Sunday, January 24, 2010

What is a Corporation? : The Regulatory Effects of Different Conceptions of Corporate Personality in American Constitutional Law in Citizens United v. FEC

This essay reviews an aspect of the recently decided case, Citizens United v. Federal Election Commission, No. 08-205 (argued March 24, 2009; reargued September 9, 2009, Decided Jan. 21, 2010). The opinions in the case may be downloaded at

On January 21, 2010, a Supreme Court closely and bitterly divided on fundamental issues of constitutional political theory decided Citizens United v. Federal Elections Commission. Over several hundred pages of majority, concurring and dissenting opinions, the case itself raised and sought to resolve a number of complex and important issues of constitutional law. These include the constitutional contours of stare decisis, the scope of the First Amendment, the extent of a government’s powers to regulate the processes of its elections, the proper scope and use of original sources in constitutional interpretation, and the prudential rules guiding the proper circumstances when issues raised in a case may be “constitutionalized,” that is when a court may reach constitutional issue embedded in a case where resolution may be possible on non constitutional grounds. These issues impact the understanding of the American constitutional order and the political theories on which that order is grounded. For that reason alone, the case is an important marker in the evolution of the construction of the political forms of the American Republic. It is unlikely that the settlement of these issues as represented by the opinions of the justices in the majority will remain intact for long. These are extremely dynamic areas of law and there is no emerging consensus with respect to any of these issues.

But to a considerable extent, Citizens United is also a case touching on basic issues of corporate law. Central to the decision was a fundamental disagreement among the members of the Court as to political consequences of activity undertaken in corporate form. This rift reflects a deeper set of disagreements relating to the appropriate conceptualization of the corporation in political society and the regulatory consequences of that conceptualization. Central to the determinations of both majority and dissenting opinions are fundamentally distinct views of the nature of the corporation, and consequently, of the relationship between the state and the corporation. On the one hand, corporations can be understood as property in the hands of their shareholders, and as such, little more than aggregations of shareholder preferences. On the other hand, corporations can be conceived as an institution, autonomous of its shareholders, with its own obligations and objectives, and as such, as independent and distinct from any individual shareholder. But corporations can also be understood as nothing more than a legal construct, an amalgam of privileges conceded by the state through which it is chartered and from which it owes its existence, and as such cannot be the direct bearer of rights or protection, only the bearer of rights derived from those of its holders. And yet, corporations can be understood as bundles of privileges, giving rise to obligations to act like and undertake the duties of a public entity with respect to its actions. Lastly, corporations can be understood as the meeting point of clusters of contractual relations among a series of actors, whose rights and obligations to the entity are a function of those relations, only some of which is subject to regulation by the state.

These fundamental differences in conception were neither accidental nor evidence of confusion. They are ancient and well considered positions on the nature of the corporation that are, to some extent are both irreconcilable and give rise to substantially different constitutional and regulatory consequences. The differences, in modern form, were first well-exposed in First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978), and contested in Austin v. Michigan Chamber of Commerce, 494 U. S. 652 (1990). Citizens United has effectively recast them anew. The effect of Citizens United is thus not merely confined to issues touching on the constitutional protections of speech rights, and the form of legitimate of constitutional jurisprudence. Rather, it will have potentially significant effects on approaches to the regulation of corporations far beyond the constitutional framework in which the case was decided.


The case arose from a challenge to certain provisions of federal law prohibiting entities from making expenditures for speech that advocated the election of defeat of political candidates. Specifically 2 U.S.C. Section 441b (as amended by the Bipartisan Campaign Reform Act of 2002 Section 203) prohibited corporations and unions from using their general treasury funds to make independent expenditures for speech defined as “electioneering communications” or for speech expressly advocating the election or defeat of a candidate for public office. “Electioneering communications” were defined as “any broadcast, cable, or satellite communication” that “refers to a clearly identified candidate for Federal office” and is made within 30 days of a primary election, §434(f)(3)(A), and that is “publicly distributed,” 11 CFR §100.29(a)(2). However, corporations and unions may establish political action committees (PACs) for the purpose of engaging in such otherwise prohibited speech activity, as long as they complied with the substantial operational, monitoring and disclosure rules relating to PACs. However, the prohibitions apply to for profit and not for profit corporations in equal measure. These regulations had been unsuccessfully challenged in some respects in McConnell v. Federal Election Commission, 540 U.S. 93 (2003), and earlier with respect to corporate expenditures, in Austin, supra, and non-profit corporations, Federal Election Comm’n v. Massachusetts Citizens for Life, Inc., 479 U. S. 238 (1986) (MCFL) (where the Court found unconstitutional only that portion of Section 441b that applied to nonprofit corporations that were formed for the sole purpose of promoting political ideas, did not engage in business activities, and did not accept contributions from for-profit corporations or labor unions. Id., at 263–264).

With respect to disclaimer and disclosure, federal law also imposed requirements. “Under BCRA §201, any person who spends more than $10,000 on electioneering communications within a calendar year must file a disclosure statement with the FEC. 2 U. S. C. §434(f)(1). That statement must identify the person making the expenditure, the amount of the expenditure, the election to which the communication was directed, and the names of certain contributors. §434(f)(2).” Citizens United, supra, slip op., at 51. BRCA Section 311 required that televised electioneering communications contain a disclaimer identifying the person or entity responsible for the communication. Id., at 50-51.

The plaintiff, Citizens United is a non profit corporation supporting conservative causes and candidates. According to SourceWatch (, Citizens United

was created in November 1988 by conservative activist Floyd G. Brown,[1] It is "a nonprofit corporation organized under the laws of Virginia and tax-exempt under section 501(c)(4) of the Internal Revenue Code."[2] Citizens United is affiliated with The Presidential Coalition, a 501(c)(4), and the 2007 Conservative Victory Committee, a Section 527 political action committee. Previously, it was affiliated with the National Security Political Action Committee (National Security PAC), Presidential Victory Committee and Americans for Bush. Citizens United is led by David Bossie, who has served as president since 2000. Its offices are on Pennsylvania Avenue in the Capitol hill area of Washington, D.C.

SourceWatch, Citizens United, available at It has a budget of $12 million, received mostly as donations form individuals. (Citizens United, supra, slip op. at 2). It accepts a small amount of funds from for profit corporations. Ironically, before filing its case, it had participated in an effort to use the provisions it challenged in this case to stop distribution of Michael Moore’s Fahrenheit 9/11 in a complaint ot the Federal Election Commission. (Susan Jones, "Michael Moore Film Violates Campaign Finance Law, Group Alleges," (formerly Conservative News Service; now Cybercast News Service), June 23, 2004).

In January 2008, Citizens United released a film entitled Hillary: The Movie. We refer to the film as Hillary. It is a 90-minute documentary about then-Senator Hillary Clinton, who was a candidate in the Democratic Party’s 2008 Presidential primary elections. Hillary mentions Senator Clinton by name and depicts interviews with political commentators and other persons, most of them quite critical of Senator Clinton.

Citizens United, supra, slip op. at 2. Citizens United released this cinematic effort in theaters and on DVD. Eventually it sought to arrange additional distribution through a video-on-demand service. Id. Citizens United intended to make this service, and a series of advertisements publicizing the film, available within 30 days of the 2008 primary elections. Id., at 4. Fearing that these efforts would run afoul of Section 441b, Citizens United sought declaratory and injunctive relief against the Federal Selection Commission. Id. Specifically, it sought to have both Section 441b and the disclosure provisions in Sections 201 and 311 of the BCRA declared unconstitutional as applied to Hillary. Id. “The District Court denied Citizens United’s motion for a preliminary injunction, 530 F. Supp. 2d 274 (DC 2008) (per curiam), and then granted the FEC’s motion for summary judgment.” Id. The Court noted probable jurisdiction 555 U.S. – (2008) and then compelled reargument to consider whether the Court should overrule “either or both Austin and the part of McConnell which addresses the facial validity of 2 U. S. C. §441b.” Id., at 5.

The Supreme Court determined that it could not avoid the constitutional issue. Id., at 5-20. It overruled Austin with respect to both its limitations on non profit and for profit corporate political expenditures, and that part of McConnell that extended Section 441b’s restrictions on independent corporate expenditures as inconsistent with the protections of the First Amendment. Id., at 20-51. Lastly, it upheld the disclaimer and disclosure requirements of BRCA Sections 201 and 311. Id., at 50-57. The majority opinion was authored by Justice Kennedy in which all justices but Justice Thomas joined as to the issue of the constitutionality of the disclaimer and disclosure provisions. Justices Alito, Scalia and Thomas, and the Chief Justice joined that portion of the opinion dealing with the constitutionality of Section 441b. Justice Stevens, joined by Justices Ginsburg, Breyer and Sotomayor, filed an opinion concurring in part and dissenting from that portion dealing with the constitutionality of Section 441b and overruling Austin. The discussion that follows looks at the opinion solely from a very limited perspective. It considers the way in which different conceptions of the corporation contributed to the arguments deployed by majority and dissenting opinions.

Privileging the Corporation as Autonomous Entity:

The majority opinion suggests the consequential power of a conception of corporation as autonomous entity in the context of constitutional rights adjudication. Justice Kennedy is able to frame his argument—focused on the prohibition of speech limitations applied to corporations—only by developing a set of premises that together constitute a corporation as an entity capable of independent action. If corporations are not autonomous, then the rights they claim, and especially the constitutional protections extended to them, would have to derive from those for whom corporations act. If, on the other hand, corporations are understood as entities separate from others, then it may be extended protection ion its own right. This distinction is crucial for the elaboration of the majority’s argument. It suggests that Section 441b constitutes an outright ban on speech, backed by criminal sanctions. Citizens United, supra, slip op., at 20. It is a ban that is a function of the identity of the speaker (a corporation) though not a function of the nature of the origin of the speech (in collective speech). Thus PACs are permitted speech rights where corporations are denied them. Id., at 21. On the other hand, PACs were understood as being burdensome because of the nature of the rules for their operation. Id., at 21-22.

Of course, this would make no difference if corporations were assumed to be no more than the sum of statutory privilege or the creature of the state. In either case, all corporate attributes would be understood as privileges rather than rights. Moreover if corporations were understood as property, then the fact that they could not “speak” for themselves would be of little moment—their real voices could be heard when shareholders chose each to speak as they liked. Corporate speech, in this sense, would merely duplicate shareholder speech, and thus would not have an independent value. “We find no basis for the proposition that, in the context of political speech, the Government may impose restrictions on certain disfavored speakers. Both history and logic lead us to this conclusion.” Id., at 25. The issue, then, reduces itself to a simple one: do corporations (or other aggregations) constitute rights bearing “speakers” for purposes of constitutional analysis. The Court determined that they were. To get there they necessarily embraced a particular understanding of the nature of the corporation.

Let us work through Justice Kennedy’s analysis for the majority. He starts with the general proposition that the “Court has recognized that First Amendment protection extends to corporations.” Id., at 25. He cites among a slew of cases, Bellotti, supra. This is noteworthy, if only because Bellotti was among the first cases where the majority opinion explicitly relied on an institutionalist conception of the corporation—as an independent and autonomous entity distinct from its stakeholders and capable of independent expression—in reaching their holding that a state could not ban corporate expenditures relating to referenda put to voters. Justice Kennedy builds on this by suggesting that this proposition has been extended to political speech in general. Id., at 26.

Corporations and other associations, like individuals, contribute to the ‘discussion, debate, and the dissemination of information and ideas’ that the First Amendment seeks to foster” (quoting Bellotti, 435 U. S., at 783)). The Court has thus rejected the argument that political speech of corporations or other associations should be treated differently under the First Amendment simply because such associations are not “natural persons.”

Citizens United, supra, at 26. Against this judicial movement toward protection of corporate political speech, Justice Kennedy identified a legislative movement toward restriction of corporate speech in political campaigns. Id., at 26-27. These courts increasingly found distasteful to its own views of the scope of political speech holders. Id., at 27-31. It is in this context that Austin is considered, and characterized as an aberrational judicial moment. Id., at 31-32. Its aberration was precisely in its privileging of a view of the corporation that suggested both its power to corrupt through aggregations of power and its in authenticity as a legitimate autonomous speaker. Id., at 32.

In its defense of the corporate-speech restrictions in §441b, the Government notes the antidistortion rationale on which Austin and its progeny rest in part, yet it all but abandons reliance upon it. It argues instead that two other compelling interests support Austin’s holding that corporate expenditure restrictions are constitutional: an anticorruption interest, see 494 U. S., at 678 (STEVENS, J., concurring), and a shareholder-protection interest, see id., at 674–675 (Brennan, J., concurring). We consider the three points in turn.

Citizens United, supra, at 32. Each is rejected in turn. And in the course of those rejections, Justice Kennedy constructs a notion of the corporation as an entity substantially different from that on which both the statute, and Justice Stevens dissent, is based.

Justice Kennedy grounds his rejection of the antidistortion rationale on an acceptance of a parity among individual and corporate speakers. Each is treated as independent, autonomous and a co-equal contributor to political discussion. But that parity requires acceptance of another premise—that corporations contribute in their own right rather than serve as amplification of the views of individuals who have a stake in the enterprise. He notes: “If the First Amendment has any force, it prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech. If the antidistortion rationale were to be accepted, however, it would permit Government to ban political speech simply because the speaker is an association that has taken on the corporate form.” Id., at 33. Because there is a parity between individual and corporate speech, there is no basis for distinguishing between speech on issues (permitted in Bellotti) and speech advocating the election of a candidate (prohibited in Austin). Id., at 33-34.

For this purpose, Justce Kennedy specifically rejected the idea of corporations as a nexus of privilege or as a construct of the state—and therefore subject to whatever limitations the state might choose to attach to that existence.

Either as support for its antidistortion rationale or as a further argument, the Austin majority undertook to distinguish wealthy individuals from corporations on the ground that “[s]tate law grants corporations special ad vantages—such as limited liability, perpetual life, and favorable treatment of the accumulation and distribution of assets.” 494 U. S., at 658–659. This does not suffice, however, to allow laws prohibiting speech. “It is rudimentary that the State cannot exact as the price of those special advantages the forfeiture of First Amendment rights.” Id., at 680 (SCALIA, J., dissenting).

Citizens United, supra, at 34-35. Noted but not discussed here is the way that Justice Kennedy, without much pause to consider the effects of the Press Clause, then leaps from this idea to the conclusion that a consequence of treating the corporation as a creature of the state would imperil the ability of media companies to operate in corporate form. Id., at 34-38. Thus, critical to Justice Kennedy’s conceptualization of the extent of speech rights is his acceptance of the premise that associations of individuals speak with a voice distinct from the individuals that comprise the organization. This institutionalist assumption posits the corporation as a entity that is less property in the hands of its owners and more an entity distinct from those with interests in its income or assets, and who retain certain indirect rights of control. Austin is thus constitutionally suspect because “permits the Government to ban the political speech of millions of associations of citizens. . . . By suppressing the speech of manifold corporations, both for-profit and non profit, the Government prevents their voices and viewpoints from reaching the public and advising voters on which persons or entities are hostile to their interests.” Id., at 38-39.

Somewhat bizarrely, Justice Kennedy then equates corporations with the political factions at the heart of Madison’s discussion of factional governance in the construction of the Republic. “Factions will necessarily form in our Republic, but the remedy of “destroying the liberty” of some factions is “worse than the disease.” The Federalist No. 10, p. 130 (B. Wright ed. 1961) (J. Madison). Factions should be checked by permitting them all to speak, see ibid., and by entrusting the people to judge what is true and what is false.” Id., at 39.

Yet for those who have been arguing that there is little difference between political parties—as special purpose political corporations in the business of securing political power for their followers—and corporations in the business of making money or fomenting some sort of social, cultural or other objectives, this argument suggests that corporations thus reimagined might well be burdened with political obligations. Yet this is something that has been rejected by the very people who have embraced the notion of corporate institutionalism for the purpose of freeing these entities from the limitations of participation in the political process. At some point the contradictions inherent in that position—that corporations are purely private enterprises that cannot have political obligations without interfering with the democratic organization of the state while simultaneously holding that corporations have a protected constitutional right to participate in the political process—will have to be confronted. To some extent that process is already occurring at the international level. See, e.g., Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises. Business and human rights: Towards operationalizing the “protect, respect and remedy” framework, at ¶ 15, U.N. Doc. A/HRC/11/13 (April 22, 2009). The position of Justice Kennedy here will make those efforts much more difficult to resist.

A similar approach was taken to reject the government’s corruption argument. First Justice Kennedy distinguished Bellotti on this score as both dicta and as based on a student law review note that ought not to have been given much weight. What, after all, could a law student know! Id., at 41-42. Absent a showing of actual corruption, the argument from corruption was assumed merely speculative. Id., 44-45. Additionally cases of the appearance of judicial corruption as a basis for recusal in the face of corporate donations to political campaigns was distinguished as not involving speech rights. Id., at 43.

Lastly, and perhaps most importantly from the perspective of the corporate law perspective of the case, Justice Kennedy rejected the argument that the provisions were valid as a basis for the protection of shareholders form their managers. Rejected, in this way, was the idea that corporations are passive shells that reflect the views of their managers, and that any use of corporate funds for purposes other than to make money might well misuse corporate funds to the detriment of shareholders. This conception, grounded in the idea of corporation as property in the hands of shareholders, was rejected in favor of the view of corporation as autonomous institution with the principal obligation to preserve itself rather than the interests of its shareholders.

There is, furthermore, little evidence of abuse that cannot be corrected by shareholders “through the procedures of corporate democracy.” Bellotti, 435 U. S., at 794; see id., at 794, n. 34. Those reasons are sufficient to reject this shareholder protection interest; and, moreover, the statute is both underinclusive and overinclusive. As to the first, if Congress had been seeking to protect dissenting shareholders, it would not have banned corporate speech in only certain media within 30 or 60 days before an election. A dissenting shareholder’s interests would be implicated by speech in any media at any time. As to the second, the statute is overinclusive because it covers all corporations, including nonprofit corporations and for-profit corporations with only single shareholders. As to other corporations, the remedy is not to restrict speech but to consider and explore other regulatory mechanisms. The regulatory mechanism here, based on speech, contravenes the First Amendment.

Id., at 46.

Left unexplored is a consequence of the decision—the ability of foreign individuals and states to participate in the American democratic process by acquiring “citizenship” and speech rights through ownership of American corporations. Justice Kennedy is at the end of his conceptual rope on this point. He merely points to 2 U.S.C: Section 441e (forbidding political contributions by foreign nationals) Id., at 47, and suggesting that this fear is not cured by retaining Section 441b. Id. Yet this is hardly satisfying as a matter of corporate law. And the ideals of the nature of the corporation as autonomous entity actually suggest that it will be exceeding hard to prevent foreign participation in the political process son the basis of the corporate conception at the heart of the decision. Corporations are deemed to be citizens of the state of their incorporation. The citizenship of their shareholders is not deemed to affect that citizenship, or the rights of the entity to assert those citizenship rights. There are exceptions, with respect to ownership of sensitive industries. But even there, it is usually the case that the implementation of approaches safeguards is usually enough to satisfy most limitations. See Eben Kaplan, Foreign Ownership of U.S. Infrastructure, Council on Foreign Relations, Feb. 13, 2007, available Yet, though corporations are deemed to speak independently of their owners, their views would necessarily be shaped by the preferences of those owners, especially if they own a sizeable stake in the enterprise. This issue will become much more pressing when, for example, it is determined that an American corporation, with substantial expenditures in a political campaign, is a wholly owned subsidiary of a Chinese or Norwegian sovereign wealth fund, which has announced its intention to be an active shareholder (something applauded as a matter of American corporate policy) to induce the corporation to further its own political and policy objectives.

So conceived, no limitation on corporate direct expenditure in political campaigns is possible. “Austin is overruled, so it provides no basis for allowing the Government to limit corporate independent expenditures. As the Government appears to concede, overruling Austin “effectively invalidate[s] not only BCRA Section 203, but also 2 U. S. C. 441b’s prohibition on the use of corporate treasury funds for express advocacy.” Brief for Appellee 33, n. 12. Section 441b’s restrictions on corporate independent expenditures are therefore invalid and cannot be applied to Hillary.” Id., at 50.

Privileging the Shareholder:

Justice Stevens dissent offers a conceptual basis of corporate organization substantially different from that on which Justice Kennedy’s majority opinion was grounded. The dissent suggests the consequential power of a conception of corporation as property in the hands of its shareholders in the context of constitutional rights adjudication. Understood on the basis of this foundation, the focus of Justice Stevens’ dissent becomes both clear and inevitable. Justice Stevens understands the case as one of reasonable management of corporate speech in the context of the election of natural persons to office. Citizens United, supra, Stevens, J., concurring in part and dissenting in part, slip op. at 1.

The basic premise underlying the Court’s ruling is its iteration, and constant reiteration, of the proposition that the First Amendment bars regulatory distinctions based on a speaker’s identity, including its “identity” as a corporation. While that glittering generality has rhetorical appeal, it is not a correct statement of the law. Nor does it tell us when a corporation may engage in electioneering that some of its shareholders oppose. It does not even resolve the specific question whether Citizens United may be required to finance some of its messages with the money in its PAC. The conceit that corporations must be treated identically to natural persons in the political sphere is not only inaccurate but also inadequate to justify the Court’s disposition of this case.

Citizens United, supra, Stevens, J., concurring in part and dissenting in part, slip op. at 1-2. While Justice Kennedy privileges the corporation as entity, Justice Stevens privileges the shareholder. For him the corporation is less entity than the nexus of shareholder interests, regularized and managed through law.

In the context of election to public office, the distinction between corporate and human speakers is significant. Although they make enormous contributions to our society, corporations are not actually members of it. They cannot vote or run for office. Because they may be managed and controlled by nonresidents, their interests may conflict in fundamental respects with the interests of eligible voters. The financial resources, legal structure, and instrumental orientation of corporations raise legitimate concerns about their role in the electoral process. Our lawmakers have a compelling constitutional basis, if not also a democratic duty, to take measures designed to guard against the potentially deleterious effects of corporate spending in local and national races.

Citizens United, supra, Stevens, J., concurring in part and dissenting in part, slip op. at 2. The conceptual foundations of corporations art the heart of this dissent could not be more distinct from that of the majority opinion.

A large portion of the fist part of the dissent was devoted to two significant issues of constitutional jurisprudence. The first touched on the prudential obligation to avoid reaching a constitutional issue if a case could be decided on non constitutional grounds. Citizens United, supra, Stevens, J., concurring in part and dissenting in part, slip op. at 4-17 “The Court’s ruling threatens to undermine the integrity of elected institutions across the Nation. The path it has taken to reach its outcome will, I fear, do damage to this institution.” Id., at 4. The second touched on the role of stare decisis in constitutional cases. Id., at 17-23. Neither will be discussed further here.

More relevant for the corporate law implications of the opinion are Justice Stevens efforts to attack three of the bases of the majority’s argument. “First, the Court claims that Austin and McConnell have “banned” corporate speech. Second, it claims that the First Amendment precludes regulatory distinctions based on speaker identity, including the speaker’s identity as a corporation. Third, it claims that Austin and McConnell were radical outliers in our First Amendment tradition and our campaign finance jurisprudence. Each of these claims is wrong.” Id., at 23. But that effort is grounded on a vastly different understanding of the corporate form.

Justice Stevens first suggests that the idea that Austin and McConnell ban corporate speech is wrong because corporate shareholders and executives remain free to aggregate their resources to assert speech rights.

For starters, both statutes provide exemptions for PACs, separate segregated funds established by a corporation for political purposes. See 2 U. S. C. §441b(b)(2)(C); Mich. Comp. Laws Ann. §169.255 (West 2005). “The ability to form and administer separate segregated funds,” we observed in McConnell, “has provided corporations and unions with a constitutionally sufficient opportunity to engage in express advocacy. That has been this Court’s unanimous view.” 540 U. S., at 203. Under BCRA, any corporation’s “stockholders and their families and its executive or administrative personnel and their families” can pool their resources to finance electioneering communications. 2 U. S. C. §441b(b)(4)(A)(i).
Id., at 24.

Central to this argument is the idea that there is an identity of interest between corporations and their principal stakeholders, or better put, that corporations do not speak for themselves, they serve to amplify the speech of the individuals who control them. That conflation, that idea that corporations, as property in the hands of shareholders is incapable of autonomous activity is further refined by Justice Stevens in this context.

Like all other natural persons, every shareholder of every corporation remains entirely free under Austin and McConnell to do however much electioneering she pleases outside of the corporate form. The owners of a “mom & pop” store can simply place ads in their own names, rather than the store’s. If ideologically aligned individuals wish to make unlimited expenditures through the corporate form, they may utilize an MCFL organization that has policies in place to avoid becoming a conduit for business or union interests. Id., at 25.

As a consequence, the statutes at issue amount to little more than reasonable time, place and manner restrictions.

So let us be clear: Neither Austin nor McConnell held or implied that corporations may be silenced; the FEC is not a “censor”; and in the years since these cases were decided, corporations have continued to play a major role in the national dialogue. Laws such as §203 target a class of communications that is especially likely to corrupt the political process, that is at least one degree removed from the views of individual citizens, and that may not even reflect the views of those who pay for it. Such laws burden political speech, and that is always a serious matter, demanding careful scrutiny. But the majority’s incessant talk of a “ban” aims at a straw man. Id., at 28.
Justice Stevens offers a similar argument against the “second pillar of the Court’s opinion is its assertion that “the Government cannot restrict political speech based on the speaker’s . . . identity.” Ante, at 30.” Id., at 28. The crux of that effort is the suggestion that Justice Kennedy misread Bellotti. “Like its paeans to unfettered discourse, the Court’s denunciation of identity-based distinctions may have rhetorical appeal but it obscures reality.” Id. First, Justice Stevens reminds us that the Supreme Court has approved identity based restrictions on speech rights in a number of contexts. Id., at 28-30. “When such restrictions are justified by a legitimate governmental interest, they do not necessarily raise constitutional problems.” Id., at 29. This applies even in the election context. Id., at 31-32. Here, the idea that corporations are not distinguishable from the individuals that control them drives the difference in conceptual approach.

The same logic applies to this case with additional force because it is the identity of corporations, rather than individuals, that the Legislature has taken into account. As we have unanimously observed, legislatures are entitled to decide “that the special characteristics of the corporate structure require particularly careful regulation” in an electoral context. NRWC, 459 U. S., at 209–210.50 Not only has the distinctive potential of corporations to corrupt the electoral process long been recognized, but within the area of campaign finance, corporate spending is also “furthest from the core of political expression, since corporations’ First Amendment speech and association interests are derived largely from those of their members and of the public in receiving information,” Beaumont, 539 U. S., at 161, n. 8 (citation omitted). Campaign finance distinctions based on corporate identity tend to be less worrisome, in other words, because the “speakers” are not natural persons, much less members of our political community, and the governmental interests are of the highest order. Furthermore, when corporations, as a class, are distinguished from noncorporations, as a class, there is a lesser risk that regulatory distinctions will reflect invidious discrimination or political favoritism. Id., at 32-33.

Notice the importance of the embrace of a particular understanding of corporate nature to the force of this argument. Rejected here is the idea of corporate existence as an autonomous institution embraced by Justice Kennedy. Corporations are derivative entities. They speak only as the individuals who control them desire. As such, there is no such thing as corporate speech per se. There is only speech by individuals through the corporations they control. “Under the majority’s view, I suppose it may be a First Amendment problem that corporations are not permitted to vote, given that voting is, among other things, a form of speech.” Id., at 33-34.

Justice Stevens devotes a substantial portion of his dissent to the idea that Austin and McConnell are not outliers. Central to this argument is a discussion of the original understanding of the role of corporations in American political life. Id., at 34-42. There is substantial irony here and a bit of role reversal. It is Justice Stevens, rather than Justice Scalia, who is the champion of arguments from original understanding in this context. And no wonder. Notions of private modern corporations as autonomous institutions are hardly more than a century old. To mold the two-century old First Amendment to changing notions of corporations barely a century old would appear to be a matter of legislative rather than judicial prerogative under the argument usually made by Justice Scalia. But here, it is Justice Stevens rather than Justice Scalia who advances this conservative argument, and who thus, exposes the radical nature of the interpretation of the majority (and with it the importance of the new conception of the corporation for constitutional and statutory law). Justice Scalia is put in the uncomfortable position of arguing in the style of those he has spent a lifetime criticizing. See, Citizens United, supra, Scalia, J., concurring, at 1-9.

Beyond irony, though, Justice Stevens suggests that the conception of corporations that was widely held at the time of the adoption of the First Amendment would be inimical to the embrace of the sophisticated institutionlaist conception of the autonomous private corporation at the foundation of Justice Kennedy’s opinion. See, Citizens United, supra, Stevens, J., concurring in part and dissenting in part, at 36-39. Indeed, Justice Stevens suggests that the corporation was understood as a creature of the state, imbued with public purpose, and subject to regulation and limitation by the public body that created and sustained it. “The Framers thus took it as a given that corporations could be comprehensively regulated in the service of the public welfare. Unlike our colleagues, they had little trouble distinguishing corporations from human beings, and when they constitutionalized the right to free speech in the First Amendment, it was the free speech of individual Americans that they had in mind.” Id., at 37. Justice Stevens then suggested the way in which both courts and legislatures acquiesced in this understanding for much of the history of the Republic. Id., at 42-56. “In sum, over the course of the past century Congress has demonstrated a recurrent need to regulate corporate participation in candidate elections to “ ‘[p]reserv[e] the integrity of the electoral process, preven[t] corruption, . . . sustai[n] the active, alert responsibility of the individual citizen,’ ” protect the expressive interests of shareholders, and “‘[p]reserv[e] . . . the individual citizen’s confidence in government.’ ” McConnell, 540 U. S., at 206–207, n. 88 (quoting Bellotti, 435 U. S., at 788–789; first alteration in original). . . . The only thing new about Austin was the dissent, with its stunning failure to appreciate the legitimacy of interests recognized in the name of democratic integrity since the days of the Progressives.” Id., at 55-56 (with a swipe at Justice Scalia).

Having thus contextualized the constitutional framework in light of a distinctive rationalization of the nature of the corporation, Justice Stevens then turns to the defense of the statute on anticorruption, antidistortion, and shareholder protection rationales. Id., at 56-89. Like his prior arguments, these are substantially informed by a conception of the corporation as a nexus of contract, a shareholder flow through and a confluence of statutory privilege that militates against treating the entity as an independent organization with autonomous consciousness and speech.

Thus, in constructing his anti corruption argument, Justice Stevens draws on his understanding of the distinctiveness of the corporate nature.

Business corporations must engage the political process in instrumental terms if they are to maximize shareholder value. The unparalleled resources, professional lobbyists, and singleminded focus they bring to this effort, I believed, make quid pro quo corruption and its appearance inherently more likely when they (or their conduits or trade groups) spend unrestricted sums on elections. Id., at 64.

Consider the importance of the conception of corporation as property as the foundation for Justice Stevens’ antidistortion argument.

Unlike natural persons, corporations have “limited liability” for their owners and managers, “perpetual life,” separation of ownership and control, “and favorable treatment of the accumulation and distribution of assets . . . that enhance their ability to attract capital and to deploy their resources in ways that maximize the return on their shareholders’ investments.” 494 U. S., at 658–659. Unlike voters in U. S. elections, corporations may be foreign controlled. Unlike other interest groups, business corporations have been “effectively delegated responsibility for ensuring society’s economic welfare”;71 they inescapably structure the life of every citizen. “ ‘[T]he resources in the treasury of a business corporation,’ ” furthermore, “ ‘are not an indication of popular support for the corporation’s political ideas.’ ” Id., at 659 (quoting MCFL, 479 U. S., at 258). “ ‘They reflect instead the economically motivated decisions of investors and customers. Id., at 75.

Or consider the understanding of corporations supporting the argument from shareholder protection:

Indeed, we have unanimously recognized the governmental interest in “protect[ing] the individuals who have paid money into a corporation or union for purposes other than the support of candidates from having that money used to support political candidates to whom they may be opposed.” NRWC, 459 U. S., at 207–208. The Court dismisses this interest on the ground that abuses of shareholder money can be corrected “through the procedures of corporate democracy,” ante, at 46 (internal quotation marks omitted), and, it seems, through Internet-based disclosures, ante, at 55. I fail to understand how this addresses the concerns of dissenting union members, who will also be affected by today’s ruling, and I fail to understand why the Court is so confident in these mechanisms. By “corporate democracy,” presumably the Court means the rights of shareholders to vote and to bring derivative suits for breach of fiduciary duty. In practice, however, many corporate lawyers will tell you that “these rights are so limited as to be almost nonexistent,” given the internal authority wielded by boards and managers and the expansive protections afforded by the business judgment rule. Id., at 87-88.

Taken together, Justice Stevens constructs a solid framework supporting diminshed constitutional protection for corporations and enhanced regulatory power by states. But this framework is grounded on notions on corporate nature that privilege the property aspects of corporate nature. It embraces shareholder prominence and the idea that corporations do not speak, rather they magnify the voices of those who control them. As such, they can more readily serve as vehicles to corrupt the political process by disguising the sources of political speech, and amplifying the voices of some individuals over others. It is a framework that suggests that corporations are less bearers of rights than are the individuals who hold interests in those entities. Lastly, it suggests that enhanced regulation is critical to protect shareholders against managers and directors, against whom most shareholders have little real power to control. This is a view of corporations substantially different from that of Justice Kennedy. And it is this difference of view, rather than jurisprudential differences about the nature of the First Amendment, that informs the differences in approach.

The COnstitutional Consequences for Monitoring and Transparency:

Ironically, within all this division, one strong consensus position emerged—all justices other than Justice Thomas agreed on the strong state interest in monitoring and transparency. While this has immediate and specific relevance to the implementation of election procedures, it also has potentially profound importance for corporate law, both within the domestic legal orders of states and in the construction of transnational systems of corporate governance.

In rejecting the challenge to the disclaimer (transparency) and monitoring rules, Justice Kennedy spoke broadly about the value of disclosure as it relates to corporate operation:

Shareholder objections raised through the procedures of corporate democracy, see Bellotti, supra, at 794, and n. 34, can be more effective today because modern technology makes disclosures rapid and informative. A campaign finance system that pairs corporate independent expenditures with effective disclosure has not existed before today. It must be noted, furthermore, that many of Congress’ findings in passing BCRA were premised on a system without adequate disclosure. See McConnell, 540 U. S., at 128 (“[T]he public may not have been fully informed about the sponsorship of so-called issue ads”); id., at 196–197 (quoting McConnell I, 251 F. Supp. 2d, at 237). With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters. Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are “ ‘in the pocket’ of so-called moneyed interests.” 540 U. S., at 259 (opinion of SCALIA, J.); see MCFL, supra, at 261. The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.

Citizens United, supra, slip op. at 55. These values appear to represent both a judicial and legislative consensus at the state and federal levels. It suggests that irrespective of the understanding of the nature of the corporation, disclosure, transparency and monitoring are now deemed an essential element in the regulation of the relationships between the corporation, its stakeholders, the state, and other parties.  Monitoring and transparency are central to the functioning of entities.  It deepens its autonomy from its stakeholders, and furthers the elaboration of the institutional character of the organization.   It suggests a direct relationship between theories of accountability for governmental entities and corporate entities.  That direct relationship may carry over to other areas of governance--from the imposition of public duties, to the nature of the duties of directors to the enterprise rather than to shareholders as one of many stakeholders in the enterprise.

Regulatory Consequences:

What emerges from the summary discussion of the two principal opinions in Citizens United that dealt with the corporate law related issues of the case is the significance of the regulatory consequences of embracing a particular set of assumptions about the nature of corporate personality.  Equally important is the insight that, even after more than a century of an "enabling" approach to corporate formation, there is no consensus on whether  corporate personality or its regulatory consequences.  In truth, such consensus, to the extent it seeks to emphasize one framework to the exclusion of the others, is impossible.  Corporations are simultaneously property in th hands of their shareholders and autonomous institutions in their  constitution and operation.  Still more, corporations exist both as the reification of a nexus or network of contract among the individuals (and other entities) with a stake in its operations, and as a nexus or web of privileges conferred on it (as an entity) by the state through which it is organized and as a result of which it (again as entity) owes certain duties).

Yet polycontextuality, even in the organization of corporate governance, does not necessarily imply anarchy.  Rather, it suggests a complexity in the relationships between the state--as the ultimate national body corporate--and other aggregations of power, which the state may recognize or prosecute.  See, Larry Catá Backer, The Drama of Corporate Law: Narrator between Citizen, State and Corporation (Winter 2009). Michigan State Law Review, Winter 2009 (suggesting the way that standard ideologies of corporation character provide a basis for legtimating their domestication within legal regimes in ways that exclude the possibility of corporate character not dependent on the state, archetypes for which are the Yakuza and Mafia). That complexity also suggests that consistency in the construction of relationships between corporations and the state, or better put between legal regimes and corporate organizations may be impossible.  Rather it may be more useful to understand corporate character as a function of the relationship within which it is relevant.  Thus, for example, as between shareholders and corporations, corporations might be best understood as property with respect to shareholdings, but as entity with respect to the control rights of shareholders.  But that flexibility, or multi-contextuality, provides little comfort within the one size fits all framework of conventional lawmaking.    Other have suggested that that a hierarchy of character may be necessary, but that the corporate character privileged in any state will be a function of the economic culture of that state.  See, Katsushito Iwai, The Nature of the Business Corporation: Its Legal Structure and Economic Functions. Japanese Economic Review, Vol. 53, pp. 243-273, 2002.

Citizens United illustrates the inability of law to embrace flexibility in the context of corporate personality.  It also shows the continued power of the lack of consensus about a guiding ideology of corporate personality and its regulatory consequences.  Entity ideology tends to disfavor shareholder rights as owners, and reduce them to the position of "citizens" of a corporate "state" in which their rights are derivative, and the greatest protection afforded them is in their rights to participate in governance, coupled perhaps, with substantial protection for their rights to "cash out" in markets for their interests.  Within this framework, corporate speech is as important as the speech rights of natural persons.  The more autonomous the interests of corporations are perceived to be, the greater the tendency to permit protection of those interests by the entity.  Entity ideology fosters notions of shareholder democracy, of corporate social responsibility, of the public character of the institution, and of its obligations to stakeholders amd others.  Shareholder ideology, on the other hand, tends to disfavor the autonomy of corporations as actors independent of shareholders and other stakeholders.  They are understood more as pass through aggregations that are valuable because of the bundles of privileges that collective action in that form provides.  The protection of shareholder's property interests in the entity, rather than the protection of the integrity of the entity itself, is privileged.  In this context, shareholders, directors and officers speak--for themselves and through the entity--but it is inconceivable to consider that the corporation speaks autonomously for itself.  Shareholder ideology fosters notions of profit maximization, of the importance of markets, and of exit rights.  

Thus understood, Citizens United is as much about corporate governance as it may be about the constitutional limitations of government efforts to regulate corporate speech.   The Supreme Court majority's embrace of an entity ideology ought to provide  substantial support for regulatory efforts that seek to deepen the autonomy of the corporate enterprise and weaken governance rules that strengthen shareholder's property rights.  Citizens United provides a foundation from which to advance everything from rules that advance shareholder democracy and participatory rights, to the imposition of public obligations on corporate entities.  It suggests a policy basis for the separation of corporate governance from the personal and individual interests of shareholders in the protection of their property. As a consequence, it may be possible to conceive of fiduciary duty as extending to other corporate stakeholders. If corporations are not synonymous with their shareholders, then domestic corporations, owned by foreign individuals or governments, may be treated as domestic persons to the same extent of natural persons resident in or citizens of the jurisdiction.  Perhaps more interesting, Citizens United also suggests a basis, tinged with constitutional implications, for the extension to corporations of direct obligations under international as well as national law.   Corporations, understood as entities with a public purpose, may be burdened with public obligations not only under national law, but under international norms as well.  Inadvertently perhaps, for it is doubtful that the justices thought in these terms, but no matter, inevitably, the consequence of the embrace of an entity ideology provides a basis for a transnational framework for corporate governance.


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