Corporations and associations between individuals

This is the second in a series of posts on corporations adapted from CCP Founder Brad Smith’s comments on an article that appeared in The Frum Forum on Tuesday, October 27th. Some of the information provided by Brad in the comments section was so informative, we made the decision to appropriate the text and repurpose it as a series of blog posts. 

As mentioned in the previous post in this series on corporate rights, corporate personhood does not mean corporations are literally considered persons. It simply means that corporations exercise all the rights that we can exercise in association with others. Thus, a corporation cannot vote – voting is an individual act, that you do singularly, not with another. It cannot hold office, just as Joe can’t act as Senator on weekdays and Jill as Senator on weekends, holidays, and for one month during the summer. Corporations cannot invoke the Fifth Amendment against self-incrimination, just as if you and I conspired to commit a crime together, I could not waive your Fifth Amendment right, or prohibit you from exercising it. But corporations can, as noted, contract, own property, commit torts, and yes, speak as a group.

However, opponents of “corporate personhood” argue that corporations give up their rights by incorporating and “accepting” limited liability.

No.

First, the benefits one gains by incorporating are irrelevant. Generally, people point to two benefits: unlimited life, and limited liability. Neither affects the ability of its members to speak, or counts as some grand gift from the state.

Limited liability does not limit the liability of the group – it limits the liability of the individuals to that which they have contributed to the group. A corporation can always be sued for all its assets. But how many people would buy shares of Microsoft or the Limited if doing so meant all their worldly possessions were at risk of loss if the corporation – the group – sold a defective product?

People found a simple way around this. When you deal with a corporation, you know it has limited liability – that you can’t go after the homes and cars and unrelated retirement accounts of the shareholders. For that, you get goods at much lower cost. From the standpoint of corporate speech, limited liability makes no difference – there is no point in investing money in a corporation simply so it can spend it all on political speech. Nothing is gained in doing so.

Similarly, the unlimited lifespan of corporations is irrelevant to it right to speak. At any moment, it is speaking for the current members. We don’t restrict the rights of people to speak simply because they may decide to pass assets on to their children in the future, or give them to charity, perhaps in a trust that will far outlast them. If anything, the unlimited lifespan of a corporation gives it an incentive to take a long-term perspective, which is lacking from politics.