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Univ. of Chicago clash on Citizens United
Published on March 15, 2010
University of Chicago law school professor M. Todd Henderson takes on the testimony of Nell Minow at last Thursday's "Corporate Governance after Citizens United" hearing in a House Financial Services subcommittee.
In a lengthy, cordial blog post Henderson shreds the hysteria held by Minow, an alumna of the school, and other pro-regulation folks about corporate dominance of the political arena after Citizens United:
While we are on the subject of partisanship, it is interesting to compare business giving with that by the other major corporate contributors—labor unions, specifically public-employee unions. Unions donated $674 million in 2008-2009 (about 1/3rd of what businesses gave), but they gave overwhelmingly to Democrats (92% to 8%). The net contributions from "corporations" were $1.6 billion for Democrats and $1.0 billion for Republicans. The conservative majority of the Court hardly gave Republicans a gift, assuming these ratios continue when the rules are liberalized across the board, and we have no reason to believe they won't be. (For reference, one candidate, our president, raised nearly $1 billion in donations from individuals in that year.)
So it is not at all clear that this case will make things worse or that it favors one political party or the other. It is not even clear that it favors things corporate or business over things uncorporate. After all, there are corporations on the side of almost all issues, especially when we remember that the ACLU, NRA, Sierra Club, AARP, Citizens United, and others are corporations too. Are those anti-corporate readers out there afraid of all of them or just some of them? If you like the ACLU and the Sierra Club, but not the NRA and the AARP, and as a consequence want to ban the speech of the former and not the latter, this is the road to totalitarianism. The Supreme Court is adamant that restrictions on speech cannot be based on content. Tolerating the speech of those we disagree with is one of our most sacred core values.
Another important passage:
Business corporations exist to make money, and donations to candidates will be aimed in that direction. Insofar as they are, shareholders should be happy, and if they aren't, they can exert influence by selling their shares. If instead, the claim is just corporate influence, as opposed to this agency costs story, then we are back to puzzles about individual contributions, donations by PACs, lobbyists, and so on. Corporations spend handsomely to lobby politicians, and shareholders don't complain. Why? Because presumably the lobbying is about increasing firm value—that is, making money for shareholders. Why do we think other forms of political spending would be different?
Moreover, firms are very jealous and protective of their reputations. Do you think Nike is going to risk its brand by spending billions to elect politicians that may offend 49% of the population? And if they do, don't we have faith in other constraints on such attempts at manipulation? Consumer boycotts, news reports, publicity by non-profits, and so on are likely to cause firms to be quite cautious in their attempts to buy politicians outright.
Finally there is the claim that business are creatures of the state and therefore the state should be able to tell them what to do. This certainly used to be the case, when state legislatures gave businesses permission to do only certain things in return for, well, political contributions and favors. But thankfully we've moved past this so-called concession theory. The concession theory is plainly inconsistent with the contractarian model of the firm, which treats corporate law as nothing more than a set of standard form contract terms provided by the state to facilitate private ordering. Limited liability can be created by contract as easily as it can by state diktat, and no matter what, if we have this view of government power, it has no end. Everything exists in some way because of government action or inaction, but that is not the basis of our government. We believe our rights exist not because of the government, but rather the other way around - the government exists to protect our preexisting rights.
Testimony by Jan Baran of Wiley Rein and Prof. J.W. Verret of George Mason University's law school-and other witnesses-is available at the website of the House Committee on Financial Services.
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