The Business Ethics Blog

I’ve long held that you can’t understand much about business ethics if you don’t understand a bit about markets (their role and limits), corporations (their nature and purpose), and managers (their role and the limits on it). Of those three, it is perhaps the corporation that raises the most controversy, although the other two certainly generate their share.

A corporation is, very roughly, an entity recognized by the law and that exists independently of the people who form it. The general term “corporation” includes business corporations (Walmart, Amazon, etc.), as well as cooperatives (such as ACE Hardware and Dairy Farmers of America) and nonprofit corporations (including charities, universities, hospitals, etc.). Some churches are corporations too.

Corporations are treated as persons under the law just about everywhere. The notion has raised controversy in the US, especially in the wake of the 2010 Citizens United* decision of the US Supreme Court. But that controversy sometimes leads people to miss the fact that corporate personhood isn’t some idiosyncratic American thing. Corporations are treated as persons pretty much everywhere. (If you know an exception, let me know in the Comments section below). Take Canada’s criminal code, for example. The Criminal Code is full of sentences that say “every one who” or “every person who” does such-and-such is guilty of a crime. In the Definitions section of the Code, it clarifies that those terms (“every one” and “person”) are to be read as including organizations, and that “organization” means “a public body, body corporate, society, company, firm, partnership, trade union or municipality” (and certain kinds of associations).

What does this mean in practice? Well, first, it means that corporations can be charged with crimes under the Criminal Code. But corporate personhood under the law also means that corporations can do things like own property, make contracts, borrow money, and own other corporations. It also means that they have certain rights, like the right against unreasonable search and seizure.

The fact corporations are persons under the law — persons, not people by the way — is sometimes described as a “legal fiction.” A legal fiction is a kind of expedient that courts engage in on a practical basis. A good example is the “doctrine of survival”. That doctrine says that when two people die for example in the same car crash, and when it is not known who died first, the older person is taken to have died first, even in the absence of any evidence to that effect. (The order in which people have died is sometimes important, as when they are named as beneficiaries in each other’s wills.) This stipulation that the older person died first is a “legal fiction.” No one believes (or needs to believe) that it is true that the older person actually died first in a particular case. The court just needs a way to move forward, and having a standard assumption is better than, say, flipping a coin.

So, many have regarded corporate personhood as a legal fiction of that sort. We don’t need to hold, in other words, that corporations really have the properties that human persons have (rationality, or intentionality, or a soul, or whatever) in order to justify treating them as persons on public policy grounds. After all, it would be incredibly dangerous to the public good for courts not to include corporations as persons under the law, since that would mean that corporations couldn’t be sued for the harm they sometimes do, they couldn’t be forced to honour warranties, and the money you invest in them wouldn’t be safe from arbitrary seizure by the government. But still, the question lingers: is corporate personhood merely a legal fiction, or does regarding them as persons make good, literal, sense?

One mistake that it is important to avoid is this: some people argue that corporations just can’t be persons, because doing so would have morally intolerable consequences. If we let corporations be persons, this argument goes, then they get all the rights ‘real’ people have. And that’s intolerable. We can’t, for example, reasonably contemplate a world in which corporations — like human persons — have the right to adopt children. But it just doesn’t follow from according corporations personhood that they must have exactly the same rights as human persons. After all, personhood already comes in many varieties, with varying clusters of rights. Adult persons, for instance, have rights that child persons do not. And tourists generally have a different set of rights than citizens have. Personhood isn’t one thing, but many.

A person, at heart, is just a kind of agent — an entity capable of taking action and intentionally shaping the world. Since they area capable of intentionally shaping the world, they are also subject to being held responsible fo the choices they make in doing so.

So, are corporations persons, in that sense?

One option is of course skepticism. Skeptics argue that corporations can’t be persons, because they don’t have minds. Since they don’t have minds, they’re not capable of intending anything. And if they can’t intend, they can’t be persons. Versions of this view are popular among people of widely divergent political stripes. One prominent person who famously held a version of this view was the Nobel-prizewinning economist, Milton Friedman. Friedman made his view of personhood clear in his argument against Corporate Social Responsibility (CSR). He argued that corporations can’t have responsibilities, because they aren’t capable of taking action. A corporation’s managers take action, and so they can have responsibilities. But to Friedman, all this stuff about CSR was just silliness.

At another corner of the political landscape are folks who share Friedman’s skepticism, but for different reasons. A range of critics of corporate behaviour worry that if we attribute personhood to corporations, we’ll be so busy holding the corporations themselves responsible for wrongdoing that we’ll neglect to hold the flesh-and-blood humans within the corporations — the ones who actually ‘pulled the trigger,’ so to speak — responsible. But of course, that outcome isn’t necessary, though it’s surely plausible in particular cases. The fact is that the law generally makes it possible both to prosecute the corporation itself and to prosecute the relevant executives for their role in corporate wrongdoing. And besides, this practical worry doesn’t exactly settle the metaphysical question.

There have been various attempts, though, by philosophers to argue that literal corporate personhood is indeed possible. Peter French, for example, argued forty years ago that corporations are indeed capable of intentionality. French argued that if you want to locate corporate intentions, you just need to look to what he called the corporation’s “Internal Decision Structure.” That is, look to the corporation’s rules about things like whose signature is required to authorize what decisions, and look as well to the corporation’s stated objectives. A decision that is in line with corporate objectives and that is made through the proper administrative processes is, in every relevant sense, made in line with corporate intentions.

Other attempts have been made to outline ways in which we can justifiably understand corporations as persons, including for example Denis Arnold‘s attempt to formulate a theory of corporate personhood based on the capacity for planning — a capacity that corporations generally do have, above and beyond the planning capacity of any individual employed by the corporation.

But the issue is, shall we say, far from settled.

My own view is that much of the hubbub about corporate personhood results from a wrongheaded kind of essentialism — a search for the true essence of the corporation, for the truth about what a corporation really, really is, at heart. Is the corporation essentially (and not just incidentally or for convenience) a person? A group of persons? A nexus of contracts? An engine of wealth creation? A mechanism for rapacious aggregation of wealth?

I think such essentialism is a mistake. The corporation — indeed, any particular corporation — is many things to many people. And there are many lenses through which we can view the corporation, lenses that make more or less sense depending on the topic at hand.

I argued above that for a range of mundane purposes, thinking of the corporation as a person (an entity capable of having rights and duties) is essential. For corporations not to have at least some rights and responsibilities would be disastrous, both in human and in economic terms.

But for other topics, it may be that thinking in terms of personhood obscures more than it illuminates.

Take, for example, the question of corporate political activity. Should corporations be allowed to use their power to lobby government? Should corporate spending on political communications be regarded as protected ‘free speech’ (and hence virtually unlimited)? The latter question was dealt with in the Citizens United case, and many people take that case to have hinged on the question of personhood. That is, they take the court’s decision as having expanded the political rights that corporate persons have.

Independent of that court decision (which as a matter of fact barely mentioned corporate personhood), I think it’s basically unhelpful to think of corporate political action in terms of personhood. In the political realm, personhood is a fraught concept, and one that has historically been the subject of important battles. It was only in 1928, for example, that the Supreme Court of Canada ruled that women were indeed persons under the law (and hence eligible to be appointed to the Senate). Discussion of corporate personhood, in this context, inevitably leads to awkward and contentious comparisons with such hard-won legal changes.

I think that a good argument can be made that politics is fundamentally about relations between citizens (and between citizens and their government). And it’s unhelpful to think of corporations as a “new” kind of persons inhabiting this domain, and to try to figure out what political rights these new, artificial beings “really” (essentially) have.

What I recommend instead, for discussion of ethics in corporate political activity, is to view corporations as a particular kind of instrument. So rather that asking whether corporations may legitimately lobby government, I suggest asking whether it is legitimate for citizens to use corporations as a mechanism for lobbying government (given that lobbying government is undeniably a right every citizen has), and to ask what the proper limits are on citizens’ use of that mechanism. And given that citizens have a right to free speech with regards to politics, what limits (if any) are there on the use of the corporation as a tool for conveying (and amplifying) their views? Compare: the right to free speech doesn’t permit you to use a bullhorn to express your views six inches from your neighbour’s ears. There are limits on the technology you may use to express your views.

Thinking of the corporation as a technology means asking an entirely different set of questions than thinking in terms of personhood.

When thinking about the ethics of corporate political action, thinking in terms of personhood is a red herring. We don’t need to ask whether the corporation is a person in order to talk about corporate free speech, any more than we need to think about my house as a person in order to ask whether my house should be free from arbitrary search by police. Both the corporation and the house serve human ends, and it is in those terms that we ought to be thinking.

Corporations must be treated as corporations, for many purposes, in order to preserve the rights and protect the interests of the persons involved with them. Owners, customers, employees, and creditors would all be worse off if corporations were not treated by courts as persons. But personhood is best thought of as a lens — useful for some purposes — rather than as a deep truth about the nature of corporations.

That is why it is essential to treat corporations as persons, except when it’s not.

*Citizens United v. Federal Election Commission, 558 U.S. 310 (2010)

(This is based in part on a presentation I gave on November 22, 2019, in the Business Ethics Speakers Series, and a paper I published in the Georgetown Journal of Law & Public Policy, called “The Right to Bear Corporations”).