Karon Law Blog

How Did Corporations Get to be People?

Posted February 03, 2017

By Jonathan A. Karon

Given that a corporation is just a way of structuring a business, it strikes many people as strange that courts grant corporations most of the Constitutional rights granted to persons. Outside the legal world, many people maintain that “corporations are not people”. Yet, the Supreme Court seems to think otherwise. How did we get here?

The disturbing answer seems to be that we got here without judges giving the question much thought at all. Prior to the Civil War, the Supreme Court held that the Bill of Rights (the first ten Amendments to the Constitution) only restricted the actions of the Federal government and not the actions of a state. So, for example, a state government could restrict freedom of speech, even though the Federal government could not. Following the Civil War, the Fourteenth Amendment to the Constitution was adopted. This was intended to protect the rights of newly freed slaves and provided that no state shall “deprive any person of life, liberty or property without due process of law” nor deny to any person the “equal protection of the laws.” By the late 19^th Century, corporations had begun to argue that government taxes and regulations violated their Fourteenth Amendment rights.

In the 1886 case of Santa Clara County v. Southern Pacific Railway Co., the Supreme Court refused to even hear argument on whether the equal protection provision of the Fourteenth Amendment applied to corporations, with the Chief Justice stating, “We are all of opinion that it does.” No rationale for why the Court were all of that opinion was ever disclosed. 118 U.S. 394 (1886).

In 1889, the Supreme Court re-affirmed that “corporations are persons within the meaning [of the 14^th Amendment]…[and] “that corporations can invoke the benefits of provisions of the constitution and laws which guaranty to persons the enjoyment of property, or afford to them the means for its protection, or prohibit legislation injuriously affecting it.” Minneapolis & St. Louis Railway Co. v. Beckwith, 129 U.S. 26, 28 (1889). Once again, no reasons were provided as to why this made any sense.

During the 1930’s and 1940’s, Justices Black and Douglas attacked this idea of corporate personhood head-on. In Connecticut General Life Insurance v. Johnson, 303 U.S. 77 (1938), Justice Black dissented from the Supreme Court’s decision that California’s franchise tax violated a corporation’s constitutional rights. He vehemently argued against the notion of corporations as people, flatly stating, “I do not believe the word ‘person’ in the Fourteenth Amendment, includes corporations.” He recited the history of the adoption of the Amendment as addressing the evils of slavery and argued, “Certainly, when the Fourteenth Amendment was submitted for approval, the people were not told that the states of the South were to be denied their normal relationship with the Federal Government unless they ratified an amendment granting new and revolutionary rights to corporations.”

In what might now be seen as a “conservative” approach to Constitutional interpretation Justice Black looked at both the text of the Amendment and the understanding of its terms at the time of its adoption. He pointed out that, “No word in this amendment gave any hint that its adoption would deprive the states of their long-recognized power to regulate corporations.” Despite his well reasoned analysis, no other Justice joined in his dissent (Justice Douglas was not yet on the Court).

In 1949, Justice Douglas took another shot at corporate person-hood, in a dissent in which Justice Black joined. He concisely pointed out how interpreting the Fourteenth Amendment to apply to corporations was inconsistent with its text, which also referred to “persons born or naturalized in the United States” which obviously could not apply to corporations. Despite his view that this “was a question of vital concern to the people of the nation,” only Justice Black joined his dissent.

Fast forward to today. In Citizens United v. Federal Election Commission, 558 U.S. 310 (2010), the Supreme Court in a 5-4 decision held that a corporation’s free speech rights essentially allowed it to spend unlimited amounts in election campaigns. Invoking the spirit of Justices Douglas and Black, the four dissenting Justices noted the many differences between corporations and people:

“Corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help structure and facilitate the activities of human beings, to be sure, and their “personhood” often serves as a useful legal fiction. But they are not themselves members of “We the People” by whom and for whom our Constitution was established.”

Similarly, in Burwell v. Hobby Lobby Stores, Inc., 573 U.S. ___, another 5-4 decision, the Supreme Court held that closely held corporations (ones in which there is no ready market for shares of stock and they are all held by a few persons) can assert a claim that a federal statute interferes with the corporation’s religious beliefs in violation of a federal statute called the Religious Freedom Restoration Act of 1993.

A cynic might suggest that corporations have the best of all worlds, most all the rights of persons and few of the obligations. The above indicates it didn’t have to be that way. One assumes that future courts will continue to draw the line on allowing corporations to vote or hold public office. But in the end what the Constitution provides is what at least five Justices say it means. Stay tuned.