Corporate Political Contributions and Bad Faith, Whatever That Is

By James Kwak

In an earlier paper (blog post here), I argued that corporate political contributions can in many cases be challenged by shareholders as conflicted transactions that further insiders’ personal interests (e.g., lower individual income taxes) rather than the best interests of the corporation. The argument (to simplify) was that if a political contribution is in the CEO’s individual interests, the resulting conflict of interest should make the business judgment rule inapplicable, placing on the CEO the burden of proving that the contribution was actually in the best interests of the corporation.

In a new paper, law professor Joseph Leahy has outlined a new theory under which shareholders can contest corporate political contributions. He argues that such contributions in many cases will constitute bad faith, since they have a motivation other than serving the best interests of the corporation. This line of reasoning exploits the vagueness of the concept of good faith as it has been established by the Delaware courts in Disney (the case over Michael Ovitz’s $140 million severance package) and later cases. Of course, that is only what the Delaware courts deserve for making such a hash out of the concept. In effect, they first said that any action not motivated by the best interests of the corporation constitutes bad faith, but then in specific cases tried to absolve any actual board of directors of ever actually acting in bad faith.

It is far from clear that a lawsuit brought on these grounds would have much chance of success in court. But by the letter of the case law, they should have a chance. And the more that plaintiffs contest corporate political contributions, the more likely it is that companies will decide that they aren’t worth the trouble. Or, even better, they will decide that they should only make contributions that are actually good for the bottom line and for shareholders—which is the way things should be.

26 responses to “Corporate Political Contributions and Bad Faith, Whatever That Is

  1. The way things “should be” and way they are, are the same things today, otherwise they wouldn’t be. No, the CEO really can’t influence the board that much, the board and the CEO always act on behalf of the shareholders or they lose their job, thus the ever climbing prices rather than the other way around. Company’s, (or corporations), should act on behalf of their members with no shareholder moneys or input involved. That, along with a fair flat tax would force people to efficiently be competitive against one another, instead of the more closet cut throat style of competition we currently have today.

  2. Until we pass a Constitutional amendment overturning the ridiculous proposition that a Corporation is a Person, and flatly contradicting the mistaken doctrine that Money is Speech, we will not be able to approach a truly democratic political system in this country. Since corporate personhood goes back to a side note in Santa Clara v. Southern Pacific Railroad in 1886, and money as speech protected by the 1st Amendment goes back to Buckley v. Valeo in 1976, Citizens United and McCutcheon are johnny-come-latelies to this party, putrid though they may be. All the current proposals to reverse CU and MC would simply return us to the perfect state of democracy we enjoyed on Jan. 20, 2010.

    For the full text of the We The People Amendment which actually addresses what needs to be done, see http://www.movetoamend.org.

  3. What brakes are in place, through social norms and through experientially earned laws of civilization (like theft and murder to “get yours”), for an individual human being who embraces “perceptions” and self-serving ideologies that make them a powerful brute force Nihilistic Totalitarian?

    http://en.wikipedia.org/wiki/Totalitarianism

    from the discussion:

    “….Friedrich and Brzezinski argue that a totalitarian system has the following six, mutually supportive, defining characteristics:

    1.Elaborate guiding ideology.
    2.Single mass party, typically led by a dictator.
    3.System of terror, using such instruments as violence and secret police.
    4.Monopoly on weapons.
    5.Monopoly on the means of communication.
    6.Central direction and control of the economy through state planning….”

    A nihilistic philosophy towards “managing” consumers/labor and the environment (man to land ratio)

    in a way that maximizes profit for the ONE person/ONE corporation with totalitarian control over ONE resource – like oil or “health care”

    is not science.

    It’s just nutz.

    One big bowl of crazy….when are we going to have true freedom – freedom from crazy….?

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  5. That sounds like a finer point. Surely the main concern is with corporations steering politics in ways that are good for their sector but bad for the common good, such as sponsoring wars, environmental destruction, etc. Not so much an executive vs. shareholder conflict.

  6. The “employees”, who do bend their knee, are a problem. Now. That’s what the “politics” is all about – stealing high paying jobs from the competent.

    just ONE thread discussion the shock of witnessing this at just one corp:

    http://www.cafepharma.com/boards/showthread.php?t=552762

    It’s so rampant in “health care” and who cares that the direct result is always death. It’s sinister. From the “Keating 5″, who planted their kind in the VA in Arizona, to the Swiss in NJ.

    Between the Human Resources Departments and the slew of busybodybabushkas selling “housing” – their access in those positions to collect economic information about the entire MIDDLE CLASS – think about it – housing and health! – was HOW they were able to conduct the economic genocide of 40 million USA citizens. FBI, NSA, IRS were in on it!

    The goal? They stood up the MERCENARY global army. Mission accomplished for USA’s greedy and DELUSIONAL welfare queen in M.E.

    Corps like Monsanto are hiring Blackwater mercenaries to keep their shareholders and C-suite psychos “safe” from the CONSUMER.

    The “corporation”, as a person, is a Nihilistic Totalitarian.

    War booty from Iraq? The ENTIRE civilization built by, and for, the Middle Class of USA.

    Every rock you pick up, vipers living underneath it.

    Never bending my knee to the GLOBAL War, Drug and Slave Lords. It’s just my “thing”. They should have never climbed up on the pulpit to preach AT the “annies” sitting in the pews….

    Just War.

  7. While we try to fix old losses, corporations will with the following new trade treaties such as TTIP and TISA end local government as we know it. Anything that effects a company or corporation will be tried in an international arena by arbitration where some times the judge is the lawyer, and lawyer becomes the judge. But if a citizen has a compliant it must go threw all local court systems first.

  8. Corporate oligarchs own and control the socalled government. There is no disputing this cold hard ugly fact, – though legions of corporate oligarchs and the predatorclass shaitans that own, massively profit from, and allegedly manage these oligarchs, – and their spaniels and purchased mouthpieces in the socalled government will vociferously deny this terrible truth. Amerika has devolved into a fascist state owned and controlled by the predatorclass, and predatorclass oligarchs, advancing, shielding, and buttressing oligarch and predatorclass interests exclusively! The people have no voice or representation in the conduct of our socalled government. Our socalled government spaniels are purchased, paid shills, mouthpieces, promoters, protectors, and apologists for the predatorclass and predatorclass oligarchs, advancing the interests of the same predatorclass and predator oligarchs and individuals singularly and exclusively, for shared otherworldly profit and unchecked political power- to the great disservice, disadvantage, disenfranchisement, and obdurate disregard of the rest of the population, – not to mention, that thing we call the Constitution, the socalled ruleoflaw, and any semblance of human decency.

    So long as socalled politicians can be legally purchased and paid for minions of predatorclass and predatorclass oligarchs, – the people are doomed.

    When the dim sheeple, and unwashed masses begin to grasp this horrorshow reality, the systemic criminal machinations, the psychopathic supremist ideologies and activities, and the total heartless, brutal disregard and dismissal of the nation once called America, the socalled rule of law, and every non-predatorclass human on the face of the earth, – the 99.9% the responses and reaction will be swift, equally brutal, asymmetric, and incendiary.

    Buckleup! In a world where there are no laws, – there are no laws for anyone predatorclass biiiiiaaatches!

  9. Definitely! Big corporations are quite notorious in influencing policies to bend them in their own favor. The practice is rampant everywhere…

  10. http://www.huffingtonpost.com/2014/04/28/elizabeth-warren-thomas-piketty_n_5226139.html

    Hillary’s recent book sales tank, no presidential run.
    U.S. loses to Germany tomorrow…
    Middle East ignores U.S. SOS John Kerry’s better advice.
    Iraq to be partitioned, “balknized” ala Yugosolvia/Chex Republic…
    Senate remain Democrat majority by slimmer margin in mid-terms.
    Jedidiah Atkinson!?….nExT?!…

  11. Wouldn’t it be a lot simpler to just sell your stock in a company that makes political contributions of which you don’t approve?

  12. This is the ENDLESS kind of crap that political funding churns out to maintain their position as filthy rich Nihilistic Totalitarians who have been avoiding their day in court for crimes against humanity – derivative-style.

    As if the Iraq thingy was NOT over-reach????!!!!

    http://www.foxnews.com/politics/2014/02/19/house-republicans-sign-on-to-measure-to-stop-presidential-overreach/

    If anyone hasn’t educated themselves on the history, do it. They looked confused when the Nuremberg Trial handed them their convictions.

    What would Europe have looked like today had there been no trial?

    Oh, right, it would have been today’s EU much earlier. Poor babies. It took them “much longer” to pull off the heist of ALL wealth created during the industrial revolution with their bat sht crazy fiat $$ and derivative software….

    Curious what metadata they finally looked at to acknowledge how “expensive” climate change is…?! Austerity applied against THAT problem just translates to pushing the skinned alive through taxes and “derivatives” USA Middle Class back into trees and caves and keeping them herded there with drones and psychobabble control for “not giving in to your hate, Luke” being supported with marihuana brownies for all…

    NO difference between the Congolese savage village takeover plan and the Federal Reserve Board. None.

    This was the warning in 1934 that was hysterically censored and squelched:

    (766.1) 68:2.11 Vanity contributed mightily to the birth of society; but at the time of these revelations the devious strivings of a vainglorious generation threaten to swamp and submerge the whole complicated structure of a highly specialized civilization. Pleasure-want has long since superseded hunger-want; the legitimate social aims of self-maintenance are rapidly translating themselves into base and threatening forms of self-gratification. Self-maintenance builds society; unbridled self-gratification unfailingly destroys civilization.

    Speculate on post WWII without the thrashing of a hysterical “ism” via the Nuremberg Trial….aren’t you all the big giant intellectual heads at MIT? :-)

  13. This is getting absurd. Can we have ONE DAY without being told what the right side of history is regarding gay PRIDE….?

    MSM beats ONE TOPIC to death without reporting any actual NEWS about it, so why not start having VACATION DAYS from certain categories – our loss of privacy started with how SEX came out of the closet in the “news”….

    This is how hatred grows – not only do they strip out a week’s worth of food stamps funding from the month when your bank account is wiped out from their derivatives fraud, use your 33% tax dollars to stand up a mercenary army as you sit in the dark for 14 days because the infrastructure around you is from 1934 – but then these Kochsuckers et al get in your face every single day making you bend your knee to how you are to “accept” where they like to stick it….historically speaking, is there any way or place that they haven’t stuck it in the search for self-gratification…?

    Refusing to self-quarantine when knowledge arrived about AIDS/HIV, did that behaviour show prove their moral, social and ethical superiority??!!

    Please – ONE Vacation Day a week – there are SO MANY other topics and categories to focus on for a day in a way that advances collective problem solving the biggies like environment and war.

    No one cares where you like to stick it as long as it isn’t in me. I still got those NSA pubic crabs to eradicate.

    That was the bottom line behind “don’t ask, don’t tell”….love is a whole other story, as is any group’s proven history record for how they benefit the “greater good”….fair and balanced to ask the question – “what have you done for me lately….?”….Besides malicious intent to harm me for MY opinion about how the “greater good” is served by quarantine when there is no cure….way too selfish, people….

  14. Case in point – the embrace of the word “Disruptive” by CNBC….

    So even though there was finally some number crunching about how Mother Nature is “disrupting” the “economy” – 480 people can’t pay to keep their lights on with 2.08 TRILLION in their piggy bank with which to pay their bills!? – talk about IGNORED “inflation” pressure!….

    there is NO COORDINATION between what CNBC is worshipping as GOOD disruptions and how it addresses the ability for the “economy” to innovate the society’s survival skills that are needed to deal with ongoing “acts of god” disruptions of nature that, itself, is adjusting to how much carbon is pouring in to the atmosphere….

    If ever there was a valid case ti use to prove your point about the benefits of FIAT $$, isn’t this it…? Investing in the future of SURVIVAL of the species….??

    FAIR question – how is disruptive technology going to help with disruptive nature?

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  16. Wait for it, wait for it, gonna bust the former foreign MD cabal’s 2 BILLION Medicare scam record wide open with the next generation’s fraud grab…

    FOR PROFIT HEALTH CARE INSURANCE always was and always will be the final abomination before jeebus arrives for his next crucifixion, right?

    They won’t lose the e-communications at the IRS when it comes time to FINE people for not buying FOR PROFIT health insurance, will they? Go figure…hey, speaking of e-communications, the NSA’s MooseAide anti-terrorist faction of advisers attached a virus to people’s resumes – part of how the economic genocide was conducted….now 40 million unemployed DO NOT EXIST in the metadata that the algorithms grab to analyze the “economy”….

    Countries/races around the planet that breached a SANE and intelligent man to land ratio need to be FINED for being so stupid and arrogant, not be supported by those who were more intelligent in establishing a sustainable life style.

    All this support of targeted economic genocide is expensive – hence the “political contributions” – hope I have helped shed a light on what “bad faith” might be :-)

  17. de·cent
    ˈdēsənt/Submit
    adjective
    1.
    conforming with generally accepted standards of respectable or moral behavior.
    “the good name of such a decent and innocent person”
    not likely to shock or embarrass others.
    “a decent high-necked dress”
    informal
    sufficiently clothed to see visitors.
    “make yourself decent”
    2.
    of an acceptable standard; satisfactory.
    “find me a decent cup of coffee”
    synonyms: satisfactory, reasonable, fair, acceptable, adequate, sufficient, ample; not bad, all right, tolerable, passable, suitable; informalOK, okay, up to snuff
    “a job with decent pay”

  18. FAIR question – how is disruptive technology going to help with disruptive nature?
    _________________________
    betting tips

  19. http://nypost.com/2014/07/02/who-will-replace-jamie-dimon-at-jpmorgan/

    Funny how the biotech sector soared on the stock exchange the other day with this announcement….

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  23. Bruce E. Woych

    http://jonathanturley.org/2014/07/13/corporate-veil-and-hobby-lobby/
    Corporate Veil and Hobby Lobby
    July 13, 2014 by rafflaw

    “CEOs leading control frauds use executive compensation and the power to hire, fire, promote, and bully to create perverse incentives to induce employees to act on their own behalf by harming the corporation”
    Bill Black
    http://www.nakedcapitalism.com/2014/04/corporate-ceos-demand-tipped-whistleblower-reports-crimes.html
    [Bill Black]…
    “The degree of hostility against regulators and whistleblowers, and intense sympathy for the CEOs leading the control frauds, is palpable among large numbers of Reagan and Bush judicial appointees. When the Republicans obtain control of presidency they will resume appointing similar judges and are likely to use their control over the SEC to force whistleblowers to tip off the crooks so that elite corporate criminals can further enhance their already near total ability to defraud and to take reprisals against whistleblowers with impunity”
    ==============================
    Corporate political finance is lobbying on steroids…, there would not be this kind of influence and power to capture political stations without the perverted incentive and moral hazards of campaign control fraud.

  24. Bruce E. Woych

    Blind Faith would be more to the point!

  25. Have faith Bruce, the answer will come from a God most people don’t believe in.