What Rights Should Corporations Have?

What rights should corporations have? Extreme answers one way or the other are immediately implausible. If corporations are to serve any useful purpose, they (and hence their owners) need to have some basic legal protections. But corporations neither need, nor deserve, every right that human persons enjoy. Somewhere in between lies the truth.

For a primer (and opinion) on the matter, check out this editorial, from the New York Times: The Rights of Corporations

The question at the heart of one of the biggest Supreme Court cases this year is simple: What constitutional rights should corporations have? To us, as well as many legal scholars, former justices and, indeed, drafters of the Constitution, the answer is that their rights should be quite limited — far less than those of people.

This Supreme Court, the John Roberts court, seems to be having trouble with that. It has been on a campaign to increase corporations’ legal rights — based on the conviction of some conservative justices that businesses are, at least legally, not much different than people….

OK, so let’s set aside American constitutional law, and think about the more general principles here. I’m far from an expert in this area, but it seems to me that there are 2 key questions to ask, in trying to come up with a general approach to this issue.

1) What social objectives are we trying to achieve by means of corporations? And what legal rights are, on balance, necessary to the achievement of those objectives? Example: the right to enter contracts is a fundamental requirement for the wealth-building function that corporations play in society.

2) What rights need to be attributed to corporations in order to protect the important interests of human persons (e.g., the human persons who work for corporations or own shares in them)? Basic property rights seem an obvious example: companies need a right against arbitrary seizure of property because, in the end, a corporation’s property belongs to people, namely the corporation’s shareholders and creditors.

All I’ll add to these preliminary comments is a suggested thought experiment.

Make yourself king or queen for a day. Imagine yourself setting up a society from scratch. Imagine that you want the people who live in your kingdom to have access to a wide range of complex goods and services, including some that are only feasibly provided through some form of large organization. Next, ask yourself this: which rights would you give to corporations, in the interests of your population? Of course, for you and me, it’s an idle (if instructive) fantasy. But for governments of developing nations, it’s a serious question; some of them really are starting from scratch, figuring out how best to structure the legal framework that underpins their economies. The film, The Corporation, gave the impression that the whole notion of rights for corporations is some sort of scam. But just try to imagine the consequences of not attributing any rights to corporations, and you’ll see that the question is not one of whether but which and how much.

(For further insight on this & related issues, see Wayne Norman & Pierre-Yve Neron’s Citizenship, Inc., Business Ethics Quarterly, Jan 2008, Vol. 18 Issue 1, p1-26.)

14 comments so far

  1. Fibocycle on

    I believe that the rights of corporations should be restricted to reflect the fact that corporations are in a position of advantage over natural persons since there are technically perpetual in longevity and that their motives and actions can become amoral since they do not embody the innate sense of conscience natural people possess.
    Their influence over government legislation and electoral processes should be, in all circumstances, subordinate to that of natural persons ie: electors of representatives in the democratic process.
    Rights to free speech should be interpreted as being the right to advertise, to seek justice through courts of law and to comment on the political process. This should not entail the ability to effect elections through the transfer of monies to political candidates. Their rights to free speech should also be restricted to political action committees that can be demonstrated to be for the direct benefit of natural persons and not for the promotion of the self interest of the corporation. Corporate rights should never be in direct competition with the rights of natural persons and the rights accorded to them should be directed to the tangible benefit of natural persons.

  2. Chris MacDonald on

    RD:

    Thanks for your comment.

    But note the problem with the requirement that a particular right be for the “direct benefit of natural persons and not for the promotion of the self interest of the corporation.”
    Can you give an example? Seems unlikely. Corporations produce benefits for stakeholders. So if a particular right promotes the interests of the corporation, it will consequently be promoting the interests of at least some people.

    Chris.

  3. Fibocycle on

    Perhaps the pharmaceutical lobby can be used as an example. Representative Bernie Sanders of the State of Vermont is on record stating: “Uniquely in the industrialized world, our government does not regulate the pharmaceutical industry—rather the pharmaceutical industry regulates the government, which is why Americans pay by far the highest prices in the world for medicines they need”
    The Medicare Prescription Drug Improvement and Modernization Act of 2003 is a case in point. One of the law’s controversial aspects is a provision that bars the federal government from negotiating price discounts with drug companies. An October 2003 study by two Boston University researchers found that 61 percent of Medicare money spent on prescription drugs becomes profit for pharmaceutical companies.
    Although a case can be made that this bill has benefited many Medicare recipients, it has been implemented in a fashion that has lead to higher costs, a major fault of the present health care paradigm. The implementation of the law that was essentially drafted by the phamaceutical industry has diminished competition resulting in a lower standard of service being provided to recipients at the expense of the taxpayer. In a recent clandestine deal that extends the trend, the Obama Whitehouse has promised Big Pharma that any healthcare legislation will bar the government from using its huge purchasing power to negotiate lower drug prices. In reference to the latest deal Robert Reich stated:
    “It’s bad enough when industry lobbyists extract concessions from members of Congress, which happens all the time. But when an industry gets secret concessions out of the White House in return for a promise to lend the industry’s support to a key piece of legislation, we’re in big trouble. That’s called extortion: An industry is using its capacity to threaten or prevent legislation as a means of altering that legislation for its own benefit. And it’s doing so at the highest reaches of our government, in the office of the President.”

    Many of the Pharma-lobbyist activiites do not adhere to any utilitarian notion of justice since they are rife with self-promotion and conflict of interest–serving a few very at the expense of many. The current health care debate has highlighted many examples where the insurers and pharmas lobby protect or promote their own self-interest at the expense of the well-being of the public–unless one feels that the status quo is an acceptable health care paradigm for a nation that boasts to be the wealthiest and most liberal in the world.

    It is deals like this that begin the slippery slope of back room dealing. It is not unresonable to think that secret deals like this have been made by Republican administrations with regard to big oil–defense contracts,and,perhaps the most blatant, the lobbyist pressures placed on congress to deregulate many sectors of the economy–including the financial sector. We are all well aware of the consequences of that misguided strategy!!!!!

    A study of the tactics of Jack Abramoff indicates the immoral consequences of many initiatives sponsered by lobbyists. Although many lobbyist backed initiatives can be claimed to benefit stakeholders, when the general population and the principles of democracy–for the people and by the people– are subordinate to the goals of corporate interests it is time to revisit the issue of corporation as a juristic person.

  4. Chris MacDonald on

    Not sure what you mean by “revisit.” Surely refinements make sense. But there’s no way on earth corporations can or should ever stop entirely being treated as juristic persons.

    For example: they have to have property rights, otherwise no one would ever invest in them. What, the police aren’t going to stop people from stealing corporate property?

    Notice also that, if they’re not juristic persons, they cannot be sued. That would leave victims of corporate wrongdoing in the lurch.

    Chris.

  5. dripab on

    Why are you pretending that “corporations having rights” is some sort of new, revolutionary idea? Corporations are legal persons, capable of having obligations and rights. They buy up resources of states, they employ people and tell them what to do, they conclude contracts more or less secretly with governments and parlamentarians for more or less cash, they spread propaganda in the media, they form conglomerates, etc. It’s every day practice. Where have you been the last hundreds of years?!

  6. crespin79 on

    While discussing the rights that corporations should have, one should note the responsibilities of corporations (and other business enterprises) to all stakeholders: customers, suppliers, management, owners, employees and the local community- those that are vital to the survival and success of the corporation. Corporations should be required to promote recycling of products and contribute to worthy causes on a regular and frequent basis rather than wait for a disaster to occur and then contribute, with a view to favorable publicity.

    Leaders should not expose stakeholders to known hazards.
    When faced with severe hardship, some companies lay off people, in line with the stockholder theory. Other companies try to reach some form of compromise and demonstrate their concern for the families of their employees. The result is usually favorable to both parties: the corporation and its employees.

    When Frederick Taylor’s views on scientific management were being put into practice by business organizations, owners were considered to be the only stakeholders, so to speak. Managers focused on profit- maximization and employees had to work hard for unsatisfactory wages. Environmental issues were hardly a concern and customers bought what was offered in the market. In today’s world, corporations have to deal with employee bargaining power, trade unions, customer bargaining power, supplier bargaining power, environmental concerns, government regulations, ethics and other factors.

    Unfortunately, many firms still focus (mainly) on profits and pay attention to stakeholder needs only when pressured to do so. They are advised to pay due heed to their responsibilities instead of merely focusing on their rights, otherwise they will suffer because of their selfishness and their short-sighted approach.

    Maxwell Pinto, Business Author
    http://www.strategicbookpublishing.com/Management-TidbitsForTheNewMillenium.html

  7. Chris MacDonald on

    dripab:

    Perhaps you could clarify who you’re addressing. I would have thought that, by default, you’re addressing me, but there’s nothing in what I wrote that remotely resembles the claim you seem to be attacking.

    Of course the idea of corporations having rights is not new. I never suggested otherwise.

    Regards,
    Chris.

  8. Chris MacDonald on

    Maxwell:

    Yes, sure. Corporations have responsibilities, just like natural persons do. But it’s not clear just how those responsibilities are interrelated with the rights that are the topic of this blog entry. I’m not suggesting that that I’m skeptical about the connection — just saying it’s not clear how your comments are connected. Why, for example, should corporations be forced to recycle, when natural persons like you and me are not? Does it follow from some difference in their rights?

    Chris.

  9. Fibocycle on

    I did not suggest that all rights should be taken away from corporations or that the concept of the juristic person should be terminated. It would be unreasonable to suggest such a radical change since the entire corporate capatalist paradigm would cease to function under an environment where rights were not accorded to individual shareholders acting in concert for the generation of wealth for the benefit os society. The problems with the status quo is that corporation’s ‘rights’ to participate in the democratic process largely through the utilization of money and other forms of persausion places the natural person at a distinct disadvantage when it comes to having their rights and expectations legislated by their elected politicians. Granted, corporations do not have the right to vote, but it seems quite apparent that the influence of lobby groups representing the objectives of their corporate clients place ‘voters’ in a position of subordination in the democratic process.
    Corporations have contributed greatly to the level of prosperity enjoyed by our society and there should not be any question that rights should be accorded them but when the liberty of natural persons is circumvented it is time to prioritize who the democratic process is primarily meant to serve. The ideology of the right has ironically acquiesced to corporate demands which ironically is oftern antithetical to the liberty of individuals.

  10. dripab on

    sorry for my previous comment sounding a bit aggressive. I am just baffled by the way you look at this issue. Corporations are already claiming pretty much every constitutional right there is, except those that – by nature – can only apply to humans, e.g. the right to life and healthcare. Intel has even gone so far recently as to claim before the European Commission that the commission is violating its “human right” (sic!) of legal protection. Seriously, they claimed the human right of legal protection under Art 6 of the ECHR.

    The question really should be where corporations’ rights END, i.e. what are their limitations? Do they have a right to engage economically where that activity destroys the environment or violates human rights? Do they have a right to free speech if that speech amounts to green- and whitewashing? Etc.

  11. Chris MacDonald on

    Dripab:

    I don’t have much of a substantive view, other than that corporations clearly ought to have some rights, but within limits. That’s what I said above.

    The only other thing in my blog entry is a thought experiment, suggesting people start from scratch & consider what list of rights corporations should have, and that necessarily means asking yourself where that list should end.

    Chris.

  12. Fibocycle on

    Here is a prime example of corporate interests trumping legislation which would be of benefit to all air breathing food eating propagating ‘citizens’. The only stakeholder that benefits from this is the shareholder–who in all likelihood was not consulted on the issue before corporate management wrote a juicy cheque to a lobbyist.
    http://tpmmuckraker.talkingpointsmemo.com/2009/09/vitter_wants_epa_to_delay_rules_on_pollutant_–_mi.php?ref=fpb

  13. crespin79 on

    Hi Chris,

    I believe that many leaders focus on their rights, but conveniently ignore their responsibilities e.g. to be fair in their dealings with others, including, but not limited to, women, other employees, customers,suppliers, the government, the community and undergraduates looking for summer jobs to gain working experience prior to graduation (in an attempt to increase their marketability upon graduation). There are some mighty organizations who are responsible (no pun intended) for manufacturing excellent products which result from the exploitation of women and children and there are some famous individuals who see nothing wrong with this approach or who consider it irrelevant to an endorsement of such products.
    Hence my feedback regarding responsibilities.

    As for recycling, failure to do so is punishable by a fine in some parts of North America and the rest of the world.

    Maxwell Pinto,
    Business Author
    http://www.strategicbookpublishing.com/Management-TidbitsForTheNewMillenium.html

  14. […] few days ago I asked what rights corporations should have. That posting generated some useful comments, but some of those comments, and other things […]


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