Business 8th Edition by Marianne Jennings

Exercise 34

Banks Are People , Too: First Amendment Political Speech
Facts
Massachusetts had passed a statute that prohibited businesses and banks from making contributions or expenditures "for the purpose of... influencing or affecting the vote on any question submitted to the voters, other than one materially affecting any of the property, business or assets of the corporation." The statute also provided that "no question submitted to the voters solely concerning the taxation of the income, property or transactions of individuals shall be deemed materially to affect the property, business or assets of the corporation." The statute carried a fine of up to $50,000 for the corporation and $10,000 and\or one year of imprisonment for corporate officers.
First National Bank and other banks and corporations (appellants) wanted to spend money to publicize their views on an upcoming ballot proposition that would permit the legislature the right to impose a graduated tax on individual income. Frances X. Bellotti, the attorney general for Massachusetts (appellee), told First National and the others that he intended to enforce the statute against them. First National and the others brought suit to have the statute declared unconstitutional. The lower courts held the statute constitutional, and First National appealed.
Judicial Opinion
POWELL, Justice
"There is practically universal agreement that a major purpose of [the First] Amendment was to protect the free discussion of governmental affairs." If the speakers here were not corporations, no one would suggest that the State could silence their proposed speech. It is the type of speech indispensable to decision making in a democracy, and this is no less true because the speech comes from a corporation rather than an individual. The inherent worth of the speech in terms of its capacity for informing the public does not depend upon the identity of its source, whether corporation, association, union, or individual.
The court below nevertheless held that corporate speech is protected by the First Amendment only when it pertains directly to the corporation's interests. In deciding whether this novel and restrictive gloss on the First Amendment comports with the Constitution and the precedents of this Court, we need not survey the outer boundaries of the Amendment's protection of corporate speech, or address the abstract question whether corporations have the full measure of rights that individuals enjoy under the First Amendment. The question in this case, simply put, is whether the corporate identity of the speaker deprives this proposed speech of what otherwise would be its clear entitlement to protection.
Freedom of speech and the other freedoms encompassed by the First Amendment always have been viewed as fundamental components of the liberty safeguarded by the Due Process Clause, and the Court has not identified a separate source for the right when it has been asserted by corporations.
In the realm of protected speech, the legislature is constitutionally disqualified from dictating the subjects about which persons may speak and the speakers who may address a public issue. If a legislature may direct business corporations to "stick to business" it may also limit other corporations-religious, charitable, or civic-to their respective "business" when addressing the public. Such power in government to channel the expression of views is unacceptable under the First Amendment. Especially where, as here, the legislature's suppression of speech suggests an attempt to give one side of a debatable public question an advantage in expressing its views to people, the First Amendment is plainly offended. Yet the State contends that its action is necessitated by governmental interests of the highest order. We next consider these asserted interests.
Appellee... advances two principal justifications for the prohibition of corporate speech. The first is the State's interest in sustaining the active role of the individual citizen in the electoral process and thereby preventing diminution of the citizen's confidence in government. The second is the interest in protecting the rights of shareholders whose views differ from those expressed by management on behalf of the corporation.
Preserving the integrity of the electoral process, preventing corruption and "sustaining the active, alert responsibility of the individual citizen in a democracy for the wise conduct of government" are interests of the highest importance. Preservation of the individual citizen's confidence in government is equally important.
To be sure, corporate advertising may influence the outcome of the vote; this would be its purpose. But the fact that advocacy may persuade the lectorate is hardly a reason to suppress it: The Constitution "protects expression which is eloquent no less than that which is unconvincing\ 7 We noted only recently that "the concept that government may restrict speech of some elements of our society in order to enhance the relative voice of others is wholly foreign to the First Amendment...." Moreover, the people in our democracy are entrusted with the responsibility for judging and evaluating the relative merits of conflicting arguments. They may consider, in making their judgment, the source and credibility of the advocate. But if there be any danger that the people cannot evaluate the information and arguments advanced by appellants, it is a danger contemplated by the Framers of the First Amendment.
The statute is said to... prevent the use of corporate resources in furtherance of views with which some shareholders may disagree. This purpose is belied, however, by the provisions of the statute, which are both under- and over-inclusive.
The under-inclusiveness of the statute is self-evident. Corporate expenditures with respect to a referendum are prohibited, while corporate activity with respect to the passage or defeat of legislation is permitted, even though corporations may engage in lobbying more often than they take positions on ballot questions submitted to voters.
The over-inclusiveness of the statute is demonstrated by the fact that [it] would prohibit a corporation from supporting or opposing a referendum even if its shareholders unanimously authorized the contribution or expenditure.
Assuming, arguendo, that protection of shareholders is a "compelling" interest under the circumstances of this case, we find "no substantially relevant correlation between the governmental interest asserted and the State's effort" to prohibit appellants from speaking.
Reversed.
What justification did Massachusetts offer for the statute? What were its concerns in passing the statute?