Political Philosophy and Business Ethics
Allen Buchanan
The definition of political philosophy is itself a matter of controversy, especially among those who identify themselves as political philosophers. There is perhaps even less agreement on proper methodology than on what constitutes the subject matter of political philosophy. How ever, most if not all of the following questions are widely recognized to be the proper concern of political philosophy.
- Under what conditions, if any, is political authority and, in particular, the authority of the state, legitimate? What are the scope and limits of state authority – what are the legitimate functions of the state? What is the proper division between the public and private sectors in a society – which functions are best performed by government, which by the private sector (including the market and non profit organizations)?
- Assuming that the state is to be the ultimate guarantor of justice, through the threat of coercive enforcement of principles of justice, which principles of justice are appropriate (under which sorts of circumstances, for which types of societies)?
- What is the nature of political obligation? When can persons rightly be said to have an obligation to obey the law or the commands of those in positions of political authority? What are the scope and limits of political obligation – when is resistance to political authority justifiable?
- What are the moral justifications for various forms of government, including democracy and federalism?
- What sorts of conduct are ethically permissible or obligatory for government officials? (To what extent, if any, can appeals to the higher good of the country or ‘‘national security’’ justify behavior on the part of officials that would otherwise be immoral?)
- More generally, how, if at all, does the ethics of governmental organizations differ from the ethics of individuals or of private sector organizations? Under what conditions can members of political units (citizens) or officials (in government bureaucracies) be said to be collectively, as distinct from individually, responsible for outcomes resulting from their actions or omissions?
- What are the rights and duties of member ship in political units (especially states)? What are the moral justifications for various proposals for determining criteria for membership (e.g., ethnicity, religion)? What is the moral case for a rights of immigration and emigration, rights of political sanctuary, etc.?
- What are the moral constraints that bear on war, considered primarily as an activity of states? (Traditional political philosophy distinguishes between the moral justification for going to war and the morality of what is permissible in the conduct of war.)
- To what extent are the legitimate goals of political association (the establishment of justice, security, etc.) best served by a state centered system as opposed to one in which other political units (regional associations such as the European Union, confederations, etc.) have a more prominent role?
This list of questions, which is not intended to be exhaustive, should make it clear that political philosophy is primarily concerned with normative issues, even though the exploration of normative questions invariably requires conceptual analysis and rests on empirical assumptions about institutions and human nature as well. If there is a theme that unifies these questions, it is the investigation of the morality of the institutionalized uses of power, and ultimately of coercive power.
The proper definition of business ethics is, if anything, even more contested than that of political philosophy. As with political philosophy, there are contrasting views on both methodology and subject matter. The following alternative conceptions of business ethics are among those currently most prominent in the field, although a number of them have come under strong criticism. As we shall see, each has important (though usually unstated) implications for what the relationship between business ethics and political philosophy is.
Rule-egoism
According to this conception, business ethics is concerned exclusively with the ethical conduct of business people as they go about their business activities. In other words, like most of the other conceptions listed below, the rule egoist model limits business ethics primarily if not entirely to the consideration of ethical questions within the sphere of business, without explicitly investigating ethical issues concerning the institution of business as a whole. More specifically, according to the rule egoist model, it is the task of political philosophy, not of business ethics, to investigate the justifications for using markets as the basic institution for producing and distributing the material requirements of human welfare. Instead, it takes the existence of the market, and hence of a distinct sphere of business activity, for granted and asks: Why should people engaged in business act ethically? The answer this view gives is disarmingly simple: Business people should act ethically because it is in their long term interest to do so. The assumption is that business activity is purely self interested and that by following moral rules business people can, at least in the long run, best serve their self interest.
One prominent variant of rule egoism is the ‘‘social responsibility’’ view of business ethics. The defining thesis of the social responsibility view is that business people can best serve their interests (and the common interest of the business community as a whole) by acting ethically so as to preempt regulation imposed by government upon business. The idea is that by acting ethically (and making the public aware that they are doing so) business people can convince the public and their legislative representatives that such external controls are not necessary because business people can be counted on to do what is right without the threat of government coercion.
The rule egoist conception is flawed on a number of counts. First, it provides no guidance whatsoever in cases in which there is not a close congruence between self interest and what is ethical – and is quite implausible if it claims that the two never diverge.
Second, the rule egoist position simply assumes that there is an independent and adequate list of moral principles available in society at large which business people can simply follow in order to maximize their own interests. In this sense it adopts an uncritical attitude toward received moral principles. Indeed, rule egoism is not properly described as an ethical theory at all. Instead, it is only a theory of why business people should be ethical – taking it for granted that there is no problem of determining what being ethical requires.
Third, rule egoism tends to overlook entirely (or at least to minimize) the fact that corporate interests (for example, the interest in maximizing profit or growth or market share) and the interests of a given individual within the corporation can and do diverge. Indeed, some of the most vexing ethical dilemmas in business have to do with the conflict between loyalty to organizational interests and a proper regard for one’s own interests as an individual, including one’s interests in the well being of one’s family. Political philosophy takes this general type of conflict as one of its central problems, especially in its investigation of the scope and limits of the individual’s obligation to obey the law and the duties of government officials to comply with institutional policies. Saying that business people ought to act ethically because it is in ‘‘their interest’’ sheds no light on these issues.
Fourth, rule egoism, at least in its ‘‘social responsibility’’ version, begs important questions by assuming that existing conceptions of self interest (or corporate interests, or the interests of the business community as a whole) are legitimate and beyond ethical criticism.
Questions about the moral character of business institutions as a whole, or of the market system, are never broached within this model. Because of this exclusion, the rule egoist model divorces questions of political philosophy entirely from the domain of business ethics. In particular, the justice of market systems is never an object of inquiry. Yet whether behavior within a given institution is ethically permissible generally depends at least in part upon whether the institution itself is compatible with the requirements of justice. By offering a conception of business ethics that is entirely independent of political philosophy’s concern about the justice of institutions, the rule egoist model presents an unduly foreshortened picture of the domain of ethical issues concerning business (see egoism, psychological egoism, and ethical egoism).
The Simple Legalist/Loyal Agent Model
This conception of business ethics is suggested by a widely cited article by Milton Friedman entitled ‘‘The social responsibility of business is to increase its profits’’ (1970). The central claim is that the only ethical obligation of business people, who are viewed as agents of the corporation’s shareholders, is to maximize profits, subject only to conformity to legal requirements (contract law, antitrust law, etc.). Legal requirements are seen as ‘‘rules of the game’’ necessary for preventing fraud and theft and avoiding anti competitive practices that interfere with the functioning of the market in the production of human welfare. Clearly, this view, like rule egoism, fails to consider either the possibility that a market institution within which corporations operate is subject to ethical criticism (for example, on grounds of justice), or the problem of determining exactly what moral constraints ought to be observed, in what circumstances, in the pursuit of profit. In addition, the simple legalist/loyal agent conception of business ethics assumes without argument that (a) all shareholders are concerned exclusively with maximizing profit (rather than with the pursuit of ethical values) and (b) managers have no ethical responsibilities to try to educate or convince shareholders that certain ways of pursuing profit are inappropriate. Here again, an unduly restricted conception of business ethics overlooks important ethical issues that are the stock in trade of political philosophy, in particular the moral obligations of persons in positions of authority within institutions to dissent from policies they regard as unethical and to be a voice for reform within the organization.
Friedman suggests that the pursuit of profit maximization is subject to the constraint of ‘‘ethical custom’’ as well as the law. However, his view here is subject to the same criticism advanced above against rule egoism, namely, that it adopts a wholly uncritical attitude toward what are commonly taken to be valid ethical principles, assuming that there is no problem of determining what ethics requires. In effect, Friedman is able to conclude that the only moral obligation of business people is to maximize profits only by assuming that there are no cases in which there are serious questions about whether the means by which profit maximization is pursued are ethical. Most importantly, Friedman’s conception of business ethics lacks any plausibility unless it is assumed that the institution of the market is itself beyond any serious ethical criticism. In that sense, the simple legalist/loyal agent view is able to exclude issues of political philosophy from the domain of business ethics only by assuming that political philosophy has already provided an adequate justification for the ‘‘rules of the game’’ of the market, including the overriding commitment to profit maximization.
The Casuistry Model
According to this conception of business ethics, the proper subject matter of ethical inquiry is the concrete case in which an ethical problem arises; and the proper method of inquiry is to argue by analogy from cases in which we have a confident consensus on what the right thing to do is, to those cases in which we are unsure about what is ethical. The casuistry model does not deny the role of general principles in business ethics (or in ethics generally). However, it does include a substantial degree of skepticism about the possibility of systematic ethical theory, and insists that whatever general principles we eventually endorse should emerge from reflection on the concrete realities of particular cases.
The casuistical approach suffers from two main limitations. First, by its own admission, it is not helpful for exploring ethical issues about large scale institutions, whose characteristics are necessarily more abstract than the features of particular cases, and about whose legitimacy we may have no clear moral intuitions. Second, and more importantly, the casuistry model assumes, quite implausibly, that the nature of our ethical responses to particular cases that arise within a framework of institutions are not themselves influenced – and possibly distorted by – morally questionable features of the framework itself. For this reason, there are serious doubts about the reliability of the results casuistry yields even in its attempt to cope with particular ethical problems, quite apart from its apparent inability to engage larger issues of the justice of the institutional framework within which these particular problems arise.
Managerial Professionalism
A fourth conception tacitly restricts the domain of business ethics to the ethical problems encountered by managers. Indeed, the fact that much, perhaps the greater part, of the contemporary business ethics literature is addressed exclusively to managers shows the pervasiveness of this conception. In effect this constitutes a reduction of business ethics to a particular kind of role morality or a species of professional ethics.
One obvious flaw of this approach is that it either denies the fact that employees who are not managers face serious ethical problems in business or facilely assumes that the solution to all such problems lies primarily in the hands of managers. Quite apart from this indefensible elitism, the managerial professionalism view has another grave defect, one which it shares with each of the preceding conceptions of business ethics: it precludes inquiry into the ethical status of the institutions within which the role of manager exists. Once again, an impoverished conception of business ethics results from the exclusion of the sorts of larger institutional issues that are the subject of inquiry in political philosophy.
An Alternative Conception of Business Ethics – Blurring the Boundary Between Business Ethics and Political Philosophy
A more fruitful conception of business ethics recognizes that for a number of reasons it is implausible to make such a sharp separation between business ethics and political philosophy. Instead, we should think of these as being fields which are in part complementary and in part overlapping.
The preceding critical analysis of several influential conceptions of business ethics reveals that what political philosophy and business ethics have in common is this: both are concerned with the morality of the uses of collective power in organizations operating in the public sphere. There are differences, of course, the most important being that the power of political institutions, at least of the most inclusive of these, includes the explicit and legally sanctioned use of coercion. In spite of this difference, however, there are many important similarities. In both business and government, there are com plex issues concerning the ethics of whistleblowing and, more generally, of the permissibility and obligatoriness of dissent, conscientious refusal, and of obligations to work for reform within the organization. In both business and government, ethical codes and principles are often invoked to cope with conflicts of interest that are inherent in principal–agent relation ships, due to the asymmetry of knowledge be tween principal and agent and in recognition of the fact that assuring a perfect congruence of interests between principal and agent through material incentives (or through monitoring and the threat of penalty) is often impractical or too costly. Furthermore, a growing body of social science research indicates that moral commitments and values (including honesty and fair ness) play a crucial role in achieving stable cooperation within organizations, regardless of whether they are in the private or the public sector. Finally, business competition and war are similar in that they are both zero sum inter actions (in which one party’s gain is another’s loss). To that extent both business ethics and political philosophy are concerned with the ethical constraints on competition in which the stakes, in terms of welfare and power, are high.
Given that both political philosophy and business ethics are concerned with the ethics of institutions and with the moral uses of institutionalized power in the public sphere, re searchers in both should be willing and able to borrow from one another. In addition, recent developments in the evolution of the global economy make the case for cooperation even stronger and may even call into question our ability to distinguish the two fields. Increasingly, we are witnessing the emergence of extremely powerful transnational institutions that are partly economic and partly governmental in nature. Examples include the European Union and the World Bank (whose leaderships include both officers of banks and representatives of national governments). For this reason as well, business ethics and political philosophy are be coming even more closely linked.
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