Bill would prohibit foreign influence in California elections

If it seems like we’re hurtling toward a reality in which corporations and interests indifferent to American democracy make the decisions about our right to health, housing, compensation and security. It is because we are. 

U.S. corporations backed by foreign investors and beholden to those shareholders’ interests spend enormous amounts of money to sway candidate elections. But now, California has the opportunity to protect the self-governance of the people of California by passing Assembly Bill 1819, which would prohibit foreign-influenced corporations from spending money on local and state elections.

Twelve years ago, in Citizens United v. Federal Election Commission, the U.S.  Supreme Court issued a 5-4 ruling that allowed U.S. corporations to spend unlimited amounts in U.S. elections through independent expenditures – candidate-related election spending not coordinated with any candidate. 

In his 2010 State of the Union address, then-President Barack Obama warned that the Supreme Court’s decision would “open the floodgates” for foreign money in our elections. Twelve years later, it has become clear that Obama was right.

Since Citizens United, independent spending on elections has grown exponentially. More than $3.3 billion in independent expenditures were spent to influence the 2020 federal elections. Corporations are able to spend unlimited amounts on elections themselves or by funneling money through super PACs, trade associations and other groups that are not required to disclose the source of the money. 

Big money spending on elections is not limited to federal elections; in California, more than $31 million in independent election spending was poured into the 2020 Assembly and Senate races.

At the same time, foreign investment and ownership in U.S. companies has also skyrocketed. Between 1982 and 2015, foreign investor holdings of publicly traded stocks in U.S. corporations grew from 5% to more than 20%. Just four years later, that figure nearly doubled: foreign investors in 2019 held a staggering 40% of all publicly traded stock in U.S. corporations.

Justice Anthony Kennedy, writing for the Citizens United majority, justified corporate spending on U.S. elections because a U.S. corporation is “an association of citizens.” But it has become clear that many corporations are not, and they do not make decisions as if they were. 

Indeed, as Lee Raymond, former CEO of Exxon, once said, “[I]’m not a U.S. company, and I don’t make decisions based on what’s good for the U.S.” These same corporations are currently authorized to spend unlimited amounts on U.S. elections.

The United States has long prohibited any foreign spending on U.S. elections. In upholding this ban in the 2011 decision Bluman v. Federal Election Commission, a district court case later affirmed by the Supreme Court, then Judge (now Justice) Brett Kavanaugh, wrote that it was in the public interest to secure “American democratic self-government, and . . . thereby prevent foreign influence over the U.S. political process.” Just last year, California passed an important law that similarly prohibited spending by foreign governments and principals on state elections.

But the Citizens United ruling created a loophole to foreign election spending bans. Luckily, there is a solution to close this loophole, and it is one that Assemblymember Alex Lee, a Democrat from Milpitas, has proposed in AB 1819, the Stop Foreign Influence in California Elections Act. 

This bill will create a bright line rule to prevent foreign influence over California elections: if a single foreign entity owns 1% or more of a U.S. corporation, it will be prohibited from spending money on California’s elections. If two or more foreign entities together own 5% or more of a U.S. corporation, that corporation also will be prohibited from spending money on California elections. 

Even at 1% ownership, shareholders can exert enormous direct and indirect influence over corporations, including corporate spending to influence candidate elections. Similar legislation has been introduced in New York, Massachusetts, Minnesota, Hawaii and in Congress.

We must act now to protect the integrity of California’s democratic self-government from foreign influence. California has a well-deserved reputation for bold leadership and innovation. With the Stop Foreign Influence in California Elections Act, California has the chance to lead once more.