Choice and Consequence: Do Corporations have a Moral Responsibility?

August 17th, 2010

I’ve been sitting for the last several minutes, munching on some blueberries, drinking milk—both are organic and local—and staring at a blank computer screen.  How can I explain this behavior?  Well, first, I’ve just moved to Oregon where quirky tendencies are generally embraced.  But second, as a consumer I try to make purchases that reflect my values and that support companies who share those values.  Despite the satisfaction I have gained from making such decisions, I feel displeased about the blank screen at which I’m staring.  I feel this way because it’s part of my HP computer.  And as the last few weeks have showed, I share few values with that company.

As you probably know by now, last week HP ousted CEO Mark Hurd in response to sexual harassment allegations by contractor Jodie Fisher.  While investigating Fisher’s charge in June, directors found inaccurate expense reports which Hurd—who was and is still married—used to cover payments to the woman.

What you may not know is that HP is also embroiled in allegations of tax fraud, bribery, and kickback schemes all over the world.

In Japan authorities discovered HP failed to report nearly $550 million in taxable income between 2004 and 2006 and have ordered HP to pay $270 million in unpaid taxes.  To accomplish the cover up, HP transferred funds between subsidiaries, using an intermediary in Switzerland to transfer its income to its U.S. parent and hide the income from Japanese authorities.

In Germany, HP executives are under investigation for potentially paying about $10 million in bribes to win software and hardware contracts in Russia.  The U.S. Securities and Exchange Commission has joined in and is now investigating possible violations of the Foreign Corrupt Practices Act, which prohibits bribes to foreign officials.

This comes just as HP reached a settlement with the U.S Department of Justice, agreeing to pay $50 million to settle two lawsuits which allege the company paid kickbacks to Sun Microsystems Inc and Accenture PLC for government contracts.

So this gets me back to my blueberries and milk.  Companies—like individuals—very clearly have an obligation to follow domestic and international laws.  But that is distinct from a moral obligation.  In most senses of philosophical morality, a law-abiding citizen can be immoral.  But can a law-abiding company be immoral?  Alternatively, do corporations have a moral obligation to follow the law?

An Economist, Gary Becker for example, will argue a corporation has no social responsibility beyond its stockholder value (Becker, Uncommon Sense, 191).  Many economists believe competition through capitalism and ruthless self-interest—not altruism or philanthropy—will maximize humanity’s interests and welfare.  Ayn Rand—a philosopher with heavy economic influences—argued just this in The Virtue of Selfishness.

These arguments should be taken with a grain of salt.  Economists have little to offer to a discussion on morality, since Economics bases nearly all of its theories on the assumption that rational individuals maximize their own utility (happiness).  A science which has already placed self-interest at the heart of its principles simply cannot speak on a subject that seeks to understand the notion of choice and the tension between one’s own desire and something greater.

As an Economist, I make this statement while acutely self-conscious of my own fallibility.  As such, I put forward these arguments with as much interest in the question as certainty of my own answer.  For one, I recognize that morality is subjective and my morality is not for everyone.  I know a number of Oregonian conventional farmers, for example, who would argue that buying organic blueberries is no more moral than stealing candy from a baby.  The same might be true when it comes to corporate responsibility.

Depending on your view of morality, however, you might argue that “law-abiding” does not ensure “moral.”  Take the example of an athlete that uses a recently discovered performance-enhancing technique that is not detectable or banned.  Or the difference between a company that evades tax (illegal) and the one that avoids it (legal).  Or the company that uses domestic laws in Seychelles to skirt taxes in India.  Or the toy manufacturer that transfers production from Europe to Asia where child labor laws are not as strict.  Or the energy company that doesn’t clean up an oil leak in international waters, where few restrictions govern spills.

HP violated many laws and in most cases, various governments have stepped in to serve justice, and in the eyes of the law will even the score.  But after HP has finished paying the settlements and the damages and the back taxes, have they truly made amends?  Or has HP violated a moral code in addition to a legal one?  If this is the case, the legal settlements do not negate the damages HP has done.  And those of us who hold with that brand of morality, perhaps have our own moral obligation to let our purchase decisions reflect our values.

Basically what I’m saying is this.  Next time I get a computer, I’m going to buy a Dell.

Written by Ann Hollingshead

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