We have all heard the phrase “corporations are people,” either stated in earnest as a reading of the law (corporations are people in that they are independent entities, pay taxes, have rights to due process, and of course, the right to free speech) or stated ironically as ammunition for our friends on the Left. But whereas that question is about the legal personhood of the corporate entity itself, I would like to discuss something else entirely: the oft-forgotten fact that a corporation is not a distinct entity but a team effort comprised of many individuals. In other words, “corporations are people,” and we would serve ourselves to understand this vital distinction.
So what is a corporation?
In a free society, corporations are voluntarily organized by and among a collective of individuals–investors, employees, volunteers, and customers–in order to pursue a common goal. If you look into any large corporation, you find nothing less than tens of thousands of real people, all on a team together. The goals of that team can be very different. At BP, the goal of the team is to explore, dig and extract new oil wells on the one hand and ship, refine, and distribute gasoline on the other. At Walmart, the goal of the team is to produce and purchase a variety of items so they can be sold at mass market prices in their retail stores. To take the opposite end of the corporate spectrum, the goal of the team at a hair salon is to make women beautiful.
In other words, corporations have no sentience on their own. This may seem blindingly obvious to anyone who has worked for a corporation of any size. Corporations are, first and foremost, collectives where people collaborate to perform labor in exchange for money, which is exactly what people as individuals do. Except in a corporations, people can be often more productive working as a team than they can alone. If someone takes a job with corporation instead of producing and selling a product all by themselves, it is often because they can earn more with their skills as part of a team than they can alone. And the more successful the team is at producing and selling a product, the larger, more specialized and more efficient the team becomes.
I am not suggesting that all the people who make up a corporation are equal, but merely that their incentives are aligned. Shareholders, for instance, have a much bigger stake in the corporation’s successes and failures than employees. But those employees benefit from greater corporate profits in the form of greater job security if not increased benefits and wages, and when corporations lose money, they are the first to suffer. The level of commitment and risk may vary among members of a corporate team, but that doesn’t mean that it’s any less of a team, for the same reason that a quarterback and a wide receiver have very different risks and rewards that come together for a common purpose.
And yet, everywhere you turn in politics today, there is an attempt to demonize and dehumanize corporations, to “make them pay” for whatever real or imagined harm they have inflicted, and in general, hold them responsible for the world’s ills. This trend is especially alarming in Europe, where hating on corporations is in vogue, and just yesterday Angela Merkel announced a G20 conference to tackle “corporate tax avoidance,” a particularly bad euphemism since it ascribes evil intent to a perfectly legal practice, encouraged by many G20 nations themselves. Corporations are routinely maligned as rapers of the environment, destroyers of wealth, vanguards of global destruction, and, of course, kingmakers behind elections. The American Left is particularly adept at these forms of accusations, although the right takes its toll in its own crusade against nonprofits like Planned Parenthood. And the Right is more prone to defending corporations, while corporations themselves deserve neither to be attacked or defended while sparing the individuals who make them up.
Why is it so easy to detatch corporations from the people who make them up?
I think for your run-of-the-mill politician on either the Right or the Left, it is politically popular to complain that “corporations are making record profits,” whereas it would be unpalatable for a politician to complain that individual tax-paying men and women are making too much money (not to mention complaining about the jobs that follow). When a politician says that an auto company should get a bailout, that is more persuasive than suggesting that tens of thousands of employees instead receive a welfare check directly from the government. It helps to be able to hold up certain corporations as “criminal,” but corporation can’t really commit a crime, only people can. Nothing is stopping us from going after criminal individuals who make up a corporation, and we should go after them just as we do anyone else committing a crime. Yet it is far easier for politicians to attack corporations as criminal rather than individuals.
So why do we continue to dehumanize corporations?
I think one of the biggest things to drive a wedge between people and corporations has been the corporate tax. Corporate taxes aren’t really corporate taxes at all, but are in reality taxes on the people that make up that corporation. If a corporation pays money in taxes, it must take that money from the corporation. If that money comes out of the pocket of shareholders, it is a tax on shareholders. If employees must earn less to cover the cost of the tax, then it is a tax on employees. If prices must go up to compensate for the tax, then it is a tax on consumers. The corporation as an entity has not paid anything, as it does not have any money of its own (much like the government doesn’t have any money of its own). Instead, the people who make up that corporation–the shareholder, the employee, and the consumer–have paid for it.
As it happens, we already impose these taxes separately: we tax shareholders for their holdings, tax employees for their income, and tax consumers for their spending. If we were to eliminate the corporate tax entirely, surely these taxes could be appropriated to the individuals from whose pockets the money came out of in the first place. But by taxing the corporate entity, we allow shareholders, employees and consumers alike to pretend that the corporation is an entity separate and apart from themselves. At the very least, the corporate taxes imposed offset the direct cost on the individual in the short term and lets the individual believe his money is safer than it would be without the corporate tax. This is an illusion, but a compelling one: we have let it drive us to raise taxes on corporations to the highest level of any country in the industrially advanced world.
Finally, I think one more major factor in creating a dehumanizing membrane around corporations is caused by corporations themselves: branding. Branding is, definitionally, creating a unified identity and persona behind a corporation. Through branding, corporations, subvert individual identity to the wisdom of the collective. Although corporations are collections of free people, the big ones present like unifaceted behemoths; ironically, the more people a corporation contains, the less human it appears. As consumers, we allow the branding of corporations to define our attitudes towards the work those corporations do, especially if we don’t approve of it. It is easier to rally against a logo that stands for a purpose rather than lash out at the indivdual actors, for the same reason it is easier to fire on an advancing enemy under one flag than it is to hunt urban guerillas. The corporation has proudly and intentionally presented its mission for all to see, and this makes its existence even the more offensive if their mission is distasteful. The fact that profit is the primary goal of the corporation is added salt in the wound. Never mind that profit, like taxes, doesn’t belong to the corporation at all, but belongs to the shareholders, employees and consumers of the corporation.
Let’s end anti-corporatism
Now, I think that it is generally true that people will ascribe a set with the actions and morals of a much smaller subset. It is generally true for racists who use the actions of a small minority of people to justify hatred of an entire group. It is true for misogynists who prefer to paint all women with the brush of a few bad ex girlfriends. And it is true for anti-corporatists, who feed on news like an oil spill or financial system collapse as evidence of the global evil of corporations. It would of course behoove the anti-corporatists to know that their prejudice towards corporations is usually based on the behavior of a small minority of corporations, usually in one or two industries. If pressed, they will of course not attack with the same vigor barber shops, restaurants, bodegas, hardware stores, bars, nightclubs, Hollywood movies, publishing houses, newspapers, coastal fishermen, travel agencies or farmers’ markets, which are all organized as corporations. Nor will they attack corporations established for an eleemosynary purpose: Churches, preschools, health clinics, hospitals, cancer research institutes, civil liberties organizations, or rotary clubs.
In addition, the anti-corporatist slant willfully ignores the unrelenting progress and prosperity we have experienced as a society using the corporation as a vehicle. It is not a coincidence that the formation of the first corporations in 17th century Holland (debatably the first, but certainly the first legally defined joint stock operations) coincide with the explosion in private capital investment, exploration, mass employment through international trade, and real distribution of wealth through wages that characterized the late mercantilist period, sowing the seeds (or tulip bulbs) for the industrial revolution. The reasons for this are complicated, but in short: the corporate vehicle allows private investors to protect their personal assets and take risks, while at the same time providing a legal structure for many people to work together in pursuance of common goals.
I’m not suggesting that corporations are victims, but just that our rampant anti-corporatism too easily misses the vital distinction between the corporation as a legal entity and the corporation as a living organism with real human beings as its working cells. We do not benefit when we deprive corporations of oxygen. We only benefit when the corporation is allowed to thrive as an organization of free people assembled to accomplish a common purpose.