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This blog is the work of an educated civilian, not of an expert in the fields discussed.

Wednesday, September 23, 2009

Shareholder Protection Justification?

And Also: Fun Gilmore Girls repeat on yesterday, with the four Thanksgivings (one serious), Cat Kirk, and Lane's first kiss (beat Rory's!).


Rick Hasen at Election Law Blog forwards us a discussion by Adam Winkler of the shareholder protection rationale for corporate speech limits. It is of mixed value. AW has something in showing us how preventing corporate executives to use "other people's money" to promote a candidate can be problematic, placing this into a historical context. And, just selling shares often is as useful as those who say you have a big "choice" in health insurance. This does not convince that a properly disclosed method in which shareholders have some veto power cannot be established.

Corporations "speak" in promotion of its interests in many ways and shareholders delegate the responsibility. Thus, though it might be reasonable to limit such speech to relevant matters (a business corporation has little reason to fund an anti-abortion group). But, if shareholders allow corporations to speak about any number of business related issues (including defending themselves from public attacks, surely at times in an ideological leaning fashion), why is support of a candidate that promotes the interests of the corporation such a problem? In particular, support of an advertisement or video of the candidate? Again, this case is not about just giving money to a candidate, but independent advocacy about a candidate or cause.
Most of the political scientific studies show that, with few exceptions, contributions don't impact legislative votes. So shareholders are not being benefited by the spending anyway. Who benefits? Mostly the executives who get to buy access—and the status that comes with attending the big fundraisers and mingling with the powerful—on other people's dime.

Uh huh. Problem is that this is a gigantic selling point of campaign finance legislation. The whole argument at times is that there is an unbalanced playing field, and certain special interests (apparently, contra to the interests of many of the shareholders who benefit too) have too much power over public policy. If the votes are not really impacted, that is just b.s.? This does not quite help the cause. The shareholder protection rationale has some bite, but there is a reason why activists do not tend to lead with it. We are left with this:
Publicly owned corporations face a whole host of restrictions on their speech in the name of shareholder protection. The securities laws are full of them. Public corporations are banned from making statements about their companies that haven’t been approved by the SEC during certain offering periods—a broad speech restriction that would never be permissible when applied to individuals. They are required to make quarterly and annual statements about their activities, which are held to a high standard of truthfulness—a type of compelled, coerced speech.

This sort of thing annoys me. This is from an expert in the field. But, it is b.s. How exactly is the requirement to make such statements -- somewhat akin I guess to the "state of the union" requirement for the POTUS -- comparable to limits on political speech? Fine, require disclosure to the shareholders and public concerning the money spent to do so and how it was relevant to the corporation's bottom line. You cannot just point to regulations to argue that some other regulation is fine -- the point is not that corporations should have no limits. And, the same applies to the offering period regulations. That's fine and all, but how is that relevant in this context? And, it is not as if the SEC approval should be allowed to be arbitrary.*

Corporate speech limits might be acceptable, even if we don't accept all the burdensome regulations for other sorts of speech related activities. But, this sort of thing convinces whom?

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* The latter limitation probably is referenced since the current law also is time barred -- certain special limits are in place within a certain amount of days of the election. Various problems remain. First, the offering statement ban does not appear to be as absolute.

Second, commercial speech of this sort is not supplied the same amount of protection than the political speech -- the core of the First Amendment -- at issue here. What is the justice of limiting speech right at the time when the voter has the most interest and need to know the information? Some countries have short election campaigns; this doesn't even have that going for it -- the limits allow the speech for an extended period of time, making things expensive, but not at the most logical time. If anything, the rule is backward.

I reckon more can be said. Bottom line, apples and oranges. Putting aside that in various cases, corporate and union regulations are probably problematic anyway, there is a different standard used. We allow corporate funded PACs to promote political speech, for instance, that do not have the same standard of truthfulness as something stated in a prospectus.