Legal studies prof discusses corporations as persons


Professor Eric Orts proposed several legal theories of the firm




Corporations are persons, but not people.

Last night, legal studies and business ethics professor Eric W. Orts tackled this issue at an event co-sponsored by the Penn Undergraduate Law Journal and the Benjamin Franklin Scholars Program. In his presentation entitled “The Future of Corporate Personhood in American Law,” Orts, a Guardsmark endowed professor, examined theories of the firm, its legal foundations and Supreme Court cases involving Citizens United and Hobby Lobby.

Orts’ lecture discussed especially relevant legal business questions that exist today, such as whether firms have religious liberties and how far the Constitution should apply Bill of Rights protections to corporations. Orts is the author of “Business Persons: A Legal Theory of the Firm,” a book published last year that examines the legal framework of businesses. He discussed parts of his new book throughout the presentation.

In his lecture, Orts said that economic theories are used too often when describing businesses, adding that law should play a more prominent role instead.

“Law is fundamental to understanding what the business is,” he said.

Orts also proposed three main legal theories of the firm — the concession, participant and institutional theories. The concession theory is top-down view where political states allow firms to exist, while the participant theory is a bottom-up view where firms rest on individual people who run them. The institutional theory is an intermediate view where corporations are run by individuals but adhere to legal rules.

Orts also described corporations as “real fictions.” He said that although corporations do not exist in the physical sense, the law recognizes their existence and enforces their contracts. The nature of business is thus a man-made construct that can be changed over time, similar to the notion of countries, he added.

“Corporations are just as real as the United States of America is real,” he said.

Continuing on this theme, Orts said that even though business firms are actually relatively new from a historical perspective, they have already established themselves as clear legal entities. Whether they are persons with guaranteed Constitutional rights, however, is debatable, he added.

At the end of the lecture, Orts said that he may discuss these issues further in a new legal studies course.

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