Corporate responsibility: concepts, practices, and stakeholder impacts

Business Ethics

Book Review of Corporate Ethical Philosophies

Business ethics may not be an oxymoron, but one must be clear as to what one means by business ethics in a corporate context. Ethicists cannot subsume a code of business ethics into other, more inchoate notions of social responsibility and personal virtues. In fact, letting businesses make their maximum profits and thus indirectly benefit society by generating revenue may actually the ultimate ethical action. Or so say libertarian economists Tibor Macham and James E. Chesher. The government that governs best, governs least suggested Thomas Jefferson, in regards to government involvement in the individual lives and wills of the American populace. Yet according to the current laws of the American nation, the corporation is an individual entity and thus, argue Tibor Macham and James E. Chesher in their Primer on Business Ethics, the best American government for business is the government that governs least. Organizational in-house ethics of profit making should dominate corporate ethics, not the law or social responsibility. A government does more harm than good when it intervenes in business affairs and ethically the only obligation a business has is to make a profit for its shareholders. A business must may have to behave in ways commensurate with societal norms to make a profit but not because it subscribes to airy notions of social change. These are the libertarian tropes, as espoused by the authors. (Boaz, 1997) But ultimately, the view of business of the authors is just as idealistic in its view of the ability of the market to right itself of excesses, such as child labor in the developing world, as the world view of those government regulators whom they would critique.

Macham and Chesher begin their text by offering three different views of corporate responsibility. The first is a kind of utilitarian contract-based theory, similar to the one expressed by University of Chicago economist Milton Friedman. (1970) This ideal suggested that corporate executives have no ethical obligation to anyone other than the owners of the company, namely the stockholders, whom they are contracted to fulfill obligations to under law. The only moral duty of a corporation is profit maximization. The corporation is a kind of collective entity that only advances the common goals of its owners.

In contrast, those who stress the social responsibility of business stress the obligations of businesses to act ethically towards society as well as the corporation's workers, not just its stockholders, even if observing these laws of justice and propriety violate immediate profit maximization. Although these duties are normally thought of as obligations only of private persons, this view stresses that as corporations are under the law individual entities, they should behave as ethically as individual actors. However, the authors Macham and Chesher argue that using company resources to advance social goals such as bettering the lot of workers through needlessly high wages, rigorous programs affirmative action, and pursing social justice outside the organization, can function as a theft of corporate profits if they act as a drain of the ultimate goal of making money. Even if companies are ethical in their wage employment policies abroad, Macham and Chesher would rather a company pursue child labor practices and make a profit and not put employees out on the streets and bereft stockholders of their funds, and ultimately bankrupt the company and put everyone out of a job -- including those working for the company in the developing world.

A third, popular theory of ethical corporate responsibility suggests that the company is not property of its stockholders alone but all with a stake in the company's future, including CEOs, employees, and others, and thus these individual's fates must be taken into consideration in questions about the company's future, even though not all of society can be considered in every decision. This suggests that companies have a stake in upholding some internal creeds of ethics. Thus, rather than think of society, people engaged in business have an obligation under contract to make their enterprise prosper and if they engage in a personal agenda, such as irrelevant and profit-limiting forms of employee discrimination that hurt the company. Thus, the authors do not advocate an ethical free for all, for they acknowledge certain ethical broaches can result in corporate legal costs, thus resulting in executives violating the ethics of their profession -- but this is a more important ethical standard than either laws or social responsibility, stress the authors.

The authors also acknowledge that in the current environment, government regulations must be obeyed by businesses, else they face the costs of litigation. But Macham and Chester also question whether this is a good, namely if too many regulations exist and ultimately hamper corporate profits. In fact, they believe that in the ideal business environment, other than protecting property, the government should not regulate business at all, and rather internal ethical systems should govern the organization, ideally in a Friedman-like utilitarian fashion, taking into consideration the fate of stakeholders only so much as need be, for the organization to evolve and survive. (Macham & Chesher, 11-14) Rather than regulate child labor abroad, and advertising directed towards children at home, consumers can always take their dollars elsewhere, and refuse to patronize such companies. Making a profit, the authors enthuse, always results in good ethics -- however, this seems to take an overly idealistic view of individuals' ability to be correctly informed, to discriminate between advertising and information (and info-tainment) as well as the ability of marginalized low-income workers to chose their place of employment, especially in locations abroad.

Undeniably the main justification for the capitalist system is utilitarian: It demonstrably increases social well being by providing jobs for willing workers and products at competitive prices. And certainly a company's ethics will affect its ability to sell goods, as consumers function as moral as well as economic entities. The authors seem to suggest that internal business self-regulation best, not the government. But what of a female or Black employee who experiences discrimination -- the authors would counsel her to go elsewhere, not seek legal redress, but even if discrimination is irrational and results in good employees fleeing the company, it may be the dominant practice of industry.