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20190421 – We the Corporations

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MAIN IDEA:

The main idea of this book is to review history of corporate litigation in USA pertained to legal status of corporation as artificial person. The author’s main point is that over the last 200 years the legal person of corporation obtained more and more rights that actually were relevant only for humans such as the first amendment rights to which author allocates lots of space in his discussion in view of Citizens United.Even more interesting is author’s point that it was not development in one direction, but rather along a complex road with a lot of loops when in some cases it was beneficial for corporation to be considered in possession of human rights, but in other to be a separate entity to which legal framework created for humans just does not apply.

DETAILS:

INTRODUCTION: ARE CORPORATIONS PEOPLE?

Author starts with the story of Roscoe Conkling the outstanding lawyer of the reconstruction period, one of the drafters of the fourteenth amendment that granted rights to former slaves. Later, after two decades in Congress, as the lawyer for Railroad Company he managed to apply equal rights to corporations. It is interesting that it become a norm, so up until 1912 there were 312 cases in Supreme Court when it was used to protect corporations and only 28 cases dealing with blacks. After describing misuse of fourteenth amendment early in XX century, author jumps to describing hated Citizen Uniteddecision that extended free speech rights to corporation in early XXI century.  After that author points out that the story of corporation acquiring more and more rights is long, illustrious, and that the objective of this book is present this history.

PART ONE CORPORATE ORIGINS

CHAPTER 1. In the Beginning, America Was a Corporation

Here author discusses origin of American colonies, which were created by corporations and were treated as business enterprises. Whether Virginia colony or later Pilgrims, or later on others, they all were extension of British tradition of privateering when king or queen would give authorization to private actors to play role of Navy and obtain colonies. An interesting fact is that in 1590 these activities were responsible for 10% of economy. As result these colonies were set up as corporations and author discusses in details how it happened. One of important consequences was perception by colonials that their rights legally defined by corporate charters rather than by the will of monarch.

PART TWO THE BIRTH OF CORPORATE RIGHTS

CHAPTER 2. The First Corporate Rights Case

This was the case of Bank of the United States v. Deveaux. The case was about corporation paying local taxes. Interestingly enough, corporation won, but the logic was different. Corporation rejected its treatment as a person and asked to be treated only as conduit for rights of its members. The key here was state citizenship of corporation, which had members in several states. Here author goes to history of corporations all way to the Roman Empire, discusses in details works of Sir William Blackstone who identified corporations as “artificial persons”, and strategy of Bank’s lawyer Horace Binney who wanted to pierce corporate veil and instead of claiming corporate identity rights, claimed members rights to sue collectively. The author also discusses another case – Hope Insuranceof the same period, in which the lawyer was John Quincy Adams, who argued for corporate citizenship and right to sue. These two cases established the framework of discussion with personhood and piercing being two different approaches to corporate rights.

CHAPTER 3. The Corporation’s Lawyer

Here author moves along of timeline, bringing discussion to Daniel Webster as a corporate lawyer, reviewing important case of Dartmouth College. This case defined private character of corporations leading to recognition of their rights, which had limited government power over them.  After this author discusses later career of Webster when he became much less successful trying to protect the Second Bank of USA against Andrew Jackson and his Supreme Court pick – Taney, who was approved as such only after the second nomination. They denied special rights to elite bank, but greatly expended access to corporate form in more democratic version. The case that was decisive in this regard was Charles River Bridge Company when Webster tried to protect its monopoly. It failed and Taney wrote decision, which stressed narrow reading of corporate chapter to prevent monopolies. Author also discusses issues of corporate personhood in view of comity clause of constitution, which defined equal rights for citizens of other states of the Union that prevented discrimination by local courts.  Overall Taney Court accepted corporate artificial personality, but would allow it more limited rights than ordinary citizen, including state option to exclude corporation from their borders.

PART THREE PROPERTY RIGHTS, NOT LIBERTY RIGHTS

CHAPTER 4 The Conspiracy for Corporate Rights

Here author returns to Roscoe Conkling and use of 14thamendment to establish corporate rights. The main point here is Conkling’s assertion of drafter’s intention to read this amendment in the way beneficial for corporations.  Author considers this assertion and consequent confirmation of this idea as conspiracy and names four conspirators: Conkling, Justice Stephen Field, Bancroft Davis, and Southern Pacific. Specifically author discusses San Mateo v. Southern Pacific Railroad, the case designed to establish civil rights for corporations. Author describes process of adding 14thamendment in detail clearly, albeit unintentionally demonstrating its dubious legality since it was ratified in some states under military occupation in period of reconstruction. There is also here an interesting story of southern lawyer John Campbell who instead of fighting this amendment managed to turn it to use in southern interest by protecting economic rights of southern small businesses against government intervention (butchers case).  Then author discusses ideas of Conkling conspiracy that appeared quite a bit later in early XX century, promoted by historian Charles Beard.  Finally author reviews fight between justices Field and White on issues related to business and ethics, with White generally siding with state regulators and Fields with corporations.

CHAPTER 5 The Corporate Criminal

This is discussion of corporation rights in criminal investigation. It starts with case of Tobacco trust and application of 5thamendment rights to corporation. Author concentrates on personalities: Edwin Hale – company executive and prosecutor Henry Taft who argued against such rights for corporations. As it was related to the case, author discusses Sherman Act and its use or lack thereof. The chapter ends with discussion of how attitude to 4thand 5thAmendments changed in courts and how it is actively used now. At the time courts decided not allow disclose of corporate communications, the decision that would not be acceptable in court now.

CHAPTER 6 Property, Not Politics

This is about another case that occurred at about the same: New York Life Insurance Company represented by its executive George Perkins. The case was about financial mismanagement, specifically payments to Morgan’s firm for unspecified services. Prompted by excessive luxurious expenses of individuals related to company it was about the level of freedom the management can or cannot use with corporate financials. In addition to personal excesses, money was used extensively to bribe politicians. Author uses this case to discuss the struggle over ethics and politics of the time and stories of several famous people: Teddy Roosevelt, Mark Hanna, and Louis Brandeis.

PART FOUR THE RISE OF LIBERTY RIGHTS FOR CORPORATIONS

CHAPTER 7. Discrete and Insular Corporations

It starts with reference to the note to Supreme Court decision written in 1938, which marks end of real protection of property rights (Lochner era) and beginning of Brown era– protection of civil rights. Harlan Stone wrote it and author discusses this lawyer and his role in this and his earlier activity as protector of socialists against “red scare”.  The same relates to Newspapers and other media that need protection from politicians such as Hue Long. Then author moves to Oliver Holmes and his protection of free speech, especially in its corporate form of media in Grosjean case. The fight was about taxing advertisement that Long was attempted to use against adversary media. The final result was extension of free speech to corporations as a right.  This was a precursor to the future Citizen United.

CHAPTER 8. Corporations, Race, and Civil Rights

This chapter is about racial struggle. One case was about NAACP, which was corporation and refused to turn in to authorities membership list. It discusses also issue of corporation’s race, which normally does not have any, but could be contrived as in Johnson amusement park case. The court defined that corporate is separate entity from its members and therefore could not have human characteristics such as race. Then author discusses career of Thurgood Marshall and Hugo Black and their roles in civil rights movement.

CHAPTER 9. The Corporation’s Justice

In this chapter author moves to discuss Nixon judges and their role in moving Supreme Court away from liberalism of Warren Court. Author provides detail look at career of Lewis Powell who fought “excessive tolerance” that created crime wave, attacks against business for environmental and other reasons. A lot of attention author pays to Powell’s role as promoter of corporate political speech and active participation in politics overall as necessary to protect shareholders interests. He discusses details of Powell’s memorandum for business leaders named “Attack on American Free Enterprise System” and its consequences.

CHAPTER 10. The Triumph of Corporate Rights

The final chapter is mainly dedicated to discussion of Citizen United and overall polarization of American. It also includes discussion of corporate money in political campaigns and personality of lawyers such as Jim Bopp who fought and successfully rebuffed campaign finance laws. Author also discusses the process of how Supreme Court became more conservative with appointments of judge Thomas, Alito, and Roberts.

CONCLUSION Corporate Rights and Wrongs

Author conclusion mainly comes down to the idea that corporations are people, at least in many aspects as Supreme Court defined it over years. Author points out to the latest move in this direction – Hobby Lobby case that defined that corporations cold have religious rights. At the end author brings in reference to Leo Strine – Delaware Chief Justice and his lecture on corporate governance in which Leo discussed corporate governance and impossibility of shareholders to control corporate political speech or any other actions for that matter. This makes the idea of corporate personhood that was continuously expanded somewhat damaging, since it resulting in actual infringement of rights of real people.

Author ends his conclusion with the story of a small Mora County court, which decided to ban fracking on its territory. The case was whether Shell Company could challenge the ban in court as violation of its constitutional rights. The Court sided with Shell, once more confirming constitutional rights for corporations.

MY TAKE ON IT:

As the great many other things American jurisprudence went way beyond original Constitution by establishing precedents and confirming laws that have no relation to original text. It is a pity because the idea of constitution was to restrict power of politician and bureaucrats to creation of explicit laws directly, instead forcing them to base laws on written Constitution so these laws could not be expanded beyond its limits. The corporate personhood, establishment of which author describes in great detail, is one uniquely demonstrative example of such legal expansion way beyond constitutional limits.

I personally would like to see complete elimination of all this unconstitutional legal structure and establishments of explicit constitutional article that would define meaning and rights of corporations, similarly to the way it defines rights of human citizens. In my opinion the existence of corporations has dual purpose: limitation of individual responsibility and combination of resources of different entities under one control. The limitation of liabilities could have two sides: material loses and negative consequences of some action or inactions by individuals. Correspondingly it should be two different types of corporations – Business Corporation with no political rights whatsoever and Political Corporation with no business activities whatsoever. The first would have neither first amendment nor any other human rights, while second would not be able to sell anything, only use collected money for political activities. As to legal standing, instead of current arrangement when corporation can sue or be sued, providing money flow away from shareholders to both corporate and adversarial lawyers, I would like to see corporate resource allocation to human beings who would curry legal responsibility for use of these resources on behalf of corporation and in the amount of allocated resources.

 

 


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