“”Corporation, n. An ingenious device for obtaining individual profit without individual responsibility.
|—Ambrose Bierce, The Devil's Dictionary|
“”Corporations are people, my friend.
Corporate personhood refers to the independent existence of a corporation as a separate and distinct legal entity from its owners for purposes of incurring liabilities and holding assets. The word "incorporate" itself means "to create a bodily form"; corporations can be said to be abstract ideas given a physical presence of sorts.
As a separate legal "person," the assets of the corporation are distinct from those of the shareholders. Corporations may open bank accounts, own property, and sue and be sued in their own names. Other types of business organizations, such as partnerships, trusts, and limited liability companies, also enjoy an "entity" status for some purposes.
Most well known is the for-profit corporation. Originally all corporations had to be granted special charters from the government and were only given these for express purposes (such as to build a bridge, dam, or other vital public works). Limited liability was a privilege in these cases. The British East India Company was the first multi-national corporation, arguably, granted corporate status by Queen Elizabeth I, and served as a quasi-governmental body for over 300 years, even ruling India for a century.
U.S. case law
In the US, common law was followed and corporations granted charters for special projects which could be (and were) revoked if malfeasance occurred. Today, such a revocation is extremely rare. As the US grew and expanded, corporations did as well. Since the stockholders were not liable for debts or wrongdoings of the corporation, they were able to accumulate much greater wealth, building up industry (with protection by tariffs and state subsidies, we must add). Next came railroads, built to claim the new territories conquered and connect the vast stretches of land as they were settled.
In 1886, the case of Santa Clara County v. Southern Pacific Railroad, 118 U.S. 394, was decided by the US Supreme Court. Though it dealt with the constitutionality of a tax by Santa Clara County on the Southern Pacific Railroad running in California, the ruling in favor of the Southern Pacific was used to grant corporations the rights of persons guaranteed under the 14th Amendment to the US Constitution. However, the ruling did not even address corporate personhood, only whether the tax was constitutional - which it held it not to be. A headnote was put in the case by the court reporter that stated corporations were held to be people under the ruling. The court reporter was a former railroad lawyer and supporter of the idea. Despite this, it was assumed to be the holding and was used since then to grant corporations unprecedented rights, leading us to where we are today, with corporate dominance over much of life in the US - huge power, but (unusually, if you live in the rest of the West) very little accountability.
In 2010, the United States Supreme Court voted 5-4 to ban the government from limiting political donations from corporations, citing the free speech principle of the First Amendment and overruling two precedents on the issue. The decision was often parodied as "corporations are people," but the legal reasoning was that, because a corporation is made of natural persons who have First Amendment rights, the legal person (the corporation) can derive First Amendment rights. Money being equated with speech has never been brought up in the same setting relating to regulations regarding prostitution, however.
In the Commonwealth system
Throughout the Commonwealth, corporations are generally considered to be "legal persons" by the common law system for the purposes of statutory interpretation (i.e. figuring out what a law means). This means that, if any given piece of legislation says "a person," that is taken to include both "legal persons" (corporations) and "natural persons" (homo sapiens). This means that corporations have many of the same rights and can commit many of the same crimes as natural persons, although there are many cases where a corporation would not be charged with a crime (it is, for example, very difficult for a corporation to commit assault).
- Freemen on the land, who believe people are corporations
- An illustrated guide to American personhood
- How can a corporation be legally considered a person?, The Straight Dope 19-Sept-2003
- Officers and board members of a corporation aren't quite so lucky. They're not liable for the corporation's debts, but unlike stockholders they can be held liable for its wrongdoings.
- Headnotes do not have precedent value, however, but only the case holding itself.
- Justices, 5-4, Reject Corporate Spending Limit, New York Times