Continued confusion over the “rights” of corporations

Voters in Madison, Wisconsin recently approved a measure asserting that corporations do not have constitutional rights.

The measure correctly asserts that only individuals have rights.  But then it proceeds to state that corporations do not.  This is collectivism at its finest.  A corporation doesn’t act.  People act.  Although the “corporation” doesn’t have rights as an entity, each and every owner of the corporation does.  The owners exercise those rights by having agents (the management) act on their behalf.  When we speak of a corporation acting, this is merely an abstraction from the individuals involved.  As Stephan Kinsella has explained, corporations are nothing more than a series of contracts enabling a large number of people to work together toward common goals.

This resolution, though purporting to support individual rights, is in reality opposed to such rights because it claims that these rights somehow disappear when the individuals who have them choose to use them in a coordinated manner.

This confusion is sadly typical on the left.  For example, it is often said that there is some “right” to hold a protest rally because of “free speech”.  In reality, the organizers have no such right; the rights that let them hold the rally are the individual rights of all the participants to walk down the street, or go to a park, or otherwise use a public place without being harassed.  If thugs break up the protest, the thugs haven’t violated the rights of “protesters”, they have violated the individual rights of each person they harassed by assaulting, battering, and falsely imprisoning them.

The principles involved here are not unique to libertarianism; they are very fundamental legal principles.  Indeed, A.V. Dicey actually discusses this very point at length in his Law of the Constitution.  One of his many outstanding examples will suffice to illustrate the point:

Suppose group X is planning on holding a rally in a public park.  Group Y is opposed to group X and intends to use violence to stop them.  The residents near the park want to avoid a riot and thus all go stand in the park before the members of group X get there, thus blocking the members of group X from holding their rally.  If the protesters had some right, they could defend it with force and attack the residents, but since using force to remove someone from a place where they have right to be is unlawful, it cannot be that the law provides special protection to “protesters”.  Rather, the law protects the individual rights of every single person involved in the protest by making it unlawful to forcibly remove them.

Apparently, 21st century Americans have regressed to the point that even understanding “introductory” concepts about rights presents great difficulty.

 

5 comments… add one

  • I don’t think the problem lies with the people you criticize for not “understanding ‘introductory’ concepts about rights.”
    If there’s “collectivism” involved in the treatment of the corporation as an entity, the fault lies with the state. Under the law, the corporation itself is a legal person separate from any or all of its shareholders. The management is not the agent of the shareholders, but of the legal person created under the corporate charter. All actions taken by management are taken in the name of that legal person, and all property of the corporation is vested in that person as well.
    And in actual practice, shareholders’ control of most large corporations is largely theoretical unless some founding family still controls a majority voting bloc. Proxy fights almost always fail to challenge inside directors. Hostile takeovers quickly waned after a brief flourishing in the ’80s, when management countermeasures made them much more difficult; now most takeovers are friendly acts of collusion between the management of the acquiring and acquired firms. And most new investment is financed from retained earnings rather than bond issues.
    The common shareholder has no contractual rights vis-a-vis management except to a pro rata share of whatever divident (if any) management chooses to issue, to participate in largely pro forma votes at the shareholder meeting, and to sell their share to a willing buyer.

    Reply
    • Kevin,

      If there’s “collectivism” involved in the treatment of the corporation as an entity, the fault lies with the state. Under the law, the corporation itself is a legal person separate from any or all of its shareholders. The management is not the agent of the shareholders, but of the legal person created under the corporate charter. All actions taken by management are taken in the name of that legal person, and all property of the corporation is vested in that person as well.

      Yes, this is the state’s fault; the state says the only way a corporation can exist is if we grant this entity privilege.
      But this is wrong, as Hessen shows; the corporation should not be viewed as an entity but as a contractual network among a number of individuals. The state ought to have nothing to do with it.

      The common shareholder has no contractual rights vis-a-vis management except to a pro rata share of whatever divident (if any) management chooses to issue, to participate in largely pro forma votes at the shareholder meeting, and to sell their share to a willing buyer.

      And to get a pro-rata share of assets upon dissolution or windup.

      But… so what? This could all be arranged contractually.

      Reply
  • As a new anacho-capitalist, (just read Bastiat’s “Law”), I still have trouble understanding how a corporation (a series of contracts) can be said to have any rights. Can anyone suggest some links for me to follow that provide basic arguments for corporate rights?

    Reply
  • If you believe that corporations have rights, then it must follow that you must believe that government is a grantor of rights (as opposed to a guarantor) by virtue of the fact that corporations are entirely creations of statute.

    What the government does is to grant privileges to corporations that are unavailable to individuals, such as limited liability. The notion that the state should have nothing to do with a corporation which is nothing more than a contract among individuals rings sort of hollow when one considers that no such corporation could exist, with “rights” bestowed by the state, in the absence of the state.

    In the absence of the state, any contractual agreement between individuals would only apply to those entering into the contract, not the general public. In the absence of the state, the recognition of a corporation as an entity would be entirely voluntary among those not bound by the contractual agreement. The only “rights” in regards to the corporation would be among the various individuals entering into the contract creating the corporation and would not extend to others unless voluntarily recognized.

    In my opinion, a libertarian minarchist can’t hold to the belief that the sole purpose of government is to guarantee rights and simultaneously believe the government is capable of granting rights or special privileges. Anarchists should view corporations, in the context of a stateless society, as nothing more than a contract among certain individuals which may or may not be recognized as an entity unto itself at the discretion of those not bound by the contract.

    Those who support free markets should view the granting of special privileges to corporations, such as limited liability, as the first building block in a system of state capitalism until such time that limited liability is also granted to individuals engaged in business. The granting of limited liability is a useful tool for the raising of capital for the corporation that is unavailable to an individual entrepreneur and therefore creates an inequality in the market.

    Any law that states corporations do not have rights has no effect on the individual rights of the shareholders of a corporation. I find this to be no more an example of collectivism than any other law that is passed, including the laws that allow for the existence of corporations or laws that grant the corporations special privileges. The corporation itself is collectivist in nature. Legislation is collectivist.

    It seems to me this article is more about unloading feelings against anti-corporate lefties and conflating a pro-capitalist state with libertarianism. I even find the author’s protester analogy rather shallow. I’ve noticed that when protesters sue over assaults that take place at protest gatherings, it is individuals that sue and not some imaginary collective of protesters.

    I do agree with the final sentence of this author’s piece:

    “Apparently, 21st century Americans have regressed to the point that even understanding ‘introductory’ concepts about rights presents great difficulty.”

    I’m just not so sure that this applies to people that believe corporations should not have state granted “rights” or privileges.

    Reply
    • Corporations do not have rights. But people do, including the people that make up the network of relationships that we refer to by the conceptual shorthand “corporation,” and by the state, which insists in calling it a “legal person”.

      Given the state’s current treatment of corporations, and its understanding of “rights” as limits on state power, if you say corporations do not have rights, this is tantamount to saying the feds have power to regulate corporations more. And since corporations are really people, this means it allows the state to harm real people.

      Reply

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