PUBLIC ETHICS CASE STUDY: THE CORPORATE SOCIAL
RESPONSIBILITY OF GOLDMAN SACHS
Jacob Kloeveroed Griffiths
IPPR Volume 5 Number 1 (October 2009)
pp. 55-68
© 2009
International Public Policy Review • The Department of Political Science
The Rubin Building 29/30 • Tavistock Square • London • WC1 9QU
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Swansborough, R. Test by Fire: The War Presidency of George W. Bush. New York:
Palgrave Macmillan, 2008.
Walters, J. P., “No Surrender.” National Review. Vol. 56, no. 18 (September 27th,
2004): pp. 41-42.
Xenos, N. Cloaked in Virtue. New York: Routledge, 2008.
PUBLIC ETHICS CASE STUDY: THE CORPORATE SOCIAL
RESPONSIBILITY OF GOLDMAN SACHS
Jacob Kloeveroed Griffiths
INTRODUCTION
In 2008 Goldman Sachs received $10bn of US taxpayer’s money, and at the same time
the bank admitted that it had a bonus pot of $2.6bn for its executives.1 Though the
concern in this case study is not pay equity, it is important to establish whether the
employees at Goldman Sachs can legitimately claim their excessive remuneration in
these circumstances. The main purpose of this paper is to examine whether the bank has
a moral responsibility to other stakeholders, especially in the light of the burdens which
the recession is putting on the rest of society. The theoretical starting point is Friedman’s
notion that the only responsibility of business is profit maximisation.2 This idea has
formed the basis for a free market regulation paradigm in neoclassical economics and has
indeed formed the basis of the politics that has governed globalisation since the 1980s.
This system appears to have failed in the financial sector.
The essay will argue that the scope of Friedman’s business ethics is too narrow. As the
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1
J. Robinson, J. Treanor, “Anger over £6.4bn bonus bonanza at four City banks”, The Observer, November
1st, 2009,
2
M. Friedman “The Social Responsibility of Business to increase its Profits”, in T.L. Beauchamp and N.E.
Bowie, Ethical Theory and Business (New Jersey: Prentice Hall, 2001).
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impact of banks on society is so significant, the range of concerns they need to address is
wider than Friedman assumes. Firstly, it will be shown that both theoretically and
practically Friedman and the stockholder thesis does not hold, as it does not adequately
incorporate externalities and wrongly assumes perfect competition as well as conflicting
with virtue ethics. Secondly, the stakeholder thesis will be discussed. While taking a
broader approach, this alternative theory could potentially damage private property rights
and will be found to be unclear. Thirdly, an attempt will be made to incorporate both
private property rights with a wider notion of ethics. The syntheses will be made using
Kantian ethics. This will also demonstrate the limitations in Friedman’s work, but allow
his concerns for profits to be preserved. However, before the main argument can be
advanced, Friedman’s concequentialist position will be outlined with an argument
legitimising high remuneration based on freedom. The essay is philosophically
committed to disputing Friedman’s position, but also examines practical economic
arrangement in society. It is an investigation into Goldman Sachs's moral responsibility,
though it must be viewed in the context of a critique of neoclassical economics in the
finance crisis of 2008 and public ethics and Corporate Social Responsibility (CSR)
generally.
AN OUTLINE OF FRIEDMAN’S ARGUMENT REGARDING TO REMUNERATION
Friedman’s main argument is that business ethics is solely a relationship between
managers and owners. However, popular interpretations of Friedman suggest that his
theory is devoid of ethical considerations. These readings reflect a misconception of what
Friedman actually says.3 Although he argues the only moral obligation of managers is
profit maximisation for owners, he does not condone all behaviour that increases
financial returns. Quite explicitly, he places four restrictions on profit seeking: business
people must obey the law, follow ethical customs, commit no deception or fraud, and
engage in open and free competition.4 For Friedman, social responsibility means
pursuing one's interests without interfering with the legally protected freedom of others.
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3
J. Harvey, “Smith, Friedman, and Self-Interest in Ethical Society”, Business Ethics Quarterly, Vol. 10,
no. 3. (2000)
4
Ibid.
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In Baron’s framework of a three way approach to ethics: concequentialist, virtue and
Kantian, Friedman should be considered a concequentialist because he believes that by
limiting the responsibility of companies the consequence will be a free society5. Though
the different natures of the approaches mean they cannot automatically be contrasted,
from a virtue ethics position Friedman undermines the inner characteristic of human
morality and also from a Kantian perspective it is problematic to justify a policy on the
basis that it is morally obligatory because it produces the best outcomes, it is principles
that count.6 Paradoxically though, Friedman advocates a free society as the highest
principle, whereas in Kantian ethics there could be potential conflicting principles, for
instance if the maintaining of a free society required the killing of an opponent of it. The
principles of a free society and principle of everyone’s freedom to live would contradict,
so Kantian ethics could be criticised because it prescribes no concrete action to get a free
society. However, the point of Kantian ethics is that it is concerned with obligatory ends,
not obligatory actions.7 On the contrary, Friedman strongly adheres to actconsequentialism; the act of not enforcing more regulation will result in a free society.
This sentiment forms the basis for his views on business ethics and ultimately
remuneration.
His belief in freedom and the responsibility of business being to increase its profits
closely resembles, though slightly incorrectly, the interpretation of Smith’s notion of the
invisible hand. This maintains that market participants, in pursuit of their self-interests,
unknowingly benefit society. Thus the market is a mechanism which regulates itself to
produce the best outcome. Businesses should freely do whatever improves their financial
position, even though others could be harmed.8 Thereby limited regulation of
remuneration is automatically controlled by the market. If enough customers at Goldman
Sachs object to high bonuses, an alternative would be provided and they could choose
another bank. Friedman is advancing that the public good is optimised through
individuals pursuing self-interest in a free market.
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5
M. Baron, P. Pettit, M. Slote, Three Methods if Ethics. (Oxford: Blackwell Publishing, 2007)
Ibid.
7
Ibid.
8
J. Harvey, “Smith, Friedman, and Self-Interest in Ethical Society”, Business Ethics Quarterly, Vol. 10,
no. 3. (2000)
6
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This raises two questions. Firstly, whether the free market does benefit everyone?
Friedman’s answer would be utilitarian, claiming that most people will benefit.9 The
second contestation is whether self-interest is an adequate basis for morality? For Smith
and Friedman profit maximising behaviour is not inconsistent with normal ethical
values.10 The invisible hand justifies this position. However, for Bowie, concern for one's
self-interest is the very heart of behaviour that conflicts with public ethics.11 When selfinterest is narrowly interpreted to mean selfishness that is the case. Though, Friedman
does not use the concept of self-interest in this narrow sense. For Smith the overriding
principle governing his interpretation of self-interest is justice, while for Friedman the
principle is freedom. For both writers, self-interest embodies another-regarding aspect
that requires individuals to moderate their actions when others are adversely affected.12 It
is this concept of self-interest that Friedman advocates.
As the basis for Friedman’s morality is freedom, it allows individuals to pursue their selfinterest. He believes that a free market is the best system to effectively coordinate people
without denying them this freedom. The basic problem of social organisation, explains
Friedman, is how to coordinate the economic activities of large numbers of people.13 He
advocates market mechanisms characterised by voluntary exchanges between
individuals. Central planning necessarily involves some degree of coercion by the state.
For Friedman regulation is inefficient and immoral, it means everyone loses as there
would be less profit in society. MacPherson rejects the argument that political freedom
requires capitalism14. However, this misses the main point i.e. the state is to be feared
because it represents a concentration of power to which there is no alternative15. The only
positive duty of the bank is to act in the best interests of shareholders. At the same time
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9
N. Barry, The morality of Business Enterprise. (Aberdeen: Aberdeen University Press, 1991)
Ibid.
11
T.L. Beauchamp, N.E. Bowie, Ethical Theory and Business (New Jersey: Prentice Hall, 2001)
12
J. Harvey, “Smith, Friedman, and Self-Interest in Ethical Society”, Business Ethics Quarterly, Vol. 10,
no. 3. (2000)
13
M. Friedman, Capitalism and Freedom. (Chicago: The University of Chicago Press, 1962)
14
C. MacPherson, “Elegant Tombstones: A Note on Friedman's Freedom”, Canadian Journal of Political
Science / Revue canadienne de science politique, Vol. 1, no. 1. (1968)
15
R. Crowley, “A Comment on Professor Macpherson's Interpretation of Friedman's ‘Capitalism and
Freedom’”, Canadian Journal of Political Science / Revue canadienne de science politique, Vol. 2, no. 2.
(1969)
10
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this duty is constrained by negative duties not to cheat, injure, or lie to all stakeholders.
In this way the optimal social coordination can be achieved.
From the forgoing analysis of Friedman's view of freedom, his position on CSR can be
derived. Since actions that impose involuntary harm on others are unacceptable, the
bank’s actions must be examined in the context of whether they are voluntary and
compatible with the freedom of those affected by their decisions. Friedman says that a
social responsibility other than to generate as much profit as possible for business owners
is a highly “subversive doctrine”.16 Bankers have a direct responsibility to conduct
business in accordance with their desires, which will be to make as much money as
possible while conforming to the basic rules of the society. Furthermore, they have no
moral obligation to indulge in any philanthropic activity to help other victims of the
credit crisis. They lack the expertise to find the best way to help others. So, Friedman has
both teleological and deontological reasons for advancing the thesis that bank executives
should pursue only profit, and stay away from actions that purport to promote society's
interests.17 On teleological grounds, he argues that it may not be possible for bankers to
know what constitutes society's interests. On deontological grounds, Friedman believes
that the bank’s actions, justified as socially responsible, violate specific duties of those
pursuing the actions. For example, unless Goldman Sachs obtains the consent of those
affected, they violate the duty not to coerce others. If bank executives do not act in the
interest of their employer, then they are coercing them into financing a project that the
owners might not want. The executive would be spending someone else's money for a
general social interest. Business people who claim they have an obligation to desirable
social ends are unwittingly puppets of intellectual forces that have been undermining the
basis for a free society.18 Thus, the setting of wages is a decision for shareholders, and
any other’s involvement is a violation of their property rights.
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16
M. Friedman, “The Social Responsibility of Business to increase its Profits”, in T.L. Beauchamp, N.E.
Bowie, Ethical Theory and Business. (New Jersey: Prentice Hall, 2001), pp. 401
17
J. Harvey, “Smith, Friedman, and Self-Interest in Ethical Society”, Business Ethics Quarterly, Vol. 10,
no. 3. (2000)
18
M. Friedman, “The Social Responsibility of Business to increase its Profits”, in T.L. Beauchamp, N.E.
Bowie, Ethical Theory and Business. (New Jersey: Prentice Hall, 2001)
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Friedman’s free market view of CSR legitimates high wages if they are the result of a
free exchange. The owners of the bank have a right to decide the amount of
remuneration. The reason for this is that in a free society an executive is an employee of
the owners of the business. Distorting this relationship is damaging and immoral, because
it results in lower profits. The price setting mechanism of the free market determines the
price someone gets for their labour. Walzer argues that there are problems with allowing
markets to dictate wages because of the inequity of power within the market19. However,
arguably even from a Friedmanite position the bonuses at Goldman Sachs are not
justified. As its market value has been halved, employees appear not to have maximised
profits.20 Though, ultimately this is a decision for bank investors to evaluate.
Walzer identifies the marketplace as a sphere of justice. Within a certain sphere of justice
certain rules apply21. Similarly, Marx claimed that it was nonsensical to criticise
capitalism for being unjust because justice was itself a capitalist term.22 The mode of
production creates its own moral rules. Thus, an actor in the market knows the
mechanism and is entitled to what he gets, but that does not necessarily correspond to
any other evaluation of how significant the job is, as demonstrated by Nozick’s
Chamberlain argument. So, in a market system, our remuneration or the price of our
labour is our desert. Walzer argues this is to misunderstand the concept of desert, indeed
timing and luck are decisive, and business is a chancy business.23 The remuneration of
bank managers can therefore be justified by its free market context. The bonuses are
gained in a free market. As Locke argued, labour itself creates the foundation for
property rights24. So when accepting the premises of a capitalist economy, as Friedman
does, bank managers can legitimately claim their remuneration.
1.
CRITIQUE OF THE STOCKHOLDER THESIS
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19
M. Walzer, Spheres of Justice. (Oxford: Blackwell Publishing, 1983)
S. Duke, “Goldman Sachs ready to hand out £7bn salary and bonus package”, The Daily Mail, 30th
October, 2008.
21
M. Walzer, Spheres of Justice. (Oxford: Blackwell Publishing, 1983)
22
K. Marx, Capital. (Oxford: Oxford University Press, 1999)
23
M. Walzer, Spheres of Justice. (Oxford: Blackwell Publishing, 1983)
24
J. Locke, Second Treatise of Government. (Indianapolis: Hacket, 1980)
20
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Friedman is defining a very limited circumstance for applying morality to business
decisions. His business ethics state that the shareholder’s interests are superior to other
considerations. There appears to be problems with this neoclassical view. Neither the
bank’s managers nor owners have any obligation to take responsibility for anything other
than running a profitable bank. However, banks rely on investors which are technically
everyone who holds an account with them, though some investors are more significant
than others. Goldman Sachs has also been bailed out with taxpayer funds due to their
important role. This raises problems with Friedman’s argument. Using tax payers’ money
seems to imply a collective ownership, though technically the state is not an owner.
Nonetheless, the system Friedman has advocated seems to have failed. There appears to
be wider accountability for firm’s actions than just to stockholders. Friedman does not
only assume the opposite, but maintains that accountability is sustained through selfregulation in the market.25 His theory is strongly grounded in a neoclassical framework
of economic belief. Central to this are the concepts of externalities, perfect completion
and an overarching assumption of market self-regulation and, finally, arrangements
relating to the role of management. The aforementioned concepts will now be discussed.
Firstly, Friedman dismisses other parties that do not fit into his framework as
externalities. An externality says Friedman, is the effect of a transaction on a third party
who has not consented to or played any role in the carrying out of that transaction.26
Accordingly, he acknowledges that some restrictions on our freedom are necessary to
avoid other, still worse, restrictions.27 However, control of wages would not count as
such a condition. So when taxpayer’s money is used to pay for bonuses instead of, for
instance cheaper loans, it is justified by the fact that the democratic US government
technically does not own Goldman Sachs and the bank is best suited to running itself.
Friedman distinguishes between harm caused by external effects, which he opposes, and
the personal consequences of decisions individuals make when they freely enter into
risky transactions, such as the remuneration at Goldman Sachs, which he accepts as
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25
T.L. Beauchamp, N.E. Bowie, Ethical Theory and Business (New Jersey: Prentice Hall, 2001)
J. Bakan, The Corporation (London: Constable, 2004)
27
M. Friedman, “The Social Responsibility of Business to increase its Profits”, in T.L. Beauchamp, N.E.
Bowie, Ethical Theory and Business (New Jersey: Prentice Hall, 2001)
26
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necessary in a free society. According to Friedman, the former reduces individual
freedoms while the latter does not.28 However, the bank seems to have pursued its selfinterest so ruthlessly that its damaging effects cannot simply be disregarded as
externalities, or “other people’s problems” as Bakan puts it29. It seems that most
members of society within Friedman’s framework cannot be considered outside his limits
of people who have a right to decide and moral worth. This becomes especially apparent
due to the asymmetry of power between individuals and large corporations. It is difficult
for them to be compensated. Today there are grounds to claim that big business is
oligopolistic. Taxpayers and others stakeholder have no real power over banks. Therefore
it seems like the neoclassical axiom of perfect competition, is incorrect. The absence of
perfect competition is a problem with regards to Friedman’s theory because of the banks’
power relation to external parties seems unbalanced.
Secondly, aspects relating to a corporation's legal arrangements can create problems.
Friedman makes it clear that his argument applies only to companies in which the
decision managers are not the owners of the company30, as is the case in Goldman Sachs.
Bank executives may feel they have personal obligations to, for instance their families,
consciences, religion, et cetera31. However, in these respects they are acting as principles,
not as agents. The banker is using his own money, time or energy, not that which he is
contracted to by his employers. If there are social responsibilities they concern
individuals not business. Corporations, even though claimed to be an artificial legal
person, cannot have responsibility, according to Friedman32. However, dichotomising a
person into a moral agent and an amoral professional can seem strange, especially with
regards to virtue ethics. Also, it can be contended that executives have a conscience and
it is their morality that should be applied to business. As Thompson33 points out, there is
a tendency to make individual ethics the only kind of ethics in public life. It seems
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28
J. Harvey, “Smith, Friedman, and Self-Interest in Ethical Society”, Business Ethics Quarterly, Vol. 10,
no. 3. (2000)
29
J. Bakan, The Corporation (London: Constable, 2004)
30
J. Harvey, “Interest in Ethical Society”, Business Ethics Quarterly, Vol. 10, no. 3. (2000)
31
M. Friedman, “The Social Responsibility of Business to increase its Profits”, in T.L. Beauchamp, N.E.
Bowie, Ethical Theory and Business (New Jersey: Prentice Hall, 2001)
32
Ibid.
33
D. Thompson, Restoring Responsibility: Ethics in Government, Business and Healthcare (Cambridge:
Cambridge University Press, 2005)
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individual relations such as within families for instance which is face to face, are
different moral principles than institutional ethics which governs relations between
individuals as members of organisations and as citizens. According to Thomson
individual ethics, like the ones Friedman discusses, dominate institutional ethics. He calls
this privatisation of business ethics. One way of regenerating institutional ethics is to
treat the corporation itself as a moral equivalent of an individual, as is the case legally34.
As Friedman feels that a business has no moral conscience, it has no moral obligation
and is not a socially responsible institution. Individuals have responsibility. Though,
Thompson argues that less emphasis should be on the moral character of the individual
manager, but the structure in which he operates. Friedman’s focus is both too
individualistic and does not appreciate the inner characteristics of human morality.
2.
CRITIQUE OF THE STAKEHOLDER THESIS
For the reasons mentioned above the stockholder thesis does not to hold and appears to
be too narrow. The bonuses at Goldman Sachs exemplify this. In the light of the financial
crisis of 2008, they are not completely using their government funds to aid society.
Alternatively, the stakeholder thesis states that business should take into account all
groups affected by a firm’s decisions. Traditionally six stakeholders have been identified:
stockholders, employees, customers, managers, suppliers and the local community.35
These groups are also discussed in Friedman’s theory, but their moral obligations are
something which must be derived from their view of a liberal society. As people who
have dignity and rights that must be respected, their status should be emphasised to a
greater extent,36 it seems that their interests have been unfairly subordinated.
Stakeholder theory also acknowledges the importance of profit maximising, but
questions whether the profits should go to the investors and managers instead of other
groups. However, in Thompson’s institutional form of business ethics, he appeals to
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34
D. Thompson, Restoring Responsibility: Ethics in Government, Business and Healthcare (Cambridge:
Cambridge University Press, 2005)
35
T.L. Beauchamp, N.E. Bowie, Ethical Theory and Business (New Jersey: Prentice Hall, 2001)
36
J. Dienhart, E. Freeman, Business Institutions and Ethics: a text with cases and readings (London:
Oxford University Press, 2000)
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principles that are shared with all fellow citizens, and not just for the pursuit of profit.
Thus he proposes, in his view, a more democratic solution so that all interests of society
can be taken into account.37 Depersonalising ethics leads in Thompson’s view to the
Friedmanite system where managers only have responsibility to maximise profits. This
neglects the nature of public ethics. It seems correct to assume that a democratic outcome
would not be such high remuneration for the bankers at Goldman Sachs. As Walzer
notes, the free market system is not founded on the one person one vote principle;
sectorial interest of a few wealthy parties seems to dictate.38 Thompson wants a balance
between profit and morality to be the aim for all business ethics that can claim to be the
ethics for all citizens. However, what sort of regulatory system he wants is unclear.
Potentially it could limit the property rights Friedman is correct in determining. In a
liberal society, taking the returns from investors would be a violation of their property
rights.
Stakeholder theory is not as developed as stockholder, so it appears vague. The rights and
responsibilities of each stakeholder are not distinct. Friedman clearly defines manager’s
obligations. They have legal obligations to the stockholders.39 In the stakeholder thesis it
is impossible to discover the balance between profits and responsibility and the
relationship between the different stakeholders. So the thesis appears vague and could
potentially undermine property rights.
3.
BROADENING MORAL APPLICATION TO BUSINESS IN LIGHT OF THE FINANCIAL
CRISES
The financial crises illustrates that a broader approach to business ethics is required.
There appear to be problems with both stockholder and stakeholder notions of CSR. On
the one hand Friedman and his followers define a too limited scope of morality, while on
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37
D. Thompson, Restoring Responsibility: Ethics in Government, Business and Healthcare (Cambridge:
Cambridge University Press, 2005)
38
Walzer, M. Spheres of Justice. Oxford: Blackwell Publishing 1983
39
M. Friedman, “The Social Responsibility of Business to increase its Profits”, in T.L. Beauchamp, N.E.
Bowie, Ethical Theory and Business (New Jersey: Prentice Hall, 2001)
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the other hand it emerges that stakeholder theory could threaten property rights and
actor’s responsibility seems difficult to define. As already established, Friedman is
correct in his analysis of property rights, but at the same time he has a limited scope of
morality, but it will now be shown how Kantian ethics can present a philosophical
solution to this problem. Kant is able to include elements with regards to, firstly,
externalities and, secondly, the problems concerning the manager’s legal and moral
obligations that Friedman and neoclassical economics neglect. Kantian ethics are not
only broader, but transcend the problems in Friedman’s work. For Kant, CSR would not
be seen as a positive externality that results from the modern corporation’s pursuit of
profit, but a factor which carries moral worth in itself. CSR should be undertaken for
genuine and altruistic reasons, rather than merely a cynical gussied up bid for good
favour. However, many stockholder theorists put shareholders and their returns at the
centre of business decisions, yet hold CSR as important for the modern corporation. They
would have no moral problem, for example, with the idea that ethics is good business.40
To pay managers lower wages than other companies might make it look like the
company is taking responsibility. However, if it is done purely for the sake of increased
profits it would not adhere to a higher moral principle in Kantian ethics and Thompson
would call this personalising ethics. If the aim is to strengthen the bank’s position in the
market, the outcome is still good but would not adhere to Kantian ethics. At the same
time, it is important to clarify that Kant’s categorical imperative has often been
misinterpreted to mean simply not to treat others as a means to an end. He actually states
one should not exclusively treat others as means to ends.41 Therefore it seems possible to
include Friedman’s narrow business ethics into Kant’s wide moral philosophy.
Firstly, with regard to Friedman treating stakeholders as externalities, it is possible for
managers to do the right thing motivated by both profits and virtuous moral principles.
For instance, to show restraint in order to generate profit, and to do so for the reason that
it is a right course of action in the finance crises, are both acceptable in Kant’s theory.
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40
D. Thompson, Restoring Responsibility: Ethics in Government, Business and Healthcare (Cambridge:
Cambridge University Press, 2005)
41
T.L. Beauchamp, N.E. Bowie, Ethical Theory and Business (New Jersey: Prentice Hall, 2001)
99)
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Friedman would call the latter motive “window dressing”, bordering on fraud,42 and Kant
would reject the idea of action purely on profit maximising grounds. At the same time he
would allow a profit-seeking mentality, as long as it was not the sole factor. Although the
motive for the action is different, there seems no contradiction in assuming that doing the
right thing, cutting bonuses, could be the same as doing the profitable thing. Since
Friedman wrote Capitalism and Freedom in 1962 there have been many changes. The
maintenance of a good corporate image is important to profitability; therefore acts of
CSR must be firmly on the agenda. It is plausible that it would be good business for the
bank to decrease bonuses and instead provide cheaper loans that would benefit everyone.
Property rights would be intact and if this was done for the sake of helping society, it
would adhere to Kantian ethics. Thus, Goldman Sachs can afford, if their morality is so
inclined, to incorporate society’s interest into business decisions.
Secondly, regarding the dichotomy of the individual agent in Friedman’s thesis, this can
be overcome by clarifying a common misunderstanding in Kant’s thesis. Some think that
Kant emphasised universal obligations over particular ones. An obligation such as
keeping a promise is universal, whereas the obligation to grade students fairly is one that
falls only on teachers.43 Similarly, the managerial obligation to use the funds of an
investor to create profit is an obligation that falls only on the manager, whereas the
manager’s obligations to for instance his local community or family are universalistic.
Thereby the bank managers theoretically should, assuming it is not contradictory,
increase profits specifically at work, but aid society generally. Though principles may
conflict in Kantian ethics, it does none the less seem possible to unite Friedman’s main
concerns with a broader thesis in ethics. Friedman’s goals of a free society would still
remain intact.
CONCLUSION
As the outlining argument explains, banker’s high remuneration alone is not in itself a
problem within Friedman’s theory because they are justified by market forces. Though,
the bankers at Goldman Sachs cannot legitimate their bonuses as their job of profit
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42
M. Friedman, “The Social Responsibility of Business to increase its Profits”, in T.L. Beauchamp, N.E.
Bowie, Ethical Theory and Business (New Jersey: Prentice Hall, 2001)
43
T.L. Beauchamp, N.E. Bowie, Ethical Theory and Business (New Jersey: Prentice Hall, 2001)
9:)
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maximisation has arguably been poor. It appears free market mechanisms have not
succeeded in the finance sector. Markets seem not to be self-regulating; therefore
Friedman’s neoclassical assumptions emerge as incorrect. The main question can now be
answered with a fair degree of certainty. Goldman Sachs has a wider social responsibility
than Friedman postulates. Firstly, Friedman’s stockholder thesis and neoclassical
economics fails to incorporate externalities, wrongly axiomates perfect competition and
dichotomises executives’ personalities. Secondly, the stakeholder theory does take into
account a wider range of concerns, but it was found to be vague and potentially neglects
property rights of shareholders. Thirdly, it has been demonstrated that Friedman need not
limit his scope of morality, even though his main concern is preserving shareholders
rights over their profits. This is because virtuous business has become more profitable
business since Friedman wrote his theory. Firstly, concerning externalities, Goldman
Sachs’ wish to generate profits can be combined with moral regard for other
stakeholders. Nearly all corporate philanthropy seems to be motivated by publicity44.
That would not necessarily be a problem for Kant, as long as there are other ethical
motives. Secondly, with regards to the dichotomy of the moral agent in Friedman’s
theory, this can be overcome by Kant’s distinction between special and universal moral
principles. The bank could accept the intrinsic moral worth of other factors and maximise
profits. Thereby Friedman’s limited view of CSR as purely an issue between mangers
and owner can be broadened.
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))))))))))))))))))))))))))))))))))))))))))))))))))))))))
44
Ibid.
9;)
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