A Brief History of Corporate Personhood

A Brief History of Corporate Personhood

Corporations originated in Great Britain at the beginning of the 17th century. The British East India Company was the most fully developed and was instrumental in the spread of the empire and inventing the key legal principles that a corporation is a separate entity from its owners; this separation limits the owner’s liability and creates an organization with an indefinite lifespan. Because of abuse and corruption 18th century French, English, and American thinkers were critical of corporations because of their monopoly practices and unaccountability. The Boston Tea Party was an attempt to thwart the British East India Company’s plan to monopolize American commodity markets.

The framers of the U.S. Constitution refused to give the central government the power to charter corporations. Such an important responsibility should be left to the states. State representatives viewed corporations as quasi-public organizations that were useful for building canals, wharves, toll roads, banks, and later railroads. In writing the charters legislators emphasized performance and accountability and inserted provisions that limited corporate activities, work, ownership, size, geographic scope, and profits.

After the Civil War the American economy gradually became centralized and oligarchic. At the same time the state control of corporations disintegrated. It was the railroads more than any other business enterprise that bypassed legislative oversight. Holding companies were created to elude regulation and states became competitors for corporate largesse. If a company objected to restrictions in New York it would then transfer its assets to New Jersey or Delaware and incorporate there were the rules were more lax and supportive. The competitive rush between states to attract businesses transformed the state-issued charter from that protected democracy from corporate power, to a system which shielded the corporation from legislative influence.

Between 1860 and 1900 the modern corporation emerged with infinitely more power and flexibility. State charters were issued more freely with fewer restrictions, the limited terms of corporate existence were lifted, specific companies were allowed remake themselves and turn into a different enterprise; companies gained mobility to move wherever they chose, the liabilities of owners were confined to corporate assets, the “rule of unanimous consent” (shareholder approval) was overturned. This last act diminished shareholder influence and elevated the power of management. Size restrictions were removed and corporations were permitted to form conglomerates and engage in potential monopolistic practices.

Then there are the constitutional protections. Table I below summarizes the rights corporations have acquired and the judicial decisions that confirmed them.

Brief descriptions of most important constitutional issues and corporate rights:

Trustees of Dartmouth College v. Woodward (1819). Court ruled that the trustees of Dartmouth had received a charter from King George and therefore it qualified as a contract which could not be impaired by New Hampshire’s decision to turn Dartmouth into a public school. The purpose here was to protect property owners from state action but it lead to the gradual recognition of corporations as deserving constitutional support.

Santa Clara v. Southern Pacific Railroad (1886). California taxed corporate property at a higher rate than individuals and the Southern Pacific Railroad challenged the practice as a violation of the equal protection clause of the 14th Amendment. The Supreme Court agreed and established that corporations were indeed “persons.”

Chicago, Milwaukee, and St. Paul Railway v. Minnesota (1890). Minnesota created a rate-setting commission to regulate railroad companies that operated in the state. State law did not allow the railroads to appeal the rate commission’s decisions. The railroads claimed the rule was unconstitutional because railroads are persons and entitled to the due process guarantees of the 14th Amendment.

Noble v. Union River Logging Railroad Company (1893). The Union River Logging Railroad has earned a right away through public lands. Later the Interior Department ruled that the Union River company was in fact a logging company and rescinded the right of way. The company claimed the revocation decision violated their right to due process under the Fifth Amendment. The Court support Union River’s claim.

Hale v. Henkel (1906). In investigating an anti-trust case against a group of tobacco corporations the federal grand jury ordered Edwin Hale to turn over selected documents. Hale refused contending he was entitled to Fourth Amendment ban on unwarranted searches and seizures and self-incrimination (5th Amendment). The Court extended 4th Amendment protections to the companies but not the Fifth Amendment.

Armour Packing Company v. United States (1908). The Court extended the Sixth Amendment’s right to a jury trial in a criminal case to corporations.

Pennsylvania Coal Company v. Mahon (1922). The Court ruled that whether a regulation constitutes a taking depends on the effects on the value of the property. The takings clause originally applied to the government physical taking or seizing property. Courts to this point had ruled that the regulation of land was not a taking and was simply the use of the government’s police power to protect public health and safety.

Fong Foo v. United States (1962). Fong Foo and a co-defendant were accused of defrauding the government. After a few days the judge threw out the case because of doubts about the government’s witnesses. Later the government tried to retry the case but the Court said no, because if would be a violation of the Fifth Amendment’s protection against double jeopardy.

Ross v. Bernard (1970). This case recognized the Seventh Amendment right of a corporation to a jury trial in a civil case.

Virginia Board of Pharmacy v. Virginia Citizens Consumer Council (1976). A case in which the Supreme Court held that a state could not limit a pharmacist’s right to provide information about prescription drug prices. This was an important case in applying First Amendment rights to commercial speech.
First National Bank of Boston v. Bellotti (1978). First National Bank of Boston and other corporations filed a lawsuit against a Massachusetts law that prohibited corporations from spending money to influence voting on political referendums. The Supreme Court ruled that the free speech clause of the First Amendments prohibits the state legislature from restricting this kind of political spending.

Pacific Gas & Electric Co. v. Public Utilities Commission (1986). The California public utilities commission ruled that the unused space on and a PG & E must allow for four messages a year from consumer advocacy groups. The company objected and the Supreme agreed claiming that there is a First Amendment right not to spread a message which one disagrees with.

Citizen’s United v. Federal Election Commission (2010). The Supreme Court rejected Bipartisan Campaign Reform Act’s prohibitions against corporations and unions for using general treasury funds for speech that is “electioneering communication” in any broadcast that refers to a clearly identified candidate. The Supreme Court ruled that the BCRA restrictions led to a “chilling of political speech that is central to the First Amendment. Then in 2011 the Court struck down Arizona’s Campaign Finance law that provided for matching funds to candidates who accept public financing. The Court’s majority ruled the law violated the First Amendment rights of candidates who raise private money. See Arizona Free Enterprise Club v. Bennett (June, 2011)