The Pursuit of Profit

Whenever I read critique's of corporate power, I always see Ford vs. Dodge get a mention. That is the case that famously decided that a corporation has no goal but the pathological pursuit of profit for shareholders. In the case Mr. Ford wanted to give his workforce a bonus, the shareholders filed suit and won. Thus the common critique from the left is radical judicial activism has caused this psychopathic pursuit for profit. [find citations] and this is a core principle of Anglo-American corporate law.

Indeed it is a core principle, however there are also plenty of other legal obligations a corporation has. The genesis of the Tort of negligence is an example of that. Companies have a duty of care to make sure their products do not harm consumers (Donohogue v Stevenson), they also have innumerable obligations under environmental law. However these are less often followed, despite them having the same normative force as the decision in Ford vs. US. The main reason why the normative force does not result in substantive changes is due to the lack of enforcement, which is a structural problem of capitalist societies. i.e. powerful groups can enforce their legal rights, the right to exploit the environment for profit. They have white shoe and magic circle law firms for that. However, the majority cannot enforce their environmental rights due to lack of either standing in court lack of funds or under staffed and overworked enforcement bodies. However, it does also seem to be as Friedman said, a core of human nature - to profit. Well, human nature of elites and power centers.

Ford vs Dodge is not the reason we live under corporations pathological pursuit of power, that argument seems to me to reverse the chronology and ignore the rest of the innumerable legal obligations corporations are under and hugely overstate the importance of a single case. Corporations are required by law to peruse profit, but that's irrelevant, they're also required to follow environmental regulations and they rarely do. The problem is not Ford, the problem is formal equality necessarily leading to substantive inequality. A critique that usually holds accurate for all of law.

Prototypical example of a lack of empiricism in jurisprudence

Guido Calabresi, in his paper on the roots of Tort law distinguishes criminal and contract law as such:

Contract law reflects the most libertarian set of relationships, in which – once
an entitlement has been given or recognized by the polity – that entitlement can
only be transferred if the parties themselves agree to do so at an individually
determined price. Regulation/criminal law represents the most collective set of
relationships in which the State not only decides who owns what, but determines,
under pain of criminal sanction, when that entitlement can be removed,
transferred or abrogated.

In all of legal theory this is just a given, it is beyond debate. It is seen as a fundamental axiom from which all other theories derive. However as I constantly bang on about, this just isn't the case. There is hardly a distinction between the two when we consider what it means in reality for the majority of the world. Perhaps jurists should consider reading the history of the United States as a great example of what the sanctity of contract meant in reality for the working class, rather than reading hundreds of pages of judgments and law journals.

Is the law the gunman situation writ-large?

Herbert Hart argues:

“The most prominent general feature of law at all times and places is that its existence means that certain kinds of human conduct are no longer optional, but in some sense obligatory. Yet this apparently simple characteristic of law is not in fact a simple one”

An easy way to show it is the gunman situation,

“the gunman orders his victim to hand over his purse and threatens to shoot if he refuses; if the victim complies we refer to the way in which he was forced to do so by saying he was obliged to do so.”. [Hart:6]

To Austin, this, that is, an order backed by threat is “the key to the science of jurisprudence”. However instinctively we cannot think the law is the gunman situation writ large, which Austin (who heavily borrowed from Hobbes) theory would have necessarily conclude. Legal scholarship has endorsed Hart’s idea that the law isn’t the gunman situation writ-large. The command theory of law is ‘demolished’ [JG Riddall:31] by Hart for three main reasons, one of which has 3 parts:

Laws as we know them are not like orders backed by threats –

• Some laws are, Hart concedes the criminal law is. However there are also many types of law which do not resemble orders backed by threats. Hart terms these ‘power conferring rules’ for they “provide individuals with facilities for realising their wishes by conferring legal powers upon them to create, by certain specified procedures and subject to certain conditions, structures of rights and duties.” Giving examples such as contracts and marriage.
• In Austin’s scheme the law maker is not bound by the command he gives. Many systems of law hold the “government of laws and not men” principle, which means sovereigns are also bound. What a legislator does is to exercise power conferred by rules.
• Not all laws stem from a deliberate datable act. An order backed by threat has to.

I’d argue that the law is, in fact, the gunman situation writ large. It’s uncontroversial to say the criminal law is but Hart’s critique argues that power conferring rules that enable contracts and marriages cannot be reduced to a threat. Any attempt to treat a void contract or marriage as sanction is an absurdity; a nullity cannot be a sanction.

In my view, marriage has nothing to do with the law. It has existed in even the ‘pre-legal’ societies Hart himself cites from Anthropological studies. Marriage law does not enable marriage; people got married long before complicated legal procedures had to be undertaken. The mere congruence of marriages and family law therefore cannot elucidate any light on law as we know it. If suddenly the legislature decided to legislate on scientific facts no one would use them to analyse what the actual law is, because those facts existed long prior to law.

I agree that contract law unlike marriage, is an example of law ‘properly so called’ to borrow Austin’s term. However, at its heart it is as coercive as a penal code, this is easily seen as soon as we adduce empirical evidence rather than relying on ex-hypothesi arguments as Hart does. Contract law crucially indulges in a legal fiction that both parties are of equal bargaining power. Ex hypotesi, this looks like a pure power conferring rule and not one backed by threat. But in reality it is nothing of the sort. Take an employment contract, one party (employer) has massively greater power than the other (employee). The compulsion to enter into the labour market and sign a contract cannot be a free choice, if one does not rent themselves as labour, one starves. The history of the war against organised labour in the US and UK clearly show any attempt at parity in bargaining power will be heavily stamped upon by the governing classes and in Latin America you'd be slaughtered. The very real sanction in this case is either starve (assuming no welfare state) or have the state crush any attempts to organise.

Take another common contract, an ISP or mobile phone provider. Consumers in these situations are ‘term takers’, you cannot begin to negotiate terms you’re just one atomized individual bargaining with a huge corporation. Of course there’s always the effect of competition, but giving that so many industries act in concert (illegally) and competition enforcement is so understaffed, consumers have little choice.

And we can go through other instances of non-criminal law that is inherently coercive. Take private property, which I’ve already argued is. Any law that is not coercive in nature is, most probably, that we humans would still do in the absence of a statute or case law. It’d be part of, what Kropotkin termed “Maxims of society”. The only difficulty in boiling law down to the gunman situation is the refusal of constitutional law to succumb to a coercion based analysis. Laws that state what courts have jurisdiction over what matters, who has the right to legislate cannot be boiled down to force. They truly are power conferring rules.

So then, Hart's distinction between primary and secondary rules, the latter being power conferring, the former orders backed by threats have are not great illuminating tools for understanding law. All they are merely saying is that what constitutes a legal system is a constitution, which sets up a judiciary, legislature and executive - as Johnathan Cohen has argued back in 1962. This, obviously, is a very western chauvinistic point of view and ruins any universality of Hart's legal theory applying to all systems in all places.