Abstract
Discussions of why corporations should cultivate a diverse workforce emphasize justice- and profit-based reasons. This paper defends a distinct third rationale of legitimacy-based reasons for diversity. I articulate and defend the market power account of firm legitimacy, which holds that private firms, much like governmental institutions, have a moral obligation to justify the power they exercise over stakeholder groups when those groups lack meaningful rights of exit from their relationship with the firm. Firms can discharge this obligation by incorporating moral diversity into managerial teams that decide company policy. Moral diversity confers both epistemic and moral advantages onto teams tasked with solving complex problems that impact disparate stakeholder groups. These advantages confer proceduralist legitimacy onto implemented policies, giving impacted groups reason to accept those policies, even when those groups find those policies objectionable on other grounds.
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Notes
The analysis focuses on firms that are functional monopolies without competitors. As such, homogeneous peer firms may only exist in imagined counterfactuals.
My examples highlight customers as the stakeholder group over whom the firm exercises power. Other possible examples could instead emphasize firm power’s impact on suppliers or local communities.
For a discussion of several studies that looked for a statistically significant relationship between firm diversity and performance and found no result, see Brennan (2023, pp. 442–443).
See “Of the Original Contract” in Hume (1985).
Some people become so deeply attached to a specific brand that they cannot countenance using substitute goods without experiencing significant loss in their lives. How one fills in the account of objective interests determines to what extent these deep attachments, combined with lack of meaningful rights of exit, generate legitimacy demands. The devoted Apple user, who cannot imagine switching from Apple’s iOS to Google’s Android, is not owed justification for every change to the iOS platform. Using Apple products may be central to her subjective interests, but not her objective ones.
Applying Gaus’ framework to markets presumes that there are background rules that both companies and stakeholders have sufficient reason to endorse. Rather than specify what those rules are, I use the Market Power and Objective Interests conditions as heuristics for determining when a violation of such rules has taken place.
Hussain and Moriarty (2018, p. 528) criticize Palazzo and Scherer’s analysis for implausibly treating business corporations as having a social purpose of presenting and representing citizens’ views in political deliberation. They argue that this is true of some private organizations, including NGOs and political advocacy groups, but not others.
For a discussion of the costs and benefits of demonstrating procedural legitimacy through industrial self-regulation, see Bowen (2019).
An example is the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).
Parent company Phoenixus AG eventually lost a class action lawsuit brought by insurance companies alleging Vyera illegally thwarted generic brand competition. Shkreli would serve a prison sentence for securities fraud.
Gaus’ list includes a sixth element: a method for modifying evaluative standards. I leave this out as, for simplicity, the present discussion ignores the fact that perspectives are dynamic and undergoing constant change.
For a more extensive discussion of the assumptions of the DTA theorem, see Brennan (2023, p. 438).
Management theorists since Levinthal (1997) have used the device to model organizational effectiveness.
These are called NK optimization problems. Problem solvers can choose to tweak a number of variables (N), but each variable has a number of interdependencies (K) with other variables.
Team members with different problem-solving approaches face difficulties communicating with each other, which can undermine team search. Hankins et al. (2023) extend the Hong-Page model to include miscommunication among team members, showing that in some circumstances miscommunication can improve team performance relative to expert teams.
There are two ways of modeling this dynamic of team search. In one model, the diverse team members conduct their search sequentially, identifying the local peak in their neighborhood before passing the “baton” onto the next member. An alternative model has all team members search simultaneously and compare results.
The morally diverse team’s creativity may enable it to find a global optimum if there is one moral perspective on the team all agree to defer to as “correct.” For example, the DTA theorem may apply when a team leader’s moral perspective is authoritative, and her subordinates offer her suggestions for various options to implement, with those subordinates all endorsing different perspectives than the team leader.
Social media platforms like Twitter do not exercise market power by selling a commodity to users. Users join platforms for free, with profits raised through ad revenue. But this business model exists within a market where platforms compete to provide users with a unique service.
In 2020, Twitter had approximately 36 million daily active U.S. users. (Cox & Watson, 2020) The New York Times, in contrast, had about 7 million subscribers (Lee, 2020). About 91% of the New York Times’ readership identified with the Democratic Party (Grieco, 2020). In 2019, 36% of Twitter’s American users identified as Democrat (Wojcik & Hughes, 2019).
Scholars debate whether conservatism or religiosity is the best predictor of vaccine skepticism. See Rutjens et al. (2018).
Twitter was by no means alone in Silicon Valley in having an ideologically skewed workforce. See Levy (2020).
Some teams saw Trump’s tweets that resulted in his ban as clearly not in violation of company policies (Weiss, 2022c). The entire staff, including low-level employees, debated the propriety of banning Trump. Despite the variety of voices in this debate, Schellenberg (2022) says that only one single junior staff member voiced any concerns regarding “the implications for free speech and democracy of banning Trump.”
Political partisans sometimes disagree on what counts as a conspiracy theory as opposed to an unsubstantiated but plausible theory. But many conspiracy theories that gain traction on social media fall well below a plausibility threshold. Those implausible theories would not survive scrutiny in a bipartisan setting.
Cost/benefit analyses of pandemic-era lockdowns are so fraught as they rely on untestable counterfactual scenarios.
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Acknowledgements
The author wishes to thank the editorial team and two anonymous referees for their very helpful feedback, as well as Miguel Alzola, Matthew Caulfield, Keith Hankins, Kevin Jackson, Santiago Mejia, and Carolina Villegas-Galaviz.
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Gjesdal, A. Diversity and Business Legitimacy. J Bus Ethics (2024). https://doi.org/10.1007/s10551-024-05695-y
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DOI: https://doi.org/10.1007/s10551-024-05695-y