Chapter 11 'Think Theory' answers

Government, Regulation, and Business Ethics

 

THINK THEORY 1

Which ethical theory would you find to be best suited to judge whether the lobbying activity of a corporation or industry association is morally right or wrong? What would constitute ‘responsible lobbying’ according to this perspective?

Students will have to decide for themselves which ethical theory they consider best suited to judge industry lobbying. As an example, though, the utilitarian view would consider ‘responsible lobbying’ to be that which promoted outcomes promising the greatest good for the greatest number. A company could not be expected to lobby against its own interests, but there are always several options in policymaking. In practice, this might mean promoting alternatives to government proposals, but it could also mean supporting measures that would raise industry costs in the short term but significantly improve public welfare (e.g. air quality legislation affecting the automotive industry). As a complementary measure, there would be nothing to stop the company from seeking public support to adapt to any changes thus required.

THINK THEORY 2

Consider the principle of procedural justice in the context of the ‘revolving door’ between business and government. Are there ways to make these types of appointments fairer from a procedural point of view?

There are two classes of victims in this situation. The first is the citizenry in general, as a business friendly individual is put into a position of power and might govern accordingly. The second is anybody engaging a connected firm – competitors might be pushed out, or concerned stakeholders might have less redress than they deserve. In both situations they are owed better than this.

Procedural justice points us to the ways in which decisions are made: we can alter these institutions and practices to limit this practice. For instance, the Canadian federal government, along with many others around the world, has created a lengthy “cooling off” period, where former governmental advisors cannot act as lobbyists and trade off their contacts. This both reduces hangers-on trading on old favours from old colleagues (thus improving the quality of current decisions) as well as it makes more difficult the practice of granting a company a favourable ruling and then retiring to take a plum position. In both ways procedural fairness is improved.

THINK THEORY 3

Corruption has also been addressed from the perspective of consequentialist theories. How would these apply to state capture as discussed here?

Advisors using both types of consequentialist theory would probably treat state capture with alarm.
From an egoism perspective, state capture is clearly against the company’s self-interest. It might be possible to argue that a company would enjoy short-term benefits from state capture, but in the longer term it is highly likely to backfire, as there is no guarantee that my company will continue to be the one influencing government policy, and then who knows what may happen to my interests in that territory. It may be possible to make an egoism case for state capture if the company has no plans for longer-term engagement in a particular country (the banditry model), but even that could backfire if the facts were to emerge in other countries. From a utilitarian perspective, the case is simpler. State capture provides a small group with disproportionate benefits at the cost of good governance and quite possibly more tangible negative effects. It is therefore not morally right, as it does not result in the greatest amount of good for the greatest number of people.

THINK THEORY 4

Reflect on the role of Western MNCs operating in oppressive regimes and countries with poor governance. What argument, based on the ethical theories in Chapter 3, can you make in favour of an obligation for MNCs to build fair background institutions in those countries?

One can make a case from both main non-consequentialist perspectives for a company obligation to build fair background institutions in those countries where they operate in which the regimes are oppressive or the governance is poor. From a duty ethic, this obligation comes from Kant’s first maxim – act in a manner that you can “will that it should become a universal law” (the ‘golden rule’). It is difficult to see how executives in a company would not want such institutions for themselves or their company. The other two maxims – to respect human dignity and to check that other rational actors would endorse the judgement – also support this obligation. Under a rights and justice perspective, the company has an obligation to respect and protect basic human rights, and to promote fair procedures and outcome. Building institutions does precisely that, and it is difficult to see how a company that chooses to engage in a country with an oppressive regime and/or poor governance can make an ethical case for not taking such actions.

One can also justify such actions from a consequentialist position, even if it becomes more difficult to argue for an active obligation. For a utilitarian, this is because the benefits of doing so – by, for example, providing healthcare in the local community – are likely to outweigh the costs. From an egoism perspective, one could also argue that it is in the company’s own interest to do so: it is likely to generate goodwill in the local community (as well as leading to (e.g.) healthier staff), and may help deflect criticism in the company’s markets in rich western countries.