Trillium Signs on to Amicus Brief to Defend Montana's Ban on Corporate Political Contributions
Coalition of socially responsible investors seeks to protect the First Amendment rights of their investors
Trillium Asset Management announced today that it has signed on to an amicus curiae brief in Western Tradition Partnership v. Attorney General of the State of Montana, currently before the Supreme Court of the State of Montana. Trillium is joined by a coalition of investors led by Domini Social Investments managing more than $100 billion. The coalition represents a wide range of institutional investors, including mutual fund managers, a private wealth manager, foundations, and healthcare systems. The investor brief supports the state of Montana’s defense of the Montana Corrupt Practices Act of 1912 (“the Act”).
The provision of the Act banning corporate political speech was held to be unconstitutional by the Montana District Court in light of the U.S. Supreme Court’s Citizens United v. Federal Elections Commission decision (“Citizens United”). The State of Montana is appealing the decision believing that its law is distinguishable from the federal law at issue in Citizens United . The coalition agrees, and believes that the large publicly traded corporations in which they are invested are distinguishable from the voluntary “associations of citizens” that were before the Court in Citizens United.
The Investor Brief — “Compelled Speech Is Not Free Speech”
The Supreme Court’s decision in Citizens United was premised on the fact that the corporations at issue were voluntary “associations of citizens” and that the members and shareholders of those corporations could register their objections to the corporation’s political spending throug h the “procedures of corporate democracy.” Neither of these facts is true with respect to the large, publicly traded companies in which Trillium and the other investors own stock.
Publicly traded corporations are not voluntary “associations of citizens” and should not enjoy the same rights that citizens do. These companies do not consult their shareholders regarding what candidates they choose to support, and may only act in the best interests of the corporation — a legal entity. They are legally barred from using corporate funds to express the political views of any individual or group of human beings.
Over two-thirds of the stock in publicly traded companies is owned by institutional investors. Institutional investors include mutual funds, pension funds, insurance companies, sovereign wealth funds and foundations. If corpora tions did seek out the political views of their shareholders, significant legal and practical barriers would prevent institutional investors from responding. These include obligations created by corporate, securities, agency, pension, and trust law, as well as structural impediments built into the proxy voting system. These investors cannot represent the disparate political views of their shareholders, policy holders and beneficiaries. In addition, because institutional investors are fiduciaries, they may not use their investors’ money to promote their own political interests.
The Supreme Court has recognized the First Amendment rights of non-assenting members of associations, requiring that they be provided the ability to “opt-out” to avoid underwriting offensive speech. An “opt-out,” however, that may allow a union member to have a portion of her dues refunded is not available to shareholders in widely held companies. The investors argue that the Montana ban, as applied to large publicly traded companies, is constitutional and narrowly drawn to protect the First Amendment interests of shareholders that would otherwise be compelled to speak on political matters. “Compelled speech,” the brief argues, “is not free speech.”
Karl Sandstrom of Perkins Coie LLP, who served as national counsel for the coalition, said “Investors should not be required to surrender a right protected under the First Amendment in order to invest in our nation’s premier businesses.”
The members of the investor coalition have all engaged corporations in their portfolios on a wide range of social, environmental and corporate governance issues.
Additional co-amici include Calvert Asset Management Co., The Christopher Reynolds Foundation, Inc., Domini Social Investments, Harrington Investments, Inc., the Interfaith Center on Corporate Responsibility, Newground Social Investment, The Sustainability Group of Loring, Wolcott & Coolidge, and Walden Asset Management, a Division of Boston Trust & Investment Management Company.
For more information:
Read the amicus brief.
Read the Motion to Participate, describing each organization and its interest in the case.
Contact Shelley Alpern, Trillium’s Director of ESG Research and Shareholder Advocacy at 617-423-6655