The Business Ethics Blog

At what point are a company’s misdeeds sufficiently grave that the right thing to do is simply to shut the doors, permanently?

As was widely reported yesterday, the printing presses at News of the World (part of Rupert Murdoch’s News Corp.) will be grinding to a stop after this Sunday’s edition. The paper’s shameful history of phone-hacking and other scuzzy “journalistic” practices has finally caught up with it.

Under what conditions is such a move the right one? When is a company obligated to commit the corporate equivalent of the ancient Japanese tradition of seppuku (a.k.a. harakiri), or even just to sacrifice a corporate “limb”?

Some people might say, “when doing so best serves the interests of your shareholders.” Others might say, “when doing so best serves the interests of the full range of stakeholders.” Still others might say that it has nothing to do with anybody’s interests, but rather with what’s in the the interest of justice. “Let justice be done,” as the ancient legal saying goes, “though the heavens fall.” So it may be thought that the organization, as a whole, needs to pay a penalty for its wrongdoing.

But there are of course counter-arguments that could apply, even where the corporate wrong is significant. For one, in shutting down an entire corporation for the wrongdoing of a few, you are effectively punishing a large number of innocent employees. And in some cases, that might be justified. Sometimes there is collateral damage along the road to justice. But surely that damage is not irrelevant.

In other cases, shutting a company down may amount to a cynical attempt to insulate sister companies or a parent company from fallout. Or to protect a favoured employee. In such cases, shutting the company is likely blameworthy, rather than worthy of praise. In such cases, surely the honourable thing to do is not to perform seppuku, but rather to stand to face the music. Accept the scrutiny, pay the price, and then rebuild under new management.

But all such considerations presume that the initial crime is sufficiently grave to make such an extreme solution plausible in the first place. In the News of the World case, the offence is serious and multi-faceted. Individual rights were violated; law enforcement officials were bribed; and the journalistic profession was arguably sullied. And all of that was perpetrated in pursuit of an utterly trivial objective, namely the production of yet more trashy tabloid “news.” Compare: there were few serious calls for BP to be dismantled after the Deepwater Horizon spill, despite that spill’s very serious human and environmental impact. But then, unlike News of the World, BP actually produces a socially valuable product.