Are Corporations People?
Recently Mitt Romney put his foot in his mouth when trying to deal with a heckler in Iowa. He said, “Corporations are people, my friend.” He’s gotten plenty of backlash since then, even though he attempted a softer follow-up with, “Everything corporations earn ultimately goes to people. Where do you think it goes?”
It makes me wonder two things. First, why is it viscerally repulsive (to me) that he should say that, and second, beyond the gut reaction, to what extent does this statement make sense?
The New York Times summed up the feeling pretty well with the statement, “…he seemed to reinforce another image of himself: as an out-of-touch businessman who sees the world from the executive suite.” Another way to say this is that the remark exposed a world view that I don’t share, and which goes back to this post containing the following:
Conservatives, for example, see business as primarily a source of social and economic good, achieved by the market mechanism of seeking to maximize profit. They therefore think government’s primary duty regarding businesses is to see that they are free to pursue their goal of maximizing profit. Liberals, on the other hand, think that the effort to maximize profit threatens at least as much as it contributes to our societies’ well-being. They therefore think that government’s primary duty regarding businesses is to protect citizens against business malpractice.
Fair enough- Mitt Romney doesn’t claim to be a liberal, after all. He was really doing us a favor by admitting how he sees things; heck, I wish all politicians would be susceptible to heckling and would go off-script and say what they actually mean every now and then.
In this way I can come to terms with the fact that Romney is essentially protective of corporations and their “human rights,” at least as an emotional response (like when discussing tax increases). But is he factually right? Are corporations equivalent to people in a legal or ethical way?
I’m no lawyer but it seems that, in certain ways, corporations are legally treated as persons, and that this has been an ongoing legal question for 200 years. In terms of political contributions, which is somehow easier to understand but maybe less systemically important, they are certainly treated like persons, in that there is no limit to the amount of money they can contribute politically (although this issue has gone back and forth historically).
Ethically, however, there seems to me to be a huge obstacle in considering corporations equivalent to people. Namely, it seems to be much easier to ascribe the rights of people to corporations than to ascribe the responsibilities of people to corporations. In particular, what if corporations behave badly and need to be punished? How do we follow through with that in a way that makes sense? Is there a death penalty for corporations? (This question originally came to me by way of Josh Nichols-Barrer, by the way)
The most obvious direct punishment we have for corporations is fines for accounting fraud or whatever, and the most obvious indirect punishment is market capitalization loss, i.e. the stock price goes down, if it’s a publicly traded company, or if not, reputation loss, which is vague indeed. However, in those cases it’s mostly the shareholders that suffer- the corporation itself, and its management, typically lives on.
Rarely, there is direct legal action against a decision maker at the company, but that certainly can’t count as a death penalty for the corporation itself, since the toxic culture which gave rise to those decisions is left intact. Even if we got serious and closed down a company, it’s not clear what effect that would have since a new legal entity could be re-formed with similar ideals and people (although the nuisance of doing this would be pretty substantial depending on the industry). But maybe that’s the best we can do: “moral bankruptcy” proceedings. Another problem with that idea is that many of the people who were in charge of the bad decisions would be the first to jump ship and go to other corporations to try again with more stealth; that’s certainly what I’ve seen happen in finance.
From my perspective, none of the punishments described above actually deter bad behavior in a meaningful way. If we treat corporations as people, then they would be people with a permanent diplomatic immunity; this doesn’t sit well with my sense of fairness or my sense of how people respond to incentives.