In what sense, if any, can business organisations be treated like morally responsible individuals?

Utilitarianism suggests we can asses what is right or wrong in terms of consequences of our actions, assessment is not easy however.  By what benchmark can we measure the result of one action against another?  Utilitarianism assesses consequences in terms of utility, meaning the greatest number of people who are happy. There are two types of utilitarianism. Actutilitarianism looks at consequences of individual action on specific occasions. The second, broader type of utilitarianism is Rule Utilitarianism. It looks to a specific situation but assesses what happens in general circumstances, not on specific occasions.

Suppose a large organisation must cut costs?   They decide to do this by incinerating dangerous materials rather than dispose them safely but expensively, thus causing pollution, while also saving jobs.  Under Actutilitarianism we would asses the moral consequences of this one action.

Under Rule Utilitarianism, we can now say, what if every large business incinerated dangerous materials and caused pollution?  Assessment of morality here is based on these moral consequences. So can we use utilitarianism to asses the morality of big business activities.  It is arguable that utilitarianism is a very naturalistic and simple approach, looking at past events and information already known.  We can see the consequences of such action and identify if it’s good or bad for the people it affects.  The problem is how to determine consequences accurately, can we really measure happiness?  Look at the business incinerating dangerous materials to cut costs and save jobs example.  If 20 jobs are saved but cause pollution, affecting 20 people, how is level of happiness for each individual group quantified?  Such assessment may prove vague and unreliable.

Kantianism approaches from a different angle, disregarding the consequences; instead it looks at the original motivation behind the action.  The consequences of our actions are now irrelevant.  We must look at the original reason for the action. We need to look at the original motivation.  Did they incinerate these materials to save money at the expense of the environment or did they do this to cut costs and save jobs, unaware of the detriment to the environment?

A person who does the right thing acts out of good will, which is a sense of duty or obligation.  We need to ask are we doing the right thing because it is right and for no other reason.  Does our company act to save jobs because it cares for its workforce or because it’s more expensive to pay severance packages and thus would rather cause pollution?  Our motivation in both instances is to save jobs, but for different reasons.  One is certainly not out of moral duty to the workforce.

Kantianism isn’t as clear cut; we must also remember that we cannot rely upon a person who acts out of accidental character.  For example, I may begrudgingly purchase a poppy every Remembrance Day. I don’t like parting with 50p, but feel it my moral duty. Another person is having a good day and happily purchases a poppy. However, this action is a one off and they will never buy a poppy again. This illustrates accidental character and this person cannot be relied upon to make the same moral judgement in the future or feel any sense of duty on the basis of this one action.  Did our large company save jobs through an ongoing duty to protect its workforce, or was someone in management feeling kind that day? Will they in future make the same decision if faced with the same problem and in a different state of mind?

Corporate accountability was a question raised by Milton Friedman when he said that as ‘artificial persons’ corporations couldn’t have responsibilities applicable to people. This entails that talk of corporate responsibility is simply a way of talking about people within corporations having responsibilities. This does not rule out corporations being socially responsible, but does mean that in practice it would be those in charge who are responsible - executive accountability.

        The basic argument against whole companies having moral responsibility is “we cannot attribute responsibility to corporations because we cannot attribute intentions to them, at least not as anything separate from those of the people involved in them”. Unless we can show specific corporate intentions at work in business activities, there is no question of the corporation itself having moral responsibilities.

        The argument for corporate responsibility tries to affirm this point, stating “there is a specifically corporate intention which is more than merely the sum of what is intended by the individuals working within the corporation”. This argument is based on organisations being comprised of a highly organised hierarchical structure, where individuals act out different tasks towards a common end. Hence there exists an over-riding level of corporate individuals involved. While corporate activities are carried out by individuals, the whole is a greater sum than its parts.

        Again we may counter this, as just because individuals work to a common end doesn’t mean executives at the top of the hierarchy don’t determine the organisation’s activities. All this said, the unarguable fact is a “corporation has to act through individuals means that only intentions formed by individuals can lie behind corporate activity”. This means there is nothing to account for what is done and so moral responsibility can’t be attached.

        Why does this matter? Why should we care about defining a corporate level of moral responsibility? When we discuss moral responsibility we are really concerned with accountability, holding someone responsible. There are two reasons for this, to bestow due credit, and give due punishment. This leads to another question, how can we fulfil the due punishment premise when we attach moral responsibilities to a whole corporation? The answer is that we can’t. In order to be punished you must suffer harm, and as corporations are entities separate from the people associated with them, they are unable to suffer it. You might say although they cannot experience physical harm they can suffer financial harm; however “it is obviously people such as shareholders, employees, customers, etc who will suffer from any resulting harm. Their dividends will be reduced their employment prospects damaged, their prices increased”. Thus we simply cannot punish and assign moral responsibility to corporations.

        Attempting to mix moral responsibility with corporations may even result in the innocent being punished and guilty evading it. The innocent may be punished, for example, through financial means when shareholders, employees, and customers may have had little or no part to play in responsibility for what corporations do. However as most power lies with executives, the responsibility for corporations belongs to them. Despite this fact, executives appear to avoid the hand of moral responsibility. Critics therefore conclude, “The idea of specifically corporate moral responsibility is not only pointless but pernicious…it exposes the innocent to harm and offers a way for the guilty to evade punishment”.

        

        Should companies even be concerned with social responsibility in the first place?  Two reasons why it might not be in corporate interest are that it may hinder the efficiency of the market, or detract from company performance. “These objections to programmes of corporate social responsibility are now widely shrugged off, both in the business ethics literature and in business, and it’s notable that the two leading statements of the objections date from the late 1950’s and early 1960’s”. It’s hard to believe the claim that healthy competitive trading does or must discourage corporate social responsibility. Kingfisher, a leading UK company, represented at the Confederation of British Industry (CBI) forum of ‘corporate conscience goes to work’, stated that market research showed their competitive position wouldn’t be harmed by having social initiatives. Nigel Whitaker, Kingfishers’ corporate affairs director, told the CBI forum that company concern with social responsibility grew in efforts to establish a trading identity and corporate culture. “Market research indicated that it mattered to high-street consumers whether retailers made a contribution to society or took measures to protect the environment”. Milton Friedman wrote one of the most widely quoted articles stating it’s not right for businesses to take on responsibilities other than money making, taking the case of price restraint. “There seems to be quite a lot of empirical evidence to support this claim that when there is upward pressure on prices, attempts at engineering price-restraint and wage restraint result in product shortages, labour shortages, grey markets and black markets”. Prices do play an important part in signalling the relative scarcity of resources and demand levels, interference with these messages can have many unwanted economic effects for business and the Public. So price restraint, however well motivated, may not be a good way of demonstrating social responsibility.

        However this may not always be the case, besides the measures considered to be advantageous to companies like Kingfisher, direct charitable contributions, which are commercially justified, there are other examples of benefit. Joint Public-Private financing of housing and transport, the inclusion on board of directors of representatives of consumers’, ethnic or employee interests; the marketing of aerosols containing CFC’s, and the introduction of improved labelling and dietary information by food retailers. Not all are expensive, and some are profitable or attract investors. A study in June 1992 by the British National Children’s Homes disclosed that 78% of shareholders would rather buy shares in firm’s that work with charities.

Although organisations aren’t people, they have ingrained rules, cultures and decision making centres which bond employees into one coherent being, essentially creating a separate entity. However, as we have seen, it is impossible to punish corporate identities and we must also appreciate that employees are not just robots without wills of their own and therefore have no causal responsibility. What is true, however, is to some greater or lesser extent, the overall structure of activity is governed by executives, which is why “to that particular extent, responsibility will belong not to the individuals but to the executives in overall charge”. What we must realise is that each case of moral accountability has its own background and thus no blanket solution to the problem raised here is possible, it must be taken case by case.

Bibliography

Velasquez, M., “Business Ethics: Concepts and Cases”, Fifth Edition, Prentice Hall,  2002.

Newton and Schmidt, “Wake Up calls: Classic Cases in Business Ethics”, Thomson, 2004

Chyssides, G. and Kaler, J., “An Introduction to Business Ethics”, Thomson, 1997

Sternberg, E., “Just Business: Business Ethics in Action”, Second Edition, Oxford University Press, 2000.

Sorrell, T. and Hendry, J., “Business Ethics”, Butterworth Heinmann, 1996.

Chryssides, G. and Kaler, J., “Essentials Of Business Ethics”, McGraw-Hill, 1996.

Crane, A. and Matten, D., “Business Ethics”, Oxford University Press, 2004.

Cannon, T., “Corporate Responsibility”, Pitman Publishing, 1994

Pratley, P., “The Essence Of Business Ethics”, Prentice Hall, 1995

Velasquez, M., “Why Corporations Are Not Morally Responsible For Anything They Do”, Business and Professional Ethics Journal, 2, 1983.

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Darren Rock

SOC 3 – x0158658

Business Ethics

MGT2B5Y

Individual Essay

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