July 1, 2011
Jul 1, 2011
6 Min read time
Even if the Supreme Court decided that corporations are in every way like persons, there might be limits on the corporate role in politics.
When the Supreme Court heard Santa Clara County v. Southern Pacific Railroad Co. in 1886, few would have pegged the case as a turning point in constitutional law. The matter at hand seemed highly technical: could California increase the property tax owed by a railroad if the railroad built fences on its property? As it turned out, the Court ruled unanimously in the railroad’s favor. And in so doing, the Court casually affirmed the railroad’s argument that corporations are “persons” within the meaning of the Fourteenth Amendment, which provides that no state shall “deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.” So certain were the justices of the Fourteenth Amendment’s applicability that their opinion did not engage the issue, but the Court reporter recorded the justices’ perspective on the topic:
Before argument Mr. Chief Justice Waite said: ‘The Court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution which forbids a state to deny to any person within its jurisdiction the equal protection of the laws applies to these corporations. We are all of opinion that it does.’
That statement marks the origin of the view that corporations are persons as a matter of constitutional law. This played a central role in the 2010 decision in Citizens United v. Federal Election Commission, which struck down portions of the Bipartisan Campaign Reform Act that restricted corporate spending on electioneering communications in the run-up to a federal election. The Court declared that Congress could not discriminate between electioneering communications according to the identity of the speaker: since individual human beings clearly have a First Amendment right to speak about candidates during the election process, so too must corporations.
Much criticism of the Citizens United decision has focused on whether corporations should have rights under the Constitution. This critique is mistaken. Corporations come in many forms, ranging from large, publicly traded profit-driven companies (think IBM) to smaller, ideologically motivated nonprofits (the American Civil Liberties Union or the Audubon Society) with many others in between (your local newspaper). The diverse nature of corporations may mean that some corporations have stronger claims than others with respect to particular rights, but on the whole it is clear that our democracy could not function if corporations received no constitutional protection. One of the most famous First Amendment decisions of the Warren Court, New York Times v. Sullivan (1964), protected a for-profit newspaper from a libel suit for publishing a paid advertisement criticizing a public official. Many foundational freedom-of-association cases likewise involve corporations, such as the NAACP. And even with respect to purely economic rights, it is hard to argue persuasively that the government should have no obligation to provide due process to corporations before imposing fines or condemning their property.
So corporations are entitled to constitutional protection. But are they entitled to the same protection as living, breathing human beings? In this year’s Federal Communications Commission v. AT&T, the Supreme Court suggested they are not so entitled. The Court refused to extend to AT&T a provision of the Freedom of Information Act that exempts the disclosure of material that might cause “an unwarranted invasion of personal privacy.” A corporation, Chief Justice Roberts said, does not have the “type of privacy evocative of human concerns.” Similarly, corporations cannot invoke the Fifth Amendment’s protection against self-incrimination.
Corporations are entitled to constitutional protection, but not the same protection as human beings.
But even if the Court decided that corporations are in every way like persons, there might be limits on the corporate role in politics. When faced with the issue of popular confidence in the democratic process, courts have agreed that the speech rights of flesh-and-blood persons may be bounded. The Hatch Act, for example, forbids government employees from engaging in partisan political activity, including some activities in their off-time. In fact, when it comes to a willingness to restrict constitutional rights in the name of confidence in the democratic process, the Court’s decisions show a troubling and puzzling asymmetry in favor of corporations. A few years ago, the Court upheld Indiana’s draconian voter-identification statute, which threatened to deny the fundamental constitutional right to vote to thousands of individuals who lack government-issued photo ID. The Court asserted, “Public confidence in the integrity of the electoral process has independent significance, because it encourages citizen participation in the democratic process.” The Court nowhere explains why a similar rationale should not apply to political spending. Several legislatures think it does and have concluded that citizens are less likely to participate in a process they think is rigged in favor of large corporate interests.
The real question, then, is not whether corporations deserve some constitutional protections: they do. The issue is whether there is something about the nature of corporations that makes it appropriate to limit their involvement in the political process. The Court has foreclosed the most common affirmative answer to that question: corporations have accumulated enormous wealth, which enables them to distort a political process that rests on a commitment to equality, embodied most prominently in the principle of one person, one vote. The Citizens United decision rejected this argument by overruling a prior holding in Austin v. Michigan Chamber of Commerce (1990).
In Austin the Court decided that the government has a compelling interest in preventing “the corrosive and distorting effects of immense aggregations of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public’s support for the corporation’s political ideas.” But in Citizens United, the Court went the other way, declaring that refusing to limit political speech “based on a speaker’s wealth is a necessary consequence of the premise that the First Amendment generally prohibits the suppression of political speech based on the speaker’s identity.” Given the vehemence with which five justices embraced this position, there is little prospect of reviving it in the foreseeable future. The rejoinder that corporate wealth is often amassed from people who don’t share a company’s political views—people might eat at Chick-fil-A because they like the food and not because they share the owners’ conservative perspective—is no less true of individuals: even people who disagree with Bill Gates’s politics use Windows, and this shouldn’t prevent him exercising his right to political speech.
The better argument in favor of limiting partisan political spending by large, publicly traded corporations rests, ironically, on the fact that corporations are made up of people. Under current law the actual owners of corporations—their shareholders—have little say in how corporations make decisions in the political arena. That corporate managers might spend corporate funds not to maximize the shareholders’ welfare but to maximize their own is a very real danger. Many shares are owned by mutual funds and pension funds that in turn are owned by individual citizens who often have political convictions that go beyond maximizing the profitability of the corporations whose stock forms part of their retirement savings. What is more, those political commitments may be sharply at odds with the economic interests of the corporate managers who are making decisions about corporate political spending. The law should not force citizens to forgo beneficial investments in order to avoid subsidizing their political opponents.
All of which is to say that campaign finance regulation is tricky. As critics of regulation—including Justices Scalia and Kennedy—observe, there are real risks that incumbents will pass regulations that protect themselves from electoral challenge. And federal campaign finance legislation often results only in shifting sources of money and influence—from individuals to PACs to 527s. But one thing is clear: the observation that corporations have rights should not end the debate about the constitutionality of regulation.
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July 01, 2011
6 Min read time