Corporate Citizenship

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In American constitutional law, business corporations are not endowed with rights of citizenship. Corporations can neither vote nor claim protections afforded by the privileges and immunities clauses of Article IV, section 2, and the fourteenth amendment. However, the Supreme Court has consistently refused to say that citizenship is a precondition for the exercise of numerous other rights granted to "the people" or to "persons" in the bill of rights or the Fourteenth Amendment. Political rights normally thought to be essential attributes of citizenship in a democratic political community—rights of speech, association, assembly, press, and due process—extend to noncitizens and citizens alike. With the important exceptions of the rights to vote and to hold office, the constitutional status of citizenship does not bar a noncitizen from exercising political rights, or from otherwise participating in political activities. The fact that citizenship does not stand as a barrier to the enjoyment of many basic political rights has also afforded the Court the opportunity to extend rights of political participation to corporations. Indeed, in first national bank of boston v. bellotti (1978), the Court conferred first amendment rights of speech upon business corporations. With this jurisprudential innovation, an ideological construct known as the "corporate citizen" acquired new meaning.

In early nineteenth-century American law, incorporation was a privilege that could be granted only by a special legislative act (a corporate charter) wherein the terms of incorporation (e.g., purpose of the business, limitations on debt and capitalization) were stipulated. Anglo-American law endowed the legal entity of the corporation with a life of its own; as a fictitious individual distinct from the corporeal membership, the corporate entity could exist in perpetuity. Historically, the attribution of constitutional rights to the entity has contributed to the expansion of corporate autonomy. This has protected business corporations against dictation by the state while it has allowed for regulation of corporate power in the public interest. The metamorphosis of the corporate entity from a highly regulated creature of government to a constitutionally protected "individual" began in the early nineteenth century when American jurists vested the entity with rights and legal capacities that afforded protection against hostile state legislation. Legal reasoning also provided ideological support for the corporation in what can be termed the doctrine of "corporate individualism." Originally a defense of the corporation's constitutional rights of property, as well as an imposition of responsibility and liability, corporate individualism gradually merged with the entrepreneurial ethos of competitive industrial capitalism to justify an expanding corporate autonomy.

The legal doctrine of corporate individualism first acquired ideological significance outside the law in political argument that personified the corporation as an individual within the competitive marketplace. Beginning in the late 1830s, this mystification promoted the liberalization of state incorporation laws by undermining the widely held perception of the corporation as an instrument of special privilege and monopoly. By 1870, most states had passed statutes making incorporation a right available to all capitalists rather than a privilege granted only to a few. Moreover, the corporate individual achieved an enhanced legal status when the corporate entity became a "person" within the meaning of the Fourteenth Amendment in Santa Clara County v. Southern Pacific Railroad in 1886, an event that would facilitate the ascendancy of corporate power in industry and finance. By 1900, the business corporation had realized a significant measure of autonomy consistent with the protection afforded by property rights embodied in the Fourteenth Amendment's substantive due process doctrine of freedom of contract.

In the last quarter of the nineteenth century, corporate leaders resorted to various means of regulating prices or combining capital in an effort to supplant competitive with cooperative methods of business. Widespread public opposition in the 1880s to the combination movement inspired Congress to pass the sherman antitrust act in 1890 to regulate monopolistic practices and unreasonable restraints of trade. However, in the absence of significant antitrust enforcement in the mid-to-late 1890s, the combination movement gained momentum. Between 1898 and 1904, the first great merger wave of corporate capitalism transformed the very structure of the American economy. Far-reaching changes in the law of corporations greatly aided this development. Following New Jersey's lead in 1896, numerous state legislatures eliminated a host of traditional regulatory controls over their corporate creations and legalized mergers. During this same period, American jurists began to formulate the modern legal conception of the corporate entity as "real" or "natural." The "real entity theory"—by which corporations were understood as the natural and inevitable result of individuals seeking to operate efficently in the marketplace—further absorbed the personified corporate individual as it gradually supplanted the venerable "artificial entity theory" that viewed the corporation as a creature of government. This personified entity, therefore, both reflected and justified an accelerating progression toward corporate autonomy.

To many Americans during the Progressive era (1890–1916), laissez-faire ideology and its legal corollary, the doctrine of liberty of contract, seemed out of phase with economic and social realities. Having evolved from a legal protection of vested rights and the exclusive franchise into an ideological justification of the competitive marketplace, corporate individualism would undergo yet another ideological transfiguration in the era of the large corporation. Contrary to the precepts of laissez-faire liberalism, legal reasoning in the law of antitrust recognized not only that corporate power posed dangers to individual liberty and equality of opportunity, but that it also produced social and technological benefits when regulated in the public interest. In adopting the " rule of reason in standard oil company v. united states (1911), Justice edward d. white explained that freedom to contract is the rule, but restraints of trade in practicing this freedom must be reasonable, as judged in light of the standard of fair competition. Supreme Court decisions thereafter articulated a business ethic of fairness that imposed on the corporate individual a legal and moral obligation to obey the law. In this way, the idea of corporate social responsibility in antitrust law provided an enduring rationale that would influence the evolving concept of corporate citizenship in constitutional law.

During the twentieth century, Supreme Court decisions enhanced the legal standing of the corporate citizen as the business corporation acquired constitutional rights under the First, fourth, Fifth, Sixth, and seventh amendments. The debate over the political rights of the corporation was first joined on the Supreme Court in Bellotti in 1978. In austin v. michigan chamber of commerce (1990), the Bellotti dissenters found themselves in the majority. Austin reformulates the issue of corporate political power debated in the Progressive era. It advances beyond the view that the threat posed by corporate power to democracy is rooted in corporate bribery and corruption of elected officials and asserts instead that the greater danger to electoral politics is the potential for large corporations to use their "immense aggregated wealth" to "distort" the political process. Austin invokes an ethic of fairness to define the rights of the corporate citizen with regard to candidate elections and thereby establishes a new standard of corporate social responsibility for the political market-place of ideas that is very similar, in principle, to that established by the rule of reason for the economic marketplace. However, in regulating corporate speech, the Supreme Court has conferred legitimacy on the corporate citizen which, as a member of the political community, can exercise its First and Fourteenth Amendment rights of political speech, press, petition, and association with minimal restrictions. With respect to the corporation's expanding constitutional freedoms, it is significant to note that Justice lewis f. powell, writing for a plurality in Pacific Gas and Electric Company v. California Public Utilities Commission (1986), did not distinguish negative First Amendment rights of corporations from those of real persons. In holding that a public utility cannot be compelled either to associate with disagreeable speech or to respond to others' views, Powell reasoned in effect that a business corporation possesses a mind or conscience. Thus corporate individualism and its ideological offspring, the corporate citizen, continue to justify and facilitate the widening scope of corporate power over economic, social, and political realms.

Scott R. Bowman

(see also: Corporate Power, Free Speech, and Democracy; Dartmouth College v. Woodward; Progressive Constitutional Thought.)


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Corporate Citizenship

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