Does a company care, ‘morally’? Do investors care if they do?

Care or its absence? photo by Churehill, CC-BY SA 4.0

When geopolitics collides with corporate decision-making, something’s got to give. Is it morality, and if so, with what implications for business ethics and the concept of corporate personhood?

Speaking to the Financial Times a few weeks back, Dirk van de Put, chief executive of the snacks company Mondelēz International, suggested that investors did not “morally care” whether a company continued to do business in Russia after President Vladimir Putin ordered his troops to invade Ukraine. “If you have an important Russian business, the hit on the company would be huge, and that becomes a different discussion,” he said.

This assertion drew the scorn of a US-based research group called Heartland Initiative,[1] a nonprofit research firm that works on behalf of institutional investors. Two of its officers, Sam Jones and Rich Stazinski, wrote in a letter to the editor of the FT: “For a biscuit maker to presume to speak on behalf of all investors is arrogant, and any suggestion that investors do not ‘morally care’ about corporate funding of Putin’s war is half-baked.”[2]

Quite a few Western companies abandoned subsidiaries in Russia in the first months after the invasion of Ukraine, but not this one. This exchange between a chief executive and one of his company’s shareholders has multiple layers of meaning, and correspondingly multiple opportunities for confusion about what’s at stake. Let’s puzzle over a few of them:

• Morality: The word opens the big puzzle box of ethics: does it refer to duty, utility, virtue, or something else? Does it mean some automatic and instinctive response to a problem, or a thoughtful, deliberated or calculated decision? The field of inquiry called the “ethics of care” has something to say about that, which we’ll get to in a subsequent post.

• Care: To a lot of people, the phrase “morally care” sounds redundant. Aren’t questions of caring (or indeed not caring) always moral? There is another understanding, however. Think of an institution of care, the organisation – often a company – that provides care for a fee. Here “care” is a product. It may be delivered, and the delivery of which may be conducted ethical or unethically by those giving care. But viewed just as a product rather than a decision or action, it is arguably without any moral implications. But that begs the question: What is a company?.

• Company: Organised as incorporated firms, companies are often described both as an inanimate “nexus of contracts” (Coase, 1937; Jensen & Meckling, 1976), and as an animated “legal person” capable of agency and speaking in a single voice. This contradiction leads us to question whether it’s the company acting (im)morally, or the people acting through it. If that sounds like a straightforward question, remember that groups of people, even boards of directors, are known to have decided on courses of action that none of the individuals, alone, supported. The phenomenon is often called “group agency” (Applbaum, 2019; List & Pettit, 2011).

• Investors: Most shares of big companies are now owned by investors which are themselves companies – institutional investors; private equity, sovereign wealth and venture capital funds. Are investors who supposedly don’t “morally care” even capable of being moral agents? In many such firms, decisions to buy, sell or hold shares are made by single individuals with reference to an organisational framework. Are those individuals capable of the empathy implied in caring?

• People: When we get to individuals surely we can say that empathy is possible. Empathy involves seeing a situation with the eyes of another, sensing what the other is feeling.

This “theory of mind” (Dennett, 1981) understanding of empathy, combined with a nexus-of-contracts understanding of the company and an investor-as-company view of investors might well lead us to the view that van de Put is right: Investors don’t “morally care”: They might deliver care – as product – to their end-investors (i.e., through fiduciary duty), but lacking a mind, they are logically incapable of caring.

But if we take the other view, the result is the opposite. On this view care is a state of mind, an intentional stance (Dennett, 1987), and a firm is not just a legal person but also a collection of conscious, sentient individuals choosing collectively the direction of actions. If so, and if investor decisions might well be those of people, not the firms under whose aegis they invest, then Harvest Initiative may well be right, logically and empirically.

The other side of this confrontation seems easier. Russia isn’t a company. Its decision to invade Ukraine wasn’t disguised as one undertaken by a “nexus of contracts”, incapable of empathy because it cannot feel. It seems pretty clear that its president, a person, decided, and that his high command, as people, acceded to the decision even if they might not, alone, have chosen that course of action.

So, when the geopolitics of states collides with the investment decisions of companies, surely the people – as individuals or groups – making the decisions inside the company have either to accept responsibility and exhibit the empathy implicit in caring or to acknowledge their inability to feel anything when tangled in the nexus of contracts.

Or is it that the individuals in the company couldn’t care less?

Applbaum, A. I. (2019). Legitimacy: The Right to Govern in a Wanton World. Cambridge, MA: Harvard University Press.

Coase, R. H. (1937). The Theory of the Firm. Economica, 4(16), 386-405. doi:10.1111/j.1468-0335.1937.tb00002.x

Dennett, D. C. (1981). Brainstorms: Philosophical Essays on Mind and Psychology. Cambridge, MA: The MIT Press.

Dennett, D. C. (1987). The Intentional Stance. Cambridge, MA: MIT Press.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. The Journal of Financial Economics, 3(4), 305-360. doi:10.1016/0304-405X(76)90026-X

List, C., & Pettit, P. (2011). Group Agency: The Possibility, Design, and Status of Corporate Agents. Oxford: Oxford University Press.

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[1] Not to be confused with another “Heartland Initiative”, with some overlapping aims, working to develop the heartland of Israel.

[2] Mondolēz, a Nasdaq-listed company, makes half its revenue selling biscuits and almost a third from chocolate. When writing this piece, I found the front page of its website bearing a highlighted feature called “Our Support to Ukraine: Supporting our colleagues and Ukrainian citizens remains a priority”.