A Welcome New Chapter or Cause for Alarm?
Author: Devin McGahey | UC Berkeley School of Law | J.D. Candidate 2021 | Posted: February 25, 2020 | Download PDF.
President Rush Limbaugh was recently assassinated and the calendar has been sold to the highest corporate bidder. Years no longer take numerical form; they’re designated by household consumer products. It’s not 2019. It’s the Year of the Whisper-Quiet Maytag Dishmaster. Such is the world etched out in David Foster Wallace’s 1996 novel, Infinite Jest, where everything—even time—has a price. [1] As a reader, it’s difficult what to make of this dystopian portrayal of corporate sponsorship. Ludicrous? Prophetic? Ask the citizens of Brazil, Indiana, whose fire hydrants now bear the KFC Fiery Grilled Wings logos. [2]
The relationship between corporations and the American public is undoubtedly in the midst of a shift. Recently, responding to public pressure in the wake of two mass shootings, the big-box chain Walmart announced that it would no longer sell ammunition for military-style weapons—a move that could cut its ammunition market share by 60 percent. [3] Similarly, NASCAR recently rejected a number of advertisements from firearms companies submitted for its souvenir programs. [4] While corporations have traditionally avoided inserting themselves into social or political issues—particularly emotionally-charged issues like gun control—Walmart and NASCAR join a growing number of blue-chip companies that have leveraged their size, reach, and loyalty to affect public policy.
Whatever the reasons—whether the consequence of new technology, the rise of populism, or the loss of public space, as some have speculated [5] —the American public increasingly expects business leaders to act where the government has failed to do so. Indeed, corporate social or political activism has become “the new reality of business . . . in America.”[6] But while corporations take an increasingly active role in contemporary American life, surely we’re far from a nationally recognized Year of the Cool Ranch® Doritos® Locos Tacos.
There are obvious reasons to welcome a new era of corporate engagement. By harnessing corporate resources, corporate social engagement allows activists to “extend their reach and deepen their impact to address large social problems.” [7] Moreover, working alongside businesses, activists and activist organizations can adopt best business practices to effectuate improved sustainability of their initiatives. [8] At the same time, however, there are compelling reasons to reject the growing entanglement of corporate entities and civic institutions.
Indeed, the effect of the Supreme Court’s decision in Citizens United v. FEC [9] was to open the door for unlimited political expenditures on behalf of corporations. [10] And despite investors’ natural desire to know how corporations choose to wield their recently acquired power, existing law does not require public companies to disclose their political expenditures. [11] Consequently, as former FEC Commissioner Ann Ravel articulated in her 2016 resignation letter, “our political campaigns have been awash in unlimited, often dark, money.” [12]
Nevertheless, some argue that mandatory disclosure is unnecessary because corporations will ultimately cede to shareholder pressure. [13] Yet a 2017 study evidencing a negative relationship between firm size and support for shareholder proposals related to corporate political spending suggests that collective-action problems plague shareholder efforts to obtain political spending disclosure. [14] These problems are further exacerbated by the increasing prevalence of institutional investors. [15] In effect, while consumer pressure may produce changes in the household, public-facing companies, the fact that shareholder support is most difficult at the largest corporations, who have the “greatest capacity to engage in political spending,” is extraordinarily concerning. [16]
Consequently, at the crossroads of immense corporate power and the blending of traditional business and government roles, we should remain ambivalent about corporate activism and “consider whether a stronger wall of separation should be erected between our two engines of freedom: capitalism and democracy.” [17]
[1] David Foster Wallace, Infinite Jest (1996).
[2] Michael Cooper, Your Ad Here, on a Fire Truck? Broke Cities Sell Naming Rights, N.Y. TIMES (June 24, 2012), https://www.nytimes.com/2012/06/25/us/cities-consider-selling-ads-as-economic-lifelines.html?pagewanted=1&hp.
[3] ‘The status quo is unacceptable’: Walmart will stop selling some ammunition and exit the handgun market, WASH. POST (Sept. 3, 2019), https://www.washingtonpost.com/business/2019/09/03/status-quo-is-unacceptable-walmart-will-stop-selling-some-ammunition-exit-handgun-market.
[4] Sara Murray, NASCAR shocks gun industry as it appears to block some firearm ads, CNN POLITICS (Sept. 13, 2019), https://www.cnn.com/2019/09/13/politics/nascar-bans-gun-ads-souvenir-program/index.html.
[5] see Steffen Böhm et. al., What’s Behind The Current Wave of ‘Corporate Activism’?, The CONVERSATION ( Sept. 13, 2018), http://theconversation.com/whats-behind-the-current-wave-of-corporate-activism-102695; Tom C.W. Lin, Incorporating Social Activism, 98 B.U. L. REV. 1537, 1544-45 (2018).
[6] Lin, supra note 5, 1535.
[7] Id. at 1576.
[8] Id. at 1576-79.
[9] 558 U.S. 310 (2010).
[10] Reilly S. Steel, Corporate Political Spending and the Size Effect, 118 COLUM. L. REV. 1, 3 (2017).
[11] Id.
[12] Ann Ravel, Departing the Federal Election Commission (Feb. 19, 2017), MEDIUM, https://medium.com/@AnnMRavel/departing-the-federal-election-commission-fee0ae9d63a1.
[13] Steel, supra note 8, at 7.
[14] Id. at 14-15.
[15] Id. at 6.
[16] Id. at 22.
[17] Timothy K. Kuhnert, The Separation of Business and State, 95 CAL. L. REV. 2353, 2365 (2007).