Civil Rights and Shareholder Activism: SEC V. Medical Committee for Human Rights

By Haan, Sarah C. | Washington and Lee Law Review, Summer 2019 | Go to article overview

Civil Rights and Shareholder Activism: SEC V. Medical Committee for Human Rights


Haan, Sarah C., Washington and Lee Law Review


I. Introduction

What does "corporate democracy" mean? How far does federal law go to guarantee public company investors a say in a firm's policies on important social, environmental, or political issues? In 1972, the U.S. Supreme Court appeared ready to start sketching the contours of corporate democracy-and then, at the last minute, it pulled back. This Article tells the story of Securities and Exchange Commission v. Medical Committee for Human Rights,1 in which a national civil rights organization, best known for its work at civil rights marches and protests, fought to expand the limits of corporate democracy and nearly succeeded.2

Between March 1968 and January 1972, Medical Committee for Human Rights waged a protracted battle with a major American company and the U.S. Securities and Exchange Commission (SEC) over its rights as a shareholder.3 Medical Committee became the first civil society organization to pursue social change within a public company using shareholders' tools, by submitting a shareholder proposal to Dow Chemical Company under SEC Rule 14a-8.4 That rule, rarely used by stockholders until the late 1960s and almost never for social, political, or environmental reform, required reporting companies to publish a shareholder's proposal in the proxy statement in advance of a full shareholder vote.5 Medical Committee's proposal, first submitted to Dow in 1968, addressed the company's manufacture of napalm, a chemical sold by Dow to the U.S. government for use in the Vietnam War.6

Dow rejected Medical Committee's proposal, and the SEC approved the company's decision. Medical Committee won an early and important battle in the fight in 1970, however, when the United States Court of Appeals for the District of Columbia Circuit issued a "pathbreaking" decision in its favor.7 A unanimous, three-judge panel of the D.C. Circuit sided with Medical Committee and suggested that the napalm proposal should have gone to a shareholder vote.8 The D.C. Circuit's surprising decision, authored by the conservative federal judge Edward Allen Tamm-who, five years later, would write an influential dissenting opinion in Buckley v. Valeo,9 in which he argued that First Amendment protection should apply to political spending10-framed Medical Committee for Human Rights v. SEC11 as a case about corporate democracy. It was the first time the phrase "corporate democracy" had been used in the federal courts in the D.C. Circuit.

Ultimately, Medical Committee's fight reached the U.S. Supreme Court, where it was billed as one of the term's major cases. Then, when the SEC introduced a last-minute legal argument, Justice Thurgood Marshall authored an opinion declaring the case moot, and Medical Committee's gains for corporate democracy were lost.12

Medical Committee's activism took place at the intersection of major strands in American history: the struggle for civil rights, which had reached a crescendo in 1968; the corporate social responsibility movement, which was then in its infancy; the Supreme Court's consistent reluctance to impede U.S. military action in Vietnam; and the end of the New Deal regulatory philosophy at the SEC. As civil rights history, the story never received much attention.13 As corporate law history, it has largely receded from memory. Yet the case marks the beginning of a period, spanning decades and reaching the current day, in which the contours of corporate democracy have remained vague and contested. Over the same period, the Supreme Court has used the existence of corporate democracy to justify an expansion of corporate rights.

Recently, the story has received some renewed attention as a precursor to twenty-first-century campaigns of shareholder activism, such as the recent push by Amazon.com stockholders to end the company's practice of selling facial recognition software to law enforcement.14 Like Medical Committee and others who pursued shareholder activism in the late 1960s as an extension of their political activism, twenty-first-century investors have begun ramping up shareholder activism. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Civil Rights and Shareholder Activism: SEC V. Medical Committee for Human Rights
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.