In Defense of an “Ethics Judgment Rule”

According to the conventional wisdom among business ethicists, the “Business Judgment Rule” gives corporate leaders the discretion needed to abide by the firm’s moral obligations. In the first part of the paper, I challenge this view: managers have compelling reasons to believe that the Business Judgment Rule (and corporate law more generally) allows corporate leaders to pursue ethically motivated decisions only when these decisions are expected to be profit-enhancing. This is problematic because it instrumentalizes ethics, pushes ethically motivated corporate leaders to dissemble, and corrupts the quality of our public discourse. In response, I propose that corporate law should incorporate ethics into the Business Judgment Rule, explicitly giving managers discretion to make ethically motivated decisions that are profit-sacrificing. After responding to concerns about implementing such a rule, I contend that such a rule would be an important step to put corporate ethics in its proper place.