Thomas Donaldson

This paper, presented at the Conference on Value Issues in Business at Millsaps College, is divided into three parts. The first sketches the logic of the evolution of U.S. business and suggests reasons for its remarkable success. The second assesses the power of U.S. business in modern society, both from an economic and political perspective. The third attempts to formulate the underlying philosophy of U.S. business using ideals such as the work ethic, entrepreneurism, democracy, and equality. Some of these ideals, the paper suggests, are irreconcilable.

ABSTRACT:In response to criticism of empirical or “positive” approaches to corporate social responsibility (CSR), we defend the importance of these approaches for any CSR theory that seeks to have practical impact. Although we acknowledge limitations to positive approaches, we unpack the neglected but crucial relationships between positive knowledge on the one hand and normative knowledge on the other in the implementation of CSR principles. Using the structure of a practical syllogism, we construct a model that displays the key role of empirical knowledge in fulfilling a firm’s responsibility to society, paying special attention to the implications of the “ought implies can” dictum. We also defend the importance of one particular class of empirical claims; namely, claims from the field of economics. Even positive economic theory, which is often criticized for endorsing profits rather than values, can cooperate in intriguing ways with non-economic concepts in the implementation of CSR goals.

Most management researchers pause at the threshold of objective right and wrong. Their hesitation is understandable. Values imply a “subjective,” personal dimension, one that can invite religious and moral interference in research. The dominant epistemological camps of positivism and subjectivism in management stumble over the notion of moral objectivity. Empirical research can study values in human behavior, but hard-headed scientists should not assume that one value can be objectively better than another. In this article, we invite management researchers to rethink this presumption. We show how accepting at least a limited form of moral objectivity, namely, an epistemic orientation that seeks objective moral reasons, can benefit management research by 1. guiding research practice; 2. using patterns of moral objectivity as clues for formulating empirical hypotheses for psychological explanations; and 3. adding prescriptive power to empirical theories.

Abstract:Social contract is rapidly becoming one of the significant alternatives for analyzing ethical issues in business. Contractarian approaches emphasizing consent as a means of justifying principles can provide needed context for rendering normative judgements concerning economic behaviors. Current research issues include developing tests of consent for both hypothetical and extant social contracts, and empirically testing the assumptions of the major contractarian approaches. Open questions include exploring the relationship between contractarian business ethics and other approaches, such as stakeholder management and virtue based ethics; and analysis of the intersection of contractarian approaches with the findings and assumptions of the field of moral psychology. Finally, the managerial utility of social contract based approaches needs to be explored with emphasis on identifying “translator” concepts.

In an engaging and provocative paper, Linda Trevino and Gary Weaver spell out the differences between the methodological approach characteristic of the natural sciences on the one hand and that of normative inquiry on the other (Trevino and Weaver, 1991). Near the end of their paper they raise a haunting question that will have increasing significance as the management literature in ethics evolves: namely, “Can the two approaches be integrated?”As C. P. Snow (1962) noted, no one can deny either the stark differences between the two worlds of normative and empirical inquiry, or the mutual suspicion shown by their inhabitants. The methodology of natural science implies a non-normative, thoroughly descriptive vision of the world in which reality awaits discovery by the scientist prepared to use increasingly sophisticated techniques. In contrast, the methodology of normative inquiry, i.e., that of traditional moral philosophy, implies a world-vision in which most important issues are allocated to ethics, where empirical pursuits are frequently trivial and always require ethical guidance, and where empirical theories contain normative presuppositions unrecognized as normative even by their scientific adherents.

In an engaging and provocative paper, Linda Trevino and Gary Weaver spell out the differences between the methodological approach characteristic of the natural sciences on the one hand and that of normative inquiry on the other (Trevino and Weaver, 1991). Near the end of their paper they raise a haunting question that will have increasing significance as the management literature in ethics evolves: namely, “Can the two approaches be integrated?”As C. P. Snow (1962) noted, no one can deny either the stark differences between the two worlds of normative and empirical inquiry, or the mutual suspicion shown by their inhabitants. The methodology of natural science implies a non-normative, thoroughly descriptive vision of the world in which reality awaits discovery by the scientist prepared to use increasingly sophisticated techniques. In contrast, the methodology of normative inquiry, i.e., that of traditional moral philosophy, implies a world-vision in which most important issues are allocated to ethics, where empirical pursuits are frequently trivial and always require ethical guidance, and where empirical theories contain normative presuppositions unrecognized as normative even by their scientific adherents.

The large, professionally managed corporation is the distinctive economic institution of the twentieth century. It has proved uniquely effective in mobilizing resources and knowledge; increasing productivity; and creating new technologies, products, and services. Corporations have proliferated and grown because they meet the needs of various members of society: customers, workers and communities, as well as investors. The worldwide spread of corporate activity has produced an increasingly integrated and interdependent global economy.The success of the corporation, however, inevitably gives rise to questions and criticisms. Corporations are spontaneous and voluntary associations in which diverse individuals and interests collaborate for the creation and distribution of wealth. Some critics question whether organizations with the vast scale and scope of contemporary multinationals can be effectively controlled and directed toward these purposes. Others are concerned about the limited range of interests directly represented in corporate governance, and the lack of openness in corporate decision-making. And, as multinational corporations expand their activities and linkages, both corporate managers and their critics search for principles for action that transcend national borders and cultural values, and modes of operation that will achieve the broad purposes of the corporation on a long-term and sustainable basis, without undue conflict with diverse human and social norms.

This paper identifies six basic languages of morals and shows that while in general it is impossible to say that one moral language is better, some languages are better for the purpose of characterizing international corporate responsibility. In particular, moral languages that imly minimum rather than perfectionist standards of behavior, and which are not overly dependent on analogy with human moral psychology, are better than ones ranging broadly over both minimum and maximum standards and requiring analogy to human beings. Languages based in rights and duties, avoidance of harm, and social contracts, are better for understanding international corporate ethics than ones based in virtues, self control, or the maximization of human happiness.

On Sept 15, 2008, ‘‘Dark Monday,’’ the world witnessed a radical reshaping of Wall Street. Lehman Brothers fell toward bankruptcy; Merrill Lynch was sold to its rival, Bank of America; and AIG pleaded for $40 billion in government relief. Those calamities marched in step with a dismal parade including the US government takeover of Fannie Mae and Freddie Mac, the bailout of Bear Stearns, and the entire subprime debacle. We rightly blame Wall Street leaders for bungling business decisions, for misestimating risk and overloading banks with single-strategy investments. We now are living with the aftermath of these business mistakes. But how about ethical mistakes? Were they, too, part of the crisis?

Michael Porter argues that some nations manifest a competitive advantage deriving from key elements of their economic structure. Some nations are thus disposed by structure to possess what Porter calls a "competitive advantage of nations" (Porter, 1990). In this paper I examine the prospect of an ethical advantage of nations, and in particular, of a set of advantages that extend far beyond the simple dimension of trust so often discussed. I consider, further, how such a range of ethical features would be structured, and what the implications of those features would be. Three conclusions are reached: 1. Morality may create economic advantages for nations in ways that extend beyond the notion of an idealized market; 2. In order for ethics to drive economic advantage, ethical concepts must rise to the status of intrinsic value; and 3. If claims for national ethical success factors are true, then nations should attend to the issue of moral education.

In this reply to Professor Hodapp's criticism of my social contract theory, I focus on the misinterpretations I believe Professor Hodapp makes of the social contract tradition as well as my version of the contract. By misinterpreting the underlying purpose of social contract theory, he neglects the contract's heuristic or functional dimension, something that leads him to downplay the importance of the contract as a conceptual catalyst. And by adopting an overly narrow notion of rationality, he imagines circularity where none exists. Later, Professor Hodapp questions the effect of the contract upon individual liberties, and in doing so broaches a critical issue. But I attempt to show that his concerns are eliminated by close attention to the theory itself.

How should highly-placed multinational managers, typically schooled in home country moral traditions, reconcile conflicts between those traditions and ones of the host country? When host country standards for pollution, discrimination, and salary schedules appear substandard from the perspective of the home country, should the manager take the high road and implement home country standards? Or does the high road imply a failure to respect cultural diversity and national integrity? In this paper, I construct and defend an ethical algorithm for multinational managers to use in reconciling such international normative conflicts.

Hedge funds are targets of mounting ethical criticism. The most salient focuses on their opacity. Hedge funds are structured to block transparency for strategic reasons: that is, they systematically deny information to their own investors and to governments in order to protect their competitive advantage, even though the information they hide holds tremendous significance for the interests of both groups. In this article I will detail the ethical allegations made against hedge funds, showing why their opacity creates intractable conflicts that cannot be resolved through government regulation. Sometimes opacity be regulated away; but with hedge funds I show why it cannot because of “regulatory recalcitrance.” In the end a form of voluntary moral coordination, a form of “microsocial contract” instituted as an industry standard, is required relief. In a word, the solution to hedge fund opacity is ethical.

Hedge funds are targets of mounting ethical criticism. The most salient focuses on their opacity. Hedge funds are structured to block transparency for strategic reasons: that is, they systematically deny information to their own investors and to governments in order to protect their competitive advantage, even though the information they hide holds tremendous significance for the interests of both groups. In this article I will detail the ethical allegations made against hedge funds, showing why their opacity creates intractable conflicts that cannot be resolved through government regulation. Sometimes opacity be regulated away; but with hedge funds I show why it cannot because of “regulatory recalcitrance.” In the end a form of voluntary moral coordination, a form of “microsocial contract” instituted as an industry standard, is required relief. In a word, the solution to hedge fund opacity is ethical.