Why Is a Corporation Considered an Artificial Person Under the Law?

Treating corporations as people began with a Supreme Court decision

Courts use a legal fiction of treating corporations as artificial persons in order to allow the law to apply to corporations as a whole. This concept actually began with ancient Rome, where a business was considered to be a single, non-human body made up of many people. In the United States, being treated as an artificial person means that corporations have many of the same duties, responsibilities and protections as real people.

History

The legal basis for treating corporations as people began in 1815, with the case of Dartmouth College v. Woodward. In this case, the Supreme Court ruled that corporations had the same rights as people to make contracts, and to have those contracts honored.

The next step was the 14th Amendment to the Constitution, adopted in 1868, which gave every person in the United States equal rights under the law. The government meant to use the 14th Amendment to overturn state laws limiting the rights of freed slaves, but it soon opened the door for corporations to be given the same rights as people.

Theories/Speculation

A case on the issue of just what types of rights corporations have came to court in the 1886 case of Santa Clara County v. Southern Pacific Railroad. In this case, Santa Clara County, in California, was trying to levy a property tax against the Southern Pacific Railroad. The railroad suggested that the 14th Amendment's equal protection clause meant it should be held to the same (lower) tax rates as human taxpayers.

Court Decisions

When the Santa Clara case reached the Supreme Court, Chief Justice Morrison Waite stated that the court would not consider the question of whether the 14th Amendment applied to corporations, supposedly adding the words, "We are all of the opinion that it does."

In its decision, the court avoided the issue by deciding the case on other grounds. But a court reporter, J.C. Bancroft Davis (a former railroad director), supposedly inserted a headnote into the court's decision, containing Justice Waite's comments stating that corporations were persons. The note was not law, but it set a precedent. The Supreme Court upheld this precedent by using it to help decide a later case---Pembina Consolidated Mining and Milling Co. v. Pennsylvania.

Insight

There has been a lot of disagreement over just how much protection corporations should receive under the law and whether the concept that corporations have protection under the 14th Amendment should be overturned. Some Supreme Courts have been chipping away at corporate rights, while others have been enhancing them, but there have been no clear-cut decisions.

Significance

Treating corporations as persons under the 14th Amendment means that, for example, it is not possible to limit campaign contributions by big businesses, because that would be restricting their First Amendment rights to free speech. WIthout these limits, it is very difficult to limit some of the powers of corporations.

References

• Cornell Law
• Green Party