Corporate Governance and Campaign Finance: Supplemental Readings

Corporations, like unions and other organizations, have a constitutional right to discuss politics. The Supreme Court has explicitly welcomed corporate speech on political topics, including the qualifications of officeholders and candidates. Yet many people would prefer to see corporate political speech excluded from the public debate.

Having lost the constitutional battle, reformers who oppose corporate speech have tried to pass legislation or enact regulations that would make it more difficult for corporations to participate in our political discussions. Those efforts have largely failed.

Some of these individuals have instead approached corporations directly, on behalf of a (usually small) number of shareholders. They ask that corporations voluntarily relinquish their constitutional rights, arguing that political speech carries outsized risks to shareholder value.

There is no evidence for such an assertion. Of course corporate political spending, like all corporate expenditures, must be directed toward maximizing shareholder value. But where unions and other associations may speak without restraint, there may be a solid business case supporting a corporate decision not to withdraw from the public square.

The Center for Competitive Politics believes that all individuals and groups, regardless of viewpoint, should inform America’s political debate. This includes businesses, whose economic position gives them a vital perspective on the pressing political questions of our time. The enclosed materials help explain not only the current attempt by shareholding activists to force corporate silence, but also the comparatively-minor amounts of money spent on politics by American corporations and the lack of any evidence that these expenditures negatively impact share prices.

Ultimately, corporations and their shareholders must compose and fund their political speech with an eye toward shareholder value. But corporate management owes a fiduciary duty to all shareholders, not merely the politically vocal.

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