Comp. by: SatchitananthaSivam Stage : Proof ChapterID: 0002505110 Date:1/4/15 Time:21:43:22 Filepath://ppdys1122/BgPr/OUP_CAP/IN/Process/0002505110.3d Dictionary : OUP_UKdictionary 377 P A R T V ............................................................................................................. POWER AND TRUST ............................................................................................... OUP UNCORRECTED PROOF – FIRST PROOF, 1/4/2015, SPi Comp. by: SatchitananthaSivam Stage : Proof ChapterID: 0002505110 Date:1/4/15 Time:21:43:22 Filepath://ppdys1122/BgPr/OUP_CAP/IN/Process/0002505110.3d Dictionary : OUP_UKdictionary 378 OUP UNCORRECTED PROOF – FIRST PROOF, 1/4/2015, SPi Comp. by: SatchitananthaSivam Stage : Proof ChapterID: 0002505110 Date:1/4/15 Time:21:43:22 Filepath://ppdys1122/BgPr/OUP_CAP/IN/Process/0002505110.3d Dictionary : OUP_UKdictionary 379 CHAPTER    ...................................................................................................................... TWO FALLACI ES ABOUT CORPORAT I ONS ...................................................................................................................... PH I LI P PETTI T Abstract One of themost important challenges for political theory is to identify the extent to which corporationsshould befacilitated and restricted in law.Byway of background to that challenge, we need to develop a view about the nature and the potential of corporations and indeed of corporate bodies in general. This chapter discusses two fallaciesthat weshould avoid in thisexercise.One, aclaim popular amongeconomists, that corporatebodiesarenot really agentsat all. Theother, aclaim associated with US jurisprudence, that not only are they agents, they arepersonswhose rights call in the sameway as the rightsof individual persons for legal recognition and protection. I NTRODUCTION .................................................................................................................................. We aremoving towards a world in which more and more people live their working lives as the employees of corporations, and more and more corporations are part of largemultinational conglomerates. Thisdevelopment isprobably inevitable in aworld of global markets, whereeconomiesof scale, efficienciesof location, and theattractions of greater market control converge in support of ever more intense incorporation. There aremany challenges that we face in looking for ways in which to organize our liveson thisplanet over thecoming decadesand centuriesbut oneof themajor issues is: how arewe to copewith thisgrowing corporatization of our world? Corporatization is as likely to have economic advantages as it is to generate economicproblemsand I seethechallengethat it raisesasoneof amorepolitical kind. As thingsstand in most countries, corporationsarenot only economically well-resourced, they are also legally privileged, politically powerful, and democratically uncontrolled (Galanter     ). Such titansraiseachallengefor usasindividuals insofar aswecoexist OUP UNCORRECTED PROOF – FIRST PROOF, 1/4/2015, SPi Comp. by: SatchitananthaSivam Stage : Proof ChapterID: 0002505110 Date:1/4/15 Time:21:43:23 Filepath://ppdys1122/BgPr/OUP_CAP/IN/Process/0002505110.3d Dictionary : OUP_UKdictionary 380 with them in our neighborhoods, seek employment by them in their workplaces, purchase the goods and services they provide, compete with them in open markets, and deal with them asplaintiffsor defendants in thecourts. And they raiseachallenge for us as communities insofar as they often have a stranglehold over our politicians, whether by virtue of the permanent threat of moving elsewhere or by dint of the capacity to exerciseelectoral patronageand extract payback. Thepolitical challengeof corporations ishard to underestimate. In thecompetition for corporate advantage-say, themaximization of shareholder incomeand wealth- corporationsarebound to usetheir muscleto seek concessionsfrom governmentsthat arelikely tomakethelivesof ordinary peopleworseoff. They will seek to preserveand even enhance the existing infrastructure of their influence: their legal privilege, their political power, and the absence of democratic control over their operations. And putting that infrastructure to work, they will push for morebusiness-friendly arrangements: less unionization, fewer worker rights, weaker consumer organizations, looser environmental constraints, lighter regulatory controls, and, of course, a lower level of corporate taxation. Frommypoint of view, theprospect of that world isaspecter toshrink from.Consider the possible consequences under a worst-case scenario. In the absence of unions or workplace restrictions, wewould depend on thewhim of amanager for being kept in corporate employment. In the absence of consumer organizations, we would lose important checks on the quality of our food and other purchases. In the absence of environmental constraints, wewould be in danger of a seriousdecline in thequality of publichealth. In theabsenceof equality in legal power,wewould havelittleor nochance of using our day in court to call corporations to book. In the absence of independent regulations,wewould bein danger of corporaterisk-takingand another disaster likethe GFC.In theabsenceof control over corporateboardroomswewouldfind it hard toknow what was going on in the first place. And in the absence of political equality with corporations, we would have almost no hope of getting government to impose our shared, democratic will on larger corporate bodies. We would live in a condition of corporatedomination, not acondition of freedom and independence(Pettit     b). It may be said against the picture I have offered that in the past decade or so corporations have begun to shrink in size, choosing to outsource a large range of their activity, productiveand otherwise(Davis    ). But whilethisisavery interesting development, and needs to be carefully tracked, I do not see it as a source of consolation. As a corporation shrinks to a board and a management that operate in the interest of shareholders, outsourcing production, distribution, marketing, and other functions, that threatens to concentrate progressively the power of those at the top, making them less responsive to theever more replaceablebodiesof workers that they employ. There is littleor no possibility of unionsservingascountervailing forces, for example, if a corporation can switch theproduction of thegoods it sells from one body of workers to another. I may have painted an excessively lurid description of an excessively pessimistic vision. I put it on thetableto try tomuster agreement that whatever differencesdivide OUP UNCORRECTED PROOF – FIRST PROOF, 1/4/2015, SPi     PH I LI P PETTI T Comp. by: SatchitananthaSivam Stage : Proof ChapterID: 0002505110 Date:1/4/15 Time:21:43:23 Filepath://ppdys1122/BgPr/OUP_CAP/IN/Process/0002505110.3d Dictionary : OUP_UKdictionary 381 uson mattersof detail, wecan all agreethat this imageof a fully corporatized world- this imageof Earth Inc-is not attractive, and not even tolerable. And if weagree on that, then thequestionsweought to befacingbear on what our different governments ought to bedoing, individually and in collaboration, in order to guard against it. Unfortunately, I cannot begin to deal with thosequestionshere; limitationsof space and skill make it impossible. What I propose to do instead is to identify and criticize two fallaciesor mistakes that might dull our senseof dismay at thescenario of a fully corporatized world, weakening our commitment to guard against it. They would each would mislead us, although in different ways, about thepower of corporations. Thefirst fallacy is that corporations are dense sites of market-like activity and not entities of the kind that raise concerns of the type illustrated. They are networks of individual-to-individual, relatively enduring arrangements, so the idea goes, and they exist because of serving the contracting parties better than more regular, episodic contracts (Williamson     ). The mistake or fallacy here is the assumption, quite common in economics circles, that there is no literal sense in which corporations constituteagents likeyou and me. The second fallacy is common within legal rather than economic traditions of thought and involvesan error of exactly theopposite kind. It holds that corporations areindeed agentslikeyou andme,not just impersonal contractual arrangements.But it maintainsthat they arepersonal agentsand that they haveajust claim to therightsthat our constitutions give to natural persons like you and me. They may not have the capacity to exercise all the rights that we routinely enjoy but where they haveappropriateabilities, they should not bedenied thecorresponding rights.1 Thetwo fallaciesI describearenot just misleading in relation to commercial bodies. They mislead uswith any familiar sort of corporatebody, whether that beavoluntary association, apolitical party, an ecclesiastical organization, or even asocial movement. In the discussion that follows, therefore, I shall often speak of corporate bodies in general, focusing only as appropriate on corporations in particular. I do not suggest that all corporate bodies should be granted the same rights, only that the fallacies I consider aremisleading in relation to all. AGAI NST THE CLAIM THAT CORPORATE BODI ES ARE NOT REAL AGENTS .................................................................................................................................. CorporateBodies areRepresentable asAgents When people incorporate for any purpose or purposes they form a body that acts through its members as if it were an individual agent (List and Pettit     ). They 1 My argument on both fronts isheavily indebted to joint work with Christian List (    ). OUP UNCORRECTED PROOF – FIRST PROOF, 1/4/2015, SPi TWO FALLACIES ABOUT CORPORATIONS     Comp. by: SatchitananthaSivam Stage : Proof ChapterID: 0002505110 Date:1/4/15 Time:21:43:23 Filepath://ppdys1122/BgPr/OUP_CAP/IN/Process/0002505110.3d Dictionary : OUP_UKdictionary 382 embraceor at least acquiescein relevant purposes, and perhapsin amodeof revisingor extending thosepurposes. They endorseamethod of formingcommon judgmentsthat can direct them in the pursuit of those ends; these judgments will identify the opportunities for advancing the ends, the relative costs and benefits of different options, the best overall means for realizing their ends, and so on. And they act as their purposes require, according to their judgments; they may act asawhole in some casesbut in most theywill authorizeoneor another member or subgroup toact in their name. In order to beeffective in themanner of an individual agent, such an incorporated group hasto organizeitself so asto bemoreor lessreliableon two fronts. First, it must be evidentially reliable in the judgments that it forms. That is, it must follow some procedure for generating representations of opportunities, costs, benefits, and means that are supported by theevidenceavailable via itsmembers to thegroup asawhole. And second, it must beexecutively reliable in theactions it sponsors. That is, it must generally adopt those actions or initiatives that promise to advance its purposes according to its judgments; it must not stall in its decisions, dither about what to do, or misidentify the right path. Like individuals, corporate bodies may often fall away from these evidential and executive standards but they cannot fall too far or too frequently without losing any claim to mimic individuals. There are many corporate bodies in this sense: organizations of individuals that operate as evidentially and executively reliable centers of decision and action. Any voluntary association that recruits its members effectively in furthering some cause countsasacorporateagent of that kind.So toodoesany political party that getsbehind a set of policies or individuals and organizes itself for the purposes of achieving democratic power. So does the church that mobilizes its members in confessional unity and recruits them to act in support of ecclesiastical community, evangelization, and social or political action. And so of course does the corporation or business that marshalsitsmanagement andworkforcein pursuit of themeanslaid down by itsboard for maximizing theprofitsaccruing to its shareholders. These corporate bodies all function under the laws of the state or states in whose territoriesthey operate. And each stateof that kind isitself acorporatebody, albeit one that imposes itself coercively within its territory. It operates or claims to operate on behalf of its membership or citizenry, however they are defined. It is organized via subgroups of elected or unelected officials, legislative, administrative, and judicial, whose activities are coordinated under a written or unwritten constitution. And while its judgments over means and other matters may shift with electoral or other changes in thebody of governing officials, it actsor claims to act for thebenefit of its members, both in domestic and international contexts. The striking thing about corporate bodies, as theseexamples illustrate, is that they come in many different sizesand, more important, assumemany different styles. The small-scale voluntary association-say, the small association you and some friends form for thepursuit of environmental goals-may operate in awholly egalitarian way, with every member exercising avote in determination of overall general purposesand OUP UNCORRECTED PROOF – FIRST PROOF, 1/4/2015, SPi     PH I LI P PETTI T Comp. by: SatchitananthaSivam Stage : Proof ChapterID: 0002505110 Date:1/4/15 Time:21:43:23 Filepath://ppdys1122/BgPr/OUP_CAP/IN/Process/0002505110.3d Dictionary : OUP_UKdictionary 383 judgments and with different members rotating in the exercise of special offices. But most parties and churches and corporations and states are very different from this. They are much larger in scale, they operate under hierarchical rules, and they often distributepurpose-shaping and judgment-making functionsacrossdifferent, coordinated sub-bodies(Hess    ). All corporatebodieshavetoestablish acorporateinternal decision-making structure-a CID, as Peter French (    ) calls it-but those structuresmay vary enormously acrossdifferent organizations. To theextent that corporatebodiespursuecertain purposesin an executively reliable way according to evidentially reliable judgments, they are representableasagents in a straightforward manner. Their behavior allowsus to identify independently plausible purposes and judgments such that in general it can be seen as oriented toward the promotion of thosepurposesunder theguidanceof those judgments. Wecan sensibly adopt the intentional stance, asDaniel Dennett (    ) has long called it, in seeking to make sense of the steps a corporate body takes in the actual situation and to predict what it is likely to do under different scenarios (Tollefsen     ). Wecan treat it aswe treat other animals, or at least other moreor less complex animals, when we look on them ascentersof purpose, judgment, and agency. CorporateBodiesRepresent themselvesasAgents But in oneimportant respect corporatebodiesaredifferent from animalsliketheseand more akin to human agents. Not only are they representable as acting reliably, in accordance with more or less reliable judgments, for the promotion of certain purposes. They actively represent themselves in that light too. They speak for themselves, whether through an authorized spokesperson or, more typically, a coordinated network of authorized spokespersons, each operating in a different domain. Those spokespersons announce the purposes adopted by the corporate body and the judgments it makes about relevant opportunities, means, and the like, inviting their own members, other individuals, and indeed other bodiesto judgethem for how far they act for those purposes, in fidelity to those judgments: inviting them, in effect, to take an intentional stanceand view them from that perspective. In representing themselves in this way, corporate bodies operate in a fashion like that in which human beings, you and I, conduct ourselves. For not only do we constitute agents who pursue our purposes, according to our judgments, as many animalsdo.Wealso speak for ourselvesin adistinctivemanner.Wedeclarethat thisor that is thecase, or that wewill do such and such, avowing thecorresponding belief or intention. And in doing thisweforeclosethepossibility of excusinga failure to liveup to those attitudes by claiming that we misread the evidence on our own minds. Moreover, wepromise that wewill take this or that action, foreclosing the possibility of excusingafailureto liveup to thosewords, not just by claiming that wemisread our minds, but also by claiming that we changed our minds since uttering those words. OUP UNCORRECTED PROOF – FIRST PROOF, 1/4/2015, SPi TWO FALLACIES ABOUT CORPORATIONS     Comp. by: SatchitananthaSivam Stage : Proof ChapterID: 0002505110 Date:1/4/15 Time:21:43:23 Filepath://ppdys1122/BgPr/OUP_CAP/IN/Process/0002505110.3d Dictionary : OUP_UKdictionary 384 With both avowalsof attitudeand promisesof action, wedo not just report on howwe think or what wewill do, since reportsallow of mind-misreading and mind-changing excuses.Weput ourselveson theline,makingit reputationally costly to fail to liveup to our words; wecommit ourselves to thinking and acting as thewords indicate. What wedo in theserespects, every corporatebody can do also. Each bodywill have an incentive, shared by its members, to endorse only purposes and judgments-for short, only attitudes-that it can liveup to and, given theattitudes it endorses, to take all theactionsthat itsattitudesrequire. If it failsto perform in that way, then it will not act effectively for thepurposesshared amongthemembership.And if it failstoperform in that way-if it fails to live up to itsword-then it cannot hope to attract others to cooperatewith it: say, to takeit at itsword and establish contractual relationsin oneor another domain. Themembersof any corporatebody can beexpected, in view of thisincentive, to fall in linewith thepurposesor judgmentsannouncedbyan authorized spokesperson.And of course the spokesperson can be expected to endorse only such purposes and judgmentsasthemembersauthorizethem to endorsein thenameof theorganization. Since this isgoing to bemanifest to all, that means that theannouncement of such an attitudecommitsthecorporatebody so that thegroup cannot excuseafailureto liveup to the words uttered on the grounds that the spokesperson misread themind of the group. A similar lesson applies when a spokesperson makes a promise on behalf of thegroup, committing thegroup to an action rather than just an attitude. In thiscase thespokesperson commitsit in such away that thegroup cannot excuseafailureto act appropriately either by claiming that thespokesperson misread thegroup mind or by claiming that it changed itsmind since thepromisewasgiven. There is a salient and important distinction between agents likemuteanimals that cannot speak for themselvesand agents likeus, who can. A traditional way of marking that distinction isto describethelatter sortsof agentsaspersons: agentsthat can speak for themselves, give their word in explicit or implicit commitment to others, and be held responsible for whether or not they keep their word. Persons in this sense are distinguished by how they can function, not by how they are composed. And in that functional sense,wecan nowseethat not only doweindividual human beingscount as persons, so do thegroup agents that weconstitute.2 Theideathat corporatebodiescan represent themselvesappropriately, and therefore count as persons, appears in the high Middle Ages. In a papal bull of     , Pope Innocent IV agreed that a corporate body is a persona or person in arguing, more specifically, that because it is a persona ficta-a fabricated person-it cannot be excommunicated. While theologians often took this qualification to mean that it was afictional rather than areal person, thelawyerstook it to imply that it wasan artificial person: a real person, to besure, but not anatural person likeyou and me(Eschmann 2 While this conception of a person has its roots in medieval, legal usage (Duff     ), it is developed in different formsby Hobbes (    ), as I note in the text, and also by Locke (    ); see Rovane (    ) and List and Pettit (    ). OUP UNCORRECTED PROOF – FIRST PROOF, 1/4/2015, SPi     PH I LI P PETTI T Comp. by: SatchitananthaSivam Stage : Proof ChapterID: 0002505110 Date:1/4/15 Time:21:43:23 Filepath://ppdys1122/BgPr/OUP_CAP/IN/Process/0002505110.3d Dictionary : OUP_UKdictionary 385     ; Canning    ; Kantorowicz    ). Andwith thisdevelopment therecognition of corporatebodiesas full-scalepersonsbecameacenterpieceof Western thought. Thethemereappearsin thewritingsof ThomasHobbesin theseventeenthcentury, for example,althoughmodified tosuit thepurposesof hispolitical philosophy (Pettit     ). Hemakesrepresentation or "personation," ashealsocallsit,central to thepossibilityof a group'screatingand enactingasinglemind. "A multitudeof men aremadeoneperson, when they are by oneman, or one person, represented." Where does the unity come from?From the fact that the representing individual-or body-will speak with one voice, thereby testifying to onemind in thegroup: "it istheunity of therepresenter, not theunity of therepresented, that maketh theperson one" (Hobbes    :   .  ). Against theFirst Fallacy The claims I have just defended run directly counter to the tradition in economic circles of claiming that group agents are expressive fictions and that in the words of John Austin (    :    ), thenineteenth-century jurist, they can becast as subjects or agents "only by figment, and for thesakeof brevity of discussion." Anthony Quinton (    :  ) sumsup theview in thefollowingpassage: "Wedo, of course, speak freely of themental propertiesand actsof agroup in thewaywedoof individual people.Groups are said to have beliefs, emotions, and attitudes and to take decisions and make promises. But these ways of speaking are plainly metaphorical. To ascribe mental predicates to a group is always an indirect way of ascribing such predicates to its members." I hopethat my remarksabout corporatebodiesalready makesclear that thisview is utterly at odds with how we ordinarily think. It is certainly true that we sometimes speak in afigurativeway of the things that certain groups think and do, not giving it any literal significance.Wemaysay in thiskey that theelectoratehasopted for dividing power amongdifferent parties, or that themarketshavemadeaharsh judgment on the government'spolicies, or indeed that theworkingclassareresistant to anti-tradeunion laws. But this sort of talk is clearly intended to be figurative, since the groups in question lack the organization that would enable them to form attitudes and abide by them in action.With thegroupsenvisaged in our examples, however, there ismore than enough organization to allow usspeak in quitea literal way of what they seek and think and do. Thereductionist lineespoused byAustin andQuinton oftenmakesan appearancein theeconomic literaturein theobservation anywould-begroup agent isconstituted by a framework of relations among its members-"a nexus of contracts," in the favored phrase-and that this means it cannot be an agent in any literal sense. On this approach, as one commentator puts it (Grantham     :    ), it is taken as obvious that acorporation or group agent isjust "acollectivenoun for thewebof contractsthat link thevariousparticipants." OUP UNCORRECTED PROOF – FIRST PROOF, 1/4/2015, SPi TWO FALLACIES ABOUT CORPORATIONS     Comp. by: SatchitananthaSivam Stage : Proof ChapterID: 0002505110 Date:1/4/15 Time:21:43:23 Filepath://ppdys1122/BgPr/OUP_CAP/IN/Process/0002505110.3d Dictionary : OUP_UKdictionary 386 The suggestion behind this reductionism makes little sense. It is true that the existence of contractual arrangements between individuals does not ensure in itself that thegroup they constitute isan agent; otherwiseevery market, for example, would bean agent. But that doesnot mean that that no sortsof contractual arrangementsare capable of making a group into an agent. Consider the argument envisaged in the nexus-of-contracts line of thought: "Markets and corporations are both built out of contracts; but marketsarenot agents; and so neither can corporationsbeagents." That the argument is invalid should be obvious from the clear invalidity of the parallel argument: "Treesand human beingsareboth built out of cells; but treesarenot agents; and so neither can human beingsbeagents." As the cellular structure of human beings enables them to be agents, unlike the cellular structureof trees, so thecontractual structureof corporatebodiesenablesthem to beagents, unlike thecontractual structureof markets. It makes it possible for them to be representable as agents and indeed to self-represent as agents. Contractual or quasi-contractual arrangements amongmemberswill give rise to a corporate agent if they are designed to ensure that overall the group meets the conditions for being representable in that way. There ismore to say in support of theagential statusof corporatebodies, since the fact that they arenot fictionsof thekind that Quinton hasin mind doesnot mean that they are not fictions in a distinct sense: for example, in a sense that someone like Hobbesmight have endorsed (Skinner     ). But that possibility need not detain us; theconsiderationsrehearsed ought to besufficient for current purposes(Pettit     a). AGAI NST THE CLAIM THAT CORPORATE AGENTS HAVE AUTONOMOUS RIGHTS .................................................................................................................................. SomeLegal History Themedieval tradition that began with Innocent IV wascontinuouswith a long lineof legal thought, already found in the compendium of Roman law, compiled under the Emperor Justinian in Constantinople in the  th century CE. The Digest, which is a central part of that compendium, quotes the eminent second-century jurist, Ulpian, with approval on thecrucial idea: "if anything isowed to agroup agent (universitas), it is not owed to the individual members (singuli); nor do the individual members owe that which the group agent owes" (Duff     :   ). This idea meant that the group, acting as such, has to be treated as enjoying an important autonomy relative to the individualswhomakeit up. It can enjoy rightsand dutiesin itsown nameand theseare distinct from the rightsand dutiesof any individual in its ranks. Themedieval tradition built on theRoman in dignifying any such corporate body with thenameof apersonaor person,aswesaw.Thelegal tradition in particular took it OUP UNCORRECTED PROOF – FIRST PROOF, 1/4/2015, SPi     PH I LI P PETTI T Comp. by: SatchitananthaSivam Stage : Proof ChapterID: 0002505110 Date:1/4/15 Time:21:43:23 Filepath://ppdys1122/BgPr/OUP_CAP/IN/Process/0002505110.3d Dictionary : OUP_UKdictionary 387 to signify just that thecorporatebody isan artificial person. It isaperson asreal asyou and I, albeit one constructed by institutional rather than biological means: that is, as they would have thought, by human rather than divinehands. The legal tradition of the fourteenth century already mademuch of the idea of the corporate person. Thus Bartolus of Sassoferrato, who was a Professor of Law at the University of Perugia, used it to great effect in maintaining that a city republic like Perugia was a self-governing entity (Woolf     ; Canning     ; Ryan     ). At the timetheHoly Roman Emperor wastreated in thecommon law, so called-theRoman law, rediscovered at theend of theeleventh century, that formed thebasisof civil and canon law-asdominusmundi, lord of theworld. Thisgavehim great legal powersof interference in the states that belonged within the Holy Roman Empire-in effect, Germany and Italy-at least insofar as they did not have rulers of their own. It was accepted that, if a city or state had a king or prince of its own, then that person represented theEmperor within local boundariesand theEmperor could not interfere within those boundaries. The principle was that the king in his own realm is the Emperor of that realm: rex in suo regno est imperator sui regni. A city republic likePerugiawasin obviousdifficulty insofar asit did not haveaking or prince-a rex or princeps-of its own. But Bartolus used the new doctrine of the corporate person to great effect in arguing that this difficulty was only apparent. He pointed out that acity republic organized itsbusiness likeany familiar corporatebody such asaguild or monastic order: it wasruled by acouncil that citizenselected and on which they took turnsin serving.Thusheargued on thisbasisthat thecivitas-thestate or citizenry-wasitself acorporatebody or universitas.But if it wasacorporatebody, it was a persona or person, albeit a persona ficta, an artificial person. And if it was a person, then in virtueof its role in governing itsmembers, it counted asaprincepsor prince. In words longquoted after Bartolus'sdeath, it wasasui princeps, aprinceunto itself. The political use of the idea of the corporate person went hand in hand over the following centurieswith its use in characterizing other corporatebodies, in particular corporations.Thusin the    sHobbes(    : .  ) could claim that just asacompany of merchantscountsasacorporateperson, so too doesany commonwealth count asa civil person. While the use of the image of the corporate person in describing states declined in the eighteenth century-a great exception, however, is Rousseau's (    ) Social Contract-its use in relation to corporate bodies, in particular corporations, greatly increased. Thus in hisclassic Commentarieson theLawsof England, published in the    s,William Blackstone(    : bk  , ch. , §   ) could write: "Personsalsoare divided by thelaw into either natural persons, or artificial. Natural personsaresuch as theGod of nature formed us; artificial are such as are created and devised by human laws for the purposes of society and government, which are called corporations or bodiespolitic." This traditional way of thinking about corporations was given a firm place in American law in a famous case decided by the Supreme Court in     , Dartmouth College v Woodward. The court decided that the Constitution protected the OUP UNCORRECTED PROOF – FIRST PROOF, 1/4/2015, SPi TWO FALLACIES ABOUT CORPORATIONS     Comp. by: SatchitananthaSivam Stage : Proof ChapterID: 0002505110 Date:1/4/15 Time:21:43:23 Filepath://ppdys1122/BgPr/OUP_CAP/IN/Process/0002505110.3d Dictionary : OUP_UKdictionary 388 contractually based constitution of Dartmouth College from interferenceby the legislature. And in thecourseof thehearingChief JusticeMarshall summed up thecourt's position in asserting that by means of incorporation "a perpetual succession of individuals are capable of acting for the promotion of the particular object, like one immortal being." What rights did corporate bodies enjoy under the law? Blackstone (bk  , ch.  , §§   – ) held that when they incorporatewith thepermission of theKing, "anumber of privatepersonsareunited and knit together, and enjoy many liberties, powers, and immunities in their politic capacity, which they were utterly incapable of in their natural." More specifically, so he argued (bk  , ch.   , §§   – ), the bodies thereby formed enjoy fiverights:first, to continueindefinitely in existence, enjoying "perpetual succession"; second, "to sueor besued, impleador beimpleaded,grant or receive, by its corporate name"; third, "to purchase lands, and hold them"; fourth, to "manifest its intentions," aswhen it "actsand speaks...by its common seal": i.e. via an authorized spokesperson; and fifth, to "makeby-lawsor privatestatutesfor thebetter government of thecorporation; which arebinding upon themselves, unlesscontrary to the lawsof the land." Blackstonewaswritingat atimewhen therightsof corporationsproper werelimited under the South Sea Bubble Act of     , which had prohibited the formation of commercial corporations not authorized by royal charter or Act of Parliament. And so it isunsurprising that heputs the following qualification on thefifth right: "But no trading company is with us allowed to make by-laws which may affect the king's prerogative, or the common profit of the people...unless they be approved by the chancellor, treasurer, and chief justices, or the judges of assize in their circuits; and, even though they beso approved, still, if contrary to law, they arevoid." TheSouth SeaBubbleAct wasrepealed in     and over thefollowing few decades, corporations gained enormously in the rights they were given both in Britain, in Europemore generally, and in the United States. They could be formed by recourse to anotary or lawyer; they could operateacrosstheland, not just in aspecific territory; they could changetheir sphereof activity at will; they could own and beownedbyother corporations; and their shareholders could enjoy the right of limited liability, which had been implicit at best up to the mid-nineteenth century (Horwitz     ). This growth in the rights of corporations went along with the ever more important economic rolethat they played in industrial development, particularly in theconstruction of canalsand railroads. At theheight of thisdevelopment, thequestion arose in theUnited Statesas to the constitutional standingof corporationsand of corporatebodiesmoregenerally.With a written constitution in place, and with lots of issues to settle about the status of corporations, it was inevitable that sooner or later theSupremeCourt would have to decidewhat rightsaccrueto corporations. And, given thefocusof theConstitution on individuals, it was inevitable in particular that it would have to make a judgment on whether the articles and amendments of the document that articulated the rights for individualsestablished thesamerights for corporatepersons. OUP UNCORRECTED PROOF – FIRST PROOF, 1/4/2015, SPi     PH I LI P PETTI T Comp. by: SatchitananthaSivam Stage : Proof ChapterID: 0002505110 Date:1/4/15 Time:21:43:23 Filepath://ppdys1122/BgPr/OUP_CAP/IN/Process/0002505110.3d Dictionary : OUP_UKdictionary 389 The issue finally came to a head in a case heard in     , Santa Clara County v Southern PacificRailroad. TheCourt had to decide in that casewhether theRailroad wasrequired to pay taxeson thewooden fencesthat bordered thetrack it used in Santa Clara County. In its defense the Railroad made a number of points: at the more mundaneend, that it did not actually own the fence; at themoreelevated, that it was protected against the allegedly unfair treatment by theCounty under the Fourteenth Amendment to theConstitution, which had been passed in     . Therelevant part of the first section of that amendment reads: "No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of theUnited States; nor shall any State deprive any person of life, liberty, or property, without dueprocess of law; nor deny to any person within its jurisdiction the equal protection of the laws." Theclaimmadeby theRailroadwasthat theCounty proposed to breach itsclaimsasa person under the last equal protection clause. TheCourt found for theRailroad on thegroundsof itsnot actually owningthefence on which theCounty wished to tax it. But thecourt report cited theChief Justiceat the time-hedied before the report actually appeared-asoffering an important remark, or obiter dictum, on the constitutional defense. "The court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to theConstitution, which forbidsaStateto deny to any person within itsjurisdiction the equal protection of thelaws, appliesto thesecorporations.Weareall of opinion that it does" (Horwitz     :   ). Thisremark had important ramifications. Supported in along lineof judgments, the Court wasabletomaintain in     , in its judgment on Southern RailwayCo. vGreene: "That thecorporation isaperson, within themeaningof theFourteenth Amendment, is no longer open to discussion" (Schane     ). This judgment has always been contentious in US jurisprudence, since the Fourteenth Amendment was one of the Reconstruction Amendments designed to establish the civic status of emancipated slavesin thewakeof theCivil War.But timeand again it hasplayed arolein judgments that invoked theConstitution to arguefor corporaterights. Theseincluded theright to search and seizure protection under theFourth Amendment (    ); the right to jury trial in criminal casesunder theSixth Amendment; the right to jury trial in civil cases under theSeventh Amendment; and, on the grounds that money is speech, the same right as individuals to independent political expendituresunder theFirst Amendment (    ). This jurisprudential tradition, particularly the finding in      in the case Citizens United v Federal Election Commission, hasgiven life to thesecond of our two fallacies. This is theclaim that corporatebodieshave thesameclaim as individuals to begiven certain rightsunder law. Wenaturally think that individualshavea claim to begiven rightsunder lawon thebasisof their havingnatural, pre-legal rightsof acertain kind or on the basis of their having certain needs or preferences. In either case we hold that they have a claim to autonomous rights in law: a claim that is based on their own interests,whether they areconstrued aspre-existingrightsor needsor preferences, and not on the interests of other entities. According to second of our fallacies, corporate OUP UNCORRECTED PROOF – FIRST PROOF, 1/4/2015, SPi TWO FALLACIES ABOUT CORPORATIONS     Comp. by: SatchitananthaSivam Stage : Proof ChapterID: 0002505110 Date:1/4/15 Time:21:43:23 Filepath://ppdys1122/BgPr/OUP_CAP/IN/Process/0002505110.3d Dictionary : OUP_UKdictionary 390 personshaveaclaim of aparallel kind to autonomouslegal rights: aclaim that isbased on their own interestsascorporatepersons. I think that thisclaim isjust asmistaken as theearlier claim weconsidered. Against theSecond Fallacy When anumber of peopleform to createacorporateperson, they exercisetheright of association that they arelikely to enjoy under any reasonabledispensation and they do so, presumably, because that answers to certain shared interests, commercial or otherwise. But our shared interests asmembers of a presumptively equal community lead usto imposelegal limitson howpeopleshould associatein any of arangeof areas: for example, in conspiring to commit crime, or in forming a cartel to fix prices. And there isevery reason, by analogy with such interventions, why our shared, communal interests might lead us to put legal limits on how people may associate in forming corporatebodies. Thereisevery reason, in other words,why thoseinterestsshould lead us to restrict the range of rights that the artificial persons created by incorporation should beabletoenjoy.After all, corporateor artificial persons, asBlackstonesays, "are created and devised by human laws for thepurposesof society and government." Thisargument, spelled out a littlemorecarefully, runsas follows: * To give any rights to corporate agents is to give corresponding rights of association to their members; thus to givea right of changing itssphereof activity to a corporatebody is to give itsmembers the right to associate in away that enables them to alter thesphere in which they act together. * The rights of association that ought to be given to individual agents should be fixed by a consideration of the interests of individuals in the community: the interests of those associating and, in an egalitarian spirit, the interests of others too. * Hencetherights that ought to begiven to corporateagentsshould befixed by the egalitarian consideration of the interests of the individuals associating and the individualsaffected; they ought not to bedetermined by referenceto the interests of thecorporateentities themselves. Thefirst proposition assertsthat therightsof corporatepersonsaredetermined by the rights of individuals, in particular their rights of association; the second holds that the rights of individuals to associate with one another ought to be restricted to fit with theinterestsof all individualsin thecommunity; and thethird drawstheconclusion that thecorresponding corporate rightsought therefore to be restricted in thesameway. This argument presupposes, plausibly, that the interests of all individuals in the community, more or less equally balanced, ought to determine the rights accorded to any individuals, in particular therightsof association that weestablish. It showsthat if we areto stick with thisprinciple-aprincipleof equal individual interests, aswemay call OUP UNCORRECTED PROOF – FIRST PROOF, 1/4/2015, SPi     PH I LI P PETTI T Comp. by: SatchitananthaSivam Stage : Proof ChapterID: 0002505110 Date:1/4/15 Time:21:43:24 Filepath://ppdys1122/BgPr/OUP_CAP/IN/Process/0002505110.3d Dictionary : OUP_UKdictionary 391 it-thenwemust beprepared to limit therightsthat weestablish for thecorporatebodies that individualsform, takingaccount of their effect on theinterestsof individuals. If we grant rights to corporate bodies on the basis of the interests of those bodies themselves-if wegrant them rightson aparallel basisto that onwhichwegrant rightsto individuals-then we are very likely to breach that principle. And insofar as that is possible, the principle of equal individual interests requires us to deny that corporate bodiesshouldhaveautonomousrightsin law;theyshouldonlyhavesuch rightsasanswer equally to theinterestsof individuals. Thecost of grantingcorporateagentsrightson an independent basis-that is, other than by reference to theprinciple of equal individual interests-isthat thelawmight no longer treat individualsasequals; it might givesomeof those who associate in various corporate forms insider benefits that would impose intuitively unfair costson thoseoutsidesuch groupsor perhapson other members. It may be said that these costs ought not to matter if all individuals are given the same legal right to associate in a self-serving way. But that is scarcely a consoling thought. It suggests that giving corporatebodiesrightson an independent basiswould provide an incentive for individuals to compete in a free-for-all attempt to gain advantages in relation to one another. And since there is no prospect of equal gains in such azero-sum game, it wouldmean that someindividualsarebound toend up in a position of seriousdisadvantage in relation to others: that is, in aposition where their interestsdo not count for asmuch as the interestsof others. Suppose, asiscurrently thecasein theUnited States, that corporatebodiesaregiven the same legal rights to make independent political expenditures as individuals. That meansthat thoseincorporated for collateral reasons-say, asabusinessor union-can exercise their clout under thecorporate form in away that may swamp theenterprise and theconfidenceof theunincorporated. Indeed it meansin many of thesecasesthat thoseat thehelm of such organizations, who will often besubject to littlediscipline in the exercise of patronage-think of the CEOs of corporations-will be superempowered individuals in the political sphere. They will be in a position to disburse corporate fundsmoreor lessat will to thecauses, and in effect thecandidates, of their choosing. Theprincipleof equal individual interestsarguesagainst giving any corporate bodies rights that would have such an adverse effect on the interests of some individuals. Is the principle of equal individual interests sufficiently compelling to support the rejection of our second fallacy?It may not seem so to thosewho think of thecorporate bodies we individuals construct on an analogy with the children we procreate as parents. Just as we do not think that the interests of parents ought to determine the rightsthat weestablish for children so, it may besuggested, weought not to think that theinterestsof individualsought to determinetherightsthat weestablish for corporate bodies. Children have interests of their own, distinct from thoseof their parents, and the idea here is that corporate bodies also have interests of their own, distinct from thoseof their creators. Thisideaisnot persuasivefor thesimplereason that,whileparentsproducechildren that growup to function without parental support and tohaveintereststhat aredistinct OUP UNCORRECTED PROOF – FIRST PROOF, 1/4/2015, SPi TWO FALLACIES ABOUT CORPORATIONS     Comp. by: SatchitananthaSivam Stage : Proof ChapterID: 0002505110 Date:1/4/15 Time:21:43:24 Filepath://ppdys1122/BgPr/OUP_CAP/IN/Process/0002505110.3d Dictionary : OUP_UKdictionary 392 from their parents, corporate bodies are quite different. They remain completely dependent on their members for being sustained in existence and activity, and their interests remain firmly tied, therefore, to the interests of those members. Whatever interestsareascribed to corporatebodies, they arenot just interestsof their own, unlike the interests of children; they inevitably reflect the interests of some or all of the members who sustain them. To give independent attention and concern to those interests, then, would be to discriminate in favor of the interestsof such individuals. It is certainly true that, if we establish corporate bodies, then we must give some rights to them; otherwisethey would not haveadefined spacewithin which to act and would not beableto play their roleasagentsamongagents. It may even betruethat if those corporate bodies are to have any useful function, then the rights we give them must include rights like those listed by Blackstone. But that just means that it would makenosensefor thelaw todeny corporatebodiesaccesstosuch rights-thiswould be to outlaw corporatebodies, period-and that it would makeno sense, the law permitting, for individuals to refuse to allow their corporatecreations theenjoyment of such rights. It doesnot mean that, oncecreated, corporatepersonshaveintereststhat call for theprotection of legal rights in theway that children havesuch interests. And it does not mean that thelaw ought to takeaccount of such interestsin determining therights that should accrue to thosebodies. The upshot of these considerations is that we can allow corporate bodies to have autonomous rightsonly if weareprepared to reject the idea that the law should treat peopleasequalsin determiningwhat rights-in particular,what rightsof association- they are to enjoy. The principle of equal individual interests seems unquestionable, however, and is respected in almost every contemporary philosophy of thestate. Thus the cost of allowing corporate bodies to haveautonomous rights is just too heavy for theproposal to haveany appeal. There are four different areas in which an assignment of corporate rights might offend against the principle. It might favor some members disproportionately over others in theprivateor thepolitical benefitsof membership: in therateof recompense for effort and talent, for example, or in thedegreeof power that someenjoy over others. And it might favor at least some members over outsiders in the private or political benefits ensured: in the greater chances it gives them of winning in legal cases, for example, or in their greater capacities to exercise influence over government. The principle of equal interests calls for a normative inquiry into the rights that ought to begiven to different corporateentities: say, to churchesor NGOsor corporations. But such an inquiry would carry uswell beyond thebrief of this chapter. CONCLUSION .................................................................................................................................. We have looked at two sharply opposed views of corporate bodies, each with a firm place in contemporary thinking, and argued that they are both mistaken. One OUP UNCORRECTED PROOF – FIRST PROOF, 1/4/2015, SPi     PH I LI P PETTI T Comp. by: SatchitananthaSivam Stage : Proof ChapterID: 0002505110 Date:1/4/15 Time:21:43:24 Filepath://ppdys1122/BgPr/OUP_CAP/IN/Process/0002505110.3d Dictionary : OUP_UKdictionary 393 maintainsthat such bodieshavenomoreclaim to thestatusof agentsthanmarkets, the other that they haveaclaim, not just to thestatusof agents, but to thestatusand rights of persons likeyou and me. As against the first position, we have argued that corporate bodies are agents- agents indeed that havecapacities characteristic of natural persons-and that they do raiseachallengefor usascitizenswhohavetomakeour livesin their company.And as against the second, we have argued that, on pain of betraying the ideal of individual equality, weshould only givecorporatebodies therights that it is in the interest of the community of natural persons to bestow; they do not haveany independent claims in their own name. That two such opposed viewseach haveaplace in our thinking reflectsa failureon thepart of our academic and public culture to bring economic and legal traditionsof analysis together in charting corporate reality. And that they areeach subject to ready criticism, asI hopetheforegoingmay suggest, reflectsa failureto takethat thinking to any depth. We face the prospect in this century of having to come to political terms with an ever more corporatized world, as I suggested in the Introduction. The first prerequisite of doing so is that weput behind us the shoddy thinking that these rival positionsexemplify. ACKNOWLEDGMENTS I benefitted enormously from thediscussion of thisand other papersat ameeting in theRoyal Society, London, in Apr.     , organized by Professor Subramanian Rangan. And equally I benefitted from a thorough discussion of thepaper at an event in Paris, Sept.     , which was organized jointly by Gloria Origgi of the Institut Jean Nicod in Paris and Astrid Von Busekist of the Institut d'EtudesPolitiquesdeParis (SciencesPo). REFERENCES Austin, J. (    ). Lectureson Jurisprudence, or thePhilosophy of PositiveLaw. London. Blackstone, W. (    ). Commentarieson theLawsof England. New York: Garland. Canning, J. P. (    ). 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