Corporations, Moral Status of

October 3rd, 2010 by in Dictionary, Moral Terms

Do corporations, like people, have moral responsibility?  What, to put it more broadly, is the moral status of a corporation?  These questions have received various responses from a variety of thinkers, some of which will be discussed here.

Corporations are a special kind of entity.  Although they are not persons, they have the same legal rights as persons in the United States, and these rights are protected under the 14th Amendment.  This fact is uncontroversial.  There is, however, some controversy and disagreement as to what follows from this peculiar legal arrangement – particularly with respect to ethical considerations such as moral responsibility.

Some hold that corporations – like individuals – have moral responsibilities, since they – like individuals – act and affect others with their actions.  This position is known as the moral person view of the corporation.  Proponents of this view take corporations to be full moral agents, with rights as well as moral responsibilities.  The argument for this view is fairly straightforward.  Philosopher Richard T. De George offers a concise account:

“Morality governs the actions of rational beings insofar as they affect other rational beings.  Formal organizations – for instance, corporations – act. Ford Motor Company produces cars; it also builds factories, hires and fires people, pays them wages, pays taxes, recalls defective models, and so on. Not only do businesses act, they also act rationally according to a rational decision-making procedure. Because their rational actions affect people, these actions can be evaluated from a moral point of view. If it is immoral for an individual to discriminate, it is also immoral for a corporation to discriminate.  If it is praiseworthy for an individual to give to charity, it is praiseworthy for a business to give to charity…Actions can be morally evaluated whether done by an individual or by an entity such as a company, corporation, or a nation.”[1]

This view is compelling to many, but the debate does not begin and end here.  Critics of the moral person view of the corporation point out that although formal organizations, such as companies or corporations, may have some legal rights, they are not persons with moral rights.  They do not, for example, have a right to life, as a person does.  In fact, corporations – unlike persons – have only limited rights, and – again, unlike persons – they are organized only for limited purposes.

On the basis of this observation, proponents of the moral actor view of the corporation seek to establish a special moral status for corporations, which identifies a number of moral responsibilities that pertain to corporations, but limits the range of responsibilities that a corporation can have.

Again, De George offers helpful insight:

“Because the moral status of corporations is different from the moral status of human beings, the moral obligations of corporations are different from the moral obligations of human beings. The difference hinges on the fact that corporations are limited and organized only for certain purposes. The fact that a corporation does exist and has been established for certain purposes is no guarantee that it should exist or that its purposes are morally justifiable. But although we can morally evaluate the ends for which corporations are formed and the means by which those ends are pursued, corporations are not bound by a large range of moral rules that bind natural persons.

“As is true of all other moral actors, corporations are bound not to harm others. This negative injunction is a major restraint on corporations. But the positive obligations of corporations depend on their ends, their particular situations, their legal status, and the sociopolitical environment in which they are organized and operate. Because corporations are not human persons, the injunction to produce the greatest amount of good applies differently to individual persons with a full range of activities open to them and to a corporation with very great restrictions on its purpose and its appropriate activities…what we can expect is that they not do what is morally prohibited.  We can praise them for doing what is in accord with the moral law, and we can blame them for what is a violation of it.”[2]

The next, and final, view of the corporation to be considered here is what might be called the legal compliance, or Friedmanite view, of the corporation.  This view of the corporation restricts the range of the corporation’s moral obligations even further, claiming that a corporation’s legal obligations are its only true obligations.

According to the legal compliance view, famously argued by Milton Friedman, corporations have no obligations to society, including moral obligations, outside of their legal obligations. Here the distinction between morality and the law is important.  After all, there may be a difference between what morality requires and what the law requires.  Although it is true that these categories often overlap, they do not necessarily do so in all cases.

Thus, according to the moral compliance view, corporations are not bound by a moral law unless that moral law is expressed in the law of the land.  A corporation, for example, has no obligation to refrain from stealing, cheating, or lying unless they are legally required to refrain from doing so.

This view tends to be embraced by so-called ‘Free Market Fundamentalists.’  There are, however, several deficiencies with the view, as De George notes:

“…there are three deficiencies with the position, if taken to be the end of the discussion of corporate responsibility.  The first is that obeying the letter of the law is not the same as obeying the spirit of the law, and it is not clear that the former marks the end of society’s demands.  Many argue that the legalistic approach to compliance often results in corporations trying to come as close as possible to infringing the law without actually doing so, if that is to the corporation’s benefit…This legalistic approach to law is not what most people usually have in mind when they speak of a socially responsible company.  The second deficiency is that a corporation may have additional social and moral responsibilities beyond those mandated by law.  The third is that…morality begins before the law does, and goes beyond what the law may require.  This is both because of the lag of law behind morality and because laws may themselves be immoral or inadequate to protect people’s rights and legitimate welfare.”[3]

Although not the only views on the moral status of the corporation, each of the three views outlined here – the moral person view, the moral actor view, and the legal compliance view – are perhaps the most common and most plausible of their kind.

[1] Richard T. De George. Business Ethics (sixth edition).  Princeton, NJ: Prentice Hall, 2006.  pp. 184-185.

[2] Richard T. De George. Business Ethics (sixth edition).  Princeton, NJ: Prentice Hall, 2006.  pp. 188.

[3] Richard T. De George.  Business Ethics (sixth edition).  Princeton, NJ: Prentice Hall, 2006.  pp. 198.

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