Read Online Corporations Are Not People: Why They Have More Rights Than You Do and What You Can Do About It by Jeffrey D. Clements, Bill Moyers - Free Book Online
Authors: Jeffrey D. Clements, Bill Moyers
secures, and rewards investment; it enables risk-taking as well as sustained operations, expansion, and innovation over long periods of time; and it can efficiently spread risk (and reward) over many diverse shareholders. All this and more makes incorporation a very useful tool to encourage and rewardinvestment, innovation, job creation, and economic growth. That’s why my business, Clements Law Office, LLC, is a corporation, why the publisher of this book is a corporation, and why thousands of businesses choose to incorporate their operations.
Because the corporate entity is so useful and so prevalent, we can forget that it is a legal tool created by government to advance government policy. People can start and run businesses without government permission or a government form of organization. People can form advocacy groups, associations, unions, political parties, clubs, religious organizations, and other institutions without incorporating and without the government’s permission or involvement. But people, or even “associations of people,” cannot form or operate a corporation unless the state enacts a law authorizing the formation of a corporation and provides rules for operations in corporate form.
The attributes of a modern corporation include limited liability, perpetual life, and legal identification as a unitary actor so as to encourage simplicity and efficiency in making and enforcing contracts, suing and being sued, and so on. State law defines these attributes. That law offers, but does not require, a useful vehicle for the individuals involved in doing business. No one is required to use the corporate form, with its relative benefits and burdens, but if people decide to do so, the privilege of incorporation is a package deal. They cannot decide to comply with some of the law to get the benefits and defy the parts of the corporate laws they find inconvenient.
Some people mistakenly call corporations “associations of people” or a “product of private contract.” 11 This is incorrect. Corporations are not private matters, and they are not mere “associations of citizens.” 12 Corporations exist only because states enact laws defining exactly what a corporation is, what it can do, andwhat it cannot do. In virtually every state, it is illegal for people to do business as a corporation unless the corporation is incorporated or registered under the laws of that state. 13
Most transnational corporations are incorporated under the law of Delaware. Three hundred of the mega-corporations listed on the Fortune 500 list are incorporated under Delaware law, as are more than half of all publicly traded companies in the United States. 14 The reason for this is a matter of some debate. Some say that giant global conglomerate corporations such as BP, Dow Chemical, and Goldman Sachs incorporate under the law of Delaware, where the corporations do little business, to ensure low corporate standards that benefit the few at the expense of the many. 15 Others say that Delaware offers a rich body of corporate law. In any event, as with the law of every state, none of the features of the Delaware corporation law are “required.” Rather, they are policy choices made by elected legislatures.
Take shareholder limited liability, for example. The concept of limited liability for corporate shareholders means that if you invest in a company, you might lose your investment if things go badly, but you will not be responsible for paying all of the debts of the corporation or for compensating victims of any misconduct or neglect by the corporation. Imagine that you owned some shares in the BP Corporation in April 2010 when the Deepwater Horizon oil well exploded in the Gulf of Mexico. If the corporation cut corners on safety, resulting in the death of eleven people and a catastrophe that ruins a vast ecosystem and fishery that had sustained millions of people for eons, are you as a shareholder to blame? If BP is liable for this
Because the corporate entity is so useful and so prevalent, we can forget that it is a legal tool created by government to advance government policy. People can start and run businesses without government permission or a government form of organization. People can form advocacy groups, associations, unions, political parties, clubs, religious organizations, and other institutions without incorporating and without the government’s permission or involvement. But people, or even “associations of people,” cannot form or operate a corporation unless the state enacts a law authorizing the formation of a corporation and provides rules for operations in corporate form.
The attributes of a modern corporation include limited liability, perpetual life, and legal identification as a unitary actor so as to encourage simplicity and efficiency in making and enforcing contracts, suing and being sued, and so on. State law defines these attributes. That law offers, but does not require, a useful vehicle for the individuals involved in doing business. No one is required to use the corporate form, with its relative benefits and burdens, but if people decide to do so, the privilege of incorporation is a package deal. They cannot decide to comply with some of the law to get the benefits and defy the parts of the corporate laws they find inconvenient.
Some people mistakenly call corporations “associations of people” or a “product of private contract.” 11 This is incorrect. Corporations are not private matters, and they are not mere “associations of citizens.” 12 Corporations exist only because states enact laws defining exactly what a corporation is, what it can do, andwhat it cannot do. In virtually every state, it is illegal for people to do business as a corporation unless the corporation is incorporated or registered under the laws of that state. 13
Most transnational corporations are incorporated under the law of Delaware. Three hundred of the mega-corporations listed on the Fortune 500 list are incorporated under Delaware law, as are more than half of all publicly traded companies in the United States. 14 The reason for this is a matter of some debate. Some say that giant global conglomerate corporations such as BP, Dow Chemical, and Goldman Sachs incorporate under the law of Delaware, where the corporations do little business, to ensure low corporate standards that benefit the few at the expense of the many. 15 Others say that Delaware offers a rich body of corporate law. In any event, as with the law of every state, none of the features of the Delaware corporation law are “required.” Rather, they are policy choices made by elected legislatures.
Take shareholder limited liability, for example. The concept of limited liability for corporate shareholders means that if you invest in a company, you might lose your investment if things go badly, but you will not be responsible for paying all of the debts of the corporation or for compensating victims of any misconduct or neglect by the corporation. Imagine that you owned some shares in the BP Corporation in April 2010 when the Deepwater Horizon oil well exploded in the Gulf of Mexico. If the corporation cut corners on safety, resulting in the death of eleven people and a catastrophe that ruins a vast ecosystem and fishery that had sustained millions of people for eons, are you as a shareholder to blame? If BP is liable for this
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