Taking Care of Business
Citizenship and the Charter of Incorporation
by Richard L. Grossman and Frank T. Adams, 1993
Program on Corporations, Law and Democracy (POCLAD)
Corporations cause harm every day. Why do their harms go unchecked?
How can they dictate what we produce, how we work, what we eat,
drink and breathe? How did a self-governing people let this come
Corporations were not supposed to reign in the United States.
When we look at the history of our states, we learn that citizens
intentionally defined corporations through charters-the certificates
In exchange for the charter, a corporation was obligated to
obey all laws, to serve the common good, and to cause no harm.
Early state legislators wrote charter laws and actual charters
to limit corporate authority, and to ensure that when a corporation
caused harm, they could revoke its charter.
During the late 19th century, corporations subverted state
governments, taking our power to put charters of incorporation
to the uses originally intended.
Corporations may have taken our political power but they have
not taken our Constitutional sovereignty. Citizens are guaranteed
sovereign authority over government officeholders. Every state
still has legal authority to grant and to revoke corporate charters.
Corporations, large or small, still must obey all laws, serve
the common good, and cause no harm.
To exercise our sovereign authority over corporations, we
must take back our political authority over our state governments.
CLAIMING OUR LEGACY
Today, in our names, state legislators give charters to individuals
who want to organize businesses. Our legislators are also supposed
to oversee how every corporation behaves. Corporations cannot
operate-own property, borrow money, hire and fire, manufacture
or trade, sign contracts, sell stock, sue and be sued, accumulate
assets or debts-without the continued permission of state officeholders.
Our right to charter corporations is as crucial to self-government
as our right to vote. Both are basic franchises, essential tools
At first only white men who owned property could vote, and
gaining the vote for every person has taken years. But as we were
winning that struggle, corporate promoters were taking away our
right to have a democratic say in our economic lives.
Corporate owners claim special protections under the U.S.
Constitution. They assert the legal authority over what to make
and how to make it, to move money and mountains, to influence
elections and to bend governments to their will.
They insist that once formed, corporations may operate forever.
Corporate managers say they must enjoy limited liability, and
be free from community or worker interference with business judgments.
The lord proprietors of England's colonial trading corporations
said the same things, even boasting that their authority came
not from a constitution, but from God. Since the colonists used
guns to take land from the Indians, they could easily see the
source of that corporate authority was the king's militia.
The colonists did not make a revolution over a tax on tea.
They fought for many reasons but chiefly to create a nation where
citizens were the government and ruled corporations.
So even as Americans were routing the king's armies, they
vowed to put corporations under democratic command. As one revolutionary,
Thomas Allen, said:
It concerned the People to see to it that whilst we are fighting
against oppression from the King and Parliament that we did not
suffer it to rise up in our Bowels... [and to have] Usurpers rising
up amongst ourselves.
The victors entrusted the chartering process to each state
legislature. Legislators still have this public trust.
A HOSTILE TAKEOVER
The U.S. Constitution makes no mention of corporations. Yet
the history of constitutional law is, as former Supreme Court
Justice Felix Frankfurter said, "the history of the impact
of the modern corporation upon the American scene."
Today's business corporation is an artificial creation, shielding
owners and managers while preserving corporate privilege and existence.
Artificial or not, corporations have won more rights under law
than people have-rights which government has protected with armed
Investment and production decisions that shape our communities
and rule our lives are made in boardrooms, regulatory agencies,
and courtrooms. Judges and legislators have made it possible for
business to keep decisions about money, production, work and ownership
beyond the reach of democracy. They have created a corporate system
This is not what many early Americans had in mind.
People were determined to keep investment and production decisions
local and democratic. They believed corporations were neither
inevitable nor always appropriate. Our history is filled with
successful worker-owned enterprises, cooperatives and neighborhood
shops, efficient businesses owned by cities and towns. For a long
time, even chartered corporations functioned well under sovereign
But while they were weakening charter laws, corporate leaders
also were manipulating the legal system to take our property rights.
"Corporations confronted the law at every point. They hired
lawyers and created whole law firms," according to law professor
Lawrence M. Friedman. "They bought and sold governments.
In law, property is not merely a piece of land, a house, a
bicycle. Property is a bundle of rights; property law determines
who uses those rights. As legal scholar Morris Raphael Cohen said,
property is "what each of us shall receive from our work,
and from the natural resources of the earth...the ownership of
land and machinery, with the rights of drawing rent, interest,
etc., [which] determine the future distribution of the goods..."
Under pressure from industrialists and bankers, a handful
of 19th century judges gave corporations more rights in property
than human beings enjoyed in their persons. Reverend Reverdy Ransom,
himself once a slave treated as property, was among the many to
object, declaring "that the rights of men are more sacred
than the rights of property."
Undeterred by such common sense, judges redefined corporate
profits as property. Corporations got courts to assume that huge,
wealthy corporations competed on equal terms with neighborhood
businesses or with individuals. The courts declared corporate
contracts, and the rate of return on investment, were property
that could not be meddled with by citizens or by their elected
Within a few decades, judges redefined the common good to
mean corporate use of humans and the earth for maximum production
and profit. Workers, cities and towns, states and nature were
left with fewer and fewer rights corporations were bound to respect.
Wielding property rights through laws backed by government
became an effective, reliable strategy to build and to sustain
Some citizens reacted to this hostile takeover by organizing to
maintain their rights over corporations. Mobilizing their cities
and towns, citizens pressured legislators to protect states' economic
rights for many decades.
Others turned to the federal government to guarantee worker
and consumer justice, to standardize finance and stock issues,
to prevent trusts and monopolies, to protect public health and
The major laws which resulted, creating regulatory and managing
agencies, actually give corporations great advantages over citizens.
Some, like the National Labor Relations Act and the National Labor
Relations Board, intended that the government aid citizens against
But these laws and agencies were shaped by corporate leaders,
then diminished by judges. They neither prevent harms, nor correct
wrongs, nor restore people and places. These regulatory laws were-and
remain-reporting and permitting laws, laws to limit competition
and to manage destruction.
Congress, betraying its obligation to preserve, protect and
defend the U. S. Constitution, has been giving away citizen sovereignty
to the EPAs, OSHAs, NLRBs, FTCs, NRCs, SECs, BLMs, RTCs.
Agency administrators act under the assumption that corporations
have prerogatives over labor, investment and production. They
regard land, air and water as corporations' raw materials, and
as lawful places to dump corporate poisons. Business leaders and
politicians are given license to equate corporations' private
goals with the public interest.
Regulators and regulatory laws treat labor as a cost and employees
as disposable. They equate efficiency and freedom with maximum
resource extraction, maximum production and maximum profits. They
shift what had been the corporate burden to prove no harm onto
the citizen, who must prove harm.
Corporations chartered by our states are the cause of political,
economic, and ecological injury around the globe. Little wonder
so many citizens lament today, as Thomas Paine did two hundred
years ago: Beneath the shade of our own vines are we attacked;
in our own house, and on our own lands, is the violence committed
A HIDDEN HISTORY
For one hundred years after the American Revolution, citizens
and legislators fashioned the nation's economy by directing the
The laborers, small farmers, traders, artisans, seamstresses,
mechanics and landed gentry who sent King George III packing feared
corporations. As pamphleteer Thomas Earle wrote:
Chartered privileges are a burthen, under which the people
of Britain, and other European nations, groan in misery.
They knew that English kings chartered the East India Company,
the Hudson's Bay Company and many American colonies in order to
control property and commerce. Kings appointed governors and judges,
dispatched soldiers, dictated taxes, investments, production,
labor and markets. The royal charter creating Maryland, for example,
required that the colony's exports be shipped to or through England.
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
Side by side with these legislative controls, they experimented
with various forms of enterprise and finance. Artisans and mechanics
owned and managed diverse businesses. Farmers and millers organized
profitable cooperatives, shoemakers created unincorporated business
associations. Joint-stock companies were formed.
The idea of limited partnerships was imported from France.
Land companies used various and complex arrangements, and were
not incorporated. None of these enterprises had the powers of
Towns routinely promoted agriculture and manufacture. They
subsidized farmers, public warehouses and municipal markets, protected
watersheds and discouraged overplanting. State legislatures issued
not-for-profit charters to establish universities, libraries,
firehouses, churches, charitable associations, along with new
Legislatures also chartered profit-making corporations to build
turnpikes, canals and bridges. By the beginning of the 1800s,
only some two hundred such charters had been granted. Even this
handful issued for necessary public works raised many fears.
Some citizens argued that under the Constitution no business
could be granted special privileges. Others worried that once
incorporators amassed wealth, they would control jobs and production,
buy the newspapers, dominate elections and the courts. Craft and
industrial workers feared absentee corporate owners would turn
them into "a commodity being as much an article of commerce
as woolens, cotton, or yarn."
Because of widespread public opposition, early legislators
granted very few charters, and only after long, hard debate. Legislators
usually denied charters to would-be incorporators when communities
opposed their prospective business project.
Citizens shared the belief that granting charters was their
exclusive right. Moreover, as the Supreme Court of Virginia reasoned
in 1809: if the applicants' object is merely private or selfish;
if it is detrimental to, or not promotive of, the public good,
they have no adequate claim upon the legislature for the privileges.
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.
Maryland legislators restricted manufacturing charters to forty
years, mining charters to fifty, and most others to thirty years.
Pennsylvania limited manufacturing charters to twenty years. Unless
a legislature renewed an expiring charter, the corporation was
dissolved and its assets were divided among shareholders.
Citizen authority clauses dictated rules for issuing stock,
for shareholder voting, for obtaining corporate information, for
paying dividends and keeping records. They limited capitalization,
debts, land holdings, and sometimes 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.
Sometimes the rates which railroad, turnpike and bridge corporations
could charge were set by legislators. Some legislatures required
incorporators to be state citizens. Other legislatures bought
corporate stock in order to stay closely engaged in a firm's operations.
Early in the 19th century, the New Jersey legislature declared
its right to take over ownership and control of corporate properties.
Pennsylvania established a fund from corporate profits which was
used to buy private utilities to make them public. Many states
Turnpike charters frequently exempted the poor, farmers or
worshippers from paying tolls. In Massachusetts, the Turnpike
Corporation Act of 1805 authorized the legislature to dissolve
turnpike corporations when their receipts equalled the cost of
construction plus 12 percent. Then the road became public. In
New York, turnpike gates were subject to be thrown open, and the
company indicted and fined, if the road is not made and kept easy
and safe for public use.
Citizens kept banks on particularly short leashes. Their charters
were limited from three to ten years. Banks had to get legislative
approval to increase their capital stock, or to merge. Some state
laws required banks to make loans for local manufacturing, fishing,
agriculture enterprises, and to the states themselves. Banks were
forbidden to engage in trade. Private banking corporations were
banned altogether by the Indiana constitution in 1816, and by
the Illinois constitution in 1818. People did not want business
owners hidden behind legal shields, but in clear sight. That is
what they got. As the Pennsylvania legislature stated in 1834:
A corporation in law is just what the incorporating act makes
it. It is the creature of the law and may be moulded to any shape
or for any purpose that the Legislature may deem most conducive
for the general good.
In Europe, charters protected directors and stockholders from
liability for debts and harms caused by their corporations.
American legislators rejected this corporate shield. Led by
Massachusetts, most states refused to grant such protection. Bay
State law in 1822 read: "Every person who shall become a
member of any manufacturing company...shall be liable, in his
individual capacity, for all debts contracted during the time
of his continuing a member of such corporation."
The first constitution in California made each shareholder
"individually and personally liable for his proportion of
all [corporate] debts and liabilities." Ohio, Missouri and
Arkansas made stockholders liable over and above the stock they
actually owned. In 1861, Kansas made stockholders individually
liable "to an additional amount equal to the stock owned
by each stockholder."
Prior to the 1840s, courts generally supported the concept
that incorporators were responsible for corporate debts. Through
the 1870s, seven state constitutions made bank shareholders doubly
liable. Shareholders in manufacturing and utility companies were
often liable for employees' wages.
Liability laws sometimes reflected the dominance of one political
party or another. In Maine, for example, liability laws changed
nine times from no liability to full liability between 1823 and
1857, depending on whether the Whigs or the Democrats controlled
Until the Civil War, most states enacted laws holding corporate
investors and officials liable. As New Hampshire Governor Henry
Hubbard argued in 1842: There is no good reason against this principle.
In transactions which occur between man and man there exists a
direct responsibility-and when capital is concentrated...beyond
the means of single individuals, the liability is continued.
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. Citizens believed it was society's inalienable
right to abolish an evil.
Revocation clauses were written into Pennsylvania charters
as early as 1784. The first revocation clauses were added to insurance
charters in 1809, and to banking charters in 1814. Even when corporations
met charter requirements, legislatures sometimes decided not to
renew those charters.
States often revoked charters by using quo warranto-by what
authority-proceedings. In 1815, Massachusetts Justice Joseph Story
ruled in Terrett v. Taylor: A private corporation created by the
legislature may lose its franchises by a misuser or nonuser of
them...This is the common law of the land, and is a tacit condition
annexed to the creation of every such corporation.
Four years later, the U. S. Supreme Court tried to strip states
of this sovereign right. Overruling a lower court, Chief Justice
John Marshall wrote in Dartmouth College v. Woodward that the
U.S. Constitution prohibited New Hampshire from revoking a charter
granted to the college in 1769 by King George III. That charter
contained no reservation or revocation clauses, Marshall said.
The court's attack on state sovereignty outraged citizens.
Protest pamphlets rolled off the presses. Thomas Earle wrote:
It is aristocracy and despotism, to have a body of officers, whose
decisions are, for a long time, beyond the control of the people.
The freemen of America ought not to rest contented, so long as
their Supreme Court is a body of that character.
Said Massachusetts legislator David Henshaw: "Sure I
am that, if the American people acquiesce in the principles laid
down in this case, the Supreme Court will have effected what the
whole power of the British Empire, after eight years of bloody
conflict, failed to achieve against our fathers. "
Opponents of Marshall's decision believed the ruling cut out
the heart of state sovereignty. They argued that a corporation's
basic right to exist-and to wield property rights-came from a
grant which only the state had the power to make. Therefore, the
court exceeded its authority by declaring the corporation beyond
the reach of the legislature which created it in the first place.
People also challenged the Supreme Court's decision by distinguishing
between a corporation and an individual's private property. The
corporation existed at the pleasure of the legislature to serve
the common good, and was of a public nature. New Hampshire legislators
and any other elected state legislators had the absolute legal
right to dictate a corporation's property use by amending or repealing
State legislators were stung by citizen outrage. They were
forced to write amending and revoking clauses into new charters,
state laws and constitutions, along with detailed procedures for
In 1825, Pennsylvania legislators adopted broad powers to
" revoke, alter or annul the charter..." at any time
they thought proper.
New York state's 1828 corporation law specified that every
charter was subject to alteration or repeal. Section 320 declared
that corporate acts not authorized by law were ultra vires, or
beyond the rights of corporations and grounds for charter revocation.
The law gave the state authority to secure a temporary injunction
to prevent corporations from resisting while legal action to dissolve
them was under way.
Delaware voters passed a constitutional amendment in 1831
limiting all corporate charters to twenty years. Other states,
including Louisiana and Michigan, passed constitutional amendments
to place precise time limits on corporate charters.
President Andrew Jackson enjoyed wide popular support when
he vetoed a law extending the charter of the Second Bank of the
United States in 1832. That same year, Pennsylvania revoked the
charters of ten banks.
During the 1840s, citizens in New York, Delaware, Michigan
and Florida required a two thirds vote of their state legislatures
to create, continue, alter or renew charters. The New York legislature
in 1849 instructed the attorney general to annul any charter whose
applicants had concealed material facts, and to sue to revoke
a charter on behalf of the people whenever he believed necessary.
Voters in Wisconsin and four other states rewrote constitutions
so that popular votes had to be taken on every bank charter recommended
by their legislatures. Rhode Island voters said charters for corporations
in banking, mining, manufacturing, and transportation had to be
approved by the next elected state legislature before being granted.
Over several decades starting in 1844, nineteen states amended
their constitutions to make corporate charters subject to alteration
or revocation by legislatures. Rhode Island declared in 1857:
the charter or acts of association of every corporation hereafter
created may be amendable or repealed at the will of the general
Pennsylvanians adopted a constitutional amendment in 1857
instructing legislators to "alter, revoke or annul any charter
of a corporation hereafter conferred...whenever in their opinion
it may be injurious to citizens of the community..."
As late as 1855, citizens had support from the U.S. Supreme
Court. In Dodge v. Woolsey, the court ruled the people of the
states [have not]:
released their powers over the artificial bodies which originate
under the legislation of their representatives...Combinations
of classes in society...united by the bond of a corporate spirit...unquestionably
desire limitations upon the sovereignty of the people... But the
framers of the Constitution were imbued with no desire to call
into existence such combinations.
STRUGGLES FOR CONTROL
Massachusetts mechanics who opposed a charter request by the
men who wanted to start the Amherst Carriage Company in 1838 told
the legislature: We...do look forward with anticipation to a time
when we shall be able to conduct the business upon our own responsibility
and receive the proffits of our labor...we believe that incorporated
bodies tend to crush all feable enterprise and compel us to Work
out our dayes in the Service of others.
Contests over charters and the chartering process were not
abstractions. They were battles to control labor, resources, community
rights, and political sovereignty. This was a major reason why
members of the disbanded Working Men's Party formed the Equal
Rights Party of New York state. The party's 1836 convention resolved
that lawmakers: legislate for the whole people and not for favored
portions of our fellow-citizens... It is by such partial and unjust
legislation that the productive classes of society are compelled
by necessity, to form unions for mutual preservation...[lawmakers
should reinstate us] in our equal and constitutional rights according
to the fundamental truths in the Declaration of Independence,
and as sanctioned by the Constitution of the United States...
This political agenda had widespread support in the press.
A New Jersey newspaper wrote in an editorial typical of the 1830s:
"the Legislature ought cautiously to refrain from increasing
the irresponsible power of any existing corporations, or from
chartering new ones, " else people would become "mere
hewers of wood and drawers of water to jobbers, banks and stockbrokers."
With these and other prophetic warnings still ringing in their
ears, citizens began to feel control over their futures slipping
out of their communities and out of their hands. Corporations
were abusing their charters to become conglomerates and trusts.
They were converting the nation's treasures into private fortunes,
creating factory systems and company towns. Political power began
flowing to absentee owners intent upon dominating people and nature.
As the nation moved closer to civil war, farmers were forced
to become wage earners. Increasingly separated from their neighbors,
farms and families, they became fearful of unemployment-a new
fear which corporations: quickly learned to exploit.
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.
Julianna, a Lowell, Massachusetts, factory worker, wrote:
Incarcerated within the walls of a factory, while as yet mere
children-drilled there from five till seven o'clock, year after
year...what, we would ask, are we to expect, the same system of
labor prevailing, will be the mental and intellectual character
of the future generations...A race fit only for corporation tools
and time-serving slaves?...Shall we not hear the response from
every hill and vale, "EQUAL RIGHTS, or death to the corporations?"
Recognizing that workers were building a social movement, industrialists
and bankers pressed on, hiring private armies to keep workers
in line. They bought newspapers and painted politicians as villains
and businessmen as heroes. Bribing state legislators, they then
announced legislators were corrupt, that they used too much of
the public's resources and time to scrutinize every charter application
and corporate operation.
Corporate advocates campaigned to replace existing chartering
laws with general incorporation laws that set up simple administrative
procedures, claiming this would be more efficient. What they really
wanted was the end of legislative authority over charters.
Cynically adopting the language of early charter opponents,
corporate owners and their lawyers attacked existing legislative
charters as special privileges. They called for equal opportunity
for all entrepreneurs, making it seem as if they were asking that
everyone have the same chance to compete.
But these corporations were not just ordinary individual entrepreneurs.
They were large accumulations of capital, and getting larger.
By 1860, thousands of corporations had been chartered-mostly factories,
mines, railroads and banks.
Government spending during the Civil War brought these corporations
fantastic wealth. Corporate managers developed the techniques
and the ability to organize production on an ever grander scale.
Many corporations used their wealth to take advantage of war and
Reconstruction years to get the tariff, banking, railroad, labor
and public lands legislation they wanted.
Flaunting new wealth and power, corporate executives paid
"borers" to infest Congress and state capitals, bribing
elected and appointed officials alike. They pried loose from the
public trust more and more land, minerals, timber and water. Railroad
corporations alone obtained over 180 million free acres of public
lands by the 1870s, along with many millions of dollars in direct
Little by little, legislators gave 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
and interpreted the laws..."
Even as businesses secured general incorporation laws for mining,
agriculture, transportation, banking and manufacturing businesses,
citizens held on to the authority to charter. Specifying company
size, shareholder terms, and corporate undertakings remained a
major citizen strategy.
During the 1840s and 1850s, states revoked charters routinely.
In Ohio, Pennsylvania and Mississippi, banks lost charters for
frequently "committing serious violations...which were likely
to leave them in an insolvent or financially unsound condition."
In Massachusetts and New York, turnpike corporations lost charters
for "not keeping their roads in repair."
"No constitutional convention met, between 1860-1900,
without considering the problems of the corporations," according
In 1876, New York's constitutional convention authorized the
attorney general to bring an action to "vacate the charters"
of any corporations which violated the state chartering law or
abused their rights and privileges. Eighteen years later, the
Central Labor Union of New York City asked the attorney general
to request the state supreme court to revoke the charter of the
Standard Oil Trust of New York. He did.
New York, Ohio, Michigan and Nebraska revoked the charters
of oil, match, sugar and whiskey trusts. Courts in each state
declared these trusts illegal because the corporations-in creating
the trusts-had exceeded the powers granted by their charters.
" Roaming and piratical corporations" like Standard
Oil of Ohio, then the most powerful corporation in the world,
refused to comply and started searching for "a Snug Harbor"
in another state.
Rhode Island enacted a law requiring corporate dissolution
for "fraud, negligence, misconduct..." Language was
added to the Virginia constitution enabling "all charters
and amendments of charters to be repealed at any time by special
Farmers and rural communities, groaning in misery at the hands
of railroad, grain and banking corporations, ran candidates for
office who supported states' authority "to reverse or annul
at any time any chartered privilege..."
The Farmers' Anti-Monopoly Convention meeting in Des Moines
in 1873, resolved that: all corporations are subject to legislative
control; [such control] should be at all times so used as to prevent
moneyed corporations from becoming engines of oppression.
That same year, Minnesota Grangers resolved: We, the farmers,
mechanics and laborers of Minnesota, deem the triumph of the people
in this contest with monopolies essential to the perpetuation
of our free institutions and the promotion of our private and
Because these and other powerful resistance movements directly
challenged the harmful corporations of their times, and because
they kept pressure on state representatives, revocation and amendment
clauses can be found in state charter laws today.
But keeping strong charter laws in place was ineffective once
courts started aggressively applying legal doctrines which made
protection of corporations and corporate property the center of
As corporations got stronger, government became easier prey;
communities became more vulnerable to intimidation.
Following the Civil War, and well into the 20th century, appointed
judges gave privilege after privilege to corporations. They freely
reinterpreted the U.S. Constitution and transformed common law
Judges gave certain corporations the power of eminent domain-the
right to take private property with minimal compensation to be
determined by the courts. They eliminated jury trials to determine
corporation-caused harm and to assess damages. Judges created
the right to contract, a doctrine which, according to law professor
Arthur Selwyn Miller, was put forward as a "principle of
eternal truth" in "one of the most remarkable feats
of judicial law-making this nation has seen."
By concocting the doctrine that contracts originated in the
courts, judges then took the right to oversee corporate rates
of return and prices, 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.
Workers, the courts also ruled, were responsible for causing
their own injuries on the job. The Kentucky Court of Appeals prefigured
this doctrine in 1839: "Private injury and personal damage...must
be expected" when one goes to work for a corporation bringing
" progressive improvements." This came to be called
the assumption of risk, what professor Cohen dismissed as "a
Traditionally under common law, the burden of damage had been
on the business causing harms. Courts had not permitted trespass
or nuisance to be excused by the alleged good works a corporation
might claim. Nor could a corporation's lack of intent to cause
harm decrease its legal liability for injuries it caused to persons
or the land.
Large corporations-especially railroad and steamship companies-pressured
judges to reverse this tradition, too. Attentive to lawyers and
growing commercial interests, judges creatively interpreted the
commerce and due process clauses of the U.S. Constitution. Inventing
a new concept which they called substantive due process, they
declared one state law after another unconstitutional. Wages and
hours laws, along with rate laws for grain elevators and railroads,
were tossed out.
Judges also established the managerial prerogative and business
judgment doctrines, giving corporations legal justification to
arrest civil rights at factory gates, and to blockade democracy
at boardroom doors.
Corporations were enriched further when judges construed the
common good to mean maximum production-no matter what was manufactured,
who was hurt, or what was destroyed. Unfettered corporate competition
without citizen interference became enshrined under law.
Another blow to citizen constitutional authority came in 1886.
The Supreme Court ruled in Santa Clara County v. Southern Pacific
Railroad that a private corporation was a natural person under
the U.S. Constitution, sheltered by the Bill of Rights and the
"There was no history, logic or reason given to support
that view, " Supreme Court Justice William O. Douglas was
to write sixty years later.
But the Supreme Court had spoken. 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 harms. The high
court ruled that elected legislators had been taking corporate
property "without due process of law."
Emboldened, some judges went further declaring unions were
civil and criminal conspiracies, and enjoining workers from striking.
Governors and presidents backed judges up with police and armies.
By establishing "new trends in legal doctrine and political-economic
theory" permitting "the corporate reorganization of
the property production system," the Supreme Court effectively
sabotaged blossoming social protest movements against incorporated
wealth. Judges positioned the corporation to become "America's
representative social institution," "an institutional
expression of our way of life."
Legislative "charter mongering" attracted as many corporations
as possible to their states. In exchange for taxes, fees and whatever
else they could get their hands on, some state governments happily
provided new homes to Standard Oil and other corporations.
Led by New Jersey and Delaware, legislators watered down or
removed citizen authority clauses. They limited the liability
of corporate owners and managers, then started handing out charters
that literally lasted forever. Corporations were given the right
to operate in any fashion not explicitly prohibited by law.
After such losses of citizen sovereignty, twenty-six corporate
trusts ended up controlling 80 percent or more of production in
their markets by the early 1900s. There were trusts for almost
everything-matches, whiskey, cotton, alcohol, corks, cement, stoves,
ribbons, bread, beef.
During the Progressive Era, corporations operated as ruthlessly
as any colonial trading monopoly in the 1700s. Blood was often
spilled resisting these legal fictions.
Jo Battley, a West Virginia miner, was beaten severely and
stabbed trying to organize a union at the Consolidated Coal Company.
Mother Jones, one of his rescuers, said, "We tried to get
a warrant out for the arrest of the gunmen but we couldn't because
the coal company controlled the judges and the courts."
Corporations 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
Today, many U.S. corporations are transnational. No matter
how piratical or where they roam, the corrupted charter remains
the legal basis of their existence.
TAKING BACK THE CHARTERS, TAKING BACK THE LAW
We are out of the habit of contesting the legitimacy of the
corporation, or challenging concocted legal doctrines, or denying
courts the final say over our economic lives.
For most of this century, citizens skirmished with corporations
to stop doing harm, but failed to question the legitimacy of the
harmdoers. We do not use the charter and the chartering process
to stop corporate harm, or to define the corporation on our terms.
What passes for political debate today is not about control,
sovereignty, or the economic democracy which many American revolutionaries
thought they were fighting to secure.
Too many organizing campaigns accept the corporation's rules,
and wrangle on corporate turf. We lobby congress for limited laws.
We have no faith in regulatory agencies, but turn to them for
relief. We plead with corporations to be socially responsible,
then show them how to increase profits by being a bit less harmful.
How much more strength, time, and hope will we invest in such
Today, corporate charters can be gotten easily by filling out
a few forms and by paying modest fees.
Legislatures delegate authority to public officeholders to
rubber-stamp the administration of charters and the chartering
process. The secretary of state and the attorney general are the
officials most often involved. Sometimes they are elected; sometimes
they are appointed.
* In all states, legislatures continue to have the historic
and the legal obligation to grant, to amend, and to revoke corporate
charters. They are responsible for overseeing corporate activities.
But it has been a long time since many legislatures have done
what they are supposed to do.
In Illinois, the law reads:
12.50 Grounds for judicial dissolution. A Circuit Court may dissolve
(a) in an action by the Attorney General, if it is established
1. the corporation obtained its certificates of incorporation
through fraud; or
2. the corporation has continued to exceed or abuse the authority
conferred upon it by law, or has continued to violate the law...
3. in an action by a shareholder, if it is established that....the
directors or those in control of the corporation have acted, or
are acting, or will act in a manner that is illegal, oppressive
or fraudulent;...or if it is established that dissolution is reasonably
necessary because the business of the corporation can no longer
be conducted to the general advantage of its shareholders.
After entering an order of dissolution, "the Court shall
direct the winding up and liquidation of the corporation's business
In Delaware, Section 284 of the corporation law says that
chancery courts can revoke the charter of any corporation for
"abuse or misuse of its powers, privileges or franchises."
New York requires dissolution when a corporation abuses its
powers, or acts "contrary to the public policy of the state...
The law calls for a jury trial in charter revocation cases.
The Model Business Corporation Act, first written in 1931
by the committee on corporate laws of the American Bar Association,
and revised twice since, is the basis for chartering laws in more
than half the states and the District of Columbia. Although strongly
protecting corporate property, this model law gives courts full
power to liquidate the assets of a corporation if they are "misapplied
It requires the secretary of state "from time to time"
to list the names of all corporations which have violated their
charters along with the facts behind the violations. Decrees of
involuntary dissolution can be issued by the secretary of state
and by courts.
Corporations chartered in other states are called foreign
corporations. Corporations chartered in other nations are called
alien corporations. Legislatures allow foreign or alien corporations
to go into business in their states through this same chartering
process. Either may establish factories or do business after obtaining
a state's certificate of authority.
In Illinois, foreign corporations are "subject to the
same duties, restrictions, penalties and liabilities now or hereafter
imposed upon a domestic corporation of like character."
When we limit our thinking only to existing labor law, or only
to existing environmental law, or only to the courts, or only
to elections-or when we abide by corporate agendas-we abandon
our Constitutional claim on the corporate charter and the chartering
When we forsake our Constitutional claim we ignore historic
tools we can use to define and to control the corporation. We
pass up strategies which can inspire citizens to act. We fail
to demand what we know is right.
We must name and stop what harms us. John H. Hunt, a member
of the Equal Rights Party, wrote this resolution in 1837: Whenever
a people find themselves suffering under a weight of evils, destructive
not only to their happiness, but to their dignity and their virtues;
when these evils go on increasing year after year, with accelerating
rapidity, and threaten soon to reach that point at which peaceable
endurance ceases to be possible; it becomes their solemn duty
coolly to search out the causes of their suffering-to state those
causes with plainness- and to apply a sufficient and a speedy
His resolution was passed unanimously by cheering mechanics,
farmers and working people during a mass rally in a New York City
Around the nation, citizens are no less willing-and are quite
well prepared-to educate, to organize and to agitate.
Citizens who have been to folk schools or labor colleges understand
that by learning together and teaching ourselves corporate history,
we can hone the skills of citizen sovereignty and power.
We can read our state constitutions. Libraries containing
our states' constitutional histories, corporate histories, and
corporate case law can provide details about what earlier citizens
demanded of corporations, what precedents they established, and
which of their legal and organizing methods we can use to our
We can demand to see the charters of every corporation. We
need to know what each charter prohibits, especially if it is
an old charter. Armed with our states' rich legal precedents,
and with our evidence of corporate misuse or abuse, we can amend
or revoke charters and certificates of authority.
When corporations violate our Constitutional guarantees, we
can take them to court ourselves. Corporate officers can be forced
to give us depositions under oath, just as elected officials who
spurned the Constitution were forced to do by the civil rights
movement- often in courtrooms packed with angry citizens.
New Yorkers used to get sufficient and speedy remedy through
injunctions against corporations. We can revive this tradition.
Surrounded by citizens and their peers, judges can be encouraged
to enjoin corporate officials from doing further harm, or from
stripping the corporation's assets, or from moving the company
Stockholders have authority to seek injunctions and file dissolution
suits if they fear managers are acting illegally, oppressively,
fraudulently, or are misusing or wasting corporate assets.
As in the first half of the 19th century, would-be or on-going
incorporators must be made to ask us for the privilege of a charter.
We can set our own criteria: workers must own a significant or
majority share of the company; the workforce must have democratic
decisionmaking authority; charters must be renewed annually; corporate
officers must prove all corporate harm has ceased. For starters.
Who defines the corporation controls the corporation. We cannot
command the modern corporation with laws that require a few days'
notice before the corporation leaves town, or with laws that allow
the corporation to spew so many toxic parts per million. If we
expect to define the corporation using the charters and putting
legislators on our civic leash, we must also challenge prevailing
judicial doctrines. We cannot let courts stand in the way of our
stopping corporate harm.
Legal doctrines are not inevitable or divine. When the liberty
and property rights of citizens are at stake, as former Supreme
Court Justice Louis D. Brandeis said, "the right of property
and the liberty of the individual must be remoulded... to meet
the changing needs of society."
The corporation is an artificial creation, and must not enjoy
the protections of the Bill of Rights.
Corporate owners and officers must be liable for harms they
cause. No corporation should exist forever. Both business judgment
and managerial prerogative must meet the same end as the colonial
trading companies' delusion of divine authority.
Our sovereign right to decide what is produced, to own and to
organize our work, and to respect the earth is as American as
a self-governing peoples' right to vote.
In our democracy, we can shape the nation's economic life
any way we want.
A SAMPLE CITIZENS' RESOLUTION
Chartering a corporation is the citizens' historic right,
and a civic responsibility. Many corporations serve the common
good but too many cause injury, corrode our democracy, and poison
To halt corporate harm, we citizens must redefine the corporation,
reclaim our sovereign authority over the corporation, and when
necessary, revoke charters of incorporation.
We urge local and state elected officials to adopt this Resolution:
Whereas, only citizens have sovereign authority to grant charters
of incorporation; now,
Therefore, be it resolved, that the legislature of this state:
* Redefine the process and criteria for granting corporate
charters to our specifications; and,
* Restore civic authority over the governance of existing
corporate charters to our specifications; and,
* Finally, revoke the charters of harmful corporations, and
revoke the certificates of authority of harmful foreign and alien
corporations operating in our state.