Corporate Mischief

Even before the McCain-Feingold Law of 2002, federal law prohibited corporations from using their own funds (their “treasury funds”) to make direct contributions or expenditures in connection with any election for federal office. But McCain-Feingold went further. It prohibited the use of corporate treasury funds for any public broadcast that refers to a federal candidate within a specified period of time before an election. Corporations were permitted, however, to establish segregated funds (“PACs”), limited to contributions by stockholders and employees, for political purposes.

Citizens United, a nonprofit corporation, wished to show a film on cable TV, using its treasury funds to oppose the candidacy of Hillary Clinton for the presidency. The corporation brought suit, hoping the courts would declare that the corporation might use treasury funds as it proposed, and that, to the extent McCain-Feingold stood in the way, it was unconstitutional as applied to the Clinton film.

As Stephen H. Shiffrin has shown in these pages (“Who Approves This Message?” February 12), the relevant provisions of McCain-Feingold probably did not apply to Citizens United. Nevertheless, last January 21, Supreme Court Justice Anthony Kennedy, writing for a 5-4 majority, declared that corporations enjoy constitutional protection of free speech, and that the limits imposed by McCain-Feingold violated Citizens United’s constitutional rights. Although Kennedy’s opinion runs on for nearly sixty pages, swatting flies in every direction, it was Justice Antonin Scalia’s concurrence that exposed the fundamental policy consideration that animated the majority.

Scalia begins with a minilecture addressed to Justice John Paul Stevens, whose dissenting opinion focuses on the attitude of the Framers toward the several hundred corporations of their own day. As Scalia points out, consideration of that question tells us little about the intended meaning of the commandment that “Congress shall make no law...abridging the freedom of speech.” But Scalia then makes a concession that cripples his argument. It is “no doubt true” (he admits) that when the Framers gave constitutional protection to the right of free speech in the First Amendment it was “the free speech of individual Americans that they had in mind” (as Justice Stevens had rightly emphasized). Never mind, says Scalia, delivering his imagined coup de grâce: “the individual person’s right to speak includes the right to speak in association with other individual persons.” The italics are his. The shot misses by a mile.

The notion that shareholders speak in “association with other individual persons” as justification for the personification of corporations has little to do with the way corporations or their shareholders speak. The cheerful picture of shareholders joining hands as they make and pay for political declarations hardly describes what goes on within Standard & Poor’s 500 indexed corporations. To suppose that the millions of shareholders of Exxon-Mobil, General Electric, Ford, IBM, JPMorgan Chase, and scores of others assemble somehow to form and support political opinions is too fantastical even for Hollywood. When these mighty entities (that is, their executives) decide to make political contributions, the right of their disparate shareholders to speak “in association with other individual persons” is quite irrelevant. Individual shareholders couldn’t care less about “association”; each is simply watching the Dow Jones.

To be sure, there are thousands of mom-and-pop and other small, or close, corporations whose shareholders may “associate,” forming a collective will. But the categorical differences among the types must be taken into account in devising national public policy. An absolute constitutional rule for the personhood of corporations clearly was not the intention of the Framers. Legislation adaptable to circumstances is the way to go.

The idea that the Framers had corporations in mind when they protected free speech may be seen as a peculiar historical lapse in Supreme Court jurisprudence. The question whether the civil rights of ordinary persons should be extended to corporations seems to have arisen in 1886 in a surprising way. The Court was then confronted with the banal question of whether California could tax fences on railroad lands in a manner that respected the constitutional guarantee to every “person” of equal protection of the laws. Holding that the fences could not be taxed, Chief Justice Morrison R. Waite in Santa Clara County v. Southern Pacific Railroad Co. announced at the outset that “the Court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a state to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of the opinion that it does.”

This dismissive treatment of what was not, surely, an easy question initiated a line of cases that enlarged the civil liberties of corporations. By 1978, it was thought in First National Bank of Boston v. Bellotti that Chief Justice Waite had “settled” the personhood of corporations a century earlier. Ignoring the heterogeneous beliefs of shareholders and the purpose of the First Amendment to promote self-expression, Bellotti and its cousins permitted Justice Kennedy to state flatly in Citizens United that “First Amendment protection extends to corporations.” Recent precedent that permitted legislation limiting corporate speech was overruled. In short, a proposition unexamined in 1886 led to the misadventure of 2010.

It will take some time before a new array of justices on the Court reconsiders that position. They will have to rethink the labored departure from precedent made by the majority in Citizens United. Meanwhile, much corporate mischief will have been done.


Related: Cleaning Up the Supreme Court Mess, by E. J. Dionne

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About the Author

Joseph D. Becker, a founding partner of Becker, Glynn, Melamed and Muffly, a Manhattan law firm, is author of The American Law of Nations (Judis).