Taking Care of Business:
Citizenship and the Charter of Incorporation
by Richard Grossman
Earth Island Journal -- Spring 1993
The chief executive officer and directors of the International
Paper Company are convicted felons. But not one of them has done
time in jail paid a nickel in fines or performed a day's community
In 1991, International Paper's (IP) CEO, John Georges, and
the IP board of directors were charged in federal district court
with violating a variety of pollution laws, destroying evidence
and lying to the US government. IP's leaders were able to plea
bargain these charges down to five felony convictions for criminal
violations of the Clean Air Act and Clean Water Act. They then
arranged for IP's shareholders to pay $2.2 million in fines for
Today, IP continues to poison the people, plants and animals
of Maine by dumping 40 million gallons of chemically saturated
wastewater daily into the Androscoggin River. Georges and IP's
directors still run the corporation.
How can this be?
Under pressure from industrialists and bankers, a handful
of 19th-century state legislatures and judges gave corporations
more rights than those enjoyed by human beings. Today's business
corporation is an artificial creation, shielding owners and managers
while preserving corporate privilege and existence by claiming
Although the US Constitution makes no mention of corporations,
the history of constitutional law is, as former Supreme Court
Justice Felix Frankfurter said, "the history of the impact
of the modern corporation upon the American scene."
A Hidden History
British kings granted charters to the British East India Company,
the Hudson's Bay Company and many American colonies, enabling
the kings and their cronies to control property and commerce.
The royal charter creating Maryland, for example, required that
all of the colony's exports be shipped to or through Great Britain.
The American colonists did not revolt simply over a tax on
tea. The laborers, small farmers, traders, artisans, seamstresses,
mechanics and landed gentry who sent King George III packing,
feared corporations. As pamphleteer Thomas Earle was to write
in 1823: "Chartered privileges are a burden, under which
the people of Britain, and other European nations, groan in misery."
While American volunteers were routing the king's armies,
they vowed to put corporations under democratic command. After
the revolution, people were determined to keep investment and
production decisions local and democratic. They believed corporations
were neither inevitable nor always appropriate.
Many colonial citizens argued that under the Constitution,
no business could be granted special privileges. Others worded
that once incorporators amassed wealth, they would use their corporate
shields to control jobs and production, buy off the press and
dominate elections and the courts.
American colonists feared corporations and vowed to put them
under democratic control
Craft and industrial workers feared absentee corporate owners
would turn them into "a commodity being as much an article
of commerce as woolens, cotton, or yarn," according to historian
Having thrown off British rule, the revolutionaries delegated
their elected state legislators to issue corporate charters on
the people's behalf. For 100 years after the signing of the Declaration
of Independence, citizen vigilance and activism forced legislators
to keep corporations on a short civic leash.
Because of widespread opposition to corporations, those early
legislators granted very few charters. They denied charters altogether
when communities opposed the plans of prospective incorporators.
Citizens governed corporations by specifying rules and operating
conditions -- not just in the charters, but also in state constitutions
and laws. Incorporated businesses were banned from taking any
action that citizens and legislators did not specifically allow.
States limited corporate charters to a set number of years.
Citizen authority clauses dictated rules for issuing stock, for
shareholder voting, for obtaining corporate information, for paying
dividends and for keeping records. They limited corporate capitalization,
debts, land holdings and sometimes profits. They required a company's
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
corporation directorates were outlawed. Shareholders had the right
to remove directors at will.
Side by side with these legislative controls, citizens experimented
with various forms of enterprise and finance. Artisans and mechanics
owned and managed diverse businesses. Farmers and millers organized
profitable cooperatives, shoemakers created unincorporated business
associations. None of these enterprises had the rights and powers
of modern corporations.
In 19th-century America, many citizens believed that it was
society's inalienable right to abolish an evil. The penalty for
abuse or misuse of corporate charters, therefore, was not simply
a plea bargain or corporate fine, as in International Paper's
case. It was revocation of the charter and dissolution of the
Accordingly, revocation clauses were written into Pennsylvania
charters as early as 1784. The first revocation clauses were added
to insurance company charters in 1809, and to banking charters
in 1814. During the 1840s and 1850s, states revoked charters routinely.
In Ohio, Pennsylvania and Mississippi, banks lost charters for
activities that "were likely to leave them in an insolvent
or financially unsound condition," according to business
scholar Edwin M. Dodd. Massachusetts and New York revoked turnpike
charters when corporations were found guilty of "not keeping
their roads in repair."
In 1825, Pennsylvania legislators adopted broad powers to
"revoke, alter or annul" corporate charters whenever
they thought proper. An 1857 constitutional amendment instructed
the state's legislators to "alter, revoke or annul any charter
of a corporation hereafter conferred . . . whenever in their opinion
it may be injurious to citizens of the community. . . ."
By the 1870s, the people of 19 states had amended their constitutions
to make corporate charters subject to alteration or revocation
President Andrew Jackson enjoyed wide popular support when
he vetoed a law extending the charter of the corrupt and tyrannical
Second Bank of the United States in 1832. That same year, the
state of Pennsylvania revoked the charter of ten banks for operating
contrary to the public interest.
New York, Ohio, Michigan and Nebraska successfully revoked
the charters of oil, match, sugar and whiskey trusts. In 1894,
the Central Labor Union of New York City, citing a pattern of
abuses, asked the state's attorney general to request the state
supreme court to revoke the charter of the Standard Oil Trust
of New York, which the court did.
During the last third of the 19th century, "Corporations
confronted the law at every turn," according to Harvard law
professor Lawrence M. Friedman. "They hired lawyers and created
whole law firms. They bought and sold governments." Courts
began creating legal doctrines to protect corporations and corporate
property, subverting charter law and constitutional amendments.
In hundreds of cases decided in the latter half of the 19th
century, judges declared that the corporate rate of return on
investments (i.e., profit) was corporate property and, hence,
could not be meddled with by citizens or by their elected representatives.
These judges gave certain corporations, such as railroad,
mining and manufacturing companies, the power of eminent domain
-- the right to take private property with minimal compensation
to be determined by the courts. They eliminated jury trials to
determine corporation-caused harm and to assess damages. Workers,
the courts also ruled, were responsible for causing their own
injuries on the job. This came to be called the "assumption
Judges created the "right to contract" doctrine,
which stipulates that the government cannot interfere with an
individual's "freedom" to negotiate with a corporation
for wages and working conditions. Former George Washington University
law professor Arthur Selwyn Miller called the creation of the
right to contract doctrine "one of the most remarkable feats
of judicial law-making this nation has seen."
Responding to banking, shipping, railroad, manufacturing and
agribusiness corporations and their lawyers, judges creatively
interpreted the commerce and due process clauses of the US Constitution.
Inventing the concept of "substantive due process,"
they ruled that laws passed as a result of widespread citizen
organizing -- e.g., state wage and hours laws, fees and rates
for grain elevators and railroads -- were unconstitutional.
Judges also established the "managerial prerogative"
and "business judgment" doctrines, giving corporations
legal justification to arrest workers' civil rights at factory
gates and to blockade democracy at boardroom doors.
The biggest blow to citizen constitutional authority came
in 1886. The US Supreme Court ruled in Santa Clara County v. Southern
Pacific Railroad, that a private corporation was a "natural
person" under the US Constitution, sheltered by the 14th
Amendment, which requires due process in the criminal prosecution
of "persons." Following this ruling, huge, wealthy corporations
were allowed to compete on "equal terms" with neighborhood
businesses and individuals. "There was no history, logic
or reason given to support that view," Supreme Court Justice
William 0. Douglas wrote 60 years later.
In 1886, the US Supreme Court ruled that a corporation was
a "natural person" and thus sheltered by the 14th Amendment
Within just a few decades, appointed judges had redefined
the "common good" to mean the corporate use of humans
and the Earth for maximum production and profit -- no matter what
was manufactured, who was hurt or what was destroyed. Corporations
had obtained control over resources, production, commerce, jobs,
politicians, judges and the law. Workers, citizens, cities, towns,
states and nature were left with fewer and fewer rights that corporations
were forced to respect.
Taking Back the Charters
Today, citizen struggles to keep corporations under civic
authority have been largely written out of history. We are out
of the habit of contesting the legitimacy of corporations like
International Paper, Du Pont, General Motors or Union Carbide.
But we can challenge corporate-shielding legal doctrines and deny
judges the final say over our economic lives, over the planet's
flora and fauna, rivers and mountains, and over our children's
We can revoke corporate charters. Our state legislatures continue
to have an historic and legal obligation to amend and revoke corporate
charters, along with the certificates of authority that permit
corporations to conduct business outside their chartering state.
Our elected state legislators are still responsible for overseeing
all corporate activities.
We can demand to see the charters of every corporation. We
need to know what each charter prohibits, especially if it is
an old charter. We can amend our state corporation laws, establishing
our own ecological, labor and democratic criteria for issuing
charters and operating businesses. (The Vermont legislature and
the state's business community are currently rewriting that state's
corporation law. By vigorously injecting themselves into this
process, Vermont's citizens are trying to establish greater authority
over all corporations chartered, and doing business, in that state.)
We cannot command the modern corporation with laws that require
only a few days' notice before a corporation leaves town or with
laws, such as the Clean Air Act and the Toxic Substances Control
Act, that assess an occasional fine while allowing a corporation
to continue to spew toxic chemicals.
We do not have to plead with corporations to be socially responsible,
or grant them concessions and incentives to cause a little less
harm. If we citizens want to control the corporation, we must
be the ones to define it.
By rewriting the laws governing corporations, we citizens
can reassert the convictions of the people who struggled to resist
corporate rule in the past:
The corporation is an artificial creation and must not enjoy
the protections of the Bill of Rights. Corporate owners and officers
must be liable for all the harms they cause. No corporation should
Our sovereign right to decide what is produced and to organize
our work is as American as a serf-governing people's right to
vote. We can assert our historical and legal rights over the fiction
that is the modern corporation.
Adapted for Earth Island Journal from Taking Care of Business:
Citizenship and the Charter of Incorporation by Grossman and Adams.
The entire pamphlet, with a more comprehensive history, notes
and bibliography, is available for $4 from Charter, Ink., PO Box
806, Cambridge, MA 02140.