Are corporations and other business organisations morally responsible for their acts and omissions? The media and popular discourse frequently assume that they are: companies are sometimes said to have “behaved disgracefully” and, in response, they “apologise”; legislators and regulators around the world seek to impose penalties on companies and justify this by reference to their alleged responsibility for wrongdoing.
But is the attribution of moral responsibility justified? Should we regard such attributions as either misconceived or merely a shorthand way of attributing responsibility to individuals within the relevant organisation? Or can one, in some sense, say that an organisation is morally responsible for its actions and, if so, with what consequences? It is these questions that The Moral Responsibility of Firms addresses.
The book originates in a 2013 conference sponsored by the Warton School of the University of Pennsylvania and INSEAD. It comprises essays by twelve authors sandwiched by contributions from the two editors. The authors comprise a distinguished array of academics from a variety of disciplines (ethics, philosophy, law, business and politics) and the editors line them up in three groups: four essays (by a total of five authors) set forth the arguments in favour of attributing moral responsibility; four (again having five authors) set forth the arguments against; and, finally, two (each with a single author) seek to point a way forward for the debate.
All the essays are of a high standard and, although they comprise serious academic work, their arguments are accessible to any educated reader who is prepared to take the time to study them carefully. Some of the authors could have used less dense language (Michael Bratman being a particular offender is this respect) and some (e.g. Philip Pettit) unhelpfully cross refer to their previous work in order to save space but these failings do not act as a serious barrier to comprehension.
Readers may find the US bias of the authors frustrating but, although a few of the issues discussed are very US specific (e.g. the question corporations are persons entitled to benefit from rights under the US constitution), these discussions are brief and the vast majority of the book is devoted to issues that are applicable to the situations in other countries. Furthermore, the authors make good use of recent corporate history to illustrate the points that they are making and the events that they refer to are generally widely known outside the USA (e.g. the Deepwater Horizon explosion and oil spill that cost BP Plc a huge amount of money and the Herald of Free Enterprise disaster).
There are two basic approaches to the attribution of moral responsibility. The first, a metaphysical approach, is adopted by Pettit. He argues that corporations (and, indeed, many other organisations and human groups) are “conversable agents”, by which he means that “in normal unrigged circumstances [a corporation] maintains certain purposes, forms reliable representations of its environment, and acts reliably so as to satisfy its purposes according to those representations” (page 17) and “corporations can use words as the means of forming their purposes and representations” (page 19). In short, he suggests that corporations are analogous to human beings in relation to the things that he considers matter for the attribution of moral responsibility.
Bratman and Peter French agree with this. Bratman argues that a group may be held responsible for its actions even in circumstances which there is no shared intention among members of the group, whilst French suggests that the moral responsibility of an organisation may vary over time as its composition and “self-told narrative” changes.
In contrast, Waheed Hussain and Joakim Sandberg arrive at the attribution of moral responsibility by means of what they call “normative functionalism” rather than metaphysics. They expressly reject “pre-institutional” corporate moral agency (i.e. Pettit’s approach, page 66) and argue in favour of attribution of moral responsibility by asking “what forms of treatment for business corporations would serve the justifying aims of the competitive market” (page 67). Pursuing this pragmatic, positivist view of moral responsibility, they suggest that “issues about when and how to treat groups of individuals as collective agents are best understood as interpretative questions about specific social practices” (page 75). Hence, “there is no one right way to treat a group of individuals as a collective agent: different forms of treatment are appropriate in different domains and contexts” (page 76).
The authors who oppose the attribution of moral responsibility also display a diversity of approaches. For example, John Hasnas is prepared to assume that Pettit has established that corporations can be held morally responsible and he thus focuses on whether they should be, but others are less reticent. David Rönnegard and Manuel Velasquez confront Pettit’s arguments head on; Amy Sepinwall argues that blame is only appropriate in relation to those who can feel guilt and experience punishment, which a corporation cannot; and Ian Maitland trenchantly says, “I have carefully avoided entering the debate over the metaphysical or ontological status of the corporation or other collective actors. That way lies madness” (page 119).
Nonetheless, there are common themes that emerge from the essays of those in the “anti” camp. Maitland speaks for them all when he says that “the anthropomorphization of the corporation has become a source of mischief, manipulation, or abuse” (page 106) and they share a strong belief that the responsibility deficit that Pettit fears would exist if corporations were not held to be morally responsible is illusory. It is, to use Hasnas’s term, a “phantom menace” (page 94). Having examined Pettit’s arguments, Hasnas suggests that they would only hold good if the inability to assign moral responsibility to corporations precluded the assignment of any kind of responsibility. This, he points out, is patently not the case since “Moral responsibility is not a pre-requisite for the assignment of civil, administrative, or ‘metaphorical’ responsibility” (page 95).
Underlying this is a wider issue: some of the authors (e.g. Hussain and Sandberg) use the terms “moral responsibility” or “responsibility” remarkably loosely. They sometimes appear to drift into confusing legal responsibility for moral responsibility and, within the category of legal responsibility, fail to distinguish between different kinds of liability (e.g. strict, “no blame” liability versus liability based upon attributed blame and criminal versus civil liability).
These confusions disguise the fact that the authors who favour the attribution of moral responsibility fail to explain exactly what they believe the practical consequences of that attribution would be. Hasnas recognises this issue and suggests that the only practical implication would be the attribution of criminal liability. However, even this concedes too much: there is no reason why moral responsibility and criminal responsibility should be linked in this way. The criminal law does not view moral responsibility as being a necessary requirement for the imposition of liability (c.f. strict liability offences such as many motoring offences) and, in any event, the moral responsibility of an individual may be, and sometimes is, attributed to a corporation for the purposes of criminal law (c.f. the English law of fraud). It is, in fact, difficult to see that there is any practical outcome for which the imposition of moral responsibility on corporations is either a necessary or a sufficient pre-condition.
The book is not without failings. In particular, the final two chapters (by Kendy Hess and Nien-Hê Hsieh) are disappointing. They are presented as an attempt to synthesize the points made by others, to demonstrate a substantial measure of agreement between the two opposing positions and to point a way forward for the debate. However, both authors are proponents of ascribing moral responsibility to corporations and their reasoning comes across as an attempt to demonstrate that those who are against such ascription are actually in favour of it after all! For example, Hsieh states that what emerges in his discussion of the issues is “that by assuming business firms are moral agents” one can “sidestep long-standing debates about the purpose of the for-profit business firm” (page 190). Hsieh recognises the obvious problem with this, namely that it assumes moral agency, which is precisely the point at issue. However, his attempt to break out of the circle through redefining the purpose of corporations is unconvincing. Perhaps no synthesis of the opposing arguments is possible.
More seriously, taken as a whole, the essays suffer from a glaring omission: all of the authors appear expressly or impliedly to view morality as a human construct and none of the essays examines this assumption. Christians and other monotheists will take issue with this. If a personal God exists, then moral responsibility is ultimately to do with a person’s relationship with that God: to say that someone is “morally responsible” is to say that they are accountable to God in relation to their behaviour. On this basis, a corporation cannot be morally responsible. It may be legally responsible but being (at most) a human legal creation, it cannot in any meaningful sense be accountable to God.
Hence, monotheists must surely reject the metaphysical concepts of Pettit, Bratman and French and also Hussain and Sandberg’s normative functionalism as an account of moral responsibility: if God is the source of moral responsibility then Orts’ argument that moral responsibility should be imposed on a firm “if only for pragmatic reasons” (page 218) must be rejected.
Monotheists may nonetheless agree that some of what Hussain and Sandberg say is a useful guide to the circumstances in which society might decide to impose legal responsibility on corporations. Hasnas’s insistence on a careful distinction between different kinds of responsibilities is thus crucial. However, before leaping to the conclusion that even legal responsibility should be imposed, it is essential to take account of the danger, highlighted by Hasnas, Maitland and Sepinwall, that one ends up punishing the wrong people and also to face the possibility that our desire to ascribe moral responsibility to corporations is simply a manifestation of our desire to blame someone whenever anything goes wrong.
Shareholders and, potentially, employees of corporations indirectly suffer as a result of the actions taken by regulators and law enforcement agencies on account of wrongdoing on the part of the managers of the relevant corporations. Hasnas, with pardonable exaggeration, describes this consequence as “antithetical to the fundamental tenets of liberalism” (page 94); Rönnegard and Velasquez rightly refer to the collapse of Andersen following the Enron scandal as an example of the issue, noting that tens of thousands of partners and employees suffered as a result of the indictment of Andersen on account of a few individuals; and Maitland is scathing about the modern tendency of law enforcement agencies in the USA to seek deferred prosecution agreements with corporations rather than pursuing the individuals within those corporations who have been responsible for the relevant wrongdoing (a tendency that is also manifest in the UK and elsewhere in the world), suggesting that this effectively allows those who are really to blame for a problem to use the company’s money to avoid personal responsibility. He reminds the reader of Professor John Coffee’s pithy characterisation of this as a “de facto sale of indulgencies” (page 110).
Hussain and Sandberg counter this by suggesting that imposing penalties on someone may be justified as “an incentive for them to act in a supervisory capacity”. This is true but it follows that such penalties need to be restricted to punishing the failure to exercise supervision and, clearly, should not be imposed on people who have no power to exercise it (as is the case with many shareholders and employees associated with particular corporations).
These points demonstrate the enormous breadth of the issues associated with the attribution of responsibility to corporations. The public debate about this is bedevilled by muddled thinking and ill thought through emotional responses. The Moral Responsibility of Firms is an important and high quality contribution to this debate. It deserves to be widely read.
“The Moral Responsibility of Firms” edited by Eric W. Orts and N. Craig Smith was published in 2017 by Oxford University Press (ISNB 978-0-19-885705-1). 223pp.
Richard Godden is a Lawyer and has been a Partner with Linklaters for over 25 years during which time he has advised on a wide range of transactions and issues in various parts of the world.
Richard’s experience includes his time as Secretary at the UK Takeover Panel and a secondment to Linklaters’ Hong Kong office. He also served as Global Head of Client Sectors, responsible for Linklaters’ industry sector groups, and was a member of the Global Executive Committee.
