A New Social Contract: Corporate Personality Theory and the Death of the Firm

In their article The Death of the Firm, June Carbone and Nancy Levit argue that, “the firm as entity is disappearing as a unit of legal analysis.” More specifically, they argue that by dismissing the corporation as a mere legal fiction and equating the rights of this legal fiction with the rights of its owners, cases like Hobby Lobby, “erode the status of the corporation as an entity that . . . has institutional obligations to its employees, or can be held institutionally accountable as a community citizen.” Therefore, “the ultimate goal of health care reform should be to eliminate the employer role altogether.” In this response essay, I focus on Carbone and Levit’s additional point that “the price for leaner firms, which have jettisoned public obligations, ought to be fewer public subsidies with more explicit strings attached for those that remain.” I note that it may not be possible to optimally reduce corporate subsidies without embracing for at least some purposes the view of corporations as existing at least in part on the basis of state concessions, and thus we should resist the temptation to completely reject the artificial entity view of the corporation. While Carbone and Levit advocate squarely facing the fact that “[t]he industrial firm is dead” and that it is “time to recognize that the firm of the technological era is a different beast,” an important role remains for the artificial entity/concession theory of the corporation. Perhaps, combining these two perspectives can be part of the new social contract Carbone and Levit advocate for.