The vocabulary of corporate personhood
What is a person? Under British common law, two types of persons existed: "natural persons" or human beings and "artificial persons" that include governments, churches, and corporations - each of which needed a legal category so they could enter intro contracts, be held accountable to the law, and be assessed and made to pay taxes.
- To the Founding Fathers, natural persons or human beings were born with human rights - rights that were inherent and given to us by God. These rights were to be carefully safeguarded from infringement. To that end, they wrote the Constitution in a way that protects us and our rights from the government. Thus, the "Constitution doesn't give us rights; it restrains government from infringing on rights we acquire at birth by virtue of being human beings." (Thom Hartman, Unequal Protection: How Corporations Became People and How You Can Fight Back. 2010:8)
- We have "natural rights" available only to "natural persons." To the Founding Fathers, the common law distinction between natural and artificial persons made perfect sense. Without such a legal category as "artificial persons," these governmental, religious, and corporate entities could not enter into contracts nor could they be assessed or forced to pay taxes.
What is a corporation? A corporation - the most common form of business organization - is an "artificial person." It is formed by a group of people, is created through state charters with separate legal standing from its owners, and protects its owners from being personally liable (limited liability) in the event the company is sued.
There are three major types of corporations:
- nonprofit corporations that engage in activities for the public good;
- municipal corporations, such as a city or town; and
- private corporations which are organized to make a profit.
All corporations must have a corporate charter granted to them by a state. A charter gives them permission to operate in a particular way that is compatible with state government regulations. If the privilege is abused, the charter can be revoked.
What is corporate personhood? Corporate personhood is a legal concept allowing a corporation to:
- buy, sell, and own property;
- enter into leases and contracts;
- bring lawsuits; and
- be prosecuted and punished (often with fines) if it violates the law.
The History of American Corporations and Corporate Personhood
European Precedents - English common law included two types of "persons" - "natural persons" or human beings and "artificial persons" like governments, churches, and corporations. By the 1500s, this artificial category became especially important so that the law could be applied and taxes assigned to the growing number of corporations.
1500s - The first corporations were created by the Dutch.The Dutch government declared their existence through a charter and the companies were owned and operated by wealthy and powerful individuals in Dutch society. The corporation was allowed to own land, to participate in the legal process of the nation, to hold assets such a bank accounts, and to buy and sell things. These corporations were explicitly limited to rights given to them by the government. They were neither governments nor human.
Throughout the 1500s, a company was set up only for the duration of a single trading voyage; it was to be liquidated when the fleet returned. Investment was a very high-risk venture not only because of the risk of piracy, disease and shipwreck, but also because supply and demand was not stable. The English were the first to understand that by combining their resources into a monopoly, they could control some of the risks.
1580 - Queen Elizabeth I became the largest shareholder in Sir Francis Drake's ship The Golden Hind. Elizabeth wanted Drake to make a profit on the voyage, thus she granted him "legal freedom" from liability." This ensured that Drake - and the Queen's - risk was low and the potential for profits was high. Thus, Elizabeth created the idea for a limited-liability corporation.
1600 - Queen Elizabeth I granted the first charter in Europe to 218 London merchants and noblemen to form a corporation that would compete with the Dutch control of the global spice trade - the British East India Company. Two years later, the Dutch chartered the Dutch East India Company which became the first corporation to issue stock. The British East India Company received monopoly privileges on all trade with the East Indies. By 1681, most members of the British government and royalty were stockholders in the East India Company.
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.
1607 - The first permanent English colony in North America - Jamestown - was carved out of land owned by the East India Company and deeded to another English corporation tied to the East India Company - the Virginia Company.
1770 - England's East India Company was nearly bankrupt after decades of going into debt to support its growth and a recent surplus of tea with no where to sell it. The Company had been hurt by competition from North American small businessmen who ran small ships that brought tea and other good to America and small business retailers that bought wholesale tea from Dutch trading companies rather than the East India Company.
1773 - Parliament passed the Tea Act which was designed to give the East India Company full and unlimited access to the American tea trade and exempted the Company from paying taxes to Britain on tea exported to the American colonies. The main goals of the new law were to increase Company profitability to stockholders (which included the King) and to help drive out its small business competitors in the colonies. Without a tax burden, the Company was able to undercut local North American importers and local merchants who sold tea and who were now required to pay higher taxes and more money for tea.
On December 16, 1773, the Boston Tea Party occurred. According to the only first hand account by George Hewes, the participants saw themselves as anti-corporate protesters who fought the actions of the East Indian Company and the British government which supported the Company at the expense of North American small business owners and the colonists. To those involved in the Tea Party, "taxation without representation" did not mean they did not want to pay any taxes, but rather that every one and every entity - small businesses and the East India Company corporation alike - should pay their share of taxes and that no one or entity should be taxed without representation at the governmental level.
Early Republic 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.
1791 - The nation's first privately-owned corporation was created - the First Bank of the United States. It's chief architect and defender, Alexander Hamilton, defended the creation of this corporation by arguing that what the government could do for a person (incorporate), it could not refuse to do for an "artificial person", a business. The Bank of the United States, being privately owned and not a government agency, was a business.
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.
1816 - Former President Thomas Jefferson wrote his concerns about the growing power of corporations: "I hope we shall crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our government in a trial of strength, and bid defiance to the laws of our country."
1817 - James Madison expressed anti-corporation sentiment typical of anti-Federalist, Democratic thought: "There is an evil which ought to be guarded against in the indefinite accumulation of property from the capacity of holding it in perpetuity by...corporations. The power of all corporations ought to be limited in this respect. The growing wealth acquired by them never fails to be a source of abuse."
1819 - Trustees of Dartmouth College v. Woodward U.S. Supreme Court decision intervened in state power to control corporations they chartered. In 1769, King George III had chartered Dartmouth Colleage as a private college. Decades later, the state of New Hampshire revoked Dartmouth's charter and rechartered it as a public college. The Supreme Court ruled that the charter was a contract between New Hampshire and the college and the state had no right to revoke it.
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.
1830s – Three things occurred that made corporate personhood a future possibility:
1833 - President Andrew Jackson attacked the corporate powers of the Second Bank of the United States (chartered in 1816) by arguing "... the question is distinctly presented whether the people of the United States are to govern through representatives chosen by their unbiased suffrages or whether the money and power of a great corporation are to be secretly exerted to influence their judgment and control their decisions." He succeeded in putting the bank out of business.
1861-1865 - The Civil War provided support for the nation's largest corporations. Every part of the government increased spending dramatically in order to get every conceivable type of commodity to the nation's soldiers. By war's end, several large corporations that had been involved in supplying war materials - especially the railroads - operated in monopolistic ways that were different from the past and that worried many politicians. Because the railroads had become monopolies, they could charge whatever prices they wanted.
1860s - Over 2000 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.
1868 - The Fourteenth Amendment to the Constitution reversed the 1857 Dred Scott decision which had excluded African Americans from the protections of the Constitution and the Bill of Rights. The new amendment made African Americans citizens who were entitled to the same "equal protections" under the law enjoyed by white citizens. The Amendment left a loophole for interpreting "persons" by not distinguishing between "natural" and "artificial" persons.
1870s - Corporate lawyers began arguing that under the law, corporations had historically been referred to as “artificial persons" not corporations. Thus, they should be considered "natural persons” with the same rights as “persons" enjoyed under the 14th Amendment.
1873 - Chief Justice of Wisconsin's Supreme Court, Edward G. Ryan told the graduating class of the University of Wisconsin Law School: "[There] is looming up a new and dark power...the enterprises of the country are aggregating vast corporate combinations of unexampled capital, boldly marching, not for economic conquests only, but for political power...The question will arise and arise in your day, though perhaps not fully in mine, which shall rule - wealth or man; which shall lead - money or intellect; who shall fill public stations - educated and patriotric freemen, or the feudal serfs of corporate capital."
1885 - All states had passed laws regulating the railroads in some way, but mostly by setting maximum fees and prices for fares and freight.
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.
1888 - Grover Cleveland included the following in his State of the Union Address: "The gulf between employers and the employed is constantly widening, and classes are rapidly forming, one comprising the very rich and powerful, while in another are found the toiling poor. As we view the achievements of aggregated capital, we discover the existence of trusts, combinatins, and monopolies, while the citizen is struggling far in the rear or is trampled to death beneath an iron heel. Corporations, which should be the carefully restrained creatures of the law and the servants of the people, are fast becoming the people's masters."
New Jersey became the first state to allow companies to hold stock in other companies. Delaware followed a few years later, making both states open to chartering large corporations.
1880s-1900 - The Robber Barons of the Gilded Age represented the new wealthy aristocracy that increasingly controled the nation's business through trusts, combinations, and monopolies.
1890 - Congress passed the Sherman Antitrust Act. The Act declared illegal "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States or with foreign nations. Every...corporation, or, if any other person" was to be fined "three hundred and fifty thousand dollars."
1907 - President Theodore Roosevelt warned against corporate persons in a Congressional address: "The fortunes amassed through corporate organization are now so large, and vest such power in those that wield them, as to make it a matter of necessity to give to the sovereign - that is, to the government, which represents the people as a whole some effective power of supervision over their corporate use. In order to ensure a healthy social and industrial life, every big corporation should be held responsible by, and be accountable to, some sovereign strong enough to control its conduct."
Congress passed the Tillman Act - the first U.S. legislation that prohibited any nation bank or corporation to "make a money contribution in connection with any election to any political office."
1913 - Under the Wilson administration, corporations began to use the Sherman Antitrust Act against unions. They argued that if it was illegal for corporate persons to conspire to form monopolies for their own benefit, it should also be illegal for human beings to do the same by forming unions.
1914 - Clayton Antitrust Act outlawed tying together corporate mergers and multiple products, as well as mandated the creation of the Federal Trade Commission (FTC) to control corporate wrongdoings.
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.”
1950 - Model Business Corporation Act was proposed by the American Bar Association's Section of Business Law, Committee on Corporate Law. By 2009, 31 states had adopted some version of the proposal which gives corporate shareholders no responsibility for the acts or debts of the corporation they own. They can invest with only financial risk and no legal risk.
1961 - In his Farewell Address, President Dwight Eisenhower noted that after World War II, the U.S. had created "an immense military establishment and a large arms industry." Then he warned that "We must not fail to comprehend its grave implications...In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic process...Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together."
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 U.S. Supreme Court has never ruled that corporate personhood is legal; instead, the decision about whether to include the declaration of corporate personhood was left to the court reporter.
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.
1994 - Congress passed the North American Free Trade Agreement (NAFTA) that requires the removal of most tariffs and restrictions on trade between the U.S., Canada, and Mexico. Under NAFTA, a corporation can sue a foreign government and can also force the taxpers of the defendant nation to pay the corporation for any profits it might have earned if the nation had not passed laws that "restricted free trade." The consequence is that NAFTA has expanded the rights and powers of multinational corporations giving them even greater powers than many sovereign governments.
1995 - On January 1st, the World Trade Organization (WTO) was founded. According to the WTO website, "The World Trade Organization (WTO) is the only international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible...At the heart of the system - known as the multilateral trading system - are the WTO’s agreements, negotiated and signed by a large majority of the world’s trading nations, and ratified in their parliaments. These agreements are the legal ground-rules for international commerce. Essentially, they are contracts, guaranteeing member countries important trade rights. They also bind governments to keep their trade policies within agreed limits to everybody’s benefit. The agreements were negotiated and signed by governments. But their purpose is to help producers of goods and services, exporters, and importers conduct their business. The goal is to improve the welfare of the peoples of the member countries."
The Community Environmental Legal Defense Fund was created to assist Pennsylvania communities facing unwanted corporate development projects. According to its website, "Beginning in 1998, we began to assist communities to draft legally binding laws in which they asserted their right to self-govern. Initially, our work focused on communities facing corporate factory farms and later the application of sewage sludge to farmland. Communities across Pennsylvania adopted our anti-corporate farming and anti-corporate sludging laws. To accommodate the growing interest in our work...we launched the Daniel Pennock Democracy Schools in 2003, which have become a critical tool in our grassroots organizing. Communities facing other corporate threats - such as uranium mining in Virginia and commercial water withdrawals in New England - began to take on this work. The Legal Defense Fund has now become the principal advisor to activists, community groups, and municipal governments struggling to transition from merely regulating corporate harms to stopping those harms by asserting local, democratic control directly over corporations."
Since 1995 - Almost every consumer and industrial product has been affected by NAFTA and the WTO, both of which were designed to provide for fair trade. Through a process known as harmonization the laws of the different nations have been aligned. In practice, this means that all nations are forced to accept corporate-friendly and the least restrictive laws of any of the member nations. The NAFTA and WTO treaties essentially allow corporations to roam freely from nation to nation to create jobs and to maximize their profits.
1996 - Democracy Unlimited of Humboldt County began as a study group of citizens interested in uncovering the history of democracy and corporate rule. According to their website, "We were so inspired and energized by what we learned that we decided to create a formal organization devoted to dismantling corporate rule at the local level. The first major project the group conducted was a three-city (Eureka, Arcata, Redway) series of well-attended public forums to reframe the USDA Organics proposal as a symptom of corporate rule."
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.
2001 - Several Pennsylvania townships passed laws forbidding corporations from owning or controlling farms in their communities.
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.
The Arcata City Council became the second city in the nation to pass a nonbinding resolution opposing constitutional rights to corporations.
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."
2009 - Move to Amend was created and consists of a coalition of hundreds of organizations and tens of thousands of individuals who are "committed to social and economic justice, ending corporate rule, and building a vibrant democracy that is genuinely accountable to the people, not corporate interests. We are calling for an amendment to the US Constitution to unequivocally state that inalienable rights belong to human beings only, and that money is not a form of protected free speech under the First Amendment and can be regulated in political campaigns."
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.
In April, Maryland became the first state in the nation to pass Benefit Corp Legislation that created a new type of corporation - the B-Corporation is required to create a material positive impact on society and the environment and to meet higher standards of accountability and transparency. Its primary goal is to redefine business success by using business power to solve social and environmental problems. B-Corp Legislation has been passed in seven states: California (AB361), New York (A4692), Hawaii (SB298), Virginia (HB2358), Maryland (SB690 and HB1009), Vermont (S263), and New Jersey (S2170). As of 2012, legislation was pending in four other states. There are over 450 Certified B Corporations across 60 different industries.
2011 - Various Occupy Movements began across the United States, many of which focused on the issues related to corporate personhood and how it advances the interests of the 1 percent at the expense of the other 99 percent.
2012 - In April, Vermont State Senate became the first state to question corporate personhood in its 26 to 3 vote to call for a constitutional amendment to abolish corporate personhood.
Questions about corporate personhood
Who benefits from corporate personhood? If you are an ordinary stockholder or a wealthy corporate stockholder, corporate personhood is in your interest. Corporate personhood allows the wealthiest citizens in the nation to use corporations to control and use government and to impose their will upon the people.
Who may not benefit from corporate personhood? The voice of ordinary citizens is much smaller and less influential than corporations who are protected through corporate personhood. For example:
What are some other cost and effect factors of corporate personhood?