Friday, January 22, 2010

Artificial Persons




Yesterday, the Supreme Court held that the right to free speech allowed unlimited expenditure on political speech by corporations.  In his dissent, Justice Stevens wrote, “Under the majority’s view, I suppose it may be a First Amendment problem that corporations are not permitted to vote, given that voting is, among other things, a form of speech.
 How can the first amendment be applicable to organizations of any kind?
Corporations were first called "artificial persons" in English courts in the 16th century.  Lawyers had tried to argue that their corporations could not be convicted, because the relevant laws began "No person shall...."
(The documents forming these early companies, by the way, were closely copied in the Mayflower Contract, and some of their language found its way into the U.S. constitution, which has influenced constitutions around the world.)
Adam Smith, with his customary foresight, worried about granting corporations these rights.  The problem was that corporations were superhuman—they tended towards immortality, growth in size, and growth in power. He suggested that laws limit the lifespan of any company.
The rights of artificial persons were first defined in law in regards to property. In the late 1700s, Stewart Kyd defined a corporation:
"a collection of many individuals united into one body, under a special denomination, having perpetual succession under an artificial form, and vested, by policy of the law, with the capacity of acting, in several respects, as an individual, particularly of taking and granting property, of contracting obligations, and of suing and being sued, of enjoying privileges and immunities in common, and of exercising a variety of political rights…."
Around the same time, Thomas Jefferson worried about the potential power of corporations. He tried to add an 11th amendment to ban “monopolies in commerce.” He wrote in a letter to James Logan, “I hope we shall... crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our government in a trial of strength, and bid defiance to the laws of our country.”
But he was soon to see his fears realized. Daniel Webster argued a case for Dartmouth College whose contract the government wanted to dissolve before the Supreme Court, ending with a touching plea for those who loved the small institution. He convinced Justice John Marshall, who wrote, "A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it either expressly or as incidental to its very existence. These are such as are supposed best calculated to effect the object for which it was created. Among the most important are immortality, and, if the expression may be allowed, individuality -- properties by which a perpetual succession of many persons are considered as the same, and may act as a single individual. They enable a corporation to manage its own affairs and to hold property without the perplexing intricacies, the hazardous and endless necessity, of perpetual conveyances for the purpose of transmitting it from hand to hand. It is chiefly for the purpose of clothing bodies of men, in succession, with these qualities and capacities that corporations were invented, and are in use. By these means, a perpetual succession of individuals are capable of acting for the promotion of the particular object like one immortal being."
By this point, the analogy had become more than that—it was justified as referring to the individuals who made up the company acting in unison. The rights were expanded to include other amendments again in 1887, in the case Santa Clara County v. Southern Pacific Railroad Company.
The idea has been further developed by later legal scholars.  In the 1952 Harvard Law Review, we find the following:
The conception of corporate personality is a simplification of the processes of thought. Its function is similar to that of an algebraic symbol. A mathematician finds it difficult to carry in his head a complicated expression such as x^2 + a x + b^2; and in order to simplify his mental processes he says to himself, "Let y = x^2 + a x + b^2," and then he uses y in his calculations instead of the longer and more cumbrous expression. So it is with the imaginary corporate personality in legal calculations. The lawyer finds himself unable to solve his problems if he thinks of a corporation not as a personified unit but as a shifting body of shareholders, or even as a real but impersonal entity; and he therefore says to himself, in effect, "Let the corporate personality equal the changing body of shareholders in respect to their relations to the joint property." By substituting the more compact idea for the more elaborate, he is enabled to reach correct results with less mental effort….”
The article also contains this fascinating tidbit:
“The famous dictum of Sir Edward Coke that corporations cannot be excommunicated because they have no souls, is seen to be illogical. This is illustrated by the history of the canon law, from which Coke derived his statement. Thus, Innocent IV held that corporations, or universitates, could not take an oath, or be baptized or excommunicated.”
One danger with all this is that corporations are legally required to work by only one motivation: to maximize the profits of shareholders. The only way Google can get away with the motto, “don’t be evil,” is because they can reasonably argue in court that in the long run, an ethical reputation will lead to greater profits.
The question I'm really interested in is, to what extent are the relevant decisions of corporations made by the executive (CEO), by committees, or (and this is most interesting) by policies and procedures that have been laid down beforehand and the employees are following? In the third case, these companies are acting as essentially programmed robots being treated legally as persons.
Anyway, that’s where the court is coming from.  It will be interesting to see how it all works out.  I can’t help but think that once artificial agents begin to exhibit what seems to be independent thought, that these laws will be applied to them as well. We will have to hope that the ethical basis of such machines is put on a surer footing.

1 comment:

David Bright said...

Very interesting observations. I appreciate the brief history lesson (can you add references to the citations you've included.

I think of the three choices you've left us with at the end of your paragraph -- all three are opearational simultaneously. The third, where people behave like robots, happens whenever the people who enact policies and procedures in a mindless way. A collective body only has a conscience to the extant that the people within it are mindful of how their individual activities coalesce with others' actions to create a corporate will.

You might find Karl Weick's book "The Social Psychology of Organizing" to be of interest.