The Law Says Corporations are Persons, but Psychology Knows Better

Abstract

Psychologists interested in law and public policy have begun to examine the nature of corporations in American society and the serious consequences of corporate irresponsibility. The dominant trend identifies areas where corporate behavior falls short of ethical standards or leads to unacceptably risky decisions and suggests ways to reform corporations or the laws that regulate them. This well‐intentioned approach is consistent with psychology's liberal reformist tendency. Unfortunately, it neither challenges the flawed psychological underpinnings of the legal fiction that corporations are legal persons nor compensates sufficiently for the dynamics of individual behavior in corporate settings. Instead, psychologists should advocate fundamental restructuring of our corporate society.

Profit creation, intra and inter-generational equity: Need for new company law

“…The first line, situated in environmental science, argues that profits and sustainability are antithetical concepts, as the lure for profits drives the use of ecosystems services in an unsustainable manner, whereas there is compelling need for the current generation to moderate its impacts on the environment so as to remedy its overuse or to avoid exceeding the carrying capacity of the earth (Meadows, 1972;Hawken, 1993;Gore, 2011). The second line of theory suggests that when environmental costs are adequately factored into company balance sheets the notion of profit will disappear unless companies radically reengineer their processes, operating models and society the ideology of the market or political capitalism and its penchant for rewarding rent seeking activities that incentivise waste and unsustainable exploitation of earth resources (C.f., Fox, 1996). Contrarian theory argues that management of environmental and social issues leads to better and increased profits and that sustainability and profits can indeed beneficiate and conciliate one another to all round beneficial impacts on Environmental and Social Governance (ESG) goals (Elkington, 1994;Mitchell, 1995;Murphy, 2002;Porter, 2011).…”

“…On the other hand, the entity maximization theory (Keay, 2008) has also been suggested, whereby the aim of directors should be to ensure the overall long run wealth of the company (People's Department Stores v Wise) in the interest of all who invest in it as an objective. Accountants have one measure for profit and economists another measure, whilst some others want to do away with the whole idea of the trading company and profits entirely in order to achieve sustainability (Mitchell, 1995;Fox, 1996). The major controversy has been on what amounts to and how to assure financial sustainability, although iterations of company law appear to be more concerned with solvency and the protection of creditors (Chan et al, 2010).…”

Citizenship as a weapon

“…Corporations also have made considerable headway in attaining First Amendment freedom of speech protections. In fact, the law often treats corporations better than individuals by having more lenient penalties for corporate harms, which are comparable or worse than individual harms, and by treating corporate harms as noncriminal wrongs (Fox 1996). Most recently, the Supreme Court held that spending restrictions violate corporate rights to free speech under the First Amendment.…”

Conscious Purpose in 2010: Bateson's Prescient Warning

“…This is a favourite complaint of the Left in the United States usually accompanying a history of the Supreme Court's finding that corporations have the legal status of persons. Psychologist Dennis Fox, for example, notes (Fox, ) that the earliest attribution of legal personhood to a corporation was in 1819 in the Supreme Court's opinion in a case entitled Trustees of Dartmouth College v. Woodward . The more commonly cited Supreme Court ruling is that of 1886 in which the Supreme Court, in the case Santa Clara County v. Southern Pacific Railroad ruled that the Fourteenth Amendment, which was written originally to give rights to former slaves, also legally protected corporate ‘persons’ (Hartmann, ).…”