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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 77
20 June 2014
CONTENTS
I. 'Economics, Ethics and Corporate Responsibility' by Yongsheng Wang
and Maxwell Chomas
II. 'Truth in the Business Arena' by Geoffrey Klempner
III. 'A Call for Papers' by Peter S. Borkowski
IV. Announcements
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EDITOR'S NOTE
In this issue we are pleased to feature research by Dr Yongsheng Wang
and Maxwell Chomas (Washington and Jefferson College) into the complex
and interwoven topics involved in Corporate Social Responsibility
(CSR). Precisely because of its multifaceted nature, this subject
commands equal attention in academic, commercial, and political
spheres. A corporation's level of virtue has attracted even more
attention in popular media due to the recent financial crises.
In many industries it is almost a commonplace that a corporation has
some 'responsibility' to 'care about' the community in which it
operates. The authors investigate this assumption with reference to
the relationship between CSR and the field of ethical theory to
assess whether CSR 'is more a concept of ethics or a business
strategy' of purely economic considerations.
The authors critically examine what it means to ask 'Why should
corporations pay attention to philanthropy?'; 'How, if the primary
motivation of philanthropic action is to reap benefits, can such
endeavors be ethical?'; and 'How do evaluations of CSR fit into the
economic concept of a corporation?' Their integration of these topics
into a broader contribution towards corporate policy will be
appreciated by readers in policy-making positions.
How has business become a neutral field where truth might be pliable?
Traditionally, 'all is fair in love and war'. Perhaps we might situate
business within the love and war concepts. Geoffrey Klempner of
Philosophy Pathways provides our second feature: a discussion from
several critical angles about truth in business. Recent candid
conversations from professionals provide insight into the attitudes
and expectations that are current regarding truth, and by
implication, moral precepts. 'Philosophers have debated the nature of
truth for thousands of years, and still not come up with a definitive
answer... But there it was, all along. You only have to look out at
the world of business and commerce.'
I end with a quote from John Wilson:
There are times when philosophy needs to retire amidst
dreaming spires: but there are other times when it needs to
learn from roaring boys. For unlike the revolutions in
physics and psychology of this century, the revolution in
philosophy has so far failed to make any serious impact
outside the universities: and this might be partly because
philosophers have not permeated society as scientists and
psychologists have done. They have succeeded neither in
teaching society the importance of their trade, nor perhaps
in learning from society those things that would make their
trade more important still. Indeed it sounds naive to claim
that philosophy is as directly important to the lives of
communities and individuals as science and psychology are.
Yet I sincerely believe that it is, and also that some
modern philosophers have been too hesitant in saying why
and how it is.
John Wilson, Reason and Morals (Cambridge UP, 1961)
Dr Peter S. Borkowski
Email: p.borkowski@aui.ma
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I. 'ECONOMICS, ETHICS, AND CORPORATE RESPONSIBILITY' BY YONGSHENG
WANG AND MAXWELL CHOMAS
Abstract
This paper examines corporate social responsibility (CSR) from an
ethical, socially responsible, and corporate performance standpoint.
CSR is a topic that has long been treated in the economics
discipline, and this paper looks to forward this discussion using the
aforementioned criteria. From an ethical standpoint CSR is evaluated
using virtue ethics theory. Viewing CSR from a socially responsible
perspective, this paper puts forth a conception of social
responsibility and how it relates to virtue ethics. The paper also
provides discussion on the various tangible and non-tangible benefits
of a corporation acting in a socially responsible manner, thus
allowing it to compete more vigorously in the marketplace.
Key Words: Virtue Ethics, Corporate Social Responsibility, Ethical
Decision Making, Corporate Culture, Corporate Governance
I. Introduction
In the last half of the 20th century something rather strange
happened in the business community. While in the first half of the
century the idea of a corporation donating funds to a charity or
performing any kind of philanthropic act was rather unheard of, even
chastised, the amount of corporate giving exploded in the second half
of the century, to the point where the amount of corporate
philanthropy had more than quadrupled by 1999 according to Caplow et
al. (1999). Ever since, the upward trend has been consistent with a
moderate dip during the years of the great recession. During the year
2012 corporations gave around 18 billion inflation-adjusted dollars in
philanthropic contributions according to the 2012 report of Giving USA
Foundation. So, why should a corporation pay attention to
philanthropy? Ultimately, its goal is to maximize the shareholders'
value. It is undeniable that a corporation may receive tangible and
intangible financial benefits due to its philanthropic contribution.
However, if the motivation of philanthropic action is to reap
benefits for itself, how ethical is it? Sometimes, people argue that
it is a corporation's social responsibility to care about the
community where it operates or its customers coming from. They called
it corporate social responsibility (CSR). Thus, this study
investigates the relationship between CSR and ethics and evaluates
whether CSR is more a concept of ethics or a business strategy of
pure economics. It was a hot topic of debate among researchers over
the years. It garnered furious criticism from studies such as
Friedman (1970) and McWilliams and Siegel (2001) and was defended by
Freeman (1984) and Donaldson and Preston (1995).
Virtuous activity of corporations has become even more important to
study due to the recent financial crisis. While it appeared that
non-virtuous activity was to only be practiced by a single
corporation or two (Enron and Anderson being an excellent example),
the most recent crisis was an entire industry (mortgage lending) and
all of its business associates. Thus, it would appear that the
problem of disingenuous motivations and practices has spread from
certain isolated cases to whole networks of corporations acting in
non-virtuous cooperation. As we all saw, this kind of behavior lead
to a humongous financial failure with global impact. As such,
corporate behavior is worthy of rigorous attention so as to develop
the kind of behavior that the market place should find acceptable and
still be able to perform its main function of producing shareholder
wealth. This paper hopes to put forth a framework that can be used in
order to address corporate behavior and more specifically CSR.
This paper will then go on to address the theoretical dispute behind
CSR in two main dimensions. The first dimension will be an evaluation
of CSR using an ethical and socially responsible criterion. In this
way, the paper will seek to find what main branch of normative
ethical CSR can be best approached from, what definition of social
responsibility can best be used to evaluate CSR, and how these two
(social responsibility and ethics) play off each other when
evaluating CSR. The second dimension will be an evaluation of how
CSR, both ethically and social responsibility wise, fits into the
economic concept of a corporation.
In order to address these concerns, the paper will be formatted as
follows: section II deals with the meaning of CSR; Section III
contains a discussion of normative ethics and then explain why virtue
ethics seems to provide the best theoretical framework to address CSR.
This section will also discuss the concept of social responsibility
and how this concept plays into a modern virtue concept. Section IV
will provide a discussion of how social responsibility and virtue
ethics correspond to the economics of a firm along with how CSR can
be evaluated using these concepts. Section VI provides concluding
remarks.
II. What is CSR?
In this study, we define CSR as the bundling of private goods with
other goods. In this case, the corporation in question either charges
a premium on its products or simply charges the regular price, and
upon their sale a part of the price will go towards addressing some
societal ill (malnutrition, environmental stability,
underdevelopment, etc.). In this definition there is some debate
whether bundling a private good with another good should be CSR. The
objection mainly comes from contemporary welfare economics as
Blomgren (2011) presents. It claims that CSR is a private good that
is bundled with a public good, not simply a general good which could
be a public or private good. So, for instance, if a corporation gives
a raise to its workers and they state that their intent is to boost
productivity through this raise, this action cannot be considered an
act of CSR because this is a transfer of a private good in that it is
intended to help only the individuals involved, and not the public.
This paper disagrees with such a specification because no matter what
the intent, a raise in worker's salaries does address a societal ill.
This point is indirectly addressed by Sharp (2006) when he expresses
doubt over the charge that CSR is completely image motivated. This is
due to the fact that, even if this extreme implication is the case,
this act of CSR will end up helping someone or some group of people.
The same principle applies to the raise in the worker's pay. While
obviously this move is to boost productivity, it still does address a
very real social problem, mainly that of inequality, no matter what
the intent. In fact, one could probably make a good argument that it
is motivated on ethical grounds, perhaps in the utilitarian way
because it gives more resources to those that have less and thus
increases utility while increasing productivity to provide more goods
and services for others, thus increasing the chance of maximizing the
probable benefit.[1] Or perhaps even consider the ethical egoist
grounds discussed by Sidgwick (2011). If such a productivity boost
brought in more profit than the increase in pay did, the board of
directors and/ or the CEO could give themselves a pay raise and also
preserve their position as the leaders of the company and even
perhaps attract more investment, thus acting in a manner that is best
for themselves.
In this study, CSR is defined as the bundling of a private good with
a good given to address some societal ill on a voluntary basis.
Societal ill can be addressed by both public and private goods.
Within this definition lies the two dimensions of assessing the
goodness of CSR itself: ethics and social responsibility. As of now
it is to be noted that the definition provided does not state what
the intent of the corporation would need to be if it is implementing
a CSR program in order for it to be both ethical, in the virtue
theoretic standpoint, and/ or socially responsible. Whether its
profit motivated, image motivated, or just done out of the goodness
of the corporation's management's heart, this paper argues that the
philanthropy provided by CSR programs are acts of generosity and
social conscience, but the goodness of this generosity does require
some discussion about the intent and approach of corporations that
implement CSR.
In addition, CSR does need to be voluntary because some voluntary
corporate actions that would be considered CSR in some countries are
mandatory in others,[2] and if they are mandatory this would
obviously only be a case of corporations adhering to civil law and
not expressing some kind of social responsibility or full ethical
practice. This is best stated by Moon and Matten (2008), when they
say that implicit CSR consists of '... values, norms and rules which
result in (often codified and mandatory) requirements for
corporations.' Thus, following customs and laws of a society is
implicit in the company performing a socially responsible act (the
necessary conditions), while performing the socially responsible act
and doing it ethically is the explicit part of performing CSR (the
sufficient conditions). Thus, most economic inquiry into CSR has been
from what has been performed voluntarily and not under the
prescription of law.[3]
III. The Relationship between Ethics and CSR
1. Virtue Ethics
In the way of virtue ethics, CSR expresses, mainly, the virtue of
generosity in that the expression of this virtue is a clear
development of the good and a development of one's moral character.
But, before we deepen our understanding of exactly how CSR is
connected to virtue ethics and why virtue ethics seems rather
appropriate as an assessment criterion for acts of CSR, it is
important to define just exactly what a virtue is, why virtue ethics
is important in the modern era, and why virtues can and should be
framed in a universal as opposed to purely relativist manner.
Virtue ethics was developed by Aristotle in his many expositions on
ethical nature, but was most clearly laid out in his Nicomachean
Ethics. In this work, Aristotle defines a virtue using a three part
definition. First, he claims that a virtue is the mean behavior
between two excessive behaviors. Using an example that he deploys in
Book II of his work, courage is the mean between absolute cowardice
and rashness. If one flees at any sign of danger or conflict he/she
will develop the traits of a coward and if one simply disregards
danger in every decision one is to make, then they will act rashly.
Courage, then, is the midway between these two behaviors. It
mitigates the obvious downsides of each extreme and instead develops
our moral character and the good in general. This mean or midway is
not an arithmetic mean but a subjective mean. Instead, the individual
has to rationally determine where his or her respective mean is in the
way of the core virtues. While the mean is obviously subjective for
each individual, regarding the individual in question the mean can be
more objectively determined through an analysis of the person's
natural constitution, developed capabilities and potential
capabilities. Secondly, a virtue must be habitual. To be a virtuous
person, Aristotle says, one must constantly act in a virtuous manner.
Once again, using courage as an example, simply acting courageous is
not enough. One must act courageously as the courageous individual
would, or more simply, one must be courageous for the sake of the
good and the development of one's moral character and not for any
other external rewards or other possible motivations. While Harrison
(2013) points out that these external rewards may come as a
consequence of your action, they are not the main goal to begin with.
Thirdly, each core virtue is 'grounded' in a universal sphere of the
human condition. For instance, returning to courage, this virtue is
grounded in the sphere of our universal fears as humans. One
particular fear that Aristotle stresses is the fear of death;
however, he does state that the brave individual does not fear even
death in certain situations (such as in battle or at sea).
Nussbaum (1987) contends that some virtues are in fact universal, and
not completely relative based on culture. Because CSR is in fact a
global phenomenon, it is critical that we recognize that generosity
is also a global virtue and can be applied to corporations across the
world when assessing their actions in an ethical manner. While the
particulars of generosity may have different conceptions across
cultures, the underlying understanding of generosity developed by
Aristotle will always be the same: '... it is more the mark of the
liberal man to give to the right people than to take from the right
sources and not to take from the wrong' (Nicomachean Ethics).
McCloskey (2006) discussed that virtue ethics was the dominant way of
theorizing in normative ethics, for the West at least, for quite some
time until the Renaissance when other modes of normative, secular
ethical thought rose to prominence. Afterward virtue ethics faded
into the background and was not heard from again for quite some time.
The question in normative ethics became much less on 'Is this action
virtuous and for the development of the good?' and much more on 'Is
this action right or wrong?' And for a couple centuries, ethical
theorists including Immanuel Kant, John Stuart Mill, Henry Sigwick,
Thomas Hobbes, etc. set out to answer the latter question using a
variety of ethical frameworks and came to a number of different
conclusions.
However, while virtue ethics may have been lost, it was not
forgotten. In 1958, the philosopher G.E.M Anscombe published a paper
entitled 'Modern Moral Philosophy' in which she called for the return
of focus to virtue as the core of ethical theory as opposed to duty,
obligation, or rightness (which were, coincidentally, the focus of
basically all moral philosophies since virtue ethics fell out of
popular favor) (Rachels 1999). Virtue ethics had been revived and
after the publishing of this influential paper, a mass influx of
books and papers sprung forward to revive the subject and give it
full substance and attention once more. It appeared that virtue
ethics was back at center stage.
As time wore on, virtue ethics established itself as one of three
major categories of normative ethics, the other two being
consequential and deontological (or an ethical framework based on
rules) (Harrison 2013). This study chose a normative ethical
theory(s) is because this paper is seeking for an ethical theory that
can be used to evaluate motivations behind people's actions. It has
been used in a variety of ways to assess different ethical problems
across multiple academic disciplines. In the social sciences,
Nussbaum and Sen (1987) utilized virtue ethics to develop their
capability approach to international development, in which they
formulated a criterion that rejected a complete focus on growing GDP.
Capabilities, as they define it, are things that a populous should be
able to do to improve their current social standing and promote their
freedom. They argued that when developing a culture, there must be
some end that the development reaches for, and this is not always or
even most of the time simply a growth in the culture's GDP. Instead,
it requires an 'immersed' analytical approach to the values of that
culture. Such an approach would include evaluations of the core
values of the given society and how these core values either
contradict or complement each other. Once this evaluation is
complete, the core values of the culture will be revealed and these
are the ones that need to be developed. In their work, they find it
important to note that cross-cultural analysis is important in
determining what capabilities need to be developed in a certain
region, along with a more in-house, immersed analysis (not to say
that a cross-cultural analysis is purely external). Less important
values (which are virtues in our case) will be thrown out in
discourse and a certain truth will be discovered. This truth is not a
purely objective one but instead one that essentially reaches
widespread consensus and is grounded in our human experience, not
theorized in some hypothetical vacuum.
Another example of virtue ethics in the social sciences is provided
by McCloskey (2006). It addresses how the ethical theory plays into
economics and the market place in general. It points out, no matter
what 'virtue list' one uses, the virtues on that list will interplay
with each other such that developing all of them will create a
well-rounded human being, while a lack of one or more of them
ultimately leads to a specific development of vice or multiple vices.
For example, an excellent development of prudence coupled with an
absolute lack of justice leads to the vice of greed, or the
expression of a 'miser' in a certain individual. It is the
combination of lacking or overstated virtues with the other virtues
that one have been developed to an almost perfect midway that creates
vices. As McCloskey states, 'To put it in an economist's terms, the
separate virtues are complements...'
2. Overlap and Difference Between Social Responsibility and Virtue
Ethics
The reason to differentiate between social responsibility and virtue
ethics is that social responsibility does not inherently address the
idea of motivation. In fact, the word responsibility seems to imply
that the implementation of such responsibilities are contrary to our
desires. It would even seem to suggest that without social
responsibility all of us would simply act in self-interest and
degrade ourselves to a kind of Hobbesian state of nature where
constant conflict would ensue. As Bright (2006) points out, whatever
the natural state of human-beings may be, social responsibility does
seem think itself to be contrary to desire, and does not impose any
strict regulations about how a person should be motivated to act in a
socially responsible manner, and thus remains silent on this very
crucial part of ethical theorizing. So it would appear that, in order
to act in a socially responsible manner, one would not need to want to
do the act, and instead would let other motivations take over. For
example, BP who is as of right now trying to furiously clean up a
massive oil spill in the gulf. It is acting in a truly socially
responsible manner because they are taking all the steps necessary to
make things right with the damage they have caused. However, is this
act purely ethical? Virtue ethics would have something to say about
this, mostly because it is one of the few contemporary ethical
theories that addresses the idea of motivation, as opposed to
assuming away personal feelings and instead replacing the individual
with the impartial spectator model.[4]
However, the ideas of social responsibility and virtue ethics also
can work together. General social responsibility requires an
individual to perform an act for the common well-being of society,
virtue ethics hones in on exactly what these general acts are and
dictates the extra criterion that the act itself has the right
motivations. While a socially responsible act works in the direction
of being a complete development of the good, virtue ethics provides
more precise description of what these acts are and also provides the
final push for how an individual can achieve a full development of the
good: mainly through having the right motivations. As stated above,
not many ethical theories take on the aspect of what motivations an
individual would need to have in order to be performing an ethical
act. Instead they seem to either state that people should follow a
set of rules or one general rule that will generate a set of rules
(Kant's categorical imperative being the most obvious example of
this), or assess their actions on possible outcomes or what results.
Most of these general criteria that formulate a very broad basis for
the two other main branches of normative ethical theory
(deontological and consequentialist). Neither of these other branches
can make it out of the socially responsible way of action, or even
cannot make it to socially responsible principles in general. Virtue
theory is one of the only normative ethical theories that can in fact
add another level of depth to evaluating CSR. Only when motivation and
outcome are consistent, an act can be evaluated under the realm of
virtue ethics. In short term, it may seem no difference between
naturally motivated corporate action and externally pressured action
if the material ending results are the same. However, the long-term
impacts on corporation itself and communities will be dramatically
different and even completely opposite. Suppose a manager and
employees who work for a corporation that constantly tries to please
the external community for either legal or marketing reasons, their
view of the society could be very negative influenced by characters
of dishonesty and deception. Thus, not all CSR actions can be
considered as ethical behavior and only can those with consistent
motivation and results that address social ills.
IV. The Economic Objective of the Firm and Virtue Ethics
1. Tangible and Non-Tangible Rewards of CSR
The economic objective of a firm is a straight forward one: maximize
the value of shareholders. It would seem that when a corporation
gives away some of its profits either directly or in the form of
goods it produces, this would be in stark contrast to the
aforementioned goal. However, as this section will explore, while CSR
can sometimes actually increase a corporation's financial performance,
more often than not it will increase its performance in less obvious
but still important ways.
While corporations can be philanthropic to society in a multitude of
forms, the most basic and commonplace method is a direct, monetary
contribution to some philanthropic organization.[5] This contribution
can either be done by charging a premium on a product or simply giving
directly from the corporation's own profits. No matter how the giving
is done, it is important to note that only 10% of the corporate tax
on said corporation can be deducted through proper filing to the IRS
(Petit 2009). Because there are most certainly corporations that
donate far and beyond the requirement to get the 10% break, there
must be some other gain that corporations can tangibly use when it
comes to implementing CSR, lest the risk of financial ruin. To gain
these benefits, depending on how the corporation decides to implement
the CSR, certain strategies must be employed.
Consider the case where a corporation decides to charge a premium on
its product to help fund the philanthropic efforts. In this case, the
corporation must follow a certain course of action in order for the
CSR to be successful and to not lead to public dismay and
consequently financial ruin. For instance, as discussed in Blomgren
(2011), a corporation may need to broadcast its CSR program, in order
to let the public know just exactly why the price on its product is
going up. This would have to be done not only to inform them of this
price increase, but also to allow consumers to fairly assess whether
they would like to support said cause and to guarantee them some sort
of safety on their investment.
In order for the corporation to receive tangible benefits beyond a
tax break, its actions must seem genuine. As noted in the tables
below, there are not any that seem to donate to causes that would
bring direct financial gain to themselves in the short or even long
run. Instead, it must be viewed that the donation in question is
being made out of the goodness of their heart or because it is a
cause the corporation in question genuinely cares about. When a
corporation can demonstrate that they are genuine in their
motivations, Godfrey (2005) argues that they are rewarded with moral
capital. Moral capital is something that can be utilized when the
corporation is questioned about other rather erroneous activities as
a way of saying, 'I know it might seem bad, but look what we did
here!' So in this case, the corporation does not see a complete
public fall out. So how can a corporation show the public that its
motivations are genuine? Godfrey would put forth three criteria:
transparency, consistency, and responsiveness (2005). Transparency
and consistency of philanthropic activities are easy enough to
understand. When Godfrey refers to responsiveness he simply means
being flexible when it comes to choosing sources to fund (such as
immediate donations to help out when natural disasters strike).
Godfrey's explanation also helps us understand why corporations
donate beyond the amount to assure their 10% tax break; mostly due to
the fact that going the extra mile presents another reason why their
donations should be considered as genuine and from here allow the
corporation in question to acquire moral capital to use as
'insurance' later down the road if they run into trouble.
Another interpretation, supplied by Argandona (2009), is that the
corporation inherently, has a virtuous dimension to it, along with a
good-providing dimension and an 'intrinsic' dimension which consists
of the corporation's development of social relations, culture,
technology, etc. The lack of development of the virtuous dimension
will lead to failure because it is a necessity for the corporation's
survival, along the same line as addressing the public image
dimension of the corporation with a marketing division (2009). So it
can be seen, then, that CSR can provide both financial rewards (a tax
break) and other, non-tangible but still instrumental rewards; such as
moral capital and a development of the corporation's virtuous
dimension. Thus, CSR can provide feasible rewards for both parties
involved, both the giver and the receiver. However, how should such
giving be assessed in ethical and socially responsible terms?
2. Assessment of Direct Monetary Giving
The following two sections will also delve into how corporations give
and how a corporation should give from the virtue theoretic
standpoint, a corporate financial performance standpoint, and a
socially responsible standpoint. As stated and elaborated on before,
there are two explicit criteria upon which an act of CSR can be
assessed: how socially responsible the act is and how ethical the
action is. As mentioned in the previous section, depending on how the
corporation goes about giving its money to address a societal ill, it
will need to adopt certain strategies in order to guarantee the
success of such a program. However, it was noted that for both
strategies that the action would have to seem genuine. It appears
that through the table provided, such strategies were generally
adopted when considering where the corporation donated, however in
following the three criteria to adopt in order to allow the public to
assess genuine motivation behind the donation, Bright (2006) finds
that most corporations lack in this endeavor.
In the way of social responsibility, practically all actions of CSR,
not too surprisingly, that end up fulfilling the demands levied
against the corporation in question. But where do these demands come
from? As we defined social responsibility earlier, it would seem that
that society (or the world population in general) would place these
demands on how individuals should act in accordance with attaining a
greater well-being for society in general. However, for corporations,
the game is a little different. It would appear that for corporations,
the demands that they intend on listening to and fulfilling come from
their stakeholders; this is known as stakeholder theory. A
stakeholder has been defined as someone that participates in the
corporation's wealth-creating activities and so are its risk bearers
and/ or potential beneficiaries in Margolis and Walsh (2003). From
this definition, it is rather easy to see that the demands of
stakeholders would have intrinsic value (Donaldson and Preston 1995)
because they are part of what enables a corporation to create wealth
and thrive. One should also notice that this is a humongous
definition that could really encapsulate all of the world's society
depending on the corporation's size and transnational status. Thus,
for very large corporations, the demands are pretty much from the
world society, while for smaller, more local corporations the demands
come from a more limited volume of stakeholders. Also, it appears that
stakeholder theory is taking root as a legitimate methodology for
managers to utilize in practice (1995), thus the demands of
stakeholders are all the more real.
If a corporation enacts a CSR policy in search of profit, image, or
both. In any of these three situations, the corporation is performing
an action of generosity not for the sake of generosity or as the
generous individual would do so, but instead the corporation in
question is doing the action for external rewards only. In all
reality, there are a decent amount of corporations that seem to
follow these patterns, but as Carroll and Schwartz (2003) argue, not
as many seem to follow a mixture of ethical and economic motives. It
also seems that corporations who ignore ethical concerns altogether
also cannot seemingly stay in business (Argandona 2009). Well, what
if the corporation is doing so for all three reasons, or perhaps one
of the first two reasons in combination with doing the right thing?
First off, as Carroll and Schwartz (2003) point out the latter case
is easily the most common motivation for corporate action. Obviously
this is a step in the right direction because the implementer of the
socially responsible act is now thinking of others. However, this
does not void the fact that this corporation is still doing the
generous act with the intent of attaining external rewards, and once
again not for the sake of generosity itself. While this isn't quite
as much a vice as the first case of motivations, it is a vice
nonetheless. As we defined vice earlier, it is the specific
combination of lack or excess in the virtues of an individual. So in
the first case, the corporation is exercising excessive prudence with
no concern for generosity and is thus acting in the way of pure greed.
For the second case, the prudence is still there but now the
corporation has developed a sense of generosity, though not in its
perfected form. The vice still ends up being greed, but to a lesser
degree. Thus, the corporation that enacts CSR could only be acting
for the good if it performs a socially responsible act because 'it is
the right thing to do' or for the sake of generosity in itself.
How much is the corporation supposed to give for it to be generous?
As noted above, the exercise of virtue is an exceptionally subjective
topic, but in this case some general guidelines can be given to help a
corporation or a critic to determine how much is enough for an act of
CSR to be considered generous. Firstly, the market influence and
correspondingly the elasticity of demand for the products of the
corporation are large factors in determining how much it should give
or, more specifically, how much of a premium it should charge. For
instance, Apple could charge a humongous premium on its products
because of the market power it has in tablets, MP3 players, phones,
and laptops. A medium sized phone making company may be able to have
the elasticity to place a premium on its products, it will probably
be much smaller than Apple's, but still be considered a full
expression of generosity. After all, each corporation has to know its
limits when it comes to charging a premium on its products. Secondly,
the corporation needs to take from the right people in order for the
act of generosity to meet the standards of developing the good.
Consider a corporation that sells mostly goods that are a necessity
but sells only a few that are luxury items. The corporation obviously
cannot charge a premium on the necessity because this is not taking
from the right people, while it can very easily charge a premium on
luxury items. Although charging a premium on only luxury goods in
this case will yield much less available money to be spent on a CSR
project than if the condition were such that a majority or perhaps
all of the corporation's products were luxury, but it will still be
considered generous because the aforementioned corporation is acting
within its means as best as it can and thus it can be considered
virtuous. One might also note charging a premium on the right people
may make a corporation exempt from implementing CSR in a virtuous
manner if it provides only necessities. A virtue theorist might argue
that a corporation could act generously in another manner, or is
already acting generously by providing a product in mass that is
necessary to our survival.
3. Other Types of CSR
Besides direct monetary contributions to some charitable
organization, there are a multitude of other methods by which a
corporation can act in the way of CSR. The other primary ways of
doing so include volunteering employees to participate in
philanthropic activities, donating goods as opposed to money directly
to participants or to philanthropic organizations, and fostering
general relations with the public and with employees within the
corporation. Each of these methods will be outlined and assessed
based upon the criterion of how socially responsible and ethical they
are.
First off, the donation of employee volunteer hours is becoming more
common practice among corporations in the modern era stated in the
2012 report of Giving USA Foundation. It can provide a great deal of
positive image effects for the corporation in question. Provided that
the employees are made to volunteer when they should be working, this
method allows for direct outreach from the corporation itself and
shows that it probably is genuinely interested in the case at hand.
If this condition is met then it shows that the corporation is
probably more genuinely interested in the case at hand and is less
interested in most other instrumental gains (the donation of hours
would obviously decrease productivity and perhaps even profit),
perhaps besides image as mentioned above. Regardless of when the
employees are volunteering, the act is easily socially responsible as
long as the cause in question is one that works towards the common
well-being of society. Not only this, but it also meets the demands
of stakeholders that are interested in seeing a corporation that is
more personable with the community and by extension the society in
which it is operating. With regard to ethical status, the result, not
surprisingly, is more mixed. Because the requirements for social
responsibility are met, this act is at least on its way to being a
clear development of virtue. The only thing that is left is the
correct motivation. This is rather hard to assess, as mentioned
above. However as long as the employees are volunteering during the
time that they should be at work and the corporation doesn't wildly
publicize that it is volunteering its employees for some
philanthropic activity, the motivation is probably genuine enough to
be considered as an excellent development of virtue. Nevertheless, it
is hard to determine how often those two criteria are met.
Secondly, the direct giving of goods to a community or sect of
society has actually been on the rise for the last half a decade or
so as discussed in the 2012 report of Giving USA Foundation. The Give
USA report even goes as far to say that this kind of giving has been
the primary drive behind the increase in corporate philanthropy over
this time period. Even more surprisingly, it appears that most of
this direct giving is coming from pharmaceutical corporations.
Obviously, any direct giving of goods (as long as they aren't
harmful) to the populace is an excellent example of social
responsibility. Thirdly, a portion of the CSR literature that deals
relations of the corporations and its clients, employees, and society
in general. These relations could just be image relations, simply
dealings with clients and the benefits given to employees. Most of
these relations seem to be contract-based, instrumental, and
incentive based. For instance, while giving employees a raise and
excellent dental and medical insurance (contract base) is probably
socially responsible, the corporation in question is probably doing
so to encourage the employee to stay in the corporation (incentive)
and to be more productive (instrumental). So why these acts are
probably socially responsible, they are also questionable in the way
of being genuine, and thus fully ethical.
4. Empirical Findings of Giving
While considering CSR figures in relation to other forms of
philanthropy may seem to yield a weak result (remembering that in the
previous fiscal year corporations gave only 6% of total donations in
the US), on their own these figures are quite impressive. The tables
in the appendix give a breakdown of corporate giving from 2003 to
2010 (Conference Board on Corporate Philanthropy 2011). Figure 1 is
in thousands of inflation-adjusted US dollars, thus in 2010, in a
survey of 138 corporations (the number goes down every year because
less and less corporations responded to the survey), about 5 billion
dollars[6] were donated to the various categories stated (health and
human services, education, culture and arts, civic and community,
environment and other) (2011). This is terribly significant, and is
only the contributions given by US corporations. International
corporations gave less, but still a humongous amount of money in 2010
totaling to 3.4 billion inflation-adjusted US dollars (2011).
Observing the 2010 breakdown given in the report, there are a few
notable assessments that can be made in order to evaluate possible
virtuous activity. First off, it can be noted in the report that
there are few categories (same as above) that the respective
industries (unfortunately they change again for this breakdown to
chemical/ gas/ mining, consumer manufacturing, electronics,
industrial manufacturing, pharmaceuticals, banks and finance,
insurance, retail and wholesale trade, utilities, and other services)
could obviously benefit from. The only one we could possibly think of
is pharmaceuticals benefiting from donations to health and human
services, which not too surprisingly they ended up donating about 98%
of their total donations to. However, as we mentioned above, a great
deal of their giving is in free medicine to individuals (about 68% of
their giving was non-cash in 2010). So in this case, we would still
consider this rather virtuous activity. On the other hand, certain
manufacturing services such as chemical/ gas/ mining and industrial
manufacturing have obvious responsibilities to health and human
services along with environmental charity because of their adverse
effect on the objects of these categories. Unfortunately, this effect
is not matched in the percentage of donations they were willing to
give. While the health and services category was decently donated to
by these industries (18.26% for chemical/ gas/ mining and 35.32% for
industrial manufacturing), their environmental donations were not so
impressive. Chemical/ gas/ mining donated 3.85% of its total
donations to the environment while industrial manufacturing came in
at an abysmal 1.19%.[7]
Total giving can also be assessed using the various Conference Board
reports that have been published starting in 2000. The best way,
using the available indices from the Conference Board reports, to
assess how much corporations have been giving over time, is to use
the median of the percentages of pre-tax income that corporations
delve out in charitable donations. In this way, it wouldn't really
matter if the businesses that were surveyed changed from year to
year, and the Conference Board probably wouldn't put out this
statistic unless they were sure that the sample they collected was in
fact significant enough to represent corporations both domestically
and internationally. Using percentage of pre-tax income given as
donations, we will do a case study comparing how certain industries
donated in 2010 both domestically and internationally, we will then
compare these totals with what they were in 1999, and then we will
investigate how in the past few years, domestically, the median
percentage of pre-tax income given as charity has changed.
It is to first be noticed that across the board, the median US
corporations consistently gave more as a percentage of pre-tax income
(Conference board on philanthropy 2011). Consider how for chemical/
gas/ mining the median international corporation gave .21% of pre-tax
income while the median domestic chemical/ gas/ mining corporation
gave 2.24%. Or perhaps how in consumer manufacturing the median
international corporation gave 0.97% of pre-tax profits while the
median US corporations gave 2.02%. Then, when we compare all of the
domestic corporations in the sample to the international corporations
on the basis of percentage of pre-tax profit as donations, we find the
median corporations for the US donated 0.70% of pre-tax profits while
median international corporations donate 0.55%. This isn't to say
that US corporations are more virtuous than international
corporations, because that is rather hard to determine. However, it
would appear that when it comes to exercising the virtue of
generosity US corporations do tend to excel a little better than
their international counterparts, as the median percentage of pre-tax
profit as donations and total donation statistics have shown. Also
remember that this is only a tendency, One can be sure there are a
good plurality of international corporations that exercise generosity
with more competence than US corporations.
It will then be useful to look at these medians for all industries
and compare them to what they were roughly 11 years ago. For
international corporations, in the Conference Board's 2000 report on
FY 1999, when the median was taken of the top 50 corporations in
regards to percentage of pre-tax profit given as donations, the value
that resulted was .95% (2000). In 2010 this median percentage for the
top 50 international corporations hasn't exactly changed. Out of the
38 that reported their percentage of pre-tax profits given as
donations, the median percentage was .87% (in the 2000 report every
one of the top 50 corporations reported) (2011). The data was more
readily available for domestic corporations in the 1999 report, so
using the table they gave the median US corporations donated 1.2% of
its pre-tax profit as philanthropy. As we saw above, using the sample
the Conference Board selected, in 2010 the median US corporations
donated .7% of its profits out of a sample of 112 corporations, so
there has been a small dip over time.
The 2012 Conference Board report 'Giving in Numbers', which gave the
statistics for FY 2011, drew bigger sample sizes and gave a slightly
different picture of where the median percentage of pre-tax income
given as donations was at in 2010, actually gave a statistic for 2009
and then routinely reported the statistic for 2011. The report tells
that in 2009 percentage of pre-tax profits given as donations came to
1.15%, in 2010 this dipped to .96% (a revision downward from what we
saw above), and then in 2011 it began to come back at .98%. The
sample size given was 114 corporations this time, as opposed to the
2011 report which used 112, and not necessarily were they the same
corporations in relation to the two reports, although, the same
corporations were used in the three year span given by the 2012
report. The reason the percentage was so high in 2009 was because
profits were lower because of recession, but it is good to see that
in 2011 when corporate profits were recovering the median percentage
began to increase to .98%, slightly above its 2010 statistic (.95%).
While we scanned the corporations that were on the top 50 list for
donors in each of the Conference Board Reports we saw remarkable
percentages such as 8% of pre-tax income as donations or 4%. As
virtue ethics tends to suggest, one should always strive to act in a
manner that the virtuous individual acts, and these select
corporations are expressing the virtue of generosity most
excellently. We would hope that in the years to come the medians
could rise a little (not just in response to lower profits from a
recession) and corporations could perhaps emulate the generosity of
these few corporations. While we would ask for a median of very close
to 2% for the random sample, a value that would simply be within
striking distance of this would be outstanding.
V. Conclusion
While virtue theory provides the core ideas behind the universal
virtues,[8] it is noted in Nussbaum (1987) that there is still some
subjectivity in how these virtues are put into practice. The way this
virtue is materialized into solid practice is completely up to
individuals of the culture. This materialization is called social
responsibility which meeting the demands of a society in such a way
to act towards the common good. The common good develops the virtue
of generosity and the moral character of the corporation.
So how effective is CSR at working towards the common good? In
another word, how consistent are the motivation and results? It
appears that some CSR scholars are only really interested at simply
stopping at the social responsibility mark of the criterion and not
pressing for corporations to act out of genuine affection for the
cause at hand, but instead simply requiring them to do it for a
multitude of reasons. Others seem to be pressing for the corporation
to become a 'global citizen' and act accordingly, thus stressing a
much more moral agenda for how a corporation should act[9] along with
a socially responsible dimension. Though, no matter what literature
you survey, you generally end up finding that corporations
participate in CSR related activities for a mixture of ethical,
social, and instrumental (in the ways of profit or accumulation of
moral capital) reasons. This is probably only a nudge in the right
direction for full moral development. In order for this to happen, it
would need to come about that it was obvious that corporations were
giving to causes that they genuinely cared about or were implementing
policies that looked to develop the virtue portion of their
corporation in general, however, at this time, this is not very
obvious. Motivation, after all, is a large part of what it means to
act virtuously, and it is perhaps the hardest part because generally
it is contrary to desire and passion. However, the pain it takes to
work against this is the 'right pain' as Aristotle mentioned in
Nichomachian Ethics.
But this ultimately is not a reason to lose hope. This study shows
that corporations are clearly moving towards a path of greater moral
development that seems to be coupled with acquisition of tangible
(tax breaks and sometimes increased financial performance) and
non-tangible (moral capital and expansion of a corporation's virtuous
dimension) assets. While some corporations have failed in the past due
to their non-genuine intent, corporations of the modern era are
learning from these mistakes and making decisions that impress people
on a daily basis (take the example of how pharmaceutical corporations
are driving the growth in non-cash donations or how BP in the 90's
voluntarily reduced its CO2 emissions (Heal 2005). In the end, there
is still a great deal of work to be done.
References
Argandona, Antonio. 2009. 'The Common Good of the Company and the
Theory of Organization.' IESE Business School University of Navarra
777.
Aristotle. 1994. Nicomachean Ethics. Massachusetts: The Internet
Classics Archive. classics.mit.edu.
Blomgren, Atle. 2011. 'Is the CSR Craze Good for Society? The Welfare
Economic Approach to Corporate Social Responsibility.' Review of
Social Economy, 69 (4): 495-515.
Bright, David. 2006. 'Virtuousness Is Necessary for Genuineness in
Corporate Philanthropy.' Academy of Management Review, 31 (3): 752-54.
Caplow, Theodore, Hicks, Louis, and Wattenberg, Ben J. 1999. THE
FIRST MEASURED CENTURY: An Illustrated Guide to Trends in America,
1900-2000. Washington DC: AEI Press.
Conference Board on Corporate Philanthropy. 2000. Corporate
Contributions in 1999.
Conference Board on Corporate Philanthropy. 2011. The 2010 Corporate
Contribution Report: An analysis of the FY2010 giving patterns of 139
U.S-based corporations.
Conference Board on Corporate Philanthropy. 2012. Giving in Numbers:
2012 Edition.
Donaldson, Thomas, and Preston, Lee E. 1995. 'The Stakeholder Theory
of the Corporation: Concepts, Evidence and Implications' Academy of
Management Review, 20 (1): 65-91.
Fairbrass, Jenny. 2011. 'Exploring Corporate Social Responsibility
Policy in the European Union: A Discursive Institutionalist
Analysis.' Journal of Common Market Studies 49, (5): 949-70.
Friedman, Milton. 'The Social Responsibility of Business is to
Increase its Profits.' The New York Times Magazine, September 13,
1970.
Godfrey, Paul C. 2005. 'The Relationship Between Corporate
Philanthropy and Shareholder Wealth: a Risk Management Perspective.'
Academy of Management Review, 30 (5): 777-98.
Harrison, Karey. 2013. 'Ontological Commitments of Ethics and
Economics.' World Economics Association: Economic Thought, 2 (1):
1-19.
Heal, Geoffrey. 2005. 'Corporate Social Responsibility: An Economic
and Financial Framework' Geneva Papers on Risk & Insurance -- Issues
& Practice, 30 (3): 387-409.
Indiana University Lilly Family School of Philanthropy. 2013. 'Giving
USA: The Annual Report on Philanthropy for the Year of 2012.' Chicago:
Giving USA Foundation. www.givingUSAreports.org (accessed August 13,
2013).
Margolis, Joshua D., and Walsh, James P. 2003. 'Misery Loves
Companies: Rethinking Social Initiatives by Corporations.'
Administrative Science Quarterly, 48 (2): 268-305.
McCloskey, Deirdre. 2006. The Bourgeois Virtues: Ethics for an Age of
Commerce. Chicago: The University of Chicago Press.
Nussbaum, Martha, and Sen, Amartya. 1987. 'Internal Criticism and
Indian Rationalist Traditions.' World Institute for Development
Economics Research of the United Nations University Paper 30.
Nussbaum, Martha. 1987. 'Non-Relative Virtues: An Aristotelian
Approach.' World Institute for Development Economics Research of the
United Nations University Paper 32.
Petit, Stephanie L. 'A Basic Guide to Corporate Philanthropy.' Alder
and Colvin: A Law Corporation. November 2009.
http://www.adlercolvin.com/pdf/A_Basic_Guide_to_Corporate_
Philathropy.pdf (Accessed July 15, 2013).
Rachels, James. 1999. The Elements of Moral Philosophy. 3rd ed. New
York, McGraw-Hill.
Schwartz, Mark S., and Carroll, Archie B. 2003. 'Corporate Social
Responsibility: A Three-Domain Approach.' Business Ethics Quarterly,
13 (4): 503-30.
Sharp, John. 2006. 'Corporate Social Responsibility and Development:
An Anthropological Perspective.' Development Southern Africa, 23 (2):
213-22.
Sidgwick, Henry. 'The Methods of Ethics.' Early Modern Texts. October
2011. http://www.earlymoderntexts.com/pdf/sidgmeth.pdf (Accessed July
20, 2013).
Smart, J.C.C. 1973. 'An outline of a system of utilitarian ethics.'
In Utilitarianism for & Against, 3-67. London, United Kingdom:
Cambridge University Press.
Williams, Bernard. 1973. 'A critique of utilitarianism.' In
Utilitarianism for & Against, 77-150. London, United Kingdom:
Cambridge University Press.
Table 1: International Corporation Giving in 2010
http://isfp.sdf.org/images/issue77-table1.jpg
NOTE: The above dollar numbers are in thousands of dollars and
inflation-adjusted.
Table 2: US Corporation Giving in 2010
http://isfp.sdf.org/images/issue77-table2.jpg
NOTE: The above dollar numbers are in thousands of dollars and
inflation-adjusted.
Figure 1. US Corporation Giving from 2003-2010 ($thousand)
http://isfp.sdf.org/images/issue77-figure1.jpg
Notes
1. The phrase 'maximizing the probable benefit' is the term J.C.C
Smart uses to describe the goal of act-utilitarianism in Smart (1973).
2. Blomgren (2011) points out that while having an employee
representative on the board of directors is seen as socially
responsible in America, in Europe such an act is mandatory.
3. According to Fairbrass (2011), recent attempts to make CSR a
mandatory endeavor in the EU through the Lisbon Treaty were easily
trounced by those representing the interests of voluntary CSR.
4. Utilitarians, for instance, would describe the individual as one
amongst millions whose feelings are rather irrelevant to those of the
whole, and must make the appropriate sacrifices, no matter how
distasteful, in order to maximize the probable benefit of the whole
(Williams, 1973).
5. This, in itself, can be done in a variety of ways. For instance,
the corporation can start its own charity, or give to a non-profit or
philanthropic organization with a stipulation on how the money is to
be used. For a full discussion of the possible benefits and drawbacks
of the various forms see Petit (2009).
6. In the report 'Giving in Numbers 2012 Edition' (2012) the
Conference Board revised this figure to an astounding 14.57 billion
dollars. They also reported that in 2011 the total came to 15.72
billion dollars (both of these figures were inflation adjusted).
7. Although, it is probably important to point out that no industry
gave any significant amount of their donations to any cause that
would be under the environment category. This lack of giving can
easily be seen as a long term trend in the graph of Figure 1.
8. Take the idea of courage as facing fear, something that is
obviously universal. Though some virtue theorists would categorize
this virtue under a broader category, for instance, refer to
McCloskey's list as mentioned above.
9. Donaldson and Prescott (1995) even suggest that the corporation
should act in the interest of stakeholders even if it is of great
harm to them and the shareholders.
(c) Yongsheng Wang and Maxwell Chomas 2014
Email: ywang@washjeff.edu
Email: chomasmc@jay.washjeff.edu
-=-
II. 'TRUTH IN THE BUSINESS ARENA' BY GEOFFREY KLEMPNER
Presentation for a four-day conference 'Shared Values: Strategy,
Finance, CSR and Business Ethics' held at Prague College, Czech
Republic 2nd-5th June 2014
I
When I first got the idea for this talk, I asked a colleague what she
thought of the title. Her reply was forthright:
We don't want business people to be honest. You want your
lawyer to manipulate others for you, your accountant to
avoid as much tax as possible, your estate agent to gloss
up the facts, the shop keeper to ask you how you are when
they don't give a damn.[1]
The Greek Cypriot owner of a local fish and chip shop where I get my
weekly take-away put the point more concisely. When I told him I was
going to Prague to give a talk on truth in the business arena, his
features stretched to a broad smile. 'There isn't any!' He started
his business 31 years ago, in his early 20s. He'd learned the hard
way not to trust anyone -- not bankers, not accountants, not estate
agents, least of all sales people. Down our high street, the
competition for take-aways is cut throat. It says something when you
succeed in keeping a business like that going for 31 years.
I'm not a cynic, at least I don't think I am. In the first unit
Ethical Dilemmas: a primer for decision makers I wrote,
What does not seem to me to be a matter of debate is that
being a good judge of business ethics is an essential
accomplishment of a business person. If ethical questions
leave you cold, or if you would like to be ethical but
become flustered and reduced to inaction by your first
encounter with an ethical dilemma, then you lack something
that is required for being good in business -- no matter how
successful you may be in making money for yourself, or your
company.
If you disagree with that statement, there is no point in
reading any further. You've made a mistake. You shouldn't
be here.[2]
As I went on to say, that 'won't stop such persons listening in at
the door: it is the nature of business that all information is
regarded as potentially of use, for example as a way of predicting
how others will behave.'
It's safer not to make any assumptions. I don't know you, and I can't
be sure of the reasons why you have come here today. If you are
interested in truth in business because you want to grapple with some
of the problems of being truthful in your dealings with customers or
other business people -- or even the tax man -- then you will learn
something. If you are interested in truth in business because you
want to learn how to become better, more accomplished at lying, then
you will also learn something.
Why be truthful? Let me be honest with you. In the past, I have lied
on at least one occasion. I don't think there's a single person in
the room who wouldn't say the same. (I can't be sure of that. Abraham
Lincoln never told a lie, so the story goes.) But there's a problem
with what I've just said. I asked you to 'let me be honest with you'.
Why should you believe me, when I have just owned up to telling a lie?
Maybe I'm lying now. Maybe my colleague didn't say what I said she'd
said. Maybe there was no man in the fish and chip shop. I could have
made the whole thing up.
Too late now to plead that I am telling the truth, really, believe
me. This time. Forget the past. I've turned over a new leaf. I will
never lie again. But you know and I know that's probably not true.
I think there's something important in the idea that, in some sense,
it is logically self-frustrating to admit that you sometimes tell a
lie -- a key to what is wrong with lying. The philosopher Immanuel
Kant famously claimed that it was wrong to lie in any circumstances
whatsoever, even if you knew for sure that by doing so you could save
a person's life.[3] I don't think Kant's idea that it can absolutely
never be right to tell a lie is as nutty as it sounds, although it
will take a while to explain. I'll get back to Kant later.
II
But let's just stop a minute. How can we possibly be asking about
being truthful if we don't know what truth is? What is it? What is
truth? Do you know?
Here's a thought. If you are looking for truth, the world of business
is the best place to find it. There's nothing clearer, or more
absolute, than the consequences for a business decision in terms of
profit and loss. The bottom line. You can have the best product or
marketing idea in the world, but if the product bombs, it was rubbish
all along. Every day, beliefs and ideas are tested in the market
place, and back comes a decision that you just can't argue with. That
is truth, in an exemplary sense. Anything else is just hot air.
One of my Pathways to Philosophy students, Dave, a business
consultant, put the idea concisely:
Is business ethical because the customers expect it to be
or is business ethical because it is right to be so? Well
ultimately it's about hitting or overachieving the numbers,
that is the primary target, but to hit numbers you have to
do a lot of things right (I mean correctly or as required,
not right in an ethical sense). To understand what is
right, you have to talk and listen to your customers (and
see what your competition is doing). Once you have the
formula you go with that plan, tweaking it along the way as
is required. Corporate social responsibility has to fit into
those plans, now, it is expected and regulated in, but it
costs and has to be paid for.[4]
When I first got interested in the philosophy of business, that is
one of the aspects that fascinated me. Philosophers have debated the
nature of truth for thousands of years, and still not come up with a
definitive answer. But there it was, all along. You only have to look
out at the world of business and commerce. It's all about the numbers,
stupid!
However, one thing that stands out to my philosopher's eye in what
Dave said is that numbers are the 'primary target'. To say that a
target is primary, implies that there are, or might be, other targets
as well. To me, this looks like a bit of a fudge. Yes, you want to
achieve the numbers, but there are other things you want to do as
well, even if they are not primary. What other things?
An example might be Steve Jobs' famous pitch to John Sculley, then
President of Pepsi-Cola, 'Do you want to spend the rest of your life
selling sugared water, or do you want a chance to change the
world?'[5]. After a long battle to win Sculley over, Steve Jobs'
inspired question was the clincher. You could say, that was Sculley's
moment of truth. Sculley went on to be CEO of Apple from 1983-1993.
Sugared water rots the teeth. That's something to worry about, isn't
it, being a major contributor to world wide dental disease. But maybe
you run a company which manufactures the cardboard tubes that go
inside rolls of toilet tissue. There's no shame in that. Someone's
got to make them. OK, it's not anything to get excited about --
hardly world changing -- but you earn a good income, your family have
a comfortable standard of living, you provide work, contribute to the
economy. And, hopefully, you have outside interests and the time to
pursue them so that, overall, you can say you live a good life.
Not everyone in business has that pragmatic attitude, however. For
some, the necessity to believe in your product, to feel that you are
doing something important, something that makes a difference to the
world, is the main thing. That's a different kind of 'truth' from
numbers truth.
Or consider a company, which to all outward appearances is doing
well. But the profits, the numbers, depend largely on exploitation of
third world labour at wages that are barely subsistence level. Another
kind of truth again. -- I could give a long list of all the evils
perpetrated in the name of making a profit, but you get the idea.
Relying on the numbers alone to take care of ethics just won't do. It
will never happen, not in the world we live in.
But why care? I said at the beginning of this talk that I am not
making a pitch for ethics. The assumption is that you do care, but
the main problem, or stumbling block, is finding a way to reconcile
this with the need to hit those financial targets.
Here's one of my favourite quotes from Nietzsche:
'The truth is simple.' -- Is that not a compound lie?[6]
In some translations this is rendered as 'doubly a lie'. Why two
lies? The first lie is that the truth is simple. The second lie is
that the proposition, 'The truth is simple' has simple truth
conditions, that is to say, that it is either simply true, if it is
true or simply false, if it is false. In other words it is not a
simple truth that the truth is not simple.
Nietzsche's pungent maxim serves as a reminder that being truthful in
all your dealings might not necessarily be as easy as it sounds.
There's more than one kind of truth. We live in a world of multiple
truths, competing truths. It's not always clear which kind of truth
comes out on top. Truth depends on your point of view, what you are
looking for.
Even if your primary focus is on the numbers, to say that a company
is doing well is an interpretation, not a simple truth. If you are
looking at the yearly balance sheet, strict profit and loss, well,
maybe. But what about the long-term sustainability of the business?
What about new competitors coming into the market place? Or upcoming
EU legislation which could potentially cripple your business model?
Or the overly complacent attitude of your R & D department for which
you will pay for dearly in the years to come?
As experienced business people, you don't need to be told this. I'm
reminding you about something you already know. The point I want to
make is that if the truth isn't simple, than neither is the
injunction to be truthful. If someone demands a simple answer from
you, yes or no, and you know the truth in this particular case is
complex, what do you say? You can try playing the role of the
philosopher and answer with a speech, but that probably won't go down
too well. So maybe you compromise, trying to suggest in your
necessarily brief answer that there is more to the question than
meets the eye. That might do the trick. Or, if you are less lucky,
you'll find yourself in a whole load of trouble. The smart thing was
to tell the questioner what they wanted to hear and be done with it.
You meet an old acquaintance in the street and they ask you how you
are and how you're doing. Before you answer (and, note, you have
around half a second to decide this) you need to consider whether
they really want to know how things are with you. Or, supposing that
they do, whether you really want them to know. Human beings are
remarkably subtle and perceptive in the way they daily handle
potentially hazardous situations such as this.
III
If the truth isn't simple, then the very same statement can be the
truth and be a lie -- at one and the same time. You'll all be
familiar with this sort of case, there's nothing obscure or deep. A
little bit of truth helps a bigger lie slip through undetected. Or
you deflect a difficult question by giving an answer to a different
question, more or less subtly altering the meaning of the original
question into one that the questioner didn't intend.
There are lies, damned lies, and then there is advertising. In
Ethical Dilemmas, I considered variations on the theme of untruth,
such as bluff, spin and bull. It is one of the necessary skills of
the business person -- or any leader for that matter, a politician
for example -- to know when to bluff when bluffing is called for, to
know how to put a positive spin on an uncomfortable truth, how to
dish out bull as well as being able to detect it when it is dished
out to you.
Truth is pliable. You can stretch the truth, implying more than is
strictly the case. Or you can be more or less economical with the
truth. I won't repeat the various examples here. It is not necessary
to go into the finer points of where exactly truthfulness shades into
falsehood, because you already know this. It isn't philosophy, it's
part of our shared understanding of how one functions in business and
in society at large, and how one expects others to behave.
What interests me, from a philosophical standpoint, is the different
expectations that we have on the topic of truth and truthfulness,
depending on whether or not we are engaged in business activity --
or, as I would put it, 'competing in the business arena'.
I would to come at this today from a different angle from the
approach I took in my 2004 article 'The Business Arena'.[7] There, I
relied on the metaphor of a boxing ring to explain how it is that the
ethical injunction to help others in need does not apply in a
competition, where there are winners and losers. If you have your
opponent on the ropes, you don't offer a helping hand or give him a
chance to catch his breath, you finish him off.
This image is valid so far as it goes but it is misleading insofar as
there are many situations in business which are win-win. More often
than not, that's what you strive for. You want your customers to be
satisfied. You need your competitors and they need you, because that
gives potential customers a sense of choice, and choice is good --
even if it is only the illusion of a choice. Business competitors can
be allies, too.
The essential point about the business arena is that, like other
areas of social activity, it has ground rules. We may not be able to
state the rules explicitly, but they are there permanently in the
background. Because knowledge of the ground rules is necessary for
being able to carry out that activity, the rules are in a sense
axiomatic. And yet they are also like the digitally encoded rules in
The Matrix. As Morpheus tips Neo in the 1999 movie, 'Some of their
rules can be bent. Others can be broken.'
In the case of our social relationships, a close relationship or
marriage, or just friendship, the essential ground rule is honesty. A
'player', or a 'user' -- someone who habitually deceives for his or
her own ends -- can't be a good friend. They can be great fun, the
life and soul of the party, but you wouldn't share confidences with
them. You don't want to risk getting too close.
Grant the rule of honesty, and certain consequences follow. You might
think that you can get away with being scrupulously honest about the
fact that 'I look out for number one'. However, if we are engaging in
honest dialogue, then the fact that 'I am number one' isn't a fact to
take into consideration. From our point of view, it's a mere
tautology, an empty repetition: everyone is the person that they are.
Everyone is an 'I'. The relevant question is who deserves the benefit
in question. In ethical dialogue, we decide what is best for us,
factoring in our individual preferences and reaching an
accommodation, an acceptable compromise.
The greatest challenge for moral philosophers seeking a foundation
for ethics is extending the more or less narrow social circle -- the
persons we care for, the persons who 'count' for us -- to include the
rest of humanity. That's a point on which Nietzsche and I part
company, sorry to say. Intellectually and emotionally, I am a
universalist. I don't believe in caste systems, or master and herd
moralities. But then again, is that a simple truth, that universalism
is true? I doubt it, but that would be a discussion for another
occasion.
What about the business arena? The essential ground rule is private
property. The game of business is defined by the rule, 'Do not
steal.' That is not to say that other kinds of wrongdoing, for
example, lying, are not sometimes as bad as theft, far from it. If I
lie about a product I am advertising for sale, and by this means get
you to part with your money, then that is money I have effectively
stolen from you. Then again, there are cases one would describe
ethically as theft, which the law permits. Ground rules can be bent.
In the business arena, honesty is still valued and lying still
frowned upon. Yet there are also any number of examples where lapses
from strict truth-telling are expected, even the norm. 'I'll try to
get the goods to you by Friday.' You know the earliest you can
possibly deliver is Monday, barring a miracle. When you said you
would try, your customer assumed that you didn't mean that you would
be praying for a miracle. 'You've done a great job.' The marketing
report on your desk is a mess, but you can see that your new intern
is trying hard, and you don't want to dent their confidence. So you
use a bit of bull -- maybe offer some tactful advice for next time --
and it has the desired effect.
No-one believes that an advert tells the literal truth about a
product, do they? But, that means adverts have to exaggerate to some
extent, because the advertiser knows that the viewer will
automatically filter the exaggeration out. Some misleading adverts
try to get under your guard by admitting their product has
shortcomings. A case of admitting a small truth so that a bigger lie
can pass undetected.
I'm not necessarily condoning examples like these. But then again, I
said I wasn't going to judge. You don't want to get a reputation for
making false promises about delivery times, or habitually offering
insincere praise. Adverts have still got to be legal, and they've got
to be at least capable of being believed. It goes without saying that
if you are playing the lying (or fibbing) game, you always consider
the shorter and longer term consequences before you act.
In the business arena it is still wrong to tell a lie, but its
wrongness is not axiomatic in the way it is in our social relations
outside the arena. What's the difference, exactly? Untruths are still
told, either way. But the standards, the priorities are not the same
inside and outside the business arena.
IV
Now we come to the difficult part. I promise to keep this as short
and painless possible -- the ethics of Immanuel Kant.
When Kant asked why it is wrong to tell a lie, his answer was
essentially that human discourse would break down if it were not
automatically assumed that when you make a statement, you are telling
the truth. This is on the principle of the Categorical Imperative:
Only act on that maxim which is capable of being -- or which you
could intend to be -- a universal law. A liar does not want this.
What they want is an exception to be made solely for themselves,
while everyone else goes on telling the truth. In doing this, the
liar is effectively admitting to themself that what they are doing,
or want to do, is wrong.
Imagine a world where truthfulness is no longer expected. You can say
what you like, true or false, in any situation. I am describing an
alternative 'language game' in Wittgenstein's sense (not an example
Wittgenstein ever considered, so far as I can recall). No-one is ever
blamed for telling a lie, no-one is ever praised for telling the
truth. If you want to know whether someone is actually telling the
truth in any given situation, you need to do some elaborate
second-guessing. Did they say what they said because it is true, or
did they say what they said because it is false? What's the payoff,
either way? (This is something you can try at home. You might want to
set an agreed time limit to the experiment first.)
Here is how I explained the point in Ethical Dilemmas. Consider the
statement, 'I never tell a lie, except when I am in a very tight
spot.' That seems a not unreasonable thing to say. It's more or less
what I said in the beginning of this talk. The problem is, if I do
admit this, then you know that next time you find me in what I call a
'very tight spot', you will have no reason to believe anything I say.
I know that you know this, because I just told you, and you know that
I know that you know this. So if you ever find me in a very tight
spot, I might as well keep my mouth shut as far as you are concerned.
As I go on to argue in the program unit,
... as I can no longer get away with lying when I am in a
very tight spot, the tightest spot where I can successfully
lie is a tight spot. So you will not believe me in this case
either. Nor, repeating the same reasoning, will you have any
reason to believe me when I am in a slightly tight spot.
Generalizing from this example, to admit that one sometimes
lies, to gain any advantage whatsoever, is logically
self-defeating.[8]
Is this argument valid? It has some resemblance to the surprise test
or hangman paradox. You can prove that it is impossible to set a
surprise test, but that won't prevent the teacher from setting the
test, and taking the class fully by surprise. You can prove that it
is inconsistent to admit to ever having lied, and yet sometimes we
lie. You take a friend into your confidence, 'Actually, I didn't tell
the truth to so-and-so.' Why should the friend you've confided in
believe you? They just do, at least on this occasion. Tolerance of
inconsistency is part of the language game, part of this
Wittgensteinian form of life.
Nevertheless, there is something wrong with the very idea of lying.
Unlike Kant, we may not have the confidence to state exactly what
this is, but we feel it and acknowledge it to be true.
In the case of theft, on the other hand, it is less clear that there
is something intrinsically wrong with taking something that isn't
yours. This is familiar territory for students of political
philosophy, starting with Locke's famous defence of private
property.[9] Other social arrangements are possible, such as those of
the early Christians or along marxist or anarchist lines. The problem
is, given the vagaries of human nature, it is not so easy to run a
society on the sole principle of brotherly and sisterly love.
This is my base line defence of capitalism. Trading is a game that
human beings invented long ago. It is a game at least as old, or
older than the eighth Commandment, 'Do not steal.' It is unthinkable
that we could get back to a golden age -- supposing such a time ever
existed -- when the trading game was not played, in some form or
other. Capitalism is the latest, most sophisticated version of that
game. Which is not to say that further improvements might not be
possible (capitalism 2.0 as some have proposed).
V
I now want to draw your attention to an interesting symmetry. I
stated that the rule of honesty defines the social game -- or the
game of 'ethical dialogue' as I would like to call it -- while the
rule of private property defines the business arena. In ethical
dialogue, it is axiomatic that one tells the truth, while all other
rules of conduct have to be argued for on their merits. In the
business arena, it is axiomatic that one does not steal, while all
other rules of conduct have to be argued for on their merits.
I believe that it was the perception, or half-perception of this
fundamental distinction between two types of conduct, two games,
which led Albert Carr to argue in his notorious 1968 Harvard Business
Review article, 'Is Business Bluffing Ethical?'[10] that it was
acceptable to do many actions in business that would be unacceptable
outside business.
From a post-Enron perspective, Carr's article is a shocking
indictment of attitudes which were then prevalent, at least in
American business. (I don't want to sound chauvinistic, but on this
side of the Atlantic in the 60s there was still nominal lip service
paid to the notion of the virtues of the 'English gentleman'. Maybe
the Yanks were just more honest about it?) It was irksome, to say the
least, when I discovered that my view had been compared to Carr in an
anonymously authored Wikipedia article on the philosophy of
business.[11]
I mentioned this in my 2005 Prague College Open Lecture[12]. Carr
seems to be saying that any action in business is ethical provided
the law lets you get away with it. Hence, the poker analogy. You can
win a game through bluff but you're not allowed to physically steal
your opponent's chips when he's not looking. And yet, as I argued,
the logic of Carr's position seems to be rather, 'Don't get caught,'
or even, 'It's OK to get caught provided the penalty isn't too
severe,' as in the case of a so-called professional foul in football.
Carr is a cynic about ethics in business, while I am not. That's the
essential difference between us. Partly, or perhaps largely, the
difference mirrors the progress that has been made in raising ethical
awareness within business over the last 40-50 years. That's something
good, isn't it? The game is nicer than it was 50 years ago. But many
nasty things still go on, as you and I well know.
I came to the concept of the business arena through consideration of
the nature of ethical dialogue in relation to the philosopher Martin
Buber, and also thinking about the early philosophy of Karl Marx, in
particular his 1844 Manuscripts[13]. As I argued in 'The Business
Arena', we don't leave the world of ethics when we enter the business
arena. We merely agree to play by special rules which allow for more
or less unrestricted competition. It is OK to 'look out for number
one' because that's the game you're playing.
Though not a cynic, I'm not a starry-eyed idealist either. My main
focus is on how I can make my own life better, in a way that is
consistent with the well being of those around me, as well as those
whose lives I have an effect on. From now until Kingdom come, in all
likelihood, the bank chairman will walk away with a salary in the
millions, while the cleaner who comes in before office hours will get
by on the minimum wage. The bank chairman believes he fully earns his
salary, and who am I to argue? I earn enough to live and I love what
I do, which is enough for me.
If I was to make a pitch for honesty, it would be that telling the
truth and being known as someone whose word can be relied on, isn't
just about selling a product, or selling your company as an ethical
company. It's a way of life. Honesty is its own reward. That's a
personal view, from someone who aspires to be a truth seeker. But if
you find you are in agreement with me, don't be misled into thinking
that somehow, if you take sufficient care, you can get off scot free
of any taint of unethical conduct. There will come a time when you
will be forced to compromise your lofty principles, including the
principle of never telling a lie. When that that time comes, face the
situation bravely and do what needs to be done. In business,
typically, yours is not the only head on the chopping block.
VI
What about business ethics? There are people who call themselves
'business ethicists' (as you will have gathered by now, I am not one)
whose primary role is to help you stay on the right side of national
and international legislation, and sell your business to an
increasingly ethically discerning public. In other words, business
ethics is a variety of PR. A company's ethical credentials are now an
expected part of the total marketing package. By the same token, no
company would try to be more ethical than their customers ask them to
be. Any such action would be rightfully treated with the greatest
suspicion. That's not included in the business ethicist's remit.
I am not accusing business ethics of being somehow a dishonest
activity. Not at all. A good business ethicist does exactly what they
advertise on the tin. It's money well spent. And the results are
verifiable. It's all about the numbers, remember?
As my Pathways to Philosophy student pointed out, social
responsibility costs money which has to be factored in when you
crunch those numbers. The same can be said about ethics. In a good
year, you can afford to spend more on ethics, in a bad year less.
Ethics is just one more item to take into account when you tweak your
business plan to get the optimal result. You spend as much time as
needed to think about ethics, and spend as much money as you can
afford, given ever-present financial constraints.
I'm not here to preach. I'm not standing in judgement. I'm out of
this. In my choice of life style you could describe me as a would-be
marxist who accepts that capitalism is the best of all possible
social arrangements. I therefore have no desire (you will be glad to
hear) to convert anyone else to marxism, or even my idiosyncratic or
ironic brand of it.
What I would like to do is get you thinking. Don't rely on so-called
experts to do your thinking for you. Hire a business ethicist if you
must. A business ethicist in your office is a luxury you can afford,
as the advertising slogan goes. Listen to their advice but don't take
it uncritically. You can be your own business ethicist too!
Most important of all, you don't have to become a philosopher in
order to be interested in the philosophy of what you do, I mean a
philosophy of practice not of high-blown theories. Let Kant scholars
worry about exactly what Kant said, or meant. But in between bouts of
more or less frenzied business activity, give yourself a bit of time
to think about ethics and philosophy, and the true meaning of your
life inside and outside the business arena.
References
1. Personal communication, used with permission
2. Ethical Dilemmas: a primer for decision makers Unit 1
http://ethicaldilemmas.co.uk (PDF)
3. Immanuel Kant 'On the Supposed Right to Lie from Benevolent
Motives' 1797
4. Personal communication, used with permission
5. Walter Isaacson, Steve Jobs Simon & Schuster 2011 p.154
6. Friedrich Nietzsche Twilight of the Idols R. Hollingdale, tr.
'Maxims and Arrows', 4.
7. Geoffrey Klempner 'The Business Arena', in Philosophy for Business
Issue 5, 7th March 2004
http://klempner.freeshell.org/businesspathways/issue5.html
8. Ethical Dilemmas: a primer for decision makers Unit 5
http://ethicaldilemmas.co.uk (PDF)
9. John Locke Two Treatises of Government 1689
10. Albert Carr 'Is Business Bluffing Ethical?' Harvard Business
Review 46, January-February, 1968, pp. 143-53
11. Although the article was drastically pruned at the beginning of
this year, there are still find numerous versions on the web. The
article is also preserved in full in Philosophy for Business Issue
15, 11th January 2005
http://klempner.freeshell.org/businesspathways/issue15.html
12. Geoffrey Klempner 'Corporate Social Responsibility and Ethical
Dialogue', in Philosophy for Business Issue 19, 1st June 2005
http://klempner.freeshell.org/businesspathways/issue19.html
13. Karl Marx The Economic and Philosophic Manuscripts of 1844, Dirk
J. Struik, ed. International Publishers 1964
(c) Geoffrey Klempner 2014
Email: klempner@fastmail.net
-=-
III. A CALL FOR PAPERS : Identity and value in work
Suggestions for forthcoming issues
The term business most often calls to mind images of corporate and
financial affairs. But 'busy-ness' also concerns the craftsman,
mechanic, repairman, painter, potter, and carpenter. In his book Shop
class as soulcraft: An inquiry into the value of work (Penguin, 2009),
Matthew B. Crawford presents the deficiencies of educating people to
be 'knowledge workers' on several levels (somewhat akin to
Baudrillard's 'ideological genesis of needs'). This trend, Crawford
argues, is based on a very problematic dichotomy between thinking and
doing. 'The disappearance of tools from our common education is the
first step toward a wider ignorance of the world of artifacts that we
inhabit'. He takes us through what is happening when we see the
mechanism but cannot comprehend it: it is as mysterious to us as that
cola bottle dropped from an airplane into an aboriginal village in
Botswana (in the film The gods must be crazy, Jamie Uys, 1980). How
do we find value in work? Can this value be taught?
Work is one's vocation (calling), one's livelihood (life-hood). How
can an education construed from a single concept of a 'global' or
'knowledge-economy' fit all personality- and identity-types? How can
the imperative 'Know yourself!' have meaning? Is the personhood
characterized in Herbert Marcuse's One-dimensional man (1964)
emerging? His description of how advanced industrial society creates
false needs seems to become clearer with each step toward a
standardized (accredited?) paradigm of education. These installed
needs, he wrote, integrate people into the Total System of production
and consumption through modes of thought created by entertainment
media, advertising as the construction of values, and the imposition
of industrial management structures on various institutions that were
once culturally and locally grounded. The result of this process will
be, according to him, a "one-dimensional" world of thought and
behavior; it will be one in which the capacity to critique society
and to oppose it on rational grounds is eliminated. Where does the
free-thinker stand in Marcuse's critique?
Daniel J. Boorstin made a similar prediction in different terms a few
years earlier in his brilliant work The Image: A guide to
pseudo-events in America (1961): 'In this book I describe the world
of our making, how we have used our wealth, our literacy, our
technology, and our progress to create the thicket of unreality that
stands between us and the facts of life'. This concept of 'unreality'
was analyzed later by Jean Baudrillard (I have in mind The system of
objects, 1968 and The consumer society, 1970), and seems to reflect
the theoretical basis of Zygmunt Bauman's analysis of work in the
forth chapter of Liquid Modernity (Polity Press, 2000). If
Baudrillard's critique is accurate (namely, that consumption is the
main drive in capitalist society, not production -- a theory that
Bauman explored in light of what he saw as a shift in the twentieth
century from a society of producers to a society of consumers), then
perhaps the criticisms of current trends in education have further
justification and support. According to some critics, modern
education (particularly the textbook industry) is designed to promote
primarily consumption; and this is precisely why, according to
Baudrillard, that consumption is more important than production. The
need for something summons its production, much the way companies
advertise first and then figure out how to deliver after. What is
this unreality of our consumer choices? How can a reading of these
thinkers be used in practice? -- as manuals for shopping? -- as
vehicles of philosophical counseling and therapy for the distressed
consumer?
Thus Marcuse called for a 'great refusal' as the only choice for
opposing the emerging methods of social, psychological, and genetic
control. When Henry Miller wrote in the 1930s about his time working
in the 'Cosmodemonic Telegraph Company' he surely had a premonition
of this. The person-cog in the Total System of the machine-age
becomes a byte in the virtual-age. The gradual emergence of Huxley's
Epsilon class? The emergence of Plato's drone-workers according to a
genetic or social classification? For those who accept Marcuse's
warning, which writings of the past can best inform them about how to
make ready for what's coming?
Manual work, crafts (house wares), arts (comics, radio), and even
careers like journalism are gradually disappearing as robotic and
computerized methods of production displace what is considered to be
the psychological and emotional satisfaction that comes from
'meaningful work'. This is most familiar in the turn to disposable
commodities, calculated and produced purposefully to have a specific
economic duration, and enforced in a cleverly managed economy in
which the cost of repairing the item will be more than purchasing a
new one. Is such a view merely the fear of Luddites and technophobes
afraid of change? Can meaningful work not be found in an evolving
system of production and innovation?
We look forward to receiving submissions on these subjects.
(c) Peter S. Borkowski 2014
Email: p.borkowski@aui.ma
-=-
IV. ANNOUNCEMENTS
Of interest on the Internet:
1. A list of interviews from 'New books in philosophy: Discussions
with philosophers about their new books'
http://newbooksinphilosophy.com/list/
2. Carolyn Gregoire's recent article 'The unexpected way philosophy
majors are changing the world of business' (Huffington Post) will be
useful to those promoting the study to students. This piece is a good
prompt for reflection on the cultivation of free-thinkers.
http://www.huffingtonpost.com/2014/03/05/why-philosophy-majors-rule_n
_4891404.html
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