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Cities and Corporations: One and the Same

Alex Marshall / Mar 07 2013

For Release Thursday, March 7, 2013
Citiwire.net

Alex MarshallTo most of us, corporations are as familiar as apple pie, if not as tasty. From the computers we work on to the businesses down the boulevard, we are surrounded by corporations and their labors.

But how many of us know or remember that our cities are also corporations, just the way Apple, IBM and General Motors are? Not only are cities corporations, but in many cases they are far older than any contemporary business, dating back not just decades but centuries.

This may seem strange, but it’s fact.

“There is no difference between Google and San Francisco,” says Harvard law Professor Gerald Frug. In the eyes of the law, he says, they are both corporate bodies, “empowered by government, to do stuff.”

It’s useful to remember that cities are corporations, with a long, distinguished history, because it helps us understand their possibilities and essential makeup. It’s also useful to remember that private companies are corporations, because it helps us remember that corporations don’t create themselves, we do, as part of our democratically elected government.

When you open a business as a company, you get a corporate charter from one of the 50 states. This charter grants you the privilege of being a corporate body, and spells out your rights and privileges.

The same is true for any city that opens its municipal doors.

While private corporations have done great things – I’m typing on a Macintosh computer, with an iPhone in my pocket – we the people are the ultimate arbiters of corporations’ power. Through our legislatures and Congress, we have granted corporations the right to exist, and we have awarded them special rights and powers. We should only continue to do so to the degree they continue to serve our interest, the public interest, as well as any private ones.

Until about the mid-19th century, it was understood most corporations were created for public purposes. Corporations were cities, universities, churches and public improvement ventures, such as canal companies. Some were foreign exploration ventures, such as The Virginia Company, which settled what’s now Virginia in the 1600s, and the mammoth British East India Company. To create a corporation took a separate act by a legislative body or the crown.

But in the latter half of the 19th century, a revolution occurred in both Britain and the United States, as legislatures began both to allow individuals and groups to create a corporation “by right,” that is, without a special vote of the legislature, and to endow them with “limited liability,” previously a rare jewel. Limited liability meant the owners were not personally responsible for the debts of their artificial body. Those two developments helped corporations multiply in number and power.

Yet, governing officials continued to recognize that corporations were meant to serve a public as well as a private purpose. Even into the 20th century, states would routinely put expiration dates on corporate charters, or revoke them. Corporate status was recognized as a privilege.

It’s no secret that cities are corporations – Seattle’s corporate charter, for example, can be seen online (click here), as can many other cities’. It says near the beginning, “The municipal corporation, now existing and known as The City of Seattle, shall remain and continue a body politic and corporate in name…”

Older East Coast cities have corporate charters that predate the states and the federal government that are now their legal masters. New York City and Norfolk, two cities where I have lived, have corporate charters that date to the 17th century.

Yet as private business corporations have grown in power in the last two centuries, the power of public corporations such as cities has lessened. Cities, as independent corporate bodies, used to have a greater independence from their state.

There were many reasons why cities’ independent authority declined during the 19th century, as corporations’ rose. It was partly due to states and judges moving to limit the political power of big cities, which were increasingly controlled by the immigrants flooding into them. The growth of private railroads played a part, as states vied with cities to see who could be their protector, and thus the recipient of their favors. A key figure was Judge John Forrest Dillon, author of the treatise now commonly known as “Dillon’s Rule,” which says, in essence, that cities have no rights beyond what the state has specifically given them.

Whatever the power of cities, we should more actively assert our authority over our children, the private corporations. Today, the state of Delaware is the de facto granter of corporate status to many large companies because its charters give a lot of power and fewer responsibilities. We the people could change that. For example, I’ve proposed a National Companies Act, which would require corporations above a certain size to have national charters, which would set uniform governance and tax policies.

Our ongoing national debate today about the role of government and the role of private business is not likely to end anytime soon. But we could at least get it on more solid footing if we remembered how much of the powers of the latter rest on the powers of the former.


Alex Marshall, a journalist, is a senior fellow at the Regional Plan Association and author of The Surprising Design of Market Economies. Reach him at alex@rpa.org.

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One Comment

  1. Brad
    Posted March 8, 2013 at 8:18 am | Permalink

    Yes, cities are corporate entities, ones in which many of us live, and which will surely outlive us and our other corporations. Their populations and communities are invested and continue to grow even as other corporations falter and fail.

    There’s a good TED talk on the work of quantifying cities and corporations. Long and short: Very few cities fail, other corporations growth is bounded and they will come to an end.
    http://www.ted.com/talks/geoffrey_west_the_surprising_math_of_cities_and_corporations.html

    Thanks for the thought provoking article.