The Religious Beliefs of Corporate Persons

I still think the Catholics should go with this
more-inspiring sigil for the modern age.

Back in 2012, well before it occurred to me that a corporation could be said to have religious beliefs, I commented on the idea of "corporate personhood."  I focused on this idea at length in that post, but recent events have made it worth looking at again.

Indiana RFRA and Corporations

In the 2010 Citizens United decision, the Supreme Court decided that these corporate entities had the ability for unlimited, unregulated political speech, which can also be made behind a mask of secrecy about the funding sources. And in the 2014 Hobby Lobby decision, it was made clear that, at least for "closely-held corporations," they also had religious liberties.

This was recently codified into law in my home state of Indiana, as part of the controversial Indiana state-level version of the Religious Freedom Restoration Act, which resulted in widespread concerns about discrimination of LGBT members. I happen to agree that the original wording of the law would have given some additional support for this sort of discrimination (which is already legal in Indiana, actually, due to no anti-discrimination protections for LGBT groups).

In comparing the Indiana and federal RFRA statutes, one difference that stands out is Section 7.3. In this section it seems that the Indiana law specifically sets very broad definitions of what sorts of organizations/institutions may make claims of having religious freedoms burdened, broader than the "closely-held corporation" rule from the Hobby Lobby decision:

(3) A partnership, a limited liability company, a corporation, a company, a firm, a society, a joint-stock company, an unincorporated association, or another entity that:

(A) may sue and be sued; and 

(B) exercises practices that are compelled or limited by a system of religious belief held by: 

(i) an individual; or 

(ii) the individuals; 

who have control and substantial ownership of the entity, regardless of whether the entity is organized and operated for profit or nonprofit purposes.

The question this leaves open is whether courts interpret the above wording as applying only to closely-held corporations, as the Supreme Court ruled for the federal RFRA under the Hobby Lobby case. Nothing in the wording above indicates to me any such limitation as being an inherent part of the law, so I think corporations can at least argue that the limitation doesn't apply. If a publicly-traded entity is owned 51% by people who want to invoke a claim under RFRA, it would seem like it should be allowed under this wording. A non-closely-held corporation that wants to exercise these sorts of religious interests is free to, at least, make the argument that they should be able to under the Indiana RFRA, in a way that they couldn't under the federal RFRA.

This is followed up by the other major difference between this legislation and others, which is Section 9:

Sec. 9. A person whose exercise of religion has been substantially burdened, or is likely to be substantially burdened, by a violation of this chapter may assert the violation or impending violation as a claim or defense regardless of whether the state or any other governmental entity is a party to the proceeding. If the relevant governmental entity is not a party to the proceeding, the governmental entity has an unconditional right to intervene in order to respond to the person’s invocation of this chapter.

It seems that when applying the federal RFRA, there has been dissent within the courts about whether protected religious liberty can be claimed in a private dispute between individuals or not. The clear and unquestioned intended goal of RFRA was to provide defense of religious activity from government regulation, from what I can tell. Its use of the phrase "and obtain appropriate relief against a government" can be interpreted as restricting its claims to those of the government, or of including the government among those relief can be sought from. Different circuits have ruled different ways in this.

The wording of the Indiana law under Section 9 makes it explicitly clear that protections of religious liberty can be invoked in disputes between private individuals ... which, in conjunction with Section 7.3, would seem to mean that corporations can invoke religious liberty defenses in completely private disputes.

Against Corporate Personhood

This attribution is false, but I like the quote
and don't feel like changing the graphic.

Here's how I, as a small business owner of a sole proprietorship that operates without corporate protections and have looked into whether I need those protections, view the way a corporation functions:

A corporation is an entity that is used to perform an act on behalf of an individual or individuals, in a way that isolates the individual from harm. Should an individual attempt to use a corporation to perform an act, retribution strikes the corporation rather than the individual. The corporation may be terminated only by bankruptcy or willful dissolution, but is otherwise immortal. Even if terminated in this way, it may pass its essential essence along to another entity which, in most particulars, may function as essentially identical to the original entity in service of the owner. The person behind the corporation is unharmed, except by the inconvenience of having to create a new entity.

Gamers and fantasy readers will recognize this:

It is a construct of some kind, possibly a necromancer's undead minion, a golem, a wizard's homoculous, or some other kind of summoned/crafted proxy creature. In Shadowrun, it would be Rigger's robotic drone (or a corporation, since they have those in Shadowrun too).

So, essentially, we now have immortal non-human entities with the ability to amass wealth for unlimited political speech and able to invoke religious beliefs in disputes with other people and corporations.

I do not think this is a good outcome.

Because, simply put, corporations are not people.

The corporation does not, as a corporation, possess the ability to have a religious belief or conviction, it can only express the religious beliefs and convictions of the owners. Any claim to religious liberty, and the ability to exercise religious liberty, is only as a second-hand consequence of the rights held by the individual who runs the corporation. Those rights are protected for the individual, and may be protected as expressed through a corporation, but the corporate entity itself does not possess those rights.

There may be many perfectly valid reasons for supporting the broad freedom of corporations to serve as the means of expressing personal liberties held by their owners, but corporate personhood is not among them.

You'll hear all kind of people quoting nonsense about how corporations are people, but this diminishes the richness and complexity of what it means to be a person. It is offensive in every way, and as a rhetorical tool needs to end.

Corporations: People, Entities, or a Hybrid of Both?

Many liberals have made a lot out of the Citizens United decision by the Supreme Court, which they describe as saying "corporations are people." However, the Supreme Court ruling doesn't actually use this terminology, even if the spirit of the ruling does imply that .

Still, one of the major elements of the campaign is the degree to which corporations deserve special considerations and what types of considerations those are. While both political sides of the debate tackle this argument with a lot of preconceptions, I think it's possible to really look at the facts behind how corporations are formed to understand the degree to which a corporation, in general, can be viewed as equivalent to an individual.

Mitt Romney's Evolving View of Corporate Personhood

Mitt Romney did use these words on the campaign trail during the Republican primary, when he replied to a critic at an event, "Corporations are people, my friend." He has been very vocal about his strong beliefs regarding the importance of corporate rights. I'm in the process of reading Romney's jobs plan, Believe in America: Mitt Romney's Plan for Jobs and Economic Growth (available on the Kindle). In it, he (or his team, at least) says the following:

The truth is, as Mitt Romney likes to say, "corporations are people." They represent human beings acting cooperatively to be economically productive.

In the e-book, Scott McNealy, the founder and former CEO of Sun Microsystems, writes a piece about tax policy that delves even more deeply into the "corporations are people" narrative.

To the vast majority of Americans who have held real jobs in the real economy, often in corporations, the point made perfect sense. Indeed, it seemed a statement of the obvious. A corporation, after all, is nothing more than people who have joined together to work cooperatively. The word "corporation" itself means "body of people." And in fact, corporations consist of two groups of "people": employees and shareholders. The former work hard to make a profit and earn their salaries and benefits. The latter, now widely dispersed across the economy by means of mutual funds and retirement-plan investment portfolios, provide the capital and can reap the financial benefits while also assuming the financial risk.

However, today I was listening to the radio and heard an intriguing segment about the latest campaign kerfluffle. I've been busy with work (at a corporation) and haven't kept up with the news, so didn't know much about the outsourcing that Obama has been accusing Romney of. Apparently, Bain Capital is accused of outsourcing some jobs, and this seems to be during a nebulous time between 1999 (when Romney stepped aside at Bain to run the Salt Lake City Olympics) and 2002, when he was still listed as CEO, President, and sole owner of Bain Capital, but wasn't actively involved in the day-to-day operations. Apparently, in response, Romney said:

"Well, I was the owner of an entity that is filing that information, but I had no role whatsoever in the management of Bain Capital after February of 1999," he told CNN. "Not that that would have been a problem to have said that I was with the firm beyond that, but I simply wasn't."

Since I had just been reading the jobs plan, the use of the word "entity" struck me as odd. So which is it? Is a corporation a person or some other type of entity?

The Benefits of Incorporating

To really understand this question, we have to consider the reasons why people incorporate their businesses. For example, in addition to my day job, I am self-employed as a freelance writer. I am not incorporated, however, and file taxes on my business as a sole proprietor of a business, The Philosopher's Stone.

As a  sole proprietor, my business is treated as an extension of me as a person. Though I have an Employer Identification Number (EIN) to file payroll taxes (my wife is my salaried employee), I have not been able to us this EIN to gain business credit cards or financing. When I set up my business checking account, I tried to use my EIN and was told that since I wasn't incorporated, I needed to set it up with my Social Security Number. When I fill out W-9 forms, the documentation says that the IRS prefers sole proprietorships to use my Social Security Number instead of my EIN. Since I am not incorporated, the credit cards I use for business expenses are in my own name, not in the name of my business.

When you begin to investigate home-business tax savings, you do find that there are a number of reasons to incorporate.

1. Credit Benefits:The first reason to incorporate, as hinted at above, is that you can now begin establishing lines of credit and bank accounts using your business' EIN instead of your personal Social Security Number. If your personal credit is poor - perhaps due to a failed business or personal bankruptcy in the past - this can be a crucial benefit to gain the necessary financing for your business venture.
   
   
2. Liability Protection:Related to the access to credit, corporations also create a level of liability protection. If a sole proprietorship goes under, all of the debt is in your name, so your creditors are able to come after your individual assets. You could lose not only your business, but also your house, your savings, garnishments against future wages, and so on. When you incorporate, a very powerful legal wall is built between these two entities. This is how people like Donald Trump can have multiple major corporate bankruptcies while maintaining their personal wealth. Even if the corporation is sued for some sort of illegal business activity and loses, the fact that it's a corporation can sometimes still protect the individual from having their personal assets garnished ... or vice versa.
   
   
3. Tax Benefits: And, of course, there are tax benefits to being a corporation. Even as a sole proprietorship, I'm in the advantageous situation where my business income is taxed after expenses, in contrast to my personal income, which is taxed before expenses. Corporations have all sorts of tax loopholes created (we hope) with the genuine desire to enhance the ability of these corporations to grow their business and become economically prosperous, thus generating overall more wealth (and, ultimately, tax revenue).

The exact nature and degree of the benefits change depending upon the type of incorporation, of course, and I'm sure that there are many other benefits beyond these. Still, one glance at these reasons makes it clear that the point of incorporating is to separate the business activity from the individual.

Are Corporations People?

Taking all of this into consideration really calls into question the "corporations are people" narrative, which Romney has chosen to officially embrace on the campaign trail and in his jobs plan. While it is certainly true to say that a corporation involves "human beings acting cooperatively to be economically productive," this description by itself isn't particularly helpful. For example, the mob, street gangs, and a team of bank robbers are all attempting to "act cooperatively to be economically productive" as well! Certainly corporations are something different.

No, saying that a corporation is " nothing more than people who have joined together to work cooperatively" (as Scott McNealy does) is a gross over-simplification. I think of it more like this:

A corporation is a group of people who have jointed together to work cooperatively for economic advantage and have then asked the government for special dispensation to treat their group activity as distinctly (and legally) different from their personal activity.

The whole point of incorporation is that it provides a powerful division between the business and the personal activities. Saying that "corporations are people" requires completely ignoring the legal meaning of a corporation ... and negating the validity of the legal protections that corporation-hood confers.

This is why as soon as Romney was called into question on the activity of his corporation, he fell back on the true definition of a corporation. A corporation was no longer a noble reflection of the people united for economic productivity, but instead just an "entity" that files paperwork. His name happened to be on the line that said he was CEO, but that doesn't mean anything at all.