Idea of company-as-person originated in late 19th century

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By Martha C. White
Sunday, January 31, 2010

The Supreme Court's 5 to 4 decision that rolled back long-standing restrictions on corporate campaign finance donations has generated a lot of Sturm und Drang from proponents of campaign reform and the White House itself. At the crux of the decision was a determination that corporations have a right to free speech. The court ruled that limiting the amount that companies can spend promoting their favored candidates is tantamount to denying First Amendment rights.

Since when do corporations have civil liberties?

Actually, this concept has been coalescing into its current state since about the late 19th century, and we can thank railroad barons for this precedent, according to Joel Bakan, a law professor at the University of British Columbia and author of "The Corporation," a book and documentary exploring the curious anthropomorphism of corporate America.

While corporations had been afforded limited rights, such as property ownership or contract-making, since the Renaissance, the idea that an inanimate entity was eligible for rights of personhood sprang from the 1886 case of Santa Clara County v. Southern Pacific Railroad. The corporation in this case was able to wield the newly minted 14th Amendment to argue that it, as a corporation, was entitled to the same tax benefits as individuals.

Southern Pacific was hardly the only corporation to invoke the Bill of Rights in the name of deregulation, Bakan points out; although the law had been added to protect the rights of African Americans after the Civil War, only 19 individuals invoked it for protection between 1890 and 1910. Businesses, on the other hand, claimed 14th Amendment protection 288 times during that period. A 1976 Supreme Court case, Buckley v. Valeo, explicitly ruled that political donations were free speech and constitutionally protected.

Other aspects of the law treat companies as though they were people. In last year's settlement with the SEC, Bank of America agreed to pay $33 million in fines over allegations that it had misled investors, although no individuals were charged with wrongdoing. The inability of the prosecution to lay the blame at the feet of any actual individuals exasperated the judge, who sarcastically asked the agency's attorney whether a ghost was responsible for the malfeasance.

But businesses eschew personhood when it comes to other areas, such as paying taxes. As an individual, you pay taxes on what you earn as well as on what you spend. If you buy a TV or hire a nanny, you pay taxes on those dollars twice. Corporations and some think tanks disagree with applying this two-tiered taxation system, arguing that it inhibits commercial efficiency.

Whether you find the idea of company-as-person and the resulting freedom on political spending troublesome hinges on whether you think more money buys you a louder bullhorn in the political arena. At least one ardent capitalist thinks so. Billionaire Michael R. Bloomberg, who is in his third term as mayor of New York City, is estimated to have spent hundreds of millions of dollars of his own fortune winning his position, breaking records with his spending every step of the way.

Some people -- including five Supreme Court justices -- think the political theater is a level playing field, a street-corner basketball court where anyone can join a pickup game. Others see it more like a country club: Unless you have the means to pony up for a membership, you cannot play.

This worries those in the latter camp, such as Bakan, whose book went so far as to bring in a psychiatrist -- who conferred a diagnosis of psychopath on the average modern commercial enterprise. Bakan's not alone in his concern; in the Supreme Court's dissent, Justice John Paul Stevens argued that because companies are without feelings, consciences or desires, they shouldn't benefit from laws that protect ordinary citizens.

He's two-thirds right. Corporations don't possess a conscience or feelings (no matter what that cause-marketing campaign tells you). They do have one desire, though: earning money. This troubles opponents of the court's ruling, who predict that companies will flex considerable economic muscle to chip away at legislation that limits earning potential in the name of things like environmental preservation and public safety.

The prospect of these protections undermined in the pursuit of profit has proponents of corporate regulation -- not to mention campaign finance reform -- discouraged. On the bright side, though, freeing corporate coffers to spend all they want on political campaigns may have come just in time to save the advertising industry.

Martha C. White is a freelance writer in New York.


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