Campaign Finance Reform and Corporate Law

I just returned from the ALI’s Annual Meeting, and I wanted to post about an interesting hypothetical that was raised in the course of the discussions.

Suppose Delaware passed a statute providing that no company incorporated there could give money to political campaigns.  (A more modest version of this statute would be that any new corporate charters would contain such a limit.)  Would this be unconstitutional under Citizens United?

1.  Yes, because a state can ban corporations entirely or impose all sorts of other regulatory limits, but not a rule that restricts corporate speech.

2.  No, because a firm can choose to incorporate in another state that would not impose such a limit.  In other words, federalism gives states broad authority over the corporate form, and the burden on free speech is incidental if you have to incorporate in, say, Ohio, instead of Delaware.  So long as some states (or even one state) permitted unrestricted campaign contributions by its corporations, then there is no First Amendment problem.

Which is the better answer?

 

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4 Responses

  1. Brett Bellmore says:

    Not a lawyer, but I’d say #1. Not because it’s viewpoint discrimination, of course, that would require the prohibition to hinge on content. Rather, as a matter of unconstitutional conditions doctrine.

  2. Kevin Outterson says:

    Easiest case is requiring a process (transparency, special committee, vote, shareholder opt out, etc.) before making any charitable or political contributions, as a default rule. The UK has a system for shareholder approval of political contribution budgets in advance.

    Let’s say DGCL permits political donations but gives any shareholder an opt out (automatic dividend of their share of the expenditure). Can’t see how that violates 1A. Or if DGCL requires a supermajority shareholder vote (75%) each year in order to approve a budgeted level of political (or charitable) contributions. Again, not a problem.

    Of course if DGCL banned donations to a particular party, clearly unconstitutional.

  3. Gerard says:

    Brett–you are of course correct that this is not viewpoint discrimination. My mistake, which I will blame on my new father lack of sleep.

  4. Joe says:

    I share Brett’s sentiments here (it’s useful to get a chance to say that now and again), but unsure how ‘interesting’ the matter is — seems pretty clear-cut that such a broad limit is problematic. I guess if you hedge it a bit …