Day: July 11, 2016

HR Word : Corporate Personhood

Corporate Personhood definition

Corporate personhood refers to the ability of organisations to be recognised by law as an individual, bringing with it certain rights, protections and abilities that are enjoyed by human beings. However, corporate personhood does not convey all the rights available to people. The main rights useful to organisations are the right to enter into contractual agreements and the ability to be sued or sue in a court of law. Corporate personhood is linked to the idea of limited liability – because it’s the corporation that enters into contracts rather than a person, it’s the company that would get sued for breach of contract, rather than an individual. Executives sign contracts on behalf of the company, rather than on behalf of themselves.

Particularly in the United States, corporate personhood is controversial, mainly due to the legal protection afforded to corporations under the US Constitution Critics want to remove this protection so that corporations are protected only by those rights afforded by state law and state constitutions. However, corporations in the US are generally not able to claim constitutional protection that wouldn’t be applicable to groups of individuals – this is where the basis for corporate personhood comes from, that corporations are just groups of people and that groups of people shouldn’t be deprived of constitutional protection.

Critics of corporate personhood say that corporate personhood creates ‘ghosts’ out of businesses – businesses can be sued but this protects those inside the business, allowing them to make decisions with the weight of this ‘ghost status’ behind them i.e. they aren’t disincentivised from unethical behaviour by the prospect of personal sanctions, such as prison time.