America / Culture / Politics / Regulation / Tax

Corporate Person: A Legal Fiction and the Reality it Represents

There has been a significant amount of discussion and disagreement about the rights held by corporations. Citizens United has equated individual speech and expression rights the speech rights of an individual with a “corporate identity.” Occupy Wall Street has demanded that corporations be striped of the rights of individuals, and the status as a “corporate person.” In a tangential context, Mitt Romney said, “Corporations are people, my friend,” while addressing a heckler last summer in Iowa. Although this statement perpetuates the current misunderstanding, it was meant to illuminate the nature of a corporation. In the context in which Mr. Romney was speaking, it is safe to assume he meant that raising taxes on corporations directly raises taxes on individuals, which is entirely accurate because corporations are property held in ownership.

Corporations are not people. Corporations are property. Property of all kinds carries with it the value not just of the object itself, but what can be done with the object. In this way, property becomes the medium through which individual rights are exercised. Not all rights can be carried through all property, and not every right is held in corporate property. The individual rights that are carried by corporate ownership constitute the legal fiction of the “corporate person.”

Just as a car is not conscious, does not have cognitive ability, and is not biological, neither is a corporation. Neither a car nor a corporation is a person. However, like a car, a corporation can be used as a device to exercise individual free speech.  Speech produced by owners through a corporation is legally the same as a car owner placing a political bumper sticker on the car. The First Amendment secures free speech in no uncertain terms, “Congress shall make no law… abridging the freedom of speech.” As individuals, each person may spend as much of there own funds to exercise the universal right to political speech. Donations to election campaigns can be limited to pursue the state interest of preventing bribery and corruption in the political process. Citizen United correctly reinforced the individual right to protected political speech when it is unaffiliated with another person’s campaign. Citizens United found that individual speech, without coordination with a candidate for public office, lacked narrow tailoring to prevent corrupting behavior.

Because free speech is a cornerstone of the Republic, the U.S. Supreme Court has applied a legal standard of strict scrutiny to any law that limits political speech. Strict scrutiny requires a law be narrowly tailored to a compelling government interest to be deemed valid. The holding in Citizens United does not mean that unaffiliated spending on political speech cannot be corrupting. It means that a limit on expenditures for political speech by individuals, or any group of individuals, is not narrowly tailored to achieve the government’s interest of preventing corruption in the political process. In other words, spending money on political speech is not per se corrupt, and increasing the amount spent by any group or individual does not transform the nature or intent of the spending from valued speech to bribery.

Lost in the discussion is the fact that these speech rights are carried for individuals through any association of people, including associations that are legally recognized as such. Corporations, charities, non-profits, and unions are all associations of people, and the ownership/membership rights in these groups allows for the ideas and thoughts shared by group to be heard more effectively through the resources of the group. Collective speech allows for charities and non-profits to promote tax-deductible status for donations they receive, corporations to promote business expense deductions and lower taxes, and unions to promote greater workplace rights and protections for their members.

A corporate identity of property does not, and should not, limit the speech rights of the individuals that own that property. The legal system creates the corporate identity to adequately protect shared interests of the individuals in the corporation. Shared interests specifically include the interests in conducting a profitable business enterprise. Whether the individuals spend the money to promote that interest as individuals or through the corporation, the First Amendment protects the speech equally.

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One thought on “Corporate Person: A Legal Fiction and the Reality it Represents

  1. Pingback: 99% Solidarity, Yet Politically Disenfranchised? | Policy Interns

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