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== /v, y, ) Jewish Business Ethics / The Firm and Its Stakeholders edited by Aaron Levine Moses Pava Robert S. Hirt, Series Editor The Orthodox Forum Series A Project of the Rabbi Isaac Elchanan Theological Seminary An Affiliate of Yeshiva University ?A JASON ARONSON INC. Northvale, New Jersey Jerusalem ~Is 311 3o 0 77 THE ORTHODOX FORUM The Orthodox Forum, convened by Dr. Norman Lamm, President of Yeshiva University, meets each year to consider major issues of concern to the Jewish community. Forum participants from throughout the world, including acade This book was set in 11 pt. Goudy Oldstyle by Alpha Graphics of Pittsfield, NH and printed and bound by Book-mart Press, Inc. of North Bergen, NJ. micians in both Jewish and secular fields, rabbis, rashei yeshiva, Jewish educators, and Jewish communal profession Copyright © 1999 Rabbi Isaac Elchanan Theological Seminary als, gather in conference as a think tank to discuss and 10 9 8 7 6 5 4 3 2 I critique each other's original papers, examining different aspects of a central theme. The purpose of the Forum is All rights reserved. No part of this book may be used or reproduced in any manner whatsoever to create and disseminate a new and vibrant Torah literature without written permission from Jason Aronson Inc. except in the case of brief quotations in reviews for inclusion in a magazine, newspaper, or broadcast. addressing the critical issues facing Jewry today. Library of Congress Cataloging-in-Publication Data Jewish business ethics : the firm and its stakeholder/ edited by Aaron Levine and Moses Pava. The Orthodox Forum p. cm. gratefully acknowledges the support "The Orthodox Forum series." of the Joseph J. and Bertha K. Green Memorial Fund Papers presented at the 8th conference of the Orthodox Forum, held Apr. 28-29, 1996, in New York City. at the Rabbi Isaac Elchanan Theological Seminary Includes bibliographical references and index. established by Morris L. Green, of blessed memory. ISBN 0-7657-6056-8 I. Commercial law Qewish law) Congresses. 2. Business ethics Congresses. 3. Ethics, Jewish Congresses. 4. Business-Religious aspects-Judaism Congresses. I. Pava, Moses L. II. Levine, Aaron. Ill. Orthodox Forum (8th: 1996: New York, N.Y.) LAW 296.3'644-DC2 l 98-36490 CIP Printed in the United States of America on acid-free paper. For information and catalog write to Jason Aronson Inc., 230 Livingston Street, Northvale, NJ 0764 7-1726, or visit our website: www.aronson.com OTHER VOLUMES IN THE ORTHODOX FORUM SERIES Rabbinic Authority and Personal Autonomy edited by Moshe Z. Sokol THE ORTHODOX FORUM EIGHTH CONFERENCE Jewish Tradition and the Non-Traditional Jew April 28-29, 1996 edited by 9-10 Iyar 5756 Jacob J. Schacter Congregation Shearith Israel New York City Israel as a Religious Reality edited by Chaim I. Waxman LIST OF PARTICIPANTS Dr. Norman Adler, Yeshiva University Modem Scholarship in the Study of Torah Rabbi Marc Angel, Congregation Shearith Israel Contributions and Limitations Dr. David Berger, Brooklyn College & Yeshiva University edited by Rabbi Yitzhak Berger, Yeshiva University Shalom Carmy Mr. Ari Bergmann, Bankers Trust Company Rabbi Saul J. Berman, Yeshiva University Tikkun Olam Rabbi Jack Bieler, Hebrew Academy of Greater Washington Social Responsibility in Jewish Thought and Law Dr. Rivkah Blau, Shevrach High School edited by Rabbi Yosef Blau, RIETS/Y eshiva University David Shatz, Chaim I. Waxman, and Nathan J. Diament Dr. Judith Bleich, Touro College Dr. D. Barry Bressler, Staten Island College Rabbi Michael J. Broyde, Emory University Engaging Modernity Professor Jeffrey Callen, Stern School of Business-NYU Rabbinic Leaders and the Challenge of the T wen tie th Century Rabbi Sahlom Carmy, Yeshiva University edited by Rabbi Zevulun Charlop, RIETS/Y eshiva University Moshe Z. Sokol Rabbi Mark Dratch, Shaarei Shomayim Congregation, Toronto Rabbi Barry Freundel, Kesher Israel Synagogue, Georgetown Rabbi Robert S. Hirt, RIETS/Y eshiva University Jewish Perspectives on the Experience of Suffering Dr. Avery M. Horowitz, Yeshiva University edited by Dr. Ephraim Kanarfogel, Yeshiva University Shalom Carmy Dr. Eliyahu Kanovsky, Yeshiva University vii viii The Orthodox Forum Dr. Eugene Korn, Hartman Institute Dr. Joshua Krausz, Yeshiva University Dr. Norman Lamm, Yeshiva University Mr. Shalom E. Lamm, Lion & Lamm Dr. Aaron Levine, Yeshiva University Mr. Nathan Lewin, Miller, Cassidy, Lorroca & Lewin Dr. Yehoshua Liebermann, Bar Ilan University Dr. Gershon Mamlak, City University of New York Contents Mr. Leon M. Metzger, Paloma Partners Company LL.C. Dr. Israel Miller, Yeshiva University Dr. Harold Nierenberg, Yeshiva University Dr. Moses L. Pava, Yeshiva University Prologue: What Is Jewish Business Ethics? xi Mr. Jay Pomrenze, Bankers Trust Moses L. Pava Dr. Jonas Prager, New York University Rabbi Daniel Rapp, RIETS/Y eshiva University 1 Moral Markets: Two Cheers for Stakeholder Theory 1 Rabbi Michael Rosensweig, RIETS/Y eshiva University Moses L. Pava Dr. Alvin I. Schiff, Yeshiva University Dr. David J. Schnall, Yeshiva University 2 Convenantal Morality in Business 27 Dr. David Shatz, Yeshiva University Walter S. Wurzburger Dr. Michael D. Shmidman, Yeshiva University Dr. Moshe Z. Sokol, T ouro College 3 The Employee as Corporate Stakeholder: Exploring the Mr. Marc D. Stem, American Jewish Congress Relationship between Jewish Tradition and Rabbi Moshe D. Tendler, RIETS/Yeshiva University Contemporary Business Ethics 45 Dr. Chaim Waxman, Rutgers University & Yeshiva University David]. Schnall Rabbi Mordechai Willig, RIETS/Y eshiva University Dr. Joel B. Wolowelsky, Yeshivah of Flatbush High School 4 Aspects of the Firm's Responsibility to Its Customers: Rabbi Walter S. Wurzburger, Yeshiva University Pharmaceutical Pricing and Consumer Pricing 75 Aaron Levine 5 Balancing the Scales: Halakhah, the Firm, and Information Asymmetries 123 Jonas Prager 6 Responsibility of the Firm to the Environment 147 Yehoshua Liebermann 7 Ethical Investment: The Responsibility of Ownership in Jewish Law 175 D. B. Bressler ix X Contents 8 The Corporate Veil and Halakhah: A Still Shrouded Concept 203 Michael]. Broyde and Steven H. Resnicoff Epilogue Aaron Levine 273 Contributors 317 Index Prologue: What Is Jewish 319 Business Ethics? Moses L. Pava The core idea upon which this book is built is that the power and success of business is ultimately dependent on mangers' beliefs about li(e's mean ing. It is no exaggeration to suggest that corporate success is set in motion and encouraged by a set of core ethical values shared by managers, em ployees, and stakeholders. It is our unflinching belief that traditional Jew ish sources provide useful and practical paradigms and solutions to many of the important issues facing the modem business manager. Jewish busi ness ethics must begin by taking both business and Jewish ethics seriously. Granted there is an important and dynamic literature focusing its at tention on the halakhic responsibilities of the individual business man or woman, but business ethics decisions are often different in kind from per sonal ethical choices. How so? The moral dilemmas faced by the modem business organization often do not resemble those faced by the isolated individual. Individuals can rarely, if ever, affect the lives of thousands of people with a single decision. For corporations, unfortunately, the deci sion to lay off huge numbers of employees is becoming uncomfortably routine. Similarly, few individuals have the ability to irreversibly pollute the environment as quickly as the Exxon Corporation or Union Carbide. Wal-Mart's recent choice not to stock record albums that contain what xi xii Moses L. Pava Prologue: What Is Jewish Business Ethics? xiii they perceive as offensive lyrics carries with it huge social impacts, as THE BOOK'S STRUCTURE Wal-Mart is of one the largest players in the CD market. Understanding the responsibilities of business to society requires an The structure of this book is built around the idea that the business firm understanding of the business entity as such. A Jewish business ethics, is best understood by examining the relationships among the various properly understood, needs to explicitly recognize the real-world situations stakeholder groups which define the modern corporation. The term stake of our students and young business people. Students must honestly con holder is a play on the word stockholder. While more traditional views front what it means to be a part of a pluralistic, modern business institu of the corporation emphasize managers' responsibilities to maximize profits tion embedded in a democratic polity. A Jewish business ethics designed to stockholders, the stakeholder theory encourages us to take a larger only for a hypothetical world in which halakhah guides our public and pri and more expansive view of business. While it remains true that the vate institutions-but which ignores business realities-is an interesting corporation must take seriously its responsibility to "increase" profits to intellectual exercise, but fails to provide guidance in the here and now. If stockholders, the theory explicitly recognizes responsibilities to various a Jewish business ethics is going to have practical import (i.e., impact on other groups which make up the corporation. In theory, at least, it is behavior), we must begin the process by understanding and interpreting possible that a corporation's responsibilities to employees, say, will trump traditional and authoritative Jewish sources, but we must also grapple with responsibilities to stockholders, or that environmental concerns will limit the meaning of business in contemporary society. Therefore, this book is profit-seeking behavior. an attempt to interpret traditional normative texts and apply these texts This particular structure was chosen for four distinct reasons: First, the to the modern situation. The focus of the analysis is at the level of the stakeholder theory has emerged as an important theory in the secular busi organization. Each of the authors in this volume views both aspects of this process earnestly. ness ethics literature. 'To date, there are more than a hundred academic articles and a dozen books on the topic.