North Texas Objectivist Society (NTOS) Message Board › Are corporations people?

Are corporations people?

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Lathanar
Lathanar
Dallas, TX
Post #: 219
Been thinking a little lately about how corporations are protected as people under the constitution. I've seen quite a few threads on different forums backing up this idea with corporations, but I'm thinking that it, and maybe even the concept of corporation itself, goes against the philosophy. How are the rights of man, to have freedom of speech, right to property, etc, transfered to a concept of corporation? Let me throw up some definitions of corporation, maybe they are off or something, but I don't find fault with them right now:

1) any group of persons united or regarded as united in one body.

2) an association of individuals, created by law or under authority of law, having a continuous existence independent of the existences of its members, and powers and liabilities distinct from those of its members.

basically a corporation is a separate person, it's own entity under law. Any suit, contract, violations, fines etc. are brought against the corporation, not the members to shield them from liability. It's basically a government. If it's wrong for a government to own property for use by it's citizens as public property, why is it right for a corporation to own property for use by it's members? The company car, the company jets, the company centers, etc.

- Travis
Dan
dbclawyer
Allen, TX
Post #: 89
Travis,

Your definition under number 2 is closest to the standard, legal definition. From Black's Law Dictionary, a corporation is defined as "a statutory entity (usually a business) having authority under law to act as a single person distinct from the shareholders who make it up and having rights to issue stock and exist indefinitely."

There are different types of corporations: closely held/publicly traded, for profit/not for profit; there are many other distinctions we can make based on elections under the tax code, method of formation and the like.

A corporation is a legal fiction. It has a legal existence--and only a legal existence. As a legally recognized entity, it can (as you point out above) own and sell property, enter into contracts, bring suits and be sued.

As you know, a person becomes an owner--a shareholder--by purchasing shares. My ownership does NOT mean I can use corporate property for my own ends. Owning 10% of a corporation's shares does not mean I have a 10% ownership interest in the corporation's property.

If I am an officer of the corporation, I must use whatever corporate property I rightfully control for the benefit of the corporation. This obligation is legally referred to as a fiduciary duty. If I use corporate property for my own ends, I have breached my fiduciary duty and am liable to the corporation--not the shareholders--for (potentially) lots and lots of money.

The protection a corporation provides its shareholders is that it limits their loss to the amount they invested in that corporation through the purchase of their shares.

Say I own stock in XYZ corporation and the stock is worth $10,000; the corporation is sued for a breach of contract; at the end of the trial, XYZ is ordered to pay $5,000,000,000. It has assets totaling $3,000,000,000. When all the assets of the corporation are seized and sold, I am personally out my $10,000 investment; I have suffered a loss. (Whether my loss should be measured by the amount I paid for the stock or its current market value is a separate question.)

I am, however, shielded from any additional liability: the plaintiffs cannot rightfully come to my door and demand that I help pay the remaining corporate debt of $2,000,000,000.

If the Plaintiffs come to my house and try to seize property, I do not call corporate security; I call the police.

Edited for punctuation.
Lathanar
Lathanar
Dallas, TX
Post #: 221
I'm understand what a corporation is. What I'm not understanding is how a corporation can become an entity that has property protection rights, etc to be treated the same as a man. Doesn't this go against Objectivism? Shouldn't the same arguments used against public property rightfully be applied to corporate property? What part of the concept of a corporation is it's right to freedom of speech derived from?

BTW when I was refering to the company car, etc, I wasn't specifically referring to people using "corporate property for my own ends", it shouldn't matter what ends they are used for with this. I'm simply referring to the fact that a non-physical entity, non-person, owns property and has property rights.

- Travis
Dan
dbclawyer
Allen, TX
Post #: 90
Under Objectivism, the only rights any organization (corporate or otherwise) has are those of its members. The rights of a organization can never exceed the rights of the individuals that make up, or own, the organization.

To put the point positively, a corporation's rights are derivative of those of its members. It is only because individuals have property rights that a corporation can legitimately be allowed to own property. The only right to free speech a corporation has derives from the rights of its members. This is (in part) the philosophical basis of why corporations are appropriate to create under the law.

Once created, lawyers and judges do not customarily refer to the philosophical basis for the existence of corporations--at least not on a "day-to-day" basis. They are treated for what they are: a legally created entity with certain rights and obligations.
Old Toad
OldToad
Group Organizer
Dallas, TX
Post #: 350
Hi Travis,

I think it is probably an overstatement that "a corporation is treated the same as a man."

In essence, a corporation is merely a contractual agreement regarding how certain actions and property of men will be managed by and for them.

Government recognition of the contractual agreement (i.e., its "Charter") merely aids in dealing with the actions and managing property of the "entity" through its managers (e.g., directors and officers).

Otherwise, it would be much more difficult to deal directly with all the individual men (perhaps even thousands) who might have small to negligible ownership interests in the contractual arrangement. Imagine if all the stockholders of Exxon had to sign every one of its business contracts?

-- Todd


Edited to correct punctuation.
Lathanar
Lathanar
Dallas, TX
Post #: 222
Under Objectivism, the only rights any organization (corporate or otherwise) has are those of its members. The rights of a organization can never exceed the rights of the individuals that make up, or own, the organization.

To put the point positively, a corporation's rights are derivative of those of its members. It is only because individuals have property rights that a corporation can legitimately be allowed to own property. The only right to free speech a corporation has derives from the rights of its members. This is (in part) the philosophical basis of why corporations are appropriate to create under the law.

Once created, lawyers and judges do not customarily refer to the philosophical basis for the existence of corporations--at least not on a "day-to-day" basis. They are treated for what they are: a legally created entity with certain rights and obligations.


Ok, so you would use the same reasoning for what gives a government rights is what applies to corporations. Granting this is true, why is it ok for corporations to own and control property and not governments?

On the other side, a corporation philosophically is not the same as a government. Both of the definitions you and I gave state that the essence of a corporation is the creation of an entity separate of it's members. If it's separate from it's members, how does it derive rights from the members? The arguments that there are no innocent civilians in an immoral government preclude the idea that the government is a separate entity from it's citizens. A government exists only to grant protection of the rights of it's citizens by controlling the use of force and that is why it is able to derive its rights from its citizens. A corporation exists to make money and shelter liability, not protect rights. It is not the same principles involved.

I think it is probably an overstatement that "a corporation is treated the same as a man."

In essence, a corporation is merely a contractual agreement regarding how certain actions and property of men will be managed by and for them.

Government recognition of the contractual agreement (i.e., its "Charter") merely aids in dealing with the actions and managing property of the "entity" through its managers (e.g., directors and officers).

Corporations have been called people since 16th century Britain. Under US law and specifically granted by Chief Justice Waite under the constitution a corporation is a person. About the only thing a corporation can't do is vote, get married and run for office. A corporation isn't merely a collection of people in a business endeavor, it's a separate entity, separate from it's members.

- Travis
Old Toad
OldToad
Group Organizer
Dallas, TX
Post #: 351
Hi Travis,

Let's put some things in perspective.

... A government exists only to grant protection of the rights of it's citizens by controlling the use of force and that is why it is able to derive its rights from its citizens. ...

A government has no "rights." It's proper purpose is to protect individual rights.



... A corporation exists to make money and shelter liability ....

A corporation is a management and organizational tool for the use of its owners.

Lots of corporations do not make money, or even have that at their purpose. Consider a charitable organization, for example. And sheltering liability of the owners is a creation of law based on the theory that the corporation has sufficient assets and/or insurance to cover its potential liabilities, and if it does not meet minimum standards, the corporate structure may not shelter its owners from liability.


... Corporations have been called people since 16th century Britain. Under US law and specifically granted by Chief Justice Waite under the constitution a corporation is a person. ...

A corporation is treated as a person only as a well-recognized "legal fiction." One of the purposes of the fiction is as a device to help us visualize the relations a corporation can engage in, which are essentially all the ownership and contractual relations that an individual person can engage in as an individual person. Another purpose is to recognize the derivative individual rights of the private persons who own the corporation, even though the owners may change from time to time and/or be multitudinous.



... About the only thing a corporation can't do is vote, get married and run for office. ...

A corporation can't think.

Theoretically it could be allowed to vote in elections (and does in the case of electing shares it may own in other corporations), it can get married (at least it can form partnerships), and theoretically it could even be allowed to run for and hold public office.



... A corporation isn't merely a collection of people in a business endeavor, it's a separate entity, separate from it's members.

Imagine "separating" a corporation from people. What would the "separate entity" consist of? Empty offices, piles of paper, and other things lying around. What "rights" would such things laying around have if "separated" from the human owners or members?

It is treated as a "separate entity" for specific delegated actions and capacities, which are based on and derived from the rights of its owners or members operating under a contractual structure that is recognized as such under the law.

-- Todd


ORGANIZER'S NOTE:
I self-edited because my original post was rather abrupt, perhaps even rude to Travis, which contravenes our standards for our message board.
Lathanar
Lathanar
Dallas, TX
Post #: 223
Ya'll aren't addressing my question. I'll bring it up Saturday, maybe in person I can be clearer.

- Travis
Old Toad
OldToad
Group Organizer
Dallas, TX
Post #: 353
Ya'll aren't addressing my question. I'll bring it up Saturday, maybe in person I can be clearer.

- Travis


Sorry Travis. I should have tried to be more cooperative in hearing what you are asking. I had a long day yesterday, and was not as careful as I normally try to be.

-- Todd
Old Toad
OldToad
Group Organizer
Dallas, TX
Post #: 354
... How are the rights of man, to have freedom of speech, right to property, etc, transfered to a concept of corporation? ...
...
It's basically a government. If it's wrong for a government to own property for use by it's citizens as public property, why is it right for a corporation to own property for use by it's members? The company car, the company jets, the company centers, etc.

- Travis


Trying to pay more attention to your particular question, I think in essence the rights are transferred by agreement. A person does not have to participate in any corporation or relate with any corporation, but in a capitalist society would only do so by agreement. The relationship between an owner/member in a corporation should be entirely voluntary. That is one rational basis for distinction from the relationship as between a citizen/resident and the government of a country.

A corporation is only a "government" in a specific and very limited sense: it is a government in the sense of a structure for managing the varied ownership/membership interests in the corporation, all of which are predicated on a voluntary, contractual agreement of the members to use that structure to manage what would otherwise be their personal property.

For example, a corporation has a "governing" agreement with regard to representing the various owners of a corporation if they have conflicting desires for the direction the corporation should take. Should the company buy a boat or a car or a school bus? How to decide when there are numerous owners in the corporation? How to manage 27 owners, each with a differnt percentage ownership in the business? How should their "votes" count? 1/27 each would be "per capita." What if one of them owns 19% and another only owns 1% of the corporation?

For example, the reason a 10% ownership stake in a corporation cannot use the corporation property for his own purposes is because it would likely violate the interests of the other 90% owners. This allows a group to voluntarily associate and regulate the purchase and use of property, such as a car, only for the agreed upon purpose of the corporation.

On the other hand, a coporation may purchase a company car for the personal use of one of its managers as compensation for his work for the company. That would be fine.

And if I own 100% of a corporation, I can use the company car for personal errands because in that case there are no other ownership interests in the business to complain of a potential diversion from the corporate purpose.

-- Todd
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