Just How Bad Was Citizens United For Business?

Tuesday’s race was the first presidential election to take place since Citizens United, and campaign spending this cycle exceeded $6 billion. With fundraising split roughly evenly between the two major parties, it was inevitable that some donors wouldn’t be able to buy the electoral outcomes they were hoping for.

Tuesday’s election did offer a number of encouraging signs that coalitions of grassroots activists, volunteers, and voters can, in fact, stand up to SuperPACs, 501(c)4 groups, and other powerful aggregations of wealth that have been empowered as a result of America’s deregulated campaign finance system.

Despite these positive developments, it would be a mistake to think that the fight against money in politics is over. As my colleague Heather McGhee wrote yesterday, millionaire political donors still ended the night with far more political access and influence than the vast majority of American voters. Inequality in political spending continues to undermine the principle of "one person, one vote" and threatens the inclusiveness of America’s political institutions.

The economic distortions caused by corporate political spending haven’t gone away either. One thing that was made clear by Tuesday’s election is that corporate political spending remains a questionable use of shareholders’ money. As Eduardo Porter noted in the New York Times, “From the point of view of shareholders, corporate contributions will probably turn out to be, at best, a waste of money. At worst, they could undermine their companies’ performance for a long time.”

The data on this goes back even further. As Porter noted in that same article:

A study published last summer by scholars at Rice University and Long Island University looked at nearly 1,000 firms in the Standard & Poor’s 1,500-stock composite index between 1998 and 2008 and found that most companies that spent on politics — including lobbying and campaign donations — had lower stock market returns.

Another study published this yearby economists at the University of Minnesota and the University of Kansas found that companies that contributed to political action committees and other outside political groups between 1991 and 2004 grew more slowly than other firms. These companies invested less and spent less on research and development.

As I describe in a forthcoming Explainer piece for Demos, current law does not require executives and board members to inform shareholders of corporate political expenditures. Challenging those decisions can be even more difficult, because management enjoys a strong legal presumption that political spending reflected good business judgment.

This assumption, that corporate political spending isn’t wasteful, is becoming less plausible each election cycle. The 2012 election and the studies cited above lend further credibility to shareholders’ arguments that they should be able to contest political expenditures decided on by corporate managers whose interests do not align.

At the very least, political spending decisions should be disclosed to shareholders so that they can make informed decisions about where to invest their money. To maintain otherwise is to empower corporate management to give other people’s money to their preferred candidates, leaving everyone else in the business world and our democracy powerless to hold them accountable.

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