Daniel J.H. Greenwood

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What's Wrong with Citizens United v. FEC

The Supreme Court's Attack on the First Amendment, Republicanism and Market Capitalism

A Talk For the American Association of Law Schools (AALS) Conference, January 7, 2011, San Francisco

Let me start by thanking Kent Greenfield and the Committee on Business Organizations for organizing this panel and inviting me to talk, Tamara Piety for moderating, and my fellow panelists, Jesse Choper, Deborah Hellman, Michael Siebecker and David Yosifon, for their interesting comments.

The basic problem with Citizens United is that it turns the First Amendment on its head, threatening core values of democracy, republican self-government, corporate law and market based capitalism. Oh, and did I mention that the opinion combines a conception of corruption that would do Boss Tweed proud, with a stunning disregard for the text, purposes, and history of the Constitution?

Let's begin with the basic insight of the social contract tradition of limited government on which our Constitution is based:

Giving rights to an organization is never the same as giving rights to its members.

We all know this, when the organization is the state: to free the people, we must tame the state, not free it. Freeing the state generally means freeing its leaders to ignore, if not oppress, everyone else.

It's no different for a multinational corporation.

So the idea that freedom of speech will be enhanced by giving rights to organizations is, on its face, implausible.

Nor is there something special about multinational business corporations that makes them more obvious holders of First Amendment rights than, say, municipal corporations or incorporated governmental agencies.

On the contrary.

Corporate speech cannot be free. It is instead expensive and coerced.

Expensive, not free, because the only way that a business corporation can "speak" is by spending money. Spending money, as we used to know, is an economic activity. And, as we discovered in the Great Depression, backward-looking judicial misinterpretation of the broad language of our pre-industrial Constitution is, bluntly, a dumb way to regulate the economy.

Coerced, because the actual speakers - the people paid to talk or write or publicize or lobby - are acting as agents. They are hired guns, not - at least during working hours - citizens freely advocating their own values. As agents, they are under legal duties and unavoidable financial coercion to advocate corporate interests, not their own values. Do something else and you will be replaced.

Even if managers escape this coercion - as they sometimes will - no one's freedom is enhanced. Freedom of speech does not mean the freedom to spend other people's money by violating your fiduciary duty. That's just theft.

And coerced, because the sources and beneficiaries of corporate money have no say in how it is spent. Corporate money comes from, and ultimately will return to, consumers, employees and investors - and none of them has any say, under current corporate law, in determining the corporation's political positions.

Even shareholders, which vote for the board of directors on the entirely anti-democratic basis of one dollar one vote, have only the most limited of rights. Once elected, directors have a fiduciary obligation to follow their own judgment of the corporation's interests -- not the views of shareholders and not the values of corporate participants.

What the Supreme Court calls corporate free speech is simply corporate agents spending corporate money to promote corporate positions that they may or may not agree with.

Indeed, nothing in corporate law requires that ANY citizen believe that the corporation's position is correct, decent, or reflective of national values. Corporate interests overlap with human interests and values. But every human has some value that conflicts with corporate profit. And the important debates of politics are precisely about how to deal with those conflicts.

In short:

No one's Freedom of Speech is promoted by permitting spending by fiduciaries for a legal construct.

On the contrary, individual freedom is enhanced by abolishing the collective right, just as individual religious freedom is enhanced by abolishing collective established religions.

No free speech value at all is at stake when managers of a business corporation are barred from spending corporate money to electioneer or promote political ideology or regulatory capture. Ordinary business corporation law imposes no virtually no restrictions on distributions of corporate funds to consumers (by lowering prices), or to employees (by raising wages), or to investors, by increasing interest or dividend payments.

And regardless of any restriction on corporate electioneering or lobbying, the recipients of those corporate funds will be entirely free to spend their own property, once it is their own property, to promote their own views. As citizens instead of fiduciaries for a legal construct.


One more point.

What the Supreme Court calls corporate free speech is the same thing that political theorists since Plato and Samuel have called corruption.

Capitalism cannot survive law for sale.

Our system is based on the assumption that we can use law to ensure that Adam Smith's invisible hand leads us to prosperity and not to Hobbes' war of all against all or the stasis of a small exploitative elite atop a mass of poverty.

It is nearly always easier for the powerful to take rather than create, to give themselves a larger slice of the pie, even at the cost of making the pie smaller.

Citizens United stands for an unlimited right of corporate managers to spend corporate money in pursuit of laws that they perceive to be in the corporation's narrow interest.

Our major corporations control far more wealth than is necessary to overpower other voices, to distort political debate, to frighten politicians into avoiding conflicts that might generate negative advertising or to entice regulators into dreams of a lucrative after-career.

Corporate "free speech" means little more than very expensive regulatory capture. Law for sale, or even politicians intimidated by the implicit threat of corporate funded attack ads, will quickly result in a system in which wealth comes from legally enforced privilege, not production or innovation. A system in which, for example, government granted monopolies in drug patents or eternal copyright allow incumbent firms to extract enormous economic rents, or in which financial interests are allowed to make highly risky bets confident that they will be allowed to keep their winnings no matter the social cost and bailed out if they lose, where "deregulation" is simply a code-word for allowing economically well-placed to "rip the faces off" their customers, where "innovation" means novel ways to avoid the law, or where regulations are regularly designed not so much to protect the public as to protect powerful firms.

Finally: Citizens United threatens the corporations themselves.

We already have a problem with perverse incentives for our corporate leaders, unmatched since Burke's denunciations of the East India Company.

The combination of extraordinarily high pay and a generation of devaluing professionalism in favor of self interest, means that our corporate managers routinely gamble the future of their companies in the hope of creating individual payoffs - why build an institution when you could retire on one more bonus? Or use corporate money to promote an ideology that allows you to take corporate money for yourself?

Sheriff of Nottingham economies - corrupt economies in which the rich and powerful use the wealth and power they control in order to increase their wealth and power - are rarely successful, growing economies. At the cost of injustice, they buy poverty.

Citizens United is one small step towards the banana republic-ization of the United States. The First Amendment no more protects corporate electioneering and lobbying than it would protect a Secretary of Defense who sought to divert public funds into a propaganda campaign for a higher Defense budget and more perqs for Secretaries and Generals.

Freedom requires that We the People control our organizations, not the other way around.

--Daniel Greenwood, Jan 7, 2011