Wednesday, February 10, 2010

Justice Thomas Defends Plutocracy

Justice Defends Ruling on Finance

“If 10 of you got together and decided to speak, just as a group, you’d say you have First Amendment rights to speak and the First Amendment right of association,” he said. “If you all then formed a partnership to speak, you’d say we still have that First Amendment right to speak and of association.”
“But what if you put yourself in a corporate form?” Justice Thomas asked, suggesting that the answer must be the same.

There is no reason the answer needs to be the same.  If you put yourself in a corporate form, you are setting up a different type of entity than a partnership with different legal relationships. The rights and responsibilities in a partnership flow directly through to the partners. The partners are the owners and the managers. They enjoy any profits that the partnership generates and they are liable for any losses that it incurs.

Shareholders stand in a completely different relationship to a corporation. The whole point is that the actions of a corporation are not the actions of the shareholders. The corporation is a statutory person that acts on its own behalf in its own interests. The shareholders are not bound by what the corporation does and they do not bear responsibility for its decisions. The shareholders' ability to influence the management of a corporation is extremely limited.

What we have learned over the last two years is that corporate management is able to work a great deal of mischief. It can structure its compensation such that it reaps huge rewards even when the corporation loses money while placing the risk of loss on the shareholders and society in general. Now they have another tool to wield power.

I regularly contribute money to a retirement plan that invests the money in mutual funds. It is absurd to think that I am exercising my right to freedom of association with the other shareholders of the corporations in which the mutual fund managers invest. It is even more absurd to suppose that my right of association necessitates giving the management of those corporations greater freedom to use company assets to increase their political influence.


  1. So we have freedom of speech and freedom of association/assembly. But when we form a corporation we give up that freedom of speech. Unless that corporation is a news organization.

    Got it. And thinking it makes no sense.

  2. Nothing stops you from speaking out on any issue you want. What is prevented is Exxon's management speaking on your behalf simply because you happen to own a few shares in a mutual fund.

  3. Limitation by association is what I read. Thanks Vinny, very informative...