Torres-Spelliscy on Corporate Citizenship and the Argument for Separation of Corporation and State

Is a corporation a citizen?

citizen

Should it be a citizen?

Those are two questions at the center of Ciara Torres-Spelliscy’s new book — Corporate Citizen? The Argument for the Separation of Corporation and State (Carolina Academic Press, 2016).

Torres-Spelliscy is an associate professor of law at the Stetson University College of Law.

Are corporations citizens?

“I don’t think so,” Torres-Spelliscy told Russell Mokhiber of Corporate Crime Reporter in an interview last week. “The Supreme Court has expanded the constitutional rights of corporations over time. The Court came to various forks in the road where corporate lawyers asserted that corporations had particular constitutional rights. And at each of those junctures, the Court could have said yes or no. If you go back to the early Supreme Court, they first granted corporations coverage of the contracts clause and they also recognized corporate property rights very early on. Another fork in the road was after the Civil War, there was the question whether the equal protection clause of the 14th amendment would apply to corporations. The Supreme Court decided that yes — corporations are covered as persons by the equal protection clause.”

“The next big fork in the road is the First Amendment. The Roberts court has been very generous in giving corporations political rights — rights most people think should only attach to a human citizen.”

When you say political rights, you mean what?

“The primary political right is the right to spend money on politics. In 1978, in the Bellotti case, corporations won the right to spend on ballot measures or initiative fights. In 2010, they won the right to spend in candidate elections. That was Citizens United, which held that corporations can spend an unlimited amount of money on political acts in American elections — whether dog catcher all the way up to President.”

When I asked — are corporations citizens? You said — I don’t think so. Are you saying, corporations are not citizens? Or they shouldn’t be citizens?

“The language around corporate citizenship is legally fraught in many dimensions. You can think of this from the perspective of corporate law. As a matter of corporate law, a corporation is a citizen from the state they are incorporated. They are domestic in that state of incorporation. They are foreign in every other state. That’s one sense in which you can think of citizenship.”

“I’m conceiving of citizenship as it applies to human beings. That’s why it’s inappropriate for the Supreme Court to give political rights to corporations. Political rights are given to human beings who were born to American citizens or naturalized. It’s strange to give political rights to corporations, in part because they are artificial beings, they can live forever, and they have advantages that are innate in the corporate form that a human being doesn’t have.”

“The Supreme Court is giving First Amendment rights to corporate entities when it is not appropriate.”

“The other one that drives me up the wall is giving corporations religious rights. In Hobby Lobby, two closely held corporations were granted coverage under a federal statute that protects religious liberty. They haven’t quite gotten to the point where they are making a constitutional ruling on the religious freedom of corporations. But that is the natural next step in litigation. They are saying — not only do we want the statutory protection for religious liberty for corporations, we want the full First Amendment protection as well. I would expect cases coming down the pike to make those arguments as well.”

You don’t think corporations should be citizens.

“Correct.”

And increasingly they are being treated as citizens.

“Yes.”

On the law books, they are citizens, but you don’t think they should be?

“There is a line of cases that arise under the comity clause. That clause guarantees that a citizen of one state will be treated the same when they go across state lines. A state is not allowed to treat out of staters any worse than it treats its own citizens. This is also known as the privileges and immunities clause.”

“Corporate lawyers tried to get coverage for corporations under the comity clause. In a set of interesting decisions, which have never been overturned, the Supreme Court came to the conclusion that corporations are not covered by the comity clause. The Supreme Court said that corporations are not citizens for the purpose of the comity clause.”

“If you are looking at corporations as citizens from a corporate law point of view, you think of them as domesticated in the state where they are incorporated.”

“But there are these comity clause cases from the Supreme Court that say explicitly that corporations are not citizens.”

“Whether they are citizens or not depends on who is asking the question and who is answering.”

Do you believe corporations should be stripped of all citizen rights?

“Corporate personhood is a useful legal fiction when it comes to contract and property rights. It’s actually useful that a corporation, say a university, can own land in the corporate name. If they couldn’t own land in the corporate name, it would require all sorts of transfers of deeds and titles to whoever was on the faculty at a particular time. If you lost a faculty member, you would have to redo the deeds.”

“There is a certain efficiency in having corporations own property in the corporate name. That’s how corporate personhood started. It started in medieval Europe with a Pope who was also a lawyer. That part of corporate rights doesn’t bother me at all. What does bother me are the political and religious rights. Those seems inappropriately granted to corporate entities.”

What about due process?

“Of course, I would want as a matter of the rule of law, whether you are a human being or a corporate entity, the government should use due process of law.”

Whether you are a person or a corporation?

“Correct.”

When I asked you whether a corporation should be a citizen, you said no. You are not saying that. You are saying corporations should have some rights of citizenship, but not others.

“Correct.”

The subtitle of your book is — an argument for the separation of corporation and state. What do you mean by that?

“Part of that is to indicate to the casual bypasser, who might see only the outside of the book, that this was not an argument for corporate citizenship. The basic thesis of my book is that corporations are getting more and more constitutional rights at the very same time that they are being excused from certain responsibilities. This is not going unnoticed. There is enormous push back from lawmakers, investors, consumers and fellow entrepreneurs. These entrepreneurs are opting to operate as a benefit corporation.”

“A benefit corporation is a new legal entity. They started in 2010 in Maryland. There are now benefit corporation laws in 31 states. A benefit corporation is one where in the foundational documents, they indicate a public purpose for the corporation in addition to making profits. The advantage of this form is the investors are on notice that the corporation will do something in the public good. It is not purely designed to make a profit. That means that investors can’t sue the board if they use corporate resources in a charitable way that furthers that public purpose. The benefit corporations are a way for corporate law to evolve.”

You say that not only are corporations gaining rights, they are evading responsibilities. For example, they effectively dodge the criminal justice system. But that’s not a function of corporate  citizenship. It’s a function of brute corporate power.

“When I teach corporate law, I note that corporations are getting off the hook in these different scenarios — deferred prosecutions, non prosecutions. When I was teaching constitutional law, I saw them sucking up these rights. It’s the combination of these two that I saw as unjust. If we are going to give them these political rights, it would be appropriate to hold them responsible in other areas.”

“The one that drives me up the wall are the human rights cases. The Supreme Court made a couple of rulings recently that essentially are going to have the effect of excusing multinational corporations from answering to human rights abroad in U.S. courts. The rationale so far has been based on the extraterritoriality of U.S. law and whether Congress has been unclear whether they want U.S. law to apply externally.”

“The net effect is that if you are a multinational corporation and you have a subsidiary in Africa, then it’s almost impossible under these rulings to bring that parent company into U.S. court even if they have a significant U.S. parent doing business in the United States. Those human rights rulings make it nearly impossible for a human rights victim, who may be in the United States because they have been granted asylum here, to go after those corporate actors for those bad deeds abroad.”

[For the complete q/a transcript of the Interview with Ciara Torres-Spelliscy, see 30 Corporate Crime Reporter  40(12), October 17, 2016, print edition only.]

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