Abstract
Stakeholder theory usually focuses on the moral responsibility of corporations towards their stakeholders. This article takes the reverse perspective to shed light on the moral responsibility of stakeholders—specifically, investors or ‘financiers’. It explicates a distinction between two types of financiers, creditors and shareholders. Many intuitively judge that shareholders have greater or more extensive moral responsibility for the actions of the corporations they invest in than do bondholders and other creditors. Examining the merits of possible arguments for or against treating owners and creditors differently elucidates which arguments can support the moral duties of investors generally, and different duties for different groups of investors specifically. The paper considers three possible lines of arguments, rooting investors’ responsibility, respectively, in how they enable corporate conduct, how they benefit from it, and to what extent they are complicit in it. The paper argues that a notion of complicity is the only tenable ground for holding investors liable; sketches an account of complicity based on the recent philosophical literature on collective intention and collective action; and concludes that shareholders but not creditors can generally be seen as complicit on this account.
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Notes
Note, however, that much of the literature on ethical investing is non-normative and consists of empirical studies of how well ethical investment strategies work. One survey article of this kind of literature is United Nations and Mercer (2007).
I also ignore altogether business that is organised in other legal structures than public corporations (such as partnerships) as well as other non-capital market forms of financing. This leaves out, in particular, bank lending. Carlos Joly has pointed out to me that much lending to business is still carried out by banks; and that banks will frequently impose clauses in their loan agreements that restrict what the borrower may do (typically, of course, out of financial, not moral, concerns). Moreover, loans can be bought and sold, which makes them not all that unlike bonds. The arguments in the main text still apply to such loans, however: the presence of other lenders and the possibility of selling a loan book for the sake of capital gains weaken, as I explain, both the enabling nature of bank lending and the claim that it reaps ill-gotten gains. To the extent that this is not true, of course, I accept that my conclusions do not hold. The complicity argument discussed later may well have to see bank loans as more akin to equity than to bonds. And as far as the enabling argument is concerned, it certainly seems that at least an initial bank lender whose borrowers have no access to alternative financing, does indeed have an enabling function.
Nowhere do I intend to suggest that I—and more generally the wrongdoing corporations in which investors place their money—am any less morally responsible because you—and investors generally—are responsible as well. That my moral taint rubs off on you does not make my hands any cleaner.
A similar point can be made about investors in other companies whose return is correlated with that of the corporation acting immorally. Suppose that instead of investing in Thievery Corporation, you instead put your money into Burglar Alarms Inc. In terms merely of how correlated the return is with immoral activity, can we morally distinguish between the two investments?
See Sandbu (2010).
Hobbes, Leviathan, Chapter XVI (Hobbes 1991 [1651]). In the term ‘by…one person’ Hobbes includes the possibility of being represented by a group, e.g. a board of directors: ‘And if the representative consists of many men, the voice of the greater number must be considered as the voice of them all.’ Ibid.
The attitudes of the individuals jointly committed to sharing in the action are what have been called ‘we-intentions’—intentions about what we, as a collective, shall do together (see Tuomela and Miller 1988). Collective or joint or shared intention (terminologies differ across authors) then consists of a combination of ‘we-intentions’ in the members of the collective. Bratman (1993) defines a shared intention to J (in a two-person case) thus:
We intend to J if and only if:
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1.
(a) I intend that we J and (b) you intend that we J.
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2.
I intend that we J in accordance with and because of 1a, 1b, and meshing subplans of 1a and 1b; you intend that we J in accordance with and because of 1a, 1b, and meshing subplans of 1a and 1b
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3.
1 and 2 are common knowledge between us. (p. 106)
And J is our shared intentional action when we J as a result of 1, 2 and 3.
Arnold (2006) points out that these conditions can logically be fulfilled by groups larger—indeed much larger—than two; thus large groups such as corporations can have shared intentions. In practice it may be harder for a large group to form such a joint intention—but this is precisely the problem legal incorporation is designed to solve.
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1.
Note that this is a feature of intentionality generally, not just of joint intentionality. I can intelligibly form an individual intention (an I-intention) to do whatever somebody else (my friend/son/therapist) decides for me, even if I do not know what that will be. Note also that the same example works for larger groups than two: her entire extended family may be committed to going wherever Rita decides the extended family will go.
This distinction is well-understood in the lay debate on ‘who corporations are for’. What I suggest is that the lay view that ‘the corporation is for its shareholders’ has much truth to it—though a proper understanding yields conclusions that are much less favourable to shareholders’ pecuniary interests than what is often said.
Kutz, comments at the Oslo Climate and Finance conference, September 2010.
As Silver (2006) points out, ‘[t]here are no rules internal to moral taint constraining how people make judgments about who is relevantly related to whom’—allowing for example the ‘barbaric kind of thinking’ according to which all Jews are responsible for the death of Jesus.
There is also a separate claim about how moral responsibility acquired by incorporators is inherited by later shareholders. I ignore this here as I think it is less controversial than how to interpret the act of incorporation itself. An argument is developed in detail in Sandbu (2010).
Nor, of course, do I want to claim that bondholders have no responsibility at all, if the simplifying assumptions do not hold. One can presumably even imagine unusual circumstances in which bondholders are more responsible than shareholders. See also footnote 3.
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Acknowledgments
The author is grateful for institutional support from the Zicklin Center for Business Ethics Research and for financial support from the Government of Norway’s Finansmarkedsfondet research fund. The paper has benefited from criticism and comment from Carlos Joly, Christopher Kutz, Hilde Nagell, Alan Strudler, participants at the 3rd Wharton–Bergamo business ethics conference in Bergamo, July 2010, participants at the Oslo Climate and Finance workshop, Oslo, September 2010, and unnamed reviewers. The arguments and any errors in this article are the author’s own.
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Sandbu, M.E. Stakeholder Duties: On the Moral Responsibility of Corporate Investors. J Bus Ethics 109, 97–107 (2012). https://doi.org/10.1007/s10551-012-1382-7
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DOI: https://doi.org/10.1007/s10551-012-1382-7