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.
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