Philosophy 223
Business and Social and Economic Justice
Justice
 We’ve run into the concept of justice this semester as one of
a number of moral terms important to our evaluation of
actions or persons.
 In the context of business, we are often encouraged to think
of justice as primarily criminal justice, and certainly there is
an important role for law in business.
 But, there is another dimension of the question of justice that
is more central to business activity. Business is about the
distribution of goods (money, products, services).
 Distributive justice addresses the question of how goods and
burdens are distributed. Businesses distribute all sorts of
important social goods (wealth, resources, labor); it thus
seems appropriate to ask if they do it justly.
Rawls, “An Egalitarian Theory of
Justice”
 Rawls proposes a theory of justice based on the
concept of justice as fairness.
 Justice as fairness sets as its goal the settling
of the principles that will determine the basic
structure of civil society.
 As such, justice as fairness sets out the
securing of the basic rights and liberties as the
first principle of justice which is lexically prior
to the second principle which distributes social
goods such that the least well off are benefited
and positions and offices are open to all.
A Theory of Society
 Society is a self-sufficient association of
persons cooperating through a system designed
to advance the good of those participating.
 There is a shared identity of interests as cooperation
makes possible a better life for all than each would
have on their own.
 There is a conflict of interests as all persons prefer a
larger to a lesser share of the greater benefits
produced by their cooperation.
 Principles of Social Justice – Assign rights and duties
in the basic institutions of society and define the
appropriate distribution of the benefits and burdens
of social cooperation.
A Hypothetical Starting Point
 Original Position (OP) – The hypothetical
position from which the principles that will
govern social cooperation are chosen.
 Veil of Ignorance – The hypothetical limiting
condition governing the OP which guarantees
that the principles chosen are done so fairly
without bias.
 Agents do not know their places in society, their class
positions, or social status.
 Agents do not know their fortunes in the distribution of
natural assets and abilities, their intelligence, strengths, etc.
 Agents do not know their conception of the good or their
special psychological propensities.
The Two Principles of Justice
 Each person is to have an equal right to the most
extensive basic liberty compatible with a similar
liberty for others.
 Basic Liberties of Citizens:
 Political Liberty – the right to vote and be eligible for public office
 Freedom of Speech and Assembly
 Liberty of Conscious and Freedom of Thought
 Freedom of the person along with the right to hold (personal)
property
 Freedom from Arbitrary Arrest and Seizure
 Social and economic inequalities are to be arranged
so that they are both:
 Reasonably expected to be to everyone’s advantage
 The Difference Principle – All inequalities in the distribution of social
goods must be acceptable to and benefit the “least well off.”
 Attached to positions and offices open to all
Pure Procedural Justice
 So long as the principles governing the
basic structure are just then the
outcomes derived from the working
out of those principles will be just.
Four branches of government
 The Allocation Branch – Keeps the price system
workably competitive and prevents the
formation of unreasonable market power. It is
also charged with identifying and correcting
departures from efficiency caused by the
failure of prices to measure accurately social
benefits and costs.
 The Stabilization Branch – Brings about
reasonably full employment in the sense that
those who want to work can find it and the
free choice of occupation and the deployment
of finance are supported by strong effective
demand.
Two More
 The Transfer Branch – Insures an appropriate
social minimum. This branch is responsible for
rectifying the fact that competitive market
systems do not take proper note of need and
the social minimum.
 The Distribution Branch – This branch imposes a
number of inheritance and gift taxes and sets
restrictions on the rights of bequest in order to
correct distributions of wealth and prevent
problematic concentrations of power.
Nozick, “The Entitlement Theory”
 Contrary to many of the popular theories of
distributive justice which base their
distributive scheme on some principle or
metric that determines what a just
distribution should look like, Nozick
proposes an entitlement theory of justice
which uses the free exchange of justly held
goods between agents as the sole
determination of just distributions.
Justice in Holdings
 In a free society, diverse persons control different
resources, and new holdings arise out of the voluntary
exchanges and actions of persons.
 Justice in Holdings consists of three topics:
 The Original Acquisition of Holdings – How unheld things come
to be held, the process, or processes, by which unheld things
may come to be held, the things that may come to be held by a
particular person, etc.
 The Principle of Justice in Transfer – By what processes may a
person transfer holding to another and how may a person
acquire a holding from another who holds it.
 The Rectification of Injustice in Holdings – If previous injustices
are responsible for current distributions in holdings then what,
if anything, ought to be done to rectify those injustices.
A Slice of Time
 Current Time-Slice Principles of
Justice
 Hold that justice of a distribution is
determined by how things are distributed
as judged by some structural principle(s)
of just distribution.
 Are Patterned – i.e. distribution is
determined by some patterning principle
such as to each according to his moral
merit, needs, how hard he tries, etc.
Entitlement Theory of Justice in
Distribution
 “From each as they choose, to each as they are
chosen.”
 The theory is historical in that whether a distribution
is just depends on how it came about.
 Not patterned – there is no principle or metric that
determines the just distribution.
 Wilt Chamberlain example – Begin with any preferred
distribution system. If agents voluntarily decide to pay $.25 to
see Chamberlain play then is that money not his to keep? If so
then the original, preferred distribution pattern is disrupted.
The only way to bring the distribution back into line with the
original distribution is to interfere with the exchanges freely
chosen by those agents by redistributing the resources.
Locke’s Principle of Justice in
Acquisition
 Property rights in an un-owned object
originates through mixing one’s labor
with the object.
 Locke’s Proviso – There must be
“enough and as good left in common
for others.”
Singer, “Rich and Poor”
 Singer begins by constructing an example of passing a
child drowning in a pond. Most people would agree that
to pass by and allow the child to die when we would
only be mildly inconvenienced by the rescue would be a
moral wrong.
 By analogy he argues that we have a moral obligation
similar to the obligation to save the drowning child that
requires us to render aid to those living in absolute
poverty.
The Obligation to Assist
 “If it is in our power to prevent something very
bad happening, without thereby sacrificing
anything of comparable moral significance, we
ought to do it” (686).
 Argument:
 P1 – If we can prevent something bad without sacrificing
anything of comparable significance, we ought to do it.
 P2 – Absolute poverty is bad.
 P3 – There is some absolute poverty we can prevent without
sacrificing anything of comparable moral significance.
 Conclusion – We ought to prevent some absolute poverty.
Objections
1.
Taking care of our own – we should take care of those closest
to us first, beginning with our families, up through local
communities, and eventually to those of the same country.
2.
Private property – someone like Nozick would argue that since
one possesses the rights to the property one holds, then no
one else may make a claim on that property, no matter what
their condition is.
3.
Ethics of triage – since resources are scarce we should refrain
from aiding those countries that will soon be able to provide
for their citizens and we should refrain from aiding those
nations that, even with our help, will not be able to limit
their population to a level they can feed (since aid will
merely increase the population and contribute to future
poverty and need).
Replies
1.
Since there exists a much greater concentration of resources in the developed
world, where relatively few live in absolute poverty, it would be wrong for us
to decide that the alleviation of the relatively less significant instances of
poverty local to us should take precedence over instances of absolute poverty
in the developing world.
2.
Even in the face of an individualistic theory of property rights (such as that of
Nozick) while one may have no “obligation” to give to those who are poor, this
does not mean that morality may not require us to give to them.

3.
Further, from an Rawlsian point of view, if we do not know where in the
world and in what economic situation we will live in would we not want
those better off to render aid to those in absolute poverty since we cannot
know which group we will inhabit?
There is a plausible theory of population growth in which countries pass
through a “demographic transition” as the standard of living rises. As health
care, economic security, and education improve birth rates fall. As a result,
providing aid, especially if measures to institute reforms such as education,
land reform measures, and provision of contraception and sterilization are
adopted this transition may instead be hastened.
Moriarty, “CEO Pay”
 Moriarty examines three potential
justifications for the fact that corporate
CEO’s are paid on average $8 million
dollars annually.
 After a careful examination of the facts
surrounding each of the three
justifications Moriarty concludes that
there seems to be no reasonable or just
explanation for why CEO’s are paid such
high salaries.
The Agreement View
 Just prices for goods are obtained
through arm’s-length negotiations
between informed buyers and
informed sellers.
 In the case of CEO wages the good is
the CEO’s services, the seller is the
CEO, and the buyer is the company’s
owner(s).
Problems with the “Agreement”
 Shareholders are represented in negotiations with the CEO by a
subset of the company’s board of directors.
 However, generally there is only one person who runs for an open seat
in an election. So once a candidate is nominated the election is
primarily a formality.
 CEO’s generally exert considerable informal influence over the
nominating process.
 Three reasons to believe that directors’ independence from
CEO’s is suspect:



Gratitude – The job of board members is prestigious, lucrative, and undemanding. The
position is rather like a gift and there is strong incentive to reciprocate.
Self-Interest – CEO pay is generally at least partially based on the pay of CEO’s at
comparable firms. Since board members are often CEO’s of other firms, if they agree to a
higher price for the CEO of the firm they serve as a board member then this could translate
to a higher salary at their firm.
No Reason to Favor Shareholders – Directors pay CEO’s with the money of shareholders, not
their own. Since shareholders generally do not have the power to recall overly generous
directors they have no real control over the salaries their directors offer. On the other
hand CEO’s generally do have the power to force out directors.
The Desert View
 People deserve a certain wage for
performing a certain job.
 The wage they deserve may depend on
factors such as the difficulty or degree of
responsibility, the individual’s performance,
or both (in other words their contribution).
 The contribution of CEO’s justifies their
compensation.
Problems with “Deserts”
 An average CEO earning $8 million per year
makes 301 times their average employee who
earns $27,000 per year.
 There are reasons to believe that the ability of
CEO’s to affect company performance is largely
constrained by forces outside of their control.
 If this is so it is hard to justify CEO pay as 301
times as valuable as that of the average
employee.
The Utility View
 Wages are best understood as incentives for
future work.
 The goal of wages are to maximize the
wealth of the corporation by attracting,
retaining, and motivating talented
candidates.
 High CEO compensation maximizes utility
(understood as company performance).
Problems with “Utility” Pt 1
 Attraction and Retention.
 Is the CEO’s job so difficult and stressful; does it
require so much training and skill that $8 million a
year is required to recruit successful CEO’s?
 The median pay for presidents of private research
universities is $385,000 per year and the median pay
for U.S. military generals is $143,000 per year. There
is little reason to believe that these positions are
significantly less demanding than that of a CEO. So if
talented individuals may be recruited and retained
for these positions with much less pay than the $8
million CEO’s are paid, it is difficult to conclude that
the difficulty of their job justifies their high salaries.
Problems with “Utility” Pt 2
 Motivation.
 There is no empirical evidence that shows that CEO’s who are
not paid $8 million are poorly motivated or that those paid $8
million are so effectively motivated that their increased
motivation gains a firm $8 million worth of corporate wealth.
 There is reason to believe that monitoring and the threat of
dismissal would be just as effective at motivating as are large
CEO salaries paid in company stock.
 Looking at the CEO’s pay as an incentive for all employees to
work harder has the potential to create problematic
competition between employees seeking advancement to
those ranks which may damage the cooperative capacities of
the firm’s employees.