Who has ethical obligations? -- July 29, 2005

Carlton Vogt's

Enterprise Ethics

Volume 3 Number 21 July 29, 2005

Who has ethical obligations?

Question of whether corporations are moral agents is perplexing to some

When we discuss ethics and the notion of ethical obligations, the question arises whether corporations, as persons, have such obligations. Some claim they do. Others are adamant that they don't. Generally, the objections to holding corporations morally accountable fall into several general categories:

They're not persons
They're not human persons -- or not, as some have said, "homo sapiens.
Corporations have legal obligations -- primarily, make as much money as possible -- that excuse them from having moral obligations.
They're simply doing what comes naturally -- much as a predatory animal might attack us.

So, let's examine these objections in order.

First, corporations are not what we normally consider natural persons, which is something that's easy to recognize. They are, however, legal persons, at least since the disastrous events of 1876 which made that a fact of law.

As such, they have the power to act in the same way that those we consider to be natural persons can act. This would seem to entail that these new entities would have, through some mechanism, the same restraints on behavior that natural persons would have. Corporations fought long and hard to be considered persons and have longer and harder to get more and more rights ascribed to persons. We have very strong feelings about rights having concomitant obligations or responsibility. Why should we abandon those feelings at the corporate door?

Someone could attempt the counterclaim that we consider human infants to be persons, yet we don't ascribe any moral agency to them -- at least for a few months or maybe years. That would seem to be true, but may not be as big an impediment as it would seem at first glance.

Corporations are capable of other-regarding actions on a scale not possible for infants. They can have significant effects on the lives and welfare interests of other people.

And, someone could also make the counter-counter-argument that if infants are incapable of moral agency, then maybe we need to reconsider their status as persons. Many people would be greatly disturbed by that suggestion. It's a valid question and one that needs to be considered in any discussion of what constitutes a "person." However, the question of personhood and who counts as a person is one of those cans of worms that, once opened, always requires a much bigger can to get all the worms back in. So, we'll leave it alone for now.

The "homo sapiens" issue is on even flimsier grounds. It's an easy proposition to make, primarily because all those people we consider "natural persons" have human DNA. However, that's not as true as some people might like to think.

Other animal species do exhibit some ideas of ethical behavior -- actions that are considered acceptable and unacceptable within the group. Some higher primates -- Koko the gorilla comes to mind -- can even express those ideas in the abstract. So, from this alone, we could argue that ethical behavior and moral agency aren't limited to members of "homo sapiens."

But let's take it one step further. Imagine that our space exploration brings into contact with an extraterrestrial population that isn't homo sapiens, has no human DNA, and isn't even a carbon-based life form. Now, let's imagine that these extraterrestrials have a well-developed society, culture, the arts, family grouping much like ours, and even religious beliefs, as well as a highly-developed ethical code.

Would we say that these are not moral agents? On what grounds? Could we exclude them from having ethical obligations because they didn't share our DNA? I doubt we would. So, I'm not sure the homo sapiens argument stands.

The question of whether legal obligations trump moral obligations has a much shorter answer: no. As I've argued before, while laws should be based on ethical principles, it doesn't work the other way around, except in a very derivative sense. You could argue that I have a general ethical obligation to obey the law, but that is a really weak obligation and completely disintegrates when the law and ethics collide.

Both the law and ethics deal in things that are required, things that are forbidden, and things that are permitted -- or things on which the law and ethics are silent. When the demands of both the law and ethics coincide, there is no problem. In other words, if the law requires something and ethics requires it or the law and ethics both forbid it, we have no difficulty in deciding which is the right course of action.

If the law is silent on something, or permits it, and ethics either requires it or forbids it, then what are we to do? The most obvious answer would seem to be to follow the ethical obligation, as ethics is prior to the law and would by that fact seem to take precedence. Some people have trouble with this and will gladly tell you that if something isn't illegal, they're free to do it. In short, they're wrong. Legally they may be free to do so, but it has no bearing on the ethical force of their behavior.

Out biggest problems come when the law and our ethical demands directly conflict -- when ethics requires something and the law forbids it, or vice versa. Then, we're in a bind. Do we follow the law or our ethical beliefs? Coming to a solution is one more reason we study ethics.

The first thing we need to do is balance off the stringency of the ethical demand versus the strength and potential penalties of the law. If it's a minor ethical point and the law is quite adamant, then we should probably act in favor of the law. If it's a minuscule point of law and ethically important, then we should probably act in favor of our ethical obligations. It's rarely that clear-cut. Sometime, it's a crucial ethical issue and the law is quite adamant. That's when ethical heroism comes into play.

However, in the scope of the current discussion suffice it to say that the law doesn't define ethical obligations, nor does it trump them. To say that corporations have a legal obligation to make as much money as possible for the shareholders obscures the fact that this isn't an unrestrained legal obligation. They have that obligation within limits. The task is to determine just what those limits are. There are other, countervailing obligations as well -- just as there are for all of us. It's rarely as simple as the "legal obligations" argument would suggest.

The last claim, that corporations, just as wild animals, have no moral sense or motivation, is, in some way true. I believe, and I've often said, that corporations have no moral motivation. However, it doesn't necessarily follow that this means there are no ethical obligations.

There are some human persons who have no ethical motivation. They do what serves their narrow, often selfish purposes without regard for the effect these actions are having on the welfare interests of other persons. They act in their own short-term self-interest without shame, without remorse, and without any sense of obligation toward others.

We call these people "sociopaths." Yet, oddly enough, we don't think that their lack of moral motivation excuses them from moral obligation. In fact, we find them more reprehensible for their lack of moral concern for others. So, it's hard to see why we would have different rules for other "persons," whether natural or merely legal.

When someone starts comparing corporations to a wild animal ravaging for food, not only don't I find it an apt comparison, but it presents a strong argument for something a lot of people find disturbing -- mainly people who don't want corporations to be morally accountable.

The difference between a corporation acting and a wild animal following its instincts is that the corporation is acting in a rational way. It considers ends and means in an abstract way and decides among different courses of action. A wild animal, acting on instinct, does what it is hard-wired to do and, in fact, would be acting against nature in doing otherwise. It sees what it perceives to be food, for example, and it attacks. There's no more thought to it than that.

However, let's assume the comparison is apt. Then this would argue that those who introduce such a creature into society have an obligation to tightly restrain the creature. If the zoo down the street were lax in confining and restraining its animals, then the neighbors would have a right to complain.

Since it's the government that charters corporations and sets them loose among us, it would seem that, in the absence of any other restraints, the government would have the obligation to impose a multitude of regulations to ensure that the entities is created could cause as little harm as possible to the population. The government has the moral obligation for the corporation's actions and should regulate accordingly to ensure that the corporation acts ethically. Unless you're willing to accept this, the wild animal analogy doesn't work.

The thing that bothers me most about the idea of corporations having no moral obligations is the asymmetry it causes. I'm seen as having some moral obligations toward corporations, and to suggest they have none toward me seems fairly lopsided. That's not how we usually view things. Ethical rights and obligations are usually built on some sort of system of reciprocity.

Some people will try to argue that I have an obligation toward MegaBank Corp. because when dealing with the bank I am really dealing with Billy, or Suzie, or Joe, or Mary in the loan department. And so, the argument goes, I have an obligation to tell the truth to the loan officer -- who is another human person and with whom I have reciprocal obligations.

That's an appealing argument, but fatally flawed. Certainly, my main interaction is with Billy or the others. I do have some ethical obligations to them. Hence, I don't snarl at them, insult them, or strike them. However, they are ultimately transparent to the transaction. It doesn't matter whether I'm dealing with Billy, Suzie, Joe or Mary. They're interchangeable.

My main relationship is with "the bank." It is "the bank" that will give me the money. And it is "the bank" that will come and take my house away if I don't meet my payments. By the time that happens, Billy and the others may be long-forgotten by both me and the bank.

It's easier to think of this now that we have online forms and ATMs. If we locate our moral obligations to the bank in the person with whom we deal, then technologies that remove that person would also remove the moral obligation. If we no longer deal with Billy or Suzie, but with the hunk of metal and plastic from Diebold or some online form, we would be able to lie and deceive with impunity, since we would have not ethical obligations to hunks of metal or the electrons and phosphors that make up online forms. I don't think we believe that. The moral obligations -- in both directions -- don't rely on the presence of a human moral agent in the middle.

Even as I write this, I can hear some trigger fingers just itching to write back and tell me that it's the stockholders, dammit. The stockholders are the owners of the corporation and the ethical obligation we have is with them. That, however, opens an even bigger can of worms, and anyone wanting to make that argument should think long and hard about it.

While Business 101 tells us that the stockholders own the corporation, and people will repeat the mythology at the drop of a hat, the truth is that there is a major disconnect between today's giant corporations and their stockholders.

As a quick exercise, take a piece of paper and, without peeking, write down the names of all the corporations in which you directly or indirectly own stock. My guess is that about 95 percent of you can't do that. You don't really know. You have 401Ks, pension plans, mutual funds, etc. All of these hold stock, making you an indirect owner of hundreds of companies, some of which hold stock in ever more companies. Do you feel any moral obligation for how all these companies perform?

Do you own, directly or indirectly, any stock in a "security company" whose employees are mercenaries torturing people in foreign countries? Or, do any of the companies in which you hold stock own stock in such a company? Are you sure?

I'm not trying to make a case for your responsibility in such things, although that would be another ethical question. My main point in bringing this up is to illustrate the idea that "ownership" of a corporation by stockholders has become such a weak concept that it's really not operable. In most cases, your ownership is more theoretical than anything else. And, if you don't feel any moral responsibility for the actions of corporations in which you directly or indirectly own stock, then it's hard to build a case that I owe you personally some moral obligations in my dealings with those corporations.

I'm not pretending that I've made an iron-clad case for corporations as morally accountable agents. I think that's a difficult task, since we have a lot of schizophrenic views about corporations. That alone makes arguments along these lines difficult. But I do think I've shown the weaknesses in the arguments against the idea of holding corporations morally accountable.