Playing Politics with Shareholder Value: The Case for Applying Fiduciary Law to Corporate Political Donations Post- Citizens United

IntroductionIn 1919, two minority shareholders of the Ford Motor Corporation ("the Company") sued Henry Ford-the Company's Chief Executive Officer (CEO) and President-claiming that he was improperly using the company's excess capital to produce cheaper cars and pay his employees better wages.1 The shareholders were John and Horace Dodge, who together would later become one of Ford's chief competitors in the automobile industry.2 Motivated by their short-term interests as shareholders of the Ford Motor Corporation and their long-term interests as Henry Ford's prospective competitors, the Dodge brothers argued that the Company was required to distribute excess capital to its shareholders as dividends, rather than diverting its assets for other purposes.3 The Michigan Supreme Court agreed, requiring Ford to issue greater dividends to its shareholders.4The court in Dodge v. Ford implied that Henry Ford exceeded his authority as president of the firm and dominant member of the board by using massive amounts of corporate funds for purposes other than the promotion of shareholder value.5 Over ninety years after Dodge, this rationale still resonates in American corporate law today.6 Although modern corporate law rules are extremely deferential to the discretion of corporate management, most courts still require that board deci-/ sions be made with the best interests of shareholders in mind.7 When non-shareholder constituencies8 cloud a board's judgment, courts have been responsive to shareholders wielding fiduciary law as a legal basis to protect their ownership interest in the corporation.9In January of 2010, the U.S. Supreme Court decided Citizens United v. FEC-a case that has attracted significant attention from politicians, academics, and corporate leaders.10 As one might expect, the focus of the Citizens United debate has centered upon the "expressive" aspect of the ruling, and rightfully so.* 11 Little, however, has been written about the implications of Citizens United on corporate law and what the decision means for the shareholders of American corporations.12 Regardless of the First Amendment rights that the Court either created or vindicated (depending upon one's perspective), the debate over corporate political speech raises a fundamental corporate law question that hark- ens back to Dodge, does donating corporate funds to political campaigns promote shareholder value?13In the wake of the Supreme Court's decision in Citizens United, this Note discusses the growing need for greater oversight of directorial discretion when corporate leaders use money from their firms' general treasuries to fund political advocacy groups.14 Given the Supreme Court's current attitudes on this issue and the lack of adequate alternative remedies, this Note concludes that fiduciary law represents the last line of defense for shareholders in retaining some semblance of control over the political behavior of the American corporation.15 Through suits based on the fiduciary duty of loyalty and the doctrine of waste, shareholders should be entitled to sue directors for use of the corporation's wealth for what is often a nonbusiness purpose.16 As with any method of promoting directorial accountability, however, several obstacles stand in the way of these suits' ultimate success, including Delaware's exculpation statute17 and the managerially-protective standards of the Delaware state courts.18Part I of this Note discusses corporate political speech in the United States, summarizing the Supreme Court's decision in Citizens United and examining what it could mean for corporations wishing to provide financial support to political campaigns.19 Part II outlines the existing state and federal corporate law rules that allow shareholders to participate in corporate political speech decisions, ranging from voting rights to more drastic remedial tools such as derivative suits.20 This Part focuses on the law of Delaware-the predominant state of incorporation in the United States-and describes how recent Delaware decisions may influence directorial responsibility throughout the United States. …