The Ethical Obligations of Corporations
In light of the recent events involving the ethics of large corporations such as Facebook, the authors convened to discuss the obligations and ethical duties corporations must answer to. The idea was to present strongly varying viewpoints in order to get the most balanced opinion. This is the transcript of our conversation edited for concision, syntax and relevance.
Jack: The primary role of corporations has historically been to maximize profits for their shareholders, simply because any other action would cause a drop in expected value. In a sense, companies have no obligations at all; they act in the interest of profit, not to fulfill some obligation to employees or others, but simply because they would otherwise be outcompeted and driven from the market. It seems that the question of business ethics is an existential matter for these companies, as opposed to an ethical or moral one. That is the nature of profit-driven organizations like companies.
Janalie: Overall, the general goal of a for-profit corporation is to bring a profit, naturally. However, that does not automatically mean that it cannot have sub-goals that are “ethical,” so to speak, and do work for gun regulation. The two are not always mutually exclusive, a corporation can both seek profit and work to benefit society. That doesn’t generally happen, though, because I would say that the vast majority of corporations see their only goal being to make a profit.
Jack: I suppose the questions still remains: what are the obligations of a company? Even if the main goal of a company is profit, and it has these subsidiary ethical roles, is a corporation still obliged to follow the ethical code? Is it even obliged to provide a profit?
Ben: If a company consistently does not show any value, then it would not be a company much longer. I do, however, believe that companies can have ethical goals not based upon profit. Companies will often provide sponsorships or funding for various projects if these activities help public relations. Companies are often bound to certain positions based upon what they produce. For instance, I doubt that a corporation that primarily makes assault weapons would lobby for an assault weapons ban because that could irrevocably damage their business. Another recent example is the messaging app, Signal. It cannot turn over the texts from terrorists because its guarantee of complete privacy is critical to its business model.
Jack: Yeah. No matter the ethical “obligations,” I also doubt that any company would willingly succumb to social pressure or ethical demands that result in less profit. Also, I totally agree. Let’s not involve utilitarianism in this.
Ben: There have been examples of when a company reacts to mass public pressure. Right now, we are seeing lots of people leave Facebook and call for action against it as a result of their unethical business practices, and they are striving to improve customer privacy and perhaps even share less information about their users.
We effectively have an aristocracy within corporations themselves, with the executives and their children and chosen successors being the aristocrats.
Jack: Yeah, but people do not like Facebook because their privacy got sold out, not because of some ideological grievance. It is also not uncommon for social pressure to act in the opposite direction. The majority of people believed slavery was good. So, on this marketplace of ideology in the 1700s and early 1800s, much of the social pressure was absolutely one that pushed towards the continuation of slavery. The external force of social pressure on corporations is not something that necessarily makes them ethical, since the force itself may not be pushing towards something ethical.
Janalie: Also, for those social pushes to be effective, a majority of the corporation’s consumers need to push for it. Otherwise, the push has no effect. You gave the example of Facebook, but how many people here still use Facebook, despite the controversies? How many people across the United States still use Facebook despite the controversy? Social pressure needs to be more uniform than it usually is for it to make much of a difference.
Ben: Sure. But the point is not that they will always act ethically, it is that social pressure, as a phenomenon, can influence corporations in ways that seem contradictory to what you claim their sole purpose is.
Jack: But when that choice for social pressure to be exerted is gone, what happens? What happens when every single cereal company in the world relies on slave labor to farm wheat because profit margins have been driven so far down by competition? The tendency for the rate of profit to fall clearly implies that it will eventually be necessary, for companies to survive, to rely on effectively slave labour.
Janalie: That is exactly why we see companies outsourcing jobs to other countries. When it becomes too expensive to make their products in the US, they move, because it’s the biggest benefit to their ultimate goal of making a profit. Quite a few corporations use labor extremely close to child slavery for their own benefit, at the harm of other societies.
Ben: This is exactly the point of minimum wage laws and collective bargaining as a check on free enterprise. These were agitated often times for by the workers, and they gained unprecedented protection for workers. It is true that corporations move jobs to other countries when they believe that prices are too high in the US, but social pressure can often prove to be an effective antidote to these excesses. For instance, Nike was pressured to close down their sweatshops in the 1990s, and in large part they have, so it seems to be that, however inconsistently applied, social pressure can induce business to take more ethical actions even at a cost to profit.
Janalie: But a lot of other corporations do not. Even with the capability for ethical change, social pressure on corporations is far too inconsistent to ultimately change the appearance of their ethical standpoints. There are so many examples of times where people pressure corporations because of one incident that happened, and then a few months down the line almost completely forget about why they pressured that corporation and essentially stop all their efforts. Take, for example, PayPal. People stopped using PayPal when they found out that the founder supports Trump. But, here we are now, quite a few months down the line, and what has come of that? Social pressures spike and then drop as certain events happen and are publicized. We as a society have too short of an attention span to exert consistent social pressure on a corporation. Thus, you see a spike and a drop over and over again.
Jack: Yeah. I am very skeptical about the utility of social pressure on corporations.
Ben: Well, that is the nature of our democracy. We cannot compel people to protest for things they are not passionate about. Some movements are successful and some are not. That is how it goes, and what is successful is often what is more important to people such as minimum wage laws. What are we going to do? Are we going to create a body that prescribes ethical behaviour at all times?
(Ben left our conversation at this point.)
Emmanuel: Actually, that is exactly what I think should happen. We know that corporations will not have any obligation to act ethically, and that demand-side external pressures will not help that much, so it seems like the only thing left to do is create a new group of people that direct and explicitly guide corporations towards ethical behaviour.
Jack: I suppose it is true that this concept of the “unwashed masses” voting for people and on things they do not understand is a scary thing to imagine. But what else is there that could work? Who is this supreme body on ethics that puts the pressure on companies?
Emmanuel: I think that government by an educated elite would be the best method to ensure that corporations act responsibly. By elite, I do not mean any person who makes hundreds of millions of dollars, but instead by those who have been raised from birth with a sense of ethical virtue instilled in them and the understanding of their particular subject taught to them. In essence, the aristocracy. I mean people who have a strong background in government and the like, as opposed to officials who are elected. Arguably, these elected people are the most unreliable in ensuring corporate ethical behaviour, as the elections for these positions could easily be swayed by meddling companies’ propaganda. Democracy always has ended up as a plutocracy; that is how it always ends up, that is what we are seeing in America now. I want the ethical body to be composed not of the monetary elite, but of the intellectual and moral elite.
Jack: There is a lot of overlap between those classes today, though. Many intellectuals and academics are deeply involved with the industry they would then be required to regulate.
Janalie: Also, I would argue that we already have an aristocracy in the United States because of big corporations. We effectively have an aristocracy within corporations themselves, with the executives and their children and chosen successors being the aristocrats. However, those corporations already control a big portion of our government through lobbying and legalized bribery.
Emmanuel: No, no, I agree. Every country has an aristocracy, whether they call it one or not. In the Soviet Union or revolutionary China, party members and their associates were the elites. In the Ancien Régime, aristocrats were the nobility. No matter which example of a country you pick, there has always been an elite. The problem with the United States is that there are no rules for the aristocracy. If you make a lot of money, even through unscrupulous means, you are now part of the aristocracy. What I am saying is that we should recognize the aristocracy as a class, and ensure that membership in the aristocracy is not determined by wealth or power, but instead by the want for helping the nation or society broadly. A CEO is not going to be concerned with anything except making money, and an unacknowledged class of CEOs working in the shadows does not help anyone. When the explicit goal of the aristocracy is then to help society, it is an entirely different ballpark.
Janalie: How do you quantify what is “good for society” in a society that has so many diverse peoples and viewpoints? How do you determine what is good for a society that does not agree on what good even means?
Emmanuel: I think there are definitely some individuals out there with enough virtue such that I doubt that many people in this country would believe them to be immoral. Even if you cannot put an exact number on it, you can still qualitatively examine individuals. For example, I think most people would believe that a volunteer nurse who willingly dives into active war-zones to assist others is morally superior in terms of selflessness to Joe the office worker. Similarly, we could probably agree that Bill Gates is more philanthropic than the average billionaire who does not share their wealth. Really, it is analogous to any topic, including business ethics.
Jack: I suppose so. But, how would these aristocrats force corporations into implementing ethical policies that cut into their bottom line?
Emmanuel: Well, they probably do it in the same way that our government does it now. Threaten them with lawsuits, sanctions, penalties, whatever gets them to agree. Now, it is just that the government is less corruptible than appointed officials, and more stable than constantly changing and unreliable popular social pressure.
Jack: Sure, but then what is to stop companies from just leaving the country to avoid all these penalties and threats from the aristocracy? Even if this incorruptible aristocracy could force these companies to act ethically while they stay within the borders, why could not these companies just pack up and leave as soon as their profits are threatened?
Emmanuel: Well, it is absolutely going to be a game of incentivizing corporations to act ethically while also balancing the penalties for bad behavior. In the case of environmental protection, for example, I think that implementing both a carbon tax and subsidies for energy-saving processes could incentivize companies to both contribute to the economy while acting in a responsible manner. It is a matter of balancing the carrot and the stick.
Janalie: I agree with that. I am still a little unsure on the whole need-for-aristocracy part, but I think I get the idea.
Jack: Same here. I think that the largest question that still remains is on the most effective way to get corporations to act ethically positive. Whether you take the Marxist perspective or not, it seems like we have more or less agreed that corporations have no moral obligations of their own. It is up to someone else, whether it be individual consumers or the state, to keep them in check.