The “Occupy” movement is trying to accomplish what the 2008 financial crash, subsequent government bailouts and rise of the Tea Party have seemed unable to do: focus the nation’s attention on the power that our government bestows on corporations. Emblematic of the movement’s concern is their focus on the doctrine of “corporate personhood.” Occupy Wall Street’s original “Declaration of the Occupation” claims that corporations “run our governments” by, among other things, persuading “the courts” to grant them “the same rights as people, with none of the culpability or responsibility.” To many, this criticism might seem opaque or even loony. But the doctrine that it references, first established in the 1886 Supreme Court case Santa Clara County v. Southern Pacific Railroad, is real, substantial and influential. Moreover, the history behind the legal finding of corporate personhood suggests that its re-examination is long overdue.
Incorporation—which is, in essence, the exchanging for certain purposes of several individual identities for a collective, group one—brings with it tremendous advantages. In the case of a business firm, for example, if a corporation were to go bankrupt or commit a crime, none of its individual owners would risk losing their personal property or going to jail. Without such protections, few people would be willing to purchase a small stake (i.e., buy a share of stock) in a business about which they know very little. Among the primary advantages of incorporation, therefore, is its ability to aid in the raising of capital.
Because corporate status conveys such great privilege, the original American colonies and, later, states were rather stingy in granting corporate status to businesses. Before the Civil War, firms were usually allowed to incorporate only by a specific act of a state legislature. States typically granted these requests only to entities that served some public purpose, so many of the earliest American corporations ran bridges, toll roads or universities. This pattern changed, however, in the democratic upsurge of the Jacksonian Era. Suspicious of the corruption and favoritism inherent in the state legislatures’ ability to bestow privileges on a select few, Jacksonians prevailed upon state after state to pass “general incorporation” laws, which granted corporate status to anyone who met specific minimal criteria. By the end of the 1870s, writes historian Alan Trachtenberg, “incorporation…had become more of a right than a privilege.”
With this change, corporate status continued to convey economic privileges, but no longer retained any of the obligations which had originally justified them. This process arguably reached its apotheosis in the 1886 Santa Clara case, a rather tedious affair involving taxes levied by the state of California on the Southern Pacific railroad. Since the state law at issue taxed the property of corporations differently than that of individuals, the railroad argued that the Fourteenth Amendment restriction of states from “depriv[ing] any person of life, liberty or property without due process of law” was not being honored. The state responded that corporations, not being persons, were not entitled to benefit from this limitation on state authority. Were it not for an aside from Chief Justice Morrison Waite, the entire case would have been lost to history long ago. Almost in passing, Waite declared the Court’s disinterest in even considering the question of whether the Fourteenth Amendment applied to corporations. “We are all of the opinion,” he declared, “that it does.”
This finding was not found in the majority opinion and, technically, should not have set a legal precedent. Yet it was also utterly uncontroversial at the time. The day after the Santa Clara decision, the local San Francisco Daily Examiner featured the case on its front page. The headline did not mention anything about corporate rights, however. Instead, it read “Value of the Mortgages Must Be Assessed to the Holders.” From such inauspicious beginnings, the doctrine of corporate personhood was firmly and permanently established. It has been continually upheld by the Supreme Court for one hundred and twenty-five years and it played a major role in one of that body’s more controversial recent findings: the First Amendment protections accorded corporations in the Citizens United case.
Yet the history of the corporation in the United States, and of the Santa Clara decision, suggests that the Wall Street occupiers have a point by contesting the doctrine of corporate personhood. The privileges accorded to the corporation were once granted in exchange for the performance of a public service. In the intervening century-and-a-half, the federal government has expanded the entitlements of the corporation while simultaneously eliminating its responsibilities. Such a far-reaching development needs to stand on firmer ground than the dubious and unsubstantiated claim that corporations are persons.
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Thanks for this interesting and timely post. My impression has always been that it was the Civil War itself, more than the Jacksonian period preceding it, that was most responsible for the increasing protections given to limited liability corporations. Vernon Burton’s The Age of Lincoln explains how the wartime Republican Party greatly expanded the uses of incorporation both intentionally and inadvertently with the passage of the Fourteenth Amendment, which as you note was later used by corporations for purposes quite different from those that animated the original Reconstruction amendment. If that account is accurate, then this may be a doubly opportune moment to revisit this history: not just because of the Occupy movements but also because of the sesquicentennial of the war.
Occupy the steps of the Supreme Court. FDR’s court-packing scheme was a failure, but it can be argued that it got the Court’s attention….
I was under the impression, in the vaguest way (meaning that I really know nothing!), that corporate personhood stemmed from the extension of 14th amendment rights in the Supreme Court decision in the Slaughterhouse Cases. But I never really understood how.
On another note, I wonder if the idea of specific acts of incorporation tied to public service and the public good was replaced by general acts of incorporation on the premise that corporations act in ways that inherently benefit the public. The idea, for instance, that efficiency of scale in industry is a public benefit by expanding jobs and creating more goods at lower prices would seem to be one expression of this. It’s what we hear on the right these days that taxing corporations and wealth obtained through investment would be penalizing those who create a public good (jobs!). The problem, of course, is that the purpose of specific acts of incorporation was to benefit the public, while corporations today (even if you accept the premise that job creation is somehow intrinsic to corporate activity, which is a big “if”) are governed almost exclusively by the profit motive and any public benefit is a side effect rather than a goal. But perhaps this idea of the dependency of public welfare on corporations allows for the ideological commitment to corporate personhood—what’s good for General Motors is good for America.
Well of course GM is a person. Chevrolet is the heartbeat of America, man.
“Listen to the heartbeat” – Aretha Franklin
I really want to comment on this thread, because I feel this is an important issue. The idea that corporations have access to the same rights as individuals seems odious to me.
One thing holding me back is a clear understanding about how the rights of incorporation are granted. I was under the impression that those rights were conferred–with great variability—at the state level. And that the federal government’s role was only to make sure that the existence and activities of a corporation did not violate any federal laws (or the Constitution). In other words, is “corporate personhood” something that could theoretically be restricted by the states—since that status is unofficial (if upheld)? If we had a states-rights-friendly SCOTUS, then you’d think they’d refuse to hear cases on states’ restrictions. – TL
Tim, just read this yesterday in Rebecca Edwards’ _New Spirits_:
“Over the course of the nineteenth century, state legislatures gradually gave up the task of chartering corporations only for special public purposes, and by the 1870s anyone could create a corporation for almost any purpose without a legislative act. At the same time, Congress and the federal courts worked to create an unimpeded nationwide market in goods, services, and labor. North Carolina, in an 1879 Supreme Court ruling, was not allowed to require out-of-state insurance companies to deposit funds with the state as security for residents who bought policies. A Virginia law that charged licensing fees to out-of-state manufacturers was struck down the following year. In Munn v. Illinois (1877) the Supreme Court did allow states to regulate grain-elevator operators (an by implication railroads) because those business were ‘clothed in the public interest,’ but in so doing the Court implied that any businesses not so clothed were out of bounds for regulation. Thus, as telegraphs and railroads bound the continent together, government policies not only facilitated their construction but also set sweeping new conditions for the business and trade they carried on” (42-43).
America went on a search for order and got railroaded.
There was a long article about this on HuffPo a while back. http://www.huffingtonpost.com/2011/10/12/corporate-citizenship-corporate-personhood-paris-commune_n_1005244.html
The idea of corporate personhood wasn’t novel in the nineteenth century, though perhaps its application to business corporations, which is what everyone thinks of when they think of “corporate personhood” (surely that’s what critics of the idea think of), may have been novel. I’m no legal historian, so I can’t say.
You can find an early version of corporate personhood in medieval England with the elaboration of the legal fiction of the crown as a “corporation sole.” This notion was dreamed up by by English lawyers as a means of establishing the “Crown” as an entity distinct from the person who occupied the office, to distinguish, that is the king’s body personal from his body royal. That’s the point of declaring “The King is dead. Long live the King!” and why the king never dies. The body natural my perish, but the body politic persists. The royal office was in some ways a corporate person with continuity, something with its own essence unrelated to that of its incumbent. This is all dealt with in Ernst Kantorowicz’s magisterial The King’s Two Bodies.
These concepts made their way into the common law. The common law made its way to the colonies, and American legal culture remains deeply imbued by it. None of this is to imply that corporate personhood as it emerged in the legal cases of the nineteenth century is identical to the corporate “Crown” of the Tudor period. (The big difference is surely the idea that corporations have rights under the Fourteenth Amendment.) But it’s not much of a leap to suggest that given America’s common law heritage, the concept of a corporate person was not alien to American legal practice.
The legal historians and scholars will have to connect the dots. But I don’t think I’m seeing things in seeing the dots.
The logical follow-up is to find out whether there is such a thing as corporate personhood in civil law jurisdictions. And how it’s handled in Britain, where the “King” continues to never die, despite the occasional setback (see Charles I).
Mike, absolutely fantastic piece.
Varad, fascinating, but it seems like a stretch. That said, if there is a common law connection between the corporate personhood of the monarch and the corporate personhood of corporations, all the more reason to contest such anti-democratic dubiousness.
Mike, this is a very nicely written concise post.
Was the extension of corporate personhood applied to entities other than business corporations? Did that understanding apply to unions or trade organizations? Is there a specific distinction made for those entities that have articles of incorporation?
And what is the history of the idea that groups can claim rights or privileges in a way similar to individuals?
Andrew,
I should have been clearer that the link, if there is one, is the legal fiction aspect of it, the idea of having the law regard a corporation as a person (or individual) for juridical purposes. Clearly, it’s not in how that legal fiction is applied or understood.
“And what is the history of the idea that groups can claim rights or privileges in a way similar to individuals?”
My understanding is that in the old days (i.e., the early modern period), rights and privileges pertained to groups rather than individuals. For example, various corporations in Old Regime France: the bakers’ guild, the watchmakers’ guild, trading companies, towns which had their own charter. A privilege is, etymologically speaking, a private law, one restricted to a particular group defined by a particular characteristic. In this sense, a privilege is really a form of legally-sanctioned entitlement. When I paid more attention to this stuff, I was assured that privileges as they existed in the Old Regime were understood the way we understand something as a “right,” and that they were treated as such. I was always skeptical about that, but that’s neither here nor there.
This understanding of privilege as some sort of qualified immunity was nuked (and I do mean nuked) in the French Revolution, in particular by the abbé Sieyès in his Essay on Privileges, a companion piece to his far more famous What is the Third Estate? Here is Sieyès on privileges: “All privileges, then, from the very nature of things, are unjust, odious, and contrary to the supreme end of every political society.”
In their stead came rights, made part of the modern political order by the American and French Revolutions. Rights are the antithesis of privileges: they are universal and inhere in the individual by dint either of his humanity or his citizenship in the political community. The gestation of rights doctrine was a long one, it is the child of two centuries elaboration of natural law theory.
Rights, by definition, can’t inhere in groups because they are anterior to the formation of any group since they belong to the individuals who form those groups. I always found it weird that people talked about the right to bear arms under the Second Amendment as a communal or group right. That made no sense, since that idea has had no place in thinking about rights for two centuries. To speak of an individual right is to be redundant, to talk of group rights is to utter an oxymoron, a non sequitur, or a nullity.
Perhaps the evolving jurisprudence about corporate personhood is a return to earlier notions of privilege, or some kind of categorical confusion of groups and individuals. I don’t know. It may also be possible that the legal fiction of corporate personhood was designed to allow legal rights to be assigned to corporations, which could not be done if they were treated as composite entities. Again, I don’t know.
A must-read here: Scott R. Bowman’s The Modern Corporation and American Political Thought: Law, Power, and Ideology (University Park, PA: Pennsylvania State University Press, 1996).
I think it should also be pointed out that to some extent the concept “corporate” entails the concept “personhood.” The root of “corporate” is “corpus,” or body. “Incorporate” literally means “to form into a body.” The point of incorporation was that the body resulting would have a separate existence from those incorporating. The corporation is treated as a specific, unique body. This matters especially for purposes of law. That’s why legal personality is one of the basic legal fictions. The law couldn’t function without it, nor in many respects could society. Now there are probably a lot of steps from this to the notion of corporate personhood in the currrent popular sense. But again, there’s exactly nothing novel about the notion of treating a corporation as an entity with its own independent legal existence. That is something inherent in both the nature of corporations and the nature of law.
The corporation doesn’t have to be something small; it can be as large as the state itself. This is what lies behind the organic metaphor of the state, which John of Salisbury described in his Policraticus which was written in the twelfth century. The body politic is probably the textbook example of a corporate being. Or as Rousseau calls it in Social Contract, “a moral person whose life consists in the union of its members.”
The concept of corporate personhood undoubtedly has different legal ramifications now and in modern jurisprudence than it did in John of Salisbury’s time, or in Rousseau’s, or in early modern England, when the first corporations in our sense were being founded. But the idea that legal personality is something that was invented in the Citizens United decision, which a lot of its critics seem to believe, is patently false.
I have had a great interest in the Occupy Movement since its beginnings, and hope that the recent actions taken against the movement will only serve to solidify resistance rather than dispersing it.
To weigh in on the “corporations as a person” debate, while this shield that has been granted to corporate power has thus far been its greatest strength I personally feel it could ultimately prove to be its greatest weakness. It is true that thus far courts have upheld only those aspects of person hood that give power to corporations (eg. right to own property, ect.) without the corporations having to face any of the negative repercussions of actually having to BE a person (eg. lack of a moral conscious, ect.). Is it not possible to think, that at some point a court case will come up where it does not make sense to uphold the rights of a corporation as a person? Obviously this illusion created by our justice system can not translate all cases of being a human to a corporation. As such it seems inevitable that the metaphor can not be extended to cover every bit of the corporation, would it not unravel? If nothing else, finding the boundaries of the “corporation as person” myth may provide a starting point for activist to roll back this idea.
Just my two cents on the issue, let me know what you think!
Check out this new document that has surfaced in the last couple weeks called “The New Common Sense” the declaration deals with the Constitution and forcing leaders to do their job and uphold it. Many in the 99% movement are supporting this as well as others. It seems to be getting a lot of attention and is a MUST read : http://pastebin.com/LW06zU1y
Or listen to it here : http://www.youtube.com/watch?v=eQMtM0LuK_4