Should People Acting through Corporations be Denied Constitutional Rights Because Corporations are “State-Created Entities”?

One of the standard arguments put forward by critics of the Supreme Court’s decision protecting corporate political speech in Citizens United is that people aren’t entitled to constitutional rights when they use corporate resources because corporations are “state-created entities.” If the state can create an entity, it supposedly also has the power to define its rights any way it pleases. This is slightly different from the argument that people using corporate resources don’t deserve constitutional protection because corporations aren’t “real people.” But it has many of the same weaknesses, and some additional ones as well.

I. Media Corporations are “State-Created Entities” Too.

The first problem is that, like the “real people” argument, it applies to media corporations as well. On this view, the government would be free to censor the New York Times, Fox News, the Nation, National Review, and so on. Nearly every newspaper and political journal in the country is a corporation. If the Supreme Court accepted this view, it would have to overturn decisions like New York Times v. Sullivan and the Pentagon Papers case.

II. The Impact on Other Constitutional Rights.

A second issue is that this logic applies not only to corporate free speech rights, but to all other constitutional rights exercised through the use of corporate resources. If people using state-created entities don’t have free speech rights, they don’t have any other constitutional rights either. After all, the supposed power to define the rights of state-created entities isn’t limited to free speech rights. Thus, government would not be bound by the Fourth Amendment in searching corporate property (including employee offices). It could take corporate property for private use without paying compensation because the Fifth Amendment would no longer apply. It could forbid religious services on corporate property (including that owned by churches, most of which are after all nonprofit corporations). If the Free Speech Clause of the First Amendment doesn’t apply to corporate property, neither does the Free Exercise Clause. And so on.

III. Nearly Everyone and Everything is Probably a “State-Created Entity.”

Third, it’s important to consider what is meant by “state-created entity.” If the term refers only to institutions that literally would not exist absent state authorization, it does not accurately characterize many, perhaps most corporations. If the federal government passed a statute abolishing corporate status tomorrow, most actual corporations would still exist and still continue to engage in the same business or nonprofit activities. They just would do so under different and perhaps less efficient legal rules (maybe as LLCs, partnerships, or sole proprietorships). But they wouldn’t all just collapse or go away. There would still be a demand for most of the products produced by corporations.

If “state-created entity” doesn’t refer to the mere existence of organizations currently defined as corporations but to the particular bundle of legal rights currently attached to the corporate form, then it turns out that virtually all other organizations are state-created entities as well. Universities, schools, charities, churches, political parties, partnerships, sole proprietorships, and many other private organizations all have official definitions under state and federal law. And all have special government-created privileges and obligations that don’t apply to other types of organizations.

Even individual citizens might be considered “state-created” entities under this logic. After all, the status of “citizen” is a government-created legal entitlement that carries various rights and privileges, many of which the government could alter by legislation, just as it can with those of corporations (e.g. – the right to receive Social Security benefits, which the Supreme Court has ruled can be altered by legislation any time Congress wants). In that sense, “citizens” are no less “state-created” entities than corporations are.

So government could enact laws requiring citizens to limit their political speech in exactly the same ways in which corporate speech can be limited (or at least condition their continued status as citizens on obedience to the government’s censorship rules). It’s true, of course, that the physical person who has the legal status of “citizen” would still exist even if that status did not. But the physical property and other assets of the legal entities known as corporations would also continue to exist if corporate status were abolished. Indeed, as noted above, many of the entities themselves would also continue to exist under different legal forms. Perhaps you want to argue that native-born citizens aren’t “state-created” entities because the Constitution requires that they be granted citizenship at birth. If so, naturalized citizens are still “state-created” since Congress has the discretion to decide which if any foreigners will get citizenship rights.

By now, the main point should be clear. If you define “state-created entity” narrowly, then it won’t include most corporations. But if you define it broadly as any legally defined status that carries government-granted rights or privileges, then pretty much every important private organization is a state-created entity. Individual citizens may be “state-created entities” as well, and naturalized citizens certainly are. Going down this road would destroy constitutional rights for just about everyone. That may be why even the liberal justices most enthusiastic about campaign finance regulation have been unwilling to really bite this particular bullet. True, Justice Stevens’ dissent does note that “A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it.” Yet even Stevens stops short of stating that this by itself proves that corporations don’t have free speech rights. I doubt that Stevens and the other liberal justices are willing to really follow that logic. For example, they’re not going to overrule New York Times v. Sullivan or conclude that the government has the power to search corporate property unconstrained by the Fourth Amendment. Yet that is where the “creature of law” argument inexorably leads. The better approach is the common sense conclusion that people are entitled to full constitutional rights whenever they use their privately owned resources to exercise them, whether those resources are legally assigned to “state-created entities” or not.

UPDATE: I should clarify that in this post, as before, I’m not arguing that corporations themselves are “persons” with constitutional rights. Rather, I’m asserting that their owners and employees are such persons and that that status enables them to use corporations to exercise their constitutional rights. Similarly, partnerships, universities, schools, and sole proprietorships aren’t people either. But people can use them to exercise their constitutional rights, and the government can’t forbid it on the sole ground that they are using assets assets assigned to “state-created entities.” This distinction was unfortunately obscured in the current post by my shorthand references to “corporations'” rights. I only used that terminology because it’s cumbersome to always write something like “people exercising their constitutional rights through corporations.”