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January 22, 2010
Advocates for Corporate Accountability Denounce Supreme Court Ruling on Political Spending
by Robert Kropp
Fearing that the decision will lead to an erosion of standards for corporate accountability and
disclosure, advocates call on shareowners to redouble efforts for disclosure of corporate political
spending.
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Yesterday’s Supreme Court ruling on Citizens United vs. Federal Election
Commission, which prevents the government from regulating corporate expenditures on election
campaigns, sent a shock wave through the community of advocates for corporate accountability and
shareowner rights.
The Court’s ruling came in a case in which an attempt by
Citizens United, a conservative nonprofit organization, to show its film “Hillary: The Movie” on
television shortly before the 2008 Democrat primaries was disallowed by the Federal Election
Commission. The Commission cited 2002’s McCain–Feingold Act limiting corporate spending on
elections as the basis for its decision.
In effect, the Court ruled that the rights of
corporations are the same as those of private individuals, despite their clearly articulated legal
status as separate entities.
In the dissenting opinion on behalf of the minority in the
5-4 Court decision, Justice John Paul Stevens wrote, “The Court’s opinion is thus a rejection of
the common sense of the American people, who have recognized a need to prevent corporations from
undermining self government since the founding, and who have fought against the distinctive
corrupting potential of corporate electioneering since the days of Theodore Roosevelt. It is a
strange time to repudiate that common sense. While American democracy is imperfect, few outside the
majority of this Court would have thought its flaws included a dearth of corporate money in
politics.”
Following the ruling, President Obama said, “With its ruling today, the Supreme
Court has given a green light to a new stampede of special interest money in our politics. It is a
major victory for big oil, Wall Street banks, health insurance companies and the other powerful
interests that marshal their power every day in Washington to drown out the voices of everyday
Americans. This ruling gives the special interests and their lobbyists even more power in
Washington--while undermining the influence of average Americans who make small contributions to
support their preferred candidates. That's why I am instructing my Administration to get to work
immediately with Congress on this issue. We are going to talk with bipartisan Congressional leaders
to develop a forceful response to this decision. The public interest requires nothing less.”
Advocates for corporate accountability and shareowner rights lost no time in roundly
criticizing the Supreme Court decision.
Fred Wertheimer, a long-time advocate for
corporate accountability and President of Democracy 21, said in a statement, “Today’s Supreme Court
decision in the Citizens United case is a disaster for the American people and a dark day for the
Supreme Court…Today’s decision turns back the clock to the nineteenth century, eliminating a
national policy to prevent the use of corporate wealth to corrupt government decisions - a policy
that has been in existence for more than a century.”
James McRitchie, publisher of CorpGov.net, wrote, “We, as shareowners
must begun to look at concepts like fiduciary duty with renewed vigor… We either need a law like in
the UK so that companies must get permission from their shareowners in advance to make political
contributions in excess of some amount or we need a massive number of shareowner resolutions at
each company to accomplish the same.”
In a statement, Bruce Freed, President of the Center for Political
Accountability, said, “The Citizens United decision will place companies under immense pressure
to use shareholder funds to support candidates, groups and causes whose positions and activities
could threaten a company’s reputation and bottom line and shareholder value.”
SocialFunds.com spoke with Freed about the potential impact of the Supreme Court decision.
“There will be much greater risk for shareholders,” Freed said, “Because companies will be able
to engage in a much broader array of spending that will open the door for such threats as
misalignment on issues like climate change.”
As an example of possible corporate
misbehavior resulting from the Supreme Court decision, Freed pointed to the recent subprime lending
crisis. “The companies involved in subprime lending engaged in heavy political spending, and when
they went down, investors lost their shirts.”
“The decision makes corporate disclosure,
systems of accountability, and board oversight even more important, to protect companies and
shareholders.”
Asked what steps shareowners can now take to defend their rights against
the impact of corporate political spending, Freed said, “They have to press companies to adopt
political disclosure and accountability. At this point, 70 companies have board oversight of their
political spending, 50 of which have adopted the broad standard that includes payments to trade
associations and other tax-exempt organizations.”
Freed said, “Investors are invited to
join our engagement effort. We will be engaging 80 companies this season to urge them to adopt
political disclosure. We need a standard, coordinated effort on this issue.”
The 70
companies that have voluntarily adopted the Center for Political Accountability’s framework for
political disclosure include almost half of those listed on the S&P 100, including Microsoft, Time
Warner, Aetna, Merck, and Hewlett-Packard. The Center’s initiative, launched in 2003, seeks to
bring transparency and accountability to corporate political spending. Thus far it has attracted
the support of 30 social investors, including Calvert, Walden Asset Management, and Trillium Asset Management.
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