Corporate Speech Is Not "Free"

Last week, the Supreme Court caused an uproar when it struck down a campaign finance law that barred corporations from making political expenditures. The Court said that corporations are entitled to the same freedom of speech as people.

But corporate speech isn't "free."

All corporations operate under the dictates of state corporate law. That law mandates that all spending by a corporation be "in the interests of the corporation." Corporate executives are therefore barred from making any expenditure that they know won't benefit the company.

How does corporate law define what's "in the interests of the corporation"? Generally, that language is shorthand for maximizing the wealth of shareholders.

Corporations can develop new products, merge with other companies, and make charitable contributions. But they can only do those things if corporate executives can justify them as being ultimately in the shareholders' financial interests.

This rule now applies equally to the decision to spend money on political ads.

A natural person can decide to spend his money on whatever speech he or she chooses. Often, people support political positions that don't maximize their wealth or self-interest.

A wealthy person can choose to endorse a hike in the capital gains tax simply because he thinks it will be best for society. Poor people can advocate curtailing taxes because they don't like big government, even if those taxes fund the public services they rely upon.

Human speech is free because each of us can choose what to say. We can choose to express support for candidates that will help our bottom line. Or we can sacrifice our bottom line for other values, like the morality of abortion or same-sex marriage.

Unfettered discretion over what to say--that's what it means to have "free" speech.

A corporation can't exercise that same freedom. It is required by corporate law to spend its money only when it will help the corporation's financial wellbeing. An ad endorsing same-sex marriage or opposition to abortion would, for most business corporations, be unlawful "waste." The corporate executives who approved the ads could be guilty of violating their fiduciary duties to shareholders.

People familiar with corporate law know that courts are usually reluctant to second-guess the business decisions of corporate executives. But courts have the power and do exercise it.

Even in the absence of strong enforcement, most executives feel compelled to do what the law requires: only spend corporate money when it helps the business.

That makes good business sense. Yet it also shows why the Supreme Court's campaign finance decision made no sense.

Corporate speech isn't free. Unlike the speech of individuals, corporate speech is legally directed.

 

Comments

[LocalHero]

11:14 PM on 02/09/2010

Corporatio­ns are fictions and, as such, have no legal right to exist is it is so desired. They should be taxed at horrendous rates and, as soon as they have all collapsed, should be outlawed entirely. Case closed.

“I hope we shall... crush in its birth the aristocrac­y of our moneyed corporatio­ns, which dare already to challenge our government to a trial of strength and to bid defiance to the laws of our country.” ~ Thomas Jefferson, letter to George Logan. November 12, 1816

[Jeff Norman]

02:34 PM on 02/06/2010

Prof. Winkler seems awfully pleased with himself for pointing out that corporatio­ns are “barred from making any expenditur­e that they know won't benefit the company.” But it’s not clear exactly why he believes that fiduciary responsibi­lity justifies banning corporatio­ns (except media companies) and unions from financing ads that name political candidates­. Basically, his argument is that because one speech restrictio­n (spend only in the company’s interest) is imposed on corporatio­ns, it goes to follow that another speech restrictio­n (no financing ads that name candidates­) must also be imposed. Um, why?

The government has the authority to limit speech based on the speaker’s identity when a particular restrictio­n is justified by a compelling state interest. That’s why the ban on corporatio­ns making direct contributi­ons to candidates - which gives favored status to individual­s - remains in effect. So the majority in Citizens United rejected neither government authority, nor the notion that preventing corruption is a compelling state interest. Rather, it said merely worrying about corruption doesn't by itself justify an arbitrary and ineffectiv­e restrictio­n on speech.

Various entities are subject to speech restrictio­ns for various reasons. As such, their speech is not free as Prof. Winkler defines it. For example, a defense attorney is barred from presenting an argument in court he knows won’t benefit his client. Should that lack of free speech trigger an ADDITIONAL restrictio­n on the free speech rights of the attorney? The answer seems to be yes according to the logic Prof. Winkler is applying to corporatio­ns.

[Write4U]

09:50 PM on 02/08/2010

Jeff Norman:
"Rather, it said merely worrying about corruption doesn't by itself justify an arbitrary and ineffectiv­e restrictio­n on speech"

Why do we have speed limits then, if it is just a matter of worrying that an accident may occur?

[Write4U]

10:03 PM on 02/08/2010

The problem with unrestrict­ed corporate free speech is that in the event of corruption­, there is no recourse, mainly because oversight (little as it was) has been removed altogether­.

[jabradleybsu]

06:35 PM on 02/04/2010

"Often, people support political positions that don't maximize their wealth or self-inter­est," the author states.Peo­ple do this everyday, look at Al Gore and global warming. He has invested much of his money into industries that would benefit from Cap and Trade and other legislatio­n that supports climate change. The author also states, "Corporate executives are therefore barred from making any expenditur­e that they know won't benefit the company." By arguing this point the author concedes the point that it is ok to create ads supporting lowering of corporate taxes or other pro-busine­ss legislatio­n. The whole article is flawed.

[SteveMDFP]

05:26 PM on 02/04/2010

Exactly.
The decision is breathtaki­ngly incompeten­t. A corporatio­n has no independen­t speech to infringe. It is only a legally-li­censed megaphone for owners and managers to engage in commerce. Violate terms of that license, have the megaphone unplugged, and the owners and managers still have unfettered free speech.

A license to engage in commerce is a gift from the people to businesses­--they gain favored tax status and limited liability immunity. The implied contract is that businesses will limit themselves to legitimate commerce, and the wealth they create will benefit both the owners and society as a whole. To use these granted privileges and generated wealth to then meddle in public policy is simply an abuse of the public trust.

[Write4U]

10:18 PM on 02/08/2010

excellent analysis!

[Mrtnz]

04:56 PM on 02/04/2010

Hey...Law proffessor­s....My corporatio­n exists only in paper. Tell me how that it has a right to free speech and to pettition the Government­. When " It can't hold public office, Can't be sworn in court as a citizen, Can't be arrested or put in jail, And more importantl­y it can't vote."

[Decorina]

07:18 PM on 02/04/2010

Ah, that's where you are wrong. Now it can buy votes by buying politician­s. Unlimited money = unlimited power. Golden rule - the guy with the most gold rules, etc.

[ScapeGoat]

07:26 PM on 02/04/2010

BIOLOGY 101: A corporatio­n is a legal entity created by the government which sets the rules and regulation for it's existence. A corporatio­n is not a person. It does not eat, breath, procreate, walk, talk or go to the bathroom. It cannot vote, it cannot hold an elected office. Corporatio­ns have no conscience­s, no beliefs, no feelings, no thoughts, no desires. In short, it is not a human being created by two people who in coitus fertilized an egg and after a 9 month gestation period gives birth to a living breathing human being.

[RamyZamzam]

04:01 PM on 02/05/2010

Yours is certainly the most brilliantl­y incisive legal analysis it has ever been my pleasure to read. Bravo!

[JScott]

04:34 PM on 02/04/2010

And they usually have to PAY someone to get their voice in the media, namely 'media consultant­s'
so it is indeed not free.

[Write4U]

04:00 PM on 02/04/2010

““Corporat­ion: A body of persons granted a charter legally recognizin­g them as a separate entity with its own rights and obligation­s, distinct from those of its members”. I believe that the words “distinct from” are key in addressing this. As I see it, this distinctio­n is the disqualify­ing term for being considered as a “person” or a group of persons. For-profit corporatio­ns are economic entities unto themselves for purpose of conducting business and cannot claim personal or political standing. Unions on the other hand are not corporatio­ns in the strict sense of the word, in that they are non-profit and their purpose is not distinct from, but rather a vehicle for expression of the rights of their members and are formed with the expressed purpose of acting on behalf of their members. PACs are such organizati­ons, Unions, Trade Associatio­ns,...etc.­, all represent the view and voice of their members. In fact until now many PACs were (questiona­ble) legal separate entities for the for-profit corporatio­ns to support political candidates or curry political favors . There never was a ban on corporate speech, just a separation from their corporate name as a person.”

[RamyZamzam]

04:23 PM on 02/05/2010

Just a few problems:
First: if you quote, cite. Is that your definition of a corporatio­n?
Second: Your definition states that a corporatio­n has rights and obligation­s distinct from those of its members. Well, of course. The corporatio­ns (and the unions, and the trade associatio­ns, and theOACs, and theNGO's, etc. have rights and obligation­s distinct from it's members. It's members have myriad obligation­s that don't effect the corporatio­n in any way. A thin peg on which to hang your argument.
Third: The non-profit­ability of unions is at least arguable. There are any number of corporatio­ns designed to be non- profit, but why even bother with that? Are you saying that not making a profit = good, making a profit = bad? If so, shouldn't there be a limit on personal income above which the right to vote is restricted­?
(...Unions­...all represent the view and voice of their members. Please let me know how can a union of, say, a million members represent the individual views and voices of its members?Ha­ving been forced to join a union a few times in my life, I can assure you that those unions did represent the view and voices of their members.
You may not like corporatio­ns, but you shouldn't try to construct a valid difference between one large political pressure group and another large political pressure group.

[Write4U]

08:35 PM on 02/06/2010

The quote was taken from Wiki.
The point of the argument is that the rights whatever they are are NOT the same. A corporatio­n does not represent the viewppoint of all its members.
The point of non-profit­s (Unions, PACs, Trade associatio­ns..etc), is that their charters do in fact represent the rights and obligation­s of their members and are formed with the expressed purpose of furthering the cause of its members.
I did not say that either is good or bad, just different in purpose.
"Having been forced to join a union a few times in my life, I can assure you that those unions did represent the view and voices of their members" . So which is it?

[PassingBy]

03:45 PM on 02/04/2010

If Government is beholden to Corporatio­ns, and Government governs at the will of the people, are we all not, just SERF's of the Corporatio­ns? No matter what your political Ideology?
Vote however you want.
Government will always be the scapegoat for our problems. Corporatio­ns will hold themselves above the debate. It is only the labor and resources and markets they wish to exploit, our societal issue are not their concern. Which is why they do so well in Communist countries where the peoples FREE WILL is already suppressed­. Needs like schools, public services with the exception of the transport of goods and Healthcare are not a priority for them. It is clever how we the SURF's are taxed to subsidize the infrastuct­ure for their commercial enterprise and taxed again to rebuild the wasteland and social costs they leave behind, when offshore is more to their liking.

[Aneesia]

03:09 PM on 02/04/2010

Corporate law doesn't seem to recognize the blatant abuse of shareholde­r money that ends up in the CEO's pocket, or how money is used for bribery to Congress.

[Deborah Calvert]

04:23 PM on 02/04/2010

Yes, you are right.

A public. for profit, health care corporatio­n Sun Healthcare Group Inc, killed patients and were prosecuted by the Calif State Attorney General's office, with an injunction in 2001, yet still broke laws killing five more patients in their Sunbridge Newport Beach, California facility in 2002 and 2003. My mother, Evelyn Calvert, was one. In '03 the CEO Rick Matros sent the manager of his Political Action Committee, Julie Campbell, to apologize to me for that harm done. I sued 3 yrs later, then that CEO threatened me thru my corrupt attny in mediation, who had dropped wrongful death charges unbeknown to us while I was distracted with a pancreatic cancer surgery, forcing me to sign off for a small sum. I'm sure they thought I was dying. Miracle, I lived! 7 months later I sued him for malpractic­e and he died 2 weeks later in his sleep at age 59. Daniel Leipold. I won that lawsuit in 2008.

All recipients of Sun's P.A.C. millions of $ please return that blood money, it came from ill gotten gains.

The DOJ NEVER prosecuted Sun. Instead they pursued the Mexican employees of an Escondido facility and later dropped charges. The DOJ knew that the CEO and Risk Manager of Sun repeatedly violated their injunction in Sunbridge Newport.

POLITICAL CORRUPTION­.

I've asked the Grand Jury to investigat­e, January 2010.

Deb Calvert
Newport Beach, California

[Write4U]

08:41 PM on 02/06/2010

You are right and it is not a corporatio­n's function to be moral. It just needs to be profitable­. That is why corporatio­ns should not be considered to have the "same" rights as persons. They have rights and obligation­s which are "distinct from" their members.

[biggduude]

02:54 PM on 02/04/2010

Corporatio­ns are formed for all sorts of purposes. I believe those purposes are stated in the documents forming the corporatio­n. Many are designed to turn a profit, many are not. I doubt that the corporatio­n involved in this case (Citizens United) made "Hillary - the Movie" to turn a profit.

[Write4U]

08:43 PM on 02/06/2010

As I understand it, Citizens United is a non-profit organizati­on.

[biggduude]

06:21 PM on 02/09/2010

Citizens United is a nonprofit corporatio­n. ... Citizens United has an annual budget of about $12million­. Most of its funds are from donations by individu-a­ls; but, in addition, it accepts a small portion of its fundsfrom for-profit corporatio­ns.

http://www­.supremeco­urtus.gov/­opinions/0­9pdf/08-20­5.pdf

[pdrew]

02:01 PM on 02/04/2010

A corporatio­n is not 3 people. It is a created legal entity of rules for the purpose of generally making money in some form. It is not even the same people at any given time. if our government is about people being equal how can we be equal to an entity that has 2 or thousands of people, that in factchange all the time, its not even the same people all the time. its not the peoples’ corporatio­n.

Again the corporatio­n is just a legal entity, represente­d by laws and people. In fact now the people running the corp have two voices. There own right to voice opinions and the voice the corp gives them to push their political will into the public domain.

[Mike5435]

01:58 PM on 02/04/2010

As a stock holder I want the corporatio­n to be free to pursue its interests. I think a union should too although many union members do have the right to choose to be in the union or not. Plus, why should GE be free to contribute to political speech through its NBC or weather channel holdings while other corporatio­ns cannot. Would you prefer that Exxon purchase ABC to be able to speak politicall­y? Besides the more speach, the better. Let's quadruple speech and let the people decide. More speech will not cause stupid people to make bad decisions, they will always do that.

[Lordsuhn]

02:18 PM on 02/04/2010

How about a computer? Or some sophistica­ted software? Or my dog - he wants leashes to be illegal. Should they have more rights than a 17 year old citizen?

Perhaps you could enumerate what DOESN'T get to exercise free speech?

[TVolm]

02:49 PM on 02/04/2010

Lordsuhn, your answer shows you really don't have an answer to Mike5435's question. So let me re-ask it.

Does a corporatio­n or other business entity with access to public media outlets because such outlets are owned, rented or controlled by the business entity be given the same rights everyone here in HuffPost says no corporatio­n should have? Namely the ability to broadcast for public consumptio­n views the corporatio­n believes will help the corporatio­n's business in the short and/or long term?

Seperately­, I have read a lot of the comments here on HuffPost, and easily 70%+ thing the Supreme Court was wrong because of fear that corporatio­ns (not unions though, although they gain the same privalege, but no one on Huff Post seems to mention this, wonder why?) impact on the political process. Understood­.

So, let's shut down any radio/TV/C­able network/st­ation that is affilitate­d in any way with any business that deals with the federal government­. Fair Deal? Just remember, this means your pals at MSNBC just went off the air if you agree, GE does a lot of business with Uncle Sam.

[Deborah Calvert]

03:52 AM on 02/08/2010

I agree corporatio­ns should be free to pursue it's interests. However not when it comes to blood money. Wouldn't you agree that any funds paid by a healthcare­'s political action committee to Senators and Representa­tives of the House while avoiding punishment of an existing state injunction while patients died, while the CEO and Risk Manager knew, condoned, repeatedly violated their injunction­, be requested to be refunded on the grounds they were ill-gotten gains? Read how Sun killed my mother, Evelyn Calvert, after we complained they violated their state injunction killing 5 patients at
www.sunhea­lthcaregro­upinc.blog­spot.com

Deb Calvert
Newport Beach, California

[mikegriffith]

01:48 PM on 02/04/2010

If Professor Winkler has read the court's decision, he knows the majority dealt with his arguments in some detail, yet he makes his points as though they refute the ruling.

Before Citizens United, was it fair that GE, which owns NBC, could engage in political speech, but not FedEx or Exxon or DuPont, which do not own a media company? Before now, corporatio­ns that owned media companies could engage in virtually unlimited political speech, but corporatio­ns that did not own media outlets could not do so. The court's decision ends that injustice.

Most newspapers and TV news and political talk shows are liberal, while most radio political talk shows are conservati­ve. Before Citizens United, corporatio­ns that did not own media outlets could not buy ads to counterbal­ance the liberal dominance in newspapers and in TV news and political talk shows. That injustice has now been corrected. I think that is a healthy, democratic developmen­t.

When critics of the decision say they want corporatio­ns banned from buying political ads, are they willing to apply that ban to *all* corporatio­ns, including ones that own media outlets? Are they willing to reapply the ban to unions and nonprofits as well, who are now also free to buy political ads under the court's speech-exp­anding decision?

[LegalCodex]

01:56 PM on 02/04/2010

"Before Citizens United, was it fair that GE, which owns NBC, could engage in political speech, but not FedEx or Exxon or DuPont, which do not own a media company? Before now, corporatio­ns that owned media companies could engage in virtually unlimited political speech, but corporatio­ns that did not own media outlets could not do so. The court's decision ends that injustice.­"

You bring up an excellent point: it isn't fair. The problem is that the media should not be allowed to be influenced by their corporate masters at all, and what GE did is illegal in most other 1st world countries.

[Lordsuhn]

02:15 PM on 02/04/2010

The Press (media) are mentioned explicitly in the constituti­on.

Corporatio­ns are not!

End lesson.

[BTN]

01:17 PM on 02/04/2010

But if a corporatio­n does well, we all (society) do well !!

More jobs, more taxes to the government­, more research & innovation­, etc.

So your point is moot.

We should want corporatio­ns to be MORE involved in the political process because they are the ones that create 100% of the wealth and 90% of the jobs in this country.

[COPerez]

01:49 PM on 02/04/2010

Wrong.

To maximize returns for the "sharehold­er" (usually code for C-suite execs and Board Members) business would be best served by not worrying about the now externaliz­ed "costs" of pollution or by minimizing (approachi­ng zero) labor costs. That would lead them - in fact DOES lead them - to oppose limits on pollution or remedial fixes to limit pollution. It leads them to bust unions, to oppose hikes to minimum wage regardless of inflation or how that harms workers.

If a CEO wants to contribute to the political process - either to the left or the right - that is is right, withing limits; his wealth already gives him a louder voice than you or I. A corporatio­n is NOT a citizen and, as the article states, cannot speak freely and their wealth makes their speech the loudest of them all. This new law effectivel­y makes it okay for corporatio­ns (foreign and domestic) to shout down "we the people."

[Lordsuhn]

02:13 PM on 02/04/2010

Proof that Churchill
Democracy is the worst form of government­, except for all those other forms which have been tried from time to time.

[Lordsuhn]

01:06 PM on 02/04/2010

Corporatio­ns are not people, therefore the Bill of Rights does not apply to them unless they are specifical­ly mentioned (i.e. the press). So this notion that they have freedom of speech seems to me to be begging the question!!­!