Columbia International Affairs Online: Journals

CIAO DATE: 07/2010

Letters and Replies

The Objective Standard †

A publication of:
The Objective Standard

Volume: 5, Issue: 2 (Summer 2010)


Full Text

Letters and Replies
To the Editor:

I am a recent subscriber and I want to let you know how much I enjoy TOS. The journal is entertaining, intellectually stimulating, and highly informative. The knowledge I have gained from your current and back issues regarding universal health care and the financial crisis has greatly enhanced my ability to defend free markets.

Your selection of audio articles, lectures, and debates is of great value as well. I have an hour-long commute to work, and I have already listened to all of your audio selections. Will you be offering more of these?

Damian Tinkey
Marlboro, NY
Craig Biddle replies:

I'm glad you're enjoying the journal and the audio articles, and your interest in the latter is quite timely! As of May 2010, we are offering three new subscription formats: audio, e-book, and premium. Full descriptions and pricing can be found on the subscriptions page of our website. Audio articles are also available à la carte, and beginning with the Spring 2010 issue all new articles are and will be available in audio format. Enjoy!
To the Editor:

I just want to say how thankful I am for your publication. After reading the free articles for a few months, I finally broke down and bought a subscription. The articles have enhanced my understanding of Objectivism and its practical applications, my ability to love life, and my ability to debate in terms of fundamentals. Best fifty bucks I ever spent!

Kristian Kanya
Hermosa Beach, CA
Concerning Citizens United
To the Editor:

In his article "Citizens United and the Battle for Free Speech in America" [TOS, Spring 2010], Steve Simpson mentions in passing that corporations "are artificial persons" and then proceeds to dismiss the factual nature of corporations.

That business corporations are owned by shareholders, and that they exist in the private sector, are treated in popular media as axiomatic, but these "axioms" are the stuff of urban legend. A corporation is a creature of the state. It exists because the state imposes on the rest of us specific restraints in doing business with the people who operate in the corporate name. In particular, the state says (through legislation and precedent) that shareholders cannot be held responsible for the obligations of "their" corporation. The state says further (quite logically) that shareholders have no legal title to the assets of "their" corporation, nor do they have a voice in its management or operation. Shareholders therefore own precisely nothing but their intangible "shares," which convey rights to participate in dividends and vote for directors but little more.

The managers and other employees of the corporation are also immunized from its obligations, because they are held as not acting in their own capacity. They are, legally, hired hands, paid to execute certain responsibilities for the benefit of the corporate entity. It has been quite rightly held that when a corporation restricts what its employees may say while on the job, this restriction in no way violates its employees' rights to free speech.

If Bill Gates writes a personal check to pay for a political ad, he is acting on his own behalf with his own money. But were he to sign a Microsoft check for the same purpose, it would be a completely different act because Mr. Gates cannot legally spend Microsoft's money on his own behalf. He can only spend it in a corporate capacity. (Even if Mr. Gates were the sole owner of Microsoft stock, he would still be legally bound, by law and by precedent, to maintain the separation between corporate and personal assets, on pain of Microsoft ceasing to exist as a legal entity and Mr. Gates being held personally liable for its obligations.)

Mr. Gates has a right to free speech, but Citizens United invented a completely new right for him: the right to use resources he does not own for political speech. And while there might be good business reasons for Mr. Gates to do so, expedience does not a Constitutional right make.

It seems clear that the facts governing the nature of the corporation place it as an entity outside First Amendment protection, and that this in no way abridges anyone's right to free speech. There may very well be practical problems brought on by the ubiquity of corporations in the distribution of books and other media, as Mr. Simpson notes, but these are logically separate. Considerations of expedience may rightly guide the legislative process, but, absent a compelling danger to the public, they have no place in interpreting the meaning of the Constitution.

David M. Smith
Plano, TX
Steve Simpson replies:

Mr. Smith repeats a common fallacy about corporations-that they are mere "creatures of the state" and therefore "artificial persons" to which the First Amendment does not apply. I did not address this argument in detail in my article for the simple reason that Citizens United is vastly more important for what it said about the First Amendment rights of all speakers than for what is said about the First Amendment rights of corporations. On the corporate speech question, Citizens United is consistent with nearly eight decades of cases protecting the First Amendment rights of corporations and with a 1978 decision in which the Court expressly held that the First Amendment applies to corporations.

Critics of Citizens United ignore all of this and treat the First Amendment, not as a moral and legal principle, but as a mere guideline that legislatures and courts apply on an ad hoc basis depending on the concrete circumstances of the moment. On their view, whether the First Amendment protects speech by a particular kind of legal entity depends on technical aspects of the entity's formation, whether it has shareholders and officers, and the metaphors commonly used to describe it.

To its great credit, the majority in Citizens United rejected this approach and analyzed the corporate speech question in terms of essentials. It recognized that the only salient aspect of corporations in this context is that they are voluntary associations of individuals. The First Amendment protects the individual's right to freedom of speech, but that right implies a corollary: the right to join with others and speak as a group. So long as individuals associate voluntarily (because no one has the right to force another to support his speech), the manner in which they organize their association is irrelevant to whether the First Amendment protects their right to associate and speak as a group.

Whatever else one may say about corporations, they are voluntary, private associations. No one forces individuals to become shareholders, managers, or employees of a corporation. No one forces individuals to do business with corporations, whether as suppliers or customers.

This is the only fact about corporations that matters to the question of whether the First Amendment applies to them, and neither Mr. Smith nor any other critic has provided a coherent reason to treat corporations differently from any other voluntary association. Instead, Mr. Smith and other opponents of corporate free speech employ the tired metaphors "artificial person" and "creatures of the state" as though those vague labels end the debate.

Observe that any legally-recognized association-from a partnership, to an unincorporated association, to a marriage-can be described as an "artificial person" or "creature of the state" in the sense that they are created by law. Would Smith say that a partnership or a married couple has no right to fund political speech because they are "creatures of the state"?

The legal principles that apply to corporations are not arbitrary rules invented on the spur of the moment at the whims of courts and legislatures. For the most part, they are objective principles. For example, the much-maligned principle of shareholder limited liability is an application of the general principle that individuals are liable only for actions they control or specifically authorize. Shareholders have no role in the day-to-day operations of a corporation; thus their liability for the corporation's actions is limited to the extent of their investment in the corporation. Similarly, corporate managers are not personally liable for actions taken in the course of their employment because they are acting as the agents of the corporation. (Of course, if the facts are otherwise, if certain shareholders do manage the corporation, or if certain managers do act outside the scope of their authority, they can be held liable in accordance with those facts.)

These characteristics of corporations do not, as Mr. Smith contends, impose "restraints" on the rights of others. Everyone who deals with a corporation knows he is dealing with an abstract legal entity with its own assets and that he is not dealing with individuals in their personal capacity. There is no "right" to sue a mere shareholder for the wrongful actions of a corporation for the same reason that there is no "right" to sue a bank that merely loaned the corporation money. By the nature of their respective relationships with the corporation, neither the shareholder nor the bank is legally liable.

As for Mr. Smith's claim that Citizens United "invented" a new "right" of people such as Bill Gates to spend corporate funds for their personal speech, that is simply false. Citizens United held only that the government may not prevent corporations from spending money on the corporations' own speech. Whether particular corporate actors are entitled to speak for a corporation or spend its money is a matter governed by the corporation's articles of incorporation and state law. Citizens United did not affect those issues at all.

The Supreme Court has made many errors in its First Amendment jurisprudence over the years, but protecting the speech rights of corporations is not one of them.

Steve Simpson
Institute for Justice
Arlington, Virginia