Private corporation charters and the Supreme Court
Private corporation charters are legal documents issued by state governments that allow companies to operate as separate entities, distinct from their owners. This practice began in the early nineteenth century, initially for charitable organizations, but quickly expanded to support industrialization by encouraging business growth and development. Charters often included special privileges such as limited liability for stockholders, tax exemptions, and, in some cases, the power of eminent domain. The Supreme Court has played a crucial role in interpreting the implications of these charters, notably in cases like Dartmouth College v. Woodward (1819), which affirmed that private corporations are protected from state regulations under the contract clause of the U.S. Constitution. In contrast, the Charles River Bridge v. Warren Bridge (1837) case clarified that corporate charters do not guarantee monopolistic privileges and that states retain the right to amend them to protect public interests. Additionally, Citizens United v. Federal Election Commission (2010) highlighted the concept of corporate personhood by ruling that corporations have First Amendment rights, thus prohibiting limits on their political contributions. These cases illustrate the evolving relationship between private corporations and state authority, reflecting broader themes of economic freedom and public welfare.
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Private corporation charters and the Supreme Court
Description: Agreements granted by states or the federal government considering a group of people to be a single entity for the purpose of maintaining an organization or institution beyond the life span of the people in question.
Significance: During the nineteenth century, the Supreme Court ruled that state legislatures had the authority to regulate private corporation charters.
Initially given to charitable organizations to operate schools, churches, or hospitals, private corporation charters were issued by state governments in the early nineteenth century to promote American industry and business. Charters promoted industrialization by permitting companies to exist as abstract entities beyond the life spans of their owners. Private corporation charters occasionally came with the power of eminent domain, local tax exemptions, or limited liability for stockholders. In Dartmouth College v. Woodward(1819), the Supreme Court extended the contract clause of the U.S. Constitution to apply to a corporate charter such as that granted to Dartmouth College. Chief Justice John Marshall ruled that the college was a private corporation and, therefore, not subject to the state of New Hampshire’s regulatory power. However, in Charles River Bridge v. Warren Bridge (1837), the Court, citing the contract clause, held that a corporate charter did not imply exclusive monopoly privileges and that states could reserve a right to amend charters that they had issued. The Court further ruled that charters should not be given a broad construction and that state governments, using their police powers, had the authority to safeguard the rights of the public against the claims of corporations.
Another case related to this issue was that of Citizens United v. Federal Election Commission (FEC). In this case, the Court ruled that the free speech clause in the First Amendment prohibited the government from restricting the contributions made to political campaigns by any type of corporation. The case brought the concept of corporate personhood to national attention.
Bibliography
"Corporate 'Rights'." CELDF, 2023, celdf.org/corporate-rights/. Accessed 6 Apr. 2023.
"Legal - Citizens United v. FEC." FEC, www.fec.gov/legal-resources/court-cases/citizens-united-v-fec/. Accessed 6 Apr. 2023.