The idea is to consider what kind of system of justice we would endorse if we did not know what our place in society would be. If I am in fact a Star-Bellied Sneetch, I might for selfish reasons endorse a society in which those with stars get more benefits than those with bare bellies. But if I had to choose before I knew whether I would have a star on my belly or not, then I would certainly choose a more equitable division of goods.
So the trick is to put ourselves, hypothetically, in the position of not knowing anything about ourselves ahead of time in order to decide the fairest way of distributing goods. We wouldn’t know, for instance, if we would be born into poor families or would become disabled sometime during our lives or if we might not be quite talented enough to achieve a higher-paying, skilled job. Since any of us might wind up in such situations, we would probably agree to a society that ensures that all have at least their basic needs met, such as food, clothing, shelter, and perhaps education and health care, and a society in which all have both the liberty and opportunity to better themselves.
This doesn’t necessarily mean everyone gets an equal share of everything. We would probably be willing to allow some inequalities to exist, if those inequalities wind up helping the less fortunate along with the more fortunate. For instance, since a relatively free market provides the incentive of increased wealth to hard workers and innovative entrepreneurs, a free market encourages the production of more goods, which ultimately means more for society as a whole, although it does mean that some people will earn more than others. So we might accept such inequalities since a high tide floats all boats. However, in the original position we also realize that some accident might befall us during our lives or that we might be born less clever, less capable of hard work, or simply not lucky enough to be born into wealthy, successful, or otherwise privileged families. We would have to consider the possible outcome of being disadvantaged or otherwise historically disenfranchised. So we would want to make sure that some goods get redistributed to those who may not benefit from a free-market economy. Especially since not all people are equal in the eyes of the free market and so often one’s chances of success hinge on characteristics beyond one’s control. This means that while we might wind up with something approximating a free market, which acknowledges property rights, we would probably also agree to a method of redistributing wealth in order to have some basic safety nets built in to ensure that everyone has at least their minimum needs met and rights guaranteed, as well as a somewhat level playing field in order to achieve equal opportunity.
If we didn’t know whether we were going to wind up as Mayzie or Horton, what kind of system of distributive justice would we choose? Would it be the kind of system in which Horton the hard-working elephant gets the egg, or Mayzie the lazy mother bird? Before we answer, we must also remember that we could wind up in the place of the newly hatched elephant-bird.
He who thinks he has all of the answers is dumb
But asking hard questions can often bring wisdom.
The question, “Whose egg is it, really?” has no clear answer. In several of his works, Dr. Seuss has raised questions of property and distributive justice in a way that even a child can understand. How should goods be distributed in a society? What is a fair division of labor? How should markets be regulated? How should environmental concerns affect property rights? Are children property? In many cases Dr. Seuss has deliberately left such questions hanging.
Another somewhat famous philosopher similarly kept asking questions while never giving answers. In ancient Greece, Socrates taught his listeners to constantly question what they were told. Although this practice led to his being sentenced to death by the people of Athens for the crime of “corrupting the youth” (i.e., teaching them to think for themselves), Socrates became immortalized in Plato’s dialogues.
Seuss, too, deserves our thanks for continuing this long tradition of corrupting the youth. One of the many great things about Seuss is that while his wit, poetry, and art make him eminently accessible to children, he raises issues with which philosophers have wrestled for centuries and which still perplex adults today. Children (and adults) reading him may not find answers, but at least Seuss has them thinking about the questions.
CHAPTER SIXTEEN
It’s Not Personal . . . It’s Just Bizzyneuss: Business Ethics, the Company, and Its Stakeholders
Matthew F. Pierlott
Just as people cannot live without eating, so a business cannot live without profits. But most people don’t live to eat, and neither must businesses live just to make profits.
—John Mackey, Whole Foods Market CEO1
At one time it was the social responsibility of anyone addressing the topic of business ethics to admit the apparent oxymoronic nature of the subject. “Business ethics? Isn’t that a bit like vegan hamburgers?” Fortunately, the very idea of applying moral thinking to business is no longer presumed misguided. That is not to say cynicism with regard to the moral conduct of businesspeople has died. The past decade has certainly seen its share of corporate scandals, from the Enron and WorldCom fiascos that, with a plethora of other creative accounting disasters, began the decade to both the financial crisis and the BP oil catastrophe glupping up the Gulf that closed it out. While all of these events have certainly contributed to the cynicism, they also have underscored the importance of taking business ethics seriously.
A fundamental issue in business ethics is determining to whom a company has a responsibility. It’s fundamental because so many other conversations in business ethics (although not all) must presuppose some model or other, and it appears that there are two competing perspectives on the issue that divide our thinking. One is known as the “stockholder” or “shareholder model,” and the other is the “stakeholder theory” of the modern corporation. In this chapter, we will examine the two basic perspectives and then explore the different responsibilities a business might have to different sets of stakeholders, with the help of Dr. Seuss, of course.
Taking Stock of the Stakeholders
and the Stakes for the Stockholders
So, what criteria must a company meet to be a “good” company? One way to answer this is to recognize that the evaluation of something depends on the function it performs. This follows the method of the Greek philosopher, Aristotle (384–322 BCE), who said:
[E]very virtue or excellence both brings into good condition the thing of which it is the excellence and makes the work of that thing be done well; e.g., the excellence of the eye makes both the eye and its work good; for it is by the excellence of the eye that we see well. . . . Therefore, if this is true in every case, the virtue of man also will be the state of character which makes a man good and which makes him do his own work well.2
The specific excellence of something is determined by its proper functioning. Aristotle saw natural functions as the illustration of this idea, but it applies to artifacts, too. A good axe is a sharp axe, because a sharp axe chops wood better than a dull one. We can also apply this notion to organizations, like companies.
Well, what is it that a company is supposed to do? One position that has had a lot of ideological influence is famously associated with the Nobel Prize–winning economist, Milton Friedman. This view is often called the “stockholder” or “shareholder” theory of the firm. Friedman argues that a business serves a social good by seeking profit, since the free-market system transforms these individual efforts into results that benefit society as a whole.3 Competition in the market incentivizes ingenuity and greater efficiencies, which translates into better quality and lower prices for end users and more profits for entrepreneurs and investors. Further, having more capital available allows for more investment and development, meaning more jobs and the opening of new markets. Oh, the magical things they can do on street Wall. Everyone wins, with investors being the winning-est winners of all.
The important moral concept here is the idea of a property right. If I own something, I am free to use it as I wish, provid
ed my use doesn’t interfere with the basic rights and freedoms of others.4 Obviously, then, if I employ you with the expectation that you’ll work to make as much money for me as possible, you owe it to me to maximize my profit. By accepting employment, you’re trading your right to make decisions as you see fit according to your own value system—at least while you are “on the clock.” You are free to reject the deal or to walk away later within the terms of the deal, but under the deal, you have a role responsibility to earn a profit for me. If you wish to do something for someone else, do it on your own time and with your own money (that you can get from me by making a profit for me). Using your employee role to accomplish other goals is tantamount to theft. Shareholder theorists assert that overall this system is best for society as a whole.
On the other side of the issue, there is a view that recognizes that businesses are a complex of human relationships and that the reduction of all interests to those of the owners is illegitimate. The American philosopher R. Edward Freeman is credited with articulating this view, known as stakeholder theory, and is often anthologized in business ethics texts right along with Friedman.5 Stakeholder theory is used in a variety of senses, though, with myriad articulations. Thus, the claims about how it contrasts or converges with shareholder theory are harder to assess than might appear in standard presentations of them (including this one).6 For present purposes, though, I only wish to provide a thumbnail sketch of the normative use of the stakeholder theory to open up the dialogue about the extent of the responsibilities of decision makers in a company, publicly traded or not.
Basically, the stakeholder theory recognizes that management of a company has the moral obligation to consider the interests of all of those who have a stake in the company’s activities and that their competing interests must be negotiated in some way. As much as their employer may want them to continue Zizzer-Zoofing, the five foot-weary salesmen must get some sleep after a day of pushing Zizzer-Zoof seeds, which nobody wants because nobody needs (Sleep). If the employer insists that their sales are too low and they must work longer hours, they can respond with the claim that having no time to sleep will endanger their health (the salesman’s interest) and leave them with less internal resources to pitch the unneeded seeds (the long-term profit interest of the employer). The shareholder model may accept the second reason as legitimate, but not the first. Within the stakeholder model all competing claims have to be evaluated, then prioritized or balanced. Property rights are one important consideration but don’t necessarily trump the variety of other claims that might emerge.
Each group generally has different interests and expectations and so develops a different perspective on what makes the company a good company (just consider the different perspectives of the Lorax and the Once-ler, as we will in detail below). Obviously, the owners’ interests play a central role. Yet, the interests of employees and managers, clients and customers, suppliers, the local community, social groups, the environment, future generations, and so on may also place legitimate claims on the activity of the company. Even in the absence of someone able to voice those interests, those interests exist and lay a moral claim on the business activity. Without the Lorax, the Bar-ba-loots and Swomee-Swans still have a legitimate claim worth considering. All of these various interests place a heavy burden on the corporation or business, and it’s in practice impossible to meet all of the demands satisfactorily. Making the choices of how to prioritize and meet as many of the obligations as possible in an effective way is the challenge for business and political leaders.
There are two important things to note here. First, shareholder theory would allow a CEO to consider the interests of other stakeholders, but only in an instrumental way.7 Treat the customers well, but only to the extent necessary to increase profits. Only the law can serve as a legitimate constraint on profit maximization. Second, stakeholder theory would admit profit as a central goal, but primarily instrumentally. Friedman put it this way: “Maximizing profits is an end from the private point of view; it is a means from the social point of view.”8 Profit allows the corporation to thrive and continue to create value for a variety of stakeholders. Stockholders also have a legitimate claim to expect a return on their investments, and so the CEO will value profit in its own right, but she would not feel the need to maximize profit at the expense of other values, as Friedman suggests.
What this opens up is the requirement for decision makers within a company to retain their sense of personal moral responsibility in their roles and to recognize the many stakeholders as persons as well. Generally speaking, with respect to stakeholder theory, it is when a company fails to respect a group of people by at least weighing their interests or by weighing them far too lightly that one might claim the company acted wrongly. In the next three sections, let’s look at how Seuss comments on these stakeholder relationships in commerce, starting with the relationship between a business and its customers.
Caveat Emptor: “No, You Can’t Teach a Sneetch”
So, we’ve all heard the expression: Buyer Beware! Is this a bit of prudential advice, or an attitude of justification for convention? If the former, no problem. I would advise anyone to use caution with others when money is on the line, since all of us give in to temptation sometime. But sometimes this phrase is used as a justification: “I’m not wrong for having cheated you . . . you should’ve known better.”9 The good Doctor presents us with a perfect illustration in Sylvester McMonkey McBean, the “Fix-It-Up Chappie” from “The Sneetches.”
So the Sneetches are divided into two social classes, Plain-Belly and Star-Belly, with those with “stars upon thars” as the dominant class. Besides being a wonderful allegory about the social construction of class and the role fashion plays in it, the poem provides a great example of the exploitation and manipulation of consumer desires. McBean swings into town with a machine to print stars on bellies, allowing second-class Sneetches to appropriate the appearance of first-class Star-Bellies for a small fee. Unable to maintain class domination without a means to discern class membership, Star-Bellies now desire a new way to differentiate themselves. McBean has a “Star-Off Machine” to do the trick, and soon he has all of the Sneetches filing in and out of his two machines. Once he has taken all of their money, he leaves the Sneetches confused on the beaches, laughingly exclaiming, “They never will learn. No. You can’t teach a Sneetch” (Sneetches).
But before we look at McBean more closely, let’s consider a prevalent principle in ethics. Immanuel Kant famously argued that morality is grounded on a fundamental command built into the nature of every rational being, the categorical imperative.10 Something like the Golden Rule, the categorical imperative requires an agent to act in way that can be universalized, insisting on equality among rational agents; respecting the inherent dignity of all others. One formulation of the command states: “So act that you use humanity, whether in your own person or in the person of any other, always at the same time as an end, never merely as a means.”11 It’s okay to use someone as long as you do so in a way that is respectful. The idea of a contract can be understood as a mutually beneficial agreement to use another person. One person sells and another person buys, each getting what they want from the other, each being used for the other’s purpose. But so long as they are equals and the transaction occurs on a level playing field between free actors, it’s all okay.
So, did McBean use the Sneetches in a way that recognized their own moral worth, their dignity? Should we view the Fix-It-Up Chappie’s activity as respecting Sneetch interests, or should his activity be viewed as manipulative and using the Sneetches merely as means to his own end, without any regard for them as ends in themselves—that is, as dignified beings? McBean provided a desired service to the Plain-Bellies, and then another desired service to the Star-Bellies. At no point did he misrepresent his service, and he did not create the desires in the consumers. We might say that he created an environment to exploit the desires of the Sneetches for his own profit, but the
word exploit might smuggle in a moral condemnation that we need to justify. If the Sneetches got what they wanted at the time of purchase, didn’t McBean provide them a valuable service by making them happier? McBean can’t be blamed if it didn’t last. If a consumer regrets a purchase later, does that mean the provider took advantage?
Of course, we know that McBean exploited the Sneetches, because we heard him laugh at their sorry state. He knew all along how this would turn out, with Sneetches penniless and confused. He wasn’t providing a valuable service to the consumers; he was undermining the value of his product after its sale. Think of the nationwide conversion to digital television broadcasting that began on June 12, 2009. The FCC fined Sears, Wal-Mart, Best Buy, and others in 2008 for failing to provide proper labels to inform customers buying analog TVs that they would need to purchase additional equipment to maintain full use of the product after the transition.12 Regardless of the merits of the FCC’s claim, the intention is clear: if true, consumers are unwittingly being sold a product whose value will soon plummet. Whenever a provider of a service or good knowingly undermines the value of that service or good after its purchase, or pushes the service or good well aware of some upcoming event that will undermine the value, that provider is exploiting the consumer.
McBean’s behavior illustrates the inadequacy of simply using consumer desire as a justification for one’s treatment of the consumer. Note that Friedman’s view must condone McBean, since he profited greatly. The Sneetches should have had better laws, I guess. Oddly, the Friedmanite view encourages society to generate more legal regulation and interference in the free market, which is counter to its goal of securing a free market. In order to protect children from manipulative and harmful advertising, the European Union issued the 2007 Audiovisual Media Services Directive (amending an 1989 directive aimed solely at television advertising), which in Article 3e.1(g) requires member states to regulate media service providers, ensuring that:
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