Corporations, the Original Understanding, and the
Problem of Power
IAN SPEIR*
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
116
I. EIGHTEENTH-CENTURY REPUBLICAN THOUGHT . . . . . . . . . . . . . . . .
121
II. THE ORIGINAL UNDERSTANDING OF THE CORPORATION . . . . . . . . . . .
123
A.
A Specially Privileged Entity . . . . . . . . . . . . . . . . . . . . . . . .
124
B.
A New and Uncertain Political Force . . . . . . . . . . . . . . . . .
127
C. Corporation Controversies of the Late Eighteenth Century . .
130
1.
The University of Pennsylvania, 1779–1789 . . . . . . . . .
130
2.
The New York Council of Revision’s Veto, 1785; the
Connecticut Medical Society, 1787 . . . . . . . . . . . . . . . .
133
3.
The Bank of North America, 1786 . . . . . . . . . . . . . . . .
136
4.
The Bank of the United States, 1791 . . . . . . . . . . . . . . .
141
5.
Other Corporation Controversies . . . . . . . . . . . . . . . . . .
143
(i) Municipal Corporations, 1780–1789 . . . . . . . . . . .
143
(ii) The Society for Useful Manufactures, 1791–1792 . .
145
D. A Discussion of this History . . . . . . . . . . . . . . . . . . . . . . . .
147
1.
The Problem of Power . . . . . . . . . . . . . . . . . . . . . . . . .
147
2.
Three Solutions to the Problem . . . . . . . . . . . . . . . . . . .
150
(i) Restrictions on the Incorporation Power . . . . . . . . .
150
(ii) Broad Authority Over Existing Charters . . . . . . . . .
153
(iii) Innovations in Charter Design . . . . . . . . . . . . . . . .
155
Drawing Insights from the Original Understanding . . . .
157
3.
* Law Clerk to the Honorable Jerome A. Holmes, United States Court of Appeals for the Tenth
Circuit. J.D. Georgetown University Law Center, 2011. My gratitude to Dr. Erin Rahne Kidwell, whose
Georgetown seminar on early American legal history provided the initial impetus for this article, and to
my wife Barbara, whose long-suffering and encouragement ensured the article’s completion. The views
expressed herein are solely those of the author. © 2012 Ian Speir.
115
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III. CORPORATIONS AND THE ORIGINAL MEANING OF THE CONSTITUTION .
158
A.
Constitutional Rights: Individuals vs. Corporations . . . . . . .
160
B.
Constitutional Limits: The Power (Or Not) to Restrict Group
Speech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
164
1.
The First Amendment: Text, Contemporary
Understanding, and the Democratic-Republican
Societies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
164
2.
The First Amendment and Corporations . . . . . . . . . . . .
169
3.
The Constitution and Interest Group Politics . . . . . . . . .
170
4.
A Summary and Some Caveats . . . . . . . . . . . . . . . . . . .
176
C. What Role, If Any, for State Legislatures? . . . . . . . . . . . . . .
179
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
182
INTRODUCTION
Holding that a corporation has a “right to speak” under the First Amendment,
the Supreme Court in Citizens United v. Federal Election Commission recently
invalidated a federal restriction on the use of corporate dollars in election
campaigns.1 A firestorm of controversy ensued. Critics of the decision asserted
that those who drafted and ratified the First Amendment would not have thought
that corporations enjoyed free speech rights. Justice Stevens, for example, in his
dissenting opinion for four Justices in the case, wrote that “members of the
founding generation held a cautious view of corporate power and a narrow view
of corporate rights,”2 and “when they constitutionalized the right to free speech
in the First Amendment, it was the free speech of individual Americans that
they had in mind.”3 A New York Times editorial stated that “[t]he founders of
this nation warned about the dangers of corporate influence” and did not assign
“rights [or] protections” to corporations.4 Professor Chemerinsky put it perhaps
most cogently: “[T]here is no evidence that the First Amendment’s drafters
contemplated the notion that spending money in election campaigns is a form of
protected speech. Nor did they intend any provisions in the Bill of Rights to
protect corporations.”5
Justice Scalia joined the majority in Citizens United but wrote separately to
1. 130 S. Ct. 876, 886, 892 (2010).
2. Id. at 951 (Stevens, J., dissenting).
3. Id. at 950.
4. Editorial, The Court’s Blow to Democracy, N.Y. TIMES, Jan. 22, 2010, at A30, available at
http://www.nytimes.com/2010/01/22/opinion/22fri1.html [hereinafter Editorial, The Court’s Blow to
Democracy].
5. Erwin Chemerinsky, The Most Important Decision of the Term, TRIAL, May 2010, at 54, 56.
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address the dissent’s arguments.6 His approach differed markedly from Justice
Stevens. Justice Stevens focused on the founding generation’s views about the
corporation and its role in eighteenth-century society, and in light of those
“background practices and understandings,” he thought it “implausible that the
Framers believed ‘the freedom of speech’” would extend to a corporation.7
Justice Scalia took exception to this approach, asserting that the Framers’
particular views about corporations are “relevant only insofar as [they] can be
thought to be reflected in the understood meaning of the text they enacted.”8 For
Justice Scalia, it was important that the First Amendment was “written in terms
of ‘speech,’ not speakers”; it thus afforded “no foothold for excluding any
category of speaker,” corporate or otherwise, and there was no evidence—at
least, the dissent offered none—“to support any such exclusion.”9 Justice Scalia
concluded that the First Amendment as originally understood protected individuals and corporations alike.10
To date, while a number of scholars have explored the role and conception of
the corporation in early American history,11 few have undertaken to articulate
the “original understanding” of the corporation—American views about the
corporation and its role in society at and around the time the Constitution and
Bill of Rights went into effect.12 Furthermore, none has attempted to tie this
6. See 130 S. Ct. at 925 (Scalia, J., concurring).
7. Id. at 950 (Stevens, J., dissenting). Justice Stevens’ point was actually a bit more nuanced. He
thought the phrase “freedom of speech” was not thought to “extend equally to all corporate speakers.”
Id. (emphasis added). Put otherwise, the First Amendment did not “preclude regulatory distinctions
based on the corporate form.” Id. at 948. This hedging language was necessary to leave room for Justice
Stevens’ contention that for the founding generation, some corporate speakers—those associated with
“the press”—would be able to claim First Amendment protections. See id. at 951 n.57.
8. Id. at 925 (Scalia, J., concurring).
9. Id. at 929.
10. See id. at 928–29.
11. The seminal work on this topic remains 1 & 2 JOSEPH STANCLIFFE DAVIS, ESSAYS IN THE EARLIER
HISTORY OF AMERICAN CORPORATIONS (1917). See also EDWIN MERRICK DODD, AMERICAN BUSINESS
CORPORATIONS UNTIL 1860 (1954); JAMES WILLARD HURST, THE LEGITIMACY OF THE BUSINESS CORPORATION
IN THE LAW OF THE UNITED STATES, 1780–1970 (1970); RONALD E. SEAVOY, THE ORIGINS OF THE AMERICAN
BUSINESS CORPORATION, 1784–1855 (1982); Simeon E. Baldwin, American Business Corporations
Before 1789, 8 AM. HIST. REV. 449 (1903); Simeon E. Baldwin, History of the Law of Private
Corporations in the Colonies and States, in 3 SELECT ESSAYS IN ANGLO-AMERICAN LEGAL HISTORY 236
(Ass’n of Am. Law Schs. ed., 1909); Oscar Handlin & Mary F. Handlin, Origins of the American
Business Corporation, 5 J. ECON. HIST. 1 (1945); Pauline Maier, The Revolutionary Origins of the
American Corporation, 50 WM. & MARY Q. 51 (1993); Samuel Williston, History of the Law of
Business Corporations Before 1800, 2 HARV. L. REV. 105 (1888); Note, Incorporating the Republic: The
Corporation in Antebellum Political Culture, 102 HARV. L. REV. 1883 (1989) [hereinafter Note,
Incorporating the Republic].
12. Many of the histories concerned with the corporation as a business and social institution span the
eighteenth and nineteenth (and sometimes twentieth) centuries and, consequently, treat of the evolution
of the corporation in early American history. See DODD, supra note 11; HURST, supra note 11; SEAVOY,
supra note 11; Note, Incorporating the Republic, supra note 11. Of the historians who limit themselves
to the eighteenth century, two are concerned with corporate law during this period. See Baldwin, supra
note 11; Williston, supra note 11. The essay by Pauline Maier, supra note 11, addresses the “Revolutionary” and republican origins of opposition to corporations during the eighteenth century, and her
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understanding to the “original meaning” of the Constitution—that is, the understood meaning of the Constitution’s text at ratification.13 This Article makes an
attempt at both.
The corporation of the late eighteenth century was both a specially privileged
(albeit socially useful) entity and a new, uncertain political force in the community. Corporations were created—that is, chartered by legislatures—for a variety
of purposes, including business ventures, education, charity, religion, municipal
government, and professional association. While these different purposes implicated a number of different societal interests and needs, the corporate entity, qua
entity, had a generally uniform set of institutional features and, consequently,
gave rise to a common set of concerns. Incorporation helped secure a group’s
identity and continuity, and provided ready governance mechanisms for directing the group’s affairs, managing its property, and regulating its members’
conduct. It also enabled members to transact efficiently both with one another
and with outsiders under a common name. At the same time, the corporation
was cause for concern. Incorporation could be a special privilege doled out to
favored groups, and corporate charters often conferred other unique privileges.
Also, corporate status set a group of individuals apart from the body politic, aggregating and concentrating the members’ several interests, and giving the group both
incentive and ability to influence public measures for its private benefit.
Not surprisingly, then, the corporation inspired heated debates among Americans of this period, the most significant and fascinating of which are highlighted
here.14 Americans wrestled with how to reconcile an ancient English institution
with the principles of the Revolution, and in these debates, the ideas of civic
republicanism, focusing on virtue, corruption, and the public interest, loomed
large. While the ideas themselves were not generally in dispute (indeed, they
provided debate participants with a common vocabulary), their application to
the corporation was contested.
At bottom, for Americans of this period, the corporation presented what
might be called a problem of power. One conception of the problem emphasized
the influence that corporations could and did wield over both private individuals
excellent insights are made use of here. In addition, the essays by Davis and the Handlins have proven
valuable. See 1 & 2 DAVIS, supra note 11; Handlin & Handlin, supra note 11.
13. There is robust debate among scholars of originalism whether the intentions of the Constitution’s
drafters (“original intent”) or the meaning of the Constitution’s text as understood by contemporary
readers (“original meaning”) is the appropriate touchstone of constitutional interpretation. Most scholars and judges favor the latter, see Gary Lawson & Guy Seidman, Originalism as a Legal Enterprise,
23 CONST. COMMENTARY 47, 48–49 & nn.11–12 (collecting sources), and this Article takes that approach.
Of course, this does not mean that the drafters’ intentions are irrelevant—indeed, they are solid
evidence of original meaning. See id. at 57.
14. As the Table of Contents above reveals, the eighteenth-century corporation controversies discussed in this Article are arranged in roughly chronological order and involve the University of
Pennsylvania (1779–1789), a New York trade union (1785), the Connecticut Medical Society (1787–
1792), the Bank of North America (1786), the Bank of the United States (1791), municipal corporations
(1780–1789), and the Society for Useful Manufactures (1791–1792). Controversies involving religious
corporations during this period also receive attention throughout.
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and public affairs. On the other hand were concerns about the power of
legislatures to incorporate groups and confer special privileges, providing occasion for partisanship, special-interest legislation, and corruption. As Americans
sparred over how properly to place limits on both private-corporate and publiclegislative power, three solutions emerged: restrictions on the incorporation
power, broad legislative authority over the charters of existing corporations, and
innovations in charter design. Each of these solutions, in some measure, remains with us today.
Amidst the corporation controversies of the era, the Constitution and Bill of
Rights came into force in 1788 and 1791, respectively. Neither document
mentions corporations, and their ratification histories reveal next to nothing
about how their provisions were thought to apply to corporations.15 The question thus arises: How did the early American view of the corporation square
with the original, publicly understood meaning of the Constitution? The breadth
of that question defies an easy answer, so a more focused inquiry is useful. In
light of the Supreme Court’s recent decision in Citizens United, we might ask:
How would the First Amendment’s reference to “freedom of speech” have been
thought, in the eighteenth century, to apply to a corporation? The answer to this
question promises to be especially interesting because, as the corporation
debates of the founding period reveal, Americans then were no less concerned
than they are today about corporate influence in public affairs.
To the extent that the First Amendment is (or was) thought to secure a right to
freedom of speech, eighteenth-century views of the corporation might compel a
narrow understanding of the right. Many Americans did indeed hold a “cautious
view of corporate power”;16 the corporation was not thought to be synonymous
with an individual, or with the individuals that composed it; and corporate
charters were seen as regulatory devices, with the capacity to restrict some
rights (such as property holding and association) that an incorporated group
would otherwise enjoy in its unincorporated, “natural” capacity.
But faithfulness to the original understanding makes the propriety of this
rights-centric approach doubtful. This is because, when it came to the corporation, Americans of the late eighteenth century simply did not approach the issue
on those terms. For them, the challenge presented by the corporation was one of
power, in both its private-corporate and public-legislative forms.
It is this conception that provides an important link to the Constitution’s
original meaning, for the concerns about power that drove the early corporation
debates also influenced the drafting of the Constitution and Bill of Rights. Like
participants in the corporation debates, the Framers were cognizant of the risks
that rent-seeking and corruption posed to the democratic process. On the one
15. Delegates to the Philadelphia Convention in 1787 debated whether to include among Congress’s
enumerated powers a power to charter corporations. The provision was rejected. The implications of
this debate are explored infra Part III.C.4.
16. Citizens United v. Fed. Election Comm’n, 130 S. Ct. 876, 951 (2010) (Stevens, J., dissenting).
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hand, well-organized groups (what they called “factions”) might seek to influence public measures for their private benefit; on the other hand, the federal
legislature would be comprised of self-interested actors whose powers had to be
restrained. This was, in short, the problem of power at the national level.
One solution was the First Amendment. While the amendment could be (and
was) described as securing certain rights, it was phrased as an express limitation
on congressional power: “Congress shall make no law . . . abridging the freedom of speech, or of the press . . . .”17 Contemporaries understood this language
in precisely those terms; to them, the amendment declared that the authority of
Congress did not extend to “speech” or “the press.” Thus, for the founding
generation, the First Amendment addressed itself to congressional power, not to
the rights of speakers as such. This understanding strongly suggests that the
identity of a speaker, including corporate identity, is irrelevant to the constitutional analysis. If “speech” is at issue, Congress lacks authority to “abridg[e]” it,
whatever its source.
Lending credence to this view is the nation’s first free speech controversy in
1794, involving the Democratic-Republican societies. Federalist opponents of
the societies argued at the time that the societies exercised undue influence over
public opinion and that their ability to organize and mobilize political opposition gave them an unfair advantage over individuals in the political process.
Taking a rights-centric approach to the First Amendment, Federalists contended
that the societies’ group-character, particularly their “self-created,” permanent
status, deprived them of First Amendment rights. James Madison and other
Republicans in the House of Representatives succeeded in heading off a Federalist attempt to censure the societies by arguing, simply, that Congress lacked
power to legislate in this way. Madison’s response to the Federalists of his day
is equally applicable to modern critics who decry the role of the corporation in
public affairs. The First Amendment is a limitation on congressional power; as
originally understood, it denies Congress any ability to “abridg[e] the freedom
of speech,” whether that speech originates from a “self-created,” permanent
body of political activists (as it did in 1794) or from a “state-created,” permanent body of interested businesspeople (as it might today).
While adherence to original meaning does indeed (to borrow Justice Stevens’
words) “preclude [Congress] from taking limited measures” to restrict a corporation’s speech,18 it does not compel us, at least at the national level, to live with
the dreaded specter of corporations that will “overwhelm elections and intimidate elected officials into doing their bidding,” as the New York Times wailed in
the wake of Citizens United.19 The Framers of the Constitution anticipated the
tug-of-war by self-interested groups in the national political process, and, as we
will see, it is plausible to think that they foresaw participation by corporations.
17. U.S. CONST. amend. I.
18. See Citizens United, 130 S. Ct. at 950 (Stevens, J., dissenting).
19. Editorial, The Court’s Blow to Democracy, supra note 4.
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But they did not think that Congress was virtuous enough to “adjust these
clashing interests.”20 Their solution to the problem of “faction” was a series of
institutional safeguards (such as a sufficiently large House of Representatives, a
bicameral legislature, and regular elections) that would prevent any one set of
self-interested actors from overwhelming the rest, oppressing the people, and
deriving private benefits at the expense of the general welfare for any sustained
period of time.
Importantly, these institutional mechanisms work in tandem with the First
Amendment’s limitations. Together, they confirm the pluralist model on which
the national government was built. As the Framers saw it, interest groups would
compete for power and influence, checked by intermediating institutions that
would help preserve the general welfare. And under the First Amendment’s
protections, voices across the political space would jockey for attention and
seek to persuade, checked by the wisdom and sound judgment of the people
(and not Congress). When it comes to a corporation’s political speech, therefore, it is not that adherence to original meaning requires that we ignore the
risks of democratic distortion and corrupting influences. It is, rather, that those
risks are accounted for by other means—institutional means that, like the First
Amendment, are part of a federal structure that allocates, restrains, and balances
public and private power.
That, in a nutshell, is the argument this Article puts forth. Part I below briefly
reviews the classical republican ideas that helped shape political thought and the
corporation debates in the eighteenth century. Part II articulates the “original
understanding of the corporation,” reviews a number of corporation controversies during the founding period, and extracts lessons therefrom. Part III moves
on to the original meaning of the Constitution, arguing that the First Amendment, as understood by the generation that drafted and ratified it, denies
Congress any power to restrict a corporation’s speech (at least, as we will see,
its political speech). Some attention is also given to whether this limitation
applies with equal force to the state legislatures. Concluding thoughts follow
Part III.
I. EIGHTEENTH-CENTURY REPUBLICAN THOUGHT
It is by now a commonplace that the ideas of civic republicanism, drawing on
sources in both classical antiquity—Aristotle, Polybius, and Cicero—and the
English “Commonwealth” tradition, played a vital role in shaping political
thought in eighteenth-century America.21 Republicanism had at its core the
ideal of “public virtue,” which taught that each citizen was called upon to
participate in the political life of the community and to continually set aside
20. See THE FEDERALIST NO. 10, at 80 (James Madison) (Clinton Rossiter ed., 1961).
21. See J. G. A. Pocock, Virtue and Commerce in the Eighteenth Century, 3 J. INTERDISCIPLINARY
HIST. 119, 120 (1972); Robert E. Shalhope, Republicanism and Early American Historiography, 39
WM. & MARY Q. 334, 334 (1982).
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private ambitions to seek, and collectively to realize, the res publica, the public
good.22 The prerequisite to virtuous citizenship was the individual’s “independence from governmental or social superiors.”23 Republican thought, therefore,
placed great emphasis on private property or independent means of wealth as
crucial to the citizen’s ability to preoccupy himself with the public good.24
If “virtue” is what republicanism venerated, “corruption” is what it most
feared. At bottom, corruption in the republican tradition “referred to the subversion of the institutions, customs, and social relations that preserved good
government.”25 Corruption, as the antithesis of virtue, meant dependence, and
late eighteenth-century Americans understood it in three distinct ways. Corruption in the first sense was a dependence by one department of the government
on another. English commonwealthmen, alarmed by the crown’s enlarged use of
patronage to curry support in Parliament, had emphasized the necessity of
mixed government and a balanced constitution26—ideas that gave way to the
American preoccupation with separation of powers.27
In the second sense, corruption meant a dependence by private citizens on the
government. Men whose wealth and success were tied to government privileges, favors, or intervention could not be expected to behave virtuously
because they lacked the economic independence on which good citizenship
rested. Not only would narrow self-interest divert them from pursuit of the
general welfare, but they would be motivated to use government power to
preserve or enhance their own wealth.28 Writing in 1792, James Madison
warned against
[a] government operating by corrupt influence; substituting the motive of
private interest in place of public duty; converting its pecuniary dispensations
into bounties to favorites, or bribes to opponents; accommodating its measures to the avidity of a part of the nation instead of the benefit of the whole:
in a word enlisting an army of interested partizans [sic], whose tongues,
whose pens, whose intrigues, and whose active combinations, by supplying
the terror of the sword, may support a real domination of the few under an
apparent liberty of the many.29
22. See Pocock, supra note 21, at 129; Gregory S. Alexander, Time and Property in the American
Republican Legal Culture, 66 N.Y.U. L. REV. 273, 280 (1991). The public good, in turn, was not the
summation of the individual interests of society’s members, but “a substantive conception of the moral
good that transcended [those] individual interests.” Alexander, supra.
23. Pocock, supra note 21, at 121.
24. Id.
25. James D. Savage, Corruption and Virtue at the Constitutional Convention, 56 J. POLITICS 174,
175 (1994).
26. Pocock, supra note 21, at 120.
27. See Savage, supra note 25, at 177–81.
28. See Pocock, supra note 21, at 121; Savage, supra note 25, at 175; see also Zephyr Teachout, The
Anti-Corruption Principle, 94 CORNELL L. REV. 341, 373–74 (2009).
29. James Madison, The Spirit of Governments, NAT’L GAZETTE (Phila.), Feb. 20, 1792, at 130.
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Corruption in the third sense was, broadly, moral decay in the life of the
citizenry, brought on by an obsession with wealth and luxury and “an exclusive
concern with private or group satisfaction.”30 In this vein, republican virtue
stood in contradistinction to new forms of wealth that tended to erode economic
independence and thereby degrade the moral health of the body politic. A
national debt and system of public credit produced speculators; capitalistic
enterprises produced stock-jobbers; and a large-scale system of manufacturing
necessitated wage laborers.31 These classes of men lacked the sort of property—
land—that wove them into the fabric of particular communities, and wage
laborers, unlike artisans, lacked the skills that ensured an independent economic
station.32
It would be a mistake, however, to brand American republicans as resistant to
commercial intercourse or modern industry. In the main, they saw the rise of
manufacturing, a commercial economy, and international trade “as a civilizing
force” that could motivate men to behave industriously and frugally.33 It would
be more accurate to characterize American republicans as cautious about and
attentive to the political and social effects of commerce.
II. THE ORIGINAL UNDERSTANDING OF THE CORPORATION
The American corporation of the eighteenth century sat somewhat uneasily
within the republican paradigm. In their earliest incarnations, corporations had
been vehicles of public liberty. English towns that were granted a royal charter
acquired powers of self-government and commercial privileges that freed the
townspeople of their dependence on feudal overlords.34 The colonial corporations played a similar liberating role for settlers who came to the New World to
establish new forms of political and religious community.35
30. Pocock, supra note 21, at 121; Teachout, supra note 28, at 373.
31. Drew R. McCoy, Republicanism and American Foreign Policy: James Madison and the Political
Economy of Commercial Discrimination, 1789 to 1794, 31 WM. & MARY Q. 633, 638 (1974)
[hereinafter McCoy, Republicanism]; Drew R. McCoy, Benjamin Franklin’s Vision of a Republican
Political Economy for America, 35 WM. & MARY Q. 605, 610 (1978).
32. See McCoy, Republicanism, supra note 31, at 640–41; Note, Incorporating the Republic, supra
note 11, at 1891; see also infra notes 157–159 and accompanying text.
33. McCoy, Republicanism, supra note 31, at 639.
34. See 1 ALICE STOPFORD GREEN, TOWN LIFE IN THE FIFTEENTH CENTURY 1–2 (London, Macmillan
1894); see also MASS. GAZETTE (Boston), Apr. 17, 1786, at 2 [hereinafter Philadelphia Incorporation
Debate] (reprinting (under headline “New-York, April 6”) argument of Pennsylvania legislator opposed
to incorporation of Philadelphia: “[A]cts of incorporation in Europe were calculated to give privileges
which were not possessed before—and thus formed little separate communities. There they had a happy
effect, in arbitrary governments, to assuage the power of the rulers.”); JAMES CHEETHAM, A DISSERTATION
CONCERNING POLITICAL EQUALITY AND THE CORPORATION OF NEW-YORK 40 (New York, D. Denniston 1800)
(similar point).
35. The American colonies of Virginia, Massachusetts, Connecticut, Rhode Island, and Georgia
existed initially as corporations, with corporate charters granted by the king. See 2 JOHN P. DAVIS,
CORPORATIONS 157–208 (1905) (extensive survey of the history of the colonial corporations). Like the
English towns, the colonies functioned as quasi-sovereign entities, with extensive powers of selfgovernment. The colonists enjoyed substantial autonomy in their affairs and were able to experiment
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By the late eighteenth century, however, the typical “body corporate” was not
congruent to a larger “body politic.” Rather, the corporation was a specialpurpose enterprise with a narrow constituency. It was a self-governing body of
individuals with interests potentially distinct from the community—features
that, to the eighteenth-century American mind, tended to magnify the selfinterest of a corporation’s members and to diminish their affection for the
common good.
A. A Specially Privileged Entity
A group of persons became a corporation by specially petitioning the legislature for that purpose.36 Incorporation entailed several advantages that the
petitioners, as a group, did not enjoy in their “natural capacity.” The first was
individuality. The members of a corporation acquired a common name by which
they could sue and be sued, and a common seal by which they could act as a
single entity and bind the corporation to certain obligations, such as a contract.
The second was internal governance. Members could make binding laws that
specified relationships among stakeholders (such as shareholders and directors,
or church wardens and congregants), how these relationships would be administered, and how the affairs and property of the corporation would be managed.
Finally, a corporation was empowered to hold and manage property in the
corporate name, often in perpetual succession. The corporation, and the assets
in corporate solution, thus survived the death or withdrawal of members.37
At bottom, incorporation brought continuity and stability to a group of
individuals—whether a religious society, a trade union, or a group of entrepreneurs. It allowed them to manage their property, direct their own affairs, and
regulate the conduct of their members to realize their organization’s goals.38
While these advantages were a feature of nearly all corporations of this
period, incorporation also often entailed the grant of specific privileges to the
corporation or its members—privileges not enjoyed by the people at large and
whose effect, in some cases, was to curtail the rights of non-members. Indeed,
often, granting a corporate charter was itself a privilege when the legislature
refused to grant charters to competitors or to others similarly situated.39
with new forms of government, law, and personal liberty—in a way that would have been unavailable
to them in Great Britain. 1 MELVIN I. UROFSKY & PAUL FINKELMAN, A MARCH OF LIBERTY 12–13, 17–36
(2d ed. 2002).
36. SEAVOY, supra note 11, at 5.
37. See 1 WILLIAM BLACKSTONE, COMMENTARIES *475–76; 1 STEWART KYD, A TREATISE ON THE LAW OF
CORPORATIONS 69 (London, J. Butterworth 1793); see also Joseph Stancliffe Davis, Corporations in the
American Colonies, in 1 DAVIS, supra note 11, at 5.
38. See SEAVOY, supra note 11, at 4, 9–10; see also Hurst, supra note 11, at 19–21.
39. See Davis, Corporations in the American Colonies, supra note 37, at 5–6 (“To be a corporation
was a special privilege, not an inherent right, of a group of individuals.”); SEAVOY, supra note 11, at 5
(“The earliest method of creating a corporation was by granting an individual charter. This mode of
creation assumed that corporations were legally privileged organizations that had to be closely
scrutinized by the legislature because their purposes had to be made consistent with the public
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For example, corporate charters for religious societies in the eighteenth
century were frequently granted only to an established church or to favored
denominations. In Virginia, the Church of England, later the Episcopal Church,
was established by law and existed as a corporation,40 with what amounted to a
monopoly on religious practices. “It enjoyed numerous official advantages,
including grants of land, financial support through mandatory tithes, enforcement of compulsory worship, and prohibition of competitors.”41 In South
Carolina, until 1778, the story was similar: the Church of England had the
financial and ideological support of the government, and only Anglican churches
were able to incorporate.42 Massachusetts, New Hampshire, and Vermont routinely denied charters and other benefits to non-Congregationalist churches such
as Quakers, Baptists, and Episcopalians.43 In these colonies (later states),
religious dissenters, in addition to being compelled to support the established
church or restrained from freely practicing their own religions, were denied the
significant benefits of incorporation—powers of self-government, the efficient
and secure management of church property, and maintenance of group identity.44
The municipal corporation supplies a second example. Incorporated American cities of the eighteenth century included Philadelphia, New York City,
Annapolis, and Williamsburg. Municipal charters from the crown or state
legislatures incorporated the inhabitants of these cities, but the franchise was
vested in freemen (local tradesmen) and/or landholders only. With this limited
electorate, municipal officials devoted much of their time to commercial regulation. Within city limits, they were able to restrict access to employment in the
trades, regulate markets and fairs, and exact duties for the privilege of doing
business in the city.45 These regulations primarily benefited local tradesmen and
welfare.”); see also infra notes 271–274 and accompanying text (discussion of motivations for general
incorporation statutes).
40. See Terrett v. Taylor, 13 U.S. 43, 46–48 (1815) (stating that “[a]t a very early period” the
minister and church wardens of the Episcopal Church had corporate status, and describing a Virginia
statute of 1784 which chartered the “Protestant Episcopal [C]hurch” as a corporation).
41. Michael W. McConnell, The Supreme Court’s Earliest Church-State Cases: Windows on ReligiousCultural-Political Conflict in the Early Republic, 37 TULSA L. REV. 7, 8 (2001).
42. See James Lowell Underwood, The Dawn of Religious Freedom in South Carolina: The Journey
From Limited Tolerance to Constitutional Right, 54 S.C. L. REV. 111, 127, 157 (2002).
43. John Witte, Jr., The Essential Rights and Liberties of Religion in the American Constitutional
Experiment, 71 NOTRE DAME L. REV. 371, 405–06 (1996).
44. See Underwood, supra note 42, at 157; Act of Apr. 6, 1784, 1 LAWS OF THE STATE OF NEW YORK
104–09 (Samuel Jones & Richard Varick eds., 1789) (broadening the ability of religious congregations
to incorporate in order to put a stop to “partial and illiberal Distributions of Charters” that had
prevented congregations from “contributing to the Support of Religion, for Want of proper Persons
authorized by Law, to take charge of their pious Donations”); An Act to Incorporate Certain Persons As
Trustees in Every Religious Society or Congregation in this State, for Transacting the Temporal
Concerns Thereof, ch. 129, 1786 N.J. LAWS 255 (broadening the ability of religious congregations to
incorporate in order to “grant[] equal Privileges to every Denomination of Christians, and secur[e] to
them all their civil Rights”).
45. Maxwell Bloomfield, The Municipal Corporation Revisited, 4 REVS. AM. HIST. 27, 27–28 (1976).
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raised costs to the public.46 The incorporation of trade unions or other professional societies was a closely related phenomenon, and charters empowered the
members to regulate the profession and set standards for admission thereto.47
Business corporations were a third form of privileged enterprise, and the
advantages they enjoyed were sometimes extensive. For a group of entrepreneurs in the late eighteenth century, incorporation entailed the grant of a
franchise or monopoly: the right (sometimes exclusive) to carry on and profit
from some activity that, in the legislature’s judgment, was beneficial to the
public.48 Most business corporations of this period were “internal improvement” companies empowered to construct and operate turnpikes, toll bridges,
and wharves and to charge a fee for their use. Other common business corporations included banks and insurance companies, public utilities (primarily water
supply corporations), and manufacturing companies.49
The conferral of a franchise or monopoly on a group of entrepreneurs
allowed them to maintain artificially high prices or to limit access to facilities
previously open to the public. It also set up legal or de facto barriers to
competition. Thus, when a legislature authorized a corporation to build and
operate a wharf in a certain location, the public could no longer use that harbor
area free of charge; or when a corporation, by special charter, undertook to
improve a public highway and set up a toll booth there, travelers were required
to pay a fee.50 When these privileges amounted to a monopoly, wrote the
economist Adam Smith in 1776,
all the other subjects of the state are taxed very absurdly in two different
ways; first, by the high price of goods, which, in the case of a free trade, they
could buy much cheaper; and, secondly, by their total exclusion from a branch
of business, which it might be both convenient and profitable for many of
them to carry on.51
Some business corporations were granted unique powers or special exemptions. Turnpike corporations were often authorized to exercise eminent domain
46. Id.; Maier, supra note 11, at 59; Stanley N. Katz, Book Review, 89 AM. HIST. REV. 1149, 1149
(1984) (reviewing HENDRIK HARTOG, PUBLIC PROPERTY AND PRIVATE POWER: THE CORPORATION OF THE CITY
OF NEW YORK, 1730–1870 (1983)).
47. See infra notes 99–102 and accompanying text (incorporated trade union); infra notes 115–116
and accompanying text (incorporated medical society).
48. SEAVOY, supra note 11, at 5; id. at 50 (“In the beginning, almost all business corporations had
some degree of franchise relationship to the state . . . .”); see MORTON J. HORWITZ, THE TRANSFORMATION
OF AMERICAN LAW, 1780–1860, at 116–18 (1977).
49. See Joseph Stancliffe Davis, Eighteenth Century Business Corporations in the United States, in 2
DAVIS, supra note 11, at 25–28 [hereinafter Davis, Eighteenth Century Business Corporations].
50. See, e.g., People v. Denslow, 1 Cai. R. 177, 180 (N.Y. 1803); Stuart v. Rich, 1 Cai. R. 182 (N.Y.
1803).
51. ADAM SMITH, WEALTH OF NATIONS 814 (Edwin Cannan ed., Modern Library Edition 1994) (1776)
(Book V, Ch. 1, Part III).
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in order to assemble the tracts of land necessary for the construction of a road.52
A corporation or its employees might enjoy certain tax exemptions, or employees might be excused from serving in the militia.53 Finally, some corporate
charters conferred limited liability on shareholders, provisions that, though
common today, were rare and controversial in the eighteenth century.54
B. A New and Uncertain Political Force
For late-eighteenth-century Americans, the corporation was inspiration for
controversy. The Revolution had been fought to confirm the principle that
sovereignty rested with the people and that they had a right to representative
self-government.55 The corporation was a strange creature, however, because it
defied the political categories of the day. It was certainly not the “government,”
but it partook of the nature of one. Incorporation established a limited electorate
(shareholders, incorporated members, etc.) and enabled them to select their
directors or other leaders. The latter could then wield the collective energies or
capital of the whole body. At the same time, the corporation was not a “citizen.”
Incorporation did establish a legal personality and conferred individuality on
a group, enabling the corporation to act and transact efficiently in the interests
of its members. But the result was an artificial thing, a soulless entity devoid of
the public-spiritedness and moral accountability that were so critical to the
health of the body politic.
Not surprisingly, then, founding-era materials are replete with statements
evincing the struggle to understand and articulate the corporation’s role in a
society built on republican ideas of popular sovereignty, representative government, political equality, and civic engagement. Corporations, said the Pennsylvania Council of Censors in 1784, were “against the spirit and the policy of
democracy” because they were capable of “holding common estates of large
52. See SEAVOY, supra note 11, at 5 (“Franchise corporations such as turnpikes required special
powers, like eminent domain, limited liability, and the right to collect a public toll, before they could
begin operations; therefore, they needed individual consideration [by the legislature].”); HORWITZ, supra
note 48, at 116; M’Clenachan v. Curwen, 6 Binn. 509, 514 (Pa. 1802) (describing a 1792 charter
authorizing a corporation to take private land for construction of a road).
53. Joseph Stancliffe Davis, The “S.U.M”: The First New Jersey Business Corporation, in 1 DAVIS,
supra note 11, at 384 [hereinafter Davis, The “S.U.M.”] (describing a corporate charter with these
features).
54. See Handlin & Handlin, supra note 11, at 8–17 (arguing that limited liability was not a common
or essential feature of American corporations in the eighteenth century); see also JAMES SULLIVAN, THE
PATH TO RICHES 28, 35 (Boston, J. Belcher 1809) (1792) (criticizing charter provision for limited liability
of shareholders of incorporated bank); DEBATES AND PROCEEDINGS OF THE GENERAL ASSEMBLY OF PENNSYLVANIA, ON THE MEMORIALS PRAYING A REPEAL OR SUSPENSION OF THE LAW ANNULLING THE CHARTER OF THE
BANK 74 (Matthew Carey ed., Philadelphia, Seddon & Pritchard 1786) [hereinafter BNA DEBATES]
(statement of Mr. Findley) (same).
55. See Chisholm v. Georgia, 2 U.S. 419, 471–72 (1793) (opinion of Jay, C.J.) (“[A]t the Revolution,
the sovereignty devolved on the people; and they are truly the sovereigns of the country, but they are
sovereigns without subjects . . . and have none to govern but themselves; the citizens of America are
equal as fellow citizens, and as joint tenants in the sovereignty.”).
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volume, and exercising the power of making bye-laws.”56 “All incorporations
impl[ied]” special privileges, echoed the New York Council of Revision in
1786, and were therefore “destructive of that principle of equal liberty which
should subsist in every community.”57 In 1800, James Cheetham remarked of
municipal corporations that
it would be difficult to conceive what corporations have to do with liberty
within these states . . . . In a republic like this, where representative systems of
government prevail in great abundance and perfection; and where a greater
degree of liberty is enjoyed without th[a]n within [corporations’] jurisdictions,
while they can be of little service to the citizen, they are capable of an infinity
of mischief.58
Of particular concern to the founding generation was the fact that incorporation drew the members of a group together and, by granting them special
advantages and powers of self-government, set them apart from the body
politic.59 Writ large, the result was “imperii in imperio[,] . . . governments within the government of the state,”60 “separate communities in the
bowels of the commonwealth.”61 A corporation was a focal point for the
aggregated pursuit of self-interest.62 As individuals came together in these
“little separate communities”63 to pursue parochial concerns, the bond between
56. Extract from the Minutes of the Council of Censors, PA. PACKET (Phila.), Sept. 7, 1784, at 2
[hereinafter Council of Censors Opinion]. This controversy is discussed in greater detail infra at Part
III.C.1.
57. ALFRED BILLINGS STREET, THE COUNCIL OF REVISION OF THE STATE OF NEW YORK 261–64 (Albany,
William Gould 1859). This controversy is discussed in greater detail infra at Part III.C.2.
58. CHEETHAM, supra note 34, at 40; see also Philadelphia Incorporation Debate, supra note 34
(arguing against chartering of a municipal corporation because “under the government of Pennsylvania,
every man enjoyed all that liberty and all those privileges consistent with the publick welfare,” such
that “[t]here could . . . be no necessity for forming separate communities in the bowels of the
commonwealth, nor for giving exclusive privileges”).
59. “Anti-Monopolist,” Letter to the Editor, GEN. ADVERTISER (Phila.), Jan. 23, 1792, at 2 (“[Incorporation] raises up various bodies of men of the most influential description in the community, and
separates them from the mass of the people; at the same time it distinguishes them with peculiar marks
of favor, it attaches them to the ruling powers by the common ties of gratitude and self-interest . . . .”)
60. Council of Censors Opinion, supra note 56.
61. Philadelphia Incorporation Debate, supra note 34. This phraseology was almost certainly
borrowed from Thomas Hobbes’ pejorative contention in 1651 that corporations were “many lesser
Common-wealths in the bowels of a greater, like wormes in the entrayles of a naturall man.” THOMAS
HOBBES, LEVIATHAN 241 (A.R. Waller ed., Cambridge Univ. Press 1904) (1651) (pt. II, ch. 29). See also
Debate in the General Assembly on Friday last, on the Bill for incorporating this city, PA. PACKET
(Phila.), Nov. 25, 1786, at 2 (statement of Mr. Smilie opposing the incorporation of Philadelphia: a
corporation was “a separate interest and influence” that was “set off from the body of the people”).
62. See BNA DEBATES, supra note 54, at 125 (statement of Mr. Findley) (“[A]s wealth is the means
of obtaining monopolies—even when in the hands of jarring individuals—how much more must it
facilitate such designs, when in the hands of a permanent society, congregated by special privilege, and
actuated by the principles of united avarice?”).
63. Philadelphia Incorporation Debate, supra note 34.
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individual and community was severed.64 In the end, if creation of these bodies
were not restrained, “the State, instead of being a community of free citizens
pursuing the public interest, may become a community of corporations, influenced by partial views, and perhaps in a little time, (under the direction of artful
men) composing an aristocracy destructive to the constitution and independency
of the State.”65
Some even noted the corporation’s ability to create perverse incentives for the
individuals standing behind the corporate veil. “Every man in the disposal of his
own wealth, will act upon his own principles,” said William Findley in the
debate over the Bank of North America (“BNA”) in 1786. “His virtue, his
honour, his sympathy, and generosity, will influence his disposals and designs;
and he is in a state of personal responsibility.” But not so with a corporation
whose “sole purpose [was] increasing wealth,” Findley contended. “[I]t must
operate according to its principle; and being in the hands of many, having only
one point in view, and being put in trust, the personal responsibility arising from
the principles of honour [and] generosity . . . can have no place.”66
Findley’s argument was about institutional design and the incentives that
incorporation created. Directors, made beholden to a narrow constituency,
would seek only to advance narrow corporate interests and aggrandize the
wealth and power of the corporation.67 It was not, he and other critics insisted,
that directors were personally motivated by such goals. Rather, this was the
“nature of the institution,” its “natural tendency,” and it was incumbent upon the
directors “to conduct it according to its natural principles.”68
The result of incorporation, then, was both something more and something
less than a natural citizen. The corporation’s ability to collect, focus, and
efficiently deploy the energies and capital of its members made it an “engine of
power.”69 But institutional incentives had a dehumanizing effect, especially for
64. See BNA DEBATES, supra note 54, at 63 (statement of Mr. Whitehill) (president and directors of
incorporated bank had “not only a separate interest from the state—but also an opposite interest”);
“Amicus,” For the Pennsylvania Herald, PA. HERALD (Phila.), Dec. 13, 1786, at 3 (“[T]he stockholders
of the bank have an interest of their own, separate from that of the community.”).
65. STREET, supra note 57, at 262.
66. BNA DEBATES AND PROCEEDINGS, supra note 54, at 66.
67. See id.
68. Id. at 65, 69; see also id. at 15 (statement of Mr. Lollar) (criticizing the BNA directors’ practice
of granting “preferences in trade, by advances of money to their particular favourites” but noting that
“any others in their situation . . . would do as they did”); id. at 24 (statement of Mr. Clymer) (“The
charter of the bank was not taken away for what the president and directors had done—they, I believe,
acted as innocently as any others would have done in the same situation.—But it was taken away from
a conviction of its dangerous tendency.” (emphasis added)); id. at 126 (statement of Mr. Findley) (“One
gentleman . . . would persuade us that the transfer[ability] of stock prevent[s] the dangers or cure[s] the
evils of the institution. How can this be? Will a few individuals transferring their bank stock, change the
principles—the nature—and influence of the institution?”).
69. See “[R]eport of the committee . . . praying the act of the assembly, whereby the bank was
established at Philadelphia, may be repealed,” [hereinafter BNA Committee Report], reprinted in
Thomas Paine, Dissertations on Government, The Affairs of the Bank, and Paper Money, in 1 THE
POLITICAL WRITINGS OF THOMAS PAINE 385 n.* (George Davidson ed., Charlestown, Mass., 1824).
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a profit-seeking corporation, which, “having no principle but that of avarice,”
tended only to “dr[y] and shrivel[] up all the manly—all the generous feelings
of the human soul.”70
To members of the founding generation, the corporation was a new and
uncertain political force in republican government. “We are too unequal in
wealth to render a perfect democracy suitable to our circumstances,” Findley
observed in the BNA debate, “yet we are so equal in wealth [and] power . . .
that we have no counterpoise sufficient to check or control an institution of such
vast influence and magnitude [as the bank].”71 James Madison echoed these
sentiments in 1791. In opposition to incorporation of the Bank of the United
States, he spoke at length about “the great and extensive influence that incorporated societies had on public affairs in Europe.” They were, he said, “a powerful
machine, . . . competent to effect objects on principles in a great measure
independent of the People.”72 The founding generation wrestled with this reality
in the numerous corporation controversies of the era.
C. Corporation Controversies of the Late Eighteenth Century
1. The University of Pennsylvania, 1779–1789
The Academy of Philadelphia was established in 1749 by several prominent
citizens of Philadelphia, including Benjamin Franklin, who initially served as
president of the board of trustees. In Franklin’s words, the purpose of the
Academy was to provide “the youth of Pennsylvania” with a “good education at
home, whereby not only considerable expense may be saved . . . , but a stricter
eye may be had over their morals.”73 In 1753, the Academy applied for and was
granted a royal charter of incorporation; in 1755, it obtained a new charter, and
its name was changed to the College, Academy, and Charitable School of
Philadelphia.74
The College was designed to be a non-sectarian institution, welcoming
students and professors of all denominations.75 Its first provost was a clergyman
of the Church of England, the vice-provost was a Presbyterian, and a “principal
70. BNA DEBATES, supra note 54, at 66 (statement of Mr. Findley).
71. Id. at 65; see also Council of Censors Opinion, supra note 60 (without a “sole executive of
permanency and weight, sufficient to restrain, and whose interest it is to keep those communities in
awe, [corporations] may . . . gradually produce an indirect, yet firm aristocracy over the state, before we
are aware of the mischief”).
72. LEGISLATIVE AND DOCUMENTARY HISTORY OF THE BANK OF THE UNITED STATES 82 (M. St. Claire Clark
& D. A. Hall eds., Wash., D.C., Gales & Seaton 1832) [hereinafter BUS DEBATES] (statement of Mr.
Madison).
73. 1 HORACE WEMYSS SMITH, LIFE AND CORRESPONDENCE OF THE REV. WILLIAM SMITH, D.D. 51 (Phila.,
S.A. George & Co. 1879).
74. Id. at 55.
75. An Act to Confirm the Estates and Interests of the College, PA. PACKET (Phila.), Nov. 30, 1779, at
2 [hereinafter College of Philadelphia Charter] (“[T]he College, Academy and Charitable School of the
city of Philadelphia, [was] at first founded on a plan of free and unlimited catholicism . . . .”).
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Professor” was “of the Baptist Persuasion.”76 There was nevertheless religious
strife among the leaders of the College, and a concern arose that one denomination would “endeavour to exclude the Rest, or put them on a worse Footing than
they had been from the Beginning.”77 With the ostensible purpose of preserving
the institution’s diversity, the trustees in 1764 passed a bylaw, the effect of
which was to ensure that the provost position was always occupied by a
member of the Church of England, the vice-provost position by a Presbyterian,
and so forth.78
Fifteen years later, at height of revolutionary fervor in 1779, the General
Assembly of Pennsylvania passed an act “to amend and alter the charters [of the
College], conformably to the revolution and to the constitution and government
of this Commonwealth.”79 The Assembly declared that the trustees, by the 1764
bylaw, had “departed from the plan of the original founders, and narrowed the
foundation of the said institution.”80 The act confirmed the school’s old charters,
changed its name to the University of the State of Pennsylvania, dissolved the
current faculty, and appointed a new and expanded board of trustees comprised
of various state officials, several prominent citizens, and ministers from every
denomination in the state.81
Following the charter revisions, Dr. William Smith, the old provost of the
College, lodged repeated grievance protests with the General Assembly, decrying the constitutionality of the 1779 act.82 He pointed to a provision of the
Pennsylvania Constitution of 1776 that secured the chartered privileges of “all
religious societies or bodies of men heretofore united or incorporated for the
advancement of religion or learning, or for other pious and charitable purposes.”83 This clause had actually been adopted at his instigation, aided by the
influence of Benjamin Franklin (president of the constitutional convention in
1776), in order specifically to protect the College from legislative interference.84
In 1784, Smith petitioned for a review of the 1779 act by the Council of
76. 1 SMITH, supra note 73, at 350 (quoting a 1764 letter to the trustees).
77. Id.
78. “Liberalis,” Letter to the Editor, PA. PACKET (Phila.), Nov. 9, 1784, at 2 (quoting and criticizing
the bylaw).
79. Edward Potts Cheyney, A History of the University of Pennsylvania, in UNIVERSITY OF PENNSYLVANIA: ITS HISTORY, INFLUENCE, EQUIPMENT AND CHARACTERISTICS 88 (Joshua L. Chamberlain ed., Boston, R.
Herndon Co. 1901).
80. Id.
81. See College of Philadelphia Charter, supra note 75; see also Steven Morgan Friedman, A Brief
History of the University of Pennsylvania, http://www.archives.upenn.edu/histy/genlhistory/brief.html
(last visited Apr. 19, 2011).
82. Cheyney, supra note 79 at 93.
83. See PA. CONST. § 45 (1776), in 5 THE FEDERAL AND STATE CONSTITUTIONS, COLONIAL CHARTERS, AND
OTHER ORGANIC LAWS OF THE UNITED STATES 3091 (Francis Newton Thorpe ed., photo. reprint 1993)
(1909) [hereinafter 5 FEDERAL AND STATE CONSTITUTIONS].
84. GEORGE B. WOOD, EARLY HISTORY OF THE UNIVERSITY OF PENNSYLVANIA FROM ITS ORIGIN TO THE
YEAR 1827, at,70 (3d ed., Philadelphia, Hist. Soc’y of Pa. 1896).
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Censors.85 The Council was a popularly elected body created by the Pennsylvania Constitution and charged with reviewing legislation and the actions of the
executive branch “to enquire whether the constitution has been preserved
inviolate in every part”86 and to ensure that public officials had “performed their
duty as guardians of the people.”87
In response to Smith’s petition, the Council upheld the constitutionality of the
1779 act. The Council cited the need to put the College “under the direction of
gentlemen . . . of known republican principles, and of tried virtue”88 and alleged
that many of the old trustees had been “hostile to our independency [and]
abettors of the cause of the king of Great-Britain.”89 For this reason, “legislative
interposition became absolutely necessary.”90
The Council rejected the contention that the Assembly had no power to
“interfere with a corporate body” until it had been found, “in a court of law
upon the verdict of a jury,” to have misused its charter.91 The Council drew a
sharp distinction, for constitutional purposes, between individuals and corporations:
[W]e highly reprobate all intermeddling of the general assembly with the
estates, interests or misdeeds of individuals, who are by the bill of rights
secured the privilege of a tryal [sic] by jury . . . yet we have no idea, that
corporations which are the creatures of society, can, under the bill of rights,
plead any exemption from legislative regulation.92
Corporate bodies, the Council continued, might become a “nuisance” or
“dangerous,” making it imperative that the legislature retain power over them
and their charters.93 Pennsylvania, not being a monarchy, had no “sole executive officer of permanency and weight, sufficient to restrain, and whose interest
it is to keep those communities in awe.”94 Corporations might, “therefore,
gradually produce an indirect, yet firm aristocracy over the state, before we are
aware of the mischief.”95
The Council’s opinion notwithstanding, the political winds had again shifted
by 1789. It was difficult to argue that a clause of the state constitution,
specifically adopted to protect the old College, did not in fact protect it. The
85. Cheyney, supra note 79, at 93.
86. See PA. CONST. § 47 (1776), in 5 FEDERAL AND STATE CONSTITUTIONS, supra note 83, at 3091–92.
The Council also had sole power to call a constitutional convention for the state “if there appear[ed] to
them an absolute necessity of amending any article of the constitution.” See id.
87. Id.
88. Council of Censors Opinion, supra note 56, at 1.
89. Id.
90. Id.
91. Id.
92. Id. at 2–3.
93. Id. at 2.
94. Id.
95. Id.
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General Assembly on March 6 enacted a law declaring the 1779 act “repugnant
to justice, a violation of the constitution . . . and dangerous in its precedent to all
incorporated bodies.”96 The new law restored the former trustees and faculty to
their positions.97 The institution acquired its current name, the University of
Pennsylvania, two years later.98
2. The New York Council of Revision’s Veto, 1785; the Connecticut Medical
Society, 1787
In 1785, the New York legislature passed a bill incorporating a trade union
that ostensibly encompassed “the several tradesmen and mechanics of the city
and county of New York.”99 The bill in fact incorporated only 43 named persons
and vested them with the discretionary power to incorporate, or not incorporate,
the rest of the city and county’s tradesmen.100 It also authorized the incorporated members to specify and enforce the terms on which other tradesmen
would be admitted to the trade union.101 Finally, the bill specified that the
corporation’s bylaws were subject to the joint approval of the incorporated
members and officials of the city of New York.102
The New York Council of Revision103 vetoed the bill, raising numerous
objections to it. The Council’s broadest objection was to incorporation as such.
“[A]ll incorporations,” it wrote, “imply a privilege given to one order of citizens
which others do not enjoy” and were “destructive of that principle of equal
liberty which should subsist in every community.”104 The framers of the New
York constitution had “tolerated” those corporations that then existed out of
“respect for ancient rights,” but chartering of other corporations could only be
justified by “the most evident public utility.”105 In the Council’s view, the
danger of the bill was the creation of an aristocratic class of incorporated groups
with unique powers, special privileges, and parochial interests.106 Unrestrained
96. 3 LAWS OF THE COMMONWEALTH OF PENNSYLVANIA 303 (M. Carey & J. Bioren eds., Philadelphia,
J. Bioren 1803).
97. See id. at 302–06. The 1789 act did nothing to deprive the current trustees and faculty of their
positions under the 1779 act. “The result was that legally there were now two institutions, or two
branches of the same institution, each with its own Board of Trustees and Faculty, both drawing their
origins from the same original charters.” Cheyney, supra note 79, at 96.
98. Friedman, supra note 81.
99. STREET, supra note 57, at 261.
100. Id. at 262–63.
101. Id. at 263.
102. Id. at 261–62.
103. The Council of Revision was a body set up by the New York Constitution of 1777 to review,
revise, and/or veto bills passed by the New York legislature that might be “inconsistent with the spirit of
this constitution, or with the public good.” See N.Y. CONST. art. III (1777), in 5 FEDERAL AND STATE
CONSTITUTIONS, supra note 83, at 2628–29. The Council consisted of the governor, the chancellor, and
the judges of the state supreme court. Id. The legislature could override a Council of Revision veto only
by a two-thirds vote in each house. Id.
104. Id.
105. STREET, supra note 57, at 261.
106. Id.
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chartering threatened to transform the state from “a community of free citizens
pursuing the public interest” into “a community of corporations, influenced by
partial views,” with the potential to undermine “the constitution and independency of the State.”107
The Council’s second major objection was to the limited class of incorporated
members and to the discretionary power vested in them. The forty-three initial
members of the trade union could “at pleasure confine the corporation to its
present number, or increase or diminish it from twenty-five members to twentyfive thousand.”108 Because the corporation was authorized to define and enforce
membership criteria, it would “acquire and establish an unbounded control over
the other mechanics of the city and county,” and every hard-working tradesman
who came to New York seeking business opportunities would “be compelled to
struggle against a combination vested with corporate powers, and interested in
keeping him unemployed.”109 To make matters worse, the trustees of the
corporation were not to be selected by democratic vote, but were able to “renew
themselves . . . [,] thus providing for the extent and perpetuity of their own
power.”110
Finally, the Council worried about the marriage of government and corporate
power that the bill would effect. The city of New York, the Council noted, was
already a “rich and powerful [municipal] corporation” with “extensive influence.”111 (At this time, the city, by its charter, enjoyed a monopoly on the East
River ferry and had substantial real estate holdings, including “water lots,” the
management and regulation of which ensured a “handsome income” for the
city.112) Because approval of the trade union’s bylaws depended in part on the
consent of New York City officials, the Council predicted that the trade union’s
members would seek to “influence the [city’s] magistrates” and turn the city’s
“extensive powers” into “instruments of monopoly and oppression.”113
The incorporated trade union might also succeed in thwarting democratic
processes at the state level. The governor and senators of New York, the
Council noted, were elected by the state at large or by residents in “extensive
districts.” A “variety of sentiments” was therefore dispersed across a large body
of citizens. The trade union, however, constituted a “small body of citizens”
capable of “uniting in one general object.” Incorporation, in other words,
offered the members an organizational advantage when it came to political
activities. They could “by their weight make the lightest scale preponderate.”114
107.
108.
109.
110.
111.
112.
113.
114.
Id. at 262.
Id. at 262–63.
Id. at 262, 263.
Id. at 262.
See id. at 261–62.
Jon C. Teaford, The Birth of a Public Corporation, 83 MICH. L. REV. 690, 690–91 (1985).
STREET, supra note 57, at 261.
Id. at 261–62.
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The bill to incorporate the trade union was not passed over the Council’s veto
and did not become law.115
It is worth noting that the incorporation of other professional societies in the
late eighteenth century motivated similar objections, but not always with the
same results. In 1787, the Connecticut General Assembly debated whether to
incorporate the Connecticut Medical Society and to authorize that organization
to set professional standards and regulate admission to the practice of medicine.116 Some lawmakers in the Lower House objected that the society was
nothing but a “monopoly,” a “combination of doctors” who had “advanced their
demands” on the legislature.117 Incorporation was “directly against liberty” and
a “dangerous thing” because the society “might shut out every body else.”118
Also, members of the corporation were “for life,” not subject to periodic
elections.119 In contrast, those in favor of incorporation pointed out that “by an
express proviso in the bill [the society] was still under the power of legislature.”120 The charter reserved to the legislature a power to revoke or amend it
“if inconveniences should be found to arise.”121 The need for incorporation was
also grounded in the pragmatic and quite reasonable intuition that “medical
skill[] is to be gained by attention and study, . . . and the best physicians are the
best judges.”122
The bill to incorporate the society successfully passed the Lower House,123
but was defeated in the Senate.124 (While the Senate debate is not available to
us, there is some indication that that body objected to the charter as a specialinterest favor to a few physicians.125) The charter was later revived and enacted
into law in 1792, with the important proviso that it was subject to amendment or
repeal by the legislature should it be “found inadequate or inconvenient.”126
115. See id. at 264.
116. See On the bill for incorporating the Connecticut Medical Society, CONN. COURANT (Hartford),
June 4, 1787, at 2 [hereinafter CMS Debate].
117. Id. (statement of Col. Burral); id. (statement of Mr. Granger).
118. Id. (statement of Mr. Granger).
119. Id. (statement of Mr. Humphrey).
120. Id. (statement of Col. Seymour); see also id. (statement of Mr. Chauncy).
121. Id. (statement of Col. Seymour).
122. Id. (statement of Mr. Chauncy).
123. See id. (“The Bill passed.”).
124. Ashbel Woodward, President, Connecticut Medical Society, Annual Address Delivered Before
the Convention of the Connecticut Medical Society (May 25, 1859), in PROCEEDINGS OF THE SIXTYSEVENTH ANNUAL CONVENTION OF THE CONNECTICUT MEDICAL SOCIETY 26 (Hartford, Case, Lockwood &
Co. 1859).
125. See “Philanthropos,” To the Printer, NEW-HAVEN GAZETTE (New Haven, Conn.), Oct. 11, 1787,
at 3 (praising the Senate for rejecting the bill and noting: “[T]he present plan of incorporation, has been
privately, stealthily and illiberally formed. A few physicians, called together by private letters, were
pleased to nominate one another fellows for a society, and appoint a committee to form a memorial and
present it to the Legislature in their names. And what was still more intolerably abusive, they had the
impudence to pray, that the government of the society be established upon them during their lives.”).
126. See Act incorporating a Medical Society (1792), in 1 THE PUBLIC STATUTE LAWS OF THE STATE OF
CONNECTICUT 488, 490 (Hartford, Hudson & Goodwin 1808).
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3. The Bank of North America, 1786
The debate over the Bank of North America (“BNA”) was one of the most
significant corporation controversies of the post-revolutionary period.127 Because it has been amply described by a number of historians,128 the task here is
to provide a brief sketch, with the major contours highlighted, and to mine the
debate for those aspects relevant to a contemporary understanding of the
corporation.
The BNA was chartered by the Confederation Congress in 1781 under a plan
drawn up by Robert Morris, then Superintendent of Finance for the confederation government.129 Because a congressional charter was of dubious validity,
Congress recommended that each of the states separately incorporate the bank,
authorize it do to business in the state, and grant it a monopoly on banking for
the duration of war.130 Several states did so, but the bank never did business
outside of Pennsylvania, making that state the locus of the debate.131
The Pennsylvania General Assembly revoked the bank’s corporate charter in
1785.132 The occasion was popular resentment of the bank’s growing wealth
and influence. It had successfully thwarted establishment of a competing bank
in Philadelphia, solidifying its de facto banking monopoly; it played favorites in
extending credit and setting repayment terms; it was prospering amidst hard
economic times but refused to increase its lending; and, to top it off, it refused
to accept state-backed paper that the Assembly proposed to issue in order to
confront the state’s financial crisis.133
In revoking the charter by a two-to-one margin, the Assembly relied on a
committee report citing the bank’s inordinate power: “[W]e see nothing, which
in the course of a few years, can prevent the directors of the bank from
governing Pennsylvania.” Already the bank’s influence was felt in the legislature, when it had refused to accept the state-backed paper. “[W]e fear the time is
not distant,” the report read, “when the bank will be able to dictate to the
127. See Matthew Carey, Preface to BNA DEBATES, supra note 54 (the BNA debate was “a subject of
as great magnitude, perhaps, as any agitated in this state since the revolution”); see also CHARLES
RAPPLEYE, ROBERT MORRIS 392 (2010) (“The struggle over the bank came to dominate the political life
of [Pennsylvania] in 1784 and for the following two years.”).
128. See Davis, Eighteenth Century Business Corporations, supra note 49, at 35–44; RAPPLEYE,
supra note 127 (especially chapter 16, “The Great Bank Debate”); Joseph H. Sommer, The Birth of the
American Business Corporation: Of Banks, Corporate Governance, and Social Responsibility, 49 BUFF.
L. REV. 1012, 1046–76; George David Rappaport, The Sources and Early Development of the Hostility
to Banks in Early American Thought (1971) (unpublished Ph.D. dissertation, New York University).
129. See Davis, Eighteenth Century Business Corporations, supra note 49, at 36.
130. Id. at 38.
131. See id. at 38, 40. Rhode Island, Connecticut, Massachusetts, Pennsylvania, and New York
granted the bank a formal charter. North Carolina and New Jersey “passed acts validating the
ordinance, but granting no formal charter. All the acts granted the desired monopoly.” Id. at 38.
132. See RAPPLEYE, supra note 127, at 396–98.
133. See id. at 393–97; see also Davis, Eighteenth Century Business Corporations, supra note 49, at
41–42.
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legislature, what laws to pass and what to forbear.”134
The repeal of the charter created a firestorm of controversy, “drawing into its
vortex all the currents of social and political conflict that had been in contest
since the early days of the Revolution.”135 Bank proponents sought a repeal of
the repealing act or, in the alternative, a new charter.136
Opponents staunchly resisted, focusing their arguments on the privileges and
monopoly power of the bank and its capacity for “corrupt[ting]” the legislature.137 They decried the bank’s unlimited life,138 the limited liability of its
shareholders,139 and its de facto monopoly.140 True, the bank had no legal
monopoly, but as a privileged institution, established for the private emolument
of its members, it had “a natural tendency . . . to promote the spirit of monopolizing.”141 Had it not successfully prevented the chartering of a competitor?142
Opponents also used the occasion to criticize the legislature’s open-ended
power to create corporate bodies and “charter away portions of either the
privileges or powers of the state.”143 A corrupted legislature might bestow
corporate status exclusively on political favorites, grant them monopoly privileges, and thereby “parcel out the commonwealth into little aristocracies.”144
This risk of abuse made it imperative that corporate charters remain within
legislative control, subject even to total repeal.145
Finally, opponents were keen to the perverse incentives that incorporation
created. The directors and shareholders of the bank had a “separate interest from
the state,”146 and they would seek to influence public measures for their own
private benefit.147 Officers of the bank, it was charged, had been “busy” in the
election that followed passage of the repealing act, canvassing for men “connected in the bank.”148 Robert Morris—a founder of the bank, one of its most
134. BNA Committee Report, supra note 69.
135. RAPPLEYE, supra note 127, at 404.
136. See id. at 399, 403.
137. See BNA DEBATES, supra note 54, at 23 (statement of Mr. Smilie).
138. Id. at 14 (statement of Mr. Lollar); id. at 123 (statement of Mr. Findley).
139. Id. at 74 (statement of Mr. Findley).
140. See id. at 113 (statement of Mr. Whitehill) (the bank’s charter did not restrict its activities, so it
“might have become a trading company; and, by stopping [credit], at particular times, might take
advantage of the private merchants”); id. at 124 (statement of Mr. Findley) (bank “promotes the spirit
of monopoly”).
141. Id. at 65 (statement of Mr. Findley).
142. See id. at 62 (statement of Mr. Whitehill).
143. Id. at 65 (statement of Mr. Findley).
144. Id.; see also id. at 23 (statement of Mr. Smilie) (raising similar concern).
145. See id. at 23; id. at 65 (statement of Mr. Findley); see also BNA Committee Report, supra note
69 (complaining that the bank was not “at all dependant upon” the government).
146. BNA DEBATES, supra note 54, at 63 (statement of Mr. Whitehill); “Amicus,” supra note 64
(“[T]he stockholders of the bank have an interest of their own, separate from that of the community.”).
147. See BNA Committee Report, supra note 69 (“[W]e fear the time is not very distant, when the
bank will be able to dictate to the legislature, what laws to pass and what to forebear.”); “Amicus,”
supra note 64 (“[The bank] controls even the legislature in its acts.”).
148. See BNA DEBATES, supra note 54, at 31 (statement of Mr. Fitzsimmons) (responding to the
argument).
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prominent shareholders, and among America’s wealthiest individuals—had sought
and won a seat in the Assembly following repeal along with other bank insiders,
such as George Clymer (a shareholder) and Thomas Fitzsimmons (a founder
and director).149 These men were not to be “personally” faulted, however; the
problem was institutional. The bank, like any corporation, had to be run
according to its “natural principles”—profit-making for its shareholders—and it
would seek to attain this end regardless of the costs to the public.150 As an
institution, the bank was therefore a “dreadful engine,”151 devoid of civic virtue,
whose tendency in the final analysis was to “engross all the wealth, power, and
influence of the state.”152
Supporters of the bank differed with their opponents less in principle than in
the conclusions they drew. Robert Morris, the bank’s most outspoken advocate,
conceded that the legislature might abuse its incorporation power and favor
certain groups over others with incorporation and special privileges. To “parcel
out the commonwealth” in this way, he agreed, would be “flagrant,” would
“violate the most undeniable rights of the community,” and would “be nugatory
in [itself].”153 But, he argued, that risk was not present with the bank because it
enjoyed no legal monopoly.154
Bank insiders also sought to counter suggestions that their pecuniary interest
in the bank would cloud their legislative judgments. “I hope our votes and our
conduct in this house will not be influenced by any partial interests which we
may have in this institution,” Thomas Fitzsimmons declared, “but by what, in
our opinion and judgment, will have a tendency to promote the general good.”155
Morris acknowledged the necessity of having public officials who were “independent in spirit [and] independent in fortune.”156 Such men would resist all
attempts by corporate interests to “dictate to the legislature.”157 Solidifying his
credentials, Morris pointed out that he was a Pennsylvania landholder: “My
landed estate—my family—and likewise the interest I hold in common with
other citizens—must attach me too strongly to the general welfare of the state,
to admit of a possibility that I should engage in the support of an institution
incompatible with the public safety.”158
Morris contrasted his “landed estate” to his bank stock. The latter was a fluid
form of capital, “easily disposed of, or parted with.” Moreover, it was “con-
149. See FOREST MCDONALD, WE THE PEOPLE: THE ECONOMIC ORIGINS OF THE CONSTITUTION 59–60
(1992); RAPPLEYE, supra note 127, at 398–99.
150. See BNA DEBATES, supra note 54, at 69 (statement of Mr. Findley).
151. RAPPLEYE, supra note 127, at 397 (quoting bank critic Jonathan Dickinson Sergeant).
152. BNA DEBATES, supra note 54, at 66 (statement of Mr. Findley).
153. Id. at 40.
154. See id.
155. Id. at 29.
156. Id. at 58.
157. Id.
158. Id. at 79.
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stantly changing hands,” so that there was no “permanent interest” comprising
the bank.159
Fitzsimmons attacked the charge that the bank exercised a “dreaded influence” because officers of the bank had sought to kindle support for friends of
the bank in the last election cycle. “[B]eing connected in the bank,” Fitzsimmons declared, did not “deprive a person of the right of canvassing for his
friends.”160 Such a principle would be “destructive to liberty”161—a point that
opponents conceded.162
Thomas Paine, hired by Morris as a pamphleteer to bolster the bank’s case,
agreed with critics that corruption was a concern but argued that the solution
was less legislative power over the bank, not more. The original committee
report recommending repeal of the bank’s charter had complained that “the
bank is not the least dependant on the government”—in other words, its charter
was perpetual and was not subject to periodic review and renewal by the
Assembly.163 That complaint, Paine inveighed, showed that the committee had
“forgotten the principles of republican government and the constitution.”164
“[F]reedom is destroyed by dependance,” he said. Bank opponents would have
a group of citizens—the shareholders and directors of the bank—become
“yearly pensioners on the favor of [the] assembly.” That kind of legislative
power would “strik[e] at the root of free elections.”165
If corporate bodies are, after their incorporation, to be annually dependant on
an assembly for the continuance of their charter, the citizens which compose
those corporations, are not free. The government holds an authority and
influence over them, in a manner different from what it does over other
citizens, and by this means destroys that equality of freedom, which is the
bulwark of the republic and the constitution.
By this scheme of government any party, which happens to be uppermost in
a state, will command all the corporations in it, and may create more for the
purpose of extending that influence.166
Paine, no less than bank opponents, envisioned the possibility of corruption
and distortion of democratic processes. The remedy, however, was to restrain
government power, to separate corporation and state, and thereby obviate the
possibility of rent-seeking behavior. Paine contended that a corporate charter
was a bilateral contract between the state, acting through the legislature, and the
corporation’s members, and could be altered or amended only “by the laws of
159.
160.
161.
162.
163.
164.
165.
166.
Id.
Id. at 31.
Id.
See id. at 72 (statement of Mr. Findley).
Paine, supra note 69, at 397.
Id.
Id.
Id.
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the land, in a court of justice and trial by jury.”167 Legislative retention of “full
and complete authority” over corporate charters was “despotic” and would
“lead us into a wilderness of endless confusion and insurmountable difficulties.”168 Some months later, Hugh Henry Brackenridge, a later justice of the
Pennsylvania Supreme Court, echoed this theme. He thought it “danger[ous]”
that the legislature might possess power “to revoke and annul charters” at
will.169 That doctrine showed “a want of knowledge of the bill of rights.”170 If
established, it would “fix the state forever in parties, for the chartered corporations will join their interests to put those they know[,] their friends[,] into
power. Thus year after year we should be employed in little else than revoking
and re-granting charters.”171
The effort by Morris, Fitzsimmons, and other bank proponents to repeal the
act failed by a vote of 28 to 41 in the General Assembly on April 1, 1786, and
the bank remained without a charter.172 But Pennsylvania politics were hardly
sedentary. In the annual elections in October, Morris kept his seat, and his
political allies made a “clean sweep in Philadelphia city and county”; they also
did well in the rural districts.173 With bank opponents now in the minority, the
first order of business was a restoration of the charter.174
Morris wanted a full and complete restoration and a declaration that the
repealing act was unconstitutional, a “violation of the public faith,” and a
“nullity.”175 Instead, the Assembly—partly out of concern for the bank’s influence and partly to mollify opponents—opted to grant the bank a new charter
with two important provisos: a limitation on the duration of the charter (14
years, subject to renewal) and a limitation on the corporation’s authorized
capital ($2 million).176 In March 1787, the new charter was approved.177 The
Bank of North America continued doing business well into the twentieth
167. Id. at 376; see id. at 374–75.
168. Id. at 378.
169. Proceedings of the General Assembly, PA. PACKET (Phila.), Dec. 25, 1786, at 3.
170. Id.
171. Id. Brackenridge’s argument was made during a later debate over rechartering of the BNA.
Other bank allies in the Assembly concurred in these views. Morris was “very glad” that the bank was
not dependent on the government. See BNA DEBATES, supra note 54, at 54. “I wish the state had not
interfered with the bank,” he said, “and the bank would never interfere with the state.” Id. at 84.
Fitzsimmons did “not wish to see the government attached to that institution” and thought it “better to
keep it for the benefit and promotion of trade and commerce.” Id. at 30. See also Paine, supra note 69,
at 397–98.
172. See RAPPLEYE, supra note 127, at 409.
173. See id.
174. See id.
175. Proceedings of the General Assembly, supra note 171, at 1.
176. See id. (statement of Mr. Findley) (expressing support for the limitations on duration and
capital but contending that they did not “sufficiently guard us”). Id. (statement of Mr. Fitzsimmons)
(arguing that a new and revised charter, as opposed to a restoration of the old one, would be more
politically palatable to bank opponents). See also RAPPLEYE, supra note 127, at 409–10; Sommer, supra
note 128, at 1072–73 (limiting BNA to 14-year life and $2 million of capital).
177. RAPPLEYE, supra note 127, at 410.
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century, and, interestingly, through a series of mergers between 1929 and 2008,
its legacy is now part of Wells Fargo.178
4. The Bank of the United States, 1791
Another bank controversy, this one over the Bank of the United States,
erupted in the federal Congress in 1791. Its prelude was the Constitutional
Convention in 1787. James Madison had proposed that Congress be given the
power “[t]o grant charters of incorporation in cases where the Public good may
require them, and the authority of a single State may be incompetent.”179
Madison and Federalists such as James Wilson saw a congressional incorporation power as crucial to a nationally integrated economy, and they specifically
envisioned nationally chartered canal companies for “facilitating . . . communication with the Western Settlements.”180
The proposal was ultimately defeated because the delegates, in their brief
exchange on the issue, could not agree on the scope of the power. Rufus King
worried that the States would be “prejudiced and divided into parties” by
inclusion of an incorporation power because the clause would be construed to
permit incorporation of national banks and mercantile monopolies.181 James
Wilson endorsed the clause and mentioned in passing that congressional power
to create mercantile monopolies was “already included in the power to regulate
trade” (that is, the Commerce Clause).182 George Mason was alarmed by that
notion; he was “afraid of monopolies of every sort” and did not think the
commerce power allowed Congress to create monopolies.183 He supported
limiting the incorporation power to canal companies only.184 Madison’s proposal was so modified but lost by a vote of three to eight.185
Mason later opposed ratification of the Constitution in part because, according to supporters of ratification, the Necessary and Proper Clause186 gave
Congress the power to “grant monopolies in trade and commerce.”187 Mason
was especially concerned that Congress might be co-opted by northern mercantile interests, which would “demand an exorbitant freight” and seek “to monopolize the purchase of the commodities,” to the injury of the agricultural states in
178. Ryan Baum, Bank of North America: America’s first bank (Apr. 16, 2010), http://blog.wellsfargo.com/guidedbyhistory/2010/04/bank_of_north_america.html.
179. 2 THE RECORDS OF THE FEDERAL CONVENTION OF 1787, at 325 (Max Farrand ed., 1911)
[hereinafter 2 CONVENTION RECORDS].
180. See id. at 615–16.
181. Id.
182. Id.
183. Id.
184. Id.
185. Id.
186. U.S. CONST. art. I, § 8, cl. 18 (“The Congress shall have Power . . . [t]o make all Laws which
shall be necessary and proper for carrying into Execution the foregoing Powers . . . .”).
187. 2 CONVENTION RECORDS, supra note 179, at 640.
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the south.188 Five state ratifying conventions—interestingly, only one of them a
southern state—proposed a constitutional amendment prohibiting Congress from
establishing a “company of merchants with exclusive advantages of commerce.”189
These issues became relevant a few years later in the debate in the House of
Representatives over Treasury Secretary Alexander Hamilton’s proposal to
create a national bank.190 Much of the debate centered on whether Congress had
the power to charter a corporation, but representatives also worried about the
influence of a corporation so closely tied to the national government. The
proposed Bank of the United States (“BUS”) would, contended Michael Stone
of Maryland, “raise in this country a moneyed interest, at the devotion of
Government; it may bribe States and individuals.”191 Madison worried that such
a power, admitting of no logical limit, would be abused: Congress “may give
monopolies in every branch of domestic industry” if it so pleased.192 Moreover,
if history was a guide, this corporation was sure to be a “powerful machine,”
capable of influencing the legislature for its own benefit, “in a great measure
independent of the People.”193
Elias Boudinot of New Jersey, a supporter of the BUS, sought to assuage
opponents’ fears by highlighting the limitations on duration (twenty years) and
authorized capital ($10 million) that would be part of the bank’s charter.194
Boudinot pointed out that, with respect to individuals, there were no limitations
on their right to associate with one another and to hold property; nevertheless,
“danger . . . might arise” from the exercise of this “joint natural right.”195 One
role of a corporate charter was to restrict the stockholders’ “original individuals
rights . . . for the public safety.”196 This the proposed BUS charter did by
188. Id.; see also Letter from Thomas Jefferson to James Madison (Dec. 20, 1787), in 5 THE WORKS
THOMAS JEFFERSON 371 (Paul Leicester Ford ed., 1904) (objecting to omission in original Constitution of a bill of rights that would provide for, among other things, “restriction against monopolies”).
189. See EDWARD DUMBAULD, THE BILL OF RIGHTS AND WHAT IT MEANS TODAY 176 (1957) (proposal
by Massachusetts: “That Congress erect no Company of Merchants with exclusive advantages of
commerce”) id. at 181 (proposal by New Hampshire: “That Congress shall erect no Company of
Merchants with exclusive advantages of Commerce”); id. at 194 (proposal by New York: “That the
Congress do not grant Monopolies or erect any Company with exclusive Advantages of Commerce”);
id. at 205 (proposal by North Carolina: “That Congress erect no company of merchants with exclusive
advantages of commerce”); see also 2 DOCUMENTARY HISTORY OF THE CONSTITUTION OF THE UNITED STATES
OF AMERICA 319 (Wash., D.C., Dep’t of State 1894) (proposal by Rhode Island: “That Congress erect no
company with exclusive advantages of commerce.”).
190. See BUS DEBATES, supra note 72, at 15–35 (reproducing Hamilton’s report recommending
establishment of a national bank).
191. 2 DEBATES AND PROCEEDINGS IN THE CONGRESS OF THE UNITED STATES 1987 (Wash., D.C., Gales &
Seaton 1834) [hereinafter 2 ANNALS OF CONG.].
192. Id. at 1948.
193. See BUS DEBATES, supra note 72, at 82. Note that this portion of Madison’s argument is not
contained in 2 ANNALS OF CONG., supra note 191.
194. See Sommer, supra note 128, at 1083 (describing the limitations on duration and capital).
195. See 2 ANNALS OF CONG., supra note 191, at 1971–72.
196. Id. at 1975.
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limiting the amount of capital stock and the life of the corporation.197 Theodore
Sedgwick of Massachusetts, another bank proponent, made a similar argument
concerning the clause in the proposed charter authorizing the BUS to hold real
estate. This clause was a limitation, not a grant, he said, because “[a]ny man, or
body of men, might, by the existing laws, purchase, in their private capacities,
real estate to any amount. This right was limited as respects the proposed
corporation.”198
Congress passed the bill incorporating the BUS in 1791.199 President Washington, after considering both Hamilton’s and Secretary of State Thomas Jefferson’s opposing views on the bank and its constitutionality, signed the bill into
law.200 Congress’s chartering of the bank was later held to be a constitutional
exercise of its Article I powers in McCulloch v. Maryland.201
5. Other Corporation Controversies
(i) Municipal Corporations, 1780–1789. Throughout the 1780s and 1790s,
the incorporation of cities aroused heated controversy. These early struggles
over municipal incorporation, involving such major population centers as Boston, Philadelphia, and New York City, have been well documented.202 A brief
summary here will offer a sense of the debate and how it dovetailed with other
corporation debates of the day.
Historically, incorporation of the inhabitants of a city meant two things: first,
limitation of the franchise to a narrower body of citizens, generally local
tradesmen or property holders only; and second, onerous economic regulation.203 Opponents of incorporation during the 1780s and 1790s regularly
decried both.204
For example, residents of Boston (which had never been incorporated) spoke
fondly of their democratic town meetings, where rich and poor alike came
together to make decisions for the community.205 Incorporation, they said, was
calculated only to deprive the “common people” of their “most inestimable
197. Id. at 1971–72, 1975.
198. Id. at 1964; see also id. at 2007 (statement of Mr. Vining) (indicating that the charter’s role was
to “enabl[e] a number of persons, in a combined capacity, to do that to a more a certain effect tha[n] an
individual may do, but subject to the control of common law in all its regulations and transactions”).
199. Sommer, supra note 128, at 1076.
200. See Thomas Jefferson, Opinion of Thomas Jefferson, Secretary of State, on the Same Subject
(Feb. 15, 1971), in BUS DEBATES, supra note 72, at 91–94; Alexander Hamilton, On the Constitutionality of a National Bank (Feb. 23, 1791), in BUS DEBATES, supra note 72, at 95–112.
201. 17 U.S. 316, 425 (1819).
202. See, e.g., HENDRIK HARTOG, PUBLIC PROPERTY AND PRIVATE POWER: THE CORPORATION OF THE CITY OF
NEW YORK IN AMERICAN LAW, 1730–1870 (1983); JON C. TEAFORD, THE MUNICIPAL REVOLUTION IN
AMERICA: ORIGINS OF MODERN URBAN GOVERNMENT, 1650–1825 (1975); see also Bloomfield, supra note
45; Maier, supra note 11; Teaford, supra note 112; Joan C. Williams, The Invention of the Municipal
Corporation: A Case Study in Legal Change, 34 AM. U. L. REV. 369 (1985).
203. See Bloomfield, supra note 45, at 27; Maier, supra note 11, at 59.
204. See Maier, supra note 11, at 59–64 (describing the debate).
205. See id. at 61.
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rights as freemen” and would establish an aristocracy within the city.206 “Publicola,” writing in the Massachusetts Centinel in 1785, criticized those who
“imagine[d] that . . . republican principles . . . will effectually check the pride
and power of the rich, and still preserve the wonted [sic] equality.” Incorporation, he wrote, would allow “the rich” to “engross the whole power of the town
in their own hands,” and “by these means the offices of Mayor and Aldermen
will become . . . hereditary among the families of the rich.”207 As against
numerous efforts at incorporation throughout the seventeenth and eighteenth
centuries, Bostonians successfully preserved their traditional mode of government and non-incorporated status until 1822.208
In Philadelphia, whose corporate charter had expired with Independence, the
electorate consisted of all adult male taxpayers,209 and reincorporation would
permit only freeholders to vote and hold office in the city.210 Opponents raised
objections similar to their Bostonian brethren. Proponents of incorporation, it
was said, hoped “to disfranchise the great body of our citizens.”211 John Smilie,
in a debate in the Pennsylvania General Assembly, also criticized the effort to
incorporate the city. “[T]hough we are republicans,” he said, “we have not
republican ideas . . . .” Incorporation would “create a separate interest and
influence” that was “set off from the body of the people,” and officeholders,
beholden only to men of property, would “labour to increase their own honor,
interest and reputation, which will be productive of discord in the state.” “This
is surely,” he continued, “a great attempt to establish an aristocracy.”212
Opponents also objected to incorporation because of the heavy-handed trade
regulation that traditionally accompanied it. Corporate officers (that is, city
officials) often required vendors to sell their goods at designated markets in the
city and charged a fee for the use of facilities (such as stalls) there.213 They also
regulated employment in the trades by, for example, restricting individuals from
practicing in several trades at once.214 This gave corporate officers (and the
property holders or tradesmen that elected them) considerable power over the
economic livelihoods of individuals. Such power was a “tyranny,” a cause of
“ruin,” and had “a direct tendency to cramp industry.”215 The “mechanics and
other respectable citizens” would have “their money disposed of[] by a few
great men.”216
206.
207.
208.
209.
210.
211.
212.
“A Mechanick,” For the Centinel, MASS. CENTINEL (Boston), Oct. 29, 1785, at 1.
“Publicola,” For the Centinel, MASS. CENTINEL (Boston), Nov. 9, 1785, at 2.
See Maier, supra note 11, at 60.
Id. at 61–62.
“One of the People,” PA. PACKET (Philadelphia), Sep. 27, 1786, at 3.
Id.
Debate in the General Assembly on Friday last, on the Bill for incorporating this city, PA.
PACKET (Phila.), Sep. 25, 1786, at 2.
213. See Bloomfield, supra note 45, at 27.
214. See Maier, supra note 11, at 61.
215. Philadelphia Incorporation Debate, supra note 34.
216. “One of the People,” supra note 210.
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On the other side of the aisle, as Pauline Maier has observed, “[d]efenders of
corporations differed from opponents not in their principles but in the conclusions drawn from them.”217 They argued that incorporated cities were small
“republics” and therefore particularly suited to the American political experience.218 They also pointed out that city officials would have to stand for election
regularly and were subject to limits on their powers.219 A form of government
could be designed, one proponent calling himself “Anti-Aristocratick” insisted,
“[w]ithout abridging the rights or privileges of the citizens.” This was especially necessary as a city grew in population because a town meeting-style
assembly of city inhabitants was chaotic and “impractical.”220
Amidst this clash of ideas, the number of incorporated cities across America
nearly doubled between 1775 and 1789.221 But in the process, several institutional reforms were implemented, growing out of the need to satisfy incorporation opponents. “Everywhere ‘closed’ or self-perpetuating corporations like that
of colonial Philadelphia . . . gave way to elected governments, often with
relatively broad electorates.”222 Municipal charters were more assertively brought
within the control of state legislatures, powers of city officials were restricted,
and limits were placed on the amount of land that corporations could hold.223
The long-term effects of these reforms became evident in the nineteenth century
as municipal corporations were transformed from domains of commercial privilege into broad-based urban governments existing for the benefit of all city
residents.224
(ii) The Society for Useful Manufactures, 1791–1792. The Society for Useful
Manufacturers (“SUM”) was granted a corporate charter by the New Jersey
legislature in 1791. This corporation, promoted and aided by Treasury Secretary Alexander Hamilton as part of his plan to bolster domestic manufacturing,
was New Jersey’s first business corporation and “one of the pioneer industrial
corporations of the United States.”225
The initial incorporation of the company aroused little controversy,226 despite
the generous privileges granted to it. Company employees were exempted from
217. Maier, supra note 11, at 62.
218. Id.
219. Id.
220. “Anti-Aristocratick,” For the Centinel, MASS. CENTINEL (Boston), Oct. 29, 1785, at 2.
221. See Bloomfield, supra note 45, at 29–30; Maier, supra note 11, at 63.
222. Maier, supra note 11, at 63.
223. See id. at 63–64; Bloomfield, supra note 45, at 30.
224. Bloomfield, supra note 45, at 30 (describing the “continued expansion of municipal services, as
citizens demanded better police and fire protection, cleaner streets, an improved water supply, and
public parks”); Katz, supra note 46 (“After the Revolution, . . . the corporation changed very slowly
into something that might be called, by the ear of the Civil War, a municipal or public corporation, in
which the function of the institution was republican (the representation of the interests of the residents)
rather than proprietary (the furtherance of the property interests of the freeholders).”).
225. Davis, The “S.U.M.”, supra note 53, at 349.
226. Id. at 389 (“In the main the current of public opinion was distinctly favorable.”).
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personal taxes and military service, the company’s lands were exempted from
property tax, the charter authorized the establishment of a state lottery to
indemnify the company against losses, and the company was empowered to
“cut canals, and clear and improve the channels of Rivers” and charge a toll for
the use thereof.227
In 1792, the SUM came under increasing public scrutiny, precipitated most
immediately by the financial devastation of many of its directors and stockholders, who had been heavily involved in securities speculation.228 (Some, apparently, had even speculated with paid-in capital of the SUM.)229 As a result, and
for a variety of other reasons, the SUM was the subject of blistering attacks in
contemporary newspapers. These attacks are remarkable because they employ
some of the most stridently republican, anti-corporate rhetoric of the period.
Critics decried the SUM’s special privileges, its capacity to monopolize manufacturing and injure the small businessman, and its ability, born of wealth and
influence, to obtain “partial laws” in its favor.230 Moreover, the company was
intimately connected with Hamilton’s 1791 Report on Manufactures, which had
recommended federal subsidies to certain manufacturing companies—something the corporation’s founders had hoped to receive.231 The response to these
attacks was primarily an insistence on the necessity of a manufacturing base to
the national welfare.232 As for the privileges that the SUM enjoyed, proponents
tried to minimize their importance.233
The impact of the clash of ideas and interests regarding the SUM is not clear.
The corporation’s charter was already in place, entrepreneurial funds had been
committed, and the New Jersey government, as well as Hamilton, were devoted
227. Id. at 384–85.
228. Id. at 410.
229. See id. (“[Following bankruptcies of several SUM directors,] the Society was shorn of its
leaders and its sources of funds were materially cut down. Furthermore, the Society’s paid-in funds
were largely in the hands of these very men and were somewhat involved in their private operations.”).
230. Davis devotes an entire chapter to popular opinion, reproducing the debate as it appeared in
newspapers and correspondence of the day. See id. at 427–53. A characteristic criticism came from one
calling himself “Anti-Monopolist,” who condemned
the present prevailing propensity for corporations and exclusive privileges, a system of
politics well calculated to aggrandize and increase the influence of the few at the expense of
the many. Wealthy speculators of all denominations are incorporated and veiled with exclusive
privileges, partial laws are made in their favor, the benefit of which others do not enjoy; and
they are exempted of the common burthens imposed on the rest of society. This propensity for
corporations is very dangerous to the liberties of a people; it raises up various bodies of men
of the most influential description in the community, and separates them from the mass of the
people; at the same time it distinguishes them with peculiar marks of favor, it attaches them to
the ruling powers by the common ties of gratitude and self-interest, and therefore gives an
additional, or rather an artificial weight to government which our Constitution does not
warrant.
“Anti-Monopolist,” supra note 59.
231. See Davis, The “S.U.M.”, supra note 53, at 450.
232. See id. at 447–48.
233. See id. at 443–45.
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to the company’s success. Nevertheless, in the immediate aftermath of the SUM
controversy, the company faced numerous financial and logistical difficulties
and lay “practically dormant” between 1796 and 1814.234
Joseph Stancliffe Davis, in his history of the SUM, speculates that the SUM
controversy contributed to the ultimate defeat in Congress of Hamilton’s proposal for subsidies to the nation’s manufacturing industry.235 Of course, subsidies were already very controversial with the American public and were widely
viewed as wealth transfers to special interests—a point that Hamilton’s Report
itself acknowledged.236 Davis also muses that the SUM controversy may have
“head[ed] off movements to incorporate similar societies in other states” and
“aided in drying up the sources of funds for” the company.237
D. A Discussion of This History
1. The Problem of Power
Republican ideals are front and center in the corporation debates of the late
eighteenth century. These ideals did not constitute a coherent ideology (lest all
agree), but they did give participants a common vocabulary—a shared set of
general principles whose application to the corporation was contested.238
Throughout these debates, we see critics and proponents of the corporation
jockeying for position around familiar themes: virtue and corruption, privilege
and equality, unity and division in the body politic, independence and servility.239
At bottom, the corporation debates centered on a topic that uniquely preoccupied American minds of the late 1700s—what Thomas Paine called “the science
of government.”240 Participants on both sides were generally in agreement, if
implicitly, that the challenge presented by the corporation was one of power. At
issue—and the source of disagreement—was how properly to limit power and
to allocate it between its private (corporate) and public (legislative) domains.
One conception of the problem emphasized the influence that corporations
could and did wield over both private individuals and public affairs. The
corporation, critics charged, was an institution specifically designed to aggregate and advance private interests.241 Able to coordinate these interests and
234. See Davis, The “S.U.M.”, supra note 53, at 492 (“The story of the manufacturing operations . . . is for the most part one of failure upon failure.”); id. at 504.
235. Id. at 451.
236. See Douglas A. Irwin, The Aftermath of Hamilton’s “Report on Manufactures,” 64 J. ECON.
HIST. 800, 804–07 (2004).
237. Davis, The “S.U.M.”, supra note 53, at 451.
238. See Note, Incorporating the Republic, supra note 11, at 1888–89.
239. Cf. Alexander, supra note 22, at 281 (listing similar dichotomies as part of republican thought).
240. Paine, supra note 69, at 397.
241. See STREET, supra note 57, at 262; CMS Debate, supra note 116 (statement Mr. Granger)
(request for incorporation of medical society was made by a “combination of doctors” who had
“advanced their demands” on the legislature); BNA DEBATES, supra note 54, at 125 (statement of Mr.
Findley) (“[A]s wealth is the means of obtaining monopolies—even when in the hands of jarring
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transact efficiently in the name of all its members, the corporation could, in
contrast to a dispersed general public, exercise an economic and political
influence greater than the sum of its constituent parts.242 It could, in the words
of the New York Council of Revision, “make the lightest scale preponderate.”243 And with potentially large sums of money at stake, the corporation had
every incentive to seek “partial laws” in its favor—laws conferring a benefit on
the corporation at the expense of the general public.244
Even proponents of corporations recognized that corporations could present
unique threats to “public safety.”245 In the debate over incorporation of the
Connecticut Medical Society, supporters conceded that such a corporation, with
power to regulate the medical profession, might at some point prove “inconvenien[t]” and even “dangerous” to the public246—an implicit nod to detractors
who warned that the society might become a “combination of the doctors . . .
directly against liberty” and “a dangerous thing.”247 Pelatiah Webster, a copamphleteer of Thomas Paine, also hired by Robert Morris to champion the
BNA’s cause, acknowledged that concentrated wealth “creates influence” in the
state.248 For Elias Boudinot, a supporter of the BUS as well as an early investor
in the SUM, that was precisely what corporate charters were for: a means of
regulation “to prevent any danger that might arise from the exercise of [the]
joint natural right” of individuals to associate and pool their wealth in a
common cause.249
A second conception of the problem centered on aggrandizement of legislative power. First was a concern that the incorporation power might be abused
individuals—how much more must it facilitate such designs, when in the hands of a permanent society,
congregated by special privilege, and actuated by the principles of united avarice?”).
242. See STREET, supra note 57, at 262.
243. Id.
244. “Anti-Monopolist,” supra note 59 (“[Incorporation] attaches [bodies of men] to the ruling
powers by the common ties of gratitude and self-interest, and therefore gives an additional, or rather an
artificial weight to government . . . .”); Council of Censors Opinion, supra note 56 (fearing that a
corporation might “become a monster of weight and influence, . . . able to counteract and over-rule our
legislative proceedings”); STREET, supra note 57, at 261 (fearing the corporation would “influence the
magistrates” of the city and turn public power into an “instrument[] of monopoly and oppression”);
CMS Debate, supra note 116 (statement of Mr. Granger) (corporations “cost more than they do good”);
BNA Committee Report, supra note 69 (“[T]he time is not very distant, when the bank will be able to
dictate to the legislature, what laws to pass, and what to forbear.”); BNA DEBATES, supra note 54, at 23,
65 (statements of Messrs. Smilie and Findley) (corrupt legislature might dole out special laws to
favored groups); “Amicus,” supra note 64 (“The men, who hold the purse strings, will certainly govern
at their pleasure.”); BUS DEBATES, supra note 72, at 82 (statement of Mr. Madison) (“[Corporations] are
a powerful machine, . . . competent to effect objects on principles in a great measure independent of the
People . . . .”).
245. See 2 ANNALS OF CONG., supra note 191, at 1975 (statement of Mr. Boudinot).
246. See CMS Debate, supra note 116 (statements of Col. Seymour and Mr. Chauncy).
247. Id. (statement of Mr. Granger); see also id. (statement of Mr. Humphrey) (the charter was
“upon an illiberal plan”); id. (statement of Mr. Burral) (fretting about the “mischief” that the proposed
corporation would cause).
248. RAPPLEYE, supra note 127, at 401 (quoting Webster).
249. 2 ANNALS OF CONG., supra note 191, at 1975.
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and become a vehicle for partisan and special-interest legislation. An unrestricted power to grant or not grant corporate charters allowed legislatures to
play favorites, awarding corporate status as a political favor and denying it to
unpopular groups.250 As the New York Council of Revision put it, “[A]ll
incorporations imply a privilege given to one order of citizens which others do
not enjoy.”251 Moreover, legislators’ views on what constituted the “public
interest” might be distorted by special petitions from well-organized groups.252
Such distortion was especially a risk—one might say a certainty—when the
legislators themselves intended to participate in the corporation.253 Incorporation was also the occasion for the grant of special privileges. BNA opponents
worried that a legislature might bestow bounties on favorites and “parcel out the
commonwealth into little aristocracies”254—concerns the other side acknowledged.255 Delegates to the Constitutional Convention feared that Congress,
through the power of incorporation, might create monopolies, privileging some
groups over others and, worse, privileging some parts of the country over
others.256 Finally, the moral and political consequences of an unbridled incorporation power were uncertain. The New York Council of Revision feared the
incorporation “of every . . . order of men in every county” of the state, with
dreadful results for the body politic: “the State, instead of being a community of
free citizens pursuing the public interest,” would “become a community of
corporations, influenced by partial views.”257
Second, inordinate legislative power also risked the substitution of corrupt
partisanship for the public interest. Thomas Paine, for example, scolded BNA
opponents for maintaining that the legislature retained “full and complete
250. General incorporation statutes for religious congregations in New York and New Jersey in the
1780s were passed specifically to put a stop to this practice. See infra notes 272–273 and accompanying
text.
251. STREET, supra note 57, at 261.
252. See CMS Debate, supra note 116 (statement Mr. Granger) (request for incorporation of medical
society was made by a “combination of doctors” who had “advanced their demands” on the legislature).
253. James Sullivan relates the story of an economic crisis in Massachusetts during the colonial
period involving an incorporated land bank. The bank loaned funds to farmers, secured by mortgages
on their farms, then issued paper to investors that amounted, essentially, to mortgage-backed securities.
“Some of the greatest men in the government were of the corporation,” Sullivan writes, “and the
influence of it pervaded everything. Elections were governed by it. The legislature was under its
control, and its power was exceeded by nothing but the misfortunes and calamities that were introduced
by it.” As it turned out, mortgage payments could not be collected, and the paper securities the bank had
issued depreciated rapidly. SULLIVAN, supra note 54, at 43. Astute readers will note the uncanny
resemblance to recent events. See Brent J. Horton, In Defense of Private-Label Mortgage-Backed
Securities, 61 FLA. L. REV. 827, 828–33 (2009) (describing mortgage securitizations by banks and the
charge that unregulated mortgage lending and issuance of mortgage-backed securities fueled the
economic crisis in 2007 and 2008).
254. BNA DEBATES, supra note 54, at 65 (statement of Mr. Findley); see also id. at 23 (statement of
Mr. Smilie).
255. Id. at 40 (statement of Mr. Morris).
256. See 2 CONVENTION RECORDS, supra note 179, at 615–16, 640.
257. STREET, supra note 57, at 262.
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authority” over the charters of existing corporations.258 In Paine’s view, if
continued corporate existence depended on nothing but legislative grace, the
legislature would acquire a “despotic” power over the lives of citizens.259 The
party in power would “command all the corporations” in the state, currying their
favor or threatening to cut short their corporate existence. More corporations
might even be chartered, and given special powers and privileges, in order to
secure political support and extend party influence.260 Paine’s argument here
parallels that of the New York Council of Revision, which a year earlier had
pointed up the danger in giving New York City officials a say in the bylaws of a
proposed corporate trade union: by that provision, the Corporation of New York
would “obtain a controlling power over the [trade union], and thus add to the
extensive influence which that rich and powerful corporation already enjoy,
thereby rendering it extremely dangerous to the citizens and to the political
freedom of the people.”261
2. Three Solutions to the Problem
These twin conceptions of the problem, and the tension between privatecorporate and public-legislative power, inspired different solutions during the
late eighteenth century. Amidst the debates, three distinct trends are evident.
First, there was a generally recognized need to place restrictions on the incorporation power. Second, Americans of this period generally agreed (not without
dissent) that legislatures maintained broad authority over the charters of existing
corporations. Finally, there was a willingness to experiment with charter design
to accommodate both public and private interests.
(i) Restrictions on the Incorporation Power. Members of the founding generation were keen to the potential for favoritism and self-dealing in the chartering
process, and the earliest state constitutions contained provisions aimed at
limiting legislative discretion in this regard. The language in the Virginia Bill
of Rights of 1776 was typical: “[N]o man, or set of men, are entitled to
exclusive or separate emoluments or privileges from the community but in
258. Paine, supra note 69, at 397.
259. See id. at 378.
260. See id. at 397; see also Proceedings of the General Assembly, supra note 171, at 3 (statement of
Mr. Brackenridge).
261. STREET, supra note 57, at 261–62. The tenor of the times in New York during this period sheds
even greater light on the Council’s decision. Between 1784 and 1785, the Council successfully vetoed
six bills (including the one discussed above) that were passed by the state legislature after proposal by
New York City officials. See STREET, supra note 57, at 251–52, 257–58, 261–64, 266–67, 273–74,
274–75. All six bills would have augmented the already significant powers of the corporation of city of
New York—one bill, for example, empowered the corporation to collect a general tax—and were thus
inconsistent with the ambient republicanism that characterized the post-revolutionary era. Many
lawmakers, including the Council of Revision, saw the corporation as “a reminder of a discredited age,”
when government “bestowed special privileges and lucrative properties on favored groups or localities.” Teaford, supra note 112, at 692.
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consideration of public services.”262 The North Carolina Constitution of 1776
contained an identical provision.263 The Massachusetts Constitution of 1780
referred explicitly to corporations: “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 rises from the
consideration of services rendered to the public . . . .”264 The Pennsylvania
Constitution of 1776 and the Vermont Constitution of 1777 each declared
“[t]hat government is, or ought to be instituted for the common benefit . . . ; and
not for the particular emolument or advantage of any single man, family, or set
of men, who are a part only of that community . . . .”265 These provisions were
invoked in the corporation controversies.266
As we have seen, delegates to the Constitutional Convention in 1787 denied
Congress the power of chartering corporations for similar reasons, and five
states recommended a constitutional amendment making that denial explicit.267
Of course, no state ever went so far as to deny its legislature the power of
262. VA. BILL OF RIGHTS § 4 (1776), in EMLIN MCCLAIN, CONSTITUTIONAL LAW IN THE UNITED STATES
383 (1905). Judge Spencer Roane construed this provision to apply to a corporation in 1809. Currie’s
Adm’rs v. Mut. Assurance Soc’y, 14 Va. (4 Hen. & M.) 315, 347 (1809) (opinion of Roane, J.).
263. N.C. CONST., A DECLARATION OF RIGHTS, &C. art. III (1776), in 5 FEDERAL AND STATE CONSTITUTIONS, supra note 83, at 2787 (“That no man or set of men are entitled to exclusive or separate
emoluments or privileges from the community, but in consideration of public services.”).
264. MASS. CONST. pt. I, art. VI (1780), in 3 THE FEDERAL AND STATE CONSTITUTIONS, COLONIAL
CHARTERS, AND OTHER ORGANIC LAWS OF THE UNITED STATES (Francis Newton Thorpe ed., photo. reprint
1993) (1909) [hereinafter 3 FEDERAL AND STATE CONSTITUTIONS].
265. PA. CONST. ch. 1, art. V (1776), in 5 FEDERAL AND STATE CONSTITUTIONS, supra note 83, at 3082;
see VT. CONST. ch. 1, art. VI (1777), in 6 THE FEDERAL AND STATE CONSTITUTIONS, COLONIAL CHARTERS,
AND OTHER ORGANIC LAWS OF THE UNITED STATES 3740 (Francis Newton Thorpe ed., photo. reprint 1993)
(1909) (“That government is, or ought to be, instituted for the common benefit . . . ; and not for the
particular emolument or advantage of any single man, family or set of men, who are a part only of that
community . . . .”). It is also worth noting that the Kentucky Constitution of 1792 had a virtually
identical provision. See KY. CONST. art. XII, § 1 (1792), in 3 FEDERAL AND STATE CONSTITUTIONS, supra
note 264, at 1274.
266. See BNA DEBATES, supra note 54, at 77 (statement of Mr. Lollar) (“The bank is not compatible
with our constitution, which does not admit of granting peculiar privileges to any body of men.”); see
also SULLIVAN, supra note 54, at 33–34 (opposing establishment of incorporated Bank of Massachusetts;
legislature had no right to grant a “charter of privilege” to a bank “because the constitution expressly
provides, that no exclusive privilege shall be granted to any man, or body of men”).
267. See supra notes 179–189 and accompanying text. There was some debate among the Founders
about what had actually been denied. Some, such as Madison, contended that it was the power of
incorporation in general. See 2 ANNALS OF CONG., supra note 191, at 1950. Others, such as Elbridge
Gerry, argued that convention delegates had only denied Congress the power of chartering “commercial
corporations,” but banks were okay. Id. at 2004–05. Hamilton thought Congress had power even to
establish commercial corporations. In arguing to President Washington for the constitutionality of the
Bank of the United States, he opined that the state conventions had rejected a power to erect a
corporation with “exclusive advantages of commerce,” thus “expressing their sense, that the power to
erect trading companies, or corporations, was inherent in Congress, and objecting to it no further than
as to a grant of exclusive privileges.” See Hamilton, supra note 200, at 110–11.
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incorporation. That power was said to inhere in sovereignty,268 and, besides,
most agreed that corporations were (or could be) socially useful institutions.269
Nevertheless, the veto of the incorporation bill by the New York Council of
Revision suggests a willingness to subject such bills to careful scrutiny. Because
incorporation was a privilege, the Council wrote, “nothing but the most evident
public utility” could justify it.270
But besides total denial of the incorporation power or careful scrutiny of its
exercise, there was a third way to restrict the power, a way that ultimately
gained considerable traction and dominates American corporations law today:
the general incorporation statute. This was a law that made incorporation
automatic for groups that requested it, thus broadening the ability to incorporate
and removing the legislature from the process.271 States began utilizing this
form of legislation in the late eighteenth century, largely for familiar reasons. In
1784, New York passed a general incorporation statute for religious congregations to put a stop to the “illiberal and partial Distributions of Charters of
Incorporation to religious Societies.”272 New Jersey’s law to the same effect,
enacted two years later, was intended to “grant[] equal Privileges to every
Denomination of Christians, and secur[e] to them all their civil Rights,” chief
among them the corporate ownership and management of the congregation’s
real property.273 Pennsylvania enacted a general incorporation statute in 1791
for literary, charitable, and religious organizations, citing as justification the fact
that “a great portion of the time of the legislature has heretofore been employed
in enacting laws to incorporate private associations.”274 The great benefit of a
general incorporation statute thus lay in its ability to do three things at once:
reduce the risk of partisan or special-interest legislation; achieve equality, by
making the benefits of incorporation available to all similarly situated groups;
and relieve the legislative docket, thereby also saving individuals the time and
expense of a special legislative petition.
With these advantages, the use of general incorporation statutes by the states
grew steadily. Massachusetts enacted such a law for water supply corporations
in 1799, and in the early nineteenth century, Massachusetts and New York
extended the privilege to manufacturing corporations.275 Today, of course,
268. Hamilton, supra note 200, at 102 (“[I]t is incident to sovereign power to erect corporations.”);
cf. 2 ANNALS OF CONG., supra note 191, at 1950 (statement of Mr. Madison) (the incorporation power is
“a distinct, and independent and substantive prerogative”).
269. See Maier, supra note 11, at 73–74.
270. STREET, supra note 57, at 261.
271. See SEAVOY, supra note 11, at 9–10.
272. Act of Apr. 6, 1784, 1 LAWS OF THE STATE OF NEW YORK 104–09 (Samuel Jones & Richard
Varick eds., 1789).
273. An Act to Incorporate Certain Persons As Trustees in Every Religious Society or Congregation
in this State, for Transacting the Temporal Concerns Thereof, ch. 129, 1786 N.J. LAWS 255.
274. 4 LAWS OF THE COMMONWEALTH OF PENNSYLVANIA 28 (M. Carey & J. Bioren eds., Phila., Francis
Bailey 1803).
275. See DODD, supra note 11, at 228; SEAVOY, supra note 11, at 64–65.
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general incorporation is the norm throughout the United States, and most state
constitutions in fact prohibit special chartering.276
(ii) Broad Authority Over Existing Charters. Fearing that corporations might
pose a danger to the state and exercise disproportionate economic and political
influence, many in the late eighteenth century insisted that a general power to
amend or repeal corporate charters should be, or was in fact, reserved to the
legislature. This position, as we have seen, was successfully advanced both by
critics and proponents: the Pennsylvania Council of Censors, opponents of the
BNA, and supporters of the Connecticut Medical Society.
The Council of Censors in 1784 upheld the constitutionality of the legislature’s unilateral revisions to the charter of the College of Philadelphia. It was
“absolutely necessary” that the legislature retain the power to revise in this way,
lest corporations produce a “firm aristocracy over the state.”277 BNA opponents
in the Pennsylvania General Assembly succeeded not only in revoking the
bank’s original charter in 1784 but in ensuring that the new 1787 charter set
important limitations on the corporation (namely, on authorized capital and
duration).278 They consistently maintained that a corporate charter “must necessarily be always within the power of the house” to alter or amend,279 and could
be taken away “when not found agreeable to the welfare of the people.”280
Tellingly, Robert Morris’s attempt to have the Assembly’s actions declared
unconstitutional fell flat—in no small part because his political allies declined to
go that far.281 Finally, the Connecticut legislature, citing the “inconveniences”
or “danger[]” that the medical society might pose, explicitly reserved to itself a
power to revise or revoke the society’s charter.282
This doctrine was not without its dissents. Thomas Paine, for example,
thought that if retention of legislative power over charters was a cure, it was
worse than the disease. Such power, he said, created dependence and gave
legislators and the parties to which they belonged a “dangerous” authority over
the lives of citizens.283 In Paine’s view, a charter was a bilateral “contract”
276. See Ian S. Speir, Constitutional and Statutory Reservation Clauses and Constitutional Requirements of General Laws With Respect to Corporations: The Fifty States and the District of Columbia 1
(April 2011), available at http://ssrn.com/abstract⫽1820868.
277. Council of Censors Opinion, supra note 56.
278. See supra Part III.C.3.
279. BNA DEBATES, supra note 54, at 14 (statement of Mr. Lollar).
280. Id. at 64 (statement of Mr. Whitehill).
281. See supra notes 175–176 and accompanying text. Fitzsimmons, a founder and director of the
BNA, opposed Morris’s attempt because, in his view, many legislators were willing to support a new
charter yet were “opposed to retaining the old one.” See Proceedings of the General Assembly, supra
note 171, at 1. This was, of course, a political compromise and not a concession that opponents were
right about legislative control of charters. But such compromise during the founding period is important
evidence of the political and constitutional values of the day—values that shed light on the original
understanding of the corporation.
282. CMS Debate, supra note 116 (statements of Col. Seymour and Mr. Chauncy).
283. Paine, supra note 69, at 397.
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between the legislature (as agent of the public) and the members of a corporation; as such, it was not subject to alteration or repeal simply at the legislature’s
say-so.284 Restricting legislative power in this way would both protect the
corporation and the general public and preserve rational legislative processes.285
As Hugh Henry Brackenridge put it, it would prevent the legislature from being
regularly “employed in little else than revoking and re-granting charters” on a
partisan basis.286 In addition to Paine’s views is the fact that one of the
discussed precedents—the Council of Censors’ decision—was overturned in
1789. The Pennsylvania legislature declared the previous, unilateral revisions to
the charter of the College to be “a violation of the constitution . . . and dangerous in its precedent to all incorporated bodies.”287
Notwithstanding, the prevailing view of the period appears to have been that
corporate charters remained firmly within legislative control.288 Indeed, it is fair
to say that, while an unrestricted power to grant (or not grant) charters caused
the founding generation some unease,289 retention of a general legislative power
over existing charters was seen as desirable, if not imperative, lest a corporation’s activities become “inimical to the public safety.”290 As against this
background, the overturning of the Council of Censors’ decision by the Pennsylvania legislature is perhaps best read narrowly. Unilateral alterations to the
College’s charter were unconstitutional, not because corporate charters were, on
284. See id. at 374–76.
285. See id. at 397.
286. Proceedings of the General Assembly, supra note 171, at 3.
287. 3 LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, supra note 97, at 303.
288. See Handlin & Handlin, supra note 11, at 17–22; see also SULLIVAN, supra note 54, at 34
(“There is no lawyer in the state, who is disinterested, that will give it as his opinion, that the legislature
has not a right to repeal [an] act of incorporation[.]”); Chisholm v. Georgia, 2 U.S. (2 Dall.) 419, 448
(1793) (opinion of Iredell, J.) (“A corporation is altogether dependant on that Government to which it
owes its existence. Its charter may be forfeited by abuse. Its authority may be annihilated, without
abuse, by an act of the Legislative body.”); Maier, supra note 11, at 82 (describing corporations of the
era as “neatly tucked under the supervisory authority of state legislatures”); Elizabeth Fleet, Madison’s
Detached Memoranda, 3 WM. & MARY Q. 534, 552 (1946) [hereinafter Madison, Detached Memoranda] (“Where charters of incorporation . . . contain clauses implying contracts, and irrevocability,
they are liable to objections . . . .”). (Madison penned his “Detached Memoranda” sometime between
1817 and 1832. See id. at 534.)
On the other hand, there was general agreement that a legislative grant of property to a corporation
could not be unilaterally revoked. See Huntington v. Carpenter, 1 Kirby 45 (Conn. 1786) (town could
not revoke grant of certain lands to one ecclesiastic corporation and transfer them to another); SULLIVAN,
supra note 54, at 34 (contrasting an “act of incorporation,” which was subject to unilateral amendment
and repeal, to conveyances of property to a corporation, which were not). There were some modest
attempts to characterize charters as property, but they were easily rebutted and did not take hold.
Compare BNA DEBATES, supra note 54, at 12 (statement of Mr. Robinson) (calling charters a “species of
property”), and id. at 86 (statement of Mr. Morris) (comparing charters to land grants), with id. at 63
(statement of Mr. Whitehill) (“[T]he charter was not their property. It was a piece of sealed writing,
which the house might burn when they pleased. Their property is as safe as it was.”), and id. at 74
(statement of Mr. Findley) (repeal of the charter did nothing to alter the shareholders’ property because
they could “still keep a private [that is, non-corporate] bank”).
289. See supra Part III.D.2.a.
290. BNA DEBATES, supra note 54, at 65 (statement of Mr. Findley).
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principle, exempt from legislative regulation, but because a particular clause of
the Pennsylvania constitution secured the chartered privileges of “all” religious,
educational, and charitable corporations291—a provision that, by virtue of its
adoption, specifically contemplated the College.292
It was not until decades later, in 1819, that Thomas Paine’s ideas saw some
vindication. That year, the Supreme Court in Dartmouth College v. Woodward,
held that a corporate charter was a “Contract” protected from legislative “impair[ment]” for purposes of the federal Constitution.293 But even that decision did
little as a practical matter to dislodge the basic and broad authority of legislatures over corporate charters. In dicta in his concurring opinion in the case,
Joseph Story opined that if a legislature wished to alter or repeal a corporate
charter after the fact, it could reserve that authority for itself in the original grant,294
just as the Connecticut legislature had done in 1792.295 Intervening decisions in the
state courts had come to the same conclusion as Justice Story.296 Immediately, state
legislatures began including such reservation clauses in the corporate charters they
issued, and later, the clauses made their way into state constitutions and general
incorporation statutes, where they remain today.297
Strictly speaking, Dartmouth College and its aftermath are not relevant to an
“original understanding” of the corporation—a concept that is time-bound to the
eighteenth century. However, the swift response to Dartmouth College suggests
that the decision was rendered against, and in contradistinction to, a doctrinal
background that stressed broad legislative authority over corporate charters.
That response may serve as a form of corroborating evidence of the views of
late-eighteenth-century Americans.
(iii) Innovations in Charter Design. The corporation controversies of the
founding era also suggest a willingness to experiment with charter design to
accommodate the concerns of both critics and proponents. Most critics, after all,
291. See PA. CONST. § 45 (1776), in 5 FEDERAL AND STATE CONSTITUTIONS, supra note 83, at 3091.
292. See supra notes 82–84 and accompanying text.
293. 17 U.S. (4 Wheat.) 518, 644, 651–52 (1819); see U.S. CONST. art. I, § 10, cl. 1 (“No State
shall . . . pass any . . . Law impairing the Obligation of Contracts . . . .”).
294. Dartmouth Coll., 17 U.S. (4 Wheat.) at 712 (Story, J., concurring).
295. See supra note 126 and accompanying text.
296. See Currie’s Adm’rs v. Mut. Assurance Soc’y, 14 Va. (4 Hen. & M.) 315, 347–48 (1809) (opinion of
Roane, J.) (legislature’s hands were not “tied up,” and a corporation’s charter could be altered or repealed); id.
at 356 (opinion of Fleming, J.) (legislature could subsequently limit or enlarge corporate privileges in
accordance with the original charter); Wales v. Stetson, 2 Mass. (1 Tyng) 143, 146 (1806) (“[R]ights legally
vested in this, or in any corporation, cannot be controlled or destroyed by any subsequent statute, unless a
power for that purpose be reserved to the legislature in the act of incorporation.”).
297. 7A WILLIAM MEADE FLETCHER, CYCLOPEDIA OF THE LAW OF CORPORATIONS § 3658 (“The immediate effect of the Dartmouth College decision was to generate enactments in the various states reserving
the right to amend or repeal corporate charters.”); see also HERBERT JOHNSON, THE CHIEF JUSTICESHIP OF
JOHN MARSHALL 1801–1835, at 180 (1997); Handlin & Handlin, supra note 11, at 19; Herbert
Hovenkamp, The Classical Corporation in American Legal Thought, 76 GEO. L.J. 1593, 1616–17
(1988). At present, 49 states and the District of Columbia have enacted a reservation clause as part of
their corporation codes, their constitutions, or both. See Speir, supra note 276, at 1.
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were not opposed to the corporate institution as such. Rather, they took aim at
those features of corporations, and of the incorporation process, that were at
odds with the general welfare. Importantly, many of the reforms in corporate
institutional design during this period were the direct result of these criticisms.298
The old BNA charter, for example, was done away with and replaced with
one that limited the corporation’s life and authorized capital.299 (Indeed, even
Thomas Paine had conceded that perpetual duration for a corporation was
unwise.)300 The charter of the BUS was unique from the start. Not only did it
contain limitations on duration and capitalization, but it also provided for a
regressive voting scheme (which capped the number of shares a single shareholder could vote) and required that one-fourth of directors not be re-elected,
ensuring rotation.301 The latter two features, which had been demanded by BNA
critics during rechartering to no avail,302 were aimed at improving corporate
governance and ensuring that corporate directors served all, and not just a few
large, shareholders.303 But these features, along with the other limitations,
served an additional purpose: limiting the corporation’s power and broadening
its accountability.304
Transformative charter innovations were also on display in the evolution of
municipal corporations in the late eighteenth century. New provisions ensured
broader electorates and more accountable city officials, in turn preventing a
propertied or mercantile elite from co-opting the corporation’s powers and
privileges for their private benefit.305 Finally, one is tempted to speculate that
insights from the municipal and bank debates may have improved the design of
the SUM’s charter. The exceptionally generous privileges granted to it, and the
lack of limitations imposed upon it, were the cause of great consternation for
New Jerseyans in 1792.306
298. This is Pauline Maier’s central thesis. See Maier, supra note 11, at 52–53, 81–84; see also id. at
76 (“The impact of anticharter doctrine must therefore be measured not by the numbers of corporations
created but by the evolving character of charters.”).
299. See supra notes 176–177 and accompanying text.
300. Paine, supra note 69, at 393.
301. Sommer, supra note 127, at 1083.
302. See id. at 1067; see also BNA DEBATES, supra note 72, at 109 (statement of Mr. Smilie) (calling
votes in proportion to stock ownership “highly dangerous” and “a direct tyranny” because nine or ten
men could control the bank’s affairs and directors would be in place for life).
303. See id. at 1091; Alexander Hamilton, Report on a National Bank, in BUS DEBATES, supra note
72, at 15, 27 (arguing that rotation of directors was necessary because directors were elected “by a
small and select class of men, among whom it is far more easy to cultivate a steady adherence to the
same persons and objects” and directors would “have it in their power so immediately to conciliate, by
obliging the most influential of this class,” thus ensuring their incumbency); id. at 28 (arguing that
regressive voting was necessary because, otherwise, “[a] vote for each share renders a combination
between a few principal stockholders, to monopolize the power and benefits of the bank, too easy”).
304. See Sommer, note 127, at 1013, 1091.
305. Maier, supra note 11, at 63–64.
306. See supra notes 228–233 and accompanying text.
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3. Drawing Insights from the Original Understanding
A study of the corporation debates of the late eighteenth century and the
solutions they inspired offer insight on the views and concerns of founding-era
Americans. The corporation was a unique institution, lying somewhere between
the individual and the state, and often the bearer of special powers and privileges. Its very existence points to its utility, if not necessity, during this period:
the corporation secured group identity, provided ready governance mechanisms,
aggregated and deployed capital effectively, and facilitated efficient transactions
on behalf of an otherwise widely dispersed group of individuals. Still, it was an
uncertain social and political force. American institutions were fledgling and
fragile, and the power of a corporate collective amidst a society of “free and
equal” individuals might create an imperium in imperio and the establishment of
self-serving aristocracy.
Participants in the corporation debates wrestled with the tension between the
utility of the corporation and the risks it posed to the body politic. Their
concerns, distilled to their essence, centered on power in both its privatecorporate and public-legislative forms. On the one hand was the need to limit
corporate power and ensure that corporations served the public interest. On the
other hand was a risk of overcorrection, which necessitated restraints on legislative power. For the founding generation, achieving the proper balance between
these was critical to harnessing the commercial and social potential of corporations while avoiding legislative self-dealing, special-interest laws, partisanship,
and corruption.
The need to limit and allocate power appropriately motivated three distinct,
though interrelated, trends. The first was restriction of the legislature’s incorporation power, and in this vein, our American forebears conceived an enduring
legal device: the general incorporation statute. The second was an insistence on
broad legislative authority over corporate charters (an insistence that persists
today in the constitutional and statutory reservation clauses enacted by fortynine states and the District of Columbia307). Finally, innovative features in
charter design, including novel corporate governance mechanisms, helped assuage corporation critics while improving the corporate institution itself.
The corporation debates sketched here occurred during a formative period in
American history and were propelled by an obsession with the “science of
government”308—those principles and institutions on which a just, prosperous,
and stable social order rested. Indeed, to a greater extent than is perhaps
appreciated, the corporation lay at the heart of that quest:
[Corporate] charters and constitutions were understood as essentially the
same . . . . The close relationship of charters and constitutions meant that
debates over the internal structure of corporations and the management of
307. Speir, supra note 276, at 1.
308. Paine, supra note 69, at 397.
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power, even specific proposals such as rotation in office, could easily draw on
precedents from state and federal constitutions.309
The converse was also true: “[T]he insistence on a broad-based electorate for
municipal and business corporations seems in some measure to have anticipated
agitation over state franchise requirements.”310
Accordingly, we shift our focus from corporate charters to constitutions, and
particularly to the federal one. We move from an inquiry into the original
understanding of the corporation to the question: How would the Constitution,
as originally understood, have been thought to apply to a corporation?
III. CORPORATIONS AND THE ORIGINAL MEANING OF THE CONSTITUTION
Amidst the corporation controversies of the era, the federal Constitution came
into force in 1788.311 The Bill of Rights followed in 1791.312 Neither mentions
the corporation, at least not directly.313 The question thus arises: How did the
early American view of corporations square with the public meaning of the
Constitution, including the Bill of Rights, at the time of ratification? More to the
point for this Article, would a corporation have been thought by a late-eighteenthcentury American to enjoy the “freedom of speech” that the First Amendment
guarantees?
Inasmuch as the First Amendment is thought to secure a right to free speech,
it is tempting, in light of eighteenth-century concerns about the corporation, to
construe the right narrowly when it is claimed by a corporation. Members of the
founding generation were keen to the dangers of corporate influence in public
and private life; they did not view a corporation as synonymous with the
individuals who composed it, and they drew legal and constitutional distinctions
between individuals and corporations. But even if this rights-centric approach
were without difficulty (and it is not), it is probably not faithful to the original
understanding. As the corporation controversies of the period reveal, Americans
at the time simply did not view the issue through the lens of rights. For them,
the challenge presented by the corporation was one of power, and how to limit
and allocate power (both public and private) appropriately.
It is this perspective on the corporation that supplies a critical link to the
309. Maier, supra note 11, at 79.
310. Id.
311. See Gary Lawson & Guy Seidman, When Did the Constitution Become Law?, 77 NOTRE DAME
L. REV. 1, 1 (2001).
312. DUMBAULD, supra note 189, at 50.
313. Douglas G. Smith argues that the phrase “establishment of religion” in the First Amendment
signified a religious congregation incorporated and regulated under state law. “‘Establishing’ a religion
was essentially equivalent to granting a special corporate charter to a particular religious denomination . . . . [I]n prohibiting Congress from issuing any laws respecting an ‘establishment’ of religion, the
founders sought to prohibit the federal government from passing laws relating to such corporate
charters.” Douglas G. Smith, The Establishment Clause: Corollary of Eighteenth-Century Corporate
Law?, 98 NW. U. L. REV. 239, 240 (2003).
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Constitution’s original meaning, for the concerns about power that fueled the
corporation debates of the eighteenth century were also present in the drafting
and ratification of the Constitution and Bill of Rights. The Framers were
attentive to the influence that self-interested groups (what they called “factions”) could wield over public affairs. At the same time, they knew that
Congress would be comprised of self-interested actors whose powers had to be
restrained.
One of the Framers’ solutions was the First Amendment. Though the Amendment might be described as securing certain rights, it was drafted and understood as an express limitation on congressional power: for the founding
generation, Congress’s legislative authority did not extend to “speech” or “the
press.” Because the First Amendment addressed the powers of Congress, and
not the rights of speakers as such, the original understanding strongly suggests
that the identity of a speaker—whether a natural or a corporate person—is
irrelevant. Simply stated, Congress may not do what it has no power to
do—namely, regulate speech, regardless of its source.
While no controversy during the founding period deals directly with the First
Amendment’s application (or non-application) to congressional regulation of a
corporation’s speech, one controversy does supply a close analogue. In debating
the constitutionality of congressional censure of the Democratic-Republican
societies in 1794, James Madison and Republicans in the House of Representatives successfully urged that Congress lacked a censorial power over speech,
rebuffing Federalist attempts to narrow the scope of First Amendment protections based on the societies’ group-identity and group-character. Tellingly, the
Federalist concerns that drove the debate over the Democratic-Republican
societies exhibit striking parallels to the concerns at the heart of both eighteenthcentury and modern debates about the corporation. The resolution to the controversy over the societies, then, buttresses the founding generation’s powercentric understanding of the First Amendment. Just as Congress then lacked
power to abridge the speech of what was dubbed a “self-created, permanent
body” of political activists,314 so it lacks power today (at least under the original
understanding) to abridge the speech of state-created, permanent bodies of
interested businesspeople (or political activists, journalists, or others who might
utilize the corporate form). Put another way, from the standpoint of the First
Amendment’s original meaning, the identity of a speaker is constitutionally
irrelevant. The issue is one of congressional power, and where “speech” is at
issue, Congress lacks authority to abridge it.
While text, contemporary understanding, and post-ratification history thus
suggest that the First Amendment restricts Congress’s ability to regulate corporate speech, it is not the case that the Framers, in fashioning the Constitution,
were blind to the risks posed to the democratic process by the activities of
powerful, self-interested groups. To the contrary, the Framers specifically envi314. See infra notes 356–359 and accompanying text.
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sioned “factional” politics at the national level: the jockeying for attention and
influence by numerous groups who would seek to gain power, or influence
public measures, for their private benefit. Rather than lodging authority in
Congress to regulate who would participate in this process and to what extent,
the Framers’ solution was a series of institutional safeguards—a sufficiently
large House of Representatives, a bicameral legislature, and others—to mitigate
the risks of endemic corruption and rent-seeking.
In sum, the First Amendment’s limitations and the institutional structure of
the federal government were the Framers’ solutions to the problem of power at
the national level. Together they embody the pluralist model on which the
Constitution was built: opinions and ideas from a variety of sources would
reverberate throughout the national political space, checked by the good sense
of the people, not the legislative powers of Congress. This understanding of
both the First Amendment in particular and the Constitution in general makes a
strong case that, for the founding generation, a corporation, no less than an
individual, would have enjoyed the “freedom of speech” that the First Amendment guarantees.
While this analysis focuses, as it must, on the limited powers of Congress
with respect to corporate speech, an open question is whether the same limitations apply at the state level, at least for purposes of the original understanding.
A brief exploration of this issue concludes this Part.
A. Constitutional Rights: Individuals vs. Corporations
There is no doubt that rights recognized in the Constitution address individuals—that is, natural persons.315 There is also no doubt that a corporation, in the
1700s as today, was a legal device embracing, or consisting of, some group of
natural persons. For Justice Scalia, the implication is straightforward: Corporations, no less than individuals, enjoy constitutional rights.316 Justice Scalia’s
argument on this score is a logical one and, in that sense, not entirely unsound.
Importantly, however, his argument is not strictly an originalist one.
In fact, there are some reasons to think that the founding generation viewed
the corporation in much more restrictive terms and as not synonymous with the
individuals who composed it. There was, first, the classical republican emphasis
on the individual and his independent obligation to engage with public affairs.317 It was precisely this that the corporation was thought to undermine. As
315. See Citizens United v. Fed. Election Comm’n, 130 S. Ct. 876, 950 (2010) (Stevens, J.,
dissenting) (“[W]hen [the Framers] constitutionalized the right to free speech in the First Amendment,
it was the free speech of individual Americans that they had in mind.”); id. at 928 (Scalia, J.,
concurring) (“All the provisions of the Bill of Rights set forth the rights of individual men and
women . . . .”).
316. See id. at 928 (Scalia, J., concurring) (“All the provisions of the Bill of Rights set forth the
rights of individual men and women . . . . But the individual person’s right to speak includes the right to
speak in association with other individual persons.”).
317. Pocock, supra note 21, at 129.
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an insular, self-governing community separate from the body politic and organized with particular ends in view, the corporation acquired a life and interest of
its own. The republican fear, consequently, was that the corporation might
deprive its constituent members of virtue and generosity and make them
incapable of independently pursuing the public good.318 Second, the founding
generation, keen to the potential for conflict between corporate interests and the
interests of the public, insisted on broad legislative authority over corporate
charters.319
Finally, evidence from the period suggests legal and constitutional distinctions between natural persons and corporations. On the one hand, corporate
status conferred on a group of individuals certain privileges that the individuals,
in their natural capacity, did not enjoy. For example, the rights to sue and be
sued and to hold property in the corporate name were the exclusive purview of
the corporation and were unavailable to a mere association.320 Conversely, the
corporation was subject to disabilities not pertaining to a group of natural
persons. For example, when a corporation did sue, it could not be represented
by one of its members and had to appear by attorney, “being [as Blackstone put
it] invisible, and existing only in intendment and consideration of law.”321
Moreover, the charter was viewed as a regulatory device and could actually
limit the rights that a group of persons would otherwise enjoy in their natural
capacities. This flowed from the requirement that a corporation’s activities serve
the public interest.322 Thus, by charter, an incorporated group’s activities were
restricted to those expressly authorized,323 and limitations could be placed on
capitalization, property holdings, and duration of corporate existence.324
318. See supra notes 60–70 and accompanying text.
319. See supra Part III.D.2.b.
320. See 1 BLACKSTONE, supra note 37, at *467–68; see also Seely v. Schenck, 2 N.J.L. 75, 75–76
(N.J. 1806) (“[B]y [an] assumed name, [an unincorporated association] cannot appear in a court of
justice. They can neither sue nor be sued by it. This is a privilege appertaining to corporate bodies
only . . . . To sue and be sued in their corporate name, is one of the great privileges always granted to
corporate bodies. It can only be authorized by the supreme power of the State.”).
321. 1 BLACKSTONE, supra note 37, at 476.
322. SEAVOY, supra note 11, at 5.
323. See 2 MATTHEW BACON, A NEW ABRIDGMENT OF THE LAW 8 (London, A. Strahan 1798) (“A
Corporation is a creature of the charter that constitutes and gives it being, and prescribes bounds and
limits to its operation, beyond which it cannot regularly proceed . . . .”); McMullen v. City Council of
Charleston, 1 Bay 46, 44–45 (S.C. Com. Pl. Gen. Sess. 1787) (counsel citing Bacon’s Abridgement for
the proposition that a corporation “was an artificial body of men, or body politic, which had no natural
rights, but such as were given it by the supreme power which gave it existence”); see also Head &
Amory v. Providence Ins. Co., 2 Cranch 127, 167 (1804) (Marshall, J.) (“[T]his body, . . . in its
corporate capacity, is the mere creature of the act to which it owes its existence, [and] it may correctly
be said to be precisely what the incorporating act has made it, to derive all its powers from that act, and
to be capable of exerting its faculties only in the manner which that act authorizes.”); Commissioners of
the Dist. of Southwick v. Neil, 3 Yeates 54, 55 (Pa. 1800) (a corporation’s powers “are limited by the
act of incorporation”).
324. See supra note 176 and accompanying text (limitations on the BNA); supra notes 194–198 and
accompanying text (limitations on the BUS); see also Charles River Bridge v. Warren Bridge, 36 U.S.
(11 Pet) 420, 424 (1837) (describing a Massachusetts act of incorporation in 1785 that limited to 40
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The most direct evidence on the individual-corporation distinction comes
from the 1786 opinion of the Pennsylvania Council of Censors. Responding to
objections that the Pennsylvania legislature had overstepped its bounds in
unilaterally amending the charter of the College of Philadelphia, the Council
distinguished between “individuals, who are by the bill of rights secured the
privilege of a tryal [sic] by jury” and corporations, which as mere “creatures of
society” could not, “under the bill of rights, plead any exemption from legislative regulation.”325 As we know, the Council’s decision was somewhat anomalous because the Pennsylvania constitution at the time contained express
protections for the charter of the College, as well as for the charters of other
religious, charitable, and educational institutions.326 Three years later, the Council’s decision was overturned by legislative act, and the previous charter amendments were declared unconstitutional and a “dangerous . . . precedent.”327 A
broad reading of these events suggests that corporations, like individuals, were
thought to have constitutional rights. A more narrow reading, as has been noted,
would highlight the express protection that the Pennsylvania constitution accorded this and similar corporations, and the Council’s decision, together with
its later reversal, may stand for the proposition that the existence of a corporation’s constitutional rights would not be inferred merely from the fact that
individuals enjoyed certain rights, but would be recognized if expressly provided for.
Notwithstanding these observations, founding-era precedents may not be
entirely on point. As Part II above reveals, much of the controversy over
corporations centered on corporate charters: how and on what terms charters
were to be granted, and the extent to which the legislature could amend or
repeal them. Questions of legislative authority, of course, merge into constitutional questions about the scope and limits of state power. But because charters
are unique to (and, indeed, are the sine qua non of) corporations, it is not clear
how broadly the lessons of the founding period may be generalized.
Consider, for example, that the Council of Censors’ decision may have been
motivated by the view that an individual’s right to a jury trial had no constitutional analog when a corporate charter was at issue. Almost certainly, the same
analysis would not have applied if the Pennsylvania legislature had sought, not
to revise the College’s charter, but to confiscate its property.328 Indeed, critics of
the BNA justified revocation of that corporation’s charter by distinguishing
charter provisions from property rights and pointing out that the bank’s property
remained unaffected by the revocation.329 Because possession of property was
years a corporation’s right to build and operate a bridge, after which time the bridge would revert to the
state).
325. Council of Censors Opinion, supra note 56.
326. See supra notes 82–84 and accompanying text.
327. 3 LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, supra note 96, at 303.
328. See sources cited supra note 288.
329. See id.
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(and is) within the purview of both corporations and individuals, eighteenthcentury Americans could easily generalize from constitutional protections for
property rights that, perhaps strictly speaking, contemplated the individual, to
similar protections for a corporate body. By contrast, a corporate charter was
not analogous to any individual right in a similar way (and, as we saw, the claim
that a charter was a contract had not, by the time the Constitution was ratified,
carried the day).
On this approach, applying the original understanding to questions of corporate constitutional rights would entail an inquiry into the congruence between
corporations and individuals with respect to the particular right at issue. For
example, because the property, papers, and effects of a corporation are just as
subject to unreasonable searches and seizures as those of an individual, it would
follow (under this approach) that corporations enjoy Fourth Amendment protections.330 The right to vote, however, is limited to natural persons for the simple
reason that corporations may be formed and multiplied in ways that individuals
cannot.331
A corporation’s right to free speech is a closer question. “Institutional speech,”
some contend, lacks the characteristics of individual expression and is but an
“abstract[ion].”332 On the other hand, the founding generation recognized that a
corporation, as a distinct body, had distinct interests to advance.333 Indeed, in an
analogous First Amendment context, corporate status for religious congregations during the late eighteenth century was critical to the enjoyment of free
exercise rights.334 The American public at the time, therefore, may well have
understood the First Amendment’s reference to “freedom of speech” to extend
equally to corporations and individuals.
330. See U.S. CONST. amend. IV (“The right of the people to be secure in their persons, houses,
papers, and effects, against unreasonable searches and seizures, shall not be violated . . . .”).
331. Natural persons come into the world after a nine-month gestation period, see 9 THE NEW
ENCYCLOPÆDIA BRITANNICA 675 (15th ed. 2010), and are qualified to vote in federal elections only after
reaching eighteen years of age, U.S. CONST. amend. XXVI. By contrast, because corporations are
creatures of law, the number of them that may be formed is theoretically unlimited.
332. Randall P. Bezanson, Institutional Speech, 80 IOWA L. REV. 735, 739 (1995).
333. See supra Part III.B.
334. See Smith, supra note 313, at 255, 267–70; Underwood, supra note 42, at 157; Michael
McConnell, The Origins and Historical Understanding of Free Exercise of Religion, 103 HARV. L. REV.
1409, 1490 (1990) (“[T]he [term] ‘free exercise of religion’ suggests that the government may not
interfere with the activities of religious bodies . . . .”); see also Act to Incorporate Certain Persons As
Trustees in Every Religious Society or Congregation in this State, for Transacting the Temporal
Concerns Thereof, ch. 129, 1786 N.J. LAWS 255 (broadening the ability of religious congregations to
incorporate in order to “grant[] equal Privileges to every Denomination of Christians, and secur[e] to
them all their civil Rights”).
In this vein, consider Bezanson’s contention that institutional speech “has nothing to do with liberty
and no necessary relationship to freedom, a term that is meaningless outside the context of individuals.”
Bezanson, supra note 332, at 739. Given the intimate connection between religious institutions
(corporations) and the free exercise of religion, and between the exercise of religion and freedom of
expression, Bezanson’s statement would probably sound odd to eighteenth-century ears.
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B. Constitutional Limits: The Power (or Not) To Restrict Group Speech
Ultimately, however, asking whether the original understanding of the corporation or the original meaning of the Constitution supports the recognition of
constitutional rights for corporations probably misses the mark. The corporation
debates of late eighteenth century simply did not approach the issue on those
terms. Rather, as noted, Americans of this period were preoccupied with the
problem of power, with the proper domains of private-corporate and publiclegislative power.
It is here that an original-meaning analysis yields important insights, for even
if the founding history supports a more restrictive view of corporate rights, it
would not follow that Congress had power to regulate corporations in ways that
implicated “speech” or other constitutionally significant activities. In fact, the
text and contemporary understanding of the First Amendment, particularly in
light of the 1794 controversy over the Democratic-Republican societies, suggest
that Congress lacked this kind of power. It is also important that the Framers
anticipated the tug-of-war among numerous self-interested groups (likely including corporations) in the national political process, and they structured federal
institutions so as to mitigate the risks of unbridled rent-seeking and corruption.
Juxtaposition of these two principles—the First Amendment’s limits on congressional power and the Constitution’s institutional safeguards—makes out a strong
case for the application of First Amendment protections to corporations.
1. The First Amendment: Text, Contemporary Understanding, and the
Democratic-Republican Societies
The First Amendment capaciously provides, “Congress shall make no law . . .
abridging the freedom of speech, or of the press . . . .”335 There is no reference
to a “person” or even to “the people”336 and therefore no need to struggle over
who (or what) is a person or who (or what) is included within the compass of
the amendment.337 The amendment sets forth an express limitation on congressional power: straightforwardly, Congress may not legislate abridgments of
“speech” or “the press.”
This phrasing accords with the contemporary understanding.338 To the found-
335. U.S. CONST. amend. I.
336. Cf. U.S. CONST. amend. IV (“The right of the people to be secure in their persons, houses,
papers, and effects, against unreasonable searches and seizures, shall not be violated . . . .”).
337. Cf. County of Santa Clara v. S. Pac. R.R., 118 U.S. 394, 396 (1886). One of the issues
extensively briefed in this case was whether a corporation was a “person” within the meaning of the
Fourteenth Amendment’s Equal Protection Clause, which provides, “No state shall . . . deny to any
person within its jurisdiction the equal protection of the laws.” U.S. CONST. amend. XIV. Before oral
argument, Chief Justice Waite stated flatly, “The court does not wish to hear argument on the question
whether the . . . Fourteenth Amendment . . . applies to these corporations. We are all of opinion that it
does.” 118 U.S. at 396.
338. See LEONARD WILLIAM LEVY, LEGACY OF SUPPRESSION: FREEDOM OF SPEECH AND PRESS IN EARLY
AMERICAN HISTORY 119 (1960) (“The Framers intended the First Amendment as an added assurance that
Congress would be limited to the exercise of its enumerated powers, and therefore they phrased it as an
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ing generation, the rights that the First Amendment secured were coterminous
with the power that Congress lacked.339 Thus, in the House debate over the
proposal for the Bill of Rights, Madison could say, in the same breath, “The
right of freedom of speech is secured; the liberty of the press is expressly
declared to be beyond the reach of this Government . . . .”340 Likewise, many
Federalists had contended that recognition of these rights was unnecessary
because Congress, being restricted to its enumerated powers, had no authority to
legislate over speech and the press in the first place.341
The nation’s first free speech controversy sheds further light on the First
Amendment’s understood meaning and, importantly, illuminates the modern
debate over corporations and the freedom of speech. Between 1793 and 1794,
the administration of President George Washington and its Federalist allies were
engaged in a sustained campaign to delegitimize and silence the DemocraticRepublican societies—loosely affiliated, voluntary associations of politically
active citizens who regularly criticized Federalist policies.342 Their opposition
to the federal whiskey tax—part of Treasury Secretary Alexander Hamilton’s
program to consolidate and fund the national debt—was said to have inspired an
express prohibition against the possibility that Congress might use those powers to abridge freedom of
speech or press.”); AKHIL REED AMAR, AMERICA’S CONSTITUTION: A BIOGRAPHY 319 (2005) (pointing out
that the First Amendment’s opening phrase, “Congress shall make no law,” stood in stark contrast to the
wording of the Necessary and Proper Clause, “The Congress shall have Power . . . [t]o make all Laws,”
in order to address fears that Congress would use its powers expansively).
339. In his speech before the House on June 8, 1789, Madison explained what role a bill of rights
would have in the national government. Referring to bills of rights in the state constitutions, he stated:
In some instances, [bills of rights] assert those rights which are exercised by the people in
forming and establishing a plan of Government. In other instances, they specify those rights
which are retained when particular powers are given up to be exercised by the Legislature. In
other instances, they specify positive rights [such as trial by jury]. In other instances, they lay
down dogmatic maxims with respect to the construction of the Government . . . . But whatever
may be the form . . . in making declarations in favor of particular rights, the great object in
view is to limit and qualify the powers of Government, by excepting out of the grant of power
those cases in which the Government ought not to act . . . .
1 THE DEBATES AND PROCEEDINGS IN THE CONGRESS OF THE UNITED STATES 454 (Joseph Gales ed., Gales
& Seaton 1834) [hereinafter 1 ANNALS OF CONG.] (emphases added).
340. Id. at 766.
341. See THE FEDERALIST NO. 84 (Alexander Hamilton), supra note 20, at 513 (“[Bills of rights] have
no application to constitutions professedly founded upon the power of the people . . . . Here, in
strictness, the people surrender nothing; and as they retain every thing they have no need of particular
reservations. . . . For why declare that things shall not be done which there is no power to do? Why, for
instance, should it be said that the liberty of the press shall not be restrained, when no power is given by
which restrictions may be imposed?”); 1 ANNALS OF CONG., supra note 339, at 455 (statement of Rep.
Madison) (explaining the Federalists’ views: “It has been said, that in the Federal Government [a bill of
rights is] unnecessary, because the powers are enumerated . . . ; that the constitution is a bill of powers,
the great residuum being the rights of the people . . . .”); see also 2 THE RECORD OF THE FEDERAL
CONVENTION OF 1787, at 617–18 (Max Farrand ed., 1911) (proposal to insert in the original Constitution
“a declaration ‘that the liberty of the Press should be inviolably preserved’” rejected as “unnecessary”
because “[t]he power of Congress does not extend to the Press”).
342. See Robert M. Chesney, Democratic-Republican Societies, and the Limits of Legitimate Political Dissent in the Early Republic, 82 N.C. L. REV. 1525, 1541, 1551 (2004).
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armed uprising called the Whiskey Rebellion in Western Pennsylvania.343 After
President Washington denounced the societies in a speech before Congress, the
House of Representatives debated whether to censure the societies for their
activities and publications.344
Both before and during the House debate, Federalists repeatedly branded the
societies as illegitimate and denied that they had any right to assemble and
criticize the government. Their arguments flowed from a particular theory of
democratic representation, one that emphasized that public deliberation and
debate were exclusively the purview of legally constituted bodies such as
Congress and the state legislatures. Any other group was “self-created” and had
no right to criticize the conduct of, or acts passed by, the people’s representatives.345
The Federalist critique of the Democratic-Republican societies is remarkable
for its parallel to the eighteenth-century corporation debates. For critics, the
societies raised many of the same concerns as corporations: they were “aristocratic”346 and were thought to have distortionary effects on the democratic
process. “It is easy to see,” said one styling himself “Deodatus,”
that if part only of the citizens are formed into Clubs [his term for the
societies], and the others remain unassociated, the Clubs though a minority
would have an over-ruling influence—and that excess of influence would be
unfair, and utterly repugnant to the nature of an equal republican government.
By thus combining together, a few may ever perplex and mislead the many. In
a word, it is an aristocratic partnership, the object of which is to increase the
power of the associates and to annul or overcome the power of their competitors.347
Recall that critics of the corporation had raised similar concerns. “We have
nothing in our free and equal government, capable of balancing the influence
which the bank must create,” read the committee report recommending repeal
of the charter of the Bank of North America.348 The statement by the New York
Council of Revision is an even clearer echo: by the unrestricted creation of
corporations, “the State, instead of being a community of free citizens pursuing
the public interest, may become a community of corporations, influenced by
partial views, and perhaps in a little time, (under the direction of artful men)
composing an aristocracy.”349
343. See id. at 1554–55.
344. See id. at 1560–62.
345. James P. Martin, When Repression is Democratic: The Federalist Theory of Representation and
the Sedition Act of 1798, 66 U. CHI. L. REV. 117, 118, 137 (1999).
346. Id. at 157 & nn.151–52 (collecting contemporary sources criticizing the societies as “aristocratic”).
347. “Deodatus,” No. II., COLUMBIAN CENTINEL (Boston), Sept. 27, 1794, at 1.
348. BNA Committee Report, supra note 68.
349. STREET, supra note 57, at 262.
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Federalists also pointed out that the societies’ power to organize and mobilize
opposition created geographic inequalities, for such power existed only in the
cities, where the population was concentrated. The views of people in the
countryside, where the population was widely dispersed, had no comparable
representation.350 “Are the country people better secured in their privileges,”
Deodatus asked, “when they find their votes are guided or rendered null and
void by the dark cabals in the cities?”351 Critics of the BNA had made similar
arguments: the bank not only tended to favor urban merchants,352 but in its
efforts to garner political support, it had duped the country-folk, for “it is well
known how easy it is to procure [petition] signers in the country.”353 The New
York Council of Revision noted the power of an incorporated urban trade union
to “make the lightest scale preponderate” when compared to the geographically
dispersed citizens in “large and extensive districts,” where the “variety of
sentiments” could not be aggregated in the fashion of a corporation.354
Of course, with respect to these arguments, Federalist critics were forced to
grapple with the obvious implications of the First Amendment. Their contention, cast in the language of rights, was that the First Amendment was not
applicable both because of the group-character of the societies and the extent of
their criticisms. For example, one “E.F.,” highlighting the First Amendment’s
protections for assembly and petition, called it “specious” to think that “this
right ever extended so far, as to authorize bodies of men, detached from the
body of the people . . . to assume to themselves the voice of the people—to
dictate, advise, condemn or applaud the measures of the government.”355 That
these were “self-created” or “self-constituted” societies was a charge repeatedly
flung.356 They had no “legal authority to assemble themselves together,” one
critic observed. “[A]s Individuals each member may have a right of giving his
opinion on public measures . . . ; and even collectively it may be tolerated if
decency is preserved.” But the societies were but “trifling assembl[ies]” that
arrogantly “pretend[ed] . . . to express the sense of many thousands of people.”357
Even a figure so eminent as George Washington thought it “absurd” that “a
350. See Martin, supra note 345, at 154–55.
351. “Deodatus,” supra note 347, at 1–2. For Deodatus, democratic participation had to be regulated, and his preferred model was the town meeting, where “the law has regulated the proceedings in
such a manner as to secure to every man his fair and equal privilege.” Id. at 1.
352. See Sommer, supra note 128, at 1053 (“[T]he BNA was accused of playing favorites, by
favoring specific merchants and by refusing to satisfy the agricultural demand for credit.”); RAPPLEYE,
supra note 127, at 397.
353. See BNA DEBATES, supra note 54, at 21 (statement of Mr. Smilie).
354. STREET, supra note 57, at 262.
355. “E.F.,” Desultory Remarks on Democratic Clubs, GAZETTE OF THE UNITED STATES (Phila.), July
21, 1794, at 2.
356. See Chesney, supra note 342, at 1544–55 & nn.82–86 (collecting contemporary sources
criticizing the societies as “self-created” or “self-constituted”).
357. “A Friend to Republican Freedom,” Letter to the Editor, GAZETTE OF THE UNITED STATES (Phila.),
Apr. 10, 1794, at 2.
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self-created permanent body” could form to criticize the government.358 As for
the First Amendment, the President averred, “no one denies the right of the
people to meet occasionally to petition for, or remonstrate against, any act of
the legislature.”359
Critics also argued that the societies had simply gone too far in their
criticisms. They had “abuse[d]” their rights to speak and publish freely.360
Liberty, it was said, did not imply license; the exercise of rights required
restraint.361 In the House debate over censure, Samuel Dexter of Massachusetts,
with some rhetorical aplomb, said that “he did not know of any article or
principle of the Constitution by which the people had reserved to themselves the
precious right of vilifying and misrepresenting their own Government.”362
Madison’s response to the Federalists, echoed by Republican opponents of
censure, was simple: the powers of Congress did not extend to censure, to
denouncing the expression of opinion. “Opinions are not the objects of legislation,” he said, and “[h]e wished it to be considered how extremely guarded the
Constitution was in respect to cases not within its limits.”363 Madison and
company succeeded in warding off a broadly worded censure by the House; the
result was a narrowly tailored, though somewhat vague, rebuke of certain
“combinations” of men who had incited the Whiskey Rebellion.364
Madison’s argument corresponded to both the text of the First Amendment
and its understood meaning at ratification. The Federalists’ focus on rights, and
their attempt to limit the scope of those rights to individuals (or temporary
358. Letter from President George Washington to Burges Ball (Sept. 25, 1794), in 10 THE WRITINGS
GEORGE WASHINGTON 437–38 (Jared Sparks ed., Boston 1836).
359. Id. (emphasis added).
360. 4 DEBATES AND PROCEEDINGS OF THE CONGRESS OF THE UNITED STATES 922 (Gales & Seaton 1855)
[hereinafter 4 ANNALS OF CONG.] (statement of Rep. Ames) (“It is not . . . the right to meet, it is the
abuse of the right after they have met, that is charged upon them.”); id. at 935 (statement of Rep.
Dexter) (“[T]he most certain way to destroy this freedom [the freedom of expression] was, to encourage
an unlimited abuse of it; and the way to render a free press useless, was to prostitute it to the base
purposes of party and falsehood . . . .”).
361. See id. at 936 (statement of Rep. Dexter) (“Restraint . . . is necessary to constitute civil liberty;
and the uniformity of this restraint, as it operates equally on all classes of citizens, is equality . . . . Let
men meet for deliberating on public matters; let them freely express their opinions in conversation or in
print, but let them do this with a decent respect for the will of the majority, and for the Government and
rules which the people have appointed . . . .”).
362. Id. at 937.
363. Id. at 934 (statement of Rep. Madison); see also id. at 917 (statement of Rep. Giles) (“Look
into the Constitution. We are authorized to legislate, but will gentlemen show me a clause authorizing
us to pass votes of censure . . . ?”); id. at 902 (statement of Rep. McDowell) (“The House of
Representatives were assembled not to volunteer in passing votes of reprobation on societies or
individuals, but to legislate.”); “A Member of the Democratic Society of the City of New York,” N.Y.
JOURNAL (New York), June 18, 1794, at 2 (“I dare the Legislature of the United States to pass a law
prohibiting the Democratic Society in the city of New York: Yes, Sir, I repeat it—they dare not even
make an attempt . . . . Because, Sir, they have too much virtue—too much regard for our happy, our
glorious constitution, to attempt passing so base, so tyrannical, so unconstitutional, an act.”).
364. See 4 ANNALS OF CONG., supra note 360, at 947–48. Cf. Chesney supra note 342, at 1530 n.11
(noting his conclusion that the outcome of the controversy was a “draw” but recognizing that this
conclusion differs from the scholarly consensus).
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assemblies) and to sufficiently decent speech, simply missed the mark. The
question was one of power, and Congress’s did not extend that far. That this
position carried the day in the House buttresses this view as the one representing the First Amendment’s original meaning.365
2. The First Amendment and Corporations
The controversy over the Democratic-Republican societies and its resolution
illuminate how the First Amendment as originally understood ought to apply to
a corporation. Consider how Federalists’ political arguments about the societies’
effects on democratic representation—arguments echoed by corporations critics
of the era—were linked to their constitutional arguments about the scope of the
societies’ First Amendment rights. If Federalists thought that groups with an
undue and distortionary influence on political processes were, as groups, not
protected or only narrowly protected by the First Amendment, it is a reasonable
inference that corporation critics of that period held similar views with respect
to corporations.
Indeed, those today who criticize the notion of First Amendment rights for
corporations rest many of their arguments on foundations laid by Federalists
long ago. Concerns about undue influence on the political process, unfair
advantage, and the ability of groups—corporate groups—to drown out the
voices of ordinary citizens and minorities all make their appearance in the
modern critique.366 The argument from the First Amendment also mirrors the
365. There are complications, of course. The Senate, for example, concurred in, “even expanded
upon, Washington’s censure.” Chesney, supra note 342, at 1562. And as Professor Chesney points out,
the debate over the Democratic-Republican societies was something like a “dress rehearsal” for the
controversy over the Alien and Sedition Acts four years later. Id. at 1575. History, at least, has judged
the Republican interpretation of the First Amendment the correct one. See Martin, supra note 344, at
123 & nn.8–9.
366. See President Barack Obama, State of the Union Address (Jan. 27, 2010), in 156 Cong. Rec.
H418 (daily ed. Jan. 27, 2010) (Citizens United “will open the floodgates for special interests—
including foreign corporations—to spend without limit in our elections. I don’t think American
elections should be bankrolled by America’s most powerful interests, or worse, by foreign entities.
They should be decided by the American people.”); Austin v. Michigan Chamber of Commerce, 494
U.S. 652, 659–60 (1990) (restrictions on corporate electioneering expenditures constitutional because
of “the corrosive and distorting effects of immense aggregations of wealth that are accumulated with
the help of the corporate form and that have little or no correlation to the public’s support for the
corporation’s political ideas”; noting that “[c]orporate wealth can unfairly influence elections”), overruled by Citizens United v. Fed. Election Comm’n, 130 S. Ct. 876, 913 (2010); Kathleen M. Sullivan,
Two Concepts of Freedom of Speech, 124 HARV. L. REV. 143, 144 (2010) (noting that opponents of
corporate free speech are interested in protecting “marginal, dissident, or unorthodox speakers, . . .
members of ideological minorities who are likely to be the target of the majority’s animus or selective
indifference”); Editorial, The Court’s Blow to Democracy, supra note 4 (after Citizens United, corporations may “use their vast treasuries to overwhelm elections and intimidate elected officials into doing
their bidding,” thus impeding “fair elections and clean government”); Warren Goldstein, Back to the
Gilded Age!, HUFFINGTON POST, Jan. 21, 2010, http://www.huffingtonpost.com/warren-goldstein/back-tothe-gilded-age_b_431721.html (suggesting that Citizens United signals a return to the Gilded Age,
during “which corporations—industrial, financial, and railroad—ran pretty much everything, from state
legislatures (which they bought with impunity) and governors to Congress and the judiciary”); Jeffrey
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Federalist position. For Federalists in 1794, protection for a group voice depended on how and why a group came together. A “self-created” body that
could not claim popular legitimacy was but a “trifling assembl[y]” and not
within the compass of the First Amendment.367 For critics today, it is important
that the corporation, particularly the business corporation, is a state-created
body that cannot claim an “associational or expressive” purpose.368 It is but an
“artificial entit[y]” and hence outside the First Amendment’s orbit.369 Thus, for
both Federalists then and critics now, a focus on individual rights, rather than
public power, and on the character of the group is occasion for narrowing the
scope of First Amendment protections.
The parallels here are striking. The Federalists’ concerns about the DemocraticRepublican societies—concerns that mirrored those of eighteenth-century corporation critics—gave rise to a distinct kind of First Amendment argument, one
echoed today by modern corporation critics. From the standpoint of the First
Amendment’s original meaning, then, the rebuttal to the modern critics seems to
be that offered by Madison over two centuries ago. The First Amendment
addresses itself to the legislative powers of Congress, not to “rights” as such,
and “speech” is simply “not the object[] of legislation,” whatever its source.370
The broad phrasing of the First Amendment confirms what the founding generation believed: “how extremely guarded the Constitution [i]s in respect to cases
not within its limits.”371 A corporation’s speech, like any other speech, is not
within the compass of congressional power.
3. The Constitution and Interest Group Politics
While this argument is motivated by the text and contemporary understanding of the First Amendment, it does not, of itself, address Federalist and modern
D. Clements, Citizens United v. FEC: Time For a Free Speech For People Amendment? (Jan. 21, 2010),
http://www.acslaw.org/acsblog/citizens-united-v-fec-time-for-a-free-speech-for-people-amendment (stating that
“[c]orporations already spend vast sums of corporate money to dominate political debate and outcomes” and
that “[a]s a result, Americans already are deeply estranged from their government”; suggesting that the effect of
Citizens United was to “dilute democratic participation of people in elections”).
Another cause for alarm among both Federalists and modern corporation critics is the danger that “foreign
influence” will creep into elections as a result of groups’ political activities. Compare Letter to the Editor,
GAZETTE OF THE UNITED STATES (Phila.), Nov. 15, 1794, at 2 (accusing the Democratic-Republican societies of
“servility” to foreign influence and calling them “the scum of Europe” and “traitorous”), with President Barack
Obama, supra (suggesting that “foreign entities” might “bankroll[]” elections). But there is one difference
between Federalist and modern critics: whereas the former were worried about the French, the latter fret about
the Chinese. Compare Communication, GAZETTE OF THE UNITED STATES (Phila.), Jan. 7, 1795, at 3 (accusing the
societies of being “the tool of the Jacobins in Paris”), with Lawrence Lessig, Citizens Unite, HUFFINGTON POST,
Mar. 16, 2010, http://www.huffingtonpost.com/lawrence-lessig/citizens-united_b_500438.html (“If it is the
regulation, and not the speaker that matters, then the Chinese are no different from the Chamber of Commerce.
So how can the Court honestly uphold the inevitable law limiting the Chinese from campaigning . . . ?”).
367. “A Friend to Republican Freedom,” supra note 357, at 2.
368. See Citizens United, 130 S. Ct. 876, 950 (2010) (Stevens, J., dissenting).
369. See id. at 950 & n.55.
370. See 4 ANNALS OF CONG., supra note 360, at 934 (statement of Rep. Madison).
371. Id.
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concerns about the ability of well-organized (and in the case of corporations,
well-funded) groups to distort democratic processes and to unduly influence
political, even legislative, outcomes. Does this mean that the Constitution, as
originally understood, compels us to live in a world where Congress is, for
example, “preclude[d] . . . from taking limited measures to guard against corporate capture of elections”?372 And did the Framers not foresee the unsettling,
even dangerous, impact of “special interests” on the federal legislative process?
The First Amendment certainly did (and does) preclude certain forms of congressional intervention in the political process, but it is not the case that the Framers
took no account of the potential for rent-seeking and corruption in the realm of
public affairs. To the contrary, the Framers assumed that self-interested groups
would seek to exert their influence on the political process and divert the
people’s representatives from acting for the public good. The Framers did not,
however, lodge a power in Congress to decide who may and many not participate in that process. Rather, to mitigate the risk of “capture,” the Constitution
set up a series of institutional mechanisms that “raise[d] the costs of governmental action and . . . provide[d] public officials with incentives to act in the public
interest.”373
The corporation debates of the late eighteenth century, as we saw, were
colored and shaped by classical republican ideas. However, the design of the
federal government set forth in the Constitution represented, to a great extent, a
rejection of the republican reliance on virtue and individual concern for the
public interest.374 Instead, at the national level, the common good was to be
preserved, and the risks of corruption mitigated, through institutional design.
The stability of a popularly elected government, Madison explained in Federalist 10, lay not in the individual virtue of its citizens or elected officials.375
Relying on the ability of these individuals to independently pursue the public
interest was not only naı̈ve, but dangerous. Without checks in place, the body of
the people would regularly be convulsed by “faction”: special interests each
vying for dominance and control of the levers of power, which, once gained,
would be used to promote narrow agendas, to the detriment of the public at
large.376 The task, then, was to design the institutions of government in such a
way as to minimize, even to the vanishing point, this possibility.377
The Constitution achieved this in two ways. First, the government was
372. Citizens United, 130 S. Ct. at 950 (Stevens, J., dissenting).
373. Jonathan R. Macey, The Missing Element in the Republican Revival, 97 YALE L.J. 1673, 1679
(1988) (footnotes omitted).
374. See GORDON S. WOOD, THE CREATION OF THE AMERICAN REPUBLIC 610–12; Savage, supra note 25,
at 176–77 (summarizing scholarly views on “[convention] delegates’ limited reliance on virtue as the
animating force of the new Constitution”).
375. See THE FEDERALIST NO. 10, supra note 20, at 77–80. John O. McGinnis has called Federalist
10 “the single most important essay on political philosophy from the time of the Framing.” John O.
McGinnis, The Original Constitution and Our Origins, 19 HARV. J. L. & PUB. POLICY 251, 254 (1995).
376. See THE FEDERALIST NO. 10, supra note 20, at 77.
377. Id.
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republican in form, not a pure democracy. Appointing a smaller number of
citizens to make decisions for the community would “refine and enlarge the
public views” and would “pass[] them through the medium of a chosen body of
citizens, whose wisdom may best discern the true interest of their country.” This
was still risky, however: “Men of factious tempers, of local prejudices, or of
sinister designs, may, by intrigue, by corruption, or by other means, first obtain
the suffrages, and then betray the interests, of the people.”378 Hence the second
solution: a large as opposed to a small republic. The number of elected
representatives must be sufficiently high so as to “guard against the cabals of a
few” and sufficiently low so as to obviate “the confusion of a multitude.”379
“The federal Constitution,” Madison reported, “forms a happy combination in
this respect.”380 Also, the number of citizens and extent of territory of the Union
would be large enough to “take in a greater variety of parties and interests,” thus
affording security “against the event of any one party being able to outnumber
and oppress the rest.”381 “The influence of factious leaders may kindle a flame
within their particular States,” Madison wrote, “but will be unable to spread a
general conflagration through the other States.”382
What the Constitution established, then, was a government that relied not on
sufficient virtue among public officials and the citizenry, but on impersonal
institutional forces that prevented rent-seeking and corruption from becoming
endemic. The Framers’ assumption, in fact, was that man, by nature, was not
virtuous.383 There had always been and would always be “distinct interests in
society”—“[a] landed interest, a manufacturing interest, a mercantile interest, a
moneyed interest.” Each would be “actuated by different sentiments and views”
and would seek to exert its influence on the democratic process, rarely with
regard for “justice” or “the public good.”384 The solution adopted by the Framers was
to control the effects, rather than the causes, of faction, to design the government in
such as a way as to limit the ability of any interest group to dominate the rest and
thwart the “permanent and aggregate interests of the community.”385
378. Id. at 82.
379. Id.
380. Id. at 83.
381. Id.
382. Id. at 84.
383. As Madison put it, the “causes of faction” could not be removed; they were “sown in the nature
of man.” Id. at 79; see 1 THE RECORDS OF THE FEDERAL CONVENTION 254 (Max Farrand ed., 1911)
(statement of James Wilson) (objecting to a unicameral legislature because “[i]n a single house there is
no check, but the inadequate one, of the virtue [and] good sense of those who compose it”); McGinnis,
supra note 377, at 252 (“The entirety of the Framers’ new science of politics was premised on th[e]
view [that] government cannot depend on man’s benevolence or virtue.”); see also Savage, supra note
25, at 176–77 (noting that “virtue” had little currency at the Constitutional Convention but that
concerns about “corruption” were dominant); Teachout, supra note 28, at 352 (“Corruption was
discussed more often in the Constitutional Convention than factions, violence, or instability.”).
384. THE FEDERALIST NO. 10, supra note 20, at 79–80.
385. Id. at 78; id. at 80 (“[T]he causes of faction cannot be removed and . . . relief is only to be
sought in the means of controlling its effects.”).
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As Federalist 10 explained, a republican form of government and a sufficiently large House of Representatives were two design features to this end.386
Other constitutional provisions, too, evince the Framers’ preoccupation with
limiting the effects of corruption, self-dealing, and rent-seeking: separation of
powers, a bicameral legislature, checks and balances, regular elections, and
others.387 Through these provisions, the institutions of government were carefully calibrated to approximate the people’s will, to check factional influence,
and to restrain the aggrandizement of government power.
The model on which the Constitution was built was a pluralist one.388 The
Framers assumed quite correctly that the national government, and Congress in
particular, would be a focal point for interest group politics, where different
groups vied for power and strove to make their voices heard and their influence
felt. At the extremes, this could be a dangerous phenomenon. The solution,
however, was not to lodge a power in Congress (or any other branch) to “adjust
these clashing interests.”389 Such a power would be susceptible to the same ills
it sought to cure, for “the different classes of legislators” were “but advocates
and parties to the causes which they determine.”390 The solution, rather, was
institutional and structural.391 Congress, along with the federal government
more generally, was designed to withstand the political give-and-take and the
numerous, and not always benevolent, influences that would be brought to bear
on the political process. To be sure, such institutional design would not preclude
specific instances of rent-seeking and corruption, and Madison seems to assume
as much in Federalist 10. But the possibility of corrupting the whole House, and
the Senate, and the Executive was unlikely. Even then, corrupting the entire
386. Id. at 79–80.
387. See THE FEDERALIST NO. 63 (probably James Madison), supra note 20, at 384 (explaining that
the Senate was necessary to guard against those “particular moments in public affairs when the people,
stimulated by some irregular passion, or some illicit advantage, or misled by the artful misrepresentations of interested men, may call for measures which they themselves will afterwards be the most ready
to lament and condemn”); Teachout, supra note 28, at 355 (chart of “anti-corruption” clauses in the
Constitution); Savage, supra note 25, at 177–81.
388. Macey, supra note 373, at 1674–79 (articulating the “[F]ramers’ pluralist vision”); see also
Pocock, supra note 21, at 126–27 (setting forth the view of scholars that “the Revolution and the
Constitution marked the establishment of American politics on the basis of an interest-group theory of
politics, a theory and practice of pluralism and consensus”).
389. THE FEDERALIST NO. 10, supra note 20, at 79.
390. Id. at 80, 79.
391. 1 JAMES WILSON, Lectures on Law, in THE WORKS OF JAMES WILSON 352 (James DeWitt Andrews
ed., Chicago, Callaghan & Co. 1896) (praising the Constitution for “introduc[ing], into the very form of
government, such particular checks and controls, as to make it advantageous even for bad men to act
for the public good”); Macey, supra note 373, at 1679 (“[The Framers recognized] that interest groups
needed to be tamed through constitutional ordering. The way to achieve this, however, was not to pray
for enlightened statesmen, but to raise the costs of governmental action and to provide public officials
with incentives to act in the public interest.” (footnotes omitted)).
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body politic was well-nigh impossible, and the people could be counted on to
send their elected leaders packing in the next election cycle.392
There is a compelling interdependence between the Constitution’s assumption of interest group politics and the limitations set forth in the First Amendment. The Framers not only foresaw the role of powerful interest groups in the
national political process and crafted federal institutions with this phenomenon
in mind, but, at the same time, denied Congress any ability to abridge “speech,”
“the press,” and other political freedoms. The institutional mechanisms of the
Constitution and the First Amendment thus mutually reinforce the pluralist
model on which the federal government is built: Interest groups would compete
for power and influence, and intermediating institutions would preserve stability
and the general welfare. Likewise, under the First Amendment’s protections,
numerous voices and ideas would compete for attention; the “good sense” of the
people and the merit of the ideas, not the federal legislature, would sort the
wheat from the chaff.393
It is plausible to think that the Framers, and the founding generation more
broadly, envisioned the role of corporations in this process. The corporation
debates of the period portray the corporation as the quintessential interest
group—a body possessed of distinct interests and a participant (though not
always a welcome one) in the political process. Similarly, concern over corporate influence in public life loomed large at this time. In his reference in
Federalist 10 to the various economic classes—“[a] landed interest, a manufacturing interest, a mercantile interest, a moneyed interest”394—Madison used
terms applicable to incorporated bodies and those associated with them.395
Finally, at the time he wrote Federalist 10, Madison was well aware of the
392. See THE FEDERALIST NO. 63, supra note 20, at 388 (transformation of Senate into a self-serving
“aristocracy” unlikely because the Senate would have to “in the first place corrupt itself; must next
corrupt the State legislatures; must then corrupt the House of Representatives; and must finally corrupt
the people at large”).
393. See 4 ANNALS OF CONG., supra note 360, at 934 (statement of Rep. Madison) (“[T]he censorial
power is in the people over the Government, and not in the Government over the people. As he had
confidence in the good sense and patriotism of the people, he did not anticipate any lasting evil to result
from the publications of [the Democratic-Republican] societies; they will stand or fall by the public
opinion . . . .”); id. at 915 (statement of Rep. Rutherford) (“If the Democratic societies spoke nonsense,
people would despise them. If they spoke otherwise, the people would esteem them . . . . The people do
not look upon them with a great deal of reverence, but they still wish to hear them.”); id. at 940
(statement of Mr. Giles) (“[I]f [the publications of the Democratic societies] are so false as is pretended,
they will defeat themselves.”); cf. New York Times Co. v. Sullivan, 376 U.S. 254, 270 (1964) (First
Amendment reflects “a profound national commitment to the principle that debate on public issues
should be uninhibited, robust, and wide-open”); Abrams v. United States, 250 U.S. 616, 630 (1919)
(Holmes, J., dissenting) (“[T]he ultimate good desired is better reached by free trade in ideas— . . .
the best test of truth is the power of the thought to get itself accepted in the competition of the
market.”).
394. THE FEDERALIST NO. 10, supra note 20, at 79.
395. See 2 ANNALS OF CONG., supra note 191, at 1987 (statement of Rep. Stone) (incorporation of the
Bank of the United States “will raise in this country a moneyed interest”). In 1792, Henry Lee wrote
James Madison, deploring Hamilton’s Report on Manufactures (the policies of which led to Hamilton’s
support for the Society for Useful Manufacturers):
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self-serving influence that municipal corporations exerted on public affairs at
the state level, an indication, he thought, of the “different interests” that would
clash in the national government.396
Even if the Framers did not specifically envision corporations in this way, we
can justifiably construe their understanding of interest groups broadly. Madison’s definition of a “faction” in Federalist 10—“a number of citizens . . .
who are united and actuated by some common impulse of passion, or of
interest”397—comfortably accommodates a corporation, at least as it was conceived in that era.398 Moreover, it is worth pointing out that the dominant mode
today by which groups collectively organize when pursuing a cause—whether
pecuniary gain, moral advancement, community betterment, or political advocacy—is the corporation, making it the institution most comparable to the
interest groups that the Framers had in mind.399 Finally, and most importantly,
the specific identity and character of self-interested groups are irrelevant from a
constitutional standpoint. The Constitution limits opportunities for rent-seeking
and corruption through institutional mechanisms—impersonal forces that operate equally on entities of all types, whether wealthy individuals, citizens’
groups, trade associations, or incorporated bodies.
If the Framers’ vision of a national politics fueled by self-interested groups
included the corporation, the conclusion is all the more compelling that a
corporation would have been thought to enjoy First Amendment freedoms—not
only because the language of the amendment dictated that result, but because
interest groups of the corporate kind were likely within the Framers’ (and the
people’s) contemplation when the amendment was drafted and ratified. What is
important, however, is that the Framers were not political naı̈fs. The broad
The money interest is growing daily more [and] more formidable, they are industrious, they
combine they concert measures, they beset every avenue of information, [and] they bespatter
the character of every individual who dares to utter an opinion hostile to the fiscal measures—So that the chance of successful opposition is more [and] more doubtful.
Letter from Henry Lee to James Madison (Jan. 8, 1792), in 6 THE WRITINGS OF JAMES MADISON:
1790–1802, at 81–82 n.1 (Gaillard Hunt ed., 1906); see also “A Farmer,” NAT’L GAZETTE, Apr. 5, 1792
(calling the SUM a “junto of monied men”).
396. Letter from James Madison to Thomas Jefferson (Oct. 24, 1787), in 1 LETTERS AND OTHER
WRITINGS OF JAMES MADISON 1769–1793, at 348–49 (Philadelphia, J. B. Lippincott & Co. eds., 1865).
Indeed, from his Detached Memoranda, Madison may have had other corporations in mind, too. See
Madison, Detached Memoranda, supra note 288, at 552–53 (worrying that “[p]erpetual monopolies of
every sort” and “charters of incorporation” may combine with “party animosities” to “more easily
admit of the contagion [and] collision of the passions,” as well as corruption).
397. THE FEDERALIST NO. 10, supra note 20, at 78.
398. William Findley in the debate over the BNA actually described a for-profit corporation in
similar terms, calling it “a permanent society, congregated by special privilege, and actuated by the
principles of united avarice.” BNA DEBATES AND PROCEEDINGS, supra note 54, at 125.
399. See McConnell v. Fed. Election Comm’n, 540 U.S. 93, 257–58 (2003) (Scalia, J., dissenting)
(“People who associate—who pool their financial resources—for purposes of economic enterprise
overwhelmingly do so in the corporate form; and with increasing frequency, incorporation is chosen by
those who associate to defend and promote particular ideas—such as the American Civil Liberties
Union and the National Rifle Association . . . .”).
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protections accorded to “speech” and other political freedoms rested, fundamentally, on the institutional foundation that the Constitution laid. Competing
opinions and ideas would reverberate throughout the federal political space, like
sounds routed through a series of baffles—set against one another and checked
at various points in their ability to overpower and oppress. It is not, then, that
the First Amendment, as originally understood, is blind to the risks of democratic distortion and corrupting influences. Rather, those risks are accounted for
by other means—institutional means that, like the First Amendment, are part of
a federal institutional structure that allocates, restrains, and balances power.
4. A Summary and Some Caveats
For the Framers, the establishment of the national government presented its
own problem of power. On the one hand, the Framers foresaw the role of
powerful special interests in shaping national politics, and they recognized the
need for constitutional (structural) limits on the ability of any particular group
to seize the reins of power and oppress the rest. On the other hand, congressional legislators, too, were self-interested actors, and their power to restrict
political freedoms, such as the ability to speak one’s mind, had to be restrained.
Manifestly, as they crafted federal institutions, the Framers were attentive to the
problems of legislative self-dealing, special-interest laws, partisanship, and
corruption. At one level, then, the debate over corporate charters and the debate
over the national Charter were deeply linked. The key in both was to strike the
proper balance of power between private interests and the public interest.
Insofar as the corporation is concerned, its role in national politics may well
have been anticipated, and the founding generation would likely have concluded
(not without controversy) that Congress had no power to repress its ability to
speak and publish freely. Naturally, however, some caveats are in order.
In the first place, it is clear that political activities and political speech lay at
the core of the founding generation’s understanding of both the Constitution’s
structure and the First Amendment’s text. The thrust of Federalist 10 is in
controlling the effects of “faction,” the divided interests and parties seeking to
influence legislative outcomes. And the free speech controversies of the eighteenth century—the attempted censure of the Democratic-Republican societies
(1794) and its sequel, the prosecution of seditious libel under the Sedition Act
(1798)—focused on the legitimacy and limits of political dissent.400 For this
reason, a corporation’s “commercial speech,” such as product advertising,
would not implicate the same concerns, or at least would not implicate these
concerns to the same degree.401 Further, it may bring Congress’s enumerated
400. Chesney, supra note 342, at 1527.
401. “Commercial speech” is speech that does “no more than propose a commercial transaction.”
Pittsburgh Press Co. v. Pittsburgh Comm’n on Human Relations, 413 U.S. 376, 385 (1973).
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powers into play, such as the power to regulate interstate commerce.402
This brings us to the second caveat: What exactly is “speech”? This is a
perennial question in modern cases, most of which are decided without any
reference to original meaning.403 In the modern debate over corporate free
speech, a hotly contested question is whether congressional limits on corporate
spending—contribution to candidates for public office or independent political
expenditures—are tantamount to restrictions on speech. As the saying goes
(somewhat tongue-in-cheek), “Money talks, but is it speech?”404 That the
founding generation would have thought so is thoroughly denied, but with little
evidentiary support.405 As noted above, Professor Chemerinsky has asserted,
though unqualifiedly and without citation, “[T]here is no evidence that the First
Amendment’s drafters contemplated the notion that spending money in election
campaigns is a form of protected speech,” adding, “[n]or did they intend any
provisions in the Bill of Rights to protect corporations.”406 It is at least
noteworthy that the First Amendment is phrased as a prohibition on “abridging
the freedom of speech,”407 and it is hard to see how a restriction on expenditures
for manifestly political purposes does not abridge this freedom.408 Would we or
the founding generation countenance a federal law prohibiting a publisher from
402. See United States v. Williams, 553 U.S. 285 (2008) (evaluating First Amendment challenge to
congressional exercise of commerce power in 18 U.S.C. § 2252A); cf. Eldred v. Ashcroft, 537 U.S. 186,
219 (2003) (upholding power of Congress to extend the term of existing copyrights as against a First
Amendment challenge: “The Copyright Clause and First Amendment were adopted close in time. This
proximity indicates that, in the Framers’ view, copyright’s limited monopolies are compatible with free
speech principles.”). Still, the notion that commercial speech enjoys reduced First Amendment protection is not without its difficulties. In the first place, that the founding generation thought that political
speech was protected by no means implies that commercial speech was not, or was less, protected. See
Alex Kozinski & Stuart Banner, Who’s Afraid of Commercial Speech?, 76 VA. L. REV. 627, 631–33
(1990). In the second place, the line between what speech is “commercial” and what speech is
“political” can blur, especially in light of the “modern corporation[’s] increasing prominence in political
life.” Free Speech Protections for Corporations: Competing in the Markets of Commerce and Ideas,
117 HARV. L. REV. 2272, 2272 (2004).
403. See, e.g., IMS Health Inc. v. Sorrell, 630 F.3d 263, 271–73 (2d Cir. 2010) (data on doctors’
prescribing behavior collected by pharmacies and shared with data-mining firms was “speech”), aff’d,
131 S. Ct. 2653, 2667 (2011) (“There is . . . a strong argument that prescriber-identifying information is
speech for First Amendment purposes.”).
404. Bezanson, supra note 332, at 741; see also Deborah Hellman, Money Talks but It Isn’t Speech,
95 MINN. L. REV. 953 (2011).
405. See Frederick M. Abbott & Graham Dukes, Global Pharmaceutical Policy: Ensuring Medicines for Tomorrow’s World, 13 DEPAUL J. HEALTH CARE L. 103, 126 (2010) (calling it “patently absurd”
to think that the Framers would “equat[e] corporate money with speech” because “Jefferson . . . in a
letter [in 1816] to John Taylor, expressed his view that ‘banking establishments are more dangerous
than standing armies’” (citing Letter from Thomas Jefferson to John Taylor (May 28, 1816), in 11 THE
WORKS OF THOMAS JEFFERSON IN TWELVE VOLUMES 533 (photo. reprint 2009) (1905))).
406. Chemerinsky, supra note 5, at 55.
407. U.S. CONST. amend. I (emphasis added).
408. See Comment, Section 304, Taft-Hartley Act: Validity of Restrictions on Union Political
Activity, 57 YALE L.J. 806, 815 (1948) (“[E]ven in the 18th Century, the exercise of free speech often
involved the expenditure of funds, as for example, in political pamphleteering. It is hardly to be
supposed that the drafters of the Bill of Rights would have countenanced a restriction on such
pamphleteering if couched in the form of a ban on expenditures.”).
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using his money to purchase newsprint or ink, on the ground that the law related
to money and not “the press”?409
Third, while it may be difficult to say, as an original matter, what the term
“speech” included, we can say, definitively, what it did not include: outright
criminal corruption, such as bribery of public officials. English law410 and the
states411 had long recognized such bribery as a crime; the Constitution provided
for impeachment of the President and other officers for, among other things,
“Bribery”;412 and the First Congress, in 1789, 1790, and 1791, enacted laws
criminalizing the bribery of certain federal officials and federal judges.413 The
power of Congress to do so was based on the Necessary and Proper Clause,414
and nothing in the historical record indicates that ratification of the First
Amendment called this power into question. Thus, as one might reasonably
expect, the First Amendment read in its historic context presents no bar to
federal criminalization of bribery.415 Whether corporate campaign contributions
to candidates for federal office are “bribes” that Congress may regulate (or
criminalize) or “speech” that Congress may not is a question beyond the scope
409. Cf. Minneapolis Star & Tribune Co. v. Minnesota Comm’r of Revenue, 460 U.S. 575 (1983)
(special tax on ink and paper used in production of publication violated First Amendment’s guarantee
for freedom of the press).
410. See 1 BLACKSTONE, supra note 37, at *179–80 (crime of bribery with respect to parliamentary
elections); 4 WILLIAM BLACKSTONE, COMMENTARIES *139 (crime of bribery generally).
411. See Newell v. Commonwealth of Virginia, 2 Va. 88, 89 (Va. 1795) (describing 1788 Virginia
statute that criminalized “bribery and extortion”); Definition of Indictable Crimes (Rodney’s Notes), 2
Del. Cas. 235, 236 (Del. 1797) (“Bribery is an offense against public justice, and consists in the
receiving or offering undue reward by or to any person concerned in the administration of public
justice, to influence him against the known rules of law, honesty, or integrity, or giving or taking a
reward for offices of a public nature.” (citing 4 BLACKSTONE, supra note 410)).
412. U.S. CONST. art. II, § 4 (“The President, Vice President and all civil Officers of the United
States, shall be removed from Office on Impeachment for, and Conviction of, Treason, Bribery, or other
high Crimes and Misdemeanors.”).
413. An Act to regulate the Collection of the Duties imposed by law on the tonnage of ships or
vessels, and on goods, wares and merchandises imported into the United States, § 35, 1 Stat. 29, 46
(1789) (criminal penalties for “any officer of the customs [who] shall, directly or indirectly, take or
receive any bribe, reward or recompense for conniving . . . at a false entry of any ship or vessel”); An
Act for the Punishment of certain Crimes against the United States, § 21, 1 Stat. 112, 117 (1790)
(criminal penalties for “any person [who] shall . . . give any sum or sums of money, or any other bribe,
present or reward . . . to obtain or procure the opinion, judgment or decree of any judge or judges of the
United States”); see also An Act repealing, after the last day of June next, the duties heretofore laid
upon Distilled Spirits imported from abroad, and laying others in their stead; and also upon Spirits
distilled within the United States, and for appropriating the same, § 47, 1 Stat. 199, 210 (1791)
(criminal penalties for “any person or person [who] shall give . . . any bribe, recompense or reward
whatsoever, to any supervisor or other officer of the inspection of the revenue”).
414. See United States v. Worrall, 2 U.S. 384, 393–94, 28 F. Cas. 774 (Chase, Circuit Juictice,
C.C.D. Pa. 1798) (“[In] the 8th section of the 1st article [of the Constitution], there is a power granted
to Congress to create, define, and punish, crimes and offences, whenever they shall deem it necessary
and proper by law to do so, for effectuating the objects of the government; and although bribery is not
among the crimes and offences specifically mentioned, it is certainly included in this general provision.”).
415. See 18 U.S.C. § 201 (2006) (federal crimes of bribery and illegal gratuity).
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of this Article.416 The point here is that, if indeed such contributions are
“speech” for purposes of the First Amendment, the original understanding
would protect them from congressional “abridg[ment],” regardless of whether
their source is a corporation.
There is a final caveat, one requiring a more extended discussion.
C. What Role, If Any, for State Legislatures?
While the original understanding denies Congress power to regulate a corporation’s speech, does it do the same to a state legislature? Under modern First
Amendment jurisprudence, the answer to this question is obvious because the
Free Speech Clause is incorporated against the States by virtue of the Due
Process Clause of the Fourteenth Amendment.417 Thus, ostensibly, what the
First Amendment forbids to Congress, it also forbids to state legislatures. Of
course, for an originalist, delineating the proper scope of state restrictions on
corporate speech would have to take into account the views of the generation
that drafted and ratified the Fourteenth Amendment. While that analysis would
be worthwhile, it is beyond the scope of this Article. What can be offered here,
briefly, is an eighteenth-century view on the question.
In the first place, in the late 1700s (as now), corporations sprang to life only
through a sovereign act of the state. The consent of the people, acting through
the state legislature, was prerequisite to a group’s corporate existence.418 Second, the corporation controversies of the late eighteenth century suggest that
state legislative authority over the corporate charter—the wellspring of corporate life—was broad, and it was well accepted that legislatures could reserve to
themselves a power to amend or repeal a charter when the public interest
required it.419 (That principle, moreover, is not merely old; it is continuing.
Similar reservation clauses remain part of the laws of forty-nine states in either
statutory or constitutional form.420) Finally, a corporation’s activities were
restricted to those authorized by its charter, and a charter might restrict what a
group of individuals, in their natural capacity, otherwise had a right to do.
Charter restrictions on capitalization, property holdings, and duration of corpo-
416. Cf. Buckley v. Valeo, 424 U.S. 1, 26–27 (1976) (upholding federal restrictions on direct
contributions to candidates for federal office because of the “danger” that “large contributions [may be]
given to secure a political quid pro quo from current and potential office holders”); McConnell v. Fed.
Election Comm’n, 540 U.S. 93, 266–67 (2003) (Thomas, J., dissenting) (criminal bribery laws are
sufficient to achieve government’s interest in preventing corruption).
417. Gitlow v. New York, 268 U.S. 652, 666 (1925).
418. See 2 JAMES KENT, COMMENTARIES ON AMERICAN LAW 223 (New York, O. Halsted 1827) (“In
England, corporations are created and exist by prescription, by royal charter, and by act of Parliament.
With us they are created by authority of the legislature, and not otherwise.”); DODD, supra note 11, at
196 (“There was almost universal assent to the proposition that the power to form corporations . . .
was in post-Revolutionary America possessed by the legislatures alone.”).
419. See supra Part III.D.2.b.
420. See Speir, supra note 276, at 1.
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rate existence during the eighteenth century were not thought to infringe
property or associational rights.421
It is true, of course, that our American forebears were also wary of excessive
legislative power over corporations. In fact, the general incorporation statutes
that appeared during the eighteenth century suggest an emerging pluralism, as
they broadened the ability of groups to incorporate and removed the legislature
from the incorporation process. In this sense, their effect was akin to that of the
federal constitutional scheme: allowance for the interplay of politically interested groups, coupled with a denial of congressional power over speech and the
press. Importantly, however, nothing appears to require states to restrict their
legislatures in this way.422 Nor does it appear that a state is required to endow
its corporations with any particular power, such as the power of political
speech.423
One plausible conclusion from this history is that a state legislature today
could, in the act constituting a corporation (that is, the corporate charter),
restrict the corporation’s political activities in the same way that it could restrict
its duration of existence, its capitalization, or its ability to hold property. For
example, a state’s business corporation code, which is part of the charter of
every corporation formed thereunder,424 might provide, “A corporation may be
formed under this chapter for any lawful business purpose, except that a
corporation so formed may not use its general treasury funds to advocate for the
support or defeat of any candidate for public office in this state or otherwise.” A
provision of that sort would not deny to a corporation a previously possessed
right. It would simply constitute the corporation on the terms specified. It
would, in essence, define what a corporation is under the laws of the state. This
notion finds some support in Justice Story’s famous Dartmouth College concurrence, which recognized that state legislatures could preserve their power to
amend or repeal charters by providing, at the outset, that the charter was granted
on those terms.425 In his dissent in First National Bank v. Bellotti, Justice
Rehnquist articulated a similar position.426
421. See supra notes 322–324 and accompanying text.
422. However, the Constitution, particularly the Equal Protection Clause, would clearly come into
play if incorporation were denied to groups on a discriminatory basis. Moreover, most state constitutions restrict the legislature to enacting general laws for incorporation. See Speir, supra note 276, at 1.
423. See First Nat’l Bank of Boston v. Bellotti, 435 U.S. 765, 826 n.6 (1978) (Rehnquist, J.,
dissenting) (“[T]he Fourteenth Amendment does not require a State to endow a business corporation
with the power of political speech . . . .”).
424. 1A WILLIAM MEADE FLETCHER, CYCLOPEDIA OF THE LAW OF CORPORATIONS § 164 (“[T]he provisions of the statute or general incorporation laws enter into and form a part of the charterzelb . In this
respect, a charter under general law is the equivalent of one by special act.”).
425. Trustees of Dartmouth Coll. v. Woodward, 17 U.S. (4 Wheat.) 518, 712 (1819) (Story, J.,
concurring).
426. See Bellotti, 435 U.S. at 825–27 (Rehnquist, J., dissenting). Justice Rehnquist would have
upheld a state criminal statute that barred corporations from spending money to influence voters’
decisions. He would not have required, as is suggested above, that the state restrict a corporation’s
powers by charter. He noted, however, that “liberties of political expression are not at all necessary to
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This idea runs into some modern objections. First, the Free Speech Clause, as
incorporated, prohibits a state legislature from “abridging the freedom of
speech.”427 Plainly, a charter provision aimed at restricting a corporation’s
political advocacy looks like an “abridg[ment]” of “speech.” That such a
provision would appear in one chapter of a state’s statute books—the corporation code—as opposed to another, such as the chapter on election law, seems to
be a distinction without a difference. Second, a charter limitation of this kind
cannot be justified on the basis that it is the “price” for the state’s conferral of
the advantages of corporate existence. “It is rudimentary,” Justice Scalia has
said, “that the State cannot exact as the price of those special advantages the
forfeiture of First Amendment rights.”428
Of course, neither objection is based on the original understanding. To the
founding generation, a charter of incorporation (for modern purposes, a state’s
general incorporation law) was a unique public act that brought a corporation
into existence and set forth precisely what powers it could exercise. The
putative charter provision above would not “abridg[e]” a corporation’s “speech”
because that provision would define what the corporate act of “speaking” was in
the first place. Further, the doctrine of unconstitutional conditions is not of
eighteenth-century vintage.429 In addition, the interdependence of the First
Amendment’s limitations and the Constitution’s structural safeguards do not
exist at the state level. The states are smaller “republics,” and their government
institutions may lack the checks and balances against legislative self-dealing,
rent-seeking, and corruption that exist at the federal level, thus heightening the
states’ interest in imposing restrictions on the corporations they bring into
existence.430
Still, whatever its appeal (politically, as a matter of the original understanding, or otherwise), such a charter provision would probably not pass constitutional muster today. While Citizens United struck down a federal restriction
on corporate electioneering expenditures, it did so by overruling Austin v.
Michigan Chamber of Commerce,431 which had upheld a similar state
restriction.432 Neither Justice Kennedy’s majority opinion in Citizens United
nor Justice Scalia’s concurrence (which dealt exclusively with the original
effectuate the purposes for which States permit commercial corporations to exist” and that “the
Fourteenth Amendment does not require a State to endow a business corporation with the power of
political speech.” Id. at 826 & n.6.
427. See U.S. CONST. amend. I.
428. Austin v. Michigan Chamber of Commerce, 494 U.S. 652, 680 (1990) (Scalia, J., dissenting)
(citing Pickering v. Bd. of Educ. of Twp. High Sch. Dist. 205, Will Cnty., 391 U.S. 563 (1968)).
429. See Michael T. Gibson, Congressional Authority to Induce Waivers of State Sovereign Immunity: The Conditional Spending Power (and Beyond), 29 HASTINGS CONST. L.Q. 439, 475–79 (2002)
(Founders had a limited view of “coercion”).
430. See THE FEDERALIST NO. 10, supra note 20, at 84 (noting the dangers of “faction” in a small
republic and stating that while the size and structure of the federal government mitigated those risks,
“[t]he influence of factious leaders may kindle a flame within their particular States”).
431. Austin, 494 U.S. at 655 (majority opinion).
432. See Citizens United v. Fed. Election Comm’n, 130 S. Ct. 876, 913 (2010).
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understanding) contemplated any disparity between the First Amendment’s
application to Congress and to the state legislatures.433 True, the state law at
issue in Austin was an ordinary act, not corporate charter legislation. But
neither the Austin Court (upholding it) nor the Citizens United Court
(disapproving it) gave any hint that the “ordinary” character of the law was
of constitutional significance.
CONCLUSION
In some sense, the above analysis vindicates aspects of both Justice Stevens’
dissent and Justice Scalia’s concurrence in Citizens United. On the one hand,
Justice Stevens is surely correct that “members of the founding generation held
a cautious view of corporate power,”434 but the statement is incomplete. What
the corporation debates of the period reveal is a cautious view of power in
general—corporate or legislative—and eighteenth-century Americans were preoccupied with the problem of limiting and allocating both forms of power in
appropriate ways. At the state level, that balance was struck by restricting the
incorporation power of legislatures, ensuring that legislatures had broad authority over existing corporate charters, and designing charters in ways that made
the corporate institution more democratically accountable. The Constitution
aimed at both forms of power, too. The First Amendment restricted congressional authority over “speech” (among other things) regardless of its source, and
institutional safeguards placed checks on the rent-seeking and corruption that
would otherwise result from private groups’ unbridled pursuit of self-interest in
the public sphere.
As originally understood, the First Amendment prohibits Congress from
restricting a corporation’s speech, at least (or especially) its political speech,
and on this point, Justice Scalia is correct. On the other hand, he may be
faulted for giving short shrift to the concerns that grew up around corporations in the late eighteenth century—concerns that remain to this day, such
as the ability of the corporate entity to magnify the pursuit of self-interest,
to exercise disproportionate influence in public affairs, and to seek and
obtain favors (privileges, exemptions, and the like) from legislatures. While
these concerns cannot justify speech restrictions at the federal level, the
original understanding may offer greater leeway to state legislatures, at least
in the design of corporate charters.
433. In a footnote in his concurring opinion, Justice Scalia, in addressing Justice Stevens’ argument
that “[t]he common law was generally interpreted as prohibiting corporate political expenditures,”
countered that, even if that were true, it “would have nothing to do with whether political expenditures
that were authorized by a corporation’s charter could constitutionally be suppressed.” Id. at 927 n.5
(Scalia, J., concurring) (original emphasis deleted; different emphasis added). That statement raises a
tantalizing question: What would Justice Scalia think of a corporate charter that expressly prohibited
corporate political expenditures?
434. Id. at 951 (Stevens, J., dissenting).
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Of course, this analysis is not meant to suggest that the only proper approach
for the Supreme Court on questions of corporations and the Constitution is the
original understanding. But that understanding, all agree, is relevant, and there
is, perhaps, some comfort in knowing that our American forebears over 200
years ago wrestled with many of the issues that we confront today. Their views
are at least entitled to our respect for their prescience.