Corporate Law After Hobby Lobby

79 Min Read By: Lyman Johnson

We evaluate the U.S. Supreme Court’s controversial decision in the Hobby Lobby case from the perspective of state corporate law. We argue that the Court is correct in holding that corporate law does not mandate that business corporations limit themselves to pursuit of profit. Rather, state law allows incorporation for any lawful purpose. We elaborate on this important point and also explain what it means for a corporation to “exercise religion.” In addition, we address the larger implications of the Court’s analysis for an accurate understanding both of state law’s essentially agnostic stance on the question of corporate purpose and also of the broad scope of managerial discretion.


In a landmark June 30, 2014 ruling on religious liberty,1 the United States Supreme Court spoke in unprecedented fashion to a foundational issue in corporate law, the question of corporate purpose.2 To resolve a clash between two important federal statutes—the Patient Protection and Affordable Care Act (“ACA”)3 and the Religious Freedom Restoration Act (“RFRA”)4—the Court entered the very heart of state corporate law and addressed a debate that has raged for decades.5 Rejecting the federal government’s position that “for-profit” business corporations cannot “exercise religion” because their sole purpose is to make money,6 the Court in Burwell v. Hobby Lobby Stores, Inc. construed state corporate law as permitting a broad array of non-monetary objectives.7 Thus, the Court reasoned, business corporations are “persons” under RFRA that can “exercise religion” under that Act,8 and it held that the ACA’s contraceptive mandate substantially burdened sincerely held religious beliefs.9

The Hobby Lobby decision has generated enormous controversy in both legal and political circles,10 and Justice Ginsburg authored a fierce and lengthy dissent.11 Undoubtedly, in the months ahead, much scholarly attention will be devoted to the intricacies of the Court’s RFRA analysis and what it reveals as to the Justices’ current thinking about religious liberty inside as well as outside the business setting.12 This is an important subject, as is the policy issue of ensuring women’s access to contraceptive care under the ACA and to healthcare generally.13

In this article we assess the implications of the Hobby Lobby decision from a corporate law perspective. The Supreme Court very rarely takes up corporate law issues of any kind and it has never spoken to the subject of corporate purpose. Without the Court’s threshold holding that, as a matter of state corporate law, business corporations can exercise religion because they need not solely pursue profits,14 the RFRA claim in Hobby Lobby would have failed, and the ACA’s contraceptive mandate would not have been struck down. With that expansive holding in Hobby Lobby, however, the consequences now radiate far beyond the context of religious liberty, healthcare, and women’s rights. Quite simply, by tackling for the first time the contentious issue of corporate purpose, the Supreme Court relaunched a stalled conversation and the Hobby Lobby decision will reverberate across corporate America. It will reshape fundamentally how business people, lawyers, legal and business scholars (particularly, corporate law professors),15 as well as ordinary citizens, think about the permitted objectives of business corporations in a free society, objectives that extend far beyond those that are religiously motivated and into the larger realm of corporate social responsibility …

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By: Lyman Johnson

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