5/9/2016
French and Werhane:
Do Corporations Qualify
as Moral Agents?
Corporate Responsibility
There are various ways of getting at the fundamental
question:
Can corporations (as such) be moral agents?
Can corporations (as such) be held morally responsible?
 A logically prior question, however, might be something like:
Morally speaking, what is a corporation, exactly?
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Corporations: Some Questions
 Morally speaking, is a corporation just a collection, an
aggregation, of individuals?
(The conventional ‘theory of the firm’ as a nexus of
contracts might support this view.)
 If so, is every individual who can be identified in the
corporate organizational chart individually responsible for
those actions of the corporation that are (to some
specified degree) under their control?
Compare: “I was only following orders”
 By contrast, might there be some special degree of
individual responsibility confined to certain people
(directors, senior executives) who have some degree of
(controlling, directing) power within the organization?
Compare: “I give the orders”
 On the other hand, is a corporation perhaps some distinct
sort of entity, over and above the individuals that comprise
it?
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Corporate Legal Responsibility
 Law and morality are in principle distinct. Consider:
• Immoral laws: Just because it’s the law, doesn’t mean it’s
morally acceptable.
• Laws that deal with matters of moral indifference, e.g.,
coordination problems
• Law and morality (normally) provide for different sorts of
sanctions: The law allows for coercive sanctions that aren’t
normally applicable to moral judgments.
 Still, by analogy, it is helpful, in attempting to sort out
questions about corporate moral responsibility, to look at
the legal background on corporate liability and criminal
responsibility…
Corporations: Legal Characteristics
 Legal personality: An ‘artificial person’ that can enter into
binding contracts and own property
 Immortality (“Perpetual lifetime”): Unless dissolved
through bankruptcy or revoked corporate charter, the
corporation lives on beyond the lifetime of its shareholders
and employees.
 Limited Liability: In case of bankruptcy or a civil
judgment, the liability of individual shareholders (normally)
is limited to the value of their investment…
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Combine these features with a laissez-faire-type doctrine that
corporations ought only to act in the financial interest of owners,
and potentially troubling possibilities emerge:
Joel Bakan (UBC): “institutional psychopaths” (The Corporation,
2003)
Adam Smith (1776):
“The directors of such [joint-stock] companies… being the
managers rather of other people’s money than of their own, it
cannot well be expected, that they should watch over it with the
same anxious vigilance with which the partners in a private
copartnery frequently watch over their own...Negligence and
profusion, therefore, must always prevail, more or less, in the
management of the affairs of such a company.”
Corporate Criminal Responsibility: Canada
Rex v. Fane Robinson (Alberta Court of Appeal, 1941)

Two principals of Fane Robinson Ltd. (a garage and auto-repair facility), George
Robinson and Emil Fielhaber were charged with two Criminal Code offenses (note: a
criminal trial, not a civil case): 1) Conspiracy to defraud and 2) Obtaining money by
false pretenses.

At trial, the charges were dismissed on the grounds that a since corporation cannot
form mens rea (a “guilty mind,” a culpable mental state) it cannot be guilty of a
criminal offense in which mens rea is an essential element.
Tweedie J.: Even if the directors or the shareholders had passed a resolution
authorizing such an act, in [the court’s] opinion that could be of no effect, as there is
no power in a corporation to commit criminal acts in which mens rea is a material
condition.
This was reversed on appeal:
Ford JA.: [Robinson and Fielhaber] were the acting and directing will of Fane
Robinson…their culpable intention (mens rea) and their illegal act (actus reus) were
the intention and act of the company.
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
There have been some refinements to the rule (ratio) in Fane Robinson
over the years, but it is still a basic precedent for establishing corporate
criminal responsibility in Canadian law.
Some things to note about Fane Robinson:

The case is remarkably late (1941)—about 100 years after corporations and
corporate amalgamation started to become a force in the North American
economy.

It marks a substantial departure from the rules generally operative until that
time: In the trial court decision, Tweedie J. cites Viscount Haldane in
Lennard’s Carrying Co. v. Asiatic Petroleum (1915):
Corporations are legal fictions, a corporation has “no mind of its own any
more than it has a body of its own”—the fairly standard view of corporate
criminal responsibility in the past.
Notwithstanding the rule in Fane Robinson, courts may still distinguish
between actions for which the corporation is responsible and other actions
responsibility for which devolves onto individual employees, construed as
acting on their own

That is, a type of due diligence (“all reasonable care”) defense may be
available to corporations charged with a criminal offense.
Justice Dickson (obiter in Regina v. Sault Ste. Marie, 1978):
“The due diligence which must be established is that of the accused alone.
Where an employer is charged in respect of an act committed by an
employee acting in the course of employment, the question will be whether
the act took place with or without the accused’s direction or approval…and
whether the accused exercised all reasonable care by establishing a proper
system to prevent commission of the offence and by taking reasonable
steps to ensure the effective operation of that system.”
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Regina v. Safety-Kleen Canada Inc.
(Ontario Court of Appeal, 1997)

A case were a due diligence defense is attempted and fails.
Safety-Kleen, a waste oil recycling company based in Breslau, ON, is
charged with three different offenses under the Environmental Protection
Act (essentially the same charges to which their employee, Howard, who
carried out the actions in question, had already plead guilty).

Taken together, Fane Robinson and Safety-Kleen suggest a fairly specific
legal account of whether and when a corporation can be held criminally
responsible.

This account may, by analogy, be of some help in answering our basic
question “Can corporations be held morally responsible?”

But legal responsibility by itself is presumably not sufficient to answer that
basic question one way or the other.
Peter French (1942 - )
 Director of the Joan & David Lincoln Center
for Applied Ethics at the University of Arizona;
formerly, Director of the Ethics Center at the
University of South Florida. [For a while: Exxon
Distinguished Research Professor (!!!) in the Center
for the Study of Values at the University of Delaware]
 (Hopefully) obvious to philosophy majors (but possibly opaque to
everyone else), French offers an account of corporate moral
responsibility that is clearly influenced by so-called ordinary
language philosophy, of the Wittgenstein, J.L. Austin sort.
Wittgenstein: Meaning is use. We need not be so concerned with
producing a theory of X; instead we should clarify how “X” is used.
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The Corporation as Moral Person

French’s argument is fairly simple:
Two senses of the term “responsibility” (not counting the
laudatory sense: “What a responsible young person!”)
1. Causal responsibility (“who-dun-it”)
2. Responsibility as accountability. Literally “having a liability to
answer” (210)

Responsibility ascriptions are conjunctive propositions:
“the first conjunct of which identifies the subject’s actions with
or as the cause of an event (usually an untoward one)…”
“…the second conjunct asserts that the action in question was
intended by the subject or the event was the direct result of an
intentional act of the subject.” (211)
 If something can’t be said to have intentions, then it can’t be
said to be responsible (in the second sense)
 So, a minimum condition for being a moral agent is to be a
“Davidsonian agent” – to be something capable having
intentions attributed to it.
And not just in an accidental way (i.e., as ‘shorthand’ way of
describing the intentions of an individual in a collectivity), but in
a “non-eliminable” way …
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 A mob, French asserts, is not normally a Davidson agent.
A mob has “no identity over and above that of the sum of
the identities of its component membership” (210). We
might say that a crowd is causally responsible for a
lynching (“the Ox-Bow mob”), but we would not say that it
is collectively accountable for it.
 By contrast, a corporation, according to French, can be
said to be morally responsible (accountable) for its actions
by virtue of its Corporate Internal Decision structure
(CID)…
The CID Structure
“the requisite redescription device that licenses the
predication of corporate intentionality” (211)
1. An organizational flow chart: Who has what role(s) within
the company
2. Recognition rules (like constitutive rules in a game): Rules
and policies that, when satisfied, authorize an a action as
an action of the company.
(Note: As under game rules, the same action may be
described differently from a constitutive vs. an individual
perspective. E.g., ‘body check’ v. ‘revenge’)
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Patricia Werhane
 Professor Emertia of Business Ethics and
Senior Fellow, Olsson Center for Applied
Ethics, University of Virginia.
 Author of all sorts of stuff related to business ethics:
Ethical Issues in Business (1996); "Employment at Will
and the Question of Employee Rights“ (1992); Adam
Smith and His Legacy for Modern Capitalism (1991);
Persons, Rights, and Corporations (1985); Corporate
Responsibility: The American Experience (2012)
Werhane argues for three related conclusions:
1. Corporations are not moral agents as such; as formal
organizations they are so structured that the attribution of
responsibility is “philosophically inappropriate.”
2. It is not the case, however, that corporations are responsible
only for maximizing shareholder value (à la Friedman); “social
responsibility and moral responsibility are not interchangeable
concepts” (43), says Werhane, and profit maximization and
social responsibility are not contradictory corporate functions.
3. At the same time, however, a free society (again, à la
Friedman) implies or requires moral accountability. Moreover,
corporate moral accountability is required for the proper
functioning of the free-enterprise system.
Autonomy → moral agency; but corporations are not moral
agents  corporations cannot expect autonomy (49)
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Werhane I
“The modern business corporation…is a an economic
institution structured primarily for the achievement of
material ends external to the corporation. Corporate goals
include customer satisfaction, technological advancement,
market penetration, profit maximization, etc.. Corporate
rules and guidelines are aimed at efficient maximization of
these goals.” (44, emphasis added)
 In this sense, says Werhane, corporations are distinct
from clubs or nations—entities organized to realize the
personal, internal goals of their members…
Werhane II

How so? Werhane asserts:

Shareholders: Corporations are directed for their benefit,
but “they are not involved in establishing corporate aims
nor in realizing (or criticizing) those aims…in reality,
stockholders are an abstract groups of owners who
happen to hold stock on the particular day when
earnings are paid out” (45).

Objection: This may be generally true in fact, but it is
necessarily true in theory? Consider: “activist investors,”
“corporate raiders”
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 Employees: Employee rights are defined (mostly?) by
institutions external to the firm (e.g., unions, government
regulations). Unlike members of a club or citizens of state,
employees do not normally have a right to protest the
rules or goals of the organization.
Objection (again): Not normally, perhaps, but never?
“Each employee in a corporation, like each part in a
machine, plays an important role in achieving corporate
ends, but any weak or dissident employee, like a
malfunctioning part, could be and should be, replaced in
order to operate at maximum corporate efficiency.
Therefore, while corporate activities are rule-governed,
these rules, as impersonal operating procedures, preclude
rather imply moral agency.” (45, emphasis added)
Robotron

Has a corporate charter and legal status

Owns property, manufactures products, conducts marketing, corresponds
with other corporations and customers, develops new product lines, writes
proxy statements, answers SEC inquires, etc.

Has stockholders and pays dividends

Obeys the law and conforms to societal expectations, e.g. pollution
regulations.

It may even aim at realizing various moral goals and social responsibilities,
e.g., fair trade practices with it suppliers.
The only difference between Robotron and any other corporation, we
are to suppose, is that Robotron has no human employees.
Robotron, says Werhane, meets a number of standard criteria that have
been proposed for corporate moral agency, yet it is not a moral agent.
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Robotron: A Moral Agent?
 To Werhane, it apparently just seems obvious that
Robotron cannot be a moral agent (it merely follows
operating instructions, it is [somehow] therefore not
capable of genuinely free, autonomous action.
If Robotron was found to be manufacturing a toxic
substance, the state would (rightly) intervene to ‘change
its programming’ , but “no one would accuse Robotron of
moral irresponsibility” (49)
 It then follows, on Werhane’s analysis, that corporations
are in the same moral boat: They are more like machines
than proper moral agents.
Robotron: An Appeal to Ineffability?
 This view has some telling implications when deployed
against Friedman: The virtues of free-market capitalism
are supposed to follow from free, autonomous agency, yet
(arguendo) a corporation is incapable of freedom or
autonomy.
So, “society should feel no moral compunction in enforcing
its demands on such an institution” (49)
 But has Werhane actually made her case with respect to
the (purported) moral agency of corporations? Arguably,
her argument is simply question begging.
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