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Constitutional Rights and Corporations:

Since the topic is in the news again, I thought I'd briefly repost — in a slightly modified form — this item that I blogged several years ago.

A reader asked me to elaborate on my comment about corporations having rights; here are some general observations of mine on the subject. Note that the following speaks only of corporate constitutional rights — naturally, corporations have many rights protected by common-law and statute as well — and in particular of the rights in the Bill of Rights and the body of the Constitution. (The rights do not include the right to vote, which is not expressly in the Bill of Rights or in the Constitution.)

1. Consequences. The New York Times is owned by a corporation. Most private universities are organized as corporations. So are most nonprofit advocacy groups. So are many religious groups (though I believe some are organized through some special quasi-corporate forms). If you really believe that corporations lack constitutional rights, then the government would be free to ban corporate-run newspapers from criticizing the government, or ban the Catholic Church or the ACLU or the NRA from expressing its views.

Likewise, if corporations lack constitutional rights, the government could take their property without just compensation, and in fact without any hearing. It could just come in and grab it, no questions asked.

Now some people might think this is the right result. Or perhaps if this happened, people would stop using the corporate form — newspapers, advocacy groups, and churches would somehow reorganize themselves as, say, partnerships or sole proprietorships. This might actually be hard, and from the perspective of people who disapprove of corporate rights, it might be counterproductive; what's the point of letting the Times have constitutional rights if it's run as a partnership but not if it's run as a corporation? But for now, my point is simply that we should clearly identify the consequences of denying constitutional rights to corporations — and those consequences hardly seem sensible.

2. Individual rights. One reason these results may seem senseless is that restricting the rights of corporations usually means restricting the rights of individuals. If you take the property of a corporation without compensation, whom are you really hurting? Not "the corporation," which is, indeed, a convenient legal fiction. You're hurting the corporation's owners.

If you accept the legal fiction of the corporation being a separate person, then taking its property violates its rights. But if you reject that fiction, as a means of arguing that the corporation should lack rights, then taking its property violates its owners' rights. Either way, the Takings Clause should apply; and that's what suggests that the legal fiction (a corporation is a person) is a sensible one here — using it makes analysis easier, but doesn't ultimately change the results much.

The same goes for the Due Process Clause, the Civil Jury Trial Clause, and so on. If you take a corporation's property, or let it be taken through certain procedures, you're affecting the property of individual owners. There's therefore no real reason to deny these rights to the corporation.

Likewise for free speech. Corporations don't actually speak; people speak. A corporation's employee (a person) communications information that is decided on by a group of managers (people) who represent the stockholders (other people). Barring the New York Times or the ACLU or the Catholic Church or General Motors from speaking bars real people from speaking using the corporation's property.

Aha, some might say, the real people aren't silenced — they can still speak using their own property. But the Court has long understood that to speak effectively in a vast nation, you need to be able to pool your resources with others (even in this cyberspace age).

The Court has recognized this under the rubric of the right to expressive association, but the same applies to speech via corporations. When people contribute money to the ACLU, so that the ACLU's directors can decide what ACLU's spokespeople say, the contributors are making a decision to pool their resources so that some decisionmakers (the directors) can decide how to use them to speak. And the same goes for GM shareholders — they are pooling their resources and giving them to some decisionmakers (GM managers) so they can decide how to spend the resources, including spending them for speech, whether advertising or political advocacy.

Related Posts (on one page):

  1. What's Missing from This New York Times Editorial?
  2. Constitutional Rights and Corporations:
frankcross (mail):
All very true, but I suspect the reason is simply legal convenience. If you take corporate property, you are taking from individuals. They should have a constitutional claim on taking from the corporation, as you suggest. However, you would have to cumulate those shareholders into some class action like device, and they would have to retain their own counsel, and you'd have all the various class action related difficulties. It's just vastly simpler and more efficient to let the corporation enforce the claim.

For speech, wouldn't the easy workaround simply be to identify an individual speaker "for" the organization? NYT articles have bylines, wouldn't that individual speaker be protected?
9.22.2009 12:58pm
einhverfr (mail) (www):

But wait, some might say: Corporations are created by the government; they only exist because of government-issued charters; why can't the government attach conditions to those charters, e.g., "If you get a corporate charter, you can't use it to express your views about ballot measures"?


There is more to this though. The question is whether a corporation is created by government of men or whether it is created by our government of laws. I think it is fairly clear both in jurisprudence since Dartmouth v. Woodward and conceptually that it is the latter.

If it is the latter, then a corporation existing in a system of laws must necessarily be granted certain rights that emerge from that system of laws. In our system, these include a right to due process, and a freedom from unreasonable search and seizure among other things. The Constitution doesn't say "freedom of speech for any citizens" or even "freedom of speech for any persons." It simply says that no law may abridge this freedom. Subsequent jurisprudence suggests that this is a right in our system based on IMPERSONAL principles rather than natural rights principles. Yates and Brandenburg both profess faith in a marketplace of ideas which corporations necessarily participate in. This marketplace is central to the democratic processes in our republican system of government, so it must be protected. (I am not saying that rules designed to protect that marketplace would be Unconstitutional, btw.)

I therefore think that political speech is a right held by corporations. However at the same time, corporations may wish to monopolize either the free marketplace of goods and services, or the marketplace of ideas. I think that reasonable regulations designed to protect the latter would not run afoul with the Constitution. However these would have to be based on anticompetitive harm rather than procompetitive behavior. I cannot think of any circumstance where preventing a corporation from printing election pamphlets would be Constitutional. Restrictions on genuinely important and scarce media might be though.
9.22.2009 1:03pm
Mark N. (www):
If corporations do have Constitutional rights, though, doesn't this make some of the Court's precedents to the contrary problematic? As a creature of the State, for example, corporations traditionally lack 4th-amendment rights to be free of unlawful search, due to the rather expansive visitatorial powers of their constitutor, which have been upheld. Granted, visitatorial powers have been abolished by statute in many states, but to my knowledge haven't been found unconstitutional.
9.22.2009 1:07pm
Shivering Timbers (mail) (www):

If you really believe that corporations lack constitutional rights, then the government would be free to ban corporate-run newspapers from criticizing the government

I disagree--the text of the first amendment specifically names freedom of "the press" as protected. Likewise for religion.

Whether or not you think corporations have constitutional rights in general, it's hard to see how denying freedom of the press or religion solely on the basis of the legal form people have used to organize themselves is consistent with the text of the bill of rights.

A more interesting set of questions would be to look at the other rights individuals enjoy and whether they should apply to corporations.

For example, does a corporation have a right to not incriminate itself? If the answer is "yes," then (given the nature of a corporation) the obvious interpretation is that a company cannot be compelled to turn over records which might pertain to illegal activity; and that company employees cannot be compelled to testify against their employer unless they are personally implicated.

What about the right to bear arms? How does that apply to a corporation as opposed to an individual?

Quartering of troops?
9.22.2009 1:17pm
Hash:
Also, even if the "creature of the govt" argument had any force w/r/t speech restrictions imposed by the state of incorporation, it clearly has not force whatsoever w/r/t Congressional legislation, since Congress doesn't create corporations. If Delaware is willing to grant limited liability to its corporations while allowing them to use their shareholders' money for political speech w/ very little oversight due to the "business judgment rule", then that's Delaware's choice as the corporate creator, and Congress can't use the fact that corporations are created by Delaware as the purported justification for speech-regulation.
9.22.2009 1:26pm
NoPublic:

I cannot think of any circumstance where preventing a corporation from printing election pamphlets would be Constitutional. Restrictions on genuinely important and scarce media might be though.


Like bandwidth or spectrum?

Somehow I don't think you mean that.
9.22.2009 1:26pm
Michael F. Martin (mail) (www):
The idea of a corporation not having rights seems completely antithetical to the notion of our being constituted by our written charter ("We the people...").
9.22.2009 1:33pm
einhverfr (mail) (www):
NoPublic:

Like bandwidth or spectrum?

Somehow I don't think you mean that.


Limited does not mean scarce, so the question is how much bandwidth is available. To me the fundamental question is how scarce and important a media is and whether there is a likelihood of anticompetitive behavior over those media.

I could see a number of ways such a law could work. One would be a fairness doctrine for analog, broadcasted tv for a period of time prior to an election. (Honestly once you regulate this media, other cable tv channels really don't need the same level of regulation because the capacity to distort isn't there.)

In short the question is whether heavy distortions to the marketplace of ideas intentionally engineered by individuals with lots of money are necessarily free from regulation. I don't think that this element of Austin v. Michigan Chamber of Commerce needs to be overruled. I just think it needs to be narrowed.
9.22.2009 1:46pm
einhverfr (mail) (www):
Mark N:

As a creature of the State, for example, corporations traditionally lack 4th-amendment rights to be free of unlawful search, due to the rather expansive visitatorial powers of their constitutor, which have been upheld.


Do you have a cite for that? This article suggests otherwise and I am trying to understand the difference.
9.22.2009 1:49pm
Lior:
Aha, some might say, the real people aren't silenced — they can still speak using their own property.


This argument as phrased would be silly. The corporation is, after all, the property of these real people!

There is a sensible argument hiding in the background though: some might argue that real people have a right to speak using property they completely own personally, but no right to band together and speak using property they own collectively, since collectively they might have "too much power" compared to others who choose not to band together.

To me, the claim is that you are free to use your own printing press, but have no guaranteed right to use the printing press you bought jointly with your neighbour.
9.22.2009 2:10pm
Rich B. (mail):
The relevant distinction (between Corporations and individuals) should be clear to anyone with a solid background in Corporate Law:

Corporations are subject to shareholder lawsuits if they take a course of action that harms their interests as shareholders. Shareholders win these lawsuits if the corporations cannot show a rationale for the action that benefits the company. (In practice, of course, "Showing itself to be a good civic and community member" can usually trump otherwise useless expenditures.)

Now, what if an insurance company took out an ad saying, "Regulate Insurance Companies A Lot! It will hurt our profitability, but will be good for America!" What if this is because the insurance company executives really believed it, and felt that it would have more political weight coming from an insurance company? What if a shareholder brought a lawsuit and the corporation admitted that it wouldn't help the corporation at all, but that it was the right thing to do? The Shareholder should -- fairly obviously -- win the lawsuit.

Given this background Corporations Law, it is clear that Corporations do not -- at present -- have "Free Speech" as they are not free to speak against their own interests, the same way a millionaire can take out an ad saying "Tax Us Millionaires!"

So, the relevant distinction seems obvious -- on any topic where a Corporation could be successfully sued for taking a position against its own interest, it should be subject to regulation against taking a position in its own interest.
9.22.2009 2:27pm
Alex S. (mail):
on any topic where a Corporation could be successfully sued for taking a position against its own interest, it should be subject to regulation against taking a position in its own interest.

So because shareholders could sue Coca-Cola for running ads that say "Buy Pepsi, it's better!" they should be subject to regulation preventing them from running a commercial saying "Buy Coke, it's better!"
9.22.2009 2:57pm
DCP:


What about the right to bear arms? How does that apply to a corporation as opposed to an individual?


The same way I presume.

Let's say you have a large hunting lodge, ranch or farm that is organized as a corporation and has a collection of necessary assets, including firearms, that are corporate property.

The gun is officially the property of ABC Chicken Farms, Inc. and it's right to own and possess that firearm flows from the 2nd Amendment.

Private security firms or armored truck companies may work the same way, although I don't know for sure whether they supply their employees with guns or they make them purchase and register their own.

As far as quartering soldiers go, surely you can figure out a scenario where this may apply. In fact this would be one example where a corporation (Holiday Inn, etc) is much more likely to be involved than an individual.
9.22.2009 3:23pm
Rich B. (mail):

So because shareholders could sue Coca-Cola for running ads that say "Buy Pepsi, it's better!" they should be subject to regulation preventing them from running a commercial saying "Buy Coke, it's better!"


Yes. It would be a silly regulation, but it shouldn't be unconstitutional (any more than the regulations preventing cigarette companies from running ads that say "Smoke ours. They're Smoother!")

When arguing whether a company should have first amendment rights, it makes sense to ask whether they have free speech anyway. If they are only legally permitted to say one thing under corporate law, I don't see why they should have a Constitutional right to say it.
9.22.2009 4:16pm
einhverfr (mail) (www):
DCP:

As far as quartering soldiers go, surely you can figure out a scenario where this may apply. In fact this would be one example where a corporation (Holiday Inn, etc) is much more likely to be involved than an individual.


Actually, following the logic of Engblom v. Carey, I am having a hard time understanding how this would apply to corporations where it wouldn't fall under a penumbra of a takings protection as well.

Remember that in Engblom, the state was the owner of the apartments in question and the 3rd Amendment was ruled to protect tenants against the state. I think there are imaginable cases which might be 3rd Amendment rights of a corporaton might be infringed (quartering soldiers in the server room for example) but those seem rather unrealistic.
9.22.2009 4:25pm
ShelbyC:

on any topic where a Corporation could be successfully sued for taking a position against its own interest, it should be subject to regulation against taking a position in its own interest.


So if I give money to Jan's non profit corporation for the promotion of pro-choice causes, and the corporation uses the money to run an ad advocating banning abortion, I could probably sue the corporation, right? Does that mean the corporation can be prohibited from supporting pro-choice causes?

How 'bout if Jan isn't a corporation? If she solicits me for money to run a pro-choice ad, then takes it an runs a pro-life ad, I'd imagine I could sue her, right? Does the same logic apply?
9.22.2009 4:40pm
godelmetric (mail):

So if I give money to Jan's non profit corporation for the promotion of pro-choice causes

Not a germane example. Non-profit corporations are subject to entirely different standards of conduct than for-profit corporations because they receive special dispensation from the government (tax exemptions).
9.22.2009 7:31pm
ShelbyC:

Not a germane example. Non-profit corporations are subject to entirely different standards of conduct than for-profit corporations because they receive special dispensation from the government (tax exemptions).


I'm not sure your distinction has any bearing on the example. But in any event, why would non-profit corporations be subject to different standards of conduct because they receive special dispensation?
9.22.2009 9:09pm
ReaderY:
Why can't the government simply say that newspapers, churches, etc. would have to organize in a form that retains pass-through personal liability? Why can't it say that freedom from personal liability is a privelege we retain only for certain purposes?

It probably won't do it. But why can't it?

Under Alito's Police v. Newark analysis, it's possible that limited liability might be considered a benefit that couldn't be denied religious entities discriminatorily. It's also possible that newspapers and universities may have a right to corporate existence under Pierce v. Society of Sisters, Sweeney v. New Hampshire, and the like because of the special role they play in society, although since Eisenstadt v. Baird, group-oriented rights previously thought to have been similar to the rights of universities and the like have been more or less decorporatized ("It is as individuals...").

But even if it were so, this would still represent a set of special exceptions. Churches, schools, and newspapers would have to argue a claim to special privelege based on their special roles in society or as penumbras from other rights and precedents. It wouldn't apply to run-of-the-mill corporations.
9.22.2009 9:28pm
diesel jeans (mail) (www):
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9.22.2009 10:17pm
Nathan Shapiro (mail):
Excellent points. Being a huge advocate of free speech myself, I've found this argument that corporations are an exception to the First Amendment maddening. I even wrote about the subject last week here: Free Speech Means Free Speech.
9.24.2009 9:45am

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