How Corporations Won Their Civil Rights
Faced with questions of constitutional rights, conservatives like to consult text and history. Americans are bound by the text of the Constitution until they choose to change it, and we can discover the text’s meaning by studying the words it contains and the circumstances of their enactment.
It’s difficult to do this, though, when it comes to the constitutional rights of corporations, which are not mentioned in the Constitution at all. Indeed, there is no definitive evidence from the Founding era that corporations were believed to have—or not to have—the assorted rights that individual citizens do. Further, corporations of the time were much different from the ones of today: each was chartered for a limited purpose that benefited the public in some way, and the government often gave them monopolies. Though corporations played an enormous role in early American history, they were relatively few in number.
As corporations grew and took their modern form, questions inevitably arose about what rights they—and the people behind them—had. In We the Corporations, UCLA law professor Adam Winkler tells the story of how, in decisions spanning two centuries, the Supreme Court muddled its way through the issue, more or less making things up as it went along.
The cases often center on a deceptively simple question: are corporations just associations of people, people who have the same rights together that they would have individually in any other context? Or is the corporation a separate entity—an artificial person, if you will—that might have some rights but not others, or hardly any rights at all?
There’s an oddity here noted by Winkler. Corporate personhood, the much-decried idea that a corporation is a person, is actually the option that grants corporations fewer rights. It’s a theory that closely reflects the core concept of a corporation—a corporation is, after all, a separate financial entity that enters contracts and sues in its own name. Its owners are generally shielded from personal liability. This is a theory that allows the government to limit the influence that corporations exert over our politics, making them less able to win cronyist favors.
But it’s also a theory that invites the government to abuse corporations and, by extension, the flesh-and-blood, rights-having people behind them. Such abuses are not alien to American history. As detailed in We the Corporations, they have included attempts to require the NAACP to turn over the identities of its members, to tax newspapers as a punishment for printing disfavored messages, to seize key business records that were not germane to any alleged wrongdoing, and even to take over a privately funded college.
As its sardonic subtitle says, We the Corporations is the story of “how American businesses won their civil rights,” a process that took centuries but is now pretty much complete, having advanced during almost every stage of the Supreme Court’s history. Today there are few rights that individuals have but Big Business does not. Or, to put it in the friendlier language of Citizens United, individuals no longer lose their rights when they act together in the corporate form.
The most challenging thing about We the Corporations is that one can read it, spend days thinking about it, and still not be entirely sure which framing is the right one. Winkler himself undoubtedly thinks that corporate rights have gone too far, but he provides a thorough and fair accounting of how we got here, never pretending the issues are simple when they are messy and complicated.
Perhaps it’s not surprising that corporations came out on top, given their deep history in this country, which Winkler recounts in the book’s early chapters. The Virginia Company of London brought settlers to the New World in the early 1600s using money it had raised from private investors. It formed a “General Assembly” in Jamestown in 1619, the first representative assembly in America.
Some of the next colonies to form had corporate roots as well, and similarly modeled the forms of government still with us today. The Massachusetts Bay Company’s charter bears striking similarities to the Constitution. A corporate bylaw it enacted in 1641, the “Body of Liberties,” was a precursor of the Bill of Rights.
Even America’s practice of judicial review echoes its corporate past. Courts in England had no right to review Parliament’s laws, as there was no written constitution for such laws to violate. But corporate bylaws were not valid if they were “repugnant to the Laws of the Nation.” England’s “repugnancy review” gradually became a limit on all colonial lawmaking, not just on the policies of New World corporations. The same concept, described with the same word but applied to the Constitution, appeared in the First Congress’s Judiciary Act of 1789 and the landmark 1803 Supreme Court case Marbury v. Madison.
Around that same time the federal government itself created a corporation, the Bank of the United States. This was legally controversial, as the Founders had considered giving the federal government the right to charter corporations but had decided not to. Yet the bank would begin the quest for constitutional rights for America’s corporations through the little-remembered 1809 case Bank of the United States v. Deveaux.
This case established that corporations could sue in federal court—which was an issue because the Constitution grants federal jurisdiction when a conflict arises among “Citizens” of different states. As it would many times in the future, the Court reached its conclusion by “piercing the veil,” or looking through the corporation to see the people behind it. Those people were indeed citizens from a different state, and thus the case created the risk that a state court would be biased in favor of the state’s own residents.
The famed litigator Daniel Webster, facing a Supreme Court led by John Marshall, managed to push corporate rights further in 1819. The case involved his alma mater, Dartmouth College, which had been created as a nonprofit corporation, with private funding and eventually a charter from the state of New Hampshire. During a struggle for control of the college’s presidency, the state decided to take control of the institution by rewriting its charter, creating an oversight board, and allowing the governor to appoint trustees. In response, Webster argued that the original charter had been a contract between the state and the private parties behind the college—and that therefore the new policies violated the Constitution’s decree that states may not impair “the Obligation of Contracts.” The Court agreed.
The Jackson years saw a backlash against corporate charters that bestowed monopolies and other special privileges—and ended up making the corporate form more accessible to the typical business through “general incorporation” laws. This period was also rough on Webster, who saw his arch-enemy, Roger Taney, become chief justice.
Most famous today for writing the Dred Scott decision, Taney took a narrow view of corporate rights. In a case involving the Second Bank of the United States, which Webster represented, Taney endorsed the concept of corporate personhood—meaning that a corporation was distinct from its members and did not have the same rights they had. Taney also stopped corporations from venue-shopping—moving cases to state court when it would be advantageous to do so by adding a board member from the state, a tactic that had grown common since the first Bank of the United States case.
The rest of the century, which saw the Civil War, the expansion of the railroads, the beginning of a “race to the bottom” among states to attract corporations through deregulation (which Delaware eventually won), and the rise of anticompetitive trusts, was chaos for corporate-rights jurisprudence. In one case a man sued a railroad that had induced him to bribe legislators in its behalf—but then refused to pay him for his efforts. In another case a lawyer who had personally been involved in the drafting of the Fourteenth Amendment lied to the Supreme Court, claiming the amendment’s equal-protection clause used the word “persons” instead of “citizens” in order to protect corporations. (That case settled out of court, likely because the lie was discovered.) Then there was the case in which a Supreme Court reporter, charged with writing the “syllabus” summarizing the decision, incorrectly said the justices had endorsed the idea of corporations as Fourteenth Amendment “persons.” A justice took advantage of this, slipping the language into the actual text of a future decision. Back then, the justice assigned an opinion had wide latitude to write it as he saw fit, and the others might not have even seen the offending passage before it was published.
Such tales certainly constitute the most entertaining passages of We the Corporations.
But then came the so-called Lochner era, named after a 1905 case striking down a New York law that limited the number of hours that bakery employees could work. This, perplexingly, was considered a violation of the Fourteenth Amendment’s due-process clause, which allegedly forbade such regulations by guaranteeing workers the freedom of contract. This has long been considered an example of conservative judicial activism.
But as Winkler notes, this era was not so outrageous as it seems. Most challenges to business regulations failed. And the Court stuck to a simple system for determining whether corporations had constitutional rights: namely, they had “property” rights, but not “liberty” rights. They had some protection against unreasonable searches and seizures—stemming from a case in which prosecutors had tried to seize so many of a business’s records that it could no longer function, including records with no plausible connection to the case—but no right against self-incrimination or even to free association.
They also had no right to influence elections, and a series of campaign-finance reforms began after the Great Wall Street Scandal of 1905, in which it was revealed that life insurance companies had been covertly donating to political candidates, outraging policyholders who hadn’t expected the companies to use their money this way. In 1907 corporations were banned from giving money directly to candidates, a policy that still stands—though they have evaded it through the use of separately funded political action committees, a strategy pioneered by unions in the 1940s and explicitly sanctioned by Congress in the 1970s.
The line between property and liberty rights eventually broke down, though. In 1936 the Supreme Court considered a nakedly political Louisiana tax that applied only to newspapers with a circulation above 20,000; all but one of these were urban papers that opposed the agenda of Governor Huey Long, whose literature explicitly defended the tax as a punishment for the political attacks the papers had published. In striking down the tax, the Court ruled, rather commonsensically, that freedom of the press could not be denied to press companies. This was a liberty right.
Other corporate rights were won by groups normally seen as progressive. The NAACP, legally a corporation, won a freedom-of-association case in 1958 when the state of Alabama demanded a list of the group’s members, presumably to intimidate them; the decision pierced the veil and relied on the rights of the members. Ralph Nader’s consumer rights group, Public Citizen, defeated a law forbidding pharmacies to advertise drug prices; the idea wasn’t that the businesses had a right to speak but that consumers had a right to hear about lower prices. The ACLU was instrumental in 1976’s Buckley v. Valeo, which struck down limits on electoral expenditures by candidates and independent individuals; the opinion held that such rules were limits on speech, because election-related speech, after all, costs money. That set the stage for similar logic to be used elsewhere, including regarding spending by corporations in particular.
That process took time, but it happened. A 1978 case allowed corporations to influence ballot measures in which they had a stake. (The opinion was written by Lewis Powell, who before joining the Court had been on the board of Philip Morris and had written a famous memo urging businesses to become more politically involved.) But corporations’ right to participate in candidate elections remained limited—indeed, such a right was explicitly rejected in the 1990 Austin case—until 2010’s Citizens United, which We the Corporations treats as the apotheosis of corporate rights. In one masterful section, Winkler ties the case’s reasoning to that of the various other cases he’s discussed throughout the book.
While not striking down limits on contributions to candidates, Citizens United held that the freedom of speech included the freedom to fund speech about candidates—and that people don’t lose their free-speech rights when they work together through the corporate form. Corporations have always been limited to pursuing the goals laid out in their charters, of course, but if they pursue those goals through speech, the First Amendment protects them.
This ruling came in a case where the Court could have rendered a much narrower decision. The case centered on a highly unusual circumstance in which a nonprofit group had made a documentary attacking Hillary Clinton but was prevented from showing it on pay-per-view and advertising it on television because a small amount of its funding had come from for-profit corporations. It also came just a few years after another case, McConnell v. FEC, that had upheld the very same limit on corporate spending. The Court’s ideological composition had shifted rightward in the meantime.
Citizens United also, though, eliminated a lot of uncomfortable tensions in the law. The previous regime had exempted media corporations—so a media company could say whatever it wanted about a candidate, but another corporation couldn’t buy ad space from that company to do the same. In oral argument before the Supreme Court, a lawyer for the government conceded the law would even allow for the banning of books (also known as the prototypical First Amendment violation), so long as those books promoted candidates and were funded with money from a corporation.
It also provides us a good opportunity to return to the question of the Founders and the text they enacted. As Winkler notes, the late Justice Antonin Scalia wrote a concurrence in the case arguing that the majority’s ruling was consistent with his originalist philosophy. We the Corporations doesn’t flesh out what Scalia said, though, so it’s worth doing here.
As mentioned above, there is no definitive evidence that the Founders wanted, or did not want, corporations to have constitutional rights. But Scalia laid out a strong case for piercing the veil—for seeing corporations as associations of rights-having individuals—and used considerable Founding-era evidence to make his point.
The Founders may have resented some things about corporations, Scalia conceded, but mainly this had to do with “the state-granted monopoly privileges that individually chartered corporations enjoyed.” Further, there were other types of entities that were more similar to the corporations we have now (references removed): “[R]eligious, educational, and literary corporations were incorporated under general incorporation statutes, much as business corporations are today. There were also small unincorporated business associations, which some have argued were the ‘true progenitors’ of today’s business corporations. Were all of these silently excluded from the protections of the First Amendment?” It seems unlikely, considering that both corporations and other voluntary associations petitioned Congress, distributed pamphlets, and published newspapers. Scalia added:
The Amendment is written in terms of “speech,” not speakers. Its text offers no foothold for excluding any category of speaker, from single individuals to partnerships of individuals, to unincorporated associations of individuals, to incorporated associations of individuals.
We are therefore simply left with the question whether the speech at issue in this case is “speech” covered by the First Amendment. No one says otherwise. A documentary film critical of a potential Presidential candidate is core political speech, and its nature as such does not change simply because it was funded by a corporation.
The concurrence not only expertly lays out the case that Citizens got it right but suggests that courts since the early 1800s have gotten it right—at least a lot of the time—when they allowed corporations to exert the rights held by the individuals behind them. This is not a conclusion anyone should be entirely comfortable with. As Winkler documents, corporate spending on elections soared after Citizens, including in the form of “dark money” whose sources are not publicly disclosed, and hardly anyone can deny the harms that result when businesses team up with legislators to gain special favors.
It’s a conclusion we will probably be living with for some time, given the makeup of the Court. And maybe it’s not such a bad thing after all, in terms of safeguarding our liberties.
Robert VerBruggen is a deputy managing editor of National Review.