Corporate Personhood: Everything You Need to KnowStartup Law ResourcesIncorporate
Corporate personhood is for corporations to have some of the same rights as people, with the idea that a corporation has its own rights.9 min read
2. The Importance of Corporate Personhood
3. Arguments for Corporate Personhood
4. Arguments Against Corporate Personhood
5. The History of Corporate Personhood
6. Frequently Asked Questions
7. Incorporate with Legal Help
What is Corporate Personhood?
Corporations have some of the same rights as people. This is known as corporate personhood. It is the idea that a corporation has its own rights. Corporate personhood has existed much longer than many people realize.
Corporate personhood is not just for large companies. As long as a business is incorporated, it can benefit from corporate personhood. Organizations that benefit from corporate personhood can include:
- Large businesses
- Small businesses
- For-profit organizations
Because it bought land, the Catholic Church is one of the earliest examples of corporate personhood.
Many people are against the idea of corporate personhood. In their opinion, companies are not people and do not deserve the same rights as a regular person. However, this legal designation does not give a business the same rights as a natural person. Corporate personhood protects corporations from unfair treatment by the government. These protections are important for corporations to operate successfully.
People who are against corporate personhood claim that the legal concept ignores an important difference between businesses and people. The argument is that people are created by God and thus have God-given rights. Businesses are not, so opponents say they do not deserve the same status as a regular person.
Opponents also argue that unlimited corporate political spending gives corporations a stronger voice than regular people. It allows them to control elections, pressure candidates, and is a de-stabilizing influence on the country's political system.
Although corporations have certain rights, they are not considered full persons under the law.
The Importance of Corporate Personhood
Although its opponents may not realize it, corporate personhood is extremely important and serves as one of the main preventative measures against government overreach. Generally speaking, corporations are entitled to 1st, 4th, 5th, and 14th Amendment protections. While the main point of contention when it comes to personhood is the 1st Amendment rights granted by the Citizens United ruling, the more important protections are provided by the other amendments.
For example, the 14th Amendment provides equal protection under the law. This is important for corporations because it prevents state governments or other jurisdictions from passing legislation that unduly burdens a corporation while not affecting other citizens.
Equally as important to corporate personhood is the 4th Amendment, which grants protection from unreasonable searches and seizures. Without the protection of the 4th Amendment, corporations could be raided by the government and have their assets seized with no legal recourse. Fourth Amendment protections were extended to corporations in the Los Angeles v. Patel ruling, which involved police attempting to search a hotel guest registry.
Also, due to 5th Amendment protections granted to corporations, the government cannot strip them of earnings or profits thanks to the "taking" clause of this amendment. This right was granted to corporations in the ruling of Horne v. Department of Agriculture. In this case, the Department of Agriculture tried to force a small grape grower to set aside a percentage of crop yield to be redistributed by the government.
Prevention of unfair treatment by the government at any level is the most important reason for the existence of corporate personhood.
Arguments for Corporate Personhood
There are strong arguments in favor of personhood. Even if they are limited, corporations need some rights to exist. Without these rights, few businesses would succeed.
Some of the best arguments for personhood include:
- World Peace: This idea enables businesses in different countries to work together. When countries are tied together, arguments aren't as common. It also means that problems between countries are fixed much more quickly. Personhood leads to world peace.
- Competition: Personhood protects corporations from liability. This allows them to take risks and expand. Without this protection, it would be difficult for corporations to compete in the marketplace. Less competition hurts both consumers and corporations, which is why personhood is important.
- Global Stability: Personhood allows for multinational corporations. This means one company can operate in many different countries. The protections of personhood defend company owners from liability, which encourages them to expand internationally. Multinational corporations increase economic bonds between countries and leads to increased global stability.
- Legal Distinction: Personhood is a legal distinction. It is used for both corporations and people. This designation is a way to define bestow rights, outline legal entitities, and define liability. Because personhood is only used as a legal distinction, and not a value judgment, it does not put corporations on the same level as natural people.
- People Create Corporations: Regular people create and run corporations. Protecting corporations means protecting the people who created them. Personhood is important because it benefits the people who start and run businesses.
- It's in the Dictionary: The dictionary defines corporations as people in some cases.
- It's a Legal Definition: Personhood is a legal definition. It does not make businesses equal or more valuable than regular people. The only reason for personhood is to protect businesses. Personhood is not meant to harm people. Without personhood, a business could be unfairly harmed by laws or regulations.
- Personhood Protects People: A business is made up of its people. Personhood protects both a business and the people who work for it. If a business does something illegal, personhood makes sure the people who work for the business are not harmed. Personhood also makes it easier for a small business to compete with larger businesses. It evens the playing field for everyone involved in business.
- Taking Part in a Business: To work at a business, you have to give up some of your rights. However, giving up these rights often leads to big benefits in the future. If personhood did not exist, you would not be able to give up these rights and take part in a business. Personhood enables businesses and employees to work together to succeed. Personhood leads to opportunity.
Arguments Against Corporate Personhood
Many people disagree with personhood. They don't feel businesses should have the same rights as people. However, getting rid of personhood would be very difficult. It would also be harmful to businesses everywhere. People against personhood don't feel it's fair that a wealthy business has the same rights as its workers. They feel like personhood gives businesses more power than real people.
The best arguments against personhood are:
- Businesses Are Not Real: The main reason to not have personhood is that businesses do not exist in reality. A business mostly exists on paper. Giving a business the same rights as people doesn't make sense because they are not people in any real way.
- Lack of Morality: Those against corporate personhood argue that corporations cannot be people because they lack morality. Morality is key to the social compact, and without morality a corporation cannot fully join the social compact. Since a corporation does not have morality, and is only motivated by profit, it does not deserve the rights of a real person.
- Only People Deserve Rights: A business needs some rights to be able to succeed. However, it does not deserve the same rights as a real person. If a business is given personhood, it means it has more power than a real person. Many people believe this is unfair because a business cannot be harmed in the same way a person can. Rights belong to people, not businesses.
- Personhood is for Citizens: A business cannot be a citizen of a country. In fact, most businesses work in many countries. If a business can't be a citizen, then it does not deserve personhood. Rights are supposed to protect a citizen of a country. Citizens can vote. Businesses are not allowed to vote. This means they are not citizens and do not deserve rights.
- Businesses Are Not Alive: A big part of personhood is feelings. Businesses have no feelings because they are not people. A business can't live. It can't die. Businesses do not feel love, get married, or have children. If a business is not alive, then it is not a person and does not deserve personhood.
- Businesses Only Want to Make Money: Real people know the difference between right and wrong. They understand why it's wrong to hurt another person. Businesses are not people, so they don't know the difference between right and wrong. The only thing a business cares about is making money. This can end up hurting regular people. Not knowing right from wrong means that a business should not be given personhood.
The History of Corporate Personhood
Before the Constitution, the United States was governed by British Common Law (BCL). BCL defined corporations as "artificial persons." Artificial personhood allowed corporations to:
- Pay taxes
- Pay employees
- Sign contracts
- Sue and be sued
- Collect dues
Being an artificial person meant that corporations did not have legal rights. They only had privileges that could be taken at any time.
The history of corporate personhood starts with the Constitution. Important events that led to full corporate personhood include:
1791: The First Amendment is ratified.
1819: In Dartmouth v. Woodward, Chief Justice John Marshall states that corporations do not deserve Constitutional protections.
1870s–1890s: The Pendleton Act limits public spending on political campaigns. William McKinley decides to seek corporate donations in 1896 and 1900.
1886: In the Santa Clara v. Southern Pacific Railroad Co. decision, corporations are given limited 14th Amendment Rights.
1897: Corporations are given full 14th Amendment rights. They also receive some 5th Amendment protections.
1905: Lochner v. New York strikes down a law that attempted to limit worker hours. This ruling stood for 30 years.
1906: The Hale v. Henkel case gives 4th Amendment Rights to corporations. 5th Amendment rights are still limited.
1907: The Tillman Act prevents direct political donations from corporations. The Act includes labor unions in 1947.
1937: The Lochner decision is overturned, and many regulations are passed that limit corporate power in favor of worker's' rights.
Corporate personhood stalled over the next 30 years. The modern push for corporate rights started in 1971:
1971: The Federal Election Campaign Act (FECA) strengthens campaign finance laws.
1974: After the Watergate scandal, FECA is improved. It now includes limits on campaign spending and donations. The Federal Election Commission (FEC) is founded.
1976: Buckley v. Valeo decides that political advertising is free speech. Direct contributions are still illegal. Virgina Board of Pharmacy v. Virginia Citizens Consumer Council gives 1st Amendment rights to some commercial speech.
1978: Bellotti v. First National Bank of Boston removes a ban on for-profit corporations spending money for political referendums. Surprise OSHA inspections are ruled to violate the 4th Amendment.
1980s: The Central Gas & Electric Corp. v. Public Service Commission decision establishes the four-part corporate speech test. A portion of FECA is struck down. Corporate spending on nonprofit organizations is now unlimited.
1986: Pacific Gas & Electric Co. v. Public Utility Commission of California gives corporations the right to "negative speech."
1990: Austin v. Michigan Chamber of Commerce upholds a spending ban. Non-media companies still can't spend on political campaigns.
2002: The Bipartisan Campaign Finance Reform Act (BCRA) is signed. Also known as McCain-Feingold, the BCRA puts limits on "soft money."
2003: The Austin decision is upheld, and a challenge to the BCRA is rejected.
2007: Federal Election Commission v. Wisconsin Right to Life strikes down a portion of the BCRA's restrictions on political advertising. Ads that mention candidates without advocating for or against them in the period leading up to elections are now legal.
2008: Davis vs. Federal Election Commission further weakens the BCRA. Individual campaign contributions may now be higher. Citizens United is prevented from showing a political ad. It decides to sue the FEC.
2009-2010: The Supreme Court hears arguments in Citizens United v. Federal Election Commission. The Court rules in favor of Citizens United. Limits on corporate political spending are now unconstitutional. Speechnow.org v. Federal Election Commission allows unlimited contributions to independent expenditure PACs.
2011: Sorrell v. IMS Health, Inc. strikes down a ban on doctord' prescribing habits being used for marketing. Arizona Free Enterprise Club v. Bennett removes a state-level public financing system. The system is found to be unfair to non-participatory candidates.
Two recent cases are important to corporate personhood. In Sebelius v. Hobby Lobby Stores, corporations are given freedom of religion under the 1st Amendment. In McCutcheon v. Federal Election Commission, limits on individual aggregate contributions were struck down.
Frequently Asked Questions
- What would happen if corporate personhood was revoked?
Corporations would go back to being artificial persons if corporate personhood was revoked. Their rights would return to being privileges. There would be nothing to stop state governments from treating corporations unfairly. Competition would likely be reduced as well. Corporations would not be protected by the 1st, 4th, 5th, or 14th Amendment. A company's ability to compete might also be harmed.
- Would small businesses be affected by a repeal of corporate personhood?
Yes. Small businesses can also be corporations. If a business is incorporated, it has corporate personhood rights. Without these protections, small business would suffer a great deal of harm. It would be hard for them to compete with larger companies. They would also be greatly affected by laws against corporations.
- Could corporate personhood be limited instead of repealed?
Yes. As we have seen, there are good reasons for limited forms of corporate personhood. It could be restricted in meaningful ways. For example, you could still protect businesses from government overreach without allowing them to donate unlimited amounts of money for political reasons. However, both restricting and repealing corporate personhood would require amending the Constitution, which is extremely difficult.
- Do unions have corporate personhood?
No. Unions are still considered artificial persons. Unions never advocated for corporate personhood, so they were never granted this status. It's possible unions will gain corporate personhood in the future.
Incorporate with Legal Help
Corporate personhood is one of the most complex political and legal issues there is, and it's likely to get more complex as corporations are granted additional rights. As corporate rights are expanded, incorporating your business becomes an increasingly useful tool. If you're interested in incorporating your business and taking full advantage of corporate personhood, you can find a knowledgeable attorney by searching the UpCounsel marketplace.
Many of the attorneys you'll find on UpCounsel have experience in the corporate world and will fully understand the rights granted by corporate personhood and the requirements to incorporate your business. Learn more about UpCounsel's superior pricing. Be sure to register so you can post your legal need today.