Can we rely on corporations to be ethical and responsible?
“Can a building have moral opinions? Can a building have social responsibility? If a building can't have social responsibility, what does it mean to say that a corporation can? A corporation is simply an artificial legal structure. But the people who are engaged in it, whether the stockholders, whether the executives in it, whether the employees, they all have moral responsibilities.” – Milton Friedman
In this essay, I am going to argue that we cannot rely on corporations to be ethical and responsible, however, we can always trust them to act in their perceived best interests and in many cases, this is concurrent with acting in an ethically and socially responsible manner. There are two main reasons for this outcome. Primarily, corporations are instruments to be used by typically self-centred individuals – they act predominantly in their own interest and to do so is to maximise the profits of the corporation. As I draw upon Shaw & Barry (2007), I will show that corporations are run by individuals with egoistic objectives, who despite their personal views, are often forced to run corporations with profitability as their primary and sometimes only purpose. Consequently, individuals and consumers are becoming more self-aware of the actions and consequences associated with their behaviour. Indeed, as I invoke upon Parker (2002), I will show that consumers can and often do sanction corporations who choose to engage in unethical activities. These two principles make it imperative for the executives who manage corporations to conduct their operations in an ethical and socially responsible manner if they seek to ensure the financial success of their organisations. I will elaborate on this further throughout the essay by initially explaining the rationale behind corporate decision making, then consequently on how consumers can strongly influence the way in which corporations act, and finally, the different types of ethical theories which help explain the actions that corporations and individuals make.
Corporate Decision Making
To determine whether or not corporations can be relied on to be ethical and responsible, we need to understand the rationale behind the decision making processes of corporations. How do corporations choose to behave? What factors into their decision making processes which define their organisation’s behaviour? To be able comprehend corporate decision making, we need to initially understand the purpose of corporations – Why do they exist? Milton Friedman argues that a corporation is a neutral, artificial legal structure, which has one, and only one responsibility – to generate profits as long as it engages in open and free competition without breaking the law, with all other factors, such as environmental impact, being secondary considerations.
This is reflected historically in the Neo Classical model of organisational management and economics which dominated the approaches to production by corporations in the early 20th Century, where the costs associated with the production of goods and services were the overwhelming concern of business organisations, as evidenced by corporations such as Ford which revolutionised mass production techniques. Other factors such as the wellbeing of their employees and the social impact of their operations were inconsequential and only addressed when they obstructed the corporation’s ability to generate profits such as strikes by their employees. As I will substantiate later, corporations will always seek to act in their own interests in order to maximise revenue, and secondary concerns are addressed only if they impact on their ability to generate profit.
Aside from profit, there are many other factors which influence the decisions corporations make in their attempts to solve the economic problem of limited resources and unlimited wants. Chiefly, these are: the Legal system which regulates to an extent how businesses operate, Rules, which are the cultural norms which the societies of stakeholders of the corporation’s activity espouse, and the intrinsic complex nature of each problem in which corporations are required to address.
Laws are imposed by governments, and must be obeyed otherwise a severe penalty which can range from a war...