Expanding the role of shareholders in the wake of Citizens United

By Linda McCollum-Brounley

Michael Siebecker, associate profesor at the Levine College of Law.

Michael Siebecker, associate profesor at the Levine College of Law.

The U.S. Supreme Court’s Jan. 21 ruling in Citizens United v. Federal Election Commission was a landmark decision that unraveled 100 years of campaign finance restrictions on corporate speech and gutted the McCain-Feingold Bipartisan Campaign Reform Act of 2002.

“Citizens United significantly lifts many of the restrictions on corporate speech. That change, for some of us, represents a tectonic shift in the ability of corporations to play an increasingly dominate role in all aspects of social, economic and political life,” said Michael Siebecker, a Levin College of Law associate professor who has written extensively on the intersection of law and political theory in the areas of securities regulation, business organizations and corporate social responsibility.

“Now, corporations have basically the same rights as individuals with respect to political speech — the Supreme Court largely cast out the window all previous concerns about corporate dominance in the political arena,” he said.

Siebecker explores how this new dynamic will affect the nature of the corporation, its role in society, and its relationships with investors, consumers, and other stakeholders the corporation serves in his article, “A New Discourse Theory of the Firm: Promoting Efficient Shareholder Suffrage After Citizens United.” Set to be published in George Washington Law Review in early fall 2010, Siebecker’s article outlines his discourse theory’ of the corporation that borrows from theories of political justice to reshape some of the basic tenets of corporate law.

“If we think of corporations as profi t-maximizing entities, their motivation for getting into the debate is simply to make money, not to do what is morally good or desirable for society. Those who own the corporation — the shareholders — have very little role in shaping these practices and projects of the corporation,” Siebecker said. “Because corporations increasingly dominate the political fi eld, it seems that we should give greater say to shareholders, stakeholders, consumers, and members of the communities that the corporations inhabit to determine the direction that corporations take.”

Siebecker, who earned two law degrees and a doctorate in political philosophy from Columbia University, has written extensively on this idea of evolving corporate democratization and social responsibility. He believes shareholders will have greater influence on the corporation when they can nominate their own slate of directors on the corporate proxy, an idea the Securities and Exchange Commission is considering as a new rule. He said this would be especially effective in promoting corporate social responsibility when voting is done in aggregate by intermediary institutional investors, like huge retirement funds or hedge funds that have specifi c expectations of corporate behavior. Siebecker said investments using socially responsible screening criteria currently exceed $14 trillion worldwide.

“I think Citizens United makes it clear that a re-conceptualization of the fi rm is necessary and should focus on speech and in bringing people into the discourse about the direction that corporations take and the role they play in society,” Siebecker said. “A discourse theory of justice rests on the notion that full, fair and adequate discourse will result in just rules for society, and I think the same is true for the corporate realm.”