Abstract
Many business ethicists assume that if a type of conduct is illegal, then it is also unethical. This article scrutinizes that assumption, using the rideshare company Uber’s illegal operation in the city of Philadelphia as a case study. I argue that Uber’s unlawful conduct was permissible. I also argue that this position is not an extreme one: it is consistent with a variety of theoretical commitments in the analytic philosophical tradition regarding political obligation (i.e. the moral duty to obey the law because it is the law). I conclude by showing why business ethicists would have a better rejoinder to the “dominant view” of business ethics associated with Milton Friedman if they dispensed with the assumption that illegal implies unethical.
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Reproduced with permission from Carroll (1991). The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders. Business Horizons, July–August, 39–48
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Notes
For simplicity’s sake, I only refer to Uber throughout this article. But most of what I say about Uber applies to Lyft and other rideshare companies.
This article refers to Uber’s as an actor, but does not intend to take a stance on the debate over whether corporate entities like Uber qualify as moral agents, or whether corporate acts can only be properly understood by reference to individual human moral agents. My analysis only requires the minimal assumption that there is some moral agent intentionally carrying out the acts that constitute Uber’s conduct, and that Uber is not a disorganized mess akin to a mob that is incapable of engaging in intentional actions. Fortunately, it is well documented that Uber intentionally pursues the sort of illegal conduct that I discuss in this article (Pollman and Barry 2016), and is not generally behaving in a way that lacks intentionality.
This article uses the terms “ethical” and moral” interchangeably.
It is actually not clear that Friedman himself subscribes to this view, since he says corporate executives should maximize profit for shareholders while conforming to basic rules of society including “those embodied in ethical custom” in addition to those embodied in the law (Friedman 1970).
Philadelphia’s law requiring taxis to maintain a medallion in order to operate legally is just one component of the set of regulations governing certification of taxis in Philadelphia. Certification also requires that taxi drivers meet certain other standards relating to safety and quality of service, such as English proficiency and a clean driving record (Philadelphia Parking Authority 2008). I am only arguing that it was permissible for Uber to violate the law requiring a taxi medallion. This article takes no stance on whether it was permissible for Uber to, for instance, subject its drivers to less strict background checks than those required for taxi certification. But it is certainly consistent with the position this article defends to hold that Uber permissibly violated the PPA’s medallion law, but also had a duty to abide by other certification requirements related to consumer protection. One could also consistently accept the position this article defends about Uber’s illegal conduct while also holding that Uber has an ethical duty to do more to protect its customers (e.g. subject drivers to more stringent background checks, require or provide better insurance) even when it is not legally required to do so.
Unfortunately, recent events compel me to add a disclaimer: Uber is a company of dubious ethical repute. It has attacked journalists who criticize Uber (Smith 2014), sabotaged its competitors (D’Orazio 2014), and allegedly allowed the proliferation of a misogynist corporate culture (Fowler 2017), to name just a few of high profile incidents (see also Stemler 2017). This article defends Uber’s conduct in one specific situation. It should not be read as defending a “pro-Uber” stance in any more general context. Relatedly, Uber has a well-documented track record engaging in “regulatory entrepreneurship”—pursuing business plans that depend on changing the regulatory environment in a way that is favorable to Uber’s interests (Pollman and Barry 2016). Uber’s regulatory entrepreneurship may improve policymaking in some cases—I believe that Uber’s regulatory entrepreneurship contributed to improving policies governing taxicabs in Philadelphia—but it may harm policymaking in other cases, especially when Uber’s interest diverges from the public interest (Pollman and Barry 2016). This article should not be construed as a general defense of Uber’s regulatory entrepreneurship.
An important exception is Cragg (2002), who argues that corporations have an unconditional obligation to obey the law due to their status as legal artifacts.
There are a couple of additional instances worth mentioning of business ethicists discussing the duty to obey the law: First, Orts and Strudler (2002) criticize stakeholder theory on the grounds that it cannot account for overriding moral obligations, of which the obligation to obey the law is one example. And Hasnas (2006) discusses cases in which the demands of white-collar criminal law conflict with managers’ ethical duties.
As of May 2017, of the 26 Pennsylvania General Assembly representatives from Philadelphia, only three are Republicans (Pennsylvania General Assembly 2017).
Most Philadelphia taxi medallion owners make money not by driving cabs themselves, but by selling the right to drive under their medallions to drivers. In 2011, leasing a Philadelphia taxi medallion cost about $400 per week, adding to the overhead expenses drivers have to cover before they are able to make any profit for themselves (DiUlio 2011).
Greyball used data from Uber’s smartphone application to identify officials trying to use its service for enforcement purposes and prevent them from reserving rides (Isaac 2017). In this article, I take no position on whether some of the extreme measures Uber employed to evade regulators, such as Greyball, were justified. The question I primarily address regarding Uber is whether its illegal activity was unethical. What sorts of measures Uber was ethically permitted to take in order to evade regulators is a separate issue. My intuition is that there will be some cases in which illegal conduct is ethically permissible, but certain extreme self-defensive measures to avoid law enforcement—e.g. involving violence—would not be permissible. At any rate, I do not consider this question any further in this article.
Estimating the value destroyed by a supply-restricting regulation like the PPA’s medallion law requires consideration of complicated counterfactuals. However, Cohen et al. (2016), who estimate that Uber produced $6.8 billion in consumer surplus in the United States in 2015 alone, provide some idea of the magnitude of value destroyed by regulations that ban services like UberX. On the producer side, Chen et al. (2016) find that the flexibility of Uber drivers’ work arrangements allows them to enjoy about double the producer surplus that they would earn in the less-flexible employment conditions typical of traditional taxi driving jobs.
The astronomical increase in Philadelphia taxi medallion value (Badger 2014) is evidence supporting this assertion.
To use Leslie Green’s term (Green 2012).
Uber funded this study. However, it was also undertaken by reputable researchers who claim Uber had no influence or control over the study and who advertise their data and methods as being available for anyone who wants to attempt to analyze or replicate it. Given these facts, readers can decide for themselves how much confidence they have in the study’s results.
Abbreviations
- PPA:
-
Philadelphia Parking Authority
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Acknowledgements
For valuable feedback on previous drafts of this article, the author wishes to thank two anonymous referees from the Journal of Business Ethics, Suneal Bedi, Brian Berkey, Norman Bowie, Matthew Caulfield, Lee-Ann Chae, Andrew Jason Cohen, Nicolas Cornell, Robert Hughes, Lauren Kaufmann, Tae Wan Kim, J. P. Messina, Hans Oberdiek, Amy Sepinwall, Alan Strudler, and James Stacey Taylor, as well as audiences at the May 2016 Transatlantic Doctoral Academy in St. Gallen, Switzerland, the 2016 Society for Business Ethics Annual Meeting in Anaheim, CA, and the Ethics and Legal Studies department at the University of Pennsylvania.
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Young, C. Putting the Law in Its Place: Business Ethics and the Assumption that Illegal Implies Unethical. J Bus Ethics 160, 35–51 (2019). https://doi.org/10.1007/s10551-018-3904-4
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DOI: https://doi.org/10.1007/s10551-018-3904-4