How Moral Can a Business Be?
by Sidney C. Sufrin
Dr. Sufrin is professor of business economics at the University of Massachusetts at Amherst. He is the author of The Management of Business Ethics (Kennekat Press, 1980). This article appeared in the Christian Century, March 2, 1983, pp. 246-249. Copyright by The Christian Century Foundation; used by permission. Current articles and subscription information can be found at www.christiancentury.org. This material was prepared for Religion Online by Ted and Winnie Brock.
In the past few years, probably as an aftermath to the Watergate and post-Watergate disclosures of how the American business and political world is sometimes run, ethics has become of lively interest in business and professional schools and among both popular and seriously reflective writers. Most of the popular writings and the case materials used by the schools have tended to be exposes; many make interesting reading. Most are stories of how some businessman broke the law or bribed and otherwise cheated (legally or illegally) his way to a big sale and even bigger success. However, not all of these stories provide good material for discussing ethics. Robert Vescoís capers are not relevant, for example, because -- it is alleged -- his stock in trade was fraud. No one seriously considers business fraud an ethical issue; both the law and business conventions treat such dishonest acts as so clearly immoral as to be illegal. Yet perhaps a case can be made for defending some business illegality. If the technical violations involved are minor compared to the possible social gains, the illegality may appear trivial. In legal cases involving violations in some species of market behavior, this is often an implied defense (e.g., in market share cases). The recent change in Department of Justice guidelines for mergers and acquisitions is an example of new administrative attitudes toward market shares. When one deals with such borderline areas, the ethical discussions become interesting.
The courts did not judge the Ford Motor Companyís supposed indifference to the safety of the rear end of the Pinto to be criminal indifference or negligence. Yet many, perhaps most, people who heard of the Pinto case decided that the company had acted immorally, even if its conduct had not been illegal. In contrast, public opinion is not outraged by some kinds of price fixing. For years real estate brokers, supposedly in competition with each other, agreed on a schedule of commissions. Only recently have court cases been brought to restrain such price fixing. Has the ideal of morality changed? Although the U.S. Steel Corporation probably is seen by the public as an archetypal monopolist, both the courts and the markets have disagreed with this assessment. The publicís moral perceptions, the expertsí opinions and the courtís holdings all may and often do differ about what propriety is or should be.
Bribing foreign government officials and go-betweens for business favors was not illegal, according to American law, when the practice was exposed by the press in the 1970s. Moral revulsion and indignation in the Congress and elsewhere, however, led to the passing of an antibribery law which makes foreign bribes by American firms an offense. Now some legislators, it is said, are having second thoughts. Although the 1982 exposure of the bribery of foreign agents by American firms led to heavy fines (offset many times by heavier sales), now American businesspersons charged with bribing foreign officials are primarily viewed as having acted illegally rather than immorally.
Obviously, moral and legal behavior are not identical. Indeed, some legal behavior may appear quite immoral to sensitive observers. For example, college students are morally outraged when they discover that their universities and colleges quite legally hold securities in companies that invest in South Africa or that make munitions. It is the confusion between moral and legal acts which tends to mar some of the current discussions of business ethics.
There is a kind of implied double jeopardy in evaluating an action as. both illegal and immoral. In truth, the action may be both, but a functioning legal system should make the charge of immorality unnecessary. Conspiracy is illegal and, in addition, is regarded as immoral by most people. But mergers require a case-by-case analysis to test their legality and/or morality. Economist Milton Friedmanís view that the purpose of a firm is to enhance the economic status of its shareholders within the legal and conventional restraints does not seem to be a very useful guide. To be sure, firms must be profitable in order to survive. But in cases where the law permits questionable practices, should a company be willing to act immorally in order to ensure high profits? Should it permit practices that, though legal, allow industrial accidents to occur or that do not adequately assure the healthful quality of its product? Should morality, an extralegal evaluation, not be an implicit guide from time to time?
The position that obedience to the law is all that is expected of a business is obviously socially dysfunctional in a world in which the managers of business have at their disposal knowledge which permits them to evaluate the implications of the laws and rules which they must obey. Morality begins in going beyond the requirements of the law, although this may also be dangerous. In South Africa, it may be illegal for a manager to direct his firm to treat blacks on a par with whites, even though such an act is moral. In the United States, it might perhaps be moral to hire people with low productivity at less than minimum wages if they otherwise would have been unemployed, although such a practice would be illegal.
Not only is there a dichotomy between profit-making and morality, but moral actions always involve a cost. This cost may be in money, effort, risk or income foregone. It would be strange indeed if we recognized that all income has to be bought, but expected morality, the most precious product, to be costless.
What is the nature of the moral actor in business? Ethical or moral discussion is descriptive, prescriptive or both. Descriptive ethics deals with the why and how of ethical decision-making, while prescriptive ethics defines the good and the evil. The first is an exercise in analysis; the second is definitional (or hortatory). By definitional, I mean that a normative rule such as "Thou shalt not kill" is presented. Faith or bias leads people to accept the precept, although secular moralists usually attempt to distinguish their moral principles from those of religious people by arguing that their moralities are based on reason, experience, human values and/or rationality, while religious precepts are based merely on faith.
The assertion that values and morals are always cut on the bias is probably not far from correct. Faith is implicit in moral definition and injunction. An understanding of ethical precepts and the choice of such values ultimately rest on reason, experience and hunch. Hence, we need to examine the nature of our values before we legitimate them as prescriptions and injunctions. To accept secular normative behavior as a matter of faith is to confuse secular and religious values. We are mainly concerned with reasoned behavior in business affairs.
It appears, therefore, that the secular ethical decisions facing business concerns are always matters of judgment. It then follows that ethical decisions are uniquely limited to people, and can never be the product of institutions. Hence, business as an institution is amoral and, like any other institution, is an artifact rather than a natural person. The Romans called corporations or legally organized institutions personae fictae -- made-up people.
The second example is from Corporations and Morality, by Thomas Donaldson (Prentice-Hall, 1982). Here again the firm, the corporation, is treated as a judging person. Donaldson argues that in order to be defined as moral agents (not necessarily real persons), corporations must be able to use moral reasons in decision-making and control corporate acts, policies and rules. He finds these capacities in corporations. Later he observes that subordinates in the corporation tend to obey the rules and inertia (thoughtless rules) of the bureaucracy, and that "commands then flow from the pinnacle of the bureaucracy to its base, and when the bureaucracy is large, the lines of accountability become overextended." This implies that many people in a corporation take orders or follow rules, but someone or some group of managers makes new rules and allows the old ones to persist. It is the manager, not the corporation, who is the judging agent.
Such business-ethics writers as DeGeorge and Donaldson have opted for the view that the corporation or the firm morally transcends the real person. They are engaging in a kind of sociological "as-if" theology. The mystical body of business is the business or the corporate system. It has no visible head but many leaders and chief executive officers (CEOs). The CEOs are dedicated to maintaining and even extending their minor vicarships, but they are bound by certain restraints and constraints. These limits, requirements and rules have been put in place by some unknown, perhaps religious, force. Particular actions, which are the stuff of business ethics, are measured against this yardstick of righteousness, which sometimes is expressed in law but also is expressed in some values which permeate the society and the marketplace. However, only rarely are there universal rules or agreed-on values for all possible situations.
The minority view, which is more reasonable if less catholic, is that people are the decision-makers. The responsible people in business are the managers. Each manager (really a group of managers) is the representative of the shareholders; he or she must at least act in accordance with the law, but may go beyond the requirements of the law in order to follow his or her own moral values. How a group of managers came by their moral conceptions is analyzed by descriptive ethics, with its reliance on economics, psychology, sociology and all of, the other business and social disciplines. Although it is difficult to explain how moral decisions are made, responsibility and accountability for them cannot be assigned to the institution of business in general or to any particular business. Responsibility and accountability are part of the process of judgment, and judgment is a characteristic reserved for real people. The personal value systems of all those who are involved in business are, then, crucial.
When in 1982 the Supreme Court held that a president of the United States was not accountable at law for his presidential behavior, the court was following a theology of the mystical body of governance. However, several years ago, when lower courts held the managers of the several divisions of different electrical companies to be in violation of the law against market rigging, their logic was based on a belief in personal responsibility.