When Did Companies Become People? Excavating The Legal Evolution
RENEE MONTAGNE, HOST:
In the last four years, the U.S. Supreme Court has dramatically and repeatedly expanded the rights of corporations.
LINDA WERTHEIMER, HOST:
The court ruled that corporations have the right to spend money in elections for public office.
MONTAGNE: It ruled that some for-profit corporations may refuse to comply with the federal mandate to cover birth control in their health plans if they have religious objections.
WERTHEIMER: These are personal rights, but they are being accorded to corporations. And our listeners have sent us a lot of mail asking, in essence, when did corporations become people? So we turned that question over to NPR legal affairs correspondent Nina Totenberg.
NINA TOTENBERG, BYLINE: Corporation - defined in the dictionary as a number of persons united in one body for a purpose.
JOHN COFFEE: We've had the corporate entity from, really, medieval times.
TOTENBERG: Columbia law professor John Coffee is an authority on corporate law.
COFFEE: You can think of the Catholic Church as probably the first entity that could buy and sell property in its own name.
TOTENBERG: Indeed, having an artificial legal persona was especially important to churches, says Elizabeth Pollman of Loyola Law School in Los Angeles.
ELIZABETH POLLMAN: Because having a corporation would allow people to put property into a collective ownership that could be held with perpetual existence. So it wouldn't be tied to any one person's lifespan, or subject necessarily to the laws regarding inheriting property and that sort of thing.
TOTENBERG: Later on, in the United States, the advantages of incorporation were crucial to the nation's economic development. Unlike partnerships, the corporation continued to exist even if a partner died. There was no unanimity required to do something. The shareholders could not be sued individually, only the corporation could be sued. So investors only risked as much as they put into buying shares. By the mid-1800s, the process of incorporating was relatively routine, and corporations were common. But corporations are nowhere mentioned in the Constitution, leaving to the courts the sorting out of corporate rights. After all, Coca-Cola is a corporation, but so are the NAACP, the National Rifle Association and small, local nonprofits. Loyola's Pollman.
POLLMAN: All these truly different types of organizations might come under that label of corporation. And so the real difficulty is figuring out how to treat these different things under the Constitution.
TOTENBERG: In the early years of the Republic, the most important right accorded to corporations was the right of contract. Legal historian Eben Moglen.
EBEN MOGLEN: And that right, the right to have contracts respected by the state, was the only federal constitutional right that the Supreme Court was thinking about before the Civil War.
TOTENBERG: The Civil War, however, coincided with an era of great industrialization and the need to raise great capital.
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UNIDENTIFIED ACTOR: (As character) Do you realize how much this is going to cost the company?
UNIDENTIFIED ACTOR 2: (As character) That's not our worry. We're here to build a railroad.
COFFEE: With the invention of the railroad, you needed a great deal of capital.
TOTENBERG: Columbia's John Coffee.
COFFEE: If only the Court could form offered limited liability, easy transferability of shares and continued perpetual existence.
TOTENBERG: Legal historian Eben Moglen adds that the end of the Civil War gave corporations a chance to pursue greater legal protection, too.
MOGLEN: From the moment the 14th Amendment was passed in 1868, lawyers for corporations - particularly railroad companies - wanted to use that 14th Amendment guarantee of equal protection to make sure that the states didn't unequally treat corporations.
TOTENBERG: We're not talking here about the right to speak out on about political issues. We're talking about equal treatment under state tax laws and things like that. The Supreme Court extended that protection to corporations. And over time, it also extended to corporations some, but not all, rights guaranteed to individuals in the Bill of Rights. The court ruled that corporations have no right against self-incrimination, for instance, but that they do have a right to be free from unreasonable search and seizure. Otherwise, as the Cato Institute's Ilya Shapiro puts it...
ILYA SHAPIRO: The police could storm down the doors of some company and take all their computers and their files.
TOTENBERG: For a hundred years, corporations were not given any right of political speech in federal law. In fact, quite the contrary. In 1907, following a corporate corruption scandal in the presidential campaign, Congress passed a law banning any corporate involvement in federal election campaigns. That wall held firm for 70 years. The first crack came in a case that involved neither candidate elections nor federal law. In 1978, a sharply divided Supreme Court ruled for the first time that corporations have a First Amendment right to spend money on state ballot initiatives. Even after that, though, candidate elections remained free of direct corporate influence for decades. Only money from individuals and groups of individuals, known as political action committees, was permitted in federal elections. Then came Citizens United, the Supreme Court's 5-4 decision in 2010 extending to corporations, for the first time, full First Amendment free-speech rights to spend money as they wish in candidate elections - federal, state and local. The decision reversed a century-old legal understanding, unleashed a new flood of campaign cash and uncorked a crescendo of controversy. It thrilled many in the business community, horrified campaign reformers and provoked considerable mockery in the comedian classes.
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JON STEWART: If only there was some way to prove that corporations were not people - their inability to love.
TOTENBERG: That, of course, was "The Daily Show's" Jon Stewart. His shenanigans notwithstanding, there are serious people on both sides of this issue. Cato's Ilya Shapiro sees all corporations, when they spend on political campaigns, as merely associations of like-minded people.
SHAPIRO: Nobody is saying that corporations are living, breathing entities or that they have souls or anything like that. This is about protecting the rights of the individuals that associate in this way.
TOTENBERG: Countering that argument are those who note that individuals are perfectly free to give money to candidates and to spend unlimited amounts independently supporting those candidates. So they shouldn't need a corporation to express themselves. Some critics, like Loyola's Elizabeth Pollman, see a difference between for-profit and nonprofit corporations. A nonprofit corporation formed to advance particular political views is one thing, she argues, a large for-profit corporation is something else entirely.
POLLMAN: There's no reason to believe that the people involved - shareholders, employees, even the directors or managers - have come together for an expressive purpose related to anything other than, really, what the business is doing.
TOTENBERG: And shareholders and employees, she observes, have no real recourse if they disagree with how corporate money is spent in campaigns. And then there's the money-is-not-speech argument. Eben Moglen.
MOGLEN: I think the real problem for those of us who see ourselves as strong First Amendment believers - as I do, too - arises not so much because we think corporations shouldn't have rights as because we think that money isn't equal to speech. And we are now winding up using constitutional rules to concentrate corporate power in a way that's dangerous to democracy.
TOTENBERG: That, of course, is not how the Supreme Court majority sees its decision. The Court has said that because speech is an essential mechanism of democracy, discrimination against any class of speaker is forbidden by the First Amendment. It matters not, the Court said just this year, that some speakers, because of the money they spend on elections, may have to undo influence on public policy. What is important is that the First Amendment protects both speech and speaker, and the ideas that flow from each. Nina Totenberg, NPR News, Washington.
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