REPUBLICANS are trying to prevent the Securities and Exchange Commission from imposing a new rule that would require disclosure of corporate political spending.
They say corporations are people, whose free speech rights would be violated by mandatory disclosure.
Advocates of investor rights and markets should now see the flaws of the Supreme Court ruling, Citizens United v. Federal Election Commission, which granted corporations the same free-speech protection as individuals.
In defending corporate political speech, this ruling expanded the scope of autocratic political rule at the expense of individual rights and accountability.
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The court justified the ruling on the grounds that corporations are legal persons. But corporations are more like states than individual human beings, and extending rights to states effectively heightened the power of leaders to dominate and exploit real people.
Corporate social responsibility and corporate citizenship are a popular remedy for the environmental and social crises supposedly brought on by companies. But the call for responsibility and citizenship is just as pernicious as granting companies the right to political speech, when arguments for moral responsibilities and political rights depend on the legal personhood of corporations.
Microsoft, in keeping with its commitments to corporate citizenship, has taken leadership in voluntary disclosure of political contributions. Boeing recently agreed to do likewise, seemingly due to shareholder activism. These decisions may seem socially responsible but they lend misleading support to Citizens United. Further information about political spending, whether voluntarily or mandatorily disclosed, will not resolve the underlying problem of corporate personhood.
Corporations represent the interests of a group of owners, and the shareholders are constantly changing due to the liquidity of the stock market. In theory, all shareholders want the same thing from the corporation in which they have invested funds: maximal return on their investments. In practice, the shareholders of any corporation have a diversity of moral and political views. Shareholders also disagree about the proper role of the government in supporting business creation of wealth.
Once a corporation entangles itself in the fray of political negotiation, it risks losing its tether to shareholder objectives. As economist Milton Friedman presciently warned regarding corporate social responsibility, executives who dabble in noneconomic pursuits are no longer acting as employees of shareholders, but as principals with their own special agendas.
Worse still, the special agendas of executives may conflict with the values and beliefs of the shareholders, so that executives are not only wasting shareholders’ money but are doing so in a way that directly conflicts with the moral and political preferences of their employers. The pragmatic difficulties involved in ensuring that the entire collective of shareholders knows and endorses the political activities of corporations liberates the executives from the political accountability present in a democracy.
Debates about Citizens United v. Federal Election Commission continue spinning the ruling as an issue of whether corporations are exercising free speech by swaying other people’s votes with corporate wealth.
Advocates of shareholder rights should be more concerned about the inefficacy of imposing democracy on market processes in a business climate that already allows executives to rob shareholders, mismanage companies, overcompensate themselves and pursue their private moral agendas.
Free-market proponents should oppose Citizens United. When corporations spend money on corporate social responsibility, corporate citizenship, political advertising or any other noneconomic work, they are essentially voting with other people’s dollars.
Jessica C. Ludescher is an associate professor of business ethics at Seattle University.