Corporations are not people.
Mit Romney, under pressure from Iowans on break from eating deep-fried Twinkies at their State Fair, said yesterday, "Corporations are people!" The rest of his brief comments seemed to indicate he meant since corporate profits go to people, that made corporations people.
Sorry, Mit, but giving an entity profits does not breathe life into it and confer on it the status of human. As I have written before, a corporation is not a living, breathing thing. It is created by statutes and consists of a piece, or more pieces, of paper. A corporation has no national loyalties. Its loyalties are to its shareholders. A for-profit corporation’s morality is shaped by its reason for existence—profit.
In this country, anyone with the money to purchase shares of stock can do so. Stockbrokers do not check customers’ passports, only their credit ratings, and are glad to buy for American, Brit, Canadian, Chinese, Saudi, or Yemeni. By the same principle, a corporation may be chartered under the laws of Delaware or Indiana, but has no state loyalty. The corporation follows the dictates of its board of directors. The board is elected by shareholders based upon numbers of shares owned. The shareholders might not even be people, but other corporations.
Oh, that’s right. I forgot about Citizens United v. Federal Election Commission, 558 U.S. 50, 130 S.Ct. 876 (2010), the Supreme Court case in which some rights were conferred on corporations. Until then, there were restrictions placed on the amounts of money corporations could contribute to political campaigns.
Corporations are not mentioned the United States Constitution or in the Bill of Rights. At the time of the Constitutional Convention, only a few corporations existed. Those entities were created for temporary works, such as construction of a specific bridge or road. There was good reason for the Framers to be suspicious of corporations. The Boston Tea Party was a reaction to British favoritism for the East India Tea Company. Thomas Jefferson, though not a delegate to the Constitutional Convention yet a man whose views had a significant effect on the thoughts of many of the delegates, wrote of corporations: "I hope we crush in its birth the aristocracies of our monied corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our county."
Again, as Justice Stevens notes:
Those few corporations that existed at the founding were authorized by grant of a special legislative charter. Corporate sponsors would petition the legislature, and the legislature, if amenable, would issue a charter that specified the corporation’s powers and purposes and "authoritatively fixed the scope and content of corporate organization," including "the internal structure of the corporation." J. Hurst, The Legitimacy of the Business Corporation in the Law of the United States 1780-1970, pp. 15-16 (1970) (reprint 2004). Corporations were created, supervised, and conceptualized as quasi-public entities, "designed to serve a social function for the state." Handlin & Handlin, Origin of the American Business Corporation, 5 J. Econ. Hist. 1, 22 (1945). It was "assumed that [they] were legally privileged organizations that had to be closely scrutinized by the legislature because their purposes had to be made consistent with public welfare." R. Seavoy, Origins of the American Business Corporation,1784-1855, p. 5, 1982.
There no longer are the same limitations on the purpose for creating a corporation as there were in the early 1800s. In Indiana, a corporation can be created to accomplish any lawful purpose. One need only fill out a simple form available on-line through the Office of the Secretary of State, plunk down the filing fee, and make sure the name one wishes to use has not already been taken.
A frequent reason to incorporate is to avoid liability. Many acts carried out under the name of the corporation are protected by the "corporate veil." Corporate shareholders, agents or employees cannot be held liable for a great variety of actions if acting within the course and scope of their corporate capacity. This also is known as the "corporate veil." Lawsuits frequently involve efforts to pierce the corporate veil as to certain matters. That can be accomplished, but it is the exception to the rule of corporate law. Also, an individual still can be held liable for his or her own conduct in certain contexts. If a driver for UPS negligently blows a stop sign, the driver as well as UPS could be held liable for damages.
If I have enough money to buy shares in a corporation, I can do so. Theoretically, so can anyone. Most people do not buy stock because the little money they have goes to items of everyday survival: food, housing, clothing, transportation. Wealthy people are more likely to invest in stocks because they have the extra money with which to play the market.
A person who buys shares in a corporation has not made a simple purchase of a commodity. The person now is a shareholder and owns a part of something that, by law, owes its shareholders a fiduciary duty. A fiduciary duty is a "relationship requiring the highest duty of care and arising between parties." Black’s, supra, at 256. In the case of a corporation, its fiduciary duty is to generate a profit for its shareholders.
These are significant points about corporations. Mit Romney’s position is scary and indicates those of us who were scared about Citizens United were right.