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Abstract
Critics contend that corporations subvert democracy by using their economic resources to lobby for corporate-friendly policies and to elect accommodating politicians.' Those who take a more sanguine view-notably, a majority of the Supreme Court-reject the claim that corporate dollars corrupt the political process. Yet, there is general agreement that corporate political activity includes financial contributions, lobbying efforts, participation in trade groups, and political advertising, all of which give corporations a "voice" in public decisionmaking.
This Essay contends that the accepted definition of corporate political activity is too narrow and overlooks the importance of "exit." When faced with objectionable laws or regulations, corporations can take their business elsewhere. Consequently, in order to preserve jobs and tax revenue, elected officials often cater to corporate interests. Put differently, exit gives corporations, individually and collectively, the leverage to influence public choices.
The ongoing fight for LGBT civil rights provides a striking example of the power of corporate exit.' By making clear that they are unwilling to do business in places that deny equal treatment to LGBT people, corporations have been instrumental in defeating proposed state laws that would restrict transgender bathroom access or permit business owners to refuse services to gay, lesbian, or transgender people. For example, after corporations signaled their intention to remove business from the state, Georgia's governor vetoed a bill that would have legalized discrimination against same-sex couples.
Although a question of democratic legitimacy arises when corporations stand between public officials and the will of the majority, we argue that corporate exit should be understood as a part of the democratic process. When conventional political channels are inaccessible, citizens can harness corporate economic power instead. Corporations are not democratic institutions, but they answer to consumers, employees, investors, and other stakeholders." Also, when corporations operate in national as well as local markets, they can accelerate progress toward the universalization of certain kinds of norms. Thus, corporations can mediate between citizens and their elected representatives as well as between local, state, and national political communities.
To be clear, this Essay does not contend that corporations will reliably protect the powerless or guide politicians to a deeper appreciation of liberty, equality, or justice. Corporations seek to maximize their profits and may threaten to exit jurisdictions in order to extract concessions that benefit their shareholders at the expense of other constituencies. For this reason, corporations may take positions that are detrimental to economic, environmental, or social justice.
Recommended Citation
Susan S. Kuo and Benjamin Means,
The Political Economy of Corporate Exit,
71 Vanderbilt Law Review
1293
(2018)
Available at: https://scholarship.law.vanderbilt.edu/vlr/vol71/iss4/4