Corporate Political Donations Poised to Spark Shareholder Lawsuits
(Bloomberg) -- Major US companies could face lawsuits from their own shareholders for making political donations, according to a new legal strategy progressives are advocating to reign in corporate influence on elections.
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Some of the money used for a corporation’s hefty super PAC donation come from shareholders. That gives those investors standing to sue if they don’t approve of how the money is spent, according to the latest Center for American Progress report, which aims to reign in the 2010 Supreme Court Citizens United ruling that allows corporations and other groups to spend unlimited amounts on elections.
That threat of legal action could make executives of publicly traded companies less likely to donate to political causes and groups, said Tom Moore, a senior fellow at the Center for American Progress and a co-author of the analysis.
Chevron Corp. and Occidental Petroleum Corp., have made seven-figure donations to super political action committees backing Republicans in congressional elections. And Coinbase Inc., a subsidiary of Coinbase Global Inc., gave $20.5 million to Fairshake, a super PAC that supports candidates from both parties who support legislation favorable to the cryptocurrency industry, Federal Election Commission filings show.
The strategy — if it ends up resulting in a raft of shareholder lawsuits — could play a major role in the 2024 elections with corporations more cautious to donate. That has the potential to hurt Republicans over Democrats, because their allied super PACs receive more money from key sectors including oil and gas producers, tobacco companies and private prison operators.
“I am not going to lose any sleep if the next time a CEO wants to contribute corporate funds to a super PAC, her general counsel says, ‘Well, that could get us sued,’” Moore said.
Corporate Money
The Citizens United ruling led to an explosion of spending by outside groups on federal elections. In the 2020 election, $2.6 billion was spent by super PACs to influence voters, according to the FEC. That’s up from $63 million in 2010, the first election when super PACs were allowed.
Senator Sheldon Whitehouse, a Democrat from Rhode Island and longtime critic of Citizens United, praised the report for finding “new and innovative ways to fight the decision and the damage the decision has done to our democracy over the last decade.”
Not all campaign finance lawyers are convinced the idea can work. Jason Torchinsky, an attorney with Holtzman Vogel who was general counsel to former President George W. Bush’s 2004 reelection campaign, said he couldn’t see what harm a shareholder could show. Companies that earn billions in profit spend a relatively small amount on politics, he said, and in a manner that aligns with their business interests.
“No one’s holding a gun to your head saying own shares of a particular company,” he added. “You can sell.”
Local jurisdictions have begun to make their own rules curbing corporate spending in elections. Minnesota and the cities of Seattle and San Jose have all passed measures that bar companies with foreign shareholders from spending money to influence elections, including ballot initiatives. Minnesota’s law, originally scheduled to take effect in January, was blocked by a federal judge and the courts are still deciding whether it can go into effect.
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