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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 37
18th April 2007
CONTENTS
I. 'A Convention Theory Approach to Corporate Morality' by Matthew Haigh
II. 'Transitional Models for Global Economic Relations' by Wolfgang W. Osterhage
III. 'CSR From a Philosopher's Perspective' by Geoffrey Klempner
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EDITOR'S NOTE
In this issue Dr Matthew Haigh from the University of Southampton School of
Management raises an issue which is of concern not only to business ethics but
to moral philosophy in general: the conditions under which a company, as
opposed to an individual can make ethical decisions and behave as a morally
responsible entity. This involves considerations of the nature of practical
moral argumentation as well as recognizing the crucial role of leadership and
corporate culture. The key to a solution consists in the way that individuals
in a company are collectively involved in developing an ethical stance and
modifying that stance in response to perceived inconsistencies in an ongoing
reflexive process of self-criticism.
Following his article in the previous issue, 'Economic Growth as Part of a
Semi-Chaotic System', Wolfgang Osterhage proposes a new model which applies to
all aspects of negotiation and collective decision making, which sees the
individuals and groups as part of a mutually adjusting framework -- analogous
to a 'neural net' in computing -- where instead of fixed rules and
relationships, a culture of mutual trust operates allowing the players to act
on their own initiative while at the same time remaining sensitive to the
actions of the other players.
On March 16 I gave a talk at a one-day conference in Prague on CSR, organized
by the British Chamber of Commerce http://www.britishchamber.cz held under the
auspices of the Social and Health Committee of the Senate of the Czech
Republic. Presentations were given in Czech and in English with simultaneous
translation provided via earphones. Despite the sizeable logistical problems
that this posed, the event was a great success and I learned a lot from the
other speakers. Below I have reproduced the script for my Powerpoint
presentation.
Geoffrey Klempner
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I. 'A CONVENTION THEORY APPROACH TO CORPORATE MORALITY' BY MATTHEW HAIGH
The automobile industry's perceived reluctance towards
becoming more environmentally friendly may not be rooted in
a lack of willingness [or] ethics ... Instead, it may be
caused by institutionalised perceptions. (Rosinski 2006)
The abridged quotation prefacing this essay admits of two interlinked
assumptions in 'business ethics' research. One, owners and professional
managers of businesses recognise moral responsibilities attaching to aspects of
business operations. Two, actors are constrained by institutional arrangements
which are reflected in the perceptions of market and non-market participants.
Both assumptions, each an essentialist element of the problem of capitalism,
have not been satisfactorily resolved in the literatures of management,
economics, and business ethics.
Criticisms levelled at contemporary approaches to corporate social
responsibilities (CSR) have concerned the posing of arguments in terms of
individuals' decision-making. The bases of such ethical arguments employ
elements of utilitarianism (honesty pays), virtue ethics (it is good to be
good) or developmental psychology. See, Bergman 2002, Colby and Damon 1994,
Solomon 1993, and Trevino 1992. Concurrence in the capitalist firm of moral
responsibility and system efficiency (return on invested capital, market share
and so on) has been addressed in industrial sociology (Boltanski and Thevenot
2000, 2006) and organisation studies (see, Nielsen 2006). Welfare economics and
critical accounting have wrestled with neo-liberalism's thin promise of social
welfare (Hausman and McPherson 1993, Lehman 1999, Keller 2007, Noreen 1988) as
another field has focused on implications of the principal-agent framework for
moral relations (Armstrong 1991, Gray and Jenkins 1993, Nelson 1993, Schweiker
1993, Shearer 2002).
Many studies have expressed concern at the absence of answers for problems
posed. Discussions remain, however, at least for the most part, self-enclosed
within discipline. Philosophical arguments that would be salient in discussions
of corporate responsibilities are rare in management journals. Consideration of
methods by which a public corporation might tackle moral problems outside a
shareholder remit is relegated as junior league in philosophy forums.
My contribution is to address limitations of within-discipline research by
bringing certain insights from moral philosophy into discussions on CSR most
often appearing in the management field. The aim of the project is to advance
CSR research from focuses on the moral identity of the individual professional
manager (as criticised by Parker 2003); market incentives and regulations (see
the hoped-for processes in Porter and van der Linde 2000); and trivialities and
effects (as noted by Shaw 1996).
Methodological note
Before we try to make sense of (presumed) frustrations to effective moral
decision-making posed by the social-capitalist corpus, I need to do clarify the
role of criticism in the essay. For a criticism to be valid, it must be able to
justify itself, especially when it is dealing with justifications such as those
whose activities are the object of the criticism itself. I take two referents.
The first is a commitment to the conventions of universalist moral thinking.
Important examples of ethical universalism are the Stoics, Kant, and Habermas;
this essay draws from recent work in France. To provide a briefest of outlines,
Kant's categorical imperative holds that the ethic or value held as object of
moral decision should be determined using a principle that a moral decision is
acceptable if all affected would agree to it. The procedure devised is that of
the tribunal in which stands the rational, impartial observer (Kant 1997: 31).
Habermas remedies the absence of additional substantive guidance by describing
three levels of possible participation in moral argumentation: the speaker, the
listener and the watcher. Those that would be affected by the outcome of
argumentation take turns as each. An 'ideal speech situation' is thus achieved
whereby the interests of all are preserved without compromise (Habermas 1990:
12). The context-bound application of Habermas' model has been criticised by
many, including Habermas himself (1993: 14). With respect to corporate
decision-making, discursive rules of reversible position-taking and
non-coercion would appear unlikely in usual competitive market environments.
A significant recent contribution in the universalist vein has come from Luc
Boltanski. In their book On Justification, Boltanski and Thevenot (2006) make
three main arguments:
* The validity of justice comes from its place as the primary
ethical value in a common humanity;
* The operation of value depends on a proper analysis of the
constraints that derive from conventionally situated
arrangements;
* leading to the notion of a test of validity, to which all
arguments are subject.
The above constitutes a test of moral competence. The pluralistic model finds
salience in discussions of the issue of integrity of CSR practice. This claim
is based on three aspects of collective morality:
* Multiple points of accountability imposed on the firm
highlight the requirement of competence to construct a
moral argument.
* The requirements of competence are reflexivity and
coherence.
* Adequate preparation for competence requires a robust
articulation capable of defending itself in a range of
conditions.
Discussion of these points is reserved for a later section.
A second referent is Foucault's later work (2001) catalysing requirements of
reflexivity in morality, culminating in the role of a moral exemplar. At
immediate issue is apparent antagonism between the two referents. Would not a
principle of argumentation clash against an ideal of an individualised ethic?
If one is to follow Kant's intention, ethics are arrived at by processes of
debate and reason.
Resolution is found in the function of the individual ethic in a shared
morality. Competence models require that the range of human values be agreed
upon by processes of reason. A panoply of individualised ethics and systems
concerns in a capitalist firm is not denied in a competence model providing all
values are agreed. As Cordner (2004) notes, a moral exemplar may be expressing
an individual ethic, but it does not follow that there is no universality.
Further, possibility that any person could be represented as an exemplar
implies a universal ethic (Foucault 1986). Tension between the universalist
ideal and the individual ethic is relaxed.
The remainder of the essay proceeds in two parts. The next argues that market
expectations affect the ability of the firm to argue in morally coherent terms.
A second section is taken up with the requirements of the exercise of moral
accountability.
Coherent moral argumentation
Possibility that corporate social responsibility might imply moral obligations
is founded on an assumption that a corporation can possess moral agency. Agency
is usually held to mean that the identification and exercise of moral
responsibility follows if an individual or collectivity is aware of the moral
nature of its decisions and actions (Mackie 1977). Let us briefly consider the
bases (meta-ethics: Williams 1985) of a corporation's moral agency.
Graham (2001), building from French (1987) and others, sets out three
conditions for collective moral agency:
* an individual action performed within the collectivity
becomes significant only because it is part of a collective
action (e.g., shareholder voting);
* only the collectivity performs the action resulting from
individuals' actions (e.g., returning a board of directors);
* the persistence of an entity does not depend on the
persistence of the particular individuals who compose it
(e.g., the corporation survives if the directors are
replaced).
This would receive support from Judith Butler (2005), who argues that relations
between and with corporations are morally constituted by virtue of singularity
of the corporate form. The relevant issue, then, is not ethics. The problem of
moral behaviour of the capitalist corporation turns to coherence of
argumentation.
Given the variety of demands and expectations placed on the firm along the
capital transformation process, it becomes appropriate to examine how moral
agency might be discharged. Judgements issuing in arenas such as social welfare
and environmental sustainability are unlikely to connect to authentic practice
if such are dependent on self-interest, self-deception, wishful thinking or
adaptive judgement formation (Long 2004).
These four aspects describe the foundations of corporate management
decision-making. Self-interest brings a bias to moral decisions in the sense
that decisions are assured validity only if seen as conforming to the narrowly
defined utility of the capitalist collectivity (Feinberg 1995). The remaining
three aspects are non-rational, obscuring relations between judgements and the
theories from which those judgements are derived (Dreier 2002). All are
immanent to the relativistic stakeholder analytic used most often to guide
corporate social sensitivities (Reed 1999).
The result? Unfortunately, often unauthentic practice. MacIntyre (1985: 74) has
noted that efficiency concerns will in the usual case make it difficult for
capitalist organisations and corporate workers will to express moral agency.
Significant scale of unauthentic CSR practice is suggested by a normative remit
delimited to self-interest and efficiency concerns. Regulatory, financial and
competitive institutions restrict moral agency to effective dealings with
non-investor groups of stakeholders, with investors usually accorded priority.
The exercise of moral responsibility
Under consideration is whether organisations can validate moral norms that
cannot be appropriated by capital. Moral decisions will stand against
possibility of corruption to the extent that their agents are confident in
resultant judgements (Long 2004: 121). Confidence comes from processes of
revision, argumentation, and testing. Corporate interests, patterned according
to relativistic, consensus-based, problem-solving styles of decision-making
(Hausman and McPherson 1993), have little truck with the possibility of, let
alone the requirement for, reversion of decisions.
The conditions for moral agency are quite different, requiring a 'narrative
unity' (Moore and Beadle 2006: 378) for the voice of the agent to be heard and
understood. For a firm to appropriate, disseminate and reflect the shared
values of its organisational members, let alone those of surrounding society,
management has to deploy an appropriate strategy. A possible procedure is
provided in a particular form of competence model devised by Boltanski and
Thevenot (2000).
Generally, the salience of a competence model with respect to decisions made by
a public corporation is provided by four aspects: possibility of efficiency;
recognition of 'situated' values; non-prioritisation by exclusion (argument is
required); and improvement with reiteration. Importantly, the formal
construction is expected to preclude claims of social responsibility from
'being too easily reduced to hypocritical moves associated with the defence of
particular interests or to unfounded illusions' (Boltanski and Thevenot 2000:
211).
Figure 1 below shows the model of Boltanski and Thevenot (2000). Figure 2 gives
my 'amendments' thereof.
Figure 1 (please click)
http://isfp.sdf.org/images/haigh1.gif
Figure 2 (please click)
http://isfp.sdf.org/images/haigh2.gif
In Figure 1, competence to make an agreement begins with the notion of a
reality test accompanied by a codification or at the least an explicit
formulation of valid proof. This gives rise to a metaphysical capacity where
persons have to refer to something which transcends persons, and referred to as
a principle of equivalence. To criticise or to justify (the model having dual
utility in this respect), the actors must extract themselves from the immediate
situation and rise to a level of generality.
Despite claimed realist tendencies, Boltanski and Thevenot do not support their
model with description of a method for arriving at a 'level of generality' by
which agreement would be determined. I address this absence with several
procedural steps. I call the resulting schema an articulation of
responsibility. Looking from the top of Figure 2, a possible ethic is first
suggested for consideration by the firm. Its candidacy is then assessed.
Subsequent processes of argumentation act as a test of the validity of the
chosen ethic. I name these processes, respectively, tests of decision,
reflexive consideration, and mitigation of risk of unauthentic practice. They
are described below.
Tests of decision
A competent moral agent must realise and accept that it possesses a moral
constitution. Foucault developed a kind of moral self-constitution in which the
subject forms itself in relation to sets of moral norms (Osborne 1999: 48). The
concept of parrhesia, or moral courage (from the Stoics), refers to a type of
relationship between the individual and what he or she says, free of rhetorical
form and carrying personal risk to the speaker (Foucault 2001: 12). The
objective is honest practice, achieved by deciding on a certain mode of
practice that will serve as a moral goal. This requires self-examination and
monitoring, by which the speaker self-constitutes as a tested, moral exemplar.
Prior to methods of application, a requirement for self-critique needs to be
considered.
Reflexive consideration
The firm faces a plethora of possible decisions and a constrained choice of
acceptable ones, giving rise to a need for organisational self-critique.
External goods essential to the system are immanent to capital. In terms of how
the capitalist firm might constitute itself as a morally responsible agent, the
danger is that in surviving, scope for other considerations is exhausted.
[It is] not simply in the variety of moral values that one
has to recognise the diversity of the specifications of the
just, but also in the confrontation of technical,
economical, social and other imperatives. (Boltanski and
Thevenot 2000)
Examination of the conditions necessary for integrity of speech and actions is
the ground work of moral accountability. At issue if the fact that moral actors
-- firms and individuals -- can and do hold economic security and wealth as
important. In most cases, excluding economic goods from moral sets would
engender false dichotomous relations between the ideal and the real.
One possible model for organisational reflexivity is reflective equilibrium: a
concept that takes as central the idea of coherence between our moral beliefs,
and the decisions that flow from those beliefs, and the theories that support
them (Long 2004: 117). One revises constantly particular moral judgements and
the theories underpinning them until the actor is satisfied that each supports
the other.
Unauthentic practice
A robust model of moral decision-making is one that can cope with constraints
associated with the arrangement of the situation in which moral agents are
placed. Boltanski and Thevenot claim pragmatic guidance is necessary if the
stakeholder analytic is to be jettisoned in favour of a pluralism without
relativism. Practical guidance, however, has not been forthcoming.
Two aspects of organisational life offer possibilities. Both concern momentum
of moral leadership which proceeds from parrhesiastic practice. Claims of
CSR-type practice have long been identified as a problem (see, Guthrie and
Parker 1990). Parrhesiastic practice has been argued as providing a resource to
assess such claims (Luxon 2004).
Within the firm, the speaker becomes the managing director: 'It is largely the
duty of the management to specify, by its speech and its actions, what type the
group of people that the company is made up of looks like (the category into
which the group of people falls)' (d'Iribarne 2003: 1300). When the speaker is
the leader, the moral image of the leader becomes an organising principle --
'like father, like son' (d'Iribarne 2003: 1288) -- part of preparation for
(moral) decision-making.
In reaching a parrhesiastic stance, the speaker must display integrity and this
is done by establishing the integrity of those putting the challenge. Two
outcomes are sought. One is virtue-in-virtue, meaning that the selflessness and
vulnerability displayed of the speaker becomes the moral ideal. The other is
integrity of action.
If intersecting with individual conscience and integrity, organisational
culture provides sufficient resources for management to draw from in navigating
moral issues attached to company operations (Roberts 2001). The mediation of
culture on moral decision-making is contingent on leadership. The role of
leaders in firms 'is to contribute to stating, by their words and acts [how
organisational culture is to] regulate the functioning of the enterprise'
(d'Iribarne 2003: 1305). Unequal relations of power between workers and
management are countered by relying on argumentation.
The creation of momentum in organisational community refers to leading by
example outside the firm. Leadership of firms is shaped by a context of other
competing firms. Isomorphism has been defined as 'a constraining process that
forces one unit in a population to resemble other units that face the same set
of environmental [functional] conditions' (DiMaggio and Powell 1983: 149). The
application of sets of moral norms to market systems is to the point. Its
efficacy is that isomorphic effects might counter organisational risks for
moral first-movers (Bansal and Roth 2000, Moore and Beadle 2006). Simulated
co-operation of entirely self-interested agents can elicit like co-operation
from others. Risk is mitigated and moral responsibility is shared.
Although moral risk has no theoretical prior in capital markets (Noreen 1988),
investor capital is marked by flighty and herd behaviour (Carhart 1997) and
expectations of some isomorphic moral behaviour are warranted.
The outcome sought from applying the requirements of reflective equilibrium is
a certain conditioning of organisational culture. A ubiquitous problem for the
firm is meeting market-derived demands. The problem of corporate
responsibilities lies in concurrent discharge of other sorts of
accountabilities. Their intersection heightens requirements of organisational
reflexivity. This, in turn, provides the tools for a corporation to justify
practices using appropriate language and arguments.
Preparation for organisational reflexivity is reiterative with moral bravery.
Business ethics and corporate responsibility are shrouded by the language of
the market. The usual outcome is a narcissistic preoccupation in the duality of
ersatz benefactor contra efficient economic agent. In the customary case, a firm
has little need to define itself in relation to others and so would dispense
with the former. In contrastive ideal, argumentation over choice of values
constitutes the firm in relation to sets of justified, internalised moral norms.
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Comments of seminar participants at Leicester University Management School are
acknowledged.
(c) Matthew Haigh 2007
Southampton University School of Management
Email: m.m.haigh@soton.ac.uk
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II. 'TRANSITIONAL MODELS FOR GLOBAL ECONOMIC RELATIONS' BY WOLFGANG W. OSTERHAGE
1. Recapitulation and Intention
This is the second paper in a series of three dealing with questions concerning
a non-existing framework for the current global economy. The first
contribution[1] summarized the basic principles and boundary conditions within
which economies can perform. Economic growth as a precondition for long term
stability was identified as the driving force. This assumption was put to the
test by applying it to chaos theoretical concepts. It can be shown that a
growth economy operates in a quasi-chaotic state, following a narrow line
between overheating and sudden breakdown. This relative stability can only be
maintained by ever increasing costs, which have to be subtracted from the
overall result of growth itself. The question to be investigated further is
whether there are potential scenarios that will allow for a controlled
transition to a more stable economic regime.
This paper will first look at non-classical criteria that can be of potential
use in a changing global economy. The concepts of subsidiarity and sufficiency
will be introduced. These have to be seen against the backdrop of the dwindling
role of the nation state. In its place networking seems to point into a
direction, which can accommodate such criteria. Again models from the technical
sciences (neural networks) will be introduced to develop a theoretical basis
upon which the concepts of self-organisation and decentralization will be
developed. Examples for already functioning mechanisms are temporary alliances
and public and private partnerships. Further considerations will open the
debate about a necessary humanistic basic for these concepts to work, which
will be discussed in the third paper.
2. Non-classical Criteria
2.1 Subsidiarity
An important element for our further discussion is the concept of subsidiarity.
Within our context this means: empowerment of the operative entities in
organisations -- the lower grades of the hierarchy. This encompasses ideas
like: team building, group work, decentralization.
People have come to know that the necessary knowledge to implement tasks lies
mostly with the operative units and less at the executive level. If that is the
case, then responsibility and liability might as well be shifted to the lower
levels in turn. Within a framework, to which all reasonable participants can
agree, mechanisms for self regulation with a high degree of efficiency can be
implemented. Thus subsidiarity is regarded as 'consistent' with efficiency.
This leads directly to the networking structures to be outlined further on.
2.2 Sufficiency
The idea of sufficiency seems to run counter to both efficiency and consistency
in the above sense. Sufficiency means, what it says: a measure can be found
according to which certain requirements are fulfilled but not above a certain
level[2]. It therefore can also mean the conscientious reduction of personal
needs, wherever that is possible. This again runs contrary to the concept of
economic growth. Sufficiency is regarded as a break on economic progress and
therefore on long term stability.
However, if the assumption of continuous quantitative economic growth no longer
holds, because either certain resources run out or because growth itself becomes
too costly to be efficient, the relationship between subsidiarity and
sufficiency can become of prime importance. In the end this may lead again to
growth in a different sense -- growth based on quality or immaterial gains.
Thus sufficiency becomes a yard stick for qualitative growth. Both sufficiency
and subsidiarity serve as critical criteria in a network economy.
3. Role of the Nation State
The nation state was conceived to guarantee peace, security, freedom and the
survival of its citizens[3]. The state was supposed to achieve this via its
proper institutions and instruments: tax authorities, legal norms, sanction
mechanisms und police. Politically speaking the precondition for this is
sovereignty.
But the nation state is coming increasingly under pressure. Globalization is
taking away its sovereignty. Of fundamental importance in this game are among
others financial transactions, which do not stop at anybody's border and with
respect to their volumes. The institutions of the nation state lose their
controlling functions, as a result of other powerful players having arrived at
the scene: institutional capital investors, hedge funds und pension funds. They
control larger capital resources than the GDP of some nation states themselves.
Even rating agencies exert influences that challenge the possibilities of
single states. Therefore the nation state of the old order can no longer solve
problems in a variety of politically important fields: taxation, social und
environmental tasks.
There is no lack of ideas, how to either reinvigorate or supplant the resulting
void: global governance, world citizen councils, cooperation in plurality or
pooled sovereignty. The discussion basis, however, is not confined to rational
practicability, but rather dominated by ethical concepts, which in turn deviate
from each other according to who leads the discussion.
4. Networking
The common denominator to all approaches to find ways and means to escape the
current void can be found in some sort of networking. This will not inevitably
lead to some automatism and well-functioning system by itself. It rather points
to a direction, where in all probability the road will lead. This part will
initially provide some theory about network dynamics, before discussing the
mode acting participants will be operating in. The practical applications then
will provide some examples already in existence.
4.1 Theoretical Considerations
One possible networking model, which seems useful within the context of
intelligently communicating actors in a global economic community can be
derived from the lessons of neural networks applied to social organisations.
A neural network can be explained as an array of processors (neurons), each of
which holds some intelligence. These processors are connected in a many-to-many
fashion via synapses. Each processor fulfils a specific task within this net,
but its overall result is achieved as a common effort of all. Thus the
recognition of messages for example can be obtained by training the net such,
that the message pattern is mapped over the whole array.
Neural nets have two features of interest to our problem area:
(i) the strength of the connectivity between any two
neurons increases with the usage of this communication path
thus facilitating communication as such;
(ii) the whole or part of the network that is excited, i.e.
preferentially employed for specific tasks, tends to migrate
to an energetic minimum i.e. to efficiency.
Using the physical qualities of a neural network, its features can be mapped on
social organisms, such as companies or trading networks. There have been
attempts with some success to replace classical process models within large and
complex organisations by assigning processor status to operating units such as
sales or accounting (depending on the granularity of the model employed). The
dynamics of the information flow between these units can be further reduced to
the model of synoptic growth. The resulting organic map can then be used as a
first basis for organisational improvement by redesigning the net for specific
intra-company goals to be achieved. On a much larger scale such a model could
be used for global economic relations.
4.2 Self-Organization and Decentralization
A popular consulting approach to the reorganization on the factory floor used
to be called 'fractal factory'[4] -- a derivative from chaos theory. It
basically meant the dissection of the whole production process into small and
self-regulated units. This concept was later advanced to various models of job
rotation. In classical deterministic organisations the following qualities
could be observed: hierarchy, rigid regulation, formalisms, authoritarian
management, rules for any options -- and lastly: cultures of mutual distrust.
In organisations, which function on a more or less stochastic basis, other
qualities are more important: individual degrees of freedom for decision
making, flexible units, group work, decoupled control functions, self
organisation, rules only as a general framework, fuzzy predictions of future
events -- and: a culture of mutual trust.
In the first paper the challenge boiled down to: how can the path of a growth
economy be abandoned without provoking a crash into non-linear dynamics? -- By
combining certain criteria developed there and in the above there seems to be a
feasible solution to this problem:
* Modern economic systems even on a global scale can be
broken down into self-organizing units, each of which act
as a processor in its own right within an exchange network.
* The dynamics of this network automatically leads to an
energetic minimum, thus stability.
This means that the strange attractor 'growth' can safely be replaced by a
fractal neural network. This network still follows the rules of chaos, but is
held in equilibrium by the dampening effects of self organisation under the
constraints of some mutually agreed framework encompassing such criteria as
subsidiarity and sufficiency.
4.3 Temporary Alliances
Who would participate in such a network with what kinds of ambitions? First of
all, people and organisations, which come together and want to achieve results
for particular aims, do not necessary organize for purely economic reasons from
the outset -- at least not always. But they are bound by common interests.
Trading partners obviously have mutual monetary gains in the forefront of their
minds. But the big players of the past -- governments and states -- have other
priorities: fiscal returns, power etc.
The big players of the past having been reduced to some sort of observer status
can still come into the game by taking on different roles. This means adopting
certain propositions and needs brought forward by other partners. Besides
governments there are international institutions and organisations,
multinational or even only nationwide operating companies, charities and
non-governmental organisations -- all of which follow specific aims that they
cannot achieve on their own. Therefore they are looking for alliances and
multiple partners -- depending on the size of the project.
Of course there has been cooperation between governments and big businesses in
the past in contractual relationships. But globalization permits additional
forms of engagement. One specific feature is the fact that such alliances tend
to be of limited duration. Once a project has been consumed there is usually no
reason to continue sticking together in a formal contractual framework.
One example is the recent tsunami catastrophe in south-east Asia. United
Nations organisations, local governments, churches, private companies
(insurance and early warning systems suppliers), non-governmental organisations
all came together in impromptu arrangements. There was no overriding
administrative body to spell out the rules and divide the plan of action. The
dynamics permitted for partners to opt out once a certain tasks was finished
(clearing the rubble) and for others to come in (clean water supplies). And
most of it was not done on a charitable basis.
Other interesting partnerships that involve International Organisations,
private companies and local governments may enter in what is called PPP (public
private partnerships).
4.4 PPP
Public private partnerships can and do exist on local, governmental and global
levels. They are increasing on a global scale[5]. Whereas scepticism has
prevailed in the past driven by fear that multi-national companies might take
over the interests of international organisations, evaluations of such
partnerships show that such reservations are usually unfounded.
The quantitative increase in such partnerships can be classified into five
different categories: policy dialogue, advocacy partnerships, mobilizing
private funds, information and learning partnerships and operations. Examples
of real functioning partnerships in one or the other category are: 1 billion
USD donation by Ted Turner of AOL to the UN that resulted in the UNF (United
Nations Foundation) und UNFIP (United Nations Fund for International
Partnerships); cooperation between various organisations and multinational
companies in the fight against AIDS; partnership between CISCO and UNDP in the
project NetAid; the Investment Deliverables Initiative between UNCTAD and the
International Chamber of Commerce; the Business Partners for Development
Program, involving more than 120 companies, civil organisations and government
agencies under the umbrella of the World Bank; the Refugee Registration Project
between the UNHCR and Microsoft.
These are but a few examples of functioning PPPs. Of course the motives may
vary between the Partners. But the important conclusion is that new forms of
cooperation are created that transcend classical frameworks and demand the
application of rules individually designed on some sort of contractual basis to
make things work.
5. Further Considerations
Coming from the chaos theoretical model of economic growth two non-classical
complementary criteria have been introduced which may serve as some kind of
measure for future economic relations: subsidiarity and sufficiency. The
applicability of these criteria has to be seen in the context of the
diminishing role of the nation state and therefore of the loss of the generally
accepted growth gauge. Looking for a substitute for quantitative growth as the
one and only stabilising 'strange attractor' to maintain a quasi-chaotic state
of economies, a model based on neural network structures was introduced.
Thereby the network theory itself was outlined and the concepts of
self-organisation and decentralisation advanced. The applicability of this
model was demonstrated on the examples of temporary alliances and public
private partnerships.
The limits of these ideas are obvious in the absence of legally binding
agreements and enforcement procedures on a global scale. There are also no
systematically binding mechanisms that would guarantee automatic adherence to
such principles. That is where the human element itself comes in. In all the
above and elsewhere discussed systemic contexts the underlying substrate, on
which everything is built and relies upon is the human participant. He or she
is both the perpetrator of the necessary action and the object of the result of
it. This shall be discussed further in the last one of this series of three
articles.
REFERENCES
1. W. W. Osterhage: 'Economic Growth As Part of a Semi-Chaotic System',
Philosophy for Business, Issue number 36, March 2007
2. M. Linz: 'Was wird dann aus der Wirtschaft?', Wuppertal Papers, Nr.157,
January 2006
3. J. Hubner: Kollektives Handeln im Zeitalter der Globalisierung', in Im
Labyrinth der Ethik', cmz-Verlag, Rheinbach, 2004
4. W. W. Osterhage: PPS in der fraktalen Fabrik', HPuG lecture, Dusseldorf, 1988
5. B. Bull et al.: Private Sector Influence in the Multilateral System', Global
Governance, Vol. 10, Oct.-Dec. 2004
(c) Wolfgang W. Osterhage 2007
E-mail: wwost@web.de
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III. 'CSR FROM A PHILOSOPHER'S PERSPECTIVE' BY GEOFFREY KLEMPNER
'The Meaning of Life'
Once in a while, it's good to ask ourselves what it's all about, or why we live
the way we do. These are not questions just for philosophers but for everyone.
For a long time, I couldn't understand why people like money. You might laugh
at this. I've been a philosophy student for most of my life. To be a thinker
defines my essence, what I am or strive to be. How can people work, just to
survive or make a living? It made no sense to me at all.
It took a while, but finally the penny dropped. I learned to admire rather than
despise the courageous entrepreneurs, the far-sighted CEOs, the advertising
geniuses, the brilliant company lawyers and accountants, and all the
indefatigable managers and workers who keep the wheels of the economy turning.
I learned to see this immense activity as a fascinating and noble contest,
where individuals strive for excellence and where material rewards are merely a
necessary element in the process, not the be-all and end-all.
The pursuit of profit defines the game. But that doesn't mean we have to narrow
our sights until all we can see are columns of figures. That is the basis of my
case. There is more to life in the business arena. There is room for thinking
-- idealistically but also practically -- about ethics and values.
'PR Fig Leaves'
In 2004 the UK Institute of Directors[1] held a debate, 'This house believes
that Corporate Social Responsibility is a PR fig-leaf.' The motion was carried
by a narrow margin.[2]
That raises the question: Is all the talk about CSR just window dressing and
token effort? To answer this we need to be clear about what we mean by CSR.
Towards the end of 2005, I had the opportunity to talk to Robin Aram, when he
was Vice-President for External Relations and Policy Development at Shell. A
year earlier, Aram had been responsible for spearheading a successful campaign
by the ICC against the UN Human Rights Commission's proposed Norms on Business
and Human Rights, which had taken four years to draft. Human rights groups were
up in arms.
The main topic of our discussion was Shell's Corporate Responsibility program.
I was left in no doubt that Shell have made big efforts to increase
accountability and transparency at every level of their organization. Whistle
blowing is encouraged. Bad practices are rooted out.
However, Aram candidly admitted that only a small fraction of Shell's Corporate
Responsibility program involves any additional capital investment.
To take one widely publicised example, the environmental damage in Nigeria
resulting from Shell's operations there has still not been addressed, despite
an impressive surge in profits announced this year.
I am going to argue today that if you are going in for CSR then you must be
prepared for a cost. If you think that you have got CSR cost free, then you
need to question whether you could be doing more. Shell is one example of a
company who -- many people believe -- could be doing a lot more.
Meanwhile, organizations like CSR Watch[3] continue to blow the whistle on
companies whose advertised CSR initiatives fail to correspond to reality. It is
not surprising that the public perception is sceptical.
'Philosophy'
Why am I here? Philosophers are professional sceptics. A philosopher will say,
'That's an exciting idea but is it true?' Or, 'That's an inspiring speech but
how does your conclusion follow from your premisses?'
Philosophers like to analyse and clarify. Unfortunately, people don't always
like things to be clear. They prefer to remain in a fog, slipping and sliding
between different meanings of words so you never quite know what they are
saying. It is difficult to have a coherent debate under such circumstances.
Let me test you. Suppose we accept -- purely for the sake of argument -- that
everyone would be better off if everyone did CSR. That's a claim that requires
more than a little backup, but let that pass. My question is: On that
assumption -- the assumption that we'd all be better off if we all did CSR --
is what I have just told you a valid argument why any one of you, an individual
business owner, should do CSR?
The answer is, No. The argument is not valid. It is invalid. The conclusion
doesn't follow from the premisses.
The argument is invalid, for the same reason as the argument, 'If everyone was
ethical we would all be better off, therefore you should be ethical' is
invalid. From the point of view of an individual who is fully prepared to weigh
up the advantages or disadvantages of NOT being ethical, it is perfectly
consistent to wish and hope that everyone else will be motivated to be ethical
-- but secretly make an exception for oneself.
'Propaganda'
Bad arguments can make effective propaganda. The argument in favour of
propaganda is that if you can bring about a beneficial effect, it doesn't
matter too much what means you use to bring that effect about. What is the harm
of a few white lies in a good cause?
The argument against propaganda is that people are smarter than you think. They
will see through your lying words eventually, even if they do not realize the
truth straight away.
Anyone unlucky enough to have lived through Communist rule has had their fill
of propaganda so I don't need to labour the point. But I will remark how the
most well-meaning liberal politician will resort to propaganda when rational
arguments fail to persuade.
What I'm hoping you will hear today is a lot of good, practical advice -- a
sprinkling of idealism -- but no propaganda. However, there is no harm in using
well-chosen words to help people to feel good about an idea. That's why
politicians hire speech writers. I'm not against the art of rhetoric, so long
as the rhetoric isn't empty or lying.
I would like you to come away from this conference feeling good about CSR, and
ready to implement it in your own business But I want you to feel good about it
for the right reasons, and not because the wool has been pulled over your eyes.
'What's in a Name?'
Academic philosophers don't use the term 'corporate social responsibility'. You
won't find it in any of the standard text books of moral philosophy. Apart from
the few academic philosophers who have taken an interest in business ethics or
philosophy of business, all you will get when you say CSR is a blank stare.
Some terms have a rich, significant meaning which can be uncovered by logical
analysis. Other terms are just labels. In my view, CSR is just a label. It has
a history, but the history is largely irrelevant to its meaning. To discover
all the things that CSR is or might be, you have to look critically at the
business world, at the kinds of things that this label has been pinned on.
However, in cases of doubt there is a logical pivot point which helps us to
identify precisely when we are and when we are not talking about CSR.
First, it is necessary to recognize that there is a minimum ethical requirement
for acceptable business practice. We recognize this requirement even when we
break it or are tempted to break it. The requirement is: legality, honesty,
fairness and respect for persons.
It should go without saying that you should not break the law. However, many
opportunities arise for telling falsehoods which are not covered by the law.
No-one will excuse you if you deliberately lie to them. As well as honesty,
there is implicit understanding about such things as fair pricing, or fair
competition, or fair treatment of employees. I don't know of any business
person who would happily admit to unfair practices. Respect for persons covers
important issues like confidentiality, racism and sexual harassment.
I propose the CSR label for any worthy or value-driven action in business which
is NOT covered by the minimum ethical requirement of legality, honesty, fairness
and respect for persons. You can fulfil the minimum ethical requirement without
taking any special interest in CSR. So the question is: Why should you do more?
Why should you do CSR?
'Stakeholders'
Another term that philosophers don't use but which gets talked about a lot in
these discussions is 'stakeholder'.
A cynic might say that the term 'stakeholder' was originally coined because of
its similarity in sound to 'shareholder'. The definition of 'stakeholder' is so
loose, that a stakeholder of a company can be any individual or organisation
affected in any way by the activities of that company.
If I have an apartment overlooking green fields and trees, and a plastic bag
manufacturer comes along and builds a factory blocking my view, then I might
feel very strongly that my interests have been adversely affected. But why
should the company in question have to compensate me? Clearly, I have no ground
for complaint. It is just my bad luck.
Having said that, it seems only reasonable that a company that proposes
building a new factory, or closing one down, or initiating any significant
change in their business activities should be prepared to talk to persons and
organisations who might be adversely affected. Not only is it the polite thing
to do, but it is also in the company's interest to head off possible law suits.
This is the beginnings of CSR. Out of respect for persons comes ethical
dialogue. Ethical dialogue is meaningless unless one is prepared to act.
However, there is a big step from allowing stakeholders to voice their concerns
-- being prepared to engage stakeholders in ethical dialogue -- to granting
stakeholders real power in a company's decision making process.
'The Business Arena'
The ethics of legality, honesty, fairness and respect for persons define the
rules for the business arena.[4] That does not go without saying. In 1968, an
article appeared in the Harvard Business Review by Albert Carr, 'Is Business
Bluffing Ethical?'[5] defending the view that the ONLY requirement is legality.
Anything you can get away with within the law -- including telling lies when the
occasion demands -- is OK.
The problem for Carr is that if he is prepared to go this far, why make such a
fuss about obeying the law? Provided the rewards are greater than the
penalties, a well timed professional foul can reap great benefits.
Judging by the large degree of consensus amongst business people today, I would
say that Carr is out in the cold. His article could not appear today, and that
is the mark of the progress that has been made in the last 40 years.
The morsel of truth in Carr's case is that in the business arena, ethics in the
fullest sense -- ethics which includes considerations of compassion and altruism
-- are in a sense suspended. It is the very nature of the game that there will
be winners and losers, and you are aiming to be one of the winners. You are not
responsible for what happens to the losers.
Each player acts out of self-interest and expects others to do the same.
Anything else would not be fair -- it could even be a case of insider dealing
-- and would certainly not be playing the game as it should be played.
If you see someone on the sidelines who needs help -- or if you create
unintentional collateral damage from your business activities -- there's
nothing to stop you stepping out of your way and pausing for a few moments from
your pursuit of profit. But always remember whose money and resources you are
using for this purpose.
'A Contradiction in Terms?'
If I was being a stickler for meaning, I could play games and remark that
'corporate' social responsibility for SMEs is a patent contradiction in terms.
But that would be missing the point. As I have explained, the meaning of CSR
derives from the phenomenon it refers to. And that phenomenon -- as other
speakers will tell you today -- is undoubtedly real.
It could indeed be argued that it is harder for corporations like Shell to
implement genuine CSR because they are restricted by their fiduciary
responsibility to their shareholders. From a public company accountant's
perspective, any expenditure that is not channelled towards generating profits
and increasing shareholder value is tantamount to theft. A board has to be
pretty sure that they have the full backing of shareholders before undertaking
any such initiative.
This is made all the more difficult when such a large proportion of the
shareholders of public corporations are institutions like insurance companies
whose only interest is maximizing the profits of their members' policies.
However, if you are an owner of an SME, you are not answerable to anyone apart
from your business partner or partners -- or possibly your spouse. You are free
to do whatever you like with your own cash.
That is why, far from SMEs merely seeking to follow the example of the big
corporations, it is not unrealistic to suppose that they could actually take
the lead in CSR. That would be something, wouldn't it?
'Cost'
Some CSR initiatives are cost free. There may even be occasions where one can
predict confidently a positive effect on the balance sheet. In such cases, only
laziness or ignorance prevents a business from implementing those initiatives.
But other CSR initiatives do have a cost. And this is where things begin to get
difficult. No business person happily takes on additional expense without a very
good reason. But what kind of reason could this be?
I suggested at the beginning of this talk that there is a danger of being too
obsessed with the 'bottom line'. When that happens, all you can see are columns
of figures. Surely, other things are important too.
However, there is a danger of confused thinking here which we need to head off.
Call a 'hard bottom liner' anyone who insists that the only acceptable
justification for any new business strategy or project is predicted return on
investment. This is still the orthodox view amongst economists and business
people.
A 'soft bottom liner', by contrast, is someone who argues that the best way to
achieve bottom line results is not to be obsessively concerned with the bottom
line. Just as philosophers teach about happiness -- that we are more likely to
get it if we are not constantly asking, each time we face a decision, Will this
make me happy? -- so the soft bottom line view is that if we just concentrate on
doing business 'well', including doing worthy things like CSR, increased profits
will naturally follow.
As an argument, I find this just about as persuasive as the claim that if you
tithe ten per cent of your income to your local Mormon church, your business
will prosper and you will become wealthy. You won't. Maybe you will be happier
for your altruistic act, but your income will be ten per cent less.
'Altruism'
So what about altruism?
According to the philosopher Ayn Rand -- one-time darling of the American Right
and still popular amongst a hard core of fanatical supporters -- altruism is a
life-destroying vice. We succumb to the vice of altruism when we allow those
worse off than ourselves to browbeat us into believing that we owe them
something, purely in virtue of the fact that we are better off. Ethics in Ayn
Rand's view is nothing but rational egoism.
I find that view repugnant, wrong-headed, and dangerous. But there's no way you
are going to persuade someone who is a hundred per cent committed egoist. It's
like banging your head against a brick wall.
Most people who are not corrupted by right wing libertarian philosophy would
agree that compassion is a virtue, and indifference to suffering is a vice. Of
course, we also have to weigh up competing considerations, for example
prudence. The interests of others count for something, but our own interests
count for something too. To me, that's common sense.
But that's precisely the question about CSR: no-one is denying that CSR is a
good thing in itself. The question is whether as a business owner you would be
prepared to implement a CSR program without knowing whether or not you will get
any financial return on your investment.
We have seen that there is scope for altruistic behaviour, and also scope for
acting in one's own self-interest. But neither altruism nor self-interest is
sufficient to bring about the result we are striving for, where CSR is seen as
the acceptable norm and anything less unacceptable. A stronger motivation is
needed.
'Limits of CSR'
The business arena puts limits on what is a realistically achievable goal for
CSR. There is room for compassion and altruism, but only if you can persuade
your partners or shareholders to go along with you.
The game is the game. Profit and loss set the ultimate parameters. But within
those parameters there are many choices of variations of play. You have a life
both inside and outside the business arena. It is ultimately your choice
whether your experience within the business arena will be personally rewarding
and meaningful -- or not. Your choice to promote CSR is a reflection of your
personal values.
Recently, I came across the term, 'capitalism with a human face'.[6] The term
echoes the famous time of the Prague Spring when Dubcek sought to achieve
socialism with a human face -- before the soviet tanks rolled in.
The experience of hopes crushed is an unforgettable lesson. To achieve
capitalism with a human face is lofty goal, fraught with danger. Think of all
the things we would have to change -- such as eliminating poverty and
abolishing exploitation of third world labour. I fear that there are vested
interests who would set the tanks rolling again if there ever appeared a
realistic prospect of such fundamental political change.
However, that's a talk for another occasion. CSR is a much more modest goal.
Let's not forget utopian dreams, but be realistic about what can be done, here
and now.
'Prisoners' Dilemma'
Earlier, I considered the claim that 'if everyone did CSR then everyone would
be better off.' I think that claim is probably true. In any case, today you
will hear plenty of good arguments in its favour.
The fly in the ointment, so far as trying to persuade businesses to adopt CSR
is concerned, is that so long as it is not the case that everyone does CSR,
there is an upfront cost to any business which takes the plunge, with no
guarantee that there will be sufficient return on one's investment.
While you do CSR and your competitors don't, they reap the benefits of your
socially responsible behaviour while you get nothing in return apart from the
glow of satisfaction at being able to occupy the moral high ground.
The problem is a familiar one from political theory. For example, everyone
agrees that we need to do something about climate change. If we all did
something about climate change we would all be better off. But everyone also
knows that any country which takes the plunge and launches a unilateral carbon
emissions initiative will be penalised economically and lose ground against
their competitors. That's why the EU agreement on climate change reached last
week is so important.
Students of political theory are told the story of the two prisoners who are
planning to escape together. Unfortunately for them, the prison authorities
have hit on the perfect plan to prevent any escape. If either prisoner provides
evidence that the other prisoner is attempting to escape, the informer will be
granted his freedom and given a million dollars. The prisoners would be happy
to settle for escape without the money, but neither can trust the other not to
go for the extra million.[7]
What would you do? There is no technical solution to this problem in the form
of a game plan which is guaranteed success. If our two prisoners can find a way
to trust one another, then they will make good their escape. But how are they to
do this? Trust can be won, but not compelled. And when you have someone's trust,
you can never be 100 per cent sure that you have it. Along with trust, you need
faith.
I hope that you can see the relevance of this to the case of CSR.
'This is Politics'
If politics is about getting people to co-ordinate their actions, to move in
the same direction at the same time in order to accomplish a worthwhile
purpose, then this is politics. What it isn't is party politics. I don't have
any axe to grind for any particular political party or movement.
Some people would like you to believe that there are irresistable arguments for
CSR. There are arguments, to be sure, but they are not sufficient to persuade
the determined sceptic. Argument has its limits. If you are going into CSR,
then better go into it with your eyes open, knowing that nothing compels you
apart from your own free, unforced choice.
As we have learned from the story of the prisoners' dilemma, all that's
preventing you is doubt whether the others will go along with what you are
planning to do. All that's missing, in other words, is an atmosphere of trust.
This meeting today is part of the political process of generating the necessary
atmosphere of trust. In my pragmatic view, whatever works -- apart from
deceitful propaganda -- is OK.
There will be courageous companies who take the plunge just to have the
pleasure of knowing that they are setting an example. All credit to them!
A competition to see who can do the most impressive CSR initiative is a great
idea too. Information, web sites, booklets, codes of ethics, speeches and more
speeches will all play their part.
I believe that CSR is a realistic goal which is well within the grasp of an
energetic democracy like the Czech Republic. Let others talk and argue about
CSR as much as they like. It's action that counts.
'Don't be a Party Pooper'
There's no harm in a bit of gentle arm twisting. At the beginning of this talk,
I raised the issue of the unethical person who is fully prepared to praise CSR
to the skies while secretly making an exception for oneself.
Plato in his dialogue 'Republic' talked about the myth of the Ring of Gyges,
which magically granted the wearer total invisibility. If you had the Ring of
Gyges, would you still be ethical knowing that you had the perfect means for
conning everyone into thinking that you are a fine, upstanding member of the
community regardless of what you did?
It is an academic question. In the business world no-one escapes scrutiny of
his or her actions. If you behave like a hypocrite or a party pooper then your
colleagues, business associates and customers will know you for what you are.
If not immediately, then soon enough.
Peer pressure is a wonderful thing, and never more wonderful than when it is
used to make individuals who fail to toe the line feel microscopically small.
However, it is well to bear in mind that peer pressure can be used to bad as
well as good ends. I hope that we can use it to a good end.
NOTES
1. http://www.iod.com
2. David Gold 'Response to Mike Parry and Robert Dunham' Philosophy for
Business Issue 4 http://klempner.freeshell.org/businesspathways/issue4.html
3. http://www.csrwatch.com
4. Geoffrey Klempner 'The Business Arena' Philosophy for Business Issue 5
http://klempner.freeshell.org/businesspathways/issue5.html
5. Harvard Business Review 46, January-February, 1968, pp. 143-53. Online at
http://falcon.tamucc.edu/~sencerz/Carr_Business_Bluffing.htm
6. Mar Peter-Raoul 'The Face Outside: Starting Point, Reversal, Realistic
Utopia' Philosophy for Business Issue 35
http://klempner.freeshell.org/businesspathways/issue35.html
7. http://en.wikipedia.org/wiki/Prisoner's_dilemma
(c) Geoffrey Klempner 2007
E-mail: klempner@fastmail.net
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