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Are Corporations "Morally Responsible Agents" ?

July 27, 2009 11:44 AM

I, too, would like to thank the Manhattan Institute for inviting me to participate in this discussion with Professor Hasnas. Having read his first post, I can assure the readers about one thing: I disagree with just about everything John has said so far. So, I have no doubt that this will be an interesting exchange.

I don't intend in this first posting to respond to every argument John has made. I will pick a few of the most fallacious, and will add to my position as the week progresses.

Let's start with the concept of whether corporations are "morally responsible agents." Corporations are, of course, legal constructs; we often refer to them as "legal persons." The primary reasons for their existence are twofold: (1) to allow individuals to pool their resources together to engage in economic activity on a scale that they could not achieve individually; and (2) to limit the liability of such individuals ("investors") should the operation go belly-up. Obviously, a corporation can only act through its "agents," i.e., its board of directors, officers, and employees. When these humans act in their agency role, however, they are not simply a bunch of people with titles doing whatever they want. They are acting on behalf of their principal, the corporation. They have a fiduciary duty to put the interests of the corporation ahead of their own.

As a result of their collective nature, corporations are extremely powerful actors in our economic system. They do a tremendous amount of good - adding trillions to our gross domestic product each year. For example, corporations do medical research, build skyscrapers, transport us by air and automobile, and supply us with endless means of entertainment. But corporations also do some things that are not so good. For example, they occasionally breach contracts and engage in tortuous activity. Just because a corporation acts through human agents, does it make any sense to say that it is not a "morally responsible agent" when its contract breach costs taxpayers millions of dollars or its poorly designed automobile blows up on impact and kills innocent people?

One could take the position that the corporation is not morally responsible for these acts; rather the responsible human or humans behind the corporate veil are. But this is not a satisfactory answer for two main reasons. First, the harm is often if not always an outgrowth of the collective nature of the enterprise itself. One person, for example, can't design, build, and mass-market an automobile. Thus, quite literally, the collective entity is at the root of the wrong - and it should take responsibility for it. Second, if we laid blame for harms caused by corporations solely at the doorstep of individuals, the result would be unworkable: no one person in the organization has the money or insurance to compensate for a contract breach or make victims of a tort whole. The corporation does.

Thus, corporations are undoubtedly morally (and legally) responsible for their contract breaches and tortuous behavior. So the question really is this: is there something different about criminal law that would lead us to a different result? The simple answer is no.

John is right that the aim of criminal law is to punish wrongdoers. We've established that a corporation can be a wrongdoer - it can, through its many agents, dump toxic chemicals or put adulterated food into the stream of commerce. Can a corporation be punished? Once again, I agree with John that the goals of criminal law are retribution, deterrence, rehabilitation, and (one I don't think he mentioned) incapacitation. I will explain later why all of these goals can, in fact, be achieved through corporate criminal liability. Here's a hint: the fact that a corporation cannot be put behind bars is irrelevant.




Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.