In the first decade of the 21st century, a five-justice majority of the Supreme Court of the United States ruled that corporations are “persons” vested with the same constitutionally protected rights as actual persons, a legal recognition for which corporate lawyers had long campaigned. The ruling was stunning to many, as it disregarded the clearly stated warnings of prominent U.S. Constitutional framers, such as Thomas Jefferson and Alexander Hamilton, and lacked jurisprudential precedent in the previous U.S. Supreme Court rulings. It also lacked any legislative basis at either the state or the federal levels and contravened public opinion, which clearly opposes the notion of corporate personhood.
Corporations have existed since the Roman Empire. Modern corporations date back to the Dutch trading companies of the 1500s and Queen Elizabeth I’s charter of the East India Company in 1600. Governments incorporated such companies as legal fictions and granted them conditional, revocable privileges to engage in commercial enterprises capable of signing contracts and participating in the legal system. They were allowed to own property; but as “limited liability” corporations, their greatest benefit was to protect their shareholders from personal liability arising from any debt the companies might incur should those companies go bankrupt.
The Anglo-Saxon common law tradition operating throughout the British Empire distinguished between human beings as “natural persons” and corporations, such as companies, churches, and families, as “artificial persons.” Although the former inherently possessed natural rights, the latter were granted only conditional and revocable privileges for specific purposes under strict conditions. When the American colonists declared their independence from Great Britain in 1776, they were clear about this distinction and established a constitutional republic to protect human beings from governmental intrusions into their privacy and infringements of their property.
In 1773, the Boston Tea Party propelled the colonists toward revolution. This was a dramatic protest against the British government’s decision to give the East India Company tax exemptions and subsidies. The company, at that time the world’s largest corporation, dominated lucrative tea imports into the American colonies. British policies favored the global giant to the detriment of colonial small businesses and consumers.
With the establishment of a new democratic republic and the framing of a new constitution, the American leaders were both hostile toward and fearful of the power and influence of commercial monopolies such as the East India Company and aimed to protect the new republic from them. Thomas Jefferson in particular warned the other Founding Fathers against the danger of artificial enterprises becoming too influential, lest they become what he called a “pseudoaristocracy” that could usurp power from a democratically elected “natural aristocracy” of citizens.
In 1784, even before the U.S. Constitution was ratified, the Pennsylvania legislature passed a precedential law to legally reaffirm the prevailing understanding that in the new American republic, states would reserve the right to grant or revoke corporate charters as they see fit. Between 1790 and 1860, more than 2,000 corporations were chartered. There were many privileges granted conditionally with numerous constraints placed on chartered corporations. U.S. laws required that corporations open all their records and facilities to government oversight as a condition of being chartered.
During Thomas Jefferson’s and James Madison’s presidencies (1801–1809 and 1809–1817, respectively), the threat of corporate power emerged. The Second Bank of the United States became the United States’ first large corporation and began putting forth its own political candidates, becoming so powerful that in 1832 President Andrew Jackson threatened the bank with the corporate death penalty.
In 1811, New York enacted the first state-level “corporate veil” shielding stockholders from liability for corporate wrongdoing, even though the U.S. Constitution does not provide for any corporate shareholder liability limitations. In the 1855 Dodge v. Woolsey case, the U.S. Supreme Court explicitly reaffirmed that the states are able to place limitations on corporations and have the authority to revoke their charters. Later, when corporate officials made campaign contributions to Republican Party candidates to combat antitrust campaigns, President Theodore Roosevelt signed the Tillman Act of 1907, the first federal law aimed at prohibiting corporate campaign financing.
But it was the corporate lawyers who would invoke the presumed Fourteenth Amendment protections against “discrimination” from local communities, doing so more often and with more success than the black (or female) persons would. Through the 1870s and 1880s, corporate lawyers relentlessly argued that their clients were people entitled to protection. In the first half-century following the Fourteenth Amendment’s ratification, of the 307 Fourteenth Amendment cases that made it to the Supreme Court, 288 involved corporations, whereas just 19 were brought by the black persons.
Some assert that in 1886, in Santa Clara County v. Southern Pacific Railroad, the Supreme Court ruled that corporations were legally persons entitled to constitutional protections. However, rather than dealing with corporate personhood, this case involved taxes that the railroad company believed it should not have to pay. Although company lawyers argued that the railroad company was legally a person entitled to “equal protection under the law” pursuant to the Fourteenth Amendment, the Court rejected this argument and did not rule that corporations are persons with constitutional rights.
Because there were no court stenographs at that time, the legal community relied on court reporters to accurately record what had transpired in Supreme Court cases. In a headnote to the case, court reporter J. C. Bancroft wrote that corporations were legal persons. Although headnotes have no legal standing and do not set precedents, generations of lawyers have assumed that this gave corporations legal status as persons vested with constitutionally protected rights.
To protect corporate privacy, lawyers have argued that corporations should be recognized as people with Fourth and Fifth Amendment rights as well. The former guarantees citizens the right to privacy, protecting them from unreasonable governmental searches and seizures, whereas the latter guarantees protection from self-incrimination. Corporate lawyers have successfully won favorable rulings, for instance, protecting corporations from random regulatory inspections. Between 1967 and 1978, the Supreme Court ruled that corporations did not have to open their books and facilities to government regulators because American citizens do not have to submit to unreasonable searches.
In 2003, footwear manufacturer Nike claimed that pursuant to the First Amendment right to free speech, it had the right in its advertising to deny claims regarding working conditions while workers in its Vietnamese factory were being exposed to toluene, a known carcinogen. Several multinational corporations, trade associations, and the American Civil Liberties Union wrote amicus briefs to support Nike, based on their belief that the Santa Clara case had granted corporate personhood and, thus, First Amendment rights. But the Supreme Court decided not to hear the case, so the matter was left undecided.
Then, in 2007, in Federal Election Commission v. Wisconsin Right to Life, Inc., the Supreme Court ruled that the Federal Election Commission could not prohibit the latter from running campaign ads just because the latter was a corporation. The Court did not decide on whether or not corporate persons could actually vote in elections, but a five-justice majority ruled that corporations could now run campaign ads. The dissenting justices argued that the majority’s ruling set a dangerous precedent that would threaten citizens’ First Amendment rights and democracy itself.
In 2008, a conservative activist group, Citizens United, wished to run a film attacking the aspiring Democratic presidential candidate Hillary Clinton during paid television programming. The Federal Election Commission recognized that it was a campaign ad restricted by the Bipartisan Campaign Reform Act of 2002 (McCain-Feingold Act), and because the Tillman Act prohibited corporate campaign contributions, it ordered Citizens United to stop. In 2010, the Supreme Court decided to hear the case, Citizens United v. Federal Election Commission.
Instead of focusing on the relatively narrow issue at hand, the Supreme Court widened the case to the matter of corporate political free speech generally. The same majority that in 2007 declared that corporations are persons entitled to First Amendment free speech rights (i.e., fund political ads) decided that corporate persons could now fund political campaigns directly. As a result, corporations have made unprecedented financial campaign contributions.
These Supreme Court decisions have given corporations power and protections that ordinary citizens do not have. For instance, corporations can monitor employee communications and subject employees to physical examinations. When corporations are criminally implicated in violating citizens’ privacy rights, they have successfully sought immunity from accountability. For example, in 2008, the Foreign Intelligence Surveillance Act granted telecommunications giants such as AT&T immunity from legal liability for allegedly helping President George W. Bush’s administration spy on U.S. citizens’ private communications.
The Supreme Court has also issued rulings that apply different standards of “proportional” punishments to corporate persons than to natural persons. In 2003, in State Farm Mutual Automobile Insurance Co. v. Campbell, the Supreme Court limited the punitive damages that courts could award natural persons in civil awards when corporate persons illegally harm them. Also in 2003, while ruling on two cases, Lockyer v. Andrade and Ewing v. California, the Supreme Court upheld California’s notoriously punitive “three strikes law,” ruling that even lifelong prison sentences for nonviolent felonies were constitutionally proportionate when committed by natural persons.
Public opinion opposes the notion that corporations are “people” with the same constitutional rights as actual people, and no American legislature has ever recognized them as such. However, returning corporations to their traditional place as artificial persons granted only conditional privileges, and privacy rights will likely require amendments to both state-level constitutions and the U.S. Constitution. Until then, potentially dangerous and illegal corporate behavior remains difficult to surveil.
Paul R. Schupp
See also Citizens United v. Federal Election Commission (2010) ; U.S. Constitution
Bakan, Joel. The Corporation: The Pathological Pursuit of Profit and Power. London, England: Constable & Robinson, 2013.
Citizens United v. Federal Election Commission, 558 U.S. ___ (2010).
Dodge v. Woolsey, 59 U.S. 331 (1885).
Federal Election Commission v. Wisconsin Right to Life, Inc., 551 U.S. 449 (2007).
Hartmann, Thom. Unequal Protection: How Corporations Became “People”: and How You Can Fight Back (2nd ed.,Rev. and expanded). San Francisco, CA: Berrett-Koehler, 2010.
Santa Clara County v. Southern Pacific Railroad, 118 U.S. 394 (1886).
State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003).