Corporate personhood


Corporate personhood

Corporate personhood refers to the question about which subset of rights that are afforded under the law to natural persons should also be afforded to corporations as legal persons.

In Dartmouth College v. Woodward (1819), corporations were recognized as having the same rights as natural persons to contract and to enforce those contracts. In Santa Clara County v. Southern Pacific Railroad, 118 U.S. 394 (1886), an insertion into the decision's headnotes by the clerk, J.C. Bancroft Davis, led many to believe the Supreme Court had recognized corporations as persons for the purposes of the Fourteenth Amendment.[1][2]

Contents

The notion of corporations as persons

As a matter of interpretation of the word "person" in the Fourteenth Amendment, U.S. courts have extended certain constitutional protections to corporations. Opponents of corporate personhood seek to amend the U.S. Constitution to limit these rights to those provided by state law and state constitutions.[3]

Others argue that corporations should have the protection of the U.S. Constitution, pointing out that they are organizations of people, and that these people should not be deprived of their human rights when they act collectively.[4] In this view, treating corporations as "persons" is a convenient legal fiction that allows corporations to sue and to be sued, that provides a single entity for easier taxation and regulation, that simplifies complex transactions that would otherwise involve, in the case of large corporations, thousands of people, and that protects the rights of the shareholders as well as the right of association.

Some have argued in court that corporations should be allowed to refuse to hand over incriminating documents under the Fifth Amendment. In one case, "[a]ppellants [suggested] that the use of the word "taxpayer" several times in the regulations requires that the fifth-amendment self-incrimination warning be given to a corporation."[5] However, the court did not agree in that 1975 case.

The Green Party,[6] the Women's International League for Peace and Freedom,[7], Democracy Unlimited, and former Vice-President Al Gore[8] are among those who have objected to the idea of corporate personhood. Their objections focus on constitutional protections–such as the right to contribute to political campaigns–that are granted to corporations. Gore argues that the 1886 Southern Pacific decision entrenched the 'monopolies in commerce' that Thomas Jefferson had wanted to prohibit.[8]

After the Supreme Court's ruling in Citizens United v. Federal Election Commission in 2008, a coalition group was formed called Move to Amend to call for a US Constitutional amendment to abolish Corporate Personhood.

Historical background

The Federal Constitution of 1788 did not mention corporations. Thus, although the Federal government has from time to time chartered corporations, the general chartering of corporations has been left to the states. In the late 18th and early 19th centuries, corporations began to be chartered in greater numbers by the states. Corporations had long existed in the new nation, but these were primarily educational corporations or institutions chartered by the British crown which continued to exist after the new nation was created from the Confederation. Due to experience as British Colonies and the accompanying corporate colonialism from British corporations chartered by the crown to do business in North America, most directly exercised through government grants of monopoly as part of the chartering process, new corporations were greeted with mixed feelings.

The degree of permissible government interference in corporate affairs was controversial from the earliest days of the nation. In 1790, John Marshall, a private attorney and a veteran of the Continental Army, represented the board of the College of William and Mary, in litigation that required him to defend that corporation's right to reorganize itself and in the process remove professors, The Rev John Bracken v. The Visitors of Wm & Mary College (7 Va. 573; 1790 Supreme Court of Virginia). The Supreme Court of Virginia ruled that the original crown charter provided the authority for the Visitors to make changes including the reorganization.

Thomas Jefferson claimed in his autobiography that he had a hand in the reorganization when he was elected a Visitor of William and Mary after being appointed the Governor of the Commonwealth in June of 1779. His main reason for the reorganization was to move the college from a curriculum rooted in theology to a curriculum rooted in science, fine arts, and languages.

The notion of corporate personhood, then, has roots in the early history of the republic. Still, as the 19th century matured, manufacturing in the U.S. became more complex as the Industrial Revolution generated new inventions and business processes. The favored form for large businesses became the corporation because the corporation provided a mechanism to raise the large amounts of investment capital large business required, especially for capital intensive yet risky projects such as railroads.

The Civil War accelerated the growth of manufacturing and the power of the men who owned the large corporations. Businessmen such as Mark Hanna, sugar trust magnate Henry O. Havemeyer, banker J. P. Morgan, steel makers Charles M. Schwab and Andrew Carnegie, and railroad owners Cornelius Vanderbilt and Jay Gould created corporations that influenced legislation at the local, state, and federal levels as they built businesses that spanned multiple states and communities. Beginning in the 1870s, corporate lawyers became bolder about using the Webster/Marshall theory of corporations as persons, arguing that as such they were entitled to some of the legal protections against arbitrary state action accorded also to natural persons.

In the late 19th century, railroads were among the most politically powerful corporations in the country as the corporate officers had to work with federal and state legislatures in order to obtain land grants for rights of way and the legislatures in turn depended on the railroads to provide the low cost transportation needed to open up new territory. Railroads provided a means for most of the nation's farmers to transport agricultural products such as grain and livestock from rural areas into cities such as Chicago. Manufacturing corporations needed coal, iron ore, finished iron, or any other materials transported and consumer goods business such as Sears, Roebuck and Company used railroads to deliver goods to mail order catalog customers.

As railroads increased their size, a number of conflicts between various states and the railroads began to surface. In four cases that reached the Supreme Court (94 U.S. 155, 94 U.S. 164, 94 U.S. 179, 94 U.S. 180 (1877)), railroads tried to argue that the Fourteenth Amendment prevented states from regulating the maximum rates they could charge. These cases did not rely on just an interpretation of the Fourteenth Amendment as most also tied in the Interstate Commerce clause as well. In each case the Court refused to render an opinion as to whether the Fourteenth Amendment applied to corporations, instead couching their decision on the Interstate Commerce clause.

Case law

In 1818, the United States Supreme Court heard the case Dartmouth College v. Woodward, 17 U.S. 518 (1819), making the following statement in their decision: "The opinion of the Court, after mature deliberation, is that this corporate charter is a contract, the obligation of which cannot be impaired without violating the Constitution of the United States. This opinion appears to us to be equally supported by reason, and by the former decisions of this Court." A public outcry ensued. State courts and legislatures, supported by many of their constituents, declared that state governments had an absolute right to amend or repeal a corporate charter.[9]

Seven years after the Dartmouth College opinion, the Supreme Court decided Society for the Propagation of the Gospel in Foreign Parts v. Town of Pawlet, (1823) in which an English corporation dedicated to missionary work, with land in the U.S., sought to protect its rights to that land under colonial-era grants against an effort by the state of Vermont to revoke the grants. Justice Joseph Story, writing for the court, explicitly extended the same protections to corporate-owned property as it would have to property owned by natural persons. Seven years later, Chief Justice Marshall stated that, "The great object of an incorporation is to bestow the character and properties of individuality on a collective and changing body of men."[10]

It should be understood that the term 'artificial person' was in long use, prior to the Dartmouth College decision, and was in principle distinct from any contention that corporations have the rights of natural persons. 'Artificial person' was used because there were certain resemblances, in law, between a natural person and corporations. Both could be parties in a lawsuit; both could be taxed; both could be constrained by law. In fact the corporations had been called artificial persons by courts in England as early as the 16th century because lawyers for the corporations had asserted they could not be convicted under the English laws of the time because the laws were worded "No person shall...".[citation needed]

Similarly, in 1877, in Munn v. Illinois (94 U.S. 113 (1876)), the Supreme Court decided that the Fourteenth Amendment (because Munn asserted his due process right to property was being violated) did not prevent the State of Illinois from regulating charges for use of a business' grain elevators. Instead, the decision focused on the question of whether or not a private company could be regulated in the public interest. The court's decision was that it could, if the private company could be seen as a utility operating in the public interest.

In the 1886 case Santa Clara v. Southern Pacific, the Supreme Court ruled that the Fourteenth Amendment equal protection clause guarantees constitutional protections to corporations in addition to natural persons.[11]

The primary purpose of the 14th Amendment was to protect freed slaves.[citation needed] One of the 1886 judges, Samuel F. Miller, had considered the purpose of the Amendment in 1872, only six years after the Amendment had become law, when the court was "called upon for the first time to give construction to these articles." In the Slaughterhouse Cases (83 U.S. 36 (1872)), Miller delivered the majority opinion and discussed the Thirteenth Amendment and the Fifteenth Amendment as well as the Fourteenth as follows:

The most cursory glance at these articles discloses a unity of purpose, when taken in connection with the history of the times, which cannot fail to have an important bearing on any question of doubt concerning their true meaning. Nor can such doubts, when any reasonably exist, be safely and rationally solved without a reference to that history, for in it is found the occasion and the necessity for recurring again to the great source of power in this country, the people of the States, for additional guarantees of human rights, additional powers to the Federal government; additional restraints upon those of the States. Fortunately, that history is fresh within the memory of us all, and its leading features, as they bear upon the matter before us, free from doubt. We repeat, then, in the light of this recapitulation of events, almost too recent to be called history, but which are familiar to us all, and on the most casual examination of the language of these amendments, no one can fail to be impressed with the one pervading purpose found in them all, lying at the foundation of each, and without which none of them would have been even suggested; we mean the freedom of the slave race, the security and firm establishment of that freedom, and the protection of the newly made freeman and citizen from the oppressions of those who had formerly exercised unlimited dominion over him.[12]

Careful research has shown that John A. Bingham, the member of Congress who is known to have been chiefly responsible for the language of Section One when it was drafted by the Joint Committee in 1866, had, during the previous decade and as early as 1856-1859, employed not one but all three of the same clauses and concepts he later used in Section One. More important still, Bingham employed these guarantees specifically and in a context which suggested that free Negroes and mulattoes unquestionably were the persons to which he then referred.[citation needed]

But whatever the reasons for their adaptation, laws often benefit those other than the original intended beneficiary. Thus, whites as well as African-Americans are clearly protected by the Fourteenth Amendment, and groups organized specifically for business purposes, including corporations, may also benefit from its protections, just as any other group of persons.

The 14th Amendment does not insulate corporations from all government regulation, any more than it relieves individuals from all regulatory obligations. Thus, for example, in Northwestern Nat Life Ins. Co. v. Riggs (203 U.S. 243 (1906)), the Court accepted that corporations are for legal purposes "persons," but still ruled that the Fourteenth Amendment was not a bar to many state laws that effectively limited a corporation's right to contract business as it pleased. However, this was not because corporations were not protected under the Fourteenth Amendment - rather, the Court's ruling was that the Fourteenth Amendment did not prohibit the type of regulation at issue, whether of a corporation or of sole proprietorship or partnership.[citation needed]

Similarly, two Supreme Court judges, Hugo Black and William O. Douglas, later rendered opinions attacking the doctrine of corporate personhood. Quoted here is the conclusion of Justice Black's opinion:

If the people of this nation wish to deprive the states of their sovereign rights to determine what is a fair and just tax upon corporations doing a purely local business within their own state boundaries, there is a way provided by the Constitution to accomplish this purpose. That way does not lie along the course of judicial amendment to that fundamental charter. An amendment having that purpose could be submitted by Congress as provided by the Constitution. I do not believe that the Fourteenth Amendment had that purpose, nor that the people believed it had that purpose, nor that it should be construed as having that purpose.

(Hugo Black, dissenting, Connecticut General Life Insurance Company v. Johnson (303 U.S. 77, 1938).)

Justice Black was not alone in his questioning of the legitimacy of corporate personhood. Justice Douglas, dissenting in Wheeling Steel Corp. v. Glander (337 U.S. 562, 1949), gave an opinion similar to, but shorter than, the one quoted above, to which Justice Black concurred. The extent to which the rights of personhood should attach to corporations has remained a subject of controversy.[13]

By the time of those opinions, political contributions to candidates in federal races by corporations had been prohibited since the Tillman Act of 1907, even though individual contributions remained unlimited.

Yet both Justice Black and Justice Douglas dissented from the Supreme Court's 1957 decision in United States v. United Auto Workers, 352 U.S. 567 (1957), in which the Court, on procedural grounds, overruled a lower court decision upholding the prohibition on corporate and union political expenditures:

We deal here with a problem that is fundamental to the electoral process and to the operation of our democratic society. It is whether a union can express its views on the issues of an election and on the merits of the candidates, unrestrained and unfettered by the Congress. The principle at stake is not peculiar to unions. It is applicable as well to associations of manufacturers, retail and wholesale trade groups, consumers' leagues, farmers' unions, religious groups, and every other association representing a segment of American life and taking an active part in our political campaigns and discussions. It is as important an issue as has come before the Court, for it reaches the very vitals of our system of government. Under our Constitution, it is We The People who are sovereign. The people have the final say. The legislators are their spokesmen. The people determine through their votes the destiny of the nation. It is therefore important -- vitally important -- that all channels of communication be open to them during every election, that no point of view be restrained or barred, and that the people have access to the views of every group in the community.

Legislation

The laws of the United States hold that a legal entity (like a corporation or non-profit organization) shall be treated under the law as a person except when otherwise noted. This rule of construction is specified in 1 U.S.C. §1 (United States Code),[14] which states:

In determining the meaning of any Act of Congress, unless the context indicates otherwise-- the words "person" and "whoever" include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals;

This federal statute has many consequences. For example, a corporation is allowed to own property and enter contracts. It can also sue and be sued and held liable under both civil and criminal law. As well, because the corporation is legally considered the "person," individual shareholders are not legally responsible for the corporation's debts and damages beyond their investment in the corporation. Similarly, individual employees, managers, and directors are liable for their own malfeasance or lawbreaking while acting on behalf of the corporation, but are not generally liable for the corporation's actions. Among the most frequently discussed and controversial consequences of corporate personhood in the United States is the extension of a limited subset of the same constitutional rights.

Corporations as legal entities have always been able to perform commercial activities, similar to a person acting as a sole proprietor, such as entering into a contract or owning property. Therefore corporations have always had a 'legal personality' for the purposes of conducting business while shielding individual stockholders from personal liability (i.e., protecting personal assets which were not invested in the corporation).

The stronger concept of corporate personhood, in which (for example) First, Fifth, and Fourteenth Amendment rights have been asserted by corporations, is often traced to the 1886 U.S. Supreme Court case Santa Clara County v. Southern Pacific Railroad (118 U.S. 394). In that case, before oral argument took place, writing a summary of the decision in a headnote to the Court's opinion, court reporter Bancroft Davis stated:

"The court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of the opinion that it does."[15]

Thus, at the outset, the Waite Court assumed that corporations were entitled to protection under the Fourteenth Amendment. However, the court did not specifically address the matter of whether corporations could be considered 'persons' with respect to the Fourteenth Amendment as the decision made such a finding unnecessary (being based on less expansive law).

Liberal/progressive author and radio/TV talk show host Thom Hartmann has argued that the court was reluctant to establish precedent in that decision. Chief Justice Waite wrote in private correspondence that, "we avoided meeting the [Constitutional] question." Hartmann claims that correspondence between Waite and Bancroft Davis (available in the Library of Congress) demonstrates that Waite did not intend to create a legal precedent. The question of whether corporations were persons within the meaning of the Fourteenth Amendment had been argued in the lower courts and briefed for the Supreme Court, but in this interpretation, the Waite Court did not explicitly decide upon this issue. In numerous cases since, however, the Court has reiterated that corporations are protected in many activities by the equal protection clause of the Constitution. The extent of the protection is what continues to be at issue. Generally speaking, corporations may invoke rights that groups of individual may invoke, such as the right to petition, to speech, to enter into contracts and to hold property, to sue and to be sued. However, they may not exercise rights that are exclusive to individuals and cannot be exercised by other associations of individuals, including the right to vote and the right against self incrimination.

Ralph Nader and others have argued that a strict originalist philosophy, such as that of Justice Antonin Scalia, should reject the doctrine of corporate personhood under the Fourteenth Amendment.[16] Indeed, Chief Justice William Rehnquist repeatedly criticized the Court's invention of corporate constitutional "rights," most famously in his dissenting opinion in the 1978 case First National Bank of Boston v. Bellotti.[17] Nonetheless, these justices' rulings have continued to affirm the assumption of corporate personhood, as the Waite court did, and Justice Rehnquist himself eventually endorsed overruling "Austin," dissenting in "McConnell v. FEC."

Corporate political spending

A central point of debate in recent years is what role corporate money plays and should play in democratic politics. This is part of the larger debate on campaign finance reform and the role that money may play in politics.

In the United States, legal milestones in this debate include:

The corporate personhood aspect of the campaign finance debate turns on Buckley v. Valeo (1976) and Citizens United (2010): Buckley ruled that political spending is protected by the First Amendment right to free speech, while Citizens United ruled that corporate political spending is protected, holding that corporations have a First Amendment right to free speech.

See also

Supreme Court cases
  • Text of Chicago, B&Q Railroad v. State of Iowa, 94 U.S. 155 (1876) is available from:  · Findlaw
  • Text of Peik v. Chicago & Northwestern Railway, 94 U.S. 164 (1876) is available from:  · Findlaw
  • Text of Chicago, Milwaukee, & St. Paul Railroad v. Ackley, 94 U.S. 179 (1876) is available from:  · Findlaw


References

  1. ^ Bravin, Jess (September 17, 2009). "Sotomayor Issues Challenge to a Century of Corporate Law". The Wall Street Journal. http://online.wsj.com/article/SB125314088285517643.html. 
  2. ^ See Santa Clara County v. Southern Pacific Railroad, 118 U.S. 394 (1886)
  3. ^ "Proposed Constitutional Amendments to U.S. Constitution-Reclaim Democracy.org". Reclaimdemocracy.org. 2010-01-21. http://reclaimdemocracy.org/political_reform/proposed_constitutional_amendments.html. Retrieved 2011-01-19. 
  4. ^ Smith, Bradley. "Corporations Are People, Too". NPR. http://www.npr.org/templates/story/story.php?storyId=112711410. Retrieved 2011-01-19. 
  5. ^ "United States of America, Plaintiff-appellant, v. S. Steve Sourapas and Crest Beverage Company, Defendants-appellees". Cases.justia.com. http://cases.justia.com/us-court-of-appeals/F2/515/295/292973/. Retrieved 2011-01-19. 
  6. ^ "Green Party USA Platform". Greenparty.org. http://www.greenparty.org/Platform.php. Retrieved 2011-01-19. 
  7. ^ "WILPF - Challenge Corporate Power, Assert the People's Rights - The Leader in Challenging Corporate Personhood". Corporatepersonhood.com. http://www.corporatepersonhood.com/. Retrieved 2011-01-19. 
  8. ^ a b Gore 2007:88
  9. ^ Grossman, Richard L.; Adams, Frank T. (1993). Taking Care of Business, Citizenship and the Charter of Incorporation. Cambridge: Charter. pp. 11–12. ISBN 0963597604. 
  10. ^ Providence Bank v. Billings, 29 U.S. 514 (1830).
  11. ^ Calvert, Clay (2006). "Freedom of Speech Extended to Corporations". In Finkelman, Paul. Encyclopedia of American civil liberties, Volume 1. CRC Press. p. 650. ISBN 9780415943420. http://books.google.com/books?id=YoI14vYA8r0C&pg=PA650. 
  12. ^ Graham, Howard Jay (1968). Everyman's Constitution. Madison: State Historical Society of Wisconsin.  See also Graham, Howard Jay (1938). "The ‘Conspiracy Theory’ of the Fourteenth Amendment". Yale Law Journal 47 (3): 341–403. doi:10.2307/791947. 
  13. ^ Mayer, Carl. "Personalizing the Impersonal: Corporations and the Bill of Rights", 41 Hastings Law Journal 577, (March 1990).
  14. ^ "United States Code: Title 1,1. Words denoting number, gender, and so forth | LII / Legal Information Institute". .law.cornell.edu. 2010-04-07. http://www4.law.cornell.edu/uscode/1/1.html. Retrieved 2011-01-19. 
  15. ^ 118 U.S. 394 (1886) - According to the official court Syllabus in the United States Reports
  16. ^ Ralph Nader and Robert Weissman. Letter to the Editor: Ralph Nader on Scalia's "originalism" The Harvard Law Record, Published: Thursday, November 13, 2008, Updated: Tuesday, September 29, 2009.
  17. ^ "Justice Rehnquist's Dissent in First National Bank of Boston v. Bellotti". Reclaimdemocracy.org. http://www.reclaimdemocracy.org/corporate_speech/rehnquist_dissent_bellotti.php. Retrieved 2011-01-19. 

Further reading

External links


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