Kent Greenfield’s new book, Corporations Are People Too (And They Should Act Like It) has added an interesting twist to the public’s understanding of the Supreme Court’s controversial Citizens United decision. His approach to the topic is both radical and practical. Here is the unabridged transcript of his interview with BC Law Magazine.
BC Law Magazine: Why did you write this book now?
Kent Greenfield: Citizens United was in 2010, and that’s when this issue of corporate rights really jumps to the forefront of the American debate. I’ve been working on it pretty actively since then. I taught a seminar for several years, up until 2015, on corporate rights, so I did a lot of research and writing and thinking about it. Then, it took me three years to write. Even though it seems like Citizens United was a long time ago, this is the nature of these academic endeavors. It’s a really hard question. It took me several years to figure out what my point of view was going to be.
BC Law: The question being …?
KG: The question being, what rights should corporations have? What kind of constitutional claims should corporations be able to make?
The answer to why this now, and why me, is that you need both a good grounding in constitutional law, and a good grounding in corporate governance. I think a lot of the people who have been thinking and writing about the constitutional side don’t have the governance chops. A lot of people who have the governance chops don’t have the constitutional chops, or they don’t have any inclination to dabble in constitutional law.
There aren’t that many of us around the country who do both corporate law and constitutional law. Citizens United, and the questions that it creates and engenders, are really only answerable if you have both sets of tools. It took me a while to figure out how to put those tools into play and figure this out.
BC Law: Jumping ahead, it seems that you feel there’s a naivete, or a lack of understanding of one side, governance, or the other, constitutional.
KG: That’s exactly right, and I think there’s both a problem as a matter of theory and doctrine, and a problem with facts on the ground. I think the response to Citizens United in general was, money is not speech, and corporations are not people. That’s been the dominant response from the Left. I think both responses are simplistic, if not flat out wrong. I think, as a matter of theory, part of my role is to try to persuade my friends on the ideological left that, instead of rejecting corporation personhood, we need to adopt it and champion it. What the court said in Citizens United was that corporations are associations of citizens. Instead of rejecting that, we should really push this notion that corporations should be seen as associations of citizens, and have obligations and duties to those citizens. Not just to a small set of shareholders.
BC Law: What are your hopes for this book? Do you think it could result in legislation?
KG: It’s always an important question to a scholar. What do you want to actually achieve? I think there are so many different ways that people reading this book could act and could operationalize its understandings, so I don’t want to cut any of those off. I will say that if you look at the years before Citizens United in 2010, the global financial crisis created a lot of energy in the progressive community to question corporate power, to use corporate governance mechanisms to adjust that power, and to humanize that power.
One of the notions that was growing was that shareholder primacy, or shareholder value, should not be the touchstone around which corporate governance should be arranged. There were more voices saying we should enlarge the obligations of corporations. The irony of what happened after Citizens United was that people got so scared of corporate power that the progressive energy was then spent on trying to cabin corporations and to push them out of the public square. Prior to Citizens United the thought was, OK, you’re going to be in the public square, we should make you more like citizens. Then, after Citizens United, the last thing people want is for corporations to be citizens.
In a way, I’m wanting people to reconsider that, and to go back to the notion that the real problem here is shareholder power. The problem is the lack of corporate citizenship, not the presence of it.
BC Law: You argue in the book that corporations have been treated as citizens in many ways, back to Colonial times.
KG: Well, they’ve certainly been able to assert constitutional rights since even before Chief Justice John Marshall wrote in the famous Dartmouth College case that corporate entities can assert constitutional claims. The Court has been trying to figure out the correct doctrinal lines ever since.
Most of us agree, I think, that groups of people — associations, organizations—can be rightful claimants of constitutional rights. Whether it be Planned Parenthood, the Boy Scouts, the NRA, unions, or Boston College. Those are all entities that clearly have constitutional rights that can properly bring constitutional claims.
Once you’re there, it’s really hard to draw a line around constitutional rights that include groups of people but doesn’t include corporate entities. If question is can you exclude for-profit companies from all constitutional claims, the answer is clearly no. At the same time, corporations should not have the same rights as natural persons. You have to draw lines. Once you realize that you have to draw lines, the hard question is where you draw those lines. That’s a really difficult chore. I think I’ve drawn some lines that make some sense, but I can understand why reasonable people might draw different lines. But you can’t draw the line in such a way to exclude corporations from all assertions of constitutional rights.
BC Law: One of the things that you’ve talked about is the idea of creating, for example, a beneficial tax status so corporations could perhaps voluntarily give up some of their rights in exchange for tax benefits.
KG: I don’t talk about that in the book but it’s in a chapter in a new book that’s coming out, in which a selection of scholars are writing about different ideas on how to respond to Citizens United. In that book I argue that you could have a tax status that corporations could opt into. That benefit could be conditioned on the corporations being limited from engaging in political speech or political contributions or expenditures.
BC Law: Like a 501(3)(c)?
KG: Exactly right. The benefit of that is that a lot of corporations, a lot of business executives I talk to, don’t want to be engaged in political speech or political spending. The only reason they do so is because their competitors are, so in a way it’s a race to the bottom. If they could be assured that the competitors aren’t engaging in political speech or in political spending, they wouldn’t do it either. They’re not going to unilaterally disarm. They’re only going to disarm if everybody else is going to disarm.
BC Law: You’re saying that one solution would be for corporations to give up some of the rights of citizens?
KG: I think that is a possibility, and I think there are various ways in which to construct that outcome.
BC Law: Let’s go back to the idea of how stakeholders other than shareholders need to have a role in governance. Why does this matter, and how do you see it playing out?
KG: In America today, in fact worldwide, corporations are among the most powerful, biggest economic powers, right? They rival the power of nations. Yet they are governed, at least in the United States, by a very homogeneous set of managers that tend to prioritize the interests of shareholders above all. They’re managed on behalf of shareholders and shareholder value, which tends to benefit a sliver of the economic elite.
BC Law: Yes.
KG: In America, two-thirds of all capital assets are owned by a sliver of the richest Americans. If corporations are managed on behalf of that sliver and use all their power on behalf of that sliver, of course they’re not going to be good citizens, of course their activity in politics is going to be skewed toward trying to achieve things that aren’t good for society. Of course.
Now, the question is, what do we do about that fact? What do we do with that economic power that’s misused and mishandled? One way to do it would be to address it in the constitutional space, which I think is really difficult to do. You could fiddle around the edges, which I talk about in the book, but the core or constitutional power of corporations is going to have to stay, because there’s no good way to draw those doctrinal lines.
The real way to deal with that problem of corporate power is on the corporate governance side. That is to encourage corporations to be more like people, to encourage corporations to have a much broader range of obligations and have a much more robust social contract that includes public welfare and includes the interests of their employees, consumers, and suppliers.
BC Law: Encourage? By what means?
KG: There are a bunch of different ways to do this. You can encourage it by way of consumer pressure; you can encourage it by way of investor pressure. There are also regulatory and legal mechanisms to encourage it and require it. One is to change the nature of fiduciary duty so that managers and companies are required to take into account the interests of all their stakeholders. This is the nature of fiduciary duty in a number of other industrialized nations. We are the anomaly, where we ask corporations to take into account only the interests of shareholders. We could change fiduciary duty, and we could change the structure of corporate governance.
We could change the nature of, for example, boards of directors, to include the interests of stakeholders. In Germany, half the supervisory board of large corporations—like Mercedes Benz, BMW, and Siemens—is elected by employees and represent the interests of employees in that decision-making structure.
BC Law: That is mandated or enforced by …?
KG: By law. In fact, this is something that has been periodically raised as a possibility in the US law. It was a live regulatory option in the ’70s. Elizabeth Warren has raised it again as a possibility in, her proposed Accountable Capitalism Act.
It may seem far-fetched that we in America could achieve this. But I think if our political energy were shifted away from changing constitutional doctrine and instead focused on adjusting corporate governance, I think there are some attainable goals here.
BC Law: And you think that, in effect, this would change how corporations view their personal responsibility as citizens?
BC Law: I just put the word personal in there.
KG: Yes, in fact that makes sense, right? We’re big believers in personal responsibility in America. But we don’t really hold corporations to have personal responsibility, except by way of external regulation or tort law and the like. I think if we embedded this sense of personal responsibility by way of structure and governance we could achieve some real change here. Of course, corporations are not human beings, so they can’t be incentivized to take into account their personal responsibility the way that you and I can, right?
BC Law: Yes.
KG: We can be shamed, we can be patted on the back, our reputation matters to us as human beings. It’s harder to figure out how corporations can be incentivized to have a sense of personal responsibility. The way you do that is by injecting democracy into them, having the corporate governance be more pluralistic, and make them see their roles as more robust and broad-gauged.
BC Law: A more broadly based governing board will be answerable to just more needs. For example, you brought up the point of CEO compensation. If employees make up half the board, they’ll be going, ‘Wait a minute, the employees deserve some of this,’ right?
KG: Absolutely. That’s a good example that’s worth talking more about, which is that there have been a number of regulatory initiatives trying to constrain this spread between the CEO pay and employee pay. You could tax CEO pay, or you could require disclosure of this differential. You could regulate it. Or you could just say corporations should have employee representatives on the board. I think the latter would be more efficacious than a bunch of command and control regulations.
BC Law: It would also probably affect other issues: safety, health, OSHA issues, et cetera.
KG: Right. I argue, not in this book but in my first—The Failure of Corporate Law—that corporate governance adjustments might be a more efficient way to regulate corporations than all these myriad external command and control requirements. You’ve got to have this kind of disclosure in the workplace. You’ve got to have this OSHA regulation about the size of ladders. You’ve got to have this regulation with regard to CEO pay. You could achieve a lot of those goals by changing the nature of governance, and it might be more efficient and more cost-effective.
BC Law: That makes sense. It seems like the book basically is about, how to, if not equalize, then balance the power between a large, financially powerful institution and individuals if they’re both regarded as the same. Is that more or less accurate?
KG: That’s right. The nature of corporations is that they receive a lot of legal powers that you and I don’t have. They can live forever, they have limited liability, they can receive their corporate charter, their birth certificate, wherever they choose. We didn’t have much choice about where we were born, we don’t have unlimited life, and we don’t have limited liability. The question is, given all those rights, given all those benefits, what obligations can we reasonably impose on corporations?
I do think corporations ought to be held to a set of obligations that weigh against those benefits. I just think the way to enforce those obligations is not in the constitutional space, but in the corporate governance space.
BC Law: Are there any such rules, regulations, or laws pending, or are there other cases pending that you know of that are going to affect corporate governance or corporate citizenship?
KG: The Elizabeth Warren initiative is the one that’s most interesting to me.
Sen. Warren has proposed a bill, the Accountable Capitalism Act. She says a corporation that gets to be a certain size has to be chartered at the national level, not at the state level, so Delaware’s dominance gets undermined. If you get to a certain size, you have to have workers on the board, employee representatives on the board. If you want to engage in political spending, it has to be a product of a board vote, which would therefore require employees to have a hand in that. In this Congress that doesn’t have much of a chance, but it’s really interesting that a presidential candidate has chosen that kind of issue as something that she wants to be running on.
Other than that, I do think that there are some ideas in the constitutional space that’s worth talking about. Last year I helped author a brief in the Masterpiece Cakeshop case. This was the case about the baker who refused to bake a wedding cake for a gay couple. The brief was on behalf of corporate law professors e saying that a respect for corporate personhood should lead the court to reject the baker’s claim that he had a right to refuse to bake the cake. That seems a little awkward, right? Why would corporate personhood mean that the corporation did not have the right to refuse to serve the gay couple?
The answer is that it was the baker who was asserting the religious freedom right, not the company. The baker was saying that he had a right to force the company not to sell the cake. The only way that is true is if you reject corporate personhood. In other words, corporate personhood means corporate separateness. The corporation is separate from its investors. But in Masterpiece, it was the baker who claimed the religious interest, who was the religious person and wanted to project that view onto the company.
But the reason the baker formed the company was to separate himself from the company, to get the benefit of unlimited life, of limited liability and the like. He wanted to be separate for reasons of economics, but unified when it came to religion. All this is to say is that, a respect for corporate personhood in the constitutional space actually leads to a greater sense of responsibility on behalf of the company to serve the public. It can’t be just assumed to have the same interests, rights, and beliefs as the shareholders.
BC Law: I think I follow that. I have to ask, since question two has passed, do you see a way forward, or a way of directing this? [Massachusetts voters passed a popular referendum in November 2018 calling on the state to name a commission to study and propose a constitutional amendment to overturn Citizens United.—Ed.]
KG: Yes. How question two is operationalized is that a commission is being formed to analyze, to evaluate, to research, and to propose some language as a possible constitutional amendment to address the problem of money in politics. I think it’s possible to come up with a proposed constitutional amendment that would address the problem of money in politics.
I think the commission would just need to be informed about, and convinced of the fact that the problem is money in politics, not necessarily corporate money. It’s all money. I think if the constitutional amendment were aimed at controlling money in politics, then I think we could develop a consensus around controlling that. I think if the commission focuses on the rights of artificial entities, corporations, and other aggregations of people, which the language of the referendum seemed to suggest, I think that would be a disaster.
BC Law: It’s losing the forest for the trees.
KG: That’s right.
BC Law: Do you see other states or municipalities tackling corporate citizenship? I don’t want to just say Citizen United.
KG: There’s been a number of cities, towns, localities, states that have passed resolutions of one kind or another to call for Citizens United to be overturned. Again, I think it depends on how it’s overturned. It could be overturned more broadly, it could address money in politics, or it could be aimed at corporations. Some of the resolutions aren’t altogether clear, but I think there is reason to question the role of money in politics. If we were to create a broad-based movement to bring about a change in that, I think that’s something that I could get on board with.
BC Law: It sounds like you’re saying the solution is sort of two-fold: Address the issue of money in politics on the larger scale, and then on the corporate-citizen scale, regulate corporate governance.
KG: That’s exactly right. They can go on parallel tracks. They can go at various speeds. I do think that progressives have spent a lot of energy on fighting corporate personhood, and I think that’s unfortunate. If they were to recalibrate their energies toward adjusting corporate governance to take into account the interests of employees, stakeholders, environment, public welfare, there’s some real progress that we could achieve on that front. We could have states around the county asserting their ability to regulate companies doing business in their states, like California has recently done.
Massachusetts could do the same thing. I think there is an increasing role for human being citizens to question the way corporations are regulated, and governed. Unfortunately, so much of our progressive energy has been spent on questioning corporate constitutional rights. If we oriented that energy toward changing and adjusting corporate governance, I think we would be better off.
BC Law: It does seem like state regulations won’t have any teeth without some federal authority, because everyone just incorporates in Delaware.
KG: That’s right, although I do think that there are two ways to do it. We could either go on the national scale, or states, like Massachusetts, could reassert their power to govern.
BC Law: If you do business in our state.
KG: At least if you’re headquartered here. This really goes inside baseball, but there’s something that’s called the Internal Affairs Doctrine, and it says the law of the state where you’re incorporated governs. That’s why everybody goes to Delaware. Delaware has got this set of laws that corporations and corporate managers really like, so they all go to Delaware to get their incorporation papers. But of course Delaware does not require that they do anything else there.
Now, the Internal Affairs Doctrine is a rule that other states don’t have to follow. Other states need not acquiesce to Delaware’s dominance. Massachusetts could say, if you’re headquartered here in Massachusetts, we’re going to govern you. Then, it would be a fight between Massachusetts and Delaware on who has the best claim to regulate the internal affairs of those corporations. There are really good arguments that Massachusetts has the stronger claim to regulate a given company based here even if it is chartered in Delaware.
BC Law: Has your book reignited the argument over corporate citizenship, or do you think it has played a role in the argument?
KG: What I hope my book does is to show that there are a number of ways through this thicket in which we find ourselves. I don’t think that the right answer is to take away all corporate rights And it is not to say that money is not speech. When I contribute to Planned Parenthood. I’m showing a point of view, and I think we need to recognize that sometimes money is required in our modern world.
BC Law: In our capitalist world.
KG: Right, in our modern world to assert a point of view. I think what working our way through this thicket will take more thought than what we can put on a bumper sticker. My hope is that a more principled analysis of both constitutional law and corporate governance can lead us to some answer that actually makes more sense, and that can be operationalized in real ways that help real people. I always start my talks talking about my grandfather. He was a coal miner. I think it’s important, whenever academics write these books, to ask what the motivation is. Books can be more than just an intellectual exercise trying to solve a puzzle.
The motivation behind the book for me is, I have seen in my own life the role of how corporations can affect people’s lives, both for good and for ill. I grew up in a little town where the good jobs were at a hosiery mill, where they made pantyhose and socks, and it was run by a local family. Then, when that local family sold the factory to a big company out of town, the factory was closed and all those people were thrown out of work. The decision-makers far away thought they could make more money by making those socks and pantyhose somewhere else.
At the same time, before I went to law school I worked for Levi Strauss and Company, that had a corporate culture that took seriously the rights and interests of its employees, its communities. Even in an industry that was very competitive and had very small profit margins, they took their social obligation seriously. I think the difficult reality is that some companies are on balance good, and provide viable benefits, and are good citizens, and some companies are on balance poor, and costs us as a matter of public welfare.
I think the goal should be making more of these companies that are operating poorly, that are externalizing their costs, that are hurting our environment, and stealing from their employees and customers, into companies that are providing real value, not only for the customers, their shareholders, and employees, but for the public as well. It’s possible to be that.
The question is, how do we make more of the bad companies into good companies? That is something that law, lawyers, and regulators can help incentivize, and it’s not just going to be achieved by saying that all companies are bad, and all companies should be thrown out of the public space.
BC Law: Limiting money and changing corporate governance also seems doable because it allows for incremental change, so it’s not an all or nothing.
KG: That’s right. The one thing we know in this country is that we have to look for places where we can achieve incremental change. Part of it is rhetoric and how we talk about things. I do think that the one danger of the response to Citizens United is to say that corporations should be excluded from the public space, and that they should be isolated.
I think that it’s a much more powerful rhetoric to say no, if you’re going to be citizens, if you’re going to be people, then you should act more like citizens. If you’re going to be a part of this public debate, if you’re going to play in the public square, then you should act like somebody who cares about something other than yourselves. That’s the obligation of citizens in a democracy.
BC Law: As a constitutional expert, how does this book fit into your continuum of scholarship?
KG: This is, in some ways, a culmination of my two decades of being a scholar, because I couldn’t have written this book without all of the work that I’ve done over two decades in corporate governance. You have to know that in order to see the defects in the Citizens United decision, and to see what possibilities exist in moving forward. At the same time, I couldn’t have written this book without the work I’ve done over the last 20 years in the constitutional law space. Both as a scholar, and even as a activist when it came to suing the Pentagon 15 years ago.
I could not have written this book without the liberty and freedom that BC has given me to dabble in both spaces. For most of my career, I was a little bit of an odd duck, even for a law professor, which is that I had this interest in corporate governance, corporate accountability, stakeholder theory, and also free speech law, constitutional law. Because I’ve been able to be at a place like BC that has allowed me to be this odd duck academically, and to bridge areas of study that most scholars don’t, and because BC has allowed me to do that, and encouraged me to do that, I was able to write this book.
After Citizens United, the only people who can really critique Citizens United to figure out a way forward are people who have both of those areas of expertise. I was just lucky that I had been doing work in both of those areas before that time, so once Citizens United happened, I was able to take advantage of both of those areas of expertise to think about responses and to write this book.