Corporations are People Too (And They Should Act Like It)

Kent Greenfield is Professor of Law and Dean’s Distinguished Scholar Boston College Law School. This post is based on his recent book, published by Yale University Press. Related research from the Program on Corporate Governance includes Corporate Political Speech: Who Decides? by Lucian Bebchuk and Robert J. Jackson Jr. (discussed on the Forum here).

The question of constitutional rights for corporations has bedeviled judges and scholars for over 200 years. The question seems to arise every generation or so, and we are in the midst of another burst of attention on the issue. Cases such as Citizens United v Federal Election Comm’n (corporations can spend unlimited amounts in elections), Masterpiece Cakeshop v. Colorado Civil Rights Comm’n (corporations can assert religious interests of their shareholders), and Sorrell v. IMS Health (restrictions on corporate sale of data is a restriction on speech), direct the public’s attention to the question of whether and when businesses can assert the protections of constitutional rights.

The Court’s analysis of the issue has been mostly piecemeal, with little theoretical advancement since John Marshall’s pronouncement in Dartmouth College v Woodward two hundred years ago. According to Marshall, corporations should receive those rights “which the charter of its creation confers upon it either expressly or as incidental to its very existence.” The constitutional question, then, depends on a matter of corporate governance theory—what rights are “incidental” to the existence of corporations?

To answer that question one has to know something about corporations, and the Supreme Court is notoriously lacking in such expertise. (As noted by others. See, e.g., Citizens United as Bad Corporate Law by Jonathan R. Macey and Leo E. Strine, Jr.; Anne Tucker, Flawed Assumptions: A Corporate Law Analysis of Free Speech and Corporate Personhood in Citizens United, 61 Case W. Res. L. Rev. 497 (2011).) Its failure to understand the nature, form, and purpose of corporations has led the Court to make numerous mistakes, such as assuming in Citizens United that shareholders have the knowledge, inclination, and power to restrict corporate political spending with which they disagree. Another example is the Court’s assumption in Masterpiece Cakeshop (and the similarly-situated statutory case Burwell v. Hobby Lobby Stores) that shareholders’ religious beliefs should be projected onto the corporations whose equity they hold, notwithstanding centuries of understanding about the veil separating corporations and their investors.

Yale University Press recently published my new book, Corporations Are People Too (And They Should Act Like It) I argue that the recent push among activists and some law scholars to restrict all rights of corporations is mis-directed. Corporations deserve many—if not all—of the constitutional rights enjoyed by natural persons. They deserve those rights that are necessary for companies to fulfill their social purpose—creating wealth. For example, the right to be free of uncompensated takings, the right of access to courts, and the right to be free of unreasonable searches are all necessary for businesses to function. Absent such rights, no one would invest in them. These rights are “incidental to [their] very existence.” On the other hand, it is obvious that corporations need not be able to claim rights to serve on juries or to vote. Those do not make sense to extend to corporations.

When it comes to the rights of free speech, the analysis needs to be more nuanced. Corporations should be able to speak to advance their corporate purpose and to speak on matters germane to their business. But businesses should not be able to claim the same speech rights as humans. The right to lie, for example, has been extended to humans. (See United States v. Alvarez, 567 U.S. 709 (2012) (plurality).) But corporations should not be able to claim such a right, since the marketplace depends on the availability of truthful information. (Compare Nike, Inc. v. Kasky, 539 U.S. 654 (2003) (corporation asserting that political speech is not covered by consumer fraud law).) And courts should look skeptically on the rights-based assertions of corporations to avoid disclosure of facts they’d rather keep hidden—whether the health risks of cigarettes or the use of slave labor in their supply chains. (See R. J. Reynolds Tobacco Co. v. FDA, 696 F.3d 1205 (2012) (corporate speech right to be free of required graphic disclosure of health risks of cigarettes); Nat’l. Ass’n. of Mfrs. v. SEC, 800 F.3d 518, 527 (D.C. Cir. 2015) (corporate speech right to be free of required disclosure of the use of conflict minerals).

Moreover, in deciding the rights of corporations, courts should not import into constitutional law assumptions about businesses that remain contested in corporate governance theory and doctrine. For example, if a jurisdiction required corporations to vet their political spending with both employees and shareholders, nothing in constitutional law should bar that requirement. Shareholder primacy is one of the most controversial and long-standing debates within corporate governance; courts should not assume that the constitution requires it.

Having said all that, the problems of corporate power are real, especially in the political realm. American law allows corporations to use their economic power to aggrandize and consolidate political influence. And conventional practice is that corporations use that power in favor of a sliver of managerial and financial elites. All too often, that power and influence is used to seek economic rents. (See Robert Sitkoff, Corporate Political Speech, Political Extortion, and the Competition for Corporate Charters, 69 U. Chi. L. Rev. 1103 (2002).) That is unfortunate from the perspective of both democracy and economics.

The way to break that unfortunate cycle is not by way of constitutional law but of corporate governance law and norms. As argued in my book, the problem is not that corporations may exercise rights. The problem is for whom those rights are exercised. If corporations were more pluralistic in their obligations and management—if their fiduciary duties were more robust and the interests of a broad array of stakeholders were included in corporate decisions—then the fact that corporations can assert political power would be less problematic.

For more on this, see my book or this journal article, which presents a good overarching summary.

Both comments and trackbacks are currently closed.
  • Subscribe or Follow

  • Supported By:

  • Program on Corporate Governance Advisory Board

  • Programs Faculty & Senior Fellows