July 17, 2014
A "Missing Person"--the "Corporation"
Posted by Lyman Johnson

As do philosophers, we corporate law scholars must struggle with whether we need a sound/better ontology of the corporation before we can prescribe and moralize(in a good sense) about it. In 2012, I wrote an article(http://ssrn.com/abstract=2070939) the abstract of which stated: "contemporary corporate theory accepts corporate personhood but, ironically, has little to say about the corporation itself, thereby sidestepping full engagement with corporate responsibility."

Like Eric, I have long thought folks of all political and theoretical outlooks should address the subject of responsible corporate behavior. The reality in today's corporate law and theory, however, is that the predominant shareholder primacy focus of our field means 1) the "corporation" as a meaningful concept with an institutional purpose and identity distinct from the persons involved in it is lost, and instead has become a mere cipher for the body of shareholders--a real and enduring failure, and perhaps this is what Eric's book takes on; and 2)only shareholders(and their dealings with directors/officers) receive sustained attention from mainstream corporate scholars, with many "progressive" scholars resisting this by means of advocating CSR and stakeholder theories of various sorts.

Corporate law and theory thus ignores the corporation itself and all those involved in it except shareholders, directors, with just a bit about officers. Other interests are out-sourced to other bodies of law. "Corporate responsibility," however, should not be a fringe element in U.S. corporate law, but a central part of it. And corporate responsibility need not be achieved only by means of "statist" solutions but can be advanced by volunteerism as well. I suspect much volunteerism is itself impeded by the faulty belief that those who govern companies must indeed focus exclusively on shareholder interests, a belief we in legal education and business education reinforce, as a 2011 Brookings Institute study reported.[And we need to distinguish "corporate responsibility," which means responsible action by an institutional actor toward others, from "corporate rights" and "interests" which focus on the holder or recipient].

But the point is that the subject of corporate responsibility should engage corporate scholars and the focus should indeed be on the distinctive "corporate" aspect of that and what it means, lest the corporate institution itself be let off the hook, as in my view, the contractarian theories do.  Some, like Alan and Milton Friedman, will believe that the responsible institutional course of conduct is to maximize profits, while others(me, for example) think corporations should voluntarily be far more attentive to the interests of employees and other vulnerable persons, whether from religious or philosophical beliefs, while yet others think the state should play a large role in requiring specified "responsible" corporate conduct. At least we in corporate law should more deliberately attend to the overarching issue of the need for responsible corporate behavior in a free society where businesses play such a central role in social life--whatever may be, and this is important, our quite differing visions of what "responsible" conduct entails in the corporate setting.

This is where the Hobby Lobby company is so fascinating, because it spans some of these categories and so challenges our thinking on this subject. Its statement of purpose is orthodox progressive stakeholderism, with one exception: it puts the Lord first, but then it follows with exceptional service to customers, taking care of employees, investing in the community, and lastly, providing a return to stockholders. They pay employees an above market minimum wage, currently over $13 I believe. The founder, Mr. Green, has said he does not want to take for himself and "skim from your employees." The company gives to charity over a third of annual profits, and in the event of a sale 90% of the proceeds will go to charity and only 10% to the stockholder-trust.  This is all voluntary and it is motivated by religious beliefs, and it is not profit-maximizing or shareholder primacy. By anyone's definition of responsible corporate behavior, and apart from not providing 4 of 20 contraceptive aids, this company has been a very good and generous citizen. Sadly, many simply don't like the religious underpinning of the actions, and we have to acknowledge that there frequently is an animus against religion in the academy and press that has fueled much opposition to this company. I hope with Eric that we can ignore our disagreements within corporate law but many religious people--and that includes some of the relatively few in the legal academy--sincerely believe there is growing hostility toward religiously-motivated behavior, even when it is a force for much good.

I believe we need a greater pluralism in the corporate world, where attending to the well-being of interests of persons besides capital providers is thought to be the affirmative responsibility of those who control and influence businesses, and not simply mandated by the state. This is why I resist the idea that, legally, profits must be maximized; it can inhibit such a voluntary focus. To be responsible, one must be free, and in a democracy we will differ as to what should be done, and how and why, with that freedom.  As with free speech, however, when we seek and  permit "responsible" corporate behavior, we may get some of the kind many of us do not like. As with diversity generally, however, it will enrich our collective life. Certainly these issues should be part of a truly "corporate" law and theory, and not pushed out on the margin.

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