Almost Human. What is a Corporation?
What is a corporation? This is a hotly debated question not just among courts and legal scholars, but among the public as well. It is tempting to dismiss out of hand the notion that, in the words of then-Presidential candidate Mitt Romney, “Corporations are people, my friend.” Corporations are not born, they are created through an act of state bureaucracy. They do not love or lust; feel sadness, pain, or guilt; they do not grow old and die; and they do not seek entry to heaven or fear hell.
So why has the Supreme Court repeatedly held that corporations have many of the same rights as
people? One explanation can be found in the binary nature of rights: People have rights. Things that
are not people, do not have rights. Rights give “people” myriad powers in our society: the ability to
enter into and enforce contracts, to protect their property from government seizure, to bring suit in the
courts, to speak their minds, to worship as they choose.
It makes sense that corporations should be able to exercise at least some of these rights. Under the
state laws that create and empower corporations, a corporation is a legal entity, separate and apart
from its shareholders. This separation is the genius of the modern corporate form. The corporation
can enter into contracts, sue and be sued, own and protect property, all in its own name and without
creating liability for the people who own it. This allows a corporation with thousands—or millions—of
shareholders to conduct a multinational business without relying on individual shareholders to
vindicate its rights. Imagine if the Ford Motor Company needed its shareholders to bring suit against
a supplier for breaching a contract—business on a large scale could not function. They say necessity
is the mother of invention. The “legal fiction” of a corporate person was born in response to this need
for corporations to conduct business as their own legal entity. For nearly 200 years the courts have
treated corporations as persons when necessary to further these business goals.
Critics argue that this legal fiction has overtaken reality in recent years. In Citizens United, the
Supreme Court held that corporations have the same right to political speech as human people.
Then in Hobby Lobby, the Supreme Court further held that corporations may be used to exercise their
shareholders’ religion under the federal Religious Freedom Restoration Act. What started as a useful
fiction to facilitate business has led to the Court holding that the government cannot “discriminate”
between corporate persons and human persons even with respect to such deeply human
characteristics as religious belief.
So what is a corporation? There is no easy answer. The law will likely continue to evolve around the
question of corporate personhood as society—and the Supreme Court—ponder what corporate rights
are necessary to vindicate the rights of its owners.
-Osher lecturer Professor Catherine A. Hardee, California Western School of Law