Corporate citizenship
In a sleeper case called Nike vs. Kasky, the U.S. Supreme Court decided this term not to rule whether private corporations can be punished for fraudulently misleading consumers about their overseas labor practices. Nike Inc. contends that it enjoys the same 1st Amendment right that flesh-and-blood citizens have and that its PR statements are protected as free speech. Kasky argues that Nike is engaged in purely commercial, not political, speech when it claims to be a good corporate citizen in poor nations and must, therefore, be governed by consumer protection laws. The case has been sent back to San Francisco for trial.
Surprising though it may seem, Nike has been favored to win because of a string of precedents that treat corporations as rights-bearing constitutional persons. In the 20th century, corporate intervention in political debate has been protected 1st Amendment expression.
The case raises important questions that Thom Hartmann explores in his immensely readable, hopeful and quirky “Unequal Protection.” How can for-profit corporations, artificial entities chartered by states for commercial purposes, have a constitutional right to engage in political speech? What makes them constitutional “persons” entitled to equal protection?
Although “Unequal Protection” breaks little new ground as legal analysis, it nonetheless makes a trenchant historical and political point. Hartmann argues that it is absurd to treat corporations as persons in our constitutional framework, that the development of this counterintuitive notion was the product of rather devious corporate litigation tactics and that the public consequences of this sleight of hand have been the political triumph of corporate power.
Showing how the progressive impulse in American life has always set itself against the unaccountable power of corporations, Hartmann vividly recounts the anti-corporate tradition in our political history. With an ear for populist rhetoric, he serves up a delicious array of vignettes and quotations. In 1788, Thomas Jefferson called for a provision in the Bill of Rights protecting “freedom of commerce against monopolies.” In 1816, Jefferson wrote: “I hope we shall crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our government in a trial of strength, and bid defiance to the laws of our country.” Even that great old railroad lawyer, Abraham Lincoln, warned of the menace of corporate power in the last year of the Civil War, writing in a letter: “As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of our country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.”
President Franklin D. Roosevelt, perhaps our most eloquent presidential critic of big business, likened 20th century industrialists to the “eighteenth-century royalists who held special privileges from the crown.” The “privileged princes of these new economic dynasties,” Roosevelt said at the Democratic National Convention in Philadelphia in 1936, have “created a new despotism and wrapped it in the robes of legal sanction.”
Hartmann shows that the American Revolution was as much a rebellion against corporate protectionism as against political tyranny. He begins his tale with Queen Elizabeth’s grant of a corporate charter to the East India Co. on Dec. 31, 1600. The company gradually challenged Dutch dominance of the global spice trade and became a major North American landowner and political power. It deeded the land of Jamestown to the Virginia Co. and proudly flew its own flag, which “was made up of 13 horizontal red and white alternating bars, with a blue field in the upper left-hand corner with the Union Jack in it.”
The commercial success of the East India Co. gave its managers monopolistic ambitions and bloated political influence. By 1681, Hartmann writes, most members of the British royalty and government were personal stockholders in the corporation. The British Parliament that year obligingly passed “An Act for the Restraining and Punishing Privateers & Privates,” which made criminals of the company’s small-business rivals in the Colonies. This act of self-dealing corporate protectionism helped set the stage for the American Revolution.
Most people remember the Tea Act of 1773, which prompted the Boston Tea Party, but wrongly think that the act imposed new taxes on the Colonists. It actually legislated the exemption of the East India Co. from paying tea taxes that applied to merchants in the Colonies. Thus, the company could export vast quantities of tea to the Colonies without paying any duties and effectively destroy its Colonist competitors.
Hartmann’s story of “a transnational corporation and its government patrons” is significant. The Colonists rebelled against what economists today call “corporate rent-seeking,” one company’s perfectly rational effort to achieve market dominance through law and politics. Our revolution was thus fought not only for political democracy against monarchy but also for a free market against monopoly, which is the extension of the monarchical principle to the economic sphere.
Yet democracy and the free market have been battered in our history by corporate political power and special-interest legislation. The Supreme Court has been complicit in this process. Hartmann identifies the 1886 Santa Clara County vs. Southern Pacific Railroad Co. case as the key moment in the growth of corporate power. There, a railroad argued that government violated equal protection by taxing its mortgaged property differently from that of natural persons. The court essentially assumed that corporations were “persons” under the 14th Amendment and granted them constitutional rights.
Hartmann devotes much energy to showing that the court actually never held that corporations are constitutional persons. This “contagious” idea was the sly handiwork of John Chandler Bancroft Davis, the conservative Supreme Court reporter who inserted words to that effect in the legally nonbinding “head notes” prefatory to the published opinion. Hartmann tells this murky incident as a detective story, with him wandering around bookstores and libraries as a kind of Lt. Columbo. This appears to be the author’s favorite literary device, and it is not without its charms.
But there is a vast literature on the constitutional status of the corporation that the author does not engage. Thus, we do not get a thorough accounting of the court’s doctrinal embrace of corporate constitutional rights. Hartmann maintains that this history is built on a misunderstanding and that the personalization of the corporation was a contingent error, not a logical necessity. He makes his point, but the argument has limited mileage in the court, which has long since internalized the corporation’s equality as a constitutional person.
At this juncture, when more than half of the world’s 100 largest economies are corporations rather than governments, Hartmann urges us to fight the environmental and social depredations of our times by revoking the personhood of the corporation. This is a tall order, perhaps impossible. Any serious campaign will require us to decide whether media corporations should lose their 1st Amendment liberties and whether corporate wealth could be taken by the government without recourse. Is corporate personhood an all-or-nothing proposition? Can due process property protections attach to stock without corporate managers also enjoying the right to become political kingmakers with corporate treasuries?
There are tough questions to be asked, and Hartmann’s book convincingly argues that we need to confront them. He shows the enormous social costs of our having made global corporations untouchable by acts of constitutional magic: massive wealth inequities in the United States and the world; topsy-turvy tax laws that left mega-corporations with no tax due and produced a $278-million refund for Enron Corp. in 2000; and the accelerating invalidation of many nations’ consumer, environment and labor laws by the North American Free Trade Agreement and by World Trade Organization panels “harmonizing” our societies in the name of free trade. There is no guarantee this century that governments will be able to control corporations or that we will even be able, in the end, to distinguish analytically between state and corporate power. For those troubled by the prospect of a fully blended corporate state, “Unequal Protection” is a vital primer on the contested role of corporations in our political economy.
