Aristotelian Decency as a Corrective for Compliance-Induced Environmental Racism

• Author: Daniel T. Ostas/Gastón De Los Reyes
• Position: James G. Harlow, Jr. Chair in Business Ethics, Professor of Legal Studies, Michael F. Price College of Business, University of Oklahoma/Associate Professor and Director for the Center for Social Impact & Innovation with Glasgow Caledonian University's New York College
• Pages: 33-66

Aristotelian Decency as a Corrective for

Compliance-Induced Environmental Racism

DANIEL T. OSTAS* & GASTÓN DE LOS REYES**

ABSTRACT

This Article addresses the phenomenon of corporate compliance decisions

that systematically allocate environmental risks to low-income communities,

disproportionately affecting people of color. The economic logic of financial

risk management (FRM) coupled with aggressive legal strategies create a per-

verse incentive that generates this racially biased outcome. We examine the

ethics of FRM in light of this phenomenon and develop a distinction between

legal compliance and legal cooperation. We argue that justice demands that

management take responsibility to avoid and redress environmental racism and

adopt a more cooperative framework; we then offer guidance on how to keep

application of this framework tractable. The Article discusses both corporate

legal strategies and corporate social responsibilities with reference to the

Aristotelian commitment to epieikeia, or decency, which Aristotle presents as a

virtuous way to correct for the limitations of general law. Proceeding in three

parts, the Article considers the economics of compliance, examines managerial

ethical obligations with regard to law generally, and offers Aristotelian virtue

ethics as a means of framing social responsibilities with regard to environmen-

tal law and justice. The Article contributes to compliance, strategy, and social

responsibility literatures. More particularly, it offers a practical compliance

framework suited to managers in their engagement with both public and private

environmental law.

* James G. Harlow, Jr. Chair in Business Ethics, Professor of Legal Studies, Michael F. Price

College of Business, University of Oklahoma; M.B.A (Indiana University, Kelley School of Business),

J.D. (Indiana University, Mauer School of Law), Ph.D. (Indiana University, Department of Business

Economics and Public Policy). © 2022, Daniel T. Ostas and Gastón de los Reyes.

** Associate Professor and Director for the Center for Social Impact & Innovation with Glasgow

Caledonian University’s New York College; M.A. (Boston University, Philosophy), J.D. (Boston

University), Ph.D. (University of Pennsylvania, Wharton School of Business, Department of Ethics &

Legal Studies).

33

TABLE OF CONTENTS

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

I. Corporate Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

A. The FRM Compliance Framework . . . . . . . . . . . . . . . . . . . . . . . . 39

1. Limitations on the Positivity of Law . . . . . . . . . . . . . . . . . . . 41

2. Substantive Imperfections in Positive Law . . . . . . . . . . . . . . . 43

3. Exploiting Procedural Imperfections in the Law—Tainted Legal

Strategies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

B. FRM—The Effect on Cancer Alley . . . . . . . . . . . . . . . . . . . . . . . . 46

II. The Comply, Cooperate, or Circumvent Framework . . . . . . . . . . . . . . . . 50

A. Complying With Reasonably Just Laws . . . . . . . . . . . . . . . . . . . . 51

B. Cooperating With The Creation and Reform of Public Policy. . . . . 54

C. Circumventing Unjust or Inane Laws . . . . . . . . . . . . . . . . . . . . . . 55

D. Applying the CCC Framework to Cancer Alley . . . . . . . . . . . . . . . 56

III. Aristotelian Decency and the CCC Framework . . . . . . . . . . . . . . . . . . . 58

A. Aristotle on the Moral Virtue of Decency . . . . . . . . . . . . . . . . . . . 59

B. Operationalizing “Legal Cooperation”. . . . . . . . . . . . . . . . . . . . . . 61

1. Recognizing Imperfections in Positive Law . . . . . . . . . . . . . . 62

2. Implementing a Corrective—Deliberative Engagement with

Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

INTRODUCTION

Corporate compliance has become a big business as there now may be more

compliance professionals working for U.S. corporations than publicly-employed

police.

1

Spurred by a shift in the Federal Sentencing Guidelines,

2

most major cor-

porations employ compliance officers who scan for legal threats and propose

means to mitigate legal fines, civil liabilities, and reputational costs.

3

Employing

the rubric of financial risk management (“FRM”), compliance directives are justi-

fied with sole reference to projected monetized consequences of alternative

1. See Sean J. Griffith, Corporate Governance in an Era of Compliance, 57 WM. & MARY L. REV.

2075, 2077 (2016) (“Over the past decade, compliance has blossomed into a thriving industry . . . .”);

Rise of the No Men: The Past Decade Has Brought a Compliance Boom in Banking, THE ECONOMIST

(May 2, 2019), https://archive.is/FLyeJ (discussing the dramatic growth of compliance in the banking

industry post-2008) [https://perma.cc/2J4F-AAR9]; William S. Laufer, A Very Special Regulatory

Milestone, 20 U. PA. J. BUS. L. 392, 393, 393 n.1 (2018) (noting a “milestone” in which “[t]here soon

will be as many enterprise-wide risk, audit, legal, and compliance professionals on the payroll of

corporations in the United States as municipal police officers. . . ”).

2. See Griffith, supra note 1, at 2084 (noting that “the present era of compliance began in 1991 with

the adoption of the U.S. Sentencing Commission’s Sentencing Guidelines for Organizations. . . ”); see

generally U.S. SENTENCING COMMISSION, GUIDELINES MANUAL (2021), www.ussc.gov [https://perma.

cc/PMU2-CUT7] (offering both “carrot and stick” incentives for implementing a compliance program).

3. See generally ANDREW S. BOUTROS ET AL., THE ABA COMPLIANCE OFFICER’S DESKBOOK (2016)

(offering a practitioner’s guide to best practices).

34 THE GEORGETOWN ENV’T LAW REVIEW [Vol. 34:33

actions.

4

The logic of FRM takes the law as a given, with little or no reflection on

the complex set of normative compromises incumbent in law or the ethical aspi-

rations the law seeks to advance.

5

Legal obligations are defined by economic cal-

culations, and money is spent on internal trainings and controls until the marginal

expense of such activities equals the marginal savings in regulatory costs.

6

This Article challenges this FRM approach to corporate compliance as ethi-

cally inadequate.

7

We argue that law too often provides an insufficient economic

incentive to assure that society’s normative aspirations are adequately addressed.

8

When this failure directly threatens human health, safety, or dignity then the need

for a corrective framework becomes manifest. In such settings, concerns for jus-

tice and fairness require managers to go beyond the economic logic of the FRM

paradigm, embrace a broader view of the firm’s political obligations, and

4. See GEOFFREY P. MILLER, THE LAW OF GOVERNANCE, RISK MANAGEMENT, AND COMPLIANCE 2–3

(3d ed. 2020) (portraying financial risk management and compliance as intimately and often inextricably

interwoven).

5. The idea that law expresses and promotes moral values is consistent with most jurisprudential

views, including natural law, pragmatic instrumentalism, and various sociological accounts of law. See

Daniel T. Ostas, Deconstructing Corporate Social Responsibility, 38 AM. BUS. L.J. 261, 271–76 (2001).

It is also consistent with interpretive techniques that direct attention to legislative intent, legislative

purpose, and practical reasoning. See Richard A. Posner, Pragmatic Adjudication, 18 CARDOZO L. REV.

1 (1998). Textualist approaches to interpretation might reference moral values only to the extent that

recourse to such moralistic language illuminates the meaning of the legal text. See ANTONIN SCALIA, A

MATTER OF INTERPRETATION: FEDERAL COURTS AND THE LAW 23–24 (1997) (distinguishing between

literalism and textualism properly understood and limiting statutory interpretation to a reasonable

reading of statutory language).

6. See William S. Laufer, Corporate Liability, Risk Shifting, and the Paradox of Compliance, 52

VAND. L. REV. 1343 (1999) (lamenting that compliance too often derives solely from FRM and ignores

the firm’s ethical duties of care). Laufer notes: “Many corporations simply purchase only the amount of

compliance necessary to effectively shift liability away from the firm. After risk of liability and loss is

transferred, the firm’s incentive to maintain high levels of care decreases. Id. at 1350.

7. Many modern compliance programs define themselves as dealing with legal compliance and risk

management, but also ethical decision making and action. The purpose of this Article is to provide a

conceptual vocabulary, see infra Part II, with which to evaluate actual compliance programs that can

“pierce the veil” of terms that corporate executives may wish to employ in naming their compliance

programs. For the Cancer Alley community, see infra Section I.B, it is little consolation to know that

corporations like DuPont actually have an “ethics program.” Community members are likely to respond

in the spirit of James Baldwin’s observation that, “‘I can’t believe what you say [. . .] because I see what

you do.’” James Baldwin, A Report from Occupied Territory, THE NATION, July 11, 1966, https://www.

thenation.com/article/archive/report-occupied-territory/ [https://perma.cc/9G8K-NWJL]. The alternative

framework developed in this Article offers conceptual tools to question what corporations actually do in

implementing “ethics and compliance” programs.

8. Sometimes a well-intentioned law provides too blunt an instrument to adequately direct corporate

activity to serve societal needs. See Kenneth R. Andrews, Public Responsibility in the Private

Corporation, 20 J. INDUS. ECON. 135, 135, 137–38 (1972). At other times, the law may be sufficiently

nuanced and well-designed, yet “underenforced” in an economic sense due a lack of governmental

enforcement resources, effective corporate concealment, inadequate penalties, and/or aggressive

corporate legal strategies that mitigate projected liabilities. See Daniel T. Ostas, Legal Loopholes and

Underenforced Laws: Examining the Ethical Dimensions of Corporate Legal Strategy, 46 AM. BUS. L.J.

487, 489–508 (2009) (classifying a law as “underenforced” whenever violating that law proves

economically cost effective).

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