Wednesday, September 09, 2009

Do Corporations have the right of free speech?

Of course they don't.

As a matter of fact, they don't have any rights. It is their owners who have rights, so, I guess that as a proxy for the rights of the owners of corporations, many legal systems in the world confer to corporations privileges that are very similar to rights, and define the figure of a "legal person".

In the United States, it happened an amazing process that I have seen called as "Corporate Personhood", through which associations of people and money to make profits (corporations) progressively acquired rights given landmark Supreme Court decisions, especially after the Civil War and the reconstruction amendments that tried to extend the constitutional protections to the recently freed slaves.

The fact remains, naturally, that a corporation is not a free citizen, so, treating it as a citizen will cause problems.

Today the Supreme Court will decide whether the free speech constitutional guarantees apply to Corporations and other associations. I am particularly concerned about the possibility of the court finding that free speech protections apply to corporations even in the case of speech intended to influence elections and public policy.

It is not difficult to imagine that corporations, although inanimate entities, may have "opinions" and "political opinions". Remember what corporations are: associations bound by law to make as much profit as they can; therefore, they have interests to promote. The corporations also have the means to promote their interest; sometimes, they can even make their case appealing to the public; sometimes they can not, because their case is detrimental of the public, but they can just keep quiet about that. For example, a high-technology corporation may need highly-skilled labor from other countries, and has the means to promote all the benefits of such immigration while never even mentioning the negatives, that is, corporations may present their cases to the public to decide, that is, they may have opinions.

There are a gazillion things wrong with allowing corporations to promote political positions.

It is very bad already that money matters a great deal in modern politics of the United States. I should remind people that this country already tried the idea that wealth was an indicative of the capacity to self govern and decide public policy issues, many states had qualifications to vote that included ownership of properties or poll taxes that effectively excluded poor or non wealthy people from voting. But it was proven an evil so bad, that the 24th amendment to the United States Constitution was submitted to the States and ratified in 1964, and still, the problem persisted at the State level until the Supreme Court decided that poll taxes where in violation of the equal protection clause of the Fourteenth Amendment (that is, the whole 24th amendment was always a moot point, because all poll taxes, for Federal or State elections, at least according to the 6-3 vote of the U.S. Supreme Court in "Harper v. Virginia Board of Elections" were unconstitutional). As can be seen, the system has moved backward, wealth provides more and more influence at public elections; only that now it is not legally sanctioned but it happens in practice.

But, if corporations are granted freedom of political speech to influence elections, I am concerned not just about the evils of eroding the principle of "one person, one vote", with "one person, his dollar votes", but that the dollar votes themselves do not represent all the dollars evenly. I mean, someone who has made some fortune is arguably someone competent, and it is not very crazy to think that there really isn't a problem to grant more influence to those who have more dollars. But, as I will show, the dollar votes do not count equally every dollar. So, there is the risk that a few individuals may use their above average wealth to become even wealthier and thus even more politically influential. By the way, I haven't seen the following argument being mentioned, so, there is a chance that it is original of mine.

It is a consequence of the fact that every corporation over represents the interests of its controlling majority. Meaning that if I control 50+% of a corporation, and an adversary controls less, I can bias the activities of the corporation to consistently privilege my interests over the non-controlling owners. Since corporations are allowed by law to own other corporations, then, I can control, let's say, 51% of a small company "A" that itself owns 51% of a larger one, "B", which itself owns 51% of an even larger one "C", and then a "D". Ad infinitum. So, while I just own 6.25% of "D", I effectively control it, I have magnified the influence of my money by 16. With enough consolidation, I can exert massive influence on an economy. By the way, this scenario is not implausible. There have been periods of great "consolidation" among the corporations, and there have been people like J. P. Morgan who had an enormous economic influence, not just in the United States, but in the whole world, while never having a really big fortune (I just read in Wikipedia that his worth at the time of his death was equivalent in modern figures to $1.4 billion, which is rather puny compared to his worldwide influence). So, the process through which consolidation multiplies the power of some people is a very real phenomenon. Thus, I am worried about people not just leveraging their economic power, but also their political influence in the same measure.

Any Libertarian must be very concerned about the possibility of giving such mechanisms to the few owners of controlling interests of the mega corporations.

But these two are not all the evils from this very bad idea of granting freedom to influence elections to corporations. Others have explained them, so, I will just mention some in here:

What about the political freedom of employees? If a corporation exercises its "right" to influence elections, then, some employees must carry out that activity; but what if the political opinions of the employee are the opposite of what his work duties must further?

Corporations are bound by law to maximize profits, but the profits of corporations are not the only goal of a society, there may be others, such as protecting life (as in environmental protection, healthcare, etc). So, if a corporation may further its profiteering interests, by law it must do so. Let's say a municipal transportation company. Let's imagine that the municipality is discussing a transportation subsidy, and some voters want to go to a demonstration against. So, is the company authorized to deny service to the protesters, because it is bound by law to maximize profits and thus to minimize the threats of the subsidy not being passed?

From time to time the Supreme Court concludes awful mistakes and sets dreadful precedents that take decades to correct, there is reason for concern


howling2929 said...

"Corporations are bound by law to maximize profits"

This statement is incorrect. A corporation's primary goal is to carry on the wishes of it's owners. But when a corporation has hunders, or thousands, or even hundeds of thousands of different owners, the easiest way to coordinate such a diverse set of interes is to maximize profit's and then let each owner use those profits to purse their wishes...

But no corporation is "bound by law to maximize profits"


Eddie said...

No incorrect statement. Corporations are indeed bound by law to maximize profits. If managers willfully miss an opportunity to make a profit, they are liable, even if they are following instructions of the owners.

Sometimes it may not be easy to demonstrate that some activity does not maximize profits

howling2929 said...

Quote the relevant articles of the relevant laws or codes.

When you see the relevant articles (and most of those are for "publicly traded corporations", as opposed to privately held firms), you will see that managers are always bound to act on behalf of the shareholders following their interests and guidelines, and never against their directions, but, at most, are bound to maximize shareholder value, or welfare, but never "Profit". At least, not in the US.

See Craiglist, for example:

There, at Craigslist, no one is maximizing profit, but are acting, again, following the desires and interests of the shareholders.

As a matter of fact, if this were true, nonprofits could not exist.

Nonetheless, in practice, most, if not all, corporations maximize their profits, for the reason I outlined, because is the easiest way to align the interests of tens of thousands of owners.

Of course, this detour does not detract from the main points of your article, which I agree with 100% (and so does the Govt of our home country, at least from the mouth out, by the way ;-))...

"Las Corporaciones son el mounstruo del futuro" (Locomotion)

Anonymous said...

Normally, it is the incumbent who gets easy time on TV. Corporate donations can jump start a non-incumbent (not everyone can do an Obama). As example is Eugene McCarthy, an antiwar candidate who forced LBJ to drop out of seeking reelection.

On the cons side, a few number of major shareholders can outvote a large number of smaller shareholders in a corporation by supporting their candidate, which is not democracy.

Recently the govt. also chose to ban books pro or anti candidate just before an election, if those books are financed by a corporation. This includes Michael Moore's rants and Kerry's autobio as per an Economist article.

But why can newspapers support or attack a candidate, but corporates can't?

I think it finally all balances out. For every Fox there are pro Dem newsgroups. Similarly, in corporations, just as Paulson was Republican, his successor at Goldman is a Dem. Jamie Dimon is a Dem. The Morgan Stanley CEO is a Rep turned Dem in 2006. Oil and Insuracne industry is Rep, unions are Dems, so is Hollywood, and so on.

Jack Bauer

Eddie said...

A friend commented:

I agree with howling2929 on the law thing. Almost all corporations maximize profits because that's the generally accepted behavior when one writes a corporate charter. But it doesn't have to be that way. For instance, you could organize a non-profit corporation, whose goal is societal service at roughly a break even point.

Your main point, nevertheless, is true. Corporate "persons" don't have all the responsibilities of human persons. They can't be drafted. They do not have to serve on a jury. Similarly, a corporation cannot go to jail or be pistol-whipped. Because of the limited responsibilities, corporate persons should have limited rights. I also believe that they have too many right now. I hate Santa Clara County vs Southern Pacific Railroad (1886) for the casual way the door was opened. This might be the worst Supreme Court decision ever, though Dred Scott (1857) and Roe (1973) are pretty bad too.

Money matters everywhere. It's unavoidable, unless we enter a world like that described at the end of Acts 4. Since that's even more unlikely than the removal of corporate personhood, we just make do.