Private Ethics in the Public Sector

Is it ethical for private businesses to work for governments with questionable or even obscene humans rights records? This question was brought to the fore after the brutal killing of Saudi Arabian journalist Jamal Khashoggi. Many American companies face an uncomfortable reality: While Saudi Arabia’s aversion to democracy and Western freedoms has never been a secret to these corporations, the American consumer may be wary of companies that appear to condone such actions. Now may be the time when U.S. companies are most vulnerable to public pressure to take a stand on human rights and democratic practices around the world.

Prominent U.S. companies with ties to the Kingdom range from U.S. defense contractors to U.S. startups to automakers like G.M. and Ford. U.S. banks like Morgan Stanley and Citigroup also work in the Kingdom, as do G.E., Bechtel, and consumer goods companies, including Starbucks and Pepsi (C.B.S.). The first issue is whether continuing to do business with an authoritarian government is tantamount to complicity.

Yes

Some would say yes. Private companies are uniquely positioned to sanction the Saudi regime. While U.S. government-imposed tariffs or withdrawals from trade deals could trigger retaliation from the Saudi government, it is difficult for Saudi leadership to respond to a drop in its stock market (NYMag).  If corporations have a moral responsibility to wield their economic power to influence politics, then they certainly should do so.

Companies may find a lucrative opportunity in boycotting authoritarian regimes because the companies can build a stronger, more respectable brand worldwide. Research featured in the Harvard Business Review shows that sticking by one’s ethical guns can be a differentiator, especially in countries where there is “free and plural press, an independent judiciary, and a potential for collective action … such as a religious community, a civic organization, or a trade association.”

Finally, there is a moral argument. Anand Giridharadas, a former consultant at McKinsey & Company (a noted business partner of the Saudi government), offered a stark criticism of the firm’s continued involvement with corrupt governments. From his point of view, “the world is divided into people who are for beheadings and against beheadings.” (N.Y.T., How McKinsey Has Helped Raise the Stature of Authoritarian Governments). Many would say that doing any kind of business with a government ruled by a leader who murders people is legitimizing a despot, and therefore an unethical choice.

On the other hand

There are many who feel that it is not the private sector’s place to try to dictate regime change. Some say that companies should only be concerned with generating profit, not human rights. Others claim that a rising tide lifts all boats; allowing private companies to continue working with the Saudi government will improve the state economically, empowering its people and influencing its government to be friendlier towards Western democracies.

Americans tend to have a kind of reverence for the invisible hand, conflating efficiency with virtue. Unfortunately, Saudi Arabia’s power structure makes it very difficult for citizens to effect change. The Kingdom’s history shows that economic prosperity does not always lead to economic liberalization, much less political liberalization. Scholars have hypothesized that as countries become more economically modern, democracy follows. There is some evidence of this in countries such as Taiwan and South Korea, but there are strong counterexamples as well. Many oil states in the Middle East have certainly grown wealthier but have not involved citizens more broadly in political or economic structures. In Saudi Arabia, there are ample government jobs in state-owned industries, but without an independent civil society or significant privatized economy, little has changed politically. Ultimately, democratization is a cultural change, one that can be influenced by proper application of diplomatic pressure and funding, but not one that will occur simply by enriching a nation or improving its economy.

Most importantly, while dictatorships will likely find means to accomplish their ends regardless of the support of private companies, citizens of an oppressive regime fare better if governments lack the best tools for repression. If governments face weapons shortages or obstacles to surveillance due to the resistance of private companies, private companies can play a role in impeding the acquisition of tools that are harmful to the population.

Conclusion

Are business as usual and complete withdrawal the only options? If all American companies, for example, cut ties with Saudi Arabia, it might overthrow the monarchy. Would that be good for the Saudi people or for Americans? Then again, is it the role of the United States or private companies to punish regimes or try to change them over time? The United States has a mixed record when it comes to successfully changing other governments, and some would argue that should not be a goal of U.S. policy at all. Regardless, in a capitalist society, it may prove extremely difficult to isolate and write off certain markets.

There are many questions left for corporations and consumers to grapple with. Overall, doing business with corrupt governments does not seem to yield an increase in those governments’ respect for human rights. While it may be difficult to craft and enforce a policy which controls corporation’s actions, men and women working for companies of all kinds should consider these questions, resolve not to participate in giving authoritarian governments the tools they need to repress their citizens, and resist the temptation to turn a blind eye or prioritize growth over morality.

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Rachel Finlayson

Rachel Finlayson grew up in Hanover, NH and came to BYU to study Viola Performance. After the major major crisis of ‘16, she switched to Political Science with minors in Chinese and Women's Studies. Her hobbies include radio, reading classic fiction, political philosophy, touting BYU’s Women in Politics (WIP), swimming, word games, and the outdoors. She is grateful for the many gifts a Political Science education has given her: clear reasoning ability, quantitative analytical skills, and curiosity. She hopes to use these skills to promote understanding between diverse groups, understand complex problems pertaining to justice, and advocate solutions through political advocacy.

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Rachel Finlayson

Rachel Finlayson grew up in Hanover, NH and came to BYU to study Viola Performance. After the major major crisis of ‘16, she switched to Political Science with minors in Chinese and Women's Studies. Her hobbies include radio, reading classic fiction, political philosophy, touting BYU’s Women in Politics (WIP), swimming, word games, and the outdoors. She is grateful for the many gifts a Political Science education has given her: clear reasoning ability, quantitative analytical skills, and curiosity. She hopes to use these skills to promote understanding between diverse groups, understand complex problems pertaining to justice, and advocate solutions through political advocacy.

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