Iowa is used to being a political leader. After all, they get first cut at choosing the Presidential candidates though the Iowa Caucuses. And the Hawkeye State has continued to show leadership by adopting a strong stance against Citizens United.
Iowa was among the two dozen states that banned corporate political expenditures up until January 21 of this year. The Supreme Court’s Citizens United decision wiped out that protective part of Iowa’s statutes. But Iowan lawmakers used the tools that are still at their disposal: they improved Iowa’s corporate governance to ensure that corporations have internal controls over their political spending.
The new law signed by the Governor on April 8, 2010, requires a majority of the board of directors to vote in the affirmative to authorize political expenditures from the corporation’s coffers. This mirrors board approval requirements already in place in Missouri and Louisiana. The bill also bars corporate political expenditures from foreign corporations and has clearer coordination rules. Furthermore, like West Virginia’s new law, and Arizona’s new law, Iowa’s law improves disclosure of corporate political spending so that voters know who is behind political adverts.
The Brennan Center has suggested that states and Congress could go further to constitutionally require not only board approval, but also shareholder approval as well. Iowa’s midwestern neighbor Wisconsin, just passed shareholder approval in its Senate and the bill is on the way to the House for further consideration. But Iowa’s groundbreaking law is a step in the right direction towards more accountability that is worthy of duplication.
On March 27, 2010, the Brennan Center hosted a symposium of some of the nation’s leading constitutional thinkers to work toward a new jurisprudence of money and politics in the wake of Citizens United. Participants largely agreed on the need to place voters back at the center of our politics, and the desirability of restoring the concept of equality to its rightful place in our constitutional jurisprudence.
Throughout the day, Justice Brennan’s legacy of deep concern for social justice combined with his respect for First Amendment freedoms was a touchstone for many speakers. One of the questions that we didn’t get a chance to discuss at the symposium was: what would Justice Brennan have done in the case of Citizens United v. F.E.C.?
While we can’t be 100% certain, his own decisions indicate that Justice Brennan would have sided with reasonable campaign finance restrictions including restrictions on electoral spending by business corporations. He would have voted with Justice Steven’s passionate dissent. Why am I so sure? The answer is in Justice Brennan’s concurring opinion in Austin v. Michigan Chamber of Commerce, one of the cases summarily overruled by Citizens United.
In his Austin concurrence which quoted liberally from his Massachusetts Citizens for Life majority opinion, Justice Brennan explained that the restrictions on corporate independent expenditures upheld in the case were supported by the need for protecting the shareholders footing the bill. Justice Brennan noted, “[a] stockholder might oppose the use of corporate funds drawn from the general treasury - which represents, after all, his money - in support of a particular political candidate.”
Justice Brennan was particularly concerned with the potential for individual business or trade associations to use other people’s money in politics. He wrote,
“The Michigan statute … prevent[s] both the Chamber and other business corporations from using the funds of other persons for purposes that those persons may not support….In addition, the Michigan law protects dissenting shareholders of business corporations that are members of the Chamber to the extent that such shareholders oppose the use of their money, paid as dues to the Chamber out of general corporate treasury funds, for political campaigns.”
He wasn’t shy about the governmental interest in stopping a corporation from hijacking investments for use in politics. Justice Brennan argued in Austin, “the State surely has a compelling interest in preventing a corporation it has chartered from exploiting those who do not wish to contribute to the Chamber’s political message.”
Justice Brennan shared the Austin majority’s worry that corporate money could be distorting in the political process, reiterating “the legitimacy of Congress’ concern that organizations that amass great wealth in the economic marketplace not gain unfair advantage in the political marketplace”.
So it is in the spirit of Justice Brennan that the Brennan Center has urged Congress to take strong policy responses to Citizens United including adopting public financing for congressional elections through the Fair Elections Now Act (H.R. 1826). But we have also urged another approach which is consistent with Justice Brennan’s clearly stated belief in shareholder protection: providing shareholders a vote on future corporate political spending as embodied in the Shareholder Protection Act (H.R. 4790). This is a constitutional way to honor the rights of the investors who may be otherwise pulled into political battles after Citizens United against their will. This is precisely what Justice Brennan would do.
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.
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.
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.
Printed on the front of "the Hitchhiker's Guide to the Galaxy" are the words "Don't Panic." And it is just this sentiment that Congress needs to internalize now that we have a decision from the Supreme Court in Citizens United v. Federal Election Commission.
As expected, the court of Chief Justice John Roberts took a decidedly regressive tack on campaign financing limits and granted corporations the same speech rights enjoyed by living, breathing persons.
This is a bad decision.
Gone are the ban on the use of corporate treasury funds in federal elections and the requirement that corporations use political action committees to advocate for a candidate. Corporations can now dip into their deep treasuries to spend on politics.
Corporate money may now be infused into elections in ways we can only begin to imagine.
For Congress, this ruling comes in the runup to important midterm elections in 2010. The rules of the fundraising game have changed radically. With key issues like health care, climate change and regulation of the financial sector in play, the impulse for managers to pull out the corporate checkbook in an attempt to influence Congress will be great.
Not only are we likely to see money pouring into ads supporting key House and Senate committee members to curry favor, we are likely to see it flowing to ads supporting potential challengers as a way of threatening sitting lawmakers with ouster.
But there can be sound policy responses to this change in the legal landscape. The key now is for members of Congress to not panic and take a moment to consider the possible options.
Adding corporate money into politics is like setting a brush fire. If the fire is contained and managed, it won't do much damage to the political culture. If it gets out of control, a whole territory can go up in flames. One possible policy response to Citizens United -- significantly raising federal contribution limits for individuals and parties -- would be like adding fuel to the brush fire, turning it into a conflagration.
Increased corporate money may encourage congressional and presidential races to turn into unprecedented arms races for funds. In the 2008 federal election, individual giving topped corporate PAC funding, but in the wake of the Citizens United decision, this ratio could flip in 2010.
Corporate money could dwarf -- by many multiples -- dollars spent by individuals in every future American election. This would inevitably damage public trust in our system and open the door to the corruption that money can bring to politics.
The Citizens United decision calls for thoughtful firebreaks to keep billions in corporate money from sweeping into our elections, to slow the progress of the corporate money wildfire.
One immediate firebreak would be to change the securities laws to allow shareholders authority and oversight over corporate political spending. After Citizens United, corporate managers are free to spend corporate treasury money on politics without the knowledge or consent of their shareholders.
The new law can be modeled on one from our peers in Britain, who since 2000 have required shareholder authorization for political spending by British companies. The U.K. also requires British companies to report political spending to shareholders in annual reports. Adopting this system in the U.S. would give shareholders a way to check such spending of corporate managers.
Another, and perhaps the best available solution, is public financing for congressional elections. Under the proposed Fair Elections Now Act, sponsored by John Larson, D-Connecticut, in the House and Dick Durbin, D-Illinois, in the Senate, candidates for Congress who qualified after demonstrating some amount of constituent financial support would receive public grants to run a campaign. Candidates would have an alternative to privately funded elections.
So instead of being beholden to large individual donors or large corporate donors, congressional candidates could be un-bought and un-bossed.
Combined, these two approaches won't stop corporate money in politics completely the way the previous ban did; but they would create protections to keep the corporate money brush fire contained rather than turning it into an out-of-control wildfire threatening the integrity of our democratic system.
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