Corporate rights are a relatively new phenomenon in American society—but a phenomenon that has resulted in corporations having an undue influence on politics. In Corporations Are Not People (Berrett-Koehler Publishers, Inc., 2014) Jeffrey D. Clements explains the history of corporations in America and the Supreme Court Citizens United decision that marked a victory for the doctrine that corporations are people with free speech and other rights. Most importantly, he offers solutions and tools to help readers join a grassroots movement to limit the rights of corporations and return political power to the people. The following excerpt is from chapter 3, “If Corporations Are Not People, What Are They?”
Is a Corporation a Person?
Occasionally, the 1886 Supreme Court case of Santa Clara County v. Southern Pacific Railroad Company is cited to claim that corporations are constitutional “persons” with rights. In that case, the Southern Pacific Railroad Company tried to avoid state and county taxes by claiming that it was a “person” under the recently adopted Fourteenth Amendment to the Constitution. The Fourteenth Amendment had been enacted after the Civil War to ensure that freed slaves and all people in America had equal rights to due process, liberty, property, and equal protection of the law. The Southern Pacific Railroad corporation sued Santa Clara County, California, arguing that a tax assessment violated its rights as a “person” under the Fourteenth Amendment because the tax was not “equal” with taxes applied to other “persons.”
The Court decided the case in favor of the railroad, but not for the reasons for which the case became known. In fact, in the Santa Clara decision, the Court did not discuss Southern Pacific’s Fourteenth Amendment argument at all. Instead, the outcome of the case rested on California law rather than a constitutional question. Nevertheless, the Gilded Age courts, almost as corporate-oriented as today’s Court, repeatedly used Santa Clara as authority to fabricate corporate rights and strike down workers compensation, child labor, conservation, and other laws.
Following Santa Clara in 1886, the Supreme Court faced a wave of cases in which large corporations and the infamous corporate monopoly “trusts” demanded constitutional rights to shield them from the growing movement for laws to protect employees (including child labor), the environment, fair taxes, and other public interests. On several occasions in the 1890s and early 1900s, the Supreme Court agreed with the corporations. The cases stated, without any explanation whatsoever, that “a corporation is a person under the Fourteenth Amendment,” as if saying that with a straight face would make it true. Could it be true?
Not a chance. Absolutely no evidence suggests that corporations were intended to be included in the Fourteenth Amendment or in the Constitution generally. Indeed, the evidence is exactly to the contrary. Since the beginning of our country, virtually every generation of Americans has acted to prevent corporate power from being leveraged into political power at the expense of the people. During the colonial era, only “a handful of native business corporations carried on business…four water companies, two wharf companies, two trading societies, and one mutual fire insurance society,” and only twenty business corporations were formed by 1787, when the American people convened the Constitutional Convention in Philadelphia. Legislatures, however, increasingly permitted the creation of corporations in the new republic to facilitate and expedite all kinds of public purposes, such as the building of roads, dams, and bridges. Yet it remained clear that corporations were legal instruments of the state, defined and controlled by the state, with limitations on their purposes and their duration.
Corporate Rights Are Legally Defined
It would be bizarre if the generation that defiantly declared to the world that “all men are created equal” and that “they are endowed by their Creator with certain unalienable Rights” and who wrote a constitution opening with “We, the People” would have tolerated corporate constitutional rights. Founders such as Thomas Jefferson and James Madison could not have been more clear about the danger of unregulated corporations and the need for, as Madison put it, “proper restraints and guards.” Another founder, James Wilson, a Pennsylvania man who signed the Declaration of Independence, served in the Continental Congress, helped draft the Constitution, and was nominated by George Washington to be one of the first six justices on the Supreme Court, agreed. He well expressed the prevailing view of the time that corporations can be useful tools of the state but must always be controlled by the people:
A corporation is described to be a person in a political capacity created by the law, to endure in perpetual succession….It must be admitted, however, that, in too many instances, those bodies politick have, in their progress, counteracted the design of their original formation….This is not mentioned with a view to insinuate, that such establishments ought to be prevented or destroyed: I mean only to intimate, that they should be erected with caution, and inspected with care.
The Supreme Court at the time knew that any “rights” of corporations come from the state charter, not from the Constitution (let alone from our Creator). The corporate legal form today is not fundamentally different than when Chief Justice Marshall explained in 1819 that a corporation, as a “mere creature of law … possesses only those properties which the charter confers upon it, either expressly or as incidental to its very existence.” A corporation today is chartered from the state just as in 1809 when a unanimous Supreme Court held that “a body corporate as such cannot be a citizen within the meaning of the Constitution.”
For nearly two hundred years, the Supreme Court rejected the argument that corporations were entitled to the rights of citizens under the Constitution’s “privileges and immunities” clause. In 1839, the Court said, “The only rights [a corporation] can claim are the rights which are given to it in that character, and not the rights which belong to its members as citizens of a state.” Fifty years later, the Court said that the term citizens in the Constitution “applies only to natural persons, members of the body politic owing allegiance to the state, not to artificial persons created by the legislature, and possessing only such attributes as the legislature has prescribed.”
At least until recently, the vigilance of American leadership about corporate power did not waver as corporations became more dominant in our economy. “Corporations, which should be the carefully restrained creatures of the law and the servants of the people, are fast becoming the people’s masters,” warned President Grover Cleveland. Theodore Roosevelt sought to end “a riot of individualistic materialism” and successfully called for a ban on corporate political contributions: “Let individuals contribute as they desire; but let us prohibit in effective fashion all corporations from making contributions for any political purpose, directly or indirectly.” President Roosevelt said he “recognized that corporations and combinations had become indispensable in the business world, that it is folly to try to prohibit them, but that it was also folly to leave them without thoroughgoing control.”
This vigilance did not mean that powerful corporations simply accepted or cooperated with the public’s “thoroughgoing control.” As those who came before us understood, the opportunity for using the advantages of corporate privileges to concentrate power and aggregate wealth have always led corporations to seek to evade control or oversight by claiming “rights.” In a democracy, an assertive, vigilant citizenry and leadership always is needed to push back.
Reprinted with permission from Corporations Are Not People: Why They Have More Rights Than You and What You Can Do About It by Jeffrey D. Clements and published by Berrett-Koehler Publishers, Inc., 2014.