The Moral Responsibility of Business

The current controversy involving the Walt Disney Company and the State of Florida led me back to this blog I posted over 6 years ago. My views have not changed.

THE MORAL RESPONSIBILITY OF BUSINESS--WHAT IS IT AND WHAT IS IT NOT?

FEBRUARY 17, 2016

Some time ago, we were presented with a real drama in the States of Indiana and Arkansas, as legislation was adopted and then quickly reversed which proposed to give license to business organizations to refuse service based on their religious principles to gays and lesbians. A broad array of business and business leaders objected to this, including the nine leading businesses in Indiana, WalMart, Apple, and many others. New legislation was quickly introduced (and that in Arkansas modified) to explicitly indicate that this “religious freedom” legislation could not be used to discriminate against marriage preference.

This is a very tricky area. To what extent do businesses have the right and indeed the obligation to voice their position on moral or ethical grounds to sway public policy? How does business strike the right balance between its values and abiding with an existing social policy, imbedded in law and perhaps embraced by a large percentage of the population, including its employees or customers?

Getting down to cases, as CEO in 1995, I reached the position that Procter & Gamble should provide equal benefits to individuals who are in a codified same-sex partnership. We did this at a time when the majority of Ohioans opposed same-sex marriage. We were not taking a position that these individuals were wrong in their belief. We were taking the position that the same-sex partnership as it was codified made it right in the name of fairness to accord our employees in such a partnership the same benefits as a married couple. It proved fairly controversial, but I believed it was right to do. We were not making a moral pronouncement on same-sex marriage at this time. We were saying that in the name of fairness there was no reason to deny individuals in this relationship same-sex benefits.

A related issue being discussed here relates to the “personhood” of a corporation. Is a corporation a “person” or not?

Many, perhaps most, would say, no, a corporation is not a “person.” As one columnist said, a corporation won’t be a “person” until it is capable of being executed in the State of Texas.

Where do I stand on this issue? It depends on what you mean by “person.”

I would say that business has a “responsibility” as part of society to advance positions that are consistent with what as a corporate body (leaders, board of directors, best understanding of shareholders) represent correct and moral values. I say this because I believe corporations have a major role to play in forming the cultural and value-based character of a society. I do believe that corporations need to be humble and circumspect in taking on an issue. They have to recognize the practical need to balance the interests of those it serves -- its consumers, employees, shareholders and the community.

In other words, if a corporation took on a value-based position that would destroy its business, it would end up serving no one in the future. Would there ever be occasions where it would have to go this far, to almost literally have to go out of business? Yes, if its being in business meant threatening the life of consumers or anyone else.

When I say a corporation must be circumspect and humble, I mean that it must avoid becoming sanctimonious or in any way believing that it has a role of being a priest or prophet in its times. It must speak judicially, though sometimes bravely, and it must avoid failing to do the good it can do at a given point in time because it cannot achieve perfection.

Take the situation of Procter & Gamble in Saudi Arabia many years ago. There was a social mandate that men and women could not work together in the same office. P&G might have, given its commitment to gender equality, said that it would not do business in Saudi Arabia at all. Or, I guess it could have taken the position it would violate the laws, though that would not have lasted long. What did we do? We set up separate office locations where women would work and where men would work and they would communicate between the two offices. We did this on market research work. We also pushed to change the social norms and the laws. We felt that was right to do, not only morally; we knew it would be better for the business to have people working together in that way. We felt advancing gender equality was right for the business and right morally. We kept advancing this goal.

This raises a question: is the test for a company taking a position on a moral or social issue whether it is relevant to the success of the business itself in the long-term? Put differently, should businesses only weigh in on social and moral issues that bear directly on having the right (and by “right” I include being morally correct) business and working environment long-term? I think the answer is yes, but I’d underscore the importance of taking a long-term view. For example, I believe the commitment to achieve a sustainable environment is one that businesses should advocate, even beyond the immediate benefit of that for the business itself. Why? Because I believe businesses should understand that having a world in which they or any other business could operate long-term requires a sustainable environment.

I believe that a business has social and moral obligations that go beyond simply making money in any short- or medium-term measurable sense.

At the same time, I believe its judgments and pronouncements must be measured and put in the context of a business’s doing what is right and fair for its employees, its shareholders and its consumers, recognizing there will always be different points of view on what is right and fair. While always seeking to do the “right” thing. It must avoid being self-righteous or over-extending its role in advocating for what it sees as the common good.