Why not treat corporations as real people? By John Ikerd
Why not treat corporations as real people?Why should corporations be prohibited from participating in politics?
A corporation is an artificial, legal person that has been granted most of the constitutional rights of a real person. A corporation has a distinct legal entity, separate from its owners and managers, and can buy, sell, and own property, enter into contracts, sue, and be sued for damages. Corporations have been denied constitutional rights appropriate only for individuals, such as the right to privacy, the right against self-incrimination, and the right to vote. Otherwise, the U.S. Supreme Court has granted U.S. corporations the same basic constitutional rights as real people. So why shouldn’t corporations have the same legal rights as their real human owners? The short answer: Because corporations are created for specific purposes—economic, social, or religious/ethical. Real people are multidimensional with a variety of different needs and values. The people who own or support a corporation may share its specific purpose, but may otherwise have very different priorities and preferences. Real people are not “single-minded.” For example, the shareholders in a large for-profit corporation may agree on its economic priorities but may have very different social and ethical preferences and priorities. In addition, those owning stock through pension funds and mutual funds may not even be aware of the numerous companies in which they own shares. Speculators may own stocks for only a few days or minutes. Large corporations obviously don’t know the personal preferences of all their shareholders. Corporations are legally obligated to serve the “common interest’ of their shareholders. The only interest shareholders in for-profit corporations have “in common” is economic, to benefit economically from their investments. Thus, a large, publicly traded corporation is a purely economic entity.
Governments are means by which we collectively make decisions about the kind of society we want to live in, including the type of economy we want. The basic responsibilities of the U.S. government are spelled out in the preamble to the U.S. Constitution: to “establish justice” or secure our basic human rights, to “insure domestic tranquility” or promote harmonious relations among the states, to “provide for the common defense” or maintain a military force adequate to defend the country, to “promote the general welfare” or further the collective interests and common good of the people in general, and to “secure the blessings of liberty for ourselves and our posterity” or maintain the conditions essential for people to continue to live free from oppression and exploitation. Effective governance reflects the shared social and ethical values of the people governed. One of the primary economic functions of government is to ensure that the economy functions for the common good of the people. Virtually all political decisions have economic consequences or implications. Thus, for-profit corporations have an inherent conflict of interest in political decisions and should not be allowed to participate in politics or governance. The same is true for most other types of corporations, excepting corporations specifically organized for political purposes. Thus, processes of governance should be limited to real people, who can express their full humanness in matters of politics and governance. The Supreme Court obviously has not agreed with this conclusion. Most Americans probably link the idea of “corporate personhood” to the 2010 Supreme Court case, Citizens United v. Federal Election Commission, in which the Court held that free speech is “indispensable to decision making in a democracy, and this is no less true because the speech comes from a corporation.” Earlier rulings, going back to 1976, had ruled that spending money to influence voters is a form of political speech protected by the Constitution but had allowed some restrictions on campaign spending by individuals and corporations. The Citizens United ruling essentially removed all limits on individual and corporate political spending. The more money a person is willing and able to spend, including corporate persons, the louder and longer they can speak politically. The basic idea of corporate personhood dates back at least to the late Roman Republic, which granted legal personhood to municipalities or local governments organized to manage public services. Later, corporate charters were granted to privately owned corporations, allowing collective ownership of public services that could be passed from one generation to the next without disruption. Commercial, for-profit enterprises were not granted corporate charters until the 1600s, when the East India Company set the precedent. The rationale was that English society would benefit by allowing investors to pool their capital to undertake high-risk, high-profit ventures in India, a British colony at the time. The East India Company, a British corporation, eventually gained economic and political control of much of India. In the United States, the constitutional rights of corporations date back to a 1886 Supreme Court Case, Santa Clara County v. Southern Pacific Railroad Co. The corporate personhood question was never debated before the Court in that case. But the Court’s conclusion was included in a headnote or summary by the court reporter: “Before argument [began], Mr. Chief Justice Waite said: ‘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.’” The 14th Amendment was ratified in 1868, after the Civil War, to guarantee emancipated slaves the full rights of citizenship. It states, “No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.” The amendment was clearly meant to ensure the rights of previous slaves who had been freed by the Civil War but had been denied their constitutional rights as citizens. A corporation, not being a real person, has no life or need for liberty, even though it can own property. Contrary to claims at the time, there is no documented evidence that corporate rights were ever discussed or considered during the drafting of the 14th Amendment. The court reporter’s headnote has nonetheless been accepted in later Supreme Court Rulings. These earlier rulings led to the 2010 Citizens United case and the 2014 Burwell v. Hobby Lobby Stores case, which extended the constitutional rights of religious freedom to for-profit corporations. Corporate personhood has been periodically challenged by dissenting Supreme Court justices, but has nonetheless prevailed. In a dissenting opinion in a 1949 case, Supreme Court Justices Douglas and Black pointed out that the Fourteenth Amendment was clearly meant to protect the civil rights of real people, specifically recently freed enslaved people, not to protect the economic rights of corporations. In another dissenting opinion in 1978, Justice Rehnquist contended that the Fourteenth Amendment was intended to apply to real people, not legally created entities, and that there were dangers in extending the political rights of people to corporations. He wrote, “Those properties [of corporations], so beneficial in the economic sphere, pose special dangers in the political sphere.” In a dissenting opinion to the Court’s ruling in the 2010 Citizens United case, Justice Stevens wrote, “It might also be added that corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help structure and facilitate the activities of human beings, to be sure, and their ‘personhood’ often serves as a useful legal fiction. But they are not themselves members of ‘We the People’ by whom and for whom our Constitution was established.” Our current politically divided society and dysfunctional government are examples of the “special dangers” of allowing for-profit corporations with “no consciences, no beliefs, no feelings, no thoughts, and no desires” to participate in the political and governmental affairs. In earlier times, corporations were only chartered if they served some “public purpose.” In the mid-1800s, however, the wording of corporate charters was changed, and corporate charters were granted for “any lawful purpose.” Since at least the 1970s, for-profit corporations in the U.S. have been purely economic entities, organized and managed for the purpose of maximizing economic returns for their investors or shareholders. Their only constraints are laws and regulations imposed by the government, not their social or ethical values. Corporations may claim to serve all “stakeholders,” including the public, but those that do so are soon driven out of business or taken over by more aggressive corporate competitors. Whenever corporations are allowed to participate in political activities, whether by influencing elections or public policies and government regulations, their logical motivation is to remove any legal restraints to maximizing profits or stockholder equity—the only common interest of their investor owners—regardless of the social or ecological consequences. Some real people hold the same myopic political views as for-profit corporations. The difference is that a for-profit corporation lacks the capacity to develop or express a social conscience or ethical values. Real people also suffer the social and moral consequences of their myopic actions; corporations do not and cannot. The only penalties a corporation can be assessed or suffer are purely economic, and corporate laws limit the economic liability of investors. The 1st Amendment to the Constitution gives real people a constitutional right “peaceably to assemble, and to petition the Government for a redress of grievances.” This was the legal justification for Political Action Committees (PACs), which allow people to pool their political contributions. Before the 2010 Citizens United ruling, corporations and labor unions had been prohibited from making direct contributions to PACs, and individual contributions were limited. The Citizens United ruling allowed corporations and unions to make direct political contributions and form Super PACs, essentially removing all limits to for-profit corporate and union funding of political campaigns. Ironically, the political activities of non-profit organizations, which serve “public interests,” remain legally limited. A national movement is currently underway to amend the U.S. Constitution to eliminate the concepts of “corporate personhood” and “money is speech” and to clarify the exclusion of corporations from the political process. The Move to Amend coalition, formed in 2009, includes “hundreds of organizations and hundreds of thousands of individuals committed to social, environmental and economic justice, ending corporate rule, and building a vibrant democracy that is genuinely accountable to the people, not corporate interests.” More than 500,000 people have signed a petition stating: “We, the People of the United States of America, reject the U.S. Supreme Court’s Citizens United ruling and other related cases, and move to amend our Constitution to firmly establish that money is not speech, and that human beings, not corporations, are persons entitled to constitutional rights.” Their draft constitutional amendment includes three sections (abbreviated below): Section 1. Artificial Entities Such as Corporations Do Not Have Constitutional Rights: The rights and privileges protected and extended by the Constitution of the United States are the rights and privileges of natural persons only… Section 2. Money is Not Free Speech: Federal, State, and local government shall regulate, limit, or prohibit contributions and expenditures… to ensure that all citizens, regardless of their economic status, have [equitable] access to the political process… Section 3. This amendment shall not be construed to abridge the right secured by the Constitution of the United States of the freedom of the press. While the adoption of such an amendment may seem a remote possibility at present, once the current political crisis has passed, the Constitution will need to be amended extensively to prevent its reoccurrence, as was attempted following the Civil War. A fundamental purpose of government is to ensure that the economy serves the public interest of society, not simply the economic interests of individuals. This purpose is explicit in the preamble to the U.S. Constitution. While the economy overall benefits from effective governance, individual corporations have no economic incentive to contribute to or support the effectiveness of government. Only real people, acting together through government, can ensure that for-profit corporations serve not only the economic interests of their shareholders but also the public interest of society, including those of future generations. John Ikerd Thanks for reading Why? Economics! Subscribe for free to receive new posts and support my work. https://en.wikipedia.org/wiki/Corporate_personhood https://en.wikipedia.org/wiki/Santa_Clara_County_v._Southern_Pacific_Railroad_Co. https://www.brennancenter.org/our-work/analysis-opinion/history-corporate-personhood#:~:text https://www.foodsystemsjournal.org/index.php/fsj/article/view/1172/1144 https://en.wikipedia.org/wiki/Political_action_committee Add your economic insights or ask your “Why? Economics” questions in the comment section below. Please share on social media and with others who might be interested. For more in-depth explanations of economic issues, see John Ikerd’s books at https://www.amazon.com/stores/John-E.-Ikerd/author/B001JOW2Y8? Or, check out his websites: https://www.johnikerd.com and https://ikerdj.mufaculty.umsystem.edu/home
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