A corporation is legally a person, able to exercise many (though not all) of the legal rights of a natural person. Corporations can sue and be sued, can own property and enter into contracts, and can even be charged with criminal offenses, although for obvious reasons they cannot actually be imprisoned, even when they are found guilty.
This is the basis of a common criticism of corporations and corporate law. Despite the legal fiction that corporations are persons, they lack the frailties of natural persons which help to inform our morality. Imprisonment may be an effective deterrent (or at least a meaningful punishment) to a natural person (including the directors of a corporation), but has no meaning for the corporation itself. Corporations have no need for food, air, water or shelter, they cannot fall in love, have children, or stub their toes. They don’t age, and they don’t feel pain, fear or remorse. Given all this, it should come as no surprise that corporations sometimes (often) act as soulless monsters without any regard for the interests of others beyond the minimum duty of care imposed by law. So, it is sometimes argued that corporations should not be treated at law as persons.
I am sympathetic to the concern motivating this argument, but something about it remains unsatisfying. Legal rights are not contingent on the specific frailties of mortal human beings. Suppose a person were to reveal, for example, that she was in fact 3,000 years old, and just happened to have a rare mutation that exempted her from the normal process of aging. Would we say that such a person should forfeit any of her legal rights on that basis? Well, we might want to modify the Copyright Act, since a term of life + 50 years is a bit extreme when the author is effectively immortal, but apart from that sort of thing I expect most of us would agree that the basic rights associated with personhood should remain intact.
But it occurs to me that the problem with corporations is not that we treat them too much like persons, but not enough. That is, there is one critical respect in which a corporation is treated in a fundamentally different manner from natural persons, at least since the abolition of chattel slavery: corporations are owned.
Now, before I continue, let me first emphasize that I am not calling for the emancipation of the corporation. Far from it. They already enjoy more than enough power and practical freedom. What I want to do, rather, is point out how this simple fact, that corporate “persons” are also at law someone else’s property, makes it almost inevitable that corporations (publicly held ones, at least) will tend to exercise their legal personhood as soulless monsters.
First, we must note that as an artificial person, a corporation itself has no mind, and can only act through agents. Thus a corporation must have directors to make decisions on its behalf. The corporation is utterly at the mercy of these directors, who are necessarily empowered to affect its interests by entering it into binding agreements, spending its money and so forth. Whenever someone is empowered over a person in this way, the law imposes a strict duty on the empowered one, called a fiduciary duty, to exercise those powers faithfully in the best interests of the other (who is called the beneficiary). Parents owe a fiduciary duty to their children, physicians owe a fiduciary duty to their patients, attorneys owe a fiduciary duty to their clients, and so forth.
But what does it mean to act in someone’s best interests? That usually depends on context and who that someone is, but will almost always include some reference to the question: “What would the beneficiary choose for himself, if only he were competent to act on his own behalf?”
That question has no meaning for a corporation, however. Remember that a corporation is property; it belongs to someone. That means that its best interest are not understood in terms of what it would want for itself, but in terms of its own value as an asset. So a corporation’s directors are thus under a fiduciary duty to maximize the corporation’s bottom line, to increase its market value. However valuable things like clean air, job security and peace and happiness might be to natural persons (including those natural persons who happen to be corporate directors), they are not a part of the best interests of a corporation, and for a director to pursue such goals on behalf of a corporation at the expense of share price is actually unlawful, a breach of fiduciary duty to the poor helpless corporation at their mercy. Essentially, then, the directors of corporations are legally obliged to make their corporations act as soulless monsters.
I am not sure what to suggest as a remedy. Perhaps we need to rethink the whole notion of equity in corporations, and redefine it more as a kind of debt. Or perhaps we can, by statute, add factors that directors must consider as being in the “best interests” of the corporations they control. (To some extent, that is possible already by way of a Unanimous Shareholders Agreement, but the default position for a corporation is to care only about its bottom line.) That may seem an artificial and forced solution, but on the other hand, corporations are themselves an artificial concept.
I dunno. Maybe I’m hoping for some good ideas to show up in the comments thread...