Mitt Romney has taken a lot of slack for his “I have some friends who are Nascar team owners” comment but much less pain for his even sillier “Corporations are people” remark. All we needed him to say was “Some of my best friends are corporations” to paint the perfect picture of his world of make-believe.
After the Citizens United case, the Supreme Court has reinforced the notion that corporations enjoy certain “human” protections under the law, specifically those related to the First Amendment right to free expression. In constitutional and practical terms that translates to mean that corporations have the unbridled right to express their political opinions by providing cash to politicians, political parties and political interest groups that, of course, any human – including Mr. 14% — could only dream of forking out.
But the entire issue of how campaigns can be financed is besides the point (though, as of the time of this post apparently Romney’s SuperPAC has raised +$100 million to Obama’s $9million). Mr. Romney was trying to say something – I can only imagine – about corporations, capitalism and the freedom from regulation that corporations must enjoy in a free society. So, if corporations are people, then they too should be free. That a corporation is in fact a person and should not be regulated is absurd. A guy who earned both a Harvard MBA and JD should know this.
As a matter of fact, a corporation is not the product of the free market, but of government intervention and regulation. Yes, that’s correct: corporations only exist because of convoluted state action and regulation that allow them to incorporate. Government is the mother of all corporations and regulation their father.
In legal parlance, we call corporations a “legal fiction” because they have been blessed with “legal personality” by the State. Remember that at the time of Genesis, when God was creating the earth and the heavens and when Eve was born from Adam’s spare rib, corporations didn’t exist. In the New Testament, when Jesus gave his sermon on the Mount, corporations did not exist. And as corporations didn’t exist, they certainly weren’t people then either. Corporations didn’t exist because they, like unicorns, are not real. This is why we lawyers call them a “legal fiction”. So where there may be some debate as to when after conception human life begins, a corporation’s life always commences with a government stamp.
Corporations had their first breaths of air during colonial times – their monopolistic powers being granted to them by monarchs – with such ventures as the Dutch East India Company to exploit trade in Asia. The modern corporation, having its roots in the 19th Century (coincidentally during the times of Joseph Smith), were empowered by the law (ie, government intervention and regulation) to benefit from four unique attributes that, absent such regulation, would render them unsustainable: (1) legal personality, (2) limited liability, (3) centralized management and (4) free transferability of ownership/shares. Notice that prior to the birth of the corporation, business ventures in their natural states did not benefit from any of these state-created values and attributes.
“Legal personality” – what makes guys like Mitt call corporations “persons” – simply means that a corporation is considered by law as a singular entity, even though it may have one or a million owners. Over time, the courts have held that such “legal personality” entitles a corporation to certain constitutional rights: freedom of expression, to be free from unlawful searches and seizures, to counsel and due process, and to enjoy the privileges of the attorney client relationship. And even though corporations are arguably subject to criminal prosecutions, American jails – the most populated in the world — are chuck full of human beings, not inc.’s.
Unlike us humans, corporations – with the exceptions of incorporation and insolvency – are not born and do not die. They are eternal. And unlike, say, the citizens of North Carolina, corporations can merge with other corporations of their kind; no Republican outrage, no referendum. While corporations are not people who vote in elections (at least not for now), corporations – as mentioned — can raise a lot more money than us natural folks. Freedom from regulation is important to corporations, yet natural persons should be heavily regulated, severely prosecuted, and policed for immoral activity. And you guessed it; We The People certainly do not have limited liability.
So just as the tax code had to be specially modified to create a universe where a few fortunate ones pay tax on only 14% on their income, so too does the State have to give the miracle of life to corporations. Now, don’t get me wrong. I have nothing against the legal fiction of corporations. Corporations have been an incredible advancement in the course of human history and play a remarkable and essential role in society and business. Without them, financing innovation, infrastructure, and other value creation would be unthinkable without resorting to monarchs or tyrants. Nevertheless, just because a corporation – this legal fiction – has been granted “legal personality” by the State doesn’t make it a person.
So forget the sound bite: corporations are no more people than people are corporations. And if you believe some of your best friends are corporations, then you definitely live in the world of make-believe, in a legal fiction.