In 2010 the Supreme Court changed the ground rules for electioneering in America when it ruled 5 to 4 in Citizens United v. Federal Elections Commission that corporations have a First Amendment right to spend unlimited amounts of money supporting candidates for public office. David Gans, of the Constitutional Accountability Center, a Washington, D.C.–based think tank, argues that the decision not only upended a century’s worth of campaign finance regulations, but also marked a seismic shift in how the Court interprets the constitutional rights of corporations.
What is the nub of Citizens United ?
A divided court ruled that corporations are associations of citizens entitled to the same First Amendment protections as “We the People.”
Did the founders intend the First Amendment to apply to corporations?
James Madison framed the Bill of Rights to protect the “great rights of mankind,” using words that apply to living, breathing persons, but that make little sense as applied to corporations. Corporations aren’t mentioned in the Constitution.
What was the status of corporations?
In the words of Chief Justice John Marshall in Trustees of Dartmouth College v. Woodward, a landmark 1819 case, corporations were “artificial being[s], invisible, intangible, and existing only in the contemplation of the law.” Corporations could assert rights under such provisions as the Constitution’s contracts clause to limit changes to their corporate charters. But they could also be extensively regulated to ensure they did not abuse the special privileges and protections governments conferred on them that were not shared by individuals.
What kind of special privileges were corporations given?
The classic foundational privilege is limited liability, which makes corporations attractive vehicles for investment. An investor can lose only what they put in. Corporations also received special tax treatment and perpetual life. That means that even if the person who started the corporation dies, the corporation goes on.
How did the notion of corporations as “artificial persons” evolve?
In the antebellum period, the Supreme Court consistently recognized that corporations are “mere creatures of law” and should not be treated as “We the People” by whom and for whom the Constitution was written. The Court established that corporations could be sued in federal courts, just like individual citizens, and invoke the protections of the contracts clause of the Constitution. But it also recognized that governments retained broad authority to regulate corporations, both to protect citizens and to ensure that corporations do not abuse their state-granted special privileges.
When did corporations begin to demand broader rights?
Things changed after the Civil War and the ratification of the 14th Amendment, which required that states respect the fundamental constitutional rights of all Americans. In the lengthy debate over the amendment, there was not a single mention of constitutional protection for corporations. Nonetheless, business interests latched onto the 14th Amendment as a vehicle to push the idea of equal rights for corporations.
How did they do that?
It begins with a famous case called Santa Clara v. Southern Pacific Railroad in 1886. The railroad was protesting state taxation—about the unfairness of treating corporations and individuals differently. The decision ultimately did not produce an opinion on the corporation’s constitutional claim, but the case is famous because the court reporter—who was once president of the board of a railroad—recited in the notes of the opinion Chief Justice Morrison Remick Waite’s oral statements to the effect that the Constitution protects corporations as persons under the 14th Amendment. There was no supporting argument; the court reporter just inserted it into the law in this backhanded way.
What impact did that have?
The Supreme Court of the Lochner era, one of the most reviled periods of Supreme Court history, took the court reporter’s statement and ran with it. In 1897 the Supreme Court ruled in Gulf, Colorado & Santa Fe Railway Co. v. Ellis that a state law regulating railroad corporations violated the equal protection clause. Citing Santa Clara, the Court declared it “well settled” law that “corporations are persons with the provisions of the 14th Amendment” and, because of this, “a state has no more power to deny to corporations the equal protection of the law that it has to individual citizens.” For the next 40 years, the Supreme Court regularly turned to both the due process and equal protection clauses of the 14th Amendment to protect corporations and other businesses from government regulation.
Was there any political opposition to this trend?
There was concerted opposition to the Supreme Court’s corporate activism both during the Progressive Era and the New Deal. In 1905, President Theodore Roosevelt, who pushed for the first federal campaign finance law regulating corporations, said: “Great corporations exist only because they are created and safeguarded by our institutions; and it is therefore our right and duty to see that they work in harmony with these institutions.” Franklin Roosevelt argued that the Supreme Court’s rulings prevented the government from effectively responding to the Great Depression. Beginning in 1937, the Supreme Court recognized the error of its ways, and repudiated the protections for corporations as “relics of a bygone era.” But eventually corporations started to aggressively fight back.
What kind of success did they have?
In 1971, Lewis Powell—a Virginia corporate lawyer who would soon be nominated to the Supreme Court— advised the U.S. Chamber of Commerce that “political power is necessary” and that “the judiciary may be the most important instrument for social, economic and political change.” The strategy came to fruition seven years later in The First National Bank of Boston v. Bellotti, when then Justice Powell authored a 5 to 4 ruling for the Court holding that limits on a corporation’s ability to oppose a ballot initiative violated the First Amendment. This marked the first time rights of corporations were extended to the political process. But the ruling was expressly limited to ballot initiatives.
What about corporate spending on individual campaigns?
In 1990, in Austin v. Michigan Chamber of Commerce, and in 2003, in McConnell v. Federal Election Commission, the Court held that the Constitution does not grant corporations the same rights to spend money to advocate the election or defeat of candidates as citizens have.
What is the effect of Citizens United?
Citizens United wiped all these precedents away, holding that corporations—whether as small as Citizens United or as big as ExxonMobil—are merely “associations of citizens” and have the same First Amendment right as individuals to spend money on elections.
What does the decision mean for the future?
Giving corporations the same rights as individuals to spend money on elections gives them the power to dominate our political system, and undermine our democracy. Corporations cannot vote in elections, run for office or serve as elected officials, but the Court nevertheless ruled in Citizens United that they can overwhelm the political process using money generated by special privileges. If the Court continues down this path, it will likely strike down the federal law—dating back to the turn of the century—barring corporations from contributing money directly to candidates.
Is the Court ruling in Citizens United the final word?
We’ve been down this road before. In the Lochner era, the Supreme Court turned its back on the Constitution’s text and history in decisions that gave corporations equal rights with “We the People.” It is a chapter in the Court’s history that is reviled by liberals and conservatives alike. When the Court changed, the idea that corporations had the same inalienable rights as living persons was disowned. Citizens United deserves a similar fate.
Originally published in the February 2011 issue of American History. To subscribe, click here.