Reclain Democracy Org.
Our Hidden History
For 100 years after the American Revolution, citizens and legislators tightly controlled the corporate chartering process. Having thrown off English rule, the revolutionaries made certain that legislators issued charters one at a time and for a limited number of years and authority was wielded through laws like those summarized here in each state.
Because of widespread public opposition, early legislators granted very few corporate charters,
and only after debate. Citizens governed corporations by detailing operating conditions not just in charters but also in state constitutions and state laws. Incorporated businesses were prohibited from taking any action that legislators did not specifically allow.
States limited corporate charters to a set number of years. Unless a legislature renewed an expiring charter, the corporation was dissolved and its assets were divided among shareholders. Citizen authority clauses limited capitalization, debts,
land holdings, and sometimes, even profits. They required a company’s accounting books to be turned over to a legislature upon request. The power of large shareholders was limited by scaled voting, so that large and small investors had equal voting rights. Interlocking directorates were outlawed. Shareholders had the right to remove directors at will.
In Europe, charters protected directors and stockholders from liability for debts and harms caused by their corporations. American legislators rejected this corporate shield. The penalty for abuse or misuse of the charter was not a plea bargain and a fine, but dissolution of the corporation.
Today, corporations wield immense power over our government, public lands, even our schools. But this was not the intent of our country’s founders.
In 1776 we declared our independence not only from British rule, but also from the corporations of England that controlled trade and extracted wealth from the U.S. (and other) colonies. Thus, in the early days of our country, we only allowed corporations to be chartered (licensed to operate) to serve explicitly as a tool to gather investment and disperse financial liability in order to provide public goods, such as construction of roads, bridges or canals.
After fighting a revolution for freedom from colonialism, our country’s founders retained a healthy fear of the similar threats posed by corporate power and wisely limited corporations exclusively to a business role. These state laws, many of which remain on the books today, imposed conditions such as these:
= A charter was granted for a limited time.
= Corporations were explicitly chartered for the purpose of serving the public interest -
profit for shareholders was the means to that end.
=They could engage only in activities necessary to fulfill their chartered purpose.
=Corporations were terminated if they exceeded their authority or if they caused public harm.
=Owners and managers were responsible for criminal acts they committed on the job.
=Corporations could not make any political contributions, nor spend money to influence legislation.
=Corporations could not purchase or own stock in other corporations, nor own any property other than that necessary to fulfill their chartered purpose.
ReclaimDemocracy.org P.O. Box 532
Boulder, CO 80306
“I hope...that we shall crush in its birth the aristocracy of our moneyed corporations which dare already to bid defiance to the laws of our country”
Thomas Jefferson 1812
How it happened:
Corporate executives paid “borers” to infest Congress and state capitals, bribing elected and appointed officials alike. They pried loose an avalanche of government financial largesse.
During this time, legislators were persuaded to give corporations limited liability, decreased citizen authority over them, and extended durations of charters.
Attempts were made to keep strong charter laws in place, but with the courts applying legal doctrines that made protection of corporations and corporate property the center of constitutional law, citizen sovereignty was undermined.
As corporations grew stronger, government and the courts became easier prey. They freely reinterpreted the U.S. Constitution and transformed common law doctrines.
One of the most severe blows to citizen authority was seeded in the 1886 Supreme Court case of Santa Clara County v. Southern Pacific Railroad.
Though the court did not make a ruling on the question of “corporate personhood,” thanks to misleading notes of a clerk, the decision subsequently were used as “precedent” to hold that a private corporation was a “natural person.” This meant that the 14th Amendment, enacted to protect rights of freed slaves, was used to grant corporations Constitutional rights. Justices have since struck down hundreds of local, state and federal laws enacted to protect people from corporate harm based on this illegitimate premise.
Corporate power, now virtually unchecked, owned resources, production, commerce, trade, prices, jobs, politicians, judges and the law. Over the next half century, as a United States Congressional committee concluded in 1941, “The principal instrument of the concentration of economic power and wealth has been the corporate charter with unlimited power....”
Today, many U.S. corporations are transnational, but the corrupted charter remains the legal basis for their existence. A new generation of American patriots are learning this hidden history and recognizing that it contains many keys to successful action today—namely, the need to focus energy on revoking corporate power and subjugating them to citizen authority.
In 1819 the U.S. Supreme Court tried to strip states of this sovereign right by overruling a lower court’s decision allowing the State of New Hampshire to revoke a charter granted to Dartmouth College in 1769 by King George III.
That charter contained no reservation or revocation clauses, the Supreme Court said. The Supreme Court’s attack on state sovereignty outraged citizens. New laws were written and old ones re-written in an attempt to circumvent the ruling. New state constitutional amendments were passed with the same intent. Over several decades starting in 1844, nineteen states amended their constitutions to make corporate charters subject to alteration or revocation by their legislatures.
As late as 1855 it seemed that the Supreme Court had gotten the people’s message when in Dodge v. Woolsey it reaffirmed state’s powers over “artificial bodies.”
But the men running the corporations pressed on. Contests over charter were battles to control labor, resources, community rights, and political sovereignty. More and more frequently, corporations were abusing their charters to become conglomerates and trusts. They were converting the nation’s resources and treasures into private fortunes, creating factory systems and company towns. Political power began flowing to absentee owners who were intent upon dominating people, nature, and the economy.
The industrial age forced a nation of farmers to become wage earners, and they became fearful of unemployment—a new fear that corporations quickly learned to exploit. Company towns arose. They kept blacklists of labor organizers and workers who spoke up for their rights, among many abuses.
When workers began to organize, industrialists and bankers hired private armies to keep them in line. They bought newspapers and painted politicians as villains and businessmen as heroes. Bribing state legislators, they then announced legislators were corrupt and said that they used too much of the public’s resources to scrutinize every charter application and corporate operation.
Government spending during the Civil War brought these corporations fantastic wealth.
For more detailed reading on this topic, we suggest:
Santa Clara Blues by Bill Meyers Taking Care of Business by R. Grossman and F. Adams Unequal Protection by Thom Hartmann When Corporations Rule the World, (2001 edition) by David Korten Taming the Giant Corporation by Nader, Seligman & Green (out of print—contact us)
The Transformation of American Law 1780-1860
by Morton Horwitz See our Recommended Resources list for more.
Please contact RECLAIMDEMOCRACY.ORG for more on turning these ideas into action. We are a (501c3)
non-profit organization working to revoke illegitimate corporate power and revive grassroots democracy.
Contributions are taxdeductible.
© 2000 ReclaimDemocracy.org and POCLAD.
Thanks to POCLAD for their groundbreaking research.
“We need to think outside the box to which we have grown accustomed—of regulating corporations—and imagine what it would be for citizens to define corporations”
ReclaimDemocracy.org P.O. Box 532
Boulder, CO 80306