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Could Connecticut Be the First to Get Serious About Shareholders Rights Post-Citizens United?

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Connecticut may be the mouse that startles the lion. Connecticut is a small state, but it has a strong record of leadership in addressing the trouble posed by money in politics. Now Connecticut may be the first state to take shareholder protections seriously post-Citizens United.

After a governor went to jail for corruption charges for accepting gifts from state contractors, Connecticut decided to regain its good name by getting serious about campaign finance reform. The Legislature pushed the reset button by adopting a ground breaking public financing system as well as pay to play restrictions on state contractors in 2005.

Also in 2010, it adopted beefed up disclosure requirements, which require political ads to show the top five donors. This small change brings more transparency to the Connecticut elections than exists almost anywhere else in the nation, including federal elections, which are still hopelessly dark.

Now in 2012, Connecticut could break ground again by requiring shareholder approval of corporate political spending. A bill pending in the Legislature would adopt this change. As I testified this morning, such a new Connecticut law would follow a best practice that has existed for a dozen years in the U.K. under the Companies Act that requires a shareholder vote to approve future political spend by U.K. companies.

Citizens United v. FEC (the 2010 Supreme Court decision) allowed corporate political spending in all of the states and federal elections. Connecticut was one of a score of states that had banned corporate money from their elections. Citizens United stripped Connecticut of its ability to protect its elections from this type of spending.

But Connecticut can still take steps to protect shareholders in companies that are now free to spend in Connecticut's elections by requiring a vote by shareholders before money is spent in an election. Here, Connecticut is building on the work of its sister states Iowa, Missouri and Louisiana, which each require board approval before corporations can spend it their elections, as well as Maryland, which mandates disclosure of political spending directly to shareholders.

Connecticut is in a federal circuit that is open to strong money in politics laws. For example, the Second Circuit recently upheld New York City's ban on corporate political contributions and the City's robust pay to play laws. In his concurrence upholding New York City's laws, Second Circuit Judge Calabresi had these choice words referencing the Bible, about the trouble with money in politics in America today:

The wider the economic disparities in a democratic society, the more difficult it becomes to convey, with financial donations, the intensity of one's political beliefs. People who care a little will, if they are rich, still give a lot. People who care a lot must, if they are poor, give only a little. Jesus's comment about the rich donors and the poor widow says it all. Today, the amount of an individual's campaign contribution reflects the strength of that individual's preferences far less than it does the size of his wallet.

Given this and other recent opinions, the Second Circuit would likely defer to Connecticut's legislative judgment.

And even Citizens United itself spoke approvingly of shareholders holding corporations accountable for their political spending. As Justice Kennedy wrote, "With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions... Shareholders can determine whether their corporation's political speech advances the corporation's interest in making profits."

Connecticut has a clear path forward with the blessing of the Supreme Court. They can adopt a requirement that shareholders get a say on politics. With any hope, Connecticut can be the mouse that roars, exhibiting national leadership in this post-Citizens United America.

Ciara Torres-Spelliscy is an Assistant Professor at Stetson University College of Law where she teaches Election Law and Constitutional Law. She is the Co-Author of "Shareholder-Authorized Corporate Political Spending in the U.K." which is available here.

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