Moral Status of Corporations
Larry M. May
The moral status of the corporation is dependent on the moral features of the corporation and on the moral status of the members of the corporation. At the heart of the philosophical subfield called business ethics are central questions of metaphysics, ethical theory, and social philosophy related to the status of the business corporation. Of chief concern are these questions: Is the corporation ontologically distinct from the individual persons who compose it? Does the corporation have responsibilities, and to whom? Does the corporation have moral rights and are they equivalent to those of individual humans? Does the regulation of corporations pose special moral problems? Questions of ontology, responsibility, and rights have always been the proper purview of philosophy and so it is easy to under stand why philosophers have gravitated recently to these questions in business ethics.
The moral status of the corporation is intimately linked with its metaphysical status, for only if the corporation is a distinct moral entity, specifically a moral agent, does the corporation have a distinct moral standing, separate from the entities (individual human persons) who make it up. Of course, the corporation could have an auxiliary or dependent moral status even if the corporation was not a moral agent. While this is in itself an important point, most of what follows will ignore this alternative. Instead, the focus will be on questions of agency, responsibility, and rights of a corporation per se.
The corporation exists, but what kind of existence is this? There are at least three ways to answer this question. First, the corporation may exist in the way that a ‘‘heap’’ exists, as merely the category which stands for the collection of entities which happen to compose it. Second, the corporation may exist as a ‘‘unity,’’ where the form of the corporation (its organizational structure) is what renders it unique, but where the substance of the corporation is entirely made up of other things. Third, the corporation may exist somehow in its own right, as a formally and substantially ‘‘unique thing.’’
The question of whether the corporation is an agent can be addressed in a similar way to the question of whether the corporation exists. First, a corporation may be an agent in the sense that ‘‘corporate action’’ is merely a shorthand way to refer to how discrete individual human persons act. Second, a corporation may be an agent vicariously through the various actors who make up the corporation and who are facilitated in their actions by the corporation’s organizational structure. Third, a corporation may be an agent in its own right, perhaps as much an actor as is the collection of body parts that make up a human actor. The law treats corporations as full fledged legal persons that can act in their own right. This is commonly known as ‘‘the legal fiction of the corporate person,’’ and hence it is not necessarily useful in determining whether the corporation is a moral person.
One way to approach the question of corporate agency is to ask whether the commonsense understanding of corporate actions can be reduced to individual human actions. In this context the corporation cannot really act on its own; only individual human persons can act. But it is very difficult to make sense completely of corporate actions, such as ‘‘Gulf Oil Company acquired XYZ Company,’’ without referring to corporations, or to features of individual human persons. Of course, merely because it is hard to make these complete reductions does not yet tell us that corporate agents should be admitted into our moral universe. But until complete reductions are made, it is intelligible to think of corporations as moral agents.
If corporations are moral agents, what kind of agents are they? Corporations may be full fledged moral agents or they may be partial or vicarious agents. In order to be full fledged moral agents there must be some sense in which they can act in a morally significant way on their own. Following the model of individual human action, a locus of choice or intention must be found from which moral actions could issue. The corporate boardroom is the most obvious place to look for such choice or intention. Here the individual choices or intentions of the board members are transformed so that what emerges is a collective choice or intention. For the choices to be the choices of a full fledged moral agent they must at least resemble the choices that a single human individual would make. But there is a wide diversity of viewpoints about what constitutes choice for a single human individual, and it is not clear what criteria must be satisfied for a collective choice to be ascribable to a corporation. Nonetheless, the more these choices and intentions resemble those cases of individual human choice or intention, the stronger the case for thinking that a corporation is a full fledged moral agent.
Vicarious or secondary agency is a weaker form of corporate agency than full fledged agency. One way to understand vicarious agency is in terms of individual humans who have been authorized to represent the corporation, thereby providing the corporation with a way in which it can act through the actions of these individuals. It is common to speak of an employee ‘‘acting within the scope of his or her authority.’’ Such expressions belie a moral fact: that for certain previously established purposes, a given act can be given two descriptions. The act always remains primarily an act of a discrete individual human; and the act is secondarily (or vicariously) also an act of a corporation. Whenever authority has been so conveyed, then it is relatively easy to establish this weaker sense of moral agency on the part of a corporation.
Corporations may be morally responsible for harms in several different ways. Most obviously, if a person is harmed directly as a result of a corporate intentional decision, then the corporation is morally responsible for this harm. Responsibility may also apply to corporations for harms that result from negligence, reckless ness, or simple omission. Such cases are more or less problematic, depending on the difficulty of telling whether the corporation’s contribution to a harm was in some sense morally faulty. In Anglo American law there are three main types of fault: intentional wrongdoing, negligence, and recklessness.
Corporations can engage in intentional wrongdoing and hence be morally responsible and blameworthy on this basis. It is rare that a corporation sets out to do wrong to a person in the same way that an individual agent might intend to do harm to another out of revenge or anger. The most obvious explanation for the rarity here is that corporations do not have any recognized way of displaying or feeling anger or revenge. The corporation can make decisions, and those decisions may be based on the emotional reactions of the members of the board of directors. Nonetheless, corporations could decide to harm a person, especially if it would advance the interests of the corporations to do so. But normally the threat of adverse publicity will make this very unlikely. Far more common is that corporations decide to do things which will risk harm to persons so as to more expeditiously advance their interests.
Corporate negligence is the most common basis upon which corporate moral responsibility can be based. Negligence is the failure to display due care, that is, care which a reasonable person would take. Decision making in the corporate domain is so focused on serving the goals of the charter, or the interests of investors, etc., that it is relatively common for corporations to fail to take into account the possible harms of their decisions. But for these failures to constitute moral negligence, it must also be the case that reasonable people would have taken those possible harms into account. An interesting example concerned a decision by the Boeing Company to build their 727 line of aircraft so that all of the backup electrical systems were in the same part of the plane. In the event of an accident it was possible that all of the backup systems could be disabled at once, leaving the plane unmaneuverable and the passengers on the plane in great peril. Of course, no one at Boeing intended to harm anyone by making this decision. But it did seem unreasonable for them to have done this, given the risks of harm to their passengers. This is a fairly straightforward case of corporate moral negligence.
An example of corporate moral recklessness concerned a decision by the Ford Motor Company to place the gas tank on the Ford Pinto in a position so close to the back of the car that it could explode upon fairly low speed collisions. What made this case one of recklessness was that key members of Ford’s management knew of the problem and knew that it would cost very little to fix it, but decided to take the risk. Here, a rare internal memorandum surfaced which indicated that Ford had actually calculated how many people were likely to die and how much Ford would be likely to lose in wrongful death lawsuits, compared to how much it would cost to fix the Pintos so that it was far less likely the gas tanks would explode. This was judged in a court of law in Indiana to be reckless because of the decision to go ahead with a known risk that no reasonable person would inflict on the populace. The moral assessment would be similar.
In addition to the responsibilities to individual persons, corporations also have more broadly based social responsibilities. While it is controversial how extensive these responsibilities are, nearly everyone recognizes the responsibility that corporations have not to harm or risk harm to the larger society, by such acts as discriminatory hiring or polluting the water sources in a particular locale. Milton Friedman, a well known critic of most social responsibilities for corporations, has said that the chief social responsibility of business corporations is to make a profit. But even this view supports the general idea that there are various customs in each locale, concerning what are appropriate and inappropriate actions which affect the overall well being of a society.
On the other side of the balance sheet from corporate moral responsibilities, are corporate moral rights. Corporate moral rights can be divided into commercial and non commercial rights. Commercial rights generally concern rights to property, rights to profit, and generally rights to determine how the corporation is run. Non commercial corporate rights concern such things as rights to free speech, and generally rights to exert influence in the public domain. The basis of rights can come from the moral agency of the corporation, or from the moral interests of the corporation. In either case, the ascription of moral rights to corporations is based on an analogy to the ascription of moral rights to persons.
Commercial rights of corporations are moral if they affect moral duties, liberties, privileges, or immunities. The property rights of corporations are moral rights if, for instance, they restrict the range of moral options that individuals or groups have in behaving toward that corporation. Property rights generally are rights to the exclusive (or nearly exclusive) ownership and use of a given thing. In most modern corporations, ownership and control are divided to the extent that, while the shareholders own the corporation, it is normally management (in a sense employed by the shareholders) which controls the activities of the corporation. The property rights of a modern corporation create moral options related to control for managers and moral options related to ownership for shareholders, but the divided nature of corporate property makes it often hard to tell who should be afforded what moral privilege or immunity.
Corporate rights to profit are even harder to ascertain morally. While it seems reasonable that corporations are morally entitled to keep what ever surplus value is generated from their pro duction processes, things get cloudier when these profits are generated by windfalls or exploitative conditions. Indeed, the moral right to profit seems to virtually everyone to be limited based on how that profit was generated. The same could be said of all commercial corporate rights. Since commercial rights themselves are justified by their social productiveness, when the overall social effect is negative, rights may be restricted as well. The corporation generally has the right to decide how it is run as long as its being run this way is not likely to be harmful to the overall social welfare.
Non commercial rights of corporations derive their moral force from analogy with similar rights for individual humans. The Anglo American legal tradition recognizes corporations as legal persons with very similar rights to other persons. Morally, to the extent that corporate agents resemble human agents, corporations will have a basis for rights to free speech similar to that which human persons have. But the problem with this strategy is that corporations are not the kind of agents whose voices necessarily add to the political process when they participate. Indeed, corporations have a history of drowning out the rest of the voices in a political debate. And these corporations are rarely the kind of agents who are vulnerable and hence in need of the kind of protection which free speech rights afford. For these reasons, most corporations will not have the same, or as weighty, non commercial rights as will individual humans.
Finally, corporations may be considered mor ally virtuous or morally evil, but from a more roundabout route. While a plausible case can be made for seeing corporations as limited agents, it is far harder to see them as having characters that can be morally assessed except in a very derivative form. But the leading members of a corporation may convey a character to a corporation by the way these members conduct themselves while acting on the behalf of the corporation. It is also possible for a succession of virtuous leading members of a corporation to convey good character to a corporation over many years. But should the moral characters of the leading members change, then so will the ‘‘char acter’’ of the corporation. The regulation of corporations does not pose the same sort of moral problems as it does for individual humans, except in limited cases of rights violation, since the lack of distinct moral character of the corporation means that there is no prima facie basis for respecting corporate autonomy.
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