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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.


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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