All eyes are on the lawsuit Hobby Lobby has pending in the U.S. Supreme Court, and most of the commentary revolves around the question of a corporation’s right to disregard a law of general application if that law offends its “sincerely held” religious sensibilities.
The threshold issue is whether a corporation can have religious sensibilities, sincere or otherwise. And hidden in plain sight in that question is an enormous threat to American business. In short, if Hobby Lobby prevails, it is likely to be at the expense of limited liability–which is the whole purpose of incorporation.
As one amicus brief noted,
The essence of a corporation is its “separateness” from its shareholders. It is a distinct legal entity, with its own rights and obligations, different from the rights and obligations of its shareholders. This Court has repeatedly recognized this separateness.
Shareholders rely on the corporation’s separate existence to shield them from personal liability. When they voluntarily choose to incorporate a business, shareholders cannot then decide to ignore, either directly or indirectly, the distinct legal existence of the corporation when it serves their personal interests.
The brief goes on to point out that it is this very “separateness” between shareholders and the corporation that they own that promotes investment, innovation, job generation, and the orderly conduct of business.
Think about it. How likely would you be to buy stock in a company if you thereby ran the risk of being found personally liable for improper or negligent corporate behavior?
Several commentators have noted that Hobby Lobby is effectively asking for the best of both worlds. Its owners want to benefit from the protection against personal liability, but they don’t want to recognize that the corporation is an artificial entity not entitled to personal individual rights.
Hobby Lobby and Conestoga argue that they should be exempt from federal law because of the religious values of their controlling shareholders, while seeking to maintain the benefits of corporate separateness for all other purposes. These corporations have benefited from their separateness in countless ways and their shareholders have been insulated from actual and potential corporate liabilities since inception. Yet now they ask this Court to disregard that separateness in connection with a government regulation applicable solely to the corporate entity.
If the Court rules in favor of Hobby Lobby–if it finds that a corporation can assert a religious right to discriminate–it will be the beginning of the end of limited liability and corporate immunity for shareholders.
It’s tempting to say “it would serve them right,” but the truth is, such a result would be a body blow to business and the American economy.
There’s a reason the business community has stayed out of this litigation.