Corporarate Personality

In 2011 I posted on several occasions and from several perspectives on the question of the moral or personal nature of a corporate entity. If you're interested in my previous musings, look here, here, and here. Most scholars of corporations describe them as nothing more than a confluence of contracts (among shareholders, between shareholders and directors, and between the corporate entity and its contract counterparties). Building on the insights of Nicholas Wolterstorff, I concluded that corporations were slightly more than derivative of their human creators; sufficient, as it turns out, to ground moral (and not merely legal) obligations (see here). In short, corporations were sufficiently "persons," to acquire moral rights (and moral duties).

But Charles Reid has a very interesting--if somewhat oblique--insight into corporate "personality" in Tales Legal Fictions Tell (abstract here). Reid writes about the nearly forgotten notion of coverture, the English common law doctrine by which a husband and wife upon marriage became a single legal "personality." Coupled with a "plain meaning" reading of the New Testament, coverture entailed that a wife had virtually no legal rights and was disabled from owning property and entering into contracts. In brief, the legal fiction of coverture "held that a wife's legal personality merged with that of her husband's at the time of marriage and that thereafter the husband alone had the legal capacity to act in the name of the couple." 

As could be expected from his previous works, Reid deftly and extensively describes the history of legal fiction of coverture, how it was ameliorated by the English law of equity, how it was reified by Blackstone, how it took on an expanded life in antebellum America, and how the fiction eventually faded into desuetude or outright repeal in America over the course of the 19th century. But the fiction of husband-only legal personhood is not my immediate concern. I'm interested in Reid's extension of the sorts of arguments eventually deployed against the fiction of coverture to contemporary understandings of corporate personality.

Reid briefly traces the history of the corporation from the Middle Ages through the 19th century and summarizes the results as follows: "the corporate personality becomes the device by which political assemblies act in a binding fashion, obligating the citizenry to follow rules and ordinances they may not have personally assented to, and in fact may object to strenuously." Corporations are collective and real means of social control.

Today, of course, corporations have a rather different flavor. They exist in perpetuity, provide limited liability to their shareholders, and function to turn a profit. Reid quickly--too quickly in my view--examines the constitutional history of the corporation in America that began with recognition of sufficient corporate "personhood" to sue and has proceeded most recently to include the First Amendment right of political expression in Citizens United v. FCC.. The legal fiction of corporate personhood has triumphed over reality. A corporation may be deemed a "person" for some purposes without succumbing to the notion that it is a person for all purposes. As Reid writes, "It is possible to see Citizens United as a kind of Blackstonian moment -- that instant in time when the logic and imagery of the legal fiction becomes so seductive that it blinds jurists to all of the carefully-crafted exceptions and compromises that allowed the fiction to tolerably carry on its functions."

Reid's concluding comparison of coverture and corporations raises more questions than it answers. Nonetheless, I hope it leads others in the world of corporate law scholarship to look deeper than often is the case. The current shallows of corporate jurisprudence (not by the way, corporate theory, which is quite well-developed) can stand some improvement.

Benefit Corporations

The lawyer types out there who practice in the non-profit field or in corporate law generally should take a look here and here to get up-to-the-minute (or thereabouts) information on the newest entity phenomenon, the benefit corporation.

Props to colleague Haskell Murray for being, if not ahead of the curve, at least at its cusp.

Corporations (Again)

The Center for Public Justice recently posted a short piece here addressing morality and the corporate form of legal personhood. The CPJ blog notes that, at least formally, until the mid-nineteenth century corporations were specifically chartered by states to serve some aspect of the common good. The author, Jess Hale, fails to note that state legislators regularly acted out of self-serving motives when approving a particular corporation; the move toward general incorporation statutes were seen at least in part as a progressive, "good government" movement.

Hale also criticizes a view that champions the corporate form as "engines of monomaniacal wealth creation." Well, nothing should exist for such a stunted moral purpose (a point I obliquely addressed here), and many corporations exist for many other purposes. As I argued here, if corporations can assert a moral obligation to keep promises to them, then virtually all other aspects of morality must obtain with respect to the corporate entity as well. And just as we'd consider a person who sought only profit maximization to be less than human (see Jesus at Matthew 16:26), so to a corporation.

What does Hale suggest as a solution to the perceived failure of corporations to serve the common good? First, "if corporations do not serve the common good, perhaps we need to think again about conferring social benefits like limited liability and political participation on these limited forms of human association that society deems to be personal." Does Hale mean that the shareholders of all corporations should lose the benefit of limited liability? Or only those whose corporations fail to meet that standard? Given the contested nature of the common good, I assume he means the former. But what of individuals whose lives fail to serve the common good? Should they too lose social benefits like participation in the political process? It is the case that felons lose certain civil rights but that's only after conviction of a crime, not merely failure to promote the common good.

Second, Hale argues that "reining in shareholder supremacy—by reforming corporate governance in order to promote accountability to shareholders, workers and the public—needs to be deliberated." As my colleague Haskell Murray observes, corporate boards already have the power to promote interests of non-shareholder constituencies so I'm not confident of the practical results of what Hale suggests here other than additional sources of litigation.

Hale's insights are interesting but ultimately seem grounded in the exigencies of immediate circumstances. A more far-reaching examination of the corporate form is in order. We must have a deeper understanding of legal and civil personhood, especially as it pertains to artificial forms like the corporation, before attempting a scatter-shot reform of general purpose corporations.