Document Type


Publication Date

Winter 2016

Publication Title

Virginia Law & Business Review

Publication Title (Abbreviation)

Va. L.& Bus. Rev.





First Page


Last Page



Corporate political activity raises an important and diffcult question of corporate law: who decides when the corporation should speak and what it should say? In several cases, the Supreme Court has provided a clear answer: shareholders, acting through the procedures of corporate democracy. While this holding has attracted substantial academic and public criticism, there has been no sustained evaluation (beyond identifying the potential agency costs of corporate political activity) of the possibility that the Supreme Court's appeal to the fraught concept of "corporate democracy," though woefully under-theorized, might be the best allocation of power in the limited context of corporate involvement in the political process.

This Article presents a more comprehensive normative case for a modest version of shareholder-regulated political activity. Specifically, shareholder political primacy as contemplated in Citizens United and Bellotti furthers three plausible aims of corporate law: (i) reducing both pecuniary and moral agency costs within firms; (ii) mitigating welfare-decreasing rent-seeking and reverse rent-seeking (i.e. political extortion) across public firms; and, perhaps more speculatively, (iii) enhancing the democratic legitimacy of corporate political activity. Privately ordering corporate political activity, via the shareholders' bylaw power, is both consistent with Supreme Court jurisprudence and the most desirable way of operationalizing shareholder-regulated corporate political activity.


© 2016 Jay B. Kesten


First published in Virginia Law & Business Review.

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