Home > Uncategorized > The Campaign Against Corporate Personhood is Moronic

The Campaign Against Corporate Personhood is Moronic

December 22, 2011 Leave a comment Go to comments

(So says Prof. Bainbridge)

The WSJ Law Blog reports that:

Groups such as MoveToAmend.org have been organizing since the Citizens United decision to reverse the ruling. In a statement today, the group points out that Boulder, Colorado, became the second city in the nation last night to pass a ballot measure calling for an amendment to the U.S. Constitution to end “corporate personhood.” In April, Madison and Dane County, Wisconsin, passed similar measures.

I don’t expect anything sensible to come out of looney left strongholds like Boulder and Madison or to be able to educate them, but let’s pause a moment anyway to reflect on what would happen if we eliminated the concept of corporate legal personhood.

For most purposes the corporation is treated as though it were a legal person, having most of the rights and obligations of real people, and having an identity wholly apart from its constituents. Corporate law statutes, for example, typically give a corporation “the same powers as an individual to do all things necessary or convenient to carry out its business and affairs.”

Although the corporation’s legal personality obviously is a fiction, it is a very useful one. Consider a large forestry company, owning forest land in many states. If the corporation is not a legal person with the power to own land, who owns the land? Presumably the shareholders of the company. If the company were therefore required to list all of its shareholder on every deed recorded in every county in which it owned property, and also had to amend those filings every time a shareholder sold stock, there would be an intolerable burden not only on the firm but also on government agencies that deal with the firm. But did anybody in Boulder or Madison pause to consider that undesirable outcome of their proposal?

An even more useful feature of the corporation’s legal personality, however, is that it allows partitioning of business assets from the personal assets of shareholders, managers, and other corporate constituents.  This partitioning has two important aspects. On the one hand, asset partitioning creates a distinct pool of assets belonging to the firm on which the firm’s creditors have a claim that is prior to the claims of personal creditors of the corporation’s constituencies. By eliminating the risk that the firm will be affected by the financial difficulties of its constituencies, asset partitioning reduces the risks borne by creditors and thus enables the firm to raise capital at a lower cost. On the other hand, asset partitioning also protects the personal assets of the corporation’s constituencies from the vicissitudes of corporate life. The doctrine of limited liability means that creditors of the firm may not reach the personal assets of shareholders or other corporate constituents. Just how do the brilliant legal minds behind this movement propose to preserve this feature of corporate personhood if they succeed?

The trouble, of course, is that the folks behind this movement are worked up about the Citizens United decision. As Movetoamend.org’s website states, their goal is to establish the principle that “human beings, not corporations, are persons entitled to constitutional rights.”

Note that what they’re doing is kind of clever. Unions were also freed by Citizens United to make independent political expenditures. Unions, however, are uniformly organized as unincorporated voluntary associations. The corporate peronhood proposal thus would leave unions unaffected. Which means a main source of the left’s financing would remain free to spend on campaigns and political ads.

On the other hand, what they’re doing is mostly stupid. Lots of pillars of the liberal political movement are limited liability entities with the status of legal persons. The NY Times is run by a corporation. Daily Kos is owned by a LLC. The Washington Post is a corporation. Moveon.org is a (nonprofit corporation). And so on. If the goal of preclude corporations from having constitutional rights by denying them the status of legal persons were to succeed both politically and legally, all of these liberal stalwarts would lose — among other things — the First Amendment rights they presently enjoy.

And even I think that’s a bad idea. But then again, I bothered to think through the consequences of what they’re doing. Sadly, but not surprisingly, apparently nobody in Boulder or Madison bothered to do so.

Update: Larry Ribstein comments.

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