Winter 2003
By What Authority
Citizens Over Corporations:
A Brief History of Democracy in Ohio and Challenges to Freedom in the Future
The Following are excerpts from the newly released second edition of Citizens Over Corporations, a booklet first produced by the Ohio Committee on Corporations, Law and Democracy in 1998. Demand from a wide variety of people, both in and outside Ohio, led to a second printing, Continuing research informed the second edition, considerably revised and expanded from the first. Its 96 pages include sections on early corporate history in the US, charter revocation, corporate personhood, popular resistance to corporate usurpation of citizen sovereignty, and numerous citations of Ohio and federal court cases. One appendix lists more than two dozen new quo warranto citations, and a second appendix examines corporations and political campaign contributions. This booklet is an invaluable resource for both experienced activists and those just beginning to study corporate rule.
The Ohio Committee on Corporations, Law and Democracy is an ad hoc group of Ohioans educating people about past history and current dimensions of corporate rule and encouraging democratic participation to reassert control over the corporate form
DEMOCRATIC ROOTS AND CONSITUTIONAL STRUGGLE
MANY, IF NOT A MAJORITY, of new settlers in the Ohio territory were opposed to the early aristocratic centralization of government and capital. Early settlers from Pennsylvania and the South resented centralized control as carried out in the Northwest Ordinance of 1787 and the New Englander-run corporations' developing communities. The territorial governor's absolute veto authority over legislative acts of the Territorial Assembly undermined mutual trust and respect and reminded settlers of their recently cast-off English colonial government. Their pioneering spirit sought a state in which the people were sovereign, individual liberty and initiative were celebrated, community-based self-reliance was strong, and the town meeting was the locus of community decision making. (1)
The Territorial Assembly believed that many private acts had to be clearly defined. In 1799, the Assembly specified design of roads and bridges and placed legislation in control of county courts. Signposts, ferries, and tolls were regulated, as were rates charged by mill owners, since mills were regarded as public utilities. (2) Congress viewed Ohio as a social laboratory. It became a model for developing the public domain in other territories from this first effort at transforming wilderness into an independent republican state equal to all others. (3) People from the east flocked to the Ohio Territory out of a yearning for liberty and freedom and to enact their ideal of self-governance. They had no desire to be ruled by any external force — including corporations.
Ohio's first constitutional convention was held in 1802. The US Congress subsequently adopted the constitution and it was signed by President Jefferson in the same year, admitting Ohio to the Union in 1803 as the 17th state. Ohio's constitution was perhaps the most democratic state constitution yet adopted. With virtually all power in the legislature, it established annual election of house members and biennial election of senators. The governor was a figurehead with no veto power. The legislature chose all other state executive officers. The judiciary was also a creature of legislature, with the General Assembly appointing state and county judges.
There were few direct references to corporations in the constitution. It was understood that Ohio's new legislature, like other state legislatures, possessed the power to create and define corporations. Making certain that corporations were legislatively defined kept them closer to the people than if the responsibilities for controlling corporations were left to the courts.
As decades passed, however, the constitution of 1802 proved to be an ineffective instrument because "the legislature swallowed up all the rest of government" and "corporate power and money power...joined hands." (4) Nearly 40 years of corruption and laws such as the 1837 Ohio Loan Law (nicknamed the "Plunder Act") proved too much for Ohioans. Corporate influence over the legislature was evident in the number of pieces of legislation benefiting one or more corporations (called "special" legislation). For example, in 1833 the legislature enacted only 30 pieces of general legislation but 250 pieces of special legislation. Public alarm over massive state debt, particularly indebtedness for canal construction and unsound investments in railroad stock and other private ventures, led to public action. In 1850 a ballot proposal to hold a constitutional convention was approved statewide by 73%. As the Cleveland Plain Dealer put it, the convention provided and opportunity to pluck "the root of all political sin" from Ohio's soil. (5) In the words of one commentator, "the major motivating force [for the convention] was an anti-corporation sentiment." (6)
The new constitution addressed the problem of "special laws" benefiting corporations by agreeing that "the General Assembly shall pass no special act conferring corporate powers. Corporations may be formed under general laws; but all such laws may, from time to time, be altered or repealed." At that time this was seen as an attempt to increase citizen power. Both state and local governments were prohibited from giving or loaning state credit "to, or in aid of, any individual, association or corporation whatever" and were forbidden to ever "become a joint owner, or stockholder, in any company or association in this state or elsewhere, formed for any purpose whatever." (7) The new constitution that emerged from the convention was adopted in 1852. With the addition of several amendments, the same document still guides Ohio's government today.
By 1910, the Progressive movement had reached its peak in Ohio. People demanded consumer protection, more citizen participation in government, and end to child labor, civil service reform, regulation of big corporations and monopolies, labor union recognition, and safe working conditions. It was in this atmosphere that an overwhelming 91% of voters approved holding another constitutional convention. In addition to formal business, the convention was addressed by several national leaders, including three-time Democratic presidential candidate William Jennings Bryan, who devoted many of his remarks to the dangers corporations posed to democracy.
Several resulting amendments to the 1851 constitution that strengthened democracy were subsequently approved by the people of Ohio. Among them, the initiative and referendum were adopted as methods to bypass the legislature in the creation and revocation of laws. Municipal home rule, permitting communities of 5,000 or more in population to govern themselves, was also adopted, despite the opposition of public service corporations, who saw it as a device encouraging municipal ownership of utilities.
Changes that affected corporations were also approved, including the establishment of compulsory workers' compensation for people injured on the job (though corporate employers were not made legally liable) and abolishing prison contract labor (which was used to drive down wages in society as a whole). Pressures from workers and unions also won the eight-hour workday. Greater legislative powers to regulate the use of timber, water and mineral resources were approved. These changes clearly reflected a Progressive agenda of regulating corporations and their harms, rather than the earlier Populist agenda of defining corporate behaviors and contracts, including holding corporations legally liable.
CONTRACTS
AS EARLY AS 1819, the US Supreme Court ruled in Dartmouth College v. Woodward that the Constitution prohibited the State of New Hampshire from revoking a charter granted to Dartmouth because the charter was a contract — and therefore property that the state cannot easily take away from a private entity. This landmark interpretation of the Constitution's contracts clause was an attack on state sovereignty that inhibited the ability of citizens and their legislators to define corporations. A contract implies an equal relationship among parties, entities that negotiate with each other. Proponents of citizen sovereignty, however, viewed corporations as fundamentally subordinate to human beings and the corporate charter as a democratic tool to limit and control corporate actions. Sovereign people do not bargain, barter, or treat as an equal a think that is subordinate
Early Ohio case law demonstrated ordinary obedience by legislators and judges to the ideals of private property and contracts implied in the Dartmouth decision. For example, in 1823 the Ohio Supreme Court held that
Although the State Legislature cannot pass laws impairing the obligations of contracts, yet they may regulate them, prescribe their form, their effect, and the mode of their discharge, and every contract is supposed to be made with reference to these laws. (8)
However, concerned about the increasing threat that banks and industrial growth represented to citizen sovereignty, people worked for a change in laws and court cases. "Ohio law in the 1850's, for example, reflected the views of pro-democratic, activist judges who foresaw many of the more tyrannical aspects of contractual and commercial big-business transactions." (9) At least four historic Ohio state supreme court decisions in 1853 challenged the Dartmouth case and its fundamental premise that a corporate charter is a contract. In open defiance of the US Supreme Court, they claimed that the state rather than the federal government possessed basic self-governance rights. (10)
BUILDING DEMOCRACY AND POPULAR RESISTANCE TO CORPORATE CONTROL
EFFORTS AT SELF-GOVERNANCE over corporate power and privilege via corporate charters, legislation, and court decisions didn't happen in a vacuum. Citizens of all walks of life and from every part of the state throughout Ohio's history have organized themselves to control corporations and build democratic structures. (11) Popular resistance to corporations in Ohio is nearly as old as the state itself. People realized that there was an inverse relationship between the rights and power of citizens and corporations — privileges granted to corporations and property were privileges denied to human beings.
LOCOFOCOS
Formed as a radical wing of the Democratic Party in 1835 in New York City, the "Locofocos," who took their name from a popular brand of self-igniting matches of the day, were political firebrands "opposed to state banks, monopolies, paper money, tariffs, and financial policies that seemed to them anti-democratic and conducive to special privilege. (12)
Workers, farmers, immigrants, and reformers comprised Ohio Locofocos from the late 1830s to the early 1850s. Strongholds of this social and political movement were the northwestern rural areas of the state, where the pioneer democratic spirit still ruled, and in the immigrant communities of Cincinnati, where "hostility to special privilege was pronounced." (13) Many Locofocos sympathized with the feeling of one Ohio Jacksonian who considered banks "a greater danger to 'free principles' than slavery." (14)
After more than a decade of Locofoco organizing, the European revolutionary movement, along with increasing political vulnerability of the Whig Party for its support of slavery, created in 1848 an opening for Locofocos in Ohio. Times were favorable for a radical reforming party and the term "radicalism" itself was a political asset. Locofocos were a major influence on voter approval of a statewide constitutional convention in 1850. They then pushed for democratic and corporation control measures during the proceedings and organized for ratification after.
In the years following the convention, Locofocos controlled the General Assembly and pushed for other democratic legislations, most notably in 1851 law involving the equal taxing on banks. The law was challenged, with the US Supreme Court ruling that it impaired the obligation of contracts. Meanwhile the Locofoco-dominated legislature in the 1852-53 session enacted an even more sweeping law calling for the taxing of all property at a uniform rate. They also passed a "crowbar law" empowering county treasurers to break open the vaults of the resisting banks and seize the amount of the tax plus penalties and costs of collection. (15)
Amazingly, the Ohio Supreme Court upheld these laws through several decisions in 1853, determining that the banking tax laws conformed with the state constitution. By doing so it challenged the legitimacy of the US Supreme Court on such matters. A year later, the US Supreme Court overruled the state tax and crowbar laws and state supreme court decisions.
Locofocoism declined in the late 1850's in part due to a conservative backlash, in part due to its constitutional and legislative partial successes, and in part due to public attention and organizing diverted toward the struggle against slavery.
LABOR
Workers organized themselves before the Civil War primarily to defend their own interests in the workplace against corporate owners and managers. They organized in order to more successfully demand higher wages, better working conditions, and fewer hours at the same rate of pay. Their organizations — trade associations or unions — were independent vehicles for workers to develop strategies and tactics to advance their own interests both on the job and in society at large. They didn't, however, directly contest the authority of corporations in particular or capital in general.
Following the Civil War, Ohioans and other Northerners soon realized that industrialization and the concentration of capital posed many of the same threats to the nation's political and economic system that chattel slavery had done earlier. The concentration of economic power gave corporations a greater ability to lower wages. Ohio workers responded by organizing themselves in solidarity for protection and a greater voice in political affairs.
One issue that was the focus of labor activity for decades was the eight-hour day with no reduction in pay. Failure by the General Assembly to pass this and other pro-worker legislation, as well as the depression in the mid-1870's, resulted in working people turning to third parties. In 1877, the state's Greenback Party and one branch of the Workingman's Party merged for the state's gubernatorial election, calling for, among many changes, the "enforcement of corporate charters." (16)
Between 1880 and 1886, the Ohio General Assembly passed a number of bills demanded by labor, including measures regulating coal mine conditions, factory inspections, the employment of convict labor, and an eight-hour workday. Additionally, labor leaders convinced the state legislators to defeat a number of bills detrimental to labor.
In the mid-1880's the Knights of Labor began a short but eventful presence in the state, particularly among the state's coal miners. The Knights believe that corporate and capitalist power could be countered through a combination of economic and political action, including the creation of producer cooperatives.
In 1891 Cincinnati hosted a national conference of third party proponents which created the national People's Party; an Ohio chapter formed soon thereafter. The worker-dominated Ohio People's Party platform called for the initiative and referendum, eight-hour day, employer liability for work-related injuries, municipal ownership of utilities and street railways, the elimination of private banks, prohibition of child labor, compulsory education, women's suffrage, abolition of alien land ownership, and national ownership of railroads, telegraphs, telephones, and mines. (17) The Ohio People's Party ran local, state, and federal candidates for several years in the 1890's.
FARMERS
Ohio farmers were near revolt by 1873 in response to the rising monopoly power of railroad corporations, which robbed then of "the larger portion of the profits of their toil." (18)
One of the first chapters of the Grange, a national farm organization, was chartered in Ohio in 1868. By 1875 there were more than 1,100 local Granges in the state, totaling more than 50,000 members. The Grand Master of the Ohio State Grange called railroad corporations "a great and dangerous power" that "holds in its grasp of iron every industry of our people" and "buys legislatures, bribes courts, muzzles the press, and silences the pulpit." Consequently, "the producer stands helplessly by and sees the profits which rightfully belong to him turned aside into the coffers of the corporations." (19)
Grange pressure resulted in an 1873 law eliminating price discrimination of railroads and supported tax and other laws that would control railroad companies. Granges also formed cooperatives to purchase goods and machinery, trade products, and set up "business agencies" and cooperative stores across the state. (20)
The National Farmers Alliance, even more critical of the rise of corporations and the economic system, came to Ohio in 1887. The Ohio Farmers Alliance was formed in 1889, ushering in a "movement culture" of education and mobilization to effect political change. (21)
Yet another farm group, the Ohio Farmers Union, was born in 1890 with the largest gathering of farmers in the state's history. Their Declaration of Principles stated in part
Corporations, banks and syndicates have for years directed largely the legislation of this country...These interests gorged with the wealth wrested from the hand that earned it, manage still to have their say, no matter which political party holds the reigns of power. The farmers have waited long, too long, for the fulfillment of partisan pledges so lavishly made before the election and so soon forgotten afterwards. (22)
Their platform, however, called for mere regulation of railroads and telegraph corporations, not control over them.
Neither the Ohio Grange nor the Alliance favored the creation of new political parties. Instead, both advocated non-partisan social and political action to force the existing two parties to respond to farmer demands and to control corporations. The paramount political issue for farmers in the late 1880's was tax reform directed at state manufacturers, which was passed by the General Assembly in 1891, in part to blunt the movement to form a third part. (23)
One of the major enemies of farmers during this period was Ohio's US Senator John Sherman. Farmers considered him the main architect of the economic policies that resulted in their ruin. Sherman would later become the target of labor, as well, over his leadership in passing, the Sherman Anti-Trust Act, which essentially superceded state laws that prevented monopolies.
POPULISTS AND PROGRESSIVES
The largest democratic movement in the history of the US, the Populists had become a political force by the mid-1880's. A decade later, they turned their attention to the free coinage of silver and to fusion with the Democrats. UMWA president and Ohioan Phil Penna claimed that the problems facing workers weren't related to silver but were "rooted in the Constitution which made it impossible for workers to strike or secure legislation to help the lives of workers." Penna asserted that workers should organize to change the nation's Constitution to allow people to legislate against the monopoly of the land, transportation, and money that had reduced the nation's workers to "the equivalent of serfs." (24)
Direct resistance to corporate power at the workplace, on the streets, or through the ballot box were not the only challenges to corporate power by workers. They also endorsed alternative business formations, such as cooperatives, worker-owned enterprises, and businesses owned outright by cities and towns. From this culture came leaders like Cleveland's Mayor Tom Johnson, who said:
I believe in the municipal ownership of all public service monopolies...for if you do not own them they will, in time, own you. They will rule your politics, corrupt your institutions, and finally destroy your liberties. (25)
The 1896 election, which fused the Populists and Democrats in their unsuccessful bid to defeat Ohioan William McKinley for the presidency, ended populism in Ohio, and with it the wide-spread challenge to corporate governance by workers, farmers, and reformers. They were replaced by Progressives who sought merely to eliminate the worst abuses of corporate actions.
Twentieth-century strikes, boycotts, and efforts to win the right of collective bargaining by workers were sometimes effective and frequently inspirational. Victories often brought tangible results that improved the wealth and health of working people to some degree — just as victories by farmers and reformers often brought tangible improvements to people and communities. They were, nevertheless, different strategies and based on different assumptions from those used by workers, farmers, and reformers who came before. Locofocos and Populists sought to regain fundamental control over the corporate form. Those who came later, (mis)names "Progressives," sought to limit the harms or controls and focused on one problem or one company at a time. In exchange for some economic and/or social gains, Progressives and those who followed gave up the struggle for political self-governance.
ENDNOTES
Chaddock, Robert E., Ohio Before 1850, AMF Press (1908), pp. 49-50.
Knepper, George, Ohio and Its People, Kent State University Press (1997), p. 88.
Knepper, p. 48.
Remarks of Charles Remelin reprinted in Volume 1 of The Report of the Debates and Proceeding of the Convention for Revision of the Constitution of the State of Ohio, 1850-51, p. 175.
Cleveland Plain Dealer, February 16, 1850, p.37.
Gold, David, "Public Aid to Private Enterprise Under the Ohio Constitution: Sections 4, 6, and 13 of article VIII in Historical Perspective," 16 University of Toledo Law Review 405 (1985), pp. 408-409.
1851 Constitution, State of Ohio.
Smith v. Parsons, 1 Ohio 236 (1823).
Cooney, Patrick, Ohio's Interpretation of Supreme Court Decisions on "Corporate Personhood" From [1886] to the Present, Samuel H. and Maria Miller Pro-Bono Fellowship Committee Report, 2002.
Debolt v. The Ohio Life Insurance and Trust Company, 1 OS 563; Mechanics' and Traders' Bank v. Henry Debolt, 1 OS 603; and The Bank of Toledo v. The City of Toledo and John R. Bond, 1 OS 622 (all 1853).
Most information in this section comes from Phelan, Craig and Ashyk, Dan, The Unceasing Struggle — A Chronology of Ohio Labor History, 1803-1987. Ohio Labor History Project, 1988.
Encyclopedia Britannica online, www.britannica.com/eb/article?eu=49865.
Wittke, Carl, History of the State of Ohio, Ohio State Archaeological and Historical Society, 1944, p. 128.
Ershkowitz, Herbert and Shade, William G., "Consensus or Conflict? Political Behavior in the State Legislatures During the Jacksonian Era." Journal of American History (1971), 58 (3), p.619.
Wittke, p.136.
Pierce, Michael Cain, The Plow and Hammer; Farmers, Organized Labor and the People's Party in Ohio, unpublished dissertation, Ohio State University (1999), p. 82.
Pierce, p. 94.
Pierce, p. 39.
Pierce, p. 41
Pierce, p. 44.
Pierce, p. 48.
Pierce, p. 58.
Pierce, p. 69.
Pierce, p. 183.
Johnson, Tom, My Story, B.W. Huebsch (1911).