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ground will no doubt relate very readily to issues such as corporate responsibility, the right to work, the position of women in industry, the ethics of advertising and the possible limits to economic growth. We hope that this book will appeal to those in the business world and to philosophers alike. If it cncourages business men and women to be somewhat more reflective, and philosophers to come down a little from their ivory towers, then we will have amply succeeded in our task.

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tsusiness ethics: its scope and purpOse

What is busincss ethics?

How is it done? How is it possible?

Why do it? Does it work? Introducing thc readings

Moral issues in business Richard T. De George The ethical side of enterprise Verne E. Henderson The rvealth of nations Adam Smith Why 'good' managers make bad ethical choices Saul W. Gellerman
Case study

Ethically active business: the work of business in the community

Discussion topics

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What is busincss ethicsi

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WHA'| IS BUSINESS

Confrontcd with an unfamiliar subjcct, many pcople insist on st:rrting rvith a definition. Horv, they ask, can rvc knorv rvhat is being talked about unlcss first wc arc told rvhat it is. FIow shall rvc dclinc business cthics? A simple clefinition is casy cnough. Thc terrn is, aftcr all, just a combination of two vcry fanriliur words, narncly 'business' and 'ethics'. Unsurprisingly then, rvhat thc ternt rcfcrs to is sirnply cthics as it applies to business. Just as we can talk of mcdical cthics as conccrned witlt thc morality of mcdical practices and policies, or political ethics as concerncd u,ith thc morality of political affairs, so also can we talk of something called 'business cthics' as being peculiarly conccrned with rnoral issucs in [rusincss. 'I'his is hardly vcry cnlirhtcninq, not only bccausc in this casc thc answcr u,us obvious, but ttcclusc lll rrny tlclinition carr clo is ofler au altcnrativc lbrnr of rvords. It hclps us knorv whal thc tcrm rcfers to of course; but unlcss this is somcthing vcry simplc, wc can hardly be said to 'knorv' that thing rncrcly bccausc wc havc undcrstood a few words of dctinition. With a contplcx subjcct, a dcfinition is only as good as the long and complicatcd account rvhich it cncapsulatcs. With the complex subjcct that is business cthics, we arrivc at such an account by looking at the prolrlcnrs rvhich raise n'roral issucs in business, and by critically cxamining thc various proposals fbr solving thcm. 'lhis entire book is just such an account. At the cnd of it readers should have a broad idea of what busincss ethics is. Accluiring that idea is not the point of the cxercisc though. It is at bcst a by-product. What rcally mattcrs is acquiring an appreciation of thc nature of the issucs and, even rnorc irnportantly, how they rnight bc rcsolvcd. This is bcqausc business ethics, likc ethics in general, is ccntrally conccrned with conduct. Ethical questions are cssentially questions about rvhether wc ought or ought not to perform certain kinds of actions; about rvhcther those actions are good or bad, right or wrong, virtuous or vicious, worthy of praise or biame, rcu,ard or punishment, and so on. Conscqucntlv, with business ethics as rvith any othcr branch of ethical encluiry, the point ol the exercise is to resolve clucstions of conduct. It has, thcn, ln esscntiaily practical purpose. Wc inquirc not simply in order to bc informecl, but to inform our actions; to providc those actions with a bettcr and soundcr basis than they might othcrrvisc have . Docs this mean that business cthics is a mattcr of producing moral

it a serics of guides to morally good business practices, replcil with iists of dos and don'ts? It can be. But if it wcre only that thcn it would be a branch of what is known as'normativc'or, alternativelr:, 'prescriptive' ethics. (We shall use thc latter term). It would be ethic:; understood as a matter of laying dorvn 'norms' of behaviour, of i:; cscribing' conduct - a matter, that is, of issuing instructions regarcling what should and should not be done; with business ethics concerning itself with those instructions that havc particular reference to thc world of busincss. Laying down the law with regard to what should and should not be done is, as we have acknowledged, very much what ethics is about. But it is not what it is all about, or even primarily about - at least not if 'cthics' is understood in its traditional philosophical sense of a disciplincc.l cnquiry into morality. (Broadly spcaking, 'cthics' is the inquiry, 'moralii;," is what is inquired into). What docs such a conception of cthics rcquirc? Does it mcan a scholarly dctachment from moral commitment, as talk of 'disciplincC enquiry'secms to imply? Is ethics, as a discipline, concerned merely to obscrvc what it is that peoplc say and do regarding moral matters without any attempt to pass judgemcnt? If so, it rvould be subsumed under what can be called 'descriptivc ethics'. Here, in contradistinction to prescriptive ethics, the concern ismcrcly to dcscribc what goes on regarding moral matters. We seek to discovcr, by observation, surveys, interviews, tests, and the like, what it is that people do, say or believe about what is good and bad, right and wrong, and so on. The concern is not to assess the moral corrcctnes:r or incorrectness of what is discovered, nor is it to come up with amcnrjmcnts or altcrnatives. It is merely to give a descriptive account of acluai moral behaviour and attitudes; with the behaviour and attitudes ol business people as the special concern of business ethics. Again,'there is more to ethics than this. It is not that accounts of rvhat people actually do, say and think about morality are set aside. Stiil less is it that no pronouncements on what is right and wrong are to be mldc. But what is missing from both a purely descriptive or purely prescriprivc approach is that vital critical element rvhich is at the heart of ethics as a disciplined inquiry. We have to subject the behaviour and attitudes exhibitcd, and the rules and principles propounded, to a rigorous critical examination to sec if we can determine why they are, morally speaking, right or wrong. It is this which is attempted here and in books on

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l-lgliness ethics: its scope and purpose

How is it done?

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business ethics generally, and is, in terms of a disciplined enquiry, what

is traditionally understood by the word ethics, whether it is applied to business or any other area of life.

wages and argue for the importance to them of an enhanced self-esteem that would come from participation in decision

in maximizing

making.

HOW IS I1'DONE?
This is all very rvell, but horv is it to be done? Horv will we arrive at thesc conclusions about moral rights and rvrongs in business? It is not cntircly facctious to answcr, 'With difliculty!' Busincss cthics is hardll, going to concern itself with issues for which there arc straightforward and obvious solutions. It is not much help, for example, to be told that theft and fraud arc morally wrong. We llready knorv that. It is barely conceivable that anyone rvould rvish to dcfend activities such as stealing thc design of a nerv product and selling it to a competitor, or keeping two sets of accounts, one for oneself and tlte other for the Inland Revenue. It is the morc complex and contentious issues that are going to be of the greatest concern in the study of business ethics: issues like corporatc rcsponsibility, cnvironmental protcction, worker participation, and so on.

Thirdly, we can subject our conclusions to the test of its compatibility with our more general system of belief. Does it fit in with what we generally take to be true in this area or does it somehow contradict our assumptions, or at least rest uncomfortably with them? How well, for example, does the claim that workers are exclusively interested in maximizing wages fit in with what we generally accept about human
motivation?

Yet rve are still left with the question of just how these admittedly difficult issucs are to be tackled. By what method do we decide on answers to questions of moral right and tvrong in business? There is no special or uniquc process to do this, nothing more or less than is involved in any disciplined enquiry into complex problems, whethcr in business or anyrvhcrc else. We consider the problcm and come up lvith
possible solutions rvhich wc thcn subjcct to thrcc broadly differcnt kinds of tcst.

o Firstly, and most obviously, there is the test of agrcement with the cvidence as rve understand it. Does the evidence support or deny the c-xplanation rve have put forward? If, for example, we are arguing for the benefits of greater rvorker participation in the running of
companies, rvhat is the evidence that employees actually want
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involvement? Scconclly, therc is the tcst oi intcrnal cohcrencc. Arc all the parts of the explanation in agreement witir each other or is it self-contradictory in some rvay? Does it say things rvhich are somchow in opposition and so cannot bc, or are unlikely to bc, equally true at thc same time'? Wc cannot, lor example, accept that workcrs arc exclttsively intercsted

In rvidening the issue out to consider compatibility with our more general assumptions, we invariably become involved in theoretical issues. The debate about worker participation will, as we have just seen, sooner or later involve theorics of human motivation. What are thcories? Vcry roughly, they are overarching, Iarge scale explanations in terms of which other and smaller explanations are both generated and evaluated. A theory of human motivation which gave pride of place to the dcsire for economic rewards would, for example, both lead to ancl endorse the claim that workers are exclusively interested in maximizing wages. Conversely, a theory giving priority to a need for social relationships would be difficult to reconcile with such a claim. Theories are no less a feature of ethical enquiry than of any other, and have just the same generating and evaluating role. If, for example, we base our argument for worker participation on the claim that workers havc a moral right to have a say in the running of the companies for which they work, then this will certainly raise theoretical questions about the nature of moral rights - questions about what they are and why (or whether) they should include workers having their particular say. Though theories have this overarching role, they are not themselves immune to evaluation of course. They are subject to much the same tests of agreement with evidence, internal coherence, and compatibility'with other beliefs as any other, but more particular, kind of explanation. The .only real difference is that the testing is done at a larger and more abstract scale when theories are at stake. It is one thing, for example, to discuss the question of workers' rights to participation, but quite another to discuss moral rights in general. Summing up then, we can say that we attempt to solve ethical problems in much the same way as we would any other complex and contentious question. Therc is the same range of tests available and the

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Critical Analysis

word is 'definitive'. There are plenty of answers, it would have to be admitted, the trouble, the sceptic would have to say, is that none of thcm are definitely correct. They are all uncertain; we can never be surc we have the right answer. That much can be admitted. As well as being complex, ethical problems are, as we noted, contentious. We have not just different, but opposing answcrs, based very often on strongly contrasting theoreticatr
perspectives.

put this way (see Figure 2.1). Herc, whar rvc have labcllcd'critical analysis' is at the ccntrc of a dynamic system where it botit uscs and

samc kind of critical rclationship to thcory. (This is rvhy this book contains a chaptcr on etltical thcory). Diagrammatically, the situation rvith regard to cthical enquiry can bc

asscsses ethical thcory (hence thc two way reiation) to examine existing moral behaviour and beliefs in order to arrivc at critically evaluated moral prcscriptions rvhich uim to rcplacc, cnclorsc, ntodify, or acld to cxistirrg idcas of morality and thcrcby altcr or rcinlbrce cxisting moral practices in some way. Busincss cthics then is sirnply that particular subdivision of this activity which deals with conduct in business affairs as opposed to any othcr particular kind or to conduct in gencral.

HOW IS IT POSSIBLE?
This is all vcry well, a scepric might say, but are not ethical problenis just too complex, too contentious, for this pretty picture to apply? Is it not the case that rve just do not havc definitive answers to these probiems? Hence, thcre can bc no 'critical anaiysis' of ethical issues in business or

anywhere clse. All wc can have is a vcry uncritical prcscriptivc or dcscriptive ethics. Ethics as an enquiry to provide us with answers to moral problems, it might be said, is just not possiblc. clearly, this objection cannot mean that arriving at answcrs to ethical problems is impossiblc. This book, for one, will bc full of them. Thc key

Much the same is true of many other kinds of enquiry of course. It is not unknown cven in the natural sciences of physics, biology, chemistry, and the like. It is a commonplace, perhaps even the norm, in social scicnces such as psychology, sociology, and economics, and it is as true of the study of business as of any otlrer study of social phenomenon. Thcrc arc many dilfercnt and sometimcs conflicting theorics, for exan:ple, of workcr motivation, marketing, and even the function of managcment itself. In fact, if dcfinitive answers are demanded for difficult qucstions, then it is doubtful if we get anywhere near this in any but the hardcst of hard scienccs - and no one rvould count management sciencc or the study of business in general as bcing in that category. This does not mcan we give up these enquiries into business or any other social phenomenon. What we very sensibiy do is settie for something less than certainty. We recognize the scope for genuine iiiffcrcnccs and so arc prcparcd to cntcrtain a wider rangc of possible solutions than would be normal in more exact forms of enquiry. For an introductory text book dealing with one of these uncertain cnquiries, this means setting out, as fairly as is possible, the various contcnding positions and inviting the reader to choose betwecn thcm. Instead of the comfort of a single definitive answer which can be relaycd to the reader simply, we have the challenging and often confusing situation of a variety of possible answers. This is so in much of the sociai sciences, in many of the more theoretical areas of business studies, ancl is r\ ' very much the situation here. However, though a text book such as this is forced, in fairness to thc reader, to be neutral between various contending answers, this does not mean that therefore there is nothing to choose between them; that tlie choicc is an cntirely arbitrary one, subject only to whim or fancy. if this were so then any old answer would do. we could decide how to act in business by tossing a coin or by looking at our horoscope - or we could simply decide that lbllowing our own personal whims at the time was the right thing to do.
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--- I ti 18 i I Business cthics: its scopc and purpose

Even in the most uncertain of enquiries

How is it possible?

it is obvious that not any old

answer will in fact do. Not any answer could equally well agree with the

evidence, be equally coherent, or be equally compatible with our other beliefs as any other. Some (such as the ones mentioned above) could be wildly implausible. Others, though plausible enough, could run into difficulties of varying degrees of severity. Even though they ncver approach certainty, some answers can still be more evidential, more coherent, more generally compatiblc than others. This has to be so in even the most contentious areas of social science and of the study of business including the study of business ethics. Ali right, it might be retorted, but is there not greater uncertainty in ethical mattcrs? Are rve not much lcss ablc to arrive at a bctter ansrver in ethics than in these other, admittedly uncertain, enquiries? This may be so, but hou, much less certain is it? Just saying cthical enquiry is particularly problematical still leaves it possible for us ro decide between competing answers to moral problems on an objective basis. We can keep on trying, even though success is likely to be particularly hard to
achicve.

The attempt to arrive at conclusions on matters of business ethics rvould be doomed to failure if it were shown that any objective justification in ethics rvas impossible. If this were the case, then anything goes in ethics, and no answer is intrinsically better than any other. This is a very Iarge claim indeed. Can it be defended, and, if so, horv? To uphold such a vierv, it would need to be demonstrated that the whole of morality lay outside the realm of objective justification, This would amount to a full blown theory of the nature of morality itself - albeit that the whole of morality was, in a sense, to be dismissed. , Theories about the naturc of morality are called 'meta-ethical' theories. A meta-ethical theory is a large scale theory which attempts to answer , questions about ethics rather than questions in ethics. The distinction can be explained more readily by considering examples of these respective types of question. 'Is it sometimes right to break confidentiality?' is a question in ethics, whereas, 'Are moral judgments simply expressions of our personal emotion?' is a question about ethics. Meta-ethics, then, attempts to explain the nature of morality as a whole and not just some particular area such as the nature of moral rights or whatever. The theory that ethical statements cannot be objectively justified is a meta-ethical theor,v. We certainly need to look at a neta-ethical thcory which denies the very possibility of ever really knowing moral right from wrong, but rve can do so adequately only in the context of an examination

of equally grand though opposing meta-ethical theories. A fuller presentation of. this question must therefore wait for the chapter on ethical theories (chaprer 3). the meantime, however, consider the consequences of such a denial _In of ultimate objective justification for the ethicai. would it follow that ethical enquiry must be abandoned? we do not think so. what would have to go is any 'evidential test'for moral conclusions: there could no longer be an aopeal to evidence as an ultimate test of ethical correctneirs. But this would still leave us with the test of internal coherence: some answcrs to ethical problems could still fit together better than others and it is still necessary to avoid having one pait of an answer inconsistent with another. Aldo, and perhaps more importantly, there is still the test of compatibility with our general system o1Uehef. This last-test is particularly important because very prominent among our moral beliefs is adherence to the correctness of some set of rnorui rules. As a matter of fact, a great number of people in all societies, perhaps the great majority, do believe they know-right from wrong. More significantly still, all but a tiny pathological minority accept th;y should adhere to rules of right and wrong. They may not always-adherl to these rules in practice; they may even have juit those intellectual doubts about knowing right from wrong that we have touched upon. Nonetheless, they accept they ought to adhere. And for the most part, they do. Moreover, there is for the most part agreement about what those rules should; at least for the most fundamental and important of them. consequently, and unsurprisingly, society will be structured around those rules. Transgression of them will meel sanctions of various kind: disapproval, ostracism, even legal penalties. The upshot of this is, notwithstanding whether or not these ethical rules can be objectively justified, they will inevitably form a living part of the structure of any and every society. Decision making will -have to accommodate them, and this will be as true of business decision making as of any other. Those responsible for the conduct of business will hal,E i. little option, therefore, but to fit their activities around this inescapable social fact. They will simply have to reconcile our business conduci with ethical expectations or run the risk of social disapproval, ostracism, or worse. Barclays Bank's very reluctant withdrawal from South Africa,,l because of a boycott by uK student unions, illustrates the kind of price they might pay (a bank rvhich does not attract students does not later have high income graduate customers), while the jailings of prominent business men following the Guinness affair demonsiratei anotirer.

lgylrytry{]9s,

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scopc and purpose

Why do it?

rules. There arc many different kinds of social rules but the moral kind is peculiarly privileged among thcm. Thcy constitutc the basis upon which

lvloreovcr, moral rules are not simply onc of many kinds of social

the corrcctncss of thc othcrs are cvalulrtccl. Rulcs of ctiquette, for

cxample, can be rigidly adhcrccl to; but not at thc cost of immorality. No onc, for cxample, would adhcre to the nicctics of polite conversation when warning of a life or death entcrgency. Even legal rules are subordinated to the moral. The (perccived) imrnorality of a law can-.be such that it is only morally propcr to disobey it. The reccntly repealed aparthcicl larvs in South Africa arc a primc cxamplc ol larvs too nrorally discreditable to be re_spected. As rvith acceptance of any kind of social rule, opcrating within a rnoral framcrvork is not simply a question of blindly follorving instructions. It will aiways involve some kind questioning and cnquiry cven when it puts question ol ultimatc justification^asidc. Thcrc arc at lcast. thrcc rcasons

within the framework of a generally shared set of moral beliefs. The conipatibility of any particular moral position with that system can by itself provide the basis for rational debate. Indeed, the great majority of moral debatcs are conducted at just this level. We can conclude then that, even without recourse to ultimate justili- i cation, ethical cnquiry rcmains not only possible but, in terms of soci;.il ''
functioning, absolutely inescapable. We simply cannot function in society without operating within and reasoning about moral rules, and this (as we shall see in chapter 3), is a good reason for regarding them as ultimately j ustifi able.

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WHY DO iT?
Granted then that ethical inquiry is all too possible, why engage in it? Why, in particular, engage in inquiring into the ethics of business activity? "i ,

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The first is that cvcn the best orclered set of moral rules is inevitably going to involve some clashes. Horv, for examplc, are we to reconciie the moral rulc that rvc should obcy tlre law rvith the apparent immorality of certain laws? A second reason is the problem of applying the rules to particular cases. No rule can possibly specify every circumstance it might apply to. It is one thing, for example, to have a moral rule against cheating, quite anothcr to decide in any particular case what constitutes cheating. Why, for instance, is insider dealing taken to be a form of cheating, and what in any instancc constitutcs insider dealing? The third reason rvhy morality is never simple.rule foiiowing is that even though there is a u,ide nteasure of moral agrcement in socicty about rvhat rules are to hold, the agreentent is ncver total. Some rules

One very good reason has already been given. It is inescapablc. Societies are, we have seen, structured around moral rules in a peculiarly fundamental way. Businesses have to operate in a social structure which in some ways is as much ethical as it is legal, political, economic, or anything else. Business decisions can therefore be as much constrainecl

by the ethical environment as by the legal, political, economic, or

whatever. Some things are better to do than others given the demands of the legal, political, or economic environments; and likewise some things are better than others to do given the demands of the ethical environ1 ment within which a business must also operate. ? Another reason to be concerned with the ethics of business activity is that as an activity business is overwhelmingly important. Most of the working population depend on it for ttrrcir livelihoods. Thc resr are at least dependent on it as consumers. As a force in society it can certainly stand comparison with religion, politics, or anything clse. Some would argue it has long been the dominant force in western societies at least, with governments of various hues only distinguished by the varying degrees of enthusiasm with which they bend to the economic power exertcd by business. Certainly it is a growing power. With world-wide i privatizations of what were state-owned assets, business methods and business attitudes are moving into more and more areas of economic activity in more and more countries. Multi-national corporations grow ever bigger. Their turnovers dwarf the entire gross national produit of ,i' many small and even medium sized countries (Shell's is bigger than

are controvcrsial; others will bc revisccl, rcpealcd or replaced. Is there, for example, a right bi, rvorkers to participatc in the running of companies? If so, tvhat of thc supposition that managers have .a right to manage' or priinary duty to sharcholders to maximizc the value of thcir holdings?

without ncccssarily raising the mcta-ethical issue of whcthcr anything ultimatcly justifies competing claims. That issue ccrtainly could arise the questioning to be pushed far enough in a theorctical direction. "vcrc But it need not be. A high level of dcbate can be conducted simply

All the above cxamplcs illusffatc thc possibility of moral clebatc

i Business

ethics: its scope and purpose

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Why do it?

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Morocco's, ICI's is bigger than Jordan's). Business generally is becoming ever more global in character with a world-rvide market in money, services, and products which is beyond the power of even the largest of individual national govemments to control. Never, in short, has there been more need for attention to the ethics of business. A third reason is much more parochial. It is peculiar to the people at whom this and other books on business ethics are chiefly aimed. They are the people who exercise, or will exercise, power in busincsses; that is, managers and those studying to be managers. For them a concern with the ethics of business- is part of a norv well established and seemingly inevitable process of frofessionalization. in this managers are no more than part of a gencral social trcnd. Many groups from librarians to school teachers, engineers to accountants, have attempted in varying rvays and with varying degrees of success to follow lawyers and doctors in professionalizing their occupations. The motivation is almost certainly a desire for that high social esteem rvhich professional status brings. The justification for this is broadly based on two considerations: the first is a claim that the job involves a high degree of intellectual dilficulty; the second is a claim that it involves a high degree of responsibility. This first factor justifies that great distinguishing mark of the professional; a period of formal education and tririning, replete with examination and certification. The second justifies that other great mark of the professional; a concern with ethics, usually rcplete with codes of conduct and enforcemcnt procedures. With managers, the intellectual difficulty factor is rootcd in the complexity, and sometimes scale, of business operations. Managers plan, organize, command, control, lcad, and so on. These erre complex tasks. If the organization is large enough and thc manager senior enough, it is complexity compounded by scale. Increasingly, but by no means universally, this complexity and possible scale is seen to warrant formal educational requirements for managers. i: AS for the responsibility factor, this virtually holds by definition. In planning, organizing, commanding, and so on, managers take on r. responsibilities. This is not just for technical matters: for manufacturing processes, bureaucratic procedures, financial budgets, and the like. There are responsibilities towards pcople. Managers must safeguard investors' money, protect the environment, keep consumers from harm, take care of the health and safety of employees, and the like. When thc organization is very iarge and the manager very senior, these irre responsibilities

International, of Bhopal, Exxon Valdez, piper Alpha and so on. Here size has brought notoriety. However, for those involved, the activities of senior managers in small organizations can be no less dire - no less a question of ruin, disaster, suffering or even death. All managers, even the most junior, are all the time making decisions which aifect some people's lives to some degree. And because of the complexity of organizational structures, even the most junior of managers will sombtimes make decisions which have far reaching consequences. They might antagonize an important cuslomer, upset a key group of workers, or fail to follow a vital safety procedure. AII in all then, we can conclude that in terms of J responsibility, managers have as much reason to have a concern with ethics as any lawyer, doctor, or other professional. t t A fourth reason for inquiring into the ethics of business activity may 4 be surprising. It is self-interest. By this we do not mean the self-interest of the groups at theTeGiviE-end of business activities: the employees, customers, trading partners, or society at large. It is easy enough to see their interest in businesses being aware of their ethical responsibilities; )' for these responsibili{eg are or_ved to them. They are the ones who courd /' be chcated, eiploited, or defrauded, if businesses pay no heed to moral matters. The claim we want to make is the altogether more problematic one that it can be in the interest of businesses themselves to inquire into the ethics of business activity. More specifically, because of course 1 'businesses' can't inquire, we want to claim that managers can serve the interests of the businesses if they inquire into the ethics of business activity. Moreover, it is 'self-interest' understood by the normal business criteria of survival, growth, and profitability which is meant and not some notion of virtue as its own reward. There are three ways in which f ethical inquiry can serve that interest: firstly, in terms of relations with I . consumers and the public at large; secondly, in terms of relations with employees; and thirdly, in terms of relations between businesses.
.

of Barlowe Clowes, Polly Peck, the Bank of Credit and

on a vast scale; with financial ruin, ecological disaster, human suffering, and even death, following on from mistakes, misdeeds, or mishaps. Think
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Relations with consumers and the public

With regard to the first way, we only have to note that there is, as was pointed out above, a penalty in terms of social disapproval facing any company which transgresses generally accepted moral rules. Such transgressions could threaten the prosperity or even survival of a company

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:4
iust as much as misjudging the political or economic climate, or running a discrete t;;1 ;fit" tu*. Moreover, thc ethical environment is no rnore with eacir interact and ail overlap They others. svstem than are the effects changes political action politics, influence factors o',"n"i, larvs rcstrict and pcrmit particular economic activities,and so on' i;-i;;, ".onomic Because of Ethical factors can vcry obviously figure in such interactions. cvcn be can thcy rulcs, moral of character In" p..uti"rly fundamental of disapproval moral example, For proccss. the in factor .f i'fr" i"iii"ting conpressure {or legal political to lead can activities certain cconomlc iioi., i"r*fting in laws against such rnattcrs as insidcr dcali'g, pollution, , or unsafe working Practices' -'H;;; the role-oi ttte moral environnlent is rcstrictive, as we would ,l it to be. it places limitations on business activity. But tliis need environment, the ethical can be "^p.", ni ot*oyt be so. Like any other social there u-ro.rr."'of business opportunity. For cxample, sittce t|e 1970s at what aimed investment funds' ioiU""n a 'mushrooming' of 'ethical to avoid wants who investor' ,, *"tf"i iesearch. tells us is an 'ethical putting n.roney into armaments manufacture, tobacco, gambling, and ifre tite. Recently, the Co-operative Bank in the UK has launched a icustomer chartei' guaranteeing, amongst other things, not to release
permission of the customer involved. i"riii"ii""t without the express a normal banking practice of releasing become has what iftii Ui""tr even being aware of it' The stand the customer without rr.tt intortation dubious activity ifr. Co-op"rative Bank has taken against this morally praise from the competitors, it says, 'hostility' from its fro, and to existing an inducement be "uot"a, hopcs., ;;;r;, and will, ir presumab.ly is by now there the Finally, rvith them. bank 1 oorential customers to whcrc a wholc rnarkctittg strlltcgy has bccn " ilassi. casc of Body Shop moral rectitude: no pblluting, no testing on of built around an image ideal of feminine beauty, unattainable an of animais, no projecting
', and so on.

Why do it? image untold good. For example, and in sharp contrast to other major producers of cosmetics and toiletries, Body Shqp5p_e_!-dl u.o_mo-n,eJ3t ali on advertisilg. tt does not need to. Instead, it has the free publicity provided by frequent media exposure. This tends to centre around the personality of the firm's co-founder, Anita Roddick. But interest in that personality and in the company at large is inextricably bound with that high moral profile which she so successfully promotes and projects. The Body Shop exemplifies the kind of actively benevolent image which probably most companies would like to have. Certainly no company would like to have a malevolent image; public relations departments and public relations consultants exist largely to make sure they do not. A now common form of public relations activity is for companies to engage in the sponsorship of sporting and artistic events, and the funding of conrmunity projects - anything from athletics, to opera, to employment schemes for inner city youth. The beneficiaries are carefully chosen for lending a particular association to the company name. Acknowledgement of the company's 'generous assistance' is made in some suitably discreet fashion. The objective is not so much to make the company known as to make it known as a health conscious, cultured, and above all caring organization. Multi-nationals in particular spend millions on 'corporate.\ advertising'which has nothing to do with selling the company's products and everything to do with making the public feel good about the corr- z pany and its activities. Assurance that the environment is safe in their' hands is a particular favourite here. When, for instance, the beautifuliy modulated voice in a TV commercial asks us, 'Why all the pretty pictures of flamingos?', it is so that we can be told what a good job the British Oxygen Company is doing in cleaning up the environment. Why,

inioi*utlon

about the credit-worthiness of its customers to other financial

one might ask, does such a largely anonymous industrial concern want to bc known to the public at large except in order to be loved by
them? Relations with employees

Whether as opportunities to be exploited or, as. is more usual' as have a very limitations to work within, there is no doubt tltat businesses It is matters. rvith ethical concerned being for ;;;;; prudential reason activities company of disapproval Moral interest. nr_,ite ,imply in their Jun .onu"ri into political pressures' legal controls and even consumel Ltu.ottt, at the very least, it does the company image harm' Morai on the other hand, not only avoids political pressures and legal ^ppio"or can even lead to consumer support; and it does the company f .iiitofs; it

That the moral approval of consumers and society generally is in the interest of businesses can hardly be disputed. There is room for more contention with the second of the three ways in which ethical concern can serve that interest; when that concern is directed inwards, towards the company's own employees. Here a claim for self-interest is vcrl' much dependent on a particular approach to the management of people. Very roughly, it is an approach which assumes that if an organization

Eg".r ethics: its scopc and purpose

shows care and considcration towards its employecs then they rvill rvork

Why do it? Ethics and self-interest

for it. They will respond with a loyalty and a commitment to the organization which rvill translate into increases in productivity and quality that will more than pay for any increascd i'financial cost of bcing caring and considerate. This is the belief which lies behind that tradition of enlightened, if sometimes paternalistic, management rvhich looks to good working conditions and company health and welfare schemes to keep workers happy and productive . It is a tradition rvith a very long pedigree. Examples can bc found in most countries. In Great Britain it can be traced back to .' rcforms instituted by Robert Owen at the New Lanark cotton mills at the start of the ninetecnth century. A iater example is Titus Salt witlr his builcling of the model industrial community of 'saltaire' around the middle of that century. The Quaker founders of the Cadbury and Rorvntree chocolate making firms are also notable examples of this approach. Marks and Spencer would probably be the most cited modern instance. At an international level, one could point to the policy of protecting jobs and attempting to provide lifetimc employment which l, is practiscd by companies such as IBM, Hewlett-Packard, and major J:rpanesc corporations in general, as proof that 'looking after' employecs ,r,. prys productive dividends.
so much more effectively Rclations bctryccn businesses

With the third and final yay which moral concern serves the self-interest of business - that of relations between businesses - there is a very simple yct rather profound and. u,e think, inclisputable point to be made. It is
.i,

'
i'

businesscs just could not function in an environment dcvoid of ethical constraint. If fraud, theft or deception rvere the norm rather than the exception in business dealings, then those dealings would eventually bccome impossibie to sustain. They would be too uncertain, too fraught rvith danger, to be worth engaging in for most people. As Plato noted many centuries ago, there must be a measure of trust, even amongst thieves.l For business to be carried on successfully there has to a reason-

thlt

able expectation that most people will behave rcasonably honourably most of thc time. So in this third way also, a concern with the ethical on the part of those running businesses will serve the intercst of those
brrsinesses.

Put all three ways together and it amounts to substantial convergence o between morally correct behaviour and commercial success. To study . business ethics is to try to identify what is morally correct behaviour for business. It is, therefore, to study something which can make a substantial contribution to the commercial self-interest of businesses. As a reason for studying business ethics this is anything but novel. It is the reason given by a former head of the US Securities and Exchange Commission, Mr James Shad, when in 1987 he gave $20 million to a $30 ,Y million ethics programme at the Harvard Business School. What he reputedly said then, and he has certainly repeated similar sentiments since,'was that: 'ethics payl . . . It's smart to be ethical'. More generally,o rve find this same lustification for.'bfusini.ss-eihiCs in the oft-repeated contention that 'good ethics is good business'.o This slogan has obvious attractions for business people. It seems to offer what might be called an 'instrumental' view of business ethics, the idea that it is there simply as an instrument of business efficiency. Like.l. cost accounting, marketing research, or any other tool of modern management, cthical investigation. is, on this view, merely something to furthcr the commercial aims of business. r, For this to be true without qualification, it has to be that there can never be any conflict between the moral and the commercial; that 'good ethics' is always, and unreservedly, 'good business'. This is obviously not so. Take the case of low wages paid to Third World plantation workers by British tea companies. ('Low' in this instance means that at best they only permit a subsistence standard of living). To make the assumption that 'good ethics is always good business' and generously increase the workcrs' wages could well be disastrous in commercial terms. Any company which did this would suffer a cost disadvantage relative to any rival company which did not. Its products would therefore be at a price disadvantage relative to those of these rival firms, and this could lead to falling sales and so falling profits. No unqualified version of the instrumental view is going to be remotely \ plausible. There is obviously a limit to the degree to which morality and' comm.ercial self-interest can converge. This is no more than could be t expected. There are obviously limits to the degree to which morality and any kind of self-interest can converge. In one way self-interest is integral to morality; in another, wholly antithetical. The integral way amounts to no more than the rather obvious but very
I ,

Plato, Tlrc Rtpublic, Book One.

?'Business Mauers', BBC2, 11 July 1991.

_l

Why do it?

' profbund fact that rve all have a vested interest in the maintenance of morality. This holds in both a negative and a positive sense. In the l ncgative scnsc it is because it is in our interest not to be the victims of rvrongdoing: to be rvrongcd is to be harrned. In thc positivc sense it is becausc it is in our intercst to have nroral obligations fulfilled towards us, such as obligations to fulfil comnritmcnts, to afford assistance, rcpay debts of various kinds. Morality is all about prohibiting wrongdoing,-on the negative side. and compelling obligarions ro be fulfiiled on the positive side. Therefore, morality serves our intercsts in both respects. That scif-intcresr is also antithetical to morality stcnrs from an cqually robvious but profound fao; it is that the sclf-interest rvhich morality serves is univcrsal in charactcr. It is both rcciprocal and collective. wL are all protected frorn bcing wrongcci by others because we arc all prohibited from rvronging others. we are all entitlcd to have moral obligations towards us fulfillcd by othcrs bccausc we are all compelled to fulfil our obligations to others. The satisfaction of our individual interests does not extcnd to being allorved to do rvrong or set aside obligations ' when it suits us. Morality seryes thc intercsts of inclividuals only up to the point that it is broadly compatiblc witli the interests of evcryone else. The whole point of morality, in fact, is to rcconcile indivictual with collcctivc sclf-intercst; in short, to scrvc thc common good. This is why though it serves self-intercst, morality is also the most threatenecl by it, for nothing is more antithetical to thc common good than the unrestiained sclf-intercst of individuals. In business, as anywherc else, it is this requircment of universality rvhich sets limits on the extent to which morality and selt'-interest can coincide. In the case of the tea companies, for instance, what makes the commercial self-intcrest in low wages wrong is that it at the expense of a reciprocal and collective self-intcrest. It violates iimits set by the common good. It is bccause conlntcrcial sclf-intcrest, like any other kind of selfinterest, can so easily extend beyond the common good that 'good business' does not necessarily follow 'good ethics' and an unqualified version of the instrumental view of business ethics is so untenable. But ,we are still lcft with thc possibility of a qualificd vcrsion. It can be rargued that 'good cthics is good business' in the scnse that while it is not always true, it is true generally, on. balance, or in the long run. There is acceptancc that bcing ethicai imposes limits and cven extra costs on businesscs. Thcy cannot pursuc profit regardlcss of harm to the common good; and things such as cnvironmental protection, lvclfarc provision for

workers, community programmes and the like, cost money. But on balance, it is argued, the benefits and opportunities outweigh the costs land limitations. As a general business strategy 'ethics pays'. Comparies which strive to be ctliical *ill, on balance and all other things being equal, have a competitive advantage over those which do not. So as business ethics is an aid to companies being ethical, it is also, on balance, an aid to companies being commercially successful. Therefore in this qualified, broadly true sense, the instrumental view of business ethics
holds good.

that the thesis 'ethics pays' is true. In the absence of such proof, probably the best that can be done is to point again to thei benefits in terms of consumer and public esteem, employee loyalty, and the trust of other businesses which accrue to ethically concerned companies. Thesc are assets of obvious commercial worth which no business would want to lose and most would strive to acquire. They are assets which would be denied the actively unethical firm, the company which will do anything at all, no matter how unethical, for financial gain. In thq long run, all it will acquire is disdain, disloyalty and idistrust. Provided it could keep out of the courts, it could still no doubt survive and prosper. Other factors, such as a commanding market position, scarcity value, unemployment, and political influence, could all offset the liabilities acquired as a consequence of immorality. But liabilities they would remain and the company is so much the poorer in having them and not the contrasting assets which being actively ethical wouid
bring.a

Whether ethically orientated firms actually are commercially more successful than those that are not is a very vexed question indeed. The evicJence is mixed. Most findings seem posiiive to some degree, a few are netural, a few are negative. This shows a balance in favour of the 'ethics pays' thesis and not much evidence that being ethical wiil actually damage a company's wealth.3 What it is not, though, is conclusive proof

What of the firm which we might describe as the 'ethically passive'? (This could well be your average business). Either from conscience or caution it is not prepared to do just anything in the pursuit of financial
3

K. E. Auppcrlc et al.,'An cmpirical Examination of the Relationship Bctween Corporate

Social Responsibility and Profitiability'; Academy of Management lournal,1985, vol. 28, no. Z, pp. 446-63. Thcir survey of past studies comes up with a majority of positive findings, but thcir own investigations points to a ncutral correlations. a Thc idea that bcing activcly cthical is connccted with risk avoidance is supported by J. B.

McGuire el al.,'Corporatc Social Rcsponsibility and Firm Financial Pcrformancc', Academy

\,lvlunagenrcnt Journul,1988, vol. 31, no.

cJ'

4, pp.854-72.

l li l I Business ethics: its scope and purpose

,--

___i

FI
If the wholly self-interested motive applies, then there is certainly a problcm about how much moral credit, if any, is deserved. Here too, good is being done merely incidentally by people who are .setting out only to serve their own interests. Worse, there is scope for insincerity, even deception; there is the setting of moral objectives without a real moral intent. Fortunately though, moral credit does not demand the other cxtreme of total altruism. Being moral is one thing, being saintly is something extra. Morality is, as we saw, a mixture of self-interest and g!rybtn;-i, is, self-interest within the limits of the common good. So, provided it is desired to advance the- Collective interest along with the personal and that the latter has priority in the event of a clash, then moral credit is perfectly well deserved. In point of fact, the people directing the morally active business are unlikely to be either totally selfinterested or totally altruistic; they are unlikely to be either total villains or saints. Their motives are almost certainly mixed. But provided they are mixed in the way prescribed, with consideration and priority given to \, the collective interest, the business is perfectly entitled to reap those rewlrds of esteem, loyalty and trust.
Ethics and the bottom line

gain. It conforms to whatever minimum standards the larv and public . opinion are prepared to tolerate, but beyond that it does nothing. It does ,not actively seek to promote the common good in any way. It seeks only, up to the maximr.rm limits tolerated, to promote its own financial self. interest. 'Minimum morals, maximum mammon'could sum up its creed. Inevitably, it does some good. For a start, it is avoiding the grosser forms , of corporate immorality, and like any business, even thc most activcly unethical, it will be providing products, services, jobs and (possibly unlike the unethicirl firm) paying taxes. Such public benefaction, if that is what it is, rvill bc incidental to its exclusivcly financial objectives; an , unavoidable by-product of making money in a minimally moral fashion. What then of such a business? Without any trouble and expense, rvill not at least a portion of the commercial advantages which accrue to the 'ethically active' business accrue to it also? We think not. If we look again at those aclvantagcs we see that they follow from being thought deserving of moral credit. Tlre ethically active business has earned the esteem of consumers and public, the loyalty of employees, the trust of other business, as gredit for doing good. But to earn such credit it is not enough just to do good. The intention must be to do good. If, as it is rvith the ethically passive business, the good it does through producing, employing, and paying taxes is incidcntal to an exclusively financial objective, then no credit is deserved. This is mercly serving one's own self-interest, and there is nothing morally credit worthy in that. It is not immoral provided the collective interest is not harmed. But in the fact that it is not directed at serving that common good, it is not moral either. It might be said that at least there is an intcntion on the part of tire ' morally passive business to refrain from the grosser forrns of corporate immorality. But this is no more than can bc expcctcd and so, very properly, earns little or no credit. In contrast, credit is heaped on the ethically active business precisely because it does more than can be expected. For what this demonstrates is a commitmcnt to the common good. It is only if such a commitment can be dcmonstrated that benefiiial deeds earn moral credit for those who perforn-r ihem. . ] All this raises interesting questions about motives of course. Are the people directing the ethically active business doing it just to have the ensuing advantages rvithout a thought for the common good? Or are their motives totally altruistic, wanting nothing but thc common good? Are they perhaps a mixture of altruism and self-interest, mindful of the advantages but also sincerely desiring to benefit society?

In being entitled to these rewards, the ethically active business does enjoy competitive advantages denied even to the ethically passive business, let alone the actively unethical one. But even accepting the qualified instrumental view that on balance such advantages outweigh the costs and limitations of being ethical, the fact that sometimes they will not entails that on occasions being ethical must mean giving ethical objectives priority over commercial ones. The optimistic response to this is to think in terms of small losses and gains within particular firms. Sometimes being ethical will cost more than it brings in, but the business can absorb these costs and in the long run the policy of being ethical pays off. No doubt under normal circumstances this is how it happens; but normal circumstances presuppose extraordinary ones. Sometimes the cost of being ethical rvill be far from minor; it might even threaten the very ) survival of the business. Take the vital foreign order scenario; does/ the company take an order from a tyrannical regime? Many western companies supplied weapons and weapons making plant to Iraq before the Gulf War of 1991, for example. Does the company bribe the corrupt official to win that vital foreign order? The American Lockheed Corporation did this in Japan, for example. Situations can and do arise in
r

F' l}:rnesl
busincss,, as

f,1191,

its scope ancl purposc

Why do '

it: l l :: lL_

heavy price. Talk of an 'on balancc' gain from be ing ethical can overlook the fact that thc balance is also across thc. rvhole sprcad of businesscs and not just rvithin a particular business. overall most busincsses might gain, but this still leavcs the possibiliry, that parricurar busincsses might iosc, ancl losc heavily. civcn this sobcring thought, it coulcl sccm to rnany business pcoplc that bcing cthicatl can be takcn too far. 'lhc irttraction of thc instrumcntal theory, evcn in its morc plausiblc qualiliecl form, is rhat it seems 10 offcr an apparcntly painlcss absorption of business cthics into business practicc. If 'good ethics' is ahvays 'good busincss' then thcre is no question of any conflict bctwecn ethical ancl commercial aims. on thc contrary, the ethical is always an aid to achieving the commercial. Even if 'good ethics' is only, generally speaking, ,good business', this still might sccm to promise only harmony anci bcnefit in the long run. Now it stands rcvcaled that evcn thougir there might bc gains overall, there could be losses - and crucial losses at that. At this point many business people could indeed decidc that maybe business ethics is not such a good idea after all, for what it now secms to bc cloing is threatcning another idca to rvhich (for good and not so good rcasons) nrany busincis peoplc are very attachcd; the idea that in business profit maximization must bc the ultimate guiding objective, thc 'bottom line'. Thg not-so-good reason for being attached to this iclea is, to put it bluntly. machismo. It has connotations of toughness, hard-headedness, cvcn ruthlessness, which are vcry attractive to somc pcople - particularly males. A vivid illustration of this was rvhen the Abbey Nitional wai convertcd from a not-for-profit building society to a for-profit bank. This meant that what rvere 'surpluses on income' would now count as 'profit'. Asked about this, the then chairnran, campbell Adamson, said in support of the change that as far as he was concerned 'surpluses were for choirboys'. (He rvas making a pun between 'surpluses' ancl ;surprices'). on this particular score we think wc can, as far as it is wirrantecl, offer some comfort. Etirical objectives in business are a far from soft option. The fact tirey must interconncct with commercial ones makes thcm compiex; the fact they can collide with the commercial makes thern uncomfortable; and they are, as we have scen, no lcss vital to the prosperity and even survival of thc companv than any other kind of objective which business people arc called upon to determine and realize. All this is dramatically dernonstratcd in thc phenomenon of 'crisis managemcnt'. why there is a crisis is invariably because management is

in lifc gcncrally, whcrc to take thc moral line is to pay a

faced with a combination of moral and commercial demands. In 1990, for example, the Frcnch company perlier rvas faced with just such a dilemma with the discovery of a relatively minor degree of iontamination of its bottled water. The perrier management had ihen to make delicate and difficult decisions involving financial, marketing, medical, and moral considerations. (Perricr eventually removed milli-ons of bottles from circulation and so rcstored public ionfidence in the product). Thc good reason why business people are attached'to thc idea of profit as the bottom line is the obviously ciucial role which profit does piay in business. Pr-ofit is gcnerally why businesses are s"t up in the firsi piace and they will not normally survive without it. Added to this, the drive for profit is an undeniable inducement to efficiency in busincss. All this is true; but if (as we presume it does) 'bottom line' means rhe ultimate guiding principle which takes precedence over everything eise then it is- simply false. None but a small minority of businesses, and then not all the time, do or possibly could operate on this principle. what they generally do, and generally must do, is to contain theii drive for profit within broad legal and moral limits.s If all businesses attempted to take. the drive for profit beyond legal limits then mosr business people wouid be in jail - onq there is only limited scope for entrepreneuiial activity there. If they all attempted grossly to exceed moral limits for the sake of profit then nor only would public and political opinion stop them, but the conduct of business itself would become imposiibte. As we have seen, there has to be an expectation that most businesses will behave reasonably morally most of the time for commercial relations between businesses_to be possible, otherwise these relations are just too unccrtain to be worth the risk. Does this mean the legal is the bottom line in business? After all, no one goes to jail for breaking rules that are merely moral. Despite this notable fact, it is moral rules which have precedence as social rules. As 7 we have also'seen, the legitimacy teg3l_,s judged in terms oiJh; t 91j,e U9IAL. If a law is deemed-im-mora1-ffien there?re groinds ff;Grid;r rcpealing it, or even disobeying it. Basic though legal rules are io society, it is the moral which are the most fundirn.niul kind of social rules. Nor is it the case that the moral are totally without the sanctions of state-administered punishment: they are to some extent replicated in law; particularly the more basic kind- rures against murder, fraud, theft,
5 It can trc disputed whethcr cvcn within broad lcgal and moral limits prolit maximization is thc

ovcrriding aim of businesscs. scc pcrer Druckcrirftc practice,r

1968).

ui"iii^i,rilionaon, rrn,

t4i

Business ethics: its scope and purpose

----t
it
is

Does it

*orrl-1

and the like. But even rvhen they are 'merely moral', rvithout legal enforcement and with perhaps only the (consiclerable) sanction of public op,inion as support, in virtue of being moral they still have that lrcgical priority over all social rules. Just as a profitable activity can be ruled out on grounds of illegality, so an activity which is both profitable and legal can be ruled out on the grounds that it is immoral. anywhere else in social Iife. This means that there has to bi a fifth, last and.overriding reason for studying business ethics. It is to help businesses gct it right morally; to discovcr thc moral limits within which businesses have to.operate, and how they might better further the common good along with their morally legitimate business aims. In adding this reason we recognize that ethically active business is attempting to operate according to the most fundamental of social rules. It is attempting to align itself with the common good; the collective sclfinterest of society. without that organizing principle, not just business activity, but social life in general, would be irnpossibre. Theie would just be competing seif-interest without hope of reconciliation. So rvhat the ethically active business is doing is organizing itself and its relations with thc rvider society in harmony rvith the guiding principle of social life, the vcry basis of social cooperation. That is rvhy it is iikely to be rewarcled with estecm, loyalty, trust, and so on.
Conclusion

[tsl

The moral is therefore the 'bottom line' in business just as

Finally, rvhere does the addition of this fifth reason leave the (qualifiecl) instrumental vierv of ethics? Not totally abancJoneci; there are stili goocl grounds for thinking that being ethically activc,is generally sound business sense. what must be abandoned is the notion that this can alone stand as a reason for studying the ethics of business. Rather, seif-intercst must take its piace alongside inescapability, importance, professionalism and above all, thc objective of moral correctness, as a reason for cngaging in this study'.

what is being demanded is some necessary connection between and practice, then the answer is no. Alr the knowledge in the world car.not guarantee to make a person more ethical. The ancient pr.eek philosopher Socrates thought it did.6 He uerieved ,t r, *rongdoing was a kind of ignorance; if ie knew what was righiwe-couto onty do.what was right. Aras, this is not so; peopre can very iu.rr mo* what is right and still, through weakness or *itrut disregard, do *rrui-i, wrong. Business ethics cannot alter this fact of life. wtra"t it .un p..rrop, do is to help people become more ethical, and it may do this in i*o *!yr. _ Firstly, it can make it more difficult for plopre to behave immoraily. Ignor.ance may.not be the sore cause of wrongdoing uut-ii-.an be a contributory facior. Lf is given exposure to ethicarissu.r unjiuii-oi 9n: resolving them, then it is that much mbre difficult not to be aware of what is at stake or retreat behind the excuse it is beyond on.;r.o.np"tence. This is the.thinking behind the increasingry popular practice'of issuing company codes of ethical practice; no oneiin claim they did not know. It,is also, incidentaily, thelhinking of an American ludgJ who sentenced unrcago exchange dealers to take an ethics course at a law school after they were found guilty of illegal trading practices. Their comment was that it was a bit ironic being taught etitiis by lawyers. But that was a comment on lawyers, not ethics courses. The s.econd way in which-studying business ethics might herp business people become more. ethical is nothlng more than the a'ssump?ion made in any academic study of any area of business. It is that tnf auitity to tackle problems of business can be enhanced by formar, rigoic,us _the study. In the case of business ethics, this means that t'he abilitf to tacl(le the ethical problems of business is enhanced. That study can lead to excellence in practice is not guaranteed; but neither is it in accounting, pTk91ing, personnel, or anything else. With any study, ir is up to individuals how well, or even whether, they translate'iearning'into
stud-y-

If

practice.

DOES IT WORK?
Given that moral correcrness is the overriding reason for studying business ethics, the inevitable quesrion is; will it'work? will studyin! uusiness ethics make business people - and hence businesses as insiituiions more ethical?

6 Plato, /oc cit.

tral L:g:f:tr

:thics: its scopc and purposc

Moral issues in business

INTRODUCING THE READINCS

The first reading is a lrroad survey of the rvhole fielcl of business ethics by Ilichard f. De George. Ir starts by considering thc issuc of objectivity in morals, moves on to the 'macro-moral' problcm of morally evaluating entire societies and economic systems (principally capitalism) and concludcs rvith a six-fold ciassification of the kinds of 'micro-moral' problems that arise within a given social and economic framework. (A similar division fcatures in this book with chapter 3 dcaling with objectivity, chapter 4 with the macro-moral, and subsequent chapters with specific micro-moral issues). The second reading, by Vcrnc E. Henderson, is explicitly ,micromoral'. It seeks to shorv how ethical considerations fit into business decision nraking in gcneral. It makes the point that businesscs must operate within an environmcnt that is as much moral as legal. Stress is placed on tackling the particular 'situation' rather than operating with a fixed set of principles, and thc assumption is made that ethics is essentially about promoting 'human welfare'. (As we shall see in chapter 3, both claims arc qucstionable). This sanre identification of the moral with the common good is made in the third rcading. It is the classic defcnce of self-interestcd individualism by the Scottish philosopher and economist, Adam Smith (17231790). In it hc propounds his famous'invisibls hand'argument. This says that providcd there is compctition to satisfy customcr wants, then thc common good is best scrvcd by thc pursuit of individual self intercst. That way, human rvelfare will bc m;rximizcd even though it is no part of the intcntion of thc self-interestecl individuals that it should be. Smith adds, howcver, a warning that busincss people will do anything to avoicl thc compctition ncrcessary to cnsurc this happy harnony betwecn individual inte rest and the common good - a point'we shall return to in
chapter 4.

Moral issues in business

I{ICHARD T. DE GEORGE

The position that ethics has nothing to do with business has a long history. But it is a position that takes too narrow a view of both ethics and business. Ethics is concernccl with the goods worth seeking in life and with the rules that ought to govern human behavioi and social intcraction. Business is not just a matter of economic exchangc,

of nroney, commodities, and profits; it involves human interactions, is basic to

society.

human society, and is intertwined with the political, social, legal, and cultural life of

The final reading by Saul W. Gellerman is very much an example of 'applied business cthics'. In it hc analyscs thrcc notablc cascs of business misconduct in ordcr to isolate the factors which lead competent managers to go morally rvrong. Having isolatcd them, he concludcs with recommendations on how to avoid their occurrencc.

and theft sometimcs lcad to greater profits than their opposites. Hcnce, moJSl udgme nls . so n-r-e!iq 9r qillgf lgT_lglirys,l!ggg._!-ts_. B usinesses needl ot bc ru n fronr moral motivcs. But the actions of-dusftesseJ affect indiviciuals, society, and the colnmon good. If moral actions are ultimately in the common good, then runnrng businesses in accord with moral norms is in the common good. To the extent that profit maximization conflicts with moral norms, it leads to actions which are not in thc common good. In such cases, if the common good is to be protected, and if businessmen do not on thcir own act in accordance with moral norms, they should be forced to do so. Either public pressure or legal mcasures should be urougtrt to bear to nrake the immoral practices unprofitable. If the penalties for not acting morally arc sufficiently scvere and if thc enforcement of norms is sufficiently diligent, then
j

There is an obvious connection between business and ethics. A businessman whose employecs rob him blind could no more survive than a businessman who through lying and fraud sold only products that did not work. such examples, howevel, co not settle any real issue between business and ethics. For iflying, fraud, or theft iead to the failure of a busincss, then a businessman might condemn and eschcw them not because thcy are inrmoral but because they are bad business practices. Actions that arc contrary to morai norms may in some, perhaps even in many, instanccs be bacl for busincss. But we can distinguish acting in.a certain way because it is moral frcir: so acting because it is economically profitable. The distinction is between an acrion donc from duty (i.e., because the action is morally correct) and an action.which happcns to coincidc with one's rnoral duty, done from some other motive. Thc claim that morality is inapplicable in business aflirms that one's calculation should be based on business, not on moral, considerations. wherc both coincidc, so much thc better; rvhcrc thcy divcrgc, so rnuch thc worsc for morality. It would bc nice to bc ablc to show that moral action is always bcst for busincss. Ilut this secnrs not to bc truc, cspccially in the short run. Lying, fraud, deception,

pcrnrission.

Rcading takcn from Ethics, Free. Enterprise and public policy, editcd by Richard r. Dc George and Joscph R. Pilchcr. Copyright O 1978 by oxford Univcrsiry picss, Inc. Reprinted 6y

I Business ethics :jlTg9f

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Moral

issues

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to moral norms will in the long run be in the

business as well as in the general interests of society, Discussions of morality and business, if the above points arc conceded, often lcad to three different kinds of qucstions. First, whose morality is to be imposecl on business? Secondly, can economic systems be morally evaluated, and how is morality to serve as a guide between different economic systems and diflbrent societies rvith varying moral norms? Thirdly, rvhich specific practices within a given system are in the public's good?

is now sufficiently clear and established that we can rightly say it is morally improper to cxcludc women, or blacks, or men, or any sub-group from the moral community.

Criteria of sex, race, nationality, and so on are not morally relevant criteria. This was true even before it was recognized. Unless it was true, it is difficult to understand how it could have come to be recognized. Thirdly, many differences in moral practices from culture to culture can-be shown
rrlorris Ginsberg argues this persu'aSivtly and at length.' Thus, the fact that different parts of the world have somewhat different moral practices shows.neither that they are all equally valid nor that any one of them is necessarily invalid or immoral. What about moral pturalism within our own society? Does it justify the claim that all moral judgments are equally good or valid, sound or proper? No, it does not. Reasoning analogous to that used above with respect to differences between cultures applies hire as well. For differe JI9U which moral relativism can be va -In-AmeiE;n sbaiet-y, aesfrte ihErathEllErgG-amount of disagreement on some issues - e.g., abortion, birth control, capital punishment - there is an enormous is true of any viable society; for without such agreement i aniorint'of-agi6emcnt.'This -tfie faUiic -oiiociety *oltO disintlgrate.iNot only is there general agreement that murder, theft, lying, fraud, and so on'are immoral, but the public reaction both to the events connected with what has become known as 'Watergate' and the public reaction to bribes by corporations is evidence of a large degree Of agreement on moral issues such as these. That peoples in some other Parts of the world did not unclcrstand American public reaction in these cases might indicate that they are cynical about morality, that they do not expect national leaders or businessmen to blhave morally, or that they hold different moral values. But their reactions are beside the present Point. In those realms where there is real difference of moral opinion in our country, moreover, there is some consensus about how to deal with that difference. Thus, thcro is general agreement that morally different opinions are to be tolerated and actions not legally controlled if their results fall exclusively or almost exclusively on the consenting, informed adults who participate in the actions. Fornication and adultery are two cases in point. Other actions, though perhaps not consiclered immoral, may harm persons other than the participants. Here, there is general agreement that the use of laws to prevent such harm is appropriate. Whether a pirticular law gets passed, however, depends on the support which can be generated ior it througtr debate, argument, and other means (e.g., lobbying). The recent history of abortion laws is an example of how differing moral judgments are handted whcre there is disagreement about rvhether the rights of innocent persons are being

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I
The first question is in several ways a specious one, though seriously and lrequently raised. It assumes that there are many different moralities, perhaps that each person has his orvn, that each is equally valid, and that there is no rvay to choose among them. When fleshed out as a theory, the position has come to be known as motal relativism. As a philosophical position, it has been refuted at some length,r and I think cogently. For present purposes, however, we need look only at the argument based on the fact of cultural diversity and on the fact of moral pluralism witbin our own contemporary American society. Do either of these facts provide adequate grounds for arguing that there is no morality we can collectively and appropriatcly apply in thc moral cvaluation of busincss practiccs? I think not, for threc rcilsons. First, despite the differences in many customs and moral practices_fro_m society to society and age to age, there is and hii 6een basic- agr-egment.o-n a kl{ge.number of central issues. The most basic agreem6ht,'thoggh-iompletely formal, is that good
should-6e done ancl evil avoided. Substantivcly, ![91"-gt"-UStj,l-requirements-that the members of any q995-!Y _must follorl if it is to survive. Thcse includc, among others, respect for lhc liG-s-g!-itf-rfr-e.Jnbe1s; fespe_c! lgl-t}.,ity,llt (without which it would be iiiipiiisible to communicate and carry <in-social life); and respect for *9!.llyl-gg h9.!pfulness Each society, for instancc, holds thirt it is imrnoral for any-orilin-aiy membCr-rviihout good reason to kill other members of that society. A society may not havc any compunction about killing menrbers of other socicties. But unless a society holds that killing its orvn nrenrbers rvithout sufficient reason is wrong, the society could not long endure. Secondly, even in those cases in rvhich the members of a society are allorvably killed - e.g., executions, infanticide, euthanasia - the society usually has a network of beliefs which justifies the practice. Beliefs differ, however, and some people believe what is false. A false belief may lead to a different.practice than a true belief, but mistaken beliefs do not validly ground a practice. The fact of differing practices, therefore, does not by itself support the claim that there is no way to decide between them. Sometimes there is. In those cases in rvhich moral practices are based on false beliefs, bad reasoning, inconsistent premises, and so on, wc have a means of sorting out practices and choosing or rejccting one rather than another. Progress in morality and changes in nroral practices, in fact, frequently follorv upon tlre grorvth of knowledge and changes in belief. The basic similarity of hunran bcings, for instance,

The pertinent conclusion for our purposes is that the morality which is to be applied to business in our society is the morality which is generally held b1' the mimbers of our society; that this covers a large area on rvhich there is agreenlent:

infringed.3

T-_ilr_] 40 i i Business ethics: its scope and purposc

Moral issues in business

agreement about the morality of business practices and that the claim of ignora:rce about what is moral, based on moral pluralism either cross-culturally or within our own socicty, is largcly spurious.

{islaturc. Secondly, tncmbers of the busincss conrnrunity arc also mcrlbcrs of society. Both should ancl usullly clo ltavc a scnsc of rvhat is inrntor:rl, of rvhat thcy rvoulcl pcrccivc to bc imnror:rl in thc busincss activitics of othcrs, ancl of what the public would pcrceive as immoral in thcir own business activitics. Just as indivicluals do not exist in a vacuum but in a socict1,, so businesscs do not cxist in a vacuum but in a socicty. As part of that society, thcy, as individuals, have responsibilitics to tlrc society as wcll as to themselves. Ignoring unethical practiccs rvhere engaged in by othcrs so that tliey will be ignorcd rvhen cngaged in by oncsclf lcads to the undcrmining of conficlencc in busincss by thc public and rvill eventually leacl to lcgislation or thc widcr public enforccment of moral norms. Thirdly, the vierv that business practiccs shoulcl be restrictcci not by morll considerations but only by legal consiclcrations fails to rccognize trvo points. First, one of the bases for rnaking practices illegal is that thcy arc lmnroral. Second, if immoral practices are not policcd by an industry but arc cngageci in until made illcgal, the resulting legislation is frequently oxccssively rcstrictivc, over-cletermincd, ind more costly than uncoerced compliance with moral norms. Thus, inclustry-wide selfrcgulation is frequcntly preferable ro legislation. Sclf-imposcci coclcs of ethics, if honestly drawn up and followcd inclustry-rvicle (because policecJ by thc inclustry) providing they are not self-serving or a mcans of controlling thai legitimate competition rvhich bcnefits society - can both protect the public intercst-and kcep thc conditions of competition within an industry fair. Our discussion thus far has not acldressccl itsclf to borderlinc cases, and has not suggestcd that it is alrvays clcar cxactly what is nroral and what is not. It has argucd in various rvays, horvcver, that despite thcse uncertainties there is a large are"a of
Ic

immoral is not just a matter of opinion; rvhethcr bribery is immoral is not just a matter of opinion. Tlresc are all matters on which a consensus has been reached (at least in our country, though also in a grcat many othcr parts of the world as rveli), and reachcd for good and substantial reasons. That these and other moral judgnenis cannot or should not bc uppliccl to thc rcillnr of busincss is sinrply not true. Thc nlorlrlity lleld by thc Anrclican pcople is cxplcsscd in thcir nroral belicfs, institutions, and larvs. In arcas rvhere thcre is no spccific lcgislation, thc norms implicd in lcgislation should bc applied. In disputc<l areas, the nroral juilgnrcnts which can be bcst dcfendcd and articularccl should hold sway. yct, thicc points should bc madc. First, rnorality is broadcr than legality. Not cvcrything that is imnroral can or shoulcl lrc nradc illcgal. public rcaction, horvcvcr, is not cxprcsscd only in law. Informcd public opinion can affect busincss, and inrpropcr busincss activitics should bc protcsted in thc markct as wcll as in tlrc ballot bbx or in the

and that, on those topics on rvhich there is clisagrecnrcnt, thcre should be informcd dcbate about the nature of the activity in question, the circumstances, and t5c moral principles rvhich diffcring groups think arc applicable. progress is made this rvay in other areas, and it is the only rvay that progress can be made in this area as lvell. Whcthcr slavcry is irnntoral is not just a mattcr of opinion; whcther cliscriminatiol is

II
Following the economic model, the second group of questions arising from the connection between morality and business can be called macro-moral. These qucstions involve the moral evaluation of entire economic systems or the moral evaiuation of countries and peoples vis-ir-vis one another in the economic realm. Issues of the second type arise, for instance, from the fact that there are at the present time some rich countrics, some poor countries, and some countries in between. weaitli may comc from natural resources or from industrial development. There are scme

problematic. But exploitation aside, whether one country which enjoys

poor ones. Is this a moral question at all, or only an economic one? If human welfare is affected by these actions, as it obviously is, thcn there does seem to be a moral clinrension. But exactly how moral suasion can be brought to bear among nations and peoplcs is far less clear than how it can be brought to bear in a given socicty. From a nroral point of view, the problcm is exacerbated by the fact that we are not dealing with individuals but with countries and peoples; how responsibility is to be assigncd is consequently less clear than when dealing with individual cases. The matter of economic exploitation poses a similar problem. Suppose that a rnanufacturing country did at some time in the past exploit the raw materials of a colony or of an underdeveloped country. Does the former country now owe reparations to the latter? If so, who precisely owes whar, if the exploitation is no longcr practiced and those who practiccd it are now dead? How exploitation is to be defined and how one is to decide whether it was in fact or is in fact practiced remain

pcrsons rvho question the right of any people or of any nation to control the rcsources of a given territory when these resources are needed by others, as wcll as the right of a manufacturing country, for instance, to exploit the natural resources of another country. An example of the first type would be whether oil-rich countries are nrorally justilicd in collectively raising the price of oil to any lcvel thcy likc, regarcless of thc cffcct on the oil-using nations - both the relatively well-to-do ones anci the

standard of .living has any responsibiliry to help another country which has a lorv standard of living or rvhose people are unable to subsist on what they have is a large moral problem, the dimcnsions of which havecyet to be adequately dcscribed. I shall not attempt to solve these problems. ftather, I shall briefly turn to a second type of macro-moral problem, viz., whether economic systems can be moralil' cvaluated. Hardly anyonc would deny that we all have a prima facie moral obligation not to engage in irnmoral practices. So if a given economic system is built on an immoral practice or practices, we havc a prima facie moral obligation not to engagc in thc system. But shorving that any economic system - which is always bound up with the

a high

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Business ethics: its scope and purpose

Moral issues in business

how machines multiply the value produced by human labor. An individual worker rvho has to gather his own rarv materials, fashion his own tools, and make whatever he produces individually should get the value of what he'produces, with industrialization, however, the labor power of a worker is multiplied by the machines he uses. If a worker today using machines can make ten times as many shoes as he could makc without machinery, does it follow that he should be paid ten times as much? It would seem not. For in the first place, as Marx saw, someone has to pay for the machines. More importantly, it took the creative genius of someone - not the particular worker who uses the machines - to invent the machine. It also took the initiative of the entrepreneur who risked his capital and the invested capital of the stockholders who put up the money for the enterprise. so although the worker is able to produce a great deal of value in a short amount of time due to the multiplication made possible by machines, all the credit should not go to him, nor therefore should all the value of what he produces. on this first interpretation, if all of the owner's profit is stolen from the workers, he gets nothing for initiative, risk, in,rentivencss, and so on. ?. A second interpietation maintains that the owner's profit is not entirely theft but is so rvhen excessive. with the rise of labor unions, workers banded togeiher to force management to share some of the profits that an enterprise realizes, to improve working conditions, to shorten working hours and days, and to get legislation pissed that favors or protects them in various ways. If the difference between what the owners and managers of an industry get and what the lowest paid worker gets is too great, this may be unfair for some reason. A system of taxation or some other form of redistribution may well be in order. Bur this is compatible with private ownenhip of industries and admits that a certain portion of surplus value mayiegitimatety go to the orvners of industry. Nor for similar reasons can the case be made out that capitalism or some variety of it has been able to continue because it has shifted its exploitation from its own workers to underdeveloped countries and it is those workers who are being exploited. The argument concerning individual workers in the country in question parallels the above analysis. If it is claimed that the country as a whoie is eiploited by the richer country, then the technique of exploitation must be characterized otherwise. If this was the case in the relation between mother countries and their colonies, then it does not seem to have been the case because of capitalism. Industrial countries today still import raw materials from other countri;s which are sometimes less developed. This fact by itself does not equal exploitation. Morbover, the raw materials can be sold to countries run more or less on the capitalistic model or to countries run on the socialistic model. The price at which the materials is sold does ;rot depend on the economic system of the buyer country. Hence, the case cannot be sustained that the capitalistic countries depend on exploitation unless the socialistic countries are to be blamed likewise. The evil, in that case, would not be an evil of capitalism, but an evil of well-to-do or industrial as opposed to poor and non-. industrial countries. This kind of charge would then become the kind we looked at

legal, political, and social system of a society - is both inhercntly immoral and practicably replaceable is frequently no easy feat. we can rest secure. in the morar judgment that sravery is arways prinu morally wrong and to be avoided. We can be less sure that because they were facie built on slavery, ancient Greece or Rome or Egypt were immoral societies. Fo, ,ue ,noy have some doubts about rvhether, in those cases, there were any viable better alternatives. I am not arguing that there were not; I am simply afdrming triii-nor every primu facie immoral practice must be avoided, since some such praCtices may be the least bad of the available alternatives. Nor should the judgment ihat rlauery is immoral be confused w.ith the judgment that everyone in a slave-holding society is acting in a subjectively imm_oral way. For they rnay not realize that the practice tirey are engaged in is immoral. Yet despite these caveats, we can be sure that slavery ii an immoral economic - as well as social and political - system for prescnt-day Americans to adopt. Granted, therefore, that economic systems can be morally evaluated, we can legitimately ask: is the capitali*tic system inherently immoral? itrougn it is not clear that Marx himself raised horal objections to capitaiism, Marxists ceriainly have, and some of them have come to a negative conclusion. How valid is this assessment? Four arguments have been used to show the inherent immorality of the capitalist ' system. one holds that capitalism is built on the exploitation, and so in a sense on the cheating or robbing, of either its own workcrs - thc prolctariat or thosc of less developed countries. A second and related argument says that capitalism involves a kind of slavery - wage slavery - which is as immoral as physical slavery. A third claims that capitalism yields alienation and similar ills and is tirerefore immoral. The ..,i.,fourth claims that though capitalism may not have been immoral when it was i/' necessary to develop the productiv. ,".nu."., which alone could raise the standard of living of mankind and make a better life possible, it is now restrictive, hampers further development, could and so should be replaceci by a preferable from a human and so moral point of view - alternative. The last claim is not that capitalism is necessarily immoral but that it is immoral to choose it over some better available alternative. We can examine each claim in turn.
attributed to Karl Marx. Marx's interpretation of the labor theory of value holds that the only way an entrepreneur can make a profit is by paying his rvorkers less than they produce. He does nor claim this is immoral. For they are paid what their replacement value is, and so in that sense they are paid what they are worth. But the entrepreneur profits by the discrepancy between what the workers produce and what he pavs them, and, if successful, he, not they, gers rich. The vierv that maintains that the appropriation of surplus value by the entre-

The claim that capitalism is built on the exploitation of workers is sometimes

preneur is stealins. and so inherentlv immoral. ho*'ever. must hold that all value belongs bv right !o rhe person .',ho pioduces ir. There are a nunrber of good rcasons rvh"'this rieg' should not be held. First of all, ir does not take sufficient account of

Wpcan(l

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Il

Moral issues in business

L'"

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above; but it would not be the kincl of claim we are prescntly examining, viz., that capitalism as a systcm is inherently immoral. The claim tirat exploitition is not hold up rvell undcr analysis.
neccssarily ingredicnt irr capitalism and that it is inherently immoral, therefore, does

sllverv is almost as brtd as absolutc physical slavcry

'lhc sccond attack nanrely, that capitalism involvcs wagc slavcry and that -

wage

that they rvork under inhrrnran condirions; that thcy are forced by thc systern to work at rvhatevcr job is avlilablc; and that noI only hcacls of houscholds but all mcmbcrs of a household, snrall children includcd, are forccd to work undcr inhuman conditions. This is thc situation NIarx so poignantly dcscribcs in Capita!. Llacl his analysis that thc plight of the rvorkcrs woulcl gct rvorse and worsc until thcy had notSing to lose but thcir chains bccn truc, thcn it coulcl wcll bc arguccl that the rvorkcrs had a moral right to scize thc irtstrurlcnts of protluction lncl changc the system. For the systcnr would uot alloiv thcnt to dcvclop thcir hunran potcntiality, rvould deprivc thcm ot' human dignity, and rvould rcnd socicty dangerously apirt. If that is the rcsult of capitalism, thcn it should bc rnorally condcnrncd. Evcryonc in the society would be alicnatcd, sct one against anothcr, lose his sense of hurnan dignity, and bc alicnated not only in labor but also in socicty, in politics, ancl so on. BuI oncc again, that situation docs not sccm to bc a ncccssary ingrcdicnt of what has come to be called capitalism. If thcrc ever was such a situation as that dcscribed (it never got quite that bad, and so Marx's revolution ncver took placc in rbe capitaiist countries of thc West), thcn it could be branclcd inrnroral, just as slavcry is biancled inrnroral. But that situation docs not prcvail toclay, and wc cannot thercfore validly make the claim that thc cconotttic systcnr oI thc so-callctl capitalist countrics is inhcrcntly immoral because it involves workcrs in such clehumanizing, slavc-like conditions. 3. The third claim is that private orvncrship of thc mcans of producrion results in thc alienation of man from the product of his labor, from thc labor process, from himself and other nlen. There is something rvrong rvith a socicty tliat vaiucs goods more than peopic, that dchum:lnizes people in thc labor proccss, and that firgments human beings into competitors, preventing them rrom social cooperation rird mutual respcct. And if it could be shown that thesc rverc the rcsults of private ownership of the mcans of production, we would all have to agrcc that any system built on such oivnership is inhcrently immoral. The link bctrveen such conditions and their source, howcvcr' is not a conccptual one but an cnrpirical one. An<i it seems clear that in those socictics in rvhich the private ownership of the mcans of production has bcen donc away rvith, there is no perccptibre dccline in alienation, in ihe desire for goods, in the dehumanization that is toleratecl in factorics, and so on. And in societies which continuc to have private owncrship of the means of production, wc find growing nunrbers lcss intcrestcd in goods than their parents; we find a stronger defense of human rights thrn clservhere; we fincl a consciousness that certain typls of work can

might be plausible if ir could bc sho*,n that capitalism pushes workers down to a lorvcr ancl lorvcr lcvcl of life; that thcy have no bargaining porvcr ancl are depcndent for thcir subsistence on sclling themsclves to the owners of the nreans of production;

is also clcfcctive. Thc vi6v

4

be dehumanizing and stultifying and attempts to change such conditions; and we find not only competition but also cooperation and a willingness to work together. I-Iow lve deal with alienation and dehumanization are real problems which we must facc. But that they are thc rcsult of private ownership of the means of producr,ion and will disappear with the disappearance of such owncrship seems clcarly not to be

truc.

The fourth charge hus thc most plausibility. The claim is that capitalism was nor (and so is not) inhercntly immoral. It was historically necessary to develop the industrialization without which mankind could nili proAuce ihe-wealth and the goccs n...rri.y for it'to increasc its standard of living and of dignity. But the capitalisl system now scrves as a brake, precluding the distribution of the wealth it produces for thc benefit of all mankind; it fosters conspicuous consumption; it continues alicnation whcn it would be possible to eliminate or at least substantially reduce it; it protccts the vcsted intcrcsts of the rich at the expense of the still poor; it stands in the way of change. It thcreforc prcvents the development of a better, fairer, juster, more moral, humanly preferable society. The charge is not that it is inherentiy unjust but that it is morally wrong because it inhibits a system which is morally

prcfcrablc. several claims arc bound up in this charge, and it is well to separate them out. The first is that thcre is a better system rvhich would be non-capitalist, or at least noncapitalist in thc sense that capitalism exists in some countries today. What the morc moral alternative would be and how to achieve it, howevcr, are crucial questions. The Marxist position is that the more moral system would be communism, which would have as its first essential ingrcdient the abolition of private ownership of thc mcans of production. But what is to take its placc? The model of the Soviet Union suggcsts that state capitalism takes its place. Are the workers better off in the Soviet Union than in the United States? No. Do they enjoy a higher srandard of living? No. Do they have morc control over their work and working conditlons? No. Do rhcy havc a lcss repressive government as a rcsult of their non-capitalistic econcmic conditions? No. They have, in some respects, more security. But that they have more frecdom for self-development and self-expression can at lcast be argued. Alicnation has not disappeared with the abolition of private ownership of the means of production. So if the Soviet model is what is to replace the capitalist model, nct only from a human point of view but even from an economic point of view, the case has not been made that capitalism as practiced in the United States is prcventing Anericans from enjoying the better life available to them if they switch to the Soviet model. Thc planned cconomy of the state-owned system has not shown itself superior to the individual initiative still possible in less planned and at least partially privately owned systenrs. The soviet model, of course, is not the only possible alternative, though it is one frequently suggested by Maniist critics. A system of non-soviet socialism is another alternativc; a mixed system is a third possibility; and there are others. But among thcse, rve should consider each on its own merits, first to see if it is in some wavs

icl t-_-.-Eqry::

cthics: its scope and purpose

Moral issucs in business

justice for the society, as well as how justice is to be weighed when it comes into conflict with welfare, liberty, and other values which are socially important. T'he 0 clcvelopment of a theory of justice, not only an ideal theory but also a theory by which we can determine present-day injustices and the proper remedies for past injustices, is required. We do not have an adequate comprehensive theory as yet. Nlany competing claims are made even in the name of distributive justice: allocation according to equality, need, effort, achievement, contribution, ability, and so o,n. These must be weighed and balanced as best we can with each other and with
commutative and other kinds of

supcrior. we have no clear modcl that has developed historically, no particular

society which u'e cirn turn to as the moral moclel to emulate. Secondly, if rve clid have a nrodel, we rvould still havc the question of how to arrivc at it in fact. Seizure of the nrcans of production in the Unitcd Statcs, for instance, seems both unlikely and implausible. For what rvould the rvorkers do once they

scized control? Workers, through their retirenrent plans, presently control large portions of the stock of major industries. What they want is rvhat every stockholder wants - they want their stock to go up. They are not demanding that the courpanies be run differently. The counter might be that they must be taught to want the companies to be run differently. If there is goocl reason for such a claim, then they shoulcl bc taught. But exactly rvhat that rvay is, is still not clcar. A workers' rcvolution is not in the offing; and a led revolution runs all the dangers of ending up
rvith a totalitarian government at the helm. The Amcrican svstem is clearly not rvithout fault; it hus in.rntoral aspccts, it includes immoral practices, it does not achieve distributive or social justice, it is not lilhout comrption. it contains unjustifiable inequalities of s'ealth. treatment. and so on. As these are slos'lv or rr,ore \igorousls correctc-d. se trrt]- develop a kind of scr::1.'ih3l no lon:er dcs:nes the name oi caoilalism. But the arguments rve have loolted at do not shos that the svslern as a rrhole desen'es moral censure, nor do thev present us rvith a better viabie alternative. \\'e havc no moral panacea to apply; \\'L- haYe no utopia *'aitinq to ire qrnspcd or fclrntcd. Brrt \\,c ckl huvc llossibilitics for itnprovcnrcnt rvhich rvill ntakc our socicty, and scl our systcnt, rnorc ntoral. Piecemcal change, howcver, from a moral point of view, brings us :rway from what I have termed the macro-moral questions of evaluating worldrvide problcnrs of justice and the morality of s1'stems, to a consideration of micro-moral problems - c.g., the morality of particular practices, statcs of affairs, and so on within a givcn system.

justice.

is just, a second set of questions arises in L Even with a definite notion of what trying to apply any given concept of justice of particular cases. Since no two cases are cxactly alike, it is often difficult to know exactly how to apply the principles. Easy cases can be handled. The more difficult ones pose moral problems which can be resolvcd only by discussion, debate, and ultimately by making some decision on the basis of the best information and insight available. A third group of moral problems arises from a conflict among different values, 1especially when there seems to be no good alternative. Justice, security, liberty, productivity, efficiency, and other values frequently conflict, with no optimal solution available. Here the determination and choice of the least bad alternative is the best
rr

i:
t., :1

'

can do.-' 'one T[c fourth kincl of moral problem comes from the development of moral insights

III
Micro-moral problcms arc not less important than macro-moral problems ancl do not deal necessarily rvith small issues, but they take as their framc of refercnce the existing situation und seck to'makc judgnrents rvithin the systonl rathel thuu about thc st,stem. .) Since I clnnot in the space of a short essay even begin to enumcrate the vast array <lf micro-moral problems, much less solve them, I shall simply categorize lL ferv of
them.

and tltc task of applying them to previously accepted practices. For a long while in thc United States, for instance, segregation was generally accepted, at least in some parts of the country. Though now seen as immoral, and though it is now recognized that it rvas immoral when practiced in the past, it took a long while and a whole program of reeducation to get people to see this. Discrimination and sexism are other cases of this kind. IJow many othel practices do we engage in without the consciousness of their immonality? Some claim that our treatment of animals, cspccially in slaughterhouses, is immoral. Only in the fairly recent past have we comc to consider the industrial pollution of the environment to any serious degree inrnroral, and have wc acted to make some instances of it illegal. It is not always clcar rvho is moratly responsible. If the pollution of the air by automobiles is injurious to the health of all of us, do we have a moral obligation to drive less or not atl all, or to force manufacturers to build cars with antipdlution devices? Are the nanufacturers morally culpable if they produce automobiles which do not have such
devices?

Thc problems of morality in business, taken rvithin a given framcrvork or cconomic system, ciin be divided broadly and some*,hat arbitrarily into six kinds. The first of these concerns the determination of thc justice of distribution of resources. It involves questions of the right to property, questions of ownership and use, questions of just \\'ligcs, return on capital investment, lppropriate rervard for risk and skill and invcntiveness, as rvell as questions of providing for the mernbers of a society so that thcy do not flll belorv a certain lcvel of rVelfarc or respect. All these questions dcnrand for their solution prior agreenrcnt on what in general constitutes

i'

The fifth general kind of moral problem arises from new activities, products, and tcchniques. The problcms raised by scientific advances are in some ways new problcms. We now have the capability of wiping out the human race, of despoiling the cnvironnrent in a way that will make it unfit for future generations, of using up unrenervable resources, of manipulating genes, and so on. Each Of these problems h;rs aspccts that affect business: whether industries should engage in the production of certain materials and whether rvorkers should work in such industries-

Lastly, and perhaps most prosaically, are the questions

of the application

crf

Eil
ordinary acccptctl moral valucs and prohibitions in thc conduct of business and industry. It is gcnorally acccptcd that lying is rvrong; that stcaling is wrong; that harming anothcr is rvrong; that giving and taking bribcs is wrong; and so on. Each of thcse leads to specific cascs in busincss as well as in other branches of lifc. If lying in advertising can nrakc more money for a company, should a company do so'l What exactly constitutcs lying in advcrtising? Florv near to lying can onc comc? How much exaggcration for cmphasis is allowed? Horv rnuch must one disclose about the bad parts of onc's products? Is telling half the tluth tying? Whether these qucstions are asked about a corporation or about mcnrbcrs rvithin a corporation - cither of managcment or of workers - thcy arc not new questions; nor do they raisc really new f, problems. The obligation to be moral applics to all aspects of our lives, and our business activities are not cxcmpted. This does not mean that morality is always obscrvcd. And rvhcre it is not self-inrposcd, thcrc is thc nced for its bcing imposcd i from thc outside rvith appropriatc sanctions to preservc thc common good. Thc case of bribery to foreign govcrnment officials in the recent past is intcrcsting. .L The argumcnt advanced in defcnse of the practice was that in dealing with certain foreign officials, since bribcry was a way of life for thcm, a business could not successfully compete unless it paid bribes; if it did not, other companies from one's 'i own nation or from other nations would pay them and win the contracts. . Whcn thc practicc was discloscd publicll', it rrised a small furor in the Unitcd ' Statcs. It led to the dismissal of a number of officers of corporations. Some clainrcd that it rvould placc Amcrican busincsscs at a disadvantagc. The rcsults, howcver, are noteworthy. Gulf Oil was involved in such practices, and several members of the ' Board wcre forccd to rcsign. Since thcn, thc corporation lras bccn following a strict set of sclf-imposcd rules with regard to bribes. Dcspite this, it has been able to

Moral issues in business

iq
f'

t".

'

competc successfully. And in some countries in which bribes were previously the way

of lifc, officials have come under

prcssurc themsclves and have been forced to reform the practicc. Public disclosurc of imnroral practiccs in this instance servcd to help reform thc practices not only of Amcrican companies but of companies and governmcnts in other parts of the world as rvell.

public debate should be articulate, informed, intelligible, clear, and should proceci in a rational manncr if a rational conclusion is to be reached. It should be frce oi dcmagoguery, or at lcast, people must learn how to distinguish the demagoguery from the reasoned argument. People can and should be trained to think ctcarly on moral issues, just as in other areas. The moral philosopher can attempt to dcveltp a theory of morals which accounts for and coheres with our consistent moral intuitions, and there are disputes about which theory does this best. But most theories agree in large part on which actions are moral and which are immoral. we cannot wait until all thc theoreticai issues are all solved before we undertake practical moral problems. Moral education helps all the members of a society take part in the debate about the common good, about the values to be realized and sacrificed, about the balance to be struck between justice and welfare and liberty, and so on. It also heips each membcr of socicty to bc more conscious of his own responsibility to act morally; it motivates him not to engage in immoral practices either on or off the job; and it makes him scnsitive to the possible immorai practices that can be found in the business world as well as in any other sector of life. Many facets of our system have not yet caught up with our social needs, and the people as a whole, as well as the managers of business, have not yet faced up to the social responsibilities - much less devised techniques for handling them - of businc:;s. It is inhcrcntly easier to decidc how to produce a product at the best price than to worry also about the social impact of that decision. But the wags who wink at immorality in busincss, arguing that ethics and business are two separate spheres and never the twain shall meet, are short-sighted and look only as far as the last line of thcir financiai statements. Society is larger than that; business is part of society; an<l ethics has as much a place in business as in any other part of social life. when all mcnrbers of society realize that fact and act accordingly, society will be that much
bettcr off. NOTES
Sec, for instancc, W. T. Stace. The Concept of Morals, N.Y.: Thc Macmillan Company, 1937; Paul Taylor, Principles of Ethics, Encino and Bclmont, Calif.: Dickenson Publishing Co., Inc., 1975; Brand Blanshard, Reason and Coodness, London: Georgc Allen & Unwin Ltd., 1961. A uscful collection of cssays on the topic is John Ladd (ed.), Ethical Re[ctit,isrn, Bclmont, Calif.: Wadsworth Publishing Co., Inc.,-1973 2. Scc his Essays itt Sociology and Social Philosophy, vol. On the Diversiry of Moruls, London: William Hcinemann, Ltd., 1956. 3. For furthcr dcvclopmcnt of this point, sec my article, 'Legal Enforccment, Moral Pluralisn and Abortion,' Philosophy and Law: Procecdings of the American Catholic Philosophicet Association, XLIX (1975), pp. 171-180.

l.

IV
ivloral philosophe rs do not havc all thc answcrs to all moral problcms and dilemmas. Somc nroral philosophcrs arc skilled at moral reasoning; some know the ways by which moral claims can bc defcnded or prcscntcd better than those untraincd, But they do not havc any nronopoly on knorvledgc or rnoral values. They cannot and should not bc expected to solvc moral riddlcs. But they can bo expected to clarify moral alternatives, articulate nroral values, and pass on techniques of moral
rcasoning.

l:

If

my claim is correct

tions of busincss ethics is the socially acceptcd morality, as opcn to correction and development - thcn disputed questions should be discussed openly and publicly. The

that the morality which should be applied to

ques-

trti
VERNE

Business ethics: its scope and purpose

I

The ethical side of enterprise

The ethical side of enterprise

Il.
IIE,NDERSOi."

TIIE NEBD TO DEFINE ETIIICS

As a scnior corporatc executivc rccently describecl the major problems his firm faces in contemplating joint ventures abroad, it becarne clear to rne that his primary
concerns were ethical ones. For instance, how do you establish trust and share risk? FIow do you deal with two governments that have significant cultural differences?

'I

'What! Another article on busincss ethics? What are they trying to ram down nry throat this time?' This is a common reaction by busincsspeople to what is becoming the latest fad. Peter Drucker recently called it that and stated flatly that thcre is no such thing as'business ethics.'1 Horvever, there is an ethical side to cnterprise, and Drucker's article convinces me that it is not rvell understood. In Death in the Afternoon, Ernest Hemingway wrote that 'What is moral is what you feel good after and what is immoral is rvhat you feel bad after.' Ethics is differe nt; it is what you do hoping that others will feel good after. My expcrience indicates that business manrgcment is particularly wary and sometimes even incensed rvhcn ethical issues are raiscd by spokespeople from thc religious

What motivates top management to undertake such complex efforts? These joint ventures are new cultural configurations in the marketplace and, as such, they rvill cause us to question old values and to establish new ones. The role of the ethicist is to aid the manager in negotiating the uncharted depths of this new environment, But first, the term 'ethics' must be defined.
A Static Definition

comrnunity. R. FI. Tarvney noted the prevalencc of that attitude more than half a century ago: 'Trade is one thing, religion is another.'2 Yet my conversations with businesspeople reveal their frustrations and concerns: 'How can we talk about ethics without raising fanatical religious or denominational flags?' 'Can't we find a fresh approach, some new words, or something so that we can talk about a subject we all

Ethics is commonly dcfined as a set of3rinciples prescribing_a_behavior codc that exp.!!ni -whatjs-good_a1d_iight-or-bad-a-nd--rruronfl it ma1_gven out!41mggal duty,and g-bligqtlo.qr gqterally. However, given the dynamic environment in which.
brlne_;smust-gp"r^le*1g-g_0fr 11t!_.gL;ntlo@beusef ul. It presumes a consensus about ethical principles that does not exist in tIiIllili6fisiic age, The absence of such a consensus can be attributed to numerous changes that

As a'spokesman from the religious community, I affirm the need to removc religious brand names and dcnominational labcls. Moreover, I believe that this new age of ever-advancing technology will require signilicant ethical innovation. The word 'ethics'should generatc a new set of feelings and perccptions. Ethics in the broadest sense provides the basic conditions of acceptancc for any activity. The ethicl-of i game or sport both implies its purpose and specifies rules of fair play. Business schools, for example, have traditionally focused on what rve might call the business side of enterprise (finance, accounting, economics, mlrketing, forecastin-q), explaining the rules rnd imparting lvinning tactics. The human and the legal sides of cntcrprise have assumcd increasing importance as the rules and tactics have become complex and the unresolved disputcs numerous. Out of weariness and frustrrtion, we ask a basic cluestion: Should tvc play this game at all? Of course, we have to plav. Business, after all, is a survival activity, isn't it. . . putting food on the table? So instead rve ask: Can't rvc play the business game diffcrently? The cthical side of enterprise emerges as this questioning of corporate activity grows in breaclth and depth. At the macro level, one may clucstion the legitinracy of both the corporation ancl capitalism as a viirble economic system.3 This article focuscs on the micro level, addressing the specific decisions of enterprise on a variety of issues.
Rcaciing takcn frorn Sloan llatngenrnt Review,,23, pp. 37-17. Copyright @) 1982 by Slorn Mirnagement Rcvicrv Association. Copyright @ 1990 by McCraw-l lill.

secretly.know is very important?'

have occurred over time in the business environment, including the growth of conflicting interest groups, shifts in basic cultural values, the death of the Puritan ethic, and the increasing use of legal criteria in ethical decision making. Ivlultiplc Clients Edgar Schein cites the increasing number of clients and interests the
manager must satisfy: the stockholders, the customer, the community and/or government, the enterprise itself, subordinate employees, peers and colleagues, a superior, and perhaps the standards of a profession.a Since these clients may possess different and sometimes conflicting expectations, their ethical assessments of a management decision are also likely to differ. With so many clients and ethical expectations, it is ncver easy to know what is right or which client to heed. The multiple clients (or constituencies) factor requires a careful balancing of priorities and a situational approach to ethical issues.

Shifting Valucs George Lodge argues that a new American ideology has emergcd as a result of five major shifts in basic values within the American culture:s

1. Frorn rugged individualism to'communitarianism';

2. From property rights to mcmbership rights; 3. From conipetitive markets as the means to determine
societal determination of community needs;

consumer necds to broader

4. From limited government planning to explanded and extensive government

planning; 5. From scientific specialization to a holistic utilization of knorvledge

l_.sz__l

I eusi"9tt_.,hi.:l$j9gq9

and purposc

The ethical side of enterprise

in valucs can givc risc to two rypcs of ethical clilemnras. First, an industry can be divicled in its loyaltics to both olcl and nerv idcologics (i.e., to a frec market vcrsus a controlled market). Second, socicty at large rnuy U" 4ividecl in its loyalities to the needs of an industly vcrsus the necds of the environmcnt.. These are I tough choiccs: open markcts or managcd markcts; industry or thc cnvironment. Such ,r shifting values increlse individuals' and hrrns' unccrtainiy rcgarding ethical issues.
Thesc shifts
idcology over anothcr or onc constitucncy over another.

- rcsolvecL by-simply choosing onc Morcovcr, this unccrrlinty is nor likely to bc

1 v , \ll, ''

,, "

Dcath of the Puritan I'lthic Accorcling to Daniel Bcll, thc 'Puritan tcrnper' or .protcstant ethic,' rvhich allcgedly inspircd thc spirit of capitalism, is dying.6 In the past this ethic promotcd hard work, thrift, saving, modcration, and cquality of opportunity or I{owevcr, commcrcial succcss has spawned confradictory .means. valucs that enrphasize leisure, spending, clcbt accumulation, hedonisrn, and equality of condition or ends. The major conscquence of this change is the erosion of a unifyirrg soci:rl ctltic. Tlrc flrct tlurt thcscl two cthical systcrus .rirt ri,r.ruttu,t o1'r,,fy rnotivatcs and justifics a schizophrcnic lifc-stylc whcre onc is cncouragecl to bL 'straight' at work but a 'swingerl on wcckcnds. It is harclly surprising thainranagers often concede that thcir most vcxing cthical dilcmnias involue pcrsonnel. Identical dcvclopmcnts arc eviclent at the corporatc lcvel. JoSn K. Galbraith pcrccives a dichotonry rvithin the productio,n systcm; hc labcls onc part a planning system and the other a markcting sysrenr.T The inordinatc power or tne ptannin! system of large corporations gives them a nronopoly over consumer needs; they evei determinc which necds will be servecl. If this is truc, it means that large cbrporations havc also dcscrted the Puritan ethic, that their only ethic is survival and ielfpcrpctuation, and that their prirnary constituency consists of themsclvcs. Thc death of the Puritan ethic as thc ckrnrinant cthical forcc in socicty has lcft us visionless. The individual and thc corporation, confronting contradictions which foster uncertainty, turn inwarc.l ancl rcsponcl to thc onc constiiucncy over which they have some sensc of ce rtaintv and control - thcrnselves.. Achievement horizons arl shortened: individuals expect rapid promotion, ancl corporations focus cxclusivcly on quarteril, progress. Larvl'ers as Pricsts We used to bc able to look to rcligion for ethical guiciancc; the priest tvould biess and legitimize our cntcrprise. That is no Ionger the casc. In fact, thc cntrt' of brand-namc rcligion into the r:'rarkcrplacc ,.",rli to riividc loyalties

the law' stone documents numerous cases in which regulation of business by law has bcen ineffectivc. In addition, such regulationcis rarely cost-effective, and it usually produces unanticipated and/or unacceptable cansequences. Thus, while our growing dependence on the law as a substitute for ethics may be understandabte, il is noi ncccssarily desi rablc. A Dynamic Definition

Yet this equation has its limitations. Christopher Stone argues that neither the i 'invisible' hand of the market nor a court of law is capabt! of delineating and enforcing the principles and behavior needed to soive soclety's problems, altirough both can play a positive roie.8 In his description of the history of corporation, oio

,;.

]lniOr,y lbuslness game have become increasingly uncrear.

[:.:T::

changing times, both the undertying purpose and the rutes of the

one consequence of these changeo is that ethics can no longer be viewed as a static code or a set of principles that is undcrstood and agrccd upon by all. charle{sv/qrs and David vogel addrcss this problcm by providing a simple but dyiami-wotI;_d_editjonlfe_-sjncrcthics_is_: qlellytg^-what condiiiutes@L{et*.9!4]lc, promotcji,'s.--_-

,y

':'

colcg111-eg[_yith-

ncccssary to

. '

least not until they are elected to legislative officc). But, as boih practitioners and lcgislators, lawyers increasingly servc our culturc as thc priest once did. Thc law dctcrnlincs rvhlrl is risht and inrplicitly blcsscs it. In cffcct, ihc cquation sccnrs to bc: if it's lcgal, it's crhical.

further and inhibit cthical cliscussion. l'his vacuunl has becn {iliccl by thc lcgal profcssion. Larvyers maintain that they only interprct thc larv ancl that they do not makc it (at

The first part of this definition implies both a constellation of values and a process discussion or debate. while some values will be widely shared, inclividuais and groups will somctimes differ on 'what constitutes human welfare.'The powers and Vogel definition is particularly suitable to the u.S., where no .ultimate aurhority, issucs quick, precisc answers. Rather, the process of clarification is an ongoing response to changing values, emerging technological or economic developments, and shifting political forces. For example, government's increasing role as an incomc transfer agent in recent years signifies a change in-the definition of human welfarc. Thc fact that some portion of the nationh_l iircome is Oisiributed on thc basis of ncctl rathcr.thiln mcrit affirms a particular pcrception of economic justice. Lester Thurow notes a correlation between environmentalism and income distribution, suggesting that environrnentalism is one ofuhe-newes!,gellsllmer wants for those wtr,ie- uasic 0 n e c d s a]1e3 df !j'T"-tj6"n-i6iGfi. d. Th i s-- re--p re slii-a- tu rt tr e r ,-efi n6-e n t o f t h c dcflnltlon of human welfare. The second part of the Powers and vogel definition focuses on behavior. once rve havc conceptualized or reached some consensus about what constitutes human wclfare, thc debate then focuses on the kind of conduct necessary to promote that concept of human welfare. For instance, having determined that some nationrl incornc should bc distributed on the basis of need rather ttih merit, we can usc incomc tax legislation to establish a new code of conduct: taking from some and giving to others. In this way a new ethic is established. Most of the regulation of business that began in the last century can be viewed from this tur" p.tr!..tive -a highcr statc of human welfare was clarificd and complem.nto.y .on,luci was subscqucntly mandared.

of

Ery:rt
I i

.rht.r, t,r r.
l

The ethical side of enterprise

E'1

New political and economic forces are continually reshaping our perception of the highest state of human rvelfare and altering our conduct accordingly. At the corporate level, deciding lvhat is good and right or bad and wrong in such a dynamic environment is necessarily'situational.'Therefore, instead of relying on a set of fixed ethical principles, we must now develop an ethical process. In order to do this, this article will next outlinc a conieptual ethiCal frameivoit ancl then present an algorithm designcd to deal rvith ethical questions on a situational basis.

A CONCEPTUAL FRAMtrWORK
Business executives regularly wrestle with thc ncw factors of the busincss enviroument: multiple clients and goals, shifting values and cultural contradictions, and incrc-asing depcndence on legal staffs. Although thc profit-priented corporation rvill naturally focus primaril), on economic goals, decisions that focus exclusivcly on profit maximization are being challenged. Typically, all of these decisions are fashioned with care in the guarded privacy of corporate offices and boardrooms. This is due in part to the nature of the competitive business ganre; undoubtedly, some secrecy is also occasioned by less noble motive. Once a product or service reaches thc market, these decisions face exposure to public scrutiny. The process has become even more complcx in our turbulent environment. Focusing on legal considcrations, let us assume that thc vast nrajority of busincsspeople intend to function within the boundarics of thc law. Unfortunatcly, the legal status of an increasing number of manufacturing or markcting clccisions is unclear when thcy are initially conccivcd and put into operation. Public scrutiny of thcsc decisions (by

Practices Act of 1977. Under this law, of course, it is illegal for U.S. firms to make payments to foieign officials or governments. Yet, some would argue that the Act itself is unethical insofar as it restricts international trade and thereby diministres both human welfare and our national interest. When the Act was proposed, the Securities andl Exchange Commission took the position that secret payments deprived current irnd prospective stockholders of potentially relevant information about company operations. The Internal Revenue Service questioned the deduction of such payments as busincss expenses. In effect, the Act was passed to satisfy a constituency that includes an unknown percentage of domestic and foreign consumers, unidentified current and prgspcctive stockholdcrs, and an agency of the federal government (which presumably acts on behalf of taxpayers). But are there consumers, stockholders, and taxpayers who would take a different ethical stance? Probably. None of the available choices satisfies the total constituency; this is characteristic of ethical
dilemmas.

' I I

Congress, a t'edcral or state agency, or perhaps some othcr client) oftcn raises questions of legality. In cases rvhere somc larv or legal preccclcnt exists, a clcar determination of status can be achicved (although this may takc years). Over time many products and services havc fallen frorn presumed legality into illegality, including cyclamates, DDT, firecrackers, recombinant DNA, and payments to foreign officials and governments. Thus, not only must products and scrvices face final acceptance or rejection by thc consumcr, but their legal status ntay change as new information becomcs available. According to ()ur d1'namic dcfinition of cthics, cthic;l issucs cmerge rvhen our perception of what constitutes human rvelfare receives or requires clarihcation. More specifically, ethicrl issucs arise when larvs or lerral precedents arc c:ither unclear or at variance rvith shifting cultural values. The proliferation of multinational and transnational corporations has providccl numerous examples of this process. Positioned betr.veen two or more legal/ethical systems, tltesc {lrms facc scrutiny by publics that ma)' differ radically on signi{icant issucs: the use ancl distribution of nraterial resources, the soLrrce and exercise of authority, perccptions of tirne, measurement of productivity, ancl the use of competition as a motivating force. These differences alter ethical objectives and their complementary customs and lcgal sanctions. Nlany multinationals have been affected by the existence of the Foreign Corrupt

The issue of foreign paymcnts illustrates how ethical questions develop from corporate decisions that are privately conceived and executed in advance of public scrutiny and without clear legal or ethical precedent. Aside from blatant corruption and dishonesty, the above process describing the emergence of ethical issues accounts for much of the consternation and confusion about business ethics today. It is the failure to understand and anticipate this process that creates the vast majority of cthical dilcmmas. 'fhe conccptual framcwork dcscribcd above is summarized in Figure 1. The inner circle of this figurc rcpresents corporatc decisions before they are revealed to the public. Once thesc dccisions are manifestcd (middle circle), they may become the subjcct of considerable public debate. The result of this debate is the codification

Figure

I A conceptual framework.

trl @s*rt ",rri.r t,J*,,".1 l;;";

proccss (outcr circlc), in which socicty cictcrnrincs thc lcgal and cthical status ofcach

The ethical side of enterprise

t4
be

our conccptual framework, the ethical perccptions concerning an issue nrust

dccision.

Onc qucstion continually confronts business exccutives as thcy privately ponclcr alternativcs: What happcns rvhen our decisions become public? This qucstion can be particularly difficult to answcr, sincc thc lcsal ancl ctlrical status of a dccision may changc ovcr timc. Dccision nrakcrs nccd to answer thc question: into rvhich cluadrant of Figurc 2 rvill :rn issuc with cthical inrplications fall? Consider the busincss cxccutivc who aspircs to function in Quadrant I. When lris or hcr decisions bccome manifcst and codi{ied, they will provc to be both ethical ancl lcgal. [n thc past this was a rcasonablc cxpcctation for nrost dccision makcrs. Whilc it is dangcrous to make assunrptions about the intcntions of busincsspcoplc today, it sccms that morc of thcir dccisions norv fall into Quadrants II, III, and IV. In Quadrant II (cthical and illcgal), we find a lrost of controversial issucs th:rt dividc the country bccausc thcir cthical and lcgal statuscs conflict: selling marijuana, 'rvhistlc blorving,' windfall pro[its, an<l pavrncnts to foreign officials. Whilc n.rany indivitluals will itilcmpt to rcsoh,c such conllicts by focusiDg on an issuc's legal status, thc cthical questions surrounding an issuc also should bc exanrined. According to

addrcssed before its legal status can bc changcd. This is a time-consuming task that busincss has been unwilling or unable to assume on a large scale. Quadrant III contains another series of controversial subjects those which are lcgal but uncthical. For exanrplc, whilc the marketing of infant feeding formulas to developing countries is legal, a recent vote at the United Nations called it unethical.

(Thc U.S. abstained frorn voting.) The following examples are legal as u,ell, but
somc havc qucstioncd their ethical undcrpinnings: the manufacture of pesticidcs, thc use of laetrile in cancer treatmcnt, plant rclocation based on labor cost differcntials,

Ethical

Ouadrant ll *EiFicafanil illegal

Quadrant l_ EthiCat anu lcgal

and intcrlocking dircctorships. As in Quadrant II, it is tcmpting to focus corporatc attcntion on the legal status of these issucs, rather than on their ethical foundation. In Quadrant IV (unethical and illegal), we find a wide variety of actions that have bccn censured, including discrimination against minorities and women, occupational hazards, disposal of chemical waste, and political slush funds. In these areas, thc larvs arc clear and ethical support is sufficiently strong to silence open disscnt. Whilc somc issues clearly bclong in one quadrant or another, there arc rnany others rvhose status is unclear. How then do wc decide which quadrant an issr.rc bclongs in? This is dctcrmincd not only by which action is being examined, but also by lrcw that action is undertaken. One interesting example is 'whistlc blowing.' To thc extent that some forms of whistle blowing are ethical but in clcar violaticjn of company rulcs or expectations, they may be placed in Quadrant II. However, whcrc such bchavior jeopardizes tradc secrets or national security, wc might want to place it in Quadrants III or IV. Thc fact that whistle.blowing may be placed in any of thcse
cpradrants underscores the turbulence in our lcgal and ethical environments.

The conceptual framework presented hcre'depicts a dynamic environmcnt fillcd rvith lcgal and ethical uncertainty. Sincc decision making in such an environmcnt must frequcntly be based on situational factors, an algorithm is necded that will allow us to judgc cach ethical issuc on its own merits.

ltlegat

A SITUATIONAL ETHIC ALGORITIIM

According to Joseph Fletcher, the basic tenet underlying situation ethics is that circumstances alter cases.lr This theory maintains that honesty is not always the bcst policy - it depends on the situation. In Fletcher's judgment, complex, significant ethical decisions are made based on the situation at a given moment in time, and, therefore, no trvo judgmcnts will ever be the same. As the consequences of business dccisions become more complcx and unpredictable, the situation ethic becomes a neccssity. Thcrc is a danger, however, that disastrous outcomes will be rationalizcd too casily as 'we did the best we could.' Since a situation ethic is without ready-ma(ic answcrs, it is inrportant to devclop a rigorous, rational process for examining ethical
issucs. Such homework should precede the implementation of a decision and scrve as

-unetFibaii-riii

Ouadrant lV iilcgal

.Quadrant lll. Unelhical and legal Unethical

!t
l

[igure 2 Classifving dccisions using thc conccptual framcwork.

the cthical cquivalent of a cost-benefit analysis. Flctcher identifies four factors that can serve as check points in sorting out the

f.-'-i:.l--

I 58 I I Business ethics: its scope

and purpose
I

The ethical side of enterprise

Business is not always happy with morality that is legislated by others. Adopting a of multiple goals (including those previously perceived as constraiuts) builds a stronger, broader ethical foundation for enterprise.

ethical dimensjons of a giicn situation.12 Thcse factors, translated into the business Ircontext, are goals, methorjs, motives, and consequences. Analyzing situations from \these four perspectives constitutes an ethical algorithm which can increase our sense 1of certainty about decisions and ultimately provide a defendable decision-making lprocess. Users of the algorithm plug in their own values as they examine goals, mcthods, motives, and consequcnces. Carcful consideration of these four factors before sclectinr a course of action is likely to yield a variety of significant insights.
Goals

hierarchy

.3coal Compatibility After a firm has identified and ranked its multiple goals, the goals should be checked for compatibility. Because the ethical side of enterprise is intangible and unpredictable, an organization will frequently find that its goals
con{lict with one another. For examplc, onc company thar was doing busincss in South Africa publicly adopted the dual goals of modest profit and effective opposition to apartheid.l3 While profit was easy to measure, 'effective oppositibn to aparthied' proved to be a much more nebulous goal. Different groups applying different standards argued that the firm should use significantly different methods to achieve these goals. One suggestion was for the firm to withdraw from South Africa, thereby sacrificing the profit goal entirely. When it finally became clear that the two goals were incompatible, the company was forced to choose between them.
Methods

The goal structure ol an organization should be examined from the perspectives of

goal multiplicity, constituency priority, and goal compatibility.

Goal Nlultiplicity While profit maximization (subject to certain constraints) is an implicit goal of most busincss corporations, many firms simultaneously pursue other goals as rvell. Moreover, an organization's goal structure is often complicated by the imposition of constraints from outside sources. For example, a firm that relocates to another part o1 the country in order to maximize profits must consider the reactions of public officials and employees. A company that does business in South Africa must weigh the effect of its actions on the 'ethical investor' who is opposed to apartheid. In some cuses constraints such as thcsc can cvcntually function as goals themselves. To the extent that these new goals can be measured, they will Iigure prominently in the minds of stockholders, employees, the government, and various segments of the population at large. Decision makers must be clear about this multiplicity of goals from the outset, particularly if constraints are incorporated into
the goal structurc. Sometimes, however, constraints are not included in the goal structure. Some corporations, for example, treat affirmative action strictly as a constraint. It never becomes part of the goal structure, at least not in a formal sense. Minimum compliance with affirmative action guidelines may be perceived as an acceptable policy, but not as a corporate objective. Such a policy may be difficult to defend publicly, but it illustrates the importance of goal clarity and lhe handling of constraints. Constituency I'}riority Multiple goals can be identified as serving only corporate purposes, a specific national interest, or a minority constituency. Ranking these constituencies in terms of priorities enriches the delinition of the goal structure. In : most corporations, top priority is usually assigned to the enterprise itself and/or the stockholdcrs to varying dcgrees. Secondary and lorvcr priorities are given, for 'example, to a national interest (affirmative action) and a nrinority constitucncy (employee satisfaction), respectivelyi The ranking exercise itself can be illuminating, i spotlighting inconsistencies and potential conflicts within the goal structurc. In , particular, inconsistcncies are like ly to apperr in matching up constitucnt priority with goal priority. Clarity and management consensus arc the opcrational objectives

Before selecting appropriate methods to achievc its goals, a firm must carefully consider the acceptability of various methods to constituents. In addition, the organ- i ization should decide whether these methods are intended to maximize goals:or nrerely to satisfy them; whether the methods are essential, incidental, or extraneous to the goals themselves.
.

"4 acceptability

Constitucnt Acceptability Where ethical issues emerge, the firm must consider the of various methods to its constituents. Today a corporation has more constituencies than ever before. Over time these groups have, voiced a greater number of expectations and concerns, which have resulted in much new legislation. Consequently, manufacturing methods must meet new standards of product and crnployee safety and environmental protection. Increased SEC and IRS regulation governs investment and marketing activities in foreign countries. The passage of ERISA has regulated the vesting of employee pension benefits. As such changes

I
.

i\
I
I

business can help shape them by cvaluating the acceptability of its methods to multiple
1,1

in regulation and legislation continue,

constituencies.

carefully

Ivlethods That Satisfy or Maximize Goals Should the decision maker select methods that satisfy a goal or methods that maximize achievement? How safe is safe? Should

':

in this cxercisc.

a firm simply satisfy affirmative action requirements, or should it make a maximum f elfort to increase the employment of minorities and women? The fact th4t cor- / porations have not really confronted and ansrvered these questions has created ethical confusion. For example, such confusion has arisen in the debate over what constitutes excess or windfall profits. What is a fair or ethically acceptable return on i investment? Over what period of time? The situation ethic algorithm suggests that brrsinesspcoplc must confront such questions as part of the dccision-making process.

@l

Lj:.1""r:

"!lf.'I

r.:q"

artd

-purporc

_.1

The ethical side of enterprise

E
r

Esscntial, Incidcntal, or Iixtrancous it has bccn suggested that thc deccntralization of manitgcntcnt lt Ccnerirl E,lcctric unr-lcr Illlph Cordincr in thc 1950s rv:rs r nurjor contributor to lhc pricing conspiracy wlrich crrsuccl.l{ Ilowcvcr, thc rcal goals bchincl GE's dccision to de ccntralizc rcnrain slrrouclc<l in controvcrsy. Was dcccntralization absolutcly csscntidl to goul rchicve mcnt? Was it irrciricrtal? Did managcmcnt belicvc that it rvould probably havc a positivc impact and was worth trying at littlc risk? Or ' rvas it rcally cxtrancor{s to thc goal itsclf and morc a l'hinr or personal prcdilection of , top managcmcnt? Such qucstions arc always rclcvnnt as a lirn-r attcnrpts to sclcct thc nrost cffcctivc mcthods for achicving its goals. Fornral contractual arrangcnrcnts and inforrnal conrmitmcnts to clnployccs nray bc areas offcring a nurnbcr of significant choiccs for thc futurc. Thcse include such issues :rs thc vcsting of pcnsions, Ilextime, cducational opportunitics and on-thc-job training, salary bonuscs for procluction rvorkcrs, and lifctinre rvork contracts. In caclt case, business can evaluatc rvhcther such changcs are esscntial, incidental, or ex-

', Slrarcd or Selfish ln The Ganrcsman, Michacl Maccoby identifies four distinct

'

cxccutivc types, cach distinguishcd in largc measurc by his rnotivcs: the Craftsman, thc Conrpanyman, thc f unglc Fightcr, ind the Gamesman.ls The Craftsman is I lrbsorbcd in his crcativc'ploccss; thc Comptnyman bases his idcntity on that of thc firn. The Jungle Fighter is a porver seeker; the Gamesman thrives on competitive i ' activities that allow him to mark himself as a winner. In addition to underscoring thc critical role that motives play, Maccoby implies that leaders drivcn by narro'.\' pcrsonal or sellish motives arc less likcly to achieve corporatc succcss, especiall;r ovcr thc long tornr. Executives who qucstion whether their motivcs arc purcly selfish or widely shared are moving in the direction of consensus management. Again thc situation ethic does not argue that consensus is always desirable or possible, only that it is an inrportant chcck point in thc ethical algorithm.
,

trltncolls to succcss.
Ntotilcs

Value Oricntation Commitments to certain basic values and/or religious bcliefs tcntl to cnter corporate lifc through thc motivcs of key busincss leaders. It is bccoming increasingly important for executives to be able to articulate these values and bcliefs

.'

in the context of their work life. The value shifts noted by Lodge appear to havc
statcd,

, It I corporations do not havc nrotivcs. Ilirthcr, intlivicluals havc nrotivcs which lind thcir , way into corporatc lilc tlrrough goal :rncl nrcthod sclcction. In sonrc instunccs, it is readily appurcnt that thc nrotivcs of l strong or inllucntial cxccutivc arc thc driving
is oftcn dif{icult to distinguish bctrvcen nrotives and methods. Simply
forcc bchind a corporation's goals :rnd nrcthuds. What clrivcs a nranagcr or cxccutivc to takc ccrtain actions? An instinct for survivirl, an innatc courpctitivc urgc, a dcsirc for power? Atthough cmployccs' motivcs arc oftcn diflicult to discern, they arc thc lifeblood of any institution, detcrmining its character, clinrate, and degrce of succcss. I Thc nrorc inllucntial an crnploycc, thc morc his or hcr nlotivcs will affcct thc firnr's i goals and methods. Whilc wc can only infcr fronr an individual's bchavior what his or hcr motivcs are, thcre arc ncvcrthclcss some uscful clteck points in this third stcp of thc ethical algorithm.

rcccived only indirect, inconsistcnt attention from the business community.16 It is not ' clcar why business has been silent in this arcna. However, it is clcar that this silcncc has had ncgativc effccts on the cthical soundncss of entcrprisc. In thc future tirc \ sr,rcccss of capitalistic cntcrprisc rvill bc largcly determincd by what business lcadcrs'

ntotivcsarcandbyIrorveffectivclytheycanarticulatethem.

i:

Conscqucnces

In thc final step of the ethical algorithm, the firm reviews its goals, methods,

and

motives and considers the potcntial consequences of its actions. Each of thc multiplc goals and methods is matchcd rvith one or more consequenccs. Decision makcrs \ must ask: What are the conscquences of using a particular method or reaching a ] spccitic goal? These potential outcomes can be grouped into several categories. l

Iliddcn or Knorvn Do othcrs know rvhlt youl moLivcs arc? As dccisions rvith cthical
iniplications are rcvcaled to thc public, thc undcrlying motivcs of busincss cxccutivcs tcnd to cmerge as rvcll. Thc rcvclation of thcse rnotivcs oftcn dctcrmines thc cthical or lcgll labcling that follorvs. i Motives of corporate dccision makcls arc oftcn suspcct sinrply bccause they are i somcrvhut hiddcn. 'lhc invisibiiitv of corporltc lcadcrs rnakcs it casy for thcm to bc labclcd'grcedy'or'power hungry.'If therc is any substancc to such accusations or if decision makers remain silcnt rcgarding their nrotives, thc worthy goals or methods of corporatc enterprise can be drorvncd in a sea of outragcd voices, Thc situation , ethic does not stipulate that all motivcs should bc revcalcd at all times. Rather, it , argucs that cxccutivcs should knorv rvhrt their motivcs arc and rvhen it is essential to make thcrn public.

:l

Tinre Framcs Most firnrs will find it instructive to project the -consequcnces of their policics over several different tirnc periods. Of course, the appropriatc timc framcs rvill vary with cach hrm's products and goals.

l.: Constitucncy Impact Possible consequences must be considcred from the pcrspcciivc of cach of the firm's constituencies. This is especially important if ethical and lcg;ri prccedents arc unclcar or if ncrv technology is to be introduced.

{-

Exogenous Effects Firms must also anticipate^ the probable consequences of the efforts of others. In some companies such a ncition is standard marketing practicc. These cxogenous effects are likely to grow in importance with advancing technologv. incrcasing intcrdependcnce, global markcts, and shifting values and political climates.

till

Busincss ethics: its scope and purposc

I

t
The wealth of nations
ADAM SMITH

EI

CONCI,USION Scnsitivity to the cthical sidc of cntcrprisc mcans scarching arrluously lbr dccisions and actions tllat warrant and rcccive the affirmation of an expanding multifarious constituency. The conceptual framework presented here is one attempt to perceive this constituency in all of its complexity. The ethical algorithm is one means of rvorking with this constituency, rather than against it. The singular importance of enterprise to our daily lives and our collcctive futurc dcmands our carcful :rttcntion and finest efforts. NOTES
1. Sce P. E. t)ruckor, 'Ethical Chic,' Forbes,14 Scptembcr 1!)81, pp. 160-173. 2. Scc R. FI.'l'awncy, Ilcligion antl tl;a llisc of Cultitoliun (Nov York: I-larcourt & Bracc,
l

Extract I This division of labour, from which so many advantages are derived, is not originally thc effect of any human wisdom, which foresees and intends that general opulence to rvlrich it gives occasion. It is the necessary, though very slow and gradual consequence of a certain propensity in-human naturc which has in view no such extensive utility; thc propensity to truck, barter,-and exchange one thing for another. Whethcr this propensity be one of those original principles in human nature of rvhich no further account can be given or whether, as seems more probable, it be the nccessary consequence of the faculties of reason and speech, it belongs not to our present subject to inquirc. It is common to all men, and to be found in no otlrer race of animals, which seem to know ncither this nor any other species of contracts. Trvo grcyhounds, in running dorvn the same hare, have sometimes the appearance of acting in somc sort of concert. Each turns her towards his companion, or endeavours to intcrcept hcr when his companion turns her towards himself. This, however, is not thc effect of any contract, but of the accidental concurrence of their passions in the same objcct at that particular time. Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. Nobody ever saw one animal by its gestures and natural cries signify to another, this is mine, that yours; I am willing to give this for that. When an animal wants to obtain something eithcr of fl man or of another animal, it has no other means of persuasion but to gain the favour of those whosc service it requires. A puppy fawns upon its dam, and a spaniel cncleavours by a thousand attractions to engage thc attention of its master who is at dinner, whcn it wants to be fed by him. Man sometimes uses the same arts with his brcthren, and whcn hc has no othcr means of cngaging them to act according to his inclinations, endoavours by cvery scrvilc ancl fawning attcntion to obtain their good will. FIe has not time, however, to do this upon every occasion. In civilised society he stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons. In alnrost cvery other race of animals each individual, when it is grown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature. But man has almost constant occasion for the help of his brcthren, and it is in vain for him to expect it from their benevolence only. He will be morc likely to prevail if hc can interest their sclf-love in his favour, and.show thcm that it is for their orvn advantagc to do for him what he requires of thenr. Whoever offcrs to another a bargain of any kind, proposes to do this. Give me thet
Extlacts takcn from Thc l{calth ol Nations. Book I, ch. (rcspectivcly). Originally publishcd in 7776.

e26).

3. See P. Bergcr,'New Attack on thc Lcgitirnrcy of llusincss,' l{arvurd Business Review,

"1.

Scptcmbcr-Octobcr 1981. Scc E. I-{. Schcin, 'Thc Problcrl oi lvloral Educltiorr for thc IJusincss Managcr'(P:rpcr prcprrrcd for thc Scvcntocnth Confcrcncc on Scicncc, I'lrilosophy, ancl Rcligion, August
196(r).

5.
6. 7.

li.
9. 10. 11.

Antcrictttr Itlcologv (Ncrv York: Allrcd A. Knopf, 1979). of Cupitalisut (Ncrv York: Basic Books, 197(r). J. K. Calbraith, Et:ortontict untl thc Pultlic Purposc (lloston: Iloughton Miffiin, 1978). Scc C. D. Stonc, lVlrcre tlrc Lu*' Ends: 'l'|rc Social Conta.rt of Corporulc llchavior (Ncw York: Flerper Torchbooks, 1975). Sce C. Pow'crs and D. Vogcl, Ethics in tlrc Education of Ilusiness Manag,ers (FlastingsonFludson: Institutc of Society, Etlrics and thc Lifc Scicnccs,'[hc l{astings Institutc, 1980). Scc L. Thurow, TIrc Zcro-Sum.9ocir:ty (Ncw York: Basic llooks, 1980). See J. Fletcher, Situation Etlrics: The Ne*,h'l<truliry (Philadclphia: Thc Wcstrninstcr Prcss, 1966). Dr. Flctchcr is formcr Profcssor of Ethics:rt thc Episcopal Divinity Sclrool, CarnSec G.

C. l.odgc, Tltc

tvuctv

See Sce

D. Bell, Tlrc Culturul

Contradictiorts

bridgc, MA).
12. Ibid. 13. Sce D. T. Vcrma,'Polaroid in South Akica (A),' #9-372-624 (lloston: Intcrcollcgiatc Caso Clcaring l'l<iuse, l97l). 14. Scc R. A. Srnith, "l'hc Incrcdiblc Illcctrical Conspiracy,' [;orturtc, April 1961. 15. Scc'Nl. Ir{eccobv,'nr( (;dntl'rnlutt (Ncrv Yrlrk: lJrttttittu Books, 197(r). l(,. Scc Lodgc ( 1979).

III; Book IV, ch. II

and Book I, ch. X

Lj!_] [!_y:'"::r
which

,!lt

its scope and purpose

is tlre meaning of cvery such

The wealth of nations

trr

I want, and you shall havc this rvhich you rvanl,

offcr; and it is in this manncr thxt we obtain fronr one anothcr thc far greater part of thosc good offlccs which we stancl in nccd of. It is not from the benevolcnce of the butchcr, tlrc brewcr, or the baker th:rt rve expcct our dinncr, but from their rcgard to
thcir orvn interest. Wc addrcs.s ourselvcs, not to thcir huntanity but to thcir self-love, and ncver talk to thent of our own ncccssitics but of thcir aclvantagcs. Nobocly but a bcggar chooses to dcpcnd chiclly upon thc bcncvolcnce of his fcllow-citizens. Evcn a bcggar does not dcpcnd upon it cnrircly. The charity of well-clisposccl people, indeed, supplies hinr with the whole fund of his subsistencc. But tlrough this principle ultimatcly provides hinr with all thc nccessarics of life rvhich he has occasion for, it ncithcr does nor can proviclc hinr rvith thcm as hc has occasion for thcnr. Thc grcatcr part of his occasional rvants arc suppliccl in tlrc sanrc manner as thosc of othcr pcoplc, by trcaty, by b:rrtcr, lnd by purchirsc. witlr thc nroncy rvhich onc mun givcs him hc purchascs food. Thc olcl clothcs rvhich anothcr bcstows upon hinr he exchangcs for othcr olcl clothcs rvhich suit hinr bcttcr, or for lodging, or for food, or for moncy, *'ith which hc can buy cithcr food, clotlrcs, or loclging, as hc has occasion.
Extract II

Every individual is continually exerting himsclf to find out thc nrost aclvanl.agcous cnrploynrcnt for whatcvcr capital hc c;ur cornrnun(I. lt is his own advantagc, indccd, and not that of thc socicty, wlrich he h;rs in vicw. Ilut thc study of his own aclvlntagc naturally, or rathcr nccessarily, lcads him to prcfcr that cmploynrcnt which is most arlvantagcous to thc socicty. First, cvery individual enclcavours to crnplov his capital as ncar home as hc can, and conscqucntly ts nruch ls hc can in thc support of donrcstic inclustry; providcd always that hc c:rn thcrcbl, obtain thc ordinary, or not a grcat dcal less than the ordinarv prollts of stock. Thus, upon equal or ncarly equal prolits, cvcry wholcsale r-ncrchant naturally prefers the home trade to the foreign trade of consump.tion, and the foreign tradc of constrmption to the carrying tradc. [n thc horlc tradc his capital is ncvcr so Iong out of his sight as it lrcqucntly is in thc fbrcign tradc o[ consunrption. l-Ic can knorv better the character and situation of the persons whom hc trusts, and if he should happen to bc dcceived, hc knorvs bcttcr thc lari's of thc country from rvhich hc must scek redrcss. In thc carrying tradc, the capital of the rncrchant is, as it were, dividecl bctween two foreign countrics, and no part of it is cvcr nccessarily brought homc, or placed under his orvn inrnrccliatc vierv und conimancl. Thc capital rvhich rn Amsterdanr nrerchant enrplol,s in carrying coln fronr Konnigsbcrg to Lisbon, and fruit and rvine from Lisbon to Konnigsberg, must generally be the one-half of it at Konnigsbcrg and the othcr half at Lisbon. No part of it need ever comc to Amsterdam. The natural residcncc of such a mcrchant should cither be at Konnigsberg or Lisbon, and it can only bc sonlc vcry particular circunrstanccs which can make him prelcr thc residcnce of Amsterdam. The uneasiness, however, rvhich

profits, thereforc, every individual naturally inclines to employ his capital in thc' manner in which it is likely to afford the grcatcst support to domestic industry, anci to give revenuc and employment to the greatest number of people of his own
country. Secondly, evcry individual who employs his capital in the support of domestic industry, nccessarily endeavours so to direct that industry that its produce may be of the greatest possible value. The produce of industry is what it adds to the subject or materiais upon which it is

hc fccls at being separated so far from his capital generally determines him to bring part both of the Konnigsberg goods which he destines for the market of Lisbon, and of the Lisbon goods which he destines for that of Konnigsberg, to Amsterdam: and though this necessarily subjects him to a double charge of loading and unloading, as rvell as to the payment of some duties and customs, yet for the sake of having sonrc part of his capital always under his own view and command, he willingly submits to this extraordinary charge; and it is in this manner that every country *hich hu, uny considerable share of the carrying trade becomes always the emporium, or general market, for the goods of all the different countries whose trade it carries on. The merchant, in order to save a second loading and unloading, endeavours always to sell in the home market as much of the goods of all those different countries as he can, and thus, so far as he can, to convert his carrying trade into a foreign trade of consumption. A merchant, in the same manner, who is engaged in the foreign trade of consumption, when he collects goods for foreign markets, will always be glad, upon equal or ncarly cqual profits, to sell as great a part ofthem at home as he can. I{c saves hirnself the risk and trouble of exportation, when, so far as he can, he thus convcrts his foreign tradc of consumption into a home trade. Home is in this manner the centre, if I may say so, round which the capitals of the inhabitants of everv country are continually circulating, and towards which they are always tending, tbough by particular causes they may sometimes be driven off and repelled from it towards more distant enrployments. But a capital employed in the home tradc, it has already been shown, necessarily puts into motion a greater quantity of domestic industry, and gives revenue and cmployment to a greater number of the inhabitants of the country, than an cqual capital employed in the foreign trade of consumption: and one employcd in the forcign trade of consumption has the same advantagc over an cqual capital employed in the carrying trade. upon equal, or only nearly equai

employed.

In proportion as the value of this

or of other goods. But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the samc thing with that exchangeable value. As every individual, therefore, endeavours 1s

likewise be the profits of the employer. But it is only for the sake of profit that any man employs a capitai in the support of industry; and he will always, therefore, endeavour to employ it in the support of that industry of which the produce is likely to be of the greatest value, or to exchange for the greatest quantity either of money

produce is great or smalj, so rvill

r-r r-

Lq] Ffrys

erhics: its scope rnct

purpose

--l

Why,goocl,managers make bad

erhical.fiq E]

generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; anci by clirecting that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, lecl by an invisible hand to promotc an end which was no part of his intention. Nor is it ahvays the worse for the society rhat it was no part of ir. By pursuing his orvn intcrcst hc frcqucntly promotes that of the socicty more effcctually than rvhen he really intends to promote it. I lrave never knorvn much good done bv those rvho affectecl to tracle for the public goocl. It is an affcctation, indecd, not very common among merchants, anrl very few worcls need be employed in dissuading them from it. Smith inclutles thL follotving famous warning to his accounr; Extrect

much as he can both to employ his capital in the support of domcstic industry, and so to direct that indLrstry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He

and cost thousands of innocent employees and investors their jobs and their savings? did managers at E. F. Hutton find themserves pleading guilty to 2000 counts -why and-wire fraud, accepting a fine of $2 milion, ano pu"tiing up an milrion $g ff 1.a"il Iund tor restiturion to the 400 banks that the company had systematically bilked? How can we explain the misbehavior that toot place in these organizations - or in any of the others, public and private, thar Iitter our newspapers'front pages: workers at a defense contractor who accused their superiors of ritsiiying time ca-rds; alleged bribes and kickbacks that honeycombed New york city goveinrient; a company that knorvingly marketed.an unsafe birth control device; the Jecision-making process that led to the space shuttle Challenger tragedy.

course of action that threatened to bankrupt the institution, ruined its reputation,

IIi

People of the sanre trade scldom meet together, even for merriment and cliversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent sucl'r mectings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder pcople of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them
necessary.

exterminate.

The stories are always slightly different; but they have a lot in common since . they're full of the oldest questions in the world, questions of human behavior andl human judgment applied in ordinary day-to-day situations. Reading them we il";;; I ask how usually honest, intelligent, compassionate human beings could u.t ln *uyr) that are callous, dishonest, and wrongheaded. rn view, the explanations go back to four rationarizations that people have t _my relied on through the ages to justify questionable conduct: believing thai the activity is not 'really' illegal or immoral; that it is in the individual's or the Jorporation's best interest; that it will never be found out; or that because it helps the company the company will condone it. By looking at these rationalizations in light of these cases, \ye c3n develop some practical ,rules--to more effectively control.-managers'_actions that lead to trouble:..control, but nolelirninate. For thshard truth is tr,it ""ip.r"t" lnip.conduct, like the lowly-cockroach*is.a-plague-.that.we can suppress but never

Why 'good' managers make bad

ethical choices
SAUL W. GELI-ERIVIAN

11:/6 t%(. 'i'u, Threecases Alq&r-EtziWli-o-$ryrg:llgtolu-ryvg;j!y-,1e-csptry

co-n9lglqd lirat_ in_ rhe* tq5.1t9[ y_diis_roi,ghty_twa=tF_i_E_,6tr

Horv could top-l(ivel .*..u,lu", at the Manville corporation have suppresscd cvidence for decacles that proveil that asbestos inhaiation was killing their orvn
cmployees?

institutions, and gives business as a whole a bad name but that also inflicts real ancj lasting harm on a large number of innocent people. The three cases that follow of the types of problems that: .should be familiar..I present them here or confront managers in all kinds of businesses "*orpi., daily.
Nlanville Corporation

:".tLglt::"1 frlye Feen,lnyolved,-in*v,arying*d.grq".--in_sonoJiorm_olillegal be_ lgrtgl]]y taking a look at three corporare cases, we may be able to identlfy the roots of the kind of misconduct that not only ruins some people's lives, desiroys

l1effi-ib0_i;;;.;

what could have driven the

Rtrsrrress Rt'r'ioy.

managers

of conrinental Illinois Bank to pursuc

Rcading takcn fronr Harvard iJusincss Rcview,July-August 1986. Copyright

19U6

Ilarvartl

A few years ago, Manvilre (then Johns Manvilre) was sorid enough to be incruded among the giants of American business. Today Manville is in the iro..r, or ,"-irg 8,07i of its equity to a trust represenring peopre rvho have suei or plan to sue it 9ve1 for liability in connection with one of its priniipai forr", products, asbestos. For all

til
cthics.

e,11:ss1r!Illi'_i.ol"_ l'ld qlryoI

IFil
Corrtinental Illinois Bank

practical purposes, thc cntire comp.uty was brought dorvn by qucstions of corporatc

More than .10 years ago, infornration began to reach Johns Manville's medical departnrcnt - and through it, the cornpany's top executivcs - inrplicating asbestos inhalation as a causc of asbestosis, a dcbilitating lung diseasc, as well as lung cancer and nresothelioma, rn invariably fatal lung discasc. Manville's managcrs supprcssed the rescarch. Moreover, as a mattcr of policy, they apparcntly decided to conccal the information from affccted cmployecs. Thc conrpany's medical staff collaboratcd in the covcr-up, for reasons we can onlv gucss at. Moncy may havc bcen onc motivc. In onc particularly chilling lticcc of tcstimony, a larvycr rccallcd how 40 vears carlicr he had confrontcd N{anville's corporate counsel about the company's policy of conccitling chest X-ray rcsults from employees. The lawyer had askcd, 'Do you mcan to tcll nrc you would lct thcnt work until they dropped dead?'The rcply was,'Ycs, we save a lot of moncy that way.' Based on such testimony, a California court found that Manvillc had hidden tlie asbestos dangcr fronr its cnrploy'ccs nrthcr than looking for safer ways to hancllc it. It wiis lcss cxpcrtsivc to p:ry rvorkcrs' conrpcnsiltion clairrrs than to dcvclop sat'cr working conditions. A Ncw Jerscy court \\,as evcn bluntcr: it found that Manvillc had madc a conscious, cold-bloodcd busincss decision to take no protective or rcmcdial action, in flagrant disregard of thc riglrts of othcrs. I low ctrn wc cxplain this bchlvior'l Wcrc nrorc than 40 vcars' rvorth of Manvillc cxccutivcs all immoral? Such an ansrver dcfies comnron scnsc. Thc truth, I think, is less glamorous - and also less satisfying to thosc who likc to cxplain cvil as thc actions of a few nrisbergottcn souls. Thc p.coplc involvcd rvcre probably ordinary mcn and women for thc most part, not very clifferen-t'ffoin you an(l me. Thcy found themsclves in a ciilernma, and'thcy solved it in a.rv:ry that scemed to bc thc least troublesome,,decid![g not to disclosc information that could hurt rlreir prodrrct. 'fhc conscqucirii,l-bi*mr thcy chose to do - both to thousands of innoccnt pcoplc and, ultimately, to the corporation - probably ucvcr occurred to thcm. Thc Manville case illustratcs thc fine linc bctwecn acceptablc and unacccptable managcrial behavior. Exccutivcs arc cxpcctcd to strike a clifficult balance - to pursue thcir companies' best intcibsts but not overstcp thc bounds of rvhat outsiders-will tolcratc. 'Ei'en the bcst managers can find themsclves in a bind, qg!-klorviqg how far-is too far. In retrospect, they can usually easily tell where they should havc drawn the line, but no one nranages in rotrospect. We can only livc and act today and hopc that rvhoevcr looks back on what rvo did will judge tirat we struck the propcr balance. In a ferv years, many of us may be found dclinqucnt for dccisions we are making now t about tobacco, clcan air, thc usc of chcnticals, or somc other secrningly benign I i/- substance. The managers at Nlanvillc may have believed that they rvere acting in the t-\ companv's best interests, or that rvhat thcy werc doing rvould never be found out, or cven that it u'asn't rcally wrong. In the end, thesc were only rationalizations for conduct that brought the company dorvn.
I

Until reccntly the ninth largest bank in the United States, Continental Illinois had to
bc savcd from insolvency because of bad judgment by management. The government bailcd it out, but at a price. In effect it has been socialized: about 80% of its equity

now bclongs to the Fcdcral Deposit Insurance corporation. Continental seems to havc bcen brouglit down by managers who misunderstood its real interests. To thcir own peril, elglytiyS!- Iqgg!:{ -g ._l!g!_e-:rrylge_4_ p*y11git-_gt_.-qfpg.-qte snds anci forgot about thc means to thc-cnds. --rii rcie, co"ri;cnral's?iaiindn dcclarcd that within five years thc magnitude of its lending would match that of any other bank. Thc goal was attainablc; in fact, for a timc, continental rcached it. But it dictated a shift in strategy away from conservativc corporate financing and toward aggressive pursuit of borrowers. So contincntal, with lots of lcndable funds, sent its loan officers into the field to buy loans that had originally becn madc by smaller banks that had less moncy. Thc practicc in itself was not ncccssarily unsound. But some of the smaller banks had donc morc than just lcnd moncy - thcy had swallowed hook, line, and sinker the cxtravagant, implausible dreams of poorly capitalized oil producers in oklahoma, and they had begun to bet cnormous sums on those dreams. Eventually, a cool billion dollars' worth of those drcams found their way into Continental's portfolio, and a cool billion dollars of depositors' money flowed out to pay for them. when the price of oil fell, a lot of dry holes and idle drilling equipment were all that was left to show for most of the money.
Contincntal's ofliccrs had beconrc so entranced by their lending efforts'spectacular rcsults that thcy hadn't looked deeply into how they had been achieved. Hugc sums of money were lent at fat rates of interest. If the bonowers had been able to repay the loans, continental might have become the eighth or even the seventh largest bank in the country. But that was a very big 'if.' somehow there was a failure of

control and judgment at continental

buying those shaky loans were getting support and praise from their superiors. or ai least thcy were not hearing enough tough questions about them. At one point, for example, Continental's internal auditors stumbled across the fact that an officer who had purchased $800 million in oil and gas loans from the penn square Bank in oklahorna city had also borrowed $565000 for himself from Penn square. continental's top management investigated and eventually issued a reprimand. The mild rebuke reflected the officer's hard work and the fact that the portfolio he had obtained would have yielded an average return of nearly 20% had it cver pcrformed as planned. In fact, virtually all of the $800 million had to be wrirten off. Management chose to interpret the incident charitably; federal prosecutors later alleged a kickback. on at least two other occasions, continental's own control mechanisms flashed signals that something was seriously wrong with the oil and gas portfolio. A vice president rvarned in a memo that the documentation needed to verify the soundness of many of the purchased loans had simply never arrived. Later, a junior loan

probably because the officers who were

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officer, putting his job on the linc, wcnt ovcr the hcads of three supcriors to tell a top executive about the missing docunrentation. Management chose not to investigate. After all, Continental was doing e-ractly rvhat its chairman had said it would do: it was on its way to becoming the leading commercial lender in the United States. Oil and gas loans rvcre an important factor in that aclrievernent. Stopping to rvait for prper*,ork to catch up rvould only slow down rcaching thc goal. Eventually, however, the word got out about the instability of the bank's portfolio, which led to a massive run on its deposits. No other bank was willing to comc to the rescue, for fear of bcing swamped by Contincntal's huge liabilities. 'Io avoicl going under, Continental in effect became a ward of the federal government. The losers were the bank's shareholders, some officers rvho lost their jobs, at least one who was indicted, and some 2000 employces (about 15"/o of. the total) rvho rvere let go, as thc bank scaled down to nt its diminishcd assets. Once again, it is easy for us to sit in judgment after thc fact and say that Continental's loan officers and their superiors rvere doing exactly rvhat bankers shouldn't do: thcy rvere gambling with their dcpositors' money. ilut on another lcvel, this story is more diffrcult to analyze - and nrore generally a part of everyday business. Certainly part of Continental's problem was ncglcct of standarcl contlols. But another dinrension involved ambitious corporate goals. Pushe{-by lofty_goals, managers could not see clearly their real intercsts. Thcy focused on ends, overlooked thc cthical qucstions :tssociatctl rvith thcir choicc oI mc:rtrs - und ultintatcly hurt
thcmselves.

I'

prcsumably thought they were pushing legality to its lirnit rvithout going ovcr thc linc. The branch managers were simply taking full advantage of what the law and thc bankers' tolerance permitted. On several occasions, the managers who played this ganle most astutely were even cpngratulated for their skill. I-Iutton probably will not suffer a fate as drastic as Manvillc's or Continenl.al Illinois's, Indeed, with astute damage control, it can probably emerge frorn this particular embarrassment with only a few bad memories. But this case has real value becausc it is typical of much corporate misconduct. Most improprieties don't cut a corporation off at thc knees the rvay Manville's and Continental lllinois's did. In fact, most such actions are never revealed at all - or at least that's how people figure things rvill work out. And ilgr3gry_cases, a willingness,llggaoble$lrqggbably
enrranced by_$r

just,as,bad_or rvould idcalistic fools

ratr!tr9]i?-t!oq:.Itu9_s.r_l!Fh{J9ry somerhing if they,cou_ld;that_t-h_qs9.-who-wouldnlt "glq9-i1-{9ing go for_1h9i.r-ihare are

!'

Four rationalizations
Why do managcrs do things that ultimately inflict great harm on their companies, thcmselves, and people on whose patronage or tolerance their organizations depencl? Thcse thrce cascs, as rvell as the current crop of examples in each day's paper, supply ample evidence of the motivations and instincts that underlie corporate misconduct.

E. F. Ilutton

Although the particulars may vary - from the gruesome dishonesty surrounding asbcstos handling to thc mundanity of illegal money managemcnt - the motivating beliefs are pretty much the same. We may examine them in the context of the
corporation, but we know that these feelings are basic throughout society; we find them wherever we go because wc take them with us. When we look more closely at these cases, we can delineate four commonly held rationalizations that can lead to misconduct:
r..

Thc nation's second largest independent broker, E. F. Hutton & Company, recently pleaded guilty to 2000 counts of mail and rvire fraud. It had systematically milked

400 of its banks by drawing against uncollccted funds or in somc cascs against none.xistent surns, which it then covered after having cnjoyed interest-free use of the money. So far, Hutton has agreed to pay a fine of $2 nrillion as well as the government's investigation costs of $750000. It has set up an $8 million reserve for restitution to the banks - rvhich may not be enough. Several officers have lost their jobs, and some indictments may yet follow. But worst of all, Hutton has tarnished its reputation, ncver a rvisc thing to do certainly not rvhe n your business is offering to handle other pcople's ntoney. Months after Hutton agreed to appoint nerv directors - as a way to give outsiders a solid majority on the board - thc company couldn't find people to accept thc seats, in lrart becruse of the bad publicity. Apparently Hutton's brancl-r managers had been encouraged to pay closc attention to cash managenlent. r\t some point,,it darvned on someonc thai usiltg othcr pcople's money was even more profitable than using your own. In cach casc, I-lutton's overdrafts involved no larqe sunts. But cumulativcll,, thc suvings on intcrest that rvould othcrrvisc havc been owcd to the bunks wa:i vcry largc. Bccause l-lutton ahvays made covering deposits, and because most banks did not object, I-lutton assured its manligers that \\,hat thcy rvcre doing rvas sharp - and not sh:rcly. 1'hcy

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that the individual

somehow be expected to undertake the activity.

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Ahclief that the-activilyfi_E{e_qe_9ause it will

classic crime-and-punishment issue of-discovery.

never be,found out or-publicized; the

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A belief that because,the activity_helps the company the company will ' condone it and
Jucn protect rhe peiJon who

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The iclea that an action is not really rvrong is an old issue. How far is too far? Exactly rvhere is the line betwcen smart and too smart? Between sharp and shady? Bctween profit maximization and illegal conduct? The issue is complex: it involves an interplay between top management's goals and middle managers' efforts to interpret
thosc aims.

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Put enough.pcople in an ambiguous, ill-_dqfued situation, and some rvill conclude

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I 72 i I Busincss cthics: L'-.----- L

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its scopc purposc I - and t-:I""-"-

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bad ethical

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that wharever hasn't lgbclcd spccifically.-wrong must be OK - cspecially if thcy !ee1 are rewarded for cbrtain hCts. OetiUeratc overdralts, for exanrple,'were not proscribed at Fiutton. Since the company had not spelled out their illcgility, it could iater plead guilty for itsclf rvhile shielding its employces from prosecution...'z'lop exccutivcs scldont ask their suborclinatcs to do things that both of thcnr kno1 are against the. law or inrpruclcnt. But company lcacicr.s sometimcs leave things .,,.' ,' unsaid or givc the impression that thcrc arc thincs thcy clon't wlnt to knorv about. iq

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clcrn if.things go lwry. oftcn thcy lurc :rml;itious lorvcr lcvcl nranagcrs 5y lttt"9.. iniplying th:rt rich rcrvards await thosc rvlro can producc ccrtain rcsults and tlrat thc rncthods for achicving thcm rvill not bc cxanrinccl too closcly. Contincntal's simplc rvrist-slapping of the officcr who rvas cau{ht in a flagrant.onfti.t of intercst scnt a clcar messagc to othcr nranagcrs about what top managcment really thought was
important.

othcr rvords, thcy can sccm, rvhcthcr dclibcratcly or othcrwisc, to bc clistlncing thcrnsclvcs fronr thcir subordinates' tactical dccisions in ordcr to kccp

thcir own

is ensuring its survival. All managers risk giving too tnuch bccausc of rvhat thcil companics clernand fr.om I them. But the same superiors rvho kecp pressing you to do more, or to do it better,

FIow can-[!n4!ers avoid crossins a linc that is sclclonr prccisc? Unfortlnatcly, thlt they hru,c ovcrstcppcd it only rvhcrr thcy havc gonc too flr. 1-hcy l\,lg lo rcliablc guidclincs about rvlrat rvill bc ovcrlookccl or tolerated or what will bc condcmncd or attackcd. whcn nr:urrgcrs nrust opcrirtc in murky boiclcrl;rnds, I Ithcir most rcliable-,guidcliqe is'n ord prirrciplc: rvhcn.i'doubt, clon'1, That may sccnr likc a rimid wa1, 1o run a busincss. one coulcl-iigue that if it actually took hold among the nriddlc managcrs who run most it might "o,r]1roni"r, take the cntcrprisc out of frec cnterprisc. But thcrc is a diffcrcn$ bctwccn taking a worthwhilc cconomic risk and risking rrn illcgal ;rct t. nrlrkc uror"''nrun"y. Thc diffcrcncc bctwectt bccoming a succcss and bccoming a staiistic lics in knowledgc - including self-knowledge - nor <Jaring. contrary to popular mythology, managers are not paid to takc risks; tlicy are paid to know which risks are rvorth . taking. Also, maximizing profits is a company's scconcl priority, not its lirst. Thc first
nrost knorv

'

ignoring thcir rvarnings. The smartest nranagers alrcady know that t5e bcst answcr to the question, 'How far is too far?' is clon't try to {incl out. Turning to the second reason why peoplc takc risks that gct their companics into trouble, bclicving that uncrhicul concluct is in a p"rron'i or corporation's bcst interests nearly always rcsults frotn a parochial view of rvhat those inierests arc. For example, Alpha Industries, a lvlassachusetts manufacturer of microwavc equiprncnt, paid $57000 to a Ravtheon manager, ostensibly for a marketing rcport. Air forcc investigatt.:rs cirarged tliat the report was . ,ui. to covcr il br"ibe: Alpha u,anted subcontracts thilt thc Raytheon rnanagcr supcrviscd. But thosc contracts ultimately cost Alpha a lot morc than they paid for thc rcport. After the company was indictcd for bribcry, its contracts rvere suspcndccl .ncl its profits promptly vnni.h.d. Alphu

or faster', or less expcnsively, will turn on you shoulcl you cross that fuzzy line bctrveen right and wrong. Thcy rvill blamc you for cxccc<Jing instructions or for

wasn't unique in this transgression: in 1984, the Pentagon suspended 453 other cornpanies for violating procuremcnt regulations. Ambitious managers look for ways to attract favorable attention, something to distinguish them from other people. so they try to outperform their peers. Some nray sec that it is not difficult to look rcn.rarkably good in the short run by avoiding rhings that pay off only in the long run. For example, you can skimp on maintenance or training or custotner sor+ice, and you can get away with it - for a whilc. Thc sad truth is that many managers havc bccn promotcd on the basis of 'grcat' rcsults obtained in just thosc rvays, leaving unfortunate successors to inherit the incvitablc whirlwind.,since rhis is not ncccssarili a just world, the problcms thar such pcople crcatc arc not always traced back to them. Companies cannot afford ro bc hoodrvinked in this way. They must be concerned with more than just results. Thcy havc to look very hard at how results are obtained. Evidently, in Llutton's case there were such reviews, but management chose to intcrpret favorably what governmcnt investigators later interpreted unfavorably. This brings up another dilemma: managemcnt quite naturally hopes that any of its bordcrlinc actions will bc ovcrlooked or at lcast interprctcd charitably if noticcd. Conrpanies must acccpt human nature for what it is and protect themselvcs with f rvatchdogs to sniff out-possiblc misdceds. ] An indcpcndent auditing agency that reports to outside directors can play such a rolc. It can provide a less comfortable, but more convincing, review of how managcment's successes are achieved. Thc discomfort can be considered inexpensive insurancc and serve to remind all employees that the rcal interests of the companl, arc scrvcd by honcst conduct in thc lirst place. Thc third rcason why a risk is taken, belicving that one can probably gct awav with it, is pcrhaps the most diflicult to dcal with becausc it's often truc. A great deal of proscribed bchavior escapes dctection. We know that conscience alone does not dcter everyone. For example, First National Bank of Boston pleadcd guilty to laundcring satchcls of $20 bilts worth $1.-3 billion. Thousands of satchels must have passed throirgh the bank's doors without incident before the scheme was detected. That kind of heavy, unnoticed traflic
breeds complacency. How can we dcter wrongdoing that is unlikely to be detected? Make it more likely to be detected. FIad today's 'discovery' process - in which plaintiffs attorneys can comb through a company's records to look for incriminating evidence - been in use when Manville concealed the evidence on asbestosis, there probably would have

been no cover-up. Mindful of the likelihood of detection, Manvillc would have chosen a diffcrent course and could very well be thriving today without the protcction of thc bankruptcy courts.
The
mos_t

effective-deterrent is-not,to incr.ease_rhe severity,q_f,pg11i,qtltrlq1J tllqp_g- lt -f9r caught but to treiglrten the.perce ived-p-qolabrlity_qf_being_caug.t_r! in_rtr_f rs!_e.i1g., for ,!j 4

II

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cxamplc, police have found that parking an empty patrol car at locations wiere

motorists often exceed the speed limit reduces the frequency of speeding. Neighbor.hood 'crimc watch' signs that pcople display decrease burglaries.

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Why'good' managers make bad ethical choices

trl
1

Simply increasing the frequency of audits and spot checks is a deterrent, especially rvhen combined rvith three other simple techniques: scheduling auclits irregularly, making at least half of them unannounced, and setting up some checkups soon aftcr others. But frequent spot checks cost more than big sticks, a fact that raises t[e question of which approach is more cost-effective. A common managerial error is to assume that because frcquent auclits uncover little behavior that is out of line, less frequent, and therefore lcss costly, auditing is suflicient. But this condition overlooks the important deterrent effect of frequent I checking. The point is to prcvent misconduct, not just to catch it. 1 A trespass detectecl should not be dealt with discreetly. Managers shoulcl announce /the misconduct and how the individuals involved weie punished. Since the main deterrent to illegal or unethical behavior is the perceived probability of detection, managers should make an example of people who are detected. Let's look at thc fourth reason rvhy corporate misconduct tencls to occur, a belief that the company will condone actions that are taken in its interest and rvill even protect the ntanagers responsible. The question rve havc to clcal with here is, I:lorv do wc keep company loyalty from going berserk? That seems to be what happened at Manville. A small group of exccutives ancl a succession of corporate medical directors kept the facts about thc lethal qualities of asbestos from becoming public knowledge for decades, ancl they managed to live with that knowlcdgc. And at Manville, the company - or really, the company's senior management - did condone their decision and protect those employees. something similar seems to have happened at General Electric. when one of its missile projects ran up costs greater than the air force hacl agreed to pay, middle managers surrepritiously shifted those costs to projects that were still operating under budget. In this case, the loyalty that ran amok was primarily to the division: managers want their units' results to look good. But GE, with one of the finest reputations in U.S. industry, was splattered with scandal and paicl a line of $1.04

must make

especially to innocent bystanders, cannot be a service to the company. Finally, and most important of all, managers must stress that excuses of company loyalty will not be accepted for acts rhat place its good name in jeopardy. To put it bluntly, iuperiors

company's benefit

clear that employees who harm other people allegedly fbr the

will

be

fired.

j
I

The most extreme examples of corporate misconduct were due, in hindsight, to managerial failures. A good way to avoid management oversights is to subjict ttre control mechanisms themselves to periodic surprise audits, perhaps as a function of the board of directors. The point is to make sure that internal audits and controls are functioning as planned. It's a case of inspecting the inspectors and taking the necessary steps to keep the controls working efficiently. Harold Geneen, former head of ITT, has suggested that the board should have an independent staff, something analogous to the Government Accounting office, which reports to the legislative rather than the executive branch. In the end, it is up to top management tol send a clear and pragmatic message to all employees that good ethics is still thef foundation of good business.
I

million.

one of the most troubling aspects of the GE case is the company's admission that those involved were thoroughly familiar with the company's ethical standards before the incident took place. This suggests that the practice of declaring codes of ethics and teaching them to managers is not enough to deter unethical conduct. Something stronger is needed. 1 Top management has a responsibility to exert a moral force rvithin the company.
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senior executives are responsible for drarving the line betrveen loyalty to the

company and action against the laws and values of the socicty in rvhich the company must operate. Further, because that line can be obscured in the heat of the monrent, the line has to be drau'n well short of where reasonable men and rvomen could begin to suspect that their rights had been violated. The company has to react long beforc a prosecutor, for instance, rvould have a strong enough case to seek an inclictment. Executives have a right to expect loyalty from employees against competitors and detractors, but not lovalty against the law, or against common morality, or agrinst society itself. Managers must warn cmplovees that a disscrvice to customers, and
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Ethically active businesses: the work of business in the community

Ilusincss in the Community (BITC) is an org:urization dedicated to gctting busincsscs involvcd in tackling thc social and cconomic problems of thc communitics in rvhich thcy opcratc. Frorn a founding membcrship of 30 firms in 1982, BI'I'C has grown to around 500 mcmber firms by 1992. They includc many ol the largcst and bcst-knorvn companies operating in Grcat Britain. In thc words of tltc Financial Tirnes, thc list of thcir rcprcscntativcs rcads likc 'a who's who of British Industry and Cornmcrcc'. BI'fC is conccrncd with an cxtrcmely r.vidc range of issues rvhich it dividcs into four main areas. These arc cducation, the cnvironmcnt, economic devclopmcnt and entcrprise, and promoting thc business case for community involvcment. 'l'hcy all overlap in practicc, but the last mcntioncd is perhaps the most pcrvasivc. This is because the role of BITC is csscntiall)' that of a co-ordinating body rather than an agency acting on behalf of businesscs. For examplc, it administers the Per Cent Club through which companies commit themsclves to spending at least 0.5% of prc-tax UK profits (or I"h of dividcnds) on community-based projects, but it is the individual companics themselves which decide on and carrv out thc projccts. The key rvord in pcrhaps all BITC's activitics is'partnership'. For cxample. under the'education'heading, BIf'C sccks to have the needs of busincss met by educational institutions in return for making the expcrtisc and rcsourccs of business available to those institutions. Under the'environment'heading, BITC not only attempts to promote environmental awareness in businesscs but seeks also to get them to co-operate with each other and rvith local communitics and governmcnt bodics in tackling problcms. Undcr the 'cconomic dcvclopmcnt ancl cntcrprise' heading, thc partncrships include thosc of businesscs and business people rvith iocal authorities and voluntary organizations in promoting the regeneration of economicaliy deprcssed areas. In addition, there is rvithin

BITC itself with Local Enterprise Agencies. (These werc established to assist new and growinq business and sctting thcm up was the original focus of BITC's work). The idea of partnership permeatcs cven the organizational structure of BITC. Though very much business-led, its governing bodies are not cxclusively composed of company executives. They include trade union leaders, as well as representatives of local authorities, governmeni dcpartmcnts, and voluntary organizations. In keeping with this consensual approach, BITC strives to be non-: partisan. lt cxpressly declares political non-alignment and is carefui to prescnt itsclf as such in its publications. It cannot though, entirclv cscape controversy. There is the fundamcntal question of whether or not busincss should leave social problems to governments (a question to bc cxplored in chapter 5). In its cxploratory publication 'Directions for thc Ninetics', BITC shows itself sensitive to the charge that it might bc acting in the place of governments when it declares that 'asking business to do more does not mean that Government should do less.' However, it almost irnmediately goes on to recommend that governments 'adopt a social franchise approach' inviting cxisting public-private partnerships to tcnder for programmes instead of creating new organizationi which increase duplication and dissipation of resources - a recommendation which, rightly or wrongly, many might see as an open invitation for governments to do less. When it comes to justifying community involvement by busincsscs,
BITC seems to have difficulty reconcil,rng an altruistic 'philanthropic' approach with a self-intercsted one. For the most part it emphasises the latter; perhaps recognizing that discomfort with the moral which, this

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chapter has suggested, is prevalent in business circles. The self-intcrest is seen as operating in ways that, again, correspond with suggcstions made in this chapter. It is, on BITC's schema, to do with'building reputations','building people' and'building markets'. Thc first is concerned with that enhanced public image which comes rvith acting in an ethically active way. The second is concerned with helping in the recruitment and retention of staff as well as the improvement in management skills whicli hopefully comes from staff involvement in community projects. The third concerns that broad and admittedly long tcrm intcrest which cornpanics have in expanding markcts for thcir products through the economic regeneration of local communities. On thc evidence of BITC's impressive membership list, there would seem to be many prominent business people who would at least go some wa;' ir:

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ethics: its scope -r'- and r--r----'- purpose

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supporting the arguments of this chapter on the relationship between ethics and self-interest in business.

sources: BITC publications, including annuar corporate revicrvs (with acknowledgemenr to BITC Information officer, Reena chuda, foi her generous supply of these items).
()

DISCUSSION TOPICS

1. Find out rvhether the organization in rvhich you are working or studying has a code of practice. Has its appearance made any difference to the behaviour of those who work there? Are there changes you would like to see? If your organization does not have a code of practice, consider what main points you would like to see included in it. (If the organization is
an educational establishment, consider the possibility of having codes of practice for studcnts as well as staff). Give reasons for the points you have included. 2. Is good business ethics good business? Consider the arguments for and against. Idcntify cxamplcs where good business ethics has been particularly profitable or unprofitable.

Ethical theory
Cognitivism and non-cognitivism Religious morality Consequentialism versus non-consequentialism Utilitarianism: an ethic of welfare Kantianism: an ethic of duty Natural law: an ethic of rights Applying ethical theories

Introducing the readings

Is business bluffing ethical? Albert Carr Does it pay to bluff in business? Norman E. Bowie Rule utilitarianism, equality and justice John C. Harsanyi

Virtues and business ethics Joseph R. DesJardins

Case study Assessing the ethics of business: the new consumer survey

Discussion topics

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In thc previous cliapter lvc lookecl at the role of values in business and considcrccl horv business ethics u,as bccoming part of thc professionalization of busincss. But rvhat cxactly are ethical judgmcnts, and horv do rvc justify them'i At first appearance this may secm a ncedless difficulty. After all, is it not obvious rvhat is happcning rvhcn u'c makc cthical clecisions? Do we not do so almost cvcry day of our livcs'l I It is onc thing to engage in an activity, but oftcn quite another to statc ! what cxactly is going on when we do it. For cxitmple, someone may have a trcmcndous gift for selling goods to pcople, but may not necessarily be

non-cognitivist, by contrast, 'objective' assessment of morai belief is not possible. It is all 'subjective'. There is no truth or falsity to be discovered. There is only belicf, attitude, emotional reaction, and the like. As Hamlet puts it, 'There is nothing either good or bad but thinking

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aware, until he or shc is taught, exactly what is going on when a succcsslul stratcgy is put intil tlpcratioti. In lr sinrilar way, we can makc moral juclgnlents, but find sonlc difficulty in cxphining cxactly what is taking placc whcn rvc do so. In thc case of e thical judgments, the situation is perhaps morc difficult. If I state that a product is - say - red, rve have little difficulty in understanding and cxplaining what is mcant. Red is a colour, and is a I physical property which can be sccn with the eycs. Ethical judgments seem to bc diffcrcnt. If rvc dcscritre somcthing as good or bad, right or wrong, rvc clo not secm to be talking about a propcrty wr: call see, touch, hear or cxperience in any obvious way rvith orlr scnses. So what are we doing rvhen u,e nrake an cthical judgrnent? Are we making a statement about the physical rvorid in which we live, rvhich can be true or falsc, or arc wc doing somcthing diffcrcnt? Are there moral truths which can bc knorvn like cmpirical statcmcnts about the world, such as 'The product I am selling is rcd"?

COGNITIVISM AND NON-COGNITIVISM Thc first ancl most profound division in ethical theory is betwccn the claim that it is possible to knorv moral right from wrong and the denial of that claim. Becausc this is clainr and counter-claim about what rve can and cannot knorv, thc position rvhich declarcs wc can know is called 'cognitivism' and the contrary position'non-cognitivism'. According to cognitivism, thcrc are objcctivc moral truths which can bc knorvn, just as wc can knorv othcr truths about the lvorld. Statcments of moral belicf, on this vierv, can be true or false, just as our statement that something is a ccrtain colour can bc true or false. According to thc

When non-cognitivism claims that there are only attitudes, its proponents do not usually mean that moral judgments are simply expressions of one'd fcelings. Advocates of non-cognitivism acknowledge the essentially social nature of morality by invariably arguing that these are group attitudes. Thcy are cultural preferences; attitudes of races, religions, societies, sub-groups, or whatever. The scope can vary, but they remain \ merely prefcrences witliout any supporting basis in reality. There is nothing to make one sct of preferences any more true or false than another. There can be no appeal to anything outside the fact of group norms to validate moral belief. Moral right and wrong is whatcvcr , particular cultural groups say it is. It is culturally relative; a view usuaily rcferred as 'moral relativism'. What lcnds plausibility to moral relativism is the fact of mcral diversity. Different cultural groups do have different moral practices. All globe-trotting business people know this. Their in-flight reading teils them; books with titles like 'Tips for travellers', government pamphlets with titles like 'Advice for visitors to. . .'. They give warnings aboui types of action considered acceptable in one's own culture, but liable to cause offcnce when exported to a different part of the globe. They state that 'here' bribes are condemned as immoral, while 'there' they are accepted as normal; that while 'here' drinking alcohol is perfectly acceptable, 'there' it is forbidden by law; 'there' women wear short skirts. 'hcre' their dress must be modest, covering the body from the neck to a maximum of twenty centimctres above the ankle. True enough; but how much of this is a difference in morals? Is there , really a culture which thinks that bribery is morally all right, for exampie? ! We have to separate practice from principle. Consider a country in rvhich there are pitifully low rvages for public officials. They can only' support themselves and their families by accepting bribes, and only b.v paying them bribes will the public get things done. It has become norrnal practice, but no one likes it and no one thinks it is morally right. The public would rather not pay and the officials would rather have a living wage. Circumstances have thrown principles and practice out of joint. So perhaps morals there arc not so different from here; only the circumstances? Where also is the differenpe in moral principle betwccn
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allowing and prohibiting alcohol consumption? Is it not rather a difference in calculations of the social cost of the practice? No society thinks drunkenness, alcoholism or the attendant bad behaviour and illness are good things. They all rvould rather bc without them. But one culture thinks a total bun on consumption is ncithcr a publiciy acccptable nor practicable solution to thc problem. (Thc USA tricd it and thc result rvas Al Caponc). Another thinks it is. They have had thc ban Ior a Iong time, pcople have broadly acccpted it, and whai is the worth of a little artificially induced merrimcnt against the bcnefits of kceping drunkenness ancl alcoholism at bay? Differing estimations of likcly social consequences could also lie behind the diffcring viervs on horv rvomen should dress. Those societies insisting on neck to ankle coverage might, in part at least, do so in the belief that any further exposure would cause men to sexually abuse rvomen. No society wants to encourage such abuse. There could rvell be disagreernent as to likely causes and to appropriatc mcasurcs for rcmoving thcm; qucstions about rvhether mt:n really are this unrcstrainecl, and rvhether it rvould be more c{fcctive to rcstrict men's bchaviour rather tharn rvomen's dress. It this is the nature of the disagreemerrt. it is not a difference in rnorals. Anothcr situation in which a cultural difference necd not amount to a moral diiferencc is in thosc arcas in which the word 'culture' is applied 'in the restricted, but;'ery usual sense of bcing connected with differences in aesthetic sensibility, manners, fashions, customs and the like. Admittedly, the moral and the merely cultural are not always easily separable, and societies do have a tendency to conflate them - particularly where the cultural is about what is 'clean' and 'unclean'. This could be the case then rvith rules about the permissible length of women's dress. They could be bersed on ideas of etiquette, aesthetics or sartorial tradition, rvhich are no less passionatcly held for being mcrely cultr.rral rather than moral'? The lesson of ail these examples is that we cannot read off diversity ' in underlying moral principle from diversity in practices. We must first I sift through differences in sociai circumstance, strategy, causai belief, i culturai preference. When rve do, we could rvell find that rvhat looks like a difference in morals is nothing of the kind, altirough at the end of the day we could of course still be faced rvith a genuine n-roral difference. Even after allorving for all the complications, we could .very well find that behind different ideas on appropriate dress for rvomcn zrre fundamentally opposing views on sexual equality. But cven given such genuine and fundamental moral diversity, this is no proof of the corrcctness of

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moral relativism. In morals, as in anything else, the fact people believe different things to be true does not, of itself, prove there is no truth to be found. The truth could be there but none have yet arrived at it; or perhaps some have got at the truth and others have not. The fact of moral diversity can thercfore simply mean that either no culture has yet arrived at thc truth on certain moral matters, or elsc that some have arrived at it and othcrs have not. { In other words, some cultures have got it morally right and others \ have got it wrong. The lattcr can be a rathcr uncomfortable possibility for libcral minded peoplc. A motive behind moral relativism has un- | doubtedly been a wholly laudable desire for cultural and racial tolerance. i If the opposing moral beliefs of different cultural groups are all equally ' unfounded, then none are superior or inferior to any other. None' are true and others false. In particular, for this is the great historical cxcmplar, western moral values have no claim to superiority over non-western ones. There are no poor benighted heathens for westerrt imperialists and western Christian missionaries to rescue from mora.l depravity. The claim of a 'civilizing mission' which was often used to justify western imperialism is without moral foundation because (at least according to the non-cognitivist) all morality is without foundation in either fact or reason. This all looks suspiciously like trying to have one's cake and eat it. There is an implicit appeal to the moral virtue of tolerance while denying, as the moral relativist must, any objective justification for such an appeal. But if morality is relative then nothing stops any particular group opting for intolerance. If we are free to choose whatever set of moral standards we like, we are free to be as intolerant as we like. Moral relativism does not entail tolerance. That is a loss of a supposed advantage to the theory but nOt a mortal blow. However, this issue of toleration poseb an altogether deeper and more serious dilemma for a consistent moral relativism; one which an'y form of non-cognitivism in ethics must face. It is that there are then no objective grounds for opposing any activity no matter how morally rcpellent it might seem. Having denied any objective basis to morality,l there is then nothing to make it either true or false that an action is right or wrong. There are therefore no objective reasons for either supporting i or opposing any particular activity on moral grounds. All culturally sanctioned practices are on an equal footing. Thinking that racism, sexism, corruption, exploitation and genocide are bad things is no more or less justifiable than thinking they are good things. Both are simply
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mattcrs of cuitural consensus. For societies opposing thesc things to take action against socicties supporting them is merely to exercise pieference for one set of attitudcs over another. The opposing societies can perfectly well inclulgc in their opposition for rhcre isnothirig to make them wrong in this: but cqually, there is nothing to make thcm right cither. Faced with the consequcncc that societics are free to pick and choose whether or not to cngage in something likc genocide, it might well seem to many that moral rclativism, along with non-cognitivism in general, is rcally not a vcry plausible position to adopt. can wc really believe that no action of any kind no mattcr what it involvcs in the way of human suffering is 'objectively' right or rvrorrg? Do we rcally have no rational rcason for prefcrring rcspcct for hunrln litc to total disrcgard, kindness to cruclty, honesty to dishoncsty? Flavc u,holc svsteflrs of morality rcally only cvolved to organizc subjcctivc irrcfcrcncos? It hardly secms crcdiblc. If it docs not we must start considcring rvhat objcctivity in ethics might bc basccl on. 'lhc mcrits of various cognitivist thcorics must bc examined.

RELIGIOUS MOI].ALITY
one obvious source of morality might be thought to lic in rcligion. After all, if cod exiSts, rvho better'rhariGod hirnself to decidc wirat is right and what is q,rong? If God is omniscicnt, theu surcly hc ntust be ihe infalliblc authority on matters ol' cthics (as inclcccl cvcrything clse). Accordingly many pcople throughout the ases, including somc moclcrn business mcn and \\'orncn, have built their ethics upon religion. Thus, for thc evangelical christian, rhe ethical rulc book is the Bibie; for the Muslim it is the Qur'an;for the Jew it is thc Torah (the first five books of the Christian's Old Testament) intcrpreted by the Talmud.l The theory that actions are right solely because Gocl commands them is sometimes known as the 'Divinc command' theory. As a theory it is hugely popular and temptingly sirnple, but also radically incoherent. This is not simply the obvious problems of proving that God exists and demonstrating that rve know he will. The clecper problem is that
I Thc Talrnud. is a lcgll compilltion of cncl'cloplctlic propor!ions, compilctl around 500 lc, and is acknorvlcdgcd to bc thc authoritativc Jcwish lcgal'rvoik, scconcl oniy to rhc Torah itsclf.

sclrcnc of things, and with their religions comes very ciearly defined codes of ethics. Although morality can exist without religion, religion will not usually exist without morality. Few, if any, religioni do not liave moral codes. . So what, if anything, does a religion add to a moral code? One respect in which a religious mgrality might extend beyond a secular moraliiy is that religion typically holds that there are dimensions of reality beyond the purely physical world. The christian does not merely -see{ for the secular well-being of humanity, but for the 'kingdom of heaven, (however that is to be understood); the Jew may seeklor the messianic age of peace, justice and harmony. Believers in a religious morality will often claim that the actions they are prescribed will help to bring about that supernatural goal. There is i belief among some Jews that if all Jews were to observe two successive

even supposing God is the final arbiter on ethical matters, how does he himself decide what it right and wrong? If God can make an action cither right or wrong just-by deciding tfiat this should be so, then God turns out to be no more than a dictator whose will is arbitrary, and humankind is subject to his whims which havc no good underlying reasons. on the other hand, if God has reasons for c-ommanding -onE thing rather than another, then it is these reasons held, independen-tly of what God decides or tells humanity. If God commands humans not to steal on the grounds that this causes human suffering, then it is human welfare that forms the basis of morality - the fact thai God comminds it is incidcntal. somc religious believers may add that God, bcing ruler of the univcrse, not only has the power to make laws on behalf olhumanity, but is able to back them up by sanctions. According to classical ihristian anci Islamic teaching, God will reward the rightcous with the joys of heaven, a-nd consign the wicked to the torments of hell. Thus, it miy be argued that what makes acrions right and wrong is the fact (if it is a faci) of divine reward and retribution. This though, clearly getsthings the wrong way round. It is never the fact of reward or punishment that makei a.ctions right or wrong, rather it is because actioni are right or wrong that they should be rewarded or punished. Thus, we stilf require reasons independent of God's rvill to explain why an action is right or wrong. The argument so far assumes that being religious is tobe equatedivith believing in God. This is not necessarily the case; Buddhistjand Jains, for example, are religious, yet a crcator Gocl docs not feature in their

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sabbaths impeccably the Messiah would come immediately. Within a religion it is possible to hold that there are special obligations which will enable the distinctively religious goal to be brought about. J There is therefore much at stake for the follower of a religion, rvhich is I rvhy thc frccclom to practisc thc rcligion of onc's choicc is gcncrally i regarded as a fundamental humatr right. f'hose involvcd in intcrnational , business are therefore ill advised to ride rough shod ovcr the religious i convictions of their trade partners, who may well believe that thcir I entire eternity could be at stake. Here readers may recall the sccne in Shakespeare's Hantlet, rvhere Hamlet, in his deliberations on whether to kill the king in order to avenge his father's murder, entertains tire idea of waiting until the king has committed some grave misdeed, so that he rvill be punished for all eternity. A religion can also enable its followers to experience a sense of belonging to a tradition or a community. The root meaning of the word 'religion' is the Latin word religio, which means, 'I bind'. Religion binds people together; thus the Jew can feel an identity with fellow Jews by knowing that they keep the same dietary rules, observe the sabbath and come together for the festivals of Passover, Weeks and Booths.

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The Muslim's undertaking of the hajj (piigrimage to Mecca) and the Christian's coming together for the sacrament are all ways in whicl-r thesc respective communities are bound together in a brotherhood (a word frequently used in the context of Islam) or a fellowship (a word often employed by the Christian). Bclonging to a community entails having distinctive characteristics, and one way of ensuring that a community is distinctive is by imposing special obligations upon its members. A religion can also provide its followers rvith a distinctive-means of achieving a desircd end. For example, many religions deplore extremes of wealth and poverty and aim for an age rvhere there will be compassion and justice. (This need not entail absolute equality - a notion explicitly rejected by most religions, in fact). The Jews in ancient times prescribed several ways in which inequalities of wealth could be levelled down; one way of doing this was the institution of the 'Jubilee Year' which occurred every fiftieth year in ancient times, and in wirich all debts were automatically cancelled. Contemporary Islam prescribes that a ccrtltin proportion of one's wealth should be given as alms for the poor (zakat), and that unearned interest may not be gained from moncys lent. The Roman Catholic Church, through the centuries, has propagated the doctrines of the just wale and the just price. The Jain religion makes the interesting recommendation that people in the business world should

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decide, in advance of aclrieving their fortune, what standard of wealth they hope to achieve; then, if such fortune is surpassed, the surplus should be given away to worthy causes. of course it would be possible to practise these ideals without belonging to a religion at all. Buf, as we all know, individual resolutions (such as ihosc marle at Ncw year or cluring; a pcriod such as Lent) are much easier to break than obligations whicfi are assumed by a whole community. Religions, too, can also havc thc function of imposing special forms of discipline on their followers. In theory at reast, suppoiteis of a religion strive for perfecticin, and few believers regard the pr-esent physical world and its values as affording a perfect state of affairs. Accoidingly, many believers will perform activities which are in effect attempts io detacii themselves from the physical world. one of the reasonj why certain christians fast during Lent and Muslims fast during the month of Ramadan is to dernonstrate their ability not to depend on the physical world - or at least to depend on it to a lesr". degree than those otdinary mortals who eat a normal diet. These activities take on a specifically religious dimension on account of the fact that believers perform these activities en masse, as part of a community. The christian Sunday, the Jewish sabbath or a religious retreat are not simply means of ensuring that followers take sufficient rest from their work, important though that is. The fixing of a definite lay or a pre-determined period enable the religion to 'bind together' its followers into a definite community which shares such activities. (Incidentally, there are now secular organizations which offer retreats for business people - contemporary secular materialism at least sometimes draws on the legacy of a religious society). Finally, religions provide their followers with myths or stories, which serve as a source of inspiration and illustration for a moral life. The Parable of the good Samaritan encourages christians to love their neighbour; the story of Job assists Jews, Christians and Muslims to exercise patience and loyalty in the face of adversity. The stories of the previous lives of the Buddha (the Jatakas) help Buddhists to understand the lengths to which compassion can go, and how good can triumph over evil. Most people think in concrete rather than abstract terms, and religions can provide examples as well as theories. To sum up, then, the writers hold that it is perfectly possible to have morality without religion, and that religious morality ultimately draws on icasons rvhich are independent of religion. However, one can talk about 'religious moralities' in the sense that each particular religion has its

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CONSEQUENTIALISN,I VERSUS NON-CONSEQUE,NTIALISM Thc grcat dividc in cognitivist thinking is betrvcen theories which assess moral right and rvrong in terms of th,.: consequcnccs of actions and those which do not. Those which do are 'consequcntialist' theories; those rvhich do not are 'non-consequcntialist'. Decp though thc division is, this is a clistinction rvhich must be treated rvith somc caution. It is doubtful if non-conscclucntialist thcorics, even the most extremc, can or do totally ignore conscqueuces in assessing right and wrong. On the wholc, consecluentialist thcorics arc thc moro exclusivc. With thcm it is gcncrally truc that onlv consccluenccs count. Yet evcn so, conccssions are possible and modifications which take other factors into the reckoning have bccn proposccl. The division into con' sequcntialist and non-conscqucntialist thcories is therefore a broad one. In somc cases and to solnc cxtcnt, it can lrc distinguished by where thc emphasis is put rathcr than by a total concentration on consequcnccs or, lcss probably, thcir total exclusion. That said, cven the differcnce in emphasis is rnarkcd and profound. With conscqucntialist theorics u,e look to thc results of actions to determinc thc truth or falsity of moral judgcmcnts about thern. if what follorvs from an action is, on balance, of benefit then it is a 'good' action and so we are 'right' to do it; convcrsely, if thc outcome is, on baiance, harmful thcn thc action is 'bad' and wc are 'wtong' to do it. For consequentialism, the test of whether an action is right or wrong is l'hethcr it is goocl or bad in thc scnse of resulting in benefrt or harm. Right or wrong is a qucstion of good or bad; and good or bad a question of benefit or harnr. For non-conscqucntialism, thcrc is no immediate appcal to bencficial or harmful consequcnces to dctcrmine good or bad. Nor do good and bad dircctiy dctermine right and wrong. Rathcr, it is thc othcr way about; it is right and rvrong that dctcrmines good and bad. We start trom some conccption of what it is for an action to bc right or wrong, and that determincs for us rvhethcr or not an action is good or bzrd. Calculations as to thc likcly consequences of thc action nccd play no part in that conception. lt can bc solely in virtuc of bcing an activity of a certain kind that thc action is right or wrong, and thcrcfore good or bad.

A Divine Command theory offers an illustration of the difference betrvecn consequentialism and non-consequentialism. If religious believcrs were to obey God's commands in order to attain a desirable state after death, or becausc they believed that obedience was rewarded by matcrial success (a view held by some Protestant Christians and also, historically, by Jews, who associated covenant kceping with the coming of the promised messianic age), then such motives presuppose a conscquentialist view
commands, not for any expected reward, but for the sole reason that God has commanded them, then hc or she presupposes a strictly nonconsequentialist account of morality. It is not what follows from oul actions which then makes them right or wrong but only the fact of their conformity or non-conformity to God's commands. It is solely in virtue of l'rcing activities of such a conforming or non-conforming kind that actions are right or wrong, and thercfore good or bad. Thc non-rcligious theories which we shall go on to examine embody thc contrast betwecn consequentialism and non-const:quentialism in morc complicated ways. Given such complexity, it is easy to assume that

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all we have here is a high-flown theoretical diffcrence. This

rvouid

be a mistake. What tlie theorctical difference of opinion highlights and claborates is a contrast which is a widespread and fundamental feature of the rvay people in general approach ethical problems. Faced with an cthical problcm, the habitual approach of some people is to weigh up the costs and bcnefits. They ask 'Where's the good in that?, or'Where's the

l
,

harm in it?'. In so doing they adopt, whlther they know it or not, a i conscquentialist approach to ethics. In contrast, other people tend to \ disregird such caliulations. For them the issue is onc of 'simple right or wrong'; something is eithcr right or wrong and that is the end of the mattcr. Take, for example, different management approaches to the problem of 'shrinkage' - the loss of stock which occurs through employees illicitly taking or consuming the company's products. A determincdly nonconsequentialist approach would be to take the line that this is stealing pure and simple and as such demands the culprits to be caught and punished regardless of consequences. A consequentialist approach would want to weigh up the pros and cons of imposing sanctions. Is the loss of stock worth thc cost of increased surveillance and supervision of staff? Is it worth the rcsentmcnt these actions would cause? What also if the culprits are caught? Are they to be dismissed regardless of their personal circumstances as the non-conscquentialist might insist? Or are factors

i
f

lld l.;il-,h.",t

___-l
non-consequentialist would regard as proper. rvould produce the best result.

such as the cffcct of thcir dismissar on thcir families to be taken into accounr? Artrrough these arc very practicnt irrr"r, of horv the cthicar diremmas strouti be resolved irri;;J;"';ley pose is a matter of theoretical concern.

It all depends on what

This differcnce in the. underrying theorcticar approach is not to be i competing list of rnorar ri.ghrs ind rvrongs. It is io i.,uu. ;;il;";'exptanations of rvhy a*ions are, right o, ,i.ong. tnl, .rn justify different stances on particular moral issues and so" read to different ristings of rights and wrongs; but it neccl not. Both a consequentiarist and a nonconscquentiarist arc,rikery, for exampre, to agree trrat stealing by ernpioyees is rvrong. where they rvouri .iitt", ,rr"i.'in,t".rton.ring of rvhy it is rvrong.,,For. the'.onr.qu.nrialisti,itin ir, ;;or;l;"rpeaking, becausc of rhe aisruptivc'cr];; ;i;t"'p;;#;. ;ar the non_ consequentialist 'o."iorrv it is because ihere is somerhing i"i.i"ri."ilv irong in tire act taking someone else's propertv. .of Taken item by itcm, a.consequcntiarist ard non-consequcntiarist listing of righrs.and rvrongs wit probabry noi cirt", u"ryilt. il;; does not mean rhis is mostrv a puiery theoreticar crispute'with iiiti"'t"u.ing on substantivc moral iisues. There wiil be some crisagreement on substantivc moral issues and t'ey are. unsurprisingly, fitef! to con.".n";'.-,r, ,fror" issues rvhich divicre sbciety tr'" .nori. ;iri" .lrrri" Here consequcntialist arguments about the sociar"*;;pl;'is'abortion. effects of unwantcd pregnancics rend to be utirized by the pro-choice touuy,-ivirte nonconsequcnrialisr arguments about the unborn chirc|s .igh;'t; riie tena to be.rseci by rhc prollif" lobby. Thc division betrveen consequentialists.a'cr non-conseq'entiarists is also likely to manifest itself in tri"i, r"if..tlvc responses to morar issues; thcy havc a radicailr',diffcrcnt .on..pii* uf rric'narurc lr'iir"'prout",r, and rherefore radiiaily different to its sorution. on the ffiou.i,", issue of shrinkage, for example, ,u" ,o.,,u that an uncompromisingly non_ consequentialist resoonse^is ihat rvrongdoing shoulcl rneet its just deserts rvhare'er rhe cost. ivh'e. for. th. ..";';"q;;;i;"li;;il';;;;,i;"'"i rvhal ro do depends on a carefur calculation oi *rrt. Adherence to principle is the basis of the non-..o:r:glenriarist ,pp;;;, h".|,'o',,,,, ,no, ;;rd; of the consequentialist. whereas rvith the non-consequentialist there could normarly be only one response in ony circumstance, rvith the consequentialist the response rvill certainly var), rvith the circumstances. In the case of shrinkage, sometimes trr.-J!.irion .""r0'rr"-i" oo nott-,ing rvhaisoever; sometinrei it could u" to iot. even harsher action than the
confusccl with havi'g a criffcrentinJrat coac in the'Jcnse-of

UTILITARIANISM: AN ETHIC OF WELFARE

The best known consequentialist theory of ethics is called 'utilitarianisrn'. The name derives from the use of the word utility to denote the capacity in actions to have good results. This choice of rvord proclaims thc

their disutility. In utilitarian terms, the more good which results fro_lq an action the more lil{y_I_hgtj the worse the result, the more dis-utililr (AlihoughJtrtctltspeatilng, good and bad are the results while utility and disutility are the capacities for those results, they amount to the same thing in practice and can, for convenience, be treated'
as synonymous).

Though utilitarianism in one form or another goes back to the earliest thinking on ethical matters, the clas_s,ic :fqrl1r_ulatiqnjs. owed to the British philosopher and social reformer, lJeternl_g_e4b4nJ 0748-1832). The formulation he offered was characteristically bold and unequivocal.* iUtility is one thing and one thing only, he said, it is happiness. Disutility/ lis unhappiness. Actions are right to the extent they maximize happinessI or at least minimize unhappiness, wrong to the extent they maximizg ) unhappiness or minimize nappinesi. Faced with a choice between two actions, one which will result in happiness and the other in unhappiness, we should choose the one producing happiness. Given a choice between two actions which will both produce happiness, we should select the one producing the most happiness. Given that both will produce unhappiness, we must choose I the one producing the least unhappiness - the lesser of the two evils. \ Where the same amount of happiness or unhappiness will result, either option may be chosen, and where neither happiness nor unhappiness will follorv our actions, we are morally free to do whatever we like. Why identify utility with happiness? Because, Bentham said, it is the only thing desirable as an end in itself. All other things are only dcsirable as a means to the end of happiness. All the other things \
I

Ei t*

hical theory

rl".k - fame, tbrtunc, Iyg I fricndship, or r.vhatcver-

--l
sanctity, sercnity, knowledge, power, lovc,

Utilitarianism: an cthic of welfare

tri

evil.
r

'fhey to .happiness. ultimate good. Flappiness is therefore the only thing good in itse"if. conve rscly. unhappiness is thc only thing bacl in ltself, inJ onty ultimate

arc of value only in so far as th-ey are conclucive are good only in so far as they lead to that single

Bentharn hoped for a precise, scientific measurc. In this he was clcarly being unre alistic. what is perfcctll' possible, though, is a sct of crude but effective calculations_. They are made all thc time; they are even put exactly to that moral use rvhich utiiitarianism supposcs. -we make cbnsequentialist asscssments of the rightness or wrongness of actions, and this invariably involves some sort of ror.rgh ancl ready calculation of the impact on human happiness of the action^-s. Thcre is,'moreover, proof of thc gcncral cffcctivcncss of such calculutions in the fact that thcy also often feature in our oftcn very succcssful attempts to predict and cbntrol behaviour. In our everyday dcalings with pcople we usually know perfectly rvell what rvill plcasc or clispleasc thcm anci, in orcler to control and prcdict their bchavionr, uct accordingly. wc arc evcn able to makc effcctivc cstimatcs of thc diflcring dcgrccs o[ happincss or unhappiness that actions are likely ro produce. It is likely that ihe harder the blow the more u_nhappiness, ih" rno." gcncrous thc gili thc morc happiness, and so op. It is not always known with ccrtainty of course. Someiimes we can have no idea of thc effect on happiuess of actiors. sometinres we get it wrong. But wc can makc rcasonablc cstimates urost of the time, and get thcm reasonably correct cnough of the timc to havc a practicablc guide to conduct in the idca of utiiiiy as happincss. Thcre is even thc possibility of acimitting an clement of quantification into thcsc estimatcs providccl rve scttle lor rvhat is aclmitiedly a very indirect approach. lt is found in economics. In economics, conjumption of goods and services is said to satisfy wants. Thc greater the propoition of our income we are prepared to devotc to purchasing on" r"t of items rather than another, the greater the relative satisfaction obtained. we arc prcsunrcd to scek only to maximizc that sutisfaction. Calculutions and predictions of economic bchaviour are maclc on that basis. ln so far as economics endeavours to explain why we are assumecl to behave in that rvay, it appeals to a conccption of human beings as, at least in the economic spherc, essentially pleasure secking. wc aie prcsumed to scek to rnaxinrize satisfaction becausc of thc happincss it brings. This has obvious parallels with utilitarianism. It is even thc case, as"anyonc who

Al

obvious objcction is

to ask how hapPircss can bc mcasurccl_.

divided into two sorts of claims. The first centres around the idca of happiness as the ultimate goal of human behaviour. This is called 'psychological hedonism' and is, as we have seen, explicit and unrestricted in Bentham but merely implicit and restricted (to economic behaviour) in economics. The second sort of claim is called 'ethical
happiness

gradually scparatcd itsclf frorn thc direct rclationship with moral gooci and became the measure of relative consumer prefcrence that it is toclay; and even with this momentous break, economics and utilitarianism are stili not entirely separate. There remains that same underlying conception of human beings as pleasure seeking. There are still also traccs of thc oicl moral sense of utility in attempts by economists to calculate the relative welfare that societics as a whole will d"erive from alternative patterns of expenditure. Conversely, modern utilitarian theory attempts to use mcasurements of welfare in the economic sense to solve moral problems; often in rather complicated mathematical ways. In so far as economics goes along with the Benthamite notion that happiness plays a peculiarly fundamental role in human conduct, it shares in a commitment to a doctrine known as 'hedonism' (from thc Creek for 'pleasure'). This is a theoretical perspective which has takcn various forms in its long and continuing history, but can be broadiy

has studied economics will know, that the terminology is sharcd. The capacity in goods and services to provide satisfaction is spoken of as their utility. The greater the capacity of any particular set of goods or services to satisfy our wants, the more utility it has for us. This conceptual ancl terminological overlap is no accident. Economics and utilitarian ethical theory have a iong historical connection. The economic concept of utiiity

hcdonism' and centrcs around the idea that moral good is identical with - something from which the science of economics has very properly come to distance itself, but is the very basis of Benthamitc

utilitarianism. Though Bentham's general commitment to both these ideas is undoubted, precisely what he subscribed to is difficult to assess. He is certainly a psychological hedonist in the sense that he accepted that happiness was the guiding aim of human behaviour. He was also certainly an ethical hedonist in the sense that he accepted that happiness was the ultimate measure of moral right and wrong. However, the position he adopts must be carefully distinguished from two others which also go under the same headings. He is probably not a psychological hedonist in thc sense that he thinks our behaviour can only be directed towards our own happiness, that it is a psychological fact about human beings that

!!l

I Erhical theory

I I I

Utilitarianism: an ethic of welfare

the population gain from having this underclass. They reap the benefits of having cheap labour (particularly in the service sector) and a pool of disposable labour to take up the slack in times of economic recession. They also enjoy a somewhat larger share of educational resources, of rvelfare provision, and of political influence to which their numbers and needs might be supposed to entitle them. They are very happy with their lot. When the total sum of happiness is added up it is found that this is the arrangement which maximizes happiness given the total resources available. An alternative arrangement could make the 20% minority a lot happier but this would not be enough to offset a marginal decrease in the happiness of the B0% majority. (We invire readers ro think of societies which might come close to this scenario). Modifications of the greatest happiness principle

they are only capable of performing acts directed at achieving their own happiness. He is certainly not an ethical hedonist in the sense that he believes that only our own happiness counts in determining right and wrong, that we ought to do whatever maximizes our own happiness. Had Bentham accepted such purcly individualistic intcrpretations of psychological and ethical hedonism, his rvould be the kind of hedonism known as'egoism'(from the Greek for I). I{e is vcry clear, howevcr, that the good rvhich we must seek is the common good. It is thc total sum of human happiness which must be maximized and not simply our orvn individual happiness. We must follow what he called thc 'Grcatcst Flappiness Principle' and aim for the grcatest happincss of the greatcst number. In this our own happiness should havc no priority. It should simply be part of the sum. If our own happiness can only be enhanced by diminishing the total sum of happiness, then it must be sacrificed for the greater happiness. Bentham's ethical hedonism is therefore explicitly and diametrically opposed to egoism. This means that, at least by implication, he rejects an egoistical interpretation of psychological hcdonism also, for in 'requiring us to sometimes sacrifice our orvn happiness for the greater happiness, Bentham must allow that sometimes we are capable of acting in a non-egoistical fashion - that is, of not just seeking our own happiness. Otherwise we would not be capable of following the Greatest Happiness Principle and there would be no point in proposing it as a guide to conduct. That Bentham should oppose ethical egoism is unsurprising. Any unqualified identification of morality rvith sclf-intercst will pcrhaps inevitably run foul of the requirement, noted earlier, that the pursuit of self-interest be compatible rvith the common good (see Chapter 2). In making the common good the arbiter of right and rvrong, Bentham avoids that problem. What hc does though, is make it the sole arbiter, only the common good counts. Only optimizing the total sum of human happiness counts in distinguishing right from wrong. This is a position that brings i its orvn peculiar problems, for then some morally clubious practices rvould seem not only to bc allorved, but positively required. Take a situation in which the happiness of society as a whole is maximized by the creation of an underclass. There is a section of the population, say 20%, which, through no fault of its own, suffers from lorv wages, high unemployment, limited access to educational and rvelfare provision, and has little or no political influence. Thcy are unhappy with their lot but cannot do much about it. The other 80% of

I I i
I

What is wrong with this situation is that it is unjust. Why should a minority suffer simply to make a majority better off? Bentham has made the common good the sole arbiter of right and wrong. He has gone on to identify the common good with a simple aggregate in the form of the sum of human happiness. The sacrifice of the rights and interests of individuals and minorities to the common good is therefore possible; even, as in the example, to the unjust extent that they are sacrificed simply to make others better off. To avoid this outcome several modifications to traditional Benthamite utilitarianism have been suggested. One is to assess utility by what generally follows from acts of a certain . kind rather than, as it seems to be with Bentham, what is actually going r) to happen in any particular case. 'What moral rule will maximize humarlr happiness if it were universally followed?' becomes the crucial question rather than the simple case by case question of 'What will happen if this is done?' The aim is to arrive at general rules of conduct rather than decisions about the rights and wrongs of particular acts. It is therefore called 'rule utilitarianism' to distinguish it from the 'act utilitarianism' of Bentham. According to proponents, it can deal with problems of justice. They argue that the test of 'Is this moral rule conducive to the greatest human happiness?' will result in the sort of situation described in the example being deemed morally wrong. We cannot be permitted to disadvantage others simply because it will benefit us. If everyone did so we would all suffer. Overall, and in the long term, the outcome would be disutility. r) Another modification abandons Bentham's aggregate method of

tElt-'rt'ci! cory
-fhat
1
I

Kantianism: an ethic of duty

fn

',I

torture and malnutrition to love and finc food). Givcn this, it can be argucd, utilitarianism rules out gross injusticcs. Intcnsc suffcring by a minority rvill alrv:rys outrvcigh any happincss thc majority might dcrive frorn bcinc advantaged by thc suffcring. A grossly cxploitcd undcrclass will thcrcfore not be pcrmittcd. The balancc of disutility ovcr utility 1 rvould rnake thc situatiott wrong. .'r / A fourrh and final nroclilicaiion is morc raclical still. lt woulcl stop i either happincss or unhappincss bcing thc only objcctivc. lt advocatcs lvc adopt a ln()rc brr>rrdly consccluetttiulist approach in which thc maximization of bcnefits and thc minimization of hann remain' the aim, but there is no attcntpt at furthcr specification. Rather a pluralist, non-hcdonistic, approach is adoptcd in which happincss and unhappiness simply take their place in an indefinite list of harmful and beneficial things. (Whcthcr this could still be callcd utilitarianisrn I is a terrninological issue). On this account, such things as freedom, friendship, knorvlcdge, lovc, honesty, and so on, are seen as good I in thcir orvn right and not mercly for thc Jrappincss they promotc. Likervisc, tyranny, enmity, ignorancc, hatc, dcceit, attd so ott, are i seen as bad in their orvn right.'fhis goes lor justice and injustice also. So rviren a minority is cxploited simply for the cnhanccd bcnefit of a majority, the increased happiness of that majority is just part of the equation. lt must be balanccd not only against the unhappiness of the minority but also against thc harnt of injusticc. In such an equation, it could bc argucd, mere enhanccd happiness rvill not be sufficient to . justify gross injustice. Thc cffectiveness of any and all of these modifications to traditional utilitarianisrn, cither alone or in combination, is a moot point. Thcy all go some wav in elirninating the sort of gross injustice involved in permitting a mert: increasc in bcncfits to justify the infliction of harm. ln

is, instead ol mercly calculating utility for sonte fornt of avcraging. : aclding up the total sunt of happiness, wc look also at its distribution. , Thc highcst nrcan or nredian (opinions vary) sharc of happiness is lsought.'lhat rvay, it is hopcd, thc injusticc of some peoplc getting much lcss than a fair sh;irc of happincss is avoidcd. A third modification picks up on a point rvhich Bcntham hinrsclf I acknorvledgcd lrut rvas littic cicvcloped by hinr or anyone elsc. It is that i unhappiness in gcncral, and pain in particular, arc usually morc intenscly t felt than happincss and plcasure. The greatcst feeling of happiness, the strongcst scnsation of plcasurc, is a rclativcly rnild affair comparcd with the depths to rvhich unhappincss and pain can take pcople. (Comparc

some judicious combination they could perhaps eliminate it all togethcr. For hostile critics though, even this success would not be enough to',

make utilitarianism acceptable. For them the whole consequentialistj approach is misguided. its intrinsic error is to think that only outcomesj matter. Peoplc are thcn not valued as persons it is argued. What is of, value is not thc individual person but the harm or benefit which accrues to the person. Thus morality becomes a matter of calculation. Principle inevitably gives rvay to expediency. The rights of individuals are ahvays capable of being overridden. For such critics, only a non-consequentialist theory will do.

KANTIANISM: AN ETI{IC OF DUTY

E;iti.

in ethics is often identified with an approach labclled 'dcontological' (from the Greck for duty). Its classic, indced definitive formulation, is that providcd by the German philosopher Imnranuel Kant (1774-1804). Although in many ways the diamctric opposite of Bentham's utilitarianism, Kant's theory also makes the monistic claim that onc thing and one thing only is 'good in itself . The diffcrence is that while for Bentham that one thing is happincss, for Kant it.is a 'goq9 wi.ll'. 4n qction is morally ri the pcrson pcrlorming il i! motivatcd by
Non-consequentialism

What docs Kant mean by a 'good will'? Essentiallv. he means the action is done for reasons of principlel from a sense of duty and nothing ilsc. Self-intercst can certainly not be the motive; but neither can kind-fr6is, loyalty, sympathy, or any othcr laudable sentiment. These are
aclmirable things, says Kant, but they d.o not constitute a specificallrv moral motivation tor acting. A-qglt" of d"ty .a" olon. i
(

|
i

.forhistheory). lf.-iUg_1bs-titt e' aeontot o gical -FIow can we know rvhen an act is done from a sense of duty? When, says Kant, it is done in accordance with what he calls the 'categorical imperative'. Kant expresses the categorical imperative in several ways, all of which are, he says, equivalent. Attention has, however, traditionally centred on just two definitions; and though they are certainly cornplementary, Kant's claim that they are equivalent is unconvincing. They are perhaps best seen as two separate but mutually supportive
formulations of what constitutes the categorical imperative. The first says:

!..

trrE
!

i. I,:

t:'

Kantianism: an ethic of duty

E'l

'l ought never

to act cxccpt in such a way that I can also rvill that my mexim shorrld l'rccornc a universrl larv,'r

.i
i:l
Jl
1i

The 'maxim' rvhich Kant mentions is the principle on whicli I act. It may bc either a good principle or a bad principle. If the personnel officer
dcciclcs to brcak an cmployec's conficlcntiality, he or shc might be acting

Irl

,n

;i

on a maxim like, 'Whencver

circumstances such as this,

'

on confidentiality might be expressed by a maxim like, 'When I am askcd to disclose personal information, I rvill only disclose what is nonconfidential.'In practice maxims may be nrore complicated than this; a personnel officer may rvish to qualify circumstances in which he or she milht exceptionallr'.reveal confidential information. for example if the policc asked for disclosure. But for the convenience of discussing Kant's philosophy, these relatively simple ones will suffice.

it

is convcnient to break a promise in

ill
{i
',:

;...
I! " \

shall do so.'

more responsiblc decision

ttit'

l:.

decide whcther or not to keep it.'But thcn, of course, the whole of making promises becomes pointlcss, even nonsensical. The whole point of promises is that they ought to be kept. If everyone were free to brcak their promises when it suited them to do so then the practice of promise making would lose all purpose. It would become impossible to sustain. Consequently, the practice of promise breaking too rvould become meaningless. There would be nothing to be gained by it because there would be no expectation that promises are going to be I kept. Hence the principle that we should make promises which we have , no intention of keeping cannot be universalized. We cannot, as a matter i of logical consistency, require everyone to act in that rvay. So actions performed under that maxim are contrary to the categorical imperative and therefore morally wrong. In contrast, there is no logical inconsistency in requiring that promises be made with the intention of keeping them. This is a maxim which can be universalized. So actions performed under
business

'Universalizing' a maxim basically means that the principle upon which we act (the maxim) should be one rvhich wc can, rvith consistency, wish , all other people to act upon. Norv, some maxims can be universalized, i rvhile others cannot. For example, it is perfcctly possible for all pcrsonnel officcrs to maintain confidcntiality conccrning crnployees; we can conceivc of all of them conscientiously doing this. But if we make a promise we have no intention of keeping, then the maxim on which we have I acted is something like; 'When I make a promise I may subsequently

treat people as being of purely instrumental value. is to den-v their I 'pcrsonhood'. It is to treat them as mere objects having no other purpose tbeyond the use to which they can be put. To do this, the argument goes 'on, is to act immorally. To act morally we must respect the personhood of people and never treat them simply as a means to an end but always, and primarily, as an end in themselves. As Kant puts it: 'Act in such a vray that you always treat humanity-. . . never simply I '" 1 I a mcans, but always at the samc time as an end.'r
as

it are in accordancc with thc categorical imperative and are thereforc morally right. Kant's second formulation of the categorical imperative is based on iln idea which is nowadays called 'respect for persons'. At its simplest it contrasts human beings with objects: vegetables and minerals, chairs attd tables. Objects have a merely instrumental value. They are things; their worth lies simply in the use to which human beings can put then:. Human beings, on the other hand are persons. They are feeling, purposeful, rational, capable of having aims of their own which they can care for deeply.'This, so the argument goes, means their lives have an intrinsic and not merely instrumental value. To deny this altogether, to

On either formulation Kantianisnr is distinguished from utilitarianisrn by the absence of any explicit and direct appeal to consequences in determining right and wrong. What is of central and perhaps sole importance is the motive for the action. With utilitarianism, in contrast, motives are incidental. They matter only in so far as they are conducive to performing actions which maximize utility. They are not, as they are with Kant, a good in themselves; but only as a means to the end of maximizing utility. The result is a contrast of consequentialist flexibility and nonconsequentialist inflexibility. It means that Kantianism is strong just rvhere utilitarianism is weak and vice versa. Unlike utilitarianism, Kan- \ tianism would not permit the sacrificing of individuals or minorities to collective self-interest. This is not how we would expect to be treated ourselves and so such actions could not be universalized. They would also be actions which very clearly treated people simply as means to an cnd. The other side of this coin, of course, is that Kantianism can be accused of making no allowance for those extreme circumstances when, very arguably, the common good must have priority over everything t Ihid., p.96.

\r

I
I

Imnranuel Kant, Grottrrrhvork of rha Metuphysic larpcr :rnd Rou, 1964) p. 70.

of irlords

transl I-1. J. Paton (London:

F*l tllrry ;t

--l

Natural law: an ethic of rilhts II Ii Y

I r-'-t
101
I

eise. ln one of his earlicr writings, for exampic, Kant stated that he disallowcd all lying; evcn if an intcnding murdercr were to ask us the whereabouts of his or hcr intcnded victim rve would be obliged to tcll tirc truth. Surcly it is not only pcrmittcd but morally obligatory that rvc should lie to cvil-docrs to prcvcnt thcnr cloing wrong? AIso, ancl morc scriously, facccl rvith a choicc bctrvccn suving many livcs at thc pricc of sacrificing a few, is it not obligatory that u'c perrnit thc sacrilice of thc , ferv - horvcver much wc rvould not want it donc to oursclves or howcver much this is trcating peoplc simply as a mcans to an end'l Philosophcrs rvho dcfcnd Kant will point or.rt that his insistcncc ott univcrsal truth tclling appeuls in u vcry mirtor r.vork rvhich docs not reflcct lris nrorc mrrturc position cxprcssccl in thc Groundworlc of thc Metupltysic of Morals, and that the problem of rvhether or not to disclose informiition to intcnding murclcrs can be solved by making the maxims on rvhich we act rather nrorc sophisticatcd than the simple formulac ol 'Alrvays tell the truth,' or 'Always kecp your promises'. For cxample, one's maxim might be, 'l propose to tcll the truth to those who seek information for honest purposcs.' Howcvcr, it is difficult to rulc out qualifications which makc nonscnsc of thc idca of univcrsalization; for cxamplc, why could not it bc thc pcrsonncl ofhccr's maxim to tell thc truth only to peoplc who live, say, in Plymouth or Wolverhampton? , Another suggestion which is very much a modification of Kantianism , is to allolv for a diffcrence betwcen 'prima facic' and 'actual' obligations. I We havc a prima facie ('at first appearance') obligation to fulfil any moral duty, but rvhcther it is actually pcrformcd dcpends on whethcr or I not it conflicts rvith othcr, and perhaps morc important, duties. If there is no conflict, the duty can and should be actcd on. If thcre !s _a_c_gnfh_ct, the most important duty is thc onc acted on. It becomes our actual duty rvhile any other is set aside as ncrcly a prima facie obligation. So, for example. our dutv not to teli lies can be overridden by our duty to thrvart wrongdoing. rvhile our duty to not to permit inuocent lives to bc lost can be overridden by a duty to preserve the grcatcst number of lives we can. Both moves to qualif,v maxims and this division into prima facie and actual duties are made to avoid unacceptablc consequences from acting on principle alone. Conversely, the srvitch from act to rule utilitarianism would seem to be a nrove to introducc principles into what would otheru'ise be a simple calculation of conscqucnccs. In both cases the strcngths of one theory are apparcntly bcing used to offset the weaknesscs of thc othcr.

NATURAL LAW: AN ETHIC OF RIGHTS

There is third tradition in ethical thinking which can be seen as compjgmgltarv to Kantian deo This is natural law doctrinel has an immensely long history going back to classical times, has been variously interpretcd, and has no single definitive version. Its distinctivc fcature however, at least since the seventeenth century, has been a conccntration on rights. This arose because natural law theory was traditionally about protecting people from unjust or tyrannical actions by
governments.

basic idea was that over and above mere human law was an objective moral order, thc 'natural law', rvhich sets limits to the power of rulers. Governments which behaved unjustly transgressed that moral order. Their Iaws could, and in extreme cases should, be disobeyed. Gradually this idea became entwined with that of a 'contract' between government and governed; with governments being obliged to act within the natural law, and the govcrned obliged to obey them, provided the1, did. By the seventeenth century a crucial modification was established. This rvas that the contract became 'social'. It was no longer deemed to be a contract between governments and people, but rather between the people themselves to set up and empower a government. With this the fundamental democratic principle of government by consent was established. An agreement of the people gave governments their porver; and an agreement of the people, through the process of holding an elcction, could take that power away. By this stage also, the idea of natural law was inextricably bound u;'r with that of rights. In requiring justice of governments, the natural law conferred rights on the governed. In saying that certain things could not be done to people, the natural law was declaring that there were things they had a right to. The generally agreed list was tj]Q.ti!94y_and, it was sometimes said, prope{y. These were proclaimed as'natural rights'; that is, rights bestowed on people by the natural law. As such, they rverc rights which governments could neither give nor take away. People possessed them simply in virtue of being human. They were, as rvc would now say, 'human rights'. The job of governments with regard to such rights was simply to recognize and protect them. Many thinkers contributed to the developments leading up to this conclusion, but the key figure was almost certainly the British phiiosopher John Locke (1632-1714). After him, and perhaps partly be-

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it ',vas a view of thc role of govcrnments which was put into practicc by the American Declaration of Independence (1776) and the French Declaration of the Rights of Man (1789). While in the twentieth century, a plethora of declarations and conventions have committcd governments to the recognition and protection of an cver-expanding list r of 'human rights'. It includcs the traditional generalities of life, liberty, i justice, and somctimes property; but also thc specifics of freedom of expression, belief, and association, as well as rights to education, wel! fare, fair trials, fair wages, and even holidays with pay. The connection of such an ethic of rights with Kantianism is very strong. Firstly, the doctrine of respect for persons has an obvious affinity with that of human rishts. In both therc is a status contmon to all hr.rman bcings rvhich affords them protection from abuse by others. To infringe people's human rights is very much to fail to treat them as ends in
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life, liberty, justice, or whatever. Traditionally, the doctrine of human i rights has Urin a bulwark not just against tyranny, but against any such /
follows from this third point that any uncompromising comrnit-' ment to rights has the same problem of inflexibility as uncompromising Kantianism. It also is faced with the fact that in very extreme cases we do seem to be morally required to sacrifice individuals and minorities in order to preserve the common good. Most starkly, people do have a right to life butmost would think it proper, if tragically regrettable, thati
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second connection is perhaps less obvious.

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correlativity between moral duty and human rights. Where there is a human right to be respected there is generally a moral duty to respect that right. The convcrse is perhaps less common in that it arguably admits of a frequent exception in the case of duties of benevolence: being kind, generous, charitable, and so on. We ought to be kind, generous and charitable, but arguably people have no right to demand this of us; there is no moral ciaim on us to behave towards them in this way. Following Kant, such merely optional duties of benevolence have come to be called 'imperfect'. The contrast is rvith 'perfect' duties rvhich have to be fulfilled. These include all really important duties and with them there generally is a corresponding right. A duty not to murder, for example, is matched by a corresponding right to lifc. In such primary cases, duties and rights"are but opposite sides of the same coin. Duties concern moralitv from the point of vierv of people performing an action; while rights concern morality from the point of vierv of people on the receiving end of the action. Kant's emphasis on duty can therefore be seen as complementary to the emphasis on rights provided by natural lau' doctrine. This interpretation is supported by the third and perhaps most important point of contact betrveen the tu'o theories; rvhich is that both are broadly non-consequentiaiist. Kantian duty imposes, we saw, a constraint on anv unqualified adherence to the utilitarian goal of optirnizing collective lvelfare. The same is no less true of the doctrine of human rights. We cannot sacrifice individuals and minorities to the common

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deontologist's admission that duties can be merely prima facie. It is to / allow that human rights are not absolute. They can be overridden. Sornell rights are more,important than others. Faced with a clash, the more important right must prevail. A right to life, for example, will obviously override any right to property. Also, rights can be lost; we lose them when we fail to respect the rights of others. For example, we can lcrse our right to liberty (be imprisoned) when we fail to respect the rights of others to their property by stealing it from them. Perhaps most significantly, declarations of human rights will invariably accept that under extreme circumstances any and all rights can be set aside when tl,e collective interest demands. This way, it is hoped, a commitment to human rights can be made compatible with the common good.

APPLYING ETHICAL THEORIES

None of the three theories seems adequate on its own; certainly not in any unqualified version. The aim of serving the common good has'to be tempered by the admission of rights and duties. Rights and duties calr]]g!_ generally be examincd separately; and neither can be pursu_e_d-regardlq5s_ ld seem t-o point a tripartite approach to the resolution of moral problems where the general aim of optimizing collective welfare is pursued but with due allowance given to duties on the one hand, and rights on the other. With regard to welfare, the first and most basic question to be askcd is how will the action at issue affect the common good? What is its likely degree of utility or disutility? In making this calculation we can set aside the issue of whether, as hedonistic utilitarianism claims, it is all comes

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down to happincss and unhappiness. Whcther it docs or not, rnany things must still bc recognized as good or bad fur human bcings, even if, in thc last analysis. thcy all rcducc to happincss or unhappiness. What ' we must also do in making this calculation is to look at thosc gcncral rules rvhich have, over timc, been found to prontote and protect collective welfare. wc must not easily set them asicie because of the icontingencics of a particular situation. wc must bcar in mincl that a ]gencral adhcrencc to such rules is itsclf an important contribr.rtor to \collectivc welfare; pcrhaps thc most important contributor. Any exception to that gencral adherence will thercforc require a pou,crful justifitcation. In addition. thc distribution of the rcsulting welfare must be considercd. who gcts what kind of benefit or harm and to rvhat extcnt? Havc pcople rcccivccl rvhat is just','Finally, rhc rclative distribution of benefits as opposcd to harm nrust bc consiclcrcd. wc rnust allow that thc\ two are not equal; clisutility carrics grcatcr nrclral rvcight than utility.'ftrc \ , pain and deprivation of cvcn a fcw, rvhcn it is scvere cnough, can count / , for more than the plcasurc and privilcgc of thc rnany. 'fhe relicf of I suffering and the avoidancc of harm must thcrcfore havc a dcgrce of priority ovcr any maintcnancc or addition of bcr-refits in mlculations of collectivc wclfart: . I With clutics thc issuc of motivc is brouglit to thc forc. Whcn we act 1 from duty we not only ainr ro clo thc right thing but to do it for thc right i rcason. Acting fronr duty nrcans that wc clcscrvc nroral crc<lit fbr our actions - and thc bcnclits rvhich rnight follow. In cxzrmining our motivcs, the tcst of universalizability is a useful guidc. lt will help detcrminc whether we act from duty or purcly sclf-interest. In ths event of a conflict of duties, we can use thc test of relative importance to separate , i the actual from the merely prinia facic. while to scparatc the perfect from thc merely impcrfect, we can appcal to thc prcscncc or absence (respectiveiy) of a corresponding right. With regard to rights, the test of respect for pcrsons tvill provide a guide to dcterminc ri,hen rights exist and when they might bi abused. Aithough there can bc profound arguments about the specifics, it can be acccpted that csrtain lundamcntal conditions must bc mct for pcrsons' lives to flourish aud be fulfillcd. These funclamental conditions constitute the things to rvhich all human beings have a right. They arc thcir human rights. 'fhere is an abuse of human rights rvhcn these fundamental conditions arc denicd: rvhen libcrtv. justice, sccurity. and cven life itsclf, are taken arvay. Then, as Kant puts it, pcoplc arc treatecl as means rather than ends. Bccause different rights scrve differcnt cnds, they can

bc in conflict. When thcy do then, as with dutics, thc most fundamerrtal must bc given priority. With regard to both duties and rights, there is a broad distinction to be madc betrveen a very general kind which usually hold good for all human beings, and those which are specific to a particular social role. For li example, and most pertinently for our purposes, there are duties or rights specific to roles as nanager, director, partner, shareholder, employer, employee, customer, supplier and so on. The point, of course, about these 'role-specific' duties or rights is that not everyone has them. They come, as it were, with the job. They arc commitments and claims over and above those we all generally have. They do not, contrary to a frequently given excuse, replace or override our general moral duties and rights. Rather, they add to or supplemeni thcm. They arc essentially an extension of our gencral moral duties anci rights, imposing an additional responsibility here, awarding an extr;l privilege thcrc, but always rcquiring to bc broadly consistent with morc fundamental principlcs. Indeed, they derive their legitimacy from that consistency. We arc morally bound by them because they are an extension of more fundanrcntal duties and rights. The duty of a manager to ensure safe working conditions, for examplc, is largely an extension of the general moral duiy
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to prescrvc and protect thc lives of our fellow human beings. Conscquently, such role-spccific rnoral rules are binding only insofar as thcy arc broadly consistent with the more fundamental kind from rvhich they dcrive their legitimacy. To choose an admittedly extreme example, it dici no good for defendants at the post-war Nuremberg trials to say their duties as officials of thc Third Reich exempted them from responsibility for Nazi atrocities, or that their rights as citizens of a sovereign nation denied thc court authority over them. Given the restricted nature of role-specific duties and rights, the tests of universalizability and respect for persons (respectively) are not generally applicable. They are tests designed to reveal moral rules which u,ill hold good for all human beings. By definition, role-specific duties and rights do not. All the other ccjnsiderations mentioned do, howevcr, apply to them. Role-specific duties can conflict and must therefore be divided into 'nctual' and 'prima facie'; and they can also divide into 'pcrfect' and 'imperfect'. Likewise, role-specific rights are as capable of conflict as any other and so might need to be ranked in order of importance. For example, in the event of a conflict between responsibilities towards workers and an obligation to advance the interests of

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shareholders, a manager must determinc an actual duty; and while responsibility for safe rvorking conditions are likely to constitute a perr fect duty (assuming a corresponding right), there is perhaps only an imI perfect duty to make generous welfare provision for workers (assuming I there is no corresponding right). Likewise, given the right of workers to safe working conditions and also right of shareholders to profits on their investment, these are rights which could be in conflict and the manager might well be in the position of deciding which onc should prevail. Taking all the above points together, the follorving checklist for moral evaluation emerges.

INTRODUCING THE READINGS

The nruch anthologized reading from Albert Z. Carr supports a kind of moral relativism by arguing that the moral rules governing business are different from, and less restrictrive than, those governing society at large. This point of view is strongly opposed in the second reading by Norman E. Bowie, who argues that, whether judged from a Kantian or utilitarian perspective, Carr's defence of deception in business is morall'/ unacceptable. The third reading is a detailed defence of rule utilitarianisnr by John C. Harsanyi. He argues, in particular, that the rule version of utilitarianism can satisfactorily account for moral duties and rights' The final reading introduces a different ethical perspective to those dealt with in chapter 3. In it, Joseph R. DesJardins argues for the applicability of a virtue based ethic for business. Here the emphasis is not on the nature or results of actions (as determined by considerations of duty and rights or: utility), but on the: moral character of the person performing the action

For wclfarc 1. Calculate the utility and disutility of actions; 2. try to maintain socially beneficial rules; 3. try to achieve a just distribution of benefits and harm; 4. give more weight to harm than benefits. For duties 1. Examinc motivcs (to dctcrminc thc moral credit dcscrvcd); 2. apply the test of universalizability to motives (to help determine gencral moral duties); 3. distinguish actual from prima facie dutics via the test of relative importance; 4. distinguish perfect from imperfect duties via the test of correlative rights; 5. recognize role-specific duties. For rights 1. Applir the test of respect for persons (to help determine fundamental nioral rights); 2. when rights conflict, use the test of rclative importance; 3. recognize role-specific rights.

(an approach associated with the great Greek philosopher Aristotle, 384-322 nc). DesJardins makes the interesting connection between such a virtue based ethics and the idea of 'business excellence' (as advocated by Peters and Waterman in their best-selling book, In Search of Excellence). This, he says, entails businesses adopting what he calls the 'professional' view of people's roles within the organization, whereby theii work is seen as fulfilling the purpose intrinsic to the business function (providing goods and services for the public good) rather than as a merely 'instrumental' means to some extrinsic end such as the securing of profits or even wages.

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respcctcd busincssman u'ith rvhonr I discussed the thcme of this article remarked rvith some heat, 'You mean to say vou're going to encourage mcn to bluff? why, blul'ling is nothing nrore than a fornr of lying! you're acrvising thern to lie!, I agrecd that the basis of private morality is a rcspcct for truth and that tlie closer a busincssman comcs to truth, thc more he cleserves respect. At the samc tirne, I suggested that nrosr biufling in busincss nrighr be regarcled simply as game strrrcgy much like bluffing in poker which docs not reflect on the rnorality of the bluffcr. I <luotccl llcrtry'faylor', thc IJritish sta(csnran rvho pointccl out that 'falschood ccllscs to bc lllschclod rvltcn it is unrlcrstood on lrll siclcs that thc truth is not cxpcctcd to be spoken' - an cxact description of bluffing in pokcr, cliplomacy, and busincss. I citcd the analogy of the criminal court, whcrc the crirninal is not expectcd to tell the truth rvhcn he pleads'not guilty.'Evcryone from the juclgc down takcs it for granted that rhe job of thc dcfendant's attorney is to get his client off, not to revc;rl the truth; and this is considcrcd cthical practice. I mentioned Reprcsentative omar Burlcson, thc Denrocrat from Tcxas, who rvas quotcd as saying, in rcgard to thc othics <lf congrcss, 'Ethics is a barrel of wornrs' - a pungcnt sumnring-up of the problem of deciding rvho is cthical in politics. I renrinded my friend that millions of businessmen feel constrained every dly to say ),cs to thcir bosses when they secretly believe no and that this is gencrally acceptecl as permissible strategy rvhen the alternative might be rhe loss of a job. The cssential point, I said, is that thc erhics of business are game ethics, diffcrent from thc ethics of religion. i-lc remained unconvinced. Rcfcrring to the company of rvhich he is presiclent, he declared: 'Maybc that's good cnough for sorne busincssmen, but I can tcll you that we pride ourselves on our ethics. In 30 years not one customer has ever questioned my word or asked to chcck our figurcs. wc'rc loyal fo our customers and fair to our supplicrs' I rcgard my handshlrkc on a dcitl as a colltract. I'vc rrcvcr entcrcd into price-fixing schemcs'"vith my contpctitors. I'vc rrcvcr iillorvccl my salcsnren to sprcad injurious rumors about othcr companics. our union contract is thc bcst in our industry. And, if I do say so myself, our ethical standards are of the highestl' FIc realiy was saying, without saying it, that hc was living up to thc cthical standards of the busincss game - which arc a far cry from those of private life. Like a genticmanly pokcr player, he did not play in cahoots with others at the tablc, try to smcar their reputatior.ls, or hold back chips hc owed thcnr. But this same fine man, :rt the vcry time, was allorving one of his products to be

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obsolcscence.' He was holding back from the market a much-improved procluct bscausc hc did not want it to interfcre with :ales of the inferior item it would have rcplaccd. I{c had joincd with ccrtain of his competitors in hiring a lobbyist to push a state legislature, by methods that hc preferred not to know too much about, into arncnding a bill thcn bcing enactcd. In his viov thesc things had nothing to do with ethics; they were merely nornal business practice. He himself undoubtcdly avoided out-right falsehood never lieci in so many words. But the cntire organization that he ruled was deeply involved i|i nunicrous stratcgics of dcccption.

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thcir companics. By conscious misstatements, concealment of pertinent facts, or cxaggcration - in short, by bluffing - they scek to persuade otirers to agree lvith them' I think it is fair to say that if the individual executivc refuses to bluff from time to time - if hc fcels obligated to tell the truth, the whole truth, and nothing bur ihe

conrpanics or themsclvcs, to practice some form of dcception when negotiating with customcrs, dcalcrs, labor unions, govcrnment officials, or even other dipartments of

Most cxccutivcs from tinrc to tirnc arc almost compellcd, in the interests of rhcir

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disadvantage in his business dealings. But herc and thcrc a businessman is unable to reconcile himself to the bluff in which he plays a part. His conscience, perhaps spurred by religious idealism, trbubles him. He fcels guilty; he may develop an ulcer or a nervous tic. Before any execurive can make prolitable use of thc strategy of the bluff, he needs to make sure thai in

hc is ignoring opportunities pcrmittcd under the rules and is at a

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bluffing he will not lose self-respect or become emotionaily disturbed. If he is to rcconcile personal integrity and high standards of honesty with the practical requirenrents of busincss, he must feel that his bluffs are ethically justified. The justification rcsts on the fact that business, as practiced by individuals as well as by corporations, has the impersonal character of a game - a game that demands both special strategy and an understanding of its spccial ethics. Thc game is played at all levels of corporatc life, from the highest to the lowcsl. At thc very .instant that a man decidcs to enter business, he may be forced into a game situation, as is shown by the recent experience of a cornell honor graduate who applied for a job with a large company.
This applicant was given a psychological test which included the statemcnt,

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the following magazincs, check any that you have read either regularly or frcm
tinre to time, and double-check those which interest you most. Reader's Digest, Titne , Fortune, Saturday Evening Post, The Ncw Republic, Life, Look, Ramparts, Newsweek, Btuiness Week, [J.5. News & World Report, The Nation, ptayboy,

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enthusiast for Ramparts, and an avid studcnt of the picturcs in Playboy. FIe was not surc rvhether his intcrcst tn Playboy rvould bc held against him, but he had a shrervd suspicion that if hc confesscd to an interest in Ramparts and Tlrc Naw Republic, he would be thought a Iiberal, a radical, or at least an intellectual, and his chances of getting the job, rvhich he needed, rvould greatly diminish. He therefore checked five of the more conservativc magazines. Apparently it was a sound decision, for he got the job.

In contrast to the cheat, the unethical poker player is one who, while abiding by the letter of the rules, finds ways to put the other players at an unfair disadvantage. Perhaps he unnerves them with loud talk. Or he tries to get them drunk. Or he plays in cahoots with someone else at the table. Ethical poker players frown on such

He had made a game player's decision, consistent with business ethics. similar case is that of a magazine space salesman who, owing to a merger, suddenly found himself out of a job.

This man was 58, and, in spite of a good record, his chancc of getting a job elsewhere in a business where youth is favored in hiring practice was not good. IIc was a vigorous, herlthy man, and only a considerable amount of gray in his hair suggcsted his agc. Bcforc beginning his job scarch hc touchecl up his hair with a black dyc to confinc the gray to his tcnrplcs. llc knew that thc truth about his age might well come out in timc, but he calculated that hc could deal with that situation whcn it arosc. Hc and his wife dccidcd that he could casily pass for 45, and he so stated his agc on his resume.

Poker's own brand of ethics is different from the ethical ideals of civilized human i relationships. The game calls for distrust of the other fellow. It ignores the claim of i friendship. Cunning deception and concealment of one's strength and intentions, not, kindness and openheartedness, are vital in poker. No one thinks any worse of poker on that account. And no one should think any worse of the game of business because its standards of right hnd wrong differ from the prevailing traditions of morality in i our society.
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DISCARD

TIIE GOLDBN RULE

This view of busincss is espccially worrisome to peopte without much business expcrience. A minister of my acquaintance once protested that business cannot possibly function in our socicty unless it is bascd on the Judeo-Christian system of
ethics. He told mc:

This was a lic; yct rvithin thc acccpted rulcs of the busincss gamc, no monl
culpability attaclres to it.

TIIE POKER ANALOGY

We can learn a good deal about the nature of business by comparing it with poker. While both have a large elemcnt of chance, in the long run the winner is the man rvho plays rvith steady skiil. In both games ultimate victory requircs intimrte knorvledge of the rules, insights into the psychology of thc other players, a bold front, a considerable irmount of self-discipline, and the ability to respond swiftly and effectively to opportunities provided by chancc. No one expr'cts poker to be played on the ethical principlcs preilched in churches. ln pokcr it is right and proper to bluff a friend out of the re*,ards of being dealt a good hand. A plaver feels no more than a slight trvinge of s),mpathy, if that, rvhen u'ith nothing better than a single ace in his hand - he strips a heavy loser, rvho hoids a pair. of rhe rest of his chips. It *''.rs up to the other lellorv to protect hin-rself. In the *ords trf an !'\cellent poker plal'er. formcr Prcsidcnt Harn'Truman.'If 1'ou cln't stant.i the hclt. s.er our of the kitchen.'Ii one shorvs mercv to a loser in poker, it is il personal gesture. divorced from the rules of the giune. Pokcr has its special cthics. and here I am not referrins to rules against cheating. The man sho keeps an ace up his slieve or rvho marks rhe cards is more than unethical: hc is a crook. xnd cf,n be punished as sucir - kickcci out of thc glnrc or. in the Old \\'esr. shor.

isn't sound. Surely the vast majority of businessmen- are ethical. I myself am acquainted with many who adhere to strict codes of ethics based fundamentally on religious teachings. They contribute to good causes. They participate in

I know some busincssmen have supplied call girls to customers, but there are alrvays a few rotten apples in every barrel. That doesn't mean the rest of the fruit

cornmunity activities. They cooperate with other companies to improve working conditions in their industries. Certainly they are not indifferent to ethics.

That most businessmen arc not indifferent to ethics in their private livcs, everyone will agree. My point is that in their office lives they cease to be private citizens; they bccomc game player; who must be guided by a somewhat different set of ethical
standards.

The point rvas forcefully made to me by a Midwestern executive who has given
good deal of thought to the question:

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So long as a businessman complies with the laws of the land and avoids telling malicious lies, he's ethical. If the law as written gives a man a rvide-open chance to make a killing, he'd be a fool not to take advantage of it. If he doesn't, somebody else will. There's no obligation on him to stop and consider who is going to get hurt. If the larv says he can do it, that's all the justification he needs. 'fhere's nothing unethical about that. It's just plain business sense.

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authority on markcting nradc a spccch in which hc dcplorcd thc employmcnt of spies by business organizations. More and more companies, he pointed out, find it che;per to penetrate the secrets of competitors rvith concealed cameras and microphones or by bribing cmployccs than to sct up costly rcscarch and design dcplrtmcnis of their own. A $'hole branch of tlrc clectronics industry has grown up with this trcnd, he continucd, providing equipment to make industrial cspionage easier. Disturbing? The marketing experr found it so. But rvhen it came to a remedy, he could only appeal to'rcspect for the golden rulc.'Robbins thought this a confcssion of defeat, believing that the goldcn rule, for all its value as an icleal for society, is simply not feasible as a guide for business. A good part of the time the busincssman is trying to do unto others as hc hopcs orhcrs will not lo unto him. Robbins
E,spionagc of ono kinc.l or anothcr has bcconrc so colllnlon in busincss that it's like taking a drink during Prolribition - it's not considcrcd sinful. And we don't

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berated them for 'unethical' practices. They had been guilty, Moynihan alleged, of using outdated actuarial tables to obtain unfairly high premiums. They habitually delayed the hcarings of lawsuits against them in order to tire out the plaintiffs ani rvin chcap settlemcnts. In their cmployment policies thcy used ingenious devices to discriminate against certain minority groups. It was difficult for the audience to deny the validity of these charges. But these men were business game players. Their reaction to Moynihan's attack was much the silmc as that of the automobile manufacturers to Nader, of the utiiities to Senator Mctcalf, and of the food processors to senator Hart. If the laws governing their
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necessary adjustments. But morally they have in their view done nothing wrong. As long as they comply with the letter of the law, they are within their rights to operate their businesses as they see fit.

evcn have Prohibition whcre cspionagc is conccrnecl; thc law is vcry tolcrant in this arca. Thcre's no morc shanrc for a busincss that uscs secrct agents than therc is for a nation. Bcar in mind that thcrc alrcady is at lcast onc largc corporation you can buy iii stock over the countcr - that nrakes milliois by providing counterespionage service to industrial firms. Espionage in business is not an ethical problem; it's an cstablished technique of business conrpetition.

The snrall busincss is in thc same position as the great corporation in this respect. For cxample:

.\YE DON'T MAKE TIIE LAWS'

Wherevcr we turn in busincss, we can pcrceivc the sharp distinction bctrvccn its ethical standards and thosc of thc churches. Newspapers abound with scnsational storics growing out of this clistinction:

of providing mastcr keys for autocustomers, although it was obvious that some of the purchasers might be automobile thieves. His ,rlefense was plain and straightforward. If there was nothing in the law to prevent him from selling his keys to anyone who ordered them, it was not up to him to inquire as to his customers' motivcs. why was it any worse, he insisted, for him to sell car keys by mail, than for mailordcr houses to sell guns that might be used for murder? Until the law was cliangcd, thc key manufacturer could regard himself as being just as ethical as any othcr businessman by the rules of the business game.
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1967 a kcy manufacturer was accused

to mail-order

we read one day that senator Philip A. Hart of Michigan

proccssors for dcccptive packaging of numerous products.

has attacked fooc!

The ncxt day thcre is a congressional to-do over Ralph Nacler's book, tJnsafe at Any speed, tvllich demonstrates that automobile companies for ycars have neglected the safcty of car-orvning families. Then another Senator, Lee Metcalf of Montana, and journalist Vic Reinemer shorv in their book, overcharga, thc nrethods by which utility companios eludc regulating government bodies to extract unduly l:rrge payments frorn uscrs of clcctricity.

violations of the ethical ideals oisociety are common in business, but they are nor neccssarily violations of business principles. Each year the Federal rrade commission orders hundreds of companies, many of them of the first magnitude, to 'cease and desist' from practices which, judged by ordinary standards, are of questionable rnorality but which are stoutly defended by the companies concerned. In one case, a firrn manufacturing a wcllknown rnouthwash was accused of using a chcap forrn of alcohol possibly deleterious to health. The company's chief executive, after testifying in Washington, made this comment privately:

major industry at rvhich a simillr attack could not bc aimed. critics of busincss
regard such bchavior as unethical, but thc companics concerned know that thcy arc merell' plaving the business garne. Among the most rcspected of our business institutions are the insurance companics. A group of insurance cxccutivcs mceting rccently in Ncrv England rvas startled u'hcn their guesr speaker. social critic Daniel patrick i\4oynihan, roundly

These are mcrely dramatic insrances of a prevailing condition; there is hardly

would bring about the grcatest economic upheaval in history!

we broke no law. we're in a highly competitive indusrry. If we're going to stay in business, we have to look for profit wherever the law permits. we don't make the laws. we obey them. Then why do we have to put up with this 'holier than thou' talk about ethics? !t's sheer hypocrisy. we're not in business to promote ethics. Look at the cigarette companies, for God's sake! If the ethics aren't embodicd in the laws by the men who made them, you can't expect businessmen to fill the lack. why, a sudden submission to Christian ethics by businessmen
be noted that the government failed to prove its case against him.

It may

Is business bluffing ethical?

CAST ILLUSIONS ASIDEJ Talking about ethics by businessmen is often a thin decorative coating over the hard rcalities of the game:

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ment, or the public at large. But decisions-in .this.area^are, in the final test, decisions of strategy, not of ethics.

TIIB INDIVIDUAL AND TIIE GAME

An individual rvithin a company often finds it difficult to adjust to the requirement$ of the business game. He tries to preserve his private ethical standards in situations
that call for game strategy. When he is obliged to carry out the company policies that challenge his ionc?-ption of himself as an ethical man, he suffers.

Oncc I listcncd to I spccch by a young cxccutivc who pointcd to a new industry codc rs proof that his conrpany and its competitors wcre deeply arvare of thcir responsibilities to society. It was a code of ethics, he saicl. The industry was going to police itself, to dissuade constituent companies fronr wrongdoing. His eyes shone rvith convictirx and enthusiasnt. Thc sanre dly there was a meeting in a hotel room rvherc the industry's top executives met rvith the 'czar' who tvas to administer the new code, a man of high repute. No onc rvho rvas present could doubt their common attitude. ln their eyes the code rvas designed primarily to forestall a move by the federal government to impose stern rcstrictions on the industry. They felt that the codc would hamper them a good deal less than new federal larvs would. It was, in other rvords, conceived as a protection for the industry, not for the public. The young executive accepted the surface explanation of the code; these leaders, all experienced game players, did not deccivc thenrselves for a momcnt about its purpose.
The illusion that business can afford to be guided by ethics as conceived in private

distrubs him when he is ordered, for instance, to deny a raise to a man who it, to fire :tn employee of long standing, to prepare advertising that he believes to be misleading, to conceal facts that he feels customers are entitled to know, to cheapen the quality of materials used in the manufacture of an established product, to sell as a new product that he knows to be rebuilt, to exaggerate the curative powers of a medicinal preparation, or to coerce dealers. There are some fortunate executives, who, by the nature of their work and circumstances, never hhve to face problems of this kind. But in one form or another the ethical dilemma is.felt sooner or later..by most businessmen. Possibly the clilemma is most painfut not when the company forces the action on the executive but rvhen he originatcs it himself - that is, when he has taken or is contemplating a stcp which is in his orvn interest but which runs counter to his early moral conditioning. To illustrate:
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life is often fostcred by speechcs and articles containing such phrases as, 'It pays to
be ethical,' or, 'Sound ethics is good business.' Actually this is not an ethical position at all; it is a self-serving calculation in disguise. The speaker is really saying that in the'long run a company can make more money if it does not antagonize competitors, suppliers, employees, and customers by squeezing them too hard. He is saying that oversharp policies reduce ultimate gains. That is true, but it has nothing to do with

ethics. The underlying attitude is much like that in the familiar story of the shopkeeper who finds an extra S20 bill in the cash register, debates with himself the ethical problem - should he tell his partner? - and finally decides to share the money because the gesture rvill give him an edge over the s.o.b. the next time they quarrel. I think it is fair to sum up the prevailing attitude of bnsinessmen on ethics as follows: We live in whlt is probably thc rnost competitivc of the world's civilized societics. Our customs encourage a high dcgree of aggression in the inclividuals' striving for success. Business is our nrain area of competition, and it has been ritualized into a game of strategy. The basic rules of the game have been set by the government, which attempts to detect and punish business frauds. But as long as a company does

The manager of an export department, eager to show rising sales, is pressed by a big customer to provide invoices, which, while containing no overt falsehood that would violate a U.S. law, are so worded that the customer may be able to evade certain taxes in his homeland. A company president finds that an aging executive, within a few years of retirement and his pension, is not as productive as formerly. Should he be kept
on?

The produce manager of a supermarket debates with himself whether to get rid

of a lot of half-rotten tomatoes by including one, with its good side exposed, in

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not transgress the rules of the game set by law, it has the legal right to shape its strategy rvithout reference to anything but its profits. If it takes a long-term vierv of its profits, it will presen'e amicable relations, so far as possible, with those with
whom

every tomato sixpack. An accountant discovers that he has taken an improper deduction on his company's tax return and fears the consequences if he calls the matter to the president's attention, though he himself has done nothing illegal. Perhaps if he says nothing, no one will notice the error. A chief executive officer is asked by his directors to comment on a rumor that he owns stock in another company rvith which he has placcd large orders. He could deny it, for the stock is in the name of his son-in-larv and he has earlier formally instructed his son-in-law to sell the holding. Temptations of this kind constantly arise in business. If an executive allows himself to be torn between a decision based on business considerations and one based on his private ethical code, he exposes himself to a grave psychological strain.

it deals. A rvise businessman rvill not seek advantage to the point rvhere he generates dangerous hostility among employees, competitors, customers, govern-

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This is not to say that sound busincss stratcgy neccssarily runs counter to ethical idcals. Thcy ntay frcqucntll'coincicic; aud rvhcu thcy do, everyonc is gratifiecl. But thc ntajor tcsts of cvcry nlovc in busincss, as in ull ganrcs of stratcgy, lrc lcgality and profit. A ntan rvho intcrrds to bc u rvinncr in thc busincss galtlc must havc a ganre
business

Is business bluffing ethical?

of a sulgcon concentrating on objcctivc iind tcchnique, and subordinating personal fcelings. If thc chicf cxecutivc adrnits that his son-in-larv owns tltc stock, it is bccausc hc stands to lose nrorc if thc fact comcs out later than if he states it boldly and at oncc. If the supcrnrarket managcr orders the rotten tomatoes to be discarded, he does so to avoid rrn incrcasc in consunrcr complaints ancl a loss of good will. Thc company prcsidcnt dccidcs not to firc thc cldcrly cxecutivc iu thc bclicf that thc ncgative rcactioll of othcr employecs s,ould in thc long run cost thc conrpany nrorc than it would Iosc in kccpirrg hinr ancl paying his pcnsion. ,4.11 scnsiblc busirrcssnrcn prcfcr t<-r bc tnrtlrful, brrt thcy scldonr fccl inclincd to tell thc whola truth. In thc busincss garne truth-tclling usually has to be kcpt within narrow limits if trouble is to be avoidcd. The point was ncatly nradc a long time ago (in 1886) by onc of John D. Rockcfcllcr's associatcs, Paul Babcock, to Stanclard C)il Company executives who rverc about to tcstify bcforc a governmcnt invcstigating committcc:'Parry cvery question u'itlr answers wliich, rvhilc pcrfcctly truthful, arc cvasivc of bollotn facts."l'his rvas, is, and prob:rbly alrvlys rvill bc rcgardccl as wisc and pernrissiblc busincss stratcgy.
pcrforming an opcration

plrrl'cr''s attitutlc. Thc business stratcgist's dccisions nrust bc as inrpcrsonal as thosc

Wcll, there I was. I was opposed to Lang, but I knew Colby. If he withdrew his I could be in a bad spot. So I just smiled and wrote out a check then and tlrcrc. I{e thanked me, and wc startcd to talk about his next order. Maybe he thought I shared his poiitical vicrvs. I wasn't Soing to losc any sleep over it. I shoulcl have had scnsc enough not to tell Mary about it. She hit the ceiling. Shc said she was disappointed in mc. She said I hadn't acted like a man, that I should have stood up to ColbY. I said, 'Look, it was an either/or situation' I had to do it or risk losing thc
business.' Shc came back at me with:

'I don't believe it. You could have been honest with him. You could have said that you didn't feel you ought to contributc to a campaign for a man you wercn't going to vote for- I'm surc he would have
undcrstood.' I said, 'Mary, you'rc a wonderful woman, but you're way off the track. Do you knorv rvhat would have happcned if I had said that? Colby would have smiled and saicl, "Oh, I didn't realize. Forget it." But in his eyes from that moment I would bc an oddball, maybe a bit of a radical. He would have listened to mc talk about his ordcr and rvoulcl havc prorniscd to givc it considcration. Aftcr that I wouldn't hcar from hirn for a week. Then I would telephone and learn from his secretary that he wasn't yet ready to place thc order. And in about a month I would hcar through the grapevine that hc was giving his business to another company. A month after that I'd be out of a job.' Shc was silcnt for a while. Then she said, 'Tom, something is rvrong with busin"ss rvhen a man is forced to choose between his family's security and his moral obligation to himself. It's easy for me to say you should have stood up to him - but if you had, you might have felt you were betraying me and the kids. I'm sorry that you did it, Tom, but I can't blame you. Something is wrong with busincss !'

FOR OFFICE USE ONLY

An exccutive's famili' life can clsily bc dislocatcd if hc fails to make a sharp distinction betwcen tlre cthical systcms of the horne and the officc - or if his rvife docs not grasp that distinction. Many a busincssrnan rvho has rcnrarkcd to his wife'I had to lct Joncs go todav'or'l lrad to adnrit to thc boss thatJinr has bccn goofing off lately,' has been met with an indignant protcst. 'Floiv could you do a thing like that? You knorv Jones is ovcr 50 and will lrave a lot of troublc gctting another job.' Or, 'You did that to Jim'? With his rvifc ill and all thc rvolry shc's having with thc kids?' If the cxecutive insists that he had no choicc becausc the profits of the company and his own sccurity were involvcd, hc nray scc a ccrtain cool and onrinous reappraisal in his wifc's eyes. Many wives are not prcparcd to acccpt thc fact that busincss opcrates *'ith a special coclc of cthics. An illuminating illustration of this corlrcs fronr a Southcrn salcs cxccutivc rvho rcl:rtcd a convcrsation ho had had with his wife at a tinrc whcn a hotll'c6n1c.1gcl politicll campaign rvas bcing wagcd in thcir
state:

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This wife saw the problem in terms of moral obligation as conceived in private lifc: hcr husband saw it as. a matter of game stratgy_.. {s a player in a Uieali.position, he fclt that he could not afford to indulge an ethical sentiment that might have cost him his seat at the tablc.

PLAYING TO WIN
Somc nrcn nright challengc the Colbys of businesSl- might accept serious setbacks to their business careers rather than risk a feeling of molal cowardice. Thcy merit out rcspcct - but as private indivicluals, not busincssmcn. Whcn the skillful playcr of thc busincss ganre is compellc<.1 to submit to unfair pressure, he does not castigate himself for moral weakness. Instead, he strives to put himself into a strong position where he can defend himself against such prcssurcs in the future without loss. lf a man plaris to take a soat in the business game, he owes it to himsclf to mastcr thc principlcs by which the game is played, including its special ethical outlook. He

I madc thc mistakc of tclling hcr'that I had had lunch rvith Colby, whtt gives me about half my business. Colby mentioned that his conrpany hacl a stake in thc clcction. Thcn hc said,'By thc way, I'nr trcasurcr of thc citizens'comniittcc for Lang. I'm collecting contributions. Can I count ol1 you for a hunclrccl dollars?'

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can then hardly fail to rccognize that an occasional bluff may rvell be justificcl in
terms of the game's ethics and warranted in terms of economic neccssity. once he clears his mind on this point, he is in a good position to match his strategy against that of the other players. He can then determine objectively rvhcther a bluff in a given situation has a good chance of succeeding and can decide when and how to bluff, without a feeling of ethical transgression. To be a rvinner, a man must play to win. This does not nlean tltat he must be ruthless, cruel, harsh, or treacherous. on the contrary, the better his reputation for integrity, honesty, and decency, the better his chances of victory will be in the long run. But from time to time every businessman, like every poker player, is offered a choice betrveen certain loss or bluffing within the legal.rulcs of the game. If he is not resigned to losing, if he rvants to rise in his company and indtrstry, then in such a crisis hc rvill blufl - lnd blufl' hlrd. llvcry norv lntl thcn onc mcets a succcssful busincssnran rvho has convcnicntly forgotten the small or large deceptions that he practiced on his rvay to fortune. 'God gave me my moncy,' old John D. Rockefeller once piously told ir Sunday school class. It would bc a rare tyioon in our time rvho rvoulcl risk the horsc laugh with n'hich such a remark would lip greeted. In the last third of the trventieth century even chilclren are awarc that if a man has become prosperous in busincss, he has somctinres tlcpartccl front the strict truth in orclcr to ovcrconro obstaclcs or has practiccd thc nrorc subtlc clcccptions of tl're lralftruth or the misleading omission. Whatever the form of the bluff, it is an intcgral part of the game, and the executive who does not master its techniques is not likely to accumulate much money or power.

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companies or thcmselves to practice some form of deception when negotiating with custoners, clealers, labor unions, government officials, or even the departments of their companies. By conscious misstatements, concealment of pertinent facts, or exaggeration - in short, by bluffing - they seek to persuade others to agree with them. . . . A good part of the time the businessman is trying to do unto others as he hopes others will not do unto him. . . . A man who intends to be a winner in the business game must have a game player's attitude.

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Although Carr's attitude is widely held, I think Carr's argument can be refuted. I begin with an appeal to Kant's ethics in order to show that unless business adheres to a minimum standard of justice, business practice would be impossible. In particular I rvill show that such practices as lying, cheating, and bribery are immoral and that busincss pmcticc prcsupposes that such practices arc immoral. I thcn consider a Carr-like trvo pronged rebuttal of the Kantian analysis * specifically that as a matter of fact business practice succeeds quite well with a certain amount of lying and .and cheating that whatever the case against outright lying and cheating, in some institutions a certain amount of deception and nondisclosure of information might be nrorally permissible. In responding to this rebuttal, I appeal to utilitarian considerations to show that when Carr's poker model is adopted, bad consequences rcsult. Deception and the nondisclosure of information are usually counterproductive' in tcms of long-tcrnr profit. The first step of my argument is based on the moral philosophy of Immanuel Kant, particularly on Kant's first formulation of the categorical imperative.2 Kant argues that a requirement of morality is consistency in action. Suppose that someone were to advocate discriminatory policics against Jews. To be consistent, that person would have to advocate discrimination even if he himsdlf should turn out to be a Jew. Presumably, he would not be rvilling to be treated discriminatorily, and hence consistency in action rcquircs that he not treat Jews in a discriminatory way. Morality is not simply a matter of treating others as you would like them to treat you. It is also a matter of not treating others in ways that you would not accept if you rvere they. Kant's point is that morality requires consistency of action and judgment when you are on both the receiving and the giving ends. Morality requires that you not make an exception of yourself, that you not engage in practices or follow rules that you could not recommend to everyone. But suppose one were to reply to Kant as follows: 'I don't care if other people try r to take advantage of the rules by making exceptions of themselves. If they can get away with it, more power to them.' In the business context, such a person would be willing to participate in a business environment in which deception is expected. This is prccisely the position of Carr. In situations like this, the Golden Rule fails us. The answer it gives depends on how thc person contemplating a given action wants to be trcated himself or hersclf. Suppose the way in which one wants to be treated is irnmoral in itself - suppose one doesn't care if others try to deceive him or her. Such a business person could be consistent in action and still behave unjustly. How could Kant reply?

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NORMAN E. BOWIE

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I Albert Carr has argued in an influcntial articler that thc ethics of business is
understood on the modcl of the ethics of poker. Poker's own brand of ethics is different from the ethical ideals of civilized human relationships. The game calls for distrust of the other fellow. It ignores the claim of friendship. Cunning deception and concealment of one's strength and intentions, not kindness and openhearteclness, are vital in poker. Most executives from time to time are almost conrpellccl in the intercsts
Reading takcn from Ethical Theory and Business Used by permission of tlie author. best

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Kant has a rcady answer. some contemplated actions would be self-defeating if they rvere universaiized. Kant's categorical impcrative strengthens the Goldcn Rule so that the person who is willing to allow others to behave unjustly is defeated. Kani's catcgorical imperativc says, 'I ought ncver to act except in such a way that I can also rvill that nry nraxim should bccomc a univcrsal larv.'To usc onc of Kant's cxanrples, consider rvhcthcr or not a businesspcrson should tcll a lic. If tho busincssperson were to make the principlc of her action a universal law, namely .lying is pcrmissiblc,' the act of lying would be self-dcfcating. For if lying were universally permittcd, people would never know rvhethcr an asscrtion was true or false, and hcnce both the purposc of rclling thc truth ancl of lying would bc defeated. Lying,is

any practice requires acceptance of the rules that constitute the practice. To accepi the practice without accepting the rules that undbrlie it is self-defeating. If you break I thc rulcs, consistency requires that you permit others to break the rules, and such ] univelsal rulc breaking rvould undermine the practice. one purpose of the preceding ldiscussion w{ts to show horv lying and bluffing undercut business practicc. Sincc such cannor be univcrsalized from thc Kantian perspective, lying.and bluffing by {actions rbusincsspersonsisimmoral. ,', ,.. i,,,. ti.*_!-t: ,9lt.,li; ,',. ', !'-(, .1 t.,, .rr.

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Kant's point can apply specifically to busincss. There are many ways of making a promise. one of thc more formal ways is by a contract. A contract is an agrcement between two or more parties, usually enforceable by law, for the doing or not doing of some definite thing. The contract device is extrcmcly useful in business. The hiring of employces, the usc of crcdit. thc ordcring ancl supplying of goods, and thc notion of rvarranty. to nanrc but a fcrv, all nrakc usc o[ thc contract dcvice. Indecd, the contract is such an important part of business opcration that it is often overlooked. This is a serious blundcr. I maintain that, if contract breaking were universalized, then busincss practice would be impossiblc. If a participant in business were to universally advocatc violating contracts, such advocacy would bc self-defeating, just as the universal advocacy of lying and cheating wcre secn to be self-defeating. I But Carr could correctly point out that hc never advocated the breaking of i contracts. FIe sinrply advocatcs thc nondisclosure of information, bluffing, and the r calculated use of cxatgeration. Docs this narrow interpretation of Carr's thesis enable him to cscape Kant's trap? Perhaps not. Lct us takc a simple busincss transaction and movc on to morc complicatecl ones. In almost cvery case of a cash-for-product transactiorl, cither thc purchascr reccives the good bcfore paying or the purchascr pays before rccciving the good. Seldom is thc transfer simultaneous. what u'ould happcn to busincss if, in an attempt to rcceive something for nothing, it rvas conrnron practice for the purchaser to claim that he or she had paid rvhen he or shc had not, in othcrr,vords, to bluff. or suppose the salesperson bluffed by claiming that rhe customer had not paid rvhen hc or she had paid. If such bchavior rvcre univcrsalizcd, ordinary conlnrcrco woulci become self-defeating. The modern groccry or dcpartmcnt storc could not exist if such bluffing wcre universalized, and hencc the bluffers havc nothing to gain if blufling is univcrsallv advocatcd. Kant's argument is meant to show that rational agcnts cannot will that ccrtain maxims bc universally actcd upon. If the principles rvcre universally adopted, the bchavior described by the principles would be sclf-defeating. The maxim, 'It's morallv pcrmissiblc to lic' is a pcrfect exarnplc of just such a principle. But docs Kant's argurlcnt really apply in tho blufling exanrplc'i rherc is nothing self-defcating about a world rvith no grocery stores or supermarkcrs. However, the obse rvation misses Kant's larger point. A Kantian could argue that the acceptance of

II
iDocs this Kantian argument refutc carr's analysis? Many philosophers woulcl think not. First, onc docs not need extensive experience in business to know that there are / many types of deception, like bluffing, that are both widely practiced and widcly / I accepted. A few examples suffice. It is common knowledge that automobile dealers do not cxpect people to pay the sticker price for automobiles. A certain amount of bargaining is taken for grantcd. The same is true for real estate priccs. Unless a seller's market is in effect, the asking price for a house is seldom the selling price. At the initial bargaining session, labor leaders overstate wage demands, and management also understates the wage increases it is willing to grant. In all these instances, the final price or wage contract is arrived at through a process that does resemble the pokcr game Carr uses as an analogy. The price or wage contract does depend in part on the strength ofone's hand and on one's bluffing ability. In the late 1970s, onedid need to pay the sticker price for small foreign cars with good gas mileage. Surely automobile dealers and sellers of homes cannot be accused of immoral bchavior when thcy post prices above those that they are willing to accept. Surely the labor leader is not behaving immorally when he overstates the wage increases his
union cxpects to rcceive. The point that carr and his defcnders is making is simply this: In the real world of everyday business practice, there is a great amount of bluffing, exaggeration and manipulation. Since everyone knows that such bluffing, and the like take place, business does quite well - the logic of Kant not withstanding. There is no danger of a collapse - either of credit or of capitalism as a whole. Practical experiencs corrfounds the philosopher's theory. The ethics of poker is still the appropriate modcl for
business cthics. Second, so long as Carr's argument is iimited to the nondisclosure of information, bluffing, and the calculated use of exaggeration, Carr can escape the Kantian trap after all. Carr might concede that once one has agreed not to bluff, then it would be
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wrong to do so. However, Carr could maintain that his recommendations apply to thc practice itself. In othcr words, he is making a recommendation regarding busincss practiccs. If bluffing and the like are accepted as a part of busincss practicc. thcn thcre is nothing wrong with bluffing in business situations. Indeed it is becausc blufling and exaggeration are acceptcd or purt of the game that'the-eximples Carr cites are not viewed as threatening to business practice.

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What response can be made to Carr and his defenders? First Kant has set some limits. If lying or cheating rvere universalized, they surely would be self-defeating. Thc fact that some lying and cheating occur is quite beside the point. Kant is not
claiming that people never lie; rather he is providing reasons rvhy they shouldn't. Indced nothing Carr has said counts against either Kant's point or Kant's argument. After all, even Carr admits that clicating in poker is not permitted. Where Carr disngrees rvith a Kantian is that if bluffing and the like were universally practiced in

management relations seminar Parti.cipant

petition to request pay cuts for their employees even though they were not needed. Use of this tactic will only cause future problems when and if the competitive threat really develops. This utilitarian poiniwas not lost on participants in

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In the past, there was a rerationship of mutual distrust. These are the dangers in crying .*oif.' wh.n the company is really in trouble, no one will believe them. To make rabor/management participation teams work, you need to generate mutual trust. It only takes one bad deal to undermine trust.

III:

it rvould be self-defeating. Pcrhaps utilitrtrianisnr can be of some assistance hcre. The task is to compare Carr's recommendation that business practice permit widespread blufling, exacgeration, and the nondisclosure of information with an alternative conception of business that seeks to eliminate or sharply circumscribe such activities. Which conception of business practice rvould produce the greatest good for society? For busincss itself? Perhaps a nrorc utilitarixn pcrspective might break the impasse. Wouldn't it bc in the bcst interest ol business to adopt thc poker nrodel of business ethics? I think not. Let us consider labor relations, where Carr's poker model is implicitly if not explicitly adopted. In collective bargaining the relationship between thc cmploycr and the emplovee is adversarial. Collective bargaining is competitive through and through. The task of the union is to securc as nruch in pay and benefits as possible. Thc task of the employcr's negotiators is to keep the pay and benefits as lorv as possible. In the resulting give-and-takc, blufling and deception are the rule. Management expects the union to demand a percentage pay increase it knorvs it won't get. The union e.xpects the company to say that such a pay increase rvill force it to shut down the plant and move to another state. Such demands are ncver taken at face valuc although they are taken more seriously on the ninetieth day of negotiations than they are on the first day. Recentl;r the convcntional 'u,ierv of collective bargaining practice has been uncler
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individuals.are indicating that the practices of bruffing and deception have in employer/employee relationships. These unfortunate con_ sequences have been well_ documented by philosopheis - most recently by Sissela Bok. Bok's critique of 'white lies' and the use of placebos applies equaily well to deception in the collective bargaining process.

Triviality surely does set limits to when moral inquiry is reasonable. But when we look more closely at practices such as placebo-giving, it b..orn., clear thatall lies defended as 'white' cannot be so easily dismissid. In the first place, the harmless_ ness of lies is notoriously disputable. what the liar perceives as harmless or even beneficial may not be so in thc eyes of the deceived. second, the failure to Iook at an,entire practice rather than at their own isolated case often blinds liars to cumulative harm and expanding deceptive activities. Those who begin with white lies can come to resort to more frequent and more serious ones. where some tell a few white lies, others may teil more. Because lines are so hard to draw, the indiscriminate use of such lies can lead td other deceptive practices. The aggregate harm from.a large number of marginally harmful instancls may, there_ fore, be highly undesirable in the end - for liars, those deceived, and honesty and
trust more generally.3 Flowever, there is more at stake here than the bad consequences of lying. Bluffing, exaggeration, and the nondisclosure of information also undermine a siirit of co_ operation that is essential to business success. The poker model, wittr iti permitted bluffing ancl the like, is a competitive model. what the model overlooks is the fact that the production of a good or service in any given plant or office is a cooperative enterprise. chrysler competes rvith General Molors and royota but thc production of chrysler K cars in that assembly plant in Newark, Delaware, is a coopcrative enterprise. Lack of cooperation results in poor quality vehicles. I-ience the competitive model of collcctive ba.giining sets \\,ages and working conditions for what at the local level is a cooperative enterprise. Labor-management ncgotiators forget thc obvious tnlth that the production of goods and services cannot succeed on a purely competitive basis. There have to be some elements of cooperation somewhere in the system. why shouldn't the colleitive bargaining process use cooperative rather than competitive techniques? when bargiining is conducte<J

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attack. One of the most prominent criticisms of current practice is its cconomic incflrciency. The aclvcrsarial relationship at the bargaining table carries ovcr to the rvorkplace. As a result of the hostility between employee and employer, productivity suficrs and manv American products are at a competitive disadvantage with respect to foreign products. Japanese labor-management rclations are not so adversarial ancl this facr accounts for part of their success. This particular criticism of collective bargaining hes rcceivecl "rnuch attention in the press and in popular business magazines. The rnost recent manifestation of the recognition of the force of this criticism is the host of decisions Gcneral Motors has made to cnsurc that labor relations arc different at its ncrv assembly plant for the Saturn. Second. the prrictice of bluffing rnd dcception tcnds to undcrnrine trust. As sorre .A.nrcrican lirnis lost ground to foreign competition, the ntanagcnent of nrany of the firms asked for pay reductions, conrmonly called 'give backs.' Other nranagcrs in firms not threatcned by forcign competition cited the 'dangers' of forcign corn-

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industry-rvidc, rs it is with autonrol)ilcs, thc corlpctitivc nroclc sccnrs natrlral. Auto production is a cornpctitive industry. Brrt just bccauso Chryslcr is conrpetitive.with Ge ncral Motors, rvhy rnust Chryslcr managenrcnt be in a competitivc relationslrip rvith its orvn cmployecs? Indccd, couldn't it be argucd that thc fact that Chrysler's managcnrent doe s see itsclf in conrPctition with its unionized cmployces undcrcuts its compctitive position vis-ir-vis othcr autol.uobile producers. To use the language of compctition, if Chryslcr is at rvar rvith itsclf, borv can it win the war against othcrs? As long as collcctivc bargaining is csscntially advcrsarial and charactcrizcd by blufling and cxaggeration on both sides, thc cooperative aspect of business will be undcrcnrphasizcd. Thc costs of ignoring thc coopcrative irspcct arc grcat - both for socicty and for business itself. Hcncc this distrust that so concerned thc participants in thc scminar is only in part a function of the dcceit and bluffing that go on in collective bargaining. It is in large part a function of using the wrong nrodel. We shouldn't look at collective bargaining as a ganlc of pokcr. With this discussion of collcctivc bargaining as instancc, lct us cvaluatc Carr's proposal on utilitarian grountls. Should thc stockholders applaud a chief cxccutive officer rvhose opcrating proccdure is analogous to the operating procedure of a pokcr player? In Carr's vierv, 'A good part of the time the businessman is trying to do unto others as he hopcs othcrs will not do unto him.'But surely such a practice is vcry risky. '[hc drngcr of discovcry is r1'cat, und our cxpcricnco of thc past scveral years indicatcs that nrxny corporations that havc playcd thc game of busincss like the garne of pokcr have suffcrcd badly. Morcovcr, if busincss practicc consistcd cssentially of thcsc conscious misst;rtcmcnts, cxlggcratit-rrrs, errd thc corrccalmcnt of pcrtincnt facts, it secnrs clcar that busincss practice would be inhcrently unstable. Contcmporary busincss practice prcsupposes such stability, and business can only be stablc if thc chicf cxccutive officcr has a sct of moial standards higher than those that govern the garne of poker. Thc growth of thc large lirm, thc conrplexity of business decisions, thc ncecl for planning and stability, and thc undcsirable effects of puffery, exaggcration, and deception all count against Carr's view that the ethics of business should hc thc cthics of a pokcr garne. NOTES

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In this paper I proposc to discuss the conccpts of equality and justicc from a rulc utilitarian point of view, after somc comments on the rule utilitarian point of r.iew itself. l

Utilitarianism and the Concept of Sociat Utility

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For a rcviov of tlrc esscntials of Kant's moral philosophy scc this chaplcr. Sisscla Bok, L_r,irrg: Moral Choice in I'ublic antl Privatc Lr/e (Ncw York: Panthcon Books, leTs). pp. 19.31.

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Lct nre start with the standard dclinitions. Act utilitarianLsnr is the theory that a morally right action is onc that in the existing situation will producc the highcst cxpected social utility. (I am using the adjective'expected'in the sense of mathematical expectation.) In contrast, rule utilitarianr.sm is the theory that a morally right action is simply an action conforming to the correct moral rule applicable to ihe cxisting situation. The correct moral rule itself is that particular behavioral rule th:ri would yield the highest expected social utility if it were followed by all moraiiy motivated people in all similar situations. It is clcar from these definitions that utilitarianism, in either version of it, is a ver1, simple theory because it tries to derive all moral values from one basic principle, thai of social utility. Yet, the history of utilitarian theory shows that interpretation of this principle givcs rise to some far-from-simplc conceptual problenrs und olro ro many disagreements among utilitarians. But this is really not surprising. Morai probienrs are. notoriously complex and difficult; and any ptritosoptric thiry that makcs a serious attempt to come to grips with them cannot fail to reflect theic complexities. More specifically, interpretation of the principle of social utility poses problenis of three different sorts. First, it poses some technical problems a-bout how to define social qtility and, more fundamentally, how to define individual utilities. Second, it poses some specifically moral problems about the dcfinition of social utility. Finail1,, it poses thc problem of how to apply the principle of social utility and, in particular, rvhether its application should follow the act utilitarian or the rule utilitarian approach.2 Under thc first hcading, we have to decide whether individual utilities are cardinal and interpersonally comparable quantities so as to make their sum and/or their arithmetic mean mathematically well-defined. we have also to decide whether to define a person's utility function in terms of his preferences, or of his feelings of pleasure and pain, or of his mental states of intrinsic worth,'3 or any other critcria. All of these are technical problems which raise no difficult moral issues.a More difficult are the specifically moral problems posed by the concept of social utility. For example, how much weight should we give to people's patenti irrational and/or antisocial preferences? Indeed, how much weight should- we give to their socially very desirable altruistic prefe rences? (If we assign positive weighl to people,s prcferenccs for othcr peoplc's welfarc, then we give unfair advantagtto individuals
Rcading takcn from Ethics and Econom.ics,,(ed E. ) Copyright ) 1985 Social Philosophy anct policy.'

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the resulting total utility over the resulting total disutility were -only "quii.if the balance of then suUrt.ntial. If thc government were u.nable to pay proPer compensation, justify expropriation' possiblycould Jnly - cxtrcme social emergencies profrr,ot position should i utilitarian take on this? Obviously, any moral code
benefits and social costs' Therefore, lecting i;diviclual rights will generate both social will obtain on occasions when people a utilitarian must try to compare the benefits

with many fricnds and rclatives, rvho rvish them rvcll, ovcr individuals rvho lack such support.) Horv much rveight should rve givc to the prcfercnccs of pcople unablc to
find out rvhether their prefercnces have bcen mct or uot - such as dead peoplc or, in general, people rvho cannot monitor the situation, for rvhatever reason? Is it evcr morally permissible to do what rve like to do, evcn if our action does not yicld thc
highcst possible social utility'? Notice that these moral problcms are important, not only for utilitarian theory, but also for any other nroral theory - even tliough utilitarian theory does bring them more clearly out into the open, simply beclusc it operates at a higher level of Itnalvtic:rl precision than urost nonutilitarirn thcorics do. Of course, it is all to thc good that utilitarianism forces us to face up to these problenrs: u,e learn a lot about the nature of moralitl' bv trving to answer them.
Rule Utilitariarrr.snr ys Act Utilitarianisnr Even though all of these are important problenrs, in mv opinion the most irnportant

they will rlis moral code protects ttreir inaivioual rights, with the inconvenience action by of freedom their restricts code moral this when iuif., on occasions

protecting other people's rights against thern' . social benefits of such I think-it is veiy clear tha-t, by any reasonable standard, the is to say, most of That costs. social undeniable t-he a morol code will greatly outweigh gives clear protection to code moral whose society in'a tive to y prefer usrvill strongl in ,ighti, inO does not permit violation of these rights, except possibly

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somerareandratherspecialcases.Inmyopinion,thisfactisthebasicargumentfol
rulc utilitarianism. obligation-s. According to Thc situation is much the samc with respect to our moral resulting.from.our family obligations .o'** sense morality, we have some special

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intcrnel problcnr for utilitarian thcory is thc choicc bctrveen act utilitarianism

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rule utilitarianism. No doubt, act utilitarianism is the sinrpler one of the two vcrsions of utilitarianism. But rule utilitarianism seems to bc closer to comrnon sense morality and to our basic moral intuitions. Moreover, much more importantly, I will try to show that b1' folloling the rule utilitarian moral code, society rvill achieve a much hic,hcr lcvel of social utility than it could achieve by follorving the act utilitarian

roles,ouroccupations,ourfriendships,andourothersPecialsocialrelationships. ,ft,"s" sp".iol otligations will, most of the time, take precedence over other moral oUtigotiont. But aionsistent act utilitarian must deny this'

lpproach. To be sure. act utilitarianism has no difficutty in dealing rvith the moral problem of benevolence. Surely, it is obvious enough that rve can incrcase social utility by helping other people or at least by not causing them nccdlcss harm. Yct, it sccms to me that act utilitarianism cannot deal adcquately with thc moral pr<;blctn of ju.rticc and rvith manv related issues because it cannot dctrl adcclulrtcly with tht: problcms of moral rrghls and Of mOral obligutions. For instance, suppose thc govcrnment wants to take ai.\' m-v home in orcler to build a freew.ay through my pr()pcrty_ Is rhis a morall-r. lustiiicd ztctir:n'l (Notc rh;rt I;rm not as?.init.ltt:,rc:rlrortl thc c{)nstitrrli()nality or the le'iillit','()f such an action. I am asking irtrr-rut its rnorulity'S utilit-v than .\c;o;Jinc'ro eci urilirarianism. 1i is morailv iusrifiec if it crezrtes morc the..prospective for utility positive disutilirl,. The government's aclion wiil create

have to decide whether to spend a given amount of money or on supporting some other children in urgent need education own or my "ttiiar#r this money on of financial help. According to common sense morality, I must spend group of second the to money the denying unless *y o*n children's educatiin would children would create very extreme hardship. In pontrast, an act utilitarian their need if children group of second to the havc to say that I should give the money for the money were slightly greater, however slightly 7rcater, than my own children's

Fir example, suppose I

nceds wcrc - that is, I should give it to this group of children if they could be expccted to derive slightly morc utility, however slightly more utility, than my orvn

usersoftlrefreervay,anclfortlrervorkersandtheiremployerswhowillbuildit.It

home, and for rvill create a negiltive utility for me and my famity, rvho 'rvill lose our to act According etc' tlre tlxpavcrs ri'ho l'ill hive to ply for the nerv freervay' lirst to thc accruinq benefits justiticd the if utilit:rrirr. thco11,. tlki.g i.r\\':.lv nry iton.t. i. group' second the on imposed sacriflces the tiig'ltit". group *ill .*...d. lrcrict'er

sense morality, according rhis cttnclusion is clcaril,iriconsistent rvilh common and more specifically' rights' ttr *'hiclt lltc'qovr'rnnlent's lction t'iolates mf irrclividual freedom to live personal mv violntes (It lrlso t.liol.r.. nrv piolrcrtr' ,igtlt. to nrv home' evs'n if the govcrnment Thr-rc'fttre. int.-rfcr.'ncc.) mr. r.rir:rt.i tiir ..irhonigo\r.rnmcnt (rf m! home could be justifled

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childrcn would dcrivc from it. Oncc morc, a rule utilitarian must, by and large, side wirh traditional morality. ln all known societies, there is a division of labor among adults in looking after the children of the community. This division of labor has considerable social utility because, if all adults had to look after all children, it would be virtually impossible for them to find out the various children's individual needs, and it would be virtually impossiblc for them to develop close emotional ties with individual children.s The specifics of this division of labor are different in different societies. For example, in some societies, the mother's oldest brother is the principal person in charge of the children. Of course, in our own society looking after children is r 'normally a rcsponsibility of the trvo parents. But, in any case, the special relationship bctrveen a group of children and the relevant adults can be preserved only if this I 'relationship normally takes precedence over most other social obligations. In con. trast, if we follorved the act utilitarian approach and permitted other - in some sense,

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pcrhaps momentarily more urgcnt moral obligations to take precedencc,. this spccial relationslrip could not sunivc. To put it differently, we must distinguish betrveen local optimality, in the sense of maximizing social utility by each individual action we may take, and global optimality, in thc scnse of niaximizing social utility by the nroral code we adopt and by the entirc systcm of ntoral liqhts and monll obligations tlris nroral code brings into cxistencc. Act utilitarianism focuses on local optimality, rvhcrcas rulc utilitalianisnr focuscs on global optinrality. In somc situations, local and global optimaliry pull in the sarne direction. But in all situations rvhcre they pull in diffcrcnt directions, we have to give preference to global optimality, rvhich means aclopting thc rulc utilitarian approach. To put it still anothcr rvay, lhc nrain cliffcrcncc bctwccn rule utilitarianism and act utilitarianism lies in the fact that thc formcr recognizes, whilc the latter denies, thc logical dcpcndcnce of justice on the cxistcncc of suitablc moral rules that deline pcople's nroral rights and rnoral obligations. Unlike sonlc contcmporary act utilitarians, John Stuart Mill clcarly undcrstood this rclationship. Aftcr arguing that justicc lirst meant confornrity to positive legal rules, hc wrote that later
. . . thc scntinicnt of justicc bccarnc attachcd, not to all violations of larv, but only to violations of such lals ars ougltt to exist, including such as ought to-cxist, but do not.6

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expectations, inccntives, and behavior, if they knew that this rvas the moral rule adopted for a given class of situations?' Consequently, under rule utilitarianism, the moral rule about promise-keeping must be choscn in such a way that it will maximize social utility by striking ttt. iigt.ri balance betrvccn two classes of social interesls. en the one hand, there is the interest of th"- promisee in obtaining rhe promised performance and in avoiding disappoinrment of his expectations by nonperformance. There is also the interest of society in maintaining public confidencc in promises. If the proposed moral rule permitted too many easy cxceptions from promisc-keeping, the promisee's interests would receive insufficient protection. Moreover, public confidence in promises would be significantly inrpaircd (because people would know how lax this moral rule aboui promisekecping actually was). This would be vcry undesirable because a good deal of social r cooperation crucially depends on the credibility of promises - in fields ranging from crcdit transactions to private agreements about rvhere and when to mect, icomnrcrcial

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specific terms, using the examplc of promisc-keeping. Suppose that A promises B to do X for him but does not'deliver on his promise. According to act utilitarianism, this breach of promise rvill be morally wrong onlv if it creates more total disutility than total utilitl'. Of course, thc main utility creatccl by thc broken promise is the utilit.v A derives from not implenrenting a prcsunrablv burdensome obligation. In contrast, thc rnain disutilities crcatecl by A's action arc:

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on thc other hand, consideration must be givcn also to the promisor's intcrest in bcing morally released from his promise, when fulfilling it would causc him undue hardship. If the moral rule about promise-keeping permitted too few exceptions, the promisor would too often be saddled with excessively burdensome obligations. | . Presunrably, there will be a moral rule maximizing social utility by permitting just i thc nght set of cxceptions from promise-keeping. To be sure, it will often be a natter of difficult personal judgment whether a given situation does or does not rcprescnt a permissible exception under the rule utilitarian criterion. As I have argued elsewhere,s in practice it is often quite difficult to decide what specific moral rule, with what particular list of exceptive cases would in fact maximize social utility. I{ence, the best course of action lor a rule utilitarian moral decision maker wili often bc to defer to the social customs existing in his social environment (for example, as to permissiblc exceptions from promise-keeping) - unless he has strong reasons to bclieve that such conformity to thcse social customs would be definitely contrary to
social utility.

utility to him of having his expcctations of obraining this benefit urterly disappointed. (2) Thc disutility to society as a rcsulr of dccrcascd public confidence in future promises rvhcn pcople lcarn about this breach of prornise by A.
Note that normally disutility (2) rvill bc negligibly small because one act of promisebrcaking is unlikcly to have rny noticeable effect on public confidence in promiscs. Consequently. for an act utilitarian, thc basic qucstion is rvhethcr A's utility gain by breaking his promise exceeds B's utility loss. If it clocs, horvever slightly, thcn A's breach of prontisc is morally justifiecl. In contrast, a rule utilitarian rnust ask the question, 'Which particular moral rule about prornisc-keeping would yield thc highest social utility?' Notc that a rule utilitarian must judgc the social-utility implications of any proposed moral rule on the assuntption that, if this moral rule werc adopted, this would automatically bccomc public knowle clge.7 Thcrcfore, in judging any proposed moral rule, he must always ask thc question,'What would be thc effects on pcople's

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permissible exceptions. Let nte draw three gcneral philosophic conclusions from this discussion. First, in many cases rule utilitarianism and act utilitarianism will yield very different practical moral implications. In particular, as we have secn, rulc utilitarianism wili protect pcople's moral rights and their special moral obligations in a much wider range of cases, and will pernrit their infringement in many fewer exceptional situations, than act utilitarianism will. By the same token, rule utilitarianism will permit many fewer cxceptions to the moral obligation of kceping our promises or io that of giatitude to a bencfactor, or to that of telling the truth, etc. - than act utilitarianism will. This

Yet, cven though thcre may often be practical difficulties in deciding what specific

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shoulcl linally put to rest the surprising clairn, sometimes made even by very distinguisheri nroral philosophers,e that rule utilitarianism and act utilitarianism are cquivalcnt as to thcir practical moral implications. Seconcl, it is rrot true, as some act utilitlrian philosophers have claimcd,l0 that rule utilitarilnism amounts to'rule worship,'in the sense of irrationally requiring observance of a moral rule cven in cases rvhere deviating from this rule rvould yield higher social utility. (At least, this is certainly not true about the version of rule utilirarianism that I anr dcfcnding.) To the contrary, as we have seen, rule r.rtilitarianism requires us to choose that particular set of permissible exceptions to lny given moral rule that rvill maximize social utility. The only important moral philosopher who can be justly accused of 'rule worship' is Kant, who derlied that there were any morally justified exceptions to our basic moral rules. Finally, society rvill reach a much higher level of social utility by following the rule utilitarian moral code than it would reach by following the act utilitarian approach. As we have seen, this is so because it will be much better to live in a society in which all people, or at least all moratly motivated members of society, respect other people's individual rights and their orvn institutional obligations, keep their promises, tell the truth on important matters, etc. (unless they have exceptionally impoltant reasons not to do so). Such a society would be preferable to an act utilitarian Society rvhere people rvill disregard other people's rights and their own moral obligations whenevcr this is likcty to yicld slightly greatcr totll utility than total disutility. To put it ctifferently, rule utilitarianism places itself on the high middle ground between act utilitarianism and various deontological thcories. Like the latter, it takes the vicw thxt we cannot clcfinc a morally right action mercly in terms of social cxpeclicncy, rvhich, by itself, would necessarily lead to a supcr-Machiavcllian morality. Rathcr, the pursuit of social cxpediency must ahvays bc constrained by the deontological rcquircntents of morality, such as obscrvancc of rationally choscn moral rules, and respect for a rational systenr of moral rights and moral obligations. On the

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contract is obviously pure fiction and, therefore, cannot possibly explain real-life moral obligations, Indecd, even if this social contract had been a real contract concluded by our very remote ancestors many thousand years ago, it could hardly be morally binding, now, on the present members of our society. But the dccisive objection to this social-contract theory is that it is irredeemably I circular. The hypothetical social contract, like any contract, would derive all of its I moral binding force from thc nroral rule that contracts should be kept. Therefore, we ! .;;;;i;;,r-",; ;;;"];;i,y craim that this morar ; Iowe their moral justification to this social contract in the first place.

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Kant took the view that morality is the highest value of human life. A consistent utilitarian cannot share this view.12 The basic task of morality is to induce people to help other people in achieving their own objectives, which are in most cases nonmoral objectives, such as ecenomic rvell-being, a good social position, health, friendship, love, knowledge, artistic exivalucs, rather than itself the highest value. Moreover, even though no person can a rich and well-balanced lifc without strong moral commitments, these moral commitmcnts are less likely to occupy the center of the stage for him than are his I work, his family and fricnds, and his intellectual, cultural, social, and political
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orher hand, iule utilitarianism agrees rvith act utilitarianism, that ultimately the rational justifrcation of thesc moral rules, nroral rights, and moral obligations must lic in their undenilrblc social utility. l1 iact, rulc utilitarianisnt is thc orrly moral thcory that can providc a rational cxplanation and justification for these dcontological components of niorality. Act utilitarianism cannot do so because the limitations of its conceptual framervork prevent it from rccognizing thesc deontological concepts as relatively autonomous ciements of morality. On the other hand, deontological theories, of course, fully recognize thcir importance, but cannot provide any rational justification for thcm. For example, Pricharci and Ross based their theories on the conccpt of moral duty but they could not explain rvhere these tnoral duties are supposed to come from and rvhv a rational person should care to discharge them. Likewise, Nozick built his theory on thc concept of'entitlements,' but never explained their logical basis and their morally binciing force.rr . Finally, corttractarixns like Lockr:, Rousseau, and Rarvls tried to explain our moral and legal rulcs in terms of a hypothetical prehistoric social contract, But this social

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Of coursc, our moral dutics must always take.precedence over any other considcrations. But this is true only in the trivial sense that we would not call anything our rnoral duty simplicitcr had we not already decided that it has an overriding moral claim upon us. In contrast, our prima facie moral duties do not always take precedence over our nonmoral interests. For example, if I make a promise, I will obviously have a prima facie moral duty to keep it. Yct, if brcaking my pronrisc would not cause any serious harm to the pronrisce, but kceping my pronrisc would cause me a very substantial financial loss ithat I could not have foreseen when I made the promise, then it might be morally ipermissiblc for me to break my promise. This means that I might be morally free to preccdence to my financial interests over a prima facie moral obligation. iBive Likewise, a utilitarian cannot regard very high degrees of moral devotion always as rl unnrixed blessings. Even less can he so regard high degrees of morally motivated devotion to idealistic political objectives. { Grcat <ievotion to one's moral values requires a willingness to make great sacrifices ,{} lfor them. Yct, as experience shows, people who are willing to make great sacrifices .;l lfor their nroral values are often equally willing to sacrifice other people to them. The junfortunate fact is that great devotion to high moral and political ideals may not be lvery far away from socially disastrous moral and political fanaticism. Robespierre irvas no doubt a man devoted to the highest moral principles.

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As has often bccn pointed out, thcrc arc many diffcrcnt typcs of cquality and of incquality. I will discuss only trvo: ctlutl considcrurion for rhc intercsis of diffcrent individuals, and equality of social bcncfits for cliffcrcnt individulls in terms of income , rvcrrltlr, status, powcr, ctc., rvhich can also bc describcc.l as ccortornic and

Thc principlc of cqual consitlcrirtion is a rlthcr unclcmancling principlc. All it rcquircs is that, in dcaling with dilfcrcnt pcoplc, rr'c shoulcl not plt-rvicic ratiopally ; unjustifiablc favorablc trcatmcnt or unfavorable trcatmcllt for any onc of thern. This principlc ltas rr futtdlrrncntal rolc in rrny vcrsion of utiliturian thcory bccausc it cntcrs I into thc vcry clcfinition of social utility: rvhcthcr rvc clclinc social utility as the surn or .ts the arithnrctic nrcart of indiviclual utilities, we rnust givc cqual rveight to all individuals' utilitics. Thc principlc of cqual considcration is a dircct corollary of onc of thc most besic ' gcneral principlcs of rationality, viz.. the principlc of suflicient rcasou. Thereforc, rve nray bc tcnrptcd to concludc that tllc principlc of cclual consiclcration is nrorally . binding on all human action. I do not think this is thc casc. For in sonrc dccisions we may havc virtually uniimited nroral discrction, and nray bc undcr no moral obligation , to follow any objectivc criteria at all. r For examplc, it secms to me thilt if I pay nry secrctary out of nry own private funds. antl nccd it ncw sccrctary, I u,ill bc nrorally frce to follow ltiy own prcfclcnces in choosing among altcrnativc candidates for thc job. I will have no real moral obligation to givc all candiclatcs'cc;ual corrsidcrrtion,'or to use any spccific critcria in ordcr to sclcct thc'ntost dcscrving'candidritc - though, of course, it will bc morally praiseworthy if I do so. In contrast, if i anr acting as a public official, or evcn as an official of a largc, or at ,lcast a modcratcly large, social organization, I rvill bc morally obliged to make any ] major decision on gcncral and rationally clcfensiblc critcria (even if I am undcr no /cgal obligation to do so). This is so becausc such ofhcials arc, in an inrportant scnsc, agents of society as a rvhole and ought to follorv thc shndards of fairness and of rationality of society in all major decisions, even in situations where a privatc citizen u'ould not be positively required to do so. I norv proposc to discuss econonric and social equality,It seems to me that, for a consistent utilitarian, cconomic and social cqualiti, is rrol an intrinsic moral value. To bc surc, other things being cqual, a more cqual distribution of cconomic and noneconomic bcnefits is always prefcrable to a lcss equal distribution. But-the. nrain rcason for this lics in the law of clirnirrishing mrrrginul utility of nroncy'and of rnost i other good things in life. Thus, greatcr cconomic cquality is morally desirable rnainly ', becausc a poor man, u'ho is likely to spcnd any extra money on in-rportant necessities, is ialso likely to derive a much higher utility from an extra $100 than will a rich man, 'who is likely to spend anv extra moncy on relatively unimportant luxuries. For this rcason, a utilitarian u'ill favor govcrnnrcllt policies for a moderate rcdistribution of income and rvealth. But he rvill hnvc to counsel moderation, bccause i socictl'hls a vitll intcrcst in m:rintrininr. pcoplc's inccntives for harcl rvork, for en-

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terprisc, and for developing their talents. Somc redistributive policies mal,increase poor pcoplc's incomcs by a few percentage points but may decrease the rate of grorvth in national income, possibly making these poor people actually much worse off a fcw years later than they wcluld have been in the absence of these policies. on the other hand, there arc strong utilitarian reasons for opposing both extreme povcrty and extrenrc wcalth, espccially extreme levels of inherited wealth. Extreme povorty not orlly causcs physical hardships, but also tcnds to paralyzc thc intcllectuat and cultulal lifc of its victinrs, and tcnds to poison tlrcir moral attitudes. Surprisingly enough, tho intcllectual, cultural, and moral effects of extreme wealth, espccially-of vcry grgat inhclited wealth, are oftcn much thc same. In many socictics, childrcn of vcry rich farnilies arc seldom conspicuous by their intellectual, cultural, and moral accomplishments, nor by their ability to lead a happy and well-balanced life. Morcover, cxtrcmcs of poverty and of wealth also tend to hinder proper operation of our democratic political institutions. I No doubt, many nroral philosophcrs take issue with the utilitarian view that i cconornic and social equality is not an intrinsic moral value. But if thcse philosophers wcrc right, this would mcan that, in a distribution of social benefits, a poor person (or an otherwisc disadvantaged person) should be given priority over a rich person i (or an otherwisc more fortunate person) cven if, for a given benefit, the former is j not cxpccted to derive a higher utility than the latter is. For easier refcrence, I will dcscribe tlre moral valuc judgnrent containcd in this last sentence as statenrcnt A. I now propose to show in two examples that slitement A would be an utterly ; un:rcccptablc nroral valuc juclgrncnt. I will nccd examplcs involving nonccononric I bencfits becausc, in a distribution of economic bencfits, owing to the law of diminishing nrarginal utiiity, a poor pcrson will almost always derive a highcr utility from any givcn benefit.

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consider a distribution of a scarce lifesaving drug, or a distribution of scarce univcrsity admissions, when the available supply of either falls very much short of existing dernand. suppose that, in the case of the drug, we have to choose between a rich patient and a poor patient, both of rvhom badly need this drug. Suppose, also, that the rich patient is definitely expected to benefit more from the drug. or suppose that, in the university admissions example, we have to choose between a rich candidate and a poor candidate, both of whom have the qualifications required for j admission. Suppose, also, that the rich candidate is clearly better qualified and can derive a greater bcncfit from university education. ' Thcn, statement A would imply that we should give the lifesaving drug or the university admission to the poorer person, even though the richer person would derive a grcater benefit from it - except, perhaps, if this richer person would derive a very much greatcr benefit from the iifesaving drug or from the university admission. Yct, even if the richer person is expected to derive only a moderately greater benefit from the drug or fronr the university admission, he will have a stronger moral claim to it' It would be morally unjustifiable discrimination against him if he were denied the drug or the university admission merely because he happens to be rich. Thus, I conclude that statcment A is a completely unacceptable moral value

Ethical theorv
, judgment. Utilitarian theory is right to take the vierv that econonric and social inequality is not an intrinsic moral value, ancl that it is morally wrong to discriminate I against a rich o| an othcnvisc fortunatc pcrson in ordcr to rcducc thc cliffcrencc , bctween him and the poorer or othcrwise less fortunatc nrcnrbcrs of society.l3
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Rule utilitarianism, equality, and justice

Conclusiott have discusscd the nature, and some of the internal problems,

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As I have argued earlicr, soS,iety has a very important interest in having its nrcrnbers respect each other's basic rights and institutional obligations - in other words, in having its members observe the basic standards of justice. Yet, this coin also has another side. Preoccupation with minor violations of our rights, real or apparent, and the widespread passion for litigation so prevalent now in the United States, are highly counterproductive social practiccs. Indccd, not only is it often socially preferable if people put up with minor injustices, instcad of engaging in e ndless litigation, it is often socially desirable to have social institutions whose very success depends on having some'unfair'practices built into thenr. For instancc, thc effectivcness of the free enterprisc systcm (rnd cven that of a
socialist system) crucially depends on the fact that a successful business executive will be promoted and an unsucccssful one demoted. Yet, this is often 'unfair,' bccausc this success or failure may be unrclated to the busincss cxccutive's own cffort and ability, and may be a matter of sheer luck. Likervise, in many parliamentary systems,

of the utilitarian point of viov. In comparing act utilitarianisnr with rule utilitarianism, I havc come down in favor of thc latter, primarily on the ground that rule utilitarianism will yicld a higher lcvcl of social utility bccause it requircs wider respect for other people's rights and for our own special obligations. I have argued that, for a utilitarian, moral values will not be ahvays the highcst values of human life, and sometimes will have to yield precedence to other social values. I have also argued that, even though equality and justicc (including fairness) are of fundamental importance from a utilitarian point of.vierv, they cannot always be the decisive considerations for
framing social policies. NOTES
1. The author wants to thank thc National Science Foundation for supporting this rcsctrch through grant SES77-06391-A02, administered by the Center for Research in Management, University of California, Berkelcy. 2. Any moral dccision, undcr cilhcr vcrsion of utilitarianianism,is a consrained maxintizaliotr problcm, witlr social utility as thc maxirnizand. But thc actual .constraints of maximization arc diffcrcnt undcr thc two vcrsions of utilitarianism. An act utilitarian must try to maximize social utility undcr the assumption that the strategies of all other utilitarians arr: simply glven, independent of his own stralegy. In contrast, a rulc utilitarian must try to maxinrizc social utility under the assumption that a// utilitarians will always use thc sarne strategy. Sce J. C. Harsanyi, 'Rule Utilitarianism and Decision Theories,' Erkenntnis 11 (1977), pp. 44-48. As a rcsult, the alternatives will also be different under the two utilitarian theories. Under act utilitarianism, they will be alternativc individual acts. Under rulc utilitarianism, they will be alternativc moral rules; in fact, as closer analysis would
show, they are alternaitve comprehensive moral codes.

a cabinet minister ntust take political responsibility for his subordinates'mistakes, regardless of whether he is really responsible for them by common sense criteria or

in both cases, of course, it would be possible to promote or to demote the individual in question only after an inquiry determined horv much responsibility he really had for the outcome. But such inquiries are costly, time consuming, and often quite inconclusive. Thus, there are good arguments for acting without any such prior inquiry. 1 More fundamentally, it is possible to argue that it is 'unfair' to reward a person's

not.

3. G. E. Moore, Principia Erhica (London: Cambridge University Prcss, 1903), p. 17. 4. For a discussion of these problems, see my Rational Behavior and. Bargaining Equilibrium
in Games and Social Situations (Cambridge: Cambridge University Press, 1977), Chaptcr 4: and 'Rule Utilitarianism and Decision Theory,' pp.27-3O. 5. Flarsanyi, 'Rule Utilitarianism, Rights, Obligations, and the Theory of Rational Bchavior,'
Theory and Decision 12 (1980), p. 128.

I superior performance by higher pay, higher prestige, and higher social status, if this ! performance is largely a result of his outstanding ability, rather than of his greater i effort, or of his higher moral standards. But a utilitarian must fully support rewards I based on performance because the alternative would destroy the incentives for gifted
r people to fully develop and use their talents to the benefit of society, and would
encourage philistinism and hostility to excellence.

6. John Stuart Mill, 'Utilitarianism,' Utilitarianbnr, Liberty, and

1967),

Reprcsentative Government, cd. Ernest Rhys (New York: Evcryman's Library, E. P. Dutton and Co., 1926), pp. a3-aa, quoted in J. Narveson, Morality and Utility (Baltimore: Johns Hopkins University Prcss,

p.

148.

Again, it is hard to deny that proportionai representation is the 'fairest' electoral svstem, and the only one really 'fair' to small parties. But this is not necessarily a convincing argument for proportional representation. From a utilitarian point of view, a question much more important than such 'fairness' considcrations is, 'wliiclt particular electorzil system is more likely to yield a stable and effective government, one able to take unpopular measures rvhen thev are called for on economic issues, on minority rights, on foreign policy and defense, etc.?' On this scorc, it seems to me that two-party systems, with the two parties from timc to time altcrnating in govcrnment, have been in most cascs far superior.

7. Presumably, under any moral thcory, rve would have to assume that moral rules will be made publicly known to enable pcoplc to comply with them. But under rule utilitarian
thcory there is an additional rcason for assuming that moral rules will be publicly known. For, in principlc, every individual can compute what set of moral rules will yield the highcst social utility. B. J. C. llarsanyi,'Somc Epistcnrological Advantages of thc Rule Utilitarian Position in Ethics.' Midwest Studies in PhilosophyT (1982), pp.395-396. 9. See Richard B. Brandt, 'Toward a Credible Form of Utilitarianism,' Morality and the Language of Conduct, I'1. N. Castaneda and G. Nakhnikian, eds. (Detroit: Wayne University Prcss, 1963), pp. 120-123; D. Lyons, The Forms and Limis of Utilitariani^sm (London: Oxford University Press, 1965), passim; R. M. I-lare, Freedom and Reason (Oxford University Prcss, 1963), pp. 130-136.

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Virrues and business

ethicl

10. J. J. C. Smart,'An Outline oIUtilitarian Erl'tics,' Utiliturianinn, Forutd Againsr (London: Canrbridge Univcrsity Prcss, 1973), p. 10. 11. FI. A. Prichard, !r!orul obligurion (oxlord: oxfr;'rd Univcrsirv press, l96s); w. D. lloss, Foundations of Erhics (Oxford: Clarcndon i,rcss, 1939); Il. Nozick, Anaichy, Sutrc, und Utopla (New York: Ilasic Books, 197-l). 12. My argunent in this scction has grortly bcrlcfitcd fron: Profcssor Narvcson's cliscussjon of thesc topics (J. Narvcson, lrloralitl'and utititl', pp.3a-37). But hc may not agrcc ivith all that I will say. 13. Ofcottrsc,thcrcislrvcrystrongcasclilrrcrncdiallctionsinfavorolsocialgroupsupjustly trclttccl in thc past. IJut it is a rnorc ijiflicult t;Lrcstion how f:rr wc rnity go iriclisiriruirrutirrg against pcoplc not bclonging to thcsc social groups, if thcsc pcoplc h;rvc nu pcr.onil responsibility for thc unjust policics of (hc past.

theorist defends the general principle rvhile the practitioner applies that principle to solve particular practical problcms. Given this principle-based understanding of ethical theory, the means for institutionalizing ethical responsibility within corporations is clear. The task is to get the corporation to accept some ethical principle as the guide for the activities of its members. A number of different strategies have been proposed to mect this goal. Milton Fricdrnan, for cxamplc, suggests that corporations ought to adopt thc principlc of profit nraxinrization as thcir guide. This principle, through thc functioning

Virtues and business ethics

JOSEPIT

of a frce and compctitivc markct, will lcad the corporation to fulfill its social responsibility. othcrs have argued for a utilitarian principle broader than profit maximization, claiming that corporations ought to be guided by a more general understanding of social goods and by the recognition of a responsibility to bring

R. DESJAI{DINS

about such goods. Still others argue for non-utilitarian principles. Tom Donaldson, for examplc, defends a version of social contract theory of corporatc social responsibility.l In this vicw, a corporation institutionalizes its ethical responsibility by obeying the implicit contract that exists between it and society, These and many other similar strategies share a beliei that the road to ethical responsibility lies with the internalization of some independently justified principle.

Much of thc rvork done by philosophcrs in busincss ctliics has bcen structurcd by an overly narrow undcrstanding of cthical thcory. 'lhis unclcrstanding is charactcrizcd by an alnrost total rcliance upen rloral rulcs and principles ancl an almost total disrcgartl of virtucs artcl tlrc cthics ol charactcr. As urrdcrstood by nrany philosophcrs rvorking in business cthics, thc goal ol cthical thcory is to idcntify and defcnd sorne fundamental principlc that can servc as thc foundation for all nrorality. Such a principle will providc this foundation if it can, first, bc defended as catcgorically binding on all ratior-ral agents and, sccond, bc capablc of nroving such agents to specific acts that arc requircd by thc principlc. Gcncrally, this second goal is achieved if the principlc can function as ii major pre misc from rvhich specific practical
conclusions can be deduced. Much of the lirst-order writing donc by philosophcrs in busincss ethics has involved the second goal: applying gencral cthical principles to spccific situations in busincss

In what follows, I suggest that there arc good reasons for thinking that any such approach will fail. I thcn go on to consider an alternative strategy for institutionalizing
etlrical bchavior.

THB FLAW IN PRINCIPLE-BASED ETHICS

What, then, is rvrong with principle-based ethics? Why do I suppose that attempts to institutionalize ethical responsibility within corporations that rely upon principles will fail? There are both practical and theoretical reasons for this skepticism. First, we should take seriously the fact that in practice, ethical principles seldom give any unambiguous practical advice. Adopting a principle-based approach in business ethics leads to numerous practical difficulties. A seemingly endless series of problems arises when one attempts to derive from such principles as the categorical imperative or the principle of utility, solutions to ethical problems faced by businesspcople. Hopeless ambiguity in application, apparent counterexamples, ad hoc rebuttals, counterintuitive conclusions, and apparently contradictory prescriptions create an overwhelming morass in the discussion of particular moral situations. Thc confusion is compounded even further when recommendations from compcting principles are addcd to the discussion. Those of us who have tried to teach business cthics in this way can attest that ethics is not engineering: unambiguously correct or even generally accepted answers occur very seldijm. This radical inconclusiveness of ethical debates should at least suggest that something is wrong with our approaches to moral problems. Beyond these practical problems, and partly explaining them, lie additional con-

and from these principles deriving rvhat onc ought to do in that situation. Moral philosophcrs lcss intcrcstcd in'applied cthics'havc bccn content in pursuing tlie first goal. Thus, moral philosophy today is often divided into two areas: Those working in ethical theory arc charged with justifying certain principles (for example, utility, the catcgorical impcrativc) as bindin_q on all pcrsons, rvhilc thosc working in applied ethics attempt to shorv how these principles commit onc to acccpting certain specilic conclusions about whistlcblow'ing, cmploycc rights, and so on. Thus applicd cthics stands in the same relationship to ethical rheory as engineering stands ro physics. Thc
et

Rcading takcn lronr Corporatc Coventance und In.ttitutiortuliiing Ethics, (cd.) M. I.loffnran al. (Lcxington. D. c. Hcath, 19s1). Copyright @ 19gi Lcxington llooks, d. c. Fleath .rt co.

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Virtues and business ethics

utilitarian happiness principles rational agents.)

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ceptual difllculties. By far the most significant is the fact that no ethical principle has yet been established in any plausible fashion as categorically binding upon all people. Philosophers have simply failed to justify the principles they apply in business ethics. Principle-based ethical theories are committed to the vierv that rvithout the prior

the farther it is from being rationally binding on all

indepcndcnt justification of thc principle, attempts to institutionalize cthical responsibility by appcal to a principle will fail. Since we must adrnit the outright failure of the project of justifying moral principles, we should be skeptical of attempts to
ground business responsibility upon moral principles. Trvo further problems with the emphasis upon principles can lead us into a discussion of the alternative approach. First, principle-bascd ethics tends to identify particular actions as the core of morality and tends to ignore the character of the person rvho performs those acts. Ethical principles, whether they be called rules, maxirns, Iarvs, or action guicles, inevitably conceive of morll judgments in terms of the question What should I do? and disregard the equally practical question of What [kind of personl should I be? Consequently, business ethics often labors under the inadequate assumption that every particular act can, once and for all, be determined as obligatory, prohibited, or permissible. Borrowing a phrase from Robert Nozick, principle-based ethical theories are'end-state'theories. They share a conviction that thcre is one unequivocable arrangement of this world (that is, arrangement that is in accord with the favored principle) rvhich would be nrorally pleferable. Of coursc, this conviction can bc seriously qucstioncd. Why should rvc assume that the moral rvorld is unambiguous? In light of the vast number of experiences that have given rise to the rapid recent growth of applied ethics, should we not assume just the opposite? I suggest that.wc recognizc the moral life to be often fundamentally ambiguous. Ethics is not like probiem solving in science or technology: There just may not be clear moral answers 'out there' rvaiting to bc discovered if only we use the right method. Principle-based ethics encourages us to think that there are such answers. If only we apply the right principle carefully enough, we can determine the moral status of each individual action. A second, not unrclated, problenr concerns the impersonal nature of principlcs. Principles arc distinct fronr the people rvho are to use thcm: They are external rulcs to be internalized, adopted, accepted as one's own, and applied. This creates a gap between person and principle, a gap that undcrlies some of the most scrious problems in ethics. Even if moral principles were plausibly justified as binding on all ration;rl agents (a goal that, I suggcsted above, has yet to be approached), the principle? As ] motivation question remains. Why should I do what is required by this

AN ALTBRNATIVB APPROACII
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guided to this alternative by Aristotle.

The

to many of the moral problems confronting us? Besides despair] is iny alternative open to us? I rvourd rike to suggest thai there is, and thui *" can be
answer

Let us suppose that, unlike technical or scientific problems, moral problems have no answers or solutions just rvairing to be discovered. what if there no single right

*.r.

Aristotelian Good

Aristotle characterizes good acts as those acts performed by the good man. Although this often is thought to be circular, it seems to me to contain a wealth of truth. Imagine that you are lost deep in a jungle. There is no one way out of this predicament and indeed you may never get out. what would you hopi for? I would want neither a map nor a survival handbook. since I don't know wheie I am to begin rvith, a map rvill be of little help. Since the handbook cannot hope to cover every situation that might be encountered, it can be only marginally helpful. Rather, i would like a pe rson who is experienced in the ways of the jungle to o.i us my guide. I think that Aristotle saw moral problems in much the same way. Deciding t,o* ,u. should live our lives is like deciding what to do in the jungle. Principles and rules will be of little help since, like maps, rhey can be helpful only when you already know where you are (have already established that the rule is morally justified) and, like handbooks, they cannot hope to cover all situations. what we'need ii a person
experienced in the ways of life. prc-established principle. Rather, it is a world populated by good people. I suggest that thc good busincss also is not one that conforms to some preestablished principte, but one that is populated by good people. A morally responsible business is not one that measures its actions against some external principle, but is one in which good peoplc are making the decisions. Such a good person wourd be a person of character, disciplined to avoid the temptations of immediate, short-term pleasures. She would recognize that much of

Accordingly, the Aristotelian good world is not one that conforms to

some

i e motivationll question, this remains open. Even if thc principle could give us unambiguous advice, we can (and do) sensibly ask Why should 1 do this? Principlebased ethics leaves us with an unbridgablc motivational gap betrveen the applicd principle and the action. (On the face of it, it seems that the closer a principle comcs to the goal of being rationilly justificd - for example, thc categorical imperative thc nrore forrnal it is and thc rnorc ernpty it is of nrotivational contcnt. On thc otlror hand, the closer a principle is to providing a motive to act - for examplc, thc

person would also foster hcr intellectual abilities. Reason and intelligence can contribute much (but nbt alr) to the good rife. Above ail else, the good person

(The good person certainly rvoulcl not be a bureaucrat!) The good pe"rson would also enjoy others, recognizing that solitude in a social world will result in the loss of great good. This might imply that the good person have a sense of humor. The good

what is worthwhile in life is not easily and immediately achieiable. This person would not be overcommitted to rules and regulations; she would have the courage to be- creative, to enocurage and entertain new ideas, to sometimes go on intuition.

. -.la I IJg_l I Ethic_al thu'ory

possesses phroncsis,

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(p. 203.)
answers

Virtues and business ethics

or practical rvisdom, Follorving Aristotle, since ethics is not a demonstrative sciencc and sincc thcrc are no unanrbiguous answers in ethics, a type of rcasoning diffcrent from scientific reasonin[ will be rcquired of the good pcrson. The abiiity to nlakc rcasonable dccisions in situations in which there is no right answcr is tlrc nrark of phroncsis: It is to pr.lsscss practical rvisdont. It is tlrc naturc of phroncsis that onc cannot spccify, a priori, what it will amount to in practicc. In general, it is thc ability to apply lessons learned in the past to new situations in thc prescnt. It is to bc able to makc appropriatc adjustments so that gcneral lcssons fit thc spccific situation. Phroncsis lequircs us to lit our reasoning to thc situation and to avoid forcing prcscnt situations into prcconceivccl catcgorics. In this scnsc, phroncsis is thc antithcsis of burcaucratic rcasoning. It is thc ability to adapt to changing situations without losing sighr of onc's ultinratc goal. A busincss sccking to fostcr tlte clcvclopntcnt ol good pcrsons u,jll bc rvcll aclvisccl to cncouragc thc dcvclopnrcnt of plironesis.l
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to the former question have in colnmcn.

what all answers to the first question have in common involves what is necessarv to live a unified, wholc life. The unity of a life can emergc only when that life is situated in a social and historical context, a 'narrative' in Maclntyre's phrase. that gives meaning to that life. Individuals do not exist as solipsisis, our every action - indccd, our every thought - can be meaningful only within a complex sociai, historical, and linguistic context. Thus, to try and live our life in isolation fiom others will underminc the very context that gives meaning to and ultimately unifies our livcs. It will cffectivcly prcvcnt us from attaining our own good, the fulfillment of our life story or narrative. what does this havc to do with business ethics? It seems to me that thcre are rwo ways in rvhich thc roles pcople play in business can be understood. only one of these will contributc to that unity of the human lifc by situating the person within a social othcr end (profit for the employer, wages for the employee). In this view, an individual fills a position in much the same way that components are plugged into a
{'
and historical context. In what r call instrunrcntal vicw, individuals fill roles that are simply means to somc

'flrc Naturc of Virtut'.s

rvoulcl norv like to pursue sonre sug{cstions about thc nature of thc virtues that are

found in Alasdair Maclntyrc's book Aftcr Virtuc. I Traditionally, the virtucs havc bccn conccptually tied to sornc Ielos, or somc'goocl I life'tbr man. Thc virtucs rvcrc thosc character traits that prornoted thc attainmcnt of the good life. The good man, in turn, was thar person who posscssed thesc virtucs. The history of moral philosophy frorn at least tlre seventeenth century csscntially ignores the role of the virtues in cthical theory. At best, the virtucs were given a position alongside sentiments and fcclings as bcing part of the noncognitivc, and - t' thereforc arbitrary and subjectivc, side of nrorality. Thc rnost compelling explanation for this vicrv centers on the fact that modern philosopliy has, by and large, rejected -:1, the notion that thcre is any single, nonartritrary telos for rnan. Some writers would , tracc this to thc individualism of post-Flobbcsian Iiberalism. The focus of that r-^l ' Iibcralism is upon m:rn As atomisric individual rrncl aw;ry from rnan as social. Sincc Iindividual nrcn havc different cnds, it becomcs tolly to try to idcntify some onc end for all mcn. other rvritcrs of a Marxist bcnt trace this'loss of a human telos to the alicnalion tltat rcsults frorn thc modcrn industrial-capitalist society. Still other1 ;,' commentators trace the rejection of a hunran telos to the rejcction of teleology in ] '' general during the scientific revolution that took place during rlie sixtccnth and I seventeenth ccnturics. Whatcver thc causc, the lack of some one telos for all pcoplei prevcntcd rhe development of anything but a subjective, variablc account of the ,
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regard to the good lil'e, Maclntyre says:

efficient means to some external end. In this view, individuals are encouraged'to think of themselves as role-players. Like the manager in Albert carr's 'Business Blufiing' article (see p. L2$, individuals play a variety of roles: managers, spouses, parents, religious believcrs, political constituents. when stripped of these roles, Itowcver, the individual means little or nothing. As a result, individuals are denied the unity of life that is essential to thc pursuit of their lood life. On thc other hand, there is what I call the professional view in which the positions individuals occupy are valuable in themselves and not just as means to some other cnd. Likc the mcdical or teaching profession, these positions derive their value from those goods (what Maclntyre calls 'internal goods') that can be achieved only through the practice of that activity. Individuals occupying these positions derive nrcaning and value from the pursuit and attainment of goods that are internal to those positions. These goods are essentially social, having developed during a long social history and, in turn, contributing to the future good of that society. As such,i these positions are morc likely to foster the unity (or integrity) that is necessary to livc out one's lifc and bring it to completion. unlike jobs, professions do not ask thel individual participant to suspcnd tlie pursuit of thc good lile while at work. I In thc instrunrental view, work is rvhat one does to earn the money needed to
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sterco system. Individuals are interchangeable parts, and as such they are denied any intrinsic value or neaning of their own. This essentially is the bureaucratic view of business in which an organizational chart gives meaning to each position. The position itself and the individual who fills it have value only so long as they are

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is left to assign her own value to anything at all. In the professional view, one pursucs what has becn cstablished as valuable in itself by the social history of that profcssion. This pursuit of the objective social good is an intrinsic part of the

pursuc what is valuable. Sincc value is thcrefore dctermined by money, the individual

Ethical theory
profession. I rvould suggest that we devclop the professional conception of business managcment by recognizing the intrinsic value of business as the supplier of goods , and services. In this vielv the function of business (indeed, its social responsibility) i is to produce goods and services that contribute to the good of society. Moral i philosophers are encouraged to examine the character traits necessary to attain these ; goods in the attempt to describe the virtues of business management. Tying some of these suggestions together, let us say that the 'good life' for man lies in the pursuit of excellence. Let us say that excellence for business is the pursuit of goods and sen,ices that contribute to and advance the social good. This social good, ultin.ratcly, is a decision that should be made in the political arena. (This calls for an rupproach to busincss cthics in terms of social and political philosophy rather than in i terms of ethical theory.) Neverthcless, we can say that a business can institutionalize ' cthics by fostering the development of good people within its ranks. Ways of doing this include closely identifying employee positions with the pursuit of business excellence. In part, this requires avoiding the instrumental view of employee roles. It rvould also includc the encouragement of phronesis as its decision procedure and the avoidance of bureaucratic tbrmalism. NOTES

CASE STUDY

Assessing the ethics of businesses: the New Consumer survey

Assessing the economic performance of businesses is far from easy but

l. Scc his Corporuliott.s antl Nlorulity (Englovood Cliffs, NJ: Prcnticc-l-Iall, i98l). 2. Fcrr an intcresting parallel to this account of phroncsis in business, scc In Scurch of E"uctllencc by Thomas Pcters and Robcrt Waternan (Ncw Yolk: Harpcr & Row, 1982).

at least has the advantage of well established procedures for measuring profits growth, market share, turnover, and the like. Assessing 'social' performance is certainly no less difficult and has the added disadvantage of requiring the development of a wholly new set of indicators. In the UK, this has been done by New Consumer (NC), a not-for-profit public interest research organization based in Newcastle upon Tyne., Over a two-year period from late 1988 to 1990, it investigated 128 major) companies based or operating in the UK, concentrating mostly on those involved in mass consumer markets for food and household i goods. There were 79 British companies and 49 were foreign owned. Small though the sample was, a significant feature was the greater openness of the foreign owned firms, and in particular the American,, compared to the British. In all, 32 of the l2S (25%) co-operated fully i witlr the survey, 64 (50%) to some extent, and 32 (25"/,) to little or no extent; with nearly a third of the American companies in the fully cooperating category compared to barely a fifth of the British. The most frequently given reason for not co-operating was an inability to collect the data because of a iack of resources or of any central collation. However, the authors of the survey also noted a distinction betweenl firms rvhich sec this kind of research as an opportunity to clarify their approach to social issues and those which see it as a threat - an attempt,l presumably, to pillory them for their shortcomings. This is despite the fact that NC is concerned only to provide consumers with the information that rvill enable them to make informed choices and explicitly rejects a campaigning or pressure group role. NC began by identifying more than 70 areas of business activity which raised ethical concerns. To makc the survey manageable, this was reduced to 13 general areas. Thcse covgred:
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2. p^y, bcnefits and conditions 3. industrial dcmocracy 4. equal opportunities 5. community involvcment 6. cnvironment 7. other countries 8. rcspect for lilc 9. political involvement 10. rcspect lor pcople
11. links rvith oppressivc regimcs 12. military salcs 13. markctirtg policy.

to their disclosure of information, had yes/no ratings for political involvement, and a quantitative rating for military sales. What emerged from the survey was a wide variation in company attitudes to ethical issues. Some companies, particularly the American, had rvell dcveloped policies in the relevant areas and were obviously kcen to be seen in a good ethical light, while others had neither thc policics nor any vcry discernible concern about ethical matters. For cxample, it was concludcd about the Kellogg Company that it 'clearli,' takes seriously the maintenance of its role as a good corporate citizen, rnd a higli level of clisclosure aids cvaluation of its policies'. However for the House of Fraser it was concluded that 'this major retailing company prcsents an extremcly negative record in both the social responsibility and business cthics fields'. The general lesson of the survey, however, is not just the range of company rcsponses to these issues but the range of those issues themselves; involving just about every aspect of busiess activity be it organizational, financial, tcchnological, political or cnvironmental.

Thc first general arca conccrned thc dcgrce of sccrccy sorrounding corporate activity. Areas 2-4 rverc lurnped together as 'employment issues'. They included such things as training, pensions, directors' pay, trade union recognition, profit sharing and policies towards women and ethnic minorities. Area 5 concerned charitablc giving and involvement in community aid programmes. Area 6 covercd a rvide range of environmental issucs from pollution control to conserving thc rainforests. Area 7 rvas about involvcment with dcvcloping countries. Area B was about concern for animal life and, in prrticular, the use of animals in scicntific experiments. Arca 9 was concerned rvith donations to political parties and any resulting conflicts of intcrest; also donations to politically aligned bodies and payments to the Economic League (an organization which blacklists potcntial employces on political grounds). Area 10 concerned involvcmcnt with alcohol, tobacco, and gambling. Area L1 was rcduced to links rvith South Africa. Arca 12 concerncd involvcment with the arms trade and defence contracts in general. Area 13 was an occasional category to covcr cases rvhere companics had adopted a morally controversial approach in advcrtising and marketing their products. In addition to a descriptive evaluation of the ir performance in some or all of these 13 areas, companics rvere given given quick comparative ratings in 12 areas. These were basicaily the original 13 excluding 2, 3 and 13, with 4 split into scparatc ratings of cqual opportunities for women and ethnic minorities, and 6 sub-dividcd into a rating for the environmental impact of a company's activitics and another for activity aiming at environmcntal improvcment. Thc ratings thcmselves were a mixturc of comparisons rvith other conrplrnies, straight ycs/no answcrs,

Sourcc: R. Adams, et
Page,1991.

al. (eds), Changing Corporate Values,

Kogan

DISCUSSION TOPICS

1. Are there some things that are wrong irrespective of the consequences? Give examples and rcasons. 2. Consider the following ethical issues in business. How would they be
viewed by (a) a utilitarian (b) a Kantian

(c) (d)

a 'natural law' theorist a non-cognitivist?

(i) lactory farming (ii) 'whistle blowing'

(iii) (iv)

(u)

attitudes to 'shrinkaqc' of stock bribery an'equal opportunitics' employrncnt policy.

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Ethical theory

3. Using

the checklist for moral evaluation on p. 106, consider to what extent the following types of business practice are ethically acceptable: (a) offering someone a job because his or her father is a friend of yours; (b) declaring your work place a 'no smoking' zone; (c) declaring several redundancies in the inrerests of profitability; (d) starting a price war to put competitors out of business; (e) burning crops to boost market prices.

Not all of the points are necessarily applicable to each example, so consider the ones which seem the most relevant. You may feel that these
brief descriptions provide insufficient detail to enable you to reach an ethical judgment. If so, feel free to invent additional details as needed. Devise examples of your orvn and test them in a similar way.

Capitalism, markets and justice

What is capitalism? Markets, social markets and market socialism Is capitalism just? Introducing the readings From unjust markets to just distribution Saul Estrin Can socialism change its spots? Chris R. Tame The capitalist system and the worker: Analysis and summary of the

encyclicals Phillip Hughes

Anarchy, state and utopia R. Nozick A theory of justice John Rawls

Case study

Employee capitalism: the story of NFC

Discussion topics

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to stipulate that those nervous of heights need not apply. They rvon't. The skill of the advertiser comes in adjusting the salary to the danger. An offer of f 1000 per week might produce a dozen applicants. An offer of f15 might produce none. Somewhere betwecn those two figures lies the cxact sum to specify thc minimum figure to attract anyone actually capable of doing the job. If there is more than one applicant. the figure has been placed a trifle too high.
@ John N,lurray (publishcrs) Ltd. Rcproclucod rvirh pcrmission.

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Corporations and responsibility

The nature of business corporations Social responsibiliry Identity and accountability Corporate governance Introducing the readings

What vierv of dctermining rvagcs is this writcr cxprcssing? Considcr argumcnts (a) in favour of this viclvpoint; (b) against it.

tn::^"::l:"sponsibitity of business
rrreoman

is ro increase its profits

Astakeholder theory of the:noclern corporation: Kantian capitalism William M. Evan and R. Edward pr"r*on Can a corporation have a conscience? Kenneth E. Goodpaster and John B. Matthews, Jr Colqorle moral agency: the case for anthropological bigotry John R. Danley
Case study

Making thc punishment fit thc crime: the Zeebrugge disaster

Discussion topics

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THE NATUITE OF BUSINESS CORI-'OII.ATIONS Thc corporation is thc dominant lornr of

business entcrprise in thc wiil normally be small not corporations are moclcrn worlcl. Those that or a few people in proprietor working busincsscs involving a single will be corbusinesses, very largc all partnership. The rest, ilcluding size which particular any fact of bcing the however, not, porations.'it is and it is owned qucstion of how a lt is corporation. a a business makes legally iclentified. For an unincorporatcd business, ownership is nothing m6rc-than the orvnership of its asscts (if there are any). These are owned by inclividuals in exactly thc samc way as any other picces of private piop"rty. lt just happens that they involve, or can be put to, a business ut". fn" business itsetf is legally ictentified with the peoplc who, in their own person or as employees, carry out thc work of the business. If thcy icasc to operatc, so docs thc business. Nothing. so straightforward uppti"r to corporate businesses. With them ownership takes the very much more initirect form of shareholclings and they are not legally idcntificd with people at all. :'- It is this sepirateness from people which defines colporate status. A business is a cbrporation whcn it is regarded as a distinct entity in its own right, separnt" fro* all or any of the people associated with it, be they t["e rvork-force, managcrs, directors, or even shareholders. Having this status means that thJcourts will recognize lhe business as possessing legal rights anci duties in much the samc way as arl individual human bc-ing. it is regarcled as something which, of itself, can enter irrto contracti, o*n oni clispose of property, incur and be owed debts, inflict and suffer damage, sue and be iued, bc victim and perpetrator of crimcs, and so on. In Jhort, a business which has the Status of a corporation is treated in larv as if it were a person. It becomes wirat lawyers speak of as an 'artificial' or 'juristic' person as opposed to the 'natural' person which is an individual human beingCorporatc status is not confined to busincsscs, nor did it originate with them. In Englanci, the idea of incorporation emerged during-the Middle Ages ancl wis probably lirst applieci to religious and public bodies suclt as=monastcries as self-govcrning towns ('boroughs'). To this day, thcse and many othcr such non-business institutions have corporate status' inclucling, for cxample, universities. (The account given here follorvs L. C. B.-Gower, Gower's Principles of Modent Company Law, Stevens & Sons, 1992, chapters 2 ancl,3.It is, in its cletails, spccinc to English,larv.) The cxtension of this status to thc business sphere begins with its

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granting to merchant guilds in the medieval period. These were bodies formed to represent (and tightly regulate) uaiious crafts, trades, or professions such as butchers, bakers, and bankers. In modern termsthey wouid be trade associations representing businesses in par:

The first businesses to be incorporated were 'merchant adventurer companies' set up to trade with overseas countries. (Their establishment
also marked the first general application of the word ,company' to a business). These date from at leait the fourteenth century, but did not become common until the expansion of overseas trade in ihe sixteenth

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century - the most famous example being the Fast India Company, formcd in 1600. At th_cir inception they werc not much like modern corporate busiluesses. In many important respccts they were more like merihant guilds. Likc thc guilds, their .incorporation was tied up with the granting of monopoly privileges - jlst as only guild memberi were allow"ed to c"arry on certain crafts, so only company members were allowed to trade witir certain overseas areas. More importantly, the companies were like the guilds in that they did not trade ai single unii. As with guild mcmbers., company members traded as individual businesses. The iompany, like the guild, was simply a organization to which, given its monopoly position, a merchant had to belong in order to carry out a particular kind of trading. c The transition to something like a mode.rn structure began rvith the introduction of what was called 'joint stock trading' inside iire merchant companies. This meant that instead of trading individually, some members would join together to purchase u .to.i of goods between them. The amount of money each member of the groi,p subscribed to the purchase of that stock could.vary, and any profit from trading in those gools- wolld be proportional to that amount. At first this arrangemenr would only hold for a singre voyage. Later, the practice became for it to continue for several years. Eventually, joint stbck trading became not only permanent but universal, with individual trading beilng prohibited and. the company operarlng as single unit which distrib"uted piont, on the basis of money invested. in-the company as a whore. et inis stage we have not only a fully fledged businesi coiporation, as opposed to a Ioose association,.but also rhe establiihment of shareholding as the ltlin, means by which such businesses are set up and owned. (The use of the

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things. This could only bc acquircd through thc granting of a royal chartcr or by act of parlianrcnt. E,ithcr rvay, it rvas a tintc consurning process requiring the winning of official approval - and still very much associated rvith the gnrating o[ nronopoly rights. All that changcd in 1844 rvith the passing of the {irst Joint Stocks Act. This crcatcd the modern situation in rvhich incorporation is rnade available by a simple process of registration. The passing of the act was probably more about regulation than anything else . An unincorporated br.rsiness rvith freely transferable shares was a difficult entity to define legally and conrrol. In the absence of incorporation it was assumed to be a partnership. As such it was identical with its presumed partners; in this case, its sharehoiders. These were though, not only potentially very numerous but could be constantly changing. It rvas therefore very difficult to know exactly to what or to rvhom legal rights and duties could be assigned. Even deciding the name or names under which actions could be brought presented something of a problem (Gower, p 32 ) By making the company something separate from the people associated with it, incorporation resolved this problem of legal identification. It established what larvyers call 'perpetual succession'. This means that in being a separate legal entity from the people associated with it, a corporation is not dependent on the participation of any particular people for its existence. They can change completely, be they employees, directors, shareholders, or whatever. As the identifiable possessor of legal rights and dutics, thc corporation carries on. Incorporation was not only about making regulation easier. It also provided advantages for the companies themselves. There were two principal benefits. The first was the very general one of continuity. The second was the very specific one of limited iiability. Continuity comes from perpetual succession. It means that one and the same company can legally carry on its activities regardless of changes in staffing, management, or evcn shareholding. The company persists through changes in the composition of these associated groupings. Moreover, because in a iegal sense their association is with this enduring

phrase 'joint stock company' for busincsses based on shareholding stems from this historical development). These fully fledged corporate businesses emerged in the seventeenth century. Their practice of sharcholding, along with their use of the title 'company', rvas rvidcly acloptcd by othcr busincsscs. What thcy could not casily adopt, though, was the corporate status which wcnt with these

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is in rhe comp"rition ;;;;;;;p;tJore conrinuc to have sharcs in rhe same .on.,puny ,.gardless the workforcc or managcment. Convcrsily,'U.Jrur. "?;d;g*; thcy are employcd by the cornr)any *trrcr than its sharcrrordlrs, changcs in,t,or"toiiin-g oo not, or themselves, affcct rhe regar positio;;i;-;r"y;;;, ;il;',liunug"., o, workers: rhcv conrinue io.bc ," o,, rmportant rcspcct, changcs in shareholding "rpb,.;'rt-i#]ril".'.lt,nolnr. do not cvcn affeci ownership. It is the company as_ a corporate entity which owns the assets of the business' what thc srrarchoide* o*n-i; a right ro u rr,u." of any distributabre financiar surprus.. rirey in eire.t o*n the company rather than irs assets' consequentiy, the tllrri acting through its emprovees, to utilize those as#ts is "i-it " _company, r"g"uy;il"irit,"i"ui ir,ung", in shareholding. Their utilization .on regardless. The benefit of limited.tiabitity o,"oniinue porriur. .;G;;;." of the general extension of corporate status to .on.,puni".-*"r-""", *'niri uppr".iur.o. It had long been recognized tf,ut i.,'U" peopre ar.i"ruteJ with lt, tr'. J"ii, not those people. They were not, trrerefo;;:idi;;iluj"rir"i, Jl; urr",, seized to pay for theii debts. rrrir rur uomittedry a concession rather than a necessary conscquence- of corporat" ,tutur,i'u;;ffi;;sry fitted in rather well with ,1"".]h-:" of the .9'.fo.ution as a separate entity. None the less, rimited liabirity was not at first given to companies incorporated by the new and simpiifiea pro""* oi?egistration.'rl *ur"onry rater, in 1856, that regisratircn was' po*.a rui.iig shareholderr-in1"gist"r"o companies liable for*company debts onry up-to the uutu" or ineir unpaid shares'. The argument was ihat becauJe this greatly reduced the risk from shareholding, it. woulf people to invest and so aicl t:qn.oqi.- development - stil the "n.ou*!" chief"reason offered. It was a reason which did not go unchalrenge d. rie rimes denounced the move as a 'rogues charter' because it irould people to evade their morar responsibiiities. As a. warning to creditors "nuli" ti,. isso uili,"["ir.o that the rvord 'limited' be added to thle titre of companie, ----'l - ,tiii ;;J;uiiJ,,,"nt ro, UK companies.

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What arc the social responsibilities o[ business corporations; that is to say, their morai responsibilities to the communities in which they operate and to society at large? One short, sharp. and endlcssly discusscd answer rvas provided by Nobel prize u,innirtg economist Milton Friedman, an uncompromising advocate of laissez-faire capitalism. In a famous article (see the first reading in this chapter) hc claims that business corPorations, along with businesses in gencral, havc only one social rcsponsibiiity ancl that is to increase their profits. In saying this he denies, in effect, that busincsses have social responsibilities. As the himself puts it, what is mcant by talk of social responsibilities is that 'business is not concerned "merely" with profit'. Accordingiy, and this will greatly sirnpiify thc discussion, we shall speak of Friedman as opposing thc rvholc idca of social rcsponsibiiity rather than proposing a particular conception of it when ltc says that businesses ought only to aim for profit maximization. In proposing that single goal, he is presumcd not to be arguing for a total disregard of morality. Though he does not say so directly (he couches it in terms of what shareholders want), Friedrnan does talk of the drive for profit being required to conform to law and 'cthical custom', and this is invariably interpretcd as rcquiring that normally accepted moral standards should apply. Exactly rvhat thosc standards demand of businesscs he does not say; but as hc combines acceptance of them rvith rejection of social responsibility, it follows that he has to be operating on the assumption that the moral demands of social responsibility are of a very much higher ordcr to those of 'cthical custotn'. In what way they are higher is also not made explicit; but he does speak of social responsibility as requiring businesscs to be concerned rvith 'promoting desirable "sociai" ends'. Goals such as 'providing ernployment, eliminating discrimination, avoiding pollution'. From this rve can infer that rvhat Friedman sees as additional to 'ethical custom' in social responsibility is an active commitment to improving social conditions: a positive rcsporrsibility for doing good. In contrast, conformity to'ethical custom'would have to be just a matter of busincsscs not doing things rvhich society rcgards as wrong - a passive ervoidance of

n'il. In rejecting a morally active rolc in favour of the

singie goal of profit that businesses must never seek to maximization, Frieclman is not saying do providcd they do it in order to serve the goal so do good. They may

of profit maximization. It is, fcr example, all right for a company to provide a local commrinity with amenides if this is done to encourage recruitment, or for tax reasons, or to generate useful goodwill, and tie like. when suborciinate to profit in thii way any such ictive do-gooding is, he supposes, 'hypocritical window-dresiing'. None the less, it is acceptable because it is in accordance with his profit maximizing criterion. with the doctrine of social responsibility, ihis condition is- rcversed. Good rnust not be done for reasons of profit, otherwise (he seems to assume) it will be just another tactical application of ihe profit maximizing principle. Thus, according to Friedman, the doctrine of social responsibility makes two distinguishing claims. They are that busines."r rnust actively seek to do good, and that this good must not be done for profit. Beforl turning to Friedman's reasons for rejecting the doctrine, ^** must first see if he has correctly described it. Broadly spcaking we think he has. Take away the two factors he picks out and we would be left with something like the profit maximizition within acceptable moral limits which he champions. where he almost certainly goes wrong, however, is in adopting too narrow an interpretation of what its two distinguishing features mean for business social responsibility. To that extent, he fails to correctly describe it. With regard to the first claim of actively doing good, he has assumed that this is readily distinguishable from a simple iu-oidun." of evil. But it is not. If we take Friedman's own examples of what social responsibility demands of business by way of 'promoting desirable social ends', *e r"b that they are as much about avoiding evil as doing good. To take action against unemployment, discrimination, and pollution is certainly to do good but is also, and very obviously, to get rid of social evils as well. what Friedman seems to be assuming is that social responsibility is confined to those optional acts of charitable benevolence which, as we saw in chapter 3, Kant labelled 'imperfect duties'. On his own examples, this is not the case. Those examples also illustrate the general point that very often the moral choice is between doing good or, by default, doing evil. In practicc, the two can very oftcn not be not separated. Conscquently, Friedman's assumption of a neat division between 'cthical custom' ancl busincss social responsibility takcs too narrow a view of both. Thc first cannot be confined to simply the passive avoidance of evil or the second to just the active pursuit of good because very often good and evil arc simply two sides of the same moral coin. Friedman is therefore wrong to assume that acceptance of 'ethical custom' has no implication for the

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narrow a vicrv of thc possible motives for social rcsponsibility as well as of its possible outcomes. Turning now from Friedman's analysis of social responsibility to his case against it, we find hc presents no less than five arguments.-Two o{ thcm arc ccntral and argued for in some detail. The other three are mentioned only in passing and also raise issues which will be, or have been, looked at. They will, therefore, be only touched on here. The first of these three subsidiary arguments is specific to the business corporation. It says that because a corporation is an 'artificial person', it cannot have mora.l responsibilities - at least not in the way that real qeople can. (This is a complex issue which we shall look at agiin late, in this chapter). Both the other two subsidiary arguments depend on appeals to the kind of laissez-faire economics discussed in chapters z and'i. one states that because accepting social responsibilities means not having profit as the only goal of business activity, this ,'involves accepting thi locialist view that political mechanisms, not market mechanisms, are the appropriate way to allocate scarce resources'. As social responsibility is only meant to supplcment profit as a goal and not totally replace it, this is clearly an exaggcration. Supply and demand will certainry not hold complete sway, but this is only a bad thing (whether it is called 'socialism' or not), givcn the controversial assumption that laissez-faire is a good
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adoption of socially responsible policies by busincss. Clcarly it has; if only becausc such is thc porvcr of busincss ovcr people's livcs that its failure to do good will very often result in ereat cvils being permitted to flourish. With regard to thc way that social rcsponsibility rcquiring is by that good should not bc done for profit, Fricdman is too rcstrictive here dcnying all possibility of profit. I{e excludes it by definition when he declares that:

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'to say a corporate executivc has "social responsibility" . . .must [our emphasis] mean that he is to act in some rvay which is not in the intercsts of his employer'.

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Acts of social responsibility, he goes on to make clear, can only involve the business in costs and never benefits. They are acts such as kecping sale prices dorvn 'though a price increase would be in the best interests of thc corporation', or an expenditure on pollution control which is 'beyond the amount that is in thc best intcrests of the corporation', or providing employmcnt 'at the expcnse of company profits'. 'i'his total exclusion of financial benefit simply does not follow. From thc fact that an activity has not bcen engagccl irt to servc the goal of profit, it docs not follorv that profit cannot result. It can happen as by-product. A company might, for examplc, dccide to kcep opcn an unprofitablc plant for longer than is economically necessary in order not to inf'lict mass uncmploymcnt on a comrnunity and find that the workforce rewards this loyalty with ploductivity gains which make the plant profitablc. What defines iocial responsibility is not the exclusion of profit as an outcomc, but its e:clusion as a motive: the fact that rvhen an act is done simply as a means to thc end of profit it is not then an act of busincss social responsibitity. Fricdman obviously fails to separate outcome and motivc. Moreover, it seems plausible to suppose that he thinks profit should bc totally cxcluded from the outcome bccausc. he starts from the assumption that it should bc totally cxcluded from the motivc. If so, he rvould be mistaken in his starting point as well as his reasoning frorn it. Social responsibility does not demand that all thought of profit should be absent. As we sarv in chapter 3, being moral does not, and cannot, totalli, exclude self-intercst. It is enough that it is ncither the sole nor predominant motive. The same then is true of acting from reasons of business social responsibility. Such actions cannot be done solely or predominantly for profit, but thoughts of financial gain need not be totally abscnt. So if Fricdman does suppose this then he takes too

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good, then the morally right thing for businesses to do is to confine thcmselves to pursuing prolit. Friedman could even say, as at times he docs, that profit maximization is the only 'socially responsible'course for business to follorv. But again this is true only if the controversial claims of laissez-faire are true. Friedman's two main arguments form the core of his case against business social responsibility. Both are specific to corporarions. one has been dubbed 'the agency argument'. It makes use of the legal concept oj an 'agent' as someone appointed by another person (the 'principal') to act on their behalf. what Friedman contends is ihat managers are agents of shareholders in the businesses they work for. As

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such, thcy must only do wliat is in thc intcrcsts of thcsc sltarcltolders, rviticlr, Frieclrnan szrys, nlcans making 'lts tlruch molley as possible' for thcn. So on his analysis, social rcsponslbility can only bc at the cxpcnsc of financial gain for the busincss, it tbllorvs that a rolc as agents ncccssariiy precludcs ltrarlagcls scttinc social rcsponsibility goals for thc businesscs thcy w'ork for. Thcy rvould not thcn bc acting in thc intcrcst of thcir princiPal. 'fhcrc are many countcr-arguntcnts to this. 'l'hcre is thc point alrcady nlade that Friedman is wrong to assume that social responsibility can only be at thc expcnse of prollt. FIc could also be said to be wrong about whit shareholders want and is in their interest. FIe assumes that what they want is to make as much money as possiblc from thcir shares' But is thii ahvays and totally true? (Even Friedman allows that it is only ,gcncrally'so). Might they not also want to balance profit against'desirible social cnds'? In any case, what thcy rvant and what is in their intercst might be two different things. Thcir intcrest could best bc served by living in a society in rvhich dcsirablc social cnds such as reductions in unempl6yment, ciiscrimination, and pollution are promoted - even if this means thcir diviclends arc somcwhat lorvcr as a conscqtlcnce. Thcsc arc all important points, but the rcally radical challcngc to Friedman's position is to question his initial premise about managers FIe plcscnts this as a statemcnt of simply bcing agcnts -lcgal of shareholcicrs. position of managers but it is also, as part of his facf about the attack on busincss sociai rcsponsibility, it situation he rvould want to obtain in any casc. As a statement of lcgal fact, thc agcncy argument is questionablc, but may well be esscntially corrcct - at lcast as a statcmcnt of American and (as it happcns) Britiih lau,.l Fricdman clocs .not cxprcss thc position correctly- Hc says that this agcncy status follorvs because 'a corporatc cxecutivc is an cmployee of thc orvners of the business'; but, as we saw in the previous section, this is not quite right. The shareholders are, in a roundabout rvay, the owners of the busincss; but neither the managers nor anyone else working in the busincss are cmployed by them. Their r
Scc D. llirsch,'Thc Failurc of Fricdnran's Agcncy Argunrcnt', in J. R. DcsJardins and J. J. McCall, Contentporery Issucs itt Businass Etlrics, Watlsworth, 1990, pp. 28-36, spccifically pp. 33-4. For rhc British-lcgal position, scc Corvcr, op cit, pp..554-5. Th-c 1980 Companics Act pcrmitrcd British contpeny dircctors to havc rcgard to thc intercst of cmployccs, but as an ipiioir rfr"y arc legally'frcc to cxerciso rathcr than a cluty rvhich has tobo fullilled. (Scc also G. Niorsc, C/iarlcsx'irth'& iglorse; Company Luw, Sivcct & iv{axwcll, 1991, pp. 398-9) For thc dilfercucc bct\\'ccn thc Anglo-AmcriCan ind contincntal Eur'opcan view of conrpanics sce R. I. 'frickcr, Corporate Got'cnnncc, Corvcr Publishing' 198'1, pp' 120-l'

en'lployer is the corporation. The corporation, however, is presumcd i:r Iarv to cxist for the bcnefit of its 'members' - that is, the shareholdcrs. lt

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is their interest which the directors, and through them the rnanagers, must ultimatcly serve. So though it does not happen in thc direct rvay he dcscribcs, but rather through the intermediary of the corporation, Friedman scems broadly correct in his contention that managers itre in fact agcnts of the sharcholders. With the deeper qucstion of whethcr this ought to be the case, the key issue is whether the interests of the corporation ought to be exclusivell' identifed with its shareholders. Why not all the groups associated rvitli it? Then managers would still be agents of the corporation but not just of the shareholders alone. Those who take this line reject what they cail lr 'stockholder model' of the corporation in favour of what, in contrast, is clcscribed as the 'stakeholder model'.3 This has affinities with codetermination but has wider scope. According to the stakeholder modei, the job of the manager is to strike an equitable balance betrveen ali the different groups of people who have a 'stake' in the company in the sense that their well-being is some way dependent on it. This will include sharcholders and ernployees, but also customers, suppliers, the local community, and even society at large. In seeking to satisfy those various interest groups a company run on stakeholder lines will clearly have many goals other than profits for shareholders. On the stakeholder model, the interest of shareholders in profit will be only one of many interests rvhich business executives must satisfy. It is therefore a model of how a corporation should be run which is compatible with the idea of business social responsibility, but clearly excludes Friedman's profit maximization criterion along with the agency argument which he uses to
support it. Friedman's second core argument is also based on the assumption that there can only be a financial loss in taking on social responsibilities. This means someone must pay: either shareholders in lower dividends, or alternatively customers in higher prices or workers in lower wages. Frorn this Friedman reasons that managers are effectively 'taxing' one or more of these groups. They are making them pay for promoting social goals that arc properly the preserve of government and would normally bc paid for out of taxes. On top of this, as business people they are not conpetent to decide on social needs and priorities. Worst of all, when

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decide they are imposing their political preferences on those thev are compelling to pay - and all this rvithout ever being elected. 'lhe above is usually called the'tax argument'; but this secms too limited a description. It might better be called the 'usurpation argument' in that the overall point being made is that business social responsibility cntails managers usurping the role of democratically elected politicians. It could be said to be the more effective of Friedman's two core arguments in that one does not need to bc in sympathy rvith his gencral political and economic position to find the thought of busincss cxccutives taking on a quasi-political rolc worrying. There is the gencral objcction that it is undemocratic. As Friedman points out, no one elected managers to the job. What right therefore have they to decide what is best for socicty? Even if the pragmatic line is taken that it does not matter rvho does these things as long as they get done, there is still the question of rvhcther managers erre thc right people for that job. This is not simply Friedman's doubts about their expertise ; there is thc decpcr issue tliat as a group they are unlikcly to be rcprcsentativc of society at largc in terms of their political ancl social valucs. By a proccss of sclf-selcction, employers' preference, peer pressure, family connections, and so on, managers rvould seem to almost inevitably end up as more conservative than society at large. This is markedly so in terms of their politicai preferences; particularly it seems at entrepreneurial and higher executive level.{ To have them decide on social priorities is to invite a markedly unrepresentative group to do so. Moreover, it can be argued, this is an unelected and unrepresentative group which already exercises too much influence over society. In the name of democracy, this argument goes on, qovernment should tightly control what businesses can do and confine them to a strictly economic role. This then, is radically differcnt political position from Friedman; one deeply opposed to laissez-faire. It has, in contra-distinction to his 'invisible hand' approach, been called the 'hand of government' argument. None the less, it ends up agreeing with Friedman that business should confine itself to making a profit and keep out of tackling social issues. Horv might these various worrics about the apparently undemocratic nature of business social responsibility be resolved? It could be argued that the fears are unfounded because social responsibility only involvcs funding politically innocuous projects which everyone supports. That

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may bc so in the majority of cases but it will clearly not be so in every one. An example is the setting up of city technology colleges by the UK government in a move designed to establish a school system outside local government control. By helping in their funding, an apparently charitable movc by businesses was also very much a poiitical gisture. These problems could perhaps be avoided by setring limits to what businesses could or could not do by way of social responsibility. only activities representative of a broad political and social consensus could be legally permitted. But evcn supposing such a consensus could be agreed on (a large supposition), it could have the result of severely limiting what business can do; perhaps at the expense of deserving causes. The consensus-might not, for example, run to a role for business in funding the arts because of the objection, frequently voiced, that business funding inevitably constrains artistic freedom. In any case there could still bc controversy in deciding priorities among the things that can be done. For instance are the arts to have priority over helping the inner
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Wc can pcrhaps cut throush all thcse difficulties by saying that if not being democratically accountable and representative is the problem, then we should add thcse features to business corporations. We can give teeth to the stakeholder model by giving stakeholders a say in the running of the corporation. That way corporations will have the democratic credentials to take on social responsibilities. (This option will be looked at in the section on corporate governance at the end of the
chapter).

IDENTITY AND ACCOUNTABILITY

The issue of the previous section was what moral responsibilities corporations should have. The issue of this one is whether they can have any at all. It was a question raised by Friedman when he said that as 'artificial persons', corporations could not have responsibilities, that they could be haci only by people. This repeats a familiar argument. What it entails is that talk of corporate responsibility is simply a shorthand way of talking about people within corporationi having responsibilities. Ii true, this would not of itself rule out corporations taking on social rcsponsibilitics. All it rvould mean is that in practice it would be those in charge of corporations who took on the responsibility - a point Friedman neecled to establish for his agcncy and usurpation arguments. None the

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less, as an issue in its own right, thc qucstion of whether corporations as such can have moral responsibilities has becomc a subject of debate in

Tlic basic premise of the case against is that wc cannot attributc responsibilitics to corporations bccause wt: cannot attribute intentions to them; at lcast not as anything separate from those of the people involved in them. Without that ability any attribution of moral rcsponsibility is nonsense. It makes no sense, for examplc, to talk about rnachines being morally responsible for anything. They do not act on the basis of intcntions. Pcoplc do. Thcy can dcciclc to clo somcthing, deliberate on how to do it, and have reasons for doing it. That is why we can speak of them doing things deliberately or accidentally, carefully or carelessly, selflessly or selfishly, malevolently or benevolently, and so on. In brief, it is why moral judgements about their actions arc possible and why, in particular, praisc and blamc arc possiblc. So unlcss it can bc shown that thcrc arc spccifically corporatc intcntions at rvork in thc activitics of business corporations, there is no question of the corporation itself having moral responsibilitics. The contrary vierv tries to show just this: that there is a specifically
corporate intention which is morc than mercly the sum of rvhat is intendcd by the individual people rvho work rvithin the corporation. The point is made that a business corporation, particularly a large one, is not a mere collection of individuals but a highly organized hierarchical structure. Use is made of organizational charts. These show how different parts of thc operation are divided betwcen differcnt sections and how an often complex chain of command co-ordinates all their different functions. What emerges from this hierarchical structure is the systematic dircction of individual activity towards a common end. 'fhis, it is claimed, cstablishcs thc existence of an ovcr-arching level of corporatc intentions which cannot be reduccd to those o1 the individuals involved. It will ernbody the complex intcr-relationships of a mass of individual intentions, giving them meaning and direction. It will have a life of its own, capable of continuing to direct individual intentions when thc individuals themsclves changc. So while corporate intentions are certainly forrnulated and effected by individuals, the rvhole can be said to bc grcater than the sum of its parts. This grcatcr part is held to constitute peculiarly corporate intentions to which attach peculiarly corporate moral rcsponsibilitics. -ihe reply to this counter-argument contends thet the fact of indivduals rvorking to a contmon end does not of itsclf dcmonstratc the existence of

harm. Their dividends will be reduced, their employment prospects damaged, their prices incrcased. There is then simply'no way of punishing corporations; or at least no way of punishing them which is nbt in reality the punishment of pcople. This impossl6itity means that the primary point of assigning moral responsibilities has no application to
corporations.

specifically corporate intentions. All it need show is that only particular individuals provide corporations with their intentions; namely those who dictate corporate policy. Their decisions set the common end to which those within the corporation work. The possibility that what results from all these interactions might indeed be greater than the sum of its parts docs not make the directing policies any less individual in origin. Al the the day, thc unarguable fact that a corporation has to ict through 9n!1 9f individuals means that only intentions formed by individuals can lie behind corporate activity. There is, in the last analysis, nothing else to account for what is done and therefore nothing eise to which moral responsibility can be attached. what this reply challenges is a rather sophisticated attempt to create a moral identity for corporation. An altogether simpler but perhaps more conclusive objection is to ask why the attempt is being made. wtr,at is thc point of deterrnining a peculiarly corporate level of morql responsibility? Moral responsibility is mostly about accountability: it is abbut holding someone.responsible for something. The purpose of this is partly t5 reward virtue but more particlarly (probably because protection is our first concern) to punish vice. How, it can be asked, is this primary purpose of punishment served by giving moral responsibilities to corporations? corporations are simply not capable of being punished. To be punished is to suffer harm and, as entities distinct from the people -harm. associated rvith them, corporations are incapable of suffering They certainly cannot suffer physical harm: they cannot be flogged, imprisoned, executed, or whatever. It might slem they can Juffer financial harm on the grounds that they can be fined, expropiated, boycotted, and so on. But it is obviously people in the shape of shareholders, employces, customers, and the like who wilr suffer any resulting

Not only is this so, critics go on to argue, but attempts at assigning ' moral responsibilities to corporations can even result in the innoceni
financial punishments aimed at the corporation, they have, for the most

suffering_ and the guilty evading punishment. The first can happen because although shareholders, employees, and customers can suifer from

part, little or no responsibility for what the corporation does. They

trql reet: rations and responsibility

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Corporate governance

simply have no control of it. Porver, as the next section will detail, lies- mostly in the hands of senior executives. For the most part, the responsibiiity for what the corporation does belongs to them. If, however, there is an area of overall moral responsibility which belongs to corporations as such, then it is not an arca rvhich belongs to executives' Deipite their control of the corporation, executives are being excused any overall moral responsibility for what it does. Thus, critics conclude, the iclea of a specifically corporate moral responsibility is not only pointless but pernicious; and doubly pernicious at that: it exposes the innocent to harm and offers a rvay for thc guilty to evade punishment. These are not merely theoretical problems. They become of great practical significance in larv. The law perhaps copes well enough with ihem in the civil area where only the payment of demages is at stake. There is no real difficulty in suing a corporate entity, albeit that in holding the company responsiblc for damages the larv is ignoring the fact that some partiiulai individuals wcre responsible. Thc conpany simply pays up and inclividual accountability is lcft as an interrtal corporate
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Whcrc, horvcvcr, thc larv docs rttn into grcat clifficultics with corporatc entities is in the area of criminal law. l-lerc the point is not mere compensation for damage suffered but the infliction of punishment for rvrongdoing. For this the law rvill usually require proof of some kind of inteniion Uefrina the act; it needs to have been done deliberately, or at least carelessly or recklessly. Thc larv calls this intentional element mens rea (Latin foi,guilty mind'). It is required because, as we have seen, without it there can be no responsibility. It is waived only for rvhat are usually not very serious offences where a necd to detcr is thought to be *or" irnportani than a need for rigorous proof of guilt. 'I'hese arc crimes of 'strici liability'. For busincsses these are offences such as selling adulterated food or giving short measure, and can be dealt with by fining the company and so exposing it to harmful publicity. The sticking poini comes with the more serious crimes whcre proof of mens reu is rcquired. the problem then, as we have secn, that it is very difficult_to ascribe intentions to corporations. In any case, the punishment for these more serious crimes is often imprisonment; something which clearly cannot be done to corporations. The law can keep up the pretence of punishing corporatc entities when it comes to strictly financial punishments, but the pr.i.n." breaks clown rihen thc prescribed punishment_ is .a physical bne such as imprisonment. Then the law has to get to the individuals

But here the very complex hierarchical structures which give corporations at least the appearance of intention become a formidable barrier. Take, for example, a case where someone is killed through company negligence - a case of what has become known as 'corporate manslaughter'. For examplc, an inexperienced construction worker is killed when an inadequately supported trench collapses. Was it the fault of the supcrvisor rvho knowingly permitted such a trench to be dug, or of the site manager who failed to insist on safe working practices, or of the chief executive who was pressing for the project to be finished on time regardless of safety considerations, or of the board of directors who appointed that chief executive precisely because of his capacity to exert that kind of ruthless pressure? To deal with these sorts of questions the law has had recoursc to an 'organic' theory of the company, whereby its directors and senior exccutives are identified as the source of the intcntions which give mcaning and direction to a corporation. They are considercd to bc the 'brains' of the corporate organism, controlling its bodily movemcnts and thercfore ultimately responsible for its activities. Paradoxically then, the law makes use of the same idea of central control that is used to argue for a specifically corporate responsibility in order to establish a level of individual responsibility. Even so, as our case study will illustrate, in practice the complexity of corporate command structures will often defeat any attempt to fix blame on particular people; though, as the next section will suggest, reform of the way corporations are controlled could perhaps be of some help here.
CORPORATE GOVERNANCE
The issue of corporatc governance, as the title suggests, is that of how companies should be govcrned. It is about mechanisms for allocating powers and responsibilities within companies. As with political government, the central question is how those who exercise power are to be accountable to those for whose benefit they exercise that power. It is a question of particular concern to public companies - that is, companies whose shares are on sale to thc public, usually through a stock exchange listing. This is because with them a separation between ownership and control is particularly markcd. There is a distinction between small group of senior managers excrcising controlling power. from what can be

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a vast numbcr of shareholdcr owncrs for whose bcnefit those managers are lcgally supposcd to exercisc that powcr. In private companies, this division betu,cen ownership and control will cithcr not exist or, if it does, be very much less marked. Private companies are those whose shares hrc not on sale to the public and so do not have a stock exchangc listing. Thcy form thc overrvhelming majority of registered companies but arc, with a few notablc exceptions, almost always vcry small in comparison to public companies. With them, owners are usually also controllers; at icast as directors and usually as executivcs also. Evcn when they arc not, the fact of just a singie or relativeiy fcw shareholders will greatly facilitate managcn-lent accountability. This docs not mean that cluestions of corporatc govcrnancc arc cottfincd to ptrblic contpanics. (It dcpcnds, as rvc shall sce, olt what vicw is takcn of the natut'e of compauies). But it does mean that those questions arc sectt as n-lore irnmcdiate and acutc thcrc. Accordingly, we initially focus on public companics in what follows. As far as the law is conccrned a UK public company should work

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rathcr like a parliamentary clemocracy. The clcctors (the shareholders) vote in a government (the directors) who use a staff of senior civil servants (senior exccutives) to rurt thc country (thc company). Thc reality, as everyone knorvs, is somewhat differcnt. In practice, sharcholders do not exercise much of a controlling function over directors, nor directors over executives. Thc only opportunity shareholders have of exercising control over directors is by voting on proposals at company meetings; usually a strictly annual event..A.nv voting has to be by attendance; postal ballots are only permitted if allowed for in company articles, and this is very unusual (Gorvcr, pp 52a-5). In vcry large companies only a tiny fraction of shareholdcrs ever attend meetings. They c-an nominate a proxy to vote for them but only a smaii rninority do so.-' In any case, the proccss of proxy voting is organizcd by the directors of the company and they will usually'not only make a strong recomnicndation on how a vote should go but will also offer themselves to shareholders as proxy voters. On any issue to put before shareholders the dircctors are therefore very much in charge of events. The initiativc beiongs to them and they can utilize all the resources of the company to promote their views. Shareholders opposing those views are not only forced to be mercly rcactive, but havc to organizc indcpendently of
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only around 1.5o/o are nominees of the supposed owners of the company. This leaves the other 85% to be nominateo uy an executive-dominated body; mostly by way of personal recommendations. on top of all this,

or another board member before appointment. of the rest, half are recruited independently of such contacts, while half are there on the recommendation of shareholders and other investors.T In other words,

company resources and at their own expense. Thus, through a combinaiion of shareholder apathy and the taitical advantages wliich accruc to directors, company meetings are almost always a rubber stamp for directoral decisions. As a general rule, the only ihareholder oppoiition rvhich directors of large public companies need to take seriously is that which might be provided by institutional investors; notably pension funds and. insurance companies. They do have the voting strengih and organizational rcsources to cliallenge executives effectively. The single most significant reason why directors, in their turn, do not cxcrcise much control over senior executives is that they are usually one and the.same people. Most directors in the majority of large uK fublic companies arc also executives in those companies.-The cliief executive not only sits on the board of directors but is rlery often also its chairman. on. average, 'executive directors' have something near a three to two majority over 'non-executive directors' on'the boards of these companics.6 The fact of this preponderance would alone mean that executives effectively control these companies. They can outvote the non-executives on any issue and given they are in a majority it would be difficult for any non-executive to stay in office without their support. If that were not enough, the apparently rather infornial way in which gritish company directors are recruited also seems to give the executive majority a pred.ominant say in the appointment of the non-executive minority. tt has been estimated that no less that 7a% of non-executive directois in the l00largest British companies were personally known to the chairman

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very independently minded but also very well informed in ordei to challenge an executive line. The.reality then is that public companies are controlled by their senior cxecutives rather than their supposed owners or even, as something
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the fact that executive directors also have full-time jobi within the company means that they will nearly always know more about its affairs than non-executives. A non-executive director would need to be not just

A survcy of UK companics by K. Midglcv givcs figurcs of lcss than l6'h for sharcholdcr participation irr proxy voring and A.25'/' tor sharcholdcr attcndancc at annual gcncral mccting. (Sce K. lv{idglcy, ctl., lllanagcntent Accountabilitl' wttl Corporate Governancc, Macrnillirn,
1982, p. 6a.)

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Corporations and rcsponsibility

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distinct from execuYivcs, their dircctors. This itsclf is not a problem if all it means is that strategic and administrative control of thosc companies is in the hands of their senior management. WIto, after all, shoulcl exercise such csscntially ntanagerial power exccpt managcrs? Thc worry is not so mr.rch that exccutives control contpanios as that no onc sccms to bc

controlling them. Here the curiously hybrid nature of the executive director is a factor. As executives they are employecs of the compar.ly, as directors they are not. In larv, a dircctor is a kind of reprcsentativc who acts on bchalf of shareholders in the pcriods between company meetings. This requires that they be distinguished from mere cmployees of the company and so any payment has to be by way of fees and expenses rather than a salary.s Whcn, as it is in large public companies, responsibility for the strategic and day to day operations belongs to a scparate executive branch of the company, then the primary and perhaps even sole task of the director as a representativc of shareholders will be supervision of that executive branch. This rvould be a tricky enough job at any time. It requires the confidence to challenge full-time professionals over things about which they have dctailcd knorvledge. When thc people supposcdly doing the supervising are thosc same full-timc profcssionals, then it cannot be done at all. For some this loss of a supervisory role is not a problcm. Everything comes down, they say, to personal integrity. Providcd exccutive directors do not exploit their position nothing zrmiss will occur. There is no need to alter the structure of corporate governance . No zrmount of tinkering with mechanisms will prevent the pcrson that lacks personal integrity from abusing powcr. They might add that to make a problem of executive accountability is to introduce an unnccessarily confrontational clement into corpor:rtc affairs, rvith non-cxccutivcs cast in the rolc of corporate policemen. They might even take the line that questions of corporate governance are strictly a matter for board room decisions and not shareholders - a position interestingly parallel to the political doctrine rvhich says that those elected to govern must vote as their conscience decides and not as thcir electors instruct them.e Othcrs are both less sanguine iind lcss trusting. Thcy point to a trend to greatly increased executive earnings which, they rvould say, are not
8 Morsc, op. cit., p.381. e This is thc line takcn by thc Institutc of Dirccrors (Guurdian,30 July 1992) in rcsponsc to the Cadburv proposals. Thc political position it cnrulatcs is that of thc conscrvativc thinker, Edmunrj Burke (1729-97).

other's rcmunerarion commirtees to deciJ. ;;' ;;"; ;; dramatically, they point.to.corporate scandals such as the Maxwell affair as demonstrating the lack of effective procedures for executive accountability. To leave it to directors themselves to introduce the necessary changes is, they w9-ul_d say, to expect an unrealistic degree of self-assessmenr. and even self-deniurj fartii,uh.t-il'Iil"y"irigrr, oOo, when it is required of peopre who have grown accustomed to virtuaty untrammelled power. These critics can take a broadly reformist view which simply adjustments in the mech.anisms of_corporate governanc",'oi proposes ' th.y ,r"n ' take a radicar rine which argues tor a uasic "re;;;;;;;;;g: They can also argue their: case oiii"rent uur", o"p.nJ*;;" whether t9. u&y they approach the probrem from a stockholder or stakehorder view of companies.
Reformists will probably concentrate on strengthening the position of Th:{ might want them io .;;;?i;;;uneration committees and the financiir uuiiting of compani"; Tht';ight arso want the roles of board chair-on uni ;;;;;;;" o;; r"purot*.tt Reform could even go as.far as requiring "hi"f a majority or no*'""*utives on boards of directors."Radicar rer;r-ir;;;;g wourcr be rhe totar excrusion of executives from boards.'This might go as far as adoption of a German two tier system, with a n6n-executi"v" "u.n rup.*irory-boaro ap.i, pointing and controting a separate executiv" uourJ. ;"ri'; arguabry increasing executive accountibility for their stewardship ot1t J".o*pony, this scparation hopcfuily wourd crarify rines of ,"rpooriuiri-tyiwithin rhe torpony: The supervisory board wourd only be u."ountibr. for the quality o.f its appointment of executives and the d"g.";1;;h;di h^ exercised contror over them, while the executive board could bear a responsi bi li ty for whai ;h; ;;;;"y does. f.11": ::._gcnerally.coltective yvnen sometnlng rrke corporate mansraughter occurs there wouid then be a lcgally distinct body of fuil-time prJfessionars to which immecriatc rcsponsibility courd be attached. Any specifi.urry
non-execurive direcrors.

only exccssive but rargcly unrelated to company performance.r0 They point to the interrocking nature of directoiships'in trre very rargest corporations with senior executives in one company very often being non-executive directors in another and, in particurar, -;;;;ri".'ii, ,iiti"g on each

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r.loulcl bclong to thcm as people rathcr than somc mcrcly abstract and conscquently unpunishable legal cntity. Thcy would have to provc thcy had donc cvcrything they rcasonably should have. Only then rvould questions of individual biame arise. That way the 'corporate veil' rvould ' perhaps not be quite so obscuring. In tcrms of thc stockholder model the problem is exclusively onc of making cxccutivcs accountablc to sharcholdcrs. At its root is thc scparation of owncrship and control. Tl-rc gcncral objcctivc is to achievc . tbr public conrpanics thc kincl of idcntity ol'orvncrship ancl control which is broadly truc of private courpanics. This can bc clone dircctly by incrcasing thc power of sharcholdcrs, or morc circuitously by converting cxecutivcs into orvncrs. Pcrhaps unsurprisingly" thc latter is the route preferred by executives. Short of a management buy out, it usually involves issuing them with shares on favourable terms. That way, it is argued, executives rvill not sec thcir intercsts as essentially different from that of sharehoiders. With the more direct route of incrcasing shareholder power, measures could range from providing more and better information for shareholders, to insisting that only shareholders could nominate and stand for elcction to boards of dircctors. In betrveen, there could be encouragement of a more activc rolc for institutional investors and perhaps the use of postal ballots to supplement attendance
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From the stakeholder perspectivc the separation of ownership and control is at best only part of the problem. In fact, were the only alternative a switch to a strictly sharcholder control, then proponents of this view rvould probably prefcr to stay rvith thc scparation. In that way .managcrs rvould at icast havc a chance of considcring thc interests of igroups other than shareholders. Sticking with executive control is not the _ only option though. Thcre is the altcrnativc of clccting stakeholder ';rcpresentatives to company boards. Exactly lvhic{r ones, and how rnany of each there rvould be, is subject to debate. Obviously shareholders and
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How far any changes go will depend on how radical or refornrist a line is taken. Most basically, should the barancing of stakeholder interests be lcft to executives or must there be stakeholder representation on con-lpany boards? If the latter, is it to be by expending existing boards or through a German-style supervisory boardi Similar choiies face advocates of the stockholder approach. Is there simply to be increased shareholdcr participation at company mceting or also *ore non-"*ecutivc dircctors? More sharcholder nominccs ori the board or only sharcholdcr nominees on thc board? A single or two-tier board? From either stakeholder or stockholder perspectives there are very similar decisions to be made about how far to go. The difference is that with the latrer executives will-^be ceding power only to shareholders, whereas with the latter it wjll b-e_ to _othergroups at well. whether constituted by a supervisory board or not, a by-product of the wider board membership envisioned by the stakeholdei approach is that. it. could perhaps deal with 'th'er criticism (raised in the previous scction) that for companies to takb on social responsibilities is a usurpation of-dcmocratic procedures. Given that whai executives do by wiy of social responsibility would be sanctioned by a board of directors representing a wide range of social groups, then executives, arguably, rvould have the dcmocratic mandate they need to justify such actioni. They would no longer also be open to the charge that tirey were using corporate resources to promote a narrow sectional viewpoint.

employees rvould be represented, probably also consumers in the case of utility compilnies, and perhaps a public intcrest director to iook after thc intercsts of society at large in the case of the verl' largest companies.

Accordingly, from this perspectivc a difference between public and private companies is not of prime importancc. It is important only in so far as it takes care of thc question of executivc accountability to sharcholdcrs. This still docs not cater for accountability to other stakcholder groups. To do so chiingcs in corporate govcrnancc are rcquired for private as well as public companics.

kd I Crtp"r"i"" ,r"a ".rp,ririiriiiy

INTRODUCING THE READINGS
The first reading is Friedman's classic account of business social responsibiiity. The second is an outline of the radically different stakeholder model by Evan and Freeman. In it they offer a Kantian defence of the moclel, arguing that the right not to be treated mcrely as a means to some end entails consideration be given to groups other than shareholders in determining corporate policy - even to the extent of having thosc othcr groups participate in determining company policy. The third reading by Goodpaster and Matthews tackles the difficult conceptual question of whether a corporation is the kind of entity to rvhich moral responsibility can be attributed. They argue that it can. They reject the 'invisible hand' argument thzrt market forces will ensure a concentration on profit maximizing will serve the common good as well as the opposing, vicw that only a strong 'hand of government' regulation will e nsure -that outcome. They do this because both would, for vcry diffcrent rcastins, confine busincsses to a purely cconomic function ancl dcny thcm any rnoral purpose. 'fhis idca that corporations as such can bc assigncd nroral rcsponsibility is firmly denied by John R. Danley. He argues that atternpts to assign specificaliy corporate intentions over and above those of people within the corporation, have failed. To this he adds the contention (outlined in this chapter) that it is pointless to attribute responsibility to corporations because they are not the kind of thing which can suffer punishment.

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The social responsibility of business ls to lncrease its profits

MILTON FRIEDMAN

is to conduct the business in accordance with their desiies, which generally will be to make,as.much money as possible *hil. tt" Urri. rules of the society, both those.rro,rLJ-ii-iu* ";;;;;irrJto ono those embodied in ethical custom' of course, in some.cases his cmployers may have o oirie."nt oijective. A group of persons might establish .orporottn-for an ereemosynary purpose _ for example, a hospital or a schoor. The " manager of such a corporation wiil not have money'profitashisobjectivesbuttherendeiingofcertain,.*i..,.
In either case, the kcy point is that, in his ipacity
as a corporate executive, thc Re:iding takcn from Thc Ncw ynrk'rinrcs Magazina,septcmbcr 13, 1970. C.pyright @ by thc Ncw York Timcs Company.

responsibility

Thc discussions of the 'social responsibilities of business, are notable for their analytical looseness and rack of rigor. wrrui Jo"r ir mean to say that .business, has responsibilities? only people can liave-responsiuitiri.r. n .o.pofuiion iJln artificiat person and in this sense.moy h.:y,: artificiai responsibirities, but 'business, as a whore cannot be said to have responsibirities, even in ihis uague sense. The n^, r*pi"*.'rJ clarity in'examining the doctrine or ir,. ro.iui responsibirity of business is to ask precisely what it implies for whom. Presumably, the individuars wrro are to be responsibre are businessmen, which means individual proprietors or corporate executives. Most of the discussion of sociar responsibility is directed ot corpo.oiions, so in what follows I shail mostry negrect the individual proprietors and speak of corporate executives. In a free-enterprise, private-property syst.r, u .orpo.ute executive is an emproyee of the owners of the businerr. n" no, oi*.|'r.rp"iri;ii;;;;';ffiers.
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of the contemporary crop of reformers' In fact they are or would be if they o. anyone else took them seriously _ prcaching purc nnd unndurterirtcd sociarism-'Businessmen *ho trir.-ir,i. way arc unwitting puppcts of thc intelre ctual forces ttrot r,ou. been undermining the basis of a frce society these past clccadcs.

its responsibilities for providing emptoyment,-eliminating ""0 air.rin'inuilo-n, avoiding pollution and wrratever erse miy u. t(..ot.t*ords

responsibirities o' busincss in a free-enterprise system,' r or r.ilinoed of the wonderfui rine about the Frenchman who disc<ivereo ai ttre og" or zo it ot he rrad been speaking prose a, his life' The businessmen berieve that"they oir'J.r"noing rr." .li".frii."when they declaim that business i.s not concerned ,merely, with pr-ofit uut urro'*ittr promoting -.Jociat desirable 'social' ends; that business tras a conscience, ,"il.. seriousry

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managcr is thc agcnt of thc individuals rvho ou'u thc corporation or establish thc eleemosynaly institution, and his priurary responsibility is to thcm. Ncccllcss to slv, this does not nlctlt that it is casy to judge horv well hc is pctfornting his tusk. But lt le:irst thc t:ritcrion of pcrformancc is straightforrvard, and thc pcrsons amonq u,hont a volLrntury contntctull arrangcnlcrlt cxists arc clcarly dcfincrl. Ol'coursc, the corporate cxccutivc is also a pcrson in his owtr right. As a pcrsoll, hc may havo many othcr rcspousibilitics thlt hc rccognizcs or assumcs voluntarily to his family, his consciencc, his fcelings of charity, his church, his clubs, his city, his country. I{c may fccl inrpcllcd by thcsc lcsponsibilitics to devotc part of his inconc to causcs lrc regarcls as rvorthy, to rcfusc to rvork for particular corporatiotls, even to lcavc his job, for cxanrplc, to join ltis country's armcd forccs. If we wish, wc may rcfcr to sonre of thcsc rcsponsibilities as'social responsibilitios.'But in thcsc rcspects hc is acting as a principal, Ilot iln agentl hc is spcnding his own moncy or timc or cnergy, not thc moncy oi his cnrploycrs or thc tinlc or encrgy he has contracted to dcvotc to thcir purposes. If thcsc arc 'socill rcsponsibilitics,' they are thc social rcsponsibilitics of individuals, not of business. What docs it mean to say that the corporate cxecutivc has a 'social rcsponsibility' in his capacity as businessnran? If this statcnlcnt is not purc rhetoric, it must mcan that hc is to act in sontc way th:rt is not in thc intcrcst ol his cmploycrs. For cxatnplc, that hc is to rcfrain from incrcasing thc pricc of thc product in order to contribute to the social objectivc of prcventing inllation, even though a price increase would bc in the best intcrests of the corporation. Or that hc is to nrake expcnditures on reducing pollution bcl,oncl the amount that is in thc bcst intcrests of the corporation or that is

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iiro inrposed so far as possible in accordance with the prefcrcnces and dcsires of the public - after all, 'taxation without representation' was one of the battle cries of
thc Amcrican Rcvolution. we have a system of checks and balances to separate the Icgislative function of imposing taxcs and cnacting expcnditurcs from thc executive function of collccting taxcs and adrninistering expenditure programs and from thc judicial function of mediating disputes and intcrpreting the law. llcre the businessman - sclf-selected or appointed directly or indirectly by stockholdcrs * is to bc simultaneously lcgislator, cxecutive and jurist. He is to decide whom to tax by how much and for what purpose, and hc is to spend the proceeds -

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all this guided only by gcneral exhortations frorn on high to rcstrain inflation,

requircd by law in ordcr to contributc to the social objcctive of improving the cnvironment. Or that, at the expensc of corporatc profits, hc is to hire 'hardcore'

improve thc environment, fight poverty and so on and on. Ttre wholc justification for permitting the corporate executive to be selected by thc stockholders is that thc cxccutive is an agent serving the intercsts of his principal. This justification disappears when the corporate executivc imposes taxes and spencls the procccds for 'social' purposes. FIe bccomes in effect a public employee, a civil scrvant, even though he rcmains in name an employee of a private enterprise. On grounds of political principlc, it is intolerable that such civil servants - insofar as their actions in the name of social responsibility are real and not just windowdrcssing - should bc sclectcd as thcy arc now. If thcy arc to bc civil scrvants, thcn thcy must bc elcctcd through a political process. If they are to imposc taxes and make expenditures to foster 'social' objectives, then political machinery must be set up to make thc assessment of taxes and to determine through a political process the objcctivcs to be scrvcd. This is the basic reason why the doctrine of'social responsibility' involves thc acceptance of the socialist vicw that political mechanisms, not market mechanisms, arc thc appropriate way to determine thc allocation of scarce resources to alternative
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unemployed instcad ol bcttcr cluali{icd availlblc rvorktnen to contribute to the social objcctivc of rcducing povert)'. In each of thcsc cases, the corporatc cxccutive would be spcnding someone clsc's money for a general social intercst. Insofar as his aclions in accord with his 'social responsibility' reduce returns to stockholdcrs. he is spcnding thcir money. insofar as his actions raise the pricc to customcrs, hc is spending the customers'money. Insofar as his actions lowcr the wagcs of some employ'ees, he is spending their money. Thc stocklroldcrs or the customcrs or thc cmPloyccs could scparately spend their

On thc grounds of consequences, can the corporate executive in fact discharge his allegcd 'social responsibilities'? On the other hand, suppose he could get away with spcnding the stockholders' or customers' or employces' money. How is he to know horv to spcnd it? I{e is told that he must contribute to fighting inflation. How is he to knorv what action of his will contribute to that end? He is presumably an expcrr in

own moncv on thc particular action

if thcy wishcd to do so' The cxecutive is c\crcising a distinct 'social rcsponsibility,' rather than scrving as an agcnt of thc stockhtrldcrs or lhc custontcrs or thc cmployccs, only if hc spcnds thc money iti lt diffcrcnt \\'ay than thcy s'ould lravc spcnt it. Ilut if hc docs this, he is in effect imposing taxcs, on th() onc hand, and deciding how thc tax procecds shall bc sPcnt, on the other. This proccss raiscs political qucstions on two lcvcls: principlc and conscquenccs. On thc lcvcl of political principlc, thc inrposition of taxcs and thc cxpcnditurc of tax proccccls arc govcrnntcntal functions. Wc havc cstablished elaboratc constitutionitl, parlianrcntalv and judicial provisions to control thcsc functions, to assurc that tilxcs

- in producing a product or selling it or financing it. But nothing about his selcction makes him an expert on inflation. will his holding down thc price of his product rcducc inflationary pressure? Or, by leaving morc spending power in the hands of his customers, simply divcrt it elsewhere? Or, by forcing him to producc less because of thc lorvcr price, will it simply contribute to shortages? Evcn if he could answcr these qucstions, how much cost is he justified in inrposing on his stockholders, customers and employees for this social purposc? What is his appropriate share and what is the appropriate sharc of others? And, whethcr he wants to or not, can he gct away with spending his stockholders', customcrs' or ernployccs' nroney? Will not the stockholders firc him? (Either the prcsent oncs or thosc who take over when his actions in the name of social responsibility havc rcduccd thc corporation's profits and the price of its stock.) His customers
running his company

Corporations and responsibility

and his employees can desert him for other proclucers and cmployers less scrupulous in cxercising their social responsibilities.

The social responsibility of business

Eal

This facet of 'social responsibility' doctrine is brought into sharp relief when the doctrine is used to justify wage restraint by trade unions. The conflict of interest is nakcd and clear when union officials arc asked to subordinate the interest of their mcmbers to some more general purposc. If thc union officials try to cnforce wage restraint, thc conscquence is likely to be rvildcat strikcs, rank-ancl-file revolts and the emergence of strong competitors for their jobs. We thus have the ironic phenonrenon that union leaders - at lcast in the U.S. - have objcctcd to Government interference with the market far more consistently and courageously than have business leaders. The difficulty of exercising 'social responsibility' illustrates, of course, the great virtue of private competitive enterprise - it forces people to be responsible for their oln actions ancl makes it clifficult for them to 'exploit' other people for eithcr selfish or unselfish purposes. They can clo good - but only at their own expense. N{any a reader rvho has followed the argument this far may be tempted to renlonstrate that it is all rvell and good to spcak of Covernrncnt's having the
responsibility to impose taxcs and determine expcnditures for such 'social' purposes as controlling pollution or training thc hard-corc uncmployed, but that the problems are too urgent to wait on the slolv course of political processes, that the exercise of social responsibility by businessmen is a quicker and surer way to solve pressing currcnt problcnrs. Aside from the question of fact - I share Adam Smith's skepticism about the benefits that can be expected from 'those who affected to trade for the public good'this argument must be rejected on grounds of principle. What it amounts to is an assertion that those who favor the taxes and expenditures in question have failed to pcrsuade a majority of their fellow citizens to be of like mind and that they are , seeking to attain by undemocriitic procedures what they cannot attain by democratic ('-procedures. In a free society, it is harcl for'evil'people to do'cvil,'especially since I one men's .qool is another's evil. * I hou", for simpticity, concentratecl on the spccial case of the corporate executive, except only for the brief digression on trade unions. But precisely the same argumcnt applies to the nerver pltenomenon of calling upon stockholders to rcquire corporations to exercise social responsibility (the reccnt G.M. crusade for example). In most of these cases, what is in effect involved is somc stockholders trying to get other stockholders (or customefs or employees) to contribute against their rvill to 'social' causes favored bv the activists. Insofar as they succeed, they arc again imposing taxcs and spending the procccds. The situation of the individual proprietor is somcrvhat different. If he acts to reduce the rcturns of his enterprise in order to exercisc his'social responsibility,' he is spending his orvn money, not someone else's. If he wishes to spend his money on such purposes, tbat is his right, and i cannot see that there is any objection to his doing so. In the process, he, too, nray impose costs olt ernployees and customers, Flowever, because he is far less likely than a large corporation or union to have monopolistic power, anv such side effects rvill tend to be minor.

appronching fraud. whether brameworthy or not, the use of the croak of sociar responsibirity, and the nonsensespoken in its name by influentiar and prestigiou, uurin"lrrn"n, ooes ctearty harnr the foundations of a_ free society. I have blln impressed time and again by the schizoplrrenic character of many businessmen. ih"y o." capable of being extremery far-sighted and crear-headed in matte^ tt,ut lr" int"rnot -matters to t-heir businessJs. They are incredibly short-sighted and muddle-heaoeo in that are outside their busi_ nesses but affect the possible survivar of business in general. This short-sightedness is strikingly cxernplified lr"l,n* businessmen for wage and price lT .",t guidelines or controls or I income policies. There is nothing that courd do more in a brief period to desrroy a markei system and replace i, iy o ;;;;;ily controred system than effectivc governmental control of prices and wages. The short-sightedness is. arso exemprified in speeches by businessmen on social respo.nsibility. This may gain them kudos in the sirort run. But it helps to strengthen the already too prevalent view that the pursuit of profits is wicked and immoral and must be curbcd and controlled by exteinar forcei. once this view is adopted, the externar forces that curb the market wilr not be the social .o"r.i."*r, however highly developed, of the pontificating executives; it wiil be the iron first of Govern_ mentbureaucrats' Here, as with price and wage controls, businessmen seem to me to reveal a suicidal impulse. The political principle that underlies the market mechanism is unanimity.

to that community or to improving its governmcnt. That may make it easier to attract dcsir.ble cmproyees, it may-rccruc-c the wagc biil or lessen r"*.r'ir#pirferage and sabotage or have other worthwhire effcctsior-,rn'oy be that, given the laws about the deductibirity of corporate charitabre contributions, the stockhorders can contribute more to charities they favor uy ttaurnf irre corporation make rhe gift than by doing it themserves, since tirey.^n in ttut"ruuy contribute an amount that wourd otherwise have been paid as corporate taxes. In each of these - and many similar cases, there is a strong temptation to rationalize these actions as an exercise - ,sociar of responsibirity., In the present. climatc of opinion, with its widespread uu..rion to.capitalism,, .profits,, the.soulless corporation' and so on, this is one way for a corporation to generate goodwilr as a byproduct of expenditures that are entireryJurtin"o in its own self-interest. It wourd be inconsistdnt of.me to cail on.o.po.ur" executives to refrain from this hypocritical window-dressing bccause i, rroi*, ,i" foundations of a rre" society. That wourd be to cail on them to exercise a 'sociar responsibility,! If our institutions, and the attitudes of the pubric make it in their ,"ti-lnt"r.rt to croak their actions in this way, I cannot summon much indignation to denounce them. At the same time, I can express admiration for those individual proprietors or owners of closery herd corpor_ ations or stockhorders of more broadry i.td .o.po.ntions who disdain such tactics as

of course, in practice the doctrine of social responsibirity is frequentry a croak for actions that are justified on other grounds rather than a reason for those actions. To illustrate, it may weil be in th-e rong-run inierest of a corporation that is a major employer in a smail community to dev;te resources to providing amenities

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all icieal frce market resting on privatc proporty, no indiviclual can cocrcc any other,

coopcration is voluntary, all parties to such cooperation bcnctit or thcy nced not par;icipatc. Thcrc tre no values, Iro'social'rcsponsibilitics irl any scnsc othcl than ifre strircct values xnd responsibilitics of incJivicluals. Socicty is a collection of indi' viduals and of the various groups they voluntarily form' The political principle that underlics the political ntechanism is conformity. Thc individual must servc a morc gencral social intercst - whcthcr that be detcrmincd by say in what a church or a dictator or a majority. Thc indiviclual ntay havc a votc and some to for appropriate It is conform. rllust hc is to be clonc, but if he is overruled, or not' to wislt rvhethcr they purposc social general a to contribute to rcquire others in rvhich i.Jnfortunatcly, unanimity is not always fcasiblc. Thcre arc some respects use of the conformity appcars unuuoidobl", so I clo not sce horv one can avoid the altogetlrcr. political mechanism But thc doctrine of'soiial responsibility' takcn scriously rvould cxtcnd the scope of philosophy the political mechanism to every hurnan activity. It does not cliffer in to bclieve profcssing by only differs It c.loctrinc. from the mosr explicitly collcctivist rvhy' in is That meanscollectiv.ist rvithout attainecl be can encls collectivist that

combination of attributcs and powcrs, and has attained a degrce of prominer:cc cntitling it to bc dealt with as a nrajor social institutions.l

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my book 'Capitalisrn ancl lirccclonr,' I havc callcd it a 'fundanrcntally subvcrsivc doctrinc' in a irce socicty, and have said that in such a socicty, 'there is one and only activitics one social rcsponsibility of business - to usc its resourccs lrld cngage in ganrc, which clcsignccl to incrcasc its profits so long ls it stays tvithin thc rtrlcs of thc
is to'say, engages in open ancl frcc conlpotition without dcccption or fraud.'

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A stakeholder theorY of the modern

corporation: Kantian capitaiism
WILLIAIVI M. EVAN AND R. EDWAITD F'REENIAN

Dcspite these prophetic words of Berle and Means (1932), scholars and managers alikc continue to hold sacred the view that managers bear a special relationship to the stockholders in the firm. Since stockholders own shares in the firm, they have ccrtain rights and privileges, which must be grantcd to thcm by management, as wcll as others. Sincc the greatcst good of all results from the self-intcrested pursuit of business, managers must be free to respond quickly to market forces. Sanctions, in thc form of 'thc law of corporations,' and other protective mechanisms in the form of social custom, accepted management practice, myth, and ritual, serve io reinforce the assumption of the primacy of the stockholder. The purpose of this paper is to pose several challenges to this assumption, from rvithin thc framework of managerial capitalism, and to suggest the bare bones of an alternative theory, a stakeholdcr theory of the moriern corporation. We do not seek thc demise of the modern corporation, either intellectually or in fact. Rather, we scck its transformation. In the words of Neurath, we shall attempt to 'rebuild the ship, plank by plank, while it rcmains afloat.'2 Our thesis is that we can revitalize the concept of managerial capitalism by rcplacing the notion that managers havc a duty to stockholders with the concept that managers bcar a {iduciary relationship to stakeholdcrs. Stakeholders are those groups who havc a stake in or claim on the firm. Specifically we include suppliers, customers, enrployees, stockholders, and the local community, as well as management in its role as agent for these groups. We argue that the legal, economii, political, and rnoral challenges to the currently received theory of the firm, as a nexus of contracts among the owners of the factors of production and customers, require us to rcvise this concept along essentially Kantian lines. That is, each of these stakeholder groups has a right not to be treated as a means to some end, and thercforc rnust participate in dctermining the future dircction of the firnr in which
thcy have a stake.3. . . Thc crux of our argument is that we must reconceptualize the firm around the follorving qucstion: For whose benefit and at whose expense should the firm be nranaged? We shall set forth such a reconceptualization in the form of. a stakeholder theory of the Jirm. Finally, we shall critically examine the stakeholder view and its implication for the future of the capitalist system.

I.

INTRODUC'TION private Corporations have ccasccl to be merely lcg:rl dcviccs through which thc uscd much still Though on. carried bc may inclividuals of busincss transactions Thc largcr significancc. a accluircd has form corpor:rte the purposc, this for -has, a means and tenure propcrty of in fact, bccome both a method corporatibn of trganizing economic life. Grorvn to trentendous proportions, therc may bc a said t-o havi cvolved a 'corPolate system' - which has attracted to itself

II. TTIE ATTACK ON IVIANAGERIAL CAPITALISM

Thc Legal Argument

pcrmission of thc authors' Rcading takcn from Etltical'flrcory und Bu:;iness.Iicproduccd by

The law of corporations gives a relatively clear-cut answer to the question: In whose intcrest and for whose benefit should the modern corporation be governed? It says that the corpolation should be run in the interests of the stockholders in the firm. Dircctors and other officers of the firm have a fiduciary obligation to stockholders in

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of thc scnse ttlat the'uffairs of the corporation'must be conclucted in the interests

those directors the stockholders. And stockholders can theoretically bring suit against exists 'in corporation the that further It says othcrrvise. doing for managers and for its liability Iinritc'd pcrson'' contemplir"tion of tbe law,' has pcrsonulity as a'legal mcmbcrs'" its of thirt transccnds its existencc actions, and immortality, as (irm, Thc basic idea of managerial capitalisnr is that in rcturn for controlling thc corporation thc managcmcnt vigorously pri.r,,"', t5e intcrests of stock5oldcrs. Since corporation arc is a 1elal p"rronl existing in contcmplation of thc law, nlanagcrs of thc ccltrrry, " ' tlris In .ll. 1t collstrllint was thcrc const;incd by larv. Uniil reccntly 'lopursuit of stockholdcr intercsts at the the to cfi'ectivclyconstrain cvolvecl has thc law guaranteed that the claims of expense of otherclaimants on tlrc nrm. It has, in effect,

proccss rights of thosc employecs who enter into collective bargaining agreements rvith management. As of the present, horvever, only 30 percent of the labor force are participating in such agrcements; this has prompted one labor law scholar to propose

a statutory larv prohibiting dismissals of the 70 percent of the rvork force not
protected.e . . . The law has also protected thc interests of local communities. The Clean Air Act and Clean Water Act have constrained management from 'spoiling the commons.' In an historic cusc, Mtrslt v. Alnbumc, thc Supremc Court ruled that u company-owncd

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.ur,o*.rr,suppliers,localcommunitics,andcmployeesareingeneralsubordinated
to the claims of stockholders. . . . market central to the managerial vicrv of thc firm is that rnilnagcme nt can pursue cxrstcttcc Tl]c t:tanncr'' unconstraincd in an transaclions wit.h supplicrs an(l custolncrs of marketplacc forces will insurc that fair priccs fo| goods will bc takcn' This

and of supplier-firm-custon.rer clrlin has been constrained by a number. _legislative v' Winlerbotlottt in articulatc(l ts 'privity contrnct,' of l,.,iriciat rrcts. Thc doctrinc of law' liability in clevclopmcnts the ty nr9f1c.11 erodccl been Wright in 1842, has liability for danrage IndJed, Grectrtrtart v. Yuba Por|cr givcs thc nranufacturer strict care in the possible all excrcised has seller thc caused by irs products, cven though prodtrct thc bought not has consumcr the procluct ancl the of preparation and sale emPtor caveat scller. from nor entercd into any contractual arrangement lvith the 'fhc Product Consumer venditor.6 cavcat rcplacc<J, in l:rrgc purt, rvitlr

town was subjcct to thc provisions of thc U.S. Constitution, thcrcby guaranteeing the rights of local citizens and negating the 'property rights' of the firm. Some states and municipalities have gone further and passed laws preventing firms from moving plants or constraining when and lrow plants can be closed, and there is much current lcgal activity in this area to constrain management's pursuit of stockholders' intcrests at thc expcnsc of tlre local commrrnitics in which the firm operates. . . . We have arguccl that thc rcsult of such changcs in thc legal systcm can be viewed as giving some rights to those groups that have a claim on the firm, for example, custonlers, supplicrs, employees, local communities, stockholders, and management. It raises thc question, at the core of a theory of the firm: In whose interest and for rvhose benefit should the firm bc managed? The answer proposed by managerial capitalism is clcarly 'the stockholders,' and we have argued that the law has been progressively circumscribing this answer.
Thc Economic Argument

has bcen

SafetyCommissionhastheporvertocnactprocluctrccalls,andinlg80oneU.S.
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In its pure ideological form managerial capitalism seeks to maximize the interests of stockholders. In its perennial criticism of government regulation, management
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thc customers want and are rvilling to pay for ihis information'7 by milnagcrial capiThe supplicr-frr--.urton1", chlrin is^ far from that visualized

talism'Firms,intlreirrolcsrrscustomersandsrrpplicrsofothcrfirnrs,havebcncfited

fronrtheseconstlaints,andtheylravebeenharrnecltothedcgrcetowlricltthe is not
that managcment constraints have meant loss of piofit. However, we can say
suppliers.

allolvedtopursuetheinterestsofstockholclersatthcexpcnscofcustomersand
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thesc rightswith fairh. It scr up the Nation'al Llbor Rclations Boarcl to cuforcc Rights Act ot Civil the of Vil Title and of 1963 Act Pay manaqencnt. The Equal have bcen practices:,,t\ese in hiring 196,1 constr.in *"n"g.*.n, irom discriminatiott cmcrgence Thc 19(r7'8 of Act in Emplovment follo*,e d *,irh the Age Discrirnination ofabodl.oflrclnlinistratir'ccasclarvarisingfromlabor-managencntdisputesandtlrc sucS as AT&T have hisroric seriling of discrimin.tion claims ivith lrrge cn.rplol,ers it consistent lvitlt that corporation the causecl the eme rllcnce o{ a boil\ of practice in the duc protccted has la*' The ihe cmplovees' ''' thc lcqal lLuirrnntce of rhc righti of

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the 'invisible hand' doctrine. It contends that it creates the greatest good for the greatest number, and thereforc government need not intervene. However, we knorv that externalities, moral hazards, and monopoly power exist in fact, whether or not they exist in theory. Further, some of the legal apparatus mentioned above has cvolved to deal with just these issues. The problem of the 'tragedy of the commons' or the free-rider problem pervades the concept of public goods such as water and air. No one has an incentive to incur the cost of clean-up or the cost of nonpollution, since the marginal gain of one firm's action is small. Every firm reasons this way, and the result is pollution qf water and air. Since the industrial revolution, firms have sought to internalize the benefits and extcrnalize the costs of their actions. The cost must be borne by all, through taxation and regulation; hence rve have the emergence of the environmental regulations of the 1970s. Similarly, moral hazards arise rvhen thc purchaser of a good or service can pass along the cost of that good. There is no incentive to economize, on the part of either the produccr or the consumer, and there is excessive use of the resources
involved. The institutionalizecl practicc primc examplc.

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Finally, we sec the avoidance of compctitive behavior or.r the part of firms, each seeking to monopolize a small portion of the market and not compete with one anothe;. In a numbcr of industries, oligopolies have enrergcd, and whilc there is questionable evidence that oligopolies are not the most efficient colporate form in some industries, suflice it to say that thc Potential for abuse of rnarket power has :rgain led to regulation of managerial activity. In the classic case, AT&T, arguably onc of the grcat tcchnological ancl managcrial achievcnrcnts of thc century, was brokcn up into cight scparatc cornpanics to prcvcnt its abusc of nlonopoly powcr. Externalities, moral haziirds, and monopoly powcr have lcd to more external control on mtnagcrial capitllism. Thcrc lrc dc facto constraints, due to these cconomic facts of life, on thc ability ol'Inltnltgcnlcnt to act in thc intcrcsts ol
stockholders. . .
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Kantian capitalism
Principle of Corporate Rishts (pcR).' The corporation and its managcrs may not violate the legitimate rights of others to determine their own future.
sponsible for the effects of their actions on others.

Prilgiple of corporate Effects (PCE).' the corporation and its managers are re-

Thc St:rkcholdcr Conccpt

are harnred by, and whose rights arc violated or respected by, corporate actions. The notion of stakeholder is builr around rhc principle of corjorate Rights (pcR) and the.Principle of corporate Effect (pcE)....The concept of stakeholders is agencralization of the notion of stockholders, who themselves have some special claim on the firm. Just as stockholders have a right to certain acrions by manigement, so do other stakeholders have a right to their claim. The exact nature of these claims is a tlifficult question that we shall acldress, but the logic is identical to that of the

corporations have stakeholders, that is, groups and individuals who benefit from or

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. . . Arguments that qucstion thc lcgitimacy of the modcrn corporation based on cxcessive corporatc power usually hold that the corporation has no right to rule for its constituents. Each person has thc right to be trcated, not as a means to somc corporate encl, but as an end in itself. If the modern corporation insists on treating others aS means to an end, then at minimum thcy must agree to and hence palticipate

(or choose not to participatc) in thc decisions to be used as such. If our theory does not require an uttderstanding of the rights of those parties affected by the corporation, then it will run afoul of our judgments about rights. Thus, plopelty rights arc not absolute, espccially when they conflict with important rights of otliers. The right to property does not yield the light to trcat othels as mcans to an end, Property rights are not a license to ignore Kant's principlc of rcspcct for persons. Any thcory of the mocle rn corporation that is consistent with our considcred moral judgments must recognize that property rights are not absolute. Arguments that qucstion thc legitimacy of the modern corporation based on cxternalities or harm usually hold that the corporation is accountable for the conscquences of its actions. Persons are responsible for the consequences of their actions through the corporation, even if those actions are mcdiated. Any theory that seeks to justify the corporate form must be bascd partially on the idea that the corporation ancl its ntanagcrs as moral agcnts can be thc causc of and bc hcld accountablc for the conscqucncos of thcir uctions. In line with these two themes of rights and effects, . . . we suggest two principles that will servc as rvorking rules, not absolutes, to guidc us in addressing some of thc foundational issues. Wc will not settle the thorny issucs that thesc principles raise, but merely argue that any theory, including the stakcholder thcory, must be consistent with these princiPles.

stockholder thcory. stakcs require action of a certain sort, and conflicting stakes roquire mcthods of resolution. . . . Freeman and Reed (1983)t0 distinguish two senses of stakeholtler. The .narrow dcfinition' includes those groups who are vital to the survival and success of the corporation. The 'wide definition' includes any group or individual who can affect or is affected by the corporation. while the wide definition is more in keeping with (PCE) and (PCR), it raises too many difficult issues. we shall begin with a more modest aim: to articulate a stakeholder theory using the narrow definition.
Stakeholders in the Modern Corporation
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Figure L depicts thc stakeholders in a typical large corporation. The stakes of each arc rcciprocal, since each can affect the other in terms of harms and beneflts as well as rigl.rts and duties. The stakcs of each are not univocal and would vary by particular

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corporatiou. We mcrely set forth some general notions that secn to be conrnron to mlny largc l)rms. Orvncrs have sonre financial stakc in the fornr of stocks, bonds, and so on, and cxpect some kind of financial return. Either thcy have given money directly to the firm, or thcy havc some historical claim made through a series of morally justified exchanges. The firm affects their livelihood or, if a substantial portion of their retirement income is in stocks or bonds, their ability to care for themselves rvhen they can no longer work. Of course, the stakes of orvners will differ by type of o*,ner, preferences for rnoney, nroral prcfcrenccs, and so on, as well as by type of firnr. 'lbe owners of AT&T arc quite diffcrcnt from the owners of Forcl Motor Conrpany, '"vith stock of the lornrcr contpany bcing rvidcly clispersed among 3 nrillion stockholders and that of the latter being held by a small family group, as well as a large group of public stockholdcrs. Enrployecs have their jobs and usually their livelihood at stake; they oftcn have specillized skills tbr rvhich thcre is usually no perfectly clastic rnarket. In return for thcir labor, thcy cxpcct sornc sccurity, wlgcs, arrcl bcncfits, and mcaningful work. Wherc thcy are used as rneans to an end, they nlust participate in decisions affecting such use. In return for thcir loyalty, the corporation is expected to provide for thenr and carry thcm through difficult times. Employees are expected to follorv the instructions of management most of the time, to speak favorably about the company, and to be responsible citizcns in the local conrmunities in which the company operates. The evidence that such policies and values as describecl here lcad to productive company-employee relationships is compelling. It is equally compelling to realize that the opportunities for 'bad faith' on the part of both management and employees arc enormous. 'Mock participation' in quality circles, singing thc company song, and wearing the company uniform solcly to please management, as well as management b1' authoritarian supervisors, all lead to distrust and unproductive work. Suppliers, interprctcd in a stakeholder sense, are vititl to thc succcss of the firm, for rarv materials will determine the final product quality and pricc. In turn the firm is a customer of the supplier and is thercfore vital to the succcss and survival of the supplier. When thc firm treats the supplier as a valued menrber of the stakeholder network, rather than simply as a source of rnaterials, the supplier will respond when the firm is in need. Chryslcr traditionally had vcry close ties to its suppliers, even to the extent that led some to suspect the transfer of illegal payments. And when Chrysler was on the brink of disaster, tbe suppliers responded with price cuts, acccpting latc paymcnts. financing, and so on. Supplier and company can risc and falt together. Of course, again, thc particular supplier rclationships rvill clepcncl on a number of variables such as the number of suppliers and rvhcther the supplies are finished goods or raw miitcrials. Customers exchange resources for thc products of the firm and in return receive the benefits of the products. Customers provide the lifeblood of the firm in thc'form of revenue. Given the levcl of reinvestment of earnings in large corporations, cusiomcrs indirectly pay for the development of new products and services. Peters and Waterman (19ti2)t1 have argued that being close to ihe custonler leacls to success

with other stakehorders a distinguishing characteristic of some companies Td .rhlt that have performed well is their emphasis on thl customer. By paying attention to customers' necds, management automatically addresses the needs of iuppliers and owners' Moreover, it seems that the ethic of customer service carries over to the community. Almost without fail the 'exccllent companies'in peters and waterman,s study have good reputations in the community. \ive would argue that peters anrj waterman have found murtipre applications of Kant's dictum, .Tieat persons as ends unto themsclves,'and it should come as no surprise that pcrsons respond to such rcspectful treatment, be they customers, supplieis, owners, employees, or members of.the local community. The real surprise ii ihe novcrty of the applicatlon of Kant,s rule in a theory of giiod management practice, The local community grants the firm the right to build facilities and benefits from . the tax basc and economic and social contributions of the firm. In return tor ttre provision of local services, thc firm is expected to be a good citizen, as is any person, cither 'natural or artificial.' The firm cannot expose the community to unreasonable hazards in thc form of pollution, toxic waste, and so on. If for some reason the firm must leave a communiiy, it is expected to work with local leaders to make the tran_ sition,as smooth as possible. of coursc, the firm does not have perfect knowledge, but when it discovers some danger or runs afoul of new competition, it is expected to inform thc local community and to work with the community to overcome any problem. when the firm mismanages its rclationship with the lolal community, it is in the same position as a citizen who commits a crime. It has violated the implicit social contract with the community and should expect to be distrusted and ostracized. It should not bc surprised when punitive meaburis are invoked. we have not included 'compctitors' as stakehorders in the narrow sense, since strictly spbaking they are not necessary for the survival and success of the firm; the stakeholder thcory works equally welr in monopoly contexts. Flowever, competitors and govcrnmcnt rvould bc thc first to bc included in an extcnsion of this basiciheory. It is simply not truc that thc interests of competitors in an industry are always ln conflict. There is no reason why trade associitions and other multl-organizational groups cannot band together to solve common problems that have little to do with how to restrain trade. Implcmentation of stakeholder management principles, in the long run, mitigates the need for industrial policy and an inireasing role ior governnent intervention and regulzrtion.
Thc Role of Managcntent Management plays a spccial role, for it too has a stake in the fiction that is the nrodern corporation. on the one hand, management's stake is like that of employees, rvith some kind of explicit or implicit enrployment contract. But, on the othir hand, nlilnagenent has a duty of safeguarding the welfare of the abstract entity that is the corporation, which can override a stake as employee. In short, management, especially top management, must look after the hearth of the corporation, and this involves balancing the nrultiple claims of conflicting stakeholders. d*n.r, wanr more

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financial returns, while customers want more money spent on rescarch and development. Employecs want highcr wages and bettcr bcnefits, rvhile thc local comrnunity wants better parks and daycare facilities. The task of management in today's corporation is akin to that of King Solomon. Thc stakeholder theory does not give prirnacy to onc stakeholdcr group ovcr another,

Kantian capitalism

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'Pl , *hi.h wc might call rhe Principle of corporate Legitimacy, redeflnes thc purpose of the firm to be in line with the principles of corporate effects and rights. It implies the legitimacy of stakeholder claims on the firm. Any social contract that justifies the existence of the cc-rrporate form includes the notion that stakeholders arc
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though thcre will surcly bc timcs rvhcn onc group will bencfit at the cxpcnse of others. In gencral, hou'cver, managcmcnt must kcep the rclationships among stakeholders in balancc. When thcse rclationships bccome unbalanced, the survival of the firm is in jeopardy.
When wagcs are too high and product quality is too Iow, customers lcavo, suppiicrs suffer, and owners sell their stocks and bonds, depressing the stock price and making it difficult to raise new capital at favorable ratcs. Notc, however, tl-rat the rcason for paying returns to owncrs is not that thcy 'orvn' the IlIm, but that thcir support is necessary for the survival of the firm, and that they have a legitimate claim on the firm. Similar reasoning applies in turn to each stakcholdcr group. stockholder theory claims that the purpose of the firm is to maximize thc rvelfare of the stockholdcrs, perhaps subject to sonre moral or social constraints, eithcr because such maximization leads to the greatest good or bccause of property rights. The purpose of the firm is quite different in our vierv. If a stakeholder theory is to bc consistent with thc principles of corporate effccts and rights, then its purpose must take into account Kant's clictum of rcspect for persons. Thc very Purposc of the firnt is, in our view, to serve as a vehicle for coordinating stakcholdcr interests. It is through the firm that each stakeholdcr group n.rakcs itself bettcr off through voluntary exchanges. The corporation serves at the pleasure of its stakeholders, and none nray be used as a means to thc ends of another without full rights of participation in that decision. Wc can crystallize thc particular applications of PCR and PCE to the stakeholder theory in trvo further principlcs. These stakeholder nranagcment principlcs will serve as a foundation for articulating the thcory. Thcy are guiding ideals for thc immortal corporation as it enclurcs through gcnerations of particular

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a party to that contract. Further, stakeholders have some inatienable rights to participate in decisions that substantiatly affect their welfare or involve their bcing used as a means to another's ends. we bring to bear our argumcnts for thc incoherence of the stockholder view as justification for P1. lf in fact there is no goocl rcason for thc stockholder theory, and if in fact there are harms, bcnefits, and rights of stakcirolders involved in running thc modern corporation, thcn we know of no

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of the firrn must redefine the purposc of thc firnr.

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other starting point for a theory of the corporation than p1. P2, which we might call rhe stakeholder Fiduciary principle, explicitly defines the duty of management to recognize these claims. It will not always be possible to meci all claims of all stakeholders all the time, since some of these claims will conflict. HereP2 recognizcs the duty of management to act in the long-term best interests of the corporatiott, conceived as a forum of stakeholder interaction, when the intercsts of the group outweigh the interests of the individual parties to the collective contract. Tltc duty described in P2 is a fiduciary duty, yet it does not suffer from the difflculries surrounding the fiduciary duty to stockholders, for the conflicts involved there are precisely those that P2 makes it mandatory for management to resolve. Of course, P2 gives no instructions for a magical resolution of the conflicts that arise from prima facic obligations to multiple parties. An analysis of such rules for decision making is a subject to be addrcssed on another occasion, but P2 does give thesc conflicts a lcgitimacy that they do not enjoy in the stockholcier theory. It givcs managemcni a clcar and distinct directive to pay attention to stakeholder claims. P1 and P2 recognize the eventual need for changes in the law of corporations ancl other governance mechanisms if the stakehoider theory is to be put into practicc. p1 and P2, if inrplcme ntcd as a major innovation in the structure of thc corporation, wiii nrake manifcst the cvcntual legal institutionalization of sanctions. . . . Structural Mcchanisnrs

mortaI stakeholders.

Stakeh

o Id

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P r incip ! cs

Pl: Thc corporation should be nanagcd for thc bcnefit of its stakcholders: its
customcrs, supplicrs, orvncrs, emplovecs, and local conrmunities. Thc rights of thcse groups ntust bc cnsurcd, anrl. furthcr, thc groups nrust perticipatc, in sotttc sense, in dccisions that substantially affect thcir u'clfare. P2: Iv{anagcment bears a hduciary rclationship to stakcholdcrs altd to tlte corporation as an abstract entity. It must irct in the intcrcsts of the stakclioldcrs as thcir agent, and it must act in the intcrcsts of thc corporation to cnsure the survivtl of thc flrm, safeguarding the long-term stakes of each group.

propose several structural mechanisms to make a stakeholder management conception placticable. we shall offer a sketch of these hcre and say little by way of argument for thom. 1. The Stukelrclder Board of Directors. Wc propose that every corporation of a certain size yct to bc detcrmined, but surely all those that are publicly tradcd or are of the size of thosc publicly traded, form a Board of Directors compriscd of rcpresentatives of live stakcholder groups, inciuding employees, customers, supplicls, stockholders, and mcmbers of thc local community, as well as a representativc of the corporalion, whom we might call a 'metaphysical director' since hc or shc rvould be responsible for the metaphysical entity that is 'the corporation.' whether or not each representative has an equal voting right is a matter that can be decidcd

we

264

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respo nsibility

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corporation in concert with the interests of its stakeholders. Such a Board would cnsure that the rights of each group rvould have a forum, and by involving a dircctor for the corporation, would ensure that the corporation itself woulrt not bc unduly harmed for the bcnefit of a particular group. In addition, by vesting each director rvith the duty of care for af stakeholders, we ensure that positive resolutions of conflicts rvould occur. while options such as 'stakeholder derivative suits' would naturally evolve undcr the larv of corporations as revised, we are not sanguile about their efl'ectiveness and prefer the workings of the political process, as inefficient as it may be. Therefore, representatives of each stakeholder group would be clected from a 'stakeholder assembly' rvho would initially meet to adopt working rules, charters, and so on, and whose sole purpose rvould be to elect ancl recall representatives to corporate boards. The task of the metaphysical director, to be elected unanimously
by the stakeholder representatives, is especially important. The fact thar the director has no direct constituency would appear to enhance management control. I{orvever,

by experimentation; issues of governance lend themselves naturally to both laboratory and organizational e.tpcriments. These directors will be vested with the dury of care to manage the affairs of the

ivhen that action implies the sacrilice of the interests of all. The metaphysical director rvould be a key link betwecn the stakeholder representatives and management, and would spearhead the drive to protect the norms of the interests of all
stakeholders. 2. The stakeltolder Bill of Rights. Each stakeholdcr group would have the right to elect representatives and to recall representatives to boards. Whether this is done on a corporation-by-corporation, an industry-by-industry, or a country-by-country basis is a matter for further discussion. Each stakeholder group would have the right to free speech, the right to grievance procedures insidc the corporation and if necessary in the courts, the right ro civil disobediencc, and orher basic political rights. 3. Tlte futanagernent Bill of Rights. Management rvould have the right to act on its fiduciary duty, as interpreted and constrained by the Board anr.l the courts, the right

nothing could be further from the truth. To represent the abstract entity that is the corporation rvould be a most demanding job. our metaphysical clirector would be rcsponsible for convincing both stakeholders and management that a certain course of action rvas in the inrercsts of thc long-term hcalth of the corporation, cspecially

tt.r. are somc very pracrical transitional steps thar could occur. Eo.r, iurg.'.;rporation could form a stakehorden advisory board, which rvould prepar" ; .h;;;.ta'ing how the organizarion is to treat rhe craims of eiich stakehorder. rnrturryiti,,tut.toto.r advisory board wourd serve as an advisor to the current board of directors, and eventualry ii'*""10 reprace that board. Simulranebuslr,:.qrgyo ;i;;;i';;lars and practirioners, such as the American Law Institute, couldlnitiate aisJussion or the regar proposals and methods to change corporate charrers, while business ;;;;p, such as the Business Roundtabre could examine the practical .onr.qu"n".r;f;;;-p*als. Given the emergence of some consensus, we bdlieve that a workable transition .un U" f*nJ. . . ,..'
NOTES

that the of Soromon' n...srory to make the stakehorder theory work w'l emerge naturally through the joint action of tt" .ourt.,-rtrkehorders, and management. While much

some areas of the raw, su.ch as products riability, where the craims of customers to safe producrs has emcrged' and iabor r;*; the claims of emproyees have been safcguarded' Indeed, in such pioneering;;;;; Marsh v. Arabamathe courts have come crose to a stakeholder perspectiv"e. w. .nuirion that a body of case raw wiil emcrge to give meaninc to'the proper ctaims oistakeholders,,and in effect 'wisdorn

t' cf' A' Bcrlc and G'

Mcans' Thc Modcrn corporation and privare properry(New york: commercc crcarins Housc,-t932), i: F;; .';;fiJ.sment of aerte ano,Mei# urgurn"n, artcr 50 years, scc iou,nut i1 t",1yi bi,ir^ir"isflrr" ibs:i, .rp.iuriy 6,."s,rgr", una c' Friedrand' 'Thc Literaruic or

2. The^l;.-t"1ilT.1]io";:!g:"'^"a mcraphor of rcbuilding thc ship while afloat js attributed to Neurath by W. word and obiccr (Cambriig.' euinc, press, 1960), and w. (iuine and J. urian, Ttrc 14cb of Bctief (Ni* v.ir.'-ir"Jo;-H;,ir", '.'iuii"iir]JJii,;

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Economics:

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3' Kant'snotionofrespectforpcrsons(i.e.,thatcachpc-rsonhasarightnotrobetreatedasa
mcrns ro an end) can bc round in r.'Kant,

capitalism.

repracc ptonr.- *itr, ;[HHl',i11:t 'fl;ll:J:^T,ust ..".',r,"i.*iii a" ; an capltallsm can " so replace the current

1e78).

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job. our

kcep thc

oi-managerial

to safeguard innovation and research and development, the right to free

speech, .,:*
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grievance procedures, civil disobedience, and so on. Both Bills of Rights merely recognize the fact that organizational life is pervasive in our societv. If r.'e are not to become rvhat orrvell envisioned, then our organizations must guarantee those basic political freedorns, even at the cost of economic

4' For an introduction to the law of corporations ,uo.itron, (tvtineota. Ny: Thc Foundation p.*i, -iblij,see A..conard, corporations in perspective
..ieciaily.

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organizational members are to fir,d meaningful work by participating actively in the modern corporation, then we must ensure that the principles of Jeffersonian democracv are safeguarded. 4. Corporate lox'. The larv of corporations needs to be redefined to recognize the legitimate purpose of the corporation as stated in P1. This has in fact developed in efficiency.

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*.,i"",ic,-""J n. Corporatiotts (St. paul: we.st eur,tistrini, iqsij, iitp,", .ietr,. sraremenr of 1.. rhe ritcraturc in managcriar econ_ onrics' for cxamore R Coase' 'ttrc'Nature'oil-t" iir*,' Eg2ngmicaa (1937): r'so-qos; Jenscn and W. Mcckling, .Thcory v. Behavior, Agency Costs and ownership Srrucrurc,' J6.u.rnat o['Fittu,:,;i"i "ai;;. Fr.;;M:nag-crial ;;;:r;;;;;r, 3 (1976):305_60: ina b. wirriamson' The Econontics of Discretiinary B;i,;r;-r"(;;:;';on: pubrishing. 1965). Scc R' Charan and E.-Frecman, 'pr;";i;;i;;,il;isrnessKershaw t;i:J:;{"t"i:i;?i*."l,,",y"lrtle80).-tri"e:;;;il; p. Environmcnr of rhe I9s0s,, r./re rs ror a urieilcc"""i"iir,.,.i"i

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Can a corporation have a consciencel

7. Scc S. llrc1,cr,

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licfortn (Cambritige: l-larvard Univcrsity Prcss, l9S3),

s. i;;

133

for -i.

Millstcjn antl S. Katsh, Thc Lintits of Corporatc /'orr'cr (Nerv York: Mlcnrillan,

an analysis of food additivcs.

Employccs Against Unjust Disniissal,' Ilorvard Ert.iirtt'.rs statenrcnt of thc argunlcnt' lor a crrcful (19S0): 136 /levicn'5ij on fO. !..'f. Frccman antl D. Rced,'stockholdcrs and Stakcholders: A Ncw Pcrspcctivc E-tplo' Delinitivc A Cornorarc Govcrnancc,' in C. iluizinga, cd., Corpctrutc Govarnuncc: ,utiin of tltc /s.rrrc.r (Los Angelcs: UCLA Extcnsion I'jrcss, 1983)' a,rd R. Watciman, Irr Search of Etccllcnce (Nciv York: Ilarpcr and Row,

9. Cf. C. Summcrs, 'Protccting All

1981), ChaPtcr four.

Weston could have been spcaking in the carly 19ti0s on any issue that corporations around the Unitcd States now face. Instead of social justice, his theme might bo cnvironmental protection, product safety, marketing practice, or international bribcry. I-Iis statemcnt for SSC raises the important issue of corporate responsibility. Can a corporation havc a conscience?

11. Sec T.'pctcrs

l 9E2).

Can a corporation have a conscience?

KENNETI-I

Weston apparently felt comfortable saying it need not. The responsibilities of ordinary persons and of'artificial persons' like corporations arc, in his view, separate. Pcrsons' responsibilities go beyond those of corporations. Persons, he seems to have bclicved, ought to care not only about themselves but also about the dignity and rvcll-being of those around them - ought not only to care but also to act. Organizations, he evidently thought, are creatures of, and to a degree prisoncrs of, the systcms of economic incentive and political sanction that givc them reality and tlicrcfore should not bc expected to display the same moral attributes that we expect of pcrsons.
Others insidc business as well as outside share Weston's perception. One influential philosopher - John Ladd - carries Weston's vicw a step further: 'It is impropcr to expect organizational conduct to conform to the ordinary principles of morality,' he says. 'We cannot and must not expect formal organizations, or their representatives acting in their official capacities, to be honest, courageous, considerate, sympathetic, or to have any kind of moral integrity, Such concepts are not in the vocabulary, so to spcak, of the organizational language game.'r In our opinion, this line of thought represents a tremendous barrier to the dcvelopment of business ethics both as a field of inquiry and as a practical force in managerial decision making. This is a matter about which executives must be philosophical and philosophers must be practical. A corporation can and should have a conscience. The language of ethics does have a place in the vocabuiary of an organization. There need not be and there should not be a disjunction of the sort attributed to SSC's Jamcs Weston. Organizational agcnts such as corporations should bc no more and no less moraliy responsiblc (rational, self-interested, altruistic) than

E. GOODPASTER AND

JOI'IN B. MATTHEWS, JR
During thc severc racial tensions of the 19(r0s, Scuthern Stcel Company (actual case, clisguiicd namc) faccd consiclcrablc prcssurc fronr govcrnmcnt alld the prcss to exilain and nroclify its policies rcgarding cliscrimination both within its plants and in (it had the major city rvhere it was locatcd. SSC was thc largest employer in thc area strides great had made and black) wcrc whonr of one-third workers, 15000 ncarly toward removing barriers to cqual job opportunity in its sevcral plants. In addition' its top cxecutiv-cs (especially its chief executivc officer, James Wcston) had distinguishcd thcmsclvcs as privatc citizens for ycars in con.rmunity plograms for black holsing, education, and small busincss as rvell as in attclnpts at desegregating ailivhite policc altd local govcrnnlcnt organizations' SSiclreg'thc linc, however, at using its substantial cconomic influence in thc local area to advancc the cause of thc civil rights movctncnt b1'prcssuring banks, suppliers, and thc local govcrnmcnt:

,As individuals wc can excrcise rvhat inllucncc wc ntay have as citizcns,' James Wcston saicl. 'but for a corporation to attcnlpt to cxert any kind of cconomic compulsion to achievc a particular end in a social arca scctl-ls to nre to be quite bcyond rvhat a corporatioll should <io and quitc boyond rvhat a corporatiott can do. I bclicuc that rvhilc governmcnt may seck to compcl social reforrns, any attempt by a privatc organization like SSC to impose its I'icws, its beliefs, and its rvill upon the community rvould be rcpugnant to our American constitutional concepts and that appropriate steps to correct this abuse of corporate power would be universally demanded by public opinion''
Rcading trken from Ilarvartl Busitrcss Rcview, Januirry-Fcbruary 1932. Copyright CI
II urvard Brtsirtes.i ReviuY.
1982

ordinary persons. We take this position because we think an analogy holds between the individual and the corporation. If wc analyzc thc concept of moral responsibility as it applies to pcrsons, we lind that projecting it to corporations as agents in society is possible. DBFINING TTIE RBSPONSIBILITY OF PERSOI}]S
When we speak of thc responsibility of individuals, philosophers say that we mcan thrce things: someone is to blame, something has to be done, or some kind of trustrvorthiness can be expected. We apply the first meaning, what we shall cail the causal sense, primarily to legal and moral contexts where what is at issue is praise or blame for a past action. We say of a person that he or she was responsible for what happened, is to blame for it, slrould be ireld accountable. In this sense of the word, responsibiliry has to do with tracing the causes of actions and events, of finding out who is answerable in a given

i I
"{ i 268 _
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ii

Corporations ancl responsibility t - -'--J t

individual. The distingr-rishing characteristic of nioral responsibility, it seems to us, lies in this third sense of the tcrm. Here tl're focus is on the intellectual ancl emotional processes in thc individual's Irtoml rcasoning. Philosophcrs call this 'taking a nroraf point of vigv' and contrast it rvith such other processes as being linaniially prudent and :rttcnding to lcgel obligutions. To be sure, ch:rracterizing a pcrson as 'nrorally responsible' may seem rather vague. But vagueness is a contcxtual notion. Everything depends on how rve fill in thc lrlerrk in .vaguc lbr _ purposcs., In some contexts the term 'six o'clockish'is vague , rvhile in others it is useful and informative. As a rcsponse to a space-shuttle pilot rvho wants to know when to fire thc reentry rockcts, it rvill not do, but it nright do in responsc to a spousc rvho rvants to know rvhen one rvill arrivb homc at the cnd of the workday. We maintain that thc progrsses underlying rnoral responsibility can bc clefinecl and are not themselves vague, even though gaining conscnsus on spccific moral norms and decisions is not always casy. what, then, characrerizes the processes underlying the judgment of a person we call morally responsible? Philosophcr william K. Frankena offcrs the following
llnswf r:

situation. our aim is to determine somcone's intention, free rvill, degree of participation, and appropri:rte reward or punishment. We apply the second meaning of rcspottsibiliry to rule following, to contexts rvhere individuals are subject to externally imposed norms often associaied with some social role that peoplc play. we speak of the responsibilities of parcnts to children, of doctors to paticnts, of larvyers to clicnts, of citizens to the law. what is socially expected and what the party involved is to answer for are at issue here. we use ttre third mcaning of responsibiliry for decision making. with this meaning of the term, we say that individuals are responsible if they are trustworthy ana reliable, if they allorv appropriate factors to affect their judgment; we refer primarily to a person's independent thought processes and dccision making, processes that justify an attitude of trust from those who interact with him or her as a responsible

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Respect' The moral point of vierv also includes a special awareness of and concer:n for the effecrs of one's d^ecisions ."d p;i;;; on others, special in the sense thar it goes beyond the kind of awareness *d .on."rn that wo;rd orJi*r'y be part of rationality, that is, beyond seeing others *"*ry u, inrt*n,.niuiio-u".o*prirr,ing one's own purposes. This is ."ri".t ror it,. rives of otr,r., unolriuorves taking their nceds and interests r:l.ourly,.loJ ri*pty u, resources in one,s own decision making but as rimiting conditions which change the very definition of one,s habitat from a self-centered io a shared It is what phirosopher Immanuer ,categorical "nuironr"nt. by the imperaiiv"i L ,r"u, others as uutuuui" in and for
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thc way in which the indiv-idiral processes information and makes choices' A rational bui not respectful Bill Jones will not lie ro his friends unless he is reasonably sure he wi, not be found out. A rationar but noi;;*;;;"ry Smith witt defend an unjustly treated party unless rt. it int, ta;;;;. ;;;;:ity to f,err"tr. A rational and respectful decision maker, t o*"u"., notices - and cares - whether the conscquences of his or her conduct lead to injuries o, in,rigniii., i"'"it"rr. Trvo indivicruals rvho take 'the rorut poini li uew' witt iot or .ourr"'ii*uy, ugr.. on cthical matters, but they clo at least'have a basis for dialogue.

responsible person. we knorv that such a person takes our point of view into account not merely as a usefur precaution (as in 'honesty is the best poricy') u", ,,*n,. These components of morat r.rponriuifiiy ^ irp".il"it'ii, ui. no, too vague to be"r,J, useful. Ration_ ality and respect affect rhe rrn::.. ;". *r,iJnl p"rson approaches pra*icar decisiorr making: they affcct

It is this feature that permits

A morality is a normative system in which judgments are macle, more or less consciously, [out of a] consideration of the effects of actions. . . on the lives of
persons . . . including the lives of others besides the person acting. . . . David Hume took a similar position when he argued that what spcaks in a moral judgment is a kind of sympathy. ... A little later,... Kant pur the rnatter somewhat better by characterizing morality as the business of respecting pcrsons as encls and not as means Or as things. . . .'2 Frankena is pointing to two traits, both rootecl in a long and cliverse philosophical

PIIOJDCTING RESPONSIBILITY TO CORPORATIONS Norv that rve have removed some of the vagueness from the notion of moral re sponsibirity :rs it appries to p., rsons, we can -search for a frame of reference in which, by analogy with Bilr Joncs and rurury s.iit,.y" 3n meaningfuty and approprilrtcly say thilt corporrrtions arc morally responsiute. This is thc issue reflecred in the SSC
case.

tradition:

1. Rationality. Taking a moral point of vierv incluc.les the features we usually attribute to ratiorral dccision mrrking. th:rt is, Iack of irnpulsivencss, carc in nriipping out
dctails of implL-ntcntirrion.

eltcrnativcs and conscqtrcrrccs. clarity about goals und purposes, attcntion to

. If rve cln s1y that persons act rcsponsibly only if they gather informaiion about the imp.ct of their actions on others ond ur"it in mat<;ng Jecisions, *..on'r.uronuury clo the same for organizations. our proposed r**" of reference r* itinting ouout and implerncnting corporatc ."rponribirity aims at speiling out the processes
associ_

To deal with it, we must ask two questions: Is it meaningful to appry moral concepts to actors who are not persons but who are instead rrrqsv ;";; ;p; uv vj persons? And even if meaningful, is it aclvlsable to do so?If a group can act like-r person'n somc rvays, then we can expect it to behave rike a person in othcr rvays. For one thing, *e tnoi" that.peopre orgonir"Ji*o a group can act as a unit. As business peoplc rvell know, legaily o .o.po.ition i, conrio"r.o o unit' To approach unity, a group usuaily hus ,orn. io.i or intJ*"r-o""isJi'rrru.tu.., a systcm of rurcs that spe.lr out authority relationships ana ,p"city iie" conditions under which certain inclivicruars' actions become otn.i"t actions of the group,J

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can a corporation have a conscienceli,il,

atcd with thc moral rcsponsibility of individuals and projecting them to the lcvel of organizations. This is similar to, thouglr an inversion of, Plato's famous method in the Ilepublic. in rvhich justice in thc community is used as a model for justice in the
individual.

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thcir productioll proccsscs and proclucts on thc cnvironment and human hcalth show
thc same kind of rationality and respcct that morally rcsponsiblc individuals do. Thus, attributing actions, stratcgics, decisions, and nroral responsibilities to corporations as entitics distinguishable from thosc rvho hold ofhccs in thcm poscs no problcm. Ancl when rvc look about us, wc can readily sec differences in morai responsibility anlong corpolations in nruch thc siinlc way that wc scc diffcrcnces an]ong pcrsons. Somc corporations have built fsaturcs into thcir managcnrcnt incentive systems, board structurcs, intcrnal control systcnrs, and rcscarch agcndas that in a person we rvould call sclf-control, integrity, and conscientiousness. Sonre have institutionalized a\\'arencss and concern for consumers, employees, and the rest of the public in ways thill othcrs clcarly hitvc not. As u niatlcr of coursc, solllc corporltions lttcnd to thc human inrpact of thcir opcrations and policics and rcjcct opcrations and policics that are qucstionablc. Whcthcr thc issuc bc thc hcalth cffccts of sugarcd ccrcal ot cigarettes, thc safcty of til'cs or tampons, civil libcrtics in thc corporation or the conrnrunity, an organization
rcvcals its charactcr us surcly as ii pcrson docs. Indccd, thc parallcl nray bc evcn rnorc dranratic. For just as the nroral rcsltonsibility clisplayccl by an inclividual clcvelops ovcr tirnc fronr infancy to aclulthood,a so too we lnay cxpcct to find stagcs of clcvclopurcnt in organizational chatacter that shorv signilicrult prttdrns.

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system, much less the managers within the organizatiotrs, To be sure, people of this opinion admit, th-ere is a sense in which social or ethical issues can and should enter the corporate mind, but the filtering or ru.t issues is thorough: they go rhrough the screJns of custom, pubric opiniori, public rerations, and.the law. And, in any case, self-interest maintains primacy u, un'oq-".tiue and a guiding star.

of the first view is.Milton Friedman (echoing many philosophers and economists since Adam Smith), According to tilir-'putt.rn or thought, thc truc and only social responsibilities'of business orgonir*ion, ur. ,o make profits and obey rhe laws. The workings of the free and 6;;;"" marketplace will 'moralize' corporate behavior quite indepeno.ntty oi ,irry- orr"*p,, ,o expand or transform decision making via mbral projection. A deliberate amorarity in the executive suite is encouraged in the name of systemic nrorality: the common good is best served when each of us and our econornic institutions pursue not the common good or moral purpose, ,ouo"ut., ,uy, bu, .onrpetitive advantage. Morality, responsibility, and conscience reside in the invisible hand of the free market system, not in the hands of the organizations within the

E\/.\LUATING TIiE IDE/\ OIr NIORAL PROJT]CTION

Concepts like moral responsibility not only make sensc when applied to organizations but also provide touchstones for designing more cffcctive models than we have for

advocates of the invisibl:^lold. model would vigorously resisf efforts, beyond regal requircmcnts, to make ssc-right the wrongs of*racial injustice. ssci r-esponsiuirity would be to makc steel of high quarity at reast cost, to deliver it on time, and to satisfy its customers and stockholders. iustice would not be part of sSC's corporare mandate. 'I'hc Hand o[ Governmcnt

The reaction from this frame of reference to the suggestion that moral judgment bc integratcd with corporate strategy is clearry negati;; such an integration is seen -uottian as incflicienr and arrogant, and in the eno illegitimat" ur""of-"orpo.ur" powcr and an abuse of the manager's fiduciary role. with respect to our

ssi.case,

guiding corporate policy.

No*'rvc can undcrst:rncl rvhat it n-Icans to invitc SSC.as a corporation to be morally rcsponsiblc both in-house and in its community, but should wc issue the invitation? Hcre u,c turn to the qucstion of advisability. ShoLrld wc rcquirc the organizational agcnts in our socictv to hlve the s:rme moral attributcs rvc recluire of ourselves? Our proposal to spell out thc proccsscs associatcd rvith moral responsibility for indil'iduals and therr to projcct thcn'r to their organizational counterparts takcs on added mcaning rvhcn rvc examinc altcrnative frarncs of rcference for corporate
responsibility. Trvo framcs of reference that compcte for the allcgiance of people who ponder thc question of corporatc responsibiiity are emphaticalty opposed to tbis principle of rnorul projcction - rvhat rvc might re fcr to as thc 'invisiblc hand' view and the 'lrand of govcrnmcnt' vicrv.

Advocates of the second dissenting frame of rcference abound, but John Kennelh calbraitlr's work has counterpointed Milton Friedman's with insight and style. un<ie r this view of corporate responsibility, corporations are to pursue objectives that are rational and purcly economic.. The regulatory hands of the law ind the poritical process rather than the invisible hand of the marketplace turns these objectives to thc common good.

Again, in this view, it is a system that . provides the moral direction for corporate dccision making - a system, though, that is guided by political managers, the custodians of the public purpose. In the case of SSC, proponents of this view would look to the state for moral direction and responsible management, both within SSC and in the community. The corporation would have no moral responsibility beyond political and legal obedience.

What is striking is not so much the radical difference between the economic

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and rcsponsibility

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Can a corporation have a conscience? LEAVING TIIB DOUI}LE STANDAITD BETIINI)

We havc come some distance from our opening reflection on Southern Steel Conrpany and its role in its community. Our proposal - clarified, we hope, through these objcctions and replies - suggests that it is not sufficicnt to drarv a sharp line betwecn irrdividtrtrls' privute itleas untl cflbrts and a corporation's institutional cfforts but that the lattcr can aud should bc built upon the former. Does this framc of rcfcrenca givc us an unequivocal prescription for the behavior of SSC in its circumstanccs? No, it does not. Persuasive arguments might be made
now and might have been made then that SSC should not have used its considerable economic clout to thrcaten thc community into desegregation. A careful analysis of the realitics of the environmcnt might have disclosed that such a course would have: bcen counterproductive, leading to more injustice than it would have alleviated. The point is that some of the arguments and some of the analyses are or would havc becn moral arguments, and thereby the ultimate decision that of an ethically rcsponsiblc organization. The significance of this point can hardly be overstated, for it represents thc adoption of a new pcrspective on corporate policy and a new way ol thinking about business ethics. We agree with one authority, who writes that 'the business firm, as an organic entity intricately affected by and affecting its environment, is as appropriately adaptive. . . to demands for responsible behavior as for cconomic servicc.'5 The frame of refercnce here developed does not offer a decision procedure for corporate managers. That has not been our purpose. It does, however, shed light on the conceptual foundations of business ethics by training attention on the corporation as a moral agent in society. Legal systems of rules and incentives are insufficient; even though they may be necessary, as frameworks for corporate responsibility. Taking conccptual cues from the fcatures of moral responsibility normally expected of the person in our opinion descrves practicing managers' serious consideration. The lack of congrucnce that Janres Weston saw between individual and corporate moral responsibility can bc, and we think should be, overcome. In the process, what a number of rvritcrs havc characterized as a double standard - a discrepancy between our personal livcs and our livcs in organizational settings - might be dampened. The principle of moral projection not only helps us to conccptualize thc kinds of demands that we might make of corporations and other organizations but also offers the prospect of harmonizing those dcmands with the demands that we make of ourselves.

and socill philosophies that undcrlie these two views of the source of corporatc ethics, responsibiliiy but the conceptual similaritics. Both vicrvs locate morality, which the in incentives and rules of in thc systems conscience and responsibility,

corioration finds itself embedded. Both vicws reject thc exercise of independent moral juclgment by corporations as actors in socicty' ltrc oftcn c:tllcd Ncithcr vi6v trusts cgrltorutc IcurJcrs witlr st*vurdsltip ovcr rvltltt to thc llcat of to malch rcsponsibility corporitte requirc l3otlr valucs. r)oneconomic press a rulcvicws drunrs outsiclc. In the jargon of moral philosophy, both .for These ethics' agcnt-ccntercd an of insteacl centereci or a system-cent"red ethics corporfor rcsponsibility rule-follorving corporatc countcnancc frarncs of refcrcncc ations but not corporatc clecision-rnaking rcsponsibility'

-oi.rn

The IIand of Nlanagement

to an invisible To be sure, the two viervs under discussion diffcr in that one looks in governforce moral visible a to moral force in the market rvhile the other looks pcrmits that projcction moral of principlc a against ment. But both rvoulcl aclvisc

o,

"n.ou,^g.s nnd operati.ons' mattcrs rh:,i frcc thcm in their short- and long-term plans Accordingly'bothwouldrejectathirdviewo{corporatcresponsibility.thatSceks .onng".n"nr' view

judgrnent over corporations to exercise inclependent, noneconomic

toaffdctthcthoughtproccliscsoftheorganizirtionitsclf_asortof.handof of profit

since neither seems willing or able to see the engines principle of r.gulite themselves to the 6egree that would be inlplied by taking the imperialism from the right moral inefficiency.a.nd of Cries serio:rslyprojection miral left, all in the rvould be matched by cries of insensitivity and illegitimacy from_the morally-amok' run managers and corporalions of preserving us from
name be pi.tr, uni politicians than to business leaders. Bettcr that corporate morality pcrformance' and policy from insulatcd it is safcty rvhere reports, io glorsy rinnual

Bctter'criticswouldsay,thatmoralphilosophybelefttophilosophers,philanthro-

kept

in forccs extcrnal The two conventional frantes of rcfcrcnce locatc moral restfaint
presume that these have a better moral cffect than that of

tothepersonandthecclrporation.Thcydenynroralreasoningandintenttothe systenr of cxplicit corporxtion in the namc ol cither market comPetition or society's

t"glt .onrt.oints and

rationalitY and resPect. corporare-conscience ancl patterns

Althoughtheprincipleofnroralprojection,rvlrichunderwritestheiclcaofa it on the thought and feeling proccsses of the part of p",.,on, is in our l'it:rr,conrpclling, rvc nrust acknorvlcdge that it is rreither Incleed, objection. or question bcyond its advisabilit,v ii nor ihe received u,isdom, rvith it ncrv and attributing the role of conscience to the corporation seems to carry

IS

A CORPORA'I'ION A MOITAI,LY
I to thc Analogy

RNSPONSIBLE 'PI'RSON'?

and business' clisturbiniimplications for our usual rvays of thinking about ethics is to address the refercnce of frame this d.'fencl and Perhap.-s rhc bcst way to clxrify There rvc see a irrticlcof this pagcs llst in thc priuciplc'kruncl the rtbjccrions to hours of during lteard ,u..^r}, of the criticisnrs 'and counteralgunlellts we hlve lhat thc We believe students. discussion $'ith business e\ccutives and brrsiness school replies to rhc objecrions abirur a corporation havinc, a conscience are convincing.

Objcction

Corporations are not persons. 'l'hcy arc artificial legal constructions, machines for mobilizing economic investments toward the efficient production of goods and scrvices. We cannot hold a corporation responsible. We can only hold individuals
responsible.

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Can a corporation have a

consciencel

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pcrsons in a litcral frame of refercnce <locs nr:t inrply tlrat corporlltions ilrc functions. nornrally and conccpts rcspccts ccrtiin in that mcans sense. It sirnply up of persorrs' madc. attributcd to pcrsons can also bc attributcd to orgtnizations oftcn attributcs'arc pcrsonal suclt othcr ancl Goals, ccorronric valucs, StrateSics, should rcscarchcrs..why and bl,munlgcrs lcvcl corpor-atc thc usct,,tiy projcctccl to corpor*" noiprolccr thc lunctio's of conscicncc in thc srrrc *,.y? As for holdi.g Motor Forcl of casc thc lts such ations rcsponsiblc, rccent crinrinul i)rosccutiolls (inds thc idou both intclligiblc socicty that suggcst tanks gas con.,p"ny and its I)into and uscful.

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thcir conduct by cthical or social valucs beyond the demands of law should bc constraincd rncrely because they are not elected to do so. The dcmands of morai rcsponsibility are independent of the demands of political legitimacy and are in fact prcsupposed by thcm. To bc surc, thc statc and the political proccss will and must remain thc primar-1' nrcchanisms for protecting the public interest, but one might bc forgiven the hopc tltat the political process will not substitutc for thc nroral judgmcnt of thc citize nry or othcr conlponcnts of socicty such as corporations.
Objection 4

ir 't.

Objection 2
and A corporation cannot be held responsiblc at thc sacrificc.of ttll:^lllLl"bility to bc thc'catcgorical irnpcra-

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Our systcm of law carefully defines the rolc of agent or fiduciary and makes corporatc managers accountable to shareholders and investors for the use of their assets. Management cannot, in the name of corporatc moral responsibility, arrogate to itself thc right to nianage thosc assets by partially noncconomic critcria. Ilcply

financial health havc always bcen ancl should continuc

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rivcs'of a busincss oPcratioll'

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and grorvth Wc must of coursc acknorvlcdgc thc imperativcs of survival, stability, we cliscuss whcn tltcm ack.orvlcdge rvhen rvc discuss corporations, ai inclcctl wc must in rcsponsibility nroral with itlcntifictl has bccn -sacri{icc rhc lifc of an indivitiurl. Sclf nccd not bc pittcd sclf-intcrcst ancl protit ol pursuit cascs.'l'ltc cxtrcu)c nr()st only thc :rrc bcst vicwed as against tlic clcnrancls of moral rcsponsibility. Moral dcnrands

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cJnlainmcnts - not rcplacclncnts - for sclf-intcrcst' ' nrorality' But proljt This is not to say that pro{it nraximization nr:vcr conllicts rvith 'lhc point is to coordinwcll' as maximization conflicts rvith other managcrial valucs validity' ate impcrativcs, not deny thcir

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Objcction 3

,f

of tlrc people, nor are tlicy Corporate exccutives ale not clcctcd rcpresentativcs lack the social ma'date tllcrcfore Thcy guarclians. or appointed as social pursue ethically or would who ^noin,"O tltosc of rightlv-denlands society that a democratic cconomic confined .to ,o.ioff,u notivatcd policics' By kceping corporatc policics
motivations,wckccpthcporverofcorlloratccxcclrtivcsinitsproperplace.
Rcpll'
public The objecrion betravs an ovcrsimplificcl vierv clf thc rclationship betrvcen thc guidc that corporations private nor individuals privatc Ncither sector. privatc and the

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it is not so clear that investors insist on purely economic criteria in thc managcmcnt of their assets, especially if somc of the shareholders' resolutions and board reforms of the last dccade are any indication. For instance, companies doing business in South Africa have had stockholders question thcir activities, other conrpanics havc institutcd audit committces for thcir boards bcfore such auditing rvas nrandatccl, and mutual funds for which 'socially responsiblc behavior' is a nrajor invcstmcnt critcrion now cxist. Sccond, thc catcgorics of'sharcholder' and 'invcstor' connotc widcr tinrc spans than do irnrncdiatc or short-term returns. As a practical mattcr, considcrations of stability and long-tcrm return on investnrcnt enlarge the class of principals to which managers bcar a fiduciary relationship. 'Iliird, the trust that managers hold does not and never has extended to 'any means rvailable' to advance the interests of the principals. Both legal and moral constraints nrust be understood to qualify that trust - even, perhaps, in the name of a larger trust and a more basic fiduciary relationship to the members of society at large.
Objection 5

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Thc power, size, and scale of the modern corporation - domestic as well as international - are awesome. To unleash, even partially, such power from the discipline of the marketplace and the narrow or possibly nonexistent moral purpose implicit in that discipline would be socially dangerous. Had SSC acted in the community to furthcr racial justice, its purposes might have been admirable, but those purposes could havc ied to a kind of n.roral imperialism or worse. Suppose SSC had thrown its powcr behind thc Ku Klux Klan.

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Reply

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Objcction 7

Can a corporarion corporation have a

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This is a very real and irnportant objection. What seems not to be appreciated is thc fact that porver affects when it is used as well as rvhen it is not uscd. A decision by SSC not to excrcisc its cconomic in{luence accorcling to 'noneconomic' critcria is incvitably a moral dccision and just as incvitably affccts thc community. Thc issuc in the end is not whether corporations (and other organizations) should be 'unleashed' to cxert moral force in our society but rathcr horv critically anrl sclf-consciously thcy should choose to do so. The degree of influence enjoyccl by an agcnt, whcthel a pcrson or an organization,
is not so uruch a factor recclnrmending moral discngagenlent as a factor demanding a high level of moral awareness. Imperialism is more to be fearcd when moral reasoning is absent than when it is present. Nor do rve suggest that the 'discipline of the marketplace'be diluted; rather, we call for it to be supplementecl with the discipline

we might make some surprising and even reassuring discoveries

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individuals? Doesn't etliics finary in the business world?

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responsibitity ro rhe level of the organizarionl) I;;:i ;;' ;:il;,i"n""Ptoiect discrrargecr ir *; ;i;,'ils,n'""'ffi,',ii,?,",ff'oJl"#J1"tJ'ilffi";rn,'".'Jll*:i;l:

Why is

it

neccssarv to

moral

r;;;;';;h-esty

and integrity of the individual

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ol moral reflcction.

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Objection 6 The idea of moral projection is a useful clcvice for structuring corporrtc responsibility only if our understanding of nroral responsibility at the levcl of the person is in some sense richer than our understanding of moral rcsponsibility on the level of the
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organization as a rvhole. projection is fruitlcss.

If

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we are not clear about inclividual responsibility, the

purpose. fi. prol..tion of rcsponsibility to rhe orqanization is 1o, 1 simpry an acknowlcdgmenr of rhe fact that thc whole is more rhan rhe ium of its parts. il'""y'i","'ig"nt plopre ao noi oi inr.rrig"n, organization make. Inte'igence needs to d"-'riru.tured, organized, divided, and t.:::?ll"^1ll comptex processes for compJex purposes. Jruores ot management have long shown that the attributes, successes, and fairures of organizations are phenomcna that emerge from the coordination of persons, attributes and rhat expranations .f t".h ;;;;;r"nu ,"quir. caregories of anarysis and description beyond the level or tne inor:viouur.'ruro.ul responsibility is an attribute that can manifest irsbrf in organizations ;;;;..1y;, competence

Yes and no. yes, in t'e sense that the contror of rarge organizations does fina'y rest in the hands of managers, of men ono *or.n.^NoIin tne is being controlled is a cooperirril:_:t:.T

.oon..orive

*;r. ;r; ;at

or efficiency.

Reply

The objection is rvell taken. The challenge offered by the idea of moral projection lies in our capacity to articulate criteria or framcworks of reasoning for the rnorally responsible pcrson. And though such a challengc is formidablc, it is not clear that it cannot be nret, at least rvith sufficient consensus to bc useful.
For centuries, the study and criticisnr of framervorks have gonc on, carried forward by many disciplines, including psychology, thc social scicnces, and philosophy. And though it r.vould bc a mistakc to suggest that any single framervork (niuch less a decision mechanism) has cmerged as the right one, it is true that recurrent patterns are discernible and well cnough dcfined to structurc nroral discussion. In thc body of the article, rve spokc of rationality and respect as conlponcnts of individual responsibility. Further analysis of these components wouid translate them into social costs and benefits, justice in the distribution of goods and services, basic rights and duties, and fidelity to contracts. The vierv that pluralism in our socicty has

Objcction 8

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Is the frame of referencc herc proposerl intended to replace or undercut the relinvisibre hand, and in" ,gou.rnrn"nt hanci,"i"*r,

;hi;;epend

on

undercut all possibility

of nroral

agreement is anything but self-evidcnt. Sincere

a

rnoral disagreement is, of course, incvitable and not clearly lamentable. But

process and a vocabulary lor articulating such values as rve share is no small step fonvard rvhen con-:pared rvith the alternatives. Perhaps in our cxploratiou of the

No' Just as reguration and economic competition are not substitutes for corporate rcsponsibility, so corportte responsibility is nor a substitute for law and the market. The imperatives of ethics cannot be relied on - nor have they ever been reried on _ without a context of external sanctions. nnJ tni, is true as much for individuars as for organizations. This frame of rcference takes us beneath, but not beyoncr, the rearm of external systems of rures and incentives and into ttre irrougt t p.o..rr", ti,ot rnt.rpr.t uno rcspond to the corporation's environment. Moraiity-is more ,t"" ,"l"rrprrt of that environment' It aims ar rhe projectio" .f cither the statc or thc competitive process. ";;;i;n.e, not rhe enthronement of it in

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The rise of the modern large corporation and thc concomitant rise of the professional manager demand a conceptual framcwork in which these phenomena can be accommodated to moral thought. Thc principal crf moral projection furthcrs such accomnrodation by rccognizing a netv lcvci of agcncy in society and thuS a new levcl of rcsponsibility. Objcction
9

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4 A process that psychorogicar rescarchers fron Jcan piaget to Lawrence Kohrberg have cxanrincd carcfuilv; scc Jcan-piagct, nt, uiritliagr^r;, tne-ciiu-ir,t J yort, pr.. Prcss, 1965) rnd Lawrcncc Kohl6crg, it,i inito"piv "r uir"fbrii[)rii1N.* vorr,
5'
I{arpcr & Rorv, l98l). "r Scc Kcnncth R' Andrcrvs,^rr e Conccpt 0f coryoratc strategy,rcvised cdition (Homcwo.ti, -- -." Ill.: Dow Joncs-lrwin.
1960), p.

99.

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r-

Corporations have ahvays tuken the intcrcsts of thosc outsiclc the corporation into account in the sensc that customer relations and prrblic relations genelally are an integral part of rational economic decision nraking. Nlarket signals and social signals that filter through thc market mechanism incvitably- rcprcscnt thc interests of partics affected by thc bchavior of thc complny. What, then, is thc point of adding rcspect to rationality?
Rcply

Corporate moral agency: the case for anthropological bigotry

JOI.IN R. DANLEY

Representing the affected parties solcly as economic variables in the environment of thecompany is treating thcm as mcans or resourccs attd not as ends in themselves. It implies lttui tt only voicc whiclr affcctcd parties should havc in organizational decision making"is that ofpotentiill buyels, sellcrs, rcgulators' oI boycottcrs' Besides, many affected partics rnuy not occupy such rolcs, ancl those who do may not be able to signal thc organization rvith mcssages that cffectively reprcscnt their stakes in

11

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its actions.

tion in free markets (with moclest adjustmcnts from the state) witl result in all relevant signals being 'hcard,' but thc abstractions from reality implicit in such theory maie it insufficient as a framc of refcrence for moral responsibility. In a world in rvhich strict self-interest was congruent with the common good, moral

To be sure, classical economic tlrcory rvould have us believc that perfect compcti'

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responsibility might be unnecessary' Wc do not, alas,.live in such a world' ihe eiemenr of respect in our analysis of rcsponsibility plays an esselltial role in ensuring the recognition of unreprescnted or undcrrcpr.esented voices in the decision making of organizations aS agents. Shorving rcspect for persons as ends and not mere means to organizational purposcs is ccntral to thc concept of colporate nroral
responsibilit.v. NOTE,S 'N{orality and thc ldcal of Ratronalit.v in Formal Organizations,' The Mortkt, Octobcr I970, p. 199. 2. See William K. Frankcna, Thinking About Mctruliry (Ann Arbor: Univcrsity of Michigan Press. 19E0). p. 2(r. 3. Sec Pctcr Frcirch. "fhc Corporation as a ir'loral Pcrson,' t\nrcrican I'hilosophicul Quartcrll',

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not be granred full-fledged moral status. within this emotionally .t u.gJi

Rcrtlirrg taken from

In 'corporate, Morar Agency,'l peter A. French argues for a position, increasingly popular, which would accept 'corporations as members of the moral community, of equal standing with the.tranditionalry acknowledged residents uioiogicar human beings.' This is but one ol accepting the craim that one can"regitirnateiy ,implication ascribe moral responsibility to corporations. Tolut the matter somewhat differently, again in French's words, 'corporations should be treated u, ruii-n"og.o .noror persons and hencc. . ' have whatever privileges, rights, and duties as ire, in the norrnal course of affairs, accorded to moral p.rronr., Unwilling to rest content with the usual assaults on prejudices against rear persons bascd on race, creed, sex, rcligion, or national origin, Frenctiis ti,or", sceking to opcn yet anothcr ncw.front. The struggre ".ongbeyond is now being extended real persons to eliminate discrimination against a particular class of personae fi.ctae, fictitious persons' namely the corporatioi. B.to.L too hastily enoorsing this new 'corporate' liberation movement lei us pause for reflection. If after serious consideration we do vote to admit these peculiai entities into our rather exclusivist and elitist community of morar beings, wc shourd insist on their having ,tunorng with the rcst of us run-of-the-miil-featherless bipeds. After all, "quur wf,at^morar nefhuortrooo worthy of the name would allow second-ilass citizens? After examinin! tfi" case for admission, however, I find myself driven to the uncomfortable positio;f defending apartheid, biological apartheid that is, of defending anthroporigical-uigot.y. r .on_ tcnd that corporations should not be included in th-e moral;"#";it;;ey should ui-orptr"r.

,t. 'ii:
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July

1979. p. 207.

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,l980. copyright @ Bowring

crccn srudics.'Rcprodriccd by pcrmission o?ir,.

.Bor vrintg Green studi.es

in Apprietr phitosophs.,

"urtor.

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it is tcmpting to employ the stlndard od hottrinents of bigotry ("I'hink of tlte value of vour property'; or, 'Before you knorv it your daughter will bring a corporation home to dinner';'What about thc children?'; and so forth), but I will attcmpt to ward off thcse tenrptations. My clainr is that the corporatist programs of the kind reprcsentcd by Irrench would seriously disturb thc logic o[ our moral discoursc. Inclccd, the corporatist position, rvhile offcring no substantial adv:rntagcs, rvould entail the reduction of biological persons to the status of second-class citizens. Let us turn now to the
dispute.
1. a.n

Corporate moral agency

@l

organization or rcsponsibility flow chart dclineating stations ancl levers within the corporate power structure and corporatc decision recognition rules.

I
There is little doubt that wc often speak of corporations as being responsible for this or that sin or charitable act, whether of microscopic or cosmic proportions. The question is what wc ntean when we sperk in that rvay. Sometimes all rve rnean is that thc corporation is thc cause of such and such. In thcse instances we arc isolating a cause for an cvcnt or statc of affairs, an exercisc not much nrore (or less) trouble-

more explicit than those contained in the chart, expanding upon it. The second sort of recognition rules are expresscd primarily in corporate polity.

decision making; the recognition rules provide ihe logic. The"purpose oiih" orgunirational chart is to locate which procedures will count as decisions ior the corporation, and rvho may or must participate in those procedures. The recognition rures, we are informcd, arc of two sorts. The first sort are procc<.rurar recognitors, .partiafly embcdded in the organizational chart.' what these amount to, it seems, are directives

As French puts it, the organizational chart provides the grammar for corporate

in two non-identical ways, or so it is claimed,

Employing the cumbersome apparatus of the cID, some acts may now be described

somc than saying 'Thc icy pavcmcnt caused tltc accidcnt.' Thc debate rcvolves around a fulle r sense of 'rcsponsibility,' a scnsc which includes morc than the idea of 'causing to happen.' In this richcr scnsc, wc ascribc rcsponsibility only if the event or statc of affairs causcd rvas also intenclccl by the agcnt. When thc concept of rcsponsibility is unpacked in this fashion, the traditionalists appear to have victory already in hand. Whatever else we rnay say of thcm, collective entities arc surely not the kinds of things capable of intending. Individuals within the corporation can intend, lust, have malice aforethought, and so forth, but the corporation cannot. Traditionalists, like myself, maintain that only persons, i.e., entities with particular physical and mental properties, can be morally responsiblc. Corporations lack these. For the traditionalists, to speak ofcorporations being responsible is simply elliptical for speaking of certain individuals within the corporation being responsible. On this point, and perhaps this one alonc, I do not belicve Milton Friedmanl to bc in error. Undaunted by this vencrable line of reasoning, the corporatists procccd to press their case. Although it is French's vierv that I am treating, I am concerned not so much rvith the <letails of his argument as with the general outlines of thc corporatist position. Using French's theory as representative, horvever, providcs us with one of the most forceful, sophisticated theories developed. French has rvorked for years in the area of collective responsibilit.v.4 His strategv is to accept the traditionalists' analysis of 'responsibility,' and then to attempt to shorv that some sense can be made of ascribing 'intcntions' to a corporationThe key to nraking some sense of corporate 'intentions' is rvhat French calls the Corporate Intcrnal Decision Structurb, the CID. The CID is that rvhich allorvs one, 'licenses' one, to redescribe the actions of ccrtain individuals rvithin a corporation as actiolts of the corporation. Although the notion is cornplicatecl, a CID contilirls two clements rvhich are particulrrly relevant:

one of thesc . . . is 'Executive X's doing y' ancl one is .corporation c's doing 2., The corporate act, and the individuar aci may have different properties; indied, they havc cliffcrent causar ancestors though they are causaily inseparabre.
The effect of this, of course, is rhat whcn certain individuals as specilied by the organizational chart, engage in ccrtain proccdures as specified by the organizational chart and some recognition rulcs, and act in accordanct with othcr recoinition rules (corporatc policy), then Frcnch claims we can redescribe the action as-a corporate act, an intentional corporate act. It is critical to the corporatist position that the two descriptions are non-identical. Saying that 'corporation c did i' ir not reducible to the statement that 'Executives X, y, and Z, voted to do y,' even though y and, z are

the sanre. Since they are non-idenricar the traditionalist is supposedly pi.ulnt"d frorn ascribing responsibility only to these individuals. The acts- of the lndividuals are neccssary for a corporatc act but not idcntical with it. Like a child with a nerv toy, one is strongly inclined by the glitter of this technical hardware to disrnantle it, to try to find out how it all works, to see rvhether it really Iits together, to sec how ancl rvhether it can handte hard cases. To be sure, there are sonre problcms which one can detect irnmcdiately. Let me mention two. First of all, it is unclear what French means by an organizational chart. Since his examples are those of nice neat black lines and boxes on a page, like the ones found in business textbooks and corporate policy manuals, one is left with the impression that this is rvhat he has in mind. If so, there are severe difficulties. Most everyone is aware of the extent to which corporate reality departs from the ethereal *oild of black lines and boxcs. will French maintain that any decisions made by the managers of corporations rvhich do not conform to the organizational chart are not decisions of the corporation? Biting the bullet here may be the best course but it is probable that most dccisions are not strictly corporate decisions then. Few corporations act at all, if this criterion is used. French needs a more positivistic interpretitions of the organizational chart, one rvhich rvould insure that the flow chart realistically captured the actual procedures and personages holding thc powers. The difficulty *itt t'tris modifi-

Ed'iq:**J"::4 responsibility

-j

Corporate moral agency

pawn opening, but is this the same sense of intend' as when I intended P-K.l? Furthermore, even ascribing an intention to the computer by no means entails that rvc would bc ready to ascribe responsibility to it. The point is that it remains for thc corporatist to demonstrate the rclationship between the sense of intend' and the sense involvcd in ascriptions of responsibility to humans. Hence, a rather difficuir task remains for the corporatist bcfore the case is made.

critcrion cation, howcvcr, is that the CID bcgins to losc its function as a notmative posiThe are not. which ancl acts by rvhlch to dcterminc which acts ilre corporatc porverful sonrc is whatcver act corporatc a that mcan tivistic intcrprctation woultl to perform, person rvithin the corporation n'lallagcs to gct othcrs in thc corpolation The CID all' work at rvill Irot Lr gcts otlrcrs outsidcio acccpt as a corporatc act.'fhirt work is more At lcast clilcnrma. a of hor's ncstlcd u'o' thc f'milii,r

"pi"o^ neccssary here.

thc CID urust bc thc corporate There is a second difficulty. A basic componcnt of 6avc bccotllc littlc .rore than chartcrs charter. Rccently thc generirl incor'oratioir for 'any lawfui purpose,' busincss irl to cngagc corporltion thc blank tablets for a anci few rccognition rulcs arc atthough somc aspccts of thc organizational chart

II
'fhus fal
position.

I havc cstablished only that the corporatist has failed to establish the I must admit that I am not entirely enamored of the preceding line of

<lclincated.EventhcsepermissivcrulesofrccognitionlravcpertilrenceforFrench, board.of dircctors evcry aspcct oi the CID rvas follorvccl exccpr that the

s;;;"r"

unlawful activity' According to votcd unanimously to engagc the corporation in some co*ld not redescribe such an Onc possiblc. ii not this ii".i,o".r, u pari of rhe"C"ID, can never act illegaliy. ;;, ;;;.nrpoior. acr. This result oi this is thar corporations not to sin, thc possiblc is not it nr;ttr Unlikc thc Augustinilrn cloctrinc that for firllcll

FrcnchdoctrirlcllPpcarstollcthatfortlrccorp<lrationitisnotpossibletosinatall. Frcnch's proposal.

Howcvcr, points here, lcst wc bc that we accept argumcnt' of sakc thc for distracted from the larger issuc' Supposc' these acts as identify could onc that suclt acts indiviclu:rl ,on]. nloo. of redescribing the cstablish that would Frcncli's. constituting a corporare iitentional act. Accept writcs that when he instance, for hancl, his tips Frencrr ;;;;;;;;#r;sc? i think nor. that corporations, and not what .needs to be shown is that thcrc is scnse in saying what they do.' But' doing for just tt,e peopte who rvork in thcm, havc reasons by a device established is rhat All nrore. much shorv ir-u"i""rry, Frcnch neccls ro intentions'
bc adclresscd to Thcse arc but two of many qucrics rvhich might

it is not -y .on."in to drvcll on such tcchnical

a
'! i

that corporations have u,hich reclcscribcs, is that there is a serrsc in saying

it,c

is tlic one used by the signin.ant question is rvhcther that scnsc of intcncl' corporations denying-tlrat rvhcn and traditionalists rvhcn cxplicating.rcsponsibility,' that the claim plausibly, quitc ancl easily, can tradiiionalists can havc intentions. The
corporatistiscquivocatirlgorr.intcncl.'Tltc.scnscinwhichacorporationintendsishas pcrson intcnds. The corporatist much different from that in rvhich a biological it ncccssary to construct the fincling by chargc this for further laid thc for.rnclation
apparatus so that the sense

argument. The dispute srnacks of the theological controversies concerning whether 'wisdom' or 'goodness' rvhen attributed to God have the same scnse as when prcc.licatcd of humans, Nonethcless, the corporatist has moved the debato in that direction by atternpting to cquate two markcdly different senses. There arc, fortunately, other factors to bc considered in evaluating the corporatist position. These factors appear whcn onc expands thc focus of attention bcyond thc narrow conditions for ascribing 'rcsponsibility,' and bcgins to examine the conccpt as it functions in the broadcr context of nroral discoursc. Much hangs in the balancc whcn ascribing'rcsponsibility.' Affixing responsibility is a prclude to cxpressing approbation or disapprobation - praise or blame. When the agcnt rcsponsible is praised, that is the final move in the moral game. (Morality n"uer poyr very weli.) But, when thc respons?bility is affixed and the agent in clucstion is blame worthy, that is far from the end of the matter. In this case, affixing rcsponsibility and expressing disfavor is itself a prelude to many further permissiblc or obligatory movcs. Minimally, the blameworthy party is expected to express regret oi remorse. More importantly, the agent may be required to pay compensation or be subjcct to punishmcnt. Ascribing responsibility opens the door for these major moral movcs. (There are other door opcners as rvell, for cxample, the notion of cause in strict liability.) Any understanding of the concept of responsibility is incomplete rvithout incorporting the role it plays in relation to these other moral movcs. It is this which is lacking from the previous discussion of intend.'Such an analysis cannot bc

providcd herc. What can be done, however, is

to sketch briefly how

ascribing

this sensc

what wc usually of ,intend'is articulatcd, thc morc clearly it clivcrgcs front

of

intencl' involvecl can bc nlade clear' The more clearly

lr

ii
.::

,n.:lnuy.intcnd.,ThearbitrarincssofconstructingaScnscof.intcnd'slrouldbc othcr *h.n ,u. considcr thc possibility of ascribing intcntions to nun)orous lcngtlts Onc corrlcl go to cxtraordinlry ""16.", cutitics, such ls plrrnts, artinrals, or miiciri,rcs. to rlany of thcsc. Yet, fcrv would intcntionally attributing for ,.nr. to fro,rl,i. . 'intcntion' to humans'
in attributing contcnd that it rvas very similar to wnat wc mcan

rvhich learns frorn prcvious Considcr a comput;r progranrmcd to ptay s5c55 to respond P-K4 to ny king intcnds conrputcr ivhich thc in nristakcs. Thcrc is il scnsc

responsibility to corporations effectively blocks these moves, sundering many of the thrcads which tie 'responsibility' so intimately with concepts like remorse, regret. compensation, or punishment. Let me elaborate, An indication of the consequences of admitting the corporation into the moral community havc bcen forcshadowcd by admission into the legal corpus as a person. 1'hat lcgacy is an odious onc, narrcd by an environment within which the corporation lras cnjoycd nearly all of the bencfits associated with personhood while shouldering but few of the burdens or risks. Much the same would result from admission into the moral world. That legacy is not solcly to be explained by jaundiced justices or bad

judicial judgments, but is a natural consequence of attcmpting to pretend that thc

b4@"uqr:ry1'b'g

----I

Corporate moral agency

E'I

corporation is just another pretty face. Whilc thc law clrly bcgan holding the corporation liablc (reld: rcsponsiblc) for ccrtain specilied ncts, and tlre scope of has things for which it was liable has ciramatically incrcased over thc years, there criminal to most be subject coulcl juclge that corporations beei a hcsitancy to of statutcs. One of ihe major stumbling blocks was just tlle one rvhich is the subject or intcnt, criminal rcquircd statutes criminal the many of thtrt rv:ts clc:rr It paper. this juclged that a criminal statc of mincl, ancl unablc to locate the corporate mind, it rvas as French's such ofproposals relevance The these. thc corporation was not subject to rvhen the corporation dctermining for a method justices have rvould norv is that the passion' acts u,ith intent, rvith malice aforethought, rvith premeditation or out of no offer proposals thcse that is what I anr anxious to bring to liglrt, horvevcr, Consider problems' further create fact in view and advantage over the traditionilist norv thc- moral moves irlvolved in extracting compensatioll from, or punishing, a guilty pcrson. I-low is one to nlrke these moral moves against a corporatc person? bne-.annot. An English .l.trrist put the point rvell in an often quoted quip to the effect that corporations havc no p^nir to kick, no soul to cl^mn. We may concur rvith the but sentimcnt of that jurist wlro concluclccl that 'by God thcy ought to have both,'

wrat of the corporatist's position? The single advantage is that the adoption of that position would nrcan that some scnse could be made of pointing an accusing finger or raising a fist in moral outrage at a fictitious person, a behavior which mighi otherwise appear not only futile but ridiculous. In the new corporatist scheme the behavior would no longcr be ridiculous, only futile. The disadvantages, on the other hand, are apparent rvhen one attempts to follow the responsibility assignment with the normally attendant moral moves as I have just shown. Either those moves are blocked entirely, since one may find no method by which to punish, or the moves are diverted away from the genuine culprit (the fictitious moral agent) and directed toward someone inside the corporation (non-fictitious moral agent). Either alternative is unacceptable. The former would entail that some citizens of the mor,al community, namely corporate persons, were not subject to the full obligations of membership. That reduces biological members to the status of second-class citizenS,
shouldering as they do all the burdens. The later alternative, 'going inside,' is equally offensive. This alternative means that biological agents are sacrificed vicariously for

thcy havc neirher, although French has given them a surrogate soul, the clD. the neck The corporation.unnoi be kickecl' rvhippccl, imprisonecl, or hangecl-by punishment until derd. only individuals of thc corporation can be punished. what of act? Flere too' through the pocketbook, or extracting compensation for a corporate Usually one conrpensation. pay tltc not docs lnd punisSccl, is not the cJrporation present corporate climatc havc virtually no thc who in stockholc.lcrs the funirlr"r of a fiscal control over corporate actions. Or, if the corporation can Pass on the cost pays for the who consunler the end the in it is compensation, or punishment in result may pocketbook the punishment or conlpensation. If severe enough, hitting more deserving, least those on burden the resting the reduction of rvorkforcc, again someone prccisely, on those not responsible at all' Sooncr or later' usually sooncr' directly most corporation the of i,ir, upon the solutign of punishing thosc indivi6uals with associated difficulties moral also are Therc act. corporate responsible for the throtrgh insurancc protcctccl arc cxcctltivcs top ntiUry exilrnplc, For this:rltcrnutivc. intent is sirnply policics, part of the pcrks o{ thc job. 'fhllt rvould bc satisfactory if the But let us pass effect. or retributive dcterrent any io.o*p.nrut", but it ncutralizes

to 'go o,rer these considerations and examine more closely these recommendations

employee, inside' the corporation to punish an individual, whether stockholder, corporation' of the a{ent, manaq,er, or director the Ftrr rhe tirditionalist there is littl; dif{iculty. Thc traditionalist recognizes protection equal have corporation as a lcgal fiction which for better or worse may legal unie, the larv of other persons, but the traclitionalist many accept those

the sins of the corporation. This solution not only reduces the biological agcnrs ro sccond-class citizens, but would make scapegoats or worse, sacrificial lambs, of them. Thus would the admission of the corporation into the moral community threaten to disturb the logic associatcd with the ascription of responsibility. In addition to these problems, the corporatists face other theoretical obstacles. It is not clear that 'going inside' a corporation is often, if ever, intelligible, given the analysis of a corporate act. To counter thc traditionalist's claim that only individual:i are responsiblc, French claims that the corporate act is not identical with the acts of individuals in the corporation. Given this, how is it possible now to reverse that claim and hold individuals responsible for something which they did not do? All they did at most was to vote for the corporation to do something, or to pay for something to be done on behalf of the corporation. The claim that individual acts and corporate acts are not identical opcns thc door to criminallcss crime, a possibility admittcd openly by Frcnch in another carlier paper. Frcnch there notes that a collective entity may be responsible yet no individual in that collectivity be responsible. Far from bcing an cxtrenrc case, that outcorne nray include all corporate acts, As mcntioncd above, such an alternative is unacceptable, But, again, can one make intelligible going inside to make one or more individuals responsible? In order to do so the corporatist must shift ground and concede that the individual acts and the corporate acts are identical, or perhaps that the individuals, by voting on a course of illegal or immoral action, coerced the hapless corporation to go along with the deed.

III
Although I have offered what I take to be a satisfactory defense of the traditionalist position, I rvould like to close by suggesting an alternative model for viewing the corporation. An alternative is needed because the corporatist's model has largely succeeded in warping many of our intuitions and is reinforced not only by legal
id

trappingsasatbestausefulwayoftreatingthecorporationforlegalpurposes.For the corporation' After the irad-itionalist it makes,r,ornir.nr" for the larv to go inside

long as those all, morally the corporation is not responsible; only individuals are.-As difficulty. theoretical is no there dced, rvithin the corporation pay for the
x
;!.

f
P

led
iclioms'butbl,managcrialvocabulary.InmnnyitcorDoratist'scyctlrecorllorationis ulutit likc rr biologrci'l pcrson'-lt l]u:-u"::,"'n'n"*' pt'l''p' an organisnr' pcriods
',,td receptors, muscle, it

Case study

E:l

CASE STUDY "*tn t""tt''"p""lt'tt''

t*pnnds'"cieveiops' grorvs' in sonre

to bc thc.fltiscutoff,,p,.,..,*.intorntation'.rnakcsclccisions,lndsoon'Itadjuststo uscful but rvc havc now bcgtrn

thc cnvironmcnt. Such u'tt'"pfto' victimizcdbythemctapnoricalmodcl.Unfortunltcly,rctortnershuvefoundituscful and thcn to vilify' model. It is usefui to pcrsonify to accept that language ""J,t,"t corporation rvith thc endorv to many attcmpts The moclel. i fear, stancls behind

nt:t)'!t

Making the punishment fit the crime: the Zeebrugge disaster

On thc evcning of 6 March 1987, shortly after leaving the Belgian port of Zccbrugge, the cross-channel ferry Herald of Free Enterprise capsizeci with a loss of 150 passengers and 38 crew. The ship was owned by European Ferries Limited (trading under the name 'Townsend Thoreson'), a company that had just been taken over by the Peninsular and Oriental Steamship Company (P&O). It was a roll on-roll off (Ro-Ro) ferry, cquipped with doors through which vehicles could be driven on and off. The astonishing reason for the capsize was that the bow doors had been lcft open on departure from Zeebrugge. A combination of increased speed and a sharp turn produced a bow wave that flooded through the open doonvay. Within four minutes the ship ended up on its side half submergcd in water. Only the good fortune of turning into relatively shallow waters prevented total submersion and an even greater loss of life. The Department of Transport set up a Court of Formal Inquiry under Mr Justice Sheen. It sat from 27 April to 12 June 1987. Instituted under merchant shipping law, such a court is primarily concerned with investigating the causes of marine accidents. Its punitive powers only extend to the rcmoval of officcr's 'certificates of competence' (the licences to be morchant navy oflicers) and n-raking shipowners contribute to the cost of thc inquiry. The court found that the reason the bow doors had not been closed was that the assistant bosun, Mr Stanley, had slept through a public address call to 'harbour stations' which should have alerted him to go and close the doors. This was, however, no simple case of one person's error. What the court also found was that there was no effective systern for cnsuring that the ship's doors were closed. They could be, and often were, closed by crew members other than Mr Stanley. Responsibility for cnsuring thc doors wcre closcd belongedcto the chief officer, Mr Sabcl.

-Ttlf,t.,':';;',li,f"'T:i,ti;ld".p..i,,ily

I rvould k,r.rhosc who arc rcform mindccl, trcncls' corltclnporary plrrp..iiu".fronr rvhic' to vicw arc mainrai,., provides Oiti.r""t thcy nlachines Likc " thau utt oru;tnism'o Thc corporation ir rnor" Iikc a nlichinc by humans' opcrated li, hunr"ns, motli'c. iru*unr. human invcntionr, A.riin.a-Uy thc fcw' Tl"rcy t y rhc fcw for thc bene{it of ,n;y'-"'."*rott",t machincs many Like but as complicatod as the
are no longer simple,

"^Jt't''**tti""ltr'iJ' latcstpicccof"l.tt'on'tlto"l'u"'"'lttakcsycltrsoftrainingtolearnhowtoopcrate shape humans' are crcatetl' vct thcy crcatc and and direct one- Like t;til;;;;y thcre seems community' a and ravaged If a complicatttl *"hi;;";;i ntt or hand and indignation to the

organizations'

our. moral ouirage and something pcrverse uuot't J*p'"'sing shoulJ bc adctiessed to the operators To machine. Mor" opp'op;;;";;';;;i;iunr rcsponsible' morally are Thcy' not thc rnachincs' to thc dcsigncrs of thc ';;;iti;' ascribcresponsibititytosuclrmachincs,non]attcrlrorvconlplicatcd,istarltanrountto foiln of This mystilication is a contcmporary mistaking thc crcatcd;;rh" crcaror.

"nirnirrn]Su.h
NOTtrS

bigotry' is the case for anthropological

I.ThcbesicargumcllttrIrhc;rrticlcilpl]cJrsinun.rorcdctirilctlr.crsioninFrcrtch'sforthconring rt,*.lit'i rt^tr thc opportun^ity, to cousult thtt ,r book Fttuttdutio,,, o1 Ci)-plo,'r' n'rliii,,rit,ti,y t*'to"')pii'',o't,,i':'il::',?,1,,",:l; Ll,iJ,'il?'li]; botrk. scc .'t'o t'i' '

'
,

"'tii"';t;i;"';;j;;';""

lii*;nl':"'Hl:;'i'il:,r,1'),i";#;lJ'rillli"l"lili"iii'i,l'1 iZs'i"J Ci'irt,.rphcr Stonc inWtrcrc'ftu r97el c.r. Chaprcr r'i"i'i.i"**"irli ilp" "*;ticc.rra*'
re62)' phitosophy,

tnc

' Law

crricago Pr.ss' lp' , i1';".ttHtri;?j:*"', ,):i.-'"'Ji;.i'nfl'llivcrsirv,r Populations,' which appcars *"rli'ir-:'ifor"ffy_Sf"ntino'fVnot" .,rr,i'ri 4. One of Frcnch.s

133- r36"
tn 1974)

oxiord University Press, u",aio),"'"'^ii)ii,i,i"iiriiir"i,, tli"i' i -i,,

*-nJ.::ll;lJ , *Hl::,,'"jj,"1,'.[l"":,:lL.f il -',i]]i'J:,Jll;'."Jil-i;;;r-,'i

organizations,,

'l'cii'rinttion r"ttt.:ti othcr ;fl"r"tJrl'X*",L:,il:lXfiJ'qlltilli'i"i;',.^.',nuns orsat)izational chrrt antl rccognrtron o''iit'i U Austin and '' ir'l'pi"r'*i"r' li"i1'..,1fi" i"i.,',r," rcscmbrcs :?',,iJllIlil'llii;,".,,*'
n.,tiol"iitv in

trrings' Frcncrr's rcrcrcnccs to

Formar

n riii"iii,*"-noi.-si

1O.tot

"'

iqzo), pp. 438-5I6'

Hc, though, was also required to be on the bridge during 'harbour

stations'. From the position neither he nor ship's master, Captain Lewry. could see whethcr or not the doors rvere closed.

'n

Fs] lgery"*,t"*

ancl responsibility

The court discovered that this problem of cnsuring the doors rvere closed had bcen previously recognized and brought to thc attention of senior management. In 1983 another Townsend Thoreson ship, the Pride of Free Enterprise, had set sail with both stern and bow cloors open. in 1985 thc thcn master of thc ship, Captain Blowcrs, hacl sent a mcmorlnclunr to thc company's chicf supcrintcndcnt, Mr Dcvelin, pointing out the problem ancl suggesting that indicator lights bc fitted to shou' those on the bridgc rvhethcr or not thc doors rvcrc closcd. Mr Develin circulated the rnemo to othcr senior managcrs who rejectcd the sug{cstion as unncccssary and cvcn subjcctcd it to somc ridicule . Two othcr ship's captains raised the issue again in 1986; one of them being the senior master of the Herald, Captain Kirby (leadcr of a rota of mastcrs captaining the ship). On tcp of this the directors had also becn alcrted to shortcomings in the arrangements for counting the numbcr of passengcrs on board (the limit was frcqucntly cxcccdcd) and mcasuring the draught of ships (a low draught rvas a lactor in the ['lcrukl capsize). Anothcr issuc raised at the inquiry was thc rvidcr cluestion of the stability of Ro-Ro ferries in gencral. Givcn their open car decks, thcy lack the sealed bulkheads lvirich rvill normally scpilratc scctions of dcck into rvatcrtight compartments. Flence, any floocling of those open decks can so rapidly dcstabilize such ;rs to make cvacuation virtually impossible. -lhe Herald, for example, was supposed to necd 30 minutes to evzlcuate but capsized in 90 scconds and sank in another 150. This basic design question was not, howcvcr, somcthing rvhich thc court was prcpared to considcr, though as an issuc involving all vehicle fcrries of this sort, it rcnrrins a matter of grave conccnr to n)any pcople - inclLrding thc l'amilies of thc
He raLd

{
q

victims.

Thc dccision of thc court of Forrnal Incluily rvas that biamc rcstcd not only on the threc principal crcrv merrbcrs involved - Assistant Bosun Stanley, Chief Officer Sabel, and Captain Lervry - but also the Torvnsend Thoreson company. Mr Sabel had his certificate suspended
for two ,vears, Captain Lewry for one. The company was ordered to pay f350000 costs. Follorving the Sheen inquiry, a Dovcr coroner's jury was callcd to determine the cause of death of the disaster victims. In October 1987, and against the advice of the coroncr, it returned a verdict of 'unlawful kiiling'. This opened the way for the criminai charges to be brought against thc company ancl its offrccrs. So as well as thc civil larv liability to pay damages from corporate funds (somethiug the company had nevcr contested), both the company and also spccific individuals within it now

faced the prospect of judicial punishment for the most serious kind of criminal misdeed. After a 15 month investigation, the Kent porice brought a charge of manslaugh.rer against the Townsend Thoreso" .;;;il lnd ,eu"n namcd individuars. As rvet as thc three members, stanley, Saber .crew and Lewry, the indivicruals were the senior master, thrcc scnior manascrs. Thc scnio*onrg"r, wcrc captain Kirby ancr the Supcrintcndc't, Mi A,IcincJor; rris immeoiate supcrior, Deputy Chief the Group Technical Director, Mr Ayers the raitMr Develin; and two arso being directors of the company. On 19 October 1990, after. only 27 days, the trial judge, Mr Justice Turner, directed the jury to 'withdraw from consideratio"n,'the charges the company and five of the seven individuals. lgolltt. The two individuals most crosery connected rvith the accident, str"i.i uno suu.t, wcre left out of the direction, but the prosecution decided it was not in the public interest to continuc the case'against them alone. The reasons given for dropping chargeiwas that while there obviously had becn negligence to somi deg-ree, iicourd not truu" L""ri iroven that thcre was thc 'gross negligencJ required manslaughter. For gross -for ncgligence therc has to be a 'scrious and obvious risk'. That the Herard had sailed under its. admittedly crefective- arrangemenir-o,''ro ,nuny previous occasions without miship was held to show that the risk of an accident was not 'obvious'. This outcornc does not mcan that the companies and thcse individuars rverc left unpunished. as-paying costs'and damages,-th" {1.w.ctt suffcred clisastrous pubricity. .Townscnd "o*pony 1i"t L n'nr" rhoreson, was rapiclly droppecl ancr rvirh ir-any incrusion or.Free Entcrprise,in ship,s llmgs - a penchant of the prcvious owners), Alr the ctarg"J individuars left the co.mpany; as, evcntually, clid the cntirc board. what was evaded was punishment under criminai law. Thus, the case does viviJtv demon_ strate the two difficulties dealt with in this chapte* ttrore oi iiiupprying criminal charges to corporarions and of (z) .pieici"; il; .orti6.ut" u.il, to hold specific individuars responsibre for crimes. f ,;gg;i;i made in the aftermarh of the Heralrt caie has been that trre nrst f,iJlein'could be eased by 'aggregating' the mens rea of all the individuals invorved to reach a corporate mens rea sufficient to estabrish ,h" i;rr';f .lrnpuni", for crimes. we have questioned point of estabr;hl;tG a cor_the porate intention in this chapter. Better, we would rugg.it,-to use this idea of an aggrcgate intenfion ro apportion brame between the individuals concerned; punishing them tb'the extent they contributed to a collcctivc responsibility for ciiminal misdeeds

1" "ii

t4 tgsryI"ri4
DISCUSSION 1'OPICS

responsibility

Sources: J Cook, An Accidettt Waiting to llappen (London: Unwin," 1989), Chapter 2. Issucs of the Ncw Law Journal;25 September 1987; 16 October 1987;26 October 1990; 3 May 1991.

1. Horv uscful cio you finci Friedman's agcnt/principal clistinction for 2. Which of the following viels is most appropriate for thc
determining whcthcr matters are cthically acceptable in business?
business

The work place: ernployrnent

Employmcnt and rights Thc 'right to work'? Equality of opporrunity

executive, (a) in Friedman's view; (b) in yours? (i) 'business is business'; (ii) 'maximize profits since shareholdcrs cxpect the maxitnum return for thcir invcstmcnts'; (iii) 'if you act rvithin thc larv you lutvc iullilled your ctliical obligations'; (iv) 'adhere to conventional standards of morality';

(v) 'thcre should be no difference bctwccn your own

personal

cthical standarcls and those you adopt when doing business'.

Explain tirc reasons for your allswer'

'Affirmative action' The fair wage Trade unions Employer rights and employee loyalties
Introducing thc readings
The just wage Michael Fogarty An employee bill of rights David Ewing Is an employee bill of rights needed? Dionald L. Martin The right to work: law and ideology Richard T. De George 'Because you are a woman' John R. Lucas Sexual justicc Janet Radcliff Richards
Case study

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Opportunity 2000
Discussion topics

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it is not mcrely that such a claim wourd be untrue, but that it rs difficuit to understand what University lecturers would'*""n if they made such a claim- In the present ecbnomic crimate it is simpry not feasibie to give them such large sums of money; hencc if such aspirations of grandeur are xpressea in ihe Ianguage of ;rights, ,".h;i;l;;b;;;; meaningless- of course, we may want to earn one million pounds per annum; wants can bc unlimited, but rights must be within the bounds of possibility.
more;
Nations declaration on h-uman rights dJclares that all men (and, one pretoo) are free and equar in rights. clearry trt.t. ur. certairr li^Ti_tl ygT.n and freedom of passage and,clothing; so on.

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In the previous chapter rve considered the obligations of companies to various stakeholders. In this chapter we consider thc rights of the
employee and the corresponding obligations of the management. Beforc rvc considcr employee rights, it is neccssary to recapitulate and develop some of the points about rights rvhich emergcd in chapter 3. In

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the course of outiining an 'ethic of rights' we distinguished bctween human rights ancl 'role specific' rights. It is now appropriate to introduce a third (and perfectly familiar) category of right, namely lcgal rights. Lcgal rights are importantly different from the prcvious two types of right, ancl relate to entitlements which are enshrinecl in the iaw of the land and rvhich can - gcnerally speaking * be rcadily determined by thc relcvant statutc books and by dccisions madc in contcmporary courts of larv. it is easy enough, at least in principle, to detcrminc rvhat legal rights a citizen or a busincss organization has; it is a matter iargcly of cletermining rvhat statutes and case laws exist. I-{uman rights, on the other
hand, urc pcrhaps sonrcwhat nrorc ncbulous.'l'hcsc arc rights which arc held to exist irrespcctive of where wc have been born, or of any legislation rvhich has been enactcd. If rve state that rve have a right of free speech, or a right not to be detained rvithout being charged, rve are (normally) speaking of things to rvhich wo are entitled, irrespective of lcgislation. If u,e livc in a rcgimc rvhich rcstricts frccdom of spccch or

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Further, a human right is something which is universal. The United

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wish to claim for all humanity: a right to the: l:::: ,on1 licht Dasrcs :li.t 01 100d' shcrter and a right

to hearth; a righi to safetl,

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which permits dctention rvithout trial, we could still claim that thcse rvere moral (although not legal) rights. Wc stateci that human rights generally imply corresponding obligations. If rve have the right to health, then there arc oirligations on others to ensure that rve rcmain as healthy as possible. To claim the ntoral right rve do not need to spccify precisely who these peoplc or bodies are: we may mean that an cmployer has an obligation to ensure that the rvork place is as safe and unpolluted as possible; we may mean that our doctor has an obligation to give us a consultation rvhen we ask; we may mean that a government ensures thert there is an cfficient hcalth scrvice. What does not make sense is for soneone to claim to havc such a right, but for no one to have any rcsponsibiiity for ensuring that our right is
acknorvlcdqcd.

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where a right docs not appear to be universal, such as the ofrcited right of a senior executive toholdrhe key to the executive cloakroom, il. is likely that we are speaking of a 'role-specific right' rattrer than a fundamental human right. Eiecutives are entitred io that key (their right) by virruc of trrcir position in the company. A right to u poy chequc of fl500 a month is again a role-specific rightiit deri"ves froni betonging to. a certain position (from having a ce.tain role) within an i'stituti"on; where some workers lrave a. (role_specific) right io o Iu.g., pay .t equ" and others to a smallcr one. Such rore-sp.Iin. rights,"hoJ"i"r, n,oy incorporatc basic human.rig!r.r: for exampre, thc r6Ie-spccrnc rigtrts ot workers to their salaries should incorporate the presumeo t,u*un right to a minimum wage. E,qually, rolc-specific rights'often have a-[uasl_tegat status. Sometimes thcy may be mitters of ionvention; when one of the authors started teaching, he was informed that he shourd not have a desk rvith drarvers on both sides, since he was not yet of senior Lecturer status. At other times they have.quasi-legar status, for example, if it becomes part of a formal contract (for example, what a Senior i'ecturer,s
(194.3) was

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to cxist, it rncaningfully claim a right to canr onc million pounds per annunt or
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rnust be macle about rights ;rt this juncturc; for a right must bc a gcnuinc livc possibility. Univclsity lcctLucrs cannot

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drafted, presumably its authors were.not envisaging a totally cgalitarian socicty when thcy declared that .all human bei"ngs"are born lree and. cquar in dignity and rights.'r Herein ri", ih" io, tno." ;r;;i"i, who wish to_implement a fair, non-discriminatory policy within ihe work place; horv does one reconcirc the craim that eveiyon. i, nn equal bearer
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will be). wlren tlre United Nation's (Jnivcrsar Dacraration of Human

Rights

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of rights with the obvious distinctions which we make within the work place? Not everyone earns f1500 per month, not everyone has the key to the executive cloakroom, not cveryone can give orders to other
cmployccs.

rl

THE 'RIGIIT TO WORK'?

Having undcrtakcn this gcnoral account of what rights are, wc are now in a position to considcr mors concrctc issucs of cmployce rights. Thc Univcrsal Declarution of Llumatt llights statcs that, 'Evcryone has the right to rvork, to frcc choicc of employmcni, to just and favourable conditions of work and to protcction against uncmploymcnt.'' Thc problcrn of implcmcnting such a 'right to work' policy lies in thc notion of the reciprocal duty which suclt a policy entails. Who would have thc obligation of cnsuring that evcryonc had a right to work? An obligation of such proportions could not be the responsibility of any individual employer, who would not be financiaily capable of offering work to all and sundry. Such a policy could only be implemcnted at a higher level - the level of govcrnment intervention. Without a very firm interventionist government policy it is difficult to see how a right to work could be assured. The notion of the 'right to work' presumably entails something different from an assurance that a society or government undertakes to find work for any citizen. What a 'right to work' policy can at least entail is everyone's right to offer themselves for employment, A government who imposed an employment ban on married womeu, or who restricted the type of job for which (for example) Jews couid apply, would be in violation of this Article. Similarly, in the USA the term 'right to work' is linked with a 'no closed shop' policy; trade.unions must not place barricrs to potential workers such as requiring them to belong to a union before they arc cntitlid to carn.

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EQUALITY OF OPPORTUNITY Thc Declaration goes on to state that, 'Evcryone, without any discrimination, has the right to equal pay for cqual work.'r Differentials
must be justificd. This applics both to cmployment policy and to wage

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1bid, Articlc 23, prrilgraph l. ,lbid. Articlc 13, para.qraph 2.

differentials. If an appointing panel appoints A rather than B, one normally assumes that they have good icason for doing so. Sometimes these. reasons might be hard to artiiulate, as anyone whJ has been on an appointing committee knows, but it does noi make very good sense for a pcrsonnel manager to claim that A was appointeo rattier than B, although there were no differences between them. As a consequence of thc Rercc Rclations Act and the sex Discrimination Act, icrsonncl dcpartments are obliged to have relevant reasons for refusing to appoint a black person or a woman, since explanations like 'becauie-you *"r. fcmale' or.'bccausc you were black' aie normally just not relevant. . Although race and sex are now reckoned to'bb irrclevant factors in determining who has the right to work, there are other possible grounds of unfair discrimination which arc now coming into the arenu o] public dcbate. At thc timc of writing it is still pcrmisiible to decline to appoinr r.9,":gl" on the grounds of age, religion, class, political affiliation, disability or physical appearance. If it iJaccepted ih;t the sole crirerion for ernploying someone ought to be their aLitity to do a job, then it follows that one ought not to discriminate aguinrt applicints on the grounds, for example, that they are over 35, or thai'they are overweight, or that they use a wheel-chair - unless of course these charactcristics are directly relevant to the job itself. (someone with a visuai impairment would not be a suitable ioastguard, and a wheel-chair user would probably not make a good steeplejack). So far alr this may sound very reasonable. However, in matleri of ethics things a." ner,"i quite as simple as may appear at first. Laudable though su"ch ideals of equal opportunity may seem, they invariably meet rv'ith resistance in certain circles. It is important to recognize that, however much one may disagree with the stance taken by certiin employers, their position is not necessarily the result of sheer prejudice, but thai they can uddu." serious reasons for their position. onc reason which is frequently put forward is that employers havc rights as well as employees. Surely-employers have ttre rigtrt io choosc who works for them (this is part of a 'freedom of contiact,), and if they do not feel that they can comfortably work beside homosexuals, National Front members, or- black people, then they have the right to refuse them employment. After all,-do not those who pay the pipJr call the. tune? one important point about rights (which *"'not.d in ctrapter 3) is that they can conflict, and when thiy do a choice based on relative importance has to be made. This p.roblem highrights the issue which was raised in chapter 3, nameiy the extent to which a presumed human right may set a limit on

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what may be achieved by way of optimizing human welfare. is the welfare of minority groups of workers, some of whom find serious difficulties in obtaining employment, to be limitcd by this presumed right of employers to choose freely the staff who work for them? It may be replied, however, that not every presumcd right is indeed a genuine human right, and indeed to endow employers with such a right would be to endow them with the right to be prejudiced and to discrin-rinate. As has been pointed out (see chapter4), there is not a right to liberty, only to specific liberties. One might also add that, if employers have problems about their feelings towards certain groups of workers, an alternative and preferable way of dealing with the problem would be to work on these feelings and endeavour to alter them. 'fhat way the welfare of empioyer and employee alike would be optimized, and also the most competent person to carry out the job would be appointed, thus ensuring the optimum benefit to the firm. Another somewhat similar argument, which is sometimcs used to justify a laissez-fairc approach to ernployment policy, appeals to the rcactions, not of entployers thcnlselves, but of fellow workers or customers. An cmployer might take thc vicw that thc work-forcc would not take kindly to receiving orders from a woman or from a black person, or that customers rvould be deterred if 'the receptionist had an unsightly birth mark. 'fhis argument is difficult to assess. Its critics argue that the sort of prejudice to which it appeals (a white man's refusal to be line-managed by a black person or a woman) ought to be outlawed in the work place, and that one effective way of doing this is to enforce a policy where managers are appointed solely on the grounds of their ability. The traditionalist, on the other hand, can arguc that those who are likely to experience difficulties in managing white male rvorkers have a serious shortcoming, of which it is reasonable to take account when making the appointment. In response, one might argue that if r,vhite male r'vorkers btcame more accustomed to taking ordcrs from non-white or non-male managers, women and minority groups r'vould have less difficulty in securing a foothold on the management ladder.

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tion'' Affirmative action involves the recognition that certain groups or individuals have been disadvantaged in the past, and seeks to iirprement deliberate measures by. way of cJmpensation. ihese ;t;";"h" speciar schemes to assist disadvantaged grbups; a company may, for example, launch a publicity drive. to attract-women, or seno femate'".prffir'"" assertiveness courses. Arternatively it may involve t;i"d;t.positive discrimination' (sometimes also reierred to as ,reveise discrimination,). Positive discrimination may involve the setting of quotu, ioi disadvan-

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'AF'FIRMATIVE ACTION'
achieve greater cquality for disadvantagecl rvorkers, somc philosophers and some employers advocate a policy of 'affirmative ac-

In order to

employee's gender, race or sexual orienration iip ti," ;.;i;;, when an appointment or promotion cannot be decided ,or.ry on-ir,e irounas or merit. since it is'likely rhat a work-force will be .i,o*-i"prSrented by women' disabled people, and ethnic minorities, it can be urgu"o that, if such measures are taken ro give these and othei simila. gr;;;;; positive advantage, we are likely to ichieve a more balanced *o"rt+6i"". Affirmativc action policies are at best controversial. Employers who discriminate activcly in favour of (instead of against) ."""i" may be accused of perpetratjng-r1," veiy kind of diicrimination ii"irps, to"whictr they are supposedly opposed. If it is right that jobs should be offered on rhe grounds of merit alone., then surery it is just as reprehensibre to appoint someone 'because she is a woman' as it ii to do so .because he is a man,. Further, it may be argued that affirmative action does not ultimately serve the cause of disadvantaged- groups, who, if they are tt otj..t, or affirmative action, leave themselves open to th. charge that " ihey only obtained their jobs,.not because they were the besl candidates, but because they came from disadvantag;d groups. It may even become apparent -that they perform worse than lhos'e who would have been appointed by traditional methods, thus reinforcing the porritte-pr"judice that women (or disabred people or ethnic minorities) ur" .noi'as good'. Supporters of affirmative action will adduce severar ,"uron, in support or tlgh policy. For some it is a matter of retributive justice tt ut ,n"n -u 1o, a.ble-bodied people or white peopre) should reap the .onr.lu"n"es for their historical unfair advantage which they have usurped o'vei ottrers; thus affirmative action is a kino of sanction imposed ^on tr,os" groups who have traditionally dominated the corrido* of po*... rt urgu,n.nt from.retributive justice, horvever, ir rurp.rt; the white able-bodied " man tyhq is. se^eking employment in an organization with discriminates positively in favour of femare emproyees ind minority gt";t; i, ;;; necessarily someone who deserves ;punishment' for the ilnrairness oi others. He may not necessarily havi downgraded women or aisaJvantage,t

or ir may simply involve lettfig u'poi"ntiui or

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minorities, so why shouid he pay the penalty for the past actions of ablebodied white malcs? Someone can only justifiably bc the recipicnt of a sanction if he or she had a hand in the relevant misdeed; the teacher who 'punishes' the whoic class for the misbehaviour of a few is acting unjustly, since only a few deserve punishrnent. Morc plausible defenses tor affirmative action lie in arguments resting on distributive rather than retributive justice. For example, it could be argued that, sincc employers still discriminate against women (notwithstanding recent legislation), the prospects for women (and othcrs) are unlikely to bc as good as thosc for men. Positive discrimination by other cmploycrs thcrefore serves to ensure that the prospects for wornen are enhanced, thcrcbry bringing thcm nearcr to a situation of sexual equality. r\ casc can also be made for affirmative action in those areas where women havc still to find a nichc, and whcre the problems lie in associating femininity rvith a particular occupation. For example, it is often noted that their arc few female physics teachers; the relative absence of \vomen, it is argued, reinforces attitudes of childrcn and schools that physics is a 'male' subject. Measures which were designed somehow to attract morc womcn into this domain could have the effect of working towards a greater balance of the scxes in this area, thus ensuring that future generations of rvomen with appropriate capabilities did not exclude themselves from this field simply because of their sex. If thcse arguments are deemcd to justify affirmative action policies, it is worth noting that they justify such discrimination in order to achieve a specific goal, namely greater (or equal) fenrale representation. Once that goal is achieved, there can no longer be arguments for continuing with such policies. As Janet Radcliff Richards points out in The Sceptical F'eminist, affirmative action can therefore only be justified as a short lerm measure, for very spccific purposes relating to the status of rvomen. ' Another way of attempting to avoid discrimination in the work place is to impose quotas on categories of rvorker. Rather than letting gender, race or disability'tip the scales', firms can aliocate pre-determined perccntages of the total work force to ccrtain categories of disadvantaged groups, and make appointments accordingly - or at ieast set targets to be reached within a certain period of time, as indccd some firms have in the Opportunity 2000 schemc. I Like many ideas for eliminating or reducing discrimination, quota schemes are not rvithout their problems. They can bring about situations where appointments are made not on merit but on the basis of having to make up a quota, thus leaving the appointec from the disadvan-

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only relevant factors would be tiken into account by employers. In the imperfect world of the work place, however, such-policies may be needed as a stepping stone towards the elimination of the prejudice-and the e_nsuring of greater equality for minority groups and women. But if equal status is ever achieved, then it would iuiely be desirable for these perhaps necessary but not ideal means of achieving non-discrimination to
be removed-

taged sector open to the same criticisms as might be made of someone appointed as a resuit of an affirmative action poticy. The quota can also discriminate against conventional applicants who'do not full into the protected categories, and arso - perhaps more importantly to those minority groups who-are_not subj-ect to a quota. To cite one example, the recent policy of the Indian government to reserve quotas of plicei for 'scheduled castes' in certain categories of job and in ihe universities, has made iife much more difficult foilndian minorities, such as the Jains and Parsees, who fall outside the caste slttem. Since iheir members do not belong to the 'scheduled castes', bcing non-Hindu, they now have to compete for a reduced number of jobs and Higher Education places, together with the 'non-scheduled caste' Hindus. In a world free from prejudice and discrimination, of course, policies of affirmative action and imposing quotas would not be needed, since

THE FAIR WAGE

as three pounds per hour?

o'ce an applicant is appointed to a post, how does one determine rvhat he or she should be paid? In -somewhat similar style to the Roman catholic doctrine of the Just wage, the uN Declaratiinproposes 'Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protectio;.'4 The most obvious form of differentiation amongst *o.k"r, is in earnings. of all the issues discussed by trade unionr]*ug", and collective bargaining feature the most prominently. why is it th"at, say, the chairr.u.l o{ a large corporation can earn sums which run into ,i^ figur"r, while the person who cleans his (not usually her) office can earn as little
one answer (which was considered in chapter 4) is that such issues are

Ibid, Articlc 23, prragraph 3.

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than detcrmined by economic forces. Good cleaners are easier to find operates which good comprny dir".tots, hence the price mcchanism, priced ii,r-ougtr the larvs of supply anci demind, dictates that they are put consistently have much lorver. The receni bonseruatiue governments they othcrwise forrvarci thc vicw that Yrigh wage carne;s nccd inccntives' to are likely to become pait of the 'brain clrain', offering their services the mind, in fear this countriei rvhich prouid" higher salaries. With of tax for Conservative Government oi t9Z8 drastically recluced the rate thus 40%, to it reduced further af "orn... from 85% to 60%, and remunergreater received likc the eniuring that company executives and ation in real terms for their labour. secm Similarly it might bc argued that rvhcrc jobs have fcatures which work' dangerous unplcasant.or dirty, as (iuch to mcrit .o*p"irrtion high rvork rvith pariicularly tong or unsociible hours, or jobs which carry enhanced offering for argumcnt economic is ir responsibility), there jobs p"y. Ott,", iftingt being equal, the potential supply of workers for to order in providcd wiit Uc lorvcr, u,ia tt',"rJfore some inccntivc rnust bc which 'lhe inducement most obvious attract personnel into such areas. cirn bc oflcrccl is cnhanccd 1lry. pay Whethcr rn.irkct [or-ccs litonc ought to clcl-crnrinc otrc's lcvcl of social their in Peters, S. R. anci hns becn scriously debatecl. s. I. Benn prittciples anrt thi Dentocr'tic Strilc point out, tradc r.rnions arc obliged to collective make out a case for rvage claims ivhen they are engagcd in appropriate or sufficient it consider normally ao riot thcy bargaining, and to state that members are in shorier supply or that demand for their pay is setby services is increasing. one can also point to situations rvhere low for inappropriately the levels of supplf and demancl but yet seems workers mine African South the efforts of the work force; for example, 1970s)' have been paicl very lorv rvages (about irvo pounds per day in the by unconvinced remained Britain but the majority oi citizens-in breat returning, kept workers the that justification, namely their employers" words' hence thl piy must have been set an appropriate-level (in other effectively)' operating were thc iarvs of supply and clemand If it is the cais that rirere are moral triteria *'hich ought to determine r.vrge differentials, what arc these criteria? A number havc been suggesied. One such criterion is parity' We have alrcady expresscd the require ju.stification, hence irinciple that differences between indivicluals receive equal pay for should employees that principle it is a'reasonable .equal valuc'. It is now commonly accepted that it is unjustifiable work of for an organization to offer different rates for male and female workers,

although this was once common practice in the United Kingdom. What counts as equally valuable work, however, is open to debate. As the law

currently stands, any worker (male or female) can bring a law suit against an employer on the grounds of discrimination, claiming parity with any other worker whatsoever in the firm, claiming that he or she does work of 'eclual value'. The plaintiff may cite any other worker or job rvhatsoevcr, although clearly if there are obvious points of comparison, the action will stand a much higher chance of being successful. In 1988 a female cook successfully claimed parity with three male ernployees who worked respectiveiy as a painter, a joiner and an insulation
engineer.5

Wherc wage claims are pursued, claiming parity between workers in one firm and workers in another, or betrveen workers in one country and workers in another, thc situation is more difficult. Here economics undoubtedly plays a rolc as well as ethics: a firm or a country may simply be unable to pay someone the same as another firm or country; as $'e havc argucd, a right must be somcthing which is possible to grant. Other criteria which are frequently mentioned in the context of the fair wagc arc skill, qualifications and experience. Students in full-time
cclucation sacrificc wagcs for scvcral ycars in order to improvc their qualifications, and it secms just that they should be paid at enhanced

'rt
t,l
,it

ratcs after graduation in order to compensate for their financially unproductive pcriod. Responsibility is also held to warrant compensation in the work place. Again, it seems a matter of justice that those whose performance can have serious repercussions should not receive the same rewards as those whose occupations are carefree. For example, a doctor can cause the loss of a life; a solicitor can lose a client's money or reputation; a careless safety officcr can potentially cause greater damage than a negligent clerk. Where negligence may result in one's having to compensate a victim, it seems right that the worker in question should financially be in a position to do this. One further type of criteria is the traditional relativities. Status maintenance was very much a criterion of the just wage in Roman Catholi: teaching on the subject. Certain types of work attract greater expectations than others in tcrms of the associated standards of living; a High Court judge, for example, expects to earn more than a bricklayer, and a company director more than a cleaner. It has sometimgs been argued
s
Nov

La*,Jounnl, May

13, 19ti8.

.ri ':,i
.i

t'

1a

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,d
14

i.'l

'fhc u'ork placc: crnploynrcl.tt

I

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I
.t. b

Employcr rights and employee loyalties

thiit stiltus nraiutcnancc is inrportilnt in cnsuring that ccrtain professions continuc to bc trcatcd rvith the rcspcct rvhich their status cntails; it can irc arguecl, thc Royal Family could not entcrtain foreign dignitaries if tlrcy livcd in a semi-dctachcd bungalow in suburbia, a judgc might not bc accordcd thc same respcct if thc public wcrc to scc him washing the clishcs bcirind thc kitchcn rvindow. Whcrc thc 'status nraintenance' arguntent cntails thal somconc nccds thc appropriatc conclitions in rvhich to rvork, it is difficult to cluarrel rvith it. It has always bcen an accepted criterion of the just rvage that the workcr must carn cnough to mcct his or hcr occupational needs. Whcrc thc 'status maintenancc' argument is sirnply designed to reinforce the status quo, thc argumcnt is morc dubious. Ccrtainly, thcrc is a case for cnsuring that rvorkcrs' cxpcctations arc rcalizcd in thc short tcrm; abrupt changcs in living standards can create obvious problems. Howevcr, ivhethcr thc abolition of such diffcrentials is desirablc in thc longcr term is a different matter. We havc argucd the case for having some differcntials in pay, but how rvidc such diffcrentials should be is a mattcr of asscssing thc moral casc for compcnsatory criteria, as rvell as detcrnrinc thc lcvcl of supply and dcntand I'or top paid occupations.

.+
.t

,il

who belong to the union; hence it can be seen as unfair that those wiro do not pay subscriptions shourd receive u"n"lits lo those who do. "quur Trrose who support- opting out w'l appeal to individuar freedom. surely workers have.rhe'rigf,t to determiie *h; ;;i rlpresent their interests, or indeed whetherihcy will forgo representation. The strength of a union, it can be. contencred, srrourd J"p"no ;;il;. workers arc prepared to votc with their feet o. "; their subscriptions. ,uthe, with Those who support. a closed shop will appeal to principles such as justice or lairness' no doubt claiming that those employers who wish to abolish closed shop poricies are guilt-y of 'union uuiting' onJ-or uir.-pting to placc workers simply at t[e mercy of amoral market forces. EMPLOYER RIGHTS AND EMPLOYEE LOYALTIES we mcntioned several rights of employees in the workplace. 'ave cvcr, do not emproyers rrave ri-ghts too? rrrJr*lrr"i-"Ji*"rrers Howhave a, contract of cmployment.and.many a definite j"b ;";;;;;n indicates that employccs have legal and coniractual obligations, ulra nen." tf,ut therc arc. corrcsp,onding rights on the part of employers

]-RADE UNIONS
Irinally, Article 23 states that 'Everyonc has thc right to forrn and to join tradc unions for thc protection of his intcrcsts.'("I'his right sterns from thc 'right of peaccful assembly and association'.7 The Dcchration further states that 'No onc may be compclled to bclong to an association.'8 At first appcirrancc this may secm to exciude the policy of thc 'cioscd shop' rvhich is practiscd in ccrtain professions. I-lorvever. supportcrs of a closcd shop policl' havc argued that a rvorker in such a profession has the choice to rcmain in the post or to leave; unlcss thcre is enforccd labour, thcrc is no such thing as enforced union mcmbcrship. (One might conrparc this situation with that of belonging to an authoritativc rcligious group; if onc fccls constrained by thc practiccs of, say, Roman Catholicism, onc has thc option of lcaving its ranks). Further, it can bc argucd that all nrcmbcrs of a trade or profession gain the benefits of collective bargaining, not simply thosc
t' Dcclarutittrt..\rticlc '/
s /l)i/.

that these bc carried out. Normatly t[is causes few cthicar ;il/r*r. But what happcns rvhen thcrc is a ionflict between the contra;tuur ouiigutions of a rvorkcr and his or her moral conscience? c..a;;;;;lii,'r,i"a are not infrequent in the fierd of medicar ethics, where a nurse may be asked to assist rvith abortions,. rvhen the kilring r"*t*'r""r-.""'"r". to his or "r kind her morar beriefs. A situation or ilis " is reso/ved; usually the nurse rvilr be given other ";;;r;"i"irry easiry duties, ant, since there are plenty of nurses who do not feel uncomfortable rvith assisting, both the patient's right to choose and the nurse's pr"runr"J-,i!tr, ,o act in accordance rvith conscience are observed. In reality ,uii--"ctions or ' opting out.o.n pu.t of such nurses and doctors oo not noimattl,mare r!-g . any material difference to the outcome; their choicc nor t; conrpr' is i. thercfore presumabl-r' madc' on gr.unds of principl.: .,;i.,.:; rh:rn r.,.r..r scquences, although ir is possiblclhrrt enri-nhi-,rrionisr ,,i,,r...* rrri.qhr rrrkt

,l

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23. paragraph r\rticlc 20, paragnrph L n rticlc 2(), pur:rgraph 2.

{.

" opinion.

the Yie$'that if cvL-n'onc ltctc'd likc' th('ur thc.rr thr.rr.. s'trukl t)(. l sislliti\..lrlt ;Citfcrc-ncc in thc't'rtttcontc - llnrl lt tliitcrr,.rrl.c. ttrr thc t,ct(r.r. irr tlrr.ir

A more thorourlt-going consctlrrc'ntillist nrig,ht tukc thc tir.\\' tlurt rrrrt , should fulfil onc's contractual obligations, sincc, if an employec wcrc to

i-----. --ri,ork plrcc: cmploymcnt "' ".t""I""-.rt l-3t0:l I The -

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Et"ptoyer rights and employee

fofaftiel FO,l

refuse, another colleague rvould comply. One of the authors used to know a sign writer who was a staunch evangelical Christian, and who strongly disapproved of football pools. One of his tasks was to paint advertisements for pools companies on double-decker buses - a task which he did without hesitation, arguing that if he refusecl scveral of his collcagucs would take the task over, and so the result would be exactly the same. Was it fair, he reasoned, to leave tasks to one's colleagues rvhich he was not prepared to do himself ? It is possible to entertain this kind of dilemma when contemplating the non-performance of an act. But the situation is different where a worker is contemplating a positive action rvhich, once done, cannot be undone by one's peers. One particular type of action which falls into this category, and which has aroused much discussion of late, is the phenomenon of 'whistle blorving' - the activity of 'going public' with pieces of information rvhich are normally regarded as confidential within the firm, but the disclosure of rvhich is decmed to bc in the bcst public interest. The rvhistle blower is faced rvith a very difficult moral decision. If, say, the issue is one of public safety (for example, from fall-out from a nuclear rcactor), there seem compclling consequentialist reasons why it is justifiable for a rvorker to break confidentiality. But either this must be done without the emrrloyer discovering the source of the'leak', or the whistle blorver can expect to pay very heavy penalties. Almost certainly, he or she will be dismissed (rvith obvious harmful consequences to spouses and families), or even worse. Sarah Tisclall, the Foreign Office clerk who leaked a mcmo to thc Guardian about the arrival of Cruise Missiles in Britain, was scntcnccd to a six month prison sentcncc. It is possiblc to adopt a strictly deontological approach to thc issue of whistle blorving. An ernployec might take thc view that moral principles such as loyalty, werc paramount, and took precedcrtcc over other prima facie principles rvhich arguably operate regarding such issues, such as public benefit. or the public's presumed'right to know'. Additionally, an employee might argue that it is the responsibility of management rather than the work-force to take decisions about rvhat should or shouid not be disclosed. After all, the management are paid more than the employees precisely because they must assume the responsibility for safety and security and for deciding what information should be accessible to the public. If there are legal repercussions it is they and not the potential whistle blower who rvill be the object of any legal proceedings. In short, the shop floor employee might argue, 'Am I my brother's keeper? Why should I assume other responsibility on behalf of those rvho are paid to

the whistle, then, would depend on how a deontologist prioritized the moral principles which apply in a situation where going public' is a
serious issue.

make crucial decisions?_'The deontologist, howevcr, need not necessarily be committed to dcciding- against wliistle blowing. Deontologists may emphasize differing moral principles. The imagiriary employJe of the previous paragraph stressed.company loyalty, bu1, equally, an emptoyce who is. contemplaring blowing the whiitle could appeai'to a posriute obligation to speak out against wrong. Loyalty, tre oi itre might igree, is important enough, but there are rimits 1o ioyalty, and ifiein! loyat involves acquiescing to unethical behaviour on-the-part of management, then one's duty to speak out takes precedence. whether or not to blow

justifications would probably rule out whistle blowing which was simply aimed at seeking revenge on one's employers, 'leaking' information ior personal gain (for example, from payment by a newspaper editor), or t<r consequentialist too, whistle blowing is very likely to be a last resort, since 'going public' inevitably has its undesirable effects which are besr avoided if at all possiblc. Finally, a consequentialist justification would only support whistle blowing which was likely to succeed in its aims; if thc whistle blower finds that the company continues to use unsafe practice aftcr thc whistle is blown, then the bad consequcnces are likely to outweigh the good; the whistle blower is worse off, and the company no better as a consequence. one piece of advice is often given to employees who contemplate whistle blowing; seek the support-of one's union first. This may not be a particularly philosophical oi even ethical observation, but it is a counsel of prudence which should be well heeded in view of the risks which the whistle blower runs.

what consequences whistle blowing wi[ -achieve. cbnsequentialist

If the deontologist does not have a clear unequivocal answer to the question of whistle blowing, neither does the consequentialist. According to- the consequentialist, it is not a matter of a priori principles, but rathei

further the aims of a competing firm who offered i bribe. For the

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@l

l*Thlwork

placc: employment

I
The just wage
MICFIAEL FOGARry

The

jurt

*uefl

INTRODUCING THE READINGS

Michael Fogarty's classic book 'i"/zc Jtut Wage gives a detailed analysis of thc criteria which havc becn appliccl to dctcrmine when a wage may be considcrcd to bc'just'; wc havc sclcctcd rr passage rvhcrc thc author has cxpounded scholastic theorics oi thc just rvagc, and attempts to show horv market forccs can combine rvith ethical critcria. David Ewing and Donald Martin dcbate the widcr qucstion of crnploycc rights; Erving supports the idea of a 'bill of rights' for employccs, wirile Martin is unconvincecl. Richard T. Dc Ccorgc, builcling on thc Univcrsal Declaration of Human Rights' statements about thc right to work, raises the question

of rvhether thc concept of thc rigiit to rvork is compatible with the

significant unemployment rate rvhich is accepted in the USA. The finai two readings bring us back to thc UK. Most writing about women in industry tcnds to support the strugglc of thc career-mindcd woman to havc access to the top managerial positions wliich have been traditionally reserved for men, and it is unusual to find an article such as J. R. Lucas, Rccause You Are a Woman, which actually argucs that it can rcasonirble to treat a woman diffcrently from a rlan on thc grounds of gcndcr. Lucas's article niay wcll sct readcrs'teeth on cdgc, but fcminists shouid bc aware of thc arguments uscd by rhcir opponents, if only to rebut thcm. (Some rcaders may also takc cxccption to tcrnts such as'ncgrocs' and'Mahometans'; rve chose not to edit out such references, in the intcrests of enabling Lucas's position to be clcarly scen). Janet Radcliif Richards is a completc contrast to Lucas, aud ofl'crs some very forceful arguments to suggest that gcnder is quite irrelcvant in appointing staff. Richards also considers the question of affirrnative action, which we discussed above. it should be notcd that, iu place of this term, the author uses the synonyms 'positive discrimination' and 'rcverse discrimination'.

e-stimate', the general opinion formed oui of discussion and consultation between those who, in the phrase quoted earlier, ,can communicate with one another in the same place, district, or town.'5 If the generar run of peopre m 1i""" o,"rr", are not well enough informed, for instance ab-out a new product, " i",nuo. to judgment of experti. The common estimate "pp.ui*uy can over-ride even a regaily fixed price if this is not 'reasonabre and equitabre', or is inspired by .brib"ry-,-;l1_r.Jrlt to*u.0, scllers' or crass ignorance',6 'for a raw is not bind'ing i" perhaps in order to avoid scandal or disturbance', if it is imposed inequitably or with a view to othcr than the common good.?

;; ;.re even a correct decision may cause scandal and confusion among those who do not know all tlrc circumstances' Trre truck system, say Antonino , can be operated in a way fair to workers; but it is a 'discreditable' method of payment. Even a technique such as the poyT:ni of wages by cheque gives rise to some doubt.r .Hid;.; ;;;;;" sation, can be licit if a wage is clearly unfair; but the conditions under which a worker can properly regard his wage.as so unfair as to justify what wourd otherwise be theft from his employer came by the.seventeenlr celtyv to be tightened up to the point of almost ruling such transactignl perquisites, though often permissible, ought to :uj., be scrutinised rather croseiy.3 Most of these are cases wheie transactions carry an atnrosphere of fiddring or chiseiling and so of dishonesty. sut it ;ourd seem rcasonablc to rcad out of thcrn, togctrrer with somc supporting evidcnce from othcr ficlds, a gcnerar conviction that crarity is better ttran iisuistr! even if it means no more than rough justice, To achievo thc maximum of clarity and of mutual consistency between rates - a ratc structurc that corrcsponds to thc common gbod the scholastics call for ,t," urJ of problem-solving techniques o.f all types, Jhether competitive, consurtative, or -bascd on dircction. Thcir discussions hiue focuscd around iou, pointr. First, they have a dcep distrust of purely individuar ;uogrn.'nt,:io, by common consent rve should always assume that an individuar is more iikery to;uog" uuory uno be dcceived rvhen calcurating a Just price than all the peopre tog"tt"r.;-wage_fixing must be in the fullest sense a sociar process, drawing on alr sources of information and points of vierv. Secondly, therefore, the final court of appeal over wages or prices is the .common tt.

Thc fccling renrains trrat^in matters of wagcs one should not try to be bcttcr to avoid forms of paymcnt where-crror is particurarlf '";;y too clevcr. It

is

;o;i;;;,;;;;;,

Rcading takcn fronr sociar principres and thc Democratic srarc. copyright
Unrvin.

1959

Ailcn and

i-I!_::'g\ plr*, :'"tlq:'.1!

Thirdly, tire common estimate should rcst irnmccliatcly on thc innumcrablc detailcd adjustments of a free labour market, for the foundations of mutual consistency are most likcly to be laid b1, free mutual adjustment. The older scholastics considcred certain cases rvhere the frcedorn of movenrcnt of ernployees is lestricted: in c,xtreme cases by slavery, or sometimcs by long hirings and pcnalties against breach of contract.s But the scholastics' rvorking assumption is normally that employees will be free to seek and cmployers to offer thc jobs that suit thcnr best, and that this dctailed compctitive proccss of adjustnrent rvill be the imnrediate mcans of bringing the Just Wage to light. Their ordinary working test for a fair rvage is, as has bcen said, that at that rvugc cntplovccs should Lrc frccly and rvillingly lvrilablc urrci thc labour niarkct should just bc cle arcd. Mcssucr sa1,s sintply that:
'The correctly functioning price mechanism much more easily and prccisely works out the wage.. . than could be done by an arnry of statisticians.'e properry. contrors are not to replace the free rabour market: they are to provide the framcwork within which it can^operate;;';; allow a fair,common estimate,to emerge. Nor are controilers authorised_ to supersede the wages or other conditions that the common estimate agrees to be faii; their business is to secure what is objectively right, not what th*ey .hoore to oeclare to be so. But their work does consriture, in the schorastics' view, an essenti;i-rink between il;;;;;:r", of con_ sultation, by which it is finaily,,g.""d *hot it.:.o,nronty estimated,rate is, and of competition in the free,labouimarket, by which the conditions un;rying this cstimate are clarified and, very often, the Jo*,nonry agreed rate is enforced. con_ sultation, in thc rast rcsort, decicrcs wages p"li;competition clarifies and, in detair, cnforces it: but contrors are arso needJd ,n r,uuitir", ;;;;;;;;:';i.J.r"ur", uno o, times supplement or correct both. To stabirise or consolidate wages or prices is not, of course, at at the same thing as to freeze them. The schorastics do not object ro i" th;;;;;;i,-ii. rro* it. But they insisr that it shall move in a stauie pattr "r,ung" otong it, tr.na, onJ iriut day to day or cyclical fluctuations, as weil as possibre deviations - what might be cailed ,vicious spirals'- shall be prevented by contrors. so to, inrton.e in Antinino,s conception it is for the market to set the.rate for the rawyer's fee: but, given the fair market rate, it is right to prcvent the

Fourthly, howcver, the operative word is the 'correct' functioning of the price mechanism. If the price mcchanism is to function corrcctly it needs regulation. Some scholastics have gone further than others in their belief that the dirccted economy is bcst. So. notably, Langcnstein: 'Arvav, then, with the excuses of bacl magistrates rvho, whcthcr for bribes or bccause they are fools, allorv prices to rise and fall according to the whim or grced of buyers and sellers. .. . These iniquitics [rnonopolistic practiccs] should be e.xterminated rvith the most scvere punishments, because they damn sellcrs with mortal sin, causc loss to buyers, and makc guilty mcn of thc magistnrtcs through whosc ncgligencr: these iniquitics flourish.'
Governments, he says, should use statistics of the population and its class distribution, and of family budgcts, to estimate required levels of consumption. Tritl balanccs should then be struck bctween requirements and prospective supplics, homc or imported, of t:ach class of goods. If discrcpancics shorv themsclves, possiblc remedies include the forcccl sale of excess stocks, purchasing missions to possible sourcos oi supply. export controls, reduction of irnport colttrols, forccd labour for the idle, and dcportation for the incorrigibly rvork-shy. Pricc controls should be
general.
1{)

labour, is.to the advantage'oi ir,e inaiuiauar,^who needs a rteady living: of the community, since the efficient"orgonirotion of production isencouroge o when employers are forbidcren to make prJn,'-uy u paying rabour ress than its fuil value: and of those who have to sorve ttre'probtems of a changing economy, since rvhere rates are steady there is timc to fo.m'a corLsidered opinion on them.

less long-sighted .".J*, .r the pr-ofession rroo, una"r_.utting it'.Modern write,rs say the same of the right of trade unions to maintain a reserve price for labour.12 To stick to standard .orir,* Iong as they represent the fuil varue ofeach class of

NOTES

Othcrs have been less enthusiastic for the dilectcd economy. But not even in their momcnts of strongest reaction against direction have tlre scholastics given its principle up. Dc Lugo, in the seventcenth centurv, pcrceivcs clearly all the deficiencies of a controlled nrarkct. ilut he still insists that price control, in particular, is 'nrost necessarv' rvhere thcre are ferv sellers, or to stabilise the priccs of dirily nccessitics rvhosc purchasc cannot bc put off, or to avoid disputes or fraud on sinrplc-mindcd or occasional buvcrs. Hc approves particularly warmly thc practicc of fixing hote l prices

2' cf' Dc Lugo

J. Langenstetn

- Antonino 3.E.4.4. 3. {. Rcginaldus (l7rh ccnrury), quorcd in Rocha, I.l?.

1.5.

1. Antonino 2.1.17.7 -8. 1'16.'{.2: Lessius 2.24.4: and sourccs (e.g. Innoccnt XI, or Viva (1zth_lgth ccntury) quoted by Rocha, l(r9.

6. Molina 364: Lessius 2.21.2.

Aquinas, Sutnnm Tltcologicu. De Lulo 2.2e.3, and nratcrial quotcrl by Rocha, p. l48_e. f: irj;r[:1?11505, 10. Langenstcin 1.7 an<l l0-t2. 11. Dc Lugo 2.26.4.

l.

lnd requiring hotel-kcepcrv to post these prices up.tr So also in thc twenticth centurv lvlessner, having made his declaration in favour of compctition and thc pricc mechrtnism, insists tlrat social controls must be used to make this mechanism rvork

,t

L".?;::f"cc

Lehmkuhl con<iemns (1.71.1) firms which forcc orhcrs into wage-curring: or

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The work placc: cmployulcut

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An employee bill of rights

An employee biil of rights

DAVID EWING

For nearly two ccnturies Anrericans huvc cnjoycd frcedom of press, spccch, and assembly, due proccss of larv, privacy, frcedom of conscience, and other irnportant rights - in their homcs, churchcs, poiitical forunrs, and social and cultulal life. But Americans have not enjoycd thcsc civil libcrties in rnost companies, governnlent agencies, and other organizations rvhcre thcy rvork. Once a U.S. citizcn steps through the plant or officc door:rt 9 a.ttr.,lrc or shc is ncarly rightless until 5 p.nt., Ivlonday tlirough Friday. 'fhc crnploycc ctlntinucs to llavc political flccrlonrs, of coursc, but thesc arc not thc signilicant oncs now. Whilc at work, thc impol'tant
relationships are with bosscs, associatcs, and subordinatcs. Inequalities in dealing with these people are rvhat really count for an cmploycc. To this gcneralization therc are important cxceptions. In some organizations,
generous managements have seen fit to assure free spcech, privacy, due process, and othcr conccrns as privilcgcs. But therc is no guarantcc thc ltrivilcgcs will survive the next change of chief cxecutive. As former Attorney Gcneral Ramscy Clark oncc said in a specch, 'A right is not what sonteone gives you; it's rvhat no one can take from you.' Defined in this manner, rights arc rarc in business and public organizations.

;:llJi:,:iffi."t"*:'
cri
ti

'nr;ry disntiss ,n.t. .r.ll:l.cs rvill.. . . for good cause, for no cause, or even Jbr cuusc nrorally wrong, wilhou: ,at. bejng thereby g"uilry of f.gof *ron* ,i""-, of coursc, disc'arge is onry the-ex,r"r, i.rpon; many stcpi short of dischargc rnay work wcri cnough loss of a raise in poy, demotion, assignment to thc boondocks, or pcrhaps simply a cutback or normal and expected benefits. consider the case of a ihirty-fiv"-y.ur.iJiusiness executive whom I shall cair 'N{ike Z.'. FIe was a respccted research manager in a large company. FIe berieved ro compry with'newry enacted 'iting onrv

'up".n.iuierrorts

In cffect, U.S. society is a paradox. Thc Constitution and Bill of Rights light up thc sky over political campaigners, lcgislators, civic lcadcrs, families, church pcople, and artists. But not so over employecs. The employec sector of our civil libcrties universe is more like a black hole, with rights so cornpacted, so implodcd by thc gravitational forces of legal tradition, that, likc thc giant black stars in the physical univcrsc, light can scarcely cscape. Perhaps thc rnost ironic thing is that only in rccent ycars havc Amcricans made manv noises about this paradox. It is as if rvc took it for grantcd and assumed therc was no alternative. 'Organizations havc always bcen this way and always have to be,' wc seem to say. One is reminded of an observation attributcd to Marshall Mcluhan: 'Anybody's total surround, or environment, creiltes a condition of nonpcrception.' To put the situation in focus, lct us make a brief review of rights in the workplace.
SPEECTI

and moved his farnily ,. ,""rt.. .i,y. could be armost anyone in thousands of companies, government agencies, rnd orher organizations.rt should rherefore, rhat when it comcs ro speaking out on issues o{ company""r.b;;;;;;ing, porcy or'munagement practice, emproyees makc about as much noisc as lish swimmlng. ' so well-cstabrishcd is the.idea tha'i any criticism of 'finking'rhat some companies r,ong .the company is.ratting,or oJ'*lii.n prohibitions for all to see. For a private bus company on the West Coast puts employees on norice with iiliiTrll,
Mrke

io a poriticar dissenter in the sovier pr,"r.irg'r", was cancclcd. Thcn his namc was .rhr.:orp^1ny 'accidentaily' 'is renroved 1| fronr trrc orn.! iuroirig dircctory insidc the main entrance. Soon routine rcquests orr*O froi"'rrionut meetings began to get f: ll* ,o he snarted up in red tape or were'rost.'Next t""rililrr"rharassed by directives to rewrite routine reports. Then his budget ro. .rrri.or-r.rvice was ."r, io'"*"J by a drastic slash in his research budgct. wf,en he ;.1; prot.rt this treatment, he met a rva' of top managcmcnt sirence. Rather rhan see his siaff sutrer rurti,c, r".-rririlrria"nce, hc quit his job
Union' First' pr.ce

diffcrcnr "only in degrec from wrrat "il:: rrappens

ca,

y r t; ;

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Hil

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The company rcquircs its employces to bc loyal. It will not toleratc words or acts of hostility to the company, iis officers, ug.ntr, or employees, its services, equipment or its condition,-or. . . criticisms of the company to others than. . . superior officers. CONSCIENTIOUS OBJECTION Thcrc is vcry iittlc protection in industry for employees who immoral, unethical, or illegar oroers frornit"-ir'rup.riorr. object to carrying our If the emproyec doesn,t like rvhat he or she is askeJ to do, the r";.dy I to pack up and t"uue. Ttis remedy scerns to presuppose an.ideal economy, wheie there is anlther .";;;; down the srrccr rvith openings for jobs just like t-he on" the employee left. But what about the rcal world? Here resignatt:n mean hauingio uproor one,s family and move ro Tu{ a strange city in another state. or it may n,"unjfo, an employee in the semifinals of a career' or.fo.r.ul emproyee with a speciarized competence, not being du able to find 'v! vv'r.' on:,h.:.::uilr.b.lc job anywhere. In 1970 Shirley zinman served as a secretary in a phiraderphia
ernproymenr agency

In many private and public

organizations therc is a well-oiled machinery for providing relief to an employee who is discharged becausc of his or her race, religion, or sex. But we have no mechanisms for granting similar relief to an cmployee who is discharged for cxercising thc right of frce specch. Thc larv states that all employcrs
Reading f.rom Freedom lrcide the Organization by David Erving. Copyright O 1977 by David W. Ewing. Reprintcd by pcrmission of thc publishcr, E,. P. Durton, a division of NAL Pcnguin, inc.

trl tr" nr.k ptac.' ..pI"y."* called LIB Services. One day she *'as instructed by her bosses to record all telephone conversarions she might have with prospective clients. This was to be done for 'training purposes,' she was told, although the callers were not to be told that their words were being taped. The office nanager would monitor the conversations on an extension in her office. Ms. Zinrnan rcfused to play along with this game, not only bccausc it rvas unethical, in her view, but illegal as well - the tclephone company's regulations forbade such unannounced telephone recordings. So Ms. zinman had to resign. she sought unen.rployment compensation. The state unemployment pay board refused her application. It reasonccl that hcr rcsignation was not 'compelling and necessitous.' with the help of attorneys from the American Civil Liberties union, she appealed her case to the pennsylvania commonwealth court. in a ruling hailed by civil rights leaders, the court in 1973 reversed the pay board and held that Ms. Zinman rvas entitlecl to unemployment compensation because her objection to the unethical directive was indeed a 'cornpelling' reason to quit hcr job.2 what this interesting case leaves unsaid is as important as rvhat it does say: Resignation continues to be the acceptecl responsc tbr the objecting employee. Tlie Pennsylvania court took a bold step in favor of employec rights, for prior to this decision there rvas littlc rcason to think that the Shirley Zinnrans of industry could expect any help at all fronr the outsidc rvorld. But within thc organization itself, an ernployee is cxpcctcd to sit at thc fect of the boss's conscicncc.

an .*proy.. uin or.idir

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;:i;XI;iJien

fired for his or her choice of outside activities can expect no damages for his loss even if he or she wins a suir againsr rh.;;;rol"r. the sright sarisfacrion.of ...ingiir-.-fi-ot.ri"n". on,y .r..ur. the sraturory pcnariies.,l Ironica,y, however, a con)pany .rnnoi discriminatc.against peopre whose poritics it tires thc;.4 Ii ;;; a rew dais exercise

iil:;il,*,,ii|

;;;;i;

;;i;;;';-

its

DUE PROCESS 'Accidents will occur in the best-regulated families,, said Mr. Micawber in David Copperfietd. simiiarly, ra.i"irt*tion

:flffi];;,i::H;,r";1
;:il:ilfi:",:TnrJ*"

occur .acciclcnts "r i"'ii"'u"sr_managed companies' wirh neuroric, inepr, or dir;;;dJ^;pervisors ""." infliciting needress harm on subordinates. Manv n .ruorainut. *r,o'j"iri"'r".t a boss to proi.rt wourd be u,ell_ J;"0""?'"n' is rikerv the

;il

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opcn

This generalization does not hold for civil service_ emproyees in the federar govern_ ment' who can resort to a grievanc. "grievanc' p.o""rr. Nor does it hord for unionized have sut it most other organizations voluntarily have establish;; a irechanism to ensure duc process.

i'i"li""'

SECUITITY AND I'RI\/ACY

when employees are in their homes, betbre ancl after rvorking hours, they enjoy
tvcll-cstablishccl rights to privacy and to protecrion lronr arbitrary search and seizure of their papers and possessions. But no such rights protcct them in the average company, governmcnt agency, or other organization; thcir superiors ncecl only thc flimsiest pretext to scarch their lockers, desks, and flles. The boss can rummage through an emplovce's lcttcrs, mcrrorancla, and tapcs looking for cvidcncc that (let us sav) hc or she is abour to'rat'on thc compan1,. 'Rnil.ing'might includc rcporting a violation of safetv standards to the Occupational Safety and Ilealth Adrninistratiol (v'hich is pro'ided for by iarv), or telling Ralph Nader about a product defect, or gi'ing the mal'or's office requested information about a violation of energy-use regulations.

Xl."i'""i:::,:fti1"Jff..-"m
They
rrre.

secc,nd organizations. As we shall ,i,"k;iiiin employec consritutionalism consistioi; tr.,i, uont, ;;;; crearry defined rights, and a means of

Thc absencc o'" rtnli,,l:iu-c process is especialry painful because it is the elcmcnt of constitutio"nalisrn in
crischarge'

d';;';,

oi other p""ii,i.,

i']o,.a

*n"n

why bothcr about rightres-sness is corporations, government organizations?

;::1

CIIOICE OIr OUTSIDE ACTMTIES r\n*D i\SSOCIATIONS

In practicc, most

business employees enjov no right

political, social, and community organizations of their choice. To be surc, in many companies an enlightened management will encourage as much diversity of choice in or"rtside activities as enrplovees can make. As notecl errlicr, holever, this is an :;, indulqencc rihich can disappear anv time, tbr most stares do not nrandate such rights, ,,.
and even in those lhar tit-r. the rights are poorlv protected. An emplovee l'ho gets
r

to rvork after hours for

the

the states conrpanies and governrnent ng"n.ie, werc tiny organizations bureaucracy' Indeed, to usc Nir. Mi;";;.1';nia.e, ttr.re

rn 1776' and in 1789,. rvhen tte Bit nigi,, (first ten amendments constitution) rvas passed by cong;;;r;;;;'r"" "i
rvas harcry roonr

it seems likely that ,to? ,n"n, if here today, would want to e.xtcnd their philosophy,to.othcr_arr.mutuge, olequivalent size and magnitude. tnc wrrrngs or Janres M.dison, rn Thorn.s;""rr.rron, George Ilichard FIenry Lee, Erbridge an,,,,pr, c..ry, and others, there is no inference that human rights were seen as a.good thing only. some the time or for sonre places' Instead, the Fathers saw rights as a universar need.5-of

For onc a'swcr, rct us turn to thc Founding Fathers. of course, they did not kn.w or conceive of the modern corporation and iub'c agency, so we cannot their thoughts about ail ,hit ;l;;;;;.'i"#"t"rn^ps read what we can make a reasonabre gue"ss, howevcr, by comparing ,Jr. nurU.*." ' rr the original thirtccn colonics wcrc large and powerfur enough to conccrn thc Founding Fathers,

H:#": 11ffi:i:1"'i:*Ii;;'';;' :;;;:'".

much smaller

r,*" ;;;;;

and federal g";;;;;;;r, arc rhcy -ro*v onrv ror o,-,o r,ou., p",

agencies, and otrrer

r-uri.r-;;;r,

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f";;;;;;;;, rrading i".,,p;;;;;arboring

in rhem

to

the

I Thc u'ork Dlacc: cmolovrncnt

@
1' No organization or
manager shail discrurge, demote, or irt other ways discriminate agairct any enrytoyee who criticizes, i, spirit, ,;;;;;'iir,'ffin,y, or sociat responsibility of managemettt actions. Conrment: what this right does not say is as important as what it does say. Protection does not extend to employees wto mate nuisances of thcmselves or o",l: argue, or conlesr managerial decisions *y,]l matters, and plannrng such as the choicc of inventory accounting "" ";.";-;;*** method, whethcr to diversify the product line or concentrate it, whether to rotate workers on a certain job or speciaiize them, and so forth. 'committing ttre truttr; ;;;;;, Fitzgeraid callcd it, is protected

to srving a cat, much

less create layer on layer of hicrarchy and rvall aftcr wall of departmcntJl structurc. Today all that has changcd. Somc of our corporate and public organizations have larger.'populations'than did thc thirtccn colonies. And a truly vast number of organizations havc large enough 'populations' to rank as rcal powcrs in people's cvcryd:ry livcs. For instancc:

";;;;;

. AT&T has more than 939000 c r

cmployecs, ncarly trvice thc size of thc lar-gest colony, Virginia, rvhich had about ,193000 inhabitants in 1776. General Motors, r.vith 681 000 cn.rployces, is ncarly trvo and one-half timcs tho size of tite second largest colony, Pcrrnsylvania, rvhich had a population of about 284000 people in 1776. Westinghouse, thc thirtcenth largest corporate cmployer today with 166000 employees, is four times the sizc of thc thirtecnth largest colony, Delawarc, which had a population of 4i 400. Westinghouse's 'population' is also larger than that in 7176 of South Carolina, Nerv Jerscy, Nerv llampshirc, Rhode Island, and Georgia.

.1

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$ J.

In fact, 125 corporations have larger 'populations' than did Delaware, the smallest colony, in 7776. But can cmploycc workforccs legitinrately be compared with state populations? Of course, there arc important differcnccs - the twcnty-four-hours-perday jurisdiction of the state as opposed to only cight hours per day for an cmployer, thc fact that thc statc has courts and military forces whilc the employer does not, and othcrs. Yct it is not an apples-and-organges cornparison. Decades ago, and long bcforc corporations and public aecncics achicvccl arrything likc thcir currcnt sizc, political scientists were noting nr:rny irnportant similarities bctwcen thc governments of organizations and political govcrnmcnts. In 1908, for examplc, Arthur Bcntley
wrotc:

2' No cmploycc sha, bc penariz.cd for engaging in outside aclivities of his choice after working *hetiu poriirZ-r, ,cono*ic, civic, or curiurat, or rttr ,hiurs., nor for buying products andservices of his' or i-u choice for pcrsonar we , nor for ex_ preslittg.o1 encouraging views contrary ro rop
and social issucs.
monagemcnr,s on poriticar, economic.

illlil"

average citizen's judgment to be is valt an expert,s *"rt standards, quesrions of fair as disclosure,

only for speakini ou, on issues where we consider an - truth in advertising, p.""iices, and so

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A corporation

is governnrcnt through and through. . . Ccrtain technical methods

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which political government uscs, as, for instance, l.ranging, are not used by corporations, gcncrally speaking, but that is a detail.6

il

In numerous rvays, sizable corporations, public agencies, and university administrations qualifl' as 'minigovernnrcnts.' They pay salarics and costs. They havc medical plans. Thcy provide for rctirement inconre. Thcy offer recreational facilities. They maintain cafetcrias. They may assist an cmployec rvith housing, educational loans, personal training, and vacation plans. They schedule numerous social functions. They havc 'larvs,' conduct codes, and other rules. Many have mechanisms for rcsolving disputes. A fe*'cven kcep chaplains on thc payroll or nraintain facilities for religious u'orship. ^Accordingly, it seems foolish to dismiss minigovernments as possible subjects of rights, or to exclude emploi,ees fron'r discussions of civil libcrties. We have assumed that rights arc not as important for employees as for political citizens. Our assumption is in crror. Thc bill oi rights that follorvs is onc pcrsotr's proposal, a 'rvorking papcr' for discussion, not 0 pliltform *orkcd out in comntittcc.

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conunent: The purpose.of this right is'to utio.o job security to subordinates who cannot perfornr an action bccause they consider it uneihicar or iilegar. it is important that the conscientious objector in sucrr a case hold to a view that has somc public acceptance. Fad morariiies - messages from flying ,uu.".r, mores of occult religious sects, and so on do not justify refusal to .ur.i oui un o.o.r. xo, in any case is the emproycc enritred ,o in,.ri.r. with the bois,s finding anothcr pcrson to do the job rcquested. 4' No organization shail airow aucrio or visuar recordings of an employee,s conversatiorts or actions to be made without his or her prior knowredge and consent. Nor may an organization require an employee or ipplicant ,o ,ii, p-uri,roUty rcrrc, exantinations, or other tesi ria co,,stiiite, in his opiniin, o, inr^ion oy i,:r,,:r::;:O Connrcnt: Triis right is based on policies that some leading organizations
have

does not authorize an emproyee to come to work ,beat, because he or she tras been moonJighting. participation in outside activities should enrich employees' tives, noi debir-itate-the*; iion-,tojob performance suffcrs, the usual penalties maj tuu. ,o be paid. No organization or nrunagei sha, pcnatiie an emproyce for refusing to carry out a directive that violates conrmon norms of morality.

f;:5::r"",, . Note that this provision in the morning

state statutes as weil as in arbitrators' decisions. The third part of the statemenr extenis thc protection of the First Amencrment the cnrproyee whose ideas abour economic policy, religion, and sociery-do not corrfo.m with thc

Connrcnt: Many companies encourage emproyees to participate in outside activities, and some states have .om*Itt.J iris rignt to regislation. Freedom of choice of products and.services fo. p".sonol use is also authorized in various

i;

!gI I Il"':o'I
5. No

plrc_c:_ggplolegnt

-I

[- -conditions.

ttt

already put into practice'

If an employee doesn't want his rvorkirrg life monitorcd' thatishisprivilegesolongashedemon.strates(or,ifanapplicant,iswillingto

demonstraie) competence to do a job well'

consuming for the employees who are required to appear as complainants and witnesses. The nature of a 'fair hearing' is purposely left undefined here so that different approaches can be tried, expanded, and adapted to changing needs and

in his or hcr ubscnce by entployee's desk, Ji'lcs, or lo'k" o'oy b.e exatninecl tlrut tlrc liles conlnin ut ltelicvc reuson an!-otte but a senior mutt;ger v,lto lrus soimd in tlrc employee's nude bc nut.st tltut lCCisiott inforttrutiott ttcctle 4 Jor n inorrngr,rrr,rr
absence.

pcoplc a privacy right as cnrployces Conurrnt: Thc intcnt of this right is to grant social citizcns under the'scitrches and political as similar to that rvhich they enjoi gifi Amcndmcnt to thc Con(Fourth Ilights of tft" of guarantec seizures'

lnd

stitution)'jvlanylea<lingorganizationsinb-usincssanclgovcrnmenthavcrcspected the principlc of this rulc for some time' on lile inforntution abottl urt 6. No etnplol'r,, orgnuizotiott may collecl anc! -kcap efliciutt matutg(nrcnt''Evcry etnetnployec tltut is not relcvant untl "cc'su'y for lrcr.personnel lile and challenge the his.oi ;i;;;; shall have,t,, 'iqli" to irtspect in it' exiept for pcrsonal c'val.uations and accLrracy, relevtttrcc, o'''i"ce'sity of data

cotl'ltllctl|sbyotltcr,,nployu,sv,hichcoulclnotrcasonablybeobtainedifconfitletttialityh'erattotpr'onr-isetl'Accesstoanemplol'ee'sfrlebyoutsideindivid' about tlrc cssential fucls of and organizutio'tts slnll be limitctl to inquiries
uals to bc nlllsters of thcir employCorrrntutt:This right is irnportant if cmployccs 0re It rvill hclp to elintinate thcm. oi viciims possible of ment track recorcls inrt"na closet' surprises, secrets, and skeletons in thc clerical of un entployee wln is 7. No nranager nlav corttntunicale ro prrtspective entployers tlrril rnighl lnmpcr lhe ipinions gratttitou-s disclnrged about to be or ltas beett intlividuul in obtainirtg I nav' posi!iorl' blacklisting. The courts have already Conrnterrr: The intent'of this iight is to stop
given somc suPPort for it'
entployrrteril.
1

Note that the findings of the investigating official or group are not binding on top management. This would put an unfair burden on an ombudsperson or 'expedited arbitrator,' if onc of thcnr is the invcstigator. Yet the employee is protectcd. If managcment rejccts a finding of unfair treatment and then the employee goes t:o court, the investigator's statement will weigh against management in the trial. As a practical matter, thercfore, employers will not want to buck the investigator-refcre,e unless they fervently disagree with the findings. Every sizablc organization, rvhcther in business, government, health, or another field, should have a Sill of rights for cmployees. Only small organizations need not have such a statement - personal contact and oral communications meet the need for them. Flowever, companies and agencies need not have identical bills of rights. Industry custom, culture, past history with employee unions and associations, and other considerations can be taken into account in the wording and emphasis given io different provisions.
NOTES

I
!

1. Sce Lawrcncc E. Bladcs, 'Enrployment at Will vs. Individual Frcdom: On Limiting thc Abusivc Excrcise of Employcr Porver,' Colunbia Law Review 67 (1967):1405. 2. SPa.Comm.Ct.Reports649,301A.2nd380(1973).AlsoseeNervYorkTimes,August26,
1.9'13.

I t

S.Anentplovecw,hoistliscltargct!,dentoted,orlransfcrradtou!.csstlasirablejobis of its reasons for .thc pcnalty' eiltitle(l to a vyrit!en stutenrcnt front ntanagen'tcnt a managcr to givc thc same cncouragc conutlctlr:The ainr of this piovision is to

i
l
9

3. Blades, 1412. 4. Scc 299 F. Supp. 1100, citcd in Employce Relarions in Actions, August 1971 (New York, N.Y., Man & Managcr), pp. 1-2. 5. Sce, for cxamplc, Bernard Schrv:rrtz, The Bill of Rights: A Documcntary Hisrory'. Vol. I 6.

{
$

rcasonsinaheirring,arbitration,orcourttrlalthathcorslrcgivcstltcemployce need not bc given unlcss when the cutdown hnpp"n'' The writtcn statement

t J t

(Toronto and New York: Chclscl Ilouse Publishcrs in association rvith McCraw-Hill Ilook Conrpany, 1971), pp. 435ff. Arthur Ilcntlcy, 'fhe Process of Governnrent, cited in Arthur Selwyn Miller, Tlc lvlodern Corporale.ltcte (Westport, Conn.: Crccnrvood Prcss, 1976), p. 188.

,.qu"rt.a;oftenitisso'cleartoallpartieswl.ryanactionisbeingtakenthatno
document is necessarY'

t i
3

9.

lrus Evcrl- ertrplovee n,tro'.,rrl thul lrc or.slrc .bccn offciul' u to entitled be fair Ircu'ring bet'orc an inlpa.rtial bitl'shull describccl in rhis d be delivare shnll hcuring ilu: of and conclusions boarrl, or orbitrator.ll,t,,,a und tnunagamenl'. in writing lo lhc employee 'irttiugs is the organizational-ccprivalcnt of due Corttntcttt: ff-,i, u"'y'in.'Porrant ri{ht process ancl community life . Without due process of la*, as ,u.'t ,ro,,, ir in pcitiiicat by cnforccd be to have all rvoulcl bill thc righs.in.this

penalized for usscrtit'tg uny rigltt

I I i I
t

in a complnv
outsicle

as rvcll as time^;;;;;' tribLrnals, iultitl.' i' expensivc for socicty untl .ourt.",

:p
v

@1.* work

place: cmployment

Is an employee bill of rights needed?

Is an ernployee bill of rights needed?

DONALD L. IVIAIiTIN

trr

'lhc

pcrccption of thc corporation as un industrial form of govcrnnrcnt in rvhich milnagcmcnt plays thc rolc of thc govcrnor and labor thc rolc of thc govclnod has bccn particularly popular sincc thc cnd of World War II. 'lndustrial dcmocracy'has becn thc slogan of thc labor movcnrcnt in the industrial rclations cornmunity. This analogy has reccntly givcn risc to clcrnuncls lor an 'Eniployec Bill of Rights.'l Such a bill rvould guarantcc the worker thc sanre duc proccss that the Constitution guarantccs thc citizcn. It rvould protcct the rvorker frorn thc arbitrary and incquitablc crcrcisc of ntanagcri:rl disclctiorr.
'I ,{ ! I
ri

i'

',8

\YIIERE

TIII]

INDUSTIIIiTL DUNIOCIIACY ANALOGY FALTBRS

are directed. Intercstingry, nronopsonisti. po** in trrJ"Lcr market may be a significant factor at the local government .rcver. i,vidcn* r""oprony exists in such ields uuv' ,!rul as public 'r cducation, fire and police protection, "r and nursing.o

No one would claim that the American economy is completely free of monopsony power' Therc is not a shred of evidence, on the other t,."0, trr"ir".li power exists in the large American corporation of today. ii"r"',r'*oiil'ril" to suggest that nronopsony is not rikely io bc .found in rarge, private"uio"n.. corporatrons. Robcrt Bunting's examination of raror market .on..nt.uiion'tir.ougnout tr.," United sratcs amons rarge firms, for;;;;, finds that emproyment concentration (nrcasured bv thc friction of total a geographic area *ho are employeci bv thc l;rrgcsr rcr)orrirq.fir1 in.that "rp;t;;;;; ;r;tl; ..L"a inversely to labor market sizc, u,hilo firnt sizc is correi-ated positively with labor market size.2 It is rvell known that monopsonistic powers reside in the collusive owners of professional sports tearns, preciicry because ,t po*"r, are exempt from antitrusr laws in the united states.3-nror.trtnur "r" however, rfor,. nLr, o" among the Iarge corporarions at which 'Erpr;t;;;ri'oi "oi ""."u"r nigntr' proposars

Iil;;

But, thc industrial democracy analogy surcly nrust be false. Trvo intportant considcrations obviatc it. First, a crucial distinction bctrvccn government at any lcvel and private ccononric organization, corporatc or otlrclrvise, is thc right entrusted to govcrnnrcnt to cxcrcisc lcgitirnatc rrncl rcasonilblc forcc in its rclaticlrrs with its citizens. Second, thc cost to a citizcn of srvitching aflliiation bctwcen govcmments is far greater than the cost to an employee of switching afl'iliations between firnrs. Since govcrnments will surely violate public trust through their police powcrs, and since thc costs to citizens of changing lcaclers or residcnces arc lelativcly high, citizens tvill scek institutiorls to insulatc thcnrsclves from thc arbitrary and cxploitative usc of such powcrs by thcir elcctcd antl lppointcd rcprelcntatives. These institutions includc thc first tcn amendnrcnts to thc Unitcd States Constitution (thc Bill of Rights) and thc Fourtccnth Amcndnrcn[ (guarantccing duc proccss).

TIIE NATURE OF EMPLOYER.EMPLOYBE AGREEMENTS

of the United States does not extend the Bill of Rights and the due process crause of thc Fourtccnth Amendment to the private r".,".".,"r"r, agents of thc lattcr are performing public run.tion, irvlo ish v. state of Arabama,66 s. ct. 276
The constitution

TIIE PROIILIiNI OIr TIIE NIONOPSONIS'I'IC t,.rgotr NIARKI|'I' to an analogous use of cxploitativc lorvcr in the private sector occurs in thc world of monopsonistic labor rnarkets. In thosc labor markcts, wouldbe employees have fcw, if any, altcrnativc job opportunitics, either becausc ol an abscncc of immediatc compctitive cmploycrs or bccause of tlie prcscnce ol rclatively high costs of moving to availablc job altcrnativcs in othcr rnarkcts. With few or no
Something close

job altcrnativcs, rvorkcrs arc morr: likely to bc thc unrvilling subjccts ol crnploycr
prejudice

(1946)l' Insread of interpreting this limiiaiion. fathers, the prcceding discussiJn rugg";;; .u, an oversight of the rbunding ,;; the distinctive treatmenr accorded governmcnrs reflects the conscious b;fef that market p.o."rr.r, ;;;;" political processes, yield a degree of protection of their participants that is closcr to revels that those participants actualr-y desire. It urro ,ugg.rt, that this inherent difference justifics rhe institurionarization or riu"rii., in on" ro.,n of activity (poriticar) and not.in the othcr form (nrarkct). "iuil This interprctarion is consistent with the repeated refusal of the United States Supreme courr to interfere,with tirc.rigrrts oi.r!roy"., ."d ;,";io;;rl.o.por",. o, otherwise) to make mutualry agreeablJ urrung.;"n* concerning the exercise of civil libcrties (otherwise protected under the coristitution) on the job or in connection with job-related activities. (The.obvious r.;iil;i"" exceptions ro this generalization are the wagner Acr of 1935 and the Taft-Iiartley ect oi tg+2. Th.r;;; proscribe thc frec spccch rights of cmploycrs *itt ..gu.J to their possibre influence over union elcctions on thcir own property, while a'o"wing labor to use that same property for sirnilar purposcs.) of mo'opsonistic power, the substantive content of an emptoyer_ employee relarionslrip is the result oi expticit anJ rmpticit brrg"i"i"g;;;leaves both parties bctter off than they-w.ould ue ii ttrey had not enterei i",oir,. ..i.rionship.

oppression. and pcrsonal discretion than

if

labor markct competirion

In the

absence

prcvails.
Rcading from flrc tlttuck on Corporutc Anrcrica, cditcd b1, lvl. Brucc Johnson, Univcrsitv of Miami Prcss. Copyright O 197S. Rcprintcd rvitli pcrnrission.

That both are better off follows u".uur.'.u.i is free to end tt..-rproy*"nt relationship at will - unress, of course, .ont*"iuut relationships ,i.iri'ott".*r.".

LE

,'vork Placc: emPloYment Li I The

F4
Prohibiting thc gathcring of such information by superimposing an 'Employee Bill has the effect of penalizing a specific group of cmployces. This group is composed of those persons who cannot otherwise competc successfully for positions of responsibility, trust, or loyalty because the high cost of information rnakes it unprofitable for them to distinguish themselves from other workers rvithout desirablc job characteristics. Thus, federal protection of r:he civil liberties of employees in the marketplace may actually harm those who wish to rvaive such rights as a less expensive way of competing. Under an 'Employee Bill of Rights,' the process of searching for new employees and the proccss of managing existing employees are relativcly more costly for an enrployer. This greater cost rvill be reflected not only in personncl policy but also in the cost of producing final outputs and in the prices consumers pay for them. lln effect of an 'Employee Bitl of Rights' would be limited dimensions on whir;h employces may compete with each other. Although there are precedents for such limitations (for example, federal minimum wage laws), it is important to recogni;le that this kind of protection may have unintended effects on the welfare of large numbers of employees. Thc anticompetitive effects of institutionalizing due proce.is ancl civil liberties have long becn recognized by trade unions. These effects constitute an important reason for the interest unions have in formalizing the procedure:s employers use in hiring, firing, promoting, demoting, rewarding, and penalizing union employees. It is false to argue, nevertheless, that an absence of formzrl procedures and rules in nonunionized firms is evidence that workers are at the mercy of unfettered employers, or that workers are more likely to be exploited if they ar,: located in corporations rather than in noncorporate forms of organization. Even the most powerful corporations must go to an effectively competitive labor market for thcir personnel. Prospective employees see arbitrary and oppressivt: personnel policies as rclatively unattractive working conditions requiring compensation of pccuniary and nonpecuniary differentials over and above what thcy woulcl receive from alternative cmploymcnts. Those workers who want morc certainty in the exercise of civil libertics pay for that certainty by forgoing these compensating diffcrcntials. Tlris rcasoning suggcsts that thc degrce of desircd denrocracy in the labor markct is amenable to the same forces that determine wages and working conditions. There is neither evidence nor persuasive arguments that suggest that rvorkcrs in large corporations sonrehow have bcen excluded frorn the process that determines the degree of dcmocracy they want,

a rvillingness to lcave cttrrent Anrericans huve Cienronstratcd at iui inrpressivc.ratc

enrployntcntfrlrllctterpccuniaryandnonpc.cuniaryaltcrnatives.Duringnonreccsco'tributc signific^ntly to turnovcr statistics'

siorary

of Rights' on the cmploymcnt rclationship

In.n uncertiri' 'crio4s. rvorlcl,

agre ement.

.n.,pfoy."-r.rig,r^tio,r'', about tlrc rvoriers rvho rcsign gcnci'atc valrrable infornlation

allternlsanclconclitiorrsttnderwhichfirrnsanclrvoul<l-bccmployeescanreaclr

T}IE COSTS OF WORKPLACB CIVIL LII}EITTIES

Ifinfornrationlbouteachpartytocnlploynrcntarrclinformirticlnaboutpotentialand cconomizc' rro,r, nrnr. arrrl cnrployces scck rvays to
acrual pcrfonnrnce

iirc

Indeed, the functions of

;";;: iLh#,

job from thc viewpoini oi employces' are to screen

a

applicantsandtomonito'-""-.t'".r"uactivities.Afirm'sfinaloutputisoftenaresult sum of tlrc workers' separate

of the joint efforts of

,.,o,f!''

,ott.,.' tr'nn

result of the

efforts.Thisjointnessofproductionm.akcsindiviclualeffortdiflrculttomeasure' incxpensive for any givcn employee' and on-the-jotr snirtini u'etot"' "tntiuely

Thcreasonisprecisely-thatallemployccsmust.sharctlrecostofoneemployee's thrcatens the carning 'goldbricking.' n, o ton*"tf"nt"' sfti't"ng' if donc cxcessively'

wilite collirr criurcs, such as pilfering finished opportunities of other,;;;k.tr. Othcr pioducts or rarv matcrials, have simiiar consequences' wclrkers use thc firnl as a monitoring To protect thcrnsclvcs fronr thcse thrcats' rvork' manage lools' obscrvc rvork practiccs agent, inlplicitty,,utf'o'i'i"g it to dircct and disciptine transgressors- If employers ,.iritics, ancl othcr on-the-job "*pily.. be higher than if the monitoring efficiently, tt""iuriing. of rvorkcrs rvill function
function rvere not Providcd'!

nlay apPear to othcrs' including somc Efficient entployer activities' however' of the personal piiunty from the perspective employees, ro u" ttagrnni uiol^iion' of employcr Thesc Constitution' the to First, Fourth, Fifth, and Ninth Amenclments of implied agrcemcnts betrvccrr employers activitics, on ,t" .on,.riy, ,r" ttr" rcsult,
ancl

emplovce...on'u'it'lnt"Juy tt"ntt'ntt and supply a firm has a smallcr value for su.strin in rccluction in pcrsonai iiU"",u ttt"t rvorkcrs
carnirlg porvcr tlt:tr rcsults''lhr'rs' Iinritlltions thcnl, at thc ntargin, rhan tltc incrcasc in

forces in tlte labormarket' Thc

onpersonallibertyinafirm'unlikesuchllnritationsingovernnents,arenot instead' the procluct o{ a mutually preferred manifestirtions ot tytannl; ;;;y ;t"'
arr:lngement. ._ c--.. ^-rl r,nrr morc llrms. entrustlng firms and crmr It should not be surprising that higher-paying cnlpltlyces itrvcst rcllltively rr.ould sonrc to responsibility
r,aluablc decision-makinq gathcring potentially revcliling infornration more rcsourccs than rv,.oril,l oitrcr ilrnrs'in ..iptoy"..-,ind abo.t thc actions of cxisting about the qualifrcatloni-oi pro,p..,i"" size or by cmployec number' the morc cmplovees. Since the ltt'gtt'o fiim is' by.as-set not be surprising that corporations Arc also likel.v it is to be .orpoi"i,o", i, ,tlouio qatheling " llirSe anrotrnti of reso'.rrces to among rhe finns thlrt deYotc reiativelv inlormation ol a personll nature about enrplovees'

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1

NOTES
Ralph Nadcr, Mark Crccn and Jocl Sclignran, Taning tlrc Giant Corporation. (New York: Norton, 1976), pp. 180-197. 2. Robcrt L. Bunting, Enploycr Concentrutictn in Local Lubor Markets. (Chapel Hill: The Univcrsity of North Carolina Prcss, 1962). And'A Notc on Large Firms and Labor Markct Concentration,'JoLtnnl of Poliricul Econonry 74 (August 1966), pp.403-40(r.

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Locat cot,crnmcnt. (Ncrv York:

I
I

The right to work: law and ideology

Jerncs S. Nlolsky,

Sk1' Ilesu'ictiorts

rtn Naw Btr'sirtcss I'rontotirtns' (New York: Matthov

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Arra,_y.rn

Pr:rcrlcr,

l')70)

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5.Arnr-en,.\.Alcltiirrr.,n.111;11oldI)enlsctz..Prtrrltrctiort.lnforlnarionCosts,attdEcttnonttc (Dcccrilt'cr 1972)' pp' 777-795' organization,' ,t"'"'i'oi''itioi"l'* iitt'i)tt'62

The right to work: law and ideologY

RICI-IARD

'f. DE GEOIT'GE

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NlanypeoplcinthcUnitcdStatesfcclstronglyabouthumanriglrts'Thcychanpton righrs irbroacl, .and toth support thc human rights, criticizc ti',. uiot"tion of hu,nln huma' rig'is violations in other countries and U.S. Governm.nr.. "frou, "on.,iiui'i, ihan the ll.cagan administ.atio' has encourage a srronger d;;; ;" hurnen_rights of lluman Rights is thc right adoptcd. Yct listcd in it'J Uni""rsal Deilaration

i
,n v
.,j.

towork_arightneithcrrccognizctlnorrc.spectcdintheUnitedStates,lvlrcre i-Io* ut" rvc to explain this apparcnt unemploymc't is both o.."pt..f inO cxpcctcd.
docs it have for law? contracliction in attitudcs, and rvhat inlportancc

-ii.

I.

TTIE HUI\IAN IUGHTTO WOITI( Articlc 23' Thc Univcrsal Dcclaration of Ilunran Rights'

statcs:
and

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E,t'cryonc has

2. Evcryonc, rvitltt'rut."V lollcfuat :.u".,yon"lvlro'vorkshasthcriglrttojustandlavourablcfcl.llulleratloncnsurlng oI human dignity' and supplefor himselt and l.tis farnily an cxistcncc worthy protcction' social mcnted, if nccessary' by other nreans of join tracie,,rions for the protcction of is -1. Evcrvonc has the ,lgrriio ior," *ncl ro
intcrcsts.
I

protcction agairrst uncmploymcnt' fauourablc conditions ol rvork anci to tfit":i'"l"trtion' has thc rigirt to,cqual pay

to just tlic right to *'ork.' to frec choicc of cnrploymcnt'

right to work; but being physically and mentally incapable of working, they do not actively excrcisc the right. Adults in primitive societies excrcise the right diffcrently from those in advanccd industrial societies. .. . Thc dcrivation that hinges on the right of all human beings to respect provides thc nrost solid basis lbr the right to rvork. To be a human being is a matter not only of bcing of a certain biological type but also of belonging to human society. A fuli. able-bodied, competent member of society has a role and plays a role in it. Each has a right to do so. No adult is'cxccss'or'expcndable' and the recognition of this fact is part and parccl of what it means for pcople to have the right to respect. Work is the typical way by which human adults asscrt their independence and are able to assumc their full share of responsibility in a community. Work involves the assumption of one's placc in the community, whcther it is work in the home, thc fields, the factory, or thc office. Onc's self respect as well as the respect of others is closely linked rvith what one does, how a person expresses himself through his actions, and the extent to which one assumes the full burden of and responsibility for one's life and one's part in the sociai wholc. A person who is not allowed to work, is not allowed to take a rightful place in society as a contributing, mature, responsible adult. The right to work is in this way closely related to the right to respect and derived from it for every society. It is for this reason that in many societies to deprive a person of a productive rolc in society is a form of ostracism, tantamount to punishment, and justifiable only for a scrious social offensc or crime. The right to work can be interprcted as both a negative and as a positive right..As a negative right, no onc, including the govcrnment, many legitimately prohibit sonreonc who rvishes to work from doing so, within the normal restrictions for negativc rights, such as not infringing the similar, cqual, or more important rights of othcrs. As a positive right it requires at least that one's society provide onc with the opportunity for full membership including the opportunity for participation in thc productivc activity of that socicty. . . .

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II.

IDEOLOGY AND I,ABOUR LDGISLATIO|f

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'fhcright'asst:ttcd,rccluircsbotlrintcrprctationancldcfcnsc.Ascvcrylrunrltn right,itappliestouffi,u*unbcingssimplybyvirtucofthcirbcinghurnan'Therigltt Uotit in diffcrcnt socictics and for peoplc of is appropriarcfy impf"*.nt.,f diffircntly
diffcrcnt
ages and

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FIow are wc to un(lerstand thc failure of the United States to recognize the right to rvork? It becomes intelligiblc when we understand thc ideology behind U.S. labour lcgislation. The ideology has two main aspects. The first is linked historically with the conception of free cnterprise that has grorvn up in thc United States and can be undcrstood in tcrms of both social conditions and ideas. The sccond is related to horv Iabour lcgislation develops in the United Statcs and is linked to the adversarial relation of labour and management and the power conflict that results from this.

.ir."*ti""....

tlte infanis as rvcli as all other hunran bcings have

;;;;;,;"t,t;,'.,

'tr Dc Ccorgc."llrc^llirlrt to )V:lk: ]lI,Li1..tdt"'ogy.' Rcl.linq takcn lrom llich:rrtl Rcprintcd bv pcrtntsston' it,- L,,u' Iic'liic", I9 (Frrll l9i4): l5-35'

Val'

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Ideology helps prcvent recognition of the right to work; but the portion of the ideology in question is a carry-over from an earlier age, no longer reflects reality, and should properly be replaced. The aspects of thc free enterprisc ideology that prevcnts recognition of the right to rvork in the Unitccl Statcs has its roots in the nation's history. At the time the Constitution was adopted thc country was young and growing. The Bill of Rights did

place: employment

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not include the right to work, for that right had not enrerged as a nlatter of concern, either in its negative or in its positive scnse, except in thc iase ofslavcry. Slavcry was a different and separate i^ssue. Thc right to life, liberty, and the pursuit of happiness lvere paramount, although behind the scenes the right to property rvas strongly uphcld. The nrain felr rvas of governmcnt intrr.rsion, and the rights to be secured rvere primarily against the governnrcnt. The right to lifc was not intcrprctccl as the right to rvork. A number of factors make this intclligible and rnakc it acccptable. The availability of thc fronticr rvas both a safcty vaivc and an opportunity for pcople who wished to strike out on their own. Thc population was relatively small, and thc c-lpportunitics nrany. It was not truc, as rvoulcl late r be thc casc, that the only rvay for most people to live rvas to sell thcir labour to entreprcncurs for wages. Together with the land and opportunities available rvent three other icleological components, thc roots of which can be traced to the conditions of tl.rc times. The first of these was the doctrinc of self-reliance. It rvas a trait that rvas cherished, and had to bc cherishcd if one werc to survivc in a new land, especially on its fmntiers. Sclf-rcliarrcc, of coursc, dicl not prcclucle hclping one's neighbour. Yet cach pcrson rvas cxpcctcd to stand on his own l'ect, work, ancl fcnd for himsclf. Joined to this rvas the doctrinc of conrpetitive individualism. The idcology of incipient capitalism, rvhiclr developed in the eighteenth and nineteenth centuries, incorporated the notion of competition. In the competitive battlc each person was ego-centered. Thc best succeeded. The expe rience of the imn-rigrants to a nerv land, joined with the experience of the frontier, complementcd the capitalistic emphasis on the individual and the conconritant notion of contpetition. Indiviclualisnr was ideologically joined rvith cornpetition to become 'rurged individualism," according to
which one competed and managcd on one's oln, rvhatever the outcome. The third component comcs from the'Protestant rvork ethic.'This con-rplcrnented the other two components and fostered the developing capitalist ideology. Industriousness was a virtue. Each person rvas expected to do his fair share. The belief was that those rvho rvorked hard prospered. Prospcrity rvas an indication of the virtue of industr.v. 'Ihe iazy reaped their orvn reward in the way of poverty and diflrculty. E,ach person, it rvas believed, l-rd the opportunity to succeed, and success depended on

In general, organized,rabour supports fu'emproyment regisration. But... Unite,c states unions have not been as vocal as on" *oirta expect in support of the right t,r rvork specifically as a human right. In practice individuar unions have often bee' more concerned with benefits for their members than with trre ,igr,t, or unemproyerJ workers. son.re have even fought for benefits resurting in ttre ralin! orioi ,o''," or their own members'2 Moreover, although fuli -no employment with unemproyerl wo'ld put unions in better bargaining pJsition than

people than would otherwise be the

people from which to drarv when the need presented itserf in the presence of training programs might arso

discipline, since lois of on"', lou is a real ,t,."or. ciu.nt; ;::::: ,fear .of it is in managemcnt's interest to have a poot or unemproyed from which to choose. Management wourd,l therefore, not be anxious to have legisration that wo.rd guarantee full employment or.recognize a right to work. If, hiwever, rult e.proyment included people in training piogrn^ uiJ p"opt. who were employed by the government only as an emproyer of rasl resort, thire wourd in fact'be'a poor .f

r"d r;;;r, ;;;;.ffir"; ,hl corective bargaining process. As a consequence, unless an issue is in the interest of either labour (as represented tJre ynions) o, runnger.nt such that it arises in corective !,r bargaining, it usuaily faiis for lack of an rd;;;;.. If, moreover,." irr""'i, opposed by eithcr labour or management outside the colrective bargaining situation and witho.ut.the fuil support of ihe other siae, it nas formidabre opposition to ovcrcornc and slight chance of eitlrer gerting a full hearinf or of finding its way into regisration. The issue of the right to work ls sucrr an isiue. It is opposed to the inrerest of managemcnt, does not arise in coilective bargaining, i;;i;;; t.ir'i',r,'porton." lry unions than issues that more directly ^."d affect tteir members. The right to work, even if undeistood, at fulr emproyment, is clearly not in the interest of managembnt. Unemproyn.'"n, guu.on,.es the avairability of p.;;i" l;r";; least some - usuaty rower levei jobs. rirr"rf r.".p wages down and herps enforce labour

out of rhc rerations betwcen management

implementation' . . . Labour legislation in the united states has developed largery

.uI". . . . "

guarantee a

ti-., J"*plnsion;

ancl

'arger

pool of quarified

individual initiative. This ideology had its basis in reality. There rvas, of course, unemploymcnt. But the general belief rvas that opportunities were availablc for thc industrious, those willing to take a chance, seek their oln fortune, and if necessary tame the wilderness. Thc right to rvork did not emerqe as an issue. It became an issue only rvhen the Iabour supply cxceeded dcmand; and only rvith the developrncnt of large industry, rvhich carricd rvith it the growth of a rvorking forcc dcpendent on others for jobs. But the frontier had disappeared; there are no longer abundant opportunitics for thc self-reliant; and aithough industriousness is still deserving of rcrvard, thc equation of poverty rvith laziness is clearly not justified. . . . If ideology stands in thc rvay of recognizing the right to rvork, the history of the devcloprncnt of labour legislation, resulting frorn this icleology, hindcrs its

A good deal of labour legislation has to do with the relation of labour anrl management, the rights of organized labour, ancr the workers ,.f..reni.o uy tt,. union' Many of the unemployed are nonunion, unorganized, and unrepresented. clearlv the hard-core unemproyed are of ress .";;;'i;'il;#;, it oi o.. union members, and in collective bargaining the unions ,";;;;;;;*ent arc concerned with trre rights.of the unempioyed. ".iit". whire the history or iaJoui'tegistotiou has been generated by collective bargaining and by the interests of the union on rhe: one hand and management on the otf,er, reis than 30 percent of rhe American labour forcc belongs to a union, and the number of unionizei *,orkers r,o, u..n iirninishing for several years.
The historv of rabour re*gisration in thc Unired states shorvs that necotiations

l::llJ"r

fuil em_ wourd also undercut to ron-'I extent the need for ttre piotection of jobs b,v

oiherwis. guuron,""o

'Because you are a woman'

betrveen unions and management havc not led to any serious consideration of the human right to rvork. Discussion of this right has not surfaced because in the context of collective bargaining this right is in the interest of neithcr organized labour nor management. While this fact makes the failurc to notice this right understandable, it does not justifl' thc absence of any legislation implcmcnting thc rigtrt of all to work and of those rvho dcsire it and are qualified. consequcntly, the ideology unclerlying labour lcgislation should be brought out in rhe opcn and reevaluated. Similarly, the presuppositions of much of labour law jurisprudencc that picture lcgislation as a means of arbitrating between contending factions - organized labour and managemcnt - should also be reexamined. This view is reinforced by the respective idcologies of both labour and managemcnt, who sec themsclves as opponents in an adversarial systent. This opposition is fostcred by collective bargaining. But since the
!

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:1.

right to work can sometimcs bc best implcrnented by collaboration rather

than

antagonisnt bctwcen management and labour, the ideology helps suppress implcmentation of the right to work. Thc rccxamination shorvs that thc traclitional idcology is partially defective. It is presupposcd that organized labour and managemcnt arc the only two contencling parties. since thosc rvho are outside of the organized labour force have no organized representative, their rights are systematically ignored and violated. The right to work is compatible rvith the best in the United States' tradition of free enterprise and of peaceful and productive labour relations. . . . NOTES 1. I. Brownlic, Ilusic Documcnts on Iluntan llights 25(2d cd. 1981). 2. Thc U.A.W., for instance, in 1982 insistcrl on highcr wages for auto workcrs- twicc the average for manufacruring workcrs- cvcn irs layoffs by auto manufacturcrs mounted.

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'Because you are a woman'

JOHN R. LUCAS

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in men and women i"diff":.",i;;ti;."xlitil'lrr";:Ti;i:::,i "p human being is constituted by his chromoro."-r, *rri.r, occur in pairs, one of eacl.r pair coming from the father, ihe ott rror.rit,J mother. Men and women share the ". as chromosomes, other than the x- unJ'v- ones, are ::T;.::T
members or dirrerent #"Ti: lXff powerful argument against the doctrine, u,tiiuu*o by some ,r rrr" lri"i"rierans, that womcn havc no sours: contrary to the view of many young mares, they are not just birds; or' in more modcrn puriun.", it gives emfi.icat suport to arguments based on the principle of univers.ar.riutnuniiy.ft";;;';. worthy of respect, for the reasons as same

chromosomcs

regardcd as The facts of fernininity.are much in dispute. The devero-pment of genetic theory is some help, but not a decisive one. we ti"* ,rr", men difier rron, nio,o.n in having one Y-chromosorne and only one X-.h;;;;;.e whereas women have rwo X_ chrornosomes. Apart from the y_ctr.o,

,"J,il:;:ffiil;i.,*,

be urrr*"..a. only when these methodological issues have been discussed can we turn ro the more suLstantiar and poritics concerned with uhether it can ever be right to-treat a woman differently from a man or whether that is-a

r" th"p;;;;;rJt-"o*pur".r, we are faced rvith two questions. ".e w" n..l-to know first what exactly are the in which women differ from r.n, oni-iirr'i-n ways ,u.n raises issues of the me thods rvhereby such questions
may

or golng to heaven? Is it not, say the feminists, just as irrational and inequitable as disqualifying a man on rte g.ounas of his hair? Is ir not, counrer the anti-feminists, just as rationa"r "ilil;';;;"", jiirn.tion or t.u*inf u between *" one ha'd and children, animars, lunatics, rrru.tiurirlnJ computers on the other? ""',t,. whereupon w., come to enunciatc the formal platitude,r,", *orin u." ilr;#; men in somc respects, different from them in oihers,,uri-ur',n"n are the same in sole respects as child'cn, animals, lunatics, rtlortronrlriJ".Ji-,put"rr, and different in others. And then we have to embark on ,;gr;ili iu"rtion, of the respects in which men 1::. and women are rhe same, and those in whichihey ur" o*r.i.r,q inJ'li*t"tt". uny such differences could be-rerevant t ii" or institution in quesrion, or courd be comparabre ro rhe.diffeii"..! ".,iJ,y c."iriry'u"tno*r.dged to exist, betwee n honto sapiens and the rest of gv"en ir *lrn"n are different from men, a feminist .creation. might argue, whv should this ue enougf ;;;;", tirem t om tr,"-ii"". the stock Exchange, when,
apparenuy, tt

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The feminist debate rurns on the application of certain concepts of justice, equality and humanity. Should the fact - 'the mere fact' - of a person's being a woman disqualify hcr from being a member of thc Stock Exchange, the Bench of Bishops or the l{ouse of Lords, or from obtaining a mortgagc, orvning property, having a votc
'

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I{eading takcn from Philosophy vol. 4[i No. 1973. Reprintcd ivith pcrmissron.

lgl pp. l(r1-71.

@ carnbridgc Univcrsiry prcss,

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to harm him, humiliate him or frustrate him, then it is wrong to hurt, trarm, trumrtiate or frustrate a woman; for she is of the same stock as he, and they share d;;;*" inheritance and have armost all thcir chromosome types i,r common. Early gcnetic thcory assumed a one-one correlation pairs of hereditary genetic factors and their manifested .between effects in ii," inoiuaual. whether I had brown eycs or bluc eyes dcpencled on whether l trao iire pair of factors BB, Bb or bB, of which cases I should have brown .y.r, o, *r,.it er I had bb, in which case in all I should

men are'

If it is wrong to hurt

a manr

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have blue eyes. No other gcnctic factor r.vas supposcd to bc relevant to the colour of my eyes, nor lvas the posscssion of a B or a b gcne relevant to anything clsc about me. If this theory represented thc rvhole truth, the feminist case would be simple. Sex is irrelevant to everything except sex. The fact of a man's being male or a rvoman's being fcmale would bc a 'mcrc fact' rvith no bearing on anythinq cxccpt scxual intercourse ancl the procreation of children. It rvould bc rational to hold that only a nrrrlc coul<l bc guiltl'ol nrJ'rc,:rnrl it nriglrt bc pcrrnissiblc to havc ll:rrliagc laws rvhich coutttcnlrtccd only lrcterosc,xuul trnions, rrncl to lorik for'plools ol paternity as rvell as of matcrnity. Perhaps rve might go a very littlc further, and on tltc surne qrtrrrnrls rts rvc lrtlntit thrt nc!1rocs ilrc llot rc:rlly cligiblc fol thc llrlt ol'Ilqo, adnrit that nulcs coukl not rcllly cxl)cct to bc cnrploycd as rnodcls lor lcrnale fashions, and vicc uersa. Bevond thesc fcrv and csscntiallv unimportant exceptions, it

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would be as wrong for the law to discrinrinatc bctrvecn the scxes as it would be if it were to prefer blondcs. Simple genetic theory is, horvcver, too simple. It nceds to be complicated in two rvavs. First, although chronlosorucs occur irt p:rirs, cach singlc onc being inherited mort: or lcss indcpcndcntly of cvcry othcr onc, caclt chrontosomc contains r)ot just one, but many, many genetic factors, and these arc not all independently inhcrited, and some, indecd, like the one rcsponsible for hacrnophilia, are scx-linked. There are, so far as we know, rclatively fcrv effects - and those mostly bad * which are causcd by factors containcd in thc Y-chromosontc, artcl therc is a slight u priori
argument aeainst many features being thus transnrittcd (becausc the Y-chronrosome is much smallcr than thc othcrs, and so, prcsunrably, carrics less gcnetic infornrntion): but there could well be more conrplicirtcd effects due to a rclatively rare rccessivc genc not bcing nrarkcd in thc nrale as it probably rvoultl havc bcen in the fcmale. Mathematical talcnt might bc likc haemophilia or colour-blinclncss: it is consonant *.ith rvhat rve knorv of genetic thcory tbat only onc in a thousirncl inherit thc genctic factor, which if it is inherited bv a bov then bccortrcs ntanifest, but which if it is inherited by a girl, still in 999 cascs out of a thousand is markcd by a dominant

unmxthcmaticality. "fhe scconcl conrplication is nrorc lunclanrcntal than thc first. Gcnctic factors not onlv arc not inhcritccl indcpcnclcntly of thc others, brrt clo not operate independentlv of thc othcrs. What is important is not simply rvhethcr I have BB, Bb, or bb, but rvhcthcr I havc one of these pairs in conj'.rnction rvith sonrc sct of other pairs of factors. In particular, rvhcther a person is male or fcmale may affect whcthcr or not some other hereditary factor manifests itself or not. Only nlen go
bald. There are many physical fcaturcs and physiological proccsscs which irrc affccted bir u'hether x person is male or fentale. So far as our boclics arc concerned, the fact of a person's being a mAn or a woman is not 'a merc f;rct' but a fundamcntal one. Although thcre are many sinrilarities betivcen mcn and worncn, the differenccs are pervasive, systcmatic and of great biological significancc. Almost thc first qucstion a hospital nccds to ask is 'r"t1 or F?'. N{any fenrinists arc dualists, and while conceding ccrtain bodily differcnccs trctrveen men and \\'onren. dcnv that thcrc is anv inheritance of intcllectual abilitv or traits of

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strictly drarvn; and scicntists acccpt thc corollary that thc topics anrenable to scicntiflc rcscarch are correspondingly limited. There 'u.. o,ony discussions which cannot bc evaluatcd rvithin the canon of scicntific argument upon the basis of scientific observations alonc, among thenr discussiont ibout rvhat is right and good for individuals and societies. But they need not be any the worse for ihat, although they will be if thc participants do not show thc samc fairness and rcasonableness in thcir discussions as scientists do in their researches. Another methodological issue is raised by those who acknou,ledgc that there hav,: . been and are differences in the intellectual achievements and the typical behaviour of wonren as compared with men, but attribute all of thcm exclusively to thc social pressures brought to bear upon women rvhich have prevented them from exercising their talents to thc full or giving rcin to their natural inclinations. When the advocatc: suprcmacy marshals his masses of major poets against a soritarv Sappho, the TuJ" :f feminist explains that *'omcn havc been so confinect by domcstic pressures and so

in tcntpcratltcllt:ttttl clttotion, it is not clc:rr horv flr tlrcsc rrrc rluc to irrhcritctl lircto's a'd how far tlrcy havc bcc''c<luirccr by irnitation o, r.u-i,rg.-it is, howc'cr, a common experience to note resembrances between different ,a.irrc of the same farnily rvlro h:rvc ncvcr sccn c'ch otrrcr and havc lrad no opportunity of imitating one anotlter. Sucli instances, when cited, are often dismisslO u, ,".. anecdotes, belonging.to mythology.rather than science, and unworthy of the attention of modern-minded thinkers in this day and age. It is difficult to stand one,s ground in the face of the charge of being unscientlfic, for the word ,scientifi.l -ho, ,,rong evaluative overtones, and to be 'unscientific' smacks of quackery anJfiejuoice. nut it remains thc case that all discussions about political and social issucs must be 'unscientilic' i' that thcy are not exclusively based on the measurable resurts of repeatable experiments. For rvhat *" or. con.".ned with is what peopre i.er, decide, and ought to do about these things, and peopre are different, and'feei differentry a'd decide to do clifferent things. If we refuse io admit to the argumenr any evidence other than the measurablc resurts of reputabre experiments, *! o,uy still be able to dis.cuss.questions of public health, but cannot even entertain those of justice or the political good. And if the feminist rejects all anecdotal evidence on piin.ipt", tt.n she is making good he.r. cruarism by stipuration, because she is not prcparcd to rccognize intellectual abilities or traits of iharacter in the way in which ttr'ey normally arc recog'ized. This, of course, is not to urge that every story a boozy bufier cares to tcll-should bc acceptcd as truc or relevant; but onry thai the worcr ,scientific, needs to bc handled with caution, .nd not used to rule out of court whore rangcs of cvidcnce and rvhole rc^lms of cxpcriencc. Thc canons of scicntific cvidencc ,,;;:;;t propcrry,
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character at all. Genetic thcory, as far as it goes, is against thcm. There is reason;rbre cvidence for the inrrcritancc of skiils ancl palterns of behaviour in other animars, and

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inhibitcd by convcntion that those fcw rvith rcal poetic talent havc ncver hacl opportunity to bring it to flower. Pocts nright bc poor, but at lcast they could listcn to thc Musc undistractcd by baby's crics: rvhcrcas potcntial poctcsscs, unless thcir lot were cast in l-csbos, rvcre ntarriccl ofl and nradc to tlrink of clcltlics and nultpics to thc cxclusion of all highe r thouqlrts. It is ditllcult to lind hard cvidcncc citlicr for or tqainst this ttrcsis. In this it is likc manv rival cxplanations or interprctations in history or litcrature. what moves us to adopt onc rather than another is that is secenls to us more explanatory or more illuminating than thc altcrnativc; and rvhat sccms to us ntore cxplanatory or illunrinating dcpcnds largcly on our own cxpericnce and understanding - and our orvn prejudiccs. Ilut although wc arc vcry liablc to bc srvlyecl by prejudicc, ir does not follorv that rvc incvitably lre, and although wc arc oftcn guidcd by subjcctive consiclcrations in tlccicling bctrvccn various hypothcscs, it does not follow that thorc is nothing, rcallir, to choosc betrvccn them. wc can envisagc evidence, even if we cannot obtain it, rvhich would dccide betwecn thc trvo alternatives. The feminist clainr rvould be cstlblishcd if totalll' uniscx socictics spranq up and flourishcd; or if therc l'crc as manv socictics in rvhicli thc r0lcs of nrcn and rvonrcn rverc rcvcrsed as therc u'crc traditional oncs. Indccd. thc existcncc of any successful and stablc socicty in *'hich thc r6lcs of thc scxcs arc rcvcrsccl is cvidcncc in favour of thc claim. Evidcncc aqainst is ntore difticult to cornc br.. Fcrv pcoplc clen1, that social prcssurcs havc a vcrv considcrablc trclrinq on our bchaviour und capacitics. Sonrc peoplc arquc frotrt thc analogy rvith othcr aninrals. s'hosc trchaviour is indubitably dctcrnrinccl gcneticallv nncl cjiffcrs accorclinq to thcir sc\l ol.trguc, as I havc clonc, by extrapolation lrorn purclv ph1'sictl lcatures. lloth irrqunrcnts ulc rcspcctablc. ncithcr conclusive. N'Ian is an animal, but vcrl'unlikc othcr aninrals, particularly in rcspcct of tlrc cxtrcme plasticity of hurnan bchaviour, ncarly all of rvhich is lcarncd. Very fcw of our rcsponscs arc purcly instinctivc; and it is unsafc to claim confidcntly that matcrnal feclings must be. Wh:rt rvoulcl constitute cvidcncc against the fcnrinislclaim rvould bc somc irrtcllecttral abilitv or character trait rvhich sccmed to be both rclativelf inclcpenilent of social circunrstancc ancl diEributed uncvenly between the scxcs. Mathcnratical talent niight bc a casc in point. It secnis to be nruch nore randonly distributcd in the population than othcr farms of intcllectual ability. If Ranranujan could triumph ovcr his circumstanccs, thcn surely numerate sisters to Sappho should abourd. But this is far fronr lrci'g a conclusivc argument. There are no conclusive arguntents about fcrninine abilities and attitudes. But the discoverics of thc scicntists, so far as thcy go, lcnd sonrc support to traclitiolal views. It could wcll be the case that intellectual and psvchological characteristics are, like physical oncs, inllucnced by gcncric factors. If this is so, thc way in which a particular pair of gcncs in an inclividu:rl gcnotvpc will bc manifcsted in ihe phenotype will depcnd on thc other gencs in thc gcnotypc, and may depcnd greatly on whethcr there are trvo X chromosomcs or onc X and one y. It could be that the masculine mind is typically nrore vigorous and combativc, ancl the femininc mind typically morc intuitive and rcsponsive, with corrcspondingly diffcrcnt rangcs of intcrests and

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;;;.'ii"u"i"i",, onc in n2 r"r;;; r;;r in-#, rraminf rl,. nroJl;lo1"r r". n,"r"--oiiortuntti., ";;;;;;;ar poricy. rt f* b"r-;;"rruo, h,g,,.. rnartrcmarics rrran for girrs. But it wourd noii,irtity *;;;'";;ir,"i ., girrs. Mosr girls prefer nursing to numeracy, but those iew who wourd rather solve differential equations ougrrt nor to bc prcvent.d i;;; Jo,gg rhey arc fenrale' Two principres. undcrric.this 1o.o"-{.;;;#;at rirst :"ig;;",. that the connexion berwcen scx and marhematical ability i, .pul.ll "#;;;;;;;"0 seconar! ir,ot;;;;;;" a posirion in which consicrerations of the i"ii"ia""r;il"i"irt, ono deserrs arc
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Grenadier Cuards on the grounds not that she would make a bacl soiclier but tllat she would be a disturbing influence in the mess room. Larvs and institutions are characteristically nvo-faced. They set norms for the behaviour or different parties, and need to takc into consicleration the interests and claims of more than tnc person. They also need to apply generally, and cannot be tailor-macle to each particular situation: thcy define rdles rather than fit actual personalities, and r6les neecl to fit the typical rather than the special case. E,ven if Miss Amazon is sure not ro artract sidelong glances from the licentious soldiery, her sistcrs may not be; ancl it may be easier to operate an absolute bar than leave it to the rccruiting officer to clccide u'hethe r a particular woman is sufficiently unattractive to be safc. This type of case turns up in many other larvs and public rcgulations. we lay clorvn rigid spced limits because they are easier to apply. Thcre are many towns in which to o.iue at 30mph would be dangerous, and many suburbs in which to drive at 45nrph rvoulcl sometimes be safe. Some boys of ten are better informed about public affairs than othcr voters of thirty. But the advanrage of having a fixed speed limit or a fixed voting age outrveighs its admitted unfairness. we can now see what sort of facts would bring what sort of principlcs to bear upon our inclividr-ral decisions and the gcncral structure ol our lar.vs ancl institutions. Wc need to knorv not only rvhether there are diff'erences, but whethcr these cliffercnces lire intcgrally or only continqcntly conncctcd rvith a pcrson's sex, and rvhethcr they apply in all cases or only as a rule. The nrore integrally ancl the more invariably i difference is connected r.vith a person's scx, the more we are entitled to insist that the mere fact of being nrale or fcmale can constitute a conclusive reason against being allorvcd to do something. The less integral a difference is, the more the arguments from Formal Equality (or Universalizability) and from Justice will come inlo play, requiring us to base our decisions only on the features relevant to the case in hancl. 'fhe less invariable a difference is, the more the arguments from Flumanity ancl again from Justice will come into play, rcquiring us to pay respect to thc interests ancl inclinations of each individual person, and to weigh her actual intcrests, as against those of the community at large, on the basis of her actual situation and actual and
reasonable desires.

To deny people the fruits of their examination success or to deprive them of their libcrty on lny lrouncls irrelevant to thcir own clesert is rvrong: but it is not so cvidently wrong to frustrate Miss Anrazon's hopes of a miliiary carecr in the

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h.vc bccn roo-d nurses, *. T'erc arc nrlrc nurs.'"s. wc rcckon i" ;;;';"ri.u" rt,ui ir i.',rri'r"i-i"0,, o" *,. i, r".r*Jr. prcfer a woman in individu;rr casc' but do not insist u.pon it in _to a'cases;;l;; wc are relucrant ro impose severe lcgat disquarificarions, trur equatif ;;;liilJrre ro impose upon emproyers an obligation nor to prcfer yom:n to play female parts frrmily in an au pair capacity. to join ;r ". ;;;;;;;;r;; nor *.'r.log-ni.'in", a person,s r"*.on r#onabry be rcgardcd as rclevanr to or h., ;;;;ilil for. particular por,r, oni-rnar man,/ institurions rvit operare on.trris 'is uasis, i",',';.," i;;;;;#.1'ii ,"ruring employ a mare au pair girl or u, ""J "r" a f.;d";;;n, arthough ir irr.r"'"r"',nany anxrous to bc rookino ;rfrcr young marer; childrcn;;;;"y womcn anxious to supervise work of orhcrs' ir n;ily.be'de1r1gi. the or.nun-,onity ro estaJilsh special institurions in wrrich thly can ""'er"unO, fulfil their join rhe Grenadier Guaicrs, ";;;;;;r. If we wilr not let Miss Amazorr ret there b; J;;;;, for hcr to join instead. Althoug' wc are rig'tly rcluctr,n, ,o i.por" 'RAC Iegal disqualifications on individuals on grounds extraneous ro their individual .1..u*r,on."r, lt is inherent in att potitica, t'inking rha.ve n,ru n".,.::?:ld.;;;;;;il

fathers in God from being. clcrgymen or bishops. How far r6les should as being integrary depenaent be regarrJed in r.* ir o'rr,r., of dispute. In very intimate pcrsonal relationsrrips.it is and evident trrat tie ritrote personarity is invorved, and that slnce a man - or at lcast many, non-ptoioni. differenr rvav from rhat in,whr:t.h.;;;;;^;; r.n - responds to a woman in a a man or a woman to a woman, naturar that these rdres shourd it is b" dependent on sex. Bur as the rdres become more rimited, so-trre "r;;;;i; crepenien;;;;r., ress. I courd hardry was nor given rhe part of Desdemona comprain if I ;l;; as an au p.air boyon account sex: bur if I had verv fcminine my r""tut., "; ;ilffi grown my hair rong and gorden,ofor I were p,rrricurarry dcrt ,, if certainrv r courd car in.questio" and o"! rvoman or be a nu^"r1'-0..-tome,su.bstantiai'p"uri" purt or o good wourd n..aio u. shown justify a legal decision enforccabre to uy p.noi J-.tion, being uniformry based not my acruar inabiliry ro fi., thc role requireo Jl g"lv,nr;;;;;;.urnrlu,,uo,,,,, r>n account of my sex. we,<ie ma.nct un hish;;;;iu.d .i*q;;"y il;;;;,, justifying what laws therc shourcr be than" t; il;;. ;;rned on-ry *,t i".r'i"ior"r decisions; and although this stancrard .un u" roiirn.d,;; by admitting considerations of rhe public good, yet the arguments neecr to be adduced, b".uur., in framing raws, u,s need to be sensitive to individuar .igh;oi lii"ru, about our crireria of relevanc,:. Although it nray be thc casc that a nurse i, u L"tt., nursc for having the feminine touch, wc hcsitatc to decm ;t ,Urotut"if err.nri,,f , and although *ony ,or" women than mcn

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feel that Justice acceptably so, if there is no way whereby to the rule and be treated as such. As thc "i."ption i'terests ol the individuar.becomc.more periphcral, or can be satisfied in alternative ways that are available,. the principle of'jusiice recedes, and wc or" n,or" rcady to accept rules and institutions based on general principles of sociai tradirion,
has been compromiscd, although an individual can prove she is an

of it to thcir long-tcrm disadvantagc. Arclcnt feminists have chefed at thc shackles of marriagc, and dcmand freedom fronr this clegrading institution or thcir sisters as wcll as themselves. But if this freedom wcrc established it would be the libertine males who would enjoy thc bencfits of liberation, bcing then free to ieave the women to bear thc burdcns of parcnthoocl all on thcir orvn. If nost mothcrs carc morc for their childrcn and thcir horncs than most fathcrs do, thcn irt thc absctrcc of institutions rhat recognize tirc fact thcy rvill in fact be disadvantagcd. Some discrimination is needed to rcdress the balance. But discrimination, evcn positive discrimination, can work to the disadvantage of individuals, howevcr much it may benefit most people on the whole. The would-be female Stakhanovitc is penalized by thc law forbidding firms to employ fenrale labour for sixty hours a rveck, just as the youthful cntrepreneur is handicapped by his legal incapacity, as a nrinor, to ptedge his credit except for the nccessitics of life, and the skilled racing motorist by the law forbidding him to drive, lrowever safely, at more than 70 miles per hour. In each casc the justification is the same: the restriction imposed on thc individual, although real and burdensome, is not so severe as to outweigh the bencfits that arc likely to acctuc in the long run to women in general, or to minors, or to motorists. It is in thc nature of political society that we forgo some frecdoms in ordcr that eithcr we ourseives or other people can secure some good. All we can in gcneral demand is that our sacrifices should not be fruitless, and that if we give up some liberty or immunity it is at least arguable that it will be on baiance for the best. Arguments in politics are ncarly always nrixed, and involvc appeals to different principles, according

fairly stringent. we are concerned onry with iire individual,s actions, attitudes and abilities, and trre reason you are a woman, must either be integralry .'Becaur. connected rvith marter in issue (as in 'why cannot I marry the giri t touez; o, t rcliably, although onry. contingcntry, connected with " it (as in .why cannot I gei mysclf employed for 60 hours u *..tt';; and in the latter case we

p"rtupi

nrercly a contingent' and not an integral, concomitance, the more ready wc should be to cater for exceptions with sufficient care we may be able to disentangre what is true in the feminists, contention from what is false. At lease we should be abre to avoid,t. oit"n'nr., which seems to be taken for gra.nted by most participants in the debate,lt ut *" n.,rrt say that women cither are.in ail respccts exactly the sarrre as men or erse are in all re-spects different from, and infcrior io, them, and not members or tne ,ame universc of discourse at alr. I do not share plato's feerings about sex. I think the sexes are different, and incomparable. No doubt, women are not quite as good as men, ir sotne respects: but since *:.n o:" not nearry as good *o*"o in oir*i ihis

to fir the generar cise. It is tegiiimate to base fu6fil r..ting o,, such differcnccs as seem to be relevant, but the more a law or an institution is based

and designed only

,*;;.

on

to how thc qucstion is construcd. We can elucidate some

canons of relevance for some of thc principles which may be invoked. Where the principle is that of Universal Humanity, the reason 'Because you afe a woman' is

ihuayi irrelevant to its general applicability, though

it

may affcct thc way

it

is

specified: perhaps women feel more strongly about thcir homes than men do, so that although we ought not, on grounds of humanity, to hurt either men or women' dcprivation of hcr home rvould constitutc a grcatcr hurt to a woman than to a man. The principle of Universal Humanity is pcrvasivc in its applications, but is conclusive only ovcr a much more limited rangc. It is ahvays wrong to torture; but often we cannot help hurting pcople's feelings or harrning their intcrests if other values justicc, libcrty, the public good - arc to be prescrvcd. And therefore argumcnts based on the principlc of universal hurnanity nray bc over-riddcn by ones based on othcr principlcs, als<l vaiuablc. Whcn thc principle invokccl is that of Formal E,quality (or Universalizability) thc rcason 'Bccausc you arc a wornan' cannot be disnrissecl out of hand as ncccssarily irrclcvant. A person's scx is not a 'mcre fact', evidently and ncccssarily scparatc from all othcr facts, and such that it is immcdiatcly obvious that no serious argutrcltt can be founclcd upon it. P:rrticularly with thosc rdlcs that involve relationships with other pcople, and especially wherc thosc rclationships arc fairly personal ones, it is likely to mattcr whcthcr it is a nran or a won.lan that is chosen. Whcn somc principle of Justicc is at stakc, thc critcria of relevance becomc

principles we value in making up our mind about social matters is a matter for further philosophical thought. Ru_t without any further thought we can align our cmotions with.the proponents of Women's Lib on the most;portant issue of all. what angers them most is the depcrsonalization of women in the Admass society: and one.cannot but sympathize with their protest against women u.inf t."ut"a u, mere objccts of sexual gratification by men; but cannot avoid the conclusion thar
ttrey oeptore. If wc arc insensitive ro the es.scntial femininity or rr," i"r.r" ,"-l adopt an -.'rrrlii casy egalitarianism which, while dcnying that ihere are any genetic differcnce, allows us to conclude in most individual cases that women, by male standards of cxcellence, are less good than their rnalc rivars. luagio Egaritarianism ends by deper-

oiir"rences are, and, indeed, what sort of differences "s" further they are, L u -utia. ior research; and exactly what bearing they should have in the application of the various

with

it

no derogatory implication of uniform iireriority. ", Exactly *irai-it

"arri"s

their argume'ts and activities in fact lead towards just that result which

sonalizing wonlen and men alike.

iF_'l I rLr. r""rrI^.. .qrtoy,r,.nt

t_

The sceptical feminist

bd

The sceptical feminist

JANET I{ADCLIFF RICI JARDS

prevent rvomen's doing the things they wanttQ do. Feminists will believe men,s gcod makc ofreir, noirurer-*r,i.r, they assure.;;;y;;.. purety in lnliilj;:IJ:l..1they kindness-to-women arqument does appear, it is not the usual justification for discriminatory practices. By far the commonist argument takes

However, although the

SELECTION

ISCRIN,{INATION

The cluestion to be scttled is this. Can we prove quite generally that it is always r.rnfair to choose a man rather than a woman for something they rvould both like to
do, rvhen the rvomnn could do it bettcr thln the nran? It is very important to get this question properly focused. We are considcring at the moment only the rejection of rvomen who are actually more suitable for the position in question than the competing mcn. If women are rejected because of poor education, that rrray shorv discrimination against them at an earlier point, but not at this one. If they are unsuitable because they rvill rvork badly u,ith a prejudicccl rvork forcc, or because somcone is rvlntecl *'ho rvill not bc away to have children, tl)at may shou, unflirness in the structure of socicty, but does not involve the rejection of actLtally .suitablc wontan at this point. Thc selectors cannot be accused of sclection discrimination as Iong as thcy choose the best candidate for thc purpose in question. Di.tcriminatiort on grouttrls of scx is counting .sax u.r relevant in cotilax$ w,hert' it i.r not, and Ieacls to thc rejection of suituble womcn. It is not discrimination on grounds of sex to rcjcct womcn rvho arc not suitable, evcn if thcir unsuitability is caused by their being women. When that happcns it is their unsuitability, an(l not their scx, rvhich has caused their rejection. The question at issue norv is specifically rvhethcr discrimination against women rvho really are suitable for a position could ever be defended according to the principles of social justice rvhich have been outlined here. There is, of course, one perfectly obvious selection rule, applicable in any situation where people are competing for something they u,ant. It is 'choose the candidate most suited to the pcsition'. The question rve arc dealing with, therefore, is that of *'h:rt possible reason there could be for adding to this en'rinently sensible rule, either opcnlv or surreptitiousll', the proviso 'but no rvornen', or 'but makc it harder for women'. There are various justifications around. One *'hich can be dismissed straight away is the suggestion rvhich appears from time to rime that the rvhole situation stems from kinclness on the part of mcn, who wilnt to protect women from all the hard things of life. It has alrcady becn argued that paternalism is not to be tolerated. Even if men did really think thcy rvere doing rvhat rvas good for women in spite of themselves (which puts rather a strain on one's crcdulity) it would still not bc justified. Ancl while many women may still be perfectly rvilling to be grateful for any male chivalry rvhich offers to take from them any chore they find burdensome, they can hardly be expected to respond with the same appreciation when men use their stranglehold on the running of evcrything to
Reading takcn from Thc Sceptical Fenbtist. Copyright C) 1982 Routlcdgc.

the tinc rhat women are ro be .*.ruo.o u..uur" ,h.t;;;;;;fi: the task in question' Thev cannot be dockers o. uus oriuers ;.;;;";.;"";"1:;'J:""g enough, they cannor go into the professions or businessbecause thei;;;;;; or can't concentrate, or are-prone to hysteria, or will reave to have chirdren "i"u.,or "nougr,, their husbands. The usual feminist *r'p""r" i" ,rris rine is an indignant deniar folow of rhe whole thing: either the accusarions o.. furr., or if women o.. in io#Jays infer:ior to men it is because men deprived *o..n of proper education. There is of -have course much truth in this. IJowevei, this is on. cr.a, cas" r" *ti"t'i"_inists wourd do berrer to forget abour factuar rrd;;;; ror-a wrrire ono .on.o,iro[ on ttre togic.

t.

I
fr L

f
4
,}

$
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1,!'

:,t '*,

i.
tt

white ones, white mcn shourd nor be atowcd to-rift tr.auy toalrlor if yorl,s"nire ;;;;;;;;. creverer than Lancashire ones, no one from Lancashire'shourd,be arowed togo to university. Average differences between men and women would account for different succc:ss rates in various activities, but.they .outo noiforsibry account f";iilJi,' poricies which differentiated bctween them. Second, even if there rvere cases where it looked. as though a, women actualry might be worse at sornething than all r"", ,iui sll/ wourd not account for a rule specifically excluding trrern or saying thcy should do better than *;;" ;; admitted, because, as M'r said, 'what *o*Jn by'";;;;;;;"not do, it is quite superfluous to forbid them from doing. whar they .on do, il ;;, so welr as the men who are their suffices to exclude,f,"n., fro*...,. If :_:.Tl_.,,it".:r,competition *"n,.uff''ttink, for rnstancc, rhar a ccrrain lever of srrcngth is ncedcct r", ori"i"g il.r;;;;'i"t just say what thar levcl is and resr ail appriJants for strength? lr ti.y l"}ry"itrint trrat ail women wir fail, why atrd'but no wonrcn'? If the presumption were true no women rvould get in anyway. It is.ridicuro-us to say thara rule specificaily excluding women is -*i,.i^'$orn.n needed becouse rhe rvork calrs for o ..rtuin' i.u.t oi *;;il prcsumed never to reach. If this-is an exampre of the wonders of mare "r. logic, perhaps it is hardly surprising if women fee.l that tf,.y .onnot aspire to it. Some people try to escape this conclusion uy ,"yi"g that if women .are inferior to

or practice which arso cxcrudes a.il the excepti,cnal a shred ofjustification for a rule ones who can do it, or deman,ds that rhc women shourcr pcrfornr be tter tt on th" ,n"n to be admitte,r. iou might as well try to argue that if tlack men were J;;;;r on average than

or othcr rvhich the avcrage man can do provicles not

In the first prace; nearry ail the differences craimed to exist between men and women arc differenccs of averagc, No one with the srightest claim to sense courd arguc that ull men werc strong-er or more iniettcctuoio, ,;;;'l;;;"iut than \vomen. But the fact (rvhcn it is one) ,a// that the average woman cannot
do something

il,T;JiTllilrt"11,,i.0'o''t",t

uu'uio ro,1*o ,"u,on, (both, incidentary,

crearry

:F

k !

14

liry v';-l ql'r9r"ry!g)ry:I

______:)
it -i

look at womgn applicants' respccts it is.a wastc of time to avcrage mcn on ilveragc in certain of their succcccling. ccrtainly if such bccausc rhcre is so littte iir.liirto".r selections making were who pcople advising l"t"unt fot dilferences did e xist t' *""f0

'll

nottospcndtoomuchtimcintervicrving'uonren:ltisnotpossiblctointerview. hrve to trc lollowccl' But still' that

cvcrvonc, rn. somc p"";;;i;'";-i'i"'prinltion excluding all wonrcn, lvltich rvould for gcncr;rl rulcs ,u,,uld not in rhc lcast "..a]""t work that they i .,pp"n".r to bc so strikingly goocl at thcir that they did ar,Dlv cvcn to the oncs *t]o cviclence who producJ. il"ooci couli not bc ovcrlookeJ, un.f ih" on", sex. N'laxims for the guidancc of selectors' oiin"i, ,."rf'O"i."ir thc nbt suffcr from quitc diffcrcnt from to look for rvh:rr is rvantccl, arc giving somc indicarion ;; ;;;r. arc unsuitablc for worllcn for rtrc job' If lllost thc lists oi cltarlrctcnstit' "t"tf"tf somctlring,itisundcrstandablcthatitselcctorslrouldnrissbyaccidcntsomoofthe to considcr Jitrcrcnt, and not acccptablc, to rcfuse ones who arc suitablc. r,'ii,,"u" *hn'" cxccllcncc cannot be missed' any wonlcn' cvcn thc on"'

Infactthereisnocscapcfromthcobviousconclusion,wlriclristhis'iftrgcneral
rtrleisnladcsayirrgwhltcharitctcristicsarencctletJforaccrl'lrirrpositiori,andtotltc womcn' or 'nrake it addccl thc provrso 'but cxcluclc list of thcsc charactcristics is rvomen do that-all:r added bccausc it is thought Tost harder for wontcn', it is not notrcachthercquircdstandarcls.Youclonotnlakea"dclitiorralrulcstoprcvcntrr,lrat 'fltc rtnly cortccivable reuson for a thc.existing,on. cs'
rv<ruld not happcn

"ty*"y'u"Jti is its ltcrpttru,rors' tlrittkitig IlMt tttitltout such u rulc rulc or pradice. *c!utlirtg tronlcil women' or more on grouncrs of strict suitability votilen tt,ourtr rtuvc ,o'i:c ir, i,r, that cannot be wontcn n"ncf sincc thc rule against womcn, rvoultl liavc ,oi"'Jrlirr.cf.

i':ilt;,i;i';;

iustific<jbysayingtl.'"t'utu't""arcnotgcncrallysuitablc'itmustfollowthatthoyarc
it appears Sincc thcy o," un'p"iiF"O' "nd 'int" *u" be prisumed that the real un'uittfiriiv''it spccious argumcnts "b;:;;";;"'* ligrt, of clay. It is not' howevcr' ,h" to *ont rcasons are not ", " ,"r, n."0" "*po..d nlust bc happcning if an must bc' What' for instlnce' difficult to work out rvhai thcy lcss' comPctent man? It a o{ wolnan irl favour conlpctcnt a ovcr passcs cmploycr it schcnlatically) that r,'cll <lonc, and thcrcforc ito put rncirns r'ar thc job,r,ll;"1;r', clo that? I-ic is bf uppninting trtt "ttu'' \vhy slroulcltohc rvhat it could l.rc rvill bc losing "t"-:;t";: scc oi .tl''cr' rtn<, it is'h.rtl actually rvilling to ,tL'; f'";;;i"'thing

;ii'"; ;'"""a''

unspi.cinccl'

hidc them under r.^ n.ccssrrv to hidc be nccessary to hn

possiblybcotlrertlianthcsimplccauscof'nlltlcsuprcnlacy,Inothcrwords, supremacy, and suffcritrg i-,r,i,r rr,r,ri, of nale unfair in<rividual womcn arc apparcn.trltuu'"" *hot could possibly be nrorc nlcn ilre gaining in the sanrc
individual
than that?

DISCRIMINA'|ION Ti{E PROBLITM OF REVERSE' Wchave,then'establishedthatdiscrirlinationagainst's'omclt'tttt't-t'tt'Cthcirsexasl rcasonlorputtingtlrcnrataclisadr,antagcincoripetitionswlrcrescxisnotrclcvant,

is alwaYs substantialll' unfair'

Clear and neat as that cortclusion is, howcver, and uscful in allowing us to pin down dcmonstrable injustice and charge individual culprits instead of having to rail in general about the unfair structurcs of society (for which it is hard to blame anyonc in particular), it does raise problems for fcminists in the context of the issue of rcversc discrimination. The usual form recommended for reverse discrimination is that women of a lower calibrc than mcn should be chosen for certain work in prcfcrcncc to them. It is a thing rvhich many fcminists think ought to happen, but the last section seemcd to show that this would be absolutely unfair; that revcrse discrimination would be opcn to exactly the samc conclusive objections as ordinary discrimination. More spccifically, thc argumont seems to show that sevcral explicit provisions of thc Sex Discrimination Act must be unfair. For instance, thc Act states that whcn appointments are made to various positions there are certain things which are not to be allowed to count against womcn applicants, the most striking of which, perhaps, is that thcy are not to be rejected on thc grounds that thcy will meet prejudiced public and rvork force. Thcrc is no doubt that when people are prejudiced against womcn a man would oftcn do the requircd work bctter; if t\re public have no confidence in a female door-to-door seller of insurance or encyclopaedias a man will scll morc. To insist that this sort of thing should not bc allowed tb count against women is actually to say that women should be appointed even when they are less good than men. In other words, it providcs for a certain amount of positive discrimination. It will not do to say in a vague way that sometintes it must be all right to discriminate in favour of womcn. The argumcnt of the last section showed that whcncver considcrations of scx entercd into selections for whosc purpose sex was not relcvant that was unfair, and the whole point is to try to achieve fairness. We cannot simply asscrt that unfairness sometimes has to be tolerated. Of course it has already been argucd that sometimesformal unfairncss has to be tolerated in the interests of substantial fairness, but since the necessity of selecting the best candidate is part of tlrc accotutt of what iI is to bc substantially fair thcre is nothing higher which can overridc it. You cannot say that some substantial unfairness must be tolerated in the intcrcsts of greatcr substantial fairncss, in the way that some bad must be toleratcd to achieve a great deal of good, bccause fairness is not a thing to be shared out; it is a principlc according to whicir other things are shared out. Anyone who is trcated with substantial unfairness gets thc wrong amount of good and bad. If positive discrimination is to be justified, something much stronger is needed. Sonre of the usual dcfcnces of it which appear should be assessed. Probably thc commonest dcfence is thc argument that since women have been badly treatcd in the past, what they should now be given is compensation for what they have misscd. Compensation is a method of making up for past privation. It is not (to avoid confusion later on) a way of putting things right for the future, or improving matters generally; it is a means to give women the level of satisfaction they ought to have had anpvay, by giving them enough now to fill the gap left by' thcir previous deprivation. It is the sort of thing which would happen if an employer

[J-'_i

I Thc rvork Place : emPl<)Ynlcnt

The sceptical feminist

t4

wclctonrakcupforcnlployccs,har,ingbcenundcrplriclintlrepastbygivingthenrall inflation, and pcrhaps danrages. thcir bacl< pay, tvith an allorvancc forinterest ancl

in thc past' it cloes seem.propcr that women have indeed b"tn ti"'tta unfairly liave had more than their fair share' thcy should bc givcn .on.'ptn"iion now' If men worncn, sincc thcy got thcm at gains.to thcy shoulcl have sonre Jf tlreir ill-gottcn the question norv is not of rvhether rvomcn's expense in tft""ntti ii'lt''Uo*"i"'' whether the way to go .rbout that is by means wome n should be .o,r",p.,]rnt.i, but of proper means And there seems little doubt that it is not a

l[

"ip"riil". of tompensation,

oircrimination.

\\'omen in general for thcir past In the first place, you crnnot actually compcnsate sornc womcn to achieve advantages suffering by changing the-rules no'u tntl allorving rvould do as a co.rpensation for ifiliat for rvhich they are "", ,;;;;;;tifiea. Even wltlrtevor fol thc othcrs' It nlight the wonlen choscn, it would tic no compcnsation that is not conrpensation' It rvould do perhaps improve things for the futurc' but passed over earlicr' and their unhappiness nothing for the women *tlo nno bec,i women being givcn aclvantages far bcyond other might eve n be increased by seeing failras a mcans of compcnsating anyrhing they had .u", nJ. n"u.ir. discrimination compcnsate a group by cannot yor women for their sufferings, both bccause indiviclually or compensating neecl (peoptc *..u.r, giving benefit, ,o ,o*"'of-ii,

for several reasons'

collectivel,v,notbysomenretltocloIrepresentation),andanyrvay'thewolnerr by cliscrimination lrc ustrally already tltc ntost

This can be illustrated rathcr schematically. Suppose a benevolent man who runs a business is sympathetic to the problems of women, and is willing to do without some of his profit to benefit them. He has two position to fill, one responsible and interesting, and one rather dull. In competition for them are a well qualified man and a less wcll qualified woman. He has two options: to give the better job to the woman or to give it to the man. Suppose first he gives it to the woman. She then has a high degree of satisfaction; we are to suppose that she is not so hopelessly incompetent as to be unhappy, only less good than the man would have been. Her inefficiency la,ses money for the firm, but the employer does not mind that because he is willing to make sacrifices to benefit women. The man, on the other hand, has a low degree of satisfaction in the lesser job. Suppose, however, that the employer takes the other option, and appoints the man to the better job. The man then has a high degree of satisfaction, and thc'firm makes the usual profit. The employer is willing to forgo this in the interests of the woman, as before, and so gives her a high salary for her work in the lesser job. She therefore has also a high degree of satisfaction, though of course of a different sort. There seems, therefore, to be no doubt about which arrangement the employer should make. He should not make an arrangement which would benefit the woman only, if he could make one which would benefit the man as rvell. Of course that example is vcry artificial, and no doubt objections could be brought against it in its present fornt, put it does illustrate a general point. To have a general policy of appointing women to positions for which they are not well qualified is not the best way to compensate them for past injustice. We should do much better to allow the best qualified people to do the work, because if work is worth doing it is in the interests of all that it should be done well. If we make such arrangements it will mean that we have a greater social product with which to compensate women, arid others, for their past injustices, and that is what we should do. Compensation should come not in the form of unmerited advancement, but in the form of other primaly social goods (to use Rawls's term). The general conclusion of all these arguments is that although no doubt some compensation is due to women for their unjust treatment, the idea of compensation does not justify reverse discrimination in their favour. Still, the defenders of reverse discrimination have no reason to retreat yet. All this talk of compensation, they can argue, is beside the point. If we are going to be fussy about the prccise meaning of 'compensation', then let us concede that compensation is not what justilies reverse discrimination. What we rvant to achieve is not compensation but an improvenrcnt of the position of women until sociery b fair to them, and as a matter of fact probably the best way to achieve this is to appoint to positions of importance women who are rather less good at the work than the men who are in competition with them. As long as they are not such hopeless failures as to confirnr everyone's ideas that women are not capable of any serious work, their holding thosr: positions will be enough to make other women set their sights higtrer, and make people in gencral more used to seeing women in former male preserves ad expecting more of them. IJigh expectations make an important contribution to high per-

rvho arc inciivicluall1,.o,t!Ip.nr,,,.c 'ii;;;;;; ii'scrimination is no compcnsrltion for rvomcn in privilegcd ,n]on, "'ot";

t';";;;0,
gcne rttl.

rarher then the idea is to conlper.lsate somc individuals it still docs not Horvcvcr prornising' more looks group, for thcir past injusticc' Thlt tliscrimination in lavour of work ls justification Jt i'-g"n""f policy of.'"ut"" its rodress, why should it ancl women. If the concern'ir"r;;ly with unierprivilcge than a man? why should rathcr rvomair is a mattcr whether the person bcing helpcd i"]:ll: bencfiting an rvomen.' rvhen it ::qnt one discriminate generally in favour of is all that If_com.pensation uian? badly off alreldy rvell off *o*o.i.i tt.,. .*p.nr" of a to be arc sex) (of eitlrer off ivorst the that is itr issuc, rvhy not heve the rule compensated?Tosaythatrvonren,sqrievancesshouldbcredrcssedinpreferenceto of women the privilege of. having their lack men,s is to be unfair to men: it gives from

thar thc

rvhole

Ii

ir
!r

il ':t
.'i

"'"tt'tt privilegetakeprecedenc"nut'n.'"tn''lackofprivilege'anclrvhenthisislookedat to bc nothing to be said thc point of ri.;';i Jeprivcd inclividuals th"'"

t I

; t:
i:
1

many women' Thc fact that rvomen for it at all. Many *"n "'" less privilcgecl than justify sorneonc's deciding to take might are ot.r averag" t... *"il off than me.,n

'i

f
{ t {
;.

particularcarervlreno.,"'.ingwon.Iencandidatesforanything,becausetherervasa but it rvould w:ould neecl compensating than mcn rvould'

higher probability that they nol justify a general rule'

't

Suppose,then,we^'g.'"atiratreversccliscrinrinationslroulc]notbespcci{icallyin person', ttnlt favour of womcn, uui i"n ruuou' of any underprivilegecl practtcc was thc1::l^1,:ltt,:: charge-.that thc cscape rvould prr,au." ten<i to favour rvomen, but

I t

iy'rt.*"ti.nff

justilicd' unfair to mcn') I3ven thcn it rvoulcl not bc

i
$

l. {

:i j.l

L
for it.

LrtrvlLrge:ry1"vryt
CASE STUDY

formance. That is quitc a differcnt point from thc conlpcnsation argumcnt, thouglt the two are very often confuscd. Fr.rrthr:rmorc it cscapcs all the objcctions to which the othcr is open, including, most importantly, the seneral arguncnt that is always unfair to sclect peoplc for rvork on thc basis of anything other than their suitability

Opportunity 2A00
Before the Sex Discrimination Act was passed in r976,it was common for 'situations vacant' columns ,o rf..iry which jobs were .male, and ,fcmale', which were ,""y lrpf"yers scparare sarary scares ,110-f", and wom6n- vet, and professions to have for men o"rpii"iilrl", thar rhc scx Discrimination Act made trt"t" unJ-o_ther practiies ilregar, women i' the uK stiu typicalll gr-;""."s; ;ir:;t;;;';;:#3J,;rjoyed b1, :arn men, and only a very small handfui of women obtain top managerial women accounted for 7 our of l08.government l?:1,]:": J"--1?91. mrnrsters' 2 High coul!judges out of gz,2 naiin"i;#;o"t;"r

The point is this. If our prescnt society is unfair to women, it is obviously fair that be chlngcd; it is f:rir that wc should sct in rnotion social progranrmes to turn societv into one rvhich is bettcr for womcn. Wc also think that whcn things are faircr to wonlcn socicty as a rvholc rvill bcneht, bccause it will no longcr wastc thcir skills. Adnrittcdly women now rna\/ not havc thc skills thcy shoulcl havc had, and since it is probably too latc for the wonten of this gencration to acquire thenr we should perhaps think of compensating them for their disadvantagc by other means, rather than giving thcm positions of responsibility. But that rvould bc to take a short tcrm vierv. We havc to plan not only for the peoplc who are alivc now, but for the world our great-granddaughters ivill have to contend with. lt rvould bc unfair to them to lct things go on as they are now, and r.rnflir to thcir contemporarics to have potcntial skill rvasted. Our social airns, thcrctore, bcconrc nrore complicated. Wc have to maintain our conccrn with high stanclards in the various profcssions, but wc have also to think of the necd to advancc wottten. Wc rvant good doctors, ccrtainly, but at the samc timc wc wal)t to cncouragc pcoplc to think of wonlcn as doctors. If, as u trmttcr oJ'fuct, wc think that the bcst rvay to itchicvc this is to liave a good rlrany successful women doctors, we nlay considcr nraking rules which allOw a woman tO become a doctor rvith slightly lower mcdical quali{ications than a uran. Bu, tlis docs not offend against the principle tlnt tlrcre sltould be no discrittination itt selectiott procedurcs, bccause we are still conccnred lo choose the best peopla for tlre job which needs doing. It is just that the naturc of thc rvork to be donc has changed, so that different people become suitablc for it. Wc now wilnt, for cxample, good doctors rvho a/so advlincc thc position of womut-t. As long as lorvcring tl-rc nrcdical qualifications for rvomen was causally rclevant to tlle end to be achievcd, it rvould be

it should

li

ustihcd. This rvay of looking at thc mattcr docs secnr to rcmove the prima facie objections to reverse discrimination. Or perhaps a better way of putting it would be to say that reverse discrimination is not well named, becausc discrinrination on glounds of sex invOlves counting sex as rclevant in contexts whcre it is not, and the argument being

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put forward now is that in some uncxPected contcxts il ntay be relevant. In thcse contexts what appcars to be discrimination in favour of women is not discrimination
at all.

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since government action is costly, however, the conservatives took the view that it would u" u rnu.tr'i*rJ*p"nriv-e way of tackling the problem if industriarists themseru.r *"r"-ro pay for a campaign and to involv"o in ,"iuiing ;",,". emproyment opportuniries i"":ffiff:ively Accordingly' on 28 ocrober 1991 prime Minister John Major an_ nounced the Government's support ioi opportonity 2000, iaunched by Business in the community comprised a ream of senior -1b!rcy,""J business leaders chaired bi i"dy iii*". a total of 61 companies ex_ pressed a commitment to i.np.ouing the" status of women within their organizarions by rhe year 2000 und"ret-themserves oenniie taigets for doing so..By October 1992 that r"i"f fr"ilisen There is no singre formura t" u"-"ppri"a to tZ:. uy .ompunies who opt for

i,j":$l J;i:f,

that 56oh of women 1,1n-n1 approvcd of John Major compared with 52% of men, but 1gg7 Generar
patterns revlared

from thar sector.

In the past, the Labour party has attracted the reputation for cham_ pioning the cause of working *;r;;, i" rqg2 ilr" b"rr""*utiu" rurty recognized rhat there-was a probrem ""J in c.ontinuing a; ;;;;, support
Cifi.p-p"ff"ina;cateO

UilllTlt llllsentation ;i"j:Tfi:,,n 3i:'il:1.Yi::d;i cilii s"*i'e permancnr secretaries,

editors our of 21, 4 assistant chier cJnstabres o;;iu7|il;fi;iJi:oresented markedly more in fis!|r.men secondary teachers) and ,s Narionar Hearth':::.:,T"1t:y service.manageis (35%).

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Case study

membership

prospects according to its circumstances. Some organizations have set very specific targets: for example, British Airways has statecl that it intends by the ycar 2000 to cnrploy a proportion ol rvomcn whiclr rvill rcl'lcct thc total

of Opportunity 2000. Each company aims to enhance the for female workers by formulating its own goals, which vary

UK rvork forcc (42%,); Natwest intcnds to incrcase thc proportion of in its managentent team from a current f63% to 33.3%; the ilBC has sct targct ratios for senior executivc positions (30:70), senior nranascrnent (40:60) ancl managcment (40:60), to bc achicvccl by 1996. Othcr companics arc lcss prccisc. Texaco's aim is 'to have a positive busincss cnvironmcnt conductive to realising the full potential of women by 199-5', rvhilc the British Railrvays Boarcl intcncls introducing ncw 'Quality of Lifc' policics, rvhich will encompass scxual harassment, amongst others. Other cmploycrs, such as the Cabinct Officc, intend
women
focussing on pay schcmes and nurseries. Thc Opportunitics 2000 targct tcam plans to expand the membcrship, particularly institutions rvhich have a high public profile and are likely to be influential. Target areas include the country's leading 500 companies,

:;H1':#::l::?Hl'

all, it might bc argued,,is not Opportunity 2000 supporting examples of 'positivc discrimination'., .therebyir,r*iri"g women and-reaving them open to the possibre criticism tt,ai ttrey r,u"?..oniy g";'il;; they are today' by artificiar intcrvcntionitt n'.ori'r.r, rather.tizir-fy j.-rnonrt.oting t'cir to with mcn f;; il samc jobs on equar 'bility ofcomDctc terms. Supporrers trrcschcm" *it ;";;; oui rr,", emproycrs,currcnt rack of provision for women's nceds ai!.r*i""i"s unfavourabry against them. Thc mosr obvious probrcnr ro, *ln.,"n'i;;;il;;;;r, irni,o?", and, as thc champions of onporllnrtr 2000 i;;;"ntry point is donc to cnsurc that women ""iirl"merhi'g "",, in to progress their carcers "on "oniinue to rtave'h;i;;:;"men

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Universitics, Tracle Unions and Local Government departments. Any organization can join Opportunity 2000. In order to join, an annual contribution is solicited, rvhich is based on the number of employees fl000 for organizations with l000 cmployccs or morc, and negotiable rcduccd rltcs for smallcr firms. Apart frorn thc annual fec, all that is nccded is a lcttcr to thc campaign dircctor from'your Ctrairman (sicl), Chief Executivc or Director of Personnel'. Most people '"vould agrce that wome n are undcr-represented in business and industry, particularly at the top. Yet Opportunity 2000 has nonetheiess attracted criticism. There are those who claim that it is little morc than a tokcn gcsturc towards womcn. Although ovcr 120 major companies are represcnted, it has been pointed out that these companies emplov only 20% of the countr)"s female rvork force, most of rvhom rvork for snrall and medium sized companies. Othcr critics have argued that thc status of women cannot bc equal until more radical changes in societv are effected - for cxample, persuading employcrs and husbands to elect to take cxtencled paternity leave instead of having the rvifc takc the traditional mutcrnitv Icave. Such options curreutly exist in Scnndanavian countries- At present, only British Gas mentions paternity leave in its Opportunit,f'2600 statement, and the pcrmitted period is only four days. Othcr critics *'ill of course see the u,holc venture as pointlcss. After

opioirniry 2000 monitors irs overajl firms'which ;""r;rp;;;';ii.'r.t"... However, not all firms are committed to monitoring their progrcss; do you think rhis shourd.bc a prior .onoition r.. i"i"i"il;;ff: schcmc go far cnough, or is thcrc ri nccci f* ;;.;;g". governmcnt action?
DISCUSSION TOPICS

before thcy can gain m.el.bgrttripi progress' as do somc individuai

Discussion qucstions on the case stutly on the-opportunity 2000 scheme. How ncccssary is it? Is there 9:1-:"r a case for fbrmuraring a more uniform set of polici", f;;'fi;;; to adoprt

1' Firms often providc thcir cmployees with symbols of their status. Company cars, for example, ,i" ofi.n-tb graded in accordance with the rank of thc cmployec,_ind ttre tey thc executive cloakroom is often
a ^covcted

2' You are intervicwing

ff J,H'l"f

wour

priic-' Horv .on ,u.(aistinctions stemming from rank cr rr rm s opc ra rc i;' i,','n",

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applicants for the post of rece ptionist. which .f the following rvould you^refuse J.onriO.rf (a) bclongs to a fringc ..tigiour-rrouo.' -' (tr) fras an unappeali-ng uirin ;;k. (cJ rs malc, age 55. (d) is overweight (remernber that obesity can read to medicar problems such as a heart condition)(e) bclongs to the paecrophire iniJ*otion Exchange.

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Docs it makc a diffcrence that some of these applicants are in this situation of their own frce rvill (eg one could teave a religious group, onc could dict)? [:ind out rvhut is rccprirccl in orclcr to inrplcnrcnt an 'cqu:rl opportunitics policy'. Il'your orgunizution llrcircly hus onc, what is involvcd'/ Do you lccl that a quoLa systcln, or a policy of 'affirmative action' would be dcsirable? (Ii you do, whicll categories of individual would you wish to identify and given particuiar help to?) Should there be a minimum andior a maximum wage? Consider argumcnts for and against.

Accoumting and ixrvestrnent

Ethics and the world of finance The ethics of investment Privatization Introducing the readings Creative accounting Ian Griffiths ED42- the end of creative accounting? Michael J. Brooks Accountability and acquistions Mike Ailen and Robcrt Hodgkinson The relevance of ethics: a practical problem analyscd .1. G. frittiams Ethics in auditing Andr6 Ziind Auditor independence: a real issue? Arnold Schilder
Case study

Polty Peck
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Discussion topics

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DISCUSSION TOPICS

1. You are a financial adviser in a finance company which arranges 'cthical investments' for members of the public. A member of the public has several thousand pounds to invest, and would like a portfolio of stocks and shares. Which of the following categories of activity rvould cause you to withhold recomntendation?
operation within oppressive regimes; poor trade union relations, low rvage levels; pollution or damage of the environment; irresponsible marketing (for example, marketing powdered baby milk in the Third World); involvement in the production of nuclear energy; manufacture or supply of weapons; animal testing; factory farming; Sunday trading; political donations; subscribes to the Economic League (the right rving employec vetting
agcncy).

Reacffi:*ff8
The ethics of persuasion
Persuasion and respect for persons

A consequentialist view
Advertising and ideology Introducing the readings
The hidden persuaders Vance Packard Advertising in Britain T. R. Nevett The affluent society J. K. Galbraith The non sequitur of the 'dependence effect' F.

these are categories identified and used by ECRA - the Ethical Consumer Research Association). Having considered the general issues, you may care to research specific companies and determinc how well they farc on these critcria. Finally, rvhich do you feel is more important rvhen offering advice on these matters to members of the public - your own personal values or
those of your clients?

(All

A. von Hayek

Advertising as communication Gillian Dyer Hcrself reappraised Advertising Standards Authority

Speaking up for advertising The Advertising Association
Case study

2. Mr Simon Cleverley of Manchester recently wrote to the Guardian, raising the intriguing question, 'Which offer the greater value to
humankind - stockbrokers or wasps?' (Guardian Supplement, 16 November 1997, p. 14). Presumably this correspondent believed that certain members of the financial rvorld do not obviously improve the country's standards of living, but makc thcir wealth from the supposedly non-productivc activity of speculating - an activity rvhich has been accused of creating instability in thc money markets, ctusing adverse effects to a country's balance of payments.

Cigarette advcrtising
Discussion topics

Do you think those rvho deal in financial speculation can justify their
activities

- or are wasps really more useful to society?

teC

Rcaching thc rnarkcts

__ ___._

L_

The erhics of

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TIJF, E]'HICS OF PERSUASION One of our colleagues reccntly reccivcd a lctter informing him that he hrd rvon a major prize, rvhiclr rvas spccially rcserved for his collection at an cxhibition in LIclston, somc 60 miles from Plyrnoutir. Attracted by the prospect of a weckend drive into decp Cornrvall, he acceptcd tire invitation, and on arrival lcarnccl that thc prizc consistcd of a frce tcnday holiday in the Mediterrancan with his farnily. However, therc were ccrtain strings attached; the family had to attend a scminar on 'timesharc' und rvoulrl asrcc t() pirrticiputc in u pronrotional viclco on bchall'of thc firm rvhich olfcrcd thcm thc prizc. At this juncturc our collcaguc dcclincd to procced any further, having heard (like most of us) thc many atrocity talcs rclating to timc-share agreements: high prcssurc salcs tactics; agrcemcnts maclc undcr a foreign country's lcgislatitlrr to rcnrlcr lcgirl redrcss clil{icrrlt; lack ol provisiou lor a tinrc-sharc company going out of busincss, lcaving timc-sharcrs rvithout any mcans of booking, sclling or liaising rvith cach othcr; and so
on.

Despitc thc cloud which ovcrshadows thc tinrc-sharc industry, thc product itsclf could actually bc a good onc, combining sensible financial invcstmcnt rvith a uscful facility. As things stand, howcver, time-share has attractcd a poor reputation and many consurrers are deeply suspicious, not only of the advcrtising of time-sharc, but of sales promotion more widcly. It is vcry casy for a 'dark corncr of the industry' (as time-share has recently bcen described by thc Advertising Standards Authorityr) to shape peoplc's attitudcs to advcrtising as a whole. A market economy relies on thc buoyancy of commercial transactions where sellers want to sell and buyers want to buy. It is only reasonable that sellcrs should be permitted to communicatc lvith buycrs, and that
mcans of comnunication is, by dcfinition, advertising; the process by rvhich goods and services are brought to thc consumer is, by definition, n-rarketing. It is thcrefore difficult to sec how anyone could justify the view that advertising or marketing 'ought to be banned' without radically calling into qucstion the vcry basis of contemporary western economic systcms. A more appropriate qucstion thcrcforc is not whether adver-

tising

or marketing should be abolished, but what

constraints might

reasonably exist to prevcnt the e.xccsses of thc more ruthless promoters in the advertising and marketinq rvorlds. Wc iravc entitlcd this cluptcr 'Rcaching thc lvlarkcts' and the authors I 'lhc r\dvcrtising
Strndarrts Aurhority, Cusc Itcporr lS{},

ll

A1>ril 1990,

p. l.

of ,nu.r"ting, producr, Price, packaging and promotion. Air f;;;, ; ;;;;,';i*l.ruu*on,ior rssues in business_ethics., For reason."*r*p1", what criteria might ably bc uscd to ban goocls and scrvices from thc market -prace complctety (cannabis, pro-rtitures, f";i;y ;l;.;;;';;#;'iT j.r,.,",,n" way in which trrcv are. soicr 1"igur"ttlr, arcohoJ, ilil;.;;.;iprion-onry mcdicines)? Arc supprietr ."iitred to .rr;g. ;;;Juli rn"y *on, -Jr"'ty for thcir wares, reaving consumers to decide wiretrr?;;;;;;; accepr an invitation to treat, o..i-, th"." .;;;;.ept as a .just price,? It is not possibre within ttre confinest a singre volume to examine ail relaring rhe .ti,i., t]-*u.t.,ing. W. ,"r.-t.A-U*ny ,lT irri":, !o on rhe rssuc of thc just price.in chapter 1, and thc"etti.r-"i,0*riing,inr..io, g.ods on Thircr worrrr couniries *ili u" treated in the finJr lnapter on the etrrics of internationat busine;;. "o", passing treatment of thesc themes is not intcnded to aorrnjiuo" tn-"i, irpo.t;r;i';;';impty thar wc preferrcd to scrcct one"singrc-arca namcly. 'avcadvertising - and to rrcat it i]n Oeptf,. in the n"ro oi-*orketing _ we have chosen advertising u".uure'tt are few issues in busi'6iion"n,, ness ethics which have. polariled pubrt "re --or". opinrn or advcrtising will craim thit it ir u.i.J, that lt puts consumers under undue psychological pressure to buy unnecessary items or strive for Iiving standards bevond those they ian-affora. critics wil claim that advertising wastes *on"y which would be better channelled into improving the product or re-ducing its price. eavertising,1"",,, i'"gedry a 'barrier to market iluy [" y. to produce goods which are "nlry'i superior to those or "Uf. bui, if *. tire 'giant' .orpuni"r, iun onty a smart business, the chances a.e thut we wili ue unable to advertise on the kind of scale which is necessary to break into the market. some critics wilr go so far or to .iui* *rut uJ""rtising is inherently a social evil, that it sets. out to deceive,-io .n.ouruge greed, and _ particularlv with the vast increas" oi.r.Ji, ilcilities *iir,ii il," iuii zs y.u., - to persuade peoplc to. spend beyond their means. F";i;;;"re, it is alleged, rhe persuasion industry J'rr;;;; than rhe prJ"."'i, overtry promotes; advertising is, arguably, one means of propagatin!-ano pcr_ petuating, the ca.pitaiist ;J"n.,"-iirr emphasis on consumer ";iil witrt oniy u t *its goods and materiar affluence. .*."fii"*l"o^".rrising by its vcry naturc must.relate ,o gooor-i,na services on wlrich-money is spent; no one advertises a. co^un1ry wark or an evening by the fireside. As the cconomist Kenneth Galbiaitrr argucs,. thc acrvcrtisirrg incrusrry

fully recognize that advertising and sares promotion are onry part of the process which bridges the gap berween'p;J;;i,r" ;;;';i"r,rrption. Standard business iextbooki io*riry-i""i .ps,

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T_-=--=I Rcachinc the markets

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p.rruurion und r"rp".t fo,

p"rronl F@

promotes consumables rathcr than public services such as education and 'rrealth. It may be the case that expenditure on public services would Uiint gr"ut",. t.nefits; if so, then advertising is helping to decrease the uenJfiis we derive from our expenditure. what limits, if any, should be requirecl of the persuasion industry? If rhe advertising industry is justly the subject of criticism from tirne to time, that is 6f course no reason for objecting to advertising per se. Aftei ail, the occasional'bent policeman'provicles no good reason for that, in afiotist'ring the entirc. police force. Inclecd it con-]cs as tro surprisc was one lo Association2, a recent survey .or.Jd out by the Advertising If advertisements' of abolition found who rvanted to see the unqualified of exist'ence the of must know business is to take place at all, consumels the goods and services which they are contemplating buying' ^ freedom of O"ne possible vicw is that, because we livc in a frce society, and advertisers to equally applies which right, an important speech is rvord'advertising' the of meaning itymological Tir. ojit.. ;;i""; cirizens is.to drarv one's attention'(Latin: advertere). Just as the advertiser has

quires truthful presentation of all descriptions of goods and services, whether these descriptions are verbal or visual. In terms of the ethical theories considered in chapter 3, it is unclear rvhether the ASA's position is based on a deontological view of business ethics or a consequentialist one; indeed it is more than likely that this question has not prcsented itself to the majority of the committee. The code itself is in fact compatible with either a Kantian 'respect for persons' or with a consequentialist view of ethics.

PERSUASION AND 'RESPECT FOR PERSONS'

ihe right to inform, so hai the intending purchaser. the -right to be informld about the existence, availability and qualities of a product.
'pro,f"at or service,

Freedom of speech and freedom of information are thus the fundamental a principles on which advcrtising shoulcl be conducted. If it is legal to sell

argued, then it ought to be legal,to advertise it' by This view of advertising wo'uld of course be emphatically rejected rather anyone rvho believes that morality has its basis in consequences

,o tot"

members

of the markcting world

have

,frin u priori principles' Horvever' even the deontologist need not be thcre are commitied to ihit iaissez-faire view of the persuasion industry;

The Kantian might contcnd that any form of persuasion which is dishonest, untruthful, or less than rational is an assault on the integrity of the individual, and can Iegitimately be the subject of moral censure. Kant's principle of 'respect for persons'may be construed as demandinq that the rationality of the individual, which is his or her characteristic endowmcnt, must be respected absolutely. This philosophical notion finds expression in certain public attitudes to advertising, for example, where consumers complain that advertising is insulting, and that the advertising industry 'treats us like morons'. The view that human rationality is the touchstone by which modern advertising must be judged is, however, somewhat problematic. While we might all agree that our minimum expectation of the persuasiorr industry is that it propagatcs truthful information, in some cases it is;
what an advertisement withholds which is more objectionable than what it states. A washing powder might truly make one's clothes whiter than white, but yet have the unfortunate consequence of causing allergic reactions from the subsequent wearer. A advertisement which indicates a free offer, but rvhich fails to disclose all the conditions which are rcquired to obtain it, is justly subject to the ASA's sanctions. It might be suggested that truthfulness is not quite sufficient to describe the spccific virtue which should be required of the advertising industry. What we should demand, it has been suggested, is 'full disclosure'; advertisers should not simply to succumb to the 'puffery' which is so characteristic of the industry, but should provide full information about the product, warts and all. The problem about the demand for full disclosure is that it is simply not possible. There are almost endless numbcrs of statements about a product rvhich can be made, and within the

oii,e, .ttticul principles which could equally be claimed to. be a priori, and which have as much, if not more importance than the presumed iight to free speech. For example, sure.ly truth and honesty arc moral piin.ipf.t which are relevant to ttt. way in which an advertiser persuades ir," puuti. to buy. Aithough the Adveitising Standarcls Auth.ority (ASA) something has generally supported tie principle that if it is legal to sell Advertising of it oight to'be'legal to advertise it, its British code pru.ri." (BCAP) is based on the four fundamental principles, 'Iegal, of 1968 redecent. honest and truthful'3. The Trade Descriptions Act
: t
Speuking -fn-,
p. f 0' Atlverrislng (London: Th.c Advcrtising Association,.1983), Practicc' 1988' of Advcrtising Committce (London: Pracrice Arli;rn'Coa, of aariritiis
{Jp

for

Sth

ed.),8.3.1, P.24.

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.

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Aclvertising and ideology

t1ryl

confincsofanadvcrtisementcventlrcmostcotrscicntiousandscrupulous advcrtiscr must makc judicious sclcction' inform rathcr than pcrEven so, the vicrv tirat the advcrtiser shouicl incomplctc) is questionablc' ,rnO-"-i"""n iiiir" int-tnation is of nccessity betw-cen info.rming and,persuading It is '; oftcn -;i;,,rassumecl that thc distinction arc trvo onc, i'deccl that thc intormation and persuas.ion i; so: to not is This a spectrulr' ;;;";";'p"l.r, quit. cliffcrcnt cnds of is a thcre that iniormcd arc inform somconc ,. oi-,* i,, persuadc; if wc a that infonncd arc u'c if firc in thc building, *" o'" pcrsuaclcd to Icave; tt' eal rlot to tutrion.. is poisoirous, wc arc pcrsuadcd fgTtt o[ persuasion Furthcr, it is not ii," tu" that wc only approv"

rvhicharc'ration:rl'onAt"n'u'"thoscwhichilrollot'Wccanpersuadea hcr.about what

him or fricnd to come to ttre cincma rvith us by informing comc on then - you'll ('Oh' tcmpt' and is showing, but wc can also coax bc rcasons rvhy tliis nray.occasionally outr'1 Alrhough rhcrc t"l.iy'" should be "idr]t un".."p,oii" ifJ' "'*"nlplc' if,wc kuorv our friend is morally thcre'is nothing neccssarily *lnl^g rvith this studying for an

the more appropriatc ground for the distinction between ethically sound and ethically unsound advertising strategy lies in the results of persuasion, not in the modc of pcrsuasion. Advcrtising, thc consequentialist woulC suggest, is acceptable if it brings good results, unacceptable if it brings bad ones. If advertising promotes human happiness by enabling higher standards of living to be achieved through consuming, and by encouraging consumers to buy products with which thcy are satisfied, then the persuasion industry has provided a useful service to society. Conversely, if certain forms of advcrtising increase human unhappiness by enabling the sale of shoddy goods or harmfui products, or by encouraging consumers to incur scrious debts, then such advertising is to be deplored. The problem with a consequentialist view of advertising ethics is that it appcars to make the end justify the means. (As we saw, this is an accusation frequently made against the utilitarian). Recently, some manufacturers of burglar alarms were taken to task by the Advertising Standards Authority on thc grounds that their advertising had aroused

""ntinution; kindofnon.ratlonatp"''uo'ion,andirrclceclartycensureislikelyto to the cinema.(a poor exam relate either to the.onr"qu.n.es of going which might bc thought to nerformanc"l o, "ntir,er'moral prin-cipte ,bluc movie'). So long as for cxampre, ir it is a [;;^i;;';,;y?.;;r;t, ;;';";;;ion i, noi dtwnright ctcceptive, we do not normally censure
that mcans of Persuasion itsclf'

be asked' should not tire allorved to coax onJ lttpt, rvhy' it mav advcrtiser?lndectladvcrtisingrvouiciturnouttobevcryboringindeedif about the products on ali it clid was to uomuara ui u,itir clinical facts betwccn acceptable diffcrcircc thc offer. we do nor b;ii;;.. rhen, that on a prcsumcd bascd bc can and unacceptablc uJtttiiting "'"ttgi"t persuasion' distinction bctwecn information and

Thesamchotclsintherealnrofadvertising.'Ifprivatecitizensarc

undue fear. One advertiser had distributed leaflets through people's lctter-boxes stating that 'A burglar could enter your house as easily as this leaflet,' making certain people, particularly the elderly, unduly anxions about their safety. Even though this advertiscr might have done home owners a good turn by inducing them to invest in home security, such bcnefits do not constitute a morally acceptable defence. Whatever the benefits, advertisers surely should not be - and indeed are not permitted to appeal to fear, or to mislead the public. (Even when the causc is a charitable one, thc same holds true. The Advertising Standards Authority has recently complained that charities often unduly play on people's good will, or resort to shock tactics). Somc time-share schemes may be thoroughly desirable (although the present authors do not know of any), but the fact that one was selling a thoroughly desirable timeshare scheme does not justify failing to disclose information about a sales promotion or browbeating seminar attendees into submission.

A CONSEQUENTIALIST

\/IE,W

Iftheinformation/persuasion<]istinctiorrclocsttotprovidcanreansof stratcgics, what oirii"g"i;rri"g etrricli-iiom unethical salcs promotion the Kantiart c.haptcr in argucd wc ]' one alternative might be founcl? As possible only form pcrsons for ;;i".i;i.t or ,itionuriii be for "nd '"'pttt basis thcre, answer to the q";;;;" of rvhat underiying 'right ethicalconcluct,andatthispointn.on,".lu"ntialistrnightsuggcstthat

ADVERTISING AND IDEOLOGY

'fhcre are more far-reaching criticisms of the advertising industry, howcvcr. than its mcthods of pcrsuasion. Advcrtisers, it is often remarked. do not sell mcrcly a product, but a whole way of life. It has been argued

;*I|**i"stt*r".rk"it
that the constant exposure to the concepts portrayed by the advertising industry conciitions us to accept its fundamental presuppositions, that consumption and the acquisition of new goods is desirable. Affluence ancl high living are often upheld in advertisements as the ideals to strive for. It is argued that advertising reinforces the values of materialist
ideology.

Advertising and ideology

t4i

posed to identify. Indeed, psychological studies which have been carried out in the field indicate that a significant number of women are affected

by negative portrayals of their gender and that this is reflected in their

purchasing patterns.

Second, there are ethical objections

to the negative portrayal of

ideoiogical stereotyping. For example, famiiy life is often portrayed as the norm, rvith the supposedly 'typical' family consisting of a father, mothcr, clclcr son ancl younger claughtcr, cvcn though a mere 15% of thc UK population live in families rvhich correspond to this description. The father is generally, white, the bread-winner, leaving the mother to act as the houservife who has little bctter to do than bake sponge cakcs, wash floors and marvei at the results of the latest brand of detergent. Singlc parcnt families, cldcrly cottples, black pcoplc, or peoplc living alonc irc scldonr portrayccl as the hcrocs lincl hcroincs of television colnmercials. There are some notable exceptions, horvever. One national newspaper has focused its advertising on the up and c91i1g carcer *,o,r,in, ancl one washing machine firm, advertising in the Midlands, has shown a black man sounding its praises' Defenders of the persuasion industry might well contend that stereotyping is an inevitable consequence of having to sell a product in limited tpo." and time. 'fhe acjvertiser h;is to use some scenario in which to sirow the goods or services, and it is not feasible to show evcry possible lifestyle in the context of the product. Above all, the advertiser may urqu", advertising requires 'targeting' and one has therefore to direct the ad-vertisement to the particular group that one wishes most to reach. Since married men are generally the principal earncrs of incomc in a family, it may therefore seem reasonable that items of expenditure rvhich involveiairly substantial outlays (such as motor cars' or expensive Christmas presents for children) should be aimed at the father. Further, thc advertiser may point out, the aim of advertising is (generally speaking) to sell; an advertiser's task is to increase saics, and not to reform so.i"ty, hotvever much others may wish to question certain stereotypes' Thire are problems, however, about stereotyping. First, there are some reasons to suppose that certain advertisers sell themselves short by introducing stereotypes. If an advertiser degrades womerl, it is very likely that he (not uzually she) will lose women's custom. The traditional poliiy of the advertiser has been to enhance, indeed exaggerate the

Advertising,

it is argued, transmits other values too by means of

women. Stereotyping can be argued to be a subtle form of conditioning; subtle, because it is often unrecognized, or else, when it is noticed, it can be thought to be unimportant and not worthy of comment or complzrint. To many women, however, the advertising industry forms part of the overali conditioning process within society which causes women to be downgraded, to be subservient to their husbands, and to settle for second-rate jobS or even for a life in front of the kitchen sink. The usr: of a nude or semi-nude female body, it is contended, reinforces the idea on the part of some men, that women are sex objects and can legitin:,ate some of the sexual harassment and innucndo which is often rife in the

statui of the people in advertisements with whom the public are sup-

work place. Although it is no longer permissible to depict a naked or semi-nude woman to advertise some product unconnected with nudity, such as a car, the Advertising Standards Authority permits such portrayal where it is judged to be 'relevant' to the product - for example a shower, a perfume, or a set of bathroom scales. This ASA ruling, however, has by no means satisfied the feminist lobby, who argue that even this criterion of 'relevance' can justify sexism; after all, do men never take showers, put on after-shave or weigh themselves? Why do we so infrequently see a semi-nude man in magazine advertisements or TV commercials? Faced with such complaints about advertising, the ASA's constant ruile of thumb has always been whether the depiction of women in advertising causes 'gravc or widesprcad of'fence', and two major studies have concluded that in general the public and women more particularly, are not offended by the way in which women are depicted by advertisers. In this short chapter on advertising, it is not possible to provide a detailed critique of these two ASA reports. It is sufficient to say, however, that the scope of Herself Appraised (the first report, published in 1986) and Herself Re-appraised (1990), focus on the portrayal of the female body; they do not address wider questions of sex-role stereotyping, a matter on which the ASA has never, to the present authors' knowledge, upheld a complaint. When Hoover published a national advertisement for its Turbo vacuum cleaner, bearing the copy-line, 'Who's built a Turbo for women drivers?', the ASA refused to uphold the large numbers <lf nationwide complaints from women who believed that Hoover's style of

I
l-111

I !{::1hrng rlrc

tt--

nrarke'rs

__t

L__
INTRODUCING THE READINGS

rl.od"gqlt"

rcadingl larr,

advcrtising rcinforcecl the traditional scxist valuc that tlrc woman's place is in her homc.a The ASA hold the view that the aclvertiser is not a social reformer; if an advertisement depicts the status quo, then this is quite acceptable, horvever much sonte mcmbcrs of socicty may rvish to changc it. Critics of thc advcrtising inclustry rvill point out that, in cxaggcrating peoplc's standards of afflucnce, the industry is ccrtainly not rcflccting thc status quo. If advcrtisers can portray living standards as they wor.rld like to sce them, thcn why not women? Wc do not proposc to resolve the issue in this chapter, but to leavc the verdict to thc rcader. The fundamental issue, howcver, appears to rclatc to the rolc of thc advcrtiscr; how does thc advcrtiser's 'rolc-specific cluty' to scll lclatc to thc widcr issuc of tvomen's fundamental human right to be treated rvith cqual dignity and respect to nren? Does the advcrtiscr simply havc an obligation to trcat women equally, or docs that obligation also includc hclping to bring about a society in rvhich all citizcns are trcatccl irs having cqual worth?
'r 'l'hc Advcrtising Standarcls Authoriry, C:rsc Rcport

ll2, l5 August

1981,

p.

l-5.

The .first reading is an extract which- crystallizes many of packard's misgivings about advertisers' methods. T, R. Nevett, tne autntr of the second passagc, cites some of the criticisms of advertising from a British point of view and outlines some of the more significint controls on advertising which have been introduced in recent times. As the extracts from the dcbate between Galbraith and Hayek show, qucstions of the ethics of advertising spill over into questioni of econ_ omics and politics. Theirs is a debaG ibout what we should spend our money on, and not (or not just) what advertising tells us to, dalbraith contends. The criticisms macle by feministr u.6 not so much about rvhethcr and what things should be advertised, but rather how they are. Gillian Dyer explores this dimension of advertising in her Advertis-ing as Contntunication; we quote here an extract entitled .what advertisem"nts n_ea-n'. Dyer refers to 'images of women', iaking up a common criticism of the ideology of advertising, namely thpt muctr advertising exploits, demeans or stereotypes women in society. while it is no doubi true that women^ have not yet achieved equal status with men, is it really the duty of the advertising industry to carnpaign for women's rightsi The Advertising Standards Authority has commissioned two majJr surveys on the treatment of wom-en in advertisin g- Herself Appratsei (t9az) ana I'Ierself Reappraised (1990) - which concluded thut,'uy and'large, the portrayal of women in advertisements did not 'cause graue or widJspread offence' and that advertisers should reflect social coiditions rathei than feel any obligation to change them. we quote an extract from the more recent report. Finally, the advertising industry answers its critics in the Advertising Association's publication, speaking up for Advertising. The AA takes the view that advertisers are sales-peopie, not social rlformers. It may have the last word in the present chapter, but readers will no doubt wisli to add their own observations.
---1

it acceptabre for it to give cgnsymers a psychological push and actually persuade? vance packaid's classic The Hidden Persutdcrs was perhaps the first major popular work which articulated the criticisms of the 'persuasion induitry" in ttre usa.

should advertising simply inform, or is

.11:l'

Reaching thc rnarkets

the . rrv hidden rrrssvrr pr^uua".r-l PerJu4ugl;

lltsl

The hidden persuaders

VANCE PACKARD

'['hc usc ttI nrlss psychoanllysis to guidc canrpaigns of pclsuasion Iras bcconrc thc basis of a nrultimillion-dollar industry. Professional pcrsuadcrs havc scizcd upon it in their groping for more effcctive ways to scll us thcir warcs - whcther products, idcas, attitudes, candidates, goals, or states of mind. This depth approach to influencing our behaviour is being used in many ficlds and is employing a variety of ingcnious techniques. It is being used most extensively to rffect our daily acts of consumption. The sale to us of billions of dollars'worth of Unitcd Statcs products is bcing signi{icantly affcctcd, if not revolutionizcd, by this approach. rvhich is still only barcly out of its infancy. Two-thirds of Arlerica's hundred largest advcrtiscrs have geiired campaigns to this depth approach by using strategies inspired b."" rvhat marketers call 'motivation analysis'. N{eanrvhile, many of the nation's lcading public-relations experts have been indoctrinating themselves in thc lore of psychiatry and thc social sciences in ordcr to increase thcir skill at 'cnginecring' our consent to their propositions. Fund raisers urc turning to the depth approach to wring morc money from us. A considcrablc and grorving nunrbcr of our industrial concerns (including somc of thc largcst) are secking to sift and mould the behaviour of their pcrsonnel - particularly their own cxecutives - by using psychiatric and psychological tcchniqucs. Finally, this depth approach is shorving up nationally in the professional politicians' intensive use of symbol nranipulation and reiteration on the voter, rvho nrore and nrorc is trcatcd likc Pavlov's conditioncd dog. The efforts of the persuadcrs to probc our cvcryday habits for hiclclen rncanings irrc oftcn interesting purcly for thc liashcs of rcvclation thev oflcr us of ourselves. We are frcqucntly revealed, in thcir findings, as comical actors in a gcnial if twitchy Thurbcrian world. The fin6tings of thc dcpth probers provide startling explanations for many of our daily habits and pcrversities. It sccms that our subconscious can be prettv rvild and untull'. What the probers are looking for, of course, arc the rvftys of our behaviour, so that thev can more effectively manipulate our habits and choices in the ir favour. This has led them to probe rvhl'rve are afraid of banks; rvhy tve love those big fat cars; rvhy rve reallv buy homes; rvhy men smoke cigars; rvhy the kind of car we draw reveals thc brand of gasoiinc rve *'ill buy; r';hy houservives typically faii into a h1'pnoidal trance \\,hen they get into a supermarket; why men are dralvn into auto showrooms bv convertibles but end up buying seclans; rvhy junior loves ccreal that pops, snaps,
end crackles.

We move from the genial world of James Thurber into the chilling rvorld of
Ilcading takcn from 'l-ht: MLldtn I'rrsuut!tr.s. Cr.rpvriglrt

19-57.
.?.

Everything comes in. one big, glossy package. sombre examples of the new persuaders in action are appearing not only in merchandising but in politics and industrial relations. The national ihairman of a political party indicatcd his merchandising approach to rhe election of 1956 by talking of his candidates as products to sell. In many industrial concerns now th; administrative personnel are psychoanalysed, and their futures all charted, by trained outside experts. And then there is the trade school in california that boasts to employers that it socially engineers its graduates so that they are, to use the phra:ie of an admiring trade journal, 'custom-built men' guaranreed to have thj right attitudes from the employcr's standpoint. what the persuaders are trying to do in many cases was well summed up by one of thcir lcadcrs, the presidcnt of thc Public Relations Society of America, when he said in an address to members: 'The stuff with which we work is the fabric of men's minds.'In many of their attempts to work over the fabric of our minds the profcssional persuaders are rcceiving direct help and guidance from respected social scientists. Several social-science professors at columbia University, ior example, took part in a seminar at the university attended by dozens of New york publicrelations experts. In the seminar one professor, in a sort of chalk talk, showed these manipulators precisely the types of mental manipulation they could attempt with most likelihood of success. All this probing and manipulation has its constructive and its amusing aspects; but also, I think it fair to say, it has seriously antihumanistic implications. Much of jt seems to represent regress rather than progress for man in his long struggle to become a rational and self-guiding being. Something new, in fact, appears to be entering the pattern of American life with the growing power of our persuaders. In the imagery of print, film, and air wave the typical American citizen is commonly dcpicted as an uncommonly shrewd person. FIe or she is dramatized as a

friends for us, as at a large 'community of tomorrow' in Florida. Friends are furnishing along with the linen by the management in offering the homes for sale.

George orrvell and his Big Brother, however, as we explore some of the extreme attempts at probing and manipulation now going on. certain of the probers, for example, are systematically feeling out'our hidden weaknesses and frailties in the hope that they can more efficiently influence our behaviour. At one of the largcst advertising agencies in America psyc-hologists on the staff are probing sanrplc humans in an attempt to find how to-identify,-and beam messagcs to, peoplc of high anxiety, body consciousness, hostility, passiveness, and so on. A chicago advertising agency has been studying the housewife's menstrual cycle and its psychological concomitants in order to find the appeals that will be mrrre effective in selling her certain food products. seemingly, in the probing and manipulating nothing is immune or sacred. f'he same chicago ad agency has used psychiatric probing techniques on little gills. Public-relations expgrts are advising churchmen how they can becbme more effective manipulators of their congregations. In some cases these persuaders even choose our

#
,

i.. 1T

' 'ri'_-_-.-' l{caching thgl'_lgk:tr_ I itll t

consumer

___.__ r I

Advertising

Britain

@l

thoughtful votcr, rutged individualist, and, abovc all, as a careful, hardheaded of the rvondrous proclucts ol Arnerican cntcrprisc. I-ic is, in short, the llowering of twcntieth-ccntury progrcss and enlirthtclimcnt.
f-lost ol us iike to fit oursclvcs into this picturc, and sornc of us surcly arc justificd in <loing so. Thc ntert arrd wonrcn rvlro hold up thcsc glorving imagcs, palticularly thc profcssional pcrsuadcrs, typically clo so, howcvcr, u'ith tongue in clrcck. The way thesc persuaders - wlro often rcfcr to thenrsclvcs good-naturedly as ,symbol manipulators' - sce us in thc quiet of thcir inter-oflicc mcmos, tradc journals, and shop talk is freclucntly far less flattcring, if more intcrcsting. Typically they sce us as bundlcs of cllty-tlre itnrs, nristy hicldcn ycarnings, guilt conrplcxcs, irrational crlotional Itlockagcs. Wc ;trc intirgc lovcrs givcn to irnpulsivc lnd conrpulsivc acts. Wc anuoy thcm rvith our sccminely sensclcss tluirks, but rvc plcasc thcm rvith our growing docility in responding to their manipulation of synibols that stir us to action. Thcy havc found thc supporting evidencc for tliis vicrv pcrsuasivc cnough to encouragc thcm to turn to depth channels on a largc scale in thcir efforts to influcnce our
bchaviour.

cxecutive added, 'The women are buying a promise.'Then he went on to say: .The cosmetic manufacturers arc not sclring lan-olin, they are sciling hope- . . . w" no longer buy oranges' we buy vitarity. we ao not buylust an ou,o,"*"-6ry prestigc., Thc reason why I nrcntion merchandisers morc irequcntly -ofttran ttre ottrir types of persuadcr in this exploration.is that they have more biilions doilu., immediately ar stake and so have been po.u.ring more eifort into pioneering trr" o"ptt .ffroach. Bur the others - including pubricists,.fund raisers, poriticians]uno iniustriur personnel experts - are getting into the field rapidly, and others with anything to promote will prcsumably follow.

Advertising in Britain
T. R. NEVETT

'l'he symbol nranipulators and tlrcir rcscarch aclviscrs havc devclopcd thcir dcpth vicws of us by sitting at thc feet of psl'chiatrists and social scientists (particularly psychologists and sociologists) who have been hiring thcmsclves out n5 lpractical' consultants or sctting up thcir orvn rescarch firnrs. Conc arc the days whcn thcse scientists con{incd thcmselvcs to cllssifying manic clcprcssivcs, fitting round pegs in round holcs, or studying the artifacts and mating habits of Solomon Islanders. Thesc new experts, rvith training of varying thoroughness, typiclrlly refer to thenrsclves as 'motivation analysis'or'nrotivation rescarchcrs'. The hcad of a Chicago rcsearch firm that conducts psychoanalytically oricnted studies for merchandiscrs, Louis Cheskin, sums up what he is doing in thesc candid tcrrns:

Motivittion rcsearch is the typc of rcscarch tliat secks to lcarn rvhat nrotivatcs peoplc in making choiccs. it enrploys tecbniclucs dcsigncd to rcach the unconscious or subconscious rnind bccause prcferenccs gcnerally are <icterminccl by factors of rvhich the individual is not conscious . . . Actually in the buying situation the consumcr gcncrally acts cnlotionally and corlpulsivcly, unconsciously rc.rcting to thc imagcs and dcsigns rvhich in the subconscious arc associatecl rvith the

product.

Nlr Cheskin's clicnts includc many of Amcrica's lc:rding producers of

goods.

consumcr

Thesc motivational analysts, in rvorking rr,ith the symbol nranipulators, are adding depth to the sclling of ideas and proclucts. They are lcarning, for examltle, to offcr us considerably more than thc actual itcrn involvcd. A Nlilwaukcc advcrtising cxccutivc commcntcd to collcagucs in print on thc flct that rvomen will pay two dollar.s and a half for skin crcam but no nrore than irvcnty-livc ccnts for a cakc of soap. Why? Soap, he explained, only promiscs to make them clcan. Thc crcam promiscs to makc thcm beautiful. (Soaps have now startc(l promising beauty as rvcll as clcanncss.) This

National Consurncrs

advertising has probabry been subjected to a greater vorume of criticism than ar any time in its history. Thls is not to say that ii has bccome less truthful - standards in this respcct are higher now than thly have ever bcen. what has happened is that a change has taken place in the climate of public and politicar opinion which has brought advertisemenls under much croser icrutiny. Increasid cmphasis has been placed in generar terms upon consumer protection. consumers themselves have probabry becomc n'o.. o*or. of advertising now that it is brought directly into their homes by the peculiarly intrusive mediuin of television. And a wide variety of writers have examined the ethics of .persuasion', the possibilities of mass manipulation, and the economics of the advertising-inspired acqu'isitive society. Labour Party has tendecl to become particularly critical of ihe .The activities of advertise.rs. In 1959 a public meeting called by Francis |ioel-Baker, M. p-, set up the Advertising Inquiry Committee, an indepenient body which was to waich out for 'all kinds of socially harmful advertisement'. Two yeais later the party set up an in_ dependent comnrission under the chairmanship of Lord Reith, which recommendcd the establishment of a National Consumer Boird jinanced by a levy on advertising. ln 1'972, a Green Paper on.Advertising was published, in which advertising was condcmned for creating an imbalance in the ielationship between consumer and producer - a state of affairs which it was proposed to rcctify by thc creation of a

since world war

II,

Authority:

(l

This Authority should be indepcndent.

It should have an income of millions rather than thousands, and thus be enabled to tcst claims on behalf of consumcrs.
Britairt,-t'R. Ncvctt' copvright@rhe HistoryorAdvcrrisine

i:J,t$$ifiij:"frfi'JJ:,Xl'J:f#

trE I Reaching the markets

to investigate complaints and to publish its rvork, (and that of others) cffectively. The establishment of a statutory code to govern advertising practice is suggested. Thc Authority would advise on its provisions, enforcement and ncedcd revisions. The troubles besetting the newspaper industry were attributed to 'excessive reliance on advertising revenue', rvhich it was felt might compromise the freedom of the press, together with 'the habit of advertisers of concentrating on papers already successful'. In addition, advertising was castigated for '. . . its tendency to overencourage gross materialism and dissatisfaction and its tendency to irresponsibility'. Since many of the problems werc secn as arising from 'an exccss of advertising above a neccssary and reasonlble levcl'. it rvas proposed to disallow 50 pcr ccnt of all advertising expenditure as a deductable expense for tax purposes. As rvell as financing the National Consumers Authority, it rvas felt that this rvould lead to competition in terms of pricc reductions on products rather than through advertising. Thc taxation of advertising was subsequently adopted as official party policy. The teaching profession has at times been extremely critical of the influence of advertisinq on childrcn. The Annual Conference of the National Association of Schoolmasters in 1962 heard Mr Terry Casey state their case in the follorving tcrms:
Perhaps the most pervasive anti-educational influence is that of moclern advertising, for that e.rr.r/.r to circumvent the reasoning faculty and weaken judgment. Some of it is puerile, but it can be subtle. Of the former kind are the many variants of the ex parre claim that 'Bloggs nrakes the best - whatever it is. This must be so because Bloggs says it is so'. Millions of young minds, which rvc seck to train to think, ar0 constitntly bombarclcd rvith this sort of nonsensc. Not content with had logic, resort is had to bad manners. Children themsclves are recruited as advertising agents, and are urged to makc importunatc demands upon their parents to buy this or that product. 'Don't forget my fluit gums, Mum!' is not even prefaced with the little word 'plcase'. Under the rough treatmcnt of thc 'blurb' writers, adjectives have lost thcir vitality and almost their validity bccause of the excessive use of superlativcs. In school rve try to enrich vocabularies, but many children arc rcduced to the vcrbal povcrty of using the prcpositional prefix 'super' as an all-purpose adjective denoting approbation, thanks to the blleful inl'luence of thc 'Ads'. Psychology, Ihc science which rve thought was to be the handnraiden of cducation, has been prostitutcd to serve the cnds of salesmanship, the panjandrum of the inflated economy. If advertising really is necessary to keep the wheels of inclustry and commerce turning, is it too much to ask that it be presented in rvays which do not offend good taste nor affront good sense'l

Advertising in Britain

F4

Law. Advertising on television is particularly tightly controlled, the Independeni Broadcasting Authority having a statutory responsibility for programme conl:ent which includes advertising. This it discharged in respect of commercials by ensur.ing that they comply with its own Code of Practice, checking them before tranmission not only for points of presentation but also to make certain that all claims are capable of substantiation. Radio commercials, for which the I.B.A. is again."sponrible, are also subject to prior approval, but since the medium is used mainly for local campaigns, vetting in most instances is left to individual stations. Mounting criticism has also forced the advertising business to tighten its own internal controls. Medical advertising in particular has come under incieasingly close scrutiny, with the Proprietary Association of Great Britain revising its code on a number of occasions, and the British code of standards in Relation to the Advertising of Medicines and rreatments, published under the auspices of the Advertisin! Association in 1948, subsequently being incorporated into the British code o1 Advertising Practice. Voluntary action in this traditionally difficult area seems to
have been successful. The Proprietary Association today works closely with the
Department of Health, and regulations made under the Medicines Act of 196g leave the detailed control of advertising very largely in the hands of the self-regulatory bodies. Even the Price commission was impressed with the job which had be,:n done: Self regulation of advertising by the industry has been initiated by the Proprietary Association of Great Britain (PAGB). This has been responsible for stopping the early advertising abuses which even now colour the image of the industry. The first Code of Practice was introduced in 1936 and this has been systematically updated since then to improvc advertising standards and to take into account ttte dcvelopment of new advertising nredia such as commercial television and radio. In addition to the controls imposed by the PAGB the advertising industry itself has imposed its own systcm of control through thc Advertising Standards

advertising, the most important of them being listed in Appendix L of the British code of Advertising Practice . . . for a detailed examination of their scope and significance the reader is rcferred to Dr Richard Lawson's definitive Ad.iertising

Authority.
The number of complaints about proprietary medicines advertising is about 0.2 per cent of all complaints and the number upheld is less than 0.1 per cent. The conclusion is therefore that the system of control is effective.

One rcsult of the gencr:rlly more critical attitude towards advertising has becn an increasc in thc amount of legislation affecting the content of advertisements, both directly and indirectly. Apart fronr the rvidely knorvn Trade Descriptions Act, there are over 60 statutes and statulory instrumcnts currently in force which rclate to

The advertising business has also made considerable efforts to improve standards on a more general level, though in responding to public pressure it may have moved tclo little and too late. A notable step forward was taken in 1961 when the Advertising Association Conference sarv the unveiling of the British Code of Advertising Practice, providing for the first time a set of formal standards to be observed and applied by all sides of the business. This was not enough to still the critical voices, objectious

Ell I Reaching the markcts

bcing made to the framing of the Codc on the grounds tltat it did not go far cnough, and to thc standing comnrittee rcsponsiblc for its cnforccnrcrrt becausc it rcprcscnted advcrtising intcrcsts rirthcr than thosc of tlrc consunrcr. 'l-hc bllowing ycar thcrcforc saw thc sctting up of r nov body, thc indcpcndcnt Advcrtising Standards Authority," rvhich had as its objcct "lhe proniotiort and cnforccmcnt throughout thc Unitcd Kingdom of the highcst standards of advcrtising in all media, so as to ensure in cooperation with all thosc conccrned that no advertising contravenes or offcnds against these standards.' Thc chairman of the Authority was namcd as Profcssor Sir Arnold Plant of thc London School of Econontics, rvhose intpartiality rvas bcyond doubt; anrong its tcn nrcnrbcrs rvas Vic Fcathcr of thc l'UC. 'lhc sceptics still rcnaincd unconvincecl, horvcvcr, arguing thilt thc Authority was llot strong cnough, was biased in favour of advertising, and thrt its working u'as conrparablc to that of the police investigating conlplttints against thcmsclvcs. By 1974 it was bccorning atrundantly clcar that unlcss justice wcrc sccn to bc cffectively enforccd, the Labour Governmcnt rvoulcl introduce a statutory code of practicc togethcr with suitablc nrachincry to ensurc its obscrvancc. Faced with this thrcat, thc industry nrade consideratrlc rcvisions to its own system. Thc Advcrtising Standards Authority's permanent sccrctariat rvas strcngthcncd. A revised edition of the Codc of Practice was produced, with copics going to cvcry Citizen's Advice Bureau in the country. N{assivc advertising campaigns wcre mounted, telling the public about thc Authority and its work, and urging thcnr to cornplain if they saw an advertisement that was not lcgal, decent, honcst and truthful. Regular bullctins wcre introduced giving details of complaints receivcd and thc action taken. A monitoring svstem was begun to kcep a check on particular catcgorics of advertisemellt where problems werc likely to occur. And the rvhole nrachincry of control was now financed by a levy on display advertising of 0.1 pcr cent to bc collected by a new body knorvn as the Advertising Standards Board of Financc (ASBOI1. lvlcanwhile the Authority had also absorbed the work of the Advertisemcnt Invcstigation Dcpartment of tlie Advertising Association, rvhich had givcn so many years of faithful servicc. The Council of the Advertising Standards Authority now consists of trvelve memsamplc pcriod:

Advertising in Brirain I I
The ncw method of working has undoubtedly been successful in ensuring strictcr obscrvance of the Code of Advcrtising Praclice. The Authority's Annual Report for

thc ycar 1976-7 gives the following brcakdown of complaints received during

The numbcr of complaints which came within the ASA's renrit over a nine week period were 1,592, against a background of something of the order of 4% million advertiserncnts published each week. of that number, 1g3 were complaints not about advcrtiscrnents but about a failure to dcliver goods ordercd by mail. (Bccause such goods are bought as a dircct result of an advertisement, the ASA has a special responsibility for bringing such complaints to a satisfactory conclusion). of the remaining cornplaints, 295 were found to be justified. This represents 18.5% of all complaints reccivcd in thc period, but only 0.006% of the cstinratcd total numbcr of print advertisements published during the nine weeks conccrncd. The complaints which were upheld ranged from technical breaches of thc codc and genuine over-sights to a very few intentionally misleading claims. A substantial proportion were concerned with questions of taste and dccency: an area rvhere self-regulation need fear no competition from the law.

Enforcement

provisions. In the case of an advertiser using 'rogue' media, or sending his material through the post, the Authority is powerless. In future it will surely be this area which will attract the attention of proponents of statutory control. In addition to the part played by the Authority in advertising control, it should be rcmembered that considerable work is donc behind the scenes by indiviciual companies and organisations within the business. The Newspaper Socieiy, by main-

ln spite of this impressive record, there still remain some awkward loopholes. of thc code is only effective if the media carrying the ofiending advertisement belong to one of the organisations which have agreJd to uphold iti

bers appointed by the Chairman, all

of whom scrvc as individuals and not

as

representatives of any business or sectional interest. Eighl arc drawn from various areas of public life, and the others from the advertising industry to provide expert aclvice. The ASA is really the public face of advertising control. Another body, the Code of Advertising Practice Committee, co-ordinatcs activities rvithin the advertising industry itsclf. Consisting of members of the twenty organisations subscribing to the Code, it is responsible for ensuring that pcople rvorking in all branches of advertising are aware of and understand the provisions of the Codc, and arc preparcd to eniorce thcm. It can specify certain classes of advertisement for prcclcarance, currently vctting those for cigarettes, pregnancy tcsting und counselling, abortion, vasectomy, and sterilisation. It also dcals with disputcs on copy matters arising bctwecn advertisers, and if required will provide prc-publication advicc on thc admissibility of advertising clairns.

taining its own Advertisement Investigation Department, running training courses and seminars, and publishing essential information in handy reference form, kceps the regional press up to date and on its guard. publishers' organisations operate guarantee schemes to protect readers against possible loss when sending off money in 'direct response' to mail order advertisements. The Incorporated Society of British Advertisers continues to supply its members with a confidential bulletin giving details of current sharp and illegal practices. Agency standards are upheld by the Institute of Practitioners in Advertising, rvhich in 1957, for example, banned the use by its members of subliminal advertising - messages flashed at such speed that they are received by the brain without the recipient's conscious knowledge. Students taking the industry's professional examination - the Diploma of thc Communication Advertising and Marketing Education Foundation - now also face compulsory questions on legal and voluntary controls. It remains to be seen whether all these efforts will be sufficient to head off the threat of tighter legal control, including compulsory prevetting of advertisements, as is the case on television. The British press has always been wary of any attempt to censor its columns, and there re.uins the fear that

@I

Reaching the

markets

The affluent society

td

machinery established for the ostensible purpose of checking advertising could very to control the editorial sections. Perhaps a few misleading advertisements are a small price to pay for denrocracy. In addition to pressure for higher standards of advertising, the industry has also had to face calls for an end to the advertising of particular products. Thc case in which feelings have run highest has bcen that of cigarettes, follorving thc publication of cvidence linking smoking rvith lung cancer. At the outset the industry ficrcely resisted any kind of curb. The public, it rvas argued, should be permittecl to smoke themselves to death if they so desired. In any case, aclvertising did not encourage people to smoke but only to srvitch brands. A typical reaction rvas that of the poster industry's Joint Censorship Committee, rvhich in 1962 banned a Ministry of I{ealth poster with the rvording 'Cigarettes cause lung cancer' on the grounds that this was not the same as saying 'Cigaratte smoking is a cause of lung cancer' - a dccision describcd by Lord Hailsharn as 'absolutelv indcfensible and indeed irrcsponsiblc, illogical quibbling'. Gradually the industry rvas forccd to givc way. In 1962 thc Indcpendcnt'Iclcvision Authority and the tobacco manufacturers agreed on a code of practice rvhich put an end to the use of romantic situations, the over-emphasis on the pleasure to be derived from smoking, and the use of appealing personalities or settings. The screening of cigarette commercials was also limited to times when children wcre lcast likcly to bc rvatching.'fhrcc ycars lltcr cigarcttcs tlisappcarcd complctcly frorn thc commercial break, despite vehement protests from the Advertising Association, the Institute of Practitioners in Advertising, and the Incorporated Society of British Advertisers. N'leanwhile, a number of newspapers and magazines was announcing that they would not accept any further cigarette advcrtising, among thcm the Radio Titnes and Lislener, rvhose decision announced in 1969 was estimated to have cost them f500,000 in lost revenue rvithin a year. The cigarette companies, for thcir part, actually increased their expenditure in thc years after the television ban, and sought to circumvent it by such means as sponsorship. At the time of writing, the appeals which can be made in cigarette advcrtising are set out in Appendix H of the British Code of Advertising Prucrice, which prohibits virtually evcry type of claim traditionally cmployed. Each advertisement also has to carry a rvarning that smoking can damage the health. Calls for a complete ban on cigarette advertising still persist, however, and there scems little doubt that this rvill eventuallv come, ending what must surely rank as one of the most contentious

The affluent society

J. K. GALBRAITH
On Sccurity and Survival

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In our society, the increased production of goods - privately produced goods is, as we have seen, a basic measure of social achievement. This is partly the-result ol the great continuity of ideas which links the present with a world in which production indeed meant life. Partly, it is a matter of vested interest. partly, it is a product of the elaborate obscurantism of the modern theory of consumer nied. And partly, we have seen, the preoccupation with production is forced quite genuinely upon us by the tight nexus betrveen production and economic security. However, it is a reasonable assumption that most people pressed to explain our concern for production a pressure that is not often exerted - would be content to suggest that it serves the happiness of most men and women. That is sufficient. The pursuit of happiness is admirable as a social goal. But the notion of happiness lacks philosophical exactitude; there is agreement neither on its substance nor its source. we know that it is 'a profound instinctive union with the stream of life,'r but we do not know what is united. As just noted, precision in scholarly discourse not only serves as an aid in the communication of ideas, but it acts to eliminate unwelcome currents of thought, for these can almost invariably be dismissed as imprecise. To have argued simply that our present preoccupation with production of goods does not best aid the pursuit of happiness would have not nowhere. The concepts to which one would have been committed would have been far too vague. Any direct onslaught on the identification of goods with happiness would have had another drawback. Scholarly discourse, like butlfighting and the classical ballet, has its deeper rules and they must be respected. In this arena, nothing counts so heavily against a man as to be found attacking the values of the public at large and seeking to substitute his own. Technically, his crime is arrogance. Actually, it is ignorance of the rules. In any case, he is automatically removed from the game. In the past, this has been a common error of those who have speculated on the sanctity of present economic goals - those who have sought to score against materialism and philistinism, They havc advanced their own view of what adds to human happiness. For this, they could easily be accused of substituting for the crude economic goals of the people at large the more sensitive and refined but irrelevant goals of their own. The accusation is fatal. The reader will now appreciate the care with which the defenses against such an attack have been prepared. The question of happiness and what adds to it has been evaded, for indeed only mathematicians and a few others are required to solive problems that can as sensibly be sidestepped. Instead, the present argument has been
Readings taken permission.

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O J. K. Galbraith.

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directcd to sccing how cxtcnsivcll'our prcscnt prcoccupations, nlost of all that with the production of goods, are conrpcllcri by tr:rdition ancl by nryth. Rclcasccl from thesc conlpulsions, rvc bccomc frcc for thc lirst timc to survcy our othcr opportunitics. Thcsc at lcast havc a plausiblc rclation to happincss. But it will romain with the rcacler, lnd (sincc many of thc t-rl.rportunitics can be scrvcd only by action of thc state) one hopcs with dcmocratic ploccss, to rcconcilc thcsc opportunitics rvith his own scnsc of uhat makes lile bcttcr.
II

A socicty has onc highcr tilsk than to consiclcr its {oirls, to rcflcct on its pursuit ol' happincss and ltalntony and its succcss in cxpclling pairr, tcnsion, sorrow and thc ubiquitous cursc of ignorancc. It nlust also, so far as this nray bc possiblc, cnsurc its own survival. Oncc, in thc not distant past, thcrc rvas a simplistic association of sccurity rvith an cxpanding ccononly - rvitli :r 'hcaltlry' incrcuse in thc procluction ol privatc cotlsunlcr grlocls.'fhis is no longcr bclicvcci. As rlotcd, i<lcrrs, rtlortq u'ith thc ability of thc Sovict Union Io cxtract awcsomc sl)ucc accomplishurcnts fronr a fal lcss productivc cconomy, joincd to dcfcat this error arrd norv it is ltitrcl to rcmcrrttrcr that we once bclicvcd such nonscnsc. But a dangcrorts, indcccl itn infinitcly nlore dangcrous, association of production with military policl' still cxists. Thc basic stabilization apparatus of thc rnodcrn ccononry consists in ir llrrgc public scctor sustaincd by a large volunrc o[ taxation, which, bcing progrcssivc. incrcascs nrorc than in proportion with incrcases in production and income, and releases itrcomc for privatc usc when thc ratc of cxpunsion is slower. Closc to half of thc expenciitures rvhich currcntly (in the ntid-sevcntics) justify this taxation and thus justify this legulatory proccss are for rnilitary or rclatcd purposcs. Econotttists havc bccn quick to arguc that othcr public cxpcncliturcs n'ould servc. Ilut thc fact canrtot bc r:ludctl; as n]attcrs now stattd, the stability of production depcrrds on a Iarge volunrc of nrilitary expcnditurcs, quitc a ferv of thcm for wcapons thoughtfully dcsigned to dcstroy all life. Additionally', the w,capons culturc whiclr undcrlics thc macrocconomic stabilization of the economy also plays a cleeply functional rolc in unicr*'riting tcchnology. lf the notion that sccurity depencls on rvinning a racc rvith the Soviet Union for incrcased production has bccn abandoned, thc sarnc cannot bc iaid for thc bclief that it dcpcnds on rvinning a compctition in tcchnological innovation. Or rather, though the race is rccognizcd as having no rational relation to thc sccurity of thc participants, thc contnritmcnt to it has bccn in norvisr: lcssencd.. And onc rcason is that thc racc has, in fact, r dceply organic rclation to ccononlic pcrforntance. A consumcr goods ccononly is linritcd iu thc lcsourccs it cun irllocutc lo rcsclrch and (lcvclopnlcnt.'lhc wcapons compctition sustains such c[[or't on a virstly grcutcr scalo. This is intcrcsting to thc participant produccrs for its own sakc. It also finances dcvelopmcnt with application to the consumer goods scctor - the dcvclopment of air transport and computcr tcchnology. Ancl it is also l covcr by rvhich thc cost of rcsoarch and clcvclopnrcnt for civilitn l)urposcs rvhich is too cxpcnsivc or too lisky to bc afiorclcd

by private firms can, on occasion, bc conducted at public cost. Were wc dccply conccrned about survival, rvc rvould qucstion the wisdom of thcse arrangenrcnts and rvc would work rclentlessiy to persuade the Soviet Union, as the principal focus of this compctition, or their danger. But if economic performance is our prinrlry conccrn - if production qua production is the thing that counts - thcn survival naturally takes second place. And so it does. Only as we get matters into beiicr pcrspective will our priorities becomc more consistent with life itself.z There are other if lesser problems rvhich our present preoccupation with production leaves unsolved. Were the Russians to disappear from the world, or, evcn moie rcntarkably, becotuc overnight as tractablc as church mice, there would remuin vlst millions of hungry and discontcnted people in thc world. Without the pron.risc of rclicf from that hungcr and privation, disorder would still be inevitable. Thc promrsc of such relief rcquircs that we have availablc or usable resources. If such is the nature of our system that we have production only because we first create thc wants that requirc it, wc will have fcrv resources to spare. We will be rich but nevcr quiic rich cnough to sparc anything much for thc poor - including our own. Wc shai:'t prcscnt a very enchanting picture to the world or even to ourselves. If we undcrstaiid that our socicty creates the rvants that it satisfics, we may do better. Evcn when thc arms race ends, as it must be made to cnd, the scientific fronticr will rernain. Either as an aspcct of international competition, or in pursuit of thc cstcem and satisfaction which go with discovery, we shall want to seek to cross it and be in on thc crossing. In the field of consumer satisfaction, as we should by norv agree, there is little on which one can fault thc American performance. But this is not all and, as wc should norv, hopefully, also agree, an economy that is preoccupied howcvcr brilliantly with the production of private consumer products is supremely ill fittcd for many of thcse frontier tasks. Under the best of circumstances, its rcsearcir rvill bc relatcd to thcsc products rather than to knowledge. The conventional wisdom will provide inrprcssive argumcnts to tltc contrary. No one should be fooled. And not only does a great part of modern scientific work lie outsidc thc scopc of

thc nrarket and privatc entcrprise but so docs a largc arca of application and developmcnt. Private enterprise did not get us atomic energy. It has shown relatively
slight interest in its development for power for the reason that it could not clearly be fitted into commercial patterns of cost and profit. Though no one doubts the vigor with which it addresses itself to travel on highways within the United States, Gencral

Motors has littlc intcrest in travcl through space. As matters norv stand, wc have few civilian arrangements that arc by central design and purposc dirccted to largc-scalc participation in modern scicntific and
tcchnological progrcss and its largc-scalc application in advancc of knowledgc thai thcsc will bc conrnrercially fcasible. Much has been accomplished by research and devclopment not imnediately subject to commercial criteria under the inspiration of military need. This has done more to save us from the partial techological stagnation that is inhercnt in a consumer goods economy than wc imagine. But this is ti hidcously incfficicut way of subsidizing gencral scientific and technical dcvelopmeni.

i 4?6 r I Reaching thc

markets

The affluent society

envy of his neighbor's new car? In the time that has passed since he was pooi, his soul may have become subjcct to a new and deeper searing. And where a society is concerned, comparisons between marginal satisfactions when it is poor and those lvhen it is affluent will involve not only the same individual at different times but different individuals at different times. The scholar who wishes to believe that with increasing affiuence there is no reduction in the urgency of desires and goods is not rvithout points for debate. However plausible the case against him, it cannot be proven. In the defense of the conventional wisdom, this amounts almost to

-- great and effect of associating as nearly all scientists agree. Anci it has the further terror' even and cxciting.scientific advances lvith an atmosphere of fear
III

problenrs of eithcr the world or Nor is this ali. The day rvill .io, ,oon comc rvhen thc shape of the problems, rve do the know not tu, orun polity are soived. Since we do is tolcrably certain- whether thing one But for solution. not kno$i the requirements space in rvl.rich to live with of and population a burgeoning of ihat be ifr. fr"Uf.r materials which nature has of the cieptetion grace, or whether"it bc the p.rJ. ^"0 upon more heavily in this drarvn been have rvhich and stockecl in ihe earth's crust that of occupying minds it be rvherher or together, rime previous all in ;."*;t than the basic demand on goods, ;; i;;g., commiued to the stockpiling of consurner The test will education' and intelligencc ability, America rvill be on its resoulces oi of our effectiveness the thln investment material of our be less the effectiveness be can one This generalization. investment in men. we live in a rJay of grandiose made with confidcnce. is in the public Education, no less than national defense or foreign assistance, private and between allocation domain. It is subject to the impediments to resource rcturns contentment and sccurity survival' for hope oui public use. So, oncc again, ends' urgent the most to guiding resources of problem l, to th" furniture until the To furnish a barren ,oo-"i. one thing. To continue to crowd in

invulnerability. However, there is a flaw in the case. If the individual's wants are to be urgent, they must be original with himself. They cannot be urgent if they must be contrived for him. And above all, they must not be contrived by the process of production by which they are satlsfied. For this means that the whole case for the urgency of production, based on the urgency of wants, falls to the ground. One cannot defend production as satisfying wants if that production creates the wants. Were it so that a man on arising each morning was assailed by demons which instilled in him a passion sometimes for silk shirts, sometimes for kitchenwale, . sometimes for chanrber pots, and sometimes for orange squash, there would be every reason to applaud the effort to find the goods, however odd, that quenched this flame. But should it be that his passion was the result of his first having cultivated t,he dcmons, and should it also bc that his effort to allay it stirred the demons to ever greater and greater effort, there rvould be question as to how rational was hris
solution. Unless restrained by conventional attitudes, he might wonder if the solution lay with more goods or fewer demons. So it is that if production creates the rvants it seeks to satisfy, or if the wants emerge pari passu with the production, then the urgency of the wants can no longcr be used to defend the urgency of the production. Production only fills a void that it
has

the problcm of producing foundation buckles is quite anothcr. To haue failed to solvc grievous misfortune' most and gloo, ,uouto have been to continue man in his oldest thence to tho next proceed to to fail and it, solved wc have [ut to fail to sec that trlrgic. as fullv rvould be tasks NOTES
precision'inThe are martcrs which I discuss'u, gi"ot lengih, and I think with grcatcr i. - ifr.r, lndustrial lhe Srute,2nd cd., rev. (B"oston: H6ughton lvliffiin' 1971) and Econ.ontics aul
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l.BertrirndRusscll,TheConquestofflappincss(London:Allcn&Unwin'1930)'p'241'-.

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The point is so central that it must be pressed. Consumer wants can have bizarre, frivolous, or even immoral origins, and an admirable case can still be made for a society that seeks to satisfy them. But the case cannot stand if it is the process ol' satisfing \\'ants lhat creates the $'ants. For then the indiridual sto urges the importance of production to satist' these *'ants is preciself in rhe position of the onlooker l'ho applauds the efforts of the squirrel to keep abreast of the rvheel that is propelled by his orvn efforts. That wants are, in fact, the fruit of production rvill norv be denied b1' few serious scholars. And a considerable number of economists, though not always in full knorvledge of the implications, have conceded the point. . . . Keynes noted that needs of'the second class,' i.e., those that are the result of effofts to keep abreast or ahead of one's fellow being, 'may indeed be insatiable; for the higher the general

individual is The notion that wants clo not become less urgent the more amply tlie only believed to be something It is sense. common to repugnant is broadly supplied iri itot" who rvisir to-believe. Yet the conventional rvisdom must be tackled on its do rest on oivn terrain. Lttertempolal comparisons of an individual's state of mind rvhich deprivation the that sure for say .on ivho ground. technically vulnerable hirn rvith lvhich afflicts deprivation the painful than more hungeiis with him afflicts

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The affluent society-]

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lcvcl, the highcr still are they.'r Ancl crnulation has ahvays playcd a considerable role irr thc viervs of other ccortomists of rvant creation. One rnan's consurnption bccomcs his neighbor's wish. This alrcady mcani rhar thc proccss by which wants are satisfied is also thc proccss by rvhich wants urc cl'clrtcd. Thc nrore rvants that arc satislicd, the morc new ones are born. Flowever, the argurnent has bcen carricd farther. A leading nrodcrn theorist of corlsumcr bchavior, Profcssor Ducscnbcrry, has stated cxplicitly that'ours is a socicty in which one of the principal social goals is a higher standard of living . . . [This] has great significancc for the theory of consunrption. . . the dcsire to get superior goods takes on a life of its orvn. It providcs a drive to higher cxpenditure wllich may even be stronger than that arising out of the necds which arc supposcd to be satisfied by that expcnditurc.'2 The implications of this vicw are inrpressive. The notion of indcpendently cstablished nced norv sinks into thc brrckqround. Bccausc thc socicty scts great storc by ability to producc a high living standard, it evaluatcs pcople by the products they possess. The urgc to consunte is fathclcd by the value systcm which cmphasizes the ability of the socicty to produce. The ntorc that is produced, the more that tlust be owncd in order to nraintain the appropriatc prcstige. The lattcr is an important point, for, without going as far as Ducsenbcrry in rcducing goods to the role of symbols of prestige in the afllucnt socicty, it is plain that his argumcnt fully implics th-at the production of goods creatcs thc wants that the goods arc prcsumcd to satisfy.i
III

But such integration mcans recognizing that wants are depenclent on production. It accords to thc produccr the function both of making the goods and of making the desircs for thcm. It recognizes that production, not only pasiively through emulation, but actively through advertising and relaterl activities, creates the wants it seeks to
satisfy.

The even more clirect link bctween production and rvants is provided by thc institutions of ntodern advertising and salcsmanship. Thesc cannot be rcconcilecl with the notion of independently detcrmined desircs, for thcir central function is to creatc desires - to bring into being wants that previously did not cxist.a This is accornplished by the producer of the goods or at his behest. A broad empirical relationship exists betrveen what is spent on production of consumcr goods and what is spent in synthesizing the desircs for that production. A ncr',' consumcr product must be introduccd rvith a suitablc advertising campaign to arouse rn interest in it. The path for an expansion of output must be paved by a suitable cxpansion in the advertising budget. outlays for the manufacturing of a product arc not morc important in the strategy of modcrn business cntcrprise than outlays for thc manufacturing of dcmand for the product. Nonc of this is novcl. All rvould bc rcgarclcd as clcmcntary by the

most retardcd studcnt in the nation's ntost primitivc school of business administration. The cost of this want formation is forniidablc. In 1974, total advertising cxpenditure - though, as nored, not all of it may be assigncd to the synthesis of wants - amountcd to approximatcly trvcnty-flve billion clollars. Thc increase in previous vcars was by about a billion doillrs a ycar. obviously, such outlays nust be integratcd rvith thc thcory of consunlcr dcmand. They rrc too irig to be ignon:d.

pedagogy so firrn - to seek unquestioningly the means for filling these wants. This being so, production remains of prime urgency. we have here, perhaps, the ultimate triumph of the conventional wisdom in its resistance to the evidence of the eyes. To eq.ual it, one must inragine a humanitarian who was long ago persuaded of the grievous shortagc of hospital facilities in the town. He continues to importune the passcrsby for money for more beds and refuses to notice that the town doctor is deftly knocking over pedestrians with his car to keep up the occupancy. And in unraveling the complex, we should always be careful not to overlook thc obvious. Thc fact that wants can be synthcsized by advertising, catalyzed by salesrnanship, and shaped by the discreet manipulations of the p.6uad.rs shows that they arc not vcry urgent. A man who is hungry need never ui tolo of his need for food. If he is inspired by his appetite, he is immune to the influence of Messrs. Battcn, Barton, Durstine & osborn. The latter are effective only with those who are so.far removed from physical want that they do not already know what they want. In this state alone, men are open to persuasion.

of all the forccs of modern salesmanship, it still rules, almost undefiled, in the textbooks. And it still remains the economist's mission - and on few matters is the

The busincssman and the lay reader will be puzzled over the emphasis which i give to a secrningly obvious point. The point is indeed obvious. But ii is one which, to a singular dcgree, cconomists have resisted. They have sensed, as the layman docs not, the damage to established ideas which lurls in these relationships. As a result, incrcdibly, they havc closed tlreir eyes (and-ears) to the most obtrusive of ali cconomic phenomena, namely, modern want creation. This is not to say that the evidence affirming the depcndence of wants on advcrtising has bcen cntirely ignored. It is one reason why advertising has so long been rcgardcd with such uneasiness by economists. Llere is something which cannot be accommodatcd easily to existing theory. More pervious scholars have speculated on the urgcncy of desires which are so obviously the fruit of such expensivily contrived canrpaigns for popular attention. Is a new breakfast cereal or detergent so much wantcd if so much must bc spent to compel in the consumer the sense of want? But thcrc has becn little tendency to go on to examine the implications of this for thc theory of consumer demand and even less for the importance of production ancl productive efficicncy. These have remained sacrosanct. More often, the uneasiness has been manifcsted in a gencral disapproval of advertising and advertising men, leading to the occasional suggestion that they shouldn't exist. Such suggestions have usually been ill reccived in the advertising business. And so the notion of independcntly dctermined wants still survives. In the face

Reaching the markets

The affluent society

Ed

The general conclusion of these pages is of such importance for this essay that it had perhaps best be put with some formality. As a society becomes increasingly affluent, wants are increasingly crcated by the process by rvhich they are satisfied. This may operate passively. Increases in consumption, the countcrpart of increascs in production, act by suggestion or emulation to creatc rvants. Expectation rises rvith attainment. Or producers may proceed actively to create wants through advertising and salesmanship. Wants thus come to depend on output. In technical tcrrns, it can no longcr be assumcd that welfarc is greatcr at an all-round highcr level of production than at a lower one. It may be the same. The higher level of production has, merely, a higher level of want creation necessitating a higher level of rvant satisfaction. There will be frequent occasion to referto thewaywants depend on the process by rvhich they are satished. It rvill be convenient to call it the Dependence Effect.
We may now contemplate briefly the conclusions to which this analysis has brought
us.

must be effectively contrived. In the absence of the contrivance, the increase would not occur. This is not true of all goods, but that it is true of a substantial part is sufficient. It nreans that sincc the demand for this part would not exist, were it not contrivcd, its utility or urgency, e.r contrivance, is zero. If we regard this production as marginal, we may say that the marginal utility of present aggregate output, er advertising and salesmanship, is zero. Clearly the attitudes and values which make production the central achicvement of our society have some exceptionally twisted
roots. Pcrhaps the thing ntost cvidcnt of all is horv new and varied become the problems wo must ponder when we break the nexus with the work of Ricardo and face the economics of affluence of the world in which we live. It is easy to see why the conventional wisdom resists so stoutly such change. It is far, far better and much safer to have a firm anchor in nonsense than to put out on the troubled seas of

thought. NOTES
1.

Plainly, the theory of consumer demand is a peculiarly treacherous friend of the present goals of economics. At first glance, it seems to defend the continuing urgency of production and our preoccupation with it as a goal. The economist does not enter into the dubious moral arguments about the importance or virtue of the rvants to be satisfied. He doesn't pretend to compare mental states of the same or differcnt people at different times and to suggest that one is less urgent than another. Tire desire is there. That for him is sufficient. He sets about in a workmanlike way to satisfy desire, and accordingly, he sets the proper store by the production that docs. Like rvoman's, his work is rttver done. But this rationalization, handsomely though it seems to serve, turns destructively
on those who advance it once it is conceded that rvants are themselves both passively and deliberately the fruits of the process by which they are satisfied. Then the production of goods satisfies the wants that the consumption of these goods creates or that the producers of goods synthesize. Production induccs more wiuts and thc need for rlore production. So far, in a major tour do force, thc intplications have

J. M. Kcynes, Essays itt

Persuasion, 'Economic Possibilities

(London: Macmillan, 1931), p. 3(r5.

Mass.: Flarvard Univcrsity Press, 1949), p. 28.

for Our

Grandchildren'

2. James S. Ducsenberry, Income, Saving and the Theory of Consumer Behavior (Cambridge,

3. A morc rcccnt and de{initivc srudy of consumer demand has addcd even morc support. Profcssors Houthakkcr and 1'aylor, in a statistica! study of the dcterminants of demand, found that for most products price and income, the accepted dcterminants, were lr-'ss
recoursc lo past consumption. Such demand nurtures the need for its own increase. H. S. Florrthakker and L. D '[aylor, Consumer Demand in the United States,2nd ed., enlarged (Cambridge, Mass.: Harvard University Press, 1970). Advertising is not a simple phenomenon. It is also important in competitive strategy and want crcation is, ordinarily, a complementary result of efforts to shift the demand curve of the individual firm at the expense of othcrs of (less importantly, I think) to change its shapc by increasing thc dcgrcc of product diffcrcntiation. Somc of the failure of economists to identify advcrtising with want creation may be attributcd to the undue attention that its use important than past consumption of thc product. This'psychological stock,'as they called it, conccdes the weakness of traditional theory; current demand cannot bc explained without

4.

been ignored. But this obviously is a perilous solution.

discussion.

It

cannot long survive

in purcly compctitivc stratcgy has attracted. It should be noted, however, that the compctitivc manipulation of consumer desire is only possible, at least on any appreciable scale, rvhcn such necd is not strongly felt.

Among the many models of the good society, no one has urged the squirrel rvheel. N{oreover, as .*'e shall see presently, the rvheel is not one that revolves rvith pcrfect smoothness. Aside from its dubious cultural charm, there are serious structural rveaknesses rvhich may one day embarrass us. For the moment, horvcvcr, it is sufficient to reflect on the difficult terrain rvhich we are traversing. . . . We saw horv deeply we rvere committed to production for reasons of economic security. Not the goods but the employment provided by their production was the thing by which rve set ultimate store. Now rve find our concern for goods further undermined. It does not arise in spontancous consumer need. Rather, the dependence effect means that it grows out of rhe process of production itself. If production is to incrcasc, the rvants

@]

LR."h,"c,r,

c nrarkcts

i i

---_j-r Ile non sequitur of the 'dependcnce eftect! I A:S

The non sequitur of the 'dependence effect'

F. A. VON IIAYEK

that we feel them whatever the situation of ourfellow human beings may be.'If the latter phrase is interpretcd to exclude all tire needs for goods *ttl.tt ur" felt only

For rvcll ovcr a lrundrcd ycars the critics of the lrcc cntcrprisc systcnr have rcsortcd to the argument that if production rvcre only organizcd rationally, thcrc would be no cconomic problcm. Ilathcr than facc the problem rvl-rich scarcity creatcs, socialist rcformcrs havc tendcd to deny that scarcity existed. Ever sincc the Saint-Sintonians thcir contcntion has bccn that the problcnr of production has bcen solved and only the problem of distribution rcmains. llowcvcr absurd this contcntion must appcar to us with respect to thc time rvhcn it was lirst advanced, it still has somc persuasive porver rvhcn repeatcd ri'ith refcrencc to thc prcscnt. Thc lntest form of this old contention is cxpor.rndcd in Tlrc Affluent Society by Professor J. K. Galbraith. ilc attenrpts to dcmonstratc thtt in our af'lluent society thc inrpo|tnnt 1;rivutc nccds urc alrcltly satisficil ancl thc urgcnt nccd is thercfore no longer a furthcr cxpansion of the output of conrnroditics but an incrcase of those scrviccs which are supplied (and presumably can bc supplicd only) by govcrnnlent' Though this book has becn extensivcly discussed since its publication in 1958, its ccntral thesis still recluires some furthcr cxamination. I bclicvc tftc author rvould agrcc that lris arguntcnt turns upoll thc 'Dcpendcncc Effect' explaincd in Chapter XI of the book. The argument of this chapter starts from the assertion that a great part of thc rvants which are still unsatisfied in modern society are not rvants which would be expcrienced spontancously by the individual if left to himsclf, but are u'ants rvhich are creatcd by the proccss by rvhich they are satisfied. It is then represented as sclf-evident that for this reason such wants cannot bc urgcnt or inrportant. This crucial conclusion appcilrs to be a complete rtort sequitur and it *'ould seem that with it the rvhole argumcnt of the book collapscs. The first part of the argument is of course perfectly tlue: we rvould not desire any of the amenitics of civilization - or cven of thc most prirnitivc culture - if we tlid not livc in a socicty in rvhich othcrs provide them. Thc innatc wants arc probably confined to food, shelter, and sex. All thc rest we lcarn to desire because we see others enjoyin_f various things. To say that a desirc is not important because it is not innate is to say that the rvhole cultural acllievement of man is not in.rportant. This cultural origin of practically all thc needs of civilizcd lifc must of coursc not bc confuscd rvith the fact that therc arc some desircs rvhich aim, not as a satisfaction dcrived directly from the use of an object, but only fronr tlre status which its consumption is expccted to confer. In a passiige which Professor Galbraith quotcs (p. 118), Lord Kcynes scems to trcat the latter sort of Veblcncs<1ue conspicuous consumption as the only alternative 'to thosc nccds which are absolute in the sensc
Rcadine takcn lronr Southarn Econotnic Jounul, April l9(rl. Coplright @ 19(rl by.Sc,rrtlrcrrr Ecottotttic Journa!. I(cprintcd rvith pcrnrission.

tastes'?

individual or of the specics. Most needs which make us act are needs for things which only civilization teaches us to exist at all, and these things are wanted by us because they produce fcclings or cmotions which we would not know if it were not for our cultural inheritance. Arc not in this sense probably all our esthetic feelings .acquired

of coursc only extrerne types of wants, but clisregard the ovirwhelming majority of goods on rvhich civilized life rcsts. Very fcw needs indeed are 'absolutci in the sense tbat thcy are indcpendent of social environment or of the example of others, a'cl that thcir satisfaction is an indispcnsable condition for the preservation of the

because these goods are known to be produced, these two keynesian classes describe

. ,,i
':-t.
'.s

'

'ri;

',i; ,'.l;i

't, 'rril .
't:

::l; r{.

ii'.

How completc a non sequitur Professor Galbraith's conclusion represents is sccn rnost.clearly if we apply the argument to any product of the aris, bc it music, painting, or literature. If the fact that people would not fcel the need for something if it wcrc not produced did provc that such products are of small value, all those highest products.of hunran endeavor would be of small value. Professor Galbraith,s argument could be easily cmployed, without and [sic] change of the essential terms, to dcnronstratc the \yorthlessness of literaturc or any othtr form of art. Surely an individual's want for literature is not original with himself in the sense that he would cxpcricncc it if literaturc werc not produccd. Does this then mean that the production of literature cannot be defended as satisfying a want because it is only the production which provokes the demand? In this, as in the case of all cultural needs, it is unquestionably, in professor Galbraith's words, .the process of satisfying the rvants that creatcs the wants.' There have never been ,independently determined desires for' Iiterature before literature has been pxoduced and tooks ceitainly do not serve the 'simple mode of enjoyment which requires no previous conditioning of the consumcr' (p.217). clearly my tastc for the novels of Jane Austin [sic] or Anthony Trollope or c. P. snorv is not'original with mysclf,'But is it not iather absuril ro concludc fronr this that it is lcss inrportant thirn, say, thc nccd for c|ucatiol'.) public cducation indeed seems to regard it as one of its tasks to instill a taste for literature in the young and even employs producers of literature for that purpose. Is this want creation by the producer reprehensible? or does the fact that some of the pupils may possess a taste for poetry only because of the efforts of their teachers prove that since 'it does not arisc in spontaneous consumer need and the demand would not cxist were it not contrived, its utility or urgency, ex contrivance, is zero?' The appearance that the conclusions follow from the admitted facts is made possible by an obscurity of the wording of the argument with respect to which it is difficult to know whether the author is himself the victim of a confusion or whether he skilfully uscs ambiguous terms to make the conclusion appear plausible. Thc obscurity concerns the implied asscrtion that the wants of the consumers are determincd by thc producers. Professor Galbraith avoids in this connection any terms as crude and dcfinitc as 'cletcrnrinc.'The expressions hc employs, such as that wants are

trc
'depcndcnt on'or the'fruits of'producticln, or that'production crcirtcs thc wrnts' do, of course, suggest detcrmination but avoid saying so in plain terms. After what has already been said it is of course obvious that the knowledge of what is being produced is one of the many factors on which it depends what people will want. It would scarcely be an exaggeration to say that contemporary man, in all fields where he has not yet formed firm habits, tends to find out what he rvants by looking at what his neighbours do and at various displays of goods (physical or in catalogucs or
advcrtisements) and then choosing what he likes bcst. In this sense thc tastes of man, as is also true of his opinions and beliefs and inclecd much of his pcrsonality, ale shaped in a great mcasure by his cultural cnvironnrcnt. But though in sornc contcxts it would pcrhaps bc legitimate to cxprcss this by a phrase like 'production creates the wants,' the circumstances mentioned rvould clearly not justify the contention that particular producers can deliberately determine the wants of particular consumers. The efforts of all produccrs rvill

Advertising

as communication

dcsirc of keeping up with thc Joncscs, that would really prove? At least in Europe rve used to be familiar with a type of persons who often denied themselves even enough food in order to maintain an appearance of respectability or gentility in dress and style of life. We may regard this as a misguided effort, but surely it would not prove that the income of such persons was larger than they knew how to use wisely. That the appearance of success, or wealth, may to some people seem more important than many other needs, does in no way prove that the needs they sacrifice to the former are unimportant. In the same way, even though people are often persuaded to spend unwisely, this surely is no evidence that they do not still have important
unsatisfied needs.

Professor Galbraith's attempt to give an apparent scientific proof for the contention that the need for the production of more commodities has greatly decreased seems to me to have broken down completely. With it goes the claim to hale produced a valid argument which justifies the use of coercion to make people employ their income for those purposes of which he approves. It is not to be denied that therc is some originality in this latest version of the old socialist argument. For over a hundred years we have been exhorted to embrace socialism because it would give us nrorc goods. Since it has so lamcntably failed to achieve this where it has been tried, we are now urged to adopt it because more goods after all are not important. The aim is still progressively to incrcase the share of the resources whose use is determined by political authority and the coercion of any dissenting minority. It is not surprising, therefore, that Professor Galbraith's thesis has been most enthusiastically received by the intellectuals of the British Labour Party where his influence bids fair to displace that of the latc Lord Kcynes. It is more curious that in this country it is not recognized as an outright socialist argument and often seems to appeal to people on the opposite end of the political spectrum. But this is probably onll' another instance of the familiar fact that on these matters the extremes frequently
meet.

certainly be directed towards that end; but how far any individual producer will succced rvill dcpend not only on rvhat hc docs but also on whitt the others do and on a great many other influences operating upon tlre consumer. Thc joint but uncoordinated eftbrts of the producers merely create one elcmcnt of thc environnrcnt by rvhich the wants of the consumcrs are shaped. It is because each individual produccr thinks that the consumers can be persuacled to like his products that he endeavours to influcncc thcrr. Brrt lhough this cffort is part of thc influcnccs rvhich shapc consumers' tastes, no producer can in any real sense 'determine' them. This, horvever, is clearly implied in such statcments as that wants are 'both passively and deliberately the fruits of the process by rvhich they arc satisficd' (p. 12a). If the producer could in fact deliberately determine what the consumers rvill rvant, Professor Galbraith's conclusions woulci have some validity. But though this is skilfully suggestcd, it is norvhere made credible, and could hardty be made crcdible because it is not true. Though the range of choice open to the consumers is the joint result of, among othcr things, the cfforts of all produccrs rvho vie with each other in making their rcspective products appear more attractive than those of their colnpetitors, every particular consumer still has the choicc between all those different offers. A fullcr cxlnrinltion of this proccss rvould, of coursc, h:tvc to considcr horv, aftcr the efforts of some producers have actually stvayed some consumers, it becomes the example of the various consumers thus persuaded rvhich will influence the remaining consumers. This can be mentioned here only to emphasize that even if cach consumer were exposed to pressure of only one producer, the harmful cffects which are
apprehended from this would soon be o{fset by thc much more porverful exanrple of his fellorvs. It is of course fashionable to treat this intlucnce of the example of others

Advertising as communication
GILLIAN DYER

(or, rvhat comes to the same things, the learning from the experience made by others) as if it amounted all to an attempt of keeping up rvith the Joneses nnd for that reason rvas to be regarded as detrimental. It seems to me that not only the importance of this factor is;,usually greatly exaggeratecl but also that it is not really relevant to Professor Galbraith's main thesis. But it might be worthwhile briefly to ask what, assuming that some expenditure wcre actually dctermincd solely by a

When we talk about advertisements or aitcmpt to analyse them, most of us tend to assume that they are vehicles for the communication of usually somewhat distorted or exaggerated publicity; and that they are'transparent'or invisible carriers at that.

Rcading taken from Advertising os Comrnunicution. Copyright

1982 by Methuen.

-l
We tend to take for granted that rvhat is on thc scrocn or pagc is tvhat the acl mcans and rve 'rneasure' ads aqainst somc assunrcd rcality wlrich could replace the 'unreal' imagcs whictr constitute most ads. 'l'hc inragcs of nren and women in ads, for example, arc usually considercd to hc mvthic raiher than real, and also stereotyped. This kind of criticism usually gets boggecl dorvn in argumcnts about the extcnt to which such images are truc or talsc and sccks to rcplace distorted imagcs rvith representations of pcoplc and situations as thcy rcally arc. [t assunrcs tliat thcrc is a simple and bctter rcality rvith which to rcplacc thc stcreotypcs and nryths ancl ignores thc fact that ads arc in thcnrsclvcs a kincl of rcality ,.vlrich havc an cffcct. In this sensc ads are not scconclary ttt'rcltl lifc'nor copiccl or clcrivccl fronr it. Acls arc rvhat some critics call'spccilic rcprcscntational practices'and producc meanings rvhich cannot bc found in reality. 'fherc is no sirnplc rcality rvith which to replacc the falscness of ads, and therc are rro simplc alternativcs to stcrcotyPcs. In ordcr to gain better undcrstanding of thc role that advcrtising plavs in our society, rvc ncccl to ask how advertising organizes and constructs rcality, horv idcology and mcanings are produced rvithin thc ad discoursc and rvhy sonrc inragcs lrc thc rvay thcy are, or horv they could h:rvc bcen constructed. In order to approach thcse questions rve need to consider a frarncrvork for analysis establishcd by scmiotics, describcd by its foundcr Ferdinand dc Saussure as 'a science that studies the lifc of si.:qns within socicty'. It is an approach rvhich has adoptccl sontc conccpts and tools of analysis fl'ont struclural linguistics, wlrich attcmpts to uncover thc intcrnal rclationships which qivc different languages thcir form and function. Although lanruage is a basic modci, scmiotics has cast its net wider, and looks at any systent of sigtts rvhethcr thc substancc is verbal, visual or a complex mixture of both. Thus spccch, myth, folktales, novcls, drama, comedy, mimc, paintings, cinema, comics, ncws items and aclvcrtiselnents can be analvsed semiotically as systems of signification sin.rilar to langurgcs. This approach involves a critical shift from thc sinrplc intcrplctation of objects and forms of comntunication to investigations of the organization and structurc of cultural artefacts and, in particular, to cnquirv into how thcy producc nreaning. lt is argucd that the meaning of an advertiscmcnt is not something thcrc, statically inside an ad, rvaiting to be rcvealcd by a 'correct' intcrpretation. what an ad rncans depends on horv it operates, how signs and its 'idcological' cffcct are organizcd internally (within the text) and extertnlly (in relation to its procluction, circulation and consumption and in relation to technological, economic, legai and social relations). Implicit in this approach is a rejection of much imprcssionistic criticism and 'scientific' content analysis which assumes that thc meaning of an ad is cvidcnt in its overt, manifest content and ignores the fornt that thc contcnt takcs. As I said at the bcginning of this chapter, ads are not invisiblc conveyors of rnessages or transparent rcflcctions of reality, thcy arc specilic discourscs or structures of signs. As such rve clo not passively absorb them but actively participatc in rhcir production <-rf signification, according to thc way thcy'spcak'to or'ensnarc'us. Wc conrc to advertisenrents as social reaclcrs. According to Janicc Winship'Wc ail. so to spcak. brins our social pt.lsitiops rvith us

i^llt

Advertising as communication I I 4:7

Most semiotic/structural studies of advertising texis distinguish between their outward manifestation and inner mechanisms - the codes and conventions whiclr organize and release the meanings of a text in the process of viewing or reading. such codes are what makes mcaning possiblc. Texts reiult from the oynimic interpla'y of various semiotic, aesthetic, social and ideological processes within ihem which also operate in the culture outside them. The audience member is involved in the work of the text and the production of its meaning; his or her own knowledge, social position and idcological perspective is brought to bear on the process of th--e construction of meaning. As Judith Williamson argues:
Advertisements must take into account not only the inherent qualities and attributes of the products they are trying to sell, but also the way in which they can make those propcrties mean something to us. . . Advertisements are selling us something besidcs consumcr goods; in providing us wjth a structure in which we, and those goods are interchangeable, they are selling us ourselves. (197g,

to.the reading of any discourse; and we are not automatically ,,interpellated', as the subject(s) which the discourse constructs' (19g1, p. 2g). she cites the example of a pos.ter for a car which proclaimed: 'If it were a lady it would get its bottom pinched', and which was defaced with this rejoinder: 'If this lady *"i. u car she'd run you down'. This challenge is effective because it uses the ,u*. *"un, of representation as the ad. It also highlights the fact that the original ad was clearly adiressed to a male and that the social reader objecting was a female. It matters, then, who an ad is implicitly addrcssed to, which may or may not include you.

p.

13)

Advertisements do not simply manipulate us, inoculate us or reduce us to the status of objects; they create structures of meaning which sell commodities not for themselves as useful objects but in terms of ourselves as social beings in our different social relationships. Products are given .exchange-value': ads translate statements about objects into statements about types of consumer and human relationships. williamson givcs thc cxanrple of the ad for diamonds (.A diamond is forevcr') in which they are likened to eternal love: the diamond means something not in its own terms as a rock or mineral but in human terms as a sign. A diamond cannot buy love, but in the ad it is the diamond which is made to generate love and comes to mean love. And once this initial connection has been made we almost automatically accept the object for the feeling. People and objects can become interchangeable as in, for example, the slogans 'The Pepsi generation', ,The Martini set'. It is in this sense that advertisenrents should be seen as structures which function by transforming an object into something which is given meaning in terms of people. Tirc meaning of. one thing is transferred to or mide interchanleable with another quality, whose value attaches itself to the producr.In the simpl-est of cases, we can see how something (someone or some place) which we like or value transfers its qualities to the product. Two things are made interchangeable or equal in value 'i-Iappiness is a cigar called Hamlct'. Williams,qn calls this transfir of mcaning

Reaching the markets

Herself reappraised Apart from the vote, two of the main aims of movements for the emancipation of women before the First World War were to free women from their personal and legal subordination to men within the family and to secure the right to work for the high proportion of womcn, between one-quarter and one-third, for whom the largescale emigration of men had denied husbands in a society which gave an assured status only to married women. The redundant women of the middle upper class who had neither father nor husband to support them sought freedom in their right to work and in opening the professions, monopolised by their brothers, to women. This explains why, into our own day, men and women often thought of the labour mart:ct as a place for single women who ought to vacate it upon marriage. Many upper class women thought abstention from marriage was an inevitable and proper cost of pursuing a career. They sometimes found themselves in conflict with working class women who sought freedom rather in regulating the conditions and restricting the hours of their over-abundant labour. Only in recent years have these clashes among the occupational interests of married and single women and of the working and upper class been resolved. But the emphasis which some still place on 'stereotyping' echoes the experience of women in the lirst half of our century when marriage and children meant the denial of a career. But the ways in which married women are now adapting to their dual roles as mothers and workers outside the home demonstrates that there is no longer an incvitable conflict between motherhood and carrjer despite thc difficulties and frustrations which affect many women. The success of the Victorian and early-twentieth century movement for ttre emancipation of women in achieving forrnal institutional and legal equality in most spheres of life rvas, by all odds, one of the main social developments of the last hundred and fifty years. By the early 1960s it had brought one-half of humanity into the outward appearance of full citizenship. But that was the trouble. The promise was mocked by the daily realities of economic and occupational inequality and discrimination, and the rcsult was a new phase in the women's movement which sought not the emancipation but the 'liberation' of women. The very titles of the pcriocl tcll a part of tlle story. 'flrc Sccond Sexr felt compelled to exhibit the Feminine Mystique? by becoming the Female Eunuclf pursuing her Sexual Politicsa through the Dialectic of Sexs with the aim of escaping from the Patriarchal Attitudes6 of The
Naked ApeT in the Huntart Zoo8.

relationships (with men, with the family, rvith neighbours). Women arc made to identify themsclves with what they consume - 'You, Daz ancl your I-Iotpoint automatic', 'You and Heinz together makc a perfcct team'. Success rvith the fanrily and friends can be purchascd for the price of a packet of detcrgcnt, a bottle of cough syrup or a jar of moisturizing crearl. Of coursc, it is womcn rvho usually do the washing and cook the meals, but they are ntade to feel inadequate without the commodities rvhich help them perform the tasks rvhich constitute their family and
social relationships.

between signs in an ad 'currency'. The cigar represents or replaces the feeling of happiness: 'Currency is something which represents a value and in its interchangeability with other things gives them value too' (1978, p. 20). Ferninists have pointed out that ads addresscd to womcn define rvonrcn in tcrnts of the commodity. Goods likc convenience foods, domestic appliances, toilct products and fashions are sold not as commodities but in tcrms of what they can do for

So in order to understand the image of a rvoman in an ad, it is import:.rnt to identify horv she is signified and positioncd in thc acl as a fenrale person,:rnd to renrenrbcr that any representation is also partially delined in relation to thc material position of women 'outside' the ad, within what fenrinists call 'patriarchal relations'their economic, political and ideological position in society.

Herself reappraised
ADVERTISING STANDARDS AUTHORITY

Among critics it is commonplace that advertising degradcs wonlcn and obstructs and delal's thc nrovcmcnt towards cquality bctrveen womcn and men by 'stercotyping' rvomen's lives as centring upon domcsticities or being subordinatccl to men: In this rvay, it is said, advertising reinforccs the barriers to rvomen's achieving equality in the rvider r.vorld. Some commentators also deplore what they describe as the usc of women as 'sex objects' in advertisements. By this they mean that naked or partly covered women are pictured in some advertiscmcnts for no reason othcr than to attract the attention of the concupiscent generality of men. 'Stereotyping' and treating women as 'sex objccts' are linked and often described as 'sexism' rvhich some denouncc as an attitude common to the advertising industry. These prescnt day attitudes have been shaped by the expericnce of thc pioneer feminists in Victorian
davs.
Rcading tekcn frorn Ilerself Reapprar.sczl. Copyright Rcprintcd rvith pcrnission.

Stereotyping and Scxism Florv then, we must ask, against the background sketched above, do the concepts of stereotyping and degradation by use as a 'sex object' help to an understanding of the treatment of women in advertiscments in the present new phase of the one hundrerl and fifty year old women's movement. A recent Canadian study of Sex Stereotyping in Advertising thus summarises its findings about how women and men are portrayed in print advertising. 'The evidence . . . is overwhelming: in print advertising, woman's place is still in the home; women are still dependent on men; women still do not

1990 by Advcrtising Stanclards

Authority.

aching thc markcts

--l
I

rAttitudcs torvards Advcrtising

H*r"lf *"pp*tr".l

tr]t

makc indcpcndcnt and important dccisions; worncn still vierv themsclvcs and arc vicwed by othcrs as sc.x objects.'e Some British critics of the trcatment of rvomen in advertising prescnt similar conclusions. Nevcrthclcss, it has oftcn bccn pointcd out that thc indictmcnt ignorcs tlie marked extcnt to which print, as distinct, perhaps,
front some television advcrtising, has changcd in this rcspcct in the last tcn ycars or so in thcsc islands at lcast. l3ut, even if it wcrc acccptcd that the Canadian study prcsents a rcalistic picture, it has to bc askcd rvhlt is actually bcing argucd by thosc rvho insist upon tllc stcrcotyping cffcct of ldvcrtising in tlro Unitcd Kingdom'/ It is difficult to support tho vicrv that social changc has bccn obstructcd for therc havc becn striking transformations ovcr thc last gcncration in the dircction of greater cquality. Thc stcrcotypcs and scxisnr ol'advcrtising has not hindcrcd changc in thc ccntral arca of fanrilv larv. In cducation, somc of thc oldcst citaclcls are falling; thcrc :rrc no\\'ls nrany gills lrs boys bcing urticlcd to solicitors lrn(l cntoring undcrgracluatc nrcdicinc. Surcly thc gcncrality of rvonrcn arc not so ignoran( ol'thc livcs thcy lcad that thcy arc unawaro of bcing workcrs as w'cll as nlotlicrs in a socicty in which it is much more difficult to bc a woman than a man? Thc fundamcntal incqualities of thc labour markct can ncithe-r bc cxplirincd by thc stcrcotypcs of aclvcrtiscrs nor curcd by tinkcring rvith advcrtiscmcnts. The vcry notion of stcrcotyping is ovcr-simple and too narrow as a means of interpreting the rich varicty of rolcs rvhich women play in a single lifetime. Again, thc argument from stcrcotyping assumcs that aclvertising exerciscs great influcnce

The problcm for thc Authority is compoundcd by the undoubted fact that the clcrisl' has always disliked and condemncd advertising. In the past, it fashioned a stcrcoiype in which advertising confronted Puritan doctrine and challenged the Protestant ethic by urging pcople to consume and to cnjoy, to spend and not to save. By promoting consumption, advertising rvas said by sonrc to devalue in others the virtues of thrift and frugal living and to scduce young and old alikc by the siren call that present joys are llot hereafter. Many supcrior folk still fcel that the good tastc and sound culrurc of their lbllow citizens are corruptcd bccause advertising is mass pcrsuasion in thc intcrcsts of mass consunrption and thcrefore encourages the proliferation of the merstricious. l0 Bchind this catalogue of criticisms lies a vision of thc advertiser as ir thirumaturgist, rnanipulating llocks of docilc consumcrs at will by inculcating wrnts wlrich thcy did not prcviously posscss lcading to purchascs of goods which they ckr not rcally necd. Dr Richard I-Ioggart was stating a representative view when hc argucd twcnty ycars agorr that the case against advertising is the same as that againsl political propaganda and 'any other form of emotional blackmail', it tries to achieve its ends by 'emotionally abusing its audiences'. similar asscssments of the evils of advertising persist in some quartcrs. A distinguished physician recently respondcd to the Chairman of the ASA, who had rcjectcd

upon thc way in which womcn think about thcir rclationships with men, their attitudes to tllenrsclvcs and socicty, and of men and socicty to them. The evidcncc for this vicw is rarcly cxamincd. May it not be ycl onc rrorc cxample of the prcscnt tcndency to critics to rcgard thc advertiscr as a magician and of many to belicve
thcm?

his conrplaint about an advertisement published by the British pharmaceurical industry, by observing that 'likc most pcople, I have always supposed it to be rhc
prinrary function of advertising to mislead . . .'. But pcoplc at large by no means share his opinion that advertising is dc',;ious and dishonourable. Regular surveys of public attitudes to advertising have been conductcd during the last twenty years, and they havc shown that advertising is favourably regarded by at least two-rhirds of the population though the degrce of approval has fluctuated between high points in the early 1960s and early 1980s.12 A limitation of those surveys is that respondents were faced with questions requiring undiffcrentiated answcrs of the order 'do you approve/disapprove of advertising a lot/little'. A survey commissioned by the Advertising Association in 1988 showect tliat 81% of a sample of the gencral population approved of advertising and only 3% disliked advcrtisements in newspapers and magazines. However, those who approveci divided into 51% who approvcd 'a little' aad 3l'h 'a lot'. when asked about print advertising, 31'% of. respondents said they 'liked' it, whilst 8% 'disliked' it and 59yo werc 'not bothered'. In thc present survey the components of approval or disapproval havc been broken down into a set of qucstions with the result that a more diffcrentiated and, in conscqucnce, at times a more critical, token of the public's attituces to advcrtising cmerges. Ncvertheless, thc upshot is that many of us rather likc and apProve in a discriminating way what some of our intellectual bettcrs consider bacl for us. Thc fact is, though, that the social and economic influcnce of advcrtising rcnrains nrorc talkcd about than studicd.l3

The sccond limb of the argumcnt is that wonrcn are stcrcotypcd as sex objects by advertising and dcgradcd in conscqucnce. The prcsent survey shorvs clcarly that this vierv is not shared by the majority of people. Moreover, 'scx object' is itself an anrbiguous terrn. Thcrc is no cscaping that naturc madc womcn sc.x objects to men just as shc nrade mcn scx objects to womcn, and most womcn and mcn have few conrplaints about nature's arrangcmcnt. It is tlrc casc, though, for many pcoplc brought up in our cultural and erotic heritage, that young womcn are nicer to look at than men, cspccially when they are nakcd, rvith obvious consequences on 'Page Three'and elservhcrc. So it is natural and inevitablc that permissivencss spreads to advertiscmcnts. Some critics insist that rvhat tlrcy objcct to is not nakccl womcn in advcrtiscmcnts but the portrayal of nakedncss which is irrclcvant to thc product or service bcing advertiscd. Thc Authority's Council has concurrcd rvith this view and has adjudicatcd accordingly upon complaints. Council judgcs such advcrtiscments from thc point of viov of acccpting thc crotic in art rs in lifc, to thc cxtcnt tlrat it is contcxtually apt, and thcrctbrc to bc trcutcd as lcgitirurrlc in;rdvcrtising rvhich is itsclf a nrajor fornr of popular art.

iuzi [n.*rlrr
NOTES

,rr.

r^;

Speaking up for advertising restrained, reasoned manner, without overwhelming consumers. So an acceptable level of persuasion is perfectly right and proper. The second question is whether persuasion takes up valuable time and space in
advertisements, which could better be used to give facts about products and services. This overlooks the first objective of an advertisement, which is to gain attention. If it can do this with facts, all well and good, but it may instead have to use fantasy or humour. Some critics would say that the fantasy or humour should be replaced by hard information. But for everyday products like tins of beans there is little that can be said that is not already known, so information on its own could be boring or even trivial. For more complex items, such as a washing machine, the reverse may be the case: an advertisement cannot encompass all that a consumer needs to know, so i',i is likely to encourage further action prior to purchase, such as sending off for a brochure or visiting.a showroom. The chances of a consumer making an expensive purchase purely because of a persuasive message in an advertisement are pretty remote, instead he will read the manufacturer's leaflets, consult friends, study 'Which?', and so on. Some critics maintain that persuasive advertising encourages excessive materialism - 'keeping up with the Joneses'. There is the added point that, at a timc when millions are unemployed, it is socially divisive to show continuously on television commercials for the good lifc that many people cannot afford. But with or without advertising the differences in socicty would exist. 'The rich man in his castle, the poor man at his gate' was apparent long before the advent of a well-developed

Simone de Beauvoir Betty Friedan (1963) Germaine Greer (1970) Kate Millctt (1969) Shulamith Fircstone (1970) Eva Figes (1970) Desmond Morris (1967) [i. Desmond Morris (1970) 9. By Alice E. Courtney and Thomas W. Whipple, 1983, p. 11. 10. On this theme sce D. G. NfucRac, kleology and Socicty (196S), pp. ?7-86. I In Alcxrndcr \\'ilson (cd.), Adverri.sing and thc Conununity (1968), pp. 50-5a. 12. Michact Barncs, 'Public Attitudes to Advertising', Intcrnatiornl Journal of Advcrtising, 1932, vol. 1, no. 2, pp. 119-128. 13. See the instructive analysis of M. J. Waterson of 'Somc Popular Advertising Fallacies',
(19,19)

2. 3. 4. 5. 6. 7.

l.

ibid., vol.3, no. 3.

198,1.

Speaking up for advertising

TI

IE ADVERTISING ASSOCIATION

Is' persuasion' desirable?

There is a view that giving people straightforward, uncluttered information is soc.ially acceptable, but trying to persuadc them to buy somcthing, or to do something, is

advertising industry. Indeed, it can be said that advertising, coupled with mass production, has helped the 'poor man' to narrow the gap between himself and the 'rich man' to achieve a better standard of living. Whether aspects of materialism are excessive is very much in the eye of the beholder, because one man's luxury can be another man's necessity. Certainly advertising as regulated in the UK encourages
reasonable consumption rather than excessive binges. As for those unfortunate enough to be unemployed, they do not need advertising to tell them that they are worse off they are only too well aware of it - so curtls would achieve nothing except taking information away from the majority who do have spending porvcr. It is all too glib and easy to blame advertising for creating

"vrong..Persuasion moment's reflection will show that what might be termed 'static information', which

can be made to have an almost Goebbels-like ring to

it. A

does not call for action of any kind, is most unlikely to exist in any form of communication. No one gives out information unless they want it to be used, rvhether it is simply the sign 'Exit' over a door or a listing in a telephone directory: these are the beginnings of persuasion. The real question is not rvhether persuasion is desirablc - it is virtually impossible to avoid it - but horv far, in advertising, it should go, and rvhether it can get in the way of factual information. Firstly, the question of the level of persuasion. It is ail too easy to overlook the fact that an advertisement is a partial statement: it has been described as 'truth in the most favourable light'. Provided that he stays rvithin the linrits of the law and the advertising codes, an advertiser can blow his orvn trumpet. The advertising industry in the UK has a well-deserved reputation for acting in a
Reading taken from Speaking Up ciation.

social ills, instead of trying to find real cures.

Docs advertising create

(false

rvants'?

Advertising,

lor tldvertising. Copyright @

1980

Thc Advcrtising Asso-

it is claimed, can persuade people to buy rvhat they do not really require - the concept of'false wants'. This is the strange suggestion that, by hanrmering home a message about a new product, an advertiser can induce consumers to purchase it, although deep dorvn they do not want it - only through advertising can sales be initiated and maintained. Not only is this insulting to the public, it is simply not borne out by the facts. Firstly, hundreds of new products - many of them widely advertised - fail cach year because consumers do not want them. Secondly, there has to be a latent need or

t14 t Rcrching tltc markcts

_i

L__-

Speaking up for advertisinl.l

dcsirc for a product trcforc it can trc srrcccsslully l:rrrnchccl. A fcrv ycars lgo h:rldli' :rnyonc hacl hcard of vidco rccordcrs, rros'tht:rc is u rvcll-cstablishccl nrarkct, a clcar exanrplc of lutent nccd (to rccord piognrmmers an(l rvatch filnrs at homc) that has becn propcrly cxploitcd. At a diflcrcnt lcvcl, rrdvcrtisinq on its orvn could not scll instant potato or cvcn chips if consu|ncrs did not alrcady havc a rcquircment tbr conveniencc foods of this kind. "fhc requircmcnt was alrcady thcrc, advcrtising nrcrcly cxposcd it rvith thc offcr of:rpproprietc yrroclucts. Somctinrcs tlrc'lalsc rvants'cr'iticisin is rladc by tlrosc rvlrri lrclicvc, oftcn with thc bcst of intcntions that thcy knorv bcsi $hat thc pcoplc ought ancl ought not to want. This 'niinny philosoplry' is not limitcrl t() lny ()rlc politicll crcctl rrrtil it is ilcnrocr;rticlullv dangcrous.

hclp consumcrs disposc of unrvantcd itcnrs. wcckly newspapers in particular arc fujl of small ads, for sales of individual products, car boot sales and so on. The so-callec 'throrv-arva1' society' does not, in practicc, throw away as much as some pcopic
iniaginc.

Arc thcrc too lnarry advcrtiserncnls?

advertiscments'. A few pcoplc believe that advcrtising is too intrusive, and should bc curbcd for that rciison. This is clcarly a pcrsonlrl mattcr, so it is impossible to satisft, cvcryonc, bccausc tolcrance of thc volume of advcrtisemcnts will differ. But wh:rr onc can say is that it is comparativcly casy to avoid advcrtiscmcnts that you do nor rvislr to sce or rcad. on ITV, for examplc, advcrtising has to be clcarly indicatcd anrj rnust appear in'natural breaks', and thcrc are lirrrits on the amount of adverrising per hour. In thc press, if an advcrtiscment is dcsigned in such a way that it might bc nristakcn for cditorial mattcr, thcn the word 'aclvertisemcnt' must appear abovc it. Sonre people protcst at thc fact that the same commercial may appear sevcrai timcs during onc evcning's tclcvision viewing. But the advertiscr wernts to bc surc that hc reaches'light' vicwers as well as those who sit in front of the set for sevcrai hours. This seems a small price for the viewer to have to pay to ensurc that tirerc is rcvenuc for two television channels. Many peoplc find nothing wrong with the volume of advertisements, To set against those who object, there are those who would say that on television the commercials are frcqucntly more entcrtaining than the programmes, because creative standards ir1 advertising are high in the UK. And classified advertisements in the press for jobs, houses, entertainment - provide a real reader bcnefit.
Docs advertising dcbase culturc?

Any spcakcr will occasionally havc thrown at him thc claim that therc are ,too manv

Is product dillcrcnti:ttion u'aste{'ul?

- :rll that cliffcrs is thc inrtgc advcttiscrl. 'lhis, thc critics clainr, is unncccssary and rv:rstclul. Ilut cconornists incrcasingly ucccpt thc conccpt of'addcd valuc', which mcilns, artrong othcr thinrrs, that a product can hrvc non-pltysical diffcrcnccs frorn sinrilar products and thus gain in valuc in the cycs of tltc consunrcr. Cosmctics arc an obvious cxamplc, as arc various l.lranrls of drinks. Diffcrent lipsticks, or a rvide rangc of pcrfunrcs, u,ould not cxist if consunlcrs did not perccivc diffcrcnccs, similarly thcrc u'ould not bc as nrany choiccs in thc lagcr ntarket. Thc differenccs may bc in intagc (a pcrfunre ntay bc ainrcd at a particular age group) or in promotion (a lagcr nral"reaclr tltc parts othcr bccrs cannot rcach'). All this mcans
Sonre products usc virtuully identical ingrcrlicnts

lntl

thc packrgirrg, inclrrrlins horv tlrcy

lrc

added valuc.

From timc to tinrc rcsearchcrs and journalists publish 'cxposis' shorving how littlc differcncc thcrc is betwccn compcting brands in partibular product ficlds. Somc consunlcrs nrly find this inforrnation ol valuc and rvill shop accordingly, but many others choosc products on thc basis of rvhich bcst suit tlicir life style, or thc imagc rvith which they havc most aflinity. Once thcrc arc perccivcd diffcrcnccs bctlccn brirncls thcrc can t)c colnpel.itiolt, with price and spccial offcrs, rvhich clearly bcnclit consumcrs. The alternative is drab confornrity, rvith peoplc havins rcduccd opportunities to ixprcss thcir pcrsonalities, and *ith thc lack of compctition cncour:rginq irrcilrciency and high priccs. There arc thosc who rvould sly that becausc thcrc is so much product dift'ercntiation, rvith ncw products (frequcntly rvith only ntinor changcs to old oncs) conring on to thc market all thc tinre, this encour'agcs rvhat has bccn te rmcd the 'throrv-away socicty'- pcoplc continuously buy ncrv lincs rvhich arc virtunlly idcntical to wliat they alrcady have, theu discard cxisting modcls that are in pcrfect rvorking ordcr. But rvho is to dccide rvhcn a product improvcmcnt is not a product intprovement? What one pcrson pcrceivcs as a wastc of monoy nray bc of positivc bcncfit to anothcr. If a ncrv product actually oflcrcrl nothing ncw to anyortc thcn it rvould fail. Ancl lct us n()t [orqct, in thc contcxt oi procluct rcplaccnrcnt, thut advcrtising cln

Argumcnts about cultural standards are rather complcx, because this is obviousty a subjcctive mattcr, ccntring on personal taste. The principal argument is that advertising is vulgar, and debases the English language. But advertisers have to use language that their customers will understand so they cannot be expected to use words that are only likely to be appreciated by graduates in literature. Advertisemcnts, which frequently play on words, can use language in a vivid and entcrtaining
mannel.

Thc usc of classical music in commercials comcs in for some criticism. Purists protest that it is wrong to use, say, snatches of Beethoven to sell lager. In practice only a few bars of music are played, and it is hard to see how this detracts from the cffcct of the full piece when played in the surrounds of somewhere like thc Royal Albert Hall. Indecd, it could well be that a snatch of music could encourage solncenc to wish to hcar the whole piecc, and so cncouragc a taste for classicai
nrusic.

tr4t Reaching the markets

Docs advertising exploit the vulnerable?

_l

Speaking up for advertising

understood as being a necessary form of shorthand demanded by the need to create a situation in a 30 second commercial, or in onc illustration. If advcrtising wcre to disappear ovcrnight, it is hardly likely that there would be a rapid speeding-up of social change. The reinforcement of stereotypes thrc,ugh advertisements is only a very minor way in which society accepts that change should be gradual. Such factors as the way friends and relatives live their lives are much more important in this context. Some would still clainr that ultra-cautious advertisers keep behind social change rather than in step rvith it. The fact is that the articulate campaigner who belierves passionately in a cause can be unwilling to accept that his view is held by a minority, and is not (yet) accepted by the world at large. By comparison advertisers do their research, and have evidence of what people are thinking in Halifax as well a:; in Flampstead. Nation-wide campaigns have to reflect nationwide taste and lifestyles.
Docs advcrtising exploit childrcn?

Advcrtising, say thc critics, exploits the vulncrablc. Thc honcst answcr to this is that therc are small pockets of pcople rvho rvill alrvays bc nrisled by advertiserncnts (or indeed by anything elsel), no matter how strong rhe regulations. For example, somc consumers go through life unable to cope rvith money management, and tend to overspend all too easily. Advertising may well guide such people towards purchases they cannot afford, but it is difficult to see how this can be avoided, because even if there were a totalitarian ban on advertising, it would casily bc replacecl by other forms of 'temptation'. And rve should never lose sight of the fact that the vast majority of the public, rvho understand rvhat advcrtiscrnents are trying to clo and know how to use them, have rights as well. This docs not, of coursc, mean that advertisers should bc frcc to prcy on thc gullible or those rvho are socially insecure. Advertising regulations, for cxample, give detailed protection to children (sec belorv), and also seek to prevenr unfair exploitation of pcople rvhq,lre cxcessivcly worricd about thcir appearance or who have an obsessive fear of burglary, mugging and so on. It is interesting to note one of the conclusions rcached by the Officc of Fair Trading in its report on advertising countrols in thc print mcdia publishecl in
November 1978: 'There is no evidence fronr the research which idcntifies any demographic or social group, for cxarnplc thc rclativcly poor, the young or the old. . . as particularly vulnerable to advertising in that the group could be shown to bc less critical of advertising, or more disposed to like or accept it. The pattcrn of responscs corresponCed closely with the overall pattcrn'.

I)oes advcrtising rcinforcc slercotypcs?

This is an argument that can nevcr be concluded to thc satisfaction of all. For example, an advertisement which shows modern mums going out to work could please progressivc women, but upset those with a morc traclitional outlook tvho might be conccrncd ilt the supposcd harmful cffcct on family lifc. What spokcsmcn for advertising can say is that it is first and foremost the job of most advertisements to sell products or services, not to make major changes in public attitudes, and it rvould be socially wrong if it was otherrvise. To take an extreme example, inragine the reaction if a soap manufacturer were to campaign in his advertiscnient for
Christianity as rvell as cleanliness. But if most critics can be persuaded to take the point that product advertising should not initiate social engineering, there will still be those who will say that, like it or not, it may at least reinforce existing stereotypes: Dad as the sole bread-rvinner, children beautifully behaved, and so on. There is much truth in this, and rightly so,
because in an advertisement an advertiser will use settings and language rvith rvhich his potential customers readily associate, or to which they aspire. Stercotypcs arc

There are basically three main areas of criticism regarding children's advertising: that it encourages materialism and artificial demands which parent cannot gratify; that it exploits children's natural credulity and sense of loyalty; and that it encourages trad cating habits and thus affects children's health. With regard to thc llrst criticism, children are, of course, dependent on their parents to supply their needs, and it is a fact of life that they will attemPt to influence thcir parents and state their prcferences for all kinds of things - not just products advcrtised on telcvision, but rvhat they do after school, the time they go to bed, the friends they choose, and the food they eat. This is a natural part of growing up and the forming of a relationship between parent and child, and will sometimes naturally causc friction. But how great a role does advertising play in causing a child to demand the unattainable and create dissatisfaction? Research carried out by the Children's Research Unit in 1978 showed ttrat childrcn's demands wcrc fclt to bc triggered off by many sources other than television, and wcre usually of a tcmporary nature. Peer groups in particular - what thr:ir friends had or wanted - werc found to be of far more influence, as well as displays in shops, adults, parents and school. Advertising is only one source of information, along with the others mention,:d above, which enables a child to make a choice. If the parent feels that the choice is wrong - as they may with other choices such as general behaviour patterns - the decision is theirs. The second criticism is that young children do not understand the purpose cf advertising, and are therefore more vulnerable than adults. It is claimed that childre:n cannot distinguish betrveen fact and fantasy, and that advertising takes advantage of this natural credulity and lack of experience. Advertisers fully recognise that the younger child needs protection on this point, and it is specifically covercd in the codes of practice. But they do not accept this as

t@
an argument for a complcte ban on children's advcrtising. Children are far more sophisticated thcn most pcoplc inragine, and all but the youngest are perfcctly capablc of evllulting rrdvcrtising mcssilgcs. Thc ability to cvaluatc advcrtising mcssages incrcascs with agc, and by thc agc of scvcn thc majority of childrcn arc compctcnt in this rcspcct. Indecd, advertising can bc a valuable rvay of tcaching consurner skills: it is far bettcr for childrcn to bc exposed to advertising anC to learn to distinguish advertising messages whilst they have littlc purchasing power and arc under thc control of their parents, than for them to be suddcnly confrontcd with it at a later agc. Without anything to judge, it is difficult to sec how judgment will dcvclop. Children are subject to all kinds of inllucnce cvery day - friends, comics, tclevision proqrammes, shop displays - and advertising must be one of the very few which is rigidly controlled and restrained. Thc third major criticisrn centres on thc advcrtising of spccilic products: food such as s\r,eets, sugarcd ccrcals, crisps and biscuits which, it is argued, arc bad for childen because thcy cause tooth decay or obesity. This argunrent embraccs more thirn advcrtising - for if such products arc as harmful as critics say, thcy surely would seek to ban not just thcir pron'rotion but thcir manufacture. Who, on that assumption, should decide that x is liarmful but y is not, and on rvhat grounds? The fact is that virtually any food taken to excess can be harnrful, not just sugar or starch. Even if thc advcrtising of'undcsirnblc'foodstuffs to childrcn rvcrc banncd - and the codes have particular rulcs which govcrn such advertising - it is unlikely that this rvould have much effect. Although nearly half thc sugar confectionery bought in 1978 was eaten by children, for cxample, only a fifth was actually bought by children; a third ofall chocolatc sold was caten by children, but thcy only bought a tcnth. So ir is clear that adults, rvho play the most inrportant part in deciding rvhat is right or rvrong for their children fccl that swcets arc right. A ban on childrcn's advertising u,ould bc incffectivc rvithout a corresponding change in adult behaviour, which influcnces childrcn far nrorc than television advertising in their attitude to categories of products. A chikl's intcrest in food is not created by advertising; nor will u'ithdrarval of advertising destroy it. It is not rvhat children eat that matters, but horv much. at rvhat tinic,.whcther thcy clean their teeth; in short, it depends on parcntal control. Advcrtising regulations can support parents, but can in no sense replace them. .\re n'omen wrongly portral'ed in advcrtisenrents?

Speaking up for advertising

houseirold purciiasing dccisions. They are the ones who do a large amount of the family cooking and rvashing. It thcrefore makes sound commercial sense that advertisements for household products should be aimed at them. Advertising mcssages must be brief, single-minded and to the point. They thercforc need to use a form of shorthand in communicating with the public. This means that rvhile it may be very true that the 'typical housewife' shown doing the washing, baking a cake, or cleaning the carpet, may also attend yoga classes two evenings a week, work as a part-time dental nurse 5 mornings a week, and enjoy visiting the theatre and walking in the country in her spare time, these facts are ali irrelevant to the point the advertiser is trying to get across, and therefore sadly it is not practical to include them within the precious and expensive 30 seconds allowed for the selling
message.

some women feel that advertisements for |rousehold products do not portray sufficiently accurately the actual drudgery of housework, that advertisements glorify what can often be tcdious chores. An argumeht that can be used in reply to this criticism is that an advertiser needs to portray the aspirational values of his potential customers in order to demonstrate his product most effectively. In 1981 the Advertising Standards Authority undertook a survey of the attiiudes of a representative national sample of women. The findings of this study were published under thc title of 'Herself Appraised: The Treatment of women in Advertisements' in the spring of L982. This did not reveal widespread dissatisfaction about advertisements arnong the women interviewed. where offence was caused, notably by nudity or by explicit references to sexuality and menstruation, it was not sufficiently rvidely sharcd for advertisements containing such material to be declared offensive in terms of the British Code of Advertising Practice. Ncither was the reaction of respondents sufficient to suggest that there is, at present, any need for additional rules within the codc specifically relatcd to the depiction of women in advertisements. However, a substantial minority of respondents were inclined to think that some women, nor necessarily themselves, might feel degraded as a direct result of the manner in which their sex is depicted in advertisements. The Authority noted in its 1982-83 Annual Report that an examination of the altcred treatment of rvomen and the family in advertisements ovcr the last decade or so indicates that prudent advertisers have already made, and are acting upon, their own assessments of the directions of change. It trusts that the findings of its preliminary research will serve to persuade other advertisers to follow and thus to become more conscious of the sensitivities of one half of their audience.

In the context of stcreotyping, it is thc portrayal of womcn that is most oftcn attacked. Critics argue, for cxamplc. that rvomcn arc frequcntly shown as 'mere' housewives rvith little or no financial sense. It is indeccl true tllat women are more
often secn in advertisements for houschold proclucts, than thosc for banks or building socictics. This :irgunrcnt can bc supportcd rvith flcts. Although more ancl morc women do a job outsidc thc hclnrc, thcy arc still rcsponsible for the majority of

115!l I Reaching the

CASE STUDY

markets

Case study

Fq

Cigarette advertising
1954 the American Cancer Society and the British Medical Research Council independently published results of research which convincingly iinked cigarette smoking rvith lung cancer. Tobacco tar contained carcinogcnic substances, with thc rcsult that malc smokers wcre six times as likely to contract lung cancer than their non-smoking peers. At first the tobacco industry tried to promote smoking materials on the grounds of improved safety, such as filter tips and cigarette holders, but the evidence suggested that consumers did not want to be reminded of the health hazards at all, and that a better nrarketing strategy was to ignore thc risks and promote the brand image. Meanwhile the US and UK governments began to introduce measures designed to curb cigarette smoking. In both countries health rvarnings bec:ime obligatory on cigarette packets, and in 1965 'a ban on all television advertising of cigarettes rvas imposed in the UK. The US government follorved suit in 1971. The Advertising Stanclards Authority, foundcd in 1.962, permitted the continuation of cigarette advertising, but drafted special regulations which controlled advertising copy produced by the cigarette companies. The ASA now insists that its permission must be sought for all cigarette advertising u,ithin the UK and that all advertisements are scrutinized to ensure their complicance with a fairly exacting code of practice.

This advertising strategy was pure inspiration. Surprisingly, it was prefaced by no market research whatsoever, yet it proved to be amazingly successful. Benson and Hedges devised further abstract advertisements based on the theme of pure gold, while other companies followed suit

In

with abstract advertising which related to their own brand image. Of all the competitors, probably Silk Cut is the best recognized, with its visual puns on purple silk being cut. Winston attempted a slightly different tactic by stating (not wholly accurately), 'We're not allowed to tell you anything about Winston, but here's d. . .', followed by something totally irrclevant, such.as an aardvark or a'tart leaning on a bar' (depicted by a crowbar and a jam tart!). Winston were not so successful on the sales front, although the entertainment value of their advertising was quite
popular.

While the cigarette manufacturers complain about undue restrictions, anti-smoking campaigners do not believe that advertising controls harve gone far enough. Action on Smoking and Health (ASH) would like to see a complete ban on cigarette advertising, and the Health Education Council has not the funds to produce anti-smoking publicity on the samc scale as the multi-million pound advertising campaigns of the cigarette
companies.

Cigarette manufacturers have alleged that they are trapped in by a morass of legislation and advertising restrictions. Although there is nothing in law or in BCAP regulations to prevent cigarettc manufacturers making truthfu:l statements about their products (so long as rhese can be substantiated), there is little they would rvish to tell which
rvould attract the consumer. Benson and Hedges were the first cigarette companv to circumvent the problem by resorting to 'abstract' advertising. Apart from the obligator,v health rvarning, the advertisement said notiring

about the cigarette at all, not even the name. The first in the series rvas the famous 'raining cigarettes' advertisement, which portrayed a 'pure gold' umbrella rvith diagonal cigarettes representing raindrops. ('Pure gold' rvas the Benson and Hedges slogan in their halcyon days of television advertising).

Pro-smoking organizations such as the Tobacco Advisory Council, FOREST (For the Right to Enjoy Smoking Tobacco) contend that a total advertising ban would be a violation of the principlcs of free speech and freedom of cxprcssion of the tobacco industry. Furthermore, they claim - and this is echoed by the Advertising Association - a complete ban would not be in the public interest. Cigarette advertising, they contend, does not increase the primary consumption of cigarettes; indeed this is not allowed by current advertising regulations which seek to ensure that advertisements are not directed at young people and do not encourage new smokers to take up smoking. Cigarette advertising, rather, is for companies to compete for their share of the market, cncouraging those who have already taken up the habit to switch brands. Not only is this the case, the pro-smoking lobby argues, a total ban would prevent the tobacco manufacturers disseminating information about their products. Smokers rvould be likely to continue rvith their existing loyalties if there were a total ban, and would not have the opportunity to be informed about safer forms of cigarette smoking, such as improved filter tips or lorver tar brands. The Advertising Association supports this position by pointing to the evidence that countries with long-term advertising bans have a lorver proportion of filter tip consump-

E'Zt

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tion. anci that in countrics such as ltalv, Norrvay and polirncJ, cigarcttc snroking continucd to clinrb during thc 1,cars in ri'liich thc rcspective bans werc imposcd.

,}
Sources: Vance Pack:rrd,'tha I'lidrLert Per:;trnclcts (lrarmondsworth: Pcnguin, 1960); M. J. waterson, z{r/vc'tisirtg und cigarette consuntptiott (London: Thc Advcrtising Association, l9B2); Tobacco Advisoiy Council, 'fhc Casc for Tobaccct Advertisin,q (Lonclon, August 1988).
:

i
i
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The ngreeming'of
busixress

/
DISCUSSiON TOPICS

""on,ples, your own conclusion on thc subjcct. rvays in which advcrtising is saici to support the clominant ideology-. Do you think it is possiblc for aclvertising to be'ideologically neutral'? 3. Ascertain which controls affcct specific areas of the advertising industry (for examplc, television, journals, mail orcier). Do you thin[ that advertising should be nrorc closcly controllcci, anct - if so - in

1. 'Advertising degradcs rvomen'. In rvhat ways do somc conternporary feminists rtiegelhat aclvertising clor-s this'/ Fin,l ancrlustify

2. considcr thc

What is a 'grcen' business? Grcen business or customcr choicc? Introducing the readings The carrying capacity of our global environment - a look at the ethical altcrnativcs J6rgen Randers and Donclla Meadows Buddhist economics E. F. Schumacher A bill of goods? Grecn consuming in perspective Debra Lynn Dadd and Andr6 Carothers Is the end of the world at hand? Robert M. Solorv Environmental problems in our daily lives

rvhat rvays?

British Government White paper

Case study

The Body Shop

Discussion topics