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Wednesday, February 24, 2016

"Human" rights and the corporate person

by John MacBeath Watkins

There is a peculiar conflict in the way society regards corporations. It appears they have the inalienable rights of a person, but they can be owned like an object.

In the Citizens United case, the U.S. Supreme Court ruled that corporations have a right of free speech, expressed in money. Yet we keep hearing that publicly traded corporations are owned by the shareholders.

The inalienable (that is, not sellable) rights referred to in the Declaration of Independence belong to people because, according to John Locke's Second Treatise of Government, people are born owning themselves, and cannot be owned by another.

After all, if I sell a chair, it cannot care who sits in it, or even if it is broken up for firewood. But as long as I remain in my body, I will care how I am used. That is why slavery is incompatible with our ideals of freedom.

But a corporation can be bought and sold, merged or dissolved, without feeling a thing. It may be a person in that it can make contracts and own property, but is it, itself, property? Many corporations belong to one person, existing as a tax category that saves the owner money compared with operating as a sole proprietor. Those can, without question, be bought and sold.

The situation with publicly traded corporations is a little more ambiguous. Shareholders do not own a corporation in the way a partner could own part of a business. They own, in theory, a share of any dividend the company distributes, and the sum of all shares is market capitalization, not ownership per se. The traditional theory of corporations was that the corporation was a person, its board functioned as sort of its brain, and management as its nervous system.

But in the 1970s, a group of economists (the most notable being Milton Friedman) began to argue that shareholders own a corporation, and if the corporation fails to maximize shareholder value, this is an example of the old owner/agent problem, and the agent (the board and management) are operating the corporation in their own interests rather than in the interest of the owners.

Legally, this is hogwash. The argument is usually supported by reference to Dodge v. Ford Motor Co., a 1919 case about what was then a closely held corporation rather than a publicly traded one, which is at odds with a body of subsequent case law.

But the fact is, that's how public corporations are managed these days. It may not be law, but it is custom. And the fact that public corporations can be taken private and then bought and sold makes it clear that we do not extend to them inalienable rights. They are not conscious beings, so they cannot care how they are used, so this makes a great deal of sense.

Yet we have this anomalous case, Citizens United, in which the highest court has ruled that they do have the inalienable right of free speech. This is, after all, a human right.

"Human rights" is a concept developed from the same idea of natural law that was the basis for the Declaration of Independence. The term came into use mainly after World War II and the disaster of the Holocaust. The Universal Declaration of Human Rights was passed by the U.N. General Assembly in 1948.


Whereas recognition of the inherent dignity and of the equal and inalienable rights of all members of the human family is the foundation of freedom, justice and peace in the world...
— 1st sentence of the Preamble to the Universal Declaration of Human Rights
Compare this to the language of the Declaration of Independence:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.
— United States Declaration of Independence, 1776
We do not give corporations the rights of life or liberty, and current practice is that they pursue, not happiness, which they in any case cannot feel, but shareholder value. Do we consider them to be members of the human family? I think not.

I don't mind people getting together to lobby, or issue statements, but Citizens United applies to corporations that were not formed for this purpose. For example, some shareholders are quite upset that ExxonMobile spent its money trying to conceal what it knew about climate change and convince policy makers that it was all a hoax. The mendacity of the corporation was not the reason they bought shares and became associated with its statements.

Citizens United is not about human rights. It is about inhuman rights.


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