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Tuesday, October 20, 2015

Natural rights and the corporate person

by John MacBeath Watkins

What is a person, and who has natural rights, such as free speech?

In Citizens United vs. FEC, the Supreme Court ruled that corporations and labor unions cannot be prevented from spending money on "electioneering communication." They did so based on the idea that neither citizens nor associations of citizens may be prevented from the exercise of free speech.

The majority ruling was that the first amendment to the constitution protects free speech regardless of the identity of the speaker, and therefore rules could not make distinctions between, say, for-profit companies and other kinds of associations.

The dissent, written by Justice John Paul Stevens, argued that the form of the corporation has certain inherent dangers to the political system. He quoted the Austin vs. Michigan Chamber of Commerce case in which the court noted that corporations have' "special advantages-such as limited liability, perpetual life, and favorable treatment of the accumulation and distribution of assets," 494 U. S., at 658–659-that allow them to spend prodigious general treasury sums on campaign messages that have "little or no correlation" with the beliefs held by actual persons...'

He argued that these legal entities were not the "people" for whom the constitution was written, and for whom such rights were preserved.

There is a great deal more to the argument on both sides, but I'm not a legal scholar, and what really interests me here is the question in political theory of whether a corporation is a person who can exercise free speech.

First, while there is some dispute about John Locke's influence on the people who wrote the constitution , to my way of thinking, it was decisive. So it's worth looking at his version of natural law and inalienable rights.

Inalienable rights are those that cannot be sold, or alienated, and assigned to someone else. The computer I'm writing this on does not have inalienable rights. I can own it, sell it, and it will never raise an objection, because it has no use for rights. If someone were to claim to own me and sell me, and use me in ways I do not like, I could not help but have feelings about it. That's why my right to freedom of conscience and freedom of speech are inalienable, and why it is immoral to treat people like things that can be bought and sold.

From Locke's Second Treatise of Government:

The state of nature has a law of nature to govern it, which obliges every one: and reason, which is that law, teaches all mankind, who will but consult it, that being all equal and independent, no one ought to harm another in his life, health, liberty, or possessions: for men being all the workmanship of one omnipotent, and infinitely wise maker; all the servants of one sovereign master, sent into the world by his order, and about his business; they are his property, whose workmanship they are, made to last during his, not one another's pleasure: and being furnished with like faculties, sharing all in one community of nature, there cannot be supposed any such subordination among us, that may authorize us to destroy one another, as if we were made for one another's uses, as the inferior ranks of creatures are for our's.

In Locke's view, all of nature was created by God, and the sort of people who had natural rights were natural people. Such people, he wrote, are born owning themselves, and the rights they possess as their own master are inalienable: They cannot be assigned to another.

The two sides in Citizens United argued very different things. The majority argued that corporations have freedom of speech as associations of people. The dissent argued that corporations do not have free speech rights as people.

Stevens' view is the easier to argue. Corporations are not their own masters. They must do as their board of directors decides, and have no opinion of how they are used. The can be bought, sold, merged or dissolved and the corporation itself has no feelings about any of these things, because it is a legal entity, not a natural person.

The majority view is harder. Certainly there are legal entities that are allowed to be political actors. Political parties are the most obvious case. But does that mean that all associations should be political actors?

Political parties are voluntary associations for the purpose of political action. So are political action committees. You do not have to belong to them for any purpose other than to act politically, so the legitimacy of any political action they might take seems unambiguous.

But what about, say, ExxonMobil? First of all, its nature as a person is somewhat contested. Shareholders don't own it in the way that partners do, in that they cannot demand their share of the assets and force the company to sell assets to pay them. Sometimes they manage to get the company to sell assets in order to finance a dividend, but the process is nothing like what happens when a partner wants to sell out its share. Shareholders own a claim on the company's future earnings, but they do not directly own a share of its assets. They are stakeholders, as are bondholders, banks that have loaned the corporation money, employees, and customers.

None of these stakeholders have associated with ExxonMobil for the purpose of political action. Some of the shareholders are pension funds, some are mutual funds. To claim that the corporation's political speech represents a sort of speech the people who have associated in the corporation want to express requires a vast leap of faith.

One of the major political issues ExxonMobil is involved in is climate change, and there is turmoil among its shareholders on the issue.

Jane Dale Owen, the granddaughter of a founder of Humble Oil (which became Exxon's largest domestic asset) contributed to the solicitation packet. "I believe that ExxonMobil's recalcitrant position on global warming, held in the face of widely accepted scientific facts and growing acceptance by the rest of the industrial sector, now casts serious doubt on the integrity of the company and its leadership," said Owen. "As a long-term shareholder, I would like for ExxonMobil to take account of these issues, both by reflecting the [global warming] liability risks in shareholder reports and accounting, and by taking immediate action to redirect the company to minimize these liabilities."
Yet the company continues to donate money to politicians who deny the danger of climate change. At a minimum, we can say with some certainty that ExxonMobil's political speech does not represent all of its shareholders. And many of the people whose money is invested by pension funds and mutual funds don't even know their money owns shares in a company that is a major political actor, let alone have any influence over how it spends its money. While the law considers shareholders only one of the stakeholders in a corporation, even if we only consider shareholders, the corporation is not competent to engage in political speech on their behalf.

For one thing, the corporation may not be revealing all it knows to the shareholders. Owen mentions that ExxonMobil has not included liability assessments in reports. But the problem is bigger than that. In the late 1970s and early 1980s, Exxon's own scientists were telling it about the problem. From Newsweek:

“Present thinking,” wrote Exxon senior scientist James Black in 1978, “holds that man has a time window of five to ten years before the need for hard decisions regarding changes in energy strategies might become critical.” And in 1982, Edward David, Exxon’s head of research, echoed that sentiment, saying “few people doubt that the world has entered an energy transition away from dependence upon fossil fuels and toward some mix of renewable resources that will not pose problems of CO2 accumulation.”
In short, the company had pretty good data on climate change, but instead of using this in a way that might benefit those whose pensions were invested in the company by pioneering a move away from fossil fuels, it chose to invest in another direction: Political action to prevent any move away from fossil fuels.

As a for-profit company, its incentives were clear. However, they conflicted with the political interests of many of the people who either directly or indirectly held the shares. They were not allowed to know that the company had researched climate change and discovered it was real long before the public became aware of that fact, until Inside Climate News did a series of reports on the topic.

This is why we cannot take for-profit companies formed for non-political purposes as representing the collective political will of those who associated with them. In part, this might be described as an owner/agent problem. The interests of the managers of the company may be to gain a short-term advantage in their careers that conflicts with the interests of long-term shareholders, such as the generations of shareholders represented by Owen.

Now, it may be that a non-profit like Citizens United is sufficiently closely held that its representation of  its associates' views is not a problem. We then must deal with the fact that an artificial "person" has been granted natural rights.

It seems to me that any corporation may publish a book with a political point of view, as long as there is a natural person to take responsibility for its content. Michael Moore, for example, directed a propaganda film aimed at George W. Bush. But Moore was there to take responsibility for his views. Citizens United was attempting to air a film about Hillary Clinton. I think as long as the prime mover of the film was clearly identified and that natural person was personally liable for the content of the film, that should be allowed. Citizens United planned to show the film on a pay-per-view basis, so it is not as if it insisted that its shareholders contribute out of their pockets.

I don't think we have to overturn corporate "personhood" or money = speech to fix the problems posed by Citizens United. I do think if a corporation engages in political speech, it should be clear that it does in fact represent the views of those associated in it, and it should be clear that a natural person takes responsibility for that speech.  The corporate person itself should not be able to make political contributions larger than a natural person is allowed. After all, the persons associated in the corporate person are all capable of acting on their own behalf, why allow the corporation to out-shout them?

A corporate person is incapable of action without actions taken by natural persons. They make the speeches, write the checks, push the buttons, and write the algorithms. Should we shield these people too much from the actions they take while working for a corporations, the responsibilities of citizenship disappear.

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