March 17, 2013



By Melvin J. Howard

This post will serve as background of an announcement I will be making shortly in regarding the subject matter on international trade and our NAFTA case and how one company’s gross misconduct demonstrates a reckless disregard of U.S. constitutional rights and the rule of law. And the continuous violation of American citizen’s protected rights both at home and abroad. Private institutions that are less accountable than governments and whose interests do not align with profitability targets are designed to co-opt the application of power on behalf of the public. What was once the only domain of a sovereign nation now belongs to multi-national corporations? But first let’s go back in time and see how companies got these broad powers and protective rights that were reserved for people in the first place. It was an individual named John Marshall the first Secretary of State who was appointed Chief Justice of the U.S. Supreme Court in1801by then President John Adams little did Adams know what his appointee would unleash. However later in 1819, Marshall participated in a decision that would dramatically alter the balance of power between corporations and the governments that created them. The origins of the case The Trustees of Dartmouth College v. Woodward can be traced back to the founding of what became Dartmouth College in 1754. By 1815, two sides were issuing inflammatory and contentious pamphlets, and the trustees ultimately decided to remove the founder Reverend Eleazor Wheelock and elect a replacement. In response, Wheelock went to the New Hampshire legislature and got them to pass a series of laws revoking Dartmouth's corporate charter and putting the school under public control. The trustees ignored the law and continued operation of the school as before. This triggered passage of yet another act by the legislature, making it illegal to serve as a trustee or officer of the college without an appointment by the legislature. The trustees appealed to the Supreme Court. On March 10, 1818, Congressman Daniel Webster a Dartmouth alumnus and future senator, secretary of state, and presidential candidate, presented arguments on behalf of the college and the original trustees. Webster had gone a step further then anyone thought. He used the idea of property rights to limit a state's influence over a corporation once it had been brought into existence. This would open the door to the gradual accumulation of other rights and prerogatives by corporate "fictional persons" that had only recently been won by real people. As we all know by now, the concept of property rights, which was originally developed to preserve an individual's rights to property, would as a direct result of this decision be used to grant individual rights to entities that were themselves a form of property.

It was ironic, hypocritical and somewhat of a insult of all involved that while these early advances were being made on the road to granting individual rights to "fictional persons," which were in fact forms of property, real people were still being bought and sold as property with fewer protections than corporations. Webster closed his case by arguing that the actions of the New Hampshire legislature in undoing the original charter violated constitutional provisions against taking away property without due process.
When the Court announced its decision, the Chief Justice began by stating that "the American people have said, in the constitution of the United States, that 'no State shall pass any bill of attainder, ex post facto law, or law impairing an obligation of contracts." He asserted that "it can require no argument to prove" that a contract existed in this case. 

The private donations of funds with future authority vested in the trustees made Dartmouth a private corporation whose rights were protected by the Constitution despite the holding of the New Hampshire court. He then defined what a corporation is:

A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it among the most important are immortality, and, if the expression may be allowed, individuality; properties, by which a: perpetual succession of many persons are considered as the same, and may act as a single individual. They enable a corporation to manage its own affairs, and to hold property without the perplexing intricacies, the hazardous and end-less necessity, of perpetual conveyances for the purposes of transmitting it from hand to hand. By these means, a perpetual succession of individuals are capable of acting for the promotion of the particular object like one immortal being. But this being does not share in the civil government of the country, unless that be the purpose for which it was created. Its immortality no more confers on it political power, or a political character, than immortality would confer such power or character on a natural person. It is no more a State instrument, than a natural person exercising the same powers would be.

Restoring Civil Rights to human-beings not corporations

While this definition is famous, it contains a big big flaw. It fails to recognize the connection between economic and political power. It fails to note that an entity that is granted immortality has the ability to accumulate more means and thus influence than a mortal human being. Further, it fails to recognize that the decision of which it was a part would later be used to open the door to future Supreme Court decisions that would grant additional "individual" rights to these "artificial beings" that would allow them to use that economic power specifically for political purposes. Furthermore, the corporation in question was an institution of higher learning, not a profit-seeking company. The decision and its subsequent interpretations seem to gloss too quickly over this fact, ignoring the critical role a corporation's mission plays in determining its value to society and consequently how it should be treated under the law. U.S. states were rattled by the Dartmouth decision and tried for a number of years to work around it by either limiting the duration of charters or obligating companies to have a public purpose. But gradually they began to change their laws in ways that ultimately gave even greater latitude to companies. In 1830, Massachusetts passed an act decreeing that corporations did not need a public purpose in order to achieve limited liability status. Seven years later Connecticut created what would be a popular model when it enabled firms in almost all areas of business to incorporate without a special legislative act. This signaled the beginning of a competition among the states to offer ever more business friendly laws. New York was an early leader in this sweepstakes, then New Jersey; ultimately Delaware was viewed as so welcoming that today more than 50 percent of publicly traded corporations are incorporated in that state. This competition for investment, of course, presaged a similar competition that would be created among nation-states for the investment of multinational corporations. While some might assert that states have the upper hand because they can issue and enforce laws, states' power is not absolute if in so doing they damage themselves economically (which in turn damages their leaders politically).

Further, while Dartmouth offered corporations the protections of property and contract laws pertaining to their charters, subsequent Supreme Court cases have enabled companies to obtain additional rights that had previously been thought to be available only to actual flesh-and- blood people. In 1886, in the case of Santa Clara County v. Southern Pacific Railroad, the Court declared without argument that the Fourteenth Amendment of the U.S. Constitution, which guarantees equal protection of the laws (and was originally intended to provide protection for actual human beings denied such protection), applied to corporations. In 1890, it used this principle to start a series of rulings over the next fifty years that were used to strike down economic and often anti-corporate regulations under the Fourteenth Amendment's doctrine of substantive due process. Fifth Amendment due process and Fourth Amendment protections against unreasonable searches were added in 1893 and 1906 respectively. And then, in the 1970s, the pace picked up and some really remarkable bending of the law took place to empower the private sector in ways that would have been unimaginable to those who once saw property rights as a tool by which to empower individuals.

Writing seventy years after the initial passage of the Fourteenth Amendment, the U.S Supreme Court justice Hugo Black lamented the fact that of all the cases to which it was applied, "less than one-half of one percent invoked it in protection of the Negro race, and more than 50 percent asked that its benefits be extended to corporations." Given that the amendment was passed after the Civil War to correct the grotesque ways the law had been used to deprive African Americans of their liberties and fundamental rights, Black's shock was easy to understand. It is quite clear that corporations were never the amendment's intended subject. The language of the amendment speaks of protections for "all persons born or naturalized in the United States." It asserts that no state can deprive such people of "life, liberty or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws," While Justice Marshall had noted that historically the law had viewed corporations as "artificial" beings, in the tradition of English law.

Of the ten amendments that make up the Bill of Rights, corporations have successfully asserted the applicability of five to win protections for themselves. These include the First Amendment right to free speech, the Fourth Amendment freedom from unreasonable searches and seizures; the Fifth Amendment prohibition against takings and double jeopardy (despite the fact that the amendment clearly refers to natural persons); and the Sixth and Seventh Amendment rights to jury trials in criminal and civil matters, respectively. This sort of high-paid alliance on behalf of the interests of business illustrates yet another way in which the scales of justice are balanced somewhat differently when it comes to corporate citizens rather than mere individuals with much more limited means. This result in an uneven application of the laws or more protections for those who can afford to assert them, then the law is once again being used as a tool to advance the interest of the few in ways that reasonable critics may see as antithetical to at least its asserted purpose within "just" societies.

Other cases show similar creativity in the use of constitutional protections to push back against federal power and advance corporate interests. Certainly, the assertion of such a right seems to be at odds with the original concept of the corporation as an entity created exclusively to advance public interests.
The Fifth Amendment protects against double jeopardy by stating that no person shall "be subject for the same offense to be twice put in jeopardy of life or limb." Nonetheless, even though a 1906 ruling asserted that corporations do not enjoy constitutional protections against self-incrimination, a 1962 case and 1977 case both asserted that companies could not be retried in cases that had previously been settled by direct verdicts. As for the Fifth Amendment guarantee that "life, liberty or property" cannot be taken by the state "without due process of law.

The majority of American businesses want nothing to do with crony capitalism and corporate rights. As in Theodore Roosevelt's day, this cause is neither partisan nor divided between racial lines. There is a strong need to contain the government-created and -subsidized transnational corporations that wield such much power over American lives and communities. Clearly, there is no reason to stay on the sidelines while these stateless corporations violate the rights that were clearly meant for human-beings. We frequently hear of the emphasis in constitutional interpretation on the intent of the framers of the Constitution. We ought not to forget, however, how often and how actively Americans have updated the Constitution by using the amendment process as a basic tool of democracy. In the end, it is the American people who are the ultimate interpreters of our Constitution, and it is we who decide how to fulfill the framers' vision of equality, freedom, and justice for all. If original intent is the guideline, we can take comfort in two key facts. The framers intended the Bill of Rights to protect the liberties of human beings, not corporations. And the framers intended that Americans take responsibility for amending the Constitution when necessary to strengthen self-government and protect our liberties.  

The Corporation Reformed  

In this global era, of self-interested companies and cross border transactions, when it is combined with the need to co-opt and bend state laws to their need, in the pursuit of enhancing shareholder value. This leads them to enter into illegal and unethical behavior that goes unquestioned. Corporations are not just accountable only to shareholders. Why should we not expect that those who accept the government created privilege of incorporation balance that privilege with good standards for the livelihood of employees, our economy, and the health of the environment and of the communities in which they do business? And why should we allow multibillion-dollar global corporations to take shelter in the corporate law. At some point should not the size and complexity of a corporation warrant a federal charter rather than a state charter from the most corporate-friendly state that transnationals can find (or can pressure)? Why shouldn't all Americans decide what standards we expect from global corporations that choose to do business in the U.S. Why should the corporate status be perpetual, without some ability of the people to evaluate whether the corporation has complied with the law and served the public interest as intended? In America, we are free, or should be, to answer these questions in the democratic way we can debate and then vote to make whatever answers best serve the country. The rules of corporations come from us if we do not like how the corporate rules are working out, we need to change them. At least two principles should guide corporate law reform to restore balance between large corporations and human beings and our government. First, incorporation is a privilege. Second, transnational corporations should not be able to use the corporate law of a single state, without proper national corporate standards and safeguards.

Incorporation Is a Privilege

Corporate law is a public matter, not a private one. Corporate law defines parameters of corporate conduct and shapes our world, our families, and our communities in profound ways. We cannot afford to leave it to multi-billion dollar transnational corporations to decide what they think corporate duties and responsibilities should be. Corporate and Constitutional law may seem boring, but we need to care about these laws as much as we care about any other laws or issue, from the environment to the economy, from healthy communities to strong families, from energy to foreign policy and war. The consequences these laws, for better or worse have as big an impact on those issues and others than any other laws, and perhaps more. Global companies should not be able to cloak themselves in the American flag when it needs U.S. funds. But drop the flag when it comes to moving earnings back home.