the roots of "corporate personhood"

The "Occupy" movement is trying to accomplish what the 2008 financial crash, subsequent government bailouts and rise of the Tea Party have seemed unable to do: focus the nation's attention on the power that our government bestows on corporations. Emblematic of the movement's concern is their focus on the doctrine of “corporate personhood.” Occupy Wall Street's original “Declaration of the Occupation” claims that corporations “run our governments” by, among other things, persuading “the courts” to grant them “the same rights as people, with none of the culpability or responsibility.” To many, this criticism might seem opaque or even loony. But the doctrine that it references, first established in the 1886 Supreme Court case Santa Clara County v. Southern Pacific Railroad, is real, substantial and influential. Moreover, the history behind the legal finding of corporate personhood suggests that its re-examination is long overdue.

Incorporation—which is, in essence, the exchanging for certain purposes of several individual identities for a collective, group one—brings with it tremendous advantages. In the case of a business firm, for example, if a corporation were to go bankrupt or commit a crime, none of its individual owners would risk losing their personal property or going to jail. Without such protections, few people would be willing to purchase a small stake (i.e., buy a share of stock) in a business about which they know very little. Among the primary advantages of incorporation, therefore, is its ability to aid in the raising of capital.

Because corporate status conveys such great privilege, the original American colonies and, later, states were rather stingy in granting corporate status to businesses. Before the Civil War, firms were usually allowed to incorporate only by a specific act of a state legislature. States typically granted these requests only to entities that served some public purpose, so many of the earliest American corporations ran bridges, toll roads or universities. This pattern changed, however, in the democratic upsurge of the Jacksonian Era. Suspicious of the corruption and favoritism inherent in the state legislatures’ ability to bestow privileges on a select few, Jacksonians prevailed upon state after state to pass “general incorporation” laws, which granted corporate status to anyone who met specific minimal criteria. By the end of the 1870s, writes historian Alan Trachtenberg, “incorporation…had become more of a right than a privilege.”

With this change, corporate status continued to convey economic privileges, but no longer retained any of the obligations which had originally justified them. This process arguably reached its apotheosis in the 1886 Santa Clara case, a rather tedious affair involving taxes levied by the state of California on the Southern Pacific railroad. Since the state law at issue taxed the property of corporations differently than that of individuals, the railroad argued that the Fourteenth Amendment restriction of states from "depriv[ing] any person of life, liberty or property without due process of law" was not being honored. The state responded that corporations, not being persons, were not entitled to benefit from this limitation on state authority. Were it not for an aside from Chief Justice Morrison Waite, the entire case would have been lost to history long ago. Almost in passing, Waite declared the Court’s disinterest in even considering the question of whether the Fourteenth Amendment applied to corporations. “We are all of the opinion,” he declared, “that it does.”

This finding was not found in the majority opinion and, technically, should not have set a legal precedent. Yet it was also utterly uncontroversial at the time. The day after the Santa Clara decision, the local San Francisco Daily Examiner featured the case on its front page. The headline did not mention anything about corporate rights, however. Instead, it read “Value of the Mortgages Must Be Assessed to the Holders.” From such inauspicious beginnings, the doctrine of corporate personhood was firmly and permanently established. It has been continually upheld by the Supreme Court for one hundred and twenty-five years and it played a major role in one of that body’s more controversial recent findings: the First Amendment protections accorded corporations in the Citizens United case.

Yet the history of the corporation in the United States, and of the Santa Clara decision, suggests that the Wall Street occupiers have a point by contesting the doctrine of corporate personhood. The privileges accorded to the corporation were once granted in exchange for the performance of a public service. In the intervening century-and-a-half, the federal government has expanded the entitlements of the corporation while simultaneously eliminating its responsibilities. Such a far-reaching development needs to stand on firmer ground than the dubious and unsubstantiated claim that corporations are persons.