History of corporation as “person” Bar exam Corporate practice Law profession Citizen of world Corporations: A Contemporary Approach • Long-time recognition by SCOTUS • Economic rights political rights • Corporation as political actor • Bellotti (state referendum); Austin (state election expenditures) • Citizens United (federal election expenditures); Bullock (state) • Supreme Court’s views of “corporation” • Creature of state law: social institution • Association: property view • Person: natural rights Chapter 5 Corporation as “Person” Slide 2 Of 17

“Don’t worry about the rich; they’ll take care of themselves. They always have. ” Harry Truman Corporations: A Contemporary Approach Chapter 5 Corporation as “Person” Slide 3 Of 17

Corporation as “Person” Timeline (1787 – 1977) ) RR S (U 8 88 1 7) 4 9 ) 74 ) 1 9 6 ) c ) 4 t( 9 a /1 0 9 3 1 c P 1 1 A ) 9 n 18 97 ) r S 3 ) 1 s 1 e 7 (U tion S 8 19 t ( 977 US th ( 1 8 c U g u ( ( 1 1 A o t in ela le l e ) r l S n S n a t. R e ig e 87 v. (U Ea (U m a W e 7. y n r d e p. t 1 S v ) ( 7. G a l v eme en oun eg n t l 0 am v. U l b v s 9 m it o o C u C A (1 Ry. C P nag gu n t ng a h it tu u o i s h r t i c t a t s la A ern es M f. A ns en r ou ec Lea C o o n l e r t P h m a E a C t rt ur nk la abo d M nt lm ou S a o a l k i e a G F U D B S T F O L S 1800 1850 Corporations: A Contemporary Approach 1900 1950 Chapter 5 Corporation as “Person” 2000 Slide 4 Of 17

Corporation as “Person” Timeline (1977 – present) ll a ’t l B F t irs nk v. Be ti ot S (U 78 9 1 ) ) ) S L CF Na F EC 1980 Corporations: A Contemporary Approach M v. A in t us 1990 2 ( ct 0) (U v. 6 98 1 M i ich n ga CC S (U 9 19 rm fo gn i pa Chapter 5 Corporation as “Person” Re C E. F m Ca ell v an nn s i o rt C a c p M Bi 2000 2 00 A ( US ) 3 00 2 v. C FE S (U 2010 Slide 5 Of 17 2 ck lo ul , B v n it o n i t i 12) U d ns ra 20 e T z S ti Am (U Ci ed 0) 1 0

Tillman Act (1907) as amended by LMRA (1947) 2 USC § 441 b(a): It is unlawful for … any corporation whatever, or any labor organization, to make a contribution or expenditure in connection with any election at which presidential … electors or a Senator or Representative in … Congress are to be voted for, or in connection with any primary election or political convention or caucus held to select candidates for any of the foregoing offices, or … for any officer or any director of any corporation … to consent to any contribution or expenditure by the corporation … prohibited by this section. Corporations: A Contemporary Approach Chapter 5 Corporation as “Person” Slide 6 Of 17

Corporation as political actor … 1. First Nat’l Bank of Boston v. Bellotti (US 1978) 2. Austin v. Michigan Chamber of Commerce (US 1990) 3. FEC v. Massachusetts Citizens for Life, Inc. (US 1986) 4. Citizens United v. FEC (US 2010) 5. American Tradition P-ship v. Bullock (US 2012) Corporations: A Contemporary Approach Chapter 5 Corporation as “Person” Slide 7 Of 17

For-profit corporations … Massachusetts Michigan (Bellotti) (Austin) PUBLIC Shareholders D Banks / business State law: No $$, corporations unless affect business Corporations: A Contemporary Approach Shareholders G N I T S I State referendum I U PAC For-profit corporations Chapter 5 Corporation as “Person” H S PUBLIC State candidates State law: No $$ (contributions or expenditure) Slide 8 Of 17

Bellotti (1978) MAJORITY Powell, Blackmun, Burger Stewart, Stevens DISSENT White, Brennan, Marshall, Rehnquist Austin (1990) MAJORITY Marshall, Brennan (Souter), Rehnquist White, Blackmun, Stevens DISSENT Scalia, Kennedy, O’Connor

Not-for-profit corporations … Members PUBLIC Federal Law (Mass. Citizens for Life) State candidates All corporations Corporations: A Contemporary Approach Chapter 5 Corporation as “Person” FECA: No $$ (contributions or expenditure) Slide 10 Of 17

• Issue Citizens United v. FEC (US 2010) – Narrow construction (non- electioneering, movie, non-profit)? – Overrule Austin? • Holding – Corporation = person – Can’t single out speaker (PAC alternative not enough) – But can require disclosure • Analysis – – Distortion of corp $ not enough No appearance of corruption Not needed to protect SHs No indication disclosure chills Corporations: A Contemporary Approach Chapter 5 Corporation as “Person” Slide 11 Of 17

Citizens United v. FEC (US 2010) Individual Political Association Political Non-profit Closely-held For-profit Publicly-held For-profit Anthony Kennedy Corporations: A Contemporary Approach Chapter 5 Corporation as “Person” Slide 12 Of 17

So what’s a corporation anyway? Corporations: A Contemporary Approach Chapter 5 Corporation as “Person” Slide 13 Of 17

Corporations and other associations, like “ingratiation and access. . . are not corruption. The individuals, contribute to the marketplace of ideas appearance of influence or access … will not cause the electorate to lose faith in our democracy. The authorized spokesman of a corporation is a human being, who on by behalf of the beings who have formed that … it is far fromspeaks clear that the end ofhuman the association-just the spokesman of an unincorporated association 18 th century corporations wereas despised. speaks on behalf of its members. Although they make enormous contributions to our society, corporations are not actually members of it. They cannot vote or run for office. The financial … smaller or nonprofit corporations cannot legal raisestructure, and instrumental resources, a voice to object when [wealthy]orientation corporations of corporations raise legitimate concerns are cooperating with the Government. about their role in the electoral process. When corporations use general treasury funds to praise or attack a particular little evidence of abuse that cannot be candidate for office, it is the shareholders, corrected by shareholders “through the as the residual claimants, who are procedures of corporate democracy. ” effectively footing the bill. Corporations: A Contemporary Approach Chapter 5 Corporation as “Person” Slide 14 Of 17

MATCHING Bellotti (1978) What is for-profit corporation? 1. 2. 3. 4. Corporations are persons; corporations need not “stick to business” Corporations are “creatures of state law, ” but state must have reason to regulate Corporations are creatures of state law, and that means “government giveth, government taketh away” Corporations are voluntary associations, who have as much right to free speech as individuals 1 – LP / 2 – TM, JPS / 3 – WR / 4 - AS Lewis Powell Byron White Wm Rehnquist Austin (1990) Thurgood Marshall Antonin Scalia Citizens United (2010) Anthony Kennedy John Paul Stevens

MORE MATCHING Bellotti (1978) Effect of corporate political speech? 1. 2. 3. 4. Corporations afford the public access to information and add to marketplace of ideas. Corporate communication doesn’t further self-realization Corporate voice has not been shown to be distorting, overwhelming or corrosive. Corporate expenditures/contributions can unfairly influence elections Lewis Powell Byron White Wm Rehnquist Austin (1990) Thurgood Marshall Antonin Scalia Citizens United (2010) 1 – LP, AK / 2 – TM, JPS / 3 – LP, AK / 4 – TM, JPS Anthony Kennedy John Paul Stevens

YET MORE MATCHING Bellotti (1978) Regulate corporate speech? 1. 2. 3. Government must have compelling interest to regulate corporate speech, just like individual speech Too much speech can’t be bad; should avoid government censorship of corporate speech Government has a compelling interest to prevent corruption, through corporate political war chests Lewis Powell Byron White Wm Rehnquist Austin (1990) Thurgood Marshall Antonin Scalia Citizens United (2010) 1 – LP, AK / 2 – LP, AK / 3 – TM, JPS Anthony Kennedy John Paul Stevens

LAST MATCHING Bellotti (1978) Internal corporate governance? 1. 2. 3. 4. Shareholders unhappy with their corporation’s speech can always resort to “corporate democracy” For-profit corporations, unlike nonprofit political associations, may not reflect shareholders’ views Ideological and political activities are not proper for business corporations Shareholders know management will sometimes be political and ideological, part of maximizing shareholder profits Lewis Powell Byron White Wm Rehnquist Austin (1990) Thurgood Marshall Antonin Scalia Citizens United (2010) 1 – LP, AK / 2 – BW, JPS / 3 – BW / 4 - AS Anthony Kennedy John Paul Stevens

• Question: Do corporate politics, governance and value relate to each other in S&P 500 before and after Citizens United? • Answer: After the shock of Citizens United, corporate lobbying and PAC activity jumped, in both frequency and amount, – firms politically active in 2008 had lower value in 2010 than other firms, consistent with politics at least partly causing and not merely correlating with lower value. – The results are inconsistent with politics generally serving shareholder interests, and support proposals to require disclosure of political activity to shareholders. Corporations: A Contemporary Approach Chapter 5 Corporation as “Person” John Coates (HLS) Slide 19 Of 17

The end Corporations: A Contemporary Approach Chapter 5 Corporation as “Person” Slide 20 Of 17