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In his commentary in The Wall Street Journal  on May 6, 2010, Michael Boskin went over the disadvantages in levying an income tax on corporations. Within his argument, he observes, “Of course, the corporation is a legal entity; only people pay taxes.”  In so doing, he transcends, if only for a moment, his own approach that is oriented to pros and cons.  His observation is significant, and it gives us a launching pad of sorts by which we can approach the corporate income tax as a phenomenon (rather than simply assessing its utility).  To be sure, utility or the lack thereof can lead us to this level.  For example, double taxation (i.e., taxation of a corporation’s earnings, and then of dividends on investors’ incomes) suggests that only people should pay tax.  Treating a “legal entity” as if it were a tax-payer is unnatural, and thus gives rise to the double taxation problem.  It is interesting that Boskin uses the word “entity,” which is not the same as “person.”  That is, to argue that corporations should not be taxed directly, he seems to assume that he needs to deny the legal person doctrine.  To be sure, it would be harder to argue that human rather than only legal persons should be taxed; to treat corporations as entities expands the distinction and thus is more permitting of Boskin’s argument.

I contend that Boskin was correct in referring to corporations as legal entities.  To treat or consider a corporation as a person in any sense is to anthropomorphise an abstraction.  Put another way, an association of human beings does not constitute in itself a person even writ large. To presume otherwise is to make a category mistake.  This error is evident when someone says, “GM says X,” or “Ford is doing Y.”  Only human beings can talk (at least in a human language).  Furthermore, an organization does not “do” things; rather, people within it are the agents.  So too, an organization cannot be a moral agent.  This statements might as be ignored, for all the sloppy anthropomorphism going on. It is no wonder that corporations are typically regarded as taxpayers.  As long as we limit our arguments to pros and cons (i.e., utility), we will miss our deeper errors or category mistakes.  Even if such faults are covered over by societal blind spots, the errors are nonetheless errors.

“I hope we shall crush in its birth the aristocracy of our moneyed corporations.” 
       Thomas Jefferson

In Citizens United v. FEC on January 21, 2010, the US Supreme Court held by 5 to 4 that because US corporations are legal persons, they can contribute to political campaigns.   The assumption here is that corporations are more than the sum of an aggregate of persons—that is, more than citizens associating.  The corporate entity has rights in itself.  Ginsberg and Sotomeyer questioned in oral arguments whether free speech applies to spending money, and, moreover, whether corporations should be considered legal persons, much less citizens.  After all, they can’t be drafted, or vote.

A corporate is essentially privately owned wealth.  To say that wealth counts as speech seems spurious to me.  In fact, the whole legal person designation seems contrived.  Whereas the Roman republic fell to dictatorship, our republic may well have already fallen to oligarchy or corporatism.   So I agree with Barak Obama that the decision is worrisome.   Already, Dick Durbin of the US Senate said that the banking lobby owns Congress after that lobby sank Durbin’s amendment to allow bankrupcy judges to modify mortgages in foreclosure (the banks want a veto, even if they contributed to the sub-prime mess).  If Goldman Sachs can spend virtually unlimited amounts of money on political campaigns, we can expect to see that bank’s influence over the government expand even beyond what influence it has over its own alums who occupy high policy-making positions in the US Government (e.g., Hank Paulson and Neil Kashkari at Treasury under Bush II).  If our republic is already compromised under the weight of huge concentrations of private capital, the US Supreme Court’s decision may well be enough to sink the republic…ironically in the name of liberty.  But liberty for whom?  Or does “whom” even apply here…  It seems to me that corporations are not citizens associating for political purposes.  There are indeed non-profit political organizations whose function it is to influence policy.  This is not a business corporation’s function.  Nor is spending money itself political speech.  Any CEO can stand outside his or her building and give a political speech for free.  But which citizens does the CEO represent in his or her association of citizens?  Stockholders?  They don’t approve corporate public affairs spending.  Employees?  They don’t either.  Customers?   We don’t approve what a CEO says just because we have purchased a bar of soap.  The US Supreme Court’s majority might well say that the CEO represents the legal person that is the corporation, but then it is not an association of citizens because associations are not said to be persons (rather, they consist of persons).  Is this too logical?  Too reasoned?  Maybe so. But maybe it shows the duplicity involved in referring to an account of private wealth as a person.  It seems to me that it is rather blatant case of anthropomorphism.  …humans treating our artifacts as having our characteristics.  We must really think we are something.

Andrew Cuomo, who was the Attorney General of New York in February of 2010, filed suit then against Bank of America and two of the bank’s employees, Ken Lewis and Joe Price.  In his complaint, Mr. Cuomo said that the bank first chose not to disclose the losses involving Merrill Lynch, which topped $16 billion, to its shareholders who were voting to approve the deal. Then, the bank told federal officials that those same losses had persuaded bank executives to consider backing out of the deal, unless the government provided a second bailout. “Throughout this episode, the conduct of Bank of America, through its top management, was motivated by self-interest, greed, hubris and a palpable sense that the normal rules of fair play did not apply to them,” Mr. Cuomo said. “Bank of America’s management thought of itself as too big to play by the rules and, just as disturbingly, too big to tell the truth.”

While “too big to play by the rules” and “too big to tell the truth” are striking  and warrant serious reflection in an economy wherein corporations are allowed to continue to operate even though they are too big to fail, my eyes are caught on something else in the quotes that is apt to be missed by many readers in the present era of corporate capitalism.  Consider “the conduct of Bank of America, through its top management…”  Does anything seem odd to you about this phrase?  In the wake of the US Supreme Court’s decision that corporations’ “free speech” is protected by the US Constitution’s first amendment, the debate on whether corporate entities should be considered legal persons has emerged from law school classrooms into the public square.  Reading “the conduct of Bank of America, through its top management,” I wanted to rewrite it as “the conduct of Ken Lewis and others in their capacities in working at Bank of America”.  This would be more accurate.  That corporate conduct must be through human beings means that corporate entities cannot themselves act or have conduct.  Accordingly, to say that a corporation apart from its human beings is a person does not make sense (because conduct applies to persons).  To say that BOA conducts itself through people is really to say that the conduct is done by the (human) persons.  

Besides questioning the corporate legal person judicial decision and the related decision that corporate “persons” have the same right to free speech as human beings have, I would argue based on my analysis here that the individual employees who were involved in the alleged understatement of losses and overstatement of an intent (and ability) to pull out of the deal (i.e., holding the economy hostage to get the feds to pony up in the deal) should be viewed as the recipients of the punishment.  Because a corporation is wealth rather than a person (i.e., it cannot go to jail), a fine could also be imposed on it even as the guilty employees go to prison for their conduct (regardless of the size of the fine on the bank).  But this wouldn’t mean that the corporation is being punished.  Rather, the stockholders (and anyone else who could otherwise draw on the retained earnings) would be punished  for lax corporate governance. If the employees’ fraud circumvented reasonable corporate goverance, however, perhaps the stockholders should not be punished/fined.

My point is that we should hold the individual decision-makers (and implementers) accountable (if they committed fraud) because they are persons.  Human beings commit fraud—not corporations.  So we should not fall under the illusion that some corporate entity greater than the sum of its human parts is somehow responsible (i.e., as if a corporation could make decisions apart from the human beings working in it).   A corporation doesn’t have hubris; persons do, which is to say human beings.  Projecting human qualities onto legal entities may feel good and be convenient for those who want to evade responsibility; what concerns me is when the rest of us unthinkingly go along with the illusion and take it for real, writing statements like ”the conduct of Bank of America.”  Reading this, one ought to think to herself, ”that doesn’t even make sense.”  Unfortunately, the lapse is so ubiquitous that few of us object to it, not to mention notice it.  When something that does not make sense comes to be routinely taken as a given, something is really wrong in a society.  The problem is particularly lethal when it is not even transparent because it is akin to flying blind.  Let’s just say that it is the financial interest of those human beings who benefit from corporate wealth that we continue to fly blind.

Source: http://www.nytimes.com/2010/02/05/business/05cuomo.html?hp