A Complex Standard

Each person has a set of personal values and morals that they hold themselves accountable to, whether for religious reasons or the result of years of environmental conditioning. These standards of behavior often go above and beyond the laws set in place by government. Just like individuals, a business entity chooses a standard of moral behavior to uphold. A difficult task to undertake, considering businesses are comprised of people with varying behavioral standards, but a necessary one nonetheless.

Businesses are required to act with a moral minimum, defined as the minimum degree of ethical behavior expected of a business, or more specifically, compliance with the law . Most businesses go above this moral minimum however, weighing decisions beyond profitability and legality, and analyzing what constitutes right and wrong behavior. With information rapidly available to investors, social responsibility is in constant check. Going above the standards set by law can actually increase profitability, ease capital attainment, and in turn, increase the stock price.

In a world where environmental concern is mounting, businesses are being called to act righteously and hold itself to the highest standard: that of natural law. In this paper, the concept of moral minimum will be further developed through the work of Hart, a positive and natural law theorist, accompanied by an analysis of the responsibilities facing business today, specifically the standards they should hold themselves to. H. L. A Hart defines law on two different levels; primary and secondary.

Primary rules are driven by a natural demand for conformity and based on behaviors alone, typical of a pre-legal system, such as a community or tribe. Secondary rules however, are directed at primary rules, and supplement them by alleviating the uncertain, static, and inefficient characteristics of a pre-legal system. According to Hart, the two rules together form the foundation of law. From this framework, Hart goes on to describe two viewpoints commonly held; internal and external.

The internal viewpoint is held by someone who accepts the standards for behavior set by law, whereas a person who holds an external viewpoint does not accept the law as the standard and instead observes patterns of behavior to determine acceptableness. The difference between these two viewpoints is further distinguished through the concept of “legal validity”. An external thinker only accepts laws upon reinforcement, while an internal thinker sees validity in a law outside of its reinforcement. Law is enforced because it is valid. It is not valid because it is enforced.

A person with an internal viewpoint holds themselves to a higher standard. They do not wait for reinforcement of a law to honor its validity and necessity in society. Businesses that hold an internal viewpoint hold themselves to a higher moral standard than those with an external viewpoint. They see validity in laws immediately, whereas, some ‘externally thinking’ companies will test the waters and see if a law is being strictly enforced or not. They would be willing to evade a law if loopholes were found. The concept of moral minimum obviously overlaps with this external/internal viewpoint developed by Hart.

An organization without a clear structure, strategy, and ethical culture, is comprised of individuals acting on varying viewpoints. It is not wrong for individuals to vary in their interpretation of law, but in the workplace, these viewpoints need to be aligned. This viewpoint should be that of an internal viewpoint, higher than the moral minimum required by law. Employees should not wait to see whether management is enforcing the ethical standards set by the company, they should abide by them without question. Defining what behavior constitutes ‘above the moral minimum’ is difficult to do.

For instance, take a company who is exposed to wage increase pressures. If the company honors these pressures, increasing the wage, it is viewed by the public as a ‘kind employer’. These wage increases are costs that have to absorbed however, whether by achieving learning curve benefits or passing the costs on as price increases to customers. If prices have to be raised, it typically cuts into revenues, especially if the product has readily available substitutes. This could lead to job cuts. So, how does a company determine what is morally right?

Retaining jobs, giving price-sensitive customers the chance to own its products, or ensuring its employees have a higher standard of living? In Joel Feinberg’s “Harmless Wrongdoing: The Moral Limits of the Criminal Law”, he discusses the moral criteria that labels certain behavior as wrongdoings, despite the lack of negative effect those behaviors have on society. They are “free-floating” evils such as evil thoughts, false beliefs or violation of ones religious moral standards. He draws a comparison between moral minimum and moral residuum.

Moral residuum refers to moral rules peculiar to a group of people and not necessarily universal. It goes beyond that of the moral minimum, rejecting certain moral norms and debating borderline “moral issues”, such as drinking or gambling. Despite the author’s book being based on criminal law and society’s dealings with deviant behavior, it sheds light on the framework for moral minimum in a business context. If a business’s behavior does not physically result in harm to anyone, but violates a higher moral calling, like that of natural law theory, i. e. God, to what extent should it change its behavior?

Take for example a publishing company. If offered a contract with a pornography business, should the company take the business because it translates into revenues, or should they refuse the business, abiding by a higher moral standard of removing filth from society? Pornography may be a form of “free speech” and meet the requirements of a moral minimum, but in no means is it a business where people with high moral standards endorse it. It violates almost every religion’s teachings, drives marriages apart, corrupts children, creates sexual deviants in society, and so fourth.

The extent to which a company adopts moral residuum rests in its ability to deeply instill a set of company-wide moral maximums in its employees. The higher the standard set, the more a company will question and debate its behavior, a process that is good not only from a social responsibility or legal standpoint, but from a profitability standpoint. The most common view overtaking the long-held debate of corporate responsibility is that of the neo-classical view, or stakeholder view, where corporations should make a profit, but not at the expense of inflicting harm on others.

The paper thus far has supported this view, but one cannot discredit the work of other theorists such as Andrew Carr, a predecessor to Friedman, who supports business decisions regardless of stakeholder analysis: Poker’s own brand of ethics is different from the ethical ideals of civilized human relationships. The game calls for distrust of the other fellow. It ignores the claim of friendship. Cunning deception and concealment of one’s strength and intentions, not kindness and openheartedness, are vital in poker. No one thinks any the worse of poker on that account.

And no one should think the worse of the game of business because its standards of right and wrong differ from the prevailing traditions of morality in our society…. The varying views could be debated for days, but the important thing to remember is businesses have a moral minimum to abide by. Moral minimum is a packed term, and the extent to which a company should go above and beyond this minimum is within its jurisdiction. Whichever way it leans, whether for the minimum or residuum, it needs to ensure those ethics are communicated company-wide and potential consequences of its behavior are always evaluated from an internal standpoint.

Bibliography Frank B. Cross, Roger Leroy Miller. Global Legal Environment of Business, 6th ed. (Ohio: Thompson South Western, 2008) 544. Joel Feinberg. Harmless Wrongdoing: The Moral limits of the Criminal Law. (US: Oxford University Press, 1988) 79-80 Norman Bowie. “New directions in corporate social responsibility – moral pluralism and reciprocity”. Business Horizons. July-August 1991, 28 Feb 2008. Rachael Patterson, “The Minimum Moral Content of Law: A Critique of Hart’s Descriptive Theory of Positive and Natural Law,” Canberra Law Review, Vol. 8 2005. 10-12.