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Philosophy 162F Lecture 5 Notes Corporate Character and Individual Responsibility Case 2. Sears Auto Centers (Pp. 159-161) In the early 1990s, the California Department of Consumer Affairs (DCA) sought to close the Sears Auto Centers outlets operating within the state. The reason for this action by the DCA was their undercover investigation into the operation of Sears Auto Centers in the state. The investigation revealed that in thirty-four out of thirty-eight instances, Sears employees recommended unnecessary repairs and services. In some cases, Sears employees falsely reported about work that had not been carried out. The average overcharge of these incidents was approximately two hundred and thirty-five US dollars. This, the DCA claimed, was evidence of systematic consumer fraud. In 1990, Sears Auto Centers changed the operation of its business. The parent company saw a forty-percent reduction of its net income. The stated response of the management was to turn the focus of all of the employees of the company towards the pursuit of profit. The remuneration of employees was changed in order to provide incentive to sell more parts and services. Service administrators that had been paid a fixed rate moved to compensation by commission. Sears Auto Centers required service administrators to meet quotas for parts and services sold. Sears Auto Centers lowered the hourly wage of mechanics and allowed them to supplement their income by paying them a flat rate for particular duties that they performed.   United States v. Bank of New England (Pp. 152-155) This is a report of an appeals court affirming the decision of a lower court on a number of similar charges filed against the Bank of New England. In the US, financial institutions are required to inform the government whenever an individual withdraws $10,000 or more in a single day. The purpose of this requirement is, in part, to make it more difficult to hide assets that might be involved in criminal activity. In this case, the bank was found guilty of breaching this requirement on multiple counts and sentenced with a fine. Two head tellers, those who could reasonably be said to have carried out illegal activity in regards to this case, were found not guilty. The judge in the lower court (supported by the appeals court) made a number of statements regarding the standards for judging the intent of a corporation. In law, one generally requires proof of both act and intent to act before a conviction can be upheld. Intent to commit a crime requires knowledge and willfulness to act on that knowledge. The judge of the lower court gave two guidelines for judging the knowledge of a corporation. If an employee knew a certain piece of knowledge, and that knowledge fell within the scope of her duties, then the corporation knew that piece of knowledge as well. A corporation knows the entirety of a piece of knowledge if the total knowledge of its employees (in the scope of their duties) covers the totality of that piece of knowledge, even if no single employee knows the entirety of that piece of knowledge. Similarly, the judge gave two guidelines for judging the willfulness of an action. If an employee, operating in the scope of her duties, acted willfully, then the company acted willfully. If a company failed to ensure that its employees acted in accordance with a law, then it is acting in flagrant organizational indifference to the law and is thus acting willfully. The appeals court assessed the evidence produced in accordance with these standards. Evidence showed that employees of the bank were aware of the regulations. The regulations were part of the scope of the employees' duties by virtue of their nature. At least one employee suspected the nature of some transactions and acted in accordance with her understanding of the nature of the customer involved as a customer of the bank.   Determining Responsibility It is important to note that the difficulty in assigning blame is not a reason to negate the idea that it is right to hold moral agents accountable. The difficulty of holding people accountable may lead us to temper the actions that we take against transgressors, but it does not absolve transgressors. We may wish to punish those who transgress moral or legal rules. Often other responses to transgressors are confused with punishment (e.g. imprisonment). Restricting the liberty of transgressors is perhaps required for evaluation of their character. Rehabilitation may require that we restrict the liberty of transgressors. Transgressors can make restitution for the damage that they have caused. We can easily see how these things can be done by people. Can corporations be punished, rehabilitated, or make restitution?   Important distinction: The responsibility that we discuss today is not necessarily the responsibility of last week. As Manuel Velasquez points out (pg. 109), we are concerned with discovering which agents caused particular actions and the claims that are to be made against those agents because of that relationship of cause and effect.   Jennifer Moore Corporate Culpability under the Federal Sentencing Guidelines This is primarily a piece of legal theory. Much of the purely legal details have been omitted. What remains is fairly philosophical. What we see in this reading is Moore's argument in favour of the idea that we can assign blame to corporations as an entity. Moore wishes to establish culpability. Culpability, as used by Moore, is different from blame. Blame attaches to specific agents who carried out specific actions. Culpability attaches to agents who cause, direct or influence the actions of other agents.   Alternative theories of culpability: respondeat superior and the Model Penal Code. Respondeat superior assigns blame to the employer for actions of an employee done in the course of their duties. Moore thinks that this does not properly relate the actions of the employee to the nature of the corporation. The Model Penal Code assigns blame to the corporation in the case that managers of particular importance in the company directly participate in the activity in question. Moore thinks that this is too narrow a focus for assigning corporate responsibility. There may be cases where there are systemic factors within the company that lead to action without the direct action of important managers. Moore's chosen theory of corporate culpability is Corporate Character Theory. Corporate Character Theory holds that there is a particular character that we can assign to a company that has an effect on the way that the employees of a corporation carry out their duties. Moore claims that the idea of corporate character matches historical analysis of corporate behaviour and our moral intuitions. Moore points to the work of Martin and Carolyn Needleman as evidence of the influence of organizational structure on criminal activity. Moore also points to the work of Christopher Stone regarding the preservation of corporate behaviour over time.   Corporate character is comprised of Rules Policies Standard operating procedures Direct supervision Decision procedures Disciplinary sanctions All of these, "are intended to replace agents' decisional autonomy with an organizational decision-making process." (Pg. 102)   Three Sets of Circumstances Leading to Corporate Fault The corporation has adopted an illegal policy and an agent has carried out that policy. An illegal act is authorized by an important managerial official and the action is carried out by an agent of the corporation. The corporation implicitly endorses the illegal activity of an employee.   Moore uses the application of culpability in sentencing as an example of the Corporate Character Theory at work.   Judging Culpability, Aggravating Factors: Involvement of important managers or other authorities Recent history of similar misconduct Violation of a judicial order Obstruction of justice Judging Culpability, Mitigating Factors: The presence of institutional factors to prevent and detect violations Cooperation with law enforcement   Manuel Velasquez Debunking Corporate Moral Responsibility   National Semiconductor Case The company committed fraud in regards to the testing of the chips it produced for the US Department of Defense. The company admitted responsibility and paid a fine. On the basis that it assumed responsibility, the company refused to divulge the names of the individuals that had actively perpetrated the fraud. Why was the decision to accept that the corporation was responsible significant? It bore on who got punished. It bore on the ability of punishment to effect deterrence. Punishing the company as a whole inflicts damage to those who were innocent of fraud. It encouraged authorities to end the pursuit of guilty individuals.   Velasquez feels that the most convincing argument for corporate agency is the collectivist argument. This argument begins with the idea that there are properties that can be predicated on a corporation as a whole that cannot be predicated of any individual that is part of the corporation. The collectivist argument: (pg. 113) If X has properties that cannot be attributed to its individual members, then X is a real individual entity distinct from its members. But corporate organizations have properties that cannot be attributed to their members. So the corporate organization is a real individual entity distinct from its members.   The fallacy of division: claiming that the characteristics of a collection belong to a particular member of that collection. Velasquez: This logical fact does not entitle us to build new metaphysics. Velasquez gives an example of a set of objects: [Monica Lewinsky, William Clinton, a cigar]. This set has properties that the members do not have. The set actually can be said to cause events. Yet this set is not an individual entity and certainly does not merit consideration as a moral agent. Perhaps a corporation is a special type of collection. A corporation is different from many sets because it persists over time, with different membership. So does a pile of sand.   Second Collectivist Argument: (Pg. 115) An agent is morally responsible for an act or event, when e agent both: (1) is causally responsible for the act or event, and (2) had the intention to so act. Now sometimes corporate organizations (1) are causally responsible for acts and events, and (2) have intentions to so act. Consequently, we can attribute moral responsibility to corporate organizations.   Velasquez identifies two problems for the claim that corporations are causally responsible. The first problem is that while we may claim that corporations as a whole have properties, this does not mean that there is no relationship between the actions of individual agents that result in the actions that may be said to be of the corporation as a whole. The second problem is that it is not true to say that I am only the cause on my own actions. (E.g., wind up toy car.)   Origin of Corporate Actions Thesis (pg. 116) Thesis (1): Where A is an organizational act that can be predicated truly of an organization, but not necessarily of any individual member, there is always some individual member or members of the organization, x, y,… and z, such that x, y,… and z are causally responsible for A.   Analogy against the idea of group intention: the housing market. (Pg. 117)   Intrinsic intentionality vs. as-if intentionality intrinsic intentionality is used when we ascribe properties to a subject as-if intentionality is used when we ascribe properties to a subject that are analogous to the properties appearing in our statement   Group Intentionality Thesis (pg. 119) Thesis (2): Where X is an intentional state that is attributed to a collection of people an X cannot be attributed to any of the individual members of X, it is always the case that X is either a descriptive or a prescriptive attribution of "as if" intentionality. Home.

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