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Daily Journal

No. Corporations Aren’t People

Jan. 25th, 2010
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RALEIGH – As far as I can recall, I have made only one appearance on the left-wing Pacifica radio news broadcast. It was awkward, to say the least.

It was about 14 years ago. I was on a book tour, promoting The Heroic Enterprise. Because my book examined the broad subject of corporate social responsibility, I spent most of my time doing interviews on related issues in the news at the time. But when I got the Pacifica invitation, I was pleased to discover that the host wanted to talk about the core themes of the book: what are corporations, what is their legal basis and business purpose, and how should policymakers approach them.

Right after the show started, however, we found ourselves in a quandary. The host and other guests were obviously ready to debate me on the subject of whether corporations were people entitled to constitutional rights. They’d read their Ralph Nader and planned on savaging me for trying to personalize corporations.

They hadn’t done their homework, though. “Of course corporations aren’t people,” I said matter-of-factly. “They are merely bundles of contracts.” My fellow panelists were flummoxed. That’s what they were supposed to say. We had a few awkward moments of dead air.

I’ve been on the radio long enough not to let dead air stand. “Only people can have rights,” I insisted. “Corporations are just agreements among people.” Courts treat corporations as people only as a handy place-holding device, a “legal fiction” to work out disputes and ensure compliance with laws and contracts. Just as it makes no sense to say that corporations “pay” taxes, since corporations are stacks of paper rather than flesh-and-blood people, it also makes no sense to say corporations have other rights.

More dead air. The other Pacifica guests looked at me uncomprehendingly, as if we were speaking different languages. The segment went downhill from there.

In a sense, of course, we were speaking different languages, or at least different dialects. For more than a century, the Left has cloaked its hostility to free markets and private enterprise by attacking “corporations” as evil, transnational, unnatural conglomerations of economic and political power (even though many of the 19th century industrialists they hated had organized their businesses as sole proprietorships or partnerships, not as corporations). Citing early incorporation statutes in Britain, France, and early America, the Left has insisted that corporations are special creatures of government, which suffers their existence only to the extent that corporations carry out public functions and operate at the direction of public officials. (The argument stemmed from a misunderstanding of the origins of a corporation’s limited liability and perpetual existence, issues I discussed extensively in The Heroic Enterprise.)

More recently, left-wing activists seeking to impose government censorship and rig the political system to favor their candidates – causes they refer to, inaccurately, as “campaign finance reform” – have seized on the old Populist/Progressive critique to insist that corporations do not enjoy First Amendment rights and as such have no recourse when Congress or states attempt to censor corporate speech during election campaigns.

I know these folks, like my Pacifica adversaries, truly believe they are making a substantive and effective argument. But as a majority of the U.S. Supreme Court explained in last week’s Citizen United decision striking down bans on independent political expenditures by corporations and unions, challenging the legal personhood of corporations has no bearing on the real issue.

You see, all citizens have equal rights under the Constitution. They enjoy these rights as individuals and are free to exercise them as individuals or as groups, in any voluntary association they choose. Because corporations are bundles of contracts among various individuals – shareholders, managers, employees, vendors, and customers – those individuals retain the right to associate or not to associate with each other. Because shareholders yield the day-to-day control of their funds to managers to maximize their return on investment, managers have significant leeway to decide how best to deploy those funds – to develop new products, attract new talent, acquire new assets, earn goodwill through charitable contributions, or seek to secure public policies they deem most likely to maximize the profitability of the business.

The Left is oddly mesmerized by the notion that corporations shouldn’t be allowed to expend dollars on politics because corporations aren’t people. Right – corporations aren’t people. They are inanimate contracts among people. Those people have First Amendment rights that government cannot be allowed to abrogate just because it doesn’t like what’s being said, published, broadcast, or Tweeted.

That’s what the Supreme Court ruled. That’s what should have been the law of the land all along. That’s what the practical result often was, anyway, given the myriad ways that corporations and unions have sought to evade government censorship over the years. What the Court has done is bring the exercise of free speech by associations back into the sunlight where it belongs.

Meanwhile, left-wingers can’t seem to get over their fixation with the disembodied corporation. Everyone else understands what a “legal fiction” means. Why don’t they?

Hood is president of the John Locke Foundation