Corporations Are Not People: Why They Have More Rights Than You Do and What You Can Do About It (13 page)

The Constitution cannot be changed by state or federal laws or majority vote; it can be changed only by the process of amendment as set forth in Article 5 of the Constitution. The people have never added corporations to the definition of “persons” in the Constitution by using the amendment process (a vote of two-thirds of Congress, ratified by three-quarters of the states, or a constitutional convention). As the Supreme Court declared in the 1800s when rebuffing early corporate efforts to create corporate rights, “State laws, by combining large masses of men under a corporate name, cannot repeal the Constitution.”
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To appreciate the distinction between “person” under state or federal law and “person” under the Constitution, consider Delaware law again. Recall that Delaware law declares that corporations can exist for a defined period of years or may have “perpetual existence.” If a majority of the Delaware legislature wanted to delete that last part of the law and simply declare that corporations may exist for a period of twenty years, they could do so. In contrast, neither Delaware nor any other state or federal legislature in America can decide that people shall have a limited period of existence. No matter how good the policy justification for such
a law, that law obviously would violate the Constitution’s due process clause protecting the life of all persons.

The Right Thing in the Wrong Place

Corporations, then, are policy tools; they are not people or holders of constitutional rights. As economic tools, corporations are highly effective. Yet the same traits that make corporations such useful economic policy tools can also make them dangerous to republican government and democracy if people and lawmakers do not watch and restrain abuses. Corporations can aggregate immense power, corrupt government, drive down wages, trash public resources, concentrate markets to squeeze out competitors, and more. As Justice William Rehnquist said in one of his many dissents from the corporate rights decisions in the late 1970s and the 1980s, a “State grants to a business corporation the blessings of potentially perpetual life and limited liability to enhance its efficiency as an economic entity. It might reasonably be concluded that those properties, so beneficial in the economic sphere, pose special dangers in the political sphere.”
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As with all tools, use of the corporate entity requires oversight and care. Gasoline is fantastic. It is also dangerous. I love working with a chainsaw or taking out guns for hunting or practice, but I know that care and rules are necessary to prevent potentially disastrous consequences of using either one. Great tools, but we would not hand them out to anyone without having some clarity about how they will be used.

The problem of corporate power is not the personal failings of the many good and decent people who work for corporations, often creating wonderful products or services that benefit us all. Rather, corporate power is now subverting our democracy because we have forgotten that corporations are just tools, and we have
forgotten our duty to keep an eye on them. Until the corporate rights offensive of recent years, the idea of restraining corporate power was a mainstream, basic American proposition, not a fringe viewpoint.

The
Southern Pacific
Case

Americans always have had the responsibility to keep corporate power in check, just as we keep government power in check. It is true that the Supreme Court sometimes references the 1886 case of
Santa Clara County
v.
Southern Pacific Railroad Company
to claim that corporations are constitutional “persons” with rights. In that case, the Southern Pacific Railroad Company tried to claim that it was a “person” under the recently adopted Fourteenth Amendment to the Constitution. The Fourteenth Amendment was 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. Southern Pacific Railroad sued Santa Clara County, California, trying to avoid a tax assessment on railroads. The railroad corporation argued, among other things, that it was a “person” under the Fourteenth Amendment and that the tax assessment on railroad property 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.

Though the Court likes to cite this case even today to shore up its creation of corporate rights, a first-year law student would be chastised and embarrassed for citing that decision for the proposition that corporations are persons under the Constitution. In fact, the decision says no such thing. The Supreme Court’s
Santa Clara
decision rested on California law and did not even decide a constitutional question.
²¹
Nevertheless, the Gilded Age Supreme
Court, almost as corporate-oriented as today’s Court, repeatedly used
Santa Clara
to fabricate corporate rights and strike down economic regulations.
²²

The response of the American people in the Progressive Era that followed is instructive for our time. 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.
²³
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.
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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.
²⁵
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.
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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.
²⁷

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). That is because corporations are “creatures of law.” 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.”
²⁸
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.”
²⁹

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.”
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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.”
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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.
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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.”
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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.”
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This vigilance did not mean that powerful corporations simply accepted or cooperated with the public’s “thoroughgoing control.” As those who came before us well understood, concentrated power and aggregated wealth in corporations have always led
corporations to seek “rights.” An assertive, vigilant citizenry and leadership has always been needed to push back.

Until the success of the Powell-Chamber of Commerce plan, the
Santa Clara
line of “corporate person” cases was rendered largely meaningless by the people’s rejection of corporate rights throughout the twentieth century. The Republicans under Theodore Roosevelt restrained corporate power with effective antitrust enforcement, labor laws, environmental laws, and laws banning corporate political spending. In Roosevelt’s words, “There can be no effective control of corporations while their political activity remains.”
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Democrats under Woodrow Wilson and Franklin Roosevelt likewise regulated corporate power to ensure the strength of the people and the country as a whole. And Republicans, Democrats, and Independents came together to amend the Constitution in 1913 to weaken the corporate hold on government by requiring senators to be elected by the people rather than appointed by state legislatures.

Finally, in a 1938 dissenting opinion, Justice Hugo Black, a former Alabama senator, demolished the idea that corporations were “persons” with rights under the Constitution’s Fourteenth Amendment. While he wrote in dissent, the clarity of his expression about corporations and persons sounded a warning to any justice who might try to slip corporate rights into the Constitution with “glittering generalities” and glib citation of
Santa Clara.
His lengthy dissenting opinion examined the words, history, meaning, and purpose of the Fourteenth Amendment:

I do not believe that the word “person” in the Fourteenth Amendment includes corporations…. A constitutional interpretation that is wrong should not stand. I believe this Court should now overrule previous decisions which interpreted the Fourteenth Amendment to include corporations.

Neither the history nor the language of the Fourteenth Amendment justifies the belief that corporations are included within its protections.

Certainly, when the Fourteenth Amendment was submitted for approval, the people were not told that the states of the South were to be denied their normal relationship with the Federal Government unless they ratified an amendment granting new and revolutionary rights to corporations…. The records of the time can be searched in vain for evidence that this amendment was adopted for the benefit of corporations.
³⁶

With Justice Black’s warning shot that there would be no more free rides for corporate rights on the Supreme Court,
Santa Clara
“corporate personhood” was a dead issue for decades. Indeed, the Court said little more about corporations’ “rights” until Justice Lewis Powell and his Chamber of Commerce plan came to the Supreme Court following the death of Justice Black in September 1971. Through most of the twentieth century, the Court returned to the basic American understanding that corporations were economic, not political, entities.

For example, in rejecting the claim of corporations for privacy rights in 1950, the Supreme Court said: