Why Corporations Must be Legal Persons
OK, this topic is too important to let drop just yet.
A few days ago I asked what rights corporations should have. That posting generated some useful comments, but some of those comments, and other things I’ve been reading online, suggested an animosity to the very notion of rights for corporations and the legal personhood that goes along with it.
So, I’ll put this forward succinctly: legal personhood for corporations is not optional. It’s absolutely fundamental to modern commerce. To believe otherwise, you basically have to be an anarchic anti-capitalist; indeed, you have to be against the very notion of large-scale cooperation and division of labour. But you’re not, are you?
At heart, legal personhood just means that a corporation can be taken seriously by courts: it can be treated as a thing, separate from the human persons that make up the corporation at any particular time.
This point does not imply any particular list of rights: the items on that list, and the limits thereon, are still very much up for debate. But what cannot be denied is that corporations must be treated as legal persons. The recent deliberations of the U.S. Supreme Court is something of a red herring in this regard. As is the American legal trend, in the decades after the Civil War, to apply the Fourteenth Amendment to corporations. Those are particular good-or-bad decisions; they tell us little if anything about the wisdom of granting some form of personhood to corporations. That idea, by the way, is a very old one, stretching back far before the 19th century. Corporate personhood is not an American invention or a conspiracy. It’s a feature of every modern economy.
(For a lively and informative history of the corporation, and other sorts of companies, see The Company: A Short History of a Revolutionary Idea.)
Look, for starters, at a few other kinds of legal persons:
– universities
– churches
– nonprofits
– political parties
– governments
– estates
– etc.
None of those is a human person. But courts treat them as persons. And you can imagine the important activities that would simply be impossible if they weren’t regarded as persons (i.e., taken as objects of legal rights and obligations) by courts. The university I work for couldn’t own the land it sits on, and couldn’t issue me a salary. Greenpeace couldn’t have a bank account. Political parties would not be able to fundraise, and to hire accountants to keep the books. Governments couldn’t be taken to court. Churches couldn’t be sued for, e.g., sexual abuse by priests . And estates — well, what would an estate even be? Just the no-longer-owned stuff of a former person, now up for grabs.
So, back to corporations. If a corporation were not regarded in at least some ways as a legal person, at least 2 very bad consequences would follow.
1) If corporations were not (in some sense) persons, they could not own property or hold bank accounts. And without those 2 things, operations would literally be impossible. (And that goes not just for corporations, but for all other large organizations, including cooperatives and nonprofits.)
2) If corporations were not (in some sense) persons, they could not be sued or fined or charged with crimes. You could sue or charge particular people within the corporation, of course, but that’s at least sometimes not really effective. For all I know, no one who worked at Exxon back when the Exxon Valdez spilled millions of gallons of oil onto the Alaskan coastline 20 years ago still works there. Should that mean no further legal action can be taken with regard to those events? Or that you’ve got to chase down people who have retired or now work at other companies? In some cases, you might want to do just that. But most of us share the intuition, I think, that Exxon itself, as a company, is responsible (too). If Exxon were not a legal person, there would be no way for anyone to take legal action against it.
So, yes, the debate over which rights (and responsibilities) corporate “persons” should have is a good and important one. But please, let’s be rid of the silly notion that corporate personhood is itself, in some sense, just a mistake.
—-
p.s. I’m not a legal scholar. If I’m wrong on any legal points, and if any readers are qualified to help me out in that regard, I’d be much obliged.
The Business Ethics Blog 
Both 1) and 2) above seem to me to be deeply confused as to what exactly you are trying to clarify.
True, in western legal systems only legal persons can own private property or enter into contracts. But, obviously, that doesn’t mean that only artificial persons can. If I had the money (and didn’t care about squandering it, since I want to prove a point), there’d be nothing stopping me from starting up my own university as a sole proprietorship or as a partnership. In that case, the legal person would be a natural person, me. I can’t think of any sort of enterprise–charity, church or even political party–that couldn’t, in principle, be organized as a proprietorship or a partnership. So, insofar as what you say under 1) suggests that artificial legal personhood is a necessary condition for certain kinds of operations to be possible…well, that’s either just false or trivial (i.e., corporate operations characterized by artificial legal personality are not possible without legal personhood).
The point under 2), however, seems to me a much more serious misunderstanding. Why is it the case that many (especially large-scale) businesses are organized as corporations rather than as proprietorships or partnerships (i.e., organization where legal personality is confined to or shared among natural persons)? The obvious, totally predominant reason is that corporations enjoy limited liability. If there was no legal person called “Exxon Corp.,” the alternative isn’t that no one would pay for the Valdez cleanup. Instead, assuming Exxon’s operations ever got going in the first place, the owners of the company would face unlimited personal liability for damages, rather than liability being limited to the value of their investment.
That is to say, what I think what you really want to be looking at is the magic of limited liability in making certain sorts of enterprises possible. Artificial personhood per se contributes much less than you seem to think: Immortality of the corporate entity, the power to make impersonal organizational rules and, well, not all that much else.
Will:
Thanks. Let me try to clarify.
First, I’m not arguing that nothing other than an artificial person could hold a bank account. That would be obviously false. I’m just saying that without personhood, you couldn’t have modern corporations, or indeed any but the simplest of business forms. You could have big companies, but you couldn’t have widely-held corporations. (Note that partnerships, too, are considered legal persons.) In practice, it would mean that only wealthy individuals (wealth acquired how?) could do business on a large scale. I doubt many of the would-be critics of corporate personhood is willing to bite that bullet.
(An admission: it was a regrettable red herring on my part to throw in the parenthetical comment about other kinds of institutions, under point 1 above. It’s useful to recall how many other kinds of artificial persons there are, but that’s not germane to the point I was making there.)
Second, yes, clearly limited liability is a key benefit of modern incorporation: it’s why so many organizations are constituted that way. Limited liability isn’t an essential ingredient of corporate personhood, but it’s a very common one. But without at least some form of legal personhood, corporations wouldn’t get off the ground in the first place. And yes, you’re right, the alternative to limited liability is, well, unlimited liability, but that still leaves us with the problem of tracking down and holding accountable the many individuals who…well, who what? Which individuals would one even try to hold accountable for the Exxon Valdez, beyond the pilot of the ship? He could be dead, for all we know. And the shareholders today aren’t the shareholders from 20 years ago, likely. As things stand, Exxon is legally liable for things it — the legal person known as “Exxon” — did 20 years ago, and it can be held accountable, be forced to pay restitution, etc.
As for your last point: I don’t think there’s any magic list of characteristics that adds up to personhood. Limited liability is just one variable. Legal personhood clearly admits of degrees: an entity could in theory be permitted to own property, but have no other rights at all, and would still in that regard be a legal person. There’s a whole list of characteristics (in particular, legal rights and responsibilities) that contribute to personhood. Each kind of legal “person” has a different subset. No one right or responsibility can be equated with personhood.
Chris.
Chris, I support your views. Here is an excerpt from my recent chapter on corporate governance best practices to help clarify part of my reasoning.
“The purpose of corporate governance is to direct and control the activities of an organization by establishing structures, rules, and procedures for decision-making. The most contentious aspects of governance revolve around answers to the questions: “On whose behalf?” and “To what end?” Corporate law of most common law jurisdictions indicates that corporate directors have the fiduciary duty to be loyal to the best interests of the corporation (Black, 1999). According to Tarantino (2008, p. 4), a corporation is a legal person that “requires the actions of real people to operate” in order to properly serve the interests of society. This view is supported not only by the Companies Act of 2006 in the United Kingdom that requires corporate directors to consider social interests (Wikipedia, 2009b) but also by the 2008 Supreme Court of Canada’s ruling suggesting that corporations fairly balance the interests of all stakeholders commensurate with “the corporation’s duties as a responsible citizen” (Tory and Cameron, 2009, p. 3).
The literal legal interpretation of a director’s duties to the corporation views the corporation as a person, subject to public laws that govern the relationship between individuals and society. Governments therefore grant every corporation a legal license to operate by way of a corporate charter. By contrast, the inferred legal interpretation that directors owe duties to shareholders (because shareholders bear the greatest risk due to their residual claim of corporate profits) views corporations as private property. This view subjects corporations to private law that governs relationships between individuals, which include contract law and property law. However, if corporations are not property but legal persons (Bakan, 2004), ownership of a person, even a legal person, could be considered slavery and therefore illegal. Ironically, corporations won the right to be legal persons by successfully claiming rights to the Fourteenth Amendment to the United States Constitution, which was enacted to end slavery (Nicholls, 2005).
Whether directors primarily serve society or the owners of their company is unclear. If they primarily serve owners, then what value do corporate boards add in owner-managed corporations or those with active, controlling shareholders? What about not-for-profit and government organizations without equity owners? On the other hand, if directors primarily serve a broader constituency of stakeholders (or society at large), is it possible to determine which groups are being served and how directors can prioritize between divergent stakeholder interests? Moreover, if directors are to serve stakeholders’ interests beyond those of their shareholders, why should the election of directors be determined solely by shareholders? This ambiguity about the underlying context within which corporate boards operate makes the job of the director more nuanced and complex.”
I guess I’m a radical, then, because I don’t see why a corporation is anything but the people who comprise it. If no one who was responsible for the Exxon spill still works there, then we should sue the people who were responsible, not the people who work there! If they’re all dead, then I guess it’s too late to do anything, and we should have acted sooner!
On a fundamental level, I see no reason to treat corporations as anything but groups of individuals.
PNRJ:
So, then, no corporate property?
A corporation wouldn’t be able to buy land, or sign a contract? Or do you actually mean that a few thousand shareholders would alllllll have to sign every contract? That’s beyond radical. Am I missing something?
In practical terms, you’re talking about abolishing corporations. Which, I guess, you’re free to argue for. As long as you’re clear that that’s what you’re proposing.
Chris.
I just saw an abstract for a neat looking paper by a Northwestern law prof (A. Alschuler) on the related issue of corporate liability. There’s a summary at:
http://lawprofessors.typepad.com/crimprof_blog/2009/10/featured-download-alschuler-on-punishing-corporations.html#at
Among Alschuler’s points is this:
“Other defenders of corporate criminal liability view it as frankpledge – a device for persuading everyone in an organization to monitor everyone else. This article questions the propriety of declaring some people guilty of other people’s crimes simply to encourage them to police one another. On the assumption that corporate liability is here to stay, however, the article argues that it is better regarded as a means to induce internal monitoring than as bona fide criminal punishment.”
The paper is available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1491263
Alschuler seems to favour an instrumentalist view — recognize criminal liability because it promotes the benefits for the broader society that we want corporations to achieve. But he also considers this other approach that’s modeled on the ancient notion of “deodand (the punishment of animals and objects that have produced harm).” He links the latter to expressivist (as opposed to instrumentalist) aims — punish a corporation in order to express society’s values (very roughly).
I think the instrumentalist approach is more important — we attribute criminal responsibility to corporations in order (primarily) to promote the objective of protecting other parts of the society from the corporation.
Re. corporate rights:
1. I don’t think expressivist views make nearly as much sense here as they do for corporate responsibilities; and
2. An instrumentalist approach to corporate rights (which I take you to support given your earlier remarks) is mainly geared to the goal of protecting the corporation from other parts of the society. But even this is subsidiary to the ultimate goal of promoting benefits for the broader population (we want to protect corporate rights in order to make corporate endeavours viable, which we want to do because of the benefits corporate enterprises can offer to the whole society).
In the United States “flesh and blood persons” speech and press rights are restricted by election laws while legal persons in the form of newspapers and broadcasters speech and press rights are not restricted.
Do you defend superior “RIGHTS” for businesses and inferior “rights” for living persons?
Richard:
I don’t defend either of those things, and I don’t know what makes you think I do. Nothing above suggests that.
Chris.
[…] entries on the topic. See my 1st, 2nd, and 3rd entries. A few months earlier, I had written about Why Corporations Must Be Legal Persons.) « Venture Capital: Lessons for Business Ethics […]
Chris, as a teacher of corporate law, my only comment is that it is not the legal personhood that is in issue, but the fact that one corporation can hold shares in another corporation. The legal reality is that each and every single corporation in a corporate group is a separate legal entity, but the commercial reality is that they ‘belong’ to the group (through ownership or control). This raises ethical issues for directors of more than one company in a group, who have a legal duty to act in the best interests of each of the corporations. In terms of accountability for negative impacts (negative externalities), the situation becomes much greyer (ethically speaking) where there is a parent company in one country and a subsidiary company in another. The UK ‘CORE Coalition’ has focused on this. Bhopal and james hardie illustrate the shortcomings of limited liability. Perhaps ‘lifting the veil of incorporation’ or making shareholders or directors personally liable in some circumstnaces may be part of the solution …. Just some thoughts.
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“It’s absolutely fundamental to modern commerce. To believe otherwise, you basically have to be an anarchic anti-capitalist; indeed, you have to be against the very notion of large-scale cooperation and division of labour. But you’re not, are you?”
I think you’re probably right on the first sentence. But I fail to see how the only alternative to “modern commerce” is anarchic anti-capitalism. Indeed, I think the rise of corporations tends to erode the capitalism present in the very societies that gave them birth. (The classic privatization-of-profits-socialization-of-losses situation that has become all too common seems an inevitable result of corporate “person” becoming powerful enough to alter the market in their favor by influencing government, imo.)
The bazaars and markets that have existed for millenia the world over, and continue to exist in some areas today, seem to be the purest form of capitalism in existence. When you have hundreds, even thousands, of individuals selling generally quite similar products, the result is the closest thing that reality will ever produce to the ideal “free market” of microeconomics 101. Only when enough actors band together (as a corporation, a trust, a syndicate, whatever label you choose to apply), do you see an erosion of market principles and a move toward centralized planning.
A market composed almost entirely of individual actors with little to no centralized authority may be close to anarchy. But it is also pretty much a textbook definition of capitalism.
Devin:
I agree with all that. But my claim stands.
What I was pointing to (in the sentence you agreed with) is modern commerce. Old-timey markets may have been close to classical capitalism, but you can’t have the stuff we have today — complex consumer goods, finance, etc. — without corporations or other institutions with legal and moral personhood.
Chris.
And that’s more my point, modern economies are not “capitalist” in any strict sense of the word. One can oppose “modern commerce” from either a socialist or capitalist perspective…since “modern commerce” in developed nations takes place in mixed economies.
I think you confuse the issue by stating critics of corporate personhood must be anti-capitalist…when it’s entirely possible to oppose corporate personhood on the grounds that corporations are anti-capitalist and anything which strengthens them erodes capitalism.
Devin:
Ah, OK, I see your point now. Let me try again: any modern economy providing a rich range of complex goods and services requires personhood. That goes whether said economy is strictly capitalist (with zero government involvement in provision of goods & services) or mixed or whatever.
So critics of personhood are anti-modernity, I guess. You can be anti-personhood as long as you favour a very, very primitive lifestyle.
Chris.
I think your analysis is sound, although you say you are not a legal scholar your thinking is pretty clear. I would add that you should consider the fact that all large media companies are corporations and thus anyone who is opposed to rights for corporations needs to think about the First Amendment implications of that. I would point out in that regard that, as interpreted in New York Times v Sullivan and Near v Minnesota, the First Amendment “limits liability” for slanderous and libelous statments.
Mark:
Thanks for that — and thanks for the great example. I think most critics of the notion of personhood should be able to think of some institution that they value highly, the activities of which is only possible due to the practice of treating that institution as a person.
Chris.
Interesting apology for the status quo. Related reading on the development of ‘personhood’ for corporations in legal history has been enlightening, particularly in that the legal definition of ‘person’ is distinct from the common, and ethical definitions. I can accept a distinction between legal and ethical definitions as long as we keep in mind those distinctions, but there are several problems that have yet to be addressed:
1. The corporation as sociopath. The point has been well addressed elsewhere, the problem is how do we address it? The current llaissez faire attitude completely ignores this problem. How do we normalize corporations so that they can become good citizens of their respective political sphere? Can we give them a conscience, or failing that how do we limit the actions of known sociopaths?
2. The inequality of power. A normal human has very limited power; a corporation consisting of parts of the resources of thousands or millions has so much more. This plays merry Ned with the notion that ‘all men are created equal’, it invalidates the assumptions that underlie ‘free markets’ precisely because the concentration of economic power creates an entity that can, and does affect the market price.
This is hardly a new problem; it is the same old inequality argument replacing the divine right of kings with near unlimited corporate personhood. In order to live with either we need realistic limits on the powerful. My solution would be to remove some of those rights, but it would be more interesting to hear yours. What would an unabashed proponent of Capitalism suggest to rein in the excesses of capitalism?
Randy:
You’ll have to explain to me how it is that I’ve provided an “apology for the status quo,” given that
a) I said that “the debate over which rights (and responsibilities) corporate “persons” should have is a good and important one,” and
b) Nothing you said comes anywhere near contradicting anything I said.
As for the corporation being a sociopath: if you’re talking about the film, “The Corporation,” that hardly counts as addressing the point well. Exactly the same kind of cherry-picking of horrific examples cold prove that other institutions are sociopaths too, including the Church, the Medial, the University, Democracy, etc.
Chris.
Hmm, ‘apology’ as ‘in defense of’. Considering the title of your article I would think this obvious; you are providing a defense for the concept of corporations as legal person. Perhaps, as I have long opposed this definition the ‘defense of’ was a little too obvious, but it is no slight. You have given me much to think on, and convinced me that as long as we distinguish between ‘people’ or ‘humans’ and ‘persons’ you have a sound point. A corporation, for example cannot have ‘life, liberty and the pursuit of happiness’, although they can have the right to pursue profit. They can have the right to own property but should not have the right to vote.
I said nothing that comes anywhere near contradicting you because I was not trying to. I merely pointed out that your position generates certain problems, that if we can solve them would put the whole argument to rest. I believe they can be solved, but I was interested in your solution.
I have never seen the film ‘The Corporation’ nor am I interested in cherry picking examples. I was pointing out that corporations fail philosophical ethical and sociological definitions of humanity. They are immune to many legal penalties (imprisonment, death, etc) that humans fear. Corporations do not have what is sometimes called a moral sense; the officers are required to consider shareholder value rather than balance self vs social duties. Such a person used to be called a sociopath but I’m told the term has been replaced in psychology, see:
http://www.ehow.com/about_5067762_definition-sociopath.html
This is not moral condemnation, merely recognition of a fact. The people in a corporation may be good and moral (although they can have huge financial pressures to ignore ethics) but the corporation they work for is incapable of having morals or ethical values. Recognizing this is no more inflammatory than recognizing that fire is amoral. Fire is a good tool but we do not make the mistake of ascribing emotions or ethical values to it. Fire is a very useful tool that will indifferently kill if conditions are right. It is up to the fire wielder to ensure it is kept under control. Corporations are likewise very useful but must be kept under control.
[…] deserves protection the way that a person deserves protection? Now, I’ve argued before that corporations need to be considered persons. And I’ve also blogged about whether corporations should have the right to sue for libel to […]
It’s a terrible wrong to go after Exxon as a company. An organization cannot be held guilty if the decision makers are no longer there, because Human beings act. Human beings choose to do illegal things. Corporations are just human beings associated together as a unit. They don’t have motive force by themselves. They are dictated by the most powerful shareholders and those they appoint to run things.
This is why shareholders should be held responsible if they knowingly held stock in a company that has committed crimes. It should be illegal to fund all criminal organizations, not just the mob. Perhaps, there should be some expectation that the person who has invested himself in an organization and given the organization that power should at least show diligence in researching the company he has invested in. Of course, his level of responsibility would depend on how much he has invested and the length of time he was in that company.
Track down the human beings who are responsible for wrongs, not corporations.
Business ethics means absolutely nothing if you don’t recognize individual responsibility. The first principle from which all law and ethics should be based is this, “human beings act”. Corporations don’t make decisions, dude. PEOPLE do. It’s not all one hive mind like the bloody Borg. The human species doesn’t operate that way.
As for the notion that corporations or churches or governments could not hold bank accounts or own property, perhaps as such they could not and should not, but under the principle of human action, there should be joint entitlements to property under the condition that the people with the power to make decisions and the names of those individuals who own significant stock (say more than 0.3%) in the company are included. This should be updated *every* time a new appointment is made or there is a change in ownership so that the wrong people aren’t rewarded or punished for the actions of others, and so that the small shareholders aren’t punished too harshly or rewarded too well. The principle should be this: the greater the power, the greater the responsibility.
If this makes corporate business impossible, oh, well.
As for estates, that is what a will is for. As long as that person is alive, he has the right to set out who he wants to give away his belongings to upon his death. After death, of course, those rights no longer exist..and yes, it would go to whoever “stakes a claim” to it, unless it can be shown that there has been significant social and emotional connections (such as giving someone else the right to make decisions for him in the event that he is unconscious, or if he had been faithfully married to so-and-so for x amount of years). I believe in these situations, it is safe to assume he would have wanted his belongings to go to those individuals. Of course, in those situations, we can’t know for sure. Disputes would have to be settled in court. We can only do the best we can with what we know. No solution is 100% perfect, but we can at least strive towards 90%.
Just a brief note:
You argue that “Corporations don’t make decisions, dude. PEOPLE do.”
That’s absolutely true, of course, for individual point-in-time decisions carried out by a single person. But not nearly obvious for things like the implementation of a complex set of practices that may never have been decided on by anyone, nor even acknowledged explicitly. Often we’re interested in a *pattern* of behaviour, that patterns often aren’t the result of any particular human decision(s). It’s also worth noting that there’s no inconsistency between corporate and individual responsibility. We should hold people responsible for the things they clearly did, but we should also be able to hold organizations or groups, as a whole, responsible where that is useful.
Finally, do keep in mind that it’s rather dangerous to be cavalier about the end of corporate business. Modern life is only possible due to the operation of large, complex organizations. Doing without them means turning the clock back to a time when life was much worse.
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[…] envision to implement those values — things like repealing corporate personhood — are deeply misguided. But then, to look for direct impact is, as others have observed, likely a mistake, and misses the […]
Let’s be clear about this corporo-fuedal world we live in: the CEOs are the kings and queens, the board are the nobility, and economists and other business school academics are their knights errant, imbued with the holy quest of maintaining power for their corporate masters.
It is therefore no shock that economists and business academics are subverting the social movement to demand corporate accountability by dismantling some of their legal advantage – most notably, personhood rights for corporations.
The following article contains most of the conceits, red herrings, brazen errors and obfuscations used to stifle this movement.
Can you find them all? I’ll start off:
[1] “To believe otherwise, you basically have to be an anarchic anti-capitalist” – MacDonald starts off offensively with good old “name-calling”. Before he provides a shred of evidence or data, he has reached his firm conclusion!
[2] “At heart, legal personhood just means that a corporation can be taken seriously by courts”. Now he uses his opinion as fact. I could just as well say “at heart, legal personhood just means that a corporation is granted unfair and unreasonable legal protections under the law in a court situation”.
The list goes on -have fun!
https://businessethicsblog.com/2009/09/27/wh
Kenji:
Well, thanks for your spirited comment, I guess.
But by way of response…
1) I’m not calling anyone names; I’m just pointing out the often-unnoticed consequences of the anti-personhood view (if anyone actually holds it). Without personhood you literally — literally — cannot have a modern capitalist economy.
2) The definition of legal corporate personhood is not my opinion. That’s just what the term means. It’s a piece of legal vocabulary. It doesn’t refer to any particular set of rights — hence, it cannot possibly refer to an “unfair and unreasonable” set of rights. It’s just the ability of courts to treat the organization (corporation, cooperative, church, union, etc.) as a separate thing. You’re free to use the word any way you want, as long as you don’t want other people to understand what you mean.
Chris.
I love this! Great to first see the facts: personhood confers standing to enter agreements and hold property, but does not (should not) confer “human” rights of any kind. I think that has become, sadly, a grey area.
Surprising to not see any reference here to the corporate ability to issue share capital, which to me, is certainly the prime reason for the primacy of the corporate form over all others in business.
The emotion of the issue comes later in the process of corporate life, when the wealth of the corporate “person” enables undue levels of influence to be applied to all interactions. Against a single employee: the ability to underpay and over-demand – addressed initially by unions, who themselves fell prey to the corruptions of power. Against government: when circumventing regulation and ultimately influencing regulation and law in their favor and demonstrably against the benefit to society as a whole. This is the one that has people protesting in the streets.
Those instances alone have been the black-marks against the corporate person for as long as we have records to show. Since this is an ethics blog, I suppose we should be able to accept the facts and move on to the much less solid concept of these “persons” being held to account and kept within bounds that stop short of any damage to persons, groups or society at large. We need firm mechanisms to address a segment of human endeavor that has run amok. That system is not functioning properly.
That is where the flak comes from. How can that question – if “ethics” can even contain the answer – be addressed by society? And how, without the rabid believers in “rights” to wealth at the expense of others getting all in your face about “class-war” (uh-huh) and “job-killers” can we get the beast back in its rightful cage?
Let’s start there. Meantime, loved the Forbes review of the Roger L. Martin book: Fixing The Game. Brilliant!
All of U.S. history has been a tug and pull fight between the people and the govt (and corps chartered by the govt). Corporations are not stated anywhere in the U.S. Constitution. They do not have rights.
I am a business owner, and I have no qualms about saying this, my company does not have any rights. It has duties. I wrote a paper for a Media law & Ethics course in college on the topic of CU v. FEC. I am by no means an expert on the topic, I rely on others who are experts, including this recent interview on the topic: http://paleoradio.us/2012/01/13/day-19-move-to-amend/
Your ‘bad consequences’ argument is based on the inaccurate premise that ‘Personhood’ is the only framework under which entities can own property, hold bank accounts, conduct operations, be sued, fined, or charged with fines. A church is not a person, a City or a Township is not a person, a Lion’s Club is not a person, a labor union is not a person, and a corporation is not a person. Churches, municipalities, clubs, organizations, unions can have assets and be held accountable to crimes without being a person, as such is the case with corporations.
Corporations consist of corporate work – multiple human persons contributing to the single purpose of the whole. They have a charter which details the extent and limits of the corp’s work. The corp is bound by law to exercise certain duties and enjoy certain protections and limits on liability.
In business law school, it used to be said that a ‘corporation is a legal fiction.’ It only exists in our minds so that it can treat it in a certain way. Corporations were invented in order to perform public works – the aqueducts and road system of Rome were built by a corporation. The idea of ‘corporation’ is a genius invention, which when working within the confines of this intention, is a great idea. All 13 of the original colonies were in fact corporations. They had a legal charter, the sovereignty (at the time a king) granted that charter. The American Revolution was about kicking the king out of the equation and granting this sovereignty to ‘the people,’ not to ‘the corporations’. The people have rights, the govt and corps have public duties. All power resides in the people, as a democratic republic we grant the govt authority to exercise the functions of govt to do what… to serve the govt? to serve the corps? nope – to serve the people.
It used to be that getting a corp charter took a long time, years. It used to be the charter had to identify a PUBLIC need. Charters were granted as a privilege, not as a right, they had to be renewed and they could be revoked if the corp failed to fulfill it’s public duty.
The corporation in any era is an embodiment of the relationship between state power and private organization. In our own generation, corps have been fighting to get back to the way it was under King George, the way it was prior to the Revolution.
The use of the 14th Amendment to argue corporate personhood is a gross distortion of the wording and intent. http://www.law.cornell.edu/constitution/amendmentxiv It clearly refers to persons as what we would clearly determine refers to biological entities which have DNA, are homo sapiens, fall in love, have a soul. The Tea-Pot Dome scandal pales in comparison to what we have going on today. Corps, corp lawyers and their lobbyists have hoodwinked a favorable SCOTUS and the Federal Govt to have us to believe that corps are ‘too big to fail,’ have an personhood equivalent that of individual human beings.
And with their access to huge resources, the corporate elite are exerting influence over our (and global) politics, our govt and the fourth estate to ensure their desired position to operate as a sovereign entity. It is the lynch-pin of the ruling elite, to use the court system to legalize it. CU v FEC solidifies the corp elite’s fight to become the rulers over all peoples in all countries, making the notion of representative govt a farce.
The MoveToAmend, and the OccupyWallSt movements we see going on is ‘we the people’ saying that corporations have distorted the law through lobbyists, well funded lawsuits, collusion, corruption and synergy to the point where they would be so bold that some corps, -transnational corps in particular, are acting in a way that is beyond the intention of the original invention of corporation. Especially beyond the intention of signers of the U.S. Constitution, who fought against the very notion of corporate personhood.
Jim:
Thanks for your comment. Just a few quick points in reply.
1) We shouldn’t get hung up on the word “personhood.” Call it “shmersonhood” or “independent legal status.” Whatever. The point is that corporations must have certain legal rights (the right to own property, enter contracts, etc.) or they simply cannot do the stuff we want them to do.
2) History is history. The way things were for corporations in the 17th or 18th or 19th century isn’t all that relevant, as far as I can see. Most of the limits that were originally imposed would make socially-useful corporate conduct all but impossible.
3) Ask yourself this: if corporations had no legal right against (for example!) arbitrary search and seizure, who in their right mind would ever invest in one? Why would I give my money to a corporation, or invest in creating one of my own, if government could just show up and seize the corporation’s property without due process? Corporate rights are essential for protecting key human interests.
4) To the best of my knowledge, no on has ever asserted “personhood equivalent that of individual human beings” on behalf of corporations. There are many rights not currently enjoyed by corporations. That’s not to say that the list & extent of rights currently enjoyed is the right list; but it’s important to get the facts right, here.
Regards,
Chris.
Lovely summation. Should be taken by all as simple common sense. Sadly, there are some (many) who disingenuously argue the opposing view to feed pure greed. How will we consolidate the common sense view of the many into one force to resist (restrain) the greedy minority? When we answer that, we’ll be headed toward a better world.
Clearly communicated concepts are a good and necessary start. Occupy seems to have missed that boat, and who knows if they can catch up…
Mark:
I have to point out that not all who disagree with Jim are either disingenuous or motivated by greed.
Chris.
I hear you.
This is certainly a case of the actions of some (more than a few) spoiling things for many. I agree that corporations should have some “protections” as in: against unreasonable search and seizure. But when the court can, as it did in Dred Scott in 1857 and again with Citizens United, bolt the corporate interest onto amendments designed to protect single human beings against mammoth entities like government, (and corporations), they have sold-out the foundations of civil society. It’s taking advantage on a grand scale.
So, fine, not all corporate officers are disingenuous or greed-fueled, but when you advance your interests (or your corporations’) over that of your own species, for your own gain, knowing the advantage you have by dint of capital and the influence it can buy, I believe my claim is more than mindless accusation. It’s indefensible on compassionate grounds.
I believe it was within the courts decision on the 14th Amendment that I read the statement i paraphrase here: for the convenience of the community and law enforcement, it is sometimes necessary to view corporations as legal “persons”.
I may have the wording incorrect but it was clearly stated that viewing a corporate entity as a single entity – like a person – is for the convenience of government and/or citizens in regulating activities of and punishing non-compliance by corporate entities. Nowhere does it mention the convenience of the corporation or grant “rights” like free speech or religion. Individual rights are retained by the officers of the corporation – why else would so many choose to remain anonymous when talking to the press or authorities charged with overseeing corporations?
Yes, individual rights are retained not just by officers, but by shareholders. And in some cases protecting those rights effectively requires attributing rights (or, if you prefer, “rights”) to the corporation itself. Example: the only way a shareholder’s investment is safe is because corporations have a right against unreasonable search and seizure.
[…] to the employees-formerly-known-as-Zellers-employees requires an especially strong version of the corporate “personhood” thesis, according to which corporations are to be treated as individual entities, under the law, […]
Perhaps one should attempt bringing ones corporation doc’s along in the passenger seat of your car. Then proceed to utilize the HOV or Carpool lane.
I feel certain the powers that be will let that slide…..
That’s a perfect example of how silly it is for people to reject corporate personhood whole-hog. We all know corporations NEED certain rights, to perform their social function. But the clearly don’t need ALL rights. The right to count as a passenger for HOV purposes is a perfect example. Thanks!
Limited Liability was originally passed to protect shareholders from full liability, the liability REAL persons are responsible for. If a real person accidentally kills or injures someone they go to jail. This is called involuntary manslaughter. If a REAL person kills someone by say poisoning their food knowingly they go to prison for murder. However, rich, entitled people do not feel the laws that apply to REAL people should apply to them because they are trying to make profits. So when they sell drugs or products that they know will kill or injure someone, they not only say they are exempt from jail but limited in the amount they can be sued for. At the same time when these rich, entitled people feel they want the privileges and rights of REAL people, all of a sudden laws and liability do apply to them. This is nothing more than the same old corruption we as a race have seen from the beginning of civilization. Rich people want all of the privileges and rights with zero accountability. If they truly believe they are PEOPLE than why shouldn’t REAL people be exempt from liability, involuntary manslaughter and murder? Oh yeah that’s because corporations demand you as a person are liable for all of your debt to them and if you murder a rich man you go to jail. In other words, in corporate America all men are NOT created equally or considered equal under the law. Rich people are better than everyone else. So choose. Either you are a LLC or a person not whichever one you want to be at the time. Either you root for Robin Hood or you root for Prince John.
Thanks for your comment. Just as a note: most shareholders (the ones being protected by limited liability) are not rich people. Notice also that not just shareholders but also employees enjoy limited liability. It would be a hard thing to do without. It would be pretty crazy to invest in a company, or to work for it, without limited liability.
[…] are and must be considered “persons”, no people but persons, under the law. (See Why Corporations Must be Legal Persons, and also, “The Right to Bear Corporations: Reframing the Corporation as a Technology for […]
[…] https://businessethicsblog.com/2009/09/27/why-corporations-must-be-legal-persons/ […]
This is so far from the truth. Everything you stated that corporations cant do unless they are people can be done by a person inside the corporation. You negelct to see the fact that since a corporation is now a person if you accuse them of bad buisness practices they can turn around and sue you for deflimation of character. So we have to risk a legal battle with a giant corporation every time we let someone know when the corporation is doing something wrong…like poisoning the food they sell for example. Corporations should not be legally concidered individuals because they are not indiciduals they are a collective.
Shannon, thanks for your comment. I would love to hear you explain how a single person could satisfy, for example, the warranty on my Macbook (currently the corporate entity known as “Apple” is required to help me out if my laptop fails). Likewise, I would be curious to see which individuals you think could effectively and usefully be held accountable for the multi-billion-dollar cleanup of the gulf coast after the Deepwater Horizon oil spill. (And keep in mind, your view also implies that churches and unions should not be allowed to own land. Doesn’t that strike you as problematic?)
Ok, personS inside a corp. Throw them in jail and confiscate their wealth to atone for their crimes. Make the owners of the corp. the holders of corporate wealth and fine them to pay for the crimes of THEIR corporation. It’s ink on paper, you can treat corps anyway you want because they are NOT people and have no rights what-so-ever.
What happens when the person who sold you the computer doesn’t work there anymore? Who do you sue? Or when the captain of the Exxon Valdez has a few hundred dollars in the bank, but did millions in damage to an ecosystem? Who do you sue? On the other end, the CEO of a company doesn’t own the building. Nor do the shareholders (or they could walk in without getting kicked out, which they can’t).
Very interesting Chris, but we live in the US where conservatives live to destroy all that does not serve them. They will eventually rule that corporations are the equivalent of real persons and be able to vote, etc. The notion must be abandoned that ink on paper is a person. Call it something else, make a different category, it cannot be allowed to continue or our representative democracy will fail.
John: Who do you mean by “we”? I don’t live in the US. But in every advanced economy on earth, corporations are considered persons. Call it something different if you want, but it doesn’t change the basic, essential fact that corporations NEED to have certain rights, if we are to protect human beings.
Chris MacDonald & John Burgess. Apologies if my point is mentioned before in the long thread. I approach the subject from the criminal aspect. Parliament, which creates our statute law is a corporation and has a CEO. The Subsidiarys known as the Ministry of Justice and courts and tribunals service are dead things, or persons. Look up the legal definition of person which is a dead thing. A summons to a court is sent out to the legal fiction; your name in capital letters. Capital has the same meaning as it does in capital punishment. The maxim in Admiralty law, the law that you are discussing here, states that all parties in a case must be equal.The courts, representing a dead thing, go through a long charade to get the living man to accept responsibility for the dead legal fiction. They order you to stand, give your name and date of birth and address and ask you to plead to a charge. Analyse the word plead. You are begging. Even pleading not guilty is giving away your common law rights.I proved this last week when charged with common assault. I normally advise people, who are being abused by the system, not to go into court but to serve a notice on the clerk to the court refusing to accept responsibility for the legal fiction. On this occasion I wished to check out what I thought to be correct. I went into court and refused to stand when ordered to. When asked for my name, I stated this is a kangaroo court, (Check out the legal definition) I will take not part in it . I refuse to accept your jurisdiction. I did not give my name. After 5 minutes of threats to me, the clerk to the court addressed the magistrates and said, “Without this man’s name there is nothing you can do”.
Now to Corporations, which you are discussing, which are dead things. This is overcome by having a CEO being responsible for legal actions. This is why I will try and argue a point with an employee of a company but If I do not get satisfaction, I serve a notice on the only person liable, the CEO.
Now why this is not just of academic interest. It affect each and everyone of us. The above shows how devious the Admiralty law is. The legitimate excuse given, is that we all need the protection that the statutes give us. I use the example I gave re common assault, of a man speeding past a school who could escape justice by refusing to become a legal fiction. But this same law is abused to imprison whistle blowers or mentally section them. The same law is used to protect establishment pedophiles. Why do you think the Pedophile Heath signed the original treaty of Rome. He knew it was against our Constitution because the attorney general told him so. The whole of our establishment is run unlawfully. It’s one lie after another to keep this from the British public. The media dare not discuss what I have written. Farage and Rees Mogg are frauds because they will not discuss our constitution. I hope readers of this will spread the word that our country is run beyond the reach of the law.
1) You refer to “our country” as if we all live in the same place. But I doubt we do.
2) Admiralty law is maritime law, the law of the sea, which is not what we are discussing.
3) A CEO of a company can’t typically pay for a multi-billion dollar cleanup, and is besides not generally the top of the corporation (the Board is). There’s no getting around treating corporations as legal persons.
QUOTE 1) You refer to “our country” as if we all live in the same place. But I doubt we do.
If you live in a common law country the comment is accurate.
QUOTE 2) Admiralty law is maritime law, the law of the sea, which is not what we are discussing.
Corporate law is the law of the sea, made by statute and administered in Administrative courts. They can only deal with dead things , hence the legal fiction which you are discussing here.
QUOTE A CEO of a company can’t typically pay for a multi-billion dollar cleanup, and is besides not generally the top of the corporation (the Board is). There’s no getting around treating corporations as legal persons.
If a company is sued for damages the CEO is the person responsible to ensure that the legal processes are followed. A board may advise but they cannot advise the CEO to ignore a court decision. That is the legal position.
I accept that in practice the law is not followed for political or huge commercial reasons, because decisions are made in back rooms with the connivance of the judges.
If corporations are people is there the death penalty for when their product or actions kill?
Yes. Notice that Enron doesn’t exist anymore (it didn’t kill anyone, but it illustrates the death penalty for corporations). Nor does its accounting firm, Arthur Andersen. (But more to the point: why would THAT be the best punishment for an organization?
Why have corporations at all? They are fictions. They become shelters for unlawful acts by the living. They are “dead” entities that can not be held responsible. They have no soul. Are not bound by God’s law.
What entity did man do business with before this dead, lifeless thing conducted business? Does the corporation place all ownership under the Holy See? When did the Holy See develop the corp (dead body)? Why does the Holy See claim ownership if all things created belong to the Creator? Because the Holy See developed what opposes life! The corporation?
The short answer to your first set of questions: without the corporation, modern live — our entire modern standard of living — is literally impossible. Corporations, for all their flaws, bring together resources (human talents + natural resources) to make things and to provide services. The digital device on which you typed your comment is pretty much impossible to produce without something like modern corporations.