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

Leonardo da Vinci, “Study in Perpetual Motion” Forster Codex (1495-97). Module II – Corporations and Policy. History of corporation as “person” Long-time recognition by SCOTUS Economic rights  political rights Corporation as political actor

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

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

  2. Module II – Corporations and Policy • History of corporation as “person” • 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 5Corporation as Constitutional “Person” Bar exam Corporate practice Law profession Citizen of world Chapter 5 Corporation as “Person”

  3. “Don’t worry about the rich; they’ll take care of themselves. They always have.” Harry Truman Chapter 5 Corporation as “Person”

  4. Corporation as “Person” Timeline (1787 – 1977) Santa Clara County v. Southern Pac RR (US 1888) Okla Press Publ v. Walling (US 1946) Southern Ry. v. Greene (US 1910) Fed Election Campaign Act (1971/1974) Bank of Augusta v. Earle (US 1839) US Constitution (1787) Fourteenth Amendment (1873) Labor Management Relations Act (1947) Tillman Act (1907) GM Leasing v. US (US 1977) Dartmouth College (US 1819) 1800 1850 1900 1950 2000 Chapter 5 Corporation as “Person”

  5. Corporation as “Person” Timeline (1977 – present) Austin v. Michigan CC (US 1990) First Nat’l Bank v. Bellotti (US 1978) Bipartisan Campaign Reform Act (2002) Citizens United v. FEC (US 2010) FEC v. MCFL (US 1986) McConnell v. FEC (US 2003) Am Tradition v, Bullock (US 2012) 1980 1990 2000 2010 Chapter 5 Corporation as “Person”

  6. Tillman Act (1907) as amended by LMRA (1947) 2 USC § 441b(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. Chapter 5 Corporation as “Person”

  7. Corporation as political actor … • First Nat’l Bank of Boston v. Bellotti (US 1978) • Austin v. Michigan Chamber of Commerce (US 1990) • FEC v. Massachusetts Citizens for Life, Inc. (US 1986) • Citizens United v. FEC (US 2010) • American Tradition P-ship v. Bullock (US 2012) Chapter 5 Corporation as “Person”

  8. For-profit corporations … Massachusetts(Bellotti) Michigan (Austin) PUBLIC PUBLIC Shareholders Shareholders DISTINGUISH State referendum State candidates PAC Banks / business corporations For-profit corporations State law: No $$ (contributionsor expenditure) State law: No $$, unless affect business Chapter 5 Corporation as “Person”

  9. Bellotti (1978) MAJORITY Powell, Blackmun, BurgerStewart, Stevens DISSENTWhite, Brennan, Marshall, Rehnquist Austin (1990) MAJORITY Marshall, Brennan (Souter), Rehnquist White, Blackmun, Stevens DISSENTScalia, Kennedy, O’Connor

  10. Not-for-profit corporations … PUBLIC Members Federal Law(Mass. Citizens for Life) State candidates All corporations FECA: No $$ (contributionsor expenditure) Chapter 5 Corporation as “Person”

  11. Citizens United v. FEC(US 2010) • Issue • 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 Chapter 5 Corporation as “Person”

  12. Citizens United v. FEC(US 2010) Individual Political Association Political Non-profit Closely-held For-profit Publicly-held For-profit Anthony Kennedy Chapter 5 Corporation as “Person”

  13. So what’s a corporation anyway? Chapter 5 Corporation as “Person”

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

  15. Bellotti (1978) MATCHING What is for-profit corporation? • 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 Lewis Powell Byron White Wm Rehnquist Austin (1990) Antonin Scalia Thurgood Marshall Citizens United (2010) 1 – LP / 2 – TM, JPS / 3 – WR / 4 - AS Anthony Kennedy John Paul Stevens

  16. Bellotti (1978) MORE MATCHING Effect of corporate political speech? • 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) Antonin Scalia Thurgood Marshall Citizens United (2010) 1 – LP, AK / 2 – TM, JPS / 3 – LP, AK / 4 – TM, JPS Anthony Kennedy John Paul Stevens

  17. Bellotti (1978) YET MORE MATCHING Regulate corporate speech? • 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) Antonin Scalia Thurgood Marshall Citizens United (2010) 1 – LP, AK / 2 – LP, AK / 3 – TM, JPS Anthony Kennedy John Paul Stevens

  18. Bellotti (1978) LAST MATCHING Internal corporate governance? • Shareholders unhappy with their corporation’s speech can always resort to “corporate democracy” • For-profit corporations, unlike non-profit 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) Antonin Scalia Thurgood Marshall Citizens United (2010) 1 – LP, AK / 2 – BW, JPS / 3 – BW / 4 - AS Anthony Kennedy John Paul Stevens

  19. John Coates (HLS) • 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. Chapter 5 Corporation as “Person”

  20. The end Chapter 5 Corporation as “Person”

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