Who's a Person Now?

One of the pet peeves of the Occupy Wall Street and its myriad offshoots is the person-hood of corporations. The recent Supreme Court decision, Citizens United v. Federal Election Commission truly shoved the idea into the faces of American citizenry that corporations are not only citizens but have rights to lobby politicians freely. The decision actually also covers activities of unions as well, but that is not what is animating protesters right now.

The case involved Citizens United, a conservative non-profit organization which aired a film criticizing Democratic candidate Hillary Clinton. The McCain-Feingold Act (more formally titled The Bipartisan Campaign Reform Act of 2002, Pub.L. 107-155, 116 Stat. 81, enacted March 27, 2002, H.R. 2356) prohibits "electioneering communications" broadcast ads that name a federal candidate within 30 days of a primary or caucus or 60 days of a general election, and prohibiting any such ad paid for by for-profit and not-for profit corporations as well as such ads paid for by unincorporated organizations using money from union or corporate funds. The Court, by 5-4, found this major provision of the McCain-Feingold Act violated the First Amendment free speech rights of the corporations. Citizens United does leave McCain-Feingold controls on foreign corporations and foreign individuals contributing to political campaigns.

I am quite in sympathy with the OWS protesters – I do not like the idea that large corporations’ lobbyists can purchase my legislators’ favors! But I think that the movement that says we should strip corporations of the status of “person” under the law needs to stop and think about the range of unintended consequences that might flow from that action.

I am not a corporate law specialist. When I practiced law, the only corporate law I really focused on was how to “pierce the corporate veil.” I was a poverty lawyer, and as a law student worked for APPALRED, which did a lot of environmental law, too. Piercing the corporate veil means to show that the corporation was set up as a sham, insufficiently funded, just in order to shelter the individuals from the legal consequences of what they were doing – so they could take unfair advantage of the legal fiction of the legal person that a corporation affords.

That fiction was allowed centuries ago, according to Mark Peters, writing in the Boston Globe Ideas section today, and quoting from William S. Laufer has written in Corporate Bodies and Guilty Minds: The Failure of Corporate Criminal Liability, corporations began to be given some aspects of personal property rights in British law as early as the 1300's under King Edward III. Corporations’ march toward personhood continued in British law, and by 1765, Laufer and Peters can quote from the Common Laws of England (not clear, but possibly Blackstone?)to distinguish between natural persons (us!) and artificial persons created by law such as corporations and “bodies politic.” The idea is to shelter the board of directors and shareholders of a corporation from liability for any wrongdoing by the corporation, or from bankruptcy if the corporation fails.

When a corporation such as Enron acts as outrageously as it did, this seems so counterintuitive. But, imagine how few people would be willing to take the risk of forming a really large corporation, when they would be liable for the actions of thousands of employees they would never meet. How few people would be willing to take the risk even of forming a less complex corporation if it failing would mean they would lose all of their personal assets! How many people would serve on boards or buy stock if being a part owner or a director meant they would be personally liable for bankruptcy or torts committed by the company? And if that happened, the economic engines of our world would just grind to a halt. Even small businesses would be fewer and much more cautious.

What other unintended consequences would we have to think about? I suspect the bankruptcy laws would have to be overhauled if we changed the status of corporations. I think we would certainly have to change the tax codes.

So, am I bothered by corporate personhood? Yes. In a lot of ways I am. But the legal fiction is intertwined in a lot of different ways into our laws. We would have to be careful in pulling it out by the roots. I am just saying be careful and take your time. But, there is another part to this...

Maybe the fault, dear Brutus, is not in our stars, but in ourselves... That is, perhaps we need to change, not the laws that allow corporations to hold some of the attributes of persons, but the fundamental problem that we are complaining about – their lobbying of legislators. The fact that legislators require funds for campaigning, and that they are susceptible to lobbyists, whether from corporate interests or any other kind, is what really should be troubling us.