Corporate Moral Agency

Corporate Moral Agency: Review and Implications1

ABSTRACT. The debate concerning corporate moral agency is normally conducted through philosophical arguments in articles which argue from only one point of view. This paper summarises both the arguments for and against corporate moral agency and concludes from this that the arguments in favour have more weight. The paper also addresses the way in which the law in the U.K. and the U.S.A. currently views this issue and shows how it is supportive of the concept of corporate moral agency. The paper concludes by considering the implications of the debate for business ethics in general, and stakeholder theory and virtue ethics in particular.

Introduction There is a fundamental issue in business ethics which is often either overlooked, or left undecided and consequently unclear, in many of the less academic books and articles. The issue is the moral status of corporations, or, more generally, the moral status of collectives. The point is made succinctly by Werhane (1989): The question of whether or not one can hold a corporation morally responsible is a crucial one. It is important not merely for the philosophical delight of deciding whether or not a corporation is a full-fledged moral person, a collective, or merely an aggregate of individual actions. Somehow we need to determine who is responsible for business practices, both commendable and Geoff Moore is a Principal Lecturer and Research Fellow at Newcastle Business School, University of Northumbria at Newcastle, U.K. He is the author of a number of papers on different aspects of business ethics and is exploring, in particular, the application of virtue ethics to business.

Geoff Moore

questionable ones. Because the law treats corporations as legal persons, these practices are commonly attributable to corporations. But if . . . corporations are not in any sense moral agents, they cannot be held morally liable. In that case one needs to find out who and how individuals are responsible for so-called corporate practices and how to distribute that responsibility accordingly and fairly. Otherwise individuals AND corporations are let off, and no individual or entity is held properly liable for his, her, or its actions (Werhane, 1989, p. 821).

One of the reasons, perhaps, why this issue is often overlooked or left undecided is the simple fact that it is inherently complex. This article does not seek to minimise that complexity. What it does seek to do, however, is to present both sides of the argument and, having thus reviewed the main literature, to explore some of the implications for business ethics in general, and stakeholder theory and virtue ethics in particular. The argument is couched in terms of corporate moral agency since that has been the focus of the debate, but it should be remembered that much of what is said could be applied equally to collectives in general. We will return to this point at the end when considering the implications of the debate.

Corporate moral agency – some preliminaries “I think they are a wicked organisation. I think their cumulative incompetence caused hell on earth on November 18, 1987. They’ve shown no remorse. They have no good will. People were maimed and killed and they threw the survivors to the sharks”.2

Journal of Business Ethics 21: 329–343, 1999. © 1999 Kluwer Academic Publishers. Printed in the Netherlands.

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“The figure [of £81,000] included “off the scale” aggravated damages against the Fuji bank, which was denounced by the tribunal chairman [Mr Lamb] as malevolent, spiteful and deeply insulting. . . . Mr Lamb made no recommendations for the bank’s future conduct, however, saying it would be pointless, because the tribunal did not believe there was an ounce of regret on their part”.3

“. . . it is clear that Occidental provided no formal training in the permit to work system”. “These comments . . . underline the grave shortcomings in Occidental’s approach to potentially dangerous jobs”.4 The quotations given above indicate the nature of the question concerning corporate moral agency. Can corporations (any organisation for that matter, but we will restrict the discussion to legally formed companies), have “good will”; can they be “malevolent, spiteful and deeply insulting”; can they have “grave shortcomings”, and, if so, should they be expected to show (genuine) regret and remorse? The views on this question are essentially twofold and diametrically opposed. Before exploring these, however, there are a number of preliminary issues which need some comment.

(a) The nature of responsibility Responsibility is one of those words that is used in a wide variety of contexts, but in which the meaning is not always the same. Velasquez (1985), at the beginning of an article arguing against corporate moral agency, sets out a conventional analysis of the meaning of responsibility. It can mean: (i)

Trustworthy or dependable (“X is a responsible person”, implying a certain quality of moral character); (ii) A duty or obligation (“X is responsible for Health and Safety”, implying a forward-looking sense); (iii) Attribution of an action or its consequences (“Y was responsible for the failure of the safety system”, implying a backward-looking sense).

The third of these can be further categorised: (iii) a) X is the cause of Y (this may be used equally of natural elements as of human agents – “the wind caused the power cut” – and is often termed causal responsibility); (iii) b) X is responsible for paying damages (compensation) arising from Y (the person responsible for the act may not necessarily have to pay – a parent may pay for their child’s act, a company for an employee’s. This is responsibility in the compensatory sense); (iii) c) X intentionally brought Y about (or helped to bring it about, or did not prevent it being brought about when s/he could have). Velasquez makes the point that the third kind of responsibility can not be transferred to others, and can be only the act of an agent who acts on reason. It is this third kind of responsibility which he says he means when using the term moral responsibility. This is generally accepted as a definition, since, as discussed below, the concept of intentionality is important in the context of defining moral agency. However, Goodpaster and Matthews (1982) return to definition (i) above, and argue that this is equally useful in terms of defining moral responsibility. They argue that it is often used in relation to decision making, where we may say that an individual is a responsible person if they are trustworthy and reliable. They further argue that this implies both rationality (lack of impulsiveness, care in mapping out alternatives and consequences and so forth) and respect (treating others as valuable in themselves) on the part of the agent. Clearly, in the context of virtue ethics, for example, responsibility as trustworthiness will be important since virtue ethics is agent- rather than act-oriented. However, the question of corporate moral agency is best dealt with by following Velasquez’ “intentionality” definition. Indeed Goodpaster’s later and more extensive article (1983) adopts this approach, despite claiming to be based on the “moral character” concept of responsibility.

Corporate Moral Agency: Review and Implications (b) Actus reus and mens rea The second preliminary issue borrows a concept from legal practice. “The distinction is made in criminal law between the criminal act and the element of guilty mind in the commission of a crime, and in general both must be present for there to be criminal liability” (Harris, 1997, p. 292). Criminal responsibility, then, requires both that an agent committed (or helped to commit or did not prevent the committal of ) a wrongful act (actus reus – or “the observable ‘doing’ or ‘bringing about’ of the prohibited consequence” (Harris, 1997, p. 292)), and that the agent did so intentionally (mens rea – with criminal intention). Intention is a complex concept, but is usually taken to mean not only deliberate purpose, but also knowledge that a particular event might occur given a particular act, negligence and recklessness (see Harris, 1997, pp. 292–302 and Laufer, 1996, passim). The debate in the context of corporate moral agency is mostly to do with mens rea, that is, whether it is possible to establish corporate intentionality (“composite mens rea” (Phillips, 1995, p. 561)) generally and particularly where there may be fault. There is at least an argument, however, that corporations do not have the means of carrying out a wrongful act and so cannot be corporate moral agents on either count. We will return to this below.

(c) Blame and punishment The third preliminary issue has to do with blame and punishment. Velasquez (1985) makes the point that the purpose of identifying the moral agent and attributing responsibility is so that blame and punishment may also be attributed. (Phillips (1995), however, questions whether we should not be more concerned with the future control of corporate behaviour rather than with blame for a past event – a point we will return to below.) There is a clear conceptual tie between moral responsibility and blame and punishment, whichever set of moral principles is adopted. Utilitarians, for example, view blame and pun-

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ishment as a deterrent, while deontologists argue either from a justice point of view (that wrongdoing constitutes a disorder which must be set right) or from a Lockean/Kantian perspective (that members of society have consented not to harm one another and have equally consented to blame and punishment in order to secure compliance). Whichever set of moral principles is adopted, however, the point in this context is that, by convention, blame and punishment should fall only on those who have committed the wrongful act and not on some related or unrelated third party. Unfortunately, the matter is not as straightforward as this makes it sound; in practice third parties often are affected by a punishment (children by a parent’s imprisonment, for example). Again, we will return to this issue below. Having now set out these preliminary issues, we turn to the main arguments put forward in the debate, taking first those in favour of corporate moral agency.

Arguments for corporate moral agency (i) Moral personhood or moral agency? The main proponent of the case for attributing moral agency to corporations is French (1979, 1984, 1995). French’s argument begins with the notion of personhood, where three quite different notions – metaphysical, moral and legal, are often entangled (1984, p. 32). As Collier (1995), commenting on French, points out, “the organisation is clearly a person in the legal sense, and legal personhood must imply metaphysical personhood, since it is impossible to create anything in law which does not exist in some prior sense – the law cannot create its own subjects” (p. 146). To move from metaphysical personhood to moral personhood, however, is not so straightforward since there is a divergence of opinion as to whether or not metaphysical personhood simply implies moral personhood. The argument in favour of this approach is that “to understand what it is to be accountable [i.e. a moral person] one must understand what it is to be an intelligent or a

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rational agent [i.e. a metaphysical person] and vice-versa” (French, 1979, p. 207). Manning (1984), while generally supporting French’s conclusion, is not convinced of the need to pursue the argument along these lines. She argues that the concept of personhood is beyond what we can attribute to corporations but that the more limited concept of agency still allows us to attribute moral fault to them. In a later article (Manning, 1988), she points out that we do not intuitively feel that a moral wrong has taken place if a corporation is “murdered” (taken over), “divorced” (split into two or more parts by a break-away group), or “dismembered” (by a regulator forcing a sell-off of parts of the organisation, for example), whereas we would feel it to be morally wrong if any of these happened to a human person. This is simply because “corporations are not moral persons in the same sense as human persons” (Manning, 1988, p. 641). Ozar (1985), develops the difference between moral personhood and moral agency by considering the issue of rights. A person has moral rights “independently of anyone’s choosing this to be so”, because of their very nature – that is, by virtue of their ontology. But since a “corporation is not a moral agent . . . by reason of any features it possesses in the very nature of things”, a corporation can have only “conventional” rights. “For corporations have only such rights as they are made to have by those who create them by accepting the relevant social rules. Corporations then do not have moral rights” (Ozar, 1985, pp. 279–280). At first sight, this notion that corporations might be regarded as moral agents (with corresponding moral responsibilities) but not have moral (but only conventional) rights, may seem strange. But this follows logically from an ontological basis of corporations which denies their personhood. Potentially, then, we have a situation in which a corporation is to be regarded, not as a moral person, but as a moral agent and with conventional, but not moral, rights. French, in his 1995 book, also comes round to this way of thinking. He writes that “it has become clear to me from many of the questions and concerns prompted by my past use of the term “person” in reference to corporations, that

calling corporations moral persons creates more confusion and misunderstanding than clarity” (1995, p. 10). He, therefore decides to substitute the term by that of “actors”. Despite French’s recent amendment, it seems appropriate to continue to use “moral agent” since this is the more generally accepted term, but recognising that it falls short of personhood while incorporating the concepts which French, Manning and Ozar elucidate. We have yet to demonstrate, however, that even the more limited concept of moral agency can be applied to corporations.

(ii) Are corporations moral agents? The first requirement for moral agency according to French, is the notion of intentionality: “What needs to be shown if there is to be corporate [moral] responsibility is that there is sense in saying that corporations and not just the people who work in them have reasons for doing what they do” (1984, p. 40). French then goes on to argue that this is the case by reference to what he terms a Corporation’s Internal Decision (CID) Structure. “Every corporation has an internal decision structure. CID Structures have two elements of interest . . . : (1) an organisational or responsibility flow chart that delineates stations and levels within the corporate power structure and (2) corporate decision recognition rule(s) (usually embedded in something called “corporation policy”)” (1979, p. 212). This CID Structure then incorporates acts of biological persons such that “corporate agency resides in the possibility of CID Structure licensed redescription of events as corporate intentional” (1979, p. 215). Or, to put it another way, “when operative and properly activated, the CID Structure accomplishes a subordination and synthesis of the intentions and acts of various biological persons into a corporate decision” (1979, p. 212). This, then, allows the attribution of mens rea to corporations. Velasquez in summarising French’s arguments, adds what is, in effect, the actus reus part of the argument. “French argues that corporate organisations can be held morally responsible for their acts because (1) they perform actions that can

Corporate Moral Agency: Review and Implications be attributed only to the corporate organisation and not to any of its members [actus reus] and (2) they perform these acts with intentions that can be attributed only to the corporate organisation and not to any of its members [mens rea]” (1985, p. 117). French, in his 1995 book, elucidates further. An actor (moral agent) has to have at least three crucial capacities: to be able to act intentionally; to be able “to make rational decisions and to consider rational arguments concerning their intentions . . . and . . . ; the facility to respond to events and ethical criticism by altering intentions and patterns of behaviour that are harmful (or offensive) to others or detrimental to their own interests” (1995, p. 12). Similarly, according to Manning, a corporation meets the conditions for fault responsibility (that is, it is a moral agent), if there is both causal responsibility and the fault is not “analysable as the mere sum of the moral fault of individual members of the corporation” (Manning, 1984, p. 82). Since both of these conditions are met, Manning argues that a corporation is a moral agent. Goodpaster and Matthews (1982), in supporting French’s arguments, make an analogy between individuals and corporations: “Goals, economic values, strategies, and other such personal attributes are often usefully projected to the corporate level by managers and researchers. Why should we not project the function of conscience in the same way? As for holding corporations responsible, recent criminal prosecutions . . . suggest that society finds the idea both intelligible and useful” (1982, p. 110). Similarly they argue that the projection of moral responsibilities to the level of the corporation “is simply an acknowledgement that the whole is more than the sum of its parts” where “what is being controlled is a cooperative system for a cooperative purpose” (p. 112). Goodpaster (1983) similarly concludes, “The fact that corporations are much more like persons than not only automobiles but even animals, is therefore significant. And this fact is doubtless rooted not only in the intelligibility of attributing intentions, decisions and actions to organisational bureaucracies, but in the intelligibility of attributing rationality (or lack of it) to

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those intentions, decisions and actions” (1983, p. 15). There is the danger here of attributing personhood to corporations, although both authors are clear that this principle of moral projection, as they call it, is by analogy. Nonetheless, their point that the moral agency of cor porations is a highly intelligible concept, is well made. Welby brings a further perspective to the argument in favour of attributing corporate moral agency. In commenting on the Cullen report into the Piper Alpha disaster, quoted above (see Note 4), he asks in what sense Lord Cullen used the word “Occidental”. His answer is that, “Lord Cullen is not using the company name as a convenient synonym for a group of individuals, but as a means of referring to something wider. He is precise in his use of terms, and the company name is consistently used to describe a pervasive failure of outlook, or ethos” (1992, p. 5). It is this concept of ethos, which Welby equates with culture, which “is the nearest thing to its character, and is the dominant factor in the consideration of moral agency” (p. 10). The implication here is that, in apparently managing to locate a corporate conscience in the corporate culture, the fact of corporate moral agency is proven. Surely, however, this is problematic in the sense that a company with no apparent conscience (that is a culture which ignores or deliberately flouts all conventional moral codes) might be argued to disprove the existence of corporate moral agency. But in the same way as a person flouting a moral code does not disprove personal moral responsibility, nor does a “wicked” company. The point at which Welby’s perspective may become useful is that, if corporate moral agency can be established via intentionality, the development of corporate virtue would undoubtedly have something to do with the culture of the organisation – a point which Hoffman (1986) and Collier (1995) both make.

(iii) Are individuals within corporations not morally responsible? A further point which needs to be discussed in the context of the arguments in favour of cor-

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porate moral agency, is to do with whether, in describing the whole as greater than the sum of the parts, there is the danger that the ascription of corporate moral agency leaves culpable individuals unblamed and unpunished. Garrett (1989), while supporting the case for corporate moral agency, is particularly concerned that this should not be so. In order to refute what he terms “unredistributable corporate moral responsibility” (that is, the idea that, having accepted moral responsibility at the corporate level, it cannot then be attributed (redistributed) back to individuals), he draws on the concept of akrasia. This “is a condition in which moral agents have split motivation: they are divided between what they should do, morally speaking, and their nonmoral desires, and it is the latter on which they act” (p. 542). Garrett’s argument is that when “akratic individuals are brought together in systematically organised contexts and provided with modern technology, the possibility for enormous, suddenly emergent harm is increased” (p. 543), but that the organised context does not relieve those individuals of their moral responsibility. Phillips (1995), on the other hand, looks for the limiting case in which corporate misdeeds are not accompanied by personal fault. He argues that “groupthink” and “risky shift” provide instances of the “psychological impact of organisational life on individuals” (Phillips, 1995, p. 568), such that their personal carelessness might be explained or excused. He then looks for the subsequent transfer of corporate moral responsibility from the organisation to the individuals within it (through guilt, shame or, even, self-interest), such that corporate conduct is altered as a result. (This is line with his concern for the future control of corporate behaviour rather than the allocation of blame, as mentioned above.) In both cases, however, Garrett and Phillips are concerned that individuals should not be relieved of their own personal responsibility, even if Phillips is more understanding of the difficulties individuals face when “inside” corporations. Accepting personal responsibility as an important caveat, the arguments for corporate moral agency are perhaps best summarised in the words

of Garrett himself: “Corporations are moral agents because the reciprocal adjustment of individual intentions and plans that take place in such organisations yields a corporate intentionality that is more like human intentionality than it is like the efficient causality that might be attributed to blindly operating social wholes such as markets” (1989, p. 536).

(iv) Conglomerates and aggregates Before turning to the arguments against corporate moral agency, there is one final issue that deserves attention. Pfeiffer, in summarising French’s arguments, points to a distinction which French is drawing, that “conglomerate collectivities such as business corporations are moral persons and that aggregate collectivities such as lynch mobs are not” (Pfeiffer, 1990, p. 473). Laying aside his use of the term persons, Pfeiffer’s argument is that this apparently clear distinction is not at all clear in practice: there can be examples of an aggregate spontaneously and for a short period of time turning into a conglomerate (he instances a group of neighbours in an apartment block witnessing a crime but doing nothing to prevent it) and also examples where a conglomerate reverts to an aggregate (he instances a corporation in a state of anarchy). Thus, he concludes that far from this distinction being one of kind, it is one of degree – and consequently the degree of moral responsibility that can be attributed is dependent on the degree to which full moral agency can be attributed. In French’s terms this would mean that only corporations with a fully-functioning CID Structure could be regarded as full moral agents. There is, of course, the danger in this approach that corporations could always claim the equivalent of diminished responsibility on the grounds that their procedures were not operating as they should have been. It seems more reasonable to accept this only in extreme cases of chaos where the normal decision-making procedures clearly have broken down, and otherwise to regard corporations as fully-fledged moral agents. But Pfeiffer’s point about aggregates is well taken and will be considered again when discussing

Corporate Moral Agency: Review and Implications the implications of the debate for stakeholder theory. In conclusion, then, we have a situation in which corporations can, under normal circumstances, be regarded as moral agents (but not persons) with conventional (but not moral) rights. This in no way, however, relieves those individuals employed by the corporation, of their moral responsibilities as natural persons either in the course of an event, or in modifying their behaviour subsequent to it. From this summary of the arguments in favour of corporate moral agency, we turn to the arguments against.

Arguments against corporate moral agency (i) Methodological individualism Velasquez has already been referred to above. In his arguments against corporate moral agency he is particularly scathing of French’s views: “. . . French is wrong. He is wrong because corporate acts do not originate in the corporation but in the corporation’s members” (1985, p. 117). Velasquez’ argument is as follows. Moral responsibility for an act “can be attributed only to that agent who originated the act in his own body, that is, in movements of a body over which he has direct control” (p. 118). Since corporations act via their members, who are autonomous individuals not under the direct control of the organisation, “the corporation obviously does not perform any bodily acts itself ” (p. 118). He concludes that “it is a mistake to assume (as French does) that when some act can be predicated only of a corporate group, the corporate group must be the locus of the moral responsibility for the act. Moral responsibility for a corporation’s acts lodges with the agents who bring about those acts and not with the corporate entity of which the act is predicated” (p. 119). Hence, according to Velasquez, the actus reus requirement is not met. Velasquez’ rebuttal of the mens rea requirement is based on the same line of argument. He admits that, “French may be correct in saying that we can infer intentions from a corporation’s policies

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and procedures and that these intentions may be attributed to the corporation and not to its members”. However, because “the intentions are attributed to one entity (the corporation), whereas the acts are carried out by another (the corporate members)”, and because “an act is intentional only if it is the carrying out of an intention formed in the mind of the agent whose bodily movements bring about the act” (p. 119), corporate acts cannot be intentional. Hence Velasquez ends up in a position in which “corporate policies and procedures are themselves wholly the products of the intentional actions of other agents and are carried out only when other agents freely choose to adhere to them” (p. 120). The technical term for Velasquez’ position is methodological individualism which “holds that the satisfaction of the conditions of collective responsibility and punishment are completely and linguistically reducible, without loss of meaning, to talk to the satisfaction of the conditions of individual responsibility and punishment” (Corlett, 1992, and see also McMahon, 1995). Ewin similarly argues that “the moral personality of a corporation is exhausted by its legal personality” such that only managers are responsible (Ewin, 1991, p. 749). Corlett argues for a modified version of methodological individualism which accepts that individuals are not completely defined apart from collectives, but, despite this, that it is “nevertheless the case that collectivism is implausible in regards to punishment because collectives are not moral agents” (Corlett, 1992, p. 214). We will need to return to the question of corporate punishment below, but before doing so there are a number of other points to be considered in this general line of argument against corporate moral agency and for individual moral agency alone. Danley follows a similar line of argument to Velasquez but adds two practical points. The first is that French’s approach can be challenged by what actually goes on inside organisations: “Will French maintain that any decisions made by managers of corporations which do not conform to the organisational chart are not decisions of the corporation?” (1980, p. 185). The point is simply that it may be much harder to identify

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corporate intentionality in an action than French assumes. Danley’s second point is that, since within corporate charters firms can do anything so long as it is lawful, then it is technically impossible for any unlawful act to be redescribed as a corporate act (that is, the actus reus part of the argument cannot be fulfilled). Danley argues that “the French doctrine appears to be that for the corporation it is not possible to sin at all” (p. 186). Neither of these arguments is particularly strong – as Danley himself admits – since it is clearly not impossible to identify corporate intentionality even if the written and unwritten decision rules differ, and nor is it impossible to conceive of a situation in which a corporation commits itself to an act that is illegal (Sunday Trading, which in the UK has been illegal for most shops, but which has become a normal practice, springs to mind); again, the written and unwritten simply come into conflict.

to speak, of the organisational language-game” (pp. 115–116). One of the consequences of Ladd’s argument is that since organisations “cannot assume a genuine moral posture towards individuals” (p. 119), then neither do individuals owe reciprocal allegiance to organisations. In addition, organisations, having no moral rights (see Ozar, 1985 above), cannot expect freedom from coercion – we as individuals should not “feel any moral scruples about what we do to organisations” (p. 120). Although, at first sight, this may seem to be an internally consistent and indeed attractive argument, the problem lies in assuming (as Friedman, 1970 also does), that corporations have only economic objectives. As soon as one admits the possibility of broader social objectives, the whole line of argument collapses.

(iii) Blame and punishment (ii) Corporate objectives and corporate moral agency Ladd’s argument against corporate moral agency accepts that “social decisions” (as he calls them, to distinguish decisions that are attributed to the organisation from individual decisions) are corporate intentional. But he argues that such decisions, so long as they are rational, can relate only to the objectives of the organisation. And since these objectives are, in the case of corporations, purely economic, “social decisions . . . are not and cannot be governed by the principles of morality” (Ladd, 1970, p. 115). Moral considerations, according to Ladd, enter only as “limiting operating conditions” where such factors as employee morale or environmental pressure groups or such like simply provide additional data which is considered as part of the decision-making process. Ladd concludes: “Thus for logical reasons it is improper to expect organisational conduct to conform to the ordinary principles of morality. We cannot and must not expect formal organisations, or their representatives acting in their official capacities, to be honest, courageous, considerate, sympathetic, or to have any kind of moral integrity. Such concepts are not in the vocabulary, so

Velasquez and Danley, however, develop a further line of argument which follows from the blame-punishment concept mentioned above. A quotation, attributed to Edward, First Baron Thurlow and then Lord Chancellor of England, illustrates the point: “Did you ever expect a corporation to have a conscience, when it has no soul to be damned and no body to be kicked?” (quoted in French, 1984, p. 187). Velasquez asks the same question as Welby – what is the entity to which we can be referring when we say “the corporation”? The answer, according to Velasquez, is one of three possibilities: a) A legal but fictitious entity recognised by law; b) A structured set of relationships that allows us to identify a group of human beings and their activities as a corporate organisation; c) The group of human beings who constitute the corporation’s members, but in this case we could be referring to: (i) the group as a whole, or; (ii) every member of the group as individuals, or; (iii) particular members of the group.

Corporate Moral Agency: Review and Implications Velasquez dismisses a) on the basis that when people say that a corporation is morally responsible they “have in mind real agents that exert physical causality upon the world independently of the law” (p. 121) – that is sense b) or c). However, he also dismisses b) on the basis that we obviously cannot punish relationships or structures and even if we could the punishment would fall on the members’ shoulders – which contravenes the principle that the punishment should fall only on those who have committed the wrongful act and not on some related or unrelated third party. Hence, we are left with c), from which we can dismiss (i) and (ii) by the same argument of blame and punishment falling only on those responsible. Thus, we are left with the same conclusion as before – that moral agency resides only in the individual members of the corporation. French (1984 and 1995), of course, has considered this issue of punishment at some length and has proposed the Hester Prynne Sanction (HPS) – a court ordered adverse publication of the corporation, paid for by the corporation, with the aim being “to create a psychological disposition of shame within the corporation for that of which it is guilty” (Corlett, 1988, p. 205, and see also Warren (1997) for an interesting extrapolation of HPS). Corlett, in attacking this concept, argues from a practical perspective that this will either be insufficiently effective and/or that the costs will fall on innocent third parties – and hence he arrives at his position of modified methodological individualism, as discussed above (Corlett, 1992). Danley argues along very similar lines in that the effect of any punishment is not felt by the corporation: “The corporation cannot be kicked, whipped, imprisoned or hanged by the neck until dead. Only individuals of the corporation can be punished” (1980, p. 187). Card, Cross and Jones (1995) also point to “the injustice of penalising shareholders, consumers or taxpayers, who ultimately bear the burden of fines imposed on corporations, for acts or omissions of which usually they are unaware” (p. 581). The counter argument to this on a practical level stems from the point made above that, in the nature of punishment, it is often difficult to

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ensure that it falls only on the guilty party. A more theoretic argument, however, can be made on the basis that membership of a corporation involves the acceptance of collective responsibility and that, as such, all should be prepared to accept blame and to share in whatever punishment might result; this is in the nature of what it means to be part of a “company”. Velasquez, in pressing his argument, points out that the lack of moral agency on the part of corporations, as he sees it, does not prevent corporations being either causally responsible for an act or effect, or responsible in a compensatory sense (see above) – but that what we cannot do is to attribute moral responsibility. Velasquez concludes by giving two reasons for thinking that it is dangerous to accept corporations as moral agents – first that we point our blame at the corporate veil rather than the individuals responsible (Garrett’s concern), and second that individuals’ interests are sacrificed to the corporation’s interests, since the attribution of moral agency to corporations might lead to the corporation being seen as a whole person and the individual members as merely a part.

(iv) Corporate motivation A further criticism of the notion of corporate moral agency is made by Ranken (1987). While generally in agreement with Goodpaster’s (1983) argument about moral responsibility in the decision-making sense, she asks how organisations can be motivated to develop certain traits of character. The organisation would have to institutionalise the traits that are associated with responsibility (informing oneself, anticipating impact on others, etc.) “But . . . the “institutionalising” of anything is not something a corporation can be motivated to do. It is an institution, created by persons using another institution (the law). It can be changed by persons from the outside; but it has no inner springs of change analogous to the motives of natural persons” (Ranken, 1987, p. 634). Similarly, Ewin (1991) insists that corporations do not care and “unlike the people who run them, have no emotional life” (1991,

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p. 753). Consequently, the person analogy that Goodpaster makes breaks down and we must again return to individual moral agency alone. Goodpaster, in responding to this criticism, returns to the point that the attribution of moral agency to corporations does not deny the moral agency of individuals and that indeed it is through these individuals that “a policy or a structural change affecting the decision making of the organisation as a whole” takes place (Goodpaster, 1987, p. 330). In other words, Goodpaster essentially takes French’s argument about corporate intentionality deriving from the incorporation of acts of biological persons, and argues the same for corporate motivation. This, then, completes the review of the arguments against corporate moral agency. The arguments are founded on the basis of the moral responsibility of natural persons, the apparent impossibility of transferring this responsibility to collectives and the equal impossibility of punishing collectives either at all, or adequately. Before considering the implications of the arguments for and against, however, it is worth spending some time, by way of illustration, in considering the legal position, at least as it relates to the U.K. and the U.S.A.

The legal position relating to corporate responsibility in the U.K. and the U.S.A. Some of the concepts behind the legal position relating to corporate responsibility have already been mentioned above. Card, Cross and Jones (1995), in a lengthy section covering this area in U.K. law, begin by defining the situation as follows: The general rule is that a corporation, such as an incorporated company, a public corporation or a local authority, may be criminally liable to the same extent as a natural person, subject to two exceptions: a) in the case of offences which from their very nature cannot be committed by corporations [e.g. rape, bigamy, incest]; and b) where the only punishment the court can impose is physical (p. 575).

This is a considerable development since, “in 1700, a corporation was not indictable at all” (p. 575). However, by 1944 at the latest, a corporation could be criminally liable as perpetrator or accomplice, for virtually any offence “notwithstanding that mens rea is required, by the use of the principle of identification” (p. 576). This principle of identification “is a judicial creation which depends upon the fiction that the acts (or omissions) and state of mind of certain superior officers (“controlling officers”) who are seen as composing the very personality of the organisation are the acts and state of mind of the organisation. In such a case liability is not vicarious . . . ; instead the corporation . . . is regarded as having committed the offence personally” (p. 576). Similarly, in the U.S.A., Laufer summarises the position by quoting an earlier case: “There are some servants or agents of a corporation . . . who can be treated as ‘the directing mind and will of the corporation, the very ego and centre of personality of the personality’ . . .” (Laufer, 1996, p. 312, quoting Lennards Carrying Co. v. Asiatic Petroleum Co., 1915). The parallels with French’s argument and terminology, in both the U.K. and the U.S.A., could hardly be closer. This principle of identification was supported and refined in the U.K. by Lord Denning in a civil case – again the similarity, this time with Goodpaster’s principle of moral projection, is striking: A company may in many ways be likened to a human body. It has a brain and nerve centre which controls what it does. It also has hands which hold the tools and act in accordance with directions from the centre. Some of the people in the company are mere servants and agents who are nothing more than hands to do the work and cannot be said to represent the mind or will. Others are directors and managers who represent the directing mind and will of the company, and control what it does. The state of mind of these managers is the state of mind of the company and is treated by the law as such (Card, Cross and Jones, 1995, pp. 577–578).

It is clear from legal precedent that directors and managers can delegate some part of their

Corporate Moral Agency: Review and Implications function of management, “such that the delegate could act as the corporation” (Card, Cross and Jones, 1995, p. 578). It is also clear that the corporation is not liable for acts or omissions when the person identified with the corporation acts “in some other capacity, such as his personal capacity” (p. 578). Similarly, in the U.S.A., “[a] corporation can only act through its employees and, consequently, the acts of its employees, within the scope of their employment, constitute the acts of the corporation” (Laufer, 1996, p. 312, quoting United States v. T.I.M.E.-D.C., 1974). With regard to the second of the two exceptions mentioned above (where the only punishment the court can impose is physical), this exception “is now confined to murder and treason for which the only punishment which the court can impose is imprisonment or death” (p. 579). There is one further principle which has become enshrined in law, which is that not only may the corporation be criminally liable as well as “the natural persons involved” who may be liable “as perpetrators or accomplices”, but that “many statutes now provide for the guilt of senior officers of the corporation who would not be criminally liable under ordinary principles, or whose guilt it would otherwise be hard to prove” (p. 582). This three-fold legal liability, therefore, would seem to be sufficient to counter Garrett’s and Velasquez’ concern that we point our blame at the corporate veil rather than the individuals responsible. An example of this three-fold liability being exercised was in the case of the Lyme Bay5 disaster in 1994 where four teenagers were killed while on a canoeing trip. In this case, the company and its directors were convicted of manslaughter, the company being fined £60,000, and, in addition, the managing director was given an immediate custodial sentence of three years. There is no doubt that the legal position has accepted that corporations are responsible in the causal and compensatory senses. It is also clear from the above discussion, however, given the attribution of intentionality and that criminal liability is attributable to corporations such that blame and punishment can be exacted on the corporation (even if it then falls on the individuals), that

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the law in the U.K. and the U.S.A. is built on a philosophical basis which accepts all the requirements of the corporation as being morally responsible. That the law, as in the case of the bank which was malevolent, spiteful and deeply insulting, quoted above, also expects regret to be expressed by corporations, simply emphasises the point. This does not, of course, mean that the law is necessarily right, but the relatively recent developments in the law do provide support to the notion that acceptance of the concept of corporate moral agency is becoming the norm.

Collective moral agency: Implications “And carry my word to the Sons of Man or ever ye come to die: That the sins they do by two and two they must pay for one by one” (Rudyard Kipling, “Tomlinson” in Barrack-Room Ballads and quoted in French, 1984: (viii)) “Woe to you, Korazin! Woe to you, Bethsaida! If the miracles that were performed in you had been performed in Tyre and Sidon, they would have repented long ago, in sackcloth and ashes. . . . And you, Capernaum, will you be lifted up to the skies? No, you will go down to the depths. If the miracles that were performed in you had been performed in Sodom, it would have remained to this day. But I tell you that it will be more bearable for Sodom on the day of judgement than for you.”

(Matthew 11: 21–24, NIV)

(i) Implications for business ethics These two quotations represent the two opposing views concerning corporate moral agency. Clearly, both views have their strong points, although it does seem to this author that the arguments in favour are more convincing than those against. This is partly on the strength of the arguments (and the criticisms of the case against already indicated), but partly also that the acceptance of corporate moral agency seems to be a better reflection of “reality” in the sense of how most people interpret the world around them. This is supported by the legal position in the U.K. and the U.S.A. and relates to what

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Goodpaster, quoted above, calls the intelligibility of attributing intentions, decisions and actions to organisational bureaucracies. What is particularly interesting in this context are two quotes from the literature reviewed above. Goodpaster and Matthews, already quoted, state: “As for holding corporations responsible, recent criminal prosecutions . . . suggest that society finds the idea both intelligible and useful” (1982, p. 110). Similarly, Card, Cross and Jones suggest that “few people seem reluctant to accept the principle of corporate personality [sic] and it is but a short step to accept its full implications” (1995, p. 581). The point is that the arguments that have been discussed above are all founded on philosophical bases concerning the nature of responsibility, intentionality, blame and punishment. This is, in itself, unsurprising. But what is surprising is that there has been no attempt to support these theoretical views with empirical findings. If, for example, there is general acceptance of the attribution of moral responsibility to corporations, then it would surely not be unreasonable to use this in support of the theoretical arguments; the theoretical is, in that case, making sense of the reality that people experience. Hence there are two implications for business ethics as a whole. One is empirical – to explore the notion of corporate moral agency with corporations themselves through their “controlling officers”, so that we better understand the concepts behind the arguments and can support one or other side of the argument with empirical evidence. Some preliminary empirical evidence, collected by the author, is highly supportive of the concept of corporate moral agency. The managing director, a non-executive director and the company secretary of Shared Interest Society Ltd., a small, U.K.-based financial services organisation, were interviewed as a pilot exercise for a much larger piece of research. All were supportive of the concept of corporate moral agency, in addition to personal responsibility, and of the notions of blame and punishment. The point was also made by two of the three that the legislative position in the U.K. was supportive of their view. This preliminary work, however, clearly needs to be taken further. The second implication is that writers and

researchers need to clarify their own position on this matter since, as Werhane (1989) pointed out (and as should now be evident), it is of crucial importance. We must, in other words, base our epistemology of corporations on a clear ontology of organisations.

(ii) Implications for stakeholder theory Now is not the place to discuss stakeholder theory at length. Suffice it to say by way of introduction, however, that there is a substantial literature on the subject (Moore, 1998), and that much of what is written about business ethics is couched in terms of responsibility to various stakeholders – customers, employees, shareholders, suppliers, competitors, the community and so forth. Relating the previous discussion to this way of thinking about business ethics, highlights a number of implications. The first is that, if the corporation is regarded as being a moral agent, there is the question of what happens to the corporation itself in discussions of stakeholder theory. Quite often, it seems, the corporation disappears as simply the point of intersection between the other stakeholders, and is not regarded as a stakeholder in its own right. Accepting corporate moral agency implies that the corporation should be regarded as a stakeholder presumably with the “controlling officers” (who are also often omitted in stakeholder theory) as its voice. Accepting corporate moral agency also, of course, then means that suppliers, competitors and institutional shareholders are corporate moral agents with their own conventional, though not moral, rights. This then raises the question as to whether there can be moral responsibility between a corporation and, say, a supplier, since neither has moral rights. This notion of the reciprocal rights and obligations of corporations to each other, irrespective of the rights and responsibilities of individuals within those corporations to one another, is one implication of corporate moral agency that is seldom if ever discussed in the literature. But what of customers, employees and individual shareholders? Are they simply individuals

Corporate Moral Agency: Review and Implications (and also aggregates), or are they conglomerates as well? That is, should they be treated individually as human beings with human, moral and legal rights and as aggregations of individuals, or can they also be regarded as conglomerates with conventional rights? There is certainly a case for arguing that employees, where they are formally represented in the workplace, act as a conglomerate – and therefore also bear collective moral responsibility as a conglomerate. A similar argument may be made about shareholders who, while they would generally be described as an aggregate, have the means to act intentionally at a General Meeting. Do they, even for a short period of time, become a conglomerate with the corresponding conventional rights and obligations? Even customers, where, for example, they move together to boycott a corporation’s products, might be regarded as a conglomerate, though in normal circumstances, of course, they would be regarded either as individuals or as an aggregate. It can be seen, then, even from this brief discussion, that the general question of the moral agency of collectives raises important issues for stakeholder theory and the nature of reciprocal rights and obligations, which require further exploration.

entirely clear on this point, as the title of her article (The Virtuous Organisation) indicates, but others such as Solomon (1993) are far less so. The major issue that arises from the previous discussion is whether, if organisations can be regarded as moral agents but not as persons, the application of virtue ethics falls simply because it assumes character and personality, and corporate moral agency denies that we can go this far. Again, this is a crucial issue for those working in this branch of business ethics.

Conclusion Having specified the nature of the issue, discussed the arguments for and against, considered the legal position in the U.K. and the U.S.A. and seen how it is supportive of the concept of corporate moral agency, the implications for business ethics in general, and stakeholder theory and virtue ethics in particular have been discussed. It remains now for academics and practitioners alike to take this forward in their work by: a) undertaking empirical work to support the arguments for and against corporate moral agency; b) having a clear ontology of organisations on which to base their epistemology of corporations; c) clarifying the nature of stakeholder responsibilities according to whether stakeholders are individuals, aggregates or conglomerates; d) clarifying whether the limited nature of corporate moral agency allows the application of virtue ethics to corporations.

(iii) Implications for virtue ethics Finally, there is an important implication of the concept of corporate moral agency for virtue ethics. Virtue ethics concentrates not so much on the acts of moral agents but on their character. Some of the concepts discussed above relate to this branch of ethics – Velasquez’ analysis of responsibility as including the idea of someone being a responsible (trustworthy or dependable) person, Ranken’s (1987) questioning of corporate motivation, and Ewin’s (1991) denial of corporate emotion, being the three most obvious. In terms of the virtues approach to moral theory, then, the issue becomes whether we can speak only of the moral character of individuals within the context of organisations or whether, in addition, we can speak of the moral character of the organisation as a whole. Collier (1995) is

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Notes 1

The author would like to thank two anonymous reviewers for their comments on an earlier draft of this paper. 2 The Guardian, 30.1.96. The quotation is from Ron Lipsius, survivor of the Kings Cross fire, speaking of London Transport after receiving £650,000 damages in the High Court. Thirty one people died in the 1987 disaster which turned the underground tunnels

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at the Kings Cross tube station into an asphyxiating inferno. 3 The Times, 19.3.96. Helen Bamber, a London City bond dealer with Fuji bank brought a case claiming she had been passed over for promotion and pay rises before being forced to resign after rejecting her boss’s advances. 4 The Hon. Lord Cullen, Department of Energy: The Public Enquiry into the Piper Alpha Disaster, Vol. 1, pp. 194 and 197 respectively and quoted in Welby (1992). The Piper Alpha condensate platform in the North Sea, east of the U.K., exploded on 6 July 1988. 167 men died as a result. 5 This was the first ever conviction in England and Wales of a company for manslaughter. OLL Ltd. operated an activity centre and evidence was given that it routinely employed unqualified instructors and did not train them. In this particular case the teenagers who died were wrongly instructed not to inflate their life jackets if their canoes capsized. OLL Ltd. was a small firm in which one individual, the managing director, could be identified with the company. He was found guilty, so that his proven mens rea could be attributed to the company (See Mayson and French, 1997, p. 626).

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Newcastle Business School, University of Northumbria at Newcastle, Newcastle upon Tyne, NE1 8ST, United Kingdom.