Author: Timothy Sandefur
Yesterday's New York Times featured an editorial calling on courts to abolish the principle of “corporate personhood.” This is the legal principle that holds that corporations should be treated like “persons” under the Fourteenth Amendment and in other areas of the law. This principle has come under increasing attack by Progressives, who believe that corporations are abusive, manipulative institutions that need to be reined in by wise and benevolent bureaucrats. These Progressives also argue that corporations are “creatures of the state” that the state should control.
But corporations are not creatures of the state. They are institutions created by individuals who choose to pool their constitutional rights together for common purposes. And when federal courts first recognized corporations as “persons” under the Constitution, they made this point clear: “The property of a corporation is in fact the property of the corporators,” wrote Justice Stephen Field in 1882. “To deprive the corporation of its property, or to burden it, is, in fact, to deprive the corporators of their property or to lessen its value.” When government burdens a corporation, the rights of investors are burdened as well. Thus “the courts will look through the ideal entity and name of the corporation to the persons who compose it, and protect them, though the process be in [the corporation’s] name.”
The New York Times editorial points out that chief Justice John Marshall and others of his generation were skeptical toward the power of corporations. But as Robert Hessen points out in his indispensable book In Defense of The Corporation, the privately owned, for-profit business corporation was a new invention in Marshall’s day. Until the early nineteenth century—when the first private incorporation laws were enacted, and the Supreme Court decided Dartmouth College v. Woodward—corporations were generally created by legislatively enacted charters, and were generally considered semi-public monopolies, the way public utilities often are today. Thus Marshall, Thomas Jefferson, and others were concerned about the power given to these semi-government entities—not because they distrusted capitalism, but on the contrary because they believed strongly in economic freedom and limited government.
Today, by contrast, corporations are created by the mere filling out of a form. A corporate license is no more an act of legislative discretion than is a marriage license. A marriage license doesn’t make your marriage a “creature of the state” or allow the government to dictate what you do in your marriage—and likewise, a corporation is not a government entity, which bureaucrats can control at will. To speak of corporations as having rights is simply to say that the individuals who make up the corporation have rights, that the government must respect: government may not take away the corporation’s property because that property belongs, ultimately, to the shareholders. Government may not censor the corporation because the people who own the corporation have the right to free speech, and the right to combine their speech and express themselves in the corporate form. Government may not treat corporations unequally because doing so means denigrating the rights of citizens who have chosen to combine their activities and act together in the corporate form. That is why corporations, like other organizations, are accorded rights under the Constitution.
Update: Prof. Eugene Volokh has more on the subject here.