PHIL 2120: Introduction to Ethics
Dr. Robert Lane
Lecture Notes: Friday November 12, 2010

 

[9.6.] Objections to the Rights-Based Defense of the Classical Model.

 

[9.6.1.] Objection 1: Property Rights are Not Absolute.

 

This objection points to the fact that moral rights, even those that are the most basic and important, are not absolute. There are restrictions on what morality allows one to do…

 

There are obvious restrictions... I can’t use a machete to kill you; my right to do whatever I want with my property doesn’t override your right not to be hacked to death.

 

and not so obvious restrictions, ones that tend to be accepted in liberal democratic societies, e.g., zoning restrictions that limit the size of new residential constructions in established neighborhoods.

 

It follows that rights, including property rights, are not “trump cards” to which someone can appeal to automatically settle a moral debate. The point is not that property rights are irrelevant to moral debates. It is that no moral debate can be settled by a simple appeal to the fact that some resource is owned by (is the property of) some party.

 

In the case of corporate social responsibility, simply asserting that the owners of a corporation have important property rights does not, in itself, settle the question whether they are ever obligated to engage in philanthropy.  Perhaps private property rights should extend this far. The point is that a defense of the free market (and of Walmart, in particular) is inadequate if it simply asserts that a company is owned by stockholders who want to earn profits and thus their property (the company in question) ought to be used as its owners see fit.

 

Since it is universally agreed that property rights are not absolute, this claim leaves open the question, what are the moral constraints, if any, on the use of one’s own private property to pursue profits?

 

In other words, the simple appeal to private property rights does not settle the question of corporate social responsibility.

 

 

[9.62.] Objection 2: Stockholders Do Not Have Full Property Rights.

 

DesJardins describes the historical origin of the social practice of selling stock in companies, in order to suggest that there are differences between investors such as stockholders and owners, differences that might weaken the sort of property rights claims made on behalf of stockholders.

 

In particular, stockholders / investors have limited legal liability for the actions taken by the company in which they own stock, and this suggests that their property rights are correspondingly limited:

 

[C]orporate property rights differ from personal property. Stockholder rights and responsibility were legal creations with particular social goals in mind. Stockholders are granted limited liability for the acts of their corporate property. This protects stockholders from losing their personal property in judgments against their corporation. In return for this protection, society gained a beneficial economic tool: an efficient means for raising large amounts of capitol to finance major economic activities. This suggests that corporate ownership may not include all of the rights and privileges that are included with ownership of personal property. Specifically, the connection between ownership and control that exists for personal property does not legally exist for corporate property. (59 / 62, emphasis added)

 

The basic idea is that stockholders are not owners in a robust sense. When it comes to large, publicly-traded companies, “ownership” can be spread out across literally millions of shares of stock. Stockholders are better thought of, not as owners, but as investors or customers, who provide the capital that the corporation needs to function. Thought of in this way, stockholders in a given corporation will not have the same property rights over that corporation as traditional owners would.

 

So in the case of managers working for a publicly traded corporation (like Walmart), a defense of the free market in terms of property rights of stockholders will be even less successful than it would be otherwise. [1]

 

 

[9.7] Norman Bowie’s Neoclassical Model and the Moral Minimum.

 

According to Norman Bowie[2], in their pursuit of profits business managers are obligated to live up to a moral minimum, but they are not obligated to exceed that minimum.

 

On this model, the pursuit of profit is constrained by an obligation to obey a moral minimum. Business managers must first meet certain moral obligations which, once met, open the door to the pursuit of profit. (62 / 66)

 

In other words, before the pursuit of profit (within legal constraints) may begin, managers must first ensure that they are living up to a minimum moral standard of behavior. Once that standard is met, then free-market behavior becomes morally permissible.

 

Bowie distinguishes among three different moral obligations:

 

According to Bowie, business managers’ obligations to actively prevent harm and to do good are merely prima facie obligations.

 

prima facie moral obligation (df): a genuine moral obligation that may, in certain circumstances, be overridden or outweighed or “trumped” by other, stronger, moral obligations.

 

For example, you may have a moral obligation not to lie, but you may also have a stronger moral obligation not to cause someone undue pain.

 

So if your 90-year-old great-grandmother asks you how her hair looks, although it would be prima facie immoral to lie (and tell her that it looks great when it really looks awful), it would be much worse to hurt her feelings. In this case, your obligation not to hurt your grandmother’s feelings trumps (overrides) your prima facie obligation not to lie.

 

A prima facie moral obligation is the opposite of an...

 

absolute moral obligation (df.): a moral obligation that always overrides or wins out over other obligations and other moral considerations.

 

However, managers have a stronger obligation (perhaps even an absolute obligation) not to cause harm, and this obligation places an important constraint on the pursuit of profits.

 

Nonetheless, the classical model of corporate responsibility is right that managers serve as the agents of stockholders and have a genuine obligation to pursue profits on their behalf. And that obligation outweighs the obligation to prevent harm or to do good.

 

So Bowie ranks the obligations of managers as follows (from most to least important):

 

  1. the strong obligation to cause no harm
  2. the strong obligation to pursue profits (based on the contract between manages and stockholders)
  3. the prima facie obligations to actively prevent harm and to do good

 

At the very least, this revision of the Classical Model is important for recognizing that the moral obligations of managers go beyond the simple obligation not to break the law or engage in fraud or coercion. On this view, morality requires more from managers than just obeying the law and pursuing profits.

 

 

[9.7.1.] Criticism #1: The Distinction Between Causing and Failing to Prevent Harm is Blurry.

 

The Neo-Classical Model essentially depends on our being about to distinguish between cases in which a company causes harm (in which case it has failed to meet the moral minimum) and cases in which the company fails to prevent harm (in which case it may meet the moral minimum).

 

The distinction between causing and failing to prevent is an instance of the more general distinction between acts and omissions.

·         We’ve seen another particular case of this more general distinction: the distinction between active euthanasia (in which a doctor actively intervenes to kill the patient) and passive euthanasia (in which a doctor omits life-giving care and then allows the patient to die naturally).

 

But the distinction between causing harm and not preventing harm can be very blurry. In some cases, it is difficult to tell whether a company has caused harm or whether it has simply failed to prevent it.

·         For example, suppose an automobile company is deciding between two new models it can produce, and it decides to produce a low mpg, high pollution SUV rather than a high mpg, low pollution hybrid sedan. As a result, air pollution is increased more than it would otherwise have been. Is this a case of causing harm (in which case Bowie’s most important obligation is not met), or is it a case of failing to prevent harm (in which case Bowie’s theory would approve of it, so long as it contributed to the company’s profits)?

·         The same sort of question can be asked about a food manufacturer who creates a product higher in cholesterol than is absolutely necessary, thus contributing to the incidence of heart disease among consumers. Did the company cause the higher rate of heart disease, or did it simply fail to prevent the rate of heart disease from getting higher?[3]

 

 

[9.7.2.] Criticism #2: The Act/Omission Distinction is Morally Irrelevant.

 

There is also a more general problem with this approach. It sometimes seems that the distinction between acting and omitting should not carry any moral weight at all (compare James Rachels’ argument that the difference between acting and omitting is morally irrelevant, and that what matters in moral assessment is consequences and motives). In effect, this objection amounts to rejecting the Principle of Doing and Allowing.

 

--

 

DesJardins concludes rather pessimistically:

 

… as a theory of corporate social responsibility, the modified version of the classical model cannot escape confronting the specific limits of corporate social responsibility head-on. The modified theory would need to offer a reasoned explanation for why any particular case is a matter of causing harm, and therefore is something ethically prohibited, or of doing good, and therefore something more akin to charity. Upon reflection, this suggests that we must abandon an in-principle determination of the extent of corporate social responsibility and decide this on a case-by-case basis. The implication of this is that for every case in which stockholder interests appear to conflict with the interests of employees, consumers, suppliers, or society, business management must carefully analyze the situation to determine its ethical responsibility. (63 / 67-68, emphasis added)

 

 

Stopping point for Friday November 12. For next time, finish reading DesJardins ch.3 (pp.64-70).

 



[1] In the most recent (2010) edition of your textbook, DesJardins discusses a variation of the classical model of CSR. He calls it the philanthropic model. It pairs the aspects of the classical model (as described above) with the idea that “business is always free to contribute to social causes as a matter of philanthropy.” (4th ed., 64) When this is done simply for reputational reasons, this model is basically the same as the classical model.  When it is done out of a sincere desire to improve the well-being of those who benefit from the contributions in question, as when a corporation donates money anonymously, the model differs from the classical model.

 

[2] Professor of strategic management and organization at the University of Minnesota ( http://www.carlsonschool.umn.edu/faculty-research/faculty.aspx?x500=nbowie).

[3] Analogous questions can be raised about the distinction between preventing harm and doing good. Suppose the car company chooses to make the hybrid sedan instead of the SUV. Is this a case of preventing harm or doing good? If the food company chooses to make a healthier food product, has it prevented harm or done good?

 




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