Can Corporations Be Held Morally Accountable?

The question whether a corporation should be legally considered a person is reducible to other questions about whether or not the corporate entity can and should be made the subject of a set of legal rights and duties.

The particular bundle of rights and duties that accompanies legal personhood varies with the nature of the entity. Both corporations and natural persons are legal persons, but they have different sets of legal rights and duties.

Temples in Rome and church buildings in the Middle Ages were regarded as the subjects of legal rights. Ancient Greek law and common law have even made objects the subject of legal duties.

In admiralty, a ship itself becomes the subject of a proceeding in rem and can be found “guilty.” It can be argued that even corporations are reducible to relations between the persons who own stock in them, manage them, and so forth. Thus, calling a legal person a “person” involves a fiction unless the entity possesses “intelligence” and “will.”

So, can it be said that corporations possess intelligence and will?

The orthodox position is that the corporation itself is a legal fiction; the humans who make up the corporation may have intelligence and will, but the corporation itself does not.

But some might argue that the properties of the corporation are not reducible to the properties of the individuals who make up the corporation. Corporations may have “a mind of their own,” at least according to some theorists.

If it can be argued that corporations can have a mind of their own, then is it possible that they can act morally and be held morally responsible for the actions of their employees? Furthermore, can corporations demand that employees follow a very strict code of conduct to ensure good morality among employees?

The emphasis on stricter accountability than is now occurring in the corporate world was an understandable response to some sickening bookkeeping-based scandals. But the notion would never have evolved from a buzzword into the focus of voluminous legislation if governments have not also been lured by the myth of precision: Because accountability suggests that there is a right and a wrong answer to every question, it flourishes where authorities can measure results exactly.

This stricter accountability whispers two seductive lies to society: Systems go wrong because of individuals; and the right set of controls will enable society to prevent individuals from creating disasters. This type of accountability is a type of superstitious thinking that allows society to live in a state of denial about just how little control individuals have over their environment and actions.

This notion of accountability assumes perfection–if anything goes wrong, it’s a sign that the system is broken.

It can be blind to human nature. For example, it assumes that society knows that if corporations are being watched, they will not do wrong, which seriously underestimates multi-faceted human minds and motivations. Big Brother is not the answer.

It bureaucratizes and atomizes responsibility. While claiming to increase individual responsibility, it drives out human judgment. When a sign-off is required for every step in the workflow, those closest to a process lack the freedom to optimize or rectify it. Similarly, by assuming that an individual’s laxness caused a given problem–if somebody hadn’t been asleep at the switch or hadn’t got greedy or hadn’t assumed that somebody else would clean up the mess–none of this would have happened.

Finally, this tighter version of accountability tries to squeeze centuries of thought about how to entice people toward good behaviour and dissuade them from bad into simple rules by which individuals can be measured and disciplined. It would react to a car crash by putting stop signs and policemen at every corner.

Bureaucratizing morality or mechanizing a complex organization gives society the sense that society can exert close control. But grown-ups prefer clarity and realism to happy superstition.

Mark Borkowski is president of Toronto-based Mercantile Mergers & Acquisitions Corporation. Mercantile specializes in the sale of privately owned companies to strategic buyers. He can be contacted at mark@mercantilema.com or (416) 368-8466 ext. 232