KASKY V NIKE AND THE QUARRELSOME QUESTION OF
CORPORATE FREE SPEECH


Don Mayer


Abstract: In the Kasky case, the Supreme Court of Califomia determined 
that Nike, Inc., might be accountable in a civil action for misleading 
statements that it made to the press and to the public about its operations 
in Southeast Asia. The Kasky case is examined here in its legal 
and ethical aspects. The U.S. Supreme Court's First Amendment cases 
that distinguish between commercial speech and political speech are 
explained, and the arguments in favor of greater protection for Nike's 
statements about its overseas operations are evaluated in light of Donaldson 
and Dunfee's integrative social contracts theory. The hypernorm 
of "necessary social efficiency" is invoked to claim that the arguments 
made by Nike and various "friends of the court" in favor of greater protection 
for corporate speech are problematic. Reliable information is the 
lifeblood of both democracy and efficient free markets. Thus, the more 
ethical approach is for corporations to support systemic legal reforms 
that would predictably sanction false and misleading statements in 
accordance with clear guidelines. 

Introduction 

In 2001, the Supreme Court of California determined that Nike, Inc., might be 
accountable in a civil action for misleading statements that it made to the press 
and to the public about its operations in Southeast Asia. A San Francisco-based 
labor activist. Marc Kasky, filed the lawsuit in 1998, using Califomia laws that 
prohibited unfair competition and false advertising. After the U.S. Supreme Court 
agreed to review the decision, numerous business interests aligned with Nike's appeal. 
Twenty-eight organizations and the U.S. government filed briefs as "friends 
of the court" to argue that Nike's statements should be fully protected by the First 
Amendment. 

The stakes were high. From the business community's point of view, the California 
law was too broad, too vague, and improperly empowered individuals to police 
corporate speech for purportedly misleading statements. The overall effect would 
be to "chill" corporate speech on matters of fundamental policy concern, ending 
any voluntary corporate social reporting for fear of civil liability and the possibility 
of "show trials" brought by labor activists.' Many corporations and their attorneys 

© 2007. Business Ethics Quarterly, Volume 17, Issue 1. ISSN 1052-150X. pp. 65-96 


BUSINESS ETHICS QUARTERLY 

considered the California statute and the Kasky lawsuit to be calamitous for the 
corporate right of free speech.^ In his oral argument to the Supreme Court, former 
Solicitor General Theodore Olson even hinted that such activist-initiated lawsuits 
were the litigation equivalent of terrorism.' 

This article reviews the Kasky v. Nike case and explores its implications for both 
business and society. Nike had numerous choices regarding the way it conducted 
business beyond the reach of U.S. law, and also had choices in responding to critics 
of its overseas operations. Each set of choices was laden with ethical implications. 
This article examines the second set of choices, inquiring whether there are any 
ethical limits on what a company says about its own operations, whether overseas 
or at home. The ethical aspects are critically important, given that the legal limits 
are so confounding. In legal terms, much depends on whether Nike's corporate 
speech is motivated by a monetary purpose ("commercial speech," subject to some 
governmental regulation) or is characterized as "political speech," fully protected 
because it relates to important public policy concerns. 

The commercial speech/political speech distinction is problematic. Justice 
Thomas finds it essentially incoherent," and many current Supreme Court Justices 
may reject it entirely.' Still, the distinction persists, and the difSculties of interpreting 
the free speech clause of the First Amendment* are legion. These difficulties 
are likely to persist; even after extensive briefing and oral argument, the Justices 
were unable to decide the Kasky case.' 

Because the legal standards and distinctions have proven so difficult to apply, it 
makes sense to consider underlying values and ethical perspectives that may apply 
to Nike's actions and speech. In this article I will attempt to address this question 
by applying Donaldson and Dunfee's frequently discussed integrative social 
contracts theory (ISCT) to the issues raised by the Kasky case. But before doing 
that, it is essential to make a detailed journey through Kasky's case against Nike, 
considering the values that underlie the First Amendment's "freedom of speech" 
clause. Along the way, I hope to lay the groundwork for a conclusion that reliable 
information is the lifeblood of both democracy and efficient free markets, and 
that reasonably accurate reporting of labor and environmental aspects of overseas 
operations should be a desired end, sought-after not only by consumers, investors, 
and workers, but by corporations themselves. Within any such reporting system, 
corporations should support sanctions and standards that reward relative accuracy 
and discourage seriously negligent and misleading speech. Such a system would 
be morally preferable to either position adopted by the litigants in Kasky. I begin 
with an explanation of how bipolar the litigants came to be, and why the Supreme 
Court of the United States found the legal issues so indecipherable. 

/. The Kasky Indecision 

Nike, Inc., is the world's leader in sales of athletic footwear, apparel, equipment, 
and accessories. Its manufacturing operations are subcontracted to more 


THE QUARRELSOME QUESTION OF CORPORATE FREE SPEECH

than 700 factories in over fifty countries. Nike gained its position in the market 
through careful nurturing of its brand image, an image associated with its distinctive 
"swoosh" logo, the slogan "Just do it," agreements with sports heroes such as 
Michael Jordan and Tiger Woods, and exclusive arrangements with major university 
athletic programs. Like Reebok, Adidas, and other makers of athletic shoes and 
sports apparel, Nike uses independent contractors in nations with low labor costs. 
After initially establishing overseas production in Japan, Nike moved operations to 
South Korea and Taiwan for cheaper labor. In 1995, a Korean subcontractor set up 
a major new facility in Vietnam; Nike subcontractors also used facilities in China, 
Thailand, and Indonesia. Over 500,000 workers are employed in Asian factories 
producing Nike products.^ 

In June 1996, critical commentary began to surface in the United States regarding 
Nike's production facilities in Southeast Asia. New York Times columnist Bob 
Herbert accused Nike of building its wealth on the "slave labor" of young Asian 
women.' Several non-government organizations (NGOs) came forward to allege 
human rights abuses, violence toward laborers, and deplorable working conditions. 
Nike began to answer accusations as early as July 1996, but other negative reports 
soon surfaced. A CBS program in October 1996 reported that workers in Nike's 
factories in Asia were "poorly paid, exposed to toxic chemicals and subjected to 
physical abuse.'"" In September 1997, a report by the Hong Kong Christian Industrial 
Committee alleged that in three Chinese factories there were violations of 
niinimum wage laws, employment of children below sixteen years of age, eleven 
to twelve hour work days, compulsory overtime, and exposure to dangerous levels 
of dust and toxic fumes." 

Several other labor-watch organizations also reported abuses at Nike facilities 
in 1997. According to the Boycott Nike website, there were four major reports of 
abusive Nike labor practices in Asia between March and November 1997. In addition 
to the Hong Kong Christian Industrial Committee, reports were released by Vietnam 
Labor Watch (New York), Community Aid Abroad (Sydney), and Transnational 
Resource & Action Center (San Francisco). These generated a significant number 
of newspaper accounts and editorials that tarnished Nike's brand image. Protests 
and boycotts began to spring up around the United States, including demonstrations 
at some Niketown retail shops; one Niketown grand opening was marred by the 
arrest of nineteen demonstrators.'^ 

Nike engaged these criticisms as quickly as possible. By late February 1997, 
Nike had commissioned a report from GoodWorks International, LLC ' Led by 
Andrew Young (formeriy mayor of Atlanta, U.S. Ambassador to the United Nations, 
and civil-rights champion), the report was finished and released four months later 
based on surveys of twenty factories in six Asian countries.''' In general, the report 
gave assurances that all surveyed operations met all applicable health, safety, and 
labor standards. In particular, the report states that average pay rate in these factories 
is double the local minimum wage, and that the company "typically" grants 
"subsidies" for meals and medical treatment. Just prior to March 1997, however. 


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Nike also received a negative report by Ernst and Young on one of its Vietnamese 
facilities. The factory had no drinkable water, and toxic chemical concentrations 
up to 177 times the allowable safety limits. With respect to the laborers, forty-eight 
of the fifty worked longer than permitted hours, workers were punished for taking 
time off to attend funerals, and 80 percent had never read the code of conduct.'^ It 
is not clear whether Mr. Young visited that facility, but it seems unlikely. 

Nike may not have been diligent in studying the methodology of the report by 
Andrew Young's company.'* Several groups were openly critical of Young and his 
methods. Vietnam Labor Watch commented that Young did not explore issues of 
wages, working conditions, or health and safety practices. Australian researcher 
Anita Chan wrote to the Washington Post that Young's conclusions were sharply at 
odds with her own conclusions, which were reached after three years of research 
on the Chinese footwear industry. Bob Herbert wrote in a New York Times op-ed 
piece that "Mr. Young said he found no evidence of child or prison labor. He did 
not seem to realize that those are not the problems that critics of Nike operations 
in China, Vietnam and Indonesia have been complaining about. The issues in those 
countries are wretchedly low wages, enforced overtime, harsh and sometimes brutal 
discipline, and corporal punishment." Herbert wrote that Young spent "just three 
or four hours in each factory and even he acknowledges that 'we probably should 
have insisted that we bring our own translators.'"'^ 

Whatever its deficiencies or merits, Nike chose to rely on the GoodWorks report, 
going forward with a public relations campaign that defended the benefits of its Asian 
factories to host countries and portrayed the company as being in the vanguard of 
corporations seeking to maintain adequate labor standards in overseas facilities.'^ 
Nike press releases responded to allegations of poor working conditions and denied 
the use of underage workers. They emphasized the company's code of conduct, and 
some of the press releases provided "detailed information and footnoted sources."" 
One Nike press release called attention to the Young report and invited readers to 
peruse it on Nike's website. Nike officials also wrote letters to non-profit organizations 
and various news sources. Full-page ads were taken in major newspapers to 
say that Nike factories were operating decently and paying a living wage.^" 

Nike also addressed the concerns on college campuses over "sweatshop" labor 
in Asia. Nike managers wrote letters to presidents and athletic directors at colleges 
that sponsored Nike products;^' the letters reported fair conditions at Nike factories 
and gave assurances of Nike's corporate responsibility.^^ Nike also created a web 
page for athletic departments that listed factory addresses in Vietnam and Taiwan 
so that coaches and athletes could see where their equipment was manufactured; 
further, Nike addressed student concerns in portions of its website. Nike CEO Phil 
Knight visited University of North Carolina—Chapel Hill to speak with students 
about the fairness of Nike's labor policies. 

In opposition to Nike's press releases and letters, Kasky filed suit under a California 
consumer protection law that permits any citizen to formally accuse businesses 
of disseminating misleading or false statements to the public. He filed on behalf of 


THE QUARRELSOME QUESTION OF CORPORATE FREE SPEECH

the general public of the State of California" as a private citizen, without alleging 
any particular economic harm to himself.^" Kasky's complaint alleged four causes 
of action based on the California Business and Professions Code.^' The first and 
second causes of action were based on negligent misrepresentation and intentional 
and/or reckless misrepresentation in order to maintain or increase its sales and 
profits.^* The third cause of action alleged unfair business practices and the fourth 
alleged false advertising.^^ Kasky sought a court order to compel Nike to "disgorge 
all monies" that it acquired by the alleged practices, to undertake a court-approved 
public information campaign as a corrective to its false advertising, and to stop its 
misrepresentations about working conditions under which its products are made. 

The California trial court dismissed the case on First Amendment grounds even 
before the pre-trial discovery phase, and the state's appellate court affirmed the 
dismissal. The Supreme Court of California reversed, however, which meant that 
Kasky could proceed to discovery and put Nike on trial. ^* In rejecting the reasoning 
of the lower courts. Justice Joyce L. Kennard reasoned that Nike's statements 
were properly characterized as "commercial speech," entitled to a lesser degree 
of Constitutional protection. She considered Nike's publicity counter-offensive 
as more akin to commercial speech rather than protected commentary on a public 
policy issue; as a commercial entity, Nike directed its message at potential customers 
(especially in its letters to athletic directors, but also in statements reaching 
athletic-shoe buyers in general), and was making factual representations about its 
own business practices. Kennard was not convinced by the argument that Nike 
entered "the marketplace of ideas" to defend itself against accusations that had already 
been made public. Nor did she agree with dissenting Justice Ming W. Chin's 
argument that Nike's statements were entitled to maximum protection on the basis 
that their commercial elements were "inextricably entwined" with noncommercial 
public-policy opinions.^' 

Nike then appealed to the Supreme Court, which granted review of the Cahfomia 
Supreme Court opinion. In granting Nike's petition for a writ of certiorari, 
the Supreme Court of the United States certified the following questions for briefs 
and oral argument: 

(1) whether a corporation participating in a public debate may "be subjected to 
liability for factual inaccuracies on the theory that its statements are 'commercial 
speech' because they might affect consumers' opinions about the business 
as a good corporate citizen and thereby affect their purchasing decisions"; 
and (2) assuming the California Supreme Court properly characterized such 
statements as commercial speech, whether the "First Amendment, as applied 
to the states through the Fourteenth Amendment, permits subjecting speakers 
to the legal regime approved by that court in the decision below."'" 
The appeal attracted thirty-nine "friend of the court" (or "amicus curiae") briefs. 
Twenty-nine briefs were filed on behalf of Nike, and business interests were well-
represented. Among many others, the Center for the Advancement of Capitalism, 
the Public Relations Society, Exxon Mobil, Monsanto, Pfizer, Microsoft, the Busi



BUSINESS ETHICS QUARTERLY 

ness Roundtable and the U.S. Chamber of Commerce all made their views known 
to the Court, as did the U.S. government. First Amendment law made for "strange 
bedfellows" in this case; "amicus" briefs on behalf of Nike were also filed by the 
American Civil Liberties Union and a consortium of newspapers that included the 

New York Times. 

In advancing Nike's First Amendment rights, critics of the decision offered various 
arguments: that Kasky did not have "standing" to bring such an action, that the 
California law wrongly imposed "strict liability" on corporate public speech, and 
that the law as interpreted by the California Supreme Court had a "chilling effect" 
on corporate speech on matters of public policy. This "chilling effect" would inhibit 
"robust debate" on important issues of the day, and the public interest would be 
ill-served. Moreover, because Nike's critics could assail its overseas practices yet 
Nike was limited in its speech by California's law, there was not "a level playing 
field" for corporations and its critics. Thus, Nike and allied "friends of the court" 
urged the maximum "breathing room" for corporate speech on matters of public 
importance. 

Two months after oral argument, however, the Court dismissed the writ of certiorari 
"as improvidently granted."^' In so doing, the California Supreme Court's 
ruling remained in effect; within three more months, the case was settled.'^ To 
advocates of corporate free speech, this meant that in any public debate, corporations 
would need to balance the desire to speak freely against the risk of litigation 
and potential liability. 

This article does not aim to assess whether the California Supreme Court 
"correctly" decided Kasky v. Nike under the law. Nor does it aim to say what the 

U.S. Supreme Court should have decided. It does look at the ethical aspects of a 
corporation's speech about its own activities. Such speech raises an array of questions 
with implications for corporate ethics and societal values. Should corporations 
have the same free speech rights as natural persons? Should corporations seek to 
be insulated from any lawsuit regarding false or misleading speech? Should all 
corporations have the kind of First Amendment protection that Nike was seeking? 
How can the rules of the game be adjusted to create the "level playing field" that 
Nike says that it seeks? 
As we shall see. First Amendment decisions have not devised helpful answers 
and clearly defined categories. Moreover, litigation is not a very efficient way to 
regulate the flow of information about a company's activities to the general public. 
But lawsuits are part of the legal landscape, and this particular lawsuit has raised 
conceptual issues both legally and ethically which are better addressed than ignored. 
Part II therefore begins with an analysis of the free speech clause of the First 
Amendment law, and judicial decisions which distinguish between "commercial 
speech" and "political speech." In part III I will examine the legal arguments of 
Nike and its friends in more detail, before evaluating the ethical merits of those 
arguments in parts IV and V. 


THE QUARRELSOME QUESTION OF CORPORATE FREE SPEECH 71 

//. Issues and Definitions: Free Speech and its "Core Values" 

Political speech as a "core value" of the First Amendment emerged in the early 
part of the twentieth century in the opinions of Justices Oliver Wendell Holmes 
and Louis Brandeis. In Abrams v. United States, a pamphleteer was sentenced to 
twenty years in prison after criticizing the dispatch of U.S. Marines to Siberia as 
a "capitalist" invasion of Russia and an attempt to crush the Russian Revolution." 
In 1919 the Supreme Court upheld the conviction and a twenty-year jail sentence 
under the federal Espionage Act despite a First Amendment challenge that the law 
as applied violated Abrams's right of free speech. In dissent, Justice Holmes noted 
that Abrams was convicted for expressing "opinion and exhortations," and advised 
that "we should be eternally vigilant against attempts to check the expression of 
opinions that we loathe." It is in this dissent that the "marketplace of ideas" metaphor 
makes its appearance. Holmes notes that "the best test of truth is the power of the 
thought to get itself accepted in the competition of the market."'"* 

Justice Brandeis concurred with Holmes's dissent. Eight years later, in Whitney v. 
California, Justice Brandeis emphasized the value of unrestricted debate for American 
democracy. He wrote that the founders of the U.S. Constitution believed 

that freedom to think as you will and to speak as you think are means indispensable 
to the discovery and spread of political truth; that without free 
speech and assembly discussion would be futile; that with them, discussion 
affords ordinarily adequate protection against the dissemination of noxious 
doctrine; that the greatest menace to freedom is an inert people; that public 
discussion is a political duty; and that this should be a fundamental principle 
of the American government.^' 

As Professor O. Lee Reed has noted. Holmes and Brandeis at this time were trying 
to shake the Supreme Court from its fairly complacent acceptance of a "majoritarian 
government view as setting the parameters for First Amendment protection."'* 

They advocated independent constitutional standards that would protect 
unpopular minority opinions unless they threatened a clear and present danger. 
... Although Brandeis and Holmes were not successful in the 1920s in 
persuading the Supreme Court to their position, both their position and its 
values rhetoric soon became dominant in free speech analysis." 

At the heart of the Holmes and Brandeis "values rhetoric" is the belief that the highest 
aim of the First Amendment is for citizens to discover what Reed calls "political 
truth." Whatever the First Amendment was originally meant to protect, or whatever 
Holmes and Brandeis posited as the highest aim, the First Amendment has come 
to protect all kinds of speech, including entertainment, commercial speech, and 
even some kinds of pornography. Although commercial speech now enjoys some 
protections, it was not always so. In the 1930s and 1940s the Court "embraced the 
value justifications offered by Holmes and Brandeis."'* Most notably, the Court 
created a category of unprotected commercial speech in the 1942 case of Valentine 

V. Chrestensen.^^ 

BUSINESS ETHICS QUARTERLY 

The case arose under New York's Sanitary Code, which banned the distribution of 

commercial handbills on public streets. To encourage people to tour his submarine, 

Chrestensen made up handbills with two sides: one side invited would-be patrons, 

and the other protested against the City Dock Department's refusal to permit him 

to moor the submarine at his preferred pier. The Court held that the intent of the 

handbill was clearly commercial, and was therefore subject to the city's authority to 

regulate public streets. "We are," said the Court, "clear that the Constitution imposes 

no .. . restraint on government as respects purely commercial advertising.'""* 

There is evident hostility to the Valentine v. Chrestensen opinion in many of 
the amicus briefs submitted to the Court in Nike's appeal. The Center for the Advancement 
of Capitalism approvingly cites a law review article, claiming that in 
Valentine, the Court "plucked the commercial speech doctrine out of thin air.'"" 
The Business Roundtable notes that Valentine has been over-ruled by a series of 
cases that afford greater protection to commercial speech, starting with Virginia 
State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc.'*^ Yet by the 
1980s, when the Court had over-ruled Valentine, regulatory restrictions on commercial 
speech were still permitted. In Zauderer v. Office ofDisciplinary Counsel, 
the Court said that "[s]ome forms of commercial speech regulation are surely 
permissible.'"'^ Moreover, the Court has never altered its position that "[t]he States 
and the Federal Government are free to prevent the dissemination of commercial 
speech that is false, deceptive, or misleading.'"^ 

Both sides in the Kasky case agreed that commercial speech, however defined, 
does not have the fullest measure of First Amendment protection. Full protection 
is given to noncommercial speech, even if it is misleading; for example, political 
advertisements may frequently distort an opponent's position and be deliberately 
misleading. Intermediate protection is given for nonmisleading commercial speech 
about a lawful activity, but no protection is given for commercial speech that either 
misleads or pertains to an unlawful activity. Thus, Nike wanted its comments about 
its own labor practices to be categorized as noncommercial (relating to a public 
issue); as noncommercial speech, even misleading statements could be constitutionally 
protected. 

Judicial definitions of commercial speech have varied. A common definition is 
speech that "does no more than propose a commercial transaction.'"" But the Supreme 
Court has also referred to commercial speech as "expression solely related 
to the economic interests of the speaker and its audience.'"** 

The first definition of commercial speech seems to suggest that commercial 
speech could be confined to a category of cases where a seller proposes a specific 
transaction to a buyer. An advertisement that invites the reader to get 30 percent off 
certain best-selling books if the purchase is made within four days would fall into 
the "specific transaction" category. The second definition—^based on the speaker's 
motivation rather than the content of the message or its relation to a particular 
transaction—is much broader. Still, neither definition prevents a company from 
commenting on matters of public importance (e.g., global warming, fuel efficiency 


THE QUARRELSOME QUESTION OF CORPORATE FREE SPEECH

laws, "sweatshops," child labor, and related issues). But comments on public issues 
presumably have at least some commercial motivation or component; why would 
corporations spend money making public comments if doing so would not advance 
shareholder value? Friends of the court favoring the California Supreme Court's decision 
(including attorneys general of New York, California, Florida, Ohio, Minnesota, 
and sixteen other states) cited the Supreme Court's statement that "many, if not most, 
products may be tied to public concerns about the environment, energy, economic 
policy, or individual health and safety."*^ The argument the attorneys general make 
is that for many products, a "tie-in" to public policy issues is often possible, and 
should not transform the sale of private products into matters of public discussion 
and thereby automatically gain the full protections of "political speech." 

The issue of commercially motivated corporate speech has come up in numerous 
cases where the commercial aspect of the corporation's speech was nonetheless 
strong enough to permit regulation. In Bolger v. Youngs Drug Products Corp., a 
condom manufacturer's pamphlets not only discussed venereal disease but touted 
its condoms.''^ In National Commission on Egg Nutrition v. FTC, a trade association 
encouraged egg consumption while adding its own viewpoint to the public health 
debate by minimizing health concerns about cholesterol."*' In Board of Trustees 
of the State University of New York v. Fox, the inclusion of a discussion on home 
economics did not make the promotion of Tupperware noncommercial; as commercial 
speech, it was subject to limited regulation consistent with standards the 
Court had announced in Central Hudson Gas & Electric Corp. v. Public Service 
Commission of New York.^° The Court in Fox noted that "No law of man or of nature 
makes it impossible to sell housewares without teaching home economics, or to 
teach home economics without selling housewares."" Likewise, Kasky argued that 
it was entirely possible for Nike to address public policy concerns without making 
factual misrepresentations about its Asian operations. 

Kasky believed that Nike had made a series of false statements about its foreign 
labor practices in order to entice consumers who do not want to purchase products 
made in unsafe or inhumane conditions. Governments, both state and federal, have 
long prohibited false or misleading statements about a product's origins or methods 
of production. It is not legal in the United States, for example, to claim that a product 
is made by the bhnd or by union labor if it has not been so made.^^ 

Reliable information to consumers is the core value here. The Supreme Court 

granted some Constitutional protections to commercial speech starting in the 1970s, 

noting in Virginia Board of Pharmacy v. Virginia Citizens Consumer Council, Inc., 

that access to factual advertising about prescription drug prices could enable con


sumers and citizens to make better decisions. As the majority opinion noted. 

So long as we preserve a predominantly free enterprise economy, the allocation 
of our resources in large measure will be made through numerous private 
economic decisions. It is a matter of public interest that those decisions, in 
the aggregate, be intelligent and well informed. To this end, the free flow of 
commercial information is indispensable.'' 


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Moreover, as Bruce Ledewitz has observed, markets have so supplanted government 
in influencing private decisions and public policies that reliable information is indeed 
indispensable. He interprets Virginia Pharmacy and other decisions protecting 
commercial speech as predicated on the idea that citizens must be trusted to evaluate 
truthful information, commercial or otherwise, in a responsible way.^"* 

Moreover, the core value of reliable information in Virginia Pharmacy and subsequent 
commercial speech cases serves to remind us that jurists will often search 
for fundamental principles that underlie constitutional terms. If we link "reliable 
information" to Brandeis and Holmes's "freedom to think as you will and to speak 
as you think," we can sensibly argue that individual autonomy and civic participation 
are undermined by false and misleading information. The Virginia Pharmacy case 
distinctly recognizes states' interest in limiting false and misleading information.^^ 
Corporate freedom of speech rights are balanced against societal needs for reliable 
market information; in Virginia Pharmacy and various commercial speech opinions 
that followed, the value of a "stream of commercial information" that flows "cleanly 
as well as freely" is frequently reaffirmed. A clean and free stream of commercial 
information is congruent with citizen/consumer autonomy and consent. As I will 
argue in part V, reliable information is also indispensable to honoring the moral 
norm of necessary social efficiency (a "hypemorm," in Donaldson and Dunfee's 
terminology). 

Did Nike in fact fully respect and trust citizens and consumers in its public-
relations counter-offensive? When it faced strong negative moral sentiments in 
1996-1997, it had several choices to make. It could commission a thorough and 
impartial investigation and report. It could hire someone to do a less than thorough 
investigation. It could choose to publicize none of the results, some of the results, 
or all of the results, whether those results were good, bad, or indifferent. Ultimately, 
Nike chose to rely on the report of GoodWorks, LLC, which cast Nike in a favorable 
light. Was it ethical for Nike to go forward in its public relations campaign without 
having a better appraisal than Young's in hand? 

To address this and related questions raised by the Kasky case, I will first follow 
the Nike/Kasky arguments about commercial speech in the Supreme Court in 
part III, and look more closely at Nike's appeals to the need for "robust debate" 
and "level playing fields" in part IV. In part V, I will come back to the central question 
raised earlier: to what extent is it ethical for corporations to demand full First 
Amendment protections for potentially misleading speech? From a societal perspective, 
the related question (with apologies to Oliver Wendell Holmes) is, "How 
can policy-makers best create and maintain market rules that encourage truth and 
discourage falsehood?"'** 

///. Commercial Speech and the Kasky Case 

The Court's indecision and the subsequent settlement between Kasky and Nike 
let the California Supreme Court's opinion stand, allowing Kasky and others to 


THE QUARRELSOME QUESTION OF CORPORATE FREE SPEECH

bring claims against corporations for false or misleading speech. This was a cause 
of serious concern in boardrooms across America; it could also be a cause for concern 
among companies outside the United States whose advertisements or public 
relations efforts might be intended to influence California consumers." 

Dire predictions followed in the wake of the Court's indecision. In addition to the 
previously noted warning that the Court's failure to overrule the modem commercial 
speech doctrine would "have a chilling effect on business and individual rights,"'* 
The Business Roundtable predicted that the public "will be deprived of corporate 
perspectives on matters of social concern," and that "the people would lose an important 
counter-weight to the power of government."^' The National Association of 
Manufacturers predicted that fear of "sanctions would cause prudent manufacturers 
to engage in self-censorship or simply to refrain from any controversial expression. 
.. . [I]t would constitute viewpoint discrimination of the worst sort. Under 
such a constitutional framework, Ralph Nader would receive full First Amendment 
protection when attacking the safety of General Motors' automobiles, yet General 
Motors' response would receive only commercial speech protection."^" 

These warnings may be overly alarmist. In considering a motion to dismiss, 
the trial court will assume that the facts in the pleading are true. Thus, the fact that 
the trial court dismissed Kasky's complaint and the court of appeals affirmed that 
dismissal does not mean that Nike actually made false or misleading statements. 
Rather, each court presumed that Nike did make false or misleading statements, 
and pondered whether those statements were nonetheless protected under the First 
Amendment. The California Supreme Court's ruling meant that—unless the Supreme 
Court reversed it—Kasky could proceed to the discovery phase of litigation 
and then trial, assuming that he could get past a summary judgment motion during 
the discovery period before trial. If there were a trial, Kasky would have the burden 
of proof to show that Nike had indeed made false or misleading statements. If 
Kasky had merely been harassing Nike in bad faith, with little or no evidence to 
prove false or misleading statements, California law would allow Nike damages 
from Kasky for its attorney fees and other expenses.''' 

There are other barriers to labor-activist criticisms and lawsuits, as well. If Kasky, 
prior to filing any kind of lawsuit, had appeared on a television show to denounce 
Nike as giving false and misleading statements about its overseas operations, Nike 
could sue for defamation or some form of product disparagement. It should also be 
said that Kasky's chances of success at trial and appeal would be limited by recent 
commercial speech cases, which require the courts to invalidate state regulation 
of commercial speech unless the state (or Kasky as its proxy) could prove that a 
company's speech was commercial (not political), that the interests of the state in 
regulating the speech are substantial, that those interests were "directly advanced" by 
the state action, and that the state has chosen to advance those interests by choosing 
"least restrictive" means to serve that interest.*^ In short, even with Nike's statements 
cast firmly as "commercial speech," the case for Kasky is not an easy one. 


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Nike, however, sought to characterize their statements as "noncommercial" or 
"political," seeking even greater protection, Nike wanted "full" First Amendment 
protection for its public statements; it is important to understand what this means. 
To borrow the formulation from the Business Roundtable, it would mean that a 
government through its laws (legislative, judicial, or administrative) could not 
impose liability "for a commercial actor's speech on a matter of public concern in 
the absence of proof of commercial harm caused by such speech and proof of actual 
malice."*-* This position is certainly arguable within the context of defamation law 
where First Amendment rights are at issue. "Actual malice" means knowledge on 
the part of the speaker of the falsity of the statement made, or "reckless disregard" 
for the truth; it does not mean that the speaker has motives of spite or ill will, or 
has some intent to be malicious. 

How would the test of "actual malice" be applied to Nike's statements? In oral 
argument before the Court, Lawrence Tribe emphasized that Nike was not promoting 
a specific product in its statements and that Kasky was not critiquing a specific Nike 
product. Nike argued that unless a particular consumer could be shown to purchase 
a particular Nike product in reliance on specific misrepresentations by Nike, there 
could be no civil liability for false or misleading statements.^ The United States 
joined the various friends of the court on Nike's behalf, and Theodore Olson made 
oral arguments to the Court in a similar vein.*' 

If the Court had adopted that position, any litigant under California's laws on 
unfair trade practices and false or misleading advertising would be constitutionally 
required to make a showing of product purchases because of reliance on specific 
statements made by Nike. These requirements would effectively preclude filing a 
lawsuit, much less winning one. Nike made statements about its operations overseas, 
not specific products. In marketing terms, it was defending its "brand" rather than 
a specific shoe or item of apparel. In short, the test or standards argued for by Mr. 
Olson and Mr. Tribe would effectively end any threat of judicial civil liability, even 
for a corporation's willful and deliberate lies to influence market share. Actual malice 
could not be shown under Nike's proposed standard, unless specific consumers 
could allege specific reliance on the false or misleading statements as to specific 
products. The difficulty of plaintiffs or attorneys general showing such specificity 
would effectively assure almost complete protection for corporate speech, even 
deliberately misleading statements to protect the company's brand. 

I will venture an argument in part V that Nike and its amici have claimed more 
protection than sound corporate ethics would warrant. Of course, the crucible of 
litigation requires an aggressive articulation of opposing positions, Kasky may have 
had well-founded doubts about Nike's good faith its counter-offensive, but by filing 
a lawsuit, Kasky forced Nike to argue aggressively. Nike's legal advocates chose 
the route most often recommended by defense trial attorneys: if possible, get the 
case dismissed on legal grounds rather than go through a lengthy discovery process 
and trial. The dismissal of Kasky's claim then set in motion the long odyssey of this 
case, culminating in the Supreme Court's intellectual deadlock. It also narrowed 


THE QUARRELSOME QUESTION OF CORPORATE FREE SPEECH

Nike's focus: having won a dismissal both in the trial court and the court of appeals, 
and losing in the California Supreme Court by only one vote, an appeal to the U.S. 
Supreme Court seemed justified both by law and by reason. Understandably, Nike's 
lawyers were not concerned about systemic ethical issues, but thought primarily in 
terms of winning through legal arguments. 

But the Justices (and the rest of us) must ask whether Nike's position would 
likely yield positive outcomes for business and society. I will argue that if Nike and 
the Business Roundtable articulate a position that would encourage the emergence 
of rehable, useful information while discouraging false and misleading statements, 
their arguments should be taken seriously. But if the arguments merely advocate 
corporate free speech rights without regard to the free speech rights of others, or 
the desire to establish a better-functioning free market system, then their arguments 
have less ethical merit. In part IV, I will sketch an overview of corporate attitudes 
and actions toward free speech in the United States; in so doing, I make the claim 
that Nike's position before the Supreme Court represented ardent advocacy rather 
than a reasoned proposal based on fairness and the assurance of unrestricted debate 
on public policy issues. This will support part V, which provides an explanation of 
how integrative social contracts theory commends a kind of corporate advocacy 
that values information above obfuscation and honors the particular nature of our 
political economy. 

IV. Corporations and Free Speech in America 
At the heart of the argument over corporate free speech in the Kasky case is a 
set of themes and ideological frames that can obscure as well as enlighten. Nike 
and its amici offer an implicit utiUtarian argument that removing constraints to 
speech will serve the greater societal and economic good. The argument that traded 
on "fairness" and "rights" (i.e., that Nike should be allowed freedom to counteract 
its critics by "leveling the playing field") also has an intuitive appeal. But, to offer 
some different (and decidedly mixed) metaphors, the "deck is already stacked" to 
give corporations not only more players on the field, but also a bigger influence 
over the referees and the rules of the game. What follows will address the ethical 
merits of what Nike and its friends have argued before considering in part V what 
policy positions it should be taking under integrative social contracts theory. It is 
also intended as a quick "reality check" to the facially appealing argument that 
Nike and other corporations "should" be able to speak freely in order to "level 
the playing field" and uphold the value of unrestricted debate that Oliver Wendell 
Holmes had championed.** 

To summarize what follows: a credible case can be made that corporations, fol


lowing their primary mandate of maximizing shareholder wealth, have not generally 

advocated for free, untrammeled discourse in order to create a "robust debate" on 

public issues in the United States media, in its courts, or in its other pubhc insti


tutions. Rather, a pattern emerges in the corporate use of economic and pohtical 


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power to limit discussion, suppress alternative viewpoints, and skew public policy 
debates. This pattern is evident in U.S. media consolidation, corporate public relations, 
corporate lobbying, lawsuits against public participation, advertiser's pressure 
on media, and widespread practices of hiding (or shredding) information that would 
be useful to public officials or the public generally. 

U.S. Media Consolidation and Public Affairs 
Robert McChesney writes, "Our media system is increasingly the province of 
a very small number of large firms, with nary a trace of public-service marrow in 
the commercial bones.'"^' William Safire notes that the five media conglomerates 
are merging their way to becoming three, with a predictable "chilling" of diverse 
facts and opinions. Safire concludes that "[y]ou don't have to be a populist to want 
to stop this rush by ever-fewer entities to dominate both the content and the conduit 
of what we see and hear and write and say."** Paul Starr notes that because of media 
concentration in a handful of corporations, dissent to prevailing policies tends to 
be muted and any political activism by media companies is designed primarily to 
further sales and profits.*' 

Corporate Public Relations 

Political speech and lobbying have been used by some corporate interests to 
undermine policy-making based on facts and probabilities. Franklin Foer notes that 
"[djocuments produced in recent litigation show that, in the early 1990s, cigarette 
companies wanted to cast grave doubts on government scientists' capacity to produce 
fair research." 

But they didn't want to be too closely associated with this debunking. Instead, 
tobacco quietly formed a coalition of industries that would challenge every 
aspect of government science, from its studies of global wanning to auto 
safety. They called their group, formed in 1993, The Advancement of Sound 
Science Coalition. As the University of California, San Francisco's Stanton 
Glantz and Elisa Ong have described, "The 'sound science' movement is 
not an indigenous effort from within the profession to improve the quality 
of scientific discourse, but reflects sophisticated public relations campaigns 
controlled by industry executives and lawyers whose aim is to manipulate the 
standards of scientific proof to serve the corporate interests of their clients." 
Despite its cynical motives, tobacco's sound science coalition acquired a 
broad following.™ 

The companies were engaged in fully protected pohtical speech under the First 
Amendment. Even if the Advancement of Sound Science Coalition was engaged 
in a blatantly self-interested disinformation campaign, it is not promoting a product 
or brand and is thus not "commercial speech" under existing standards. Thus, a 
Kasky-type activist could not "chill" such speech using the California law. Moreover, 
industry trade associations and other groups have considerable operating room 
because they are not attempting statements of fact that can be argued as "false" or 


THE QUARRELSOME QUESTION OF CORPORATE FREE SPEECH

"misleading." The method of much trade industry communication is not to claim the 
truth of specific facts so much as to question opinions, methodologies, and conclusions. 
They not only have "breathing room" but an open field of play. Moreover, if 
their advertising budgets and pubhc relations efforts are large enough, media giants 
will be willing to give their messages full exposure. 

Corporate Lobbying: Changing the Rules of the Game 

Large corporations can not only own and leverage major media, but have First 
Amendment protections for political lobbying and campaign contributions as well. 
This came about in the early 1970s—after business interests were set back by a 
decade of social regulation on environmental, consumer, and worker rights—as more 
and more corporations sought a presence in Washington, D.C., and the Supreme 
Court extended First Amendment protection to corporate campaign contributions,^' 
As William Greider documented in the early 1990s, the rise of political action 
committees (PACs) in the 1980s resulted in substantial regulatory retrenchment 
during the Reagan and Bush I administrations. Both parties were beholden to large 
contributors in order to get sufficient money for media-intensive election campaigns, 
and most of the large contributions came from corporations,^^ 

Greider's thesis is that while legislators sometimes pass laws that seemed to 
address public concerns, they are often "symbolic gestures" or "hollow laws" 
that leave ample room for business interests to get what they really want in the 
administrative process,'-* He has pointed out that in a society where many people 
are speaking, money and access are vital. Large corporations and trade associations 
have it. They also have that rare commodity, the power to resist and change laws 
that they do not hke, and to replace them with laws that they do like. In the game 
of influencing public policy, they not only have more players, but also have the 
officials and broadcasters on their side. 

Strategic Lawsuits against Public Participation 

Large corporations have created what George Pring and Penelope Canan 
originally termed "SLAPP suits," an acronym for strategic lawsuits against public 
participation. As Lawrence Soley notes, SLAPPs are civil suits filed primarily for 
purposes of intimidation, largely without merit, and expressly designed to suppress 
criticism of business activities.'''' Soley claims—with abundant documentation—that 
"many corporations have filed frivolous, vexatious lawsuits, alleging copyright 
violations, patent infringement, defamation, business torts, process violations, civil 
rights violations, and a laundry list of other alleged injuries, not expecting to win 
the suits but seeking simply to silence critics,"" This has the effect of making public 
debates into private legal disputes and shifting significant financial burdens onto 
the defendants, Soley contends that even the threat of a SLAPP suit is sometimes 
enough to silence critics; many times companies bring SLAPP suits "expecting to 
drop them before they go to trial,"'*" Corporations will often require that settlement 


BUSINESS ETHICS QUARTERLY 

depend on the critic-defendant's signing of a non-disclosure agreement that prevents 
the critic from ever commenting on the 

Advertiser and Conglomerate Pressures on the Media 

The past ten years have offered numerous examples of commercial interests 
"chilling" free speech in the political arena. Political messages offered by MoveOn. 
org during the 2004 Super Bowl were rejected by CBS in favor of more "acceptable" 
advertisements for Viagra and Cialis.'^ Lawerence Soley cites numerous incidents 
where corporations have withdrawn advertising dollars because they did not like 
the critical content of a news story, and where media companies have refused to 
run stories out of concern for upsetting advertisers or corporate parents. Soley cites 
a number of examples, such as General Electric's ownership of NBC, that demonstrate 
the free speech chilling effect for news organizations that have conglomerate 
parents with conflicting commercial interests.'' 

Discovery Abuses and the Secrecy of Judicial Records 

Numerous sources have pointed out that many large corporations have been 
actively abusing the discovery process in civil litigation by secreting records or 
destroying them (spoliation). This abuse remains largely unchecked by judges.^" In 
this way the truth is often hard to fathom, even for litigants with supposed access 
to documents and testimony through the discovery process. Because spoliation and 
secretion of records are undertaken in secret, it is difficult to know just how deep 
and wide these practices are; but the post-Enron corporate scandals have illustrated 
the apparent temptation to shred documents and delete incriminating e-mails when 
criminal or civil hability looms large. Arthur Andersen comes to mind, among 
many others. 

Even after trial or settlement, corporate lawyers often seek to seal the records in 
order to do "damage control." If someone is harmed by a defective product, medical 
malpractice, an investment scam or a wrongful discharge, they can expect that 
their lawsuit will be opposed by highly skilled and well-paid attorneys, who will 
use every conceivable motion to dismiss the case, and use every means to resist 
discovery requests. When settlement is offered, the usual condition will be that 
the litigant and his or her lawyer will agree to secrecy. The company will "insist 
that it did nothing wrong .. . [and] evidence discovered in the case will be sealed 
against disclosure to other persons similarly injured, lawyers representing such 
injured parties, the media, and regulators—even if the secrecy serves no beneficial 
public purpose."*' 

In many ways, then, corporations have sought to limit the public's access to diverse 
and reliable information and opinion. Even if Nike, Inc., does not itself engage 
in the foregoing behaviors, the corporate community supported its position before 
the Court that fairness (to level the playing field) and positive societal outcomes 
(through unrestricted debate) could be secured by providing full First Amendment 
protections to Nike's speech. I have argued in this part of the article that the Kasky 


THE QUARRELSOME QUESTION OF CORPORATE FREE SPEECH

case is more realistically framed in the context of corporate self-interest than the 
pursuit of the public good through a "level playing field" and "robust public debate," 
From ethical and policy perspectives, it would be easier to embrace Nike's arguments 
for a "level playing field" if large corporations consistently supported the airing of 
diverse opinions in the media, sought to limit undue influence of private money on 
questions of public import, worked to ensure that those without economic power had 
a public voice, and sought to keep judicial records open rather than closed. Robust 
public debate depends on a variety of voices, and a way for both consumers and 
citizens to have valid information as well as ideology or opinion on which to base 
consumer choices in the marketplace and political choices on Election Day. 

The final section focuses on the ethical and pubhc pohcy questions presented 
in the Kasky case. Pre-eminent among those questions is what kind of legal regime 
should be sought and argued for by corporations in order to create and maintain 
market rules that encourage truth and discourage falsehood? 

V. Corporate Moral Choices on Free Speech 
Large U.S.-based companies have every reason to contribute to a "robust public 
debate" about laws and regulations. They do so routinely, both as corporations and 
as members of trade associations. They contribute to political candidates, and offer 
their opinions and viewpoints through lobbyists at the state and federal level. Their 
views are well-represented at international trade and finance institutions as well. 
The temptation—some would say the profit-maximization mandate—is not always 
to safeguard the truth about their goods and services and their means of production. 
Sometimes corporations will choose to conceal reahties they would prefer to remain 
hidden. Acts of concealment and obfuscation are varied, and can be entirely legal, 
A group that sounds pro-environment may in fact be a trade association that speaks 
to the pubhc and to pohticians against new limits on mercury emissions. An auto 
manufacturer facing lawsuits for rollovers of sport utihty vehicles may settle cases 
singly, insuring silence by requiring confidentiality agreements and sealed records. 
If a whistleblower speaks the painful truth about a corporation's actions, there are 
numerous legal ways to suppress that speech. The history of SLAPP suits may also 
remind us that some corporations have actively sought to suppress speech. As noted 
in the preceding part of this article, corporations often seek an unlevel playing field 
when it comes to matters of speech. Why does any of this matter? 

Beyond any legal distinctions between commercial and political speech in First 
Amendment jurisprudence, the aim for those who care about law, business, and 
society should be to visuahze, construct, and maintain a political-legal system in 
which there is both efficiency and fairness. In arguing to the Supreme Court that 
the law requires corporate freedom of speech to insure robust pubUc debate, Nike 
and the various business interests that submitted briefs could either be looking to 
achieve the upper hand in the playing field we call "the market," or could be genuinely 
concerned with the quahty of the pubHc debate about outsourcing and overseas 


BUSINESS ETHICS QUARTERLY 

factory workers. If the arena for this discussion went beyond the courtroom, what 
should the "corporate community" say? Should it say, as Nike and its friends did, 
that corporations should only be criminally or civilly liable for deliberately false 
or misleading statements that caused particular plaintiffs some specified economic 

Such a recommendation for system-wide change goes too far. I propose to use 
(or abuse) Holmes's "marketplace of ideas" metaphor to discuss what kind of policies 
corporations should support in order to generate not only a wider selection of 
ideas and facts in that marketplace, but also to generate more validity and reliability 
rather than less. The goal is to create and maintain a system in which people can 
more easily distinguish among products in terms not only of price and quality, but 
also in terms of their origins and processes. It is to design policies that more likely 
assure that consumers and investors can distinguish what is true from what is false, 
and where economic power does not suppress the emergence of better products and 
the expression of moral preferences by consumers and investors. 

Nike's Decisions in a Marketplace of Morality 

In essence, Nike had a series of ethical decisions: (1) how to conduct operations 
in Vietnam and other states where subcontractors operated, (2) how to advertise 
and/or publicize its activities, and (3) how to argue for a change in the law that 
would allow for meaningful participation in matters of public debate. This part of 
the article will review all three, but primarily focus on (2) and (3). 

In his article on the "marketplace of morahty," Thomas Dunfee demonstrates 
why legal compliance, in itself, is an inadequate guide to corporate ethics. For 
example, suppose that Nike is a market leader, and that Global Exchange wants to 
shame Nike into paying higher wages in Vietnam, even though Nike is complying 
with all applicable labor laws of Vietnam. Because people do express preferences 
in the market, careful attention to maximizing shareholder wealth may require a 
more nuanced response than "what we did was both legal and profitable." Potential 
boycotts, or the tarnishing of brand image, can easily be triggered by legal activities 
that some customers and activists regard as unethical.^^ Sensitivity to investors 
as well as consumers is now advisable; a growing group of "socially responsible" 
funds will not invest in companies involved in sales of tobacco or alcohol, the use 
of child labor or forced labor, or environmentally suspect activities. 

Moral concerns from consumers, activists, or investors can be readily addressed 
by using Donaldson and Dunfee's integrative social contracts theory (ISCT). ISCT 
will also be useful in considering what kind of legal positions on corporate free 
speech are most ethical. ISCT specifically addresses the structural integrity of the 
legal and cultural norms of a market system in a representative democracy. The 
reader's basic familiarity with ISCT is assumed here.*^ The dual-level structure 
of ISCT is particularly helpful in a context where there are multiple communities 
that have a voice and an interest in Nike's actions and speech. In its attempt to 
balance universal rules with more local ethical norms, ISCT gives moral weight to 


THE QUARRELSOME QUESTION OF CORPORATE FREE SPEECH

the "microsocial norms" of specific societies and communities, while yet rejecting 
some of those norms by the invocation of "hypemorms," Thus, if the practice 
of nepotism in hiring is deeply embedded in a society (or, "embodied in ethical 
custom"), it is presumptively ethical unless it violates one or more hypemorms. 
These hypemorms can be substantive, procedural, or derived from "necessary 
social efficiency,"*' As explained by Donaldson and Dunfee, the hypernorm of 
necessary social efficiency imposes certain systemic duties. "At its broadest," they 
explain, "this hypemorm requires observance of duties generated by the multitude 
of institutions and organizations that taken together provide the basic fabric of a 
given political economy."** 

Deference to local norms is given particular significance by those doing business 
globally who must come to terms with varying cultural standards; indeed ISCT accords 
moral weight to authentic local norms. For example, in ISCT, autonomy is 
specifically recognized as fundamental to a person's participation in a moral community; 
without the ability to "consent" and have "voice," authentic moral norms 
cannot emerge.*' Without reliable information, one loses the information necessary 
to exercise the moral autonomy to voluntarily accept contractual duties. Thus, in 
legal contracts as well as social contracts, "consent" seems to require relatively 
accurate information. 

Using Integrative Social Contract Theory (ISCT) 

In brief, ISCT would recommend that Nike look at its various subcontractors' 
overseas operations and consider whether they were acting in compliance with 
"authentic" local norms (including laws and customs). If so, then a presumption 
of moral acceptability would attach. The presumption would be tested against 
"hypemorms," including substantive hypemorms, procedural hypemorms, and the 
hypemorm of necessary social efficiency. If Nike's subcontractors were acting in 
compliance with local norms, then Nike should (by ISCT's lights) only intervene 
to change those subcontractor practices that violated hypemorms. Again, however, 
the first step would be to ascertain that its operations were in accord with local law 
and custom, or what Donaldson and Dunfee call "authentic micro-social norms." 

Adhering to Authentic Micro-Social Norms 

In balancing the universal and the particular, ISCT starts with the notion that 
"authentic" ethical norms regarding what is right behavior can be found in "communities" 
that have "moral free space" to contract as they wish, subject to the "right 
of voice and exit" and bounded by hypemorms.** Such norms would include both 
written and unwritten rules, and both formal and informal norms. In "moral free 
space," idiosyncratic norms can emerge, allowing for considerable moral diversity 
in what is regarded as right behavior; Japanese and Chinese organizations, they 
note, "can be expected to differ significantly from their Westem counterparts in the 
manner in which they utilize their moral free space."*' 


BUSINESS ETHICS QUARTERLY 

Given that there were various Asian nations where Nike's subcontractors were 
operating, it is entirely possible that varied local norms would apply. If some nations 
encouraged child labor, or forced labor, or discrimination against women, then 
Nike's subcontractors could be complying with authentic moral norms while still 
offending sensibilities of NGOs, labor activists, and certain customers in the United 
States. Under ISCT, ascertaining that local contractors were at least in compHance 
with local norms would be a first step; Andrew Young's GoodWorks investigation 
did make claims that Nike's subcontractors were largely in compliance with local 
laws and norms. Notably, though, the Young report also sought to portray Nike as 
taking a leadership position.^^ The link to ISCT seems clear enough: compliance 
with local laws and customs may not be ethically enlightened where enough people 
worldwide are convinced that substantive hypemorms are being violated. 

Applying Substantive Hypemorms 

Typically, the hypemorms that might be violated would be from the "vitally 
important category" of "substantive hypemorms, which specify fundamental 
conceptions of the right and the good."" Noting "threads of convergence" around 
"fundamental ethical principles,"'^ Donaldson and Dunfee suggest that both rational 
and empirical approaches may be needed to discover substantive hypemorms. 
Evidence for substantive hypemorms could be found in widespread consensus that a 
norm is universal, in global industry standards, in the support of NGOs intemationally, 
through consistency with major religious precepts and/or major philosophies, 
or in laws upholding the norm in many different countries.'^ Some trans-cultural 
norms may include human rights, such as the right to freedom from torture or the 
right to subsistence, or the right to minimal education.''' It is possible for a U.S.based 
corporation to use forced labor in its profit-making activities abroad,'^ in 
which case ISCT would probably hold that, regardless of the law and culture in a 
host country that would allow or approve such labor, the U.S. company should not 
engage in it, for doing so would violate a substantive hypemorm. 

Supposing Nike was to thoroughly investigate its subcontractors and find that 
it was observing all authentic local norms in various Asian nations, ISCT would 
also commend a further evaluation of those norms by measuring them against hypemorms. 
Hypemorms, as Dunfee notes, 

are defined as "principles so fundamental to human existence that... we would 

expect them to be reflected in a convergence of religious, philosophical, and 

cultural beliefs." As expressed by Michael Walzer, they would be a thin "set 

of standards to which all societies can be held—negative injunctions, most 

likely, rules against murder, deceit, torture, oppression, and tyranny."" 

Thus, while Vietnam or Indonesia (or some smaller community within those territories) 
might have specific norms, and those norms were adequately complied with 
by Nike and its subcontractors, the moral maneuvering room would nonetheless 
be limited by hypemorms. For example, if the citizens and government of Myanmar 
were to actually agree that forced labor was their best path to economic and 


THE QUARRELSOME QUESTION OF CORPORATE FREE SPEECH

social development, that agreement would nonetheless be evaluated with reference 
to hypemorms; a U.S. company seeking collaborative relationship with the government 
of Myanmar would also want to consider whether forced labor violated 
hypemorms. 

There is room for vigorous disagreement about the existence of substantive hypemorms, 
their epistemology, and their utility.^' In the context of Nike's decisions 
in a marketplace of morality, however, it makes sense for Nike to look for applicable 
substantive hypemorms that could be clues to whether investors and customers 
would react negatively to any news that Nike's operations were paying less than a 
living wage, physically or sexually abusing workers, employing underage workers, 
or lying about its benefits and working conditions. 

Donaldson and Dunfee suggest that clues to the existence of substantive hyper-
norms can be found both rationally (in philosophical thought) and empirically (in 
various collective agreements).'* For example, one could look from Confucius to 
Kant to Rawls, on the philosophical side, and to the Universal Declaration of Human 
Rights or the Caux Round Table on the empirical side. 

The Caux Round Table offers a number of guidelines for multinational corporations 
that might apply to de-legitimize adherence to authentic local norms. The 
Round Table agreed that its member companies have a responsibility to provide 
jobs and compensation that "improve workers' living conditions," that "respect each 
employee's health and dignity," avoid "discriminatory practices" and guarantee 
equal treatment and opportunity "in areas such as gender, age, race, and religion," 
and "protect employees from avoidable injury and illness in the workplace."'' 

In comparing authentic local norms to hypemorms, Nike might well conclude that 
although local laws and customs may allow unsafe or unhealthy working conditions 
or wages below subsistence level, hypemorms might suggest a more worker-fdendly 
set of corporate policies. They would be mandated not in a legal sense, but only in 
the sense that the marketplace of morality commends that corporations pay attention 
to generally held notions of what is right. To do otherwise is to risk alienation of 
some consumers and investors through adverse publicity. Nike CEO Philip Knight 
and the Andrew Young GoodWorks report took pains to paint Nike as a moral leader 
that would go beyond legal compliance to enforce its own code of conduct. In so 
doing, Nike may have raised the ire of Kasky, but the corporate intent precisely fits 
ISCT's recommended moral path: ascertain compliance with local norms, and look 
to broader norms where local norms seem morally insufficient. 

Yet Nike's ethical choices do not end by complying with authentic norms that 

are consistent with substantive hypemorms. Where its activities are called into 

question by the media or by NGOs, there are both better and worse ethical choices 

to be made. So, if the company wants to change the law, what kinds of changes 

can be ethically proposed? Law schools teach the tradition of "zealous advocacy" 

of a client's position, but citizens and judges must question whether the advocates 

would shape the legal environment in ways that create the best possible "marketplace 

of ideas." I argue in what follows that in responding to its critics, Nike should no 


BUSINESS ETHICS QUARTERLY 

longer be looking at authentic local norms and substantive hypemorms, but rather 
to ISCT's hypemorm of necessary social efficiency. 

The Hypemorm of Necessary Social Efficiency 

Let us suppose for the sake of argument that company X, based in the United 
States, was not in compliance with authentic local norms overseas, or, if in compliance, 
the local norms were in conflict with various substantive hypemorms. ISCT and 
the Kasky case pose a second-level ethical choice. Should Nike do all in its power 
to make the situation sound better than it really is? Should their public relations 
division seek to "spin" whatever "news" comes out? Should Nike choose to make 
it more difficult for NGOs and govemments to monitor workplace safety, wages, 
and other conditions? While any or all of these tactics may work well enough in the 
short-term, they do not build a sound system of choices for workers, customers, or 
investors. They do not, in short, support the "basic fabric" ofthe political economy 
in the United States today.™ 

In Ties that Bind, Donaldson and Dunfee devote a chapter to the hypemorm 
of necessary social efficiency. A brief explanation begins with the understanding 
that economic systems vary, and these systems impose certain obligations if the 
system is to work efficiently. If a society "chooses" a system to promote aggregate 
welfare, members of that society should play "their part" in maintaining the 
"underlying efficiency" of that system."" Most people tend to regard "efficiency" 
as morally neutral, depending on the end to which the efficient means are applied. 
Yet Donaldson and Dunfee contend that if necessary social and public goods exist—
such as justice and aggregate welfare—then efficiency in pursuing those goods 
is necessarily "good" in a moral sense. For example, a judicial system that costs 
twice as much as an altemative system but delivers only the same amount of justice 
is "dpe for reform."'02 

There are clear policy implications in this. Historically, human societies have 
generally sought cooperation in various forms (agriculture, hunting, industiial production). 
Different systems have existed throughout history, but in each, the goal 
"is to achieve a form of social organization that maximizes or increases retums 
from economic endeavor.""*^ Cooperative behavior is critical; favorable business 
conditions depend on cooperative behavior among individuals, firms, and nations. 
Trust is efficient; fraud, opportunism, and misinformation are not. Negotiations are 
known for bluffing and for some degree of misdirection or nondisclosure, but there 
are still some basic unwritten ground-rules (i.e., rules that are not "law" or formal 
in nature) that reduce uncertainty and enhance efficiency. 

Donaldson and Dunfee invoke Rawls's related notions of "the citizen," "social 
cooperation for reciprocal benefit," "the well-ordered society and its basic institutional 
structure," and "the norms for discussion and decision-making to which fellow 
citizens can be expected to adhere in arriving at principles of social justice.""^ Taken 
together, these exhibit what tiiey call "necessary goods" of faimess (or justice) and 


THE QUARRELSOME QUESTION OF CORPORATE FREE SPEECH

"aggregate welfare or 'benefit,' as well as the necessity of designing strategies and 
institutions to fulfill them.""'^ 

If we accept that efficiency and aggregate welfare are "good things," we presumably 
do so (following Rawls) whether we are consumers, investors, employees, or 
corporate managers. If we make a moral choice to manifest efficiency and aggregate 
welfare, we do so by following the "necessary social efficiency" hypemorm. Donaldson 
and Dunfee have a formal iteration of this, which I find somewhat abstract: 
"Discharge role duties stemming from the economizing parameters of Efficiency 
Strategies in which you participate."'* We might translate this into saying that in a 
system of democratic capitalism, act consistentiy with tiie fundamental principles 
of that system [i.e., do nothing to undermine it]. If the system requires laws, institutions, 
and other public goods to maintain it, do not undermine it by seeking special 
exemptions, subsidies, imposing extemalities, hiding information, or subverting 
reasonable laws and regulations that will enhance the overall public good. 

I believe that Nike (and many of Nike's friends ofthe court) argued for a standard 
of corporate free speech that did not seek the best overall level of efficiency and 
aggregate welfare. It is understandable that corporations would seek to maximize 
both freedom and profit; but serious attention to the necessary social efficiency 
hypemorm would require that certain standards be honored. 

Donaldson and Dunfee take John Rawls's duty of civility and translate it to mean 
a consistent honoring of the standards of cooperation. 

The duty, then, is to go beyond self-interest and in doing so to refuse to exploit 

the regrettable but inevitable ways in which institutions fail automatically to 

align self-interests with broader interests."" 

To accept this proposition, we have to first reject the idea that "pursuing self-inter


est" at all times—^both individually, corporately, and nationally—will actually result 

in overall justice and aggregate social welfare. Adam Smith's Wealth of Nations 

and his 'invisible hand' have often been misread to mean that all we need to do 

is to pursue self-interest and "the market" will take care of optimizing resources 

and, ultimately, general welfare."** Donaldson and Dunfee, by contrast, note tiiat 

"economic systems require the ethical cooperation of their participants. The effi


ciency hypemorm serves as a moral pathfinder, guiding business transactions where 

micro-social norms are obscure or inconsistent.""® 

Economics texts routinely note that well-functioning markets have a number 

of features."" Prominent among them is the presence of buyers and sellers with 

fairly abundant and reliable information. Facts are the basis on which people can 

express their moral sentiments in the marketplace. Concealment, misdirection, ly


ing, deception, and fraud undermine both trust and efficiency in the market. It is 

therefore appropriate for govemments as mle-makers in the market to encourage 

tmth and discourage falsehood. Accurate accounting, rules against fraud, disclosure 

of conflicts of interest, enforcement of promises, are all of a piece with the need to 

provide reasonably good (even if not perfect) information to market participants. 


BUSINESS ETHICS QUARTERLY 

The autonomy of individual choices in the market can be rendered meaningless 
where no one and nothing can be relied upon for the truth. 

Conclusion: Corporations and "Free Speech" in U.S. Society 

The Constitutional command that Congress can make "no law" infringing freedom 
of speech or the press has been particularly difficult for the Supreme Court to 
apply. In the crucible of First Amendment litigation, judicial distinctions between 
political speech and commercial speech are coming under increasing strain, even 
as commercial speech has come to enjoy greater legal protection. In Nike's appeal 
to the U.S. Supreme Court, business interests joined with Nike in urging the 
Court to allow even greater freedom for corporate speech. Whether a majority of 
Justices were tempted to overtum the California Supreme Court opinion and grant 
the full measure of First Amendment protection that Nike wanted may never be 
known. But this article concludes that such a ruling, even though avidly sought, 
could undermine the political economy that has worked so well for Nike and others; 
advocating such change and making such a change is not consistent with the 
hypemorm of necessary social efficiency. 

The facts seem to suggest that Phil Knight and Nike probably did not exercise 
due diligence in their acceptance of GoodWorks report. The report contradicted 
other reliable evidence that Nike had, and the process used was open to criticism. 
Yet Nike's attempt to ascertain whether local norms and laws were being complied 
with confirms the utility of ISCT's "authentic norm" inquiry. Moreover, Nike's 
public stance that it was going "beyond" compliance with local laws confirms that 
in a marketplace where moral sensibilities must be reckoned with, attention to some 
set of substantive hypemorms will also be desirable. 

Nike could have worked diligently to go beyond compliance with local law 
and custom, even without publicizing such efforts. But given the marketplace of 
morality, it would be profitable to make clear to the public its status as afirst mover 
in working for higher standards. Clearly, once Nike was pubhcly criticized, it felt 
obliged to speak. This article has sought to explore the question of what kinds of 
corporate speech—to the public and to lawmakers—are ethically sound. Kasky's 
legal position was that a corporation should not lie or mislead, and should be forced 
to pay damages and correct itself if it does, even if there was no intent to mislead. 
Nike's legal position was that if a corporation unintentionally misleads people in 
its public relations efforts, only those who have direct economic interests should 
be able to sue, and only then if they can show that the false or misleading statement 
was made with "malice" (meaning that the company knew that it was false and 
was likely to be relied upon). Both of these legal positions are less than satisfactory 
ethically, where our aim should be to encourage more reliable reporting about 
social and environmental aspects of corporate activities. Understandably, litigation 
breeds excessive rhetorical advocacy, but presumably Nike and other corporations 
would have been pleased had their position been upheld. 


THE QUARRELSOME QUESTION OF CORPORATE FREE SPEECH

Appeals to the Court to "level the playing field" seem to ignore the outstanding 
advantages that corporations have in communicating their messages to the public 
and in keeping hidden what they do not wish to disclose.''' Dedication to the values 
of more diverse and reliable information would have corporations adopting a very 
different kind of agenda for public relations, lobbying and htigating at both state 
and federal levels. 

During the time between the California Supreme Court's decision and the Supreme 
Court's indecision, Nike CEO Phil Knight was reported to have endorsed 
a proposal calling for corporations to issue audited corporate social responsibility 
statements. False statements "would be punishable, but in a predictable manner and 
in accordance with guidelines that everyone would understand beforehand.""^ Such 
audited statements are in keeping with the necessary social efficiency hypemorm, 
and it is to Nike's credit that it would support such a system. Conscientious corporations 
should take the lead in lobbying not for full First Amendment protections, but 
for meaningful reporting systems. There are problems with such reporting, just as 
there are with currentfinancial reporting standards. But given the vagaries of litigation 
and the conceptual minefield that is First Amendment law, some such system 
is bound to better encourage disclosure of reliable information than the confusing 
standards that currently govern corporate speech in the United States. 

Notes 

1. See Oral Argument before Supreme Court, April 23, 2003 (Argument of Professor 
Laurence Tribe), at 7 ("the kind of show trial that would be involved in this case is a lot more 
expensive than [the Alta-Dena Dairy case]), and at 14 ("What we hold is impermissible is making 
the courts pawns in a public debate and having what amounts to—they didn't use the phrase 
show trial, but essentially they were saying that a trial in which you, in effect, put on trial such 
a large and massive question and hopeless mix of fact and opinion as the impact on the Third 
World of this large company.")). 
2. See, e.g.. Reed B. Bynim, Nike's speech fight is our own, 74 ADVERTISING AGE (3), 
Jan. 20, 2003, at 22 (noting that a victory for Kasky in the Supreme Court would spell the end of 
corporate public relations); Robert J. Samuelson, The Tax on Free Speech, 142 NEWSWEEK (2) 
July 14, 2003, at 41 (Supreme Court's failure to rule on Nike's petition is "a disaster."); Carole 
Gomey, One "Strike Suit" and You're Out, 48 PUBLIC RELATIONS QUARTERLY (3), Fall 2003, at 
36-38. 
3. See Oral Argument before Supreme Court, April 23,2003 (Argument of Mr. Theodore 
Olson, at 22.) ("California has transferred its governmental authority to regulate marketplace 
communications to anyone and everyone who possesses the price of the fihng fee. Unelected, 
unaccountable private enforcers, uninhibited by established notions of concrete harm or public 
duty, have the power to advance their own agendas or personal ideological battles by launching 
complex, burdensome, and expensive litigation. The in terrorem effect and potential for abuse is 
difficult to overstate.") Id. 
4. See Thomas, J., concurring in 44 Liquormart Inc. v. Rhode Island, 517 U.S. 484 (1996) 
at 522. ("I do not see a philosophical or historical basis for asserting that "commercial" speech 
is of "lower value" than "noncommercial" speech. Indeed, some historical materials suggest to 
the contrary."). Id. 

BUSINESS ETHICS QUARTERLY 

5. See JVIitchell N. Berman, Commercial Speech and the Unconstitutional Conditions 
Doctrine: A Second Look at the Greater Includes the Lesser, 55 VAND. L. REV. 693, 794-95 
(2002) (suggesting that Justices Thomas, Scalia, Kennedy, and Stevens are so inclined, with 
Justice Ginsburg leaning in that direction.). 
6. The First Amendment says, in full, "Congress shall make no law respecting an establishment 
of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or 
the press; or the right ofthe people peaceably to assemble, and to petition the Government for a 
redress of grievances." U.S. CONST., AMEND. I (1791). 
7. Nike, Inc., v. Kasky, 539 U.S. 654 (2003) (per curiam) (dismissing writ of certiorari 
as improvidently granted). 
8. Nike, Inc., Corporate Responsibility Report, FY04, at 4. This report is available at 
http://www.nike.com/nikebiz/nikebiz.jhtml;bsessionid=KGY432GNWCIPGCQCGJDSF4YK 
AIZEQIZB?page=29&item=fyO4 (accessed March 20, 2006). 
9. Bob Herbert, Nike's Boot Camps, N.Y. TIMES, Mar. 31,1997, at A15. ("The women often 
are treated little better than slaves. Mr. Nguyen said the factories are like 'military boot camps' 
in which workers are subjected to various forms of humiliation and corporal punishment.") Id. 
10. David G. Savage, Nike Takes Ad Liability Case to High Court, L.A. TIMES, Oct. 15, 
2002, at B6. 
11. Kasky v. Nike, 93 Cal. Rptr. 2d 854 (2000) at 856. This report is available at http://www 
.saigon.com/~nike/NikeChina.html (accessed March 20, 2006). 
12. Tony Emerson, "Swoosh Wars: In an Operation Modeled on the Clinton Campaign 
Machine, Nike Takes on its Enemies," NEWSWEEK, Mar. 12, 2001, at 35-40. 
13. Matthew C. Quinn, Young to study Nike policies on sweatshops. THE ATLANTA 
JOURNAL-CONSTITUTION, Feb. 25, 1997, at lC. 
14. Maria Saporta, Young insisted Nike give him full access to plants. THE ATLANTA 
JOURNAL-CONSTITUTION, June 24, 1997 at 03E. Young spent 15 days in Asia and "six months" 
doing research for Nike. Id. 
15. Roger Parloff, Can we talk? FORTUNE Aug. 11,2002, at 102-112. The Ernst and Young 
study is also noted in the California Court of Appeals' opinion; see Kasky v. Nike, 93 Cal. Rptr. 
2d 854 (2000) at 856. 
16. The study is still available on the internet. See http://www.calbaptist.edu/dskubik/young 
.htm (accessed March 20, 2006). 
17. Bob Herbert, Mr. Young Gets It Wrong, N.Y. TIMES, June 27, 1997, at A29. 
18. Kasky v. Nike, 93 Cal. Rptr. 2d 854 (2000) at 857. 
19. Id. 
20. Parloff, supra note 15. 
21. Parloff, supra note 15. 
22. David Graulich, Press Release: Write in Haste... Repent, NATIONAL LAW JOURNAL 
25(6), at D. 12. 
23. Kasky v. Nike, Inc., Complaint for Statutory, Equitable and Injunctive Relief (Apr. 20, 
1998), available at http://www.corpwatch.org/article.php?id=3448 (accessed March 20, 2006) 
24. See Cal. Bus. & Prof. Code 17204 (2003). 
25. The California Business and Professions Code defines "unfair competition" to include 
any "unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue 
or misleading advertising and any act prohibited by the Chapter 1 (commencing with Section 
17500) of Part 3 of Division 7 ofthe Business and Professions Code." Cal. Bus. Prof. Code 17200 
(2003). 

THE QUARRELSOME QUESTION OF CORPORATE FREE SPEECH

26. Kasky, 93 Cal. Rptr. 2d at 857. The first and second causes of action, based on negligent 
misrepresentation and intentional or reckless misrepresentation, alleged that Nike engaged 
in an unlawful business practice in violation of the California Business and Professions Code 
17200 by making the above misrepresentations "In order to maintain and/or increase its sales and 
profits .. . through its, advertising, promotional campaigns, public statements and marketing." 
Id. (referring to Cal. Bus. Prof. Code 17200 (2003)). 
According to the complaint, Nike made a series of six misrepresentations regarding its labor 
practices: (1) "that workers who make NIKE products are .. . not subjected to corporal punishment 
and/or sexual abuse;" (2) "that NIKE products are made in accordance with applicable 
governmental laws and regulations governing wages and hours;" (3) "that NIKE products are made 
in accordance with applicable laws and regulations governing health and safety conditions;" (4) 
"that NIKE pays average line-workers double-the-minimum wage in Southeast Asia;" (5) "that 
workers who produce NIKE products receive free meals and health care;" and (6) "that NIKE 
guarantees a 'living wage' for all workers who make NIKE products." In addition, the complaint 
alleges that NIKE made the false claim that the Young report proves that it "is doing a good job 
and 'operating morally.'" See Kasky v. Nike, Inc., supra note 23. 

27. The third cause of action alleged unfair business practices within meaning of 17200, 
and the fourth cause of action alleged false advertising in violation of Business and Professions 
Code section 17500. Section 17500 states that "it is unlawful for any person, firm, corporation 
or association, or any employee thereof with intent directly or indirectly to dispose of real or 
personal property or to perform services, professional or otherwise, or anything of any nature 
whatsoever or to induce the public to enter into any obligation relating thereto, to make or disseminate 
or cause to be made or disseminated before the public in this state, in any newspaper or 
other publication, or any advertising device, or by public outcry or proclamation, or in any other 
manner or means whatever, including over the Internet, any statement, concerning that real or 
personal property or those services, professional or otherwise, or concerning any circumstance or 
matter of fact connected with the proposed performance or disposition thereof, which is untrue or 
misleading, and which is known, or which by the exercise of reasonable care should be known, 
to be untrue or misleading, or for any person, firm, or corporation to so make or disseminate or 
cause to be so made or disseminated any such statement as part of a plan or scheme with the 
intent not to sell that personal property or those services, professional or otherwise, so advertised 
at the price stated therein, or as so advertised. Any violation of the provisions of this section is 
a misdemeanor punishable by imprisonment in the county jail not exceeding six months, or by 
a fine not exceeding two thousand five hundred dollars ($2,500), or by both that imprisonment 
and fine." Cal. Bus. Prof. Code 17500 (2003). 
28. Kasky v. Nike, Inc., 45 R3d 243 (2002). Going to trial would require Kasky to survive 
a summary judgment motion either during or after discovery; it is not clear that he could. See 
infra, note 62 and accompanying text. 
29. Kennard wrote: "No law required Nike to combine factual representations about its 
own labor practices with expressions of opinion about economic globalization, nor was it impossible 
for Nike to address those subjects separately." In contrast. Justice Brown's dissent noted 
that Nike could not meaningfully comment on the public issue of its labor practices by making 
general statements about overseas labor exploitation and economic globalization. "The majority, 
however, forgets that Nike's overseas labor practices are the public issue." Kasky v. Nike, Inc., 
45 P.3d at 276 (dissenting opinion by Justice Brown). 
30. Nike, Inc., v. Kasky, 537 U.S. 1099 (2003) (granting certiorari). 
31. Nike, Inc., v. Kasky, 539 U.S. 654 (2003) (per curiam) (dismissing writ of certiorari 
as improvidently granted). 

BUSINESS ETHICS QUARTERLY 

32. Press Release, Nike, Inc, and Kasky Announce Settlement of Kasky v. Nike First 
Amendment Case (Sept. 12,2003), at http://www.nike.com/nikebiz/news/pressrelease.jhtml7ye 
ar=2003&month=09&letter=f (last visited July 9, 2005), 
33. Abrams v. United States, 250 U.S. 616, 624 (1919) (dissenting opinion of Justice 
Holmes). 
34. Id. at 630, Holmes is often quoted for the following language: 
But when men have realized that time has upset many fighting faiths, they may 
come to believe even more than they believe the very foundations of their own 
conduct that the ultimate good desired is better reached by free trade in ideas—that 
the best test of truth is the power of the thought to get itself accepted in the competition 
of the market, and that truth is the only ground upon which their wishes 
safely can be carried out. That at any rate is the theory of our Constitution. Id. 

35. Whitney v. California, 274 U.S. 357 (1927) (Brandeis, J. concurring). Justice Holmes 
joined in the concurrence, 
36. O, Lee Reed, Is Commercial Speech Really Less Valuable than Political Speech?: On 
Replacing Values and Categories in First Amendment Jurisprudence 34 AM. BUS. L.J. 1, at 10 
(1996). 
37. Id. 
38. W. at 10-11. 
39. Valentine v. Chrestensen, 316 U.S. 52 (1942). "Unprotected" speech means words that 
can be regulated by government without any protection from the First Amendment, 
40. 316 U.S. at 54. 
41. AlexKozinskiandStuartBanner, M'/io',yA/ra(Vfo/Commerc(aZ5'peec/i,''76VA L REV 
627 (1990). 
42. 425 U.S. 748 (1976). 
43. Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 
U.S. 748, 770, (1976), 
44. Zauderer v. Office of Disciplinary Counsel, 471 U,S. 626, 638 (1985). 
45. Bolger v. Youngs Drug Products Corp,, 463 U.S, 60, 66 (1983) 
46. Central Hudson Gas & Electric Corp. v. Public Service Com,, 447 U,S. 557, 563 
(1980), 
47. Brief of j4/nia' Curiae, The States of California, Alaska, Arizona, Connecticut, Florida, 
Illinois, Louisiana, Maine, Maryland, Minnesota, New Mexico, New York, North Dakota, Ohio, 
Oklahoma, South Dakota, Vermont, and West Virginia and the Commonwealth of Puerto Rico, 
at 10, citing Central Hudson, 447 U,S. at 562 n.5. 
48. Bolger v. Youngs Drug Products Corp,, 463 U,S. 60, 66 (1983). In this case, a proposed 
mailing of materials by the distributor of Trojan brand condoms that discussed (inter alia) 
public issues of venereal disease and family planning was nonetheless "commercial speech." As 
the Court noted, "advertising which 'links a product to a current public debate' is not thereby 
entitled to the constitutional protection afforded noncommercial speech." Id. at 68. Still, Youngs 
Drug Products proposed mailer was given the "qualified but nonetheless substantial protection 
accorded to commercial speech." Id. at 68. The Court held that the government's restrictions were 
more sweeping than necessary and invalidated the restrictions, 
49. National Commission on Egg Nutrition v, FTC, 570 F2d 157 (1977), cert, denied, 439 
U.S, 821 (1978). 
50. Board of Trustees of the State University of New York v. Fox, 492 U.S. 469,474-75. 
The Central Hudson case is discussed infra, note 62. 

THE QUARRELSOME QUESTION OF CORPORATE FREE SPEECH

51. Board of Trustees v. Fox, 492 U.S. at 474. 
52. See Kasky, 119 Cal. Rptr. 2d 296, at 314. Federal trademark law has several such 
prohibitions, and federal law requires food packages to include the place of business of the manufacturer, 
packer, or distributor. 21 U.S.C. § 343(e). For a thoughtful discussion ofthe distinction 
between production information and process information, see Douglas A. Kysar, Preferences for 
Processes: The Process/Product Distinction and the Regulation of Consumer Choice Preferences 
for Processes: The Process/Product Distinction and the Regulation of Consumer Choice, 118 
HARV. L.REV. 525 (2004). By in large, Kysar's analysis upholds the benefits of having consumers 
fully informed not only as to product quality and price, but also to the ways in which the product 
was made. 

53. Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 
748 (1976), at 765. 
54. See Bruce Ledewitz, Corporate Advertising's Democracy, 12 B.U. PUB. INT. L.J. 389 
(Spring/Summer 2003), at 394 
55. Virginia State Board of Pharmacy, 425 U.S. at 771 ("Obviously, much commercial 
speech is not provably false, or even wholly false, but only deceptive or misleading. We foresee no 
obstacle to a state's dealing effectively with this problem. The First Amendment, as we construe 
it today, does not prohibit the state from insuring that the stream of commercial information flow 
cleanly as well as freely." Id. 
56. See supra note 34 (Holmes, J., dissenting in Abrams v. United States). 
57. The California economy is the fifth-largest in the world, and most companies cannot 
do business without potentially reaching a California consumer. See Vicki Mclntyre, Note: 
Kasky v. Nike: Leaving Corporate America Speechless, 30 WM. MITCHELL L. REV. 1531 (2004) 
at 1536. 
58. Brief for Amicus Curiae, The Center for Advancement of Capitalism, Nike, Inc., et al. 
V. Marc Kasky, at 3. 
59. Bdef for Amicus Curiae, The Business Roundtable, Nike, Inc., et al. v. Marc Kasky, at 3. 
60. Brief for Atnicus Curiae, National Association of Manufacturers, Nike, Inc., et al. v. 
Marc Kasky, at 3. The claim here is that Ralph Nader would receive full protection of the First 
Amendment while General Motors would be provided a lesser standard of protection. Citing 
Bose Corp. v. Consumers Union, 806 F.2d 304 (1987), what Nike and its amici are arguing is 
that a specific product can be falsely criticized by a consumer advocate, and that because of First 
Amendment concerns the manufacturer can succeed in a product disparagement lawsuit only if it 
can prove that the critic spoke with "malice" or "reckless disregard." To "level the playing field," 
therefore, the Court was urged to find the California statute and decision to have provided less 
than the "full" First Amendment protection of requiring that a plaintiff prove malice or reckless 
disregard. 
This argument, however, may overlook a number of important distinctions between product 
disparagement and business defamation. See, e.g.. Lisa Magee Arent, Note: A Matter of " 'Governing 
' Importance ": Providing Business Defamation and Product Disparagement Defendants 
Full First Amendment Protection, 67 IND. L.J. 441 (1992). Moreover, the "level playing field" 
argument does not account for the many other advantages currently enjoyed by corporations to 
suppress unfavorable ideas and facts. See infra, notes 67-81 and accompanying text. One example 
is the economic might of the meat industry, which has given large processors the resources to 
defend their practices vigorously to the public, while consumers often have little or no information 
on how animals are raised or processed for the market. Oprah Winfrey was accused of product 
disparagement by Texas cattlemen for hosting a 1996 television segment on the risks of mad cow 
disease breaking out in the United States. While the lawsuit failed, it "may have chilled media 
criticism of the meat industry, and it has spurred a significant number of states to enact new or 


BUSINESS ETHICS QUARTERLY 

stricter food libel laws." See Note: Challenging Concentration of Control in the American Meat 
Industry, 117 HARV. L. REV. 2643, 2651 (June, 2004). 

61. The California Code of Civil Procedure allows expenses for frivolous actions, bad faith, 
or delay. See Cal Code Civ Proc § 128.5 (2004). 
62. This follows the contours of the Central Hudson Gas & Electric case, which is now 
followed in all cases where commercial speech is regulated. Central Hudson Gas & Electric Corp. 
V. Public Service Commission of New York, 447 U.S. 557, 65 L. Ed. 2d 341, 100 S. Ct. 2343 
(1980). In Central Hudson, the state utilities commission had prohibited promotional advertising 
by electric utilities, except for encouraging shifts of consumption away from peak demand 
times. The Supreme Court, invalidating the commission's ban, articulated a four-part test that has 
been widely followed in commercial speech cases. The first inquiry is whether the expression is 
protected by the First Amendment; to be protected at all, commercial speech must concern lawful 
activity and not be misleading. The second inquiry is whether the governmental interest being 
asserted is "substantial." If not, then First Amendment protections will trump the government's 
attempted restrictions. If the courts find both protected speech and government interests that are 
substantial, then the third and fourth "prongs" of Central Hudson will be reached: whether the 
regulation or restriction "directly advances the governmental interest asserted" and whether it is 
not "more extensive than necessary to serve that interest." Central Hudson, 447 U.S. at 566. 
In many cases, the courts have rejected government regulations as not based on substantial 
government interests or as "not narrowly tailored" to effectuate that interest. See, e.g.. Bad Frog 
Brewery v. New York State Liquor Authority, 134 F.3d 87 (1998) (finding that New York's interest 
in keeping a beer label with a frog extending its middle "finger" oiT New York grocery shelves 
may have been significant but that its regulations did not "directly advance" that interest and 
were not the least restrictive means of effectuating that interest). 

63. Brief for Amicus Curiae, The Business Roundtable, Nike, Inc., et al. v. Marc Kasky, at 
3. 
64. Oral Argument to the Supreme Court, April 23, 2003 (Lawrence Tribe, at pages 5, 
11-12,16,17). 
65. Oral Argument to the Supreme Court, April 232003 (Theodore Olson, at page 24, 
26-27). 
66. See infra notes 34-37 and accompanying text. 
67. Robert W. McChesney, Waging the Media Battle, 15 AMERICAN PROSPECT, no. 7 (July 
2004), at 24. 
68. William Safire, The Five Sisters, N.Y. TIMES, op-ed page, Feb. 16, 2004. 
69. Paul Starr, Check and Balance, 15 AMERICAN PROSPECT, no. 7 (July 2004), at 30. As 
Starr notes, "The FCC no longer uses its authority to promote public-affairs programming in the 
broadcast media, which have cut back the money and airtime they devote to news and public issues. 
The big question facing the media, as Harold Evans has said, is not whether they will stay 
in business but whether they will stay in journalism." Id. 
70. Franklin Foer, Closing ofthe Presidential Mind, THE NEW REPUBLIC, July 5 & 12, 
2004, 17-21, at 21. 
71. Buckley v. Valeo, 424 U.S. 1 (1976). See also JOEL BAKAN, THE CORPORATION (2004), 
at 103 (n.33). 
72. WILLIAM GREIDER, WHO WILL TELL THE PEOPLE? THE BETRAYAL OF AMERICAN 
DEMOCRACY (1992). 
73. Id. at 123-140. (Chapter Five, "Hollow Laws."). 
74. See LAWRENCE SOLEY, FREE SPEECH AND PRIVATE ENTERPRISE CENSORSHIP INC. : THE 
CORPORATE THREAT TO FREE SPEECH IN THE UNITED STATES (2002) at 88. 

THE QUARRELSOME QUESTION OF CORPORATE FREE SPEECH

75. Id. 
76. Id. at 90. 
77. /rf. at 90-91. 
78. This may be an example of a commercially motivated choice that fights erectile dysfunction 
yet promotes electile dysfunction. See MoveOn.org,- "CBS Guilty of Political Favoritism in 
Rejecting MoveOn.org Voter Fund Ad: Network Allows White House Anti-Drug Ad As it Lobbies 
for Favors from Bush and Congress, available at http://www.moveon.org/press/pr/releasel2204 
.pdf (accessed March 21, 2006), 
79. Soley, supra note 74, at 229-30. Soley documents the conflict of interest in General 
Electric's ownership of NBC. General Electric is a "major defense contractor, nuclear power plant 
builder, and consumer electronics manufacturer." Id. Among other things, NBC has extolled the 
virtues and safety of nuclear power, has cancelled scheduled appearances by anti-nuclear activists, 
has failed to cover breaking stories on nuclear power safety issues and plant closings, and 
boycotts of General Electric. Id. at 230-31. 
80. See Charles R. Nesson, Incentives to Spoliate Evidence in Civil Litigation: The Need 
for Vigorous Judicial Action, 13 CARDOZO L. REV. 793, 793 (1991) ("[Spoliation] is a form of 
cheating which blatantly compromises the idea of the trial as a search for the truth."); see also 
Dale A. Oesterle, A Private Litigant's Remedies for an Opponent's Inappropriate Destruction 
of Relevant Documents, 61 TEX. L. REV. 1185, 1186 (1983) ("The naked truth is that many corporations 
purposefully operate programs to destroy evidence."); in accord, RALPH NADER AND 
WESLEY J. SMITH, NO CONTEST: CORPORATE LAWYERS AND THE PERVERSION OF JUSTICE IN 
AMERICA (1996), at 134-157. 
81. NADER AND SMITH, supra note 80, at 76, 
82. See supra notes 64-65 and accompanying text. 
83. THOMAS DONALDSON AND THOMAS DUNFEE, TIES THAT BIND (1999), at 7. [hereafter. 
TIES] ("AS social contracts change, so too do the challenges for business The view has shifted 
from attitudes half a century ago that limited the responsibilities of companies largely to that of 
producing goods and services at reasonable prices, to a view today where corporations are held 
responsible for a variety of fairness and quality of life issues,") Id. 
84. See TIES, supra note 83. See also Thomas W. Dunfee, Challenges to Corporate Governance: 
Corporate Governance in a Market with Morality, 62 LAW & CONTEMP. PROB. 129 
(1999). See also Thomas Donaldson and Thomas W. Dunfee 1995, Toward a Unified Conception 
of Business Ethics: Integrative Social Contracts Theory, ACADEMY OF MANAGEMENT REVIEW 
19 (1994) at 252, 
85. See TIES, supra note 83, at 49-81 (Chapter 3, Hypemorms: Universal Limits on Community 
Consent). See infra notes 101-111 regarding the hypemorm of necessary social efficiency. 
86. W. at 118. 
87. TIES, supra note 83 at 25. ("Our primary task," write Donaldson and Dunfee, "is to 
unravel the potential of social contracts as a foundation for an adequate ethical framework for 
economic activity. We begin by noting that at the core of all contractarian approaches is the acceptance 
of and respect for human autonomy. As Aristotle notes, all ethical behavior begins with 
choice.") 
88. See TIES, supra note 83, at 83. 
89. See TIES, supra note 83, at 86. 
90. See supra notes 14-15 and accompanying text. 
91. TIES, ^ywpra note 83, at 52. 
92. TIES, supra note 83, at 58. 

BUSINESS ETHICS QUARTERLY 

93. TIES, supra note 83, at 60. 

94. TIES, supra note 83, at 68. 

95. See, e.g.. Doe v. Unocal, 395 F.3d 932 (2002), in which Unocal's cooperation with the 
military govemment of Myanmar brought complaints of forced labor and other alleged violations 
of human rights. 

96. Dunfee, supra note 84, at notes 86 and 87. 

97. See, e.g., William C. Frederick, Pragmatism, Nature and Norms, 105 BUSINESS AND 
SOCIETY REVIEW (4), (Winter 2000), 467-79; Bill Shaw, Review: Ties that Bind, 37 AM. BUS. 

L.J. (Spring 2000), 563-78. 

98. TIES, supra note 83, at 68-69. 

99. The Caux Round Table Principles for Business can be found on the Caux Round Table 
website. See http://www.cauxroundtable.org/principles.html (accessed March 21, 2006). 

100. TIES, supra note 83, at 118.
lOL W. at 119.


102. W. at 119-121. 

103. W. at 122-23. 

104. W. at 125. 

105. Mat 125. 

106. Mat 130. 

107. M. at 134. 

108. For a corrective view, see PATRICIA WERHANE, ADAM SMITH AND HIS LEGACY FOR 
MODERN CAPITALISM (1999). 

109. TIES, supra note 83, at 138. 

110. In TIES THAT BIND, Donaldson and Dunfee explicitly rely on the assumptions of a 
perfectly competitive market to buttress the notion of a necessary social efficiency hypemorm 
Id at 135. 

111. See infra, notes 66-81 and accompanying text. 

112. Parloff, supra note 15.