- Our Hidden History of Corporations in the United StatesWhen American colonists declared independence from Englandin 1776, they also freed themselves from control by Englishcorporations that extracted their wealth and dominated trade.After fighting a revolution to end this exploitation, our country'sfounders retained a healthy fear of corporate power and wiselylimited corporations exclusively to a business role.Corporations were forbidden from attempting to influence elections,public policy, and other realms of civic society.Initially, the privilege of incorporation was granted selectivelyto enable activities that benefited the public,such as construction of roads or canals.Enabling shareholders to profit was seen as a means to that end.The states also imposed conditions (some of which remainon the books, though unused) like these:* Corporate charters (licenses to exist) were grantedfor a limited time and could be revoked promptly for violating laws.* Corporations could engage only in activitiesnecessary to fulfill their chartered purpose.* Corporations could not own stock in other corporations nor ownany property that was not essential to fulfilling their chartered purpose.* Corporations were often terminatedif they exceeded their authority or caused public harm.* Owners and managers were responsiblefor criminal acts committed on the job.* Corporations could not make any political or charitablecontributions nor spend money to influence law-making.For 100 years after the American Revolution, legislatorsmaintained tight controll of the corporate chartering process.Because of widespread public opposition, early legislatorsgranted very few corporate charters, and only after debate.Citizens governed corporations by detailing operating conditionsnot just in charters but also in state constitutions and state laws.Incorporated businesses were prohibited from takingany action that legislators did not specifically allow.States also limited corporate charters to a set number of years.Unless a legislature renewed an expiring charter, the corporationwas dissolved and its assets were divided among shareholders.Citizen authority clauses limited capitalization,debts, land holdings, and sometimes, even profits.They required a company's accounting booksto be turned over to a legislature upon request.The power of large shareholders was limited by scaled voting,so that large and small investors had equal voting rights.Interlocking directorates were outlawed.Shareholders had the right to remove directors at will.In Europe, charters protected directors and stockholdersfrom liability for debts and harms caused by their corporations.American legislators explicitly rejected this corporate shield.The penalty for abuse or misuse of the charterwas not a plea bargain and a fine,but dissolution of the corporation.In 1819 the U.S. Supreme Court tried to strip statesof this sovereign right by overruling a lower court's decisionthat allowed New Hampshire to revoke a chartergranted to Dartmouth College by King George III.The Court claimed that since the charter containedno revocation clause, it could not be withdrawn.The Supreme Court's attack on state sovereignty outraged citizens.Laws were written or re-written and new state constitutionalamendments passed to circumvent the Dartmouth ruling.Over several decades starting in 1844, nineteen (19) statesamended their constitutions to make corporate charterssubject to alteration or revocation by their legislatures.As late as 1855 it seemed that the Supreme Courthad gotten the people's message when in Dodge v. Woolseyit reaffirmed state's powers over "artificial bodies."But the men running corporations pressed on.Contests over charter were battles to control labor,resources, community rights, and political sovereignty.More and more frequently, corporations were abusingtheir charters to become conglomerates and trusts.They converted the nation's resources and treasuresinto private fortunes, creating factory systems and company towns.Political power began flowing to absentee owners,rather than community-rooted enterprises.The industrial age forced a nation of farmers to becomewage earners, and they became fearful of unemployment -- a new fear that corporations quickly learned to exploit.Company towns arose. and blacklists of labor organizersand workers who spoke up for their rights became common.When workers began to organize, industrialistsand bankers hired private armies to keep them in line.They bought newspapers to paint businessmen as heroesand shape public opinion.Corporations bought state legislators, then announced legislatorswere corrupt and said that they used too much of the public's resourcesto scrutinize every charter application and corporate operation.Government spending during the Civil Warbrought these corporations fantastic wealth.Corporate executives paid "borers" to infest Congressand state capitals, bribing elected and appointed officials alike.They pried loose an avalanche of government financial largesse.During this time, legislators were persuaded to give corporationslimited liability, decreased citizen authority over them, andextended durations of charters.Attempts were made to keep strong charter laws in place,but with the courts applying legal doctrines that madeprotection of corporations and corporate propertythe center of constitutional law, citizen sovereignty was undermined.As corporations grew stronger, government and the courtsbecame easier prey.They freely reinterpreted the U.S. Constitutionand transformed common law doctrines.One of the most severe blows to citizen authorityarose out of the 1886 Supreme Court case ofSanta Clara County v. Southern Pacific Railroad.Though the court did not make a ruling on the question of"corporate personhood," thanks to misleading notes of a clerk,the decision subsequently was used as precedentto hold that a corporation was a "natural person."From that point on, the 14th Amendment,enacted to protect rights of freed slaves, was used routinelyto grant corporations constitutional "personhood."Justices have since struck down hundreds of local, stateand federal laws enacted to protect people fromcorporate harm based on this illegitimate premise.Armed with these "rights," corporations increased control overresources, jobs, commerce, politicians, even judges and the law.A United States Congressional committee concluded in 1941,"The principal instrument of the concentration of economic powerand wealth has been the corporate charter with unlimited power...."Many U.S.-based corporations are now transnational,but the corrupted charter remains the legal basis for their existence.At ReclaimDemocracy.org, we believe citizens can reassertthe convictions of our nation's founders who struggled successfullyto free us from corporate rule in the past.These changes must occurat the most fundamental level -- the U.S. Constitution.
Thanks to our friends at the Program on Corporations, Law and Democracy (POCLAD) for their permission to use excerpts of their research for this article.
Please visit our Corporate Personhood page for a huge library of articles exploring this topic more deeply. You might also be interested to read our proposed Constitutional Amendments to revoke illegitimate corporate power, erode the power of money over elections, and establish an affirmative constitutional right to vote.ISSUES