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Culture Corporations are not people demo sign

Published on March 19th, 2012 | by Jonathan Gifford

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Citizens United: corporations are not associations of citizens

 

In 2010, a ruling by the Supreme Court of America in the now notorious Citizens United v. Federal Election Commission (FEC), allows corporations and unions to spend unlimited amounts of money as ‘independent expenditures’ on political advertising, arguing that to prohibit  these organisations from doing this (as did the previous, relatively sensible and sane legislation) would amount to a limitation on these organisations’ rights to freedom of speech, as guaranteed by the First Amendment to the Bill of Rights (the term given to the first ten amendments to the Constitution of the United States).

A nation conceived in liberty

Americans have sought to find laws and regulations that balance the need to prevent corruption, or the appearance of corruption, in the political process with the right to freedom of speech ever since their nation, ‘conceived in liberty’, was born. It’s a noble aim, the means to achieve which appeared to have been very cleverly enshrined in the 1789 Bill of Rights, which guaranteed the core liberties of any open democracy, including those spelled out in the First Amendment: the right to free assembly, the right to freedom of speech, the right to establish and practise a religion; the right to a free press.

Despite the clear common sense of the Bill of Rights, the recent legalistic twists and turns in the continuing debate about its interpretation and implementation have, quite recently, led America into a very strange and potentially dangerous place.

bill-of-rightsAt the heart of the debate is the understandable argument that, if John or Jane Doe feel strongly enough about a political issue to want to take out an advertisement saying that they disagree strongly with the policies of a particular politician and that they urge their fellow Americans to vote them out of office, then they should be allowed to do so.

This kind of advertising is called ‘independent expenditure’, and it is seen as different from money that is given directly to political candidates or parties for them to use to promote their own cause. The latter kind of contribution and expenditure is (thankfully) still subject to regulation by the Federal Election Commission.

Advertising involving independent expenditures, it is argued, is merely another form of speech. Indeed, many argue that effective speech is likely to cost money: it’s all very well standing on a soap box and shouting, but your voice will not be heard by many people. Advertising, on this analogy, is just a bigger soap box and a more powerful megaphone.

So far, so good.

But the dramatic effect of the Supreme Court’s judgment in Citizens United v. Federal Election Committee is to rule that corporations have the same rights to free speech as ordinary citizens, and that it would be a breach of those corporations’ supposed constitutional rights if they were prevented (as they previously were prevented by law) from making direct contributions to ‘independent expenditures’, made by political action committees, in exactly the same way that citizens can make contributions to political action committees.

Corporations are no longer prevented from spending as much money as they like in order to influence the political process – though, you will be glad to hear, these expenditures must not be ‘coordinated or controlled’ by political candidates. (I won’t even bother to go into the detail of what is happening in reality: you can probably work out for yourself the various means by which candidates for political office could ‘not control’ and ‘not coordinate’ these vast expenditures.  All that one needs to note, in any case, is that these newly permitted ‘independent’ expenditures, impossible as it may seem, appear to be highly controlled and coordinated.)

Corporate money sloshing around the political system

The Supreme Court’s majority verdict could not have been narrower: 5 judges voted in favour of the new ruling; 4 against. But the results of the ruling have utterly transformed the political landscape of the United States of America – immeasurably for the worse. Huge amounts of corporate money are now sloshing around the American political system without any curb or oversight, funding strident advertising campaigns for individual political candidates – precisely what that the previous (sensible and sane) legislation had sought to avoid.

So how did the Supreme Court get America into this mess?  Well, there’s a long answer to that question, but for me, the fundamental error in the Supreme Court’s ruling is in this paragraph, taken from  the opinion of the court:

‘If the First Amendment has any force, it prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech. If the anti-distortion rationale were to be accepted, however, it would permit government to ban political speech simply because the speaker is an association that has taken on the corporate form.’[1]

In referring to ‘the anti-distortion rationale’ the opinion of court refers to a previous ruling (Austin v. Michigan Chamber of Commerce), which held that corporate spending on the political process was highly likely to distort that process. That earlier court found ‘a compelling governmental interest in preventing “the corrosive and distorting effects of immense aggregates of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public’s support for the corporations’ political ideas”’.[2]

That quote about the potentially corrosive and distorting effect of huge amounts of corporate money entering the political process (from Austin v. Michigan) is very well put.

Not only is it very well put, it’s also true.

Amazingly, the opinion of the Supreme Court in the Citizens United case argues that it is not true, and that there will be no ‘corrosive and distorting effect’ from allowing corporate funds to enter the political process in this way.

The court reaches its surprising conclusion by getting itself into a muddle about the word ‘association’.

‘Simply . . . ‘

Referring to previous court rulings which had held, for example, that ‘Corporations and other associations, like individuals, ‘contribute to the discussion, debate and the dissemination of information that the First Amendment seeks to foster’,[3] the concurring judges in the Citizens United verdict seized upon this loose use of the word ‘association’ and based their entire case on it. We should not allow the government to ban political speech, they said, ‘simply because the speaker is an association that has taken on the corporate form.’

I like that use of the word ‘simply’. It reminds me of most instructions which, while proving impossible either to understand or to follow, start out boldly with the word ‘Simply . . . ‘

There is nothing simple about this decision. The very heart of the conclusion of the concurring judges in the case of Citizens United v. FEC – and their fundamental error – is the argument that corporations should be seen as ‘associations of citizens’. Having made their fundamental error, the concurring judges then dig themselves deeper into a pit of their own making.  The law as it previously stood, they argue, ‘permits the government to ban the freedom of speech of millions of associations of citizens’[4] (by ‘associations of citizens’, they now mean corporations’).

No it doesn’t. Or, rather, no it didn’t (farewell, previous sane and sensible legislation).

Corporations are not associations of citizens. To suggest that they are is to fail to have grasped what a corporation is.

Corporations are legal entities, not associations of people

Corporations must of course be free to speak on their own behalf (was anybody in America trying to gag the speech of corporations? If so, they should indeed be stopped).

But if anybody was to attempt to deny the right to speech of a corporation, it would be the corporation’s right to speech that had been infringed, not that of its shareholders or employees (because corporations are not associations of citizens).

Corporations were created with the explicit and essential intention that they should not be ‘an association of persons’: a corporation is a legal entity in itself.

Some of the earliest examples of ‘corporations’ in relatively recent times include The City of London and the Universities of Oxford and Cambridge.

If you wish to argue that the City of London is an association of citizens, then you must (and presumably do) accept that the City of London has the right to speak on behalf of all of the people of the City of London – and that, if the City of London is not allowed to speak in this way, then the freedom of speech of the inhabitants of the City of London has been diminished.

That, if I may say so, is a strange thing to believe.

There’s something else that’s very strange here. The corporation must of course be allowed to speak for itself. You really don’t need the First Amendment to ensure that, you just need not to have a law gagging the speech of corporations.

What is not obvious is that the corporation’s ‘speech’ should take the form, not of speech about the corporation itself, but of speech about political candidates.

The City of London, for example is, in fact, very able to speak for itself and does so, promoting its own cause with vigour. It speaks for itself as a corporation, not on behalf of all of the people who live or work in the City of London.

What the City of London is not allowed to do, under UK law, is to finance advertising campaigns aimed at electing politicians who are well-disposed to the City of London – who might, for example, propose tax legislation that was in the interests of the City of London.

The City is welcome, in the UK, to use its resources to shout as loudly as it likes about the advantages of such a piece of legislation, but it is not allowed to use its resources to support the campaign of a particular politician who might subsequently promote its interests in parliament by attempting to promote such legislation.

The freedom of speech of all of the citizens of the City of London is not thereby diminished. Concerns about the possibility of corruption and distortion in the political process are avoided.

The Association formerly known as Ford Motor Company

The freedom of speech of citizens is not, and never has been, at issue. Has the average citizen, who might happen to be a shareholder of the Ford Motor Company, now entered into an ‘association’ called the Ford Motor Company?

No they have not.

Does that citizen, in having (not) joined that association, now demand that the executive officers of Ford  should have the right to spend huge amounts of the company’s money supporting the company’s political interests, which may or may not coincide with the citizen’s own political interests?

No, they do not.

In what sense can The Association known as The Ford Motor Company possibly speak for both the humblest of its employees and the richest of its shareholders?  To suggest that the shareholders or the employees of Ford are some kind of association and that the freedom of speech of that association is diminished (or ‘chilled’ to use the bizarre term that is favoured by the opinion of the court) by refusing to allow Ford to spend money on political advertising, is a kind of madness.

Do you, or have you ever, worked for a corporation?

There is a real sleight of hand involved in taking the line that corporations are ‘associations of citizens’: this makes it sound as if extending the right of freedom of speech to corporations is merely ensuring that all of those citizens’ voices get to be heard. But that is not how corporations work – as we all know very well.

Have you ever worked for a corporation? Did it feel as if you were an association of individuals? Do you feel, for example, that every decision made by that corporation was something that you were happy to endorse?

Let me guess . . . Er, not exactly? Quite.

Corporations are run by the executives, or officers, of that corporation in the best interest of the corporation. Corporations are not democracies.  A relatively small group of people are charged with making the corporation’s key decisions. We are beginning to have a debate about whether corporations should in fact be run on more democratic lines, but to suggest that any corporation expresses the joint views of all of its shareholders or employees is laughable and, more importantly, wilfully wrongheaded.

When the officers of a corporation decide to spend large amounts of money supporting a particular political cause (which they should be prevented, by law, from doing), this does not and cannot reflect the wishes of the ‘association of citizens’ that the corporation is said to represent under this false representation of what a corporation is.

There are a couple of other points that are worth exploring before we put ‘corporations are associations of citizens’ to rest.

i) Limited Liability

One of the most important forms of the corporation is the limited liability company. Precisely because such companies are not associations of individuals, the corporation, as a legal entity, is liable for its own debts and the investor – the shareholder – is liable only to the extent of his or her investment. In the earliest commercial ventures, investors came together as partners to fund enterprises. If the venture failed, the partners lost all of their expenditure and were personally liable for all of the venture’s debts. To attempt to argue that the shareholders of limited liability company are ‘an association of citizens’ raises, to my mind, some interesting legal questions about the principle of limited liability. If a corporation is ‘an association of citizens’ as opposed to . . . what’s the right word here? Oh, I know: ‘a corporation’ . . .  then perhaps that association of citizens should be liable for all of the association’s debts. It’s just a thought.

ii) Corporations are not citizens

Corporations, by definition, follow their own agenda. It would be legally (and arguably morally) wrong for the officers of a corporation to do or to support anything that was not in the interests of that corporation. The corporation is obliged to strive to fulfil its purpose. Corporations, unlike citizens, cannot be expected to support laws that disfavour them, in the interest of the common good. If new legislation threatens a corporation’s profitability or the fulfilment of its other goals, the corporation is duty bound to use its resources to oppose this.  Corporations, as you may have noticed, are not in the habit of saying ‘Oh well, this particular piece of legislation will cut my profits, or runs counter to everything that we have been lobbying for, but what the heck? That’s democracy for you!’ Corporations will in fact, and rightly so, fight tooth and nail on behalf of their shareholders to prevent such legislation. This is the free market in action. It is also a compelling argument against allowing corporations to use their corporate wealth to influence the political process.

Corporations shout louder than citizens

The collective expression of citizens’ free speech helps to ensures that a democracy reflects the general will of the people. The unfettered free speech of corporations – if this ‘speech’ is allowed to enter the political process – will ensure that democracy reflects the will of the corporations, because corporations can shout louder than citizens.

Politics in America, since the ruling of Citizens United v. Federal Electoral Commission in 2010, is already a sleazier place, in which citizens can be far less confident that the political process is free from influence by powerful vested interests.


[1] Opinion of the Supreme Court of the United States, Citizens United v. Federal Election Commission http://www.supremecourt.gov/opinions/09pdf/08-205.pdf p 33 [pages in the ‘Opinion of the Court’ section of this pdf are numbered separately from the pages in the preceding ‘Syllabus’. To find a page in the pdf, add seven pages e.g. for p 33 in the Opinion go to p 40 in the pdf]

[2] Opinion of the Court, ibid., pp 31-32, quoting from Austin v. Michigan Chamber of Commerce

[3] Opinion of the Court, ibid., p 26, quoting Pacific Gas and Electric Company v. Public Utilities Commission of California, in turn quoting First National Bank of Boston v. Bellotti

[4] Opinion of the Court, ibid., p 38




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I write and blog about the human aspects of business and leadership, with an interest in the lessons that we can learn from history, including recent history. Please do leave a comment if anything occurs. You can sign up for my occasional newsletter, highlighting some recent blogs. I live in Oxfordshire, England.



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