The globalization of society erodes established ideas about the division of labor between the political and economic spheres and calls for a fresh view concerning the role of business in society. Some multinational corporations have started to change their role from one of simply following the rules to one of creating the rules of the economic game. They already have assumed responsibilities that once were regarded as belonging to government. They engage in the production of public goods (e.g., public health, education), and in self-regulation to fill global gaps in legal regulation and to promote societal peace and stability. Some corporations do not simply comply with societal standards in legal and moral terms; they engage in discursive social and political processes that aim at setting or redefining those standards in a changing, globalizing world. Those activities go beyond the mainstream understanding of stakeholder responsibility and corporate social responsibility.

The corporate scandals of the past few years have brought renewed attention to the problem of curtailing dishonest and fraudulent business practices, a problem on which strategic, ethical, and law enforcement interests should be aligned. Unfortunately, several features of federal criminal law and federal law enforcement policy have driven a wedge into this alignment, forcing managers to choose between their ethical obligations and their obligation to obey the law or aid law enforcement. In this article, I examine the nature and implications of the growing divergence between managers’ ethical and legal obligations. After describing the traditional approach to business ethics analysis, I identify the features of federal criminal law and law enforcement policy that are responsible for the divergence and show how they are undermining the efficacy of the traditional approach. I illustrate this effect with the issue of workplace confidentiality. I then argue that the traditional approach must be reformed to give explicit recognition to the legal dimension of normative analysis, and demonstrate how such a reformed approach would function by applying it to three illustrative issues—organizational justice, privacy, and ethical auditing—and supplying a case study—KPMG's allegedly abusive tax shelters.

Hasnas is correct that ethicists should pay attention to law and be on guard for perverse effects from regulation and legal interpretations that may encourage or require unethical behavior. He is not correct that the business ethics literature assumes that law and ethics consistently pull in the same direction. Analysis of the relationship between law and ethics requires nuanced, in-depth treatment. An example is provided regarding the well-known case of United States v. Park. Ultimately, there is a need for more serious consideration of ethical principles and norms in legal policy making and practice.

John Hasnas's fine article, “Up from Flatland: Business Ethics in the Age of Divergence,” fails in its stated goal of challenging the mainstream business ethics community's methods of analyzing normative issues. However, it achieves what is likely Hasnas's true goal of alerting both business ethicists and managers of the bigger stakes now in play when the federal government indicts employees and seeks their employers’ cooperation in establishing the prosecutor's case. While prosecutorial overreaching is a legitimate concern that deserves to be highlighted, it requires no qualitative change in normative ethical analysis. That analysis now involves different inputs (greater stakes for firms and employees), but continues to involve a familiar but complicated weighing of shareholder interests against employee interests and, sometimes, a weighing of both against the requirements of the law.

This response to Professor Hasnas recasts the apparent divergence between the legal and ethical obligations of managers in light of the rhetorical claims and counterclaims that accompany the interaction between regulators and the regulated. It is argued that this divergence is more apparent than real, and that the convincing but often empty rhetorical statements that accompany reforms should be seen in context and largely disregarded. This rhetoric is designed to claim integrity, and reclaim legitimacy with the hope that “burdensome” reforms will be minimized.

Accountability, it would seem, is something that everyone would like to see more of. Citizens would like to have a more accountable government; teachers and parents would like to have more accountable students and schools; and clearly, stakeholders and commentators appear to desire more accountable corporations. One of the leading organizations concerned with improving the social and ethical performance of business is called simply, “AccountAbility” (http://www.accountability21.net/). The uniformity of such calls for greater accountability tempts one to see it as an unalloyed benefit to organizational performance and societal advancement.

This paper argues that social reporting can be an important form of New Governance regulation to achieve stakeholder accountability. Current social reporting practices, however, fall short of achieving stakeholder accountability and actually may work against it. By examining the success and failures of other transparency programs in the United States, we can identify key factors for ensuring the success of social reporting over the long term. These factors include increasing the benefits-to-costs ratios of both the users of the information and the disclosers, and recognizing the importance of the involvement of third-party intermediaries.

I apply stigma-management strategies to corporate scandals and expand on past research by (a) describing a particular type of stigma management strategy that involves accepting responsibility while denying it, (b) delineating types of stigma that occur in scandals (demographic versus character), and (c) considering the moral implications of shifting stigmas that arise from scandals. By emphasizing the distinction between character and demographic stigma, I make progress in evaluating the moral implications of shifting different types of stigma.

According to one prominent view of rationality, for the choice of alternative to be justified, it must be at least as good as other alternatives. Michael Jensen has recently invoked this view to argue that managers should act exclusively to maximize the long-run market value of economic enterprises. According to Jensen, alternative accounts of managerial responsibility, such as stakeholder theory, are to be rejected because they lack a single measure to compare alternatives as better or worse. Against Jensen's account, this paper argues that choosing the alternative that is at least as good as other alternatives need not preclude managers from respecting considerations in addition to long-run market value. The paper argues that such considerations may be incorporated into managerial decision-making by introducing constraints and priorities into the process of maximizing long-run market value and by allowing for “clumpy” values.

This paper challenges some of the basic epistemological assumptions that underpin our current conceptions of accountability. Recent legislative developments like Sarbanes-Oxley attempt to enhance accountability in the business environment through the employment of checks and balances and the threat of individual liability. This kind of legalistic strategy still seems to assume the existence of an individual agent who employs moral principles to come to decisions in a deliberate, impartial manner. This paper will emphasize that moral decision-making often does not take place in this manner, but is rather a tacit process of sensing what the appropriate behavior would be. Accountability, both with respect to individuals and organizations, is less a matter of “accounting for” a set of concrete assets, than a question of being accountable to a set of internal and external stakeholders, or in terms of the tacit sense of moral propriety that develops among business associates and colleagues over time.

Practical wisdom has received scant attention in business ethics. Defined as a disposition toward cleverness in crafting morally excellent responses to, or in anticipation of, challenging particularities, practical wisdom has four psychological components: knowledge, emotion, thinking, and motivation. People's experience, reflection, and inspiration are theorized to determine their capacity for practical wisdom-related performance. Enhanced by their abilities to engage in moral imagination, systems thinking, and ethical reframing, this capacity is realized in the form of wisdom-related performance. This can be manifested either in wise business decisions or through their performance as mentors, advice givers, or dispute handlers.

The moral foundation of capitalism holds that the wealth of a nation is enhanced (utilitarianism) by providing individuals with the freedom and liberty to do what comes natural, pursuing their own self-interests (egoism). When alignment between individual interests and general welfare is achieved, even if unintentionally achieved, minimum paternalistic governmental oversight and intervention is needed.

In the book's preface, McCloskey explains that it is the first of a planned four-volume set that asks us to make “a fresh start in our attitudes … toward how we earn a living.”1 She asks us to embrace unapologetically our capitalist society. We should neither scorn nor feel guilty about the relative luxury capitalism affords most of us since it is necessary to develop the full, virtuous life that the ancient Greeks, most notably Aristotle, advocated.

SHAWN L. BERMAN is an assistant professor of management policy at the School of Management, Santa Clara University. He received his Ph.D. in strategic management from the University of Washington. His three main research interests are corporate social performance, especially measurement issues; intra- and inter-organizational trust; and issues of corporate governance. His work has appeared in the Academy of Management Journal, Academy of Management Review, Business Ethics Quarterly, and Business & Society, as well as other outlets. E-mail: [email protected].