If Corporations Aren’t People, How Can They Be Greedy?

A few weeks ago, Mitt Romney observed that corporations are people. This prompted hysteria on the left, including a video produced by the Democratic Party. But of course Romney was right. A corporation consists of its owners, i.e. shareholders, and its employees–people. It is an elementary principle of law that a corporation can act only through its employees and agents–people. The Democrats’ apparent belief that you can hurt companies without hurting people is absurd. The corporation is merely a legal form in which people do business, now several hundred years old. It is absolutely necessary for any major commercial enterprise because its existence can continue without disruption beyond any one individual’s lifespan. So being “anti-corporation” is equivalent to being pro-medieval.

Lately, we have heard a lot from the Wall Street occupiers as well as more mainstream Democrats about “greedy corporations.” But wait! This is sheer anthropomorphism: if companies aren’t people, how can they be greedy? In fact, referring to a company as “greedy” makes little sense. A for-profit company exists to make money for its owners, and secondarily to provide wealth and opportunity for its employees. The managers who run any company have a fiduciary duty to try to maximize returns for their company’s owners–that is to say, profits. If a company’s executives decided not to be “greedy,” but rather to operate their company at a break-even level so as to avoid profit, they would be violating their legal duties and would be subject to shareholder lawsuits. And properly so.

The same principle applies to taxes. Every company has a duty to minimize its tax liability–legally, of course. If a company’s management were to volunteer to pay more taxes than the law requires, it once again would be violating its legal duties and would no doubt be dismissed by its board of directors, and subsequently sued by shareholders.

Some companies make charitable contributions. Target Corporation is a good example; it plows a percentage of its profits back into the communities where it does business. When I was in law school, there were discussions of whether it is legally proper for a company to give money to charity. The question is debatable, but the law is that a company can make such contributions as long as they represent a rational business judgment that they enhance the company’s goodwill.

It is precisely the desire to maximize profits that drives businessmen, consistent with their fiduciary duties, to work hard; to innovate; to compete; to operate efficiently so as to reduce costs and prices, and thereby gain market share; and on on. Is this “greed?” Of course not. It is progress. Do liberals really want the rest of us to be lazy; to be uncompetitive; to squelch change; to be inefficient and to pass the costs of that inefficiency on to our customers? Well, yes, actually, they do–just as the federal government passes the costs of its inefficiency on to its customers, the taxpayers.

But then, liberalism is the reactionary dogma of our age. If you hate progress and would rather live in poverty than see someone else prosper, you are a born liberal.

Responses

-->