Seeing the elephant: an organizational perspective on corporate moral agency

“Out of timber so crooked as that from which man is made nothing entirely straight can be built.”

Immanuel Kant (1784)(1)

“[B]ecause organized groups of human beings are limited in ability to agree on goals, to communicate, and to cooperate .. . organizing becomes for them a problem.”

Herbert A. Simon (1957)2

INTRODUCTION

Over twenty years ago, Russell B. Stevenson, Jr. observed that the legal concept of the corporation, the treatment of an organization as a “legal person,” was “one of the most potent concepts in history.”(3) This potency is manifest not only by corporations having become the dominant actors in the world economy, literally transforming our world, and with it, our lives. It is also manifest in the power of this idea to dominate our imaginations, to perplex and bedevil us, and to shape our very thought.

What is this “artificial being, invisible, intangible and existing only in contemplation of law,”(4) this entity with “no soul to be damned, and no body to be kicked?”(5) It has been likened to a machine,(6) described as an “intentional system,”(7) and dismissed as a legal fiction,8 which serves as nothing more than a “nexus of contracts” among those human beings whose activities cluster around it.(9) Is it nothing more than the sum of its parts,(10) something less than the sum of those parts,(11) or a real entity with characteristics of its own that are not derivable through such simplistic exercises in addition and subtraction?(12) Is it a moral, as well as legal, person with all, or at least some, of the moral duties and rights that we attribute to human persons?(13) Before we subject such a “person” to “the law’s ultimate threat,”(14) the criminal sanction, should we require proof of the same level of moral culpability that we commonly require when human persons stand in the dock?(15)

Such questions have been grist for the mills of legal scholars and philosophers for well over a century, and the debate shows no signs of abating. Because so much is at stake, it would be unrealistic to expect that widespread agreement will ever be reached on a particular set of answers. Nonetheless, the answers we accept, even if only tentatively, are important because our notions about the nature of corporations must inevitably shape our positions on crucial questions relating to corporate social responsibility(16) and the most effective means of exerting social control over corporations.(17)

Our understanding of the nature of corporate reality also, we believe,(18) has critical implications for the field of business ethics. An accurate understanding of intraorganizational reality is a necessary precondition of justified ascriptions of corporate moral culpability.(19) If corporations as such have moral duties, then that fact should inform business ethics instruction,(20) and if such instruction is effective,(21) it may produce positive changes in corporate behavior.(22) If, on the other hand, the only possessors of moral duties are the corporation’s human constituents, we cannot reasonably expect to change their behavior for the better without an accurate understanding of the organizational context that shapes it.(23) Yet much of the discussion among business ethicists is focused on the admittedly important, but relatively rarified, topic of ethics theory on the apparent assumption that resolution of the theory debate among ethicists and the subsequent embrace of the victorious theory by corporations will ineluctably lead to improved corporate behavior.(24) However, as Jeffrey Nesteruk has observed, “the corporation as an environment has a more direct impact on the ethical choices of individuals within the corporation than traditional ethical theories.”(25)

Even when business ethicists think ontologically about the corporation, as many who have addressed the issue of corporate moral agency have done, their efforts tend to exhibit a preoccupation with natural persons that may get in the way of a fuller understanding of organizational reality.(26) The law(27) and traditional economic theory(28) have long suffered from a similar tendency to think anthropomorphically about corporations, a tendency which may be explained by a number of factors. Prominent among these may be traditional notions of culpability that emphasize the guilt of the individual(29) and the sense many people have that organizations do have a reality apart from that of their members.(30)

Whatever organizations may be, they are not people. Neither are they machines, though at times they may exhibit attributes that we properly associate with persons and machines. Those who have thought of them as such, like the proverbial blind men grasping the pachyderm, have a hold of parts of the corporate beast but have an recomplete sense of the animal in its entirety. Daniel Dennett has noted that “metaphors are tools of thought,” making it imperative that we equip ourselves with the best tools available.(31) Those who would understand and change corporate behavior must use all of the tools available to them.

In the pages that follow, we do not propose to advance any new metaphors about the corporation. What we do propose is to use organization theory to take a look inside the corporation at how people actually behave and how corporate decisions actually get made. We will then ask what light corporate reality thus depicted can shed on legal and philosophical models of the corporation in general, and on the questions of corporate moral agency and the level of culpability that should be required for corporate criminal liability in particular. We will also make some observations about the import that all this has for business ethics instruction. We do not expect to utter the final word on any of these topics. We merely hope to get a little better picture of the elephant and whatever incremental increase in understanding that such a picture can provide. To do so, we must first take a look at others’ pictures of the beast.

LEGAL PICTURES OF THE CORPORATION

What Is It?

American law’s theories of the corporation seem to be the product of two powerful forces–social reality and political interest.(32) The earliest legal theory of the corporation, the concession/fiction theory, finds concise expression in the statement from Chief Justice Marshall quoted in the Introduction.(33) Corporations are artificial entities with existences separate from those of the human persons who form them (fictions), entities that exist solely at the sufferance of the state which enabled their creation (concession).(34)

In the early days of the nineteenth century when incorporation was only possible through a special charter granted by the state legislature (which commonly limited corporate purpose, duration, and sometimes, capital),(35) it may have been descriptively accurate to see corporations solely as creatures of the state.(36) As the American economy grew, however, the demand for corporate charters exploded, so that “by the 1840’s and 1850’s … legislatures would have been swamped unless the job were made more routine.”(37) The result was the rise of general incorporation laws, which “made the corporate form a freely available right, rather than a privilege of the few.”(38)

Once incorporation became the right of the many rather than the privilege of the few, the state lost some measure of actual and conceptual control over corporations. Gone was much of the power to restrict corporate purpose and life

To the aggregate theorist, the corporation is nothing more than “the sum of its human (and perhaps nonhuman) parts.”(41) The corporation has no separate existence, it is merely “a concept, a mental construct, used to classify different relationships between individuals.”(42) This emphasis on the transparency of the corporation leads aggregate theorists to the conclusion that one cannot meaningfully distinguish between the rights of a corporation and those of its human constituents.(43) This emphasis on individual rights also led to a new way of thinking about corporate creation-inherence theory, which suggests that “men have a natural right to form a corporation by contract for their own benefit, welfare, and mutual self-interest.”(44)

Attractive as it may have been to its advocates, aggregate theory appeared(45) to enjoy only a brief period of ascendancy. By the turn of the century, its individualist, contractualist perspective seemed obsolete in the face of the rise of the large, management-controlled corporation.(46) This development provided a new context in which “individual corporators were responsible neither for much of the growth within a given corporation nor for the adverse consequences of corporate actions.”(47) Instead, a corporation’s actions came to be recognized as “autonomous, the product of its organization and management.”(48) Such corporations appeared to many to be real entities, not mere aggregates of their human components. Some likened them to organisms,(49) while others spoke of a group will or corporate personality.(50) The arguments advanced to prove a separate corporate existence ranged from observations about the changes in individuals and individual behavior that occur when people interact in organized groups,(51) through arguments appealing to the felt reality of corporate bodies,(52) to linguistic arguments demonstrating that our common usage treats corporations as real entities,(53) indeed that we often refer to them as we would to natural persons.(54) Whatever their differences, what real entity theorists had in common was their insistence “that corporations are real, naturally occurring beings with characteristics not present in their human members.”(55) They also had at least one point of agreement with their aggregationist predecessors: corporations are naturally occurring entities the existence of which law recognizes, not artificial entities that law creates.(56)

Real entity theory also fell by the wayside as American legal thinkers came under the influence of John Dewey and other pragmatists, who argued that competing legal rules should be assessed by the consequences of their adoption rather than by their congruence with any particular theory of the corporation.(57) Pragmatism, of course, had its own problems,(58) but its influence and the ensuing period of theoretical desuetude prevailed until the 1980s, when writers associated with the law and economics movement resuscitated(59) aggregate theory under its most recent guise, the nexus-of-contracts theory.

The nexus-of-contracts theory has sparked a “revolution”(60) in the legal theory of the corporation. In its most common version, the theory defines the corporation as “a connected group or series of contracts among the firm’s participants.”(61) The “contracts” referred to by the theory reflect the economist’s notion of the term rather than the law’s definition,(62) and the corporation’s human units likewise derive their attributes from economic theory.(63) To nexus-of-contract theorists, the corporation is at best merely a legal fiction “which serves as a nexus for contracting relationships.”(64)

Like all other revolutions, this one has an agenda. If the corporation is nothing but a nexus of contracts, why should the contractors be denied the freedom to design their contracts as they desire? This reasoning leads contractualists to argue that corporation law should be transformed into a set of default rules that the parties are free to change by voluntary agreement.(65) It also suggests to them that a corporation can neither be a moral agent nor be said to have social responsibilities. The following statement by Daniel Fischel captures it nicely:

A corporation . . . is nothing more than a legal fiction that serves as a

nexus for a mass of contracts which various individuals have

voluntarily entered into for their mutual benefit. Since it is a legal

fiction, a corporation is incapable of having social or moral obligations

much in the same way that inanimate objects are incapable of having

these obligations. Only people can have moral obligations or

responsibilities ….(66)

Whether or not corporations have social or moral obligations, the powerful impact of their actions on society has left us with no choice but to try to control their behavior. Here too our conceptions of the nature of the beast have played a dominant role in shaping legal thinking, and here too confusion and disagreement have been the order of the day.

How Can We Make It Behave?

Although American law in our century has increasingly resorted to the criminal law as a corporate control device,(67) our criminal law initially rejected the idea that a corporation could be criminally responsible.(68) The criminal law’s traditional focus had always been on individual offenders,(69) and the notion of organizational criminal liability raised significant conceptual problems. How, after all, could legal fiction have the mens rea(70) required for common-law crimes if it lacked the “mind” necessary to entertain a criminal intent?(71) And how could one impose imprisonment, the primary common law penalty, on something that lacked a corporeal body?(72) Fortunately for the law, the need to grapple with these conceptual issues initially was not great because early corporations were small in size and few in number. Thus, when wrong doing occurred, it was “usually not hard to reach into the organization and locate a meaningfully responsible individual, a `culprit,’ and apply the sanctions of the law to him.”(73)

This happy state of affairs did not, however, long endure. During the latter half of the nineteenth century corporations rapidly grew in size, power, and number, rendering exclusive reliance on individual liability less feasible.(74) As often happens in the course of legal development, conceptual concerns yielded to the claims of expediency.(75) The first step down the slippery slope was the imposition of corporate liability for “public welfare offenses,” which required no proof of mens rea on the part of the defendant.(76)

Offenses requiring proof of malice, intent, or willfulness remained a problem until the courts hit upon the device of imputing the intent of corporate agents to the corporate entity itself. This was done by applying to criminal cases(77) the tort doctrine of respondeat superior, which holds principals civilly responsible for the torts of their agents.(78) Today, it is generally acknowledged that a corporation can be found guilty of almost any criminal offense.(79) In federal cases this vicarious liability(80) may be premised on the wrongful intent of any corporate employee,(81) even if that employee’s act contravened express instructions or company policy.(82) Some federal courts have gone so far as to base criminal liability on collective or composite mens rea where no single employee can be proven to have possessed the wrongful intent.(83) Starting from a point where we eschewed corporate liability in favor of an exclusive focus on individuals, we have arrived at the point where we hold companies liable though no culpable individual can be identified.

Critics have, of course, challenged these developments, arguing that vicarious liability abandons the traditional emphasis on moral culpability that differentiates criminal law from tort law,(84) and that proof of fault on the part of a corporate employee bears no necessary relationship to fault on the part of her employer.(85) Some have argued that only individuals should be subject to the criminal sanction

Whatever the intrinsic merits of these arguments, it seems unlikely that we will experience a significant reversal in the expansion of corporate criminal liability any time soon. This realization has led other critics to suggest that we should focus our inquiry on the development of defensible standards of organizational culpability that are not necessarily tied to the criminal law’s individualistic origins and assumptions.(88) In other words, if we are going to impose criminal liability on organizations, how might organizational (as opposed to individual) moral culpability manifest itself?

One might understandably be tempted to ask, however, whether the effort is worth the candle. Asking what form organizational culpability might take necessarily involves asking the more fundamental and difficult question whether organizations can be moral agents. Some have suggested that the only good reason for lifting that rock is to gain enhanced control of corporate behavior.(89) Yet we have already seen that, whether justified or not, we do in fact impose criminal liability on corporations without requiring proof of organizational culpability. So what is to be gained by entering the corporate moral agency fray?

Part of the answer lies with the very good reasons for supposing that attempts to impose criminal liability in the absence of moral culpability are ill-advised and doomed to failure, the most prominent of which(90) are captured in this observation by Herbert Packer:

[T]o punish conduct without reference to the actor’s state of mind

is both inefficacious and unjust. It is inefficacious because conduct

unaccompanied by an awareness of the factors making it criminal

does not mark the actor as one who needs to be subject to punishment

in order to deter him or others from behaving similarly in the

future, nor does it single him out as a socially dangerous individual

who needs to be incapacitated or reformed. It is unjust because the

actor is subjected to the stigma of a criminal conviction without

being morally blameworthy. Consequently, on either a preventive

or a retributive theory of criminal punishment, the criminal sanction

is inappropriate in the absence of mens rea.(91)

Even if there were no reason to doubt the ultimate efficacy of the imposition of corporate punishment in the absence of corporate moral fault, we would still have some reason for concern about the moral price at which such efficacy is purchased. Any imposition of punishment on the guilty necessarily results in some harm to the innocent,(92) but the punishment of groups is especially problematic in this regard,(93) a fact that should motivate us to avoid such harms unless they are truly justified. Yet traditional approaches to corporate punishment manifest an all too obvious tendency to punish the innocent in the name of deterring the guilty.(94)

Further, as Patricia Werhane has observed: “[E]ven if legal sanctions and incentives do produce appropriate corporate performance, we must give an adequate account of the ontological nature of the corporation before we can talk about the internal affairs of corporations and to make sense out of the relationships of employees to the organization.”(95) Law has not been terribly effective at controlling corporate behavior,(96) however, and a major factor in its ineffectiveness has been a lack of understanding of the nature of the corporate beast. Legal efforts at corporate control would therefore stand to gain from the ontological inquiry Werhane advocates,(97) as a brief look at traditional legal approaches to corporate control will confirm.

Until quite recently,(98) legal corporate control strategies have largely been premised on the neoclassical economic model of the corporation.(99) Corporate behavior was assumed to mirror that of a unitary,(100) rationally acting,(101) profit-maximizing(102) entrepreneur. The genesis of most corporate wrongdoing was assumed to lie in the quest for profits.(103) Success-oriented managers,(104) subjected to intracorporate pressures for conformity,(105) and operating in an environment where decisionmaking is often impersonal and bottom-line driven(106) and the gravity of white-collar offenses is frequently trivialized,(107) respond to pressures from shareholders,(108) superiors,(109) and competitors(110) by doing “whatever it takes” to meet corporate profit goals.

If this Rational Actor Model accounts for most corporate misbehavior (it plainly accounts for some of it), then the law’s traditional reliance on financial penalties to punish corporate defendants is hardly misplaced. Meaningful profit threats(111) should induce a rational profit-maximizer to avoid proscribed behavior.(112) But effectively bringing profit threats to bear on corporations is an enterprise rife with problems, prominent among which are the questionable impact fines have on the guilty and their undeniable impact on the innocent.

If individual managers are responsible for the wrong for which the organization is being fined, they are likely to feel little direct impact from the fine’s imposition.(113) If they can, corporations will pass the cost of fines on to consumers in the form of price increases.(114) If competitive forces prevent a price increase,(115) shareholders will end up bearing the brunt of fines.(116) Yet the shareholders of large, publicly-held corporations are unlikely to have had either any connection with the wrong that occasioned the fine or any effective power to have prevented it.(117) One can, of course, argue that fines are not unjust if they merely serve to deprive shareholders of ill-gotten gains from the violation,(118) but many shareholders will have acquired their shares after the wrong at issue,(119) having derived no benefit from it and having paid too much for shares purchased in ignorance of the contingent liability the violation created.(120)

One can also argue that the risk of such punishment is simply one of the many risks one assumes when buying stock,(121) but this rationale will not as easily apply to the harms other innocents may endure as a consequence of a corporate fine.(122) A fined company’s employees, suppliers, lenders, and the communities in which it operates may all feel the bite of a fine. To be sure, all may have benefited in some way from gains attributable to corporate wrongdoing,(123) but it is harder to analogize them to the buyer of a raffle ticket “who in return for possible gain assumes the risk that his ticket will prove to be worthless”(124) than it is an investor who voluntarily decides to purchase a particular company’s stock from the almost limitless menu of available investment alternatives. The raffle ticket analogy is not even a very good fit for the myriad of “investors” whose pension funds are invested in equity securities and who exercise scant control over their fund managers’ specific investments.

Thus, attempts to inflict financial punishment on a corporation inevitably result in the imposition of punishment on the individuals who depend on it.(125) The larger the fine imposed, the greater the likelihood that innocents will be harmed. Additionally, very large fines may indeed be required to produce deterrence if critics are correct in their argument that most fines imposed on corporations are inadequate(126) and are therefore likely to be treated as a cost of doing business.(127) Even large fines may be discounted if corporations perceive that the odds of their imposition are not great.(128) Fines that exceed the firm’s ability to pay may not even produce adequate deterrence,(129) though they would be certain to inflict significant harm on innocents whose interests are linked with the firm’s existence(130) if courts and juries could be induced to impose them.(131) Neither would the wholesale abandonment of fines in favor of an alternative punishment device such as negative publicity(132) altogether eliminate the problem given that such publicity is likely to stigmatize all corporate employees for the crimes of a few.(133)

There may be those who believe that the random infliction of punishment on the innocent is not too great a price to pay for enhanced corporate control. Even such individuals, however, should ask if the law’s Rational Actor model assumptions about the nature of the corporate beast are always accurate. If corporations at times pursue values other than profit-maximization,(134) or at times act irrationally,(135) then we should have concerns about the odds that they will respond appropriately to financial threats or penalties.(136)

Philosophers pursuing the question of corporate moral agency also should concern themselves with the actual nature of the corporation because the inquiry into any entity’s capacity for moral agency necessarily must involve questions about that entity’s qualities. As the following sections illustrate, however, more than a few of those who have spoken are grasping the Rational Actor part of the beast.

Philosophical Pictures of the Corporation

The Opponents of Corporate Moral Agency

Any discussion of the ideas of the opponents of corporate moral agency should probably start with John Ladd’s well known work on rationality in formal organizations.(137) Official decisions in such organizations are “impersonal,” Ladd says, because they are attributed to the organization rather than to the decisionmaker.(138) Because the organization’s identity and continuity are theoretically unaffected by the departure of any individual decisionmaker, such organizations are in a sense “immortal.”(139)

Ladd explicitly eschews any inquiry into corporate actuality(140) in favor of an analysis based on the “‘ideology’ presupposed by organizational decision-making.”(141) The centerpiece of this bureaucratic ideal is the notion of the detached, objective, decisionmaker who acts solely in the interests of the organization as defined by its goals.(142) Ladd acknowledges that there may be a gap between an organization’s stated goals and its actual goals(143) and that there may even be “a struggle over the goals of an organization,”(144) but such untidy realities have no impact on his analysis.(145) Prevalent moral notions, like extant statutes and regulations, figure in the decision-maker’s calculations, but only as features of the organization’s environment and only to the extent that “they affect the efficiency of the organization’s operations.”(146)

From these premises, Ladd concludes that organizations are “like machines,”(147) and as such neither they nor their human cogs can be expected to “comply with the principles of morality.”(148) It makes little sense to say that a machine can have moral responsibilities, and true to the logic of his argument, Ladd rejects such a possibility.(149) Without moral persuasion as an organizational control option we are left only with coercion,(150) which can be freely employed against organizations because the flip-side of having no responsibilities is having no rights.(151)

Even without whatever light our inquiry into organizational reality can shed on his ideas, Ladd’s account seems incomplete in a number of ways. First, given that attempts to punish organizations inevitably punish their human components,(152) how can we bring justifiable coercion to bear on organizations if we are constrained in that exercise by the rights of their individual members?(153) Ladd’s account also denies the possibility that any organization could adopt moral action as an explicit part of its goal set,(154) but many organizations claim to have done so, as such pronouncements are a regular feature of organizational mission statements and ethics codes.

Of course, far more organizations “talk the talk” than “walk the walk,” but it is also true that moral considerations do appear to enter into some organizations’ decisions at least some of the time.(155) This may perhaps be due to purely instrumental considerations,(156) but even so, it would appear to us that a rational organization, even in Ladd’s narrow sense of the term, would be more likely to be able to recognize such instrumental considerations and to translate them into effective action than would a non-rational organization.(157)

All of which is not to say that Ladd’s “machine” model is utterly without descriptive power, but rather to suggest that it is too limited to capture much of the behavioral variety exhibited by real organizations.(158) If organizations are sometimes less than machine-like, then arguments that derive from organizations’ machine-like attributes may need to be reformulated if they are to support the same conclusion in the case of organizations (or given organizational decisions) in which such attributes do not play a prominent role.(159)

One need not, however, adopt such a simplified model of organizations to reach Ladd’s conclusion on the ultimate question of corporate moral agency. Michael Keeley admits that organization theorists have long viewed organizations as “persons” of sorts, but expresses concerns about the “unattractive social implications” of doing so.(160) He criticizes both John Ladd’s and Patricia Werhane’s(161) portrayal of corporations as “impersonal arrangements for the efficient attainment of particular goals”(162) because even their simplified portraits “grant to organizations the very sort of property around which a theory of moral agency can be built–namely, the property of intentionality.”(163)

Instead, Keeley says, organizations “have no intentions or goals at all”(164) and there is therefore “not much point in pretending … that organizations resemble persons in any significant way.”(165) Official organizational goal statements may not reflect the true nature of the organization’s operations,(166) and we cannot necessarily infer true goals by looking at actual operations because we cannot isolate the organization’s intent from its behavior.(167) To be sure, individuals associated with the organization have goals for it, but in large organizations these goals are likely to be diverse and conflicting.(168) Organizations do, of course, “produce events or consequences”(169) that are attributable to them qua organizations.(170 )But to say that an organization can produce a given effect, such as profits, is not necessarily to say that it intended that effect because it is impossible to separate consequences intended by the organization from other consequences “without resorting to the intentions of participating individuals.”(171) While it may be “fairly clear that organizations have some collective properties of their own .. . [i]t is not clear .. . that intentionality is among them.”(172)

Unlike John Ladd, Keeley’s unwillingness to extend moral agency to corporations does not lead him to forego the pleasure of subjecting them to moral evaluation.(173) He advocates “a Lockean trust” notion of organizations as “nexes of power and resources that exist to promote the welfare of participating individuals, who have overwhelming claims against the organization.”(174) The moral-person approach, Keeley admits, assigns responsibilities to organizations too, but does so at the cost of assigning them “inordinate rights to pursue organizational welfare.”(175) Keeley’s desire for corporate control motivates his criticism of David Ozar’s suggestion that corporations “may be excused from moral responsibility under conditions similar to those constituting excuses for persons”(176) and his admonition to others that corporate moral personhood carries too high a price tag in lost corporate control.(177)

Because Manuel Velasquez voices similar concerns even more strongly than Keeley, we will defer most of our observations about such concerns until we treat Velasquez’s arguments.(178) At this point we will simply observe that Keeley’s argument smacks more than a little of the desire to “have your cake and eat it too”(179) and note the instrumental approach to moral rights implicit in his argument. Consequentialists may find nothing untoward about the proposition: “If recognizing that X has moral rights provides too little gain at the cost of too much control, deny that X has rights,” but it is not our impression that many of those who would deny moral personhood to corporations readily embrace consequentialism in cases where X is not a corporation.(180)

We will also defer until later the question of whether it is necessary to analogize organizations to persons in order to subject them to moral evaluation.(181) We do, however, wish to raise some initial logical concerns about Keeley’s arguments relating to organizational goals and outcomes, though we find little fault with many of his premises. For example, the conclusion that the organization has no goals of its own does not logically follow from the undisputed fact that individuals may have various goals for the organization.(182) Neither does the fact that its members may embrace a variety of goals necessarily mean that no organizational criterion exists for making judgments about the relative validity of various goals. Surely, the sine qua non of any business corporation is to generate profits for its owners.(183)

Keeley’s argument about the inseparability of organizational consequences from individual intentions is similarly vulnerable. If organizations can meaningfully be said to have an intent, that some individuals may at some times have an identical intent with reference to the same action(s) would hardly render the organization’s intent any less its intent.(164)

Pointing out logical problems with Keeley’s arguments is not, of course, the same as disproving his ultimate conclusion regarding corporate moral agency. It is merely to raise questions about the path by which he arrived at that conclusion. Manuel Velasquez’s arguments, however, amply illustrate the possibility of coming to the same conclusion via a very different path, one far less grounded in the supposed realities of organizations.

The title of Manuel Velasquez’s well-known essay, Why Corporations Are Not Morally Responsible for Anything They Do,(185) plainly states his position on the corporate moral agency question. Unlike Michael Keeley, Velasquez is willing to forgo moral judgments about organizations in favor of an exclusive focus on their human constituents.(186) He arrives at this individualistic position by starting with a definition of “moral responsibility” derived from the classical common law notion that the fusion of mens rea and actus reus is necessary for criminal responsibility.(187) Under this traditional standard an accused should only be convicted if:

(1) he personally brought about the wrongful act (i.e., the act was

the conventional or causal result of his own bodily movements) or

he personally helped to bring it about or he failed to prevent the

act when he could have and should have, and (2) he did so intentionally

(i.e., he was in voluntary control of the bodily movements

that resulted in the act and he knowingly carried out those bodily

movements in order to bring about that act or knowingly refrained

from carrying out the bodily movements that could have prevented

the act).(188)

According to Velasquez, the philosophical roots of the common law position are traceable to the scholastic doctrines on “imputability

The fact that blame and punishment visited on the organization will inevitably be felt by its human members is acknowledged as a matter for concern,(197) but this need not leave the victims of corporate wrongs totally without remedy where punishable human wrongdoers are absent. In such cases Velasquez assures us that it is acceptable to impose “compensatory” responsibility on the organization.(198) This is so even if its impact is felt by innocent organization members because such responsibility does not carry with it the stigma associated with criminal punishment(199) and because we often deviate from the principle that those who are morally responsible for a harm should pay for it when “considerations of efficiency, fairness, ability to pay, causal connections, or risk distribution” lead us to do so.(200)

Furthermore, Velasquez admonishes us that there are two reasons why it is not just mistaken, but positively “dangerous” to attribute moral agency to corporations.(201) If we accept corporate moral responsibility, “we will tend to be satisfied with blaming or punishing only the corporate entity”(202) with a consequent loss of effective social control of corporate behavior.(203) Worse yet, he argues, “viewing the corporation as an entity that can ‘act’ and ‘intend’ like a large-scale personality will result in our being tempted to look upon the corporation as a larger-than-human person whose ends and well-being are more important than those of its members.”(204) The consequences of yielding to this temptation, Velasquez says, will be dire indeed,(205) and those who take a step down the slippery slope of acknowledging corporate moral agency “are unwittingly allying themselves with this new form of totalitarianism.”(206)

Any argument that reaches such disturbing conclusions deserves more than a bit of scrutiny. The most obvious starting point for such scrutiny is the beginning of Velasquez’s argument, which seems to us to stack the deck against corporate moral agency by starting with an explicitly human-centered notion of moral agency. Now it may be that only humans are capable of being moral agents, but assuming that (as Velasquez’s argument implicitly does) is not the same as proving it. Also, if organizations are capable of being morally responsible for some or all of their actions, it is not immediately obvious why their culpability should manifest itself in ways identical to those in which human culpability is manifested.(207)

There is a subtle confusion here, and it is one that afflicts much of the discussion of corporate moral agency. The fundamental question that concerns us here is not the question that concerned the common law, which was the identification of those circumstances in which we can conclude that human actors (who are presumed to be capable of moral agency) have manifested the degree of moral culpability appropriate to the imposition of the criminal sanction. What is at issue is whether, to borrow the words of English philosopher G.J. Warnock, a corporation is the kind of entity that may be “a proper or possible object of moral evaluation.”(208) Being a proper object of moral evaluation is a necessary, but not sufficient, condition of “moral responsibility,”(209) however the latter is defined.(210) So, the proper approach would be to ask what kinds of entities are proper objects for moral evaluation,(211) and whether corporations can ever(212) fairly be said to be such an entity.

Even if he were not guilty of putting the cart (culpability) before the horse (proper object of moral evaluation), Velasquez oversimplifies the criminal law (which, rightly or wrongly, has overcome the very problem Velasquez finds insurmountable) and makes rather too much of the traditional “act” requirement. The major reason for requiring the commission of an act “is the notion that the criminal law should not be so broadly defined to reach those who entertain criminal schemes hut never let their thoughts govern their acts.”(213) Yet no one has suggested holding corporations responsible where no “act” (or omission) on the part of any corporate agent has taken place. The problem in the corporate context is whether all such acts may fairly be attributed to the organization.(214) True, when a corporation “acts” it cannot do so through a body that it does not have, but it is also worth noting that the “act” required of even human actors is incredibly minimal, given that it need “consist of nothing more than the movement of the tongue so as to form spoken words.”(215) Nor does Velasquez’s discussion of intentionality take into account the existence of criminal liability for negligence, strict liability offenses, or vicarious liability offenses, all of which both fail to fit the traditional model(216) and are commonly used against corporations and their employees.

A few comments are also in order about Velasquez’s own corporate control strategy. A focus on individual wrongdoers is fine, where such exist and are identifiable. Indeed, the effectiveness of such a focus is likely to be enhanced by an investigation into the nature of organizational reality.(217) For many reasons, however, individual wrongdoers may not be identifiable in an organizational context.(218) It is for this reason and considerations of efficiency,(219) and not due to the availability of corporate criminal liability, that prosecutors sometimes pursue organizations rather than organization members. Neither, we hasten to add, is there any evidence that the decades of availability of organizational liability have produced any significant diminution in calls for individual criminal liability on the part of corporate officers. The desire to hold a human actor responsible seems to us to be too basic a part of the human psyche ever to take a psychological back seat to notions of exclusively corporate accountability.

Velasquez is, of course, right when he says that we have, for a variety of reasons, departed from linking moral responsibility and civil responsibility. For employers, the creation of respondent superior marked the first giant step down that particular slippery slope. He is also correct in observing that civil punishment does not, in theory, carry with it the stigma associated with a criminal conviction. However, to say that we have done something is not the same as saying that we should have done it, and one might ask whether we really believe that the general public finely distinguishes highly publicized damage awards from criminal fines when it goes about the business of stigmatization. One also has to wonder whether a shareholder who has lost a substantial part of her investment or an employee who has lost his job due to a large judgment’s impact on the firm will feel better about it if the judgment comes without the label “fine.”(220)

What of Velasquez’s assertion that those who advocate some form of corporate moral agency are the unwitting allies of totalitarianism? To understand his depth of concern one must trace his statement’s lineage to the post-World War II criticism of “organicist” theories of society such as Hegel’s Idealist Theory of the State,(221) which some critics linked to the emergence of totalitarianism.(222) Such fears illuminate not only Velasquez’s concern that any tendency to treat an organization as some sort of “super person” has negative implications for the rights of the real persons who are its constituents, but also one of the most fundamental reasons why many philosophers have doggedly insisted that guilt is, and must remain, personal.(223) If guilt is collective, then individuals may fairly be punished for the real or imagined wrongs of the collective, regardless of their personal qualities or behavior. The Holocaust and the more recent horrors in Rwanda and Bosnia are fearful reminders of the dangers implicit in such thinking,(224) and our discussion of those who support some form of corporate moral agency will make clear their desire to avoid lending any support to such an outcome.(225)

Does saying that corporations are moral agents of some sort necessarily entail saying that their rights are somehow superior to those of human beings? Not as a matter of logic, certainly. As a general proposition, however, we may be tempted to put the group’s interests ahead of those of individuals. Whatever inclinations we have in this direction, however, probably exist independently of any theory of corporate moral responsibility we may adopt. To the extent that their origins are in any way intellectual, such inclinations may stem from an intuition that collectives, embodying the interests of the many, may have interests that transcend those of the individual member,s of that collective. Long before corporations as we know them existed, the leaders of large collectives — public or private, secular or religious — demonstrated a tendency to exalt the interests of the collective over those of individuals. A sociobiologist would suggest that only organizations that made such choices survived, and that the tendency for individuals to sacrifice their interests to those of the group has been a fundamental engine driving our species’ survival.(226)

Those who share Velasquez’s ultimate concern of preserving a moral space for individuals in an organizational society should ask whether denying that organizations are capable of any sort of moral agency is the most reliable means of achieving that end. There is, after all, more than a bit of irony in the fact that the philosophical opponents of corporate moral agency find themselves in agreement with legal “nexus-of-contract” theorists whose political agenda of freeing corporations from state control they can hardly be supposed to share. If corporations were acknowledged as moral agents of a sort, could we not say that they face moral constraints on the pursuit of their welfare (which would, inter alia, affect their relations with employees) just as we assert that individuals face such constraints in their pursuit of personal or group welfare? In fact, might not even an organicist view of society and organizations be more conducive to notions of corporate social obligation than the view that organizations are mere conduits through which groups of individuals pursue their own interests?(227)

What of those individual corporate employees on whom Velasquez would have us focus our attention for liability purposes? Does our sense of contemporary corporate reality suggest to us that they are automatons whose excessive organizational loyalty puts them in peril of being “swallowed up” by the organizations they serve? One need not read our portrayal of intraorganizational reality(228) to have some doubts on that score. Anyone who has read Robert Jackall’s best seller, Moral Mazes,(229) has grounds to wonder whether egoism has “swallowed up” loyalty in today’s organization.(230) To be sure, corporations have long attempted to instill such loyalties in their employees whatever the philosophical legitimacy of doing so. There is, however, reason to think that, for better or worse,(231) they have had only limited success. Thus, for all Velasquez’s purported focus on the individual, his account of the corporation gives off more than a whiff of oil from John Ladd’s machine. As the following examination of some prominent proponents of corporate moral agency will demonstrate, however, Velasquez is far from alone in settling for an oversimplified view of the complex phenomenon of the corporation.

The Proponents of Corporate Moral Agency

Whereas Manuel Velasquez started his journey to the conclusion that corporations could not be moral agents with legal notions of individual culpability, Peter French begins his trip to the opposite conclusion(232) by charging that the use of the concept of legal personhood has encouraged “an anthropocentric bias that has led to the general belief that corporations just cannot be moral persons.”(233) According to French, “[t]he concept of corporate legal personhood under any of its popular interpretations is … virtually useless for moral purposes.”(234)

For French, a “moral person” is “the referent of any proper name or description that can be a non-eliminatable subject of … a responsibility ascription of the second type.”(235) To be accountable to others, one must have a “responsibility relationship” with them,(236) and to be “responsible” in this sense involves not only effective causal agency for the act in question, but also having intended it.(237)

For a corporation to be a moral person, then, it is necessary that “some things that happen, some events, are describable in a way that makes certain sentences true, sentences that say that some of the things a corporation does were intended by the corporation itself.”(238) It is obviously true that “a corporation’s doing something involves or includes human beings doing things”(239) and that these human beings “usually can be described as having reasons for their behavior.”(240) If, however, corporate behavior is reducible to nothing more than the intentions of biological persons, “there would be no way to distinguish between corporations and mobs.”(241)

For French, the thing that makes it possible to distinguish corporations from mobs is the former’s “CID Structure,”(242) which consists largely of “an organizational or responsibility flow chart that delineates stations and levels within the corporate power structure and … corporate decision recognition rule(s) (usually embedded in something called `corporation policy’).”(243) The organization chart provides the “grammar of corporate decision-making,”(244) distinguishing among various corporate “players” by clarifying their rank and responsibility within the organization and providing “procedural recognitors” that allow us to see “that decisions are to be reached collectively at certain levels and that they are to be ratified at higher levels….”(245) Corporate policy provides the other means if identifying a decision as corporate.(246) When in place and properly functioning, this CID Structure “accomplishes a subordination and synthesis of the intentions and acts of various biological persons into a corporate decision.”(247)

Corporations can fairly be said to have reasons “because they have interests in doing those things that are likely to result in the realization of their established corporate goals regardless of the transient self-interest of directors, managers, etc.”(248) Corporate goals, French says, tend to be narrower and more stable over time than those of the corporation’s human constituents.(249)

For our purposes, there is much that is positive about French’s approach. He focuses welcome attention on the corporation itself,(250) and his subsequent work emphasizes the impact of the CID Structure on human behavior inside the organization, calling it the organization’s ”character.”(251) We do believe, however, that his picture of the corporation is a bit oversimplified on at least two important counts. First, his treatment of the organizational chart seems to assume that this document invariably represents the real corporate decision hierarchy something which our look reside the corporation will suggest is not always true.(252) If true decision-making power lies elsewhere in a particular instance, is that decision still a “corporate” decision in French’s reckoning? Second, his account of the CID Structure infuses the corporate decision-making process with the kind of linear intentionality typically associated with the Rational Actor model, something that other corporate decision-making models suggest may not be present in all corporate decisions.(253) Under French’s scheme, who has moral ownership of corporate outcomes that are not intended by anyone in the hierarchy and that work against the long-term interests of the corporation?

French’s subsequent work also reveals that, for reasons similar to those expressed by Keeley and Velasquez,(254) French (or perhaps his co-authors) may be having second thoughts about granting corporations moral rights as an attribute of moral agency.(255) If corporations are moral agents for responsibility purposes, it would seem to follow logically that they also should have rights.(256) If they do not, a clear explanation of why they do not is required, and the expressed fear that corporate rights might someday conflict with individual rights is not, standing alone, such an explanation.(257) Of course, a notion of corporate moral agency freed of anthropocentric bias would not necessarily have to attribute to corporate moral persons either the same set of responsibilities or the same panoply of rights possessed by their human counterparts. Patricia Werhane’s work reaches this conclusion (albeit without completely escaping anthropocentric bias).

Werhane begins her account of the nature of the corporate beast by claiming to include elements of both “ontological individualism and methodological collectivism” while criticizing the views of exponents of these seemingly polar positions.(258) In a manner reminiscent of Michael Keeley,(259) Peter French is taken to task for his attempt to attribute goals and intentions to corporations(260) because “it is very difficult if not impossible to specify the intentions of an organization apart from the intentions of the individual members of that organization.(261)

French’s idea that corporations can be the non-eliminatable subjects of responsibility ascriptions(262) also comes under attack. Werhane acknowledges that corporations may sometimes give the appearance of being such subjects,(263) but upon closer examination she finds “that it is not corporations who engage in self-reflection and moral self-analysis, but rather their constituents who do so on behalf of the corporation.”(264) This renders corporate intentions and actions “the collective result of decisions made by individual persons,”(265) which makes corporations eliminatable subjects because “without persons, corporate ‘actions’ literally could not occur.”(266)

Most serious of all, Werhane voices concerns similar to Keeley’s and Velasquez’s when she says that French’s original position on corporate moral agency raises questions about the relative moral status of human beings:

If a corporation is a moral person, what is the status of

employee-persons? Are they lesser moral persons? An employee,

by this reasoning, could be a moral person of grade one,

MP[supp.1], a corporate committee making decisions a[n]

MP[supp.2], etc., so that a corporation would be an MP[supp.n].

A corporation would be allowed to do as it pleases so long as it did

not interfere with the freedoms of other corporations (other

MP[supp.n]s). But by this reasoning, a corporation could interfere

with the freedoms of MP[supp.1]s without violating them, because,

being MP[supp.n]s, corporations would have more moral freedom

than persons or MP[supp.1]s. French’s analysis may give so much

to corporations in the way of moral personhood that individuals end

up having less moral status than corporations.(267) Here the calculus of Velasquez’s fears(268) is fully articulated, but to us it is no more persuasive for all that. It is not clear to us that moral status is necessarily additive in the way that Werhane’s analysis suggests. Certainly deontologists, who tirelessly remind us that the moral rights of the collective do not trump those of the individual, would not think so. Perhaps utilitarians would be inclined to approach the matter in this fashion, but their analysis would surely be more complex than Werhane’s.(269)

Whether it is completely fair to French or not, this certainly sounds like an individualist critique. Werhane also, however, finds aggregate theorist Robert Hessen’s analysis(270) wanting. She grants that the aggregationist position avoids some of the problems associated with treating the corporation as a moral person,(271) but argues that its account of the corporation is incomplete because it “erroneously identifies the causal role of the individual in corporate decision-making with the outcome of that process: corporate ‘action.”‘(272) Besides, she notes that “[w]e often praise or blame corporations even when it is virtually impossible to trace their actions to individuals.”(273)

Why do we do that? Because a corporation is what Daniel Dennett calls an “intentional system,” a system exhibiting behavior that “can be — at least sometimes — explained and predicted by relying on ascriptions to the system of beliefs and desires (and hopes, fears, intentions, hunches …).”274 We can usefully use intentional language to talk about corporate behavior because “corporations act as units and exhibit intentional behavior”(275) and because “not all actions of corporations are redescribable merely as individual actions.”(276) That being said, we are not free to conclude that corporations are full moral agents because they “have no reality over and above their constituents, because they are created by and function only because of them.”(277)

Werhane’s path toward this conclusion begins with the distinction between primary and secondary actions.(278) Most individual actions are “primary,” but when individuals act through agents, their actions may be termed “secondary.”(279) Corporate “action,” then, occurs when the primary actions of individuals are fairly attributed to the corporation.(280) While they are invariably secondary,(281) corporate actions are not like the secondary actions of individuals because there is no autonomous individual on behalf of whom corporate agents are acting.(282) When corporate actors act, they “act on behalf of a nonhuman charter or goal or in compliance with the norms or character of the business.”(283) Thus, corporate actions are properly termed “collective secondary actions.”(284)

In passages reminiscent of Ladd(285) and French,(286) Werhane emphasizes the supposedly impersonal nature of corporate decision-making(287) and the decision-maker’s place in the corporate hierarchy,(288) though from other passages it is clear that she knows things are not quite that simple.(289) This impersonality is important to her analysis, how ever, because it can operate to prevent the attribution of a given corporate act to the person(s) who caused it to occur.(290) This in turn raises the possibility that “there could be corporate immoral ‘action’ that is the result of a series of blameless primary actions.”(291) Because such collective secondary actions derive from the actions of human persons, they are still properly subject to moral evaluation,(292) as are corporations, which as “collectives made up of persons can `act’ as moral agents, and therefore are morally responsible.”(293)

But corporations are only “secondary moral agents,”(294) not full persons,(295) because they lack the autonomy necessary to perform primary actions and possess no intentions of their own.(296) This secondary status means that the rights of corporations “are derived from, dependent upon, and secondary to, individual rights, although they are not identical to them.”(297) This derivative status in turn means that “no secondary right can exceed any individual’s entitlement to a right.”(298) Thus Werhane, without fully denying corporate moral agency, achieves the same effect as Keeley,(299) holding corporations to be proper subjects of moral evaluation without giving them much in the way of rights.

Werhane is certainly not alone in her idea that corporations, while real entities of some sort,(300) are not full-fledged persons possessing full-fledged rights.(301) It seems to us, however, that more is needed to support such a conclusion. For example, starting from the premise that corporate rights are in some way derivative of human rights, it does not necessarily follow logically(302) or legally(303) that they are less potent than human rights. To put it another way, to say that corporate rights are not necessarily superior to human rights it is not necessary to say that they are inferior to human rights.

In fact, what Werhane and others who wish to discount corporate rights in the name of protecting individual rights have so far failed to acknowledge is that any situation that they would describe as a conflict between individual and corporate rights necessarily involves a conflict between competing groups of individual rights. In a way, this reminds us of a T-shirt slogan seen on our campus: “People Before Profits.” What apparently escapes the wearer of the shirt is the fact that many different classes of “people” invariably benefit from profits. Of course, “Some People Before Other People” lacks the punchiness of the first slogan, injects an unwelcome complexity, and raises some troubling questions (e.g., Why? Under what circumstances? Exactly which “people” are we talking about?). Why precisely is it that those people whose interests happen to be allied with the corporation must invariably have them discounted in favor of the interests of those opposed to the corporation?

Consider, for example, a plant relocation decision. Our T-shirt sloganeer might be tempted to see this as a “Jobs Before Profits” or “Workers Before Capitalists” or “Communities Before Corporations” issue. However, a relocation that strengthens a company financially increases the job security of at least some of its other employees (and, perhaps, of some major suppliers’ employees), benefits other workers whose pension funds have invested in the company in question, and helps other communities (those that gain jobs through the relocation or keep them as a result of the company’s improved position). Is it immediately obvious that the interests of the displaced workers or the abandoned community necessarily and invariably trump those of the benefiting workers or communities? We might, to be sure, be tempted to start weighing relative benefits and losses or making some judgment about the relative importance of the various competing rights, but that is precisely our point. What most of us would not do is assume a priori that the displaced workers or abandoned community automatically have a moral veto over the move simply because a corporation is on the other side.

Moreover, even if we ignore the impact that anything that affects the corporation invariably has on its human constituents, we would still need some clarification about the difference between the “secondary rights” Werhane grudgingly allows corporations and the rights of human persons who find themselves in opposition to a corporation in a particular instance. For instance, though she appears to say so,(304) we doubt that Werhane really means that any individual right, however trifling, always trumps every corporate right, however significant. And what of rights that we might otherwise assume are qualitatively the same? In a conflict between corporate property rights and individual property rights, for example, does the individual always win because the corporation’s rights are “secondary”? If not, what does it really mean to say that corporate rights are secondary to those of individuals?

We have other, perhaps more mundane, concerns about Werhane’s account. Werhane’s description of impartial decision-making by decision-makers defined by their position in the corporate hierarchy(305) contains hints of the Rational Actor model and depersonalizes the actions of human actors inside the organization. Is this an accurate picture of the workings of the innards of the corporate beast? If we think about our own organizational experience, we may have some doubts about whether it is. We observe that people inside our organization tend to personalize the decisions made by their superiors. When a faculty member says of an action of the President of her university: “Did you hear what President X did?” does she commonly mean “what X as an impersonal, neutral servant of the university decided in accordance with the goals and interests of the university”? Is there some reason to think that people inside corporate organizations view their superiors any differently? Robert Jackall quotes one corporate officer as saying: “What is right in the corporation is what the guy above you wants from you.”(306) This may be deplorable, but it hardly suggests an environment where impersonality and neutrality prevail.

We also must confess that, when we think about our personal organizational experience, we would be hard-pressed to say that our university impresses us as a unitary, rationally-acting entity motivated by any central, energizing goal. Perhaps the corporate variant of the species is markedly different from the university elephant. If it is, then Werhane and the other thinkers we have discussed may have grasped enough of the creature to tell us what it is, how it should be treated, why it sometimes misbehaves, and what we should do to improve its behavior. If it is not, then it seems reasonable to assume that all of our thinking might benefit from a fuller picture of this elusive creature.

AN ORGANIZATIONAL, PICTURE OF THE CORPORATION

Is It Really A Rational Actor?

At some point, any ontological inquiry into the corporation should ask whether the Rational Actor model,(307) which has shaped so many thinkers’ ideas about the nature of the corporation, adequately captures the complexities of the beast. An obvious reason for concern about the accuracy of the Rational Actor model is its anthropocentric bias: It assumes that corporations make decisions like individuals,(308) and fairly simple-minded individuals at that.(309) It seems rather curious for a model of organizational decision-making to ignore the fact that its subject is an organization,(310) with all that fact entails.(311) For example, nowhere in the Rational Actor model will one find a hint of the internal differences in goals and perceptions(312) that can foster intergroup conflict in real organizations.(313) An organization is, after all, composed of human beings who may perceive their personal interests in ways that are inconsistent with the longer-term interests of their organizations.

Corporate managers are not ciphers or automatons who mindlessly serve the organization’s goals, but human beings with complex motivations(314) whose natural desire to avoid punishment or secure rewards may lead them to take unjustified risks(315) or to distort information about their performance.(316) Management compensation systems that emphasize short-term financial goals(317) and promotion systems that allow “high-performers” to outrun their mistakes(318) can further tempt managers to pursue short-run profits at the expense of their employers’ longer-range good.(319) Nor are such defective systems the only features of the organizational environment that can lead an organization’s human constituents to depart from the bureaucratic ideal of rationality.(320) In fact, it has been suggested that there is something about the dynamics of organizations that leads people to behave differently in groups than they would as individuals.(321)

Consider, for example, the phenomenon social psychologists call “risky shift.” People in groups seeking to reach a consensus about acceptable risk levels tend to select a choice that is riskier than the average of their individual risk preferences.(322) Explanations for “risky shift” vary,(323) but whatever its causes, its effect can be to produce corporate decisions that are riskier than those that would be made by a hypothetical individual rational actor.

The quest for group consensus also plays a major role in the phenomenon Irving Janis called “groupthink”: “[T]he mode of thinking that persons engage in when concurrence seeking becomes so dominant in a cohesive group that it tends to override realistic appraisal of alternative courses of action.”(324) Organizations in the grip of “group-think” are hardly likely to respond rationally to their environments because they develop norms that enhance group morale at the expense of critical thinking,(325) bring powerful pressures to bear on dissenters,(326) and foster an “illusion of invulnerability” in group members that can result in excessive optimism and a disregard of danger signals.(327) Decision-making in such groups may also be impaired by information distortion caused by self-appointed “mind-guards” who suppress information that would tend to damage group confidence.(328) Internalization of their group’s norms can also negatively affect the moral judgment of “groupthink” victims, leading them to believe unreservedly in their group’s morality and to ignore the moral consequences of its actions.(329)

The organizational socialization process is, of course, completely natural(330) and certainly not always negative in its effects.(331) All organizations seek to heighten their members’ identification with the organization’s goals.(332) Some organizations, however, develop norms that imperil their ultimate survival.(333) In a variety of ways(334) and for a number of reasons,(335) organizations336) may develop deviant norms that then shape employee behavior(337) in a socially undesirable manner.(338)

Such behavior is not necessarily economically irrational (or inconsistent with the Rational Actor model), however, if it has historically contributed to profit-maximization because the organization has not been punished with sufficient frequency or severity to offset the gains derived from it.(339) Some scholars have also challenged the Rational Actor model’s assumption that corporations are solely motivated by profits, arguing that companies that enjoy appreciable isolation from competition(340) may elect to “satisfice” in their pursuit of profits,(341) devoting much of their energies to the pursuit of discretionary goals.(342) Others have questioned whether organizational reality effectively precludes the single-minded pursuit of any particular goal.(343)

It is certainly possible to envision rational organizations that pursue a goal other than maximum profits or that pursue multiple goals,(344) but there are additional reasons to wonder whether corporations, whatever goal(s) they may embrace, are capable of the “rationality” assumed by the Rational Actor model. After all, corporations are made up of human beings whose limited intelligence and knowledge render them at best capable of “bounded rationality.”(345) Organizations exist because they are potentially more effective than any individual could hope to be, but the introductory quotations from Immanuel Kant and Herbert Simon suggest why it would be unrealistic to assume that any organization could completely transcend the limitations of its all too imperfect creators.(346)

Even creatures with far fewer limitations than our own might find the task of managing a large, modern organization somewhat daunting. As organizations increase in size, they fairly quickly reach the point where the tasks of detailed decisionmaking and order communication exceed any individual’s capacities.(347) Thus, sharing authority becomes a necessity,(348) but shared authority means diffusion of responsibility(349) and loss of control(350) by top management. Control loss and diffusion of responsibility can facilitate discretionary behavior by lower-level managers,(351) which is likely to be economically irrational from the perspective of the firm.(352) To be sure, a number of devices may serve to increase top management’s effective span of control,(353) but at some point organizational diseconomies of scale can be expected to offset any economies of scale associated with increased size.(354) Organizational structure plays a major role in determining when that point is reached, but neither of the major extant approaches to structuring large organizations(355) avoids all of the organizational problems associated with large size.(356)

Alternative Models of the Firm

If the Rational Actor model is at best an incomplete picture of the corporate beast, then other pictures of the corporation are needed that eschew the Rational Actor model’s anthropocentric simplifications in favor of an explicitly organizational perspective. Such models do exist,(357) though we would be the first to admit that they are far from perfect.(358) They too are only parts of the corporate elephant,

but if we can grasp them we will have a more complete picture of our subject than the Rational Actor model standing alone can ever provide.(359)

The Bureaucratic Politics Model

The Bureaucratic Politics model emphasizes the roles that intraorganizational parochialism(360) and conflict play in shaping corporate action.(361) It challenges the Rational Actor model’s assumption that the firm is a unitary, rational actor by instead portraying the organization as “composed of a number of groups divided by alternative conceptions, value preferences, and sectional interests.”(362) Organizational decisions are “the outcome of a bargaining game involving a hierarchy of players and a maze of formal and informal channels through which decisions are shaped and implemented” rather than the results of a conscious choice by a rational actor.(363) No dominant organizational goal exists, or “decisions are made which are inconsistent with maximizing the attainment” of it if such a goal does exist.(364)

Every decision opportunity is seen as a new game between players whose identity is a function of the issues at stake and the organization’s structure.(365) Any given player’s ability to influence a particular game’s outcome flows from her power and personality, but her formal organizational position may be a poor indicator of her true power. Expertise,(366) or control over required resources(367) or information(368) can result in a player’s possession of more power than her formal position would suggest. Personal characteristics (or their lack) such as charisma, persuasiveness, physical attributes, and the willingness to use power can also enhance (or reduce) a player’s potential power.(369) Thus, an important dichotomy may exist between formal and actual authority in an organization.(370)

The decision produced by the game will in all likelihood be an amalgam of the preferences of the players involved because none may have enough power to attain his preferred outcome.(371) Even a player who succeeds in winning his desired decision cannot be assured that the final outcome of the process will reflect his preferred choice. Formal decisions must be implemented, and during the implementation process the final outcome may be influenced by the new players who are needed to implement the decision or by disappointed players trying to minimize the decision’s effects.(372)

The Organizational Process Model

Like the Bureaucratic Politics model, the Organizational Process model challenges the notion that organizations are unitary, rational actors. According to the Organizational Process model, large organizations are aggregations “of loosely allied decisionmaking units (e.g., a marketing group, a manufacturing division, a research and development staff), each with a primary responsibility for a narrow range of problems.”(373) To increase efficiency, to guide constantly occurring activities, to promote stability, and to reduce individual discretion, corporations and their subunits seek to routinize decisionmaking by the creation of standard operating procedures (SOPs).(374) While these SOPs may be a necessary element of large organizations’ struggle for internal control, they can also serve to shape organizational behavior in unfortunate and unintended ways.

For example, because individual subunits only have a partial view of their larger organization’s environment, managers’ perceptions about their environment may in part be a function of the efficacy of their company’s SOPs for collecting and handling information.(375) SOPs can also operate to limit artificially the range of responses managers consider when confronted with a problem.(376) According to the model, when subunits realize that they face a problem(377) they begin a sequential “search” for an appropriate SOP or group of SOPs.(378) Because organizations only possess a finite number of SOPs,(379) and because those they possess are designed to deal with recurring, standard problems, available SOPs can generate improper organizational responses to novel or non-routine situations.(380) A given organizational action may therefore be the result of the application of extant SOPs instead of a calculated, rational response to the problem at hand.(381) Worse yet, an organization in the grip of inadequate SOPs may be slow to correct its mistakes.(382) Organizations tend to resist altering their SOPs.(383) When change does occur,(384) it is likely to occur slowly(385) and to amount to nothing more than incremental alterations to existing SOP’s.(386) Thus, organizational “error admission” problems may not always be attributable to bureaucratic commitment,(387) and corporate recidivism may sometimes stem from something other than inadequate enforcement(388) or a defective corporate culture.(389) Indeed, law-abiding and well-intentioned managers are likely to be particularly frustrated by the routinized decision processes portrayed by this model since they may have little personal control over a subunit’s SOPs.(390)

All of this certainly suggests to us that actual knowledge about the steps leading up to a particular action is a necessary precondition for making any well-founded judgments about either its moral quality or the degree of culpability of any individual or group of individuals inside the organization. Was the particular outcome the intended or reasonably foreseeable consequence of decisions made by responsible persons acting consistently with corporate policy? Or was it the undesired outcome of an internal political struggle or the inadvertent product of flawed organizational processes? Or was the actual process that led up to the event in question an amalgam of all three models(391) or the product of some other organizational malady?(392) A detailed investigation into actual events is plainly the most reliable way to answer such questions, but it is possible to make some generalizations.

Selecting the Right Model

The nature of an organization’s decision processes is likely to be influenced by a variety of factors such as its size, age, structure, and complexity. Factors external to the organization, such as its competitive environment, and factors unrelated to the organization’s characteristics, such as the nature of the decision in question, can also play a critical role. Decision processes consistent with the Rational Actor(393) model are most likely to be found in small organizations(394) and in those large firms that face competitive product markets.(395) In the absence of intense competition, M-form firms(396) are more likely to engage in long-run rational actor behavior than are their U-form counterparts.(397) The hierarchical organization of U-form firms is said to expose them to an increased risk of the internal bargaining games described by the Bureaucratic Politics model.(398)

Organizational complexity(399) can also contribute to the emergence of the bargaining behavior associated with the Bureaucratic Politics model because complex organizations tend to generate internal goal and perspective differences.(400) Unit managers in complex organizations are likely to develop their own preferences about the way in which their units should operate and may be inclined to pursue their units’ goals regardless of whether they are consistent with the organization’s goals.(401) Such organizational parochialism in turn fosters political bargaining behavior.

Highly centralized organizations,(402) on the other hand, are more likely to exhibit of the kind of rational choice and organizational goal pursuit posited by the Rational Actor model.(403) Dominant decision makers in such organizations are likely to possess the power to determine and enforce organizational goals,(404) and they may be able to reduce the impact of intraorganizational bargaining on organizational action.(405) However, the ability of dominant decision makers effectively to constrain political behavior may itself be limited by the organization’s size,(406) and organizations that attempt to correct this problem by increased formalization(407) may end up skewing their behavior toward the Organizational Process model.

Large, older organizations(408) are more likely to formalize their decision processes in an attempt to reduce control loss that tends to accompany increasing size.(409) In such highly formalized organizations, organizational action is likely to be shaped by SOPs,(410) which will help determine which problems and crises are identified and will also channel the way in which the organization will search for solutions.(411) The Organizational Process model is particularly likely to have explanatory power when the decision(s) at issue are of the recurring variety for which SOPs have been established.(412) In contrast, novel or non-routine decisions are unlikely to have been influenced by SOPs(413) and are therefore more likely to be arrived at by processes approximating the Rational Actor(414) or the Bureaucratic Politics model.(415)

IMPLICATIONS OF THE ORGANIZATIONAL PERSPECTIVE

Theories of the Corporation

Now that our organizational look at the corporation has given us a more complete look at the nature of the beast, what does it lead us to conclude about the relative validity of the contending legal theories of the corporation? Is the corporation a legal fiction, an aggregate, a nexus-of-contracts, or a real entity? The Rational Actor model, which is plainly anthropomorphic in the sense that it assumes that corporations behave like persons,(416) does not necessarily require us to view corporations as real entities. If a given corporation truly conforms to the Rational Actor model, its behavior would be a perfect expression of interests and goals of its owners (and nothing else), and the organization therefore could possess the kind of transparency that represents the ideal(417) of the aggregate(418) and nexus-of-contract theories.(419)

The Bureaucratic Politics and Organizational Process models, however, suggest that organizations can sometimes assume a life of their own in the sense that their behavior may not always represent the preferred choices of management or shareholders. While both models are oversimplified, they capture the fact that organizations are sociological systems(420) that shape their members(421) and their members’ behavior.(422) In doing so, they demonstrate that a corporation can at times be more than merely the sum of its individual parts. Thus, while it is indeed accurate to describe a corporation as a legal fiction, an aggregate, and a nexus-of-contracts because each of these descriptions captures some aspect of the beast, it is also necessary to say that corporations are not just fictions, aggregates, or contractual next. They are also real entities that produce real behavior t}rat is fully explainable by none of the other theories and that has a real impact on the quality of the lives that all of us lead. It is, of course, true that organizations would not exist without individuals, but it is also equally true that phenomena such as risky shift(423) and groupthink(424) would not exist without organizations.

To say that corporations are real entities, however, is merely a necessary,(425) but not a sufficient, condition for saying that they are proper subjects of moral evaluation.(425) It is to that more difficult question that we now turn, asking first what light our organizational approach has shed on the nature of the corporation as portrayed by the ethicists whose views on corporate moral agency were discussed earlier.

Corporate Moral Agency

Viewing the Ethicists’ Views

Just as aggregate and nexus-of-contract theorists are likely to find the Rational Actor model congenial to their theories of the corporation, so too is John Ladd mast likely to find in it confirmation for his portrayal of the corporate “machine.”(427) Under this model, at least, the organization’s actions are consistent with, and motivated by, its goals. The Bureaucratic Politics model, however, expressly embraces the same messy organizational phenomena that Ladd so determinedly ignores.(428)

Indeed, it is hard to imagine a machine with operative parts constantly engaged in mutual struggle and perpetually rearranging themselves with every action cycle.(429) While it is true that there is something a bit machine-like about the routinized, repetitive behavior portrayed by the Organizational Process model, defective SOPs are as likely to run the machine repeatedly into a wall as they are to drive it forward to the achievement of the organization’s goals.

However, even the Rational Actor model is less than a perfect replica of Ladd’s machine. To say that an organization behaves as if it were a rational actor is not necessarily to say that its internal processes are actually rational,(430) and our examination of the model suggests that Ladd’s critics were right in their assertion that a rational organization could adopt moral action as a part of its goal set.(431) Moreover, the non-linearity of the decision processes sketched by the Bureaucratic Politics and Organizational Process models suggests that Ladd is mistaken in his assertion that an organization’s amenability to external suasion, moral or otherwise, varies inversely with its degree of rationality.(432) The Rational Actor’s linear rationality presumes both that some form of rational choice is going on and that decision makers have sufficient control over their organizations to translate decisions into appropriate action. The Rational Actor model therefore provides space for ethical organizational leadership(433) that is absent from the alternative models, in which the best-intentioned managers may find frustration lurking in organizational politics(434) or processes.(435) Conversely, the same lack of control guarantees that organizations will never have perfect control over their members, leaving some scope for individual moral action in the most machine-like organization.(436)

The highly politicized processes at the heart of the Bureaucratic Politics model also represent a serious challenge to the impersonal decision making pictured by Ladd,(437) French,(438) and Werhane.(439) Their stress on the potential gap between actual and formal authority(440) likewise undercuts Werhane’s(441) and French’s(442) emphasis on the importance of a decision maker’s position in the corporate hierarchy. On the other hand, though they challenge her premises, both alternative models provide support for Werhane’s conclusion that wrongful corporate acts may occur for which no identifiable human being may be responsible.(443)

What our alternative models cannot do by themselves, however, is challenge or confirm any of the ethicists’ ultimate conclusions about the existence of corporate moral agency. To do that, we must measure what we have learned about organizational reality against a fully articulated theory of what it means to be a proper subject of moral evaluation and, indeed, of why moral evaluation is important. The theory we have chosen for this exercise originates with contemporary British philosopher G.J. Warnock.(444) We have selected Warnock’s theory because it is complete,(445) well explicated, non-anthropomorphic, and consistent with our conception of the instrumental goals of the business ethics enterprize.(446)

Warnock and the Object of Moral Evaluation

Warnock argues that the proper subjects of moral evaluation are “the actions of rational beings.”(447) To be sure, we judge people’s characters too, but “[a] person is morally good or bad primarily at least because of what he does or omits to do”(448) and bad character is merely “a disposition to act morally badly.”(449) An institution can be morally objectionable, but only because “it permits, or even requires, things to be done that ought not to be done, or prevents things being done that should be done.”(450 Why “rational beings” rather than “people” or “human beings”? Because, Warnock says, it is “a purely contingent matter”(451) that humans are the only beings we know of who clearly satisfy these conditions for moral responsibility:

For one’s doings to be a proper or possible object of moral evaluation

whether by others or by oneself, it is a necessary condition that

one should have at least some ability to perceive and consider

alternative courses of action, to appreciate what is to be said for or

against the alternatives, to make a choice or decision, and to act

accordingly.(452)

Moral evaluation is important, Warnock tells us, because of the kind of creatures we are and the situation in which we find ourselves. We are not, unfortunately, the sort of rational beings Kant imagined who would always immediately see what the morally correct action was and would also always be moved to do it.(453) For such creatures, moral persuasion and perhaps, moral condemnation, would be unnecessary.(454) Neither are our life circumstances such that we are unlikely to be confronted by moral issues.(455) Sadly, “there is in what may be called the human predicament a certain ‘natural’ tendency for things to go very badly.”(456)

The salient features of the human predicament, as described by Warnock, are biological needs,(457) wants,(458) limited resources,(459) and limited information and intelligence.(460) In combination, these factors guarantee the persistence of a certain level of human dissatisfaction, not only because scarcity and competition mean that the satisfaction of some people’s wants and needs can only come at the expense of others’ but also because “there is no reason to assume that the needs, wants, and interests of any one individual will … form what might be called a consistent set.”(461) There are, of course, things that theoretically could be done to improve our situation, but here again we are confronted with certain sad facts about human beings–our limited rationality and limited sympathy.

Human beings are “not just naturally disposed always to do what it would be best that they should do, even if they see, or are perfectly in a position to see, what that is.”(462) They are “naturally somewhat prone to short-run rather than long-run considerations,”(463) and while “rational” in the minimal sense of being able to envision alternatives, to deliberate, and to decide, “they are not all just naturally, or indeed in any other way, rational in the more exacting sense of being regularly disposed to deliberate well and to act accordingly.”(464) Worse yet, “most human beings have a natural tendency to be more concerned about the satisfaction of their own wants … than those of others,”(465) and when they do care about others, “it is likely to be only about some others–family, friends, class, tribe, country, or `race.”‘(466) This limited sympathy can lead us not only to be indifferent to the needs of others, but can at times foster active malevolence toward them.(467)

Our limited sympathy and rationality are the most important factors in the human predicament because “they determine what, of the things that can be done, are done.”(468) Of the two, limited sympathy is the most important because “[r]ationality . . . seems, like intelligence and skill and resources, to be something that can be used to do harm … as well as good

It seems obvious that the human predicament would be bettered by a general improvement in the moral behavior of corporations (and other organizations), so corporations plainly have the “capability” Warnock identifies as a condition of moral agency. It is equally obvious, however, that Warnock did not entertain the possibility that organizations could be “rational beings” within the scope of his theory.(473) It is to this possibility that we now turn.

Are Corporations Warnockian “Rational Beings”?

To be a proper subject of moral evaluation, Warnock says, an entity must have at least some ability:

(1) to perceive and consider alternative courses of action

(2) to appreciate what is to be said for or against the alternatives

(3) to make a choice or decision

(4) to act accordingly.(474)

It seems obvious that Rational Actor model decision processes are the best “fit” with Warnock’s criteria. This should hardly be surprising, given the individualistic and rationalistic premises of the model.(475) Our organizational picture of the corporation, however, suggests that the Rational Actor model often will not accurately describe actual corporate decision processes. An organization’s ability to “perceive and consider alternative courses of action” might well be negatively affected by organizational delusions,(476) the data distortion of self-serving managers,(477) or the data screening of groupthink “mindguards.”(478) Likewise, defective SOPs for the collection and/or handling of information can prevent and organization from perceiving that it has a problem that needs solving and can distort the choices decisionmakers make by distorting their picture of reality.(479) One could also reasonably ask whether the search among available SOPs that constitutes Organizational Process decisionmaking(480) amounts to the “consideration” Warnock envisions. The number of “alternatives” considered surely is limited by the number of available SOPs.(481)

One might also reasonably question whether the intraorganizational bargaining depicted by the Bureaucratic Politics model constitutes the kind of consideration of alternatives Warnock speaks of, given that there is no reason to assume that the result dictated by organizational politics will be the most rational (or even a rational) alternative. In fact, just as the limited number of its extant SOPs can operate as an artificial constraint on an organization’s choice set, so too can intraorganizational politics constrain the range of choices an organization considers. Alternatives that are anathema to the organization’s dominant coalition or that run counter to the desires of individuals or groups possessing substantial political power may be effectively excluded from consideration for that reason.

Warnock’s requirement that an entity subject to moral evaluation have some ability to “appreciate what is to be said for or against the alternatives” seems to represent an insistence on some minimal level of cognitive ability. This seems to be borne out by his later assertion that “rationality” in his sense of the term would be absent or impaired if a person was “unable or inadequately able to understand and think.”(482) Once again, something like consideration and cogitation is going on under both of our alternative models but the question remains whether in some circumstances an organization’s “understanding” and “thinking” abilities might be so impaired as to place it outside Warnock’s requirements.(483)

The essence of Warnock’s insistence that an entity must have the capacity “to make a choice or decision” is made clear by his subsequent Observation that “we do not ‘require’ a person to do, or hold him responsible for not doing, what he is not capable of doing, just as, I suppose, we would not regard him as either commendable or blameworthy for doing something which in fact he could not not have done.”(484) Thus, Kant’s mythical rational creatures who always instinctively do the right thing(485) are as exempt from commendation as they are from blame

One could, of course, ask whether an organization in the grip of non-rational decision processes really could have done other than it did, but to do so one must open the Pandora’s box of the centuries-old dispute between free will and determinism. Once opened, one of the demons sure to escape is the question whether it is meaningful to speak of anyone ever being “morally responsible” for anything. While we are unwilling to agree with Thomas Nagel that “nothing approaching the truth has yet been said on this subject,”(488) we are not inclined to enter the fray. Suffice it to say that all of those who have debated the question of corporate moral agency must have accepted the premise that there is such a thing as “moral responsibility

Warnock’s insistence that eligibility for moral evaluation include the ability “to act accordingly” with one’s choices merely fleshes out the fundamental notion that moral responsibility accompanies only volitional action. He recognizes the possibility that truly compulsive acts may deprive an individual of the “rationality” he requires for moral responsibility if one is “not fully able to choose and to act in accordance with one’s thoughts.”(489) Certainly, many organizations experience some difficulties when it comes to executing organizational strategies and decisions, and the Bureaucratic Politics model expressly embraces the possibility of some “slippage” between a decision and its implementation.(490) Whether such difficulties are, in most cases, fairly analogous to true compulsion is doubtful. In fact, one might ask whether they are comparatively any greater than those most of us experience in executing personal decisions (or New Year’s resolutions!).

The latter comparison of organizations with human beings is not entirely facetious. No doubt some readers’ intuitive reaction to our portrayal of the sources of non-rational organizational action and to the alternative decision making models we have discussed was to conclude that organizations are so unlike human beings that they could not possibly be considered to be “rational agents.” Such a conclusion may be the product of anthropomorphic bias, but there is a sense in which it is quite logical to ask how organizational reality thus portrayed squares with the reality of human decision making. After all, Warnock plainly thinks that most human beings are proper subjects of moral evaluation, as do those ethicists who have argued that organizations are insufficiently human-like to be moral agents. What if actual human decision making also turns out to vary significantly from the Rational Actor paradigm?(491) If the capacity for rational choice is a central component of moral agency and if humans are no more rational than most organizations and yet are capable of being moral agents, what does that say about the validity of arguments against corporate moral agency premised on the idea that organizations are insufficiently like humans?

Let us start our brief(492) examination of human reasoning and its flaws with a reminder: Warnock does not exactly have a good opinion of human rationality(493) and the level of rationality he consequently requires for moral agency is not terribly high.(494) Like organizations, humans tend to satisfice when making decisions(495) and are vulnerable to escalation of commitment.(496) Also like organizations, humans suffer from delusions and unconscious(497) biases that distort their perception(498) and their choices.(499) Some degree of distortion may simply be unavoidable, because the very process of perception necessarily involves a screening out of much of the sensory data with which we are constantly being bombarded.(500) Further distortion of perception is likely to resort from self-deception, a basic human activity(501) that may be necessary to our social and psychic survival.(502) Whatever its source, when defective perception is combined with irrational thought processes(503) the result is unlikely to be rational decision making.

What of the composite nature of corporate goals, actions, and preferences that figured so prominently in Keeley’s,(504) Werhane’s,(505) and Velasquez’s(506) ideas about corporate moral agency? The Rational Actor model assumes that corporations act as if they were unitary actors,(507) but it is particularly hard to square the idea of a unitary actor with the intraorganizational power struggles highlighted by the Bureaucratic Politics model. Must, for example, an entity be unitary in its preferences to be a Warnockian moral agent?

The answer is plainly negative, given that Warnock acknowledges that individual humans are quite capable of simultaneously having inconsistent preferences.(508) Warnock is by no means alone in making this observation. Others have suggested that an attribute of human personhood is “to live under the conditions of intrapsychic conflict”(509) and that individuals’ conflicting preferences may make it appropriate in some instances to compare them to a firm.(510) After all, if our preferences were consistent and our selves were unitary, why would we need to engage in behavior aimed at restraining our future choices(511) and why would we even have a concept of self-deception?(512) If our selves were unitary, why would we need to exert “self-control” and why would we have a term, akrasia, for actions that we take that are contrary to our better judgment?(513)

All of this has led David Nyberg to assert that “no person is only one person,”(514) and to argue that we should abandon thinking of the self as a unity in favor of a view of the self “as a confederation of selves-in-context.”(515) In a similar vein, Daniel Dennett has argued persuasively in favor of a Multiple Drafts model of human consciousness:

A self, according to my theory, is not any old mathematical point,

but an abstraction defined by the myriads of attributions and interpretations

(including self-attributions and self-interpretations) that

have composed the biography of the living body whose Center of

Narrative Gravity it is. As such, it plays a singularly important role

in the ongoing cognitive economy of that living body, because, of

all the things in the environment an active body must make mental

models of, none is more crucial than the model the agent has of

itself.(516) Given our multiple selves, Dennett suggests that when we try to engage in introspection “we are really very much in the position of the legendary blind men examining different parts of the elephant.”(517) All of which provides an answer to why true self-knowledge proves so elusive,(518) and raises some troubling questions about the nature of human moral responsibility:

If the self isn’t a real thing, what happens to moral responsibility?

One of the most important roles of a self in our traditional conceptual

scheme is as the place where the buck stops, as Harry Truman’s

sign announced. If selves aren’t real–aren’t really real–won’t the

buck just get passed on and on, round and round, forever? If there

is no Oval Office in the brain, housing a Highest Authority to whom

all decisions can be appealed, we seem to be threatened with a

Kafkaesque bureaucracy of homunculi, who always reply when challenged:

“Don’t blame me, I just work here.”(519)

If the possible absence of a unitary self in human beings has troubling implications for the idea of human moral agency, what are its implications for corporate moral agency? To us, the answer is that if humans can be Warnockian moral agents, so too can corporations given that corporations can possess (or lack) the requisite qualities in much the same degree as human beings.(520) Saying that organizations in general are subject to moral evaluation is not, of course, to deny that some organizations (like some human beings) may sometimes be so lacking in those qualities as to be ineligible for moral agency.(521) It is also not to say that they are always morally responsible for all organizational actions.(522)

Given the fervor that the subject generates in those who address it, we would be surprised if our analysis is viewed as convincing by the opponents of corporate moral agency. Neither are we willing to claim to have uttered the final word on the issue. At a minimum, however, we would suggest that our analysis indicates that those who would deny corporations moral agency on the grounds of their insufficient resemblance to human beings need to subject their assumptions about human beings to some rigorous scrutiny.

Corporate Culpability

Although the preceding paragraphs suggest that in some basic senses organizations may not be as different from human beings as is commonly supposed, our alternative decisionmaking models and our inquiry into the realities of the corporate decisionmaking process do indicate that the process by which corporate decisions are made often varies substantially from our common suppositions(523) about the nature of normal human decisionmaking. This, in turn, raises questions about the wisdom of anthropomorphizing corporations and suggests the need for caution when ascribing moral culpability to corporations or corporate employees. In doing so, it adds weight to the arguments of those who have called for explicitly organizational standards of culpability.(524)

It is true, of course, that neither moral personhood(525) nor proof of organizational moral culpability are always necessary prerequisites for imposing criminal liability on corporations.(526) Questions about the nature of organizational culpability, however, are important for those who remain persuaded that there are important reasons why the criminal sanction should not be imposed in the absence of substantial moral culpability.(527) They also are significant for those who want a better understanding of the circumstances in which moral blame may properly be imposed on organizations and upon individuals acting in an organizational context.(528)

What does our look at organizational reality have to tell us about corporate culpability? One of the most obvious things is that the province of intentionality in corporate decision making is narrower than those inclined to make Rational Actor behavior assumptions about corporations might suppose. This means, for one thing, that behavior that might justifiably provoke judgments about an individual’s moral character may not necessarily justify similar judgments when the actor in question is an organization. For example, Professor David Owen has noted that a manufacturer’s failure to modify promptly a product that generates injuries and complaints does not necessarily signal serious blameworthiness.(529)

More fundamentally, what might serve as good evidence of intentionality on the part of an organization? A clear order from a person high in the corporate hierarchy specifically commanding other corporate employees to commit an immoral or illegal act?(530) Such orders may be uncommon(531) and, in any event, unless they are consistent with specific policies or mandates emanating from the board of directors the possibility still exists that they are parochial rather than organizational in intent. The issue is confounded by the fact that much corporate wrongdoing is the unintended outcome of corporate decisions and policies that plainly were intentional. Consider, for example, Sears’ much publicized problems with fraud at its auto-repair centers.(532) Sears has now admitted that a new incentive pay system stimulated the fraudulent overcharging, but while the top managers who adopted the system may be guilty of stupidity or negligence,(533) no one has suggested that they consciously sought the fraudulent behavior their defective system produced. Such managerial failings may be evidence of moral culpability of a sort, but few (if any) would argue that they manifest the degree of culpability that would inhere in a conscious plan to defraud.

Managerial stupidity and carelessness are not the only available culprits other than conscious intent. The Bureaucratic Politics and Organizational Process models easily illustrate how corporations could come to do things that are not in anyone’s ultimate interests (including the corporation’s) and are not the intended outcomes of any single individual inside the organization. This confirms the suggestion by Manuel Velasquez(534) and others(535) that truly inadvertent wrongs may sometimes occur for which no identifiable human member of the organization is responsible.(536) In fact, it seems sensible to argue that human frailty and the difficulties associated with organizing large organizations effectively guarantee a certain unavoidable number of such outcomes. Consider, for example, the problems implicit in organizational SOPs. There are good reasons why large organizations have SOPs, but by definition they must be limited in number. Also by definition, they will not and cannot address even all reasonably foreseeable circumstances in which they may be applied, let alone those unforeseeable circumstances that may nonetheless occur. Some organizational problems are therefore almost guaranteed to “fall through the cracks” and some harms may therefore result.

To acknowledge the inevitability of some such harms is not necessarily to say that organizations should not be held responsible for them.(537) It is to say, though, that commentators such as Larry May(538) and Michael Phillips(539) are probably right in suggesting that most corporate culpability will come in the form of negligence or recklessness rather than in the form of conscious wrongdoing. We see no reason for objecting to a “reasonable corporation” standard of behavior, so long as that standard’s application is informed by an understanding of organizational reality rather than by the often spurious assumptions of the Rational Actor model.

When we consider the culpability of individual corporate officers, we reach a similar conclusion: Negligence and recklessness are likely to be the most frequently encountered forms of culpability.(540) Where top managers are concerned, the kind of guilty knowledge required for intentional wrongdoing may be non-existent or impossible to prove.(541) We agree, however, with Saul Gellerman’s observation that “[t]op management has a responsibility to exert a moral force within the company.”(542) A substantial portion of that responsibility must be insuring that their corporation’s systems and structures are such that, at a minimum, they do not promote unethical behavior(543) or produce an unreasonable level of inadvertent wrongs. After all, as Michael Phillips has observed, “defective design must have originated in decisions made by human beings.”(544) Our essential inquiry, therefore, should be to ask “whether the relevant actors knew or should have known that certain corporate structures, rules, or practices were reasonably likely to result in damaging behavior by the firm.”(545) This means that those who create or oversee an organization’s SOPs may have some responsibility for harms directly traceable to their operation.(546) Our Bureaucratic Politics model’s emphasis on the potential separation between actual and formal authority,(547) however, should at least alert us to the possibility that individuals with the official responsibility for SOPs may not have the actual power to correct them.

Finally, our view of organizational reality leads us to reject the idea that corporations’ greater-than-human powers necessarily mean that they should be subjected to a higher culpability standard than human actors.(548) True, organizations have greater physical and financial resources than most human beings and they enable humans to achieve things through concerted action that no human could achieve by individual action. Were that not the case, organizations would not exist. Such capacities, however, are not, as Warnock’s discussion(549) shows, the capacities relevant to moral agency. The complexities and pitfalls of organizational decision making suggest that organizations’ cognitive capacities may not always exceed those of human actors. If, as our brief discussion of individual decision making suggests, human beings face substantial problems with distorted perceptions, harmonizing their preferences, making rational choices, and carrying out those choices, how much greater are the problems potentially confronting an organization, which must account for and coordinate the activities of hundreds or thousands of (less than completely rational and less than completely unitary) individuals? Once again, the introductory quotations from Immanuel Kant and Herbert Simon confirm the difficulties of crafting perfection (or anything remotely approaching it) with such imperfect materials.

Business Ethics Instruction

To us, the implications for business ethics instructors of our organizational picture of the corporate beast are clear. If business ethics instruction is ultimately about improving business behavior, it is doomed to failure without an adequate understanding of the organizational context in which business behavior takes place.(550) “Business ethics” and “business” cannot be meaningfully separated.(551) Organizations’ powerful role in shaping the members(552) and their members’ behavior(553) bestow upon them a behavioral significance unlikely to be attained in this secular society by any ethical theory(554) or religious tenets. The sad truth of the matter is that the “institutional logic” of business organizations(555) is likely to have far more impact on the behavior of most of their employees than any moral exhortation, whether from the company’s ethics code(556) or from external advocates of “corporate social responsibility.” As Steven Kerr put it in his classic article: “Most organisms seek information concerning what activities are rewarded and then seek to do (or at least pretend to do), those things, often to the exclusion of activities not rewarded.”(557) A critical question is therefore what an organization’s incentive systems actually motivate its employees to do. Business ethics instruction that fails to address the organizational sources of unethical behavior is simply ignoring where the real action is and by doing so, foregoing any realistic hope of effecting real change.

All this points to the critical moral importance of effective organization. Even corporate leaders who have whole-heartedly embraced the “right” ethical theory(558) will be unlikely to make the right decisions if the information that they receive is limited by defective SOPs, distorted by self-serving bureaucrats, or filtered by “mind-guards,” and they are unlikely to be able to translate good intentions and good decisions into effective action if their organizations are riven with intraorganizational power struggles. Like human rationality,(559) organizational rationality is a tool that can be used for good or evil. However, just as human empathy unsupported by rationality may not necessarily lead to good decisionmaking, non-rational organizations are unlikely to act in a consistently moral fashion, whatever the values of their leaders may be.(560) Organizational rationality is therefore properly characterized as a necessary, but not a sufficient, condition of organizational morality.

CONCLUSION

For far too long, legal and philosophical thinking about the nature of the corporation has been afflicted by an oversimplified view of the nature of the corporate entity. Our only hope of clarifying our thinking and formulating effective policy lies with attempting to see corporate reality in its entirety, however complex and disturbing that entirety may be and however at odds with our personal preconceptions and biases. Our flaws as humans probably preclude the possibility that we will attain any ultimate perfection either in our perceptions on these matters or in the actions we take as a consequence of those perceptions. It is not an overstatement to say that in a world dominated by large organizations, we are unlikely to improve substantially the human predicament without getting a better understanding of these organizations which are, after all, our creations. In the process of trying to understand better what we have created we may also come to better understand ourselves. (1) Idee zu einer allgemeinen Geschichte in weltburgerlicher Absicht, quoted in Isaiah Berlin, the Crooked Timber of Humanity xi (1991). (2) Herbert A. Simon, Models of Man, Social and Rational 199 (1957). (3) Russell B. Stevenson, Jr., Corporations and Corporate Social Responsibility: In Search of the Corporate Soul, 42 Geo. Wash. L. Rev. 709, 709 (1974). (4) Trustees of Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518, 636 (1819) (Marshall, C.J.). (5) The full quotation on this subject is attributed to Edward, 1st Baron Thurlow, Lord Chancellor of England: “Did you ever expect a corporation to have a conscience, when it has no soul to be damned, and no body to be kicked?” The Oxford Dictionary of Quotations 697 (4th ed. 1992). (6) See infra notes 147-51 and accompanying text. (7) See infra notes 274-77 and accompanying text. (8) See infra notes 33-34 and accompanying text. (9) See infra notes 60-64 and accompanying text. (10) See infra notes 40-42 and accompanying text. (11) “Since the individuals who manage corporations do presumably have souls, in this respect, at least, the corporation is very much less than the sum of its parts.” Stevenson, supra note 3, at 710. (12) See infra notes 48-56 and accompanying text. (13) See infra notes 137-306 and accompanying text. (14) Herbert L. Packer, The Limits of the Criminal Sanction 250 (1968). (15) See infra notes 67-94 and accompanying text. (16) We agree with our colleague Michael Phillips that “the debate over the nature of the corporation is critical to the question of corporate social responsibility.” Michael J. Phillips, Reappraising the Real Entity Theory of the Corporation, 21 Fla. St. U. L. Rev. 1061, 1096 (1994). (17) It seems axiomatic that social attempts at corporate control are more likely to be effective if policymakers and law enforcers have an accurate understanding of the behavioral phenomena they are trying to control. Yet, “the law, which was developed with individual wrongdoers in mind, has not responded adequately to the particular problems associated with controlling organizational behavior.” Michael B. Metzger, Corporate Criminal Liability for Defective Products: Policies, Problems, and Prospects, 73 Geo. L.J. 1, 2 (1984). Michael Phillips argues that “corporate moral responsibility’s practical importance is insecure unless such responsibility has important consequences for the control of corporate misbehavior.” Michael J. Phillips, Corporate Moral Responsibility: When It Might Matter, 5 Bus. Ethics Q. 555, 555 (1995) [hereinafter Corporate Moral Responsibility]. (18) Just as we constantly assure our students that there can be no meaningful separation between “business” issues and “ethical” issues because all significant business decisions have ethical implications, so too we assert that business ethicists cannot coherently address ethical issues arising out of the business context in a vacuum divorced from the realities of that context. Not everyone, however, appears to agree with us on this point. For example, in a recent review of a book by Peter French and others, well known business ethicist Norman Bowie observes that French’s description of the corporation’s “CID Structure” “may represent more of a contribution to organizational theory than to business ethics.” Norman E. Bowie, French for the Masses, 4 Bus. Ethics Q. 513, 516 (1994) (book review). Others, however, do appear to share our sentiment. See, e.g., R. Edward Freeman, The Politics of Stakeholder Theory: Some Future Directions, 4 Bus. Ethics Q. 409, 413 (1994) (“I want to suggest how things would look if we dropped the idea that we can meaningfully talk about business and ethics by keeping the concepts, ideas and theories of each autonomous.”). (19) See Corporate Moral Responsibility, supra note 17, at 555, for the observation that “deciding whether corporations are morally accountable helps us determine whom to blame for business misbehavior.” For the important nexus between moral culpability and the effective use of the criminal sanction, see infra notes 90-94 and accompanying text. (20) “If corporations are morally responsible entities, then they have moral duties. Through ethical instruction in its various forms, they can be led to recognize and embrace those duties.” Corporate Moral Responsibility, supra note 17, at 558. (21) We share Michael Phillips’s conception that the instrumental ends of business ethics instruction and research are “to affect business conduct and thus to advance some conception of the social good.” Michael J. Phillips, Corporate Moral Personhood and Three Conceptions of the Corporation, 2 Bus. Ethics Q. 435, 436 (1992). (22) Michael Phillips hypothesizes that instruction in corporate moral duties might lead “future managers to internalize more ‘responsible’ values than those which otherwise would prevail” and that “business misbehavior might be checked by the guilt corporation members feel over past firm misdeeds.” Corporate Moral Responsibility, supra note 17, at 558. Such guilt might arise spontaneously, he suggests, or “from justified public blame,” but even if no guilt arises, image conscious managers may be led to “clean up their act.” Corporate Moral Responsibility, supra note 17, at 558. (23) “[W]e can not alter or maintain moral standards unless we understand the institutional matrix in which they are shaped.” Aaron Wildavsky, If Institutions Have Consequences, Why Don’t We Hear More About Them From Moral Philosophers?, 83 Am. Pol. Sci. Rev. 1343, 1345 (1989). See also Michael B. Metzger & Michael J. Phillips, Corporate Control, Business Ethics Instruction, and Intraorganizational Reality: A Review Essay, 29 AM. Bus. L.J. 127, 154 (1991), for the observation that “ethics instruction is unlikely to deliver the goods unless it becomes more attentive to the environment in which its tenets must operate.” Yet the business ethics movement, Robert Jackall argues, has “done little detailed investigation of the day-to-day operations, structure, and meaning of work in business and of how the conditions of that work shape moral consciousness. Robert Jackall, Moral Mazes: The World of Corporate Managers 5 (paperback ed. 1988). (24) “As understood by many philosophers working in business ethics, the goal of ethical theory is to identify and defend some fundamental principle that can serve as the foundation for all morality.” Joseph R. DesJardins, Virtues and Business Ethics, in Corporate Governance and Institutionalizing Ethics 117, 118 (W. Michael Hoffman et al. eds., 1984). DesJardins also observed that “[g]iven this principle-based understanding of ethical theory, the means for institutionalizing ethical responsibility within corporations is clear. The task is to get the corporation to accept some ethical principle as the guide for the activities of its members.” Id. (25) Jeffrey Nesteruk, Legal Persons and Moral Worlds: Ethical Choices Within the Corporate Environment, 29 Am. Bus. L.J. 75, 82 n.46 (1991). On the role organizations play in shaping the behavior of their members, see the discussion infra notes 321-38 and accompanying text. (26) Put in standard form, with its premises above the line and the conclusion below, the usual course of the argument runs something like this:

Only persons can be moral agents.

Persons possess critical attributes X and Y.

Corporations do (not) possess attributes X or Y.

Therefore, Corporations are (not) moral agents. For a discussion of a slightly different way of approaching the issue that may help to reduce the conceptual focus on “persons,” see infra notes 208-12, 444-73 and accompanying text. (27) See infra notes 99, 111-12 and accompanying text. (28) See infra notes 100-02 and accompanying text. (29) “[T]he belief in ‘individual’ as against any form of ‘collective’ responsibility is quite fundamental to our ordinary ethical attitudes.” H.D. Lewis, Collective Responsibility, 23 Philosophy 3 (1948), reprinted in Collective Responsibility 17, 17 (Larry May & Stacey Hoffman eds., 1991). See also infra notes 68-73 and accompanying text for a discussion of the criminal law’s traditional focus on individual wrongdoing. (30) Harold Laski put it this way:

[W]e are compelled to personalise these associations…. The Bank of England

is … the “little old lady of Threadneedle Street”

of seven distinguished merchants as a little old lady. The House of Commons

is distinct from “its” members, and, no less clearly, it is not the chamber in

which they meet…. Eton, we know well enough, is not six hundred boys,

nor a collection of ancient buildings. Clearly, there is compulsion in our

personalising. We do it because we must. We do it because we feel in these

things the red blood of a living personality. Here are no mere abstractions

of an over-exuberant imagination. The need is so apparent as to make plain

the reality beneath. Harold J. Laski, The Personality of Associations, 29 Harv. L. Rev. 404, 404-05 (1916), quoted in Phillips, supra note 16, at 1101. Others, of course, disagree. See id. at 106263 for a discussion of the perennial dispute between holists, who believe in the existence of “social facts” such as organizations, and methodological individualists, who see organ) rations as nothing but collections of individuals. (31) Daniel C. Dennett, Consciousness Explained 455 (1991). (32) For a more detailed discussion, see Phillips, supra note 16, at 1062-73 and the sources cited therein. Most of what follows is derived from this account. (33) See supra note 4 and accompanying text. We must confess that we are not the first to employ the elephant image in a discussion of the corporation. Aggregate theorist Robert Hessen has criticized Justice Marshall’s definition as “confusing because it is metaphorical, not literal (as a definition should be)

[A]t the time the law was in its formative stages, it was individual identifiable

persons, operating outside of complex institutional frameworks, who trespassed,

created nuisances, engaged in consumer frauds, killed and maimed.

The law responded with rules and concepts built upon contemporary notions

about individuals — about what motivated, what steered, what was just toward

them.

Christopher D. Stone, Where The Law Ends: The Social Control of Corporate Behavior 1 (paperback ed. 1975) (original emphasis). See also Gerhard O.W. Mueller, Mens Rea and the Corporation, 19 U. Pitt. L. Rev. 21, 36 (1957) (common law was “a creation by individuals for individuals”). This identification with individuals remains a feature of our criminal law. See Walt & Laufer, supra note 64, at 263 (contemporary criminal law “modelled on individual criminal law” and “transposed to corporations” over the years). (70) Mens rea generally refers to criminal blameworthiness. Special mens rea means the particular mental state required by the definition of a specific offense. See William S. Laufer, Corporate Bodies and Guilty Minds, 43 Emory L.J. 647, 650 n.11 (1994). The link between mens rea and traditional Western notions of moral culpability is obvious:

[A] historic Characteristic of Judeo-Christian culture has been a fundamental

concept that certain mental states are a necessary condition for the just

ascription of moral responsibility. Moral responsibility, in turn, has been tied

to the idea of having certain mental capacities and having acted voluntarily

under the influence of certain intentions. This fundamental logic was imported

into the criminal law at a very early stage and became the central assumption

in criminal law by the Middle Ages. Id. at 703 n.235 (quoting Stephen L. Golding, The Adjudication of Criminal Responsibility: A Review of Theory and Research, in Handbook of Psychology and Law 230 (Dorothy K. Kagehiro & William Laufer eds., 1992)). (71) See, e.g., Elkins, supra note 68, at 107

[A]s corporations became diverse and ranging in their functions, and more

complex in their organizational structure, more and more problems connected

with corporations could no longer feasibly be dealt with by, in effect, ignoring

them as entities and reaching inside to locate some specific. human malfeasors.

Thus, over a period of years the compunctions about whether corporations

might “themselves” be liable for various classes of wrongs were

disregarded, one by one, until only a few vestiges remain. Id. (75) William Laufer has observed that expediency and necessity account for “the fictitious attribution of employee intentions to the corporation.” Laufer, supra note 70, at 654. (76) Elkins, supra note 68, at 97-98. (77) The Supreme Court first sanctioned the process in New York Central & Hudson River R.R. v. United States. Its rationale for doing so will be familiar to anyone conversant with the literature of corporate moral agency:

Since a corporation acts by its officers and agents their purposes, motives,

and intent are just as much those of the corporation as are the things done.

If, for example, the invisible, intangible essence of air, which we term a

corporation, can level mountains, fill up valleys, lay down iron tracks, and

run railroad cars on them, it can intend to do it, and can act therein as well

viciously as virtuously. 212 U.S. 481, 493 (1909). (78) Even in tort law respondeat superior is generally acknowledged as the product of expediency, the desire to assure the availability of a “deep pocket” to pay for harms caused by impecunious agents. See Philip A. Lacovara & David P. Nicoli, Vicarious Criminal Liability of Organizations: RICO as an Example of a Flawed Principle in Practice, 64 St. John’s L. Rev. 725, 730 (1990)

[T]he maximum meaningful fine that can be levied against any corporate

offender is necessarily bounded by its wealth. Logically, a small corporation

is no more threatened by a $5 million fine than by a $500,000 fine if both

are beyond its ability to pay…. If the “expected punishment cost” necessary

to deter a crime crosses this threshold, adequate deterrence cannot be

achieved. For example, if a corporation having $10 million of wealth were

faced with an opportunity to gain $1 million through some criminal act or

omission, such conduct could not logically be deterred by monetary penalties

directed at the corporation if the risk of apprehension were below 10%. That

is, if the likelihood of apprehension were 8%, the necessary penalty would

have to be $12.5 million (i.e., S1 million times 12.5, the reciprocal of 8%).

Yet such a fine exceeds the corporation’s ability to pay. In short, our ability

to deter the corporation may be confounded by our inability to set an

adequate punishment cost which does not exceed the corporation’s resources.

Coffee supra note 108, at 390 (original emphasis). See also Fisse, supra note 128, at 139

One response to Ladd is the argument that formal organizations can adopt

ethical behavior as one of their goals. Ladd himself rejects this option,

presumably because he believes that formal organizations are incapable of

the reasoning necessary for selecting such goals and because ethical behavior

is not the kind of end that it is possible mechanistically to pursue.

Jennifer Mills Moore, International Reflections on Individual Autonomy and Corporate Effectiveness, 3 Bus. Ethics Q. 197, 203 n.8 (1993) (book review). (155) See, e.g., the following comment from Patricia Werhane:

Moral and immoral issues sometimes enter into the decision-making process

of … corporations, even in corporations that try to operate strictly as formal

organizations. Moral issues enter into corporate decision-making in another

way, too. Because corporations … exist in a social and political context, it

is impossible to ignore all social pressures.

Werhane, supra note 89, at 44. (156) The organization may, for example, have accepted the argument that, more often than not, “good ethics is good business.” Ladd’s denial of corporate moral agency, of course, removes the major moral reason why a corporation should acknowledge such an obligation. See, e.g., Bowie, supra note 18, at 515 (“the notion of a corporation as a moral agent would enable us to speak meaningfully of corporate social responsibilities that go beyond what is required by law”). (157) On the positive aspects of the Rational Actor model of corporate behavior as compared to alternative models, see infra notes 431-35 and accompanying text. (158) Patricia Werhane acknowledges that Ladd’s model is “useful in accounting for corporate behavior in eases where corporations appear not to be aware that they have moral as well as economic responsibilities” but argues that “it cannot account for the nonmechanistic behavior in which corporations engage.” Werhane, supra note 89, at 43. (159) Larry May has observed that “Ladd’s strategy is especially suspect when the actions attributed to corporations do not resemble automatic behavior patterns in which there is a corporate directive and an immediate employee response.” Larry May, The Morality of Groups 44 (paperback ed. 1989). Jennifer Mills Moore makes a related point when she notes that “[a]s long as acting on behalf of the corporation means unquestioningly carrying out corporate goals, Ladd’s reasoning suggests, there can be no such thing as corporate moral agency. To put the point in a somewhat different way, corporate moral responsibility requires autonomy on the part of its individual members.” Moore, supra note 154, at 199. For the suggestion that such autonomy sometimes exists, see Diane Vaughan, Toward Understanding Unlawful Organizational Behavior, 80 Mich. L. Rev. 1377, 1393 n.86 (1982) (noting that imperfect ability of organizations to attain total congruence between their goals and those of their employees can produce unlawful conduct despite the presence of organizational norms favoring compliance or lawful conduct in spite of organizational pressures toward deviance). (160) Michael Keeley, Organizations as Non-Persons, 15 J. Value Inquiry 149 (1981), reprinted in Ethical Issues in Business 120, 120 (Thomas Donaldson & Patricia H. Werhane eds., 2d ed. 1983). Thus, Keeley sounds a familiar theme of those who oppose corporate moral agency, the notion that according any moral status to the corporation will have negative consequences in the quest for corporate control. As subsequent discussions of other thinkers will confirm, such concerns have played a major role in shaping the arguments of thinkers on both sides of the moral agency debate. (161) See infra notes 258-98 and accompanying text. (162) Keeley, supra note 160, at 120. (163) Keeley, supra note 160, at 120. (164) Keeley, supra note 160, at 120. For Keeley, the goals of an organization would be “outcomes intended by the organization itself.” Keeley, supra note 160, at 120. These are distinguishable from goals individual organization members have for the organization and from the consequences of organizational action. Keeley, supra note 160, at 120. (165) Keeley, supra note 160, at 121. (166) Keeley, supra note 160, at 121. (167) Keeley, supra note 160, at 121. Focusing on organizational procedures, Keeley says, is likely to be similarly unproductive for similar reasons:

If we know the rules of play (i.e., organizational procedures), we can often

specify which actions count in the game (i.e., organizational behavior). And

usually we can infer from these rules how various participants intend the

game to turn out (i.e., goals for the organization). But rules of the game do

not reveal what the game itself intends. In fact, it makes little sense to say

that the game itself intends anything.

Keeley, supra note 160, at 122 (original emphasis). (168) Thus, for example, shareholders may see a manufacturing organization as a profit generator with salaries as a cost, while employees may see it as a salary generator with profits as a cost. Keeley, supra note 160, at 123. The organization, Keeley says, “cannot tell us which [among these competing goals] is correct” because “there is ordinarily no organizational criterion by which to resolve such disputes.” Keeley, supra note 160, at 123. (169) Keeley, supra note 160, at 122. (170) On this point, see, e.g., the following observation by Larry May:

[I]t is impossible to describe accurately the acts that occur in the corporate

setting merely by referring to acts of the individual members of the corporation,

and not mentioning in the description a causal role of the structure

of the corporation. More often than not, the acts must be described with

reference to the corporation, since the acts here are different from the acts

of the individual members, just as the whole is different from its parts. Even

when the corporate entity acts through its chief executive officers, it is not

merely the case that these officers acted in various ways, one writing a

report, a group voting on that report and then delegating one other member

to execute the decision. Such a description would fail to capture the fact

that Gulf Oil Co. acted, with the various individual acts of the officers being

mere parts of that corporate action.

May, supra note 159, at 45. See also the discussion infra notes 238-49, 270-76, 330-38 and accompanying text. (171) Keeley, supra note 160, at 122-23. (172) Keeley, supra note 160, at 122. (173) “It is still logical, for instance, to argue that, as social systems if not persons, organization X is preferable to organization Y on moral grounds.” Keeley, supra note 160, at 124 (original emphasis). (174) Keeley, supra note 160, at 124. (175) Keeley, supra note 160, at 124. Thus we learn the exact nature of the “unattractive social implications” Keeley sought to avoid from the beginning: If we treat corporations as moral persons “we may give away too much in the way of corporate rights to gain too little in the way of corporate accountability.” Keeley, supra note 160, at 124. (176) Keeley, supra note 160, at 124 (discussing David T. Ozar, The Moral Responsibility of Corporations, in Ethical Issues in Business 294 (Thomas Donaldson & Patricia H. Werhane eds., 1979)). (177) “[P]hilosophers who try to tack on social responsibilities to this view will justify less corporate accountability than many would accept.” Keeley, supra note 160, at 124. (178) See discussion infra notes 204-06, 221-30 and accompanying text. (179) In Keeley’s account corporations are both less and more than persons

X has goal A for the corporation.

Y has goal B for the corporation.

Z has goal C for the corporation.

Therefore, the corporation has no goals of its own.

Nor would saying that the organization has its own goals necessarily negative the

existence among its members of conflicting goals. For a related point, see the quotation from Peter French reproduced infra note 247. (183) It is true, of course, that this is also its owners’ goal for the corporation. However, if we assume arguendo that a corporation can have goals, prominent among them would be survival, which in a competitive market for capital is inextricably linked to the generation of profits. A business organization that ceases to be a generator of profits will soon cease to be a generator of salaries for employees, returns for investors, or any of the other goods that effective business organizations can provide for their various stakeholders. Patricia Werhane puts it like this:

[I]n our country profitability, or at least not operating at a loss, is also at

least an implicit goal of most business corporations, even though it is not

usually stated in the charter. Because most corporations are privately owned,

no corporation can survive in our economic system without being financially

solvent. Werhane, supra note 89, at 31. (184) Indeed, one of the central challenges in the management of any organization is to attain and preserve a substantial identity between the organization’s goals and the goals of its members. (185) Manuel G. Velasquez, Why Corporations Are Not Morally Responsible for Anything They Do, 2 Bus. & Prof. Eths. J. 1 (1983), reprinted in Collective Responsibility 111 (Larry May & Stacey Hoffman eds., 19911. (186) Very early on Velasquez asserts that “it makes sense to say that a corporation is morally responsible for a wrongful act only as an elliptical (and somewhat dangerous) way of saying that certain human individuals are morally responsible for the act.” Id. at 112. (187) “One basic premise of Anglo-American criminal law is that no crime can be committed by bad thoughts alone. Something in the way of an act, or of an omission to act where there is a duty to act, is required too.” LaFave & Scott, supra note 80, at 178. See also Hall, supra note 84, at 11 (“the fusion” or “concurrence” of mens rea and conduct is among general principles of criminal law). On the individualistic roots of the common law position, see supra notes 68-73 and accompanying text. (188) Velasquez, supra note 185, at 113. (189) “[M]oral responsibility is the kind of responsibility that is attributed to an agent only for those actions that originate in the agent, insofar as the action derived from the agent’s intentions (the mens rea requirement) and from the same agent’s bodily movements (the actus reus requirement).” Velasquez, supra note 185, at 114. (190) Velasquez, supra note 185, at 114 (“origination” is “tied to a concept of human beings as having a certain kind of mental and bodily unity”). (191) Velasquez, supra note 185, at 117 (emphasis added). See also id. at 118 (“Corporations do not originate acts in the manner required by attributions of moral responsibility — namely, by directly moving one’s own body”). (192) “[A] group, unlike a body, is made up of autonomous individuals. The individuals who make up the organization are autonomous in the sense that each individual can choose not to carry out the direct bodily movements necessary to bring about the corporate act.” Velasquez, supra note 185, at 118. (193) “[A]n 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.” Velasquez, supra note 185, at 120. (194) “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.” Velasquez, supra note 185, at 119. (195) Velasquez sums it up this way:

To the extent that certain members of a corporation act together, those

members are each morally responsible for that corporate act. To the extent

that a corporate act is the result of policies and procedures that were

intentionally designed by certain persons to produce precisely that type of

act, those persons are morally responsible for that act. Velasquez, supra note 185, at 122. (196) “[T]o the extent that a corporate act is the unintentional result of the concatenated actions of several corporate members, none of whom knew about or intended that outcome, the corporate act may be an act for which no one is morally responsible: it is an unintentional happening.” Velasquez, supra note 185, at 122. Velasquez’s view here is thus at odds with those who argue that corporate moral responsibility is potentially significant in precisely those cases where wrongdoing has occurred for which no identifiable human actors are morally responsible. See generally Corporate Moral Responsibility, supra note 17. (197) Velasquez puts it this way:

[I]n fact it is not possible to impose blame or punishment upon an organizational

structure without having that blame or punishment fall on the

shoulders of the corporation’s members. It is members who will feel all the

effects and bear all the injuries if the corporation’s structures are “fined,”

if its “public image” is “tarnished,” or if these structures are altered or

perhaps even dissolved. Velasquez, supra note 185, at 124. (198) “It … makes perfectly good sense to attribute ‘compensatory’ responsibility for an injury to every member of a corporation, even though not every member of the corporation may be morally responsible for the injury.” Velasquez, supra note 185, at 127. (199) “Charges of this kind, levied upon individuals who bear compensatory responsibility for an injury, obviously should not be counted as forms of punishment or blame (they do not carry with them any opprobrium nor any implication or moral guilt).” Velasquez, supra note 185, at 127. (200) Velasquez, supra note 185, at 127. On the difference between the moral culpability requirements of tort and criminal law, see supra note 84 and accompanying text. (201) Velasquez, supra note 185, at 128. (202) Velasquez, supra note 185, at 128. (203) Velasquez argues that the surest way to achieve such control is to insure that “our blame and punishment must travel behind the corporate veil to lodge with those who knowingly and intentionally bring about the corporation’s acts.” Velasquez, supra note 185, at 129. In suggesting that prosecuting individuals yields enhanced deterrence, Velasquez has plenty of company. See, e.g., Elkins, supra note 68, at 82 (prosecuting responsible individuals produces greatest deterrence)

[T]here [is not] anything puzzling about this once we cease to assume that

the standards used for judging individuals should be the same as those we

use for judging collectives. A collective’s falling below an expected standard

might be quite different from an individual’s falling below a standard expected

of him. Certain things may be expected of a collective, and if it fails

to live up to expectations then it will incur blame. This may occur without

any individual failing to live up to what is expected of him. Id. (208) G.J. Warnock, The Object of Morality 13 (1971). (209) That is, before entity X could ever be said to be “morally responsible” for event Y, X must be the kind of entity to whom (or to which) the concept of “moral responsibility” may be meaningfully applied. (210) Much of the reason for the confusion stems from the many senses in which we use the word “responsibility.” H.D. Lewis used it in the sense of being subject to moral evaluation when he said that “it means simply to be a moral agent, and this means to be an agent capable of acting rightly or wrongly in the sense in which such conduct is immediately morally good or morally bad, as the ease may be.” Lewis, supra note 29, at 23. Yet David Cooper has observed that “responsibility” can also be used in a sense “which is broadly equivalent to ‘causally operative.”‘ Cooper, supra note 207, at 35. It also can be used in the sense in which “responsibility” is linked with “attitudes of blame, praise, indignation, remorse, reward, and punishment.” Cooper, supra note 207, at 35. This latter sense is the one that occupied the common law. Its essence is captured in this observation by Joel Feinberg:

In the typical case of individual liability to unfavorable responses from

others, three preconditions must be satisfied. First, it must be true that the

responsible individual did the harmful thing in question, or at least that his

action or omission made a substantial causal contribution to it. Second, the

causally contributory conduct must have been in some way faulty. Finally,

if the harmful outcome was truly “his fault,” the requisite causal connection

must have been directly between the faulty aspect of his conduct and the

outcome. Feinberg, supra note 92, at 53. The most complete explication of the steps implicit in an assessment of individual moral responsibility of which we are aware comes from Virginia Held:

(1) Person M performed action A at time t

A

(2) M could have done A or non-A.

(3) M was morally responsible for doing A.

(1) and (2) are requirements for (3).

(4) A was right (wrong) or good (bad).

(5) M ought (ought not) to have done A.

(3) and (4) are requirements for (5).

Other assumptions that might be added for clarification of those listed …

are:

(6) The validity of (5) was ascertainable by M at t.

(7) M deserves praise (blame).

(5) and (6) are requirements for (7). Held, supra note 53, at 92. (211) For Warnock’s answer to this question, and a discussion of how well corporations fit, see infra notes 447-522 and accompanying text. (212) The purpose of the qualifier is to make the perhaps obvious point that even if we were to conclude that corporations are the kind of entity that can be proper objects of moral evaluation, this would not necessarily mean that a given corporation was morally responsible for every putatively corporate action. (213) LaFave & Scott, supra note 80, at 179. (214) See discussion supra notes 79-87 and accompanying text. (215) LaFave & Scott, supra note 80, at 218. One could, for example, commit murder by merely giving perjured testimony that results in wrongful conviction of another for a capital crime. Id. Further, “because one is guilty of a crime if he encourages or commands or hires another to commit it, it would seem that practically all crimes may be committed by conduct which includes no voluntary bodily movement other than speaking.” Id. This latter sort of offense is, of course, precisely the kind of intentional wrong that a corporation would be capable of committing. (216) See, e.g., LaFave & Scott, supra note 80, at 182 (vicarious liability violates general principle of criminal law “that one is not criminally liable for how someone else acts, unless of course he directs or encourages or aids the other so to act”). (217) For example, an increased understanding of the nature of corporate decision-making in general and of the internal processes of a specific corporate defendant can help identify those who are truly responsible for a particular decision, whereas generalized reliance on a person’s position in the corporate hierarchy may give us a misleading impression of that person’s true influence over corporate outcomes. See infra notes 365-70 and accompanying text. (218) For a discussion of such reasons, see Metzger & Schwenk, supra note 203, at 333-35. (219) The difficulty of identifying wrongdoers inside large organizations may render such an exercise infeasible when combined with limited prosecutorial resources. See, e.g., S. Prakash Sethi, Executive Liability for Corporate Law Violations, 5(3) Los Angeles Bus. & Econ. 10, 15 (1980) on the reasons why pinpointing responsible individuals is so expensive:

Large corporations, employing thousands of people and making millions of

decisions, impose impossible burdens on society to isolate and identify a

particular individual to be held responsible where only the last link in the

long decision chain is visible. Even if the entire corporate decision process

were exposed to public scrutiny, it might still be impossible to isolate and

identify the guilty person because of the collectivity of actions that resulted

in law violation and the lack of specific intent or direct knowledge on the

part of thousands of people who may have contributed in some minuscule

sense to that direction. Further problems stem from the feet that threatened organizations are unlikely to help prosecutors identify guilty individuals. When “faced with the prospect of official investigation of crime suspected on the part of individual personnel,” organizations “tend to close ranks, usually out of loyalty or through fear of dismissal or nonacceptance.” Corporate Criminal Responsibility, supra note 103, at 371. Such organizational reluctance can “easily confer de facto immunity from criminal prosecution upon those captains and high-placed officers who manipulate the crews of industry in an improper way.” Corporate Criminal Responsibility, supra note 103, at 371-72. (220) In other words, calling a hanging “an abrupt vertebral realignment” does little to change its ultimate effect on the recipient. One might also, perhaps, be forgiven for wondering if Velasquez would be quite as sanguine about dispensing with moral responsibility in the name of efficiency, ability to pay, or risk distribution, if business ethicists or college professors were the ones who’d feel the impact of “compensatory responsibility” rather than the constituents of a business corporation. (221) of Hegel’s theory, William Reese says:

Hegel … shows how the family entails civil society which entails the state

and in the state universality and particularity find their proper relationship

in individuality

(even though states may be disfigured in various ways). States are organisms,

he says. Life is present in every cell. Thought and consciousness belong

essentially to the mature state. States relate to each other as persons, each

embodying a developing idea, and together constituting the process of world-history.

The state is “the march of God in the world,” and while the bad

state is finite, the rational state is inherently infinite. William L. Reese, Dictionary of Philosophy and Religion 213, 215 (1980). (222) This comment by H.D. Lewis, writing three years after the conclusion of hostilities, is typical:

It is therefore well to remind ourselves that the ideas of a pervasive

communal guilt and of collective responsibility are simply the obverse of the

tendency to set some abstract good of the community above the well-being

of its individual members, a tendency whose terminus is the ruthless oppression

and totalitarianism against which our face is so resolutely set in

democratic countries. Lewis, supra note 29, at 31. (223) See supra note 29 and accompanying text. (224) “[P]rimitive peoples pay little heed to the individual

What should be conceded to the individualist … is that from the judgment

‘Collectivity C ought (ought not) to have done A,’ judgments of the form

‘Member M of C ought (ought not) to have done A’ cannot be derived. From

our attribution of an action, and moral responsibility, to a collectivity, it

does not follow that the collectivity’s members are morally responsible for

the action of the collectivity. Held, supra note 53, at 93 (original emphasis). See also discussion infra notes 254-55, 267, 297-99 and accompanying text. (226) See, e.g., Edward O. Wilson, On Human Nature 149-67 (1978). (227) The idea here is that under an organicist view organizations, as components of society, would have interests subordinate to society. We are indebted to our colleague Michael J. Phillips for this insight. (228) See infra notes 307-89 and accompanying text. (229) See supra note 23. (230) “To Jackall … managers do not assume an essential harmony between their inclinations and the demands of group life. Instead, corporate affiliation is a vehicle for the attainment of egoistic satisfactions, and conformity to group demands is simply a means of personal advancement.” Metzger & Phillips, supra note 23, at 133. (231) Jennifer Mills Moore has captured the ambiguity here when she observes:

Because corporations act through individuals, a corporation’s control over its acts … seems to depend on its control over the individuals who make it up. Such

control … erodes individual autonomy. Without this control, however, it is difficult to see how the corporation can effectuate any of its ends, including

ethical ones. Corporate moral agency seems to require both individual autonomy and control, values that at least appear to be in conflict. Moore, supra note 154, at 199 (emphasis added). See also supra note 159 and accompanying text. (232) French argues that “corporations can be full-fledged moral persons and have whatever privileges, rights and duties as are, in the normal course of affairs, accorded to moral persons.” Peter A. French, The Corporation as a Moral Person, 16 AM. PHIL. Q. 207 (1979), reprinted in COLLECTIVE RESPONSIBILITY 133, 133 (Larry May & Stacey Hoffman eds., 1991). There is now some indication that he may be having second thoughts about corporate rights. See infra notes 254-55 and accompanying text. (233) French, supra note 232, at 134. (234) French, supra note 232, at 135-36. French argues that, for all their differences, both real entity theorists and legal fiction theorists use the juristic definition of a “person” as “the subject of rights,” a notion of personhood that does not necessarily deal with questions of metaphysical or moral personhood. French, supra note 232, at 138. Aggregate theory, on the other hand, he takes to task for failing “to recognize the key logical differences between corporations and mobs” and ignoring “key logical, socioeconomic and historical facts of corporate existence.” French, supra note 232, at 137. (235) French, supra note 232, at 139. The “first type” of responsibility ascription, he says, “pins responsibility on someone or something, [in] the who-dun-it or what-dun-it sense.” French, supra note 232, at 139. The “second type” includes “the notion of accountability.” French, supra note 232, at 140. (236) “[F]or someone to legitimately hold someone else responsible for some event there must exist or have existed a responsibility relationship between them such that in regard to the event in question the latter was answerable to the former.” French, supra note 232, at 140. This does not, however, require any special relationship between the parties because “every person is a party to a responsibility relationship with all other persons as regards the doing or refraining from doing certain acts: those that take descriptions that use moral notions.” French, supra note 232, at 140. (237) French puts it this way:

A responsibility ascription of the second type amounts to the assertion of a

conjunctive proposition, the first conjunct of which identifies the subject’s actions

with or as the cause of an event (usually an untoward one) and the second conjunct

asserts that the action in question was intended by the subject or that the event

was the direct result of an intentional act of the subject. French, supra note 232, at 141. (238) French, supra note 232, at 141. (239) French, supra note 232, at 142. (240) French, supra note 232, at 142 (original emphasis). (241) French, supra note 232, at 141. (242) “[A] Corporation’s Internal Decision Structure (its CID Structure) is the requisite rediscription device that licenses the predication of corporate intentionality.” French, supra note 232, at 141. (243) French, supra note 232, at 143. (244) French, supra note 232, at 144. (245) French, supra note 232, at 144. (246) French says that “every corporation creates an image .. . or a general policy … that must inform its decisions for them to be properly described as being those of that corporation.” French, supra note 232, at 144. Thus,”[a] corporate decision is recognized internally … not only by the procedure of its making, but by the policy it instantiates.” French, supra note 232, at 144. (247) French, supra note 232, at 143. Such descriptions are not always mutually exclusive:

[W]e can describe many events in terms of certain physical movements of human

beings and we also can sometimes describe those events as done for reasons by those

human beings, but further we can sometimes describe those events as corporate and

still further as done for corporate reasons that are qualitatively different from

whatever personal reasons, if any, component members may have for doing what

they do. French, supra note 232, at 147. (248) French, supra note 232, at 146. French understands, of course, that “[i]t is … in a corporation’s interest that its component membership view the corporate purposes as instrumental in the achievement of their own goals.” French, supra note 232, at 146. (249) “If there is a difference between corporate goals and desires and those of human beings it is probably that the corporate ones are relatively stable and not very wide ranging, but that is only because corporations can do relatively fewer things than human beings.” French, supra note 232, at 146. French acknowledges that corporate intent derives from corporate policy and purpose, which are themselves “but an artifact of the socio-psychology of a group of biological persons.” French, supra note 232, at 147. To some, he says, this may render corporate intent the “tarnished illegitimate offspring of human intent,” but to him this just shows that “corporations are collectivities,” and those who make such objections are merely displaying “another form of anthropocentric bias.” French, supra note 232, at 147. (250) “French’s emphasis on the corporation’s CID structure has the result of focusing attention on the organization rather than on the individual.” Bowie, supra note 18, at 514. (251) PETER A. FRENCH ET AL., CORPORATIONS IN THE MORAL COMMUNITY 44 (1992). This, the authors say, means “that the CID Structure will tend to foster or promote certain kinds of decisions.” Id. That realization in turn leads them to the entirely salutary conclusion that “[a] central responsibility of corporate managers is to maintain a decision-making structure which tends to promote ethical corporate actions.” Id. On the latter point, see the discussion infra, notes 542-47 and accompanying text. For a somewhat more anthropocentric view of organizational “character,” see Sherwin Klein, Is a Moral Organization Possible? 7 Bus. & PROF. ETHICS J. 51, 59 (1988) (“organizations can not only be said to have or lack character, but there can be stages in the moral development of a corporation, just as there are in a person”). (252) See discussion infra notes 365-70 and accompanying text. (253) See discussion infra notes 360-89 and accompanying text. (254) “Granting rights to corporations would give such entities claims against natural persons. Such corporate entitlements thus have the potential of limiting or restricting the freedom of individuals. FRENCH ET AL., supra note 251, at 46. (255) His initial statement on this point is quite unequivocal. See supra note 232. (256) Norman Bowie asks: “[I]f corporations can be moral agents, why can’t corporations also be rights bearers?” Bowie, supra note 18, at 515. Certainly, the juristic notion of person is inextricably bound up with the notion of being a bearer of rights, something French knows quite well. See supra note 234. (257) Norman Bowie makes essentially the same point when he asks: “How does the mere feet that a corporation’s having a moral right could restrict the freedom of natural persons count decisively against the existence of corporate moral rights?” Bowie, supra note 18, at 515. See also the discussion supra notes 179-80 and accompanying text. (258) WERHANE, supra note 89, at 49-50. (259) See supra notes 164-71 and accompanying text. (260) “There is a difference between ascribing goals to an organization and determining what are the intentions and goals of an organization.” WERHANE, supra note 89, at 36 (original emphasis). (261) WERHANE, supra note 89, at 36 (original emphasis). This observation leads Werhane to ask “whether the concept of intentionality can be appropriately ascribed to corporations at all.” Id. (262) See supra notes 23541 and accompanying text. (263) “[M]any corporations appear to think about their desires, beliefs and goals, and some corporations or persons acting on behalf of corporations seem to engage in moral self-analysis as well.” WERHANE, supra note 89, at 39. (264) WERHANE, supra note 89, at 39 (original emphasis). (265) WERHANE, supra note 89, at 39. (266) WERHANE, supra note 89, at 39. (267) WERHANE, supra note 89, at 40. (268) See supra notes 204-06, 221-27 and accompanying text. (269) Any utilitarian analysis of a particular conflict between corporate rights and individual rights would have to account for the fact that the interests of many individuals are dependent on the continued welfare of the corporation, but would also recognize that those interests are only a part of the interests of the persons involved, whereas a greater portion of the interests of the individual(s) whose rights might be sacrificed in the interest of the collective could possibly be involved. In addition, the long-term utility effects of favoring corporate rights over individual rights would have to be factored into the utility calculation. Further, rule utilitarians would have to ascertain the probable general utility effects of giving corporations such superior rights. It is not immediately obvious to us that either sort of utilitarian calculation would invariably support Werhane’s conclusion. (270) See supra notes 42-44 and accompanying text. (271) WERHANE, supra note 89, at 41. (272) WERHANE, supra note 89, at 42. (273) WERHANE, supra note 89, at 42. (274) WERHANE, supra note 89, at 37 (quoting DANIEL C. DENNETT, BRAINSTORMS 33 (1978)). (275) WERHANE, supra note 89, at 37. (276) WERHANE, supra note 89, at 51 (original emphasis). We confess that how this differs from saying a corporation is a non-eliminatable subject is not entirely clear to us. (277) WERHANE, supra note 89, at 51. See also the discussion infra notes 294-96 and accompanying text. (278) In making this distinction she draws on the work of David Copp. See David Copp, Collective Actions and Secondary Actions, 16 AM. PHIL. Q. 177, 177 (1979). (279) According to David Copp, an action is secondary “if, and only if, it is correctly attributable to this agent on the basis of either an action of some other agent, or actions of some other agents.” Copp, supra note 278, at 177. (280) “[I]t makes sense to talk about corporate ‘action’ only if whatever activity is attributed to a corporation is a result of primary actions of individuals.” WERHANE, supra note 89, at 53. (281) “Corporate ‘actions,’ then, are secondary actions produced by a series of primary individual actions.” WERHANE, supra note 89, at 53. (282) Because corporations are not individuals and not autonomous, they cannot authorize primary actions in the manner in which they can be authorized by a human. This means, Werhane says, that corporate secondary action is “much more complex” than individual secondary action, and that the analogy between individual primary and secondary actions and collective action is “imperfect.” WERHANE, supra note 89, at 54. (283) WERHANE, supra note 89, at 54. (284) WERHANE, supra note 89, at 54 (285) See supra notes 142-47 and accompanying text. (286) See supra notes 242-47 and accompanying text. (287) “[I]n all except very small corporations constituent actions are often anonymous, that is, they are actions performed ‘for the corporation’ or with the goals of the corporation in mind rather than for personal satisfaction.” WERHANE, supra note 89, at 55. See also id. at 33 for the observation that “[o]ne makes decisions ‘for the corporation’ or for the success of some specific project. The choice often becomes impersonal. It is not ‘my choice’ but rather a decision for the benefit of the organization.” (288) “The constituent decision-maker’s place in the hierarchical structure and his job description determine the scope and influence of the decisions he or she contributes to the corporation.” WERHANE, supra note 89, at 33. (289) Werhane does acknowledge that “[e]very corporation operates differently, and the personalities of its constituents affect the structure as well as the goals of individual corporations.” WERHANE, supra note 89, at 33. At a later point, she makes the following observation:

Corporate action is often a result of the functions of disparate groups within a

corporation so that an action of one part of a corporation is a function in part, of

actions of another group within an organization. An individual action is often

unrecognizable when the final “action” is taken or a policy is formulated. Id. at 55. (290) “Since it is authorized by an impersonal ‘authority’ and carried out formally or disinterestedly by constituents working for the impersonal authority, not every secondary action can be reattributed in every instance to the persons who caused that action to occur.” WERHANE, supra note 89, at 56. (291) WERHANE, supra note 89, at 56. This would occur when individual inputs were transformed by the corporate decision-making process into a “collective action different from the primary actions” of the corporation’s human constituents. Id. (292) “[B]ecause secondary actions are, in a derivative way, actions of persons, they can be moral or immoral actions, and one may evaluate them accordingly.” WERHANE, supra note 89, at 57. (293) WERHANE, supra note 89, at 59 (original emphasis). (294) WERHANE, supra note 89, at 58. (295) WERHANE, supra note 89, at 57. (296) “[W]hen one talks about collective intentionality one is not saying that a corporation or nation thinks, desires, believes or literally has intentions, as French’s position implies.” WERHANE, supra note 89, at 56 (original emphasis). Instead, a corporation is an “intentional system … it exhibits intentional behavior.” Id. Indeed, she observes, “[t]here is no psychophysical entity to have such intentions.” Id. (297) WERHANE, supra note 89, at 62. (298) WERHANE, supra note 89, at 62. Werhane further observes that “the rights of organizations are distinguished from individual rights because, being derived from them, they do not take precedence over, but rather should be secondary to, individual rights.” Id. (299) See supra notes 173-75 and accompanying text. (300) Anyone who is concerned about giving “corporations” too much in the way of rights at the expense of the rights of individuals must at least implicitly be acknowledging that corporations have some reality apart from that of their human constituents. (301) See, e.g., the quotation from Larry May reproduced supra note 170, arguing that corporate action is more than just the sum of the acts of individual corporate constituents. May, however, also argues that the derivative nature of corporate action rules out full personhood:

Yet it should be clear that just as the forest is not itself a full-fledged biological entity,

so the corporation is not a full-fledged person. Gulf Oil Co. does act in some sense of

that term, but its acts are vicarious ones, and its personhood is thus greatly restricted.

But, corporate agency is not restricted to such an extent that moral appraisal of its

action is ruled out. There are actions of the corporation which can be morally

blameworthy even though the corporation’s agency status is much more restricted than

that of full-fledged moral agents. May, supra note 159, at 45. This limited standing has an impact on corporate interests as well, May says, arguing that “corporations are the sorts of entities which can have action-based interests, but only vicariously.” Id. at 124. (302) When the argument is reduced to standard form it is readily apparent that some premises are missing:

Class X’s rights are derived from class Y’s rights

Therefore, X’s rights are inferior to Y’s rights. (303) The normal assumption in most areas of law is that if I hold my rights through you I may have fewer rights than you (if you explicitly transferred less than you had), but I cannot have greater rights than you had (since you could not have given me more than you had to give). A prominent exception is the ease of a buyer in the ordinary course of business who takes greater title to entrusted goods than his merchant seller had. See U.C.C. [sections] 2-403(2) (1990). (304) See supra notes 297-99 and accompanying text. (305) See supra notes 287-91 and accompanying text. (306) Jackall, supra note 23, at 6 (emphasis deleted). (307) See supra notes 99-110 and accompanying text. (308) See, e.g., John Byrne and Stephen Hoffman’s observation that the Rational Actor model “was constructed to stand for the thought patterns and behavior of an individual, not the twentieth-century corporation composed of many individuals, many products, many decisions, many values, and many goals.” Byrne & Hoffman, supra note 125, at 112. see also supra note 100 and accompanying text. (309) Herbert A. Simon, Rational Decision Making in Business Organizations, 69 Am. Econ. Rev. 493, 570 (1979) (Rational Actor model “do[es] not even remotely describe the processes that human beings use for making decisions in complex situations.”) [hereinafter Rational Decision Making]. (310) Cyert & March, supra note 102, at 8. (311) Richard Cyert and James March observed that the Rational Actor model “has few of the characteristics we have come to identify with actual business firms,” as it has “no complex organization, no problems of control, no standard operating procedure, no budget, no controller, [and] no aspiring middle management.” Cyert & March, supra note 102, at 8. (312) James G. March & Herbert A. Simon, Organizations 124 (1958). (313) Jeffrey Pfeffer argues that the Rational Actor model “involves the selection of the goal-maximizing alternative regardless of which particular interests within the organization favor that alternative.” Pfeffer, supra note 105, at 22. Brent Fisse notes that “although profit may be the predominant goal of business corporations from an external viewpoint, the profit goal is often overshadowed within a corporation by the more immediate goals of organizational subunits.” Fisse, supra note 128, at 140. See also discussion infra notes 340-43 and accompanying text. (314) See, e.g., Fisse, supra note 128, at 140 (managers’ motivation “is not confined to satisfaction of monetary want but includes the urge for power, the desire for prestige, the creative urge, and the need for security”). (315) Making the Punishment Fit, supra note 114, at 9-10. (316) Anthony Downs said that bureaucrats tend to distort the information that reaches their superiors by exaggerating data that show them in a positive light and minimizing data that reflect unfavorably upon their performance. Anthony Downs, Inside Bureaucracy 77 (1967). Downs also said that one should assume that all officials act at least partly out of self-interest, and that some officials are solely motivated by self-interest. Id. at 83. If Downs is correct, the neutral, detached decisionmakers pictured by Ladd, Werhane, and French are chimerical indeed.

One should also note that even in the absence of bureaucratic self interest, a certain amount of information distortion may be an unavoidable feet of life in large organizations. Consider, for example, the phenomenon organization theorists call “uncertainty absorption.” This occurs when persons lower in the organizational hierarchy draw inferences from a body of evidence and communicate those inferences, rather than the evidence they are based on, to persons at higher levels in the corporate hierarchy, thereby limiting their superiors’ ability to judge the correctness of those inferences. See, e.g., March & Simon, supra note 312, at 165. (317) In a classic article, Steven Kerr once observed that “many organizational reward systems pay off for short-run sales and earnings only. Under such circumstances it is perfectly rational for officials to sacrifice long-term growth and profit . . . for short-term advantages.” Steven Kerr, On the Folly of Rewarding A, While Hoping for B, 18 Acad. Mgmt. J. 769, 775 (1975). For numerous examples of such systems, see Metzger et al., supra note 98, at 33-34. (318) Saul Gellerman says that many managers are promoted on the basis of “great” results obtained through short-sighted strategies, “leaving successors to inherit the inevitable whirlwind.” Saul Gellerman, Why “Good” Managers Make Bad Ethical Choices, Harv. Bus. Rev., July-Aug. 1986, at 85, 89. Richard Pascale argues that companies must examine the structure of their promotion systems to make sure that “[c]utting corners catches up with you.” Richard Pascale, The Paradox of”Corporate Culture”: Reconciling Ourselves to Socialization, 27(2) Cal. Mgmt. Rev. 26, 31 (1985). (319) Christopher Stone has also argued that the feet that managers are somewhat insulated from the negative consequences of bad decisions by their ability to pass some losses on to consumers or shareholders and by the availability of bankruptcy may skew managerial decisions in the direction of greater risk than the Rational Actor model would predict. Stone, supra note 69, at 46. (320) See supra note 142 and accompanying text. (321) See, e.g., Wright, supra note 106, at 63-64, for the statement that G.M.’s problems with the Corvair were “a first-class example of a basically irresponsible and immoral business decision which was made by men of generally high personal moral standards.” Some people have made the point in a more extreme way. See, e.g., Michael K. Moch & Louis R. Pondy, The Structure of Chaos: Organized Anarchy as a Response to Ambiguity, 22 Admin. Sci. Q. 351, 351 (1977) (reviewing James G. March & Johan P. Olsen, Ambiguity and Choice in Organizations (1976)), for the observation that [w]e all know that people eolleeted together in organizations seldom make rational decisions.” (322) Chester Insko & John Shopler, Experimental Social Psychology 468 (1972). (323) Some have suggested that the diffusion of responsibility associated with group decisionmaking ratchets choice toward a higher risk level because no single individual can be held responsible for a group decision in the event something goes wrong. Id. However intuitively appealing this may be, most scholars accept the “value hypothesis,” which says that individuals tend to see choices embodying higher levels of risk as acceptable after being exposed to the disproportionate number of pro-risk arguments that are likely to be encountered when the group attaches a positive cultural value to risk. Id. at 472-75. (324) Irving L. Janis, Groupthink, reprinted in Psychological Foundations of Organizational Behavior 406, 407 (Barry M. Staw ed., 1977) (original emphasis). (325) Id. Cohesive groups, for example, tend to place a premium on group loyalty, which can induce members to continue group policies “even when those policies are obviously working out badly and have unintended consequences that disturb the conscience of each member.” Id. (326) Id. at 407. (327) Id. at 409. (328) Id. at 413. (329) Id. at 410. (330) Organizations are “sociological systems” and shape their employees’ behavior in a variety of ways. Structural Crime, supra note 67, at 357. (331) In an organization that places a positive cultural value on ethical behavior effective socialization would increase the incidence of such behavior. See, e.g., the following statement by Edwin Hartman:

[A]n organization with the right kind of culture cultivates not simply virtuous

behavior . . . but actual virtue. Its citizens behave virtuously not because they

are rewarded for so doing and punished if they do not, but because they value

so doing and have second order desires accordingly. Edwin M. Hartman, The Commons and the Moral Organization, 4 Bus. Ethics Q. 253, 258 (1994). (332) For a general discussion of organizational socialization processes, see Pascale, supra note 318. For a more specific discussion of socialization focusing on deviance, see Vaughan, supra note 159, at 1389-91. She argues that the socialization process begins when new employees are hired, because “organizations selectively recruit new members who in many ways match those already there.” Id. at 1389. (333) Lawrence W. Sherman, Deviant Organizations, in M. David Ermann & Richard J. Lundman, Corporate and Governmental Deviance: Problems of Organizational Behavior in Contemporary Society 52, 56-57 (2d ed. 1982). (334) Diane Vaughan has argued that unlawful conduct tends to be chosen as survival strategy when intraorganizational support diminishes for legitimate procedures for reaching desired goals. See Vaughan, supra note 159, at 1382. In doing so, Vaughan is applying to organizations Robert Merton’s ideas about the role of the social structure in generating the motivation for individual deviance. Merton essentially argued that when the norms specifying the socially acceptable means for attaining culturally approved goals (e.g., economic success) are emphasized less than the goals themselves, the power of means-specifying norms fades and anomie (a state of normlessness) emerges. Vaughan, supra note 159, at 1378 & n.3. Ambiguity about organizational priorities can play a role here

[A]lmost all organizational structures tend to produce false images in the

decisionmaker, and . . . the larger and more authoritarian the organization,

the better the chance that its top decisionmakers will be operating in purely

imaginary worlds. This is perhaps the most fundamental reason for supposing

that there are ultimately diminishing returns to scale. Kenneth Boulding, The Economics of Knowledge and the Knowledge of Economics, 58 Am. Econ. Rev. 1, 8 (1968). (355) These are Unitary form (“U-form”) and multidivision form (“M-form”). U-form organizations are functionally departmentalized and highly centralized, seeking to offset finite spans of control by adding hierarchical levels to the organization. Corporate Control, supra note 353, at 110. M-form firms compartmentalize themselves into quasi-autonomous operating divisions organized along product, brand, or geographical lines in an effort to avoid the problems inherent in U-form structure. Id. at 115. (356) For a complete discussion of the relative merits of M-form and U-form organization, see Metzger & Schwenk, supra note 203, at 347-50. One specific example of a size-related problem that neither organizational form may prevent and that is germane to our present inquiry is the difficulty large organizations may have with “error admission”:

[B]ureaucratic commitment compounded by ex post access to large resources

commonly results in a tendency to persist beyond judicious cut off limits. A

decision to proceed easily becomes a commitment to succeed, whatever the

costs. Although error admission may also be difficult for the small firm, its

inertial qualities are fewer and the latitude needed to delay response is apt

to be lacking. Corporate Control, supra note 353, at 158. Williamson argues, however, that M-form organizations may be less vulnerable to error admission problems than U-form organizations. Id. The “crooked timber” from which organizations are made has of course been known to have individual problems with error admission. See Barry M. Staw, The Escalation of Commitment to a Course of Action, 6 Acad. Mgmt. Rev. 577 (1981), for a discussion of the problem in individuals. Our point is that both sorts of error admission problems can cause corporations to behave in ways that are not explainable by the Rational Actor model. (337) Here we will confine our discussion to two alternative models, the Bureaucratic Politics model and the Organizational Process model. For the discussion of an even more radical model, the Organized Anarchy model, see Metzger & Schwenk, supra note 203, at 355-57. The Bureaucratic Politics and Organizational Process models first appeared in Graham Allison’s study of governmental decisionmaking. See Allison, supra note 99. They first surfaced in the legal literature in Kriesberg, supra note 96. (353) For example, Brent Fisse has criticized these alternative decisionmaking models as “too exaggerated to command acceptance as a practical guide for lawmakers.” Corporate Criminal Responsibility, supra note 103, at 368. Of course, the same could be said of the Rational Actor model. As we see it, the question is whether multiple partial models are preferable to a single partial model.

Bill Shaw and Frances Zollers have made a very different criticism: “Our criticisms of the other models are reducible to our complaints about the rational actor model. Lurking behind the organizational process . . . [and] bureaucratic politics . . . models is the supposition of a rational actor directing the process.” Bill Shaw & Frances E. Zollers, Managers in the Moral Dimension: What Etzioni Might Mean to Corporate Managers, 3 Bus. Ethics Q. 153, 157 (1993). If our understanding of this critism is accurate, we think it is misplaced. The central point of the alternative models is that they give an account of corporate behavior which does not presuppose the existence of a rational actor. Shaw and Zollers’ main target is the neoclassical economic model of individual decision making and its identification of the pursuit of economic self-interest with rational action. As we have noted above, however, the Rational Actor model of the firm is adaptable to organizations pursuing multiple goals or single goals other than profits. See supra note 344 and accompanying text. The only normative implication inherent in the alternative models (which are intended to be purely descriptive) may be that they may make us yearn for a rational organization. In fact, we assume that if Shaw and Zollers were in charge of an organization they would prefer that it act rationally in pursuit of whatever goals they assigned primacy rather than display the organizational maladies portrayed by the other models. (359) Graham Allison argued that good analysis would employ the insights offered by all three models. Allison, supra note 99, at 258. See also Ellen Earle Chaffee, Rational Decisionmaking in Higher Education 6 (1983) (actual decision processes often involve elements from several models)

[T]o be said to have acted morally badly, it is not necessary that one should

have seen one’s act as a breach of moral principle, nor even that one could

have been reasonably expected to do so, but only that one should have been

capable of doing so–should have had the sort of capacities that make such

realization possible.

Warnock, supra note 208, at 146. On this point, Virginia Held’s standards for moral responsibility are more demanding:

To hold an individual morally responsible for an action requires that he be

aware of what I shall call the moral nature of the action, which can be

understood as either the moral import of the kind of action of which it is

an instance or as the moral value of the consequences it may produce.

Held, supra note 53, at 90. See also supra note 217 for a complete statement of Held’s criteria. Held argues that “[i]f these requirements for responsibility and moral responsibility can be met by individual persons, they can, I think, be met by collectives.” Held, supra note 53, at 91. (484) Warnock, supra note 208, at 143-44 (original emphasis). (485) See supra notes 453-54 and accompanying text. (486) Held, supra note 53, at 90. (487) See Held, supra note 53, at 91 for the following observation: [I]f Dow Chemical Company manufactures napalm, it is aware that the product is not edible gelatin and aware of the kind of activity it is performing. And it may sometimes be as reasonable to assert that a collectivity could have done something else than … manufacture product Y as to assert that an individual could have done something else than the action for which he is held responsible. (488) Thomas Nagel, The View From Nowhere 137 (paperback ed. 1989). Nagel does give a fairly succinct account of the major problems. See id. at 110-37. (489) Warnock, supra note 208, at 144. (490) See supra text accompanying note 372. (491) This is a sensitive issue, and one which has occasioned more than its share of denial, even among philosophers. Alfred Mele has argued that “philosophical models for the explanation of action and belief are typically designed specifically for rational behavior. When irrational behaviors cannot be stretched or cut to fit the favored model, their very existence may be denied. Alfred R. Mele, Irrationality vii (paperback ed. 1992). See also supra note 309 for Herbert Simon’s argument that the Rational Actor model does not adequately describe the decision processes of human beings. (492) Space constraints prevent us from even remotely doing justice to this topic. We believe, however, that it is of critical, though unacknowledged, importance to the business ethics enterprise. That, however, is a subject for another article. (493) See supra notes 462-64 and accompanying text. (494) Warnock at one point describes it as “minimal … able in at least some degree to envisage practical alternatives, to deliberate, and to decide.” Warnock, supra note 208, at 21. (495) See supra notes 341-42, 345 and accompanying text. (496) See supra note 356. (497) A nice recent example of subconscious bias can be found in a study of 1,461 epidemiologists, toxicologists, physicians, and general scientists on various health risks. Half of those surveyed were presented with mainstream scientific data about the effects of secondhand smoke as such. Of this group, 70% thought it a serious environmental hazard and 85% thought public health intervention was necessary. The other half of the respondents were given the same information, but told it pertained to “substance x.” Of this group, only 33% thought “substance x” was a serious hazard and only 41% thought that it warranted public health regulation. See Jerry Taylor, Cancer Risks for Thee, but Not for Me, Wall St. J., Jan. 3, 1995, at A10. (498) “[P]eople, or at least people of the political class, define problems so as to make them amenable to those solutions that they favor for ideological or moral reasons.” James Q. Wilson, A New Approach to Welfare Reform: Humility, WALL ST. J., Dec. 29, 1994, at A8. (499) Warnock notes that “racial hostility, for instance, is not merely–though of course it is–a gross defect of human sympathy

[P]eople typically observe the behavior of their peers, whether they are choosing a restaurant or an investment. Even if

their own judgment may run contrary, when they learn that their peers favor something, they tend to go with the herd

and justify that decision by reasoning that the weight of opinion must be correct.

Id. at 85. For general treatments of human cognitive problems and their impact on rationality, see, e.g., Jon Elsteb, Sour Grapes: Studies in the Subversion of Rationality (1983)

In our brains there is a cobbled-together collection of specialized brain circuits, which, thanks to a family of habits

inculcated partly by culture and partly by individual self-exploration, conspire together to produce a more or less

orderly, more or less effective, more or less well-designed virtual machine…. By yoking these independently evolved

specialist organs together in common cause, and thereby giving their union vastly enhanced powers, this virtual

machine, this software of the brain, performs a sort of internal political miracle: It creates a virtual captain of the crew,

without elevating any one of them to long-term dictatorial power. Who’s in charge? First one coalition and then another,

shifting in ways that are not chaotic thanks to good meta-habits that tend to entrain coherent, purposeful sequences

rather than an interminable helter-skelter power grab.

Dennett, supra note 31, at 228. (510) Stephen Walt and William Laufer note the existence of “instances in which an individual herself can be treated as a firm: a set of loosely allied decision making units or, more weakly, units with preferences. As Schelling has suggested, sometimes, for some decisions, individuals are like small collectivities.” Walt & Laufer, supra note 64, at 271 (citing Thomas C. Schelling, Choice and Consequence 93 (1984)). Another philosopher has suggested that individuals might profitably be compared to a club. See generally Derek Parfit, Reasons and Persons (1984). (511) For example, consider “forced savings” plans such as whole life insurance and payroll deduction plans, and the kinds of bets we make with spouses and friends to help ourselves quit smoking, lose weight, etc. By such intertemporal choice behavior “[a]n earlier self is strategically manipulating a later self.” Walt & Laufer, supra note 64, at 273. (512) As David Nyberg noted, “the idea of deceiving oneself is a threat to our sense of wholeness and our integrity.” Nyberg, supra note 501, at 90. In fact, the contradiction has led some philosophers to argue that self-deception is impossible. For such arguments, see generally Alfred Mele, Recent Work on Self-Deception, 24 Am. Phil. Q. 1 (1987). (513) On these subjects, see generally Mele, supra note 505. In a related vein, Daniel Dennett asks: “What good could talking to yourself do, if you already know what you intended to say?” Dennett, supra note 31, at 301 (original emphasis). (514) Nyberg, supra note 501, at 90. (515) Nyberg, supra note 501, at 96. (516) Dennett, supra note 31, at 426-27. (517) Dennett, supra note 31, at 68. This helps to explain why we are so vulnerable to self-deception, particularly deception about ourselves and our qualities. As Dennett sees it, when we engage in introspection “we are always actually engaging in a sort of impromptu theorizing–and we are remarkably gullible theorizers, precisely because there is so little to `observe’ and so much to pontificate about without fear of contradiction.” Id. at 67-68 (original emphasis). David Hume was an early doubter of the existence of the unitary self, as is evident from his comments about the actual experience of introspection:

For my part, when I enter most intimately into what I call myself, I always

stumble on some particular perception or other, of heat or cold, light or

shade, love or hatred, pain or pleasure. I never catch myself at any time

without a perception, and never can observe anything but the perception. David Hume, A Treatise of Human nature 252 (P.H. Nidditch ed., 1978). (518) Walker Percy asks: “How you can survive in the Cosmos about which you know more and more while knowing less and less about yourself, this despite 10,000 self-help books, 100,000 psychotherapists, and 100 million fundamentalist Christians?” Walker Percy, Lost in the Cosmos 1 (1983). (519) Dennett, supra note 31, at 429 (original emphasis). (520) In fact, it is somewhat tempting at this point to ask why we should be surprised to find that the flaws of organizations mirror the flaws of their creators. (521) See supra notes 483, 489 and accompanying text. (522) Warnock recognizes the distinction when he observes that “[t]here may be many to whose actions moral principles apply who are not blameworthy at all for acting morally badly.” Warnock, supra note 208, at 146. (523) In saying this we recognize that, as Daniel Dennett’s comment suggests, a detailed investigation of actual human processes might force us to rethink our general notions about individual culpability as well. We also, however, acknowledge the argument that society may need simplified models of both individual and organizational culpability. In other words, even if we ultimately concluded that no one (or thing) was “morally responsible” in any traditional sense of the term, for social control purposes we might find it desirable to continue to act as if moral responsibility exists. (524) See supra notes 88, 207 and accompanying text. See also May, supra note 159, at 84 (calling for models of corporate criminal liability instead of continuing to treat corporations like persons, requiring either difficult proof of intent or holding them strictly liable). (525) See Walt & Laufer, supra note 64, at 401 (corporations can be held criminally liable without deciding whether they are moral persons). Interestingly, though they acknowledge that “legal liability is not coextensive with moral blameworthiness,” Walt and Laufer argue that “both sorts of liability require reference to standards of culpability, not of personhood. Corporations, no less than individuals, can satisfy both sorts of liability.” Id. at 406. (526) On the departure from requiring proof of moral culpability that occurred when we began to apply respondeat superior principles in the criminal context, see supra notes 78-87 and accompanying text. Our decision making models have implications for corporate control strategies that are not dependent on legal liability and moral blameworthiness being coextensive. These have been amply detailed elsewhere, so we will not discuss them here. See Michael B. Metzger, Organizations and the Law, 25 AM. Bus. L.J. 407, 436-40 (1987). (527) See supra notes 90-94 and accompanying text. (528) “[I] do not imply that `to understand all is to excuse all.’ But I insist that we must first understand, and then we can have some indication of guilt.” Lewis, supra note 29, at 30. See also the related quotation from Patricia Werhane reproduced supra note 95 and accompanying text. (529) Owen notes that it can take “a good deal of time” for large, bureaucratic organizations “to perceive and understand the nature of a safety problem, to study whether it can be remedied feasibly, and to decide upon and then accomplish a corrective course of action.” Owen, supra note 118, at 14 n.41. See also supra notes 356, 388-89 and accompanying text. (530) Note that the object of our inquiry here is to identify the circumstances under which an organization might justifiably merit the same level of moral opprobrium to which we would subject an individual who is guilty of a conscious, voluntary wrong. We take it that organizations, like humans, fairly may be held civilly, or perhaps criminally, responsible for less. It is interesting to note, however, that some commentators have argued that criminal liability should only be imputed to corporations for the acts of members of the corporate “inner circle” (usually defined as members of the board and high managerial agents). See Metzger, supra note 17, at 50-51. The rationale normally given for this stance is that these individuals may fairly be compared to the “brain” or “alter ego” of the organization. Id. (531) Saul Gellerman puts it this way:

Top executives seldom ask their subordinates to do things that both of them

know are against the law or imprudent. But company leaders sometimes

leave things unsaid or give the impression that there are things they don’t

want to know about. In other words, they can seem, whether deliberately

or otherwise, to be distancing themselves from their subordinates’ tactical

decisions in order to keep their own hands clean if things go awry. Often

they lure ambitious lower level managers by implying that rich rewards

await those who can produce certain results–and that the methods for

achieving them will not be examined too closely. Gellerman, supra note 318, at 88. Gellerman may, however, have been writing in less troubling times. A very recent survey of newly-minted Harvard MBAs found that “in many cases, young managers received explicit instructions from their middle-manager bosses … to do things that they believed were sleazy, unethical, or sometimes illegal.” Joseph L. Badaracco, Jr. & Allen P. Webb, Business Ethics: A View From the Trenches, 37(2) Cal. Mgnt. Rev. 8, 8 (1995). On the difficulties associated with proving individual wrongdoing in the corporate context, see supra notes 218-19. (532) See Tung Yin, Sears is Accused of Billing Fraud at Auto Centers, Wall St. J., Feb. 1, 1992, at B1. (533) On the role of incentives in producing unethical organizational behavior, see Metzger et al., supra note 98, at 32-34. Any well-designed incentive system should be accompanied by negative feedback mechanisms designed to detect and deter foreseeable forms of cheating behavior by persons within the organization. See id. at 34. We are tempted to argue that any competent manager should understand such things, but the abundance of similar stories in the business press causes us to wonder whether our expectations are too high or such managers are too rare. (534) See supra note 196 and accompanying text. (535) See, e.g., Corporate Social Responsibility, supra note 17, at 56 (referring to situations where “the firm’s left hand does not know what its right hand is doing”)

What we should be concerned with is whether there is a structural feature

of the corporation which has allowed for a nexus of actions taken by the

members of a corporation. Responsibility or liability should be assigned to

a corporation when that nexus of actions which cause a harm can be properly

attributed to the corporation. May, supra note 159, at 87. (538) May, supra note 159, at 85 (proposing a model of responsibility based on negligence and vicarious agency). May acknowledges that requiring proof of negligence (as opposed to imposing strict liability) will in some cases enable corporations to avoid responsibility for harms they have caused, but he argues that it will also encourage them to exercise more care. Id. at 86. (539) Corporate Moral Responsibility, supra note 17, at 557. Phillips argues that negligence does demonstrate moral culpability, albeit of a lesser degree than that manifested by intentional misconduct, and cites Aristotle in support of his position. Id. at 557 & nn.15, 16. Recall that Jerome Hall disagreed on this point. See supra note 84. For reasons beyond the scope of this article we are inclined to agree with Phillips and Aristotle. (540) See Corporate Moral Responsibility, supra note 17, at 556 (“Ordinarily, personal fault for defective organizational design should take the form of negligence or recklessness.”). (541) See supra note 531 and accompanying text. (542) Gellerman, supra note 318, at 90. (543) See supra note 264 for Peter French’s thoughts on this point. For the elements of a complete corporate ethics program, see generally Metzger et al., supra note 98. (544) Corporate Moral Responsibility, supra note 17, at 556. See also the following observation by R.S. Downie:

In the first place, the rules which constitute the collective have been created

or accepted by the decisions of individuals, who therefore bear moral responsibility

for their decisions. If a collective tends to produce actions with

a characteristic moral quality this will be partly because the decisions of the

individuals who created the collective are to be morally praised or blamed. R.S. Downie, Collective Responsibility, 44 Philosophy 66 (1969), reprinted in Collective Responsibility 47, 50-51 (Larry May & Stacey Hoffman eds., 1991). (545) Id. (546) There are, however, some reasons to wonder whether most such managerial failures will involve sufficient culpability to provoke courts and juries to impose stiff enough penalties on individual managers to produce effective deterrence. For a discussion of this point, see Metzger & Schwenk, supra note 203, at 358 n.249. (547) See supra notes 366-70 and surrounding text. (548) See Corporate Moral Responsibility, supra note 17, at 570. (549) See supra note 474 and accompanying text. (550) See supra note 23 and accompanying text. (551) See supra note 18 and accompanying text. (552) See supra note 331. (553) See supra notes 420-22 and accompanying text. (554) See supra note 25 and accompanying text. (555) Robert Jackall defines an organization’s institutional logic as “the complicated, experientially constructed … set of rules, premiums, and sanctions that men and women in a particular context create and re-create in such a way that their behavior and accompanying perspectives are to some extent regularized and predictable.” Jackall, supra note 23, at 112. Their company’s institutional logic looms large on managers’ personal horizons because their organizational “fates depend on how well they accomplish defined goals in accordance with the institutional logic of their situation.” Id. (556) “Any company that expects a corporate ethics code to countervail the corrupting effects of … warped institutional logic is ignoring human nature and living in a dream from which a rude awakening can be expected.” Metzger et al., supra note 98, at 34. (557) Kerr, supra note 317, at 769. Judge Richard Posner makes the related point that “people seem to behave morally in situations in which the costs of behaving morally are small, but to respond to incentives in situations in which those costs are large.” Richard A. Posner, The Problems of Jurisprudence 195 (1990). (558) For a somewhat depressing view of the likelihood of major corporations ever being headed by such persons, see Metzger & Phillips, supra note 23, at 152-53. (559) See supra note 469 and accompanying text. (560) On the potential advantages of rational organizations in this respect, see supra notes 432-35 and accompanying text.

MICHAEL B. METZGER, Charles M. Hewitt, Jr. Professor of Business Law, Indiana University School of Business

DAN R. DALTON, Associate Dean – Academics and Samuel & Pauline Glaubinger Professor of Management, Indiana UniverSity School of Business