The Supreme Court is now hearing the case of FCC vs AT&T, in which AT&T is attempting to thwart a Freedom of Information Act request into its records by claiming that it has privacy rights as a person does. My guess is the Court will side with AT&T and continue the trend of making corporations more “person-like,” more like citizens.
A corporation is a legal entity, a thing created by law. If a State grants a corporate charter, that charter allows actual people, or groups of people, to create a single legal entity for commercial purposes.
Granting a corporate charter means “the corporation,” this fictitious being, can do things that persons can do. It can buy and sell land; it can file lawsuits; it can sign checks. These are good rights to have, but the biggest advantage is “limited legal liability.” If I form a corporation to build a maglev train, and the thing fails, the corporation is responsible, not me. It is liable for failure or disaster, but “it” does not physically exist. Its assets can be seized, but it can’t go to jail. You can’t look it in the eye or shake its hand, but it can hire people to, say, repossess your car.
This makes a corporation quite an odd beast: a fictitious, immortal, disembodied being. You and I will long be turned to dust, but the Coca Cola corporation or Disney will live possibly forever. Corporations are person-like, but unlike you or me they can own other corporations. The “trust”, that favorite target of Gilded Age cartoonists, was a corporation which bought other corporations. (If slavery is illegal, how can a person-like entity own another person-like entity? See below.)
Corporations are an old idea–the Virginia Company, charted by the King to settle the new world, was a corporation. Because they granted sweeping legal powers, and because they created an odd non-corporeal beast, not at all like the individual imagined in the Enlightenment, corporate charters at first tended only to go to enterprises clearly in the public interest.
In the 19th century, that changed. The notion of “public interest” came to mean “any enterprise likely to make money,” and by the 1880s states began handing them out like candy, which is why the world’s biggest oil company was Standard Oil of New Jersey.
In 1886 the Supreme Court heard the case of Santa Clara County vs. Southern Pacific Railroad, which had the effect of declaring that the “fourteenth amendment, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws,” applies to railroad corporations. The case is not straightforward–wikipedia has a good account. But it had the effect of granting 14th amendment protections to corporations.
The 14th amendment, passed in 1868, was one of the “Reconstruction Amendments.” The key part states:
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.
The amendment was passed to protect former slaves from unfair treatment. By 1886, it was being used to protect corporations by endowing them with more person-like rights, even though they regularly bought and sold other corporations, which seems more than a little like slavery.
Opponents of reconstruction argued that racial equality was not a natural fact, it was a social fiction, brought about by law, by legislative fiat. By 1886, the corporation, a social fiction brought about by law, was being endowed with rights intended to protect former slaves. Ironically, it’s also part of the “Obama is not a citizen” movement today.
By the early twentieth century, as Charles McGovern has pointed out, corporations adopted the language of individual rights to describe themselves claiming the people have “elected” General Motors and elected Woolworths; that shopping was like voting. By making a purchase seem equal to a vote, they further established corporations as person-like.
In 2010, the Supreme Court ruled in Citizens United vs the Federal Election Commission that a corporation’s right to free speech cannot be limited under the first amendment. It’s an interesting case, even for a non-lawyer like me.
Corporations are not “natural born:” they have no body, none of the physical attributes of personhood. They have no single consciousness: rather they represent a collective that speaks with one voice. In that sense, they’re about as far from “individualism” as one can imagine. It’s doubly interesting that the same people who describe labor unions as anti-individualist and illegal defend corporations in the language of individual rights. It may be that the Supreme Court is telling us that in the future, in order to speak politically as individuals, we need to form collectives and assume a “fiat identity.”
The United States could not have become what it is without corporations–the corporate form was and is crucial to industrial society. But it’s an odd kind of society that can extol classical individualism and also the idea that fictitious collective beings have the same rights as you and I.
The corporation is a philosophically fabulous thing. Most histories treat it in a kind of functional way, as an institution. But it’s magically weird and impossible. Historians ought to be able to examine that aspect.
Update: The Supreme Court rejected AT&T’s argument–I’m delighted to have been completely wrong!
[…] This post was mentioned on Twitter by John McChesney-Young and Chad Black, Mike O'Malley. Mike O'Malley said: On the corporations as persons and the FCC vs AT&T case, now before Supremes. http://theaporetic.com/?p=1475 […]
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You may find it interesting; it scares the c!@% out of me. And I entirely fail to see how the court came to the the conclusion it did.
That aside, it is quite interesting to consider various aspects of corporate form and how changing those aspects would change their behaviour. Limited liability, or even just the degree to which it is limited, is one of those aspects.
It’s interesting to note that until the late 20th century, most investment banks, such as Lehman Brothers, were partnerships, not corporations, where the partners had far higher degrees of personal liability than the current owners and managers. It seems clear that during that stage they were more conservative in their behaviour. What if the owners of stock in a corporation such as BP had greater liability for the company’s actions and failures? Greater liability isn’t unknown; Lloyds “names” had unlimited liability with dramatic consequences in the 1980s.