The Moral Responsibilities of Companies

C. Chapple

• Publisher: Palgrave Macmillan
• Year: 2014
• ISBN:
  9781137377982
• Topic: Filosofía
• Subtopic: Filosofía política

The Moral Responsibilities of Companies is a philosophical analysis of the question of whether companies can be held morally responsible for the harms they create, and what implications such a view has on the moral position of employees and shareholders in these companies.

1

The Problem of Corporate Responsibility

Corporations are not individual persons, but rather persons who have some form of relationship with individuals. The nature of that relationship is what I explore here.

We all encounter corporations in everyday life. These include universities, churches, clubs, voluntary associations and – most commonly – commercial companies, on which I shall concentrate my attention. When we encounter companies, we find that they have a range of harmful and beneficial effects. A company will usually affect its members in ways that are beneficial to them in the sense of being advantageous with respect to furthering their interests or wellbeing. The main advantage for members of a company is conventionally said to be pecuniary, and the company is organised such that only members enjoy these advantages (for example, salaries and dividends paid by the company out of its profits). Membership of a company is voluntary, so potential members will usually anticipate the receipt of such advantages when deciding whether or not to join. The creation of beneficial effects by companies for their members plainly has great social significance, both in terms of work and in terms of the creation of wealth, directly and indirectly (such as through pension funds).

Companies may also be a source of harm to members in the sense that they impose burdens or demands of some sort. In most cases, these apparent harms would be offset by related advantages in such a way that they might not, all things considered, really be treated as harms at all; rather, they would be necessary costs of membership, willingly borne. For example, taxes or group subscriptions might not, if fairly distributed, constitute a genuine harm to members of a group because there would be a net benefit attached to membership.

The actions of a company can also affect third parties, that is to say non-members. Sometimes these effects will beneficial, and in other cases they will be harmful. The beneficial effects are often thought to include the production of goods and services for consumption. A company might also form part of a market that creates further advantages: for example, it is commonly said that, in a free market, increased competition leads to greater innovation and generally lower prices.

In terms of corporate harms imposed on third parties, companies are an interesting case insofar as they create harms that are intentional, as well as those that are non-intentional. Harms may be created intentionally where the third parties are members of another company engaged in competitive activity in a free market. Harmful effects may be created non-intentionally where, for example, these are the by-products of corporate action that was primarily aimed at creating benefits for members. A common example of this is where individuals are affected by some form of pollution or waste created by the activities of profit-seeking companies (what economists refer to as ‘externalities’).

We can therefore imagine a ‘matrix’ of corporate effects, harmful and beneficial, affecting members and third parties.

In this book, I will primarily be concerned with the tension that can arise where the creation of benefits for members (such as profits) imposes harms upon third parties (such as externalities), and the question of how we evaluate moral responsibility in that context. In particular, we must consider the question of who (that is to say which agent or combination of agents) bears such responsibility, and what practical consequences may flow from this.

When thinking about this question, two intuitions appear to come into conflict. We can describe these, in broad terms, as a ‘holist’ intuition and an ‘individualist’ intuition. I give a brief account of each of these in turn below.

The first intuition – the ‘holist’ intuition of corporate responsibility

The way in which we talk about companies suggests an intuitive attachment to the idea that they can be held morally responsible in their own right. This idea draws support from the ease with which we talk about what an institution is, what it has done, and what it is going to do. In other words, we talk about the character or personality of an institution that enables us to place its actions within a narrative and make predictions (albeit fallible ones) about its future. In the social sciences, and in our everyday legal, political and social discourse, we refer to social groups or associations such as nations, families, and corporations, and when doing so often ascribe properties to them that entail, or imply, a morally evaluative position. For example, we talk about a war-like nation, or a supportive family, or an acquisitive company perfectly naturally and in a way that does not differ, in terms of grammar, from our talk about individual human agents.¹ To put this another way – as Christian List and Philip Pettit have done in their recent book on group agency – we represent collections of human beings as if they were ‘unitary’ agents, capable of performing like individuals (List and Pettit, 2011, 1). The very term ‘organise’ derives from a biological analogy – such that a thing is given orderly structure, formed into an ‘organic’ whole.

This intuition is apparent in our responses to the BP oil spill in the Gulf of Mexico, or the recent behaviour of banks and other financial institutions. Many people, such as politicians and media commentators, made predictions as to what, for example, BP or the Royal Bank of Scotland would do, and how they would react, despite having very limited knowledge of the underlying members. For instance, it was possible to predict, fairly confidently, that Stephen Hester (RBS’s CEO) and Philip Hampton (its Chairman) would forgo their bonuses in 2012, despite knowing nothing of them as individuals. There was no apparent sense in which this talk was merely a way of speaking, as opposed to being a literal ascription of character and attitudes from which predictions about behaviour could be made.

Another way to put this is to say that our ‘reactive attitudes’ in respect of corporate harms seem to be on a par with the participant attitudes which arise from involvement in interpersonal human relationships, in the sense that attitudes of, for example, resentment or indignation towards companies are (in Strawson’s terms) ‘personal’, rather than ‘objective’ (cf. Strawson, 1960).² Considered from the point of view of the moral ‘patient’ (that is to say, the persons affected by these actions), the actions of a company appear, as Melissa Lane has put it, more like those of an agent than like forces of nature (cf. Lane, 2005, 238).

We can think of this intuition as assuming a form of philosophical holism. A core claim of holism is the rejection of the notion that one can explain everything about an entity or phenomenon by appealing to a theory about its parts. In the context of the social sciences, it is claimed that the characteristics of ‘social wholes’ are qualitatively distinct from the characteristics of their parts, and that these characteristics have a causal relevance in the world (cf. James, 1984, 2). On this account, collective entities are the ‘whole’ and individuals the ‘parts’, and the claim would be that some truths about collective entities might not be found by a full study of the individuals that make it up; rather, richer explanations are to be found at the collective level.

One area of social life for which this has important practical implications is criminal law, and it is interesting to note how the law has responded to this intuition. For many years, arguably stretching back into Roman law, analogies have been drawn between a company and a human agent. The law treats companies as separate legal ‘persons’ in recognition of their significance in contracting with others, a significance that has steadily grown in modern times. In quite recent times, the loss of many lives in a series of public transport and other disasters has heightened public interest in whether a company itself, that is to say the collective entity, could be held responsible and liable to punishment (such as legal prosecution).³ This line of thinking has led to important legal changes, including a new statutory offence of corporate manslaughter (in The Corporate Manslaughter and Homicide Act 2007).

This development has, however, been controversial, and certain aspects of the idea that a company can be ‘responsible’ in any literal sense appear, to many people, to be perplexing. I believe that this reflects a second, conflicting intuition, which is explained further below.

The second intuition – the ‘individualist’ intuition

It is possible to interpret our customary talk about companies and groups in a different way. It is often thought that when we appear to form moral judgments about a collective entity, such as a company, this is merely a figure of speech, and what we actually mean to do when we form such judgments is hold responsible the individual members of the company (being the ‘real’ agents involved). Plainly some talk about some groups is just metaphorical shorthand along these lines. Our talk of markets, electorates, peoples and so forth often has this character. This has led many philosophers to deny altogether the possibility of non-individual agents. An implication of such denial is that in cases where we intend to talk literally about group agents we are, in fact, in error (cf. Quinton, 1975/6). Whilst the holist might point to the moral indignation we feel in the face of corporate harms, perhaps, as Susan Wolf (1985) suggests, this should in many cases fade, upon reflection, and be replaced by a ‘moral sadness’ directed at society, the community, or humanity at large.

We can think of this intuition as assuming a form of philosophical individualism. An individualist would typically hold that collective entities can be satisfactorily analysed and understood by means of theories and statements that deal primarily with their members, and the intuitive appeal of some form of individualism appears to be very strong. Susan James has described its hold over our imaginations as being so strong that it is often regarded as ‘invincible’ in the face of holist challenges (cf. James, op. cit., 7).

Individualism is often thought to be a ‘reductionist’ view, and holism anti-reductionist.⁴ In a reductionist view, notwithstanding their apparent complexity, collective entities such as companies simply arise from an agreement between individual members, and are reducible to facts about those individuals.⁵ In particular, it is these members who possess the relevant intentions, act as causes, and are properly the bearers of rights and duties in respect of any collective or corporate action. On this account, one cannot attribute responsibility to a company at all. More permissive versions of individualism might also be possible. These might allow that a company could have some form of moral status, but hold that one cannot attribute moral responsibility to a company without also attributing it to its members in such a way that the moral responsibility of members exhausts all the moral responsibility there could be for any action. In this case, it may be redundant to speak of a corporate responsibility ‘on top’ of individual responsibilities, except insofar as it serves as a shorthand or expedient summary of the wider, more complex distribution of responsibilities. Borrowing from the vocabulary of the philosophy of mind, we could think of corporate responsibility on this account as being ‘epiphenomenal’.

We can see this individualist intuition at work when we consider the positions of economists and business people in relation to corporate responsibility. Milton Friedman, for example, is particularly forthright in criticising ‘loose talk’ about companies having responsibilities in their own right (cf. Friedman, 1970, 50). Whilst a company can have legal rights and responsibilities – for example, a company can enter into contracts, including employment contracts with individuals, and can be sued in its own right for certain contract breaches or torts – it does not follow that companies can be agents that can bear moral responsibilities in the way suggested by the first, holist intuition we described above. Friedman asserts confidently that only individual human beings are the sort of agents that can be the bearers of moral responsibilities. Descriptions of companies that suggest that they have duties and a conscience are, he says, merely figurative. Similarly, lawyers will often view corporate-level responses (such as punishments) as less precise ways of responding to individual faults (cf. Wolf, 1985). This also implies that the legal analogy with individual agents is misleading. In particular, companies are not – unlike human agents – self-owners, but are owned by shareholders to whom certain primary duties are owed.

The problem of corporate responsibility

It is clear that there is, at least on the face of it, a tension in our attachment to these two intuitions. This, in turn, makes the question of how to allocate responsibility for corporate actions seem complex. This is, in general terms, what I take to be the main ‘problem of corporate responsibility’.

In some cases, it is plain that we merely talk in a muddled way about corporations. Take the example of recent criticism of companies, such as Google, over their tax affairs in the UK. The Public Accounts Committee heard detailed evidence from Google, their auditors Ernst and Young, and HM Revenue & Customs (cf. House of Commons, Committee of Public Accounts (2013–2014)). Google was represented by their Vice President for Sales and Operations in Northern and Central Europe, Matt Brittin. The Chair (Margaret Hodge MP) referred to Google’s motto, ‘Do no evil’, and, addressing Mr Brittin, countered, ‘But I think you do do evil, in that you use smoke and mirrors to avoid paying tax’ (Ibid., Q219).

Earlier, Mrs Hodge had questioned John Dixon of Ernst and Young. Mr Dixon refused to disclose confidential information about his firm’s work for Google, instead insisting on referring to work carried out for ‘a hypothetical company’ (despite the repercussion that this risked making him appear somewhat cagey). Mr Dixon was, he said, not able to disclose such information without consent from Google. Mrs Hodge replied ‘Why not? They are sitting right next to you. If he says yes, you can’ (Ibid., Q50).

Now in the first example, it was clear that Margaret Hodge was not accusing Mr Brittin of ‘doing evil’. He was there representing Google, and the accusation was that Google was ‘doing evil’. Grammatically, this resembled a case of synecdoche, that is to say, a part (Mr Brittin) is standing for the whole (Google). In the second example, it is clear that ‘They’ (Google) were not really sitting next to Mr Dixon, rather Mr Brittin was (made clear by the subsequent ‘If he says you can ... ’). Mrs Hodge’s deliberately obtuse line of questioning yielded nothing in this regard precisely because Mr Brittin was not Google and was not able to give the consent required.

This is all Parliamentary pantomime, but there are many other cases that make it clear that what is at stake in questions of corporate responsibility goes far beyond how we talk about corporations and their members. Issues of corporate responsibility become pressing when, for example, corporate harms are caused and those who have suffered seek compensation, to impose sanctions, or press for reform. Whilst it seems a natural response for the victims of harms to ask who is responsible, the complexity of modern corporations makes it extremely difficult to identify particular individuals responsible for these harms in the normal, full sense of moral responsibility. A theory of corporate responsibility is needed before we can impose legitimate and effective sanctions in respect of corporate harms, or reform corporate behaviour. These issues become pressing in a different way when particular individuals are excessively criticised for particular harmful outcomes when, in fact, their behaviour is only a small part of a complex pattern of causation and may seem less blameworthy when viewed in that context. For example, the treatment of the captain of t...

Table of contents

• Cover
• Title
• 1  The Problem of Corporate Responsibility
• 2  The Object of Study: The Nature of the Company
• 3  The Emergence Account (I) The Agent-Choice Condition
• 4  The Emergence Account (II) Causation And Control
• 5  The Emergence Account (III) Good Judgment
• 6  Developing an Alternative Account of Good Judgment
• 7  Understanding Collective Responsibility
• 8  Implications of the Emergence Account (I) Rights and Punishment
• 9  Implications of the Emergence Account (II) Individual Moral Responsibility
• 10  Conclusions
• Notes
• Bibliography
• Index