A reader asked me to elaborate on my comment about corporations having rights; I thought I’d therefore repost something I put up over two years ago, in the first months of the blog’s life. Note that the following speaks only of corporate constitutional rights — naturally, corporations have many rights protected by common-law and statute as well.
CORPORATIONS AND THE CONSTITUTION: A recent e-mail made me think of the perennial question — should corporations generally enjoy the protections of the Bill of Rights?
The answer, I think, is a definite yes (with some exceptions that I might talk about later; note for now that the right to vote is not in the Bill of Rights). The courts have generally held this (again, with some exceptions), and they’re right. Let me start for now with five general observations.
1. Consequences. The New York Times is owned by a corporation. Most private universities are organized as corporations. So are most nonprofit advocacy groups. So are many religious groups (though I believe some are organized through some special quasi-corporate forms). If you really believe that corporations lack constitutional rights, then the government would be free to ban corporate-run newspapers from criticizing the government, or ban the Catholic Church or the ACLU or the NRA from expressing its views.
Likewise, if corporations lack constitutional rights, the government could take their property without just compensation, and in fact without any hearing. It could just come in and grab it, no questions asked.
Now some people might think this is the right result. Or perhaps if this happened, people would stop using the corporate form — newspapers, advocacy groups, and churches would somehow reorganize themselves as, say, partnerships or sole proprietorships. This might actually be hard, and from the perspective of people who disapprove of corporate rights, it might be counterproductive; what’s the point of letting the Times have constitutional rights if it’s run as a partnership but not if it’s run as a corporation? But for now, my point is simply that we should clearly identify the consequences of denying constitutional rights to corporations — and those consequences hardly seem sensible.
2. Individual rights. One reason these results may seem senseless is that restricting the rights of corporations usually means restricting the rights of individuals. If you take the property of a corporation without compensation, whom are you really hurting? Not “the corporation,” which is, indeed, a convenient legal fiction. You’re hurting the corporation’s owners.
If you accept the legal fiction of the corporation being a separate person, then taking its property violates its rights. But if you reject that fiction, as a means of arguing that the corporation should lack rights, then taking its property violates its owners’ rights. Either way, the Takings Clause should apply; and that’s what suggests that the legal fiction (a corporation is a person) is a sensible one here — using it makes analysis easier, but doesn’t ultimately change the results much.
The same goes for the Due Process Clause, the Civil Jury Trial Clause, and so on. If you take a corporation’s property, or let it be taken through certain procedures, you’re affecting the property of individual owners. There’s therefore no real reason to deny these rights to the corporation.
Likewise for free speech. Corporations don’t actually speak; people speak. A corporation’s employee (a person) communications information that is decided on by a group of managers (people) who represent the stockholders (other people). Barring the New York Times or the ACLU or the Catholic Church or General Motors from speaking bars real people from speaking using the corporation’s property.
Aha, some might say, the real people aren’t silenced — they can still speak using their own property. But the Court has long understood that to speak effectively in a vast nation, you need to be able to pool your resources with others (even in this cyberspace age).
The Court has recognized this under the rubric of the right to expressive association, but the same applies to speech via corporations. When people contribute money to the ACLU, so that the ACLU’s directors can decide what ACLU’s spokespeople say, the contributors are making a decision to pool their resources so that some decisionmakers (the directors) can decide how to use them to speak. And the same goes for GM shareholders — they are pooling their resources and giving them to some decisionmakers (GM managers) so they can decide how to spend the resources, including spending them for speech, whether advertising or political advocacy.
3. Constraining government power. Constitutional rights aren’t meant only to protect individuals; they’re also meant to constrain government power. The freedom of speech is valuable because it keeps the officials who are now in the government from suppressing criticism, and thereby entrenching their power. Procedural rights are valuable because they keep the government from punishing dissenters through arbitrary arrest, search, and imprisonment.
This rationale applies to corporate rights as well as to individual ones. Consider, for instance, First National Bank v. Bellotti (1978), where the Court clearly held that corporations generally have free speech rights. The Massachusetts legislature wanted the voters to give the legislature the power to impose an income tax. Various corporations — which is to say, the managers of the corporations, whom the stockholders gave the power to speak on behalf of the corporations — opposed the income tax. So to get the tax enacted, the legislature banned corporations from speaking out about most proposed ballot measures. If the government had the power to thus shut out one large set of speakers from the public debate, it would have tremendous power indeed.
Likewise, if the government had the power to freely take corporate property, think how much leverage this would give it. “Hmm, you don’t want us to take your business away from you? Just make sure you don’t speak out too much against us.”
4. Creatures of the government. But wait, some might say: Corporations are created by the government; they only exist because of government-issued charters; why can’t the government attach conditions to those charters, e.g., “If you get a corporate charter, you can’t use it to express your views about ballot measures”?
The Supreme Court, though, has long (and correctly) recognized that the government does not have a free hand to impose conditions on grants of benefits. When the government controls 25-30% of the GNP, and has vast regulatory power over the economy, imagine what it could do using conditions. “Want a tax refund? Promise not to spend in on anti-government activity.” “Want to buy a chunk of federally owned land to build a home? Promise to let us search your house whenever we like, without any excuse.” “Want a corporate charter? Promise not to criticize the government.”
The government does have considerable power to define the rules of property, contract, and corporations, especially if it’s changing them for the future. (Retroactively attaching conditions to corporate grants is much more problematic.) If a state chose to bar the creation of any new corporations, it could do that, and newspapers, nonprofits, and businesses would have to organize as partnerships or sole proprietorships or other entities. But this power to bar corporate charters altogether does not give the government the power to say “We will give you a corporate charter, but only if you promise to waive your constitutional rights.”
5. Economic power. But doesn’t this allow the creation of entities with great economic and thus political power? Well, it’s true that the corporate form does make it easier for people to pool their resources — whether for business, for the business of news reporting, for nonprofit advocacy, for religious activity, or for other purposes. Had the corporate form not been invented, we’d probably have fewer such power centers.
We’d probably also have far less wealth, technological progress, health, and military security (since wealth tends to on balance bring health and military security). The aggregation of economic and political power does create some risks for democracy, for instance by making it easier for power centers (whether corporations, unions, or other interest groups) to lobby for government handouts and protectionist measures. But modern economic history suggests that such aggregation of power is necessary to effectively develop and distribute consumer products, tools, medicines, food, and so on.
Finally, remember that the federal government is the largest single aggregation of economic and political power. It controls 20% of the GNP (the 25-30% figure includes state and local governments). It controls the military. It can pass laws that govern our lives.
Stripping all corporations of speech rights won’t materially empower individuals; individuals are generally powerful to the extent that they can form themselves into groups. Stripping for-profit corporations and unions of speech rights will comparatively empower nonprofit corporations (religious entities, the NAACP, the NRA, and so on), since they won’t have the media or other business corporations as rivals.
But the group that has the most to gain from denying corporations free speech rights is the government, which will have even fewer power centers to balance its tremendous power.