Are Corporations People?
How Corporations Used the Constitution to Expand Their Economic Power
Since 1976, corporations have been expanding their rights. They've become entities whose rights are protected by the U.S. Constitution. That gives them a legal status like that of U.S. citizens. As a result, they've increased their political and economic power.
The Constitutional Rights of Corporations
In various cases, the Supreme Court has granted corporations some of the same Constitutional rights as citizens.
Explicitly, they are protected by the First, Fifth, and Fourteenth Amendments.
The First Amendment protects religious freedom, the right to free speech, and the right to assemble peacefully.
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.
On January 21, 2010, the Supreme Court gave the right of free speech to corporations and unions. Citizens United v. the Federal Election Commission allowed organizations to fund ads that explicitly endorsed or opposed a candidate.
The decision overturned Section 203 of the Bipartisan Campaign Reform Act of 2002. The McCain-Feingold Act said corporations should not have any influence on politics. The Act was named after Senators John McCain, R-AZ, and Russ Feingold, D-WI.
The Court said the Act restricted corporations' rights under the First Amendment. Justice Anthony M. Kennedy ruled, “Corporations and other associations, like individuals, contribute to the ‘discussion, debate, and the dissemination of information and ideas’ that the First Amendment seeks to foster.” The Court added that speech is a requirement of democracy.
As a result, the First Amendment forbids discrimination against any class of speaker.
In 2014, the Court extended First Amendment protection to corporations' religious freedom. It said companies could disobey a law that violated their owners' religious beliefs. In Burwell v. Hobby Lobby Stores, Inc., the Court upheld Hobby Lobby's religious freedom. The company did not have to include contraception coverage in its health plans. The Court said the Affordable Care Act violated the firm's rights under the Religious Freedom Restoration Act.
The Court said the corporations had the same rights under the Fourteenth Amendment as people did. The Fourteenth Amendment protects citizens from state actions. It also affords all citizens equal protection. The state cannot discriminate against anyone in its enforcement of the law.
...No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.
The Fifth Amendment protects corporations from government actions to nationalize their property.
... nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.
The Evolution of Corporations as People
Corporations acquired many of their rights through the history of campaign financing. This battle pitted Congress against the Supreme Court. Congress wanted to restrict large corporate donations while the Court increasingly allowed them.
1907-1970: Congress limited campaign spending of corporations, unions, and federal employees.
1971: The Federal Elections Campaign Act required politicians to report their contributions. It limited how much an individual or group could donate. It created the Federal Election Commission.
1976: The Supreme Court said limiting campaign regulations was against the Constitution.
In Buckley v. Valeo, the Court ruled that such limitations were a violation of free speech. It allowed unlimited funding for political commercials. It considered advertising to be a form of free speech.
1978: In First National Bank of Boston v. Bellotti, the Court reaffirmed that corporations had the right to free speech, just as individuals did. It said the Bank could spend money on state ballot initiatives. It did not grant them the right to support specific candidates.
2000: The presidential race saw $450 million in so-called soft money. Individuals, corporations, and labor unions could donate as much as they wanted to either major party. More than 60 percent came from organizations.
2002: Congress enacted the McCain-Feingold Act. It banned organizations from financing issue-based advertising on behalf of candidates. It also banned soft money. Instead, wealthy donors gave to "shadow parties." These political action committees supported a political agenda. In so doing, they supported the candidate that represented their views. But they were independent of the two parties.
2007: The Supreme Court allowed issue-based advertising if it did not endorse or oppose a candidate.
2008: Citizens United spent $1 million on ads criticizing presidential candidate Hillary Clinton. It violated the 2002 finance reform act. Citizens United sued, taking the case to the Supreme Court.
2010: In Citizens United v. the FEC, the Court ruled the McCain-Feingold Act violated the Constitution's First Amendment.
2010: Congress defeated a bill that would have made political donors reveal their identities. As a result, so-called dark money influences national and many local campaigns.
Effect on Free Trade Agreements
Corporations maintain these constitutional rights in free trade agreements. The agreements make sure companies have the same rights in foreign countries as they do in the United States. There are four rights that pertain to trade.
- Freedom from discrimination. Foreign governments won't treat U.S. companies worse than local firms.
- Protection against the uncompensated expropriation of property. Foreign governments won't nationalize corporate property without fair compensation.
- Protection against denial of justice. Companies won't be denied justice in foreign courts.
- Right to transfer capital. Governments won't freeze corporate assets except in cases of financial emergency.
To make sure these rights are upheld, the countries agree to an approach called the Investor-State Dispute Settlement. It is a neutral, international arbitration process that resolves conflicts. Corporations can avoid a country's court system, where they might not be treated fairly. Under the ISDS, they are assured the same rights they receive under the U.S. Constitution.
Effect on Politics
Since the Citizens United ruling, outside spending has soared. But it was soaring before that as well.
Many blame the Supreme Court. It gave corporations the right to make donations for political advertising.
Others blame the 2002 Finance Reform Act. It allowed anyone with enough money to form a PAC. As a result, wealthy individuals and corporations have done so when they support a candidate. Some say it's why American politics has become more polarized.
The Trump tax cut has benefited many PAC donors. For example, the Congressional Leadership Fund ran ads supporting Republicans in the 2018 mid term campaign. The fund’s donors include the casino owner Sheldon Adelson who gave $30 million. His company, Las Vegas Sands, received a $700 million tax cut. Valero Services, a Texas oil refining company, gave $1.5 million to the fund. It received $1.9 billion in tax cuts.