Corporations Are People

The title of this post is taken from the 1973 film Soylent Green, set in the dystopian, overpopulated world of 2022. The bulk of the world’s population subsists on manufactured food called Soylent Green. Charlton Heston plays a police detective charged with investigating the murder of a wealthy businessman. At the end of the movie, Heston discovers that Soylent Green is made from human remains and, seriously injured, he tries to spread the word that Soylent Green is people.

Corporations are not people in a physical or moral sense, of course. No corporation could be mistaken for a human being. Nevertheless, corporations are considered to be persons in a legal sense. Before I get into explaining this, I should begin by saying just what a corporation actually is.

Many people on the Left seem to think  that a corporation is some sort of alien entity that dropped down from outer space and is intent on using up all the world’s resources. While there are certainly corporations that act like that, that is not what a corporation is. A corporation is simply an entity that has been incorporated through legislation or a registration process established by law. A corporation is one of three ways in which businesses are legally organized in the United States, the others being sole proprietorships and partnerships. A sole proprietorship is owned by one person while a partnership is owned by more than one person. In each case, the owners of the business are entirely responsible for any debts or damages the business accrues and there is no legal distinction between the owners of the business and the business itself. With a corporation there is a legal distinction the  between the owners of the business (the shareholders) and the business itself. A corporation is a separate legal entity from its owners and this is where corporate personhood comes in.

Because a corporation is a legal person, the owners or shareholders can enjoy limited liability for the debts or damages incurred by the corporation. They are separate from the corporation and are not financially responsible for the corporation beyond what they have invested in it. There are actually some very good reasons why corporations are considered persons.

Suppose you own a few shares of Acme Widgets. This makes you a part owner of Acme Widgets, even if the shares you own are only .01% of the total number of shares. Now, suppose someone is injured when one of Acme’s widgets explodes and he decides to sue Acme Widgets for negligence. If the corporation were not a separate legal entity, or a person, you could be held partially responsible for Acme’s negligence and you could be required to appear in court, along with thousands of other shareholders. If the court rules against Acme, you could be required to pay part of the damages. If Acme Widgets goes out of business because their widgets keep exploding, you could find Acme’s creditors at your door, demanding that you pay your share of Acme’s debt. Also, that man who decided to sue Acme Widgets might find it very difficult to sure a thousand separate owners of Acme Widgets. Since the corporation is a legal person, it can be represented in court as a person, and found liable for damages, indicted for crimes, etc. Considering corporations as persons makes it much easier for the courts to deal with them.

This limiting of liability is the most important advantage the corporation has over other ways of organizing business. Because liability is limited, investing in the company is less risky. Were it not for limited liability, only the very wealthy, or reckless, would be able to invest in the stock market, and companies would find it much more difficult to raise capital. There are a number of controversial issues relating to corporate personhood, especially regarding just what rights corporations have compared to actual human beings, and like anything else, the concept can be abused, but the idea of corporate personhood itself is a beneficial one.

 

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One Response to “Corporations Are People”

  1. Soylent Green | David's Commonplace Book Says:

    […] little while back I made a reference to the movie Soylent Green while writing on a very different subject. I’ve been thinking […]

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