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  • Written by  Eusebius Mckaiser, www.businessday.co.za
  • Published in In the News
  • Read 2215 times

Why global firms should not be granted a free moral pass

"A company is a special kind of moral agent. But being special does not mean exemption from the requirements of decency. We should not be fooled by the fact that companies are legal entities that do not exist in the way we do. Behind the company are human beings, who do have the capacity to think and act morally. They take and execute decisions in the name of the legal entity. "

Morality and law

LAW and morality sometimes make strange bedfellows. So it is not surprising that the public debate about the lawsuit against companies that propped up the apartheid government has focused on legal headaches, rather than moral ones.

The case brought by the Khulumani Support Group in the US against various international companies has tossed up two tricky legal questions. One is whether the US represents the right jurisdiction for hearing this case. The other is whether there is a legal basis for holding a company responsible in this way. Disagreement about the answers to these questions has resulted in an ethical dimension being silenced. Does it even make sense to regard corporations as moral agents that can be held morally accountable in the same way that you and I hold each other morally accountable? And how does this ethical stuff intersect with the legal debate?

It is relatively easy to make sense of why people hold each other morally responsible. Moral rules speak to expectations of decent behaviour that we demand of each other as a community of people. Anyone who has the capacity to understand these rules and the ability to act in accordance with that understanding has no excuse for ignoring these rules. A baby does not understand such rules, so we do not regard it as a moral agent. Adults, however, barring exceptional circumstances that reduce your capacity to think and act morally, such as mental illness, must comply with social and moral norms.

A company is a special kind of moral agent. But being special does not mean exemption from the requirements of decency. We should not be fooled by the fact that companies are legal entities that do not exist in the way we do. Yes, we cannot imagine a company committing a murder, for example, because it does not exist in the flesh. Companies are abstract things that exist on paper. But that fact is a red herring.

Behind the company are human beings, who do have the capacity to think and act morally. They take and execute decisions in the name of the legal entity. This means there is nothing weird about saying a company that releases toxic waste into a river from which a community draws water, for example, is acting immorally as a company. There are managers who took such a decision and who could have acted otherwise.

What does all this mean for the companies that did business with the apartheid government? They acted immorally. It is immaterial whether they complied with laws. If, for example, you produce technology that enables the apartheid government to be efficient in classifying its citizens racially for purposes of enforcing its pass laws, then you are directly assisting in the commission of a crime against humanity.

A company has the capacity and ability to reason as follows: "Do I really want to sell these buggers machines that can make the enforcement of apartheid more effective? Do I want to help sustain their evil?" Given that we know that people execute the mandate of a company, it is not weird to expect this kind of moral reasoning on the part of a company. We are, in effect, demanding that those who constitute the executive management and leadership of the company behave morally on behalf of that company. All the corporations Khulumani are targeting fell short of these requirements of morality.

There are at least two challenging responses to my analysis that demand attention. One is the claim that the only duty of a company is to maximise shareholder value. Companies may be agents but not moral ones. The other response is to concede that companies acted immorally but to deny that they should be held legally accountable. It is not the business of law to enforce morality.

It is unconvincing to pretend that companies need only concern themselves with their legal mandate. First, companies operate within a social context that is affected by their actions. They cannot be oblivious to the consequences of their actions. Once we accept that they are agents at all - with human decision makers - there is no reason to regard them as "agents but not moral agents". This would be like you or me asking society to regard us as agents but not moral ones just because we wish to ignore inconvenient requirements of decent behaviour that get in the way of our personal "mandate".

Your membership as part of the moral community is not negotiable unless you lack the capacities that are sufficient to follow moral norms. The same goes for companies. Just because you have a legal duty to maximise shareholder value does not mean that the effect of your economic behaviour on all stakeholders can be disregarded. Companies are not the first creatures to need to balance legal duties or selfish interests with moral ones. We all do. So the challenge of acting morally while maximising shareholder value cannot be regarded as unreasonable.

Indeed, there are examples of companies doing both. For example, at least some pharmaceutical companies have eventually come round to accepting that there is an overriding moral justification for sharing intellectual property in a time of a pandemic and allowing drugs to be produced cheaper to save lives.

Not all these actions are motivated by the force of the moral arguments, but we ourselves often act in accordance with moral norms prudentially rather than for the right reasons. The point is that companies will not find it impossible to maximise shareholder value simply because we expect them to act morally. The companies that colluded with the apartheid government are no different.

Finally, it is true that not all moral norms can or should be legally enforced. However, global corporations are so powerful in their reach and effect that it is proper that laws exist to ensure ethical behaviour. The Khulumani case should set a precedent that states that corporate morality is not an extra optional to be discussed by the marketing division of a company. If a crime against humanity will be successfully committed partly because of the zeal of some corporations, then it is time for the law to step in. It is irrelevant that international law is unclear on this point. It can and should be changed to clearly reflect the demands of morality.

And given that the US is still the world's economic centre, it is also apt that this nexus of economic morality and legal expectation be clarified in a US court.

McKaiser is an associate at the Centre for the Study of Democracy.

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