The most basic concept of American political idealism acknowledges that "[w]e hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness." Nowhere in the Declaration of Independence are the rights of corporations, unalienable or otherwise, mentioned. Nowhere in the United States Constitution or its amendments are corporations mentioned. Corporations are mentioned four times in the Federalist Papers, but only in passing. Despite the lack of any favorable reference to corporations in any of the American scriptures, corporations have achieved the status of super citizens in the United States. They use their great wealth to influence political and electoral outcomes thousands of times the influence of a natural person and make a mockery of the fundamental democratic ideal of "one person one vote." Corporations have achieved a preferred legal status, and have succeeded in subordinating the rights of natural persons to their own financial interests. This is the essential thesis of Unequal Protection: The Rise of Corporate Power and the Theft of Human Rights, by Thom Hartmann, Rodale 2002. (1) In Unequal Protection, Hartmann provides a historical context for the growth of corporate power from colonial times, through the age of Robber Barons and including present day abuses involving corporate governance. In the post-script he provides a model ordinance for rescinding corporate personhood and a state-by-state legal basis for so doing. Although Hartmann's review of historical events is at times scholarly, this book was not intended as work of scholarship. Rather, Unequal Protection was intended as a call to arms, and an effort to raise the public's consciousness about the corporate usurpation of individual rights. In this effort, it succeeds extremely well. This book is recommended for all serious minded people who are concerned about the subordination of individual rights to corporate power.
No state can act or refrain from acting except as to serve the public interest. It follows therefore that when the Secretary of State of an individual state acts to grant a corporate charter, it can only do so to serve the public interest. Often corporations conduct business in a way that is consistent with the public interest. Often they do not. The rule of law has developed over time to protect the public interest and to hold corporations accountable for their illegal and socially irresponsible behavior. But as explained in considerable detail by Hartmann, corporations are not held accountable to the rule of law in the same way or to the same extent as natural persons.
Natural persons can be executed for extreme violations of law. In many states, conviction of three serious crimes will result in life imprisonment without possibility of parole. But corporate charters are never revoked no matter how many innocent people they may kill or injure in the name of profit. They can not be sent to prison regardless of how many crimes they may commit.
Corporations live in perpetuity and even reproduce by spinning off wholly owned subsidiary corporations for which the parent corporation is responsible only to the extent of its limited capital investment. A parent corporation is virtually never responsible for the illegal polluting acts of its subsidiary. If the subsidiary is without sufficient resources to fund a cleanup, the expense is ultimately paid for by the public and the parent corporation keeps the profit.
Corporations pay taxes at a rate far less than natural persons so that it is not at all unusual for corporations making hundreds of millions or even billions of dollars annually to pay no taxes at all. Corporate taxes as a share of the nation's tax revenue plunged from 28 percent in 1956 to only 11.8 percent in 1996, the last year for records are available. The Enron Corporation, for example, was able to pay no federal taxes in four of the five years prior to its implosion in 2002. In the year 2000, the company was able to convert a tax bill of $112 million into a refund of $278 million. This is not at all unusual. Some of the largest and most profitable corporations which have received multi-million dollar tax refunds include: Chevron, PepsiCo, Pfizer, J.P. Morgan, Saks, Goodyear, Weyerhaeuser and General Motors.
Corporations work to maintain their preferred legal status by lobbying the legislature and contributing to political campaigns. As of 2002, there were roughly 38 registered lobbyists for every member of Congress - over 20,000 in total - and 138 of them are former members of Congress. In this way, corporations not only influence legislation, they actually get to write it. Energy legislation introduced by the Bush Administration was literally written by energy lobbyists and executives. Subpoenaed documents which would expose the process are being withheld under the guise of executive privilege. See In re Cheney, 334 F.3d 1096 (D.C.Cir. 2003), cert granted ____ U.S. _____(2003).
How in a representative democracy could the political power and rights of natural persons become so diminished? How in a free society dedicated to the unalienable rights of man could artificial entities possess constitutional rights? What can be done, if anything, to reverse this process? Much has been written about the subordination of individual rights to corporate power, but nowhere as well as by Thom Hartmann, Unequal Protection: The Rise of Corporate Power and the Theft of Human Rights. Hartmann discusses all of the corporate abuses mentioned above and many more.
The story of the Boston Tea Party is one that is repeated for school children routinely as a basic element of their education. The inequity of "taxation without representation" is cited as one of the instigating factors for the American Revolution. But corrupt corporate power is an essential part of this story which is rarely explained. Corporations are not mentioned favorably in any of the American scriptures because it was the corrupt power of a corporation which in large part instigated the American revolution.
In the late 18th Century, the corporate form was rarely utilized. Especially in the colonies, the most prevalent form of commerce was individual proprietorships or small partnerships. Corporate charters were granted by the King for the purpose of trading. The King and many members of Parliament had a significant ownership interest in the corporations which were created. One of the largest and most powerful corporations of the day was the East India Company.
Among its many interests, the East India Company traded in tea. The undisguised purpose of the Tea Act of 1773 was to make the East India Company's tea more marketable in the colonies. It achieved this purpose by passing a tax on all tea imported into the colonies, except the tea imported by the East India Company, and the Act even gave the company a tax refund on millions of pounds of tea that it was unable to sell and was holding in inventory.
Needless to say, the Tea Act infuriated the colonists. Not simply because they were being forced to pay a tax on tea, but because the East India Company had been granted a preferred legal status so that its English stockholders could profit at the expense of the local merchants and traders. It was no accident that the tea which was eventually thrown in Boston Harbor belonged to the East India Company.
The Boston Tea Party resembled in may ways the growing modern day protests against transnational corporations willing to sacrifice the interests of the local community in the name of greater profits. As Hartmann explains in considerable historical detail, "with few exceptions the Tea Party's participants thought of themselves as protestors against the actions of the multinational East India Company and the government that unfairly represented, supported, and served the company while not representing or serving the residents." Those who protest against the World Trade Organization don't disguise themselves as American Indians, but their spirit is substantially the same as those American patriots who did.
This hostility toward corporations was fresh in the mind of the colonists during and immediately after the American Revolution. It was widely understood that corporations were a genuine threat to the natural rights of man. It is quite simply inconceivable that the founding fathers ever intended to give corporations constitutional rights.
In Santa Clara County v. Southern Pacific Railroad, 118 U.S. 394 (1886), the U.S. Supreme Court allegedly ruled that corporations are persons within the meaning of the Fourteenth Amendment and therefore possess constitutional rights. This ruling more than any other has facilitated the growth of corporate power and privilege, and has changed the face of American democracy. But even the most superficial reading of the opinion makes it abundantly clear that the Court declined to reach the constitutional question.
In Santa Clara County, the County attempted to levy taxes against the railroad under assessments made by the state board of equalization on its franchise, road-ways, rails, and rolling stock. The railroad argued, inter alia, that the assessment violated its rights to equal protection because the assessment was based upon the value of the property without a deduction of mortgages, as allowed for natural persons and other corporations which operated in only one county. Id. at 409.
The railroad also argued that the assessment was void because it included fences in the value of assessed property, which the board of equalization had no jurisdiction to assess. The railroad argued that because there was no way to separate the value of the fences from the value of property which the board could assess, the assessment was void. Id. at 410. Beyond any doubt the case was decided on this basis.
Speaking to constitutional questions raised by the railroad, the Court acknowledged that "[i]f these positions [that assessment for the value of the fences were beyond the jurisdiction of the state board of equalization] are tenable, there will be no occasion to consider the grave questions of constitutional law upon which the case was determined below; for, in that event, the judgment can be affirmed upon the ground that the assessment cannot properly be the basis of judgment against the defendant." Id. at 411. Concluding that the fences were beyond the jurisdiction of the equalization board, the Court stated: "As the judgment can be sustained upon this ground, it is not necessary to consider any other questions raised by the pleadings and the facts found by the court." Id. at 416.
Nevertheless the head note to the case clearly states: "The defendant corporations are persons within the intent of the clause in section 1 of the Fourteenth Amendment to the Constitution of the United States, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws." It is exclusively on the basis of this head note that courts have consistently cited Santa Clara County for the proposition that corporations are persons within the meaning of the Fourteenth Amendment. How this head note came to be written is the subject of considerable discussion and scholarship by Thom Hartmann in Unequal Protection.
It appears that immediately before the Justice Harlan delivered the Court's opinion, Chief Justice Morrison Waite stated to the attorneys "[t]he Court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment . . . applies to these corporations. We are of the opinion that it does." Justice Harlan then delivered the Court's opinion which, of course, says nothing of the kind. Apparently somewhat confused, the Court Reporter, J.C. Bancroft Davis, sent a written memo to the Chief Justice seeking clarification about the constitutional question. Chief Justice Waite responded: "I leave it to you to determine whether anything need be said about it in the report inasmuch as we avoided meeting the constitutional question in the decision." The Court Reporter decided to include the Chief Justices opening remarks in the head note and changed American history in the process.
Of the cases decided in the Supreme Court "in which the Fourteenth Amendment was applied during the first fifty years after its adoption, less than one-half of one per cent invoked it in protection of the negro race, and more than fifty per cent asked that its benefits be extended to corporations." Connecticut General Life Insurance Company v. Johnson, 303 U.S. 77, 90 (1938) (Justice Black dissenting). Although subsequent courts have cited Santa Clara County for the proposition that corporations are persons within the meaning of the Fourteenth Amendment, no case has independently reviewed or decided the issue, and many cases prior to Santa Clara County ruled to the contrary. Id. citing cases.
It has been implicit in all of our decisions since 1886 that a corporation is a "person" within the meaning of the Equal Protection Clause of the Fourteenth Amendment. Santa Clara County v. Southern Pac. R. Co., 118 U.S. 394, 396, so held. The Court was cryptic in its decision. It was so sure of its ground that it wrote no opinion on the point, Chief Justice Waite announcing from the bench:
The court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of opinion that it does.
There was no history, logic, or reason given to support that view. Nor was the result so obvious that exposition was unnecessary.
Wheeling Steel Corp. v. Glander, 337 U.S. 562, 576-77 (1949)(Justice Douglas with whom Justice Black joins dissenting). See also Connecticut General Life Insurance Company v. Johnson, supra (Justice Black dissenting)("The State of California has the constitutional right to limit the privileges of its own corporations and to reserve the right to control their privileges and to define and limit their activities. . . . I do not believe the word "person" in the Fourteenth Amendment includes corporations. Neither the history nor the language of the Fourteenth Amendment justifies the belief that corporations are included within its protection").
Who would have guessed that a constitutional amendment enacted to guarantee the rights of newly emancipated slaves would end up empowering corporations? Yet, that is exactly what has happened.
The process of returning the control of American democracy to natural persons is undeniably extremely complicated and arduous. Hartmann suggests several approaches including model local ordinances, standards for the revocation of corporate charters and legislation creating an incentive for corporations to behave with a social conscience. But the revocation of corporate personhood is central to the goal. This requires reversing Santa Clara County. In Washington State, it also requires amending the state constitution, which provides that "[n]o law shall be passed granting to any citizen, class of citizens, or corporation other than municipal, privileges or immunities which upon the same terms shall not equally belong to all citizens, or corporations. Art. I § 12. As Thom Hartmann eloquently states: "Only when corporations are again legally subordinate to those who authorized them - humans, and the governments representing them - will true change be possible."
In the meantime, we need to elect officials who are not the personification of corporate personhood. We need to elect officials who don't promote the interests of pharmaceutical and insurance companies over the need for affordable health care; who don't promote the interests of the Chamber of Commerce over the viability of the civil justice system; who don't allow energy corporations to drill for oil or otherwise sacrifice the environmental commons in the name of greater profit; and who don't allow media giants to swallow competition and thereby control the political conversation.
Jeffrey Needle is a Seattle trial lawyer. He is a former ATLA Board member; former Chair of the ATLA Civil Rights and Employment Rights Sections; and former Chair of the WSTLA Civil Rights Section.
1. According to his short biography, Thom Hartmann is an award-winning author of more than a dozen books, an international relief worker and psychotherapist, a former business and marketing consultant, and founder and former CEO of seven corporations that have generated over a quarter-billion dollars in revenue.