Is Your 401(k) Used to Influence Congress?

Posted August 5, 2009 at 3:43pm

Thanks to the Supreme Court, corporate-funded political ads may be about to make a big comeback. And ordinary shareholders — including everyone with a 401(k) account — will foot the bill.

The Supreme Court ordered re-argument in an important case, Citizens United v. Federal Election Commission. Citizens United is a nonprofit group that wanted to use corporate treasury funds to pay for a 90-minute pay-per-view documentary about Hillary Rodham Clinton, “Hillary the Movie,— during the presidential primary.

The court indicated that it may reverse a 1990 campaign finance decision that upheld limits on corporate spending in elections, Austin v. Michigan State Chamber of Commerce. At issue in Austin was whether the state of Michigan could require corporations to use political action committee money in lieu of corporate treasury funds to pay for independent expenditures expressly advocating for or against the election of a candidate.

The distinction between corporate PACs and treasury funds matters. While a corporate PAC collects money from corporate employees and shareholders who know that their donations will be used in elections, the treasury contains money that the corporation earned from the sale of stocks and products.

Requiring the use of corporate PACs actually protects the interests of shareholders because most investors are unaware of how, when or why corporations make political expenditures. Shareholders may disagree with the corporation’s choices of which candidates to oppose or support, and yet shareholders will have no voice. In contrast, corporate PAC donors are fully on notice that the money will be used for a political purpose.

Michigan defended its law by asserting the state’s interest in preventing corruption and the appearance of corruption. The majority accepted this argument and defined corruption broadly to include the “distorting effects of immense aggregations of wealth that are accumulated with help of the corporate form.—

In contrast to other decisions by the court, which probed corporate influence on elections, the Austin dissents by both Justice Antonin Scalia and Justice Anthony Kennedy defined political corruption far more narrowly. Their approach was rejected in cases over the years. In McConnell v. FEC, the court explained that narrow, quid pro quo corruption is not the only evil legislatures can address:

“Just as troubling to a functioning democracy as classic quid pro quo corruption is the danger that officeholders will decide issues not on the merits or the desires of their constituencies, but according to the wishes of those who have made large financial contributions valued by the officeholder.—

The risk posed by corruption is bigger than politicians going to jail. The risk is to the democracy itself. As the Supreme Court explained in Nixon v. Shrink Missouri Government PAC, “Leave the perception of impropriety unanswered, and the cynical assumption that large donors call the tune could jeopardize the willingness of voters to take part in democratic governance.—

If the court overrules Austin, it may redefine corruption too narrowly, thereby greatly limiting the tools that states and Congress may use to protect the integrity of the democratic process. And little has changed in the 19 years since Austin to merit its reversal. Corporations still pay to influence policy, as evidenced by the billions they spend lobbying Congress. Giving them more sway over elections through the deep pockets of their treasuries is a step backward, not forward.

When Citizens United is reargued in September, the court need not take the extraordinary step of overruling Austin. Rather, it could issue a far more narrow holding that gives nonprofit groups like Citizens United a way to fund their video-on-demand, 90-minute film without unleashing political spending by every corporation in America: spending that would be funded in part by — you guessed it — the little remaining in your battered 401(k).

Ciara Torres-Spelliscy is counsel at the Brennan Center for Justice at New York University School of Law.