Campaign finance: The perils of favorable SCOTUS rulings for corporations

SCOTUS has handed corporations important new rights, but there are consequences to the unexamined exercise of those rights

It's been a persistent theme of this column that, in the current business environment, there is compelling need for chief legal officers to play more strategic business roles as C-suite advisors and on boards of directors (an increasingly common phenomenon). Extraordinarily diverse issues now flash across the GC's radar screen, transcending the limits of strictly legal oversight.

Two events that occurred this spring underscore this diversity.

First, on April 2, 2014, the Supreme Court, in a 5-4 decision written by Chief Justice John Roberts, overturned the section of federal election law setting “aggregate limits” on campaign contributions. In McCutcheon v. FEC, brought by engineer and businessman Shaun McCutcheon as a First Amendment case, McCutcheon's team successfully argued that donors can give allowable contributions to as many politicians as they’d like.

While my communications firm represented McCutcheon in this matter, it is not my intention here to advocate his position. Instead, it is my purpose to highlight the case as further signaling a generally deregulatory trend that seems most favorable to corporations in their efforts to influence policy-making. The barriers are toppling in the wake of Citizens United v. FEC.

All that can change with the next presidential administration if a Democrat has the opportunity to appoint even one Supreme Court judge supportive of stricter controls, but for now at least the ball's in the corporate court.

The McCutcheon decision has the additional effect of reviving a question that was asked—if rather too quietly—after Citizens United. Are corporations simultaneously exposed, not legally but from a business perspective, by this newfound license? Should campaign contributors have reason to beware what they’ve wished for?

The aforementioned second event does indeed suggest the need for a commitment to manage the risks that accompany political giving. Around the same time as the McCutcheon decision, the CEO of Mozilla, Brendan Eich, resigned soon after his appointment. Disclosure that he gave $1,000 in support of California's anti-gay marriage Prop 8 in 2008 infuriated Mozilla employees, users and business partners.

True, it was a contribution by an individual, therefore not directly related to the substance of Citizens United. But the controversy highlights the potential impact of any form of giving by a company or its officers, all the more so as McCutcheon green-lights a limitless aggregate number of donations. A modest $1,000 check can unravel years of reputational positioning without a single law being broken.

It's a question of brand, regardless of whether the contributor is the corporate entity or the CEOs who, as the business’ “rock stars,” increasingly define that brand in many markets. The risk management demanded entails assessment of specific benefits against predictable negative public reaction—and to that discussion GCs can bring their trained eye for spotting just such perilous “what-ifs” lying ahead.

If we give to Candidate X or Issue Y, what are the benefits compared to the risks of alienating Candidate X supporters or Issue Y's detractors? What do we lose if we play it safe and give to neither? What if we give to both sides in the interest of “encouraging open dialogue and the democratic process?” A well-known law firm once used similar language in a race for state insurance commissioner and was then questioned in the press about trying to buy favors no matter who won.

SCOTUS has handed corporations important new rights, but there are consequences to the unexamined exercise of those rights. If Mozilla Corp. tells us anything in the wake of these SCOTUS rulings, it is that CEOs and their own once-personal views are themselves a brand as much as whatever positioning their companies assume. The best practice is to anticipate worst-case public scenarios for the dual brands—both the company and the CEO—as comprehensively as practical circumstances warrant. It's a job in-house lawyers are well trained and prepared to handle.

Richard Levick

Richard Levick, Esq., is the chairman and CEO of Levick. Follow him on Twitter @RichardLevick.

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