Recently we’ve been hearing that some banks are greedy, immoral and must be punished. Many of the international scandals involving banks raise the issue: who is doing wrong and who is punished for the wrongdoing?
Banks have paid billions of dollars in fines for wrongdoing. The London Interbank Offered Rate (LIBOR) fixing case alone is likely to cost those involved more than A$35 billion. Corporations such as banks do not have a body or a soul; people act on their behalf. This raises questions of who is responsible for corporate behaviour and who should be punished for misbehaviour.
While there is general agreement on the legal status of a corporation, there is no such agreement about its moral status. The debate about whether an organisation is a moral person and therefore responsible for its behaviour has been going on for decades without resolution.
The acceptance that the organisation is not a moral person (as many think only humans can be responsible for the actions of corporations) is the side of the debate that seems to have most support. This is, in part, a consequence of what a corporation’s moral status would do to personal responsibility. If the corporation is a moral person, then it can be held responsible for its actions. This then creates what many consider an unacceptable possible consequence: human beings are not responsible for their actions when they act on behalf of a corporation. While most think we can’t have that outcome, it seems to be what we have ended up with.
The division between corporate and personal responsibility is complex. Corporate actions cannot necessarily be distributed to members. There are synergies that make the sum of actions greater than or different from the parts. But that does not mean that no responsibility can be attributed.
Having CEOs walk away with all, some or none of their bonuses when they were at the helm of rate‑fixing or money-laundering scandals, or even having them stay to clean up the mess and not holding anyone responsible for illegal behaviour, should concern us. Should we not hold the people who act for the corporation at least partially responsible for the actions they undertake on its behalf?
A corporate world where individuals do not face the consequences of their actions is likely to continue to promote unethical behaviour and violations of the law.
Dr Eva Tsahuridu is CPA Australia’s policy adviser, professional standards and governance.
This article is from the October 2012 issue of INTHEBLACK magazine.