Leftists assault corporate free speech

July 3, 2012

By Dave Roberts

SAN FRANCISCO — The left, which has championed the media and legislative crusade against bullying, is itself engaged in the bullying of one of the few groups you’re still allowed to demonize in this country: corporations. Not content with dominating the media, academia, unions, the courts and much of the government, leftists are now trying to shut down the free speech of businesses.

“What they are trying to do is to cow corporations from supporting free market-oriented groups, including trade associations and even government affairs type of operations,” said former Securities and Exchange Commissioner Paul Atkins, speaking at a Pacific Research Institute luncheon in San Francisco on June 27. “In the wake of Citizens United, the unions and state pension funds and shareholder activists have been agitating because they are, of course, not happy about Citizens United.”

The Supreme Court in that 2010 case upheld the free speech rights of corporations and unions to make political contributions. So, having lost in the highest court, leftists are taking the low road, a chapter out of the Saul Alinsky playbook, in an attempt to muzzle opposition to their political agenda. Alinsky advocated getting individual and institutional shareholders in corporations to assign their proxy votes to leftist groups in order to pressure boards of directors to do their bidding.

The latest campaign seeks to push corporations into disclosing their contributions to political action committees, advocacy organizations, trade associations and any other political or quasi-political activities. That information will then be used to organize boycotts, shareholder meeting protests and other campaigns in an effort to shut off corporate contributions to groups and causes with whom they disagree.

“They are basically trying to subvert the shareholder proposal process in order to try to influence corporate behavior,” said Atkins. “Usually corporations, especially in the retail area, want to try to avoid controversy. Because they are pulled and tugged by people on both sides. And so they don’t want to be subject to boycotts or negative publicity or things like that.”

Target boycott

A good example is the 2010 boycott against Target. The retail giant had committed the “crime” of contributing $150,000 to Minnesota Forward, a political group that supported the campaign of a gubernatorial candidate who opposed gay marriage. In response to the boycott, Target apologized for the contribution.

“Going forward, we will soon begin a strategic review and analysis of our decision-making process for financial contributions in the public policy arena,” said Target CEO Gregg Steinhafel in a letter. “Target will take a leadership role in bringing together a group of companies and partner organizations for a dialogue focused on diversity and inclusion in the workplace, including GLBT issues.”

Caving into leftist groups like Moveon.org worked — the boycott fizzled out. Target’s website notes that, while the company continues to belong to trade associations and other policy-based organizations, “the positions they take do not always reflect Target’s views.” A Target pie chart shows nearly equal contributions to Republican and Democratic PACs.

Attacking ALEC

Having tasted Target’s blood in the water, the leftist sharks recently went after corporations that had joined the American Legislative Exchange Council.

“It’s kind of a nerdy group, sort of behind the scenes,” said Atkins. “They work towards building model statutes for state legislatures, things like tax reform, regulation and health care and all sorts of things. Among the things they were asked to help with was ‘Stand Your Ground’ laws and also ‘Voter Identification.’ So, in the wake of the Trayvon Martin shooting, Van Jones’ group called Color of Change and another group figured out that Pepsi and Coke and Wendy’s and McDonald’s and a few other companies had contributed to ALEC. So they blew all this up and said, ‘Ah ha, look, Pepsi, Coke and all of these other companies are helping Voter ID, so it’s racial profiling’ or whatever their charge was.”

More than a dozen corporations have reportedly dropped out of supporting ALEC, producing more blood in the water.

Now some companies are considering buckling under to the latest pressure to disclose their contributions — or perhaps get out of politics altogether in order to make the sharks go away. But Atkins is hoping that the companies stand their ground.

“Sure you have some corporations that might support something that might not be in the best interest of their shareholders,” he said. “But overall, for the most part, corporations really do support things like a push for a better tax system, push for a better regulatory system, support things like the National Association of Manufacturers, the Chamber of Commerce, the American Petroleum Institute and things like that, which really do a lot of good.

“For example, in Washington right now, one of the big issues before the SEC is the Conflict Mineral provision of the Dodd-Frank rule. The American Petroleum Institute is doing a great job in trying to argue against this particular provision of Dodd-Frank, which will be very harmful to business and cost shareholders a huge amount of money. The reason why you have trade groups is so they have the guts, hopefully, to stand up. Because one individual corporation can always get cut down and have pressure put against it. That’s why you need the trade groups to get into it, or groups like PRI or others who are supported by corporations, or the Competitive Enterprise Institute in Washington, which has filed suit against Dodd-Frank and they had sued against the public company accounting oversight board in Sarbanes-Oxley before that. So, these groups are very valuable with respect to some of the disputes with government and regulation and those sorts of things.”

PRI, the Pacific Research Institute, is CalWatchDog.com’s parent think tank.

One of the challenges for corporations in resisting leftist pressure is that the issue is framed in terms of the laudable goal of seeking more information and transparency for shareholders.

‘Materiality’

“Why not just put all the chips out on the table and let the chips fall where they may?” asked Atkins rhetorically. “Well, the thing is when we talk about disclosure with public companies, the main rubric behind the securities laws and behind SEC rules is ‘materiality.’ Materiality means what a reasonable, rational investor would take to be an important fact that he would want to know in trying to decide whether to buy, sell or hold a particular company’s stock. This materiality concept goes back and is embedded in the Securities Act and been upheld by the Supreme Court time and again as giving a standard by which companies should decide what to disclose and what to put into their prospectus and annual report and what to leave out.

“So these sorts of contributions by public companies are clearly not material. They don’t rise to any level that would affect the corporation as far as the bottom line. A number of these shareholder activists argue, ‘Well, it’s material in that it could be controversial, and shareholders need to know it because it might cause a boycott like you saw with Target or whatever.’ But that’s very much a circular argument. Because the very same groups who are arguing for disclosure are the ones who then light the fuse to have these boycotts and other things go on. Ultimately, it’s the board of directors that oversees these sorts of contributions in the end who have a fiduciary duty to the shareholders to decide what is or is not in their best interest and how they should build shareholder value.”

Atkins pointed out that disclosure requirements are already in place for contributions to candidates, and that Congress always has the option of requiring similar disclosure for super PACs.

“But it should not be where the shareholders themselves disarm unilaterally and say, ‘OK, we will disclose and open ourselves up to criticism and what not,’” he said. “So what we are trying to do is encourage boards and others basically to stand their ground if they choose to do so. Some companies disclose and others don’t. But it is a very slippery slope if you start going down that road.”