Our Hidden History
of Corporations in the United States
When American colonists declared independence from England in 1776, they
also freed themselves from control by English corporations that extracted their
wealth and dominated trade. After fighting a revolution to end this
exploitation, our country’s founders retained a healthy fear of corporate power
and wisely limited corporations exclusively to a business role. Corporations
were forbidden from attempting to influence elections, public policy, and other
realms of civic society.
Initially, the privilege of incorporation was granted selectively to enable
activities that benefited the public, such as construction of roads or canals.
Enabling shareholders to profit was seen as a means to that end. The states
also imposed conditions (some of which remain on the books, though unused) like
these*:
- Corporate charters
(licenses to exist) were granted for a limited time and could be revoked
promptly for violating laws.
- Corporations could
engage only in activities necessary to fulfill their chartered purpose.
- Corporations could not
own stock in other corporations nor own any property that was not
essential to fulfilling their chartered purpose.
- Corporations were often
terminated if they exceeded their authority or caused public harm.
- Owners and managers were
responsible for criminal acts committed on the job.
- Corporations could not
make any political or charitable contributions nor spend money to
influence law-making.
For 100 years after the American Revolution, legislators maintained tight
controll of the corporate chartering process. Because of widespread public
opposition, early legislators granted very few corporate charters, and only
after debate. Citizens governed corporations by detailing operating conditions
not just in charters but also in state constitutions and state laws.
Incorporated businesses were prohibited from taking any action that legislators
did not specifically allow.
States also limited corporate charters to a set number of years. Unless a
legislature renewed an expiring charter, the corporation was dissolved and its
assets were divided among shareholders. Citizen authority clauses limited
capitalization, debts, land holdings, and sometimes, even profits. They
required a company’s accounting books to be turned over to a legislature upon
request. The power of large shareholders was limited by scaled voting, so that
large and small investors had equal voting rights. Interlocking directorates
were outlawed. Shareholders had the right to remove directors at will.
In Europe, charters protected directors and stockholders from liability for
debts and harms caused by their corporations. American legislators explicitly
rejected this corporate shield. The penalty for abuse or misuse of the charter
was not a plea bargain and a fine, but dissolution of the corporation.
In 1819 the U.S. Supreme Court tried to strip states of this sovereign right
by overruling a lower court’s decision that allowed New Hampshire to revoke a
charter granted to Dartmouth College by King George III. The Court claimed that
since the charter contained no revocation clause, it could not be withdrawn.
The Supreme Court’s attack on state sovereignty outraged citizens. Laws were
written or re-written and new state constitutional amendments passed to
circumvent the (
Dartmouth
College v Woodward) ruling. Over several decades starting in 1844,
nineteen states amended their constitutions to make corporate charters subject
to alteration or revocation by their legislatures. As late as 1855 it seemed
that the Supreme Court had gotten the people’s message when in
Dodge v. Woolsey
it reaffirmed state’s powers over “artificial bodies.”
But the men running corporations pressed on. Contests over charter were
battles to control labor, resources, community rights, and political
sovereignty. More and more frequently, corporations were abusing their charters
to become conglomerates and trusts. They converted the nation’s resources and
treasures into private fortunes, creating factory systems and company towns.
Political power began flowing to absentee owners, rather than community-rooted
enterprises.
The industrial age forced a nation of farmers to become wage earners, and
they became fearful of unemployment–a new fear that corporations quickly
learned to exploit. Company towns arose. And blacklists of labor organizers and
workers who spoke up for their rights became common. When workers began to
organize, industrialists and bankers hired private armies to keep them in line.
They bought newspapers to paint businessmen as heroes and shape public opinion.
Corporations bought state legislators, then announced legislators were corrupt
and said that they used too much of the public’s resources to scrutinize every
charter application and corporate operation.
Government spending during the Civil War brought these corporations
fantastic wealth. Corporate executives paid “borers” to infest Congress and
state capitals, bribing elected and appointed officials alike. They pried loose
an avalanche of government financial largesse. During this time, legislators
were persuaded to give corporations limited liability, decreased citizen
authority over them, and extended durations of charters.
Attempts were made to keep strong charter laws in place, but with the courts
applying legal doctrines that made protection of corporations and corporate
property the center of constitutional law, citizen sovereignty was undermined.
As corporations grew stronger, government and the courts became easier prey.
They freely reinterpreted the U.S. Constitution and transformed common law
doctrines.
One of the most severe blows to citizen authority arose out of the 1886
Supreme Court case of
Santa Clara County
v. Southern Pacific Railroad. Though the court did not make a ruling
on the question of “
corporate
personhood,” thanks to misleading notes of a clerk, the decision
subsequently was used as precedent to hold that a corporation was a “natural
person.” This story was detailed in “
The Theft
of Human Rights,” a chapter in Thom Hartmann’s recommended book
Unequal
Protection.
From that point on, the 14th Amendment, enacted to protect rights of freed
slaves, was used routinely to grant corporations constitutional “personhood.”
Justices have since struck down hundreds of local, state and federal laws
enacted to protect people from corporate harm based on this illegitimate
premise. Armed with these “rights,” corporations increased control over
resources, jobs, commerce, politicians, even judges and the law.
A United States Congressional committee concluded in 1941, “The principal
instrument of the concentration of economic power and wealth has been the
corporate charter with unlimited power….”
Many U.S.-based corporations are now transnational, but the corrupted
charter remains the legal basis for their existence. At Reclaim Democracy!, we
believe citizens can reassert the convictions of our nation’s founders who
struggled successfully to free us from corporate rule in the past. These
changes must occur at the most fundamental level — the U.S. Constitution.
We are indebted to our friends at the Program on Corporations, Law and Democracy (POCLAD) for
their research, adapted with permission for this article. Sources include:
- Taking Care of
Business: Citizenship and the Charter of Incorporation by Richard L. Grossman
and Frank T. Adams (published by POCLAD) was a primary source
- The Transformation of
American Law, Volume
I & Volume
II by Morton J. Horwitz
Please visit our Corporate Personhood page for a huge library
of articles exploring this topic more deeply. You might also be interested to
read out proposed Constitutional
Amendments to revoke Illegitimate corporate power, erode the power of money
over elections, and establish an affirmative constitutional right to
vote.

Consider
buying a
corporate logo flag
(The American flag with corporate logos in place of stars), to demonstrate your
objection to corporate personhood and raise awareness for our cause.
http://reclaimdemocracy.org/corporate-accountability-history-corporations-us/