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P H I L O S O P H Y F O R B U S I N E S S ISSN 2043-0736
http://klempner.freeshell.org/businesspathways/
Issue number 20
6th July 2005
CONTENTS
I. 'What's our case? Back to basics in corporate responsibility' by Ian Christie
II. 'Socrates in the Marketplace' by Daniel Silvermintz
III. 'Ethics Codes, Corporations and the Challenge of Globalization' reviewed
by Rachel Browne
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EDITOR'S NOTE
Just when I thought I had made the case against an ethical argument for CSR
('Corporate Social Responsibility and Ethical Dialogue', Issue 19), Ian
Christie from the Green Alliance and New Economics Foundation offers powerful
considerations in favour of an appeal to ethics. Who is right?
Daniel Silvermintz from the University of Houston, Texas relives the battle
between Socrates and the Sophists of Ancient Greece, and examines the relevance
of Socrates teaching and example for contemporary business practice.
In our first book review, Rachel Browne looks at the difficulties in the way of
applying uniform ethical standards to the activities of companies and
corporations across the globe.
Geoffrey Klempner
-=-
I. 'WHAT'S OUR CASE? BACK TO BASICS IN CORPORATE RESPONSIBILITY' BY IAN CHRISTIE
Corporate responsibility in crisis
For twenty years, advocacy for 'corporate responsibility' -- action by business
to integrate concern for social inclusion, international social justice and
environmental sustainability into its core activities -- has drawn to a large
extent on 'the business case'. This is a set of arguments stressing the
benefits to companies from such integration and engagement with communities at
home and abroad. Below I discuss how business case arguments, while important
and still in need of further development, need to be seen as supplementary to
acceptance of an 'ethical case' that should take priority. The need for this
reorientation of arguments for corporate responsibility has been highlighted by
the crimes and excesses that have come to light at the top of a number of major
corporations of late.
The past two years have been a time of gathering crisis for the corporate
social responsibility (CSR) movement, as business scandals and controversies
over top executives' values and behaviour have followed one another with
depressing regularity. The collapse of Enron and the emergence of related
scandals in the USA, and the ceaseless flow of stories about chief executives'
astounding pay and pension deals in America and the UK, have dominated
headlines about business in the press. While of course most businesses are
untouched by either wrong-doing or the uproar over extreme pay packages for top
executives, this is of little comfort to proponents of corporate social
responsibility. After two decades and more of hard work to build up a critical
mass of companies engaged in a huge variety of initiatives on social inclusion,
regeneration and environmental stewardship, organisations such as Business in
the Community find that public trust in big business has been seriously damaged
by coverage of minority -- but highly significant -- corporate irresponsibility.
If anti-capitalist campaigners had been operating undercover inside Andersen,
Enron, WorldCom and others, in order to discredit the system, they could not
have done a better job than the executives themselves. They have lived up to
every extreme of criticism thrown at capitalism by its modern-day detractors.
They have also done an immense disservice to the responsible and law-abiding
majority in business, by corroding public confidence and making it harder to
build up trust that 'corporate citizens' can be a force for sustainable
development and a vital contributor to social well being. The crimes and
misdemeanours that have come to light have also done damage to those who
contend that business can do better for itself and for society through
self-regulation.
All this raises a fundamental issue for the CSR movement. So much of the agenda
for corporate engagement in the community, carefully developed over the past 20
years, now appears as worthy yet marginal to the real action. How was it that
Enron could pose for so long as a decent corporate citizen in the USA? Why is
it that the CSR agenda over there and in the UK has managed to exclude
discussion of deep inequalities in society, of excessive pay awards, and of the
'irrational exuberance' that drove the dot-com boom and brought it to bust? The
lack of public debate in the UK's mainstream CSR community about the moral
dimension of extreme executive pay awards, not to mention the damaging effect
they can have on employee relations and corporate reputation, has been
astonishing, and amounts to a conspiracy of silence.
Too often, CSR membership bodies have shied away from recognising a central
truth: that CSR is about hard politics and ethics as well as corporate
measurement systems, award schemes, good practice and 'win-win' projects that
benefit companies and communities. Membership of CSR clubs has been eagerly
extended to companies for more than two decades, but no-one has been thrown out
or suspended, despite copious evidence of breaches of the spirit of CSR, and
sometimes too of the letter of the law, by many of the corporations concerned.
We need much more debate about the non-negotiable criteria of claiming to be a
good corporate citizen. And this leads straight to the issue of the case on
which CSR draws when making its fundamental arguments. Business case or ethical
case?
The business case and its merits
The point of businesses is to make profits. This is entirely proper and
desirable. Companies are bound to respect the law, but as long as they comply
with whatever legal rules constrain them, they are not here to duplicate the
work of government or charities. The great merit of the classic CSR business
case is that it recognises that the system of motivations that operates in
companies is, in the last analysis, bound to be driven by the need to make
profits and compete successfully in markets. The key elements of 'business
case' models for CSR emerged in the 1970s and 1980s and have been greatly
elaborated since.
There are qualitative and quantitative arguments. Businesses displaying high
levels of commitment and activity geared to social inclusion and environmental
care can gain consumer trust; they can secure first-mover advantage in emerging
markets; they can attract and retain better recruits; reputational advantages
can accrue to companies, making them more attractive to investors; companies
showing high engagement in CSR can argue better for self-regulation as opposed
to government intervention to mould their behaviour; CSR is good for employee
relations; and so on.
Quantitative evidence continues to be built up, and much more needs to be done.
Roughly summarising two decades of work on whether CSR pays as the business case
suggests, we can say that sometimes it does, and sometimes it seems to make no
difference, and sometimes it might not pay at all, or at least not for a long
time or without external intervention to change the rules of the marketplace.
It is not yet a decisive array of arguments with a rock-solid core of evidence.
But the merits of using a business case approach to companies are clear enough.
It speaks to business people in terms that are directly relevant to their work
and corporate goals. It provides a way to translate ethical concerns into
practical business language and practices. It helps companies make their case
for CSR to investors and customers. At its best, it can be a subtle and
powerfully persuasive tool -- see for example the excellent business case for
disability equality in companies, prepared for the Employers' Forum on
Disability by Simon Zadek and Susan Scott-Parker.
Hard-nosed or hard-hearted? Limits to the business case
That said, there are two deep problems for the business case. The first is that
it has come to be used as a superior and more sophisticated tool than a clear
'ethical' case for CSR. We can see this process at work in many pronouncements
by committed business leaders, who point out in interviews that their CSR work
is driven wholly by hard-nosed commercial considerations. 'Doing good' is good
business, so we do it. The practical value of such language in many business
contexts is obvious. But it brings with it over time a damaging implication.
This is that if doing the right thing for social inclusion and the environment
were not good business, we'd stop. The use of hard-nosed language about the
business case also subtly puts ethics in its place -- a subordinate one. This
might be unintended much of the time, but it has practical effects -- a sense
that what is often termed 'philanthropic' motivation is somehow old hat or
inevitably inferior to tough-minded, business case-based action.
The second point is a related one, made with great force in recent writings by
Sir Geoffrey Chandler, lately with Shell and now with Amnesty International. He
notes that often the business case for doing the socially and environmentally
irresponsible thing is powerful. And making the business case seem to be prior
to an ethical case is deeply damaging to the prospects for public trust in
companies, and to the long-term health of capitalism. Chandler's argument, made
for example at BT's Just Values conference in January 2003, is powerful and
timely:
I don't believe ethical behaviour should depend on its
paying. To suggest that doing right needs to be justified
by its economic reward is amoral, a self-inflicted wound
hugely damaging to corporate reputation... Doing right
because it is right, not because it pays, needs to be the
foundation of business.
Some would argue that this is a non-debate, since the business case and the
ethical case will often both converge on a demand for exactly the same values
and policies. This can be so, but the points made above about the subtle
implications of making the business case prior still stand. And the issue has
to be faced: what happens when a company finds that the business case cannot be
made, but stakeholders in society at large are demanding new standards of
ethical behaviour?
Here we can see that the world has overtaken the conventional business case. In
part this is a result of the extension of business freedoms and influence since
the 1980s, the very process that has led to so much concentration on arguments
for CSR that are conducted entirely on the terms of a hard commercial model of
corporate purpose. As governments have embraced a strongly pro-market world
view and renounced old corporatist habits (though not that of generous and
often perverse subsidy for key sectors), so the social and cultural influence
of business has risen. Companies find themselves as a result in prominent roles
in fundamental areas of policy previously the terrain of government -- such as
utility management -- and their impact on environment and society seems all the
greater to the citizen. In many areas, there is a poor fit, or even no link at
all, between what makes good commercial sense and what citizens and NGOs might
regard as the common good, locally and globally.
Beyond the business case: a case for universalising right action
What can companies do in this changed context? The conventional business case
wisdom is of little use. One approach for companies facing clashes between
business cases and ethical arguments is to hope that government will step in
and make regulations that will level the playing field. Another is to wait
until market developments -- such as changes in consumer values -- make the
business case work at last. Another is to be bold and try to change the terms
of the market by oneself, setting the pace and taking the risk of living up to
the claims of the business case when others are not convinced. Some companies
have been pioneers in this sense. But most are not, and it is not surprising
that this is so.
One under-explored idea could be the foundation of a new approach from business
to the case for CSR. This is to take seriously the arguments of major schools of
moral philosophy that there are universal needs and rights that should be
respected, and that when we acknowledge something to be the right course of
action, what we mean is that we would wish it to be universally enacted. In
this setting, a company faced with a clash between the business case and the
ethical case for some form of CSR should aim to make its desired course of
action one that could be universally shared.
This takes us in new directions. It could mean making a business case for
regulation, in order to redefine the marketplace, or making a case for
self-regulation by peer companies and working to form 'coalitions of the
willing' among companies and partners, such as NGOs, in order to transform the
market environment in question, with or without the aid of government. This
leads us far from the business case as it has been developed to date. But
arguably we are now at the limits of what that particular approach can do for
business and society. Recent crimes and excesses and the implications of the
expanding reach of business point to the urgent need for a fresh case for
corporate responsibility. It is time to move on, to take up the challenge of
understanding the 'ethical case' in depth, and to use ingenuity and imagination
in applying universal ethics to CSR challenges.
(c) Ian Christie 2005
E-mail: christies@gn.apc.org
[This article originally appeared under the title, 'Honest to Goodness' in
Green Futures, No. 42 Sept/ Oct 2003. Ian Christie is an Associate of the Green
Alliance, New Economics Foundation and http://www.opendemocracy.net and is Joint
Head of Economic and Sustainable Resources Service, Surrey County Council, UK]
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II. 'SOCRATES IN THE MARKETPLACE' BY DANIEL SILVERMINTZ
Finally then I went to the manual labourers. For I was
conscious that I knew practically nothing, but I knew I
should find that they knew many fine things.
And in this I was not deceived; they did know what I did
not, and in this way they were wiser than I.
(Plato, Apology 22c-d) [1]
The Roman orator and statesmen, Cicero, credits Socrates as the first thinker
to 'bring philosophy down from the heavens and into the cities' (Tusculan
Disputations V.10-11). Rather than studying the natural world so as to uncover
the causes that lie behind its order, Socrates spent his days in the
marketplace investigating the opinions of men. Defending himself during his
trial against the charges of impiety and corrupting the youth, he recounts his
lifelong attempt to find someone wiser than he concerning the virtues of a
human life. While Socrates found Athens' most celebrated citizens to be
incapable of explaining their views, he audaciously declares the lowly class of
artisans as the only ones with a valid claim to knowledge. With implications for
discussions of business ethics, this essay will examine Socrates' appeal to
craft-knowledge as instrumental in advancing his understanding of ethical
matters.
Cicero's assessment of Socrates' role in the history of philosophy is not
completely accurate; in fact, Socrates' focus upon the human realm and the
ethical sphere is largely motivated as a response to the immoralist position
promoted by the wandering school of thinkers known as the sophists. All
sophistic reasoning assumes as its first principle Protagoras' claim that, 'Man
is the measure of all things' (DK 80b1). Since there is no consensus among men
and no higher authority to arbitrate disputes, the sophist embraces a position
of complete relativism.[2] Having rejected any claim to absolute truth, the
follower of the sophistic position pursues personal gain without regard to the
conventional mores that attempt to restrain unjust action.[3] While Socrates
idled his time in the marketplace, the sophists were peddling their skills in
outsmarting others to a generation of wealthy and ambitious youth eager to
outdo their companions.[4] One such student of the sophists, Meno, unabashedly
declares his acquisitive ethics: 'and that, I say, is virtue -- to desire what
is beautiful and be able to procure it' (Plato, Meno 77b).
Socrates attempts to redirect Meno and other upstart youths by convincing them
of a realm of truth that transcends the conflicting opinions of men. The
relativist must at least, acknowledge that the truths of geometry and
mathematics are universal and objective. And even if the sophist spins words
refusing to accept mathematical knowledge as objective, he implicitly concedes
the argument when demanding proper remuneration for his teaching.[5] Socrates
additionally demands that the sophist account for the quality of his
merchandise in the manner of other traders in the marketplace. Never himself
charging a fee for instruction, Socrates here raises concerns regarding the
financial success of his intellectual rivals:
For I know of one man, Protagoras, who amassed more money
by his craft than Pheidias -- so famous for the noble works
he produced -- or any ten other sculptors. And yet how
surprising that menders of old shoes and furbishers of
clothes should not be able to go undetected thirty days if
they should return the clothes or shoes in worse condition
than they received them, and that such doings on their part
would quickly starve them to death, while for more than
forty years all Greece failed to notice that Protagoras was
corrupting his classes and sending his pupils away in a
worse state than when he took charge of them!
(Plato, Meno 91d-e)
In spite of its failure to recognize the sophist as a charlatan, the market
should be commended for its ability to discern the true artisan from the
shyster.
By appealing to the objectivity of the true artisan's knowledge, Socrates
dismantles the sophistic embrace of absolute relativism. This argument is not
merely won with words, but even more convincingly, demonstrated through our
daily practices. Even the most fervent defender of the sophistic position
abandons his relativistic epistemology when demanding that objects fulfil a
definite purpose. Not anything suffices as a protective garment for Protagoras
when he is forced to confront the brutal elements of winter. Everyone
implicitly adheres to an objective epistemology as he or she engages with a
meaningful world of serviceable goods. Regardless of how beautifully a table
may be crafted, there is no disputing its deficient status if it cannot support
the weight of objects placed upon its surface. Assuming that one is employing
the object in the manner intended by its maker, the validity of the artisan's
truth claim is readily validated by the user.[6]
So what does craft-knowledge have to do with ethics? Socrates' contemporaries
certainly thought that he was debasing the lofty discussion about ethics by his
incessant appeals to the world of the manual labourer. Callicles chastises him
thusly, 'I believe, on my soul', swears his most belligerent interlocutor, 'you
absolutely cannot ever stop talking of cobblers and fullers, cooks and doctors,
as though our discussion had to do with them' (Plato, Gorgias 491a). Contrary
to Callicles' rebuke, Socrates' intention is to elevate discussions of ethical
matters by demanding the same sort of certainty that everyone assumes in the
mundane world of serviceable goods.
Once Socrates has purged the interlocutor of complete relativism by appealing
to the crafts, ethical notions can be explored under the assumption that they
too conform to objective standards.[7] Just as the culinary art provides
seasoning to foods and the medical art administers drugs to the body, Socrates
wants to know the scope of the comparable art that is responsible for
performing just actions, 'In the same way tell me the art that renders what to
whom would be denominated justice' (Plato, Republic 332d). Notwithstanding
these constant appeals to the crafts, one finds Socrates ultimately promoting a
non-technical conception of ethics.
Although individuals may derive the skills of a given art by studying under a
master craftsman, one cannot become virtuous by mere instruction. Justice and
the other virtues are not realized by merely adhering to a set of prescribed
guidelines, but rather are only manifest in the individual who constantly
strives for wisdom. In light of this non-technical understanding of virtue,
Socrates' use of the craft analogy must be deemed a methodological ladder that
advances the argument but is abandoned once the interlocutor has accepted that
ethical notions conform to universal standards. The virtuous soul shares with
the craftsman a strong held belief in universal truth, yet parts company from
him insofar as he must accept that the truth in which he believes is not wholly
obtainable. In this regard, the craftsman is wiser than the philosopher, whose
greatest claim is that he knows that he does not know.[8]
Although artisans do possess a valid claim to knowledge, there is no assurance
how they will put this knowledge to use. The precise knowledge that qualifies
them as an expert also grants them the ability to apply their expertise toward
malicious ends. Thus the physician, who should be engaged in healing patients,
is the one most capable of killing the patient if he should so desire.[9] So
while the virtuous soul does not achieve his end in the manner of the crafts,
the craftsman is not necessarily virtuous, conflicted between his professional
integrity to serve the consumer and the sophistic temptation to pursue his own
interest regardless of the consequences to others.
FOOTNOTES
1. All quoted passages are taken with minor modifications from Plato, Plato in
Twelve Volumes, Apology trans. Harold North Fowler; Gorgias trans. W.R.M. Lamb;
Republic trans. Paul Shorey, (Cambridge: Harvard University Press, 1967).
Citations refer to the standard marginal numbers printed in all editions of
Plato's works.
2. See in particular Plato, Theaetetus 161c for this interpretation of
Protagoras' maxim.
3. For the sophistic defence of injustice as being more profitable than
justice, see Plato, Republic 338c-9a, 340e, 343c, 348c, 358a-9c and Plato,
Gorgias 483c-d.
4. For the sophist as a merchant in the goods of the soul, see Plato,
Protagoras 312b-313b and the extended discussion in the dialogue Sophist.
5. Aristotle recounts that Protagoras held to his relativistic principles and
actually allowed the students to pay whatever they believed the lessons to be
worth. Other sophists, Aristotle indicates, would demand the fee upfront,
'since nobody would pay money for the knowledge which they possess'
(Nicomachean Ethics 1164a, in Aristotle in 23 Volumes, Vol. 19, trans. H.
Rackham [Cambridge: Harvard University Press, 1934]).
6. For the user as possessing superior knowledge over the producer, see Plato,
Republic 601d; Cratylus 290b; Euthydemus 289b. See Charmides 171a-c for the
notion of testing the artisan's knowledge.
7. For discussion of Socrates' use of the crafts as an analogy for virtue, see
David Roochnik: Of Art and Wisdom: Plato's Understanding of Techne (University
Park: Pennsylvania State University Press, 1996) and Richard D. Parry, Plato's
Craft of Justice (Albany: State University of New York Press, 1996).
8. For Socrates' famous profession of ignorance, see Plato, Apology 21d.
9. Socrates uses this example at Plato, Republic 332d to suggest that the arts
are ethically neutral. He later suggests that the arts may be considered as
exemplary of virtue as long as the necessary secondary art of moneymaking does
not corrupt the art's proper work.
(c) Daniel Silvermintz 2005
E-mail: silvermintz@cl.uh.edu
Daniel Silvermintz
School of Humanities
University of Houston-Clear Lake
Houston, TX 77058, USA
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III. 'ETHICS CODES, CORPORATIONS AND THE CHALLENGE OF GLOBALIZATION' REVIEWED
BY RACHEL BROWNE
Ethics Codes, Corporations and the Challenge of Globalization
Edited by Wesley Cragg
Published April 2005 by Edward Elgar Publishing Limited
Web site: http://www.e-elgar.com
This is a book which will have wide appeal, not just to business ethicists, but
to politicians, members of non-governmental organisations, historians,
economists, the general public and, of course, company directors.
Wesley Cragg is a Professor of Business Ethics at the Schulich School of
Business. In his opening paper 'Ethics, Globalization and the Phenomenon of
Self-Regulation: An Introduction', Cragg neatly sets out the problem posed by
globalization and multi-national corporations: No longer do laws and
regulations fall under the state. The state cannot regulate a company's
behaviour beyond it's own borders. And the problem is getting worse. Individual
states can loosen state laws to attract new businesses, making
multi-nationalisation easier for companies to achieve, fortifying
globalization, hence a more pressing need for international policy in regard to
self-regulation.
Modern forms of communication, the freedom of trade which is thought to be in
the public interest, are two other ways which enable globalisation to grow. The
immediacy of financial transactions is also a relatively modern phenomenon. The
public is concerned about poverty and the environment, and there is much
scepticism about codes of ethics.
Cragg notes that what is common to codes of ethics is 'the need to protect;
against unwanted harms... infringements of personal freedom... fundamental
human freedoms... the importance of ensuring equitable access to opportunities
for personal and/ or collective development' (p.7), hence this book, which is
the result of a university research project, concentrates mainly on rights,
corruption and the environment as well analyses of codes of ethics themselves.
In his first paper, Cragg asks how we are to achieve ethical protections for
the public when the state is no longer powerful in the face of
multi-nationalisation, other than through self-regulation through codes of
conduct by individual corporations themselves? Are ethical codes, both those of
individual corporations and those of international associations, enforceable?
Cragg states that globalization is a phenomenon that is forcing us to consider
this issue. Law vs ethical self-regulation is currently debated in the business
world and CORE, in the UK, are campaigning for law over self-regulated business
ethics codes, just because the latter are not enforceable. But is CORE right?
This book is Canadian and most examples are from Canada or the US. Cragg's
example of a Canadian corporation and the International Code of Ethics for
Canadian businesses provides an exemplar which allows him to argue with an
unrealistic optimism that law is not needed. But even a Canadian company has
seriously violated human rights. In a case study contained in the book we find
both evidence of such a violation as well as the finding that 'a majority of
large Canadian companies active internationally did not 'have codes containing
reference to even the most basic human rights standards' (p.79).
In Cragg's own case study (written with William Woof), which contains gripping
historical, corporate and political information in relation to bribery and the
US Foreign Corrupt Practices Act, he concludes that the FCPA has had virtually
no effect in changing US corporations practice of bribery of foreign public
officials and that his study challenges the view that ethics codes are seen as
'at best a weak alternative to legislated standards' since legislation itself
has shown weaknesses. 'Neither legislatively mandated standards nor voluntary
self-regulation can be relied on as effective' (p.145).
Cragg's own research belies his earlier expressed belief in widespread ethical
commitment by corporations. Cragg claims 'there is widespread agreement that
corporations have ethical responsibilities' and that this is a consensus which
is 'well-grounded' (p.40). Nor is it argued that this really IS an
international view rather a Western/ Japanese one. We haven't reached a stage
of true internationalism which allows us to talk of 'consensus'.
On reading the case studies it is difficult to believe that corporations
themselves agree with Cragg about their ethical responsibilities. For instance,
when the Transparency International's Bribe Payers Index placed the US 9th with
Germany, at the time of the survey Germany had no laws against bribery, yet the
FCPA had already been introduced in the US. As far as bribery goes, it seems to
fall outside ethics as well as law, from the point of view of individual
corporations.
Cragg's research suggests that bribery by the US of foreigners has not been
stemmed because while the US has anti-bribery laws, countries with higher
levels of corruption don't, and corporations don't want to lose a competitive
edge. The ethical question, which is whether corporations should abide by the
norms of other countries isn't addressed.
Returning to the law vs. codes issue, the third paper 'Corporate Codes of
Conduct: Profit, Power and Law in the Global Economy' by Harry W. Arthurs
exhibits scepticism towards codes. While sanctions against violations of codes
is not widespread, Arthurs shows ways in which they could be enforceable in
law, but then they would lose their essential 'corporate' character.
Consideration of new forms of law and the possibility of 'law without state'
might be considered given that globalisation exceeds state law. This too,
though, would take power from corporations committed to the capitalist belief
in a market economy.
The following section of case studies highlights the failure of theory to
reflect reality. Whether or not codes are enforceable is theoretical; the
reality is that they often not enforced. Penelope Simons agrees with Arthurs
about the loose wording of codes, and points out that where a company could
state in its code that it was 'bound' by a commitment to human rights, Premier
Oil is picked out as an example of a company who will only 'promote' such
rights. (p.81). Simons names a surprising number of companies who have behaved
unethically, supporting the pessimistic view that codes are not enforceable.
Although the language of codes is loose, in another paper by Harry W. Arthurs,
'Private Ordering and workers' Rights in the Global Economy: Corporate Codes of
Conduct as a Regime of Labour Market Regulations' it is pointed out that the
same can be said for legislation (p.201), yet the law can be a means of
enforcement. It is not impossible for the state to 'enforce codes which
originate in agreements within sectoral organizations or amongst stakeholder
groups' and these may 'constitute legally binding contracts' (p.204). This
would rely on self-regulated compliance to codes of conduct. States do not have
the resources to inspect every workplace to assess labour legislation is being
followed (p.203), so it is in the interest of the state to encourage the
self-regulation in the form of codes of conduct.
Of course it is not in fact the case that states do intervene to enforce
self-regulation.
It is depressing to find how far from an international business ethic we are,
and how much further from a global 'law without state'. Although The Global
Reporting Initiative has set out Guidelines, Simons reports that Talisman's
2002 report, for instance, was 'developed in the spirit' of the GRI guidelines
(p90), a form of language that virtually admits that it doesn't fit
international ethical guidelines.
In the next case study '"Voluntary" Ethical Conduct: Anti-Money Laundering
Compliance and the Financial' by Margaret E. Beare we find that international
law suffers the problem that there is not in fact an 'international community',
but rather 'diverse vested interests' (p161). While Canada has legislation
making reporting on suspicious transactions in financial institutions
mandatory, the European Parliament wants to 'reduce the burden on lawyers,
accountants and tax consultants' (p.179). This is so even though research has
shown that 'lawyers were professional group that was most frequently found to
have been used by launderers' (p156).
As with Cragg's example of the FCPA, Beare's research shows that even when
there is legislation, as in Canada, there are still problems with compliance
and, in the case of money-laundering, financial institutions need highly
trained in-house individuals to make reports, an expense to which banks, who
are found to prioritise profits, will not want to meet.
After these papers, I was pleased to the read the next case study 'Ethics Codes
and MNCs as Minority Shareholders' by William F. Flanagan and Gail Whiteman.
Contrary to Beare's claim that there is no such thing as an 'international
community', it is argued here that a corporation can be held to have social and
environmental responsibilities as a 'global citizen' (p.213). Furthermore, we
find examples of codes of conduct of six multi-nationals and the language is
not loose. Terms such as 'commitment' and being 'bound' by the code suggest
compliance is likely. However, the field studies undertaken by Flanagan and
Whiteman show that that Alcan (Canada), for instance, is found to have no CSR
programmes even though they claim CSR is their 'goal' (p.219) and refused to
answer questions on their code. Norsk Hydro (Norway), on the other hand, has
detailed policy commitments and was willing to elucidate these further on
request.
Norsk Hydro is a multi-national who, though a minor shareholder in the
Brazilian company Mineracao rio do Norte which has and is facing environmental
and social problems, is prepared to spread its CSR policy to the extent that it
will attend CSR meetings at MRN in Brazil. That its success is slightly limited
is due to MRN's own approach to CSR and that there are no procedures in place
to ensure compliance is probably due to Norsk Hydro having only 5 percent
interest so this is a truly inspiring example of a multi-national doing it's
best to behave as a global citizen.
The case studies in this book are enormously informative and fascinating and I
am persuaded to take shares in Norsk Hydro!
The final section is on 'future directions'. The first paper in this section,
by Stepan Wood, analyses codes of conduct specifically in relation to
environmental management systems. While voluntary and vaguely worded, these
systems have given rise to experts who are prepared to oversee 'mundane'
'technical routine' (p.278) and may well be a model for other codes of conduct,
which isn't very inspiring in the light of Wood's description of environmental
management systems as 'MEGO' (my eyes glaze over) (p.276) when the subject is
brought up in the boardroom. Furthermore, although such codes might have given
rise to expertise in the routine of dealing with environmental problems, what
constitutes 'intolerable risks to human or ecosystem' (p.253) are not
specifically addressed in the code leaving it open to organisations to form
their own decisions.
However, this paper argues that self-regulation does not happen in
organisations without awareness of the cultural and political arena and there
is a discursive relationship between politics and organisations. That this is
so by no means encourages us to think that when it comes to compliance rather
than simply creating codes, ethical behaviours are on the increase. It is seen
in this book that codes are not always followed and the language allows leeway.
Ethical behaviour is not increasing. In the following paper by Mark S Schwartz
on the US Federal Sentencing Guidelines for Organizations (Guidelines) we find
that since the enactment of this law 'numerous corporations have been
prosecuted' (p.297) and, worse, 'the number of organizations sentenced has
steadily increased in almost every year'. Such evidence suggests that even with
a law which provides punitive action against organisations who violate their
codes of conduct, conduct is not improving. Furthermore, state laws provide no
answer to multi-nationals' behaviour in 'host' countries and unless there is
international agreement on policy and law, globalisation remains a problem.
In 'Voluntary Codes and New Sustainability Paradigm', David V J Bell speaks
with a tone of optimism for future environmental and social progress. It is
difficult to see that this optimism is warranted. Whilst it might well be the
case that 'the World Business Council for Sustainable Development' which is a
'coalition of 150 international companies united by a shared vision of
achieving sustainable development' (p329), this is not very impressive in light
of the fact that there are 37,000 multi-nationals (p.323). While Bell says that
'the problem with pessimism is that it can become self-fulfilling' (p344), in
the light of the problems raised in this book it might also be seen as
realistic. It is true that in order to progress a vision is needed and when it
comes down to practice the increase in self-regulation together with
legislative punitive measures might be a way forward at the national level, but
while multi-nationals are based in rich industrialised countries in which
corporations can be richer than the state itself, any international agreements
will be fuelled by the desire of organisations for profit.
This is not incompatible with ethical action if we are able to believe that
specifically ethical or altruistic motivation isn't essential to ethics. Taking
codes as ethical in an instrumental way such that a corporation can commit to
certain values as long as they don't damage, but further, self-interests, is
what Cragg, in his conclusion, calls the current 'dominant paradigm' (p.356).
Cragg suggests that the way forward need not be on the basis of instrumental
ethics on the part of corporations, but through the values upheld by
non-governmental organisations, the number of which is vast and growing. Where
these are international and constitute agreements between states, a 'new social
contract' (p.363) with ethical force beyond those of individual states can be
formed. Whilst the papers in this book highlight problems with enforcement,
Cragg's optimism might be well-founded. David Bell tells us that 'According to
the Environics 2001 public opinion survey of the G20 countries,
non-governmental organizations (NGOs) and religious groups/ churches rank
higher in the public's belief that they can be 'trusted' to operate in the best
interests of society than either business or national governments.' Again, this
has a rather depressing aspect to it, but as globalisation has transformed
issues of concern to the public, new structures need to be put in place to meet
its challenge.
On finishing this book I found that Cragg's optimism had inflected my own
pessimism. I also found the book so much more interesting than I expected it to
be, to the extent that some of the papers were positively gripping.
(c) Rachel Browne 2005
E-mail: RachelEBrowne@aol.com
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