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The Moral Duties of Business

In the recent Forum on ESG, several leading thinkers offered important critiques and analyses of the larger conversation surrounding this timely issue. Dr. Samuel Gregg of AIER, critiqued ESG on the grounds that it distracts corporations from creating value for their shareholders and argues that the remedy lies in re-embracing the pursuit of profit as the “telos,” or core purpose, of business.

While re-emphasizing profit as a morally legitimate end of business is essential to reclaiming Corporate America from the illiberal clutches of ESG, the critique does not go far enough, and perhaps understates a crucial truth about the moral duty of corporations in a free society. ESG is objectionable not only because it distracts businesses from pursuing morally legitimate ends, but also because it requires businesses to undermine basic social goods in the name of “equity,” “sustainability,” and “social justice.” These “basic social goods” comprise the fundamental building blocks of any healthy society, including core civil liberties such as freedom of expression and religion, along with the attendant institutions of civil society that make their preservation and exercise possible.

Consider, for instance how the “S” in the ESG framework is increasingly cited as a primary justification to censor and deplatform people and groups in the name of combating so-called “misinformation” or “disinformation”; or how a growing number of major financial institutions are debanking individuals and groups for politically biased reasons; or how in order to promote so-called “women’s equality” and receive higher ESG ratings, a large number of companies are not only directly subsidizing abortion, but are now directly opposing pro-life protections in the states; or how, in the name of so-called “diversity,” “equity,” and “inclusion,” companies are pressuring employees to attend Critical Theory-ladened “diversity” training, and are increasingly stifling any sort of genuine freedom of thought in their workforces.

The thrust of all of this is that ESG is objectionable, not only because it distracts businesses from pursuing profit, or because it undermines their autonomy to operate freely in the marketplace, as Russell Greene has argued (though it certainly does that), ESG is also objectionable on the grounds of its own demands. It co-opts business in the service of ideology, weaponizing corporations against the very freedoms, values, and institutions necessary not only for economic prosperity but for human flourishing more broadly.

Corporate Moral Responsibility

If the principal objection to ESG is that it directs businesses toward unethical ends and not solely that it distracts them from creating value for their shareholders, then the implication is that companies have moral duties that are not solely reducible to profit-making. This conclusion follows because if businesses can (and do) act in ways that cause harm to bedrock norms and institutions (even if doing so advances their immediate material interests), they are moral agents, and thus have a negative moral obligation to, at the very least, primum non nocere (first do no harm). Put differently, if it is possible for corporations to act unethically, then it follows that corporations, like individuals, are moral actors that bear certain moral obligations that transcend their material interests.

This seems consistent, at least in part, with Dr. Gregg’s acknowledgment that “decisions of companies and people’s investment choices certainly have moral dimensions.” And that, “[a]t a minimum, such choices should involve a refusal to choose evil or to formally cooperate with other people’s evil.”

Some will likely object that if a business is obliged to avoid harm, generally speaking, a corporation’s consideration of “harm” should extend only to those actions or effects explicitly defined and prohibited by law.

But expanding on Dr. Gregg’s observation about the moral dimensions of business and the marketplace, the decisions and actions of private companies invariably entail ethical obligations that transcend the strict requirements of law or fiduciary duty. Consider that within the context of complex human social relations, people and communities must (and do) consider more than the letter of the law in defining the contours of their obligations.

Imagine a society where each individual agreed only to refrain from committing those harms strictly defined and prohibited by law. Suppose every individual in this imaginary society agreed not to steal, assault, or murder because such actions were deemed material, “concrete” harms punishable under the legal code. But at the same time, no one in that society possessed any virtues of honesty, discipline, thrift, charity, etc. And imagine further, that for this reason, no one engaged in communal life, or felt any bond or duty to his neighbors beyond avoiding physical or material injury to their persons or property. Such a society would be inhumane and inconducive to freedom. And by freedom, we mean self-governing individuals exercising their inalienable rights within the framework of values and norms mediated by the family and other key civil institutions and associations.

Extending the hypothetical to social institutions, and specifically, to the modern corporation: No person would desire to live in a society where communities of individuals (i.e., corporations) assumed no moral duty aside from what was necessary to avoid penalty or sanction. Just as individuals ought to observe duties that are not strictly required by law, we should expect the same commitment from commercial enterprises. Thus, corporations that act in ways that undermine basic social goods commit a moral wrong, even if they do not explicitly violate the law.

To take a current example, consider Musk-confidant David Sacks’ repudiation of Twitter’s censorship of the Hunter Biden laptop story prior to the 2020 presidential election. Central to Sacks’ critique is that because Twitter has emerged as an important platform for public discourse, its actions significantly harmed speech and the democratic process. While the #TwitterFiles suggest that Twitter may have violated the First Amendment by censoring the story at the behest of the federal government, Sacks’ point is that regardless of how that legal question would play out, Twitter’s actions were morally objectionable in their own right because of their adverse impact on the freedom to share and receive information about matters of public concern.

ESG is unethical because it undermines basic social goods like freedom, markets, and social institutions.

Crucially, this objection would hold even if Twitter demonstrated that suppressing the Hunter Biden laptop story improved user experience, leading to higher user engagement and thus, higher ad revenue for the company. Even if such actions could be shown to benefit shareholders (however implausible), they would still be justly condemned on the grounds that they harmed fundamental freedoms and imperiled the sharing of information essential to the democratic process. When companies act in ways that undermine foundational values, they harm their reputations, increase the risk of incurring legal liability, and invite heightened scrutiny and pushback from lawmakers, shareholders, employees, and civil society groups.

A Larger Social Context

Profit alone does not override the moral imperative to avoid actions that directly or intentionally harm fundamental values, freedoms, or institutions.

Consider, for instance, that many companies are using corporate funds to facilitate abortions, paying for everything from out-of-state travel to and from abortion clinics, to meals, lodging, the procedure itself, and even time off afterward. The rationale for corporate-funded abortions, aside from the obligatory nod to “equality,” is that doing so allows companies to attract and retain high-quality female talent, and prevents major financial losses caused by employee turnover. While the claim that supporting abortion contributes to employee retention, and the bottom line is questionable at best, suppose advocates of this approach are right.

Are these businesses justified in facilitating abortions on the grounds that doing so improves their bottom lines? Clearly not. Doing so is a direct contravention of the basic principle of natural law that human life, like liberty, is sacred and ought not to be intentionally violated. 

Those who dispute this conclusion may of course still argue that social goods and their consequent obligations, even if somehow binding on the human conscience, are open to individual interpretation and application. But taken to the extreme, where would this leave society? Returning again to our earlier hypothetical, a society of individuals who feel no obligation to moral standards beyond mere law-abiding, and who aspire to no (voluntary) virtue, would be one utterly bereft of the core social conditions necessary for freedom and human flourishing. We recognize principles of natural law that are discernable by reason, and that are reflected by just human law (civil law) but are not restricted merely to ordering human action by means of the state. Indeed, natural law imposes extra-judicial standards on human action that are binding on individuals and communities of persons—including corporations.

The reality that discerning these basic social goods and considering their application in the context of voluntary communities and social institutions may sometimes prove difficult does not absolve a corporation of considering them any less than it does an individual.

Our critics might again respond that this entire approach assumes a moral paradigm that is disputed in today’s cultural milieu. They are of course right. But the reality that the bedrock norms and institutions of marriage, family, the sanctity of life, religious liberty, and free speech, are now in doubt is a good reason to be concerned for the future of classical liberalism more broadly. These principles and institutions, once mainstays of American society, are quickly fading from our socio-politico consciousness. Without them, however, a free-market economy is not feasibly supportable.

This was Wilhelm Röpke’s important observation in his work, Humane Economy:

[T]he market economy is not everything. It must find its place in a higher order of things which is not ruled by supply and demand, free prices, and competition…. The market is only one section of society. It is a very important section…. But still one whose existence is justified because it is part of a larger whole which concerns not economics but philosophy, history, and theology.

His crucial premise is both that the market is not everything, and that the market presumes a larger social context of norms and institutions that make its operation and existence possible. Röpke argues that “those who compete in the market” require the “social and moral bonds of community” to prevent competition from “[degenerating] most grievously” into a state of affairs where man is denied the conditions (social and material) proper to his nature and dignity as a human being. For this reason, markets “may be regarded and defended only as part of a wider general order encompassing ethics, law, the natural conditions of life and happiness, the state, politics, and power.” In the Western tradition, ethical norms are derived from principles of natural law, discernable through reason, and mediated by institutions of civil society, including families, communities of faith, schools, charities, and other civic associations.

Insofar as businesses shape and are shaped by other institutions of civil society, they have a moral duty to seek the good of those communities by avoiding actions that do them harm. Such determinations are doubtless complex and context-dependent, but they are necessary in a world where private corporations play a pivotal role in our public and private lives.

Some will counsel that corporations can cordon themselves off entirely from values and institutions beyond the marketplace. But even if corporate actors were to abstain from politicizing their services and workforces (a welcome change), no organization operates in a moral vacuum. The decisions and activities of every corporation inevitably reflect certain values and moral commitments (e.g., the tremendous social implications of how digital platforms are designed or how personal data is acquired and used). And those decisions, as Dr. Gregg acknowledges, have moral dimensions. There is no escaping the reality that businesses impact society in fundamental ways. And that reality only re-enforces the truth that businesses are not just economic actors; they are moral ones, too. This means, as Austin Stone observed, that companies cannot “remain value-neutral.”

ESG is unethical both because it distracts businesses from their telos, and because it causes them to undermine the basic social goods that sustain markets and a free society. Ending Corporate America’s embrace of the destructive ESG agenda is doubtlessly important, but it is simply not enough. Businesses must recognize their moral duty to respect the freedoms, values, and institutions essential to American democracy and society.