Citizens United: States

Thanks to the Business Law Prof Blog for a chance to share some thoughts.   As noted earlier, I teach at the University of North Dakota School of Law where I teach the Business Associations courses, Energy Law and Labor & Employment Law.  My research focuses on energy law and corporate law ( and both, where possible). 

I had the good fortune to arrive in North Dakota shortly after the state passed the North Dakota Publicly Traded Corporations Act, a shareholder friendly corporate law option supported by several shareholder advocates, including Carl Ichan.  There are many views (including mine) on the North Dakota Act (many of them negative, see, e.g., Prof. Bainbridge), but the Supreme Court's decision in Citizens United raises some new questions and new opportunities for discussion about the role of state corporations laws (including the North Dakota Act).

Regardless of one’s view of Citizens United, the case fundamentally changed the relationship between shareholders and the company.  That is, to the extent Citizens United changed corporations’ ability to use corporate funds in a political manner, corporations now have a power (at least arguably) not contemplated by their charters.  (It was not really necessary to consider as part of the corporate charter because such expenditures were generally viewed as not permitted.)  

This certainly was not lost on shareholder activists, who are already putting forth a plan to help ensure accountability and disclosure of corporate political activity.  Current action items include engaging companies directly to gather information and encourage disclosure, encouraging the SEC to consider rulemaking in this area, and lobbying Congress.

Beyond action at the federal level, it will be interesting to see how, if at all, the states respond.  In addition, the shareholder proxy-access provisions of the North Dakota Act could have some significant (and renewed) appeal to those concerned about corporate political spending.   After all, this is now an internal governance issue, which is a state-level issue. At least, that’s how I see it.

-- Josh Fershee