Academic journal article Missouri Law Review

Are Corporate Super PAC Contributions Waste or Self-Dealing? A Closer Look

Academic journal article Missouri Law Review

Are Corporate Super PAC Contributions Waste or Self-Dealing? A Closer Look

Article excerpt

Table of Contents  I.  Introduction II. Brief Background on Citizens United      A. The Decision and the Experts' Reaction      B. The Result: CEOs Can Cause         Corporations to Contribute to Super PACs          1. Citizens United Leads to Unlimited Independent Expenditures          2. The Rise of Super PACs III. Derivative Lawsuits to Challenge Corporate Political      Contributions: The Scholarly Consensus      A. Shareholder Derivative Lawsuits and the Business Judgment Rule      B. Most Scholars Reject Derivative Suits         Challenging Political Contributions.      C. The Sparse Case Law on Point IV. Challenging Corporate Political Contributions as Waste      A. What is Corporate Waste?         1. The Objective Approach to Waste         2. The Subjective Approach to Waste         3. Waste is a Breach of the Duty of Loyalty         4. When Does a Waste Claim "Succeed"?      B. Nelson's Arguments for Waste and a Critique Thereof         1. Corporate Gifts, but Not Charitable?             a. Goodwill: The Disclosure Straw Man             b. Goodwill: The Target Corporation/MN Forward Debacle             c. Tax Deductibility         2. Damage to Corporation and Reduced Shareholder Value         3. No Corporate Purpose         4. Cost-Benefit Analysis and Other Arguments      C. A Better Argument for Waste?         1. How Charitable Donations Differ from Political Contributions            a. Binary, Winner-Take-All Nature of Elections            b. Zero-Sum Nature of Politics in the Two-Party System            c. Political Spending is an Arms Race            d. Elections Are About People, Not Policies            e. Politicians Do Not Necessarily Keep Their Promises            f. Elected Officials Rarely Act Alone            g. Charitable Contributions May Require No Business Purpose         2. Evaluating the Argument: Do These Differences Matter?            a. Target Corporation and MN Forward/Emmer            b. The Actual Worst Case Scenario: Waste Exemplified      D. What Do the Cases Tell Us? V. Challenging Corporate Political Contributions as Self-Dealing    A. What is Self-Dealing?    B. How Do Courts Review Self-Dealing?    C. Romiti's Argument for Self-Dealing and a Critique Thereof        1. Political Contributions to a Friend Are Not Self-Dealing        2. Self-Interested Motives Are Not Self-Dealing Transactions    D. Are Some Corporate Political Contributions       Nonetheless Self-Dealing?       1. Can Corporate Giving Ever Be Self-Dealing?       2. Are Corporate Political Contributions Typically Self-Dealing?           a. Proxies and Indirect Self-Dealing           b. Political Contributions Versus Charitable Donations:              Expectation of Financial Benefit               i. Charity Is Supposed to Be Altruistic;                  Politics Need Not Be               ii. Charities Do Not Hold the Reins of Power       3. Examples of Political Contributions that Might Be Self-Dealing    E. The Charitable Donation Self-Dealing Cases That Weren't    F. Why Self-Dealing is Often a Superior Approach to Waste VI. Conclusion 

"[N]othing need be added to the present legal rights of the stockholder, a single stockholder having already a complete right of action in case of expenditure of any portion of corporate funds for political purposes." (1)

I. Introduction

Four years ago, in Citizens United v. FEC, (2) the United States Supreme Court famously held that corporations may spend unlimited sums of money on behalf of candidates for federal political office. (3) This decision paved the way for the rise of "Super PACs," (4) which spent billions of dollars in the 2010 and 2012 elections. (5) Today, Citizens United remains deeply unpopular among progressives who decry the growing influence of corporate money in politics. (6)

Yet, opposition to Citizens United is not simply a matter of politics. Proponents of increased shareholder power also have criticized the Citizens United decision because it permits a corporation's management to spend the corporation's money to support political candidates whom most shareholders oppose. …

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