Academic journal article Journal of Markets & Morality

Controversy: Do Corporations Have Any Responsibility beyond Making a Profit? A Response to Dennis P. McCann

Academic journal article Journal of Markets & Morality

Controversy: Do Corporations Have Any Responsibility beyond Making a Profit? A Response to Dennis P. McCann

Article excerpt

Though I am not an Aristotelian there is something the philosopher says that applies to the question of moral responsibility in business. Aristotle claims that institutions are to be understood in terms of their purpose, i.e., the telos that constitutes their fundamental aim. I argue that the purpose of the corporation is to realize long-term owner value, which is why corporations were set up in the first place. However, any departure from this goal, and non-owning managers are skilled at diverting attention away from a corporation's fundamental purpose, is potentially fatal. A manager's fiduciary duty is first to act in the best interest of the owners, yet a manager's immediate self-interest lies in protecting his or her job. I think this tension explains why managers became active lobbyists of anti-takeover legislation throughout state legislatures in the late 1980s. The academic "discipline" of business ethics has proven to be a convenient shroud behind which some purely self-interested, rent-seeking managers have prospered.

None of this should be taken to mean that by pursuing profit, business personnel are exempt from traditional moral restraints on self-interested behavior. To urge that business personnel are absolved from their duty of honoring promises, respecting justly acquired property, and adhering to a society's rules of fair play merely to show an instant return on investment, would be to perpetuate the "myth of amoral business." Respecting these moral obligations, however, does not constrain profit maximization. Indeed, business has developed its own procedures for detecting rule breakers and enforcing moral codes, which are beneficial to all business personnel over the long-term. In an Aristotelian sense, all this is quite consistent with the purpose or telos of business. However, business moralists normally try to impose, either through statutory law or intense moral persuasion, supererogatory duties (those that may be ethically desirable but are not morally obligatory) on business agents. Robert Solomon, an author Professor McCann cites, falls prey to this temptation in his discussion of corporate social responsibility. Charities and public-spirited organizations are splendid institutions, but they are not, strictly speaking, businesses. It is damaging to both business and charity if such institutions are intertwined. Too often, business is condemned as immoral simply because it refrains from pursuing supererogatory purposes.

Corporate Responsibility and Supererogatory Purposes

The most recent example of confusion surrounding corporate social responsibility and supererogatory purposes occurred in the United Kingdom. The Body Shop cosmetics franchise, under the inspiring ethical leadership, if not egregious moral vanity, of Ms. Anita Roddick had for many years eschewed shareholder value and pursued some worthy aims, such as the refusal to use animals in product testing and paying First World wages to workers in its Third World plants. Yet the share price eventually plummeted and, ironically, the company was accused by people even more virtuous than Ms. Roddick, of certain unethical practices. Consequently, Ms. Roddick decided to privatize the company to be free from shareholder pressure in its pursuit of moral value. (1) However, it turned out that the restraints imposed by lenders were as onerous as stockholder pressures. Thus she was forced to return to the stock market with the promise to put shareholder value as one of her top priorities. Even with this eleventh-hour solution, the Body Shop's share price has been languishing for years. The point of this example is to show that attempts to make two different human activities (responsible corporate behavior and the pursuit of supererogatory purposes) serve one common purpose will eventually result in failure for both.

I was pleased to see that Professor McCann agreed with most of my strictures on the stakeholder movement. …

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