On a couple of occasions (here and here) I considered
whether we could use Aristotle’s four-fold notion of causation (material,
efficient, formal, and final) to justify legal recognition of the corporate
entity and to consider whether interactions with such entities generated moral
obligations. And here I noted Charles Reid’s brief foray into corporate
personhood in connection with coverture and Citizens
United.
Brian M. McCall has recently posted a lengthy article titled
“The Corporation as Imperfect Society” (abstract here). McCall uses Aristotle’s
political philosophy to examine whether and how a corporation fits into the
larger picture of the polis or
society. From this point of view corporations are not, as the mainstream of
neo-classical economists assert, a “nexus of contracts” but “imperfect
communities which are one of several constituent parts of a perfect community,
the civil polity.” One need not stay on the Aristotelian train as far as to
characterize the civil polity as the perfect community (one “which aims at a
complete good and thus incorporates the goods of all lesser communities”) to
agree that something created by the state is not merely a private association.
If it were only that, shareholders could contract around state law location of
corporate governance in the board of directors, and the claims of persons who
were not parties to the corporate “contract” or who had not contracted with the
corporation (e.g., tort claimants) would not be limited to corporate assets.
(For some of my thoughts on the place of involuntary and semi-voluntary
creditors in bankruptcy see The Missing Piece of the Puzzle: Perspectives on the Wage Priority in Bankruptcy (abstract here).)
McCall locates in the crucial but legally fictional identity
of the corporation as a “person” the nature of the corporate entity as an
imperfect society. The corporation is more than an association because it
transcends the identity, lives, and
interests of its individual shareholders. It is like the state in that its
governing authorities can “legislate” for its shareholder members. The
corporation is less than the state, the Aristotelian “perfect” society, however,
because the state creates it; it is artificial (an artifice, something created
to produce something else). But, according to the same Aristotelian tradition,
like any other society, the end or purpose of the corporation must be ordered
to the common good of the larger whole. Profit-making is certainly a legitimate
purpose for a corporation but profit understood as shareholder wealth
maximization standing alone is insufficient to achieve the end of the common
good.
The common good is, as McCall acknowledges, a contested
notion. I suspect some (many?) (most?) corporate law scholars would deny its
existence; for them there is no “common” good but only an aggregation of
individual goods. McCall’s response to this problem is to canvass the views of
Catholic moral philosophers and canonists. A bit tedious, IMHO. But then to the
meat of his contention: “Shareholder wealth maximization is clearly inadequate
to capture the overall end of a particular corporation.” Wealth maximization is
a private good for shareholders,
which is indeed a legitimate good. But it is not sufficient as a common good for the political community
of which the corporation is a constituent part. While “earning a living” is a
private good for me, it is not the
end or good of my work as a law professor. My end is legitimate only if what I
do—teach commercial law—contributes to the common good of my commonwealth and
nation.
What is McCall’s end for the business corporation? “Efficiently
producing economically useful products [or services].” In other words, the
customer and not the shareholder is the end of the corporate enterprise. But what limit does this place on the
enterprise? Is a business corporation equally contributing to the common good
by satisfying its customers by streaming internet porn as providing them with
nutritious food? Although his negative examples are economic rather than
social, I suspect McCall would say no:
In reconciling the particular good of the corporation to the
common good of the nation, the national authorities need to allow for the
pursuit of the corporation's end-its products-but can restrain its activity
only to the extent necessary to harmonize with the common good. Since a
corporation is created to pursue its own particular end, profitably producing
goods and services, it will produce externalities affecting the common good of
the larger political community.
The sorts of “externalities affecting the common good” are,
in my opinion, equally with corporate ends what make a corporation good. Or
not. State limitations on corporate ends and externalities will be minimal in a
polity committed to maximal self-expression but nonetheless must be accounted
for in any calculus of the common good. Indeed, given the artificial and
post-political nature of the corporate entity, one can imagine a polity that places
greater limits on corporate ends than those of its natural and pre-political
citizens.
What of the corporation’s directors? McCall argues that they
legitimately may (indeed should) take the common good as well as shareholder
wealth into account when making business decisions. Given the breadth of the
business judgment rule, he is no doubt correct as a matter of law.
McCall does a fine job of finding a place for the
corporation in Aristotelian (and thus Catholic) political and moral philosophy.
Yet those not inclined toward the virtues of teleology in politics or even
ethics should appreciate the metaphysical foundation that McCall provides for
the corporation. Those who as a matter of faith reject the possibility of
metaphysical realism may not be able to fathom McCall’s concerns but those of
us who are ethical realists should find him helpful.
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