When Government Contractors May or May Not Spend Money On Political Speech

Daniel M. Isaacs ()
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Daniel M. Isaacs: Fox School of Business

Journal of Business Ethics, 2020, vol. 161, issue 1, No 7, 102 pages

Abstract: Abstract Some leading economists maintain that corporate managers have no social responsibilities other than to maximize profits and obey the law. To support that thesis, they rely, in part, on the agency theory of the firm. The theory provides that managers are agents of shareholders and must do what shareholders want, which is generally to make as much money as possible. For purposes of this article, I accept that managers are agents of shareholders, but I reject the conclusion that the relationship dilutes their moral obligations. Managers, as agents, cannot justify immoral decisions on the grounds that their shareholders direct their actions. Similarly, shareholders, as principals, lack moral bases to authorize managers to take actions the shareholders could not justify taking themselves. I apply this thesis to the ethical challenges managers of government contracting businesses face when they consider whether to make independent political expenditures. I argue that where it is in the interests of government contractors to publicly disclose, limit, or forego making independent political expenditures, they can legally do so, and that in the absence of financial advantage or legal obligation, agency theory highlights the ethical obligations of shareholders and their managers agents. It does not grant them an ethical free pass.

Keywords: Agency theory; Contracts; Government contractors; Private prisons; Political expression (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10551-018-3947-6

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