Corporate Personhood

 

Corporate Personhood Emerges Into Law

“The defendant corporations are persons within the intent of the clause of section 1 of the Fourteenth Amendment to the Constitution of the United States, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws.”

Quoted from the court reporter’s head notes

Santa Clara County v Southern Pacific Railroad

(118 US 394). May 10, 1886

“Corporations, which should be the carefully restrained creatures of the law and the servants of the people, are fast becoming the people’s masters.”

President Grover Cleveland, December 3, 1888

The first of the three major usurpations we will examine was the establishment, in 1886, of the concept of corporate personhood. This seemingly minor modification led the way in our decline because it was the genesis of the so called Robber Baron era, the period when trusts and monopolies came to dominate American culture. Because of that status as persons, corporations suddenly received the protections which the Fourteenth Amendment reserved to all natural persons. Thus, they essentially came out from under the regulation of the states and localities because the states were no longer allowed to put any controls on corporations that they didn’t put on individual humans.

The basis of this change, even though it is set in stone in our laws, is murky and hard to trace. This murkiness is caused by two factors. First of all, the Court never issued any such ruling (until a separate case, People United, 120 years later). Second, where the concept is found, and was wrongly cited as precedent in later cases, was in the head notes of the 1886 case, Santa Clara County v Southern Pacific Railroad (118 US 394). written by the Clerk of the court ( and cited at the head of this post). Then, in later editions of the Court's ruling, as the Clerk, Mr. John Chandler Bancroft Davis no longer held the copyright, those head notes no longer appeared. So it is difficult to trace the derivation of this legal concept, but it is nonetheless cited as precedent and used to rule over us. 1.

Discovering who carried out this skulduggery is also difficult, because the mischief went undetected for fifty years, so all the major players were long gone. Was it the Clerk, making an honest (or not so honest?) mistake, or a corrupt court, or corrupt legislators who wrote the Fourteenth Amendment, using the word ” person”, instead of the phrase, “natural person?” It appears that all three theories hold some water, and that indicates that big business, especially the railroads, were engaged in skulduggery and mischief. That then points to a deeper theory about how all this came about, which is that the invention of a radically new technology, i.e. the locomotive, gained the owners of that new technology so much wealth that they were able to change the balance of political power in their favor.

At the time of the advent of railroads, many saw the great promise of this new technology, which could move more goods, longer distances, more rapidly than horse drawn wagons, and at much lower cost. Some states perceived the threat that such great wealth might pose to good government, and took steps, such as not allowing railroad companies to consolidate, mandating breaks in rights of way to ensure an advantage to local merchants, and other such controls.,

While this was admittedly less efficient, and may have been merely the result of the jealousy of other commercial interests, it did work to keep railroad owners from getting too much influence over the political processes of those states. That has to be contrasted with states like Pennsylvania where the arguments for large scale efficiency won out, and, in a few short years, the Penn Central Railroad began to dominate the Pennsylvania state house and to extend its power to other states.

Concurrent with that concentration of wealth and power, the Civil War broke out. Northern industrialists in general, and railroads in particular, did very well in the war. Congress went so far as to fund the construction of a transcontinental railroad in that era. All of this added even more to the immense wealth of the railroads and corporations as a whole.

Because of that nearly limitless wealth, the railroads could take shot after shot after shot at the courts, and state and national legislatures, to gain even more advantages. Santa Clara County was not the first case heard before the Supreme Court where railroad lawyers tried to get the court to declare that corporations were persons; it’s just the first case where the plan worked. The railroad owners, individually and collectively, had the motivation, since corporate personhood would take them off the leash of community accountability and probably allow them to gain even more wealth. They had the means, since they had almost unlimited wealth with which to bribe, cajole, lobby and otherwise influence public officials. And they had unlimited opportunity, since they could bring any number of cases to trial. Eventually, they were able to commit the crime, and the Robber Baron era of big business, of monopolies dominating our nation, was born.

Abraham Lincoln saw it coming, shortly before he was murdered, and in a letter of Nov. 21, 1864 to Col. William F. Elkins, warned;

“We may congratulate ourselves that this cruel war is nearing its end. It has cost a vast amount of treasure and blood. The best blood of the flower of American youth has been freely offered upon our country’s altar that the nation might live. It has indeed been a trying hour for the Republic, but I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country.

As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed. I feel at this moment more anxiety than ever before, even in the midst of war. God grant that my suspicions may prove groundless.”²

His suspicions did not prove groundless, and the era of monopolies, something even the Founders had warned of, came upon us. Some of the Founders were so apprehensive that they proposed a prohibition on monopoly be included in the Bill of Rights. That idea, however, was ultimately rejected in favor of allowing regulation of corporations to remain at the state and local level.

The following passage was included in a letter from Thomas Jefferson to James Madison in 1788:

“I sincerely rejoice at the acceptance of our new constitution by nine States. It is a good canvas, on which some strokes only want retouching. What these are, I think are sufficiently manifested by the general voice from north to south, which calls for a bill of rights. It seems pretty generally understood, that this should go to juries, Habeas corpus, standing armies, printing, religion, and monopoly” 3.

Others among the Founding Fathers voiced similar concerns, but when the Constitution, and the Bill of Rights were enshrined as the basis of law, no such prohibition of monopoly was added. Instead, as mentioned earlier, the compromise the Founders reached on the subject was that the states, not the federal government, would regulate corporations by controlling the chartering process however they wanted. Thus, it was reasoned, protection against monopoly would be in the hands of the level of government which is closest to, and at least in theory, most responsive to, the desires and concerns of the people. That is the way things stood until 1886.

The states used the power of chartering corporations to rein in corporate power and greed in many creative ways.

“…in Wisconsin—as in most other states at that time: (1800’s)

*Corporations’ licenses to do business were revocable by the state legislature if they exceeded or did not fulfill their chartered purpose(s).

*The state legislature could revoke a corporations’ charter if it misbehaved.

*The act of incorporation did not relieve corporate management or stockholders/owners of responsibility or liability for corporate acts.

*As a matter of course, corporation officers, directors, or agents couldn’t break the law and avoid punishment by claiming they were ‘just doing their job’ when committing crimes, but instead could be held criminally liable for violating the law.

*State (not federal) courts heard cases where corporations or their agents were accused of breaking the law or harming the public.

*Directors of the corporation were required to come from among stockholders.

*Corporations had to have their headquarters and meetings in the state where their principal place of business was located.

*Corporation charters were granted for a specific period of time, like twenty or thirty years (instead of being granted ‘in perpetuity’, as is now the practice).

*Corporations were prohibited from owning stock in other corporations in order to prevent them from extending their power inappropriately.

*Corporations real estate holdings were limited to what was necessary to carry out their specific purpose(s).

*Corporations were prohibited from making any political contributions, direct or indirect.

*Corporations were prohibited from making charitable or civic donations outside of their specific purposes.

*State legislatures could set the rates that some monopoly corporations could charge for their products or services.

*All corporation records and documents were open to the legislature or the state attorney general.

Similar laws existed in most other states.”^74.

Some states also had laws against any person sitting on the board of more than one corporation.

With those powers in the hands of states and communities, we had a real, and healthy, way of reining in the excesses of big business, while also reaping the benefits that flow from allowing some forms of incorporation. While allowing incorporation can be dangerous if such entities are allowed to run amok, the basic idea is valid and beneficial. Consider the original concept of incorporation. LLC stands for Limited Liability Corporation, and it means that the folks who have invested their money in some particular enterprise can be held liable, if the enterprise fails, only for what they have invested and not for their entire personal fortunes.

For instance, building a new railroad costs a lot of money so it must attract some deep pocketed investors. However, a railroad can involve significant risk. Just imagine a train full of toxic chemicals derailing while going through a populated city. The liability could be huge, so many, if not all, of those deep-pocketed investors would shy away from that kind of investment unless their liability could be limited. If it could be limited, by forming an LLC, then the investors would lose only what they had invested but not risk their entire personal fortunes. To cover that risk and make sure any victims of an accident could be made whole, the railroad would be required to carry insurance. In that way, by using the corporate tool of LLC, the railroad gets built and the community gets to enjoy the benefits of a railroad.

A corporate charter is thus granted, as a privilege, by the community,because it is seen as a way to benefit the community. Since a corporate charter is granted through the agency of the government, the representatives of the community, the law makers, have a consequent duty to ensure that this artificially created beast (which can’t die or feel pain) actually delivers benefits, or at the least doesn’t do harm, to the people. Community and cultural protection was thereby ensured through the powers endowed to local and state governments to grant and pull charters as they deemed appropriate. That protection ended in 1886.

Many have noted what happened at that time. Consider this passage from “Gangs of America,” by Ted Nace:

“Sociologists call the 1897-1903 period “the corporate revolution.” But as we have seen, the real corporate revolution took place over a longer period, roughly from 1850-1900. During this revolution, larger corporations did not merely come to dominate the American economy. More significantly, the legal structure defining the corporation as an institution was fundamentally altered. A century earlier, the framers of the American system of government had attempted to devise a “containment vessel” for corporate power: the state-issued charter. Now that system was completely disassembled and replaced with another whose goals were the exact opposite—as though the steel bars that had formed a cage were melted down, recycled, and used to create a suit of protective armor instead. Rather than protect democracy from corporate power, the legal system increasingly shielded corporations from legislative power.”^.5

Some of our leaders saw what was happening at the time, but could only warn us about what was coming,

“On December 3, 1888, President Grover Cleveland delivered his annual address to Congress. Apparently, the President had taken notice of the SANTA CLARA COUNTY decision, its politics, and its consequences, for he said in his speech to the nation, delivered before a joint session of Congress, ‘As we view the achievements of aggregated capital, we discover the existence of trusts, combinations and monopolies, while the citizen is struggling far in the rear or is trampled to death beneath an iron heel. Corporations, which should be the carefully restrained creatures of the law and the servants of the people, are fast becoming the people’s masters.”⁶

That then is how we got to where we are today, with corporate personhood allowing corporations to run amok, like wild beasts, ravaging the countryside and our people, while subverting our culture. The worst, and most immediate aspect of this cultural subversion is the way that it changed the social dynamic around how business is to be done. Pre-corporate personhood, we generally had a community based approach, with corporations seen as beneficial pillars of the community. We came to decide these issues as equal citizens, mutually seeking the best path forward.

When the regulation of business is under the control of federal authorities (or, unbeknownst to most of us, under the control of anonymous WTO boards which meet in secret and issue rulings that can’t be appealed to any court or legislature), we come to these issues as hostile divided groups, as consumers, versus environmentalists, versus workers, versus owners. The decisions handed down are the fruit of this divided hostile and stifled dynamic. If corporations are consequently legally empowered to be abusive; as with credit cards, lending practices, environmental damage, pension and bankruptcy abuses, and all the rest, then we, the people, have no other option than to just suck it up and hope to win the next hostile battle in some federal, or international, venue.

Even if we do get a law passed that favors the little people, it might not be enforced or might be repealed in the dark of night or any of a number of stratagems the powerful can employ to thwart the will of the people. What’s more, the preceding litany doesn’t even mention outright corruption where bribes and influence can be used by the wealthy to keep the workers and consumers in line.

At best, when the present system works as it was intended, federal controls amount to a letter of the law kind of control. If a corporation can meet certain legal guidelines (often written by or in cooperation with corporate officials), it is free to be as greedy and abusive as it can get away with. This aspect must be contrasted with the dynamic that would, and did, prevail when corporations weren’t considered persons.

To better understand this point, it will help to refer to the biblical concepts of the letter of the law versus the spirit. In the Old Testament, there are given ten basic laws and numerous minor laws which must be adhered to if God is to be pleased. In the New Testament, there is one law in two parts; namely love. That is, love God totally and love your neighbor as yourself. While it seems at first glance the New Testament law is much easier to live out, in actual life the opposite is true. With the letter of the law, once the legalistic standard is met, people feel free to be abusive and oppressive. The law of love, while much less specific, calls us to give everything of ourselves, in every situation, and never leaves us free to become abusive or oppressive by hiding behind legalistic rationales.

In the same way, when we sit down under LCMSG, at the round table of community, to discuss giving a corporate charter to some enterprise, we come not as workers divided against consumers divided against owners, but as equal citizens of a community. Rather than any objections being dismissed if said enterprise can meet some list of federal guidelines, we can ask the simple question of “How does this business benefit the community?” That might seem like it would be easier than meeting federal guidelines, but in the end, it would be a much more thorough and healthy control on the business; one which would involve the owners in self-policing.

The question of benefiting the community goes to all the issues of business. This would involve more than just clever public relations work and would go to issues like low pay, taking too much profit out of the community, harming the local environment, leaving too many sick and injured workers to be cared for on the public dole, causing too many people to be in great debt, and all the other issues that might involve any business enterprise.

Once a business or two has been de-chartered, because the people rose up against it after they didn’t see it as benefiting their community, things would change for the better. With no federal court ruling to protect the offending corporations, other business owners would soon learn to concentrate on actually providing a benefit to the community.

Erin Brockovitch-- who won fame by opposing corporate environmental abuse, and being the subject of a movie named after her- - was once heard in an interview stating that she knew some corporate executives agreed with her concerns about the environment. In the boardroom, however, they never voiced those concerns because in that room their only role is to increase shareholder value.

In a post corporate personhood world, those same executives would find their voices in the corporate boardrooms because the corporations would be self-policing. They could not know with certainty how far they could go before crossing that line of community outrage. Thus, in a post personhood corporate boardroom concerns about community well-being, which would include worker and environmental well-being, might always relate to shareholder value. Those issues would, therefore, always be on the table. The idealistic executives might not win every debate, but their arguments would definitely get a hearing.

It is entirely fitting that the government, at any level but especially the community level, should exercise these kinds of controls over corporations. When a government charters any corporation, it creates a kind of beast. Therefore, it has an absolute duty to give the people a way to control that beast. When corporations are chartered at the local and state level and can be de-chartered by the local lawmakers for almost any reason, the beast is on the appropriate short leash. Then, the beneficial aspects of incorporation can be entered into without the risk of corporations being able to rule over us.

That is exactly the way it was before Santa Clara County v Southern Pacific Railroad in 1886. Shortly thereafter, at the start of the present era of runaway corporate greed, the so-called Gilded Age, the people were scandalized to learn the owners and fat cats were taking home twenty times the income of the average worker. That degree of greed hadn't been heard of up until that time. Yet today that would be seen as moderate profit compared to the average CEO making 400 times as much as the average worker.

To emphasize the point that runaway corporate greed wasn’t the case in early America, consider a quote from “Democracy in America” 1835, by Alexis DeTocqueville. As a French aristocrat he was welcomed in many upper-class homes and, therefore, privy to their unvarnished sentiments.

“For all this conventional enthusiasm and obsequious formality toward the dominant power, it is easy to see that the rich have a great distaste for their country’s democratic institutions. The people are a power whom they fear and scorn. If some day the bad government of democracy were to lead to political crisis or if ever monarchy appeared as a practical possibility in the United States, one would see the truth of what I’m saying.” 6.

Clearly, the wealthy were not unanimously happy (though they pretended to be in public) with the rise of a democratic nation. After the Civil War and the corporate personhood that followed in its wake, they seized the opportunity to change things.

What we have ended up with is a culture which embraces greed as good and that considers there is no such thing as excess profit. The only alternative we are offered is some form of socialism or other, which can be arrived at only by way of bitter class warfare.

Thus, the proclamation of corporate personhood scuttled that much more conciliatory, community based discussion about business and incorporation, and landed us in a perpetually hostile, worker versus owner confrontational dynamic. This is very reminiscent of the dynamic in Europe at the time, a dynamic which probably always ends in some form of fascism.

When we come to the table as a community, we see greed not as some good engine of progress (reasonable profit is that, but excessive profit is not) nor as an inevitable bludgeon of class warfare that must be stopped by ending free enterprise but rather, as the cancer it is. Cancer in a living body is when one cell begins to grow, multiply, and take resources far in excess of what it needs or is appropriate, to the detriment of the larger body. Cancer is almost identical to greed, a kind of cellular level greed.

When we have the kind of community consciousness around a common table that organically arises after we rid ourselves of corporate personhood, we will just naturally feel repugnance toward the cancer of greed and feel no duty or compulsion to accommodate it. Those who would incorporate or conduct a business would be members of the community, and would probably share those values. Those who didn’t would come to know that their greed was seen as a moral failing, wasn’t welcome, and would behave accordingly.

There is one more point to be made about the advantages of ending corporate personhood, a point that will be emphasized again in a later blog. In 1939 there was a famous debate between Wendell Willkie and FDR’s spokesman Robert Jackson, which elevated Willkie’s stature enough to gain him the Republican nomination for President in 1940. During the debate,

“Jackson also made a stab at explaining why there was conflict between government and business; ‘The man who is in government is brought in contact with the problems of all kinds and conditions of men. Everybody’s business is his business.’ The private businessman, by contrast, ‘has been intensely preoccupied with a very narrow sector of the world.’”7.

This is specifically where the concept of corporate personhood comes in, and it is such a tragedy that it wasn’t noticed before. Yes, that discussion that takes the interests of the entirety of society into consideration should take place and did and would, at the state and local level, if there were no corporate personhood. As Walter Lippmann wrote, in “Liberty and the Press” 1919,

“That means, in terms of public opinion, a resumption of that contact between beliefs and realities which we have been losing steadily since small town democracy was absorbed in the great society.”

It is such a tragedy that even as knowledgeable a man as Walter Lippmann did not realize that it was corporate personhood which had done so much to move us away from that “small town democracy” 8.

If business could be de-chartered for not benefiting the community with no federal courts preventing the states and localities from operating in that mode, then even the thinking of businessmen would start to become more holistic. Also, the thinking of all citizens would come into play, being heard in the counsels of (especially local) government. Citizens would once again become aware of the needs of business and learn to balance those considerations with the legitimate calls for economic and environmental justice on the part of workers and consumers.

In other words, when we come together to this holistic discussion of how we can work together to meet the challenges that nature and reality throw at all communities, we will be much better off. In that mode we can figure out how to best accommodate whatever new technology that comes along. Then, the kind of hostile, class war thinking induced by the advent of corporate personhood won't even emerge.

In fact, the lack of a class warfare ethic in this country, so lamented by leftist radicals of the European mode, is probably a residual throwback to the time before corporate personhood. The people as a whole faintly remember, understand and sympathize with the need for business to make a profit.

The distinction between legitimate profit of a beneficial business and the excessive profit of greed is one that can’t easily be made by the blunt instruments of federal regulations. It is, however, a distinction which comes easily to the fore if regulation of corporations is in the hands of local communities or state governments.

During that same (Jackson- Willkie) debate, one listener asked whether the threat of the concentration of government wasn’t stronger than the threat of concentrated business. Jackson, defensive, said that the United States would never have concentrated government in Washington if business had not become so powerful. The states alone were obviously not sufficient to regulate big utilities, Jackson argued; ‘How can a single state regulate Mr. Willkie?’” 9.^.

How indeed? It is certain that Americans needed and still need some way to regulate corporations. It is a good bet, however that we would have had to wait a long time for Mr. Willkie (who embraced big corporate links with big government) to respond that we should return the chartering of corporations to the states. Here, in this one instant in time, we can see the negative symbiosis, the unspoken collusion, between the forces of big business and the forces of big government.

Footnotes:

^1. “Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights.”

Thom Hartmann, Rodale, 2004. p. 54-55

^2. Lincoln private letters

3.“The Complete Jefferson,” Assembled and arranged by Saul K. Padover, Duell, Sloan, and Pearce, Inc.,NY 1943 p.295

4.“Equal Protection” p. 75-76

^5. “Gangs of America.” Ted Nace, Berrett-Koehler Publishers, Inc., San Francisco 2003, p.62

^6. “Democracy in America.” Alexis de Tocqueville, J.P. Mayer- Ed., Anchor Books,

Garden City, NY 1969, P.179

7. “FDR's Folly.” Jim Powell, 2003, Crown Forum, NY p.217, 218

8.“Liberty and the News.” Walter Lippmann, (1920), 1995, Transaction publishers, New Brunswick, NJ p.88

9. “FDR's Folly” p. 218