|The NATIONAL LAWYERS Guild Practitioner|
CURRENT PROBLEMS LAW AND PRACTICE
TAKING BACK THE CORPORATION AND
ENDING CORPORATE WELFARE
RICHARD L. GROSSMAN
ASSERTING DEMOCRATIC CONTROL
OVER CORPORATIONS: A CALL TO LAWYERS
PETITION TO THE ATTORNEY GENERAL OF
DELAWARE TO REVOKE CORPORATE CHARTERS
ROBERT W. BENSON
FOUR MODEL LAWS TO CURB CORPORATE
WELFARE AT THE STATE AND LOCAL LEVELS
volume 52, number 4
RICHARD L. GROSSMAN
AND WARD MOREHOUSE
ASSERTING DEMOCRATIC CONTROL OVER CORPORATIONS:
A CALL TO LAWYERSThe judgment sought against the defendant is one of corporate death. . . . The life of a corporation is, indeed, less than that of the humblest citizen. . . . Corporations may, and often do, exceed their authority only where private rights are affected. When these are adjusted, all mischief ends and all harm is averted. But where the transgression has a wider scope, and threatens the welfare of the people, they may summon the offender to answer for the abuse of its franchise or the violation of its corporate duty. The [North River Sugar Refining] corporation has violated its charter, and failed in the performance of its corporate duties, and that in respects so material and important to justify a judgment of dissolutio. . . . All concur.--Justice Finch, for a unanimous Court of Appeals
of New York State, 1890 
A Corporate Counterrevolution
After the Civil War, bitter struggles erupted between states and corporations, with corporations using the federal courts (along with President Hayes and other elected officials) as their agents. Insurance, banking, railroad, grain and other burgeoning corporations hired the most experienced lawyers they could -- including former senators, along with state and U.S. supreme court justices.
As Charles McCurdy has described, the Supreme Court first had to be apprised by skillful counsel of the growth-eroding potential of state laws and to be persuaded that new juridical principles must be forged to preserve free trade among the states. Second, the legitimacy of protectionist state legislation had to be challenged by litigants with sufficient resources to finance scores of lawsuits in order both to secure initial favorable decisions and to combat the tendency of state governments to mobilize 'counterthrusts' against the Supreme Court's nationalistic doctrines. 
When the briefs had settled, corporate leaders and their lawyers, among other accomplishments, had gotten the federal courts:
Corporations and their lawyers had also
- to take substantial jurisdiction over corporations from state courts;
- to concoct the liberty of contract and other doctrines, and reinterpret the commerce clause, severely undermining state authority over corporations;
- to apply the 14th Amendment's due process and equal protection clauses to corporations;
- to transfer the authority to set railroad corporation and utility corporation rates from elected state legislators and state commissions to federal judges;
- to broaden the definition of property to encompass economic and political power (making "Cain's motto, 'Am I my brother's keeper?' the supreme law of industry," as one legal philosopher has commented); 
- to mid-wife the judicial injunction, which corporate lawyers used to cripple the rights of workers and communities resisting corporations' exercise of their new property rights;
- to focus corporate law on the obligation of corporation directors and managers to maximize profits. (With the doctrines of "loyalty" and "care," and the "business judgment rule," federal judges bestowed upon corporate directors great latitude, declaring outside the pale of corporate law -- and therefore beyond the reach of the sovereign people -- what corporations actually do: decide upon investment practices, production, the technologies, industrial processes, and the organization of work.)
- shaped law school philosophy and curriculum;
- rewritten legal history; and
- diverted citizen protest by creating federal regulatory agencies -- starting with the Interstate Commerce Commission in 1887 -- to serve as barriers between the sovereign people and corporate fictions, and to co-opt movement leaders and institutions.
As the 20th Century winds down, growing numbers of people are no longer willing to grant sweeping powers and privileges to corporations, to their directors, managers and stockholders. The Program On Corporations, Law & Democracy has been bringing such people together in "Rethinking The Corporation/Rethinking Democracy" meetings over the past two years to talk about what is to be done. We have been listening.
What has become clear is that accepting corporate law as it has been created by corporate lawyers and judges, and taught by law schools, means conceding to giant corporations dominance over our nation's elections, laws, money, work, manufacturing, resources, health, education, culture and ecosystems -- not to mention over the rest of the world.
Tactically, it means limiting ourselves to resisting harms one corporate site at a time, one corporate chemical or biotechnology product at a time; to correcting imperfections of the market; to working for yet more permitting and disclosure laws; to initiating procedural lawsuits and attempts to win compensation after massive corporate harm has been done; to battling regulatory and administrative agencies; to begging leaders of global corporations to please cause a little less harm.
Frustrated, angry, and in search of new goals and strategies, people have begun examining the nature and history of the modern, giant corporation. Looking into their state and the federal constitutions, corporate law and popular resistance to corporate rule, people have been uncovering rich lodes of constitutional provisions and case law, such as People v. North River Sugar Refining Co. Even at this early stage of such investigations, Justice Frankfurter's observation that the history of constitutional law is "the history of the impact of the modern corporation upon the American scene"  has been amply confirmed.
A New People's Movement
Uncovering this hidden history is providing precedent -- and inspiration -- for a new people's movement to disempower the corporation as an institution, revoke the charters of particularly abusive and destructive corporations, and fundamentally redefine the legal relationships between the sovereign people and our enterprises.
Such a movement will require taking the offensive against a century of corporate usurpation and the colonization of our minds. It will require building upon the work of valiant people of past generations, and making new history based on principles as expressed in the Massachusetts Constitution since 1780 (and found in diverse forms in other state constitutions as well):
No man, nor corporation, or association of men, have any other title to obtain advantages, or particular and exclusive privileges, distinct from those of the community, than what arises from the consideration of services rendered to the public. 
The progressive wing of the legal profession has vital roles to play in a people's movement for corporate disempowerment. People's lawyers will need to join organizers as educators, theoreticians, strategists and litigators in community, state, national and international arenas. They will be essential for protecting and expanding human beings' free speech, free assembly and other rights needed for redress of grievances, and for self-governance, protest and education, research and amending the law.
Ten Suggestions to Stimulate the Legal Profession
End the virtual monopoly of corporate lawyers by nurturing a new breed of progressive lawyers knowledgeable about constitutional history and corporate law and committed to helping citizens exert popular authority over corporate fictions.
Help plan -- and where appropriate litigate -- revocation of corporate charters under state laws; investigate potential for "rechartering" corporations with limited powers, explicitly subordinate to the sovereign people; investigate past citizen tactics which used criminal conspiracy as the basis for involuntary corporate dissolution; explore the use of quo warranto and ultra vires, and the removal of liability protections.
Help craft amendments to state corporation codes; produce a model "'Citizens' State Corporation Code" as an alternative to American Bar Association's fifty-year effort . to help states give away public authority to corporations.
Help provoke debate -- within the legal community and among the general public -- questioning legal doctrines which disempower people, places and the natural world, and empower corporations; work with organizers in the various states to draft ballot initiatives and legislation which confront legal doctrines granting corporations special privileges and immunities.
Help document illegal and harmful (but treated as legal) acts of corporations; help uncover and reinterpret judicial precedents, laws and constitutional provisions which people can use in the several states to bring giant corporations and corporate leaders to justice.
In daily law practice, question all the rights and powers which corporate lawyers claim for their clients; help people to resist clear and present corporate harms in ways which reveal modern giant corporations as unconstitutionalized governments; encourage clients to choose tactics which not only seek justice but also weaken corporate privilege.
Help devise theories and strategies which towns, cities and states can use to prohibit all corporate involvement in elections, law making and the selection of judges -- from banning financial contributions to prohibiting advertising on matters of public policy.
Provoke debate from the grassroots up about human rights vs. property rights; explore and expand work on the "reliance interest"  and related efforts to establish property rights of workers, communities, other species and places.
Defend people and organizations from SLAPP and similar lawsuits, as well as from government, university, shopping mall/real estate corporation efforts to deny speech, assembly, and related rights essential for citizen redress of grievances, education, protest and organizing.
Become skilled in the creation and operation of alternative institutions of enterprise, such as those under municipal and worker ownership and control, and cooperatives.
A Hidden History
Giant corporations -- often global in reach -- are the dominant governing institutions on our planet today. They function as governments.
The largest U.S. corporations have sales greater than the gross domestic product of many countries. General Motors Corporation, for example, outstrips Denmark, as well as Norway, Hong Kong, Israel, Ireland, New Zealand and Hungary.  The world's largest corporations "account for about three-quarters of the world's commodity trade, and fourth-fifths of the trade in technology and managerial skills of [market] economies."  The largest 50 corporations obtain over half their revenues from outside their country of origin. 
The 500 largest U.S. industrial corporations control 35% of all non-financial corporate assets.  From 1980-1992, these corporations more than doubled their assets, from $1.8 trillion to 2.57 trillion.  The Wall Street Journal proclaimed that the first quarter of 1995 brought "the highest level of corporate profitability in the postwar era, and probably since the latter stages of the Bronze Age." 
By corporate decree, poverty is up, wages are down, and millions are literally working their way into poverty.  Corporate leaders and their shills order Congress, state legislatures and local officials to fire teachers and public health workers; close schools, libraries, hospitals and parks; gut health and environmental laws; withhold legal aid and other services to young people, the poor, the sick and elderly. And our politicians hop to: A New York Times headline sums it up: "As City and State Budgets Are Cut, Millions In Tax Breaks Go To Companies." 
Withdrawing constitutional protections from corporate legal fictions and replacing global corporations with politically subordinate institutions of enterprise are the self-evident challenges of our era. Yet we see conference after conference for justice taking place where corporations are barely on the agenda. People work hard to enact election and lobbying reforms which leave corporate claims to free speech unchallenged, permit corporate lobbyists to roam the halls of government and fill our elected officials' pockets with money. Citizen groups hire lawyers to sue regulatory agencies over and over again, but justice is continually mocked by court-sanctioned corporate claims to property rights. Appointed judges keep violating the expressed intentions of laws passed by a century of citizen organizing. And people invest years of time and effort to get corporate leaders to sign codes of conduct which are purely voluntary, and to gain standing in national and international councils only to find that corporations have written all the rules.
It's not corporate responsibility, or corporate accountability, or good corporate citizenship that sovereign people must seek. Those phrases are all contradictions in terms, and diversions from the public's central task -- to become unified enough to exert citizen authority over the creation, structure, and functioning of all business enterprises.
This Is Not as Crazy as it May Appear
In the United States after the American Revolution, both law and tradition defined corporations as creatures of the state, subordinate to the sovereign people.  The people who came -- or were forcibly brought -- to these shores knew first-hand that unconstitutionalized business extensions of the state -- such as the East India Company, the Hudson's Bay Company, the Royal Africa Company, and the crown corporations which ran colonies in Carolina, Virginia, Pennsylvania and elsewhere -- were tyrannical and dictatorial by design. For example, the Royal Africa Company played a major role in the transatlantic slave trade.  The directors of the crown corporations in North America exercised total authority over the colonists -- conscripting them into corporate militia, instructing them on what to grow, what work to do, where to buy goods, where to market their products, what to think.
The need to be wary of corporations was expressed by pamphleteering revolutionaries such as Thomas Earle: "Chartered privileges are a burthen [sic], under which the people of Britain, and other European nations, groan in misery."  Jefferson spoke about the need "to 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."  Artisans and mechanics made known their concerns as well, that absentee corporate owners would turn them into "a commodity, being as much an article of commerce as woolen, cotton or yarn." 
To be sure, great gaps always existed between the ideals and achievements of the American Revolution. The Constitution and laws have served as tools for legalized oppression as well as for inspiration and liberation. But for several generations, incorporation was regarded both by law and by custom as a privilege, and all corporations were obligated to serve the public trust. Charters were issued sparingly, and expired after twenty or thirty years. State legislators spelled out rules for each corporation in its charter, and then in state corporation codes. Among the detailed requirements, directors and managers were held liable for corporate harms, capitalization and land holdings were restricted, and the rights of minority shareholders were carefully protected. (For example, unanimous shareholder approval for major corporate decisions was common.)
And legislatures reserved the right to amend and revoke corporate charters at will. Faced with the onslaught of corporate power, they eventually retreated from exercising that right. But the powers, though latent, are still there waiting to be used.
Latent State Powers
For example, in Wisconsin during the past hundred years, a corporation could not own another corporation; corporate landholdings and capitalization were limited; corporate officers and directors were liable for all corporate harms; the state reserved the right to amend and revoke corporate charters, as the attorney general once put it, "for no reason at all." Until 1973, corporations were forbidden from contributing money to election campaigns. And until 1953, violating this law constituted a felony. 
A federal bankruptcy court construing Florida law in 1984 declared that it was a "well-settled principle that the legislature cannot bargain away the police power of the sovereign or its power to take appropriate measures to protect the health, safety and morals of its citizens. . . . It cannot be gainsaid that corporations are creatures of the state legislature and owe their existence to a grant of the charter by the state. To enforce and control their functions falls, without doubt, within the regulatory power of the state. . . . From all this follows that the State of Florida is not prevented to take measures to assure that the corporate charter granted by the State is not misused or that the corporation is not used for purposes that are illegal or expressly prohibited by the charter. Neither is the State powerless to revoke the charter. . . ." 
Article 83 of the New Hampshire Constitution reads: "The size and function of all corporations should be so limited and regulated as to prohibit fictitious capitalization and provision should be made for the supervision and government thereof. Therefore, all just power possessed by the state is hereby granted to the general court to enact laws to prevent the operations within the state of all persons and associations, and all trusts and corporations, foreign or domestic, and the officers thereof, who endeavor to raise the price of any article of commerce or to destroy free and fair competition in the trades and industries through combination, conspiracy, monopoly, or any other unfair means."
According to Section 1101 of the New York State Business Corporation Law, the attorney general "may bring an action for the dissolution of a corporation upon one or more of the following grounds. . . (2) That the corporation has exceeded the authority conferred upon it by law, or has violated any provision of law whereby it has forfeited its charter, or carried on, conducted, or transacted its business in a persistently fraudulent or illegal manner, or by the abuse of its powers contrary to the public policy of the state has become liable to be dissolved." That state's constitution, in article XIV, section 4, defines "the public policy of the state": "The public policy of the state shall be to conserve and protect its natural resources and scenic beauty and encourage the development and improvement of its agricultural lands for the production of food and other agricultural products."
In Washington State, "Every corporation, whether foreign or domestic, which shall violate any provision of RCW 9A.28.040 [criminal conspiracy], shall forfeit every right and franchise to do business in this state. The attorney general shall begin and conduct all actions and proceedings necessary to enforce the provisions of this subsection." 
Forty nine state corporation codes outline grounds for charter revocation. Professor David Millon has observed that "state general incorporation laws routinely include provisions reserving the right of amendment and announcing their potentially retroactive force . . . state legislatures define the content of these property rights. By redefining them, the legislatures are simply exercising a prerogative that has always been theirs . . . . The manner in which shareholder property rights are defined is a manifestation of the states' general power to specify the content of property rights in order to promote justice or utility. So-called private property rights always exist in order to give expression to public values; the survival of a given property law regime depends ultimately on its social utility." 
Looking To The Future
In response to accelerating corporate oppression and destruction, an intensification of citizen resistance and opposition is now under way. At some fifteen "Rethinking The Corporation" meetings we have organized in ten states, we find people moving increasingly quickly through discussions about their limited goals, narrow tactics and false victories of recent years, and about the anti-democratic nature of giant corporations.
More and more people are being inspired by the legal and corporate histories of their states, which they are discovering for themselves in preparing for these meetings. They are eager to begin the deep educating and organizing work they know is essential for the long haul. This work has begun in Maine, Wisconsin and Oregon, where groups have formed to pursue corporate disempowerment agendas.
Compared with just two years ago, when suggesting that people should organize to get their states to dissolve the most abusive corporations evoked nervous laughter and advice to "get real," growing numbers of people now see this work as essential for achieving justice and protecting human rights. But they also recognize the difficulties of such undertakings.
For example, how do people avoid ending up in the courts, before even a significant minority of the bench and bar has been acquainted with the history of citizen sovereignty over corporations, or before a movement exists to restrain unsavory political, legal and political counterattack by corporate leaders? How do people prepare for -- even pre-empt -- threats of freezing, starving, joblessness in the dark from corporations, their front groups, politicians and academics? What about the "divide and conquer" efforts that can be anticipated including what Noam Chomsky has labeled "feigned dissents"  intended to divert debate and derail a citizen's movement . . . or comparable diversion and derailing by well-meaning people willing to go along with corporate rule because they do not believe there are alternatives to giant corporations?
There is no avoiding the formidable task of overcoming the colonization of our minds, of uprooting what Edward Said has called the "ideological pacification" that has been taking place for decades because large corporations have dominated so many aspects of our lives and communities.  As Cornel West has observed, "[t]he sheer power of corporate capital . . . makes it difficult to even imagine what a free and democratic society would look like (or how it would operate) if there were publicly accountable mechanisms that alleviated the vast disparities in resources, wealth, and income owing in part to the vast influence of big business on the U.S. government and its legal institutions." 
This colonization is at the heart of the "TINA" (There Is No Alternative) phenomenon, which pervades all aspects of American life. But once people convince each other that there are real alternatives to the present domination by large corporations, then redefining the relationship between the people and our enterprises -- based on the principles of citizen sovereignty and self-governance -- will no longer seem like an impossible dream. And the adoption of model state corporation codes based on these principles, reinforced by a body of legal doctrines, will appear to be logical, and achievable.
But We the People -- and our lawyers -- will have to shift our thinking and our strategizing. We can start by figuring out how to resist corporate harmdoing in ways which begin to weaken all corporations, and by seizing the offensive to define the conditions under which corporations may exist and function.
And as the American people begin reclaiming citizen sovereignty from corporate fictions, there must be deliberate efforts to extend the benefits of sovereignty to those who have historically been excluded from constitutional "personhood" -- notably women, people of color, Native Americans, other species, future generations, and the Earth itself.
None of this will be easy or quick. But the only other choice is giving up and living under corporate rule. And failure even to try will abandon our children to the terrifying question posed by the philosopher Morris Raphael Cohen more than half a century ago:
Never before have those absorbed in the producing of material things had so much power in the governance of human life. . . But their ultimate criterion is the very simple one of monetary profit. Can the ultimate interest of human life be safely left to be governed by that simple consideration? 
People v. North River Sugar Refining Co., 24 N.E. 834 (1890)
Charles W. McCurdy, "American Law And The Marketing Structure Of The Large Corporation, 1875-1890," 38 J. ECON. HIST. 631, 648 (1978).
Morris R. Cohen, "Property and Sovereignty" in Law and the Social Order: Essays in Legal Philosophy 41, 44 (1933).
Felix Frankfurter, The Commerce Clause Under Marshall, Taney and Waite, quoted in Arthur S. Miller, The Supreme Court and American Capitalism 1 (1968).
Mass. Const. of 1780, p. 1, Art. VI.
Joseph Singer, "The Reliance Interest in Property," 40 STANFORD L.REV. 614 (1988).
Justin Martin & Lorraine Tritto, "The Fortune 500 Ranked by Sales," Fortune, Apr. 19, 1993, at 184, 184-185; The World Bank, World Development Report (1994).
United States Congress, Off. of Tech. Assessment, Multinationals and the National Interest: Playing by Different Rules 38 (1993).
United States Bureau of the Census, Statistical Abstract of the United States, 1994, Tables 839, 870.
Id., Table 870.
Roger Lowenstein, "The `20% Club' No Longer Is Exclusive," Wall Street Journal, May 4, 1995, at C1.
David Dembo & Ward Morehouse, The Underbelly of the U.S. Economy: Joblessness and the Pauperization of Work in America 17-32 (1995).
Thomas J. Lueck, "Tax Breaks for Companies Flow Despite Budget Cuts in New York," New York Times, July 5, 1995, at A1, A18.
Richard Grossman & Frank Adams, Taking Care of Business: Citizenship and the Charter of Incorporation (1993).
W.E.B. Du Bois, The World and Africa 54 (1946).
Thomas Earle, The Right of States to Alter and Annul Charters, Considered, and the Decisions of the Supreme Court of the United States Therein Examined (1823).
People's Bicentennial Commission, The Voices of the American Revolution 154 (1975).
Mechanics Free Press, Sept. 20, 1828, quoted in Louis Hartz, Economic Policy and Democratic Thought, 1776-1860 at 197 (1948).
Jane A. Morris, "Is It Live or Is It Corporate?" (1995) (unpublished manuscript, available from editor).
In re Jesus Loves You, Inc., 40 B.R. 42, 45 (Bankr. M.D. Fla. 1984).
Wash. Rev. Code ¤ 9A.08.030(5) (1995) (emphasis added).
David Millon, "Redefining Corporate Law," 24 IND. L. REV. 223, 272-73 (1991).
Noam Chomsky, Language and Politics 376 (C.P. Otero ed. 1988).
Edward Said, Culture and Imperialism (1994).
Cornel West, "The Role of Law in Progressive Politics," in The Politics of Law 468, 468-469 (David Kairys ed. 1990).
Morris Cohen, A Tribute to Professor M.R. Cohen, Teacher and Philosopher 81 (1928).
Richard L. Grossman and Ward Morehouse are co-directors of The Program On Corporations, Law & Democracy. Grossman was director of Environmentalists For Full Employment from 1976-1984. Morehouse, president of the Council on Public And International Affairs, is a human rights activist.