The History of American Corporations and Corporate Personhood
Colonial Period - While there were very few corporations in colonial America, the ones that existed were quite powerful - the Dutch West India Company that founded NY. Corporations were the original governing bodies of Virginia, Maryland, and the Carolinas. Until 1776, there was a great deal of conflict between citizens trying to establish rule by elected government and the British corporations that wanted to rule the colonies for profit.
Revolutionary Period - The newly-independent colonies kept corporations on a short leash. Any firm seeking a corporate charter had to go to the state legislature to prove that they were serving the public good – most often by constructing a road, bridge, canal, or other public-works project. They could sue and be sued and were subject to all the laws of the land and any restrictions that the state placed in their charters. Their tenure was limited and they were prohibited from deviating from their original chartered design. They could not own shares in other corporations, lobby elected officials, or give campaign contributions. If they did so, they could have their charters revoked.
Until the Civil War, almost every state had liability laws holding corporate investors and officials individually and personally liable for all corporate debts.
By 1800, less than 200 large corporations existed and these were controlled by the state legislatures which clearly defined them as “artificial” creations of their owners.
1823 In Society for the Propagation of the Gospel in Foreign Parts v. Town of Pawlet, an English corporation dedicated to missionary work that owned land in the U.S. sought to protect its rights to that land under colonial-era grants against an effort by the state of Vermont to revoke the grants. The Court explicitly ruled that the same protections to corporation-owned property should be extended as it would have to property owned by natural persons.
1830 In Providence Bank v. Billings, Chief Justice Marshall ruled that, "The great object of an incorporation is to bestow the character and properties of individuality on a collective and changing body of men." The 1830 Supreme Court decision set the precedent for a more general ruling on corporate personhood.
1830s – Business organizations began to raise money by selling stock to the public. Stockholders increasingly voiced their belief that the purpose of corporations were to turn a profit for the stockholders.
1860s - Thousands of corporations had been chartered - mostly factories, mines, railroads, and banks. Many wealthy business people sought to use the Federal government, especially the courts, to get their corporations out from under control of the states, many of which had revoked corporate charters that violated laws.
Gradually, state legislatures gave corporations limited liability whereby investors or partners risked only the amount they invested, not any debts of the corporation. Thus, the investor or partner was no longer personally responsible for the debts and obligations of the company in the event that they were not fulfilled. Limited liability encouraged business investments by ensuring that if a company failed, an individual’s assets could not be seized by creditors. But it could also insulate stockholders and directors from company debts and misdeeds.
1870 - 1886 - Corporate lawyers began arguing that corporations were not “artificial persons,” but were, instead, "natural persons” with the same rights as “persons.” With such status, corporations would gain a great deal of leverage against legal restraint. While most arguments were made in state courts, four cases brought by the railroads reached the U.S. Supreme Court. In each, the lawyers argued that their corporate clients were protected by the 14th Amendment. In each case, the Court (whose majority were former corporate lawyers) did not render an opinion as to whether corporations were persons covered by the 14th Amendment. Instead, the Court ruled that the 14th Amendment was not meant to prevent states from regulating commerce.
1886 - Santa Clara County v. Southern Pacific Railroad Company (118 U.S. 894 (1886)) argued at the lower court level that corporations were persons. Before oral arguments took place when the case went to the U.S. Supreme Court, the court reporter J.C. Bancroft Davis wrote the following as part of his headnote for the case, "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 corporations. We are all of the opinion that it does." And so the decision handed down in 1886 gave corporations all the rights of "natural persons."
The immediate effect of the decision was the protection of corporations from some, but not all, state regulation. Corporations tested any efforts of states to regulate in federal courts to see if they violation the corporation's constitutional rights. If a state successfully, and with federal court approval (which was rare), prohibited any industry from dumping waste in streams and rivers and then actually enforced such a law (highly improbable), then the industry simply moved to a state that had no such law or did not enforce any such laws.
1919 – In Michigan, Henry Ford was sued by his shareholders for a plan in which he proposed to sell his cars at below-market prices so he could create more jobs and “spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their homes.” The Michigan Supreme Court ruled in favor of the shareholders, thereby setting a precedent that corporate business should be conducted “primarily for the profit of the stockholders.”
1963 Historian C. Peter Magrath discovered exchange that took place prior to the public release of the Santa Clara County v. Southern Pacific Railroad Company decision. The correspondence was between Supreme Court Chief Justice Morrison R. Waite and court reporter J.C. Bancroft Davis. On May 26, 1886, Davis wrote the following in a letter to Chief Justice Waite to make sure his headnote was correct: "Dear Chief Justice, I have a memorandum in the California Cases Santa Clara County v. Southern Pacific. In opening the Court stated that it did not wish to hear argument on the question whether the Fourteenth Amendment applies to such corporations as are parties in these suits. All the Judges were of the opinion that it does. Waite replied: "I think your mem. in the California Railroad Tax cases expresses with sufficient accuracy what was said before the argument began. I leave it with you to determine whether anything need be said about it in the report inasmuch as we avoided meeting the constitutional question in the decision." In other words, the decision about whether to include the declaration of corporate personhood was left to the court reporter. Given this new understanding, some authors have declared that opinion made plain that the Court did not decide the corporate personality issue and the subsidiary equal protection issue.
1967 - See v. City of Seattle (387 U.S. 541 (1967)) ruled that corporations have 4th Amendment constitutional rights to freedom from random inspection. Without random inspections it became virtually impossible to enforce meaningful anti-pollution, health, and safety laws.
1976 – Buckley v. Valeo held that corporations had the right to contribute money to political campaigns as a free speech right under the First Amendment.
1978 - First National Bank of Boston v. Bellotti (435 U.S. 765 (1978) held that corporate persons have the same free speech rights as natural persons and could spend unlimited sums of money "speaking" in the forms of ads and campaign contributions. In other words, corporate donations to political campaigns were now equated to free speech. Thus, 1st Amendment rights were conferred to corporations.
1998 - In November, the city of Arcata, California became the first metropolitan area in the U.S. to pass an anti-corporate personhood bill. By a vote of 3193 to 2056 (60.83% to 39.17%), the citizens of Arcata supported Measure F, "The Arcata Advisory Measure on Democracy and Corporations" which called on the Arcata City Council to co-sponsor two town hall meetings to address the issue, "Can we have democracy when large corporations wield so much power and wealth under law?" and to immediately establish policies and programs which ensure democratic control over corporations conducting business within the city and a manner that would ensure the health and well-being of the community and its environment.
2003 – A new tobacco company was chartered in Virginia – Licensed to Kill Incorporated. Cofounder Robert Hinkley declared the company’s purpose was to manufacture and market its product in a way that “generates profits for investors while each year killing over 400,000 Americans and more than 4.5 million other people worldwide.” Their motto – “We’re rich, you’re dead” – and the corporation were created to demonstrate how states sanction and protect corporations. Virginia didn’t want to grant the charter, but had no choice - the corporation’s structure or purpose did not break any laws.
2004 - The movie The Corporation featured efforts of communities (including Arcata) and small businesses across the nation to fight corporate personhood.
2006 - In June voters in Humboldt County California adopted "Measure T: the Ordinance to Protect Our Rights to Fair Elections and Local Democracy" by a vote of 55% to 45%. The measure prohibited corporations from outside the county from bankrolling political campaigns. The measure makes clear that Humboldt citizens do not believe corporations are legal people and that only humans have constitutional rights.
2008 In 2008, Blackwater sued the City of San Diego to force the city to issue them a certificate of occupancy for its training facility in Otay Mesa before the plan went through the city's public review process. U.S. District Judge Marilyn Huff ruled in Blackwater's favor. "Blackwater is a person and has a right to due process under the law and would suffer significant damage due to not being able to start on its $400 million Navy contract."
2010 - In January, the U.S. Supreme Court in Citizens United v. Federal Election Commission decided that corporate funding of independent political broadcasts in candidate elections cannot be limited, because doing so would be unconstitutional. The decision resulted from the non-profit corporation Citizens United's case before the court regarding whether the group's film - Hilary: The Movie - that was critical of a political candidate could be defined as a campaign advertisement under the 2002 McCain-Feingold Act. The decision reached the Supreme Court on appeal from a 2008 decision by the United States District Court for the District of Columbia, which sided with the FEC, holding that under the McCain-Feingold Act the film Hillary: The Movie could not be shown on television right before the 2008 Democratic primaries. The Supreme Court's decision struck down a provision of the McCain-Feingold Act that banned for-profit and not-for-profit corporations and unions from broadcasting “electioneering communications” in the 30 days before a presidential primary and in the 60 days before the general elections. Justice Kennedy wrote the court's majority opinion, while the four dissenting justices were represented in a dissenting statement from Justice Stevens.