Moral Cretinism, Ownership and Ethical Advocacy

by James & Miel on September 5, 2008 · 0 comments

Hello All,

Some of our postings are more nuts and bolts, some address aspects of finance that pertain to softer topics – like the interaction of money and ethics. Both are important for coming to terms with your financial situation. This posting is on one of the stickier topics: morality and profits.

Can Corporations be Judged Morally?

In 1970 Milton Friedman wrote a classic essay in which he argued the sole responsibility of corporations was to increase their profits (here). Friedman argued that only individual people, NOT corporations, have an obligation to act in an ethical manner. Others – like the classic German philosopher and social thinker, Max Weber say that collective organizations take on a life of their own – and by extension these organizations are therefore subject to ethical judgments about their behavior. In the view of this author, Weber makes the stronger argument – to argue that corporations have no obligation to act in an ethical manner is to invite moral cretinism.

How Do You React?

Assuming that you agree with Weber that corporations are capable of being judged and you own stocks – then you’re left with a choice. Do you choose to profit when your corporation engages in unethical behavior? There are plenty of companies that do unethical things – and make a ton of money doing it. For example, companies like Taser International Inc. and Altria (a.k.a Phillip Morris) have been roundly criticized – in Taser’s case for producing electrical weapons suitable for torture and in Altria’s case for degrading the health of America via mass tobacco sales.

Be An Advocate.

One way to react to this is to be a pro-active advocate. If you don’t think a company is behaving in a ethical manner then you are free to sell your shares – and to use your 1st Amendment rights to encourage others to do so. Or alternatively, you can take a position in a company and exercise your traditional rights as a owner to insist that management change their business model. In any case, you should not buy into the moral cretinism that many on wall street believe in.

Best,

James

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