Corporate Personhood

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A legal fiction that corporations have equal rights to individuals. Wasn’t our Constitution written in the name of “We the people”? It was, of course, and the Constitution does not even mention corporations. But in 1886 the Supreme Court started down a treacherous path by viewing corporations as “people” with rights to equal protection under the 14th Amendment. Since that time the Court has granted “corporate persons” additional rights under the First, Fourth, Fifth, Sixth, and Seventh Amendments. What we call “corporate personhood” has resulted. Rights originally meant to protect human beings from the potentially oppressive powers of our government now belong as well to the corporation, an artificial entity.

The choice of the word “person” arises from the way the 14th Amendment to the U.S. Constitution was worded and from earlier legal usage of the word person. A corporation is an artificial entity, created by the granting of a charter by a government that grants such charters. Corporation in this essay will be confined to businesses run for profit that have been granted corporate charters by the states of the United States. The federal government of the United States usually does not grant corporate charters to businesses (exceptions include the Post Office and Amtrak).

Corporations are artificial entities owned by stockholders, who may be humans or other corporations. They are required by law to have officers and a board of directors (in small corporations these may all be the same people). In effect the corporation is a collective of individuals with a special legal status and privileges not given to ordinary unincorporated businesses or groups of individuals.

Obviously a corporation is itself no more a person (though it is owned and staffed by persons) than a locomotive or a mob. So why, in the USA, is a corporation considered to be a person under law? In the United States of America all natural persons (actual human beings) are recognized as having inalienable rights. These rights are recognized, among other places, in the Bill of Rights and the 14th Amendment.

But corporate lawyers (acting as both attorneys and judges) subverted our Bill of Rights in the late 1800’s by establishing the doctrine of “corporate personhood”. Corporate personhood is the idea (legal fiction, currently with force of law) that corporations have inalienable rights (sometimes called constitutional rights – formerly unalienable rights, or God-given) just like real, natural, human persons.

That this idea has the force of law resulted from the power and wealth of the class of people who owned corporations, which enabled them to accumulate even greater power and wealth. Corporate constitutional rights effectively invert the relationship between the government and the corporations. Recognized as persons, corporations lose much of their status as subjects of the government. Although they are artificial creations of their owners and the state governments, as legal persons they have a degree of immunity to government supervision. Endowed with the court
– recognized right to influence both elections and the law making process, corporations now dominate not just the U.S. economy, but the government itself.

Corporations are not persons and possess only the privileges we willfully grant them. Granting corporations the status of legal “persons” effectively rewrites the Constitution to serve corporate interests as though they were human interests. Ultimately, the doctrine of granting constitutional rights to corporations gives a thing illegitimate privilege and power that undermines our freedom and authority as citizens. While corporations are setting the agenda on issues in our Congress and courts, We the People are not; for we can never speak as loudly with our own voices as corporations can with the unlimited amplification of money.

When American colonists declared independence from England in 1776, they also freed themselves from control by English corporations that extracted their wealth and dominated trade. After fighting a revolution to end this exploitation, our country’s founders retained a healthy fear of corporate power and wisely limited corporations exclusively to a business role. Corporations were forbidden from attempting to influence elections, public policy, and other realms of civic society.

Initially, the privilege of incorporation was granted selectively to enable activities that benefited the public, such as construction of roads or canals. Enabling shareholders to profit was seen as a means to that end. The states also imposed conditions (some of which remain on the books, though unused) like these*:

  • Corporate charters (licenses to exist) were granted for a limited time and could be revoked promptly for violating laws.
  • Corporations could engage only in activities necessary to fulfill their chartered purpose.
  • Corporations could not own stock in other corporations nor own any property that was not essential to fulfilling their chartered purpose.
  • Corporations were often terminated if they exceeded their authority or caused public harm.
  • Owners and managers were responsible for criminal acts committed on the job.
  • Corporations could not make any political or charitable contributions nor spend money to influence law-making.

For 100 years after the American Revolution, legislators maintained tight control of the corporate chartering process. Because of widespread public opposition, early legislators granted very few corporate charters, and only after debate. Citizens governed corporations by detailing operating conditions not just in charters but also in state constitutions and state laws. Incorporated businesses were prohibited from taking any action that legislators did not specifically allow.

States also limited corporate charters to a set number of years. Unless a legislature renewed an expiring charter, the corporation was dissolved and its assets were divided among shareholders. Citizen authority clauses limited capitalization, debts, land holdings, and sometimes, even profits. They required a company’s accounting books to be turned over to a legislature upon request. The power of large shareholders was limited by scaled voting, so that large and small investors had equal voting rights. Interlocking directorates were outlawed. Shareholders had the right to remove directors at will.

In Europe, charters protected directors and stockholders from liability for debts and harms caused by their corporations. American legislators explicitly rejected this corporate shield. The penalty for abuse or misuse of the charter was not a plea bargain and a fine, but dissolution of the corporation.

In 1819 the U.S. Supreme Court tried to strip states of this sovereign right by overruling a lower court’s decision that allowed New Hampshire to revoke a charter granted to Dartmouth College by King George III. The Court claimed that since the charter contained no revocation clause, it could not be withdrawn. The Supreme Court’s attack on state sovereignty outraged citizens. Laws were written or re-written and new state constitutional amendments passed to circumvent the (Dartmouth College v Woodward) ruling. Over several decades starting in 1844, nineteen states amended their constitutions to make corporate charters subject to alteration or revocation by their legislatures. As late as 1855 it seemed that the Supreme Court had gotten the people’s message when in Dodge v. Woolsey it reaffirmed state’s powers over “artificial bodies.”

But the men running corporations pressed on. Contests over charter were battles to control labor, resources, community rights, and political sovereignty. More and more frequently, corporations were abusing their charters to become conglomerates and trusts. They converted the nation’s resources and treasures into private fortunes, creating factory systems and company towns. Political power began flowing to absentee owners, rather than community-rooted enterprises.

The industrial age forced a nation of farmers to become wage earners, and they became fearful of unemployment–a new fear that corporations quickly learned to exploit. Company towns arose. and blacklists of labor organizers and workers who spoke up for their rights became common. When workers began to organize, industrialists and bankers hired private armies to keep them in line. They bought newspapers to paint businessmen as heroes and shape public opinion. Corporations bought state legislators, then announced legislators were corrupt and said that they used too much of the public’s resources to scrutinize every charter application and corporate operation.

Government spending during the Civil War brought these corporations fantastic wealth. Corporate executives paid “borers” to infest Congress and state capitals, bribing elected and appointed officials alike. They pried loose an avalanche of government financial largesse. During this time, legislators were persuaded to give corporations limited liability, decreased citizen authority over them, and extended durations of charters.

Attempts were made to keep strong charter laws in place, but with the courts applying legal doctrines that made protection of corporations and corporate property the center of constitutional law, citizen sovereignty was undermined. As corporations grew stronger, government and the courts became easier prey. They freely reinterpreted the U.S. Constitution and transformed common law doctrines.

One of the most severe blows to citizen authority arose out of the 1886 Supreme Court case of Santa Clara County v. Southern Pacific Railroad. Though the court did not make a ruling on the question of “corporate personhood,” thanks to misleading notes of a clerk, the decision subsequently was used as precedent to hold that a corporation was a “natural person.” This story was detailed in “The Theft of Human Rights,” a chapter in Thom Hartmann’s recommended book Unequal Protection.

From that point on, the 14th Amendment, enacted to protect rights of freed slaves, was used routinely to grant corporations constitutional “personhood.” Justices have since struck down hundreds of local, state and federal laws enacted to protect people from corporate harm based on this illegitimate premise. Armed with these “rights,” corporations increased control over resources, jobs, commerce, politicians, even judges and the law.

A United States Congressional committee concluded in 1941, “The principal instrument of the concentration of economic power and wealth has been the corporate charter with unlimited power….”

Many U.S.-based corporations are now transnational, but the corrupted charter remains the legal basis for their existence. At Reclaim Democracy!, we believe citizens can reassert the convictions of our nation’s founders who struggled successfully to free us from corporate rule in the past. These changes must occur at the most fundamental level — the U.S. Constitution.

The First Amendment

“. . . no law. . . abridging the freedom of speech. . .”

The First Amendment right to free speech has been broadened by the courts to allow corporations to give campaign contributions, lobby legislators, run advertisements that support their interests, exercise the right not to speak, and paint their activities as “green.”

When President George W. Bush ran for governor of Texas, he received more than $4 million in campaign donations from companies that have benefited greatly from the Texas Environmental, Health, and Safety Audit Privilege Act, which he signed soon after taking office.2 This law says that companies need not report their violations of environmental regulations to law enforcement officials or to the public. Nor can they be penalized for self-reported violations. Some 25 other states have passed similar audit privilege laws in the past decade.3

The Fourth Amendment

“The right of the people to be secure. . . against unreasonable searches and seizures. . .”

Under many circumstances, corporations have the right to “shut the door” on government inspectors who lack a search warrant. The resulting delay may be enough for a company to cover up signs of wrongdoing. Even if evidence is collected under a search warrant, there is no guarantee that it will hold up in court.

Riverdale Mills, a wire-mesh manufacturer, sits on the Blackstone River near Worcester, Mass. In 1997, the Environmental Protection Agency (EPA) received an anonymous tip from an employee that the mill’s wastewater treatment system was not working. Agents got a search warrant to investigate what was going on and collected evidence that was used by the government to indict Riverdale’s owner on two counts of violating the Clean Water Act. The case fell apart, however, after the judge handling the case threw out key evidence (water test results) because the EPA took samples on the mill property without informing the owner.4 Apparently, having a search warrant is not even enough.

The Fifth Amendment

“. . . nor shall any person. . .be deprived of life, liberty, or property without due process of law; nor shall private property be taken for public use, without just compensation.”

Corporations have the right to challenge governmental actions that protect the environment by claiming they are “takings” of their property rights. Further, the government may be required to provide monetary compensation for any consequent reduction in property value, even intangible property value such as lost potential profits.

Florida Rock Industries applied for a permit to mine limestone from 1,500 acres of wetlands in the Florida Everglades in the early 1990s. The U.S. Army Corp of Engineers denied the permit because the risks of pollution and habitat destruction were high. Florida Rock sued successfully to get compensation for a regulatory taking, even though the company had the opportunity to sell the property for more than twice as much as it paid.5 The government could end up paying Florida Rock tens of millions of dollars.6

In 1986, Monterey, CA rejected the application of Del Monte Dunes Corporation to build a residential complex on environmentally sensitive sand dunes. The state eventually purchased the property from the company for a public park, paying more than the original purchase price. Nevertheless, Del Monte Dunes sued for a takings on the basis that the company would have made much more money if allowed to build. The jury hearing the case awarded the company $1.45 million.7 Other “personhood rights” were claimed by Del Monte Dunes in this case as well: the 14th Amendment (due process and equal protection) and the Sixth and Seventh Amendments (right to trial by jury).

The 14th Amendment

“. . . nor shall any State . . . deny to any person within its jurisdiction the equal protection of the laws.”

By using the cry of “equal protection” to open the courts to them, corporations can evade, if not overturn, regulations while conducting business as usual.

Gwaltney of Smithfield Ltd. operated a meatpacking plant on the Pagan River in Smithfield, Virginia. Between 1981 and 1984, the company repeatedly violated the conditions of its permit to pollute by discharging excessive quantities of five pollutants. The Chesapeake Bay Foundation and Natural Resources Defense Council sent notice of their intent to file a citizens suit under the Clean Water Act. But they got nowhere: the court ruled that citizens could sue a corporation only for an ongoing violation of the law.8 Because citizens must provide polluters with a 60-day notice of intent to sue, violators have the opportunity to do a “quick fix” and so avoid litigation.

By asserting their personhood rights, corporations are able to influence legislation and gain access to the courts. The total effect is devastating, with no part of our environment left untouched. Corporations not only find ways to avoid or minimize regulation but use their wealth and power to slow or halt enforcement.

We need to accept that there is no point in continuing to play the same game. Corporations have shown that they are better at it. But if we abolish corporate personhood, they lose the constitutional rights that have permitted them to trump democratic processes. If we recognize that corporations are legal entities, created and defined by the authority of government – and extended privileges rather than rights, we will help lay the foundations for the creation of a true democracy.

SIGNPOSTS ALONG A TREACHEROUS PATH

Corporations gained their constitutional “rights” to fight regulation through a series of precedent setting Supreme Court decisions. Cases that yielded these decisions include:

  • 14th Amendment Santa Clara County v. Southern Pacific Railroad [118 U.S. 394 (1886)] Corporations are included in the word “person” in the 14th Amendment and given equal protection under the law.
  • Fifth Amendment Noble v. Union River Logging [147 U.S. 165 (1893)] A corporation cannot be deprived of its property without due process. Pennsylvania Coal Co. v. Mahon [260 U.S. 393, 415 (1922)] Corporations have protection against the taking of private property without compensation. A regulation is a taking.
  • Fourth Amendment Hale v. Henkel [201 U.S. 43 (1906)] A corporation is entitled to protection against unreasonable searches and seizures. Marshall v. Barlow [436 U.S. 307 (1978)] Corporations have the right to demand a search warrant for monitoring of regulatory compliance.
  • First Amendment Buckley v. Valeo [424 U.S. 1 (1976)] Political money is equivalent to speech. Boston v. Bellotti [435 U.S. 765 (1978)] Corporations have the same rights to the First Amendment as people and can spend unlimited money to “speak” in ads to overturn referendums.

Significant U.S. Court Cases in the Evolution of Corporate Personhood / Commercial Free Speech

  1. Trustees of Dartmouth College v. Woodward (1819) – Corporate charters are ruled to have constitutional protection.
  2. Munn v. State of Illinois (1876) – Property cannot be used to unduly expropriate wealth from a community (later reversed).
  3. Santa Clara County v. Southern Pacific Railroad (1886) – The substance of this case (a tax dispute) is of little significance, but this fateful case subsequently was cited as precedent for granting corporations constitutional rights. Several articles linked above detail how this happened.
  4. Noble v. Union River Logging Railroad Company (1893) – A corporation first successfully claims Bill of Rights protection (5th Amendment)
  5. Lochner v. New York (1905) – States cannot interfere with “private contracts” between workers and corporation — marks the ascension of “substantive due process” (later mitigated after President Roosevelt threatend to add Justices to the Court).
  6. Liggett v. Lee (1933) – Chain store taxes prohibited as violation of corporations’ “due process” rights.
  7. Ross v. Bernhard (1970) – 7th Amendment right (jury trial) granted to corporations.
  8. U.S. v. Martin Linen Supply (1976) – A corporation successfully claims 5th Amendment protection against double jeopardy.
  9. Marshall v. Barlow (1978) – The Court creates 4th Amendment protection for corporations — federal inspectors must obtain a search warrant for a safety inspection on corporate property.
  10. First National Bank of Boston v. Bellotti (1978) – Struck down a Massachusetts law that banned corporate spending to influence state ballot initiatives, even spending by corporate political action committees. Spending money to influence politics is now a corporate “right.” Justice Rehnquist’s dissent is a recommended read. Related articles: Ballot Initiatives Hijacked / Behind the Powell Memo
  11. Central Hudson Gas v. Public Service Comm. of NY (1980) – This oft-cited decision concerns a state ban on ads promoting electricity consumption.
  12. Austin v. Michigan Chamber of Commerce (1990) – Upheld limits on corporate spending in elections.
  13. Thompson v. Western States Medical Center (2002)
  14. Nike v Kasky (2002) – Nike claims California cannot require factual accuracy of the corporation in its PR campaigns. California’s Supreme Court disagreed. The U.S. Supreme Court took up the case on appeal, then issued a non-ruling in 2003. See our comprehensive archive on this case.
  15. Randall v Sorrell (2006) While this case dealt with the legality of Vermont’s contribution limits, not corporations directly, it carried important implications for corporate political influence, as Daniel Greenwood detailed in our amicus brief to the U.S. Supreme Court.
  16. Citizens United v Federal Election Commission (2010). In a 5-4 ruling, the U.S. Supreme Court overrules Austin and a century of federal legislative precedent to proclaim broad electioneering rights for corporations.
  17. Western Tradition Partnership, Inc. v. Attorney General of Montana The U.S. Supreme Court overruled Montana’s Supreme Court ruling, which had upheld a challenge to the state’s century-old ban on corporate electioneering.

Footnotes:

  1. Russell Mokhiber, “Interview with Richard Grossman, Program on Corporations, Law and Democracy.” Corporate Crime Reporter, February 8, 2002.
  2. H. B. No. 2473 (1995)
  3. Richard Caplan, Polluter’s Playground: How the Govemment Permits Pollution. U.S. PIRG Education Fund, May 2001.
  4. David Armstrong, “EPA Agents Accused of Going Too Far.” Boston Globe, November 11,1999.
  5. Florida Rock Industries, Inc v. United States [18F. 3d 1560] (Fed. Cir. 1994)
  6. Sharon Buccino et al., Hostile Environment: How Activist Judges Threaten Our Air, Water, and Land. NRDC, July 2001.
  7. Del Monte Dunes v. City of Monterey [U.S. 9th Cir. Court of Appeals No. 94-16248 (1996)] unpublished
  8. Gwaltney v. Chesapeake Bay Foundation [484 U.S. 49 (1987)]

Sources:

  1. DemocracyNow
  2. MoveToAmend

Recommended Articles

  1. The Hijacking of the 14th Amendment by Doug Hammerstrom (pdf)
  2. Santa Clara Blues by William Meyers (pdf). Also in HTML format
  3. Taking Care of Business: Citizenship and the Charter of Incorporation by Richard Grossman and Frank Adams
  4. Personalizing the Impersonal: Corporations and the Bill of Rights by Carl Mayer. Recommended for lawyers or those interested in a detailed legal history (70 pp html).
  5. When Silence is Not Golden: Negative Corporate Free Speech by Dean Ritz
  6. Abolish Corporate Personhood by Molly Morgan and Jan Edwards.
  7. The PBS program NOW compiled some useful resources on the topic for this 2005 episode.
  8. Court Rules Corporations Enjoy Human Rights, Some People Don’t
  9. Monsanto Claims “Negative Free Speech” Rights Should Preclude Product Labels that Can Harm Sales of its Products

Videos

Recommended Books

  1. The People’s Business by Charlie Cray and Lee Drutman
  2. Gangs of America by Ted Nace
  3. Unequal Protection by Thom Hartmann
  4. When Corporations Rule the World by David Korten
  5. The Transformation of American Law 1870-1960 by Morton Horwitz (for those interested in detailed legal background). See also Volume 1: 1780-1860.
  6. Corporations Are Not People: Reclaiming Democracy From Big Money & Global Corporations, Jeff Clements