Friday, May 1, 2015

Why Companies Are Individuals... and Not

Companies are people. And they aren't.

This concept of legal personhood, or legally responsible entity, is embodied in the United States Code:
1 U.S.C. §1 (United States Code): In determining the meaning of any Act of Congress, unless the context indicates otherwise the words "person" and "whoever" include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals;
The reason for this artificial legal construct is simple, though many progressives, and more than a few conservatives, fail to understand why the construct is necessary. If corporate entities didn't exist as people, they could not conduct business. Consider everything a company does that an individual does:
  1. Buy property.
  2. Pay bills.
  3. Enter into contracts.
  4. Pay individuals (employees and consultants).
  5. Register copyrights and patents.
  6. Pay taxes and fees.
  7. Pay fines… (yes, that matters).
Executives come and go, so suggesting they have the legal obligation for all contracts is absurd. Imagine having to reassign all contracts and property when a CEO, COO, CFO, or other executive left a company. That's not feasible. Likewise, board members and stockholder change. Companies are composed of people, but the composition changes constantly.

When you are hired by a company, no one individual is bound by the agreement: the entire company is. The people hiring you might leave, but you surely wouldn't want the employment contract to be instantly nullified. You need an employer to be bound by basic rules, just as a sole-proprietor would be.

Companies need to own buildings, furniture, technology, equipment, and real estate. Again, those items need to belong to "someone" (the legal entity) who isn't a person… because the people making purchases come and go. A delivery company owns its vans, and is legally responsible for those vehicles. The company has to pay for licenses, insurance, and any operational costs. That's personhood.

Legally, a person has free speech. Legally, a voluntary assembly of people has free speech. After all, that's what a political party is: a group of like-minded people engaged in free speech. So, does a company have free speech? What about a non-profit company? What are the limits and why?

The argument that companies aren't people is also accurate, but it ignores that people are the company.

Companies can't be sent to jail. But of course we should hold the individuals within a company responsible for illegal actions and decisions that harm others.

Trying to detail every case when a company is or is not a "person" would create messy legal disputes. We need to maintain the idea that companies are legal entities, while also holding leaders accountable for what they do as individuals.