Wednesday, November 26, 2014

We, the Corporations?

CHICAGO – You would think that 600,000 comments on a petition would be sufficient to bring an issue to the top of the US Securities and Exchange Commission’s agenda. But public opinion does not seem to matter if the issue is mandatory disclosure of political spending by corporations.

Denying rumors that such a rule will be promulgated soon, SEC Chair Mary Jo White recently told lawmakers that this issue is not at the top of her list of priorities. But it is at the forefront of the Republican Party’s concerns, reflecting its leaders’ determination to prevent any such requirement from taking effect. In April, Ann Wagner, a Republican congresswoman, introduced a bill “to prohibit the Securities and Exchange Commission from issuing rules requiring the disclosure of an issuer’s expenditures for political activities.”

The reason why such an apparently minor issue is gaining so much attention is that it transcends corporate governance and goes to the very essence of America’s democratic system. For this reason, it is important to understand what is at stake.

Freedom of expression is a core democratic principle. Integral to this freedom is the right to spend money to disseminate speech. Any limitation on spending is a limitation on freedom of speech itself.

But is this right limited to individuals or does it extend also to associations of individuals? In a controversial decision issued in 2010 – Citizens United vs. Federal Election Commission – the US Supreme Court ruled that the First Amendment of the US Constitution also protects the free-speech rights of associations of individuals. Thus, corporations, as associations of individuals, have the right to spend as much as they want to disseminate their views, including in support of electoral campaigns.

Whether you like the political consequences of the Citizens United decision or not, it has its own logic. And that logic applies outside of the United States as well, and can lead to similar consequences everywhere: an enormous increase in the largest corporations’ political power. Will parliamentarians become mere spokesmen of corporate interests? Is there any mechanism within the US Constitution, or other constitutions, to prevent this?

A logical implication of the view that corporations are “people” is that shareholders should learn about the political spending carried out by the companies in which they invest. Disclosure may help democratize political donations, preventing them from having an undue influence in elections. If I appoint an agent to manage my money, shouldn’t I want to know how much he spends on political donations in my (alleged) interest? And wouldn’t it be preposterous for any rule or regulation to prevent me from finding out?

But this is exactly what is happening. Not only do companies refuse to disclose to their shareholders how much they spend on political campaigns; they also are lobbying hard to prevent any rule that would require them to do so. The US Chamber of Commerce opposes all such proposed rules as “politically motivated,” because the pressure to require disclosure of election-related corporate spending does not come from institutional investors, but from government pension funds controlled by elected officials.

But conservative groups are shortsighted in their opposition to mandatory disclosure of such information. They believe that it would weaken Republicans and benefit Democrats, and they are right: there is no doubt that the left stands to gain more in the short term from such a requirement. But the biggest winner would be democracy. The current political game in the US is one in which both Republicans and Democrats compete for corporate money, which they then deploy in expensive campaigns to preserve or increase their power.

The winners are not the Republicans or the Democrats, or even the companies that fund them. The winner is a corrupt form of capitalism that is undermining the US economy, making it less productive and undermining people’s sense of fairness.

I doubt that a mandatory disclosure rule alone could fix the problem. But it would be an important step in the right direction. More important, actively blocking that step forces the political system toward a precipice from which democracy cannot return.

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    1. CommentedParrain Boursorama

      The best model for expanding Alternative Energies and Environmental Protection globally is through using market equilibrium, whereas governmental subsidies and fiscal stimulus to be just supplementary

    2. CommentedJeffrey Scofield

      Corporations enjoy purchasing information on consumer spending, many times without the knowledge of the consumer, but act offended when voters want to know how corporations are spending profits. There is no doubt about it, both corporations and governments are so intertwined that transparency and accountability are needed to keep the voter  informed about the exact nature of the collusion, especially now that corporations are financial institutions are providing incentives for members of their own to make the transition into politics or regulation. As long as multinationals are allowed to spend unlimited amounts of money to exercise their "right to free speech", the rest of us have a right to watch their lips move.

    3. CommentedFrank O'Callaghan

      A corruption has erupted through the business and political world world and needs to be stamped out for the good of society.

    4. CommentedTom Whelan

      Luigi, let us be candid. The antipathy toward Citizens United, and the immediate impetus prompting calls for additional disclosure requirements, have two disparate sources. The first is a legitimate, if misdirected, concern about the corrupting influence of money in politics. And the second is a McCarthyite desire to use mandated disclosures as another tool to intimidate supporters of causes that activists and politicians oppose. Are you now, or have you ever been, a contributor to this party, that politician, or this disfavored cause? Once this question must be answered, a polite letter from Uncle Sam is bound to follow.

      Dear Madame:

      We see from your mandatory disclosure that your corporation contributed to a candidate and to a non-profit group that opposed the Administration’s bill to establish heaven on earth. The law prohibits the government from using this information for any purpose other than, well, knowing what you’re thinking and doing. It is purely a coincidence that your IRS audit notice is enclosed, your OSHA inspection begins on Tuesday, and the EPA will begin conducting tests at your manufacturing plant on Wednesday. Thursday is a Federal holiday. HHS will take your first born on Friday.

      In the interest of full disclosure, low level bureaucrats leaked your confidential information to news outlets and activist groups, but you should take comfort that there is no evidence any senior level officials knew about, or condoned, these disclosures in advance, or for that matter, did anything about the unfortunate disclosures once they learned about them in news reports. The Inspector General announced last week at the GSA’s Las Vegas retreat that budget cuts will delay any investigation until after the next election. In the interim, the IG will take no action to ensure that this never happens again; human nature being what it is, there is nothing the IG can do anyway. These things happen and will happen again.

      One group who received your leaked information, and who receives generous subsidies from the higher taxes you now pay, asked to exercise its First Amendment right to petition the government for redress of its grievances, which include their dislike of you and the amount of money you make that the government does not redistribute to them. We have issued a parade permit to this group. Protesters are scheduled to begin picketing at your headquarters tomorrow. We understand a boycott will be announced at that time. The group’s application for a parade permit states, however, that if you renounce your support for the candidates and causes identified in your disclosures, and you make a generous contribution to support their cause, the protests and boycott will be called off. This is a deal you can’t refuse. Any questions?

      One question underlying the disclosure conundrum is this: Does money corrupt politics or does politics corrupt money? The answer, obviously, is, yes. But the focus on corporate personhood obscures the underlying issue. All of the disclosures in the world will not change these facts:
      • Ambitious public men are attracted to power over money.
      • Ambitious private men are drawn to money over power.
      • The distinction between ambitious public and private men fades as each learns to turn public power into private gain and private gain into public power (e.g., LBJ, any Kennedy, Jim Johnson, Franklin Raines, etc., etc.).
      Men and women attracted to capitol cities, like Washington, love power, not only for its own sake, but also to get rich. The more power a government assumes over the money and lives of its people, the more its money its people spend to influence the exercise of the government’s power over their lives. Why is so much money spent in Washington DC to influence the flow of money across the Potomac? Because, as Willie Sutton said, “that’s where the money is,” at least once it’s taken from taxpayers.

      Additional disclosure will not change a gosh darn thing. We already know almost everything important about who the big influence peddlers are; who buys; who sells; and at what price. Big labor buys Democrats, and Democrats rent unions. Big Oil buys Republicans, and Republicans rent oil companies. Both parties buy and sell themselves to local business interests. Soros funds progressives and progressive causes. Koch funds libertarians and conservatives. Liberal Democrats buy votes for food stamps from Conservative Republicans with votes for farm subsidies, and conservative Republicans buy votes for farm subsidies from liberal Democrats with votes for food stamps. Urban liberals vote to subsidize ethanol to salve the green consciences of limousine liberals, and rural conservatives ignore their free market ideals to fatten the wallets of their farming constituents. Big Pharma cuts itself in on Obamacare so Obamacare won’t cut Medicare reimbursements to Big Pharma. Speaking of Medicare, every time Docs bitch, Congress fix. And too-big-to-fail banks own almost everyone in Washington; somehow big banks scared the credulous geniuses who run Washington that the FDIC can’t devise a deposit insurance system that keeps Ma and Pa from losing their life savings at an FDIC insured bank on Main Street without bailing out all of Wall Street.

      Does anyone really believe that additional disclosures will change the way horses are traded and power is auctioned at the DC Auction House? Adding a few names to the bidder’s registration list isn’t going to change the House rules – other people’s money will still go to the highest bidder – or the same Senate rules for that matter. There is a problem. But additional disclosures are a distraction, not the solution.

    5. CommentedMark Pitts

      Disclosures will incite audits by the IRS for opinions unfavorable toward the government.

    6. CommentedRobert Winter

      An excellent point. When you couple it with the practical inability of shareholders to exercise effective control over large corporation -- it is almost always easier to sell than to fight, particularly for those without great resources -- absent disclosure the impact of the Supreme Court's decision is to vest great political power in an economic class characterized by great wealth. You are correct as to the long term risks to democracy. We already have more than enough crony capitalism in our system.