Friday, February 21, 2014

Religion, Corporate Social Responsibility, and Hobby Lobby

Professor Stephen Bainbridge made me aware of Keith Paul Bishop's post entitled:

44 Law Professors Make A Case Against Corporate Social Responsibility

Bishop writes:

I was shocked because the [law professor] brief constitutes a frontal assault on corporate social responsibility.  For example, the law professors make the following apocalyptic claim: "If this Court were to agree that, as a matter of federal law, shareholders holding a control bloc of shares in a corporation may essentially transfer their [social responsibility] beliefs to the corporation, the results could be overwhelming."  Ok, I substituted “social responsibility” for “religious”.  However, if the transfer of stockholder religious beliefs to the corporation would be “overwhelming”, why wouldn’t the same be true of beliefs regarding climate change, the environment, or other beliefs animating the corporate social responsibility movement?

Two of my co-bloggers signed the law professor brief in the Hobby Lobby case that Bishop discusses, so they are probably better suited to respond, but I will provide a few thoughts. 

One distinction, between the Hobby Lobby case and CSR, that may be quickly raised is addressed in section II.C of the law professor brief.  Hobby Lobby is attempting to use religion to avoid legal obligations.  There may be situations where companies argue they should be able to avoid legal obligations because of  "beliefs regarding climate change, the environment, or other beliefs animating the corporate social responsibility movement" but none spring immediately to mind. 

While the parade of horribles in the second section of the law professor brief might prove compelling, the entire first section (over half of the argument) would be seriously damaged if Hobby Lobby's articles of incorporation were amended to express the religious stance of the company.  The first section of the brief focuses on treating the corporation as a separate entity, distinct from its owners.  It seems, however, that Hobby Lobby's owners could amend the corporation's articles to endow the corporation with its own, separate and distinct, religious views. 

As I have previously mentioned, Hobby Lobby could have helped its chances in this case by converting to some form of for-profit benefit corporation and being specific about its religious views in its articles of incorporation.  The Delaware Public Benefit Corporation ("PBC") statute makes the ability to maintain a religious purpose in a PBC explicit when it defines "public benefit" as "a positive effect (or reduction of negative effects) on 1 or more categories of persons, entities, communities or interests (other than stockholders in their capacities as stockholders) including, but not limited to, effects of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological nature." (emphasis added)  According to Delaware's PBC law, each PBC must include at least one "specific public benefit" within its statement of purpose. 

I am interested in any additional thoughts on this topic, and am eagerly awaiting Professor Bainbridge's promised full response to the law professor brief (and any responses to his response).

Update: Go here for Professors Bainbridge's response.  Also, two of my co-bloggers have joined the conversation: here (Stefan Padfield) and here (Anne Tucker).

Business Associations, Corporate Governance, Current Affairs, Haskell Murray, Religion, Social Enterprise | Permalink


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