Hawaii’s New Law on Corporate Donations Is a Model for US States

Should corporations have the power to spend money on elections in the first place? Hawaii has answered that question with a resounding no.

For too long, Citizens United v. Federal Election Commission (2010) has been invoked to support the claim that wealthy corporations must be allowed to wield outsized influence in our elections, influence that tends to corrupt the political process.

When Gov. Josh Green (D) signed SB 2471 into law on May 14, the state took a huge step toward restoring integrity in the electoral system. Starting in July 2027, Hawaii corporations will no longer have the power to spend money on elections, and out-of-state corporations doing business in Hawaii will similarly lack that power in our state.

More than a dozen states have been considering such legislation, but Hawaii is the first to enact it into law. In so doing, Hawaii has demonstrated that longstanding authority empowering states to create corporations also allows states to limit corporate powers, including the power to influence elections through political spending.

Some observers warn that SB 2471 (now Act 011) will lead to litigation. But doing the right thing often triggers court challenges. And right now, our democracy is fragile, in no small measure held together by decisions coming out of federal district and appellate circuit courts. From preserving the right to free speech to blocking abusive immigration enforcement, those courts have stood strong.

The threat of “see you in court” shouldn’t deter efforts to solve serious problems. It’s among the likeliest ways for justice to be done.

Citizens United unleashed limitless, often untraceable spending by corporations to influence elections. The ruling was based on the high court’s assumption—naïve at the time and demonstrably wrong now—that “individual expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption.”

Since then, corporate spending on elections has climbed into the billions, and the instances of quid pro quo corruption tied to substantial expenditures have become too numerous to count.

It doesn’t have to be this way. Corporations are artificial—not natural—beings. Unlike individuals, they are creatures of the state in which they are incorporated and have no inherent right to do anything.

Corporations are limited to the powers conferred upon them by the state legislatures who authorize their creation. This corporate law doctrine has been well-settled in the US for centuries. States traditionally have restricted corporate speech in categories that range from truth-in-lending requirements to laws that punish fraud.

Citizens United struck down a federal regulation that prohibited an already-empowered corporation from spending its resources in elections. But there is a threshold question that Citizens United didn’t resolve: Must a state grant political spending power to corporations? Hawaii’s answer is no.

Alaska, Arizona, California, Georgia, Iowa, Kansas, Maine, Maryland, Massachusetts, Minnesota, Missouri, Montana, New York, Oklahoma, Rhode Island, Vermont, and Virginia all have been exploring “corporate reset” approaches similar to SB 2471. In Montana, for example, signatures are being collected to determine if a referendum limiting corporate powers should be included on the ballot this fall.

Legislators and voters in those states likely will hear a litany of reasons why they shouldn’t move forward. But the underlying premise of SB 2471 is sound. We aren’t aware of any decision, in any jurisdiction, that holds a state must include political spending power in any corporate charter it grants.

The new law won’t solve all our electoral problems. Wealthy individuals still will be able to spend unlimited amounts to support or oppose candidates or issues as they see fit. But it is an important step forward that is firmly grounded in age-old principles of corporate governance.

Hawaii has taken a major leap for American democracy. Now other states must step up and be bold.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Clare Connors served as US Attorney for the District of Hawaii and attorney general of Hawaii.

Mark Recktenwald was chief justice of the Hawaii Supreme Court and an assistant US attorney for the District of Hawaii.

Aviam Soifer is emeritus professor and former dean of the William S. Richardson School of Law, University of Hawaii.

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