Law and Legal Theory in the History of Corporate Responsibility: Corporate Personhood

JurisdictionUnited States,Federal
CitationVol. 35 No. 04
Publication year2012


Law and Legal Theory in the History of Corporate Responsibility: Corporate Personhood

Lyman Johnson(fn*)

I. Introduction

This Article, the first of a multipart project, addresses the nature of corporate personhood, one area where law has played a central role in the history of corporate responsibility in the United States.(fn1) The treatment will be illustrative, not exhaustive. Consistent with the theme of the larger project, the Article serves to make the simple but important point that a full historical understanding of corporate responsibility requires an appreciation of the law's significant, if ultimately limited, contribution to the longstanding American quest for more responsible corporate conduct. On one hand, the spheres of law and corporate responsibility, although clearly complementary, might be seen as distinct, in both theory and practice. Law, after all, mandates-with the state's full sanctioning power behind it-compliance with specified standards of behavior. Apart from a decision to comply or disobey, there is no real exercise of discretion in choosing to abide by the law. "Responsible" conduct, on the other hand, presupposes the freedom to engage in or refrain from certain conduct. Viewed this way, corporate responsibility concerns can be seen as picking up precisely where legal strictures leave off. Consequently, a history of corporate responsibility could be written while being largely unmindful of law and legal theory.

Scholarly discourse itself suggests a certain academic "siloing" of law and non-law treatments of corporate responsibility and its history. Both legal and other scholars have written quite extensively on corporate responsibility.(fn2) But despite the literatures occasionally overlapping, in recent years the academic discourses seem to be carried out more in parallel than continually and fruitfully interwoven. On the non-law side, this may stem from scholars failing to fully appreciate law's formative role in corporate responsibility. On the law side, it may result from modern corporate law's disavowal of a full engagement with corporate responsibility, as elaborated in this Article.

The history of corporate responsibility in the United States itself, however, reveals no such neat cabining. The legal vein runs conspicuously throughout historical concerns about corporate behavior, especially as the twentieth and twenty-first centuries witnessed the full emergence of the large, multifunctional, and now global, public corporation.(fn3) The legal thread, moreover, has two strands. First, there is that aspect seen in developments in positive law, whether legislative or judge-made, as more and more of American social life-including the corporate institution- has been subjected to regulation. Second, there is that aspect reflected in the larger legal culture of theoretical and normative discourse about corporate power and appropriate mechanisms for social control of that power and those who wield it.(fn4)

In addition to taking account of both facets of this legal history for a full telling of the corporate responsibility story, it is important to see that the two strands are not distinct, but intertwined. Changes in positive law mandating (or prohibiting) certain corporate conduct reflect a broader public consensus, a consensus in turn influenced by theories of corporateness and by evolving social beliefs about what comprises "responsible" corporate conduct under constantly changing conditions. Corporations-long deeply embedded in U.S. culture-pervasively affect consumers, employees, investors, creditors, media, philanthropy, scientific research, the environment, communities, and public policy. Thus, corporations powerfully influence the overall quality of life and create societal expectations of appropriate corporate conduct.(fn5) Many such expectations become encoded into law and, at the same time, are accounted for (or explained away) in various ways-and to greater or lesser degrees-in theoretical understandings of the firm.(fn6) Conversely, by establishing new regulatory standards, positive legal change periodically ratchets up the level from which ensuing prescriptive discussions about yet additional responsible behavior will begin. In short, law and legal theory not only dynamically reflect but also shape the larger social and ethical terrain in which corporations function and in which discussions about "responsible" corporate conduct take place.

This Article discusses one of the four areas where law historically has both influenced and mirrored cultural expectations concerning corporate responsibility-the emergence of and struggle to come to grips with corporate personhood. The other three areas, to be treated in later articles, are corporate purpose, corporate regulation, and corporate governance. In addressing each of these spheres, the project's overall aim is to highlight certain key developments in positive law, as well as critical issues in the larger theoretical and normative grappling with the phenomena of corporate power and corporate control in a democratic society characterized by both a strong private business sector heritage and an abiding expectation of responsible behavior. Any apparent legal or social accord on these core debates has always been, historically speaking, inconclusive and maddeningly provisional. History readily reveals, therefore, law's recurrent role in coproducing, but never finishing, the story of corporate responsibility in a dynamic society.

The subject of corporate personhood is a longstanding and recurring topic that continues to vex and excite, as seen in the U.S. Supreme Court's 1886 decision confidently asserting that corporations are legal persons for purposes of the Fourteenth Amendment(fn7) and in its more splintered 5-4 decision granting corporations First Amendment free speech rights in 2010.(fn8) Moreover, in the nineteenth century as the corporate institution grew dramatically in significance as a source of private gain, it appeared to lose its original, explicit public-serving aspect.(fn9) Although seemingly a setback for proponents of socially responsible corporate conduct, state governments never wholly relinquished lawmaking control over the make-up of corporate personhood. This confounding factor has continued to haunt full-fledged "private" accounts of firm theory.(fn10) At the theory level, the nature of the corporation was hotly contested and has remained so, notwithstanding undoubted corporate per-sonhood.(fn11) Even as the full contours of corporate personhood were being fleshed out in law and theory, the quest for corporate responsibility drew on and significantly benefited from the emergence of a distinctive corporate person that, as a meaningful social-legal actor in its own right, was distinguishable from its various formative constituencies. Distinctive personhood thus permitted the majority in Citizens United to accord corporations their own First Amendment political speech rights.(fn12) Concern about the adverse political and social ramifications of such corporate speech rights, however, was central to the dissent in that case.(fn13)

Historically then, corporate personhood has both necessitated and bolstered discussions about corporate responsibility, and served to fuel important twentieth-century debates about corporate purpose and corporate regulation.(fn14) Citizens United is just one especially visible example of how legal acceptance of corporate personhood invites continuing debate about corporate responsibility. Recently, however, the predominant legal theory of the firm, i.e., the upgraded 1980s revival of a nexus-of-contracts theory, although not denying corporate personhood (even as it immediately disaggregates it), has served to deflect concerns over corporate responsibility away from the ambit of corporate law and into other venues.(fn15) Thus, theoretical orthodoxy in modern legal discourse accepts corporate personhood. But by sharply separating the treatment of internal corporate governance relationships from that of a larger institutional responsibility, modern orthodoxy seeks to sidestep full engagement with the ongoing cultural quest for enhanced corporate responsibility. The result is that corporate law today has little to say about a subject of great societal significance corporate responsibility.

This Article proceeds in five parts. Part II provides a historical backdrop and describes the relationship between corporate personhood and corporate responsibility in U.S. corporations. Part III explains the historical societal concerns about corporate activity and who should address those concerns. Legal personhood for the corporation has not dampened those concerns; it has heightened them. Part IV discusses corporate personhood in the context of corporate theory and analyzes two theoretical approaches to corporate personhood-entity theory and the nexus-of-contracts theory-and discusses the consequences of the re-emergence of the nexus of contracts theory for corporate responsibility. Finally, Part V concludes that, ironically, modern legal theory trivializes the corporate institution and deflects the enduringly important topic of corporate responsibility away from corporate law and into other venues.

II. The Relationship Between Corporate Personhood and Corporate Responsibility

In 1886, the United States Supreme...

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