Legislative Options After Citizens United v. FEC: Constitutional and Legal Issues
The Securities Act of 1933 ... does not attempt to regulate or prohibit the sale of securities in intrastate commerce. It merely provides as a condition precedent to the use of the mails and the facilities of interstate commerce that the issuer file a registration statement containing a true and complete statement of the information required by Section 7 of the Act, 15 U.S.C.A. § 77g, in order to protect the public against imposition and fraud in the sale of securities through the use of the mails or the facilities of interstate commerce.... It is well settled that Congress may enact reasonable regulations to prevent the mails and the facilities ofinterstate commerce from being used as instruments of fraud and imposition. 52
The type of legislation described above would not prohibit corporate spending on political advertising; rather, it would require that shareholders give their approval of the spending. It may be argued that shareholders, as owners of a corporation, have virtually an inherent right, though perhaps not necessarily the expertise, to direct spending by executives and boards of directors and that legislation of the type in question would affirm this right.
Legislation requiring voting by shareholders on proposed corporate political advertising could arguably be drafted in such a way as to act as a kind of impediment to the corporation’s free speech as set out in Citizens United. For example, if a proposal required that a corporation submit to shareholder vote each specific expenditure for political advertising and that the vote must occur within an unreasonable period of time, a court might conclude that the legislation is a violation of the corporation’s free speech rights as described by Citizens United. The practicalities of when to require these votes and the enforcement of this kind of legislation may need to be carefully considered in order not to run afoul of corporate freedom of speech rights defined by the Supreme Court in Citizens United.
Restrictions on Foreign-Owned Corporations53
The Supreme Court in Citizens United struck down an attempt to limit First Amendment rights to political speech based on the speaker’s “form” as a corporation.54 However, its doing so does not necessarily mean that the ability to make campaign expenditures, or otherwise engage in political speech, cannot be restricted based upon the speaker’s foreign status.55 Certain federal laws already categorize some corporations incorporated within the United States as “foreign” because of circumstances related to their ownership and control and impose significant restrictions upon them. Congress could explore similar legislation in response to the Citizens United decision. Because of the lack of direct precedent, it is unclear how far Congress could go in this regard.57 56
Oklahoma-Texas Trust v. Securities and Exchange Commission, 100 F.2d 888, 890 (10th Cir. 1939).
53 This portion of the report discussing restrictions on U.S. subsidiaries of foreign corporations was written by Kate M. Manuel.
Citizens United, slip op., at 40.
Id. at 47-48.
56 Prior Congresses considered similar proposals, including amending the definition of “foreign national” to include corporations with more than 50% foreign ownership, and the Federal Election Commission reportedly once proposed similar rules. See, e.g., S. 2, 100th Cong., 1st Sess. (1987); S. 779, 100th Con., 1st Sess. (1987); H.R. 2499, 104th Cong., 1st Sess. (1995); Foreign-Connected PACs Increased Gifts in ‘92 Races, POL. FIN. & LOBBY REP., Jan. 12, 1994, at 1.
57 Cf. Testimony of Heather K. Gerken, J. Skelly Wright Professor of Law, Yale Law School, Before the Senate Committee on Rules and Administration, Feb. 2, 2010, available at http://rules.senate.gov/public/index.cfm?a= Files.Serve&File_id=46b20c68-8e8b-44ba-a206-32703e280a4e (“We have relatively little guidance as to whether preventing foreign influence on elections is a legitimate state interest or what level of scrutiny would be used to (continued...)
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