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Wednesday, February 3, 2010

Featured Guest Blogger: Lyle Denniston

Constitutional Cloning: How the Court Came to View the Corporation as a “Person”

Congress, it seems obvious, had real people in mind when, in 1866, it drafted what would become the Constitution’s Fourteenth Amendment, assuring protection for the rights of “persons.” As matters have turned out, that would be only partly right. A corporation, usually thought of as an “artificial being,” not a human being, is a “person” in the constitutional sense, and it has constitutional rights.

That is not an obvious interpretation of the Amendment, if one were starting from scratch. But, to the United States Supreme Court in 1886, it was so obvious that, at the beginning of a hearing before the Justices, Chief Justice Morrison Waite told the lawyers: “The Court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of the opinion that it does.”

And so, by that unassisted birthing process, the American corporation came into being as a person with rights. Many things about the nation’s civic life are so simply because the Supreme Court said they were. This is one of those. After the Supreme Court makes such a constitutional declaration, it will spend years, even decades, spelling out what that actually means.
Now, 124 years later, it is not clear just what rights a corporation has; the Supreme Court is still working on that. The 1886 comment by Chief Justice Waite, of course, made it clear that corporations cannot be singled out and discriminated against by government. The Court since then has also assured corporations that they are entitled to “due process” – that is, the government cannot treat them arbitrarily and must assure that procedures that affect corporate rights are conducted fairly. And the Court has long been of the view that corporations have free-speech rights under the First Amendment, and the separate right under that same Amendment to take their grievances directly to the federal government and ask for help.

But the process of “cloning” the corporation into a constitutional “person” is not really an attempt to give it human characteristics. As a Supreme Court Justice wrote just the other day: “Corporations have no consciences, no beliefs, no feelings, no thoughts, no desires…They are not themselves members of ‘We the People’ by whom and for whom our Constitution was established.”
But, interestingly, that belittling view of corporations was written in a dissenting opinion. The majority in a 5-4 decision strongly reaffirmed the First Amendment rights of corporations, and lauded the role they play in American economic – and political – life. The First Amendment, the majority declared, gives corporations the right to spend whatever they choose, out of their corporate treasuries, to influence who gets elected to the Presidency and to Congress.

Still, no matter what rights a corporation has, it is still an artificial creation: its birth “certificate” is its articles of incorporation, establishing it as a separate economic entity. It can exist at all only if a state allows it to come into being. But, once it exists, it does have what lawyers call a “legal personality” all of its own. It stands apart from the legal identities of its executives, its directors, and the stockholders that own it; it can file its own lawsuits, and, when it is sued, it is responsible for the consequences. If it is owed money, that must be repaid to the corporation, not passed through to officers or investors.
Sometimes, this separate legal existence can seem very strange. Last fall, a federal judge, examining a legal complaint that the Securities and Exchange Commission had made against Bank of America over executive bonuses, wondered why the SEC had sued only the corporate entity itself, and not the executives supposedly responsible for the alleged illegality. Judge Jed Rakoff commented sarcastically: “Was it some sort of ghost or a human being?”

Still, the ghost-like character of at least some corporate activity is simply a reflection of not only the corporation’s artificiality, but also its separate existence. And there is no realistic prospect that the corporation is going to lose either that legal identity, or the constitutional rights that go with its “personhood.”

There is, to be sure, some skepticism within the Supreme Court about that ”personhood.” Last September, in a hearing before the Court that preceded the recent 5-4 ruling on corporations’ campaign spending, the Court was poring over the complexities of government attempts to regulate corporate activity, looking for something that might implicate constitutional rights.

Justice Sonia Sotomayor commented at one point that “there could be an argument made that that was the Court’s error to start with…the fact that the Court imbued a creature of state law with human characteristics.” And her colleague, Justice Ruth Bader Ginsburg, remarked that “a corporation, after all, is not endowed by its creator with inalienable rights.” And, Ginsburg asked, “Is there any distinction that Congress could draw between corporations and natural human beings” under the Constitution?

Justice Ginsburg’s question, one might say, is going to occupy the Court for the next several years as corporations seek, as surely they will, the legal shield of more clauses in the Bill of Rights. In reaction to the Court’s ruling on the corporate role in American politics, Congress is preparing to draft new legislation to keep those rights within some limits. One idea, for example, is to give a corporation’s stockholders veto power over political activity that the company officers plan to undertake – a measure that might raise the core question of which part of the corporate entity has rights. Another idea is to curb political activity by the domestic affiliates of foreign corporations. Undoubtedly, if such measures pass, corporations will be back in court, to test whether such restrictions impair their “personal” rights under the Constitution.


  1. It's not only Congress that's looking to review corporate rights. There have been a number of citizens' groups over the years who have discussed the issue of corporate personhood, and their movement is growing after the Citizens United decision. See for instance the "Move to Amend" campaign - one of numerous groups calling for a constitutional amendment, but they have some of the most game-changing proposals:

  2. The dissenters notwithstanding, it is not self-evident that corporate "personhood" is the functional concept at work in Citizens United v. FEC. The majority did not find that a corporation is a “person” nor did it state that such a finding would be necessary to accord First Amendment protection to corporate speech. Rather, the majority applied a speech-centric analysis consistent with First National Bank v. Bellotti (1978), wherein the Court had rejected “personhood” as a prerequisite to First Amendment protection of corporate speech. “The proper question,” wrote Justice Powell for the Bellotti Court, “is not whether corporations ‘have’ First Amendment rights and, if so, whether they are coextensive with those of natural persons. Instead, the question must be whether . . . [governmental action] abridges expression that the First Amendment was meant to protect.” The novelty of Citizens United, then, is to be found in the heightened commitment to speech-centrism in campaign finance cases. This almost certainly means that the analysis in future cases will turn more to the nature and degree of burdens placed on “political speech” than to Justice Ginsburg’s for-now antiquated attempts to distinguish corporations from natural persons.