Alexei Marcoux on moral partiality in business [video interview transcript]

Interview with Professor Alexei Marcoux, conducted at Rockford University by Stephen Hicks and sponsored by the Center for Ethics and Entrepreneurship.

Part I

Hicks: My guest today is Dr. Alexei Marcoux, who spoke at Rockford University on moral partiality in business practice. Dr. Marcoux is a philosopher by training. He teaches in the business administration program at Loyola University in Chicago.

Alexei, in your talk today you were defending moral partiality in business practice, but, as you started you pointed out that most or at least a majority of business ethicists take business ethics to be about impartiality in ethics, and you took Norman Bowie to be your primary foil in the argument today. So, what is impartiality in ethics and why does Bowie think it’s a good idea?

Marcoux: Well, Bowie is just following the general trend in moral philosophy, which is to view ethics as being fundamentally concerned with impartiality. And for many ethicists, they view ethics just as teasing out the implications of impartiality for our actions. What Bowie is arguing — and what I am arguing is actually mistaken — is that impartiality lies at the very core of ethical business practice. And, I think if you actually look at business practice, and if you actually look at the considerations that he offers for why that is so, it actually shows that partiality, loyal service to another, is what is actually at the root of ethical business practice.

Hicks: You also walked through the arguments you constructed from Bowie, and you said he gave three considerations or three arguments on behalf of the impartiality. The first was that business is or should be characterized by arm’s-length transactions. How does that argument work?

Marcoux: What Bowie says is “Look, business should be conducted at arm’s length, and to let personal, that is, the interest of friends or family intrude, is often wrongful in a business environment.” And I am saying that that is true, that is true, but it doesn’t show that impartiality is at the core of ethical business practice. That is, we aren’t under a general duty to bargain at arm’s length. I can go through my whole life giving sweetheart deals to others, buying only from my friends, selling only to my family and so on, and it would be very strange to say that I am acting wrongfully. There is no general duty to engage in arm’s-length transactions, nonetheless, there is a special duty that occurs frequently in business for us to engage in arm’s length transactions. So, the question or the conundrum that needs to be answered is: how can we simultaneously be under no general duty to engage in arm’s-length transactions, but frequently under the special duty to engage in arm’s-length transactions. And the answer is found in agency relations, that is, we are duty-bound to bargain at arm’s length, when we are bargaining not on our account, but on account of others. And in that situation, we bargain at arm’s length as the best way to serve the interests of those others. But what that just shows is that when we are duty-bound to bargain at arm’s length, we are duty-bound to do so as a way of acting loyally, that is to say, partially to our principal. So, the arm’s-length transaction consideration doesn’t show that impartiality is central to business practice. If anything, it shows that partiality is.

Hicks: Right, so we can look at lots of business practice, there are people who go into business with their families, so they hire family members, they might do significant deals with family members or extended family members, friends, suppliers and customers and so forth, so, none of those are arm’s-length transactions that require impartiality. Those are all partiality relationships and so Bowie is insisting that all business transactions not fall into that category is just missing the business facts on the ground.

Marcoux: Well, that’s what he seems to be saying, and I think I said in the talk, if you take what he is saying, you know, as given, you’d have to conclude that all family business is morally suspect, because, a family business is a business in which you hire labor through other than arm’s-length transactions.

Hicks: Another argument that Bowie makes is the idea there are conflicts of interest in business, and the way we solve conflicts of interest is by making oneself impartial — not allowing one’s interests to dictate inappropriately how one should be behaving. So, why don’t conflicts of interests as a phenomenon show that impartiality is important?

Marcoux: Undoubtedly, in the world, there are conflicts of interest that are cases of being, or having an interest in being, partial to some, when we are actually duty-bound to be impartial. Think, for example, of a judge in a competition. If a judge in a competition favors one of the competitors over the others, that judge is acting wrongfully and the wrong is being partial when you are duty-bound to be impartial. But, of course, judging a competition isn’t doing business. Now, in business, there are examples of that too. Government contracting is an example. Government purchasing agent is duty-bound to all who will do business with the government to bargain at arm’s length. The problem is that this is very much the lesser part of business. In any basically capitalist economy the great bulk of transactions are not between the government and private business, or the government and private individuals, but transactions among and between private people. So, conflicts of interest in those cases tend to be cases of agents not faithfully acting loyally towards their principals. In other words, favoring the interests of some when they are duty-bound to favor the interest of others. So, what I am saying is, in the middle 80 percent of cases of conflicts of interest in business, the wrong of a conflict of interest is acting, or having an interest in acting, partially to some, when you are duty-bound to act partially toward others.

Hicks: Because of your agency relationships.

Marcoux: Because of your agency relationship. And so that doesn’t show that impartiality is at the center of ethical business practice.

Hicks: You also mentioned Bowie’s arguments about fiduciary duties and fiduciary obligations. How is that to, on Bowie’s view, provide support for the impartiality view?

Marcoux: Well, that’s what is actually hard to discern. In his book Business Ethics: A Kantian perspective, he treats this all very quickly en route to getting what he wants to say his Kantian business ethics consists of. So, when he observes that to favor family or friends may put a manager in violation of a fiduciary duty, again, that’s true, but how that shows that impartiality is central to business ethics is mysterious, because a fiduciary duty just is a duty of partiality, like the duty of an agent to a principal. So, a fiduciary duty is a duty of partiality and so, if you violated that duty by favoring family or friends, that’s another case of being partial to the interests of some when you are duty-bound to be partial to others. So, Bowie does a great job of identifying the considerations that bear on ethical business practice. I could hardly do better than to say that arm’s-length transactions, conflicts of interest and fiduciary duties reveal the character of ethical business practice. What is not at all clear is why he thinks that those show that at its core ethical business practice is impartial when all of those — when we have duties to avoid violating fiduciary duties, to avoid conflicts of interest and to engage in arm’s-length transactions — we have those as a result of duties of partiality to the others we serve.

Part II

Hicks: The subtitle of Bowie’s book is ‘a Kantian Perspective’, and that indicates there are some heavy-duty ethics, theoretical issues at stake here. And the usual foil to Kant in contemporary literature is John Stuart Mill and you do appeal to John Stuart Mill’s utilitarianism as guidance for how to think about these issues of partiality and impartiality. How does Mill come to rescue, so to speak, or at least how does Mill provide guidance on these thorny issues?

Marcoux: Well, the way Mill provides guidance here is through his distinction between fundamental and secondary moral principles. This isn’t really so much a utilitarian versus Kantian distinction. In fact, you can see the two-level structure of morality that Mill talks about in Kantian deontology itself. What I am saying is that the way out of the confusion is to recognize the distinction between fundamental moral principles, which are principles of justification versus secondary moral principles, which are action-guiding principles. I am saying, fundamental moral principles, that is what moral theory is, but applied ethics, of which business ethics is a part, is mostly about identifying action-guiding principles that we can follow. And so, I think the mistake that lies at the root of Bowie’s argument is that — when he says that if the impartiality requirement applies anywhere, it applies in the ethics of business practice — he is taking a fundamental moral principle, a principle of justification, and treating it as if it’s a secondary moral principle, a principle of action guidance.

Hicks: So that is different from saying that the requirements or duties of impartiality are a small subset of normal business practice whereas rules of thumb of partiality are the majority?

Marcoux: Well, I think that the best way to say it is this: the impartiality requirement in ethics is a requirement to reason from an impartial perspective. It’s not a requirement to act impartially. In other words, we can have impartially-derived reasons to act partially. And we do so very often in business, as well as in other walks of life.

Hicks: So the other part of the argument then is a secondary, like that, if you look in the business facts on the ground, partiality is the dominant mode of business practice, the impartiality cases are a subset, secondary case, and that’s a supporting argument.

Marcoux: That’s it, okay, because business is a web of agency relations.

Hicks: I want to make a connection to one of the major debates as characterized in business ethics literature for the last generation or so, and that’s the stockholder-versus-stakeholder debate. I want to ask whether your distinction between the partiality positions on the impartiality tracks onto to that in the following sense: that stakeholder theorists will often say that the way business managers should think about proper action in a business context is to identify all of the stakeholders in the business — there are employees, there are customers, there are investors, there is society at large, and so forth — and that to be moral one should be impartial with respect to the interests of all of the different stakeholders. And the stockholder position, by contrast, says: there are a lot of stakeholders, but nonetheless is morally fine for business managers to be partial primarily to the stockholders’ interests, the others are derivative, secondary interests. So, is the debate between you and Bowie — say, in this case here — also the stockholder-or-stakeholder debate in another form?

Marcoux: Well, the way I would put it is that the stockholder/stakeholder debate is a particular instantiation of the general thing that I am talking about in paper, which is that the stakeholder theory basically is an attempt to take practice, in this case, the management of enterprises, which is governed at law and by custom in partialist terms — that is, managers or firms are to act as fiduciaries for the stockholders — and turn it into an impartialist one. You know, one of the ways I put in the paper is that ethical business practice is less like judging, and more like lawyering. The judge is supposed to be impartial, a lawyer is supposed to zealously represent the interests of his client. So, really, the stakeholder argument is an attempt to fundamentally change business practice. It doesn’t give an ethics of business, it is a new ethics for business. In other words, we want business people to do something else. That’s what the stakeholder theorists are saying.

Hicks: So they, in your judgment, have an idealized conception of what business practice should be.

Marcoux: Correct.

Hicks: Your argument is that methodologically we should be starting empirically and realistically about how business does operate and work within that framework to figure the moral principles.

Marcoux: Yes, I think only that is applied ethics. What is being done under the guise of stakeholder theory is moral philosophy, under — excuse me, I would say normative political philosophy, under a different name. These people want to design new economic institutions, and that’s fine as normative political philosophy. But, as an attempt to tell business people who work within a given set of institutions, what it is to act ethically within those institutions, I think it’s a failure.

Hicks: If we kick things upstairs to normative ethical theory or normative political philosophy, another debate between egoist and altruist on ethical principles. And one form of altruism, if we take it very strongly, says that one should be selfless in moral considerations. And that means not allowing one’s own personal interest to guide anything that one does. Instead, one should selflessly see oneself as a servant or the needs of other people, the needs of society at large. And that strikes me as pushing in the direction of a strong impartiality, and the egoist position by contrast, says it’s fine to be partial to one’s own interests and that we are all mutually seeking our own self-interests in a market economy. So, is there, then, a tracking between this impartiality/partiality debate as you see in the business ethics literature to the longstanding debate over egoism versus altruism? I do note that, ’just in passing, that Norman Bowie also wrote a strongly critical argument attacking ethical egoism, so I was just wondering if you see the connection there, as well.

Marcoux: I think there is clearly a connection. I mean, the particularly stringent form of altruism that you just laid out would preclude anyone appointing an agent to act on their behalf. Because, if you can’t act on your own behalf, how could you appoint an agent to act on your behalf? And similarly would be hard to be an agent in those circumstances, because, to be an agent would be to be partial to some as opposed to others, whereas the essence of altruism is to serve all. So, an altruistic ethic can’t underwrite things like agency relations or fiduciary duties.

Hicks: Alright, then, once again, if one is — prior to doing business ethics — committed to a strongly altruistic ethic, that would then mean your business ethics has to attempt to be transformative, and not take business practice as is, but rather try to change it into a radically different kind of moral practice.

Marcoux: I think it’s constrained to do that.

Hicks: Do you suspect that that is what Bowie is doing?

Marcoux: Well, I suspect that is what Bowie is doing, I suspect that that is what the mainstream of the field is doing and has been doing since its conception.

Hicks: All right, fair enough. Fascinating material. Thanks for being with us today.

Marcoux: Thank you for having me, Stephen.

[The video interview with Dr. Alexei Marcoux follows.]

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