3.7 SUMARY AND REVIEW
This chapter has introduced some of the basic theories for understanding the ethical responsibilities of business. These theories provide normative models for understanding how business should operate. Since they describe contemporary business. Nonetheless, there is much evidence that contemporary business has moved in the direction of a more explicit incorporation of ethical concerns into its daily operation.
One can think of these competing models of corporate social responsibility along a continuum of expanding ethical constraints upon the general goal of increasing profits by responding to consumer demand. At one extreme we find the very narrow view of corporate social responsibility associated with Milton Friedman and neoclassical economics. Business’s social responsibility is to maximize profit by meeting consumer demand. The only constraint upon the pursuit of profit is obedience to the law. At its most libertarian extreme, of course, this view would also argue that the only appropriate laws are those that protect property and prohibit fraud and coercion.
Theories of corporate social responsibility become more moderate by expanding the range of constraints upon the pursuit of profit. Thus Norman Bowie, for example, argues on Kantian grounds that beyond obedience to the law business has an ethical duty to cause no harm. At its most extreme, the only harms recognized as ethically legitimate would be those that violate the rights of other people, but a broader understanding of harms would lead to a broader conception of business responsibility. Stakeholder theories essentially develop this notion by identifying ethically legitimate stakeholder theories essentially develop this notion by identifying ethically legitimate stakeholders essentially develop this notion by identifying ethically legitimate stakeholders other than investors and by articulating the specific duties that are owed to them.
We can thus characterize these theories as variations on the theme of balancing utilitarian and deontological ethics. The pursuit of profit is the mechanism by which business is thought to serve the utilitarian goal of satisfying consumer demand and thereby maximizing the overall good. But this utilitarian goal is itself to be constrained by the duties that one has to persons affected by these activities. Depending on the theory of rights and duties which one adopts, those constraints range from the minimal duty of obeying the law, to more extensive accounts of duties associated with the stakeholder theory.
As a final reflection, we night consider the implications that the stakeholder model has for our understanding the nature and purpose of business. When stockholders are given a privileged position in management’s ethical responsibilities, it is common to conceptualize business on the model of private property being managed for the sake of its owners. But, when the interests of stockholders are given equal ethical standing with the interests of all other constituencies affected by managerial decisions, the model of business as private property is less compelling. If managers have the responsibility to balance the ethical interest of all stakeholders, then we can begin to understand the firm as an independent entity.
The claim, reflected so clearly in Milton Friedman, that the purpose of a business is to maximize profit makes sense only when stockholders the beneficiaries of profit are given a distinctive ethical status. But what would the purpose of business be if not to maximize profits? What goal should guide the management as they seek to balance the demands of various, and often competing, stakeholders?
A plausible alternative was suggested decades ago by Theodore Levitt, longtime professor of marketing at the Harvard Business School. Levitt’s quote can provide a thought-provoking end to this chapter.
The purpose of business is to create and keep a customer. To do that you have to produce and deliver goods and services that people want and value at prices and under conditions that are reasonably attractive….It was not so long ago that a lot of companies assumed something quite different about the purpose of business. Thy said quite simply tat the purpose of business is to make money. But that proved as vacuous as saying that the purpose of life is to eat….To say that profit is a purpose of business is, simply, morally shallow….if no greater purpose can be discerned or justified, business cannot, morally, justify its existence. It is a repugnant idea, an idea whose time has gone….Finally, it’s an empty idea. Profits can be made in lots of devious and transient ways….To say that they should attract and hold customers forces facing the necessity of figuring out what people really want and value, and then catering to those wants and values. It provides specific guidance and has moral merit.11