The Magazine of Corporate Responsibility

Citizens United and Political Contributions: The Story So Far

by James Hyatt

Last Jan. 21, the U.S. Supreme Court set off a political earthquake, ruling in the case of Citizens United v Federal Election Commission that corporations, labor unions and other groups are free to spend money seeking to influence political campaigns, although they still can’t contribute directly to candidates or their organization.

The ruling “may make the hundreds of millions spent in past presidential and congressional elections look like a pittance,” declared veteran Supreme Court watcher Lyle Denniston at SCOTUSblog.

US Supreme CourtThe tsunami from that decision continues to spread. While the full ramifications haven’t yet been measured, aftershocks are already shaking the political ground.

Even before corporations and other groups start writing checks to exercise their new-found freedom, the Citizens United case appears likely to emerge as a key litmus test in the process of selecting a successor to Justice John Paul Stevens, who has announced his plan to retire after the current Supreme Court term.

Well before the Stevens announcement, President Obama fired his zinger in the State of the Union address, declaring as the Court sat in the audience, that the Court had “reversed a century of law that I believe will open the floodgates for special interests – including foreign corporations – to spend without limits in our elections.  I don’t think American elections should be bankrolled by America’s most powerful interests, or worse, by foreign entities.”

The remark appeared to prompt Justice Samuel Alito to mouth “Not true” and the commentariat launched its own debate as to the propriety of the remarks and speculation as to whether the Court should show up for Presidential speeches at all in the future.

Chief Justice John Roberts stepped it up a notch later in remarks to the University of Alabama School of Law, declaring “to the extent the State of the Union has degenerated into a political pep rally, I’m not sure why we are there.”

Thus ended round one. But there are many rounds to come.

Setback or Victory?

Initial reactions to the decision literally ranged from pronouncements about “the end of politics as we know it” to declarations that the ruling was a “rousing victory for free speech.” Advocates on both sides promptly followed up with plans to reverse or temper the decision or to widen it even further.

In mid-April White House senior adviser David Axelrod called the decision a case the president might keep in mind as he chooses a nominee to replace Justice Stevens. "He understands that the justice he appoints will be a pivotal voice on this court on issues like, for example, the one we just saw, Citizens United, where the court ruled that corporations have the same first amendment rights as individuals and they basically sanctioned a corporate takeover of our elections," Mr. Axelrod told MSNBC.

Virginia Thomas, wife of Justice Clarence Thomas, added to the commotion when she helped launch and became president and CEO of LibertyCentral.org, which calls itself “a major online resource for informing, motivating and activating everyday citizens around core founding principles of the US Constitution.” The group plans to work with the Tea Party Patriots organization.

There’s no dearth of opinion about the Citizens United case. The Court “treated political speech by commercial enterprises as though it was political speech from people,” Nell Minow, shareholder activist and editor of The Corporate Library, told a House committee. “If our goal is to preserve the marketplace of ideas, we must make sure it is not tainted by that other marketplace, the marketplace of money.”

She said corporations should report their political spending, calling for “clear, accessible, comprehensive disclosure without loopholes and we need every member of the board to sign their names to show that they have been fully informed and have approved the expenditures.”

Ralph Nader labeled the Court ruling a “corporatist, anti-voter decision…so extreme that it should galvanize a grassroots effort to enact a Constitutional Amendment to once and for all end corporate personhood and curtail the corrosive impact of big money on politics.”

While much commentary about the ruling has been critical, there are supporters, and even a Facebook page entitled “Fans of Justice Kennedy’s Citizens United Opinion!”

Ira Glasser, former executive director of the ACLU, wrote at Huffington Post that critics “have failed to appreciate what a great ruling it was for the First Amendment, and what a huge victory it was for freedom of speech and against government censorship.” He said liberals and Democrats should shift their attention to providing public financing that will enable more speech instead of restricting it.

Related litigation is already underway.  In late March, the D.C. Circuit court of appeals struck down federal campaign finance laws restricting independent political expenditures by groups.

Proposals for Change

Opposition to the Citizens United ruling takes many different forms, ranging from proposals for new laws and new regulations, to Constitutional amendments, all intended to change or reverse parts or all of the decision.

Sen. Al Franken of Minnesota has introduced the “American Elections Act of 2010” intended to “keep foreign interests out of our elections” by banning election contributions and spending by corporations that are controlled or highly influenced by foreign nationals, and by requiring corporations to “disclose in their political advertising how much of their company is controlled by foreign nationals.”

The Congressional Research Service has suggested that Congress has two broad choices: provide candidates or parties with additional access to funds to combat corporate spending; or restrict spending or require additional spending disclosures. A March report tallied nearly 40 bills introduced that involve the Citizens United decision, with more expected.

Major policy questions, the CRS noted, include whether and how corporate and labor groups should be restricted in making independent political expenditures, whether spending by subsidiaries of foreign corporations should receive different treatment, and what information about political spending should be required.

Several proposals have been introduced in this Congress to amend the Constitution to permit Congress to further regulate campaign finance.

Rep. Alan Grayson (D-Fla.) takes a different approach. His “Business Should Mind Its Own Business Act” would levy a 500% tax on corporate political contributions.

Remember those “I approve this message” acknowledgments in political ads? Rep. David Price (D-NC) and Rep. Mike Castle (R-Del) propose to extend that requirement to corporations, unions and associations using political ads. They call it the “Stand by Every Ad” Act.

Karl J. Sandstrom, a former Federal Election Commission vice-chairman and counsel to the Center for Political Accountability, told one recent Congressional hearing “the amount of corporate money now available simply dwarfs what was previously available to corporations.” He said, “We do not know how corporations will use their new rights. Most troubling, however, is that under present federal statutory law, we will not be able to find out.”

Sandstrom labeled current disclosure requirements “woefully inadequate” and called on Congress to mandate disclosure of contributions made to third parties for political purposes; to require shareholder or at least director approval for significant corporate political spending; and to require institutional shareholders, as fiduciaries, to vote for or against such proposed spending.

Socially-involved institutional investors are also weighing into the debate, urging companies to take steps to disclose political involvement even without federal regulation.  The Council of Institutional Investors argues that as a result of Citizens United political organizations are likely to increase pressure on companies to ramp up their spending in the political marketplace. “The danger for shareowners is that the money could be used to underwrite candidates, issues and activities that are contrary to the values and policies of the company,” the Council says. “That could tarnish the company’s reputation and, ultimately, its share value.”

More to Come

Some commentators note that the decision appears to have opened up political activity well beyond the corporate sphere.

Laura Otten, director of the Nonprofit Center at La Salle University, says if corporations may now plunge into politics “shouldn’t nonprofit organizations be able to use their unrestricted dollars to do the same?” and does the ruling “open wide the door to challenge the IRS’ ban on campaign activities by 501(c)(3) organizations. It would certainly seem so, and I doubt there will be a dearth of organizations willing to mount that challenge!”

And the Texas Right to Life organization says the Citizens United decision “allows Texas Right to Life and similar groups to speak out more in favor candidates who share our views…”

At the moment, Democrats led by Sen. Charles Schumer of New York and Rep. Chris Van Hollen of Maryland are focusing on requiring disclosure of political expenditures by corporations, including personal acknowledgment of the major sponsor.

James Hyatt, a retired reporter and editor for The Wall Street Journal, has been writing about business ethics and social responsibility issues since 2005.

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