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Research Report

Corporate Campaign Spending: Giving Shareholders A Voice

Published: January 27, 2010

In Citizens United, decided January 21, 2010, the U.S. Supreme Court gave an unequivocal green light for corporate money in elections, by outlawing under the First Amendment, laws that limit corporate spending in elections. This radical decision overturned more than 100 years of settled law. While it is difficult to know how distorting an effect on our democratic electoral processes this decision will have, it is reasonable to expect a significant increase in corporate expenditures.

Corporate law is ill-prepared for this new age of corporate political spending by publicly-traded companies. Today, corporate managers need not disclose to their investors – individuals, mutual funds, or institutional investors such as government or union pension funds – how funds from the corporate treasury are being spent, either before or after the fact. And the law does not require corporate managers to seek shareholder authorization before making political expenditures with corporate funds.

This report proposes changes in corporate law to adapt to the post-Citizens United reality. Two specific reforms are suggested: first, require managers to report corporate political spending directly to shareholders, and second, require managers to obtain authorization from shareholders before making political expenditures with corporate treasury funds. Modeled on existing British law, these changes will ensure that shareholders’ funds are used for political spending only if that is how the shareholders want their money spent.

This report represents the first of several proposed “fixes” to the damage done to American democracy by the Supreme Court’s Citizens United decision. The Brennan Center will also be releasing proposals to develop public funding systems that build on grassroots participation with matching funds. We will also be working to develop an alternative constitutional paradigm to the disastrous and radical view of the 1st Amendment adopted by a conservative majority of the Supreme Court. We will also continue working to repair voter registration systems through federal legislation that could bring millions more voters onto the registration rolls and reduce fraud and abuse. If our democratic system is permitted to be overrun with corporate spending, we can expect increased public cynicism about our institutions of government and further erosion in the public’s trust in our democratic system.