How Corporations Got The Same Rights As People (But Don’t Ever Go To Jail)

Image courtesy of Josh Bassett

In every common-sense, everyday way, a corporation is not a person. Corporations don’t date, don’t have families, don’t go catch a movie on Friday night. They also don’t go to jail when they do something criminal. But in the eyes of the law, corporations enjoy many of the same rights — including free speech and religious expression — and protections afforded to individuals.

Groups of people have joined together to become a single legal entity for, literally, thousands of years. But in modern American law, this useful legal fiction — of a corporation as a single legal person — has taken on new aspects. Over the past two hundred years, and particularly in the last five, the Supreme Court has repeatedly found that not only are corporations people, but also that being people gives them the same constitutional rights as the rest of us.

But corporations are not actually living, breathing, physical beings. They cannot go to jail, they cannot lose their lives, and they do not think or feel. Their actions and inactions are the sum total of the actions and inactions of their members.

It’s easy for us to point to an individual and say, “There he is, this man did a thing, and he is responsible.” It’s harder for us to point to a group. So where does the fictional person of a corporation begin and end? What rights does it have, and what responsibilities? Where is the corporation at fault, and where do the real people come in?

The Evolution Of Constitutional Rights

Image courtesy of Adam Fagen

The basis for the idea of corporations as persons comes from the literal beginning of federal law: section 1 of the U.S. code.

Criminal statutes that apply to “whoever” violates them, or to any “person” that commits a crime, are legally defined as including “corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals.”

But the legal extent to which corporations have shared the same legal rights and responsibilities as other kinds of people, including actual people, has changed significantly over time.

In late 2013, a report from the Congressional Research Service (PDF) explained the constitutional protections afforded to corporations:

“Corporations have no Fifth Amendment privilege against self-incrimination. On the other hand, the courts have recognized or have assumed that corporations have a First Amendment right to free speech; a Fourth Amendment protection against unreasonable searches and seizures; a Fifth Amendment right to due process and protection against double jeopardy; Sixth Amendment rights to counsel, jury trial, speedy trial, and to confront accusers, and to subpoena witnesses; and Eighth Amendment protection against excessive fines.”

Law is iterative. It evolves whenever a conflict between two parties ends up being resolved by the courts. The legal foundation that guarantees corporate persons those rights and protections was not delivered wholesale by an act of Congress, but rather is the sum total of several different Supreme Court rulings.

In 1819, the Supreme Court protected the rights of corporations to exist and to act without interference from the states. Since then, there have been a handful of particularly important cases that redefined or clarified the constitutional protections afforded to corporations as we know them today.

Santa Clara County v. Southern Pacific Railroad, 1886
Sometimes, landmark case law springs from the most unlikely of sources. In this case, the issue was over whether or not the state of California had the power to tax the railroad for their fencing (the railroad paid taxes on other property, like rails and train cars).

The Court unanimously held that the state was improperly assessing taxes on the railroad, but in the long history of corporate personhood, that part — and the rest of the case — doesn’t matter at all. Instead, the case is remembered for a headnote appended to it by the court reporter, in which the Court’s Chief Justice, Morrison Waite, said he and the other justices believed that the protections of the Fourteenth Amendment of course applied to corporations as well as to individuals:

“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.”

Although that note is not part of any official opinion, concurrence, or dissent, it is part of the official court record and was reaffirmed in later cases. Corporate persons have since been granted equal protection under the law, which forms the foundation for granting a number of other rights.

Through the 20th century, the Supreme Court debated and affirmed those rights in dozens of other cases. Through the 1950s, 1960s, 1970s, and 1980s, corporations were found to have rights against unreasonable search and seizure and double jeopardy. They were also found to have rights to due process, legal representation, and to public and speedy trials (or at least, what passes for “speedy” in the system we have).

In the 21st century, questions of corporate personhood have moved away from questions of legal process in criminal and civil liability, though, and have moved on to a different core concept entirely: freedom.

Conscience, Speech, and Souls

Image courtesy of Ashi Fachler

In all of the 20th century court cases that afforded corporations rights under the Fifth Amendment, one key right was withheld: corporations do not have the right to avoid self-incrimination. If someone asks a corporation about a bad thing it allegedly did, it cannot plead the fifth.

The 2013 Congressional Research Service report cites an 1892 case that found “since a corporation has no soul, it cannot have actual wicked intent” to, for example, intentionally defraud or murder someone, and in 1909, the Supreme Court found it “true that there are some crimes which, in their nature, cannot be committed by corporations.”

These cases are among the historical legal precedents separating corporate “people” from physical people. A corporation has no soul, no intent, and no need not to incriminate itself because it has no body and cannot be executed or go to jail. It’s a complicated web of federal law, but still all pretty straightforward — until we get to the current decade.

In a pair of now-infamous cases from 2010 and 2014, the Supreme Court expanded the legal view of corporate personhood to include some rights under the first amendment that had previously been reserved for the sort of actual humans who do have bodies and can act with intent: enter free speech and religious expression.

Citizens United v. Federal Election Commission, 2010
The case began when a lobbying group, Citizens United, wanted to spend a large pile of money making and advertising a film critical of a presidential candidate right up against the primary elections. At the time, it was illegal for corporations to spend on “electioneering” within 30 days of a primary or 60 days of a general election.

Citizens United argued that limits on campaigning were violations of their rights to free speech under the First Amendment, and the Supreme Court agreed.

In a 5-4 ruling, the court held that if individuals have free speech, then so must collected groups of individuals. Corporations are groups of individuals and, therefore, they have free speech rights. Further, the Court found, the ability to spend money is central to the ability to disseminate speech. Therefore, limiting spending is also unconstitutional, because limiting money is equal to limiting speech.

Burwell v. Hobby Lobby Stores, 2014
In a particularly contentious and hot-button case from earlier this year, the Supreme Court moved to protect the religious beliefs not just of individuals, but of the corporations they work for.

The Affordable Care Act requires health insurance plans provided by employers to include coverage for an array of health services, including certain contraceptives. The family that owns Hobby Lobby claimed that providing contraception to female employees runs contrary to their Christian religious beliefs. Explicitly religious non-profit organizations, like churches, were exempted from the law but no such provision existed for for-profit, secular corporations and so the family, representing the company, sued the government.

In another 5-4 ruling, the Supreme Court ruled with Hobby Lobby, finding that closely-held companies — ones that aren’t publicly traded on the stock market — can file for exemptions to federal law on religious grounds, in the same way that churches can.

In the Hobby Lobby case, the Court set the precedent that for-profit corporations can have a religion that the government must not interfere in the practice of, just as individuals do.

Corporations Can Be Criminals, But Only Bodies Can Go To Jail

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If a person breaks into your house and steals your money, the process of arresting, prosecuting, convicting, and incarcerating that burglar is (relatively) straightfroward. But if a corporation steals your money, things are a little trickier.

“Corporations,” as the CRS report explains, “cannot be incarcerated. Nor can they be put to death,” although “government action, public scorn, or the two in concert may wipe them out of existence.”

Otherwise, though, they “face many of the same consequences [as individuals] following conviction.” They can be fined, placed on probation, or ordered to pay restitution. They can have their assets confiscated, or can be prohibited from engaging in certain kinds of activity.

Although corporations are fictional persons rather than literal ones, they can indeed be held both civilly and criminally responsible when they get caught doing bad things. But how do you decide whether an incorporeal, fictional “person” had intent to commit a crime?

Corporate criminal liability focuses on the actions of individuals within the corporation, because it has to. Companies, as solo entities, can’t actually do anything; the people employed by them do. And so corporate criminal liability covers crimes committed by the corporation’s “officers, employees, or agents,” within the scope of their work, and “at least in part for the benefit of the corporation.”

That’s still a definition with a lot of wiggle room in it. The Department of Justice makes a determination whether or not to prosecute a corporation as a whole, instead of just individuals in it, based on a wide array of factors.

Basically, if a (usually high-ranking) person employed by a corporation does something illegal, related to their job, with the purpose of helping the corporation, then the company can be found criminally liable — even if the employee was told not to do the thing. So if the CFO of SmithCo shreds all of the incriminating files in her office, even though the CEO of SmithCo told her, “Don’t shred those files,” SmithCo can still be prosecuted (along with the CFO).

As corporations are collections of individuals, another kind of criminal problem pops up fairly frequently: conspiracy. If multiple employees in a corporation conspire to commit or hide a crime, then the corporation, along with the individuals, can be held responsible for the conspiracy. But if there’s just one corporate officer involved, the individual and the company cannot be treated as co-conspirators.

The Justice Department has discretion deciding whether to prosecute individuals, corporations, or both for a criminal action. When deciding whether or not to prosecute a corporation, they can take into account whether it looks like something was the act of a rogue employee or whether it looks like it went all the way up. They can also consider the past history of a corporation and at how well it has complied or not complied with processes and regulations.

Freedom from Jail, Freedom From Law

Image courtesy of Ben Balter

The problem with law is that, like the personhood of a corporation, it exists only on paper. In reality, things shake out a little differently. As we have seen since 2008, the biggest corporate disasters are also the least likely to result in prosecution or in guilty verdicts.

Earlier this year, Attorney General Eric Holder insisted that no corporation is too big to jail, but the facts say otherwise. Actions and inactions by several large banks both spurred and worsened the 2008 economic crisis from which we are still recovering, and yet prosecutions have been few and far between.

(The executives who ran the banks likewise mostly still have jobs and have not been prosecuted. And the former DOJ prosecutor in charge of investigating these banks admitted he lost sleep at night over concerns about the damage that could result from bringing charges against these execs.)

Prosecutions do occasionally happen. In 2013, for example, Bank of America was found liable for actions taken by Countrywide. Usually, however, investigations result in settlements before any further action can take place, like the $25 billion group settlement in 2012, or the $13 billion JPMorgan Chase settlement in 2013, or the $16.65 billion Bank of America settlement earlier this year.

Those agreements cost corporations big bucks, but allow them to defer prosecution and avoid admitting or being found guilty of any actual criminal wrongdoing. The head of the SEC has been pushing hard to make companies admit wrongdoing in these settlements, as has Senator Elizabeth Warren, but we’ve seen very little change.

Of course, if you can argue that a law doesn’t apply to you at all, then you don’t have to worry about being prosecuted for ignoring or breaking that law. The expanding rights of corporate persons into the arena of the first amendment also makes it likely that companies will gain ever more freedom to pick and choose which laws and regulations they feel like following, and which their legal teams find a way to declare them exempt from.

Justice Ruth Bader Ginsburg pointed to such future problems in the dissent to Hobby Lobby earlier this year:

“In a decision of startling breadth, the Court holds that commercial enterprises, including corporations, along with partnerships and sole proprietorships, can opt out of any law (saving only tax laws) they judge incompatible with their sincerely held religious beliefs. In the Court’s view, RFRA demands accommodation of a for-profit corporation’s religious beliefs no matter the impact that accommodation may have on third parties who do not share the corporation owners’ religious faith — in these cases, thousands of women employed by Hobby Lobby and Conestoga or dependents of persons those corporations employ.”

If a corporation can lay claim to any earnest belief that exempts it from law and regulation, then law and regulation lose their power and third parties, as Justice Ginsburg pointed out, will suffer.

Can a for-profit corporation claim religion as a reason to discriminate in hiring, if the C-suite officers think women shouldn’t do certain work? Can a company with a highly religious ownership refuse to permit patrons of the “wrong” race, religion, or sex?

An individual can believe whatever she or he wants, in daily life. But a corporation, by its nature and under the law, is comprised of and works with any number of different and different kinds of people, each of whom is also free to believe whatever she or he wants. Now, nominally secular corporations get to pick and choose religious exemptions to federal law — and employees and customers with different beliefs are now subject to all of the challenges that arise.

Third parties — meaning “ordinary people” — are also the most vulnerable to harm from corporations having gained expanded first amendment rights. Removing barriers to unlimited corporate political spending in Citizens United also led to the removal of limits on individual political spending in McCutcheon vs FEC earlier this year.

Corporations (and individuals) still face firm limits on contributions directly to candidates or their campaigns, but the removal of aggregate contribution and “electioneering” limits immediately led to a massive increase in political spending that still continues unchecked. In the 2012 election cycle, “outside spending” — the non-campaign organizations that corporations are allowed to give to — topped $1 billion for the first time. This was not a gradual increase; spending in every previous cycle stayed well south of the $400 million mark.

The amount of money spent in state and local elections has also skyrocketed since 2010. Meanwhile, fewer and fewer organizations are disclosing where their money comes from.

The result is a political system that, even more than it already was, is basically available for purchase by the highest bidders. And as giant wads of undisclosed corporate cash become more and more critical for getting into office, fewer elected officials will be willing or able to take any stance against it.

The Future…

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In the dissent to Citizens United, Justice John Paul Stevens wrote, “Corporations help structure and facilitate the activities of human beings, to be sure, and their ‘personhood’ often serves as a useful legal fiction. But they are not themselves members of ‘We the People’ by whom and for whom our Constitution was established.”

For now, it seems corporations increasingly are joining the ranks of we other people. Some lawmakers, though, are working to push back.

The effort that has gotten the most traction at both the state and federal level is a call for a constitutional amendment that would reverse the effects of Citizens United.

The Senate debated on a Constitutional amendment to do just that this week. The text of the proposed amendment reads:

Section 1. To advance democratic self-government and political equality, and to protect the integrity of government and the electoral process, Congress and the States may regulate and set reasonable limits on the raising and spending of money by candidates and others to influence elections.

Section 2. Congress and the States shall have power to implement and enforce this article by appropriate legislation, and may distinguish between natural persons and corporations or other artificial entities created by law, including by prohibiting such entities from spending money to influence elections.

Section 3. Nothing in this article shall be construed to grant Congress or the States the power to abridge the freedom of the press.

An amendment needs to be passed by a two-thirds majority in both the Senate and the House in order to be sent to the states, where it must then be ratified by three-fourths (38) of the states. The proposed amendment received 54 (of 66) yea votes in the Senate this week, on a party-line vote.

Advocacy groups are urging the House also to debate the potential amendment, but getting 2/3 of either house of Congress to do anything in the current political climate is unlikely at best… especially when the status quo benefits so many of them.