Joseph Heath

This paper raises a challenge for those who assume that corporate social responsibility and good corporate governance naturally go hand-in-hand. The recent spate of corporate scandals in the United States and elsewhere has dramatized, once again, the severity of the agency problems that may arise between managers and shareholders. These scandals remind us that even if we adopt an extremely narrow concept of managerial responsibility – such that we recognize no social responsibility beyond the obligation to maximize shareholder value – there may still be very serious difficulties associated with the effective institutionalization of this obligation. It also suggests that if we broaden managerial responsibility, in order to include extensive responsibilities to various other stakeholder groups, we may seriously exacerbate these agency problems, making it even more difficult to impose effective discipline upon managers. Hence, our central question: is a strong commitment to corporate social responsibility institutionally feasible? In searching for an answer, we revisit the history of public management, and in particular, the experience of social-democratic governments during the 1960s and 1970s, and their attempts to impose social responsibility upon the managers of nationalized industries. The results of this inquiry are less than encouraging for proponents of corporate social responsibility. In fact, the history of public-sector management presents a number of stark warnings, which we would do well to heed if we wish to reconcile robust social responsibility with effective corporate governance.

I would like to start by thanking Jan Narveson for his time and for the attention that he has shown to my book, The Efficient Society. As someone with broadly left-wing sympathies, I am acutely aware of the lamentable tendency that leftists have of spending their time arguing exclusively with the people who are closest to them on the political spectrum. I have always hoped to avoid that trap. Thus it has been extremely gratifying to see my book provoke unsolicited critical response from, among others, Terrence Corcoran, Walter Robinson, and now Jan Narveson.

Critical response to John Rawls's The Law of Peopleshas been surprisingly harsh) Most of the complaints centre on Rawls's claim that there are no obligations of distributive justice among nations. Many of Rawls's critics evidently had been hoping for a global application of the difference principle, so that wealthier nations would be bound to assign lexical priority to the development of the poorest nations, or perhaps the primary goods endowment of the poorest citizens of any nation. Their subsequent disappointment reveals that, while the reception of Rawls's political philosophy has been very broad, it has not been especially deep. Rawls has very good reason for denying that there are obligations of distributive justice in an international context.

The term “political” egalitarianism is used here, not to refer to equality within the political sphere, but rather in John Rawls’s sense, to refer to a conception of egalitarian distributive justice that is capable of serving as the object of an overlapping consensus in a pluralistic society.1 Thus “political” egalitarianism is political in the same way that Rawls’s “political” liberalism is political. The central task when it comes to developing such a conception of equality is to determine what constraints a principle of equality must satisfy in order to qualify as “freestanding,” or to be justifiable in a way that does not presuppose the correctness of any one member of the set of reasonable yet incompatible “religious, philosophical and moral” doctrines that attract large numbers of adherents in our world.2 (Rawls uses the analogy of a “module” in order to describe the way that a properly political conception of justice “fits into and can be supported by various reasonable comprehensive doctrines that endure in the society regulated by it.”3 Political egalitarianism would be “modular” in this sense.) Rather than getting embroiled in the controversies that have arisen over Rawls’s formulation of this idea, I would like simply to accept the intuition, widespread among political philosophers, that equality is the sort of principle that – if given a proper formulation – could satisfy the requirements of a political conception of justice. After all, regardless of what peoples’ projects, values, or conceptions of the good life may be, it should be possible to design a set of arrangements that would provide equal opportunity to pursue these goals, or that would treat each conception of the good with equal respect, etc. From this perspective, the principle of equality resembles the principle of Pareto-efficiency, or certain formulations of the principle of liberty – it is one that everyone should be able to endorse, insofar as it does not privilege, or presuppose the correctness of, any particular set of projects, values..

One of the most troubling features of international trade is that it often involves exchange between individuals facing dramatically different life circumstances, who therefore derive different levels of benefit from the exchange. Most obviously, wages are extremely low in underdeveloped countries. However, the principle underlying these wages is the same as the one the dictates wage levels in wealthy countries. It is, therefore, difficult to criticize the wages paid to ?pauper labor? without at the same time criticizing the way that capitalism functions as a whole. For those who would like to question aspects of globalization, without simply repeating the standard moralizing critique of capitalism, this poses particular difficulties. This paper offers some suggestions on how egalitarians can approach this issue. The central piece of conceptual apparatus introduced, in the service of this aim, is the distinction between a ?first-best?, a ?second-best?, and an ?nth best? set of normative principles. It is then suggested, first, that capitalism is acceptable to egalitarians only within a third-best framework, and second, that this low level of idealization imposes real constraints on how far one can go in criticizing trade practices at the global level

Kevin Sauvé has recently argued in this journal that David Gauthier's conception of ‘morals by agreement’ is inimical to the development of long-term productive investment and sustainable levels of resource exploitation. According to Sauvé, this is because society is confronted with an intergenerational interaction problem whose strategic equilibrium is suboptimal. However, unlike the ‘contemporaneous Prisoner's Dilemma’ that Gauthier analyzes, the intergenerational version cannot be solved by an appeal to constrained maximization. As a result, Sauvé claims, Gauthier cannot effectively address the question of intergenerational justice.The portion of Sauvé's argument that concerns me is the following:Gauthier solves the contemporaneous Prisoner's Dilemma by ensuring that each person will cooperate only if all others cooperate, and indeed his conception of morality is aimed at ensuring that all individuals incur the costs as well as the benefits of social cooperation. But the contemporaneous solution cannot be applied to the Intergenerational Dilemma: if each generation will save for the next only if the previous generations have also saved, none will ever save.

One of the most persistent legacies of Karl Marx and the Young Hegelians has been the centrality of the concept of “ideology” in contemporary social criticism. The concept was introduced in order to account for a very specific phenomenon, viz. the fact that individuals often participate in maintaining and reproducing institutions under which they are oppressed or exploited. In the extreme, these individuals may even actively resist the efforts of anyone who tries to change these institutions on their behalf. Clearly, some explanation needs to be given of how individuals could systematically fail to see where their interests lie, or how they might fail to pursue these interests once these have been made clear to them. This need is often felt with some urgency, since failure to provide such an explanation usually counts as prima facie evidence against the claim that these individuals are genuinely oppressed or exploited in the first place.

One of the arguments that is often advanced in defence of the public health care system in Canada appeals to the idea that medical care should not be treated as a “commodity.” The recent Romanow Report on the Future of Health Care in Canada, for instance, says that, “Canadians view medicare as a moral enterprise, not a business venture.”1 Public provision is then urged on the grounds that this is the only mode of delivery compatible with this constraint. This argument has received surprisingly little scrutiny, despite the important role that it plays in structuring the recommendations of the report, not to mention the broader public debate. This is unfortunate, since not only is it, in my view, a bad argument, but it is one that actually obscures the rationale for the current public system. It encourages the widely shared misperception that health care is a pure public good in our society (financed through taxation, then provided “for free” to all citizens). Provincial governments in Canada do not, for the most part, deliver health care services directly to the population. What they provide instead is health insurance. They rely primarily upon the private sector to deliver care. Thus the Canadian health care system more closely resembles what is often described as a quasi-market, or a “public market.” The justification for the role of the public sector in health care can be traced back to market failure in the insurance sector, and not in the market for health care services.

Ronald Dworkin’s argument for resource egalitarianism has as its centerpiece a thought experiment involving a group of shipwreck survivors washed ashore on an uninhabited island, who decide to divide up all of the resources on the island equally using a competitive auction. Unfortunately, Dworkin misunderstands how the auction mechanism works, and so misinterprets its significance for egalitarian political philosophy. First, he makes it seem as though there is a conceptual connection between the ‘envy-freeness’ standard and the auction, when in fact there is none. Second, he fails to appreciate how idealized the conditions are that must be satisfied in order for his results to obtain. This leads him to draw practical conclusions from the thought experiment that do not follow, such as his claim that the principle of equality generates a presumption in favor of the market as a mechanism for the distribution of resources. The result is that Dworkin saddles resource egalitarianism with a set of commitments that are, in fact, inessential to that view

_ Source: _Page Count 28 Recent debates over climate change policy have made it clear that the choice of a social discount rate has enormous consequences for the amount of mitigation that will be recommended. The social discount rate determines how future costs are to be compared to present costs. Philosophers, however, have been almost unanimous in endorsing the view that the only acceptable social rate of time preference is zero, a view that, taken literally, has either absurd or extremely radical implications. The first goal of this paper is to show that the standard arguments against temporal preference are much less persuasive than they are usually taken to be. The second goal is to explore two different avenues of argument that could be adopted, in order to show that temporal discounting of welfare may be permissible. The first involves simply an application of the method of reflective equilibrium, while the second involves consideration of the way that our abstract moral commitments are institutionalized.

One of the most influential ideas in the field of business ethics has been the suggestion that ethical conduct in a business context should be analyzed in terms of a set of fiduciary obligations toward various “stakeholder” groups. Moral problems, according to this view, involve reconciling such obligations in cases where stakeholder groups have conflicting interests. The question posed in this paper is whether the stakeholder paradigm represents the most fruitful way of articulating the moral problems that arise in business. By way of contrast, I outline two other possible approaches to business ethics: one, a more minimal conception, anchored in the notion of a fiduciary obligation toward shareholders; and the other, a broader conception, focused on the concept of market failure. I then argue that the latter offers a more satisfactory framework for the articulation of the social responsibilities of business.

One of the most influential ideas in the field of business ethics has been the suggestion that ethical conduct in a business contextshould be analyzed in terms of a set of fiduciary obligations toward various “stakeholder” groups. Moral problems, according to this view, involve reconciling such obligations in cases where stakeholder groups have conflicting interests. The question posed in this paper is whether the stakeholder paradigm represents the most fruitful way of articulating the moral problems that arise in business. By way of contrast, I outline two other possible approaches to business ethics: one, a more minimal conception, anchored in the notion of a fiduciary obligation toward shareholders; and the other, a broader conception, focused on the concept of market failure. I then argue that the latter offers a more satisfactory framework for the articulation of the social responsibilities of business.

Henry Hansmann has claimed we have reached the “end of history” in corporate law, organized around the “widespread normative consensus that corporate managers should act exclusively in the economic interests of shareholders.” In this paper, I examine Hansmann’s own argument in support of this view, in order to draw out its implications for some of the traditional concerns of business ethicists about corporate social responsibility. The centerpiece of Hansmann’s argument is the claim that ownership of the firm is most naturally exercised by the group able to achieve the lowest agency costs, and that homogeneity of interest within the ownership group is the most important factor in achieving lower costs. He defends this claim through a study of cooperatives, attempting to show that homogeneity is the source of the competitive advantage most often enjoyed by shareholders over other constituency groups, such as workers, suppliers and customers, when it comes to exercising control over the firm. Some business ethicists, impressed by this argument, have taken it to be a vindication of Milton Friedman’s claim that profit-maximization is the only “social responsibility” of management. I would like to suggest that this conclusion does not follow, and that the “Hansmann argument” lends itself to a less minimalist view, what I refer to as a “market failures” approach to business ethics

The prevalence of white-collar crime casts a long shadow over discussions in business ethics. One of the effects that has been the development of a strong emphasis upon questions of moral motivation within the field. Often in business ethics, there is no real dispute about the content of our moral obligations, the question is rather how to motivate people to respect them. This is a question that has been studied quite extensively by criminologists as well, yet their research has had little impact on the reflections of business ethicists. In this article, I attempt to show how a criminological perspective can help to illuminate some traditional questions in business ethics. I begin by explaining why criminologists reject three of the most popular folk theories of criminal motivation. I go on to discuss a more satisfactory theory, involving the so-called “techniques of neutralization,” and its implications for business ethics.

In the economic literature on the firm, especially in the transaction-cost tradition, a sharp distinction is drawn between so-called “market transactions” and “administered transactions.” This distinction is of enormous importance for business ethics, since market transactions are governed by the competitive logic of the market, whereas administered transactions are subject to the cooperative norms that govern collective action in a bureaucracy. The widespread failure to distinguish between these two types of transactions, and thus to distinguish between adversarial and non-adversarial relations, has led many business ethicists to develop a “uniform” moral code. Yet in market transactions, the checks and balances built into the system of commercial exchange are such as to permit more instrumental forms of behavior. In administered transactions, by contrast, these checks and balances are absent, and thus the institutional context calls for much greater exercise of moral restraint. In this paper, I begin the task of developing an adversarial ethic for business. According to this view, the competitive environment licenses a greater range of “self-interested” behavior, but also imposes its own constraints on the strategies that firms may adopt in the pursuit of their interests.

In the economic literature on the firm, especially in the transaction–cost tradition, a sharp distinction is drawn between so-called “market transactions” and “administered transactions.” This distinction is of enormous importance for business ethics, since market transactions are governed by the competitive logic of the market, whereas administered transactions are subject to the cooperative norms that govern collective action in a bureaucracy. The widespread failure to distinguish between these two types of transactions, and thus to distinguish between adversarial and non-adversarial relations, has led many business ethicists to develop a “uniform” moral code. Yet in market transactions, the checks and balances built into the system of commercial exchange are such as to permit more instrumental forms of behavior. In administered transactions, by contrast, these checks and balances are absent, and thus the institutional context calls for much greater exercise of moral restraint. In this paper, I begin the task of developing an adversarial ethic for business. According to this view, the competitive environment licenses a greater range of “self-interested” behavior, but also imposes its own constraints on the strategies that firms may adopt in the pursuit of their interests.

Egalitarian liberal political philosophers have been at pains to show that there is a nonnegligible “place” for liberty within the framework of an egalitarian theory of justice. Thus, many have insisted that, when redistribution is required in order to achieve greater equality, assets should be transferred in the most abstract form possible, ideally through a system of cash transfers. In this article we argue that this strategy has the potential to generate significant violations of neutrality. The problem arises from the fact that individuals with certain rates of time preference often want to use social institutions as self-binding mechanisms and as a result may exhibit a preference for in-kind benefits or other institutional arrangements that are frequently misclassified as paternalistic. We argue that egalitarians who rely on cash transfers as a way of accommodating the demands of liberty do so at the expense of neutrality.

Few issues in business ethics are as polarizing as the practice of risk classification and underwrit­ ing in the insurance industry. Theorists who approach the issue from a background in economics often start from the assumption that policy-holders should be charged a rate that reflects the ex­ pected loss that they bring to the insurance scheme. Yet theorists who approach the question from a background in philosophy or civil rights law often begin with a presumption against socalled “actuarially fair” premiums and in favor of “community rating,” in which everyone is charged the same price. This paper begins by examining and rejecting the three primary argu­ ments that have been given to show that actuarially fair premiums are unjust. It then considers the two primary arguments that have been offered by those who wish to defend the practice of risk classification. These arguments overshoot their target, by requiring a “freedom to under­ write” that is much greater than the level of freedom enjoyed in most other commercial transac­ tions. The paper concludes by presenting a defense of a more limited right to underwrite, one that grants the legitimacy of the central principle of risk classification, but permits specific deviations from that ideal when other important social goods are at stake.

Any theory of practical irrationality necessarily imposes a division of labour between an account of the agent's intentional states and how these are formed, and an account of how these intentional states get applied in particular circumstances to choose a particular action. Nevertheless, questions that concern the content of the agent's beliefs and desires are still routinely lumped together with questions that deal with the way the agent chooses in the light of these beliefs and desires. This generates a number of pseudoproblems. Seeks to clarify some of them, by considering the internal structure of decision theory.

(1968 [1922]). It amounts to the claim that social phenomena must be explained by showing how they result from individual actions, which in turn must be explained through reference to the intentional states that motivate the individual actors. It involves, in other words, a commitment to the primacy of what Talcott Parsons would later call “the action frame of reference” (Parsons 1937: 43-51) in social-scientific explanation. It is also sometimes described as the claim that explanations of “macro” social phenomena must be supplied with “micro” foundations, ones that specify an action-theoretic mechanism (Alexander, 1987).