May 05, 2009
The Faith Perspective in Corporate Law: Top Down or Bottom Up?
Posted by Christine Hurt

Gordon left the door open for us regular Glommers to, as they say, glom on to the Religious Faith and Corporate Law symposium here.  I've found the posts very interesting so far and am happy for the chance to jump in here in our own backyard.

While a lot of questions remain unanswered as to what a religious perspective for corporate law would mean, I want to separate out some thoughts based on the divide between the corporate entity and the individual.  Much of religion focuses on the individual:  what the duties and obligations are for an individual in serving her faith; the relationship between the faithful person and God; and the relationship between the faithful person and God's other creations.  Here, we can use the lens of faith to remind us that individuals make decisions based on other considerations besides rational choice; homo economicus is not as one-dimensional as he might seem.  Many make decisions based on other principles, whether they ascribe those principles to a particular religion or philosophy or not.

However, much of the corporate social responsibility dialogue focuses on the corporation (or other business entity) as a super-individual.  One theory might be that the corporation as entity should reflect certain values and make choices based on certain principles, just as a collection of individuals should.  However, we live in a land of heterogenous principles.  One CEO might think that the corporation she controls should strive to bolster fair trade, even if the end results are less profits.  Another CEO might think the corporation she controls should use retained earnings to fight proposed legislation legalizing behaviors her religion tells her are immoral.  Sorting becomes difficult for like-minded shareholders.  Sorting based on profits was much easier!

A third perspective would be to analyze the capital market as a whole from a religious perspective.  Let's leave that for another time.

This week I heard of a unique combination of the first two perspectives.  I am always on the look out for good BA case histories, and heard the story of Stanley Tam and U.S. Plastic.  (Here is a video from the Generosity Book website about him.)  This may be an old story, but it's the first I've heard of it.  When Stanley began the company decades ago, he decided to "make God his senior partner."  He finally convinced an attorney he was serious, and so he transferred 51% of the corporation to a religious foundation.  Therefore, 51% of the profits went to the foundation each year.  Literally tens of millions of dollars were used in this way.  A decade or so go by, and Stanley feels God urging him to become an employee of God.  So, he transfers the remaining 49% of the profits to the foundation, and he took only a modest salary.  The foundation has an old-line mission:  converting souls around the world to Christianity.  Anyway, according to the website,  U.S. Plastic does not seem like a tiny operation.

Of course, U.S. Plastic is not a publicly-held corporation and in fact seems to have only had two shareholders, Stanley and the foundation, in its history.  As an investor, would you purchase shares (publicly-held or privately-held) in a corporation owned 51% by a charitable foundation?  Would the purpose of the foundation matter to you?  Would you feel differently owing publicly-traded shares in a corporation owned 51% by a charitable foundation with values you disagreed with than owing shares in a company owned 51% by a person you disagreed with?  If the return on your investment were good, would you care either way?

I saw a writer describe Stanley Tam as a "Christian entrepreneur."  What is a Christian entrepreneur?

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First Post from Robin Wilson
Posted by Robin Wilson

Professor Johnson asks how religious belief and corporate law might be connected.  The intersection of faith and business is not one that we ordinarily stop to consider.  However, new laws recognizing same-sex marriage can put faith and business on a collision course, but it doesn’t have to be this way.

With the advent of same-sex marriage, a whole host of new questions for businesses arise: may a Catholic university that provides married student housing decline to offer housing to same-sex couples because doing so would violate its religious tenets?  May a therapy practice offering Christian marriage counseling serve only heterosexual married couples? What about a Christian bed and breakfast---can it open its doors only to heterosexual married couples or require same-sex couples to stay in separate rooms?  These collisions between same-sex marriage and religious liberty are far from speculative, as my new book illustrates.

Flash-points over same-sex marriage have occurred across the country and the world. For example, a Methodist-affiliated group in New Jersey, the Ocean Grove Camp Meeting Association, that refused to allow same-sex commitment ceremonies on its boardwalk pavilion lost its property tax exemption--resulting in a tab for $20,000 in back taxes. Elsewhere, New Mexico’s Human Rights Commission fined a small husband and wife photography shop more than $6,000 for refusing for religious reasons to photograph a same-sex commitment ceremony.

Some states now considering same-sex marriage laws, like New Hampshire, would provide religious exemptions only to the clergy. New Hampshire’s bill exempts “clergy . . . [from officiating] at any particular civil marriage or religious rite of marriage in violation of their right to free exercise of religion”--unnecessary protection in light of the First Amendment. Neither religious individuals nor religious organizations receive protection under this bill.

Yet New Hampshire’s existing anti-discrimination statute prohibits sexual orientation discrimination in employment, housing, and public accommodations, exposing religious objectors to fines of up to a $50,000.

Who should worry about these fines? Any employer in New Hampshire who employs 6 persons or more.  Anyone who provides public accommodations.  Any owner of rental property intended for 3 or more families (except religious organizations that offer housing to other adherents for non-commercial purposes, unless membership in the religion is based on race).  This is potentially a whole lot of people.  Businesses and individuals who for reasons of faith prefer to step aside from same-sex marriage need explicit guidance about if and when they will be permitted to do so.

Robust religious liberty exemptions provide one way for religious objectors to live in peace and harmony with same-sex couples.  Such exemptions are routinely used in employment statutes and health care conscience clauses.

Exemptions need not impose hardships on same-sex couples seeking services.  In many states considering same-sex marriage, there are countless vendors of photography, catering, and other services that couples need.  In the rare instance that there is a single vendor in a particular geographic area, carefully tailored religious exemptions can address the possibility of hardship.  For a discussion of such exemptions, see the attached letters.

Letter by Professors Thomas Berg, Carl Esbeck, Robin Fretwell Wilson, Richard Garnett.

Letter by Douglas Laycock.

Thus robust religious liberty exemptions can guarantee both the rights of religious minorities and of same-sex couples.

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May 04, 2009
First Posting from Robert Ashford
Posted by Robert Ashford

For my first post, I would like to underscore one of the closing propositions advanced by Lyman Johnson in "Re-Enchanting Corporate Law"

"Recognizing that [religious] faith and beliefs can affect economic behavior seems important whether one seeks simply to understand the corporation or also seeks to reform its conduct in some manner."

This proposition represents the theme of three recent sessions of the Annual Meeting of the Section on Socio-Economics of the Association of American Law Schools (AALS). The latest session title and description is set forth below:

Session Title: Socio-Economics and Faith in a Higher Power

Socio-economics recognizes (1) that faith in a higher power affects economic behavior and (2) an understanding of how faith affects economic behavior will enhance one’s ability to address law-related economic issues. Yet much economic analysis of law proceeds without an explicit recognition of the impact of faith on economic behavior. This panel continues a socio-economic inquiry that began during the 2007 annual meeting.

The recognition that faith in affects economic behavior carries with it the recognition that faith also affects the understanding of wealth maximization whether it be for the corporation, the shareholders, other stakeholders and/or society. To the extent that wealth-production and wealth maximization are central to the nature of the corporation, religious faith and beliefs also affect the nature of the corporation and the duties of its agents.

The AALS Section on Socio-Economics can provide an important forum for developing the themes expored in this partidipatory discussion on "Faith and Corporate Law."

Plans are under way to continue the exploration of this subject at the 2010 Annual Meeting of the AALS Section on Socio-Economics which will be held on Thursday, January 7, 2010.  People interested in this program should let me know.

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A Possible Christian Perspective on Corporate Law
Posted by Ronald Colombo

Thank you to Lyman and David for getting the ball rolling today, and to Gordon and The Conglomerate for graciously hosting this on-line symposium.

In response to David's post, I offer the following (David's initial four questions are reprinted in italics):

1) Is a Christian perspective on corporate law one of many possible true perspectives, or is it, in the end, the only way to ground a theory of corporations and corporate regulation?  Similarly, is there likely to be a single Christian perspective?

This could be read (as, perhaps it was intended) as a profoundly theological question, touching upon issues that go to the heart of religion, and Christianity, in general.  Is, for example, the Christian view of mankind, the world, and salvation, simply one of many possible true perspectives, or is it THE correct understanding of mankind, the world, and salvation?  Anyone subscribing to the former approach would, I imagine, a fortiori, consider a Christian perspective on corporate law as simply one of many possible true perspectives.

But for those wedded to the latter approach, I don't think the answer is as clear.  The question turns on, it would seem, the nature of corporate law.  For, just as Fiorella LaGuardia famously observed that "There is No Democratic or Republican Way to Pick Up Garbage," perhaps corporate law is, at base, a mere exercise in pragmatism - and not rooted in the loftier principles that religion and Christianity are concerned with. 

2) How does one construct a Christian theory of corporate law (e.g., Do you start with relevant passages of Scripture?  Do you start with general underlying principles?)

I'd suggest an Aristotelian / natural law approach to corporate law - which I think can quite fairly be justified as an approach in keeping with the Christian tradition. 

Under such an approach, I'd like to see considered the following fundamental questions:  why do corporations exist?  to what end are they created?  are corporations necessary to the proper ordering and functioning of society?  what characteristics serve the corporation well?  what characteristics undermine the corporation?

Around answers to these and similar questions is how a natural law theory of corporate law could be constructed.  

Additionally, such an approach would have a thing or two to say about shareholders as well.  As both Susan and Lyman have mentioned, the myth of homo economicus does not fare well under such an approach - and this has important implications regarding the shareholder wealth maximization norm around which so much of corporate law is based.

3) How is a Christian perspective on corporate law different from communitarian theories of corporate law?  Are they the same in the end?  (With the exception of Steve Bainbridge's important work, most of the Christian perspectives seem to me to look a lot like communitarian insights).

Although largely overlapping with communitarian theories of corporate law, a Christian or natural law perspective on corporate law would feature one (at least one) very significant difference.  Namely, the Christian / natural law focus would be guided by the principle of "the common good."  This principle differs rather dramatically from the principles undergirding most communitarian theories, despite some similarities (both apparent and real). 

Most basically, "the common good" refers to an objectively good state of affairs; a state of affairs that most readily contributes to the flourishing of both the person and society as a whole.  Most communitarian theories don't really promote the "common good," but rather simply enlarge the number of constituencies for whom the corporate is said to be governed.  This is basically a special-interest approach to corporate governance, where the special interests of one group (the shareholders) is simply joined by the special interests of various other stakeholder.  That's not what common-good thinking is about.

Additionally, "the common good" refers, as mentioned, to a state of affairs that is objectively good.  This diverges from communitarian theory, which has largely bought into the law-and-economics notion that utility maximization is the law's desideratum.  But utility is a matter of subjective preferences, and the maximization of subjective preferences is not at all the same thing as the common good.

4) What is the audience of a Christian perspective on corporate law?  (Other Christian believers?  Those who don't share these beliefs?).

Perhaps it depends on what that perspective ultimately reveals.  If, for example, the corporation is viewed as an institution necessary to one's eternal salvation, I'm doubtful that reforms predicated upon that perspective will play well outside the circle of believers.

If instead, the Christian perspective reveals truths about the corporation that are useful regardless of one's religious beliefs, then the audience of "Christian corporate law" should extend well beyond the circle of believers.

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Faith and Corporate Law
Posted by Susan Stabile

One of the questions posed by David Skeel in his opening contribution to this discussion is: How is a Christian perspective on corporate law different from communitarian theories of corporate law?  As David notes, some of the insights of Christian perspectives on corporate law resonate with communitarian insights, and it is the case that secular progressive corporate law scholars have argued for broader notions of corporate responsibility based on communitarian principles and other theoris of distributive justice. 

I do think that the religious perspective adds something in offering a different vision of the human person and of relations among persons than that offered by secular theories  In a piece I published in the Wake Forest Law Review give years ago, I articulated a vision of the person rooted in religion, contrasing that with the  vision of the person that I think underlies much secular corprate law scholarship.  In talking near the end of the piece about precisely the question raised by David I wrote:

The value of the religious persepctive of the person, an advantage not shared by these other approaches, is that it gets to the root, giving it a greater likelihood of success.  Some commentators have suggested the 'corporate social responsibility is a problem that never goes away,' because corporations are 'inherently untrustworthy.'  If we attempt to deal with it sipmly by attempting to change conduct without changing underlying notions that produce that conduct, I agree that the problem will always be with us.  However, addressing, and attempting to change, the core view of the individual and her relation to the world attacks the problem at a different level and aims to create an environment where other changes may flow more naturally."

I continue to think that what I wrote then is true.

I willl have something to say about audience and some of the other questions in a later post. 

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What is a Christian Perspective on Corporate Law?
Posted by David Skeel

When I think about Christian perspectives on corporate law, I find myself worrying over the same set of questions.  As we consider Lyman's opening and our initial exchanges, I'd be interested in others' reactions to the following questions (and I'll offer a few thoughts myself):

1) Is a Christian perspective on corporate law one of many possible true perspectives, or is it, in the end, the only way to ground a theory of corporations and corporate regulation?  Similarly, is there likely to be a single Christian perspective?

2) How does one construct a Christian theory of corporate law (e.g., Do you start with relevant passages of Scripture?  Do you start with general underlying principles?)

3) How is a Christian perspective on corporate law different from communitarian theories of corporate law?  Are they the same in the end?  (With the exception of Steve Bainbridge's important work, most of the Christian perspectives seem to me to look a lot like communitarian insights).

4) What is the audience of a Christian perspective on corporate law?  (Other Christian believers?  Those who don't share these beliefs?).

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Re-Enchanting Corporate Law
Posted by Lyman Johnson

    In mid-April, several of us (Robert Ashford, Ron Colombo, Sarah Duggin, Mike Naughton, David Skeel, Gordon Smith, Susan Stabile, and I) gathered at the University of St. Thomas Law School in Minneapolis for a roundtable on "Exploring the Connection Between Religious Faith and Corporate Law."  We had an afternoon of lively and far-ranging conversation, and we ended by asking ourselves what venues might exist for extending and widening the dialogue.  Gordon offered us two weeks of guest blawging on The Conglomerate.  Each of us will post and comment at various times over that period.  We hope many others will join in with comments, questions, ideas, and so on.  Let me kick things off.

    Corporate law has profitably been examined from a number of disciplinary vantage points.  Economics -- whether of the older, neoclassical or the newer, behavioral variety -- along with psychology, sociology, history, and feminism all have enriched the discourse.  Recently, a decided turn toward empirical work also is discernible in corporate law scholarship.  Largely missing from these various "takes" on the corporation,  however, is sustained scholarly attention as to how religious belief and corporate law (and corporate life) might be connected.

    As an empirical matter, evidence reveals not only that vast numbers of people hold religious beliefs, it also suggests that those convictions give meaning and purpose to their lives, and shape behavior.  The issue is not whether, as a normative matter, people should or should not hold such beliefs or whether, as a scientific matter, certain scientists and social commentators think people are foolhardy or, conversely, fully justified, in doing so (Dawkins, Hitchens, and Maher -- and their respondents -- have addressed that topic).  The issue is more basic, more empirical:  people in large numbers do hold religious beliefs and they consistently report that those beliefs influence how they live.  Shouldn't this sociological fact carry significance for those who theorize about corporate decision-makers, such as investors, directors, managers, and employees?

    For example, corporate law scholars might probe the implications for contemporary theories of corporateness if, in fact, significant numbers of people in the business world -- including executives, directors, investors, and employees -- remain "enchanted" by religious faith (Max Weber having famously noted in 1919 that the modern sensibility had become "disenchanted") or other spiritual belief systems.  Again, the issue is not whether people should or should not have such beliefs.  What matters is whether, and how, as an empirical matter, various beliefs actually influence, or potentially might influence, behavior in the business arena.  Do we really know?  Or do we simply make assumptions about human decisionmaking that may be, as a matter of fact, unwarranted?

    The seeking of such an enriched model of human motivation is what lies behind recent "behavioral realist" approaches in legal scholarship.  Here, humans are no longer wholly understood to be self-serving calculators of costs and benefits, as modeled by rational choice theorists.  Rather, the influence of less visible but "pervasive, fundamental and arational cognitive processes"1 on human conduct is openly examined.  Too, growing evidence from a broad array of disciplines suggests that people may tend to naturally regard others with sympathy, and that humans both value and reward cooperative behavior in others. 

    The ways in which markets themselves vitally depend on such character traits as trustworthiness, fairness, honesty, and concern for the welfare of others is being demonstrated.  Such a more-rounded conception of people is at odds with standard neoclassical economic theory -- that humans are inherently self-centered and routinely seek to maximize personal well-being.  It is at odds too with the notion that value systems are simply constructs of human social systems.  We are seeing, in short, a growing interest in what Michael Jensen has called the "positive analysis of normative values..."2  Rather than simply positing that humans are entirely self-serving in economic settings, many observers are undertaking more nuanced analyses of how values guide human interaction.

    Data about religious beliefs both here and abroad tie into these emerging scholarly pursuits and findings.  After all, if religious faith -- for some people -- forms the very fiber and foundation of who they are (that is, their self concept) and how they interact with others (that is, their relationships), shouldn't we expect that to influence behavior in the corporate world?  The groundspring of values for many people is religious belief:  As noted by Oliver Goodenough and Monika Gruter Cheney, "[R]eligiously based virtues [such] as honesty, dependability, respect, and concern for others represent commitments by which a good person should live, and these commitments map dependably onto the kinds of mechanisms that can reframe economic life to make cooperation a dominant strategy...."3  And the Catholic Social tradition recognizes that humans "are created with an essential linkage between our personal good and the good of others.  We cannot become good persons unless we intend our lives to serve others' good as well as our own, and a vital way that we live for and with others is through institutions."4  Recognizing that faith and beliefs can affect economic behavior seems important whether one seeks simply to understand the corporation or also seeks to reform its conduct in some manner.

    I will stop here and let others from the roundtable make their quite different contributions on the broader topic, but I will pick up where I left off in a later post, where I will contend that ideology should be no impediment to an exploration of how faith might inform an understanding of corporate law and corporate life.  I will also join in commenting on posts by others as well.  Please contribute to this conversation, and thanks to Gordon and other Glommers for hosting us.

________________

1    Jerry Kang, Trojan Horses of Race, 118 Harv. L. Rev. 1489, 1494 n. 21 (2005).

2    Michael C. Jensen, Foreward, in Moral Markets:  The Critical Role of Values in the Economy ix (Paul J. Zak, ed. 2008).

3    Oliver Goodenough & Monika Gruter Cheney, Is Free Enterprise Values in Action?, in Zak, at xxiii, xxvi.

4    Jeanne Buckeye, Michael Naughton, et al, Educating Highly Principled Leaders 5 (Draft 2009).

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May 03, 2009
"Exploring the Connection between Religious Faith and Corporate Law": An Online Symposium
Posted by Gordon Smith

Beginning tomorrow, The Conglomerate will be hosting an online symposium of scholars who will address the topic, "Exploring the Connection between Religious Faith and Corporate Law." This online symposium was prompted by a live Roundtable held in April at the Holloran Center for Ethical Leadership in the Professions, University of St. Thomas. Lyman Johnson organized that Roundtable, and he will kick off our discussion tomorrow. I hope you will feel inspired to participate.

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