Saturday, February 1, 2014

“To be, or not to be,” is an important question, but so is, “What to be?”

A lot of chatter this week surrounding the submission of an amicus brief filed in the Hobby Lobby case by corporate and criminal law professors in support of petitioners.  In particular, Stephen Bainbridge has written a series of posts critical of the brief:



I was one of the 44 law professors that signed on to the amicus brief, and I also have a tremendous amount of respect for Prof. Bainbridge, so I’ve been very interested in what he’s had to say.  However, I’m also currently trying to advance my latest writing project (relatedly, on the intersection of corporate governance theories, theories of corporate personality, and corporate social responsibility) to some semblance of completeness that I can submit to journals with a straight face in the next few weeks.  Thus, I am going to pass on addressing Bainbridge’s critiques for now – except for briefly responding to his claim that there is some inconsistency between arguing that the Supreme Court should respect corporate personhood in Hobby Lobby (the brief states: “this legal separateness—sometimes called legal ‘personhood’—has been the very basis of corporate law at least since the 18th Century”) while at the same time bemoaning the application of that corporate personhood in Citizens United (while I won’t speak for my co-signers, I think it is fair to assume many are critics of Citizens United and I personally have expressed my disagreement with the opinion in various places, including here).

By way of background, the three primary theories of corporate personality are aggregate theory, real entity theory, and concession theory (AKA artificial entity theory).  At the risk of over-simplifying, aggregate theory and real entity theory essentially presume corporations stand in the shoes of natural persons (e.g., shareholders in the former case, and the board of directors in the latter), and thus have available to them all the rights of natural persons in resisting government regulation.  Concession theory, on the other hand, views the corporation as fundamentally a state creation, and presumes the state has the right to regulate its creation as it sees fit.  Importantly, concession theory does not preclude granting particular rights of natural persons to corporate entities, and it certainly doesn’t preclude doing so by including “corporation” in the definition of “person” for purposes of a particular rule, regulation, or statute.  It just doesn’t presume that all the rights of natural persons are automatically transferred to corporations upon their creation.

I focus on presumptions, and the concomitant allocation of burdens of proof, because I believe these issues were critical in Citizens United.  The majority presumed that corporations were entitled to the same political free speech rights as natural persons, and placed the burden of proving that this right was subject to limitation on the basis of corporate status alone on the state.  Meanwhile, the dissent argued that the burden was on those claiming free political speech rights for corporations and presumed the legislative determinations regarding the corrupting influence of corporate spending on politics were sufficient to uphold the relevant regulation.  Accordingly, while many commentators disagree as to whether aggregate or real entity theory animated the Citizens United majority, most of those to have considered the issue agree it was one of two (I believe the key line in the opinion is: “[T]he Government cannot restrict political speech based on the speaker's corporate identity.”).  On the other hand, I believe most – though certainly not all -- of the commentators that have considered the issue appear to agree that concession theory animated the dissent’s position (despite the dissent’s express protestations to the contrary). 

Thus, I believe the better characterization of the relevant issue is not whether corporations are persons (we can all likely agree that corporations are entitled to personhood rights at the very least for a variety of relatively non-controversial purposes), but rather which rights of personhood corporations should be entitled to.  In Hobby Lobby, the issue is not whether corporations should ever be deemed persons under the law, but rather whether corporations should be deemed legal persons that are entitled to rights of religious freedom identical to natural persons and, if so, in what situations and to what extent.  I see no inconsistency in arguing that corporate personhood should not include religious freedom rights co-extensive with natural persons while at the same time arguing that corporate personhood should also not include political free speech rights co-extensive with natural persons.

Business Associations, Constitutional Law, Corporations, Current Affairs, Stefan J. Padfield | Permalink


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