Ius et Iustitium is happy to present this guest post by Gregory B.L. Chilson. Mr. Chilson is an LL.M. candidate at the University of Vienna.
In his examination of American patent law for Ius & Iustitium earlier this year, Jake Neu’s piece explored Adrian Vermeule’s view that the common good tradition enjoys a pedigree worthy of greater examination. Neu offered a compelling demonstration of the practical role which the classical legal tradition can and should play in contemporary jurisprudence, drawing on his chosen topic of patent law. Can the same be said of the company and corporate law as well?
Just as the patent found its role in Venetian courts, the parentage for our companies can be traced back to late medieval Italy. Although the modern company is often attributed to English and Dutch Mercantilism (and French liberalism)[1], jurists ought not overlook the extent to which English guilds were in part influenced by Italian confraternities and para-ecclesiastical bodies.[2] The term ‘guild’ itself, is well noted for its dual meaning as it is a derivative of the Germanic word ‘geld’ which first and foremost as a verb means ‘to pay’ or ‘contribute’, but also as a noun for ‘sacrifice’ or ‘worship’.[3]
Both meanings point to a common theme: pulling resources together in order to achieve common goals, both religious and secular in character, which were desired by stakeholders and at the same time benefitted the society and the state.
The medieval ecclesiastical foundations for incorporation are themselves a tributary of the classical Roman legal tradition which did not fail to recognise the fundamental relationship between commerce and society. The Roman maxim Ubi ius, ibi commercium (where there is law, there is commerce) observed the fundamental role of the law in facilitating a market society. Where successful, individuals could combine their skills to benefit their community as a whole.[4] Montesquieu who exercised significant influence on Liberalism appears to have echoed this tradition when writing “wherever we find agreeable manners, there commerce flourishes.”[5] The French thinker seems to have recognised that the principle of reciprocity, was inextricable to the social institution of politeness. Montesquieu applied the same principle to healthy commercial practices given that commerce, like social etiquette, depends on reciprocity. However, the fundamental connection between society and commerce does not seem to be self-evident. Although it would be constructive to investigate whether Montesquieu succeeded in providing a coherent explanation for the relationship between the two, we need not do so. This is because an effective explanation may already be derived from the common good tradition.
What might the common good tradition say of the company and corporate law? How does jurisprudence benefit from such an analysis? What relevance might this have in our present-day context?
I.
Beginning with this last question, brief consideration should be paid as to why jurists should reaffirm the company as a means in upholding the common good today. Since the fall of the Berlin wall, the dominance of the transnational-corporation as a vehicle of commerce has become interwoven with policies seemingly at odds with the common good. Deregulation has neutered the nation-state’s capacity in the apportionment of justice. Ossification of the trade union system has alienated worker from owner. The current economic model appears so incommensurate with individual consideration, that the ownership of real property and the raising of children, for example, are seemingly unattainable goals for many. The economic fallout of COVID-19 risks catalysing these affairs further as family businesses and small and medium-sized enterprises disappear leaving only giant transnational corporations to address the multitudinous needs of society.
Given the present failings of the liberal economic model, it falls on the common good tradition to take account of the role in which companies (both public and private) have within society as an integral aspect of the natural rights of man. Below, a defence is offered of the role of private enterprise before considering the tension between the private enterprise and public good within American Jurisprudence and the benefits which a common good analysis can bring.
II.
As a starting point, it is important to understand the means and ends of private enterprises as seen through the prism of natural law. Pope Leo XIII proclaimed that the role of private ownership in Rerum Novarum does not find incompatibility with the general and public ends of the whole of a society.
Moreover, the earth, even though apportioned among private owners, ceases not thereby to minister to the needs of all, inasmuch as there is not one who does not sustain life from what the land produces.[6]
In the latter days of the cold war, Pope Saint John Paul II’s publication of Centesimus Annus reemphasised his predecessor’s writings on their centenary, stating that it:
[I]s [a] “natural human right” to form private associations. This means above all the right to establish professional associations of employers and workers, or of workers alone.[7]
This is because:
Work thus belongs to the vocation of every person; indeed, man expresses and fulfils himself by working. At the same time, work has a “social” dimension through its intimate relationship not only to the family, but also to the common good, since “it may truly be said that it is only by the labour of working-men that States grow rich.”[8]
While these truths seem apparent within the classical mindset, it appears today that the natural rights of man to flourish (broadly speaking) through commerce have been warped by current economic practice. In his recent encyclical Fratelli Tutti, Pope Francis acknowledges as such writing:
“Some economic rules have proved effective for growth, but not for integral human development. Wealth has increased, but together with inequality, with the result that “new forms of poverty are emerging.”[9]
The three Popes, in their respective encyclicals offer an account of societal goods which are grounded in the Aristotelian-Thomistic tradition. While a full explanation cannot be given here[10] it suffices to say that this account offers a broader conception of goods than is typically given weight within liberal economics.
A helpful discussion is offered by Antonio Argandoña who observes how these competing traditions conceive of goods within the context of “use and consumption”[11] or “production [and] generation”[12] amongst other metrics. In the case of use and consumption, liberalism’s attribution of value to a good is delineated from a limited basis of rivalry and exclusion.[13] One such consequence of this state of affairs is that intrinsic goods as they might appear within the context of a company, (such as education, friendship and vocational satisfaction) can fall under private rather than public goods. E.g., if an economy provides only a limited number of jobs which prioritise vocational satisfaction, the basis over who engages in them is addressed by the whim of a company and rivalrous competition. That such goods are of an inherent interest to the whole of society is irrelevant. In contrast, the Thomistic tradition accounts for a broader categorisation of goods, whereby what may be understood as public, is also treated as common. The shortage of job diversity and vocation in many Western economies in this sense reflects a cultural relinquishing of the inherent relationship between community, training and partnership. As a consequence, it is clear that:
To economic theories of the organization, the theory of the common good adds this greater variety of goods – and, consequently, more complex decision and learning processes and new conditions for the organization and the people who work in or with it to flourish.[14]
On this basis, the common good tradition demands that public and private goods as well as intrinsic and extrinsic goods, be treated as a matrix which can prevail within the microcosm of a private enterprise such as a company. Private interests are not at odds with public objects and the law has a role in promoting both. Wealth, as John Paul II points out, cannot be conceived merely as fiscal performance. The innate connection between work and ownership necessitates that wealth also reflect the intimate role which work as a vocation has on human relationships and wider society.
What this means, is that although the modern company “… does not consist of its direct contribution to the common good of society […] the human goods it pursues contribute indirectly to that common good.”[15]
If private enterprises can in fact contribute to a common good, we ought to pay consideration to the role which the law has in assisting to materialise this endeavour. The state-corporate relationship is a complex one for which there is no simple panacea. The common good perspective, however, brings considerable depth, as it will be illustrated through a discussion of one of the most famous examples of American jurisprudence on this question.
III.
In Dartmouth College v. Woodward (1819) the Supreme Court considered the legality of the State of New Hampshire’s attempts to convert Dartmouth from a private into a public institution by means of amending the university’s charter, which was obtained by its founder Rev. Eleazer Wheelock in 1769 from the British Crown. Finding for the college, Chief Justice John Marshall’s leading opinion viewed the charter as a contract between Wheelock and the Crown, invalidating the act of amendment by the New Hampshire Legislature.
Much ink has been spilled on Dartmouth, and the merits of its outcome need not be reiterated here. For our purposes, Dartmouth illustrates the possible advantages of legal analysis that utilises the common good approach. Marshall’s opinion for the court, demonstrates the underlying tension in balancing private capital with public interests when viewed through a purely liberal prism.[16] Nineteenth-century American jurisprudence offered two theories as to how a corporation should be understood.[17] The grant (or concession) theory – handed down from the British legal tradition – viewed all corporations as grants of The Crown. Dartmouth’s charter was in fact one such grant. The aggregate theory viewed legal entities as the sum of mutual agreements which were made via an aggregate of natural persons. It is notable that Marshall’s own judgement seemingly includes an account of both competing theories in his ruling.
On one hand:
A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law.[18]
And yet:
An aggregate corporation, at common law, is a collection of individuals, united into one collective body, under a special name, and possessing certain immunities, privileges and capacities, in its collective character, which do not belong to the natural persons composing it.[19]
It would at first appear that the grant/concession theory of the corporation logically described Dartmouth. However, in finding for the college, one of the central premises and concerns[20] in Marshall’s ruling was that private institutions would be unnecessarily encumbered with the political will of the state if they were, due to their seemingly public objects, then treated as public corporations and extensions of the state. To avoid this, Marshall chose to view the charter as a mutual agreement (a contract) between the Crown and the college as an agreement that may exist between two private entities.[21] In doing so, the aggregate theory of corporations, one which historically has emphasised the singular interest of the shareholder, and not the wider interests of society, seemingly triumphed. The crux of the argument was:
The fact, then, that the charity is public, affords no proof that the corporation is also public; and consequently, the argument, so far as it is built on this foundation, falls to the ground.[22]
Although Marshall did recognise that a greater variety of corporations existed within the framework of common law, the Dartmouth decision, in a nutshell, greatly narrowed this variety and enshrined a rigid duality between public and private corporations. Under this analysis, even if a privately funded corporation has objects of a public nature, it cannot be considered a public corporation nor can it be viewed as amenable to common objects recognised by the state.
From a certain perspective, Marshall’s logic concerning the inviolability of the contract can be viewed as a value which pertains to the common good. After all, if individuals cannot rely on the enforcement of a contract, then the moral force of an agreement is abandoned and the state itself ceases to fulfil an essential role in supervising commerce and maintaining justice. But the application of contractual inviolability to the corporate context had far-reaching ramifications. Firstly, by viewing Dartmouth in this manner, public goods such as the charitable objects of an educational institution, were squarely relocated into the private sphere simply because of the private nature of the corporation’s trust. In this process, the Aristotelian-Thomistic categorisation of goods was seemingly abandoned for the liberal dualism which separates private goods from common aims. Charitable goods such as the advancement of education in this case transitioned from public to private affairs. Secondly, it appears that this ruling ushered in a new understanding of the state’s role whereby it was to yield from public policymaking especially where regulation of corporate objects is concerned. The state’s role has since changed, from a guardian of common societal aims to a referee of competing private goods.
A logical progression of these developments is evident in cases such as Burwell v. Hobby Lobby Stores, Inc. (2014).[23] There, the Supreme Court recognised a closely held for-profit corporation’s right to uphold its religious convictions (refusal of provision for certain contraceptive products in private insurance plans of employees) within its private operation pursuant to the Religious Freedom Restoration Act (RFRA). The religious convictions of the owners were to be viewed as an entirely private good, which on this occasion only intersected with public policy insofar as there was primary legislation which the company could rely upon for a protection of its private objects in court litigation. The substance of those private objects, i.e. their good or ill for the public seemingly had no relevance to wider society, other than establishing the corporations rights in the given case. While it is not within the remit of this work to speculate, one may wonder whether a case such as Hobby Lobby would ever have needed litigation in a society orienteered towards the common good. There would have been no need for the (miscategorised) recognition of a for-profit corporation’s claim to religious belief, because religious belief – like education, healthcare and many other common public goods – cannot really be separated into a purely private affair. Their presence is self-evident and emanate from the common endeavours of man. It appears that the privatisation of public goods, therefore, transpires when a state by its own omission, mandates an understanding that these are goods that cannot be held in common by wider society.
This assessment is by no means exhaustive, and both cases could benefit from a far more detailed treatment than is offered here. Nonetheless, it is apparent that, in addition to demonstrating that private enterprise and public goods ought not be ascribed their usual exclusivity, the common good tradition requires us to reconsider the fairly elusive relationship that law has with the state and rethink at the same time, the role the state ought to have in affirming the common good. This is especially so if laws are to serve commerce in tandem with society as a whole.
Gregory B. L. Chilson
[1] Henry Clark selected this passage in his anthology Commerce, Culture and Liberty: Readings on Capitalism Before Adam Smith (published by Liberty Fund, 2003).
[2] For discussion on relationship between Anglo-Saxon and Italian Confraternities, see: Neslihan Şenocak (2016) Twelfth-century Italian confraternities as institutions of pastoral care, Journal of Medieval History, 42:2, 202-225,
[3] Gary Richardson, Medieval Guilds, https://eh.net/encyclopedia/medieval-guilds/
[4] And, the word corporation, itself a derivation from corpus meaning body – and even then, body of people – is pertinent to the point of self-explanation.
[5] Montesquieu, Spirit of Laws, bk. 20, CHS. 1
[6] Rerum Novarum, para. 8
[7] Centesimus Annus, para. 7
[8] Centesimus Annus, Para. 6
[9] Fratelli Tutti, Para. 21
[10] For a formative discussion; see Thomas Crean OP & Alan Fimister, Integralism: A Manual of Political Philosophy (2020).
[11] Antonio Argandoña, “The Common Good of the Company and The Theory of Organization”, Working Paper WP no 777 Jan 2009, p.5
[12] Ibid., p.6
[13] Ibid., p.5
[14] Ibid., p.8
[15] Ibid., p.13
[16] It also demonstrates the struggle which the common law experienced in adapting to a republic after it it ceased to answer to the Crown as its chief authority.
[17] Choudhury, B., & Petrin, M. (2019). Tort Law, in Corporate Duties to the Public (pp. 127-165). Cambridge: Cambridge University Press, p. 136
[18] Trustees of Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518 (1819), at 120
[19] Ibid., at 166
[20] Mordecai lee questions this premise, noting that private education institutions of a religious nature generally have greater say over the beliefs and practices of their staff whereas public bodies are put to task where constitutional obligations are concerned. See Professor Mordecai Lee, Revisiting the Dartmouth Court Decision: Why the US has Private Nonprofit Agencies Instead of Public Non-Governmental Organizations (NGOs), Public Organization Review 7:2 (June 2007) 113-42.
[21] Although, if this were the case, an argument could again be made that the university was still a creature of the state.
[22] Dartmouth College v. Woodward, at 170
[23] Burwell v. Hobby Lobby, 573 U.S. 682 (2014)