Do corporations have beliefs?

When the US Supreme Court ruled in favour of a company called Hobby Lobby in 2014, it was hailed by conservatives as a win for the religious freedom of business owners.

Critics of the decision said it dealt a major blow to the rights of employees to access reproductive healthcare.

But there's more to this case than meets the eye. 

Has the Hobby Lobby case rewritten the rules about what a corporation actually is?

Guest: Associate Professor Steve Kourabas, Deputy Director, Centre for Commercial Law and Regulatory Studies, Monash University

Case: Burwell v. Hobby Lobby Stores, Inc., 573 U.S. 682 (2014)

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Transcript

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CNN Reporter: With us today is Lori Windham. She's the attorney for Hobby Lobby, and she's here to share her reaction to today's ruling in favor of Hobby Lobby, the company that you've been representing Lori, and this highly contentious fight that's garnered a lot of attention. Tell me what your reaction is. 

Lori Windham: We are thrilled with the court's decision today. We think this is a great day for religious freedom. The court reaffirmed that American families don't give up their constitutional right to religious freedom just because they open a family business. 

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James Pattison: That's one of the lawyers representing a company called Hobby Lobby, talking to CNN on the steps of the United States Supreme Court in 2014, 

Melissa Castan: The controversial Hobby Lobby decision was chalked up as a win for religious freedom and a big loss for access to healthcare.

James Pattison: But our guest today says the Hobby Lobby case is about much more than religious freedom or healthcare in the United States. 

Melissa Castan: He says that this Supreme Court decision has bigger implications. For some of the most powerful institutions on a global scale, I'm Melissa Castan. 

James Pattison: I'm James Pattison, and this is Case In Point.

Melissa Castan: Associate Professor Steve Kourabas is a corporations law expert at Monash University. Welcome to Case In Point, Steve. 

Steve Kourabas: Thank you for having me. 

Melissa Castan: Let's begin with the case itself and this very benign sounding company called Hobby Lobby. Who or what is Hobby Lobby? 

Steve Kourabas: So Hobby Lobby, the fun sounding name is a company in America that sells arts and crafts.

Steve Kourabas: It's a, got approximately 21,000 employees and it was founded by a self-made billionaire, David Green, and owned by him and his family who are evangelical Christians. So I don't 

James Pattison: immediately think, you know, arts and crafts store and a major sort of religious viewpoints. How did this corporation get tangled in this religious debate?

Steve Kourabas: Well, actually it was a, it was a few corporations that had a, a religious background or a religious owners that were RA bringing this, this claim. So there was several cases joined together. But really what, what all of this was about. Was that the Affordable Care Act, commonly known as Obamacare required that employers provide employer-sponsored health insurance for their employees.

Steve Kourabas: And this included about 20 contraceptive care aids that had been approved by the US Food and Drug Administration. And the concern here for some of these companies that were bringing the action was that the contraceptive care that was included. I had some aids that they felt constituted abortion and therefore were contrary to their freedom of religious expression.

Steve Kourabas: So not as fun sounding as hobby lobby. 

Melissa Castan: Steve, one thing that might need clearing up, I mean, the, the fundamental difference just for, for our audience is the issue of why an employer would be providing medical aid or health support to its employees. How does that come about? 

Steve Kourabas: So in America, they don't have the public health coverage that, that we do through the, the Medicare system and the Affordable Care Act or Obamacare was an attempt to get people healthcare insurance through their employment status.

James Pattison: So, Steve, I. You're, you're a very smart guy, but I think I'm not gonna be stepping outta bounds if I say that you're not a religious freedom or constitutional law expert. So, so why are you interested in this case? 

Steve Kourabas: Yeah, no, I, I really am not. So the, the reason that I'm talking about this case is because of the, the, the plaintiff here was actually a company, and as mal Melissa introduced me, I teach corporations law at Monash. So the interesting point for me at least of this case is how a company could potentially have a right to religious expression or, you know, to protection for their religious expression.

Steve Kourabas: And that raises some questions about. What is a company, you know, and whether it's a person that can have these kind of religious rights that are worthy of protection, 

Melissa Castan: but Steve, what is a company or what is a company actually? 

Steve Kourabas: So that's subject to a lot, a great deal of debates. But there are a couple of or, or three key doctrines I think, that are really important to understand for corporations or companies, whether it's in America or Australia or many other countries.

Steve Kourabas: The. Thing is that a company is what we call a separate legal entity. So whenever you register a company, so in Australia, we would register with the Australian Securities and Investments Commission on online. When you do this, a company becomes a, a legal person that has legal capacity and powers of an individual.

Steve Kourabas: So that means that they have the legal capacities and powers of us. So for instance, me, Melissa, and James, the companies have those same legal capacities and powers. So this means that companies are separate once they're incorporated, separate from the people who own them and manage them. And this leads to a couple of other principles that are important in understanding companies.

Steve Kourabas: The first is that because they're separate. They have what we call perpetual succession. This means that the owners and the managers and employees can change, but the company can continue. And that's why you have some very old companies, you know, companies that exist from the 18 hundreds even. And the second principle, which is really important for the Hobby Lobby case, I think, is this concept of limited liability.

Steve Kourabas: So because the owners are separate from the company that has been created. The owners have limited liability. In other words, the company can have its own liabilities. So if they enter into a contract and the person who loaned them money loaned the company money they would have to seek reimbursement of their debts from the company rather than the owners.

Steve Kourabas: In essence, it protects the owner's personal assets. So these are the, the three fundamental principles I think that underpin what is the corporation. So tell me 

James Pattison: if I've got this right or not. There's three features of a company. First it's a, a separate legal entity from the owners. Yeah. Second, it can live forever.

James Pattison: Yes. Perpetual succession, is that right? 

Steve Kourabas: That's 

James Pattison: right. Yeah. Yes. And, and then third, this issue of limited liability. So I, is that in terms of that if the company majorly stuffs up, the people who own it can't sort of, you know, don't have to pay money or don't have to get into sort of legal trouble.

James Pattison: Is that right? 

Steve Kourabas: That's, that's exactly right. So limited liability is one of the key, the key reasons that people incorporate, you know, there are, there are a number, but limited liability means that if something goes wrong with your business, with your company your, your personal assets are safe. Your house is safe because the, the creditors, the people that the company owes money to can't go after your house.

Steve Kourabas: You know, generally, so that's one of the major reasons for incorporating, you want to separate you, you want to protect yourself personally by creating this new legal entity. And so your, your liability as a you know, as an owner is, is limited. And I should point out that that applies, not just, you know, let's say the three of us were to set up a company.

Steve Kourabas: That would be really useful, but I could just set up a company myself and my liability would be limited as well, because the company is still separate, even though it's just me behind the scenes. 

James Pattison: So let's break down this Supreme Court decision. I. Let's look at Hobby Lobby. What was argued by both parties and what did the court decide here?

Steve Kourabas: So it was a really complex case. It had a lot of elements to it, and again, I, I probably won't get into the constitutional aspects too much, but really what was being argued here for green, the Hobby Lobby, the company, sorry was that. The company was a person, and as a person it was able to have its right to religious expression, protected and this religious expression could only be protected if it didn't have to include in, in insurance coverage.

Steve Kourabas: Those contraceptive aids that it felt constituted abortion or contributed go.

Steve Kourabas: Said that a company is separate from the owners and therefore you can't attribute the religious beliefs of the owners onto the company and therefore protect the company. So that was the, the basic argument as it related to the, the corporations elements of the case. Now the, the decision was split five four and the five judges that found for Hobby Lobby.

Steve Kourabas: So they found in favor of the company and the protection of its religious expression. They were what we typically consider conservative judges in America. And the four judges that dissented, that disagreed. We usually consider or, or, or label as liberal judges. 

James Pattison: I'd like to come to a bigger discussion about the implications of this decision upon the role of the corporation shortly.

James Pattison: And before we go to that, there's some really compelling quotes in the majority and dissenting judgements in the Hobby Lobby case. Steve, can you. Take us through a couple of the most sort of notable quotes from, I believe it's Justice Alito and Bader Ginsburg as well. 

Steve Kourabas: Yeah. So Justice Alito wrote on behalf of the the majority, so the, the five conservative judges said that.

Steve Kourabas: The, the company here was actually a legal person. And as a legal person, it was therefore able to have religious rights that were worthy of protection. And further it held that the, by protecting the company's rights. You are also protecting the owner's rights. So the, the green family you are protecting their religious expression rights.

Steve Kourabas: A couple of of key quotes really stood out to me in terms of the corporation. So the first is that a corporation is simply a form of organization used by human beings to achieve desired ends. Protecting the free exercise rights of corporations like Hobby Lobby and the other companies that were involved, protects the religious liberty of the humans who own and control those companies.

Steve Kourabas: So it's really an an interesting legal device there that the, the, the court is using to protect ultimately the interests of the owners. The second quote that I like from justice Alito is the following. For-profit corporations with ownership approval support a wide variety of charitable causes and is not at all uncommon for such corporations to further humanitarian and other altruistic objectives.

Steve Kourabas: If for-profit corporations may pursue such worthy objectives, there's no apparent reason why they may not further religious objectives as well. 

Melissa Castan: It's a funny thing because it's like saying. That a corporation has ideas or morals or an internal mental life. Yeah, but a company doesn't have that. It's the people that work for a company or own a company or run a company.

Melissa Castan: They may have that thought process, but a company itself is a legal structure, right? So how can it have those kind of moral or ideological positions, 

Steve Kourabas: what the court has done here. Is, it's it's pierced What the, the veil? It's this means that it's looked behind the legal structure of a corporation and attributed the views of the owners to the corporation.

Steve Kourabas: And that's quite controversial really, because one of the main benefits of incorporating. Is that you separate the company from the owners. So if you were to change the, the facts a little bit here, you would, you'd probably wonder what the greens would argue. So if, if there was a someone that was owed a lot of money by hobby Lobby, and they approached the greens and they said, well, the debts of the.

Steve Kourabas: Is really your debts because you and the company are the same. I presume the greens would've relied on the, the legal fiction there and said, well, we're separate and the company, it can't have our debts. They didn't make that argument when it came to their religious beliefs. So it's kind of providing a company these moral and ethical views through the owners in a way that was.

Steve Kourabas: Not really commonly accepted in countries like America or Australia or England. Previously the dissenting judges went back to the pri. One of the principles that I, or, or some of the principles that I outlined just a little bit before, they said a company's completely separate. And as it's a separate company you can't attribute the religious beliefs of the owners.

Steve Kourabas: To the company and therefore the, the company could not receive protection for religious views. I can probably pull out a couple of interesting quotes from the dissent, which was written by Ruth Bader Ginsburg, who noted that until this litigation, no decision of the US Supreme Court recognized a for-profit corporations.

Steve Kourabas: Qualification for religious exception from a generally applicable law, and she found that this is what one would expect for the exercise of religion is characteristic of natural persons, not artificial legal entities. 

James Pattison: On that very point, there was a quote that you directed me to from Lord Chancellor Thurlow in the 18th century.

James Pattison: He says. Did you ever expect a corporation to have a conscience when it has no soul to be damned and no body to be kicked? Yeah. So that's 

Steve Kourabas: a, that's a really famous a very famous quote in corporations law in, in, in, you know, many countries. It's, it's from England but it really. Sets the scene, doesn't it?

Steve Kourabas: Right. It's, it's kind of saying, why would you expect a company to have a conscience if it doesn't have a soul and a body to kick? Well, I guess the Hobby Lobby case in, in, in, in one respect is providing at least those companies with a soul, right? And the reason that that's really interesting is.

Steve Kourabas: I think the, the common concern at least in the seventies and eighties and and continuing now, was that companies didn't have a soul and therefore they acted in a, a manner that wasn't that that didn't comply with some of the moral expectations that we have, the companies. So they were just.

Steve Kourabas: For profit organizations that didn't really consi care about anything other than making a profit. And this caused a whole load of other problems in society. This case is really interesting because it's an attempt to give the company a solve but it may not be the outcome that everyone was expecting or hoping for.

James Pattison: So, are you, are you characterizing this as, you know, o over the decades we've gone from the company that is. Just seeking a profit to return to the owners, the shareholders, and something like corporate social responsibility has Yeah. Kind of blown up in our face if we, if, if we hold different, you know, religious or social views to the owners of Hobby Lobby.

Steve Kourabas: I think, I think in a sense, right, I mean it's, it's kind of, complicated things. At least. You know, we, we used to have a very clear distinction, right? Corporations were economic actors. And that's all that we expected of them, really. I mean, as long as they complied with the, the, the laws that were in place in, in a country then we said their only, the only thing that they should care about is making money for their shareholders.

Steve Kourabas: But I think as the decades have evolved since, you know, since that kind of theory of the corporation came, came to was, was popular we've actually started to expect more of a corporation. We've wanted it to have a bit of a soul. And thi this is reflected in, you know, lots of things like I think you just mentioned corporate social responsibility.

Steve Kourabas: We talk about things like a good corporate citizen. So we're expecting corporations to act. In a manner that reflects more than just profit. But I don't know that we've settled yet. How, how corporations should act if we expect 

James Pattison: more of them. Steve, how significant is this decision? I mean, this is a decision of the US Supreme Court and, and it's a very, you know, different yes.

James Pattison: Socially, a very different place than a place like Australia. So. You know, how significant is this on, on a global scale? 

Steve Kourabas: So I think that the, the common assumption really is that Accordion Australia wouldn't take a similar approach. I I'm not a hundred percent sure that that's, that's right. You know, I could maybe, I, I could see this happening where.

Steve Kourabas: You know, you've got a, a private company. We, we often have cases or, or we have cases in Australia where you've got these private companies closely held where we consider them as quasi partnerships. So we do attribute to some extent the views or the expectations of the owners onto these companies.

Steve Kourabas: Being willing to pierce the veil, as we said earlier, and, and kind of attribute the expectations to a certain extent of the owners onto the corporation. So. I think it's probably unlikely that would have an exactly or an exact case of this nature. But I think the, the, the potential bigger implication for Australia is how do we think of a corporation and how it operates in, in our country.

Steve Kourabas: It raises questions about. Do we want companies in Australia to have this, this kind of moral backing that is suggested in, in, in a case like hobby Lobby or, or this moral element? Or are we happier to clearly distinguish, you know, between corporations? That have an economic motive, and then other aspects of our life such as you know, politics which are dealt with in a completely different sphere.

Steve Kourabas: Or are we willing to intermingle the economic and political parts of our life? Through the corporation. So I think that we can think about this through a, through a bit of a thought exercise. So I'm gonna put some questions to, to the two of you now. Aha. Okay. To, to help me out. Let let, let's, let's think about what we just said about Hobby Lobby and religious expression in terms of an Australian example.

Steve Kourabas: And we probably will remember a couple, couple of years back the marriage equality debate. That we had. And there was a lot of activity at that time coming from corporations who were concerned about the effects of this discussion on their employees, but more broadly on society. So you had things like CEOs signing letters to the government on, on behalf of their companies talking about, or, or talking or, or.

Steve Kourabas: In favor of marriage equality. Now, if I were to ask you, do you think that that is a good thing that a company does that, what would you say? I'd say yes. 

Melissa Castan: I think you're trying to trick us, Steve, because I don't think a, because I don't think a company says anything. I think people say things. 

Steve Kourabas: Yeah. So that could be right.

Steve Kourabas: You know, and in and in essence that it's kind of what the Hobby Lobby case made out. Right. And and it's a really interesting point because it makes us think about how does a company do anything? And it's always the people behind it, right? And therefore, are we providing protection for these people behind the company through the, through the legal construct of a corporation.

Steve Kourabas: But it make us a little bit about. How do we expect the company to engage in these issues that are important in society? So, do you guys think that companies should have a say or they shouldn't? And I think I already under, I already think I know what Melissa might say, but let's go for it. 

Melissa Castan: So, Steve, I reckon what, what you could say is we are the people who work at X company and we believe in.

Melissa Castan: Such and such, right? Yeah. So you, you, you can put yourself forward as saying, I'm the managing director of uh mm-hmm. Melissa Cast company, and I say, we should support this. This policy or that policy, that's where we stand on these issues. 

Steve Kourabas: Why would they, so what would be the benefit of saying, I am the managing director of X, Y, Z company in making that argument?

Melissa Castan: Well, because I'm important and I have a certain place in society and you know, my company employs 57,000 people and it's giving a message to the people that I work with. Yeah. And sending a message to society in general. This is where. You know, the team or me, or me as the leader, et cetera, stand on this, but I don't actually know that a company says much.

Melissa Castan: Oh, you know, maybe a company says something when it says, we advertise in this newspaper, or we advertise on this platform. Right? Yeah. So they're kind of implicitly. Engaging in that platform or you know, in that newspaper or, yeah, whatever the next thing is by putting their money there right then. So that's a kind of messaging, but I'm not sure that companies themselves have things to say.

Melissa Castan: It's the people that work for them that have the things to say, but it's so much more, 

James Pattison: well, it's so much more powerful though to see a brand stand for something. We saw this, whether or not you think of it as something that was, had sort of positive intentions or whether you're, it was a bit cynical, but during the Black Lives Matter movement, there are a number of brands including Nike, who put out very overt support for Black Lives Matter.

James Pattison: If that came, I think there was a 

Steve Kourabas: lot of streaming companies that were doing that. Right. You know, they were putting on, they were putting signs on social media as the company themselves. There wasn't anyone behind that. You know, in the messaging it was, you know, Netflix or it was Uber or whatever company that was saying it.

James Pattison: And if that came from the CEO, I'd feel like as someone who uses their products, I just kind of think, oh, who's, who's that? It wouldn't really, they don't carry that. Yeah. You know, the history or the respect of that, that brand. 

Steve Kourabas: And when you think about it in the context of Hobby Lobby, at least the court there was saying that indeed a company can have such a view, right?

Steve Kourabas: Right. And, and that could be independent of the people that constitute the company. And, and, and that could make some sense when you think about the fact that a company can include lots of people with very different opinions. And so they have to deliberate. And then they will make a statement, and some people may disagree with the ultimate statement of the company, but the company has made a statement, even though it may reflect.

Steve Kourabas: The views of some people within the company and not everyone else. So it's a really, it's a it is at least an interesting thing to think about that we can use a, a company now to talk more about these social issues. And if you go back to the marriage equality debate. Indeed the government at the time was quite upset that these companies were making such statements or the, the people on behalf of the companies were making these statements and they told 'em to stick with to what they do best, which is make money.

Steve Kourabas: So there was in addition to the marriage equality debates, there was also this debate about what role should business and corporations have in these social debates whether it should have more of a say in these social matters or whether it should just stick to what it did best and make money.

James Pattison: Steve, what do you think? This particular case says about the future of corporations in our society. And and do you think we're sort of heading towards a utopia in Steve's mind or a dystopia? Yeah. 

Steve Kourabas: Okay. So I want the robots, you are asking the really tough questions. I think, I think Robocop dealt with that question precisely.

Steve Kourabas: Now we're talking it, it was a dystopia. It was a dystopia, not a utopia. But what do I think are the major. Implications, really. I think that it's kind of, pushing us to reconsider the, the basic or the, or the most fundamental elements of our, of the way that we organize our, our economic lives.

Steve Kourabas: So it's sort of giving, you know, that, that that little bit of soul or it's attempting to give that little bit of soul to the company, but in doing so, it's making us ask questions about. If, if we, if we do that, how do we want the corporation to act? I I think that the, the the, the, the presumption was that if we give that soul to the company, it would act in a particular way, you know, support environmental causes, you know, climate change and, and whatnot.

Steve Kourabas: But there's, but we, we'll have to engage in a bigger debate about how corporations are held accountable and how they may influence society if, if they have this, this say on social matters rather than just purely economic matters. So it kind of is bringing up a new dynamic in society between economic and other aspects of our lives.

Steve Kourabas: I don't know. Do you guys agree with that? 

Melissa Castan: I don't know. Imagine if you had a, a pharmaceutical company, a big, you know, transnational pharmaceutical company. It. We don't believe in a certain issue or product. Mm. And so we are not applying any of our scientific research and design to that product because it goes against us as our, as the private owners, our, you know, philosophy of this.

Melissa Castan: Yeah. And so they just take themselves outta the market for, you know, a vaccine for a terrible pandemic or Yeah. A contraceptive aids medical intervention. Yeah. You know, like it would be, that's really interesting. Now there's not only one. Major transnational pharmaceutical corporations. So if one takes themselves outta that space, you know another mega.

Melissa Castan: Far big pharma would come into the space, but it's a pretty interesting question. If companies say we, we are just taking ourselves out of that market. 'cause we don't believe in it. Not not because of the economics. The economics would work. We don't believe in it because of the philosophical or ideological or social consequences of it.

Steve Kourabas: I think that that's the, that's the really important thing to, to, to consider And, and it played out in Hobby Lobby, even in a more, in a more personal or, or, you know, way, you know, these employees that, that wanted to use these the, this contraceptive care in essence. They were just, they were working for a company that they didn't necessarily think had some kind of religious view or you know, so, so now their, their decision about contraception was being determined by not their employer, which was the company but by the beliefs of the owners of that company, which were then being attributed to, to, to the company.

Steve Kourabas: And, and there's been you. Several instances where companies have acted in a way since the Hobby Lobby case which has raised questions about protection of individual rights when they're dealing with a corporation in, in this manner. Even so, it's a, it, it raises some really big issues about how we think corporations should act.

Steve Kourabas: That I don't think we've necessarily done so far and whether I think we're going into a utopia or a dystopia that, that, that's really a difficult thing to commit to on the record. But I think that there's both, there, there's some cause for concern but also potential hope out there for us.

Steve Kourabas: There's often talk. People feeling disenfranchised in, in the political aspects of their life. You know, they don't, they, they may not necessarily feel represented. And if I can give it an example in America again, when president Trump first came in, he made some, some decisions regarding immigration that were rather controversial and some people may not have felt represented in, in that decision.

Steve Kourabas: And you could see that they were trying to act out through corporations which had a bigger influence than people did individually. And I think that that was the point that Melissa was was making when we were talking about marriage equality. So there is some, some hope, I think that we can have a balance of interests represented through through corporations. But we just need to be sure that we are providing clear expectations of corporations when they're acting in this manner. And I don't think that we're doing that so far.

Melissa Castan: Steve Kourabas, thanks so much for speaking with Case In Point. 

Steve Kourabas: Thanks guys.

James Pattison: Melissa, if people are liking Case In Point, you have an ever so tiny favor to ask. 

Melissa Castan: Okay, well first of all, send us cash in an unmarked brown paper bag. Addressed to James. No questions asked. 

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