homework

Social Responsibility Revisited

ABSTRACT. This chapter reviews and updates much of the literature on social responsibility including the author’s own [2001] “Social Responsibility Within and Without Self-Interest.” The chapter relates the debate’s history from its development in the 1960’s to its current global emphasis. It reviews “social responsibility” as “window-dressing,” as well as “the market for virtue” in several key companies including Dow, Merck, Malden Mills and others. It presents the arguments from altruism and utilitarianism found in the work of Peter Singer, John Rawls and R.E. Freeman (stakeholder theory) and then addresses and defends the “free market” side of Milton Friedman against his critics. I argue that we should widen the idea of self-interest and reject altruistically motivated ethics. Getting rid of altruism and utilitarianism will leave plenty of egoistic social responsibilities that are also responsible to business needs and demands.

INTRODUCTION: THEORY MEETS PRACTICE.

Business professionals quarrel more intensely over corporate social responsibility (CSR) than perhaps anything else. Social Responsibility is the doctrine that businesses, governments, individuals or other such entities have a moral obligation to 1) promote the positive welfare or 2) not infringe upon the rights or property of others, or 3) both. 1) indicates a positive obligation to help or assist; the second is “negative” indicating a responsibility to refrain from harming.

The idea that corporations should be responsible for their actions developed in earnest in the 1960s when public protests and boycotts against Dow Chemical prefigured those against Shell in the 1990’s [Vogel 2006, 6]. According to David Vogel, many new “contemporary strategies of civil regulation” developed during this period “including voluntary codes of conduct, social audits, . . . social investment funds” and a plethora of ways to assess and rank [2006, 6]. The heightened state of corporate awareness reflected increasingly global politics. According to James Rowe:

The first wave took place in the 1960s and 1970s, when revelations about corporate corruption, tax evasion, and involvement in clandestine political activities, including the U.S.-backed coup that ousted Chilean president Salvador Allende, fueled populist attempts to rein in corporate power and increase accountability. In 1976, the United Nations began negotiating a binding international code of conduct for corporations. [Rowe, quoted by McNulty 2005]

As in the ‘60s, the public currently demands more social responsibility. However, corporations now respond differently. With “globalization” corporations are more likely to form “compacts” among international members [Rowe, 130]. According to BSR (Business for Social Responsibility) a global corporate nonprofit and the self-proclaimed “world leader in corporate social responsibility (CSR) research and consulting”:

Today’s business landscape requires that companies navigate a complex and evolving set of economic, environmental and social challenges and address stakeholder demands for greater transparency, accountability and responsibility. These factors affect all aspects of business operations -- from supply chain to marketplace and from employee productivity to investor return. [BSR website]

“Stakeholders,” according to R. E. Freeman who coined the term, comprise people affecting or affected by a corporation or more narrowly customers, suppliers, employees, and the local community [2002, 41]. Freeman says that he can “revitalize the concept of managerial capitalism by replacing the notion that managers have a duty to stockholders with the concept that managers bear a fiduciary relationship to stakeholders” [2002, 49].

In short, activists and others demand transparency and accountability. “Transparency” is “obviousness—the ability to be “easily seen through, recognized, or detected” [www.dictionary.com]. An “accountable” person can give a (presumably satisfactory) “account” of their actions. Critics want businesses to improve the environment, the economy, and society itself. A considerable wealth of philosophical and business argument backs their demands. And yet the arguments may mislead. Is transparency really possible? How might we make everyone “accountable” and what exactly does that mean?

After a brief, “history of social responsibility,” this chapter first addresses the philosophical and political arguments that try to define social responsibility and our desperate need for it. Debates are confused; so one must distinguish the primary philosophical question, which is not so much the definition of social responsibility as it is altruism’s split from egoistically minded ethics. Do businesses have duties to help others at a cost to themselves, or only when it is in their enlightened interest?

After equating altruism with its near cousin utilitarianism, I review and attempt to refute Luis Pascal’s and Peter Singer’s “shaming” arguments. Pascal’s and Singer’s arguments try to make one feel bad for not doing enough to help worldwide suffering. Actually, I find such arguments either religiously motivated (and therefore rationally arbitrary) or hopelessly oblivious of economic realities.

Economics and political structures are just as important as philosophy and ethics. Duties to “distributive” or social justice are instantiated in and in turn depend on certain forms of government and economics. Yet, economics also needs philosophy and ethics. Economics should never be reduced to just the attempt to rank preferences scientifically without suggesting them. Economics without ethics is sort of like tabulating the weights of prisoners in concentration camps without any regard for their condition. Business needs an ethical economics of the sort that Plato meant. In short, it needs an adequate social and political philosophy. Therefore, this chapter reviews the main options given in John Rawls’ Theory of Justice as well as the numerous critics condemning Milton Friedman’s doctrine. Exploring America’s capitalist foundations a bit and the so-called “purpose” of the corporation, I argue for an amendment to Milton Friedman but not a wholesale dismissal.

A BRIEF HISTORY OF SOCIAL RESPONSIBILITY

In 1966, no one had ever heard of public protest against a major United States corporation. But, those days against Dow Chemical have since transformed traditional civil disobedience and activism. “In 1966, there was no pre-packaged corporate apologia upon which Dow could model its own defensive campaign. There were, for instance, no widespread environmental or consumer protection movements, . . . ” [Huxman & Bruce, 1995]. Newly declassified “rhetorical artifacts,” shed light on nationwide student protests and the public condemnation of the use (or abuse) of technology in a hugely unpopular war.

The scenario resembles our own times (esp. the Persian Gulf war). Dow manufactured “Agent Orange,” (or napalm) a chemical defoliant also designed to debilitate the enemy by burning their bodies chemically. Dow neither invented napalm nor was the first to use it. Nor did napalm ever make much money, “accounting for merely one half of one percent of total sales (which in 1967 totalled [sic] $1.3 billion)” [Huxman & Bruce, 1995]. Nevertheless, charges of war profiteering proliferated, as did the student protests. Dow’s official response, as could be expected, was “understated and reactive.”

What were the students seeking? A complete change in corporate practice? An overhaul of capitalism itself? Vogel relates an argument he used to hear in graduate school: “that as a new generation of more socially committed managers moves into positions of responsibility, we can expect corporations to become increasingly responsible” [2006, xxi]. Unfortunately, the scandals since have rendered such zeal shortsighted or even misleading. Business needs something more than social commitment, and that something includes an understanding of how business has developed and what it has become:

Important social and political forces encourage firms to behave more responsibly, and they have accomplished much more than almost anyone could have predicted a decade ago. But, there are also important restraints on more responsible business behavior. [Vogel 2005, xxi]

Early corporations were hardly “corporations” in the modern sense that endows them with all the attendant rights and responsibilities of persons. Before 1886 the state granted “corporate charters” to churches, charities, and even cities” [Lipshitz and Rowe 133 quoting Hans 2000, 80]. The government, of course, carefully directed the power of such corporations to what it saw as the public good. After 1886, social responsibility became voluntary and a period of huge commercial growth, scandal and apologetic philanthropy (say Andrew Carnegie’s) followed. Meanwhile, a new player emerged, replacing the “robber baron” or the lone entrepreneur. She was the investor, or stockholder. When asked whether higher worker salaries or lower consumer prices should take “priority over stockholder interests” [Bowie and Beauchamp 2001, 46], Dodge v. Ford Motor Company [1919] resounded, no:

A business corporation is organized and carried on primarily for the profit of the stockholders . . . , It is not within the lawful powers of a board of directors to shape and conduct the affairs of a corporation for the merely incidental benefit of shareholders and for the primary purpose of benefiting others, . . . . [quoted in Bowie and Beauchamp 2001, 87]

No doubt, World War II and its aftermath woke the United States from its industrial slumber. The government encouraged corporations to train their newly found domestic might on helping Europe recover economically. This “abetted the outflow of foreign direct investment” and the transnational corporation was born; a “symbol of American economic power” [Lipschitz and Rowe, 135]. But, few were happy.

Domestically, Americans came to view corporations as huge autonomous Goliath’s “’He’ [the corporation] was power without personality, without proximity, ‘he’ was cold and distant” [Lipschitz and Rowe, 134]. Meanwhile, the public searched for civil rights and domestic equality, all the while mistrusting the huge corporations they saw buttressing the old system. In response, they created a regulation-friendly environment and enacted many familiar laws including those governing occupations, consumer products, clean air and water and others [Lipschitz and Rowe, 136].

Edwin Epstein claims that the 1960’s saw governments “no longer reluctant to enact laws that transformed general public expectations about business responsibilities into specific legal requirements” [Epstein 1998, 6 quoted by Lipschitz and Rowe 2005, 134]. However, a distinction should be made between laws that protect the rights of so-called economic “externalities” (those affected by business) and laws that confer positive benefits upon them. In this respect, post WWII governments have possibly been a little “benefit happy” at least with its own citizens.

Internationally, relationships changed. Colonialism gradually released its grip, though the colonialist powers still found time to carve out Israel over local resentment. The League of Nations and the United Nations States promised self-determination and states gradually shaking off the yoke wanted it. “Salvador Allende’s Chile and some 20 other developing nations” sought to control the transnational corporations (TNCs) they could not nationalize [Lipschitz and Rowe 2005, 136].

Moreover, these “developing nations” attempted unsuccessfully to control TNCs internationally. Lipschitz and Rowe write of the G-77 (Group of 77) nations who, partly emboldened by the “OPEC-orchestrated oil crises of 1973” sought to pass what they called a New Economic Order (NIEO). Complete with binding corporate codes of ethics, the NIEO would erase the “international division of labor” that resulted from unrestrained market capitalism [136-138].

However, the G-77 misunderstood both market capitalism and the possible responses of the dominant powers in a way that now seems hopelessly naïve. The “global North” simply conceded everything the G-77 wanted on paper seeing that often the best way to deal with an incredibly ambiguous proposal is to embrace it. Lipschitz and Rowe explain that the worldwide recession of 1980-82 helped the “global North” quash international regulation more than politics and more than the misguided and counterproductive help of International Telegraph and Telephone in Chile’s coup leading to Allende’s death. I believe that they are right: corporate responsibility (CSR) emerged in this period as “business strategy” and it has mostly remained there ever since. As they say

The primary reason for business’s trenchant interest in corporate codes is that they are an effective means of quelling popular discontent with corporate power and the political change that discontent might impel. Our research has convinced us to approach corporate codes of conduct less as exemplars of business ethics and more as effective business strategy. [2005, 132]

It may be that something can be done to further corporate responsibility not only domestically but also internationally. Indeed, global warming and the approaching environmental crisis may thrust responsibilities upon us. Nevertheless, simple demands for transparency or the dissolution of capitalism will not work. Perhaps a new way of thinking will. Therefore, let us look at the theory and philosophy behind social responsibility to see if we can find one.

THE PRIMARY PHILOSOPHICAL QUESTION.

The Need for Ethics: What is Social Responsibility?

Philosophical questions may be divided from scientific questions by assessing how much and what kind of argument they need. In science, the lay community expects explanations, not arguments. In such a way scientists use observation and experiment to “settle” (at least in principle) questions about the boiling point of mercury or the origin of sunspots. Not so in philosophy. Observation and experiment rarely settle philosophical questions (hence business ethics questions). Philosophers do not disdain these any more than science disdains argument. Indeed, science without argument is dogmatic, and philosophy without observation and experiment is silly. However, philosophers use conceptual analysis and arguments to “settle” philosophical questions, if at all. If we do not settle them, we at least try to clarify them.

One might think that the most pressing philosophical question about social responsibility is its definition: “what is it?” However, I think the etymology has always explained its meaning. Something is “social” if it involves other people: one either owes something to others (the dative sense) or cannot have something without others (the generative sense).

The generative sense is interesting. In this sense, one has to derive the form and function of a language from society before she can speak it. “The social” includes language and other “socially constructed” entities. But we can set the generative sense aside for the moment. This meaning of social responsibility bears on some arguments for social responsibility (say that corporations owe their position and conditions to society, so they owe society X, Y, Z in return). However, including arguments in definitions is usually a case of “begging the question” or “rhetorical definition” and these should be avoided. If a responsibility is an obligation, i.e. something we have to do or face the consequences, then the non question begging definition of social responsibility is: one’s social responsibilities are what one owes to society or what one is obligated to do for society.

But, what about the consequences? What consequences confront the irresponsible? Obviously, the law condemns certain forms of irresponsibility (failing to do what one “must” for others). And some, even some who call themselves business ethicists, seek to reduce all responsibility to legal responsibility as if the law or the political system could capture what one ought to do for or to others, or in general, how we ought to live. A businessperson should find legal responsibility very important, but hardly the only thing that is. Yet another field seeks to go beyond that law or even critique the law when it is irresponsible, this field is Ethics.

So, when one speaks of consequences for social irresponsibility, we mean primarily if not exclusively moral consequences. We say: not only is embezzlement illegal, it is wrong. As I use the idiom, Ethics covers theories of what is good or bad right or wrong in human conduct, while each person/society has his or her individual morality or moral view. Business Ethics, then, studies how different moral theories apply in business, and then recommends how they should be applied.

In short, our social responsibilities are what we are ethically or morally required to do for or to society. Our legal or contractual responsibilities are important but separate. They may derive from given moralities or they may simply regulate (like “drive on the right-hand side of the road” when in the U.S). It is not like driving on the left-hand side of the road is unethical; it just probably means you are British.

Which Ethics Applies to Social Responsibility?

So, what kind of things do ethical theories or moralities oblige? This question has two different senses: it has an actual sense and a prescriptive sense.

The ‘actual’ sense indicates what businesses actually oblige of those who work in them. For example, Enron and Google ask for (or asked for) very different things. Enron officials touted “integrity” and “honesty” on huge banners in their parking lots but flouted these in their private offices. Or so it is alleged, cases are still pending. Google, it seems, goes above and beyond the “standard of the industry” devoting “20 percent of employees’ schedules for their own intellectual pursuits” [Coughlin 2005]. Computer scientist Rob Pike left Nobel winning Bell Labs for a pay cut at Google and an “exciting place to work” [Coughlin 2005].

However, Business Ethics does not primarily concern what corporations actually do, it concerns what they should do. Business ethicists are concerned with the “prescriptive” sense of obligation. What moral obligations does a businessperson have, regardless of who keeps them? Are any of these “social”? What must a moral businessperson do for others even when everyone else is doing differently?

First, an exhaustive list of responsibilities cannot be provided, however numerous ethical theories, codes and faith traditions seem right: these moral responsibilities include honesty, integrity, determination, passion, and many others. Not one of these is always a “virtue” for any time or place except perhaps integrity (remaining true to one’s chosen values). Here the reader is referred to Robert Solomon’s work [Solomon 1999]. Solomon gives a whole list of virtues and admirably explains how they are situational.

Instead, consider one specific list of “social responsibilities,” that which Milton Friedman proposes and rejects in his important essay “The Social Responsibility of Business is to Make a Profit.” He writes:

The businessmen believe that they are defending free en​terprise when they declaim that business is not concerned “merely” with profit but also with promoting desirable “social” ends; that business has a “social conscience” and takes seriously its responsibilities for providing em​ployment, eliminating discrimination, avoid​ing pollution and whatever else may be the catchwords of the contemporary crop of re​formers. [Friedman 1991, 78]

In addition to “providing employment” and the rest, one can include eliminating poverty or inflation as “catchwords of the contemporary crop of re​formers.”

I am not going to argue for or against this list right now, but it is worth presenting because it highlights a crucial distinction: that between egoism and altruism. This distinction is essential. According to egoism, I should seek my overall, enlightened, “best” interest; according to altruism I should always put others ahead of myself.

Egoism.

Fundamentally, people misunderstand the egoist, accusing her of crass selfishness [Rand 1964, 33]. However, an egoist sacrifices much along the way. She may work to go to school, pay taxes, take classes she finds boring, and even care for a sick relative she finds to be of value. Still, an egoist always pursues (to the extent she acts voluntarily) what she at least thinks to be in her best interest or most conducive to her overall happiness. This theory has its appeal, though others think it hardly amounts to an ethical theory at all as they level arguments against it. I will oppose some of these objections to egoism later, but for right now the egoist theory is clear.

Altruism.

For an altruist, consider Auguste Comte who said “[Man must serve] Humanity, whose we are entirely” [Comte 1973, quoted by Machan 2006]. Like L. Ron Hubbard (Dianetics), Comte attempts to craft a “secular” religion from the ashes of supernaturalism. Unlike Hubbard, Comte’s “positive religion” (Comte began the “positivist” philosophical school) reproduces much Christian sentiment. For example:

We are born loaded with obligations of every kind, to our predecessors, to our successors and to our contemporaries. . . . Whatever our efforts, the longest life well employed will never enable us to pay back but an imperceptible part of what we have received [Comte 1973, quoted by Machan 2006]

This reflects the debt that supernaturalism says one owes to a creator. Comte substitutes other people for God. On his view, rights are nonsense. No one could possibly have a right: “All human rights then are as absurd as they are immoral.”

Economics and Law.

Others object that such an “extreme view of altruism” does not capture anyone’s actual view. Yet, Tibor Machan, a classical liberal (libertarian), writes extensively on the altruism (or “welfare”/positive rights view) he finds in economist Amartya Sen and co-author Martha Nussbaum [Rationality and Freedom [2002]], as well as in legal theorist Ronald Dworkin [Sovereign virtue, the theory and practice of equality [2000]]. These are important arguments, but it is important to stick to philosophers that are more relevant to social responsibility in particular and the foundation of business ethics.

Religious Ethics.

For this reason, religion should not be discussed much as well. I also want to base my arguments on reason and not faith. Religion is perhaps the most powerful source of altruism. Currently theologians such as Philip Hefner, Denis Edwards, Gerd Theissen, and Sallie McFague are debating several fundamentals of the Christian faith in numerous books and articles. McFague, in particular, finds the universe “directed toward inclusive love for all, particularly the oppressed” [CTNS-Vatican]. Of course, this “inclusive love” is altruistic: “The religious traditions carry altruistic values, particularly trans-kin altruism, and the biblical commandments ground altruism ultimately in God” [CTNS-Vatican]. Hefner goes so far as to say “Altruistic love holds the status of a cosmological and ontological principle” [quoted in Edwards 1999, 15].

The arguments complicate quickly, but the basic story relates God’s totally uninterested sacrifice of his beloved son. Christ heroically saves unworthy human beings including us. He “turns the other cheek” and allows himself to be killed. Instead, of remaining mired in sin, one should follow Christ’s example and sacrifice her self to save others.

Two thirds of our nation wants to be “like Christ” and much of the rest of the world follows similar prophets. Far from obscurity, this “extreme version of altruism” has won the greatest “market-share” by far! Many theologians seek non-altruistic, and perhaps more plausible, ways to interpret the Christian story. Even so, the altruistic account carries the day.

Business Ethics.

Altruism’s prescribed sacrifices may seem tangential to social responsibility, but they are not. These sacrifices form the lynchpin of the social responsibility theorist’s argument. It is not enough to argue that one should live up to his social responsibilities only when they conduce to his best-interest or convenience. Business people do not object to that view since in business most everyone wants to contribute to the bottom line without violating law and ethical custom. If one can do so by helping others in the process, then why not? No, the social responsibility theorist must argue that one should live up to her social responsibilities even when these contradict her best-interest or when they are very inconvenient or expensive. Put schematically (with ‘a’ for altrust; ‘e’ for egoist):

Social responsibility (a): one must help others even if doing so harms

one’s self.

Social responsibility (e): one must help others if doing so helps one’s self.

Now, on the other side, Friedman and other “free-market” theorists do not object to “Social responsibility (e).” In fact, Friedman writes in a famous passage:

In practice the doctrine of social responsibility is frequently a cloak for actions that are justified on other grounds rather than a reason for those actions.

To illustrate, it may well be in the long run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government. That may make it easier to attract desirable employees, it may reduce the wage bill or lessen losses from pilferage and sabotage or have other worthwhile effects. Or it may be that, given the laws about the deductibility of corporate charitable contributions, the stockholders can contribute more to chari​ties they favor by having the corporation make the gift than by doing it themselves, since they can in that way contribute an amount that would otherwise have been paid as corporate taxes. [Friedman 1991, 78]

So, on the egoist or “free-market” view, businesses can contribute time, energy, and money to community resources when that will contribute most to business interests. An executive who spends her time making money rather than taking advantage of other socially responsible opportunities should not be condemned. She should rather be praised. She is not harming anyone. (The law and ethical custom make sure she is not). And, in fact, she is helping others by providing jobs, goods and services, and paying taxes.

The Plan of this Chapter.

This chapter largely take altruism as equivalent to utilitarianism as found (for example) in the work of that theory’s present day champion Peter Singer, although it then explores the variant “responsibility sensitive egalitarianism” [Matravers 2007, 71] of John Rawls’ difference principle. Altruism clearly resembles utilitarianism. An altruist puts the good of others ahead of his own in most if not every case, while a utilitarian seeks the “greatest good of the greatest number.” “The greatest number” almost always means others, but it may also include the self, so utilitarianism is a little more benign in seeking one’s own good. Yet, since it is not difficult to find at least two people worse off than oneself, utilitarianism, like altruism, often demands too much or is inconsistent. Or, so I shall argue. If you find one person worse off than you are, then you do not have to do anything. If you find two, they comprise a “greater number” and that “greater number” obliges you to give them everything until you are as worse off as they [Singer 1997, 42]. Consistency in altruism, and utilitarianism, seems to require a sacrifice of individual good.

Actually, no consistent theory of altruism seems available, though I do not pretend to refute them all at this point. A paradox, however, should be pointed out. When the altruist is asked why one should always (or even often) seek the interests of others before her own, she may only respond in two ways. She may answer, “because it is good for you” thus defeating her own argument, or she may answer “just because” thus giving an article of faith, not reason.

Of course, many supposedly ‘altruistic’ acts may be good for the individual, but those acts still sum into egoism and not altruism if they really are “good for the individual.”

The Primary Philosophical Question(s).

The primary philosophical question is, therefore, not what social responsibility is, it is: what grounds are there for the principle that one should sacrifice her good for another’s? There are very little or no grounds when enlightened interest frames the question and all social responsibilities become egoistic (a matter of convincing people that x or y policy is really in their best interest).

Of course, if all of our interests where those of brutes—if one only wanted to eat, propagate and rule—then inevitably some must sacrifice their “good” for another’s. Having taken care of eating, propagating, and “ruling,” at least to a large extent in the so-called “developed” nations; we turn our attention to other values like loving, wisdom, and making money. In his influential book The Market for Virtue (2006), David Vogel describes the contemporary development of CSR thought:

Friedman had no quarrel with corporate social policies or programs that benefited shareholders—a category in which he included contributions to the community where the firm’s employees resided. What he objected to were expenditures that benefited “society.” And in the late 1960’s there was no shortage of business initiatives that appeared to violate his criteria. [19]

The 1960’s were both more volatile and more optimistic. Vogel explains that times have changed:

Were Friedman now to revisit the subject, he would find much less to concern him. Virtually all contemporary writing on CSR emphasizes its links to corporate profitability. The typical book on CSR consists either of examples of companies that have behaved more responsibly and thus have also been financially successful, or advises managers how to make their firms both responsible and profitable. [19]

Vogel is probably right about today’s “typical book.” Authors can publish a thousand explanations about how to make money through pacifying the public, and no doubt they will. None of these will touch the core of Business Ethics: which is about what businesses should or should not do. Arguments about whether one has any social responsibilities to sacrifice his interests for the good of others are very different from arguments about how to help one’s self by helping others. These latter are, no doubt, important. But, they are not the issue.

As should be clear, I agree with the modern trend. The best and perhaps only way to truly help others is by helping ourselves. As Adam Smith author of the Wealth of Nations famously put it, a person who does this

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; and by directing 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, led by an invisible hand to promote an end which was no part of his intention. [2002, 159]

However, a focus on arguments about social responsibility (e)--that is, ways that corporations can be successful and responsible--runs two risks. First, such a focus runs the risk of marginalizing dissenting voices within American capitalist culture and begging the question for that system. Secondly, one runs the risk of marginalizing dissenting voices and alternative systems from other cultures and spreading intellectual colonialism.

The point is about pedagogy and fairness. Suppose that one agrees that the best way to get businesses to shoulder “responsibility” is to convince them that it is in their best interest. We still need to hear and refute arguments for social responsibility (a) that corporations should be responsible regardless of those interests. Let us turn to those.

AM I MY BROTHER’S KEEPER?

At the University of Pennsylvania in Philadelphia on about 34th and Locust, mere blocks from my office at Drexel University sits the Roy and Diana Vagelos Laboratories for Advanced Science and Technology. Roy Vagelos headed Merck research labs in 1978, when a senior researcher in parasitology, Dr. William Campbell, suggested that a drug they were currently studying for animal use might also help humans. As late as 1978 a severely debilitating disease struck millions living along fast-moving rivers in the so-called “Third World.” The World Health Organization considered “some 85 million people in thousands of tiny settlements throughout Africa and parts of the Middle East . . . at risk” [Donaldson et al 2002, 238].

Tiny black flies would bite their victims and thereby deposit parasitic worms. These in turn grew to more than two feet, thereby creating ugly but harmless skin nodules. The real problem came when the worms reproduced, spawning hordes of microfilariae that swarmed the body’s tissues, making the victim itch like mad. The microfilariae attacked the skin causing lesions and de-pigmentation and soon attacked the eyes causing blindness. Doctors used diethlycarbamazine (DEC) and Suramin to combat the parasite, but these had bad and sometimes lethal side-effects.

Merck, of course, is a major pharmaceutical company headquarted in Rahway New Jersey. Like most pharmaceuticals, it realized that “its success ten and twenty years in the future depended upon present investments” into research and development [Donaldson et al, 2002, 239]. At the same time, Merck also thought itself socially responsible. According to George W. Merck, former chairman and the founder’s son: “We try never to forget that medicine is for the people, . . . . It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear” [quoted in Donaldson et al, 240].

Scientists discovered Ivermectin in a soil sample from a Japanese golf course. Ivermictin promised to eradicate onchocerca cervalis a relatively unimportant horse parasite [Donaldson et al, 242]. “Could a safe, effective, drug, for community-wide treatment of river blindness [caused by the related onchocerca volvulus] be developed?” [Donaldson et al, 242]. Should it be developed? After all, the people who needed it would never be able to afford it. “Some diseases were so rare that treatments developed could never be priced enough to recoup the investment in research, while other diseases afflicted only the poor in rural and remote areas of the Third World.” [Donaldson et al, 241].

It is difficult to find much in the way of argument for the principle that one should sometimes or always sacrifice one’s good for another’s. This is the principle of altruism (or here utilitarianism) which says that we should put the good of other people ahead of our own, or what amounts to the same thing, certainly never put our own good ahead of that of others. I have described it as social responsibility (a).

The principle can get pretty complicated when it is applied. Suppose I want to become a doctor, and I even have some skills and aptitude for it. Would altruism move me to helping the poor in the streets of Calcutta where Mother Theresa pursued her calling? Could I spend ten or more years becoming a doctor? Probably, I could go to school if I could show that my becoming a doctor would help more people or help them better. The idea that “inequalities” or self-interested actions are allowable if they tend to contribute to the good of the whole or of the disadvantaged (a version of John Rawls’ “difference principle”) will be important in what follows. But, for right now, let me just keep to the basics.

The “arguments” from religious sources that I am my brother’s keeper, that I have a moral obligation to at all times seek their good (Christ’s commandment to love our neighbor as ourselves) are already too well understood and obvious to need review. In fact, I do not consider these to be arguments. Arguments consist of premises that are importantly different from the conclusion but that lead to the conclusion by reason rather than divine fiat. An understanding of theology should be left up to the theologians.

Turning to the philosophical literature (which supposedly depends on rational arguments), one finds little in the way of arguments for altruism. Numerous examples are present. There arguments about whether it is our duty to cure world hunger [Govier 1975; Singer 1972; Hardin 1974]; to provide jobs or employment (Miller 1998; Orlando 1999; Stieb 2004a) or to stem overpopulation (Pascal 1980, 1986). However, arguments about a duty to cure world hunger may turn on whether one has a duty to put other people’s interest ahead of his own without being an argument that one has a duty to put other people’s interests ahead of his own. In other words, proponents of the principle simply assume it in their further arguments.

I agree more with Nicholas Rescher. In his book on welfare, Rescher writes of the “superogative” (above and beyond) duties of a society to its own members. Many think that welfare is a moral imperative. However, Rescher thinks the story is more complicated:

In what respects and to what extent is society, working through the instrumentality of the state, responsible for the welfare of its members? What demands for the promotion of his welfare can an individual reasonably make upon his society? These are questions to which no answer can be given in terms of some a priori approach with reference to universal ultimates. Whatever answer can appropriately be given will depend, on the final analysis, on what the society decides it should be. [Rescher, N. Welfare: Social Issues in Philosophical Perspective, 114 quoted by Govier, 378]

Rescher says that a non-question begging arguments for the desert of welfare or of social responsibility (a) cannot be found. There can, however, be many reasons that providing welfare is in society’s best interest. For example, it may help quell civil unrest.

The different motives must be separated. Society’s pursuit of its best interests differs entirely and importantly from categorical duties to help others regardless. Again, altruism or utilitarianism does not say, “do what is best for society.” They say do what is best for the afflicted regardless of any self interest, whatever “self” one means: whether that is the individual self or society as a self. Sometimes society itself is “the afflicted.” But, when society acts as an agent to help the victim, it is not itself the victim and is not supposed to act for itself. It is supposed to act for the good of others. Altruism by definition requires a sacrifice of the agent’s good (utilitarianism almost always does).

At least a couple of papers explain the altruist or utilitarian “arguments” such as they are. Louis Pascal writes one. He is not a philosopher, and his arguments are less guarded and easier to refute. His paper does put a lot of issues on the table, though. Peter Singer writes the second, and a discussion of that paper will follow.

An Uncomfortable “Utilitarian” Question.

Utilitarians are fond of asking “train track” or lifeboat type questions. “Imagine that your spouse is tied to one track of a train track and five world leaders are tied to the other and you control the track on which a speeding train descends,” they say. In his paper, “Judgment Day” [Pascal 1986], Louis Pascal applies an interesting test of “how morally committed the students of a good school are.” He creates a fictitious lecturer giving a speech to 300 students at Columbia University. The lecturer, Walter Bradford Ellis, asks the students to raise their hands if they say “yes” to a host of “train track” type ethical questions. He then lectures on overpopulation, trying by that means to have the student’s responses elicit ethical action.

Pascal (or Ellis) recognizes that 300 students do not make a scientific sample. The group is “neither large enough or diverse enough to give an especially accurate picture” [105]. Still, he says, the test should indicate roughly how “morally committed” the students are. Pascal has good reasons for his questions:

In today’s world of racial prejudice, Vietnam, and above all, the miseries of overpopulation, it will take an uncommonly dedicated and selfless generation to grapple with these issues successfully. [105]

One can agree that Vietnam, racial prejudice and overpopulation continue to be big problems. However, notice how Pascal has snuck in the idea that only “selflessness” will grapple with these issues successfully. Philosophers call that “sneaking in’ “begging the question” or “insinuation” and it has been found in so-called arguments at least since Socrates. Pascal has so far given no evidence that these problems demand selflessness. He has stacked the deck.

No wonder, then, that scenarios meant to test “moral commitment” make students uncomfortable. These do not test “moral commitment” to whatever code of values, they test whether the students agree with Pascal’s altruism and are willing to stand up for it. At any rate, here is his first scenario:

Imagine yourself to be in an ancient country which is ruled over by an evil king who has absolute power of life or death over all his subjects—including yourself. Now this king is very bored, and so for his amusement he picks 10 of his subjects, men, women, and children, at random as well as an eleventh man who is separate from the rest. Now the king give the eleventh man a choice: he will either hang the 10 people picked at random and let the eleventh go free, or he will hang the eleventh man and let the other 10 go free. And the eleventh man must decide which it is to be.

Pascal distinguishes two questions: 1) Should the eleventh man give up his life for the other ten? 2) If you were the eleventh man, would you give up your life for the other ten? The distinction between these two questions is interesting, because in Ethics one often believes in “universalizability” which roughly says that whatever moral standards apply to everyone should apply to the individual and vice versa. One should not make a moral exception of herself or of any one else.

Pascal wants one to give up her life to save ten others. There are two ways to go about disagreeing. First, if the answer to 2) differs from 1)--that is, if our being the eleventh man means ten others could die in one’s stead--then one denies the principle of universalizability: we say it is ok to make an exception of ourselves. It is ok to “kill” ten others so that we may live. Or rather, it is morally permissible to let someone else kill ten people when the only way to prevent it is our certain death. The fire fighters in 9/11 were sort of this way. They raced in to save people’s lives but not when it meant certain death for them. Pascal presumably has a problem with denying universalizability, however he need not. For example, it is morally ok to send your kid to college and not everyone else’s. It is ok, to make an exception for your kid. One can make himself a moral exceptions in a lot of ways. One feeds himself first, houses himself, and so on.

Once again, Pascal is trying to convince the reader to allow the king to kill her so that ten others may live. I think universalizability can be dismissed. However, anyone wishing to preserve it may disagree with Pascal in another way. Libertarians argue that the situation itself is fundamentally unjust. A king or a “gunman” forcing a person to do something immoral (such as killing 10 people with her inaction or other means), bears the full brunt of responsibility. Responsibility lies with the person initiating the force (or fraud) and not on the person used as an instrument.

This goes back to Aristotle’s distinction between voluntary and involuntary. An action cannot be moral or immoral unless it is voluntary—one is not responsible for what she could not do otherwise. Our own law preserves this distinction when it distinguishes between murder and manslaughter. Manslaughter is “accidental,” i.e., the agent did not intend to kill and did not do so voluntarily. In some cases, “ignorance of the law is no excuse” but these cases can be set aside.

After these initial inroads, Pascal shifts the burden of his question. He asks how many students would save ten people if the king only required twenty years in prison. Pascal’s fictitious pole has many more people give up twenty years of freedom to save ten people. I think this case resembles the first. Twenty years of life is still a lot of life to give up, and twenty years of prison will almost certainly sour one’s subsequent life.

Pascal then has the king say he will release the ten “if you will agree to give him all the money you have and all the money you will make in the future, except of course enough for you to feed yourself and house yourself and take care of all the absolute necessities” [107]. Readers who think their taxes too high already may find this situation upon them. All the same, a huge number of people starve to death each year.

Pascal argues that failing to give up one’s money is murder.

If you are poor and kill 10 people in order to steal their money, that is surely murder. But morally speaking that situation is exactly the same as this one. In both situations if the people die, you will be rich; if they live, you will be poor, and it is within your power to decide which it is to be. In either situation if you decide that they should die in order that you can be rich, you have put your happiness, or not exactly even that, you have put material riches for yourself above 10 people’s lives. That is the moral error you have made and it is exactly the same for both cases. [108]

Pascal says, “Morally speaking the situation is exactly the same.” However, he does not seem to be right. Killing 10 people to take their money is very different from failing to save 10 people by refusing to give up all of one’s money. Even if one uses utilitarianism the situations do not come out the same “morally speaking.” Here are the situations:

1. Keep my money and have 10 people die who I could have helped.

2. Murder 10 people for their money.

Utilitarianism looks at consequences, or the greatest good for the greatest number. In case one, ten people are dead, but the murderer is still as happy or miserable as he ever was. In case two, ten people are dead and the murderer is much happier because now he has their money. Case two thus shows a net increase in happiness. Of the two cases, utilitarianism actually seems to prefer the second. This is reason for dispensing with utilitarianism.

If Pascal is not using utilitarianism, what theory he is using is not clear. Virtue ethics, Aristotle’s theory, would morally prefer case 1 because, although 10 people are dead in either case, one is not a murderer. Murder does not stain one’s character, give her bad habits, or set the law at her heels. Virtue ethics posits a big difference between killing 10 people and keeping one’s money when the alternative is giving up all (or most all) of one’s money.

Obviously, Pascal should change the alternative, although he does not. He should ask, “what if the king asked you to give up say 10 or 20 percent of your money so that 10 people may live?” This is commonly known as “tithing.” What if the king asked one to tithe in order to save the lives of 10 people? (We may also dispense with the idea that he will actually kill them if one does not agree; he will just be unable to prevent their deaths.) That I should help others when the cost to myself is little convinces more than that I should help others at great cost to myself. This first idea might be enough for “social responsibility,” so it is discussed in the next section.

Should We Give Something?

Peter Singer argues that one should at least give something to the needy in his paper “Famine, Affluence, and Morality” [1997]. Singer writes more carefully and skillfully than Pascal. He puts it this way:

If it is in our power to prevent something bad from happening, without thereby sacrificing anything of comparable moral importance, we ought, morally to do it. By “without sacrificing anything of comparable moral importance” I mean without causing anything else comparably bad to happen, or doing something that is wrong in itself, or failing to promote some moral good, comparable in significance to the bad thing that we can prevent [1997, 400].

Singer says

An application of this principle would be as follows: if I am walking past a shallow pond and see a child drowning in it, I ought to wade in and pull the child out. This will mean getting my clothes muddy, but this is insignificant, while the death of the child would presumably be a very bad thing. [400]

Fair enough. But, a drowning child represents only one application of Singer’s principle, and probably the least contentious. Singer mainly discusses the famine in East Bengal in 1971 where “constant poverty, a cyclone, and a civil war have turned at least nine million people into destitute refugees” [399]. Singer laments that individuals “have not responded to the situation in any significant way.” Governments, on the other hand, are more interested in “supersonic transports” and Opera houses. Singer implies “that the British government values a supersonic transport more than thirty times as highly as it values the lives of the nine million refugees”; Australia values its Opera House twelve times as much.

Singer’s strategy, like Pascal’s, seeks to analogize and shame. If a drowning child compels our aid, a starving refugee should do the same. One stuffs his face, while people starve.

First, Singer says that his principle “requires us only to prevent what is bad, and not to promote what is good” [400]. This seems incorrect. The two cannot be divided so neatly. If I feed a starving man, am I promoting his good or just preventing something bad? After all, he receives a service.

More importantly, Singer writes: “It is not beyond the capacity of the richer nations to give enough assistance to reduce any further suffering to very small proportions” [399]. Singer also wants each individual to give until it hurts, he writes:

One possibility, . . . , is that we ought to give until we reach the level of marginal utility—that is, the level which, by giving more, I would cause as much suffering to myself or my dependents as I would relieve by my gift. This would mean, of course, that one would reduce oneself to very near the material circumstance of Bengali refuge.

Singer approves of reducing one’s material circumstances to those of a Bengali refugee:

It will be recalled that earlier I put forward both a strong and a moderate version of the principle of preventing bad occurrences. The strong version, which required us to prevent bad things from happening unless in doing so we would be sacrificing something of a comparable moral significance, does seem to require reducing ourselves to the level of marginal utility. I should also say that the strong version seems to me to be the correct one. . . . I can see no good reason for holding the moderate version of the principle rather than the strong one. [404]

It does follow from my argument that we ought, morally, to be working full time to relieve great suffering of the sort that occurs as the result of famine or other disasters. [403]

What is missing from Singer’s “argument” is any sociological or economic input about how viable societies actually run. He seems oblivious of how “rich nations” got that way in the first place. Marx’s famous slogan (actually Thomas More’s) “From each according to his means, to each according to his need” illustrates this problem as well. Someone has to have means before anything goes to the needy.

Singer should ask, “How did these rich nations become rich in the first place?” Undoubtedly, a certain amount of force, fraud, and deceit underlies any nation’s history. America itself rests on slavery and near genocide. Our country exports wastes to countries where the laws are more lenient and wars against sovereign nations without clear evidence of destructive intent or capability (such as weapons of mass destruction). Things have not necessarily changed much since 1971. However, reducing America’s material circumstance to that of the Bengali refugees simply makes us prey to less altruistically minded nations.

Singer’s principle cannot be universalized. One cannot give everything to others because that would leave nothing left to give. If it cannot be universalized in general (that is for everyone everywhere), then it cannot be universalized in particular (that is for you or me now). I mean that a principle of production must precede a principle of distribution. Or, as Plato put it “If our servant goes empty-handed to another city, without any of the things needed by those from whom he is trying to get what his own people need, he will come away empty-handed, won’t he” [370a10]? If, in general, a city must produce, then one cannot fault those who concentrate solely on production. If people must produce in general, then some must produce in particular. Production must be a virtue or value preceding distribution. If some focus on creation and others on distribution, who can fault either?

Now, whether a city must give as well as produce, and therefore, whether some individuals in the city must give in particular and how is still an open question. Apparently, Plato did not think that a city owed anything to any other in virtue of need (though something was owed in virtue of contracts or alliances or in times of disaster). Moreover, he is very murky about what citizens owe each other. Plato was an aristocrat who never argued against the institution of slavery. Both Plato and Aristotle thought slavery quite natural. On the other hand, Plato’s hero Socrates, spent his life relying on the good graces of his friends whom he sought to educate philosophically There is an aura of caring about city politics (i.e., the good of the city and the individual) in Plato and Aristotle, but the altruistic impulse is absent. Apparently, it had to wait for Christianity.

My critics might think this historical review an easy way to dispense with the issue: should one tithe? Should we individually or collectively give up only 10 or 20 percent of our wealth in order to help starving nations? They say, surely we can without making ourselves “prey to less altruistically minded nations.”

Perhaps we can. But let us not lose sight of whether we should and why. So far, we have not seen very good moral arguments for social responsibility (a), that one should help others regardless of his own interests. Internationally, there are of course, very good reasons for caring about starving refugees (or economically depressed countries). There are very good reasons for social responsibility (e), the kind that is also in our best interest.

For example, few Americans seemed to care or know that the Taliban (the former government of Afghanistan) destroyed two thousand plus year old monuments to the Buddha. They shot them out of the rock face with artillery. These are cultural icons of the age and status of the pyramids. However, most every American knows that many of the 9/11 terrorists trained in formerly Afghani camps. This was the casus belli (cause of war) against that country (that and the wish to hunt out the mastermind Bin Ladin). The rather horrible point is that sometimes it takes planes crashing into New York City skyscrapers to remind Americans of the bedraggled plight of much of the rest of the world. Such acts remind us not only to protect our security, they remind us of the self-interest involved in making sure that “most of the world” lives “nearly as well as its most privileged part” (Margolis 2004, 407; Stieb 2005).

Still, as Rescher implied, whether one should tithe depends on the governmental structure and economics in question and not on some supposed apriori moral duties. Of course there can be better or worse governmental structures. Let us look next at the arguments from economics and social and political philosophy that suggest alternative structures fostering social responsibility (a).

TWO THEORIES OF POLITICS.

The City of Pigs.

If you were founding a city of pigs, Socrates, isn’t that just what you would provide to fatten them?

--Plato [2004, 372d5] attributed to Glaucon.

According to Plato, a city is a man “writ large” and justice fundamentally orders both. Of course, justice is not easy to define and Socrates seeks a definition through most of the Republic. Traditionally, Plato has his mouthpiece Socrates refute the troubling and half-baked ideas of foils like Thrasymachus who thinks that justice is the advantage of the stronger. However, the Republic also offers a theory of city construction from the ground up.

One by one Socrates ticks off the city’s needs. The city (my translator calls it “Kallipolis”—literally beautiful city) needs farmers, builders, and weavers to take care of the fundamentals; cobblers and toolmakers to take care of secondary needs. Notice, however, that Socrates makes the “real creator” of the city “our need,” not the needs of others. He bases the city in rational self-interest assuming that each role will work productively and collectively for the good of all. Altruism is foreign to Socrates.

Socrates adds that the settlement will not be very large “even if we added cowherds, shepherds and other herdsmen, so that the farmers will have cows to do their plowing, the builders oxen . . . [and so on]” [370a10]. And, naturally it will trade: “Our citizens, then, must produce not only enough for themselves at home, but also goods of the right quality and quantity to satisfy the needs of others” [371a5]. Sharing is very important to Socrates: “It was in order to share, after all, that we associated with one another and founded a city.” Citizens will build a marketplace and establish a common currency. Some become retailers and accountants.

Socrates says that citizens of the “healthy” city

will mostly work naked and barefoot, but in the winter will wear adequate clothing and shoes. For nourishment, they will provide themselves with barley meal and wheat flour, which they will knead and bake into noble cakes and loaves and serve up on a reed or on clean leaves. They will recline on couches strewn with yew and myrtles and feast with their children, drink their wine, and, crowned with wreaths hymn the gods. They will enjoy having sex with one another, but they will produce no more children then their resources allow, lest they fall into either poverty or war. [372a5-372c]

At this point, Glaucon interrupts: “If you were founding a city of pigs, Socrates, isn’t that just what you would provide to fatten them” [2004, 372d5]? Glaucon means that barley meal and wheat flour feasts will not please everyone. The “feverish” city must have painting, gold and ivory, actors, jewelry and even prostitutes. The healthy city is fit for pigs, not for people. A city fit for people must exceed one’s basic needs. And when, one oversteps her basic needs, war is sure to follow. One will

have to seize some of our neighbor’s land, then if we are to have enough for pasture and plowing[.] And won’t our neighbors want to seize ours in turn, if they too have abandoned themselves to the endless acquisition of money and overstepped the limit of their necessary desires. [373d5-10]

Of course, the idea that pursuing luxury beyond the bare minimum inevitably causes war [373e5] is a non sequitor. There is no reason to believe that citizens in the healthy city will not have to fight for their parcel of land. However, Socrates is right that exceeding our natural due is importantly related to injustice.

Altruists or utilitarians tend to equate going beyond the bare minimum with selfishness (or egoism) and argue that one should live at the bare minimum so as to leave as much as possible for others. Some Christians even blame acquisitiveness on “original sin” and a fallen nature. However, these arguments appear too fast. Socrates tries to define what is in one’s best interest; he does not argue that one should sacrifice it in order to avoid war. In fact, Socrates implies that one should avoid excess and luxury because he thereby avoids strife and war. We gain our true self-interest by sacrificing our illusory wants.

Postmodern Economics: The Ethics of Impartiality.

Times have changed since Plato. Today theorists discuss “distributive justice.” Distributive justice “uses some principle or criterion to give out a supply of things. Into this process of distributing shares, some error may have crept. So, it is an open question whether redistribution should take place; . . .” [Nozick 2002, 203]. In Plato’s time, economics meant “house things”—i.e., taking care of the house, and men left the job to women. Today economics is the province of elite forecasters (mostly men).

According to Mark Fleurbay, economics explains distributive justice through theories of inequality and poverty measurement, social choice, bargaining and cooperative games, fair allocation and welfare economics [Fleurbay]. Since economic naivety riddles the philosopher’s analysis (Pascal’s and Singer’s) then one might want to embrace modern economic theory. However, that is not the solution either. Embracing modern economics is a mistake because it really does not have much say about “distributive justice” at all. In fact, it is purposely irrelevant to the question of altruism—hence of social responsibility (a). Rather, one should go back to a pre 20th century understanding of economics to find a relevant economics. Turning to philosophers other than Pascal and Singer might also help.

The supposed difference between the “normative” (the ethical) and the “positive” (non-ethical, scientific) illustrates economics’ obliviousness to moral questions. In the first half of the 20th century, noted economists involved themselves with helping the less fortunate [Fleurbay]. But, something happened. Today, the economist is more “positivistic,” more uninvolved and scientific. “Normative economics itself may be partly guilty for this state of affairs, in view of its repeated failure to provide conclusive results and its long-lasting focus on impossibility theorems” [Fleurbay].

The whole “postmodern” effort to replace narrative, patriarchy, and colonialism with behaviorism (cf. B.F. Skinner) and science can be blamed. Postmodernism has transformed questions of “house things” (oeconomicos) into questions of subjective value-preferences. It has eroded the metaphysical question of the good. There is not any independent thing to be preferred, there is what one happens to prefer and questions about how she may get it most efficiently.

Actually the supposed value objectivity of economics is just a story. Ethically, it defaults to utilitarianism. For example consider “poverty measurement.” Obviously, the only reason to measure poverty is in order to do something about it. (I certainly hope that economists do not measure poverty simply as an academic exercise).

Second, consider welfare economics. Fleurbay notes the strategy:

The proponents of a “new” welfare economics (Hicks, Kaldor, Scitovsky) have distanced themselves from their predecessors (Marshall, Pigou, Lerner) by abandoning the idea of making social welfare judgments on the basis of interpersonal comparisons of utility. Their problem was then that in absence of any kind of interpersonal comparisons, the only principle on which to ground their judgments was the Pareto principle, according to which a situation is a global improvement if it is an improvement for every member of the concerned population (there are variants of this principle depending on how individual improvement is defined, in terms of preferences or some notion of well-being, and depending on whether it is a strict improvement for all members or some of them stay put). Since most changes due to public policy hurt some subgroups for the benefit of others, the Pareto principle remains generally silent. [Fleurbay]

This requires a bit of unpacking. Basically, it says that Hicks, Kaldor and Scitovksy (or others like them) have tried to avoid “interpersonal comparisons of utility”--i.e., they want to avoid saying what is good for one person vs. what is good for another. The motive is clear. One does not want to judge someone’s life or choices as good or bad; rather one seeks a neutral measurement such as what they prefer or what the market will allow. The neutral measurement will prevent hypocrisy or condescension. Some economists think the “Pareto principle” provides that neutral measurement. According to the “Pareto principle” “a situation is a global improvement if it is an improvement for every member of the concerned population.” Moreover, the “Pareto Principle” tries to remain “silent” because “most changes due to public policy hurt some subgroups for the benefit of others.”

However, the Pareto Principle does not provide a neutral measurement: there is no neutral measurement. Second, the alternative to utilitarianism (hurting some subgroup for the benefit of others) is not silence (or as I prefer to call it postmodern catatonia). It is a better ethics. First, how could a measure that measures a “global improvement” on the basis of “an improvement for every member of the concerned population” not make significant value judgments about what is good or bad for the members of the “concerned population”? Obviously, one exports and transports his values—one should rather try to have good values than to remain ‘neutral.’ This leads to a second point. The alternative to utilitarianism (sacrificing some for the greater good of the greater number) is not silence; it is redefining social responsibility so that it does not require sacrifices. Social responsibility (e) can be defined so as to avoid unnecessary sacrifices if one reads the economist Milton Friedman the right way.

The “Theory of Social Choice” and the “Theory of Cooperative Games” fail even worse in these respects. “Social choice . . . deal[s] with the problem of synthesizing heterogeneous individual preferences into a consistent ranking.” Arrow argued that such a ranking could not be set up. Nash argued that it could. He, Nash, refocused on game theory: “Nash (1950) published a possibility theorem for the bargaining problem, which is the problem of finding an option acceptable to two parties, among a subset of alternatives” [Fleurbay].

The history of economics is all well and good. But whether all “heterogeneous individual preferences” can be ranked consistently or not has little to do with how to rank certain important individual preferences (such as whether to go to school, take a job, etc). Nash and others realized this and hence refocused economics on bargaining and games. But, that did not help much, for game theory has spun wildly and irrelevantly out of control. It has lost most of its relevance (and even intelligibility) to the phenomenon it was supposed to explain. One such example of game theory is the much cited “prisoner’s dilemma,” (PD) which authors argue refutes egoism [Lucas 2003, 16; Boatright 2007, 50-51].

Persons A and B are arrested; the charges will be dropped against whoever confesses, unless both confess. “Whatever the other does, each is better off confessing than remaining silent. But the outcome obtained when both confess is worse for each than the outcome they would have obtained had both remained silent” [Kuhn, 2003]. If both remain silent then both A and B are better off (no charges stick). The egoist is likened to the prisoner who “rats out” her partner with the result that egoism does not appear to be the best policy for individual betterment.

However, the PD argument assumes too much. Ethical egoism is the view that we should do what is really in our best interest. First, the PD assumes that not doing time for one’s crime is in one’s true best-interest. However, paying for one’s mistakes might actually be best. Second, the PD depends on raising an unjust situation and on not adequately distinguishing between psychological and ethical egoism. In the first case, it is not just to let someone go free just because she confesses. One could easily say that there is no moral way out of an unjust situation [Gillespie 2002], and leave the PD at that.

In the second case, the PD claims that the prisoners think that confessing (while the other remains silent) is in their best interest, while both prisoners remaining silent is really to each’s best-interest. If this is true, then ethical egoism councils doing what is really in their best interest (not what they think is), so there is no contradiction: on this supposition, they should both remain silent. I see no way that the PD gains any purchase without assuming that there is something that is really to the best interest of the participants that differs from what they think is. Ethical egoism says, once again, that an agent should do what is really in her best interest whether or not there are situations in which she does not or cannot know that.

The “purely economic view,” or the view that “ethics and economics can be neatly and sharply separated” [Freeman 2004, 364] is unlikely to settle any question of Business Ethics. As Freeman says, “In this context, the challenge of doing business becomes a Sisyphean task because business ethics is, by definition, an oxymoron” [2004, 364]. Economics is not a pristine oasis for retreat.

The problem is that economic naivety limits Pascal’s and Singer’s ethical theories. Pretensions to value objectivity limit economics. What is left? The answer is now called “social and political philosophy” though it was once called “economics.” Altruism (or social responsibility (a)) will not come out of the ethical theories. Nor will it come out of purposely oblivious economic theory. Unfortunately the best example of social and political philosophy rather smuggles altruism (a) instead of deriving it. Hence, the need for an alternative social and political philosophy recalling Plato.

Justice As Fairness:

According to Fleurbay, “Rawls’ difference principle (Rawls 1971) has been instrumental in making economic analysis of redistributive policies pay some attention to the maximin criterion, which puts absolute priority on the worst-off, and not only to sum-utilitarianism” [Fleurbay]. Rawl’s distributive justice theory favors altruism to the “worst off” while avoiding the sacrifices of “sum-utilitarianism.” Actually, Fleurbay is wrong. Rawls does not avoid utilitarianism. The idea that inequalities are justified by improving everyone’s lot is a kind of utilitarianism. As for altruism or social responsibility (a), Rawls assumes these for his theory; he does not derive them. But let us look at the theory.

John Rawls’ theory of justice (justice as fairness) is important because it shows what not to do in social and political philosophy. It is famous and widely read. It proceeds systematically spanning a number of volumes often in outline form and with ample response to objections. Finally, Rawls intends it to be very altruistic. Rawl’s second (“difference”) principle justifies inequalities only when they favor the disadvantaged. It is the job or the social responsibility (a) of the economic system (or perhaps of Business) to stamp them out otherwise.

Here are the two principles as Rawls first states them:

1. The “Liberty Principle”

Each person is to have an equal right to the most extensive basic liberty compatible with a similar liberty for others. [1971, 60]

2. The “Difference Principle”

Social and economic inequalities are to be arranged so that they are both (a) reasonably expected to be to everyone’s advantage, and (b) attached to positions and offices open to all. [1971, 60]

Libertarians and “negative” minded social responsibility (e) theorists such as Robert Nozick [2002] agree with the first principle, but not with the second. I am not sure that anyone would disagree with the first principle, so I set it aside. The second, occasions a lot of difficulty, not least of all because Rawls’ 1971 formulation is really just an obscure piece of writing. The 1971 formulation in A Theory of Justice makes the difference principle sound like the liberty principle. However, a 1967 chapter reprinted in at least one important Business Ethics textbook [Donaldson et al, 2002] gradually clarifies what Rawls means:

Now the second principle holds that an inequality is allowed only if there is reason to believe that the institution with the inequality, or permitting it, will work out for the advantage of every person engaged in it. In the case of the basic structure [,] this means that all inequalities which affect life prospects, say the inequalities of income and wealth which exist between social classes, must be to the advantage of everyone. Since the principle applies to institutions, we interpret this to mean that inequalities must be to the advantage of the representative man for each position; . . . [2002, 196].

Now, this formula does not obviously improve over the previous. It does introduce a central government stamping out all sorts of inequalities “affecting life prospects.” They stamp them out unless leaving them alone helps the “representative man.” But, who is the representative man? Rawls says, “The one obvious candidate is the representative man of those least favored by the system of institutional inequalities” [197]. Hence,

We interpret the second principle to hold that these differences are just if and only if the greater expectations of the more advantaged, when playing a part in the working of the whole social system improve the expectations of the least advantaged. The basic structure is just throughout when the advantages of the more fortunate promote the well-being of the least fortunate, that is, when a decrease in their advantages would make the least fortunate even worse off than they are.

So, Rawls says that the centralized government should stamp out inequalities such as wealth, talent, health, looks, and so on, if preserving those inequalities does not help those worse off. Otherwise these inequalities are unjust. Second, it should stamp out inequalities unless doing so harms those already disadvantaged. For example, Bill Gates. It is better that Gates has more computers than others, because he will provide jobs with them while I would only play more video games. Gates’ having more computers improves everyone’s status, while my having more computers does not.

At any rate, Rawls attempts to put much social responsibility (a) into his system; indeed, he seems to be a leading advocate of such responsibility. However the arguments for his “difference principle” are lacking. These arguments are well known although they are hard to get exactly right. One begins by thinking of a social contract situation, i.e., in Rawls’ idiom “an agreement among free and independent persons in an original position of equality . . . [that] reflect[s] the integrity and equal sovereignty of the rational persons who are the contractors” [2002, 195]. Our “representatives” (curiously it is not us) in such a thought-experiment choose “in one joint act, what is to count among them as just and unjust” [195].

Of course this “suitably defined initial situation” is supposed to be “Kantian.” To be “Kantian” is to be independent of wants and desires--that is, to be based solely on the apriori (oblivious of experience) resources of reason. Of course this comprehension “prior to experience” baffles. However, the apriori rather means “oblivious” to experience rather than temporal priority. This is purposeful obliviousness of the sort present in modern economic theory.

Descartes cogito (his saying “I think; therefore, I am”) also provides a good example. In his Meditations, Descartes says that he wants to assess each of his former opinions for soundness and validity, to find out whether they are indeed right or wrong. He resolves to doubt anything that can possibly be doubted, which he finds to be the case with anything that comes through his senses. He could be dreaming that he is seeing a fire before him, or his senses could be deceiving him. When train tracks recede in the distance, supposedly parallel lines appear to meet. But, they do not. Our senses deceive us.

Descartes then moves on to mathematical propositions. Is not 2+2=4? Not so, says Descartes because an evil deceiver (a sort of anti-god) could make one only think 2+2=4 when really it equals 5. At any rate, even if an evil deceiver grips me icily and deceives me mightily he/she can never make me doubt one thing: I am a deceived being. And as long as I think I am a deceived being, then I know I exist. Cogito; ergo sum. I think; therefore, I am.

I cannot doubt that I exist, because in my doubting I am existing. Scholars often find it difficult to get any other “indubitable” apriori knowledge (although they fought for a while over what they called “synthetic” vs. “analytic” propositions). Certain axioms, postulates or common notions might count as apriori knowledge. For example, Euclid’s famous 5th postulate says that parallel lines do not meet. One cannot prove that parallel lines do or do not meet without assuming that they do. Strangely, all of mathematics (from the Greek mathemata—“true knowledge”), hence all science, depends on certain improvable postulates, axioms and common notions. Moreover, one can have perfectly sensible Euclidian geometries based on the premise that parallel lines do not meet, and Lobachevskian geometries based on the premise that they do.

At any rate, Rawls wants his original position to be Kantian in this respect: independent of experience and also necessary (if he can get it). For this purpose, he introduces a “veil of ignorance.” In Rawls’ system, the veil actually shields the wearer from knowledge of others and themselves.

This decision is thought of as being made in a suitably defined initial situation one of the significant features of which is that no one knows his position in society, nor even his place in the distribution of natural talents and abilities. . . . A veil of ignorance prevents anyone from being advantaged or disadvantaged by the contingencies of social class and fortune; and hence the bargaining problems which arise in everyday life from the possession of this knowledge do not affect the choice of principles. [2002, 195]

Rawls’ account of the veil of ignorance has much going for it. Consider the intense fighting between the Palestinians and the Israelis and the many attempts at negotiation. The parties cannot forget their differences. If they could, they would hammer out a peace. Moreover, justice is supposed to be blind. Judging on character and not on skin color or gender would eradicate many modern problems such as racial profiling or sexism.

Few authors if any (I have not seen any) describe exactly how the two principles of justice are supposed derive from the original position. I do not think it is even possible for one to really imagine that she does not know her gender, race, monetary and societal position, history, natural talents, abilities and so on. The best one can do is to pretend that these do not matter. She then asks, “If I could be anyone, then what principles of justice would I endorse.” Rawls thinks that I would endorse the maximal liberty compatible with like liberty for all and that I would only allow some persons to have more than others if doing so left everyone better off.

If I could be anyone, then it is in my best interest that everyone has maximal liberty compatible with like liberty for all. Whoever I actually turn out to be when the veil is lifted, then, I too will have maximal liberty. Similarly, if I could be anyone, then I could be one of the disadvantaged, so it is in my best interest to make the disadvantaged as best off as possible. Though Rawls thinks social responsibility (a), i.e., egalitarianism, motivates his system; social responsibility (e), egoism, or self-interest, actually motivates it. We may think of Rawls’ (and Kant’s) systems as ways of “taming egoism” for the ultimate good of the individual. However, if they are ways of “taming egoism” for the ultimate good of the individual, then they are not ways of “taming egoism” at all.

Moreover, scholars seem to exaggerate the system’s importance, but there seems to be little reason for preferring “Kantianism” to other hypothesese:

I guess there may be something special about putting our representatives behind a veil of ignorance (as Rawls proposes). But, I can’t see the general difference between that and any scientist that proffers a hypothesis while ignoring what she thinks is irrelevant. The question, of course, is how much can we safely ignore?

. . .

The “ideal gas law” (PV=nRT) assumes that there are no intermolecular forces and collisions are perfectly elastic. Both Rawls’ theory of justice and the ideal gas law are “idealized” constructions. The difference between Rawls and the scientist is that the latter realizes that her scientific law doesn’t work in every situation, while Rawls thinks that his theory of justice might work for any democratic society ([Rawls] 1993, xvi).

[Stieb 2006a, 381-382].

Hence, I cannot really see any argument for social responsibility (a) coming out of Rawls’ theory of distributive justice. One favors the disadvantaged in his system (the difference principle) because that is best for one given the knowledge restrictions of the original position. If an action helps others and helps us then that is social responsibility (e), not social responsibility (a). We are trying, and apparently failing, to find arguments for social responsibility (a) that business people have a responsibility to put others before any interest they may have however enlightened. It does not appear that we have a duty to give to others at an overall cost or inconvenience to ourselves.

THE CLASSICAL MODEL OF CORPORATE SOCIAL RESPONSIBILITY.

The Social Responsibility of Business is to Increase its Profits.

Having no luck with positive arguments for social responsibility (a), perhaps we should start from the negative side, with the conclusion that business has no extra social responsibilities other than those that are in its best interest. Maybe we can compose the critics’ objections into a single coherent argument for social responsibility (a).

Milton Friedman, a “Chicago school,” nobel winning economist is best known for his defense of the free market. “Social responsibilities” or the lack of them are key to Friedman’s defense. In the by now notorious paper “The Social Responsibility of Business is to Increase its Profits” Friedman concludes that the only social responsibility of business it to make a profit provided it follows law and ethical custom.

That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom. [1991, 79]

Friedman, of course, puts the point in an unfortunate way. He makes it seem like business must take advantage of every opportunity (“make as much money as possible”). Industrialists should, therefore, set up lemonade stands because they could thereby make “more” money, legally and ethically. No, “opportunity costs,” the fact that one cannot do X if she does Y, make this reading of Friedman preposterous. Yet, most of Friedman’s critics (at least in Business Ethics) either miss the subtlety of Friedman’s arguments or obviate them “on principle.” Let us first look at the arguments before we look at the critics.

Friedman’s argument may be divided into four particulars. First, the CEO is an employee of the stockholders and should do what they want. They want a return on their investment, since they could have put their money into charity otherwise.

In either case, the key point is that, in his capacity as a corporate executive, the manager is an agent of the individuals who own the corporation or establish the eleemosynary institution, and his primary responsibility is to them. [79]

If one hires an engineer to build a bridge and the engineer gives the funds to charity, one should perhaps applaud his philanthropy before suing him. But, one should sue him nonetheless.

Second, there are other experts such as social workers and economists. Friedman lists “providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers” [78]. Surely, social workers, economists, and governmental officials are better trained to deal with these problems than are corporate executives:

On the grounds of consequences, can the corporate executive in fact discharge his alleged “social responsibilities? . . . How is he to know how to spend it? He is told that he must contribute to fighting inflation. How is he to know what action of his will contribute to that end? He is presumably an expert in running his company—in producing a product or selling it or financing it. But nothing about his selection makes him an expert on inflation. [80]

Third, the government is charged with taking care of “social responsibilities.” This may sound like an appeal to “other experts,” but it is a bit different because of Friedman’s list of proposed social responsibilities. For better of worse, since the depression, American government has assumed the goal of putting of “a chicken in every pot.” There are complex reasons why the process of improving living conditions is slow and sometimes not possible. Nevertheless, Friedman argues that arguments that affect everyone should be made by everyone otherwise one is “seeking to attain by undemocratic means what they cannot attain by democratic procedures” [81]. This is why Friedman accuses advocates of social responsibility (a) of “preaching pure and unadulterated socialism” and “undermining the basis of a free society these past decades” [78].

Lastly, the executive is what one might call “a small fish in a big pond”; she does not have that much ability to effect change even were trained to do so. I tell my students that Bill Gates could cure poverty in the United States—for about an hour and then there would be one more poor person. Society must look at and ameliorate the complex reasons why people are poor, not simply throw more money at the problem. Critics counter that small CEOs can pool their resources. However, in keeping with Friedman’s arguments, such “collusion” may form the sort of monopoly Friedman detests. The government is slow but separate from the public sphere for a reason.

To me, these form a powerful bulwark of argument against social responsibility (a). As noted before, Friedman does not reject social responsibility (e) and at times even embraces it:

In practice the doctrine of social responsibility is frequently a cloak for actions that are justified on other grounds rather than a reason for those actions.

To illustrate, it may well be in the long run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government. That may make it easier to attract desirable employees, it may reduce the wage bill or lessen losses from pilferage and sabotage or have other worthwhile effects. Or it may be that, given the laws about the deductibility of corporate charitable contributions, the stockholders can contribute more to chari​ties they favor by having the corporation make the gift than by doing it themselves, since they can in that way contribute an amount that would otherwise have been paid as corporate taxes. [Friedman 1991, 78]

Friedman even revisits the issue in a recent [2005] debate with Whole Foods CEO John Mackey. Mackey posits, among other things, that “The most successful businesses put the customer first, instead of the investors” and that “There can be little doubt that a certain amount of corporate philanthropy is simply good business and works for the long-term benefit of the investors.” Friedman disputes Mackey in two ways. First he says, “Had it [Whole Foods] devoted any significant fraction of its resources to exercising a social responsibility unrelated to the bottom line, it would be out of business by now or would have been taken over” [Friedman et al, 2005]. Second, Friedman disputes “Mackey's flat statement that ‘corporate philanthropy is a good thing’” by noting no reason to believe that a “stream of profit” directed to corporate philanthropy “would do more good for society than investing that stream of profit in the enterprise itself or paying it out as dividends and letting the stockholders dispose of it.”

Whole Foods donates 5 percent of net profit to charity. Contrary to what his critics expect, Friedman agrees that this practice makes sense: “They were clearly in their rights in doing so.” However

it makes sense only because of our obscene tax laws, whereby a stockholder can make a larger gift for a given after-tax cost if the corporation makes the gift on his behalf than if he makes the gift directly. That is a good reason for eliminating the corporate tax or for eliminating the deductibility of corporate charity, but it is not a justification for corporate charity. [Friedman et al, 2005]

In other words, the government has set up a system that makes corporate philanthropy make sense. It is a fluke. For, corporations will actually better achieve real end-goals such as jobs, improved working conditions, and a cleaner environment, by reinvesting the money than by giving it away for a tax break.

Stakeholder Theory.

Many see R. E. Freeman’s “Stakeholder theory of the corporation” as a welcome and leading alternative to Milton Friedman’s “stockholder” theory. Stockholder theory prioritizes stockholders or investors. They are the beneficiaries of corporate effort and dividends. Freeman argues that others have a “stake” in the success or failure of the firm and that corporations should be “responsible” to these “stakeholders.”

Until recently [there] . . . was no constraint at all. In this century, however, the law has evolved to effectively constrain the pursuit of stockholder interests at the expense of other claimaints on the firm. It has, in effect, required that the claims of customers, suppliers, local communities, and employees be taken into consideration, though in general they should be subordinated to the claims of stockholders. [2002, 39-40]

Certainly, one can doubt that there was “no constraint at all” on the pursuit of stockholder interests. However, Freeman’s point is well taken. He seems to agree with John Orlando that “the business ethics literature has yet to identify a morally relevant distinction between the situation of the shareholder and that of the worker in relation to the corporation” [Orlando 2003, 32-33]. If there is no morally relevant distinction between the stakeholder and stockholder, then fairness and respect for persons demand that we treat both alike.

Freeman says “My thesis is that I can revitalize the concept of managerial capitalism by replacing the notion that managers have a duty to stockholders with the concept that managers bear a fiduciary relationship to stakeholders” [2002, 39]. “The crux of my argument,” he writes, “is that we can reconceptualize the firm around the following question. For whose benefit and at whose expense should the firm be managed” [39]? Freeman thinks that firms should be managed to benefit and exact costs from stakeholders equally. There seems to be no way to assess whether one stakeholder has made a greater contribution than another. So, all should be treated equally and all should have equal decision making power: “That is, each of these stakeholder groups has a right not to be treated as a means to some end, and therefore must participate in determining the future direction of the firm in which they have a stake” [39]. They must have real and not simply illusory or token decision making power.

First, in a previous paper, I addressed the idea that “the business ethics literature has yet to identify a morally relevant distinction between the situation of the shareholder and that of the worker in relation to the corporation” [Orlando 2003, 32-33]. In fact I think the morally relevant distinction is between presently owned money and the prospect of future work:

indeed a significant difference in the kind of risk that each shareholder or worker assumes. Shareholders already have their money, earned (we may assume rightfully) from their own work. . . . Workers, on the other hand, don’t have the money in question yet. Money from the future employment that Orlando feels workers ordinarily deserve is money that can be legally and morally obtained by the worker only on the condition of future performance adequately agreed to (i.e., under a contract). Shareholders risk present money; workers risk future earnings. Shareholder money (to use Kant’s terminology) is “categorical”; worker money is “hypothetical.” Should we not assume, then, that the nature of the moral imperative involved follows the nature of the money in question? A manager’s duty to a shareholder is categorical, while to a worker it is hypothetical. [Stieb 2004, 65]

Second, Freeman does not seem to give valid arguments for his conclusions. Stakeholder theory is the theory proposed by Freeman that we should a) change the beneficiaries, and b) give them serious decision making power. He argues for this on the basis of a legal argument and an economic argument.

According to Freeman’s legal argument,

The law has evolved to effectively constrain the pursuit of stockholder interests at the expense of other claimants on the firm. It has, in effect, required that the claims of customers, suppliers, local communities, and employees be taken into consideration. [Freeman 2002, 39-40]

Instances of such requirements are “privaty of contract” in Winterbottom vs. Wright, “strict liability” in Greenman vs. Yuba Power. Freeman also includes the National Labor Relations Act, Title VII of the Civil Rights Act of 1964, and the Age Discrimination act of 1967. In a nutshell the argument goes like this.

There are all these new laws constraining corporations.

----------------

We should change the beneficiaries and give them serious decision power.

One can see that the conclusion does not follow. We may justly approve of these laws some of which protect consumers, others of which clear gender gaps and the like without concluding that any stakeholder is now benefited. Those who respect our dignity regardless of race or age do not benefit us. They merely give us what we rightly deserve as human beings.

Moreover, stockholder theory can accept new constraints on businesses without changing their primary message. One should not tar stockholder theory with racial or age prejudice; it is simply the theory that investors should be and are the primary beneficiary of what businesses do with stockholder money. Even if the new laws “benefit” the public in some sense, it does not follow that they ever could replace the investor as the primary beneficiary. Yes, new laws constrain corporations. But they only protect some third party, against say pollution for example. If A and B are doing business and C gets polluted, the law then allows greater protection of the “economic externality” C. The law makes C whole again. However, it does not give C anything she did not have before. She does not seem to have any new decision power either.

I cannot see in what sense the new laws would give its new “beneficiaries” greater decision-making power. Title VII may give a worker more options, but that is not the same thing. Greater decision-making power is the ability to have one’s decisions listened to and acted upon. Improved working conditions such as a minimum wage do not confer such power on workers. The minimum wage may frustrate the decisions of some managers, yet workers do not decide anything about the minimum wage (except as voters): the government decides for them.

Freeman’s economic argument is similar. According to Freeman

In its pure ideological form managerial capitalism [stakeholder theory] seeks to maximize the interests of stockholders. In its perennial criticism of government regulation, management espouses the “invisible hand” doctrine. . . . However, we know that externalities, moral hazards, and monopoly power exist in fact, whether or not they exist in theory.

The problem of the “tragedy of the commons” or the free-rider problem pervades the concept of the public goods such as water and air. . . .

Similarly, moral hazards arise when the purchaser of a good or service can pass along the cost of that good . . .

Finally, we see the avoidance of competitive behavior on the part of firms, each seeking to monopolize a small portion of the market and not compete with one another. [2002, 41]

In other words,

Capitalism has numerous problems

----------------

We should change the beneficiaries and give them serious decision power.

Once again, we can agree with the premises without the conclusion being true.

Yes capitalism, as they like to say, is the worst system there is except for all the others. But, again, that does not make any alternative such as stakeholder theory better for that reason. Freeman does not show that the tragedy of the commons, the free-rider problem, moral hazards or “the avoidance of competitive behavior” result from stockholder theory. There is nothing in stockholder theory that councils morally questionable behavior that may in fact diminish the return to stockholders. Stockholder theory may be a cornerstone of capitalism, but it is not, thereby, heir to capitalism’s problems (which, by the way, are problems for any economic system).

Moreover, I cannot see that laws that prevent the abuse of the commons, that make everyone pay his share, or that disallow monopolies, challenge the investor’s primacy at all. Surely, the investor has fewer options. Law constrains the potentially lucrative behavior of harming others. But, the investor is still Queen. The law rather provides the conditions for free trade; it does not direct that trade to altruistic ends. (The exception of course is government produce, but even that is strategically directed.)

Freeman writes about how stakeholder theory is supposed to affect each stakeholder. Here are two. First the supplier: “When the firm treats the supplier as a valued member of the stakeholder network, rather than simply as a source of materials, the supplier will respond when the firm is in need” (43). I do not know what it means to treat anyone “simply as a source of materials,” and there is no guarantee that any supplier will “respond” to any “need” no matter how well treated. Nor is there any reason to believe that the supplier has a responsibility to act altruistically.

Second,

The local community grants the firm the right to build facilities . . . The firm cannot expose the community to unreasonable hazards in the form of pollution, toxic waste, and so on. If for some reason the firm must leave a community it is expected to work with local leaders to make the transition as smooth as possible. Of course, the firm does not have perfect knowledge, but when it discovers some danger or runs afoul of new competition, it is expected to inform the local community and to work with the community to overcome any problem. When the firm mismanages its relationship with the local 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 be surprised when punitive measures are invoked. [2002, 43]

It is a play on words to say the local community grants anything: representatives of that community sit on zoning boards. Government bodies are instituted (as the Declaration of Independence says) to “secure the rights of the governed” not to grant them. At any rate, I am not sure what the local community may validly “expect” but a firm that fails to inform the community of a new source of competition or fails to “work with the community to overcome any problem” is hardly criminal. The law decides what is criminal, not the community. Members of the community certainly have the right to “distrust” and “ostracize” any firm they want (within the prescribed limits of civil disobedience and occasionally beyond), but they may invoke “punitive measures” only when laws are broken. Stockholder theory specifically says, “Follow law and ethical custom.” There is no extra-legal, punitive community sanction that the community can level against firms.

Freeman’s recent (coauthored) articles merely repeat these arguments, if they offer any arguments at all for changing the beneficiaries and giving them serious decision-making power. More often than not the recent articles simply offer business strategy. For example:

We would argue that stakeholder theory gives managers more resources and a greater capability to deal with this challenge [of getting stakeholders to sign on and give their best for the firm], because they can offer not only financial reward, but language and action to show that they value relationships with other groups and work to advance their interests over time. [2004, 365]

Managers have more resources and greater capabilities because they can offer more language and action. No doubt some people value “language and action to show that they [companies] value relationships with other groups.” Such language and action will encourage these people to “sign on and give their best for the firm.” Yet, other “stakeholders” do not value these things in the companies they associate with. They believe that too much “language and action,” emphasis on “value relationships with other groups” and “group advancement” diverts them from the already daunting task of creating a quality product and competing in the market place. These individuals do not lack values because they lack “collective” or “altruistic” values. They value competence and precision more and prefer not to waste their time with corporate handholding (or whatever it is that Freeman means that one should do for other stakeholders that they are not already doing. Freeman is not exactly clear).

One more quote should adequately seal Freeman’s view of business under stakeholder theory:

Finally stakeholder theory does a better job of explaining and directing managerial behavior in markets. Stakeholder theory claims that whatever the ultimate aim of the corporation or other form of business activity, managers and entrepreneurs must take into account the legitimate interests of those groups and individuals who can affect (or be affected by) their activities (Donaldson and Prestion 1995, Freeman 1994). It is quite natural to suggest that the very idea of value creation and trade is intimately connected to the idea of creating value for stakeholders. Business is about putting together a deal so that suppliers, customers, employees, communities, managers, and shareholders all win continuously over time. [2004, 365]

Freeman thinks that business is about making all stakeholders win. However, Business is not about “putting together a deal so that suppliers, customers, employees, communities, managers, and shareholders” (the stakeholders) will “all win continuously over time.” Business, the free market, is about trade. One person or a group of people put mental and/or physical labor into materials in order to create a product. They then attempt to advertise and sell their product. There are no “winners” and “losers.” There are those who buy and those who sell. The government sets minimal conditions of trade in order to verify quality and insure delivery (for example). All other associations, assistance giving, or team sports analogies are up to the traders involved. There is no “right” or “wrong” beyond following law and ethical custom. There is the stupid and the intelligent (course of action). Of course everyone should best look out for his interests, social responsibility (e)). As of yet, I still see no reason (beyond law and ethical custom) that one needs to put the interests of others first. Even following law and ethical custom is not putting the needs of others first, because one certainly has a self-interest in their being law and ethical custom that they and others follow.

Some Other Objections to Milton Friedman:

J.R. Lucas.

According to J.R. Lucas

Many thinkers deny the possibility of businessmen having responsibilities or ethical obligations. . . . Admittedly, there is a framework of law within which he has to operate, but that is all, and so long as he keeps the law he is free to maximize profits without being constrained by any moral or social considerations, or any further sense of responsibility for what he does. [2003, 16]

Lucas thinks that a businessman who maximizes profits is “unconstrained by any moral or social considerations, or any further sense of responsibility.” Lucas believes this view is mistaken because

It is a mistake to construe rationality in terms of maximizing. Even though some economists, influenced by the Theory of Games, offer it as a definition, it is, as the prisoner’s dilemma shows, an incoherent one. For individuals each seek to maximize their own payoff can lead to sub-optimal outcomes assessed in maximizing terms. [16]

Instead, rationality also requires us “to widen our range of concern. We accept that it would be foolish to be guided only by immediate payoffs without considering future ones; . . . .“ Like Freeman, Lucas believes that

cooperation, not competition, is the most fundamental aspect of business. . . . The obligations of a businessman arise from the cooperative nature of business and the shared values and mutual understanding of the cooperative associations within which business transactions take place.

I can entice someone into wanting to do business with me only by attempting to figure out and serve her needs. Lucas best explains his point with the inconsistency he calls “scepticism.” He thinks that many in business are “sceptical”:

It would still be possible for a businessman to remain sceptical. . . . The tough-minded can dismiss all concern for the environment as unrealistic woolly-mindedness, and may defer payment to his suppliers until the last possible moment: but when the Mafia call and suggest that he might like to purchase protection from arson attacks, he is likely to be indignant. He believes vehemently in the rule of law, and that violence has no place in a civilized society; his skepticism, in short, is selective. . . . Morality and self-interest remain opposed, but each version of self-interest is seen ultimately to belacking in enlightenment. Scepticism is always possible, but never in the long run reasonable. [2003, 18].

In sum, those who cleave to the law to determine businesses social responsibilities, “deny the possibility of businessmen having responsibilities or ethical obligations.” This view is inconsistent even on egoist terms, both because of the prisoner’s dilemma and because of the businessperson’s insistence on the rule of law in his own case “when the Mafia call.”

Unfortunately, Lucas’ arguments are unsound. One cannot follow the law and simultaneously deny all responsibilities or ethical obligations. This is why Friedman called following the law (and much else) plausible “social responsibilities” (e), though they are not social responsibilities (a).

Of course, the corporate executive is also a person in his own right. As a person, he may have many other responsibilities that he rec​ognizes or assumes voluntarily–to his family, his conscience, his feelings of charity, his church, his clubs, his city, his country. He may feel impelled by these responsibilities to de​vote part of his income to causes he regards as worthy, to refuse to work for particular corpo​rations, even to leave his job, for example, to join his country's armed forces. Ifwe wish, we may refer to some of these responsibilities as "social responsibilities." But in these respects he is acting as a principal, not an agent; . . .

As far as this view being inconsistent, I fail to see the inconsistency. First, I tried to show (above) that the prisoner’s dilemma does not show that construing rationality in terms of maximizing is incoherent. Understanding the prisoner’s dilemma depends on what one is maximizing. The prisoner’s dilemma may show that maximizing short term or immediate profit seeking goals contradict maximizing long term goals. But, ethical egoism is the view that we should do what is really in our best interest whatever that is not what we think is. The PD claims that the prisoners think that confessing (while the other remains silent) is in their best interest, while we know that both prisoners remaining silent is really to each’s best-interest. If this is true, then ethical egoism councils doing what is really in their best interest (not what they think is), so there is no contradiction: on this supposition, both are better off when both remain silent.

The PD represents an unjust situation anyway. If the world where truly just there would be no crime in the first place. Even if there were, each prisoner would confess honestly so that each could better receive the correction he deserved. Any contradictions stem not from maximizing one’s best interest but from the injustice of the situation.

Similarly, Lucas supposes that it is contradictory for me to call the police (or be indignant) when the Mafia come calling offering their protection. However, I do not see the inconsistency since it is supposed that I fully believe in following the law. I would then expect others to follow the law, and be indignant when they do not.

Robert Hannaford.

Like Lucas, some authors such as Hannaford object that stockholders want a lot of things besides money: “it is not clear whether our interest is to be given a purely financial interpretation” [1991, 86]. Of course, Hannaford is right: stockholders might an improved environment and a cure to poverty. However one probably better cures these ills by giving her money to Greenpeace than by investing in IBM. As an investor, the stockholder’s interest can be given more of a “purely financial interpretation,” though not as a person.

Hannaford accuses Friedman of just such an equivocation: that a “theoretical twist” allows Friedman to advocate greed while defending self-interest. Yet this is exactly what Hannaford does. He advocates the interests of stockholders by conflating them with the interests of persons. In my [2001] essay I wrote: “We should recognize, he says, that a CEO has many genuine social responsibilities. While I agree, in part, with Hannaford’s conclusion, his attack is misguided. Friedman treads no “two-step back and forth” (Hannaford 1983, 86)” [Stieb 2001, 240]. Accordingly, in his “The Theoretical Twist to Irresponsibility in Business,” Hannaford calls “self-interest” a striving each of us has “to better his or her condition” [85]. He claims “To say that all persons will seek what they regard as useful does not tell us anything about what in particular they so regard, nor what they will seek” [86]. Of course he is right. And, it doesn’t follow that because we seek our own self-interest continuously that “we have a right to say each of us seeks his or her own financial interest continuously” [86]. We have other interests besides financial ones.

Friedman wrote:

In a free-enterprise, private property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accord with their desires which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom. [Friedman 1991, 79]

But, he never denies that CEO’s represent only one interest among a stockholder’s many plausible interests. “Instead, he argues that they or their duly elected government represent their other interests better than would a CEO hired to represent one’s financial interest (within the rules of law and ethical custom).” [Stieb 2001, 242]. As noted before, Friedman explicitly recognizes other personal responsibilities:

Of course, the corporate executive is also a person in his own right. As a person he may have other responsibilities that he recognizes or assumes voluntarily—to his family, his conscience, his feelings of charity, his church, his clubs, his city, his country [79].

Friedman’s point is crucial: public outcry against companies and their CEO’s merely fixates on the closest source of power. In this way the public forgets “its proper democratic role in the generation and check of that power. It is ‘seeking to attain by undemocratic procedures what [it]…cannot attain by democratic procedures’ (81)“ [Stieb, 2001, 242].

The whole justification for permitting the corporate executive to be selected by the stockholders is that the executive is an agent serving the interests of his principal. This justification disappears when the corporate executive imposes taxes and spends the proceeds for “social” purposes. He becomes in effect a public employee, a civil servant…If they are to be civil servants, then they must be elected through a political process. If they are to impose taxes and make expenditures to foster “social” objectives, then political machinery must be set up to make the assessment of taxes and to determine through a political process the objectives to be served [Friedman 1991, 80].

For better or worse, democracy is rule by the people for the people. “Friedman doesn’t defend greed by defending self-interest; he defends “greed,” or the pursuit of profit, by paying attention to job descriptions and the real source of political power” [Stieb 2001, 243].

Robert H. Frank.

First of all, Frank mischaracterizes Friedman:

In Friedman’s view managers who pursue broader social goals—say by adopting more stringent emissions standards than required by law, or by donating corporate funds to charitable organizations—are simply spending other people’s money. Firms run by these managers will have higher costs than those run by managers whose goal is to maximize shareholder wealth. According to the standard theory of competitive markets, the latter firms will attract more capital and eventually drive the former firms out of business (252).

Frank thinks that Friedman will disallow any investment of stockholder funds to anything else than “the bottom line.” However, Friedman recognizes that the bottom line is not precise and well-defined. Contributing to “broader social goals” may also contribute to the bottom line (social responsibility (e)).

It is true that managers who pursue any corporate goals are spending someone else’s money unless they, themselves are primary or otherwise investors. Friedman also thinks that we can do anything we like with our own money: “the individual proprieter . . . is spending his own money, not someone else’s. If he wishes to spend his money on such purposes, that is his right, and I cannot see that there is any objection to his doing so” (36). However, Friedman clearly recognizes that corporate management or philanthropy is far from an easy matter of “simply spending other people’s money.”

To illustrate, it may well be in the long-run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government. That may make it easier to attract desirable employees, it may reduce the wage bill or lessen losses from pilferage and sabatoge or have other worthwile effects. Or, it may be that given the laws about charitable contributions, the stockholders can contribute more to charaties they favor by having the corporation make the gift than by doing it themselves, since they can in that way contribute more to charaties they favor by having corporations make the gift than by doing it themselves, since they can in that way contribute an amount that would otherwise have been paid as corporate taxes. (37)

So Friedman does not think that necessarily “firms run by these managers will have higher [overall] costs than those run by managers whose goal is to maximize shareholder wealth.” He recognizes that “higher costs” in one area may be offset by greater returns in other areas.

Frank continues:

In the years since Friedman wrote this article, the development of the theory of repeated games has given us ever more sophisticated accounts of the forces that often align self-interest with the interests of others. For example, Robert Axelrod (1984) suggests that firms pay their suppliers not because they feel a moral obligation to do so but because they require future shipments from them.

Frank makes two claims 1) game theory helps explain better how self-interest aligns with others’ interests (than Friedman does, presumably). 2) paying suppliers because one requires future shipments is not part of a “moral obligation” while paying them for some other reason is. Let me start with 2). Moral obligations are at least in part those duties we owe to others in virtue of being part of the same shared, human enterprise. We all strive (or should strive) to be happy, to please God (perhaps), to do our duty. One theory could be called, after the literature, “consequentialist,” another “divine,” a third “deontological.” Paying suppliers (doing on to others) so that we may then have a reasonable expectation of them continuing to supply to us (do onto us), seems the very call of morality whether Aristotelian, Christian, or Kantian.

As for 1), it has often been asserted that game theory improves and perhaps falsifies the famous “invisible hand” of Adam Smith. I have already dealt with this assertion in previous sections.

Thomas Donaldson, et al.

Donaldson, Werhane and Cording seem to think that Friedman’s arguments have something to do with the “purpose” of business. They ask: “As a businessperson, is it sufficient to manage one’s firm such that it operates within the confines of law?” (Friedman’s point). Only to follow with the suggestive question “In its most basic sense, what is the purpose of a large business organization?

In fact, they also imply that Friedman’s position is nonethical (or perhaps unethical). They write:

Some argue that ethics has nothing to do with business, nor business with ethics. For example the obligation of a firm that generates pollution as a byproduct to its manufacturing processes is to comply with pollution-control laws; it is up to the government to set these standards such that the public welfare is protected [again, very close to Friedman’s point]. Others claim that because business involves people, by definition it involves ethical considerations. In determining the amount of corporate funds to spend on abatement, they argue firms must consider the damage their actions may have on innocent people. Both sides of this argument are presented throughout the text. (12)

All of these assertions miss the point. Friedman was not describing the purpose of a business; he was describing what its social responsibility is not. Second, we need not accept the false dichotomy that one is ethical or profit-minded. One can be ethical and profit-minded. Indeed, running a successful business would seem impossible without being both. In “determing the amount of corporate funds to spend on abatement” (which all corporations do), one must do more than “consider the damage their actions may have on innocent people.” One must offer specific recommendations and numbers and follow through. For example, the National Pollution Discharge Elimination system (NPDES) specifies the total amount of chromium that municipalities may discharge into the waterways [Gunn & Vesilind 2003, 10]. We may conclude from these specific recommondations that municipality that failed to meet the requirement is immoral; while one that failed to exceed it is decidely not immoral.

We must go beyond the vague language of “giving greater consideration” to stakeholders. Male chauvinists “consider” women all the time; they “consider” them to be greatly inferior. In business, this is basically Kenneth Goodpaster’s point:

We can imagine decision-makers doing “stakeholder analysis” for different underlying reasons, not always having to do with ethics. A management team, for example, might be careful to take positive and (especially) negative stakeholder effects into account for no other reason than that the offended stakeholders might resist or retaliate . . . . [2002, 51]

Goodpaster argues that we must do more than talk about and analyze who the stakeholders are. I think that we are already doing that “more” the best way we can: by attempting to pass legislation.

Robert Solomon

Solomon seems to argue against Friedman, although it is not exactly clear why given his emphasis on Aristotelian virtue ethics. He writes: “The Aristotelian approach to business ethics begins with two concepts, the individual embedded in the community and the ultimate importance of happiness as the sole criterion of success” [1999, xxii] This seems clearly egoistic: we should pursue our true self interest. The crux of the argument lies in what is to our true self-interest. Aristotle, Solomon and Friedman all seem to agree that our true self-interest lies partly in community:

The underlying assumption was that a person is who he or she is by virtue of his or her place and role in the community, and the virtues of the community in turn, nurture and encourage each of its members to be a good person. . . . On the Aristototelian approach to business, a good corporation is one that is not only profitable but that provides a morally rewarding enviroment in which good people can develop not only their skills but also their virtues. [1999, xxiv]

However, later Solomon calls Friedman’s view “a more sophisticated version of the myth of the profit motive.” This myth, Solomon suggests “causes more damage than any amount of sleaziness or dishonest dealings on the part of the business community. It is the narrow-minded language of the profit motive that gives rise to public suspicion” [1999, 30]. One should note that so far the argument such as it is seems entirely ad hominem: Friedman should not talk about the profit motive (or a social responsibility to make a profit) because the public suspects it. We may refuse to use certain words or phrases because of public distaste (supposing that a good reason). However, retiring a word does not change the idea(s) the word stands for. We would be forced to invent another word for “profit” and the argument becomes simply semantic.

Solomon adds: “Milton Friedman adds to the confusion with his famous charge that charitable giving (on the part of corporations, not individuals) is nothing less than theft (from stockholders) an insidious form of socialism” [33]. As noted before, Friedman did not argue that charitable giving is theft. Friedman agrees that the practice of corporate charitable giving makes sense: “They were clearly in their rights in doing so.” However

it makes sense only because of our obscene tax laws, whereby a stockholder can make a larger gift for a given after-tax cost if the corporation makes the gift on his behalf than if he makes the gift directly. That is a good reason for eliminating the corporate tax or for eliminating the deductibility of corporate charity, but it is not a justification for corporate charity. [Friedman et al, 2005]

It may be true that Friedman “adds to the confusion.” But, that is not the point. The point is whether he is correct or not. And a statement may be correct no matter how much confusion it adds.

Friedman’s point was that business has no other social responsibility but to use investor money to make more money without violating the “rules of the game.” In the end, Solomon seems to concede the point: “But does it have to be proven to the myopic stockholder who can see only his share price and dividends that such community-minded activities do indeed improve profitibility? (Could one ever conclusively prove this?)” (33). I think the answer (Vogel’s answer) is that we have to try to prove whether social responsibility is profitable or not, even if we could never do it conclusively. It does have to be proven to the “myopic” stockholder that community-minded activities are worthwhile and not just ways of throwing away money.

SOCIAL RESPONSIBILITY REVISITED

In a paper aptly titled “You Don’t have the Right to do it Wrong” [2001] Robert Gotterbarn declares “The world will no longer accept the view that BUGS arise in programs by Spontaneous Generation. The BUGS (errors) were put there by people who should know better.” [Gotterbarn]. Gotterbarn has made large contributions to the computing profession and to the professional responsibility movement. However, enough is enough. Programmers do not purposely put bugs in their programs. They try to avoid them, which is difficult in millions of lines of code.

I advocate that business has no other social responsibility (a) but to make a profit provided it follows law and ethical custom. Of course Friedman’s picture has its problems. [Stieb 2001]. Certain responsibilities devolve to government, while Friedman limits the power of that “laissez-faire” government. Of course there might be inconsistencies in Friedman’s overall picture. “It is possible to keep passing the buck until there is no one left to take responsibility” [Stieb 2001, 243].

In my 2001 paper I talked about responsibilities that arise for “non-exhortative” issues occuring when emergency (or emergent) situations, or other technological or secretive issues prevent appeal to law and ethical custom. I concluded that these special cases force genuine responsibilities on CEOs regardless of self-interest. For, sometimes there is no one else. However each of these cases represents either a case of social responsibility (e), the kind that helps the actor and the beneficiary, or a case of that does not have to do with self-interest at all (it is “without self interest”). This chapter has tried to show that there really are no good arguments for social responsibility (a), that business must sacrifice its true self-interest for the good of stakeholders.

It has looked at the “history of social responsibility,” and addressed the philosophical and political arguments that try to define social responsibility and our desperate need for it. We distinguished the primary philosophical question, which is not so much the definition of social responsibility as it is the question of altruism. Do businesses have duties to help others at a cost to themselves, or only when it is in their enlightened interest?

After equating altruism with utilitarianism (the view that moral behavior seeks the greatest good of the greatest number) I attempted to refute Luis Pascal’s and Peter Singer’s “shaming” arguments. They try to make one feel bad for not doing enough to help worldwide suffering. Such arguments either seem religiously motivated (and therefore rationally arbitrary) or hopelessly oblivious of economic realities.

Then, of course we turned to “economic realities.” Economics and political structures are very essential to an account of social responsibility. However, I find the emphasis on business duties to “distributive” or social justice as instantiated in and in turn dependent on certain forms of government and economics really just begs the question. Economics should never be reduced to just the attempt to rank preferences scientifically without suggesting them. Business needs an ethical economics of the sort that Plato meant, although we should avoid Plato’s excesses as much as Friedman’s. Business needs an adequate social and political philosophy. After reviewing John Rawls’ Theory of Justice as well as the numerous critics condemning Milton Friedman’s doctrine, I have argued for an amendment to Milton Friedman but not a wholesale dismissal.

According to David Vogel, on leading expert in the field of Corporate Social Responsibility (CSR), all current CSR projects are or should be based on the self-interest of business anyway. Partly this is because of the incredible complexity of measurement:

It is hard to draw broad conclusions about the relationship between CSR and profits because the studies often measure different things. In the ninety-five studies summarized by Margolis and Walsh, financial performance is measured in seventy different ways: these studies employ fourty-nine different accounting measures that mix accounting and market indicators and four other measures . . . .

. . . Measurements of social performance also vary widely. In the ninety-five studies, twenty-seven different data sources were used. These range from multidimensional screening criteria, surveys, conduct in South Africa (which has since become irrelevant), organizational programs and practices, disclosure, money spent, environmental performance and reputation. [2005, 30]

We may also come to the same conclusion by looking at case studies. Here are two:

Beech Nut.

These days chemists can make Styrofoam taste like a turkey dinner. Executives at Beech Nut saw nothing wrong with making corn syrup taste like apples. Back in the 80’s Beech Nut got their “apple” concentrate from a Bronx supplier called the “Universal Juice Company.” Beech Nut a competitor with huge company Gerber in the baby food industry, was doing everything it could to improve its fifteen percent market share including selling corn syrup as “apple juice” to infants. There was no evidence that the juice was harmful [Boatright 2007, 30], although it depends on what one means by “harmful.” X or Y reports that corn syrup and other … antioxidants…

When the Swiss giant Nestle bought Beech Nut in 1981, and made Lars Hoyvald company President, Hoyvald promised Nestle that he would return a $7 million dollar profit that year. Switching suppliers and a juice recall would not make that profit. Indeed, Hoyvald complains: “I could have called up Switzerland and told them I had just closed the company down. Because that would have been the result of it.” In the famous Ford Pinto case (or the reckless endangerment or wrongful death suits against Ford) Ford executives expected an imminent recall and “attempted to squeeze as many Pinto’s out “before the gun” as it were” (Stieb 2001, 246 Check Page). Beech Nut acted similarly. Hoyvald unloaded thousands of cases to its distributors in Puerto Rico and the Dominican Republic.

Malden Mills

Solomon writes of Malden Mills:

Here is a contemporary role model for executives. He is not historical but very contemporary. . . . He is Aaron Feuerstein, who was and is CEO of Malden Mills, a textile company in Massachusetts.

Just before Christmas 1995, a fire destroyed the manufacturing plant in Lawrence, Massachusetts, and three thousand employees were put out of work. Feuerstein announced that he would keep all of them on the payroll while the business was being rebuilt, and in January, and again in February, he continued to pay them and assure them of jobs. The plant was back in full operation by March, and needless to say, Malden Mills now has the most loyal, hardworking, workers around.

Feuerstein is not the usual candidate for business hero. He has no pretensions of being a “master of the universe.” He is just a very successful businessman and human being. . . . True, Feuerstein paid out several million dollars that others might have seen as “unnecessary,” but in the “long run” (about six months!), Malden Mills came out just fine. [Solomon 1999, 10]

Unfortunately, the real case is not as rosy as Solomon (or Desjardins 2003) would have us believe. A 2003 CBS “60 Minutes” report (Safer, 2003) holds the 1995 fire and resulting debt (Feuerstein’s good intentions) at least partly responsible for driving Malden Mills into bankruptcy. Other factors include the long decline of the U.S. textile industry and warm winters that have cut into the sales of Polartec, the Mill’s main product. “Feuerstein [also] decided to rebuild right there in Lawrence - not to move down South or overseas as much of the industry had done in search of cheap labor.”

The “60 Minutes” report emphasizes the countrywide acclaim greeting Feuerstein’s exercise of social responsibility: “The press loved him, and so did politicians. President Clinton invited him to the State of the Union Address as an honored guest. He also received 12 honorary degrees, including one from Boston University” [Safer, 2003]. Indeed, the deeply religious Feuerstein credits the Torah:

You are not permitted to oppress the working man, because he's poor and he's needy, amongst your brethren and amongst the non-Jew in your community," says Feuerstein, who spent $300 million of the insurance money and then borrowed $100 million more to build a new plant that is both environmentally friendly and worker friendly.

That is hard to argue with. Nonetheless the Harvard Business school details the struggle on behalf of Feuerstein’s “ creditors “to decide whether to lend Feuerstein additional funds to enable him to regain control of the company after emerging from bankruptcy” [Nohria et al, 2006].

Meanwhile, a recent New York Times article (Oct 27, 2004) reported on Feuerstein’s unsuccessful bid to regain control of the company that had been in his family for three generations. Instead, “the reorganization put lenders, including the GE Capital Corporation, in control.” [Malden Mills Rejects Purchase Bid]. The board wasted no time. On July 26, 2004 the board named Michael Spillane, the former President for Children’s Apparel & Men’s Underwear and Loungewear at Tommy Hilfiger, the new CEO at Malden Mills.

***

Business is rarely easy. Let us not make it more difficult by politicizing it more than we have to.

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� See Santa Clara County v. Southern Pacific Railroad.

� See Berger and Luckman. John Searle. See reply to John Searle in Stieb.

� I tell my students: if you are not making arguments you are not doing philosophy; and if you are not talking about how things should or should not be, you are not doing ethics.

� Psychological egoism motivates me psychologically to do whatever I think is in my best interest (when I act voluntarily). Ethical egoism says I should do what is really in my best interest. The first explains psychological motivation; the second is an ethical theory (a theory about what I should or should not do). My true best-interest only relates tangentially to what I may think it is.

� Singer writes: “One possibility, . . . , is that we ought to give until we reach the level of marginal utility—that is, the level which, by giving more, I would cause as much suffering to myself or my dependents as I would relieve by my gift. This would mean, of course, that one would reduce oneself to very near the material circumstance of Bengali refuge.” [1997, 404].

� Details of this case study derive from Donaldson et al 2002.

� Most famously, see the dialogue called Meno. Arguably, Socrates “coaches” the slave boy through the necessary steps to find the diagonal of a given square. Socrates (or Plato) argues, perhaps facetiously, that he has awakened dormant knowledge that everyone possesses prior to their birth. For me, the dialogue suggests that there may be forms of knowledge that are “logical” but no items of knowledge embedded in our collective unconscious.

� The Theory derives from Immanuel Kant in the liberal tradition. See Kant DATE.

� The example derives from Marcia Baron, a contemporary deontologist (duty-based ethicist in the Kantian tradition). See Baron 1991.

� I may have missed something in The Laws or another dialogue, however Aristotle’s defense of slavery is notorious.

� For an account of Kantian constructivism vs. Rawls’ political constructivism see Stieb 2006a.

� PV=NRT (Pressure x Volume = Number of moles x Universal gas constant x Temperature). See (“Ideal Gas Law.” Georgia State U. 8 Mar. 2005 <http://hyperphysics.phy-astr.gsu.edu/hbase/kinetic/idegas.html>).

� I get most of the details of this case from Boatright 2007 who in turn gets it from Traub 1988.