Chapter 3 - Should Corporations Have Rights?

One of the conclusions of the previous chapter was that if corporations are to bear autonomy rights on their own behalf, this can only be on account of their characterisation as social entities. This is because the fact that corporations are social entities imbues them with the human character necessary to prevent the grant of corporate rights from being a morally irrelevant exercise.

But before it is possible to conclude that corporations should in fact have rights, two further conclusions are necessary. The first is that corporations have a claim to autonomy of comparable weight to that of individual human beings, such that it requires protection by rights. The second is that this claim is not reducible to the sum of the claims of its members to the corporation's autonomy, in which case the right would be merely derivative. These propositions are propounded in the first two sections of this chapter.

1. Corporate Autonomy

Just as individuals exercise individual autonomy, corporations exercise corporate autonomy. It is this fact that has enabled humanity to reach the moon, to distribute Coca-Cola and to construct nuclear weapons. However unlike individual autonomy, corporate autonomy can claim no direct protection under a Kantian system of autonomy rights. In my submission this is a deficiency of liberal rights theory. A complete theory of rights should recognise the value of corporate autonomy and protect it through corporate rights, for at least two reasons.

First, corporate autonomy is no less a form of human autonomy than individual autonomy, except that it is enjoyed collectively. Just as "'the individual' is partly constituted by the community [and] is not a fully formed person prior to participating in social life,"1 so individual autonomy is incomplete before it is exercised in concert with others to a shared end. Second, corporate autonomy is not properly characterised as a capacity which humans enjoy in addition to their individual autonomy. To a large extent corporate autonomy derogates from and replaces the individual autonomy of the corporation's members.

I turn to the first of these reasons in more detail. Although corporations can pursue and achieve ends which lie beyond the capabilities of any individual human being, the fact that they are social entities means that their autonomy cannot be divorced from the humanity of their members. It is the members of a corporation who constitute its autonomy by acting out organisational roles, and who are thereby empowered to share in the realisation of collective goals which would otherwise lie beyond their grasp.

When a corporation is dissolved, regulated or injured by the actions of a third party, the corporate autonomy shared by its members may thereby be restricted or denied. However unless this denial of corporate autonomy also involves the infringement of any individual's autonomy rights - which it need not2 - the denial is likely to be irremediable. Apparently then, to the extent that our legal system only recognises the rights of individuals, it is assumed that corporate autonomy does not warrant protection.

This position is not inevitable, however. As explained in chapter 2, the conceptual basis of rights is very simply that a moral intuition exists to support them. In my submission, the rights of corporations can derive support from such an intuition. This intuition is the same as that which supports the right to individual autonomy: namely, that human autonomy is a fundamental value that ought to be protected. Once it is recognised that corporate autonomy is simply a different species of human autonomy it becomes clear that

analysing modern organisational rights claims from the standpoint of individuals in some pre-corporate state of autonomy is off-kilter because the corporate factor in promoting human well-being is not included in the foundational rights-according intuition.3

To correct this imbalance requires that we recognise corporations' autonomy rights.

The second reason why corporate autonomy should be protected by rights is that individuals who exercise corporate autonomy by acting as a corporation forfeit some of their own autonomy in doing so. For instance, shareholders give up the right to control their own property, and employees their own labour. On a deeper, psychological level, members of a corporation are forced to accept organisational roles and objectives that may conflict with their authentic selves,4 and must adopt role distance to shield their personal integrity.5

The fact that corporate power compromises individual autonomy has long been recognised, and has been received with varying degrees of pessimism.6 My own view is more positive. Members of a corporation who forego their individual autonomy in order to join it do so because they with to become part of a larger autonomous entity. In a sense, members of a corporation voluntarily "transfer" a portion of their own autonomy to the corporation in order that they may share in its autonomy instead. Looked at in this way, to refuse to protect the autonomy of a corporation would be to depreciate the value of the autonomy given up by its members.

This argument for corporate autonomy rights supports the first by suggesting that individuals are willing to weigh individual and corporate autonomy in the same scales, and to forego the former in exchange for the latter when this furthers their individual ends. Recognising rights to corporate autonomy therefore accords with the importance which members of corporations attach to it.7

2. Rights to Corporate Autonomy

2.1. Are Corporate Rights Derivative?

Even if, as I have argued, corporate autonomy is a value worthy of protection by rights, it does not follow that these rights must be held by the corporation, or that such rights if granted would be more than merely derivative. Hartney has argued that rights to the autonomy of a collectivity are properly viewed as belonging to the individual members of the collectivity.8 He draws the analogy of a pet owner's right to the continued existence of a dog.9 Although it is the autonomy of the dog that is at stake, the right belongs not to the dog, but to its owner. The essence of Hartney's argument is that even if rights to the autonomy of a collectivity are conveniently collected in the collectivity itself, they are nevertheless derived from the individual interests of its members.10

This proposition has been disputed by Réaume on the ground that the autonomy of a collectivity is a "participatory good".11 A participatory good "involves an activity which, at least in part, requires a group both for its provision and for its enjoyment."12 An individual right to a participatory good is not tenable, according to Réaume, because an individual cannot enjoy it except through the participation of others.13 Since the good can only exist where there is a group to provide and enjoy it, only the group can assert a right to that good.

This is not to say that the members of a corporation have no individual interests in its autonomy; clearly they do. But the corporation's own interest in its autonomy cannot be derived from these individual interests, as the two sets of interests are incommensurable. I have argued that the corporation's interest in its autonomy is of sufficient importance to require the protection of autonomy rights. In contrast, an individual member of the corporation could only be granted a utility right to its autonomy, at most.14 Since the autonomy of the corporation can only be exercised and enjoyed by its members as a collectivity, only the collectivity can claim an interest in that autonomy, or a fortiori, a right to it. In other words, "[t]he liberty for which protection is claimed cannot be divided into discrete, independent parcels owned by individuals; its essential character is solidarity."15 Thus a corporation's autonomy rights are not derivative, but original.

2.2. Who Should Claim Corporate Rights?

It is a trite observation that a corporation can only act through its agents. This raises the question, who should be responsible for asserting a corporation's rights? Its directors are the obvious choice. Directors have a fiduciary duty to act in good faith for the benefit of the company as a whole.16 Although attempts have been made to rationalise this duty as being owed to the "hypothetical individual shareholder",17 it is now clear that this characterisation is deficient.18 In light of the analysis developed in this paper, the directors' duty to the company as a whole can be viewed as exactly that - a duty to the social entity that comprises the corporation.19 The judicious assertion or waiver of the corporation's rights is a responsibility that calls for the imposition of just such a duty.20

3. Three Objections

3.1. Isn't it Simplistic to Attribute a Single Interest to a Corporation?

A corporation may be composed of many thousands of members. Although it can be presumed that they will all have individual interests in the corporation's autonomy (so long as membership is voluntary), the content of these interests will depend on the particular goals and conceptions of the good of the individuals in question. It might therefore be seen as implausible that the corporation could possess a single set of corporate autonomy rights where the interests of its members in its autonomy are so heterogenous. Surely it is more realistic to recognise that

the ascription or denial of these rights to corporate parties represents instead a legal ordering of the rights of those persons whose interaction through agents constitutes the corporate whole.21

This complaint misunderstands the nature of the interest which corporate autonomy rights are designed to protect. Certainly, the members of a corporation have heterogenous interests, but they cannot all fully satisfy these interests within a single corporation. Instead, they delegate power to a management coalition to further a unified interest that represents a compromise between the various interests of members. It is this process of collective decision making and compromise which corporate autonomy rights are required to protect, and this is a good in which all members of the corporation share.

3.2. Ascribing Rights to Corporations Leads to Absurd Results

Another objection is that ascribing rights to corporations could lead to absurdity. For instance, if a corporation's autonomy rights are truly independent and not merely derived from its members' rights, it should be able to claim these rights even where its doing so is contrary to most, or even to all of its members' interests.22 Similarly, if a member of the corporation wished to leave it, and this would threaten the corporation's autonomy (perhaps because it would take the corporation below a certain critical mass of members), it could theoretically have a right to prevent that member from leaving.23

The first of these examples is unrealistic. Since a corporation is constituted by its members, they are unlikely to assert a right on behalf of the collectivity which is contrary to their individual interests.24 The second example may be disposed of on the additional ground that any right the corporation might assert to prevent a member from leaving would have to be weighed against the member's opposing individual right to freedom of dissociation.

3.3. Do Corporations Deserve a Right to Make Profit?

Even if it is accepted that corporate autonomy is important and that it cannot be protected by a system of individual rights, it might still be objected that corporations do not "deserve" rights of their own, because their autonomy is put towards such base purposes. In criticising the extension of free speech rights to corporations in America, one author has argued, "The bare fact that a corporation has but one goal - turning a profit - distinguishes it utterly from human beings."25

This reflects an outmoded conception of corporate governance. In reality, corporations have various goals,26 including non-financial goals such as maintaining a high level of service or product quality, building a good reputation with customers and fostering technical innovation. Many corporations also set goals wholly unrelated to their shareholders' interests, in order to fulfil their perceived social responsibility. Some explicitly elevate these above their financial goals; for instance, Johnson & Johnson's credo is that "customers come first, employees second, the community third, and shareholders fourth and last."27 The legitimacy of such corporate benevolence, once questioned by the law,28 is increasingly recognised as appropriate for entities whose actions affect so many external interest groups.29

Certainly, many and possibly most corporations set profit maximisation as their primary goal. But so too do many humans. If rights are to be denied to corporations because of their uncharitable objects, there is no obvious reason why they should not be denied to humans for the same reason. I believe that a corporation's goals should be as irrelevant to its rights as are a human being's conceptions of the good. Just as a hospital may be the corporate equivalent of Mother Theresa, and a church the equivalent of Martin Luther, a profit maximising corporation may be the equivalent of Gordon Gekko. All three should share equal rights to autonomy.

4. What Rights Should Corporations Have?

In chapter 2 I adopted the Universal Declaration of Human Rights as a plausible list of individual autonomy rights. I now return to this document in considering what kind of autonomy rights corporations should have. For this purpose it is useful to divide the rights of the Universal Declaration into four categories. First are those which may be applied just as effectively to corporations as individuals, and may be presumed to serve similar purposes in furthering the autonomy of both classes of person. Second are rights which can have no application to corporations at all. A third set of rights are inapplicable to corporations on a literal reading, but can be extended by analogy to protect corporate autonomy. The fourth category contains rights which are not actually found in the Universal Declaration at all; those rights which are required to protect corporate autonomy but which are inapplicable to individuals.

The first category mentioned above includes the right to a fair and public hearing (article 10) and to the other protections of the criminal law such as the presumption of innocence (article 11). Although the fact that corporations cannot be imprisoned may weaken their claim to these rights to some extent, the sanctions to which they are subject are nevertheless capable of compromising their autonomy. In addition to such "negative" rights, corporations should be able to claim positive rights to autonomy under this category, including private property rights (article 17) and freedom of opinion and expression (article 19).

The second category, rights which are inapplicable to corporations, includes rights which depend on human beings' corporeal form, such as freedom from torture (article 5) and freedom of movement (article 13), as well as rights to autonomy in emotional and spiritual matters which lie beyond corporate minds, such as the right to marry (article 16) and freedom of religion (article 18). Most of the economic, social and cultural rights of the Universal Declaration fall into this category for one or other of these reasons; thus, corporations do not require rest or leisure (article 24) and cannot appreciate culture or the arts (article 27).

The third category, rights which apply with modification to corporations, most obviously includes the right to life (article 3). Although corporations are not alive, they do possess an autonomous existence, and can meaningfully claim a right not to have this existence annulled. Such a right exists in America, where it is unconstitutional for the state to revoke a corporation's charter.30 Other rights in this category include freedom from slavery (article 4), which, for a corporation, may involve freedom from external control of the board of directors; and the right to peaceful assembly and association (article 20), which would involve the right to form corporate groups.

The fourth category of rights are those which flow from the unique characteristics of corporate persons, and hence do not appear in the Universal Declaration, which is concerned with the rights of individuals. Of the various characteristics of corporations discussed in chapter 1, one stands out as being both prerequisite to corporate autonomy, unshared by human beings, and capable of being denied or restricted by third persons. This is the collective nature of corporate governance and decision making, whereby the goals and preferences of members of the corporation are unified by management towards a common purpose. Unjustified impedence of this process (for instance, through the overzealous legislative extension of directors' duties to external interest groups) could compromise corporate autonomy just as surely as could the denial of the corporation's right to a fair trial or to hold property. To protect corporate autonomy against attack on this front it is necessary to recognise corporations' right "to protection of the integrity and autonomy of their deliberative and decisional processes."31

5. What Weight Should Corporate Rights Have?

Should corporate rights be of equal, greater or lesser weight than individual human rights? This question is important because of the inevitability that corporate and individual rights will at times conflict. However it seems that it is a question that may be impossible to resolve without a more developed conception of the good than that implicit in the norm of autonomy from which those rights are derived.32 Utilitarianism may suffice for this purpose, but since utilitarian arguments for corporate rights lie beyond the scope of this paper, I do not attempt to engage the question here.

One question which can be resolved is whether the number of members of a corporation should affect the weight of its rights. Since corporate rights are not derivative, there is no necessary reason why it should.33 If anything, the weight of corporate rights should depend on "how important the continued existence of the group is to its members."34 This is no more susceptible to measurement than is the importance of autonomy to a given individual; certainly, it cannot be assumed that it will vary in proportion to the corporation's number of members. On the other hand, the number of members of a corporation is not entirely irrelevant to its rights. If the number falls too low, the corporation may fall outside the definition of an organisation, and thus lose its moral claim to rights altogether.35

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