New York Attorney-General Eric Schneiderman is investigating Exxon Mobil for possible legal violations in connection with its public statements about climate change. While the legal issues are likely to be technical and complex, the investigation also raises fundamental questions about the ethical responsibilities of corporate officials, both to their investors and to the public as a whole.
In the light of mounting attention in the United States to climate change, a lot of people are going to be pressing those questions.
No one doubts that those who manage corporations have strong obligations to their shareholders. They are entitled, and even obligated, to take steps to maximise shareholder value. To do that, corporate officials may sharply oppose costly regulations, cast their activities in a favourable light, oppose what they see as unjustified scientific conclusions and in general act as vigorous advocates to promote their company's interests.
At the same time, the obligation to maximise shareholder value imposes a duty of honesty and fairness. Shareholders will ultimately be hurt if a drug company falsely says it is developing a product that will cure cancer, or if an energy company knowingly misstates the economic and environmental benefits of some untried new technology.
The same principle requires companies to stay within the bounds of probity in discussing external factors that bear on the company's prospects, such as coming regulatory requirements and relevant technological shifts - and climate change. If a company is perceived to have misled the public, its economic prospects will suffer, and it will struggle mightily to show that it has served its shareholders.
Finally, large corporations have social and political influence, and for that reason they have ethical obligations to the public as a whole. Of course those obligations usually allow corporations to protect
their own interests. Companies that use genetically modified organisms, for example, are entitled to argue that their products carry no health or environmental risk. Many experts believe that on purely scientific grounds, that argument is right.
But as the Volkswagen scandal suggests, it would not be legitimate for truck manufacturers to misstate the greenhouse gas emissions from their vehicles, or even to say that greenhouse gas emissions just aren't a problem - at least if that position is inconsistent with the clear views of their own researchers about the science. Good-faith disagreement is fine; knowingly conveying falsehoods is not.
Which brings us to Exxon.
It's perfectly fair for companies to argue that some regulations aren't worth the cost, or that the Environmental Protection Agency has exceeded the requirements of the Clean Air Act, or that the US should act only if China (and the rest of the developing world) does so as well, or that economic growth and cost-effectiveness need to be central considerations in any and all climate change initiatives.
But there is a big difference between these arguments and making false statements, to investors and the public, about what corporate officials actually know. If corporate officials really have been lying, there's going to be hell to pay - if not in courts of law, at least in the court of public opinion.
BLOOMBERG VIEW
