Abstract
This paper examines the role of vulnerability in the basis of business ethics by criticizing its role in giving a moral substantial character to fiduciary duties to shareholders. The target is Marcoux’s (Bus Ethics Q 13(1):1–24, 2003) argument for morally substantial fiduciary duties vis-à-vis the multifiduciary stakeholder theory. Rather than proceed to support the stakeholder paradigm, a conception of vulnerability is combined with Heath’s 2004) “market failure” view of the ethical obligations of managers as falling out of their roles as professionals involved in the institution of the market. The result is the core of a theoretically defensible and managerially motivating and deployable ethic.
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Notes
I will turn to two notable exceptions in my discussion: Alexei Marcoux’s paper “A Fiduciary Argument Against Stakeholder Theory” and Robert Goodin’s book Protecting the Vulnerable.
Clearly one important issue here is the relation of systemic risk to vulnerability. Unfortunately, it is beyond the scope of this paper to do more than allude to this issue. I do not believe that this lacuna affects the main thrust of the argument developed.
Also worth mentioning is MacIntyre (1999), though it does not focus so directly on the precise concept of vulnerability.
Briefly examined by Heath (2004, p. 85).
It should be noted that this schema could be accepted as definitive of the fiduciary relationship with its associated duties while rejecting the idea that there are any fiduciary duties whatsoever or rejecting the idea that fiduciary duties are significant. That is, it does no more than define the duty-relationship between a possible fiduciary and a possible beneficiary.
That Marcoux’s conception is best understood as a shareholder priority conception is explained below.
Marcoux holds that his position is “perfectly consistent with the view that firms have obligations—perhaps negative, perhaps positive, perhaps both—to non-shareholding stakeholders,” but that these obligations must be understood as side-constraints on the MSFD-based pursuit of the interests of beneficiaries, and not as a matter of advancing the interests of the non-beneficiaries (Marcoux 2003, p. 24, n. 41).
Williamson’s notion of information impactedness is native to this sort of situation: Firm A has contracted with and supplied P to Firm C for 15 years. Now, Firm B is considering trying to make a bid to replace Firm A. Firm B is in a position of information impactedness since, though P may be a product that does not require hugely specialized knowledge to produce, Firm A has much more knowledge about Firm C and its needs and processes than Firm B. This is exacerbated when P is a specialized product and/or one that Firm C uses internally. Firm B may be “priced out” of the market for P because the costs of overcoming this information asymmetry are too high to make it worth trying.
1 and 3 would not seem to be worth considering alone. Trust by itself does not generate duties, and while a person may voluntarily decide to advance someone else’s interests, he is also free to shed them any time, and no harm done, if the moral features of the case are confined to this.
Here Marcoux is following Easterbrook and Fischel (1991, p. 90).
An outcome of this argument is that, on Marcoux’s own terms, there seems to be a good reason to think that managers have multiple MSFDs. Of course, as Marcoux has noted, this is a conceptual and practical absurdity (2003, p. 4) due to the priority condition that is inherent in the very idea of a fiduciary duty (see also Hasnas 1998, p. 26). If that is so, then the MSFD approach seems to be flawed.
In the chart, I have merely adopted the convention of assigning arbitrary numerical values to focus the mind. They are meant as heuristics only. Nor, of course, is the 2D account a full account of vulnerability in all its aspects.
I am grateful to an anonymous reviewer of JBE for this point.
Heath says that the market failures approach is an instance of the “tinged stockholder theory”: “firms should be run to maximize the interests of stockholders, subject not only to legal constraints but also to moral or social obligations. These might be, for example, grounded in moral rights possessed by people generally or by specific categories of people such as employees of the firm; or there might be moral duties of beneficence not grounded in rights of the recipient” (Langtry 1994, p. 435). It may be that my co-optation of the market failures approach distinguishes itself from tinged stockholder theory by elaborating a conception of professionalism grounded in the idea of the market as an institution. Managers as professionals are to advance the interests of stockholders/owners, but this is in virtue of their role in the institution of the market itself. The relation of the manager to the stockholder/owner on this view is mediated by the manager’s professional responsibility to the competitive character of the institution of the market.
There is nothing in my account of vulnerability above which suggests that X, just by being vulnerable to Y, is somehow or other wronged by Y.
I think they can be called this under the aspect of their ethical character, but not, of course, their character as principles of economic science.
I assume that not only firms but also civil society actors are instrumental to any attempt at compliance with the Imperfect Market Rule.
The World Bank understands collective action more in terms of collaboration while underplaying contestation: “‘Collective Action’ is a collaborative and sustained process of cooperation among stakeholders. It increases the impact and credibility of individual action, brings vulnerable individual players into an alliance of like-minded organizations and levels the playing field between competitors. Collective Action can complement or temporarily substitute for and strengthen weak local laws and anti-corruption practices.” (World Bank Group 2008, p. 4)
“Ambivalence with informal social controls or effective incentives, we argue, risks far too much deference to private sector interests… And the risk of ambivalence is a naïve and uncritical approach to corruption, one that makes the genuine adoption of normative principles against corruption, such as C2 Principles, far less likely” (Petkoski et al. 2010, p. 817 [their citations removed for felicity].).
Transparency International cites the following nations as employing integrity pacts at various levels and scopes: Argentina, Colombia, Germany, India, Italy, Latvia, Mexico, South Korea, and the UK. (Transparency International, “Integrity Pacts”).
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Acknowledgments
Thanks to Peter Hardi, David M. Rasmussen, Patrice Canivez, Jay Fogelman, Anca Gheaus, and Judit Szalai for helpful comments.
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Brown, E. Vulnerability and the Basis of Business Ethics: From Fiduciary Duties to Professionalism. J Bus Ethics 113, 489–504 (2013). https://doi.org/10.1007/s10551-012-1318-2
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DOI: https://doi.org/10.1007/s10551-012-1318-2