Corporate personhood

Corporate personhood is the legal notion that a corporation, separately from its associated human beings (like owners, managers, or employees), has some, but not all, of the legal rights and responsibilities enjoyed by natural persons (physical humans). For example, corporations have the right to enter into contracts with other parties and to sue or be sued in court in the same way as natural persons or unincorporated associations of persons.

Corporate personhood in the United States

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

The basis for allowing corporations to assert protection under the U.S. Constitution is that they are organizations of people, and the people should not be deprived of their constitutional rights when they act collectively. In this view, treating corporations as "persons" is a convenient legal fiction which allows corporations to sue and to be sued, provides a single entity for easier taxation and regulation, simplifies complex transactions that would otherwise involve, in the case of large corporations, thousands of people, and protects the individual rights of the shareholders as well as the right of association.

Generally, corporations are not able to claim constitutional protections that would not otherwise be available to persons acting as a group. For example, the Supreme Court has not recognized a Fifth Amendment right against self-incrimination for a corporation, since the right can be exercised only on an individual basis. In United States v. Sourapas and Crest Beverage Company, "[a]ppellants [suggested] the use of the word 'taxpayer' several times in the regulations requires the fifth-amendment self-incrimination warning be given to a corporation." The Court did not agree.

Since the Supreme Court's ruling in Citizens United v. Federal Election Commission in 2010, upholding the rights of corporations to make political expenditures under the First Amendment, there have been several calls for a U.S. Constitutional amendment to abolish Corporate Personhood, even though the Citizens United majority opinion makes no reference to corporate personhood or to the Fourteenth Amendment.

Historical background in the United States

During the colonial era, British corporations were chartered by the crown to do business in North America. This practice continued in the early United States. They were often granted monopolies as part of the chartering process. For example, the controversial Bank Bill of 1791 chartered a 20-year corporate monopoly for the First Bank of the United States. 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, under general laws allowing for incorporation at the initiative of citizens, rather than through specific acts of the legislature.

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 the 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 corporation's Board of Visitors to make changes including the reorganization.

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 which influenced legislation at the local, state, and federal levels as they built businesses that spanned multiple states and communities. After the adoption of the 14th Amendment in 1868, there was some question as to whether the Amendment applied to other than freed slaves, and whether its protections could be invoked by corporations and other organizations of persons.

The primary purpose of the 14th Amendment was undoubtedly to protect freed slaves. However, the Amendment applies to all Americans, not only freed slaves and their descendants.

Following the reasoning of the Dartmouth College case and other precedents (see below, Case law in the United States), corporations could exercise the rights of their shareholders and these shareholders were entitled to some of the legal protections against arbitrary state action. Their cause was strengthened by the adoption of general incorporation statutes in the states in the late 19th century, most notably in New Jersey and Delaware, which allowed anyone to form corporations without any particular government grant or authorization, and thus without the government-granted monopolies that had been common in charters granted by the Crown or by acts of the legislature. See Delaware General Corporation Law. In Santa Clara County v. Southern Pacific Railroad (1886), the Supreme Court held, ipse dixit, that the Fourteenth Amendment applied to corporations. Since then the Court has repeatedly reaffirmed this protection.

Case law in the United States

In 1818, the United States Supreme Court decided Trustees of Dartmouth College v. Woodward – 17 U.S. 518 (1819), writing: "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." Beginning with this opinion, the U.S. Supreme Court has continuously recognized corporations as having the same rights as natural persons to contract and to enforce contracts.

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 the 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: "The great object of an incorporation is to bestow the character and properties of individuality on a collective and changing body of men."

In the 1886 case Santa Clara v. Southern Pacific – 118 U.S. 394 (1886), the Chief Justice Waite of the Supreme Court orally directed the lawyers that the Fourteenth Amendment equal protection clause guarantees constitutional protections to corporations in addition to natural persons, and the oral argument should focus on other issues in the case. In the Santa Clara case the court reporter, Bancroft Davis, noted in the headnote to the opinion that the Chief Justice Morrison Waite began oral argument by stating, "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." While the headnote is not part of the Court's opinion and thus not precedent, two years later, in Pembina Consolidated Silver Mining Co. v. Pennsylvania – 125 U.S. 181 (1888), the Court clearly affirmed the doctrine, holding, "Under the designation of 'person' there is no doubt that a private corporation is included [in the Fourteenth Amendment]. Such corporations are merely associations of individuals united for a special purpose and permitted to do business under a particular name and have a succession of members without dissolution." This doctrine has been reaffirmed by the Court many times since.

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 which 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.

Opinions by two long serving Supreme Court judges, Hugo Black and William O. Douglas, indicate the extent to which corporate personhood is not an all-or-nothing doctrine, but rather relates to the purpose of government regulation and the underlying rights of the individuals making up the corporation. In a case challenging corporate tax rates, Justice Black wrote:

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 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.

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 striking down 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.

Thus the two justices would have adjudicated the case and upheld the lower court opinion striking down the ban on corporate and union spending.

Although it is now well settled law that the 14th Amendment extends to corporations, the extent to which it should attach to corporations has continued to draw criticism from liberal legal theorists.

Legislation in the United States

See also: Creature of statute

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), 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 shareholders from personal liability (i.e., protecting personal assets which were not invested in the corporation).

Broadcaster Thom Hartmann has argued that the Santa Clara County case was not intended to extend equal protection to corporations. Chief Justice Waite wrote in private correspondence; "we avoided meeting the [Constitutional] question." Hartmann writes that correspondence between Waite and Bancroft Davis (available in the Library of Congress) demonstrates Waite did not intend to create a legal precedent.

Ralph Nader, Phil Radford and others have argued that a strict originalist philosophy should reject the doctrine of corporate personhood under the Fourteenth Amendment. 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; though, in Bellotti, Justice Rehnquist's objections are based on his "views of the limited application of the First Amendment to the States" and not on whether corporations qualify as "persons" under the Fourteenth Amendment. Nonetheless, these justices' rulings have continued to affirm the assumption of corporate personhood, as the Waite court did, and Justice Rehnquist himself eventually endorsed the right of corporations to spend in elections (the majority view in Bellotti) in his dissenting opinion in McConnell v. FEC.

Corporate political spending

A central point of debate in recent years has been 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 which money may play in politics.

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

• Tillman Act of 1907, banned corporate political contributions to national campaigns.
• Federal Election Campaign Act of 1971, campaign financing legislation.
• 1974 Amendments to Federal Election Campaign Act provided for first comprehensive system of regulation, including limitations on the size of contributions and expenditures and prohibitions on certain entities from contributing or spending, disclosure, creation of the Federal Election Commission as a regulatory agency, and government funding of presidential campaigns.
• Buckley v. Valeo (1976) upheld limits on campaign contributions, but held that spending money to influence elections is protected speech by the First Amendment.
• First National Bank of Boston v. Bellotti (1978) upheld the rights of corporations to spend money in non-candidate elections (i.e. ballot initiatives and referendums).
• Austin v. Michigan Chamber of Commerce (1990) upheld the right of the state of Michigan to prohibit corporations from using money from their corporate treasuries to support or oppose candidates in elections, noting: "[c]orporate wealth can unfairly influence elections."
• Bipartisan Campaign Reform Act of 2002 (McCain–Feingold), banned corporate funding of issue advocacy ads which mentioned candidates close to an election.
• McConnell v. Federal Election Commission (2003), substantially upheld McCain–Feingold.
• Federal Election Commission v. Wisconsin Right to Life, Inc. (2007) weakened McCain–Feingold, but upheld core of McConnell.
• Citizens United v. Federal Election Commission (2010) the Supreme Court of the United States held that corporate funding of independent political broadcasts in candidate elections cannot be limited under the First Amendment, overruling Austin (1990) and partly overruling McConnell (2003).
• Western Tradition Partnership, Inc. v. Attorney General of Montana (2012). U.S. Supreme Court summary reversal of a decision by the Montana Supreme Court holding that Citizens United did not preclude a Montana state law prohibiting corporate spending in elections.

The corporate personhood aspect of the campaign finance debate turns on Buckley v. Valeo (1976) and Citizens United v. Federal Election Commission (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. Opponents of these decisions have argued that if all corporate rights under the Constitution were abolished, it would clear the way for greater regulation of campaign spending and contributions. It should be noted, however, that neither decision relied on the concept of corporate personhood, and the Buckley decision in particular deals with the rights of individuals and political committees, not corporations.

Misconceptions

In debates on this topic it is sometimes asserted that the notion of corporate personhood implies that corporations are entitled to all of the rights and privileges that apply to natural persons (i.e., human beings). However, the definition of corporate personhood includes some, but not all of said rights and privileges. Whether a corporation is a "person" possessing any one of those rights or privileges is properly decided by applying basic logic, common sense, and relevant and valid law to an examination of generally accepted reasons why the state grants existence to the legal fiction of the corporate form, so that on the one hand courts may hold that corporations must have the right to own property or enter into contracts, or to be subject to municipal zoning laws that apply to "persons" without necessarily having the same speech rights enjoyed by natural persons and without having the right to vote and without counting as a second "person" for the purpose of driving in a carpool lane.

See also

• Anti-corporate activism
• Corporate behaviour
• Corporate governance
• History of central banking in the United States
• History of rail transport
• Industrial Revolution
• Juristic person
• Legal fiction#Corporate personhood
• Persona designata
• The Corporation (film)

Supreme Court cases

• Text of Dartmouth College v. Woodward, 17 U.S. 518 (1819) is available from:  Findlaw 
• Text of Slaughter-House Cases, 83 U.S. 36 (1872) is available from:  Findlaw 
• Text of Santa Clara County v. Southern Pacific Railroad, 118 U.S. 394 (1886) is available from:  Findlaw  Justia 
• 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 
• Text of Wheeling Steel Corp. v. Glander, 337 U.S. 562 (1949) is available from:  Findlaw 
• Text of Yick Wo v. Hopkins, 118 U.S. 356 (1886) is available from:  Findlaw 

Further reading

• Gore, Al (2007). The Assault on Reason, New York: The Penguin Press. ISBN 978-1-59420-122-6
• Horwitz, Morton J., THE TRANSFORMATION OF AMERICAN LAW: 1870-1960 (Oxford, 1992), especially Chapter 3, usefully places the notion within the context of competing strains of jurisprudence.
• See also Jack Beatty, AGE OF BETRAYAL (Knopf, 2007). The `conspiracy theory' here has not to do with the Waite-Davis correspondence regarding the reporter headnotes, but with a disingenuous attempt to claim congressional intent in the original framing of the 14th Amendment that it include establishing corporate personality as constitutionally protected.