Are Political Contributions Ultra Vires?

It’s been three years, but the Supreme Court’s decision in Citizens United v. Federal Election Comm’n, 558 US 50 (2010) continues to foment a fierce debate about corporate political spending. In February, Representative Adam Schiff of California introduced a resolution, H.J. Res. 31, to amend the Constitution as follows:

Nothing in this Constitution shall be construed to forbid Congress or the States from imposing reasonable content-neutral limitations on private campaign contributions or independent election expenditures, or from enacting systems of public campaign financing, including those designed to restrict the influence of private wealth by offsetting campaign spending or independent expenditures with increased public funding.

Meanwhile in the California legislature, Assembly Member Bob Wieckowski has introduced a bill, AB 644, to call an election for the purpose of placing before the voters of the state an advisory question asking whether California’s Congress Members should propose and support, and the California Legislature should ratify, an amendment to the United States Constitution that reverses the Supreme Court’s ruling in Citizens United and limits campaign contributions and spending, to ensure that all citizens, regardless of wealth, may express their views to one another and their government on a level playing field. Last summer Assembly Member Wieckowski co-authored a resolution, AJR 22, labeling the Citizens United decision a “serious and direct threat to our democracy.”

Implicit in this sturm und drang is the notion that corporations have the power to make political contributions. But do they? For California corporations, the answer is clear that they do. Corporations Code Section 207 provides that a corporation has “all of the powers of a natural person”. This is followed by a non-exclusive list of powers, including the power to make donations, regardless of the specific corporate benefit, for the public welfare or for community fund, hospital charitable, educational, scientific, civic or similar purposes.

In Marsili v. Pac. Gas & Elec. Co., 51 Cal. App. 3d 313 (1975), some shareholders filed a suit challenging the propriety of a contribution made by the corporation to an association advocating the defeat of a proposition appearing on the ballot in a municipal election. The Court of Appeal held:

We believe that where, as here, the board of directors reasonably concludes that the adoption of a ballot proposition would have a direct, adverse effect upon the business of the corporation, the board of directors has abundant statutory and charter authority to oppose it.

 

Topics:  Citizens United, Political Contributions, Proposed Legislation, SCOTUS, Ultra Vires

Published In: Business Organization Updates, Constitutional Law Updates, Elections & Politics Updates, Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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