Image is Everything: Is Disclosure an Effective Check on Corporate Political Donations?

November 1, 2010

In his January State of the Union address President Obama warned that the Supreme Court’s decision in Citizens United would result in American elections being “bankrolled by America’s most powerful interests, or worse foreign entities.” President Obama wasn’t alone in his disapproval of the Supreme Court’s decision. The Pew Center reports that a large majority—65%—of Americans also disapprove of the decision. However, the gubernatorial race in Minnesota is demonstrating that corporate donations are not completely unchecked. In fact, the biggest factor limiting a corporation’s exercise of this First Amendment right may be the First Amendment itself.

Minnesota’s upcoming gubernatorial election has become the focus of corporation’s contributions to political organizations because of a Minnesota law requiring organizations to publicly disclose contributions over $100. The law does not set any limitation on the amount of a donation, but if it is more than $100, the public and the press are going to know about it. According to two Minnesota political organizations, the disclosure requirements are unconstitutional.

The Minnesota Citizens Concerned for Life and the Taxpayers League of Minnesota, brought suit claiming that Minnesota’s reporting requirements are so burdensome that they violate their First Amendment rights. On September 20, 2010, U.S. Federal District Judge Donovan Frank denied the plaintiff’s motion for a temporary injunction and found no First Amendment violation. Judge Frank, relying heavily on the Supreme Court’s decision in Citizens United, rejected the Plaintiff’s claim that the law acts as a ban on corporate political contributions. Instead, Judge Frank found that the law was simply a disclosure law, requiring a much less stringent standard of review. In his assessment of the government interest Judge Frank concluded that “[t]here can be little doubt that the reporting requirements assist the electorate to make informed decisions in the political marketplace.” This position echoed the Citizens United decision, which found that “disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable.” Judge Frank argued that a contrary decision would undermine transparency in the November election. He found that such a result “so close to the election would clearly harm the State, Minnesota voters, and the general public interest.”

Judge Frank’s findings about the impacts of transparency are not unfounded. The donations of two corporations drew national attention after they donated to MNFoward, a Minnesota pro-business organization. In its second pre-primary report of receipts and expenditures, MNFoward reported $785,195.54 in total contributions. Two hundred and fifty thousand dollars of that came from the combined contributions of Best Buy ($100,000) and Target ($150,000).  The donations became the source of headlines, organized protests, facebook groups and questions from shareholders because of MNFoward’s support of Republican gubernatorial candidate Tom Emmer. Emmer is an opponent of gay rights, a position seemingly at odds with Target’s corporate image.

The donations by Target and Best Buy resulted in bad press. Lots of it. In the insanely competitive world of retailing, bad press is something a company cannot not afford and spends millions of dollars on corporate branding to avoid. So the reaction to Target’s $150,000 donation begs corporations to ask the question: is it worth it? For each corporation the answer will be different.

For some corporations the answer is a resounding no. Organizations with views that embroil political controversy may have a more difficult time getting major corporations to contribute, especially if those contributions are public. In those cases, reporting requirements may lead corporations to decide that political contributions are no longer good business.

For other corporations the answer is a yes. After seeing the backlash faced by Target and Best Buy, shoe manufacture Red Wing Shoe Company still decided to make a $50,000 contribution to MNForward and 3M, the maker of Post-its, donated $100,000. For these companies the benefit of a political contribution outweighed the risk of a negative reaction.

Ultimately, what is important is not whether a corporation decides political contributions are good for business, but the fact that it is a consideration. The Minnesota election demonstrates the power of the First Amendment to both enable campaign contributions as a form of political speech, and also provide a powerful check on the unrestrained use of that right. Disclosure coupled with engaged and informed public force major corporations to make careful decisions about campaign contributions. Otherwise their company may become the unwilling subject of articles, Facebook protests and boycotts.

At the State of the Union Address Supreme Court Justice Samuel Alito mouthed “not true” in response to President Obama’s concerns about Citizen United. It remains to be seen who is right, but if Minnesota’s upcoming election is any indication, maybe disclosure and a free press are all the protection we need.

Brianna Coakley is a third-year student at William & Mary Law School.

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