This is the first in a series of posts on corporations adapted from CCP Founder Brad Smith’s comments on an article that appeared in The Frum Forum on Tuesday, October 27th. Some of the information provided by Brad in the comments section was so informative, we made the decision to appropriate the text and repurpose it as a series of blog posts. The following is a very clear explanation of corporate personhood and why CCP supports the general idea.
Is a corporation a person? Of course not. But what is it, then? Trees? Ducks? A building with a corporate name on the front? A bank account? Of course not. If a corporation is just an “artificial being,” how could it spend money to spend on politics, or pollute, or operate ships, or make a profit, pay taxes, or drill for oil? It must be something more.
A corporation is an association of people (or in some cases just one person) joining together to achieve mutual ends. The corporation deals with persons – customers – on the basis of limited liability. That is to say, customers may sue the corporation, but may only recover the assets put at risk (invested in the enterprise) by the owners. For legal purposes, we call it a “person,” though what we really mean is a group of people with fluctuating membership.
Treating it as a single person for legal purposes has many, many benefits. It allows the corporation to be sued, for example, rather than an aggrieved person having to name all the shareholders individually as defendants, with the burdens of notice, service, joinder, jurisdiction, and venue that would entail. Similarly, it allows the members to sue as one entity. It allows the corporation – the group – to buy and sell property, or enter transactions, without having to change the title every time someone sells out of or buys into the corporation. It provides for an efficient means for the shareholders to manage their affairs, or often even better, to have their affairs and investments managed for them. As such, it greatly enriches the economy.
Absent the corporate structure, it would be very difficult to aggregate the type of capital needed to undertake any major industrial enterprise – that is why corporations “go public.” People who are all upset about the idea of “corporations being people” don’t know what they are talking about. It makes no more sense to rail against corporate personhood – a legal concept that recognizes how people are organizing their affairs – than it does to rail against “team personhood,” as when we say that “the Nebraska Cornhuskers have scored 35 points today.” (How could that be? How can Nebraska score a touchdown? It’s a state. Can you execute Nebraska? If not, how can Nebraska carry a football over the goal line?)
A corporation is an association of people. It makes sense, therefore, for the association to defend and exercise some of the rights of its members/shareholders. Indeed, that’s why corporations are formed. Thus, a corporation can enter a contract, buy, hold, and sell property, etc. Indeed, it can do all the things that people can do in association with one another. You can speak. I can speak. John can speak. We can join together and speak as a group (chanting in unison, if you want to be literal about it, or pooling our financial resources to buy time for an advertisement on the radio, if you’ve got any imagination). We have a First Amendment right not only to speak individually, but also to speak as a group.
We don’t lose that right merely because we choose to organize ourselves as a corporation rather than a partnership or an unincorporated association.
