Personality Issues

First of all, my apologies for the extended silence. At first, it was a lack of interesting topics; but then the worst enemy of blogging, the loss of habit of frequent writing. I will do my best to get back into it now.

I start off by a comment on an interesting recent article by my NYU professor, former National Legal Director of the ACLU, and sometime movie start, Burt Neuborne. In “Of ‘Singles’ without Baseball: Corporations as Frozen Relational Moments,” prof. Neuborne grapples with an issue that has aroused a great of controversy of late: the legal personality and constitutional rights of corporations. (I have a couple of posts on this topic here and here.)

In a nutshell, prof. Neuborne argues that corporate legal personality is a legal fiction, which is very useful for protecting and enforcing the rights of the corporation’s “participants”―mostly, but not only, shareholders. Accordingly, this notional personality can be endowed with constitutional rights insofar as doing so protects the rights of the corporation’s participants. For example, courts rightly recognize that corporations have a right to property, because this recognition protects the property rights of its shareholders; they rightly recognize the corporations’ freedom of speech when that freedom is exercised to communicate about the corporations’ business, because this protects the shareholders’ ability to pursue their legitimate commercial interests; and so on. On the other hand, courts have traditionally refused, and ought to refuse, to recognize corporate rights when doing so would favour some “participants” in a corporation at the expense of others. Thus, conferring on a corporation constitutional protection against self-incrimination would favour managers by allowing them to cover up their misdeeds, to the shareholders’ detriment. And, crucially, allowing a multi-shareholder corporation to spend money to intervene in electoral politics:

Unlike the garden-variety decisions about how to manage the corporate business …  no participant in the corporate enterprise believes that by joining a corporate community he or she has delegated the exercise of his or her First Amendment electoral rights to corporate management. Given the inevitable conflicts of interest within a large multi-shareholder corporate community about which candidate to support in a contested election, it appears inconsistent with [the usual legal principles] to vest a corporate management with a centralized power to use other peoples’ money for political ends.

Thus broad readings of the U.S. Supreme Court’s Citizens United decision, which, controversially, declared unconstitutional restrictions on the ability of corporations to spend money to support or oppose candidates in elections, are misguided. 

This is an elegant argument, much more fine-grained and plausible, and thus interesting, than the categorical rejection of corporate legal personality and constitutional rights which have become popular in some quarters on the left in reaction to Citizens United. But I find it problematic in its own way. For one thing, I wonder whether it makes sense to make the answer to the question whether a corporation has a certain free speech right dependent on its internal structure. For another, I think that prof. Neuborne mischaracterizes the relationship between the rights of the “participants” in a corporation and the corporation itself, at least in the case of electoral speech. Most broadly, I think there is reason to question his rejection of the possibility of meaningfully distinct corporate personality and rights.

First, prof. Neuborne’s theory makes the existence of corporate rights dependent on their potential for advancing or hindering the interests of corporate “participants”―rights should be recognize when they advance the participants’ interests when they are unified, and rejected when the participants’ interests conflict and corporate rights would favour those of some participants over others. This means, as prof. Neuborne acknowledges, that corporations owned by a single shareholder, or presumably by a small group of like-minded shareholders, should have more rights than those owned by large numbers of shareholders who might have diverse opinions and interests. A public corporation whose shares are widely held would not have the right to spend on supporting candidates for an election―but the same corporation, if it bought out and taken private, would presumably have that right in the next election, as there is no longer a possibility for conflict among its shareholders. This strikes me as implausible. Rights, we generally think, are universal, if they exist at all.

Second, I don’t think that recognizing corporate speech rights, including the right to intervene in electoral politics, amounts to “delegat[ing] the exercise” of these rights from the shareholders and other corporate “participants” to management. Shareholders remain free to exercise these rights on their own, independently from and contrary to the corporation. One doesn’t have a limited supply of free speech rights, some of which one hands over to corporate management, so one’s rights are not actually impeded by corporate speech, even if one disagrees with it. Of course, one might be upset about one’s investment serving to promote ideas one disagrees with, but one might be similarly upset about business decisions a corporation of which one owns shares makes. Prof. Neuborne is right that there is a certain price to pay for extricating oneself from a relationship with a corporation―but that is the risk one takes by buying shares. 

Finally, I am not sure that prof. Neuborne is right to argue that corporate personality and rights can exist only insofar as they promote the easily ascertainable interests and uphold the rights of corporate “participants.” I accept that a corporation only serves to advance the interests of its shareholders (note that prof. Neuborne speaks of “participants,” not only shareholders―it is a disagreement I do not want to get into here). But we treat other artificial entities―notably governments of all sorts―as having an existence and rights of their own, even though they also exist in order to serve the interests and/or protect the rights of individuals. I’m not persuaded that the position of corporations is very different.

Author: Leonid Sirota

Law nerd. I teach public law at the University of Reading, in the United Kingdom. I studied law at McGill, clerked at the Federal Court of Canada, and did graduate work at the NYU School of Law. I then taught in New Zealand before taking up my current position at Reading.

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