The Supreme Court yesterday allowed corporate executives to tap into their company’s resources and use that money to directly influence elections instead of for the profitable operation of the company. This use of company funds isn’t considered bribery because the company executives can claim they are only engaged is “speech” to promote good government, not influence public officials to bring a return to the company.
To fix this we should pass a law that tightens up corporate governance and explicitly spells out – as law – that for-profit companies can only use company resources for the profitable operation of the company. This would make it illegal to use company money to “promote good government” or any other excuse currently used to get around the bribery laws. If by law executives can’t use the company’s money except for activities that return a profit, then use of this money in politics can’t be just “speech” — it is to return a profit. Therefore the federal bribery of public officials statute would apply to any use of corporate resources to elect candidates:
18 U.S.C. § 201 : US Code – Section 201: Bribery of public officials and witnesses
(b) Whoever –
(1) directly or indirectly, corruptly gives, offers or promises anything of value to any public official or person who has been selected to be a public official, or offers or promises any public official or any person who has been selected to be a public official to give anything of value to any other person or
entity, with intent –
(A) to influence any official act; …
shall be fined under this title or imprisoned for not more than two years, or both.
Currently it is the fiduciary responsibility of the managers of a company to use corporate resources only for the profitable operation of the company, but not law, and executives largely ignore this responsibility and get away with it. Give this responsibility the force of law. Spell it out. And by doing so, protect the corporation’s shareholders from this misuse of their money by executives.
Would this end “corporate philanthropy? Yes it would! This is a good thing!
I completely agree with Milton Friedman that corporate philanthropy is nothing more than a scam – theft from the company by the few who make these decisions. If there is extra cash laying around and the money isn’t used to bring back profit to the company it should be distributed to the shareholders or taxed. That is what a company is FOR. We need to restore this understanding of what these companies are for.
We shouldn’t have our parks, symphonies, etc. decided by some executive’s vanity. In a democracy we should have these things because We, the People want them. Tax big companies and let US decide how to use the money, instead of begging some executive to let us have these things. This is why we set up the legal construct that allows these companies to exist.
There is a common misunderstanding of what a corporation is that led to the Supreme Court getting away with this. A corporation is not a sentient entity, but we tend to think of it that way and this leads us to bad decisions about where they fit in society. It is simply a legal construct that allows the pooling of resources to reduce individual risk, so that large-scale projects can be accomplished. One person can’t fund the building of a 747 airplane and even if one person had the resources it would be “putting all of the eggs in one basket.” By bringing in thousands that risk is reduced and the necessary capital is gathered. To further reduce risk we excuse the shareholders from personal liability for the debts of the company – they don’t have to pay the debts if the company goes bankrupt or is sued and they don’t go to jail if the company does something bad.
We through our laws set this construct up for our benefit – to accomplish large-scale projects, create goods and jobs, and to pay back a portion to us as taxes. In return for giving the investors these advantages we expected a return. The advantages would lead to profits that would be shared so we could build the roads, schools, courts and other public structures that enable these companies and us to thrive. But over time that understanding has also eroded and the tax burden has shifted ever downward – or just borrowed.
Companies don’t make decisions, think, act or speak and more than a book or a chair does. A few executives at the top make these decisions and then use corporate resources to implement them. Bob in Sales and Alisha in Accounts Receivable have nothing to do with these decisions. If the executives screw up or engage in schemes that enrich themselves Bob and Alisha get laid off, the executives have already pocketed their bonuses so they don’t really care and “the company” doesn’t “learn a lesson” because it can’t lean any more than a book or a chair can.
We must restore this understanding of the role of corporations in our society. They exist to accomplish certain things. We, the People set this up to benefit US. We enabled the aggregation of vast resources and assumed that the fiduciary responsibility to only use those resources for operating the company would be upheld. This turns out to have been a mistake. The executives who control those resources are using them to tilt the playing field and bring advantage to themselves, in ways that have nothing to do with delivering better products or services. They instead use these resources to influence government to just hand them competitive advantage – or just cash.
So if we want to end corporate domination of our politics and our lives we need to tighten up corporate governance and spell out in law that the resources of a corporation must not leak out of that corporation, and should ONLY be used for the profitable operation of the company and nothing else.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.