“They control the people through the people’s own money.” — Louis D. Brandeis, Other People’s Money and How the Bankers Use It (1914)
Like tens of millions of baby boomers, I have a retirement fund, and like over 4 million of us, I am building my nest egg with the venerable Teachers Insurance and Annuity Association of America–College Retirement Equities Fund. Heeding the TIAA-CREF newsletter’s recommendation to “diversify” my holdings, I have dutifully directed my savings into mutual funds, which invest that money with large and medium-size corporations spread across the economy.
Although I have contributed on a monthly basis for twenty-five years, it never occurred to me to find out which corporations I have an investment in. Then, in September, the US Senate failed in a party-line vote to advance a proposed constitutional amendment reversing the Supreme Court’s disastrous Citizens United decision, which gives business corporations unlimited political-spending rights. Corporate cash in campaigns is here to stay, I realized—so I had better find out where my money’s going. What if chunks of my retirement savings are being turned into “dark money” and Super PAC contributions on behalf of candidates I would never dream of voting for, much less sharing my retirement savings with?
Lucky for me, in September a freak technical error illuminated one little eddy of corporate cash in the deep, swirling currents of political dark money: the Republican Governors Association accidentally revealed the names of dozens of “corporate members” on the Republican Governors Public Policy Committee, which The New York Times described as a “secretive 501(c)(4)” that is not obligated to disclose either its receipts or its expenditures. The leak revealed that the association met with top corporate donors at the Omni La Costa Resort and Spa in Carlsbad, California, where attendees talked politics while enjoying a “lush atmosphere” that featured the “most storied” golf courses in California and “spa sessions that soothe stress and revitalize the spirit.”
The twenty-two corporations that gave the Republican Governors Public Policy Committee $250,000 or more were awarded the title of “statesmen.” This group included Aetna, Coca-Cola, ExxonMobil, Microsoft, Motorola, Pfizer, Pike Electric, Range Resources, Reynolds American, Sanofi, United Health Group, USAA, Walmart, WellCare Health Plans and WellPoint.
Another thirty-eight corporations chipped in $100,000, which earned them “cabinet” status. This group included Aflac, Allegiant Air, Allergan, Apollo Group, Babcock & Wilcox, Citigroup, Comcast, Duke Energy, Express Scripts, Gtech, Healthways, Hewlett-Packard, Johnson Controls, Marathon Oil, Maximus, Novartis Pharmaceuticals, Shell Oil, US Cellular, Verizon and Walgreens.
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Thirty-nine corporations contributed a modest $50,000 to become members of the “board,” among them 3M, Accenture, Astellas Pharma, Best Buy, Bristol-Myers Squibb, Cisco, Diageo, General Motors, Target, Teva Pharmaceuticals, TransCanada, Union Pacific and Unisys.
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As it turns out, when I examine the holdings of my TIAA-CREF mutual funds, I discover that I am invested in every single one of the generous and politically active corporations listed above. This means I am underwriting a corporate consortium that backs Republican gubernatorial campaigns across the United States. Along with millions of other unwitting donors—Democrats, Republicans, independents and people who hate all politicians—I helped bankroll the 2014 victories of twenty-four Republican governors, including:
§ Kansas Governor Sam Brownback, the anti-choice hero who has made it easier to carry guns in public buildings and slashed taxes to the point that his state is running unmanageable deficits;
§ Maine Governor Paul LePage, the Tea Party favorite who called the Internal Revenue Service the “new Gestapo,” wants to weaken his state’s child-labor laws, and opposes marriage equality and the right to choose; and
§ Wisconsin Governor Scott Walker, the union-busting, public-service-privatizing, pro-life and pro-death-penalty conservative, who is currently exploring his presidential prospects.
If your retirement money is in a mutual fund, you too probably own stock in one or more of the corporate funders of the Republican Governors Public Policy Committee. Moreover, this systematic mobilization of corporate dollars for right-wing politics is no aberration. The corporations that my mutual funds are invested in, including Merck, Dow Chemical and Microsoft, have bankrolled many other conservative entities driving America to the right—for example, the US Chamber of Commerce, which spends more than 90 percent of its campaign money to elect candidates who reject the scientific consensus on climate change, according to the American Sustainable Business Council; or the well-oiled Republican State Leadership Committee, whose Redistricting Majority Project (REDMAP, for short) has specialized in maximizing GOP-held House and legislative seats in each state by packing African-American and Latino voters into as few districts as possible. In sum, if you’re lucky enough to have a retirement or pension plan, you are almost certainly contributing to America’s right-wing political apparatus.
Now, I hasten to concede that the Democratic Governors Association assiduously recruits corporate money too, and that the whole Democratic galaxy aspires to catch up with the Republicans in terms of corporate fundraising. This gives me no comfort. As an investor, I want none of my money siphoned off for political contributions—to anybody. If I wish to support a candidate, I can write a check of my own; nor does it reduce my outrage over being conscripted to support Tea Party candidates to learn that Republicans saving for their golden years are forced to subsidize spending for Democratic candidates whose politics they abhor. Moreover, it does not soothe me to be told that some big corporations have a “bipartisan” agenda, which simply means they want to buy both parties.
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Forcing people to underwrite political candidates is outrageous in both moral and constitutional terms, a point well established when it comes to unions. The Supreme Court held, in Abood v. Detroit Board of Education (1977) and Communications Workers of America v. Beck (1988), that employees who disagree with their union’s campaign spending have a First Amendment right to a pro-rata rebate of that portion of their fees spent on the offending activities. But corporate shareholders—a vast class that includes millions of union members—don’t even have the right to be apprised of company political expenditures, much less to demand a rebate when they oppose them.
Although Citizens United toppled decades of campaign-finance law in order to launch the new age of CEOs spending corporate-treasury money in federal elections, the decision also makes clear that investors don’t have to put up with it. Justice Anthony Kennedy’s majority opinion is based on the idea that, because corporations are just “associations of citizens,” they are expressing the views of the shareholders when CEOs finance political campaigns. Thus his opinion directly invites the creation of a procedural solution. Kennedy writes that if shareholders object to political spending, they can use “the procedures of corporate democracy” to address it. This will be simple, he predicted, because all political spending can be disclosed online:
With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters. Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are “in the pocket” of so-called moneyed interests.
As promising as this all sounds, it is not even close to reality. With hundreds of millions of dollars in dark money running wild today, and without any corporate disclosure rules in place, the notion that shareholders can reverse political spending “through the procedures of corporate democracy” is a joke. Knowledge of a company’s political spending is necessary for shareholders to control it, but no government entity has done anything to require companies to disclose campaign spending to shareholders or the public. A deadlocked Congress has failed to pass the Disclose Act, and the Securities and Exchange Commission has blithely ignored more than 1 million regulatory comments from people demanding the mandatory disclosure of political spending by publicly traded corporations.
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Given the standoff in Washington, the state governments that register and regulate corporations must take the lead in pulling back the curtains to stop the plunder of shareholders. As a Maryland state senator, I am introducing “Shareholders United” legislation that will require corporate managers who wish to engage in political activity to disclose all political contributions and expenditures by posting them on company websites within forty-eight hours, and to confirm that such partisan spending has been authorized in advance by shareholders owning a majority interest in the company. Under this plan, companies can seek general authorization for their political budgets on an annual basis, as is the case under a parallel law in the United Kingdom. So far, I have heard from more than two dozen state legislators across the country interested in introducing similar legislation.
Some people fear that shareholders would simply be trained over time to ratify whatever political budget is offered by management, but I have my doubts about that. In any event, note that a corporation’s ownership structure may make it impossible for a majority of its shareholders to approve political spending. This will be the case with many publicly traded companies. Around 70 percent of the shares of the top 1,000 corporations in the United States are owned by massive institutional investors, chiefly federal, state, and local retirement and pension funds, as well as mutual funds, universities, foundations and charities. Most of these multibillion-dollar funds exist solely for investment purposes and are prevented from engaging in partisan political activity by their fiduciary and contractual responsibilities, their tax status, or state and federal law. For example, if most of a company’s shares were owned by TIAA-CREF, Fidelity, the California Public Employees’ Retirement System (CalPERS), Stanford University and the Catholic Church, that company could not assemble a shareholder majority to approve the use of corporate-treasury funds to elect Jeb Bush or Hillary Clinton.
It makes sense that these kinds of institutions cannot endorse campaign spending by the business corporations they’re invested in: the actual “beneficial owners” of the shares—natural persons like you and me—have no idea that the votes are even taking place, much less a voice in the process. In the case of TIAA-CREF or Fidelity, how could the managers claim to be representing the political views of millions of individual investors? How could fund managers for the Catholic Church or Harvard University vote to approve partisan expenditures consistent with their 501(c)(3) status, which forbids political activity?
A 2012 poll showed that 80 percent of Americans favor legislation to condition corporate political spending on shareholder assent. Even several CEOs I have spoken with about this problem welcome a shareholder rule. They know that the big pools of cash in corporate treasuries make an irresistible target for politicians, who understand that executives have little ability and no incentive to say no when those politicians come calling for a chunk of “other people’s money,” as Justice Brandeis called it. Although the movement for campaign-finance reform has focused on the billions of dollars in corporate money flowing into political campaigns as a form of legalized bribery, there is good reason to see this transfer as a form of legalized extortion too. Corporate dark money in electoral politics is forming a back-channel axis of plutocracy in which coercion is experienced by both the political askers and the corporate givers. The late-nineteenth-century strategies of Mark “Boss” Hanna, William McKinley’s campaign manager, who assessed the banks and large corporations one-quarter of 1 percent on their capital toward the Republican Party’s victory in the 1896 presidential election, have returned with a vengeance—and on a bipartisan basis—in the Citizens United era.
Whether you see today’s dark-money system as a shakedown of unwitting shareholders, strategic rent-seeking by corporate actors unwilling to compete on fair terms, efforts by CEOs to ingratiate themselves with politicians for ambassadorships and cabinet posts, or some combination thereof, shareholders’ money should not be confiscated in these perversions of democracy. Now that the Supreme Court has written corporations directly into our system of government, the states are our best hope for writing political democracy into corporate law. So far, the enemies of corporate disclosure and the champions of management’s political power have successfully blocked every public effort to let the sun shine in. But, as they say on Wall Street, past results are no guarantee of future performance.
