Changing Corporate Governance, Not Constitution is the Way to Counter ‘Citizens United,’ Law Prof. Says

September 10, 2012

by Jeremy Leaming

The effort to amend the Constitution to counter the ever-growing corporate influence on lawmakers and elections is a noble one, but there is a more useful and far-reaching way to correct the matter – make corporations more democratic. That’s law Professor Kent Greenfield’s take in a new article for Democracy.

It’s an extensive piece that helps explain why the Supreme Court’s 2010 opinion in Citizens United v. FEC is quickly producing a corrosive effect on elections from coast to coast, but also why seeking a constitutional amendment is a wobbly strategy.

Not long after the high court in Citizens United invalidated some major campaign finance regulation and found that corporations have nearly unfettered rights to funnel their expenditures into elections, an effort was launched to amend the Constitution.

John Bonifaz and Jeffrey Clements co-founded Free Speech For People a group devoted to a constitution amendment overturning Citizens United.

A recent debate with Bonifaz helped spur Greenfield to write the Democracy piece. Greenfield, who teaches business and constitutional law at Boston College, says that too many progressives have decided that constitutional law solution is needed to trump the Citizens United. Instead, Greenfield argues that it is corporations and how we understand them that need to change.

“While the constitutional effort is defensive and palliative, a campaign to redesign the corporation itself would be affirmative and transformative,” Greenfield writes. “To cure Citizens United, we don’t have to amend the Constitution – we need to rethink corporations.”

The nation’s laws governing corporations are weak and shareholders, despite widespread belief, do not have much to do with running corporations. (He notes for instance that shareholders are “not ‘owners’ in any meaningful way. If you own a share of General Motors, you will still be tossed out of its headquarters as a trespasser if you try to enter without an appointment.”) In Citizens United the Supreme Court majority, Greenfield notes, saw corporations as “associations of citizens,” but in reality America’s corporations are largely representative of the wealthy few, the 1 percent.

If corporations were truly democratic, he writes, their involvement in elections would be representative of lot more people and interests. But at the moment corporate money is really only representing the interests of the financial elite, whose interests are extremely narrow.

The problem stems in part from how we see and govern corporations. “Here in the United States,” Greenfield says, “the law of corporate governance is among the most conservative and least democratic in the developed world. For example, U.S. employees have no role in corporate decision-making, and U.S. managers are not required even to gather information on the potential impact of their strategic decisions on communities, employees, the environment, or the public interest, except to the extent those impacts might affect shareholder value.”

The “most profoundly anti-democratic oddity of American corporate law is the federal abdication of it to the states,” he writes. And as he explains Delaware has far too much power in the wildly undemocratic setup. In much less eloquent terms, corporations are not governed by shareholders or accountable to many people, and they have played a great role in exacerbating economic inequality.

If progressives are concerned about corporate America’s influence on our elections, they would be wise to work for changing corporate governance, not the Constitution, Greenfield argues.

For starters, the Constitution is incredibly difficult to amend. Indeed when President Obama recently provided support to the idea of constitutional amendment, he conceded it might ultimately fail. (But the president said the effort nonetheless would be worthy, spotlighting the growing threat of unwieldy and undemocratic corporations pose to democracy.)

Greenfield notes that changing corporate governance would not be an easy lift either, but far more realistic, and could address and solve more problems. Changes to corporate governance could expand “genuine benefits” to more than the few superrich that now oversee the nation’s most powerful corporate entities by making it more likely that overcompensation of those few elite would soon dwindle.

“As the governance of corporations begins to take account of the interests of their stakeholders, the public voice of corporations would reflect the voices of those myriad stakeholders,” Greenfield says.

A more democratic corporation would not undermine democracy, the professor concludes, it would “reflect it.”

His is a compelling argument. For sure too many powerhouse corporations in this country are all about short-term gain and not a whole lot more. They are also bent on protecting the status quo, which explains the large sums of money a few of them are funneling into elections, even judicial ones, all over the country.

Clements and Bonifaz are not likely to be swayed, nor should they. Both see the growing danger of corporate constitutional rights, one that had been building long before Citizens United. In his book, Corporations Are Not People, Clements documents the decades-long trend and builds a case for a campaign to ensure people, not corporate entities, govern America.

Greenfield’s work should also be taken seriously. The Great Recession brought about by poorly governed and short-sighted corporations should spur lawmakers and citizens alike to not only pay greater attention to who the powerful few are serving, but whether that service is ultimately undermining democracy.