March 25, 2014
Religious Obligations in the Corporation
Posted by Lyman Johnson

I look forward to reading the transcript of today's arguments. In the meantime, a comment on Marty's post.

I am glad that he has concluded the same thing as me, i.e., that of the burdens on natural persons here, it is on those persons as directors; see the reasons I stated yesterday. But I disagree with him that a corporation cannot have a religious obligation.

Imagine an incorporated church. Of course that organization, as an organization, has obligations of a religious nature, whether that be calling a minister, providing worship services, conducting communion, prayer meetings, and so on. There is no corporate law reason, as explained yesterday, that a for profit corporations cannot pursue profits and do some of those ecclesiastical activities. Indeed, I believe Hobby Lobby employs three chaplains. Moreover, in the Christian tradition, much of the directives are not just to individual believers but to the Body of Christ, which is the church, a group of people. And the word "corporation" derives from the root word for "body." People carry out religious activity in groups, that is, "corporately," and the law provides a ready-made vehicle for doing so, the "corporation."

But even if one accepts arguendo that the company qua company has no religious obligations, the natural person directors on the boards of these two companies certainly do. And they owe fiduciary duties to the serve the company's interests. If, because the company here is assumed to have no religious obligation, and therefore must comply with the Affordable Care Act in toto, and if, as fiduciaries, the board members must serve those interests even as they themselves, personally, have religious obligations that forbid them from doing so, then those natural persons are being forced to choose between violating their duties or violating their beliefs and obligations. I understand this to supply the scenario that Marty thought was absent.

Better in my view, to see that, for the reasons explained yesterday and above, a for-profit business corporation can be(it need not be but it can be) a mixed purpose entity advancing profits and one or more other purposes, maybe religious but maybe another social or environmental purpose, as Ron notes. And those walking, breathing people who serve as directors, in "exercising" their individual beliefs and their governance duties to the corporation, can simultaneously draw on and seek to advance individual and "corporate" obligations.

And to the nexus of contracts point, it is well taken as a theory matter. I think, however, in the world of legal doctrine the distinct legal personhood of the corporation is entrenched, subject to piercing, and this is where the 44 professors and Steve join issue.  But as noted yesterday, such separateness is no impediment to the business founders here. This is because it is in their capacity as directors that these natural persons must, by corporate statute,  "exercise" corporate responsibilites, and they seek to do so in this litigation by vindicating their "free exercise" religious right as individuals discharging this corporate function.

 

Lyman Johnson

Business Organizations, Corporate Governance, Corporate Law, Hobby Lobby | Bookmark

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