Moral Agency in Charities and Business Corporations: Exploring the Constraints of Law and Regulation

Journal of Business Ethics, Dec 2017

For centuries in the UK and elsewhere, charities have been widely regarded as admirable and virtuous organisations. Business corporations, by contrast, have been characterised in the popular imagination as entities that lack a capacity for moral judgement. Drawing on the philosophical literature on the moral agency of organisations, we examine how the law shapes the ability of charities and business corporations headquartered in England to exercise moral agency. Paradoxically, we find that charities are legally constrained in exercising moral agency in ways in which business corporations are not. Implications for charities and business corporations are then explored.

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Moral Agency in Charities and Business Corporations: Exploring the Constraints of Law and Regulation

Journal of Business Ethics https://doi.org/10.1007/s10551 Moral Agency in Charities and Business Corporations: Exploring the Constraints of Law and Regulation Eleanor Burt 0 Samuel Mansell 0 0 School of Management, University of St. Andrews , The Gateway, North Haugh, St. Andrews, Fife KY16 9RJ , UK 1 Samuel Mansell For centuries in the UK and elsewhere, charities have been widely regarded as admirable and virtuous organisations. Business corporations, by contrast, have been characterised in the popular imagination as entities that lack a capacity for moral judgement. Drawing on the philosophical literature on the moral agency of organisations, we examine how the law shapes the ability of charities and business corporations headquartered in England to exercise moral agency. Paradoxically, we find that charities are legally constrained in exercising moral agency in ways in which business corporations are not. Implications for charities and business corporations are then explored. Charity law and regulation; Company law; Corporate moral agency Introduction If we look forward across the centuries, from their early roots in the religious orders which distributed alms to the needy, through to ‘the golden age of philanthropy’ which saw Victorian charities laying the foundations of what was later to become the modern welfare state (Grant 2014; Williams 1989) , to the acts of generosity and self-sacrifice displayed by staff and volunteers in the contemporary charitable sector, it is not difficult to see how charities may be regarded, prima facie, as organisations of good moral standing. The House of Lords Select Committee on Charities describes them as the ‘eyes, ears and conscience of society’ (2017, p. 3). By contrast, for-profit business corporations in general have been characterised as ‘soulless’ or even ‘psychopathic’ organisations (Bakan 2004, p. 28) . Friedman and Miles (2006 , p. 20), for example, write that the potential for corporations ‘to do mischief to real people, combined with their lack of inherent moral sense, lack of a soul or ‘feelings’ for the consequences of their actions on others, such as shame, remorse or gratitude’ has led to various solutions aimed at curbing their power. Notwithstanding this popular antithesis between charities and business corporations, we assess whether the former have more capacity for moral agency, in the context of English law, than the latter. By ‘moral agency’, we mean a capacity to act (from agere, to do or to act) on the basis of moral judgements.1 Exploring the philosophical and legal literature on this topic, we examine how English law restricts (or enables) the ability of charities and business corporations to exercise moral agency. In particular, we look at how charity law2 constrains the capacity of trustees to exercise 1 Our understanding is that a ‘moral agent’ can act on a belief about whether an action is ‘good’ or ‘bad’, not merely as the most efficient means to an end, but in the light of considerations that are sensitive to conscience. The archetypical ‘moral agent’ is the individual human being; we later consider the sense in which an organisation itself can be a moral agent. 2 Our focus in this paper is charity law, as it is here that the constraints upon the moral agency of charities are first framed and originate. Clearly, however, the wider ‘regulatory’ context is also contributory, and, depending on how this is defined, this can be taken to include everything from the law more generally, to ‘guidance’ issued by regulatory bodies such as the Charity Commission for England and Wales or the Information Commissioner, to sector ‘norms’, and donor behaviours. While it is beyond the scope of the paper to have taken a ‘broad gauge’ approach, such as a wider interpretation of the ‘regulatory context’ would entail, we do acknowledge this in the course of the article in relation to the role of the Charity Commission for England and Wales : arguably the foremost ‘prime mover’ (or ‘framer’) next to the legal system itself. their consciences when acting on behalf of the charities they represent. We find that charity trustees are constrained in the exercise of conscience in ways that shareholders of a business corporation are not. Counter-intuitively, given the popular characterisations we have highlighted, our argument is that business corporations have greater capacity for moral agency than charities. In England, charities are a legally recognised form of organisation, subject to particular legislative and regulatory requirements (Morris 2016; Harding 2014; Harding et al. 2014; McGregor-Lowndes and O’Halloran 2010) . Problematically for English charities, for it is thought to be associated with lowering public trust in these organisations (Radojev 2016a, b; Smith 2015; Charity Communications 2014) , there is a growing disconnection between the concept of charity as applied in law and the public perception of what it is to be a charitable or (...truncated)


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Eleanor Burt, Samuel Mansell. Moral Agency in Charities and Business Corporations: Exploring the Constraints of Law and Regulation, Journal of Business Ethics, 2017, pp. 1-15, DOI: 10.1007/s10551-017-3750-9