Corporate Personhood: An Unusual Promise for American CorporateLaw and Constitutional Rights

Corporate Personhood: An Unusual Promise for American Corporate Law and Constitutional Rights

Anjali Mani Edited by Sayora Shukurova

Anjali isa freshmanat UC Santa Barbara studying Economics.

ABSTRACT

The battle for rights within the United States continues into the 21st century yet the scope of participants engaging in this fight has vastly broadened over time. This is referring to the concept of Corporate Personhood that has planted its roots into American law, raising questions about the interpretation of the constitution’s preamble (“We the People”) and its shift from referring to the American individual to including a corporate entity with innate rights. The Supreme Court has essentially cultivated the legitimacy and normalcy of corporate personhood within American law through cases such as Santa Clara v. Southern Pacific Railroad Co. and more recently Citizens United v. FEC. This has, in recent years, ushered in a newfound movement against corporate personhood and citizenship as many critics have claimed that the fight for corporate personhood has created new complications which include limiting the average citizen’s influence in elections and increasing corrupt quid pro quo between corporations and politicians. However, while these arguments have validity and express sound reasoning, addressing genuine concerns about the implications of corporate personhood, it is important to address alternate

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avenues wherein corporate personhood can act as a positive force on American Law, Society, and Democracy -even if it is yet to reach its highest potential. This article outlines the origins of corporate personhood and examines prominent legal cases and its current interpretation in legislation. While there is validity to claims against certain areas of corporate personhood, this article makes a case for the promise of corporate personhood in the context of economic welfare, corporate morality, and democracy via two methods - a mechanism for accountability and increased corporate moral responsibility, and a safeguard of free press and protection of rights -while also addressing its detractors and future implications through possible improvements to its scope moving forward.

I. THE CONCEPT OF CORPORATE PERSONHOOD AND ITS LEGAL HISTORY WITHIN THE UNITED STATES

According to the Brennan Center for Justice, corporate personhood in the U.S refers to corporations’ ability to enter contracts, hold and sell property, and engage in civil cases like suing a party or being sued by a party.1 On a much broader scale, corporate personhood generally refers to the notion that corporations can enjoy the same rights and responsibilities citizens do. While the roots of corporate personhood in the United States can be traced back to the presence of joint-stock companies such as the Virginia Company, the concept of corporate personhood as it is known today did not exist until the landmark passing of the Fourteenth amendment in 1868. The 14th amendment was initially created with the purpose of grantingcitizenship to all persons born naturalized in the United States which includes formerlyenslaved people in the aftermath of the civil war. Not only did it grant sweeping civil rights to formerly enslaved peoples, but the 14th amendment also limited state

1 Ciara Torres-Spelliscy, The History of Corporate Personhood, Brennan Center for Justice (April 8, 2014), https://www.brennancenter.org/our-work/analysis-opinion/historycorporate-personhood

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power by prohibiting states from depriving any natural citizens of their life, liberty, or property without due process. However, it was the guarantee that all citizens had an ‘equal protection of the law’ under the Equal Protection Clause of the 14th amendment that would later serve as the first legal basis for corporate personhood in American law -by creating a new precedent for how the 14th amendment could be interpreted beyond civil rights. The 1886 Supreme Court case Santa Clara v. Southern Pacific Railroad Company appealed to the Equal Protection Clause of the 14th amendment. The Southern Pacific Railroad company had claimed that it should not have been the target of differential tax treatment in comparison to natural persons. What is both interesting and unusual about this case, is that the court never once officially acknowledged or attributed the defense’s argument appealing to the Equal Protection Clause as applying to corporations being a factor in its decision tofavor the defense. However, it was a headnote added to the decision by a court reporter that would be the basis for subsequent decisions of applying the Equal Protection Clause to corporations. Within the headnote, Chief Justice Morrison Waite articulated:

The Court does not wish to hear argument on the question of 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 all of the opinion that it does.2

The presumption made by Waite openedup the Equal Protection Clause as a medium for corporations to fight for the same rights enjoyed by natural citizens in the decades that followed. Across the 19th and 20th centuries, various state courts would pass general incorporation laws which would allow corporations to be created by any natural citizen without a need for a charter

2 Santa Clara v. Southern Pacific Railroad Company, 118 U.S. 394 (1886)

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from the state legislature.3 The need for a government charter to create a corporation heavily tied corporations to state governments. In contrast, these statutes, predicated on the concept of corporate personhood set forth by the headnote of the Santa Claracase, established corporations as entities with more rights and fewer ties to the government: in that corporations had the freedom to operate without government charters. Leading into the 21st century, the concept of corporate personhood continued to gain ground, especially through the now landmark 2010 case Citizens United v. Federal Election Commission; the Supreme Court extended the First Amendment protection of free speech to corporations - making corporations exempt from government prohibitions on independent expenditures for political campaigns and other associations. Citizens United also allowed for the creation of Super PACs orpolitical action committees that are able to gather and donate unlimited amounts of money for campaigns. Moreover, labor unions themselves were able to make unlimited campaign contributions, overturning the Taft-Hartley act of 1947 which initially banned them from doing so.4 The rationale behind the ruling was that “independent political spending” was in-line with free speech as spending money was a means of expressing one’s belief or opinion. Citizens Unitedsubstantially shifted previous interpretations of First Amendment protections awarded to corporations which in turn, established a new precedent for campaign financing laws in the U.S. Following the ruling, numerous dissenters questioned and criticized Citizens Unitedas impeding on Congress’s power to safeguard elections from private sector corruption and collusion: arguing that the private sector, by nature, could not be adequately held responsible nor adequately monitored for quid pro quo.

3 Ciara Torres-Spelliscy, The History of Corporate Personhood, Brennan Center for Justice (April 8, 2014), https://www.brennancenter.org/our-work/analysis-opinion/historycorporate-personhood 4 John Dunbar, The 'Citizens United' decision and why it matters Center for Public Integrity, The Center for Public Integrity (October 18, 2012) https://publicintegrity.org/politics/the-citizens-united-decision-and-why-it-matters

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Other cases such asBurwell v. Hobby Lobby Stores saw the U.S Court of Appeals for the Tenth Circuit affirm the defense’s claim that forcing corporations to provide contraception to employees violated the Free Exercise Clause of the First Amendment and the Religious Freedom Restoration Act of 1993 (RFRA).5 The court reasoned that forcing Hobby Lobby to provide contraceptives to employees would directly contradict the RFRA which prohibits the government from burdening individuals that are trying to exercise their religious beliefs. Because corporations consist of employers and employees who themselves are individuals, the court extended religious freedom to corporations. The notion that corporations were now protected under religious freedom laws and statutes further raised questions and challenges among dissenters who question the moral and constitutional legitimacy of the now broadening scope of corporate personhood. As it stands today, Article 1, Section 1 of the U.S Code encapsulates the current legal standing of corporate personhood, stating “In determining the meaning of any Act of Congress, unless the context indicates otherwise— the words ‘person’ and ‘whoever’ include corporations, companies, associations, firms, partnerships, societies, and joint-stock companies, as well as individuals”.

II. MAKING THE CASE FOR CORPORATE PERSONHOOD

In the aftermath of Citizens Unitedand Hobby Lobby, there has been a widescale movement in opposition to corporate personhood and these criticisms range from regulating campaign finance laws to larger attacks on the complete dissolution of corporate personhood. Common Cause, for example, is a watchdog group calling for the stripping of First Amendment speech rights to corporations as they declare “Only People are People” and thus only citizens should enjoy suchprotections under the constitution. This movement against

5 Burwell v. Hobby Lobby Stores, Inc., 573 U.S. 682 (2014)

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corporate personhood has voiced critical concerns and provided sound reasoning in questioning the broadening scope. However, entirely deconstructing corporate personhood is a simplistic method of examining its implications. Instead, a deeper, more nuanced analysis is needed of corporate personhood as it is more than just a means for gaining profit by abusing constitutional rights. Corporate personhood can serve as a mechanism for accountability and newfound corporate moral responsibility while also working as a safeguard to a free press and an asset to democracy.

III. A SAFEGUARD OF FREE PRESS AND A PROTECTION FOR RIGHTS

Many dissenters, such as the group seeking to pass the We The People Amendment, havecalled for the creation of a constitutional amendment that would explicitly state that corporations would have no rights under the Constitution that citizens have. However, this exposes a fallacy that neglects the fact that corporate personhood is responsible for the protection and safeguard of free press and speech in the United States. Corporations, through various statutes granting them recognition of personhood, have increasingly served as legal mechanisms for citizens to bring about lawsuits against laws in the U.S that have historically infringed upon freedom of the press and free speech. For example, the 1936 case, Grosjean v. American Press Co, involved 12 of the most prominent newspaper publishers of the state of Louisiana, suing Huey Long and his political machine which passed a law in 1943 taxing newspapers that criticized him.6 Long’s defense was that the 14th amendment did not apply to corporations as in his interpretation, they were not people. However, the Supreme Court sided with the defense by stating that corporations were in fact people and that the Equal Protection Clause applied. They subsequently struck down Long’s discriminatory law. Thus, in cases such

6 Dylan Matthews, Like Free Press? Thank Corporate Personhood,VOX (July 2, 2014) https://www.vox.com/2014/7/2/5860732/six-reasons-liberal-should-like-corporatepersonhood

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as this, corporate personhood acts as a safeguard and protection for the free press by allowing the press to use corporations as a medium to challenge discriminatory laws that infringe on the freedom of the press and free speech. Additionally, not only is corporate personhood responsible for safeguarding free press in the legal system but it also helps protect nonprofit corporations’ freedom of speech and association - showing how corporate personhood doesn’t onlywork as a means for increasingprofit but can act on behalf of “morally'' aligned nonprofits that benefit society. Historically speaking, organizations like the ACLU and the NAACP have been targeted by the government, especially during the civil rights movement of the 1960s. For example, the 1963 case of NAACP v. Buttoninvolved the NAACP’s challenge to Virginian laws which hindered the organization’s ability to start lawsuits that would prompt integration and reduce segregation due to their civil rights affiliations.7 Through corporate personhood and the idea that corporations and non-profits were protected under the First Amendment, the Supreme Court struck down the discriminatory Virginian laws which infringed on their free speech and thus protected non-profits’ freedom of speech and association. The Supreme Court Associate Justice William Brennan, who sided with the NAACP, said:

We think the petitioner may assert this right on its own behalf, because, though a corporation, it is directly engaged in those activities, claimed to be constitutionally protected, which the statute would curtail.

7 Dylan Matthews, Like Free Press? Thank Corporate Personhood,VOX (July 2, 2014) https://www.vox.com/2014/7/2/5860732/six-reasons-liberal-should-like-corporatepersonhood

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IV. A MECHANISM FOR ACCOUNTABILITY AND NEWFOUND CORPORATE MORAL RESPONSIBILITY

When most critics of corporate personhood cite it as an abuse of power and a means of gaining rights to evade responsibility, they fail to account that by giving corporations the right to sue and file lawsuits against other parties, corporate personhood allows citizens to in turn sue corporations and hold them accountable for their actions. In Corporations Are People Too, law professor and author Kent Greenfield asserts that corporate personhood allows for a “deep pocket to sue” when they are harmed. This, in his research, proves to be one of the greatest outcomes of corporate personhood as it increases the power of the public in the private sphere. For instance, in 2021, an Amazon worker was able to sue Amazon for a van collision due to the intense pressure and risk created by the Amazon flex app’s confusing software and layout. The claimant stated that the flex app enabled a dangerous and distracting environment for drivers, leading to crashes and injuries on the road. Whether or not the court will side with the defense, this case underscores the newfound level of accountability corporate personhood brings to corporations and the increase in power natural citizens have in holding them accountable. Moreover, one of the ways in which corporations are often able to evade liability is by deferring blame onto individual workers, such as managers, contractors, and other employees. With corporate personhood, this becomes much harder to do as corporations, now considered people, can be held fully responsible for illegal acts because the entity itself is held accountable. Take for example the Deepwater Horizon oil spill disaster. 50,000 barrels of crude oil spewed into the Gulf of Mexico in 2010 due to a mistake in construction that caused the failure of a blowout preventer. Transocean and BP, the two companies operating and leasing the rig, were ultimately held accountable and were able to compensate those affected in the region while providing the capital for a massive clean-up effort. As stated previously, corporate personhood allows for the corporation itself to be liable for breaking laws instead of

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individual employees. Thus, Corporate personhood is the reason why these two corporations were held accountable for their actions as the alternative would have been for them to hold individual contractors or construction managers responsible. Kent Greenfield in The Atlantic articulates that if this were the case, there is almost no chance that an individual person unless it were a billionaire like Bill Gates, would be able to compensate all of the victims of such a large disaster.8 Thus, corporate personhood also provides a true and more likely chance of real compensation for victims harmed by corporate actions.

V. WHERE CORPORATE PERSONHOOD FAILS: LIMITATIONS, DETRACTORS, AND CURRENT DRAWBACKS

As stated previously, corporate personhood has been a growing constitutional ideology further supported by legal cases awarding corporations rights normally only granted to persons. However, it is important to note that both detractors and the courts themselves have made it clear that corporations cannot attain all of the same natural rights as some rights are easy to abuse if awarded to entities like corporations. For instance, corporations are not protected under the 5th amendment right against self-incrimination. In United States vs. Sourapas and Crest Beverage Company, the defendant attempted to claim that the word “taxpayer” in several government regulations warranted a warning about the Fifth Amendment protection against selfincrimination.9 Despite appealing to corporate personhood, the court did not agree that corporations were protected by Miranda warnings against selfincrimination. This case underscored certain limitations to corporate personhood, specifically in regard to protection against self-incrimination, as

8 Kent Greenfield, If Corporations Are People, They Should Act Like It, The Atlantic (February 1, 2015)https://www.theatlantic.com/politics/archive/2015/02/if-corporationsare-people-they-should-act-like-it/385034/ 9 United States of America, Plaintiff-appellant, v. S. Steve Sourapas and Crest Beverage Company,Defendants-appellees, 515 F.2d 295 (9th Cir. 1975) Justia Law,

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corporations have a wide array of resources available to skirt important regulations. On a much broader scale, corporations are not considered citizens under Article IV’s Privileges and Immunities Clause, also known as the Comity Clause. The Comity Clause states that “[T]he Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States.” In other words, the Comity Clauseworks to prevent a U.S state from treating the citizens of other states partially - thus, it established the principle that Americans, regardless of which state they live in, all have the same rights. However, this principle does not extend to corporations as, going back to 1839, the case Bank of Augusta v. Earlesaw the court explicitly refuse to protect corporations under the Comity Clause. Similar to the rationale behind the exclusion from the Fifth Amendment, the reasoning behind the Comity Clause exclusion was to prevent the skirting of state regulations. Thetranscript states as follows,

The only rights [a corporation] can claim are the rights which are given to it in that character, and not the rights which belong to its members as citizens of a state.

In addition to legal limitations set by the courts themselves, detractors have specifically criticized corporate personhood for the broadening of its scope into elections. As stated previously, Citizens Unitedextended the First Amendment protection of free speech to corporations -making corporations exempt from government prohibitions on independent expenditures and political campaigns. Detractors have noted some valid arguments against corporate personhood’s expansion into campaign financing as it allows corporations to heavily influence American elections by allowing corporations to “vote” with money. Additionally, a more vehement argument against corporate personhood and Citizens Unitedin particular, is aimed at Super PACS which, as stated earlier, are political action committees that have

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unlimited campaign contributions that are a direct result of Citizens United. Citizens Unitedremoved the previous spending limits of $5,000 a year per candidate.10 As a result, nearly 3 billion USD was spent by Super PACs on federal elections from 2010 to 2018 according to the Brennan Center for Justice. This interpretation of money as a medium for expressing free speech, they argue, would lead to increased corruption, collusion, and quid pro quo which Congress would no longer be able to effectively safeguard elections

from.

VI. POSSIBLE, FUTURE IMPROVEMENTS

In light of the aforementioned failures and drawbacks of corporate personhood, it becomes increasingly evident that the movement of corporate personhood in U.S law is not a zero-sum game in which corporations constitutionally “deserve” all of the rights natural citizens have. Instead, it is important to build upon and improve certain areas where corporate personhood excels, like accountability and rights protections. This is as opposed to focusing on abolishing corporate personhood entirely, solely for the areas in which it toes the line between rights and democratic interference and abuse of power as seen inHobby Lobbyand Citizens United. There is a need for reforms to allow the positive impacts of corporate personhood to come to fruition while balancing the growing power corporations have in the U.S. The solution lies in making corporationsmorelike people. In other words, increase the existing responsibilities and accountability measures that natural citizenhave. While it seems counterintuitive to the dissenters, it is important to understand that corporations are essentially legal mechanisms bridging investments with goods and services. Ultimately, the shareholders hold corporations accountable for their actions and it is through stakeholder

10 Tim Lau, Citizens United Explained, Brennan Center for Justice, (December 12, 2019) https://www.brennancenter.org/our-work/research-reports/citizens-unitedexplained

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governance that corporate personhood can be transformed and improved into the promise that it can be.11 Stakeholder governance is the idea that all of a corporation’s investors should be involved in the firm’s governance predicated on the acknowledgment that not just shareholders, but nonshareholders, have interests and ties to the corporation that need to be accounted for.12 In essence, stakeholder governance would serve as a mechanism for further accountability. It acts as a regulatory measure akin to a legal statute in and of itself by protecting the interests of shareholders and increasing confidence in corporate management being considerate of all key investors in the firm. Moreover, one key opposition to corporate personhood was its impact on elections by interfering with citizens’ interests. Stakeholder governance, by nature, would make corporations more pluralistic and democratic by better representing shareholders and non-shareholders allowing these shareholders and non-shareholders to essentially act as voters through the corporate medium. With that being said, according to law professor Kent Greenfield in the Yale University Press, there are ultimately three great organizational, economic, and political benefits in adding stakeholder governance to corporate personhood: better decision making through increased accountability, less economic inequality, and less short-termism.13 Greater board pluralism through stakeholder governance would encourage dissent, expose and root out bias, and allow for a more diverse discussion from stakeholders of different backgrounds. This cognitive diversity -according to Professor Aaron Dhir at the Osgoode Hall Law School -is an asset to all actors and a crucial step forward to corporate personhood. It thus works as its own legal mechanism without the need for more government intervention. Secondly, studies have shown that

11 Kent Greenfield . “The Promise of Corporate Personhood.” In Corporations Are People Too: (And They Should Act Like It), 208–23. Yale University Press (2018). 12 Kent Greenfield . “The Promise of Corporate Personhood.” In Corporations Are People Too: (And They Should Act Like It), 208–23. Yale University Press, (2018). 13 Kent Greenfield . “The Promise of Corporate Personhood.” In Corporations Are People Too: (And They Should Act Like It), 208–23. Yale University Press (2018).

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reforms in corporate fiduciary duties would allow the reallocation of economic surplus to be better distributed. Including fiduciary duties and interests belonging to those outside of inner corporate management would lead to increased economic equality within the workplace. Lastly, there is little debate about the short horizon in which shareholders are involved in the holding of a company’s stock - reducing a corporation’s moral obligation to adequately invest in interests and projects with future benefits. A corporate governance structure through stakeholder governance would deal with the negative externalities produced by corporations by mimicking the makeup of society and evaluating long-term costs and future benefits more objectively.

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SECTION II REPRODUCTIVE RIGHTS

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