West Virginia is one of over 20 states affected by the Supreme Court’s Citizens United ruling. The state used to ban corporate political expenditures. Now its ban is gone.
West Virginia completed its 60-day legislative session this weekend without adopting a new set of protections for shareholders after the Senate failed to act. However, the legislature did adopt improved disclosure and disclaimer rules for corporate spending by passing HR 4647.
The bill requires detailed disclosure requirements for all independent expenditures costing $1,000 or more. Contributors that provided $250 or more for such independent expenditures will be disclosed. These filings with the state will be posted on-line so that the public will know who is funding campaign ads.
Furthermore, there is improved “stand by your ad” disclaimer provision in West Virginia that requires political advertisers to clearly identify the person or entity making the expenditure(s) for the communication within the ad itself.
Both of these provisions will inform West Virginia voters about who is bankrolling political ads in the post-Citizens United world. The bill is awaiting the governor’s signature.
Thanks to five members of the Supreme Court in the Citizens United case, CEOs are free to spend shareholders’ money on politics. Will Congress protect investors? We don’t know, yet.
In a Thursday Congressional hearing, corporate law experts debated how best to improve corporate governance. Most of the experts agreed: Current laws don’t protect shareholders.
Professor John Coffee of Columbia Law School and Nell Minow of the Corporate Library eloquently told Congress that we can make corporate political spending more transparent and more accountable by changing U.S. securities laws.
Shareholder consent should be part of the post-Citizens United reform package. There are numerous ways to structure shareholder consent rules: Sen. Sherrod Brown (D-Ohio) introduced S. 3004, the Citizens Right to Know Act, which requires shareholder consent to corporate electioneering communications. And Rep. Mike Capuano (D-Mass.) introduced H.R. 4537, the Shareholder Protection Act, which requires shareholder consent for a range of corporate political contributions and expenditures.
Or, Congress can look to the United Kingdom to get a sense of shareholder consent rules in action; British law has required shareholder consent for corporate political spending since the British Companies Act was amended in 2000. Now British law allows corporate managers to spend corporate funds on politics — but with prior shareholder approval. This comes in the form of a resolution proposed by management and voted by shareholders usually during the company’s normal proxy season. The Internet is full of such shareholder resolutions, many of which appear as attachments to annual general meeting announcements.
Yesterday, in response to Citizens United v. FEC, (the Supreme Court case which allows unlimited corporate independent expenditures directly from the corporate treasury), the West Virginia House of Delegates passed a bill (HR4646) that would require prior shareholder consent to corporate political spending by West Virginia corporations. This follows the model suggested by the Brennan Center in its report, Corporate Campaign Spending: Giving Shareholders A Voice, which urges Congress to change the U.S. securities laws to give shareholders (1) the opportunity consent to and (2) notice of corporate political spending.
West Virginia, like every other state, has full authority to improve its corporate governance requirements for its corporations. The bill now goes to the West Virginia Senate for consideration.
A month after the Supreme Court's ruling on the case, the American Constitution Society hosted a panel discussion on Citizens United v. FEC at the National Press Club, Feb. 24, 2010. The panel addressed these questions and more:
Does the decision represent a victory for the First Amendment or an opening for corruption of elections? What are the merits of mechanisms being considered by Congress as ways of dealing with the decision? In practical terms, what does the decision mean for corporations and unions? What does the overruling of Austin suggest about the Roberts Court and its relationship to precedent?
The panel discussion featured:
Moderator, William P. Marshall, Visiting Professor of Law, George Washington University Law School; William Rand Kenan, Jr. Distinguished Professor of Law, UNC Chapel Hill School of Law
Jan W. Baran, Partner, Wiley Rein LLP
Laurence E. Gold, Of Counsel, Lichtman, Trister & Ross, PLLC; Associate General Counsel, AFL-CIO
James S. Portnoy, Chief Counsel, Corporate & Government Affairs at Kraft Foods
Joseph E. Sandler, Member, Sandler, Reiff & Young P.C.
Monica Youn, Counsel, Brennan Center for Justice, NYU School of Law
On February 17th, Brennan Center Counsel Monica Youn took part in an NYU Law Forum analyzing the effects of the Citizens United Supreme Court decision on campaign finance reform. The panel, moderated by Vice Dean Barry Friedman of NYU, also included Floyd Abrams, a partner at Cahill Gordon & Reindel and one of the attorneys who successfully argued Citizens United before the Court; and Samuel Issacharoff, Bonnie and Richard Reiss Professor of Constitutional Law at NYU. Watch the discussion:
Campaign Finance Reform expert and Brennan Center staff Monica Youn was joined by Professor Zephyr Teachout from Fordham Law to discuss the Citizens United decision and what it means going forward. Bill Moyers hosted the discussion, which took place on January 28, 2010, and was broadcast the next day. See related materials, and the rest of the broadcast, at the The Journal's site.
When the five conservatives on the Supreme Court decided last week that money is speech and corporations have the same rights to spend as much of it buying elections as you do, you could hear the champagne corks popping over at Goldman Sachs, JPMorgan Chase, and Exxon Mobil.
But when the late night talk shows heard the news, they didn't break out the bubbly; they broke out in laughter. At THE DAILY SHOW WITH JON STEWART, correspondent John Oliver made fun of the very notion of corporations as an oppressed minority.
JOHN OLIVER: What a day! With this historic ruling, the last bastion of discrimination in this country has come toppling down. For too long, Jon, corporations have suffered under the yoke of laws, stripped of the basic freedom and dignity guaranteed by our founders [...] For the first time in history, corporations can walk with heads held high, having left their mark on American democracy.
BILL MOYERS: But seriously, folks, is this the end of democracy as we know it? Can it get any worse? My first guests say this is no laughing matter.
Monica Youn directs the money in politics project at New York University's Brennan Center for Justice. She's litigated campaign finance and election law issues in federal courts throughout the country.
Zephyr Teachout, is a faculty member at Fordham University's School of Law, who at this moment is also a Visiting Assistant Professor at Harvard University's Kennedy School. During the presidential campaign of Howard Dean in 2004, she was director of his online organizing, which as you know revolutionized political networking and fundraising.
Welcome to you both.
ZEPHYR TEACHOUT: Thank you.
MONICA YOUN: Thank you.
BILL MOYERS: Now, comedians can be funny and journalists can be facetious, but in very plain language, who won the Supreme Court decision?
MONICA YOUN: Well, corporations clearly won this decision. I mean, essentially, what the court does is it awards monopoly power over the First Amendment to corporations. You can think about the last couple of elections as, you know, the slow rise of the grassroots. And as a result, the political parties, for the first time, had an incentive to start reaching out to small donors, to start cultivating grassroots organizing networks. And you saw what happened in the last election. Now, what the Supreme Court has done here is really a power play. It takes power away from the grassroots, and it puts it squarely back in the hands of corporate special interests.
It threatens to make these grassroots networks irrelevant. To say, you know, it's no longer going to be worthwhile for, you know, parties to look for fundraising opportunities, $20, $100, even $2,400 at a time, if they can just have multimillion dollar support directly from corporate treasuries.
Last week, in its 5-4 decision in Citizens United v. FEC, the United States Supreme Court ruled that laws banning independent expenditures by corporations meant to influence the outcome of political campaigns are invalid under the First Amendment. The decision has vast implications for campaign finance on the federal level and in many states, but our state’s campaign finance system is so lax to begin with that Citizen’s United appears to have no substantive effect on New York’s existing campaign finance laws. But as we have reported over the past two weeks, the Governor and the Legislature have proposed two different reform packages, each of which has components that would change existing campaign finance laws in this state. To avoid any doubt about the impact of the ruling on New York’s pending ethics and campaign finance reforms, we reviewed the proposed bills and came to the following conclusions:
First, both the Governor and the Legislature propose increased reporting of independent expenditures by corporations: reporting requirements in the case were ruled valid: “…disclosure requirements may burden the ability to speak, but they “impose no ceiling on campaign-related activities … and do not prevent anyone from speaking,”” wrote Justice Kennedy, citing earlier precedent (id at 51).
Second, the Governor proposes banning direct contributions by corporations. The Court noted that this issue was not presented in the case, leaving similar laws in place at the state and federal level unchallenged. “Citizens United has not made direct contributions to candidates, and it has not suggested that the Court should reconsider whether contribution limits should be subjected to rigorous First Amendment scrutiny.” (id at 43)
Third, the Governor proposes closing the housekeeping accounts loophole that allows unlimited contributions to political parties’ general funds. Citizens United does not directly address soft money contributions, and we have no reason to believe that Governor Paterson’s attempts to limit contributions to housekeeping accounts would come into conflict with this ruling.
Finally, after reviewing the ruling carefully, we see no reason to suspect that the Governor’s proposal for public financing would be challenged on the basis of the ruling (although technical issues with the proposal merit study; we will write more about this later), or that either proposal’s increased enforcement and disclosure requirements are undermined in any way.
Yesterday’s Citizens United decision threatens to bring immediate and substantial changes to our country’s electoral process. Most notably, the decision invites giant corporations to spend massive amounts in campaigns, thereby threatening to marginalize the opinions of real people during political debate. As Justice John Paul Stevens predicted in his eloquent dissent, “[w]hen citizens turn on their televisions and radios before an election and hear only corporate electioneering, they may lose faith in their capacity, as citizens, to influence public policy.”
With the 2010 election season looming, we must act quickly to restore public faith in our democratic process. Reform in an Age of Networked Campaigns, a report released last week by the Campaign Finance Institute, American Enterprise Institute and the Brookings Institute, proposes a number of innovative and intelligent campaign finance reforms to foster civic participation, including building on the small donor revolution of the 2008 campaign. Broad civic participation is undoubtedly key to combating democratic commercialization.
Along with reform proposals that could take some time to occur, the report advances one particular proposal that is not only absolutely critical, but immediately politically feasible. The idea is to create a single disclosure website to catalog “all electronically relevant material about political spending that must be disclosed by law.”
On the federal level, election-related financial information is currently scattered across a number of website – the result of a wacky system where various political entities report various types of information to various federal agencies. As the report illustrates,
For example, candidates, parties, and PACs report their financial activity in federal elections to the FEC; political committees known as 527 organizations (for the section of the tax code under which they are organized) report their finances to the IRS, but their expenditures that qualify as federal election activity, particularly their “electioneering communications” are disclosed to the FEC; labor unions report to the Department of Labor, but also disclose some of the monies spent communicating with members in federal elections to the FEC.
Now, one must have the navigation skills of Ferdinand Magellan and the patience of Mother Teresa to follow the money through that web. If, as the report proposes, all of this information were compiled in one easily-accessible hub, ordinary citizens would be able to stay on top of the campaign spending of candidates and other entities. This would not only serve a valuable voter informational interest, it would empower citizens to police violations of other valuable campaign finance laws.
There is no reason to think that turning this proposal into reality should be unduly burdensome. Organizations like the Sunlight Foundation and The National Institute on Money in State Politics have already been working to increase government transparency in precisely this manner. Thus, blueprints for affecting this type of reform already exist. Moreover, this initiative is a natural fit with the Obama administration’s commitment to promoting governmental transparency, citizen participation and collaboration to nourish innovation.
There is no excuse and no time to wait – We the People need to begin reclaiming our democracy today.
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