VII. Is a corporation a person?

(This post is the seventh in the series on corporations--see links below for previous posts. If you like this or other posts, share it with your friends.)

A corporation is a legal person but not a human one.

Unfortunately, the criticisms of Citizens United that attack the idea that a corporation is a human person miss the point and thereby divert attention away from the real need for campaign finance reform. (See my earlier post, The Misguided People’s Rights Amendment.)

A corporation has never been considered to be the same as a human person. There is a difference between a legal person and a human person. Corporations in U.S. law are legal persons, not human ones. This difference is important and negates the attempts to mock Citizens United as affirming that corporations are the same as people.

An example of the distinction between a human person and a legal person was made evident in the U.S. Supreme Court case of Federal Communications Commission et al. v. AT&T Inc., 562 U.S. ____, 131S. Ct. 1177 (2011).

This case began with an investigation of AT&T by the Federal Communications Commission. The FCC sought certain documents from AT&T under the Freedom of Information Act. The Freedom of Information Act states that the Act does not require the disclosure of certain specified kinds of documents. Among those documents that are excluded from the Act’s disclosure requirement are "records or information compiled for law enforcement purposes" that "could reasonably be expected to constitute an unwarranted invasion of personal privacy" -- §552(b)(7)(C).

AT&T argued that, as a corporate person, it had personal privacy rights. Thus, AT&T claimed that it, as a corporation, did not have to disclose records that invaded its personal privacy. The U.S. Court of Appeals for the Third Circuit agreed with AT&T. The U.S. Supreme Court disagreed and held for the FCC.

The Supreme Court’s opinion was unanimous except for the absence of Justice Kagan who did not participate. Justice Roberts, writing for the Court, stated, “’Personal’ ordinarily refers to individuals. We do not usually speak of personal characteristics, personal effects, personal correspondence, personal influence, or personal tragedy as referring to corporations or other artificial entities” (my emphasis). Thus, the Court held that corporations do not have “personal privacy” for the purposes of the personal privacy exemption in the Freedom of Information Act.

Note particularly that the Court referred to corporations as “artificial entities.” The Court thus has clearly established that there is a difference between human persons and corporate persons.

As we know, Citizens United did not make use of this distinction. Why? Later in this series I will post an examination of that case. In any event, Citizens United handled difficult legal issues that cannot be easily dismissed by incorrectly mocking the Court for saying that a corporation is a human person. The Court is quite aware that a corporation is a legal person, not a human one.

Thus, those jumping on the simplistic bandwagon of “corporations are not people” are shooting themselves in the foot by not addressing the more difficult constitutional issues that Citizens United present. These are difficult issues that require careful thought, not slogans.

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Links to previous posts this series:

Corporations (Part I of series): Introduction—Why We Need To Know About Them (2/3/12)

                II. Corporations: Their Early Beginnings (2/18/12)

                III. Corporations--an Example of Extreme but Conditional Power (7/3/12)

                IV: The First American Corporations--pre-1776 (12/31/12)
            
                V: The Transformation of the American Corporation (2/24/13)         

            VI. A recent example of potential governmental and people power over corporations

V: The Transformation of the American Corporation

(This post is the fifth in the series--see links below for previous posts)

During the second half of the nineteenth century, the American corporation underwent a dramatic change.

The early American corporations, while important, were not going to dominate business. The reason: the existence of a corporation required a specific grant from a governmental body, called a “charter.”

Since a corporation is a legal entity, not a natural one, its existence requires a legal act. “The charter is a grant of authority from the sovereign. It specifies the powers, rights, and duties of the corporation.” (2), p.129.

The nature of that legal act, the charter, changed dramatically toward the end of the nineteenth century. Until this change occurred, charters were granted one by one, by legislative acts, to establish corporations to do particular things. “Approval of a charter was a political issue, involving lobbying, campaign contributions, and worse.” (3), p. 13.

Yet, corporations had an advantage over other business forms. A corporation could raise capital quickly from a wide variety of sources. The purchasers of a corporation’s shares risked no more than the cost of the shares, while they stood to gain from the corporation’s success. The corporation did not need to rely solely on the wealth of a few people. Instead, it could obtain capital from numerous less wealthy sources, and the accumulated amount of this capital could easily exceed that available from one or two wealthy investors. To fund the industrialization of the nineteenth century, such capital was essential.

In the eighteenth century, most corporations were chartered for educational, religious or charitable institutions, or to create municipalities: cities and boroughs. (See the previous post.)  In that entire century, only 335 business had received charters in the U.S. (2), p. 129.

Industry in America began its enormous growth beginning around 1825, not coincidentally the year the Erie Canal was completed. Transportation and banking infrastructure were essential to this growth. Railroads began to expand, eventually connecting the Atlantic and the Pacific coasts. Banks went from small clubs of merchants providing credit to one another to chartered institutions that were essential players in the industrial expansion. The chartering of corporations one by one was a clumsy process that needed streamlining to keep up with and expand this growth.

This need was met by state legislatures, which, beginning around 1850, began to replace the one-by-one chartering process with general laws that simply required that a corporation can be created by filling out and filing the appropriate forms. “Under a general corporation law, anybody who wanted to could incorporate, and without wasting the time of the legislators.” (2), pp. 390-91. Any restrictions on the corporation were stated in the general law for all to see. Different states imposed different restrictions, but in the beginning of this process, all states who had such laws exercised some control over what corporations could and could not do. Massachusetts and New York, for example, placed upper limits on the size of the capitalization of any corporation incorporated in its state. Some of these provisions controlled the price of shares and specified what the corporation could or could not do without shareholder approval. States also charged fees to incorporate. (2), pp. 398-99.

In spite of these restrictions, the move from one-by-one chartering to a general law of incorporating evolved into a revolutionary change that enabled corporations to become the dominant business institution of the twentieth century, as they still are today.

Once a corporation came into existence, it was not restricted to operating solely in the state of incorporation. Court decisions essentially supported the idea that the U.S. Constitution, in particular the Commerce Clause and the Fourteenth Amendment, protected the right of a business to operate across state lines. This meant that, if a corporation wanted to do business in New York, it could incorporate in another state with friendlier incorporation laws, set up a storefront in the incorporating state, and do practically all of its business in New York. (2), pp. 396-98.

The states, in turn, had an interest in drawing business to within their borders. Businesses not only paid the states’ incorporation fees, they also provided a source of income for the states through taxation, and they potentially provided jobs. One way for states to attract businesses was by removing restrictions on corporations and lowering the fees. The states began to compete to be the least restrictive. Some other states simply did not enforce the restrictions on their books. New Jersey was the first to remove all significant restrictions. In its 1896 law, “a corporation could be formed for ‘any lawful business or purpose whatsoever.’” (2), p. 396. New Jersey quickly became the preferred home of corporations. But New Jersey then took a step “backward” and increased regulatory control over corporations. (3), pp. 13-14.

In 1899, Delaware passed its liberal incorporation law and did not step “backward.” It then became the favorite state for incorporating businesses. (2), p. 399. Even though many other states followed with equally liberal incorporation laws, Delaware’s prior success allowed it to establish itself as the source of developed corporation law and judicial expertise, thus adding more certainty and stability to corporate law than other states could achieve. Delaware remains the favorite home of corporations.

By the turn of the century, the American “corporation had torn free of its past--it could be formed almost at will, could do business as it wished.” (2), 399. This was possible only because states changed their laws. But the same reasons that led them to change their laws remain as reasons they are unlikely to reverse course and change them in the future to regulate corporate power. They could but, most likely, won’t.

Still, the existence of corporations and the scope of what they can do depend on the laws of the governments that enable corporations to exist.

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References (the numbers correspond to the numbers above):

(1) John Micklethwait and Adrian Woolridge, The Company: A Short History of a Revolutionary Idea: Modern Library, 2005

(2) Lawrence M. Friedman, A History of American Law, 3^rd ed.: Simon & Schuster (Touchstone), 2005

(3) Robert W. Hamilton, The Law of Corporations, 4^th ed.: West Publishing Co., 1996.

Links to previous posts in this series:

Corporations (Part I of series): Introduction—Why We Need To Know About Them (2/3/12)

II. Corporations: Their Early Beginnings (2/18/12)

III. Corporations--an Example of Extreme but Conditional Power 
                   (7/3/12)

IV. The First American Corporations--pre-1776  (12/31/12)

IV: The First American Corporations--pre-1776

            Corporations as they exist today did not spring up all at once. It took several centuries for the concept to catch on and be implemented as a way of doing business. Viewing this history will help us to see the strengths and weaknesses of the corporate structure and help us to determine how corporations might be steered to contribute to the welfare of all instead of contributing primarily to the profits of a few.

As this series continues, we will also see more clearly the role governments play in making corporations possible. The goal of this series is to provide a foundation of understanding so that we may intelligently tackle the problem of excessive corporate influence, particularly on the funding of electoral candidates. (1).

            To understand the role corporations play in the nation and the world, it is crucial that we see that some very important corporations include more than profit-making businesses.

            The first currently-existing corporation created on the soil of what is now the United States is Harvard University. (3). It was incorporated in 1650 through the action of the Massachusetts colonial legislature, called The General Court (as it is still called today). Harvard’s existence began in 1636; incorporation came later. (2, p. 84). Yale University received its charter of incorporation in 1701. (4). By the time of the American Revolution, nine colonial colleges had been incorporated. (2, p. 84). (Most private colleges and universities today are corporations.)

            In the colonies, communities also sometimes were incorporated. Apparently the very first corporation in the colonies occurred in 1587 when a grant from Sir Walter Raleigh, acting under authority given to him from England, created the city of Raleigh, Virginia (2, p. 30), on an island (later in North Carolina) that was subsequently abandoned. Although it was not always clear which entities had legal status as corporations and which did not, there were roughly two dozen municipal corporations created in the colonies, beginning in the latter half of the seventeenth century. (2, pp. 50ff). Most of them survived up to and following the Revolution. (2, p. 59). However, most cities and towns in the colonies were not corporations or had a disputed legal status. (2, pp. 60-64). In addition to municipal corporations, a few public corporations were established for the purposes of charity or to administer loans. (2, p. 73).

In the colonies there was no clear line separating public from private corporations, but the latter were more directly financed and controlled by private parties. (2, p. 75). These private corporations included many non-business entities, such as religious institutions, e.g., churches and various religious societies. (2, pp. 75 ff). The establishment of such religious corporations started at the beginning of the eighteenth century. (2, pp. 75 ff). Many such institutions were not corporations but enjoyed legal stability in other forms that varied considerably over time and in different places. (2, pp. 75 ff). Private corporations too included entities that were charitable, educational, or a combination of both. (2, pp. 82 ff).

Business corporations existed prior to the Revolution, but their influence was limited. (2, p. 87). Apparently the first business corporation in America was established in 1589 when Sir Walter Raleigh, under authority granted to him by the Queen, granted a group of men a corporation for business. It did not last long. (2, pp. 31-32).

Subsequently colonial corporations came into existence by receiving a charter from the colonial government with no interference by the British. The governmental sources of these charters varied across the colonies: sometimes it was from the governor acting alone, sometimes from the governor with legislative approval, and sometimes from just the legislative body. Most were set up for charitable, educational or religious purposes; a few were for business purposes. There were also many corporate-like associations and societies that lacked one or more of the formalities required to create a corporation. (2, pp. 104-107).

As we shall see in subsequent postings, it was not until the nineteenth century that the business corporation took hold as an important and significant alternative way of doing business. Even so, the concept of the corporation was controversial. The slowness of the rise of the corporation was most likely because, until the middle of the nineteenth century, corporations were too dependent on the governments that created them. The existence of a corporation depended on a specific charter granted by the appropriate governmental authority. For example, the governing body of Connecticut granted a charter to the New London Society for Trade and Commerce in 1732, and then revoked the charter a year later. (5, p. 43). The existence of any particular corporation, therefore, depended on politics. Since one of the purposes of a corporation is to have an extended life beyond the life of any particular owner, there was little reason to form a corporation that may live for a shorter time at the whim of the legislature. Educational, religious and charitable institutions were on safer, less political ground.

As we shall see in subsequent postings, the business corporation as we know it today requires some assurance that its life would not be threatened by a change in the composition of the legislators or governorship in power at the time of the corporation’s creation.

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References (numbers correspond to the numbers in the preceding text):

(1)   Links to other posts in this series:

Corporations (Part I of series): Introduction—Why We Need To Know About Them (2/3/12)

            II. Corporations: Their Early Beginnings (2/18/12)

                  III. Corporations--an Example of Extreme but Conditional Power 
                   (7/3/12)

(2)   Essays in the Earlier History of American Corporations, Vol. 1, by Joseph Stancliffe Davis, New York: Russell & Russell, Inc. (1965) (originally copyrighted in 1917).

(3)   Harvard’s website (as of this posting) claimed that Harvard is the oldest corporation in the Western hemisphere (http://www.harvard.edu/harvard-governance). It does appear to be the oldest existing corporation in the United States, but verifying that the original inhabitants and the various European colonists did not establish an earlier still-existing corporation somewhere in the Western Hemisphere would be difficult if not impossible to do.

(4)   http://yale.edu/about/history.html

(5)   John Micklethwait and Adrian Wooldridge, The Company: A Short History of a Revolutionary Idea (New York, 2003; page references are to the paperback edition, 2005).

III. Corporations—An Example of Extreme but Conditional Power

Corporations come in all sizes. Some consist of a handful of people with little or no capital. Others are huge and powerful. Some are non-profits that have socially valuable objectives. Some, such as private educational and health-care institutions, are woven into the fabric of society. But many exist only to provide profits to the shareholders without regard to their broader social impact. It is incorrect to lump them all into one bucket.

This posting, the third in this series, will briefly describe the power and fate of what was perhaps the most powerful corporation of all, the British East India Company (which had various other official titles, and below will just be called “the Company”). It survived for 274 years from 1600 until 1874—though its power was practically all taken away from it in 1858. (Today, another company by the same name, selling food in London, claims some kind of unclear connection to the defunct one.) Subsequent postings in this series will also discuss other kinds of corporations, from the minute to the powerful, from the charitable to the soulless.

“What was so special about this Company? Well, at the end of its powers it was responsible, directly or indirectly, for nearly one-fifth of the world’s population.” (Gardner, p. 11—see references below.)

What started it? The exotic health foods of the day—spices, notably cloves, nutmeg, mace, pepper and cinnamon, and later tea and coffee, combined with the irresistible lure of profits. The attraction of these spices led to the European “discovery” of America, resulting from an attempt to reach these spices by sailing west instead of east. The Europeans who sailed east found many of these spices in an area appropriately called ‘The Spice Islands,” an area mostly of now Indonesian islands between the Philippines to the north and Australia the south. These spices could be obtained at very low cost from their sources and sold at high prices in Europe and England. (For example, in one instance, in 1608, a cargo of cloves that was purchased for the equivalent of £3000 sold in England for £36,000.) The ships of Europe began to replace the slower transport of these spices through Persian and Arab lands. The Portuguese ships got to this area first, followed more successfully by the Dutch and later the Company which engaged in frequent skirmishes with the Dutch. Due to the success of the Dutch, the Company pulled back from the Spice Islands and retreated northwest towards India and for certain periods, Burma and Thailand.

The Company was established as a corporation by Elizabeth I, Queen of England, in 1600, by her signing a “charter” that gave the Company authority to operate as a corporation. The corporate form enabled the Company to collect large investments simply by selling shares, often to others who had no interest in engaging directly in the Company’s business. Years before, British merchants began to set up various endeavors, complete with ships, to engage in trading with Asian areas, just as Portuguese and Dutch merchants did. The Company evolved out of these earlier endeavors, but to become a corporation, an artificial legal entity, a charter from the Queen was necessary. The Company’s charter was initially valid for only fifteen years, but it was continually renewed (with modifications) until the final charter that expired in 1874. The Company’s first ships sailed in 1601, going south and around the African Cape of Good Hope and then northeastward to reach their destinations many months after leaving England.

With the huge profits from the sales in England of these Asian items, the Company not only funded itself and built more ships, but also paid the shareholders who provided the Company’s funding. Much later, beginning in the late eighteenth century, the Company earned further income by engaging in the Asian tea and opium trades that included trade with China.

The Company’s earliest efforts were focused on trade in the East Indies, not conquest of Asian lands. Nonetheless, the Company’s ships were well armed and, when the opportunity presented itself, would often attack and plunder other European ships, take over their outposts on land or seek to divert trade to itself. Other major battles were fought with pirates—and, less successfully, with cholera and other diseases. By the end of the seventeenth century, the Company was well established along various costal areas of what was later known as India. Occasionally there were battles with local Indian authorities, which the local authorities sometimes won, and some ill-advised plundering of Indian vessels that jeopardized the very trade on which the Company depended. Often, but not always, the Company’s presence was accepted by the local authorities through various arrangements, including bribes and intrigue.

Beginning in the early eighteenth century, the Company’s armies grew, consisting of both British and Indian soldiers (“sepoys”). Without the sepoys, the British would have had no hope of success. Beginning in the middle of that century and well into the next, the Company increasingly engaged in military takeovers of Indian lands with the essential assistance of sepoys. These ventures involved fighting other European powers, most notably Portugal and France, as much as Indian powers. Communications and directives from London, including occasional directives to avoid intervention into Indian affairs and to respect native culture, were often ignored or arrived too late to change what had already happened. Desires to westernize and Christianize India increased, both within the Company and in England. Nonetheless, there were some marriages between Company men and Indian women and some notable Anglo-Indian families resulted. In addition to the marriages, from the beginning of the Company’s numerous landings from India to Japan, sex between the Company’s male personnel and the local women were documented and sometimes seemed to play a role in decisions affecting commerce. Thus, the Company’s complex and varied life might be said to have been governed by commerce, carnality, adventure, alcohol, disease, warfare and intrigue.

As these incursions into India increased, by the end of the eighteenth century the Company controlled, directly or indirectly, much of the Indian sub-continent. It expanded further. However, its attempt to take over Afghanistan resulted, in 1842, in the total slaughter of an entire Company camp, more than 16,000 people, with only one known survivor. (A poignant trilogy of novels set in those times was written by Thalassa Ali, noted below.)

While the Company came increasingly under the control of London beginning towards the end of the eighteenth century, the Company’s final demise was brought about in 1857 by a mutiny of sepoys in a large area that included Delhi. The mutiny developed into war. During these battles, both the British and opposing Indian forces engaged as commanded in some of the most depraved and bloody atrocities of which humans are capable. The Company eventually prevailed at great cost to human life—and the loss of any credibility of whatever dubious claim it might have made to be a force of decency.

The war was not well received in London, and it triggered successful efforts in Parliament to transfer the Company’s possessions to the crown. By act of Parliament in 1858, the Company was reduced to a minimal existence that was later completely eliminated by the expiration of its final charter in 1874. Its huge, stately headquarters in London were demolished in 1861. However, the Company set the stage for England to take direct control over the places that the Company had colonized. By then, the age of imperialism was well underway.

While the Company has been called the world’s most powerful corporation, we must not lose sight of the fact that the Company’s existence depended entirely on charters from the government. When the Company’s final charter expired and was not renewed, the Company ceased to exist. This is important, because a corporation today, as has always been the case, exists only to the extent that a government authorizes its existence.

But we must also not lose sight of the fact that the Company often operated on its own, sometimes in direct defiance of directions from London. The Company became a nation of its own, authorized by another nation that could not control it while it existed. Still, the Company’s foundation was nothing more than a series of legal writings approved by the British government. Thus, in spite of its independent stature, the Company was, as a legal matter, an extension of the British government, but an extension that took on a life of its own and that the government could not fully control without entirely removing the Company’s legal foundation.

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Histories:

Brian Gardner, The East India Company: A History, McCall Publishing Co, New York, 1972.

John Keay, The Honourable Company: A History of the English East India Company, Macmillan Pub. Co., New York, 1991.

A short overview:

John Micklethwait and Adrian Wooldridge, The Company: A Short History of a Revolutionary Idea, Modern Library, New York, 2005, pp. 21-28.

A trilogy of novels in an historical setting in nineteenth century India: 
Thalassa Ali, A Singular Hostage (London, 2002), A Beggar at the Gate (New York, 2004), Companions of Paradise (New York, 2007).

Links to previous postings in this series:

1. Corporations (Part I of series): Introduction—Why We Need To Know About Them (2/3/12)
2. II. Corporations: Their Early Beginnings (2/18/12)

II. Corporations: Their Early Beginnings

[This is the second of a series. Why this series on corporations?]

Beyond the individual, the family, the church and the state, there have always existed associations of people who act as a group. In early times, such associations may have been hunting parties, harvesting groups, gangs, villages, tribes and the like. Somewhere during the development of civilization, some of these associations evolved into today’s corporations.

When did this evolution begin? (Hint: It was long before the nineteenth century.)

To even attempt to answer that question, we first need to have an idea of what a corporation is so that we know what to look for.

In essence, a corporation is an entity that (1) holds and expends resources of monetary value (capital), (2) has a legal existence independent of any natural person or group of natural people living at any particular time, and (3) has a management that is different from the providers or owners of its capital.

A private business corporation is only one kind of corporation. Corporations may be towns, educational institutions, religious institutions, religious communities, and charitable organizations, as well as profit-making businesses. A key feature of a corporation is its independent existence apart from living people. (One historian traces the origin of the corporation to the family, which has a continued existence beyond the family members living at a particular time—Ancient Law, pp. 178 ff; see “References” below. However, a family is not a corporation; the latter has additional characteristics.)

A consequence of this independence and structure is that people or entities that provide capital to the corporation are protected from any of the corporation’s liabilities that may exceed the capital provided to it. That is, the providers of the capital (investors or owners) have “limited liability.” In practical terms, that means that a corporation may go bankrupt without bankrupting the investors or owners.

Thus, a corporation is not like a family or any ordinary organization of people. If all of the participants of an ordinary organization die, the organization dies. A corporation would continue to have a legal existence (though it may die for other reasons). Historically, before there was a corporate option to form a business, businesses were run by individuals and teams of individuals (partnerships). If all of these individuals died, the business died. In addition, if the business was sued because its products were harmful (assuming such suits were possible in those days), each of these individuals would be liable to pay the damages, even if it took everything these individuals owned. But if these individuals could have instead formed a corporation, the damages owed would not exceed the amount of capital the individuals had contributed to the corporation. The rest of their assets could not be used to pay the damages. (There is an exception if the corporation is too completely tied to one or two people.)

An advantage of the corporate structure, therefore, is that a corporation can obtain and use capital and risk failure without risking the economic survival of those who provided the capital.

When and where in history did such an entity begin to exist?

Unlike specific historical events, it cannot be said that corporations began on a specific date. If there was a “first” corporation, we may never know when it happened or what it was, although there are some informed guesses. Suffice it to say, as two writers noted:

In the early Middle Ages, jurists, elaborating on Roman and canon law, slowly began to recognize the existence of “corporate persons”: loose associations of people who wished to be treated as collective entities. These “corporate persons” included towns, universities, and religious communities, as well as guilds of merchants and tradesman. Such associations honeycombed medieval society. . . .

(Quoted from The Company, p. 12; cited in full in “References” below.)

Prior to the Middle Ages, the concept of corporate entities can be found in Roman law, dating back to the late third century B.C. (The Company, p. 4.)

So the concept of the corporation developed very gradually beginning even prior to the Middle Ages. Corporations set up for private commercial purposes developed later. A commercial corporation, Aberdeen Harbour Board (Scotland), was set up in 1136. (The Company, p. 12.) Some believe the first European private business corporation still in existence was Stora Kopparberg of Sweden, which was issued a royal charter in 1347 and is the predecessor of today’s Finish company, Stora Enso Oyj. (The Company, p. 12; supplemented by information on Wikipedia.) 

The importance of this historical background is to know that corporations and corporate personhood did not just come into existence in modern times. It’s an ancient idea that continued to grow and develop into the modern corporation. The next few posts in this series will briefly outline this development. That will help us understand the corporation today.

And tomorrow? We would be short-sighted to believe that this process of historical change has ended. 

________________________________

Go to the first post in this series on corporations.

References:

Joseph Stancliffe Davis, Essays in the Earlier History of American Corporations, Vol. 1, (New York, 1965; originally published 1917)

Melvin A. Eisenberg, The Structure of the Corporation (Boston and Toronto, 1976)

Robert W. Hamilton, The Law of Corporations, 4^th ed. (St. Paul, MN, 1996)

Henry Sumner Maine, Ancient Law, 10^th ed. (Gloucester, MA, 1970; originally published 1861)

John Micklethwait and Adrian Wooldridge, The Company: A Short History of a Revolutionary Idea (New York, 2003)

Wikipedia.org (used with caution; it contains errors)

Corporations (Part I of series): Introduction—Why We Need to Know About Them

Corporations are an integral part of the fabric of modern society. They affect nearly everything we buy as well as our jobs, entertainment, news sources, and politics. Yet, little is known about them. What is a corporation? Can they distort financing of political campaigns? I am writing this series on corporations so that we may learn about them.

The need for this series is indicated by my previous posting, “The Misguided People’s Rights Amendment.” The promoters of this amendment are seeking to amend the U.S. Constitution to make it inapplicable to corporations. Though these promoters are liberal democrats with good intentions, they are going down the wrong path. They think, incorrectly, that the disproportionate influence of wealth in the financing of political candidates can be corrected by eliminating any legal rights corporations may have under the Constitution. They also think, incorrectly, that the amendment will reverse the U.S. Supreme Court decision in the Citizens United case. (See previous post.) These promoters not only misunderstand what Citizens United actually held (which pertains to much more than corporations), they also misunderstand what corporations are. Their promotion of this amendment, thus, arises from and depends on public ignorance.

But don’t feel bad if you are among the ignorant. Corporations are such varied and complex entities that they are not easy to comprehend. Understanding Citizens United requires very careful reading of a very long legal opinion. You can have a Ph.D. and know nothing about corporations. My first introduction to corporations was in law school, and many lawyers never took a course in the subject. I will be learning too as I continue with this series.

Corporations are entities created by law that exist independently of any person or group of people. Corporations cannot exist without some sort of legal authorization from a governmental body. They have historically been regarded as artificial persons. Unlike real people, they are potentially immortal, though like real people, they can be born, die or be killed. Whether a corporation is created and how long it lives, nonetheless, depends on real natural living people.

Most of us think of corporations as huge businesses, like General Motors or Apple or Bank of America. But there are many different kinds of corporations. They include tiny businesses, educational and religious institutions, and non-profit organizations. For example, Wikipedia is operated by Wikimedia Foundation, Inc., a non-profit charitable corporation. Thus, it is incorrect to equate corporations with large capitalistic profit-making enterprises. Corporations serve many purposes, some good, some not so good, depending on your point of view. If we think of corporations as “bad,” then we do not understand what they are. Nonetheless, there is good reason to be concerned about the influence and power of mammoth multinational corporations. Are they a threat to democracy?

This series of postings on corporations will give us some basic information. The series will span many months. We will use this information later to discuss the role that corporations should have, or not have, in a democratic society. We will learn that corporations, for better or worse, have played a major role in the development of modern civilization. The world economy depends on them. This blog depends on them. So if we determine that there is a problem with them, we need to be careful in addressing the problem.

The Misguided People’s Rights Amendment

The so-called “People’s Rights Amendment” is an attempt to nullify the 2010 U.S. Supreme Court decision in Citizens United v. Federal Election Commission. The key provision of the proposed amendment states, “People, person, or persons as used in this Constitution does not include corporations.”

An “op-ed” supporting this proposed amendment, written by U.S. Representative Jim McGovern and author Jeff Clements, appeared in the Boston Globe on January 21^st, titled “'We the People' can overturn Citizens United.” In a similar vein, the Huffington Post, on January 9^th, published an online article by Marge Baker titled “Overturning Citizens United: A Movement Moment.” (My January 10^th comment on that article is similar to my letter below.)

These articles illustrate the need for the public to know more about corporations, for the articles are products of widespread public ignorance of the subject. I will seek to remedy this problem by posting a series on corporations. It’s a big subject that will take several months of postings. The first posting will be soon.

Meanwhile, you should know something about why the People’s Rights Amendment is a bad idea. My letter to the editor, published today, introduces the matter. Here is the letter as it appeared in the Boston Sunday Globe in the Ideas section, page K9, January 29, 2012, and also online for subscribers at BostonGlobe.com:

Proposal is misguided attempt to reform election financing

THE PEOPLE’S Rights Amendment, as currently drafted, is a misguided attempt to bring about needed reform of the financing of elections ( “ ‘We the People’ can overturn Citizens United,’’ Op-ed, Jan. 21). Such financing reform is desperately needed, but it cannot be attained merely by attacking the personhood of corporations. Since wealthy individuals can distort the funding of elections just as easily as corporations, the electoral reform that is needed is different from and broader in scope than corporate personhood.

Moreover, the Supreme Court initially declared that corporations were persons, not in Citizens United v. Federal Election Commission in 2010, but in Santa Clara County v. Southern Pacific Railroad Company in 1886. Even in the colonies prior to the Revolution, corporations (such as they were then) were regarded as artificial persons. Such entities created by law have been instrumental in the development of modern civilization and include not only large business corporations but a multitude of micro and small businesses and charitable nonprofits.

Thus, the People’s Rights Amendment is not only based on a misunderstanding of the history and law of corporations. It also misses the bigger target of wealth’s disproportionate influence over government.

John L. Hodge

Jamaica Plain