Leaving Friedman Behind?

One of the fundamental divides in business ethics is the divide between the Stockholder view and all of the others which would saddle business entities with social responsibilities. On the one hand, corporations are artificial entities, and so they aren't really persons, and we can't reasonably expect them to behave as persons. Milton Friedman points this out to us while arguing that their artificial nature is what should limit their responsibilities to one: "Increase profits while staying within the rules of the game." On the other hand, there seems to be a good deal of evidence that citizens don't regard businesses in that way, and that businesses don't regard themselves in that way, either. 

If one were to ask people whether or not a business can act "rightly" or "wrongly" they would generally say that they could. In fact, most of you have already said something like this. When you responded to the Pinto case in Module 1, the overwhelming majority of students said that Ford acted wrongly when they sent the Pinto out to dealerships with a dangerously-positioned and poorly-protected fuel tank. Some of those responses pointed to the dangers that this car posed to Ford's bottom line and their investor's pockets, but most students who are asked this sort of question point to some moral failing.

"Ford didn't care enough about it's customers."

"Ford shouldn't have balanced a loss of profit against people's lives."

"Ford betrayed the trust of people who expected their car to be safe."

Dozens of comments like those above were made by people who had some information about the case, the legal requirements at the time, and Stockholder and Stakeholder theories of corporate responsibility. Given that they (and you) are reasonably informed members of society, they make up a pretty decent sample of persons. We can question the breadth of the survey and the strength of the questions that were posed, it seems uncontroversial to say that people apply the concept of moral responsibility to businesses and corporations even when those corporations have acted within the bounds of the law.

This is damaging to the idea that corporations lack social obligations, but it could just be that the people in society don't have any understanding of what it takes to keep a business alive and profitable. Perhaps if they had that understanding they would have said different things about the case of the Pinto. Perhaps most people simply have the wrong idea about corporate responsibility. People are pretty self-centered, after all, and they are bound to cast dispersions upon businesses for doing just those things that the people themselves would have done in the same case. They're trying to force businesses and corporations into the form of a person when they shouldn't do so, and that leads them to think that they should should have social responsibility when they really don't. In a way, they're foisting their own responsibilities off on the corporations and businesses that they're talking about.

If it were only citizens who were trying to cast businesses in the role of persons, then this might be a legitimate response. It isn't the case, though. More and more often, it is businesses themselves who are casting themselves as persons in the community. Often they do this in order to secure rights in the same way that persons have rights. There are several Supreme Court cases which have affirmed the "personhood" of the corporation and extend some of the same rights that persons enjoy to corporations.

One of the most talked-about of these cases is the Citizens United v. FEC case that was decided in 2010. That case is often poorly understood as giving corporate entities the power to donate unlimited amounts of money to election campaigns. That's not really the case. It only removes the limits on spending aimed at persuading the public's vote.1,2 In effect, corporate entities (including unions) can now spend as much as they like on political advertising.  The details of the decision are available at the links for footnotes 1 and 2, but the spirit and intent of the cases are important to our discussion in this part of the module. Citizens United sought to remove the limits that had been imposed on this sort of spending by corporate entities based on the idea that corporations are persons, and the free speech of persons is constitutionally protected. This is an analogy from the rights of persons to the rights of corporations, and that is what makes it germane to our discussion. 

This case, while more recent, expands upon a 1977 case of a very similar nature.3 In First National Bank of Boston v. Bellotti, the argument is much the same. Corporations are persons, persons' speech is protected by the First Amendment, and so the speech of corporations must be protected. In these cases, there is another analogy being made. This is the analogy between persons' speech and corporate expenditure of money. The legitimacy of these cases rests with the strength of the analogy between the natural person and the artificial person (the corporate entity). If the corporate entities in these cases were resting their cases on this analogy, then they must have thought that it was a very strong analogy. They're saying something like, "Corporations and persons, and so they should have the same rights."

My purpose here isn't to debate the legitimacy of that second analogy or to debate the decision of the SCotUS. That sort of thing is beyond the scope of this class. (If you're interested in those sorts of question, then you should look into taking a Philosophy of Law course.) These cases are an illustration of the claim that corporations are, themselves, taking on the role of a moral person. 

What follows from businesses and corporations taking on the mantle of the natural person? Well, frankly, lots of things. They are entitled to the same sorts of rights and privileges that natural persons have.4 The analogy can't stop there, though. If a corporation is entitled to the benefits of being a person (expanded rights) then they must also be subject to the obligations of being a person (social obligations). Trying to escape the inconvenient portion of this equation is what some call "having your cake and eating it too." You just don't get to keep all of the good things without enduring the things that you would rather avoid. 

The arguments that Friedman made in the article we read in Module 1 refer to several reasons that we should think that it is better for corporations to have only one obligation, but that model might just be one that should be rejected if it doesn't match the world any longer. Moving back to a model without corporate social responsibilities would require that all of us, citizens and businesses alike, revise our view of what a corporation is obligated to do.


1. http://www.scotusblog.com/case-files/cases/citizens-united-v-federal-election-commission/

2. http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&vol=000&invol=08-205

3. http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&vol=435&invol=765

4. Some of them don't carry over, but cases like the ones above point to the conclusion that more of them will over time.