Friday, June 11, 2004

Corporate Rights are Human Rights:

Professor Bainbridge makes the point that I was trying to make in my previous post much better than I ever could:

When you ask “what rights does a corporation have,” you are reifying the corporation – you are treating the firm as an entity separate from its various constituents. The prevailing law and economics account of the corporation, by way of contrast, views the firm not as an entity, but as an aggregate of various inputs acting together to produce goods or services. Employees provide labor. Creditors provide debt capital. Shareholders initially provide equity capital and subsequently bear the risk of losses and monitor the performance of management. Management monitors the performance of employees and coordinates the activities of all the firm's inputs. The firm is simply a legal fiction representing the complex set of contractual relationships between these inputs. In other words, the firm is not a thing, but rather a nexus or web of explicit and implicit contracts establishing rights and obligations among the various inputs making up the firm.

From this perspective, the correct question to ask is whether this set of stakeholders acting collectively through the board of directors and top managers should be able to exercise the same rights they could exercise individually....

I remember when I lived in Center City Philadelphia while I attended graduate law school (my LL.M. in International Law program), and around the same time I became familiar with Chris Stone’s argument about Trees having rights or "standing," I saw a program on a local cable channel, Drexel University’s DUTV (this channel didn't reflect just a “left-wing” perspective, but a Chomsky type radical "progressive" ideology that viewed Clinton/Gore/Kerry as “right-wingers,” and of course it was Drexel’s only channel, no competing conservative version) entitled something like (don't remember the exact wording) “How can property own property?” This referred to the fact that corporations weren’t human beings, but rather “property” (And in a sense, that’s true: A corporation is one big piece—or if we view every share as individual pieces, a bunch of pieces of intangible personal property). And the question that was begged was how can this non-human property own property (or how can property have “rights” that are intended for humans)? Bainbridge effectively answers this question in this short passage.

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