A moral law for the jungle: a Kantian exploration in corporate environmental ethics

Transcription

1 University of Wollongong Thesis Collections University of Wollongong Thesis Collection University of Wollongong Year 2005 A moral law for the jungle: a Kantian exploration in corporate environmental ethics Fabian P. D. Sack University of Wollongong Sack, Fabian P. D., A moral law for the jungle: a Kantian exploration in corporate environmental ethics, PhD thesis, School of English Literatures, Philosophy and Languages, University of Wollongong, This paper is posted at Research Online.

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3 A Moral Law for the Jungle: A Kantian Exploration in Corporate Environmental Ethics A thesis submitted in fulfilment of the requirements for the award of the degree Doctor of Philosophy From University of Wollongong Philosophy Program By Fabian P. D. Sack Ba(Hons) August 2005

4 Certification I, Fabian P. D. Sack, declare this thesis, submitted in fulfilment of the requirements for the award of Doctor of Philosophy, in the Philosophy Program, University of Wollongong, is wholly my own work unless otherwise referenced or acknowledged. The document has not been submitted for qualifications at any other academic institution. Fabian P. D. Sack 1 August 2005 A Moral Law for the Jungle i

5 Abstract Almost global acknowledgement of environmental crisis and social inequity suggest a secular revision of Kantian moral philosophy embracing sustainability. By eschewing subjective preferences as the foundation of morality Kant avoids an aspect of corporate responsibility that has otherwise proved intractable. Corporations, as artificial and disembodied agents, cannot depend on desires or intuitions to guide their actions. Kant s moral theory avoids subjective preferences that arbitrarily exclude our environments, communities or future generations from moral relevance and corporations from moral responsibility. Kant says: Let no one think that here the trivial quod tibi no vis fieri, etc. [Don t do unto others what you don t want done to yourself] can serve as a standard or principle. 1 The problem with this golden rule, which the empirical tradition takes as the central statement of ethics, is that it bases morality on shared preferences. In the process the golden rule excludes our environments from moral consideration and corporations from the scope of moral accountability: Neither corporate nor environmental preferences are commensurate with those of humans. In place of this biblical injunction Kant offers a law whose effect Kantians have characterised by the adage What if everyone did that? Kant s moral law uses the proscriptive universalization implicit in moral language and practice to make efficacy the basis of morality. Strictly, the only practical conclusion that Kant s argument leads to is that agents moral action is defined by the universalizability of their maxims and reciprocally, that universalizability is defined by agents ability to choose actions. Used as a test of right actions, Kant s moral law is very sensitive to the way in which proposed actions that provide it content are described. Contrary to recent interpretation, Kant s maxims are not teleological descriptions; they functionally describe those aspects of an action that are intended to serve interests. Act descriptions put to the test that fail to capture the relevant intention proclaim Do as I say, not as I do and are 1 Kant (G), 4:430 A Moral Law for the Jungle ii

6 not maxims. Moral appraisal of any sort implies a procedural sanction against selfdeception that avoids false moral judgements: Honesty effectively corrects for bias in describing maxims, allowing immoral proposed actions to be proscribed. Kant notes that the proposition, Honesty is the best policy is beyond all refutation, and is the indispensable condition of all policy. 2 By introducing glosses on the kinds of actions humans propose to the moral law Kant s theory guides corporate action towards sustainability. Kant argues that the idea of reason shared by humanity at any time is the core of political theory and ethics. Kant s anthropology means that the limits of moral consideration remain open: By asking How would it look to others? maxims consider all interests (including non-human interests) and the process of universalization ensures that consideration extends both forwards and backwards in time. Imposing this moral law on corporations can be justified on pragmatic grounds, it is sensitive to environmental, historical and cultural contexts as well as the implications for future generations: Corporate Virtue is its own reward. As a moral proscription test the moral law self-corrects through honesty and improved understanding. As we get to know more about the impact of corporate actions on other species or ecologies, on the future and on other cultures the process of universalization adjusts providing a self-correcting definition of what makes corporate actions unsustainable: A moral law for the jungle. 2 Kant (PP), 8:370 A Moral Law for the Jungle iii

7 Acknowledgements This thesis has been achieved because of the unflagging supervision of Associate Professor Robert Dunn and Dr. John Burgess at the University of Wollongong Philosophy Program and the study assistance policy of the Sydney Water Corporation. I would like to thank Dr. Simon Longstaff and Richard Batten for their apposite comments. More than anything, I would like to acknowledge the indefatigable support of my family who have had to forego many outings in favour of my studies and endure the inevitable periods of distraction that accompany doctoral research. A Moral Law for the Jungle iv

8 Table of Content Certification... i Abstract... ii Acknowledgements... iv Table of Content... v INTRODUCTION ARTIFICIALITY AND DISEMBODIMENT: A RACE OF DEVILS...1 CHAPTER ONE HYPOTHESISING RECIPIENCE: DO AS YOU WOULD BE DONE BY!...14 Section 1.1 The Brightline Problem Section 1.2 Do as you would be done by! Section 1.3 Universalization without Reciprocity CHAPTER TWO PROSCRIPTION TESTING: WHAT IF EVERYBODY DID THAT?...33 Section 2.1 Universalization Tests Universalisation: Testing or Guiding? Testing Action Proposals Kant s Universalization Test...38 Section 2.2 What if everybody did that? The Formula of the Law of Nature Another Moral Argument A Kantian Adage...50 Section 2.3 Making Exceptions for Ourselves Proscription and Conventions Moral Patients and Proscriptive Universalisation Proscription Testing: What if everybody did that?...62 CHAPTER THREE UNIVERSALISING MAXIMS: DO AS I SAY, NOT AS I DO!...64 Section 3.1 Problems of Relevant Description Describing Actions Describing Corporate & Personal Maxims The Hegelian Objections...71 Section 3.2 Kant s Theory of Right in the Groundwork Moral Judgement of Action The Practical Contradiction Interpretation Kant s Theory of Right...85 Section 3.3 Do as I say, not as I do! The Purpose of Actions Excluding Irrelevant Maxims Universalising Maxims: Do as I say, not as I do! A Moral Law for the Jungle v

9 CHAPTER FOUR APPRAISING INTENTIONS: HONESTY IS THE BEST POLICY Section 4.1 Pure Foundations: The Argument of Kant s Groundwork The Argument of the Groundwork Cosmopolitan Scope and Objective Value Pure Foundations Section 4.2 Honesty is the best policy Kant s Negative Theory of Value Kant s Response to Hume Unconditional Honesty Section 4.3 Duty and Human Interests Kant s Concept of Duty Happiness & Duty: Formal Motivations Appraising Intentions: Honesty is the best policy CHAPTER FIVE CORPORATE SUSTAINABILITY: VIRTUE IS ITS OWN REWARD Section 5.1 How would it look to others? An Artificial Will A Licence to Operate How would it look to others? Section 5.2 Virtue is its own reward Section 5.3 A Moral Law for the Jungle Environmental, Human and Corporate Interests Reciprocity and Anthropocentrism A Moral Law for the Jungle Conclusion: Corporate Sustainability BIBLIOGRAPHY English Translations of Kant References References to Kant s Works A Moral Law for the Jungle vi

10 A Race of Devils Introduction Artificiality and Disembodiment: A Race of Devils At first blush it might seem that an exploration of corporate environmental ethics might devote roughly equal hearing to the environment and to corporations. Expecting this reveals a misunderstanding of the real problem: some kind of environment will always persist, though not necessarily one we can endure. It is we who are in crisis, not our environments. We are, for a wide range of very pragmatic reasons (including the encroaching limits of available natural resources), increasingly concerned with the viability of ongoing human enterprise. Large corporations, in particular, are singled out as significant contributors to this declining confidence in our collective futures. This concern is often given a moral cast by blaming multinational corporations for reducing the capacity of our environment to carry what we regard as a good life. By our current understanding of corporations, it is doubtful that such a moral slur is warranted; it is certainly of only marginal impact. My aim in this thesis is to explore how an alternative, Kantian, understanding of corporate responsibility fosters a more viable relationship between corporations and our environments. Although I end by specifically addressing the ethics of corporate actions upon our environments, the greater part of this thesis is dedicated to ensuring that moral theory can be applied to corporate actions without excluding consideration of our environments. The first chapter considers whether one of the most widely accepted moral norms the biblical golden rule can reliably govern corporate actions or give consideration to impacts on our environments. It cannot. The second chapter explores an alternative interpretation of moral theory put forward by Kant. This does work as a test that proscribes immoral actions without excluding our environments. The third chapter considers how the most widely acknowledged technical problems troubling Kantian moral theory might be overcome to reliably test actions, including those proposed by corporations. The fourth chapter considers more programmatic objections to Kantian moral theory, concluding that these also do not present an impediment to corporate application of a Kantian test. The fifth chapter describes how Kantian corporate moral theory could be implemented and the A Moral Law for the Jungle 1

11 A Race of Devils implication this would have for our environments and, more broadly, for corporate sustainability. Before deciding upon this Kantian strategy my initial research into corporate moral theory looked to economics and law to explain what motivates corporate actions. Both legal and economic discussion focuses on the relative utility of corporate acts and the just distribution of this utility. Considerable effort has been devoted to exploring how to amend corporate behaviour through the law governing corporate personality, limited liability and collective ownership. Considerably less effort has been devoted to bringing the economics of profit, coordination and efficiency to bear on improved corporate behaviour. From Adam Smith through to John Maynard Keynes little mainstream economic theory has concerned itself with how the actions of a firm might differ from those of individual humans. By concentrating on supply, demand and invisible market forces, mainstream economics gives little account of the advantages of collectively owned, hierarchical organizations (with the exception of the thought that the firm exists to lower transaction costs, conceived by Ronald Coase in 1937 and still struggling for the recognition it deserves). The main purpose of the following thesis is to establish moral, and not just legal or economic, motives for the actions of artificial, disembodied entities, including those actions affecting our environments. What is interesting, from the moral point of view, is what a corporation is not. While we may indicate the material possessions of a corporation or its officers, the corporation, like any grouping of humans, has an identity beyond its constituents. Such collective entities are, strictly speaking, disembodied. Disembodied identity brings into sharp relief the evaluative assumptions latent in most moral philosophy, which in the end relies on features of embodiment like desires or preferences to explicate the motivation of action. For groups like families or mobs, the cumulation of desires and preferences occurs viscerally in the interactions of constituent members. Other groups, like communities and nations, generate interpretations that arrive at collective motives. A series of interrelated interpretations can be discerned in the historical development of corporations like the Roman State, the Christian Church, the Virginia Colony, the East India Company and General Motors. These represent increasingly sophisticated constructs describing the identity of groups in a way that allows legal responsibility for actions to be assigned. This A Moral Law for the Jungle 2

12 A Race of Devils history moves further and further away from any pre-existing, organic groupings of humans that happen to need legal identity (like nations, cities and religious orders), towards an artificial legal identity requiring more or less arbitrarily chosen humans to populate it (like a shelf company). By way of introduction a potted anthropology will serve to focus the subsequent moral argument. Peter French is a moral philosopher who has dedicated considerable effort to understanding the grammar of collective decisions. He distinguishes between an aggregate collectivity like a mob, someone s neighbours or a gang and a conglomerate collectivity which, as the geological metaphor suggests, exhibits an internal structure. 1 As French suggests, the internal structure of corporations distinguishes them from more organic groupings of humans in a significant way, well captured in a 1923 judgement: It is said that all this was machinery, but this is true of all participation in limited liability companies. They and their operations are simply the machinery, in an economic sense, by which natural persons, who desire to limit their liability, participate in undertakings which they cannot manage to carry on themselves, either alone or in partnership, but legally speaking, this machinery is not impersonal though it is inanimate. Between the investors, who participate as shareholders, and the undertaking carried on, the law interposes another person, real though artificial, the company itself, and the business carried on is the business of the company, and the capital employed is its capital and not in either case is the business or the capital of the shareholders. Assuming, of course, that the company is duly formed and not a sham, (of which there is no suggestion here), the idea that it is mere machinery for effecting the purposes of the shareholders is a layman s fallacy. It is a figure of speech, which cannot alter the legal aspects of the facts. Gas Lighting Improvement Co Ltd v IRC [1923] AC 723 at The idea of a conglomeration that is real though artificial and not impersonal though it is inanimate has great legal significance, but its moral significance is more obscure. It is not clear that the requisite moral abilities upon which personal moral responsibility is premised abilities like a conscience, compassion and respect accompany corporate intentions. Without something like these abilities any assertion of corporate moral 1 French, p.13 A Moral Law for the Jungle 3

13 A Race of Devils personality, such as that which French argues for, fails. Without an effective corporate moral imperative it is misguided to attribute moral blame to corporations. A Kantian approach, tuned to the distinction of duty from desire, recommends itself as an alternative to current approaches to facilitating corporate ethics. In caricature, Kant s moral philosophy is unworkably austere, but his actual position relies heavily on anthropological input. A counter-example that Kant uses to develop his moral anthropology is the idea of a race of devils. This race is constrained by no moral feelings or conscience and yet, Kant argues, each of its members will (to the extent that they are rational) do right. Exploring the degree to which moral features particular to corporate anthropology can be substituted for those particular to humans serves to tighten contemporary Kantian debate to a point where it can serviceably deliver corporate moral decisions. This Kantian alternative is no more natural than any of the mechanisms that now animate corporations and its ability to morally structure corporate decisions recommends it as a preferable artifice. Following is a very shortened account of how corporations acquired their devilish dispositions. This abridged narrative history does no justice to the complexity of serious jurisprudence or political economy and serves only in an allegorical capacity. Statutory and administrative technologies have developed over thousands of years to bring us an institution that is, despite its artificiality and disembodiment, capable of wholesale environmental destruction. As early as five centuries before Christ, Themistocles famously exhorted the Athenian people to invest the profits of the city s silver mines in a fleet, rather than dividing the spoils amongst themselves. The Romans took this idea and developed it; expanding its application to various sorts of public bodies, codifying it, allowing corproations to own property and separating them from any individual by means of a legal device limited liability. 2 Originally only the Roman state (populous) was 2 The absence of criminal liability serves to clearly distinguish the ancient corporate forms from those that follow. Civil liability was recognised in later Roman law as follows: Si quid universitati debentur, singulis non debetur, nec quod debet universitas, singuli debent. [If something is owed to the group, it is not owed to the individuals nor do the individuals owe what the group owes]. This principle was however an article of Roman public law and did not hold in the domain of private law. This limitation of liability concerns only the transfer of property or wealth, it requires little formal acknowledgment of any intention beyond entering into A Moral Law for the Jungle 4

14 A Race of Devils deemed capable of entering into transactions as though it were itself an individual; apart from it only individuals could formally own property. By the Republican period of Roman history one finds a well-developed corporate theory of the town. Later still, authorised private societies (such as burial societies and associations of tradesmen and artisans) were permitted to hold property in the same fashion as municipal communities. While from its earliest manifestation the corporate form expressed collective ownership of property by a group of individuals, this did not give rise to an entirely separate legal person. For example, the ownership of property by temples devoted to the pagan gods worshiped in ancient Rome was identified with the relevant deity. It was not the temple as institution or the functionaries who operate on behalf of the goddess, it was the goddess herself who featured in the transfer of ownership. Similarly, a town s folk or artisans themselves collectively engaged in transactions. The ownership that these Roman corporations articulate is something similar to the ownership that we, today, call public ownership. Under the Roman law the community itself owned the property, or the god in the case of temples, not a distinctly separate person who could take responsibility. With increasing clarity the Roman law excluded trade from operating corporately. Only public entities such as towns, the state or select beneficial groups, usually of a pious or eleemosynary nature, were allowed to operate as corporate entities. No form of private commercial endeavour (and this included at times the collection of tax) was carried out as a collective action, it was always carried out under the name of an individual. The private enjoyment of wealth in Roman times was premised on a simple and robust physical connection between the wealth itself and the individual. Roman corporations were created to facilitate public administration, including that of a religious group on the ascent the Christian Church. The Roman Church took its corporate nature as a primary tenet in its central texts and its structure, acting as a vehicle for Ancient Roman jurisprudence, including the notion of the corporate form with limited liability. Through the middle ages the Church granted this status to an ever-widening circle of entities, including guilds, towns and monasteries, refining the idea of functional contracts. Corporations were excluded from more complex commercial arrangements requiring good faith, ex fide bona. A Moral Law for the Jungle 5

15 A Race of Devils hierarchy. Corporate property did not belong to individual participants in these medieval corporations ownership was exclusively collective. For instance, in the case of a monastic order, property was held by the order itself and not by the individual monks. To be sure, the members of incorporated guilds engaged in profitable callings, but these corporations did not themselves conduct the business, rather they provided administrative arrangements between guild members, establishing standards of service and training, managing the market by setting price standards, providing relief payments and social services to guild members and their families. While Roman law was embodied in much of Christian doctrine and practice, it was only after the middle of the twelfth century that serious scholarship on the civil and cannon law began. This canonistic academia attracted the best minds of the age and grew rapidly, starting in Bologna and spreading to the new universities springing up throughout Western Europe and England. In the thirteenth century the Church refined its understanding of the corporation s separation from individuals by introducing the notion of the corporate body as fictitious person. Neither this notion nor that of limited liability were employed to organise the various maritime trading communities operating in the Mediterranean and the major European rivers during the later middle ages. The Genoese Bank of St George and other such organizations operated more or less strictly as trading partnerships generating pre-agreed interest payments for their members. Similarly, the Iberian exploitation of the new worlds in the fifteenth century did not call upon the notion of a body corporate. To compete with the commercial success of these feudal arrangements the courts of England revived and began to apply the principle of limited liability to commercial endeavours as a way of pooling comparatively meagre resources. The revival of Dicaearchus Aristotelian account of private property by natural rights theorists in the sixteen hundreds gave expression to moral rights to property absent from Roman and medieval law. The idea that property could in some way be morally owned meant, amongst other things, that items could be granted by the relevant moral authority, instead of just being taken. 3 On this logic, European nations granted charters of 3 The chartered company draws its justification from the sanctity of its charterer, the church or the regent. In the case of the English king, the justification of this sanctity is known as the divine right of kings. This A Moral Law for the Jungle 6

16 A Race of Devils incorporation to groups of wealthy men and merchants to seek profit through trade. While the individual stockholders clearly benefited from their involvement, the states of Europe pursued this mercantilist policy to increase the wealth and power of the nation as a whole charters were granted with this in mind. This notion was refined by John Locke, who a century later described the notion of a moral claim to property based on the admixture of one s labour. In England, business enterprises first started incorporating under Queen Elizabeth I, driven by a pressing need to finance war with the bullion rich Spanish. Various enterprises were granted the privilege of limited liability in order to exploit the wealth of Russia, America, Canada, Asia and Africa in the name of the Crown. The most famous of these companies is undoubtedly The East India Company, chartered in Following his predecessor, James I began granting charters to a new sort of corporation chartered colonies aimed at exploiting new lands, rather than seeking trade. These new corporations served the purposes of individuals and communities whose interests diverged sharply from those of the incorporating nation and, in some cases, from the stockholders interest in profit making. The divergence of these interests was not immediately apparent, for example the first Virginia Company set forth with the following postscript to their instructions: Lastly and chiefly, the way to prosper and achieve good success is to make yourselves all of one mind for the good of your country and your own. 4 While this type of corporation was an abject failure as a business model, the American tradition of chartered and proprietary colonies was to have profound ramifications for the shape and purpose of corporations. A participatory government obsessed with corporate profit struck DeTocqueville as uniquely North American only one hundred and fifty years ago. thesis basically hypothesises a direct linage to Adam, justifying the regent s powers. This theory, as our present day disbelief indicates, was one of the casualties of the theory of property rights expounded by Locke. Nonetheless, in the inestimable Westminster tradition of precedence, this noble myth continues to justify beneficially, publicly motivated corporations. 4 Cited Blackford, p.22. In the first year of the Virginia company over half of the all male colonists died. The following year, 1609, free stock and one hundred acres was being offered to anyone willing participate. The company continued to flounder, relinquishing its charter in The colony remained though. Since its first settlement, some 5,500 persons had been shipped to Jamestown. Of these 1,500 survived, 300 returning home. A Moral Law for the Jungle 7

17 A Race of Devils Although the first to incorporate a trading company equipped with limited liability together with a primitive form of professional management, the English were not alone in developing the corporate form of mercantile capitalism to exploit the riches of the world, nor were they the first to introduce the joint-stock model. Early English corporations were really only registered partnerships with a monopoly secured by the Crown. (In many cases this was a monopoly in name only with competition from other types of business rife). Their financiers regarded them as short term investments and expected that their stake in the corporation would be released in short order, usually after only one voyage. Indeed the stock was issued on this basis, leading to an accounting nightmare as dividends and capital from various trading exercises began to overlap. This was particularly the case with the English East India Company. This approach was soon overhauled and the idea of permanent capital investment paying dividends on the basis of ongoing profits was borrowed from the merchants of Holland, who had banded together in 1602 to form the Vereenigde Compagnie. Its advanced financial arrangements and oligarchic structure mark this as a prototype for the modern corporation. For quite some time the Dutch company enjoyed monopoly rights (by strength of arms) over the riches of the Indies, excluding the English, the French and the Portuguese. 5 The French were not far behind the English and the Dutch in spotting the advantages of the corporate form of organisation. As the infamous Cardinal Richelieu wrote in his Memoirs of 1627:... there was no kingdom so well situated as France and so rich in all the resources necessary for making her master of the seas. In order to arrive at this goal, it was necessary to see how our neighbours managed to do it by creating large companies and obliging merchants to make use of them through the bestowal of valuable privileges. Without these companies, each small trader trades alone and for himself, using for the 5 Certainly, by today s standards, its charter was extreme: war, peace, treatise with the pagans, nomination of governors and councils with the power to carry out civil and criminal justice in the company trading posts. In the end the company had a land-based army of 10,000 to 12,000 troops, and a sea navy of forty to sixty ships. [Beaud, p.25] English corporations of the day enjoyed similar powers. Indeed, for the English East India Company, these powers were only curbed by Parliament in 1784 following decades of bloody fighting against indigenous powers and the French who were trying to establish their own East India Company. A Moral Law for the Jungle 8

18 A Race of Devils most part small and ill equipped ships which are easy prey for the corsairs and the princes of our allies, because they do not have the means to resist, as would a large company, and to pursue justice to the end. Cited in Beaud, p.37-8 French corporations, under the tutelage of Louis XIV, established a commercial foothold in Canada, Senegal, the Antilles, Madagascar and North Africa. These French companies were unsuccessful in applying the new incorporated joint-stock companies and quickly reverted to older forms of trade. Less influential than the English and Dutch efforts (and less disastrous than the French effort), the Swedes, Danes and other European nations also incorporated companies with varying degrees of success. By the beginning of the seventeenth century it was clear that the corporation was highly profitable to the stockholder and a powerful instrument of wealth creation for the nation. In 1694 William III and Mary took the legal and administrative technology forged for the trading companies to finance war, this time with Flanders, by chartering the Bank of England. This type of corporation was a particularly successful innovation; until then no banks operating in corporate form had appeared anywhere in Europe or England with the notable exception of the Bank of St George in Genoa private individuals undertook all banking. By 1725 there were a couple of dozen banks in London and by the end of the eighteenth century there were 400. With the already booming mercantile economy these new corporations helped English commerce to become foremost in the world. The English and European joint-stock companies of the later two thirds of the 16th and the beginning of the 17th centuries were, in most important ways, like their modern descendants. They issued transferable stocks which paid dividends, they were permanently capitalised, they enjoyed limited liability, they were managed by increasingly sophisticated bureaucracies operating in a global market and they were well and truly profit motivated. The major difference between these corporations and their descendants was that an explicit national interest in their operations was established through incorporation by decree and regulated by a civil bureaucracy intent on defending an increasingly defined national purse. A Moral Law for the Jungle 9

19 A Race of Devils The creation of the Board of Trade to regulate the American Colonies was a case in point. 6 The Board of Trade or the Secretary of State appointed the English Governors in the American colonies with scant regard for ability or the problems of communication. So ineffectual were these efforts that, with the exception of Jamaica, even the Crown colonies (such as New York) refused to pay lip service to the powers of the homeland. This state of affairs, as the Board of Trade realised, largely came about through the chartered rights of the colonial corporations. Even the threat of the French was not enough to override the autonomy of the chartered colonies. The high level of government involvement, often making demands counter to commercial realities, meant that the success of these companies was very mixed. While the idea of professional management is as old as the royal court, organised religion and armies, the new administrative approach of detached management played a major part in bringing corporations into disrepute. The private interests of professionals were increasingly strictly defined as separate from those of their employers, just as the interests of the employers were increasingly strictly defined as separate to those of the nation. The corporation, ever more free from the constraint of representing any interests could, by the eighteenth century, serve the narrow self-interest of its senior officers. This became dreadfully apparent when the South Sea Bubble burst. Not long after, the East India Company ran amok, necessitating its hasty nationalisation. The British Government s attempt to intervene on behalf of the Company inspired a gathering of influential business men and profiteers (later venerated as founding fathers) to lead the American colonists in a war of independence. It was East India Company tea, imported to undercut a thriving smuggling industry, which was cast into Boston harbour. The American War of Independence was only one of a number of catastrophes to be visited on attempts to operate 6 In 1675 a committee of the Privy Council called Lords of the Committee of Trade and Plantations was formed. This committee tried to suppress the proprietary and chartered colonies, but were interrupted by English Civil War, during which all charters were restored. After a great deal of discussion, the Board of Trade was formed in The Duties of the Board were to improve trade, to care of the poor (ie. put them to useful work in a workhouse) and to take care of the plantations. Indicative of the association of this approach to regulation with the newly articulated theory of property rights was the inclusion of John Locke as an adviser to the initial Board of Trade. A Moral Law for the Jungle 10

20 A Race of Devils and regulate corporations under a mercantilist model. By the eighteenth century joint stock trading companies had acquired such a reputation for being corrupt and inefficient that the creation of freely transferable shares was prohibited by the Bubble Act of During the eighteenth and early nineteenth century English lawyers devoted considerable effort to creating trusts that operated corporately but without charter. By the mid eighteen hundreds the scale of manufacturing had grown to a size where more robust means of funding was necessary. While partnerships and public loans provided some limited means of collective financing, the corporate form was a far more effective arrangement. Nonetheless, until the mid nineteenth century, the English law clung to the view that corporations were simply oversized partnerships before being forced to acknowledge the corporation as a legal person with independent interests. This advance can be attributed to a protégé of Jeremy Bentham s, John Austin, who introduced the term legal person into English law for the first time in 1831 as a translation of the German term juristische Person. The term has since become the backbone of corporate law in the common law tradition, but without the metaphysical substance lent by a legal tradition grounded in Roman jurisprudence. Goethe likened the continuous European tradition of codified law, social and philosophical discussion based in Roman law to a duck. Sometimes it is visible, swimming prominently on the surface of the water; at other times it is hidden, diving amid the depths. During the nineteenth century Friedrich Carl von Savigny led an ambitious effort to rediscover and reemploy the historical Roman law. It was from Savigny that Austin plucked the term legal person. Unfortunately, Roman Law (the Ursus Modernus) continued to govern German states of the time, forcing Savigny to an almost pietistic faith in Roman law to deal with the messy legal realities of life. Savigny s introduction of fictitious legal persons into modern law failed to recognise that granting moral rights to property changed the nature of corporations fundamentally. Roman and medieval corporate law was designed to assist in the administration of pre-existing normative structures, like religious or cultural institutions, that constrain behaviour morally or culturally. The idea of fictitious legal personality does not lend itself to constraining the pernicious pursuit of individual interests in the name of a A Moral Law for the Jungle 11

21 A Race of Devils chartered or publicly listed company, which looks solely to the law to regulate their behaviour. This drawback is not entirely recognised within the English tradition, which occasionally persists in considering the doctrine of legal personality to be an uncomplicated and convenient fiction. 7 The railways were the first truly modern corporations. They enjoyed legal personality and limited liability, were completely privately owned (although substantial incentives were provided by the public purse), ownership was in the form of completely transferable shares under professional management. Necessitated by the sheer scale of their operations, the railway companies borrowed the idea of scientific management from the military and engineering disciplines, using it to develop complex managerial bureaucracies, suited to the task of coordinating large concerns through line management and a functional hierarchy. Similar to the railroads, utilities companies sprang up, indicating the demise of officially sanctioned chartered monopolies and the ascent of natural monopolies (supposedly defined by economic law). For most of the nineteenth century both America and Britain relied on market forces to control the ever increasing number of corporations. Some of today's most well known names in manufacture (eg. ICI, Singer & Co., Dupont, Sears & Roebuck, Dunlop and GKN) survive from this period. In response to the abject failure of mercantilism, Adam Smith established the economic orthodoxy that national interests were best served by allowing market mechanisms free rein. Despite the clear evidence presented by the increasing power of corporations, the view that corporations could not be successful in a free market continued to dominate economic theory throughout the nineteenth and early twentieth centuries, albeit with the minor concession that corporations were like individuals driven by profit maximisation. In practice, by the close of the 19th Century the British Government, worried that the huge corporate production facilities appearing in the United States and 7 In Germany, Savigny s fiction theory soon came under attack from Otto von Gierke who proposed that the personality of the corporate body was a sociological reality. Gierke s realist political theory relies on a sociological approach to explain the state in terms of a group will and was introduced to common law debate about corporate identity by his foremost English proponent, Fredric William Maitland. The debate between fictionalist and realist theories continues amongst corporate theorists to the present day. A Moral Law for the Jungle 12

22 A Race of Devils Germany would swamp their inefficient businesses, abandoned a policy of laissez-faire and actively promoted mergers between the large numbers of medium sized family manufacturing firms. In America a public outcry about the way in which American firms benefited from vertical and horizontal integration grew, and antitrust laws (seeking to limit the extent of monopoly holdings) were drafted in the late 1800 s. Distrust of big business corporations reemerged during the Depression resulting in the creation of many of America s most recognised regulators, but it took the urgency of wartime supply to effectively control corporations. Multidivisional structures were first introduced by Du Pont and General Motors but were not widely accepted in the USA until after WWII and not in Europe until the 1960s. From this point consumer and market activism in areas such as product liability, financial transparency and environmental protection has fuelled a crisis of public confidence in corporations, to which the creation of a pantheon of statutory regulators and controls seems an increasingly inadequate response. As long as humans attempt to resolve the practical tension between their collective and individual interests through legal means, the moral metaphysics of disembodiment and artificiality will continue to be of practical relevance. Legal and economic theory concerned with governing corporations has struggled to address the considerations that animate corporations. Discussion of the role that artificial personality and limited liability plays in administering collective ownership, in fostering the national estate, in minimising transaction costs or in maximising shareholder profit continues to do little more than describe corporate behaviour. Beyond the fairly ineffective proscription of particular behaviours by statute, it is the revision of the normative theory governing corporate law alone that has changed corporate behaviour in any major way. The moral philosophies of John Locke, Adam Smith and John Stuart Mill have greatly influenced subsequent corporate actions by prescribing individual liberty and utility as imperatives on the path to a collective good life. As history indicates, this has increasingly estranged corporate motivation from the collective interests of any particular group of people, leading to our current state of corporate bedevilment. A Moral Law for the Jungle 13

23 Do as you would be done by! Chapter One Hypothesising Recipience: Do as you would be done by! Corporate law, which usually takes the corporation to be a fictitious person apart from any natural person, recognises the collective character of corporations. In exploring moral responsibility corporate ethics takes the collective character of corporations as a point of departure rather than the moral responsibility of individual managers, individual shareholders or individual employees. Widening the sweep of moral theory to include collective entities, such as corporations, presents philosophers with a problem. The moral judgements of people occur in the context of their personal experience of emotions and desires, but decisions reached by corporations can often not be attributed to any one person or even to a particular role fulfilled by a person. Like corporate ethics, environmental ethics cannot simply borrow from ethical theory that deals with persons. Collective environmental entities have very different moral properties to individual non-human entities. The morally relevant properties of the collective cannot always be directly attributed to those of the individuals that comprise it. For instance, a forest or a mob of roos may flourish for eons but the individuals that compose it have a very limited span of flourishing. Another, more clearly moral, example might be the welfare of a beehive. This is clearly not directly reducible to the sum welfare of the individual bees whose individual welfare is often thwarted for the good of the hive. Although collective environmental entities do not, by and large, exhibit the features upon which traditional moral theories rely, nature has attracted a consistent moral interest. Deontological accounts of moral value do not confer anything other than instrumental value on nature because collective environmental entities are considered incapable of reasoned action. On the other hand, apart from the effects on stakeholders such as employees and shareholders, no moral objections are raised when corporations, which are usually considered paradigmatically rational, are ended, merged, put into receivership, disbanded, or asset stripped. It has often been suggested that the moral worth of the environment is chimerical and arises only as an apparent feature of the utility that the environment represents in fulfilling personal desires. Similarly, it is often contended that corporations only have value insofar as they meet the needs of shareholders. Denying value to collective environmental entities, on the basis that they A Moral Law for the Jungle 14

24 Do as you would be done by! are not rational, and denying value to corporations although they are rational, is not a coherent position in moral philosophy. If rationality plays no part in assigning moral value, it is difficult to justify attributing moral value to people, even when it is assumed that moral judgements arise directly from, or in response to, personal desires. Many popular contemporary ethical theories, notably, consequentialist ethics attempt to account for moral interest in our environments by asserting that sentience, rather than rationality, is a criterion for moral considerability. Even if, given the taxonomical diversity of our environments, we are willing to concede that sentience is a capacity widely shared by environmental entities, it is only our own personal preferences or aversions that suggest there is anything morally distinctive about this. Further, it seems very odd to think that corporate moral relations with our environments could only be premised on a corporate capacity to experience pleasure or pain. Explaining moral relations between corporations and our environments, in a way that is consistent with traditional interpersonal ethics or with contemporary applied ethics, presents a problem for moral philosophy. An alternative is called for. Section 1.1 The Brightline Problem A major and ongoing debate between lawyers and economists is the extent to which market mechanisms are an appropriate guide to corporate conduct. This is usually couched in terms of a trade off between the assumption that profit is the preferred signal to convey social values to corporations and the requirements of justice, both of which can be regarded as socially desirable. Christopher Stone, a widely respected commentator on things jurisprudential, provides discussion of how these two assumptions share a common normative source institutional efficiency in delivering social good. Stone s discussion leads to the conclusion that any position committed to supporting the corporate pursuit of profit as socially desirable must also be committed to internal corporate restraint in this pursuit. A moral stitch before time, so to speak, saves nine costly legal stitches after the fact. Stone notes that the conventional approach to corporate social responsibility takes for granted that the best way to control undesired corporate behaviour is through threats to enterprise profits. He relates that there is a rare consensus amongst practicing lawyers, judges, scholars and business people which questions the ability A Moral Law for the Jungle 15

25 Do as you would be done by! of statutory regulation to deliver corporate social responsibility. 1 Proponents of effectively restraining corporations from misconduct fall into two camps: There are those that question the adequacy of the market to discipline corporations (even when the market is skewed by fines and the threat of civil compensation). Members of this camp suggest legal intervention aiming to impinge the firm s bureaucratic structure in such a way that the corporate decision process mimics the decision process of the responsible individual. 2 Members of the other camp question the adequacy not only of the market, but of the law as well, in order to bring about socially responsible behaviour by corporations. 3 In his landmark work on corporate regulation Where the Law Ends, Stone s discussion of legal interventions put him in the first camp. A subsequent paper contributed ten years later, Corporate Regulation: The Place of Social Responsibility, gives an analysis that moves Stone closer to the second camp. An interesting thing about Stone s later analysis is that he promotes the adoption of moral codes by corporations on prudential rather than moral grounds. According to Stone, law is ultimately ineffective as a means of controlling corporate behaviour. He points out that by relying on laws as a control device, and therefore laying down a relatively precise brightline standard of wrong conduct, we may tempt actors to press their conduct to the outer bounds of what they can get away with. 4 The brightline problem occurs in instances where the vagaries of profit ranking to which many corporate decisions are subject give way. In some circumstances the spirit of the law requires a clear decision against a profitable course of action. Stone illustrates this point by having us suppose a manager is faced by the option of a profitable but illegal act (say hazardous pollution). The fines and civil damages accompanying transgression are paltry compared with the profit. Under the assumption that profit is the preferred signal to convey social values to corporations (an assumption that Stone by and large endorses), a manager who chooses not to pollute would be withholding valuable goods and services from society. Stone thinks that most people 1 Stone (1985), p.13 2 Ibid. p.17 3 Ibid. p.15 4 Ibid. p.26 A Moral Law for the Jungle 16

26 Do as you would be done by! would want the managers to engage in some moral analysis that is not constrained to stop short of sacrificing investor profits for the good of others. 5 Stone s choice of prudential language here is explicit. He does not maintain that, in most people s opinion, the manager ought to engage in moral analysis; it is rather a matter of social utility. Stone indicates that the inefficacy of the law under certain conditions arises from an underlying inefficiency of the law to bring about socially responsible behaviour in people as well as corporations. He says: Yet, while we acknowledge the right of persons to do whatever they please within the bounds of the law, no society that we know of has regarded the law as the only constraint on what people morally ought to do. Instead, societies everywhere encourage their members to abide by moral codes, to engage in ethical reasoning, even simply to practice good manners and mores (not to push to the front of the line) rather than to give vent to their first impulse within the bounds of the law. Stone (1985), p.25 Putting aside the suspect anthropology by which Stone generalises his position, we can agree that, within our society and those like it, normative mechanisms are widely relied upon to coordinate life. Nor is the employment of these mechanisms restricted to informal social relations. The modern state often employs normative means of social control, relatively benignly in cases of public health and environmental campaigns, rather more sinisterly in pursuit of political and territorial agendas. Normative mechanisms can be very useful from the point of view of the institutions that coordinate social life. Voluntary adoption of socially responsible behaviour is much more efficient than coercive means of social control. The efficiency of normative mechanisms in bringing about socially responsible behaviour amongst citizens is a feature of the existence of normative reasoning within society. Institutions such as government and the judiciary are in a sense dependent upon this normative reasoning. We legitimate government and the law by our compliance. (Of course, the rub is that we legitimate the use of coercion to ensure our compliance). From an institutional perspective, as Stone points out, the virtue of these nonlaw conventions is to coordinate life, and keep it pleasant, without incurring the various 5 Ibid. p.32 A Moral Law for the Jungle 17