Corporations have long posed conceptual difficulties in a variety of doctrinal contexts. From the first cases involving corporate claims for protection under the U.S. Constitution, to early recognitions of corporate criminal liability a century later,1 the Supreme Court has an extensive history of inquiring into the nature of corporations and what that answer might tell us about their rights and responsibilities.2 It has often come up short in this regard — for example, using thin characterizations of corporations as “artificial entities” or “creatures” given their separate legal personality, or as “associations of persons” or “aggregates” given the human interests at stake.3 At times, the Court has ignored or dismissed as irrelevant the corporate identity of a rights claimant or litigant,4 or it has simply acted pragmatically, such as to discard an “old and exploded doctrine” that no longer fit societal realities regarding corporate liability.5
The Court has continued this struggle with corporations in the twenty-first century. With rising globalization, technological development, and complexity in business organizations, the divergence grows between the Court’s characterizations or abstractions and the realities of corporations. For example, blockbuster cases on corporate rights in the Roberts Court era, such as Citizens United v. Federal Election Commission6 and Burwell v. Hobby Lobby Stores, Inc.,7 paint a picture of corporations as “associations of citizens”8 and as rights bearers for “the humans who own and control [them].”9 People do not, however, typically look at their 401(k) account and think about civic participation in expressive associations. Nor does one generally think of a national chain with hundreds of stores as the same as its small handful of shareholders. While expanding corporate rights to political spending and religious liberty, the Court’s opinions in these cases gave little sense of the distance between its view of corporations and their reality to everyday people who participate in them and bear the weight of their activity.
Further, in shaping and interpreting the law on rights and responsibilities, the Court continues to struggle not only with questions of what are corporations and whom do they serve — but also where are corporations?10 Adequate resolutions to these questions seem as far from grasp as at any time in the past. Corporations can transcend borders, change form to arbitrage or to take advantage of laws, outsource activity, and divide into subsidiaries around the world.11 Analogies between corporations and natural persons often fall flat as they do not capture these capabilities, the roles and relationships among corporate participants created by internal governance, and the related facts and values.12 Attempts to parse where corporate conduct occurred can become roadmaps for corporations to evade liability.
In the recent Supreme Court Term, three of the world’s largest corporations — Ford, Nestlé USA, Inc. (Nestlé), and Cargill — argued that they could not be held accountable to plaintiff victims in the jurisdictions in which these litigants brought suit. In Ford Motor Co. v. Montana Eighth Judicial District Court,13 the global auto company asserted that personal jurisdiction was lacking in two products liability suits stemming from accidents that injured residents in Montana and Minnesota, where the Ford vehicles arrived through resales and relocations.14 In Nestlé USA, Inc. v. Doe,15 together with Cargill, Inc. v. Doe,16 the food giants defended themselves against claims under the Alien Tort Statute17 (ATS) brought by plaintiffs who were enslaved as children on cocoa farms in Ivory Coast (Côte d’Ivoire) and who maintained that the corporate defendants had aided and abetted human rights violations in their supply chains from their U.S. headquarters.18 Nestlé and Cargill boldly asserted that they had categorical immunity as U.S. corporations, and, alternatively, that the Court should parse where the relevant conduct occurred and find it outside the reach of the statute.19
Critically, both cases hinged upon the Court’s understanding of corporations and where it located their activity for purposes of potential liability. And, in each of these two consolidated cases, ranging on the merits from products liability to international human rights, the corporate defendants attempted to avoid legal responsibility through clever arguments that put corporations on better footing than individuals. Many observers would find the cases quite unsurprising in this regard. Corporations are shaped by a complex mix of forces, including both internal and external governance and rules of the game — corporate and securities laws govern the “internal” world of corporations and everything else is perceived as “external,” such as civil procedure, human rights, environmental law, labor law, consumer protection, and so on.20 Corporations have often pushed for rights and challenged external rules and regulations that create responsibility, and as the Supreme Court in recent years has appeared to take a friendly stance toward their claims, it has developed a “pro-business” reputation.21
Although far from absolute, whether one takes a quantitative or qualitative approach to the question, it is possible to observe that corporations and business litigants have often succeeded in their claims before the Court and in shaping the direction of the law.22 This past Term, Nestlé and Cargill did not obtain categorical immunity, but they emerged victorious in their claim that the plaintiffs’ complaint impermissibly sought extraterritorial application of the ATS. Even though a majority of the Justices seemed prepared to hold domestic corporations to the same standard of liability as natural persons under the ATS, Nestlé and Cargill convinced the Court to accept a narrow view of where they could be held accountable for their conduct. The Court flatly rejected as insufficient the plaintiffs’ allegations that the corporate defendants made “major operational decisions” in the United States, reversing the decision below and allowing Nestlé and Cargill to avoid a trial on the merits.23 Ford, by contrast, lost its bid to aggressively draw lines around where it could be sued for products liability, as the Court stood by existing precedent and ruled in favor of plaintiffs. Yet the case might still reflect a pro-business trend as an instance of corporate overreach following a string of corporate wins that have reshaped personal jurisdiction doctrine. Ford’s audacious argument that it could not be sued in Montana and Minnesota because the particular cars involved in the plaintiffs’ accidents were not originally sold in-state exemplifies just how far the law has already evolved in corporate defendants’ favor.24
Other cases from the recent Term also help to fill out this picture of the Court’s approach to corporations. Most notably, in Americans for Prosperity Foundation v. Bonta,25 the Court endorsed a robust understanding of the First Amendment right to freedom of association for nonprofit corporations and other charitable organizations. In a splintered majority opinion, the Court held that a California regulation unconstitutionally burdened associational rights by requiring these organizations to disclose donor information to the state’s Attorney General’s Office for potential investigation into fraud and other wrongdoing.26 The Court’s willingness to strike down the regulation and raise the bar on the “exacting scrutiny” standard suggests that campaign finance regulations and other compelled disclosure regimes — even for business corporations — may be dismantled or threatened in the future.
Thus, from parsing the location of corporate activity for accountability to shielding organizations from disclosures on the basis of associational freedom, these cases provide valuable entry points for exploring how the Court’s conceptions of corporations shape its jurisprudence. And yet digging into these cases also reveals that the pro-business label is at once correct but also wrong — or at least too simple. Corporations have often been empowered with rights and unburdened from responsibilities. Certainly this can be understood as favorable to business organizations in the broad sense. But deeper examination reveals that an enormous diversity of corporations exists and serves the interests of many different constituencies — many of whom do not benefit from, or welcome, this “pro-business” jurisprudence. The very notion of what is in the “business” interest of a corporation is highly contested and varies widely across corporations and participants. Cases from the recent Term, and others from the Roberts Court era, therefore also present an opportunity to examine the complex relationship between the Court’s treatment of corporations and contrasting trends regarding corporate law and governance.
This Comment makes two primary contributions. It first observes that cases from the recent Term reflect an important way in which the Roberts Court has earned its reputation: over the beginning of the twenty-first century, the Court has often expanded corporate rights while narrowing corporate liability or access to justice against corporate defendants. Part I of this Comment sets forth this argument, using Americans for Prosperity, Ford, and Nestlé as case studies to show how the Court uses ill-fitting conceptions or overbroad generalizations to empower corporations and limit their accountability.
This trend gives rise to a paradox that Part II subsequently explores: the “pro-business” Court is often at odds with internal activity in corporate law and governance. Quite remarkably, as the Roberts Court has expanded corporate rights and narrowed pathways to liability, many shareholders and stakeholders have become vocal participants, putting pressure on corporations to rein in the use of their rights, to mitigate risks generated by their externalities, and to take account of environmental, social, and governance (ESG) concerns. The Court’s expansion of corporate rights not only disserves many corporate participants and spurs them to action but also might fuel challenges to new disclosure rules about corporate political activity or other ESG-related concerns that investors and others seek for effective participation in corporate governance. Further, as the Court has downplayed or ignored corporate decisionmaking structures in its jurisprudence expanding rights and narrowing liability, by contrast, in the world of corporate law and governance, we see that board oversight, monitoring, and compliance functions have grown in importance. State corporate law cases have heightened attention on the board’s role in providing oversight to ensure legal compliance throughout the corporation’s operations and to mitigate litigation and reputational risks that can arise from corporate abuses around the world. Corporate compliance programs and voluntary ESG initiatives have proliferated amid widespread debate about the purpose of the corporation and a broadened role for stakeholders.
Looking at these diverging developments together suggests that, at least in some important circumstances, the Supreme Court’s approach may not capture the reality of modern business corporations, and it might not be what many shareholders and corporate participants actually want. It may instead create new tensions in corporations that are not fully and easily resolved through private ordering and that undermine the conceptual foundation for the existing arrangements in corporate law and governance. It may also ultimately serve only a limited set of business interests — not the great number of workers who are often framed as stakeholders on the other side of “pro-business” jurisprudence, nor the majority of public corporation shareholders, who are increasingly diversified through institutions that rely on external regulation to constrain corporations and minimize systematic risk. And so, in sum, corporations might bear little resemblance to the Court’s characterizations, and the business world, on the whole, might often be better off without “pro-business” jurisprudence that empowers corporations and erodes their external constraints.
I. Expanding Corporate Rights and Limiting Responsibilities in Twenty-First-Century Supreme Court Jurisprudence
When scholars have approached the question of whether the Roberts Court is pro-business, they have used a variety of methods ranging from coding and counting cases to qualitative analyses in different subject areas.27 All of the leading accounts have reached the conclusion that, in various qualified ways, and without singular meaning, the answer is yes — it is “pro-business.”28
This Part explores one of the most notable but less explored trends of this era — the expansion of corporate rights and narrowing of liability or access to justice against corporate defendants. Landmark cases from previous Terms such as Citizens United and Hobby Lobby have garnered significant attention on the first part of the equation — expanding rights.29 Running through these cases is a failure to capture the full nature, dynamics, and facts on the ground of corporations. By describing corporations as “associations of citizens” in a “corporate democracy,”30 and projecting the beliefs of shareholders onto corporations,31 the Court has empowered corporations with greater speech rights and religious liberty.32 In Citizens United, the Court held that corporations have a First Amendment right to make independent political expenditures.33 In Hobby Lobby, the Court held that the Religious Freedom Restoration Act of 199334 (RFRA) applied to three closely held business corporations, allowing them to claim a religious exemption from providing certain contraceptive coverage to their employees.35 In both cases, the Court extended protections — either constitutional or statutory — to for-profit business corporations.
And, although Citizens United and Hobby Lobby are the most well-known recent corporate rights cases, they are not alone. The Court has also invigorated the commercial speech doctrine36 and given a forum for a business corporation’s claim to a First Amendment right to discriminate against customers.37 Most recently, in Cedar Point Nursery v. Hassid,38 the Court validated agricultural employers’ claims that sought Fifth and Fourteenth Amendment protection against a state regulation that provided periodic access to their farm property for labor union organizers.39 As discussed by Professor Nikolas Bowie in this issue, the case takes a sweeping approach to Takings Clause jurisprudence in favor of the employers40 — operating as corporations or through other forms of business organization. Further, as noted above, in Americans for Prosperity, the Court sided with nonprofit organizations, under the First Amendment freedom of association, in their facial challenge to a state disclosure requirement that facilitated regulatory oversight.41 The Roberts Court has recognized the most expansive scope of corporate constitutional rights in U.S. history.42
Other cases from the recent Term, Ford and Nestlé, provide insight into the latter part of the equation about how the Court tilts or narrows the procedural rules and external laws regulating corporations.43 Ford involved the Due Process Clause of the Fourteenth Amendment and the doctrine of personal jurisdiction,44 and Nestlé involved the Alien Tort Statute, a part of the Judiciary Act of 1789 enacted in the first session of the U.S. Congress.45 Both cases contemplated ongoing challenges with conceptualizing corporations, and reflect how, from time to time, the Court displays awareness that its rulings and reasoning do not fit or fully capture the nature of modern corporations or that the law has tilted in their favor without meaningful justification. Concurring and dissenting opinions in Ford and Nestlé notably did so, and yet still failed to put the Court on a different path. They followed years of cases which have trended, albeit not in absolute fashion, toward limiting corporate responsibility and access to accountability against corporate defendants.46
The discussion next turns to a more in-depth look at three of these examples — Americans for Prosperity, Ford, and Nestlé — as the recent Supreme Court Term provides a microcosm of the general trend identified in this Part. Arising under widely different areas of law, each is offered in the spirit of a case study to explore in more detail how the Court’s understanding of corporations can translate into expansions of rights and contractions of responsibilities.
A. Corporations as Rights-Bearing Legal Persons
The first example, Americans for Prosperity, comes from the world of nonprofit corporations and charitable organizations. Specifically, the case raised the issue of whether California’s requirement that nonprofit organizations disclose information about their major donors to the state authorities violated the First Amendment right to free association.47 The purpose of the required disclosures — Schedule B to Internal Revenue Service Form 990, including a list of major donors — was to facilitate the state Attorney General’s ability to police against charitable fraud and misconduct.48 Although the state Attorney General’s registry inadvertently provided public access to confidential Schedule Bs at one point several years ago, since that time the state codified a policy prohibiting such public disclosure and imposed security measures to protect the filings.49
The litigants bringing the challenge were two organizations that might be characterized as ideologically or religiously oriented affinity groups: the Americans for Prosperity Foundation, described by the Court as a “public charity” with a stated mission of “education and training about the principles of a free and open society, including free markets, civil liberties, immigration reform, and constitutionally limited government,”50 and the Thomas More Law Center, described by the Court as a “public interest law firm,” with a stated “mission . . . to protect religious freedom, free speech, family values, and the sanctity of human life.”51
Two aspects of the case are particularly noteworthy as they speak to the Roberts Court’s approach to corporate rights. First, the Court’s 6–3 ruling found facially unconstitutional the disclosure requirement with little inquiry into whether most of the nonprofit organizations to which it applied would have any associational interests burdened.52 This approach, without sensitivity to the specifics of entities and the interests of the people involved in them, can lead to granting overbroad corporate rights. A similar dynamic was at play in Citizens United, when the Court granted First Amendment political spending rights to all corporations instead of simply the nonprofit political advocacy corporation that was before it as a litigant.53 This pattern reflects how the Roberts Court tends to either characterize corporations with ill-fitting descriptions or avoid examining them altogether to elide how broadly it is ruling.
To elaborate further on this point, the litigant organizations — the Americans for Prosperity Foundation and the Thomas More Law Center — might indeed be composed of individual donors who understand that their affiliation expresses values they hold and exercise through association, and who have privacy interests at stake that can be represented by the entities.54 In that way, although vastly differing in aims and burdens, the organizations could perhaps be likened, as the Court did, to the NAACP, a civil rights group pursuing racial justice through its organization as a membership corporation.55
However, in the landmark 1958 freedom of association decision, NAACP v. Alabama ex rel. Patterson,56 the Court invalidated only a targeted production order requiring that the NAACP disclose its membership list to the state.57 Further, the NAACP specifically showed that it was associational in nature, it brought together members with common beliefs, and the individuals represented by the organization faced the severe threat of violent reprisals if their names and addresses were disclosed pursuant to the production order.58
By contrast, in Americans for Prosperity, the Court broadly invalidated the state regulation as to all nonprofit organizations — approximately 100,000 registered in California — and did little to examine the interests, associational dynamics, or evidence of threats or chilling effects on any other organizations besides the two litigants.59 Many of the 100,000 nonprofit organizations registered in California might have few if any individual donors making contributions large enough to be listed on a Schedule B, nor organizational aims and dynamics that would give rise to a concern about causing serious harm to donors or chilling their association.60 Over strong dissent by Justice Sotomayor on this point, which was joined by Justices Breyer and Kagan,61 the Court cited only evidence from the two litigants and cursorily noted briefs filed in support by amici curiae organizations that also wished to avoid disclosing donor information to the state.62 In sum, the majority opinion takes an expansive approach to assuming privacy and associational interests for a wide array of organizations that it does not investigate — broadly enforcing rights with little regard for determining whether the facts on the ground showed them to be in danger.63
Second, the Court arrived at its ruling by applying a narrow tailoring requirement to the standard of “exacting scrutiny”64 — a move that could have broad implications for a variety of disclosure regulations, including for business corporations.65 Instead of focusing on deeper analysis of the organizations and the significance of their burdens, the Court justified invalidating the law on a facial challenge because of its view of the regulation — that the state’s investigative goals were merely for “administrative convenience” and not narrowly tailored.66 A majority of the Court joined in applying this standard and reaching this conclusion, though Chief Justice Roberts did not sway enough of his colleagues to also join in his one-size-fits-all vision that, “[r]egardless of the type of association, compelled disclosure requirements [should be] reviewed under exacting scrutiny.”67 In separate concurrences, however, Justices Thomas and Alito (joined by Justice Gorsuch) set out their views for either applying an even higher level of scrutiny or leaving open the question of a uniform standard for cases involving a First Amendment challenge to compelled disclosure.68
Altogether, the decision avoids investigating the associational dynamics and interests of thousands of nonprofit organizations, ratchets up scrutiny to strike down the state’s disclosure regulation, and suggests that future challenges to compelled disclosure might receive the same or even greater levels of scrutiny. As cases involving the rights of nonprofit corporations and charitable entities have been harbingers for business corporations,69 Americans for Prosperity is an important example of the Roberts Court’s trend of expanding corporate rights with an approach insensitive to many of their realities.
B. Corporations and Procedural Rules of the Game
Turning now from expanding rights on one side of the “pro-business” trend identified in this Part to limiting accountability on the other, consider two other cases from the recent Term: Ford and Nestlé. Starting with the first, Ford illustrates how procedural rules are infused with conceptions of corporations and have often been tipped in their favor. It is the latest in a long line of personal jurisdiction cases involving corporate defendants that dates back to International Shoe Co. v. Washington.70 The history before and after this 1945 case is a cat-and-mouse tale of courts taking rules made for individuals, roughly adapting them to corporations, and then acceding to corporate claims to whittle them down over time.
Before International Shoe, courts interpreted theories of consent, doing business, and presence in a state to give “relatively unlimited jurisdiction over corporate and individual defendants having certain commercial ties with the forum.”71 Gradually, however, corporations engaged in crafty tactics to get around these rules, and courts began to embrace a more limited and dispute-specific approach to jurisdiction, often leaving injured parties without a convenient forum for their claims.72 In International Shoe, the Court charted a new course: it held that due process requires only that a corporate defendant have “minimum contacts” with the forum state such that “the maintenance of the suit”73 is “reasonable, in the context of our federal system,”74 and does not “offend traditional notions of fair play and substantial justice.”75 Further, the Court noted that “continuous corporate operations within a state [could be] so substantial and of such a nature [so] as to justify suit against [the corporation] on causes of action arising from dealings entirely distinct from those activities.”76 Subsequently, by the mid–twentieth century, a framework recognizing two types of personal jurisdiction emerged: general and specific jurisdiction.77
Recent years have once again given a “massive gift to corporate defendants,”78 however — a string of Supreme Court cases that contracted both types of personal jurisdiction.79 Most notably, using flawed analogies to individual humans, the Court has dispensed with the notion that general jurisdiction subjects corporations to jurisdiction in all states in which they do “continuous and systematic” business.80 Envisioning a natural person’s “domicile” as the “paradigm forum,” the Court interpreted “an equivalent place” or “home” for corporations as the state of incorporation and principal place of business.81 General jurisdiction exists, essentially, in just one or two states for most U.S. corporations.82 Further, specific jurisdiction evolved to cover a “narrower class of claims,”83 in which the corporate defendant “purposefully avails itself of the privilege of conducting activities within the forum State”84 and the plaintiff’s claims “aris[e] out of or relat[e] to the defendant’s contacts” with the forum.85
Seizing on this line of favorable precedent, Ford took an aggressive stance in response to suits brought against it in Montana and Minnesota for accidents in those states involving its vehicles.86 The multinational auto manufacturer is incorporated in Delaware, headquartered in Michigan, and advertises, sells, and services its vehicles in the United States and abroad.87 In the cases before the Court, it claimed that personal jurisdiction was lacking because general jurisdiction did not attach and, although there might have been purposeful availment, there was no causal link between its conduct in Montana and Minnesota and the plaintiffs’ claims.88 Specifically, Ford asserted that the particular vehicles involved in the relevant accidents were designed, manufactured, and first sold in states other than Montana and Minnesota — it was only through resales and relocations that the vehicles had found their way into those states, and thus by its logic, specific jurisdiction was improper.89
Reflecting on this history and Ford’s claim, Justice Gorsuch, in his concurrence, forcefully rejected Ford’s claim and observed the inequity: “Nearly 80 years removed from International Shoe, it seems corporations continue to receive special jurisdictional protections in the name of the Constitution. Less clear is why.”90 He highlighted the Court’s failure to modernize its approach to corporations: “[I]t seems almost quaint in 2021” to “speak of a corporation having one or two ‘homes’”91 when we are “in a world where global conglomerates boast of their many ‘headquarters.’”92 And although in the 1940s “purposeful availment” might have been “a reasonable new substitute for assessing corporate ‘presence,’” in the twenty-first century with Internet advertising, e-commerce, platform business models, and global reach, “the old test no longer seems as reliable a proxy for determining corporate presence as it once did.”93
Not only is the doctrine out of touch with modern business, Justice Gorsuch noted, but it treats corporations better than humans — “individual defendants remain subject to the old ‘tag’ rule, allowing them to be sued on any claim anywhere they can be found.”94 Indeed, “[t]he Constitution has always allowed suits against individuals on any issue in any State where they set foot.”95 Corporations, of course, do not have a physical body to set foot anywhere except through directors and agents, but the failure to fairly assess their presence or consent is precisely the point. Justice Gorsuch did not spell out the consequences in his concurrence, but they are clear: plaintiffs pay the price.96 Those plaintiffs may be corporations themselves or individuals, who, going about their everyday lives, are harmed by corporations’ products or services and then might be unable to bring suit in their home state.
What, then, did the Court rule in Ford? It “proceed[ed] as the Court has done for the last 75 years — applying the standards set out in International Shoe and its progeny.”97 Writing for the Court, Justice Kagan acknowledged its recent case law narrowing specific jurisdiction for corporate defendants and rejected Ford’s attempt to further narrow the rule to include a strict causal relationship between the defendant’s in-state activity and the plaintiff’s claim.98 From there, the Court affirmed the decisions below by applying its statement from 1980 in World-Wide Volkswagen Corp. v. Woodson99 that if a car manufacturer “serves a market for a product in the forum State and the product malfunctions there,” it is not unreasonable to subject it to suit in that state.100
This time, Ford lost. But the bigger picture is the trend line of decisions incrementally tilting in favor of corporate defendants, leading to Ford — one of the largest U.S. corporations, which sells millions of vehicles across all fifty states — claiming that it could not be sued for products liability in Montana or Minnesota. The shortcomings of personal jurisdiction doctrine to capture modern business and the inequity in treatment between individuals and corporate defendants were brought to light, but the status quo remained. The Court quite reasonably noted that the facts did not distinctively raise the issues discussed in Justice Gorsuch’s concurrence101 — but, of course, it granted certiorari in Ford in the first instance and not in another case that might have done so. It remains to be seen if the pendulum favoring corporatate defendants has started to swing back, or if Ford simply signals that the Court will not go further than its already accommodating approach.
C. Corporations and External Laws
Finally, Nestlé provides another window into how the Court’s jurisprudence conceptualizes corporations and can limit access to justice against corporate defendants or otherwise narrow sources of liability. It represents the third major ATS case of the Roberts Court era to assail the hopes of victims of human rights abuses to have their claims heard in U.S. courts.102
A brief examination of the ATS helps shed light on this path. The First Congress enacted the ATS in the Judiciary Act of 1789 to provide a federal forum for foreigners to bring tort suits against violators of the “law of nations.”103 Scholars have explained that, at that time, “every nation had a duty to redress certain violations of the law of nations committed by its citizens or subjects against other nations or their citizens.”104 If a nation did not provide a forum to pursue a remedy, it became responsible and gave “just cause for war”105 — an outcome to be avoided. Therefore, with the passage of the ATS, “the First Congress enabled the United States to remedy an important category of law of nations violations committed by U.S. citizens against aliens.”106
Invocation of the statute was rare until the 1980s.107 With evolving recognition that certain atrocities and abuses violated international norms, courts began to hear ATS actions based on modern human rights harms.108 Debate ensued over the meaning of the ATS and its scope.109 Federal courts took different approaches to ATS cases, and the fact patterns were wide-ranging.110 By the late 1990s, human rights advocates began to bring suits against corporations for being complicit in human rights abuses in violation of international law.111
The first modern ATS case to reach the Court, Sosa v. Alvarez-Machain,112 came in 2004, just before the Roberts Court era began.113 It involved an international dispute that arose out of a drug cartel–related incident involving the U.S. Drug Enforcement Agency and a Mexican national.114 Reviewing the history of the ATS, the Supreme Court determined that it is a jurisdictional statute, and claims should “rest on a norm of international character accepted by the civilized world and defined with a specificity comparable to the features of the 18th-century paradigms,”115 such as interfering with the rights of ambassadors, violating safe conducts, and piracy.116 Any such norm must be “specific, universal, and obligatory.”117 If that threshold is met, a court should also consider whether allowing the case to proceed is an appropriate exercise of judicial discretion, particularly in light of the potential for foreign policy consequences.118 Applying this understanding, the Court concluded that the case before it failed,119 but it rejected the notion “that federal courts must avert their gaze entirely from any international norm intended to protect individuals.”120 Instead, it concluded “the door is still ajar subject to vigilant doorkeeping, and thus open to a narrow class of international norms today.”121
To date, however, following Sosa, three ATS suits have gone before the Roberts Court, each involving corporate defendants, and each time the Court has pushed the door closer to shut. First, in Kiobel v. Royal Dutch Petroleum Co.,122 the Court rejected a suit against two foreign corporations accused of aiding and abetting atrocities committed by the Nigerian government, holding that the presumption against extraterritoriality applies to the ATS.123 According to the complaint, “after concerned residents in Ogoniland began protesting the environmental effects” of a joint subsidiary of two large oil and gas companies, the corporate defendants “enlisted the Nigerian Government to violently suppress the burgeoning demonstrations.”124 For years after, the “Nigerian military and police forces attacked Ogoni villages, beating, raping, killing, and arresting residents and destroying or looting property,” while the companies allegedly provided the Nigerian forces with resources and staging ground for the attacks.125 The plaintiffs, victims of these abuses, were granted political asylum in the United States and brought suit under the ATS.126 Although the defendant corporations were traded on the New York Stock Exchange and had a New York office through an affiliate company, the Court held that the suit could not be maintained because the relevant conduct occurred overseas and did not “touch and concern the territory of the United States.”127 In a concurrence, Justice Breyer pointed out a weakness in the majority’s reasoning — applying the presumption against extraterritoriality did not properly account for piracy, which has long been understood as “fair game ‘wherever found.’”128 As Justice Breyer noted, this is why the Court had previously left the door open to ATS claims and prompted judges to ask, “[W]ho are today’s pirates?”129
Next, in Jesner v. Arab Bank, PLC,130 the Court further constricted the reach of the ATS, holding that foreign corporations are categorically exempt from suit under the statute.131 The Court ruled in favor of a Jordanian bank accused of transferring funds through its New York branch for terrorist groups that committed deadly attacks in the Middle East.132 In so doing, the Court gave an assortment of reasons for excluding foreign corporations from suit under the ATS: (1) international tribunals do not evidence a “specific, universal, and obligatory” norm133 of imposing liability on “corporations or other artificial entities”;134 (2) separation of powers concerns weigh in favor of deferring to Congress;135 and (3) if plaintiffs could sue multinational corporate entities, other nations might hale American corporations into their courts “seeking to impose massive liability for the alleged conduct of their employees and subsidiaries around the world.”136 In all, the Court concluded it prudent to exclude foreign corporations from suit under the ATS and leave it to Congress to say otherwise.137
Justice Sotomayor, joined by Justices Ginsburg, Breyer, and Kagan, vigorously dissented in Jesner and explained that the text and historical context of the ATS “requires only that the alleged conduct be specifically and universally condemned under international law,”138 not the method of enforcement such as corporate liability.139 The Court had unnecessarily provided immunity to foreign corporations and undermined the original purpose of the ATS.140 In some instances under the Court’s ruling, the “harm will persist unremedied”141 because corporations may have a “profit motive”142 for human rights abuses, and individual employees may be unavailable or unable to compensate plaintiffs.143 Moreover, suits against individuals “d[o] not impose accountability for the institution-wide disregard for human rights.”144 Citing Citizens United and Hobby Lobby, the dissent concluded that immunizing corporations from human rights liability under the ATS allows “these entities to take advantage of the significant benefits of the corporate form and enjoy fundamental rights, without having to shoulder attendant fundamental responsibilities.”145 As this Part highlights, that trend is indeed the leitmotif of the “pro-business” Roberts Court.
Against this history, the Court heard Nestlé in the recent Term and further narrowed access to justice against corporate defendants — this time U.S. corporations.146 At the root of the case is the fact that the majority of the world’s cocoa comes from Ghana and Ivory Coast, and child labor has been pervasive on cocoa farms in these countries, with over a million children as young as five years old engaged in hazardous work.147 The low price of cocoa from farms in this region reflects the economics of using child labor; the vast majority of the cocoa farms are tiny enterprises, and many of the farmers themselves earn about one dollar a day.148 The plaintiffs, originally from Mali, “allege[d] that they were trafficked into Ivory Coast as child slaves to produce cocoa.”149 They sued Nestlé and Cargill — U.S. corporations that bought cocoa from farms in Ivory Coast, where plaintiffs claim they were enslaved, and “provided those farms with technical and financial resources — such as training, fertilizer, tools, and cash — in exchange for the exclusive right to purchase cocoa.”150 Although the resource distribution and injuries occurred in Ivory Coast, the plaintiffs argued that the corporate defendants “made all major operational decisions within the United States” and “knew or should have known” that the farms were using enslaved child labor, and thus could be held liable for aiding and abetting child slavery under the ATS.151 By contrast, the corporate defendants argued that they were immune from suit under the ATS and, alternatively, it would be an improper extraterritorial application of the ATS in this case.152
Writing for eight members of the Court, Justice Thomas ruled in favor of the corporate defendants on their latter argument, reasoning that “[n]early all the conduct [plaintiffs] say aided and abetted forced labor — providing training, fertilizer, tools, and cash to overseas farms — occurred in Ivory Coast” and only “allegations of general corporate activity — like decisionmaking” occurred in the United States.153 The tight, matter-of-fact language dispensed with “generic allegations” of decisionmaking as “general corporate activity” that is “common to most corporations” and plainly insufficient for alleging a domestic application of the ATS.154
This conception of corporate activity is quite perplexing, however. A fundamental tenet of corporate law is that the board of directors is vested with authority to manage the affairs of the corporation.155 It acts as a collective body through decisionmaking.156 The board of directors may properly meet in person or convene via technological means, whether inside or outside of its state of incorporation — the location of such a board meeting makes no difference as a matter of corporate law; what is important is that there is a decision of the corporation.157 All other decisions and operations flow from the board’s authority by delegation — from the board to the CEO and then all the way down to the employee or agent at the lowest rung.158 Therefore, to look at the lowest rung of corporate activity — agents on the ground — and dismiss the decisionmaking at the top as insignificant turns the ordinary understanding of corporate activity on its head.159 Although tools and cash might have a tangible presence in a location, that does not make the decisionmaking that got them there any less important. Nor is there difficulty in attributing the decisionmaking of a U.S. corporation to the United States. And decisionmaking can provide assistance that constitutes aiding and abetting in various contexts.160 Boards also have oversight duties to monitor their organizations for legal compliance — an obligation with significant complexity for multinational corporations that are coming under increasing scrutiny by regulators, shareholders, and other stakeholders around the world.161 As section II.B explores in more detail, the Court’s reasoning thus fundamentally misconstrues or understates the significance of the corporate decisionmaking structure that is integral to the corporate entity and one of its defining features.
Further, generic allegations of corporate decisionmaking might understandably raise pleading concerns, but it is unclear how plaintiffs who were trafficked and enslaved as children on cocoa farms can be expected to pinpoint exactly who at the corporation was involved in the decisionmaking. Tort victims do not have “the tools at hand” that are available to corporate shareholders, who have the right to request corporate books and records to investigate corporate wrongdoing before filing suit.162 The circumstances might allow for inference, given the well-known pervasiveness of child labor on cocoa farms in Ivory Coast and the cocoa prices that reflect this practice — and that is exactly what the plaintiffs’ complaint highlights.163 From these facts, it would admittedly be more difficult to infer knowledge or reckless tolerance of human trafficking and child slavery rather than unforced child labor. The Court did not attempt to distinguish between human rights abuses, however — it only made the empty statement that alleging “general corporate activity — like decisionmaking” is not enough.164 It also did not specify whether, or what kind of, specific corporate activity might suffice to establish domestic application of the ATS.165
Moreover, the Court did not rule on the larger question it granted certiorari to address — Are U.S. corporations immune from liability under the ATS?166 The issue of corporate liability was a central focus of oral argument, with Justices repeatedly asking variations on Justice Kagan’s question: “If you could bring a suit against 10 [enslavers], when [they] form a corporation, why can’t you bring a suit against the corporation?”167 Justice Breyer similarly reimagined the Marbois affair of 1784, in which a French official had been assaulted in Philadelphia, as being done by a corporation instead of an individual and asked: “Why should that make a difference?”168
Justice Alito, alone, dissented on this ground.169 He explained: “I would decide that question, and . . . I would hold that if a particular claim may be brought under the ATS against a natural person who is a United States citizen, a similar claim may be brought against a domestic corporation.”170 Quite simply, “[c]orporate status does not justify special immunity.”171 In Justice Alito’s view, the Court had put the cart before the horse by answering the question of extraterritoriality instead of the threshold issue of corporate liability.172 The through line to Justice Gorsuch’s Ford concurrence on personal jurisdiction was clear — U.S. corporations should not be put on special footing.173
And, indeed, Justice Gorsuch concurred in Nestlé with this view as well: “Nothing in the ATS supplies corporations with special protections against suit.”174 Neither the statutory text nor original understanding suggests that corporations are exempt.175 As Justice Gorsuch highlighted, the text refers to who may sue (“alien[s]”), and the types of claims (“tort[s]” in “violation of the law of nations or a treaty of the United States”), but “nowhere does it suggest that anything depends on whether the defendant happens to be a person or a corporation.”176 At the time of the passage of the ATS, corporations could be sued as defendants at common law,177 the purpose of the ATS was to provide judicial recourse, and one of the earliest ATS cases involved an in rem action against a ship involved in piracy.178
In a separate concurrence, Justice Sotomayor, joined by Justices Breyer and Kagan, also argued that U.S. corporations should not be immune from liability179 — which added up to five Justices holding that view, and a mystery why Nestlé did not reach this holding.180 Instead, after reaching critical mass on the issue of extraterritoriality, the bulk of the remaining concurrences fought about the scope of actionable torts under the ATS and attempts to further erode the pre–Roberts Court case of Sosa.181 No clarity emerged on the cognizability of secondary liability such as complicity or aiding and abetting liability.182
In sum, instead of making clear that domestic corporations can be defendants and keeping the “engine of international human rights protection” alive in Nestlé,183 the Court narrowed the path to liability through its self-admittedly “convoluted” parsing of the location of corporate conduct184 and reasoning untethered to the legal and practical realities of how multinational corporations operate. A more nuanced treatment of the roles and duties of corporate boards and officers might have set the Court on a different path, but it instead overlooked their significance and continued to embrace an approach that limits the places that a corporation can be held to account for the consequences of its decisions. Battles ensued through concurrences about just how narrowly to construe actionable torts for any case going forward, after a series of cases that had already adopted an unnecessarily cramped understanding of the statute, even from an originalist standpoint.185 This is how corporate accountability shrinks or disappears.
As this Part has argued, one of the most notable trends of the Roberts Court era to date is expanding corporate rights and narrowing liability or access to justice against corporate defendants. The recent Term is a microcosm of this trend: Americans for Prosperity displays the Court’s tendency toward broad rulings for rights without regard to relational facts and dynamics of organizations. Ford reflects how flawed analogies and a failure to reimagine longstanding principles have bent the law over time toward favorable procedural rules for corporations and emboldened corporate defendants in their claims. Nestlé reveals the Court’s willingness to disregard the reality of multinational corporations and their decisionmaking structures and supply chains. And, although principles of fairness and accountability motivate underlying doctrines in areas such as personal jurisdiction and the Alien Tort Statute, the Court often seems to come to decisions that do not fully resonate with these values. They leave readers with colorful questions: Why are corporations deemed “at home” in only one or two states? Who are today’s pirates? But more importantly, they raise a broader concern: Why are corporations treated more favorably than individuals? Particularly as this concern is expressed in concurrences and dissents by Justices across a spectrum of viewpoints and with different judicial philosophies, it suggests that the “pro-business” label captures something notable about the Court’s orientation or outcomes as a general trend. Yet, as the next Part argues, it is also too simple as a description of the larger dynamic.
II. The Pro-Business Paradox
The discussion so far has focused on the Supreme Court’s treatment of corporations regarding “external” rules and regulations. This Part now shifts to the related “internal” world of business. Doing so highlights something remarkable: many of the Court’s rulings seen as pro-business are actually at odds with corporate law or catalyze countervailing activity in corporate governance. In many ways, the Roberts Court has moved in the opposite direction as current corporate debates and activity — the world that is inhabited by investors, directors, executives, other business industry insiders, as well as stakeholders.
This Part investigates this relationship between the internal and external realms and the impact of the Court’s jurisprudence on corporations. It does so in four interrelated sections. First, the discussion examines how expanding corporate rights can trigger internal battles and imperil key governance mechanisms such as disclosure. Next, the discussion explores how the Court’s jurisprudence is not only in tension with corporate law and governance on the topic of rights, but also on core issues of accountability for board decisionmaking and oversight. Bringing these threads together leads to the larger observation that increasing rights and weakening external accountability more broadly undermines basic assumptions of corporate law. The Court’s “pro-business” jurisprudence contributes to a dynamic that ultimately increases pressure on internal law and governance to create stronger constraints and processes to sort the various interests of its participants and stakeholders, as evidenced by growing calls for reform and the rising ESG movement. These efforts to shape corporate activity through the internal realms may create benefits, but might also be costly for corporations and their participants, as well as limited in their overall effects, and potentially hindered by the Court’s robust conceptions of corporate rights. Finally, the discussion concludes by observing that the “pro-business” Court may not actually serve the interests of many shareholders and stakeholders when it tilts toward corporate power and narrows responsibility.
A. Corporate Rights, Governance Battles, and Regulatory Pressures
Some Supreme Court decisions directly catalyze an internal reaction in corporations. Most notably, when the Court expands corporate rights, an impact on the corporation may be “inevitable.”186 With expanded rights comes a need to decide whether and how to use them. A “pro-business” ruling can thus, paradoxically, spur a corporate battle as participants attempt to rein in corporate activity. Further, the Court’s expansion of rights can influence new regulation or bolster challenges seeking to dismantle existing regulation that applies to corporations. Each of these situations has the potential to create significant tensions in corporate law and governance, as we can see from Citizens United, earlier in the Roberts Court era, to Americans for Prosperity, from the recent Term.187
For over a decade since the Court opened the door to corporate independent political expenditures in Citizens United, shareholders in large corporations have fought to restrain this spending and receive disclosures for greater transparency.188 Given the Court’s flawed assumptions and vision of corporations as “associations of citizens” in a “corporate democracy” with access to information,189 corporate political spending has become an intractable problem of corporate law and governance.190 Private ordering occurs, but is unlikely to succeed on a wide scale.191 Shareholder proposals sometimes garner majority support, but overall the shareholder proposal mechanism is a costly and inefficient means for achieving widespread change and is subject to collective action and agency problems given the realities of intermediated and retail investment.192 Some companies have voluntarily adopted policies regarding corporate political spending and disclosure, but only a small handful have agreed to stop spending, and many companies have failed to keep their promises or disclose only partial information.193 Shareholders have turned to behind-the-scenes negotiations for private deals with management on corporate policies — furthering the lack of transparency and democratic processes in corporations.194 A petition for the Securities and Exchange Commission (SEC) to mandate corporate political spending disclosure has stalled despite a record-breaking 1.2 million comments.195 Meanwhile, corporate political spending has increased and gone “underground” to intermediaries.196
All of this is so despite many, if not most, shareholders having a variety of reasons — including business and financial — to prefer restraint in corporate political spending. Corporate political spending presents agency cost problems that are difficult for shareholders to monitor and eliminate.197 Shareholders do not want corporations they are invested in to engage in political speech they oppose.198 Institutional investors have a “double legitimacy” problem as neither investment funds nor company management have legitimacy to speak for shareholders.199 Corporate political spending can increase social and political risk, either at a particular company or more generally across the market if such spending and perceptions of corruption significantly contribute to polarization and social instability.200 And, corporate political spending might undermine external laws and weaken corporate accountability201 — which diversified shareholders should not favor. Even many corporate directors and officers might have preferred to forego corporations having the power of political spending in order to avoid the difficulty of navigating these decisions and risks in a polarized era.202 And so, Citizens United not only empowered corporations as political actors, but also launched a thousand ships in corporate governance and created problems that cannot easily be solved.
New battles now loom on the horizon. In particular, with rising interest in corporations’ ESG activity and data, securities regulation increasingly appears to be on a collision course with the First Amendment — what corporate and securities law experts frame as a “disclosure” regulation might become “compelled speech” as a matter of constitutional scrutiny.203 To date, the Supreme Court has avoided the question of whether the First Amendment covers speech affected by securities regulation,204 and for many years observers believed it was inapplicable,205 but current developments suggest this could be the next “jurisprudential train wreck”206 for corporate investors and stakeholders.
Americans for Prosperity intensifies concern that a heightened level of scrutiny might apply to mandatory ESG disclosure, and thus has the potential to influence the content and structure of the SEC’s rulemaking on a host of disclosure issues from corporate political spending to climate risk. Simmering under the surface of the Court’s opinion and various concurrences in the case was a debate about the standard of constitutional review for compelled speech under the First Amendment. This space has increasingly become muddled with gray areas about when the Court will apply strict scrutiny, exacting scrutiny, intermediate scrutiny, rational basis review — or something in between.207
A majority of the Court in Americans for Prosperity ratcheted up exacting scrutiny by imposing a narrow tailoring requirement, and in a splintered portion of the opinion, Chief Justice Roberts suggested on behalf of a three-Justice plurality that this level of scrutiny should categorically apply to all compelled disclosure requirements, “[r]egardless of the type of association.”208 He noted that the Court had applied exacting scrutiny outside of electoral-disclosure regimes, and that under NAACP v. Alabama ex rel. Patterson, “‘it is immaterial’ to the level of scrutiny ‘whether the beliefs sought to be advanced by association pertain to political, economic, religious or cultural matters.’”209 A concurrence by Justice Alito, joined by Justice Gorsuch, declined to decide between exacting and strict scrutiny for a uniform approach to compelled disclosure, but applauded the majority opinion for giving “real teeth” to the exacting scrutiny standard.210 None of these discussions in Americans for Prosperity makes clear whether they would extend a heightened form of scrutiny to securities regulation of business corporations such as for corporate political spending or other forms of ESG disclosures, as opposed to the specific context at issue in the case of nonprofit organizations and freedom of association. The general tenor of Americans for Prosperity, however, suggested an approach even more protective of organizations than Citizens United, which had upheld disclosure of corporate political spending.211 Justice Sotomayor’s dissent in Americans for Prosperity indeed observed: “Today’s analysis marks reporting and disclosure requirements with a bull’s-eye.”212
In the shadow of this case is a growing ESG movement in which global and U.S. institutional investors and asset managers are demanding expanded ESG disclosures using a standardized, mandatory reporting framework.213 Trillions of dollars are under management with sustainability screens and strategies to integrate ESG data into portfolio selection and management, but the information currently being produced through voluntary initiatives is limited, suffers from quality problems, and lacks comparability.214 Whether various ESG information is “material” or outside of the SEC’s “core mission” has been the subject of robust debate, while investors and corporate managers increasingly embrace the potential benefits of ESG strategies for risk mitigation and long-term value.215
After a change in administration, the SEC requested public comment on climate change and other areas of potential mandatory ESG disclosures such as political spending, workforce diversity, and more — signaling that it intends to act.216 A tidal wave of responses has swiftly come into the SEC with varying views on content and approach, including a warning from one state attorney general of a plan to file a First Amendment lawsuit if the SEC adopts ESG disclosure requirements.217 In combination with a D.C. Circuit decision in 2015 that struck down the SEC’s conflict minerals disclosure rule on First Amendment grounds,218 and the Supreme Court’s recent ratcheting up of scrutiny on compelled speech, the SEC is likely aware that it faces a choice between exceedingly tightly crafted rulemaking or years of litigation.
This is the crux of the tension — while many investors want additional disclosures to broadly understand a wide array of environmental, social, and governance activities and risks of corporations, cases like Americans for Prosperity suggest that government regulation forcing this disclosure will come under fire. And, all together, from Citizens United to Americans for Prosperity, the Roberts Court’s jurisprudence could ironically lead to a situation in which the Court has protected a corporation’s right to engage in political spending based on a view of it as an “association of citizens,” but allows constitutional scrutiny to block actual participants in the corporation from getting information about matters relating to the social and political activity of the corporation.
B. Accountability for Board Decisionmaking and Oversight
The Court’s approach to corporations emerges not only in its expanding rights jurisprudence that creates governance tensions and imperils disclosure obligations, but also in its decisions in other areas of law that misconceive or ignore key features of corporations and erode corporate accountability. Nestlé provides an example, with the Court’s ruling and reasoning diminishing the central corporate activity of board decisionmaking. More generally, the trend of increasing rights and tilting external rules and regulation toward corporations undermines foundational assumptions about the role of corporate law and runs counter to emerging investor preferences.
Recall the Nestlé majority opinion’s conclusion that “general corporate activity — like decisionmaking” is insufficient for ATS pleadings to avoid the presumption against extraterritoriality.219 Such phrasing and understanding is difficult to reconcile with corporate law, which creates the corporation as a separate legal person and places the board of directors at the heart of its decisionmaking structure and vests it with the authority to manage the affairs of the corporation.220 This centralized decisionmaking structure is a “cardinal precept” of corporate law and the means through which a corporation takes action.221 Further, board decisionmaking is embedded in a structure for accountability, as exercise of this power carries with it the fiduciary duties of loyalty and care, which are often expressed as being owed to the corporation and its shareholders.222
Corporate law has long focused on decisionmaking as a potential basis for liability, and contemporary doctrine has evolved to encompass broader oversight obligations. As part of their duty of loyalty, corporate directors and officers have a duty to act in good faith, which prohibits decisionmaking with the intent to violate positive law.223 Corporate law does not limit the scope for legal obedience to domestic laws, nor does it limit the beneficiaries of legal obedience only to shareholders — thus the duty of good faith in decisionmaking can have far-ranging impacts.224 Further, Delaware courts, the most influential purveyors of corporate law, have also recognized that a failure to make a good faith effort to put in place and oversee a board-level system of monitoring and reporting could constitute a breach of fiduciary duty giving rise to director liability.225 Under the Caremark doctrine, directors can be held liable if they knew or should have known that violations of law were occurring in the corporation, and if they failed to take steps in good faith to prevent or remedy the situation.226 That is, corporate law requires legal obedience to rules of positive law and further recognizes that directors can be held liable in certain circumstances for decisionmaking as well as inaction — such as a failure of oversight regarding legal compliance.227 These principles of corporate law serve public values by incorporating legal responsibility, and protect shareholders and the corporation by prohibiting fiduciaries from knowingly allowing the corporation to participate in lawbreaking.228
Claims for a breach of the duty of good faith are difficult for shareholder-plaintiffs to win even in egregious circumstances, but over time Delaware corporate law has trended toward a more robust conception of the monitoring board and its oversight duties.229 This fits into a larger trend in which corporate compliance programs have proliferated and taken on greater importance in corporate practices, including for global issues such as supply chain risk management, foreign corrupt practices, and other regulatory regimes.230
Put in this light, the Court’s disregard for the importance of board decisionmaking and oversight is all the more glaring — large corporations with significant risk for legal violations related to core aspects of their business model are likely well aware that their decisionmaking or failure of oversight could expose both the corporation and its fiduciaries to litigation and liability, particularly if they failed to monitor and respond in good faith to “red flags.”231 Under corporate law the individual directors’ fiduciary obligations notably run to shareholders for enforcement, not third-party tort victims — but the larger point here is about conceptualizing corporations and their accountability. If “general corporate decisionmaking” in the United States is not enough, and financing and training farmers in Ivory Coast is outside of reach, it would seem the Court has set up a nearly insuperable standard for ATS claims that does not cohere with general corporate understandings of the significance of board decisionmaking and oversight responsibility.
Looking ahead, the Court has not fully foreclosed U.S. corporate liability under the ATS and could still correct course while respecting the limits of the statute. Congress could act to clarify the ATS or specific areas for accountability as it has done in decades past by granting express causes of action for victims of torture and human trafficking.232 Further, Congress could follow the lead of other lawmaking bodies around the world by mandating corporations to engage in human rights due diligence.233 But in the absence of these developments, corporations will likely receive the message that the door that was left open in Sosa to ATS claims for international human rights abuses has nearly closed.234 And more broadly, the Court’s lack of attention to corporate principles could perpetuate flawed reasoning in other areas of law.235
C. Opposite Trends and Changing Dynamics in the Role of Corporate Law
In addition to the above, the larger trend of increasing rights and narrowing liability for corporations undermines corporate law principles in a more fundamental way. Since the early twentieth century, U.S. corporate law has developed with a focus on shareholders, directors, and officers, with a view that concerns about stakeholders and the impact of corporations on society will be primarily addressed by laws external to corporate law.236 State corporate law does little to take formal account of participants such as employees, creditors, consumers, or other stakeholders in the governance structure, and assumes that their interests will be furthered by external regulation and contracts.237 As this Comment’s discussion has highlighted, the boundaries between the internal and external realms of corporate governance and regulation are far more permeable than this traditional formulation suggests, and some aspects of corporate and securities laws serve stakeholder interests or leave considerable room for boards, shareholders, and managers to do so238 — but the basic framing remains.239
When the Supreme Court increases corporate rights, particularly in the political realm, and narrows accountability through external regulation, it thus weakens the justification for leaving stakeholders without voice or protection in corporate law and governance.240 Put differently, corporate law and governance rely on the enforcement of external regulation to constrain corporate activity in the interest of social welfare.241 Jurisprudence that weakens corporate accountability or tilts the rules of the game in their favor eventually increases pressure on corporate law and governance to create stronger internal constraints and processes to sort the various interests of its participants and stakeholders. In the bigger picture, the Court’s jurisprudence is just one thread among many in the twenty-first century that has contributed to the changing balance of powers and protections for corporations and their stakeholders,242 but it is notable nonetheless. And, as one might expect given the tension identified here, recent years have evidenced this changing landscape with corresponding calls from scholars and politicians for a rethinking of corporate law to promote stakeholder interests and increase democratic values and processes in corporate governance.243
In this environment, other mechanisms besides external regulation, and short of major corporate law reform, have moved into the spotlight. Corporate social responsibility (CSR) has evolved into a mainstream ESG movement that continues to gain steam.244 Managers and investors increasingly see ESG initiatives as a means of incorporating stakeholder interests into corporate activity and mitigating risks and externalities created by corporations, ultimately promoting the creation of sustainable, long-term value.245
This trend is moving in the opposite direction as the Court’s jurisprudence and suggests that many investors and other corporate participants may not want “pro-business” rulings that weaken corporate incentives to mitigate their externalities.246 Further, the trend is global and multinational corporations do not escape its reach.247 For example, as the Court has made it considerably harder to hold corporations liable for human rights abuses under the ATS, demands on companies to eradicate human rights abuses from their supply chains have grown. The chocolate industry has come under significant public pressure for reform.248 In fact, before or while litigating their cases all the way up to the Supreme Court, Nestlé and Cargill became signatories to the United Nations (UN) Global Compact.249 The related UN Guiding Principles on Business and Human Rights provide a soft law framework that directs companies to “protect, respect and remedy” human rights and “to comply with all applicable laws,” including on issues of product safety and quality, forced labor, and child labor.250 Ford is also a signatory to the Global Compact,251 and while its managers and legal team might drive it to take an aggressive stance on issues of personal jurisdiction in an attempt to limit customer suits, many others who have a stake in the company recognize that dodging accountability on product safety issues ultimately poses a risk to the company’s brand and reputation.
Although many view with great skepticism corporate commitments to voluntary compacts and principles and rightfully express concern about “bluewashing,” these soft law frameworks are “hardening” and becoming part of a complex and quickly evolving environment for multinational corporations.252 Investors and stakeholders bring a global perspective and impose expectations on corporations to engage with voluntary soft law frameworks and otherwise prevent social harms to avoid reputational risk, mitigate liability, maintain their social license to operate, and contribute to long-term value — reflecting an “enlightened” view that is not readily captured by the “pro-business” label.253
Yet lessons from the past decade also suggest that there are limits to what can be achieved consistently, efficiently, and transparently through corporate law and governance to adapt to increasing corporate rights and to address corporate externalities without regulation and legal accountability.254 Most corporations still do not resemble the “corporate democracy” envisioned by the Court in Citizens United, nor is there consensus that they should. The continued expansion of rights reflected in Americans for Prosperity highlights the uncertain fate of regulation that mandates disclosure. Incentives for corporate boards, managers, and shareholders to prioritize corporate oversight and compliance, and to embrace the growing ESG movement and concerns for stakeholders and social welfare, are connected in complex ways to legal accountability, litigation, and reputation — particularly in a global business environment. Further, these movements occur through a system oriented toward shareholder interests,255 and with large amounts of intermediated capital in public corporations.256 Consequently, the shortcomings of the Court’s “pro-business” approach likely cannot be fully or easily resolved through counter trends in corporate law and governance.
D. Implications and Deeper Questions
This Part has thus far explored how, in many respects, the Supreme Court’s nominally “pro-business” jurisprudence of the twenty-first century has trended in the opposite direction of corporate law and governance, and pays little attention to corporate realities and principles. It is debatable whether challenges with conceptions of the corporation are genuine obstacles in reasoning through thorny legal questions or whether rhetoric about corporations justifies outcomes determined through other means.257 This Comment has therefore not aimed to uncover or opine on possible biases or motivations of Justices, but instead to apply a sharper lens focused on conceptions of the corporation across different areas of law to understand patterns in the Court’s jurisprudence and its impact on corporations.
As this approach has highlighted diverging corporate trends and internal battles, it leads to a larger question: who actually benefits from the Court’s “pro-business” rulings? A full exploration of this topic could fill a volume on its own, and generalizations are dangerous, but at least a few modest observations flow from the preceding discussion.
To start, the business world, and the corporations that inhabit it, is far more complicated than a unitary term like “pro-business” could possibly convey. A wide universe of corporations exists and corporations engage in nearly endless forms of activity. Even just looking at large public corporations, a diverse set of interests in these corporations is on display in the myriad corporate governance contests of our time. From hedge fund activists winning proxy fights at Exxon by championing renewable energy strategies258 to Amazon warehouse workers pushing the company unsuccessfully for a diversity audit and board seats,259 we see a range of highly engaged corporate participants and clashing views on the issue of just what, exactly, is in the “business” interest.260
Ownership structures and trends in stockholding can help to make some additional observations at a high level about who might benefit from “pro-business” jurisprudence. First, about half of Americans are invested in the stock market, but most people who own stock have very little.261 Less than one third of U.S. households have $10,000 or more in stock holdings.262 Conversely, “more than 80 percent of the value of the stock market is held by the wealthiest 10 percent of our country; . . . and the share held by the entire top 1 percent is twice as large as the share held by the entire bottom 90 percent.”263 Thus, to the extent the Court’s jurisprudence empowers corporations, dismantles their constraints, or enriches them by minimizing their costs and liabilities, it is likely disproportionately serving the interests of the wealthiest individuals. Particularly when one considers that most people own relatively little stock and have interests outside of stock ownership related to employment, consumer contracts, the environment, democratic participation, and so on, it is likely that most shareholders would not be served by much of the Court’s jurisprudence that increases rights and limits legal responsibility of corporations.264
Second, putting aside general trends of wealth inequality reflected in public company stock ownership, another way to parse who might benefit from “pro-business” jurisprudence is to consider that most Americans hold stock through institutional investors, and a rising amount of stock ownership is invested through diversified index funds.265 Institutional owners currently hold 70-80% of all U.S. publicly traded stock.266 Three big mutual fund complexes now collectively hold an average stake of more than 20% of large public corporations.267 The ultimate beneficiaries are unlikely to be served by expansions of corporate rights, as they have no direct voice in decisions about their use, and the institutions that they invest through increasingly aim to minimize systematic risk at low cost, and generally benefit from external regulations in areas that do so, such as climate change, social stability, and financial security.268
In contrast to diversified investors who largely “hold the market,” individuals who hold large corporate stakes in public or private corporations, including corporate directors and executives who receive large compensation packages and equity, have more concentrated interests that may be furthered by “pro-business” jurisprudence. For example, Ford is a public company but with dual-class stock through which the founding family still holds a controlling stake.269 Cargill is one of the largest family-owned private U.S. companies.270 The large individual shareholders in these corporations, or those with substantial voting power, likely benefit from at least a significant portion of “pro-business” decisions as they have voice in the corporation and stand to gain a proportionately large amount of wealth from holding equity in corporations relative to other interests and concerns such as salary from employment, consumer contracts, and so on.271 In closely held corporations, the large shareholders may be able to control the corporate levers to direct corporate wealth to themselves as salary or dividends.272
Business executives and directors who get significant compensation packages from a corporation, and especially those who have significant managerial control to direct a corporation in line with their views, are likely also key beneficiaries of the Court’s “pro-business” jurisprudence. For example, although the Court likened corporations to “associations of citizens” in Citizens United, shareholders generally have little to no voice in decisionmaking about corporate political activity — that is an ordinary business decision under corporate law, and the board of directors and executives have “virtually plenary authority.”273 They also typically receive outsized compensation packages compared with average workers, often with equity stakes, and thus stand to disproportionately gain from corporate profit-making, and can do so even when their companies lag behind the overall market.274 Influential business trade organizations often lobby for these executives’ interests and push a pro-management agenda, sometimes framed through the lens of serving shareholders or business more generally to minimize the optics of these internal tensions.275
Ultimately, answering the question of who benefits will vary depending on the specific case at hand as well as the corporation and its participants. In the ways discussed here, we can at least start to observe that what is in the “business” interest is complex and contestable, and the Court’s jurisprudence not only often misses the realities of corporations and creates internal tensions, but also serves a limited set of business participants’ interests. Significant numbers of shareholders, and certainly other stakeholders like employees, might often be better off without decisions that empower corporations and erode their external constraints.
Whether genuine conceptual difficulty or mere rhetoric, the Roberts Court’s struggle with analogies and realities involving corporations is reflected in a trend of case law expanding corporate rights and limiting their exposure to liability. The trend is far from unqualified, but perceptible in blockbuster cases like Citizens United as well as lesser-known cases like those from the recent Term that this Comment examines. Americans for Prosperity applied earlier freedom of association rulings to a broad facial challenge from nonprofit organizations seeking to avoid a routine administrative-disclosure regime. The Court invalidated a regulation for tens of thousands of organizations without inquiring into to whether they had real people with burdened privacy and associational interests at stake. Ford affirmed rulings for plaintiffs and maintained the status quo, but brought to light conceptual challenges and favorable treatment of corporate defendants in contemporary doctrine on personal jurisdiction. Nestlé disregarded the significance of corporate decisionmaking to find the corporate defendants’ activities outside the reach of the ATS, furthering the Court’s pattern of limiting the viability of ATS claims against corporations for complicity in human rights abuses.
Although not absolute, this trend of expanding rights and narrowing responsibility supports the “pro-business” reputation that the Roberts Court has developed. Under current doctrine, corporations have great power to shape their regulatory environment through political spending and influence as well as to challenge a host of business regulations using a panoply of rights. At the same time, corporations often enjoy favorable procedural rules and interpretations of regulatory constraints.
This Comment’s aim has been to examine a variety of cases through the lens of corporations and to highlight this “pro-business” pattern as well as its contradictory relationship with counter trends in corporate law and governance. If “business” is equated with corporate profit-seeking, private ordering, or managerial power, then it might appear there is no paradox. But if one digs beneath the surface of these concepts, or takes a more capacious view of “business,” a deep and growing contradiction emerges between the Court’s business-related decisions and other currents in business law. The exploration reveals that the Court’s failures to account for the realities of corporations and their governance contributes to reasoning that empowers corporations and erodes their external constraints, but these “pro-business” decisions do not benefit the business world writ large. The Court’s approach to corporations may be a detriment to many people who actually participate in them. Further, this jurisprudence might ultimately undermine key mechanisms that have developed to balance the various interests at stake in corporations and temper their negative externalities. The insights interspersed throughout various dissents and concurrences in recent cases suggest that a more coherent approach to conceptualizing corporations and their legal rights and responsibilities is possible. A richer understanding and accounting for the spectrum of corporations, and their internal laws and governance, could contribute to a different kind of business-oriented jurisprudence that would serve a broader group of participants and support their efforts in shaping corporate activity and accountability.
* Professor of Law, University of Pennsylvania Law School. For valuable comments and suggestions, thanks to Ellen Aprill, Bill Bratton, Vince Buccola, Jill Fisch, Sarah Haan, Dorothy Lund, Amelia Miazad, James Nelson, Kish Parella, Jennifer Rothman, Amanda Shanor, Beth Simmons, Leo E. Strine, Jr., Karen Tani, Bob Thompson, Andrea Wang, Adam Winkler, Yesha Yadav, Adam Zimmerman, participants of the faculty workshop at American University Washington College of Law, and the editors and members of the Harvard Law Review.