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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.

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Comment Preferences

  •  how about an escrow for campaign donations? (1+ / 0-)
    Recommended by:
    George3

    How about we make all campaign donations go through an escrow company and then to the person or party of the donator's choice. However the state executes a tax of 20% to be held in escrow for used and disbursed during federal elections to give a little 'free' speech to qualified alternative political voices.
    Taxing political donations to take a bite out of 'Citizen's Ignited', is quite far fetched and of course the House would never let something like this get out of committee. But, you're right that state houses might be able to do something like this.
    Corporations are NOT people, and the mindset that thinks they are is immoral and wicked.

    •  Escrow (2+ / 0-)
      Recommended by:
      martini, George3

      I'm afraid that adding the element of taxation would be an even bigger red flag than simply applying one-person-one-vote to corporate decisions  I know that a state legislator in Maryland who told me that he is introducing a bill to require shareholder approval of political expenditures, but that would be approval by  the majority of shares.

      •  keestone - it's hard to think of a rationale (1+ / 0-)
        Recommended by:
        nextstep

        under corporate governance rules where shareholders should even have a vote on non-material campaign activities of a corporation. If you look at the few items that require shareholder approval, beyond routine board elections, they are items that have a very high direct impact on the corporation, like selling the business or a major asset or events that dilute the existing shareholders by more than 20%. Now, in addition to having a vote you want to make it one shareholder, one vote, rather than one share, one vote? It's hard to fathom the fairness of that.

        "let's talk about that"

        by VClib on Sat Nov 24, 2012 at 10:26:59 PM PST

        [ Parent ]

  •  Thank you so much (1+ / 0-)
    Recommended by:
    George3

    for taking the time to outline this possibility.

  •  The Supreme Court deciding not to decide (2+ / 0-)
    Recommended by:
    cacamp, George3

    ..the case brought by Montana tells me all I need to know.

    Five of the Justices aren't all that interested in justice.

    Maybe one day the Fourth Estate will take their jobs seriously. Or not..

    by Anthony Page aka SecondComing on Fri Nov 23, 2012 at 07:42:55 PM PST

  •  Read the amicus briefs in American Tradition, (2+ / 0-)
    Recommended by:
    George3, keestone

    Montana's AG declined to use the eleventh amendment argument. There is a proposed eleventh amendment enabling act. If you think the virus in Buckley has finally crashed the system, then you would get more political with the court as FDR did with the horsemen and as Lincoln simply ignored Dred Scott. But those two won the wars that saved the nation. No one currently has that stature. As Lincoln's debates demonstrate, this is rocket science. One research site is moneyouttapolitics.org

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