Sunday, July 26, 2009

What is "Corporate Justice?"

In preparing my first blog post, I began to ponder the meaning of the words “corporate justice.” Immediately, I was reminded of Plato’s book entitled The Republic, detailing Socrates’ dialogue with Thrasymachus, Adeimantus and Glaucon, outside the city of Athens at Polemarchus’ house. It is with this backdrop in mind that I began to contemplate the true meaning of “corporate justice.”

Socrates defined justice as "working at that which he is naturally best suited," and "to do one's own business and not to be a busybody." He further explained that justice must sustain and perfect the three cardinal virtues of temperance, wisdom, and courage. Socrates did not include justice as one of the cardinal virtues. Instead, a close reading of The Republic reveals that Socrates believed justice to be a function of structure, order and control. According to Socrates, justice is not a priori; people are not hardwired for it.

As a result of these fundamental tenants, Socrates reasoned that in order to have a just society, society needs order. To accomplish this ideal society, Socrates created a republic wherein people were divided into three classes; the ruler, the soldier, and the producer. If the members of each class did what they were supposed to do, then justice would prevail. The rulers were responsible for giving orders that were motivated by an interest to benefit society rather than self gain (not surprisingly, in Socrates’ just society, the rulers happened to be the philosophers or what Socrates called the “philosopher kings”), the warriors were responsible for carrying out these orders, and the producers were responsible for obeying these orders. The people that made up each of the classes were separated by their ability to control their “worldly” appetites or indulgences. The rulers had to exercise the greatest level of control. In exercising this responsibility, their primary objective was to put their own selfish motivations aside and to act in the greatest interest of society.

Based on Socrates’ aforementioned conception of justice, in modern society the corporation (really the board of directors) has become the modern day philosopher king (ruler). The officers and upper level management are the “warriors,” and everyone else is a “producer.” Because of the corporation’s role as the ruler, the corporation has a larger social responsibility. Much like, the philosopher kings in Socrates just society, the corporation must control its appetites and avoid the temptation of indulgence.

This begs the question of how a corporation must act within a just society. Extrapolating from Socrates’ discussion in the Republic, a corporation in a just society will “do what it is naturally best suited to do.” This responsibility may include tasks such as selling products, or consulting with clients, etc. In exercising these tasks, corporations in a just society must act with an interest to benefit society rather than an interest solely of profit. Thus, corporate justice should focus on diversity, acceptance, advancement of a global marketplace, and more importantly, the overall interests of society rather than selfish gain because these things focus on societal good and social responsibility.

The prevailing motivation of the corporation in modern times is that of profit maximization and shareholder gain. This system promotes injustice because it often only rewards those corporations that are profitable and reinforces a mantra of “profit at all cost.”

If Socrates’ conception of justice and its relationship to order is accurate, in re-evaluating the way in which we think about corporate justice, should the law impose greater controls to accomplish a more just society? More specifically, does greater corporate governance promote corporate justice? For example, in addition to the duties that a corporation (really the board of directors) owes to its shareholders, should the law go a step further and impose an affirmative duty of care/loyalty from the corporation to society as a whole? If such a duty did exist, would we have experienced the most recent occurrences of financial greed and corruption (Enron, AIG, Lehman Brothers, etc.) ?


  1. professor clark:
    thought provoking post. in light of the affirmative responsibility to maximize profits, can corporations (board of directors) genuinely be influenced by the greater good? with the threat of derivative suits for too generous activity, can corporations afford to be philosopher kings?

  2. I wonder if capitalism could survive without shareholder primacy. The problem in my view is the allocation of capital from passive investors to business enterprises. A significant problem today is the movement towards CEO primacy. If we transform the corporation to an instrument of social justice don't we empower CEOs more by giving them further cover to ignore shareholder interests? Why do shareholders invest if the corporation is not run for their benefit?

  3. Very insightful analogy to Socrates. Now if only our society conformed to logic, then we could all embody the meaning of justice. Until then, we will need warriors like you and the rest of the contributors to the corporate justice blog to show us the way.

  4. What position do regulatory agencies hold in the republic, are they friend or foe to the ruler?

    Wouldn't it be great if society would be the principal and corporations the agents? In the end it's society that pays for the corporation's services and therefore employs them.

    How is it that the FCC constantly approves drugs that are unsafe and only to recall them later after too many mishaps. Monsantos...