Corporate rights and individual rights

Last week the U.S. Supreme Court, by a 5-4 vote, overturned the McCain Feingold Act’s restrictions on “soft money” campaign contributions. The court’s reasoning was as follows: (1) The United States Constitution guarantees every person the right of freedom of speech and freedom of the press; (2) Corporations are legally persons; (3) Spending money to promote causes you believe in is a form of free speech and free press.

Is there anything wrong with this? A business corporation is simply a structure for the benefit of stockholders. Why shouldn’t they have the same rights acting through a corporation as they would acting individually? The answer is that the stockholders don’t have the same responsibilities as if they acted individually.

If I start a business, I’m liable for everything the business does. If I operate the business illegally, I pay a fine or go to jail. If the business fails, I have to pay off the debts or go bankrupt. But if I buy stock in the business, my profits are potentially unlimited, but my loss is limited to what I put in. If a limited liability corporation fails, creditors can’t ask stockholders personally to pay them off.

The limited liability corporation is a good thing. It stimulates enterprise. People wouldn’t invest in risky businesses, they might not invest at all, if they were liable for everything the business does.  But a corporation is not a person; it is a legal fiction chartered by a state legislature. It is reasonable for courts to treat corporations as people for certain purposes and not as others.

What corporations do is make possible huge concentrations of wealth which would not otherwise be possible. This is a good thing because it enables our economy to function. It also is a dangerous thing because it threatens our democracy.

Take as one example, Exxon Mobil Corp. In 2008, Exxon Mobil organized a political action committee, mainly among its executives and employees, which raised about $1 million for favored candidates (both Republicans and Democrats). The same year Exxon Mobil made $45 billion in profits. Under the recent Supreme Court decision, it could have spent $100 million in the 2008 election and it would have been less than 1/4 of 1 percent of its profits. Exxon Mobil or any other large corporation had been given an enormous increase in power to reward and threaten politicians. This is not good for our democracy.

It is not clear whether, as President Obama said, the decision opens the way to foreign corporations interfering in U.S. elections. The Supreme Court decision (as I understand it) did not repeal restrictions on foreign individuals spending money in U.S. elections. But what about U.S. corporations that are owned by foreigners. Citgo for example is incorporated in the United States, but is a wholly-owned subsidiary of the Venezuelan government oil company. It also isn’t clear to me what President Obama thinks he can do about the decision. Like it or not, a Supreme Court decision is the law of the land.

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