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The research determines persons who are taking moral responsibility for the scandal committed by the company
South American Journal of Management
Volume 1, Issue 2, 2015
Moral Standards and Corporation’s Moral Responsibility
Article Damianus Abun
Divine Word College of Vigan, Ilocos Sur, Philippines
It has been an old argument that Business Corporation is a legal entity, separate entity and
separate from the owner. It has blanket to protect itself from being sued. Corporate veil has been
used as shield to protect itself from prosecution. With such protection, how can it be morally
responsible for its act? Moral responsibility is only applied to human, not to any other things.
However, this paper will argue otherwise. Based on paper reviews, it is found that one of the
requirements in determining moral responsibility is the presence or the absence of knowledge
and free will in a certain act. Such requirement clearly strengthen the idea that corporation,
though it is a separate entity from the owner may not completely out of hand, wash its hands and
can just do what it wants but it has to be also guided by moral standards and take moral
responsibility to its immoral actions. The reason is that a corporation as an entity is still
composed of rational beings that have knowledge and free will in pursuing their objectives.
Therefore, when things go wrong in the corporation, it is not only individual employees who
committed the crime are taking the moral blame but also the corporation as a whole including the
Key words: Moral responsibility, moral standards, element of moral standards, individualism
methodology, the nature of corporation, knowledge and freewill.
We are trying to understand moral responsibility of a corporation. The concern of this
particular subject is: who is responsible for what is going on in a corporation when things are
going wrong? Is it individual person or the corporation to be blamed? This question is raised
based on the nature of corporation itself, that a corporation is not the same as individual person
who has the reason or knowledge and freedom because moral responsibility is referring to human
only, not to anything other than human. Now who is then to be responsible when things go wrong
in a corporation? Is it only the man who has reason taking the responsibility? How about the
corporation? This is the main issue that we need to understand in this topic. To help us understand
this issue, we need to understand the nature of corporation. However, before going further, one
needs to know about the morality of certain act. Are there moral standards to be followed? Are
there moral standards being violated? Are these violations intentional or not intentional? What are
the elements to be considered intentional? It is assumed that the judgment of certain act, either to
be moral or immoral, is always based on criteria or moral standards, not on anything else. A
certain act must be evaluated against those moral standards. However, moral standards elements
may not be enough as basis for moral judgment and for someone to take the responsibility.
Responsibility involves knowledge/reason and freewill. Therefore, reason and free will may be
used as the starting point in any moral investigation, be it to the individual person or the
corporation. After knowing the element of moral responsibility, then, we proceed to evaluate
whether an organization or corporation is subject to moral evaluation, and if so, then what
qualifies it to be treated as a human person so that it can be held morally responsible for its
actions and what disqualifies it in order not to be held morally responsible.
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Volume 1, Issue 2, 2015
The purpose of this article is to enlighten everyone on the nature of Business Corporation and
its moral responsibility. We would like to know if a corporation, as a legal entity, not as a person,
has the moral responsibility over the crime it has committed. The area of concern is corporate
veil. Corporate veil has been used as shield to protect itself from prosecution. The question here
is: is corporation protected from moral responsibility? In this paper, I would like to show that
corporations cannot hide behind their corporate veil and wash its hand. To support my stand,
careful readings on certain authorities related to the topic are the basis of the arguments presented
in this paper. The paper will only limit its argument on the main element in determining moral
responsibility of a corporation. The writer realizes the difficulty in writing this topic because it
does not accommodate the idea of moral relativism. He assumes that the readers are believer of
universal morality.
Moral Standards
The meaning of Moral Standards and the Law
Moral standards are bases for moral behavior and bases for determining whether a certain act
is moral or immoral and for someone to be responsible or not. These are the guides of human
behavior and decision making. These standards are not only applied to individual persons but also
to a group or corporation. Something is unethical if it does not conform to a particular standard of
morality. They may not be written but observed and they are assumed norms of moral conduct
(Articulo, 2005). These norms are point for checking if certain action is good or bad. The
concerns of moral standards are norms, not theory which explains why certain act is good or bad.
Moral standards are not the same with social norms but they are beyond social norms. Though
social norms are code of conduct within a particular society but they are not moral standards.
Moral standards are beyond borders or may be called universal that are accepted by all rational
being everywhere. The coverage of social norms is local, while the coverage of moral standards is
universal. Therefore, the function of moral standards is to check if the social norms are moral or
immoral. Example, certain society allows killing in the name of God or offers human as a form
sacrificial lamb to God. Moral standards will tell us that it is immoral, though social custom
declares that it is accepted.
Based on the above understanding, it is clear that ethical standards guide individuals to act in a
good manner in dealing with other humans, society and the environment. These standards should
encourage individuals to make the right decisions for their actions, and give them the courage to
come forward should they notice dishonest and unethical behavior. Individuals need to follow the
norms prescribed by all rational agents. Therefore, in deontological systems, being morally good
is defined as obeying certain moral rules (Harris1986). When you follow those rules and do your
duty, then you are good — regardless of any other considerations like whether the consequences
of that obedience lead to suffering or happiness. On the other hand, if you ignore or break any of
those rules then you are not doing your duty and are morally bad — once again, regardless of any
consequences. These moral duties are absolute and unconditional duties such as telling the truth,
being honest, being fair, etc. They apply whatever consequences might follow from obeying
them. Example is the order not to steal. It is our duty not to steal, though the consequences of
stealing would save the life the one who is stealing. It does not explain why one should not steal
because it is the concern of moral philosophy.
One should remember that moral standards are not the same with legal standards. Following
laws does not make one ethical. Abortion in a certain country is legal but it does not mean that
abortion is moral because it involves killing a human being. While this practice is certainly legal,
the unethical nature of it is quite clear. Another example is euthanasia. Some countries are
legalizing euthanasia in which one can terminates one’s life on the basis of mercy or other
reasons. Though it is legal but such action is immoral because it is considered killing. Thus Legal
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is following the law and may include exploiting holes in the legal system but it may contradict
morality. Ethics is doing the morally right thing. Some laws may not even have any ethical
connotations whatsoever. Some moral acts may be legal but it may be also illegal. The legality of
an action does not guarantee that the action is morally right. Many issues in life that cannot be
resolved by appeal to law alone. Thus Shaw, Williams (1999) argued that law codifies a society’s
customs, ideals, norms and moral values and changes in laws undoubtedly reflect changes in what
society considers right, wrong, good and bad. However, he further emphasized that it is a mistake
to see law as a sufficient to establish moral standards that should guide an individual, a
profession, an organization or society. Law cannot cover all individual and group conduct. Thus
conformity to law does not necessarily mean that the act is immoral or non-conformity to the law
does not mean that the act is immoral.
Sources of Moral Standards
Related to moral standards issue, one may ask question, “Where are the sources of these
standards or where do we get those standards? If our ethics are not based on feelings, religion,
law, accepted social practice, or science, and then what are their sources? Many philosophers and
ethicists have helped us answer this critical question. They have suggested at least five different
sources of ethical standards we should use.
Common Good
Common good principle would argue that certain act may be considered good if it promotes
the interest of the majority over individual interest. This principle is originated from the
utilitarianism theory. Utilitarianism emphasizes that the ethical action is the one that produces
most good for the greatest majority interest and does the least harm for all who are affected
(Velasquez, 2014). One should not act if it does not bring good to the majority of the society,
though it might violate to one’s individual interest. If we apply it in the business setting, an
ethical corporate action is the one that produces the greatest good for the stockholders,
stakeholders and the environment. All actions are analyzed from its consequences, if the
consequences are good for the majority, then such act can be pursued.
The Rights Doctrine
Immanuel Kant classified rights as natural and positive rights. Natural right is inborn right
while positive or statutory right is what proceeds from the will of a legislator. From the two
classifications of rights, thus we have innate rights and acquired rights. Innate right is that right
which belongs to everyone by nature, independent of all juridical acts of experience. Acquired
right is that right which is founded upon such juridical acts. Innate right may also be called the
“internal mine and thine” (meumveltuuminternum), for external right must always be acquired
(Kant, 1790). Kant argued that there is only one innate right such as birth right of freedom, while
other rights are originated from right to freedom such as right to property and other rights. For
Kant, freedom is independence of the compulsory will of another; and in so far as it can coexist
with the freedom of all according to a universal law, it is the one sole original, inborn right
belonging to every man in virtue of his humanity. This is a right to be independent and of being
coerced by external force. The limit of this freedom is the freedom of others, in the sense that the
exercise of freedom is limited by the freedom of others. Emanated from freedom is the right to
property. It is believed that each one is free to own a property. He/she has the right to property if
he/she is connected to it and that if any other person should make use of it with the owner’s
consent and if they do it without the consent of the owner, then they do an injury to the person or
the owner. The subjective condition of the use of anything is possession of it as Immanuel Kant
puts it, “Anything is “Mine” by right, or is rightfully mine, when I am so connected with it, that if
any other person should make use of it without my consent, he would do me a lesion or injury”.
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Thus anyone who would assert the right to a thing as his must be in possession of it as an object.
According to Robert Nozick (1974) as cited by Shaw (1999) argued that property rights is
considered sacrosanct. It grows out of one’s basic moral right. Such right is either reflecting ones’
initial creation or appropriation of the product, some sort of exchange or transfer between
consenting individuals or a combination of the two. However, Nozick, as quoted by Shaw argued
that property rights exist prior to any social arrangement and are morally antecedent to any
legislative decision that a state could make.
Reading the argument of Kant and Nozick, it can be said that there are two kinds of rights and
they are moral natural rights and legal rights. Moral natural rights are possessed by man by virtue
of their human nature; they are born with those rights, not conferred by the state. While legal
rights are those conferred and recognized by the law. That’s why we have constitutional rights
which are conferred and protected by law. They cannot be altered by the state. While statutory
rights are derived from legislation which are drawn by the people’s representative such as right to
minimum wage and right to just compensation to additional work (Articulo, 2005).
Thus the ethicists agree that the ethical action is the one that best protects and respects the
moral rights of those affected. This approach starts from the belief that humans have a dignity
based on their human nature per se or on their ability to choose freely what they do with their
lives. On the basis of such dignity, they have a right to be treated as ends and not merely as means
to other ends (Kant, cited by Stanford Encyclopedia of Philosophy, 2004). The exercise of any
moral rights is limited to the moral rights of others, the sense that while the bearer of the right has
the right to exercise his/her freedom but at the same time the same time the bearer should not
violate the rights of others. Others have the duty to protect our rights and we have the duty to
protect the right of others.
The Justice Doctrine
Plato as cited by Velasquez (1996) argued that in a society that lacks norms of justice, he
suggests, people inflict injustices on each other. People quickly conclude that they will be better
off if everyone adheres to norms of justice. People consequently agree to cooperate in mutual
adherence to norms of justice. It is a long this line of reason, we take justice as one sources of
moral standards, a standard of moral behavior. All know that just action is considered to be
ethical. Therefore, the principles of justice are some portion of the total principles that make up
ethics. There are a lot of different ideas about justice. Aristotle and other Greek philosophers have
contributed to the idea that all equals should be treated equally. Today we use this idea to say that
ethical actions treat all human beings equally-or if unequally. This kind of definition refers to fair
treatment. But the question here is: who does the treatment and who are to be treated? The answer
to this question leads us to think of individual justice and social justice or group justice. Justice is
not only fair treatment from other people toward the person but how the person treats other
people justly. Therefore justice becomes individual virtue and social virtue. A just person always
treats other people justly and a just society is always treating its community members justly. As a
just individual, I pay people more based on their work, based on the amount they have
contributed to the organization and so the greater the amount that they contribute to an
organization, the greater they receive. Just society, just government, just organization would treat
individual justly as how the individual treat each other. In this case justice means giving what is
due to a person fairly deserves. An act is ethical if it gives a person his proper due, otherwise the
act is unethical. Giving what is due indicates that all persons must always be treated equally.
Velasquez (2014) argues that there are two kinds of justice and they are distributive and
retributive justice. Distributive justice is dealing with the way how the wealth is distributed to
members of the society. Thus distributive justice refers to fair distribution of society’s benefits
and burdens. The benefits should be distributed according to the contribution or the burden.
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Someone should not expect more if he/she has not contributed anything to the production of the
output. Thus, pursuing society’s benefits but avoiding burdens is unethical because it is unfair for
anyone to benefit from society’s economic pool without working hard for it. Such idea of justice
falls within what Aristotle called formal justice. Formal justice is the requirement that we should
treat similar people similarly. If two persons have the same qualifications, the same amount of
contribution to the organization, they should be treated equally or similarly. This kind justice
would contradict with what Karl Marx meant by justice. For him justice is to share benefits
according to the needs but the burden is shared according to the capability. While retributive
justice refers to the punishment given to a person who committed a crime and punishment must
be equal to the crime she/he committed. Not accepting the punishment is considered unethical
because such act would mean that the person avoids what is due him. In relation to this idea, it is
the same when someone destroys the property of other people, then it is his due to pay or replace
it. When he violated the law, then it is his due to be jailed.
There are other views of justice when we talk about society as a whole (Velasquez, 2014).
When a person thinks that talents, education qualification, ability, experience are the basis for job
distribution and salary structure, would understand justice in terms of merit. This what we have
mentioned above that justice means giving what is due to the person who deserve. Such idea is
originated in the idea of Plato. Plato believes that people are classified not based on their family
background but based on their talents and abilities and with such talents and abilities, those
persons can play their social role. Further, when a person considers that the government should
provide free education to all, would think that justice is about equality. This is rooted in the belief
that all men are created equally or the same. Therefore treatment should not be based on religion,
gender, race, and nationality and all should be given the same opportunity. Therefore, since all
human are the same, they should be given equal shares of benefits and burdens. Next, if a person
believes that business is importance to the common welfare of society and they should be given
tax break, then they view justice as utility. For this group justice means what promote the
common good or common welfare of the citizens. In this case, a business is just when it promotes
the welfare of majority of people.
Natural Law and Virtue Doctrine
Humans are born good, they are given the natural knowledge, capability of knowing what is
good and bad which is already built in the reason. Such concept would emphasize the point that
human are rational being and moral being. This is true to all human beings. Peter Singer as cited
by Arneson (1998) argued that human have special moral privilege based on the superior
cognitive abilities. Though his argument has been criticized by some for it leads to conclusion
that there are different capacities among human and so there must be different level of moralities
among human. Beside the point of different argument but the common point in the argument is
that all human are moral being. All actions are commanded by reason which makes a different
from the animal and therefore actions motivated by reason are necessarily good or moral. It
makes a different from animal. Such concept leads us to categorize acts as have human act and
act of man. The human act is calculated by reason, while act of man is calculated by instinct
which is the same with animal. Therefore, an act is good if it reflects the nature of man as a
rational being and a moral being and these are first basis for moral evaluation of human acts.
Since human are moral being, then definitely human must possess moral character or virtues.
Therefore human are necessarily virtues human being. Aristotle argued that that a virtuous person
is someone who has ideal character traits. These traits derive from natural internal tendencies, but
need to be nurtured; however, once established, they will become stable. Virtue ethics emphasize
the role of character and virtue in moral philosophy rather than either doing one’s duty or acting
in order to bring about good consequences. A virtue ethicist is likely to give us this kind of moral
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advice: “Act as a virtuous person would act in your situation.”Or virtue ethicists would advise us,
“act always as honest person”. Honesty here is not refereeing to certain dealings or transactions
but the honesty is a character of the person. Human transactions must always be honest because
honesty is a reflection of human as a moral being, a virtuous human being. If transactions are not
honest, then it is immoral because it does not reflect a character of human being as virtuous
human being. A virtuous person is someone who is kind across many situations over a lifetime
because that is her character and not because she wants to maximize utility or gain favors or
simply do her duty(Athanassoulis, 2013).
Moral Responsibility
After knowing that someone has done something wrong based on either one or all of those
moral standards, then that person should take the responsibility. Responsibility means something
for which one is responsible to one’s act or the state or fact of being responsible, answerable, or
accountable for something within one's power, control, or management. Related to the topic of
ethics, responsibility would mean being accountable for what we are doing knowingly and freely.
It is the extent to which the person or group deserves blame or punishment for what he/she has
done or the group has done. In other words, she/he should not wash his/her hands and throw
his/her moral responsibility to other people after he/she committed certain action. Be responsible
and take the blame. Why? The person who performs an act knows why he acts and freely
commits it, even though he knows his act is wrong but he/she does it and therefore she/he must
take the full responsibility for his/her actions. Consequently the person deserves blame or
punishment. Thus moral responsibility involves the notion of guilt or innocence (Articulo, 2005).
Take an example, the employer was found to be violating the right of employees to privacy. The
investigation committee recommend to the management that certain employer has to take the
responsibility. As a result, the employer was punished and the employer was ordered to pay for
moral damages.
The example mentioned above is a case of individual act, in a sense that the act was done by an
individual person, not authorized by the management. Now our concern is, how if such act was
done out of duty or she/he was authorized by the management as prescribed in his job
description? Should the individual employee or the corporation take the responsibility? Should
both wash their hands? The contention here is related to the extent of moral responsibility. Moral
responsibility refers to both, individual and collective moral responsibility (Risser, 2014) because
immoral act may be done either by individual person authorized by corporation or a group as a
corporation. There can be a situation in which as a group knowingly and freely plans certain
activity which brings disaster to a community. Moral responsibility becomes complicated here
because it involves corporation which is not considered a human person or rational being.
Corporation is only a legal entity created by law which is not an individual person that has no
reason, knowledge and freedom or free will. How can it be imposed with moral responsibility?
Therefore, we have the reason to argue that the person or a group who has committed certain
immoral act is not always responsible for their wrongful act. It might have been the idea behind
why some individual prefer to form a corporation than single proprietorship because it has a veil
to protect from moral responsibility. It is a veil given by law. It has a limited liability. Now, what
happen if certain corporation committed a crime? Who is the one taking the blame? Let us be
clear that morality and law are two different things, in a sense that what is legal may not be
always moral and what is moral may not be always legal. The issue on hand is moral issue and as
a moral issue, there are simple requirements to be met if certain act is moral or immoral. In this
regard, there must be criteria or requirements to be fulfilled for one or a group to be morally
responsible, and thus we need to know when the person is morally responsible and when they are
not. In order to determine moral responsibility, we need to know what makes an act right or
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wrong morally. This is important criteria to determine on which we can base our judgment and
moral theories will help us in determining the extent of moral responsibility.
Element of Moral Responsibility: Knowledge and freedom
Moral standards are the guide of our moral behavior. Everyone including corporations should
be guided by those moral standards. However, in determining moral responsibility of certain act,
moral standards may not be a good starting point. Therefore, evaluating certain act and their
moral responsibility merely based on the moral standards would not be enough or sufficient. The
issue of moral responsibility is framed within the nature of persons. Persons are classified as
unique because of the reason, minds (McKenna &Widerker, 2006). Thus the starting point to be
investigated is knowledge and freedom. Thus, we need to see if the violation of those moral
standards were intentional or not intentional. In other words, evaluation may continue if the
element of knowledge and free will are found. Thus, the primary step to be taken before a
judgement can be done is to find out if there was the presence or absence of knowledge and
freedom or free will (Sandel, 2014, cited from Immanuel Kant). If there was a sign that
knowledge and freedom were present in the act, then the question remains: to what extent is the
presence of knowledge and free will? This is relevant to the issue because it will determine the
level of moral responsibility. But we will not go deeper into it because our main purpose here is
to find out if corporation can be morally responsible for its action. A judgement on certain act can
be made if it is found that there is presence of mind or reason and free will, if the act was done
knowingly and freely. In other words, the person can be blamed if the person is acting out of his
knowledge and free will. The person acts knowingly and willingly despite the fact that he knows
that such act will destroy common good, the right of people, justice, the doctrine of his religion,
and dignity of other people. Despite of that knowledge in mind, however he still commits it.
Reason allows us to act with a purpose and guide us to pursue the objective. With such reason,
one can identify or differentiate right from wrong or good from bad and one can avoid it. Thus
the absence of reason, depending on the situation or circumstance, can reduce or mitigate the
moral burden of the person who committed the act. It is the reality that many times a person acts
out of fear or anger or external force. In other words, the person is not in full control of his acts.
In such situation the person may or may not be morally responsible. When the person acts
without being aware of the consequences or the wrongness of his act, cannot take full
responsibility of his act.
Knowledge and free will are the first bases for moral judgement of certain act because we
believe that only knowledge and freedom belong to human as a rational being. Consequently all
acts performed by human must be based on his reason or knowledge and free will. This is what
we call human act; the acts are specifically belonged to human, a rational being who has a
freedom. Knowledge and freedom are the only things belong to human and the acts that are
belonged to human act are the only the acts we can judge. Human should act based on the
knowledge and his free will (Widereker and Mckenna, 2006). This is to emphasize that there are
other acts which we call act of man. The act of man does not necessarily belong to human but
also belong to animal which is not necessarily motivated by reason but by instinct like animal.
Example, eating, drinking, sleeping, is acts that are also belonged to animal. These acts are
neutral to moral judgment. Therefore, we emphasize that it is only human act that we can judge
morally. Before we judge certain whether it is immoral or immoral based on the motive, the
means, the ends and consequence, we need to determine first if the act was done knowingly and
freely (Widerker & Mckenna, 2006).
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Taking Full Responsibility, Not Full Responsibility and Exempted.
Based on the discussion on the determining factors of moral responsibilities, then we have the
idea that not all wrong act are done knowingly and freely. There are certain situations or
circumstance that a certain person committed a certain act either with full knowledge and
freedom or incomplete knowledge. It is here we need to examine when someone can be full
responsible of his /her action or not fully responsible for his /her actions (Widerker and Mckenna,
Someone is judged to be morally wrong and fully responsible for his/her actions when she/he
does it with full knowledge and freedom. In other words, he/she does it knowingly and freely.
The person has a complete knowledge of the wrongness of that act but he/she chooses to commit
that act at his own choice and free will. In other words, the person committed such act
intentionally, voluntarily and is a product of contemplation and deliberation. After establishing
facts and determining that such act is done knowingly and freely, then the person has full
responsibility and that person should be punished according to the crime he/she has committed.
Example a manager knows that bribery is immoral, however, despite of such knowledge, he/she
committed it.
However, there are circumstances in which a person commits certain act not because he/she
has full knowledge. Despite of her lack of knowledge, she/he committed it because she /he might
be pushed or forced by a certain circumstance that he/she has no choice but to do it. This is the
case that we cannot throw all the responsibility and blame over that person. Given that situation,
in the case of lack of knowledge of the correctness or rightness of the act, however, the person
cannot also be removed from all moral responsibilities. The responsibility and blame are still with
the person, however, to a lesser extent, not totally exempted because lack of knowledge is not
sufficient enough to exempt the person from moral responsibility because he/she could still find
ways to get information but he/she did not.
A person can be exempted totally if the person acts out of complete ignorance of the moral
wrongness of the act, unintended result of a rightful act, result of an accident, coercion to the
extent that the person’s reason cannot work and when such person has no capability to know if
such act is right or wrong, good or bad. The first and the last is the case of a child or a crazy
person who burn the house of their neighbor because of excitement to the see the beautiful fire.
The case of unintended result is the case of double effect of certain act. This is the case in which a
person performs certain act that lead to, either good or bad outcome. Example a doctor examines
a pregnant mother who has cancer. The only way to deliver the baby is through caesarean;
however, the result was the mother’s death.
Corporate Moral Responsibility
The Nature of Business Corporation
In order to determine moral responsibility of corporation, first, we need to know the nature of
corporation. Proper understanding is needed for us to determine if a corporation is morally
responsible for their actions. This is due to the fact that corporation is not human, it is a legal
entity created by law but what qualifies it to be like human and therefore be responsible morally.
It is commonly known that a business entity is an entity that is a group of people organized for
some profitable or charitable purpose. Business entities include organizations such as
corporations, partnerships, charities, trusts, and other forms of organization. Generally speaking,
entrepreneurs incorporate their business in the state where they conduct their business (Perez,
2015). After incorporation, then the business is considered legal and it is now recognized as a
legal business entity. It has a legal personality and now can legally pursue its business objectives
as prescribed in their constitution and bylaws as approved by the Security of Exchange
Commission. Thus the treatment to a corporation is now the same treatment to a person. Business
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entities, just like individual persons, are subject to taxation and must file a tax return. Some
business entities are exempt from federal income tax. These include non-profit charities, non-
profit corporations. Business entities may be subjected to state income tax, depending on the laws
of the state or states where they conduct business.
There are different types of businesses and knowing different types of businesses could help us
understand the nature of business. The classification of business is depending on the objective
that it pursues. Therefore, first, we have sole proprietor. Sole proprietor is unincorporated
businesses and it is usually owned by a single individual. There are no forms we need to fill out to
start this type of business. The only thing you need to do is report your business income and
expense. This is the easiest form of business to set up, and the easiest to dissolve. A Sole
Proprietorship in the Philippines is also known as a "single proprietorship, A sole proprietorship
is the most simple form of business and the easiest to register in the Philippines, through the
Bureau of Trade Regulation and Consumer Protection (BTRCP) of the Department of Trade and
Industry (DTI). It is owned by an individual who has full control or authority over all the assets,
as well as personally answers all liabilities or losses. The fact that it is run by the individual
means that it is highly flexible in which the owner retains absolute control. In relation to liability,
the sole proprietorship has an unlimited liability as compared to corporation. This is in case if the
owner put up his/her business not by her/his own capital but from loans either from individual
person or from the banks. When the business bankrupt, then the owner has to pay all the money
that he/she has loaned from other people or creditors. The creditors can also file case against the
owner and run after the owner and can proceed not only against the assets and property of the
business but also the properties of the owner. Therefore the laws do not differentiate between the
owner and the business, both are the same.
Second is corporation. A corporation is an entity which is separate from its owners. Therefore,
unlike sole proprietorship, corporation has limited liability protection. The Corporation is formed
under the laws of the state in which it is operating, with Articles of Incorporation. It has
shareholders, and the shares may be privately or closely held, or they may be offered for sale to
the public. Corporations are taxed separately from their owners at the corporate tax rate. Since
corporations are separate entities, the debts and liabilities of the corporations are also separate
from those of the owners. This separation is sometimes called a “corporate shield” or “corporate
veil”. Corporate veil is a term used to describe the separation of the corporations from its owners.
As a separate entity, the corporation is set up to shield its owners from personal liability for the
debts and negligence of the business. Since it is a separate entity, when the corporation is sued,
the individual shareholders and officers cannot be brought into the lawsuit. But there are cases in
which the corporation's officers and shareholders could be sued for negligence or for debts; the
action of bringing in these shareholders to be sued is called "piercing the corporate veil" or
"lifting the corporate veil. “There are two instances when a corporation can be sued: first, in the
case of fraud, in which the corporation was found to be a sham that was set up for the purpose of
carrying on fraudulent deals or for fraudulent purposes. In this case they knowingly and freely
pursue immoral objectives. Second, in the case of egregious and willful activity by corporate
shareholders or officers who put corporate gain over public good (Murray, 2015). Again they
knowingly and freely pursue immoral intention even though they know that the common good
will be violated.
Third is partnership. It is a legal relationship formed by the agreement between two or more
individuals to carry on a business as co-owners. Unlike Corporation, partnership is not a separate
entity from its owner. Since it is not a separate entity from its owners, then the owners must take
the responsibility in case of business going bankrupt. Partnership must have at least one general
partner who assumes unlimited liability for the business, for actions of the partnership. It may
also include limited partners who are merely investors and who do not share in the day-to-day
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operations of the business and who do not share in liability. Partnership must have at least two
partners. Partnerships are usually registered with the state in which they do business, but the
requirement to register varies from state to state. Partnerships use a partnership agreement to
clarify the relationship between the partners, roles and responsibilities of the partners, and their
respective shares in the profits or losses of the partnership (Murray, 2015)
Fourth is Trust. Trust is usually formed upon the death of an individual and is designed to
provide continuity of the investments and business activities of the deceased individual (Perez,
2015). Fifth is called non-stock nonprofit corporation. Their purpose is not for profit but it is for
service or for charity. Such kind of business is exempted from tax but it needs to report its
activities and income and assets to ensure that it complies with the government laws with
charitable institution or corporations. We use the term nonprofit because these organizations are
not set up for the sole purpose of making a profit. Rather, they pursue public benefit purpose that
is recognized by the constitution. What makes an organization a nonprofit is that: first its mission.
Its mission is to undertake activities whose goal is not primarily for profit. Second, no person
owns shares of the corporation or interests in its property. Third, the property and income of the
nonprofit corporation are never distributed to any owners, but are recycled back into the nonprofit
corporation's public benefit mission and activities. In terms of ownership, it is owned by the
public, it belongs to no private person and no one person controls the corporation. All its assets
are dedicated to service or charity. The cash, equipment, and other property of a nonprofit cannot
be given to anyone or used for anyone's private benefit without fair market compensation to the
nonprofit organization (Fritz, 2015). In terms of control, it is controlled and governed by Board of
Trustees and their function is to see to it that the organization serves the purpose and the founder
does not own or control the nonprofit. Board of Trustees does not act as individual persons but act
as a group. Nonprofit is only accountable to the public and it is therefore, it must file annual
information return to the appropriate office of the government (Fritz, 2015).
After understanding the nature of business, now we have idea how business are working. Some
are taking full responsibility and others are avoiding responsibility which is allowed by law by
creating a corporation. However, setting aside the discussion on the different kinds of business
organization, from the definition, it gives us a clear view of what business organization is all
about. Depending on the kind of business, each business has different set up and has different
level of liability. Some have unlimited liabilities, while others have limited liabilities. In the case
of unlimited liabilities, then such business cannot cover itself from legal charges and assume the
damage. However, our concern in this particular topic is corporate moral responsibility. A
corporation has a limited liability because it is a separate entity from its owners. The concern is:
who is taking the moral responsibility or who is going to take the blame?
Corporate Moral Responsibility and Individual Responsibility
The starting point of discussion is: is a corporation not morally or morally responsible for its
actions? This question is raised because of the fact that corporation has a limited liability. Such
nature of corporation has brought controversies between theorists whether a corporation is
morally responsible or only the individual person, not the corporation. Answering the above
question would be simple if we follow the previous argument on the determining factor of moral
responsibility, then we can give immediate answer to this question. As long as the act was done
knowingly and willingly by the corporation, the organization is morally responsible. However,
problem becomes complicated because it is not a matter of applying such principle but the theory
of corporation makes it complicated. The idea of corporate veil makes things harder. Pursuing
this idea, we encounter a problem and the problem is a corporation has no reason and free will
because it is a legal entity created by law that can carry out a business for a certain objectives. It
is not an individual person who acts knowingly and freely. Corporation is a separate entity from
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its owners and thus it has a limited liability, in the sense that it cannot take all the blame for its
actions. Why? Two opposing groups present their views. Those who use the individualism
methodology would argue that "corporations don't commit offences; people do (Bodenheimer,
1980). The strategy of Individualism, as revived by numerous commentators in recent years, is to
abolish corporate criminal liability and to rely instead on individual criminal liability (Lederman,
1985). He continued that theoretical basis for imposing criminal liability on the corporation
remains unclear. And such situation has encouraged the trend toward a slight restriction in the
scope of corporate criminal liability.
How can we apply moral responsibility and blame to a corporation? Friedman (1967) as cited
by Lederman (1985) argued that many debates have come out to discuss issues related to moral
responsibility of the corporations. Indeed, the very substance of the corporate body is
controversial and various views concerning it have emerged. There are those who treat the
corporate body as a mere legal fiction devoid of the ability to function independently and
requiring permanent representation by human beings. Others treat corporations as real entities
claiming that the law merely recognizes the existence of corporate bodies rather than creates the
corporate entities. A third group of jurists rejects both these approaches and offers additional
explanations. For the upholders of the theory of individual responsibility rooted in
methodological individualism and its related metaphysics, argue that one cannot ascribe moral
responsibility to a corporation but only to a “a flesh and blood” individuals who are moral person
but Soarez (2003) argued that corporations have sufficient structural complexity to be agents
whom it makes sense to call to account for their actions and the consequences of those actions. It
may not be possible for corporations to be responsible in the way that the individual can be but
they can be responsible appropriate to corporations. J. Braithwite and B. Fisse, (1998) in an
article, “The Allocation of Responsibility for Corporate Crime: Individualism, Collectivism and
Accountability” as cited by Soarez (2003) argue that methodological individualism amounts to a
dualistic ontology. On the one side are individuals and on the other are corporations. Individuals
are observable and therefore, real, while corporations are abstractions without the possibility of
direct observations. If it is so, it is not possible to ascribe to moral responsibility to a corporation
and ideas such as agency, autonomy and rationality do not apply to a corporation. Therefore we
cannot expect formal organization or their representative to take the moral blame. It is along such
line of argument, Soarez (2003) lamented that moral responsibility is a word without meaning.
Amidst those conflicting discussions, however, debate along such idea never ends because of the
desire to settle the score on who is holding the moral responsibility. The question of who is
holding the responsibility remains alive because different interpretation of the nature of
corporation. Trying to settle the interpretation, Lederman (19850 suggested that that distinctions
must be made between human beings and corporate bodies. Those distinctions are not to clear one
and punish one but to clear the responsibility in terms of the extent to which both are responsible
morally. Some argue that even assuming that the individual desires of a group of people working
in concert can form a "collective will" as a result of the interdependence and mutual influence
within the group, and even assuming that this synthesis of desires is distinct from the separate
wills forming it (Braithwite &b Fisse, 1998), the problem of personifying the corporate body is
not thereby brought to a clear-cut solution. The corporate entity is an enterprise devoid of the
physical ability characteristics of the human race. Man possesses consciousness and physical
aptitude, as well as the power to exercise them. Corporate bodies, in contrast, are bereft of those
capacities and depend totally on a human source in order to function.
To clear such issue, Soarez (2003) presented two arguments from two contestants: Nominalists
and realists. For the Nominalists, corporations are collections of individuals or aggregations of
human beings. While the Realists argue that a corporations has its own existence and a meaning
as well as moral/legal personality of its own. He further emphasized that both of these views have
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implications for moral and legal responsibility. In the Nominalists view, corporations do not exist
apart from its members; any blame worthiness or responsibility can only be obtained from the
culpability of an individual employee. Therefore, in line with this Nominalists view, corporations
are moral persons in the sense that they are entities and they are intentional actors. Corporations
are entities with dominant role to play in our society. Corporations are more than mere collection
of individuals which means that they are capable of moral decisions and therefore susceptible to
moral blame. However, this would leave one with the problem of deciding whether the
corporations should be responsible for the behavior of its employees or only for some of them.
Definitely if employees or employee acts on behalf of the corporation because they are or he/she
is carrying out their duty or her/his duty authorized by corporation, then in this case the
corporation has to take the blame. On the realists view, corporations represent something beyond
individuals which means that following this point of view, it may be possible to find a new
candidate for attributing responsibility. In the realists view, the corporation is not morally
responsible. However, Lederman (1985) settles this issue by using the conspirator theory. He said
that the theory of conspiracy holds any conspirator liable for crimes committed by fellow
conspirators in the furtherance of the conspiracy, even if the conspirator was not capable of
committing the offense himself. The analogy to the theory of corporate criminal liability suggests
that each breach of law the corporate body has been accused of is in furtherance of an offense
previously plotted between the corporation and the perpetrator. Hence, the corporation is
criminally liable for the acts of the perpetrator in execution of the plan of the conspiracy.
Based on those arguments presented in the discussion, we can settle our case on the question of
“who is taking the blame?” Following the argument, the traditionalist and the nominalists
definitely would answer that the one who is taking the blame is an individual person or
employees because they are the ones who have reasons and freedom. They have the knowledge of
what is right and what is wrong and the knowledge of what is good and what is bad. Therefore
using their freedom, individual employee or employees could refuse to carry out a job which is
not moral, even though they or she/he is authorized to do so. Further they argue that individuals
had to carry out the particular actions that brought about the corporate act. Contrary to the
traditionalists and nominalists’ view, French (1979) as cited by Velasquez (1998) claimed that
when an organized group such as corporation acts together, their corporate acts may be described
as the act of a group and consequently the corporate group and not the individuals who make up
the group must be held responsible for the act. Take an example, the defective product of a beauty
product cannot be attributed to the individual person but it is attributed to the corporation or the
company where the product is made, so long the cause of defective product was not caused by
individual employee but a consequence of following the order of the company. Velasquez pointed
out that more often than not, employees of large corporation cannot be accused of “knowingly
and freely” join their actions together to pursue corporate objectives. Often time they may not be
aware of the intention and the ends/objective of the corporation’s act because they are not
involved in the discussion during the planning process and they have no way of finding it out and
are not capable of stopping it. In this case, the excusing factor is ignorance and inability.
However there are situations wherein employees know that the corporation’s plan is immoral,
however, they just ignore about it because they have no power and no choice to do otherwise
except to follow the order. They have the capability to question and to withdraw their cooperation
but they choose to go along because of the fear and pressure that they might be fired. However,
such situation could not be used as an excuse by the employees or employee from their moral
responsibility. Velasques (1998) claimed that following orders out of fear of his/her boss cannot
absolve the employees/employee from moral responsibility. Unwillingly cooperate with the
corporation to do a certain crime cannot excused him/her from moral accountability because such
reason is not serious enough to cause his/her mind goes blank but she/he is still in full control of
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her knowledge about the wrongness of her/his action. Example, an employee was authorized by
his/her employer to put a bump near the gate of their business competitors. The employee cannot
claim that he/she is just following orders because the employee knows that it is wrong but still
doing it. Doing a certain crime because of fear, threat, and uncertainties may lessen or mitigate
the moral responsibility of the employees. The employees/ employee can only be exempted from
moral responsibility if the employees/employee is found to be in complete ignorance about the
wrongness of their act and if he/she was coerced by his/her boss to commit a certain crime,
however, such reason can only be accepted if the coercion was very serious up to the point that
her reason cannot function well. Moral responsibility requires merely that one acts knowingly and
freely and it is irrelevant to use the reason of “following orders only”. Following orders because
of pressures may only mitigate the employee’s moral responsibility over the crime.
Moral standards are applied to all who are called rational being, be it an individual person or a
corporation. Consequently all must take the responsibility if they are found to violate moral
standards. We conclude that employees and corporations are morally responsible to the crime
they have committed. However moral responsibility depends on the circumstance in which how
the crime is committed. The determining factors of moral responsibility of corporation are
knowledge and freedom or freewill. Though a corporation is separate legal entity from the owner,
and not considered as an individual person, however, a corporation is composed of rational
human beings who have knowledge and freedom. There are situations in which, as a group, it
knowingly and freely pursues objectives that are in violations of moral standards. When they
violated the ethical standards, they are acting as a group with full knowledge and free will.
Employees are acting on behalf of the corporation. They are authorized by the corporation to
carry out their job as prescribed by the organization or in other words, they are just doing their
job. However, employees cannot just wash their hands and throw the blame to the corporation
because the element of reason and free will are retained with them. Thus as individual employees,
he/she has still the freedom to choose to follow or not to follow if the order is not moral.
It is based on such argument, we conclude that both: employees and corporation are morally
responsible to the crime committed by the corporation. This position may be opposed by those
who are using the argument of individualism methodology; however our determining factor is
knowledge and free will. As long as these two factors are present in certain act, then corporation
is morally responsible. In this regard we have group and individual moral responsibility.
Individual responsibility maintains that only individual human agents can be held morally
responsible, and group responsibility maintains that groups, such as corporation, can be held
morally responsible as group, independently of their members. These opposing positions rest on a
deeper conflict between methodological individualists, for whom all social phenomena, such as
group activities, can be explained by reference only to facts about individual humans, and
methodological holists who defend the ontological position that there are social groups capable of
actions that cannot be reduced to the actions and interests of their individual members. Though
they are using different approach but the two approach lead to the same conclusion that both
individual employees and corporation are morally responsible because both are still considered
rational being who have knowledge and freewill.
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This chapter illustrates parallels and similarities between the interplay that links and shapes the four internal dimensions, and the interaction between individuals (micro-level), their close environment, including the institutions they work in (meso), society (macro) and the planet (meta). This perspective is applied to the working of humanitarian organizations with an overview of options for using this logic to optimize the full potential that is inherent to the mandate of these institutions. It is shown how the proposed paradigm shift can be started, expanded and maintained, from individuals to institutions and vice versa. The outline of Compassion for Change (C4C) proposes a concrete way for using the paradigm-shift that this book is based up to transform the internal culture of humanitarian and development organizations in order to reanimate and expand their external influence.
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There is a clear tendency in contemporary political/legal thought to limit agency to individual agents, thereby denying the existence and relevance of collective moral agency in general, and corporate agency in particular. This tendency is ultimately rooted in two particular forms of individualism – methodological and fictive (abstract) – which have their source in the Enlightenment. Furthermore, the dominant notion of moral agency owes a lot to Kant whose moral/legal philosophy is grounded exclusively on abstract reason and personal autonomy, to the detriment of a due recognition of the socio-historical grounds of moral social conduct. I shall argue that an adequate theory of responsibility is needed, which does not only take into account individual responsibility, but also collective and corporate responsibility, capable of taking into consideration society and its problems. Furthermore, corporations are consciously and carefully structured organisations with different levels of management and have clearly defined aims and objectives, a central feature upon which I shall be focussing in this paper.
The article summarizes the theory that corporations and corporate-like entities can satisfy the conditions of being intentional actors and qualify as moral agents to which moral principles and rules apply and be held morally responsible for what they do. The theory is an alternative to the methodological individualist's interpretation of corporations as merely contractual relations between human moral agents with no moral status of their own. It provides a synopsis of the locus classicus of the theory that was developed by Peter French and clarifies that holding a corporation morally responsible for an action or event does not exclude the possibility that a human moral agent may also be responsible for the same action or event. Keywords: corporate moral agency; corporate responsibility; methodological individualism; collective responsibility; organizational ehtics; intentional rational agents; corporate internal decision structure (CID Structure)
Cambridge Core - Texts in Political Thought - Bentham: A Fragment on Government - edited by Ross Harrison