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14 March 2017

Corporations vs Charters

The history of constitutional law is the history of the impact of the modern
corporation upon the American scene.

-    -  Supreme Court Justice Felix Frankfurter

Individuals are legally required to support corporations’ political advertising. Opposition is a violation of the corporation’s First Amendment rights. [1]

EPA monitoring of the air over a corporation’s factory, constitutes violation of the corporations Fourth Amendment rights. [2]

Corporations must be compensated for compliance to environmental regulations. Lack of compensation violates the corporation’s Fifth Amendment rights.[3]

Yes, inanimate, non-accountable corporate entities have the very same rights[4] afforded you by the authors of the Constitution. But it wasn’t always so. The Constitution doesn’t mention corporations. In Colonial times, corporations as we know them today didn’t even exist. Instead, there were charters*. The Founders knew well the abuses of the contemporary charters such as the East India Company, the Hudson's Bay Company and the British Crown charters in America and chose to allow the States to regulate them.

*Technically corporations are charters. For the purposes of this post, “charter” is used to identify the original charter entity before the re-definition of the word in the 19th century.

Some key differences between corporations and charters;

Of limited duration, Must be renewed or disbanded.[5]
Capital is limited
Capital unlimited. Can be "too big to fail"
Established for defined reason
Essentially unlimited
Strong accountability to shareholders is written into charter
Weak accountability to shareholders.
Minority shareholders protected
Minority shareholder support not needed for major decisions
All stakeholders responsible
Stakeholders not responsible for corporate actions

As early as 1816 Thomas Jefferson, always a foe of large powerful entities, warned of the threat to the young democracy from “moneyed corporations”;

“"I hope we shall …crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country."
- Thomas Jefferson, Letter to George Logan, 1816”

It took 70 years of struggle, but the corporations won their “trial of strength” in the infamous landmark Supreme Court review of Santa Clara County v. Southern Pacific Railroad, 1886; which overturned previous precedent and was used to give corporations the legal status of a natural person, and thus by extension, protection under the Bill of Rights. (Before this time corporations were considered “artificial persons” with a limited sub-set of human rights).  Since then, corporations have won erroneous judgements one after another, until we have arrived at the sorry state we find ourselves now.

Supreme Court Justice William 0. Douglas commented on the decision decades later, writing;

"There was no history, logic or reason given to support that view"

Corporations are Accountable to No One

Not the Government;

We regularly see in the news headlines “Corporation X Fined XX Dollars”. This is misleading. Corporations no longer exist as a privilege granted by the people through their government, but rather they exist under “contract” with the government. This is the reason fine amounts are “recommended” and companies are allowed to negotiate the final value. Corporations are not “fined” in the sense that you are fined for speeding or jaywalking, but rather the “fines” are more akin to liquidated damages for a violation of their “contract” with the government.

Directors can be held liable only for their own personal misconduct. No single person or persons are accountable for miss-deeds of the corporation.[6]

Not the People;

Corporations, having usurped the Commerce Clause to relieve “themselves” of government authority, and gained protections under the Bill of Rights, have granted “themselves” much greater freedoms than enjoyed by any individual. Individuals cannot invoke Commerce Clause precedent to overrule laws. Corporation can, and do on a regular basis. This has created the curious situation where an entity (the corporation) is no longer accountable to the entity that created it (the government). 

Even the most die-hard free-marketer must admit that even if individuals and corporations should have equal rights, it is much more difficult for the individual to assert those rights. Do you have a personal lobbyist in Washington? (No, your congressional representative doesn’t work for your interests. They follow corporate wishes and interests; you are not going to give them a job when they leave government).

Not Shareholders

Shareholders routinely resort to litigation to assert their supposed rights to control the corporation. Minority shareholders are easy silenced by majority shareholders or shareholder blocs. Shareholders have no direct influence in matters such as treatment of workers or the environment.

Not the Consumer

Even if corporations are not accountable to any one else, they must be accountable to the consumer, right? Not really. Corporations can treat consumers any way they chose. Telephone companies are one example. They routinely mistreat their customers, their business declines, and then they merge or otherwise reform themselves under a different name and continue business with the same equipment, the same employees and even the same customers (Who are non the wiser) Study the history of ATT for proof.  Airlines are another striking example. Under a charter system, entities that harmed the public good would be disbanded and their assets sold and delivered in proportion to their stakeholders.

Corporations (including the Federal Reserve) are the scourge of democracy and will be the cause of the failure of the Grand Experiment.  You cannot “vote with your dollars” to force corporations to behave in an ethical manner. The only hope is to reform the nature of corporate “personhood” and return to the ideals of the founders of this great country.

[1] Pacific Gas & Electric Co. v. Public Utilities Commission of California ET AL. Appeal from the Supreme Court of California. No. 84-1044.

[2]  Dow Chemical Corporation v. U.S., 476 U.S. 337

[3] U.S. Supreme Court review of Pennsylvania Coal Co. v. Mahon 260 U.S. 393 (1922)

260 U.S. 393 Pennsylvania Coal Co. v. Mahon et al. No. 549.

[4] Actually, they have more. An individual’s power to control government is through the vote and the resultant composition of Congress and the Presidency, and ultimately, through elected officials, the Judiciary. But since corporations have successfully hijacked the Commerce Clause to limit government’s power, they are ultimately accountable to no one.

[5] The scourges of the First and Second Banks of the United States were eliminated by allowing the charters of these abominations to expire. The present incarnation of this evil, The Federal Reserve, cannot be dispatched so easily because its status as a corporation allows it to exist in perpetuity.

[6] To cite a recent example, is the CEO of British Petroleum responsible for the Gulf disaster? No, he wasn’t even there, he had no way to know what they were doing, and he can’t be expected to keep up with every employees actions. How about the guy on the
rig? No, he was just an employee doing a job. He can’t be responsible for the corporation. Inevitably, a mid-manager will be taken to task for the disaster and punished accordingly. But does this change the corporate attitude? Can this alter the corporation’s way of doing business? Of course not. In the end, no one is accountable. What incentive does BP really have to be responsible? If worse comes to worse, they can always simply merge with some unknown company, change their name, and continue business as usual. BP can easily change their legal structure, since there is no longer a requirement to serve a public good. Articles of Incorporation are available simply for some relatively trivial paperwork and fees. Would the boycotters even know? No, they would declare “victory”. Would anyone even care that the new ACME Oil company was formerly BP? No, they will have moved on to the next cause. BP knows this.