The Boundaries of Corporate Politicking

Ashlee A. Paxton-Turner

As corporations become red brands and blue brands (whether purposely or accidentally), they are participating in the American political landscape in ways distinct from lobbying and political spending. Specifically, corporations are increasingly making statements or launching ad campaigns that appear to support one side (or the other) of a political or social debate. This Article refers to that activity as “corporate politicking.” Unlike political spending or lobbying, corporate politicking lacks a legal definition and is far less regulated—whether internally or externally.

This Article’s central contribution is an administrable framework to demarcate corporate politicking from other corporate activities and decisions. It does so by drawing on concepts in corporate law to assess when such a decision is relevant to shareholders and constitutional law to identify when business decisions convey a particular political or social message that would be understood by shareholders. By demarcating corporate politicking, this Article’s framework clarifies the scope of the phenomenon and, in doing so, reveals its wide-ranging consequences.

Corporate politicking can undermine democratic self-governance by skewing public debate; can impose financial costs on shareholders, employees, and customers alike; and can burden shareholders, employees, and customers with a political affiliation either counter to their views or when they want no such thing. These consequences share a common problem: It is unclear who is making these decisions and for whose benefit, which is a problem that corporate law is well-suited to address—to the benefit of shareholders and society.

Because this framework makes corporate politicking identifiable, it also makes corporate politicking regulable. This Article argues that improved internal accountability through corporate law interventions is an important first step to address those consequences and, accordingly, proposes four reforms to incorporate the voices of shareholders (and potentially other stakeholders) into the decision-making process and enhance transparency about who is responsible for the politicking and why it has occurred: (1) a corporate governance proposal that develops a politicking subcommittee; (2) a state statutory requirement expanding on what must be filed with the articles of incorporation or registration statement to do business out of state; (3) for public companies, a federal securities reform that adds to the management discussion and analysis section of their annual reports; and (4) for private companies, a revised risk factor for private placement memoranda.