Many people have heard about the Supreme Court case known as the Hobby Lobby Case. Essentially, it allows a corporation to deny certain health care benefits that other companies are federally required to provide if that corporation has a religious objection to the benefit, such as birth control.
However, there is a potential ramification from the case that has a lot less to do with religious freedom and a lot more to do with what is known as piercing the corporate veil. There are a long line of cases that have established that a corporation is an entity with shareholders and those shareholders are protected from individual liability. The corporate veil is the legal concept by which the corporation is seen as a separate entity from the individuals that make it up and therefore the individuals cannot be held accountable for the liabilities and obligations of the corporation. In other words, you can’t go after the shareholders for the debts of the corporation.
Knowing that there will not be any individual liability is what convinces people to invest their money into a company. What would happen if shareholders became responsible for the liabilities of the corporation or individuals were put at risk for the corporation’s actions? How many people would continue to invest in a company or become a shareholder if they could put themselves at risk for the liability of the corporation.
There is a fear by some that the Hobby Lobby decision has created that exact dilemma. If a corporation which by its own nature cannot have a religion, has the religion of an individual or group of individuals imputed on it so that the law recognizes the corporation as having certain religious beliefs, then when the law pierces the corporate veil to look to the religion of the individuals, is it also piercing the corporate veil to look to the individuals as to liability as well? Put simply, if I start a corporation and then assert that the corporation has the same religious beliefs as me, have I torn a hole in the corporate veil?
Some say yes, but others argue that individuals have always used their own beliefs for corporate decisions and this is no different. Only time will tell, but there is too much at risk to allow the corporate veil to be destroyed. Likely, the courts will come up with an answer to keep things running smoothly.