The response of the American people in the Progressive Era that followed is instructive for our time. Following Santa Clara in 1886, the Supreme Court faced a wave of cases in which large corporations and the infamous corporate monopoly “trusts” demanded constitutional rights to shield them from the growing movement for laws to protect employees (including child labor), the environment, fair taxes, and other public interests. On several occasions in the 1890s and early 1900s, the Supreme Court agreed with the corporations. The cases stated, without any explanation whatsoever, that “a corporation is a person under the Fourteenth Amendment,” as if saying that with a straight face would make it true.23 Could it be true?
Not a chance. Absolutely no evidence suggests that corporations were intended to be included in the Fourteenth Amendment or in the Constitution generally. Indeed, the evidence is exactly to the contrary. Since the beginning of our country, virtually every generation of Americans has acted to prevent corporate power from being leveraged into political power at the expense of the people. During the colonial era, only “a handful of native business corporations carried on business … four water companies, two wharf companies, two trading societies, and one mutual fire insurance society,” and only twenty business corporations were formed by 1787, when the American people convened the Constitutional Convention in Philadelphia.24 Legislatures, however, increasingly permitted the creation of corporations in the new republic to facilitate and expedite all kinds of public purposes, such as the building of roads, dams, and bridges.25 Yet it remained clear that corporations were legal instruments of the state, defined and controlled by the state, with limitations on their purposes and their duration.26
It would be bizarre if the generation that defiantly declared to the world that “all men are created equal” and that “they are endowed by their Creator with certain unalienable Rights” and who wrote a constitution opening with “We, the People,” would have tolerated corporate constitutional rights. Founders such as Thomas Jefferson and James Madison could not have been more clear about the danger of unregulated corporations and the need for, as Madison put it, “proper restraints and guards.” Another founder, James Wilson, a Pennsylvania man who signed the Declaration of Independence, served in the Continental Congress, helped draft the Constitution, and was nominated by George Washington to be one of the first six justices on the Supreme Court, agreed. He well expressed the prevailing view of the time that corporations can be useful tools of the state but must always be controlled by the people:
A corporation is described to be a person in a political capacity created by the law, to endure in perpetual succession…. It must be admitted, however, that, in too many instances, those bodies politick have, in their progress, counteracted the design of their original formation…. This is not mentioned with a view to insinuate, that such establishments ought to be prevented or destroyed: I mean only to intimate, that they should be erected with caution, and inspected with care.27
The Supreme Court at the time knew that any “rights” of corporations come from the state charter, not from the Constitution (let alone from our Creator). That is because corporations are “creatures of law.” The corporate legal form today is not fundamentally different than when Chief Justice Marshall explained in 1819 that a corporation, as a “mere creature of law … possesses only those properties which the charter confers upon it, either expressly or as incidental to its very existence.”28 A corporation today is chartered from the state just as in 1809 when a unanimous Supreme Court held that “a body corporate as such cannot be a citizen within the meaning of the Constitution.”29
For nearly two hundred years, the Supreme Court rejected the argument that corporations were entitled to the rights of citizens under the Constitution’s “privileges and immunities” clause. In 1839, the Court said, “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.”30 Fifty years later, the Court said that the term citizens in the Constitution “applies only to natural persons, members of the body politic owing allegiance to the state, not to artificial persons created by the legislature, and possessing only such attributes as the legislature has prescribed.”31
At least until recently, the vigilance of American leadership about corporate power did not waver as corporations became more dominant in our economy. “Corporations, which should be the carefully restrained creatures of the law and the servants of the people, are fast becoming the people’s masters,” warned President Grover Cleveland.32 Theodore Roosevelt sought to end “a riot of individualistic materialism” and successfully called for a ban on corporate political contributions: “Let individuals contribute as they desire; but let us prohibit in effective fashion all corporations from making contributions for any political purpose, directly or indirectly.”33 President Roosevelt said he “recognized that corporations and combinations had become indispensable in the business world, that it is folly to try to prohibit them, but that it was also folly to leave them without thoroughgoing control.”34
This vigilance did not mean that powerful corporations simply accepted or cooperated with the public’s “thoroughgoing control.” As those who came before us well understood, concentrated power and aggregated wealth in corporations have always led corporations to seek “rights.” An assertive, vigilant citizenry and leadership has always been needed to push back.
Until the success of the Powell-Chamber of Commerce plan, the Santa Clara line of “corporate person” cases was rendered largely meaningless by the people’s rejection of corporate rights throughout the twentieth century. The Republicans under Theodore Roosevelt restrained corporate power with effective antitrust enforcement, labor laws, environmental laws, and laws banning corporate political spending. In Roosevelt’s words, “There can be no effective control of corporations while their political activity remains.”35 Democrats under Woodrow Wilson and Franklin Roosevelt likewise regulated corporate power to ensure the strength of the people and the country as a whole. And Republicans, Democrats, and Independents came together to amend the Constitution in 1913 to weaken the corporate hold on government by requiring senators to be elected by the people rather than appointed by state legislatures.
Finally, in a 1938 dissenting opinion, Justice Hugo Black, a former Alabama senator, demolished the idea that corporations were “persons” with rights under the Constitution’s Fourteenth Amendment. While he wrote in dissent, the clarity of his expression about corporations and persons sounded a warning to any justice who might try to slip corporate rights into the Constitution with “glittering generalities” and glib citation of Santa Clara. His lengthy dissenting opinion examined the words, history, meaning, and purpose of the Fourteenth Amendment:
I do not believe that the word “person” in the Fourteenth Amendment includes corporations…. A constitutional interpretation that is wrong should not stand. I believe this Court should now overrule previous decisions which interpreted the Fourteenth Amendment to include corporations.
Neither the history nor the language of the Fourteenth Amendment justifies the belief that corporations are included within its protections.
Certainly, when the Fourteenth Amendment was submitted for approval, the people were not told that the states of the South were to be denied their normal relationship with the Federal Government unless they ratified an amendment granting new and revolutionary rights to corporations…. The records of the time can be searched in vain for evidence that this amendment was adopted for the benefit of corporations.36
With Justice Black’s warning shot that there would be no more free rides for corporate rights on the Supreme Court, Santa Clara “corporate personhood” was a dead issue for decades. Indeed, the Court said little more about corporations’ “rights” until Justice Lewis Powell and his Chamber of Commerce plan came to the Supreme Court following the death of Justice Black in September 1971. Through most of the twentieth century, the
Court returned to the basic American understanding that corporations were economic, not political, entities.
For example, in rejecting the claim of corporations for privacy rights in 1950, the Supreme Court said:
Corporations can claim no equality with individuals in the enjoyment of a right to privacy. They are endowed with public attributes. They have a collective impact upon society, from which they derive the privilege of acting as artificial entities…. Law-enforcing agencies have a legitimate right to satisfy themselves that corporate behavior is consistent with the law and the public interest.37
For more than a century until Citizens United, most states and the federal government banned corporate political contributions and spending. Some states, such as Kentucky, even made the control of corporate political activity part of their state constitutions.38 With the exception of Justice Powell’s early foray into corporate rights in the 1978 First National Bank of Boston case, this basic understanding of the place of corporations in American democracy guided the Supreme Court, even as Justice Powell’s “corporate speech” cases worked away at creating the new corporate rights doctrine.
The one time before Citizens United when the Supreme Court went off the rails with respect to corporate political spending occurred with Justice Powell’s maiden corporate rights decision in First National Bank of Boston, striking down a state law banning corporate spending in referendum elections. That exception should have proved the rule, in large part because of the force of Justice Rehnquist’s dissent. Rehnquist concluded that the “Fourteenth Amendment does not require a State to endow a business corporation with the power of political speech.”39 Instead, Rehnquist forcefully pressed the truth that corporations are not people with rights but are entities defined by the states, with restrictions that the legislatures find appropriate. Congress, he wrote, and numerous
States of this Republic have considered the matter, and have concluded that restrictions upon the political activity of business corporations are both politically desirable and constitutionally permissible. The judgment of such a broad consensus of governmental bodies expressed over a period of many decades is entitled to considerable deference from this Court.40
Again, the different opinions of these two Richard Nixon appointees—William Rehnquist and Lewis Powell—showed the stark gap between the corporatist and the conservative understanding of our American republic. For a time, the conservative Rehnquist was able to form a majority on the Court. In 1990, the Chamber of Commerce in Michigan attacked a law restricting corporate political spending and lost. The Court upheld the right of the people to keep corporations out of politics. In that case, Austin v. Michigan Chamber of Commerce, Justice Rehnquist’s dissenting views in the corporate speech cases became the majority view.41
Rehnquist joined the liberal Thurgood Marshall, who wrote for the Court in affirming Michigan’s regulation of corporate spending in elections. Marshall’s words for the Court were drawn from the earlier Rehnquist dissents:
State law grants corporations special advantages…. These state-created advantages not only allow corporations to play a dominant role in the Nation’s economy, but also permit them to use “resources amassed in the economic marketplace” to obtain “an unfair advantage in the political marketplace.”42
Even as late as 2003, before Chief Justice John Roberts and Justice Samuel Alito replaced Chief Justice Rehnquist and Justice Sandra Day O’Connor, the Court agreed that the same corporate election spending law that the Court would later strike down in Citizens United was perfectly fine under our Constitution. In that 2003 case, McConnell v. Federal Election Commission, the Court affirmed that the people’s representatives in Congress were entitled to “the legislative judgment that the special characteristics of the corporate structure require particularly careful regulation.”43
Citizens United: Corporations Back
on the Track, People to the Back
We then come to Citizens United a mere seven years later, posing again this fundamental question of American democracy: Can Congress and state legislatures make laws distinguishing between the American people spending money in politics and corporations spending money in politics? What had changed since 2003, 1990, the New Deal, Theodore Roosevelt’s presidency, the 1800s, or the days of Madison, Jefferson, and President Washington’s Supreme Court justice and national founding father James Wilson?
Is Citizens United different because that case involved a nonprofit corporation? Although that point may have been worthy of examination, it made no difference to the Court. The Court in Citizens United made very clear that its decision applied to all corporations (or, as Justice Kennedy’s decision called them, all “voices” and “speakers”). That is why Koch Industries, Target, News Corporation, and other global, for-profit corporations fun-neled hundreds of millions of dollars into the November 2010 elections and are gearing up to do even more in the 2012 elections.
While sympathy for a nonprofit corporation seeking to express the views of its members is understandable, corporations, whether for-profit or not-for-profit, are creatures of the state. Take Citizens United, for example. Citizens United is a corporation organized under Virginia law. It exists as a nonprofit corporation because the people of Virginia passed an incorporation law. Under this law, people may create a nonprofit corporation only if they file with the state a set of articles of incorporation containing elements that the state requires, pay a filing fee of $75, designate a registered agent to deal with the state’s annual assessment packet, and comply with record-keeping and other requirements set out in the Virginia law.
Without all of these steps, Citizens United (or any other nonprofit corporation) does not exist. In fact, the state provides the equivalent of the corporate death penalty for noncompliance with these laws. No one forced people to incorporate their activity as Citizens United, the nonprofit corporation, but once they chose to do that, is it too much to ask that the corporation comply with the laws on the books?
That does not mean that the people who support Citizens United, who work there, or who believe in its mission lose any rights whatsoever. They have all the same rights they had before they decided to incorporate and the same inalienable rights of all Americans. The corporation, however, does not, and we are not required to pretend that the corporation is the same as the people.
Once we recall that the rules for corporations come from us, for the betterment of our nation, the idea of “corporate rights” will be exposed as ridiculous. If we return to recognition that corporations are policy tools, rather than people with constitutional rights, we can then begin to realize many possibilities to improve the tool so that it better serves the purposes for which we Americans permitted the corporate entity in our laws in the first place. We can begin to rethink and reinvigorate our incorporation laws.
We might decide that the 306 million Americans who do not live in Delaware should have as much say about corporate law as the 900,000 people who live in Delaware now have. We might decide to create new and better corporate entities under the law, such as for-benefit “B Corporations,” and options for sustainable “low-profit” hybrids between for-profits and nonprofits. We can change the rules to make real shareholder democracy and to make corporations justify their corporate charters and show how they have served the public and complied with the law. We can use the corporate chartering and charter revocation process and other features of corporate law to prevent and punish corporate crime and misconduct. We can insist on accounting for externalities—the dumping onto society of costs from pollution, destruction of our global ecosystem, and financial bailouts.44
That’s not all. When people—voters, legislators, businesspeo-ple, everyone—take responsibility for the public tool of incorporation, we are not only saving our republic; we may also be saving our economy. With new corporate rules, we can make corporations more effective at business, protect innovation and competition, create more jobs, and free human creativity.
In Chapter Se
ven, I will explore these ideas in more detail, along with the tools to enact a constitutional amendment and many more things you can do to take back our rights, our republic, and our democracy. This will succeed because more and more Americans know just how badly unbalanced corporate power and the Powell-Chamber vision of a “corporate marketplace” country has corroded our political system and how costly that corrosion has become. In the next chapters, I will examine more closely how these costs are imposed on the nation as a whole and on so many people who can no longer count on their government and elected representatives to stand up for them.
Chapter Four
Corporations Don’t Vote; They Don’t Have To
The strength of America is in the boardrooms, country clubs and Lear jets of America’s great corporations. We’re saying to Wal-Mart, AIG and Pfizer, if not you, who? If not now, when?
—Murray Hill Inc., Candidate for United States Congress1
Not long after the Citizens United decision, a corporation chartered under Maryland law announced its campaign for Congress. Leading with the slogan “Corporations Are People Too,” Murray Hill Inc.’s statement explained: “Corporate America has been driving Congress for years,” and now “it’s time for us to get behind the wheel ourselves.” Proposing to “eliminate the middleman,” the corporation promised “an aggressive, historic campaign that puts people second, or even third.” The corporation explained that it would use Astroturf lobbying, avatars, and robocalls to reach voters, concluding, “It’s our democracy. We bought it, we paid for it, and we’re going to keep it.”2
Corporations Are Not People Page 9