The People vs. the "Corporate People"

The Supreme Court's Citizens United case, which helped further open the floodgates for corporate political spending in America, is about an ongoing and extremely contentious issue. Even before the ruling, there was plenty of reason to believe the deep-pocketed "corporate people" had far more influence on politics than regular people, and it was a bit amazing to think that corporate interests were given the go-ahead to exert even more power over political outcomes.

In California, lawmakers recently put forth a resolution to overturn the unpopular decision, further asking Congress for a constitutional amendment to that end. Obviously, many regular people simply can't accept the "corporate personhood" argument. The fact that corporate money is equated with "free speech" for these inhuman entities is pretty hard to swallow, too.

The criticism is leveled at corporations from many quarters, including some of their shareholders. All investors should keep track of the resolutions that are being lodged at public companies, and be aware of which ones are willing to voluntarily practice full disclosure of their political spending (or even ban such spending altogether).

Embracing disclosure
Some corporations are coming around to the idea that honesty is the right policy in this area. Of course, they've probably gotten a little nudge in that direction in the form of shareholder resolutions demanding transparent policies about political spending.

In late March, the Center for Political Accountability reported that 100 corporations have adopted disclosure and oversight of their political spending.

These aren't minor operations that hardly ever show up on investors' radars, either. Halliburton (NYSE: HAL  ) , Safeway (NYSE: SWY  ) , and CSX (NYSE: CSX  ) have all agreed to disclose direct corporate political donations, as well as indirect expenditures through vehicles like trade associations. They also have agreed to implement board oversight procedures.

Financial giant Goldman Sachs (NYSE: GS  ) has a shaky reputation in many areas, but it has banned the use of corporate money for political donations, and blocks the trade associations it works with from using its payments for any political purposes other than lobbying.

Occupy proxy ballots
These "corporate people" likely recognized the writing on the wall. In last year's proxy season, the average shareholder vote supporting political spending disclosure and accountability rose to a record 33%.

Some companies' votes were compellingly high, such as the 46.5% of Halliburton shareholders who voted for such proposals. Nearly half of R.R. Donnelley & Sons (Nasdaq: RRD  ) shareholders voted in favor of better political disclosure and oversight, with the vote total hitting 48.7% in favor. R.R. Donnelley is also one of the 100 companies that the Center for Political Accountability lauded for having voluntarily adopted such policies.

Many big investors have been working with companies to make this change. For example, the New York State Comptroller's Office took on CSX, R.R. Donnelley, and Safeway; Trillium Asset Management targeted Halliburton.

Even beyond such specific targeting, corporate managements and boards have good reason to believe this year's proxy season likely will yield even higher numbers of shareholder votes in favor of controlling political influence or, at the very least, being upfront about it. Now that the Citizens United case is returning to the forefront of public attention, the situation's even more urgent and timely.

The corporate megaphone outshouts us all
It's good news that many of the biggest companies are getting the message that, at the very least, shareholders are entitled to know how their money is spent in the political realm. The issue looms large this year more than ever.

Perhaps companies that wish to keep too many secrets and obscure incendiary elements of their expenditures should never have gone public in the first place. Furthermore, big money interests that attempt to distort the marketplace for their own benefit should never have been freed to exert even more undue influence over politics.

Shouldn't the strongest companies compete on their own merits and plow their resources into growth initiatives anyway? Political expenditures are a misuse of shareholder capital, and another distraction from true business excellence. Free speech for individuals is one thing, but corporations' big money talks too loud for the marketplace to function well. The volume on the corporate megaphone needs to be cranked way down.

Check back at every Wednesday and Friday for Alyce Lomax's columns on environmental, social, and governance issues.

Alyce Lomax does not own shares of any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Goldman Sachs. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (5) | Recommend This Article (9)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 16, 2012, at 4:21 PM, mdk0611 wrote:

    In the interest of complete disclosure:

    1. Do you consider George Soros to be one of the deep pocketed "corporate people"?

    2. Are unions "people"?

  • Report this Comment On April 16, 2012, at 4:27 PM, SheaKub wrote:

    I haven't seen a court case in recent memory that has been so misunderstood by so many in the country. I think many believe it says something that it does not say.

    Essentially the court case reaffirmed "money" in a political context is "free speech." A corporation, as a collection of people, still have that free speech.

    Unions have taken money and given it to politicians for decades. They have also been allowed to run ad campaigns. If this group is allowed to be a "person" with context to free speech, the Citizens United case set a precedent that it was unlawful to NOT allow corporations the same rights as a union.

    So if a corporation is not a person, then a union is not a person with respect to free speech.

    The opposite is therefore true. Corporations, as collections of people who own property (shareholders) can elect to run political campaigns when their business is under attack by other entities (anything from unions, to corporate welfare directed at their competitors or crony-capitalism).

    If you think more money makes politics corrupt, you need to invest in more ethical politicians. The money isn't the corruption; the politicians sometimes are.

    I remain firm in my belief that if unions can speak politically, the companies I own can speak politically as well.

  • Report this Comment On April 16, 2012, at 4:31 PM, DJDynamicNC wrote:

    Corporate lobbying is rent seeking, pure and simple - and once somebody starts doing it, everybody has to do it to keep up (or so they'll claim, with some justification).

    Banning direct corporate would be unconstitutional, unfortunately (the right to petition for redress of grievances is right there in the Bill of Rights) but corporate donations to Super PACs and campaigns can, and should, be banned entirely. Indeed, forcing politicians to all run on a very limited budget of public money rather than soliciting donations would go a long way towards cleaning up the mess.

  • Report this Comment On April 16, 2012, at 4:32 PM, DJDynamicNC wrote:

    @mdk0611 - Really? George Soros? :lol:

  • Report this Comment On April 16, 2012, at 11:43 PM, richardwinger wrote:

    The First Amendment applies to all speakers, not just flesh-and-blood human beings. Otherwise it would be possible for the government to censor newspapers, the NAACP, the ACLU, the NRA, the Democratic Party, GLAAD.

    The US Supreme Court did not say "corporations are people" in Citizens United. That didn't come up. Corporations already had free speech rights.

    The First Amendment free speech provision says, "Congress shall make no law restricting freedom of speech". It doesn't refer to whom the speaker is.

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