On the day before Thanksgiving, the New York Times ran an editorial called "A Broken Election System." The last section had proposals for diluting the power of money in the political campaigns, but made the common assumption that only a constitutional amendment could overcome the effects of the Supreme Court's ruling in Citizens United. The Times may be right with respect to putting limits on contributions from wealthy individuals, but corporations and other business entities are creatures of state law and their behavior may be regulated other ways. It is time for us to consider some more creative responses, outlined below.
Business companies adopt corporate form (whether as corporations, limited liability companies or limited partnerships) in order to allow investors to limit their liability to the amount of their investment in case things go wrong. States used to impose a number of conditions on corporations in exchange for allowing this limitation of liability, but there has been a race to the bottom, led by Delaware and Nevada, to allow companies very wide latitude in what they may do and how they may organize themselves. Today the purpose stated in a corporate charter can be "any lawful activity" and, since the Supreme Court has made it impossible for states to outlaw political activity by a corporation, there is no way to keep corporations from lobbying and investing in candidates for political office. But states can and do still regulate certain corporate behavior. Even Delaware has laws to protect minority shareholder from having their equity diluted by the majority.
The problem with corporate campaign spending and lobbying is the opposite. Because wealth and economic power is so concentrated, a small minority is able to make political decisions for an economic entity in relative secrecy and without the consent of the majority of its owners, let alone the majority of other stakeholders, such as the employees. If this minority is allowed to act without restriction, then political democracy itself is at risk. But states are not powerless to protect themselves. A state that wishes to safeguard its political process could enact a law stating that any expenditure by a business organized in or doing business in the state which seeks to influence the state's elections or its legislative process must be ratified by a majority of all shareholders or members, on a one-person-one-vote basis, or by a board member selected on the same basis. A shareholder with 100,000 shares would have one vote, as would a shareholder with one share of stock. And just as we don't allow voting by proxy in our political elections, voting by proxy could be prohibited for this purpose. And shareholders other than natural persons could be subject to the same requirement with respect to the casting of their votes.
We could go even further and, like many European countries, recognize that employees should have a say in certain corporate decisions. The rationale for employee participation is particularly strong where the company is acting in the political sphere, which is supposed to be subject to the democratic principle of majority rule.
The result of this sort of democratic reform would be both transparency and a limitation of political spending to issues and candidates that a majority of a company's stakeholders supported. Organizations such as labor unions or cooperatives whose boards are already elected democratically could continue to make political contributions. And the distinction would lay bare the fundamental distinction between democratic organizations and anti-democratic organizations, restoring the true meaning of a "special interest" as economic interests not subject to the popular will.
Following this month's election there are at least thirteen states, including California, where Democrats control all three branches of government. Now is the time for those states to strike a blow for democracy and consider some new ways to dilute the power of money in politics.