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CORPORATE GOVERNANCE AFTER 

CITIZENS UNITED 

HEARING 

BEFORE THE

SUBCOMMITTEE ON CAPITAL MARKETS, 

INSURANCE, AND GOVERNMENT 

SPONSORED ENTERPRISES 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

MARCH 11, 2010 

Printed for the use of the Committee on Financial Services 

Serial No. 111–109 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

CHARLES A. WILSON, Ohio 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

BILL FOSTER, Illinois 

ANDRE ́ CARSON, Indiana 

JACKIE SPEIER, California 

TRAVIS CHILDERS, Mississippi 

WALT MINNICK, Idaho 

JOHN ADLER, New Jersey 

MARY JO KILROY, Ohio 

STEVE DRIEHAUS, Ohio 

SUZANNE KOSMAS, Florida 

ALAN GRAYSON, Florida 

JIM HIMES, Connecticut 

GARY PETERS, Michigan 

DAN MAFFEI, New York 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

BILL POSEY, Florida 

LYNN JENKINS, Kansas 

CHRISTOPHER LEE, New York 

ERIK PAULSEN, Minnesota 

LEONARD LANCE, New Jersey 

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III) 

SUBCOMMITTEE ON CAPITAL MARKETS, INSURANCE, AND GOVERNMENT SPONSORED

ENTERPRISES

PAUL E. KANJORSKI, Pennsylvania, Chairman 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

NYDIA M. VELA ́ ZQUEZ, New York 

CAROLYN B. MALONEY, New York 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin 

PAUL W. HODES, New Hampshire 

RON KLEIN, Florida 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

ANDRE ́ CARSON, Indiana 

JACKIE SPEIER, California 

TRAVIS CHILDERS, Mississippi 

CHARLES A. WILSON, Ohio 

BILL FOSTER, Illinois 

WALT MINNICK, Idaho 

JOHN ADLER, New Jersey 

MARY JO KILROY, Ohio 

SUZANNE KOSMAS, Florida 

ALAN GRAYSON, Florida 

JIM HIMES, Connecticut 

GARY PETERS, Michigan 

SCOTT GARRETT, New Jersey 

TOM PRICE, Georgia 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

FRANK D. LUCAS, Oklahoma 

DONALD A. MANZULLO, Illinois 

EDWARD R. ROYCE, California 

JUDY BIGGERT, Illinois 

SHELLEY MOORE CAPITO, West Virginia 

JEB HENSARLING, Texas 

ADAM PUTNAM, Florida 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

RANDY NEUGEBAUER, Texas 

KEVIN McCARTHY, California 

BILL POSEY, Florida 

LYNN JENKINS, Kansas 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

March 11, 2010 ................................................................................................. 1 

Appendix: 

March 11, 2010 ................................................................................................. 29 

WITNESSES 

THURSDAY, MARCH 11, 2010 

Baran, Jan, Partner, Wiley Rein LLP .................................................................... 17 

Coffee, John C., Jr., Adolph A. Berle Professor of Law, Columbia University 

Law School ............................................................................................................ 5 

Klausner, Michael, Nancy and Charles Munger Professor of Business and 

Professor of Law, Stanford Law School .............................................................. 15 

Minow, Nell, Editor and Co-Founder, The Corporate Library ............................. 13 

Sandstrom, Karl J., Of Counsel, Perkins Coie ...................................................... 8 

Verret, J.W., Assistant Professor of Law, George Mason University School 

of Law .................................................................................................................... 12 

Yerger, Ann, Executive Director, Council of Institutional Investors ................... 10 

APPENDIX 

Prepared statements: 

Kanjorski, Hon. Paul E. ................................................................................... 30 

Garrett, Hon. Scott ........................................................................................... 31 

Baran, Jan ......................................................................................................... 33 

Coffee, John C., Jr. ........................................................................................... 44 

Klausner, Michael ............................................................................................ 65 

Minow, Nell ....................................................................................................... 72 

Sandstrom, Karl J. ........................................................................................... 79 

Verret, J.W. ....................................................................................................... 84 

Yerger, Ann ....................................................................................................... 86 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Kanjorski, Hon. Paul E.: 

Written statement of Lisa Gilbert, U.S. PIRG ............................................... 147 

Capuano, Hon. Michael E.: 

Report of the Brennan Center for Justice by Ciara Torres-Spelliscy entitled, ‘‘Corporate Campaign Spending: Giving Shareholders A Voice’’ ...... 149 

Written statement of Ciara Torres-Spelliscy .................................................. 192 

Excerpt from U.S. News & World Report by Ciara Torres-Spelliscy entitled, ‘‘To Fix the Supreme Court’s Citizens United Decision, Copy the 

Brits’’ .............................................................................................................. 211 

(1) 

CORPORATE GOVERNANCE AFTER CITIZENS 

UNITED 

Thursday, March 11, 2010 

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON CAPITAL MARKETS, INSURANCE, AND GOVERNMENT

SPONSORED ENTERPRISES, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The subcommittee met, pursuant to notice, at 10:30 a.m., in room 

2128, Rayburn House Office Building, Hon. Paul E. Kanjorski 

[chairman of the subcommittee] presiding. 

Members present: Representatives Kanjorski, Capuano, Lynch, 

Perlmutter, Grayson; Garrett and Castle. 

Ex officio present: Representative Frank. 

Chairman KANJORSKI. This hearing of the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises 

will come to order. Pursuant to committee rules, each side will 

have 20 minutes for opening statements. Without objection, all 

members’ statements will be made a part of the record. 

The CHAIRMAN. Paul, I don’t think your microphone is on. 

Chairman KANJORSKI. Can you hear me now? Still off? Okay. 

Well, I get a chance to say good morning again. For the convenience of the caucus and this committee, we will first recognize the 

chairman of the full committee, Chairman Frank, for his opening 

statement. 

The CHAIRMAN. I thank the chairman of the subcommittee. People were asked, apparently there was a Democratic caucus going 

on, but having invited a number of very busy people to a hearing, 

I think it would be inappropriate for us to either cancel this or 

delay it, so we are going to go ahead with this hearing. 

This is a very important subject. The Supreme Court has made 

a decision that many of us dislike. I must say I was struck by the 

sensitivity of the Chief Justice. Since he’s not here, I can comment 

without further wounding his apparently delicate feelings. But he 

was quoted as saying that he thought it troubling that he had to 

sit in a room full of Members of Congress who were cheering a criticism of his opinion, and I trust that sensitivity does not translate 

into his First Amendment rulings going forward. The notion that 

people should be constrained about criticizing a Supreme Court ruling in the presence of a Justice is not one that I have a great deal 

of sympathy for. 

But our purpose today is not to criticize the ruling—a little side 

thing we may do, but that’s not our purpose. It is to, in an entirely 

2 

appropriate and constitutional way, occupy the space that the opinion leaves for appropriate regulation. The Court has ruled that corporations have certain rights, but I guess if we were to follow the 

Declaration of Independence, if they are endowed by their Creator 

with those inalienable rights, since we are the creators of corporations, because they get their form from law, we can put some rules 

here. And the purpose of this hearing is to, in an entirely constitutional way, as I say, explore ways in which we can, in my view, 

protect the political process from further diminution of the one 

man, one vote principle by money coming in, in inappropriate ways. 

What we are talking about is disclosure and shareholder voting. 

I believe what we are doing is entirely constitutional and within 

the spirit of the opinion, and I think we are talking about ways 

that we can—and in my judgment, what the Supreme Court did 

undercuts the democratic process. I think we are reducing that, but 

even people who were all for the decision don’t necessarily have to 

be against this bill. 

But what we are talking about here is a matter of corporate democracy and of corporate governance, and what we have done and 

I think the gentleman from Massachusetts and the gentleman from 

Florida, Mr. Grayson, has worked with him, and Mr. Capuano of 

Massachusetts and others, have come up with a very appropriate 

way to make sure that democracy is protected and the integrity of 

the electoral process is protected. And I thank the chairman of the 

subcommittee for calling this hearing, and this is something we intend to move on. Mr. Chairman, I appreciate your recognizing me. 

Chairman KANJORSKI. The Chair recognizes Representative Castle for 5 minutes. 

Mr. CASTLE. Thank you, Mr. Chairman. And I would like to 

thank obviously all the witnesses for being here today, and I appreciate you holding today’s hearing. Corporate governance is a very 

important issue to me and to this committee obviously. In my home 

State of Delaware and across the country, corporations are a major 

source of economic activity. In this economy when we must remain 

focused on job retention and job creation, we must be especially 

careful when considering proposals that would alter 150 years of 

State corporate governance laws. 

With that said, I believe the Congress must act in response to 

the campaign finance restrictions overturned by the Citizens 

United v. FEC case. This ruling now allows corporations and 

unions to spend unlimited funds from their general treasuries in 

campaign advertisements targeted at a specific candidate. I was 

one of four Members of Congress who filed an amicus brief prior 

to the ruling asking the Supreme Court to uphold the laws that 

long prevented corporate and union spending from being a deciding 

force in the political process. For this reason, I have introduced a 

bill with Representative David Price from North Carolina called 

the Stand By Every Ad Act, which extends the Stand By Your Ad 

disclosure currently required of candidates and political advertisements to CEOs of corporations and the union leaders. I believe this 

is a targeted response to the Citizens United case. 

I look forward to listening to the testimony of the witnesses before us today. We know there’s a lot of other legislation, and I 

would be interested in your comments about that and again thank 

3 

you all for being here. We look forward to the hearing. I yield back, 

Mr. Chairman. 

Chairman KANJORSKI. Thank you, Mr. Castle. Today, we meet to 

examine the likely effects of the Supreme Court’s decision in Citizens United v. the Federal Election Commission. In response to this 

groundbreaking ruling, Members of Congress have introduced no 

less than 30 bills. While other panels in the House have jurisdiction over many of these measures, the Financial Services Committee has the responsibility to examine these bills related to 

shareholders’ rights and corporate governance. 

Like many, I was disappointed in the Supreme Court’s ruling. In 

our system of capitalism, corporations enjoy many benefits designed to promote the efficient allocation of resources in a variant 

economy. Unduly influencing elections should not be one of those 

privileges. Moreover, shareholders have financial interests in companies, not political interests. Finally, I should note that in our political system, people vote. Corporations lack such rights. 

To limit the influence of the Citizens United decision, the Capital 

Markets Subcommittee now has under consideration several proposals. Those thoughtful bills generally aim to increase shareholders’ participation in the electioneering decisions of public companies, enhance public transparency on corporate campaign spending, and contain corporate political activities. At the very least, we 

ought to act to empower shareholders to determine whether and 

how corporations can spend their money for political purposes. 

Shareholders should not expect that a company will use their 

money to invest in candidates that the shareholders themselves do 

not support. In this regard, corporate management should obtain 

some form of approval from their shareholders regarding corporate 

campaign expenditures. 

We also ought to enhance public disclosures of corporate political 

expenditures. Many have said that transparency is the best disinfectant. Better information about how corporations spend their 

money on political activities will help to hold corporations accountable for their actions. Today, we will examine pending legislative 

proposals introduced by Mr. Ackerman, Mr. Capuano, Mr. Peters, 

Mr. Grayson, and Ms. Kilroy that achieve these desired ends. We 

will also explore ways to refine these bills. 

I look forward to a vigorous debate at this hearing so that we can 

determine the best way to move ahead on these important policy 

matters. Moreover, because we have many ideas concurrently in 

motion, I am also hopeful that we can work today to achieve consensus, improve coordination, and ensure a comprehensive legislative reaction. 

In sum, while courts have long granted corporations the status 

of personhood, they are not actually people. We need a legislative 

response to the Citizens United case in order to restore the balance 

in our democratic system. And corporate governance reforms represent an important facet of an effective solution. Such reforms can 

give American citizens—the living, breathing, voting people we are 

here to represent—faith that our system of representative democracy will long endure and thrive. 

Mr. Capuano is recognized for 3 minutes. 

4 

Mr. CAPUANO. Thank you, Mr. Chairman. First of all, I want to 

welcome the witnesses today. My hope is that—we have been working on this original draft bill for a while now. We have actually 

taken out some of the provisions I think some people might be concerned with, that I was concerned with, relative to the numbers of 

votes specifically by shareholders and the like. And I hope that you 

have a chance to look at the redrafted bill soon to get further input. 

I think we have addressed most of the concerns that some people 

might raise that I had myself. 

And of course, what this bill is, is exactly what has already been 

told. The bill is an attempt to do what we can do within the limits 

of the law, without impeding anybody’s First Amendment rights or 

rights to gather or anything else. When I was in law school, I was 

taught that corporations had three basic rules: Use somebody else’s 

money; make a profit; and keep both. My understanding is that the 

Supreme Court has kind of expanded that just a little bit more, 

and I respect that. I may disagree with it vehemently, but it’s not 

the first Supreme Court ruling I have ever disagreed with, and I 

have no doubt that it will not be the last. At the same time, that 

does not mean that we should not then have an appropriate and 

thorough response to it to the best of our abilities, knowing full 

well that someone will bring something to court again. That’s why 

we have this system. We do what we think is best to the best of 

our abilities without intentionally breaking any laws or violating 

the Constitution and have those attempts tested in court. And 

that’s why we’re back today. We thought we had fixed this once, 

but apparently we didn’t, so now we’ll try it again. 

I’m looking forward to hearing testimony today and ideas as we 

go forward as to what it is that we can do, knowing full well that 

some people think that we shouldn’t do anything, and I respect 

that position. I just strongly disagree with it. And I’m even open 

to suggestions by people who do disagree with this. I’m not trying 

to intentionally stifle corporations, though I would like to. I make 

no bones about it. My preferences lost in court a few months ago, 

and that’s life. At the same time, all I want now is if that’s going 

that be the case, the question then becomes, whose money is this 

that corporations can now use? And the answer is, it is shareholders’ money. That’s whose money it is. And if that’s their 

money, if they choose to be involved in politics, fine. Now I would 

love to get it to a situation where we could have it only direct 

money, and I would love to be open to that idea, because I would 

love to have ads on TV against me saying, don’t vote for Mike 

Capuano, he’s a horrendous guy, brought to you by the Exxon Corporation. That would be perfectly okay with me. We can’t get there 

yet, and I haven’t found a way to require that just yet, so I would 

love to hear ideas on that. 

But in the meantime, we’re going to do the best we can to come 

up with a bill that is constitutional yet thorough and clear to make 

sure that the free speech that has now been given to these transparent yet fake organizations, at least responsible to those people 

who own the money, which is shareholders. So with that, Mr. 

Chairman, I yield back my one second. 

Chairman KANJORSKI. Thank you very much. It is my pleasure 

to introduce the panel and call for their testimony. I want to thank 

5 

the entire panel for appearing before the subcommittee today, and 

without objection, your written statements will be made a part of 

the record. You will each be recognized for a 5-minute summary of 

your testimony. 

First, we have Professor John C. Coffee, Jr., Adolf A. Berle Professor of Law, Columbia Law School. Professor Coffee? 

STATEMENT OF JOHN C. COFFEE, JR., ADOLPH A. BERLE 

PROFESSOR OF LAW, COLUMBIA UNIVERSITY LAW SCHOOL 

Mr. COFFEE. Thank you, Chairman Kanjorski, and members of 

the subcommittee. My message is going to be very simple: Congress 

cannot really fight with the Supreme Court or with the scope of the 

First Amendment. What Congress can do, what Congress should 

do, and what I would say Congress must do, is increase the transparency and accountability surrounding corporate involvement in 

the political process. 

The best means to that end is to use Congress’ unquestioned 

power over the Federal securities laws and particularly the proxy 

rules, because that already is an established system of disclosure 

that is widely used and relied on, and only modest adjustments are 

necessary. 

The goal, however, has to be not only to increase transparency 

and disclosure, but to give shareholders an effective remedy by 

which to challenge decisions of which they disapprove, because this 

is a world in which shareholder and managerial interests are not 

well aligned. There may be perfectly legitimate corporate contributions, but for every dollar contributed by a corporation that maximize shareholder wealth, there are other dollars that are contributed to pursue the personal, political or ideological agenda of senior 

managers, and all of that is hidden. It is hidden because we today 

have an election contribution system that works through conduit 

organizations, typically trade associations and others, and there is 

no obligation for the corporation to disclose non-earmarked payments to trade associations, even though they’re perfectly aware 

and are actually told by the trade association that these payments 

are substantially going for political and electioneering expenses. 

Our focus I think today is on implementation, and what would 

I suggest? First of all, I would ask the SEC to form an advisory 

committee to reexamine its disclosure rules. We have the end report on Form 10K, the quarterly report on Form 10Q and the proxy 

statement, all of which are providing shareholders a rich range of 

information, but absolutely nothing today about political contributions or contributions to conduit organizations such as trade associations. Here you don’t need legislation. We need to prod the SEC 

to put something else on their rather busy and overcrowded agenda. That’s step one. 

Step two, we need to give shareholders an actual remedy that allows them contest a decision once it’s brought to light. And here 

there’s a problem that Citizens United just ignores. It assumes that 

shareholders have practical remedies by which to contest decisions 

of managers to make contributions. In fact, they have very few 

rights. What can we do? As a corporate governance specialist, let 

me tell you that there are always really three basic options: You 

6 

can give shareholders the right to sue. I’m not recommending that. 

I think it would be largely futile, but others can suggest that. 

You can give shareholders increased voice, and increased voice 

means a right to vote on specific proposals that are focused on a 

particular company’s situation and what has been disclosed about 

that company’s behavior. 

Next, you can finally give shareholders a right to exit, a right to 

sell their shares if they are dissatisfied. And that right only works 

if they are given specific disclosure about what contributions have 

been made, how they have been made, what the process was within 

the company for approving these, and what the rationale was. 

Now most importantly, what I would tell you is that to really 

give shareholders an effective remedy, they must be given an enhanced right to vote. Classically, the right to vote in this field was 

implemented through shareholder-approved bylaw amendments. 

For generations, shareholders have had the rights in virtually 

every State to adopt bylaw amendments that could regulate anything in the corporation’s business and affairs. Such bylaw amendments might, for example: one, require a committee of independent 

directors to approve all political contributions and electioneering 

expenses; two, require that there be a report annually to shareholders of what the purposes were and what the justifications were 

and what the process was for the contributions that were made; 

and three, prohibit certain kind of payments that are not really related to the company’s line of business or to the goal of shareholder 

wealth maximization, but appear to be related to social issues, 

whether it’s same-sex marriage or abortion, either side of these 

issues, there’s no real nexus between those issues and shareholder 

wealth maximization. 

Such bylaw amendments do not have to obtain a majority vote 

to be effective. There’s a lot of experience here. And the moment 

you have a bylaw amendment that can get a 20 percent shareholder vote and could be put up in the next year, management will 

come in and negotiate, and you’ll get a practical solution between 

the shareholders and the management because no management 

wants to have a quarter or more of its shareholders dissatisfied. So 

once these issues can be put on the agenda, then we will get a 

practical resolution. That has been the experience in a lot of areas 

with shareholder bylaw proposals. 

But there are two major obstacles, and they are both new, and 

this is where implementation really hits a rocky road: first, there’s 

a major State law problem; and second, there’s a major problem 

with SEC rules as they are currently interpreted. The major State 

law problem is a decision a year-and-a-half-old called CA Inc. v. 

AFSME. It was a Delaware Supreme Court decision a year-and-ahalf ago, and it says that shareholder power to amend the bylaws 

can never intrude upon, encroach or interfere with the power of the 

board of directors to substantively direct the business and affairs 

of the company. 

It’s an old tension, but this is a new decision, and it has really 

curbed the power of shareholder bylaw amendments. This is an 

area where I think Congress could add a simple modest provision 

to the Federal securities laws and the Security Exchange Act of 

1934, that could be limited just to bylaw amendments dealing with 

7 

corporate political activity and electioneering expenses giving 

shareholders a uniform Federal rule, because this is not an area 

where we want State-by-State variation, so that shareholders of 

any public corporation could adopt a bylaw amendment restricting 

or curbing or otherwise influencing corporate political behavior and 

corporate election expenses. 

The idea here would be to give a continuing right to adopt bylaw 

amendments, because if we only have one vote up front, the problem is there we’ll get a blanket authorization that the shareholders 

will vote forward in order not to cripple the company. We want our 

specific amendments from time to time that are focused on what 

the company is doing. 

That is the State law problem. Now, we move to the SEC’s problem. Shareholder voting basically depends today on one SEC rule 

called Rule 14(a)(8). Shareholders can place an issue on the corporation’s agenda. The issue might be a bylaw amendment, or more 

typically the issue has been a shareholder request to get an informational report. So shareholders may request the board of directors to report to them about the company’s behavior and activities 

in the political process and election expenses. That is a technique 

that has been used for 20 years or more. 

But something new has happened. In the last year, year-and-ahalf, the SEC has fallen back on several broad, ambiguous exemptions under Rule 14(a)(8) and it has ruled that the corporation may 

exclude shareholder proposals seeking more information about the 

corporation’s involvement in politics or in campaign contributions. 

It may do so, the SEC staff has ruled, at a very low level at the 

SEC, because there is a broad exemption in 14(a)(8) that says 

shareholders may not make proposals that relate to ‘‘ordinary business operations.’’ That is a very ambiguous phrase, ‘‘ordinary business operations.’’ 

And the staff has said that any proposals dealing with lobbying 

or political contributions are really dealing with ordinary business 

operations. Frankly, I think that’s symptomatic. If we say that the 

company’s involvement in politics or in campaign contributions is 

only ordinary business operations, we are assuming a giant conclusion without information about what is really going on. Thus, I 

would suggest that this committee can prod the SEC to reexamine 

these broad and ambiguous resolutions. 

The truth is that under 14(a)(8), the SEC staff once took the position that broad bylaws—the broad policy saying the company 

would not hire or retain any employee who was gay, was a matter 

of ordinary business operations. Over time, the SEC became embarrassed by that position, and Congress prodded them to reexamine it, and now they have ruled that any kind of discrimination is 

not a matter of ordinary business operations. 

I similarly think that their position that political campaign contributions are always ordinary business operations is overly broad, 

undesirable, and has to be reversed. Until it is reversed, shareholders are not going to have an effective remedy by which they 

can prod and push the company to take stronger, clearer positions. 

In conclusion, I’m suggesting there really are three things that 

should be done. One, Congress can prod the SEC to reexamine its 

disclosure rules, which is a continuous disclosure system involving 

8 

the 10K, the 10Q and the proxy statement, and have a section in 

each that describes what the company is doing in its political operations. That’s something that the SEC can do without legislation, 

but it has to be prodded because the SEC often has a very full 

plate and isn’t looking at these issues today. 

Two, I think Congress should prod the SEC to revise and narrow 

its overly broad exemptions under Rule 14(a)(8). There shouldn’t be 

any concept that ordinary business operations includes political 

contributions. 

Finally, and I’ll stop here, most ambitiously, Congress could 

amend the Securities Exchange Act and give the shareholder the 

right to adopt bylaw amendments that would limit corporate involvement in political and electioneering expenses. Then and only 

then would the key premise to Citizens United that shareholders 

can take effective action become accurate. 

Thank you. 

[The prepared statement of Professor Coffee can be found on 

page 44 of the appendix.] 

Chairman KANJORSKI. Thank you very much, Professor. Now, we 

have a little bit of a dilemma. We have about what, 101⁄2 minutes 

left, and I want to give the other witnesses equal time, since we 

allowed the professor to run over a little bit. Do you want to take 

your 5 minutes now? But we will have to limit you to no more than 

6 minutes, because we have to make a vote on the Floor. 

Mr. SANDSTROM. I will happily try to summarize my testimony 

in 6 minutes. 

Chairman KANJORSKI. Okay, then. We will recognize Mr. Karl 

Sandstrom, of counsel, Perkins Coie. 

Mr. Sandstrom. 

STATEMENT OF KARL J. SANDSTROM, OF COUNSEL, PERKINS 

COIE 

Mr. SANDSTROM. Chairman Kanjorski, Congressman Castle, Congressman Capuano, I thank you for the opportunity to appear here 

today to testify on an issue that I think is of great importance. I 

will summarize my testimony and request that the public opinion 

polls that I refer to be made part of the record. 

When Citizens United was first argued, the issue before the 

Court was whether Citizens United was required to disclose the 

corporations and other contributors who paid for the advertising 

and broadcasting of the film. The argument was made to the Court 

that disclosure was likely to chill giving by corporations. Many corporations, the Court was told, prefer anonymity. They did not want 

to be associated with controversial issues like climate change and 

financial regulation. 

In an 8 to 1 decision, the Court rejected this argument and found 

that disclosure was essential to the ability of shareholders, and 

more generally to the public, to monitor management’s use of corporate resources. Justice Kennedy wrote, ‘‘With the advent of the 

Internet, prompt disclosure of expenditures can provide shareholders and citizens with information needed to hold corporations 

and elected officials accountable for their positions and supporters. 

Shareholders can determine whether their corporation’s political 

speech advances the corporation’s interest in making profits and 

9 

citizens can see where their elected officials are in the pocket of socalled monied interests.’’ 

When the case was reargued, the issue that was added to the 

case was whether corporations enjoyed the same rights as citizens 

to spend unlimited sums promoting or opposing their candidates of 

choice. One argument that was made to the Court against extending that right to corporations is that dissenting shareholders’ reports to underwrite spending in support of candidates that they 

personally opposed. The Court rejected this argument, finding that 

the government’s legitimate interests in protecting shareholders 

could be achieved through strengthening the rights of shareholders 

through corporate governance. The Court found that there was little evidence of abuse that could not be corrected by shareholders 

through the procedures of corporate democracy. 

This decision stands for two propositions that are particularly 

relevant to this committee: first, disclosure served important governmental interests; and second, corporate governance is the 

means the Court envisions as being available for companies to be 

held accountable for their political spending. If transparency and 

accountability in the wake of Citizens United is to be more than a 

mirage, Congress will need to act. 

Current law is not up to the task. Corporations cannot disclose 

to shareholders what they do not know. Current law encourages 

companies to rely on outside groups to do their politics. The less 

a company knows about the political spending that it finances, the 

less likely it will be publicly associated with that spending. The 

more involved a corporation is in making an expenditure, the 

greater the likelihood that it will not need to be disclosed. 

Current law perversely creates incentives for corporations to remain ignorant regarding how their money is spent. The first step 

is to require corporations to be made aware of how corporate funds 

are used. Corporations should know and in turn inform their shareholders and the public when corporate money is being used to support or oppose a candidate. Unless a corporation is provided with 

the necessary information, it should not be allowed to contribute to 

an outside organization that engages in politics. Persons using a 

corporate donation to pay for political ads should be required to 

disclose its spending to the public and to the donating corporation 

and confirm that the corporate donors approved of the use. 

Transparency is insufficient without accountability. Substantial 

political expenditures should require a shareholder, at least a minimum, board of director approval. The approval needs to be specific 

and not general. The shareholders and the board need to know 

what candidates are being promoted or attacked with corporate 

funds, and why this spending is in the interest of the corporation. 

If the shareholder approval is required, an institutional shareholder should not be allowed to sit on the sidelines. An institutional shareholder needs to independently evaluate the proposed 

spending and determine it is in the best interests of its beneficiaries. 

In conclusion, only Congress can provide the protection to which 

the Court suggests shareholders are entitled. Therefore, I would 

urge this committee to accept the Court’s challenge and bring 

transparency and accountability to corporate political spending. 

10 

[The prepared statement of Mr. Sandstrom can be found on page 

79 of the appendix.] 

Chairman KANJORSKI. We are so well organized right now in the 

House that we can have a conference going on with the Republicans and a Democratic caucus going on at the same time and 

have a quorum call. So you can see we are really on track here to 

get the House well organized and on its way. And unfortunately, 

in the middle of this hearing, we have the pending quorum call. 

What we are going to do is take a 15-minute recess so we can 

record our votes, and then we will come back and finish the witness statements. So with no further ado, the hearing will stand in 

recess for 15 minutes. 

[recess] 

Chairman KANJORSKI. The committee will come to order. The 

next presenter will be Ms. Ann Yerger, executive director, Council 

of Institutional Investors. 

Ms. Yerger. 

STATEMENT OF ANN YERGER, EXECUTIVE DIRECTOR, 

COUNCIL OF INSTITUTIONAL INVESTORS 

Ms. YERGER. Good morning—I think it’s still morning. Thank you 

very much for the opportunity to share the Council’s views on the 

very important issues under consideration today. By way of introduction, the Council is a nonpartisan association of public, union, 

and corporate employee benefit plans with assets exceeding $3 trillion. Council members are responsible for safeguarding assets used 

to fund the retirement benefits of millions throughout the United 

States. Our members are quite diverse and include the State funds 

from almost all of your States, along with corporations such as 

Johnson & Johnson and unions such as the AFL–CIO. So clearly, 

there is a wide variety of views on issues within the membership. 

Our members do share some very important characteristics. 

First, they have a very significant commitment to the domestic 

markets, on average investing about 60 percent of their portfolios 

in stocks and bonds of U.S. public companies, and they are longterm patient investors due to their lengthy investment horizons 

and heavy commitment to passive investment strategies. 

As an initial matter, I want to state up-front that consistent with 

our membership-approved policies, the Council has no position on 

the legal issues arising from the Citizens United decision, including 

whether there should be limits on corporate political activity. And 

since we are an organization of investors, I have no position either 

on the need for limitations on activities by nonpublic entities. Rather, we view the issue of corporate political activities solely from the 

lens of an investor organization that advocates corporate governance best practices and shareowner rights. 

Our long-standing policies reflect consensus among Council members that political and charitable contributions by public companies 

are important corporate governance matters warranting robust 

board and shareowner oversight, comprehensive and accessible 

public disclosure, and meaningful director accountability. 

Corporate governance at its most fundamental is about ensuring 

that investors’ capital is prudently used to create long-term value. 

Heightened scrutiny is warranted any time corporate executives 

11 

may simply give away investors’ money. The Council acknowledges 

that to date, corporate political and charitable contributions are 

generally immaterial in amount. However, as Professor Coffee 

noted, given the potential for conflicts, waste, and legal, 

reputational, and governance risks that may arise from corporate 

political and charitable contributions, enhanced oversight is particularly important. 

The Council believes such oversight is best addressed by directors and shareowners through a combined approach focused on disclosure and board accountability. Thus, we believe Congress should 

consider taking steps that would facilitate a market-based, disclosure-focused approach to corporate political and charitable activity. 

That approach should include at least two elements: 

First, requiring all public companies to disclose their charitable 

and political contributions as well as their board’s policy for monitoring, assessing, and approving such spending. To be useful to investors, those disclosures should include amounts and recipients. 

They should also be readily accessible through some electronic, 

widely-used format that facilitates comparisons and other analyses. 

Second, providing shareowners with meaningful tools to hold directors accountable if they are disappointed with their oversight of 

the corporation’s charitable and political activity. More specifically, 

all public companies should be required to: first, have majority voting for the uncontested election of directors; and second, provide 

long-term shareowners the ability to include director’s candidates 

on management’s proxy card. That’s the so-called proxy access reform. 

I should note that the Securities and Exchange Commission is 

considering a proposal addressing proxy access, and the Council 

strongly supports this proposal. The Council also commends the 

House for affirming the SEC’s authority in this area in the Wall 

Street Reform and Consumer Protection Act of 2009. 

I agree transparency is the best disinfectant. However, that’s 

only half of the solution. Without basic reforms to the director election process, shareowners simply will not have the tools they need 

to hold directors and boards accountable for their oversight performance, including their oversight of political and charitable 

spending. 

Before closing, I would like to note for the record that at this 

time, the Council’s policies do not address shareowner approval of 

political and charitable contributions. Views are mixed within the 

Council membership on this issue. Some members strongly support 

such approval. Others have concerns, particularly regarding the 

workability and effectiveness of such a vote. 

Thank you, Mr. Chairman, for inviting me to participate, and I 

look forward to answering your questions. 

[The prepared statement of Ms. Yerger can be found on page 86 

of the appendix.] 

Chairman KANJORSKI. Thank you very much, Ms. Yerger. We 

will now hear from Mr. J.W. Verret, assistant professor of law, 

George Mason University School of Law. 

Mr. Verret. 

12 

STATEMENT OF J.W. VERRET, ASSISTANT PROFESSOR OF LAW, 

GEORGE MASON UNIVERSITY SCHOOL OF LAW 

Mr. VERRET. Chairman Kanjorski, Ranking Member Garrett, and 

distinguished members of the committee, it’s a privilege to testify 

today. I thank you for the invitation. My name is J.W. Verret. I am 

a professor of law at George Mason Law School, and I am also a 

senior scholar in the Mercatus Center at George Mason University, 

where I am a member of the Financial Markets Working Group. I 

also direct the Corporate Federalism Initiative, a network of scholars dedicated to studying the intersection of State and Federal authority in corporate governance. 

The one group with the most to gain from H.R. 4537 and other 

bills under consideration today, including H.R. 4537, the Shareholders Protection Act of 2010, are large institutional shareholders 

that have unique conflicts of interest. The group that stands to suffer the most from much of the legislation under consideration today 

are ordinary Main Street shareholders who hold shares through 

their 401(k)s. 

There are two types of shareholders in American publicly traded 

companies. The first are retail investors or ordinary Americans 

holding shares through retirement funds and 401(k)s. Half of all 

American households own stocks in this way. The other type of investor is the institutional investor, including union pension funds 

as well as State pension funds run by elected officials. H.R. 4537 

and other legislation seeks to give those institutional investors leverage over companies for political purposes at the expense of retail investors. We have seen numerous instances where institutional shareholders use their leverage to achieve political goals, like 

CalPERS, the California pension fund, and their insistence on environmental or health policy changes that are paid in the end by ordinary shareholders. 

Today’s legislation attempts to contort the securities laws to regulate campaign finance. In doing so, it risks limiting the ability of 

companies to communicate with legislators by giving special interest institutional shareholders like unions power to stop those communications. This bill does not limit union political spending in any 

way, I might add. And it has nothing to do with the investor protection goals of the Securities Exchange Act, other than the fact 

that in the end of the day, it actually harms those goals. 

Shareholders have two available remedies if they become dissatisfied with the performance of their companies: they can sell the 

shares; or they can vote for an alternative nominee. They do both 

with some frequency. In the rare event that political advocacy results in corruption, there’s a third line of defense in place. If the 

audit committee of the board of directors, which is independent of 

company management, determines that donations are inappropriate, they are required under the Foreign Corrupt Practices Act 

to stop them immediately. 

The structure of American corporate law rests the authority to 

manage the day-to-day affairs of the company, including decisions 

of how to invest the company’s funds, with the board of directors. 

Putting expenditures to a shareholder vote, like the legislation 

today requires, is the first step toward turning shareholder votes 

into town hall meetings. 

13 

Some shareholders may want the company to locate a new factor 

in their town or give away health benefits for employees without 

regard to whether those expenses risk bankrupting the company. 

Shareholders choose the board of directors and delegate authority 

to make those decisions to the board in order to avoid that very 

problem. 

Political risk poses a danger to the 401(k)s of ordinary Americans 

more now than ever before. Leaders responsible for policies that 

subsidized dangerous mortgage practices, for instance, through 

Fannie Mae and Freddie Mac, now seek to expand financial regulations to generate the appearance of responsive action. 

The Supreme Court recently affirmed that companies have a constitutional right to advocate on behalf of their shareholders. Corporations do so particularly to protect the property rights of those 

shareholders from expenses associated with regulations whose 

costs might exceed their benefits. Many reputable companies spend 

money in this way. Berkshire Hathaway, for example, one of the 

most highly regarded companies in America, spent $3 million last 

year advocating for the interests of the school and its shareholders. 

Today’s bill purports to redefine State corporate law, to make 

unvoted expenditures a violation of the company’s fiduciary duty. 

This is a serious misunderstanding of the structure of corporate 

law. As Justice Powell wrote, ‘‘No principle of corporate law is more 

firmly established than a State’s authority to regulate domestic corporations, including the authority to define the voting rights of 

shareholders.’’ 

The Shareholder Protection Act of 2010 has nothing to do with 

reforming financial regulation in response to the financial crisis, 

and indeed is a distraction from that vital work. It risks giving 

powerful institutions such as pension funds and State-elected 

treasurers dangerous leverage over the retirement savings of ordinary Americans. To call H.R. 4537 a Shareholder Protection Act is 

fundamentally misleading. 

Thank you for the opportunity to testify, and I look forward to 

answering your questions. 

[The prepared statement of Professor Verret can be found on 

page 84 of the appendix.] 

Chairman KANJORSKI. And next, we have Ms. Nell Minow, editor 

and co-founder of The Corporate Library. Ms. Minow, I understand 

you are the daughter of Newton Minow. Is that— 

Ms. MINOW. Yes, I am. 

Chairman KANJORSKI. Oh, congratulations. He is quite a famous 

fellow. 

Ms. MINOW. He’s also the world’s best father. 

Chairman KANJORSKI. Great. 

STATEMENT OF NELL MINOW, EDITOR AND CO-FOUNDER, THE 

CORPORATE LIBRARY 

Ms. MINOW. Thank you very much, Mr. Chairman, and members 

of the committee. It’s an honor to be back in this room to talk with 

you about one of my favorite subjects, corporate governance. 

I want to associate myself with the remarks of the first three 

panelists in particular, and so I’m not going to reiterate their 

points. I’m just going to move over them quickly so that we can get 

14 

to the question part. But I think we can all agree that the bedrock 

principle here in the United States is freedom of speech. We’re all 

in favor of freedom of speech. We’re all in favor of the marketplace 

of ideas and of allowing even bad ideas in and countering them 

with better ideas, but we cannot let the marketplace of ideas be 

tainted by that other marketplace, the one that involves actual 

money. And I think that is what’s happening here. 

I’m a little surprised by Professor Verret, aside from the fact that 

he’s factually wrong on a number of his assertions. 401(k) investors, for example, invest largely through institutional investors and 

don’t do individual stock picks. But I’m a little surprised because 

I thought that he understood that markets run on information. And 

what we’re really about here is getting that information out there. 

The conflict of interest is not at the shareholder level; it’s definitely at the executive level. Executives are the ones who spend 

corporate money hiding it through intermediaries to influence the 

political outcomes in a way that is even contrary to their expressed 

views. We need to clean that up. 

If in fact, as the Court says, corporations are assemblages of individuals with First Amendment rights, let’s make sure that the corporate positions reflect the views of those individuals. I really particularly object to his point that apparently shareholders are smart 

enough to buy the stock and to sell the stock but they’re not smart 

enough to vote the stock intelligently. I think the whole idea of 

shareholder rights is that shareholders will in aggregate make the 

right decision, and when they don’t, they bear the consequences. 

That’s what markets are all about. 

So the problem, as always under a capitalist system, is agency 

costs. How do we give corporate managers enough authority to run 

the company in a way that is sustainable over the long term without giving them so much that they appropriate corporate funds for 

their own ends? The secret is, of course, better disclosure. If we had 

a better idea of what they were doing, then perhaps I would be 

able to tell you exactly how much money the insurance industry is 

spending to stop health care reform instead of saying it’s between 

$10 million and $20 million. I don’t know. How do I not know? Because it’s not disclosed. Problem number one is the lack of disclosure to the current and potential investors in the company. 

Problem number two, as Ann Yerger said, is that even if shareholders know how their money is being spent and what positions 

it’s being used to support, there’s no way for them to respond effectively to provide necessary direction. I always love explaining to 

people who know better than anyone else in the world what an 

election means in the corporate world: no one runs against you; 

and management nominates the candidates and counts the votes. 

Not only that, but if you only get one vote, you get elected. We currently have over 80 directors serving even though a majority of the 

shareholders voted against them. We have to have a better system 

than that. We must require majority vote and give shareholders access to the proxy to run their own candidates. 

The third problem, and the one I really want to focus on, is the 

problem of intermediaries. It’s not enough that corporations must 

disclose every penny that they spend on political contributions, lobbying, ads, etc. We have to get them to disclose what they funnel 

15 

through intermediaries, whether it is the Chamber of Commerce, 

which has been completely co-opted by the executives to the detriment of business, or these fake groups that are called something 

like ‘‘Citizens for a Better Tomorrow.’’ 

The Chamber of Commerce, which recently was found to have 

overstated its membership by 900 percent, has been particularly 

susceptible to this kind of manipulation. They now have of course 

only 300,000 members, not the 3 million they had previously 

trumpeted, but their tax filings show that just 19 donors contributed one-third of their income. We need to find out where that 

money is coming from and where it is going and who it benefits. 

The fourth problem, and this is the one that I think is most important, is once shareholders have the information, do they have 

the right and the opportunity and the obligation to act on it? 

Shareholders, institutional shareholders of course are fiduciaries, 

the strictest standard under our legal system. I think that’s intended to address the conflicts of interest that may exist that Professor Verret refers to, but we need to make sure. I would really 

love to see this committee call in Fidelity, Vanguard, etc., and ask 

them: ‘‘How do you vote on these issues? What do you look for? 

Why aren’t you doing a better job?’’ 

Finally, the fifth problem is that political elections, as you know, 

are too expensive in this country. I think we need to work on that 

side of it, too. I urge the members of the committee to give careful 

consideration to the Fair Elections Act and to making free television time available. Because frankly, if that was available, politics would not be so expensive and we wouldn’t have this problem 

to begin with. 

Thank you again for allowing me to comment, and I look forward 

to your questions. 

[The prepared statement of Ms. Minow can be found on page 72 

of the appendix.] 

Chairman KANJORSKI. Thank you very much, Ms. Minow. Next, 

we will have Professor Michael Klausner, Nancy and Charles 

Munger Professor of Business and Professor of Law, Stanford Law 

School. 

Professor Klausner. 

STATEMENT OF MICHAEL KLAUSNER, NANCY AND CHARLES 

MUNGER PROFESSOR OF BUSINESS AND PROFESSOR OF 

LAW, STANFORD LAW SCHOOL 

Mr. KLAUSNER. Thank you, Chairman Kanjorski, and members of 

the committee. I too agree with much of what the first three speakers said, and Ms. Minow as well, so I’ll be brief. In Citizens United, 

the Supreme Court recognized that its decision left open the question of how the corporate governance regime would address political advocacy by corporations. The Court suggested that concern 

over management control of political expenditures could be ‘‘corrected by shareholders through the procedures of corporate democracy.’’ The Court further stated that ‘‘the remedy is not to restrict 

speech but to consider and explore other regulatory mechanisms.’’ 

So that’s what we’re doing today. 

The threshold question is, what can shareholders do under the 

current governance regime if they would like to influence manageVerDate Nov 24 2008 16:53 Jun 15, 2010 Jkt 056773 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\56773.TXT TERRIE
16 

ment’s use of corporate funds for political activities? And the answer is, not much. The only potential tool available to shareholders, as Professor Verret said, is their right to vote annually for 

nominees to the board of directors. That mechanism, however, is 

poorly designed for the purposes of controlling political expenditures. It doesn’t allow shareholders to exert any sort of advanced 

power, nor does it allow shareholders to vote out boards of directors, as Ms. Minow said. So the vote for nominees to the board is 

not going to be effective in this realm, in my view. 

The other potential response, also referred to by Professor 

Verret, is that shareholders can sell their shares. That response, 

however, won’t influence management’s political expenditures, and 

in fact, it barely amounts to self-expression. Management won’t 

even know the shares have been sold. They will be bought by other 

investors who don’t know of or aren’t bothered by the political expenditures. Unless the political expenditure is significantly bad for 

business, there will be no effect on the company’s share price and 

therefore no influence on management before or after the fact of 

their political expenditure. 

Now if a political expenditure is materially bad for business, then 

the share price will decline as a result of normal share trading, regardless of whether they are politically motivated stock sales. So 

in sum, the current system of voting for boards of directors and 

selling shares isn’t really a response to the political expenditure 

question. 

The basic problem is that the current system is not designed to 

give shareholders a direct voice in management decisionmaking, 

nor should it be. The assumption of the system is, first, that shareholders essentially have uniform interests in having management 

maximize the return on their investment. And second, that shareholders lack the expertise to manage the company. These are valid 

assumptions in the context of business decisions. But they don’t 

apply in the context of political expenditures. Shareholders are not 

uniform in their political views, and there is no reason to defer to 

management on this dimension. 

Now the fact that shareholders lack effective means of controlling 

political expenditures doesn’t mean that they will do nothing. To 

the contrary, they could well decide, and I expect they would, to 

use the annual vote for board nominees as a mean of expressing 

dissatisfaction, even if doing so will not result in displacing the 

board. This use of the shareholder vote would undermine the signal 

that vote could send with respect to the quality of management and 

its business decisions. I therefore think not only is the shareholder 

vote inadequate, but it actually is a poor vehicle through which to 

try to control political expenditures. 

So what do I think this committee should consider? I propose the 

following. That corporations be required to let shareholders vote 

annually on whether they want their company to exercise the 

rights Citizens United gave to them. Managers who seek shareholder approval of political expenditures would use this opportunity 

to explain the expenditures they intend to make, how those expenditures would be in the shareholders’ interest, and what the 

cost would be. It need not be a line item disclosure, just a description of the types of expenditures management anticipates. The vote 

17 

would be separate from the vote for board nominees. Therefore, 

shareholders would be able to express their views on politics separately from their views on how well management is doing at running the company. 

The mechanism isn’t perfect, but I think it’s an improvement 

over what we have, now that Citizens United has been decided. 

Thank you, and I look forward to your questions. 

[The prepared statement of Professor Klausner can be found on 

page 65 of the appendix.] 

Chairman KANJORSKI. Thank you, professor. 

And finally, we will hear from Mr. Jan Baran, partner, Wiley 

Rein. 

Mr. Baran. 

STATEMENT OF JAN BARAN, PARTNER, WILEY REIN LLP 

Mr. BARAN. Thank you, Mr. Chairman, and thank you for your 

excellent Polish pronunciation of my name. 

My name is Jan Baran. I am a partner at the Washington, D.C. 

law firm of Wiley Rein LLP, and I head the firm’s Election Law 

and Government Ethics Group. I am here today in a purely personal capacity, even though I was involved in the Citizens United 

case through the submission of an amicus brief. I am not representing any party to that case or any client of my firm. 

I would like to touch on three subjects in summarizing my prepared comments which were submitted to the subcommittee: first, 

I would like to just spend a moment to make sure we understand 

the scope of what the Supreme Court did; second, I wish to comment on some of the constitutional ramifications of that decision in 

the context of what you’re considering here in this subcommittee; 

and third, I want to touch on some practical concerns I would have 

that I’m sure you will want to keep in mind when you undertake 

your legislative drafting. 

In terms of the Citizens United case, the technical conclusion of 

the Court was that the First Amendment does not allow Congress 

to prohibit corporations, and presumably unions, with respect to 

the content of certain public advertising. That content involves 

what is called express advocacy or electioneering communications. 

Until the decision, Federal law and the law in approximately 24 

States prohibited corporations from financing public advertising 

that says ‘‘vote for’’ or ‘‘vote against’’ a named candidate. 

Up until the Citizens United case, there were many other forms 

of corporate financed advertising, including political advertising, 

that were permitted, and in fact protected under the First Amendment, including so-called issue advertising, discussion of public officials with respect to public issues and legislation. In fact, 2 days 

before the Citizens United case, there was a special election in the 

Commonwealth of Massachusetts, and in that election, which predated Citizens United under then-existing law, there was approximately $4.5 million in advertising financed by corporations and 

unions and other groups with respect to that election. 

So the technical consequence of Citizens United is that corporations can now be unburdened with any content regulation as to 

what they say independently of any candidate or political party, 

18 

and they can do so at any time. They cannot be limited in their 

pre-election communications to the public. 

Having made that conclusion, this subcommittee and Congress 

has a challenge of addressing what forms of regulations it may 

want to implement in light of Citizens United. Obviously, I have 

heard a great deal of discussion today about corporate governance 

and corporate law principles, which is what I assume is the typical 

jurisdiction of this committee. But when you legislate now, you are 

legislating in an area of First Amendment rights, and you don’t 

have as free a hand, assuming you did before. 

One of the principles in First Amendment jurisprudence is that 

political speakers must be treated equally. This has been evidenced 

in numerous Supreme Court cases involving, for example, First 

Amendment exercise of picketing and other forms of expression. 

There were laws in Illinois at one time that prohibited certain 

types of picketing except by labor unions. The Supreme Court in 

the Mosley case said, well, there’s no reason to distinguish between 

these types of activities, between unions and corporations and 

other organizations. And just last month, the Colorado Supreme 

Court struck down a State law that imposed contribution prohibitions and limitations on labor unions if they had a contract with 

the State but did not do so with respect to private corporations or 

other types of entities that had government contracts. The reason 

that the court struck it down is that in these types of cases the government has an obligation when questioned in court to come forward and explain why different speakers, different participants in 

the political process exercising First Amendment rights are being 

treated differently. And you have to demonstrate a compelling governmental interest in justifying the disparate treatment. 

So how does that affect you and this legislative issue that you 

are addressing? Well, if you are going to require shareholder voting 

because you want to have the participants in a corporation make 

this type of decision, why will that not be true of other speakers 

spending money, including labor unions? Will their members now 

approve any expense over $10,000? And what about other types of 

incorporated entities such as trade associations? Will a trade association require the vote of its members before it spends more than 

$10,000? What about groups like the National Rifle Association or 

the Sierra Club? If they’re not going to be required to ‘‘approve’’ 

this type of an expense, what is the reason that you are requiring 

business corporations to do that? 

There are also other types of discriminatory effects that you will 

have to be mindful of. I know that Congressman Capuano’s proposed legislation as currently drafted—I have not seen any of your 

revisions, sir—requires shareholder votes for expenses over 

$10,000, except for media corporations. There’s an exception for 

media corporations. So there has to be an explanation. Why are we 

treating public media corporations differently than other types of 

public corporations? That presents a big problem, because the Supreme Court in Citizens United noted the discrepancy of treatment 

of public media corporations and said that really wasn’t fair. All 

corporations should have the same rights that media corporations 

have. In practical terms, some media corporations are actually subsidized by subsidiaries that aren’t media corporations. I’m thinking 

19 

of The Washington Post Company. The newspaper is a money-losing proposition. But the company is quite profitable, mainly because of Kaplan Educational Services. So one can say that’s a 

media company, but in fact it’s being subsidized by non-media corporate activity. 

Finally, as noted in my written testimony, you will have to confront some very practical implications in anything that you propose, including proposals by other committees or other legislation 

that may not be handled here. For example, I note the question of 

what’s going to happen to foreign corporations? There is a suggestion elsewhere to treat corporations that are more than 20 percent 

owned by foreign nationals, however that’s defined, to be a foreign 

company, and therefore, they cannot make any expenditures. That 

proposal presents some unique issues, but it also runs into some 

of the things you’re considering. If you require public corporations 

to have a vote of stockholders, what does that mean for a foreigner 

who owns stock in one of these corporations? Are you requiring 

them to vote on this, or are you going to prohibit them from voting 

on these types of issues because, after all, they’re foreigners. Separately, there’s the issue of, well, what does make a company foreign, 20 percent stock ownership? What about a company whose 

revenues from foreign sales well exceeds 20 percent of all its revenues? That’s foreign money coming in here to a corporation. Does 

that make that corporation ‘‘foreign’’ in the sense that it is now 

benefitting from foreign financing, which theoretically could be 

used here in the United States for political expression? 

Thank you for this opportunity and I look forward to your questions. 

[The prepared statement of Mr. Baran can be found on page 33 

of the appendix.] 

Chairman KANJORSKI. Thank you very much, Mr. Baran. I will 

take my few moments and then we will hear from the experts in 

the committee. First of all, it strikes me that we should be considering a resolution to establish the United Corporations of America, 

because is that not the path we are really going down? We are trying to make corporations and other entities like that so human as 

to be true, complete citizens of the United States. 

You know, that sounds far fetched, but I am not sure we are not 

running down a path that will not become very popular in a short 

period of time to call for and convene another Constitutional Convention in the United States to reexamine the First Amendment 

and the rights attendant thereto. And I think we were on that 

track ever since Sullivan v. New York Times, to tell you the truth, 

and that whole course of conduct that we are in. And it somewhat 

frightens me. Just to take it out of the realm of humor in terms 

of establishing a Constitutional Convention, maybe that should be 

serious. 

But, you know, in Pennsylvania at the turn of the century, we 

had a very unique thing. The three industries of Pennsylvania—the 

railroad, the steel industry and the mining industry—actually had 

reserved seats in the State Senate of Pennsylvania so that they 

could participate right on the Floor with the Senators so they 

would not get too far away from the intended principles of capital. 

And it always struck me that is about as far as the country and 

20 

certainly Pennsylvania had gone, and then we swung back to the 

progressive era of Roosevelt and changed some of those things, but 

we seem to be on that same course right now. 

We ran across this incidentally, in this committee most recently 

of how to get our arms around rating agencies with their constitutional protection under the First Amendment and what do you do 

and what the effect is and how do you regulate them. I am not at 

all sure that if I had my d’ruthers, I would view the First Amendment to the Constitution in terms of free speech as not being corporate free speech. That if you want the protection of free speech, 

be a single entity. Once you start getting in a conglomerate, you 

should lose those rights. But we have lost that battle. Now we are 

into corporations. And I happen to agree with you, Professor, if 21 

percent of a corporation is ‘‘foreignly’’ owned as compared to 19 percent, and who should participate. 

I am more worried about the amount of monies involved and the 

effect of that money on elections. Having participated in 13 or 14 

primary and general elections in my term in Congress, I have seen 

what money can do in campaigns, and it seems to pollute them 

every year more and more. And sometimes humorously on the 

Floor, we comment that really it would be much better if everybody 

just announced that they were no longer going to take a salary or 

take an office allowance, but that they would have their sponsors 

pick that up and you could go to your constituents and say, I’m not 

costing you anything to cast your representative vote in Congress 

because I represent United States Steel, and they pay my salary 

and they pay—and everybody go out and get their corporate sponsor. And I am sure some segment of the American population may 

think that is a great cost savings. I hope not, but I am afraid that 

may be the truth. 

Where do you see this—and maybe I will start with you, Professor Coffee, where do you see this all to be heading? I know your 

presentation got us to how to handle immediately using the governance provisions. But do you think we ought to go beyond that in 

addressing this issue and think about going to the basis of the Constitution itself and whether or not we lost control of that definition? 

Mr. COFFEE. I would hesitate to encourage anyone to convene a 

Constitutional Convention. There are so many different issues 

here. The rating agencies are one issue. The courts can still handle 

that. There is this area where we’re told corporations have speech, 

but the Supreme Court is also telling us that shareholders have 

full control over limiting, curbing, and focusing that speech. And I 

think that should play out for a bit. I think you should think about 

a range of options for shareholders, whether it’s an annual vote, 

whether it’s bylaw votes, whether it’s referendums, giving them all 

the possible mechanisms to control their own organization. I think 

that’s the least drastic means. And I would suggest we approach 

this by looking for the least restrictive alternative, and I think 

that’s enabling self-regulation. 

If self-regulation fails, and we may decide that in 4 or 5 years, 

then we can come to the Constitutional Convention. But I’m not 

sure that we have the same people that we had when Madison, 

Hamilton, and the Founding Fathers were putting this together, 

and I think that this would be also intensely lobbied. So I would 

21 

first give the chance for self-regulation to work by empowering 

shareholders and by prodding the SEC, of which I’m a great admirer, but they’re very busy. And they need to respond to this new 

revolution. 

Citizens United is a revolution, and they have to think about how 

they should reform and revise their own disclosure medium to give 

shareholders more information. Only then will voting work. Voting 

works when there’s full information. So I’m suggesting self-regulation first and maybe ultimately you’ll be right and we have to have 

this convention, but I wouldn’t rush there. 

Chairman KANJORSKI. No, I am afraid—I agree with you in 

terms of we probably would lose a good portion of the Bill of Rights 

if we convened a convention. The price would be extraordinary. But 

it looks like we are headed down that path. Do any of you as Constitution scholars see, has the Court gone to its extreme with this 

thought process, or are they going to go beyond this and continue 

to go beyond this and just push us to a corporate society? 

Mr. COFFEE. I think it depends a lot on who is on the Court. 

Chairman KANJORSKI. Well, I— 

Mr. COFFEE. —we’re going to have a transition, it’s coming. I 

would think that the Court has taken a strong position but it has 

also left open a lot of room for self-regulation and for regulation 

that enhances the power of shareholders to curb and control the 

corporation. And I think that’s the area that can be most exploited 

in the short run. 

Chairman KANJORSKI. How do you handle Mr. Baran’s problem 

with the ownership problem? 

Mr. COFFEE. You know, I did hear—Mr. Baran and Mr. Verret, 

and they different views, but they were somewhat similar. I don’t 

believe there’s a fundamental conflict here between institutional investors and retail shareholders. There may be in some other areas 

like securities litigation, but I don’t think there is here. In terms 

of Mr. Baran’s problem about foreign shareholders, I don’t think 

there’s any danger about this bill being underinclusive because it 

covers only publicly held corporations. That’s where we have the 

problem of disbursed ownership, where there are tens of thousands 

of shareholders and management that is effectively immune from 

shareholder control. 

When you look at privately held corporations, there are powerful 

shareholders there, and they can find their own ways to control 

managers. So I would start with the publicly held corporation 

where Congress has always directed the securities laws at the publicly held corporation. And I don’t think there is any danger of a 

statute being found unconstitutional because it’s underinclusive. 

Obviously, you want to comment. 

Chairman KANJORSKI. How do you handle the hidden ownership 

question of whether the ownership is in trusts or other devices that 

really do not readily disclose who the owners are? How do we know 

that in fact China is not a participant in a trust held in one of our 

major banks? 

Mr. COFFEE. I think you can’t handle every problem at the first 

crack of the bat. It could well be that there are conflicts that you 

will find among institutional investors, but institutional investors 

probably own over 70 percent of our largest companies. And if we 

22 

feel that there are conflicts there influencing their voting, Congress 

can come back and give the beneficiaries greater control over the 

institutions. But I would start with the manageable problem of giving the shareholders of the company a greater say in this process. 

Because right now, they don’t know what’s going on. 

Chairman KANJORSKI. Mr. Castle, I exceeded my time and I am 

going to get to your questions. 

Mr. CASTLE. Thank you, Mr. Chairman. Mr. Baran, you stated 

in your testimony, and I think I wrote it down, I think you said 

that this case applies to corporations. I think you said presumably 

unions too. I have not read it, and I’m not an expert on it anyhow, 

but does anyone disagree here on the panel that it applies to 

unions as well as to corporations? Mr. Sandstrom? 

Mr. SANDSTROM. Mr. Castle, I think the regulator, the Federal 

Election Commission, has determined how it’s going to enforce the 

law, and it’s going to enforce the law in the same way against labor 

unions as corporations. The labor unions will be free to make independent expenditures from labor funds. 

Mr. CASTLE. I don’t know if this hearing is about just Mr. 

Capuano’s bill or not, but it has been referred to, and it refers to 

shareholder protection and deals with just corporations. Would you 

not agree that we need to deal with the union issue as well? 

Mr. SANDSTROM. I think the union issue is somewhat different. 

First, with respect to disclosure, one of the problems in the corporate area is most of the money is not disclosed. Most of the 

money unions use in politics is disclosed. Second, I don’t think anybody, even Mr. Capuano’s bill, is looking that the beneficial shareholders actually have a vote. But when you have a large number 

of institutional shareholders and others who are representing the 

interests of those beneficial shareholders, the millions of Americans 

out there who hold stock beneficially, that they should have—be required to act in this area. 

Mr. CASTLE. I’m not sure I agree with you. The mere fact it’s disclosed may not be sufficient. Should the various union members be 

given the right to vote on whether or not the actual expenditures 

are being made? Why wouldn’t the same rules apply? There are different circumstances of stockholders and union members, but why 

wouldn’t the same rules apply? 

Mr. SANDSTROM. I think the issue would be how to define those 

rules, who would have— 

Mr. CASTLE. I agree with that. 

Mr. SANDSTROM. —to vote on. 

Ms. MINOW. May I respond to that, please? There are several differences, but the main difference is that, as I discussed in my testimony, we do not have a robust system for electing corporate directors. We do have a very robust system for electing representatives 

in these other kinds of entities. I’m not saying that we shouldn’t 

have rules that apply to them and disclosure rules, but the fact is 

that union members can actually change their management if they 

don’t like the political positions that they’re taking. I’m open to the 

idea— 

Mr. CASTLE. Let me interrupt you. They can’t change their—I 

mean, you can change a board of directors, too. They can’t change 

their officials that easily. 

23 

Ms. MINOW. Actually, you can’t change the board of directors. 

Mr. CASTLE. They could change them— 

Ms. MINOW. That’s my point. Eighty directors are currently serving on public companies in this country, even though a majority of 

the shareholders voted against them. It’s almost impossible. It’s 

less than a fraction of 1 percent of the cases where— 

Mr. CASTLE. That doesn’t make your earlier statement correct, 

though. Your earlier statement was that they could change their— 

the people running the union. They can’t do that until there’s an 

election or something of that nature. 

Ms. MINOW. Until there’s an election. But then they can. But 

they actually can when that happens. There are also several—you 

know, they’re different, they’re different kind of entities, they’re organized differently. I’m not saying that that shouldn’t be addressed, but we should understand their differences as we address 

them. 

Mr. CASTLE. Okay. 

Mr. VERRET. Representative Castle, if I could add to that as well, 

and just in counter to the view that elections aren’t contested for 

boards of directors. Last year, at 59 companies, dissidents were victorious in contested elections, dissidents against the incumbents. 

Mr. CASTLE. Thank you. 

Ms. MINOW. Again, I did say a fraction of one percent, and that 

is a fraction of one percent. 

Mr. CASTLE. Thank you. Professor Verret, you indicated that 

the—who has the most to gain by all this is the large institutional 

stockholders and the ordinary retail investors might have the least 

to gain. I’m a little bit concerned about that as well. I mean, in a 

broad—talking about the corporate structures now, in a broad 

sense, in that you may have somebody, anyone who owns 100 

shares of something and then you have those who own 20,000 

shares of something or whatever it may be, and who’s really going 

to benefit from this and who is not in terms of making decisions. 

Can you expand on that a little bit? 

Mr. VERRET. Yes. I would offer that retail shareholders who own 

mostly through 401(k)s, whether through mutual funds or indirectly in shares, don’t have the time to vote their shares the way 

that a union pension fund would or the way that a State pension 

fund would. They don’t have the incentive to do so the way that 

those large institutions do, and they don’t have the time and the 

resources. But we have seen some political conflicts of interest from 

some of the large institutional shareholders. 

For instance, Mr. Angelides, when he was treasurer of the State 

of California, a very dedicated public servant, but certainly a political figure, as everybody would agree, said look, CalPERS has very 

strong policies about environmental regulation and about health 

care, and we’re going to use our shareholder power to see those 

through, policies we can’t get through Washington, we’re going to 

use our shareholder powers to get them. Now those might be very 

important issues, but I would take issue with the fact, with the instance of using Federal securities laws and using ownership in 

companies to deal with those policy issues. Because I don’t think 

ordinary investors through their 401(k)s want to pay for that. 

24 

Ms. YERGER. But if I may just clarify, ordinary investors who are 

indeed generally investing through 401(k)s are investing through 

mutual fund companies, institutional investors, who have a fiduciary duty to vote on behalf of those individuals. So those individuals don’t even have the right to vote those shares. But the mutual 

fund company does have the right and the responsibility. And those 

votes, I might add, are publicly disclosed. So I actually strongly disagree with your assertion there. 

Mr. VERRET. I don’t disagree with respect to mutual funds. In 

fact, my concern is not really with mutual funds today. It’s more 

with the institutions that have demonstrated political interests. 

Ms. YERGER. But they are indeed a minority of the institutional 

owners. 

Ms. MINOW. And I disagree with your characterization of those 

interests as political interests. Are you saying that there is no legitimate interest of a fiduciary investor in the environmental policies of the portfolio companies? Of course it’s a completely legitimate interest, and you’re making a completely false dichotomy. 

Mr. VERRET. I’m suggesting that fiduciary law is not sufficient to 

deal with these conflicts of interest with respect to State pension 

funds and union pension funds. Yes, I am suggesting that. 

Mr. KLAUSNER. Can I just clarify one thing? 

Mr. CASTLE. Wait a minute. Mr. Chairman, how are we doing 

time-wise here? 

Chairman KANJORSKI. We are down to about 21⁄2 minutes. 

Mr. CASTLE. On the vote? 

Chairman KANJORSKI. Yes. 

Mr. CASTLE. On the Floor. I think we’re going to have to suspend 

at this point. I yield back. 

Chairman KANJORSKI. If I may call the attention of the panel, 

Professor Klausner and Mr. Baran have a conflict that require 

them to leave by 12:30. We are faced with six votes now on the 

Floor, and that would necessitate us being away until about 12:30. 

We will return. We ask the rest of the panel to remain until that 

time, and the next examiner will be Mr. Capuano of Massachusetts. We are going to recess now, and you will be first up. And if 

you are first back, take the chair, start and convene. 

Mr. CAPUANO. Okay. 

Chairman KANJORSKI. This committee will stand in recess. 

[recess] 

Mr. CAPUANO. [presiding] I would be very interested in your comments after you get a chance to look at it. But I think, I’m not sure, 

that it addresses most of the concerns. I mean, even the original 

bill, I just—the idea was to try to do something we think is legal 

and constitutional without overstepping the bounds. Who knows 

where the bounds are. The courts will make that determination in 

some future time. But the concept is not to make it so onerous as 

to be de facto prohibition. 

So what we have done is we’ll change it from a—the original pro- posal was every time there’s an expenditure over $10,000, it would 

be a one-time annual vote followed by a disclosure by the board of 

directors any time they vote to spend more than $50,000, not an 

additional vote of the shareholders, but simply a notification online, and then in the quarterly report to shareholders that this is 

25 

what we have done, and the annual shareholder vote would be to 

set a limit to say you can spend up to ‘‘X’’ dollars, whatever that 

might be. 

It would be a separate vote that’s required, and we did not try 

to take on—one of the reasons this bill is what it is, including some 

of the union issues, I think some of the union questions are fair 

questions—is that I tried to draft this bill in the jurisdiction of this 

committee. 

These other issues go to other committees, and you all know that 

there are other bills pending at the moment to address some of the 

other concerns, including some of the greater corporate concerns 

which I think are legitimate as well. And though Mr. Baran is 

gone, I just want to make sure he knows that we did take out that 

specific language relative to media corporations because it’s not 

necessary as we understand it now. 

But that’s the basic idea. And I want to be really clear. The 

whole concept of this bill is to try to thread the needle, to say what 

can we do without being overly burdensome, but also asking, whose 

money is it? And in this situation, it is clearly and unequivocally 

the shareholders’ money. And honestly, one of the things we did, 

I want to be clear, is that there was some debate as to how we 

could get to each individual shareholder so as to not disadvantage 

one shareholder over another, we couldn’t figure out a way to get 

to the people represented by proxies without creating a system that 

was so burdensome that I think that a court probably would have 

ruled it so and said it was a de facto prohibition. 

So we let the proxies do it as long as they report to the people 

that they are voting on in their behalf. And again, if somebody has 

a suggestion as to how we could do it, I totally agree I would prefer 

a situation where each individual shareholder could cast that vote. 

We couldn’t come up with a way that would do it that we thought 

would stand the test of the Constitution. 

But I want to be clear. I don’t know and I’m not all that fearful 

of most corporations doing, and if I had my d’ruthers, and everybody has different goals and motivations, my motivation in a perfect world would be to get everybody out of the electoral process except those of us who have our names on the ballot. Everybody else 

should be out of it. I can’t do it, you know, that’s the way it is, but 

I would have not just no corporate money, no union money, no 

527s, no D triple C, no nobody, if I had my d’ruthers. Just me, my 

opponents, and the voters. I can’t get there, at least if you can help 

me get there, I would be more than happy to listen, but absent 

that, the next best thing I can do is at least allow the voters to 

know who is saying what about who. 

And I have, under that situation, I have no serious concerns. If 

Exxon Corporation wants to take out an ad that says I’m good, bad 

or indifferent, I don’t like and I actually would love to find a way 

to get away from the Citizens for a Better World saying Mike 

Capuano stinks, you know, who are they? And we’re trying to do 

that in other bills. The whole idea is the battle over ideas and philosophies should be between the voters and the people that they 

are electing. And others should either stay out or put their name 

on the ballot or at least, at the very least, let the voters know who 

they are as they speak. And that’s for both sides. 

26 

And at the moment, as I understand it, the entire money spent on Federal elections in 2008 was in the $5 billion range. That’s 

every penny that was spent by every Federal candidate, both themselves and D triple C, the RNCC and all the others that play in 

these games. The problem is, up until now, without the general 

treasuries of these corporations being involved, okay, we know the 

universe, you know, the impact is minimal even if there was—I 

think it was Mr. Baran who said there was something like $4 million spent in the Massachusetts election. Well, that’s out of about 

$30 million that was spent on that whole election. 

The problem is the Exxon Corporation is just one corporation, made a profit of $45 billion in the same year that the total spent 

on elections was $5 billion. They could take 10 percent of their 

profit, not their operating expenses, of just their profit, and equal 

every penny spent in every election across the country and clearly 

have a serious voice. Okay. We can’t stop that. I got it. But we can 

certainly let people know where it comes from. 

So actually, I have heard several ideas here today that I do want 

to follow up with several of you on specific comments, because, you 

know, I am open to anything and even Professor Verret. I don’t 

agree with some of your philosophical views, that’s fair. But honestly, I am more than open to try to find a way. I’m not trying to 

stick it to anybody. I’m trying to do just the opposite. And I fully 

suspect we will come up with a different philosophical viewpoint, 

but that doesn’t mean you can’t help us find a way to at least better impose a philosophy that you don’t agree with. And I would ask 

that you do so. 

So I would ask that you read the new bill, and I would ask that 

you look at it in that way. And again, if there’s a more perfect way 

to do it, I want to hear it. And I am involved with some of the 

other bills that are being written for other committees, and I will 

tell you that these are not easy things to do. You know that. And 

if there are suggestions as we go along as to how to do it, please, 

you guys are the experts here. Help us do it, even if you don’t agree 

with us. 

And so that honestly—I don’t have questions, but I will tell you 

that we will be calling on you and I really do ask that you read 

the bill and take a look at it, and again, give us your viewpoint, 

and, you know, the philosophical viewpoints sounds like I’ll agree 

with some. Professor, I presume we won’t agree. But that’s okay. 

That’s what we do here. I still would like to have your input on 

the details if you find a detail you think that we could change, I’m 

not only open, I encourage you to do it. 

Mr. VERRET. You got it. 

Mr. CAPUANO. Thank you. With that, I really don’t have questions per se. Oh, yes, right. I have something here from the Brennan Center that they have asked that we submit in the official 

record. And with your permission, Mr. Chairman, we will do that. 

Chairman KANJORSKI. Without objection, it is so ordered. 

Mr. CAPUANO. They are a well respected organization with some 

interesting thoughts. And with that, I think, again, I apologize for 

holding you here, but you guys know the system and thank you 

very much. Thank you, Mr. Chairman. 

Chairman KANJORSKI. Thank you very much, Mr. Capuano. 

27 

Do any other members seek recognition? 

Okay. I apologize for the lack of good scheduling in the House. 

But there are a lot of things happening that required us to remain 

there and now return with several other votes. But we appreciate 

your input, certainly your testimony, and we look forward to having your expertise available as we start down this road. 

One of the thoughts, if you could give some thought to it, is many 

of you may be familiar with the Landrum-Griffith Act as it guarantees democratic processes for labor unions. I do not think we have 

a comparable act regarding corporations, and it may be an interesting time since corporations are going to be taking part in the political process that we may find a corollary type of act requiring 

corporations to have democratic principles apply and methodologies 

of enforcing the same. When I was in private practice before my 

election to Congress, I was fortunate to have the first damage case 

against one of our national unions under the Landrum-Griffith Act. 

And their denial of democratic practices after that recovery, which 

was substantial, changed the course of how unions operated. Maybe 

we could apply the same principles to corporations in order to provide democratic principles in how they act and whatever we do in 

terms of their activities, and that will be perhaps a good enforcement mechanism. But if you would think about it and analyze it 

as we go through this process. 

Now without any further ado, the Chair notes that some members may have additional questions for this panel which they may 

wish to submit in writing. Without objection, the hearing record 

will remain open for 30 days for members to submit written questions to these witnesses and to place their responses in the record. 

Before we adjourn, the following will be made part of the record 

of this hearing, the written statement of Lisa Gilbert, United 

States Public Interest Research Group, and without objection, we 

will enter the polling that was offered earlier, which I had not entered into the record. Now let it be noted that without any objection, that polling will be attached to the witness’ testimony and entered into the record. 

Without any objection, it is so ordered. The panel is dismissed, 

and this hearing is adjourned. 

[Whereupon, at 1:30 p.m., the hearing was adjourned.] 

(29) 

A P P E N D I X 

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