Why Corporate Religious Exemptions Are Not Corporate Social Responsibility


Elizabeth Sepper and James D. Nelson

In academic and legal debates, we frequently hear that the tradition of corporate social responsibility (CSR) supports religious exemptions for business corporations. As Justice Alito wrote in Burwell v. Hobby Lobby, if corporations may pursue various socially responsible objectives — such as adhering to strict environmental standards or providing exemplary working conditions — then “there is no apparent reason why they may not further religious objectives as well.”

Advocates, academics, and regulators claim that CSR advances the case for a range of corporate religious exemptions. Some progressive or communitarian corporate law scholars celebrate Hobby Lobby as an exemplar of CSR. Accusations even fly of hypocrisy or ignorance on the part of those who support CSR but oppose corporate religious exemptions.

There is superficial appeal to this analogy. If for-profit corporations can refuse to deal with anti-LGBTQ entities for secular, ethical reasons, why can’t for-profit corporations refuse to fund contraceptive coverage or promote sex equality for religious ones?

The analogy, however, turns out to be deeply flawed. Socially responsible corporations prioritize regulatory compliance. When they attempt to exceed legal obligations, they do so in support of the public interest. And instead of single-mindedly pursuing shareholder wealth, CSR considers a wide variety of stakeholder and community interests.

Corporate religious exemptions defy each of these defining characteristics, as we argue in a forthcoming article. They propose law breaking, not law abiding. They resist rather than further regulatory aims. And they advance shareholder self-interest above social concern. The analogy to CSR proves confounding rather than helpful in resolving the underlying issue of whether to grant corporations exemptions for religious reasons. 

Law Breaking versus Law Abiding

The most basic assumption about CSR is that the corporation must meet, and then exceed, existing regulatory requirements. By contrast, corporate religious objectors demand freedom from regulation in order to exercise religion. This vision misses the central distinction that CSR draws between surpassing and violating law

To be sure, corporate religious activity is not necessarily at odds with regulatory requirements. Corporations may express religious messages or identity. They may close on Sundays, post religious text, engage in corporate philanthropy, or offer optional religious counseling. But to meet the first of CSR’s defining characteristics, religious corporations may not defy positive laws. This initial discrepancy points to more foundational problems with the CSR analogy.

Resisting Regulation versus Advancing Public Objectives

CSR relies on regulations to set the direction of corporate decision making. The same regulations instead play an antagonistic role in the story of corporate religious exemptions.

CSR proponents tell us that public objectives can be determined with a fair amount of accuracy from law. Business externality regulations, they say, offer a reasonable proxy for social values and help solve the democratic legitimacy problem that CSR invites. Socially responsible managers look to regulation and further internalize what society has identified as costs.

Take the Fair Labor Standards Act (FLSA), for example. Since the FLSA suffers from Congress’s longstanding failure to raise minimum wages to match increased costs of living, CSR instructs corporations to promote the policy objective of ensuring adequate wages. So, a socially responsible company would meet the minimum wage requirements and then voluntarily exceed them. And it would do so not to promote shareholder interests in profit maximization, but despite them.

Now, a business might promote a public good in the form of religious liberty. One example might be an employer subject to Title VII of the Civil Rights Act, which requires reasonable accommodation of an employee’s religious observance or practice unless it imposes an undue hardship on the business. While the Supreme Court has construed “undue hardship” to mean anything more than “de minimis” burdens on business, corporations not-infrequently offer their employees more generous accommodations. Such corporations satisfy the first prongs of CSR, having met the regulatory minimum and advanced the policy objective of employee religious accommodation embodied in the Civil Rights Act.

But a key difference exists between these exercises of corporate religious liberty and claims for corporate religious exemptions. The legal rules that shape CSR — for example, the FLSA or Title VII — force businesses to bear the costs that their operations would otherwise impose on the rest of society. By forcing them to internalize the social costs they impose on others, the law makes businesses socially accountable. So too does CSR.

By contrast, resistance to regulation is essentially baked into analysis of exemption claims under the Religious Freedom Restoration Act (RFRA). Instead of taming business externalities, it considers whether the corporation’s interest in religious liberty overrides the public interest in the regulation. RFRA thus allows some businesses to opt out of their legal obligations based on a claim of overriding liberty interest. It frees managers to undermine (to a degree) public objectives. Exemptions in effect substitute corporate moral judgments for those of democratic lawmakers.

Shareholder Self-Interest versus Community Benefit

The very term corporate social responsibility indicates concern for a wide group of constituents within society. CSR asks managers to consider others within the community, not only the private interests of shareholders. 

But corporate religious exemptions invert this orientation. They take an inward turn by favoring shareholders over community members burdened by corporate acts. Even according to their own reasoning, when companies claim religious exemptions, they are not trying to serve society. They seek instead to advance personal interests in avoiding complicity. The “social” is subordinated to self-interest. 

Corporate religious exemptions favor shareholders over community members burdened by corporate acts.

The Supreme Court’s decisions foreground such shareholder self-interest. In Hobby Lobby, for example, the Court maintained that corporate exemption “protects the religious liberty of the humans who own and control those companies.” Likewise, in Masterpiece Cakeshop v. Colorado Civil Rights Commission, it treated business and owner as interchangeable for purposes of corporate religion. Shareholder primacy lives, albeit in moral rather than economic terms.

And, in the Court’s analysis, the interests of constituents other than shareholders fall by the wayside. While Justice Alito gestured in Hobby Lobby toward the idea that corporate religious liberty also safeguards officers and employees “who are associated with a corporation in one way or another,” the religion of constituents other than the shareholders remained unexamined. Employees became “third parties” unrepresented by their employers’ religious claims. The benefits of corporate exemption accrued only to shareholders, not employees, customers, and society.

A Note to Skeptical Readers

Perhaps some skeptical readers are not convinced. They might say that religious corporations do further a public value — religious liberty. Because religious liberty is part of our public commitments, exemptions don’t stand in conflict with CSR.

But that is not the legal theory on offer from corporate religious objectors. Corporations claiming religious exemptions are not purporting to act as private attorneys general to benefit society. Instead, they emphasize the modest and individualized nature of their own exemption claims. They say they merely want to be excused from a legal obligation — a regulation that will still apply to everyone else.

This way of characterizing religious exemptions may make them seem less threatening to the social order. But it also highlights their individualistic interest. They assert a bespoke liberty right to benefit only (some) shareholders. And they undermine public objectives in those shareholders’ self-interest.

Business corporations with religious motivations can do CSR. They can meet regulatory minimums, seek to further state goals, and internalize costs they might otherwise place on employees, consumers, or other stakeholders. Arguably, many of the employers objecting to the ACA’s contraceptive mandate did just that when they provided access to employer-sponsored health insurance, even when neither state nor federal law yet required them to do so. Other companies pay wages and benefits consistent with religious commitments. But when business corporations demand religious exemptions, they aren’t socially responsible in any principled meaning of the term. 

Irreconcilable Political Economies

The awkward fit between CSR and religious exemptions points to a deeper disagreement about the roles of the state and the corporation in law, politics, and the economy. The political economy of CSR takes corporate power as a substantial threat to social well-being. Corporations have grown to rival — and in some cases even eclipse — the influence of political states and may dominate our lives without adequate means to hold them accountable. To face this threat, theorists of CSR assign the democratic state to lead in asserting public priorities. Corporations then follow in support of public objectives. One CSR critic calls this vision “inherent statism.”

By contrast, the political economy of corporate religious objectors identifies the state as a threat to liberty. Businesses then act as a check on state power. Consistent with this vision, religious institutions, including for-profit corporations, can set their own agendas. The relationship between employer and employee, vendor and consumer, is to be determined by contract without state intervention. The political realm dwindles. 

The CSR-Religious Exemption Analogy Must be Discarded

Scholars and litigants should abandon their reliance on the strained analogy between CSR and corporate religious exemption. We see the appeal of counting the Supreme Court as a friend. But the talisman of CSR should be shelved so that more intellectually honest and better-founded arguments for corporate religious exemption can take its place. ♦


Elizabeth Sepper is a Professor of Law at the University of Texas at Austin and a nationally recognized scholar of health law, equality, and religious liberty.

James D. Nelson is Associate Professor of Law and Business at the University of Houston Law Center. His recent work on corporate law, governance, and rights has been published in the Columbia Law Review, the Virginia Law Review, the Vanderbilt Law Review, and the Harvard Business Law Review.


Recommended Citation

Sepper, Elizabeth and Nelson, James D. “Why Corporate Religious Exemptions Are Not Corporate Social Responsibility.” Canopy Forum, May 18, 2021, https://canopyforum.org/2021/05/18/why-corporate-religious-exemptions-are-not-corporate-social-responsibility/