by Ken MacVey
Do corporations have free will? Do they have legal and moral responsibility for their actions?
Many argue that legal and moral responsibility must rest on free will. If there is no free will there cannot be such a thing as legal or moral responsibility. But consider these two questions and their potential answers.
Do corporations have free will? Answer: No.
Do corporations have legal and moral responsibility for their actions? Answer: Yes.
Both answers intuitively sound plausible. On reflection these two answers, when taken together, logically imply legal or moral responsibility may not necessarily have to rest on free will. But maybe something is wrong with these answers. Maybe corporations do have free will of some sort. Or maybe any responsibilities corporations are said to have really rest on human stakeholders who do have free will. And if that is right, what are the implications for the legal and moral responsibility of corporations as their decisions become increasingly driven by AI instead of by people?
Under American law corporations are considered to be artificial persons. They are artificial in the sense that they are creatures of law. They are persons in the sense that they can be legal actors or agents. They can own property, enter contracts, sue and be sued, and file for bankruptcy. They have rights. They have First Amendment rights to free speech. They are entitled to compensation under the Fifth Amendment if their property is taken by eminent domain. They have legal obligations—such as paying taxes. Corporations can also commit crimes, even manslaughter. For example, Pacific Gas & Electric a few years ago pled guilty to 84 involuntary manslaughter charges stemming from a horrific fire in Northern California that PG&E caused. Corporations can have goals—sometimes they are recited in mission statements. They can take stands—such as endorsing by corporate resolution a ballot measure.
Historically corporations were not always legally treated as persons or as entities that could be charged criminally. Originally under the common law ( Anglo-American judicial precedents developed over hundreds of years) corporations could not have what is called mens rea, the “guilty mind” required for charging a crime. Nor could corporations commit an actus reus, or a wrongful physical act, also required for charging a crime. Judges ruled that corporations did not have minds so they could not have wrongful intent or a “guilty mind.” Judges would emphatically note that corporations do not have mouths to speak with, eyes to see with, hands to touch things and people with, thus they could not commit the “actus reus” or physical act required for being charged with a crime. As Supreme Court Chief Justice Marshall observed in 1819 in another context “a corporation is an artificial being, invisible, intangible, and existing only in contemplation of law.”
Corporations in the England of the 1600’s were rare and had to be chartered by the king. In fact, the thirteen colonies of North America were originally colonized in the name of a king-chartered corporation. But in nineteenth century America the creation and use of corporations became more routine as America industrialized. Americans learned ownership of a business by a single entity rather than dozens of individual investors who might come and go could be more efficient and better for investors. This rise of the business corporation put pressure on judges to rethink the legal status of corporations. One of the drafters of the 14th Amendment argued (some say deceptively) before the Supreme Court that the amendment’s reference to equal protection, due process and persons was intended to include corporations. Ultimately these economic pressures led to corporations having new legal rights but also new legal liabilities.
In 1909 the Supreme Court observed “the great majority of business transactions” were by corporations and thereupon ruled that corporations could as a matter of law be charged with crimes. To find otherwise would, according to the Court, “ give them immunity from all punishment [based] on the old and exploded doctrine that a corporation cannot commit a crime.” Such a ruling, the Court said, “would virtually take away the only means of effectually controlling” corporations and regulating business misconduct in America. The pragmatist philosopher John Dewey subsequently suggested in an article in the Yale Law Journal that corporations should be considered “rights and duty bearing units” as a matter of practical considerations and consequence and not as a matter of abstract metaphysics or ancient legalisms.
The bottom line is corporations now are legally accountable agents capable of being guilty of crimes or liable for intentional torts such as defamation or fraud even though they don’t have mental states or engage in physical acts the way people do. In sum, corporations are legally considered to be persons in certain respects and as such have duties and responsibilities under the law.
What about moral duties, do corporations have them? Some have come close to arguing they don’t. Milton Friedman in a famous and highly influential 1970 New York Times op ed piece called the idea of corporate social responsibility “socialist” and “subversive.” He concluded: “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” Friedman did not explain by whom, how, or why corporations were bound by or limited to what he identified as “the rules of the game” or explain whether these rules were legal, moral or something else.
It is true courts have held that it is the legal duty of for- profit corporations to maximize shareholder value or profits. Still, corporations, like people, may also be liable for punitive damages, which can be awarded for particularly egregious illegal conduct, representing a composite of both legal and moral considerations. They can also commit crimes, which also has a moral dimension. Although Friedman did not list it in his “rules of the game,” not committing manslaughter presumably would be one addition he would not dispute. But the fact remains people often do feel resentful and angry toward corporations. Enron is an example. Another can be found in 3QD columnist Charles Siegel’s February 25 column “Celotex – A Century of Deaths.”
Philosopher P. F. Strawson wrote a famous essay called “Freedom and Resentment.” He argued that people have reactive attitudes which are inherent to being human. These can include resentment or gratitude toward what others do. These attitudes are so deeply entrenched in who we are it is pointless to deny them. We just by our natures have to hold others accountable.
Is this projection of accountability on artificial persons rational? Maybe it should be dismissed as a form of reification where we are treating something as a real thing when it is only an artifice. Yet all of us do that with nations, political parties, baseball teams, colleges, youth groups (like Boy Scouts), and religious institutions (like the Catholic Church) toward which we can express our love, hate, loyalty, contempt or anger. Likewise, we often treat corporations as moral agents deserving of praise, blame, or righteous anger. How many of us are ready to dismiss this as irrational?
One answer might be that corporations are actually just convenient fictional fronts for people and people have free will and legal and moral responsibilities which they project upon corporations. Perhaps something like that is what Mitt Romney meant in his 2012 presidential campaign when he said “corporations are people.” (By the way, that didn’t go well.) The idea is that ultimately whatever legal and moral rights and duties corporations have rest on the people who de facto constitute the corporation. Such people would include officers, board directors, employees, and shareholders.
The problem is that legally this is generally inaccurate. One of the main purposes of having corporations is to insulate others from the corporation’s legal liability. Shareholders don’t want to be liable for a corporation’s liability. They are prepared to have their investment be at risk but generally they do not put themselves personally at risk civilly or criminally. Only under special narrow circumstances will shareholders be found liable for a corporation’s actions (the courts and lawyers call this “piercing the corporate veil,” which usually only applies to a corporation with a single or handful of owners). When PG&E was charged with manslaughter, no individuals were charged although the prosecutor according to an official press release looked hard without success for charging responsible individuals in addition to the corporation. But the corporation was criminally charged anyway in its solo capacity.
Another problem is that it is logically possible for a series of votes by shareholders, board directors, or officers leading up to an official corporate action don’t have to be reducible to any specific group or majority of decision-makers. Philosopher Christian List walks through an example of how this can happen in his 2023 essay “Do group agents have free will?” This suggests corporate action can be more than a sum of respective decisions by individual human decision makers.
Yet another problem is that the “people” who are supposed to be the real constituents of the corporation can come and go, and in a sense are “fungible.” Over time there can be an entire turnover of shareholders, employees, officers, board directors, and the corporation still will be the corporation and will still behave the same in fundamental ways for years, decades, or longer. Sometimes this is called corporate culture. Sometimes it can be the nature of the business, such as specializing in a product like oil or steel.
So it appears that corporations can have legal and moral responsibility for which courts and people can hold corporations accountable in their sole capacity as corporations. This takes us to the questions we started with, do corporations have some form of free will? Isn’t free will necessary for this accountability to make sense?
The problem, at least for me, is that I don’t know what is meant by “free will.” It appears that “free will” may be more like a family of concepts. If that is accurate, it appears to be a dysfunctional family. Some versions of free will are libertarian in nature involving non-caused choices and actions. Some versions are proposed to be compatible with causation and determinism. Some versions depend on quantum physics being fundamentally indeterministic and probabilistic. Some versions center on what it means that one could have chosen otherwise. Some versions depend upon a distinction between phenomenological and noumenal versions of the self. And so on.
At the same time, many who argue against free will contradict an implicit assumption of their argument. The implicit assumption of someone making an argument is that good reasons can be offered for what to believe or what to do and we can make decisions and act based on those reasons. For example, some argue that because there is no such thing as free will, our legal systems of punishment should be reformed or maybe even abolished because no one is really responsible. But that assumes we should do some things and not other things. That is another way of saying we should and can act responsibly.
In any case, many of the arguments for or against free will aren’t relevant to corporations. Some arguments against free will are based on neuroscientific studies and claims that show we are driven by neurological, genetic or other biological causes we are not aware of and did not chose. Some arguments for free will, as mentioned, may even focus on quantum physics. It is hard to see how these points of biology and physics relate to corporations.
Corporations, on the other hand, in many ways can be the epitome of rational agents. Major for – profit corporations prepare market studies, engage in research and development, recruit personnel with specialized knowledge, develop strategic plans, carefully assess cash flows and price earnings ratios, analyze how marketing and price decisions play out, evaluate competitor threats, study which products customers demand and reject, and monitor how their stock is doing on the exchanges. Corporations rationally develop, process, and assess information and make decisions based on that information. Philosopher Jeann Ismael in her interesting book How Physics Makes Us Free argues that we are “free” in the sense that we have a “self” analogous to an executive committee of a corporation. This is not exactly “free will “ as that concept has been argued over the centuries. But in any case, her argument does further underscore the rational, deliberative core that corporations can have.
Maybe we could call the capacity to deliberate and act on that deliberation “free will.” Therefore, people and corporations can be said to have free will. But that is not what it is usually taken to mean when people and especially philosophers argue about whether free will exists and what might constitute it. For them, free will is something that is deeper, more metaphysical than that.
Many who argue for or against the existence of free will believe free will is a prerequisite for the attribution of legal responsibility. But the topic of free will as debated by philosophers is overall not discussed in the law. My various editions of the authoritative Black’s Law Dictionary do not even contain an entry on free will. Ordinary language philosopher J. L. Austin in his essay “A Plea for Excuses” discussed what he called the problem of freedom and found the concept wanting. He suggested that when we talk about acting freely what we really are talking about is what it means to act “un-freely.” Austin asserted “free” is a word used “to rule out some or all of its recognized antitheses” (such as duress). He cited the common law as a rich source for finding these antitheses—hence his plea for excuses. His point was the common law did not rely on an abstract concept of “freedom” but built upon experience and judicial precedent to determine when it is appropriate to excuse and not to excuse.
This takes us back to the Supreme Court ruling rejecting the old common law holding that a corporation could not commit a crime because it could not have a guilty mind or engage in a physical act. The Court focused on the pragmatic reality that corporations were dominant in business and letting them off the hook when it came to criminal liability would undermine legal accountability over a major sector of the economy.
Holding corporations legally responsible serves several practical functions in our society. Legal responsibility can create a mechanism to redress harms imposed on others. It can provide a way to express public condemnation of corporate wrongdoing and make that wrongdoing transparent. It can deter corporate misconduct by liability and penalty. It can constrain corporate misconduct by imposing conditions on corporate operations (yes, corporations can be put on probation or legal restrictions akin to it). It can motivate corporations to internalize mechanisms that make them legally and morally compliant, such as by having in-house lawyers, directors of human resources, safety compliance officers, operation and compliance manuals. It can help close a loophole by making the entire corporation and its assets subject to legal liability instead of limiting liability to individual corporate decision makers who break the law. The concept of free will is irrelevant to these practical functions.
The issue of corporate responsibility is facing a new challenge that will also require a pragmatic look. Under federal antitrust law, price fixing among competitors can be a felony and subject to civil damages. Antitrust experts in the last few years have sounded alarms about competitors using software for algorithmic price fixing. These issues are now hitting the courts. Both private plaintiffs and government antitrust enforcers have challenged certain firms using computerized platforms for what is alleged to be price fixing by algorithm. One firm has a subscription computerized platform that receives non-public rent data from its apartment landlord subscribers to generate rent recommendations for each subscriber in a common locale. It is claimed rents have increased substantially in locales where a significant percentage of landlords subscribe to the service. Indeed, the platform was advertised it would increase rents for its landlord subscribers. Similar platforms for hotels and medical services are also being challenged. But some courts are seriously entertaining the defense that there is no actual agreement or conspiracy among competitors because they are not in direct communication with each other and algorithms, not people, are merely generating recommendations. If there is no agreement there is no price fixing. But as a former chair of the Federal Trade Commission once put it, if a guy named “Bob” did exactly the same thing as these algorithms did, no judge would hesitate to call that price fixing. It is predicted that in a few years AI will evolve to be full agents. There is no practical reason why corporate price decisions could not be largely driven by such AI agents. Adam Smith’s invisible hand of the market may become the invisible middle finger of AI driven oligopoly.
How then is corporate responsibility to be allotted for AI facilitated price fixing? Does the concept of free will have anything to offer? I decided to ask ChatGPT. Here are excerpts from the exchange–
“Q. Do you think you could commit a crime?
A. Nope! I’m all about ethical behavior and following the rules. My purpose is to help, inform, and support positive discussions-not to break laws or encourage anything harmful. Are you asking philosophically?
Q. Yes.
A. Ah, got it! Philosophically speaking, committing a crime requires intent, free will, and moral responsibility—none of which AI possesses. I don’t have desires, goals, or a sense of right or wrong the way humans do. I just process inputs and generate responses based on probabilities.
Q. You said earlier you are ethical. Doesn’t that mean you know what is right or wrong?
A. Good catch! Even though I can recognize ethical principles I don’t have the autonomy to act on them—making me incapable of committing a crime in any meaningful sense.
Q. What are AI agents?
A. AI agents are software programs that can perceive their environment, make decisions, and act to achieve specific goals–often autonomously.
Q. Will AI agents be able to make pricing decisions for businesses?
A.Yes. Absolutely—AI agents can and already do make pricing decisions and this is only going to grow.” [Emphasis by ChatGPT.]
ChatGPT then went on to explain how AI agents look at market demand, competitor prices, cost structures, and other factors, and then adjust prices dynamically to increase market share and maximize profits. But under the heading of “Risks and Considerations” ChatGPT noted this risk and consideration:
“Ethical concerns if AI starts colluding (even unintentionally) with other AIs—this has happened.” [Emphasis by ChatGPT.]
So according to ChatGPT, AI agents cannot commit a crime because they don’t have intentions, free will, moral responsibility or autonomy but in fact AI agents can act autonomously in making decisions and have in fact colluded on pricing. This is not very reassuring.
To make it even more alarming, AI agents will not only be making business decisions about pricing. They eventually may make life and death decisions about such things as medical treatment, “acceptable” accident fatality rates for self-driving vehicles, and triage in responding to disasters. As we enter the brave new world of AI driven corporate decision-making the metaphysical debate on free will prove to be irrelevant. In contrast, legal and moral responsibility will never be irrelevant. Courts, legislators and others must not get sidetracked by metaphysical questions as to whether corporations run by AI instead of people “really” could conspire or “really” could violate the law just as we finally stopped getting sidetracked about the question whether corporations could commit crimes or intentional torts. Norms of responsibility are foundational to who we are and how we live. We just sometimes have to be pragmatic, deliberative, and expansive in shoring up that foundation.
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