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When Companies Vote

by Ryan Jordan | Fall 2019

This essay discusses the topic of personhood in business, specifically how rights attributed to people in the Constitution and expounded upon in the Bill of Rights are incorporated to companies, helping to expand their business powers and protect owners and investors from liability for actions of the company. Companies have already successfully been protected under the 1st, 4th, and 14th Amendments, among others. In this paper I conclude that the current interpretation of companies and their protections under the “rights of personhood,” specifically in reference to the case Citizens United v. FEC and their 1st amendment protections, have expanded the rights of companies beyond what the founders had intended.

3. Grossman, Drew Isler. 2016. “Would a Corporate Death Penalty Be 

5. Holdsworth, W. S. n.d. “ENGLISH CORPORATION LAW IN THE 16TH AND 17TH CENTURIES.” Yale Law School Legal Scholarship Repository. Yale Law Journal. Accessed October 27, 2019. https://digitalcommons.law.yale.edu/ylj/vol31/iss4/4.

6. "McCutcheon v. Federal Election Commission." Oyez. Accessed October 27, 2019. https://www.oyez.org/cases/2013/12-536.

In 2008, the financial world went into a meltdown. The housing market, ballooning for the past years, had burst and sent Wall Street spiraling out of control.  The rampant abuse on behalf of several financial institutions with regard to their labelling of subprime mortgages, along with a host of other misdeeds, quickly became apparent. The U.S. government allowed one such company, Merrill Lynch, to fail as a public company before it was acquired by Bank of America shortly thereafter. But after the dust had settled, the realization that some banks, proven as such by the government's efforts to save the economic system, were indeed “too big to fail,” leading many to wonder as to why the companies involved received salvation instead of punishment, and how the process of dismantling a company for such wrongdoings would even occur.

The notion of “killing a corporation” has fascinated legal scholars for centuries. As W.S. Holdsworth writes in the 1922 Yale Law Journal, “Corporate life and form therefore cannot exist without the permission of the state, express, presumed, or implied. But the incidents of the continuance of that life are not equally dependent on the state.”[1] The question of a company’s legal status   is particularly unique given ambiguity  surrounding its ability to enact policy, its structure and  function relative to individuals,  as well as the way it engages with other entities such as other companies, individuals, and governments. The continuation from English common law, where charters were given to companies specifying their intended purpose and the duration of their mandate, stemmed in authority from the sovereign. In the same manner, companies in the United States were initially authorized by the English Crown . However, this initial conception of companies being given the right to exist through the will and authority of the Government became increasingly contested, as the relationship has the potential to fall victim to corruption.[2] In the current corporate landscape, it is far more likely that the incorporation process of a company is one of self-inception through the legal process, as defined by the state in which a company is being incorporated.[3]

When raising the question of “killing a company,” it is presumed that a company has a “life;” a company, by this logic, operates as if it was a biological entity.In recent history, the United States has continually leaned towards increasing  the protections of companies under the mandate of the Bill of Rights, with a progression over time through three theories to the true legal standing of companies. The three theories vary  in popularity among justices and lawyers today. These theories  include: Artificial Entity theory, in which the protections given to a company are solely allocated by the governments intended purpose in creating them, and the Bill of Rights simply does not apply; Real Entity Theory, which  recognizes a company as its own entity, with rights beyond those of the owner and protection from individual liability; and finally  Attribution Theory, coined by  by Professor Darrell A.H. Miller. “The theory acknowledges that corporations are separate entities, and that they can claim certain constitutional rights. However, they can only do so because the individuals uniting under the corporate form can claim those rights. In other words, denying a corporation Bill of Rights protections would deny its shareholders, owners, or others those same protections.” [4]

The debate over the legal rights of companies stems from the interpretation of the U.S. Code § 1. ‘Words Denoting Number, Gender, and so Forth,’ better known as the Dictionary Act of 1871[5], states “the words ‘person’ and ‘whoever’ include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals.” [6] This statement has allowed successive generations of justices to apply the protections of the Bill of Rights to companies, both at the federal level and the state level given that the Bill of Rights’ protections have been successively incorporated at the state level as well.

This definition of person, meaning a company as well as an individual, has been used in successive pieces of legislation that expand the realm of company power. This was notably the case in 2010, when the Supreme Court ruled in favor of Plaintiff Citizens United in Citizens United v. Federal Election Committee finding that the company was protected under the First Amendment’s Free Speech and Free Press clauses[7], specifically and especially with regard   to campaign finance. This ruling was followed four years later by a verdict in favor of McCutcheon in McCutcheon v. Federal Election Committee, which removed several  of the restrictions on  how much  can  be donated during election cycles.[8] These decisions essentially removed campaign spending limits for companies and enabled the company's funds to be viewed as an expression of “speech,” greatly expanding  the influence that major corporations could have on American politics.

By granting this degree of political power to  corporations, effectively permitting  the formation of Super PACs and a level of concentrated political power never before seen in American history, the justices depart from the perspectives and intentions of the framers of the Constitution. . Brian Murphy, a history professor at Baruch College in New York, stated in an interview with the Harvard Business Review that the differences in what constituted companies during the early republic are  dramatic:

“The first American corporations end up being cities and schools, along with some charitable organizations. . . . We don’t really begin to see economic enterprises chartered as corporations until the 1790s. Some are banks, others are companies that were going to build canals, turnpikes, and bridges — infrastructure projects that states did not have the money to build themselves.”

“Let me put it this way: the Founders did not confuse Boston’s Sons of Liberty with the British East India Company. They could distinguish among different varieties of association — and they understood that corporate personhood was a legal fiction that was limited to a courtroom. It wasn’t literal. Corporations could not vote or hold office. They held property, and to enable a shifting group of shareholders to hold that property over time and to sue and be sued in court, they were granted this fictive personhood in a limited legal context.” [9]

The Framers never intended for  companies to be viewed as equivalent to individuals; they saw chartered companies as social institutions, not as the for-profit machines that they are today. The reasoning behind the success of such corporate entities in court battles stems from the current interpretation of companies under attribution theory, where the company is seen as a representation of a collection of individuals – as such, any hindrance to the company’s expression of rights is perceived to be a hindrance to the affiliated individuals’ expression of rights. However, this interpretation of companies ignores the modern reality of their operation – the simple fact that publicly owned companies do not represent individuals but are rather a manifestation of legal agreements between individuals.

REFERENCES

[1] Barnet, Emily J. n.d. “Hobby Lobby and the Dictionary Act.” The Yale Law Journal - Home. Accessed October 27, 2019. https://www.yalelawjournal.org/forum/hobby-lobby-and-the-dictionary-act.

[2] Fox, Justin. 2014. “What the Founding Fathers Really Thought About Corporations.” Harvard Business Review. Harvard Business Review. July 23, 2014. https://hbr.org/2010/04/what-the-founding-fathers-real.html.

[3] Grossman, Drew Isler. 2016. “Would a Corporate Death Penalty Be [4] Cruel and Unusual Punishment.” Legal Information Institute. Legal Information Institute. 2016. https://scholarship.law.cornell.edu/cjlpp/vol25/iss3/4/?utm_source=scholarship.law.cornell.edu/cjlpp/vol25/iss3/4&utm_medium=PDF&utm_campaign=PDFCoverPages.

[5] Holdsworth, W. S. n.d. “ENGLISH CORPORATION LAW IN THE 16TH AND 17TH CENTURIES.” Yale Law School Legal Scholarship Repository. Yale Law Journal. Accessed October 27, 2019. https://digitalcommons.law.yale.edu/ylj/vol31/iss4/4.

[6] "McCutcheon v. Federal Election Commission." Oyez. Accessed October 27, 2019. https://www.oyez.org/cases/2013/12-536.

[7] “State of Incorporation: UpCounsel 2019.” n.d. UpCounsel. Accessed October 27, 2019. https://www.upcounsel.com/state-of-incorporation.

[8] Stone, Geoffrey R., and Eugene Volokh. n.d. “Freedom of Speech and the Press.” First Amendment | The National Constitution Center. National Constitution Center. Accessed October 27, 2019. https://constitutioncenter.org/interactive-constitution/interpretation/amendment-i/interps/266.

[9] “1 U.S. Code § 1 - Words Denoting Number, Gender, and so Forth.” n.d. Legal Information Institute. Legal Information Institute. Accessed October 27, 2019. https://www.law.cornell.edu/uscode/text/1/1.

1. Barnet, Emily J. n.d. “Hobby Lobby and the Dictionary Act.” The Yale Law Journal - Home. Accessed October 27, 2019. https://www.yalelawjournal.org/forum/hobby-lobby-and-the-dictionary-act.

2. Fox, Justin. 2014. “What the Founding Fathers Really Thought About Corporations.” Harvard Business Review. Harvard Business Review. July 23, 2014. https://hbr.org/2010/04/what-the-founding-fathers-real.html.

7. “State of Incorporation: UpCounsel 2019.” n.d. UpCounsel. Accessed October 27, 2019. https://www.upcounsel.com/state-of-incorporation.

8. Stone, Geoffrey R., and Eugene Volokh. n.d. “Freedom of Speech and the Press.” First Amendment | The National Constitution Center. National Constitution Center. Accessed October 27, 2019. https://constitutioncenter.org/interactive-constitution/interpretation/amendment-i/interps/266.

9. “1 U.S. Code § 1 - Words Denoting Number, Gender, and so Forth.” n.d. Legal Information Institute. Legal Information Institute. Accessed October 27, 2019. https://www.law.cornell.edu/uscode/text/1/1.