Volume 1, Issue 3 - Corporations and the US Constitution: Perspectives on "Citizens United" and Its Aftermath

In Citizens United vs. FEC, the Supreme Court struck down a Federal statute banning direct corporate expenditures on political campaigns. The decision has been widely criticized and praised as a matter of First Amendment law. But it is also interesting as another step in the evolution of our legal views of the corporation. This article argues that by viewing Citizens United through the prism of theories about the corporate form, it is possible to see that the majority and the dissent departed from previous Supreme Court jurisprudence on the First Amendment rights of corporations. It is also possible to then predict what arguments can be expected next.

Both Citizens United and the recent debate on opinions provided by rating agencies amid the financial crisis face the problems raised by defining the corporation as a legal person and a legal subject. In contrast, the enterprise entity perspective considers the corporation as an intermediate collective body and a legal object, granted with instrumental legal personality in some circumstances. The legal person view has been historically important to articulate private and public orders, and protect the private domain from abuse of public power. At the same time, it was and still is important to impose some social control and social duties towards the community on enterprise entities, especially in a world where corporations are allowed to own and control other corporations, constituting corporate groups that are autonomous and opaque fields of private power. From this perspective, the definition and role of enterprise entities point to the constitution of legal-economic orders. Drawing upon Dewey’s suggestion, the corporation can be defined as a functional set of mutual relations that has social consequences, controlled and modified by being the bearing of rights and obligations, privileges and immunities. This understanding embeds the corporation in its social context fraught with immanent conflicts of interest and representation. In this context, the enterprise entity emerges as an overarching principle (and idea) that can foster the unfolding formation of transient social orders. Here the quest for legal-economic principles becomes unavoidable. Like the corporation, these principles acquire duties and rights. They have the right to be tentatively free, which implies two distinctive duties: they are responsible towards reality, because they are expected to guide human actions in situation; and they are responsible towards society, because they are expected to facilitate welfare and justice and liberty in ordering social activities.

I welcome Avi-Yonah’s new deployments of descriptive theories of the corporation. But I traversed this territory years ago and came away with a skeptical view of the enterprise. Although Avi-Yonah’s interventions are compelling in the encounter, I remain unconvinced that the theories have important lessons to teach us.

Avi-Yonah's article is to be commended for bringing corporate theoretical sophistication to bear on the opinions of a Court that is largely unfamiliar with the real world of corporate and business practice. But the essential question with which I leave Avi-Yonah’s work is: Why does it matter? The principal flaw in Avi-Yonah’s argument is that it consistently operates at the level of high theory while failing to contextualize the theoretical debate in a way that might elucidate for us theory’s importance. While he takes us through all of the standard cases, he disregards the purposes for which theory was used in each. For corporate theory in the context of constitutional law is about the power relationship between the corporation and the state, while corporate theory in the context of corporate law is about the relationship between directors and shareholders, and thus the distribution of power within the corporation. One set of theories is largely independent of the other, as clear as the contrast between the Progressive Era theoretical literature Avi-Yonah cites, and Berle and Means’s "The Modern Corporation and Private Property". What difference does it make? Constitutional law is about power within politics, writ both large and small. Corporate law is about power within business. The former goes to the question of the corporation’s power vis-a-vis the state and society. The latter goes to questions of the efficiency of the enterprise and the legitimacy of its organization.

Do Corporations have a constitutional right to donate money to organizations that engage in electioneering? The US Supreme Court has recently decided that they do. Citizens United v. Federal Election Commission held that restrictions on a corporation’s expenditures for “electioneering communication” or other speech that advocates the election or defeat of a candidate were unconstitutional under the First Amendment of the US Constitution.This case has generated an enormous commentary in the legal literature, much of it quite critical of the opinion. Most of the critical commentary has emphasized two bad results that are claimed to flow from the decision. First, these commentators have presumed that, as result of Citizens United, the floodgates will be opened, sending a torrent of corporate money gushing in and elections will come to be, in substance, more like auctions than democratic choices. Second, many have been quite concerned that the corporate origins of all this money make it much more destructive to the political process. Part 2 of this essay will discuss why these arguments are overblown and unpersuasive. The floodgates were already open, and the problem is large amounts of money coursing through the political process which has been subject to little effective control for some time. The money, not its corporate origin, is the real concern. (Many of the commentators have emphasized technical points of Constitutional Law and traditional ideas of good practice in constitutional interpretation, topics that are beyond the scope of this essay.)Yet there are real worries that grow out of this case, and Part 3 will survey these. Citizens United is less of concern for what it actually commands in this opinion, but, if it is seen as a major step in a continuing journey, it is of much more concern for what it shows about where the journey is going.