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“I hope we shall crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country.”

— Thomas Jefferson

Our Hidden History:
Corporations in America

From Reclaim Democracy!

(section titles added by author of present site)

In the early days of our country, we allowed the creation of corporations to fulfill specific needs of society. This shared financial responsibility facilitated projects desired by residents of the state granting the charter. We granted charters for purposes such as construction of roads and bridges.

The corporate charter is an operating license that citizens may give, and likewise, may choose to revoke. Our country’s founders had a healthy fear of corporate corruption and limited corporations exclusively to a business role:

Most of this vital history is unknown to citizens today, but our past contains many keys to solving current problems.

Through corruption of our government and courts, corporations subverted their intended role and acquired the legal status of “natural persons”.

This subversion was institutionalized in an 1886 Supreme Court decision of which Justice William O. Douglas would later write:

“There was no history, logic, or reason given to support that view.”

Thus corporations gained Bill of Rights protections and more, even before women and minorities had full protection.

Once upon a time, long ago:
When there was public control of corporations

For one hundred years after the American Revolution, citizens and their legislators controlled the nation’s economy by controlling the corporate chartering process. Having thrown off English rule, the revolutionaries did not give governors, judges or generals the authority to charter corporations. Citizens made certain that legislators issued charters, one at a time and for a limited number of years. They kept a tight hold on corporations by spelling out rules each business had to follow, by holding business owners liable for harms or injuries, and by revoking charters.

Because of widespread public opposition, early legislators granted very few corporate charters, and only after long, hard debate. Citizens governed corporations by detailing rules and operating conditions not just in the charters but also in state constitutions and in state laws. Incorporated businesses were prohibited from taking any action which legislators did not specifically allow.

States limited corporate charters to a set number of years. Unless a legislature renewed an expiring charter, the corporation was dissolved and its assets were divided among shareholders.

Citizen authority clauses limited capitalization, debts, land holdings, and sometimes, even profits. They required a company’s accounting books to be turned over to a legislature upon request. The power of large shareholders was limited by scaled voting, so that large and small investors had equal voting rights. Interlocking directorates were outlawed. Shareholders had the right to remove directors at will.

In Europe, charters protected directors and stockholders from liability for debts and harms caused by their corporations. American legislators rejected this corporate shield. The penalty for abuse or misuse of the charter was not a plea bargain and a fine, but revocation of the charter and dissolution of the corporation.

Supreme Court attempts to subvert democracy

In 1819 the U.S. Supreme Court tried to strip states of this sovereign right by overruling a lower court’s decision allowing the State of New Hampshire to revoke a charter granted to Dartmouth college in 1769 by King George III. That charter contained no reservation or revocation clauses, the Supreme Court said.

The Supreme Court’s attack on state sovereignty outraged citizens. New laws were written and old ones re-written in an attempt to circumvent the ruling. New state constitutional amendments were passed with the same intent. Over several decades starting in 1844, nineteen states amended their constitutions to make corporate charters subject to alteration or revocation by their legislatures. As late as 1855 it seemed that the Supreme Court had gotten the peoples’ message when in Dodge v. Woolsey it reaffirmed state’s powers over “artificial bodies”.

Tyranny and subversion by the American corporate plutocracy

But the men running the country’s corporations were not sitting idly by during this time. Contests over charters and the chartering process were not abstractions. They were battles to control labor, resources, community rights, and political sovereignty.

More and more frequently, corporations were abusing their charters to become conglomerates and trusts. They were converting the nation’s resources and treasures into private fortunes, creating factory systems and company towns. Political power began flowing to absentee owners who were intent upon dominating people, nature, and the economy. In factory towns, corporations set wages, hours, production processes and machine speeds. They kept blacklists of labor organizers and workers who spoke up for their rights. Corporate officials forced employees to accept humiliating conditions, while the corporations agreed to nothing.

The industrial age forced a nation of farmers to become wage earners, and they became fearful of unemployment — a new fear which corporations quickly learned to exploit.

When workers began to organize, industrialists and bankers hired private armies to keep them in line. They bought newspapers and painted politicians as villains and businessmen as heroes. Bribing state legislators, they then announced legislators were corrupt and said that they used too much of the public’s resources to scrutinize every charter application and corporate operation.

The effect of the Civil War on corporate power

“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavour to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.”

— Abraham Lincoln

Government spending during the Civil War brought these corporations fantastic wealth.

Flaunting this new wealth and power, corporate executives paid “borers” to infest Congress and state capitals, bribing elected and appointed officials alike. They pried loose an avalanche of government financial largess. During this time, legislators were persuaded to give corporations limited liability, decreased citizen authority over corporate structure, governance, production and labor, and ever-longer terms for the charters themselves.

Corporations rewrote the laws governing their own creation. They “left few stones unturned to control those who made or interpreted the laws...”

There were certainly attempts to keep strong charter laws in place, but once the courts started aggressively applying legal doctrines which made protection of corporations and corporate property the center of constitutional law, the people were in a rout.

As corporations grew stronger, government and the courts became easier prey. Following the Civil War, and well into the twentieth century, appointed judges gave privilege after privilege to corporations. They freely reinterpreted the U.S. Constitution and transformed common law doctrines. Judges gave certain corporations the power of eminent domain; they eliminated jury trials to determine corporation-caused harm and to assess damages. Judges created the right to contract and then took from the legislators the right to oversee corporate rates of return — a right entrusted to legislators by the U.S. Constitution. They laid the legal foundation for regulatory agencies to be primarily accountable to the courts — not to congress.

Supreme Court corruption and the death of American democracy

Undoubtedly, one of the most severe blows to citizen constitutional authority came in 1886. The Supreme court ruled in Santa Clara County vs. Southern Pacific Railroad that a private corporation was a “natural person” under the U.S. Constitution, sheltered by the Bill of Rights and the l4th Amendment.

Using the 14th Amendment, which had been added to the Constitution to protect freed slaves, the justices struck down hundreds more local, state and federal laws enacted to protect people from corporate harm.

The Supreme Court had now effectively positioned the corporation to become “America’s representative social institution,” “an institutional expression of our way of life.”

Corporate power, now virtually unchecked, owned resources, production, commerce, trade, prices, jobs, politicians, judges and the law.

Over the next half century, as a United States congressional committee concluded in 1941, “The principal instrument of the concentration of economic power and wealth has been the corporate charter with unlimited power...”

Today, many U.S. corporations are transnational. No matter how piratical or where they roam, the corrupted charter remains the legal basis for their existence.

Related sites

Reclaim Democracy!

“Imagine democracy with an actively participating public. Imagine progress defined as improved quality of life for all people and families. Reclaim Democracy! aims to make these goals reality. We strive to restore democracy to improve our lives today, and for our children’s future. We are a non-partisan grassroots organization and welcome all who share our goal of regaining democratic authority over corporations. Our interest is not mere corporate responsibility. The Reclaim Democracy! goal is to address our root problems and inspire people to consciously choose what role corporations should play in society.”

Corporate Watch

“Corporate Watch provides news, analysis, research tools and action resources to respond to corporate activity around the globe. We also talk with people who are directly affected by corporate abuses as well as with others fighting for corporate accountability, human rights, social and environmental justice. As part of the independent media, Corporate Watch is free of corporate sponsorship.”

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