Power & Market

Don’t Confuse the Rights of Corporations with the Rights of Human Persons

Corporation

A foundational principle in financial accounting, corporate finance, and corporate law is that—despite jurisdictional divergences—there exists a conceptual distinction between natural persons (human beings) and juridical persons. As the definitions of both are in constant flux, this essay advances the view that, for present purposes, a juridical person shall be understood as a legal entity distinct from a human being which, under the law, possesses legal personality and, accordingly, may hold rights, property, and obligations in its own name.

Corporations are therefore juridical persons to which the statutory framework grants the capacity to generate profits and distribute them among shareholders. Crucially, however, shareholders are not the legal owners of the corporation’s assets, since such assets belong solely to the corporate entity. Thus, if a government decides to impose corporate income taxes, the property rights of natural persons remain unaffected.

Corporations, Libertarianism, and Economic Policy

If libertarians were always unconditionally in favor of corporations, we would support granting them subsidies or even implementing government bailouts for bankrupt corporations. Yet, as I explained above, corporations are not human beings, and their assets are not legally the property of their shareholders. The limited liability enjoyed by shareholders in relation to corporate obligations constitutes a legal benefit rather than a natural right. Therefore, as long as being a shareholder in a corporation is not a government-imposed obligation in the absence of an agreement or in the presence of a prior violation of property rights, imposing income taxes on corporations amounts simply to regulating a legal benefit.

Leaving aside the broader relationship between economic policy and normative principles (e.g., the necessity of human consent), it is worth emphasizing that not every increase in corporate tax rates entails a change in dividend policies or in the market capitalization of public corporations. Indeed, it should be noted that some investors even prefer corporations that do not distribute dividends, since in some cases share price appreciation is more valuable than a dividend payout.

Capitalism, Corporations, and Definitions

A minimally contentious definition of capitalism is that it constitutes a form of social organization wherein the means of production are privately owned and wage labor is the predominant, if not exclusive, form of labor. Yet this definition fails to discriminate between natural persons (human beings) and juridical persons. As such, it encompasses highly divergent economic scenarios: from societies in which no human being owns any means of production and corporations alone exercise ownership, to societies in which corporations are absent and only human beings own productive assets.

With respect to the notion of private property, if it is defined negatively as that which is neither collective nor governmental, further specification is required as to what counts as governmental. Are we referring to rulers as individual human beings, or to governments conceived as juridical persons? Should one adopt the latter, one gains not merely a more precise definition of capitalism but also of government itself as a legal entity, subject to the same conceptual analysis as any other legal construct.

Conclusion

The purpose of this brief essay is not to expose adherents and students of the Austrian School of economics to “interventionist doctrines.” On the contrary, it is to remain faithful to its methodological tradition: a tradition that draws analytically from other disciplines while maintaining a critical focus on the definitions upon which theoretical edifices ultimately rest.

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