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Legal Perspectives on Corporate Responsibility: Contractarian or Communitarian Thought?

Published online by Cambridge University Press:  20 July 2015

Jeffrey Bone
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This paper reviews the accountability regimes of contractarian and communitarian theory. The contractarian theory is further elaborated with the developments of shareholder primacy, the stakeholder theory and team production model (TPM), and the communitarian themes of single constituency, Catholic social thought (CST) and corporate citizenship. Contractarian theory is rooted in liberalism, where as communitarian theory is a humanist discipline. While contractarians stress the value of competition, liberty and freedom, the communitarians emphasize cooperation, justice and civic responsibility. The purpose of this analysis is to frame corporate ‘personhood’ in the perspective of the existing theories. This article suggests that corporate citizenship has been revived under Canadian law which contemplates a communitarian corporation.

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Research Article
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Canadian Journal of Law & Jurisprudence , Volume 24 , Issue 2 , July 2011 , pp. 277 - 304
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Copyright © Canadian Journal of Law and Jurisprudence 2011 

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References

I would like to thank Professor Shaun Fluker and the anonymous reviewers for their helpful suggestions.

1. For instance, “[t]he idea of “corporate responsibility” has attracted increased media attention since the early 1970’s, but the concept has been around for more than a century and typically involved helping to build civil society.” McMullen, Alia, “New Streams of Responsibility: A Company’s Social Work Should be Aligned with its Business”, National Post (23 March 2010) FP 8 Google Scholar.

2. Theodore Roosevelt, (First Annual Message to Congress, December 3, 1901) [unpublished] online: Miller Center of Public Affairs, University of Virginia http://millercenter.org/scripps/archive/speeches/detail/3773.

3. Friedman, Milton, “The Social Responsibility of the Corporation is to Increase its Profits” (13 September 1970) NY Times Magazine 32 Google Scholar [Friedman].

4. Crane, Andrew & Matten, Dirk, Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization, 2nd ed (Oxford: Oxford University Press, 2007) at 44 Google Scholar [Crane].

5. Bakan argues that if corporations were actually people, they would be classified as psychopathic because as ‘externalizing’ machines, corporations disregard their social impact on communities. Under this premise, corporations are not capable of achieving socially constructive goals. See Bakan, Joel, The Corporation: The Pathological Pursuit of Profit and Power (New York: Simon & Schuster, 2004).Google Scholar

6. French, Peter, Collective and Corporate Responsibility (New York: Columbia University Press, 1984) at ix CrossRefGoogle Scholar [French].

7. Khanna, Parag, “Our neo-medieval world”, National Post (4 March 2011) A12 Google Scholar.

8. Micklethwait, John & Wooldridge, Adrian, The Company: A Short History of a Revolutionary Idea (Toronto, ON: Random House Inc, 2003) at 4 at xvii Google Scholar [Micklethwait].

9. Further, communitarian corporate theory has also been labelled ‘protectionism’. See Daniels, Ronald, “Stakeholders and Takeovers: Can Contractarianism be Compassionate: The Corporate Stakeholder Conference: Part 1—The Adequacy of Stakeholder Contractual Protection” (1993) at 316 in “Special Issue on the Corporate Stakeholder Debate: The Classical Theory and its Critics” (1993) 43 UTLJ 315 CrossRefGoogle Scholar.

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11. A translation of the term would essentially equate to ‘Society of Publicians.’ Some translate this entity as the ‘societates’ pointing to its first usage in Rome for the collection of government taxes. William Blackstone agreed with the assertion that the corporation is a Roman invention. Blackstone, William, Blackstone’s Commentaries: With Notes of Reference, to the Constitution and Laws, of the Federal Government of the United States; and of the Commonwealth of Virginia, translated by Tucker, St. George, 2nd ed (Philadelphia, PA: William Young Birch and Abraham Small, 1803) at 469 Google Scholar [Blackstone].

12. The investments were typically used for public infrastructure, building monuments and raising armies for war. One example would be the second Punic War (218-202 B.C.). See Goetzmann, William & Rouwenhorst, K. Geert, The Origins of Value: the Financial Innovations that Created Modern Capital Markets (Oxford: Oxford University Press, 2005) at 32.Google Scholar

13. Micklethwait, supra note 8 at 8. Guilds were also called: collegia or corpora. Further, these entities provided “security and fellowship in an otherwise forbidding world”, ibid at 12; see Kerr, Michael et al, Corporate Social Responsibility: A Legal Analysis (Markham, ON: LexisNexis Canada, 2009) at 56 Google Scholar [Kerr].

14. Micklethwait, supra note 8 at 4.

15. Ibid at 8. These were typically family ventures, used for the purposes of lending. These entities were akin to partnerships in the sense that every member of the compagnia was jointly liable. This attribute was an important feature because the punishment for bankruptcy was imprisonment or servitude. Therefore, it was crucial; that each member had faith and trust in their business associates. These organizations were used to insulate against the effect of usury, a form of lending at high interest rates which was thought to be immoral. Christians condemned this practice, however carefully used the legal intricacies of the compagnia to avoid it. For instance, usury was prevented in part because the payment of interest was reconciled with Canon Law as a form of compensation. See Ferguson, Niall, The Ascent of Money (New York: Penguin Press, 2008) at 44, 71 Google Scholar.

16. See Welling, Bruce, Corporate Law in Canada: The Governing Principles, 3rd ed (Queensland AU: Scribblers, 2006) at 48 Google Scholar [Welling]: “The right to incorporate was jealously guarded by the French kings” as one such historical example. Further, many profitable businesses in the 19th century did not adopt the corporate model because they wanted to avoid the restrictive influence of the state in forming their corporate charters. For example, Andrew Carnegie formed his steel operation as a limited partnership, and John D Rockefeller set up Standard Oil as a trust.

17. William Blackstone said “[b]ut, as all personal rights die with the person; and, as the necessary forms of investing a series of individuals, one after another, with the same identical rights, would be very inconvenient, if not impracticable; it has been found necessary, when it is for the advantage of the public to have any particular rights kept on foot and continued, to constitute artificial persons, who may maintain a perpetual succession, and enjoy a kind of legal immortality. These artificial persons are called bodies politics, bodies corporate (corpora corporata), or corporations: of which there is a great variety subsisting, for the advancement of religion, of learning, and of commerce; in order to preserve entire and for ever those rights and immunities, which, if they were granted only to those individuals of which the body corporate is composed, would upon their death be utterly lost and extinct”. Blackstone, supra note 11 at 467.

18. Welling, supra note 16. For instance, see the English Bubble Act of 1720 which forbade all Joint Stock Companies which were not registered under Royal Charter or Letters Patent with a public purpose. This was repealed in 1825 paving way for the Joint Stock Companies Act in 1844 and the UK Companies Act of 1862 (25 & 26 Vict c 89) and similar legislation in the rest of the world which did not require a public purpose as part of incorporation. Part of the reason for this evolution was on account of the sheer demand for incorporation in commerce and the fact that governments could not enforce and review a public service feature as part of every application to incorporate. Therefore, general incorporation replaced special incorporations in most jurisdictions. Kerr, supra note 13 at 56-59.

19. 7 & 8 Vict c 110 (UK). Note that this act did not provide for limited liability of shareholders, which was not introduced in England until 1855 with the Limited Liability Act 18 & 19 Vict c 133.

20. Welling, supra note 16 at 51.

21. Additionally, the historic public purpose feature of a corporation was also prevalent in the United States. For example, the state of Massachusetts began as the Massachusetts Company, “with the “freeman” stockholders transformed into citizens” when the corporation eventually became a Commonwealth State of the Union in the United States. Kerr, supra note 13 at 57.

22. Ibid at 50.

23. 13 & 14 Vict c 28 (Can 1850) cited in Welling, supra note 16 at 51. Further, Letters Patent registration remained a part of the corporate mosaic in Canada. However, in 1897 British Columbia became the first province to adopt the English-model of memorandum and articles of association. Ibid at 51-54.

24. Ibid at 55.

25. Dickerson, Robert, Howard, John & Getz, Leon, Proposals for a New Business Corporations Law for Canada (The Dickerson Report) vol 1-2 (Ottawa, ON: Information Canada, 1971)Google Scholar [The Dickerson Report].

26. Welling, supra note 16 at 56. See in the Dickerson Report: The primary purpose of corporation law is not regulatory. They are enabling acts, to authorize businessmen to organize and to operate their business, large or small, with the advantages of the corporate mechanism. They are drawn with a view to facilitate efficient management of business and adjustment to the needs of change. They provide the legal frame and financial structure of the intricate corporate device by which business can be carried on an in which the combined energies and the capital of the managers and of many investors may work together. They deal with the internal affairs of the organization, the content of the articles of incorporation, the rights of shareholders, the power and liabilities of directors…. Some of these provisions are regulatory, seeking to prevent abuses of management and also of the majority and to protect minority shareholders and creditors. Dickerson, Robert, Howard, John & Getz, Leon, Proposals for a New Business Corporations Law for Canada (The Dickerson Report) vol 1 (Ottawa, ON: Information Canada, 1971) at para 8 Google Scholar.

27. Canada Business Corporations Act, RSC 1985, c C-44.

28. See Welling, supra note 16 at 56: “The CBCA variation on the Ontario initiative swept the country. Manitoba, Saskatchewan, Alberta, New Brunswick, Ontario, Yukon, and Newfoundland adopted statutes remarkably similar to the CBCA.”. Further, New Zealand and several Caribbean countries have also enacted corporate statutes as variations of the CBCA. Ibid at 57.

29. Ibid at 59.

30. Ibid.

31. Rotman, Leonard, Fiduciary Law (Toronto, ON: Thomson Canada Ltd, 2005) at 415 Google Scholar [Rotman].

32. Welling, supra note 16.

33. Micklethwait, supra note 8 at xv. Further, “[t]his privilege of immortality, not to mention the protection that the artificial corporate form has afforded various venal people down the ages, has often infuriated the rest of society—particularly governments. Hence, there has been a lengthy series of somewhat bad-tempered laws trying to tamper with the concession”. Ibid.

34. As mentioned previously, as early as 1765 Sir William Blackstone in his infamous Commentaries on the Laws of England advocated for strong public governance over corporations: “For corporations, being composed of individuals, subject to human frailties, are liable, as well as private persons, to deviate from the end of their institution. And, for that reason, the law has provided proper persons to visit, inquire into, and correct all irregularities that arise in such corporations”. Blackstone, supra note 11 at 480. The assumption of Blackstone was of course tied to the notion that all corporations must have a public function in the service of greater society.

35. Dartmouth College v Woodward, 17 US (4 Wheat) 518, 4 L Ed 629 at 636 (1819) [cited to L Ed].

36. The author continued: “vested, by the policy of the law, with a capacity of acting, in several respects, as an individuals, particularly of taking and granting property, contracting obligations, and of suing and being sued, of enjoying privileges and immunities in common, and of exercising a variety of political rights, more or less extensive, according to the design of its institution, or the powers conferred upon it, either at the time of its creation, or at any subsequent period of its existence.” See Kyd, Stewart, A Treatise on the Law of Corporations (London: J Butterworth Fleet-Street, 1794) at 13.Google Scholar

37. Freund, Ernst, The Legal Nature of Corporations (Kitchener, ON: Batoche Books, 2000) at 32.Google Scholar

38. In this light, the personality of a corporation can only be the expression of the sum of its parts: “[t]he aggregate must partake of the nature of its constituent elements, and the elements being individuals qualified by subjective differentiation, the aggregate body must be qualified in like manner.” Ibid.

39. Ibid at 33.

40. Further, a 1882 treatise on corporate law advanced the notion of the aggregate theory: “a corporation is not in reality a person or a thing distinct from its constituent parts. The word “corporation” is but a collective name for the corporators or members who compose an incorporated association”. Morawetz, Victor, A Treatise on the Law of Private Corporations, 2nd ed (Boston, MA: Little Brown & Co, 1886) at 2.Google Scholar

41. Lee, Ian, “Corporate Law and the Role of Corporations in Society: Monism, Pluralism, Markets and Politics” (2006) 85 Can Bar Rev 1 at 6Google Scholar [Lee].

42. Horwitz, Morton, “ Santa Clara Revisited: The Development of Corporate Theory” (1985) 88 W Va LR 173 at 223Google Scholar.

43. Rotman, supra note 31 at 418.

44. Kerr, supra note 13 at 57.

45. Lee, supra note 41 at 6.

46. Dodd, Merrick, “For Whom are Corporate Managers Trustees?” (1932) 45 Harv LR 1145 CrossRefGoogle Scholar [Dodd].

47. Allen, William, “Our Schizophrenic Conception of the Corporation” (1992) 14 Cardozo LR 261 at 266-70Google Scholar.

48. Bendall, Jem, “Barricades and Boardrooms: A Contemporary History of the Corporate Accountability Movement” Technology Business and Society Programme Paper No. 13 (Geneva: University Research Institute for Social Development, 2004) at 7 Google Scholar, as reported in Kerr, supra note 13 at 28.

49. For instance, consider various models of the corporation as based in the economics discipline. These economic theories conclusively and unanimously support the shareholder primacy norm. See Hart, Oliver, “An Economist’s Perspective on the Theory of the Firm” (1989) 89 Colum LR 1757 CrossRefGoogle Scholar.

50. Sandel, Michael, “Introduction” in Sandel, Michael, ed, Liberalism and its Critics (Oxford; Basil Blackwell, 1984) at 4 [Sandel]Google Scholar. Some legal scholars have associated ‘the good’ with ‘politics’ and ‘the right’ as ‘markets’ in terms of two streams of social decision-making. Lee, supra note 41.

51. Sandel, supra note 50 at 1.

52. Fiesel, Corrine, “Fiduciary Duties of Directors, Corporate Governance and the end of Shareholder Primacy” in Puri, Poonam, ed, Corporate Governance and Securities Regulation in the 21st Century (Toronto, ON: Butterworths, 2004) 61 at 77 [Fiesel]Google Scholar.

53. Ostas, Daniel, “Deconstructing Corporate Social Responsibility: Insights from Legal and Economic Theory” (2001) 38:2 Am Bus LJ 261 at Am Bus LJ 261 at 283.Google Scholar

54. Butler, Henry & Ribstein, Larry, “Opting out of Fiduciary Duties: A Response to the Anti-Contractarians” (1990) 65 Wash LR 1 at 8-10Google Scholar.

55. Rotman, supra note 31 at 417.

56. See Franklin, Daniel, “The Next Question”, The Economist 386:8563 (19 January 2008) 8 at 8Google Scholar.

57. Friedman, supra note 3 at 33.

58. Hansmann, Henry & Kraakman, Reinier, “The End of History for Corporate Law” (2001) 89 Geo LJ 439 at 440Google Scholar.

59. Bainbridge, Stephen, “Director v. Shareholder Primacy in the Convergence Debate” (2002) UCLA School of Law Research Thesis No. 02–04 Google Scholar. SSRN, online at SSRN: http://ssrn.com/abstract=299727 at 2 [Bainbridge].

60. Ibid at 2.

61. Ibid at 8. This is a reference to Plato’s description of Socrates explaining the education of the philosopher king as for “the public good, not as though they were performing some heroic action, but simply a matter of duty.” Plato, The Republic, translated by Jowett, Benjamin (New York: Random House, 1991) at 289–90Google Scholar as cited in Bainbridge, supra note 59 at 8. On this basis, Bainbridge argues that the American position is firmly rooted in the director primacy norm which incorporates the shareholder primacy model. Further, Bainbridge wrote: “[i]f U.S.-style corporate governance has systemic economic advantages, those advantages are attributable not to shareholder primacy but to the numerous legal regimes that enforce director primacy.” Ibid at 21. Canadian law is synonymous on this point of director primacy, however arguably contemporary Canadian corporate law rejects the shareholder wealth maximization norm.

62. See Chomsky, Noam, Profit Over People: Neoliberalism and Global Order (New York: Seven Stories Press, 1999).Google Scholar

63. O’Connor, Marleen, “American Corporate Governance and Resilient Families: Investing in Children’s Human Capital in Turbulent Times” (2003)CrossRefGoogle Scholar, online: SSRN. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=439420.

64. Wade, Cheryl, “Corporate Governance as Corporate Social Responsibility: Empathy and Race Discrimination” (2002) 76 Tul LR 1461 Google Scholar.

65. Testy, Kellye, “Adding Value(s) to Corporate Law: An Agenda for Reform” (2000) 34 Ga LR 1025 Google Scholar.

66. The stakeholder approach is also known as the “other-constituency” theory and was first conceived in the 1980’s during a series of corporate hostile takeovers on Wall Street. Fiesel, supra note 52 at 78. Today over thirty U.S. states have legislation allowing corporate directors to consider the interests of corporate constituents other than shareholders and at least one Canadian province also has such legislation: The Business Corporations Act (Alberta), SA 1981, c B-15, s 117(4).

67. Blair, Margaret & Stout, Lynn, “A Team Production Theory of Corporate Law” (1999) 85 Va LR 247 at 253Google Scholar [Blair & Stout].

68. Beyond his social contract theories, Hobbes had an inherently negative view of corporations. He said: “the great number of corporations, which are as it were many lesser commonwealths in the bowls of a greater, like worms in the entrails of a natural man.” Hobbes, Thomas, Leviathan (Indianapolis, IN: Hackett, 1994) at 218.Google Scholar

69. Rawls, John, A Theory of Justice (London: Oxford University Press, 1972).Google Scholar

70. Taylor, Charles, Philosophy and the Human Sciences: Philosophical Papers 2 (Cambridge: Cambridge University Press, 1985) at 187 CrossRefGoogle Scholar [Taylor].

71. Breslin, Beau, The Communitarian Constitution (Baltimore, MD: John Hopkins University Press, 2003) at xiii Google Scholar [Breslin].

72. Fiesel, supra note 52 at 79.

73. Ibid.

74. Blair & Stout, supra note 67 at 249.

75. Fiesel, supra note 52 at 80; see Blair & Stout, supra note 67 at 265-66.

76. Globalization has facilitated a corporate institution that functions in a transient manner and the individuals who make up the highly fluid set of stakeholders changes rapidly within a single corporation. For instance, globalization has occasioned the onset of the institutional investor and the corporate raider in the guise of unforgiving hedge funds and private equity conglomerates. Those stakeholders have no loyalty to ensuring jobs remain in a jurisdiction or that employees positions should be preserved. It is evident that corporate constituents are motivated to preserve profit for themselves and push costs on to the other corporate constituents. For a critique on the implications of globalization and the corporation see Saul, John Ralston, The Collapse of Globalism and The Reinvention of the World (Toronto, ON: Viking Canada, 2005).Google Scholar

77. Blair & Stout, supra note 67 at 291.

78. Note this is dealt with through the mechanism of the oppression remedy in Canada. See Ben-Ishai, Stephanie & Puri, Poonam, “The Canadian Oppression Remedy Judicially Considered” (2004) 30 Queen’s LJ 79 Google Scholar.

79. See Ashford, Robert, “What is New in Corporate Social Responsibility?: The Socio-Economic Law and Corporate Social Responsibility” (2002) 76 Tul LR 1187 Google Scholar.

80. Ibid at 1200. Further, an important trend in the western world, as Harvard Professor Sandel has pointed out, is the ‘marketization’ of government. Thus, government has been replaced by cost benefit analysis as opposed to moral judgment. In this sense ‘the citizen’ has been replaced by the ‘consumer.’ The difference is a consumer is a fixed concept based on the rational person from the economic model, whereas the citizen is not merely a self-interested individual but has concern for the ‘common good.’ Sandel believes governments exist to protect people and work in the ‘common good.’ Sandel, Michael, “A New Citizenship: A New Politics of the Common Good” (Reith Lecture, BBC Radio, 30 June 2009)Google Scholar [unpublished] [Sandel, “Common Good”].

81. Kuras, Ruth O, “Corporate Social Responsibility: A Canada-U.S. Comparative Analysis” (2002) 28 Man LJ 303 at 306Google Scholar [Kuras].

82. See Fiesel, supra note 52 at 77.

83. Kuras, supra note 81 at 306.

84. Waitzer, Edward & Jaswal, Johnny, “ Peoples, BCE, and the Good Corporate ‘Citizen’” (2009) 47 Osgoode Hall LJ 439 at 443Google Scholar [Waitzer].

85. The communitarian critique of liberalism argues persuasively for a different view of liberalism that gives “fuller expression to the claims of citizenship and community.” Sandel, supra note 50 at 5.

86. For instance, “the civil rights movement of the 1960s might be justified by liberals in the name of human dignity and respect for persons, and by communitarians in the name of recognizing the full membership of fellow citizens wrongly excluded from the common life of a nation”; and further, “if we are defined by the communities we inhabit, then we must also be implicated in the purposes and end characteristic of those communities.” Ibid at 6.

87. Breslin, supra note 71 at 40.

88. Ibid at 37. This is also a teleological argument considering that individuals have purposes or ends. If the liberal conception is true, then the choices we make would be hallow; without understanding or values. Ibid at 38.

89. Sandel, Michael, Democracy’s Discontent: America in Search of a Public Philosophy (Cambridge, MA: Harvard University Press, 1996) at 13.Google Scholar

90. Taylor, supra note 70 at 209. According to Taylor, even the liberal idea of freedom cannot exist apart from society, but only in a common society as an ideal.

91. For instance, even if we organize people as individuals who do not promote common bonds; why would we want to live in such a society when there is no hope of sharing anything meaningful? Communitarians ask what constitutes human identity. What influences the choices we make? That decision is deeply, if not completely constrained by the relationships in the community that nourish us. We cannot escape the control of culture, heritage or emotional surroundings. Breslin, supra note 71 at 37. As poignantly said by Alasdair MacIntyre: “I understand the story of my life in such a way that it is part of the history of my family or of this farm or of this university or of this countryside; and I understand the story of the lives of other individuals around me as embedded in the same larger stories, so that I and they share a common stake in the outcome of that story and in what sort of story it both is and is to be”. MacIntyre, Alasdair, “Is Patriotism a Virtue?” in Theorizing Citizenship, ed by Beiner, Ronald (Albany: State University of New York Press, 1995) 209 at 224Google Scholar.

92. As Isaiah Berlin noted, “the only persons who can so recognize me, and thereby give me the sense of being someone, are the members of the society to which, historically, morally, economically, and perhaps ethically, I feel I belong.” Berlin, Isaiah, “Two Concepts of Liberty” Four Essays on Liberty (Oxford: Oxford University Press, 1969) 118 at 156Google Scholar.

93. Sandel, supra note 50. For instance, note that the ‘common good’ is a principle tied into the Thomistic model of virtue ethics. The Augustinian tradition of human liberty is understood as the freedom to do ‘the good.’ Sargent, Mark, “Competing Visions of the Corporation in Catholic Social Thought” School of Law Working Paper Series No. 5 (Villanova: Villanova University School of Law, 2004) at 6, 22Google Scholar [Sargent].

94. Sandel says that “[i]f the party of the common good is right, our most pressing moral and political project is to revitalize those civic republican possibilities implicit in our tradition but fading in our time.” Sandel, supra note 50 at 7. Further, this is given public expression by human rights academics such as Michael Ignatieff, who argues for a democratic global renewal based on civic nationalism rather than ethnic nationalism: “[C]ivic nationalism maintains that the nation should be composed of all those—regardless of race, color, creed, gender, language, or ethnicity—who subscribe to the nation’s political creed. This nationalism is called civic because it envisages the nation as a community of equal, rights-bearing citizens, united in patriotic attachment to a shared set of political practices and values. This nationalism is necessarily democratic, since it vests sovereignty in all of the people.” Ignatieff, Michael, Blood and Belonging (Toronto, ON: Penguin Books Canada, 1994) at 6.Google Scholar

95. Communitarianism views the corporation as an individualist entity with the rights and corresponding responsibilities of a natural person. As such, communitarians argue that legal constraints are necessary to ensure corporations are accountable to the society in which they operate. See Etzioni, Amitai, The Spirit of Community: The Reinvention of American Society (New York: Simon & Schuster, 1993)Google Scholar. Therefore, in the communitarian vision of the corporation, the special privilege of corporate personhood requires the corporation to observe socially responsible conduct. Peter French has argued that corporations may have a moral responsibility depending on which organizational structure defines them. He describes an “aggregate collectivity” as a collection of individuals. Change in the membership of these individuals is not compatible with the aggregate identity. French, supra note 6 at 5. Comparatively, the ‘conglomerate collectivity’ is an organization of individuals where its identity supersedes the identity of the individuals in the organization. Further, the “existence of a conglomerate is compatible with varying membership” as that does not change the identity of the conglomerate. Ibid at 13. Conglomerates are characterized by internal and binding decision-making procedures, enforcing standards and exercising power over the membership. Ibid at 13-14. Ultimately, French supports a conglomerate understanding of the corporation as an entity that carries moral responsibility, but the individual members are not responsible for the action of the conglomerate itself.

96. Sandel, “Common Good”, supra note 80.

97. Fiesel, supra note 52 at 77.

98. Ibid.

99. Stephen Bottomley categorized the ontology of corporate theory into concession, contractual and constitutional theory. See Bottomley, Stephen, “The Birds, the Beasts and the Bat: Developing a Constitutional Theory of Corporate Regulation” (1999) 27 Fed LR 243 Google Scholar.

100. Ibid.

101. Kerr, supra note 13 at 65.

102. Further, the constitutional theory as described by Richard Eells envisions the corporation as a form of government with formal regulations, procedures and norms. Eells, Richard, The Government of Corporations (New York: Free Press, 1962)Google Scholar. Eells states: “The corporate constitution may now be defined as that body of fundamental principles, whether codified or uncodified, written or unwritten, which in practice determines the authority and power relationships within the core area of administrative co-ordination and in a wider area of its contractual and noncontractual relationships with groups of interests that make contributions to and assert claims upon the corporation.” Ibid at 85.

103. Miller, Arthur, “Constitutionalizing the Corporation” (1982) 22 Technological Forecasting and Social Change 2 at 95CrossRefGoogle Scholar.

104. Millon, David, “Default Rules, Wealth Distribution and Corporate Law Reform: Employment at Will Versus Job Security” (1998) 146 U Pa LR 975 at 976CrossRefGoogle Scholar.

105. Hurst, James Willard, The Legitimacy of the Business Corporation in the Law of the United States 1780-1970 (Charlottesville: University Press of Virginia, 1970) at 105.Google Scholar

106. Millon, David, “The Single Constituency Argument in the Economic Analysis of Business Law” (2007) 1 Washington & Lee Public Legal Studies Research Paper Series 4 Google Scholar.

107. Ford, Henry Sr, quoted by Donaldson, Thomas, Corporations and Morality (Englewood Cliffs, NJ: Prentice-Hall, 1982) at 57.Google Scholar

108. Millon, David, “The Ambiguous Significance of Corporate Personhood” Agora, Stanford, Social Science Research Network Google Scholar http://ssrn.com/abstract=264141 at 2 [Millon].

109. Bainbridge, Stephen, “Catholic Social Thought and the Corporation” (2003)CrossRefGoogle Scholar University of California, Los Angeles School of Law Research Chapter Series online: Social Science Research Network papers.ssrn.com at 1.

110. For instance, see Thomas Aquinas’ words that: “Man should not consider his outward possessions as his own, but as common to all”. Thomas Aquinas, Summa Theologica, Q 66 Art 2 Pt II, 1471.

111. CST contribution to corporate law has not just been through theoretical and scholarly work. The Catholic religious orders use their status as shareholders to promote socially responsible initiatives through the mechanism of shareholder proposals (i.e. access to health care, the contract supplier system, sweatshops, wage inequality, the lack of a sustainable living wages, unfair labour practices, environmental justice, global warming, violence and the militarization of society). See Interfaith Center on Corporate Responsibility (ICCR), online: http://www.iccr.org.

112. Sargent, supra note 93 at 9.

113. This is all viewed by CST as a violation of human dignity. Associated with human dignity is liberty, and economic liberty is essential to the flourishing of the human person. Stabile, Susan, “A Catholic Vision of the Corporation” (2005) St John’s Legal Studies Research Chapter No. 07-0018 1 at 3Google Scholar.

114. The CST legal perspective requires a practice in virtue above a perceived allegiance or loyalty to any one particular group of stakeholders in a corporation. While profit is “essential to the success of the corporation… [it is] merely instrumental, and not the ultimate purpose of the corporation.” Sargent, supra note 93 at 11. At this time, it is unlikely that CST will dominate in corporate legal circles as a theoretical foundation generally speaking, because corporate directors’ and managers’ “attitude to religion ranges from indifference to active hostility.” Lasch, Christopher, The Revolt of the Elites and the Betrayal of Democracy (New York: WW Norton, 1995) at 215.Google Scholar As Mark Sargent wrote, “different critiques indicates that much fundamental theoretical and practical analysis remains to be done before CST can be a useful normative framework for understanding corporate law.” Sargent, supra note 93 at 23. For instance, it is difficult for the CST core principles of human dignity, the ‘common good’ and the reciprocity of rights and obligations to resonate into a secular theoretical paradigm of corporate law. After all, CST is carved out of theological statements made in Papal documents and Bishop Statements, and therefore it is unclear whether these documents can have a meaningful relationship to specific legal content.

115. Dodd, supra note 46.

116. Ibid at 1161. Intriguingly, Dodd quoted an officer of the General Electric Co who offered a warm assessment of this corporate vision and related this to the public obligation and public duty of large corporations to act as good citizens: If there is one thing a lawyer is taught it is knowledge of trusteeship and the sacredness of that position. Very soon he saw rising a notion that managers were no longer attorneys for stockholders; they were becoming trustees of an institution…. One no longer feels the obligation to take from labor for the benefit of capital, nor to take from the public for the benefit of both, but rather to administer wisely and fairly in the interest of all.

Address of Young, Owen D, January 1929, quoted in “The New Place of the Stockholder”, Sears (January 1929)Google Scholar as quoted in Dodd, supra note 46 at 1154. More recently, a General Electric lawyer wrote in the The Wall Street Journal that “corporate citizenship has three interrelated dimensions: strong, sustained economic performance; rigorous compliance with fundamental accounting and legal requirements; and ethical actions beyond what the law requires, which advance the reputation and long-term health of the enterprise.” Heineman, Benjamin, “The Next Question”, The Wall Street Journal (28 June 2005)Google Scholar.

117. Millon, supra note 108 at 14.

118. Ibid.

119. Berle, Adolf Augustus Jr & Means, Gardiner, The Modern Corporation and Private Property (New York: Macmillan, 1993).Google Scholar

120. Dodd wrote: “[s]everal hundred years ago, when business enterprises were small affairs involving the activities of men rather than the employment of capital, our law took the position that business is a public profession rather than a purely private matter, and that the business man, far from being free to obtain all the profits which his skill in bargaining might secure for him, owes a legal duty to give adequate service at reasonable rates.” Dodd, supra note 46 at 1148. Further, Dodd wrote: “Regulations imposed in the interest of employees, consumers, or others may increasingly limit the methods which managers of incorporated business enterprises may employ in seeking profits for their stockholders without in any way affecting the proposition that the sole function of such managers is to work for the best interests of the stockholders as their employers or beneficiaries.”Ibid at 1153.

121. Ibid at 1151. Consider for example, President Franklin Roosevelt’s ‘New Deal’ including the United States 1935 Social Security Act and 1935 National Labour Relations Act (also known as the Wagner Act) and the creation of the Work Progress Administration which nationalized unemployment relief.

122. In an interesting study on corporations in Russia, the authors analyzed whether in the absence of strong state regulations, corporations viewed themselves as corporate citizens with a responsibility to protect the environment, or as purveyors of citizenship, and “thus upholders of individual’s rights to a clean environment?” Rodgers, Peter & Crotty, Jo, “Corporate Citizenship and Environmental Sustainability in the Russian Federation” (Paper delivered at the Corporate Responsibility and Research Conference in Queens University, Belfast, September 2008)Google Scholar [unpublished]. In this sense, corporations are a mediator of citizenships rights. Alternatively, these Russian state-corporations may side step these responsibilities. The authors argued that the corporate role in Russian society is becoming increasingly “blended” with that of the state. Ibid. As a contemporary example in the Canadian context, there is a growing trend of private project financing for government infrastructure known as P3’s. This involves a consortium of investors who are delegated (to perform, design and manufacture) on behalf of government, public responsibilities. As one reporter commented: “there can be little doubt that municipalities are likely to drive the next wave of public participation projects—where the private sector take on the risk of designing, building financing and, in some cases even operating, public infrastructure on behalf of government.” Melnitzer, Julius, “Cities Search for Alternative Funding; Big Digs”, National Post (Legal Post) (21 October 2009) at LP 1 Google Scholar. See also Middlemiss, Jim, “Law firms line up for P3s”, National Post (Legal Post) (21 October 2009) at LP 1Google Scholar. Additionally, public and private partnerships are intimately linked with the concept of corporate citizenship and the objectives of the Global Compact UN., the world’s largest voluntary corporate citizenship initiative. See Deva, Surya, “Global Compact: A Critique of the UN’s ‘Public-Private’ Partnership for promoting Corporate Citizenship” (2006) 34 Syracuse J. Int’l L & Com 107 Google Scholar.

123. Dodd, supra note 46 at 1155-56.

124. This is in direct contrast to the shareholder primacy model of corporate accountability: “Milton Friedman famously stated that the sole responsibility of business was to maximize financial returns to shareholders. Corporate citizenship has been taken as a challenge to this assertion and associated practices.” Zadek, Simon, The Civil Corporation (London: Earthscan, 2006) at 76 Google Scholar [Zadek].

125. Mills Acquisition Co v Macmillan Inc 559 A 2d 1261, n 29 [Del 1989] at 1282 [cited to A].

126. Morck, Randall & Yeung, Bernard, Some Obstacles to Good Corporate Governance in Canada and How to Overcome Them (18 August 2006)Google Scholar, online: Commissioned by the Task Force to Modernize Securities Legislation in Canada http://www.tfmsl.ca/docs/V4(5)%20Morck.pdf at 326.

127. Companies Act 2006 (UK), 2006, c 46, s 172(1).

128. Canada Business Corporations Act, RSC 1985, c C-44 (CBCA), s 122(1).

129. BCE Inc v 1976 Debentureholders, 2008 SCC 69 at para 40 [BCE].

130. Ibid at para 81 [emphasis added].

131. As a final point on this topic, the author would like to acknowledge ‘stewardship theory’ as a potential theory in corporate accountability. It is a progressive concept utilizing psychology and sociology and indicates that corporate managers are not only motivated by self-interests and economic gain. In other words it dispels the law and economics theories by arguing human beings are motivated towards self-actualizing behaviour. However, to date there appears to be sparse legal scholarship on the subject and the potential implications of the theory have been confined to discussions in management journals and books. An inquiry by another legal scholar in 2005 using Westlaw, Lexis Nexis, AGIS and CaseBase revealed only one article, mentioning the topic in passing which has appeared in a law review: Turnbull, Shann, “Corporate Charters with Competitive Advantages” (2000) 74 St John’s LR 89 Google Scholar. In my own search in 2009, using the legal databases of HeinOnline, LegalTrac and ENVIROnetBASE, the search did not reveal any further materials on the subject.

132. See Bone, Jeffrey, “The Supreme Court Revisiting Corporate Accountability: BCE Inc in search of a legal construct known as the ‘Good Corporate Citizen’”, online: (2010) Alberta Law Review Google Scholar—Online Supplement www.albertalawreview.com.

133. Freedman, Samuel, Report of the Industrial Inquiry Commission on Canadian National Railways “Run-Through” (Ottawa, ON: Queen’s Printer, 1965) at 111.Google Scholar

134. Ibid.

135. Eriksen, Erik Oddvar & Weigard, Jarle, “The End of Citizenship?” in McKinnon, Catriona & Hampsher-Monk, Iain, eds, The Demands of Citizenship (London: Continuum, 2000) at 15.Google Scholar Further, Aristotle said of citizens: “[i]t has been well said that ‘he who has never learned to obey cannot be a good commander. The two are not the same, but the good citizen ought to be capable of both; he should know how to govern like a freeman, and how to obey like a freeman—these are the virtues of a citizen.” Aristotle, Politics, translated by Barker, Ernest (Oxford: Oxford University Press, 1995) at 9394 Google Scholar.

136. Marshall, Thomas Humphrey, Class, Citizenship and Social Development (New York: Anchor Books, 1965)Google Scholar. For a philosophical discussion around citizenship see Villa, Dana, Socratic Citizenship (Princeton, NJ: Princeton University Press, 2001).CrossRefGoogle Scholar

137. CSR begin in the late 1970’s with Archie Carroll’s four types of corporate responsibilities: economic, legal, ethical, and as a voluntary component philanthropic. This evolved through the stakeholder theory, which questions the potential groups in society that a corporation is accountable towards. See Matten, Dirk et al, “Behind the Mask: Revealing the True Face of Corporate Citizenship” (2003) 45 J Bus Ethics 109 at 110 [Matten]CrossRefGoogle Scholar; Carroll, Archie, “A Three Dimensional Model of Corporate Social Performance” (1979) 4 Acad Mgmt Rev 497 CrossRefGoogle Scholar. There are other theories such as Thomas Donaldson, who argued that corporate social responsible activity gives a business a license to operate in society. Donaldson premised his ideas on the relationship of business and society through social contract theory borrowed from political philosophy. Essentially, the business receives it privileges from society: “mainly related to the legally institutionalized corporate personality…. [Therefore] [s]ociety agrees with this exchange as long as the social benefits exceed the social costs”. Jeurissen, Ronald, “Institutional Conditions of Corporate Citizenship” (2004) 53 J Bus Ethics 87 at 89CrossRefGoogle Scholar.

138. Frynas, Jedrzej George, “Corporate Social Responsibility in the Oil and Gas Sector” (2009) 2 Journal of World Energy Law & Business 3 at 179CrossRefGoogle Scholar.

139. Matten, supra note 137 at 111; see Waddell, Steven, “New Institutions for the Practice of Corporate Citizenship: Historical, Intersectoral, and Developmental Perspectives’” (2000) 105 Business & Society Rev 107 CrossRefGoogle Scholar. Also see Matten, Dirk & Crane, Andrew, “Corporate Citizenship: Towards an Extended Theoretical Conceptualization” (2005) 30 Acad Mgmt Rev 166 [Matten & Crane]CrossRefGoogle Scholar: “[Corporate Citizenship], meanwhile, has been introduced into the CSR discourse in the last few years, mainly at the instigation of corporate actors” at 167. Finally, Professor Williams said, “I think there are important differences in the connotations of ‘corporate social responsibility’ versus ‘corporate citizenship,’ with the latter having more connotations of privileges, including of political involvement, rather than duties, as connoted by the term ‘corporate social responsibility.’” Williams, Cynthia, “A Tale of Two Trajectories” (2007) 75 Fordham LR 1629 at 1633 n 18Google Scholar.

140. For instance, “[t]he implications are that corporations are engaging as facilitators of the citizen process, regardless of whether they are explicitly setting out to be ‘good corporate citizens.” Matten continues, arguing that: “Citizenship is a bundle of more or less well defined rights, and the corporate involvement in this context does not mean that corporations bravely share in these, but that they have gradually amounted to replace the most powerful institution in the traditional concept of citizenship, namely Government.” Matten, supra note 137 at 117.

141. As variations on the concept of corporate citizenship, Matten and Crane explain two ‘conventional’ views on corporate citizenship and a third ‘extended’ view. See Matten & Crane, supra note 139 at 166-79. Traditionally, the corporation is part of the private sector, but in this model, the corporation is placed in the public sector with a “‘state-like’ role with regards to its corporate citizenship behaviour.” Ibid.

142. Dion, Michael, “Corporate Citizenship as an Ethic of Care: Corporate Values, Codes of Ethics and Global Governance” in Andriof, J & McIntosh, M, eds, Perspectives on Corporate Citizenship (Sheffield, UK: Greenleaf, 2001) at 119.Google Scholar

143. Ibid.

144. While there is little contribution on corporate citizenship in legal scholarship, the academic literature on this topic in non-legal disciplines (particularly management) is numerous and substantial as briefly outlined here. For further review, please see McIntosh, Malcolm, Living Corporate Citizenship: Strategic Routes to Socially Responsible Business (London: Pearson Education Limited, 2003)Google Scholar; Crane, Andrew, Matten, Dirk & Moon, Jeremy, Corporations and Citizenship (Cambridge: Cambridge University Press, 2008)CrossRefGoogle Scholar; Waddock, Sandra, Leading Corporate Citizens: Vision, Values, Value Added (New York: McGraw-Hill, 2002)Google Scholar; Andriof, Jörg & McIntosh, Malcolm, eds, Perspectives on Corporate Citizenship (Sheffield, UK: Greenleaf, 2001).Google Scholar

145. Zadek, supra note 124 at 36.

146. As Simon Zadek said: “[c]orporations have sought under this umbrella to gain broader trust and legitimacy through visibly enhancing their non-financial performance. Today, the focus is shifting from philanthropy to the impact of core business activities across the broad spectrum of social, environmental and economic dimensions represented by the vision of sustainable development.” Ibid at 29.

147. Ibid at 19 [emphasis added]. Further: “[d]ifferent stakeholders, after all, have very different ‘social’ interests. The need must therefore be to identify and enhance the drivers of corporations’ more progressive engagement in the vision of sustainable development.” Ibid at 36.

148. See Pies, Ingo & Beckmann, Markus, “Sustainability by Corporate Citizenship—The Moral Dimension of Sustainability” (Discussion paper) Wittenberg Center for Global Ethics (2004)CrossRefGoogle Scholar, online: Social Science Research Network http://ssrn.com/abstract=991323 at 2 for the tie between corporate citizenship creating corporations that are “no longer confined exclusively to their economic role, but are more and more perceived as moral and political actors.” Further, the authors argue: “This moral dimension of institutional legitimacy [of corporate citizenship] presents the missing link to empowering sustainability.” Ibid.

149. Waitzer, supra note 84 at 441.

150. [1931] UKHL 3.

151. Castle, Richard, “Lord Atkin and the Neighbour Test: Origins of the Principles of Negligence in Donoghue v Stevenson ” (2003) 7:33 Ecc LJ 210 at Ecc LJ 210 at 213.Google Scholar While technically a decision under Scots law, it was adopted under the English common law system.

152. Ibid at 210. See Luntz, Harold, “Editorial Comment: Reliving History” (2010) 18 Torts LJ 2 Google Scholar.

153. Note that many commentators make a ‘business case’ for CSR where shareholders stand to benefit financially from a corporate commitment to CSR. Therefore, if adopting good corporate citizenship equates to financial rewards, then a contractarian model may be consistent with CSR and proponents of CSR would not have to appeal to communitarian theory. While this is an interesting economic argument, I have confined this research to the legal nature of a corporation which I suggest has its roots and current themes embedded in the communitarian perspective.

154. Bradley, supra note 10 at 44.

155. Addabor, Elizabeth, The Regulation of Transnational Corporations: An Assessment of the Alternatives and the Role of Multilateral Development Banks (LLM Thesis, University of Calgary Faculty of Law, 2005) at 49 Google Scholar [unpublished].

156. Millon, David, “Frontiers of Legal Thought: Theories of the Corporation” [1990] Duke LJ 201 at 231CrossRefGoogle Scholar.

157. Without making a moral argument, John Ruggie has suggested that corporations have an implicit responsibility to respect human rights in their sphere of influence. Ruggie’s arguments are sound and persuasive and the undertaking of such a duty implicates a communitarian perspective. Ruggie, John, “Promotion and Protection of all Human Rights, Civil, Political, Economic, Social and Cultural Rights, including the right to Develop” in Protect, Respect and Remedy: A Framework for Business and Human Rights Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, UN Human Rights Council, 8th session, Agenda item 3 (7 April 2008)Google Scholar, online: Business and Human Rights Resource Centre www.business-humanrights.org at 16-20. For instance, respecting human rights may have logical business applications such as honoring the view of employees, consumers, civil society, communities and the court of public opinion as Ruggie suggests. Ibid at 16. However, companies may choose to ignore these stakeholders under a contractarian model. It is evident that Ruggie is advocating mandatory respect for human rights as a prime directive of corporations when operating in a domestic or foreign territory. This is suggestive of the communitarian approach.