July 16, 2014
When Should Corporations Have RFRA Rights?
Posted by Brett McDonnell

Unlike most on my side of the political aisle, I am mostly a fan of the Hobby Lobby decision, for reasons I outline in part in a recent op-ed.  Giving some for-profit corporations protection under RFRA makes sense as a matter of both quasi-constitutional law (RFRA is a statute, but it draws upon First Amendment concepts) and corporate law.  As for the constitution, as the Court explains well, individuals often exercise their religious beliefs collectively within organizations, and protecting such organizations is important to protecting the individuals involved.  As for corporate law, as a proponent of progressive corporate law and corporate social responsibility, I think that corporations can and often should have core purposes that include more than just maximizing shareholder returns.  But once one recognizes all this, we must analyze when corporations should be able to invoke RFRA protection.  I do that here, and in my next post I will consider whether the Court's opinion is consistent with my analysis.

Consider two dimensions: degree of organizational commitment to religious beliefs, and share ownership.  Each can vary in strength of commitment.  On the organizational dimension, the formally strongest commitment would come with a charter provision concerning religious goals, or a bylaw or shareholder agreement.  Less formally, one can have mission statements, or various entrenched practices or public statements, and so on.  On the ownership dimension, one can go from having one or two shareholders who hold sincere and strong shared religious beliefs all the way to publicly-traded corporations with no controlling shareholder and a diverse mix of thousands of shareholders.

Both dimensions count.  Consider four possible extremes.  (1) Both dimensions show a strong commitment to religious goals, e.g. a corporation with just one, highly religious, shareholder, selling a religious product, with formal commitments and many entrenched, public religious practices.  Here the case for RFRA protection is strongest.  (2) Both dimensions are weak, e.g. a public corporation with no religious practices.  Here there is no RFRA protection.  (3) The organizational commitment is strong but the share ownership side is weak (perhaps the corporation has gone public and now has a diverse shareholder base).  The lack of committed shareholders weakens the corporation's commitment to religion, since the shareholders can ultimately change course by electing a new board.  However, with strong enough organizational commitments, the corporation can still be adequately devoted to religious goals that RFRA protection could be appropriate.  (4) Share ownership is centered in a few religious owners, but the organizational commitment is weak.  I struggle with this fourth situation.  It will depend upon the facts, including whether there is any previous organizational commitment at all (and if so, what and how much), and whether there are good reasons why the owners might not have shown a religious purpose before yet the corporation can still legitimately object to the imposition of the law in question.

I think that this way of looking at things shows both the strength but also the limits of objections like that of the law professor brief.  Those objections focus on corporate personhood and the distinction between shareholders and the corporation.  But that strikes me as only calling into question a particular way of determining RFRA status, one overly focused on the beliefs of individual shareholders.  It does not succeed in showing that some corporations, at the entity level, may not have a strong religious goal. 

For more analysis of the corporate law theory of this topic, I strongly recommend the paper by Meese and Oman.  The main limit of that paper is that it does not develop a set of guidelines for when RFRA protection should apply, based on its analysis .  I am trying to start on that project here.  Next up:  given this approach, has the Supreme Court got it right? 

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