Reconsidering the Rights and Responsibilities of the Corporate Person
Editors’ note: This post is part of a joint symposium between the IACL-AIDC Blog and African Law Matters, featuring posts on the theme ‘Constitutional Transformations’ from participants at the World Congress of Constitutional Law in Johannesburg, South Africa 5-9 December 2022. Erika George will speak at the Plenary on ‘Constitutionalism in the Era of Private Power and the Fourth Industrial Revolution’.
Corporations increasingly enjoy more rights but face fewer consequences for abusing rights.
Recent rulings by the Supreme Court of the United States have provided greater rights protections to private corporate actors while placing significant restraints on access to remedy for alleged victims of human rights violations involving corporations. Judicial interpretations concerning what a corporation is have empowered businesses to exercise rights to expression and association; while judicial interpretations concerning where a corporation operates have enabled business enterprises to avoid legal liability.
Despite a growing consensus for a more robust understanding of corporate purpose and efforts to advance a stakeholder form of capitalism which would take account of the impact businesses have on society for good or ill, the court’s tendency to favor business litigants remains problematic especially when corporate profit motives may be at variance with the public good. Constitutional courts are making decisions in the context of a globalized economy characterized by different types of business enterprises with operations and relations across nations. This further complicates analysis.
In Nestle USA, Inc. v. Doe, the US Supreme Court rejected a suit against large manufacturers, purchasers, processors, and retailers of coca beans filed by kidnapped African children enslaved and forced to work on cocoa plantations in the Ivory Coast, holding that the children failed to demonstrate that the relevant corporate conduct connected to the abuses occurred in the US, even though the corporations named in the suit were based in the US.
The children alleged that the companies involved made “major operational decisions in the US” to purchase from and provide financial and technical support to farmers that used forced child labor, despite being aware of slave labor problems in the Ivory Coast. Nestle went so far as to seek categorial immunity from liability by virtue of being a corporate person, arguing that international law does not recognize a universal norm of corporate liability: “[C]rimes against international law are committed by men, not by abstract entities, and only by punishing individuals who commit such crimes can the provisions of international law be enforced.”
The court rejected claims that the companies were liable under the Alien Tort Statute (ATS) for aiding and abetting slavery because reaching abuses outside of US borders would be an impermissible “extraterritorial application” of the law. Central to the court’s reasoning was an understanding of where the corporation’s conduct occurred. General corporate activity including decision making in a domestic context is not enough to connect a cause of action to the impact of a corporation’s impacts abroad.
In Citizens United v. Federal Election Commission, the court provided corporations with a First Amendment right to make independent contributions to political candidates overruling Austin v. Michigan Chamber of Commerce, an earlier precedent that relied on an anti-distortion rationale to regulate corporate influence in political speech. The Austin Court understood that “the unique legal and economic characteristics of corporations necessitate some regulation of their political expenditures to avoid corruption or the appearance of corruption” and allowed the imposition of speech restrictions. Finding Austin’s anti-distortion rationale “an aberration,” the court concluded that a speaker’s corporate identity was not sufficient reason to limit political speech.
Political speech does not lose protection simply because its source is a corporation. Central to the court’s reasoning was an understanding of the corporate identity as an “associations of citizens.” In Americans for Prosperity Foundation v. Bonita, the court reaffirmed its commitment to a freedom of association approach to the corporate identity. The court held a state statute requiring organizations to disclose donor information for potential fraud investigations was an unconstitutional violation of association rights and subjected the statute to the strictest scrutiny.
In Burwell v. Hobby Lobby, the court again protected First Amendment rights for corporations when it held that the Religious Freedom Restoration Act (RFRA) allowed business enterprises to claim religious exemptions. The company successfully asserted a religious freedom right to not provide contraception coverage to its employees relying on the court’s rationale that when rights, whether constitutional or statutory, are extended to corporations the purpose is to protect the rights of the people associated with the corporation. The court ruled corporations to be “persons” protected under RFRA and reasoned that protecting the religious freedom rights of corporations protects the religious liberty of the people who own and control companies.
The court did not appear to give consideration to the rights of people employed by the company or the possibility that people of different faiths could be owners with differing ideas about how and when to exercise articles of faith. The court again sided with corporate employers when in Cedar Point Nursery v. Hassid, it struck down a state regulation that would have provided labor union organizers periodic access to farm property.
“If anything, the scale and scope of private commercial power globally lends credence to earlier concerns about the distorting and out-sized influence of business on democratic processes as well-founded worries.”
Empirical legal research conducted by Lee Epstein, William Landes, and Richard Posner has established that corporations often prevailed in litigation before US courts and in shaping the direction of the law. Corporate legal scholar Elizabeth Pollman has pointed out the court’s pro-business bias as based in an approach that fails to capture the reality of modern business. Professor Carliss Chatman has called for a statutory scheme of corporate law that would recognize the reality that companies exist in a web of affiliated entities with different identities that can be exploited.
If anything, the scale and scope of private commercial power globally lends credence to earlier concerns about the distorting and out-sized influence of business on democratic processes as well-founded worries. Dissenting from the decision in Citizen’s United, Justice Stephens captures the concern as follows: “the distinction between corporate and human speakers is significant. Although they make enormous contributions to our society, corporations are not actually members of it…The financial resources, legal structure, and instrumental orientation of corporations raise legitimate concerns…”
Constitutional courts should be more concerned with the concentrated power of the private sector and protecting the public space for effective policy making and adjudication. Courts could consider applying a less stringent standard of review for regulations in the public interest that are tailored to the type of entities and issues involved. A new approach is urgently needed.
