Ethics, law, and economics: Legal regulation of corporate responsibility

Journal of the Society of Christian Ethics

Volumn 25, Issue 1, 2005, Pages 123-146

  Rothchild, Jonathan ^a  

^a NONE

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EID: 60949606175     PISSN: 15407942     EISSN: None     Source Type: Book Series    
DOI: 10.5840/jsce200525127     Document Type: Article

References (59)

1. Lionel Robins, On the Nature and Significance of Economic Science (New York: New York University Press, 1984), 134
2. quoted in Amartya Sen, "The Nature and Classes of Prescriptive Judgments," Philosophical Quarterly 17 (1967): 53.
3. For further elaboration, see Milton Friedman, Essays in Positive Economics (Chicago: University of Chicago Press, 1953).
4. Milton Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 1982), 199-200.
5. Posner's invective against moral philosophy appears in many of his writings. For example, Posner succinctly launches the critique: "I regard moral philosophy as a weak field, a field in disarray, a field in which consensus is impossible to achieve in our society." Richard Posner, "Law and Economics Is Moral," in Adam Smith and the Philosophy of Law and Economics, ed. Paul Malloy and Jerry Evensky (Boston: Kluwer Academic Publishers, 1994), 170
6. For Posner's full development of transactions costs, see Richard Posner, Economic Analysis of Law (Boston: Little, Brown, and Company, 1972).
7. Richard Posner, "Values and Consequences: An Introduction to Economic Analysis," in Chicago Lectures in Laws and Economics, ed. Eric Posner (New York: Foundation Press, 2000), 198
8. Jacob Viner, "Adam Smith and Laissez Faire," in Adam Smith: Critical Assessments, vol. 1, ed. John Cunningham Wood (London: Croom Helm, 1984), 145
9. Adam Smith, The Wealth of Nations, Book I, Chapter II (London: Penguin Books, 1986 [1776]), 117.
10. See Amartya Sen, "Adam Smith's Prudence," in Theory and Reality in Development: Essays in Honour of Paul Streeten, ed. Sanjaya Lali and Frances Stewart (New York: St. Martin's Press, 1986), 28-37
11. In reflecting on distributive justice, Smith remarks, "No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves well fed, cloathed and lodged." Wealth of Nations, Book I, Part VIII, Paragraph 36, quoted in Charles Griswold Jr., Adam Smith and the Virtues of Enlightenment (Cambridge: Cambridge University Press, 1999), 249-50
12. A. Oneken, writing in 1897, declared that they were "two entirely independent works, contradicting each other in their fundamental principles." A. Oneken, "The Consistency of Adam Smith," in Adam Smith: Critical Assessments, vol. 1, ed. John Cunningham Wood (London: Croom Helm, 1984), 1
13. Vivienne Brown similarly suggests that Smith abandons his interest in morality altogether in The Wealth of Nations; Brown states that "[The Wealth of Nations] is an amoral text in that it is not concerned with the dialogic experience of conscience" and that "what emerges in [The Wealth of Nations] is a concept of individual freedom deployed within a basically amoral discourse." Vivienne Brown, Adam Smith's Discourse: Canonicity, Commerce, and Conscience (London: Routledge, 1994), 209 and 218
14. In examining Smith's diverse references to an invisible hand, Emma Rothschild suggests that "Smith did not particularly esteem the invisible hand and thought of it as an ironic but useful joke. " Emma Rothschild, "Adam Smith and the Invisible Hand," American Economic Review 84(1994):319
15. Horst Claus Recktenwald affirms that Smith's "view of man seems more realistic and comprehensive than the comparable views of David Ricardo, Karl Marx, and modern authors." Horst Claus Recktenvvald, "An Adam Smith Renaissance Anno 1776? The Bicentenary Output - A Reappraisal of His Scholarship," Journal of Economic Literature 16 (March 1978): 58
16. Adam Smith, Theory of the Moral Sentiments, Pan III, Chapter III (Amherst, N.Y.: Prometheus Books, 2000 [1759]), 189
17. Smith, Theory of the Moral Sentiments, Part II, Section 2, Chapter I, 112.
18. In this way, Smith's impartial spectator incorporates self (one's own conscience), others and society (the social situatedness of the moral judgment), and general moral rules. Moreover, Smith's attention to the affective and cognitive (rational) dimension of the impartial spectator distinguishes it from Hume's notion of spectator. For further comments, see Werhane, Adam Smith and His Legacy for Modern Capitalism, 38-39
19. John Cairns, "Adam Smith and the Role of the Courts in Securing Justice and Libert)'," in Adam Smith and the Philosophy of Law and Economics, ed. Paul Malloy and Jerry Evensky (Boston: Kluwer Academic Publishers, 1994), 39
20. and A. I. Macfie, "Adam Smith's Theory of Moral Sentiments," in Adam Smith: Critical Assessments, vol. 1, ed. John Cunningham Wood (London: Croom Helm, 1984), 297-309
21. Voice also functions importantly in Smith's writings. For analysis of Smith's rhetorical strategies, see Brown, Adam Smith's Discourse: Canonicity, Commerce, and Conscience and Griswold, Adam Smith and the Virtues of the Enlightenment
22. Vivian Walsh identifies resonance between Smith's imagination and sympathy and contemporary notions of the entanglement of fact and value: "In somewhat similar vein Smith saw our recognition of moral obligations as dependent on our ability to enter imaginatively into another's plight or suffering. It is not, I believe, historically improper to use the present-day philosophical concept of the 'entanglement' of facts and values for this key property of classical political economy in its philosophically richest manifestation, namely in Adam Smith." Vivian Walsh, "Smith After Sen," Review of Political Economy 12 (2000): 9
23. D. D. Raphael, "The Impartial Spectator," in Skinner and Wilson, Essays on Adam Smith, 93. Raphael asserts that Smith's theory of the impartial spectator "was meant to be a sociological and psychological explanation of some moral capacities." Ibid., 96
24. Smith, Theory of the Moral Sentiments, Part I, Section 1, Chapter V, 27-28.
25. In addition to separating fact and value, Walras envisions economics as an exchange between disparate individuals. Jan Peil describes this phenomenon in Walras: "In Walrasian economics, exchange and competition are viewed as the effects of action and reaction by atomistic individuals." Jan Peil, Adam Smith and Economic Science: A Methodological Reinter-pretation (Cheltenham, UK: Edward Elgar, 1999), 91
26. Sallie McFague, Life Abundant: Rethinking Theology and Economy for a Planet in Peril (Minneapolis: Fortress Press, 2001), 75; emphasis in original. McFague declares that this one value undergirds American individualism and consumerism at the expense of solidarity, interdependence, ecological sustainability, and distributive justice
27. Robert Nelson, Economics as Religion: From Samuelson to Chicago and Beyond (University Park: Pennsylvania State University Press, 2001), 169.
28. See, for example, Harlan Beckley, "Capability as Opportunity: How Amartya Sen Revises Equal Opportunity," Journal of Religious Ethics 30, no. 1 (2002): 107-35
29. and Douglas Hicks, "Gender Discrimination and Capability: Insights from Amartya Sen," Journal of Religious Ethics, 30, no. 1 (2002): 137-54
30. Amartya Sen, On Ethics and Economics (Oxford: Blackwell, 1988), 2.
31. Sen explains that in the 1930s and decades thereafter "economists came to be persuaded by arguments presented by Lionel Robbins and others (deeply influenced by 'logical positivist' philosophy) that interpersonal comparisons of utility had no scientific basis. " Amartya Sen, "The Possibility of Social Choice," American Economic Review 89, no. 3 (June 1999): 352
32. For Hilary Putnam's criticisms on this point, see Hilary Putnam, The Collapse of the Fact/Value Dichotomy and Other Essays (Cambridge, Mass. : Harvard University Press, 2002), particularly "The Empiricist Background," "The Entanglement of Fact and Value," and "Fact and Value in the World of Amartya Sen." For Iris Murdoch's criticisms, see Iris Murdoch, Metaphysics as a Guide to Morals (London: Penguin Books, 1993)
33. Amartya Sen, "Introduction: Rationality and Freedom," in Rationality and Freedom (Cambridge, Mass. : Belknap Press of Harvard University Press, 2002), 46
34. Amartya Sen, "Goals, Commitments, and Identity," in Rationality and Freedom, 213.
35. Amartya Sen, "Rational Fools: A Critique of the Behavioral Foundations of Economic Theory," in Beyond Self-interest, ed. Jane Mansbridge (Chicago: University of Chicago Press, 1990), 37
36. Elizabeth Anderson, Value in Ethics and Economics (Cambridge, Mass. : Harvard University Press, 1993), 15
37. For concerns about overregulation, see Floyd Norris, "Too Much Regulation? Corporate Bosses Sing the Sarbanes-Oxley Blues," New York Times, 23 January 2004, Cl
38. for an assessment of the reform measures one year after the act, see Nanette Brynes, "Reform: Who's Making the Grade," Business Week (September 23, 2003), 80-84
39. Prior to the Sarbanes-Oxley Act, thinkers observed connections between transparency and accountability. Robert Hahn, for example, writes, "States and the federal government can improve regulatory accountability if they recognize that transparency increases accountability and that accountability builds the public support necessary for effective reform." Robert Hahn, "State and Federal Regulatory Reform: A Comparative Analysis," in Cost-Benefit Analysis: Legal, Economic, and Philosophical Perspectives, ed. Matthew Adler and Eric Posner (Chicago: University of Chicago Press, 2001), 49
40. As cited in Peter Fusaro and Ross Miller, What Went Wrong at Enron: Everyone's Guide to the Largest Bankruptcy in U.S. History (Hoboken, N.J.: John Wiley and Sons, 2002), 201
41. Loren Fox, Enron: The Rise and Fall (Hoboken, N.J.: John Wiley and Sons, 2003), 193
42. For a historical, critical, and constructive analysis of the accounting profession and the new regulations, see Mike Brewster, Unaccountable: How the Accounting Profession Forfeited a Public Trust (Hoboken, N.J.: John Wiley and Sons, 2003)
43. The 2001 Economic Crime Package preceded the act and increased penalties for fraud offenses and obstruction of justice offenses. For further commentary, see John Steer, "The Sentencing Commission: Implementation of Sarbanes-O.xley," Federal Sentencing Reporter 15, no. 4 (2003): 263-69
44. For example, Smith describes the benefits of security afforded by regulations: "Corporation laws enable the inhabitants of towns to raise their prices, without fearing to be undersold by the free competition of their own countrymen. Those other regulations secure them equally against that of foreigners. " Smith, Wealth of Nations, Book I, Chapter X, Part II, 231
45. See Michael Schroeder, "Congress Reviews an SEC Ruling Granting Enron Units Exemption," Wall Street Journal online, 21 January 2002; available at www.wsj.com (accessed December 12, 2003)
46. See Jacob Schlesinger, "Did Washington Set the Stage for Current Business Turmoil: Seeking Growth, Policy Makers Made Free Markets Freer, Shot Down Naysayers," Wall Street Journal online, 17 October 2002; available at www.wsj.com (accessed December 12, 2003)
47. Jeffrey Gordon, "What Enron Means for the Management and Control of Modern Business Corporation: Some Initial Reflections," University of Chicago Laiv Review 69, no. 3 (2002): 1236
48. For example, section 402 of the Sarbanes-Oxley Act prohibits personal loans to executives of public companies. Diane McGowan and A. Thomas Brisendine comment on the lack of clarified instruction with respect to the prohibition on these loans: "The Securities Exchange Commission has provided no guidance with respect to what constitutes a prohibited loan under these rules, and has indicated that it has no intention of doing so." Diane McGowan and A. Thomas Brisendine, "What's Next After Enron and Sarbanes-Oxley," Benefits Law Journal 16 (2003): 97
49. See Jim McTague, "Security in Numbers," Barron's (December 30, 2002), 26.
50. Thomas Jones and Andrew Wicks, "Convergent Stakeholder Theory," Academy of Management Review 24 (1999): 211; emphasis in original
51. Thomas Donaldson and Lee Preston, "The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications," Academy of Management Review 20 (1995): 87
52. For further comments on the applicability of the Sarbanes-Oxley Act to foreign issuers, see Megan Gates, "The Sarbanes-Oxley Act and Non-US Issuers: Considerations for International Companies," Journal of Commercial Biotechnology 10 (2003): 40-53.
53. William May, "Professional Virtue and Self-Regulation" in Ethical Issues in Professional Life, ed. Joan Callahan (New York: Oxford University Press, 1988), 410
54. (originally published in "Professional Ethics: Setting, Terrain, and Teacher" in Ethics Teaching in Higher Education, ed. Daniel Callahan and Sissela Bok [New York: Plenum Press, 1980])
55. Mark Schwartz, "A Code of Ethics for Corporate Code of Ethics," Journal of Business Ethics 41 (2002): 28. In attempting to fill this normative vacuum, Schwartz proposes six universal moral standards that would constitute a basic framework for corporate ethics: trustworthiness, respect, responsibility, fairness, caring, and citizenship. He traces the development stages of a code (content, creation, implementation, and administration), and he contends that the six moral standards "would necessarily be required to take priority over other values such as profit maximization or self-interest" (Ibid., 30)
56. "The Sarbanes-Oxley Act: Sentencing Prousions," Federal Sentencing Reporter 15, no. 4 (2003): 256
57. See, for example, Senator Joseph Biden, "Certifying Statements under Section 906 of the Sarbanes-Oxley Act: Holding Corporate Executive Accountable for the Accuracy of Corporate Financial Statements," Federal Sentencing Reporter 15, no. 4 (2003): 257-62
58. Dan Kahan and Eric Posner, "Shaming White-Collar Criminals: A Proposal for Reform of the Federal Sentencing Guidelines." Journal of Law and Economics 42 (1999): 368
59. Although I cannot develop the concept of moral education in full here, it is important to note that implementation of a program of moral education could redress the inadequacies of exclusive regulation. Shaming introduces one form of moral education, although some thinkers differentiate between shaming and educating. For example, Stephen Garvey distinguishes shaming and educating on the grounds that shaming "menaces certain ideals that any morally respectable mode of punishment should honor, not the least of which is human dignity." Stephen Garvey, "Can Shaming Punishments Educate?" University of Chicago Law Review 65 (1998): 739