Ethics in a World on Fire: Private Sector’s Response to Climate Change, Kreps Symposium 2025

Key Concepts

• Structural Ethics: The ethical implications of the systemic constraints and incentives within which businesses operate, including the duty to maximize shareholder value and the influence of firms in the political system.
• Embedded Ethics (Moral Intuitions): The role of gut feelings, emotions, and cultural norms in ethical decision-making, as opposed to purely rational or deontological approaches.
• Executive Control Mode: A problem-solving, rational, and independent mode of thinking often prioritized in Western societies and business education.
• Default Mode: A relational, intuitive, and embodied mode of thinking that emphasizes connection, empathy, and long-term perspectives.
• Shareholder Value Maximization: The principle that a corporation's primary duty is to increase the wealth of its shareholders.
• Pareto Efficiency: An economic state where resources are allocated such that it is impossible to make any one individual better off without making at least one individual worse off.
• Externalities: Costs or benefits that affect a party who did not choose to incur that cost or benefit.
• Free Politics: A political system where everyone is a valued member of the body politic, everyone's vote counts, and everyone has the information.
• Inner Development: Shifting humans, not just about the tech.

Structural Ethics: Beyond Individual Responsibility

• The Problem with Focusing Solely on Individual Ethics: Traditional ethics education often focuses on individual decision-making within existing structural constraints, neglecting the ethical implications of shaping those constraints themselves.
• Shareholder Value Maximization as a Structural Constraint: The widely held belief that managers have a duty to maximize shareholder value is deeply rooted in contract theory, welfare economics, and agency theory. It is often viewed as both a legal requirement and a moral duty.
• The Limits of Shareholder Value Maximization: While shareholder value optimization might be Pareto efficient, there's no guarantee it's welfare maximizing.
• Externalities and the Political System: The speaker argues that the legal conditions that have to be in place for markets to be fully competitive are quite comprehensive. Externalities have to be properly priced, everyone has to be able to play, there has to be no collusion, and firms cannot pay to distort the rules in their own favor. If these conditions do not hold, there is absolutely no guarantee that maximizing shareholder value will maximize the things we care about.
• Firms' Participation in the Political System: The speaker raises the question of how we should think about firms' participation in the political system and what we should be teaching about it.
• The Case of Philip 66 and the Washington State Carbon Tax: Philip 66, the largest supplier of fossil fuels in Washington state, spent a million dollars to defeat a proposed carbon tax of $15 a ton on CO2, even though the company acknowledged the reality of climate change. The speaker questions whether this behavior is ethical, given the company's influence on the political process and the potential consequences of climate change.

Embedded Ethics: The Role of Moral Intuitions

• Beyond Rationality: The Importance of Moral Intuitions: People often make decisions based on gut feelings, emotions, and moral intuitions, rather than purely rational calculations.
• Ethics are Embedded: Ethics are embedded in our bodies, minds, culture, institutions, and norms.
• Moral Intuitions Vary: Moral intuitions vary across times, places, classes, and cultures.
• The Disconnect Between Elites and the Rest of Society: The speaker suggests that one of the reasons our society is in such distress is that our elites no longer appear to share or to be interested in acting on the moral intuitions of the rest of us.
• Examples of Ethical Failures: The speaker cites examples such as the privatization of Thames Water in England, where an Australian private equity firm extracted wealth from the company and discharged raw sewage into rivers, and the high rate of healthcare claim denials in the United States, which can lead to bankruptcy and loss of homes.
• The Climate Crisis as a Moral Failure: The speaker argues that the failure to address climate change is a moral failure, driven by a focus on short-term profits and a disregard for the well-being of future generations and other species.

The Executive Control Mode vs. The Default Mode

• Overindexing on Rationality and Separation: The speaker suggests that Western societies have overindexed on the executive control mode, which is characterized by rationality, problem-solving, and a sense of separation from others and the environment.
• The Default Mode: Relationality and Connection: The default mode, on the other hand, is characterized by relationality, intuition, empathy, and a sense of connection to something larger than oneself.
• The Dark Side of Prioritizing the Executive Control Mode: The speaker argues that the default mode has been devalued and labeled as female, primitive, emotional, and spiritual, which has negative connotations in certain contexts.
• Practices for Activating the Default Mode: Humans have practiced activating the default mode for thousands of years through activities such as art, music, poetry, gratitude, awe, and being in nature. These practices are most effective when done in groups, as they emphasize relationality and connection.
• The Benefits of Activating the Default Mode: The default mode helps people take other people's welfare as central as their own and focus on the long term.

Implications for Teaching and Action

• Integrating Inner Development into Business Education: The speaker suggests that business schools should teach students about inner development, including mindfulness, self-awareness, and the importance of connecting with their values and emotions.
• Creating Shared Value and Building Cooperation: The speaker argues that there is a business case for cutting emissions by at least 50% through creating shared value, building cooperation in industries, and rewiring finance.
• Rebuilding Institutions and Establishing Public-Private Partnerships: The speaker emphasizes the need to rebuild institutions and establish public-private partnerships to create the regulatory regimes that can move the whole world towards sustainability.
• Embracing a Purpose Beyond Profits: The speaker concludes that businesses need to embrace a purpose beyond profits and be willing to take risks and do the emotional work that comes with taking the risk and doing new things.

Conclusion

The speaker argues that ethics is not just about individual decision-making, but also about the structural constraints within which businesses operate and the role of moral intuitions in shaping ethical behavior. She suggests that business schools need to teach students about structural ethics, embedded ethics, and the importance of balancing the executive control mode with the default mode. By integrating inner development into business education and embracing a purpose beyond profits, businesses can play a key role in solving the climate crisis and creating a more sustainable and equitable world.