I am looking for theoretical frameworks which would help in understanding why businesses fail to follow their own code of conduct
The best place to understand business integrity or the moral duty of corporations to the society is thorough analyzing the argument offered by Milton Friedman, a Nobel prize winning American economist, in an article piece published in The New York Times Magazine in 1970, a must-read for any student of business ethics.
The business world of 1960's in the US experienced the existential angst, the outcome of which was the movement of the corporate social responsibility (CSR). Corporations believed that they should be better selves in their conduct of doing businesses: e.g., contribution to social programs, procurement of natural resources in a politically and environmentally right way, and engagement in fair trade practices.
Friedman however argued that there is no such thing as CSR, and the only responsibility of a corporation is to make money (indeed, to maximize profits) within the boundary of the law. I dissect his argument as follows.
A corporation is not a person; it is an artificial entity.
Only a person can have a moral duty.
- If there is a duty to CSR, the duty must lie in the executive of the corporation, the one with the real power.
Executives are mere agents of the owners of the corporation,i.e., the stockholders.
Being agents, executives have the moral duty to their principals, the stockholders.
- The executive’s duty to stockholders is the maximization of profits.
- An executive acting upon her perceived CSR must be acting against the interest of the stockholders. That is, her duty to CSR is inconsistent with her duty to the principal.
Her duty to her principal clearly exists.
Thus, her duty to CSR cannot exist.
From 9 and 3, there is no duty to CSR.
Philosophers of business ethics believe that Friedman's argument is unsound, and have been trying to show that some of his assumptions are wrong.