Corporations, the Constitution, and the Rights of Others

The Supreme Court’s protection of corporate political expenditures in Citizens United v. FEC and corporate religious exercise in Burwell v. Hobby Lobby has rekindled perennial fears about the influence of corporations in U.S. politics and policy. One popular response has been to argue for stripping corporations of constitutional rights. For example, the proposed “People’s Rights Amendment” would exclude corporations from the categories of “people, person, or citizen as used in this Constitution,”[1] thus denying corporations the constitutional rights of human individuals.

Unfortunately, denying corporate constitutional rights is unlikely to have much effect. Insofar as the Supreme Court has protected corporations under the Constitution, that protection does not expressly rely on the notion that a corporation per se has constitutional rights. To the contrary, a central strategy of the Court’s corporate constitutional jurisprudence has been to avoid deciding whether corporations are the holders of constitutional rights. Constitutional decisions protecting corporations have not been based on the rights of corporate “persons,” but on the less controversial rights of human persons. That is, “corporate” constitutional rights are actually based on the rights of others.

The Court does this in two ways. First, it sometimes treats a corporation as no more, and no less, than an “aggregation” of human individuals whose rights are the real rights implicated in corporate constitutional questions. Hobby Lobby expressly states the Court’s reasoning: the corporate “person” is merely “a familiar legal fiction” created to protect the rights of “the people (including shareholders, officers, and employees) who are associated with the corporation.” Thus the Fourth Amendment prohibits unreasonable search and seizure of corporate papers because such papers implicate the property and privacy rights of individuals. By contrast, a corporate entity cannot invoke the Fifth Amendment’s protection against self-incrimination, because no individual’s rights are compromised when a corporation (in contrast to, say, a CEO) is compelled to incriminate itself.

In the First Amendment free speech context, the Court bases corporate protection on individuals’ rights in a second, very different way. The so-called “listeners’ rights” theory of the First Amendment protects the public’s right to hear messages, and thus requires neither a corporate nor an individual “right” to speak. Thus in Citizens United (and earlier, in First National Bank v. Bellotti (1978)) the Court held that corporate political spending must be protected in order to protect voters’ First Amendment rights to receive diverse sources of political information.

The Court, then, has avoided the mistake of equating corporations with human individuals for constitutional purposes. However, its “rights of others” approach suffers from a different error: a fundamental misunderstanding of the corporate decisionmaking process. In the “aggregation” cases, the Court purports to protect the individuals associated with the corporation, but this erroneously assumes that the corporation’s acts are in effect the acts of those individuals. The Court makes a similar error with respect to corporate political spending. Even if listeners have an interest in hearing corporate messages, that may conflict with the rights of the corporation’s constituent individuals if they disagree with those messages. Citizens United dismissed this concern on the ground that shareholders control a corporation’s messages through “corporate democracy.”

Small, family-run corporations, such as that involved in Hobby Lobby, may accurately represent the wishes of their constituents.  The same is not true of larger corporations, however.  Corporate law does not, and is not intended to, run corporations in a “democratic” way. Rather, in the interests of money-making efficiency, the law concentrates power in professional managers. They enjoy nearly unreviewable discretion to control the resources of the corporation with negligible input from shareholders.

As intended, this arrangement is likely to benefit shareholders financially. But it does not protect them from corporate political spending or other speech acts they disagree with. Shareholders can sue management only for deliberate malfeasance, and political spending has been treated as a proper matter for management discretion. Furthermore, the Court itself has stated that corporate rights are meant to protect not only shareholders, but also other corporate constituents, such as employees. Those individuals, however, have even less power than shareholders with respect to corporate decisionmaking. Employees cannot vote in corporate elections and can be fired for disagreeing with management.

The protection of corporate constituents may present a compelling state interest justifying the regulation of corporate speech. Corporate political spending in particular could compromise the speech and property interests of corporate constituents who may disagree with the political message. This argument questions the reasoning of Citizens United, and is consistent with the proposed “Democracy for All Amendment,” which would expressly permit campaign finance law to regulate corporations and natural persons differently.[2]

ENDNOTES

[1] See S.J. Res. 18 & H.J. Res. 21, 113th Cong. (1st Sess. 2013). I should disclose that I am a member of the Legal Advisory Committee of Free Speech for People, an advocacy group that supports this amendment, as well as the “Democracy for All Amendment,” discussed below. See Free Speech for People, www.freespeechforpeople.org.

[2] See S.J. Res. 19 & H.J. Res. 119, 113th Cong. (2nd Sess. 2014).

The preceding post comes to us from Thomas W. Joo, Professor at UC Davis School of Law. The post is adapted from his recent article, Corporations and the Rights of Others, 30 Const. Comment. 335 (2015), which is available here.