After Citizens United, MIT Sloan students consider the identity and purpose of the corporation

September 27, 2012

An MIT Sloan panel discussion on corporate personhoodAn MIT Sloan panel discussion on the purpose of the corporation

In the wake of the landmark 2010 Citizens United Supreme Court case, the United States was thrust again into an old debate: should the corporation be considered a legal person, and if so, to what end?

The court thought so, and its ruling protected corporations’ and unions’ right to the exercise of free speech through political expenditures.

Since then, the concept of corporate personhood has worked its way into the 2012 election campaigns, with Republican candidate Mitt Romney’s 2011 comment that “corporations are people, my friend” drawing retorts from President Barack Obama and like-minded Democrats such as U.S. Senate hopeful Elizabeth Warren, who deplores the influx of corporate cash into the campaign process.

Campaign rhetoric is just the most obvious sign of the challenge, though. Behind it lies the ongoing consequences of the economic downturn of the past four years, and the understandable desire to apportion blame: who caused the crisis—government, business, civil society?

On the premise that there’s enough blame to go around, and that each sector might take the initiative in changing behavior on its own turf, the MBA Class of 2014 met during orientation week to discuss Corporate Personhood, Business Leadership, and the U.S. Presidential Election of 2012, a new case study written by MIT Sloan Senior Lecturer Leigh Hafrey and Cate Reavis, associate director of curriculum development for the School.

“All of that evidence of concern—from politicians, business leaders, ethicists, and other academics—about corporate engagement demonstrates that we need, as a school, to encourage our students to be thinking about what they do, or what their employers do, in the context of the larger society,” Hafrey said.

In the case, Hafrey and Reavis note the current challenge to corporate personhood, and ask how one might respond to it: test and perhaps undo the legal precedent? Let it stand, but ask the business community to commit to a new level of ethically-driven self-regulation and thereby supply the conscience that we attribute to real persons? Or trust that the financial services sector will eventually right itself through a continuation of its current business practices?

Case studies present a real life business situation, ask students to analyze the circumstances and data supplied, and invite them then to argue for a viable solution or solutions to a specific managerial challenge. Corporate Personhood includes input from MIT Sloan faculty, including Dean David Schmittlein, Senior Lecturer Jeffrey Shames, and professors Simon Johnson and Andrew Lo. Like many other cases available for free through MIT Sloan Teaching Innovation Resources, it provides both a teaching device and a spotlight for work that faculty are doing at the School.

In the breadth and diversity of opinion that Corporate Personhood captures about the sources of the 2008 financial collapse, the case ultimately asks students to move beyond the blame game and consider, as future managers and business leaders, how they want to build their business organizations and practices.

MBA orientation week also included a panel that grew out of the case on “The Purpose of the Corporation,” moderated by Jake Cohen, associate dean for undergraduate and master’s programs at the School. The panel included MIT Sloan alumni Subramanian Rangan, MBA ’88, a professor at INSEAD, Alan Spoon, SB ’73, SM ’73, a general partner at Polaris Venture Partners, and Tania Zouikin, SM ’82, former chairman and CEO of Batterymarch Financial Management.

“My deep held belief is this is not a technical dilemma, this is not like finding the Higgs boson and if we study it enough we will find the purpose of the corporation,” Rangan said. “This is actually a fundamental choice. It’s a social choice. It’s not a financial or a legal dilemma that we can parse. And it requires the judgment of those that are engaged in thinking ‘What kind of society do we want to live in?’”

Allen White, vice president and senior fellow at not-for-profit research and policy organization Tellus Institute, framed the discussion as a fundamental question of how corporations—defined as people—fit into the social contract between citizens and government.

“Well, it turns out in the 21st century there’s a third party, it seems, at the table,” White said. “That third party is business. And the conditions, the expectations, the rules of the game, are being redefined, but without much vision, without much thoughtfulness about the long term consequences of adding this player to the table.”

Though the concept of corporate personhood may not be as central to business education as some of the basics of finance, marketing, and other disciplines, Hafrey believes MBA students must understand its implications for their careers and future employers.

“I think we take corporate personhood for granted,” Hafrey said, “and so when we actually raise the question of what it means and the implications of that concept in law, people say ‘Ok, why does this matter?’”

“But if you look at the political discourse in this country, at the very least over the past year, then you realize that in the political sphere, it does matter,” he said. “And we as businesspeople or people in business education should recognize that concern and factor it into what we teach.”