Document Type

Article

Publication Title

Journal of Free Speech Law

Volume

5

Publication Date

2024

Keywords

corporate law, First Amendment, shareholder proposal, freedom of speech, Rule 14a-8, securities regulation, SEC, corporate speech rights, compelled speech

Abstract

The negative speech right (the right to refrain from speaking) strains the standard rationale for corporate speech rights. First Amendment jurisprudence extends speech rights to corporations on a mix of intrinsic and instrumental rationales. The intrinsic rationale is derived from the natural rights of persons, and often thought not to apply to corporations. Meanwhile the instrumental rationale, grounded on the value of speech in promoting self-government, would seem not to apply to the negative right. Remaining silent, after all, does little to advance public debate.    This article uses the SEC’s shareholder proposal rule to examine the larger question of corporate First Amendment rights, ultimately finding in the doctrine of corporate purpose a stable doctrinal foundation for corporate speech rights, both positive and negative. Corporations are not natural persons, but they exist to serve the purposes of the people who associate together to form them—that is, their shareholders. Sometimes, as in the case of a closely held firm, the scope of shareholders’ shared purposes may be broad, encompassing a wide array of values held in common. However, in the context of publicly held firms, where conflict in the shareholder base is inevitable, the scope of shared values is necessarily narrow. It is limited to shareholder wealth maximization.     This narrow vision of corporate purpose implies a correspondingly narrow scope of corporate speech rights for publicly held firms. It implies that corporate speech may be regulated to the extent that it departs from wealth maximization. At the same time, however, corporate purpose implies a limit to the state’s ability to abridge corporations’ negative speech rights. Government can compel speech only when the regulation is consistent with corporate purpose.

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