Corporate Personhood: A Suggestion

 

“Corporate personhood”, the notion that corporations have constitutional rights the same as flesh-and-blood people, is one of the most harmful pathologies of our system. In spite of the Constitution saying nothing even remotely like this, the constitutionality of it is allegedly founded in an 1886 Supreme Court case, Santa Clara County vs. Southern Pacific Railroad.

 

But in fact the actual decision in this case makes no such finding. Rather, Chief Justice Morrison Waite made a non-binding informal comment (technically called an obiter dictum):

“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 the opinion that it does.”

 

This comment wasn’t part of the proceedings, and wasn’t part of the decision.

 

But a the court reporter, a railroad cadre named Bancroft Davis, inserted the line in the boilerplate preamble. It’s only on account of this that the sentiment supposedly became part of the decision. (A later epistolary exchange between Davis and Waite confirms that they had conspired to smuggle this into the decision without it actually having to be argued under the sunlight of legal day.)

 

Since then corporatist judges have used this as the basis for their decisions, as an alleged precedent. But there is no such precedent. Every corporatist decision is simply a castle built on sand.

 

The Constitution does not mention corporations at all, but in the 18th century it was clear that corporations can be formed only under specific circumstances, for specific purposes, for limited periods of time. This is how the Founding Fathers must have understood them. Otherwise they would have enshrined something different. It’s clear that the Fathers envisioned a far more limited role for corporations than they’ve been allowed to arrogate, in large part because of this bogus non-precedent.

 

If I were a judge at any level, I’d consider that since there is no precedent on the issue I’m free to go back to the Constitution, where I’d find that there’s no such thing as a corporate person. What could be more clear?

 

So far as I’ve heard, no judge has yet had the integrity to do this. (Though some localities have passed laws declaring that corporations are not persons and/or do not enjoy certain “rights”.)

 

It would require political courage, something very rare today.

 

But more judges are standing up to the bullying banks. In foreclosure cases, more and more judges have the novel idea that before a bank can foreclose on a house it has to produce the note proving it actually owns the mortgage. Judges are demanding to see this note. What a concept! Radical.

 

It turns out many times the bank, or whatever goon it’s using, doesn’t have the note. It turns out in many cases no one knows where the note is or who really owns the thing. Yves Smith at Naked Capitalism keeps saying how “gobsmacked” she is over this. It seems to be the one thing in the whole mess that truly astounds her.

 

But it isn’t surprising that judges are plenty unsympathetic, and in cases, outraged. The law is all about sanctity of process, both the underlying law and court proceedings. Cases typically revolve around disputes of fact or grey areas of the law. This isn’t grey (whether a party has standing to file a suit is fundamental) and the law in this area is well established. Basically, the securitization industry tried creating rules outside any established legal framework and judges are having none of it.

(I commend to your attention this excellent video discussion. The whole thing’s good, but especially interesting for this post is Hernando de Soto’s emphasis on how property, seen as a system of organizing legal and social stability, has been completely eroded by this phenomenon of diffusing everything through ever more abstractly tranched pieces of paper.)

 

Then there’s Jed Rakoff’s big No to a business-as-usual corrupt collaboration between Bank of America and the SEC. Here too we see the rare judge who thinks he’s actually a public servant and not a corporate tool.

 

Little by little, we’re seeing some action on this front. So it shouldn’t be out of the question that somewhere a judge who wants to be a public hero might take the plunge and point out what’s obvious but what no one wants to say:

 

The Corporate Emperor has no Personhood.