New York Has a Historic Opportunity to Prohibit Political Spending by Foreign-Influenced U.S. Corporations
New York State is on the verge of taking a big step toward protecting democracy and returning power to people. A bold bill sponsored by Assemblywoman Walker is pending in the state Assembly that would prohibit foreign-influenced U.S. corporations from spending money to sway New York’s elections. A counterpart bill sponsored by Deputy Majority Leader Michael Gianaris (Queens) just passed the state Senate with bipartisan support. If this legislation becomes law, it will protect elections against foreign influence and reduce the huge power of big-spending foreign-influenced companies.
The Empire State has a proud history of welcoming immigrants, visitors, and investors from around the world. Yet foreign entities are not permitted to influence state elections. That’s because foreign entities often have political or policy objectives at odds with New Yorkers’ priorities. People want confidence that their lawmakers are accountable to them. It’s about self-government.
This foundational principle of self-governance was reaffirmed in a 2012 federal court decision, written by then-Judge (now U.S. Supreme Court Justice) Brett Kavanaugh. The court explained that foreign entities “do not have a constitutional right to participate in, and thus may be excluded from, activities of democratic self-government,” including in election campaigns.
Unfortunately, another federal court decision allowed a backdoor for foreign interests to pervade American elections. In its disastrous 2010 ruling in Citizens United, the U.S. Supreme Court gave corporations the right to unlimited political spending on the assumption that corporations are “associations of citizens.” Since then, independent groups unrelated to political parties have poured more than $7 billion into federal elections. This includes secret “dark money” from multinational corporations, which is often routed through opaque organizations like the U.S. Chamber of Commerce or the NRA.
New York State certainly is not immune to foreign-influenced corporations trying to sway its elections. For example, in 2016, Airbnb reportedly spent $11 million on a super PAC to influence New York’s legislative races, despite the fact that Airbnb was appreciably owned by a Moscow-based investor with alleged Kremlin ties.
This year, in the New York City mayoral election, a mega-donor to a big-spending super PAC is Madison Square Garden Sports Corp. Some might think that nothing could be more New York than Madison Square Garden, but the company is substantially owned by investors based in the Cayman Islands, the U.K., Japan, and Norway.
And while many New Yorkers drive for or use car services like Uber or Lyft, those companies’ executives are primarily accountable to their investors. In 2020, foreign-influenced Uber (owned in part by the government of Saudi Arabia) and Lyft (owned in part by a Chinese conglomerate) spent a staggering $200 million with other multinationals to overturn a pro-worker California law, a fight that may soon come to New York.
Tightening the law does not mean that foreign investment in our economy is bad. In fact, approximately 40% of all U.S. stock is now owned by foreigners. But problems arise when corporate CEOs are legally obligated to look out for their foreign shareholders and are inclined to spend corporate money in ways that don’t hurt foreign shareholders. As the former CEO of ExxonMobil lamentably remarked, “I’m not a U.S. company and I don’t make decisions based on what’s good for the U.S.”
Since that’s the case, it’s time for state law to explicitly prevent multinational corporations from providing paths for foreign entities to achieve, either directly or indirectly, what they are barred from doing as governments or individuals: spending money in elections.
The good news is that the legislation being advanced by Assemblywoman Walker and Senator Gianaris proposes a cutting-edge solution: using bright-line foreign ownership thresholds to prevent this type of election spending. Under this legislation, if a single foreign entity (government, company, or person) owns more than 1 percent of a U.S. corporation, that corporation would be prohibited from spending money in New York’s elections. One percent might seem low, but investors who own at least 1 percent of a major corporation are usually among the most powerful shareholders, with at least tens of millions of dollars of stock and the ability to get the CEO on the phone. The law would also apply if a group of foreign entities owns at least 5 percent of a U.S. corporation.
There’s similar momentum on the federal level, where Sen. Elizabeth Warren (D-MA)and Reps. Jamie Raskin (D-MD) and Pramila Jayapal (D-WA) are fighting for this popular policy. In 2020, Seattle, Washington, became the second city in the nation to pass this policy into law, after St. Petersburg, Florida.
New Yorkers — especially those in marginalized communities — know that their preferred candidates or policies cannot be accurately reflected when elections are heavily influenced by runaway corporate spending and foreign investors to whom CEOs owe a fiduciary duty.
To protect the integrity of New York’s self-government and to promote economic patriotism, it is time to pass a state law banning political spending by foreign-influenced U.S. corporations.