The Death of the Firm

By June Carbone & Nancy Levit. Full text here.

This Article maintains that the decision in Burwell v. Hobby Lobby, which referred to the corporation as a legal fiction designed to serve the interests of the people behind it, signals the “death of the firm” as a unit of legal analysis in which business entities are treated as more than the sum of their parts and appropriate partners to advance not just commercial, but public ends. The Hobby Lobby reference to the firm as a fiction is a product of a decades-long shift in the treatment of corporations. This shift reflects both an ideological embrace of the free-market-oriented “agency-cost” school of corporate analysis and a material change from the brick-and-mortar corporations of the industrial era to the network-like operations of the technological age. As “the firm,” that is, the corporate form used to structure most business organizations, becomes less dependent on fixed supply chains and hard-to-assemble labor forces, the networks that determine employee motivation, security, and career mobility also change. These shifts fundamentally alter the relationship of people to companies, as owners, executives, shareholders, and employees all become more mobile. This Article is the first to link the Supreme Court’s revised conception of the firm to the role of the state. If Hobby Lobby owners have the First Amendment right to choose for their employees what publicly subsidized health care benefits to make available, the corollary should be that individuals should not be dependent on employers for access to basic public benefits. The new networked era should encourage individual as well as corporate flexibility.