Monday, August 13, 2012

Sachs on Corporate Shareholders Deserve Equal Rights on Campaign Finance

SachsBen Sachs (Harvard) has an interesting and important commentary up at The Atlantic Monthly's Wire entitled: Corporate Shareholders Deserve Equal Rights on Campaign Finance.

A taste:

As the 2012 election season rolls forward, campaign cash is taking center stage. And when it comes to money in politics, the debate seems inevitably to end in a fight over the Supreme Court’s Citizens United decision. Many believe Citizens United unleashed new torrents of spending. Others think the decision merely nudged along an escalation that was occurring anyway. But we’re all missing a central feature of Citizens United that will have a major impact on the balance of political power in the country, in 2012 and beyond.

Here’s the issue. The conventional wisdom is that Citizens United treats political spending by corporations and labor unions equally. And, as a formal matter, the case does free both groups to spend their general treasuries on politics. But the freedom that the Court’s Citizens United decision gives to corporations and unions alike, other cases take away from unions alone. The result? A legally constructed advantage for corporations over unions when it comes to politics . . . .

What should be done? Many approaches are possible, but one promising strategy – and one that would have the virtue of treating these political spenders equally – would be to take the opt-out right currently available to employees and offer it to shareholders. It would work like this: When you invest in a corporation — either directly or through a mutual fund — you would be given the right to object to spending corporate assets on politics. The firm would then figure out what percentage of its overall expenditures go to politics, and return to you your pro-rata share of these expenditures (depending on how many shares you own) in the form of a dividend. Since unions have faced a similar obligation for decades now – they have to divide all of their expenditures into political and non-political, and then reduce the dues payment of objectors accordingly – we could look to the union example as a source of guidance when crafting and administering the corporate rule. (If the Supreme Court were ever to require private sector unions to secure employee opt in to union political spending — as an aggressive extension of the Knox decision might entail – then corporations should similarly be required to secure shareholder opt in to corporate political spending.)

With the recent decision in Knox v. SEIU, many (including Matt Bodie on this blog) have weighed in on the difficulties union have in keeping up with the political spending of corporations.  Ben has been front and center in this debate, both in law reviews and other commentaries, and makes a persuasive argument that corporate shareholders should have similar opt-out rights as dissenting union members.

Read the whole thing. This is going to be an on-going debate for many months and years to come and an essential issue if unions are to flourish in the American public and private-sector.


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This may be the one that jumps the shark. Since when are corporations permitted to force people to purchase stock? And then there's the misrepresentation of what Knox actually says: "a Supreme Court rule prohibiting unions from spending even one dime of their general treasury money on politics when individual employees object to such use."

Of course it doesn't say that. It says no such thing. Nowhere does Knox limit union spending of monies derived from voluntary members, and it is a fraud upon the readers to suggest otherwise.

Professor Sachs offers a solution in search of a problem. Well, it's only a problem if you're a union or apologist for unions who wants to stifle what is presumed to be opposing speech.

Posted by: James Young | Aug 14, 2012 10:52:42 AM

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