Imagine if corporations were permitted to ?plead the First Amendment,? making it virtually impossible to use litigation to test the truth of company statements about their social and environmental records. This could be the impact of the position taken by Nike in a case to be decided soon by the Supreme Court, Nike v. Kasky. Nike argues that in defending itself against charges of using sweatshop labor, its statements were ?political speech,? subject to full First Amendment protections. But if this view prevails, it could invalidate many consumer protection laws and securities regulations. And it could permanently undermine the reliability of corporate reporting?both financial and social.

The case concerns statements made by Nike in the late 1990s: that it paid ?on average, double the minimum wage? in overseas countries, for example, and that its workers ?are protected from physical and sexual abuse.? Marc Kasky sued Nike in 1998 for making false statements, using California consumer protection laws. The case hinges on whether Nike?s statements are commercial or political speech, because the former is subject to greater regulation. Nike maintains its statements were political because they touched on matters of public concern. The California Supreme Court disagreed, reasoning that when a commercial entity states facts about its products or operations to influence consumer decisions, that is commercial speech.

Even Nike concedes that social issues have financial impact?since labor controversies affected Nike?s stock price and financial performance in the late 1990s. Yet Nike defines any commercial speech that also touches upon matters of public concern as ?political speech,? which makes it more difficult to regulate. That definition is alarmingly broad, affecting nearly every aspect of a corporation's business. After all, the financial performance of a publicly traded corporation can be considered a matter of ?public concern.? Stock options expensing, auditor independence, and executive compensation are matters of public concern. Should corporate disclosures on these issues be immunized from litigation or SEC enforcement?