Wednesday, February 10, 2010
Corporations and Campaign Finance
I have a short take on the Citizens United case in the current issue of Commonweal. http://commonwealmagazine.org/who-approves-message
Among other things I argue that the act should not have been applied to the documentary film in question and it should not have been applied to an organization like Citizens United. More important, business corporations are required by law to be sociopathic. Sociopaths do not care about the impact of their actions on others. Business corporations likewise are required not to think of others, but to maximize shareholder returns. In increasingly competitive markets, they are forced to focus on short term competitive gain. (See Robert Reich, Supercapitalism). If business corporations advocate the common good it is entirely by accident. The legislatures of this country were wise in trying to control the behavior of the most wealth institutions in our society, particlarly given that their support of the common good could only happen by accident.
As the late Ed Baker argued so well in Human Liberty and Freedom of Speech, the market affects media corporations in ways different than it does business corporations, and media reform should be designed to make media corporations editors and writers even more free to mitigate the colonizing effects of advertisers and owners.My Commonweal piece does not make all these points, but it makes some of them as well as some arguments not included here.
cross posted at http://religiousleftlaw.typepad.com/religiousleftlawcom/
https://mirrorofjustice.blogs.com/mirrorofjustice/2010/02/corporations-and-campaign-finance.html
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I am not a fan of the Citizens United decision.
I don't agree, however, with your statement above that corporations are "required by law to be sociopathic" by which you mean that they are required to "maximize shareholder wealth." I would not be objecting if you had only claimed that markets or their shareholders required corporations to maximize shareholder wealth because I think that is true.
Corporation laws require that a corporation be managed in the best interest of the corporation. Usually this has been interpreted to mean that directors are expected to prioritize the interests of the shareholders over everyone else. Even in those circumstances, shareholders get some say in what their interests are. It is perfectly legal to set up a corporation that will pay just wages to its workers, respect the environment, treat its suppliers with dignity, etc. if that is what the shareholders want it to do. This is, of course, provided that such a business can stay solvent.
What drives corporations to maximize shareholder wealth is that is usually what most shareholders, who are technically the owners of the business, want them to do. This is particularly true of publicly traded corporations that tend to find their share prices depressed if they don't adopt strategies to maximize shareholder wealth. Several articles have pointed out that Costco's share price tends to be lower than Walmart's because of the higher benefits it gives its workers compared to the benefits that Walmart employees receive. As result, corporations founded with a social activist mission need to seriously consider whether that mission will survive the pressure of the marketplace if they choose to go public.
Shareholders seeking higher returns on their investments are not necessarily evil people. Many people have been pushed to invest in stocks in order to have funds to retire, primarily through IRAs and 401k plans, or to save for their kids' college education, such as through 529 plans. About 40-50% of all US households now hold, either directly or indirectly though mutual funds and similar vehicles, investments in the publicly traded corporations. In order to obtain other goods - retirement income or funds for college - they want such corporations to maximize the returns on their investments. Certainly, some investors will sacrifice some returns and choose to invest in socially responsible firms or mutual funds, but not everyone feels that doing so is moral obligation, that they can afford to do this, or that they have the time to do the research necessary to verify that a particular firm or mutual fund is, in fact, behaving in a socially responsible manner.