Mirror of Justice

A blog dedicated to the development of Catholic legal theory.
Affiliated with the Program on Church, State & Society at Notre Dame Law School.

Saturday, August 21, 2010

Citzens United--Wall Street v. Main Street

As Rob points out, the Citizens United decision continues to provoke controversies. We sorely need a clearer and more nuanced consideration of the meaning of Court's extension of the definition of corporate personhood to include rights of free speech. Publically traded corporations, like Target, are not natural persons. They are persons only as legal fictions. And, the shareholders of publically traded corporations are, often, likewise not persons, but other legal fictions or collective entitites. Typically, they fall into two categories that we might call Wall Street investors and Main Street business owners. The Wall Street investors (which includes institutional investors) buy equities as investment insturments for short term gain. They don't have much concern for the underlying business, beyond the quarterly yield and profit statement. The bulk of shares of most publically traded corporations are held for short periods by Wall Street investors. Main Streeters care about the long-term health and reputation of the business, often because they are involved with its operation in some way. But, they represent a minority of shares traded.

Citizens United appears to give corporate boards fiduciary duties with respect to the speech rights of both kinds of individual investors. Given the short-term concerns of Wall Street and the longer term concerns of Main Street, there will most like be conflicts between the two classes of investors over how funds should be allocated in furthering political speech. But this raises a number of issues that are unanswered. For example: how, if at all, can corporate boards be held responsible to both types of investors? What are the Board's fiduciary duties toward minority speech rights? Which type of investor's speech interest should take priority, and what kind of oversight a court can maintain over the board without running afoul of first amendment.

The "conscience" (to use Rob's analogy) of Wall Streeters would seem to be deformed by the short-term interests of institutional investors. Any decent underrstanding of conscience would seem to include a more robust moral sense than making a quick buck! While the Main Streeters would seem to have greater concern for long term well-being, they typicall hold only a minority of shares. 

Moreover, given the business judgment rule and demand pleading requirements (at least in Delaware), it seems nearly impossible to maintain an action for breach of fiduciary duty once the board has issued a nonreviewable proffered interest for the corporation in issuing the expendature. So, Boards will be fairly free to spend corporate funds to back politicians of their own, private concern with little accountability to the shareholders beyond the need to proffer an attenuated "profit motive."

All of these issues stem from the extension of the legal fiction corporate personhood into the realm of political speech. Corporations, not being ontological persons, have no inherent rights. They are creatures of the states in which they are chartered by the authority of the executive, typically acting through the secretary of state. The Supreme Court seems to seek to federalize the ability to shape the rights that states give to the entities they create.

Catholics have traditionally affirmed that the physicality of real human persons is foundational for their dignity. Philosophical systems that have sought to gound the dignity of the person apart from the physical embodiment of actual beings run two risks--first, they devalue the dimensions to human existence that cannot be communicated conceptually--thus conscience can be viewed as a collective discourse. They mystery of persons revealed in Christ escapes such discourse. The mystery of the person is not disclosed in discourse, but in the mystery of the Eurchaistic presence and the mystery of the Church as communio. Second, by devaluing the physical, the body becomes an object of incovenience and subject to scorn when it becomes an interference with one's lifestyle. Life as a physical reality loses meaning.

I look on Citizens United as a dangerous development for the American democracy, both because it continues the process of aggregating power in an interelated complex of corporation and state interests that are insulated from the will of the people, and also (relatedly) because it further distorts and confounds the conception of the human person as the physical bearer of rights who must be served by the law, if the rule of law is to be admirable.


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Kevin, there's (as one would expect) a lot of deep and profound stuff in this post, but you lost me at the end. Citizens United is, perhaps, written more broadly than was necessary or warranted. But (what I take to be) the bottom line is both constitutionally sound and *good* for democracy: The government may not regulate political speech in a way that discriminates against those citizens who -- for good reason, given all the realities of the modern world -- "speak" using the corporate form. Yes, it is a mistake to lose sight of the person -- "the physical bearer of rights who must be served by the law" -- but Citizens United need not result in this mistake. At the end of the day, what is protected is not "the corporation", separated from the person, but the person's ability to participate in politics, *with others*, using the corporate form.

Posted by: Rick Garnett | Aug 21, 2010 3:23:17 PM


My comment is limited to publicly traded corporations. It is hard for me to see how they can be construed as people coming together for the purpose of political speech. The capital markets are efficient mechanisms for raising vast amounts of capital. Shareholders participate in them to make money, not to engage in political speech. States charter them for that purpose, and ensure their profitable intent through "Bluesky" laws. Shareholders are interested in profit--mostly short term profits--from trading equities. Mostly, the shareholders will look at corporate political speech as wasteful, unless it is clearly of immediate benefit to the corporation.

Corporate boards need not be concerned with assessing the political preference of their shareholders. Note that Target Corp.has not sought shareholder action, but was responsive to public pressure and fearful of market reaction. They are procedurally insulated from suits challenging corporate expenditures as wasteful or non-reflective of the shareholder's sentiments.

As Caperton v. A.T.Massey Coal Co. suggests, increasing the ability of publicly traded companies to make direct contributions to political campaigns, (in that case a judge's re-election) puts great pressure on ethics codes and rules of recusal to protect democratic institutions from being overrun by the vast wealth that is available from the global equity markets.

It seems to me that Citizen United is over-broad. Publicly traded corporations need to be treated differently from non-profits, which may be organized for speech purposes.

Posted by: Kevin | Aug 21, 2010 6:23:24 PM

Kevin - so, we agree that Citizens United is correctly decided, even if overbroadly reasoned, with respect to the outcome of the particular case? You are focusing on a distinction that I agree is important, but it is one that the speech-regulators tend to elide, I think. If the debate were about (and only about) regulating the speech of such corporations (without the exemptions that so infected the laws invalidated in CU), then that would be real progress. To assimilate, as too many do, say, Wisconsin Right to Life to, say, General Electric seems to me mistaken.

Posted by: Rick Garnett | Aug 22, 2010 3:07:26 PM

Rick--I think I can agree as to the particular case. The problem as I see it is that no distinction is made among types of corporate entities. And, given the truly vast wealth and power of the publicly traded corporations compared to other entities,there is a substantial need to do so. But the Court seems to have made it difficult to do. one problem is that giving the corporate entity a right to political speech substantially alters the fiduciary relationship between board members and shareholders. The bundle of rights that are conferred in owning shares have not traditionally included speech interests, just participation in future earnings and a control interest. Where money is the only issue, one can do right by all shareholders simply by maximizing wealth. But speech will prove very difficult because it is individualized and particular to the viewpoints of the shareholders. Benefiting one viewpoint will injure another. As fiduciaries, however, the board members must respect all rights and interests of the shareholders, including the minority interests. I don't see how they can maintain their fiduciary duties to the minority shareholders unless their speech interests are either ignored or the speech right is viewed as being inherent in the corporate entity and not derived from the individuals. So, this is totally new ground for corporate law. It seems like a meddlesome federalization of corporate law to me, since corporate law determines the rights of shareholders in the corporate entity. Could a state now create an entity that lacked speech rights? Do LLC's and LLP's have speech rights distinct from their members? These seem like state law issues that now will be determined by federal courts.

Posted by: Kevin | Aug 22, 2010 3:52:05 PM

I'm with you on Citizens United, and with you until the paragraph beginning "Catholics have traditionally affirmed," and your assertion that "the mystery of persons as revealed in Christ escapes...discourse." The "mystery of the person is revealed," you argue, "in" other mysteries -- "the mystery of the Eucharistic presence and the mystery of the Church as communio". Not only does this present the problem of a "mystery" that is revealed only in "mystery" -- so not revealed at all; it also begs the question to what extent those mysteries are themselves discursive constructs, accretions of doctrine and dogma, both disclosed and hidden in the language, symbols, stories and ceremonies of Catholic communion. I'm not sure there really is an "escape," or has to be, or whether it is necessary or desirable to situate personhood, or even the physical body, outside of "discourse." That Citizens United is an affront to all true persons -- to the very idea of a person -- remains clear, and should be grounds for concern.

Posted by: Louis V. Galdieri | Aug 23, 2010 9:14:08 AM

Thank you, Louis. I am guided in thinking through the complexities of the mystery of the person by Guandium et Spes, para.22 (for example) "Christ, the final Adam, by the revelation of the mystery of the Father and His love, fully reveals man to man himself and makes his supreme calling clear." This passage was quoted by John Paul II frequently. I think it reflects his phenomenological personalism and elements of Christian Platonism. He speaks of a mystery that is unfathomable, but not unknowable, pointing beyond dogma and discursive reasoning.

Posted by: Kevin | Aug 23, 2010 7:54:51 PM

Thank you, Louis. I am guided in thinking through the complexities of the mystery of the person by Guandium et Spes, para.22 (for example) "Christ, the final Adam, by the revelation of the mystery of the Father and His love, fully reveals man to man himself and makes his supreme calling clear." This passage was quoted by John Paul II frequently. I think it reflects his phenomenological personalism and elements of Christian Platonism. He speaks of a mystery that is unfathomable, but not unknowable, pointing beyond dogma and discursive reasoning.

Posted by: Kevin | Aug 23, 2010 7:54:52 PM

I have very mixed thoughts about this decision. Like Prof. Lee, I have no fondness for corporations and it seems odd that in America today a corporation is considered a person but a 39 week old human fetus in the womb is not.

Nevertheless, I think Citizens United was correctly decided because the First Amendment bars Congress from infringing with Freedom of Speech and Freedom of Press and this is clearly what Congress did. The status of the corporation is irrelevant.

Therefore, I would like to pose a hypothetical to you. Suppose Congress were to pass a law which banned any Corporation from publishing (in the broadest sense) any pornographic or otherwise prurient materials. For the sake of this hypothetical, please assume that while this definition is broad, it is precise and not vague. Would you still uphold such a law?

If not, can I assume that you believe that pornography is constitutionally protected but political speech is not?

Posted by: W.Sulik | Aug 24, 2010 12:53:36 PM