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Corporate personhood
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The corporate personhood debate refers to the controversy (primarily in the United States) over the question of what subset of rights afforded under the law to natural persons should also be afforded to corporations as legal persons.
Opponents of "corporate personhood" believe that large corporations as juristic persons have enjoyed certain constitutional rights intended for natural humans as the result of a misinterpretation of an 1886 Supreme Court Case, Santa Clara County v. Southern Pacific Railroad.
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The corporate personhood debate refers to the controversy (primarily in the United States) over the question of what subset of rights afforded under the law to natural persons should also be afforded to corporations as legal persons.
Opponents of "corporate personhood" believe that large corporations as juristic persons have enjoyed certain constitutional rights intended for natural humans as the result of a misinterpretation of an 1886 Supreme Court Case, Santa Clara County v. Southern Pacific Railroad. Opponents claim that certain rights of natural persons, such as the right to political and other non-commercial free speech, are now exercised by corporations to the detriment of the American democratic process as provided under the Constitution. Some opponents point to the recent discovery of correspondence between then Supreme Court Chief Justice Morrison R. Waite, and court reporter J.C. Bancroft Davis as proof of a conspiracy among the railroad corporations to intentionally create a misrepresentation of that decision for the benefit of the railroads.
Proponents of corporate personhood believe that corporations, as representatives of their shareholders, were intended by the founders and framers to enjoy many, if not all, of the same rights as natural persons, for example, the right against self-incrimination, right to privacy and the right to lobby the government.
Controversies about corporate personhood
Since the mid-1800s, corporate personhood has become increasingly controversial, as courts have extended other rights to the corporation beyond those necessary to ensure their liability for debts. Other commentators argue that corporate personhood is not a fiction anymore—it simply means that for some legal purposes, "person" has now a wider meaning than it has in non-legal uses. Some groups and individuals (including the Green Party, the ), and former Vice-President Al Gore (Gore 2007:88) have objected to corporate personhood. These opponents usually do not actually want to abolish the theory that allows corporations to be governed by the law, be subjected to taxes, sue and be sued, and otherwise be treated as a legal entity. Rather, their objections focus on constitutional protections such as the ability to contribute to political campaigns. For example, Gore argues that because of the 1886 decision, "the 'monopolies in commerce' that Jefferson had wanted to prohibit in the Bill of Rights were full blown monsters, crushing competition from smaller businesses, bleeding farmers with extortionate shipping costs, and buying politicians at every level of government" (Gore 2007:88).
In part as a matter of subsequent interpretations of the word "person" in the Fourteenth Amendment, U.S. courts have extended certain constitutional protections to corporations. Opponents of corporate personhood don't necessarily want to eliminate legal entities, but do want to limit these rights to those provided by state constitutions through constitutional amendment. Often, this is motivated by a desire to restrict the political speech and donations of corporations, interest groups, lobbyists, and political parties. Radio personality and political commentator Thom Hartmann is among those that share this view. Because juristic persons have limited "free speech" rights, legislation meant to eliminate campaign contributions by juristic persons (notably, corporations and labor unions) has been repeatedly struck down by various courts. Those who believe juristic persons should have the protection of the U.S. Constitution point out that they are just organizations of people, and that these people shouldn't be deprived of their human rights when they join with others to act collectively.
Recent background
The laws of the US 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 , 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 into contracts. It can also be sued, and held liable under both civil and criminal law. 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 Company (118 U.S. 394). However, that particular Supreme Court decision did not address the matter of whether corporations were 'persons' with respect to the Fourteenth Amendment; in Chief Justice Waite's words, "we avoided meeting the question".
Also see creature of statute.
History of the debate in the United States
The history of corporate law in the United States can be directly tied to the ebb and flow of the debate first enunciated between Alexander Hamilton and Thomas Jefferson over how centralized the government of the United States should be, how much power the member states should have over their own affairs, and how much say citizens and citizen organizations should have in public affairs.
While both Hamilton and Jefferson participated in the creation of the more centralized United States out of the original confederation by the Federalist Party, they had very different ideals as to what the new creation should be. Hamilton believed in a strong central government, which he believed necessary for an industrialized nation, while Jefferson believed in a de-centralized, more agrarian nation (see Jeffersonian democracy). When Hamilton, as the first US Treasury Secretary, created a national bank for the new country (see First Bank of the United States), Jefferson was much against the idea. Later, President Andrew Jackson did his best to undermine the Second Bank of the United States (see Jacksonian democracy) succeeding in eliminating that institution by refusing to renew its charter thereby eliminating a central bank in the United States. The creation of a national banking system after the American Civil War and Reconstruction, a measure by Congress to provide some stability to the growing national economy, provided some though still insufficient amount of monetary stability to help economic growth until the Federal Reserve System was created in the early 1900s.
The Federal Constitution of 1788 did not mention corporations, thereby leaving the chartering of corporations to the states, since the Constitution did not explicitly say otherwise. In the late 1700s and early 1800s, corporations began to be chartered by the states. Corporations already 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, new corporations were greeted with mixed feelings. Thomas Jefferson wrote in a 1816 letter to George Logan:
I hope we shall... crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our government in a trial of strength, and bid defiance to the laws of our country.
As with banks, so with other corporations, especially perhaps colleges, the degree of permissible interference 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.
In 1818, the United States Supreme Court heard arguments in another such matter, Dartmouth College v. Woodward, 17 U.S. 518 (1819). Daniel Webster was the advocate for Dartmouth. He concluded his argument in the following emotional fashion, directly addressed to that same John Marshall, now chief justice. Webster equated the property rights of the donors and their trustees with the cause of literature and science, in short, with civilization itself.
- "Sir, you may destroy this little institution; it is weak; it is in your hands! I know it is one of the lesser lights in the literary horizon of our country. You may put it out. But if you do, you must carry through your work! You must extinguish, one after another, all those great lights of science which, for more than a century, have thrown their radiance over our land. It is, Sir, as I have said, a small college. And yet, there are those who love it."
At this point, the Chief Justice is said to have become teary. The following year, he read from the bench the court's decision in that matter.
The key paragraph in the decision is as follows: "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.
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 corporation-owned property as it would have to property owned by natural persons. And, seven years after that, 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."
The notion of corporate personhood, then, has roots in the early history of the republic. Still, as the 19th century matured, manufacturing in the US, became more complex as the British Industrial Revolution generated new inventions and business processes which US industry copied. U.S. industry was largely protected by tariffs from British and other foreign competition. 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. And as these corporations came to dominate business life, they also began to dominate America's politicians, lawyers, courts and culture.
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.
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...."
In the late 1800s, 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 becoming business organizations that operated across multiple states, 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 14th Amendment prevented states from regulating the maximum rates they could charge. These cases did not rely on just an interpretation of the 14th 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 14th Amendment applied to corporations instead couching their decision on the Interstate Commerce clause.
Similarly, in 1877, in Munn v. Illinois (94 U.S. 113 (1876)), the Supreme Court decided that the 14th Amendment did not prevent the State of Illinois from regulating charges for use of a business's grain elevators, ignoring the question of whether Munn & Scott was a person.
Was the 14th Amendment about corporations? One of the 1886 judges, Samuel F. Miller, had not thought so 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.
- It has been argued that the men who wrote the 14th Amendment specifically meant for the word person to be a loophole which you could drive a giant corporation through. Apparently in one of the railroad cases an attorney who had been on the committee that drafted the amendment waved a paper before the court claiming that it documented such; but the paper was not entered as evidence, nor apparently was it shown to anyone, nor was it saved. However, careful research has shown that, John A. Bingham the member of Congress who is known to have been chiefly responsible for the phraseology 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 rather than corporations and business enterprise unquestionably were the persons' to which he then referred.
Later, in Northwestern Nat Life Ins. Co. v. Riggs (203 U.S. 243 (1906)), having accepted that corporations are a type of people, the court still ruled that the 14th Amendment was not a bar to many state laws that effectively limited a corporation's right to contract business as it pleases.
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.
Twenty-first century developments
The understanding of corporate personhood in the United States may be changing as a result of developments in bankruptcy law and mass tort litigation.
Near the end of the 20th century, several major corporations entered chapter 11 (i.e., judicial protection from creditors) on the basis of their liability for harm done or allegedly done to actual or potential plaintiffs by asbestos. Owens-Corning, an insulation manufacturer, was perhaps the most high-profile of these.
Owens-Corning was, formally speaking, not one corporation but several, and it has maintained in the bankruptcy proceedings that the several corporations must be treated separately in any court-directed re-organization.
In 2003, a Supreme Court showdown over corporate free speech was narrowly avoided when the parties in Nike v. Kasky settled out of court over the question of whether Nike's defense against claims it was using sweatshop labor through means including letters to the editor and press releases, was "commercial speech" (which is legally obligated to be factual) or private speech.
See and
In 2004, a federal district court ordered the substantive consolidation of the different corporations that operate under the Owens-Cornings name for purposes of re-organization. This is still a hotly disputed matter, and that order was overturned on appeal, but it may prove a landmark in the willingness of courts to pierce the corporate veil.
In 2008, Blackwater sued the City of San Diego to force the city to issue them a certificate of occupancy for its training facility in Otay Mesa before the plan went through the city's public review process. "U.S. District Judge Marilyn Huff ruled in Blackwater's favor. Blackwater is a person and has a right to due process under the law and would suffer significant damage due to not being able to start on its $400 million Navy contract."
See also
External links
- Extensive library of resources on the subject.
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- (POCLAD)
- by Ted Nace: free book on the historical and legal bases of Corporations
- 90-minute documentary film exploring the subject.
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Notable U.S. Supreme Court cases
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