Corporate personhood is getting a bad name.
Following the Supreme Court's 2010 ruling in Citizens United v. Federal Election Commission (1) protecting the First Amendment rights of corporations to spend money in elections, the nation has seen two trends of interest. First, we are experiencing an explosion in the amount of outside spending in elections, with so-called "independent" expenditures in elections going up significantly--from less than $150 million in the 2008 election cycle to over $1 billion in 2012. (2) Even greater increases appear on the horizon. (3) Second, we have seen the development of a broad-gauged movement to overturn the decision by way of constitutional amendment. These proposals range from relatively limited and contained grants of Congressional authority to regulate campaign finance to broad attacks on what proponents call corporate "personhood." (4)
While there is honest disagreement about the causal relationship between the Court's decision in Citizen United and the increase in independent expenditures, (5) there is no dispute about the causal link between Citizens United and the increased political focus on corporate personhood. President Obama criticized the decision in his 2010 State of the Union address, with members of the Court looking on, and continued the critique during his 2012 reelection campaign. After Mitt Romney served up the issue by asserting on the stump that "Corporations are people, my friend," Obama responded by declaring "I don't care how many times you try to explain it, corporations aren't people. People are people." During the 2014 mid-terms, Sen. Elizabeth Warren kept the issue fresh as she barnstormed the country to rally the faithful. According to the Washington Post, her most dependable applause line in her stump speech was "Corporations are not people!" (6)
The opposition to corporate personhood has not just been the stuff of speeches. A number of advocacy groups have either sprung up to fight corporate personhood or rebranded themselves by newly taking aim at it. Most of these groups oppose the right of corporations to assert any First Amendment speech rights, and some have gone further, calling for disabusing all corporations or businesses of any constitutional right. Common Cause, for example, uses former Secretary of Labor Robert Reich to tout its support for "a constitutional amendment declaring that 'Only People are People' and that only people should have free speech rights protected by the Constitution." (7) Public Citizen, the liberal litigation group founded by Ralph Nader, argues that "rights protected by the Constitution were intended for natural people." (8) Free Speech for People, one of the groups most influential in the anti-personhood movement, is pushing a "People's Rights Amendment" (the "PRA") declaring that "the rights protected by this Constitution" are "the rights of natural persons." (9) Under the PRA, "corporate entities" would be "subject to regulations as the people ... deem reasonable." Corporations, that is, would not be able to claim any constitutional right. (10) A version of the PRA was sponsored in the last Congress by Senator Jon Tester of Montana and Congressman Jim McGovern of Massachusetts. It would declare that "the rights protected by this Constitution" are "the rights of natural persons." By their count, sixteen states and nearly 600 localities have endorsed some kind of anti-personhood amendment. (11) Moreover, the movement against corporate personhood has benefitted from the intellectual heft offered by a number of prominent legal scholars, including several speaking at the conference that engendered this series of essays. (12) In a moment when the progressive left seems listless, this movement has genuine energy.
This essay is a critique of this attack on corporate personhood. I will explain that the corporate separateness-- corporate "personhood"--is an important legal principle as a matter of corporate law. What's more, as a matter of constitutional law, corporate "personhood" deserves a more nuanced analysis than has been typically offered in arguing in favor of an amendment to overturn Citizens United. Indeed, the concept of corporate "personhood" can in fact be marshaled in arguments against corporations being able to assert constitutional rights. In the nascent category of cases brought by corporations asserting rights of religious freedom, for example, corporations typically derivatively assert the religious claims of their shareholders. Attention to corporate "personhood" would lead courts to separate the claims of shareholders from those of the corporation itself, leading to a dismissal of corporate religious claims asserted on behalf of shareholders.
Finally, I will propose that the concerns motivating the movement against corporate personhood should be ameliorated with adjustments in corporate governance rather than constitutional law. In corporate law, what we need are changes in corporate governance to make corporations more like persons, not less. Unlike persons, corporations are expected to act if they have only one goal--the production of shareholder value. People must balance a range of obligations, both moral and legal. Requiring corporations to attend to a broader range of stakeholders would make corporations more like people, would make them better citizens, and would make their political participation less problematic.
THE IMPORTANCE OF SEPARATENESS
In 2014, the Court heard arguments in Burwell v. Hobby Lobby, (13) a case contesting the so-called "contraceptive mandate" in the Affordable Care Act. As enacted, the Affordable Care Act contained a provision requiring companies over a certain size to provide its employees with health insurance that includes all medically approved forms of contraceptive care. (14) Hobby Lobby sued, saying that the provision operated as a violation of the Religious Freedom Restoration Act (RFRA), (15) which provides that the government "shall not substantially burden a person's exercise of religion" unless that burden is the least restrictive means to further a compelling governmental purpose. (16) Hobby Lobby argued that under traditional canons of statutory construction and under the Dictionary Act, (17) it should be considered a "person" under RFRA. (18) While the case was limited to the statutory question, it presaged religious exercise cases certainly to be brought by corporations in the future.
An arts and crafts retailer, Hobby Lobby is a big company, with over 20,000 employees and more than 600 stores. But it's closely held, with all its stock owned by members of one family--the Greens of Oklahoma City--who are devout Christians. The Greens believe that four of the methods covered by the contraceptive mandate of the ACA are "abortifacients," and argued that the mandate caused them to violate their genuinely held belief that human life begins at conception. At first glance, the Greens' arguments appear to depend on corporate personhood. Indeed, they argued that Hobby Lobby deserved to be considered a person under RFRA.
Nevertheless, as a group of corporate law professors argued in an amicus brief, a crucial aspect of Hobby Lobby's argument turned on a rejection of corporate personhood. (I helped write the brief and was a signatory. (19)) The brief explained that "corporate personhood" simply expresses the idea that the corporation has a legal identity separate from its shareholders, employees, and other constituents. That separateness, the brief pointed out, is inherent in what it means to be a corporation. A "first principle" of corporate law is that "for-profit corporations are entities that possess legal interests and a legal identity of their own--one separate and distinct from their shareholders." The very purpose of the corporation as a legal form is to create an entity "distinct in its legal interests and existence from those who contribute capital to it."
This separateness means, among other things, that shareholders are not held liable for the debts of the corporation. That makes it possible for people to invest in corporate stock without overseeing the day-to-day activities of companies in which they invest and without risking every penny they own in case the corporation goes bankrupt. This separateness thus makes capital markets possible. And capital markets are essential for the development of a vibrant national economy. Separateness also means that corporations can exist long after the life of any individual that invests in, or works for, them. As Lynn Stout has pointed out, corporations in this way provide a mechanism for society to make long-term, intergenerational investments that are not linked to government or a specific family. (20) In this light, it is not an overstatement to say that corporate separateness has been one of the legal innovations most important to the development of national wealth.
The professors argued that separateness meant the Greens should not be able to attach their own religious beliefs to the corporation. The reason the Greens had chosen to form a corporation was to be able to operate the business without running the risk of losing their personal assets if the corporation went belly up. For purposes of liability, the Greens wanted separateness; they wanted "personhood" for the corporation. They should not then be able to stand in the shoes of the corporation for purposes of religion. The Greens' argument was cursed with an internal inconsistency: to be a religious "person" with religious beliefs cognizable under RFRA, the company had to borrow the religious beliefs of the Greens. That is, to disregard the company's personhood.
The Supreme Court did not notice the inconsistency. It held, 5-4, that the Greens could project their religious beliefs onto the corporation and refuse to provide their employees the required contraceptive-care benefits. Justice Samuel Alito's opinion is evidence of the...