Paper Abstract
972. Jonathan Macey & Leo E. Strine, Jr., Citizens United As Bad Corporate Law, 09/2018.
Abstract: In this Article we show that Citizens United v. FEC, arguably the most important First Amendment case of the new millennium, is predicated on a fundamental misconception about the nature of the corporation. Specifically, Citizens United v. FEC, which prohibited the government from restricting independent expenditures for corporate communications, and held that corporations enjoy the same free speech rights to engage in political spending as human citizens, is grounded on the erroneous premise that corporations are “associations of citizens” rather than what they actually are: independent legal entities distinct from those who own their stock.
The Citizens United view of the corporation as an association of individuals is inconsistent with the established conception of the corporation as a juridical entity with limited liability and confuses the corporation with the general partnership form of business organization.
We base our argument that corporations are separate and distinct legal entities and that they are not “associations of citizens” as Citizens United asserts on three facts about the corporate form: (1) the treatment of corporations as separate legal entities is what distinguishes corporations from general partnerships and sole proprietorships and what justifies the legal notion of “limited liability” and other central characteristics of the corporate form, such as the ability to contract and to sue and be sued; (2) corporations do not have owners, they have investors who have contract-based, financial interests in the firms and limited management rights; and (3) corporations are not fiction, but fact only because the law makes them real and distinct entities with a legal identity.