Supreme Court Rules on Corporate Political Speech; And a Short Account of the History of the Corporation: PART 1

On Thursday, the U.S. Supreme Court ruled in Citizens United v. Federal Election Commission, that it is unconstitutional to put spending limits on corporate spending for political speech. Only five justices ruled in favor of overturning two precedent decisions, with the remaining four justices opposing the new ruling; the court split along conservative and liberal lines. At its essence, what the ruling does is equate First Amendment rights of a corporation with the First Amendment rights of a U.S. citizen.

Over the last two hundred years with the formation of the modern corporation, our laws have wrestled with the nature of rights a corporation should receive. In simple terms, our laws recognize the corporation as an "artificial individual" with much the same rights of a human individual. As the latest decision (which received validation from only 5 justices) suggests, however, the law on this issue still remains unsettled.

At another time, I will explain why I think the Citizens United decision is a faulty one both from a First Amendment standpoint, and from a Delaware Corporate Law standpoint (the majority of the largest corporations in the U.S. are incorporated in Delaware as it provides the most favorable law to businesses). I will just say briefly here, that it is dangerous to equate the rights of an artificial being with that of a human being, and further, as business law demands that corporations drive to increase profitability on behalf of shareholders, how this is reconciled with unlimited spending on political speech is unanswered.

In this blog I want to offer a short account of the history of the corporation through the modern era. Much of my research over the years has been on the role of the corporation in society, so some of what I will offer below comes from my own research and some comes from excellent books out there on the subject; one of the best concise books on the subject is "Corporation: A Short History of a Revolutionary Idea."

The historical shaping of the corporate entity reveals much about its place in the public square today and what role it is anticipated to play in the global affairs of tomorrow. For the public to chart a course to where the corporation ought to be in the coming years, it is useful identifying its current status in society and how it arrived here. A number of variables have helped shape the corporation into its current role, including legal developments, consumer demands, government regulation, technological advancements, and labor pressures, to name a few. The following discourse will offer a cursory view of the corporation’s short history, identifying key developments transforming this entity from a novelty in its earliest beginnings to a place of great power in the present.

EARLY HISTORY

The concept of the business enterprise and business contracts trace back to the earliest annals of recorded history. In ancient Mesopotamia dating as far back as 3000 B.C. there is evidence of complex business negotiations that extended “beyond simple barter.” Sumerian traders were able to define property ownership through the utilization of contracts. Around 2000 B.C., Assyrians employed partnership agreements where at least one example is strikingly similar to a modern venture capital fund.

Athenians further developed contracts by framing it around the rule of law; previous types were merely subjected to the interests of whoever ruled that particular jurisdiction. Ancient Rome built upon this legal framework, adding two important features. First, many Roman firms used a form of what we would now refer to as limited liability. This reduced the risk to parties invested in the enterprise, making it a more attractive business model. Second, Romans developed a feature that has been a common trait of corporations ever since: “the idea that an association of people could have a collective identity that was separate from its human components.” In theory this development could be considered the beginning of the modern concept of the corporation - a legal body possessing a perpetual life. In reality most Roman corporations were sanctioned by the state with a very short life span, existing just long enough to fulfill a specific function and then were dissolved once its public purpose was achieved.

After the fall of the Roman Empire, it was the church that firmly established in Western Civilization the idea of the “perpetual life” of a corporate body. The Greek word that would later come to be synonymous with “church” is εκκλησία (ecclesia), literally translated as “ones gathered together.” The idea behind ecclesia is that people are gathered together for a common purpose, becoming an identity distinct from any one person or building or city or state. Monasteries and abbeys would eventually acquire the legal version of this corporate entity in order to protect property interests so that land would remain within the group despite the death of members.

It wasn’t until much later in Europe – with the merchants of Italy and then state-charted operations in northern Europe – that the complex business organizations reminiscent of its Roman counterparts returned for good. In 12th century Florence, the merchant community utilizing joint-liability partnerships began using the Latin term 'compagnia,' translated as “breaking bread together.” In 12th century England the Corporation of London was formed. This municipal corporation remains in existence today with ownership of a “quarter of the land in the City of London.” Most of the earliest corporations, however, were ecclesiastical in nature.

We can see from the term compagnia as well as the state's use of limited charters to demand that business fulfill a specific function for the public, that the early concept of the corporation was very much communal in nature, that its means and ends were to serve the interests of the public's well-being. Keep this in mind as we go forward in this discussion.

Peace

Jeremy