What Rights and Responsibilities Should Corporations have as Legal "Persons"

Great Debates
1

Continuing the discussion from Hawaii Seeks to Overturn Citizens United:

I’ve spun this topic off (per my own moderation!) to allow for a greater discussion of the general rights of corporations in the USA, and of course, the rest of the world. I particularly wanted to examine @RitterSport’s response:

Because the legislation establishing corporate “Persons” seems increasingly long in “rights” and very good at avoiding “responsibilities”. Something you all know is often a hobbyhorse for me. I had read an online article a while back related to this:

Though that involves a much wider discussion of the fraught issues with declaring personhood given America’s historical treatment of women, enslaved peoples, and so forth. Still, and pointing to the above, corporations have grown vastly in size, diversity, and self governance, and been long abused to avoid responsibility for their own actions.

So, if the challenge to Citizen’s United (in the parent thread), or a general reduction in corporate personhood per @RitterSport were to be enacted, what ideally narrow sets of rights and broad responsibilities be considered ideal?

Note this is a Great Debates structure, not a Politics & Elections - I understand and acknowledge that any practical, immediate change would be disastrous politically and economically. But given the advantages and abuses corporate status has allowed, especially in the years since Citizen’s United, what should we work towards as an ideal going forward?

And lest we forget our roots:

So I won’t be accused of not representing my opinion in my own thread, I think that the biggest issue is right there in my title (hobbyhorse warning!): Responsibilities. By the name alone, LLC’s and corporations in general enjoy the rights of personhood, but dodge almost all the responsibilities. They may face fines for illegal or unethical actions taken (though often far less than the profits they make by such actions!), but it’s extremely rare that the corporation itself or those directing it have lasting punishments or consequences. Especially when it comes to spinning off liabilities as their own “independent” company to take the fall (and fail to pay) while the parent company is absolved of the risks and damages.

This would be the first few points I would want to see new legislation aim toward as we work towards a better ideal. Your preferences may vary!

Hawaii Seeks to Overturn Citizens United
2

We could have a system where corporations are required to serve some public good in order to exist. And in fact, most corporations do, and still make money in the process. A company that sells a useful product or service to customers is doing good by virtue of providing that product or service. Mostly, I’m looking to cut off the argument of “It’s OK for corporations to be amoral bastards that screw over their customers, because we have no choice; we have to be evil in order to meet our fiduciary duty”.

3

Commercial speech is already regulated differently from private speech, so even if money is speech, there’s no reason that commercial ventures couldn’t have different rules than private citizens (maybe that belongs in the other thread).

Other ways that corporations are treated differently:

  • Companies can commit felonies and have to pay fines. These fines may be large or small relative to the company’s earnings. When people commit felonies, they tend to go to jail and are not able to work productively at all. A company could be treated the same way – commit a felony and then for the next X years, you cannot operate in any of its markets. If it spends its time doing charitable work, maybe it will get time off for good behavior
  • Companies can’t vote and have no right to bear arms
  • Companies have a totally different tax code
  • Companies can be found liable for lying to its customers in a way that I can’t be for lying to my friends (again, commercial speech is different)

They were created in order to protect investors and make it worth investing by limiting liability by owners and investors. It’s a separate legal entity, and can separately enter into agreements, be found guilty of crimes, get sued, all in ways that can protect the owners and investors. Corporate personhood is a good thing for that, or else it would be much riskier to start a new venture – if you put money into a company, you don’t want to be sued for everything you have, just for what you put into the company.

But, that doesn’t mean it’s the same as natural personhood.

4

I think the misconception is that most of the laws are written in such a way that the concept of “legal entity” and “person” are pretty much the same. You have to be one in order to actually have standing, etc… in the legal system. Which isn’t a bad thing for companies of any size; like @RitterSport points out, they’re a way of structuring a company such that a person’s only liable for what they’ve invested in it, not for the whole enchilada. Meaning that if the company racks up massive debts, and you only own 1% of it, your personal fortune is not on the hook to pay those debts; only that 1% ownership stake is.

Where it gets weird is in stuff like companies getting to act as if they’re people in other ways like campaign donations. They already can’t do stuff like bear arms- in the context of this, I’d think that would mean armed corporate forces. Nor can they vote. And they likely shouldn’t be allowed to make political contributions either, but the legal system hasn’t caught up to that yet.

And that’s the catch; the way our system works is that basically unless there is legislation to the contrary, there has to be a court decision making something illegal. And there’s no legislation or court decision yet.

5

I think we need to reject the idea that corporations exist only for the purpose of making money and that they should do whatever is necessary to maximize profits. The profit motive needs to be balanced against the impact to their employees, to the communities in which they operate and the country and world as a whole.

6

It’s more of a question of the company-as-an-institution’s duty. Of course there are multiple obligations, but the primary one, and the one that for-profit companies are founded to accomplish, is to make money (profit). People own shares with the expectation that as owners of a successful company, they’ll share in the success (i.e. profit) proportionately to their ownership stake (at least in the classic ownership model). That doesn’t let them off the hook for their other obligations, but it’s their primary and overriding one.

Otherwise, you’d found something else- non-profit or not-for-profit organizations are the most classic examples.

The answer to making sure companies don’t abrogate their other obligations to their workers, their communities, the environment, etc… is government oversight and regulation. Environmental laws, labor laws, etc… are all exactly that.

In my opinion, there needs to be executive compensation reform. If executive compensation was required by law to consider multiple objectives, not just profitability, you’d see changes in a relatively quick fashion. But as long as we tie the c-suite’s compensation to profitability, you’ll see those people making every effort to maximize profits through fair and foul means, because it directly affects their own income/wealth.

7

That’s the way it is right now, but it doesn’t have to be that way. We as a society could make other decisions.

So far as I can tell, executive compensation isn’t really based on anything, beyond maybe how good you are at schmoozing with the board members (most of whom are themselves executives of other companies that you’re on the board of). How many times have we seen an executive utterly destroy a company, only to get rewarded with a golden parachute?