Meeting Goodpaster's Challenge: A Smithian Approach to Goodpaster's Paradox

Abstract

Goodpaster identifies a paradox in corporate decision-making where it appears unethical to raise the status of non-owner-stakeholders to that of shareholders, whereas it is also unethical not to. In addressing his own paradox, he suggests that allowing managers to make ethical decisions within the ambit of the consciences of the shareholders, the shareholders' position is maintained but the interests of non-owner- stakeholders are considered inequitably in the generation of a strategic direction. It is suggested that there is a weakness in his case. We argue that Adam Smith's impartial spectator provides a potentially more complete solution to Goodpaster's problem in that, being sympathetic to the feelings of others, all stakeholders share the burden of seeking to achieve an ethically desirable outcome