Cooperate, Comply, or Evade? A Corporate Executive's Social Responsibilities with Regard to Law

• Author: Daniel T. Ostas
• Date: 01 June 2004
• DOI: http://doi.org/10.1111/j.1744-1714.2004.04104004.x
• Published date: 01 June 2004

Cooperate, Comply, or Evade?

A Corporate Executive’s

Social Responsibilities

with Regard to Law

Daniel T. Ostas

n

This article seeks to advance discussions of the topic of corporate social

responsibility by critically examining the relationship between a business-

person’s social and legal duties.

1

In particular, the article distinguishes sit-

uations in which a corporate executive has a social duty to cooperate with

the spirit of business laws from situations where mere compliance with the

559

American Business Law Journal

Volume 41, Issue 4, 559–594, Summer 2004

n

Professor of Legal Studies and Harlow Chair in Business Ethics, Michael F. Price College of

Business, University of Oklahoma. B.S., Purdue University; J.D., Indiana University School of

Law; Ph.D. (Business Economics), Indiana University School of Business.

1

The relationship between social and legal duties can be viewed from a number of perspec-

tives. For a collection of philosophical works addressing the topic, see THE DUTY TO OBEY LAW:

SELECTED PHILOSOPHICAL READINGS (William A. Edmundson ed., 1999). The collection reprints

several oft-cited works, including John Rawls, The Justification for Civil Disobedience,in CIVIL

DISOBEDIENCE 240–55 (1969) (specifying the conditions necessary to justify willful evasions of

law); Joseph Raz, The Obligation to Obey: Revision and Tradition,1NOTREDAME J.L. ETHICS &PUB.

POL’Y139 (1984) (arguing that the duty to obey law varies with the moral content of the law in

question); Richard A. Wasserstrom, The Obligation to Obey Law, 10 UCLA L. REV. 780 (1963)

(drawing an oft-cited distinction between an absolute and a prima facie duty to obey law); and

Robert Paul Wolff, The Conflict between Authority and Autonomy, in DEFENSE OF ANARCHISM 3–19

(1971) (denying that there is any prima facie duty to obey law). Management scholars typically

assume that a businessperson must obey law and then ask whether there are social duties in

addition to these legal duties. See, e.g., Archie B. Carroll, The Pyramid of Corporate Social Re-

sponsibilities: Toward the Moral Management of Organizational Stakeholders,34B

US.HORIZONS 39,

42 (1991) (depicting a hierarchy of responsibilities: first economic, then legal, then ethical, and

finally philanthropic); Milton Friedman, The Social Responsibility of Business Is to Increase Its

Profits, N.Y. TIMES MAG., Sept. 13, 1970, at 32 (assuming without elaboration that a corporate

executive has a social duty to obey the law and arguing that there are few social responsibilities

beyond legal obedience). At least one scholar has criticized this compartmentalization of legal

and ethical realms as potentially misleading. See LynnSharp Payne, L aw,Ethics, and Managerial

Judgment,12J.L

EGAL STUD.EDUC. 153 (1994) (criticizing the tendency to separate legal and

ethical inquiries).

letter of those laws is sufficient.

2

The article also inquires whether willful

evasions of law can ever be justified. To this end, it examines both the no-

tion of an ‘‘efficient breach’’ of regulatory law

3

and the proper role of civil

disobedience in business settings.

4

The analysis proceeds in two parts followed by a conclusion. Part I

begins with a review of the early corporate social responsibility literature.

This literature supports the general normative proposition that a business-

person has a social obligation to inquire into the social purposes that un-

derlie law and to cooperate with those purposes. Part I then refines and

extends this proposition by critically examining the distinction between le-

gal compliance and legal cooperation and by considering justifications for

willful legal evasion. Part I concludes by developing an analytical frame-

work that asserts and defends the idea that the social duty to cooperate,

comply, or evade law varies systematically with reference to the moral con-

tent of the law in question. Immoral law should be evaded, morally neutral

law requires compliance, and morally just law deserves cooperation.

Part II illustrates the usefulness of this framework with reference to

an extended hypothetical case. A sole proprietor of a manufacturing com-

pany must decide whether to cooperate with, comply with, or intentionally

evade a series of eight environmental regulations. Relevant to each deci-

sion are the letter of the law, the social purposes that underlie the law, and

the relative economic consequences of cooperation, compliance, or eva-

sion. The analytical framework provides a means of understanding the

interplay between legal, ethical, and economic forces so as to both predict

and critique business conduct.

Given the recent spate of corporate scandals, including widespread

instances of white-collar crime, an inquiry into the legal duties owed by

corporate officers seems both timely and needed. A nuanced understand-

ing of why businesspeople obey law and an understanding of the condi-

tions that are most likely to elicit cooperation can help inform the likely

effects of any regulatory reforms. Simply assuming that law is a precise

command of the sovereign to which businesspeople are morally bound

to obey hides more than it reveals. Ultimately, regulatory laws vary in

moral content and the social duty to cooperate, comply, or evade varies

2

See infra notes 34–43 and accompanying text.

3

See infra notes 64–70 and accompanying text.

4

See infra notes 82–87 and accompanying text.

560 Vol. 41 / American Business Law Journal

systematically with that content. This article seeks to advance scholarly

discussions of the topic of corporate social responsibility by offering such a

jurisprudential view together with a means for keeping the view tractable.

I. RELATIONSHIP BETWEEN A BUSINESSPERSON’S

SOCIAL AND LEGAL DUTIES

It is difficult to talk about a businessperson’s social duties without refer-

encing law. Social and legal duties are intertwined. A legal duty is enforce-

able through a legal sanction such as a fine, imprisonment, or civil liability.

Social duties, by contrast, include duties that are not enforceable through

legal sanctions. Social duties typically include legal duties,

5

but the concept

of a social duty is more expansive.

In examining the extent of a businessperson’s social duties to coop-

erate with law, a number of interesting questions present themselves. For

example, when the letter of the law is vague or ambiguous, is a business-

person free to exploit that legal ambiguity for personal gain, or must he or

she seek to cooperate with the intent or social spirit behind the law? If the

law is unjust or inane, must the businessperson nonetheless follow it, or is

she free to engage in a form of civil disobedience and intentionally evade

the law? When lobbying, must the businessperson consider the public

good, or is he or she ethically authorized to unabashedly seek the self-

interests of his or her firm? And if the answers to these queries depend on

other factors, what are these factors?

The analysis of these and similar questions begins with a brief review

of several well-known and influential works from the corporate social re-

sponsibility (CSR) literature. Taken collectively, these early works posit a

fairly robust normative stance. That is, each suggests that businesspeople

generally must cooperate with law and the regulatory process rather than

5

Recognizing the possibility of a legitimate form of civil disobedience, a person ‘‘typically’’ has

a social duty to follow the law, but not always. For example, a person has no social duty to

follow an unjust law, buthe or she does have a ‘‘legal duty’’ to do so, enforced through threat

of legal sanction. Perhaps the most commonly cited passage on civil disobedience comes from

Aquinas. See SAINT THOMAS AQUINAS,SUMMA THEOLOGICA Q. 90, Art. 4.3 (‘‘[L]aws may be unjust

through being opposed to the Divine good; such are the laws of tyrants inducing idolatry,or to

anything else contrary to Divine law: and laws of this kind must nowise be observed.’’). See

generally Rawls, supra note 1 (discussing justifications for civil disobedience); Wasserstrom,

supra note 1 (same).

2004 / Cooperate, Comply, or Evade? 561