Monday, January 7, 2013

Corporations are bodies, but are they people?

There's being clever, then there's being stupid in an attempt to be clever. A California man clearly falls into the latter category with his rather pathetic attempt to make a point about corporate personhood. Pulled over by police for driving in the car pool lane (which, by the way, is a moronic thing all by itself), Jonathan Frieman from San Rafael had an excuse:
He waved his corporation papers at the officer, he told, saying that corporations are people under California law.
Of course this was all a set-up, an attempt to get before the court to make has point:
Frieman doesn't actually support this notion. For more than 10 years, Frieman says he had been trying to get pulled over to get ticketed and to take his argument to court -- to challenge a judge to determine that corporations and people are not the same. Mission accomplished in October, when he was slapped with a fine...
Frankly, this stunt--as a means of challenging the idea of corporate personhood--is about as stupid as attempting to marry a corporation to make the same point. And it actually fails on its face, since while corporate papers define what a corporation is to some extent, they are not the physical embodiment of the corporation itself, anymore than the U.S. Constitution is actually the totality of the Federal Government. Just because I have a copy of the latter in my car, it doesn't follow that Nancy Pelosi and Harry Reid are in the car with me.

Still, the driver here--Mr. Frieman--thinks he has a legitimate point. The above story even links to an op-ed written by the same back in 2011, laying out his arguments. Through the use of some faulty logic, he ultimately deduces that corporate personhood leads to the legalization of slavery. But it's too silly to get into. Instead, let's talk about the underlying concept here: corporate personhood.

As a legal doctrine, corporate personhood has been around for a long, long time. It wasn't conceived in the United States and today it exists in most other countries besides the United States, so have a care not to fall for some of the hype out there. The fundamental idea behind it is that a corporation (or really, any chartered organization) can be legally treated as a person in specific situations. For instance, this doctrine is what allows corporation to own property. Without it, property ownership is limited to individuals and the state (though a state could arbitrarily assign ownership to a corporation, I guess).

In the United States, proper, there is a body of legal decisions with respect to corporate personhood, dating all the way back the the eighteenth century where--in 1790--future Supreme Court Justice John Marshall argued a case before the Virginia Supreme Court. Bracken v. The Visitors of William & Mary College was about whether or not the Board of the school had the authority to change the core curriculum (to a law school) therein and terminate professors to that end. Marshall argued that it did, that the charter of the college created a legal entity whose internal decisions--made by the Board of the school--were generally valid as a matter of course and that some of the protections in the Virginia Constitution extended to the school, with regard to government interference.

This is no small thing. The charter of the college dated back to the Crown and Reverend Bracken--who has brought suit to challenge his termination--argued that the charter was the only controlling element, that the Board had no authority to do, well, anything. The Court decided for the college and Marshall, thus allowing that the Board could act as if it were an individual in hiring and firing employees and altering the nature of the business as originally chartered. Thus, individual rights (some of them) translated to, essentially, corporate rights.

Prior to this, one could argue that corporations were bound to act as chartered companies, with little wiggle room. Thus, they were largely controlled by the state. The beginnings of the American Republic including the opening of this critical aspect of capitalism and economic development: the idea that business entities could function as individuals in certain situations.

Future decisions in the courts expanded the nature of this personhood more often than not, especially when the Industrial Revolution was in full swing and corporations became a regular feature of the the U.S. economy (this was just as true in parts of Europe, as well).

In 1886, the U.S. Supreme Court decided the landmark (in the eyes of many) case, Santa Clara County v. Southern Pacific Railroad Company.  The background of the case was essentially about taxes. Southern Pacific Railroad wanted to deduct debt--in this case, mortgage debt--from property values, as a means of establishing taxable amounts. Individuals were allowed to do this and the Railroad had been doing it, but the California State Constitution of 1879 specifically disallowed railroads from doing this. So, the company stopped paying taxes altogether, which finally led to Santa Clara County--and others--suing the company for those back taxes.

When the case reached the Supreme Court years later, the Court ultimately found in favor of the Railroad Company. In that regard, the case is often cited today as the first time the Equal Protection Clause of the Fourteenth Amendment was held to extend to corporations. For the Court noted that one of the claims of the Company was as follows:
...That the provisions of the constitution and laws of California, in respect to the assessment for taxation of the property of railway corporations operating railroads in more than one county, are in violation of the fourteenth amendment of the constitution, in so far as they require the assessment of their property at its full money value, without making deduction, as in the case of railroads operated in one county, and of other corporations, and of natural persons, for the value of the mortgages covering the property assessed; thus imposing upon the defendant unequal burdens, and to that extent denying to it the equal protection of the laws.
The Court never actually addressed this argument in the decision, as it did not find it germane to the core issues of the case. But in oral arguments, the Court made clear why it did not take up the issue: it took it as a given that some of the protections did extend to corporations. Indeed, even the plaintiffs in the case understood this; their argument never hinged on the nature of corporations, as opposed to individuals.

And therein lies the truth of the issue: the State of California could only sue Southern Pacific Railroad if the latter could be treated as a person in the Courts, for purposes of the actual lawsuit. The cacophony of outrage over corporate personhood most often heard from today is largely ignorant of this reality. As a matter of law, "defendant" and "plaintiff" refer to persons. Only the state is exempt from this, thus the idea of corporate personhood is the very basis for legal action involving corporation. No personhood, no lawsuits. End of story.

Going back to the late nineteenth century and even before, this was a readily understood concept: corporations--under certain specific conditions--had to be treated as individuals, otherwise every single instance of legal dealing with corporations would require a specific law. The issue has always been the extent of this personhood. Some of the limitations for this personhood were--and still are--self-evident. Corporations can't get married (though they can merge, I guess), they can't be issued passports or driver's licenses (though they can ship jobs overseas), and they can't run for office (even when it looks like they can). At the same time, some aspects of the extent of this personhood are equally obvious: corporations can be held accountable for what they do (they can be sued and even be charged with violating laws or rules), they can own property, and they can pay taxes (unless they're non-profits; ain't that a kick in the pants?).

Obviously though, they can't ride shotgun in a car. That issue doesn't need clarification. But there is still a lot of grey area. For instance, there are the issues of political speech and political donations. There are arguments on both sides of these issues and it is not my intent to go down that road, only to note that corporate personhood did not magically appear as a concept with the Citizens' United ruling a few years back, so again don't believe the hype. Also, there is the issue of liability--civil and criminal--with regard to corporate officers and stock-holders, along with the issue of remuneration.

At the end of the day, the issue of corporate personhood is being blown way out of proportion. Like pornography, most people can easily recognize the moments when corporations need to be treated like people. Lawsuits remain the quintessential example. Ask Mr. Frieman about those. Ten will get you twenty, he wants to retain the ability to sue companies and to otherwise hold them accountable for what they do. But like many others in the "corporations are teh evil" crowd, he hasn't really thought things through.

Cheers, all.


  1. Well, I think the idea is that if you can't sue the corporation, you can sue its owner/s. Etc. Essentially, treating corporations like small non-incorporated businesses like partnerships. This, of sourse, is significantly counterproductive to any kind of risk taking in developing a business.

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  3. Sure Dm, you can go that route, suing the owner(s). Or its top executives, possibly. But with a large company, people want the ability to go after "ill-gotten" gains. I'm just sayin' that people who are all up in arms over corporate personhood, who want an Amendment to undo it or some such thing, are the same ones that want to be able to sue corporations. They're inconsistent and they don't even know it.

  4. I am in a general agreement with you here, but I don't think it is necessary an inconsistency. The ability to sue a company is a "need" to mitigate the expansive size of the companies. Remove the incorporation option, and it would make owners personally responsible for all the deeds and debts of the company. Then, the companies will not grow so big because of the immense risk, and you won't need to sue a company, but can sue the owner directly.