In his recent book, Business Persons, a Legal Theory of the Firm, Wharton professor of ethics and legal studies Eric W. Orts answers the question: Are corporations “people?” The question is particularly germane today given the case involving arts and crafts retailer Hobby Lobby that the U.S. Supreme Court has agreed to decide. At issue is whether for-profit companies can refuse to include contraception coverage now mandated by the Affordable Care Act in basic health plans. Hobby Lobby and another chain, Conestoga Wood Specialties, object to providing such coverage on religious ground and are seeking to be exempted under the Religious Freedom Restoration Act.
Orts calls the case “as important as Citizens United,” a 2010 Supreme Court decision that allowed for unlimited, anonymous corporate donations to political campaigns, raising concerns about undue political influence and outright bribery. In this Knowledge at Wharton video interview, Orts explains why corporations should be treated as “persons” in some — but not all — instances.
An edited transcript of the conversation appears below.
Knowledge at Wharton: We’re speaking today with Eric Orts, a professor of legal studies and business ethics at Wharton, about his new book, Business Persons, a Legal Theory of the Firm. Thanks for joining us today, Eric.
Eric W. Orts: You’re welcome. I’m happy to be here.
Knowledge at Wharton: The book covers a lot of ground. But let’s focus on a couple of specific ideas that were very interesting. One has to do with … the Citizens United Supreme Court case, which gave corporations the right to spend unlimited amounts on political groups, campaigns and candidates. So, based on Citizens United, corporations are people too, right? Or are they?
Orts: Well, that’s one of the main questions that I try to answer in the book or at least elucidate. The title of the book includes the phrase “business persons.” What I mainly argue … is that corporations are persons, but that doesn’t mean that they are people. Therefore, as the majority of the Supreme Court said, they have all of the rights, apparently, that people do.
“It might make sense to give corporations rights for political speech in some contexts, but on the other hand it might not.”
Knowledge at Wharton: Persons not people — interesting distinction.
Orts: It’s interesting because actually people are persons in legal terms as well. And we don’t treat all people equally either. Infants are treated differently than adults. Aliens are treated differently than citizens. Slavery was a big issue for many years until rights were accorded to every person without any discrimination. So, the idea of legal persons is quite a deep and difficult idea in the law in general. And what I try to talk about is how businesses are persons, and it wouldn’t make any sense to think of them not as persons or it would cause a radical revolution in how we act every day.
Businesses own property and they have rights to protect that property. Businesses are constructed and have legal rights to protect those who are working in the business. So, in that sense, businesses can be said to represent people and people represent businesses.
Knowledge at Wharton: But there are some things businesses can’t do, right? They can’t vote. They can’t go to jail.
Orts: There are some rights that clearly corporations do not have. It’s not possible to put a business in jail, although it’s possible to put people who are acting on behalf of businesses in jail, and there’s a debate in the law about whether companies and other businesses should be criminally culpable. Some countries say it doesn’t make any sense to say a company could be committing a crime. In the United States it’s different and we currently have the SAC Capital case … where that issue is being raised.
So, there are many different kinds of questions. With respect to the Citizens United case, what I argue is that both sides of the Supreme Court decision … do not go deeply enough into the question of what it means to say that corporations are persons? Once you start thinking about that, you might come to a better answer than either, “Yes, they do have all these rights” or “No, they don’t have any rights.”
Knowledge at Wharton: So, you disagree with the Supreme Court’s decision?
“This issue is not going disappear after Citizens United. You’re going to continue to have this kind of question raised.”
Orts: Actually I disagree with both the majority decision and the minority decision. So I’m sure it would be a popular argument that I’m making.
Knowledge at Wharton: Let’s start with the majority decision. You think they went too far? They gave too many rights to companies?
Orts: The majority decision basically doesn’t go into the question very carefully by saying, “Well, look, here are all these cases in which we have found corporations to have rights as persons. Therefore, they have rights for political speech.” It might make sense to give corporations rights for political speech in some contexts, but on the other hand it might not. And so, there are questions that are raised in the dissent. For example, for many years there had been a question — if companies get too involved in politics, isn’t there going to be a corruption problem where companies are only going to be supporting issues and candidates that are going to benefit them? Is the public interest really going to result in the best laws that way? I’m sure there would be some constrictions.
Knowledge at Wharton: Is that because they would have an out-sized amount of money to push those issues?
Orts: Another argument — and Justice Stevens in dissent raises this as well — is that there will be too much influence if you allow companies into politics. The other argument is a corruption argument. And it’s clear there are some limitations — so, almost everyone agrees that bribery should not be allowed. You shouldn’t be allowed to go to Congress and say, “Hey, I’ll give you this much money if you vote in this way.” That’s clearly illegal.
But what about these grayer areas, where you have campaign financing and campaigns in general, where you have various organizations active in trying to inform public opinion? And what is the legitimate role of business in that process? My feeling is that there’s probably a gray area where sometimes you want to have the public informed about issues that business is going to be closest at knowing about and they should have a right to be talking about those issues. On the other hand, when it’s sliding over into a question of potential corruption or potential distortion of the process, then I think Justice Stevens has a good argument.
I also think the dissent goes too far by saying, “Corporations are not people, therefore they’re not persons, therefore we can do any kind of regulation whatsoever.” If we follow that argument to its logical extreme, we’d have a lot of problems also. For example, can a company protect its own property? A lot of property in the United States and the Western world in general is technically and legally owned by those corporations. To say that they would have no Constitutional right of property or to protect their property would seem to override all the individual people’s interest in that property and a firm’s.
“At the end of the day, most political scientists or others who look at what democracy is about would say that mainly it is voters who should decide. And that means individual human beings.”
Knowledge at Wharton: Do you think that’s what the dissent was suggesting? Or are you simply saying that’s the logical conclusion?
Orts: The dissent doesn’t really parse where you’re going to draw a line and that was a weakness. This issue is not going disappear after Citizens United. You’re going to continue to have this kind of question raised.
Knowledge at Wharton: Requiring companies to disclose how much they’re giving and who they’re giving it to seems like a reasonable thing. But that’s actually not required under the current law. What are the arguments against that?
Orts: Well, I think someone who takes a very strong view that corporations have political rights and they’re the same as any individual adult might say, “Well, individual adults don’t have to disclose this sort of thing. So, you can vote and it’s secret for example.” But I think that the reasons that we allow that sort of non-disclosure — for example, secret balloting — don’t apply when you are talking about problems of potential corruption or distortion of the political process. I think at the end of the day, most political scientists or others who look at what democracy is about would say that mainly it is voters who should decide. And that means individual human beings.
No one is arguing that corporations have a right to vote, for example. Stevens makes a lot of that in his dissent. So, clearly, some kinds of restrictions are obviously appropriate and this seems to me to be one that might start to put some balance into the system.