Scholars of corporate legal finance tend not to spend a lot of time worrying about how the corporation relates to novels, poems, literary movements. Or to political cartoons, like Udo Keppler’s fascinating 1910 magazine illustration of the shadowy corporation (more on that one below). But maybe they should. That’s what I argue in my new book, Modernism and the Meaning of Corporate Persons, out just now as part of the Law and Literature series from Oxford University Press, edited by Professors Robert Spoo and Simon Stern.
Udo J. Keppler, “Get after the substance, not the shadow,” Puck 68, no. 1757 (November 2, 1910). Library of Congress Prints and Photographs division, Washington, D.C.
The story begins with the fateful US Supreme Court decision, Santa Clara v. Southern Pacific Railroad, which legitimatized the American legal fiction of corporate personhood in 1886. After that decision, the development of the idea that law could endow a nonhuman entity with certain rights expanded into American culture. And, not surprisingly, the notion that an eerie, insubstantial corporation could be considered similar to persons bothered many actual people throughout the first decades of the twentieth century.
In the book, I explore how and why the possibility that large collective organizations might mean to do what they do—and might mean like us, like persons—both excited and worried American creative writers, artists like Keppler, and theorists of the corporation. In roughly the first half of the twentieth century, these ideas stimulated new thoughts about what it means to act as a person or as a group. It also sparked new thoughts on what it means to intend to act at all. Of course, versions of that conversation continue today, most often as debates on blogs, scholarship, and in heated media discussions, whether on legal personhood, corporate social responsibility, veil-piercing, or corporate criminal liability. But the earlier deliberations on similar issues have remained, until now, an untapped resource to understand corporate action, worked out in entirely different forms.
For example, consider the law reviews and treatises on contracts and agency law by US Supreme Court Justice Oliver Wendell Holmes, Jr. and law professor Ernst Freund. Or, alternatively, take the inventive modernist poems of Gertrude Stein and the novels of F. Scott Fitzgerald, author of The Great Gatsby and The Love of the Last Tycoon. Whichever you choose, you can find each writer trying to work out the following problem. Namely, if you can’t be sure how to represent or describe a corporate entity, or who exactly intended what a corporation said or acted, then how can you really know what that corporation meant when it “said” something or acted in a certain way? But knowing, or not knowing, mattered. It would determine what you might fairly expect from the various human persons when they work for a corporation. And it would impact how society should treat (or regulate) these corporate entities and what they did in the world.
Writers, artists, and jurists posed these questions using their own styles and techniques. Can a “corporate organism possess a will” or “a mind?” Legal scholar Arthur Machen asked that question in the 1911 issue of the Harvard Law Review. Around the same time, Gertrude Stein, who was good friends with Picasso and served as the intellectual center of the large American expat community in Paris, was pondering a similar issue. In her creative writing, she tried to imagine how she could describe “every possible kind of crowds of human beings” by capturing its essential mind. In 1912, she penned an experimental book with the odd title, G. M. P., that tried to do just that. To describe her own crowd of human beings, she gave her vibrant artistic community—Gertrude, Matisse, and Picasso—an acronym: “G. M. P.” The name evoked a corporation that you might find represented on the era’s ticker tape, its stock price fluctuating daily. Along the way, Stein’s inventive book explored how corporate minds and art movements work both similarly differently.
Or consider my original example. Keppler’s detailed illustration, also sketched at the same time, represents a problem of negligence and corruption still familiar to practitioners of corporate legal finance. Generally, individuals owning or working for corporations are protected by the concept known as limited liability—the rule, briefly put, that a corporation’s owners (its shareholders) cannot be held responsible for more than the market value of the shares they own. But in the early twentieth century, the emerging doctrine of limited liability had become so powerful and abused that it was publicly despised.
Officially, the corporate person was responsible for corporate actions. Unofficially, its corporate veil—like the sinister “INCORPORATION” shadow in Keppler’s picture—could be used to remove responsibility entirely. The angel of the Department of Justice raises her shield against the menace, blocking the specter from advancing. But from our vantage point behind her we can see what she cannot. Swinging her battle axe at the “INCORPORATION” shadow is pointless. Hacking at the corporation might not touch its source. And Keppler’s caption to the image insists on this: “Get after the substance, not the shadow.” He also includes a quote from New York Judge Alton B. Parker, making the same point: “Whatever of wrong there is, is not the fault of the Corporation, but of the officials in charge of it. And for the individual committing the offense there should be punishment.”
This drawing, along with the quote from Judge Parker, explores what was then an emerging strategy to deal with certain kinds of corporate wrongs: veil piercing. The phrase refers to the legal remedy of “piercing” the corporate form (that is, the corporate veil) for fraud or where the corporation’s assets have been combined with those of the corporation’s owners. It can also be used when the corporation is not sufficiently separate from its owners to justify treating it as a separate legal “person.” Early twentieth century legal scholar Maurice Wormser developed the concept. If the corporate entity was not functioning abstractly enough, then the fiction of the corporation, he argued, should change. The symbolic veil that made corporations into persons should be removed and the “real” individual persons hiding behind it could be revealed and punished. This led to another kind of inquiry: figuring out who or what was really the actual substance on the other side of the shadowy corporate veil. The fat-cat corporate director, labeled “THE INDIVIDUAL,” resting comfortably on his plush parlor chair and smoking a cigar, seems—at first—to be Keppler’s official target.
But there are two more ominous little figures in this image. You might have noticed them, there on the far left of the original print. They are, I think, Keppler’s real targets, and the reason why veil piercing is still not a perfect answer to corporate shadiness. The truly bad actors here are two figures in the wings, carefully aiming the light of a burning torch onto the industrialist’s shape. They are the ones who create the corporate form on the wall. With their formal jackets and handlebar moustaches, their identity could be known by magazine readers of the era even without the helpful signs stuck in their top hats: “CORPORATE LAYWER” and “CORPORATE LEGISLATOR.”
The true creators and perpetrators of the incorporation veil, says Keppler, are corporate lawyers, lobbyists, and legislators. And they are hard to catch in the act. They illuminate, but they also can hide in the corner, too wily for the angel of Justice to target. Thus, even at the very moment that Keppler promotes a veil-piercing strategy, he also depicts the inevitable complications with it. Attacking the “substance” of the shadow will do nothing to stop these torchbearers from projecting, tomorrow, another legal fiction, another corporation. They will just create another projection with some other human form. And this “INDIVIDUAL” running the corporation, at least according to the image, also appears blameless or without agency. He sits blithely in his regal chair, apparently oblivious to what the lawyers and legislatures are up to beside him. As another (more recent) legal doctrine has it, he is enacting a form of “willful blindness.” That is, he is closing his eyes to the corporate actions that he should know about.
Keppler asks us various questions: who exactly is the corporate actor here? How can we truly target that person? And how to do we—as legal practitioners, scholars, or concerned members so society—deal with this situation when corporate acts, and knowledge about them, are spread across many different people? Keppler’s wonderful drawing is just one of the examples I explore in the book. I show how similar stories, with their own carefully worked-through ideas, existed throughout the first decades of the twentieth century. They appeared in other political cartoons, in novels and poems, in theories of legal scholars like H. L. A. Hart and Ronald Coase, and, most recently, in major US Supreme Court decisions like Citizens United v. Federal Election Commission (2010), and Burwell v. Hobby Lobby Stores, Inc. (2014). As American law struggled with opposing arguments about corporate action and intention, creative writers and artists grappled with interrelated questions, albeit under different guises and formal procedures. By telling this story, I seek to open up this crucial reserve of inventive thinking to anyone who might want to use it.
Lisa Siraganian
James R. Herbert Boone Chair and Associate Professor
Department of Comparative Thought and Literature
The Johns Hopkins University (Baltimore, MD)
Corporate Finance Lab 