Photo by Johannes Plenio on Unsplash
Corporations don't bleed. People do. Corporations don't think, have opinions or vote republican or democrat - people do. If people kill other people, they go to jail. If Corporations kill other people, wipe out their savings, or destroy millions of jobs - they get fined.
Why do they get to do things that normal people can't?
Should Corporations Be Considered a Living Person?
Corporations are not mentioned anywhere in the U.S. Constitution and yet businesses, large and small were abundant before, during and after the Constitution was deliberated and formally accepted by all the states. If their importance in the basic fabric of American society, or society in general, was equally self-evident, why were they omitted?
Corporations took hold in the US in the late 18th century. Soon thereafter, they began their journey to be recognized as a person with the same rights accorded to the living sort, by the Constitution and subsequent amendments. One of their first efforts was made through this lawsuit, Bank of the United States v. Deveaux, 1809. https://www.loc.gov/item/usrep009061/
Article 3, Section 2, Clause 1 in the above-named case, points out two objectives.
1. That a corporation, composed of citizens of one state, may sue a citizen of another state, in the federal courts.
2. That a right to sue in those courts is conferred on this bank by the law which incorporates it.
So, Why the Rush to be Considered a Person?
With no empirical evidence to being a living breathing person, why would a business entity, wish to be treated as one? What advantages are accrued to the corporation by being named a person in a court of law?
And if it happened, would a Corporation be an actual person or just a pretend one?
A corporation is defined by Webster and all his cohorts as: a company or group of people authorized to act as a single entity (legally a person) and recognized as such in law.
A corporation therefore can act as a person does. It can live in a specific location – a legal address or PO Box. Have a specific and legally recognized name: Acme Rubber Bands. Possess a look and identity: Brand, logo, letterhead – like Coke®. Communicate and engage like normal folk, using colloquial expressions and current jargon. Just Do It. Where’s the Beef? We Try Harder.
In other words, it is assuming the mantle of an actual person and with it, the legal right to behave as you or I do and be held to the same standards of ethics, integrity and responsibility.
Or perhaps not.
The main reason for forming a corporation is to limit the liability of the owners. In a sole proprietorship or partnership, the owners are personally liable for the debts and liabilities of the business, and in many instances, creditors can go after their personal assets to collect business debts. If a corporation is formed and operated properly, the owners can be protected from all such liability. LegalZoom
So, we are not all created equal in the eyes of the law, are we?
The Road to Becoming Human
In 1886 a specific case was heard before the Supreme Court, that would set the wheels in motion for corporations to be considered as real people. The case: Santa Clara County v. Southern Pacific Rail Road, actually didn’t touch upon the 14th Amendment per se (Rights of Citizenship) and generally had little to say about corporations one way or another, in the outcome.
It became very relevant, however, for all those seeking to change the status of corporations, when a headnote, written in by a court reporter, (quoting Chief Justice Morrison Waite, communicated quite clearly how the court was leaning in regards to those rights. It read as follows: “The Court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution which forbids a state to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of the opinion that it does.”
There have been many stops along the road to becoming human; and unlike the myth of Frankenstein, it did not all happen one dark and stormy night.
With one significant exception. It had acquired the distinctly inhuman ability to twist, turn and disarticulate the corporate body in ways a normal human never could, all in an effort to not be held responsible or accountable for its actions.
Corporate Hide and Seek – See, they are a lot like Humans
When we peer into the past, both recent and distant, we see example after example of corporations performing for the sole interest of the shareholders and their own bottom line and forgoing any real or imaged interest in the well-being of their own customers.
A quick journey in the Wayback Machine will bring into view numerous excursions to the dark side of human nature.
Between January 2007 and September 2009, during the Great Financial Crisis, the International Monetary Fund estimated that U.S. and European banks lost $1 trillion dollars due to toxic assets and bad loans.
And according to an LA Times articles written during the period, somewhere in the neighborhood of 10,000,000 people lost their homes through foreclosure.
Pushing the throttle down a little further we end up in the year 2001 for a bird’s eyes view of Enron, a giant energy trading and utilities corporation, based in Houston, Texas, filing for bankruptcy claiming losses of $74 Billion.
According to Investopedia: “Enron orchestrated a scheme to use off-balance-sheet special purpose vehicles (SPVs), also known as special purposes entities (SPEs), to hide its mountains of debt and toxic assets from investors and creditors.”
And with a little momentum, we’ll end our journey somewhere over the late 1980s, where we can witness the unraveling of the Savings and Loan Industry; where earlier deregulation of the industry, deceptive practices and outright fraud, brought about losses of $150 Billion. Which were mostly covered by the Federal Deposit Insurance Corporation, meaning the American taxpayers.
While fines in the billions were levied, the corporations, in the forms of banks, investment companies, hedge funds, et al, did not actually suffer the ignominy of going to prison. How would an entity like Lehman Brothers or Enron actually fit into a cell?
But those that drove these “persons” to the brink of self-destruction, largely in pursuit of higher and higher profits, were seldom held accountable. One person, from Credit Suisse, was the token executive during the GFC, out of thousands that could have been seen as criminally negligent, that was made to see the inside of a cell.
And the Mind that Runs the Corporate Body, is where, exactly?
In the real world, the one that appears to be unraveling at times all around us, there are those who suffer from the hardships compounding all around them and have acute and/or chronic reactions to them.
They are without work, without support, without a sense of hope that the future can somehow be bent in their favor. As a result, they become bad, not in heart, but in mind and do bad things. They are then caught and prosecuted and at times, sent to prison. The Law and Society say, they must be held accountable.
But in the corporate world, where businesses loom large and giant like. Where billions and at times trillions of dollars or pounds or euros are dealt back and forth in endless arcane trades and transactions, these “people” have somehow been accorded separate rules.
In the Land of Corporations, even Math and Logic end up in bloody fights. Logic swearing that performance over time and consistency matter is determining someone’s value. One good deed does not make a saint. But a lifetime’s worth of effort and decency account for something.
Math, on the other hand, says nay. Value is fluid. Value is abstract. Like Pi, or the predictions of a Black Hole. The Marketplace, a place where math and science, voodoo and alchemy live side by side, alone can determine what is and is not of value.
And while Logic and Math, swap punches and insults, the world tilts slightly, changing climates in primordial forests, ice shelves and on Wall Street.
What Happens when Corporate Potential and Logic Collide?
General Motors was founded in 1908 and has operations on several continents throughout the world. In 2019 it sold over 7.7 million cars and trucks, generating an estimate revenue of $137 Billion. Its current share value is - $33.23. Its market capitalization is - $75.98 Billion. (https://finance.yahoo.com/quote/GM/)
Tesla, Inc. in contrast, was founded in 2003 – almost 100 years after General Motors. In 2019, Tesla sold 367,500 cars (about 5% of what GM sold) for a revenue of $24.6 Billion. Its share price topped $2000 recently, before splitting in August 2020 and is now valued around $790. Its market capitalization stands at $800 Billion (https://finance.yahoo.com/quote/GM/)
General Motors has survived the Great Depression, the Great Recession, two world wars, the opening of a global economy and today has a value, 1/10 that of Tesla, who was born when GM was 95 years-old.
What is Value?
Is it something that is based on an exact formula, that can be used and reused to update and correct any visible errors or inconsistencies? Is it mathematical in nature, something that accountants can roll up their sleeves and dive into, uncovering valuable nuggets that represent product or infrastructure or the timeless importance of goodwill and longevity? What is it that makes a 17-year-old corporation so valuable when compared to older and admittedly, less trendy corporations like GM or Toyota?
But what about results? You know, profits?
2019 – General Motors - $6.58 Billion
2019 – Tesla, Inc – ($862 million) – those brackets mean a loss. The loss for 2018 was over $1 Billion. (https://www.theverge.com/2020/1/29/21113987/tesla)
GM’s stock price trended slightly up during 2020. And in contrast, while suffering a combined loss of almost $2 Billion in 2018-2019, Tesla’s stock price SOARED to over $2000.
So – Logic or Math?
Rules of Engagement
There is one and only one responsibility of business: to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game. Milton Friedman - Economist
Real World v. Corporate World
"The definition of insanity is doing the same thing over and over again, but expecting different results." Albert Einstein.
In the real world, someone who does this, is advised to seek help and often gets put into therapy or on medication. In the corporate world they are often validated with bonuses and rising stock prices that defy logic.
Facebook doesn’t produce cars or planes or toasters or anything of a material nature and has little infrastructure to add value to it and yet, while younger than Tesla, has a market value approaching $1 Trillion.
Others exalt at the marvels of Wall Street and the endless ingenuity and innovation of the marketplace. And while the market remains Bullish during a Pandemic, with high unemployment and 70% to 80% of Americans living paycheck to paycheck, we must ask – Who is determining this value and is it actually based on real world data?
Can a corporation (Tesla) who has never shown an annual profit in 17 years, actually be valued at $411 Billion? Does that actually make sense?
Hopeful Takeaways
a. Corporations are businesses being treated as a person. Shouldn’t they be held accountable as are all other people and made to behave as if their actions actually do have an impact on the rest of society, and therefore are accorded no special privilege as a result?
b. Value is not as abstract and fluid as it is made out to be. No one on Main Street gets away with charging $99 for a burger – because the value simply isn’t there and no one would buy it. But on Wall Street abstract is a wonderful place for corporations to live, because in an abstract world – one where reality is altered to fit a need – value is what “we say it is.”
c. If corporations are to continue to be shielded and not treated as real people, while legally being given the rights and freedoms of real ones, then value, will cease to have any real meaning or worth. Value will become equally fluid and mean a lot in March and little to nothing in September. Its importance in determining right and wrong in a society will crumble and new terms, like profit, greed and alternative facts, will rush to fill the breach made by reality being chased away.
d. Corporations, thanks to decisions like Citizens United v. FEC, have been turned into superhumans, capable of altering the course of governments and societies in general. If decisions like these, elevate corporations to a supreme level, what will happen to the average person, who is handicapped by the limitations of one life, one income and one vote?
And with That Said ….
There is beauty in business. There truly is innovation and invention and limitless potential that exists within its ranks. But these things MUST be tempered with compassion and honesty.
People are afflicted with greed and distrust and become something different and unrecognizable through their actions. Why would we consider that corporations, acting as people, would be immune to this? They aren’t, examples to the contrary abound.
Corporations, despite great efforts to prevent this, do become the Frankenstein monsters that Mary Shelley wrote of 200 years ago. Cobbled together, in equal parts of purpose, greed, power, desire and hope, they are subject to the same distractions and influences as we all are and therefore must be subject to the same remedies.
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