Daily RC Article 70

CEO Moral Responsibility


Paragraph 1

Many people complain about corporations, but there are also those whose criticism goes further and who hold corporations morally to blame for many of the problems in Western society. Their criticism is not reserved solely for fraudulent or illegal business activities, but extends to the basic corporate practice of making decisions based on what will maximize profits without regard to whether such decisions will contribute to the public good. Others, mainly economists, have responded that this criticism is flawed because it inappropriately applies ethical principles to economic relationships.

Paragraph 2

It is only by extension that we attribute the quality of morality to corporations, for corporations are not persons. Corporate responsibility is an aggregation of the responsibilities of those persons employed by the corporation when they act in and on behalf of the corporation. Some corporations are owner operated, but in many corporations and in most larger ones there is a syndicate of owners to whom the chief executive officer, or CEO, who runs the corporation is said to have a fiduciary obligation.

Paragraph 3

The economists argue that a CEO’s sole responsibility is to the owners, whose primary interest,except in charitable institutions, is the protection of their profits. CEOs are bound, as a condition of their employment, to seek a profit for the owners. But suppose a noncharitable organization is owner operated, or, for some other reason, its CEO is not obligated to maximize profits. The economists’ view is that even if such a CEO’s purpose is to look to the public good and nothing else, the CEO should still work to maximize profits, because that will turn out best for the public anyway.

Paragraph 4

But the economists’ position does not hold up under careful scrutiny. For one thing, although there are, no doubt, strong underlying dynamics in national and international economies that tend to make the pursuit of corporate interest contribute to the public good, there is no guarantee—either theoretically or in practice—that a given CEO will benefit the public by maximizing corporate profit. It is absurd to deny the possibility, say, of a paper mill legally maximizing its profits over a five-year period by decimating a forest for its wood or polluting a lake with its industrial waste. Furthermore, while obligations such as those of corporate CEOs to corporate owners are binding in a business or legal sense, they are not morally paramount. The CEO could make a case to the owners that certain profitable courses of action should not be taken because they are likely to detract from the public good. The economic consequences that may befall the CEO for doing so, such as penalty or dismissal, ultimately do not excuse the individual from the responsibility for acting morally.

Topic and Scope:  

The morality of corporate behavior; specifically, CEO’s moral responsibility to uphold and enhance the public good.

Purpose and Main Idea:

The author’s purpose is to describe two groups’ (critics of corporations and economists) view on the moral responsibility of corporations, and then to side with one of the groups. The main idea is that the critics of corporations are right in believing that corporations and their CEOs have a moral responsibility above and beyond simply maximizing profit; they must also consider the public good when making decisions that affect the community at large.

Paragraph structure:

Paragraph 1 sets up the debate: Critics blame corporations for many of the ills of Western society, and their criticism isn’t limited to illegal practices; it also includes the overarching mentality that informs corporate behavior: maximizing profit. Economists say phooey—business isn’t about ethics, it’s about money, so keep your morality to yourself.

Surprisingly, Paragraph 2 doesn’t help much in advancing the argument or shedding light on the debate. We want to know the author’s take on this debate, but we’ll have to wait for a clear expression of this. Paragraph 2 offers, at best, a slight hint that the author believes that corporations should have the moral responsibility of individuals since a corporation is simply an aggregate of individuals acting in the corporation’s behalf. But even this is hazy; we’re not really sure where the author stands yet, or how the discussion of owner-operated corporations in the last sentence of the Paragraph  relates to the debate at hand.

Luckily, the final two Paragraphs resolve the debate for us in strikingly clear fashion. First, Paragraph 3 presents the economists’ seemingly “airtight” argument: Except in charitable organizations, maximizing profits for owners is built into the CEO’s job. If the CEO doesn’t like this, he or she shouldn’t have taken the job. But even when the CEO isn’t obligated to maximize profits and is concerned with the public good, the best approach is to maximize profits anyway, because that’s the surest route to enhancing the public good. Thus, the “airtight” argument: Any way you look at it, maximizing corporate profit is both good and necessary.

We need not wait long for the author’s rebuttal of this position and the presentation of his own opinion: The first sentence of Paragraph 4 says the economists’ argument is a pile of nonsense. The author attacks the economists’ assumption that maximization of profit necessarily benefits the public, and presents a hypothetical example intended to demonstrate just the opposite. The author concludes with the hard line position that the potential personal drawbacks of acting morally (which in the case of CEOs, includes penalty or dismissal) do not excuse CEOs from the responsibility to act morally.

The Big Picture:

  • When a debate is introduced, our main concern is to find out where the author stands on the issue. Does he take a side? Reject both sides? Introduce his own view? As mentioned above, Paragraph 2 is a bit of a letdown because it doesn’t help us fully nail down the author’s opinion. There could be a detail question based on Paragraph 2 (in fact, there’s not even that), but as for the main point, we have to look further. And if you hang in there, the author’s main point explodes out of the first sentence of Paragraph 4, and is then elaborated on further. All of which is to say . . .
  • Don’t always expect the main idea to jump out of the first Paragraph —in some passages, the main idea doesn’t fully emerge until somewhere near the end. Always keep your eye out for the author’s main idea, no matter where in the passage it may appear.
  • Strive to nail down each passage’s structure, and then keep this structure in mind while answering the questions. If you need to refer back to the passage, this mental roadmap will be your guide. Not every passage is blocked out as nicely as this one:
  • Paragraph 1 defines the debate, Paragraph 2 fills the picture in a bit, Paragraph 3 presents the economists’ view, Paragraph 4 gives us the author’s rebuttal and main idea. But every passage has some structure, and the better you understand that structure, the easier it will be to refer back to the passage when necessary.

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