Fictions, Concessions & Genossenschaft
posted by Nate Oman
Kaimi’s post about corporations and constitutional rights has provoked a response from Will Baude, who points out that at the time that the Fourteenth Amendment was passed it is not as though considering corporations as persons was beyond the pale. My own response to this issue (aside from a hearty “What Will said!”) is — in the best tradition of legal academia — self citation. Consider the following gem from “Corporations and Autonomy Theories of Contract,” forthcoming in the next issue of the Denver University Law Review:
There are three basic theories about the nature of corporations: the real theory, the concession theory, and the fiction theory. The real theory claims that corporations are the legal expression of organic groups or other supra individual entities and should be understood as having a will and an existence that cannot be reduced to the sum of their collective parts. The concession theory claims that the corporation is a creation of the state that exercises delegated authority to serve the purposes of the government, even when that purpose is “private” business. The fiction theory claims that the corporation is nothing more than a collection of individuals and that the language of corporations is little more than a useful shorthand referring to a complex set of individual rights and obligations.
It seems to me that it is only under the concession theory of corporations that thinking of them as right-holders becomes difficult. Even under this theory, however, if one thinks that rights have a utilitarian basis, then there is no a priori objection to corporations having rights. Certainly, if we subscribe to the fiction theory, then it seems to me that denying corporations rights is to work an injustice against actual human beings on the basis of a mere conceptual shorthand.
Of these three options, I dare say that the real theory sounds the oddest to modern ears. There was a time, however, when it represented the cutting-edge of Anglo-American legal thought. Back in those days (circa 1900) instead of doing cool, interdisciplinary work really hip legal intellectuals imported concepts from German jurisprudence. (Germany invented the research university in the the 19th century and by 1900 it occupied a position of academic prominence analogous to the United States today.) Ernst Freund summarized the real theory at the time, stating:
Above the existence of the individual there is the existence of the species, and the corporation is nothing but the legal expression of this fact, which appears as a reality in the physical person, so the higher will of the species is embodied in numerous and various forms of as-sociation, and as a result we find, beside the individual, entities of a higher order endowed with volition and acting capacity. And where the law recognizes such embodied will as a person, we have a juristic person or a corporation.
Obviously, this has a Germanic and Hegelian feel to it, and as one would expect you can push the idea back to a Teutonic root:
Nineteenth century German jurists were eager to find authentically German legal traditions in contrast to the foreign influences of the Roman law. Otto Gierke became the proponent of this approach in the context of corporate law. According to Gierke, the indigenous, pre Roman German law had a thick notion of corporate existence, what Gierke called Genossenshaft. In contrast to the thin, Roman theory that a corporation was nothing more than a legal fiction, Gierke argued that historically German law recognized the organic existence of the group. Corporations, he argued, are the legal manifestation of communities possessed of a collective spirit. Hence, the acts of a corporation are not the mere aggregation of the individual acts of its members, but rather should be understood as being qualitatively different. Gierke’s treatise became influential in common law countries by virtue of a translation by Frederick Maitland. Maitland and others argued that in numerous instances the common law acknowledged the real existence of collectives and treated their actions as what they were—the choices of organic groups, even when the groups were not formally incorporated. They took this as evidence that in practice the common law, whatever the rhetoric of its judges and lawyers, contained elements of the real theory.
Of course even today we have elements of Genossenschaft in our law, most notably the doctrine of corporation by prescription, which holds that a community — such as a town or a school — that for a long period of time has acted as a corporation without a charter will be treated as a corporate entity without one.
October 13, 2005 at 4:18 pm
Posted in: Corporate Law
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Responses (9)
Clark - October 13, 2005 at 6:17 pm
Very interesting Nate. And how often do you get to mention Hegel in posts like this?
For us non-lawyers, to what degree does this German view live on in our laws?
Crescat Sententia - October 13, 2005 at 9:05 pm
Corporations Followup
Nate Oman has a follow-up to my post on corporations, with a much more thorough discussion of early-20th century theories of the corporate form. Meanwhile Paul Gowder takes the bait and argues that he really does hate the corporate form,…
Christopher M - October 14, 2005 at 1:02 am
“Certainly, if we subscribe to the fiction theory, then it seems to me that denying corporations rights is to work an injustice against actual human beings on the basis of a mere conceptual shorthand.”
I don’t know why the conclusion follows from the premise. Just because an individual has a right to do X, which it is injustice to deny him or her, it doesn’t follow that the individual also has the corresponding right to do the thing that we fictionally describe as “a corporation in which that individual is a stakeholder doing X.”
Nate Oman - October 14, 2005 at 7:27 am
The short answer is that under the fiction theory the corporate form is a contractual mechanism that provides asset partioning for particular endeavors. Allowing one’s rights to turn on the particular form chosen for the payment of debts is arbitrary.
Nate Oman - October 14, 2005 at 9:21 am
Clark: I think that the answer to your question is “Not much.” In 1928 or there abouts John Dewey published an article in the Yale Law Journal criticizing the real theory of corporations and interest in theory disappeared almost over night. I think that it still has some legs in German law, where corporate governance is seen more in terms of representing the corporation as a community, e.g. labor representatives sit on corporate boards.
Jason R. Mullings - January 31, 2009 at 11:00 am
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Jason R. Mullings - January 31, 2009 at 11:06 am
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At L.A. Lewis Enterprize Ltd provide the number one tracking service in the Caribbean for Jamaican Musician, sound systems, sport personalities, venues, entertainers, dub poets and hence we find them for you. We make round clock checks via internet, telephone and on the road roll call. Over the the short period of time L.A. Lewis Enterprize Ltd has track down 576 artist and found them with the assistance of local police, area leaders, on the streets persons and private investigators. Trust me when I say if we cannot find them for you no one else can, feel free to call us now so that we can assist you.
Jason R. Mullings - January 31, 2009 at 11:07 am
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( 2.) 7 Star Legal Service Team
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(3.)7 Star Promotional Service Team
L.A. Lewis Enterprize Ltd we are the number one promotional company in the Caribbean, as we use guerilla style market tactics to get your artiste or your product to promote in the streets. As you know the streets is the people and the people is the streets. Over the years we have promoted dancehall events, concerts and festivals to name a few for eg. Sting – the greatest one night Reggae show in the world, Sashi – international R&B and Reggae concert, Symphony – Under the Stars at Cable & Wireless Golf Club, Richie Stephen-Take Me Away concert, Stone Love Anniversary, Firelink- Hot Monday and Weddy Weddy just to name a few.
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Also creating, designing website faster, better than any one else in the world. As in the words of Christopher Bangladesh, L.A. Lewis Enterprize Ltd is the one stop shop for all your entertainment and promotional needs that you can think of whether its product or persons. Feel free to call us now for all your needs to be fulfilled.
(5.)7 Star Supplies & Rentals and Services Team
At L.A. Lewis Enterprize Ltd we supply
1. Lighting & Stages
2. Sound systems
3. P.A. systems
4. Backdrop
5. Props , decorations service & decorations
6. Escorts bodyguard, male and female
7. Piano’s rental
8. Music band
9. Including videographers and photographers
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Each pieces is made only 1000 times and then that screen is put a side. Dream about it or think about it, anything you need under fashion we can supply it please feel free us now.
(7.) 7 Star Tracking Service Team
At L.A. Lewis Enterprize Ltd provide the number one tracking service in the Caribbean for Jamaican Musician, sound systems, sport personalities, venues, entertainers, dub poets and hence we find them for you. We make round clock checks via internet, telephone and on the road roll call. Over the the short period of time L.A. Lewis Enterprize Ltd has track down 576 artist and found them with the assistance of local police, area leaders, on the streets persons and private investigators. Trust me when I say if we cannot find them for you no one else can, feel free to call us now so that we can assist you.
tmaxPA - October 23, 2010 at 7:23 pm
“Even under this theory, however, if one thinks that rights have a utilitarian basis, then there is no a priori objection to corporations having rights.”
I think you mean ONLY under this theory. A theory invoking the ‘real’ existence of a corporate entity would be necessary for such an objection to be a priori. The concept of rights relates to human beings, and the objection to corporate rights is not a priori unless it is presumed that corporations are not merely ‘real’ but also human beings.
Also, I think the assumption that corporate rights precisely presents the combined compound rights of all the individuals involved, necessary for the fiction theory to be supportable, is presumptive.
Granted, I’m only an interested amateur, but it seems to me that any theory of corporations apart from the concession theory is, for all the scholastic explication, completely incoherent, requiring a post-modernist mangling of the very term “rights” which borders on doublethink.
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