Are Corporations Really People?

In his recent book, Business Persons, a Legal Theory of the Firm, Wharton professor of ethics and legal studies Eric W. Orts answers the question: Are corporations “people?” In this [email protected] video interview, Orts explains why corporations should be treated as “persons” in some — but not all — instances.

Eric W. Orts

When you are using short-term options or other mechanisms to pay managers only in terms of their share-price performance, you create perverse incentives for them to commit fraud. I think that this is something that people did not think about when they adopted economic theories. Basically, in the economic jargon this is called “principal agent theory.” Principal agent theory was invented and advocated beginning about … [ Read more ]