The Corporation and the Republic
Originally published in April 1958 as a pamphlet issued in connection with The Fund for the Republic’s discussion of the Free Society.
© 1958 Fund for the Republic
There are no restrictions on the use of this work.
As we look for the shapes of our liberties as reflected in the Declaration of Independence, the Constitution, and the Federalist Papers, we are struck by their thin outlines and the great spaces that are left empty. Years ago, Lord Bryce noted these omissions with admiration and attributed them to the wisdom and skill of the authors, to their shrewd avoidance of controversy, to chance, and to a kind providence that inhibited the Founding Fathers. As we now try to face our contemporary problems, we can add the hindsight of more history and congratulate our forebears on having been born in the eighteenth century, when clear and distinct ideas had not yet met the realities of the nineteenth and twentieth centuries.
The eighteenth century knew the corruptions of tyranny and power, but it did not clearly imagine party politics, pressure groups, and congressional committees. It proposed federation as the cure for big government and its inherent imperialism, but it did not anticipate big business and big labor. The Constitution is silent when it comes to corporations, with which the age of reason was very familiar. And more is the wonder, since it was in this age that the social contract, its theory and its practice, had transfigured many private corporations into state governments, whose constitutions were the models for the federal Constitution. It is even more wonderful that Adam Smith thought the business corporation had no significant future. It is said that the eighteenth century philosophers had more faith in posterity, that is, in the nineteenth and twentieth centuries, than they had in God. It seems that now we must learn to put their and our trust in the corporation in which we live, and move, and have our being.
Our new awareness of the corporation is evidenced daily in the news we read, and in weekly commentaries and business reports. As we look to these mirrors of our lives, we must realize that it is not only the business corporation, the private corporation for profit, in which we have invested our lives and fortunes. The business corporation has old and familiar companions. It is immediately connected, as donor, to the charitable corporations in which we worship, learn, and exercise our private charities: the church, the school, the “voluntary organization.” The business corporation often becomes the public utility, serving our common life and submitting to rules that ensure that service. These familiar organizations of the economic world operate under charters that are granted by the public corporations that we recognize as mature governments: city, state, and national. All of these, save the business corporation, have long histories, and together they divide and unite the jurisdictions in our free society.
Clearly we have some new thinking to do if the intelligence that freedom requires is to be effective. I should like to propose a principle and a hypothesis for some of the new thinking to pursue.
The principle is that the loss of freedom in a society is due in part to a failure to understand its own vital processes. Habits of feeling, action, and even thought are established and accumulated unawares. Until they are recognized and understood, they cause frustration and disorder similar to those complexes that cause hysteria in individuals. The hypothesis is not a new one, but the reframing of it seems to cut across many lines of cliche and orthodoxy, and for that reason it encounters resistance. It is that the corporation, taken in its generic sense to include the separate kinds mentioned above, has for a long time been generating and nurturing a set of habits of feeling, action, and thought that are only now becoming recognizable and articulate; and, as they are at present expressed, they appear to be incompatible with our understandings of the principles of the Bill of Rights by which we think we have been living our common life.
This formulation bristles with questions that need further definitions and answers. It may therefore call for an attempt to understand the principles in the Bill of Rights as they bear on the twentieth century. An initial explication of the hypothesis will seem amateurish in the sense that established proverbs, precepts, and rules that govern the treatment accorded to corporations may seem to be torn from their context and transferred to the comparatively unprofessional contexts and methods of philosophy and history. For instance, it was often said in the last generation that the business corporation — to take one form of corporation for the moment — is a government, private and invisible perhaps, but also touched with public interest. The warning is often given that this is a metaphorical statement, not therefore to be taken literally. It will come very close to the central purpose of this memorandum to take this statement literally, to explore what it means, and to draw the fire of professional criticism, and, perhaps, professional attention.
If corporation is a genus, it has many species and varieties; in fact, it has an elaborate and complicated evolutionary tree. With out tracing the long and detailed history or exhausting the specific differences between the presently extant forms of the family tree — both tasks being impossible in the present state of our knowledge — we can identify the varieties of the form and the threads of heredity and kinship that bind the varieties together. Sir Henry Maine in his half-forgotten classic, Ancient Law, seems to have made the best judgment, guess and myth though it may be, about the origin of the corporation in the Roman republic. He judges that it arose on those frequent occasions of crisis when the father of the family died, and the family with its sons, daughters, adopted children, and slaves had to be reorganized in order to perpetuate the property and the civil functions of the members of the family. It was perhaps in this context that the fictional “legal person” first raised its fearsome head. Some such historical image must have been in Justice Marshall’s mind when he wrote his opinion in the Dartmouth College Case:
A corporation is an artificial being, invisible, intangible and existing only in the contemplation of the law. being the mere creature of the law, it possesses only those properties which the charter of its creation confers on 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 be allowed, individuality; properties by which a perpetual succession of many persons are considered 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 these capacities, that corporations were invented and are in use . . .
It may be well, in stretching one’s mind to comprehend under one conceptual unity the Roman family, Dartmouth College, and the modern business corporation, to recall Maine’s thesis that the connecting theme in the history of the law is the passage from status to contract; that is, from natural to artificial association. It may be time to stretch our minds to another concept — the adopted or artificial son in a Roman family, a Dartmouth student, and a worker in the Chevrolet plant as members of their respective corporations.
Between the corporate families in the Roman republic and the big corporations of the American republic there have been many intermediate forms, some leaving fossils that are now being dug up. F. W. Maitland in his introduction to Gierke’s Political Theory of the Middle Ages lists the forms in a section of the evolutionary tree:
Let us imagine — we are not likely to see — a book with some such title as English Fellowship Law, which in the first place describes the structure of the groups in which men of the English race have stood from the days when the vengeful kindred was pursuing the blood feud to the days when the one man-company is issuing debentures, when parliamentary assemblies stand three deep above. Canadian and Australian soil and “Trusts and Corporations” is the name of a question that vexes the great Republic of the West. Within the se bounds lie churches, and even the medieval church, one and catholic, religious houses, mendicant orders, nonconforming bodies, a presbyterian system, universities old and new, the village community which germanists revealed to us, the manor in its growth and decay, the township, the New England town, the counties and hundreds, the chartered boroughs, the guild in all its manifold varieties, the inns of court, the merchant adventurers, the militant companies of English condottieri who returning home help to make the word “company” popular among us, the trading companies that became colonies, the companies that make war, the friendly societies, the trade union, the clubs, the group that meets at Lloyd’s Coffee House, the group that becomes the Stock Exchange even to the one-man company, the Standard Oil Trust and the South Australia statutes for communistic villages. The English historian would have a wealth of group life to survey richer than that which has come under Dr. Gierke’s eye, though he would not have to tell of the peculiarly interesting civic group which hardly knows whether it is a municipal corporation or a sovereign republic. And then we imagine our historian turning to inquire how Englishmen have conceived their groups; by what thoughts they have striven to distinguish and to reconcile the manyness of the members and the oneness of the body The borough of the later middle ages he might well regard with Dr. Gierke as the central node in the long story. Into it and out from it run most of the great threads of the development, economic and theoretical. The borough stretches one hand to the village community and the other to the freely formed companies of all sorts and kinds.
This catalogue of ships with its startling categories and epithets is only a middle section of the long history, but it should be associated with an earlier section in which the threat of ecclesiastical splits caused lawyers and philosophers to precipitate a dialectical and speculative consideration of the proper government of the church as the Mystical Body (corporation) of Christ. The exploration of the possibility of the church becoming a Christian republic planted the seeds of republican political theory throughout Europe, the harvest of which is still being reaped outside the church in far-away places. Maitland also divined the future in which the giant business corporation elbowed its way to the top, where it shares with the nation-state the honor, power, and glory of having no superior.
It seems an absurd generalization, but still a good guess, that there’s no human purpose or treasure that the corporation has not carried, or can carry. This does not mean that society has ever trusted its whole burden to the corporation in its many forms, nor that it ought to, but it does mean that it could happen, there is nothing in the nature or principle of the corporation that would limit its capacity to serve human purposes. It also suggests the many historic instances when a small business corporation became a colony and then a nation-state — James Bryce cited the United States and India as the familiar examples. Not only is there great variety in the possible forms, but any individual is capable of continuous development through all these forms, with chance circumstances and small acts of choice building the series of contracts that are periodically sealed with charters of approval by reigning sovereigns of church or state. There is a great deal in this story that parallels the Darwinian story of biological evolution, but the fact that human reason and will have always been the prime movers in the evolution would seem to argue that the individual organisms in the series are persons in more than an artificial legal sense, and that the survival of ancient forms in the present species is due to more than accidental causes, or merely natural selection.
As corporate forms, the church and the nation-state are so familiar, so massive, and so pervasive that we take them for granted and forget that their chronic troubles are and always have been struggles for corporate existence, or coexistence. The nation-state is conceded to be the model of the corporation without-superior; there might be a controversy about the church, whether in its unity its superior was only God, or whether in its disunity it gels its many charters from many states. But these two corporate forms, the church and the nation-state, have been the sources from which chartered authority for the other forms has been derived. Corporations without superior would seem to have a uniquely procreative capacity; they give birth to lesser corporations and serve as their superiors, and in these cases the offspring can choose their parents by petition. Four natural persons sitting in a room at a stated place can call a meeting, outline their purposes, elect officers, record minutes, and petition the secretary of state; this is the act of conception. The secretary of state consults substantial citizens; this is gestation. He then grants a charter and records it; this is parturition and baptism. There is a new person with a habitation and a name, who can perform acts: to wit, make contracts with other persons, natural or artificial, with an official seal. Delaware is said to be the most prolific of the states of the American Union, and the street in Wilmington where the charters are filed is said to be the most densely populated area in the world. The birthrate of corporations in this country in the last fifty years is said to be the highest in all history.
But the main trunk of this evolutionary tree — formerly the church and now the state — does not breed true, and the species do not follow even the laws of formal logic. One can only speak of varieties, grouped in flexible classes. Churches, for instance, are now subvarieties of the general class styled private and charitable, along with universities, colleges, schools, hospitals, orphan asylums, foundations, and some welfare associations. Tax laws have recently been throwing all these into doubtful classes. In a complementary class are the so-called business corporations, legally classified as corporations for profit. These are the most numerous, the most lively, and the most familiar — so familiar, in fact, that in the popular mind they are synonymous with the generic corporation and the capitalistic enterprise that is, or was, their purpose. Latterly, these corporations have been acquiring vicariously “the conscience of the King,” have been showing charitable tendencies and a concern for educating themselves and their members. (They are also worrying the tax collectors. )
Historically considered, the boroughs or municipalities are the nodes into which all forms merged and out of which they emerged, but the surviving members of this variety are tending to return to the protection if not the apron strings of their mothers, the nation-states, or the states in the American republic They are the unruly, corrupt, and sometimes underprivileged arms of the larger units of government. James Bryce in 1888 called these American municipal corporations “the schools of corrupt politics,” which trained the then-small class of professional politicians to which the citizens delegated their powers. This suggests the weak political habits that all citizens now acquire by the parting and parceling out of their lives and persons to the many corporations to which they belong. The corporation is the perpetual adult school of our society, as cities like Athens have been in the past.
Perhaps the most instructive variety at present is the public utility corporation. This was apparently invented to cure the ills and counter the threats of corporations whose functions were by nature monopolistic. Many public utilities started as private corporations for profit, but if they dealt in water, gas, electricity, or sewage, their technical systems had to be united or consolidated. This threatened competition, which is the life of profit, and the supposed protection of the citizen, so their charters became heavily impregnated with public regulatory prescriptions. By a thin distinction they are not public, but they operate under a cover of public law. By the extension of legal logic and association, public utility corporations have suggested corporate inventions, such as the Tennessee Valley Authority and the New York Port Authority, which serve public purposes — the welfare of the people of a region, and the order of the port — but they do this under quasi-private charters and in a style of business management.
The public utility corporations and these “authorities” imply, or at least suggest, what seems to be the major, perhaps fateful, development in corporation theory and practice; namely, the identification of business management and governmental ad ministration with a consequent confusion of public and private purposes. Private corporation practices touched with public interest and competitive teamwork in government bureaus are now hard to distinguish on any level of operation: directors, managers, and membership. This could be the deeper reality that lies back of the slogan, Corporations are governments, and the origin of the frustrations in our civil life.
The three-hundredth or four-hundredth anniversary of the invention of the private corporation for profit should be celebrated by emblazoning on a medal the likeness of n sailing vessel. Although sailing vessels were often built and operated by the sovereigns of corporations-without superior — whence comes the designation, ships of state — they soon caught the eye and enthusiasm of the private investor, and what could not be done by the individual was done by the company. The companies were chartered because “the objects for which a corporation is created are universally such as the government wishes to promote.” These were risky enterprises in terms of credit and bankruptcy and of wind and wave.
The masters of the ships were rugged fellows, able to persuade investors and to command obedience of seamen. They could become privateers, convert their ships from merchantmen to men-of-war and vice versa, and exchange their roles with pirates if need be. Their character and their authority were derived almost wholly from their knowledge of the nature and technology of the sea, and their jurisdiction extended from the home port to the limits of their voyages. When the steam engine took the place of sails, the authority and discipline of the shipmaster was transmitted back through the prime mover to the factory master, who also persuaded investors, navigated a land ship, and was a captain of industry.
The picture and symbol can be rapidly brought up to date by substituting the airplane for the sea vessel, with its leviathan body, wings instead of sails, its gas or jet engines generating its own wind. The substitution emphasizes two important points: the adaptability of the corporation to science and technology, and the easy convertibility from private to public purpose or from peace to war. To be the mediator between nature, science, and technology, on the one hand, and private and public purpose on the other — this is the basic function that the modern private corporation for profit has demonstrated it can perform.
For any organized study of the corporation, the multiplicity, the high birth- and deathrates, and the current diversity of forms pose a numerical problem. The best guess from tax information places the number of business corporations alone in this country between half a million and a million. How many private charitable corporations, public utilities, and public or governmental bodies there are depends on definitions and distinctions of units. How many quasi-corporate entities there are, not legally incorporated but imitating corporate organization and operations, and so treated by the courts, is not an easy matter of public knowledge. It is not certain that this kind of numerical knowledge is important. A more significant basic knowledge can be had by a kind of parody on pollster methods. Take a group of moderately well-informed people and ask them how many corporations they belong to as members. In a trial run with a class of teachers of current issues, with no agreement on a sharp definition of membership, but with considerable conviction, the average person claimed membership in 150 corporations of all kinds. But the network of contractual and treatylike relations that enmeshes the corporations and the individual members makes membership and the habits it generates hard to interpret. Any case in corporation law and the questions it raises for the mind not trained to keep to legal channels illustrate the maze.
The Marxist would speak here of the stage of finance capitalism at which we have arrived, and he would point out the mergers, the holding companies, the federations, the cartels, and the government contracts that tie together the mixed economies of the world. If these are economies, what is the shape of the market or markets? If these are governments, what are the shapes and structures of the authority, purposes, and responsibility that the corporations distribute?
The Marxist used to speak vividly, if not too accurately, about the concentration of capital and the expropriation of the worker. If the dialectic is still working, he ought now to point out the next stage or moment when the labor union applies for corporate membership in the big corporation whose directors grant annual tenure and salaries, pensions, and the power of veto on the policy of the corporation instead of the right to strike. As a result, the corporation is a government by and with the consent of the workers as well as the stockholders. As Adolf Berle puts it inThe 20th Century Capitalist Revolution, creeping socialism has become galloping capitalism, and, we might add, corporate communism, free world variety.
In the seventeenth century the Earl of Shaftesbury was engaged with Titus Oates and King Charles II, with the Popish Plot and the reformers, with the establishment of the powers of Parliament and the foundation of the Whig Party. He had John Locke as secretary writing charters for trading companies and sailing ships, charters for colonial commonwealths, and treatises on government. These activities occasioned a great sorting of corporate categories in the light of the new theory of the social contract. Out of this came many written constitutions and bills of rights. Viewed from this distance, the main theme of these thinkings and writings seems to be the separation of governmental powers and the distribution of many of them to individuals and groups generated in the ferment of voluntary association. More than we realize, our liberties are implicit in the separation and quasi-autonomy of self-governing corporations.
We may then be coming close to a diagnosis of our present discontents if we note that the political, economic, and social phenomena of the twentieth century are marked by the mixing and confusion of corporate forms and functions. This may be partly due to the closing of the world, each part of which is in effective contact with every other part, all parts of which are penetrated and heavily influenced by our Western civilization, with its corporate structure and style of operation; the result may be the congestion of corporations. There is no longer an unincorporated frontier; corporations everywhere meet and either conflict or coalesce, and consequently lose their identity and independence. Such a mixing and confusion of corporate forms may be comparable to the breakdown of the villages and the drift to the great cities that have marked the nineteenth and twentieth centuries in Europe and America.
It is more likely that both these drifts, from villages to cities and from the separate corporations to mergers and affiliations, are due to the great integration of technologies that we are witnessing. From the stage when the hand and the tool of the craftsman were moved by the bodily energy of the individual, to the stage when many metal fingers were attached to one machine of wheels and levers and moved by steam power, and on to the stage when hundreds of such machines were combined in a factory, we are now rapidly moving to a stage when the factories are energized by one electric grid. The prime movers, factories, machines, and tools organize human beings horizontally as workers and vertically as managers. Although they are together called the means of production, and therefore should be subordinate to ends and human direction, they are all too often master automatons. With thinking machines and automation they can be autonomous autocrats, and a few more steps in the integrative process will bring into view the possibility of one master autocrat, with a further question whether leviathan is human or subatomic.
The development of the modern corporation has been parallel with the building of this monster. In some subtle way, perhaps describable by a Samuel Butler, the corporation has been the collective builder, not only of the machines and the factories but also of the craft guild, the factory company, and the giant corporation itself. By contracts, licenses, and franchises that attach to chartered bodies for the buying of raw materials, the selling of products, and the hiring and organizing of workers and managers we all, one way or another, contract ourselves into the technological system. We belong to the corporations as we earn or enjoy our living. We have become socialized in the building process, and we are not sure whether we are masters or slaves of the resulting organization. If the corporate structure is a person, as it is made of persons, it may assert mastery of the technology. At present it is fair to .say that the person has not yet made up its mind whether to master or to succumb to the apparent technical necessities. It would seem that we are already past the point where centralization and decentralization, pluralism and totalitarianism, are things we need worry about nothing short of genuine political invention can inform the artificial corporate mind.
The twentieth-century phenomena mentioned above can be described in corporate terms as corporate linkages or affiliations. The Church created schools in our civilization, and the filial relation has lasted longer than many such. But the schools have labored long to be free by setting up boards of directors or trustees for themselves. The personnel of the boards and the financial support they represent have generated strong bonds of affiliation to the business corporation, and when this has not worked the state has taken over. The schools are the orphan charities of the private profit and the public governmental corporations. Universities, addicted as they are to idle curiosity in their laboratories, as Veblen would say, have supplied the basic science for the factories. Reluctantly, and sometimes from bad conscience, the business corporations have increasingly tried to pay a debt of gratitude by donations to the universities. Two world wars have channeled tax funds into government contracts and veiled the laboratories in secrecy for reasons of security that have also dictated the choice of personnel in the laboratories. This affiliation and contagion of corporate forms has raised the question of academic freedom and autonomy in a new and acute way.
Heretofore, corporations-for-profit could be sued by stock holders if they made donations to charitable corporations. In the last twenty years states have passed new laws that permit such donations, and these laws, together with tax exemptions, have resulted in the formation by both business Corporations and colleges of weak federal associations for collective bargaining leading to donations. There are law firms that specialize in merging colleges with businesses into one mixed corporate form, with resulting headaches in the tax division of the U. S. Treasury Department.
Business firms have long known the profitability of pure research and have increasingly established not only laboratories but research villages for universities to envy. They have recently recognized the low estate of liberal education as evidenced in its graduates, and they are now either sending their employees back to the universities or setting up their own liberal arts colleges beside their own laboratories.
I shall not enter the web of filiations between business and government. We are far beyond the issue of regulation or control that Woodrow Wilson explored in the public interest. We do not know which regulates or controls which, when it comes to government and business. The newspapers and the reports of commissions such as that on the freedom of the press reveal an all-enveloping web. All this — the private corporations, charitable and for profit, the public utilities and the “authorities” that are budding from them here and abroad, the public corporations from incorporated towns and municipalities to the super states and federations, the myriad associations that imitate the explicit charters in both internal organization and external operation — all these artificial social organisms in which we live and move and have our being are before us for a gigantic attempt to understand them, if the Republic in its full function is to survive. The corporate idea has been a leading principle in arriving at such an understanding on at least two previous occasions in Western history: at the time of the transformation of the Roman republic into an empire, and at the time when the government of the church was threatened by the Great Schism. On both occasions, the idea of the corporation was not only the hypothesis guiding diagnosis; it was also the idea that, by being stretched to receive new light and invention, was renewed and led to a new epoch. The Earl of Shaftesbury and John Locke probably led a similar great dialectical and practical reconsideration. Our own time and our discontents would seem to need like treatment.
There is much material ready for further treatment: the work of Beatrice and Sidney Webb on the English poor laws, the local governments, and the trade unions, not to mention their controversial study of the Soviet Union; the study and thought and pleading that went into Justice Brandeis’s cases and opinions; the many reports of Congressional committees, particularly the work on the concentration of economic power; and finally, hut not least, the work started by Berle and Means in The Modern Corporation and Private Property. Perhaps one should add the studies that have been done by Fortune and the Harvard School of Business Administration. These studies have been made for various purposes — the Fabian Society, the Progressive movement of the first decade of the century, the New Deal, and for the comfort of the business executive. They all have a split mind about the corporation, preventing the comprehension that may become possible from a study of the generic corporation, for here the distinction between the corporation as an economic institution and the corporation as a political institution can be transcended.
This schism between economics and politics must be healed if we are to consider the current problems of mixed economies, integrated political economies, and even the foreshadowing of the economy of abundance, as these are presented in such a study as Gunnar Myrdal’s An International Economy. To the eighteenth century mind, which sought to ensure its liberties by separating governmental powers and trusting them to rational debate, the addition of economic powers money, industry, and welfare to the fragile political forms of the republic is letting the bull loose in the china shop. Russian Communism has done just this. But we might get a clearer view of this, as well as of our own politics, if we tried to see some reasonable distribution of these powers to the various corporate forms that are at present performing similar services for us. Russia has invented three separate but coordinated giant corporations and entrusted the whole social burden to them. Other socialist countries have invented other forms to meet their needs. It is not to be supposed that we are lacking in inventive imagination.
This brings us to the problematic area where one can see only shadowy lines of research and study, lines that at present pass through knots of paradoxes. What about the lines of authority, responsibility, loyalty, and consent that pass from the Defense Department to the General Electric Company or General Motors, from them to the IUE and the UAW, and from them to the citizen worker? These lines are the traces of contracts made by corporate bodies, and their junctures are conflicts of laws that reach constitutional foundations, economic conflicts that are loaded with weights of welfare and security, and moral dilemmas to paralyze citizens. We have watched congressional committees test these lines at various points and trespass on fundamental law in their attempts to find new statutes. Then there are the tax courts that cast doubt on all charitable corporations because tax evaders have invented corporate labyrinths for the charity that begins at home.
These are the deeper, almost invisible processes that work behind corporate veils, and the individual sees a conspirator in every neighbor and suspects himself when he looks in the mirror because he does not know the underground network that he joins when he buys, contracts, or gets a job. It is no wonder that we project this habitual suspicion on the giant public corporations with which we fight cold and hot wars.
It was from a like suspicion and an accompanying fear of civil war that Thomas Hobbes in seventeenth-century England made two prophetic observations on the new style corporations that were then exploring and organizing the new world. He said they were “worms in the body politic,” and that they were “chips off the block of sovereignty.” By the first he meant that they were private associations that were taking on a kind of spontaneous autonomy in their parasitical way of life; by the second he meant that they were no longer mercantile arms of the state, but had taken some of the power of the government into their own management. He was foreseeing what we have come to recognize as the corporate veils and legal fictions under which corporations carry on their vital private governments. Our courts have become familiar with certain procedures in corporation law which they call “piercing the corporate veils.” The purpose of this procedure is to discover and designate the individual responsibility for obscure and puzzling corporate behavior that may be touched with public interest.
Now that we have realized many of the possibilities that Hobbes only suspected, it might be well if we looked through the corporate veils to the political realities that have been developed in private corporate operation and have filled the empty spaces and thickened the lines of our public constitutional liberties. The analogy between public and private governments suggests the application of two principles of federal government as criteria for judging the legitimacy and health of corporate bodies. The Constitution says that the federal government assures to each constituent state a republican form of government. It may be recalled that this was the alternative chosen in place of the direct exercise of police power as a check on undue growth or irresponsible use of state and factional powers against the federal government. In effect, this constitutional provision implies that the justice and freedom not only of the individual state but also of the whole community will be secured if the orderly processes of republican government are ensured to the constituent parts. It would be important to find out whether republican forms of government are ensured to and upheld by our respective corporations.
The other principle is the now much misused principle of states’ rights, that the states retain all rights not explicitly delegated to the federal government. The principle might better be stated and understood as the principle of federation; namely, that there should be explicit formal recognition of the separate powers, rights, and duties of the parts of government. It is the chief genius of our government that this principle has been honored in the original allocation of powers and that it has been extended beyond its original meaning in the discovery and recognition of the implied powers. On the other hand, we have not been able to see the principle working under the veils of corporation law, where there is potentially another branch of the public government.
The charters of private corporations are remarkably reticent concerning the rules required for their internal government; each corporation improvises its bylaws and its table of organization beyond the minimal requirement that there be a president, a vice-president, a treasurer, and a secretary. When charitable corporations grow in size and function they tend to differentiate their organs and function more or less in the pattern of their predecessor and mother, the church. They provide for executive, legislative, and even judicial divisions. The business corporation shows, on the other hand, the pattern of an amoebae increasing to the size of a whale, but with no sharp differentiation of organs — either this or a series of fissions and fusions into colonies, such as the parts of General Motors, each with strong oligarchic controls within and weak federal connections with each other. It may be that there is still the implication of oligarchy in a plutocracy, and an incompatibility with democracy, but it would be interesting to see if replacing the Sherman antitrust law by the ensurance of a republican form of government to all private corporations would not take the strain off the heavily pressed executive and hasten the present tendency of the business corporation to accept more community responsibilities.
The analogue of the states’ rights or federal principle would redraft the categories of corporations according to their distinctive functions, ensure them separation of powers and independence of one another, and restrict, or strictly define, the contracts and treaties ( cartels ) they are empowered to make. Agencies like the Federal Trade Commission might even be expanded and given permanent powers to revise corporation law.
These suggestions are proposed not as cures for diseases, but rather as procedures of explorative and diagnostic therapy. Before they are applied, there should be a preliminary study of the notion of membership. This would involve the further exegesis of the text from 1 Corinthians often quoted by the church in its study of corporation theory: “Now ye are the Body of Christ, and members of members.” Civil liberties, as formulated in the amendments to the Constitution, are mainly concerned with the notion of membership. Many of our present frustrations in this field are due to the fact that our memberships have been confused, therefore also our loyalties, our duties, and our consents to our many tangled governments.
There is ample evidence in our Bill of Rights to show that the political principles it enunciates are derived from antecedent historic situations and metaphysical as well as religious doctrines. Some of the erosions of their meaning show in the opinions of the Supreme Court following the two world wars. There have also been attempts on the part of historians, philosophers, and theologians to recall and repair what has been forgotten. But something is still missing in this research; it is not reaching the nerve of present political thought, either on the professional level or in the citizen’s conviction. The elegant eighteenth-century words and propositions do not mean what they have always seemed to mean, and the bottom has fallen out of our political courage. This memorandum is suggesting the missing term: the corporation seen as a body politic, within which the terms of the Bill of Rights need redefinition. What are the rights of a member of a corporation, or of many corporations, those pyramiding structures in which members of members can be discerned?
Both the Stoic Emperor Marcus Aurelius and the Stoic slave Epictetus thought of themselves as citizens of the cosmopolis, the universe as a polity. The Christian likewise thought of himself as a member of the kingdom of heaven. But both Stoic and Christian entertained these thoughts as reasons justifying their withdrawal from many of the institutions of their times. There were frustration, futility, and chaos in the pluralism over which the Roman empire brooded. For many, Roman citizenship was a solution, a kind of center of gravity around which a multiplicity of other roles could be organized, but as the empire lost its internal freedom and order, a deeper strategic retreat from the community was needed to save personal integrity. It was then that the universe was discovered as the great community that was governed by natural law. This was the notion that was revived in the eighteenth century and accepted as the self-evident basis for self-government. The trust in this vision made it possible to draft constitutions with thin lines and many open spaces, few laws chartering many freedoms. The sentiments of one community including all men as members were expressed in many state papers.
But, as we have noticed at the start, these empty spaces have been filled in by older surviving institutions and many new inventions, most noticeably at present by corporations of all kinds. Something like what happened in Rome is happening to us, living as we do in super-states. We are withdrawing and detaching our selves from many of our institutions, but we are not yet retreating to the wider community the Romans discovered. Rather, we are developing a passion for indiscriminate togetherness and trying to find the one subcommunity into which we can put our hearts and souls. Some of these subcommunities arc trying to meet our needs, particularly the big business corporation that claims to be one big family, perhaps a revival of the Roman family from which the corporation originally grew. The current discussion of this development reveals a deeper worry inside the new artificial family. In many respects it is not a family, in spite of the fact that it provides many social securities; it is a public institution, and as such its life is shared with government, education, religion, and many other affairs, not all of which share its essential purposes. So we have what pluralisms usually exhibit: each separate part of the social pattern tries to take on the functions of all the others. The corporate linkages and affiliations become a labyrinth within which the individual loses himself.
The great community imagined by the Stoic, the Christian, and the eighteenth-century philosopher-citizen is a community in whose membership the individual can identify himself as a whole man. The communities and subcommunities of which we are now members are communities to which we distribute ourselves in parts, in which we dismember ourselves, and then shrink to one of these congested parts. We become identified with aspects of ourselves, masks that we put on and take off as our roles change from day to day, sometimes from moment to moment. Inside we are hollow men, zero members of “the lonely crowd,” shadowy participants in the American way of life.
The notion of privacy is a further consequence of this division of the individual soul. Only a part of the man is received into these bodies politic; the rest is not received and is private. The First Amendment to the Constitution may be suffering a confusion on this point. If no law can be made that abridges freedom of speech, it may mean that speech is not a property of the individual as citizen but a private power at the individual’s disposal, merely a privilege. This is probably not the correct interpretation in the context. It may mean quite the contrary — that the legal person or the citizen has the duty in a democracy to exercise his freedom of speech in playing his part in self-government, and that Congress should protect this right as the source of its own power to legislate.
Freedom of religion would seem to be a case where that aspect of the individual that is not assimilated to the body politic is reserved for his membership in a church, where his religious freedom should be exercised. Again, religion is not merely some thing that Congress should not abridge but something that it must protect if wisdom is to be available to the legislators and the electorate.
If our society has a corporate, or quasi-corporate structure, that is, if it is made up exhaustively on a certain level of corporations, then freedom of association, freedom to join and resign from corporations, may be as important as education, or may be essentially educational. One of the original aims of the free public educational system for the young was to prepare the individual for maximal diversity of skills and functions, and this implied the wide range of social mobility that is the mark of free Western civilization. There are signs now that both our educational system and our society are favoring specialization of skills and functions and the narrowing and hardening of the channels of social movement. The free, spontaneous circulation of the individual may well be something that the government wishes to encourage and promote as its own lifeblood.
These points would seem to argue that our civil liberties are degraded when they are understood as privileges merely; civil liberties of members of corporations are touched with public interest.
Montesquieu said that freedom, political freedom, is the assurance that you can do what you ought to do, and that you will not he forced to do what you ought not to do. To us in the twentieth century this assurance connotes economic power, and it seems to be the condition that underlies all our other powers of freedom. As Charles Beard has said, the Constitution and particularly the Bill of Rights need economic underwriting. This could mean direct governmental appropriations to meet the cost of public information, elections, and legal counsel for the poor, but he probably meant indirect legislative action to control large concentrations of money and credit and the redistribution of wealth. Autonomy and self-government for the corporations that manage and control wealth would seem to he implied, on the principle that, although unjust power corrupts, just or legitimate power ennobles; and justice is ensured in our society by the continuous and all-pervasive practices of republican principles.
But all devices of this kind seem weak before the massive power of money and technology that now is identified with the processes of free speech and assembly. Mass communication has become more and more massive, and less and less communicative, partly because public communications now have to pass through the physical facilities of giant, unwieldy bodies politic, incorporated newspaper chains and broadcasting systems, whose public functions are not yet sufficiently distinguished from their private business interests. As we understand and practice freedom of the press, it should not be supported or controlled by either the private corporation for profit or the public corporation of government, but these are the only two organizations that have the economic power to operate the means. This would seem to be the critical problem in the general field of economic underwriting for the Constitution.
The main weight of the considerations in this short essay has been put on the questions whether the political nature of the corporation has been recognized and whether it would not be good for our whole political life if the recognition were formalized in the body of corporation law. These questions are hidden in the phrase private or invisible governments. The answers to these questions have been in the negative for more than a generation. The evidence has not been clear enough, and when parts of it have been clear, they have pointed in too many different directions, often indicating restriction and regulation of corporation activities rather than giving them measures of self-government. But the evidence is rapidly accumulating and demanding under standing not only by lawyers and economists, as in the past, but also by sociologists, anthropologists, political scientists, and journalists. New evidence raises new questions, and finally directors, managers, trustees, administrators, and various categories of members are asking themselves questions about the corporations that they work with.
Many of the new questions concern the kind of human beings that are being formed by the corporations they belong to. These are difficult questions to answer, but they should be asked, and they can be answered if they are kept in order. This essay leads to one of these new questions: how do the political habits formed by members of corporations fit with the habits that republican forms of government have developed in their citizens heretofore? The answers to this question are not definite or final; such as they are, they can best be summarized by a sharp observer of a few years ago, Mark Twain: “It is by the goodness of God that in our country we have these unspeakably precious things: freedom of speech, freedom of conscience, and the prudence never to practice either.” It may be that the corporation is the school of political prudence in which we learn not to practice what the political republic has always preached.
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