Role as a Moral Agent
One reason businesses still struggle with ethical behavior is they are unaware of their role as a moral agent. A moral agent is a person who has the ability to distinguish between right and wrong and to be held accountable for their actions. Moral agents have a moral responsibility not to cause harm.
The idea that a business has moral agency obligation stems in part from U.S. Supreme Court decisions declaring that a corporation is a person in the eyes of the law -- at least for some purposes. For example, corporations have a right to have their contracts respected by the government. The shareholder/owners generally cannot be sued. Instead, the corporate entity could be sued if its actions are similar to those of an individual who broke the law or violates ethical norms.
In a well-known opinion piece published in the September 1970 edition of the New York Times magazine, Milton Friedman, an economist who is well-known for capitalist philosophy, offered the following quote: “There is one and only one social responsibility of business – to increase its profits.” Some would say Friedman’s statement ignores how corporate actions affect the public. This may be true on the surface but Friedman went further in his statement to address the moral agency responsibility of corporate America.
Friedman’s quote has been taken out of context because it omits the rest of the statement, which is “to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” By the latter statement, Friedman meant that businesses should not commit fraud on customers, employees, suppliers, shareholders and other stakeholders whose interests would be harmed by such actions.
So, what kind of fraud are we talking about? Plain and simple, whenever a corporation knowingly, and with intent, acts to deceive others about their actions. Typically, we’re talking about deceiving the public. For example, a product may be marketed as safe only to find out there are defects that can cause harm to the public or worse. The automobile companies are known for acting this way – i.e., Volkswagen “defeat device”, Takata faulty airbags, Toyota unintended acceleration of the engine.
Banks are also guilty of putting profits over people. The most recent example is Wells Fargo where unsolicited accounts were set up for uninformed customers, customers were charged fees for services not requested, and so on. Going back to the financial fraud of 2007-8, dozens of bankers were penalized for fraudulent activities, such as selling off high risk loans to unsuspecting investors. Yet, virtually none were sent to jail.
Is it time to jettison the capitalistic system? Before we decide let’s review how and why it was developed.
Adam Smith (1723-1790) is known as the father of modern capitalism. His major work, An Inquiry Into the Nature and Causes of the Wealth of Nations, outlined the basis for free-market capitalism. Capitalism laissez-faire philosophies, such as minimizing the role of government intervention and taxation in the free markets, and the idea that an “invisible hand” guides supply and demand, are key elements of his political philosophy. His famous statement that expresses that philosophy is: “It’s not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.” Smith meant that each person, by looking out for his or her self-interest, inadvertently helps to create the best outcome for all.
At first glance it may seem that Smith was a proponent of egoistic corporate behavior, and maybe he was. But, it wasn’t without limitations. Even before Smith wrote The Wealth of Nations he produced a treatise on morel philosophy. The Theory of Moral Sentiments makes the case that business should be guided by the morals of good people.
Smith sets forth a theory of how we come to be moral, of how morality functions on both individual and societal levels, and what forces are likely to corrupt our sense of morality, which is derived from our capacity to sympathize directly and indirectly with other people. This occurs by feeling what others actually feel in their circumstances. He believed we could achieve this moral perspective because of our consciences, which allow us to envision our own actions just as a disinterested observer might. Thus, Smith’s philosophy was more of enlightened egoism in that the interests of others should be considered (sympathized with) in making moral decisions.
Serving the Public Interest
Companies have an ethical obligation to serve the best interests of society, but in reality some have focused on their own self-interests to the detriment of society. Have they sacrificed their right to serve as the engine of economic development? I think we’re getting closer to it but since I’m an optimist, I hope they will recover their lost moral compass through efforts of concerned citizens and politicians who realize turning to other economic systems – i.e., socialism -- is not the answer because the key to any change is for corporations and all organizations to act ethically.
No economic system will work as it should and benefit all in society until and unless those in charge do what’s best for society. This doesn’t mean making no profit or greater government intervention. It means reclaiming the moral high ground that has been lost over the years by increased greed, uncaring behavior, and the pursuit of self-interests to the detriment of others.
Albert Einstein is quoted as saying “The definition of insanity is doing the same thing over and over and expecting different results.” This seems to fit the behavioral actions of businesses which, over time, have continued to ignore the public interest, promote self-interest, ignore product defects, and basically be oblivious to their ethical obligations as a moral agent in society.
To learn more about how an ethical workplace environment can bring happiness and meaning to your life read Steve’s new book Beyond Happiness and Meaning: Transforming Your Life Through Ethical Behavior.