How corporations became 'persons'
The amazing true story of a legal fiction that undermines American democracy.
Sound like a protester railing against the World Trade Organization? Think again. These are the words of a successful corporate lawyer who represented railroads before becoming president of the United States. They resonate for many people in this Era of Enron, when huge hot-stock corporations have cooked deals with the aid of their auditors and Wall Street bankers to enrich executives at the expense of their employees and shareholders, when corporate lobbyists and campaign donors so often have their way despite the interests of the voters, and when Federal Reserve figures show that the top 1 percent of U.S. households controls 38 percent of the nation’s wealth. But these words were [purportedly] written in an 1864 letter, by Abraham Lincoln.*
Today, Lincoln’s prophetic letter turns up more than 1,100 times in an Internet search, largely in writing that provides evidence that concern about corporate power is spreading rapidly—even though the issue is far from popular in our corporate-owned news media. The number of books on the topic is growing in number and quality. And a new breed of activists is winning converts to the idea that while vast corporations have helped fuel unprecedented prosperity they have also overpowered “government of the people, by the people, and for the people,” to quote another memorable Lincoln phrase. Corporations’ power over the government is at the root of a wide array of issues of deep concern to Unitarian Universalists, including campaign finance reform, the growing gap between rich and poor, environmental degradation, globalization, and whether democracy itself has been reduced to a mere charade or a sideshow in a global bazaar.
The debate about corporate power so far has cast it as a political issue. Yet, like all that is crucial, it is a religious concern as well. Any force that can overpower democracy is a threat not only to our nation’s political system but also to the human spirit, to the right of conscience, and thus to human freedom.
Democracy expresses the collective consciences of citizens. However noble or flawed its message, this is how our nation’s moral voice is heard.
Corporations express the collective investment goals of shareholders. The legal stricture known as fiduciary responsibility confines all but closely held corporations to this singular goal. By shutting off other values to focus solely on pursuit of profit in inherently amoral economic competition, corporations are by their nature amoral as well. Despite image-enhancing claims of corporate citizenship, they have no consciences to express, only earnings per share. They differ from people not only in form and size but, most importantly, in their fundamental character: People—including corporate executives, employees, and shareholders—have inherent worth and dignity; corporations in and of themselves do not.
Thus, as big corporations’ power to influence our government grows in relation to the power of We the People as expressed through democracy, the power of the amoral grows in relation to the power of the moral.
Just how powerful have corporations become? Scale is a telling measure. The biggest ones are so big that in 2001 fifty-three of the world’s hundred largest economies were corporations and only forty-seven were nations. For example, the annual sales of Wal-Mart that year exceeded the gross domestic product of Sweden. And corporations are growing: Five years earlier, only fifty-one of the planet’s biggest economies were corporations; since then corporate expansion crowded two more nations out of the Top 100. To apply another measure, an analysis of corporate earnings reports and government statistics shows that the combined revenues of just the fifty largest American corporations exceed the budgets of all governments in the United States combined—the federal government, the fifty states, and the thousands of local governments—by more than half.
The new activists are digging deeper and deeper into the fascinating yet all-but-secret history of how corporations have come to be so vast and powerful. It’s not in the standard schoolbooks, but several recent books establish that our nation’s founding patriots had a deep distrust of corporations, and for good reason. People now tend to be amazed to learn that the British colonies were corporations chartered by the king and given the right to govern—such as the Virginia Corporation and the Massachusetts Bay Company—and that British law forced the colonists to trade under disadvantageous terms with the East India Company, the mother of all British crown corporations. So the American Revolution overthrew not only King George III’s sovereignty over the colonies but also the power of the first huge corporations, and people of the era understood this. The distrust of corporations ran so deep that Thomas Jefferson proposed, unsuccessfully, that freedom from monopolies be included in the Bill of Rights. He later wrote, “I hope that we shall crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength, and bid defiance to the laws of our country.”
“It’s amazing what we don’t learn in school,” writes the dedicated researcher Thom Hartmann, whose Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights provides the deepest look yet into corporate history.
In the early days of the republic, most corporations were what we now call nonprofit organizations; the for-profit corporations were largely banks. Then as now, charters were issued by states, each under its own laws. But early charters specified the corporation’s purpose and expired at the end of a set term. If corporations overstepped their boundaries their charters could be—and not infrequently were—revoked. Corporations could not own shares in other corporations, so mergers and acquisitions and subsidiaries were unknown. They certainly could not curry political favor with campaign donations. This sweeping prohibition on political activity is from a Wisconsin statute that was in force well into the twentieth century:
No corporation doing business in this state shall pay or contribute, or offer consent or agree to pay or contribute, directly or indirectly, any money, property, free service of its officers or employees or thing of value to any political party, organization, committee or individual for any political purpose whatsoever, or for the purpose of influencing legislation of any kind, or to promote or defeat the candidacy of any person for nomination, appointment or election to any political office.
Corporations that violated this law faced charter revocation and “any officer, employee, agent or attorney or other representative of any corporation, acting for and in behalf of such corporation” would be subject to a fine and “imprisonment in the state prison for a period of not less than one nor more than five years.”
Lobbyists Pay for Victory Party
A party to celebrate confirmation of Nancy Victory as assistant commerce secretary was paid for by telecommunications lobbyists, including some who represented cellular telephone companies opposed to a restriction on how much of the wireless spectrum a company can control. Days later, Victory urged the Federal Communications Commission to revoke the restriction; the commission complied. Victory defended the party, saying that the lobbyists were her friends, that “these parties are very, very common,” and thus it was “ridiculous” to conclude that there was a link between the party and her recommendation. Before joining the Bush Administration, Victory practiced law at a corporate law firm in Washington where her husband remains a partner specializing in communications law. (The Associated Press, January 20, 2003)
Given this history, how did corporations get so big and powerful that parties like Nancy Victory’s are “very, very common”?
First, the Industrial Revolution created a new generation of businesses whose owners persuaded state legislators to grant them corporate charters under ever more favorable terms. And the Civil War enriched businesses that manufactured war materiel and the railroads that transported it, giving rise to Lincoln’s prophetic concern. But most fascinating and least known, and the main focus of today’s prodemocracy advocates, is a phenomenon that is an oxymoron except among lawyers: corporate personhood.
Corporations gained personhood through aggressive court maneuvers culminating in an 1886 Supreme Court case called Santa Clara County v. Southern Pacific. Until then, only We the People were protected by the Bill of Rights, and the governments the people elected could regulate corporations as they wished. But with personhood, corporations steadily gained ways to weaken government restraints on their behavior—and on their growth. After steady progress over the decades, they made huge strides in the 1970s through Supreme Court rulings that awarded them Fourth Amendment safeguards against warrantless regulatory searches, Fifth Amendment double jeopardy protection, and the Sixth Amendment right to trial by jury. These blunted the impact of the Clean Air Act, the Occupational Safety and Health Administration Act, and the Consumer Product Safety Act, which were enacted to protect workers, consumers, and the environment.
They also won court battles that awarded them First Amendment guarantees of political speech, commercial speech, and the negative free speech right not to be associated with the speech of others. On the surface, when the big corporations and We the People have the same rights, they are equal, and the playing field is level. But disparities of scale tip the field toward the corporations at a steep pitch. If a nation-sized corporation with its huge treasury and squadrons of lawyers wants to exercise its free speech rights in a shouting match with a citizen who is exercising her or his free speech rights, can this be a fair fight?
The Supreme Court has ruled that corporate political speech includes the right to spend millions on lobbying in Washington and to contribute more millions to political campaigns, and corporations have no greater tools for making government their ally. As for commercial speech—advertising, largely—research by Wayne McIntosh and Cynthia Cates of the University of Maryland shows that commercial speech cases, once nonexistent, have become the Supreme Court’s “single most emphasized issue, composing nearly one-quarter of the speech docket over the last decade.”
“The end result,” says Ward Morehouse, cofounder with Richard Grossman of the pioneering group of prodemocracy thinkers known as POCLAD, short for the Program on Corporations, Law, and Democracy, “is that they exercise greater rights than actual persons, and this is an absurd situation.” Morehouse (see profile) says that in addition to the rights granted them by the Supreme Court, under the law corporations have limited liability, can live on indefinitely, and, while their employees may be tried in criminal courts, corporations themselves cannot.
Another way personhood amplifies corporate power is cruelly ironic in a way that underlines the amoral nature of the marketplace. The court argument that corporations used to gain personhood was that corporations constituted persons under the Fourteenth Amendment—the 1868 measure whose aim was to ensure full personhood to the freed slaves. If this sounds preposterous to you, you’re hardly alone; researchers have been scouring archives in an effort to make sense of it but so far have no conclusive explanation.
While corporate lawyers went about consolidating the power that their clients gained from personhood, Jim Crow laws inflicted many more decades of oppression on African Americans before the civil rights movement finally ended government-sanctioned segregation and ensured their voting rights. As “persons,” corporations not infrequently sue to claim that decisions by democratically elected governments violate their rights under laws meant to protect people of color from injustice. This gains them the status of an oppressed person, despite their wealth and power, and thus strengthens their position in court. (See “Fighting City Hall.”)
Although corporate use of the Fourteenth Amendment is little known, it is hardly a new phenomenon. Justice Hugo Black observed in 1938, “The history of the amendment proves that the people were told that its purpose was to protect weak and helpless human beings and were not told that it was intended to remove corporations in any fashion from the control of state governments.” He also wrote, “Of the cases in this court in which the Fourteenth Amendment was applied during its first fifty years after its adoption, less than one-half of one percent invoked it in protection of the Negro race, and more than fifty percent asked that its benefits be extended to corporations.”
In 1994, transnationals’ power was amplified again when the intensely lobbied Senate, with the urging of President Clinton, ratified the 30,000-page General Agreement on Tariffs and Trade. This treaty makes democratically enacted national, state, and local laws subordinate to World Trade Organization rulings handed down by unelected panels that meet in private with no due process; corporations as well as nations may initiate WTO proceedings, and there is no way to appeal the rulings. Particularly at risk are laws protecting the environment and working conditions. The WTO is devoted entirely to the same single purpose—return to shareholders—as the transnational corporations that are its constituents. It may do wonders to grease the skids of international trade but because it has the formal power to overrule the authority of We the People, it is the antithesis of democracy, here and everywhere on Earth.
US Delays Suit against Europe
Because of tender feelings in Europe over the United States advocacy of war in Iraq, the Bush administration has decided to hold off suing in the World Trade Organization to force European nations to lift their bans on genetically modified foods. European citizens are overwhelmingly opposed to such foods but experts agree that the United States could win a WTO ruling that would force European nations to allow them to be sold. Earlier, U.S. Trade Representative Robert B. Zoellick accused Europeans of Luddite attitudes about biotechnology patented by American corporations that would profit if Europeans started eating genetically modified food, and Agriculture Secretary Ann M. Veneman said, “Our patience is just running out.” (The New York Times, February 4, 2003)
Government of the corporations, by the corporations, and for the corporations now poses at least as great a threat to democracy as the robber barons’ trusts and monopolies posed in the Gilded Age a century ago. The government responded then with antitrust laws; most notably, John D. Rockefeller’s Standard Oil was ordered broken into thirty-three pieces. The Princeton economist and New York Times columnist Paul Krugman makes a powerful argument that wealth has again become so concentrated that the United States has entered a second Gilded Age. But the long history of antitrust regulation has been all but abandoned in recent decades; deregulation is still accelerating, and new biggest-ever mergers keep popping up on the front pages.
The world is more complicated now than it was in the Gilded Age, so how to meet the new challenge to democracy is more complicated as well. Solutions will have to minimize collateral damage to people and to the institutions that buttress democracy, starting with the First Amendment: All major news organizations are owned by corporations now, so curtailment of corporate speech would have to be crafted so as not to curtail freedom of the press. Likewise, care would have to be taken to protect freedom of expression by not-for-profit corporations such as the Unitarian Universalist Association.
Care would also have to be taken in democratizing the WTO so as not to hurt the global economy or to hurt workers in the developing world. And if American corporations’ personhood rights are eliminated or curtailed, would their competitiveness in the global marketplace be curtailed as well? What impact would that have on jobs in American communities? Would we have less money to spend? Would things cost more?
It is beyond the scope of this article to offer detailed suggestions, but, in broad terms, meeting the challenge will mean restoring a right relationship between the market economy that fuels American prosperity and the democracy that enshrines American freedoms. It will mean restraining the neoliberal worldview—that government is wasteful and an untrustworthy impediment to freedom, and that markets are the ideal way to sort out what’s best—and revivifying the worldview that the democratic nation-state is the way to establish moral boundaries to contain the injurious excesses of the amoral marketplace.
Perhaps if government is seen as untrustworthy it is because it has become untethered from the authority of the citizens and is for sale to the highest bidder. Perhaps what it needs is not to be further disempowered but rather to be reconnected to We the People.
At the personal level, as we face our duty as citizens and religious people our consciences are challenged by a fundamental question: Which is more important, our prosperity or our democracy?
In balancing prosperity and democracy, conscience is the fulcrum. Consider the Fifth Principle of Unitarian Universalism, which affirms and promotes “the right of conscience and use of the democratic process within our congregations and in society at large.” The right of conscience is the essence of freedom. Even more fundamentally, it is the essence of what it means to be human. No other creatures are known to have consciences; corporations certainly do not. To the extent that we are forced to act against our consciences, we are not free. In the spiritual realm, this means our humanity is diminished. In the political realm, it means we are less citizens and more like subjects.
People have complex concerns. We have families with children and grandchildren to raise, so we tend to worry over the health of our culture and what will become of our communities and the environment. We save and invest for the future. We go to church and worry over questions of conscience. In the words of the author Robert Wright, humans are the “moral animal.” In each person is a spark of the divine.
Corporations have but one concern: profits. They come to exist not through the miracle of life but through laws that people create through their governments. Corporations often take care to behave in ways that enhance their images in the marketplace—think of the Philip Morris ads extolling its charitable activities, with the aim at perfuming its reputation as a purveyor of tobacco. For image purposes, corporations may advertise themselves as “corporate citizens.” But they are not and cannot be citizens. Only people can be citizens.
In twenty-first-century America, when tens of millions of good people draw their paychecks from amoral corporations, the structure of our interwoven economy, laws, and culture makes it a challenge for us to find ways to be responsible citizens and thus add strength to our nation’s moral voice. Happily, many of us manage, including legions of responsible executives who don’t make headlines for corrupt dealings. And understanding of the challenge is spreading and deepening.
Secrets, Threats, and Lawsuits
The General Accounting Office, the bipartisan investigative arm of Congress, dropped its lawsuit aimed at gaining access to the list of corporate executives and lobbyists who met in secret with Vice President Cheney when he was planning the Bush administration’s energy policy. The White House insists the list must remain secret; GAO officials acknowledge that several Republican lawmakers threatened to cut the agency’s funding if it did not drop the suit. (The Hill, a newspaper that covers Congress, February 19, 2003)
The Supreme Court announced January 10, 2003, that it will hear arguments in a case that has all the elements of a contemporary morality play, corporate style. It’s about truth and lies, and about money. It has a David and a Goliath. Without corporate personhood, this case would not exist.
The case is called Kasky v. Nike, in which a San Francisco man named Marc Kasky, taking the role of David, accused the sneaker maker of lying in public relations efforts that put a positive spin on the conditions under which its shoes are made in Asian factories. The corporate Goliath responded by asserting that as a person protected by the First Amendment it is not obligated to speak the truth.
Supreme Court rulings over the decades have established distinctions among several kinds of speech under the First Amendment. The issue Kasky brings to the Supreme Court is where to draw the line between what has come to be defined as political speech and what has come to be defined as commercial speech, which under previous rulings receives less protection. The California Supreme Court’s ruling in Kasky, which is under appeal, would extend the boundary of corporate speech to include public relations as well as advertising.
Not surprisingly an array of corporations, hoping to preserve as much free speech power as possible, have rushed to file friend-of-the-court briefs in support of Nike. In these briefs is a clue to why you rarely read about issues of corporate power in the major news media: Among Nike’s court friends are the owners of most large American newspapers, magazines, and broadcasting outlets, and their brief is based on support of corporate personhood.
The American Civil Liberties Union, which has won justified respect for defending the rights of the oppressed and unpopular, also supports the First Amendment rights of corporations as persons in the seemingly noble belief that all speech is valuable. In its thinking, the ceaseless manipulative efforts of corporate lobbyists and campaign donors are protected political speech. So are corporate public relations efforts that distort or shatter the truth.
But prodemocracy activists hold an opposing view. They argue that for corporations, there is no distinction between commercial and political speech, that public relations efforts to polish a corporation’s image are just as much about improving profitability as ads aimed at selling its products. And the critics warn that if protecting corporate speech and personhood helps corporations continue to amass power until democracy is made irrelevant, free speech for citizens will then be only a hollow right, to be honored at the whim of the undemocratic authorities—along with all other human freedoms.
It is in the Supreme Court’s power to remove or curtail corporate rights, and Kasky v. Nike is its first opportunity to restrict corporate personhood in years. Some legal analysts see the case as a flawed vehicle for change and predict that the justices will overturn the California ruling; no one is predicting that the justices will take this occasion to rescind personhood. For the court to consider personhood, it will first have to become a substantial and enduring political issue on the scale of civil rights in the years leading up to the 1954 Brown v. Board of Education ruling that ended official school segregation. The Supreme Court quite simply does not take up legal questions of little interest, and given its large number of personhood precedents, this is a question it may never take up. Or it might take cases that lead to incremental whittling away at personhood rights. Fully reversing corporate personhood might very well require a constitutional amendment.
“If history is any indicator,” writes author Hartmann, whose resume includes a successful business career, “it won’t be a short or direct path. It may be in my children’s or their children’s lifetime that humans finally take back their governments and their planet from corporations.”
If personhood were reversed, what would happen?
“It’s like the proverbial onion, many layers,” says Morehouse, of POCLAD. “First and foremost, it would express itself in an enormous diminution of the role corporations play in politics.”
Morehouse says corporations would lose also the coercive tools personhood has handed them, such as access to the 1964 Civil Rights Act, and would be more susceptible to democratic control in such realms as advertising and public relations.
However much democracy might benefit, Hartmann writes, most corporations would be unaffected: “I would say the vast majority of corporations in America do not exploit personhood rights. The guy who runs the diner in town or the woman who owns an ad agency—they’re not trying to keep the government from inspecting their facility by claiming Fourth Amendment rights, or fighting local government regulatory attempts by claiming Fourteenth Amendment protections. Only the giant corporations that wield such tremendous power and give huge amounts to political campaigns would be affected. In fact, smaller corporations would likely benefit because the playing field would be leveled; they would rather no company be able to exploit constitutional rights for its benefit than only the rich ones.”
About transnationals, Morehouse warns, “Ending personhood wouldn’t mean the fight is over. Corporations would still be vast and eternal, and officials of corporations could still exercise their rights as natural persons.” And in the slow-moving halls of government, it could take many years for attitudes to change.
Erasing ‘Us Versus Them’
Before Mark Weinberger became an assistant secretary of the treasury for tax policy, he was a corporate tax lobbyist. “I want to change the ‘us versus them’ mentality,” he was quoted as saying, “the ‘us’ being government, the ‘them’ being business.” (The New Republic, December 30, 2002)
The most dramatic way that democracies come to an end is in a coup d’état. We have seen it happen too many times, usually in countries in the Southern Hemisphere. The military takes over and installs a dictator. Sometimes the dictator is a right-winger, sometimes the dictator is a left-winger. From the perspective of democracy it doesn’t matter: All democracy knows is that authority has been wrenched from the people.
There is little reason to worry that a coup will topple American democracy. The fear, to quote T.S. Eliot, is that American democracy might end “not with a bang but a whimper,” the collective whimper of We the People when we come to understand, too late, that we have simply let our authority slip away, without noticing, in what amounts to a self-inflicted coup.
There is no shortage of people who, having discovered the little-known history of corporations in the United States, conclude that this has already happened. But our democracy is not dead until We the People have given up. Personhood and the WTO treaty do magnify the power of corporations, but the people still have the power of the vote, and the votes of citizens can still overrule the wishes of money. It will take creativity, determination, and discipline, but it remains possible to inspire the people who have given up on democracy to abandon their apathy and vote to renew the strength of government of the people, by the people, and for the people.
See sidebar for links to related resources, including other articles from our 2003 special issue on corporate personhood.
Correction 1.25.10: When this article was first written, sources checked by the author, including the Lincoln Encyclopedia, seemed to accept Abraham Lincoln’s authorship of the 1864 letter. However, it now appears that Lincoln did not write the letter attributed to him. Click here to return to the article.