Kenneth Goodpaster and John Matthews, “Can a Corporation have a Conscience?”

1.       Case of Southern Steel Corporation and CEO Weston

          a.       As private individuals we should be socially and morally responsible

                    i.        As a private citizen, Weston had worked for community programs for black housing, education and small business and to desegregate the all-white police force and local government

          b.       As business people, we should not

                    i.        Refused to advance the cause of civil rights by using the corporations economic power to pressure banks, suppliers and local government

                    ii.       Note: They did “remove barriers to equal job opportunity inside its several plants”

2.       Goodpaster/Mathews: This double standard is a mistake

          a.       Reject that in private lives should be morally responsible and business lives amoral

3.       Like individuals, corporations can and should have a conscience

          a.       They should be honest, courageous, considerate, sympathetic and show moral integrity

          b.       Corporations are no more nor less morally responsible than individuals

          c.       Note: This does not imply that the duties of a person while in business are identical to the duties the person has as private individual or that they must act the same way

4.       What does it mean to be morally responsible?

          a.       Take the moral point of view, as distinct from a legal point of view or from being financially prudent.

          b.       Taking the moral point of view means

                    i.        Consider the effects of actions on others (all stakeholders)

                    ii.       Respect others interests as ends in themselves (for their own sake) and not merely as means to others ends (treating them as tools, instruments)

5.       Examples of moral duties

          a.       Be honest (don’t make misleading promises); don’t use people as tools (firing a salesman before she can receive a commission from a sale); don’t harm others (pollution); assist those in needs (help a hurricane ravaged community); respect people’s rights (employee privacy), treat people fairly (don’t promote the boss’s son before a harder working colleague); treat people with respect (women as sex objects in advertisements)

6.       Three mechanisms for insuring social responsibility

          a.       (1) Invisible hand (Adam Smith and Friedman)

                    i.        Free and competitive markets moralize self-interested corporate behavior

                    ii.       Each corporation acting in own self-interest will lead to the maximization of the well being of society

                    iii.      No need to seek morality or the common good, just seek personal advantage (for market’s invisible hand will turn this into the common good)

          b.       (2) Hand of government (Albert Carr)

                    i.        Laws and regulations will moralize corporate pursuit of economic self-interest 

          c.       Note: Both (1) and (2) locate morality and responsibility and ethics outside corporations; and have it imposed on them externally

          d.       (3) Hand of Management

                    i.        Self-regulation

                    ii.       Business people exercise independent moral judgment

          e.       Goodpaster/Matthews argue that all three have an important role

Objections & Replies

7.       Objections #1, #7: Corporations are not persons (individuals), and we can only hold individuals responsible. How could we punish corps? Only individuals can be punished.

8.       Reply

          a.       We do hold organizations accountable and judge them (KKK, Nazi Germany, Exxon)

          b.       Structure of corporation can make it good/bad, apart from people who fill that structure

                    i.        E.g., Ethics officers, environmental audits, employee ombusperson

9.       Objection #2: Corporation can’t be held responsible at sacrifice of profit; competition will drive socially responsible corporations out of business

10.     Reply

          a.       Morality rarely requires self-sacrifice

          b.       Less than maximize profit not same as going out of business

          c.       Morality controls self-interest, not replaces it

          d.       Other corporate goals conflict with maximize profit: stability, growth, safety of investments, job security

          e.       Ethics is one value to add to this

11.     Objection #3: Friedman’s tax argument: Politically illegitimate for private individuals to seek public interest, as not democratically elected

12.     Reply:

          a.       Don’t need to be an elected official to have a duty to act morally responsibly

13.     Objection #4: Social responsibility violates fiduciary (=trust/promise) role of managers to shareholders to maximize profit

14.     Reply

          a.       Not clear shareholders really insist only on economic criteria

          b.       Social responsibility is part of stated purpose of many corporations and thus they have fiduciary role to society and all stakeholders as stated in corporate charters

          c.       Fiduciary role constrained by morality and not simply any legal means available

                    i.        What if legal and maximally profitable to paint a toy which is likely to cause lead poisoning in children?

15.     Objection #5: Corporation are too powerful and so it’s dangerous to unleash them into the moral domain; what if they throw their power behind the wrong cause? (SSC supports KKK?)

16.     Reply

          a.       Power affects when not used as well as when used

          b.       Under certain circumstances can’t remain morally neutral

          c.       Not to act is a moral decision as well

                    i.        Sins of omission

          d.       Most important for those who are powerful to consider morality rather than to pretend to ignore it