Corps as People?

In the history of capitalism, we saw how English law regarding food and property changed to allow the growth (existence?) of capitalism. In thinking about the recent Supreme Court case in Citizens United vs. FEC, I pulled out my old The Transformation of American Law 1870-1960 by Morton Horwitz, which has a chapter on the evolution of the law of corporations. His is a brief account, so expect a lot of complexity in the real evolution. However, even this was surprisingly complex.

In the first place, this book is about the progressive (but don’t confuse this with people who call themselves Progressives in politics today) critique of the old conservative view of law which takes as the paradigm case that of Lochner v. New York, where the Supreme Court ruled unconstitutional a state law that limited the number of hours bakers could work because it interfered with the freedom to contract (is freedom of contract “in” the Constitution?). There are many elements to this critique of the old classical view, which was based on a particular essentialist theory of human nature and an impossibly bright line between law and politics. Here, the Supreme Court was behind the times and they eventually changed their views of the Constitution. We saw this conflict continue into the 1930's, which is what spawned FDR’s very bad idea of adding additional members to the court. I am mentioning this issue partly to point out how some of the rhetoric in contemporary journalistic analysis is woefully oversimplified and often outrageously incorrect (so turn off the tv and the radio and skip the op-ed columns!!!).

The original Supreme Court view of a corporation held that shareholders were liable for the debts of a corporation even in excess of what they paid for their shares!! In other words, no limited liability, which is the prime hallmark of incorporation today. Indeed, it is more like the law of partnerships. But the court got into a confusing mess dealing with watered-down stock cases, creating two different classes of shareholders.

Three conceptions of the corporation competed for dominance after 1880. The first was that a corporation was “an artificial entity created by positive law” based on English corporate law and antebellum grant theory. The second conception mirrored the old Supreme Court view that a corporation was a “creature of free contract among individual shareholders,” in other words, no different from a partnership. The third theory was the “natural entity theory,” which viewed the corporation as a private entity, yet neither artificial, fictional or a creation of the state. Some commentators trace a notion of the “corporation as a person” back to the case of Santa Clara v. Southern Pacific, but Horwitz persuasively argues that this characterization was later projected back onto this case. It also should be noticed that seeing the corporation as a “natural entity” does not require seeing it as a person, as claimed by some liberal commentators.

I have read defenses of Citizens United based on the lack of a constitutional difference between an individual and a collection of individuals, generally by conservatives. But a corporation is no mere collection of individuals (otherwise it would just be a partnership and would not have limited liability). We have already opened a rat’s nest of issues. One would be what is “natural” about a corporation? One cannot help but notice that the transformation of the conception of ‘corporation’ went hand in hand with the increasing size of corporations in the late 1890's. Initially confined to railroads, which were seen as a special case, it spread rapidly with mergers and takeovers that drastically narrowed ownership of the assets in society. It also evolved with the creation of the stock market and resulted in positing a sharp distinction between the corporate entity and the shareholders (which by the way, Appleby sees as leading to much greater efficiency in management).

Horwitz’ tracing of the evolution of law in this area is fascinating in its own right, and I’m sure it has caused numerous debates within the field of legal history. One also sees different conceptions of economics read into the decisions. Maybe it is not so surprising that a vision of markets as self-regulating or laissez-faire is involved, but the notion of laissez-faire itself changes over time. One also sees philosophical arguments about property rights, e.g. whether they are independent of society, that enter into discussion of libertarian theories of property (not to be confused with the simple-minded libertarianism of Ron Paul). The progressive critique of forms of legal argument were begun by the Legal Realists, to whom Holmes was an inspiration. It was the subject of my proposed dissertation on the Critical Legal Studies movement in the 1980's. I now can see that I needed to understand more history and continental critiques of social science to start to get a grip on the issues. But they largely eluded training at the time in analytic philosophy, which was my primary interest.

My view that this decision is bad for the country rests on my view that the biggest corruptor of our politics is money. And who has money? Big corporations and unions. Here is a brief article by Ronald Dworkin making this case in more detail. Clearly the Supreme Court did not need to reach this issue and in the process the conservatives departed from their own views of judicial restraint. But then the doctrine of judicial activism is mired in incoherence, too.

Ultimately, my view about money and politics is something I need to think about much more. Complicated issues arise. However, it is inconsistent on many levels with views espoused by conservatives like those at the Cato Institute. One view of mine that Citizens United clearly supports is that if we are going to “fix” what is wrong it will take a Constitutional amendment. Since we know incumbents in Congress would not support an amendment limiting their powers, such an amendment would have to be accomplished through a Constitutional Convention approved by two-thirds of the states. I think the Supreme Court is behind the curve of intellectual thought again, as they were in the early part of the last century, so fixing this problem will have to go around both Congress and the Court. That seems like a mighty task.