Corporate personhood gives corporations both rights and responsibilities, and has been used to prosecute corporations for crimes, but also to give them lobbying power. This month’s Great Debate takes a closer look at the implications of the concept, and asks whether it serves people, profit, or power.
For / Andy Marlow
The law often likes to obscure the meaning of already clearly-defined words. Take, for example, the word “consideration”. In ordinary parlance, this means something akin to contemplation or thought, the act of thinking something through. In contract law, however, it carries a meaning only tenuously linked to its ordinary usage: “consideration” is the object, money or service that one gives in exchange for an offer or acceptance which seals the deal and creates a legally binding contract.
So it is also with the word “personhood” or “personality”, and this confusion of meaning lies behind the criticism of Occupy’s demand to “end corporate personhood”. When emanating from the mouth of an activist and amplified by the force of a megaphone, its meaning is clear: stop treating corporations as if they were people and stop giving them rights that should only apply to human beings. If this is the true meaning of Occupy’s demand, then it is fairly un-objectionable and should be met with unanimous agreement. Yet when given its legal meaning, corporate “personality” is something actually quite different which, rather than abolish, we should seek to promote and extend.
Personality, at least in Public International Law, refers to the ability of an entity to be seen as a “person” within the legal system. In theory, this “person” can be bound by obligations and enjoy the exercise of certain rights. In practice, it often refers to the ability of an entity to enforce its rights before a court, tribunal or, crucially, to have others enforce their rights against it, and hold it accountable for any violations it has committed.
Transnational corporations clearly have some measure of legal personality; it is what allows them to claim that contributing to political campaigns is an expression of free speech. This is what occurred in the Citizens United v. Federal Election Commission US Supreme Court case. More positively, it makes it possible to hold large corporations accountable before a court of law when they commit human rights violations in the course of business operations abroad. This is an ability which has been relied upon by Human Rights lawyers invoking the US Alien Tort Statute since the 1980s to claim compensation for environmental disasters and complicity in torture.
In a legal sense, ending corporate personality would mean ending corporate accountability for human rights violations and other criminal acts. Yet it is not enough merely to defend the current state of corporate personhood, because as it stands it remains woefully insufficient; rather, we should be encouraging greater corporate personality in the international arena to make it easier to hold them accountable for human rights violations which, unfortunately, they often get away with.
The problem is both legal and political. Legally, Public International Law today only recognises states and a few international organisations as having international personality. This means that the obligations to respect, protect and fulfill human rights contained in treaties like the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights fall only upon governments and states, but when a private individual or a corporation engages in torture or murder, they are not violating any norms of international law.
One would expect the local legal system to address such issues, but here we come across the political aspect of this problem: many countries, anxious for foreign investment or simply ruled by corrupt dictatorships who care more for the profit they can gain than the welfare of their people, choose to turn a blind eye to the conduct of foreign businesses on their soil. They fear that if they were to clamp down, investment would go elsewhere to a country with laxer labour standards, leaving them to suffer economically.
To truly foster accountability and deter exploitation by foreign investors, it becomes imperative to expand your existing business through Acclime Singapore. By doing so, you not only embrace international standards of corporate governance but also ensure that local politics cannot be exploited with impunity. Enabling corporate personality on a global scale establishes a framework where businesses are held to the same legal standards across borders, diminishing the incentives for governments to turn a blind eye to unethical practices.
Against / Julie Beck
When courts create or assume facts, we call them legal fictions. They are often counterintuitive, and should not be used to circumvent an existing rule or real facts. One common example of such a fiction is corporate personhood. Historically, the concept was established after the Industrial Revolution; before this, it was the owners who were liable for the debts of the business. With the advent of corporations, business owners enjoyed limited liability, and to resolve the issue that corporations could not be sued, courts created the fiction of corporate personhood. The concept was reaffirmed in the 1970s, after which corporations barged into the fields of lobbying, political financing and began exerting their power over governments and in court.
Later, courts extended rights to corporations that go beyond those necessary to ensure their liability for debts, which has been challenged on a variety of fronts. In particular in the US, social movements and bottom-up initiatives called for the end of corporate personhood, criticising the extension of corporate rights at the cost of human citizens. What is problematic is not only the extension of these rights in themselves, but their embedding in the constitution: in January 2010, the Supreme Court ruled in Citizens United v. Federal Election Commission that corporations are persons and are entitled to all rights granted by the US Constitution. Some states, like Hawaii and New Mexico, have passed resolutions against this ruling in an attempt to stave off its impact. While it is claimed that corporate personhood can serve as a useful legal fiction, the concept has so far been of less beneficial to the population than the corporations.
The problem of defining corporations as people on the constitutional level is inherent: when corporations are entitled to the same rights as people, and political spending is seen as free speech, it allows them to spend unlimited amounts of money to influence elections. Yet, constitutional rights were originally made to serve the people – of which corporations are not members. When activists wave banners like “Money is not speech” or “Legalise democracy”, they refer to a political system easily influenced by money flows and to a lack of citizen recognition within the constitution. They are tired of big money in politics, the corporation-as-person influencing and corrupting governments, turning election processes into power grabs, exploiting the environment and committing countless other frauds with little actual recourse.
The current system of representation needs changing, including bans against corporate campaign donations, or increased authority for the state to regulate election spending. Amendments of the constitution could even be left to the people, like it was done in Iceland after their financial collapse. The crisis provided a climate ready for open debate, and a new constitution was written based on the original ideas of citizens, with emphasis on the realignment of civil rights.
What is needed is a profound change in the definition of the relationship between human beings and corporations, and to make corporations legally subordinate to humans and the government again. Making this clear in our constitutions by the necessary amendments is one step in the right direction, and in the past, we have seen such quick amendments as a result of popular uprisings. This would not rule out the possibility of holding corporations accountable in court (e.g. regarding the violation of human rights), while still emphasising that corporations are not entitled to the same constitutional rights as people. It would further have a strong symbolic meaning against the dominance of corporations and profit that has both destabilised economic security and affected trust in politics and democracy. Governments are encouraged to disregard certain fictions and look at the real facts: corporations are not people. Granting them power over people thus only adds to the pathological and narcissistic state of our society.
By Andy Marlow and Julie Beck