RESEARCH Business Government

BUSINESS ETHICS
Corporate speech should not be governed by First Amendment

Mark Reutter, Business Editor
(217) 333-0568; mreutter@uiuc.edu

5/1/03

Photo by Bill Wiegand Law professor Cynthia A. Williams has called upon the U.S. Supreme Court to hold corporations accountable for statements they make about their environmental and labor practices. She is the principal author of an amicus curiae or "friend of the court" brief in Nike v. Marc Kasky, which is now before the high court.

CHAMPAIGN, Ill. — A law professor at the University of Illinois at Urbana-Champaign has called upon the U.S. Supreme Court to hold corporations accountable for statements they make about their environmental and labor practices.

Cynthia A. Williams is the principal author of an amicus curiae or "friend of the court" brief in Nike v. Marc Kasky, which is before the high court. The case centers on whether statements made by the athletic shoemaker concerning its use of overseas labor should be broadly protected under the First Amendment as "political speech" or be considered less-protected "commercial speech" subject to state consumer protection laws.

In her brief, Williams argued that granting full First Amendment protection to corporate speech would jeopardize disclosure and reporting requirements imposed by all government agencies, including antifraud regulations by the Securities and Exchange Commission, and make it easier for companies to sidestep demands for accurate information by investors, nonprofit organizations and consumers.

She also argued that Nike’s position that its public statement regarding its labor practices are covered by First Amendment protection would threaten investors’ ability to obtain information from corporations on many issues of public concern.

"Nike or any other company should not be able to ‘plead the First’ so that the truth of the facts they assert about their social and environmental records cannot be tested in litigation – just as they would not be able to plead the First to preclude an examination of their statements of fact about their financial results of operations or about product quality, price or safety," she argued in the brief, which was filed by Domini Social Investment LLC, KLD Research & Analytics, and Harrington Investments.

"While the government has no role to play in winnowing false from true political ideas, it has a role to play in ensuring that facts of commercial significance are accurate," Williams noted, adding, "When a commercial entity states facts about its own products or operation in order to influence purchasing decisions about either the product or the company’s stock, that is and should be understood to be commercial speech."

The case stems from a 1998 suit filed by Marc Kasky that Nike’s claims that it paid high overseas wages and protected workers from physical and sexual abuse amounted to "false advertising" under California law. The lower state courts agreed with Nike that its statements were protected as noncommercial speech, but the California Supreme Court ruled in Kasky’s favor. Nike then appealed the case to the highest court, which heard oral arguments on April 23.

Nike’s position, if affirmed by the Supreme Court, could have implications for securities laws and stockholder rights, according to Williams, because it is "alarmingly broad, potentially affecting companies’ statements about nearly every aspect of a corporation’s business, from its treatment of stock options to compliance with environmental regulations."