Corporate obligations should reflect stakeholders' best interests

Lenders would also have less expectation of receiving an adequate return on investment. Stakeholderism is thus likely to produce poorer, static, risk-averse corporations and hence a poorer, static, risk-averse economy. If this is true, then stakeholder theory may actually serve purposes that are contrary to the interests of the very stakeholders that it purports to help.

The emergence of stakeholder theory illustrates that boards of directors as well as executives must have some consciousness of the direction and character of public policy debates. This will require a more active engagement with the world of ideas on the part of corporate leaders, not least because the promotion of stakeholder notions such as ‘corporate social responsibility’ and ‘ethical investment’ has spawned an unprecedented debate about ethics and corporate life.

Yet when it comes to developing a sound moral ecology within corporations, there is no substitute for abiding by long-established conventions, observance of the rule of law, and an enhancing of understanding of nature of ethics.

While this is a somewhat humbler (and far less politicised) path than many propositions advanced by some stakeholder theorists, it is a way that takes the moral life more seriously, precisely because it focuses upon the only moral agent there is: the individual human person.

The plausible and ordinary moral duties that one expects people working in corporations to recognise, such as honesty and fair dealing, flow from ordinary morality rather that a unique ‘business ethics’.

Such ordinary obligations are crucial, indeed essential, to the functioning of corporations and market economies. Where they do not exist, one either has to resort to the clumsy tool of regulation or helplessly watch as Mafia-like/crony-capitalist arrangements begin to prevail. If market and corporate relations are to endure, there must be some degree of moral consensus about our obligations.

There will, of course, be those directors, managers, employees and owners of corporations who shirk the responsibility of trying to live the moral life in their business activities. Here we inevitably rely upon the law, social conventions, and other devices to deter them. Such deterrence does not always work, and some individuals working in corporations will engage in immoral activity that may or may not be discovered and punished.

But to an extent, this is one of the prices of living in a free society. The alternative is to introduce stringent controls that unduly hamper the initiative and entrepreneurship required in corporations, not to mention undermine the scope for the free choice that is an essential prerequisite for a person’s actualisation of moral good.