corporations as persons

December 27, 2002 6:44 AM

Are Corporations Legally Persons?

Orthodoxy has it the Supreme Court decided in 1886, in a case called Santa Clara County v. the Southern Pacific Railroad, that corporations were indeed legal persons. I express that view myself, in a recent book. So do many others. So do many law schools. We are all wrong.

Mr. Hartmann undertook instead a conscientious search. He finally found the contemporary casebook, published in 1886, blew the dust away, and read Santa Clara County in the original, so to speak. Nowhere in the formal, written decision of the Court did he find corporate personhood mentioned. Not a word. The Supreme Court did NOT establish corporate personhood in Santa Clara County.

Pardon me while I go to the bookstore. This looks to be a book well worth reading. Imagine the US government controlled by the best interests of real people instead of corporations.
posted by nofundy (25 comments total)

Corporations have never had full rights as people. Corporations can't marry, can't vote, etc.

But they are a legal entity, and I don't see why certain reasonable allowances (due process, etc.) might not be logically granted to them as well as to individual people.

Corporations are not intrinsically evil. In general, they're actually beneficial to society, though (just like people) there are a few rotten apples in the barrel.

If corporations are controlling your elected representatives, it may not be the corporations that are the problem, but the representatives who let corporate interests sway their votes.
posted by Erasmus at 6:55 AM on December 27, 2002

Even if the case in question doesn't establish a precedent, what about the century-plus worth of cases based on it?
posted by nickmark at 6:56 AM on December 27, 2002

If the nature of a corporation is determined by the people who own it, then shouldn't the corporation itself have some privilieges (not all, some) comparable to the collective rights the share owners would have?
posted by PenDevil at 6:57 AM on December 27, 2002

As far as "rights" go, a corporation may not act outside of its State approved charter (which vary tremendously, I think one of the most liberal is in Delaware, which is why so many corporations are HQ'ed there.) However, when they become multi-State or national, they *also* come under the sway of the interstate commerce act.
"Corporate Civil Rights" also permit the income tax of corporations, and most recently the right of corporate "free speech", in the form of campaign contributions, has been upheld by the courts.
N.B.: Corporations only wanted civil rights in the first place when greedy local and State governments saw them as cash cows and wanted to loot them, or tried to use protectionist laws to thwart technological advances that might cost jobs.
posted by kablam at 7:22 AM on December 27, 2002

More on hartmann's book here.
Isn't the basis of the problem that, while people generally have a conscience, corporations by law must act in the shareholders interest? That is, isn't a corporation--at it's most basic--a means of insulating people from what would otherwise be their human compassion?
posted by ahimsakid at 8:06 AM on December 27, 2002

Maybe sharehholders could have a moral interest? (You have a valid point, imho, especially when it's difficult for most people to express their moral preoccupations via their pension funds, etc).

Maybe it's better to say that people are much less good at making moral decisions at a distance (the commons are easier to despoil if they're in another country, for example) and so legal rights should somehow decline as the "moral distance" between individuals and actions increases.
posted by andrew cooke at 8:17 AM on December 27, 2002

I'm no lawyer, but I can read the case itself, in the record of which is recorded the following, right at the outset:
MR. CHIEF JUSTICE WAITE said: 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 opinion that it does.
The decision itself may not mention legal personhood, but in the official record it is clear that the Court was already assuming legal personhood. Hartmann is just splitting hairs.
posted by beagle at 8:28 AM on December 27, 2002

Yes! Decrease rights proportionate to "moral distance." Or move to real consequences for the absence of conscience. To paraphrase Spidey, "With great power should come great responsibility. "
posted by ahimsakid at 8:28 AM on December 27, 2002

Imagine the US government controlled by the best interests of real people instead of corporations.

I cannot. Nor can I remember a time when money was not a power, and that power did not influence the United States.
posted by four panels at 9:13 AM on December 27, 2002

There is a growing movement out there beginning to challenge corporate personhood, including towns explicitly denying it.

There seem to be a lot of good benefits for abolishing it, and I'm sure we'll be seeing this issue a lot more in the coming months and years.

No one is saying "sorry, no more business", but the idea that a charter granted by the state providing limited indemnity for business done for the public good implies that company can now exercise:
1st amendment protections (lies have been held up as legal political speech, the right to not speak about GMOs), 4th amendment protections (the EPA needs a warrant to check for violations which can be easily covered up), 5th amendment protections (employees and directors don't have to incriminate the company), and 14th amendment protections (tying the hands of governments to levy differential taxes based on the company's impact on the community).

Rejecting corporate personhood would arm the people with tools to dramaticall help several existing issues (campaign finance reform, environmental practices, workers rights, small business, unemployment, health & GMO, and corporate corruption).

bah, enough ranting. mefi isn't here to debate politics...
posted by fiz at 9:15 AM on December 27, 2002

beagle,

If you had taken time to read the link you would have known about this claim dubiously attributed to the Chief Justice and know said statement cannot be used as precedent for law.

Thanks for the link ahimsakid!

For all the "strict constructionists" it is also very relevant that no rights were granted or intended for corporations by the founding fathers. I happen to agree with Jefferson's views on this matter.
posted by nofundy at 9:16 AM on December 27, 2002

correction (pardon)

... no such rights were granted...
posted by nofundy at 9:17 AM on December 27, 2002

In one of the few issues I am in agreement with him, Jesse Jackson proposed a "corporate death penalty", a legal way to rid ourselves of a corporation that is both morally corrupt and a scofflaw.
However, I would take it a step further. The boards of directors of most major corporations are paid individuals acting on behalf of large shareholders, often mutual funds; and these individuals serve on many corporate boards as proxys for their employers' interests. This is why corporate America seems so incestuous--one bad apple can afflict many corporations with bad business practices.
In such cases as a CDP is imposed, these persons should be prohibited *not* by the courts, but by the more powerful SEC from sitting on such boards as proxys.

And these individuals MUST be linked to the interests they represent by a supervisor, say at the mutual fund, who is both individually financially and on behalf of his fundholders RESPONSIBLE for the actions and decisions of this corrupt proxy.

Which means that, down to the individual investor level, a CDP could mean the forfeiture of every dime invested in a corrupt corporation. This would, in effect, punish everyone who engaged in, or permitted through inaction, this malfeasance.
posted by kablam at 9:37 AM on December 27, 2002

In one of the few issues I am in agreement with him, Jesse Jackson proposed a "corporate death penalty", a legal way to rid ourselves of a corporation that is both morally corrupt and a scofflaw.


There has always been a corporate death penalty. A corporate charter may be revoked by the state; it just rarely happens.
posted by Ayn Marx at 10:05 AM on December 27, 2002

If corporations are controlling your elected representatives, it may not be the corporations that are the problem, but the representatives who let corporate interests sway their votes.

if an on-off switch is controlling the flow of electrons to your computer, it may not be the on-off switch that is the problem, but the electrons who let on-off switches control thier flow.
posted by quonsar at 10:17 AM on December 27, 2002

I would suggest that, currently, corporations under US law enjoy rights far more extensive than those granted to actual living US citizens. For example:

I was not aware that I had the ability to split myself, like some horror film creature, into separate, distinct entities such as 1) the corporation as a legal construct and 2) it's employees, managers and agents WHO ARE GENERALLY PROTECTED FROM CRIMES COMMITTED BY THE CORPORATION. Wow. Think of it. I could spin off (from 'myself') a legal entity, "The Troutfishing Corporation", and then serve as it's CEO. Then I could commit very lucrative CRIMES on a MASSIVE SCALE! I could contract to dispose of PCB's and Dioxin, dump them in a river somewhere, and yet remain LEGALLY IMMUNE! (way cool)

And it gets better. I could hire lobbyists to patrol the hallways in Congress larding out money to politicians who support my line that "Dioxin isn't really all that toxic". AND WRITE IT OFF ON MY TAXES. Neat! And when people notice the cancer cluster around the Troutfishing Co.'s illegal dump, and start to investigate, and if Troutfishing Corporation is ever brought to court for this crime, then I can hire the best (and most expensive) lawyers in the business for it's defense. And this too Troutfishing Co. can WRITE OFF ON IT'S TAXES. So sensible!

And as the (human) CEO of the deathless Troutfishing Co., I could - with a yearly budget the size of many a developing word company (Troutfishing co., you see, has prospered greatly from it's dioxin dumping) - begin a long term covert propaganda campaign through PR firms in Alexandria, VA., to create fake citizen's groups which run constant ads on NPR arguing for the weakening of laws on toxic waste disposal (on the grounds that tough laws hurt the economy): So that my children - who have gone to the finest schools (funded by toxic waste dumping dollars) can join Troutfishing Co. (as junior CEO's) in a sunny, benevolent future world which is friendly to rational waste management.


"OOPS! Troutfishing Co. isn't doing so well...one of the 500 or so lawsuits against the corporation has come through for the plaintffs. Stocks are WAY DOWN (from 95 and 1/4 to 3 and a half). What a shame. Hmmmm....I'm going to have to talk to some people I know about doing something about these damn corporate liability laws..."

"But no matter! I cashed my stock options at 85, MONTHS before the court verdict (thanks for that heads up, Barney...), and I tucked away a hundred million in CEO bonuses. Not to mention my "golden parachute" ($500,000 a year plus benefits for life, or to acrue to my widow should I die)....what, the employee pension plans are down to 5% of their high value? Fools. Just goes to show, there's a sucker born every...."

"Hey! I've got a great new idea. I'll make BILLIONS! I'll call it "SalmonCo"! first, I'll have some people I know in government start a war...they want to anyway. Then there's this pipeline they'll need for all that oil..."


Sounds good to me! When can I start?
posted by troutfishing at 10:36 AM on December 27, 2002

It is my understanding that civil rights, and as a result, corporate personhood, come from contract and tort law.

To be able to do business with basically anyone, one has to be able to both sign on to a contract and to have the terms of that contract enforced in a court of law. Without that, one would have no obligation to others to follow through on agreements, written and oral.

If you deny rights to someone in order to make them lesser in the eyes of the law, then they could argue that they are not subject to the same laws as others. If corporations were not "persons", or, more accurately, held to the same standards as people when it comes to contracts, then contracts would not have the same meaning for corporations and people.

If corporations could not enter into agreements, then who would contracts be with? The owners of the company? The board of directors? The president of the company? What would happen if those people left the company? Would the corporation still be obligated to fulfill its contracts? Or would the individuals themselves be liable for the terms and conditions?

I agree that corporations have to large a hold over the US political system, but denying corporate personhood is not really the way to go about it. The corporate death penalty and/or holding shareholders liable for the sins of the company are both interesting ideas, and I'd be interested in seeing what other sorts of suggestions are out there.

Also, on preview: what troutfishing said.
posted by bshort at 10:39 AM on December 27, 2002

I quote Congressman Shrub of Vice City: "I like to give people opportunity, not tie them down with regulation! The fact is that businesses are run by moral people who would never try to do anything illegal or get rich quickly."
posted by bingbangbong at 10:56 AM on December 27, 2002

In You've Heard of Santa Clara, Now Meet Dartmouth (scroll down) Peter Kellman makes an interesting point:
"The word corporation is not mentioned in the Constitution or in any of its 27 amendments. However, Article 1, Section 10 of the US Constitution, known as the Contracts Clause, declares that no state shall make any "Law impairing the Obligation of Contracts..." Chief Justice Marshall, writing for the majority in the Dartmouth case, stated in reference to the corporate status of the college that; "The Opinion of the Court, after mature deliberation, is, that this is a contract, the obligation of which cannot be impaired, without violating the Constitution of the United States." That is, a corporation is a contract and therefore is protected by the Constitution."

In other words, section 10 is often taken as trump over the preamble intention to "... promote the general welfare"
posted by ahimsakid at 11:31 AM on December 27, 2002

Imagine the US government controlled by the best interests of real people instead of corporations.

Sounds like communism to me!
posted by Durwood at 11:55 AM on December 27, 2002

It's an interesting argument, but without more knowledge of law than I have, it reminds me of the old "The United States declared itself bankrupt and therefore doesn't exist" wacko argument. (I'm sure there was a previous thread about this, but I have no idea where.)
posted by tweebiscuit at 12:01 PM on December 27, 2002

If corporations were not "persons", or, more accurately, held to the same standards as people when it comes to contracts, then contracts would not have the same meaning for corporations and people.

I think fiz dealt with that argument in his third paragraph before you posted. For me, I don't mind granting corporations charters with limited, contingent "rights" that would let them sign legally binding contracts. It's the other stuff they reach for - First Amendment protection and corporate donations to politicians, for starters - that we need to stop.

It's a classic "give 'em an inch" scenario. They need to be slapped down and reminded that a corporate entity is a lesser thing than a human citizen, and has *none* of the inalienable rights a human citizen has.
posted by mediareport at 9:35 AM on December 28, 2002

Corporations exist as a legal fiction to allow a group of investors to pool their funds in order to undertake a risky enterprise. They originate from a time when trans-oceanic exploration and shipping was a long and exceedingly dangerous proposition, and ships sent out were unlikely to return.

It was at that time in the State's interest to encourage this exploration for markets and raw materials. The incentive to investors was to insulate their private wealth from creditors of the corporation; so when a ship failed to come home (or came home empty) creditors could not claim the assets of the investors, only the assets of the corporation. This is called limited liability.

In exchange for this privilege, incorporated businesses had to accept some oversight by the State, in the form of the corporate charter. These charters generally set forth that the corporation must act in the interests of the public good, and not solely in its own. This provision was an attempt to reign in what was commonly understood to be the natural excess that an otherwise unencumbered business would pursue.

This privilege makes a corporation not a person, but a super-person: they are immortal, not being embodied in a single individual; they are far wealthier than their constituent parts, with the concomitant influence that implies; and they have a protection the unincorporated individual does not-- limited liability.

It is natural that such a super-person should assert itself politically as we see today, to the detriment of the underclass of actual physical individuals.

The threat of revocation of the corporate charter is the only power we now hold over these super-people, but it is firmly in the hands of the politicians these super-people have purchased into office. This is why the power is so little invoked. It wasn't always this way, nor does it have to always be this way. This is a fact corporations are acutely aware of, and in many states pro-business lobbies are hard at work attempting to amend laws and constitutions to remove this last hold we have over them.

If that happens, pray for your children.

There is of course no problem with an unincorporated business entering into contracts. There are plenty of unincorporated businesses all around us. In fact, more businesses are unincorporated than are incorporated, a fact usually ignored by corporate apologists.
posted by Cerebus at 7:00 PM on December 28, 2002

My problem with corporate personhood is that if you extend equal rights to corporations and real, flesh-and-blood people de jure, what happens is that corporations have greater rights de facto. How many times have we heard about corporations winning either in court or by threat of legal action simply because an individual can't afford a lawyer? Sure, the individual can get state-appointed counsel as a defendant, but as a plaintiff (that is, as one out to take a corporation to task), all but the richest of individuals are doomed. And how do you get rich as an individual? Exactly.

It's naive in the extreme to assume that this is an accident; after all, our legal and legislative systems are structured so as to have a large degree of confluence with the dominant power structure, which is largely dictated by economic concerns.

Hey troutfishing, is there an open post on your board of directors? I'm tired of being on the short end of the stick and want to get my evil on.
posted by amery at 8:18 PM on December 28, 2002

mediareport: So if we limit, for instance, the rights of corporations to free speech, then who exactly will determine what is "correct" corporate speech?

Would there be some sort of corporate thought police that determines what corps can say and how they can say it?

If the representative of a company says something that would be banned as inappropriate corporate speech, then would that same speech be allowed if the representative was speaking as an individual? For that matter, would officers of the company be allowed to ever speak as individuals?

Would corporate offices not be subject to the same sorts of limitations on illegal search and seizure?

Would corporate officers be immune from prosecution if they were forced to testify against their corporation?

It seems like limiting the rights of corporations starts to come dangerously close to limiting personal rights.
posted by bshort at 10:14 PM on January 1, 2003