Sunday, September 23, 2018

A Weak Defense of Citizen United: Ownership v. Control

Many thanks to Peter Dorman for highlighting Citizens United As Bad Corporate Law. I guess we had to endure this comment, which is a really weak rebuttal:
Corporate shareholders are most definitely owners; they alone have the authority to sell their shares or the company's assets. Their rights are based not on contract law but statutory rules of franchise. They are guaranteed rights of assembly abd representation, and they cannot legally surrender those rights even if they elect Directors who vote to do so.
My first thought to this attempted rebuttal was the complaints of condominium owners in San Francisco. They may own the rights to what is effectively an apartment but they have to deal with management as they really do not own the land. And even the land owner does not have that much control in a city where regulations control land use. My second thought involved the minority shareholders of Yukos Oil during Yeltsin’s Russia, which I noted in this related post:
AB noted yesterday that some of Sinclair Broadcasting’s shareholders were upset the decision of management to aid the Bush-Cheney ’04 campaign with free air time for another smear of John Kerry. Their stock, which was around $10 a share in early August, is trading now for about $7.30 a share.
Now I get that the corporate governance rules in the U.S. are not as pathetic as they were during Yeltsin’s Russia but the idea that an individual shareholder has any real control of how a corporation is run is quite naïve. Peter asked this commenter if he had read the paper. Had he done so, he might have noticed footnote 34 on page 19, which included a seminal paper by Ronald Coase entitled “the Nature of the Firm”. This paper initiated an entire literature on what this recent paper calls the “nexus of contracts theory”. If our commenter has not read this literature, he should.


LetUsHavePeace said...

Forgive me for suggesting that this is a simple problem that demands a simple answer: are there limits that Congress can place on the freedoms that the First Amendment guarantees? The language of the Constitution is explicit: Congress shall make "no law". No one, except Justice Black, has ever been willing to accept that original meaning. But it is rather difficult to see how individuals can logically be limited in their exercise of their unrestricted 1st Amendment freedom of peaceful assembly for the petitioning of grievances based solely on the statutory category of their association.

Don Coffin said...

I've come to believe that that political campaigns should be publicly funded. That, however, looks (politically) like an impossibility. So, as a second-best when it comes to contributions to political campaigns, I think that the following rules should apply:

1) Only registered voters may contribute to political campaigns. Corporation, not being voters, cannot contribute. And voters may not be reimbursed by a third party (e.g., an employer, an individual, whether a registered voter or not, and so on) for their contributions--they have to use their own resources.

2) The campaigns must report who contributes and how much they contribute.

3) Contributions to any specific campaign should be strictly limited (although I don't have any specific amount in mind, $1000 to any campaign seems ample).

LetUsHavePeace said...

Both public funding and limiting political spending to registered voters only are likely to run up against equal protection. It is doubtful these good government rules could avoid the Supreme Court's modern decisions on the poll tax and other discriminatory restrictions. While the States have been allowed to adopt party qualification rules that favor the established parties, because the rules on the exercise of the franchise are the States exclusive jurisdiction, even those attempts to let only proper people's organizations organize the vote have been made subject to the Constitution's Reconstruction amendments.

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