The United States is one of only a few countries in the world that recognizes corporations as persons. It's a so-called "legal fiction" that's meant to uphold the rights of groups and to smooth business processes. But it's a dangerous concept that's gone too far — and could endanger social freedoms in the future.
Illustration from Judge Dredd: Mega City Two by Ulises Farinas
Corporate personhood is a legal concept that's used in the U.S. to recognize corporations as individuals in the eyes of the law. Like actual people, corporations hold and exercise certain rights and protections under the law and the U.S. Constitution. As legal persons, they can sue and be sued, have the right to appear in court, enter into contracts, and own property — and they can do this separate from their members or shareholders. At the same time, it provides a single entity for taxation and regulation and it simplifies complex transactions — challenges that didn't exist during the era of sole proprietorships or partnerships when the owners were held liable for the debts and affairs of the business.
That said, a corporation does not have the full suite of rights afforded to persons of flesh-and-blood. Corporations cannot vote, run for office, or bear arms — nor can they contribute to federal political campaigns. What's more, the concept doesn't claim that corporations are biological people in the literal sense of the term.
A "Legal Fiction"
"Corporations are 'legal fictions' — a fact or facts assumed or created by courts, used to create rights for convenience and to serve the ends of justice," says ethicist and attorney-at-law Linda MacDonald Glenn. "The idea of 'corporations as persons' though, all started because of a headnote mistake in the 1886 case of Santa Clara County v. Pacific Railroad Co, 113, U.S. 394 — a mistake that has been perpetuated with profound consequences.
Mistake or no mistake, the doctrine was affirmed in 1888 during Pembina Consolidated Silver Mining Co. v. Pennsylvania, when the Court stated that, "Under the designation of 'person' there is no doubt that a private corporation is included [in the Fourteenth Amendment]. Such corporations are merely associations of individuals united for a special purpose and permitted to do business under a particular name and have a succession of members without dissolution."
It's a doctrine that's held ever since, one that works off the conviction that corporations are organizations of people, and that people should not be deprived of their constitutional rights when they act collectively.
The concept may seem strange and problematic, but UCLA Law Professor Adam Winkler says corporate personhood has had profound and beneficial economic consequences:
It means that the obligations the law imposes on the corporation, such as liability for harms caused by the firm's operations, are not generally extended to the shareholders. Limited liability protects the owners' personal assets, which ordinarily can't be taken to pay the debts of the corporation. This creates incentives for investment, promotes entrepreneurial activity, and encourages corporate managers to take the risks necessary for growth and innovation. That's why the Supreme Court, in business cases, has held that "incorporation's basic purpose is to create a legally distinct entity, with legal rights, obligations, powers, and privileges different from those of the natural individuals who created it, who own it, or whom it employs.
Of course, other nations don't employ this "fiction", yet they've found ways to cope with these challenges.
Living in a World of Make-believe
Moreover, the problem with evoking a fiction is that it can lead us down some strange paths. By living in a world of make-believe, courts have extended other rights to corporations beyond those necessary. It's hardly a fiction anymore, with "person" now having a wider meaning than ever before.
Here's what Judge O'Dell-Seneca said last year in the Hallowich v Range case:
Corporations, companies and partnership have no spiritual nature, feelings, intellect, beliefs, thoughts, emotions or sensations because they do not exist in the manner that humankind exists...They cannot be 'let alone' by government because businesses are but grapes, ripe upon the vine of the law, that the people of this Commonwealth raise, tend and prune at their pleasure and need.
To this list of attributes, MacDonald Glenn adds a lack of conscience.
"I've heard it said that if a corporation had a psychological profile done, it would be a psychopath," she told io9. " The concept of corporations was created partially to shield natural persons from liability; and it allowed individuals to create something, a business, that was larger than themselves and could exist in perpetuity. But it's twisted reasoning to allow them to have equal or higher status than 'natural' persons or other sentient beings. A corporation cannot laugh or love; it doesn't enjoy the warm breezes of summer, or mourn the loss of a loved one. In short, corporations are not sentient beings; they are artifacts."
Similarly, solicitor general Elena Kagan has warned against expanding the notion of corporate personhood. In 2009 she said: "Few of us are only our economic interests. We have beliefs. We have convictions. [Corporations] engage the political process in an entirely different way, and this is what makes them so much more damaging."
The New York Times has also come out in condemnation of the concept:
The law also gives corporations special legal status: limited liability, special rules for the accumulation of assets and the ability to live forever. These rules put corporations in a privileged position in producing profits and aggregating wealth. Their influence would be overwhelming with the full array of rights that people have.
One of the main areas where corporations' rights have long been limited is politics. Polls suggest that Americans are worried about the influence that corporations already have with elected officials. The drive to give corporations more rights is coming from the court's conservative bloc — a curious position given their often-proclaimed devotion to the text of the Constitution.
The founders of this nation knew just what they were doing when they drew a line between legally created economic entities and living, breathing human beings. The court should stick to that line.
I asked MacDonald Glenn if the concept of corporate personhood is demeaning or damaging to bona fide persons, particularly women.
"It's about sentience — the ability to feel pleasure and pain," she responded. "Corporate personhood emphasizes profits, property, assets. It should be noted that corporations were given legal status as persons before women were."
MacDonald Glenn says that although the Declaration of Independence starts out idealistically with the words, "We hold these truths to be self-evident, that all men are created equal", we still live in very hierarchical class-based society.
"Although we have made significant strides towards recognizing the value of all persons, generally speaking, the wealthier you are, the more powerful you are, the more influence you exert," she says. "So, if corporations are the ones with the money, they become the ones who have the power and influence. The recent Supreme court decisions reinforce that and, sadly, it encourages social stratification — a system not very different than those portrayed recently in recent movies, such as The Hunger Games or Elysium. No notion of 'all (wo)men are created equally' there."
The notion of fictitious persons can be harmful to women in other ways as well. If it can be argued that artifacts are persons — objects devoid of an inner psychological life — it's conceivable that other crazy fictions can be devised as well — such as fetal personhood. It's something that should make pro-choice advocates very nervous.
At the same time, while corporations are thought of as persons, an entire subset of nonhuman animals deserving of personhood status are refused to be recognized as such. In the future, the concept could lead to the attribution of personhood onto artificial intelligences or robots devoid of sentient capacities. Furthermore, the practice of recognizing artifacts as persons diminishes what it truly means to be a genuine person.
Clearly, corporations deserve rights and protections, but certainly not under the rubric of something as precious and cherished as personhood.
The Hobby Lobby Decision
Which brings us to the controversial Hobby Lobby case — a prime example of what can happen when corporate personhood is taken too far. In this controversial case, the owners of a craft store claimed that their personal religious beliefs would be offended if they had to provide certain forms of birth control coverage to employees.
"The purpose of extending rights to corporations is to protect the rights of people associated with the corporation, including shareholders, officers, and employees," Justice Samuel Alito wrote in the ensuing decision. "Protecting the free-exercise rights of closely held corporations thus protects the religious liberty of the humans who own and control them."
Of course, the Supreme Court justices failed to acknowledge a number of aspects indelible to the U.S. Constitution, including the right to be free from religion, not to the mention the fact that corporate personhood was never the intention of the Founding Fathers in the first place.
Indeed, as Washington Post's Dana Milbank recently pointed out, the decision went way too far: "…corporations enjoy rights that 'natural persons' do not. The act of incorporating allows officers to avoid personal responsibility for corporate actions. Corporations have the benefits of personhood without those pesky responsibilities."
And as MacDonald Glenn told me, the decision doesn't protect religious liberties of individuals — it gives an artifact human rights, previously only reserved to natural persons.
"It's form of corporate idolatry," MacDonald Glenn told io9. "Granting the rights of citizens to corporate structures creates a disproportionate impact where the rights of those with wealth supersede the rights of those without."
Follow me on Twitter: @dvorsky