This article originally appeared on Ethika Politika
One of the demands made by the Occupy Wall Street movement has been the ending of the legal fiction of personhood for business corporations. This desire on the part of the Occupy movement is healthy, but the issue is actually more complicated than might at first appear. For corporate personhood and corporate rights under the Fourteenth Amendment to the United States Constitution are two different things, and the first does not necessarily imply the second.
First let us look at the text of the relevant section of the Fourteenth Amendment:
Section 1. All persons born or naturalized in the United States and subject to the jurisdiction thereof are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.
This amendment was ratified in the summer of 1868, the second of three amendments enacted after the Civil War to free the slaves and secure their rights as citizens. The reference to “persons born or naturalized” would be, one hopes, clear enough so that no one could ever have imagined that the text refers to anything except natural persons. After all, corporate bodies are neither born nor do they achieve citizenship by naturalization. But this was not what occurred.
In the period during and after the Civil War corporations were beginning their successful attempts to influence state legislatures to grant them privileges unknown to ante bellum corporations. These included the right of a corporation to own stock in other corporations, thus allowing the creation of holding companies, and the passage of general incorporation laws. In the ante bellum era corporations were generally chartered by state legislatures for specific purposes, for example, to operate a steamship or a bridge, for a certain number of years, and usually with other restrictions as well. Of course, in some cases, this grant of state authority was tantamount to a temporary grant of monopoly rights. General incorporation laws, which gradually came into existence in the second half of the 19th century, allowed corporations much more flexibility than they previously had. In such a climate of opinion, it was not surprising that corporations, especially the then powerful railroads, would use their political influence to obtain the ultimate prize, corporate personhood rights under the Fourteenth Amendment.
The odd thing is that the U.S. Supreme Court never really gave such a grant of personhood in any of its decisions. Rather, the statement that the Court considered corporations as persons under the Fourteenth Amendment was inserted into the headnote, or prefatory material, of an 1886 case by the man responsible for compiling and printing the Court’s decisions, Bancroft Davis, the court reporter. In the case of Santa Clara County vs. Southern Pacific Railroad (118 U.S. 394), Davis, with the concurrence of the Chief Justice, inserted the following into the headnote:
One of the points made and discussed at length in the brief of counsel for defendants in error was that “Corporations are persons within the meaning of the Fourteenth Amendment to the Constitution of the United States.” Before argument Mr. Chief Justice Waite said: The Court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are of opinion that it does.
Although nearly twenty years later the Supreme Court formally stated that headnotes do not have any legal force, by then it was too late. The “ruling” in Santa Clara had already been cited more than once and had acquired the status of a precedent. So in this extraordinary and clearly extralegal manner corporations in the United States acquired the personhood and, one by one, the rights granted by the Fourteenth Amendment solely to “persons born or naturalized in the United States.”
What is even more outrageous is that those justices and judges, such as Antonin Scalia, who make much of their commitment to “originalism,” i.e., to interpreting the Constitution as it was understood by those who wrote it, seem to have no difficulty in acquiescing in the hijacking of the Fourteenth Amendment by corporations and their legal lackeys. This would seem to call into question the honesty of their “originalism.”
Although it is ludicrous to grant corporations the rights of natural persons under the Fourteenth Amendment, one can make a distinction between the mere notion of corporate personhood or personality and the absurd notion that corporations are entitled to the rights of natural persons. The former is not necessarily wrong, so long as the crucial distinction between natural and artificial persons is maintained. There are many sorts of corporations, including universities and colleges, other non-profits of all kinds, as well as the ubiquitous business corporation. The legal fiction of treating corporate bodies as persons is a great social convenience, so long as it is remembered that they are not natural persons. For if corporate personhood did not exist, how would one interact legally with a corporate body? If one were to sue a university or college, would it be necessary to sue each and every member of the board of trustees, or perhaps each and every administrator and faculty member? Or could a corporate body engage in legal action without involving each and every member or employee or participant? Corporate personhood is a convenient method of organizing legal and social life, and for this reason has been around at least since ancient Rome, where it was explicitly recognized in the law. But any sensible person will realize that although corporate personality is a useful tool, corporations are not natural persons and all their legal rights derive from legislative enactment. In fact, strictly speaking, they are not rights at all, simply legal conveniences granted by a governing authority. The following sums up the traditional view of the legal status of corporations:
As the corporation is in all respects an artificial person, not only is its possession of a distinct legal capacity derived from the state, but the extent to which that capacity may be legitimately exercised is determined by the same authority. It is therefore improper to extend to the corporations all the principles regarding personality which apply to natural persons.
Thus to hold that corporations have free-speech rights, or the right to participate in the political process, as if they were natural persons is an abuse of the legal and social convenience which allows a corporate group to be regarded as a single person.
It is true of course that men have a natural right of association. Speaking of labor unions, Pope Leo XIII noted that if the state “forbids its citizens to form associations, it contradicts the very principle of its own existence…” (Rerum Novarum, no. 51.). As I said above, there are many different kinds of corporate bodies, and although the state grants them corporate personality and defines their rights and duties, the law ought to distinguish among them as to which derive their fundamental character from “the natural propensity of man to live in society” (ibid.) and which are merely social conveniences and therefore have their entire “legal capacity derived from the state.”
Some might object that these suggestions are against private property rights, but such an objection is certainly not based on the Catholic understanding of property rights. Nor does it even seem congruent with the classical liberal idea of absolute property rights either, since logically these would apply only to natural persons. In fact, it is hard to imagine any reasoned case for why corporations deserve Fourteenth Amendment rights. In any event, in the case of Catholic teaching, Pope Pius XI taught the following in his 1931 encyclical Quadragesimo Anno:
It follows from the twofold character of ownership, which we have termed individual and social, that men must take into account in this matter not only their own advantage but also the common good. To define in detail these duties, when the need occurs and when the natural law does not do so, is the function of the government. Provided that the natural and divine law be observed, the public authority, in view of the common good, may specify more accurately what is licit and what is illicit for property owners in the use of their possessions….
However, when civil authority adjusts ownership to meet the needs of the public good it acts not as an enemy, but as the friend of private owners; for thus it effectively prevents the possession of private property, intended by Nature’s Author in His Wisdom for the sustaining of human life, from creating intolerable burdens and so rushing to its own destruction. It does not therefore abolish but protects private ownership, and far from weakening the right of private property, it gives it new strength (no. 49).
We should note, moreover, that Pope Pius is speaking here of the property rights of individuals. So although in the case of a corporation, it is certainly true that the individual incorporators or shareholders do have rights not to have their property seized arbitrarily, this hardly translates into rights of the corporation as such, especially to freedom of speech or freedom to participate in the political process. The individual stockholders already have those personal and political rights, and if they choose to exercise them on behalf of their financial interests, this is undoubtedly their right under the Constitution. But it does not follow that the corporate body itself has any such right. The corporation exists as a mere creature of the law and any of its so-called rights are in fact privileges bestowed upon it by the legislature for the sake of the public good.
Although in these times when the power of corporate finance seems well-nigh omnipotent, there is little prospect of the Supreme Court’s changing direction and repudiating the power grab made in 1886, still it helps to inform public opinion on these questions. If enough people realize how monstrous is the policy of equating fictitious corporate “persons” with real people, then perhaps gradually public opinion will force a change in the Supreme Court’s attitude of the kind we have seen before. After all, there used to be an adage, the Supreme Court follows the election returns.
. This account is taken from Ted Nace, Gangs of America: the Rise of Corporate Power and the Disabling of Democracy, San Francisco, 2003, which provides a handy overview of the rise and consolidation of corporate power.
. William C. Morey, Outlines of Roman Law, 2d ed., New York, 1914, p. 264.