Corporate Speech and Stakeholders

At a recent discussion on the Citizens United v. Federal Election Commission case at the University of Virginia, a speaker stated that most publicly traded companies do not contribute to political campaigns and political action committees. The reasons the speaker gave were public companies are generally risk adverse and do not want to alienate stakeholders, and the proxy process for approving such actions is cumbersome. The speaker noted that closely-held companies are often the biggest contributors to campaigns during election cycles.

There is much debate about whether corporations and CEOs should engage in political speech. Recent U.S. Supreme Court decisions have affirmed that companies are entitled to free speech, even when exercised through campaign spending. Over the past few years there have been several media stories about individual CEOs’ views which have led to boycotts.

Since the U.S. has a two-party system that roughly divides the electorate, political speech has the potential to upset one-half of the customer base. There are other consequences for firms to consider: shareholders could disagree with a political contribution and seek removal of the CEO. In addition, other stakeholders, such as suppliers and employees, could be unfairly associated with a company’s views.

In practical matters, while the speaker argued for more corporate speech, he noted the public company proxy process was highly inefficient. The need for individual stockholders to weigh in by voting slows down decision-making.

Should companies engage in free speech? Many would argue yes, that it is their right. However, should they risk alienating their stakeholders, such as customers, shareholders, suppliers and employees?

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