Ethics and Morality in Business Practice 9781846638091, 9781846638084

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14/03/2008

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ISSN 1747-1117

Volume 4 Number 1/2 2008

Social Responsibility Journal Ethics and morality in business practice Guest Editors: Jelena Debeljak and Kristijan Krkac ˆ

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Table of contents Ethics and morality in business practice Jelena Debeljak and Kristijan Krkacˇ Volume 4 Number 1/2 2008

CSR and management Ethics and morality in human resource management Access this journal online

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John Simmons

The Social Responsibility Research Network

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Values in organizations: difficult to understand, impossible to internalize?

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Merita Mattila

Editorial Calls for papers

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Corporate governance and innovative leaders

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M.A. Musa, S.E. Ismail and S. Othman

Moral commitments to community: mapping social responsibility and its ambiguities among small business owners 41 Elizabeth A. Lange and Tara J. Fenwick

CSR, women and SMEs: the Croatian perspective

56

Mirna Koricˇan and Ivija Jelavic´

CSR and corruption Corporate ethics: an end to the rhetorical interpretations of an endemic corruption

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Ben Tran

Corruption as a moral issue

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Hartmut Kreikebaum

Teaching, communicating and evaluating CSR Can we teach ethics and professional deontology? An empirical study regarding the Accounting and Finance degree

89

Francisco Alegria Carreira, Maria do Amparo Guedes and Maria da Conceic¸a˜o Aleixo

Corporate social responsibility, new activism and public relations

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Kristin Demetrious

‘‘What we learn today is how we behave tomorrow’’: a study on students’ perceptions of ethics in management education

120

Fernanda Duarte

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Analysis of CSR: principles and concepts Ten principles of corporate citizenship

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David Birch

The ‘‘ethics’’ of being profit focused

136

S. Mercia Selva Malar

Revisiting rights and responsibility: the case of Bhopal

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Loong Wong

Paradigms in corporate ethics: the legality and values of corporate ethics

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Ben Tran

Business ethics? A global comparative study on corporate sustainability approaches 172 Sharon Moore and Julie Jie Wen

The organisation’s captives: the no mean production of the contemporary administrative techniques

185

Alex Coltro

Accountability discourses in advanced capitalism: who is now accountable to whom?

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Miriam Green, Wim Vandekerckhove and Dominique Bessire

Corporate social responsibility in India: towards a sane society?

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Aruna Das Gupta and Ananda Das Gupta

‘‘Me, myself & I’’: practical egoism, selfishness, self-interest and business ethics

217

Jelena Debeljak and Kristijan Krkacˇ

Fighting a smoky fire: an analysis of Philip Morris’s CEO speeches according to image restoration strategies

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Maria de Fatima Oliveira

Back to basics: an Islamic perspective on business and work ethics Riham Ragab Rizk

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The Social Responsibility Research Network The Social Responsibility Research Network (SRRNet) is a body of scholars who are concerned with the Social Contract between all stakeholders in global society and consequently with the socially responsible behaviour of organisations.

Mission The mission of the SRRNet is to promote collaborative, cross-cultural and international research on any aspect of its social responsibility agenda, to disseminate such research globally and to improve knowledge.

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the exchange of research through its web site;

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the promotion and organisation of a series of international research conferences, in various parts of the world and under the leadership of a named individual;

B

the production and dissemination of an academic journal;

B

the production of such other publications as are deemed appropriate and for which sufficient funds exist; and

B

the promotion and organisation of a series of international working travels to produce special projects.

Organization Membership is open to anyone. It is a formally constituted organisation governed by a constitution and managed by an elected/nominated board. The management of the network will be delegated to this board, which will be supplemented by a general meeting, open to all members, which will take place at each conference organised. Full details of SRRNet and details of how to join can be found at the web site www.socialresponsibility.biz

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Editorial Ethics and morality in business practice Jelena Debeljak and Kristijan Krkacˇ thics is about finding an answer to what a good person is and how to be(come) one. Therefore it applies to any area of human social life, i.e. forms of life. Regardless, ethics has been repeatedly and carelessly ignored in one of those areas in particular – ethics in business, which that is the area we tackle in the Special Issue of Social Responsibility Journal sitting in front of you, business and organisations. The papers gathered discuss the consequences of such practice, trying to promote a way and relevance of seeing business and morality together.

E

The title of this Special Issue of Social Responsibility Journal is ‘‘Ethics and morality in business practice’’. Our contributors discuss the theme broadly, demonstrating how present and widespread it is in this field. The great interest in publishing an article in this Special Issue has produced a double issue, which also shows how many academics realise and are trying to inform society about the problems. The research published within these issues testifies that ethics and business do not, or should not, create an oxymoron – as is considered by ‘‘Friedman-style’’ economic reasoning. Ignoring ethics in business practice bears negative consequences for business, manifested in general negligence, such as pollution, environmental changes, problems in HRS, the business relations scale in general, and eventually the maintenance and sustainability of general prosperity and business itself. The purpose of this Special Issue is to facilitate understanding of where ethical and moral limits should actually be underlined, as this question seems to represent the most difficulty. Perhaps because the answer is plain – they are within each and every one of us, and are nurtured by each and every one of us, as that is where morality comes from. We can try to avoid taking responsibility, as we – by our fragile human nature – frequently tend to do, but that only makes things worse for no-one else but ourselves. So, ‘‘When shall I start acting upon the realised importance of morality?’’ is perhaps a more convenient question. This Special Issue of Social Responsibility Journal, due to directions on topics chosen by us as Guest Editors and because of accepted papers, covers at least four topics as we see it: B

the first and rather practical topic is CSR and management issues;

B

the second is the always fresh issue a` propos corruption;

B

the third covers teaching, communicating and evaluating CSR; and

B

the last covers theoretical and fundamental troubles concerning questions on CSR principles and crucial CSR concepts in terms of their analysis.

This difference between the topics is somewhat blurred, as all the papers in CSR to some extent follow the standard model of papers in social sciences, and quite often such an approach is mixed with the philosophical analysis popular among experts in practical philosophy and applied ethics, and in addition, cases are frequently presented in order to show the problem and the solution in practice. In respect of the number of the papers reviewed to be published, the editors have tried to accomplish a certain degree of balance among previously listed topics of the journal’s contents. Nevertheless, the fourth topic, the re-description of some indispensable notions of CSR, seems to be of greatest concern in the present volume. In such circumstances and especially on an occasion such as this, i.e. as Guest Editors, we should say that this suggests a certain way of development of the area of CSR in practice – by ethical officers in firms, by academics, by NGOs, and many other stakeholders.

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A` propos of this, we have tried to combine papers into a whole which could provide readers with an idea about how to move from practice to theory in a way that would eventually make practice speak for itself (to paraphrase the words of Austrian philosopher Ludwig Wittgenstein). Practice itself isn’t justified or unjustified, as there cannot be justification stronger than the practice itself, and this is so because every practice is a proper part of steady and fairly complicated form of life, i.e. particular practices, actions, procedures, routines and world-view as a whole (to paraphrase the same philosopher once again). So, the first section is concentrated around the topic of management. In the words of one the contributors, J. Simmons, whose paper focuses ‘‘on operationalising corporate social responsibility in the context of employee governance. Its purpose is to critically evaluate the ethics of ‘mainstream’ human resource management (HRM) and to propose an alternative stakeholder systems model of HRM’’. The practice of value-formation in corporations in the context of management is studied in the second paper by M. Mattila. A similar topic is developed by M.A. Musa, S.E. Ismail, and S. Othman in their paper ‘‘Corporate governance and innovative leaders’’. So, this first part, to continue with application of some philosophical concepts, shows how form of life can be changed on the level of management. Somewhat more loosely connected to the topic of the chapter is the paper by E.A. Lange and T.J. Fenwick, ‘‘Moral commitments to community: mapping social responsibility and its ambiguities among small business owners’’, and the paper by M. Koricˇan and I. Jelavic´, ‘‘CSR, women and SMEs – the Croatian perspective’’. The second part is composed of just two papers, which are compatible in principle since both discuss an issue of corruption, the first regarding corporations (by B. Tran), and the second regarding corruption as a general ethical issue (by H. Kreikebaum). B. Tran, in his paper ‘‘Corporate ethics: an end to the rhetorical interpretations of an endemic corruption’’, suggests that ‘‘implementing organizational guidelines is one appropriate and objective method in addressing corporate corruption and to confirm corporate compliance’’. On the other hand, H. Kreikebaum, in his paper ‘‘Corruption as moral issue’’ states that ‘‘a compliance approach can only serve as a necessary first step to counteract fraud and corruption, and that to obtain a good corporate citizen status a company should also develop an open dialogue with all stakeholders (integrity management approach)’’. The third part shows something rather different regarding not just these changes, but also that these forms of life must be introduced together into society, namely to its new members. So, drilling, teaching, or acquiring practices seem all to be important. Papers gathered here address many relevant topics. F. Alegria Carreira, M. do Amparo Guedes and M. da Conceic¸a˜o Aleixo pose the question of the possibility of teaching business ethics; Kristin Demetrious connects it to new activism; and E. Ariwa and S. Olaya formulate many queries regarding digitalization and CSR through a quite interesting case. Finally, the fourth part discusses some fundamental CSR concepts. This also calls for some clarification. The Austrian philosopher already mentioned wrote that during the drill of morality ethics itself should be presented as a kind of mysterious thing, and only later it can be explicated, and that on the other hand something must be presented as fundamental during teaching and acquiring. So, one thing is to drill certain practice (i.e. form of life, way of action and living) into the members of a certain group or society, and quite another is to explicate it, to present it perspicuously for various practical purposes. Although these appear to be two different things, they are not. Practice alone contains rules, notions and ideas within itself, so while certain action is de facto practised these rules are implicit within it and manifest themselves during the process. On the other hand, due to the new circumstances, need for change of practice or a similar explication is required as a kind of practical synopsis or overview. If so, then these implicit rules can be explicated, mystery (at least partially) can be revealed, but once again, only for practical purposes. After all, we learn practice by doing something (not to tell lies, not to steal, to be honest, to be fair, etc.), not by learning rules before or separately from training. So, that is our reason for creating the fourth part, which addresses issues starting with principles of corporate citizenship (D. Birch), contemporary administrative techniques

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(A. Coltro), to many particular concepts such as accountability (M. Green et al.), sanity (Gupta and Gupta), affirmative action, rights, sustainability, and others. Furthermore, we should mention that some principal issues are discussed in various contexts in some of the papers in the fourth part, namely: B

in the context of a certain corporation (Maria de Fatima Oliveira, ‘‘Fighting a smoky fire: an analysis of Phillip Morris’s CEO speeches according to image restoration strategies’’; ‘‘On the morning of December 3, 1984, a holding tank with 43 tonnes of stored MIC from the Union Carbide factory, overheated and released a toxic MIC gas mixture, which, being heavier than air, rolled along the ground through the surrounding streets’’. This ecological and corporate disaster is the topic of the paper by Loong Wong, ‘‘Revisiting rights and responsibility: the case of Bhopal’’);

B

in the context of national economy (paper by Gupta and Gupta, ‘‘Corporate social responsibility in India: towards a sane society?’’); and

B

in the religious and cultural context (paper by Riham Rizk, ‘‘Back to basics: an Islamic perspective on business and work ethics’’).

By summarising these somewhat disconnected ideas in all of the chapters, it is possible to argue that these topics are of the utmost importance to CSR and business ethics since they call attention to the vital responsibilities of business and its stakeholders, especially regarding: B

proper functioning of management and of some ‘‘improper’’ functioning, i.e. corruption (first and second parts);

B

the role of learning about ethical values (among businessmen, PR, students, professors, and activists; third part); and

B

the importance of fundamental conceptual investigations exposed as practical in various cases which reveal them at the same time to be purely abstract as well as everyday obstacles (fourth part).

This last part also can be divided into those papers that give rise to some fundamental issue in the light of a particular case, and those that discuss a conceptual issue in the first place and try to apply it to economic realities. In the light of all of the ideas mentioned of the relationship between practice and theory, and vice versa, we are thankful to Professor David Crowther, who gave us the opportunity to present this Special Issue of Social Responsibility Journal to readers of different interests and positions in the corporate, business, and academic worlds – not just as a sum of excellent investigations, but also as significant ideas of what is relevant in social responsibility in different fields of business, societies, and cultures nowadays.

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CSR and management Ethics and morality in human resource management John Simmons

John Simmons is HRM Subject Group Leader, Liverpool John Moores University, Liverpool, UK.

Abstract Purpose – The paper seeks to focus on operationalising corporate social responsibility in the context of employee governance. Its purpose is to evaluate critically the ethics of ‘‘mainstream’’ human resource management (HRM) and to propose an alternative stakeholder systems model of HRM. Design/methodology/approach – Stakeholder theory is utilised to critique modes of employee governance, in the light of concepts of stakeholder accountability and organisational justice. Conceptual analysis attests to the need for a different philosophy of employee governance – in particular within knowledge-intensive organisations. Findings – The paper identifies the concept of ‘‘the responsible organisation’’ as a means of assessing organisational maturity in employee governance, and relates this to dimensions of organisational justice. Linkage enables employee perceptions of equitable treatment to be combined with effectiveness measures in the employee governance model proposed. Research limitations/implications – The paper demonstrates the significance and application potential of a stakeholder systems development of current modes of managing people. Conclusions confirm instrumental and ethical rationales for the greater involvement of and accountability to employee stakeholders. Practical implications – The paper demonstrates a business-based rationale for the adoption of ethical corporate governance and HRM. Originality/value – The stakeholder systems model represents a holistic approach to human resource management by its incorporation of employee perspectives at HRM system design, operation and evaluation stages. It responds to the need for a new philosophy of HRM in an era of stakeholder-accountable organisations. Keywords Human resource management, Ethics, Corporate image, Social responsibility Paper type Conceptual paper

Introduction What is ethical business, and how does an organisation demonstrate corporate social responsibility? Can the elusive concepts of ethics and morality be made explicit and, if so, is it practical for businesses to strive to act ethically or is ‘‘doing good’’ always at the expense of ‘‘doing well’’? If it is possible and desirable to become an ‘‘ethical organisation’’, how can this aspiration be incorporated in corporate and employee governance? The paper addresses these questions in the following way. First, it analyses the concepts of morality, accountability and justice that underpin corporate social responsibility (CSR). Second, it utilises stakeholder theory to identify organisation responsibilities to salient constituencies in an era of stakeholder-accountable organisations. Third, it recognises levels of CSR to show how organisations may become more socially responsible, while acknowledging the possibility of limited progression or regression. Fourth, it relates this analysis to human resource management (HRM) and, by delineating levels of concern for social responsibility from stakeholder involvement, identifies four modes of HRM. Finally, by

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DOI 10.1108/17471110810856794

viewing HRM as both a component and a potential facilitator of CSR, it addresses the question of assessing levels of ethical practice in HRM via a stakeholder systems model that incorporates measures of equity and effectiveness.

The meaning of ‘‘ethical business’’ Research identifies the lack of synthesis in ethical domains as a barrier to the ethical development of business (Ahmed and Machold, 2005) together with the need for an organisationally relevant ethics stance (Kaler, 2004). Questions of ‘‘what is ethical’’ and ‘‘how business should demonstrate corporate social responsibility’’ are also raised by practitioners and professional bodies (Steare, 2006). The paper responds to this gap in the literature by analysing the values that underpin CSR, and proposes the concept of ‘‘the responsible organisation’’ as an ‘‘ideal type’’ that enables assessment of a business’s ethical stance. While acknowledged as an embryonic and contestable concept (Windsor, 2006), an influential definition of CSR is ‘‘the ethical behaviour of a company towards society [. . .] [involving] management acting responsibly in its relationships with all stakeholders who have a legitimate interest in the business’’ (World Business Council for Sustainable Development, 1999). Concepts of integrity, justice and accountability underpin this definition. Integrity is acting in accordance with ethically justifiable yet self-imposed positive values (Carey, 1999), so ‘‘ethical behaviour’’ is the outward manifestation of an organisation’s moral values – and an organisation demonstrates moral commitment when altruistic actions are given priority over those bringing purely institutional gain (Bebeau et al., 1999). ‘‘Acting responsibly’’ infers incorporating ‘‘justice’’ and ‘‘fairness’’ in organisational decision making by recognising the rights of others and the possible consequences of organisation decisions for them. The responsible organisation demonstrates ‘‘ethical foresight’’ by anticipating the possible consequences of its actions to those within its sphere of influence (Nijhof and Jeurissen, 2006). ‘‘Stakeholders’’ and ‘‘legitimate interest’’ imply accountability to those with a ‘‘stake’’ in the business – i.e. being accountable to salient stakeholders for actions that affect the well being of these groups. Criteria for evaluating levels of social responsibility in corporate and employee governance via the perceptions of salient stakeholder groups are proposed in a later section of the paper.

Ethics and the stakeholder-accountable organisation ‘‘Nothing could be more loaded with moral significance than the questions surrounding the roles and responsibilities of the various stakeholders in the corporate system’’ (Wilson, 2000, p. 14). Stakeholder theory is seen as an important framework for business ethics (Gibson, 2000) and key to developing a more practical view of CSR (Gago and Antolin, 2004). The significance of stakeholder perspectives is shown by recognition of them as the ‘‘dominant discourse’’ in organisation theory (Pesqueux and Damak-Ayadi, 2005), and by their application across a range of academic disciplines. Stakeholder approaches subsume a mainstream method of organisational enquiry – i.e. stakeholder analysis – and a managerial response to the greater interconnectedness of organisations – i.e. stakeholder management. Within the former, stakeholders are those who affect or who are affected by organisational decision making (Freeman, 1984), while the latter is the socio-political process by which organisations manage potentially disparate stakeholder interests (Burgoyne, 1994). Common to both is the proposition that sustainable organisational success in large part depends on systematic consideration of the needs and goals of salient stakeholders (Fraser and Zarkada-Fraser, 2003). Stakeholder theory’s initial conception of the firm as the focal organisation with a ‘‘hub and spoke’’ relationship to stakeholder groups has moved to a less organisation-centric view of the corporation and its stakeholders as embedded in a complex network of relationships (Lozano, 2005). Applications of stakeholder theory can be functionalist or radical. However, it is the potential of the radical perspective to provide a more balanced, realistic and ethical view of organisational relationships (Friedman and Miles, 2002) and to facilitate development of a stakeholder systems approach to employee governance that is the focus of this paper. The stance taken aligns with research evidence that indicates that the quality and acceptability of decision making in stakeholder-accountable organisations is enhanced by incorporating stakeholder perspectives (e.g. Pettijohn et al., 2001). The studies cited relate to employee stakeholders,

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but the paper contends that the proposition has validity to both internal and external stakeholder constituencies. Why should organisations take stakeholder views into account? The notion that organisations will interact with stakeholders based on their perceptions of stakeholder attributes has been the focus of significant debate. Mitchell et al.’s (1997) influential model of stakeholder saliency is based on stakeholder attributes of power, legitimacy and urgency. It posits that perceptions of the extent to which stakeholders can facilitate or prevent achievement of organisation objectives, the degree to which stakeholder expectations are seen as legitimate, and the timescale within which stakeholder expectations have to be responded to, cumulatively influence the leverage that stakeholder groups have. The other side of the coin is how organisations respond to stakeholder influence and the link between perceived stakeholder attributes and organisation response. Wider organisation-stakeholder relationships are discussed elsewhere (Greenwood and Simmons, 2004), so the paper focuses on the link between organisation stance on stakeholder management and its HRM strategy. The normative stance that stakeholders should have the opportunity to participate in organisation governance is not new (Etzioni, 1998). However, the debate lacks an ethical philosophy of employee governance and an organisation development technique for its implementation (Introna and Pouloudi, 1999). A philosophical rationale for ethical HRM can be developed by utilising Niebuhr’s concept of ‘‘the responsible self’’ (Niebuhr, 1963). This suggests that individuals act responsibly if they consider the consequences of envisaged actions for those affected by them in a manner analogous to the ‘‘ethical foresight’’ capability identified earlier in the paper. The paper relates this to the contemporary business context to propose the concept of ‘‘the responsible organisation’’. It suggests that responsible organisations are those whose governance systems recognise relationships with a range of internal and external stakeholders and establish systems to facilitate fair discourse with them on strategy initiatives they consider undertaking. While many managers recognise instrumental reasons for dialogue with constituencies that can facilitate or impede organisation actions (Idowu and Papasolomou, 2007), the responsible organisation goes further to acknowledge a duty of care for ‘‘silent’’ stakeholders – i.e. those stakeholders who are affected by decisions but who have limited scope to influence them.

Towards socially responsible employee governance The ‘‘responsible organisation’’ is conceptualised as a position on a continuum that indicates an organisation’s level of social responsibility (Greenwood, 2003) that relates to the concepts of an ‘‘ethical anchor’’ and ‘‘legitimacy’’ (Kok et al., 2001). Organisations may progress to greater concern for social responsibility in corporate governance in a similar way to the moral development of individuals. Kohlberg’s model of the process of moral development provides an insight into how individuals may become more independent moral agents in their dealings with others that can be seen as analogous to the development of a CSR ethic by business organisations. The model suggests that the maturation process enables individuals to develop a greater understanding of the world that they then use to make better judgements (Kohlberg, 1969). Early stages of moral development are characterised by a focus on ‘‘short-term gratification’’ that maximises short-term, beneficial outcomes without consideration for others’ concerns or expectations. This is similar to a view of corporate governance where organisational concern centres almost exclusively on serving shareholder interests, and recognition of other stakeholder constituencies is limited to legal compliance and the provision of employment (Friedman, 1982). However, this self-centred stance is increasingly challenged in the contemporary business context (Parker, 2003). Consequentially a significant number of organisations have progressed to mid-range stages of socially responsible governance where stakeholder expectations for influence are recognised with the instrumental rationale that long-term benefits to organisation image and viability will accrue from this. To some this is merely a smokescreen to obscure a performance-portrayal gap (Adam, 2004) or the ‘‘ethics of Narcissus’’, where an organisation’s outward concern for socially responsible practice is in fact driven by narcissistic efforts at self-promotion (Jones, 2003). More ethical governance purposely goes beyond legislative requirements or mid-range instrumental rationales to

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facilitate broad-based stakeholder involvement for altruistic as well as for self-interest reasons. The boundary between instrumental and altruistic behaviour is blurred as a concern for wider stakeholder involvement may also anticipate the benefits that accrue from extending stakeholder relationships across increasingly permeable organisation boundaries (Soloman, 2001) and from business demonstrating its contribution to ‘‘societal value’’ (Zairi and Peters, 2002). The need to involve stakeholders in an ongoing dialogue on organisation strategy to achieve legitimacy and to develop positive stakeholder relationships in the longer term is recognised by a range of commentators (Parker, 2003). This ethical rationale for stakeholder involvement is complemented by an instrumental one, as research indicates that those who contribute to formulating performance criteria are more likely to achieve desired system outcomes (Simmons and Iles, 2001). Similar gradations of stakeholder involvement are found in Morsing and Schultz’s (2006) typology of CSR communication strategies. The first strategy they describe is one where communication with stakeholders is to seek their support or to prevent opposition, but organisational conviction of the soundness of its CSR stance makes stakeholder endorsement of it unnecessary. In the second, information is disseminated to stakeholders to enhance public perceptions of the organisation, but via a process of ‘‘asymmetrical communication’’ as the organisation discounts the possibility of needing to change as a result. In the third, dialogue with stakeholders is ‘‘symmetrical’’ as the organisation actively seeks stakeholder feedback and recognises that it may need to change as a result of this. Table I shows different levels of CSR in corporate governance and performance management with the implications if organisations evolve to more ethical stances. However, progression towards ‘‘more enlightened’’ forms of CSR is not assured. Organisations may ‘‘stagnate’’ at intermediate stages because of deliberate decisions or from a lack of knowledge on how to develop further. Reasons for this limited progression include the belief that greater stakeholder involvement will constrain organisational decision making and effectiveness. Organisations may also ‘‘regress’’ to less ethical stances as a result of management changes or market pressures. Moreover, there are continuing challenges for organisations that adopt ethical practice. These include justifying an ethical stance by demonstrating the link between this and resultant business benefits (Balabanis et al., 1998), and ‘‘capping’’ the demands of stakeholder groups (Greenwood, 2003). The model refers to the CSR stances of organisations, but it is recognised that this represents a form of reification as such stances are enacted by managers and other employees (Wijnberg, 2000). The question of whether ethics is an individual or an organisational issue remains a matter of debate among researchers (Clegg et al., 2006). The scope for managers and employees to influence organisational stance on CSR – and the implications of this for the two constituencies’ significance as stakeholder groups – is considered in a later section of the paper.

Table I Levels of social responsibility in corporate governance Traditional financial reporting

Scorecard-type frameworks

Stakeholder systems model

‘‘Stakeholder selectivity’’

‘‘Stakeholder recognition’’

‘‘Stakeholder involvement’’

Compliance-focused and limited distribution of financial results to institutional investors and shareholders

Broader-based performance measurement, management and reporting; dissemination of financial and non financial measures and performance outcomes to a range of organisation constituencies

Collaborative approach to the design, operation, and evaluation of performance management systems; incorporation of equity considerations; and socially responsible recognition of the legitimate claims of organisation stakeholders

Traditional cost accounting Mainly financial and retrospective Restricted and largely one-way communication to specific stakeholder groups

BSC, EQFM, ‘‘Triple bottom-line accounting’’ Broader-based and more future-orientated Broader-based stakeholder management and reporting – but possibly for ‘‘corporate image’’ purposes

Stakeholder systems accountability Holistic and ‘‘enlightened’’ Acceptance and implementation of obligations from being a stakeholder-accountable and socially responsible organisation

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Responsible governance requires an ‘‘ethical anchor’’ to ground its societal legitimacy (Frederick, 1994) and the paper utilises the concept of organisational justice to anchor the model of employee governance it proposes. This relates to a view of organisations as open, interactive and dynamic systems that need to respond to stakeholder claims for participation and equity (Takala et al., 2001).

Incorporating organisational justice Any stakeholder theory will be a theory about what the ethics of organisations should be (Kaler, 2004), and this paper utilises organisational justice to develop an ethical framework that can be applied in corporate contexts. Using organisational justice to measure progression towards an ideal-type ‘‘responsible organisation’’ aligns with a philosophical stance that links levels of moral development to justice reasoning (Maclagan, 2007). The paper conceptualises organisational justice as individual or group perceptions of equitable treatment in an organisation context, and behavioural responses to such perceptions. Such perceptions are key components in the wider psychological contract that comprises organisation and individual perceptions of the reciprocal obligations implied in the employment relationship (Atkinson, 2007). Organisational justice is related to perceptions of equity in three domains: 1. the distribution of organisation resources – distributive justice; 2. the systems by which these decisions are made – procedural justice; and 3. how fairly managers treat staff when carrying out these systems – interactional justice (Erdogan et al., 2001). Each dimension has a different impact and is therefore related to a particular stage of the stakeholder systems model. However, organisations need to deliver on all three dimensions to maximise employee performance and contribution (Cook and Crossman, 2004). Utilising organisation justice concepts in this way addresses a limitation of HRM research – namely its failure to relate organisation development initiatives to the constructs that underpin them (Thorpe and Beasley, 2004). It aligns with equity theory in suggesting that stakeholders reduce their commitment to organisation systems that they believe treat them unfairly (Flint, 1999), and with psychological contract research that indicates stakeholder agreement is more likely if factors that give rise to mutuality are present in the governance system (Rousseau, 2001). Organisations can therefore increase the effectiveness, equity and legitimacy of their governance systems by facilitating employee involvement in system design and modification (Gilliland and Langdon, 1998) that in turn facilitate a psychological contract characterised by mutuality and trust (Atkinson, 2007). These represent strong organisational justice rationales for stakeholder viewpoints to be incorporated in corporate and employee governance systems. The paper’s focus on employee stakeholders demonstrates the benefits of stakeholder involvement and the significance of this stakeholder constituency in the contemporary organisation.

Stakeholder synthesis as a means of stakeholder engagement Commentators recognise that establishing a process for stakeholder engagement is a key element in the socially responsible organisation (Castka et al., 2004). Facilitating transparency, accountability, and dialogue can build organisation legitimacy and reputation (Morsing and Schultz, 2006). A ‘‘process-relational’’ (Doorewaard and Benschop, 2003) view of governance systems as negotiated outcomes implies a need to achieve consensus between salient stakeholder groups on system design, operation and reporting. A range of factors – organisational culture, management ideology, power relationships, time pressures, etc. – influence whether and how decision makers seek wider stakeholder involvement. If stakeholder involvement is seen as necessary or desirable, senior managers decide who are salient stakeholder groups and the scope these groups have to influence organisation decision-making. Stakeholder synthesis is a method of seeking consensus between different stakeholder perspectives and agendas (Winstanley and Stuart-Smith, 1996), and is seen as management’s hardest challenge in the current business context (George, 2003). It relates to a view of managers as agents who arbitrate

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between multiple and differentially important stakeholders within a nexus of formalised and psychological contracts (Hill and Jones, 1992). Identifying salient stakeholders and their needs at an early stage of strategy formulation can help launch a highly inclusive process (Scholl, 2004), and areas of commonality and difference in stakeholder viewpoint can be made explicit by identifying each group’s stance and its agenda for change. Multi-stakeholder dialogues based on stakeholder engagement constitute emerging management practice (Castka et al., 2004; Scholl, 2004). They involve a reciprocal sense-making process that can encompass plural perspectives and a degree of dissensus (Morsing and Schultz, 2006). Stakeholder synthesis also represents a developing theme in stakeholder theory – a move away from an Anglo-American focus on the firm as the focal or primary perspective towards the alternative European approach, which emphasises broader-based stakeholder integration and involvement (Kakabadse and Kakabadse, 2001; Windsor, 2006). The implication is that a greater number of stakeholder groups – internal and external – need to be involved in strategy formulation (Clarke and Butcher, 2006), and that ethical criteria should be included in before-profit decisions rather than solely at the profit-allocation stage (Key and Popkin, 1998).

The contribution of employee stakeholders: vital but discretionary A further reason for viewing employee stakeholders as an especially significant group is the increasing importance of intellectual capital in relation to strategy formulation and organisation effectiveness (Perez and Ordonez de Pablos, 2003). Within the literature on the resource-based view of the firm, a range of measures is used (e.g. market to book value) to demonstrate the value of knowledge-intensive (KI) employees to contemporary organisations (Pedrini, 2007). Although ‘‘knowledge-intensive organisations’’ and ‘‘knowledge-intensive employees’’ are contested terms, the former are suggested to be organisations where most work is of an intellectual nature, where well educated employees constitute the major part of the workforce, and where these employees are deployed to solve complex problems by identifying creative and innovative solutions (Swart et al., 2003). Achieving sustainable competitive advantage through the utilisation of intellectual capital (IC) is inherently challenging as the people component of IC is not owned by the organisation. Moreover, where KI employees are highly valued in the wider labour market, companies that wish to attract, motivate and retain them will recognise their dependence on these employees’ discretionary effort. A further complication is that ‘‘employee stakeholders’’ constitute a group that subsumes employees with different levels of saliency to the organisation. Thus, KI employees may have greater saliency to organisations than peripheral employees. Also, KI employees include senior managers who determine the ‘‘breadth and depth’’ of stakeholder group involvement, while middle ranking KI employees are more involved in day-to-day liaison with stakeholder groups such as customers and suppliers. KI employees are therefore unique in that they are both a centrally important stakeholder constituency in their own right – that also includes a management group that decides which other stakeholders the organisation involves and the level of influence they have.

Challenging ‘‘mainstream HRM’’ During the 1980s and 1990s the terrain of HRM was dominated by a mainstream ideology imbued with an individualist and unitarist view of the employment relationship that aligned with the enterprise ideology of the time (Greenwood and Simmons, 2004). This influence continues through the prescriptive writing of practitioner literature and through HRM research that seeks to demonstrate the contribution of HRM to organisational effectiveness. However, criticism of mainstream HRM includes theoretical and practitioner concerns. The former relate to the lack of a coherent theoretical framework for HRM, together with the discipline’s limited consideration of issues of inequality and employee involvement in decision-making (Greenwood, 2003). The latter highlights the difference between claim and reality in relation to the beneficial impact of ‘‘high performance HRM’’ and performance appraisal (Grint, 1993). The paper responds to these critiques by offering the stakeholder systems model as a cogent theoretical framework for more fully understanding HRM as well as for providing practitioners with a rationale for its application as an organisation development technique.

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This alternative conception of HRM adopts a ‘‘critical theory’’ stance that involves a pluralist perspective (recognising a range of salient stakeholders with potentially disparate agendas and goals), and that views employee stakeholders through a collectivist lens (acknowledging employee stakeholders as a collectivity that constitutes both a voice to be considered alongside those of other stakeholders – and is the group that is most centrally affected by the HRM system in operation). This conception of HRM allows consideration of the overall ethicality of the HRM philosophy adopted as well as the ethical impact of specific HR systems. These issues relate to concepts of justice and accountability that are identified as fruitful areas for HRM research (Ferris et al. 1999), and go to the heart of critiques of HRM (Barrett, 1999). Thus, a more ‘‘balanced’’ agenda for HRM will include employee well-being alongside its concern to be seen as strategic and business-focused (Francis and Keegan, 2006).

CSR, stakeholder involvement and HRM strategy Detailed consideration of the link between organisation stance on corporate governance and HRM strategy is outside the scope of this paper and is discussed elsewhere (Greenwood and Simmons, 2004). However, in drawing on this debate, the paper contends that an organisation’s stance on stakeholder involvement is conceptually distinct from its concern for stakeholder well-being. The distinction is utilised to delineate the four conceptually distinct HRM strategies shown in Figure 1, which depicts a continuum of high to low social responsibility (HSR-LSR) as its vertical axis, and one of broad-based to limited stakeholder involvement (BSI-LSI) as its horizontal axis. Each quadrant depicts a particular organisational stance and the HRM strategy that derives from it. HRM strategies are labelled ‘‘hard’’, ‘‘paternalist’’, ‘‘soft’’ and ‘‘ethical’’. Thus LSI/LSR organisations exhibit both low regard for social obligation and highly selective concern for organisation stakeholders. Institutional investor and shareholder concerns are the predominant influences on organisation strategy, Figure 1 Corporate social responsibility, stakeholder involvement and HRM strategy

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while other stakeholders’ concerns are either defied or minimally complied with. This stance is likely to permeate a ‘‘hard HRM’’ strategy where employees are seen as similar to other organisation resources and utilised for maximum short-term return. The LSI/HSR quadrant contains organisations that give greater significance to CSR, but their stance is one of ‘‘asymmetrical communication’’. Here the organisation ‘‘party line’’ on CSR is conveyed to salient stakeholders – but without organisation expectation that this will need to be modified as a result of stakeholder feedback. This paternalist stance towards stakeholder groups is likely to pervade a ‘‘soft HRM’’ philosophy of employment relations in which organisation and employee interests are regarded as identical. The alternative pluralist rationale is found in organisations in the BSI/LSR quadrant, but disclosure on CSR issues to stakeholders is largely for corporate legitimacy and to facilitate the organisation’s licence to practice. The concomitant HRM strategy provides some scope for employee involvement, but has the underlying instrumental purpose of increasing employee commitment and effectiveness. Organisations in the BSI/HSR quadrant are ‘‘responsible’’ as they regard CSR as a key component of their broader-based stakeholder accountability. They encourage a broad church of salient stakeholders to contribute to policy formulation and to provide feedback to the organisation on information disseminated to them – notwithstanding that such disclosure may increase stakeholder expectation and corporate vulnerability (Morsing and Schultz, 2006). Such organisations’ HRM strategy is equally concerned with ethics as with effectiveness, and so employee involvement is sought at the development and evaluation stages of their systems of employee governance. This ‘‘best practice HRM’’ views people as key sources of competitive advantage and behaves ethically towards them.

Ethical governance – potential benefits How can organisations be persuaded of the benefits of ethical behaviour and CSR? Those who seek to impose this through government regulation are likely to have limited success, while those who rely on exhortation and an outbreak of corporate altruism may be similarly disappointed (Collier and Esteban, 2007). The theme of the paper is that in the long term socially responsible behaviour is a key contributor to organisational effectiveness, and to sustaining an organisation’s ‘‘licence to practice’’. Stakeholder-accountable organisations – especially KI organisations that need to attract, retain and motivate the IC that is their primary source of competitive advantage – need to incorporate CSR in strategy formulation and operations (Matten and Crane, 2005). If the Zeitgeist of the 1990s was customer service and TQM, then its equivalent in the first decade of the twenty-first century is sustainability and CSR. Business will increasingly be held responsible for the footprints it leaves in the environmental, commercial, social and employment relations landscapes. So it is appropriate for the paper to identify the potential benefits of CSR and to show how the stakeholder systems model can facilitate their achievement? First, corporate reputation is constituted by the perceptions of salient stakeholders either in a positive or a negative sense (Chun, 2005). From a ‘‘beneficial outcomes’’ perspective, a recent study summarised the main organisational drivers of CSR and the potential advantages accruing from these (Franklin and Warhurst, 2005). Advantages include improved financial performance, enhanced corporate image, better access to investment capital and resources, and greater employee satisfaction. The alternative ‘‘adverse consequences’’ view relates to the publicity test question that asks how comfortable senior managers would be if there was full disclosure of organisation activities to stakeholders and the wider community (Tullberg, 2005). Second, there is a growing body of evidence of stakeholder concern regarding CSR and the ethical stance of organisations, together with stakeholders’ behavioural response to the conclusions that they draw. Stakeholder response when an organisation’s ethical stance is viewed as inappropriate or inadequate may include the following. Potential employees are less likely to join it; existing employees are less committed to promoting its products or to demonstrating corporate citizenship; customers are less willing to purchase its products and services; and communities are less accepting of its operations and societal impact (Chartered Institute of Personnel and Development, 2006; Brammer et al., 2006; Pryce, 2002). Evidence suggests the significance of ethical stance may be greater for KI organisations, where the responsible organisation’s

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involvement of employee stakeholders has a greater potential payoff in terms of productivity gains (Matten and Crane, 2005). Socially responsible involvement of employee stakeholders can also facilitate recruitment and retention in competitive labour markets where the organisation affiliation of KI employees is seen as increasing akin to membership of voluntary clubs (Butcher and Clarke, 2002).

A stakeholder systems model of HRM The stakeholder systems model of HRM in Figure 2 assumes a range of stakeholder perspectives and agendas in relation to employee governance philosophy and practice. Figure 2 A stakeholder systems model of HRM

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The significance of stakeholder perspectives to the organisation is determined via the concept of stakeholder saliency, which relates to the perceived legitimacy, leverage, urgency and coherence of stakeholder claims (Greenwood and Simmons, 2004; Mitchell et al., 1997). Organisation decisions on stakeholder saliency mean particular stakeholder perspectives are seen as requiring reconciliation with those of other stakeholder groups. Stakeholders include line and specialist managers, employees and staff representatives, ‘‘fiduciary’’ stakeholders who influence from a distance (e.g. shareholders, elected representatives, customers, professional and regulatory bodies), and stakeholders who are only influential at particular times or who are more influenced by outcomes of the process than impacting on it (e.g. the media and local or national communities). Disparate stakeholder perspectives and agendas mean some form of stakeholder synthesis is required to reconcile competing claims (Butcher and Clarke, 2002), and research suggests agreement is more likely if factors facilitating mutuality are present (Rousseau, 2001). The importance of reconciling stakeholder expectations of HRM systems horizontally (across managers, employees, shareholders, regulatory bodies, etc.) is paralleled by the need for their ‘‘vertical integration’’ (across directors, business functions, teams and individuals). This alignment is central to the concept of a stakeholder-accountable organisation. The extent to which the conflict resolution process produces stakeholder agreement on HRM philosophy and mode of operation is a measure of ‘‘system procedural justice’’, while ‘‘interactional procedural justice’’ measures perceptions of equity in HRM system operation. The latter represents the extent to which stakeholders believe the HRM process accords them opportunities to input views, receive a fair hearing and constructive feedback. As a result of interaction with stakeholders, management will decide to pursue a range of HRM system outcomes. The perceived fairness of these HRM system outcomes is a measure of ‘‘system distributive justice’’. The subsequent stage involves an evaluation of HRM system performance by reference to a range of qualitative and quantitative indices. Quantitative measures may include: B

employee efficiency and effectiveness assessments;

B

levels of absenteeism, turnover and grievance;

B

employee skill acquisition and development; and

B

the cost effectiveness of HRM systems.

Qualitative assessments include: B

perceptions of the HRM contribution to corporate objectives;

B

general levels of stakeholder satisfaction;

B

employee attitude survey results, etc.

While recognizing that an overall stakeholder evaluation may be the most satisfactory measure (Armstrong, 2001). The use of composite measures of system efficacy, efficiency, effectiveness and equity to produce an overall evaluation of HRM systems that includes ‘‘lagging’’ and ‘‘leading’’ performance measures is similar to those in the Balanced Scorecard (Kaplan and Norton, 1992), European Foundation for Quality Management (1999) and management audit’s ‘‘integrated bottom line’’ (Zairi and Peters, 2002). The HRM stakeholder systems model’s premise of stakeholder accountability aligns with ‘‘enlightened stakeholder theory’’ (Jensen, 2001), which identifies long-term value maximisation as the function’s primary objective. The final stage of the model concerns the dissemination of information on HRM system operation to salient stakeholders – a component of CSR reporting that represents an increasingly important tool in stakeholder management (Greenwood, 2003). However, reporting will range from limited dissemination without commitment to action to the provision of comprehensive information that forms part of an ongoing stakeholder dialogue. The level of disclosure, the quality of information provided, whether the intent is ‘‘narcissistic’’ or ‘‘substantive’’ (Roberts, 2003), and if HRM strategy or process is modified as a result of stakeholder feedback – are all components of an organisation’s CSR stance (Elkington, 1997).

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Conclusion The paper takes a stakeholder-accountable approach to the development of ethical HRM, and responds to the need to integrate ethics into the strategic HR process (Carey, 1999). Its stance is that ethical HRM derives from and contributes to the overall CSR philosophy that an organisation adopts to the stakeholder constituencies that affect or are affected by it. A stakeholder systems model of ethical HRM incorporates the ‘‘how’’ and the ‘‘why’’ of stakeholder involvement by demonstrating the value of a more participative, accountable and equitable approach to employee governance. The model also serves as a framework for the analysis and development of an organisation’s HRM practice in a stakeholder-accountable era. The viability of organisation systems (both in philosophy and implementation) is dependent on their acceptability to a range of stakeholder groups that have potentially disparate agendas and goals. However, such governance debates have largely overlooked the importance of ethical governance of employees (McNutt and Batho, 2005). The stakeholder systems model is underpinned by concepts of justice, accountability and involvement, and its eclectic inclusion of elements of systems thinking, HRM, ethics and corporate governance avoids the silo-based approaches of many theory-based perspectives (Marr and Schiuma, 2003). In particular, it emphasises the ‘‘primus inter pares’’ standing of employee stakeholders to CSR initiatives in viewing employees both as those who have significant influence on CSR strategy, as well as the constituency whose willingness to translate CSR policy into practice is dependent on the standard of ethical treatment it receives within the employment relationship (Collier and Esteban, 2007). The paper identifies factors that influence an organisation’s ethical stance. It also shows that organisation-level stance can be distinguished from levels of ethical treatment in system operation. The distinction is similar to that between espoused and enacted ethical practice, where the former represents corporate intent or policy and the latter indicates the degree to which this is put into practice. The stakeholder systems model includes both of these. An organisation’s ‘‘macro’’ or overall stance on business ethics will be determined via a stakeholder synthesis process in which senior managers make decisions based on perceptions of stakeholder salience and significance that influence the ethical treatment groups receive. This macro stance underpins and influences ethical stances taken in relation to subsystems such as employee governance. Standards of ethical practice are identified from stakeholder perceptions of the equity of system outcomes, system process and the way they are treated by managers who operate the system. The stakeholder systems model relates to an organisation’s HRM stance and ethical standards in HRM system operation, but it could also be applied to customers or suppliers. Its holistic view of employee governance and reporting is an example of a ‘‘third generation scorecard’’ that incorporates effectiveness, equity, intellectual capital development and sustainability in its measurement of system outcomes (Collier and Esteban, 2007; Pedrini, 2007) that seeks to balance effective management and good governance (White, 2001). The paper focuses on HRM stances and people management practice. The paper demonstrates that employees have unique characteristics as a stakeholder group as they are an increasingly important constituency in their own right, as well as having a major influence on an organisation’s relationships with other stakeholders. In relation to the former, the HRM literature is replete with claims of the increasing significance of KI employees. They are described as representing an organisation’s only potentially appreciating asset, the pre-eminent organisation resource in the knowledge economy, and a constituency that has ceased to be malleable ‘‘human resources’’ and instead are ‘‘resourceful humans’’ for whom organisational tenure is voluntary and conditional. There is also increasing recognition that ethical practice and CSR can only be implemented by employees who have a positive view of the standard of ethical treatment they receive (Brammer et al., 2006). Employee willingness to act as ambassadors who exemplify and promote their organisation’s products, services and ethical stance is contingent on this. A recent commentary identified employees as those who ‘‘carry the main burden of responsibility for implementing ethical corporate behaviour in daily working life. Effective

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delivery of CSR is dependant on employee responsiveness and willingness to implement it’’ (Collier and Esteban, 2007, p. 24). Thus, successful CSR policies depend on ethical HRM as only organisations that deliver their side of the psychological contract can expect to elicit a reciprocal employee response through this form of corporate citizenship behaviour. The paper identifies instrumental and ethical reasons for rewriting the psychological contract with employee stakeholders to reflect the expectations and values of the new workforce (Wilson, 2000). This is especially important in knowledge-based organisations where the human resource is central to their success. Employee expectations also imply revisiting the balance between control and commitment in CSR and ethical practice. From the control standpoint, it is necessary for responsible organisations to establish a common CSR culture, to inculcate general standards of ethical practice and to set up lines of accountability. This commonly takes the form of codes of practice and mission statements that are conveyed to employees via policies and training programmes (Clegg et al., 2006). However, the paradox is that to hold people responsible for something, it is necessary for them to have the scope to act in a responsible way (Fisscher and Nijhof, 2005) and to have had a role in bringing it about (Kaler, 2004). Acceptance of accountability derives from stakeholder involvement in setting performance standards and from demonstrable fairness in system operation and reporting (Steare, 2006). Thus, the responsible organisation’s participatory stance towards stakeholders is similar to Kohlberg’s ‘‘just community’’, whose members engage in meaningful dialogue with each other over matters of moral significance (Maclagan, 2007). Balancing control and commitment is a similar distinction to that between prescriptive and devolved codes of ethics. The former prescribe principles and their general application, whereas the latter empower those confronted with a moral dilemma to judge it on its situational merits (Farrell et al., 2002). The paper’s stance is that it is possible and desirable to describe CSR and ethical behaviour in both rights and outcomes terms. This accords with the ecumenical approach to ethical business practice advanced by Hosmer (1996), and aligns with the tenets of stakeholder theory. The responsible organisation recognises its duty of care to those affected by its actions, derived from general moral principles (Dillard and Yuthas, 2001). However, specific applications of these are contextual in that they can only be determined by reference to their impact on salient stakeholder groups in a particular context and at a particular time. This recognises the ‘‘ethical pluralism’’ in much organisational decision making, where moral choices are made in unclear situations and against potentially conflicting standards (Clegg et al., 2006). Another challenge is that CSR is a ‘‘moving target’’ (Morsing and Schultz, 2006), so there is a continuing requirement for the organisation to adapt to changes in stakeholder salience or expectations (Nijhof and Jeurissen, 2006). So what is the future for ethical HRM? A stakeholder-accountable era where IC is the major source of competitive advantage has the potential to move CSR and ethical HRM centre stage. While conceptions of what constitutes CSR differ, European and US interest in the topic is paralleled by a developing recognition of its importance in Japan (Tokoro, 2007; Nakano, 2007). As CSR is accorded increasing importance by politicians, environmentalists, and communities, HR has the opportunity to become the corporate conscience of the organisation in way that can demonstrate long-term benefits in terms of effectiveness, viability and societal acceptance (Foote, 2001). In the past, the HR function’s association with welfare and administration meant it was viewed pejoratively by many line managers and marginalised because of its perceived lack of business relevance. However, this secondary and subordinate role need no longer apply, and it is the role of HR to push the CSR agenda (Watkins, 2003; Woodd, 1997). By demonstrating that organisation viability depends on stakeholder contribution and acceptance, HR can demonstrate a business-based rationale for the adoption of ethical corporate governance and HRM that is the key to sustainable organisation development. So the answer to the question posed at the start of the paper is ‘‘yes’’: it is possible and desirable to become an ethical organisation. But, if CSR is to be a key business consideration of business in the twenty-first century, the paper argues that CSR should ‘‘begin at home’’ and be assimilated into ethical modes of employee governance.

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Corresponding author John Simmons can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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Values in organizations: difficult to understand, impossible to internalize? Merita Mattila

Merita Mattila is a Senior Lecturer at the Lappeenranta School of Business (Management and Organizations), Lappeenranta University of Technology, Lappeenranta, Finland.

Abstract Purpose – This paper aims to study personnel perceptions about value processing in three case organizations in the Finnish context, especially management’s role in organizational change where values are considered. Design/methodology/approach – The research follows the methodology of the case study approach to tackle the research theme. The data include interviews from multiple (managerial) hierarchical levels, from top management to local levels (in top management and at the local level) in the case companies. The interviews are analyzed by content analysis. Findings – The paper provides information about personnel perceptions in organizational value processes, especially the management’s and organizational culture’s role, in this kind of change process, as well as the individual’s own role and responsibilities as an employee. Research limitations/implications – The research reported is not exhaustive and was done in the Finnish context, which may reduce its applicability to other, especially non-European, countries. Practical implications – The paper represents a very useful source of information and practical advice for companies encountering changes where organizational values are processed. Originality/value – This paper fulfils the growing need for information about value management and value processing in organizations, and offers practical help to individuals working among these themes in their organizations. Keywords Organizational philosophy, Value analysis, Organizational change, Personnel psychology Paper type Case study

Introduction Currently, ethical perspectives in organizations are ‘‘in fashion’’. With the help of current economic situations and strong transitions in the labour market, ethics poses itself as a crucial topic in conversations. Mahoney (1997) argues: Business ethics is ultimately the ethics of power, of how to handle the power of business and how that power is acquired, increased and exercised. The need for ethics in business has never been greater, precisely because the power of business has never been so manifold and so extensive as it is today.

Values and value processes are said to be needed in every organization. The world is changing and companies have to have something to ‘‘keep it together’’ in the turbulent times of today. Values are often referred to as organizational change agents that are processed to improve organizational performance. The biggest and most crucial challenge is the feasibility of the value process. The main point of this research is to study how the case companies process their values and particularly how the personnel perceive it. In this paper, I study three different organizations (forest industry, bank and market) and their value processes, especially the role of management in organizational change where values are considered. Data is gathered by interviewing personnel at both the head and local level

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offices of all three companies. These companies have multiple managerial hierarchical levels. In all three companies, values are ‘‘made’’ at the head office and then disseminated locally. Each company has its own way of performing the process; these processes are studied further in this paper. According to Crane and Matten (2004), whatever approach an organization might have to managing business ethics, whether it is formal or informal, compliance-based or values-based, minimal or extensive, the role of the organization’s leaders is going to be significant. Leaders are often said to set the ethical tone in organizations. This perspective is studied further in this paper. Business ethics is currently a very prominent business topic. The debates and dilemmas surrounding it tend to attract an enormous amount of attention from various quarters. There seems to be an increasing demand from consumers and pressure groups for firms to seek out more ethical and ecologically sounder ways of doing business. The media also constantly seems to keep the spotlight on corporate abuses and malpractices. Even companies themselves appear to be increasingly recognizing that being ethical (or at the very least being seen to be ethical) may actually be good for business (Crane and Matten, 2004, p. 12). value processing has often been bound to management and to management’s responsibility (e.g. Aaltonen and Junkkari, 1999; Chakraborty, 1991; Crane and Matten, 2004; Kunda, 1992; Parker, 2000). The majority of companies still deal with human resource management (HRM) amateurishly. Usually, the nature of HRM is defined by how individual professional fields consider competitive edge to be created. Management considers personnel to play a key role in the service sector and in some high-level expert organizations, whereas in other fields it still, at best, consists merely of the management of employment relationships instead of fostering, developing and productively utilizing the capacity tied to human resources (La¨hteenma¨ki, 1996). Before the ‘‘rise of values’’ in organization studies, it could be said that generally, ethical issues have been of marginal significance to the unfolding debates around HRM (Winstanley and Woodall, 2000, p. 4). Despite the active investigation of business ethics at an academic level since the 1960s, there remains a gap between the work of academics and the application of business ethics in the workplace. There is still a gulf between academia and practice. However, it should be emphasized that academics can help practitioners with ethics by assisting in the clarification of the moral perspective in practices (Spence, 2002).

Case study approach and research strategy The research approach used is qualitative, and the empirical studies concern three case companies which published their official values several years ago. Qualitative research does not search for simple and unambiguous answers, unlike quantitative research. Instead it tries to find new ways of thinking and to find problems in self-evident truths (Alasuutari, 1993, p. 193). In qualitative research, the aim is to find new ways of explaining different phenomena. The most important aspect of researching is to explain one’s theory. The interpretation has to be well grounded but not necessarily final; there will always be someone who finds weaknesses in the study. Research and science are like games which include uncertainty and skepticism (Ehrnrooth, 1990, p. 33). The methodology that this research follows is the case study approach, which is used to tackle the research question. Data are gathered by interviewing people from multiple managerial hierarchical levels both at top management and at the local level in the case companies. One of the most interesting issues is employees’ experiences and opinions about the value process. Interviewees from different hierarchical levels make the study both interesting and intriguing. As individuals come into contact with organizations, they come into contact with dress norms, stories people tell about what goes on, the organization’s formal rules and procedures, its informal codes of behaviour, rituals, tasks, pay systems, jargon, and jokes only understood by insiders, and so on. These elements are some of the manifestations of organizational culture. When cultural members interpret the meanings of these manifestations, their perceptions, memories, beliefs, experiences, and values will vary, so interpretations will differ – even of the

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same phenomenon. The patterns of configurations of these interpretations, and the ways they are enacted, constitute culture (Martin, 1992, p. 3).

Values are developed over time and may be strongly linked to societal factors such as peer groups or strongly held beliefs emanating from becoming a member of an organization or deriving from particular creeds. Organizations have become more and more interested in both the individual and collectively held values which permeate the organization. The organization may seek to portray a strong ethical stance in its operations, reflecting commonly held ethical values inside the organization (Brooks, 1999, p. 27).

Organizational culture and management’s role Values and value management are considered to be very important issues in companies today. An organization works better by constantly keeping in mind what is essential. Values can be viewed as, for example, ‘‘a type of belief, centrally located within one’s total belief system, about how one ought to or not ought to behave, or about a particular end-state of existence worth or not worth attaining’’ (Rokeach, 1972, p. 124). Values are the connecting thoughts that determine the direction of the actions of an organization: ‘‘who we are and where we are going – supported by our common values’’. Next, the case companies are presented from the value management perspective. Company A: management as an example, employees following Leaders identify appropriate and inappropriate conduct. They convey their expectations to employees through codes of ethics and values. Ethical conduct is influenced by our environment. In work settings, managers and the entire cultural context are an important source of this influence and guidance. People are interconnected in the workplace. This means work is an important source of meaning in their lives. Business is no longer just about products and bottom-line profits. The words ‘‘products’’ and ‘‘profits’’ are associated with words like ‘‘meaning’’ and ‘‘values’’ (Jakarta Post, 2001). It depends very much about the local top management, about the organizational culture and about the willingness to receive these kind of things (Manager, head office).

Effective managers, from all walks of life, have to become skilled in the art of ‘‘reading’’ the situations they are attempting to manage or organize (Morgan, 1997, p. 3). Local management has a central role in value processing. If local management is not committed to work with values, then the values have no real value or effect on the actions of the employees. I believe in leadership, in real leadership with a big L. Through this leadership the values can be processed, not by orders. By being a manager, by being an example (Manager, local level).

Managers set an example. Value management means that the superiors find ways and means, which follows or pays attention to as many of the values of the people as possible. Rational activity is not necessarily the basis of success of an organization, or even the most essential factor for that matter. Organizational success is also, to a great extent, a matter of the heart and a question of faith. This is why leaders must also have an understanding of values and beliefs along with the organization’s deep structure which can be sensed through its activity, but can not be observed in its bookkeeping or balance sheet, for example (Nurmi, 1992, p. 16). The personal behavior of managers is the best way to attain the desired behavior in the organization. This brings great challenges to management: Managers have a big role in this . . . How they behave, what they emphasize . . . They can’t just go and give an order that people in the factory should behave like this and like this . . . It all starts from the top, by being an example. You can’t say like ‘‘don’t do what I do, do what I tell you to do’’ (Manager, local level).

According to Crane and Matten (2004, p. 172), literature on management and organizational studies have effectively demonstrated that the deliberate management of culture is a difficult, lengthy process, which is rarely successful except at very superficial levels. Indeed, there has not been substantial empirical evidence in studies that provides wholesale support for the claim that culture can indeed be managed in the realm of ethical behaviour. The

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existing cultural beliefs and values about what is right or wrong tend to be very resistant to change (Crane and Matten, 2004, pp. 673-96). The task of management is to make culture responsive to values (by their own example): An organization has to have a goal and boundaries within to achieve its goal. Organizations need certain principles for every action. Management has a special responsibility in solving the goals and principles. Solving does not mean dictating these goals and principles, but learning together through discussions, negotiations and agreements. These are agreements of the values which direct all the actions. By way of value management, the future will be provided (see www.paideia.fi/frames/arvojohtaminen). In my opinion it is a management question. That’s why the values are brought here. If people behave due the company values, it of course makes the management easier. I think this is purely a management question. Like an automatic management . . . as a beautiful basic idea (Manager, local level).

Company B: values belong to everybody’s responsibility The values held by the members of an organization determine its organizational culture, which according to Simmerly (1987, p. 15) is the most powerful internal force affecting any organization. According to Simmerly, ‘‘organizational culture defines expectations about behaviour, how work is done, how decisions are made, how social interactions are structured and how people communicate’’. Safrit (1990) argued that before any organization begins to plan strategically for change within the organization, the organizational values held by its members must be identified, clarified and validated (Seevers, 2000, p. 71). Someone has to have the ‘‘puzzle’’ in his mind. And in my opinion it has to be the management.’’ The management and superiors have to be the first example (Top manager, local level).

Managers are the primary designers in personnel’s wellbeing and value processes. The need for an example is great. Top management’s individual values greatly affect the organizational value processing, because they are the key people in all strategic actions concerning the organization. Support is given by the company to the managers. We are aware that in this competition we can’t manage without a competent and committed personnel. We do appreciate that, we have a rewarding system that reflects that it isn’t just a fad here nowadays (Manager, head office).

If a company can develop a set of commonly held values among its personnel, it is creating a specific corporate culture which might differentiate it from its competitors, thus giving it competitive advantage. Nowadays, the machinery to achieve this is similar in all companies: the main thing is that the personnel are committed. Values are also seen as relatively soft attributes, like the wellbeing of the personnel. Everything should be justified by calculations: As a manager I sometimes feel that . . . since these personnel issues are more like ‘‘soft’’ things, it may feel like just a nonsense when speaking about personnel welfare and competence, etc. . . . But to the people who have really realized the connection between wellbeing and profit, it isn’t nonsense (Manager, head office). It is the basis for a professional company like this (the personnel as the most important resource). The personnel is important intellectual capital, it’s the basis (Employee, local level).

The connection between the wellbeing of the personnel and value-based actions is clearly recognizable in the interviews. It is emphasized that the education and development of an individual is their own responsibility since no manager can learn on the behalf of their employees. The willingness of an employee to learn and develop is their own responsibility too. We do appreciate people who want to develop themselves here. Someone might feel that she/he isn’t appreciated even she/he has worked here for 20 years . . . And haven’t been in any training course offered by the employer . . . (Manager, local level).

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Company C: management’s commitment first Leadership, as such, is already a very complicated and challenging area. When organizational values are added to this, the aggregate becomes even more versatile. Managers have to be committed to the values the want to employ before they can disseminate them further to their employees. I think they (top management) are committed to the values. My nearest supervisor and the managers who I meet are supporting the values . . . Of course it depends about the person . . . (Employee, local level).

It is obvious that values cannot be disseminated successfully without the commitment of management. The mission of having values is to keep the organization together, to create goals, to motivate employees, create permanence, conformity and sense of community. The real value discussion and the greater level of commitment starts from functioning values. Values are real values only when they can be inspected in the performance of companies. Value discussions and declarations are useless if nothing is done in real actions (Kotilehto, 2001, p. 42). Values are very important part of management behaviour . . . How the leaders and the managers experience values . . . Being an example is very important in management, values are reflected straight through the manager’s behaviour (Top manager, local level).

The example that managers set is seen as being very important in company C. Everyone who trains new employees creates new values, regardless of their organizational status. Those who create values not only add momentum to the corporate strategy and symbolism, but also help newcomers understand how company-wide values affect employee performance. Values efficiently internalized by personnel are the source from which leadership springs (Peters and Austin, 1989, pp. 377-8). Being an example, I think that has a huge role, kind of an ethical question. How the manager acts, how a superior acts, how he makes decisions, how he deals with conflicts, etc. When talking about manager’s or superior’s work, it is all the time about the own benefit, company benefit and personnel benefit (Top manager, local level). If the management spoils things, if the superior spoils things, by their own example . . . Values are tools for management, for managerial behaviour (Top manager, local level).

Values are seen as management tools, which demand a good example from the direction of management. It is common rhetoric amongst several serious academics that the hierarchy in organizations is a factor inhibiting creative, flexible, effective, etc. performance. Tall hierarchies are supposed to foster tight supervision with narrow spans of command, and they are also alleged to clog and contaminate the communication channels (Chakraborty, 1991, p. 188). Managers have a responsibility to their employees and their actions. They have to keep control in different situations, motivate people and be an example. Control in an organization is exercised through individual, interpersonal influence, in which those with roles of authority motivate and direct others to act as they would like (Pfeffer, 1997, p. 127) The task of managers is to explain what kind of behavior is desirable in the company. After that, they are entitled to demand the employees to act in accordance with common values. The top management has a very central role, they can spoil these kind of things quickly (Manager, head office).

The role and responsibility of top management are strongly emphasized in the company. They have to be the first examples before processing values further in the organization. Each individual interprets values differently . . . it is the main thread in responsible management, but each employee should be able to speak with their superior, that what the responsible management means, so. It comes through the conversation, that it isn’t confined to certain one thing (Employee, local level). I say that he (general manager) is a person, who demands much from his employees and these values are followed literally, but he is also a person, who rewards employees always when things go right (Employee, local level).

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Cultural values are important facilitators of mutual adjustment in organizations. Cultural values can smooth interactions among the members of the organization. People who share the values of an organization may identify strongly with the organization (Etzioni, 1975). This includes commitment and being proud to be part of the organization. Organizational and personal values do not necessarily have to be similar, but they have to be in balance in order to support and complete each other. The role of management in value processing is crucial: they have to show the way, be an example and act on their words. The transformational, ‘‘feeling’’ leadership is needed when values are processed. Values are actually quite intimate to people, something under the surface. When organizational values are processed, it has to be done with strong management and respect towards the personnel.

Individual in value processing: respect, trust and communication According to Mahoney (1997) there certainly seems to be an impressive moral authority, that human beings ought to be treated, and ought to treat each other, only in ways which will respect their inherent value and dignity. People want to be respected, to be valuable as individuals (Ahonen, 2001). Company A: let people flourish People want to make right things, to do something good. And it motivates people. And when people are motivated and happy, it creates more and more good things to share (Manager, head office).

This manager trusts in the goodness of people in the work place as well. When people are treated fairly and well, they become more motivated. In the long run, this creates better results and also better profit: If we give the people chance to flourish and work independently, to use their own brains, in the end it shows on the last line (a good return) (Employee, head office). There is so much information available nowadays, no one can rule it, like there were the great wise man somewhere . . . The information must be shared and you have to trust that the people know how to use it (Employee, head office).

Trust is interlinked with values. Nowadays, the amount of knowledge available is huge and constantly increasing. Nobody can handle all this information, either managers or employees. That is why trust is needed and values as a basis for actions makes it easier to implement. In the background is the basic assumption that you trust that the person does his/her best . . . the trust in people . . . (Employee, head office). I think that it all culminates in trust (Employee, local level).

Respect towards individuals is needed in organizations. It is also important to remember that an individual as such is already valuable, regardless of his/her task or position in the hierarchy. It is even more important is to realize that the respect should go through the organization, from the top to the workers and from the worker level to upper levels. Somebody buys a factory, another buys a pen, but they both are respected in the community, as persons (Manager, local level).

Company B: treat others like you wish to be treated In my opinion, it’s all about the human. How a person thinks about other people (manager, local level).

The higher the level of trust that management can generate, the greater the level of empowerment achieved. The interpersonal trust and optimism makes the employees feel more committed and motivated towards the organization. To get the new roles and cooperation works, the key concept is trust. The construction of trust so that the information conveys better . . . And it comes to values again . . . (Manager, local level).

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We work really hard here, but on the other hand we have very good tools to manage. We have, for example, a very good health system by our employer (Employee, local level).

As in all of the organizations today, demands on efficiency are also significant in the bank company. Still, employees feel they have been given good tools to manage the challenges. Hard work is needed, but it is seen as possible to deal with. Sometimes it feels like . . . When talking to employees who are held at stated intervals . . . they are not respected as they should. They give the same effort in their work as regular employees (Employee, local level).

Respect towards part-time employees is seen as a problem. If they are respected on the same level as regular employees, why do they not get a permanent post? Naturally this is again a matter of financing. Probably, there is no company that can afford to establish permanent posts for all its employees, especially in the service sector. Respect means that you can work together in the same workplace, although you are not necessarily your co-workers’ ‘‘best friend’’ outside the workplace. ‘‘Respect for other people. . . Respect means that you have to get along with everyone here (Employee, local level).

Company C: treat people well I have always been thinking that the treatment of the employees is the main thing, which creates the spirit and joy in work, and makes the profit (Employee, local level).

The comment above sums up the basic idea of respect towards other people. If people are treated well, they become more motivated and want to benefit the performance of their company. For example, if a person’s opinion is not respected, it (values) comes straight away out . . . That ‘‘what about our company values, the respect for the individual?’’ I think it is an awfully good situation. It makes pressure for the managers and superiors, they have to start reacting (Top manager, local level).

The fact that values are often referred to as a positive thing in the company, it puts pressure on managers and superiors to really consider values in their everyday work. Every shopkeeper keeps their backyards clean, the values are very simple issues: e.g. responsibility as a value (Manager, head office). People speak willingly about real things, important things. If the work community handles them (the values) right, it arouses new ideas that these things are the ones we should discuss about and they are connected to our everyday work, joy in our work and interpersonal relationships in our workplace (Manager, head office).

The joy of work is emphasized. The organization is seen as a place to succeed through the wellbeing of personnel: Everything is effected by humans, everything is effected by personnel. The management culture and philosophy . . . if it is made wrong, it destroys the image. The only way to success is to take care of our personnel. Every company can get the physical milieus, but the game is played through competitive personnel (Employee, local level). Every and each great business strategy can be spoiled with disrespect to the personnel. If you don’t give the earned respect to the personnel, they will act against values in a service situation. You can’t build success only by the service personnel, but you can destroy success through them (by disrespect). The service personnel can always manipulate the situation (Employee, local level).

This comment reflects the power of service personnel in value processing. If they do not feel respected by the management, they can easily act against their values while dealing with customer service. This makes both employees and customers dissatisfied with the organization. We are personification of our market, a living advertisement. It is extremely important to invest the personnel welfare (Employee, local level).

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It is obvious that if people do not receive the rewards they feel entitled to, they are often motivated to do something about it. Some might become angry and work less hard; others might work even harder in hope of eventually obtaining what they want. (Cropanzano and Folger, 1991, p. 131). It can be seen from the empirical data that neglecting to reward people for their good work always makes them dissatisfied and less motivated (in all three companies). Of course with the finite resources available, people sometimes take second place (to profit, for example), but companies should still strive for the best allocations possible (Cropanzano and Folger, 1991, p. 141). Interpersonal respect is seen as the most crucial actor in value processing: It has to be always kept in mind that another person is another person. The honesty . . . (Employee, local level).

Conclusions of the study It can be said that value dissemination is always a long and demanding process, especially since managers are the primary designers of the process. In the empirical data, it seems obvious that top management (in the head office) seem to have a clear and sincere vision about how values can strengthen and support the organizational culture th eventually end up with better results. Values are a basis for well-organized performance (Kotilehto, 2001, p. 42). The problem is the process itself – how to disseminate visions down to all hierarchical levels of the organization. Company A (forest) disseminated values straight from the head office to the local level. There are problems in value dissemination at the local level. The local mill has become dependent on the head office through several mergers: while analyzing interview data, it became apparent that people at the local level feel that the organizational culture has changed radically. The value process has been taken as an order, and this leads to resistance. Still, managers at the local level have crucial roles in value dissemination as they are acting as examples. As can be seen from the data, both the head office and local mill have people who perceive the value process well, but some of them think it is just a fad. It is important to emphasize that these different opinions often culminate in the relationships between employees and their managers. Company B (bank) processed values from the head office to the local level by discussing the matter with personnel. The local management concentrated hard on the dissemination, which seems to keep the resistance towards values quite low among the personnel. Again it can be said that the role of manager is crucial. Still, some employees feel that values are too customer-oriented and there should also be ‘‘inner’’ values for the personnel. Company C (market) locally created its own values with its personnel. Values from the head office lie behind these. Participating in the operations of the company, including the value process, seems to be very important. Many interviewees emphasized the importance of taking staff into consideration when strategic decisions are made. The example of managers is again a very important factor. In short it could be said that people want to matter. People feel connected to the company when they can participate and influence the strategies of the company. Naturally, objections towards renewals and values exist, but resistance seems to be much weaker when people can influence their own work. The role of managers in shaping a value-based organizational culture is extremely significant. They are important examples to their employees: managers have to act in line with values before demanding this from others, and they have to give support to employees (support value-based behavior). Transformational, ‘‘emotionally effective’’ leadership could be the crucial aspect of successful value processing. Managers need more information and support to cope with the growing challenges of value management. People at all organizational levels need to be informed and respected. The main difference between a human and an animal is that a human being wants to be acknowledged as a person, as a valuable self, as a creature with its own value and meaning: this also holds in

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their working life (Ahonen, 2001). Ahonen maintains that it is easy to see how one of the most important catalysts of human activity is the need for recognition. When people feel appreciated by their organizations, they become more motivated towards their work, more committed and efficient: this is a win/win situation for both the employer and the employee. Still, it should be emphasized that respect towards individuals is important at all hierarchical levels of the organization, and in all directions. Too often management/the organization is blamed for disrespecting the workers; we should not forget that top managers, managers and superiors are also individual human beings. Since they have more power than ‘‘ordinary employees’’, they are easily seen as garbage cans that cause all the bad things inside the organizations. It is much easier for people to see the blame in others, and not in themselves. Respect towards individuals does not just mean ‘‘our organization should give us respect’’; it also means that the organization (and management) needs to be respected. When values are processed, both the implementation and the new situation demand effort from all personnel. The role of management is clearly huge, but employees also have their own responsibilities when new ideas are elicited. The basic mindset of being opposed to all new things in organizations is a problem; this is a mindset that needs to be solved. A common, real value basis could be one solution to this.

References Aaltonen, T. and Junkkari, L. (1999), Yrityksen arvot ja etiikka, WSOY-kirjapainoyksikko¨, Juva. Ahonen, A. (2001), Organisaation, johtaminen ja edistyksen puheka¨yta¨nno¨t. Liikkeenjohdollisen tiedon kenta¨t, kerrostumat ja kulttuurinen paikka, Turun Kauppakorkeakoulun julkaisuja, Sarja A-1, Grafia, Turku. Alasuutari, P. (1993), Laadullinen tutkimus, Vastapaino, Tampere. Brooks, I. (1999), Organizational Behaviour: Individuals, Groups and the Organization, Financial Times Pitman Publishing, London. Chakraborty, S.K. (1991), Management by Values; Towards Cultural Congruence, Indian Institute of Management/Oxford University Press, Calcutta. Crane, A. and Matten, D. (2004), Business Ethics: A European Perspective. Managing Corporate Citizenship and Sustainability in the Age of Globalization, Oxford University Press, Oxford. Cropanzano, R. and Folger, R. (1991), ‘‘Procedural justice and worker motivation’’, in Steers, R.M. and Porter, L.W. (Eds), Motivation and Work Behaviour, McGraw-Hill, New York, NY, p. NY. Ehrnrooth, J. (1990), ‘‘Intuitio ja analyysi’’, in Teoksessa Ma¨kela¨, K. (Ed.), Kvalitatiivisen aineiston analyysi ja tulkinta, Gaudeamus, Helsinki. Etzioni, A. (1975), A Comparative Analysis of Organizations, The Free Press, New York, NY. Jakarta Post (2001), ‘‘Managing ethics in your professional life’’, 29 September. Kotilehto, J. (2001), Arvojen, osaamisen ja johtajuuden murros: Mita¨ tulevaisuus puolustusvoimien henkilo¨sto¨lta¨ vaatii?, Maanpuolustuskorkeakoulu/Johtamisen laitos, Helsinki. Kunda, G. (1992), Engineering Culture: Control and Commitment in a High-Tech Corporation, Temple University Press, Philadelphia, PA. La¨hteenma¨ki, S. (1996), Henkilo¨sto¨voimavarojen johtamisen tila ja strategisuudenaste Suomessa 1990 – luvun laman puristuksessa, Turun Kauppakorkeakoulun julkaisuja, Sarja A-3, Grafia, Turku. Mahoney, J. (1997), Mastering Management, Financial Times Pitman Publishing, London. Martin, J. (1992), Cultures in Organizations: Three Perspectives, Oxford University Press, Oxford. Morgan, G. (1997), Images of Organization, Sage Publications, Thousand Oaks, CA. Nurmi, R. (1992), Johtaminen kilpailuetuna, Mermerus, Mariehamn. Parker, M. (2000), Organizational Culture and Identity: Unity and Division at Work, Sage Publications, Thousand Oaks, CA. Peters, T. and Austin, N. (1989), Intohimo menestykseen, WSOY, Juva.

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Pfeffer, J. (1997), New Directions for Organization Theory: Problems and Prospects, Oxford University Press, Oxford. Rokeach, M. (1972), Beliefs, Attitudes and Values, Jossey-Bass, San Francisco, CA. Safrit, R.D. (1990), ‘‘Values stratification in the strategic planning process of an adult educational organization’’, unpublished doctoral dissertation, North Carolina State University, Raleigh, NC. Seevers, B.S. (2000), ‘‘Identifying and clarifying organizational values’’, Journal of Agricultural Education, Vol. 41 No. 3. Simmerly, R.G. (1987), Strategic Planning and Leadership in Continuing Education, Jossey-Bass, San Francisco, CA. Spence, L. (2002), ‘‘Is Europe distinctive from America? An overview of business ethics in Europe’’, in Weltzien von Hoivik, H. (Ed.), Moral Leadership in Action: Building and Sustaining Moral Competence in European Organizations, MPG Books, Bodmin. Winstanley, D. and Woodall, J. (Eds) (2000), Ethical Issues in Contemporary Human Resource Management, Macmillan, London.

Further reading Mattila, M. (2007), ‘‘Value processing in organizations: individual perceptions in three case companies’’, Acta Universitatis Lappeenrantaensis, No. 263.

Corresponding author Merita Mattila can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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Corporate governance and innovative leaders M.A. Musa, S.E. Ismail and S. Othman

M.A. Musa, S.E. Ismail and S. Othman are Lecturers in the Faculty of Administrative Science & Policy Studies, Universiti Teknology MARA (UiTM), Shah Alam, Selangor Darul Ehsan, Malaysia.

Abstract Purpose – The purpose of this paper is to attract readers’ attention to the importance of the integration of corporate governance and innovation for companies to strive further in business. The paper also attempts to illustrate how an innovation champion can exist in companies with a good corporate governance structure and fully utilize the structure, at the same time being aware of the limitations of innovation activities. Along the way, corporate social responsibilities should also be taken into consideration. Design/methodology/approach – The objectives of this paper are achieved first through an explanation of how corporate governance structure works and what purpose it serves. By understanding the mechanics of corporate governance, the integration of the structure with other fields of knowledge, in order to boost corporate performance, becomes possible. The paper also makes several references to companies around the world which have integrated successfully. Findings – Innovation is a teamwork effort. Concentrated efforts are needed from every person in the organisation, from the board of directors and all the employees. The main actor in the picture is the board of directors. Also, other critical factors such as culture, conducive environment and rewards very much need to be present in the system. Practical implications – Innovation, even though deemed risky, must be supported. The board of directors or leaders of corporations must change the way they think. Leaders of corporations must make an effort to understand innovation, and subsequently spread it far and wide among managers by creating corporate policies that support innovation. With a consumer-centric organizational principle in mind, corporations can improve their innovation success rate. A successful innovation effort requires full participation from everyone in the corporation to ensure that the end results of research and development are for the interests of society at large. Originality/value – Corporate governance is a structure that needs input from other fields of knowledge. Too much faith is put in corporate governance to bring about performance; unfortunately corporate governance is just a structure. There are a lot more factors that should be taken into consideration before achievement can be seen and success stories can be heard. This integration of knowledge is suggested to companies so that they can generate more revenue. Keywords Corporate governance, Innovation, Corporate social responsibility, Economic sustainability, Corporate philosophy Paper type Viewpoint

1. Introduction The advancement of technology and changes in the political environment have been a catalyst for a rapidly changing world. On the plus side, corporations are presented with an abundance of opportunities; however, the negative side of this is that survivability and sustainability in such surroundings are ‘‘challenging’’; to say the least. For a corporation, a rapidly changing environment can only mean an intensely hyper-competitive business setting, in which all players are fighting for a limited piece of market share in an industry. In order to succeed in such an environment, corporations have to be responsive entities that are flexible to change.

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Corporations should be aware of the changes in the environment in order to assess their impact and assimilate them into the corporation’s long-term direction, or strategic plan. Strategic plans should be viewed as a ‘‘guideline’’ towards a goal, and not something that is ‘‘etched in stone’’; hence, the strategic plan is subject to change in order to sustain the corporation’s existence. Monitoring of competitors, demographic factors, and changes in demand or taste are among the many elements that are worth monitoring.

2. Corporate governance Before proceeding any further, it is best to give a brief explanation of the meaning of corporate governance. The Organization for Economic Cooperation and Development (OECD) defined corporate governance as ‘‘The structure through which the company objectives are set and the means of attaining those objectives and monitoring performance’’. As quoted in the Financial Times by J. Wolfensohn, President of the Word Bank (Wikipedia, 2007a), ‘‘Corporate governance is about promoting corporate fairness, transparency and accountability’’. From the various definitions we can say that corporate governance is a multi-faceted subject, which deals with the issues of accountability, essential fiduciary duty, and the protection of shareholders. The corporate governance structure is determined by the board of directors. It is a system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. The two main theories in corporate governance are agency theory and stakeholder theory. In agency theory, it is stated that the corporation needs to be responsible to its principal and shareholders, and therefore should at the very best aim to maximize profits. Another theory which is strongly related to corporate governance is stakeholder theory, which calls for more attention and accountability to players other than the shareholders, for example employees or the environment (Wikipedia, 2007b). It is believed that adherence to these theories will guarantee the best corporate design and structure, and the control mechanism to steer the corporation towards success. In a rapidly changing environment however, chief executive officers (CEO) of blue-chip corporations like Jeff Immelt (General Electric Co., or GE), and A.G. Lafley (Procter & Gamble Co., or P&G), realize that relying solely on good corporate governance does not ensure the corporation’s success. Success normally refers to excellent performance and sustainability through the improvement of two important factors: 1. efficiency; and 2. quality. A good example of a system that focuses on these two factors is Six Sigma. It is a system of practices originally developed by Motorola to systematically improve processes by eliminating defects (Wikipedia, 2007c). It focuses on operational excellence and on ‘‘doing things right first time’’. By its very nature, because it is a ‘‘precision management tool’’, Six Sigma fosters a very low tolerance for risk (Rae, 2007). The biggest challenge may be making the leap from Six Sigma process skills to a new way of thinking which encourages creativity and risk-taking and even tolerates failure. This of course does not mean the end for Six Sigma. In fact, the lessons learned throughout the Six Sigma experience should be looked upon as a foundation on which managers can transform the hard-driving, process-oriented corporation into one steeped in creativity and wired for growth (Brady, 2005).

3. Innovation and innovative leaders There are various definitions of innovation. Most understand innovation to be the managed effort of a corporation to develop new products, or new uses for existing products. From a more ‘‘business-school’’ perspective, innovation is looked upon as a new way of doing things that is commercialized. It is ‘‘invention þ commercialization=exploitation’’, in which

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invention is the creation of a new idea, while innovation refers to the process of commercialization or exploitation of the idea (Drucker, 1988). In general there are two types of innovation: 1. product innovation; and 2. process innovation. Product innovation is about improved products, or completely new products, that are introduced to meet an external or internal need. Alternatively, process innovation refers to the corporate structure and administrative processes. Basically, process innovation covers the changes introduced into an corporation’s production or service operations (e.g. input materials, task specifications, information flow mechanisms) to improve the ways in which the products or services are conceived and distributed to customers (Afuah, 2003). The term ‘‘innovation’’ and creativity always go hand in hand, indicating a strong link between them. The same cannot be said about innovation and management. Most corporations who do not understand believe that innovation stresses the freedom to be unconventional (and hence costly), while management, on the other hand, stresses control mechanisms that stifle creativity. It is no wonder many corporations gave up trying to understand innovation. The truth is that innovation is really a management process. Innovation needs to be manage so that risk can be limited your and informed decisions can be made in the pursuit of the ‘‘next big thing’’. The knowledge economy as we know it is being eclipsed by something new, labeled by influential CEOs as the ‘‘creative economy’’. Analytical work associated with knowledge, such as pricing, cost-cutting, efficiency, quality and deal-making (activities normally performed by the ‘‘left-brain’’), which were once central to corporations, are fast being shipped off to cheaper, highly trained Chinese, Indians, Hungarians, Czechs, and Russians. It seems that more and more, the power of the ‘‘right-brain’’ is being harnessed. The new core competence is creativity, and innovative corporations are now taking full advantage of it to generate top-line growth. The playing field is changing. It is not just about math and science any more. It is about creativity, imagination, and, above all, innovation (Nussbaum et al., 2005). To maintain corporate sustainability and stay ahead of the competition, corporations have to make sure they are offering something that is different based on an analysis of consumers’ needs. Corporations that are aware of the environment are moving towards creating consumer experiences, not just products. The new forms of innovation driving it forward are based on an intimate understanding of consumer culture. In this context, understanding consumer culture refers to the ability to determine what people want even before they can articulate it. The evolution of the economy towards creativity has been under way for some time, albeit relegated to the background during the Six Sigma era. Today, however, the creative economy has taken center stage (Nussbaum et al., 2005). Innovation is the process of creating new products, services and processes in order to improve the current quality of life. Corporations definitely cannot offer the same product as the rest of the players in their industry (whether they are competitors or suppliers) if they want an edge over their competitors, gain premium profits, and maintain their existence in the industry. Innovation requires corporations to dare to be different. Corporations need to constantly search the environment for hidden opportunities (something that has been overlooked, or ideas not thought of before by others) they can take advantage of through commercialization. The term ‘‘different’’ here does not necessarily means something that is totally new – it could also refer to the application of an existing product or service in a new way. Innovation should not only be limited to the development of new products and services, but also the way the corporation markets them, finds a niche market within their core industry and related industries, or creates a totally new market altogether. A corporation’s innovative endeavor should also be extended to how they use their resources, and to investment decisions. In any circumstance, while trying to merge innovation with good corporate

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governance, corporations must make sure the initiative that they have undertaken falls within the ambit of the law. Furthermore, corporations must be creative to innovate in a strictly regulated environment and should continually keep their thinking hats on. At the same time they must bear in mind that innovation, while necessary for growth, also comes with an element of risk and uncertainty. Innovative corporations are said to be risk takers since innovation is normally associated with risk. This belief is only true to a certain extent, because a truly innovative corporation does not take risks blindly. Such corporations do not expose themselves to unnecessary risk; instead, the risks taken are calculated risks, and well within the financial retention capabilities of the organization concerned. Corporate governance can provide the structure to facilitate innovation activities and also double as a control mechanism. It is important to remember, however, that it is only a structure that facilitates the process of innovation; it does not bring about innovative performance on its own. This is where input from innovative leaders can optimize the effectiveness of a good corporate governance structure. The integration of strategic decision making with the information and knowledge of innovative leaders will enhance not only the abilities of planners to develop ground-breaking strategies, but also increase their incentives to do so, because they see their own goals being furthered through investment in research and development processes that are both collective and cumulative (O’Sullivan, 2000). The board of directors has the responsibility to ensure a proper allocation of resources based on priority that shapes innovation efforts within the corporation. This, of course, requires the board of directors or leaders of corporations to truly understand the concept of innovation, and subsequently spread it far and wide among managers by creating corporate policies that support innovation. In the midst of the eagerness to innovate, these policies should not veer away from the best practices as suggested in the governance code.

4. The innovation cultural revolution A successful innovation effort requires the full participation of everyone in the corporation to ensure that the end results of research and development are in the interests of society at large. Corporations should also work on a whole new set of leadership traits in order to connect with a new set of values and corporate principles. Here is a good example: in an effort to unearth a new leadership trait to lead the innovation culture within the corporation, GE went through a comprehensive internal effort and came back with five traits which they now use at their training center in Crotonville, New York. The new leadership traits are: 1. imagination and courage; 2. external focus; 3. decisiveness; 4. domain expertise; and 5. inclusiveness. GE believes this is the foundation of how managers could become more innovative (O’Connell, 2005). Corporations need visionary leaders, or better yet, ‘‘innovation champions’’ to initiate innovation efforts. Innovative leaders need to convince others in the organization that innovation and creativity are something crucial to pursue. The innovation champion needs to frame the whole corporation in such a way that others will see the benefits of innovation the way he sees it. Framing is a way to use language to manage meaning, a way for leaders to influence how events are seen and understood. It involves the selection and highlighting of one or more aspects of a subject while excluding others (Robbins, 2003). Imaginative leaders are those who have the courage to influence boards of directors to fund new ideas, lead teams to discover better ideas, and lead people to take more educated risks (Nussbaum et al., 2005). What is unfolding is the commoditization of knowledge.

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Under its former CEO (the renowned Jack Welch), GE produced a number of outstanding results using precision management tools such as Six Sigma and rewarding executives by giving rich incentives for efficiency. At that time, the skills GE prized above all others were deal-making and cost-cutting. Continual improvement of operations is of the utmost importance, and that mindset helped make the $152 billion industrial and finance behemoth a marvel of earnings consistency. In the last three and a half years, however, Jeff Immelt (current GE chairman and CEO) has been on a mission to transform the hard-driving, process-oriented company into one steeped in creativity and innovation (Brady, 2005). Immelt wants to change GE’s corporate governance focus, and turn its precision management mindset into a legion of innovators with a flair for creative thinking (O’Connell, 2005). In doing so, the corporation has made a leap from its Six Sigma principles to what is known as CENCOR, a consumer-centric innovation process which increases the corporation’s innovation success rate. CENCOR is an acronym for ‘‘Calibrate, Explore, Create, Organize, and Realize’’. It is implemented to change the corporate structure in order to spur creativity. Through the newly created post of Chief Marketing Officer (CMO), Immelt has appointed Beth Comstock to take charge of areas concerning the corporation’s creativity and innovation initiatives (Nussbaum et al., 2005). Quite clearly we can see that GE’s top man is pushing for a cultural revolution. The outcome of this revolution (which at the moment is priority number one), is to move GE’s average organic growth rate (i.e. the increase in revenue that comes from existing operations, rather than deals and currency fluctuations) to at least 8 percent from about 5 percent over the past decade. This is something which competitive pricing, cost-cutting and improvement in efficiency (skills which Jack Welch deemed important) could not deliver. This does not mean that Immelt has turned his back on the ‘‘teachings’’ of Jack Welch. It is just that under him, GE’s imperatives have changed from a process-oriented company into one that embraces risk-taking, sophisticated marketing, and above all, innovation (Brady, 2005). As stated earlier, GE is not alone in the effort to merge good corporate governance with innovation. Another company that has done it fairly well is P&G. When A.G. Lafley took over as P&G’s CEO in 2000, his main agenda was to take the corporation into new markets, product areas, and industries. He does this by encouraging his managers to connect with consumers and learn to take risks; he gives them incentives based on how imaginative they are. Through this, Lafley aims to influence the strait-laced corporate governance structure (board of directors) into accepting a novel business model that is based on a new research and design (R&D) strategy and innovation method. This is very important in the effort to transform the corporation into an innovative entity, since it is the board of directors that prioritizes which projects are to be pursued, and the funds to be distributed among different projects. The basics of this new business model which Lafley is championing are quite simple. At its the core is the need to be focused on where customers are going, and he believes this can be achieved in part by playing into major demographic trends. It starts with observation; for example, going out and directly looking at how consumers shop at supermarkets, how they eat in restaurants, or how they are treated in hospitals – in other words, observing how consumers interact with the corporation. Once all the information is gathered, managers are then required to brainstorm for new ideas, followed by prototyping, with the use of models or videos. This enables managers to visualize concepts and make decisions on which ideas to improve and which to discard. Therefore, the product can be assessed for commercial viability much faster. In ensuring ideas are accepted by the decision makers of the corporation, articulation of ideas or ‘‘storytelling’’ is very important. Managers have found that placing a potential new product within an emotional story that connects with consumers raises its chances of success. This changed P&G’s entire product creation process, making it consumer-centric rather than driven by new technology. The final ingredient in this new business strategy is ensuring that the corporate structure will follow all these processes through all the time. This kind of change can be a wrench for a corporation, but the benefits are worth the effort (Nussbaum et al., 2005).

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5. A word on corporate social responsibility Nonetheless, it must be noted that changes should not occur just for the sake of change. It is necessary for the changes implemented to be followed by improvements and benefits to the corporation and to society as a whole. Creativity is the key to innovation, but it must be part of a broader discipline that includes CEO leadership, corporate governance, management incentives and corporate social responsibility. Ethical issues and public sentiment towards certain business ventures and innovations must be taken into consideration. Promoting corporate social responsibility is very important because prospective investors do take this factor into consideration during the investment decision process. Investors believe that corporate social responsibility brings more value to the corporation and it is worthy of their support. Corporations should take care of the environment they are in because if the environment is damaged, then the wealth they have accumulated will be meaningless since there will be no one to support them. Bear in mind that ‘‘tech-centric’’ innovation generates feature-ridden products that can frustrate consumers. In contrast, ‘‘consumer-centric’’ innovation generates products that are craved by people because of their ability to improve their life through ‘‘environmentally friendly’’ aspects.

6. Conclusion Corporations are a part of an open system, in which every action taken has an effect on society and the environment. CEOs should lead a cultural revolution within their companies, personally championing the goal of raising innovation success rates, while at the same time using natural resources wisely and efficiently without destroying nature. Consider the ‘‘triple bottom line’’ theory, where a harmonious existence between corporations and the environment can be achieved when corporations make a conscious effort to give back to society and the environment using the earnings that they have gained through the utilization of natural resources (McShane and Von Glinow, 2005). It may be a good idea for corporations to start thinking of hiring more anthropologists and social psychologists and cutting back their budgets for hiring engineers. One thing is clear: innovation today is based on observation of consumers, to discover what they want. After that, it is just the matter of satisfying those customers. At the end of the day, this will enable corporations to gain continuous improvement, together with continuous support from society.

References Afuah, A. (2003), Innovation Management: Strategies, Implementation and Profits, 2nd ed., Oxford University Press, New York, NY. Brady, D. (2005), ‘‘The Immelt revolution: he’s turning GE’s culture upside down, demanding far more risk and innovation’’, available at: www.businessweek.com/magazine/content/05_13/b3926088_mz056. htm (accessed 19 March 2007). Drucker, P.F. (1988), ‘‘The discipline innovation’’, Harvard Business Review, Vol. 109 No. 10, p. 95. McShane, S.L. and Von Glinow, M.A. (2005), Organizational Behavior: Emerging Realities for the Workplace Revolution, 3rd ed., McGraw-Hill, New York, NY. Nussbaum, B., Berner, R. and Brady, D. (2005), ‘‘Get creative! How to build innovative companies’’, available at: www.businessweek.com/magazine/content/05_31/b3945401.htm (accessed 19 March 2007). O’Connell, P. (2005), ‘‘Bringing innovation to the home of Six Sigma’’, available at: www.businessweek. com/magazine/content/05_31/b3945409.htm (accessed 19 March 2007). O’Sullivan, M. (2000), ‘‘The innovative enterprise and corporate governance’’, Cambridge Journal of Economics, Vol. 11 No. 24, p. 393. Rae, J. (2007), ‘‘Six Sigma vs innovation’’, available at: www.businessweek.com/innovate/content/ feb2007/id20070227_766365.htm (accessed 19 March 2007). Robbins, S.P. (2003), Organizational Behavior, 10th ed., Pearson Education, Englewood Cliffs, NJ.

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Wikipedia (2007a), ‘‘Corporate governance’’, Corporate_Governance (accessed 4 April 2007).

available

at:

http://en.wikipedia.org/wiki/

Wikipedia (2007b), ‘‘Corporate agency and stakeholder theory’’, available at: http://en.wikipedia.org/ wiki/Corporate_Governance (accessed 4 April 2007). Wikipedia (2007c), ‘‘Six Sigma’’, available at: http://en.wikipedia.org/wiki/Six_sigma (accessed 4 April 2007).

Corresponding author M.A. Musa can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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Moral commitments to community: mapping social responsibility and its ambiguities among small business owners Elizabeth A. Lange and Tara J. Fenwick

Elizabeth A. Lange is Assistant Professor, Educational Policy Studies, University of Alberta, Edmonton, Canada. Tara J. Fenwick is Professor and Head of Department, Department of Educational Studies, Faculty of Education, University of British Columbia, Vancouver, Canada.

Abstract Purpose – The purpose of this paper is to map the different moral positions articulated by small business owners in relation to social responsibility (SR) commitment and practice. Design/methodology/approach – This qualitative study utilized collaborative action research with 25 small business owners in two Canadian provinces and used combined methods of group dialogue, personal semi-structured interviews, and thematic analysis through researcher triangulation. Findings – We found that the morality underpinning business owners’ social responsibility tended to be embedded in a sense of relationship with and commitment to the well-being of the local geographic community. However, this was threaded with felt ambiguities, revealing their understanding of a spectrum of SR practices. Research limitations/implications – Through an ethical analysis, we argue that this moral commitment to community is connected to a relational worldview as part of a distinctive ethical vision while, at the same time, the small business owner-managers were continuing to pursue business within an environment of orthodox economic ethics and practices. This substantially impacted the shape of their commitment as social change agents and their engagement in collective activities with like-minded peers. Practical implications – Further research is needed to reveal how much the lack of engagement in collective social change activities and collective promotion of social responsibility is related to the practical issues of time famine, maintenance of a business niche, or an individualist ethos. Originality/value – This study contributes several original findings by identifying a range of SR practices and the ethics behind each, from the perspective of small business owners, how they position themselves, as well as the paradoxical constraints they experience. Keywords Corporate social responsibility, Small enterprises, Business ethics, Economic sustainability Paper type Research paper

Introduction Along with the rise of corporate social responsibility (CSR) discourse and practice, there has been a concurrent rise in studies exploring how ethics and morality are understood by business owners, and consequently how they practice social responsibility. Particularly understudied have been the concepts of social responsibility that small or micro business owners operationalize. This article explicates the findings from a qualitative study involving 25 small business owners who practice social responsibility in various sectors located in Western Canada. Our findings confirm the findings from a number of European studies on small and medium-sized socially responsible enterprises (SMEs), but this study is unique in revealing that the morality underpinning social responsibility practices by small business owners tends to be embedded in a sense of relationship with and commitment to the well-being of the local geographic community. Yet, the precise nature of this commitment and its enactment in business decision-making and practices appears to vary according to the nature of the business, the owners’ meanings about community and thus the nature and extent of business responsibility, about viability (what it is possible to do), and about the

DOI 10.1108/17471110810856820

VOL. 4 NO. 1/2 2008, pp. 41-55, Q Emerald Group Publishing Limited, ISSN 1747-1117

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owners’ personal connection with and interests in the community. Further, this moral commitment is threaded with felt ambiguities, such as the ambiguity around the business owner’s role as a social change agent in the community, and the extent to which community demands should take precedence in business decision-making. Motives and incentives for making moral commitments to community can come into conflict with the demands of operating a profit-making enterprise, and tensions can emerge around the extent of interconnection with community while retaining the independence and distance required for competitiveness. This article maps the different moral positions related to social responsibility (SR) as articulated by the 25 small business owners and explains their positions within a range of SR practices. Through an ethical analysis, we argue that this moral commitment to community is connected to a relational worldview that they perceive to be distinct from values and assumptions driving the existing economic system, yet they pursue this vision as individual actors rather than working collectively.

Corporate social responsibility and small business Corporate social responsibility (CSR) can be defined as a business commitment to respond ethically to social and/or ecological concerns. This is often understood as recognizing a ‘‘triple bottom line’’ of investing shareholders, the natural environment, and other stakeholders, including local community, government, customers, employees, and interest groups ranging across environmental, religious, ethnic, and trade groups (Canadian Business for Social Responsibility, 2001). In actuality, corporate social responsibility is not a unitary phenomenon but is characterized by wide-ranging meanings and practices including transparent accountability, respect for ethical values, commitment to improving quality of life and preserving natural environments, and support for the local community (Hopkins, 2003; Crowther and Rayman-Bacchus, 2004; Canadian Business for Social Responsibility, 2001). In Canada where this study was conducted, corporate SR is described as an ‘‘urgent social and political issue’’ in the federally sponsored National Corporate Social Responsibility project (Conference Board of Canada, 2004). However, business ethical commitments and motives to participate in CSR range widely, from strategic to altruistic (Husted and de Jesus Salazar, 2006; McWilliams et al., 2006). Some firms perceive CSR to be simply new language for old business commitments to philanthropy and being good citizens (Joyner and Payne, 2002; Whitehouse, 2006). Others argue that a corporation’s defining and sole ethical responsibility is to create profits for shareholders (Hinkley, 2002) and that a CSR agenda is a vague altruistic project that does not serve shareholder interests or, therefore, the public good (Husted and de Jesus Salazar, 2006). Some firms treat CSR as a public relations exercise, promoting ethical suspicions of ‘‘greenwashing’’ to camouflage resistance to systemic change (Dobbin, 1998). Ethical demands of diverse stakeholders pose conflicting definitions of the ‘‘good’’ for business: fiduciary responsibility to company shareholders, utilitarian demands to provide greatest benefits to the greatest number, virtue demands to behave as a ‘‘good’’ corporate citizen in a particular context, duty demands to enact ethical principles (honesty, justice, respect), and transactional demands to compensate local communities fairly for the corporate footprint and economic gain. CSR doctrines have yet to articulate approaches to classifying, prioritizing and understanding these diverse stakeholder needs on the one hand, and the extent of corporate responsibility to them on the other (Coelho et al., 2003). Internally, levels of ethical commitment to CSR principles range widely within companies (Hemingway and Maclagan, 2004; McWilliams et al., 2006). Employee resistance is a particular problem facing some managers interested in CSR (L’Etang, 1995). The public also can be ethically unpredictable, ultimately choosing lower prices over responsible products despite their demands for corporate social responsibility (Davidson and Hatt, 2005). CSR commitments are particularly challenging for small businesses that often cope with slim resources, loan recall vulnerability, constant work overload in everyday operations, and networked structures of production. The larger the firm size, the more cash is donated to philanthropy (Seifert et al., 2003) and the greater the tendency to develop specific, formal

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CSR strategies to focus on particular stakeholder needs (Perrini et al., 2007). In a large survey of Italian businesses, Perrini and colleagues found that small businesses tend to feel greatest responsibility to their customers. In fact, small businesses experience most of their ethical conflicts in relation to their clients, and mostly with regard to contracts and agreements (Vitell et al., 2000). Lepoutre and Heene (2006) concurred that constraints related to the small business do affect CSR commitments. However, they indicate that the unique characteristics of these conditions – including personal, contextual and issue characteristics – create a more nuanced effect than simple barriers, and that small business can overcome these constraints. Jenkins (2006) suggests that because SMEs on the whole learn mostly through networking with peers, this activity represents an opportunity to strengthen CSR if sufficiently strong leaders will champion such networks. One ethical issue that we have found in previous studies among some small business owners, particularly women in micro-enterprise, is a desire to change certain criteria of success and taken-for-granted business practices such as traditional business planning (Fenwick, 2002a). Competitive structures of growth and profit were challenged by these business owners in favour of a conscious stance to focus more on contributing to local communities and others’ well-being, a stance that owners described as ethics-driven. Some, in fact, had started their business primarily as a way to create a space for work that was ethical: in their terms, this meant work that was creative, socially just, collaborative and community-oriented – but still viable as a business (Fenwick, 2002b). The close connection of business, personal identity and values among small business owners is well documented. For those who feel personally drawn to acting for social change, including change to the fundamentals of capitalism (relatively open markets, competition, perpetual growth, and profit), the pull between such ethical commitments and the necessary activities to sustain a small business is difficult to reconcile. Overall, there is considerable ambiguity surrounding the diverse ethical positions and motives to practice CSR, alongside the difficulties of sustaining these ethical commitments, as documented in both large and small organizations. Given this diversity, it is useful to understand more deeply how small businesses understand their ethical commitments to CSR and what moral positions they take in their CSR approaches and decision making.

Methodology To trace the meanings and practices of social responsibility in-depth at a micro level, this study was designed to be qualitative and interpretive in nature, examining the perspectives and experiences narrated by 25 small business owner-managers located in Western Canada. The region is notable for its economic prosperity in recent years both in relation to the rest of Canada and to the USA, chiefly due to large petroleum reserves at a time of high world oil prices. In terms of CSR, the Canadian federal government has only recently (in late 2006) taken up an explicit agenda of environmentalism in response to public opinion. CSR has been promoted at national levels through non-governmental agencies such as the Conference Board of Canada (2004) and Canadian Business for Social Responsibility (2001), but compliance has been completely voluntary with few government incentives or disincentives. The 25 study participants were all owners of micro-enterprises ranging in size from one to 11 employees, and ranging in years in business from two to 16 (see Table I). Business sectors were mostly in retail, business services, personal services and food service, with one in manufacturing. About two-thirds were owned by women. Potential participants were identified through indexes maintained by agencies such as Canadian Business for Social Responsibility as well as through snowball methods of obtaining referrals. Our criteria were firms that had been operating successfully at least two years (demonstrating viability) and that explicitly professed a commitment in their core business purpose and processes to values directly related to social and/or environmental responsibility (e.g. on their website or other promotional material). These small business owners were invited to join group dialogues for the purpose of sharing strategies and discussing new approaches to practice CSR in small business in a modified action research process. Collaborative action research

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Table I Demographic information for study participants Owner(s)/ representative pseudonym

Type of business

City

Number of employees

Gender

Years in business

Apex Equipment Aputik Garments Conscious Creativity Earth’s Grocery Store and Cafe´ Eastside Works

Leslie Alasie Leah

Wilderness equipment retail Clothing design and manufacture Communications and advertising

Edmonton Vancouver Vancouver

20 þ 3 8

Female Female Female

35 2 14

Calvin and Cathy Organic restaurant and grocery store

Edmonton

20

Mary

Vancouver

3 to 15

Male and female Female

Fair Flowers Get Organized Holistic Consulting Humour Works

Laura Jill Mike

Vancouver Vancouver Edmonton

Female Female Male

20 2 15

Vancouver

1 1 Sole proprietor 4

Female

4

Edmonton Vancouver Vancouver Vancouver Vancouver

5 to 6 15 30 1 12

Female Female Female Female Female

14 5 7 3 18

Vancouver

Sole proprietor

Female

1

3

Business pseudonym

Employment development for homeless people Florist Closet organizing consulting Holistic agricultural management consulting Business consulting – humour in the workplace Household and personal goods retail Bakery Register businesses on the internet Style consultancy Obtain development approvals for real estate industry Graphic design and illustration

Chris

Market Earth Mini-Cakes Inc. Name Domains New You North River Associates Northern Network Graphic Design Ray Social Responsibility Consultancy Respectful Workplaces

Roberta Kelly Pin Yin Ellen Patricia Wendy

7 6

Raymond

CSR consultant for first generation companies

Vancouver

Sole proprietor

Male

Phyllis

Conflict resolution for businesses

Vancouver

Female

17

Restaurant Organic

Ron and Wanda

Organic and locally grown restaurant

Edmonton

Male and female

10

Stellar Trophies Steward Consulting Sustainable Consulting Workabilities Write On

Bill Leslie

Vancouver Edmonton

Sally

Award manufacturing Marketing and communications consultancy Social auditing and consulting

Vancouver

Dumont Sandy

Design for accessible workplaces Business writing services

Vancouver Vancouver

Proprietor and one business partner 7 to 12 depending on season 11 Sole proprietor Sole proprietor 2 1

Male Female

7 6

Female

10

Male Female

3 2

Note: All names are pseudonyms

inquiry (Kemmis and McTaggart, 2000) involved combining methods of group dialogue, personal interviews, and collaborative thematic analysis. This process was aligned with ‘‘action learning’’ (Kember, 2000; McGill and Beaty, 1995) which is well established in workplace learning studies (Revans, 1995). The objective of the researchers was to stimulate collaborative conversations, as Feldman (1999) suggests, that were inquiring, reflective, and hermeneutic as well as to open the possibility for a collaborative action project for enhancing their practice of social responsibility. Two groups of business owners were formed, one in each separate province. Each group met face-to-face five to six times over a total period of almost two years. At these meetings, participants talked together about their meanings, challenges and strategies in developing practices of social and environmental responsibility while surviving as a small business. The two groups evolved differently as each decided their own group objectives and whether to engage in any collaborative activities. Individual in-depth semi-structured interviews were held with each participant at the end of the dialogue process.

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The researchers worked together to facilitate the dialogue at these meetings and record all proceedings through audiotaping (later fully transcribed), flipcharts and detailed field notes. All individual interviews were audiotaped and fully transcribed. Interpretive content analysis of group meetings, individual interviews, researcher notes and transcripts examined relations among the individual and collectively stated purposes, meanings, values and strategies of CSR. Subsequent comparative data analysis identified common themes, significant differences, and points of tension among the participants. The broad themes and contradictions discussed in this article were verified with the two groups. Trustworthiness in data analysis was also strengthened through the multiple data sources, member checks with individual interviewees, participant validation, an audit trail maintained by the researchers, and researcher triangulation, involving critically comparing our interpretive analyses and questioning each other’s biases and influences on the meanings emerging in the inquiry process, as recommended by Lincoln and Guba (2000).

Findings: community, moral ambiguity, and perceptions of social responsibility As this research project was founded on collaborative action learning, we were interested in identifying the common ground among the participants. One group in particular decided to develop a declaration of their SR beliefs by collaboratively writing a pamphlet for use with customers or clients, necessitating the deliberate building of consensus in the creation of value statements and in identifying common practices. Thus, this first section of findings identifies areas where there was a high degree of commonality. However, throughout the discussions, it was apparent that there were significant divergences, partly due to business type as well as to different understandings and SR practices. These divergences are represented in the next section of findings. The third section of findings elaborates on their insights and discussions by mapping the spectrum of practices, described by the participants and categorized by the researchers. Morality as community relationship and well-being Consonant with the findings of Vitell et al. (2000) and Jenkins (2006) regarding SMEs, our study confirmed that each business reflected the personalized style and values of the ‘‘owner-manager’’. In particular, the practice of social responsibility directly reflected the interpretations of social responsibility held by the owner-manager. Most often, the business operations were established to publicly exhibit the personal moral philosophy held by the owners, in this case, for social responsibility. The thing is that you hope that you can influence people because you’re practicing something different . . . because we are built on [a] philosophy (Wanda, Restaurant Organic, ll. 649-669). People have to start eating consciously or eating with a conscience so that they know why they’re eating a specific thing or buying a specific thing or why they shouldn’t buy. So many people, we go into a grocery store . . . you’re not thinking about why or where it came from, how it was raised . . . and I say . . . we have to buy consciously, not unconsciously (Ron, Restaurant Organic, ll. 270-275).

Moreover, these small business owner-managers judged their sense of social responsibility by the willingness to maintain their commitment to the philosophy, even in challenging times. It’s keeping your commitment no matter what. When times get tough we stayed, we stayed the course . . . I mean we just stayed with the principle and figured . . . we make [it] this way, [or] we don’t make it at all. We’re not going to compromise what we believe in (Ron, Restaurant Organic, ll. 2409-2413). The first two years we were not making money at all and there were many, many nights where we thought, ‘‘Should we continue? Is it worth it? Should we just go all conventional?’’ . . . we didn’t do it because we had so much heart into what we’re doing (Cathy, Earth’s Grocery Store, ll. 827-830).

Not only was it expected that they would adhere to the commitment at all times but that their philosophy permeated all parts of the business operation. The second research group expressed this as ‘‘principle two’’ in their pamphlet: ‘‘We value ‘whole business’ that benefits local people, the environment and the community’’ (Research Group 2, 2006). Social responsibility constituted a working philosophy for these owner-managers and was defined as

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social and environmental well-being. Many participants continuously evaluated themselves against the principles they considered to comprise social responsibility, to determine how well these principles were integrated throughout all aspects of the operation, and whether they had compromised their commitments in any way over the long haul. This required a high degree of ongoing self-reflexivity, which was exemplified throughout their conversations. While nuanced in expression across the participants, the most significant factor that shaped the understanding of community was commonly understood as local, geographic community, lived out in face-to-face relationships (10-01, ll. 2028-2031). Owners considered their key stakeholders to be all the direct, personal relationships they had with customers, suppliers, employees, or community contacts, with whom they had built a sense of trust and to whom they felt a sense of accountability (06-01, ll. 981-993). Most relationships in small business operate upon personal engagement; therefore their ethics were similar to personal systems of morality, described as trust, honesty, fairness, respect, and community service. In this way, a personal style of morality became translated into socially responsible business ethics, one facet of which was characterized as transparency: We value openness and make ourselves accessible to customer feedback and questions. This is an ongoing conversation . . . We will be willing to engage in a conversation and to explain our practices (Research Group 2, 2006).

Most participants claimed to want their operation to be transparent and directly accountable to stakeholders. Not only was strength of commitment and public evidence of accountability important to their sense of social responsibility, but their business operation gave priority to community values as much as to profits: We know we could make more money if we did things differently, but that’s not why we started in this business . . . that’s not who we are (Ron, Restaurant Organic, ll. 2409-2413).

Principle 10 from the group pamphlet explains this position further: We believe in being a values-based company. Therefore, we weigh social and environmental values equally with financial success. We believe small businesses such as ours play an important role in creating a fairer, more democratic, and environmentally respectful future for our communities . . . (Research Group 2, 2006).

One participant summarized, ‘‘No business is sustainable if it is not socially responsible’’ (06-01, ll. 20). As found in other studies (Jenkins, 2006), this term ‘‘sustainability‘‘ was used interchangeably with ‘‘social responsibility’’. While there was considerable debate about the meaning and utility of the term ‘‘sustainability’’, it was, for these small business owners, primarily grounded in responsibility to community: sustainability ‘‘revolves around relationships and interactions’’, more specifically as ‘‘care of people and care of the planet’’ (06-01, ll. 580). The sixth principle developed by Group 2 emphasized this: We believe that business is relationships. Therefore, we have created a business that builds trust and respect as the foundation for good relationships between us and customers, employees, and suppliers. We practice workplace democracy where employees benefit, and can seek a sense of fulfillment by their work with us. We believe small business has a unique role in building community (Research Group 2, 2006).

Therefore they enacted both social and environmental responsibility in a way that was anticipating a future arrangement of community relations. Many participants envisioned the role of business as contributing to a moral vision of working and living that considered the common good distinct from shareholder good through profits or the good of other self-interested stakeholders: ‘‘The primary, um, driving factor isn’t that it’s called business; it’s about a way of living, a way of living and working together’’ (Roberta, Market Earth, ll. 308-316). We strive to be responsible stewards of the common good. We take time to understand the gifts we have been given, take responsibility to use these gifts wisely in the world to do what is right and honorable. We recognize our actions represent our awareness of our social and environmental connectedness (Research Group 2, 2006).

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This new way of living and working was predicated upon a new way of thinking about themselves as part of a web of social and environmental connections. Some participants described this as connectiveness thinking, suggesting that urban people in particular lose touch with this connectiveness and ecosystem dependence, as they simply press a button for electricity or move a handle for water (06-01, ll. 1371-1383). Specifically, owner-managers said they contributed to the common good by participating in community events, helping to solve community challenges, trying to reduce their impact on the local environment, and hiring staff from the immediate community where possible. Their community involvement ranged from philanthropy (donating a percentage of profit to community initiatives) to more active participation such as volunteering for local agency boards and offering store space to host public events such as films and speakers. [W]e support the work individuals do within [other] organizations . . . because I’m thinking, ‘‘every day what do we do?’’ We help people do whatever work it is that they want to do in the community (Roberta, Market Earth, ll. 518-522).

Indeed, one of Group 2’s principles was ‘‘We believe in community involvement to build the fabric of strong, self-reliant communities’’ (Research Group 2, 2006). However, when this conception of social responsibility was questioned at a deeper level in terms of practice, some ambiguities emerged.

Ambivalence as community change agents A key area of moral ambiguity was embedded in these small business owners’ sense of themselves as change agents. All described themselves to varying degrees as agents working for social change: to bring about an alternate vision of society as well as of doing business. For some, these were radical visions of change: I mean to make change, right, . . . are you going to be passive about it or do you want to be more assertive . . . by being here we’re stepping forward and we’re saying you know, we have to change. Therefore you should be doing this. We’re not asking you to do it. We’re telling you to do it. Because we need to make a change (Jana, Windsong Design, ll. 1500-1514).

Others viewed themselves as social leaders, standing apart from other firms: Creating the social change . . . I think that’s the essence, one of the essences anyway that makes us different from the corporate model because they’re still using the dominant model (Roberta, Market Earth, ll. 2020-2023).

Overall in their social change approach, these owner-managers tended, at times, to remain detached, concerned about their public reputation and focused on building local influence. While they aspired to change consumer behavior, participants said they often were cautious when encountering customers’ conservative preferences, such as when one consultant accepted that his client was uninterested in selecting ‘‘responsible’’ off-shore suppliers (e.g. with humane work conditions). While these owner-managers were often frustrated by insufficient recognition and tax incentives by governments for small business adoption of CSR practices, none viewed part of their role as attempting to influence government policy. In fact advocacy or activism was viewed by participants as problematic. Some were concerned about being viewed as left-wing, thereby losing credibility as business owners: When we opened in 1997 we were more assertive in . . . that we were going to be organic, we were going to be healthy, we were going to be nutritious . . . And we put it all over the menu and . . . we were right into their faces, evangelizing the whole thing like fundamentalists . . . And what it did is it backfired. People stopped coming . . . You know they started talking about it, gossiping about the vegetarian freaks and gay chefs, they thought it was just wacko! (Ron, Organic Restaurant, 0906-09, ll. 303-327).

Resistance to dominant norms through activism was described as ‘‘judgmental’’ or ‘‘negative’’. Rather, they were concerned about being positive role models by manifesting the changes they wanted to see rather than criticizing what they did not see.

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Most participants described their evolution from initially being an advocate toward the position of educator. In trying to attract and keep clientele, they did not want to be seen as ‘‘cultish, hippies, out there, judgmental or confrontational’’. Experiencing patron loss when labeling their practices a certain way, they preferred to model desirable practices as a form of education and to educate clients when inquired about chosen products and services. All business owners emphasized their focus on relationships, supporting customers interested in social responsibility: We support . . . individuals in their own personal choices and changes (Roberta, Market Earth, 0906-02, ll. 522).

Many owners focused on the local, preferring to work face-to-face with customers where they could establish community and personal relations of trust, rather than through virtual environments. However, this limited the geographic reach of the business, resulting in lower volumes and overall less demand. Even though they stipulated their deliberate intention to be social change actors, the overall impact was to constrain the owners’ capacity to effect social change even though this formed an important aspect of their business identity. Overall, most participants described their work in terms of effecting change one customer at a time rather than engaging in broad-based or collective social change activities. Thus, local interpersonal relationships were pivotal to their view of SR practice: A lot of small companies have very, very good relationships with their customers. It’s different than just having a relationship. In fact we have discussed that very often. That role as a mentor, teacher, leader (Roberta, Market Earth, 11-01, ll. 562-566).

They often discussed their role as educators but often found that the high level of expectations and vigorous challenges to their practices to be exhausting, once again stimulating a sense of ambivalence about boundaries in this relational way of doing business. The grocery store owners expressed shock when a customer rifled through their garbage cans to see if they were composting and recycling and then challenged them for not doing all they could (06-01, ll. 963-993). Another said: You just have to let go [of] some dreams . . . You can live with limits . . . the community can be the black hole that, it just swallows all your energy (Alasie, Aputik Garments, ll. 329-331).

While all of these business owners described themselves as working for and within a more communitarian, relational view of society than the competitive market system tended to allow, most did not view themselves as acting in coalition with other like-minded businesses or agencies to create social change. The exceptions were the awards manufacturer and the outfitter retail firm, both of which were the largest of the businesses, the longest surviving, and had the most developed CSR plans. The others expressed strong disinterest in forming alliances with institutions such as education or government, with labour groups, or with NGOs such as environmental groups or local community agencies to bring about change: I wish the government would keep their nose out of it. Second of all . . . the government doesn’t know anything about social responsibility or organics or agriculture . . . They’re ill informed and they are, uh, corporate driven, they’re not people driven (Ron, Organic Restaurant, ll. 554-563).

They stated instead their preference to rely on themselves to create a vision of an alternate society, to generate the resources, and design the process to bring it about. As found by Perrini et al. (2007), their most important connections were their customers. However, many owner-managers perceived themselves as connected to larger social movements by providing learning space for the public as part of their private retail space – through displays of information, meeting space, networking of community members, or hosting educational events. Naturally, to survive, small business owners walked a careful line in exhibiting their social change intentions. This gave clear evidence of a conflict between their identity as change agents and their actual behaviors. While many perceived themselves as participating in a collective movement for change, they remained rather isolated as individual agents, acting cautiously and conservatively, with minimal ongoing contact with like-minded business peers. They considered their contribution as role models and educators rather than activists.

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However, as they discussed these roles, they were careful to differentiate themselves from medium-sized business or large corporations, revealing their understanding of a spectrum of SR positions.

Mapping perceptions and positions within social responsibility As Jenkins (2006) found, these business owners identified a lack of language with which to articulate their activities and the lack of a business model that represented their intentions. Most participants said they disliked the term ‘‘corporate’’ in corporate social responsibility as it held connotations of ‘‘big business’’ that was removed from the community and the relational realities of sole owner-managers (06-01, ll. 294-300). I suspect that [at] some point in time we will stop using the word ‘‘corporate’’ . . . because what we’re talking about is about people and it’s about human relationships and it’s about community (06-01, ll. 308-310).

Further, many indicated a belief that ‘‘corporations’’ are largely working according to ‘‘models from the past’’ and are using the CSR label as an ‘‘add-on’’ rather than the raison d’eˆtre of their business practice (06-01, ll. 336). Some regarded corporate-level social responsibility as a cover for conventional practices and a system that was inherently dysfunctional and unsustainable. Most believed that their business practices represented a fundamental change in core economic beliefs: . . . what do we need in our lives, what do we need to have fulfilling lives? I’ve never seen this [in a] business model . . . have I ever seen the question ‘‘what condition does our resource base have to be in, indefinitely, in order to sustain the production that we’re going to do, in order to make the people happy’’? (06-01, ll. 463-481).

Yet in describing alternate business models and their moral underpinnings, these owners distanced themselves from hard-line ideological and moral positions. They preferred a more pragmatic description of their value-based approach, which was fluid and even eclectic: . . . there’s this list that either you’re a hardest capitalist or you’re a softest socialist and . . . there’s no understanding that you can, well, why can’t you just be as a business and [as] a political perspective, socially responsible and sustainable? (06-01, ll. 381-385).

Yet however eclectic their position, some were clear about their radical shift to a fundamentally different concept of the role of business within community: In, you know, the corporate world now . . . a lot of them are truly struggling trying to be more ecologically and socially responsible . . . but because they’re trying to do [it] . . . within the current framework they’re trying to make adjustments; it’s the framework [itself] that doesn’t work . . . that’s why they’re having so many problems, is that they [are] trying to have business as usual but a little bit differently . . . it doesn’t work (06-01, ll. 415-446).

Most described their motivation for SR to be internal, premised on their value system. Corporate-level SR, for them, was simply a pragmatic or even manipulative response to customer demand, not because of an intrinsic belief in SR necessarily, but because ‘‘the customers want it, so they’ll do it because it affects their bottom line . . . they’ll be socially responsible as long as they can make money, you know’’ (06-01, ll. 581-582, 629-630, 650). For these small business owners, this external motivation was less acceptable. Thus in articulating their own moral vision and comparing these to what they perceived to be corporate-style SR, these small business owners focus on three elements: 1. the motivation behind adoption of SR practices; 2. the extent to which SR practice was integrated into core operations (business purpose, product sourcing, waste practices, employee relations, etc.); and 3. the relation of CSR to profit. From the descriptions of their understanding and practices, the following spectrum of positions emerged. We have characterized these positions as ranging from ‘‘weak’’ to

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‘‘strong’’ social responsibility to capture the ways participants seemed to view these positions (see Figure 1). Participants described a weak SR position pejoratively as ‘‘corporate greenwashing’’, where profit maximization remained the central motivation but was camouflaged by a public relations exercise that marketed their corporation as socially and environmentally responsible. They considered this to be ‘‘greenwashing’’ because minor modifications in the product, the manufacturing process, or the service were amplified out of proportion to the real impact in terms of social and environmental responsibility. They described a slightly stronger version of social responsibility to be a corporate ‘‘triple bottom line’’ approach. This is the attempt of a large corporation to transition toward triple bottom line goals (the equivalence of social, environmental and fiscal goals) as part of a larger vision of social responsibility and an authentic commitment to manifest this in their business practices. However, they noted that large corporations have a fundamental barrier by virtue of their size, bureaucratic nature, and stakeholder/stockholder interests as well as operating within traditional capitalism. This makes an authentic transformation from conventional business toward social responsible business difficult despite the commitment of leaders or champions in the organization. They suggested that sheer size dictates against a company being relationally based – an aspect they considered a core element of social responsibility. An even stronger version of social responsibility is what they described as ‘‘entrepreneurial’’ social responsibility. They described these practitioners as enterprising small business people who see a niche for a product or service that is socially responsible in its inception, but this innovation is not necessarily part of a larger social vision. The businessperson does not question market principles but works within the dominant economic system in generating profits and using them to remain viable. While they may do ‘‘good things’’ in terms of community and environmental altruism, they do so within the entrepreneurial spirit of individual success and autonomy rather than as part of a social change mandate. The strongest version of social responsibility is what they described as a ‘‘community transformation’’ approach in which the small business owners feel a significant tension with the market system and establish their business as part of a larger social vision of building a different economic and social reality. Rather than just manifesting social responsibility in their business practices, they also expressed the onus of an educative role to create demand for socially responsible goods and services, as part of a social change strategy. Thus, they not only responded to the rising public demand for socially responsible goods and services, they also articulated a need to create this demand. They expressed tension with market principles and the demands of business viability as well as tension with their customers/clients, with whom they often debated the best practices of SR. This version of SR, however, is where many participants positioned themselves. In the statement of principles formulated collaboratively by Research Group 2, this position is clearly visible: We believe in a fair and environmentally respectful society. Therefore we have created business that will contribute to building this kind of society. We believe that this kind of society is possible. . . . We will act as leaders; leading by example. We are positioned to offer opportunities for change and will consciously lead toward this vision.

Figure 1 Spectrum of social responsibility positions

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We value fairness. Therefore, we charge fair prices; pay livable wages; take only a fair return from the business. We will discuss and make intentional decisions regarding the distribution of the wealth and benefits from the business. We believe in creating positive social change. Therefore we innovate to create a ripple effect toward positive social change. We consider the impact of our actions on present and future generations (Research Group 2, 2006).

Despite this consensus, there was also a range of perspectives within this version of SR. One participant considered the decision to write a pamphlet as ‘‘soft’’: [Social responsibility] is about personal relationships, people [in the group] were reluctant to do something that would require like more risk to themselves and/or because they’re so accustomed to making very personal choices . . . that unless someone had . . . their own signature way of doing things it was just something they weren’t interested in (Roberta, Market Earth, 0906-02, ll. 903-909).

Thus, some owners saw the viability of business predicated upon a unique niche, that they did not want to threaten. What the groups did not discuss were the business participants who worked within formal co-operative structures, as another version of SR. Co-operatives exemplify democratic socialist values through a collective ownership and decision-making structure. This was one area of significant tension where many of the owner-managers in this study, wanting to protect their freedom to enact their moral vision, did not want to function like a board-controlled NGO (non-government organization) and did not necessarily want to be beholden to the decision-making of employees. This autonomy and control over the operation was the central reason they chose to be independent business owners. Many were risk takers who desired self-sufficiency and the freedom to innovate, based on principles of social responsibility. While they avoided ideological implications by framing their messages to customers in more neutral ways ‘‘to start where the customers are’’ (10-01; ll. 1814), they also acknowledged their socialization into orthodox business practices. One participant noted the inherent contradiction of wanting to network and share ideas with other like-minded businesses but also wanting to protect proprietary information. Finally, the dialogue itself made some participants question their non-politicization about economics and business and individualist approach to social change. I wonder sometimes if the scale of challenges we face is such that I need to get out of my comfort zone and be more radical . . . but I might start feeling [it] is necessary is to be more active politically. If, because all of this sort of voluntary corporate stuff is not achieving results at the speed at which we need it to, and there are things that are going rapidly downhill the other way (Sally, Sustainable Consulting, ll. 1245-1256).

In sum, most participants described themselves as leaders and innovators, ‘‘creating the future’’, and they discussed the tensions of trying to do so within existing economic structures.

Analysis and discussion: capitalism, social responsibility and ethics Is it possible for capitalism to be socially and environmentally responsible? In an ethical analysis, orthodox capitalism is built upon universal ethical egoism comprised of basic premises that are operational in day-to-day business. The first is that it is ethically necessary to act in one’s self-interest. Many ethicists concur that it is questionable whether this is good moral theory for, as commonly agreed, ‘‘morality is about overcoming our selfishness and living our lives with a positive concern for the well-being of other people for their own sake’’ (Hinman, 1994, p. 137). The maximizing version of ethical egoism is that everyone should try to maximize self-interest, which can lead, at best, to a kind of pragmatism and at worst, a ruthlessness that permits various kinds of behaviour such as cheating, lying, and exploitation, as long as the larger goal is being met (Hinman, 1994, p. 139). The second assumption is that consumers operate on the basis of hedonistic egoism in that they try to maximize their pleasure in the short-term, rather than using rational egoism that considers long-term ends. In applying ethical egoism to business, Hinman explains, a business owner located in a neighbourhood where there are repeat patrons would tend to operate on

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long-term egoistic interests rather than a large business not reliant on repeat customers or with many locations. Corporate-based SR, it can be argued, issues from a different ethical base, that of utilitarianism. In this ethical view, consequences count. The morality of an action is judged solely by the consequences, favoring that which produces the greatest overall positive outcomes for the majority (Hinman, 1994). In this case, corporate-level social responsibility is important as it considers long-term social and environmental impacts, not necessarily considered previously. However, as the participants debated, is considering the consequences good enough for a strong practice of social responsibility? The participants in this study appeared to be operating largely from two other ethical premises – Kantian ethics and virtue ethics – which explain their suspicions of CSR and their moral commitments to community. As they expressed, what matters about the practice of SR is the motivation behind it. In particular, they repeatedly stated that they carry out SR because it is the right thing to do and they gave various examples where they would choose not to engage in a practice or sell a product if it contravened that sense of what was right. Kant calls this the ethics of duty, whereby the moral worth of an act depends upon the reason for doing it, outside of any self-serving motive. Kant does not consider feelings of compassion or care as motivators but rather the rational determination a person engages in to choose the morally superior action. Again, in the same way, [this] huge connectiveness . . . [for instance, decisions] have a way of moving out and affecting all of society ultimately . . . recognizing that you know it’s not just about you, it’s not just about . . . you making a living, it’s about how does this affects, you know, the community in which I live, the world in which I [live] (06-01, ll. 275-280).

Thus, these small business owners considered the impact of their actions as emanating from a relational worldview founded on both the ethics of duty and virtue ethics. Another element of Kantian ethics is respect, where people are never considered a means to an end but ends-in-themselves, but with inherent human dignity. This view was present throughout most of the participant discussions about stakeholders and their right to a differing opinion or their need for access to good information for their moral agency. Some participants went even further to stipulate that it was the character of the business owner that was being publicly reflected within their business practices. Thus, it was not only about motivation, but about the virtues of the owner-manager that is vital to SR. This is similar to Aristotle’s argument that ethics is not only about the principles but also about the persons, their desire to do the good, and their good judgment in carrying that out (Hinman, 1994). These owner-managers indicated that they wanted the stakeholders to judge their business not by an accountability report but by their level of reflectiveness about what is fair and responsible in all aspects of their business (11-01, ll. 1747, 1918-1929). In this way, their moral position is rooted in both rational decisions about what constitutes the good as well as emotional desire for a better world. As described earlier, these participants started from questions about what is good for individual happiness and fulfillment, but more importantly, what is good for life in a community. Thus, the current discourse about social responsibility reflects this interplay of different ethical systems that are simultaneously operative in contemporary society. The view of SR by these small business owners, the ambiguities they experience in their practice of SR, and their suspicions of CSR may be viewed as reflecting certain fragmented ethical perspectives operative in larger society. When examining some of the ambiguities and paradoxes that the participants revealed, we argue that despite their commitment to social responsibility and building community, these small business owners were reluctant to work cooperatively which undermines their maximum impact as change agents. They often spoke about social responsibility as an individual responsibility. While they pragmatically restricted their engagement in ideological debate or social activism to retain business credibility with a wide range of customers, they consistently declined opportunities for longer term relationships with each other that would multiple their impact. Nevertheless, they represented themselves as connected to a web of relations, particularly as innovators practicing unique value premises whose influence would

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ripple outward into society. This is becoming known to ethics theorists as holism, where one acts with awareness of multiple interdependent relations as in an ecosystem (Macrae, 2003). Thus, while they have an ethic founded on a relational worldview, their lack of engagement in the collective promotion of social responsibility limits their overall social change impact. They prefer to take the long-term view. As one participant explained, the process of creating sustainable communities and changing people’s attitudes around sustainability can take years, especially when others believe existing structures are too large and rigid to change. So what you do is you stand alone and you say, OK, I’ll do what I’m going to do, and then you start affecting the people around you and they buy in one at a time and in return influence one at a time; right, it complements (Ron, Restaurant Organic, 11-01, ll. 210-223).

In this moral vision, change does not occur through conflict or confrontation but through small individual actions that attract support and plant seeds of transformation. As one participant phrased it: It’s attraction not promotion . . . presenting opportunities . . . if you go around preaching to people, they’re not going to hear it . . . [it’s] leading by example (11-01, ll. 173, 242, 195-196, 181).

In their different ways, these business owners clearly expressed moral commitment to bring about a different reality. As they described, it was through the interchange with local customers or clients primarily that they enacted this commitment: From a customer . . . two kinds of examples, one kind of example, you go ‘‘oh, that’s a good idea’’ and we learn from it. And the other kind, you’re going, ‘‘Holy cow, what? We are trying our best here’’, that’s a kind of, sort of pie in the sky . . . [but] that keeps us on our toes in a different way (Calvin and Cathy, Earth’s Grocery Store and Cafe´, 06-01, ll. 958-961, 989-990). In the beginning I was not, I really didn’t feel it was our store, it feels [like] everyone, like a team store . . . (Roberta, Market Earth, 06-01, ll. 1014-1016).

Conclusion Small businesses practicing social responsibility walk a fine line as they balance the demands of sustaining their enterprise in highly competitive conditions while attempting to enact deeply felt value principles with consistency and integrity. These value principles are developed personally by the small business owner and are often closely linked to the core purpose of the business, even to the motives for business start-up. Their sense of a spectrum of moral positions in social responsibility appear linked to three main elements: 1. the motives for practicing SR; 2. the extent of integration of SR practice into core business operations; and 3. the relation of SR activity to profit. Ethical tensions arose for them personally within these three areas. Thus, while most viewed themselves as operating from a distinct and intentional moral position, most experienced conflicts in the everyday enactment of this position, due to operating within an environment of orthodox economic ethics and practices. This substantially impacted the shape of their commitment as social change agents and their engagement with like-minded peers. These small business owners perceived themselves as being on the cutting edge of SR practices, but distinct in their moral position and practice from other groups who declare allegiance to social responsibility, including business corporations, medium-sized business, NGOs, and governments. While these small businesses expressed an overriding commitment to using their business practice of social responsibility for the good of the local community and environment, and while their moral commitments revolved around a relational worldview as part of an ethics of holism, there were three areas of significant tension. First, they were ultimately cautious about coordinating their efforts with other like-minded organizations or networks. Whether this is largely due to issues of time famine, maintenance of a business niche, or an individualist ethos is not clear, but this limits their overall impact as social change agents. Second, while they talked in terms of interconnection and relationship, they preferred to restrict this to local face-to-face

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relations, primarily with customers. Although most articulated a vision for social change, they were pragmatic in remaining distant from ideological pronouncements and explicit activism. Most preferred to work by modeling their values, seeding ideas through education, and offering their space for public use rather than by overtly leading efforts for social or economic transformation. Third, most of the small business owners preferred autonomy rather than a cooperative business structure, as it gave them unrestricted freedom to implement social responsibility the way they desired, illustrating a paradoxical mix of ethical commitments and pragmatic action. One theme that cuts across the many different meanings, priorities in practice, and moral positions of social responsibility described by these small business owners, was a moral commitment to local community. This commitment was evident in both their descriptions of priorities (primarily social justice and environmental integrity), their statements of values and attendant practices, and their assessment of the spectrum of SR practices and their position within this spectrum. A fundamentally relational worldview was apparent in which these small business owners viewed their moral responsibility as influencing those immediately around them (particularly customers and local community members) in small ways, that could ripple into larger social and economic change over the long term.

References Canadian Business for Social Responsibility (2001), Government and Corporate Social Responsibility: An Overview of Selected Canadian, European and International Practices, Canadian Business for Social Responsibility, Vancouver, BC, available at www.cbsr.ca Coelho, P.R.P., McClure, J.E. and Spry, J.A. (2003), ‘‘The social responsibility of corporate management: a classical critique’’, Mid-American Journal of Business, Vol. 18, pp. 15-24. Conference Board of Canada (2004), The National Corporate Social Responsibility Report: Managing Risks, Leveraging Opportunities, Conference Board of Canada, Ottawa, available at: www. conferenceboard.ca/documents.asp?rnext ¼ 734 Crowther, D. and Rayman-Bacchus, L. (2004), Perspectives on Corporate Social Responsibility, Ashgate, Aldershot. Davidson, D.J. and Hatt, K.C. (2005), Consuming Sustainability: Critical Social Analyses of Ecological Change, Fernwood, Winnipeg. Dobbin, M. (1998), The Myth of the Good Corporate Citizen: Democracy Under the Rule of Big Business, Stoddart, Toronto. Fenwick, T. (2002a), ‘‘Transgressive desires: new enterprising selves in the new capitalism’’, Work, Employment and Society, Vol. 16 No. 4, pp. 703-24. Fenwick, T. (2002b), ‘‘Canadian women negotiating working knowledge in enterprise: interpretive and critical readings of a national study’’, Canadian Journal for the Study of Adult Education, Vol. 16 No. 2, pp. 1-29. Feldman, A. (1999), ‘‘The role of conversation in collaborative action research’’, Educational Action Research, Vol. 7 No. 1, pp. 125-44. Hemingway, C.A. and Maclagan, P.W. (2004), ‘‘Managers’ personal values as drivers of corporate social responsibility’’, Journal of Business Ethics, Vol. 50, pp. 33-44. Hinkley, R.C. (2002), ‘‘How corporate law inhibits social responsibility’’, Humanist, Vol. 62, pp. 26-8. Hinman, L. (1994), Ethics: A Pluralistic Approach to Moral Theory, Harcourt Brace College Publishers, Orlando, FL. Hopkins, M. (2003), The Planetary Bargain: Corporate Social Responsibility Matters, Earthscan, London/Sterling, VA. Husted, B.W. and de Jesus Salazar, J. (2006), ‘‘Taking Friedman seriously: maximizing profits and social performance’’, Journal of Management Studies, Vol. 43, pp. 75-91. Jenkins, H. (2006), ‘‘Small business champions for corporate social responsibility’’, Journal of Business Ethics, Vol. 67 No. 3, pp. 241-56.

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Joyner, B.E. and Payne, D. (2002), ‘‘Evolution and implementation: a study of values, business ethics and corporate social responsibility’’, Journal of Business Ethics, Vol. 41, pp. 297-311. Kember, D. (2000), Action Learning and Action Research, Kogan Page, London. Kemmis, S. and McTaggart, R. (2000), ‘‘Participatory action research’’, in Denzin, N.K. and Lincoln, Y.S. (Eds), Handbook of Qualitative Research, 2nd ed., Sage Publications, Thousand Oaks, CA, pp. 567-606. Lepoutre, J. and Heene, A. (2006), ‘‘Investigating the impact of firm size on small business social responsibility: a critical review’’, Journal of Business Ethics, Vol. 67 No. 3, pp. 257-73. L’Etang, J. (1995), ‘‘Ethical corporate social responsibility: a framework for managers’’, Journal of Business Ethics, Vol. 14, pp. 125-32. Lincoln, N.K. and Guba, E.G. (2000), ‘‘Paradigmatic controversies, contradictions and emerging confluences’’, in Denzin, N.K. and Lincoln, Y.S. (Eds), Handbook of Qualitative Research, 2nd ed., Sage Publications, Thousand Oaks, CA, pp. 163-88. McGill, I. and Beaty, L. (1995), Action Learning, Kogan Page, London. McWilliams, A., Siegel, D.S. and Wright, P.M. (2006), ‘‘Corporate social responsibility: strategic implications’’, Journal of Management Studies, Vol. 43 No. 1, pp. 1-18. Macrae, S. (2003), An Introduction to Ethics: Theories, Perspectives, and Issues, Pearson Education Canada, Toronto. Perrini, F., Russo, A. and Tencati, A. (2007), ‘‘CSR strategies of SMEs and large firms: evidence from Italy’’, Journal of Business Ethics, available at: www.springerlink.com/content/p2538114623003r2/ ?p ¼ 1f004d2f5f27429c9e88 Research Group 2 (2006), ‘‘Principles of social responsibility’’, unpublished pamphlet, University of Alberta, Edmonton. Revans, R.W. (1995), The ABC of Action Learning: A Review of 25 Years’ Experience, University of Salford, Salford. Seifert, B., Morris, S.A. and Bartkus, B.R. (2003), ‘‘Comparing big givers and small givers: financial correlates of corporate philanthropy’’, Journal of Business Ethics, Vol. 45 No. 3, pp. 195-211. Vitell, S.J., Dickerson, E.B. and Festervand, T.A. (2000), ‘‘Ethical problems, conflicts and beliefs of small business professionals’’, Journal of Business Ethics, Vol. 28 No. 1, pp. 15-24. Whitehouse, L. (2006), ‘‘Corporate social responsibility: views from the frontline’’, Journal of Business Ethics, Vol. 63, pp. 279-96.

Further reading Kell, G. (2003), ‘‘The global compact: origins, operations, progress, challenge’’, Journal of Corporate Citizenship, Vol. 11, pp. 35-49. King, R. (2002), Globalisation, Corporate Social Responsibility and Sustainable Development, Centre for Sustainable & Environmental Management, London.

About the authors Elizabeth A. Lange is Assistant Professor, Educational Policy Studies, at the University of Alberta, Canada. Her research focuses on transformative and restorative learning in adult education, sustainability education, and learning processes related to citizenship participation and social/environmental responsibility. Elizabeth A. Lange is the corresponding author and can be contacted at: [email protected] Tara F. Fenwick is Professor and Head of Educational Studies Department at the University of British Columbia in Vancouver, Canada. Her research focuses on learning processes and knowledge generation in work environments, with particular interest in knowledge workers, the effects of globalizing processes on work and learning, and knowledge of vulnerable workers.

To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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CSR, women and SMEs: the Croatian perspective Mirna Koricˇan and Ivija Jelavic´

Mirna Koricˇan is a Professor and Ivija Jelavic´ is an Assistant Professor, both at the Zagreb School of Economics and Management, Zagreb, Croatia.

Abstract Purpose – The purpose of this paper is to present the idea that CSR needs to be communicated from four different levels – government, community, company, and the individual. It also aims to stress that women managers in Croatia are still discriminated against and to show that managers in SMEs in Croatia need to become more aware of the importance of CSR. Design/methodology/approach – This paper is based on several different researches conducted on different populations – those of women managers and of SME managers. Findings – The findings of this paper show that, for the improvement of CSR awareness in general, the CSR idea needs to be communicated on four different levels simultaneously. Even though there are more women managers in higher positions in Croatia, they are still discriminated against. Managers of small and medium-sized enterprises are still not thinking enough about all stakeholders when making decisions. Practical implications – This paper shows that, in practice, government, community, companies and individuals should be consistent in communicating and working on the CSR idea for the general welfare and advancement of society. Originality/value – The main value of the paper is that it provides the newest results on CSR for companies in Croatia. This paper also gives a new perspective on the importance of simultaneous attempts to communicate the CSR idea for the advancement of society. Keywords Corporate social responsibility, Women, Small to medium-sized enterprises, Croatia Paper type Conceptual paper

1. Introduction Undoubtedly, companies today need to include corporate social responsibility in their strategy and way of doing business if they intend to achieve sustainable development. The question is whether the companies are succeeding in being ethical and moral on all levels of doing business. Government and the community can play a major role in this, and encourage more responsible and ethical behavior. Input about ethical behavior can come from the leading people within a company, but the sustainability of this ethical behavior will depend on those ‘‘little’’ people on all levels in the company. If the company culture is not supportive of ethical behavior, and if people within the company are able to get away with unethical behavior, those little people in all levels of the organization will not think about how ethical or unethical their behavior is. In this paper we will talk about communication levels of the CSR idea within and outside the company, and touch upon some problems in the communication and implementation levels in Croatia. We will also discuss women in management and the situation in small and medium-sized companies in Croatia.

2. Business strategy and CSR Strategy is defined differently; for example, Thompson et al. (2006) define strategy as consisting of ‘‘competitive moves and business approaches that managers are employing to

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DOI 10.1108/17471110810856839

grow the business, attract and please customers, compete successfully, conduct operations, and achieve the targeted levels of organizational performance’’. If we try to search for one key idea of business strategy, it is to out-compete rivals and gain as much profit as possible. In the past, companies were more focused on a specific strategy and maybe their rivals. After some time, managers’ focus shifted to their products and utilities. Besides good strategy, managers and owners became aware that quality of product was important. Because of this they realized the importance of the quality of their relationships with customers. The last decade of the last century favored intellectual capital as the most important resource of a company. Not long after, corporate social responsibility became a buzzword among managers, and companies started to think about their stakeholders and how to keep them satisfied. So, the theme of corporate social responsibility started as a topic in a debate about whether CSR activities should be regulated by law or should be above regulations and accompany the main goal of a company, which is making a profit (Musˇura, 2006). Later on it became obvious that some CSR principles should be mandatory, obligated by law, and that some should be initiated by companies. The main idea of CSR is for companies to be transparent – use of the internet helps companies to succeed in disseminating information about themselves. Jones et al. (2000) emphasize that CSR can be expressed as one dimension with three stages. When companies are behaving according to the law, they are in the stage of social obligation: behaving ethically a little more than prescribed by law means they are in the stage of social responsibility. If they incorporate ethical behavior into their strategy, they are in the stage of social responsiveness. Koricˇan (2006) states that the internet is enabling companies in two-way communication with their stakeholders. Stakeholders and investors have an ability to send information to companies via the internet. The internet can also be used as a communication channel towards employees. The model proposed by this author is shown in Figure 1. This communication with stakeholders is important for the company and provides feedback control on strategy and company’s position in the society. In the next paragraph, we will propose more communication levels for transferring information about CSR in both ways, i.e. from the company and towards the company.

Figure 1 Two-way process of communication: investor-company

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3. Communication levels of CSR idea If we look at CSR from outside the company, the idea of CSR can be communicated on four different levels, which are shown in Figure 2.

3.1. Government If government is not supporting or even obliging companies to behave responsibly and ethically, companies will not behave responsibly or ethically. Therefore, government initiatives are crucial to induce and provoke ethical behavior in companies. If in one country large and important companies are provoked, follower companies and small companies will follow. But we should not mistakenly think that this initiative should come from government. Strong and large companies can influence government and ask that standards for CSR be set on a national level. A similar thing is happening in Croatia. Managers of a few large companies, together with HRPSOR (the Croatian National Council for Sustainable Development) and HGK (the Croatian Chamber of Economy) started the initiative. The expert group consisted of experts and academicians with one goal – creating the Croatian National Index of Sustainable Development for companies. This initiative started in early 2007, and the plan is to give first rewards to those companies that are behaving socially responsibly towards their stakeholders in early 2008.

3.2. Community Since companies are working in the community, it is expected that they are giving part of their profits back to the community. In return, the community rewards companies with its trust and loyalty. The influence of the community can come from different civil organizations and NGOs. If we look at the situation in Croatia, there are several organizations that are working in this field. Besides the active NGOs and organizations of civil society, several consulting companies like Hauska and Partner or the consulting company Ognjenovic´ and Lovegrove, are organizing conferences on the subject of corporate governance and corporate social responsibility. All of this is improving the overall understanding that the ethical behavior of companies towards stakeholders is important.

Figure 2 Communication levels of CSR

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3.3 Company It is in the company’s best interest to inform the community and society about the work that the company is doing. Being transparent does pay off for companies. More and more companies are realizing this and trying to improve their level of transparency. The Zagreb School of Economics and Management conducted research on investor relations and corporate social responsibility in major Croatian companies for three years in a row (Matthews et al., 2007a). During the research, web sites of major companies were scanned and important information for investors and stakeholders was collected. The results show that the situation as regards transparency is improving, and companies are trying to have websites with lots of useful information (Figure 3). Other research, also conducted by the Zagreb School of Economics and Management, shows that results on corporate social responsibility are also improving compared to the results for previous years. Scanning of websites, annual reports, and other reports of major Croatian companies shows that companies are providing more information in three fields: 1. corporate governance; 2. environmental policy; and 3. social policy (Matthews et al., 2007b). Even though the results are improving, we would like to stress that there is still much room for improvement. The results for Croatian companies are similar to those that companies in countries in Central and Eastern Europe had three years ago. 3.4 Individual The last level on which the communication of the CSR idea is important is the level of the individual. The company may have a policy about CSR and behave socially responsible towards its surroundings, but it is also important for the company to behave responsibly towards its employees. Since new theories stress that nowadays the most important resource is people, companies are becoming aware of this fact. Because of this, an unwritten strategy of all good companies is to attract new, competent people and retain those employees that are performing well. But when we talk about CSR on the individual level, companies should also promote ethically good behavior among their employees. It is no use for a company to have, for example, a policy on donations and pension funds, and not to have, for example, an ethical code. A company can succeed in ethical behavior only if it is communicated on all levels – Figure 3 Average points for major Croatian companies (maximum 93)

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government, community, company, and individual. All employees should try to behave ethically on a daily basis and to model socially responsible behavior for all newcomers. A question that one may pose is how a company can monitor this and succeed in the idea that CSR is important on the individual level, for every employee. Besides putting together an ethical code and posting it visibly for everyone to see, managers should reward ethical behavior and punish unethical behavior. For every company, it is essential to develop a plan of monitoring and rewarding socially responsible behavior on the individual level. Only a few research studies can be found about this aspect of CSR, and in future companies could build case studies about implementing a plan of monitoring and setting standards to stress ethically good behavior.

4. Women in management According to the literature, women in management are the most powerful initiator of economic growth. Some even say that the twenty-first century is the century of the woman (Debeljak et al., 2007). Women are important, not just as workers, but also in the role of consumers, investors, and managers. The management style used by women is becoming an interesting topic and a very good guide to how to become a better and more successful manager. Despite their achievements and quality, women are still not promoted often enough and still struggle with many obstacles in their careers. The most common and the most frequent problem for women in management is the ‘‘glass ceiling’’. Diversity in earnings, responsibility, performance and valuation are reasons for a social phenomenon called the glass ceiling. In practice this problem is manifest in different chances for employment within the company, stereotypes, inefficient work hours, and a lower possibility for education. All of this prevents a woman from climbing in a company’s hierarchy. Even though most companies have polices to expand possibilities for the employment of women, the statistics show a huge a disproportion in the representation of women in higher positions than men. Although women in developed countries make up more than half of the work force, they accomplish better results in education than men – there are only 8 percent of women in leadership, and in politics even fewer. In Croatia, in the management of the largest 100 companies, only 6 percent are women (Moj Posao, 2006). In the USA 46.5 percent of the work force are women, but in high management positions only 8 percent are women (Moj Posao, 2006). The situation is similar in Europe: there are no women among the 25 most highly paid executive directors listed by Fortune magazine. Recent research on the Croatian women managers listed as most being influential in Croatia showed some problems in their careers. Women managers claim that in their career they had to make more input and effort than their male colleagues, and more than 60 percent of ´ ibaric´, 2007). woman mentioned that they had lower salaries than their male colleagues (C The position of women in management depends on organizational culture, networking, mentoring, family, payment, manners, etc. It has been proved that women have preferable characteristics for business nowadays. Some of these characteristics are competence, loyalty, responsibility and speed in decision-making, tendency for teamwork, and successful communication and organizational skills. It is true that women need to work harder to achieve goals, but with time men and women will be equal in their positions in management.

5. Decision making in small and medium-sized enterprises Awareness of the importance of CSR for the company is even weaker in small and medium-sized enterprises. Through the Croatian National Index of Sustainable Development mentioned above, small and medium-sized enterprises will also be incorporated and rewarded if they behave socially responsibly according to the standards. The community increasingly expects these companies to behave according to the CSR standards.

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Research conducted on the SME sector shows that when making decisions, managers could think more about some of the stakeholders (Koricˇan and Jelavic´, 2008). In making decisions, managers of small and medium-sized enterprises think mostly about their clients, which is as expected. Employees, suppliers, and competitors are the next important groups of stakeholders that managers think about. Least important are the local community and the media (Figure 4). It is expected that the importance of other stakeholders in decision making for SMEs will increase. Since the SME sector is becoming more important, and the number of small and medium-sized enterprises comprises 94 percent of all companies, it is crucial to build awareness about CSR in that sector.

6. Conclusion In conclusion, we can add that the results of research show that CSR in Croatia is improving. Companies are realizing the importance of CSR and that CSR brings quality to the business strategy, and has a positive impact on business. Communication of the CSR idea depends on the business strategy and communication levels (government, community, company, individuals), but it mostly depends on the managers and employees in the company. To implement the CSR idea within the country, the idea needs to be present on four levels: 1. government; 2. community; 3. company; and 4. individual. Government should oblige and support companies to behave socially responsibly, and companies should also communicate the importance of CSR to government. The community can be active in implementing the CSR idea through NGO organizations and other civil organizations and have an impact on companies. Companies need to be transparent and to take care of all the important stakeholders in their environment. Individuals or employees have to incorporate ethical issues and the ethical code, if it exists in the company, and model ethical behavior to newcomers.

Figure 4 Stakeholders which managers of SME think about when making decisions (maximum 5 points)

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As in most countries, women managers in Croatia are fighting against a glass ceiling. The results of research show that during their working lives, women managers faced some discrimination, and at some point in their career had lower salaries than their male colleagues. The situation for small and medium-sized enterprises shows their reasonably high awareness of some stakeholders like clients, employees, competitors and suppliers. But this awareness is not so high towards the local community and the media. Since SMEs comprise 94 percent of all companies, it is strategically important for government and the community to impact on these companies. It will take a couple more years for these small and medium-sized companies to become more aware and to start implementing more actions in the field of corporate social behavior.

References ´ ibaric´, P. (2007), Women in Management, ZSEM, Zagreb. C Debeljak, J., Koricˇan, M., Krkacˇ, K. and Musˇura, A. (2007), ‘‘Caring principle and practices in corporate social responsibility’’, in Davila Gomez, A.M. and Crowther, D. (Eds), Ethics, Psyche and Social Responsibility, Ashgate Publishing Company, Aldershot. Jones, R.G., George, J.M. and Hill, C.W.L. (2000), Contemporary Management, McGraw-Hill, New York, NY. Koricˇan, M. (2006), ‘‘Investor relations’’, Business Ethics and Corporate Social Responsibility, MATE, Zagreb. Koricˇan, M. and Jelavic´, I. (2008), ‘‘Decision making in small and medium enterprises’’, forthcoming. Musˇura, A. (2006), ‘‘Corporate social responsibility’’, Business Ethics and Corporate Social Responsibility, MATE, Zagreb. Matthews, Sˇ.L., Koricˇan, M. and Musˇura, A. (2007a), Investor Relations Online – Survey of Website Disclosures of Leading Croatian Firms, MATE, Zagreb. Matthews, Sˇ.L., Koricˇan, M. and Musˇura, A. (2007b), Reporting on Corporate Social Responsibility by Leading Croatian Firms, MATE, Zagreb. Moj Posao (2006), available at: www.moj-posao.net/jseeker_wiki.php?sessionId ¼ 5421c5b3f61e763af 844d179b549f8fc&wikiName ¼ ZeneTopMenadzment (accessed 20 September 2007). Thompson, A.A., Strickland, A.J. and Gamble, J.E. (2006), Crafting and Executing Strategy: The Quest for Competitive Advantage, McGraw-Hill, New York, NY.

Corresponding author Mirna Koricˇan can be contacted at: [email protected]

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CSR and corruption Corporate ethics: an end to the rhetorical interpretations of an endemic corruption Ben Tran

Ben Tran is a Doctoral Candidate at the Marshall Goldsmith School of Management, Alliant International University, San Francisco, California, USA.

Abstract Purpose – Crime, fraud, and corruption, are all nouns that pertain to the act of deception that depicts an intention to increase an opportunity in one’s favor in an unlawful manner that pertains to an organization’s interest and goals. Such offenses are numerous and quite costly and are now a commonplace criminal behavior within corporations. Motivations and purposes for corruption may be subjective but the legality of corruption is not. Thus, the rhetorical interpretations of corruption may be analyzed through two distinctive paradigms, the social behavioral science paradigm and the legality paradigm. This paper seeks to address this issue. Design/methodology/approach – Court cases were analyzed, 70 major American corporations, in addition to a study of the largest industrial firms focused upon a two-year period. Findings – Based on the above samples, it was found that corporate corruptions are extremely common, but taboo to admit. The limitations to this study are accessibility, participants, and whistle-blowers. Originality/value – Implementing organizational guidelines (OG) is one appropriate and objective method in addressing corporate corruption and to confirm corporate compliance. While implementing the OG is objective, the process of implementing the OG is subjective. Subjectivity derives from opportunistic interpretations of the imperfect OG. Objective interpretation and objective implementation of the OG will confirm corporate compliance, and it is the CEO’s responsibility to oversee this process. Keywords Ethics, Value analysis, Corporate image, Corporate strategy, Fraud, Corruption Paper type Viewpoint

Introduction Crime, fraud, and corruption, are all nouns that pertain to the act of deception that depicts an intention to increase an opportunity in one’s favor in an unlawful manner that pertains to an organization’s interest and goals. These actions (offenses or corruptions to be exact) are nothing new to the corporation. Such offenses are numerous and quite costly, and are now commonplace in the criminological makeup of the corporation (e.g. Adler and Lord, 1991; Baker and Faulkner, 1993; Bacus and Near, 1991; Calavita and Pontell, 1991, 1994; Clinard and Yeager, 1980; Clinard et al., 1979; Jamieson, 1994; Mokhiber, 1988; Perez, 1978; Pontell and Calavita, 1993; Reichman, 1993; Ross, 1992; Simpson, 1986, 1987; Staw and Szwajkowski, 1975; Yeager, 1987, 1993). Gottfredson and Hirschi’s (1990) definition of crime, according to Reed and Yeager (1996), is the use of force or fraud in the perpetrator’s self-interest. This paper was presented at the 22nd Society for Advancement of Management (SAM) 2006 International Business Conference: Sustaining a Competitive Edge, held in Orlando, Florida, April 6-9, 2006.

DOI 10.1108/17471110810856848

According to Shover and Hochstetler (2002), on the other hand, crime is behavior that violates criminal statutes, regardless of whether or not it becomes known or responded to by criminal, civil, or administrative state agencies. Crime is behavior that is potentially sanctionable by agencies of criminal justice. Historically, investigations of crime focused predominantly on individuals and their misdeeds, and investigators by contrast were slow to recognize and to take seriously the fact that a great deal of crime is organizational in nature.

VOL. 4 NO. 1/2 2008, pp. 63-81, Q Emerald Group Publishing Limited, ISSN 1747-1117

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Organizational crime is crime committed by officers, managers or employees of legitimate formal organizations in furtherance of their conception, however far-fetched or erroneous, of organizational interest and goals (Shover and Hochstetler, 2002). Sutherland (1945, p. 9) defined (corporate) crime as ‘‘. . . committed by a person of responsibility and high social status in the course of his occupation’’, and reported that his sample of 70 major American corporations had an average of 14 legal decisions against them for illegal acts, roughly one for every three years of their average corporate lifetime. The offenses ranged from restraint of trade and false advertising to patent and trademark infringement and unfair labor practices. He also found significant levels of recidivism. The 41 companies that had been criminally convicted of offenses averaged four convictions each. Sutherland’s definition of corporate crime prompted a debate and an investigation on the meaning of (white-collar) crime (Wozniak, 2001). Following Sutherland’s (1945) study, according to Reed and Yeager (1996), more recently, Clinard and Yeager (1980) also found a high rate of lawbreaking by large US corporations. Their study of the largest industrial firms focused upon only a two-year period (1975-1976), but they found that 46 percent (222 companies) of the sample had been charged with non-minor violations of federal laws. While arguably not all of such cases involved force or fraud, the study found numerous offenses that did, such as antitrust conspiracies, unsafe workplaces, unfair labor practices, and commercial bribery. Similarly, in his case of more than 1,000 of the nation’s largest firms during the period 1970-1980, Ross (1992, pp. 9-10) found that 11 percent (117 firms) had either been criminally convicted or signed consent decrees involving five types of offenses: 1. criminal antitrust violations; 2. bribery; 3. illegal political contributions; 4. fraud; and/or 5. tax evasion. Ross also described the numerous cases of procurement fraud, many committed by the nation’s largest defense contractors in the 1980s, as constituting ‘‘a corporate way of life’’ in the defense industry (Ross, 1992).

Corporate ethics: an end to the rhetorical interpretations of an endemic corruption Views from and of the inside of corporations consistently suggest that the routine nature of such offenses in organizations is not new. Indeed, surveys of corporate officials indicate that unethical and illegal practices are common. For example, studies find that substantial majorities of executives agree that criminal antitrust violations and other unethical acts are rather common in business (Baumhart, 1961; Nader and Green, 1972; Silk and Vogel, 1976). This body of research also finds that managers see superiors as pressuring them toward unethical and illegal behavior. For example, in a Harvard Business Review survey on corporate ethics, half of the sampled managers thought that their superiors frequently did not wish to know how results were obtained so long as the desired outcomes were achieved. Moreover, ‘‘respondents frequently complained of superiors’ pressure to support incorrect viewpoints, sign false documents, overlook superiors’ wrongdoing, and do business with superiors’ friends’’ (Brenner and Molander, 1977, p. 60). Relatedly, Clinard’s (1983) interviewees, retired middle managers, reported that unethical and illegal acts were connected to the culture established by top management. Intriguingly, these managers further suggested that the nature of the ethical climate depended in part on the professional backgrounds of corporate leaders and their mode of recruitment. Respondents saw leaders with engineering backgrounds, and those recruited from among long-standing employees, as being more likely to establish positive ethical climates than financial specialists and recruits from outside the firm, who focused more on bottom-line results (Clinard, 1983, pp. 136-137).

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Endemic corruption and rhetorical interpretations of endemic corruptions are not new, yet why is it so difficult to uproot endemic corruption? The answer to this question requires a deeper understanding of the corruption phenomenon. Corruption is an extremely complex social behavior. There have been many notable scholarly studies on the causes of corruption (e.g. Huntington, 1968; Klitgaard, 1988; Merton, 1968; Rose-Ackerman, 1978; Scott, 1972; Theobald, 1990). However, a true interdisciplinary theory of the causes of corruption has never emerged from the extensive scholarly efforts. A theory that synthesizes the many political, economic, and cultural causes of corruption is still needed (Collier, 2002). Thus, the purpose of this paper is to analyze the endemic corruption (in the corporation) and to put an end to its various rhetorical interpretations through two paradigms: 1. social behavioral science; and 2. legality. The social behavioral science paradigm will be analyzed through the institutional choice analytic frame and the constructivist approach, and the legality paradigm will be analyzed through laws and codes of ethics. This paper will conclude by making a case for the creation of a new corporate officer, the Chief Ethics Officer.

The social behavioral science paradigm Institutional choice signifies the analysis of social behavior that is ‘‘bounded’’ by social institutions. The Institutional Analysis and Development (IAD) framework pioneered by Elinor Ostrom, Roy Gardner, and James Walker combines the use of rational choice theory and game theory explanations for social behavior with the ideas that agent choice is bounded by both the decision-making capacities of individual agents and by a surrounding structure of political, economic, and cultural rules (institutions) (Collier, 2002). The IAD framework not only demonstrates how varied institutional structures affect agent decision-making, but also how agent decisions affect (change) the institutional structures themselves. When the IAD framework is combined with Nicholas Onuf’s constructivist approach, it highlights the mechanisms that link institutional structures to agent decision-making processes. Onuf’s constructivist approach offers its own ontology for social analysis that sees the social world as constructed by social rules[1]. Consistent with the IAD framework, constructivists believe that reality is affected by both social and material factors and that the properties of agents and structures are both relevant to explanations of social behavior. Constructivists privilege neither agents nor structure in their analysis, but consider both equally in the development of theoretical explanations. The constructivist analytic frame allows the linkage of theories from a variety of academic disciplines – theories that may otherwise seem unrelated. The constructivist analytic framework also allows the development of theoretical explanations across multiple levels of analysis. Methodologically, Onuf’s version of constructivism believes in the application of natural science methods of social science analysis and in the importance of validating empirically its theoretical explanations. In consonance with IAD tenets, a principal constructivist tenet is that people (agents) and society (structure) co-constitute (construct) each other in a continuous process. Onuf explains this best (Collier, 2002, p. 3): General prescriptive statements, hereafter called rules, are always implicated in this process [the co-constitution of agents and structure]. Rules make people active participants, or agents, in society, and they form agents’ relations into stable arrangements, or structure. Any change in society’s rules redefines agents, institutions, and their relation to each other; any such change also changes the rules, including those rules agents use to effectuate or inhibit changes in societies.

Figure 1 represents the institutional choice analytic frame consisting of both internal (agency) and external (structural) worlds. The internal world constitutes the agent’s decision-making process. The external world constitutes the institutional (rule) structure that influences the internal world of agent decision making. Included in the external world are material resource factors that affect agent information about expected benefits and costs

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Figure 1 The corruption institutional choice analytic frame

leading to corrupt behavior. Another way to look at Figure 1 is as a complex me´lange of factors that define the agent’s willingness (internal world) and opportunities (external world) that can lead the ruling elite to engage in corrupt behavior or to avoid it. Figure 1 also displays a feedback loop that symbolizes how agent corrupt behavior (decision-making) affects both the institutional structure and internalized rules of individual agents (the constructivist process of co-constitution). Social rules provide the mechanisms that allow the linkage of the Figure 1 external and internal worlds. To constructivists, social institutions are individual rules, or sets of rules, established in consonance with material realities. Theoretical explanations emerge from the analysis of the interaction of rules, agents, and material conditions. Constructivists analyze how these interactions constitute or cause individual behavior by providing agents with direction and incentives for action, and how these interactions influence changes to institutions (rules) (Adler, 1997). Onuf’s theory of rules is the foundation of the constructivist analytic frame. Rules tell people what they should do, what they must do, and what they have a right to do. When agents fail to follow rules, other, supporting rules bring consequences. Considering their material circumstances, agents follow or disregard rules to achieve their goals. Institutions or regimes are simply patterns of stable rules, while structure is a stable pattern of rules, institutions, and their unintended consequences. Complex institutions, like corruption, consist of a constantly changing mix of three different types of social rules that perform distinct functions[2]. First, instruction rules delineate the principles, beliefs, or norms that inform agents of the institution’s purposes. Instruction rules tell agents what they should do. Second, directive rules provide specificity to the instruction-ruled principles, beliefs and norms. Directive rules support instruction rules by telling agents what they must do. In order for directive rules to be effective, they must be supported by other rules (sanctions) that stipulate the consequences if an agent does not follow a particular directive rule. Third, commitment rules create roles for agents. Commitment rules tell agents what they have a right or duty to do. Commitment rules give some agents well-defined powers, while assuring other agents that those powers will not be abused. How well the three types of rules perform their assigned function depends upon

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their formality and strength. A rule’s formality concerns how well the rule is supported by other rules. A rule’s strength is determined by how frequently agents follow the rule. The mix of the three different types of rules results in three distinct forms, or methods that govern society. While all three types of rules exist in every society, those societies with a higher proportion of instruction rules are ruled by hegemony. The concept of hegemony used here closely follows the analysis of Gramsci, who argues that a ruling class must persuade other classes in society to accept its moral, political, and cultural values, thus making the phenomena of culture and ideology central to the ruling system (Gramsci, 1971). Onuf offers: Hegemony refers to the promulgation and manipulation of principles and instructions by which super ordinate powers monopolize meaning, which is then passively absorbed by the subordinate actors. These activities constitute a stable arrangement of rules because the ruled are rendered incapable of comprehending their subordinate role. They cannot formulate alternative programs of action because they are inculcated with the self-serving ideology of the rulers who monopolize the production and dissemination of statement through which meaning is constituted (Collier, 2002, p. 5).

Societies with a higher proportion of directive rules are ruled by hierarchy. Onuf submits: Hierarchy is the paradigm of rule most closely associated with Weber because, as an arrangement of directive rules, it is instantly recognizable as bureaucracy. The relations of bureaux, or offices, form the typical pattern of super- and subordination, but always in ranks, such that each office is both subordinate to the one(s) above it and super ordinate to the ones below [. . .] The visualization of this arrangement of ranks linked by directives is the familiar pyramid of organization charts (Collier, 2002, p. 6).

Finally, societies with a higher proportion of commitment rules are ruled by heteronomy. This term is traced to Kant, who referred to heteronomy as a condition of not having autonomy (Collier, 2002). Heteronomy defines a condition where rational decision makers are never fully autonomous, and whose directions toward particular ends are bounded both by societal rules and their material means. Formal commitment rules stipulate promises by some agents, promises that become the rights of other agents. Ruling elite in societies with strong commitment rules find their autonomy severely restricted. The emergence of commitment rules is often unintended consequences of the strengthening of instruction and directive rules. A theory of the causes of corruption Michael Johnson offers that cases of corruption can be explained by not only analyzing the state’s boundaries between public office and private interests, but also through investigation of four social (directive) rule-sets surrounding a state’s: 1. elite competition; 2. elite accountability; 3. mass citizen participation; and 4. methods of managing material resources (Collier, 2002). Of the four, accountability is the most detrimental. A lack of accountability provides increasing opportunities for the elite to act in corrupt ways. Analyzing and evaluating accountability for the elite is a new topic in political research. Adapting the work of Guillermo O’Donnell (1999), Collier claimed that there are three distinct types of accountability: 1. circular; 2. vertical; and 3. horizontal. Circular accountability is characteristic of collective political cultures and symbolizes informal answerability and enforcement of societal rules within the individual’s respective group. Vertical accountability is characteristic of individualistic cultures and signifies that

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answerability and enforcement measures originate in and travel through the state’s vertical bureaucracy. Horizontal accountability is characteristic of egalitarian cultures and indicates that answerability and enforcement originate not only within the state bureaucracy, but also from groups outside government, checks and balances, and loyal opposition structures.

The legality paradigm Tania Brief and Terrell McSweeny (Brief and McSweeny, 2003) addressed the issue of corporate criminal liability with a detailed coverage of the law. Brief and McSweeny discussed the broad based principles guiding the law of corporate criminal liability. According to Brief and McSweeny’s interpretation of the law of corporate criminal liability, the Organizational Guidelines define an ‘‘organization’’ as ‘‘a person other than an individual’’[3]. Thus, the Organizational Guidelines are applicable to corporations, partnerships, associations, joint-stock companies, unions, trusts, pension funds, governments and their political subdivisions, as well as unincorporated and nonprofit organizations[3]. As such, an organization, under the Organizational Guidelines, can be held criminally liable for the acts, omissions, or failures of an agent acting within the scope of his employment[4]. Because corporations are incorporeal legal entities, courts look to employees of the corporation as a means of imputing intent, or mens rea[5], as well as the guilty act, or actus reus[6]of the corporation. Courts use a three-pronged inquiry to determine whether a corporation will be held vicariously liable for the acts of its employees: 1. the individual must be acting within the scope and nature of his employment; 2. the individual must be acting, at least in part, to benefit the corporation; and 3. the employee’s act and intent must be imputed to the corporation[7]. Corporations are only liable for the acts of employees if the employees are acting within the scope and nature of their employment For a corporation to be liable for the illicit behavior of an employee, the employee must be acting within the scope of his employment[8]. This requirement is met if the employee has actual or apparent authority to engage in the act in question[9]. Actual authority attaches when a corporation knowingly and intentionally authorizes an employee to act on its behalf[10]. An employee is acting with apparent authority if a third party reasonably believes that the agent has the authority to perform the act in question[11]. The government bears the burden of demonstrating the existence of an agency relationship[12]. Beyond this general framework, the question of whether an employee acted in the scope of his or her authority depends on the jurisdiction. In federal courts, a corporation may be reliable for the actions of its agents regardless of the agent’s position within the corporation[13]. The decision to impute liability is based on a fact-specific inquiry[14]. Federal courts have found that an employee’s act can bind the corporation even where the corporation has implemented policies explicitly prohibiting the behavior[15]. Corporations that prove they established corporate policies in an effort to reduce crime may qualify for a reduced penalty[16]. Such policies are usually part of a larger compliance program designed to insulate the company from liability, but they do not prevent a court from finding criminal liability[17]. Many states have adopted specific statutory language limiting liability to criminal acts comitted by ‘‘high managerial agents’’[18]. A few states developed similar requirements through the common law doctrine rather than through statutory enactments[19]. In some states, the corporation may be liable for employee actions even if the corporation’s directors, officers, or other high managerial agents did not specifically approve of the employee’s behavior[20]. The Model Panel Code (‘‘Code’’) provides two standards for imputing corporate liability for employee behavior, depending on the source of liability. First, the actions of any agent of the corporation may be imputed to the corporation if liability is imposed by statute and if ‘‘a

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legislative purpose to impose liability on corporations plainly appears’’ in the statute[21]. Second, in the absence of such a statutory provision, liability is imposed only if ‘‘the commission of the offense was authorized, requested, commanded, performed or recklessly tolerated by the board of directors or by a high managerial agent acting on behalf of the corporation within the scope of his office or employment’’[22]. The Code thus differentiates between assigning liability based on the actions of agents[23] versus high managerial agents[24]. Barring any statutory modification, the Code allows a corporation to evade liability only if it can demonstrate that supervisory agents with power over the area in which the offense took place acted with due diligence to prevent the commission of a crime[25]. A corporation will not be liable for the acts of its employees unless those actions are designed to benefit the corporation The second element of corporate criminal liability requires that the employee act to benefit the company[26]. To fulfill this requirement the corporation need not actually receive a benefit; the employee’s mere intention to bestow a benefit suffices[27]. Courts may find this intent manifested whenever the employee’s actions are not inimical to the interests of the corporation[28]. In addition, it is not necessary that the employee be primarily concerned with benefiting the corporation, because courts recognize that many employees act primarily for their own personal gain[29]. Liability may be imputed to a corporation even when the corporation derived no actual benefit from the action[30] or when the agent violated a company policy[31]. However, a corporation may avoid liability when an employee’s actions constitute a breach of fiduciary duty to the corporation[32]. Furthermore, acts committed by an employee that are expressly contrary to the interests of the corporation cannot subject the corporation to criminal liability[33]. To hold a corporation liable for the acts of its employees, a court must impute the intent of the individuals to the corporation The third and final element necessary to hold a corporation liable is that the act and intent of the agent must be imputed to the corporation. There are a number of ways in which courts have traditionally imputed intent, in particular: B

imputing liability in conspiracy cases;

B

imputing liability to corporations after merger or dissolutions;

B

the misprision of felony doctrine;

B

the willful blindness doctrine; and

B

the collective knowledge doctrine.

Conspiracies. A corporation may be liable for a conspiracy to commit a criminal act by its employees, or for conspiracies involving one employee and others not employed by the corporation[34]. Conspiracies have traditionally been defined as conduct by two or more people who agree to commit an offense, with one or more of those persons taking affirmative action to further the goals of the conspiracy[35]. There is some disagreement among Circuits regarding whether a corporation may conspire with its own employees). The ‘‘intracorporate conspiracy doctrine’’ declares that because a conspiracy requires an agreement between two or more distinct persons, and because a company is a single entity made up of its employees, it may not be convicted of conspiracy with its own employees. Otherwise, the corporation would be guilty of conspiring with itself[36]. Most courts have declined to extend the ‘‘intracorporate conspiracy doctrine’’ to criminal cases, stating that to do so would shield corporations from the liability[37]. However, the rule is not universal, and there is no definitive Supreme Court ruling on the matter[38]. Mergers, dissolutions, and liability. Corporations can be criminally liable for the previous wrongdoing of a corporation after a merger or consolidation[39]. When determining whether

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or not a corporation can be liable for the acts of its predecessor, federal courts apply state corporation law governing successor liability[40]. Although corporations have avoided liability through dissolution at common law[41], recent cases have imputed liability, even if the dissolution occurs before the indictment[42]. In addition, many states provide statutorily imposed periods of time after dissolution during which the dissolved corporation can be held liable[43]. Misprision of felony. A corporation may be held liable for misprision of felony, which is the offense of concealing and failing to report a felony[44]. Misprision of felony requires proof of four elements: 1. that a principal committed a felony; 2. that the defendant knew of the felony; 3. that the defendant failed to notify authorities as soon as possible; and 4. that the defendant took affirmative steps to conceal the crime[45]. Merely failing to notify authorities is insufficient to sustain a charge of misprision; an active part in concealing the crime is required[46]. Similarly, mere intent to conceal is inadequate if the intended act is not completed[47]. The legal prohibition against misprision of felony does not dissipate if the government already has knowledge of the crime[48]. Although the doctrine of misprision of felony is firmly rooted for individual defendants, the use of the doctrine against corporation is a fairly recent development[49]. Accordingly, the contours of misprisions of felony as applied to corporations have yet to be judicially resolved[50]. The willful blindness doctrine. Corporations can be criminally liable for deliberately disregarding criminal activity[51]. The ‘‘willful blindness’’ doctrine is usually applied to situations where a corporate agent became suspicious of a criminal violation, but deliberately took no action to mitigate or investigate potential criminal activity[52]. The collective knowledge doctrine. The ‘‘collective knowledge’’ doctrine imputes to a corporation the sum knowledge of all or some of its employees – aggregating individual employee’s knowledge for the purpose of creating the necessary guilty intent for the corporation[53]. Thus, a corporation may be liable even if there is no single employee at fault. In this way, the collective knowledge doctrine prevents corporations from evading if there is no single liability by compartmentalizing and dividing employee duties[54]. Although many commentators recognized the collective knowledge doctrine as a stand-alone doctrine after the First Circuit’s decision in United States v. Bank of New England, others argue that aggregation of ‘‘innocent’’ knowledge is not persuasive unless the corporation is also turning a blind eye to legal requirements, or otherwise acting in a culpable manner[55]. Indeed, some courts and commentators have described the entire doctrine as a ‘‘myth’’[56].

Effective corporate compliance programs An organization may reduce its culpability score by up to three points by having an effective program to prevent and detect violations of law in place at the time of the offense[57]. A compliance program can be a mitigating factor despite its failure to prevent a criminal offense from occurring because of the recognition under the Organizational Guidelines that even the most diligent corporate monitor may fail to prevent every violation[58]. However, an effective compliance program must, at a minimum, ensure that the organization exercises ‘‘due diligence in seeking to prevent and detect criminal conduct’’[59]. In so doing, the organization must assign high-level personnel to oversee the compliance effort[60]. Courts cannot reduce an organization’s culpability score if a high-level manager of the organization or a person responsible for the administration or enforcement of the program ‘‘participated in, condoned, or was willfully ignorant of the offense’’[61]. If high-level personnel are involved in the misconduct, there is ‘‘a rebuttable presumption that the organization did not have an effective [compliance] program’’[62]. Furthermore, corporate directors who knowingly institute ineffective compliance programs can be held personally liable for corporate misconduct[62].

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Another way an organization can demonstrate an effective compliance program is to use ‘‘due care not to delegate substantial discretionary authority to individuals whom the organization kn[ows], or should [. . .] know [. . .] ha[ve] a propensity to engage in illegal activities[63]. However, corporations must be careful to ensure that criminal background inquiries do not violate Equal Employment Opportunity Commission regulations[64]. Another possibility includes establishing an effective program to enforcing compliance[65]. Compliance can be achieved through effective ‘‘monitoring and auditing systems’’[66]. The program must be tailored to the corporation’s business activities and comply with applicable industry practice or government regulation[67]. Other reasonable steps to achieve compliance may include the establishment of a ‘‘reporting system’’ through which employees and agents can ‘‘report criminal conduct by others within the organization without fear of retribution’’[68]. Accordingly, managers should encourage and protect ‘‘whistleblowers’’[69]. Moreover, an organization should consistently enforce the program through ‘‘appropriate disciplinary mechanisms’’[70]. Once an offense is detected, the organization must take ‘‘all reasonable steps to respond appropriately to the offense and to prevent further similar offenses – including any necessary modifications to its [compliance] program’’[71]. If a criminal offense is found, the company must notify the appropriate law enforcement agency[72]. Furthermore, when an offense occurs, an organization should review the existing compliance program and consider whether it adequately prevents illegal behavior[73]. The Organizational Guidelines provide strong incentives for organizations to establish compliance programs. Although effective programs do not guarantee immunity from prosecution, the existence of a qualifying compliance program may influence a prosecutor’s decision to prosecute[74]. However, few organizations receive full credit for compliance programs. For example, in 1997, one organization was sentenced for criminal conduct despite having an ‘‘effective program to prevent and detect violations of law’’[75]. In 2001, no organization received a reduction in its culpability score for having an effective compliance program[76].

Chief Ethics Officer Corporations in the past were gullible and naı¨ve; corporations in the present are naı¨ve and skeptical; corporations currently and in the near future, however, do not have the luxury of being gullible, naı¨ve, and/or skeptical. Corporations with longevity and reputability in their strategic plan cannot afford to gamble or flirt with nouns such as, but not limited to, deception, fraud, crime, and corruption. Instead, corporations need to be creative, innovative, and cutting-edge by embodying a noun such as (corporate/ethical) compliance in their strategic plan. Along with Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Operation Officer (COO), Chief Information Officer (CIO), Chief Technical Officer (CTO), and Chief Marketing Officer (CMO), corporations need their next generation of CEO – Chief Ethics Officer. A Chief Ethics Officer (CEO), according to Alan Yuspeh (1999), is a person who typically oversees all aspects of ethics and compliance programs. This includes but is not limited to standards setting, communication of standards, dealing with exceptions or problems, oversight, monitoring, and ensuring the proper operational supports. He or she also advises senior management as to the ethical or compliance aspects of executive decisions[77]. The duty of the CEO, as implied (organizations must assign high-level manager personnel to oversee the compliance effort) in accordance with the Organizational Guidelines, is to, but not limited to: B

due diligence in seeking to prevent and detect criminal conduct;

B

monitoring and auditing systems;

B

reporting systems; and

B

whistleblowers.

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The CEO acts consistently to enforce the program through appropriate disciplinary mechanisms. Choice of appropriate disciplinary mechanisms is subjective and based on the discretion of individual corporations and their CEOs. Verizon Communication and MCI (Nancy Higgins) are examples of corporations who have created CEO positions.

Conclusion Crime, fraud, and corruption, are all nouns that pertain to the act of deception that depicts an intention to increase an opportunity in one’s favor in an unlawful manner that pertains to an organizational interest and goals. These actions (offenses and corruptions) are nothing new to corporations. Such offenses are numerous and quite costly, and are now a commonplace in criminal actions of corporations (e.g. Adler and Lord, 1991; Baker and Faulkner, 1993; Bacus and Near, 1991; Calavita and Pontell, 1991, 1994; Clinard and Yeager, 1980; Clinard et al., 1979; Jamieson, 1994; Mokhiber, 1988; Perez, 1978; Pontell and Calavita, 1993; Reichman, 1993; Ross, 1992; Simpson, 1986, 1987; Staw and Szwajkowski, 1975; Yeager, 1987, 1993). Core cases of corruption involve four key components: 1. an official (A), who, acting for personal gain; 2. violates the norms of public office; and 3. harms the interests of the public (B); 4. to benefit a third party (C) who rewards A for access to goods or services which C would not otherwise obtain (Philp, 2001). Reasons and purposes for corruption may be subjective, but the legality of corruption is not. Thus, the rhetorical interpretations of corruption may be analyzed through two distinctive paradigms 1. the social behavioral science paradigm; and 2. the legality paradigm. Understanding corporate corruption, however, is only half of the battle, and addressing corporate corruption is the other. There is no one right way to address corruption, but there are appropriate ways to tackle the concern. Implementing the Organizational Guidelines (OG) is one appropriate and objective method in addressing corporate corruption and to confirm corporate compliance. While implementing the OG is objective, the process of implementing the OG is subjective. Subjectivity derives from opportunistic interpretations of the imperfect OG. Objective interpretation and objective implementation of the OG will confirm corporate compliance and it is the Chief Ethics Officer’s responsibility to oversee this process.

Notes 1. There are several competing social science version of constructivism. Each version believes that the world is socially constructed. Beyond this one commonality, the different versions of constructivism have a variety of ontological, epistemological and methodological views. In the remainder of this article, ‘‘constructivist’’ refers to the use of the analytic frame developed by Onuf. 2. Much of the growing constructivist literature refers only to two types of rules – regulative and constitutive rules. In Onuf’s constructivism, all rules are deemed to have both regulative and constitutive properties. To Onuf there are only tree types of rules – instruction, directive, and commitment – that govern social action. 3. USSG Manual §8A1.1 cmt. 1 (2002) (citing 18 USC §18 (2000)). 4. See NY Cent. & Hudson River Co. v. United States, 212 US 481, 491-95 (1909) (finding corporation liable because it acts only through its agents or employees whose knowledge and purpose may be attributed to the corporation); see also United States v. Phtotgrammetric Data Serv., 259 F.3d 229, 242 94th Cir. 2001) (holding that a corporation can act only through the conduct of its agents); United States v. Jorgensen, 144 F.3d 550, 560 (8th Cir. 1998) (concluding possible failure to instruct jury on requirements for corporate criminal liability did not substantially effect defendant’s rights

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because officer, agent, or employee of corporation was acting within scope of his or her employment when each of criminal acts was committed). 5. See NY Cent., 212 US at 493 (‘‘[A] corporation may be liable criminally for certain offenses of which a specific intent may be a necessary element’’ (quoting Telegram Newspaper Co. v. Massachusetts, 52 NE 445, 446 (Mass. 1899))); see also United States s. Sain, 141 F.3d 463, 475 (3d Cir. 1998) (noting if agent of corporation conspires with another, corporation may take in mental state of agent through doctrine of respondent superior and be criminally liable for conspiracy); United States v. Sun-Diamond Growers, 964 F. Supp. 486, 490 (DDC 1997)) (noting many circuits have required government to ‘‘establish, beyond a reasonable doubt, that the agent acted within the scope of his employment with the intent to benefit the corporation’’ in order to hold corporation liable for acts of its employees). 6. See NY Cent., 212 US at 494 (holding corporation can be held responsible for illegal act of authorized employees of company). Actus reus, or the ‘‘guilty act’’, is defined as ‘‘[a] wrongful deed that comprises the physical components of a crime and that generally must be coupled with mens rea to establish criminal liability; a forbidden act’’. Black’s Law Dictionary (7th ed., 1999). 7. See In re Hellenic, Inc., 252 F.3d 391, 395 (5th Cir. 2001) (‘‘An agent’s knowledge s imputed to the corporation where the agent is acting within the scope of hid authority and where the knowledge relates to matters within the scope of that authority’’); United States v. One Parcel of Land, 965 F.2d 311, 316 (7th Cir. 1992) (stating agent’s knowledge of illegal act may be imputed to corporation if agent was ‘‘acting an authorized and motivated at least in part by an intent to benefit the corporation’’ (citing Zero v. United States, 459 US 991 (1982))). 8. See United States v. A&P Trucking Co., 358 US 121, 126 (1958) (holding partnership entity liable for acts committed knowingly by agents of entity in scope of their employment); AI Credit Corp. v. Legion Ins. Co., 265 F.3d 630, 637 (7th Cir. 2001) (explaining any actions by corporate agent within the scope of his employment are attributable to corporation); Gutter v. DuPont De Demours, 124 F. Supp. 2d 1291, 1321 (SD Fla. 2000) (noting for corporation to be liable for employee’s act, act must be within scope of employment); Acuff v. IBP, Inc., 77F. Supp. 2d 914, 923 (CD III. 1999) (same); One Parcel of Land, 965 F.2d at 316 (same). 9. See Meyers v. Bennett Law Offices, 238 F.3d 1068, 1073 (9th Cir. 2001) (rejecting fact that employee acted outside scope of authority because employee had at least apparent authority to take action); United States v. Investment Enter, Inc., 10 F.3d 263, 266 (5th Cir. 1998) (‘‘[A] corporation is criminally liable for the unlawful acts of its agents, provided that the conduct is within the scope of the agent’s authority, whether actual or apparent’’); United States v. Basic Constr. Co., 711 F.2d 570, 572 (4th Cir. 1983) (holding corporate liability may attach if offending employee has either actual or apparent authority to commit act). 10. See New Hampshire v. Zero Chi Fraternity, 696 A.2d 530, 535 (NH 1997) (stating actual authority exists when ‘‘the principle explicitly manifests its authorization for the agent to act’’) (citations omitted); see also Androphy et al. (1997, pp. 121-2), (discussing actual and apparent authority). 11. See Androphy et al. (1997), supra note 20, at 122 (‘‘A corporation would be criminally liable for conduct engaged in by the employee if a third party reasonably believes that the employee was expressly authorized to take the action resulting in the criminal violation’’); see also Meyers, 238 F.3d at 1073 n.2 (explaining that ‘‘a party claiming apparent authority of an agent must prove [. . .] that the acting party subjectively believed that the agent had authority to act for the principal and [. . .] that the subjective belief in the agent’s authority was objectively reasonably’’; United States v. Bi-Co Pavers, Inc., 741 F.2d 730, 737 (5th Cir. 1984) (stating apparent authority is authority ‘‘which outsiders would normally assume the agent to have, judging from his position with the company and the circumstances surrounding his past conduct’’ (quoting Cont’l Baking Co. v. United States, 281 F.2d 137, 151 (6th Cir. 1960))). 12. United States v. Bainbridge Management, 2002 U.S. Dist. Lexis 16686 at *16 (ND III, September 5, 2002) (holding the government did not adequately demonstrate the existence of an agency relationship because the government did not offer proof of principal-agent relationship). 13. See In re Hellenic, 252 F.3d 391, 395 (6th Cir. 2001) (recognizing that although courts generally agree that the actions of high managerial officials may be imputed to corporations, courts are not in agreement with respect to actions of lower-level employees; decisions in such cases should thus be based on scope of employee’s responsibilities rather than his official rank within company).

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14. See United States v. Josleyn, 206 F.3d 144, 159 (1st Cir. 2000) (concluding person need not be ‘‘central figure’’ in company in order for his knowledge to be imputed to company; he need only have some relationship to company that allows him to obtain requisite knowledge); DePont De Demours, 124 F. Supp. 2d at 1309 (finding knowledge of company’s attorney may be imputed to that corporation if facts known by attorney were in sphere of his authority). 15. See Practising Law Institute, US Department of Justice Memorandum Regarding Federal Prosecution of Corporations, 1248 PLI/Corp 169, 179 (May-June 2001) (‘‘A corporate compliance program, even one specifically prohibiting the very conduct in question, does not absolve the corporation from criminal liability’’); United States v. Portac, Inc., 869 F.2d 1288, 1293 (9th Cir. 1989) (affirming company’s conviction although supervisor of agent who committed infraction had expressly told agent that company did not permit violations of law (citing United States v. Hilton Hotels Corp., 467 F.2d 1000, 1007 (9th Cir. 1972))); United States v. Automated Med. Labs, Inc., 770 F.2d 399, 407 (4th Cir. 1985) (‘‘The fact that many of [employees’] actions were unlawful and contrary to corporate policy does not absolve [defendant] of legal responsibility for their actions’’; see also Webb et al. (1994, p. 624) (‘‘[E]even when an employee acts contrary to compliance program policies and specific directives, the corporation can be held criminally liable.’’). 16. See Webb et al. (1994), supra note 25, at 619 (noting sentencing provisions applicable to corporations ‘‘authorize much lower penalties if the corporation [. . .] implement[s] an effective compliance program’’). 17. See Webb et al. (1994, p. 624). 18. Model Penal Code §(1)(c)(1962). E.g. Ariz. Rev. Stat. Ann. §13-305 (West, 2001) (‘‘An enterprise commits an offense if [. . .] the offense is engaged in, authorized, solicited, commanded or recklessly tolerated by the directors of the enterprise in any manner’’); Colo. Rev. Stat. Ann. §18-1-606 (West, 2001) (using substantially similar language). Compare Iowa Code §703.5 2001 (‘‘A corporation is guilty of the offense if [. . .] the conduct constituting the offense is committed by an agent [. . .] when said act or conduct is authorized or requested or tolerated by the board of directors or by a high managerial agent’’). ‘‘High Managerial Agents’’ are defined as, ‘‘officer[s] of a corporation or an unincorporated association, or, in the case of a partnership, a partner, or any other agent of a corporation or association having duties of such responsibility that his conduct may fairly be assumed to represent the policy of the corporation or association’’. Model Penal Code §2.07 (4)(c)(1962). 19. See Healthcare Centers v. Rigby, 2002 WL 369960 (Tex. App. Mar. 7, 2002) (holding a nursing home administrator was not a high managerial agent and thus liability could not be imputed to the company that owned the nursing home); North Dakota v. Smokey’s Steakhouse, Inc., 478 N.W.2d, 362 (ND 1991) (holding for corporation to be liable for its agents’ criminal acts, corporate management must have ‘‘authorized, tolerated, or ratified’’ criminal acts); Minnesota v. Christy Pontiac-GMC, Inc., 354 NW 2d 17, 20 (Minn. 1984) (stating conviction of corporation was justified partly because middle manager had engaged in illicit conduct). 20. For example, Mo. Rev. Stat. §562.056.1 (‘‘A corporation is guilty of an offense if [. . .] the conduct constituting the offense is engaged in by an agent of the corporation while acting within the scope of his employment and in behalf of the corporation, and the offense is a misdemeanor or an infraction, or the offense is one defined by a statute that clearly indicates a legislative intent to impose such criminal liability on a corporation’’). See also New Hampshire v. Zeta Chi Fraternity, 696 A.2d 530, 535 (NH 1997) (‘‘The criminal conduct need not have been ‘performed, authorized, ratified, adopted or tolerated by the corporation[’s] directors, officers or other ‘‘high managerial agents’’’ in order to be chargeable to the corporation’’ (quoting Com. v. LAL Corp., 511 NE 2d 599, 601 (Mass. 1987))). 21. Model Penal Code §2.07(1)(a)(b) (1962) (imposing liability on corporation for criminal conduct of individual). 22. Model Penal Code §2.07(1)(c)(1962) (emphasis added). 23. ‘‘Agents’’ are defined as, ‘‘any director, officer, servant, employee or other person authorized to act in behalf of the corporation or associations’’ (Model Penal Code §2.07(4)(b)(1962)). 24. ‘‘High Management Agents’’ are defined as, ‘‘officer[s] of a corporation or an unincorporated association, or, in the case of a partnership, a partner, or any other agent of a corporation or association having duties of such responsibility that his conduct may fairly be assumed to represent the policy of the corporation or association’’ (Model Penal Code §2.07(4)(b)(1962))

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25. Model Penal Code §2.07(5)(1962) (requiring corporate defendant to prove by preponderance of evidence that supervisory agents employed due diligence in preventing commission of crime). 26. Mylan Labs, Inc. v. Akzo, NV, 2F.3d 56, 63 (4th Cir. 1993). (holding agent must have acted with intent to benefit corporation); United States v. One Parcel of Land, 965 F.2d 311, 316-17 (7th Cir. 1992) (finding knowledge obtaining while acting within scope of employment, which means with intent to benefit employer, is imputed to corporation). 27. For example, United States v. Automated Med. Labs, 770 F2d 399, 407 (4th Cir. 1985) (‘‘[W]hether the agent’s actions ultimately redounded to the benefit of the corporation is less significant than whether the agent acted with the intent to benefit the corporation’’). 28. See Cox v. Administrator US Steel and Carnegie, 17 F.3d 1386, 1404 (11th Cir. 1994) (rejecting argument that corporation is vicariously liable for RICO violations of its employees only when corporation has derived some benefit from violation). 29. See Automated Med. Labs, 770 F.2d at 407 (upholding corporation’s conviction where corporation’s agent acted ‘‘at least in part’’ to benefit corporation); United States v. Bainbridge Mgmt, 2002 Dist. Lexis 16686 at *15 (ND III, September, 2002) (‘‘To impute liability a[n] [. . .] agent must have been intended to benefit the corporation or partnership, not merely his own interests’’). 30. Automated Labs, 770 F.2d at 407 (‘‘[I]t is not necessary for an agent’s actions to have actually benefited the corporation entity’’ (citing Old Monastery Co. v. United States, 147 F.2d 905 (4th Cir. 1945))). 31. United States v. Portac, Inc., 869 F.2d 1288, 1293 (9th Cir. 1989) (affirming company’s conviction although supervisor of agent who committed infraction had expressly told agent company did not permit violations of law (citing United States v. Hilton Hotels Corp., 467 F.2d 1000, 1007 (9th Cir. 1972))); Automated Med. Labs, 770 F.2d at 407 (holding company liable for acts of its employees despite fact that many of acts were contrary to company policy); see also Webb et al. (1994), supra note 25, at 624 (‘‘[E]ven when an employee acts contrary to compliance program policies and specific directives, the corporation can be held criminally liable’’). 32. See Tigar (1990, p. 228) (asserting that ‘‘decisive factor’’ in case where no corporate liability was found was that ‘‘the employees intended to benefit, and were faithlessly violating their fiduciary duty’’). 33. See Std. Oil Co. v. United States, 307 F.2d 120, 129 (5th Cir. 1962) (reversing defendant Standard Oil’s conviction because agent’s criminal acts were intended to defraud company and were for benefit of third party). 34. See United States v. Inv. Enterprises, Inc. 10 F.3d 263, 266-67 (5th Cir. 1993) (finding evidence was sufficient to convict company’s president of conspiring with individuals not employed by company to transport obscene videos and imputing liability to company); see also United States v. General Motors, 121 F.2d 376, 411 (7th Cir. 1941) (finding if a corporation and its employees are indicted for conspiracy, the corporation can be held liable even if all of the individual defendants are exonerated); McAndrew v. Lockheed Martin Corp., 206 F.3d 103, 1038 (11th Cir. 2000) (adopting exception to intracorporate conspiracy doctrine holding that corporation can be convicted of criminal charges of conspiracy based solely on conspiracy with its own employees). 35. 18 USC §371 (2000) (establishing penalties for conspiracy against United States); United States v. Richards, 204 F.3d 177, 208 (5th Cir. 2000) (describing the elements necessary to establish a violation under §371); United States v. Ellis, 121 F.3d 908, 922 (4th Cir. 1997) (same); see also United States v. Sain, 141 F.3d 463, 475 (3rd Cir. 1998) (‘‘there must be at least two natural individuals for a conspiracy involving a corporation to exist’’). 36. See generally Handler and Smart (1981) (offering critique of the intracorporate conspiracy doctrine as contradictory to the goals of antitrust law). 37. McAndrew, 206 F.3d at 1035-40 (declining to extend intracorporate conspiracy doctrine to criminal case); see also United States v. Sain, 141 F.3d 463, 473-75 (3rd Cir. 1998) (finding owner of corporation guilty of aiding and abetting his own corporation) cert. denied, 518 US 8987 (1994); United States v. Hughes Aircraft Co. Inc., 20 F.3d 974, 979 (9th Cir. 1994) (‘‘If we applied the intracorporate conspiracy doctrine to this case, no corporation acting on its own behalf by and through its employees could be found guilty of conspiracy. This result is illogical’’).

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38. United States v. Stevens, 909 F.2d 43, 432-33 (11th Cir. 1990) (finding intracorporate conspiracy doctrine does apply when single individual is accused of conspiracy with corporation that he owns and controls). 39. See United States v. Alamo Bank, 880 F.2d 828, 830 (5th Cir. 1989) (holding Alamo Bank of Texas could be convicted for violations of Central National Bank’s officers which occurred prior to their merger); United States v. Polizzi, 500 F.2d 856, 908 (9th Cir. 1974) (holding successor corporation can be held liable for crimes of its predecessor); see also Lowell Brown (1996, pp. 469, 470-96) (explaining federal common law of successor corporations is based on whether transaction can be characterized as merger, consolidation, or purchase and sale of assets of predecessor); Becker (1992, pp. 435, 444) (discussing all aspects of corporate successor criminal liability). 40. See, for example, Man v. Raymark Indus., 728 F. Supp. 1461, 1469 (D. Haw. 1984) (applying Hawaii law in determining that a successor corporation would be liable for the acts of its previous entities); Polizzi, 500 F.2d at 908-09 (holding surviving corporations may be liable under New York law for crimes of their predecessor organizations); see also Lowell Brown (1996), supra note 49, at 481 (asserting corporate criminal liability follows ‘‘from the predecessor, by operation of state corporation law as interpreted by the federal courts [. . .] to the post-merger successor corporation’’). 41. See, for example, Oklahoma National Gas Co. v. Oklahoma, 273 US 257, 259 (1927) (analogizing dissolution of company to death of natural person). 42. See, for example, Melrose Distillers v. United States, 359 US 271, 273-74 (1959) (holding in Maryland and Delaware, corporations remain viable for purpose of legal proceedings for statutorily imposed time period); United States v. Mobile Materials, Inc., 776 F.2d 1476, 1477 (10th Cir. 1985) (establishing corporation dissolved under Oklahoma law two years prior to indictment could still be found criminally liable); In re Segno Communications, Inc., 264 BR 501, 507 (2001) (declaring corporations are not liable after dissolution, unless Illinois state law provides otherwise). 43. See, for example, Del. Code Anm. §278 (2001) (‘‘All corporations, whether they expire by their own limitation or are otherwise dissolved, shall nevertheless be continued for the term of three years from such expiration or dissolution or for such longer period as the Court of Chancery shall in its discretion direct, bodies corporate for the purpose of prosecuting and defending suits by or against them’’). 44. 18 USC §4 (2000) (establishing whoever has actual knowledge of a commission of felony, ‘‘conceals, and does not as soon as possible make known the same to some judge or other person under civil or military authority under the United States’’ can be fined, imprisoned or both). 45. 18 USC §4 (2000); United States v. Cefalu, 85 F.3d 964, 969 (2d Cir. 1996) (outlining elements of misprision of felony (citing United States v. Ciambrone, 750 F.2d 1416, 1417 (9th Cir. 1984))). 46. See United States v. Warters, 885 F.2d 1266, 1275 (5th Cir. 1989) (‘‘Concealment [of the felony] – indeed an affirmative step to conceal – is a required element; mere failure to make known does not suffice’’ (citing United States v. Johnson, 546 F.2d 1225, 1227 (5th Cir. 1977))). 47. See Neal v. United States, 102 F.2d 643, 650 (8th Cir. 1939) (finding defendant who altered bank books but returned them to their original condition before turning them over to investigators was not guilty of the offense). 48. United States v. Lancey, 356 F.2d 407, 409-10 (9th Cir. 1966) (holding defendant charged with misprision of felony is not immunized by governmental knowledge). 49. Misprision of felony charges were brought against a corporation for the first time in 1996, when the government indicted Daiwa Bank, Ltd. See Brodsky (1998, p. 9) (stating Daiwa indictment was ‘‘apparently the first time a corporation had been charged with [misprision of felony]’’). For more information on the Daiwa case, see Miller (1996, pp. 560, 561-76) (describing charges against Daiwa and recommending steps to avoid liability); Donovan (1996, p. B1); Misawa (1996). 50. See Brodsky (1998) supra note 59, at 9 (noting because Daiwa case ultimately settled, ‘‘Daiwa challenges to the misprision charges were never judicially resolved’’). 51. See Brodsky (1998, pp. 856-7) (holding bank criminally because bank willfully and knowingly disregarded federally-required filing and subsequently remained consciously indifferent to reporting requirements).

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52. See Williams (1961) (‘‘The rule that willful blindness is equivalent to knowledge is essential, and is found throughout the criminal law [. . .] A court can properly find a willful blindness only where it can almost be said that the defendant actually knew. He suspected the fact; he realized its probability; but he refrained from obtaining the final confirmation because he wanted in the event to be able to deny knowledge. This, and this alone, is willful blindness’’). 53. See United States v. Farm & Home Sav. Ass’n, 932 F.2d 1256, 1259 (8th Cir. 1991) (holding if multiple employees participated in illegal transaction, knowledge of such transaction may be imputed to employer); United States v. Penagaricano-Soler, 911 F.2d 833, 843 (1st Cir. 1990) (imputing to corporation various employees’ collective knowledge obtained within scope of their employment); United States v. Bank of New England, NA, 821 F.2d 844, 856 (1st Cir. 1987). 54. See Bank of New England, 821 F.2d at 856 (‘‘Corporations compartmentalize knowledge, subdividing the elements of specific duties and operations into smaller components. The aggregate of those components constitutes the corporation’s knowledge of a particular operation [. . .] [and the] corporation cannot plead innocence by asserting that the information obtained by several employees was not acquired by any one individual who then would have comprehended its full import’’). 55. Hagemann and Grinstein (1997) (analyzing collective knowledge cases and concluding that ‘‘no company was ever convicted without having acted in some conscious, culpable manner [. . .] Rather, when courts have aggregated knowledge, they invariably have done so as a technique in response to willful blindness to inculpatory knowledge’’). 56. Hagemann and Grinstein (1997, p. 237). See United States v. United Techs. Corp., Sikovsky Aircraft Div., 51 F. Supp. 2d 167, 197 (D. Conn. 1999) (disagreeing with government’s assertion that application of collective corporate knowledge doctrine is well recognized in certain corporate liability cases). 57. USSG Manual §8C2.5(f) (2002). In 2001, none of the organizations sentenced had an effective compliance program in place. USSC 2000 Report, supra note 93, at 48. The three-point reduction translates into a potential reduction of the minimum fine by 60 percent and of the maximum possible fine by 100 percent to 120 percent. USSG Manual §8C2.6 (2002) (providing table for determining maximum and minimum multipliers based on culpability score). If the compliance program reduces the culpability score, but was instituted as a result of a court or administrative order, an upward departure may be warranted as an offset. USSG Manual §*C4.10 (2002). 58. A corporation must argue that its compliance program was ‘‘effective’’ despite the fact that those responsible for monitoring employees and managers failed to prevent the violation for which the organization was convicted. See generally Gruner, supra note 88, at 605 (discussing the strength and weaknesses of the guideline’s standards for effective compliance programs). There remains the additional problems of monitoring the monitors, i.e. the in-house compliance program. For a thorough overview of current scholarship regarding corporate compliance programs, see generally Jordan (1996). 59. USSG Manual §8A1.2 cmt. 3(k) (2002). The organization’s actions must demonstrate that the organization is not indifferent to the law, and has adopted a proactive plan for compliance. A number of practitioners have made recommendations regarding whether to implement compliance program, how an effective program should function, and what is should feature. See Groskaufmanis (1995), §5.001 (Nov. 1994) (emphasizing the need to tailor a program to a company’s legal needs and corporate culture); Kaplan (1997), (discussing often overlooked yet essential issues); Webb and Molo (1993) (discussing in greater detail advantages and disadvantages of implementing such a program); Williams and Kavanaugh, supra note 78, at 563 (‘‘[A] compliance program is a process, not an insurance policy’’). 60. USSG Manual §8A1.2 cmt. 3(k)(2) (2002). High-level personnel are defined as persons who either have ‘‘substantial control over the organization’’ or a ‘‘substantial role in the making of policy’’. USSG Manual §8A1.2 cmt. 3(b) (2002). The Guidelines do not specify the positions that constitute ‘‘high-level personnel.’’ USSG Manual §8A1.2 cmt. 3(k)(2) (2002). However, organizations should appoint a compliance officer, ideally an ombudsman, whose sole responsibility is to administer and oversee the program. See Kientzy v. McDonnell Douglas Corp., 133 FRD 570, 572 (ED Mo. 1991) (emphasizing importance of providing employees with ‘‘opportunity to make confidential statements and to receive confidential guidance’’), aff’d, 990 F.2d 1051 (8th Cir. 1993); see also Garstang v. Cal. Instit. of Tech., 39 Cal. App. 4th 526, 533-37 (Cal. App. 2d 1995) (finding qualified

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privilege exists for individuals acting within their ombudsman capacity). The guidelines encourage the involvement of upper management in the organization’s compliance program because such involvement impresses upon all employees the seriousness of the program. See Gruner, supra note 88, at 859-61 (indicating that compliance policies and standards will have greatest force if transmitted by top corporate managers). Thus, the more senior the executive assigned the compliance responsibility, the more likely the court will find a qualifying program. A business too small to hire such a compliance officer may undertake these functions by either creating a compliance oversight committee or through delegation to a single person such as the general counsel. See Gruner, supra note 88, at 857. 61. USSG Manual §8C2.5(f) (2002). 62. See In re Caremark Int’l Inc. Deriv. Litig., 698 A.2d 959, 969-70 (Del. Ch. 1996) (holding corporate directors, in ‘‘satify[ing] their obligation to be reasonably informed concerning the corporation’’, must ensure that an effective compliance program is in place). A director may be held ‘‘liable for losses caused by non-compliance with applicable legal standards.’’ Id. at 970. The court note both the difficulty and necessity of this standard: ‘‘[s]uch a test of liability – lack of good faith as evidenced by sustained or systemic failure of a director to exercise reasonable oversight – is quite high. But a demanding test of liability is the oversight context is probably beneficial to corporate shareholders as a class, as it is in the board decision context, since it makes board service by qualified persons more likely, while continuing to act as a stimulus to good faith performance of duty by such directors.’’ In re Caremark Int’l Inc. Deriv. Litig. at 791 (emphasis in original). 63. USSG Manual §8A1.2, cmt. 3(k)(3) (2002). The commission has not yet indicated whether a pre-hiring criminal background check of employees engaged in areas where problems may occur satisfies this due care requirement. USSC 1995 Report, supra note 77, at 124. 64. See Gruner, supra note 88, at 859 (noting that Equal Employment Opportunity Commission forbids questioning on prior arrests not leading to conviction). 65. USSG Manual §8A1.2 cmt. 39(k)(5) (2002). 66. USSG Manual §8A1.2 cmt. 39(k)(5) (2002). For example, audit committee for outside directors is one approach towards providing independent review company-wide compliance. Regular ‘‘legal audits’’ of personnel or business operations should also be conducted. Gruner, supra note, 88, at 861-63. 67. USSG Manual §8A1.2, cmt. 3(k)(7)(iii) (2002). 68. USSG Manual §8A1.2, cmt. 3(k)(5) (2002). 69. Gruner, supra note 88, at 864. 70. USSG Manual §8A1.2, cmt. 3(k)(6) (2002). An organization should investigate every employee report of perceived improprieties. Managers must ensure that employees face certain punishment, including loss of pay, suspension, reduction in position, transfer, and termination for violation of the code of conduct. If an offense is discovered, and the responsible employee is not terminated, his or her discretionary authority should be reduced so as to minimize the chance to recurrence. In determining the appropriate disciplinary measure, the company should be aware of limitations imposed by state law or contract. 71. USSG Manual §8A1.2, cmt. 3(k)(7) (2002). 72. USSG Manual §8C2.5(g)(1) (2002). 73. USSG Manual §8A1.2, cmt. 3(k)(7) (2002). 74. See Rakoff, supra note 87, at 1 (suggesting Guidelines are exercising ‘‘subtle influence’’ on prosecutors to pursue more corporate indictments than in past); cf. Pilchen, supra note 87 (stating Guidelines are encouraging prosecutors to turn away from violations by large corporate offenders to target closely held corporations). 75. US Sentencing Comm’n, 1997 Ann. Rep. 41 (1997) (hereinafter USSC 1997 Report). The organization, a food importer and distributor, was convicted of making false statements. Id. The corporation, however, employed a full-time FDA inspector at its facility, which was considered an effective compliance program. Id. 76. USSC 2000 Report, supra note 93, at 48.

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77. Definition of CEO is available at www2.cio.com/ask/expert/1999/questions/ question1081. html?CATEGORY ¼ 19&NAME ¼ Leadership/Management

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Corresponding author Ben Tran can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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Corruption as a moral issue Hartmut Kreikebaum

Hartmut Kreikebaum is a Professor at the European Business School, International University, Oestrich-Winkel, Germany.

Abstract Purpose – Corruptive behaviour penetrates the business process itself and permeates the mental attitude of decision makers on all hierarchy levels. This paper seeks to present the special legal situation in Germany as the regulatory environment for business transactions and to discuss the moral consequences of an ‘‘economy of greed’’. Design/methodology/approach – The moral aspects of corruption are treated from an institutional ethics viewpoint as well as an individual ethics perspective. Regarding the institutional aspects (compliance approach) reliance is placed on the empirical study of ethical conflicts of companies in Germany and the USA. The individual ethics perspective is derived from a Christian understanding of man’s personal responsibility in society. Findings – A compliance approach can only serve as a necessary first step to counteract fraud and corruption. To obtain a good corporate citizen status, a company should also develop an open dialogue with all stakeholders (integrity management approach). Research limitations/implications – The concept of quasi-regulation, which combines governmental legal aspects with a company-wide good corporate citizen approach, offers a viable concept and needs further empirical research. Practical implications – This paper proposes to restore the concept of an honourable entrepreneur. Decision makers should pursue personal authenticity, fairness, and mutual trust in their relations with others. Originality/value – Preventing corporate corruption requires a new way of thinking based on a loyal attitude and the personal commitment of leaders. Keywords Corruption, Ethics, Moral hazards, Compliance costs Paper type Viewpoint

1. Introduction: corruption as a spreading disease To date, corruption is recognized as an issue of serious political, economic and moral significance representing a cost for growth and development. Yet, many corporations claim that they do not suffer any damage by corruption. These firms probably deceive themselves because frequently their control systems are too weak to discover a bribe. Even companies applying sophisticated control measures experience a fairly high amount of yet unknown corruptive actions and actors. Offering bribes and accepting bribes are the two core elements of corruption. Offering a pecuniary or other advantage to somebody for an improper action beyond his duties is called ‘‘active’’ corruption. We speak of ‘‘passive’’ corruption when such an advantage is not combined with a legal offence. Derived from the Latin corrumpere ( ¼ deceiving, betraying, bribing) the term ‘‘corruption’’ covers a wide range of elements. According to Transparency International, corruption defines the secret abuse of entrusted power to gain a private advantage. The German Federal Criminal Office adds that corruption must lead to a public or a private damage.

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Corruptive behavior, indeed, includes a high degree of material as well as immaterial loss. But only a very small portion of corruptive cases are known to the public; up to 95 percent remain hidden. One of the leading prosecutors in Germany, Wolfgang Schaupensteiner, puts it this way: ‘‘Corruption is like a ghost: not to grip and very old’’ (Bannenberg and Schaupensteiner, 2004). According to the authors, the central problems of corruption can be summarized as follows: (1) Criminal decision makers gain an economic advantage over honourable competitors. The person offering a bribe will in all likelihood win the order, although the offer is not based upon the lowest prize possible. (2) A businessman who bribes a civil servant or another official in order to obtain a license for production will eventually endanger public welfare. (3) Bribery has often become a tradition, in the sense of corruption as a cultural phenomenon. It would be naive to ignore the hardships of doing business with people who demand some sort of gift or payment as a cultural tradition or a certain ‘‘right’’. In the long run, this situation may only be altered by institutional changes to structures and regulations. Meanwhile bribery has taken on a global perspective. Its transnational character makes close scrutiny and follow-up of transactions almost impossible. A ‘‘wall of silence’’ often prevents legal authorities from pursuing criminal behavior in a specific case. Corruption prefers a climate of concealment and deception. The common reader is probably not able to identify ‘‘unfunctional payments’’ or ‘‘creative thinking’’ as synonymous expressions for bribery. This falsifying linguistic usage heightens the difficulty of treating corruption as a moral issue. On the other hand, it underlines the importance of analyzing the ethical aspects of this topic and of developing a concept of anti-corruption proposals. In this regard, we have to distinguish between the institutional aspects of ethics and an individual ethical perspective. Both elements are necessary to gain a deeper understanding of corruption itself and to present a realistic approach to viable solutions. This paper focuses on the notion that corruptive behavior is creeping in the decision-making process and affects the mental attitude of decision-makers on all hierarchy levels. We will present this aspect in the following section. Consequently, in sections 3 and 4 corruption will be treated from an institutional as well as from an individual ethical viewpoint.

2. Corruption as an integrated element of business 2.1 Legal background: the compliance approach In this chapter we shall reflect some important aspects of corruptive behavior within the special realm of day-to-day business decisions. Since individual corporations have to observe legal regulations, we start with a description of the present state of criminal justice in Germany. Corruption is regulated §§331-335 of the German Penal Code. These paragraphs were expanded as well as tightened up with the ‘‘Law for Fighting against Corruption’’ (‘‘Corruption Act’’) of August 13, 1997 as a result of the implementation of the OECD anti-bribery convention of the same year. This OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions has so far been adopted by about 40 states. According to the Corruption Act, bribery includes payment for an undutiful accomplishment of a public official. Offering bribes as well as accepting bribes is penalized. Severe cases of bribery are regularly punished with sentences of imprisonment for between three months and five years, and in severe cases even more. Ordinary bribery is punished with sentences of imprisonment for between three months and five years. Unfaithful judges can be punished with a jail sentence of up to ten years. Other improvements in the above legislation include the strict prohibition of accepting gifts which may be regarded as a first step to gaining an advantage for a third party.

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So far, we have only mentioned legal regulations issued by the Government of the Federal Republic of Germany. In European countries, ‘‘the government’’ in general also includes all legislative and executive bodies situated in Brussels, Luxembourg, and most notably in Strasbourg. It extends to all governmental actors and other delegated authorities at regional (the German ‘‘Bundesla¨nder’’) and local or municipal levels. Business enterprises have to comply with government regulations. By enacting a regulatory environment for business, governmental institutions protect society’s interest in a stable economic framework, enabling investments, taxes, growth and income. From this perspective, acting in compliance with the law marks a necessary prerequisite for entrepreneurial decisions within a stable interrelationship of business, governmental and societal interests. Fighting corruption starts with a well-devised regulatory environment. Business transactions in compliance with the law respond to the fiduciary relationship of government, business, and society. The interest of the public must focus a stable legal framework as a guarantee for fair trade and justice for everybody. This policy excludes the bribing of public servants as well as taking kickbacks in public procurement, for example as a result of coercion or a previous arrangement. Compliance with the law does not forbid lobbying by business actors through information provision, but it excludes the application of pressure and threatening public officials as well as ‘‘state capture’’ by business (Crane and Matten, 2004, pp. 405-6). Other concepts of attacking bribery, like integrity management and the quasi-regulations conception, will be discussed later. 2.2 Moral aspects The specific management attitude towards bribery and its moral implications can be understood against the background of legalizing corruption in Germany until 1997. Due to the former tax regulations, the payment of bribes could be deferred as expenses from taxable turnover if the recipient’s name and address were mentioned. This generous legal provision certainly led to easy morals and a lax attitude towards corruption in general. Although the legislation has been changed by introducing the new Corruption Act, active corruption is still being viewed as a peccadillo. Many companies still regard corruptive actions as useful expenditures and as a generally agreed-upon way of business. Bribes are being made an ordinary element of price calculation and are refinanced via overcharged accounts. If ‘‘helpful expenses’’ are needed for winning a tender, they are funded by a system of prearranged dismal cash accounts and hidden reserves gained from fantasy bills by foreign affiliates. Fortunately, the majority of business leaders in Germany oppose such immoral behavior. It should be noted, however, that the number of prosecuted criminal cases in Germany rose significantly from 258 companies in 1994 to 1,100 cases, and nowadays each case involves six to seven suspects. Corruption represents an ageless problem. In the famous Codex Hammurabi, the king of Babylon (1728-1688 BC ) declared the bribery of civil servants a capital crime. About three and a half thousand years later, Daniel Defoe stated: ‘‘Every degree of business has its invitation to do evil’’ (Defoe, 1727, p. 21). In an early treatise on ethics in an international business context, Hans Schollhammer (1977) spoke about the apparent hypocrisy in dealing with ethical issues. He addressed the inherent conflict between ethical norms on the one hand and the economic imperative (like maximizing profits or a company’s market share) on the other. Schollhammer cited 200 North American firms that were under charges and investigations by the Securities and Exchange Commission (SEC) in the early 1970s. He stated that multinational corporations are both victims and culprits with regard to corrupt practices, and he blamed European governments for not having strengthened their efforts to restrict unethical the practices of firms under their jurisdiction. His conclusion holds still true some 30 years later: ‘‘Briberies, falsification of business records, collusive agreements, and similar improper actions have proliferated to an intolerable extent’’ (Schollhammer, 1977, pp. 58-62).

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The US Foreign Corrupt Practices Act of 1977 set the standards for fighting corruption in the USA. The Act can be regarded as a forerunner for counteracting corruption in Europe. However, it took 20 years until the Federal Republic reacted against bribery with its own anti-corruption act of 1997. Regarding the impact of corruption and bribery in Germany, more than half of large companies complain about the damage caused by corruption, the disadvantages ranging from material injury to regulation losses, weakening of partnership relations, and destructive motivations. However, a dichotomy exists with regard to morality. According to a representative opinion poll conducted by the Allenbach Institute in 2006, only 23 percent of the population consider the statement ‘‘lying for one’s own benefit’’ immoral. On the other hand, 70 percent assess ‘‘taking bribes’’ and ‘‘stealing a petty matter’’ as immoral. These findings illustrate a dilemma of the present morale in Germany. People stigmatize the wrongdoing of others (bribery, stealing, and committing larceny). By the same token, they belittle moral lapses of their own. If a majority of 77 percent declares without hesitation that lying for one’s own profit is harmless, unlawfulness is being reverted to its contrary. This attitude is also reflected in the consciousness of perpetrators. Nearly all persons accused of corruptive behavior plead not guilty and try to blame the other party for their own misbehavior (Kreikebaum, 2007). Especially, managers at the top echelons of their companies try to excuse their immoral actions. Apparently they are not able to confess their own faults. They regard themselves as victims of a conspiracy and fight for competence illusion – even in a loss-loss situation. It should be noted that this behavior bears important consequences for employees. It creates a classical moral dilemma: to gain a contract by bribery benefits the whole company as well as its major stakeholders. But, ‘‘[C]orporations might on one hand provide a context that to some extent encourages behavior that is of dubious legality and, on the other, be expected to ensure that employees fulfil their legal obligations’’ (Crane and Matten, 2004, p. 252). As in any other ethical conflict, no easy solution exists. In a world of greed and avarice, many people look upon the glittering surface of things as the very essence of life. They place a high value on material success and tend to neglect immaterial values. By attaching most importance to their own financial goals, many businessmen are tempted to instrumentalize the company and its employees for their individual purpose. Striving for money becomes a legal as well as a legitimate issue and finally dominates their lifestyle and personal relationships. This hypothesis can be proved by results from a recent empirical study of top management remuneration in the German DAX-30 companies. A comparison between average personal expenses per employee and the members of the board of directors (Vorstand) in 19 enterprises between 1987 and 2005 indicated a rather disparate development. Whereas the employees’ payment rose about 76 percent, the board members increased their income by 445 percent. The Pay for Performance Test, comparing total shareholder return and return on equity, presented a strong indication of the ‘‘pay without performance’’ hypothesis (Schmitt and Schwalbach, 2007, pp. 117-9). Nevertheless, the relative divergence in the Stoxx 50 companies in other European countries is even higher than in Germany. These results prove that incentive-oriented remuneration systems can also be inefficient. Horst Albach (2003) has proved that an ‘‘economy of greed’’ destroys trust and supports an uncovered egoism. This type of behavior is deeply rooted in personal greed as well as in a prevailing methodological individualism. Modern microeconomic theory assumes that unlimited opportunism governs managerial behavior. However, according to the author, the majority of managers do not want to damage society. It is only a minority of wrongdoers who injure other people and destroy trust. Yet, the cases of Enron and Comrade, Holzmann, Flowtex and Babcock, Volkswagen and Siemens, among others, demonstrate that trust in top managers, external auditors, and boards of overseers behaving responsibly has rapidly decreased. The question remains whether under these circumstances corruption can be combated in an efficient and effective way. Does corporate ethics offer a viable concept to

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counteract bribery? In the next section, we will discuss different concepts to deal with bribery from the basis of institutional ethics.

3. Corruption from an institutional ethics viewpoint ‘‘Ethics is the study of morality and standards of conduct’’ (Hodges and Luthans, 2000, p. 74). When these authors wrote about the connection of ethics and social responsibility from an international management perspective, they focused on the Federal Guidelines of the United States Sentencing Commission. According to Chapter Eight of the Guidelines, companies employing an effective ethics program may be able to reduce the degree of punishment of unethical behavior. This type of regulation demands a strict obedience from the corporation as well as from its employees to avoid further disciplinary measures and sanctions. It is in the economic interest of top management to comply with the governmental order. Rules like those mentioned above may be criticized on the basis of fostering a ‘‘culture of mistrust’’ and a lack of voluntariness and personal commitment. On the other hand, they offer the chance to counteract the exploitation of a certain moral behavior of individuals. Generally agreed-upon regulations may not suit everybody, but they do prescribe a common behavior for competitors. This safeguarding of competition may be the reason for the widespread introduction of codes of ethics in US-based companies. In an empirical investigation in the USA and Germany, 49 percent of US-based corporations regarded ethical guidelines as a very important instrument for handling ethical conflicts, in contrast to only 21 percent in German companies (Kreikebaum et al., 2001, pp. 102-4). Nine out of ten American companies use codes of ethics as guidelines. The main crucial point of a compliance management structure envisages the lack of transparency and cooperation between the partners of such an agreement. They don’t possess the desirable motivation, they are not involved in the design and implementation of a company-wide agreement, and they are excluded from critical appraisal (Paine, 1994, p. 111). These disadvantages of compliance led to the alternative concept of an integrity management structure. This approach also regards law-abiding and sticking to regulations as an indispensable first step. However, it surpasses this necessary prerequisite and takes into account the legitimate interests of employees, clients, and suppliers. In this case, all stakeholders encountering the issue of bribery try to reach a reasonable solution of the problem on hand in an open dialogue. This approach requires a sensible discussion, which will probably hardly please every partner. The rather vague concepts of integrity, fairness, and justice present a pretentious demand and usually meet with some harsh reactions. A common element of compliance and integrity management is designed in the rational search for an encroaching, unchallenged concept called ‘‘quasi-regulation’’ (cf. Behnam and Gilbert, 2004). This approach starts with globally accepted principles, for example the Universal Declaration of Independence of the United Nations or the European Charter of Human Rights. Common social standards may be transferred to an enterprise with the assistance of the Social Accountability 8000 (SA 8000) model. This model offers a worldwide first standard for the certification of ethical actions and the chance to obtain ‘‘good corporate citizen’’ status. Many firms do not comply with bribery at all. They do not yield to competitive pressures but develop strategies to cope with corruption in a positive manner. From an economic viewpoint, in the short term these companies may consider themselves at a disadvantage by losing contracts to competitors who do bribe. In the long term, however, they avoid the significant costs of government corruption, a weakened infrastructure, delays in investment, and the going astray of management capabilities (Doh et al., 2003, pp. 115-20). According to these last authors, the pervasiveness and arbitrariness of corruption may induce companies to feel obliged to avoid special foreign markets. Another key strategy would be to adjust entry modes (e.g. choosing a joint venture versus a wholly owned entry), as in this case the level of corruption decreases.

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In line with the quasi-regulation concept, companies may follow the International Chamber of Commerce’s (ICC) Rules against Extortion and Bribery. The seven basic rules target large-scale extortion, bribery and kickbacks, agents, financial recording and auditing, the responsibilities of firms, and contributions to politicians and to senior officials. They should be accompanied by a firm’s specific code of ethics, which includes the adoption of anti-bribery policies. Another instrument to cope with corruption, called whistle blowing, refers to anonymous or open contracts between employees and their superior or employer. If the employee discovers a case of bribery, he may call his employer and furnish information about the (perceived) corruption. The Oscar-nominated movie The Insider presents such a case, including the different problems involved (see Crane and Matten, 2004, pp. 123-6). Resistance to change, which does not only happen in this case, can be overcome efficiently by setting up a joint program of firms together with governmental bodies. Such a ‘‘joint venture’’ offers the structure needed to minimize corruptive behavior. However, it seems impossible to solve all moral problems through rules or regulations. Institutional ethics can possibly straighten out an order and introduce additional controls. But it is not feasible to ‘‘prescribe’’ moral or ethical behavior or to substitute intrinsic motivation by extrinsic rules. In any case, returning to the ‘‘honourable entrepreneur’’ concept at least offers a chance to level out the deficiencies of institutional ethics (Schwalbach and Fandel, 2007).

4. Corruption within an individual ethics perspective The concept of an honourable entrepreneur is rooted in a specific philosophical and theological understanding of man’s destination in the world. It can be traced back to a position of individual as well as of professional responsibility. This conception includes a double aspect: people are responsible for themselves and for other people. From a Christian viewpoint, they have to apply ‘‘the yardstick of love within the social order of society through a personal care for other people’’ (Von Weizsa¨cker, 1983, pp. 138f.). And they are held responsible for their actions towards others. ‘‘Always be prepared to give an answer to everyone who asks you to give the reason for the hope that you have’’ (1 Peter 3:15). This statement leads to the conclusion that all our actions are being recorded for a final evaluation. ‘‘For we must all appear before the judgement seat of Christ, that each one may receive what is his due for the things done while in the body whether good or bad’’. The basic idea of responsibility leads to a personal attitude of authenticity and honesty. It forbids, however, blaming or condemning the behavior of others (Kreikebaum, 1996, pp. 184-94). The Bible conveys a rather realistic image of human beings. God describes their whole mind and thoughts as malicious from the very beginning (1 Moses 8, 21). Mosaic law consequently follows this line of thinking. According to the second book Moses 23, 8, nobody should accept gifts and thus get corrupted because presents make open eyes blind and pervert the concern of people who are right. Around 850 BC , King Joshaphat of Judah restored this old commandment and barred newly inaugurated judges from taking bribes. The restoration of the traditional ‘‘honourable entrepreneur’’ concept in our time will entail more labour, hardship, and audacity. The effort will probably be more strenuous in Germany than in other countries with comparable conditions. In our study of ethical conflicts in US-based and German corporations, 46.3 percent of the German managers regarded the acceptance of advertising gifts as harmless, but only 14.6 percent of the interview partners in the USA were of the same opinion: 65.9 percent of US companies felt very uneasy when governmental agents in host countries asked for ‘‘transfer payments’’, whereas 11.0 percent of German managers said: ‘‘No problem’’ (Kreikebaum et al., 2001, pp. 78-84). These results unequivocally confirm that there is no simple and easy way back or forth to a world of mutual trust, understanding, honesty and fairness.

References ¨ konomie der Habgier’’, WZB-Mitteilungen, Albach, H. (2003), ‘‘Zuru¨ck zum ehrbaren Kaufmann. Zur O No. 10, pp. 37-40.

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Bannenberg, B. and Schaupensteiner, W. (2004), Korruption in Deutschland – Portrait einer Wachstumsbranche, 2nd ed., Beck, Mu¨nchen. Behnam, M. and Gilbert, D.U. (2004), ‘‘A Habermasian approach to ‘manage’ business ethics in multinational corporations’’, paper presented at the Annual Meeting of the Australian and New Zealand International Business Academy, Canberra. Crane, A. and Matten, D. (2004), Business Ethics: A European Perspective, Oxford University Press, New York, NY. Defoe, D. (1727), The Complete English Tradesman, D. Rivington, London. Doh, J.P., Rodriguez, P., Uhlenbruck, K., Collins, J. and Eden, L. (2003), ‘‘Coping with corruption in foreign markets’’, Academy of Management International Review, Vol. 17 No. 2, pp. 114-27. Hodges, R.M. and Luthans, F. (2000), International Management, McGraw-Hill, New York, NY. Kreikebaum, H. (1996), Grundlagen der Unternehmensethik, Scha¨ffer-Poeschel, Stuttgart. Kreikebaum, H. (2007), Maßnahmen zur Beka¨mpfung der Korruption, Vol. 9, Deutsches Institut fu¨r Wirtschaft, Ko¨ln. Kreikebaum, H., Gilbert, D.U. and Behnam, M. (2001), Management ethischer Konflikte in international ta¨tigen Unternehmen, Gabler, Wiesbaden. Paine, L.S. (1994), ‘‘Managing for organizational integrity’’, Harvard Business Review, Vol. 72 No. 2, pp. 106-17. Schmitt, R. and Schwalbach, J. (2007), ‘‘Zur Ho¨he und Dynamik der Vorstandsvergu¨tung in Deutschland’’, Zeitschrift fu¨r Betriebswirtschaft, Special Issue 1, pp. 111-22. Schollhammer, H. (1977), ‘‘Ethics in an international business context’’, Management International Review, Vol. 17 No. 2, pp. 23-33. Schwalbach, J. and Fandel, G. (Eds) (2007), ‘‘Der ehrbare Kaufmann: Modernes Leitbild fu¨r Unternehmer?’’, Zeitschrift fu¨r Betriebswirtschaft, Special Issue 1, Editorial VI. Von Weizsa¨cker, R. (1983), Die deutsche Geschichte geht weiter, Siedler, Berlin.

Further reading Kreikebaum, H. (2006), ‘‘Internationale Unternehmensethik’’, Zeitschrift fu¨r Betriebswirtschaft, Special Issue 1, pp. 1-20.

Corresponding author Hartmut Kreikebaum can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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Teaching, communicating and evaluating CSR Can we teach ethics and professional deontology? An empirical study regarding the Accounting and Finance degree Francisco Alegria Carreira, Maria do Amparo Guedes and Maria da Conceic¸a˜o Aleixo

Francisco Alegria Carreira is Professor Coordenador, Maria do Amparo Guedes is Professor Adjunta and Maria da Conceic¸a˜o Aleixo is Assistente, all at the Ecola Superior Cieˆncias Empresariais do Ipsetu´bal, Setu´bal, Portugal.

Abstract Purpose – This paper sets out to analyse the role of ethics and moral values in higher education, as well as the articulation with two important professions in the financial area, because ethics and professional deontology play an important role in organizations and society, which have a great concern with corporate social responsibility. Design/methodology/approach – The literature review allows one to build a questionnaire used to evaluate the ethical behaviour and rules of ethics in a sample of higher education students of the third year of an Accounting and Finance course in the Business Administration College of the Setu´bal Polytechnic Institute. The same questionnaire was applied to those students wishing to become chartered accounts and statutory auditors. Finally an exploratory analysis was carried out that summarises the questionnaire, categorising in several clusters as result of cluster analysis, according to the variables that had higher scores. Findings – The concept of ethics is not a consensual one among the different investigators: for some it means a set of rules, principles and values that may be mistaken for morality from a broader point of view. Some authors consider ethics as a judging reflection upon morality. Concerning the cognitive dimension of attitude towards ethics, the subject of ethics and professional deontology strengthened the answers to the questions with lower scores. Concerning the affective/assessing attitude of ethics, the subject of ethics and professional deontology strengthened the students’ convictions about the importance of the existence of a deontological code, of ethical principles and of accounting information, as well as the question with the lowest score (the entity’s interest is more important). Practical implications – The results of this research confirm the initial hypothesis that higher education students of the third year of an Accounting and Finance course in the Business Administration College of the Setu´bal Polytechnic Institute do not know the limitations of ethical behaviour. Originality/value – This paper provides valuable empirical evidence in the role of ethics and moral values in higher education, because teaching ethics and professional deontology is an essential need of society and is inherent to teaching activity that must be promoted by policy makers. Keywords Ethics, Higher education, Accounting, Portugal Paper type Research paper

The authors are grateful for the many helpful comments made by David Crowther, Rute Abreu and from participants at the 5th Corporate Social Responsibility Conference, Edirne, April, 2006. Ideas expressed in the article are those of the authors and should not be attributed to any organization.

DOI 10.1108/17471110810856866

1. Introduction Life in society demands sociability, so that standardised behaviours based on moral and ethical rules are crucial to minimize possible conflicts. Morals and ethics show up as synonyms: a set of principles or behavioural patterns. This notion is shared by several philosophers and has to do with the fact that both words have the same etymological basis (‘‘ethos’’ from the Greek and ‘‘mores’’ from Latin). Morals have been associated with a set of

VOL. 4 NO. 1/2 2008, pp. 89-103, Q Emerald Group Publishing Limited, ISSN 1747-1117

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ruling and dogmatic principles based on the distinction between good and bad, whereas ethics is assumed as a behavioural science. Argandon˜a (1997, p. 64) sees ethics as: . . . the science that studies Man’s behaviour in order to help him reach his goals. It is a science, not a belief or the result of a political consensus; it is a knowledge that can be learnt by means of reasoning or experimenting. It is a practical science: we don’t study it to have knowledge but to be able to act. It is a normative science: it doesn’t tell us how most of the people act – that is up to sociology –, but how we all should act.

When formalised, normative ethics is translated in deontological and behavioural codes that have as a their main goal to draw basic concepts of law and duty set by a group for the performance of their profession. According to Mercier (2003, p. 63), the ‘‘deontological dimension assumes beforehand a reflection on the rules and translates the will to make the members join those rules and the organisation norms’’. The relationship with behavioural practice that one expects to be observed when performing any profession, aiming at the wellbeing of society and assuring the correct procedure of its members within and without the profession, is essential for stockholders’ confidence. The social and ethical responsibility of enterprises has to do with the internalization of these rules by the managers, chartered accountants or TOCs responsible for the accounting information, and by the auditor accountants or ROCs who provide credibility to that information. It is then crucial to keep thinking, reflecting and building. The Business Administration College of the Setu´bal Polytechnic Institute, in its Accounting and Finance degree – which aims to create technicians in the areas of accounting, auditing, taxing, finance and enterprise management – is conscious that the ethical education of the youngest generations has to do with a transversal perspective of the students’ education, dealing with the several different influences of society so that they can be free and autonomous to think and judge. In that perspective, the authors thought it interesting to assess the students’ attitudes before and after attending the subject of ethics and professional deontology that is taught in the Accounting and Finance degree as an optional subject.

2. Ethics, morals and education Moral and ethical values are related to the values of good and bad of justice. The values are defined by a two opposed pole scale and can be faced as subjective criteria present in the individual or as an attribute of objects, beings and situations. Ethics is linked to general principles of good and bad, whereas morals are linked to patterns of duty and concrete practice. Morals are a system of norms, principles and values, according to which the mutual relationships among individuals or between individuals and the community are regulated. These norms have a historic and social character accepted freely and conscientiously by a subjective conviction. Many authors define ethics as a judging study of morality, as it is a reflection on our moral behaviour. However, other authors have a different approach when distinguishing ethics and morals, such as in the way expressed in Table I. According to Lisboa (1997, p. 26): . . . the central problem for ethics has been the double work of analysing the meaning and nature of the moral normative element in the human behaviour, in thought and in language as well as assessing the meaning and nature of the human behaviour, showing the criteria to justify the rules and the judgements of what is morally correct or wrong, good or bad.

Table I Approaches to distringuishing ethics and morals

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Ethics

Moral

Set of principles Permanent Universal Rule Theory

Specific behaviour aspects In time Cultural Rule of conduct Practice

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Ethics can be understood from the point of view of different dimensions. This idea comes from Mercier (2003), who distinguishes three different dimensions as shown in Table II. Reflecting upon rules is what is called ‘‘deontology’’, which comes from the conjugation of the Greek words ‘‘de´on, de´ontos’’, which mean duty, and ‘‘lo´gos’’, that means speech or treaty. Under this perspective, deontology would be the treaty of the duty or the set of duties, principles and norms adopted by a specific professional group. It is a normative subject that deals with the duties that must be followed in specific social circumstances within a specific profession. Deontology is therefore the science that sets the guiding norms of professional activities under the sign of morality and honesty. Professional deontology systematically elaborates the ideals and the norms that should guide professional activity. Deontological codes are based on the great universal declarations that translate this ethical feeling and that adapt to the peculiarities of each country and each professional group. Also, these codes propose sanctions, according to explicit principles and procedures, to transgressors. According to Lisboa (1997, p. 58) the deontological code ‘‘may be understood as a relationship of behavioural practices that are expected in the performance of a profession. The code norms aim at the society’s well being, in order to assure the honesty of procedure from its members within and without the institution’’. Under this perspective it is important that schools take an active part in the divulgation and sensitization of ethical rules since students who attend university, and who may have a moral and ethical maturity, may not know the deontological codes that rule the different professions. Therefore it is essential to provide them with a subject that explains the impact of their future profession upon society and that makes them conscious of the norms of the ethical conduct that must always be present in their work and that make them familiar with the deontological codes that rule their profession. In many European and North American universities the teaching of ethics is part of the curriculum. Portugal follows that tendency and offers the study of ethics as a compulsory or optional subject in some degrees and postgraduate courses. This is the case of the Business Administration College of the Setu´bal Polytechnic Institute, which provides the optional subject of Ethics and Professional Deontology in the Accounting and Finance degree, which aims at presenting and framing the concepts of ethics and deontology in the professions of Tecnico oficial de contas (TOC) and Revisores oficials de contas (ROC) and analysing the role of these professionals in the enterprise and in society. These professionals have the responsibility to spread the economical and financial data of organisations subject to social responsibility rules built upon behavioural codes, namely the Deontological Code of Chartered Accounts (CDTOC), the Code of Ethics and Professional Deontology of Auditor Accounts (CEDPROC) in the Portuguese context. As the school is a space of relationships where the students can discuss the ethical values, it becomes fundamental to reflect upon or to make them conscious of a set of behavioural rules aiming at defining intra-professional procedures.

3. The importance of ethics within the profession This research deals with the subject of ethics and professional deontology in the Accounting and Finance degree, which aims to train technicians in the financial field. Thus the authors have essentially approached the professions of TOC and ROC, as they are the only professions that are organized within a Chamber and an Order of professionals and that have elaborated codes that represent the existing consensus at a specific moment of the behavioural norms that each member must follow. Table II Three different dimensions of ethics Axiological ethics Deontological ethics Theological ethics

Reflection upon values Reflection upon rules Reflection upon the values of sacred, transcendental, divine and profane

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The public nature of the TOC and ROC professions implies responsibilities from a social perspective, once that it is identified with the collective wellbeing of the community, the people and the institutions for which they work. The social responsibility of these technicians is based on the social responsibility of the enterprise, which has the duty to inform with quality all those related to it. As accounting is above all an information system without which it would not be possible to produce information of a trustworthy economical/financial character, and which enables its users to use it for decision-making, it becomes imperative that enterprises become conscious of the issue of social responsibility, which has been progressively introduced into the rules and conceptual structures of accounting and into the rules that should be followed by the professionals that work within it. The professions related to accounting and auditing (TOC and ROC), legally recognised under the Statutes that created them, have produced behavioural codes aiming at encouraging mutual respect, justice, dialogue and solidarity. The Industry Rates Code of 1963 created the Technician of Accounts. For the first time accounting was recognised as a privileged information system both for management and for taxing. The responsibilities of Technicians of Accounts had to do with the accounting organisation and execution as well as the filling in of tax forms. The Technician of Accounts as such has disappeared with the taxing reform of the 1980s when the first Code of the Collective Income Tax (IRC) was published, which did not need a Technician of Accounts, only a person responsible for the accounting. Only in 1995 with Act no. 265/95, October 17, was the Chartered Accountants Association created, which regularized the profession of chartered accountants. In 1999, with the Act no. 452/99, November 5, the statutes were changed and became the Chamber of Chartered Accountants. In 2000, the Deontological Code of Chartered Accountants was created (CDTOC), which came into force on 1 January of the same year and which sets in place the third article – the general deontological principles that the TOC should follow in his profession, which are based on several articles of the Code and of the Statutes as presented in Table III. Since 1969, the ROC has been responsible for checking on the accounting of limited companies. The profession of Auditor of Accounts was regularized only in 1972 under Act No. 1/72, January 3, although it was only in 1979 that the profession effectively began under Act No. 519-L2/79, December 29. In 1993, after the publication of Act No. 422-A/93, December 30, the new legal statute that regularizes the profession of Auditor of Accounts was promulgated. Later, in 1999, after the publication of Act No. 487/99, November 16, a new Statute of the Auditor of Accounts was instituted. The Ethical Code and Professional Deontology of the Auditor of Accounts (CEDPROC) was published on December 26, 2001 and established the principles that the ROC must follow in their profession, in the second article. These principles are defined in specific articles according to Table IV. Of all the principles referenced in CDTOC, only the principle of equity is not defined in CEDPROC, although it is implicit in other articles. Concerning the principle of loyalty, although it is not defined in the second article, it is referred to in article 10, which is about the duties of the ROC towards his colleagues (Table V). Many of these principles are common to any ethical code and can be downsized to, among others, the following: Table III General deontological principles that TOCs should follow General deontological principles Integrity Honesty Independency Responsibility Competence Confidentiality Equity Loyalty

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References Art. 3.8 CDTOC Art. 3.8 CDTOC Art. 3.8 CDTOC Art. 3.8 CDTOC Art. 3.8 CDTOC Art. 3.8 CDTOC Art. 3.8 CDTOC Art. 3.8 CDTOC

– N8 2 Art. 52.8 ETOC Art. 4.8 CDTOC Art. 5.8 CDTOC Art. 6.8 CDTOC Art. 10.8 CDTOC – Art. 17.8 CDTOC

Table IV Fundamental principles of CEDPROC Fundamental principles

References

Independency Responsibility Competence Urbanity Legality Professional secrecy

Art. 3.8 CEDPROC Art. 4.8 CEDPROC Art. 5.8 CEDPROC Art. 6.8 CEDPROC Art. 7.8 CEDPROC Art. 8.8 CEDPROC

Table V Duties of TOCs an ROCs TOC

ROC

Integrity Honesty Independency Responsibility Competence Confidentiality Equity Loyalty

Urbanity Legality Independency Responsibility Competence Professional secrecy – –

B

be faithful to the institution and the boss who oversees the work;

B

respect colleagues and avoid dishonest competition;

B

have up-to-date and developed knowledge as well as technical skills;

B

keep professional secrecy; and

B

do not use privileged information to manipulate or blackmail others.

4. Empirical research The authors aimed to assess, firstly, how the conscientiousness of ethics remains unchanged and how much it changes in relation to the teaching of a subject such as ethics and professional deontology to students of a double-phase degree in Accounting and Finance (corresponding to the period between October 2005 and January 2006, three hours a week, for a total of 45 hours), in the Business Administration College (ESCE) of the Setu´bal Institute Polytechnic (IPS). Thus, the authors built a questionnaire divided into three sections: 1. characterisation of the sample collaborator; 2. cognitive dimension towards ethics; and 3. affective/assessing dimension of attitude. In the first section – characterization of the sample collaborator – the authors identified age, sex, qualifications and professional experience, as well as the duration of that experience. The second section – cognitive dimension towards ethics – translated the student’s sensitivity towards issues like ethics and is measured in terms of agreeing/disagreeing, want/don’t want, like/don’t like. This section is comosed of 21 questions assessed on a scale from 1 to 7, where 1 corresponds to ‘‘I totally disagree’’ and 7 to ‘‘I totally agree’’. The third section – affective/assessing dimension of attitude – measures the students’ receptivity about ethics, in 15 questions assessed on a scale between 1 and 7, where 1 corresponds to ‘‘not at all important’’ and 7 to ‘‘very important’’. 4.1 Sample characterisation The sample is composed of the students of the double-phased degree in Accounting and Finance, corresponding to the school year 2005/2006, first semester, which lasted a total of 45 hours. In total there were 104 students, of which 71 were analysed (68 percent of the

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sample), who answered the same questionnaire twice: the first time before attending the subject of ethics and professional deontology (October 2005) and the second time after the terminus of that subject (at the end of January 2006). There was a direct correspondence between both questionnaires, as only in this way could they could be compared. The sample characterisation consisted of the analysis of age, sex, qualifications, professional experience and the duration of that experience. The average age of the sample was 22: the youngest student was 19 and the oldest was 48, which corresponds to a variation of 23. Most students of the sample of the degree in Accounting and Finance in the ESCE of the IPS are between 19 and 25 years old (90 per cent), while 10 per cent are aged between 27 and 48. Most of the students are female, about 66 percent against 34 percent male. The students hold no superior education and the majority (about 70 percent) have never had any professional experience. The rest (about 39 percent) have a professional activity divided over several different areas and their experience varies between one and 33 years in duration. Professional experience is essentially in the finance area (accounting, filing or administrative), corresponding to 17 percent, other activities correspond to 9 percent (namely sales, logistics, hotels, telephone operator and cashier) and activities without a defined area to about 4 percent. 4.2 Cognitive dimension towards an ethical attitude 4.2.1 General characterization. Scores for questions about the cognitive dimension towards ethics before attending the subject of ethics and professional deontology the authors came to the conclusions presented in Tables VI and VII. Scores for questions regarding the cognitive dimension of the attitude towards ethics after attending the subject of ethics and professional deontology are presented in Tables VIII and IX. It should be highlighted that the answers with a higher score and those with a lower score registered smaller and larger variations, respectively. 4.2.2 Cluster analysis. The authors have analysed the process of the students’ positioning towards the questions asked by researching groups with equal attitudes and afterwards the authors tried to identify the reason for this before and after attending the subject of Ethics and Professional Deontology. Thus, the authors used the Statistical Package for the Social Sciences (SPSS) in order to build clusters, that is, to create homogeneous groups of students according to their similar attitudes in such a way that students ‘‘belonging to the Table VI Cognitive dimension towards ethics before attending the subject of ethics and professional deontology: four answers with highest scores Questions 1. 10. 12. 2.

An ethical attitude from the TOC/ROC allows a higher degree of transparency in business A deontological code must be based upon strong ethical principles A deontological code defines the ethical norms of a specific profession Ethics must be normative

Score 6.4 6.16 5.44 5.23

Note: Scores greater than 5 on a scale of 1 to 7

Table VII Cognitive dimension towards ethics before attending the subject of ethics and professional deontology: four answers with lowest scores Questions 17. Professional secrecy is incompatible with an accusation of public crime 18. The existence of a deontological code limits professional action 13. If a specific knowledge diminishes the accounting result but not the taxing result, its recognition is dispensable 15. The existence of a deontological code eliminates the ethical dilemma Note: Scores less than 4 on a scale of 1 to 7

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Score 3.12 3.26 3.36 3.42

Table VIII Cognitive dimension towards ethics after attending the subject of ethics and professional deontology: four answers with the highest scores Questions 1. 10. 12. 2.

Score

An ethical attitude from the TOC/ROC allows a higher degree of transparency in business A deontological code must be based upon strong ethical principles A deontological code defines the ethical norms of a specific profession Ethics must be normative

6.09 5.81 5.21 5.09

Note: Scores greater than 5 on a scale of 1 to 7

Table IX Cognitive dimension towards ethics after attending the subject of ethics and professional deontology: four answers with lowest scores Questions

Score

18. The existence of a deontological code limits professional action 13. If a specific knowledge diminishes the accounting result but not the taxing one, its recognition is dispensable 14. The TOC/ROC depends on the enterprise’s perspective towards ethics 17. Professional secrecy is incompatible with accusation of public crime

3.35 3.38 3.51 3.63

Note: Scores less than 4 on a scale of 1 to 7

same group are as similar as possible and always more similar to elements of the same group than to the elements of the other groups’’ (Reis, 1997, p. 290). In order to do this the authors went through the following four steps: 1. Variable selection – the four variables (questions) with a higher score were considered and they correspond to questions 1, 2, 10 and 12 (see Table V). 2. Definition of a similar measure – this is the process used to measure the distance between the values of the variables that constitute the groups, and the square Euclidean distance was chosen. At the same time the answers were standardized, which means that the scale of the answers is uniform and that every variable has the same score in determining the groups or clusters. 3. Aggregation criterion choice – the authors sought to assess how the groups kept stable or reliable, since ‘‘there is no such thing as the best criterion of (dis)aggregation in the analysed cases of clusters. It is common practice to use several different criteria and to compare the results. If they are similar it is possible that we have obtained results with a high stability degree and which are therefore reliable’’ (Reis, 1997, p. 310). As a method the authors adopted the average linkage between groups, seeking to clearly separate the distances among all the pairs of answers among the groups. 4. Results validation – the results obtained were treated (see below) with the other alternative processes, which did not clearly highlight the groups. Thus, based on steps 1 (variable selection), 2 (similarities measure) and 3 (aggregation criterion), the authors identified that there were, before the course, three distinct groups according to the dendogram represented in Figure 1, and which are gathered thus: B

Cluster 1, composed of six students;

B

Cluster 2, Group A, composed of 22 students; and

B

Cluster 2, Group B, composed of 43 students.

Cluster 1 is characterised by showing a high score in question 1 (An ethical attitude from the TOC/ROC allows a higher degree of transparency in business), with 6.67 points – and in the other questions there were values inferior to the other groups under analysis with a score of

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Figure 1 Clusters before attending the Ethics and Professional Deontology subject

2.50 points in question 12 (A deontological code defines the ethical norms of a specific profession). Group A from Cluster 2 shows a score that is always inferior to Group B from the same cluster in the four questions under analysis (questions 1, 2, 10 and 12). Still, Group A gave more meaning to questions 1 and 10 (An ethical attitude from the TOC/ROC allows a higher degree of transparency in business, and A deontological code must be based on strong

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ethical principles) with a score of 5.59 in both questions. Question 12 also has a score of 5,09 points and the question with the lowest score was question 2 (ethics must be normative), with 4.64 points. On the other hand, Group B from Cluster 2 gives particular relevance to question 1 (An ethical attitude from the TOC/ROC allows a higher degree of transparency in business; 6.60 points), and to question 10 (A deontological code must be based upon strong ethical principles; 6.48 points), while the other scores for questions 12 and 2 were 6.03 and 5.70 points, respectively. After the course, four distinct groups were noted, according to the dendogram shown in Figure 2, which are gathered as follows: B

Cluster 1, composed of only one student;

B

Cluster 2, Group A, composed of five students;

B

Cluster 2, Group B, Subgroup B1, composed of two students; and

B

Cluster 2, Group B, Subgroup B2, composed of 63 students.

Cluster 1 is characterised by having the maximum score in question 2, a high score in question 1 with 6.00, and a reduced score in question 12 (A deontological code defines the ethical norms of a specific profession; with 2.00 points), which makes this an insignificant group due to its size. Cluster 2 includes the other 70 students that are gathered in two distinct groups: Group A shows a higher score, about 5.80 in question 10, and low scores in the other questions when compared to Group B. Thus, it is important to highlight the scores of question 12 (i.e. 2.80) and question 2 (3.20). On the other hand, Group B shows higher scores in the answers to questions 1, 2 and 12 (A deontological code defines the ethical norms of a specific profession), with 6.58, 6.03 and 5.83, respectively. We can clearly identify two subgroups in Cluster B, which keep the distinct characteristic of Group A but with close patterns to the scores of the answers given to questions 1, 2 and 12 and more distinct in question 10, i.e.: B

Subgroup B1: scores for questions 1, 2, 10 and 12 were 6.50, 6.35 and 5.50 respectively; and

B

Subgroup B2: scores for questions 1, 2, 10 and 12 were 6,67, 6,06, 6,61 and 6,17 respectively.

4.3 Affective/assessing dimension of attitude After analysing the questions about the affective/assessing dimension of attitude towards ethics before attending the subject of Ethics and Professional Deontology, we now discuss our conclusions. The four answers with the highest score (greater than 5 on a scale of 1 to 7) are presented in Table X. The answer with the lowest score (less than 4 on a scale from 1 to 7) was to question 3 (the entity’s interest is more important), with 3.83. On the other hand the questions about the affective/assessing dimension towards the ethical attitude after attending the same subject allowed us to draw the following conclusions. The four answers with the highest scores (greater than 5 on a scale of 1 to 7) are presented in Table XI. The answer with the lowest score (less than 4 on a scale of 1 to 7) was question 3 (the entity’s interest is more important, with 4.50). It is important to highlight that the answers to the questions with higher scores and with lower scores registered a smaller and a bigger variation respectively. 4.3.2 Cluster analysis. In order to perform the cluster analysis, the authors developed the following four steps: 1. Variable selection – The four variables (questions) with the highest scores (1, 7, 8 and 14) were considered (The existence of a deontological code, Accusation of a public crime and Accounting information) respectively, in each moment. 2. Definition of a similarity measure. 3. Aggregation criterion choice. 4. Results validation (see section 4.2.2).

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Figure 2 Clusters after attending the Ethics and Professional Deontology subject

Thus, based on steps 1 (variable selection), 2 (similarities measure) and 3 (aggregation criterion) the authors identified: three distinct groups before the course according to the dendogram shown in Figure 3, gathered as follows:

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Cluster 1, composed of only one student;

B

Cluster 2, Group A, composed of six students;

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Table X Affective/assessing dimension of attitude towards ethics before attending the subject of ethics and professional deontology: four answers with highest scores Questions

Score

7. Professional secrecy; 8. Accusation of public crime 1. The existence of a deontological code; 14 Accounting information

6.42 6.09

Note: Scores greater than 5 on a scale of 1 to 7

Table XI Affective/assessing dimension of attitude towards ethics after attending the subject of ethics and professional deontology: four answers with highest scores Questions 7. 11. 1. 6.

Score

Professional secrecy; 8. Accusation of a public crime An ethical TOC The existence of a deontological code The ethical principles

6.40 6.23 6.19 6.10

Note: Scores greater than 5 on a scale of 1 to 7

B

Cluster 2, Group B, Subgroup B1, composed of two students; and

B

Cluster 2, Group B, Subgroup B2, including 62 students.

Cluster 1, with little meaning as it concerns only one student, shows the maximum score of answers to questions 1, 7 and 8 (The existence of a deontological code, Professional secrecy and Accusation of a public crime), respectively and 5 in question 14 (Accounting information). Cluster 2 has an opposite result: i.e. it has the highest score in the answer to question 14 (with 6.22 points) and the lowest in the answer to question 1 (with 4.98 points), where the authors can identify two groups that divide themselves into three sub-clusters: 1. The first sub-cluster, Group A, has an intermediate score in relation to the other two sub-clusters (Groups B1 and B2) concerning the four questions. 2. Subgroup B1 has answers with a higher score for questions 8 and 14, with 7.00 and 6.50 respectively, and lower scores for questions 1 and 7, with 5.00 and 4.00 respectively, when compared either with Subgroup B2 or Group A. 3. Sub-group B2 has an opposite result: i.e. it has higher scores for questions 7 and 1, with 6.52 and 6.10, respectively, and lower scores for questions 8 and 14, with 6.26 and 6.07, respectively. After the course, four distinct groups were identified according to the dendogram shown in Figure 4, which are gathered as follows: 1. Cluster 1 – composed of only one student. Cluster 1, although representing only one student, has a higher score than Cluster 2 for questions 7, 8 and 14, and a lower score for question 1. 2. Cluster 2, subdivided by Group A (composed of five students) and Group B (composed of 37 students). In Cluster 2 the two groups reflect different intensities about subjects on ethics, namely: B

Group A always has the lowest scores when compared to Group B, yet it has high scores of about 5 points and the highest score in question 14 with 5.60 points and the lowest in question 7 with 4.60 points.

B

Group B gives particular relevance to question 7 with 6.57, points even though the other questions have high scores – 6.18 points in the question about accusation of a public crime and 6.14 in the questions about the existence of a deontological code and accounting information.

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Figure 3 Clusters before attending the Ethics and Professional Deontology subject

5. Discussion and limitations This paper has considered the appearance of deontology with its corresponding codes in different professions. This research deals with the deontological codes of TOC and ROC, as they are the professions most closely related to the Accounting and Finance degree (which includes the subject of Ethics and Professional Deontology) and are properly regulated. The

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Figure 4 Clusters after attending the Ethics and Professional Deontology subject

concept of ethics is not a consensual one among different investigators: for some it means a set of rules, principles and values that may be mistaken for morals from a broader point of view. However, in this research the authors share the idea of some authors that consider ethics as a judging reflection upon morals. After analysis, the authors have verified that there is a similarity between both codes, which is to be expected as these two professions belong to the same scientific or technical area

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.

and are based on an identical normative work – accounting plans and norms. Comparing the CDTOC with the CEDPROC elaborated by CTOC and OROC, respectively, the authors verified the existence of the common deontological principles outlined below. From the empirical research carried out in the classes of the Accounting and Finance degree of the ESCE of the IPS in 2005/2006, the authors can conclude that: B

Concerning the cognitive dimension of attitude towards ethics, the subject of Ethics and Professional Deontology strengthened the answers to the questions with lower scores. At the same time the authors could register a stronger Cluster 2, Subcluster B in particular, which changed from 43 to 63 students in a total of 71 students (which represents 89 per cent of the initial sample); This homogeneous group highlighted mainly questions 1 (An ethical attitude from the TOC/ROC allows a higher transparency in business, with a score of 6.58 points), 2 (Ethics must be normative, with 6.03 points) and 12 (A deontological code defines the ethical norms concerning a profession, with 5.58 points), in a reference scale that varies from 1 to 7 points.

B

Concerning the affective/assessing attitude of ethics, the subject of Ethics and Professional Deontology strengthened the students’ convictions about the importance of the existence of a deontological code, of ethical principles and of accounting information, as well as the question with the lowest score (the entity’s interest is more important).

The authors could register a consolidation of Cluster 2 after the aforementioned subject by the number of students that compose it (initially subdivided into to sub-clusters with two and 62 students that changed into one cluster of 65 students, who represent 92 per cent of the sample), who consider professional secrecy (with 6.57 points), the accusation of public crime (6.18 points) and accounting information (with 6.14 points) extremely relevant. Since in previous school years this questionnaire – or any other equivalent one – was used not used, there are no elements of comparison to confirm in a stronger way the importance of a subject such as Ethics and Professional Deontology for students of the Accounting and Finance subject in the ESCE of IPS. It is our intention to examine this theme more thoroughly. In summary, the authors teach Ethics and Professional Deontology as an essential need of society and as inherent to teaching activity: this must be promoted by policy makers. All these examples will have left an indelible impression that all is not well with the teaching world and that there are problems which need to be addressed (Crowther and Rayman-Bacchus, 2004).

References Argandon˜a, A. (1997), ‘‘La importancia de la e´tica en la empresa’’, E´tica Empresarial e Econo´mica, Vida Econo´mica, Porto. Crowther, D. and Rayman-Bacchus, L. (2004), ‘‘Perspectives on corporate social responsibility’’, in Crowther, D. and Rayman-Bacchus, L. (Eds), Perspectives on Corporate Social Responsibility, Ashgate Publishing, Aldershot. Lisboa, L. (1997), E´tica Geral e Profissional em Contabilidade, Editora Atlas, Sa˜o Paulo. Mercier, S. (2003), A E´tica nas Empresas, Edic¸o˜es Afrontamento, Lisboa. Reis, E. (1997), Estatı´stica Multivariada, Edic¸o˜es Sı´labo, Lisboa.

Further reading Caˆmara dos Te´cnicos Oficiais de Contas (1999), Co´digo Deontolo´gico dos Te´cnicos Oficiais de Contas, Caˆmara dos Te´cnicos Oficiais de Contas, Lisboa. Caˆmara dos Te´cnicos Oficiais de Contas (1999), Estatuto da Caˆmara dos Te´cnicos Oficiais de Contas, Caˆmara dos Te´cnicos Oficiais de Contas, Lisboa. Carreira, F. and Gonc¸alves, C. (2005), A Avaliac¸a˜o da Dimensa˜o Cognitiva face a` E´tica: Um Estudo Empı´rico, Documento de Trabalho da ESCE, Setu´bal. Cravo, D. (1999), A E´tica como Factor de Diferenciac¸a˜o no Exercı´cio da Actividade Profissional do Contabilista, Estudos do ISCAA, Aveiro.

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Mautner, T. (2005), ‘‘E´tica e moral, Crı´tica Revista de filosofia e ensino’’, Australian National University, Canberra, available at: www.criticanarede.com/eti_eticamoral.html Moreira, J. (2004), Questiona´rios: Teoria e Pra´tica, Almedina, Coimbra. Ordem dos Revisores Oficias de Contas (1999), Estatuto da Ordem dos Revisores Oficias de Contas, Ordem dos Revisores Oficias de Contas, Lisboa. Ordem dos Revisores Oficias de Contas (2001), Co´digo de E´tica e Deontologia Profissional dos Revisores Oficias de Contas, Ordem dos Revisores Oficias de Contas, Lisboa. Pereira, A. (1999), SPSS – Guia Pra´tico de Utilizac¸a˜o, Ana´lise de Dados para Cieˆncias Sociais e Psicologia, Edic¸o˜es Sı´labo, Lisboa. Pestana, M. and Gageiro, J. (2000), Ana´lise de Dados para Cieˆncias Sociais – A Complementaridade do SPSS, Edic¸o˜es Sı´labo, Lisboa. Quivy, R. and Campenhoudt, L. (1992), Manual de Investigac¸a˜o em Cieˆncias Sociais, Editora Gradiva, Lisboa. Reis, E. (1999), Estatı´stica Aplicada, Vol. 2, Edic¸o˜es Sı´labo, Lisboa. Singer, P. (1994), E´tica Pra´tica, Editora Martins Fontes, Sa˜o Paulo. Solomon, R. (2004), ‘‘A e´tica empresarial: crı´tica revista de filosofia e ensino’’, University of Texas, Austin, TX, available at: www.criticanarede.com/fil_eticaempresarial.html

To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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Corporate social responsibility, new activism and public relations Kristin Demetrious

Kristin Demetrious is a Lecturer in Public Communication at the School of Communication and Creative Arts, Faculty of Arts, Deakin University, Geelong, Australia.

Abstract Purpose – This paper aims to analyse why some contemporary corporate organisations are reluctant to articulate the effect of their market positioning behaviour on the unwilling communities that oppose their activities. It describes the communicative interactions between several large corporate organisations and the grassroots activist groups opposing their activities, in Victoria, Australia. Design/methodology/approach – Extensive secondary data were collected, including extensive newspaper and radio transcripts from the campaign periods, web site downloads, letters and other campaign documents. The research design applied to the data, a qualitative, interpretative analysis, drawing on key theoretical frameworks. Findings – The research findings suggest that powerful protest strategies, combined with the right political and social conditions, and a shift in the locus of politics and expertise, bring to light public concerns about the ethics of corporate practices, such as public relations, used egocentrically by organisations, to harmonise their activities in late modern Western society. It finds that no serious overhaul of business ethics can occur until the unity of public relations is critically scrutinised and reformed. It helps define an alternative holistic communicative approach which could be applied more widely to business practice that helps avoid the limitations and relativism of public relations. Originality/value – The research flags new ways of thinking expressed in the notion of public communication that could lead to creative and unusual coherences vital to deal with the apparent ecological challenges for society in late modernity. Keywords Public relations, Ethics, Community relations, Risk management, Australia Paper type Research paper

PR – outmoded, outmaneuvered, out of touch In the twentieth century, communication management, or the planned teleological, or goal-oriented programs of public relations, began ‘‘as a way for an organisation to generate positive publicity that might offset public pressures to regulate big business’’ (McElreath, 1997, p. 6). Furthermore, organisations that employ public relations as a strategy to manage dissent in order to achieve ‘‘harmony’’ are promoted not only as a legitimate, but as beneficial to society. Widely known, this ‘‘Official Statement of Public Relations’’ appears in key public relations education texts, such as Wilcox et al. (2000), Hendrix (2001) and Cutlip et al. (2000). Public relations helps our complex, pluralistic society to reach decisions and function more effectively by contributing to mutual understanding among groups and institutions. It serves to bring private and public policies into harmony. (Public Relations Society of America; see www.prsa.org/_Resources/profession/index.asp?ident ¼ pro).

But public relations, as the instrument of business and a positive harmonising effect on society, is contested. Critics of public relations (Stauber and Rampton, 1995; Beder, 1997; Nelson, 1989; Hager and Burton, 1999) argue that, as a domain, it has an unfair advantage over other social groups in ways that lead to the entrenched dominance of business interests

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DOI 10.1108/17471110810856875

and unscrupulous behaviour, particularly in relation to the civil sector. For example, Nelson (1989) claims that some business organisations in the USA use the hidden subterfuge tactic of environmental greening, sometimes known as ‘‘greenwashing’’, to deflect criticism and disguise their other profit-based objectives. Stauber and Rampton (1995) claim that public relations practice is structured to be unethical because practitioners bow routinely to the self-interest of their employers, leading to deliberate harm to the reputation of the opposition. Similarly, Beder (1997, p. 34) argues that the public relations and practices such as ‘‘astroturfing’’, or the deceptive manufacture of public support for corporate programs, are accelerating with the proliferation of new information technologies and techniques. Indeed, more recently, Salleh (see www.abc.nte.au/cgi-bin/common/2005) reports on new media developments, such as blogs and podcasts, that create online astroturfing. For example, she claims that McDonald’s set up a fake blog or ‘‘flog’’ to promote the fast-food multinational using a fictional character (pp. 1-2). While these writers describe some of the detrimental effects of public relations on a democratic society, the work of Durkheim (1957) provides a deeper understanding of why these practices occur. In particular, he discusses some of the characteristics of capitalism, such as the principle of competition, which pits one business against another, and potentially leads to a conflict with the common good. He argues that business – unlike other complex unities such as the law, army and education and government – has no effective professional body to ensure that traditions are kept and common practices observed. Indeed, that when a breach occurs, there is no effective overseeing body in business, nominal sanctions, and that public opinion plays a minimalist role. The characteristic insularity of business also stops the permeation of ideas from other sources: ‘‘since opinion is not kept lively by frequent contact between individuals and since it therefore cannot exercise enough control over individual action, it is lacking both in stability and authority’’ (Durkheim, 1957, p. 10). Applying the ideas of Durkheim to contemporary business practices, it is not surprising that public relations’ codes of ethics are criticised as hollow and unable to protect the public from the frequent lies, exaggerations, and breaches of public confidence perpetrated by the industry, such as greenwashing and astroturfing. Indeed, Durkheim’s analysis helps in understanding why the powerful but uncontrolled position of public relations within modernity has spawned an industry of critics such as Nelson (1989), Stauber and Rampton (1995) and Beder (1997), who relentlessly lampoon the public relations industry for its meaningless ethics and lack of accountability. The work of Habermas (1984, 1989, 1995) also sheds light on why, in late modernity, some corporate organisations are reluctant to articulate the ethics of their market positioning behaviour and its effect on communities. Habermas’s (1995) work explores the foundations of early modernity in the eighteenth century and the socio-economic historical changes that occurred then, such as European trade and capitalism. He argues the new mercantile classes saw free trade and competition as a fair means by which individuals could reap rewards. Indeed, Habermas (1995, p. 9) claims that the development of trade and capitalism led to bourgeois humanism or a ‘‘concern with man rather then God or nature’’ (Abercrombie et al., 1994, p. 204). At this time, the bourgeoisie saw resources such as water, forests, air and soil as available for exploitation precisely because the pursuit of technological progress or advancement was regarded as an innate, good and defining human characteristic (Habermas, 1995, p. 9). Business, within the spirit of early modernity, established the domain of public relations as their instrument. Hence, public relations theorists constructed and validated knowledge about communication to promote organisations’ self-interest, scientifically. They designed systematic teleological programs to measure public opinion and to classify publics, markets or audiences, and often used the press and other information technologies to reach large groups (Wilcox et al., 2000; Hendrix, 2001; Cutlip et al., 2000). However, Habermas regarded the phenomenon of public relations as insidious because, largely, the public is unaware of its presence within the bourgeois public sphere. For Habermas (1995, pp. 3-5), the idea of the public sphere is as a centre of self-interpretation which, through discussion and debate, promotes the overall common good. But he argues

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that public relations mimics and undermines the original intention of the public sphere through the creation of ‘‘news’’ anchored to commercial self-interest (Habermas, 1995, p. 194). Therefore, consumers are given a false consciousness and believe that they are actually making a decision based on their own judgement about what is good for society. For Habermas, public relations is therefore merely the instrument of specialised commercial interests designed to create a mood of consent in which public acceptance of takes place. As a result, rational agreement arising from exchanges of different opinion has disappeared from the public sphere precisely because it is ousted by public relations (Habermas, 1995, p. 195). Significantly, for Habermas, this form of publicity in modernity is dangerous for democracy because it strengthens prestige and position, without drawing attention to unwanted discussion. Organisations and functionaries become interested in representation, not just from the outside, but through the public sphere as a form of legitimisation (Habermas, 1995, p. 201). In a later work, Habermas (1984) sheds light on how public relations is produced and practiced. Broadly, he argues that rationality is used to form understandings and create meanings and co-ordinate action in our society. But herein lies a fine distinction: for Habermas rationality does not imply knowledge but rather how the ‘‘speaking and acting subjects acquire and use knowledge’’ (p. 8). I take this to mean that if the speaking and acting subjects express knowledge in ways that are congruent with notions of reliability, objectivity and in goal-directed actions, then knowledge is deemed rational in relation to the norms and conditions of the time – for example, modernity. Habermas’s (1984, 1989) refinement of the concept of rationality leads to his premise that in modern societies an individual subject may respond to two aspects of reason to coordinate action. The first form of rationality is instrumental, which implies an uncritical, teleological outlook, used to create means/end systems that appear to be totally rational, for example engineering. The appearance of rationality is an important point, because Habermas argues that there is sometimes confusion between this ‘‘system rationality’’ and what he calls ‘‘action rationality’’ which leads to an inability by participants to separate the two (Habermas, 1989, p. 333). System rationality refers to instrumental reasoning that is successful to the extent that people integrated in its maintenance assume it has higher order of rationality, and lose sight of its original purpose. The second form of rationality for coordinating action is communicative; this implies an interpretative consensus of understanding and mutual agreement, for example that reached in church and community centres on issues such as morality and law (Habermas, 1984). According to Habermas (1984, p. 397), in the conditions of modernity ‘‘religious-metaphysical world views lose their credibility’’ and, together with an ‘‘instrumental reason that has gone wild’’, converge to override the conditions that support communicative action. The ideas of Habermas suggest that in modern society, human advancement or ‘‘progress’’, through the organising principle of ‘‘system rationality’’, has led to the privileging of business over other sectors, such as civil. However, in late modernity and in advanced capitalist society, it appears that change is in the air. Ulrich Beck (1992) defines life in this era as characterised by the conditions of a risk society, that is, one where the life-threatening and hazardous by-products associated with industrialisation’s production processes and their distribution cause conflict in society in ways that radically influence thinking and action. He argues ‘‘[W]e are therefore concerned no longer exclusively with making nature useful, or with releasing mankind from traditional constraints, but also and essentially with problems resulting from techno-economic development itself’’ (Beck, 1992, p. 19). These theories describe a significant break in the logic of early modernity that determined decision-making and cultures in business and by extension, ‘‘PR’’ as mission-focused system rationality ambiguously represented through the symbols and signs of communicative action. Moreover, within the conditions of a risk society, Beck argues that in late modernity an increase in expertise will occur outside mainstream institutions (Beck, 2000, p. 29), which in turn will spearhead sub-political activity like grassroots activism or bottom-up politics. (‘‘Sub-political’’ and ‘‘bottom-up politics’’ refer to extra-parliamentary political activity outside traditional party domains of left and right politics; Beck, 2000, p. 19). Indeed, Beck

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claims that there is ample evidence that citizen initiative groups now provide leadership and set public agendas in ways usually associated with the state and with the business sectors. In this sense ‘‘sub-politics has won a quite improbably thematic victory’’ (Beck, 2000, p. 19). By this he means that collectives of citizens working for social change are resource-poor in technology and money and operate in less powerful political positions in society, yet nonetheless can influence social change in power structures that favour the dominant ruling groups. Beck argues that this is because once people are awake to the hazardous side effects of progress they are upset, especially as some people absorb more effects than others. In this case; ‘‘[I]t is the same everywhere: the demand is for forms and forums of consensus-building co-operation among industry, politics, science and the populace’’. However for that to happen, ‘‘the model of unambiguous instrumental rationality must be abolished’’ (Beck, 2000, p. 29). Therefore, to retrieve credibility for the processes of production and stop the hazardous by-products of industrialisation, ‘‘transcending borders’’ in unusual cross-linking and alliances of groups or new ambivalences must occur (Beck, 2000, pp. 28-31). Indeed, Beck argues that, in questioning system formations, people must recognise the state does not always act for the common good, even though that may be its objective; and that knowledge and legitimate expertise is available in different forms outside traditional administrations. Beck refers to this as the ‘‘demonopolization of knowledge’’ (Beck, 2000, p. 29). He argues that this situation is unlike simple modernity in which groups operated, often in isolation and bound to a fixed set of alliances or when industry was privileged and its advancement was seen as progress – and there was certainty in the state’s decision making. Indeed, according to Beck, a defining characteristic in the era he refers to as ‘‘reflexive modernisation’’ is the public’s rigourous examination of speaking positions and rethinking of unities or the ‘‘boundaries between subsystems’’, such as the state, business and civil sectors (Beck, 2000, p. 28). The emerging discourse of CSR with its holistic notions of business accountability and responsibility is also consistent with Beck’s ideas about a trend, towards consensus, occurring in the restructuring of power relations between business, state and activist groups in a risk society (Beck, 2000, pp. 28-31). These theories can be observed in action in contemporary society, where business is attuned to ideas of corporate social responsibility (CSR). CSR (Andriof et al., 2002; Lyons, 2001; Greenwood, 2001; McIntosh et al., 1998) theorises new developments in social relations and claims that it is possible to achieve an acceptable intersection between profit-making and social, economic and environmental responsibility to create sustainability that has a ‘‘positive social and environmental impact’’ (Birch, 2001, p. 62). In line with this, organisations can apply CSR principles to create ‘‘new self-awareness benchmarks’’ and more complex criteria to measure success and define public benefit, for example ‘‘business responsibilities, social and economic and impacts, business behaviour, respect for rules, support for multilateral trade, respect for the environment and avoidance of illicit operations’’ (Goodpaster et al., 2002, pp. 52-53). Bliss (2002, p. 252) also sheds light on how business and activist organisations can apply CSR. She argues that by adopting the principles of CSR, business can communicate in more productive and sustainable ways. In particular, she argues that there are various styles in which activists can mount campaigns that determine the tenor of relations between stakeholders. One style is adversarial and another is working together through a stakeholder collaborative campaign (Bliss, 2002, p. 252). The ideas of Bliss (2002) do not assume rigid or fixed sets of social relations, and in this respect, intersect with Beck’s (2000) notions about rethinking unities, and acknowledging the possibility, and the value of, new system formations and alliances and the demonopolisation of knowledge.

New activists: groups of ordinary citizens However, while it appears that important transitions in logic that determine social thought and action are taking place in late modernity, the pace of change is variable. Rage and frustration – sometimes manifesting in the form of grassroots activism – over the imposition of narrow profit-maximisation business agendas is palpable. Moreover, within these changed social conditions, the role of public relations to ‘‘harmonise’’ ‘‘pressure’’, raises

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serious ethical questions that need to be resolved. In the Southwest region of the state of Victoria, Australia, between 1995 and 2003, three activist groups – Werribee Residents Against Toxic Dump (WRTAD), the Batesford and Geelong Action Group (BAGAG), and the Otway Ranges Environment Network – typify this reflexive response to risk. This section describes parts of their campaigns and some of their encounters with the various corporations whose activities they opposed. Werribee Residents Against Toxic Dump In 1995, CSR[1], an Australian sugar and building material company, announced its proposal to build a hazardous waste disposal facility (HWDF) in Wests Road, Werribee, approximately 32 kilometres Southwest of Melbourne, Victoria’s capital city. In a brochure designed to allay community concerns, CSR described ‘‘prescribed hazardous waste’’ as having mainly a ‘‘nuisance value’’, arguing that ‘‘until it was classified as prescribed waste about 10 years ago, such waste went to ordinary municipal tips all over Victoria’’ (CSR, c. 1996), CSR’s approach to communication was to convince the locals – who had mobilised quickly as Werribee Residents Against Toxic Dump (WRATD) – to trust them because ‘‘they knew best’’. However, as events unfolded, this appeared not to be the case. CSR initiated a raft of inept public relations moves that lost credibility with the politically, technically and media savvy local community, (Strangio, 2001, pp. 141-3). In one example, in 1998, Bob Reid, CSR’s General Manager Recycling and Waste Management announced that the landfill would now operate as a ‘‘repository’’ as opposed to ‘‘landfill’’, meaning that the waste could be retrieved and recycled. He said that ‘‘global positioning satellite technology’’ could locate materials earmarked for recycling at a later date and that half the material could be turned into ‘‘environmentally friendly potting mix and other garden products’’ (Dent, 1998b, p. 12). But according to Strangio (2001, pp. 141-3) the proposal’s 3D mapping capacity was outlined in the original plan and therefore not news to informed locals. Additionally, in what appears to be an acknowledgement of the effectiveness of WRATD’s campaign, CSR’s Bob Reid used WRATD’s catch phrase ‘‘no toxic dump’’ reflexively in his key messages ‘‘it is the right technology and it is in the right place’’ (Dent, 1998b, p. 12). But WRATD took the unusual step of publicly countering CSR’s communication management. The following brochure extract shows how WRATD presented public relations and advertising for readers as complex instruments to filter forms of truth: CSR makes a lot of false claims in its advertising and PR campaign, including their claims about EPA policy and about prescribed waste [. . .] CSR has spent a lot of money on advertising; they have lobbied politicians, held an ‘‘invitation only’’ press conference, and distributed more than 300,000 leaflets trying to convince the public that nothing could ever go wrong with their clay-lined toxic dumps (Werribee Residents Against Toxic Dump, c. 1998, p. 2).

Furthermore, when WRATD was sure of community support, in April 1998, it organised a consumer boycott of CSR (Werribee Residents Against Toxic Dump, c. 1999, p. 4). Indeed, the local newspaper, the Werribee Banner, reported that WRATD had ‘‘released hundreds of fliers listing items sold by CSR and the top 17 shareholders in CSR’’ (Werribee Banner, 1998). Despite these circumstances, on 30 April 1998, Robert McLellan, Minister for Planning, approved the CSR proposal for a hazardous waste disposal facility. The Environmental Effects Statement (EES)[2] supported CSR’s position that the proposal was sound and within acceptable limits (Strangio, 2001, pp. 133-5; Werribee Residents Against Toxic Dump, c. 1999, p. 5). Furthermore, Victoria’s high profile, pro-development Premier, Jeff Kennett, reinforced the necessity of such a facility saying that it would be ‘‘state of the art’’, and moreover, that community concerns were caused by ‘‘fear of change itself’’ (Lyon, 1998, p. 16). However, thousands of people from Werribee and beyond turned up at a public meeting at the Werribee race track to protest against the government approval of the CSR proposal (Strangio, 2001, pp. 136-8). Following this, CSR placed a full-page public notice in a local paper. In ‘‘question and answer’’ style, CSR reassured Werribee residents that when the site was full ‘‘It will be sealed, covered with earth, and planted with trees and grass as an

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attractive new parkland asset for Werribee’’ (CSR, 1998, p. 6). But a week later, on 20 May 1998, WRATD issued the media with a report that addressed CSR’s ‘‘12 false claims’’ and accused CSR of ‘‘trying to buy public support through a false advertising campaign’’ (see www.21century.aom.au/environment/wratd/). According to a WRATD media release: CSR has spent well over $100,000 over the past ten days to try to ram a set of lies down the public throat [. . .] They are counting on their wealth to override truth and community opposition, in the knowledge that we don’t have that kind of money (Werribee Residents Against Toxic Dump, 1998b, p. 1).

In another surprising tactic by the grassroots activist group, WRATD delivered a submission to CSR at its Annual General Meeting in Sydney on 13 July 1998 (Werribee Residents Against Toxic Dump, 1998a, c. 1999, p. 5). This document argued that the proposed HWDF would damage shareholder value by drawing attention to the prospect of litigation and add further damage to CSR’s corporate identity. Another WRATD communication, aimed more specifically at stockbrokers and shareholders, was a flyer that listed reasons for the decline in CSR share value, including its diversification into ‘‘non-core and non-profitable business ventures’’. It included a plea to shareholders that ‘‘the 70,000 Werribee residents and their many supporters who oppose this proposal should be seen as potential customers, not adversaries’’ (Werribee Residents Against Toxic Dump, c. 1998, p. 1). However, regardless of being given state-government approval to proceed with its installation, by November 1998, CSR was ready to abandon the proposal for the hazardous waste disposal facility and sell the quarry site to Wyndham City Council. Indeed, CSR and the Wyndham Council were engaged in talks ‘‘conducted in strict confidence, with all other parties, including the Kennett government, left in the dark’’ (Strangio, 2001, p. 169). The Herald Sun, Melbourne’s tabloid daily, reported the meeting outcome: CSR last night announced it had accepted an offer from Wyndham City Council for the council to purchase CSR’s quarry site, shelving plans to dump 120,000 tonnes of toxic substances into the quarry [. . .] Mr Reid (CSR Recycling and Waste Management General Manager) said the offer was an opportunity to end a protracted and expensive legal dispute that started 12 months ago and could continue for 12-18 months (Dent, 1998c, p. 7).

CSR’s policy change caused deep embarrassment for the Kennett-led coalition state government. The Herald Sun reported Kennett as saying that: CSR would have to have been the most inept private sector organisation I have come across in trying to establish a facility [. . .] the management of this issue has been appalling and in the end they simply didn’t have the stomach for seeing it through (Dent, 1998d, p. 9).

Melbourne’s daily broadsheet The Age discussed the implications of WRATD’s challenge to the state government: It was, after all, an unaccustomed experience for the Premier to witness a project he has anointed being defeated by the actions of a group of ordinary citizens. For six years, his Government has successfully fended off the protests of organised lobby groups and the State opposition over everything from the privatisation of public utilities to the curtailment of powers of the auditor-general (The Age, 1998, p. 24)[3]

Batesford and Geelong Action Group Almost a year later, on 18 September 1999, ‘‘the unthinkable happened’’; a minority Australian Labor Party (ALP) state government replaced the radical right-wing coalition (Strangio, 2001, p. 178). Indeed, while in office, Premier Kennett had overseen a range of controversial issues, such as the locating of toxic dump at Werribee, and instigated some significant long-term policy changes for Victoria, including the privatisation of the state’s power utilities (Alford and O’Neill, 1994). But rather than resolve the issues about supply, the privatization policy reduced the state’s capacity to meet and/or manage energy demand, which was under increased pressure due to a consumer trend to buy and use air conditioners. Therefore, the newly elected state ALP government – which had pledged a different approach to government characterised by community consultation and consensus – was confronted by the need to take swift action to address the predictions of power

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shortages in the state’s electricity grid and the potential for blackouts, particularly in the Southwest region of the state (Gardiner, 2002, p. 13). In 2001, and in response to the state government alert, US multi-national energy company AES Corporation applied for a generation licence under the Electricity Industry Act 2000. It proposed to build a peaking power station at the small rural centre of Stonehaven, near the regional city of Geelong, 75 km Southwest of Melbourne. The power station was intended to ease the pressure on the electricity network and to provide timely back-up for the state’s power reserves. It was to be known as AES Golden Plains and operated by their subsidiary, AES Power One (AES Power One, 2001, p. 1). AESPO reassured the Labor state-government in its application that that the Golden Plains facility was ‘‘clean, quiet, safe and reliable’’ (AES Power One, 2001, p. 2), while The Sunday Age (Adams, 2001, p. 11) reported that the proposed Golden Plains project would have positive economic flow-ons, as it ‘‘was a direct capital investment of $260 million’’ that drew on local Victorian services, products and workforce as much as possible (Adams, 2001, p. 11). The state government, led by new ALP Premier Steve Bracks, and the proponent AESPO, wanted the power station operational as soon as possible. AESPO’s licence application stated that ‘‘Golden Plains is being fast-tracked in an attempt to address the current shortfall in reserve capacity’’ (AES Power One, 2001, p. 3). A spokesperson for Planning Minister John Thwaites said the government ‘‘believed key environmental issues would be addressed in the planning permit and the Environment Protection Authority (EPA) approval processes’’ (Hodgson, 2001, p. 39). However, residents in the semi-rural Dog Rocks estate, only a few kilometres from the proposed site, were upset that the project was proceeding so fast. They were uncomfortable, not only with the idea of a polluting power station so close to their homes, but also with the way the ALP state government appeared to be circumventing process to suit the proponent. Local residents, environmentalists and other concerned citizens quickly mobilised to communicate opposition to the proposed AESPO power station. In mid-2001, Batesford and Geelong Action Group (BAGAG) formed ‘‘to stop AES Corporation building a gas fired, peaking power station at Stonehaven’’ (Oliver Baird, 2001, pp. 12-3). In a letter to the Office of the Regulator-General, Victoria[4] the group’s steering committee stated that widespread community concerns about the proposed power station had led to the group’s formation. ‘‘Recent meetings have been attended by up to 150 people. Their opinions are representative of thousands more’’ (Batesford Action Group Steering Committee, 2001). BAGAG mounted arguments against the proposed power station’s production of hazardous risks based on contradictions in local, state and federal policy, its location, its technology and the proponent’s reputation for corporate irresponsibility and violations. On a state level, BAGAG questioned the government’s commitment to reducing greenhouse gases and consumption, particularly of air conditioners, which were known to create significant power demands. In particular, BAGAG criticised the incumbent ALP government for taking shortcuts in the community consultation processes. Indeed, the state planning and health minister, John Thwaites, had bypassed the Environment Effects Process (EES) process which Premier Bracks previously had stated was needed to accompany any new power station development in Victoria. According to BAGAG, an EES process would consider the plant’s environmental impact in relation to, for example, water and air quality over a 12-month period, taking into account locally specific meteorological conditions. Without such a detailed study, the group maintained the approvals process was flawed. Furthermore, BAGAG argued that AES Corporation’s compliance record in the international electricity industry made it an inappropriate licensee for the power plant. The group found that AES was currently being investigated for price fixing in the US by five statutory authorities and that in 2000 it was fined for a number of breaches of environmental standards. BAGAG claimed it presented this information at a mediation meeting to AESPO Director Jerry McBrien who admitted it was true and that ‘‘no one is perfect’’ (see www.chalicedreams.com/Batesford-Action-Group/b-aes.htm). To harmonise community anxiety over these apparent contradictions in logic, in early October, AES produced a letter signed by AESPO’s Golden Plains Manager Graeme

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Dowers, in part, to respond to alleged false and misleading claims and unethical communication practices that accompanied the approvals process. They argued that this had come in two forms, through the local media and ‘‘people opposing the development’’ (Dowers, 2001): There has been a degree of negative reporting of the AES Golden Plains power station and AES itself recently through the local media. This has been based upon the misconception of some key facts, and regrettably, in some cases the result of misleading information propagated by people opposing the development. As we move closer to the power station’s imminent construction phase, I am pleased to report AES will considerably step up communication with key stakeholders, including the local Golden Plains and Greater Geelong communities in order to ensure the station’s smooth integration. First and foremost, AES is concerned to encourage a full understanding of the project – particularly to clarify present misconceptions regarding environmental impacts (Dowers, 2001).

Despite representations from BAGAG and other activists, the planning dispute resolution process Victorian Civil and Administrative Tribunal (VCAT)[5] announced approval for the AESPO to build the $260 million, 500 MW peak power station (Mayne, 2003, p. 5) on 14 December 2001. AESPO Director Jerry O’Brien was reported to have said that ‘‘VCAT has made an independent assessment [. . .] and determined it won’t be harmful to the community or the environment in Geelong. We would hope that people would be comforted by that assessment’’ (McCann, 2001, p. 5). However this was not the case. A separate entity to BAGAG, Community Picket Line (CPL) was formed in response to VCAT’s decision to uphold the Golden Plains Shire’s planning permit and designed to physically block access to the site (Geelong Independent, 2001, p. 3). The act of forming a picket line was a singularly effective communication tool, conveying the long-term commitment of the protesters. It provided a visual reference point for the protest and a means by which signage and the human face of the protest could be effectively communicated to local media (Johnstone, 2002b, p. 5; Box, 2002, p. 14; McCann, 2002, p. 1). However, ironically, at the same time as the Stonehaven activists were preparing for long-term community opposition to the proposal, the proponent was reconsidering its viability. AESPO had announced its USA parent company, energy giant Enron, had lost money and investments and for this reason it was considering withdrawing its interest (Poehland, 2002, p. 7). According to AES Project manager Matthew Barley, the current reassessment did not necessarily mean that the power station would not be built, rather ‘‘AES would maintain its planning permits and could reconsider construction some time after this year’’ (Murphy, 2002, p. 3). The state government, however, in the confusion surrounding the withdrawal of AES Corporation, took the opportunity to reassess its decision regarding the power plant’s construction. It argued that the completion of other electricity upgrades had catered for the shortfall, and it was now questionable as to whether the power station was needed at all, even though it had previously said the 500 MW power station was essential to service Victoria’s power shortages (Johnstone, 2002a, p. 5). Otway Ranges Environment Network At the same time that WRATD was forming in 1995, a collective of environmentally concerned citizens was mobilising in the vast forests of the Otway Ranges, approximately 200 km Southwest of Melbourne. Their campaign was centered on protecting the Otway region’s diminishing reserves of old growth and other native forest areas and stopping large-scale commercial logging practices (see www.oren.org.au/othistory.htm). When it formed, members of the Otways Ranges Environment Network (OREN) were a mix of practised and novice activists. Some came to the group as experienced protesters whereas others joined in response to current forest issues and debates. To position itself in the long running dispute about logging in the Otway Ranges, OREN focused its arguments on the forest’s multiplicity of values. In particular, it contested definitions of value that the timber industry and the state government assigned to different

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forest resources, such as timber, water and wildlife. Therefore, they defined the value not predominantly by economic indictors such as woodchipping yields set by forestry practices. To do this, they researched scientific, economic and social effects of commercial timber practices, such as biodiversity. Furthermore, OREN argued that subsidised commercial timber practices were economically unviable compared to the value of tourism. According to OREN’s 2003 calendar; ‘‘Tourism in the region is worth $1 billion each year, and employs thousands of people. Logging is subsidised by taxpayers by about $1 million and employs about 60 people, while destroying forest’’ (Otways Ranges Environment Network, 2003). OREN also argued that the Otways supplied 300,000 people with water and that the state’s logging policies, in particular woodchipping in native forests, were putting this at risk. In tandem with this, OREN contributed to policy making in the Otways through the participation in a state and federal forest management process, the West Victoria Regional Forest Agreement (RFA)[6]. However, an analysis of OREN’s web site also sheds light on how the group framed meanings and knowledge for other citizens who were interested in the debate. In particular, one page on the OREN web site is devoted to an expose´ of contested understandings of logging issues. This page appears to be designed to undermine the dominant reading position put forward by the logging industry and empower readers to undertake a critical negotiated reading of the logging industry produced text. Titled ‘‘Clearfell logging – Logging industry propaganda’’, the page lists ten statements issued by the logging industry that OREN challenge (see www.oren.org.au/logging/directory/clearfell.htm). It is evident from this quote that OREN paid a high level of attention to the multiple interpretations that the reader would encounter of particular words such as ‘‘harvest’’: B

The word ‘‘harvest’’ is a substitute for the word ‘‘clearfell logged’’ because it sounds better.

B

The word ‘‘harvest’’ implies that a complex forest ecosystem can be managed by humans in the same way as a mono-culture crop of wheat or sugar-cane is farmed. The word harvest implies forests were created by humans to exploit when in fact they evolved over millions of years. The Otways forests exists [sic ] in its [sic ] own right without human intervention.

B

A more accurate description of the concept ‘‘harvest’’ would be ‘‘the natural forests are being cut down and replaced with a modified crop of trees similar to a plantation that will be harvested in 60 to 80 year rotations’’ (italics in original; see www.oren.org.au/logging/ directory/clearfell.htm).

OREN’s web site also claims that the state government department, Forestry Victoria, suppressed key information for subjects. Titled ‘‘Forestry Victoria research and information suppression’’, a web page lists documents the state department supplied to the public that they claim that are misleading, such as incorrect maps and hydrology research (see www.oren.org.au/logging/who/FVsupress.htm). The text producers, by posting this information on OREN’s web site, demonstrate a preparedness to interrogate and challenge competing values and assumptions and to produce a counter-hegemonic reading position and discourse on forestry issues. Indeed, this theme of revealing the controlling properties of discourse is evident in many parts of the OREN campaign. This extract is taken from an OREN research report and contains another example where readers were positioned by the group to challenge the preferred reading position of the state and industry organisations: Timber Industry Double Talk – the Forests Regenerate The concept that forests regenerate after logging is widely used by industry spokespeople. The use of the word ‘‘regenerate’’ implies that exactly what was in existence before logging will be recreated. This had the effect of deceiving the public into believing that nothing is being lost. The industry plans to log in 80-year rotations while today it clear fells trees over 250 years old. We will not know for 250 years if these forests will regenerate to what they are today. How the forest

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industry manages to grow 250 years in 80 years is remarkable (Otways Ranges Environment Network, 1999, p. 9).

As a result of this unusual rigour and engagement with techno-scientific discourse, OREN’s scientific bona fides became legitimate and the Melbourne media began to refer to them as an authority to describe logging practices in the Otways: Water is already a critical regional issue, with Geelong on restrictions since January last year. The warning is contained in a report by the Otways Ranges Environment Network. It is based on a five-year study by the Cooperative Research Centre for Catchment Hydrology, which found that run-off into dam catchments declines when trees are young, then progressively increases, levelling off after 240 years (Miller, 1999, p. 9).

A breakthrough for OREN occurred in November 2002, when Premier Steve Bracks announced that, if a Labor state government were re-elected, logging in the Otway native forests would stop within six years. The Herald Sun (2002, p. 1) reported that ‘‘The Premier unveiled a $50 million plan to buy back all timber licences in the Otways and create a national park from Anglesea to Cape Otway in Victoria’s southwest. Mr Bracks denied that the promise was a move to win Greens preferences’’. Bracks said, ‘‘We have listened to the community and we will now act of [sic ] behalf of future generations to save the Otways. If re-elected, we will make the Otways one of the world’s great national parks’’ (Otways Ranges Environment Network, 2004).

CSR, New Activism and the ethics of manufacturing consent Given these events, what are the lessons about conflict and communication between business and community that can be learned from these examples and, drawing on the theories of Durkheim (1957), Habermas (1984, 1989, 1995), Beck (2000) and Bliss (2002), how can they be applied to new holistic business approaches such as corporate social responsibility? Foremost, the WRATD, BAGAG and OREN examples show that the corporations these groups opposed used public relations based on the logic of early modernity and that it was characterised by numerous problems within a risk society and in a period of late modernity. One example was the framing of the activists, by public relations practitioners, as the opposition, enemies and/or simple-minded. In the BAGAG case study, AESPO demonstrated this in a letter designed to quell concerns about the power station (Dowers, 2001). However clearly, the tactic failed to undermine the public’s confidence in the activists or to garner support for the company. In fact, this approach was viewed by the activists as counter-productive and offensive because it appeared patronising and simplistic to the informed readers of the media. Nor, in these examples, was public relations able to operate in the discreet or invisible ways that Habermas described. For example, to counter the effects of CSR’s communication, WRATD produced and distributed a brochure for the public that drew attention to the processes of public relations and advertising (Werribee Residents Against Toxic Dump, c. 1998). Furthermore, they produced the document: ‘Lies, Damn Lies and CSR’ (Werribee Residents Against Toxic Dump, 1998b) as a rebuttal to CSR’s ‘‘12 false claims’’ and refocused the debate around the truth-telling capacity of the company. Following this, CSR’s public relations efforts were highly scrutinized and further weakened. Similarly, OREN made public relations visible and exposed and interpreted it for people who may otherwise have accepted it uncritically. OREN’s web site included a page of analysis applied to terms such as ‘‘clearfell logging’’ and other ambiguous statements used by the logging industry to describe aspects of their system rationality. In this sense, OREN’s communication was designed to undermine the native timber logging industry’s dominant discourse. The state and the timber industries produced dense and technical information about the logging of the Otway native forests in ways that suggest language was used to funnel thought back into the bureaucratic and instrumental systems which had been dominant to this point. OREN’s response to counter the legitimacy of this authority is consistent with Beck’s notion of the ‘‘demonopolization of knowledge’’ (Beck, 2000, p. 29). Therefore, OREN achieved a depth of understanding and rational critical debate on logging issues and eventually adopted an authoritative speaking position, despite some journalistic

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and editorial predilections to engineer an anti-logging/pro-logging dichotomy, despite its members being embroiled in violent incidents with the logging industry, despite the distraction of timber industry-generated public relations, and despite the bureaucratic intransigence and the barriers to understanding it created through the technologisation and demonopolisation of discourse. WRATD, BAGAG and OREN not only critiqued and rejected public relations’ fundamental system rationality but, moreover, used publicity to uncloak its mask of communicative action for publics. Therefore, the use of public relations in these examples – and the activists’ response to this by the creation of the object of public relations in its complexity – raises a number of issues that are significant. Firstly, by exposing the involvement of public relations in text production, the activist groups created critical public opinion shaped by ‘‘rational agreement between publicly competing opinions’’, rather than consent for the organisations issuing public relations to gain credibility (Habermas, 1995, p. 195). Secondly, they demonstrated that these industries could only succeed in using public relations to gain exposure and prestige if the ‘‘PR’’ was unrecognisable as self-interest (Habermas, 1995, pp. 194-5). Thirdly, they showed a belief that, if public relations were left unchallenged, it could stifle vital public debate about contested and complex social issues such as toxic contamination, deadly air emissions and changes to water yields. Public relations can be ruthless and socially undemocratic in the promotion of large business and government interests, but this approach did not work in the WRATD, BAGAG and OREN campaigns. Despite its best efforts to engineer an outcome that served the self-interest of its organisations, business was defeated by activism’s most marginal form – grassroots. Public relations was used as an instrument by business and the state to intervene socially in ways that were expected to be unscrutinised and undetectable (especially to uneducated publics), within the public sphere (regarded as a forum for political and social control) to produce a naturalised speaking position that promoted their views of a harmonious balance between society and capitalism. But these case studies show that there are other effective forms of organisational communication occurring in the Australian civil sector and, importantly, that within the unity of public relations these examples are largely unnamed, undescribed and unacknowledged. I conclude that the problems of public relations stem from both its fusion of system rationality and unauthentic communicative action that exploits – sometimes benignly and other times ruthlessly – the public sphere using goal-oriented instrumental reason in psychologically complex ways to justify and promote system organisational self-interest within a climate of acceptance that erodes critical public opinion shaped by rational debate, precisely because its driving doctrine is that the common good is somehow being served by its actions. Therefore, the claim of public relations to theorise and speak for the unity of organisational communication is deeply flawed, because it is ideologically invested to include some sectors and exclude others, in particular, grassroots activism. Public relations’ unusual fusion of system and communicative rationality contributes to its invisibility and an erroneous understanding by business and the state as a universal activity. ‘‘PR people’’ have become so integrated in the maintenance of these programs that the discourse has taken on a high order of credibility and authority in modern society. Therefore, the unity of public relations has been credited falsely as an authority to speak on communication activities between organisations, precisely because it is an arm of larger and more powerful examples of system rationality such as the power, chemical and timber industries discussed in the WRATD, BAGAG and OREN examples. No serious overhaul of business ethics or public relations can occur until business acknowledges the social context of a risk society – in its complexity – and scrutinises the ethics of manufacturing consent. However, the examples of grassroots activism also show an alternative approach to communication. WRATD, BAGAG and OREN developed depth of discussion in the public sphere and critical debate. Through a range of discursive practices, they produced and distributed communication for subjects to promote understandings that assisted them to think and act independently on the debates and to form considered and informed judgements. Communication throughout the campaigns was characterised by consistent,

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rational and regular approach that sought to educate subjects, rather than to persuade, in order to shed light on the complex relationships between the state, business and civil sectors and the consequences for public policy. In particular, they show that within the model of a risk society ‘‘new ambivalences’’ or unusual cross-linking and alliances between groups – such as with WRATD and the CSR stockbrokers and shareholders – will occur. Therefore a better method of communication between business and other groups is through a holistic stakeholder collaborative approach to set the tenor of relations from the outset (Bliss, 2002, p. 252). This approach assumes a rethinking of the ‘‘boundaries between subsystems’’, such as the state, business and civil sectors (Beck, 2000, p. 28). This is significant, not only because it shows an alternative, but because if businesses continue to apply simple approaches in their public relations when dealing with resistance from activist groups, they will not only contribute to significant social havoc through conflict and antagonism but they will waste the collective resources of the state and risk their long-term business viability. Furthermore, within the conditions of reflexive modernity and a risk society, collaborative deliberative-communication could be applied by groups other than business, which could have positive flow-on effects for society. This application could have significant consequences for the polity, or the institutions, (such as the state government, the water authorities and the local councils discussed) which determine relations of power in society (Abercrombie et al., 1994, p. 319). In particular, grassroots activists could, through the use of this mode of communication, make important contributions to social debates. As a result, less concentration of decision-making in state and business sectors could occur in a more democratic distribution of resources and a shift in the structure of the polity to include the civil sector to a greater extent. This could produce greater diversity of ideas and more tolerance through communicative deliberation. For example, grassroots activists have a unique ability, through their sub-political status, to present arguments about how the common good will be served, considered from a range of unusual perspectives. As a result, citizens acting within sub-political groups could describe and identify issues that the polity, paradigmatically linked to system rationality, may have overlooked. In turn, the civil sector could gain greater legitimacy to participate in the political life of society. By the same measure, for business sectors, gaining legitimacy may be harder. For example, the constant onus on activists to prove ‘‘why not’’ (a toxic dump or polluting power station or clearfell logging in the Otways) may shift to business and industry having to prove ‘‘why’’. Overall, holistic collaborative-deliberative communication, within the conditions of reflexive modernity and a risk society, could produce more diversity in public debates, which in turn could benefit the individuals involved who are exposed to greater political processes. Stronger community networks may develop through this experience in process which could, in turn, create in individuals the capacity and agency to engage successfully with the polity. As a result, new forms of community could emerge with stronger expectations of political involvement and the means to access and participate in such activities. This could give rise to new discursive practices that facilitate further empowerment. If this occurred, the level of debate and understanding about issues relating to the polity could be raised in communities and more rigorous and considered decisions could be made. As discussed, an outcome could be that the polity could embrace dissent and have greater expectations of a divergence of views from a wider range of people, who in turn have the ability to accept the divergent views of others. People and groups engaging in political life, using collaborative-deliberative communication, could pay attention to fairness, participation and honesty in ways that result in less hidden relations and more transparency, and in particular less junking of the public sphere. Significantly, within a risk society, the collaborative-deliberative communication principles could be important to guide politically volatile sub-political expressions to maintain their focus and longevity in the face of a range of social and economic pressures. By reflecting and encouraging the values of citizenship, collaborative-differential communication approaches could affect a greater sphere of influence than the social issue itself. For practitioners, this mode of communication, characterised by the permeation of ideas, could

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help avoid the limitations and relativism of public relations. As a result, the absence and/or negativity in public relations discourse about the use of communication by grassroots activists could be addressed. Public relations’ authority, for example, to describe organisational communication in a way that marginalises activism could be exposed and undermined in the future. Furthermore, the objectification and critical analysis of public relations by an increasingly knowledgeable public suggests that the area may transform to a transparent, ethical, rigorous and inclusive approach, such as collaborative-deliberative communication. Their greater exposure to political process and interaction could lead to new concepts and thematic choices that become culturally embedded as institutions. Therefore, the movement of grassroots activism, through the mainstreaming of collaborative-deliberative communication, into a more central political and social space could result in its greater inclusion in decision-making, education and practice. This is significant firstly because it is a break with the logic of modernity where business and the state dominate thinking and action, and secondly because new ways of thinking, nurtured through this process, could lead to creative and unusual coherences that are vital to deal with the imminent ecological threat and hazard that lies within our risk society in reflexive modernity.

Notes 1. Originally Colonial Sugar Refinery, now referred to as CSR. 2. The public EES process is to facilitate orderly growth in planning and to assess ‘‘the potential impacts of the proposal on the environment’’ (see www.dse.vic.gov.au/dse/index.htm). ‘‘Once the EES is prepared, the DSE checks its adequacy for public exhibition. The EES is exhibited, for a period of between one and two months, and public submissions are invited’’ (see www.dse.vic.gov.au/dse/index.htm). 3. Strangio also uses this quote to describe this point in the WRATD campaign in ‘‘From Nimby (not in my backyard) to Niaby (not in anyone’s backyard): a model of non-parochial grass roots community action’’. 4. The Office with powers under the Electricity Industry Act 2000 to grant or refuse applications for an electricity licence (Office of the Regulator-General, c. 2001, AES Power One, 2001). 5. Victorian Civil and Administrative Tribunal (VCAT) was created by an Act in 1998 to deal with disputes between people and government (state/local) in areas such as planning and environment, amongst others (see www.vcat.vic.gov.au/). 6. The Commonwealth of Australia and the state governments were jointly developing Regional Forest Agreements (RFAs) to control future hardwood woodchip exporting for the next 20 years. The Agreements were intended as a strategy for long-term forest management to balance environmental, social and economic interests. They were meant to represent a diverse range of views, driven by extensive community consultation (Commonwealth/Victoria RFA Steering Committee, 2000, p. 1).

References Abercrombie, N., Hill, S. and Turner, B. (1994), Penguin Dictionary of Sociology, Penguin Books, London. Adams, D. (2001), ‘‘Hundreds hit the streets of Geelong in power struggle’’, The Sunday Age, 23 September, p. 11. AES Power One (2001), AES Generation Licence Application, 9 July, AES Power One Pty Ltd, Australia. (The) Age (1998), ‘‘Power to the people’’, 22 November, p. 24. Alford, J. and O’Neill, D. (Eds) (1994), The Contract State: Public Management and the Kennett Government, Deakin University Press, Geelong. Andriof, J., Waddock, S., Husted, B. and Sutherland Rahman, S. (Eds) (2002), Unfolding Stakeholder Thinking: Theory, Responsibility and Engagement, Greenleaf Publishing, Sheffield. Batesford Action Group Steering Committee (2001), ‘‘Re: Generation License Application by AES for power station Stonehaven’’, 7 August, Batesford Action Group Steering Committee, Melbourne. Beck, U. (1992), Risk Society: Towards a New Modernity, Sage Publications, London.

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Beck, U. (2000), ‘‘The reinvention of politics: towards a theory of reflexive modernization’’, in Beck, U., Giddens, A. and Lash, S. (Eds), Reflexive Modernization Politics: Tradition and Aesthetics in the Modern Social Order, Stanford University Press, Stanford, CA. Beder, S. (1997), Global Spin: The Corporate Assault on Environmentalism, Scribe Publications, Melbourne. Birch, D. (2001), ‘‘Corporate citizenship: rethinking business beyond corporate social responsibility’’, in Andriof, J. and McIntosh, M. (Eds), Perspectives on Corporate Citizenship, Greenleaf Publishing, Sheffield. Bliss, T. (2002), ‘‘Citizen advocacy groups: corporate friend or foe?’’, in Andriof, J., Waddock, S., Husted, B. and Sutherland Rahman, S. (Eds), Unfolding Stakeholder Thinking, Theory, Responsibility and Engagement, Greenleaf Publishing, Sheffield. Box, G. (2002), ‘‘Anniversary for power station opponents picketers fight on’’, Geelong Advertiser, 13 December, p. 14. Commonwealth/Victoria RFA Steering Committee (2000), West Victoria Regional Forest Agreement Consultation Paper, Commonwealth/Victorian RFA Steering Committee, Melbourne. CSR (c. 1996), Proposed CSR Waste Management Precinct, CSR, Chatswood. CSR (1998), ‘‘Waste storage at Werribee: the facts’’, The Times, 13 May, p. 6. Cutlip, S.M., Center, A.H. and Broom, G.M. (2000), Effective Public Relations, Prentice-Hall, Englewood Cliffs, NJ. Dent, S. (1998b), ‘‘Dump plan switch fury’’, Herald Sun, 9 May, p. 12. Dent, S. (1998c), ‘‘Victory on toxic dump’’, Herald Sun, 14 November, p. 7. Dent, S. (1998d), ‘‘Premier slams dump cave-in’’, Herald Sun, 17 November, p. 9. Dowers, G. (2001), AES, Golden Plains, Brisbane, 4 October. Durkheim, E. (1957), Professional Ethics and Civic Morals, Routledge Kegan Paul, London. Gardiner, A. (2002), ‘‘Parties trade blows over power crisis’’, Herald Sun, 3 January, p. 13. Geelong Independent (2001), ‘‘Objectors vow 24-hour picket of site’’, Geelong Independent, Vol. 21, December, p. 3. Goodpaster, K.E., Maines, T.D. and Rosang, M.D. (2002), ‘‘Stakeholder thinking: beyond paradox to practicality’’, in Andriof, J., Waddock, S., Husted, B. and Sutherland Rahman, S. (Eds), Unfolding Stakeholder Thinking: Theory, Responsibility and Engagement, Greenleaf Publishing, Sheffield. Greenwood, M.R. (2001), Community as a Stakeholder in Corporate Social and Environmental Reporting, Monash University, Caulfield. Habermas, J. (1984), The Theory of Communicative Action Reason and the Rationalization of Society, Vol. 1, Beacon Press, Boston, MA. Habermas, J. (1989), The Theory of Communicative Action: The Critique of Functionalist Reason, Vol. 2, Polity Press, Cambridge. Habermas, J. (1995), The Structural Transformation of the Public Sphere: An Inquiry into the Category of Bourgeois Society, MIT Press, Cambridge, MA. Hager, N. and Burton, B. (1999), Secrets and Lies, Common Courage Press, Munroe, ME. Hendrix, J.A. (2001), Public Relations Cases, Wadsworth Thompson Learning, Belmont, CA. Herald Sun (2002), ‘‘Promises, promises’’, Herald Sun, 7 November, p. 1. Hodgson, S. (2001), ‘‘Outrage over power plant’’, Sunday Herald Sun, 12 August, p. 39. Johnstone, K. (2002a), ‘‘Government backflip on Stonehaven power station. We don’t need it’’, Geelong Advertiser, 22 March, p. 5. Johnstone, K. (2002b), ‘‘Power protest marks 200-day milestone’’, Geelong Advertiser, 26 June, p. 5. Lyon, K. (1998), ‘‘Dump ‘approval’ angers Werribee’’, The Age, 21 March, p. 16.

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Lyons, M. (2001), The Contribution of Nonprofit and Cooperative Enterprises in Australia: Third Sector, Allen and Unwin, Crows Nest. McCann, K. (2001), ‘‘Power fight to continue’’, Geelong News, 18 December, p. 5. McCann, K. (2002), ‘‘This is life on the line’’, Geelong News, 12 February, p. 1. McElreath, M.P. (1997), Managing Systematic and Ethical Public Relations Campaigns, Brown and Benchmark Publishers, Madison, WI. McIntosh, M., Leipziger, D., Jones, K. and Coleman, G. (Eds) (1998), Corporate Citizenship: Successful Strategies for Responsible Companies, Financial Times Pitman Publishing, London/Washington, DC. Mayne, N. (2003), ‘‘AES pull the plug. Power station site on market’’, The Geelong Advertiser, 21 February, p. 5. Miller, C. (1999), ‘‘Water ‘at risk’ from logging’’, The Age, 24 June, p. 9. Murphy, N. (2002), ‘‘Critics claim victory as station stalls’’, Geelong Advertiser, Vol. 16, March, p. 3. Nelson, J. (1989), Power in Societies, Macmillan, Toronto. Office of the Regulator-General (c. 2001), AES Power One Electricity Generation Licence Application, Office of the Regulator-General, Melbourne. Oliver Baird, S. (2001), ‘‘Power to the people’’, The Geelong Times, 22 August, pp. 12-13. Otways Ranges Environment Network (1999), Clearfell Logging in the Otway State Forests and its Effect on Water Resources in the Region, May, Otways Ranges Environment Network, Otways Ranges. Otways Ranges Environment Network (2003), 2003 Calendar: Stop Woodchipping the Otways, the Forest of the Great Ocean Road, Otways Ranges Environment Network, Otways Ranges. Otways Ranges Environment Network (2004), 2004 Calendar: The Otways, the Forest of the Great Ocean Road, Otways Ranges Environment Network, Otways Ranges. Poehland, S. (2002), ‘‘Doubt over power plant objectors’ claim company has hit financial troubles’’, Geelong Independent, 22 February, p. 7. Stauber, J. and Rampton, S. (1995), Toxic Sludge is Good for You! Lies, Damn Lies and the Public Relations Industry, Common Courage Press, Monroe, ME. Strangio, P. (2001), No Toxic Dump, Pluto Press Australia, Annadale. Werribee Banner (1998), ‘‘That rotten bunch in Spring Street’’, 1 April. Wilcox, D.L., Ault, P.H., Agee, W.K. and Cameron, G.T. (2000), Public Relations Strategies and Tactics, Longman, New York, NY. Werribee Residents Against Toxic Dump (1998a), ‘‘Submission to CSR directors and shareholders’’, Werribee Residents Against Toxic Dump, Werribee. Werribee Residents Against Toxic Dump (1998b), ‘‘$100,000 on false advertising by CSR’’, 20 May, Werribee Residents Against Toxic Dump, Werribee. Werribee Residents Against Toxic Dump (c. 1998), ‘‘Stockbrokers and shareholders: 5 reasons why you should not trade in CSR shares’’, Werribee Residents Against Toxic Dump, Werribee. Werribee Residents Against Toxic Dump (c. 1999), ‘‘WRATD chronology of events’’, Werribee Residents Against Toxic Dump, Werribee.

Further reading Andriof, J. and McIntosh, M. (Eds) (2001), Perspectives on Corporate Citizenship, Greenleaf Publishing, Sheffield. Beck, U., Giddens, A. and Lash, S. (Eds) (2000), Reflexive Modernization Politics: Tradition and Aesthetics in the Modern Social Order, Stanford University Press, Stanford, CA. Dent, S. (1998), ‘‘15,000 at dump rally’’, Herald Sun, 5 May, p. 2.

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About the author Kristin Demetrious is a Lecturer in Public Communication at Deakin University, Victoria. An experienced communication practitioner and media specialist, Kristin has worked in education and cultural industries and operated her own communication consultancy. Currently undertaking a PhD, Kristin’s research interests include communication in sub-political movements, public relations and identities. Her work is published in Australia and in the UK. Kristin Demetrious can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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‘‘What we learn today is how we behave tomorrow’’: a study on students’ perceptions of ethics in management education Fernanda Duarte

Fernanda Duarte is a Lecturer at the University of Western Sydney, Penrith South DC, Australia.

Abstract Purpose – The purpose of this paper is to investigate students’ perceptions of studying ethics in a business management degree. Design/methodology/approach – The method used is qualitative design with some quantitative elements. Data were collected through an anonymous survey with 119 students from a management subject, and analysed in the light of deontological and theological theories of ethics. Findings – A large majority of the students surveyed (95 percent) believed that the study of ethics in management is important, and that they had personally benefited from studying ethics in the subject surveyed (84 percent). Four major thematic patterns emerged in the responses: a teleological view of ethics; a ‘‘hybrid’’ view of ethics; a link between ethical behaviour and leadership; and a gap between the ideal and practice of ethics. Research limitations/implications – The study had a small sample and referred only to one subject. Further studies should be done with larger samples, comparing different cohorts of students, or students at different stages of a degree. Practical implications – The study draws attention to issues that emerge from the teaching of ethics in management, in particular the need for sustained efforts to foster critical thinking and reflexivity among management students. Originality/value – The paper is based on an original study that addresses the current gap in studies investigating management students’ attitudes to studying ethics. It is particularly valuable for ethics teachers. Keywords Business ethics, Ethics, Leadership Paper type Research paper

Introduction The focus of this Special Issue of Social Responsibility Journal is on ethics and morality in business practice, a topic which – albeit not new – has attracted a renewed interest in the wake of the corporate scandals of the 1990s and early 2000s. Hand in hand with the practice of business ethics is the training of ethical practitioners, an issue that has been the object of extensive research from various perspectives since the 1970s (Allen et al., 2005; Lowry, 2003). While there does not seem to be a consensus on how business ethics should be taught (Kochunny, 1994; Sims and Felton, 2006), there is a general agreement among scholars in the field that ethics should be an integral part of curricula in business schools (see, for example, Block and Cwik, 2007; Crane, 2004; Harris and Guffey, 1991; Milton-Smith, 1995; Pamental, 1989; Sims and Felton, 2006). A significant proportion of works on ethics in management education is concerned with the role of the teacher in imparting knowledge to students, but not much research has been done in recent times on students’ perceptions in relation to the study of ethics in undergraduate management subjects. This paper contributes to addressing this gap through a discussion of the findings of a qualitative study carried out at an Australian

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university, which investigated the students’ perceptions of the relevance of studying ethics to future managers. The first part of the paper provides a brief overview of the main theoretical perspectives on ethics, and the second discusses the main findings of the study in the light of the theoretical perspectives examined.

Ethics: key theoretical perspectives and concepts In order to understand the nature of the students’ responses in the study, it will be useful to briefly examine the main theoretical perspectives on ethics, and associated concepts. Before anything, it is important to understand the meaning of ethics. Derived from the Greek word ethos – which refers to the conventional customs and norms of a given culture – the term ethics can be understood in two ways: 1. as a traditional field of philosophical inquiry dating back to ancient Greece, which is concerned with values as they relate to human conduct; and 2. as the systematic study of norms and values that guide how people should live their lives (Desjardins, 2006, p. G3). The latter meaning is particularly relevant to the purpose of this paper, given its focus on students’ understanding of norms and values within the context of management education. The study of ethics can be either descriptive or normative (Boatright, 2007, p. 23). Descriptive ethics involves empirical research or inquiry into the actual rules and standards of a particular social group. Normative ethics is concerned not only with what people believe they ought to do, but also with what they really ought to do. It therefore entails taking a position. Nevertheless, it must be recognised that these two categories are in actual fact intertwined, as even the most empirically minded individuals engage in prescription as well as description. There is therefore no conceptual barrier to combining descriptive with normative ethics. As this paper deals specifically with ethics in the sphere of business management, it will be useful to provide a definition for the particular type of ethics characteristic of this sphere. For the purpose of this paper, business ethics is defined as ‘‘a specialized study of moral right and wrong as they apply to business institutions, organizations and behaviour’’(Velasquez, 2006, p. 12). In short, it refers to ‘‘values, standards and principles that operate within business’’ (Desjardins, 2006, pp. 8-9). Main perspectives on ethics This section is written with two caveats: first, what is provided below is only a very sketchy overview of the key theoretical perspectives on ethics; the section is essentially descriptive and will not appraise the perspectives examined. Second, the categories discussed are not to be seen as discrete and mutually exclusive; in real-life situations involving complex ethical issues, they often overlap. For the purpose of this analysis, two major systems of ethics will be considered – the deontological and the teleological ethics systems. Associated with the ideas of Immanuel Kant (1724-1804)[1] the deontological system is based on the assumption that actions must be guided by universalisable principles and rules which apply regardless of the consequences of the actions. For Kant, the ‘‘moral person’’ is one of good will, who makes ethical decisions based on ‘‘what is right’’. From this viewpoint, nevertheless, an action can only be morally right if it is carried out as a duty – not as an expectation of approval or reward. From the Kantian perspective, ethical principles exist a priori; that is, they are established by deductive reasoning, independent of, or prior to, the consideration of the specific aspects of the situation at hand. For example, lying is seen as always wrong, regardless of the context within which it occurs. People should not lie under any circumstances, even if lying means that a human life will be saved. Kant believed that every rational being is able to act according to their categorical imperative – a set of principles that can be prescribed as universal laws to be applied to the whole of humankind. Virtue ethics is another type of deontological ethics, and refers to personal qualities that constitute the basis for a person to lead a virtuous, noble life. It is not a formal system of rules,

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but a set of personal traits that, if put into practice, will ensure that the ‘‘right thing’’ is done in an ethically complex situation. From this perspective, the fundamental issue is what character traits make a person a ‘‘morally good human being’’ (Velasquez, 2006, p. 110), and this is determined by exercising judgement, rather than applying a universal set of rules like in the Kantian model. Virtue ethics can be traced back to Aristotle (384-322 BC ), who devoted a great deal of time and effort to grasping the essence of ‘‘human virtue’’. For him, the good is happiness, which is ‘‘an activity of the soul’’ (Russell, 1994, p. 185), and human virtues such as courage, self-control, generosity, magnificence, patience, amiability, truthfulness and wittiness (Fisher and Lovell, 2006, p. 103) are a means to happiness. Another deontological approach to ethics is the perspective of religion (Hartman, 2005, p. 9), which is a rule-based enterprise (e.g. the Ten Commandments). Here, principles and rules are believed to come ‘‘directly from God’’, and faith – not reason, intuition or knowledge – is the element that provides the foundation for a moral life (Hartman, 2005, p. 9). The teleological system of ethics includes theories which are based on the assumption that the ethical implications of an act can be determined by looking at its probable outcome or consequences (Hartman, 2005, pp. 6-7). In other words, the ‘‘rightness’’ or ‘‘goodness’’ of one’s action is not inherent in the action per se, but can only be judged by its consequences (or ends). The philosophy most representative of this approach is utilitarianism, historically epitomized by the work of Jeremy Bentham (1748-1832) and John Stuart Mill (1806-1873). Bentham was of the opinion that the moral rightness or wrongness of an action is a function of the amount of pleasure or pain that it produced. From this perspective, the ‘‘greatest happiness’’ principle is the foundation of morals; that is, actions are ethical if they promote happiness, wrong if they promote the opposite of happiness. Utilitarianism is the dominant ethical perspective in the business sphere, and can be seen as a ‘‘calculating approach’’ to ethics (Fisher and Lovell, 2006, p. 126), as it assumes that the ‘‘quantity of happiness’’ can be measured[2]. It is also underpinned by the assumption that happiness stems from material affluence – which in the business sphere means profits. A common example of business utilitarianism is the adoption of ethical principles – not because it is the ‘‘right thing to do’’ – but because of the image enhancement which this may produce, in view of society’s increased demand for ethical conduct in the business sphere. A positive company image creates what is known in the literature as ‘‘reputational capital’’ (Firestein, 2006; Fombrun, 1996; Fombrun and Shanley, 1990; Inglis et al., 2006; Jackson, 2005; Petrick et al., 1999; Suh and Amine, 2002) or advantages accruing to companies from a good reputation which may lead to positive outcomes in areas such as improved employee morale, increased strategic flexibility and enhanced financial performance. Equipped with a basic knowledge of the key theoretical perspectives on ethics, we proceed to examine the findings of the study on students’ perceptions of ethics in management education.

The study The study was carried out in May 2007, at the School of Management, University of Western Sydney, Australia. The idea for the study emerged from a comment made by one of my students, a couple of years ago, about what he perceived to be ‘‘too much ethics and social responsibility’’ in our Bachelor of Business Management degree (from hereon BBM). The student’s comment was a source of concern, as it made me wonder whether this was just the personal opinion of one individual, or a general attitudinal trend among the students in the degree. When our School invited expressions of interest for its annual research grants, I submitted a proposal for a study with two broad aims: 1. to ascertain the extent to which students believe that ethics is a relevant topic for future managers; and 2. to ascertain whether management students believe they have gained any benefits from their study of business ethics in the BBM degree. The proposal was accepted and I proceeded to recruit participants from a third year subject called ‘‘Power, Politics and Knowledge’’ (from hereon PPK), which is part of the BBM. A total

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of 119 students with an average age of 25 years and from various backgrounds participated in the study; the majority had work experience. The reason for using purposive sampling was two-fold: 1. PPK is premised on the assumption that power is a normal feature of management, and therefore managers must learn how to use it ethically. Ethical considerations are thus embedded in this subject, which ensured that the participants had at least a basic knowledge of ethics, in order to address the survey questions. 2. From a more pragmatic perspective, as the coordinator of PPK I am well acquainted with this subject’s structure, content and schedule of delivery, which gave me greater control over the data gathering processes, carried out during the last week of session. Methodology The study was primarily qualitative, in that my interest was to identify thematic patterns based on the students’ personal experience of studying ethics in a management degree. However, the design also included elements of the quantitative method to establish the broad numerical trends in the responses to the main questions of the survey. The instrument of data collection was an anonymous questionnaire survey containing two open-ended questions and one multiple choice question. The open-ended questions were: B

Do you believe that studying ethics is important for future managers? Why? Why not?

B

Have you gained any benefits from studying ethics in the Bachelor of Business Management? Please explain why or why not.

These questions were specifically designed to obtain information on the students’ experience of studying ethics in the BBM. The multiple-choice item consisted of a polemic statement, designed to elicit a more spontaneous response among the students. The statement read: It’s all very well to talk about ethics in business management, but the reality is that, at the end of the day, what matters is a company’s ability to remain competitive and profitable.

Students were instructed to tick the appropriate box indicating whether they ‘‘agreed’’; ‘‘disagreed’’ or were ‘‘indifferent’’ in relation to the statement. Space was provided for further elaboration if so desired. How important is the study of ethics for future managers? The qualitative survey yielded rich data which articulated a variety of themes associated with the notion of business ethics. I was relieved to see that the findings in the study were largely at odds with the comment made by my student who believed there was an excessive emphasis on ethics in the BBM. The great majority of survey respondents expressed the view that ‘‘it is important for future managers’’ to study ethics (95 per cent), and also felt that they had benefited from studying ethics in the BBM (84 per cent). In qualitative terms, the responses reflected a reasonably good grasp of the meaning of ethics, and also a relatively high level of reflectivity acknowledging issues such as: B

the importance of morality and responsibility in managerial decision making;

B

consideration of the consequences of one’s action;

B

empathy with stakeholders;

B

compassion towards subalterns;

B

recognition of people’s rights and justice; and

B

the need for managers to ‘‘do the right thing’’.

Only a few participants stated that they did not see value in studying ethics in the BBM, on individual or deontological (religious) grounds. Below are three responses in this category: Undecided – studying it (ethics) won’t really change much. I think ethics is largely individual . . .

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I think it is important to some extent. I don’t think it should be emphasised because it’s an individual choice. Not really, my Christian faith is the core influence.

Analysis of responses to Question 1 revealed two major thematic patterns informed by the two systems of ethics discussed earlier: the first category of responses reflected an essentially teleological (or utilitarian) view of ethics, and the second reflected a ‘‘hybrid’’ perspective on ethics which incorporated elements of both the teleological and deontological systems. There was also a third category, which included responses that established a link between ethical behaviour and leadership. These thematic patterns are examined and illustrated below. Teleological responses Most respondents conceptualised ethics in largely utilitarian terms as ‘‘a means to an end’’, which is not surprising in view of the fact that the study took place in the context of business management education. Many of the participants expressed the view that ethics is a response to societal pressures and expectations, and that it is important for society to perceive business as ‘‘doing the right thing’’. Here the operating concept is ‘‘reputational capital’’, discussed earlier and reflected in the selection of responses below to Question 1: Yes, definitely, so that the company has a good reputation. Yes. Today’s society expects more from their business/industry. Clean/low emissions, green practices, etc. Shareholders and stakeholders want to be seen as good corporate citizens also. Yes, corporate ethics is becoming a highly scrutinised area of business, and it would be beneficial for managers to study it, as it is becoming essential to hold good solid values. Yes, I believe ethics is important for future managers. This is because satisfying society is the main driver of contemporary business organisations; hence if a company is not ethical, then society will not approve of it; so, survival for that organisation is difficult. Managers need to be aware of this. Yes, ethics is important because society is demanding that organisations act more ethically now than they used to.

Some students in the teleological category explicitly referred to the negative social impacts of corporate collapses and other events involving unethical behaviour in the last decade, and their effects on business: Yes, societies will demand [ethics] from future managers. This would have been emphasised by recent events such as the Qantas take-over and businesses collapsing in strange circumstances. Due to mass media and the collapse of large multinational companies such as HIH, Arthur Andersen and Enron, the public and institutions are placing greater pressure on business organisations to act ethically. Thus as a manager, it is important to know what ethics is and what constitutes ethics.

These responses reflect important consciousness shifts that have occurred in the past two decades – to a large extent due to the spread of the mass media – which have created greater public awareness of corporate malfeasance, and accordingly a growing demand for ethical behaviour (Duarte, 2006). In this category, there were also responses that conceptualised ethics more thoughtfully as a tool for fair decision-making and effective management. Below are some examples: Yes, I believe the study of ethics is an invaluable tool when entering the workforce in your chosen career, particularly in higher levels of management where bigger decisions are usually made. It also requires you to empathise with others and use your people’s skills. Yes, I believe it is important, as in the future we all will be in a position of decision making where these decisions will affect certain stakeholders in a way or another. So, having a good background in ethics studies is significant. Yes, as managers the decisions we make have ethical implications whether they realise it or not. Therefore, studying it makes individuals reflect on the possible ethical implications their decisions may create. I strongly believe [studying ethics] is important as managers are constantly involved in interactions and situations that often rely on individual moral conscience and judgement. By

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means of studying ethics, future managers will be better equipped to handle these interactions and situations.

Hybrid responses Despite the predominance of teleological attitudes among the students surveyed, there were also responses that incorporated elements of the deontological system of ethics. These ‘‘hybrid’’ responses conceptualised ethics essentially as a means to an end, but also incorporated a ‘‘moral point of view’’ (Boatright, 2007, pp. 8-9) or the assumption that the best course of action is that supported by the best reason, and that the interest of others must be considered. The excerpts below are illustrative of the ‘‘hybrid’’ category of responses: Yes, it is important to understand how unethical behaviour can affect an organisation’s reputation. As managers we should learn to be just and fair when making decisions. Yes, as future managers and as citizens, it is our responsibility to ensure that business does the right thing in the future, not only in economic terms, but in legitimate and responsible ways. Yes. It is always important for managers to behave in ways that are ethical and consider the greater good of the organisation and its employees. The study of ethics will help future managers become aware of the positive and negative implications associated with one’s behaviour, and hence will allow them to think about how ethical/unethical behaviour has future effects. Yes, as well as forming a personal basis of ethics, it is important for managers to take into consideration ethical practices and not just profit and finances. Companies in the future need to be ethically responsible.

Ethics and leadership In addition to the two categories discussed above, there emerged a third thematic pattern related to a notion that Boatright (2007, pp. 20-2) calls role morality – in other words, the type of morality specific to a particular professional role. Here the underlying message is that as company leaders, managers are expected to meet the expectations of the company’s stakeholders, and also to set a good example to their employees. The link between ethical behaviour and leadership is evident in the following responses: [Ethics is] important because as a manager you are at times looked upon by those under you as a role model and therefore by your demonstrating ethical behaviour, they can learn from you. Yes, having high standards of ethical practices set role models for others to follow; one gains respect from others. Yes, because part of a manager’s job in organisations is to act ethically and lead others to act ethically.

While there were only a few responses in this category, it was reassuring to see that some students were able to establish the important connection between ethics and leadership. This perspective goes beyond the simplistic assumption that being a good manager is synonymous with being able to ensure profitability and productivity. The ‘‘daunting gap’’ between ideal and practice As evident in the above excerpts, the responses to the core question of the survey were overwhelmingly positive, indicating a predominant trend towards a normative approach to the study of ethics; that is, the view that future managers should study ethics in order to achieve certain outcomes (e.g. to meet societal demands; to gain or maintain a good reputation; to make fair decisions, or ‘‘do the right thing’’). However, the responses to the polemic statement, which implied that economic performance should come before ethical behaviour, revealed traces of what Desjardins (2006, p. 9) refers to as the ‘‘daunting gap between ethical judgement and behaviour’’. Here, there is a clear fissure between the ideal of ethics and the perceived difficulty – for some the impossibility – of achieving it in professional practice. As noted by Boatright (2007, p. 22) many of the moral dilemmas facing contemporary managers result from conflicts between their individual beliefs and their role as professionals. Whereas as individuals they may honestly believe in ethical practice, as professionals they often find themselves in an unsettling conundrum where

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there is a temptation, or shareholder pressure, to place economic performance and productivity above ethical principles. This thematic pattern figured prominently in the survey data. While the majority of participants responded positively to the question regarding the importance of ethics in management education, and also to the more specific question regarding benefits from studying ethics in the BBM, a significant number of respondents (42 percent) indicated agreement with the polemic statement. My initial reaction to this was one of dismay: how can my students be so thoroughly indoctrinated into conventional business dogma? How can they still put profits above ethics after our numerous discussions during the semester about the importance of ethical behaviour in business? Nevertheless, an examination of the qualitative comments written by most of the respondents in the space provided below the statement revealed that indicating agreement with it did not necessarily mean that they condoned what was being said. Students were merely expressing their (somewhat cynical) perceptions of the ‘‘business world’’, and hoping that ‘‘society’’ would intervene to force businesses to behave more ethically. Below are some typical statements given in qualification of their response to the polemic statement: I only agree with this statement because [I think that] a company’s ability to make profits should be hindered if they engage in unethical practices. It’s society’s role to disallow this. Unfortunately, I have to agree . . . but as times change people are becoming less tolerant of unethical behaviour . . . It is unfortunate that most businesses are only concerned with profits and most leaders are managers [who] will do whatever it takes to make a profit and reduce expenses. Companies put too much pressure on managers and they are forced to deviate from ethical behaviour to whatever is required to succeed or make profit.

In this category, there were also responses that revealed something akin to a feeling of powerlessness in the face of ethical abuses in the business sphere. The following quotes are illustrative of this perspective: [I agree] because this is a fact of life. Business is exactly what it is, Business. People want to make profits; that is the primary objective and it is common for people to act unethically. Unethical behaviour is an extremely difficult concept to overturn (original emphasis). Has a manager or an average employee any say when it comes to ethical dilemmas in an organisational situation? The top management in all the companies want to make a profit and they really don’t care if it affects the management overall or not. There are many employees in major corporations who do what they are told and they don’t have a say in the ethical decision making.

Nevertheless, it was reassuring to find out that a slightly higher percentage of students (43 percent) disagreed with the polemic statement, suggesting that they may be ‘‘taking aboard’’ the ethical concepts and issues studied in the course. The comments below reveal a strong tone of disapproval of the profit motive as the main driver of business firms, and awareness of the need to incorporate ethical principles in business practices: I chose to work for a non-profit making organisation specifically to avoid fitting in with this statement. I don’t agree with this statement; however it is still the mentality of some organisations, and if we worked for them we would probably be easily swayed. Making profits is essentially the role of business; however, ethics in business management is something that has to be taken seriously . . .

A number of students who disagreed with the polemic statement explicitly acknowledged the need for balance between profits imperatives and ethical behaviour, suggesting a link between ethical behaviour and economic performance: Sometimes a lack of ethics can cause a business to go belly up and then there is no way to make profits. The best way is a balance of both . . . While a company needs to make a profit it also has to be socially responsible and behave in an ethical manner. By gaining profits via unethical practices the company is creating a negative public image.

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The ability to gain financial objectives gives an organisation power, thus it is their responsibility to give back to society and improve the standards of society as a whole. From studying corporate social responsibility I have learnt that an organisation has a responsibility to all its stakeholders, not just shareholders/owners. Organisations need to balance their focus on profits with their other responsibilities, e.g. environmental.

Summary and conclusion This paper has discussed the findings of a qualitative study carried at an Australian university on students’ perceptions of the relevance of studying ethics in an undergraduate business management subject. The findings indicated that the great majority of participants consider the study of ethics relevant to future managers, and indeed believe they have gained benefits from studying ethics in the Bachelor of Business Management. The general gist of the responses is aptly surmised by one of the participants, who stated: ‘‘What we learn today is how we behave tomorrow’’. Three main thematic patterns emerged from the analysis of the survey responses, namely responses revealing teleological (or utilitarian) attitudes to ethics, responses reflecting a combination of teleological and deontological attitudes, and responses linking ethics to leadership. It was clear from the findings that the predominant kind of ethics and morality amongst the students is underpinned by the teleological system, which did not come as a surprise, given the context of the study. Most respondents viewed ethics as ‘‘a means to an end’’ – as a means to foster reputational capital by enhancing the company’s image, or as a means to achieve leadership and fair decision making. However, many of the comments also revealed an ‘‘ethics of care’’ (Velasquez, 2006, p. 60) – the need to be mindful of people’s wellbeing, to do ‘‘the right thing’’. The findings were reassuring for a teacher who takes the study of ethics in management seriously: it seems that my students have been listening. There was, nevertheless, something disturbing about the responses to the polemic statement, in that many of them conveyed an impression of resigned powerlessness and passive acceptance of the status quo (‘‘That’s the way things are’’). This prompted a number of questions for me as a teacher: B

Does this mean that the students have been so thoroughly indoctrinated into conventional managerial dogma that they are unable to imagine more democratic alternatives to the status quo?

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Does this mean that they are still unable to grasp the meaning of critical thinking?

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Does this mean that they have no sense of the role of human agency in social transformation?

Fisher and Lovell (2006, p. 33) warn that in the process of dialectical transformation of society there is always a ‘‘risk of social capture’’ – that is, feeling ‘‘trapped’’ in a particular version of social reality that is not particularly desirable. If this is indeed a trend among management students, ethics teachers have a crucially important role to play in order to persuade students that their individual voices do count in the shaping of more humane and equitable managerial practices – in the creation of a better society. The role of an ethics teacher is not to indoctrinate students into a particular world view, but to treat them as ‘‘active learners and engage them in an active process of thinking and questioning’’ (Desjardins, 2006, p. 9). An important conclusion to draw from this paper is that continuous debate on ethical dilemmas and a more explicit effort to foster critical thinking and reflexivity are essential features in the teaching of future managers in order to avoid the paralysing effects of social capture.

Notes 1. Kant was not the only scholar to prescribe a moral system based on rules and rights. In the sixth century, Chinese philosopher Confucius elaborated an extensive set of rules or maxims that seem commonplace in contemporary society, stressing virtues such as compassion, kindness, justice, fairness, patience, reflectivity, selflessness and honesty (Hartman, 2005). 2. Bentham (1982) believed that happiness could be measured in terms of intensity, duration, certainty, extent, propinquity, richness and purity.

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References Allen, W., Bacdayan, P., Kowalski, K. and Roy, M. (2005), ‘‘Examining the impact of ethics training on business student values’’, Education þ Training, Vol. 47 Nos 2/3, pp. 170-82. Bentham, J. (1982), An Introduction to the Principles of Morals and Legislation, Methuen, London, (originally published 1843). Block, W. and Cwik, P. (2007), ‘‘Teaching business ethics: a ‘classificationist’ approach’’, Business Ethics: A European Review, Vol. 16 No. 2. Boatright, J. (2007), Ethics and the Conduct of Business, 5th ed., Pearson Prentice-Hall, Upper Saddle River, NJ. Crane, F.G. (2004), ‘‘The teaching of business ethics: an imperative at business schools’’, Journal of Education for Business, Vol. 79 No. 3, pp. 149-51. Desjardins, J. (2006), An Introduction to Business Ethics, McGraw-Hill, New York, NY. Duarte, F. (2006), ‘‘Spivs, shonks and sharks: the HIH collapse as a moral tale of corporate capitalism’’, Social Responsibility Journal, Vol. 2 Nos 3/4, pp. 282-90. Firestein, P. (2006), ‘‘Building and protecting corporate reputation’’, Strategy & Leadership, Vol. 34 No. 4, pp. 25-31. Fisher, C. and Lovell, A. (2006), Business Ethics and Values, Prentice-Hall, Hemel Hempstead. Fombrun, C. (1996), Reputation: Realizing Value for the Corporate Image, Harvard Business School Press, Boston, MA. Fombrun, C. and Shanley, M. (1990), ‘‘What’s in a name? Reputation building and corporate strategy’’, Academy of Management Journal, Vol. 33 No. 2, pp. 233-58. Harris, J.R. and Guffey, H.J. (1991), ‘‘A measure of the short-term effects of ethical instruction’’, Journal of Marketing Education, Vol. 12, pp. 64-8. Hartman, L. (Ed.) (2005), Perspectives in Business Ethics, McGraw-Hill Irwin, New York, NY. Inglis, R., Morley, C. and Sammut, P. (2006), ‘‘Corporate reputation and organisational performance: an Australian study’’, Managerial Auditing Journal, Vol. 21 No. 9, pp. 934-47. Jackson, K. (2005), Building Reputational Capital: Strategies for Integrity and Fair Play that Improve the Bottom-line, Oxford University Press, New York, NY. Kochunny, C.M. (1994), ‘‘Head-heart disparity among future managers: implications for ethical conduct’’, Journal of Business Ethics, Vol. 13 No. 9, pp. 719-29. Lowry, D. (2003), ‘‘An investigation of student moral awareness and associated factors in two cohorts of an undergraduate business degree in a British University: implications for business ethics curriculum design’’, Journal of Business Ethics, Vol. 48 No. 1, pp. 7-19. Milton-Smith, J. (1995), ‘‘Ethics as excellence: a strategic management perspective’’, Journal of Business Ethics, Vol. 14 No. 8, pp. 683-93. Pamental, G.L. (1989), ‘‘The course in business ethics’’, Journal of Business Ethics, Vol. 8, pp. 547-51. Petrick, J., Scherer, R., Brodzinski, J., Quinn, J. and Ainina, M.F. (1999), ‘‘Global leadership skills and reputational capital: intangible resources for sustainable competitive advantage’’, The Academy of Management Executive, Vol. 13 No. 1, pp. 58-69. Russell, B. (1994), History of Western Philosophy, Routledge, London. Sims, R. and Felton, E. (2006), ‘‘Designing and delivering business ethics teaching and learning’’, Journal of Business Ethics, Vol. 63, pp. 297-312. Suh, T. and Amine, L. (2002), ‘‘Defining and managing corporate reputational capital in global markets: conceptual issues, analytical frameworks, and managerial implications’’, paper presented at the American Marketing Association Conference, Chicago, IL. Velasquez, M. (2006), Business Ethics: Cases & Concepts, Prentice-Hall, Upper Saddle River, NJ.

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Analysis of CSR: principles and concepts Ten principles of corporate citizenship David Birch

David Birch is Professor of Communication, Deakin University, Melbourne, Australia.

Abstract Purpose – This paper aims to reflect briefly on some of the major principles that have emerged from the developing policies, practices and debates about corporate citizenship in the last ten years or so. Design/methodology/approach – Considerable scholarly work has been conducted on corporate citizenship in the past, and will continue to be done in the future. This paper is deliberately written for a non-scholarly audience. Findings – Ten principles are outlined, all of them focusing on developing a cultural aspect of corporate citizenship as good business. Originality/value – The basic premise of this paper is that significant cultural change, through corporate citizenship will only take place by business implementing policies, and practices based on the sort of sound (but basic) principles presented here. These ten principles, in this format, are original to this paper. Keywords Corporate image, Citizenship, Organizational theory Paper type Viewpoint

Charters of corporate behaviour Many companies have, for several years now, been carefully developing policies and practices of good corporate citizenship, demonstrating to both internal and external stakeholders, shareholders, supply chains, politicians and customers/clients that it is not only socially and environmentally ‘‘right’’ for a company to be a good corporate citizen, but that it also makes good business sense. An increasing part of a company’s commitment in this area has been the formal development of a company ethos of behaviour, often expressed in the form of a code of conduct and more recently as charters of corporate behaviour. These codes and charters have been in practice for a long time now, but more and more companies are now including some form of commitment to corporate citizenship and/or corporate citizenship within them. A good, and globally pioneering, example in Japan, is the Japan Business Federation (Nippon Keidanren), one of Japan’s leading organizations for major corporations, which has been used for many years by numerous companies worldwide as a model for formally stated commitments to good corporate behaviour which recently revised its long-standing, and well known, Charter of Corporate Behaviour, to include corporate social responsibility (see Appendix). Together with this Charter, the Federation also provided a detailed Guide for Implementing the Charter of Corporate Behaviour to its member companies, dealing with issues which have become increasingly important to all major companies worldwide, like corporate governance, ethics and compliance, information disclosure, environmental preservation, human rights in labour, and philanthropy. The Guide provides a road map in many ways for the best ways a company should engage with its communities, consumers, customers, clients, the market, shareholders, the environment, society, employees and other businesses in general. Similar charters, codes and guides have been produced in some considerable numbers by other

DOI 10.1108/17471110810856893

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organisations over the last few years’ all dealing with some aspect or other of corporate behaviour and citizenship. The very large Ricoh Group, for example, was a pioneer in such charters, developing as early as 1993 the Ricoh Business Behaviour Standards Guidelines, from which more recently emerged the Ricoh Group Corporate Social Responsibility Charter, which specifically deals with how every company in the Ricoh Group should engage with integrity in corporate activities, harmony with the environment, respect for human beings and harmony with society. In effect this Charter establishes behavioural standards for every company and member of staff in the entire Group. Every member of staff receives the Charter in booklet form and related educational materials have been developed in both video and CD-ROM formats. It has to be made very clear though, that the development of such behavioural standards is not simply a ‘‘good’’ socially responsible thing for business to do as an add-on to its core business practices, but is increasingly being seen as an a non-negotiable part of that core business. For example, the NEC Group Charter of Corporate Behaviour, which first appeared in April 2004 states: The NEC Group works to improve profitability through sound business activities and to achieve dynamic development so as to benefit society. To this end, the Group is aware of the need to enhance its corporate value not only by observing all relevant laws and regulations, but also by fulfilling its social responsibilities as a good corporate citizen. At the same time, the Group must win the trust of customers, shareholders, investors, suppliers, the community at large, its employees, and all other stakeholders.

There is still a long road to travel for many companies with respect to corporate citizenship, but there is sufficient evidence to demonstrate that corporate citizenship is seriously on the business agenda now, and as a consequence there are valuable lessons to be learned from the work of the last ten years or so, and I draw out some of those lessons here in a framework of ten principles of corporate citizenship as follows.

1. Extending corporate responsibilities beyond core business One of the first principles of corporate citizenship to have been developed is well expressed by the large pharmaceutical company Pfizer, in its document Good Business Practices: Integrating Citizenship Throughout Our Company, where under the heading of ‘‘Our Companywide Responsibilities’’, the very first principle in enabling Pfizer’s core business ‘‘to discover and develop medicines, and help make medicines available around the world’’, is that ‘‘all Pfizer colleagues have responsibilities beyond their specific jobs’’. This is a crucially important first principle. Every employee of every business, no matter how small or large, needs to be educated in the basic idea that there are responsibilities beyond a particular position description or business role, whether that role is senior management, or as a receptionist or cleaner. The sorts of responsibilities that Pfizer, and many other companies, have articulated in recent years in their codes and charters of good business practice and behaviour include: 1. practising good governance; 2. ensuring compliance and ethical behaviour; 3. social and environmental responsibility; 4. participation, where appropriate, in public policy debates; 5. commitment to the public good overall and business-relevant communities in particular, often expressed in some company-specific detail as in Pfizer’s Charter:

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support our communities;

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protect the safety of employees, the community and the environment,;

B

respect the welfare of animals;

B

respond to all public, media and government inquiries appropriately;

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conduct political activity responsibly; and

B

cooperate lawfully with our local host governments.

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These are not only ways to educate staff in any business to think beyond the narrow box of a particular task orientation in their work, but a means for them to see themselves as part of the bigger picture of the business they work in. Such a repositioning of employees’ and management thinking from the traditionally understood concept of the workplace is a major feature of contemporary thinking about good business practice where the employees and management are now increasingly considered as internal stakeholders and so therefore have a contribution to make beyond a particular set of defined tasks.

2. Interactive and not just ‘‘transactive’’ communication with communities The Fujifilm Group sees success not simply in terms of its own financial bottom line, though this always needs to remain paramount in business thinking and practice, but as part of a bigger social picture of the company contributing to what it calls ‘‘the creation of affluent communities’’. This brings me to the second basic principle which I believe underscores the development of corporate citizenship policies and practices in recent years, which is what the Fujifilm group refers to as ‘‘interactive communication with our communities’’. There are two main challenges to any business in this second basic principle. First, a business needs to be able to define and articulate exactly who its communities are, and there is no doubt that one of the major lessons of the corporate citizienship journey, in recent years, has been the inability of many businesses to be able to do this at all well. The second challenge, once the communities have been defined (and many businesses have multiple communities to engage with) is what then constitutes ‘‘interaction’’ with those communities. I believe that for any business to simply refer to all of its customers/clients as if they are a single homogenous group or market and to treat them all the same, is poor business practice. Really understanding the diversity of a business’s communities, and the potential those communities have for contributing to the business beyond their traditional role as customers/clients, for example, requires a level of engagement and interaction which enables the business to more fully understand the diversity of thinking in its communities and to then find strategies and activities to capitalise on that diversity in order then to return increased value for everyone, community and business alike. Transactive corporate citizenship (e.g. chequebook philanthropy and sponsorship) is always going to be necessary, but for longer-term sustainability of community-business relations, a more interactive approach is the key. This is a major lesson from the development of corporate citizenship thinking in the last ten years or so.

3. The importance of local knowledge Understanding community diversity is an important step towards what I argue here as a third basic principle and that is to use local knowledge to contribute beyond what is generally considered to be core business. For example the IGA chain of supermarkets across Australia, as part of its corporate citizenship profile, donates a small percentage of its takings to community groups and projects, but such donations are made not as a faceless decision in Head Office, but in close, local, consultation with the customers of particular stores in very specific locations. In other words, the customers of a particular store are able to contribute, beyond their traditional role as customer in a supermarket, to decisions about community funding for local charities, school groups and other needy organisations in the vicinity around the particular store. In other words, this approach is a direct business encouragement of good customer citizenship as an integral part of corporate citizenship – driven, and managed – by business interaction with its communities beyond traditional business and customer roles.

4. Reducing the divide between private and public cultures A further lesson from the journey that many companies have made along the corporate citizenship route in recent years is the recognition of corporate citizenship not simply as a set of activities, donations, programs or transactions, between business and various community groups, but as an enabling vehicle for cultural change, both in business and in society overall. This has been an important development because in recognising this, business, and its staff and management, are drawn into an understanding of the bigger picture involvement of business as part of a broader public culture, and not simply seeing itself as a private

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enterprise making as much money as possible without any thought to the larger social and environmental consequeneces of its actions. The important cultural change that has occurred – and continues to develop – as a result of this thinking is that an older, more traditional, view of the workers leaving their own values and morals behind at the factory gate or office door, and picking them up again as they go home, is redundant business thinking. But it has been a very prevalent model over many years. Increasingly now, though, in less restrictive workplaces at least, staff are able to contribute their different ideas, thoughts, values, experiences and cultures to the business and workplace overall, beyond their own defined set of day to day workplace tasks. Staff are increasingly positioned as internal stakeholders not simply as workers. As such I think it is reasonable to develop a fourth basic principle, learnt from corporate citizenship in general, and applicable to the development of a more rigorous business case and understanding of the value of organisational citizenship overall, and that is to see corporate citizenship as a bridge between the private culture of a particular business, and the public culture of that business’s operations in its communities and beyond, and its consequent impacts upon, a particular market, customer base and community. Recognising this then starts to add a different set of opportunities for business to engage with its staff and customers/clients/communities in ways that can bring them more closely together, so that the often very alienating divide that can be developed between business and community, and vice versa, can be reduced. Such a divide, for example, was a major feature of the entire banking system in many countries for many years until the large banks caught up with the corporate citizenship journey that some of the smaller banks had started to make in the late 1990s. Breaking down existing cultural divides between the ‘‘private’’ world of the business and the ‘‘public’’ world of the community, and ensuring that such divides do not grow up again, is crucial, and enabling and encouraging corporate citizenship should, I believe form a crucial basic principle for the reduction and/or elimination of this divide.

5. Going beyond compliance A fifth basic principle which I believe has emerged in recent years, particularly from the corporate governance debates and crises around the world, but also from the increased corporate engagement with environmental issues, is the principle of ‘‘going beyond compliance’’. There are clear definitions in many areas of business for what constitutes legal, ethical, environmental, health and safety and other responsibilities, many covered by strict legislation and regulation, others covered by self-regulating codes and guidelines. Any business is expected to meet the very minimum compliance to such standards and regulations, but there is a very strong business case to be made (and which is put into practice by some companies with an eye to the competitive edge it can give them) for going beyond compliance, and making sure that business markets, customers and stakeholders, and others, particularly government and licensing agencies, are aware of the fact that a business is going beyond compliance. To do so is to give a very strong signal that a business is seeking to do more than is expected of it, and in a world where customer and client awareness, expectations, and disatisfactions with the business world is growing, such a signal is a very important one to make, as more and more customers, in particular, make many decisions about who to give their business too, beyond simply cost considerations. For a business to demonstrate that it is prepared to go beyond compliance in a whole range of issues, for example the health and safety requirements of a particular mining site, sends a strong signal to the community that it is being considered beyond simply what is required from the business, and so therefore, that community may well be prepared to respond to this move in more effective citizenship terms, themselves going beyond compliance to the expected and traditional role of a customer or client, or community member impacted by the business. There is a clear potential, I would suggest when applying the principle of beyond compliance in a corporate citizenship environment, for creating increased business value.

6. Empowerment A sixth basic principle to emerge in recent years across a number of related debates in the changing face of business behaviour, is what some have called empowerment, though this is a term not generally favoured by some in business and is sometimes replaced with

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‘‘enablement’’. This is really about the support and encouragement for personal (as against business-relevant professional) development beyond the required tasks of a particular job description. With such support, there has been a growing awareness of business to recognise and encourage an increased dignity and self-respect amongst all its staff and management, regardless of their role and status in the workplace. This is a philosophical change of mindset in business which has increasingly put phrases like ‘‘We put people first’’ in their mission statements and corporate codes of conduct and behaviours. Issues of equity, non-discrimination, and access to a much more diverse workforce has resulted in this changing thinking about the importance of workers as people first, and like all of the basic principles I have extrapolated from the various corporate citizenship debates and practices of the last few years, this is a principle about cultural change.

7. Change through education Cultural change is the key to the development of any new thinking in business, but it is very difficult to bring about. Any changes are likely to be long-term, and those companies, for example, who have mandated a particular set of values of corporate citizenship have not been as successful as those who have sought to see them through by a carefully thought out education process. This awareness brings me to the seventh basic principle applicable to any development in corporate citizenship, and that is the overriding need for change to be achieved through education in the workplace and not from a directive from ‘‘above’’. What is needed from ‘‘above’’ is for the CEO in particular, and the senior management in general, to be champions for cultural change, not dictators expecting immediate responses, because what we are talking about here is a shift of thinking from the creation of business value from tangibles only, to the creation of business values from the more intangible, ‘‘softer’’, less easily accounted-for and measurable activities, like the encouragement of corporate, employee and customer citizenship. As such, any form of organisational citizenship, like corporate citizenship has become for many companies in the past, needs to be positioned by its champions through a carefully constructed education process specific to each business. It needs to be an ‘‘agenda item’’ at each level and stage of any business thinking and reflection about itself, just as health and safety, marketing, procurement and all the other now standard agenda items are for any business meeting.

8. Think ethically An eighth basic principle, and one that perhaps appears to be self-evident but which has been brought to the fore in recent years because of a variety of corporate scandals and collapses, is the need for business to not only operate ethically, but also to think ethically. The emphasis I put on thinking here is crucially important, and is perhaps not as widely considered as it should be. Business ethics has often been limited to the ethics of business practice, but it seems clear to me that unless business thinking is ethical, no amount of codes of conduct or legislation will create greater integrity or more ethical behaviour. Thinking ethics is particularly relevant to the development of good corporate citizenship, because unless considerable thought is given by business as to how to demonstrate that it is an ethically aware business, as well as a business concerned for all the other things I have talked about in these basic principles, then there is unlikely to be any motivation to go beyond their traditional role. Again, this is about intangibles much more than it is about the tangible. A factory, for example, could post on its walls an ethical code of behaviour for its workers, but this could be completely redundant in value if that same factory has not given any thought not just to the ethical behaviour of the staff running the place, but to the education of the ethical thinking of its staff, so that every decision a staff member makes, no matter how large or small, alsways has them asking an ethical question about the decision itself and its impact on others. Again, this principle is about achieving cultural change, not simply compliance to a set of practices developed by someone else in the business and expected to be adhered to unthinkingly by every member of staff.

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9. Ownership Some years ago an incoming CEO of a very large, global, mining company developed and issued a charter of values for the company, laminated on a small card that could fit into the wallets and purses of all the many thousands of its workers. However, the only person who had any real ownership of these values was the CEO himself, because there had been little or no staff involvement in the development of the values; they were simply cascaded down through the organisation failing to have any major impact throughout the descent. The Singapore government developed a similar set of five ‘‘Asian values’’ some years ago, designed to be applicable to (and implemented by) all Singapore citizens but it is highly likely that if asked, most, if not all Singaporeans, would not be able to name all (and probably most not any of) the five values. Without ownership of an idea or a policy or set of protocols there is little purpose if any sort of cultural change is to be brought about. It is for that reason that I include here the ninth basic principle that I believe applies to the development of corporate citizenship, and that is that everyone involved in the business needs to be able to have ownership of any developments, education, policies or practices that will encourage increased organisational citizenship. Without it the sort of business value that can be returned, as is now being returned by many business who have developed ownership by their staff of corporate citizenship policies and practices, will not be returned.

10. Create new value Finally, the tenth, and final, basic principle I develop here for the building of an effective business base for corporate citizenship, and for which all other preceding principles are related and relevant, is the fundamental need for everyone in business to create new value for that business – staff, management, workers and customers, communities, irrespective of the role and status of any of the members of that workplace. This principle, which has been emerging in recent years in a number of areas of business, particularly in internal stakeholder theory, effectively breaks down the once highly marked out boundaries between workers’ roles in a business, where only a select number of people were responsible for strategic thinking and the creation of new business value. There is an opportunity, particularly through the emerging intangible corporate and organisational citizenship developments I have been discussing here, for everyone in the business to contribute to the creation of new value, (and hence increased profitability across all aspects of the triple bottom line) and as such, I would suggest, needs to be at the heart of any business case for corporate citizenship developed for any business in any relevant sector. In summary then, the ten basic principles I have developed here for building effective corporate citizenship are: 1. Develop a culture where everyone in a particular business, irrespective of role and status, should have responsibilities beyond their specific jobs. 2. Ensure that business is able to engage in interactive (and not just ‘transactive’ communication with its communities. 3. Use local knowledge to enable the business to contribute beyond what is generally considered to be core business. 4. Find ways to lessen the divide between business perceived to be a private culture and the public culture in which it functions. 5. Go beyond compliance. 6. ‘‘Empower’’ the people involved in the business. 7. Seek to effect cultural change in business through education not mandates. 8. Not only operate ethically but think ethically. 9. Create ownership for relevant staff in any new developments. 10. Ensure that everyone in business is able, in some way, to contribute to the creation of new value, and be recognised and rewarded for it.

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Appendix Charter of Corporate Behaviour Member corporations of Nippon Keidanren (The Japan Business Federation) are expected to conduct themselves in a socially responsible manner, observe both the spirit as well as the letter of all laws and regulations applying to their activities both domestically and overseas in accordance with the following ten principles. We believe that corporations exist not only as economic entities designed to pursue profits through fair competition, but also as social entities which must make a contribution to society at large. Member corporations of Nippon Keidanren (hereafter referred to as ‘‘members’’) by the development and provision of socially beneficial goods and services in a safe and responsible manner shall strive to earn the confidence of their consumers and clients. Members shall promote fair, transparent, and free competition between corporations. They shall also ensure that their relationships and dealings with government agencies and political bodies are of a normal and proper nature. Members shall engage in the active and fair disclosure of corporate information, not only to shareholders but also to members of society at large. Members should recognize that a positive involvement in environmental issues is an essential part of their activities and their very existence as a corporation, and should therefore approach these issues positively. As ‘‘good corporate citizens’’, members should actively engage in philanthropic and other activities of social benefit. Members should strive to respect the individuality and differences of their employees, to promote safe and comfortable workplaces, and to ensure the physical and mental well being of their employees. Members shall reject all contacts with organizations involved in activities in violation of the law or accepted standards of responsible social behaviour. Members shall respect the culture and customs of other nations and strive to manage their overseas activities in such as way as to promote and contribute to the development of local communities. The highest levels of management within member corporations must assume the responsibility for implementing this charter and for taking all necessary action in order to promote awareness of it among all those concerned. Management must also heed the voice of their organization’s stakeholders, both internally and externally, and promote the development and implementation of systems that will contribute to the achievement of ethical corporate behaviour. In the event of a violation of the principles of this charter, management of member corporations must investigate the cause of the violation, develop reforms to prevent its recurrence and make information publicly available regarding their intended actions for reform. After the prompt public disclosure of appropriate information regarding the violation, responsibility for the violation and its effects should be clarified and disciplinary action should be taken which includes the highest levels of management where necessary.

About the author David Birch was the founding Director of the Corporate Citizenship Research Unit, Deakin University, Melbourne, Australia in 1997, and General Editor of The Journal of Corporate Citizenship, 2005-2006. He is on the editorial boards of Asian Business and Management, Asia Pacific Public Relations Journal, The Journal of Corporate Citizenship, International Journal of Business Governance and Ethics, and Social Responsibility Journal, amongst others. David Birch can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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The ‘‘ethics’’ of being profit focused S. Mercia Selva Malar

S. Mercia Selva Malar is a Professor at SCMS Cochin, Alwaye, India.

Abstract Purpose – This paper seeks to emphasise the importance of firms being responsible to society. Design/methodology/approach – The paper examines firms’ omissions and commissions in the various functional areas of management while they focused on profit. Examples of such omissions and commissions are also discussed. Support from businessmen and authors who share such a viewpoint is mentioned Findings – In the long term, firms that are socially responsible are successful. Practical implications – Practising social responsibility consciously, firms can make the world a better place for all people. It can be beneficial for the entire society. Originality/value – Omissions and commissions arising out of being profit-focused are the author’s original contribution. The paper is of value to researchers and practitioners of corporate social responsibility and business ethics. Firms need to understand that they cannot succeed and excel for long if they neglect stakeholders other than shareholders. Keywords Corporate image, Corporate social responsibility, Business ethics, Profit Paper type Viewpoint

Introduction Jim Collins, author of Built to Last and Good to Great, said: Contrary to business school doctrine, we did not find ‘‘maximizing shareholder wealth’’ or ‘‘profit maximization’’ as the dominant driving force or primary objective through the history of most of the visionary companies. They have tended to produce a cluster of objectives, of which money is only one – and not necessarily the primary one (Collins, 2001).

The actions of firms abiding by the principles of ethics and morality are spontaneous, and based on the universal truth of enduring values. Therefore no law can enforce ethics and morality being incorporated into businesses. Ethics and morality in business today are superficial terms. Firms try to show that they are ethical and moral, but in reality they fail. There is a more lip service being paid to ethics and morality than actually acting ethically and morally. There are several theories that emphasize the purpose of the business. Milton Friedman’s dictum, ‘‘The purpose of business is business’’, is held dear by most firms. It is this theory which gives rise to the thinking that profit alone is the necessary focus of business. The theory that portrays shareholders as the only group to be considered by the managers in decision-making concerning business is again a lopsided view of the accountability of business. Even when businesses follow some ethical standards they follow them with the purpose of improving their image and further enhancing their profits. With increased awareness of the need for ethics and greater pressure from various quarters of society, there is greater deterioration and erosion in ethics and morality in the corporate world today. Firms are more driven by the numbers, by the bottom line. Though it is not wrong to focus on this, and it can be justified from all perspectives of business, getting carried away and focusing on profit alone is against ethics and moral principles.

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Why being profit-focused is unethical A business evolves, exists and excels with the blending of various factors of production and supportive services. Forgetting all other contributors to the success of a business and aiming at and working to reward only the shareholders results in injustice to all other stakeholders in the business. When a firm becomes focused on profit and profit alone, it forgets and neglects the importance of employees, customers, society, government, environment, etc. Negligence towards other elements that are crucial for the success of the business would, in the long term, prove detrimental to the firm. Negligence of other elements can do irreparable damage to society and the environment.

Omissions amounting to unethical practices Wall Street overdoses on greed. Corporate lawyers make fortunes by manipulating contracts and finding ways out of signed deals. Many CEOs enjoy princely lifestyles even as stakeholders lose their jobs, pensions, benefits, investments and trust in the American way (corporate way) (Huntsman, 2007, pp. 3-4).

When the business puts profit before employees, it minimises its employee cost in order to reduce total costs. This would leave employees poorer and with a lower standard of living. The people who work for the organisation and enable it to fulfil its objectives must be rewarded generously and must be kept well. The ethical issue of treating workers with human dignity and maintaining their welfare is denied by corporations on the pretext of workers being low skilled and marginal contributors. A firm cannot afford to multiply its profits while leaving its workers to struggle with minimum remuneration. With some of today’s corporations being larger than some countries, they have a greater responsibility to look after the welfare of workers. By taking care of workers firms would enrich their workforce to be more productive and responsible. This benefits the firm and the nation. In the short term it can be viewed as an injustice to the workers, but in the long term it is an injustice to the human resource pool of the nation. Thus a firm involved in profit-making alone is into unethical business and immoral practice. The occupational hazards and occupational diseases to which employees are prone are not empathetically considered by firms. Earnest efforts to protect employees from occupational hazards and diseases are minimal, and only where required by law are the employees taken care of. Most firms try to save expenses which should accrue to the employee as a benefit for his courage to work in risky situations and to commit himself consistently to disease-oriented exposure. When firms save on such expenses and add to their profits, they are guilty of indulging in unethical practice. Firms are involved in other forms of unethical practice with regard to employees. There is rampant discrimination in all firms, based on sex, race, origin, religion, social group, etc. Most firms consider women less important than men and talk of them and treat them as less than men. Even today, women have to perform doubly well to prove that they are better than or equivalent to men. Discrimination based on sons-of-the soil policy is an unethical practice which has taken deep root and cannot be eliminated easily. The environment is yet another crucial contributor to a firm’s success. Air, water, land and space all add up to the very existence of the firm. Most firms take nature’s bounty for granted. Not only do they pollute, damage and worsen the quality of the environment by their over-focus on profit, they justify their actions and fight litigation on any such accusation. Any business that alters the quality of the environment should seek to earn profit only after setting right the change caused in the quality of the environment. If this is not done then it equates to unethical business. While firms are so unmindful of the cost involved in advertising and sales promotion, when it comes to environmental care and concern they would point out the costs involved as being major.

Commissions amounting to unethical practice ‘‘The purpose of a firm is to create customers’’, said Peter Drucker. Today firms are not creating customers through marketing and advertisement but are indulging in destroying the moral, social and religious, values of customers, and therefore the very fabric of their life.

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Advertisements with obscene pictures and clippings and advertisements in all kinds of media cause a great deal of cultural degradation and societal damage. Firms add to the social woes of countries and the world by advertising with indecent pictures and photographs that trigger the emotions of youngsters who are easily carried away by simple pleasures. Once they lose their path in life it becomes difficult for them to come back to normalcy or the mainstream. Corporations that produce liquor and cigarettes have no ethics to survive but they flourish by promoting their products to an extent that even youngsters of the age of 11 get carried away by such products and try them at their tender age. Once they use these products they become slaves to the products and forget their primary responsibilities in life. Cooked ledgers, look-the-other-way auditors, kickbacks, flimflams of every sort have borrowed their way in today’s corporate climate. Many outside corporate directors bask in perks and fees, concerned only in keeping Wall Street happy and their fees intact. Less-than-honest financial reports are tempting when the market penalizes flat performances and candid accounting. Wall Street consistently signals that it is comfortable with a lucrative lie (Huntsman, 2007, p. 4).

This is true not only of Wall Street: the world over, all financial markets accept candid lies to push up the price of stocks. In the process of painting a positive picture in the minds of investors and the public at large, firms project their financial situations slightly rosier than they are, and forget the ethics involved – accounting and auditing with window dressing to keep the employees, government and customers at bay. It is said that – and found to be true – firms prepare different sets of accounting statements for the use of different groups. The accounting statement presented to government is different from the one presented to shareholders. This is done with the purpose of hiding certain information from certain groups. Also, the practice of inflating and deflating balance sheets does occur. There are many professions in which one can find examples of hollow values, but nowhere is it more evident than on Wall Street . . . (Huntsman, 2007, p. 39).

In the area of marketing, firms can regularly be found involving themselves in unethical and immoral activity. Certain practices which are well accepted as part and parcel of marketing have ethical connotations. A few examples of where marketing indulges in deception and therefore unethical practice are: B

markdowns from a ‘‘suggested retail price’’;

B

introductory offers incorrectly purporting to offer savings; and

B

bogus clearance sales offering inferior goods.

Much packaging and labeling misleads the consumer as to the size, shape, picture, description and use of terms such as ‘‘economy size’’, ‘‘new’’, ‘‘improved’’, etc. Also, most corporations provide customers with warranties in which the terms cannot be easily read and understood by the consumer. The amount spent on advertising by firms with no concern for the poor and hungry of the nation is yet another disturbing feature evident in the unethical practices of firms. While thousands of people go without one square meal a day, corporations spend millions of rupees on advertising and promoting their company or products or services. Although advertising and promoting products is essential, being unmindful of the poor and the hungry is in no way ethical. In the USA, fast food firms have now resolved not to advertise using Walt Disney characters as children are lured by these advertisements and have grown obese over the years. The USA wants to deal with the problem of obese children and therefore firms are resolving to stop advertisements that make children eat these junk foods. Why were firms not thinking of the problem ahead? Their advertisements have caused a two-fold problem: 1. a country with obesity as problem; and 2. several countries with starvation and malnutrition as problem. Is this not unethical and immoral?

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The materials used for advertisements are again a problem of environmental threat. Printed advertisements, which are simply thrown away by the receivers, without even being looked at, are a serious threat to the environment which is never thought about. Plastic-based materials used for printing advertisements pose an environmental hazard. They add to solid waste, and there is no scientific method for their disposal. Advertisements on roads which distract the attention of drivers, advertisements on corners and curves where they obscure the view of drivers, and advertisements in places of scenic beauty are all unethical as they exist only with the profit motive, with no thought given to the impact they may have on the lives of people who might be adversely affected by billboards and hoardings. In order to save costs and to enhance profits, firms dump waste in rivers and oceans, and pile solid waste on the earth’s surface without the necessary effort to cause no harm to the environment. In order to reduce costs and maximise profits, firms provide low quality at a higher cost, adulteration and goods that may deteriorate quickly, all in the name of maximising profits. The charging of higher prices in order to increase profits is also an act which is not ethical as it reduces the purchasing power of the needy and the common man. How can one see ethics in the bottled water business when firms are not able to prove that their bottled water is purer than tap water? What are the ethics of profit maximisation from bottled water and aerated beverages taken from groundwater, paying nothing for it but charging customers exorbitantly, leaving the groundwater depleted, taking no initiatives to recharge the groundwater, polluting while transporting bottled water, posing an environmental threat with the bottles after use by customers, and leaving customers with a false contentment that they have consumed safe water when the water could be even worse than tap water? While the world is struggling to manage waste, the corporate producers and marketers of bottled water and aerated beverages are busy spending on promotions and advertisements, adding to solid waste, selling products on huge margins and making hefty profits.

What are the consequences of the omissions and commissions? Society at large and the firm in turn are the permanent losers from neglecting and damaging the environment. Environmental damage might range from polluted air, water, soil, etc., to complicated environmental issues such as global warming, greenhouse gases, the hole in the ozone layer, etc. This damage to the environment is not good for the firm or for society, which suffers the consequences. In the long term, the shareholders of firms that are solely profit-focused are also victims. What would be the benefit to the planet if people had more and more money but no pure water, air, or land? Should firms not think from this perspective, as without people no firm can survive and succeed? If firms are only profit-focused without giving any thought to forthcoming generations, is that not unethical? When labour is poorly paid, it has a multidirectional impact. The standard of living of the worker is low, with minimum food and clothing, damaging the learning ability of workers and their children. In the long term, depriving labour of what is due to them in fair terms (in order to maximise profits) leads to a nominal labour force with not much motivation or initiative, a frustrated and demotivated labor force, weak and sick in mind and body, supporting a family with similar physical, emotional and psychological conditions. This leads to a deterioration in the quality of work done and gives rise to a future with lot of human resources well below the required standard for productive work. With their physical and psychological woes, labour at the lower end of the economy falls prey to immoral and antisocial activities. They seek pleasure and earnings from sources not permitted or approved of by society, creating a mire of problems for labour and society. Also, the human resources of the future are affected qualitatively and fall into a cyclical pattern of poorer quality. When governments initiate the implementation of policies that are eco-friendly or pro-labour or consumer-oriented, the powerful corporate sector immediately exerts moral pressure to put such policies down. Any tax increases or charges for the cost the corporate sector incurs for society are avoided by protesting and overpowering government. If none of these efforts keep the government away, then bribing government officials is also a very common practice. Today’s corporate sector never realises that exerting pressure on government for

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causes that would otherwise benefit society at large, and paying bribes to government officials to turn the tables to meet the corporate advantage of added profits, is unethical and immoral. Even if this is pointed out, they feel they are using a smarter way to get things done and there is no harm in adopting such actions. By window-dressing and making adjustments in accounts to boost profits, firms keep shareholders in the dark as to the reality of the situation. Preparing a greater number of final accounts statements keeps all stakeholders in ignorance of the real position of the firm. Employees who are aware of the situation and, the audit firm accountants who are a party to it, learn a lesson unconsciously, and carry it into the world: giving a picture that things are better than they are is acceptable. This lesson penetrates deep into society. What is not acceptable in individual behaviour is made acceptable by corporate behaviour, bringing down the social conscience. Thus, aside from being unethical, the firm breeds an unethical society, which is a great injustice done to society. The advertisement that claims its product to be the solution, to be the market leader, to be the pioneer, etc., when really the product is not, cheats the public and but still feels no guilt. The consumer who gets carried away by such advertisements and consumes such products and finds them to be substandard ends up with psychological discomfort and questions why the corporate sector goes unpunished for the great big lies it tells in public, leaving so many individuals cheated. Again, the public learns a disguised fact – if you are powerful enough it is OK to tell lies, cheat, and get away with it easily. Advertisement copies and clippings leave messages that linger long in the minds of people, but the kind of messages they leave are quite dangerous to society at times. The advertisement for Chocolate Horlicks portrays children stealing the milk of Lord Vinayaka and praying to him: please don’t punish us, we’ll give you a share. What does this teach children? That it is OK to steal even from God to satisfy your desires, if you give a small portion of it back to him. The lessons for stealing and bribing are boldly presented. No one can question this advertisement as there is no law on the ethics presented in advertisements. Neither the firm that presents the advertisement, the producer of the product, nor the advertising company that prepared the advertisement, thinks of the ethical implications and the lessons of morality presented to its audience. There is an advertisement that presents a young woman who goes away with a stranger who presents her with a mouth freshener. What morality does this advertisement present to a culture where one’s husband is God on earth to a woman? These kinds of advertisement are quite large in number, luring the minds of young and old alike, and driving the public away from the fundamental values on which society is built. Thus, corporate influence on public ethics and morality is greatly negative rather than positive. So, where is the room for ethics and morality in today’s businesses if profit is all they desire? In order to maximise profit, firms manipulate their customers (take advantage of customer psychology to make a sale). Some existing consumer manipulation practices include customary pricing, multiple pricing, odd-even-pricing, bait-switching, etc. Further, in the name of market research, the corporate sector involves itself in systematic fact gathering, which is used for making sales pitches or to generate prospective sales lists, which is otherwise known as ‘‘sugging’’. With the increased use of database marketing and to quench their thirst for maximising profit, firms pose a privacy threat to consumers, amounting to unethical practice. Profit-oriented businesses are not wholesome in their approach and their perspective towards their existence. One day, unethical and immoral practices which are very much legal will take their toll on the firm itself. Should firms wait for this day to wake up to the call for ethical and moral practices in all that they do? Is it not wise and intelligent to be proactive rather than be reactive when all possible harm has been done and cannot be undone?

What is the remedy? It is not right to complain that business the world over is rampant with unethical and immoral practices. The world must know that the winners are not those who shine in the short-term

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through short-cuts, but businesses who follow the long route of being ethical and moral in all aspects of business. In the words of Huntsman (2007), ‘‘There should not be tension between making profits and adhering to traditional principles of decency and fairness’’. Firms should always instruct their employees to follow these suggestions of Huntsman: B

Every activity to be initiated or engaged in must begin with the question ‘‘Is it right?’’

B

Would I like to be treated this way? Let individual values rule at work too. There should be no de-linking of personal values while at work.

B

While confronting contexts of ethical behaviour examples, consider your family. Every employee must be asked to underpin his life with a string of f-words: family, faith, fortitude, fairness, fidelity, friendship, and philanthropy.

Firms are inanimate and people are the ones who act on behalf of firms. If firms have to be ethical and moral in their activities they must be led by ethical and moral people. The Board of Directors and the management team must first be governed by ethics and morality. They must be fully convinced that there is no necessity that there should be a conflict between profit and ethics. If this is to happen, then the responsibility of business schools and the faculty of business schools are great. How can business schools be of help in revamping the whole corporate world towards being ethical and morally focused rather than profit-focused? The curriculum must be loaded with ethical and moral values. All the courses taught must have a tinge of ethics and morality added to them. The activities of business schools must be based on ethics and morals. The students must be watched and evaluated for their ethical and moral behaviour, along with courses on business ethics. The whole educational experience of being groomed as a manager must emphasise ethics and morality. This way, every economy can be assured of ethics and morality ruling the corporate world. If this is to happen, the management and faculty of business schools must be convinced of the necessity for ethics and morality in the corporate world. This conviction will not be easy to inherit as one consistently watches the unethical and immoral dominate the world. All those who have any doubts on the rewards of ethics must remember a statement of wisdom from Huntsman (2007): ‘‘Nice guys really can and do finish first in life’’. The UK Accreditation Board recently endorsed a stronger focus on ethics in the business school curriculum. In a article presented in Chronicle for Higher Education (see http:// chronicle.com/daily/2003) which explained the reaction of the body to the stinging criticism that it has not done enough to raise the ethical awareness of MBA students, the nation’s accrediting body of business schools proposed raising ethics to the top of the hierarchy of topics that business schools must confront. The Board of the Association to Advance Collegiate Schools of Business (AASCB) International endorsed proposed changes in its standards. In addition to highlighting the importance of ethics, the revised standards would encourage schools to develop codes of ethical conduct for MBA students, faculty members and administrators. While developed nations in the West are taking earnest initiatives to make ethics a significant part of management education, nothing serious has been done along these lines so far in India. While ‘‘Ethics in Business’’ is included as a subject in the MBA course, the required seriousness and significance is not attached to it. No regulatory system, however stringent, can provide against the consequences, of human greed, folly or corruption (Yeo, 2003).

Conclusion The current profit model benefits only a few, and it will benefit these people only for a short time. The majority of the people are left out of the profit maximisation target and this can create unrest between the haves and the have-nots. It is not ethical to use workers as the ladder on which elite management and wealthy shareholders can climb to attain their portion of limitless profits. The profit made should be shared equally or at least at a decent level, not making a mockery of the toiling worker. The earth should be explored, not exploited, as when

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disaster strikes it does not discriminate between owners, managers and workers. Similarly, in times of social unrest or terrorist strikes, or wars, there is no special protection for the rich shareholder or manager, and neither do the poor escape. Such catastrophes strike all equally; no amount of accumulated wealth will ever be a saviour for shareholders and managers. Further, by being focused only on profit, firms are denying future generations their right to live with the necessary and available natural resources like water, air, soil, etc. It is crucial that corporate responsibility in the ethical and moral conduct of business is embraced by all who run businesses, be they promoters, boards of directors, shareholders or managers. The earlier that this is embraced, the better it will be for the world.

References Collins, J. (2001), Good to Great, Harper Collins, Philadephia, PA. Huntsman, J.M. (2007), Winners Never Cheat, 3rd ed., Wharton School Publishing, Philadelphia, PA. Yeo, T. (2003), ‘‘Audit shake-up is ‘a big fudge’’’, 29 January, available at: http://news.bbc.co.uk

Further reading Bajaj, P.S. and Agarwal, R. (2004), Business Ethics: An Indian Perspective, Biztantra, New Delhi. Boatright, J. (2006), Ethics and The Conduct of Business, 2nd ed., Prentice-Hall, Englewood Cliffs, NJ. Frederickson, H.G. and Ghere, R.K. (2005), Ethics in Public Management, Prentice-Hall of India, New Delhi. Hartman, L.P. and Chatterjee, A. (2006), Perspectives in Business Ethics, 3rd ed., Tata McGraw-Hill, New Delhi. Raj, R. (2004), A Study on Business Ethics, Himalaya Publishing House, Mumbai. Shaw, W.H. (2005), Business Ethics, 4th ed., Thomson Wadsworth, Belmont, CA. Valasquez, M.G. (2006), Business Ethics: Concepts and Cases, 5th ed., Pearson Education, Harlow.

Corresponding author S. Mercia Selva Malar can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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Revisiting rights and responsibility: the case of Bhopal Loong Wong

Loong Wong is a Senior Lecturer in the School of Business and Government, University of Canberra, Canberra, Australia.

Abstract Purpose – This paper seeks to examine the activities and consequential effects of a transnational corporation in a developing country. Via an examination of the industrial accident in Bhopal and a discursive examination of the firm’s strategies, the paper seeks to contest the firm’s claims that it has been acting responsibly. The paper further suggests that the contexts and development of the relationships, and claims by Union Carbide and its supporters, and its place within the global economy, must be critically examined and subjected to a systemic analysis if corporate social responsibility is to have any significant resonance. Design/methodology/approach – The paper seeks to integrate a wide range of epidemiological and social science literature relating to Bhopal. It seeks to examine Bhopal within the context of power discourse and the relationships engendered via its manifestations and practices. This discursive approach enables the researcher to disentangle various strands of practice within the context of the transnational firm and local communities Findings – The paper finds that a more systemic approach to corporate governance and corporate social responsibility (CSR) is necessary, if developing countries and local communities are to be treated as critical in the development process and as stakeholders in the debate on CSR. Originality/value – By its examination if this case, the paper emphasises the need for a more systemic approach to corporate governance and CSR. Keywords Globalization, Corporate social responsibility, Corporate image, Regulation, Social behaviour, Case studies Paper type Research paper

Introduction The globalisation of economic activity and the growing role of transnational corporations have increasingly drawn attention to the twin issues of corporate governance and corporate social responsibility. Whilst welcomed and to be lauded, we (as investors and consumers and the bulk of the population) are, however, given only partial narratives; corporate activities and deliberations remain Fort Knox-like, wrapped in the legalese of commercial and private information. But as numerous writers have reminded us, the corporation is a special organisation and its influence and impact on national economies has been enormous (Bakan, 2004; Meintjes, 2000; Anderson and Cavanaugh, 1996; Galbraith, 1977). This is especially pronounced in developing countries, where governments have had little or no alternative but to be receptive to the terms of these corporate interests. Another criticism of TNCs is that their overall strategy to relocate from the North has kept wages and living conditions down to exploit lower standards on working conditions, basic worker rights, and environmental regulations (Forsythe, 2000, pp. 196-7; DeMartino, 2000; Meyer, 1998, pp. 198-203; Snider, 1993). TNCs have responded by claiming they provide jobs and investment and acting within national legal jurisdictions (Meyer, 1998). These competing claims played themselves out within the interpenetrated landscape of post-industrialism, post-modern cultures and post-modern selves. In such a context, the corporation appears

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invincible but of late, this invincibility has been challenged, ‘‘exposed’’ and attacked (Korten, 1995; Klein, 2001; Cavanagh et al., 2002). In this paper, I use the tragic case of the Bhopal disaster in December 1984 and its aftermath as a means of addressing the issues of corporate responsibility, international management, host relationships, post-colonialism and globalisation. Indeed, Bhopal’s import can be seen at various levels of discourse. First, the case poses in its starkest form the issue of corporate power and notions of accountability as they relate to the corporate form. Second, it raises questions of the efficacy of our legal and regulatory mechanisms, particularly for victims of corporate crime in developing countries. Third, the disaster had and continues to have significant global effects, particularly on environmental and occupational safety issues and its relations to multinational activities of the corporate firm; it thus preoccupies our views on international business practices, corporate strategies and also the vexatious issue of corporate social responsibility. Fourth, it opens up the question of the efficacy of self-regulation and the whole question of corporate social responsibility. As such, Bhopal can be seen as an example of how the social values and norms of one country (or a group of countries) can frame, affect and determine the social and environmental responsibilities of the operations of transnational corporations in another country.

The script: explaining Bhopal In Bhopal, India, a chemical plant operated by Union Carbide of India Limited (UCIL), a subsidiary of UCC, used highly toxic chemicals, carbon monoxide, chlorine phosgene (mustard gas), monmethylamine and methyl iso-cyanate (MIC) to produce carbamate pesticides. On the night of Sunday 2 December 1984, water entered an MIC storage tank, setting in process an exothermic reaction. Unknown quantities of hydrogen cyanide, nitrous oxide and carbon monoxide spewed into the atmosphere. Between 200,000 and 450,000 local people were exposed to the toxic fumes; some 60,000 were seriously affected with impaired lung functions, severe gastrointestinal damage and other ailments. More than 20,000 people have been permanently injured and up to 10,000 people have died as a consequence of the tragedy (Mehta et al., 1990; Cullinan et al., 1996). Sight, respiratory and fertility problems persist for many Bhopal residents (Mehta et al., 1990; Andersson et al., 1990; Kapoor, 1991; Varma and Guest, 1993; Mukerjee, 1995; Cullinan et al., 1997). UCC responded immediately on the defensive. They claimed that they located at Bhopal not ‘‘for reasons of economy or to avoid safety standards’’ and they maintained the same safety standards in their American and overseas operations (Everest, 1986, pp. 47-8; Shrivastava, 1991; Holtz, 2000). They also claimed that they had an excellent safety record and had sound standard operating procedures (SOPs). Moreover, they maintained they had no responsibility for the production of MIC in India or for the siting of the plant and the quality of the materials used. They argued that UCIL and the Indian state were responsible and as UCIL was an independent company, responsibility and liability could not be extended to UCC (Castleman and Lemen, 1998). UCC also claimed that India’s cultural, social and political backwardness contributed to the problem of lax enforcement, poor maintenance and management, and inadequate planning procedures. The company further claimed Bhopal was caused by sabotage arising from disgruntled employees (Kalelkar, 1988). That claim was contentious and had taken various forms. Initially, it was alleged that a disgruntled employee, who was off-duty, removed a pressure gauge and then used a hose to put water into an MIC tank with a view to spoiling a batch of chemicals. Then it was claimed that disgruntled employees had placed a water line where a nitrogen line should have been used. Tellingly, The New York Times reported on 26 March 1985 that such claims were not tenable since the relevant nitrogen and water lines were of a different colour and the nozzles were of different sizes. That same day, Warren Anderson, UCC’s chairman, withdrew the sabotage claim at Congressional Hearings. Then, between 31 July 1985 and 3 January 1986, UCC claimed that a group of Sikh terrorists, the Black June Movement, were responsible. Again, no identifiable group or corroborating evidence was presented and the claim was dropped.

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Clearly, there is a problem with the ‘‘sabotage’’ scenario (Chouhan, 1994). There is no consistency in UCC’s portrayals. More importantly, if such claims were accepted, it clearly demonstrates how unsafe the plant was and the critical position played by UCC in managing its firm’s activities, particularly in operational issues, for example was it possible to remove a pressure dial by hand when this was connected to such a toxic and volatile chemical? And secondly, why was water there? The focus on sabotage also serves to deflect attention from UCC’s own role – the poor design of the plant, its inappropriate siting, its safety systems, the lack of a proper emergency plan and its generally run-down condition. In other words, the way in which the plant had been designed and managed was an issue and demonstrates a critical problem with a particular corporate structure and management style. Technologically and safety-wise, Bhopal was demonstrably inadequate and inferior to its American plant (Holtz, 2000)[1]. Plant instrumentation was found to be inadequate to monitor normal plant processes. Dump tanks and other equipment (e.g. a dedicated sump system) were not available at Bhopal. Nevertheless, even with inferior technologies, fewer people would have died if the plant had not been sited near shanty towns, if there had been adequate risk assessment, modeling and monitoring of discharges and emergency planning and management, and if the plant personnel, local medical services and the state and national government had known more about the nature and effects of the deadly gas emissions. Despite this litany of failures, the Wall Street Journal pronounced that ‘‘economic progress is not without its risks’’ (Wall Street Journal, 1984) and academic analysts similarly intoned that in complex production and high technology industries, such accidents are systemic and ‘‘normal’’ (Perrow, 1984; Toft and Reynolds, 1994; International Labour Organization, 1995). Indeed, we are increasingly becoming a risk society (Beck, 1992).

Staging UCC: a TNC in motion Whether UCC was legally responsible has been the subject of much debate. Kelvin Jones (1982) suggested that there are three distinct and necessary functions of property in the sphere of economic production: 1. title ‘‘involves the sort of calculations and conditions which govern the more general provision of finance, the socialization of debt, the exchange of guarantees and the constitutional position of shareholders’’ (Jones, 1982, p. 78); 2. control ‘‘refers to the distribution of the relevant means of production to a particular use [. . .] to the more or less absolute power to dispose of the means of production within the relevant confines imposed by other relations of ownership’’ (Jones, 1982, p. 77); and 3. possession ‘‘concerns the day to day relation of management‘‘ (Jones, 1982, p. 77) and the ‘‘strategies and calculations which comprise the use or actual operation of any particular process of production irrespective of who is the agent of possession’’ (Jones, 1982, p. 76). In common with UCIL’s other shareholders, UCC had ‘‘title’’ to much of the revenue generated by UCIL. Despite the rule that foreign companies should usually own no more than 40 per cent of an Indian company’s stock, UCC owned 50.9 per cent. In 1982, UCIL remitted $1.43 million in dividends to UCC (Everest, 1986, p. 167). Its majority ownership clearly allowed UCC to determine and to affect, to a large extent, decisions made about investments and dividends and the assets of the company. Indeed, a ‘‘subsidiary cannot change the substance of any policy without review by the parent’’ (Muchlinski, 1987). UCIL’s production and marketing strategies were dictated by the corporate strategies of UCC (Morehouse and Subramaniam, 1986, p. 17). Moreover, the continued existence of the Bhopal plant was UCC’s decision: it had commissioned a preliminary study of the cost of dismantling the MIC unit and other pesticide production facilities at Bhopal (Dinham and Sarangi, 2002, p. 27). Despite such a threat to its existence, UCIL was not in a position to ‘‘go to a competitor of Union Carbide and buy a pesticide plant’’ ready-made; moreover, it would be too costly to develop a pesticide plant from scratch (Muchlinski, 1987, p. 582). UCC also dictated how and which chemicals were produced and stored. Control of UCIL’s production, as such, is integral to UCC’s corporate maneuvers.

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UCC, to a large extent, ‘‘possessed’’ the Bhopal plant. This was most apparent in its intellectual and technological know-how. In common with TNCs’ engagement in international business operations, UCC typically received significant revenues from its licensing, managerial, monitoring and marketing activities. UCC decided on plant expenditure, staffing and safety and related matters (Sandberg, 1985; Everest, 1986). Control and possession are problematic and are absolute only when drastic decisions like opening or closing a plant are made. Daily operations are more often than not relative and relational, the outcome of struggle, negotiation and compromise, albeit between unequal protagonists (Meyer, 1978; Miles, 1982). These considerations can be demonstrated thus: UCIL’s production of the pesticides Temik and Sevin were produced and sold so that subdivisions of the company showed a profitable return on investment. It is questionable whether it was possible for UCIL to safely make and sell those pesticides at a profit, and indeed, UCC’s SOPs do not offer us much guidance, and indeed the question of control is certainly open. However, top management of UCC had represented itself to shareholders as effectively controlling its various subdivisions and had received the rewards and privileges commensurate with such control, and was thus responsible for, if not in fact totally in control of, the organisation’s actions. UCC as such seems to have been responsible for the acts of both commission and omission that created the Bhopal disaster. However, this does not take place in a vacuum. In this case, it invariably involves examining the relations between different groups involved in different modes of production and their shared common interests. Because of this, Everest (1986) and others claimed that some Indian interests were equally culpable as they engendered a positive and cosy relation with UCC and other transnationals.

Passing the buck Conducting business transnationally allows businesses to take advantage of their negotiating power, and the desire on the part of national governments to effect development and growth, and in developing countries particularly, lax and inadequate legal, monitoring and enforcement systems (Castleman, 1979, 1995; Fagre and Wells, 1982; Ives, 1985; Castleman and Navarro, 1987; Singh et al., 1989; Forget, 1991; Jeyaratnam, 1992). TNCs and their subcontractors use increasingly large amounts of dangerous raw materials in advanced and complex production systems that are beyond the technical capacity of most national host governments. Enormous quantities of explosive, toxic and radioactive materials are stored, transported, utilized and disposed of by TNCs. Often, there is an implicit ‘‘racist’’ discourse to justify their carelessness and unusual level of risk taking – the value of life in Third World countries, the technologically unsophisticated locals, their lack of comprehension of safety procedures and worker incompetence in general. These rationalisations, however, ignore important determinants of conduct, such as unacknowledged interests which allow actors to ignore the effects of their actions on others; such a rationalisation could be used to justify lies and aberrations (Scott and Lyman, 1968) but could equally reflect a complete lack of understanding of what is ‘‘really happening’’ (Nichols and Beynon, 1977). As such, although India is often represented as less developed country by UCC officials, these representations fail to come to terms with the ‘‘real’’ India. India is in many respects a major industrialised economy and certainly on the common measures of economic activity, India ranks as one the world’s 20 most significant economies. This is not to deny that a majority of India’s population live in extreme poverty. Like other industrialised economies, India has a significant chemical industry (Sufrin, 1985; Cassels, 1993; Shrivastava, 1993a, b), and it is intrinsically linked to food production. By 1984, India was the fourth largest producer and consumer of chemical fertilizers in the world (Jalees, 1985, p. 409). The agrochemicals industry, as a particular division of chemicals, is dominated by some of the world’s largest multinational corporations. At a global level, in 1983, three companies – Bayer (West Germany), Ciba-Geigy (Switzerland) and Monsanto (USA) – controlled one-quarter of the world’s agrochemicals market, or ‘‘over $4billion in sales’’ (Weir, 1986, p. 7). Today, about three dozen companies control over 90 per cent of that trade in pesticides, and UCC was a key player in the industry (Forget, 1991). Many of these chemicals are also

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highly toxic and have a detrimental effect on the environment and people’s health (e.g. dioxins, PCBs, DDTs and others; see Thrupp, 1991; Al-Saleh, 1994). Following two decades of high growth fuelled by government subsidies, tax breaks, low cost loans and lax safety regulations, the pesticides industry in India had become extremely competitive by the end of the 1970s. Because of this intense competition, UCC sought to ‘‘backward integrate’’ and began (in 1979) the domestic manufacture of MIC and other pesticide components at the Bhopal plant (Shrivastava, 1992, pp. 33-4). The general context of multinational-host government relations, and the particular context of the local pesticides market, are crucial contextual factors in understanding the Bhopal disaster. In respect of the latter, increasing competition meant a need for greater efficiency and in a context of weak health and safety regulation, it was therefore not rational for UCC and its subsidiary, UCIL, to spend money on these areas if it would not be matched by its competitors or its competitors would not be required to do so. Rather, it was rational to take advantage of such laxity, and be able to ‘‘export hazard’’. This cutback in investment resulted in an inappropriate use of technology, the non-replacement of defective parts, and inadequate maintenance and monitoring of the production process. Global competition and fluctuating demands further contributed to the problem as the general need for ‘‘economy’’ and saving and scrimping all further contribute to the likelihood of ‘‘accidents’’ and disasters. Management at UCC saw it as their right to exclusively maintain and manage UCIL and its operations, and were ignoring and/or distrusting concerns raised by local journalists, trade unionists and workers. In exercising its managerial prerogative, management sought to neutralise and control any challenge to its exclusive authority, and perhaps the clearest example of this is the withholding of information on the plant from local authorities. Any third-party involvement in control was seen as anathematic to management’s interests.

Fronting up: the court case On 14 February 1989, UCC and the Indian government, acting on behalf of the Bhopal victims, reached an out-of-court settlement of US$470 million in the Indian courts. It was agreed that this settlement would render UCC immune from all impending litigation, including criminal charges (Cassels, 1993). The money was to compensate the families of the 3,329 people officially recognised by the Indian government as having died as a result of the tragedy and the 20,000 seriously injured that it accepts as bona fide victims. The case clearly demonstrated the nature of inequitable treatment in that Indian lives had been treated callously and rather cheaply vis-a`-vis American lives. The Indian government’s claim that UCC was ‘‘the creator of the design used in the Bhopal plant and directed UCIL’s relatively minor detailing program’’ and that all relevant documents and personnel were to be found in the USA rather than India were set aside by the American judiciary (Baxi, 1986). The courts also found that privacy, personal and confidential information which UCC held were critical components in their decisions. In effect, the courts protected UCC from exposure to damages in a US court, decreasing American transnational corporations’ vulnerability to the ‘‘inconvenience’’ of responsibility for their overseas operations (forum non conveniens). UCC, with the aid of the American chemical industry, the American state and the American courts, had succeeded in transferring the case to India, and thus avoided responsibility for the accident and imposing an inequitable settlement for the Bhopal victims (Kapur, 1990; Hager, 1995). More tellingly, UCC claimed that: . . . the Indian government may have granted a licence for the Bhopal plant without adequate checks on the plant; that the relevant controlling agencies responsible for the plant were grossly understaffed, lacked powers and had little impact on conditions in the field. More particularly, the Bhopal Department of Labour office had only two inspectors, neither of whom had any knowledge of chemical hazards (Muchlinski, 1987, p. 575).

In other words, the Indian government bore a major responsibility for the Bhopal disaster. There is no dispute that Indian regulatory agencies were inadequate (Cassels, 1993; Everest, 1986; Hazarika, 1987). But in arguing this position, UCC was being disingenuous. First, because it had cultivated and maintained close relationships with personnel at all levels of the Indian state, it was able to circumvent the regulations. Second, effective regulation in what was

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to all intents and purposes a deregulated country would have partly curtailed UCC’s ability to ‘‘export’’ hazardous materials, and no corporation would (or could) autonomously encourage the development of stringent measures restricting its own freedom to locate production. Third, UCC’s withholding and curtailment of information to the Indian state and its ability to enforce managerial control was equally significant in ensuring that effective and meaningful monitoring was not compromised. Instead, Bhopal was explained away as the regrettable result of small but unavoidable risks in an inherently hazardous industry. But Bhopal is part of a transnational chain and is part of a global strategy. Therefore, to understand Bhopal, we have to understand the nature of a transnational corporation itself.

The inevitable rise and triumph of transnational corporations? Ever since corporations began operating as autonomous institutions, they have been critically influential on our livelihood and society at large (Galbraith, 1977; Caves, 1996). They have also been seen as threats to national sovereignty (Vernon, 1977). What is new, however, is that increasingly, corporate interest now ‘‘defines the policy agendas of states and international bodies’’ (Korten, 1995, p. 54; Snider, 1993). This has prompted much debate about the actual impact of globalisation and the pronounced role of a new neo-liberal market disciplining discourse (see, for example, Korten, 1995; Meyer, 1996; Bhagwati, 1998; Smith et al., 1999; Klein, 2001; Cavanagh et al., 2002; Stiglitz, 2002). Critics have argued that this discourse has promoted and enhanced corporate power, and corporations today have ‘‘unfettered power’’ over our societies and economies. They not only bring with them new technologies and management systems, they also employ a different kind of corporate culture and assumptions about the relations between national governments and countries’ economic and sociopolitical institutions (Tarzi, 1995; Jones, 1999). Even market enthusiasts have noted that the distribution of gains from international trade and investment has been skewed strongly in favour of the rich and of those who control capital and against the poor (Sachs and Warner, 1995). Consequently, this has led to human rights standards, guidelines and best practices to govern the business of TNCs (Frankental and House, 2000; Addo, 1999). As such, the TNC itself needs to be understood as an evolving institutional form within multiple and dynamic economic, political, technological, and sociocultural fields (Weick, 1995). The modal strategies and structures employed by TNCs have changed greatly over the past couple of decades (Bartlett and Ghoshal, 2003). A particularly significant development has been the adoption of new sourcing arrangements involving the spatial reorganization of TNC value-chains from primarily national to regional or global configurations in line with changing corporate strategies (Dicken, 2003). These arrangements are constituted by the national dis-integration of a given value-chain and the relocation of its nodal segments in multiple host countries. In the new production structure, intermediate products are transferred from one nodal point to another for further processing as they move along the value chain. A related development has been the growing tendency for TNCs to replace hierarchically governed, vertically integrated production systems with network systems – of inter-dependent, vertically linked suppliers and/or distributors coordinated by focal TNCs to produce goods or services in a manner which maximises flexibility and minimises risk for TNCs. The hierarchical network form of organisations allows TNCs to reduce their transaction costs and increase their flexibility by delegating non-essential activities to subcontractors who bear most of the risks associated with uncertain market conditions (Harrison, 1997; Goldsmith, 1996). These subcontractors are locked in TNC-centred commodity chains in which they have little power and in which the intermediate goods they produce have little trading value outside of the chain in which they are located. TNCs can then focus on high strategic value-added activities based upon proprietary knowledge, technological intensity and scalar economies (Cowling and Sugden, 1985; Harrison, 1997; Markusen, 2001). TNCs are thus able to have their cake and eat it by enjoying the benefits of control without the liabilities of ownership. Moreover, they are able to do this precisely because of their structural power over their network affiliates. Transnational corporations, then, are institutions designed, constructed, and maintained to make money for the interests that own them. TNCs as such are not development institutions, although they often promote certain forms of economic development. Nor do they exist in

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order to fulfil the aspirations of the people that they employ, although they will often find it useful (sometimes even necessary) to ‘‘make people happy’’ in order to generate increased productivity and desired market outcomes. Nor do they exist to satisfy the wants or needs of their customers (although they must obviously do so to some extent), who are always means and never ends in themselves. Nor, finally, do they exist to make society a better place, despite the fact that their activities often generate wealth, employment, technological advancement, etc. Such outcomes are irrelevant positive externalities from the perspective of these institutions themselves. Because of these, they have been subjected to increasing criticisms, particularly in abusing and exploiting workers and in causing egregious harm to the environment. TNCs’ responses to public concern and criticism about their role have been two-pronged: 1. justifications for their conduct; and 2. proposals for institutionalising changes in their conduct. They have justified their conduct on the basis of market and competitive factors and pointed to increased societal benefits through income growth and job creation in countries where they operate. They have chastised critics as unrealistic. Employment of young teenagers, long working hours, and low wages are presented as the necessary price of progress, unfortunately inevitable in the early stages of economic takeoff. TNCs assert that increasing local wage rates would be counterproductive since it would force them to increase the retail prices of their products, reducing aggregate demand, investment and jobs (Kapstein, 2001). TNCs also contend that they adhere to local laws and regulations in their own operations and insist that their suppliers also adhere to similar standards of compliance. They put the blame for poor working conditions largely on the shoulders of local manufacturers and local labour authorities. At the same time, they condone laxity in compliance as a necessary evil because developing countries cannot afford the luxury of enforcing labour and environmental standards similar to those that prevail in industrially advanced countries (Business Week, 2000; Kristof and WuDunn, 2000).

It’s so logical: we do what is good for us Corporate management strives to put organisational resources to their most economically productive use and establish proper control systems to ensure that this occurs. Management seeks to allocate resources and configure the firm’s boundaries so as to maximise shareholder value, at least over the long term, or face eventual dismissal. The drawing (and redrawing) of boundaries is a function of a firm’s ‘‘administrative heritage’’ (Bartlett and Ghoshal, 2003), industry factors, and current strategic choice. This involves mapping out strategies impacting on the firm’s boundaries – vertical[2] and spatial[3]. Typically, a firm seeking to leverage its value-chain function will seek to capitalise on both country locational factors and firm-specific resources and capabilities – including the ability to manage spatially dispersed, multi-country operations (Dunning, 1993). This renders the corporation ‘‘footloose’’, seeking to continuously ‘‘exploit economic opportunities around the world’’ (Forsythe, 2000, p. 251). Numerous studies have shown that as the firm grows and becomes bigger, it becomes necessarily more bureaucratised. Control systems are introduced and structured to delimit or channel individual agency in ways that are in accordance with segmented and/or organisational imperatives (Kanter and Stein, 1979; Vandivier, 1982; Vaughan, 1983; Fligstein, 1990). For an individual to deviate from these imperatives in pursuit of some socially responsible outcome – which simultaneously represents an unproductive resource expenditure for the organisation – constitutes a highly irrational act in terms of its likely effect on that individual’s pursuit of organizational rewards. As noted by Herman (1981, p. 77): Bureaucratic pressures and the disciplined pursuit of overall corporate objectives tend to be greater in large organizations. Community pressures and interests are less personally felt and tend to be lost in bureaucratic processes dominated by a market-based profit-loss calculus [. . .] With profit motive and competitive pressures intact, market forces should produce organizations that are better structured to abandon individual plants and communities in the interests of

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company profits as a whole. In an important sense, the success of large organizations follows in part from their being designed to be less ‘‘responsible’’ than smaller local enterprises.

Given the reality of financial hegemony, bureaucratic control and the corporative imperative, the opportunities for management to act in socially responsible ways are quite limited. This does not mean that large firms will not or cannot do good (Porter and van der Linde, 1995; Jacobs, 1991), but that they will do substantive good only when it is also good for them (Bakan, 2004). They will act ‘‘normally’’ and legally to pursue their best interests, and as Vaughan (1996) shows in his analysis of the Challenger disaster and NASA, managers respond to the corporate credo and in seeking to maximize corporate returns, unwittingly stretch imperceptibly the concept of acceptable risk.

Trying to work out the script? Join us In the present analysis, I have sought to show that UCC had created or allowed to develop the conditions whereby an accident was possible and then failed to take the necessary steps to mitigate the effects of any accident. Furthermore, UCC had sought to control and manage the legal process and public opinion to secure a favourable settlement, one in which responsibility for the disaster was not determined legally. Finally, I have also shown that the host-multinational relationship is indeed problematic – there is little possibility that UCC or UCIL or any other transnational corporation would have been successfully prosecuted under law due to the relative powers of the actors, the desire amongst governments of developing countries for foreign capital, and the nature of national (and absence of international) legal systems (Lal, 1996). In this context, it is worth noting that Asia (including India) has experienced major growth and expansion in the chemical industry, fuelled by a government-defined economic and political imperative (Hsu, 1995). In India, the government set a national policy of ‘‘feeding itself’’ and gaining development, economic self-sufficiency, skills, technology transfers, and the pesticide and chemical industry provided both jobs and a means of higher food production. BASF, BP, Dow, Du Pont, Exxon, ICI and Shell were courted and have all developed, or are developing, significant interests in the Indian chemical industry (Marsh, 1997; Nanavaty, 1996; Sidhva, 1995). Today, it is a US$30 billion industry and contributes about 13 per cent of India’s GDP (see www.indianchemicalportal.com/ chemical-industry-overview). The expansion of these interests was given a fillip in 1991 when liberalisation became part of the Indian government’s reform agenda. Foreign direct investment was targeted and industrial production was deregulated and de-licensed (Nanavaty, 1996). This influx of capital occurred before any ‘‘real’’ lessons were learnt from Bhopal; indeed, the desire for foreign capital may partly explain why any such ‘‘lessons’’ have not been acted upon (Bowonder et al., 1994). I have also sought to show that UCC is not a rogue company amongst transnational corporations. Many analysts have readily conceded that ‘‘normal accidents’’ are likely and that ‘‘high risk should not be interpreted as imminent danger’’ (Time, 1984, pp. 26-30; Perrow, 1984). However, I have also shown that there is an almost inexplicable aspect of management to ignore the strong signals that something is seriously wrong at Bhopal and that such continuous disregard of the problem clearly suggests some form of corporate misconduct. In their quest for development, developing countries have offered business environments with few controls on the movement of capital, hazardous production or pollution. Sometimes, this is official policy, as in the case of ‘‘free trade zones’’; on other occasions, regulations exist but are not enforced. This is true not only in India, but also to a lesser degree in the USA, UK, Australia and other ‘‘developed’’ nations. In these countries, there were cutbacks in resources and powers of regulatory bodies concerned with occupational safety and health and environmental dangers, whilst their enforcement responsibilities were extended (Pearce, 1990; Pearce and Tombs, 1997; Tombs, 1995; Berger, 1999: Hopkins, 2002). It is prudent that we treat with some scepticism industry’s claims of corporate social responsibility. There are clearly complications surrounding the issue of stakeholders and their import, particularly when a subsidiary is relatively independent and the local managers

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operate under a strictly national frame of mind. Therefore, particularly in environmental or social issues (Donaldson and Dunfee, 1994, 1999), where the potential divergence between national cultures could be rather high, managers of multinational corporations have to take extra care in identifying foreign stakeholders, who might have an impact on the matter. However, as I have indicated, this is not tenable as management practices are clearly centrally determined and whilst the host country and local partners and employees are important actors, the overall responsibility for the company lies with UCC. UCC has continued to maintain its safety-conscious and environmental responsibility image – for example, in 1989, it published Towards Environmental Excellence: A Progress Report, despite its many infractions in the USA and elsewhere. Clearly, these public relations initiatives seek to manage social and political pressures, particularly around clean, safe and healthy production. This is not to say that improvements in the production, use, storage, transport and disposal of hazardous substances cannot and do not occur. However, these improvements are not altruistic outcomes nor arrived at voluntarily by corporations, but are subsequent to disasters and popular and regulatory scrutiny and reforms. Corporations can, do and will commit health, safety and environmental crimes – workers and local communities suffer death, injury, ill health and harassment due to the actions or inactions of corporations. In developing a context for social action, the above considerations are clearly important. Globalisation has mutated capital into a heartless, placeless, myopic monster chasing profits. The ‘‘disembodiment’’ of ownership and control that accompanies the transition in investor profile, the increasing ‘‘statelessness’’ of both finance capital and TNCs, the escalating ‘‘despatialisation’’ of capital as huge flows of short-term portfolio investment scan the globe on a 24/7 basis, the extent to which isomorphic behaviour subjects both fund managers and organisational decision makers to follow the herd, and, most fundamentally, the accelerating colonisation of non-economic institutions by economic rationality all bear evidence to this central point. This is the context within which Bhopal can and needs to be understood – a script of footloose capital and its attendant props. Economic alliances between government and transnational businesses, the judicial system and its ‘‘alienness’’ (including to local, poor residents in Bhopal), complicity, greed, desire and nationalism all intersect to ensure that the issues become inter-linked and inter-related. Corporate social responsibility alone will not suffice, although a necessary part of the reform process. Analysis needs to progress and unfold simultaneously on several levels, disentangling and resolving a whole set of reinforcing and sometimes, conflictual relationships, and desires to move global economic and political practice in the direction of global justice.

Notes 1. The New York Times had reported that an internal audit team had earlier warned UCC about inadequate safety measures and the possibility of a runaway reaction involving the large MIC storage tanks just three months before the Bhopal tragedy (New York Times, 1985). 2. Vertical boundaries refer to the relationship between a firm’s value-chain and the relevant industry value-chain (Porter, 1985). How many segments of the overall industry value-chain does the firm participate in directly? Which segments does it refrain from, and how does it relate to those segments – through external markets, relational contracting, and/or vertical networks? 3. Spatial boundaries refers to the specific geographic location of a firm’s assets and activities. Where does it conduct its research and development? Its manufacturing? As a firm enters into international business through exporting, its spatial boundaries expand as it reaches out to foreign customers. As it relocates manufacturing facilities to countries with lower labour costs, its spatial boundaries shift from old to new production sites.

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Dembo, D., Warehouse, W. and Wykle, L. (1990), Abuse of Power: Social Performance of Multinational Corporations – The Case of Union Carbide, New Horizons Press, New York, NY. Dicken, P. (2003), Global Shift, Paul Chapman, London. Dinham, B. and Sarangi, S. (2002), ‘‘The Bhopal gas tragedy 1984 to the evasion of corporate responsibility’’, Environment and Urbanization, Vol. 14 No. 1, pp. 89-99. Donaldson, T. and Dunfee, W.T. (1994), ‘‘Towards a unified conception of business ethics: integrative social contracts theory’’, Academy of Management Review, Vol. 19 No. 1, pp. 252-84. Donaldson, T. and Dunfee, W.T. (1999), ‘‘When ethics travel: the promise and peril of global business ethics’’, California Management Review, Vol. 41 No. 4, pp. 45-63. Dunning, J. (1993), The Globalization of Business, Routledge, London. Everest, L. (1986), Behind the Poison Cloud: Union Carbide’s Bhopal Massacre, Banner Press, New York, NY. Fagre, N. and Wells, L. (1982), ‘‘Bargaining power of multinationals and host governments’’, Journal of International Business Studies, Vol. 13, pp. 9-23. Fligstein, N. (1990), The Transformation of Corporate Control, Harvard University Press, Cambridge, MA. Forget, G. (1991), ‘‘Pesticides and the Third World’’, Journal of Toxicology and Environmental Health, Vol. 32, pp. 11-31. Forsythe, D. (2000), Human Rights in International Relations, Cambridge University Press, Cambridge. Frankental, P. and House, F. (2000), Human Rights: Is it Any of Your Business?, Amnesty International UK/Prince of Wales Business Leaders Forum, London. Galbraith, J. (1977), The Age of Uncertainty, Houghton Mifflin, Boston, MA. Goldsmith, A. (1996), ‘‘Seeds of exploitation: free trade zones in the global economy’’, in Mander, J. and Goldsmith, E. (Eds), The Case Against the Global Economy, Sierra Club Books, San Francisco, CA. Hager, R. (1995), ‘‘Bhopal: courting disaster’’, Covert Action Quarterly, Vol. 53, pp. 38-42, 56. Harrison, B. (1997), Lean and Mean, Basic Books, New York, NY. Hazarika, S. (1987), Bhopal: The Lessons of a Tragedy, Penguin Books, Delhi. Herman, E. (1981), Corporate Control, Corporate Power, Cambridge University Press, Cambridge. Holtz, T. (2000), ‘‘Tragedy without end: the 1984 Bhopal gas disaster’’, in Kim, J.Y., Millen, J.V., Irwin, A. and Gershman, J. (Eds), Dying for Growth: Global Inequality and the Health of the Poor, Common Courage Press, Monroe, ME. Hopkins, A. (2002), Lessons from Longford: The Trial, CCH Australia, North Ryde. Hsu, W.K. (1995), ‘‘Asia: the centre of future growth for the chemical industry’’, Chemistry & Industry, 4 December. International Labour Organization (1995), Recent Development in the Chemical Industry, International Labour Organization, Geneva. Ives, J. (Ed.) (1985), The Export of Hazard: Transnational Corporations and Environmental Control Issues, Routledge Kegan Paul, Boston, MA. Jacobs, M. (1991), The Green Economy, Pluto Press, London. Jalees, K. (1985), ‘‘Environmental impacts of fertilizers in India’’, Chemistry and Industry, 16 June. Jeyaratnam, J. (Ed.) (1992), Occupational Health in Developing Countries, Oxford University Press, Oxford. Jones, K. (1982), Law and Economy: The Legal Regulation of Corporate Capital, Academic Press, London. Jones, M. (1999), ‘‘The competitive advantage of the transnational corporation as an institutional form: a reassessment’’, International Journal of Social Economics, Vol. 24 No. 7, pp. 19-35.

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Kalelkar, A. (1988), ‘‘Investigation of large magnitude incidents: Bhopal as a case study’’, Preventing Major Chemical and Related Process Accidents, Symposium Series No. 110, Institute of Chemical Engineers, Rugby. Kanter, R.M. and Stein, B.A. (Eds) (1979), Life in Organisations: Workplaces as People Experience Them, Basic Books, New York, NY. Kapoor, R. (1991), ‘‘Fetal loss and contraceptive acceptance among the Bhopal gas victims’’, Social Biology, Vol. 38 Nos 3/4, pp. 242-8. Kapstein, E. (2001), ‘‘The corporate ethics crusade’’, Foreign Affairs, Vol. 80 No. 5, pp. 105-19. Kapur, R. (1990), ‘‘From human tragedy to human rights: multinational corporate accountability for human rights violations’’, Boston College Third World Law Journal, Vol. 10 No. 1, pp. 1-40. Klein, N. (2001), No Logo, Flamingo, London. Korten, D. (1995), When Corporations Rule the World, Earthscan Publications, London. Kristof, N.D. and WuDunn, S. (2000), ‘‘Two cheers for sweatshops’’, New York Times Magazine, 24 September. Lal, V. (1996), ‘‘Sovereign immunity in an unequal world’’, Social and Legal Studies, Vol. 5 No. 3, pp. 431-6. Markusen, J.R. (2001), Multinational Firms and the Theory of International Trade, MIT Press, Cambridge, MA. Marsh, P. (1997), ‘‘Chemical engineering. Globalisation: focus on Asia-Pacific’’, Financial Times, 3 April. Mehta, P., Mehta, A.S., Mehta, S.J. and Makhijani, A.B. (1990), ‘‘Bhopal’s tragedy health effects: a review of methyl isocyanate toxicity’’, Journal of the American Medical Association, Vol. 264 No. 21, pp. 2781-7. Meintjes, G. (2000), ‘‘An international human rights perspective on corporate codes’’, in Williams, O.F. (Ed.), Global Codes of Conduct: An Idea Whose Time Has Come, University of Notre Dame Press, Notre Dame, IN. Meyer, M. (1978), Environments and Organisations, Jossey-Bass, San Francisco, CA. Meyer, W.H. (1996), ‘‘Human rights and TNCs: theory versus quantitative analysis’’, Human Rights Quarterly, Vol. 18 No. 2, pp. 368-97. Meyer, W.H. (1998), Human Rights and International Political Economy in Third World Nations, Praeger, New York, NY. Miles, R. (1982), Coffin Nails and Corporate Strategies, Prentice-Hall, Englewood Cliffs, NJ. Morehouse, W. and Subramaniam, M.A. (1986), The Bhopal Tragedy, Council on International and Public Affairs, New York, NY. Muchlinski, P.T. (1987), ‘‘The Bhopal case: controlling ultrahazardous industrial activities undertaken by foreign investors’’, Modern Law Review, Vol. 50 No. 5, pp. 545-87. Mukerjee, M. (1995), ‘‘Persistently toxic: the Union Carbide accident in Bhopal continues to harm’’, Scientific American, Vol. 272 No. 6, pp. 16-18. Nanavaty, K.P. (1996), ‘‘The Indian petrochemical industry’’, Chemistry and Industry, 18 November. New York Times (1985), 25 January. Nichols, T. and Beynon, H. (1977), Living with Capitalism, Routledge Kegan Paul, London. Pearce, F. and Tombs, S. (1997), ‘‘Hazards, law and class: contextualising the regulation of corporate crime’’, Social and Legal Studies, Vol. 6 No. 1, pp. 79-107. Pearce, F. (1990), ‘‘Responsible corporations and regulatory agencies’’, The Political Quarterly, Vol. 61 No. 4, pp. 415-30. Perrow, C. (1984), Normal Accidents: Living with High Risk Technologies, Basic Books, New York, NY. Piasecki, B. (1995), Corporate Environmental Strategy: The Avalanche of Change Since Bhopal, Wiley, New York, NY. Porter, M. (1985), Competitive Advantage, The Free Press, New York, NY.

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Porter, M. and van der Linde, C. (1995), ‘‘Green and competitive’’, Harvard Business Review, September/October, pp. 120-34. Sachs, J. and Warner, A. (1995), ‘‘Economic reform and the process of global integration’’, Brookings Papers on Economic Activity, No. 1, pp. 1-118. Sandberg, H. (1985), Union Carbide Corporation: A Case Study, International Management Institute, Geneva. Scott, M.B. and Lyman, S. (1968), ‘‘Accounts’’, American Sociological Review, Vol. 33, pp. 46-62. Shrivastava, P. (1992), Bhopal: Anatomy of a Crisis, Paul Chapman, London. Shrivastava, P. (1993a), ‘‘Crisis theory/practice: towards sustainable development’’, Industrial and Environmental Crisis Quarterly, Vol. 7 No. 1, pp. 23-42. Shrivastava, P. (1993b), ‘‘The greening of business’’, in Smith, D. (Ed.), Business and the Environment: Implications of the New Environmentalism, Paul Chapman, London. Shrivastava, P., Miller, D. and Miglani, A. (1991), ‘‘The evolution of crises: crisis precursors’’, International Journal of Mass Emergencies and Disasters, Vol. 9, pp. 321-37. Sidhva, S. (1995), ‘‘Go away, says Goa’’, Financial Times, 13 May. Singh, A., Jang, B. and Lakhan, V.C. (1989), ‘‘Business ethics and the international trade in hazardous wastes’’, Journal of Business Ethics, Vol. 8 No. 11, pp. 889-99. Smith, J., Bolyard, M. and Ippolito, A. (1999), ‘‘Human rights and the global economy: a response to Meyer’’, Human Rights Quarterly, Vol. 21 No. 1, pp. 207-19. Snider, L. (1993), Bad Business: Corporate Crime in Canada, Nelson, Toronto. Stiglitz, J. (2002), Globalisation and its Discontents, Penguin, Harmondsworth. Sufrin, S.C. (1985), Bhopal: Its Setting, Responsibility and Challenge, Ajanta, Delhi. Tarzi, S.M. (1995), ‘‘Third World governments and multinational corporations: dynamics of hosts’ bargaining power’’, in Frieden, J.A. and Lake, D. (Eds), International Political Economy: Perspectives on Global Power and Wealth, St Martin’s Press, New York, NY. Thrupp, L.A. (1991), ‘‘Sterilisation of workers from pesticide exposure: the causes and consequences of DBCP-induced damage in Costa Rica and beyond’’, International Journal of Health Services, Vol. 21 No. 4, pp. 731-57. Time (1984), 17 December, pp. 26-30. Toft, B. and Reynolds, S. (1994), Learning from Disasters, Butterworth, Oxford. Tombs, S. (1995), ‘‘New organisational forms and the further production of corporate crime’’, in Pearce, F. and Snider, L. (Eds), Corporate Crime: Contemporary Debates, University of Toronto Press, Toronto. Vandivier, K. (1982), ‘‘Why should my conscience bother me?’’, in Ermann, M.D. and Lundman, R.J. (Eds), Corporate and Governmental Deviance, Oxford University Press, New York, NY. Varma, D. and Guest, I. (1993), ‘‘The Bhopal accident and methyl isocyanate toxicity’’, Journal of Toxicology and Environmental Health, Vol. 40 No. 4, pp. 513-29. Vaughan, D. (1983), Controlling Unlawful Organisational Behaviour: Social Structure and Corporate Misconduct, University of Chicago Press, Chicago, IL. Vaughan, D. (1996), The Challenger Launch Decision, University of Chicago Press, Chicago, IL. Vernon, R. (1977), Storm over the Multinationals: The Real Issues, Harvard University Press, Cambridge, MA. Wall Street Journal (1984), 10 December. Wallace, C.D. (2002), The Multinational Enterprise and Legal Control: Host State Sovereignty in an Era of Economic Globalization, Martinus Nijhoff, The Hague. Weick, K. (1995), Sensemaking in Organisations, Sage Publications, Thousand Oaks, CA. Weir, D. (1986), The Bhopal Syndrome: Pesticide Manufacturing and the Third World, International Organisation of Consumers’ Union, Penang.

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Further reading Agarwal, A., Merrifield, J. and Tandon, R. (1985), No Place to Run: Local Realities and Global Issues of the Bhopal Disaster, Highlander Center & Society for Participatory Research in Asia, New Market, TN. Chouhan, T. (2005), ‘‘The unfolding of Bhopal disaster’’, Journal of Loss Prevention in the Process Industries, Vol. 18 Nos 4-6, pp. 205-8. Fortun, K. (2001), Advocacy after Bhopal: Environmentalism, Disaster, New Global Orders, University of Chicago Press, Chicago, IL. Galanter, M. (1994), ‘‘The transnational traffic in legal remedies’’, in Jasanoff, S. (Ed.), Learning from Disaster: Risk Management after Bhopal, University of Pennsylvania Press, Philadelphia, PA. Heaton, A. (1996), ‘‘The world’s major chemical industries’’, in Heaton, A. (Ed.), An Introduction to Industrial Chemistry, Blackie, London. Jasanoff, S. (Ed.) (1994), Learning from Disaster: Risk Management after Bhopal, University of Pennsylvania Press, Philadelphia, PA. Jones, M. (2002), ‘‘Globalisation and the organisation(s) of exclusion’’, in Clegg, S. and Westwood, R. (Eds), Debating Organisation Theory, Macmillan, London. Jones, T. (1988), Corporate Killing: Bhopals will Happen, Free Association Books, London. Kumar, S. (1993), ‘‘India: the second Bhopal tragedy’’, Lancet, Vol. 341, pp. 1205-6. Kurzman, D. (1987), A Killing Wind: Inside Union Carbide and the Bhopal Catastrophe, McGraw-Hill, New York, NY. List, J. and Co, C.Y. (2000), ‘‘The effects of environmental regulation on foreign investment’’, Journal of Environmental Economics and Management, Vol. 40 No. 1, pp. 1-20. Markowitz, G. and Rosner, D. (2002), Deceit and Denial: The Deadly Politics of Industrial Pollution, University of California Press, Berkeley, CA. Pearce, F. (1993), ‘‘Corporate rationality as corporate crime’’, Studies in Political Economy, Vol. 40, pp. 135-62. Pearce, F. and Tombs, S. (1993), ‘‘US capital versus the Third World: Union Carbide and Bhopal’’, in Pearce, F. and Woodiwiss, M. (Eds), Global Crime Connections, Macmillan, London. Pearce, F. and Tombs, S. (2003), ‘‘States, corporations and the new world order’’, in Potter, G.W. (Ed.), Controversies in White-collar Crime, Anderson Publishing Co., Cincinatti, OH. Rajagopal, A. (1987), ‘‘And the poor get gassed: multinational aided development and the state: the case of Bhopal’’, Berkeley Journal of Sociology, Vol. 32, pp. 129-52. Rajan, S.R. (2001), ‘‘What disasters tell us about environmental violence: the case of the Bhopal gas disaster’’, in Watts, M. and Peluso, N. (Eds), Violent Environments, Cornell University Press, Ithaca, NY. Rodericks, J.R. (1992), Calculated Risks: The Toxicity and Human Health Risks of Chemicals in our Environment, Cambridge University Press, Cambridge. Rutherford, P. (2006), ‘‘How have international business discourses on the environment changed over the last decade?’’, Global Social Policy, Vol. 6 No. 1, pp. 79-105. Shrivastava, P. (1994a), ‘‘Castrated environment: greening organizational science’’, Organization Studies, Vol. 15 No. 5, pp. 705-26. Shrivastava, P. (1994b), ‘‘Technological and organisational roots of industrial crises: lessons from Exxon Valdez and Bhopal’’, Technological Forecasting and Social Change, Vol. 45, pp. 237-53. Smith, D. and Tombs, S. (1995), ‘‘Beyond self-regulation: towards a critique of self-regulation as a control strategy for hazardous activities’’, Journal of Management Studies, Vol. 32 No. 5, pp. 619-37. Smith, D. (1993), ‘‘The Frankenstein syndrome: corporate responsibility and the environment’’, in Smith, D. (Ed.), Business and the Environment: Implications of the New Environmentalism, Paul Chapman, London. Smith, M.A. (Ed.) (1986), The Chemical Industry after Bhopal, IBC Technical Services, London. Surendra, L. (1985), Bhopal: Industrial Genocide?, Arena Press, Hong Kong.

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Thompson, G. (1992), ‘‘The enterprise as a dispersed social agency’’, in Thompson, G. (Ed.), Economic Calculation and Policy Formation, Routledge Kegan Paul, London. Wagner, E.N. (1991), ‘‘Bhopal’s legacy: lessons for Third World host nations and for multinational corporations’’, North Carolina Journal of International Law and Commercial Regulation, Vol. 16 No. 3, pp. 541-85.

Corresponding author Loong Wong can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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Paradigms in corporate ethics: the legality and values of corporate ethics Ben Tran

Ben Tran is a Doctoral Candidate at the Marshall Goldsmith School of Management at Alliant International University, San Francisco, California, USA.

Abstract Purpose – It has always been claimed that business ethics are ambiguous and thus hard to define. As such, with recognizable unethical corporate behaviors as an epidemic, it is hard to hold perpetrators accountable. Even more detrimental are the miscommunication, the misunderstanding, the misinterpretation, and the misuse of the various paradigms in business ethics. Such flawed values and legality of business ethics paradigms cannot persist. There exist a gap and a bridging in the analysis of the paradigms in business ethics between the practitioners and the ethicists. This paper aims to provide an elaborate analysis of the values, trust, and legality of corporate behaviors in business ethics utilizing various paradigms. Design/methodology/approach – The analysis of this paper focused on the founding values and legality of business ethics and the underlying paradigms that practitioners and ethicists adopt. Findings – The limitation of this study is that the probability of the diverse schools of thought intertwining is smaller than that their coexisting. Originality/value – It is this coexistence of schools of thought that makes corporate USA humane, civilized, and balanced. Thus, to maintain this coexistence, if not improve it, this paper maintains that practitioners of higher education and corporate USA must take responsibility in training, educating, and producing future ethical business practitioners. Keywords Business ethics, Corporate governance, Best practice Paper type Viewpoint

Introduction When it comes to business ethics, practitioners operate on the contractualist business ethics paradigm, whereas ethicists idolize a different typology paradigm. The contractualist paradigm is rooted in at least four factors. First, contractualist business ethics is blessed with a highly parsimonious conceptual apparatus. Second, this apparatus is also well adapted to its field of application. Third, the notion of contracting allows both positive and normative applications. Fourth, the idea that the norms that ought to govern everyday business ultimately derive from some form of consent that coheres well with a global public ordering in which liberal democracy and modern capitalism seem to emerge as dominant organizing principles. In addition, instrumental, prudential, and rule-based approaches will also be touched upon. Ethicists, on the other hand, claim three paradigms: 1. moral awareness; 2. moral dilemmas; and 3. moral laxity. First, the moral awareness paradigm is derived from behavioral models of ethical decision-making, which represent the first step in the ethical decision-making process. The

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core of the moral awareness paradigm is recognizing the existence of a moral problem in a situation. Second, moral dilemmas are based on the principal difficulty that it is hard to discover what one ought to do when facing a choice between non-overriding conflicting moral requirements or between non-overriding conflicting interests. However, many ethical problem cases are neither a compliance problem nor a genuine moral dilemma. Moral laxity is the failure to identify particular opportunities and take significant steps toward realizing a broad moral goal whose worthiness is admitted.

Business ethics: science versus art Ethics is not the study of morals, whether this word is used to designate conformity to conventional social rules or to the existing moral judgments of men. Although existing norms and judgments may contain valuable insights, ethics does not accept them, but sets out to critique and test them in terms of more universal norms. To put it another way, custom, convention, and the accepted courtesies of a society are not the foundations of ethics even though they can provide valuable hints as to what men think. For this reason, business ethics must study existing business codes to determine whether they have a solid foundation or only express the narrow consensus of a group or a sort of commercial etiquette. Law enshrines many of the ethical judgments of a society, but it is not coextensive with ethics. In the first place, law is generally concerned only with the minimum regulation necessary for public order, while ethics examines both the individual and the social good in all dimensions. In the second place, ethics critiques law as it does custom in an effort to obtain more perfect rules for the conduct of life. While the law demands great respect, it too is subject to the higher norms which ethics seeks to develop. In addition, since many people identify ethics with vague feelings of approval or disapproval, it should be noted that ethics does not rest on feelings but in the careful examination of the reality around us. That said, ethics is the science of judging specifically human goals and the relationship of means to those goals. In some way ethics is also the art of controlling means so that they will serve specifically human ends (Garrett, 1966). From this point of view, ethics involves the use of any human knowledge that has something to tell us about the relations between men or about the suitability of the available instruments. As an art, moreover, it involves techniques of judging and decision-making as well as the tools of social control and personal development[1]. Thus ethics really is or should be involved in all human activities. Business ethics is concerned primarily with the relationship of business goals and techniques to specifically human ends. It studies the impacts of acts on the good of the individual, the firm, the business community, and society as a whole. While it does not concentrate on the obligations which man has as a private individual and a citizen, these enter into the frame since the businessman is not three separate persons. This means that business ethics studies the special obligations which a man and a citizen accepts when he becomes a part of the world of commerce. As such, the meaning that we ordinarily attach to this term is that ethics concerns judgments about conduct, and ethics is about what people do (Barry, 2000; Johnston, 1961). With that said, two points should be made clear: 1. ethics is concerned with what ought to be done; and 2. ethics is concerned with human conduct. Perhaps these points will seem obvious when stated, but failure to state them sometimes leads to confusion.

Business ethics defined: the ambiguity and falsifiable of it Business ethics is a form of the art of applied ethics that examines ethical rules and principles within a commercial context, the various moral or ethical problems that can arise in a business setting, and any special duties or obligations that apply to persons who are engaged in commerce. Simply stated, business ethics is any human behavioral conduct that should, and ought to be converted into productive action addressing any and all unethical behaviors presented and practiced by an individual, a group, or an entity (corporation). As

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clear cut as it may sound, the definition of business ethics is quite ambiguous, falsifiable, and thus rhetorical. What paradigm and from where has such definition derived when the meanings of ‘‘should’’, ‘‘ought’’, and ‘‘unethical’’ or ‘‘ethical’’ to one are different for another? The fact is that practitioners and ethicists operate on diverse parallel ethical paradigms. Practitioners operate on the contractualist business ethics paradigm, whereas ethicists idolize a different typology paradigm.

Business defined: practitioners’ paradigm Business, in general, is defined as any organization (commercial or government) whose aim is to satisfy a set of customer requirements and is required to deliver results and provide value to the receiving customers, organizations and/or institutions. This is obviously a simplistic view of an organization, but in order to grasp the importance of processes it is critical to understand the importance of business processes to business success. It is also important to realise that regardless of the nature of an organisation (e.g. commercial, government or others) the organisation’s operations and processes have to provide value to someone outside the organisation. Starting from the business’s place in the world will assist in building an understanding of how an organisation must behave to serve its purpose and ultimately its external customers[2].

Business ethics: the two meanings The term ‘‘business ethics’’ is ambiguous. It has at least two different meanings with significantly different implications depending on its uses. The first use of the term business ethics appeals to people who have a strong sense of role morality, where individuals take on the behavior of the office that they hold rather than rely on their personal judgment. The second use of the term is that the understanding of business ethics makes no distinction among the different roles in our lives and in fact rejects the notion that we can divide our moral lives into discrete sections labeled ‘‘home’’, ‘‘family’’, ‘‘business’’, ‘‘romance’’, and so on, each with its distinct set of rules (Gibson, 1997). Instead, this view proposes that we have a single set of standards that apply throughout all aspects of our lives. That said, the difference is that business presents us with new and different situations that require specialised assessment. Thus, relationships between producer and consumer may involve a set of considerations that do not apply to interactions between two people without the element of commercial interest. Nevertheless, the baseline of moral decency would be consistent throughout, and the same moral principles of justice, fairness, goodness, and what is right would hold in business as they do in our everyday dealings. In this light, the legal and ethical spheres may overlap, but we gauge correct action by personal morality rather than by reference to a legal code.

Instrumental, prudential, or rule-based approaches Morality can be defined in terms of intrinsic and instrumental motivation. Those holding intrinsic views believe that good should be done for its own sake, whereas instrumentalists would look for some form of payoff by examining the situation to see what course of action would be most beneficial economically (Gibson, 1997). The moral motivation involved here is that there has to be a reward. Essentially, instrumental approaches are self-interested, since they are concerned mainly with personal or corporate benefits. The benefits need not be immediate. The rewards for prudential actions may not come soon or be measured easily, but that may not matter as long as the person involved believes in the reward system (Gibson, 1997). Hence a faithful believer might resist temptation, and do charitable works because of a promise of eternal salvation, even though there is no evidence that this will occur. As a practical matter the evidence is secondary to the individual’s belief. We might say business dealings are analogous, because despite the difficulty in proving that a business will benefit by doing good works, it may become self-verifying if everyone involved in commerce adopts the belief as a matter of course. According to Gibson (1997), there is some anecdotal evidence that firms that act morally do better in the marketplace. As we have seen with

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reputation effects, the payoff might not be immediate, and so these things have to be looked at in the long term. An alternative view, the rule-based, often associated with the economist Milton Friedman, is that following the law fulfills the moral requirements of business (Gibson, 1997). Based on this approach, the rationale suggests that business is out to make a profit, and it should do whatever it can to maximise returns. However, this view has some difficulties. Imagine a competitive world where everyone relied on the law as their gauge of appropriate behavior. In every transaction we would believe that the other party was predatory, and our only defense would be a close reading of settled law. Society would be deluged by lawmakers, regulators, and compliance officers, and a court system to adjudicate and punish. This illustrates that although we may feel that sharp dealing is commonplace, in fact most of our business dealings are done against a backdrop of trust.

Practitioners’ ethical paradigm In the world of practitioners, contractualism is one of the most promising centers of gravity in business ethics, and an everyday understanding of contractual commitment is one of the cornerstones on which modern business practices rest (Taylor, 1985). The relative success of contractualist thought is rooted in at least four factors. First, contractualist business ethics is blessed with a highly parsimonious conceptual apparatus. Second, this apparatus is also well adapted to its field of application. Third, the notion of contracting allows both positive and normative applications, and hence assures at least some degree of continuity between the world as we would like it to be and the world as we find it as a matter of fact. Fourth, the idea that the norms that ought to govern everyday business ultimately derive from some form of consent coheres well with a global public ordering in which liberal democracy and modern capitalism seem to merge as dominant organizing principles. The two dimensions which contribute to the contractualist tradition are: 1. positive versus normative; and 2. four different levels of analysis that are commonly employed in contractualist business ethics: B

nano;

B

micro;

B

meso; and

B

macro (Heugens et al., 2006).

Practitioners’ ethical paradigm: contractualism revisited The contractualist conceptual framework goes back a long way and has developed in alternative directions in different disciplines. Although early manifestations of contractualist reasoning can already be found in classic Greek philosophy and the Bible (Heugens, 2004; Lessnoff, 1990; McClelland, 1996), a more thorough and comprehensive elaboration of the contractualist framework had to await the passing of medieval darkness and the dawn of enlightenment (Hobbes, 1968; Locke, 1993; Pufendorf, 1991; Rousseau, 1994). But it is not just through respectable historic credentials that contractualism has established and been able to maintain itself at the theoretical stage in the humanities and the social sciences. It has also found its way into a number of different disciplines in which it has been put to use in a variety of different ways and for a mixture of purposes, both of an academic and a practical nature (Wempe, 2005). The contractualist conceptual framework, for example, has been applied fruitfully in normative political theory (Rawls, 1971), positive political theory (Buchanan, 1971; Buchanan and Tullock, 1962), economics (Binmore, 1994, 1998; Skyrms, 1996; Sugden, 1986), personal ethics (Gauthier, 1986; Scanlon, 1982), corporate law (Easterbrook and Fishel, 1989, 1991), and most relevant for the issue at hand, in economic organisations theory (Cheung, 1993; Jensen and Meckling, 1976; Williamson, 1990, 1991) and business ethics (Donaldson, 1982; Donaldson and Dunfee, 1999; Keeley, 1988).

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Contractualism’s basic argumentative structure According to van Oosterhout et al. (2006), the basic argumentative structure that underlies all contractualist theory is that human action, interaction and exchange is or, in case theory building has a normative ambition, ought to be, guided and constrained only by those practices, rules and institutions that freely consenting agents could, and possibly would, agree to if they had the choice (Hampton, 1993; Heugens, 2004; Lessnoff, 1990). Having outlined what we hold to be the basic argumentative structure of contractualist theory, we now turn to the conceptual question of what is, and what is not, a contractual scheme. In defining a contractual scheme, there are two conceptual strategies available (Sartori, 1970): 1. intension; and 2. extension. First, intension is a connotation of a concept in terms of the conjunction of general attributes that define that concept. The advantages of this strategy are its abstract and general results. Its main disadvantage, however, is that an intensional definition may not function perfectly in demarcating actual phenomena in terms of what is, and what is not, a contractual scheme. Reality has an unpredictable habit of turning out to be more recalcitrant than our conceptual understandings of it would lead us to believe. Second, extension is a denotation, pointing out the set of real-life phenomena to which the concept refers. The advantage of such an operational definition is that it enables us to neatly separate contractual schemes from non-contractual schemes. The drawback of this approach, however, is that we may not fully understand why, in a general sense, certain arrangements are contractual schemes and why others are not. The danger exists that our attempts to fixate reality in this way have an arbitrary element to them. To avoid the relative drawbacks of each approach we employ both partially. Contractual schemes: a characterization A contractual scheme is a set of norms, rules, practices or institutions that specify a system of cooperation, ratified and sustained by consent or voluntary reenactment, and designed to advance the good of those taking part in it (Gauthier, 1986; Rawls, 1971). This definition intentionally leaves undecided whether conditions of consent that constitute these schemes are ‘‘real’’ (Gauthier, 1979) or ‘‘hypothetical’’ (Rawls, 1971). The distinction between real and hypothetical consent is largely irrelevant to the understanding of what constitutes a contractual scheme and what does not. Instead, the concentration should be on two generic patterns of normative expectations that are implied in the joint commitment of all contractors, regardless of whether their agreement to a contractual scheme is actual or virtual (Gilbert, 2000). Mutual advantage. The primary characteristics of contractual schemes are characterized by the fact that they either raise or ratify expectation of mutual advantage. Parties enter into cooperative arrangements because they expect that the total pay that derives from the venture will in some way be greater than the net benefits that would accrue to them if they were to act separately (Nozick, 1974) or else they would not voluntarily commit to such a scheme. Of course, considerable flexibility exists with respect to the distributive characteristics of cooperative schemes, and in practice most contractual schemes will invoke some kind of evenness (Macneil, 1980, p. 44). But the bottom line for all contractual schemes is that all who partake in it should and may expect to receive at least some benefits over and above what he or she would be able to realize on his or her own. Effectiveness. The secondary characteristics of contractual schemes are that they presume expectations of effectiveness. Contractors will only consent to a cooperative scheme if they expect their contracting partners to live up to the terms of the agreement (van Oosterhout, 2002). Many extant contracts incorporate some proviso that relieves a party of his or her obligations in case the counterpart fails to hold up his or her side of the bargain. In fact, one of the central dogmas of contract law states that non-performance by one of the parties constitutes breach, thus rendering a contract null and void. Even divine contracts are not immune from ineffectiveness.

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Contractual schemes: boundary conditions The term ‘‘contract’’ is commonly used to describe only commitments and associations between two or more parties seeking to realize mutual benefit, or the prevention of some harm, which they could not realize or prevent, acting on their own. Thus, one must analyze how contractual schemes in management and economic organizations fail, when the boundaries set by the presumption of voluntary action and association are violated. Three boundary conditions are especially relevant here: 1. the autonomy of the contractors; 2. the alignability of the contractors’ interests; and 3. the ability of the contractors to live up to the terms of the agreement (Heugens et al., 2006). Autonomy. The first boundary criterion of the contract model is that all the parties to a contract should be sufficiently autonomous to bind themselves to a set of self-imposed obligations and constraints. In his discussion of the contract model, Rawls (1971) has introduced an oft-cited conception of autonomy at the level of the rational individual. He suggests that in a well-ordered society the consent of such individuals to contractual schemes should not derive from moral convictions that are the result of coercive indoctrination or exposure to a direct threat of bodily or psychological harm. He therefore defined autonomous persons as those that ‘‘are acting from principles that they would acknowledge under conditions that best express their nature as free and equal rational beings’’ (p. 515). But even individuals who are ‘‘free and equal’’ in their positions as citizens of well-ordered societies are not necessarily autonomous in the corporate context. On the contrary, when people join modern complex organizations (Etzioni, 1975), they voluntarily subject themselves to an authority relation (McMahon, 1994, 1995; Raz, 1986; van Oosterhout, 2002) that entails an agreement ‘‘that within some limits will accept as premises of his behavior orders and instructions supplied to him by the organization’’ (March and Simon, 1958, p. 90). Such a surrender of judgment (Friedman, 1990) may render the condition of autonomy in firm and stakeholder relationships problematic for two reasons: 1. subjecting to authority constrains individuals in making further commitments that are ‘‘preempted’’ (Raz, 1986) by the authority relationship; and 2. authoritative structures create a representation problem because they only allow certain individuals to bind others within those structures to agreements with other parties (Pitkin, 1967). Alignability. The second boundary criterion to the contract model is that the interests of all parties to a contract should to a certain extent be alignable. Both Rawls (1971) and Nozick (1974) have argued that all contracts are typically marked by conflicting as well as converging interests. There is a convergence of interests when the social scheme of cooperation underlying the contract allows the collaborating parties to produce a surplus of benefits over and above the sum-total of interests only because the parties ‘‘are not indifferent as to how the greater benefits are distributed’’ (Rawls, 1971, p. 4). Ability. The third boundary criterion of the contract model is that all the parties to a contract should possess the ability to perform in accordance with the terms of the agreement. This by no means implies that all contracts will be terminated as soon as one of the parties shows the first signs of non-compliance. On the contrary, some forms of contract are characterized by relatively high degrees of loyalty and forgiveness among the partners. The parties to such ‘‘relational contracts’’ (Macneil, 1978; Williamson, 1985) often value the relationship that they have with the other party more than the foregone short run benefits, and will accept a responsibility to work together with an ailing partner to resolve its problems cooperatively. The relationship then takes on the properties of a ‘‘minisociety with a vast array of norms beyond those centered on the exchange and its immediate processes’’ (Macneil, 1978, p. 901).

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Two dimensions of contractualist theorizing The first dimension concerns the ambitions that contributions to CBE and that can either be positive (explanatory) or normative (justificatory). The second dimension involves the level of analysis at which the contractualist argument is put to work. Both dimensions are also helpful in locating the field of CBE vis-a`-vis contractualist contributions in other domains, such as political theory, law, and economics. It is of crucial importance to distinguish between positive and normative theoretical claims within the broad contractualist framework outlined. Positive theoretical claims either seek to explain certain norms, rules, or institutions by means of the contractualist conceptual framework, or have the ambition to clarify or explain the existence, persistence and working of contractual schemes themselves. Normative theoretical claims, on the other hand, serve either to justify certain norms, rules and institutions by means of the contractualist basic argument, or seek to provide a foundation for the application of the contractualist argument by elaborating on its basic structure and conditions of application. Since positive and normative contractualist theories rely on the same basic argumentative structure, they are often difficult to untangle, even when they are premised on different assumptions. Moreover, positive and normative contractualist claims may very well be complementary, with positive contractualist claims providing an explanation of how norms, rules, or institutions justified by normative contractualist claims are realized as a matter of fact. Yet in spite of their common theoretical origins and potential for complementarily, it is crucial for the further development of CBE to carefully disentangle normative from positive claims. One should be careful from the onset, therefore, not to mix-up normative and positive claims, as that may significantly hinder and constrain the positive or normative ambitions of contractualist theorizing.

Different levels of analysis In addition to the different ambitions that contractualist theory may have, the contractualist argument can also be put to work at different levels of analysis, which include macro-level, meso-level, micro-level, and nano-level. Applications of the contractualist argument at the macro-level of analysis typically serve either to explain or to justify features of the basic institutional structure of society. What is particularly interesting about applications of contractualism at this level of analysis is that they will inevitably have to cope with the question of whether contractors will need to be roughly equal (Buchanan, 1971; Gauthier, 1986; Hobbes, 1968) or that very different and unequal contractors are assumed or allowed as input to the contractualist argument as it is being put to work. More concretely, the question becomes whether only individual human beings are allowed as contractors, or whether the state and other non-governmental organizations, such as firms, are also assumed to be parties in the pre-contractual situation. Rawls and Gautier exemplify the former position, whilst Weingast (1997), Sened (1997), and Donaldson and Dunfee (1995, 1999) are examples of the latter. Meso-level contracting takes place within the basic institutional structure of society as a whole, and is therefore located one level below the macro-level contractual schemes, schemes that constitute at least part of the institutional context within which business and economic organizations are embedded. Meso-level contractual schemes are typically found at the industry or organizational field level. That meso- and micro-level may overlap significantly is demonstrated by the fact that Donaldson and Dunfee (1999) characterize these agreements as micro-social contract. Micro-level contracts can be seen as concrete agreements between individuals, organizations, or a mix of both, to realize something with apparent value to all involved. As such, one can straightforwardly classify microsocial contracts in terms of their ambitions. These ambitions can either be positive or normative. In the positive sense, microsocial contracts are explanatory devices that can be used to make sense of the decision. Macro-level contract, which is typically portrayed as a universally compelling conclusion concerning rights and obligations that every rational contractor ought to obey, the overlap between the contractors; motivations to enter a microsocial contract is seldom perfect. In the

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normative sense, however, microsocial contracts can be used to justify extant business practices and community-level norms. Nano-level is the smallest particle in any contractual relationship between individual contractors. Nano-level, in the organizational behavior literature, is called psychological contract. Psychological contract is defined as a set of individual beliefs, which are shaped by the organizations, regarding the terms of an exchange agreement between individuals and their organizations (Rousseau, 1995, p. 9). Critics may note that the psychological contract is in fact not a contract at all, as it merely represents a unilateral image of an agreement that resides in the psyche of a single contractor. Unless shared by all other relevant contractors, such images are unlikely to lead to attractive collective outcomes and will certainly not hold up in court. Nevertheless, psychological contracts harbor a number of features which may jointly warrant their classification as (quasi)contractual schemes, even though the whole idea of a psychological contract remains somewhat controversial. First, these contracts are voluntary, in that they only refer to images of commitments that are freely made. Second, psychological contracts are promissory in that they pertain to the cognitive and motivational background conditions for future intent. Third, nano-level contracts are intendedly mutual, in that they will not come into being unless the focal actor believes that some sort of agreement exists. In other words, the emergence of a psychological image of contract requires a belief on behalf of the focal actor that his or her counterpart will act in good faith and the he or she will do everything that may reasonably be expected of him or her to keep up his or her end of the bargain.

Ethicists’ typology paradigm Growing engagement of organizations in ethics programs has prompted research on issues of effectiveness (Ferrell et al., 1998; Knouse and Giacalone, 1996; Trevino and Weaver, 2001; Trevino et al., 1999; Weaver et al., 1999a, b). The various taxonomies of ethical problems used in most current textbooks are based either on an examination of selected application areas, or on an examination of selected common generic issues. Both categorizations, as catalogs of selected violations of ethical principles, tend to portray organizational ethics as basically proscriptive ethics. Common formalized ethics awareness mechanisms such as codes of ethics, corporate officers dealing with ethics and legal compliance, telephone hotlines for reporting ethical concerns, and advice systems, all revolve around the assumption that someone in the organization, if not employees or managers, then the ethics officer, knows what is right or wrong. A very different category of ethical problems that arise in business are moral dilemmas (Badaracco, 1997; Nash, 1990; Sinnott-Armstrong, 1988), in which the principal difficulty is to discover what one ought to do when facing a choice between non-overriding conflicting moral requirements, or between non-overriding conflicting interests. In many cases, however, the ethical problem is neither a compliance problem nor a genuine moral dilemma. In such instances, Geva (2006) proposed a typology of moral problems in business, a cross-classification of two dimensions: 1. moral judgment; and 2. motivation. The two essential dimensions that characterize the nature of moral problems in business are determinate moral judgment and indeterminate moral judgment. The two dimensions that characterize the nature of motivation are strong and weak motivation. The cross-classification of these two dimensions is used to distinguish four types of moral problems: 1. genuine dilemmas; 2. compliance problems; 3. moral laxity; and 4. no-problem problems.

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Dimensions of ethical problems in business Judgment about moral standards and the evaluation of behavior or policies as measured by these standards do not always drive action (Bandura, 1991; Rest, 1986; Trevino, 1992). In other words, moral judgments alone do not guarantee adherence to moral standards. For example, one can judge that X is the right thing to do while having, without irrationality, absolutely no motivation to do it. Without the desire to do the morally preferable thing, judgment is idle, and without the belief that a certain act is morally better than some alternative, motivation is blind (Geva, 2006). Moral judgment The nature of moral judgments has been at the center of a continuous debate between virtue ethicists and advocates of principled theories (Slote, 2000; Solomon, 1993). According to Rest (1986), moral judgments reflect a person’s underlying organization of thinking about matters of right and wrong. In the context of the typology, as a practical tool for analyzing ethical problems in business, moral judgments are evaluations of right and wrong, good and bad, virtue and vice as they pertain to business actions and policies, among persons within the wider society (Beauchamp and Bowie, 2003; DeGeorge, 1999; Velasquez, 2002). Moral judgment is commonly thought to arise from rational, conscious, voluntary, reflective deliberation about what would be the appropriate way of settling matters. Moral judgment involves two essential components: 1. a definition of the situation at hand which determines available and relevant types of information, formulating alternative responses, and predicting the possible results of each responses; and 2. weighing the moral reasons for and against the alternative responses so as to determine where the overall force of reason lies (Geva, 2006). In terms of the typology, moral judgments are classified as determinate when generating a clear recommendation and as indeterminate when culminating in unsettled prescriptions. Moral motivation A common managerial approach to moral motivation in business seeks to demonstrate that good business is ethical business. A major weakness of this approach is that is begs the motivational question in just those circumstances where ethics and business make conflicting demands. Paine (2000, p. 326) once noted, ‘‘It is naı¨ve to think that ethics pays any time and any place. It is also naı¨ve to suppose that the two (good business and ethical business) cannot be brought into a closer alignment’’. Managers can enlarge and strengthen the zone of overlap between what pays and what is good through the organizations they create and the choices they make. In terms of the typology, motivation is high when there is no need for external incentives to ensure moral behavior, whereas motivation is low when narrow self-interest overrides moral considerations.

Typology of ethical problems in business A typology of ethical problems in business is suggested that combines the two dimensions of moral conduct: 1. the judgment dimension, whether or not the guiding precepts involve ethical conflict; and 2. the motivational dimension, whether or not narrow self-interest undermines the motivation to act on moral judgments. The cross-classification of these two dimensions produces four possible combinations, each defining a different type of ethical problem and, accordingly, different lines of coping strategy. According to Geva (2006), the first is a genuine ethical dilemma, in which one is unsure as to what one ought to do, but has the will and the ability to do what is right. The second is a compliance problem, where one knows what the moral obligations are, but experiences difficulty in fulfilling them. The third is moral laxity, which means that one acknowledges a general moral duty, but given that there is an indefinite range of ways to

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fulfill this duty is unsure as to what exactly should be done and fails to take serious steps toward pursuit of the general duty. The fourth is a no-problem problem, which means one knows what the moral obligations are, and has the will and the ability to fulfill them. Genuine ethical dilemmas A genuine ethical dilemma arises when two or more valid ethical requirements or legitimate interests conflict and consensus does not exist as to how it should be resolved. The crucial features of a moral dilemma are these: the agent is required to do each of two (or more) actions, the agent can do each of the actions, but the agent cannot do both (or all) of these actions and neither of the conflicting requirements is overridden (Sinnott-Armstrong, 1988). The agent thus seems condemned to moral failure. In other words, no matter what one does, one will do something wrong (or fail to do something that one ought to do). Debates over the possibility of genuine dilemmas have been extensive in moral philosophy. Philosophers as diverse as Kant, Mill, and Ross have assumed that an adequate moral theory should not allow for the possibility of genuine moral dilemmas (Lemmon, 1962; Marcus, 1980; Sinnott-Armstrong, 1988). In terms of the typology, a genuine ethical dilemma stems from conflicting requirements, not from lack of ability or willingness to do what is right. Compliance problems A compliance problem is primarily one of ability and willingness. Knowing the right thing to do is one thing, but performance may be inhibited by pressures of self-interest, short-term thinking, bottom-line orientation, market practices or unwritten organizational laws which run counter to morality. Thus, the solution to a compliance problem does not require an ethical judgment as much as a strategy for reinforcing moral conduct. The main role of the manager here is to enforce willingness to conform to ethical standards as well as to prevent, detect, and punish unlawful conduct and to remove organizational disincentives for compliance. The design and analysis of much of the empirical research on organizational ethics initiatives concerns the central role of self-interest in compliance problems and is reflected in the special attention given to socially desirable responses (Trevino et al., 1999; Weaver et al., 1999a, b). Strictly speaking, concerns about socially desirable responses, where respondents tell the researchers what they think the researchers want to hear rather than the truth, are only relevant to compliance problems, where the appropriate ethical norms for a specified matter are clear. Such concerns are irrelevant in the case of genuine dilemma where one must choose between two alternatives, both of which are socially undesirable. The typology, which emphasizes the moral aspects of the compliance problem, suggests resolving it by allocating ethically adequate measures to ensure an environment in which moral conduct is regarded as more attractive than misconduct to most organization members. Moral laxity In the case of moral laxity, one recognizes an important moral goal and believes that one should, at some time, do something toward the pursuit of this goal. Yet one need not perform any particular action at the moment. As such, moral laxity lies rather in the lack of concrete obligations, and in the discretion it allows to postpone the fulfillment of the duty. It is only when one looks back on one’s conduct over the long run that one may find oneself guilty of moral laxity. In contrast to a compliance problem, which can be best described in terms of backsliding, moral laxity is a problem of slackness. The guilt of moral laxity stems not from a wrongful conduct but mostly from a late recognition of a lingering self-illusion that one could do tomorrow what one neglected today. Moral laxity is not only a problem of positive or beneficence duties, it is also, and perhaps especially, a problem of negative duties, which results first and foremost from neglecting the duty to prevent foreseeable harm. Moral laxity on the negative side is the mirror image of the positive side: one faces the danger of a potential problem caused by excessive behavior. In other words, one recognizes that one

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should do something to stop the behavior, yet there are many ways to get rid of the threat, each with a potential cost. No-problem problems Here one knows what the moral goal is and has the will and the ability to pursue it, hence a no-problem situation. Unlike the other three types of ethical problems, which draw attention to ethical failures, the no-problem problem looks to ethical success. The no-problem problem is typical of a proactive decision guided by the desire to forestall moral hazards and create an ethical culture in which the organization and the people in it can effectively fulfill their moral obligations without entering into needless conflicts. In contrast to moral laxity, which calls for specification of duties, the most relevant issue here is how to institutionalize ethics as an internal factor of organizational behavior. In contrast to a compliance problem, which calls into play a means-end system of incentives designed to avoid wrongdoing, the no-problem involves efforts to enhance ethical awareness and integrate the ethical standpoint with the overall values of organizational members.

Conclusion It has always been claimed that business ethics are ambiguous and thus hard to define. As such, recognizable unethical corporate behaviors as an epidemic is hard to hold perpetrators accountable. Even more detrimental is the miscommunication, the misunderstanding, the misinterpretation, and the misuse of the various paradigms in business ethics. Such flawed values and legality of business ethics paradigms cannot persist. There exists a gap and a bridging in the analysis of the paradigms in business ethics between practitioners and ethicists. This is no longer an issue of miscommunication, misunderstanding, misinterpretation, or the misuse of the various paradigms in business ethics, all in all. Through this elaborate analysis, practitioners now can no longer claim naivety, or to be uninformed, or even misinformed. The responsibility now rests on the practitioners, whether to be ethical in their business practices, or continue playing Russian Roulette in their business practices.

Notes 1. Those who are interested in a more detailed coverage on the history of business should see Chandler (1996). 2. Those interested in another paradigm on science versus art should see Kuhn (1996).

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Trevino, L.K., Weaver, G.R., Gibson, D.G. and Toffler, B.L. (1999), ‘‘Managing ethics and legal compliance: what helps and what hurts’’, California Management Review, Vol. 41, pp. 131-51. van Oosterhout, J. (2002), The Quest for Legitimacy: On Authority and Responsibility in Governance, Erasmus Research Institute of Management, Rotterdam. van Oosterhout, J., Heugens, P.P.M.A.R. and Kaptein, M. (2006), ‘‘The internal morality of contracting: advancing the contractualist endeavor on business ethics’’, Academy of Management Review, Vol. 31 No. 3, pp. 521-39. Velasquez, M.G. (2002), Business Ethics: Concepts and Cases, Prentice-Hall, Upper Saddle River, NJ. Weaver, G.R., Trevino, L.K. and Cochran, P.J. (1999a), ‘‘Corporate ethics practices in the mid-1990s: an empirical study of the Fortune 1000’’, Journal of Business Ethics, Vol. 18, pp. 283-94. Weaver, G.R., Trevino, L.K. and Cochran, P.J. (1999b), ‘‘Corporate ethics programs as control systems: influences of executive commitment and environmental factors’’, Academy of Management Journal, Vol. 42, pp. 41-57. Weingast, B.R. (1997), ‘‘The political foundations of democracy and the rule of law’’, American Political Science Review, Vol. 91 No. 2, pp. 245-63. Wempe, B. (2005), ‘‘In defense of a self-disciplined domain-specific social contract theory of business ethics’’, Business Ethics Quarterly, Vol. 15 No. 1, pp. 113-35. Williamson, O.E. (1985), The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting, The Free Press, New York, NY. Williamson, O.E. (1990), ‘‘The firm as a nexus of treaties: an introduction’’, in Aoki, M., Gustafsson, B. and Williamson, O.E. (Eds), The Firm as a Nexus of Treaties, Sage Publications, London, pp. 1-25. Williamson, O.E. (1991), ‘‘Comparative economic organization: the analysis of discrete structural alternatives’’, Administrative science Quarterly, Vol. 36, pp. 269-96.

Corresponding author Ben Tran can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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Business ethics? A global comparative study on corporate sustainability approaches Sharon Moore and Julie Jie Wen

Sharon Moore is Professor of Management, Sydney Graduate School of Management, University of Western Sydney, Lidcome, Australia. Julie Jie Wen is a Lecturer in the School of Social Sciences, University of Western Sydney, Lidcombe, Australia.

Abstract Purpose – The purpose of this paper is to see whether ethical and sustainable corporate strategy is not just an ‘‘add on’’ for good community relationships and publicity, and whether companies across the globe are approaching sustainability differently. Design/methodology/approach – This paper is based on the assumption that company publications reflect the principle and philosophy of its business approach. Findings – The paper identifies stark differences in global sustainability practice, with the USA, in particular, falling behind in terms of sustainability leadership, compared with similar organisations in both the European Union and the Asia Pacific region. Research limitations/implications – This paper implies that US multinationals need to improve their sustainability practice and to begin to think in terms of triple bottom line management, ethical standards and governance. Practical implications – This paper implies that corporations need more effort in developing and managing ethics and sustainability as part of their competitive advantage and corporate strategy. Originality/value – The original contribution of this paper is that it provides valuable insights into how different organisations are in reality putting sustainability first. Keywords Corporate image, Corporate social responsibility, European Union, United States of America Paper type Research paper

1. Introduction Interest in sustainable business is at an all-time high, driven by external pressures including regulation and legislation, but also by customer and stakeholder needs and interests (Benn and Dunphy, 2007). Global operation makes it necessary to compare how companies of different regions approach sustainability (Aaron and Singh, 2005). A global survey of 160 annual company reports has revealed that public companies are emphasising non-financial reporting, including more information on ethics and corporate sustainability reporting (McInerney, 2005). Another report, commissioned by the Craib Group of Companies and investor relations consulting firm Barnes McInerney, Inc., found that 36 per cent of North American annual reports surveyed included a special separate section on sustainability and corporate responsibility in their annual reporting process (McInerney, 2005). Therefore, to understand how companies are dealing with ethics and sustainability issues, this paper starts from analysing driving forces of sustainability. It also includes a global survey of the reporting habits of the 50 largest public companies in the USA, the 50 largest companies in the European Union and the 50 largest companies in the Asia-Pacific area. All of these companies were approached to participate in a questionnaire on their views of sustainable development, reporting, and the tools that they presently use to manage strategy. Empirical data on sustainability reporting will be analysed in an attempt to explore good practice and compare progress and different approaches throughout the world. There

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are significant and noteworthy driving forces behind the sudden and spectacular growing interest in sustainable business, and these will be explored in the next section of the paper.

2. Sustainability drivers 2.1 Legislative pressure Pressure for disclosure of environmental and social impacts is being driven by external forces including national and state governments, for example, the UK (Environmental Reporting General Guidelines, 2001), and New Zealand (NZBCSD, 2001). The UK has levied fines for emissions breaking EU emissions limits (The Guardian, 2006). These countries have produced reporting frameworks to assist companies to begin to report environmental impact voluntarily. Other countries, including Denmark, Norway, Sweden, The Netherlands and France, have even made publishing environmental information mandatory. In Scandinavian countries, due to legislation which states that the producer retains the responsibility for the recycling of tyres, 100 per cent of ‘‘end of life’’ tyres are being recycled (European Union, 2003). The Waste Electrical and Electronic Equipment Directive passed by the EU, which came into effect on 15 March 2007, requires that the manufacturer is financially responsible for arranging and meeting the cost of the dismantling, recovery, and in particular the reuse and recycling of equipment. This must be managed in an environmentally sound way (European Union, 2003). What is lacking to date is a similar approach to an integrated social system strategy as part of sustainable business. Stakeholder analysis provides some early evidence for this development, but it remains a critical challenge for sustainable business and society. 2.2 Stakeholder pressure In addition, stakeholder pressure for organisations to behave in a more socially responsible manner is greater than ever, partly due to business scandals including Enron, WorldCom and Arthur Andersen, and partly due to a growing interest in being ‘‘green’’ on the part of consumers (Brudenall, 2005; Kemp et al. (2005)). A recent survey by Global Market Insite (2005) surveyed the opinions of more than 15,000 online consumers in the USA and 16 other countries about their socially conscious business practices. This survey found that Americans place the highest value on corporate community involvement, but chose damaging the environment as the main reason they would think that a company is socially irresponsible. Significantly for the future, a GMI Poll also found that future American consumers, between the ages of 18-29, are more likely to spend more on organic, environmentally friendly or fair trade products than other age groups. America is unique in its emphasis on giving back to the community; when asked which factor was the most important in determining whether a business is socially responsible, ‘‘contributing to the community’’ (e.g. sponsorship, grants, employee volunteer programs) was highest with 47 per cent (Global Market Insite, 2005). The highly influential 2000 Millennium Poll (see www.ipsos-mori.com/polls/1999/millipoll. shtml) collected interviews with over 25,000 average citizens across 23 countries on six continents. It revealed that citizens in 13 of the 23 countries think their country should focus more on social and environmental goals than on economic goals. In forming impressions of companies, people around the world were found to focus on corporate citizenship ahead of either brand reputation or financial factors. Two in three citizens want companies to go beyond their historical role of making a profit, paying taxes, employing people and obeying all laws: they want companies to contribute to broader societal goals as well. 2.3 Sustainability and corporate social responsibility pressure As the original and well-established definition details, ‘‘Humanity has the ability to make development sustainable – to ensure that it meets the needs of the present without compromising the ability of future generations to meet their own needs’’. Sustainability can be viewed as the balance between what inputs our business takes from its resources and the outputs which it returns to the environment from raw materials, work-life balance to bottom

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line profit (Figge and Hahn, 2005). Laszlo et al. (2002) propose that ‘‘ only companies that deliver value for their shareholders without robbing value from other stakeholders truly have a sustainable business’’. In particular, they argue that ‘‘value can be created in a wide range of ways including through better management risks and reputation, reducing energy usage and waste, redesigning products to better serve customers while reducing safety hazards and harm to environment, developing new business that contribute to improving social and environmental performance’’. This analysis has been strengthened by developments including the Equator Principles, the Dow Jones Sustainability Index (DJSI) and the FTSE4 Good Index on the stock markets, as well as the emergence of socially responsible investment funds and The World Business Council for Sustainable Development. The awareness of the financial implications of climate change issues on businesses is also growing among the financial sector after the introduction of the European Union Emissions Trading Scheme (EU ETS) and the ratification and debates of the Kyoto Protocol (Hart, 2001; Figge and Hahn, 2004). Whilst initiatives such as global reporting remain voluntary and elective in most countries, consumer demands and legislative pressure are harder to ignore. Corporate social responsibility and ethical behavior is associated with a business behaving ethically towards employees and other stakeholders. For the purposes of this paper the authors will refer to sustainable business and its practices as our way of contributing to ethical business practice. Many organisations have found it increasingly important to become socially responsible businesses. Their effort is partly reflected in producing sustainability and corporate social responsibility reports. In our analysis sustainability is about understanding and managing the resources which we use in business: for some time now we have recognised that employees are in fact any organisation’s most important resource, yet they are often overlooked when we talk about sustainability. Thus, our continuing focus is the lack of a social system approach to sustainability, including a commitment to ethical human resource management. In this way ethical business is encouraged and promoted as an internal system response.

3. The business cases for ethical business practice Many organisations have identified that good business ethics and a sustainable approach can lead to long-term value creation in a range of areas. Examples of companies that are finding value from sustainable and ethical business practices include: B

Ecolean, the Swedish packaging manufacturer founded in 1997, has developed a unique product which not only uses 40-60 per cent less petrochemical products by substituting calcium carbonate, but in addition – and perhaps an even stronger selling point – it costs 25 per cent less than petro-based alternatives. Ecolean has been growing at an average of 50 per cent per year and has seen considerable growth in the markets of the developing world (Ecolean, 2007).

B

At their Hamtramck plant in Detroit, General Motors adopted a sole supplier policy for chemicals. The implementation costs of this project were only $19,000, but it saved the plant $1.6 million in its first year alone. The savings included a range of resource reduction benefits: a reduction of 11.8 million litres of water, a reduction of 115,000 litres of topcoat paint, and a reduction of 8,200 litres of hydraulic fluid. It also reduced VOC emissions by 40 tonnes, and paint waste and sludge by 750 tonnes (Cullum, 2007).

B

IAG Insurance Group in Australia has recently invested many millions installing wind power on its corporate headquarters in Sydney Harbour. Not only will this initiative supply enough power to operate their head office, the Group will sell the excess power back to the local electricity board (Thorsenson, 2006).

Some researchers have proposed that good practice in the field of CSR ‘‘creates a reputation that the firm is reliable and honest’’ (McWilliams and Siegel, 2001). The brand is often described as being a firm’s most valuable asset. Some have argued that organisations can create a balance of positive CSR, which they can call upon in times of need (Bhattacharaya and Sen, 2004). BP is often described as one of the most successful

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sustainable organisations, recently named number 2 in Business Week’s ‘‘Top Green Companies’’ (Business Week, 2005). However, in 2004 it was named by Greenpeace as the world’s worst climate contributor (Greenpeace BP Global Survey, 2004), and in 2006 received considerable criticism and apparent loss of brand value due to the Prudhoe Bay oil spill crisis. Hopefully BP’s brand value may still be a surplus, which will assist them through this crisis. BP has repositioned the whole company with an environmental focus, from a new global logo to an environmentally focused strategy. It is clear that BP has made considerable investments to uphold the ‘‘Beyond Petroleum’’ positioning statement, including acquiring Solarex, now the largest solar power provider in the world. BP has also pioneered consumer offsetting, launching the Target Neutral campaign in the UK, a unique initiative for consumers to measure and then offset their cars’ CO2 emissions through a BP loyalty card. As always, many companies will imitate the pioneers. Recently, both Virgin Atlantic and Wal-Mart, the world’s largest retailer, have made powerful commitments to environmental issues. Presently this is purely a move to create positive brand value. While there are clearly considerable eco-efficiency savings to be made by Walmart, at the present moment this is just a move to generate positive PR as the industry waits to see the actual evidence (Walmart, 2006). Unfortunately, these dramatic and successful initiatives are all based on environmentally sustainable strategies rather than including more far-reaching social system responses. Companies need to pay more attention to ethical and moral practices in social and cultural contexts.

4. Empirical study The empirical data presented below form a detailed investigation into the reporting habits of the largest 50 listed companies in the USA, the EU and the Asia-Pacific region – a total of 150 companies. The sample companies were selected on the basis of their being reported as among the 50 largest companies operating in three major geographical regions. Much of the data was public domain, and was available electronically. The annual report survey involved an analysis of the top 50 US-based organisations according to the annual top 500 listing published by Fortune (2006). The top 50 European companies were based on the Standard & Poor 350 Index (Standard & Poor, 2006). The top 50 Asian-Pacific organisations were those according to Hoover’s APAC (Hoover, 2006). In total 150 reports were surveyed. The survey concentrated on five main areas of research: 1. Title of report. What title was used to describe the report? In some cases they were integrated into the annual report, described as sustainable or environmental reports, and in others Social and CSR reports. 2. Was the report externally validated? Many reports are produced and validated by an ‘‘external’’ party. Again, there is a great deal of interpretation into what is ‘‘external’’: for the purposes of this report, ‘‘external’’ is defined as a third party separate from the auditors. 3. Did the company prepare an annual reports producing data in accordance with the Sustainability Reporting Guidelines of the Global Reporting Initiative (2006)? While there are many reports detailing CSR or the environmental policies of organisations, unless these reports were using the GRI Guidelines, they were not considered sustainability or CSR report for the purposes of this study. 4. Was a GRI Index produced? A recommendation of the GRI framework is to produce a GRI Index to allow speed of navigation of the report and to allow external stakeholders with a tool to benchmark companies against each other quickly and easily. 5. Other trends identified. The data were analysed according to the headings outlined, which were viewed as significant criteria for evaluating sustainable business practice.

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5.1 Title or focus of report This study tried to identify the focus of company reports by three categories: 1. CSR reports (focusing on social impacts); 2. environment or sustainable business (incorporating environmental impacts); and 3. integrated reports. Reports with no mention of any of these key words in the title were listed under ‘‘no CSR/Sus report’’ in the study. As indicated in Figure 1, over a third of company reports have some mention of environmental impacts, while an alarming 32 per cent do not have any CSR or sustainability focus in the title. In the US reports analysed, it seems very interesting that CSR or ethical behaviour currently appears to be higher on the agenda than environment initiatives, as reflected by the titles of the reports studied. Around 34 per cent of US reports concentrate on ethical behaviour, while only 10 per cent have any mention of the environment or sustainable business in their title (see Figure 2). In contrast, the term sustainable business is much more commonly used in Europe, and is reflected in the name for 41 per cent of the European reports produced (see Figure 3). In Asia, although corporate social responsibility (CSR) appears more common than the title sustainable business, 30 per cent of reports have sustainable business in the title. Many organisations are clearly investing considerable funds into producing reports such as social responsibility, corporate governance, and values reports (Marathon, 2005). However, there still appears to be a reluctance to produce real transparency and disclosure of their environmental impact. It may be a worrying sign that by integrating environmental measures into the annual report they can be overlooked more easily, or that they do not receive the level of attention that they deserve. An example of this is Continental Tyres, which is involved Figure 1 Type of sustainability reporting for all companies studied

Figure 2 Annual report focus of US companies

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Figure 3 Annual report focus of European companies

in a high pollution producing industry with considerable end-of-life implications. However, in the integrated report, only four environmental measures are published: 1. water consumption per ton of product; 2. energy consumption per ton of product; 3. waste production per ton of product; and 4. CO2 emissions per ton of product (Continental Tyres, 2006). Another example is Landlease, long a pioneer in Australian CSR, which produces an annual report with an integrated sustainability report, but this includes no data at all on the companies’ environmental impact or activities (Landlease, 2006). Some organisations produce a whole range of reports. For example, Honda publishes annually a corporate social responsibility report, a sustainable business report, an annual report, a philanthropy report and a safety report, and is starting to produce the same for individual markets such as the USA (Honda, 2006). Telstra, Australia’s largest telecoms company, produces annual corporate social responsibility reports, an annual report, environmental management reports and equal opportunity reports (Telstra, 2006). 5.2. Was the report externally validated? While external review or validation is still an optional criteria of the GRI, it is highly recommended to obtain an external review and even assurance of the report. There are two recognised professional standards for the assurance process: 1. the AA1000 Assurance Standard, provided by the Institute for Social and Ethical Accountability (AccountAbility); and 2. the International Standard on Assurance Engagements (ISAE 3000) provided by the International Audit and Assurance Standards Board (IAASB), part of the International Federation of Accountants (IFAC). All members of IFAC, including the Big Four accounting firms (KPMG, PricewaterhouseCoopers, Ernst & Young, and Deloitte), are encouraged to use the ISAE 3000 standard for non-financial assurance. The AA1000 Assurance Standard, by contrast, is specifically designed with sustainability reports in mind, and does not limit the form that assurance takes or who can provide it. As Table I illustrates, a mere 5 per cent of reports produced according to the GRI guidelines in the USA were reviewed externally. This is a major shortcoming of the approach to sustainability reporting to date. While there are clearly examples of stakeholder dialogue in many of the reports, an official external review was very rare, with HP being the notable exception having employed SustainAbility to independently review their report. (BHP Billiton, 2006).

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Table I External review of the reports

Global 150 US 50 EU 50 Asia 50

Yes (per cent)

No (per cent)

40 5 61 57

60 95 39 43

Within the EU an external review is much more common, with as many as 61 per cent of reports being reviewed. This is very different to the American situation. Powerful examples of the benefit of external review include Shell. The Shell External Review Committee comprises Margaret Jungk (Business Department Director, Danish Institute For Human Rights), Dr Li Lailai (National Programme Director, Leadership For Environment and Development (Lead) – China; Director, Institute for Environment and Development, Beijing), Jermyn Brooks (Review Committee Chair; Board Member, Transparency International), Roger Hammond (Development Director, Living Earth), and Jonathan Lash (President, World Resources Institute). Whilst in many cases of course a fee is paid for the time and effort of any committee, assurances are provided that the external review is totally independent (Shell, 2006). While in the case of European companies the external review and assurance was provided by the appointed auditors, in many cases in the Asia-Pacific region an external stakeholder group was appointed. This welcome initiative encourages independent and stakeholder involvement in the sustainability project. For example, URS Corporate Sustainable Solutions independently assessed BHP Billiton’s Sustainability Report 2006 against the current Global Reporting Initiative (GRI) 2002 Sustainability Reporting Guidelines and the GRI Mining and Metals Sector Supplement Pilot Version 1.0 (BHP Billiton, 2006). For Mitsubishi Financial Group, a very impressive external dialogue group was assembled consisting of Kensuke Onishi (CEO, Peace Winds Japan), Chairperson of Japan Platform Council, Kyoji Okamoto (Senior Advisory Manager, Environmental Affairs, IBM Japan Ltd), Takashi ‘‘Tachi’’ Kiuchi (Chairman, GRI Forum Japan), Mizue Tsukushi (President & CEO, The Good Bankers Co. Ltd), Makoto Teranaka (Secretary General, Amnesty International Japan), and Yoshihiro Fujii (Senior Staff Writer, Economic News Department Editorial Bureau) (Mitsubishi Financial Group, 2006). This allows more analysis and frank and honest dialogue. As demonstrated by the NEC (2006) report: ‘‘Merely creating systems aimed at promoting a healthier work-life balance is a necessary but insufficient condition for success in this area: these systems must also be used widely. Also, NEC needs to focus here on encouraging greater use of the systems and on creating the necessary workplace environment to promote this outcome’’ (NEC, 2006, p. 45). Another interesting observation was the report produced by Old Mutual. In fact the whole report was prepared externally by ERM on Old Mutual’s behalf. Old Mutual has appointed ERM Southern Africa to continue to assist them with their environmental reporting obligations and the ongoing development of a sustainability strategy. 5.3. Did the company prepare an annual report producing data in accordance to the Sustainability Reporting Guidelines of the Global Reporting Initiative? The USA is currently lagging behind both the EU and the Asia-Pacific region in terms of reporting, which is a very significant finding given the size and power of US multinational companies. Only 48 per cent of US companies produced a CSR/sustainability report in accordance with the GRI Guidelines, in stark contrast to the EU’s 86 per cent and the Asia-Pacific region’s 70 per cent. Whilst there is clearly a great deal of activity in terms of sustainable business in terms of providing a transparent indication of a companies impact, the USA has a lot of ‘‘catch up’’ work to do. For example, Wal-Mart, who have received more column inches than other corporation in terms of sustainable development, still do not publish an annual report. However, they do

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provide anecdotal stories on initiatives and projects they have in operation (Wal-Mart, 2006). Altria, the Phillip Morris group which has agricultural tobacco operations in most developing countries and owns some of the world’s biggest brands, provides no data on its environmental impact (Altria, 2005). Some organisations, such as J.P. Morgan’s promise transparency but make no commitments to date or time, except a statement that ‘‘Finally, we will publish an annual sustainability report using the Global Reporting Initiative framework’’ (J.P. Morgan, 2006). 5.4. Was the GRI Index included as a critical element of the reporting? Including the GRI Index provides stakeholders such as customers, shareholders and competitors with a key and easy reference system to compare companies’ compliance with the GRI. As it is clear from Table II, the use of the GRI Index in US reports was not as common, notable exceptions being Hewlett Packard, who produced a GRI Index on the front page of their report (Hewlett Packard, 2006). The inclusion of the GRI Index was most common in EU countries, with 64 per cent of companies using it. BHP Billiton have developed an online navigator specifically designed to benchmark their performance against the GRI index. This GRI Navigator represents the assessment of where each requirement of Part C of these Guidelines is addressed in the Report (further information on the Guidelines can be found at www.globalreporting.org). The colour coding of the indicator is an indication of the level of coverage of each GRI indicator in the report. Green indicates adequate disclosure, orange indicates partial disclosure, while red indicates no disclosure. Where there is no or partial disclosure, the reasoning for this decision is provided by BHP Billiton and is presented as red text in the Navigator. This navigator makes the report very easy to navigate, a vital tool considering the report is, at over 522 pages, the longest sustainability report included in the survey (BHP Billiton, 2006). 5.5. Other trends identified 5.5.1 Sustainability and governance. It is important to know whether ethics, sustainability or CSR is actually represented at board level. This can often be demonstrated due to the Chairman and or CEO’s leadership and values in examples such as Ray Anderson at Interface, Jeff Immelt at GE, and Chad Holliday at Dupont. But, in other organisations, are sustainable development issues really given the attention they require when long-term company objectives are being set? The measure was omitted primarily due to the difficulty in identifying the person or department who is actually responsible for sustainability issues. Titles range from Sustainable Development Officer to Corporate Affairs and Total Customer Experience & Quality at Hewlett Packard. In addition it is also of particular note that some organisations provide easy access to the sustainability department, inviting comments, criticism and encouraging participations in online surveys and questionnaires. These organisations facilitate contact with the sustainability or CSR department by listing the names and contact details of the sustainability department on the website or at the end of the report (e.g. LaFarge and Michelin). In contrast, other organisations – including some of the supposed ‘‘Hall of Famers’’ such as Shell and PG – provide no contact details or access despite building sites such as Tell Shell and P&G. At one extreme, the Shell switchboard at headquarters could not find the extension number for the sustainable business department. Table II Proportion of inclusion of the GRI Index

Global 150 US 50 EU Asia 50

Yes (per cent)

No (per cent)

51 43 64 57

49 57 36 43

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5.5.2 Who signs on the report?. In the Asia-Pacific region and the EU, the report is often introduced by a statement by both the CEO and the Chairman of the board – sometimes a joint statement; often a statement from each. In contrast, many US reports are signed by the CEO only. Many Japanese organisations have taken this to another level of detail, including interviews with key personnel, as demonstrated by Sony who follow the Chairman and CEO’s introduction with an interview with both Howard Stringer (Chairman) and CEO Ryoji Chubachi (President and Electronics CEO, Representative Corporate Executive Officer Member of the Board; see Sony, 2006). In the case of Nissan, the interview was very specific: ‘‘What does corporate social responsibility mean to Nissan, and what activities is the company focusing on to fulfil this responsibility? How is Nissan positioning environmental concerns and diversity in its business strategy? And how is this strategy shaping the company’s relationships with its stakeholders?’’. Chief Operating Officer Toshiyuki Shiga discussed these topics with Simon Sproule, Corporate Vice President in charge of Global Communications, CSR and IR, with their interview being assessed by an external moderator in Peter David Pedersen, a specialist in environmental and sustainability issues (Nissan, 2006). An impressive example is the Ricoh Environment Report, which is a whole series of interviews from CEO to ground-level staff on a global scale (Ricoh, 2006). 5.5.3 Structure of CSR/sustainable decision making. Often, following the CEO or Chairman’s introduction, organisations detail how CSR and sustainable business is integrated, managed and administered throughout the company. The examples shown in Figures 4 and 5 illustrate different ways in which the sustainability strategy can be managed operationally through varied organisational structures. While the GRI index is clearly the approach and measure that many firms are operating within some organisations take this further and propose key performance indicators that they are working towards. ‘‘In addition to GRI recommended measurements, we developed key performance indicators that are new to our industry. They represent a significant step forward to fully and accurately measure the impact of companies like us on society and the environment. The new measurements include ground network fuel efficiency and aircraft emissions per payload capacity’’ (Figure 6).

6. Conclusion The empirical data analysed in this paper poses many interesting challenges. What is surprising is the range in responses from different regions of the world, which cannot be accounted for entirely in terms of cultural differences. The particular challenges for US multinationals to improve their sustainability approach and begin to think in terms of triple bottom-line management, ethical standards and governance is an inescapable early Figure 4 Organisational structure

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Figure 5 Organisational structure

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Figure 6 Key performance indicators

conclusion. In this context the relatively good performance of the EU is not surprising, and what is particularly encouraging for us researching in the Australian and Asian contexts is the positive development emerging from business practice in the Asia-Pacific region, a diverse area with enormous environmental, human and social challenges. In terms of assisting organisations to improve their practice in terms of competitive advantage and a whole-systems approach, the authors would encourage the development of more people-centred strategic models and tools. One such approach could be developing the Balanced Scorecard, currently in place in most businesses, for system improvement to develop the practice to integrate sustainability thinking across all areas of strategy and operations. Organisations are encouraged to regularly evaluate decisions, monitor progress and assist in creating value for organisations while maintaining sustainable or socially responsible corporate practices. Taking the starting point from the Balanced Scorecard, it is proposed that the Sustainable Scorecard integrates the triple bottom-line 3 Ps of profit, planet and people and adds two further key metrics process (to cover the huge growth in outsourcing, off shoring and the global supply chain) and product. Further research on this approach will be forthcoming from the authors based on case study analysis and empirical work, particularly in the Asia-Pacific region.

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Bhattacharaya, C.B. and Sen, S. (2004), ‘‘Doing better at doing good: when, why and how consumers respond to corporate social initiatives’’, California Management Review, Fall. BHP Billiton (2006), ‘‘Sustainability Report’’, available at: http://sustainability.bhpbilliton.com/2006/ sustainability/aboutUs.asp Business Week (2005), ‘‘Battling climate change’’, 12 December. Brudenall, P. (2005), Technology and Offshore Outsourcing Strategies, Palgrave Macmillan, Basingstoke. Continental Tyres (2006), ‘‘Annual Report’’, available at: www.conti-online.com/generator/www/com/en/ continental/csr/themes/downloads/download/gbericht2005_en.pdf Cullum, T. (2007), General Motors Corporation: Chemicals Management Program, Environmental Services, Detroit, MI.

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Daimler Chrysler (2006), ‘‘360 degrees: facts on sustainability’’, available at: www.daimler.com/Projects/ c2c/channel/documents/915030_dcx_sust_2006_sustainabilityreportfacts_e.pdf Environmental Reporting General Guidelines (2001), available at: www.defra.gov.uk/environment/envrp/ guidelines.htm Benn, S. and Dunphy, D. (Eds) (2007), Corporate Governance and Sustainability: Challenges for Theory and Practice, Routledge, New York, NY. Ecolean (2007), available at: www.ecolean.com (accessed 2 January 2007). European Union (2003), EU Directive 2003/108/EC, available at: http://ec.europa.eu/environment/waste/ weee_index.htm Figge, F. and Hahn, T. (2004), ‘‘Sustainable value added – measuring corporate contributions to sustainability beyond eco-efficiency’’, Ecological Economics, Vol. 48, pp. 173-87. Figge, F. and Hahn, T. (2005), ‘‘The cost of sustainability capital and the creation of sustainable value by companies’’, Journal of Industrial Ecology, Vol. 9 No. 4, pp. 47-58. Fortune (2006), ‘‘Top 500 listing’’, available at: http://money.cnn.com/magazines/fortune/fortune500/ full_list/index.html (accessed 17 April 2006). Global Market Insite (2005), available at: www.gmi-mr.com Global Reporting Initiative (2006), ‘‘The GRI sustainability reporting guidelines on economic, environmental and social performance’’, available at: www.globalreporting.org Greenpeace BP Global Survey (2004), available at: www.greenpeace.org/international/footer/ search?q¼ bp (The) Guardian (2006), ‘‘UK firms fined for breaking EU carbon rules’’, 6 December. Hart, S. (2001), ‘‘Beyond greening: strategies for a sustainable world’’, in Starkey, R and Welford, R. (Eds), The Earthscan Reader in Business and Sustainable Development, Earthscan, London, pp. 7-19. Hewlett Packard (2006), ‘‘Annual Report’’, available at: www.hp.com/hpinfo/globalcitizenship/gcreport/ pdf/hp2006gcreport_lowres.pdf Honda (2006), ‘‘Annual Report’’, available at: http://world.honda.com/investors/reports/ Hoover (2006), ‘‘APAC 50’’, available at: www.hoovers.com/global/hoov/index.xhtml?pageid ¼ 15619 (accessed 7 December 2006). Morgan, J.P. (2006), ‘‘Community Report’’, available at: www.jpmorganchase.com/cm/ cs?pagename ¼ Chase/Href&urlname ¼ jpmc/community/env/policy Kemp, R., Parto, S. and Gibson, R.B. (2005), ‘‘Governance for sustainable development: moving from theory to practice’’, International Journal of Sustainable Development, Vol. 8 Nos 1/2, pp. 12-30. Landlease (2006), ‘‘Annual Report’’, available at: www.lendlease.com.au/llweb/llc/main.nsf/ pdf_asx_annual_report_2006.pdf Laszlo, C., Sherman, D. and Whalen, J. (2002), ‘‘Shareholder value and corporate responsibility’’, Ethical Corporation Magazine, December. McInerney, B. (2005), ‘‘The Annual Report Trends Survey’’, available at: www.altria.com/download/pdf/ investors_AltriaGroupInc_2005_AnnualRpt.pdf McWilliams, A. and Siegel, D. (2001), ‘‘Corporate social responsibility: a theory of the firm perspective’’, Academy of Management Review, Vol. 26 No. 1, p. 120. Marathon (2005), ‘‘Press release’’, available at: www.marathon.com/content/released/LOVReport FinalPDF.pdf Mitsubishi Financial Group (2006), ‘‘CSR Report’’, available at: www.mufg.jp/english/csr/csrreport/2006/ pdffile/all_e.pdf NEC (2006), ‘‘CSR Report’’, available at: www.nec.co.jp/csr/en/report/pdf/CSR-all.pdf Nissan (2006), ‘‘Global Report’’, available at: www.nissan-global.com/EN/DOCUMENT/PDF/SR/2006/ SR2006_E_all.pdf

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NZBCSD (2001), ‘‘The NZBCSD Sustainable Development Reporting Guide for New Zealand Business’’, prepared with support from the Ministry for the Environment, available at: http://www.nzbcsd.org.nz/ section.asp?NewsSectionID ¼ 3 Ricoh (2006), ‘‘Environment Report’’, available at: www.ricoh.com/environment/report/pdf2006/all.pdf Shell (2006), ‘‘Reporting Review’’, available at: www.shell.com/home/Framework?siteId ¼ envandsoc-en&FC2 ¼ /envandsoc-en/html/iwgen/our_approach_reporting/external_review_ committee/zzz_lhn.html&FC3 ¼ /envandsoc-en/html/iwgen/our_approach_reporting/external_review_ committee/external_review_committee_24042006.html Sony (2006), ‘‘Annual Report’’, available at: www.sony.net/SonyInfo/Environment/environment/ communication/report/2006/qfhh7c00000a2fg8-att/CSR2006E.pdf Standard & Poor (2006), ‘‘350 Index’’, available at: www2.standardandpoors.com/portal/site/sp/en/eu/ page.topic/indices_euro350l (accessed 21 October 2006). Telstra (2006), ‘‘CSR Report’’, available at: www.telstra.com.au/abouttelstra/csr/reports.cfm Thorsenson, L. (2006), Interview with Lynette Thorsenson, Sydney, 16 June. Time Warner (2006), ‘‘CSR Report’’, available at: www.timewarner.com/corp/citizenship/index.page/ csr_report_060519.pdf UPS (2005), ‘‘Sustainability Report’’, available at: www.sustainability.ups.com/downloads/ Sustainability05.pdf Walmart (2006), ‘‘Environment Report’’, available at: http://walmartstores.com/GlobalWMStoresWeb/ navigate.do?catg ¼ 217

Corresponding author Julie Jie Wen can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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The organisation’s captives: the no mean production of the contemporary administrative techniques Alex Coltro

Alex Coltro is Professor, Escola Superior de Agricultura Luiz de Queiro´s, Universidade de Sa˜o Paulo, Sa˜o Paulo, Brazil.

Abstract Purpose – This paper seeks to understand administrative action, to know its deeper and excellent roots. Such roots, for the West, are based in the concept of reason and its derivatives. Design/methodology/approach – Initially the paper presents the basic relationship between administrative action, organizational theories and its roots. It then develops an archaeological process of historical recovery of the concepts and ideas associated with the reason, and concludes by clearly pointing out the remaining challenge: the development of an administrative boarding that respects the human being per se and not as a recourse thing, at the same time making if possible for organizations reach their objectives. Findings – Taking into consideration comparative traces of the diverse characteristics of organizational theories, this research has empirical findings which provide new comprehension and insights about the main product of any organization – people. Originality/value – This paper presents a new view and a deep comprehension about the roles that people develop in an organization, particularly from an administrative focus. Keywords Ethics, Product oriented organizations Paper type Research paper

Every image as a way of seeing is at the same time a way of not seeing (Morgan).

Since the early days of Western culture, philosophers have demonstrated that human beings are not tied to a deterministic and natural universal law, but they are essentially open, i.e. their lives are a constant and challenging task. In each free decision what is really considered is the constitution of their always incomplete being. The human conquest of autonomy, freedom and happiness implies a rupture of the closed circle of the self and signifies the start of a construction of a true sociability. Freedom is authentic when it is self-recognised and promotes the liberty of all human potentials based on a mutual recognition of freedoms assented in solidarity. But how can human actions be justified in the human social context? Each person is unique, irreplaceable, never a thing but an end in themselves and should be considered as a free being, author of and responsible for their acts. In this manner, the ethical interest emerges in responding to the requirements of self-criticism, an argumentative effort which pursues to justify and to configure the actions of the own being in the social world. In such case, the realisation of self is the most valuable human task, and it has to be considered that self-realisation does not exhaust in itself, but especially in responsibility in the presence of others. The nature of a human act necessarily implies the intention of an end and a value position. In a manner of speaking, true wisdom should be the opponent of all forms of human domination and of the humiliation of human dignity. This wisdom should control the negative effects of the instrumental reason which appeared with the development of the modern technological

DOI 10.1108/17471110810856947

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and scientific world, which has transformed human beings into captives of contemporary organisations.

1. Reason and the reasons Reason is neither exclusively objective reason nor exclusively subjective, but it is the necessary unity of the objective with the subjective (Hegel).

In administrative practice, in his famous and considered book Administrative Behaviour, Simon (1947), in approaching the ‘‘administrative action’’ intuited that the core of the phenomenon should be regarded as the aspects of the typical rationality which embodies this kind of action. Waldo (1948), in his Study of Public Administration, gave significance to this subject when he said that the concept of the rational action should be the main focus when studying administrative action. 1.1 Reason Through reason, in its ‘‘latu sensu’’, the human being defines the meaning of his (her) internal and shared life, putting into action his (her) autonomy, conquering his (her) liberty of being, besides the fact that the rationality is one of the main Western questions regarding knowledge. In this context, it should be noted that a lot of meanings of the term ‘‘reason’’ are possible, as Mora (1982) points out: 1. reason is the denomination of a determined human faculty through which the human being is differentiated from animals: usually this faculty is defined as the human capacity of getting universal knowledge, of ascending to the reign of ideas as essences or values; 2. reason is equivalent to the foundation: reason explains why something is as it is and not another way; and 3. sometimes, reason is defined as a saying (logos) which is based in a way of being rational (Mora, 1982, p. 322). According to Nozick (1993, p. 122): . . . the evolutionary accompanying of the rationality and its limitations [has showed that the] Rationality is an evolutionary adaptation with delimited proposals and functions that was selected and configured by the work carried out by the humans in their own evolutionary process.

Some contemporary authors have dedicated themselves to study of the transmutation of the concepts of the idea of reason, in its origins, and the process in itself, as in the observed consequences of rationality in industrial society. In this analysis, a notion similar to the classical notion of reason is called ‘‘substantive’’ or ‘‘substantial’’ reason, while the notion of reason that was characterised by Hobbes and his followers is named ‘‘functional’’ or ‘‘instrumental’’ or ‘‘technical’’ rationality. 1.2 Instrumental rationality In accordance with Weber (1944), action is rational and related to aims if: . . . [it] was determined by the expectations of future behaviour of the objects of the external world as much as the other human beings, using these expectations as conditions or means to the reaching of the own purposes rationally evaluated and pursued (p. 20).

The rationality that is subjacent to this kind of action is named ‘‘instrumental’’, which does not consider properly the intrinsic quality of the action but its major contribution to the aim of a pre-established goal, independently of the content of the action itself. Manhein (1942) denominated this rationality as ‘‘functional’’, and noted that it is characterised by: . . . a series of rules organised in a way that can carry out the objective previously defined, receiving all the elements of this series of acts a function position or role [. . .] and this series of acts will be in its best conditions when, to reach an objective, coordinate the means in the most efficient way (p. 63).

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The absolutisation of instrumental rationality is the mythification of rationality and, by consequence, of its constructs. In this manner, the mythic deformation transforms a kind of rationality (instrumental) in the rationality, exalting as the maximum expression of the human being, the capacity of realising an accurate calculus in the combination between means and goals, transferring to the organisation the possibility of reaching a high level of rationality, translated by its efficiency and efficacy. ‘‘The rational action related to ends is systematic, conscious, calculated, attempted to the imperative of adapting conditions and means to the aims deliberately elected’’, in accordance with Guerreiro Ramos (1989, p. 23). Discussing instrumental rationality, Weber (1980) says: Decisively, the capitalism emerged through the permanent and rational enterprise, of the rational accounting, of the rational techniques and of the rational right. To these should be added the rational ideology, the rationalisation of the life and the rational ethic of the economy (p. 169).

Manhein (1942) said that functional rationality despoils individuals of their critical capacity and safe judgement in proportion to the development of industrialisation, permitting only a few possibilities besides the abdication of their own autonomy and of their own interpretation of events in favour of those things that the social world give to them. Instrumental reason is a substratum of organised bureaucracy and, in the domain of organisational theory, the commitment to instrumental rationality leads to a false pragmatism – the unbridled search for solutions for organisational problems obscure their essence, i.e. their raison d’eˆtre. 1.3 Substantial rationality Substantial rationality consists of a process of association which permits the elaboration of patterns of references that will define the ends, objectives and goals which will be searched by instrumental rationality. According to Manhein (1942), this kind of rationality characterises a social action derived from a reflexive and critical capacity of individuals. In principle, the person is not tied to any objectives. He (she) thinks and acts obeying a categorical imperative of reason, and it can be said that every substantially rational act is intrinsically intelligent, and is based on a playful and autonomous knowledge about the relations between facts. It is an act of the dominion of the impulses, feelings, emotions, prejudice, and other factors which perturb the vision and the understanding of reality. This modality of rationality is related to values in a way that, as Weber (1944) says, rational action is to related to values, so that ‘‘it is determined by a conscious belief in the value – interpreted as ethical, aesthetical, religious or of any other way – peculiar and absolute of a determined conduct, considered ‘per se’ and independent of success’’ (p. 20). Ordinarily, substantial rationality is closely related to worries about liberties, in accordance with Guerreiro Ramos (1983), who redefines it elsewhere (Guerreiro Ramos, 1989) as an ‘‘active power of the human ‘psyche’ which enables the individual to distinguish between the good and the bad, between the false and the true knowledge and, in this manner, orientates his own personal and social life’’ (p. 25). 1.4 Administrative rationality As stated by Guerreiro Ramos (1983), the reason of administrative action is not reason as understood as a transcendent human faculty. It is simply efficacy, the productive operation of a combination of resources and means, taking into account reaching predefined, contingent objectives. This rationality has reshaped the world, according to Weber (1944), who worked this theme into his writings: monetary and economic calculus, bureaucratic rationalisation, procedures and general rules of organisations have surpassed actions realised on an individual basis. When following a blind process, this is rationality diffused by technology, new administrative techniques, new models of management imported from distinct and faraway cultures, and

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by industrialisation. It is this rationality that submits the human being to functional criteria instead of substantial understanding and comprehension of the world. It is this perspective which characterises the perils of the massification and robotisation of human conduct. Administrative action comprehends that human beings are a resource, and has created a lot of conflict between organisational systems and the human world of life. This collision has traditionally been won by instrumental reason which, in conceiving the human being as just a producer, transforms him (her) in just objects, depotentialising him (her) as a subject. It should be noted that functional rationality, through an anti-critical language, absorbs the eventual transcendental human elements, denying them. Studying critically the instrumental rationality expressed by administrative rationality, Horkheimer and Adorno (1980), in their text ‘‘The dialectic of the enlightenment’’, noted the fact that that directing class uses a technological rationality in the service of domination, which is a high treason to the essence of reason in its classical conception, which by principle would be emancipatory, i.e. a process of development of the consciousness of the human being.

2. The moral question There are trues which is not enough that we are persuaded; it is necessary feel them. These are the trues related to the moral (Montesquieu).

As stated by Chaui (1994): . . . it is not the lonely subject who becomes moral, because the moral is based in the solidarity: it is by the discovering and by the recognition of the Other which every man finds himself (p. 336).

Distinct social and cultural formations have instituted different sets of ethical values while fomenting patterns of conduct, intersubjective and interpersonal relations, and social behaviour which have assured the physical and psychical integrity of their members, as well as maintaining the social group. In this manner, Chaui (1994) stated: . . . the feelings, conducts, action and behaviours of the persons are moulded by the conditions (social and cultural) in which they live in [. . .] they are formed by the social habits, which educate the persons to respect and reproduce the proposed good values, in this manner, as obligation and duties (p. 340).

Ethical existence is structured by the values and obligations which form the content of moral conduct. These conducts, while moral, are normative and factual, and they should be voluntary in their nature, free, conscious and responsible. In the ethical world only means that are in accordance with the ethical finality of the action are justified. Ethical finalities demand ethical means. This relationship between means and finalities presupposes that the moral person does not exist as a given fact, but he (she) is established by inter-subjective and social life, a demanding being educated in values and moral virtues. According to Nozick (1993): . . . the ethical actions can symbolise [and express] that a creature is rational, which gives himself (herself) laws [. . .] the symbolic actions often are expressive action [which connected] to a situation, make possible the expressions of some attitudes, beliefs, values, emotions, or any other thing (p. 28).

2.1 Ethics and the moral According to Santos (1991): The Philosophy of Moral or Ethics is the theoretical expression of the bases of the human act, in the search of the individual satisfaction (the happiness) in the social context (p. 360).

In this manner, critical reflection about the notions and principles which are the basis of moral life is part of the purpose of ethics. Such principles codify how to behave in the right way in

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relation and in the presence of others, with appropriateness related to the values and friendly feelings of the agent. This behaviour becomes possible through the individual dimension of ethics, which is concretised by a personal and individual choice act which should be free and conscious to be considered moral. This moral responsibility, as stated by Hodgkinson (1983), ‘‘can be reduced to the person. It is singularly phenomenological. It is the responsibility of a person with himself by his own adherence to the values which he became authentically engaged’’ (p. 159). The ethical person is the conscious person. Although the ethical agent should be the person, the individual, the nature of ethics is predominantly social. The person follows his (her) own life plan attempting to reach happiness, but the heritage of the values of the social group stand in the way of this individual realisation. This heritage is inclined to make reference to some consideration about generalised well-being which, when bypassing the personal dimension, reacquires a new human existential perspective emphasised in the essential inter-subjectivity of the moral. As stated by Aranha and Martins (1992): . . . [there] exist two contradictory poles of the moral: from one side the social character of the moral and in the other side the intimacy of the subject [. . .] generating a dialectical perspective or a relation which implies at the same time an adaptation and an inadaptation to the rule, an acceptance and the refusal of the interdiction, the conflictive implication between determinism and liberty (p. 276).

Besides the social aspect, the moral has a profound historic character: behaviour in the moral sphere varies in accordance with the time and place, and in conformity with the demands of the conditions in which human beings organise themselves to establish the effective rules and practices of work. 2.2 Ethics in the organisational world Individuals as professional managers in the organisational ambit have a specific ‘‘ethos’’, that is distinct from the human world of life in general. Of course many aspects are assimilated in this, but the acceptance of the distinction between a private ambit and a professional ambit is normal in the existences of those who work, and managers, while professional, are not anonymous agents, depersonalised, ‘‘committed of a paper. At least four conditions amplify and compound the moral complexity of his task: 1) he designs and creates roles for himself and for others; 2) he has the general duty of conciliating the nomothetic and ideographical aspects of his organisation; 3) he determines in part, or in a whole, the organisation values; 4) he has to make all this in the limits imposed by the values which are besides dispute or contention (metavalues)’’ (Hodgkinson, 1983, p. 156). In this manner, the manager, while acting professionally, deliberates and decides about the possible, or in other words, everything which, to be and to happen, depends on the will and the actions of the members of the organisation. This moral act is very distinct to that of duty by duty. It is the moral through which one should do everything in one’s responsibility to realise the ends and goals that the organisation defines, because the manager knows, from the very beginning, that they will be evaluated by their success in relation to reaching the organisation’s goals. Therefore, in the organisational ambit, the exercise of any function, duty or career requires the auto-rationalisation of the conduct of its occupying or titular, objectifying becoming rational part of the administrative action. Naturally organisations do not occupy all the human existential space, corresponding only to the professional quotidian where a moral directed to responsibility predominates, distinct of the existential world of the individual where other conducts orientated by his (her) values predominate. These ethical aspects of administrative action and of the quotidian of the organisational professional was initially characterised by Max Weber (1944), who classified them in a pair conceptually named ‘‘ethic of responsibility and ethic of absolute value or conviction’’.

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In this manner, the ethic of responsibility corresponds to the rational action with relation to ends or goals, which is based on the instrumental or pragmatic rationality. The ethic of absolute value or conviction is implicit in all actions referring to values, and is based in substantive rationality. The ethics of responsibility is an ingredient of every administrative action. It is its content ‘‘par excellence’’. Those who adopt it, tacit or implicitly, find themselves upon the links of a commitment: by self-command of impulses, of preferences and until beliefs and ideologies auto-rationalise their own conduct, transforming them in a functional part of administrative action. The ethic of responsibility is a way of life, a habit of whoever is in charge of any function in the organisation. Ingran (1987), commenting about the ethic of responsibility, noted that the thinker and contemporary philosopher Ju¨ergen Habermas defined such a mode of action as teleological (in search of certain objectives) and strategic (when the decisions and behaviour of people are included in the calculus corresponding to means and goals). This teleological action is rational in the dimension in which the agent calculates the most efficient means to reach the desired goal. In accordance with this model of rationality, in the strategic mode the actors relate between themselves as objectified means or obstacles to the realisation of the desired goals.

3. Liberty Man is born free, and everywhere, he is in chains (J.J. Rousseau).

Misunderstood, denied, desired, and above all usurped, liberty has always been a fundamental question in the history of humanity. Life and freedom almost confuse themselves: ‘‘I am my liberty’’, says one of Sartre’s characters. Human liberty is a conditioned liberty: in the same way that zero liberty does not exist (slaves always have some possibilities of choosing), infinite liberty does not exist either (nobody can choose everything). Human liberty is conditioned by a series of factors that do not depends on individual will. But, it is in social and political organisations where most of the obstacles to liberty are engendered. The right to be free is a right between other fundamental rights of the human being, but liberty, while a right, has as a corollary responsibility during duty. The rational and free human being builds as much as destroys: he (she) raises schools, hospitals and cathedrals as well as creating bombs with the capacity to destroy the planet. It is impossible not to be scared by the incredible power that liberty permits to the human being: for good and for bad. Meanwhile, the human being is condemned to be free, as stated by Sartre. Liberty is the capacity of giving a new meaning to what looks like fatality, transforming the situation in a new reality created by human action. This transformational power – which transmutes as real that which was only possible and that which was only latent as a possibility – is what gives rises a work of art, a work of thinking, an heroic action, an anti-racism movement, a fight against sexual or class discrimination, a resistance against tyranny, and a victory against it. The possible is not pure contingency or chance. The necessary is not brute factuality. The possible is what is open in the core of the necessary and what human liberty catches to make itself. The human desire and will are not unconditioned, but the conditionings are not obstacles to liberty but precisely the way by which it can be exercised. If the human being is born in a society which teaches determined moral values – justice, equality, veracity, generosity, courage, friendship, the right to happiness, etc. – and, meanwhile, obstructs their concretisation because it is organised and structured in a mode that impedes the recognition of the contradiction between the ideal and realities, then this is the first moment of liberty and of ethical life as a rejection of violence. The second moment is a search for breaches by which can be passed the possible, i.e. another society that concretises in the real what is proposed in the ideal.

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The third moment arises in the process of decision about the action to be taken and about the means of acting. The last moment of liberty is the realisation of the action to transform a possibility into a reality. Human liberty is the fundamental power that the human being has of being the subject of all his (her) experiences. Through acts of liberty, he (she) interprets the situation, and from this interpretation of values, norms and principles, arises the acceptance or the refusal, the internalisation or the transgression, the continuity or the creation, which culminates in the maximum power that every individual has of evaluating his (her) own and most profound values, in accordance with Nietszche. The human conquest of autonomy, liberty and happiness implies disrupting the closed circle of the ego and building true sociability: it is an anthropogenesis, and is a process through which the subject searches for his (her) emancipation. Liberty is authentic it when recognises and promotes the freedom of all others, based on a reciprocal recognition of liberties based in solidarity.

4. Work and its products The work does not cause suffering; it is the suffering which produces the work (C. Dejours).

Human realisation is always a process, a becoming, a project eternally unfinished. Happiness as much as the realisation of absolutes is not a property of the human being. The human being is an eternal not-realised: it is the ceaseless search for this realisation which permits to the human being the transformation of his (her) environment, in this way making history. It is in this transforming action that the human being finds moments of satisfaction, in the realisation of his (her) projects, besides the fact the concomitant he (she) is generating new anxieties. If by the word ‘‘work’’ is understood every transformational action (material or intellectual) of the human being realised in nature or in the society where he (she) lives, the relationship between work and human realisation appears to be evident – it is a relationship as old as human history. Meanwhile, why do work and realisation look to be living in eternal conflict? This question becomes complex when work conditions and the concrete possibilities of human beings realising themselves through it are considered. This complexity is due to the fact that human beings organise society in a mode that for the majority of the individuals, the work that they do is not their projects, and neither are the fruits of their efforts their own. Far from of being synonymous with creation and transformation, the work that they develop becomes oppressive and fatiguing. In the development of contemporary society, strongly directed towards work, there was the necessity of the construction of a disciplinary body which encompassed all individuals, in and out of the factory: the bourgeoisie order of productivity became the rule to manage all instances of the social, as the physical and the mental. Every physical malady can be prejudicial to the productivity and profitability of the enterprise. But mental suffering is not confined to schemes forged out of its coherence. This is the essential difference which establishes the opposition between medicine and psychoanalysis. In repetitive tasks, conditioned behaviours are not the only consequences of the organisation of work. Much more than that, they structure all life external of work, contributing to surrendering workers to criteria of productivity. The erosion of the individual mental life of workers is useful for the implementation of a conditioned behaviour favourable to production techniques. Mental suffering appears a necessary intermediate to the submission of the body. The worker transforms himself (herself) into the artisan of his (her) own conditioning/suffering. In the typical organisational environment, the only way to escape aggressiveness is to work faster: productivity increases

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via the exasperation and suffering of the worker, in a way that the work does not cause suffering but it is the suffering that produces the work. What is explored by work organisations is not properly suffering in itself, but mainly the mechanisms of defence utilised against suffering, through automated work which expels the desire of the subject, whose consequent frustration and aggressiveness, manifest as tension and nervousness, are used specifically to increase the rhythm of work.

5. Alienation At the same time the work humanises the nature and dehumanises the human being (Octa´vio Paz).

Work in the industrial societies is more and more synonymous with human alienation related to his (her) nature. The modern human being, besides the conquest of a series of rights and freedoms, in a certain way still has some aspects in common with slaves and servants. Millions of salaried individuals produce richness but only accumulated misery, as research has shown, especially in Brazil. Even between those who receive high salaries, it is not hard to verify the high degree of dissatisfaction because there is no identity between their will and the tasks they perform. The high level of alcoholism, the use of drugs, sexual harassment and suicides in those countries considered to be developed also attest to this dissatisfaction. In modern societies, work that at the same time can be the realisation of the human being as a social and historical subject is also his (her) negation. The human being only creates and realises as a human when working to transforming his (her) social or natural environment. Meanwhile, it is this same work which steals his (her) own liberty and will. The human being denies himself (herself) while building his (her) identity in the relations of work. As a worker, the individual does not have his (her) own will regarding what to produce and how to produce it – this decision power does not belongs to him (her), and neither does the fruit of his (her) work. The identity that work generates is something strange to his (her) own will. This identity is imposed. Confined to his (her) production locale, the worker does not define his (her) work’s rhythm, salary, conditions and free time. He (she) becomes an alienated subject. At the same time, his (her) identity, which is his (hers), does not belong to him (her): it is the market that defines it. Those things that work produces have more importance than the worker himself (herself), the producer. In the market, what is valuable is not the worker, but the value that he (she) produces in the market – the merchandise. It is this merchandise which defines life and work conditions, in this manner defining the worker’s identity. Alienation is a process of transformation of the worker into a thing through work: those things that were lifeless (materials, products), when they gain existence determine the value of their producer/creator. In other words, the human being, when submitted to market conditions and without exercising his (her) own will, becomes a thing losing his (her) humanity.

6. The research Against the positivism which stops in front of the phenomenon and says: ‘‘There is only facts’’, I say: ‘‘On the contrary, facts are what does not exist: there are only interpretations’’ (F. Nietzsche).

6.1 Methodological approach The social sciences consider the social act as a basic unity and they admit that the human being can comprehend his (her) intentions in the same way that they interpret the motives of the conduct of other human beings, in a mode that can be apprehended in an inter-subjective totality. The phenomenological method is characterised by the emphasis in the ‘‘world of quotidian life’’ – a return to the totality of the lived world. This method has an approach which does not

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adhere only to things factually observable, but aims to ‘‘penetrate its meanings and context with more and more refinement’’, in agreement with Boss (1979; pp. 3-4), who gives relevance to the aspect that it is particularly adapted to the philosophical bases of any phenomenon. In this way, in accordance with Masini (1989): . . . this posture implies in the refusal of the myths of the neutrality and of the objectivity [of the science]; it obliges the researcher to assume his (her)will and intentionality of reviewing his (her) values and attitudes which contributes to the maintenance of the present ‘‘status quo’’ (p. 46).

By isolating the phenomenon, studying it will permit questioning and discussing of the presumed beliefs of the intentionality of the subjects with regard to the realities of their actions. Phenomenological research begins with the comprehension of life and not of concepts and definitions. It is a comprehension directed towards the meaning perceived by the subjects that human beings are not objects and that their activities are not only reactions. In this mode, ‘‘the phenomenological investigations show the consciousness of the subjects, through reports of their internal experiences, and with the researcher trying to living in his(her) mind – by empathy – the phenomenon reported by others’’ (Asti-Vera, 1980, p. 71). Empathy is an intentional act, a mutual penetration of perceptions. The phenomenological approach elevates the interpretation of the world which arises intentionally in the consciousness of the researcher, emphasising the pure experience of the subjects in polysemic dialectic. These interpretations are done in multiple and indispensable conflicts of interpretations in a way to approximate more and more the symbolic structure of the phenomenon. It should be noted that this approach suggests exhaustive, constant and continuous reflection about the importance, validity and finality of the questioning, the investigations and the answers already obtained. It appears to be always exploratory, an interpretation which makes possible other interpretations and conflictives, and which demarcates the polysemic aspect of its nature. This approach, which is hermeneutical in its essence, is based in the ontological thesis of the living experience as an essential interpretative process that illuminates the modes of being in the world. Direct observation is the richest technique by which to obtain an expression of the face-to-face social world. The apprehension of motives by the researcher will be as good as he (she) will be able to approximate of the context of the face-to-face relationship, creating the possibility of understanding the phenomenon in its essence and in a complexity that is typical of the human world. As stated by Capalbo (1979): . . . the mode of collaboration indicates the living in common is the part of the set of the experience, and that is a co-operate, a co-realisation. Collaborate is be able to act upon the things in common [. . .] the comprehension between the human beings is done when is realised a work in common. It is this task that makes the multiplicity of perspectives and interests to converge to a centre in common (p. 97).

6.2 The subjects of the research The lived and intentional work which permitted this research was developed and done in a public hospital located in Sa˜o Paulo State, Brazil. It is a hospital with more than 4,000 employees distributed in four departments and 12 divisions, segmented in 72 sections and 230 services areas. As well as this, there are a still larger number of teams, commissions and sectors. This lived work was developed directly during two and half years with a high hierarchical level of the institution’s managers in an effort to develop and implement an organisational development plan named ‘‘Programa de Controle de Qualidade Total’’ which made the execution of the present research possible.

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The principal motives that directed the development of this work in this particular institution are: 1. the institution is typically a humanitarian organisation directed to the most substantial aspects of existence (questions about life and death); 2. the institution is a large and bureaucratic one, typically characterised by its rational orientation; 3. the institution is developing a lot of distinct projects of organisational development which are permitting administrators to take hard and difficult decisions. The main objective of this research was not only the accumulation of facts about the existential world, but its comprehension, in that what was perceived was not the facts themselves but their meanings. Comprehension was achieved through observation, direct examination and immediate participation in the phenomena, which provided significant questions for the investigation with reference to the basis of everyday social life in the organisation, particularly that of high-level managers. This research made possible a lot of very frequent contacts in cooperative situations, in an intentional living characterised by a long series of purposeful acts, and in a perspective that Sands and McClelland (1990) classify as ‘‘emic’’.

7. In consequence and against conclusions We should not be surprised that what we are creating or just reproducing are homunculi (B. Sievers).

The results of this research showed that a living comprehension of administrative action demands a knowledge of instrumental rationality and of the ethics responsibility. The other rationalities cited should be known, but they are not very relevant in the organisational world. Instrumental rationality is very preponderant, making valuable Simon’s (1983) statement that ‘‘We see that reason is wholly instrumental. It cannot tell us where to go; at best it can tell us how to get there’’ (p. 7). In this manner, in the institutional practices experienced, the rationality dominant in all administrative actions was instrumental rationality, the same rationality that is diffused by technologies, by contemporary administrative techniques and by industrialisation. In this research we identified with absolute preponderance only a basic category of ethical principles that are inherent to administrative actions – the ethics of responsibility. It is known that the instrumental rationality is the substratum of the ethics of responsibility. In the occurrences identified and lived in this research, the instrumentality of actions was so evident that it should not be passed over, but should be examined again to gain a bigger distinction once the creature has the same soul as its creator. The institutional characteristics of this double concept (instrumental rationality and ethics of responsibility) can be elucidated as: . . . a set of actions through which the administrative agent must do everything in his (her) power to reach the ends and goals that were defined for the institution by its owners. The agent should be conscious, from the very beginning, that they will be judged on their success related to reaching these goals. This is done in a way that activities directed to reaching organisational goals and ends express themselves to the administrative agents as official duties and they are linked to expectations that the behaviours of the objective world, as of any other human beings, will be compatible with the conditions/means to the scope of the pre-established objectives.

Far from the frequent occurrence of the cited phenomena, other activities and tensions appeared that should be classified in distinct ways, as instrumental irrationality, anti-ethical responsibility and substantial irrationality. These concepts are not the opponents of the first concepts, but distinct and characterised in other ways.

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The importance of the identification of this other category is based on the fact that they are the origins of tensions which every individual has probably felt in the organisational world, but never explained ‘‘how’’ and ‘‘why’’ these emotions arise. It should be noted that Weber (1944) considered the co-existence of those ethics in the same situation and in a tense situation, and stated that ‘‘there is a hard difference to be surpassed between the act in accordance with the maximum of the ethic of the conviction and the acts in accordance with the ethic of the responsibility’’ (p. 55). In such a way, this tension has a permanent nature, and can be diminished but never eliminated. Such existential conflicts, really lived by the researcher during the resolution of the work done, only corroborate what Ingran (1987) enunciated when he stated that the rational-valorative aspects of the ethic of the conviction is obfuscated by the rational-purposeful demands of the ethics of responsibility: . . . therefore the actions and its renunciation go along with themselves necessarily. The loss of liberty brought by this renouncement is much more evident to the professional bureaucrat, who is nothing more than a gearing in a mechanism of perpetual movement that prescribes him (her) an essentially fixed routine (p. 74).

It is important to say that instrumental rationality has prevailed as the logic of the substratum of managers’ actions, and, as Serva notes (1997, p. 19): . . . this reality finally happen to conduct the individuals to thrown themselves in a permanent competition, that produces anxieties and other psychical pathologies engendering a society [. . .] responsible by the psychological incertitude, by the degradation of the quality of living, by the pollution, by the wastes of the natural resources of the planet.

From this, the loss of human capacity for transcendence of the immediate organisational situation commonly characterised in the research is evident. It is this that led to an initial consideration about the nature of the real production of institutions, as a derivation of the results of the production process in working enterprises and employing institutions, which in contemporary organisations is continuously sustained by the split of life into work life and the remainder. The probability of whether the final results of contemporary work enterprises are ultimately human beings or soulless automatons will, therefore, be determined fundamentally through real practice in the organisational world. In contrast to what Herbst (1974) stated – ‘‘the product of work is people’’, it can be asked: ‘‘what kind of people?’’. Those ‘‘human beings who [are] willing to act as substitutes for machines and [. . .] to subordinate themselves to the requirements of authoritarian hierarchical work organisations?’’ (Sievers, 1990). What kind of human is the product of contemporary work? Captives?

References Aranha, M.L.A. and Martins, M.H.P. (1992), Temas de filosofia, Moderna, Sa˜o Paulo. Asti-Vera, A. (1980), Metodologia da pesquisa cientı´fica, Globo, Porto Alegre. Boss, M. (1979), Na noite passada eu sonhei, Summus, Sa˜o Paulo. Capalbo, C. (1979), Metodologia das cieˆncias sociais: A fenomenologia de Alfred Schutz, Antares, Rio de Janeiro. ´ tica, Sa˜o Paulo. Chaui, M. (1994), Convite a` filosofia, A Guerreiro Ramos, A. (1983), Administrac¸a˜o e contexto brasileiro, Editora da Fundac¸a˜o Getu´lio Vargas, Rio de Janeiro. Guerreiro Ramos, A. (1989), A nova cieˆncia das organizac¸o˜es: reconceituac¸a˜o da riqueza das nac¸o˜es, 2nd ed., Editora da Fundac¸a˜o Getulio Vargas, Rio de Janeiro. Herbst, P.G. (1974), Socio-technical Design: Strategies in Multidisciplinary Research, Tavistock, London. Hodgkinson, C. (1983), Proposic¸o˜es para uma filosofia da administrac¸a˜o, Atlas, Sa˜o Paulo.

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Horkheimer, M. and Adorno, T. (1980), Diale´tica do esclarecimento, Textos escolhidos, Colec¸a˜o Os Pensadores, Sa˜o Paulo. Ingran, D. (1987), Habermas e a diale´tica da raza˜o, Ed. Universidade de Brası´lia, Brası´lia. Manhein, K. (1942), Libertad y planificacio´n social, Fondo de cultura economica, Me´xico. Masini, E.F.S. (1989), ‘‘O enfoque fenomenolo´gico de pesquisa em educac¸a˜o’’, in Fazenda, I. (Ed.), Metodologia da pesquisa educacional, 1st ed., Cortez, Sa˜o Paulo. Mora, J.F. (1982), Diciona´rio de filosofia, Publicac¸o˜es Dom Quixote, Lisboa. Nozick, R. (1993), The Nature of Rationality, Princeton University Press, Princeton, NJ. Sands, R.G. and McClelland, M. (1990), ‘‘Emic and etic perspectives in ethnographic research on the interdisciplinary team’’, in Headland, T.N., Pike, K.L. and Harris, M. (Eds), Emics and Etics: The Insider/Outsider Debate, Sage Publications, Newbury Park, CA, pp. 32-41. Santos, F.A. (1991), ‘‘As dimenso˜es da e´tica e o mundo organizacional’’, 15a. Reunia˜o da Associac¸a˜o Nacional dos Programas de Po´s-Graduac¸a˜o em Administrac¸a˜o, 23-25 September, pp. 359-72. Sievers, B. (1990), ‘‘Zombies or people – what is the product of work?’’, in Turner, B.A. (Ed.), Organisation Symbolism, de Gruyter, Berlin/New York, NY. Simon, H. (1947), Administrative Behavior: A Study of Decision-making Process in Administrative Organizations, Macmillan, New York, NY. Simon, H. (1983), Reason in Human Affairs, Stanford University Press, Stanford, CA. Waldo, D. (1948), Study of Public Administration, Ronald, New York, NY. Weber, M. (1944), Economia y sociedad, Fondo de Cultura Economica, Mexico. Weber, M. (1980), ‘‘Histo´ria Geral da Economia’’, in Tragtenberg, M. (Ed.), Textos selecionados/Max Weber, 2nd ed., Abril Cultural, Sa˜o Paulo.

Further reading Beck, C.T. (1994), ‘‘Phenomenology: its use in nursing research’’, 28 April, available at: http:/elsa.dmu. ac.uk/ , elsa/GASS/ns/00000047/00000047.html (accessed 10 January 1996). Boss, M. (1977), ‘‘O-Modo-de-ser-esquizofreˆnico a` luz de uma fenomenologia Daseinanalı´tica’’, Daseinanalyse, Vol. 3, pp. 5-28. Cohen, M.Z. and Omery, A. (1994), ‘‘Schools of phenomenology’’, in Morse, J.M. (Ed.), Critical Issues in Qualitative Research Methods, Sage Publications, London, pp. 136-56. Corbin, J. (1986), ‘‘Qualitative data analysis for grounded theory’’, in Chenitz, W.C. and Swanson, J.M. (Eds), From Practice to Grounded Theory: Qualitative Research in Nursing, Addison-Wesley, Menlo Park, CA, pp. 91-101. Dejours, C. (1987), A loucura do trabalho. Estudo de psicopatologia do trabalho, Cortez, Sa˜o Paulo. Denzin, N.K. (1970), The Research Act: A Theoretical introduction to Sociological Methods, Aldine Press, Chicago, IL. Etzioni, A. (1974), Ana´lise comparativa de organizac¸o˜es complexas: sobre o poder, o engajamento, e correlatos, Zahar, Rio de Janeiro/EDUSP, Sa˜o Paulo. Etzioni, A. (1988), The Moral Dimension: Toward a New Economics, The Free Press, New York, NY. Forghieri, Y.C. (1993), Psicologia fenomenolo´gica: fundamentos, me´todo e pesquisas, Pioneira, Sa˜o Paulo. Habermas, J. (1975), Problemas de legitimacio´n en el capitalismo tardio, Amorrortu, Buenos Aires. Ray, M.A. (1994), ‘‘The richness of phenomenology: philosophic, theoretic and methodology concerns’’, in Morse, J.M. (Ed.), Critical Issues in Qualitative Research Methods, Sage Publications, London, pp. 117-35. Sanders, P. (1982), ‘‘Phenomenology: a new way of viewing organizational research’’, Academy of Management Review, Vol. 7 No. 3, pp. 353-60.

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Swanson, J.M. (1986), ‘‘Analyzing data for categories and description’’, in Chenitz, W.C. and Swanson, J.M. (Eds), From Practice to Grounded Theory: Qualitative Research in Nursing, Addison-Wesley, Menlo Park, CA, pp. 121-32. Vasconcelos, F.C. (1993), ‘‘Racionalidade, e´tica e organizac¸o˜es’’, 17a. Reunia˜o da Associac¸a˜o Nacional dos Programas de Po´s-Graduac¸a˜o em Administrac¸a˜o, 27-29 September, pp. 22-35.

Corresponding author Alex Coltro can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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Accountability discourses in advanced capitalism: who is now accountable to whom? Miriam Green, Wim Vandekerckhove and Dominique Bessire

Miriam Green is a Senior Lecturer at the London Metropolitan University, London, UK. Wim Vandekerckhove is Assistant Professor of Ethics at the Center for Ethics & Value Inquiry, Ghent University, Ghent, Belgium. Dominique Bessire is a Full Professor at the Laboratoire Orle´anais de Gestion, Universite´ d’Orle´ans, Orleans, France.

Abstract Purpose – This paper aims to argue that the concept of ‘‘accountability’’ has changed and become perverted. Originally the concept meant answerability or the act of rendering an account. Those who were traditionally accountable were the powerful in organisations, public institutions and international bodies. The paper seeks point out that the notion of ‘‘accountability’’ has largely been emptied of its substance, as over the past few decades the concept of accountability has become perverted in discourse and in practice. The powerful are often no longer held accountable and are able to make those to whom they have hitherto been accountable, accountable to them instead. Design/methodology/approach – The analysis is developed at the micro, meso and macro levels, through an analysis of the academic literature, in particular journals dealing with the interface between accounting and organisation studies. Findings – It was found that what happens at the micro and meso levels becomes comprehensible when put into the context of the macro level. Instances of partial or reversed accountability in practice are pointed out and linked with insights from commentators in the fields of sociology and philosophy. Originality/value – Concepts of accountability have become increasingly important in organisational discourse and practice over recent decades. This is particularly so given the importance now accorded to corporate governance and new public management. This paper is intended to formulate resistance to a particular discursive domination of corporate social responsibility. The paper is also new in the linking of this analysis with the argument that the weakening and reversal of accountability might be all-pervasive in the current era of advanced capitalism and free market ideologies, and that the subversion of accountability is an instance of politically motivated hegemony. Keywords Accounting, Literature, Ideologies (philosophy), Politics Paper type Research paper

Introduction The concept of accountability has become increasingly important in organisational practices over the past decades, given the centrality of the concept in corporate governance and new public management, both frameworks steering current public and private sector organisational change (Vandekerckhove, 2006). There have been different discourses on accountability, both explicit and implicit, and definitions of accountability, including those of accountants, range from answerability, through responsibility for disclosure and social welfare of the community, to issues of consent and to democracy itself.

The authors wish to thank David Crowther and Gary Pheiffer for their comments on an earlier draft of this paper.

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In a very wide sense, accountability as the act of rendering an account renders the economic subject an obligation to demonstrate the reasonableness of his or her actions to others (Arrington and Francis, 1993; Shearer, 2002). For Schwerker, the remit of such accounting is far wider than the organisation’s profit and loss account, and includes a wide variety of human and environmental issues within the institution and without, making economic forces ‘‘servants of larger human and environmental purposes’’ (Schwerker, 1993, p. 249; cited in Shearer, 2002, p. 546). However, difficulties arise in implementing these notions of accountability into organisational practice, such as problems with the definition of

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standards, the criteria for corporate responsibility and the purveying of accurate and timely information (Medawar, 1976). In this paper, we first suggest that the notion of ‘‘accountability’’ is emptied of its substance and becomes a word hollow of meaning, part perhaps of a general trend that tends to devitalise words. Implementing accountability then perverts its implied social responsibility in the sense that representations of accountability become partial and sometimes even reversed, so that those set out to be held accountable become accountable to. We do so by pointing out instances of partial or reversed accountability in practice and linking these with insights from commentators in the fields of sociology and philosophy. This allows us to suggest that the weakening and reversal might be all pervasive, given our increasingly scientific civilisation (Habermas, 1976a) in the current era of advanced capitalism and free market ideologies. In the three sections that follow, we develop our suggestion respectively at the micro, meso and macro levels. The subsequent sections build up to suggest that what happens at micro and meso levels becomes comprehensible when put into the context of the macro level. Our argument, that the all pervasiveness of the subversion of accountability is an instance of hegemony (Gramsci, 1971), is obviously politically motivated. This paper is hence an attempt to formulate resistance to a particular discursive domination of corporate social responsibility.

Accountability in practice at micro levels There are many examples of capital ‘‘playing’’ with the concept of accountability to its own advantage and against those in more subordinate positions. Political muscle has long been used to deny workers accounting information when senior management is strong enough to do so. Toms (2002) writes about a case in the Lancashire cotton mills in the late nineteenth century where there was extensive financial disclosure coupled with democratic political structures, but this pertained only in the early period, as with the development of capitalism the corporate democracies were no longer powerful enough to hold senior management accountable. Bougen (1989) analysed the industrial relations and accounting practices in a UK engineering company in the early 1900s, when talk of revolution was in the air. To avoid unrest the company co-opted workers’ representatives onto the board and made the accounts available to them. But with a loss of worker power nationally in the aftermath of the failure of the 1926 General Strike, they lost their representation on the board and were denied the accounting information they had previously seen. More recently, changes in the meanings and practices of accountability are evident through new organisation structures that have been introduced in recent decades. Organisations that are decentralised with a flatter hierarchy often offer more responsibility, skill and empowerment to employees. However, cynicism about these new organisation structures has been expressed, particularly by radical and critical theorists who argue that such structures have been shown often enough to encompass a different, tighter type of managerial control. Employees in such structures are more autonomous vis-a`-vis established rules and procedures but instead are more strictly accountable to their bosses, and must follow their instructions at all costs with very little accountability in the other direction. The concept of accountability by employees to the public or the customer has also been narrowed or subverted (see, for example, Keen, 1994). In the 1970s, for instance, the concept of accountability was widely represented as one that implied a responsibility by the powerful to act in the interests of the common good and it demanded full disclosure of information in the interests of meaningful democracy (see, for example, Shearer, 2002). According to Medawar (1976), corporate reports should include a statement of policy and information on employment, consumer, environmental and other social issues. Bedford (1976) claimed that a business organisation existed: . . . only by the consent of the total society in which it operates, [and that therefore] no collective group may be permitted to pursue their common goal if in doing so, the total society is polluted or harmed in some way (Bedford, 1976, p. 111).

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A Department of Trade consultative paper in 1976 asserted that: . . . few would now dispute the view that companies have responsibilities to their employees and the community generally as well as to shareholders and creditors (Department of Trade, Consultative Paper, Aims and Scopes of Company Reports, June 1976; cited in Medawar, 1976, p. 392).

Hopwood (1976) echoed these ideas in his editorial in the first issue of Accounting, Organizations and Society: economic performance in business enterprises should be measured in terms of added value, which was to be distributed amongst all stakeholders in the organisation rather than labour being seen as a cost. Implementations of such standards of accountability, however, have been thought to be difficult owing to problems with the definition of standards, the criteria for corporate responsibility and the purveying of accurate and timely information (Medawar, 1976). The practical difficulties mentioned above in terms of defining criteria and their implementation fit well into postmodern constructions of the ‘‘fuzziness’’ and ambiguity of organisation policies, and the allowance for differences in interpretation because of varied understandings, different roles and vantage points in organisations and, not least, different political interests. Radical theorists take a more cynical view, seeing effective enactment as clashing with powerful interests in essentially exploitative and conflictual capitalist systems (Power et al., 2003). They would regard such discourses as masking the continuation of existing inequities with the promise of a ‘‘new Jerusalem’’ (Alvesson and Deetz, 1996). Marcuse argued in the 1960s that with the concentration of economic and political power where technology is an instrument of domination, dissenting ideas are blocked by powerful forces. The media, the ‘‘monopolistic or oligopolistic administration of public opinion’’, were themselves the instruments of economic and social power and ideology (Marcuse, 1969, p. 325). Marcuse writes about a false ‘‘tolerance’’ where all views are encouraged and mediated by those who communicate them. This ‘‘deceptive impartiality’’ disguises what is true and false for people in the existing society (Marcuse, 1969, p. 312), not least with the help of accounting conventions and practices. Hopwood (1976) has supported the idea that capital can always manipulate accounting information to its advantage. One example he gave was how, with a new labour government in the 1970s, corporations found a way of showing reduced rather than enhanced profits, supported by accounting practices and bodies of knowledge that: . . . can and do respond with quite surprising speed to shifts in the configuration of socio-economic interests in and around the enterprise (Hopwood, 2000, p. 766).

Another example of how accountability is inverted in organisational practice can be found in an article from Accounting Today (Prosen, 2006). Under the header ‘‘Practice management’’, leaders are advised on how to increase accountability and results. The article starts off with stating that ‘‘leaders are always searching for ways to increase accountability to get the results they need‘‘ (Prosen, 2006, p. 8; emphasis added). Seven steps are formulated on just how to accomplish such increased accountability. These steps are (Prosen, 2006, p. 8): 1. establish the organisation’s top three objectives; 2. assign each team member their objectives; 3. ask each team member what they need to win; 4. agree on what the leader will do to help; 5. follow up; 6. share lessons learned; and 7. reward results.

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What the seven steps actually do is to impose organisational goals top-down (steps 1 and 2), limit the responsibilities of the leader (steps 3 and 4), control (steps 5 and 6) and sanction (step 7). Accountability then loses all external reference points such as answerability to a wider set of rules and standards, and ultimately to the wider society (Shearer, 2002). There is nothing in place to encourage employees to protect consumers or the community, let alone their own interests, now solely dependent on satisfying their managers’ wishes, however self-interested, irrational or whimsical.

Public sector organisations and newly privatised utilities: meso levels of analysis Writers are increasingly arguing that bureaucratic structures, despite their well-publicised defects, had an inbuilt ‘‘ethico-political’’ set of standards which constituted an external reference point against which all management instructions could be referred. Included in this set of standards was a wider accountability to the public. Pay and conditions for employees too were usually rigorously defined, and were far less liable to be held hostage to the subjective whims of managers or to internal politicking. Du Gay (2000) has analysed British state bureaucracy and the effects on accountability when this is replaced by more decentralised structures, market-oriented ideologies and more personalised management styles. While acknowledging some of the criticisms made against bureaucracy, he argues that the objectives of these bureaucracies were to ensure ‘‘fairness, justice and equality in the treatment of citizens’’ (Du Gay, 2000, p. 2). Quoting Weber (1978, pp. 958ff), he claims that their ethos was ‘‘impersonal, expert, and procedural’’, with their hierarchical character of ‘‘bureaucratic reason and action’’ giving them ethical and moral force, as did bureaucrats’ commitment to office and their acceptance of the subordination and superordination of the hierarchy (Du Gay, 2000, p. 4). According to Weber, civil servants’ responsibilities included providing ‘‘honest and impartial advice, without fear or favour [. . .] whether the advice accorded with the Minister’s views or not’’ (Armstrong, 1985; cited in Du Gay, 2000, p. 92). Nowadays, as mentioned above, impartial advice is often replaced by personal loyalty to ministers, bosses or managers. This has been regarded as a serious abnegation of public responsibility. Du Gay (2000) takes the concept of social accountability further in his argument that the civil service has a vital constitutional role in the absence of a written constitution, which can act as a check on the erstwhile policies and machinations of the government of the day. Through administration and advice: . . . civil servants in the British system of government do not simply execute policy, they play a significant role in governing the country (Du Gay, 2000, p. 141).

Thus they may be political actors, but they should not be party political actors. What would protect the public interest is their eschewing any passionate commitment to political programmes, their refusal to sacrifice everything to ‘‘economy, efficiency and effectiveness’’, and their maintaining the standards that Weber argued for. However principles of accountability are being eroded in the British civil service. Another step away from any discourse about and responsibility for social accountability is the emphasis on strictly financial accountability by agencies. Stokes and Clegg (2002) have argued that: . . . [the] removal of a bureaucratic ethos and its replacement with a cost-cutting mentality – in the guise of efficiency – may reduce personal accountability in public sector organisations because it elevates one dimension of public sector management above all considerations (Stokes and Clegg, 2002, p. 227).

Evidence from Parliamentary Select Committee investigations showed how civil servants in the Child Support Agency (CSA) were so keen to fulfil the CSA’s objectives and meet performance targets in terms of sums of money recovered from absent fathers that they targeted fathers who were already paying far more money rather than those who were absent. This was easier to do, and the CSA was able to demonstrate a ‘‘successful’’

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execution of policy at the expense of accountability issues such as fairness and equity in the handling of all cases, not to mention the mothers and children left without any maintenance (Du Gay, 2000, p. 92). The CSA example shows how efficiency and effectiveness can be opposed, and that the real cost of efficiency was effectiveness in terms of getting a fairer deal for families without maintenance. Not recognising such potential costs constitutes a dereliction of responsibility and a failure to take into account the potential conflict between values of fairness and the potential unfairness of certain policies. Stokes and Clegg (2002), citing McCullough and Shannon (1977), argue that where rules are abrogated in an organisational space, capricious and coercive behaviour can result by those in senior positions. In a study of a group of managers in a large public sector organisation undergoing a reform process in Australia, Stokes and Clegg found that bureaucratic work for these managers was constantly being subordinated to political imperatives. Some of the stuff of bureaucratic responsibility, such as the planning of activities and the analysis of future outcomes, were discarded. A senior manager described how political manoeuvring undermined attempts at doing the actual work required: Political expediency, making the Director or Minister look good, constantly overrides planning with such frequency that, despite efforts to put in place some notion of progress from past work problems to future improvement, the immediacy of political demands prevents any significant change from being realised (Stokes and Clegg, 2002, p. 235).

Another manager, when asked about existing policy guidelines, laughed at the concept of a defined policy: Given that policy is ah . . . the position at any one particular time, whether it’s by the minute, hour, month or year, it’s the position in which we’re going to address a particular [issue] . . . Given that there is a preferred policy position that is endorsed by the Minister, so therefore a policy position of the government of the day, we must remind everyone all the time that the policy position can change (Stokes and Clegg, 2002, p. 236; brackets included).

In the case of the privatisation of utilities in the UK the notion of accountability was used not to protect the interests of the public or weaker stakeholders in organisations, but in Habermas’s (1968/1971) sense as a tool of instrumental reason to bring about cultural and political change. Ogden and Anderson (1999) and Carter and Crowther (2000) have shown how the institution of accounting standards and accountability played central roles in moving senior and middle management from a public service culture to privatised systems with costs and profits as central values. An analysis of the organisational change in the water industry showed how accountability was used to make employees accountable to their bosses and to the organisation rather than the other way round. Accountants were offered a measure of power over their budgets. The ‘‘empowerment’’ the accountants received was part of the equation to change the culture from that of providing services to customers to that of bringing profits to shareholders. Along with this new power came computerised control to ensure that accounts and budgets were being used to promote the new culture and value system. The increase in autonomy for junior and middle managers was tightly circumscribed by the need to meet financial targets, and, according to Ogden and Anderson (1999), the autonomy was often limited to how best to achieve those targets. In one of the water companies studied, managers individually contracted to achieve certain output and quality standards. According to a senior manager, such contracts meant that: the district manager is signing in blood to say he will deliver all these specific outputs to specific standards in return for qualified resources of money and people and things, which actually is quite a powerful business discipline (Ogden and Anderson, 1999, p. 109; emphasis in original).

Accountability here too is used for instrumental ends rather than to achieve what Habermas (1968/1971) called ‘‘practical reason’’ – the taking into account of workers’ opinions and interests as well as those of the public, which the broader concept of accountability has been defined as encompassing.

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Habermas’s concept of systematically distorted communication contains important caveats about the way knowledge is presented in organisations. Where managerial or greater institutional interests are at odds with those of other stakeholders, information withheld or doctored makes it more difficult for those other stakeholders to oppose the former interests. A striking example of this is the way the collapse and closure of the BCCI bank was handled in the early 1990s. It illustrates how every ‘‘rule’’ of what was entailed in the concept of social accountability was broken. Depositors in the UK were not initially informed of the bank’s problems, with the probable consequence of increased losses for them. In Hong Kong the Banking Commission also assured the public that there was no evidence of fraud, and the Commissioner assured depositors that the Exchange Fund (Hong Kong’s monetary authority) would continue to bank with BCCHK, a statement which was later described by Taylor et al. (1991, p. 68; cited by Arnold and Sikka, 2001, p. 489) as a ‘‘deliberate attempt to deceive the public’’. Nor was there a ‘‘duty of care’’ to other individuals such as employees or individual shareholders (Arnold and Sikka, 2001, p. 496). There was a gross abuse of power and very little accountability not only by governments but also by the auditors, Price Waterhouse. They were unwilling to participate in any inquiry and were helped in their refusal to disclose information by the banking laws and by British institutions. International jurisdictional boundaries coupled with bank secrecy laws in the UK gave them a reason to refuse to cooperate with US investigators. The Bank of England refused to give permission which would force Price Waterhouse to disclose results of their audit – all in the interests of protecting the City of London as a centre of finance capital (Arnold and Sikka, 2001). Non-disclosure by auditors in the BCCI case was supported by the American Institute of Certified Public Accountants (AICPA) in 1997[1]: The disclosure of possible fraud to parties other than the client’s senior management and its audit committee ordinarily is not part of the auditor’s responsibility and ordinarily would be precluded by the author’s ethical and legal obligations of confidentiality (American Institute of Certified Public Accountants, 1997, p. 27; cited in Arnold and Sikka, 2001, pp. 491-2).

Yet disclosure of information to stakeholders and user groups inside and outside the organisation has been regarded as essential for accountability. In the 1970s this was endorsed by official accounting bodies in both the UK and the USA[2], by the UK government in 1973 (Cmnd 5391), by the CBI and by the Labour Party (McDonald and Puxty, 1979). Accountability was about making visible what had been covert. The quality of the information disseminated had to be ‘‘accurate’’ (Toms, 2002, p. 81) and, according to the Accounting Standards Steering Committee, ‘‘relevant [. . .] ‘reliable’ [. . .]‘complete’ [. . .] ‘comparable’ [. . .] ‘objective’ [and] ‘timely’’’ (Medawar, 1976, p. 394). In the case of BCCI, the concept of accountability has been subverted, through a type of Orwellian logic, to a dominant discourse where words mean the opposite of what they could mean, and where non-disclosure is legitimated as an ethical practice despite the consequent inequality and harshness of treatment meted out to ordinary citizens. Non-disclosure of fraud is legitimated; confidentiality to the client has taken precedence over ‘‘rendering an account’’ to the public in the interest of the collective good, consensus and ultimately democracy. What we see is that, at both micro and meso level, the definitional references of accountability to concepts such as social responsibilities, truthfulness and transparency, go together with practices that subordinate the object of this definitional accountability – a wide variety of social groups – to the interests of employers and government. Hence we can suggest that the concept of accountability is hegemonic in a Gramscian sense (Gramsci, 1971): those in power succeed in inscribing their agenda into that of other social groups by gaining consensus over certain values (responsibility, truth, transparency) and hence a wilful submission to the concretisation of those values (partial or inverted accountability). In the following section we suggest that this hegemony is tenable because the discursive domination permeates our sense-making even at a macro level.

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Accountability at macro level: the strength of globalisation, or how the rest was won Accountability has been linked to the wider issues of consensus and following from that, democracy. Both John Maynard Keynes and Richard Stone (Nobel Prize Winner in Economics, 1984) emphasised the importance of making information about the economy public, which Stone called ‘‘accounting expressionism’’, and of thereby discharging government accountability in order to obtain consensus among the population on matters of the economy and its management (Suzuki, 2003, p. 474). It was a democratic ideal for those in corporate bodies with decision-making powers to ‘‘propose, explain and justify the use of those powers to those without’’, which he called ‘‘full social accountability’’ (Medawar, 1976, p. 393). Habermas (1976a) argued that an increasingly scientific civilisation survives through continually increased technical control over nature and ‘‘a continually refined administration of human beings’’ (p. 331). ‘‘Enlightened’’ action which includes moral and socially aware thinking has been reduced to a technical control: . . . no longer directed towards the consciousness of human beings who live together and discuss matters with each other, but to the behaviour of human beings who manipulate (Habermas, 1976a, pp. 331-2).

What Habermas called ‘‘practical questions’’ or praxis still needed to be addressed, but because the process of ‘‘scientification’’ had overridden social considerations and socially conscious communication, there was no attempt to obtain rational consensus by the community in respect of the practical control of their affairs (Habermas, 1976a, p. 332). Instead there was a supposedly ‘‘value-free’’ knowledge, deriving ‘‘pseudo-normative power from the concealment of its actual interest’’ (Habermas, 1968/1971, p. 306; emphasis in original). Lyotard (1979/1984) echoes these sentiments. He sees the notion of performativity – the principle of optimal performance – as a central value in contemporary society. This entails maximum output on the back of minimum energy expended. It is a technological game, where principles are no longer according to what is true, just or beautiful. The criterion now is efficiency, leading to wealth creation with the onus on technological improvement and product realisation. Actions and discourses can be wilfully directed in favour of performativity and, if needs be, against the ‘‘truth’’. The question ‘‘Is it true?’’ is replaced by questions about efficiency, saleability and usefulness. What is taught is the ‘‘organized stock of established knowledge’’, rather than knowledge defined by criteria such as truth, justice or low performativity (Lyotard, 1979/1984, p. 50). Disclosure has also been emphasised for a wider arena by Stiglitz, Nobel Prize Winner in 2001, former Chief Economist at the World Bank, and before that Chairman of President Clinton’s Council of Economic Advisors. He linked his theoretical work on market imperfections and imperfect competition with the ‘‘asymmetries of information’’ between worker and employer, lender and borrower and insurer and insured, which he claimed were pervasive in all economies. He argued that if information economics would provide deeper analyses and better models, globalisation could work for the benefit of everyone rather than the few (Stiglitz, 2002, p. xi). Habermas (1976b), among others, argues that in the most advanced capitalist societies economic fluctuations and crises are able to be contained and flattened, cushioning the potential poverty of working class people and obfuscating their class interests. He claims that the dysfunctional aspects are spread among diverse, including weak, groups in society (such as consumers, schoolchildren, transport users, invalids and the elderly) who have a low degree of organisation. Class consciousness is thus weakened and class identity reduced, despite growing inequalities in the distribution of wealth. Development and globalisation theorists have explained and linked the relative wealth and well being of people in the advanced economies with the exploitation and under-development of the Third World:

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. . . the historical development of the capitalist system [has] generated underdevelopment in the peripheral satellites whose economic surplus was expropriated, while generating economic development in the metropolitan centres which appropriate that surplus – and, further, that this process still continues (Frank, 1971, p. 27).

The ideology of the free market resulted in further disparities between developed countries and much of the rest of the world. Such ideas were strengthened from the 1980s by the governments of Reagan in the USA and Thatcher in the UK, and by the fall of the Eastern Communist bloc and the resultant hegemonic power of the USA. Gray called this ideology ‘‘neo-liberal brutalism’’, which according to him also discouraged hitherto prolific academic writing on the subject (Gray, 2002, p. 691). Neo-classical economics fostered systems and practices constructed to pursue narrow ends rather than the good of the wider collectivity, and consequently current accounting practices could not meet the legitimate demands of social accountability (Shearer, 2002). Stone (1986, 1991; cited in Suzuki, 2003, p. 508) claimed that UK national accounting information had become ‘‘economical’’ with the truth. A reality had been constructed through accounting information, which excluded non-economic aspects such as environmental damage, gender discrimination and non-ethical practices. The consequences of this were felt not only in these countries, but throughout the world. Powerful international institutions such as the IMF and the World Bank imposed these ideas on Third World countries. Economists at the World Bank who had as their main goal the elimination of poverty were purged and replaced by those believing that the solution for developing countries was free markets. Stiglitz argued that the ideological fervour with which this was pursued militated against free discussion. He describes how when he first dealt with the International Monetary Fund (IMF) he saw how their policies were imposed on countries without considering the effects on those societies. Rarely did I see thoughtful discussion and analyses of the consequences of alternative policies. There was a single prescription. Alternative opinions were not sought. Open, frank discussion was discouraged – there was no room for it. Ideology guided policy prescriptions and countries were expected to follow the IMF guidelines without debate (Stiglitz, 2002, p. xiv).

On the part of the IMF, accountability for policies that would drastically affect much of the world’s population was completely absent. Far from being transparent, the IMF, according to Stiglitz, operated so as not only to prevent citizens from the countries affected in participating in discussions on the economic policies the IMF was demanding, but also denied them knowledge of what agreement had been made. Stiglitz (2002) claimed that this secrecy extended to withholding information from the World Bank, their partners, as well as from the US Congress. The strength and scope of the global market system has turned the concept of accountability on its head. Third World countries were in many cases afraid to question the IMF policies that were wreaking economic devastation and severe poverty on them, in case they lost funding. Rather, it was they who had to be accountable to the IMF in order to acquire or keep their funding. Stiglitz cites the example of Ethiopia, which forfeited IMF funds because it would not follow its ‘‘formula’’, despite the fact that Ethiopian economic policies made sense, in Stiglitz’s view, for a government trying to raise the living standards of its people in a situation where there were droughts and starvation (Stiglitz, 2002). McMurty (cited in Shearer, 2002, p. 542) has written more widely about people and countries in relation to trans-national corporations (TNCs). He argues that in order to secure benefits for individuals and governments, they must work within the system rather than making the system work for them. He points out that TNCs, because of the free movement of capital, have the power to invest or remove it arbitrarily from countries. They have no accountability to these countries; rather, these societies become accountable to them. TNCs subvert conditions of employment and general economic and social benefits because: Regional labour forces [. . .] increasingly sacrifice wages and benefit provisions, work-place safety regulations, job security and maximum work-week provisions, or the right to collective representation in order to make their employment competitively attractive to transnational

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corporations. Similarly, nation states may sacrifice tax revenues, the environmental resources of their countries, state control of essential services, and the social and economic well-being of significant segments of their population in order to attract new investment or secure economic aid (Shearer, 2002, p. 542).

This shows how the reversal of accountability extends beyond the Third World. The increase in the strength of the global market economy has led to increasing influence over individual and collective lives, who seem increasingly powerless to influence the system (Shearer, 2002), and who are excluded from institutional influence (Bricher and Chandar, 2000). The state’s power to regulate TNCs in the public interest is limited because of the ‘‘domination of private interests in the governance process’’, ruling neo-liberal ideologies and the weakness of class struggles for democratic control (Arnold and Sikka, 2001). This has led to an almost complete abrogation of accountability both in practice and also with a changed discourse as to what counts legitimately as accountability.

Concluding remarks We have suggested in this paper that the concept of accountability has shifted and in practice is being used to achieve ends opposed to those for which many argue it was intended. At micro, meso and macro levels the concept no longer serves (if ever it did) as a protection for all stakeholders in society. This applies to employees and consumers in and outside organisations, to citizens on the receiving end of public utilities and services, and to people in both the ‘‘developing’’ and developed worlds. Powerful organisations, governments and international institutions cannot be held to account to the general public for the wider social good. Rather, accountability is being used as a means of ideological and physical control in the interests of powerful institutions and for the good of a minority. Our argument was that this subversion of accountability is an instance of the strengthening and extension of free market ideologies in the context of Western, particularly US hegemony, and of the power of international financial institutions and trans-national corporations. Hence, the examples offered in this paper are not exceptions, rather the subversion of accountability is to be regarded as all-pervasive in our era of advanced capitalism. The ethos and visible power of technology has led to what Habermas has called ‘‘technical reason’’, which conveniently leaves decisions and implementation with existing structures of authority at the expense of wider participation and consensus. While Marcuse has argued that the Left is unable to stand up for accountability because it has ‘‘no equal voice, no equal access to the mass media and their public facilities – not because a conspiracy excludes it, but because, in good old capitalist fashion, it does not have the required purchasing power’’ (Marcuse, 1969, p. 326), we assert, in a Gramscian sense, that the hegemonic struggle over values and concepts remains important in the light of corporate social responsibility. This paper, with the suggestion formulated herein, is merely one instance of such a continued hegemonic struggle.

Notes 1. Statement on Auditing Standard No. 82, 1997, p. 27. 2. UK Accounting Standards Steering Committee’s Corporate Report, 1975; US Financial Accounting Standards Board, 1976.

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Bedford, N.M. (1976), ‘‘The corporate report: a discussion’’, Accounting, Organizations and Society, Vol. 1 No. 1, pp. 111-4. Bougen, P.D. (1989), ‘‘The emergence, roles and consequences of an accounting-industrial relations interaction’’, Accounting, Organizations and Society, Vol. 14 No. 3, pp. 203-34. Bricher, R. and Chandar, N. (2000), ‘‘Where Berle and Means went wrong: a reassessment of capital market agency and financial reporting’’, Accounting, Organizations and Society, Vol. 25 No. 6, pp. 529-54. Carter, C.J.G. and Crowther, D. (2000), ‘‘Unravelling a profession: the case of engineers in a regional electricity company’’, Critical Perspectives on Accounting, Vol. 11 No. 1, pp. 23-49. Du Gay, P. (2000), In Praise of Bureaucracy: Weber, Organization, Ethics, Sage Publications, London. Frank, A.G. (1971), Capitalism and Underdevelopment in Latin America: Historical Studies of Chile and Brazil, Penguin, Harmondsworth. Gramsci, A. (1971), Selections from the Prison Notebooks (trans. by Hoare, Q. and Smith, G.N.), International Press, New York, NY. Gray, R. (2002), ‘‘The social accounting project and Accounting, Organizations & Society: privileging engagement, imaginings, new accountings and pragmatism over critique?’’, Accounting, Organizations and Society, Vol. 27 No. 7, pp. 687-708. Habermas, J. (1968/1971), Knowledge and Human Interests, Beacon Press, Boston, MA. Habermas, J. (1976a), ‘‘Theory and practice in a scientific civilization’’, in Connerton, P. (Ed.), Critical Sociology, Penguin, Harmondsworth. Habermas, J. (1976b), ‘‘Problems of legitimation in late capitalism’’, in Connerton, P. (Ed.), Critical Sociology, Penguin, Harmondsworth. Hopwood, A.G. (1976), ‘‘Editorial’’, Accounting, Organizations and Society, Vol. 1 No. 1, pp. 1-4. Hopwood, A.G. (2000), ‘‘Understanding financial accounting practice’’, Accounting, Organizations and Society, Vol. 25 No. 8, pp. 763-6. Keen, L. (1994), ‘‘Middle management experiences of devolution in Barsetshire County Council Social Services Department’’, in Adam-Smith, D. and Peacock, A. (Eds), Cases in Organisational Behaviour, Pitman, London. Lyotard, J.-F. (1979/1984), The Postmodern Condition: A Report on Knowledge, Manchester University Press, Manchester. McDonald, D. and Puxty, A.G. (1979), ‘‘An inducement-contribution approach to corporate financial reporting’’, Accounting, Organizations and Society, Vol. 4 Nos 1/2, pp. 53-65. Marcuse, H. (1969), ‘‘Repressive tolerance’’, in Connerton, P. (Ed.), Critical Sociology, Penguin, Harmondsworth. Medawar, C. (1976), ‘‘The social audit: a political view’’, Accounting, Organizations and Society, Vol. 1 No. 4, pp. 389-94. Ogden, S.G. and Anderson, R. (1999), ‘‘The role of accounting in organisational change: promoting performance improvements in the privatised UK water industry’’, Critical Perspectives on Accounting, Vol. 10, pp. 91-124. Power, M., Laughlin, R. and Cooper, D.J. (2003), ‘‘Accounting and critical theory’’, in Alvesson, M. and Willmott, H. (Eds), Studying Management Critically, Sage Publications, London. Prosen, B. (2006), ‘‘How leaders increase accountability and results’’, Accounting Today, 11 December, pp. 8-9. Shearer, T. (2002), ‘‘Ethics and accountability: from the for-itself to the for-the-other’’, Accounting, Organizations and Society, Vol. 27 No. 3, pp. 541-73. Stiglitz, J. (2002), Globalization and its Discontents, Penguin, London. Stokes, J. and Clegg, S. (2002), ‘‘Once upon a time in the bureaucracy: power and public sector management’’, Accounting, Organizations and Society, Vol. 9 No. 2, pp. 225-47.

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Suzuki, T. (2003), ‘‘The epistemology of macroeconomic reality: the Keynsian revolution from an accounting point of view’’, Accounting, Organizations and Society, Vol. 28 No. 5, pp. 471-517. Toms, J.S. (2002), ‘‘The rise of modern accounting and the fall of the public company: the Lancashire cotton mills 1870-1914’’, Accounting, Organizations and Society, Vol. 27 Nos 1/2, pp. 61-84. Vandekerckhove, W. (2006), Whistleblowing and Organizational Social Responsibility, Ashgate, Aldershot.

Corresponding author Miriam Green can be contacted at: m.green@ londonmet.ac.uk

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Corporate social responsibility in India: towards a sane society? Aruna Das Gupta and Ananda Das Gupta

Aruna Das Gupta is a Research Scholar at WISDOM, Banasthali Bidyapith, A Deemed University, Rajasthan, India. Ananda Das Gupta is Associate Professor (HRD Area) at the Indian Institute of Plantation Management, Jnana Bharathi Campus, Bangalore, India.

Abstract Purpose – Based on a survey, this paper seeks to confirm that Indian corporates are already working on the guideline of the Global Compact. Design/methodology/approach – The approach is theoretical with ample scope for application. Findings – It is found that there should be a realisation that the real CSR leadership is not just putting one’s own house in order, but advocating the right conditions to reward responsible practice. Research limitations/implications – A disadvantage is the paucity of literature for the survey. Originality/value – The paper succeeds in confirming that Indian corporates are already working on the guideline of the Global Compact, because the Indian ethos and religious values teach these doctrines from a socio-religious aspect. Keywords India, Corporate image, Globalization, Religion, Ethics Paper type Conceptual paper

Introduction The Global Compact Programme, launched by Mr Kofi Annan, Secretary General of the United Nations, in July 2000, is aimed towards the social responsibility of corporates all over the world and sustainable growth. The Global Compact is a partnership between the United Nations, the business community, the International Labour Organization, and NGOs. It provides a forum for them to work together and improve corporate practices though co-operation rather than disagreement. The Global Compact is aimed at responsible corporate citizenship so that businesses work for social development while creating and spreading wealth and prosperity. The UN’s Global Compact asks companies to embrace, support and enact, within their sphere of influence, a set of core values in the area of human rights, labour, environment and anti-corruption and adhere to ten universally accepted principles, which are as follows: Human rights B

Business should support and respect the protection of internationally proclaimed human rights.

B

Business should make sure they are not complicit in human rights abuses.

Labour

DOI 10.1108/17471110810856965

B

Business should uphold the freedom of association and the effective recognition of the right to collective bargaining.

B

The elimination of all forms of force and compulsory labour.

B

The effective abolition of child labour.

B

Eliminate discrimination in respect of employment and occupation.

VOL. 4 NO. 1/2 2008, pp. 209-216, Q Emerald Group Publishing Limited, ISSN 1747-1117

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Environment B

Business should support a precautionary approach to environmental challenges.

B

Undertake initiatives to promote greater environmental responsibility.

B

Encourage the development and diffusion of environmentally friendly technologies.

Anti-corruption B

Businesses should work against all forms of corruption, including extortion and bribery.

Current scenario of CSR in India The last decade of the twentieth century witnessed a swing away from charity and traditional philanthropy towards a more direct engagement of business in mainstream development and concern for disadvantaged groups in society. This has been driven both internally by corporate will and externally by increased governmental and public expectations (Mohan, 2001). It is estimated that India has over 200,000 private sector trusts, a large number of which have been set up by Indian businesses, which have been contributing to social causes through their trusts, foundations or societies. Many among these were established long before India became independent. A noticeable change in the move of the focus from charitable donations and philanthropy to issues of ethics, ecology, support for small rural enterprises and consumer education became prominent in the decades after independence. This was evident from a sample survey conducted in 1984 reporting that of the amount companies spent on social development, the largest sum – 47 per cent – was spent through company programmes, 39 per cent was given to outside organizations as aid and 14 per cent was spent through company trusts (European Union, 2001). With the challenges of globalization, liberalization and the emerging trend towards a free market economy facing India, the role of CSR is paramount. Primarily because foreign investment has increased in India, the trade links between India and developed countries have grown and the role of private companies has been extended, which has had a powerful influence on CSR in India. Companies can benefit from adopting corporate responsibility policies in response to globalization, through access of markets, cost and risk reduction, improved productivity, competitiveness and improved public image. When combined with increased competition and commercial pressures, regulatory standards and consumer expectations, concepts of corporate citizenship are becoming more influential within the business environment. If a company is not a part of the visible supply chain of a larger company with a socially responsible credo, these standards have less influence. Lack of information, skills, and technological and financial capacity can also limit the scope to respond effectively, especially in the case of small and medium-sized enterprises. A powerful global civil society lobbying and protesting against poor corporate performance means that companies are under pressure to cooperate with communities and NGOs to tackle problems together. The formal processes of stakeholder consultancy are still in their infancy and are yet to become popular (European Union, 2001). A recent study pointed out that Indian companies are doing much better than multinational companies in both the scope and content of their work in CSR. According to this study, by Business World/Indica Research (1999), of the top 25 companies that were performing CSR activities, 68 per cent were Indian, 28 per cent were MNCs and 4 per cent were public sector companies. Globalization has brought significant advantages to countries and business around the world, but the benefits have spread unequally both within and among countries. With a rich cultural heritage regarding corporate social responsibility, the Global Compact has taken root in India. A large number of key corporates from India have joined. Professional organizations and academic institutions have also shown interest. Considering the large size of the country and the stage of development at present, it is felt that a longer sustainable effort is needed to ensure that the Global Compact is firmly established as a part of the corporate vision, mission and activities. In today’s world it is clearly demonstrated that

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human and ethical values pay better results in industry and business (Swami Someswarananda, 2000). At the outset, looking into the Indian philosophical context of corporate social responsibility, we may refer to the preaching of Vivekananda, one of the eminent philosophers and spiritual leaders of India. Vivekananda is not only a religious leader; he was a patriot and social reformer too. Now his social outlook gives the people of India a new vision – service to humanity. This changes its nature over time from charity to corporate social responsibility, from corporate governance to the Global Compact. We can divide his social outlook into six different models. 1. on Vedanta; 2. on practical Vedanta; 3. on humanity; 4. on society; 5. on organization; and 6. on the brothers and sisters model. On Vedanta To Vivekananda the most important teaching for humanity was Vedanta, the summit of Vedic philosophy, which teaches the unity of the self and the absolute. Practical Vedanta Practical Vedanta is a conscious and deliberate way of life leading to a realization of true nature. Removing individual ignorance, practical Vedanta has one more function: it clears the way for desirable social change for the better, instilling knowledge which tries to etch new lines of selflessness on the minds of humanity. Practically, practical Vedanta tries to shake the foundation of ignorance and selfishness that prevents humanity achieving its perfect heavenly glory. On humanity When practical Vedanta is applied to the nation, it will lead to the uplifting of the country, to the raising of the standing of the country in the world – a world that largely looks down on all Indians as having no self-confidence. The self-respect that Vivekananda means is rooted in the idea of divinity. If self-respect is cultivated, social pride and national pride come as a matter of course. It is a self-respecting man who values his work. On society Vivekananda’s love for mankind, his empathy for the poor and downtrodden of all lands, and his great devotion to his Motherland and her depressed masses, were the motivating power behind all of his actions. In his social views, whether on caste, education, women’s rights, or the conditions of the masses, the one common factor was his great compassion for all who suffer. It was this sympathy and compassion of heart that impelled him to accomplish as much as he did in such a short period of time; and it was the same sympathy of heart that brought so much suffering to his life as well. On organization Vivekananda observed that Indians do not know how to work in co-operation. Ten of us get together to form a society, and in no time we start quarrelling amongst ourselves, and our effort collapses. To solve that problem in the light of practical Vedanta, we have to begin with the simple step of trying to respect our own being, from which follows the ability to work in co-operation and respect for others. It is another application of atma-shraddha, which Vivekananda has stressed for this country or for any society to raise.

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Brothers and sisters model Vivekananda, in his opening and closing addresses at the Parliament of Religions in Chicago, spoke the eloquent, powerful and memorable words ‘‘brothers and sisters’’ to highlight the importance of inter-religious understanding and respect. He expanded the concept of brotherhood and sisterhood to all religions, nations, and communities. He closed his maiden speech with the following words: Sectarianism, bigotry, and its horrible descendant, fanaticism, have long possessed this beautiful earth. They have filled the earth with violence, drenched it often and often with human blood, destroyed civilization and sent whole nations to despair. Had it not been for these horrible demons, human society would be far more advanced than it is now. But their time is come; and I fervently hope that the bell that tolled this morning in honour of this convention may be the death-knell of all fanaticism, of all persecutions with the sword or with the pen, and of all uncharitable feelings between people wending their way to the same goal.

All the corporate initiatives that have been started of late, with respect to either ethics in business, or in the broader sense of corporate social responsibility, have a direct bearing on Vivekananda’s six basic models. Far-sighted business leaders like J.R.D. Tata of the famous Tata Group have recognized that it is unsustainable for their companies to exist as ‘‘islands of prosperity’’ in a sea of poverty. However, tragically enough, the dreams of Vivekananda have not been fully realized as yet. Whatever may be the signs of progress, CSR activism in India has yet to utilize its full potential. Individual and collaborative initiatives continue to be dominated by self-assertion rather than accountability. There is certainly no lack of CSR programmes and projects in India: what is absent, however, are clear metrics for evaluating their actual impact in improving social conditions. One quick indicator: of the 95 supporters of the Global Compact from corporate India, only one – Atlas Cycles – has produced the annual communication on progress that is expected of the Compact’s supporters. And while most large corporations now disclose some information on their social or environmental programmes – with BHEL, Dr Reddy’s, HLL, and TISCO in the vanguard – much of this remains highly descriptive and qualitative, lacking the rigour of common, quantified performance information that characterises company financial accounts. Companies routinely claim that their employees are their greatest asset – and yet provide little evidence of how this asset is being valued and enhanced. Similarly, there are no generally accepted standards for measuring the success of the array of community development programmes that are now in place. Without this, it is difficult for companies and their stakeholders to judge the efficiency or effectiveness of these well-intentioned interventions. The high-sounding slogans of corporate social responsibility apart, however, tragically enough there is another side of it which smacks of unethical corporate practices, bereft of Global Compact principles, and inhuman and shoddy practices that utterly violate the basic principles of CSR, virtually pushing the economic scenario to the brink of the entire breakdown of the distribution of wealth. We cite few cases here in support of our arguments. Case study 1: tea workers Tea is a national institution in the UK. But in the tea plantations of India there lies a tale of poverty, hunger and a denial of workers’ rights. Since the late 1990s, at least 60,000 workers have lost their jobs as tea prices have fallen and plantations have closed down. Tens of thousands of workers are threatened by further closures. On the plantations that remain open, workers are suffering wage cuts, tougher picking demands, increasingly short-term, insecure contracts and appalling living and working conditions. Yet major global tea companies such as Unilever and Tata Tea, which buy and blend the leaves in our PG Tips and Tetley tea bags, are reaping large profits. These companies are failing to take sufficient responsibility to safeguard the rights and livelihoods of the millions of tea growers and workers who contribute to their profits. Action Aid joined together with Indian civil society groups, and conducted interviews with workers on Davershola tea plantation, owned by Hindustan Lever, a Unilever subsidiary, and with smallholder tea growers in the Gudalur

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valley in Nilgiris, Tamil Nadu, in June 2004 and April 2005. The interviews provide a snapshot of the problems facing workers and tea growers throughout the Indian tea sector. Workers paid lower wages for increased workloads: Our wages have gone down from 76 rupees to 71 rupees. The estate has become tougher on all workers (Chandran).

Workers suffering hunger and malnutrition: We were beginning to feel that severe malnutrition was a thing of the past. Suddenly we are seeing an alarmingly steady increase in the numbers of malnourished children (Dr Shylajadevi Menon).

Workers facing increasing job insecurity: My wife has been working as a casual worker for the last eight years. We always thought that one day she would be made permanent. But now that does not seem likely (Raman).

Smallholder tea growers struggling to feed their families: We can’t afford to pull out the tea, it was such a huge investment. My grandchildren eat less food now than I fed my children in our early days when we struggled here (Aleyamma).

Tribal communities harassed by plantation guards: This is the first time they uprooted my plants, I must tell you that they pulled down my house three times and forced me to move (Nanan).

(Source: Action Aid, 2005) Case study 2: Union Carbide Company details. Dow (formerly Union Carbide) (Bhopal, India). Union Carbide India Limited, Bhopal, India. Main products: pesticides, battery cells, bulk chemical intermediaries. At the time of the disaster Warren Andersen was CEO of the corporation. Today the company is merged with Dow and Ravi Muthukrishnan is the CEO. The Indian operations mainly supply chemicals to industry and make only a few end-consumer products. After the merger with Union Carbide, Dow emerged as the largest chemical corporation in the world. The group headquarters of Dow is in Midland, Michigan, USA. Location of damage. Bhopal, India. Company activity. Chemical production of primarily methyl isocyanate for pesticide manufacture. Type of incident. Accident that led to leak of gases, chiefly methyl isocyanate (MIC), mono methylamine, carbon monoxide and possibly 20 other chemicals. Date: 3 December 1984. Type of damage. Loss of life. More than 8,000 people died in the first three days; 520,000 people were exposed to poisonous gases; 150,000 victims are still chronically ill, with even now one person dying every two days. Range of damage/amount of loss. Conservative figures are at least 20,000 thousand dead. The gas leak killed many thousands instantly. Of the affected people who survived the initial leak, many have died over the years due lack of proper care. Improper diagnosis led to ineffective medical treatment. Improper diagnosis was due to the refusal by Union Carbide India Limited (UCIL) to disclose all the details regarding the leaked gases. Misinformation and lying by the company led to confusion, making treatment difficult. The delay in providing timely medical aid made the situation of the victims even worse. Late and inadequate compensation compounded the situation and more lives were lost. Today the survivors suffer from lung fibrosis, impaired vision, bronchial asthma, tuberculosis, breathlessness, loss of appetite, severe body pains, painful and irregular menstrual cycles, recurrent fever, persistent cough, neurological disorders, fatigue, weakness, anxiety and depression. Tens of thousands of children born after the disaster suffer from growth problems and far too many teenage women suffer from menstrual disorders. In the years following the disaster, the stillbirth rate was three times, perinatal mortality was two times and neonatal mortality

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was one and a half times more than the comparative national figures. Tuberculosis is several times more prevalent in the gas-affected population and cancer cases are on the rise. Chromosomal aberrations in the exposed population indicate a strong likelihood of congenital malformations in the generations to come. Some of this is already apparent. A third generation of victims is emerging. These are the children born to parents born after the gas leak and they are suffering from various abnormalities. The storage of huge volumes of MIC in a densely inhabited area was itself in contravention of company policies strictly practised in its other plants. A total of 67 tons were stored in Bhopal against a permissible maximum in Europe of only 0.5 tons. The company ignored protests and built large tanks in a crowded community. MIC is required to be stored at extremely low temperatures, but safety measures were reduced to cut operating costs. The air conditioning plant was ‘‘expensive’’ to run and cost-cutting measures (saving US$50 per day) led to less than optimal conditions in this critical area. The company cut down on preventive maintenance staff to save money and then provided insufficient training even to this reduced few. Safety training was slashed to two weeks as against the standard 24 weeks. Routine maintenance was neglected and critical equipment, which should have been replaced every six months, was often replaced only after two years. Scrubber systems were inadequate. The company never created disaster management plans for the community living around the factory. State authorities are also culpable for failing to implement the law. The proposition to store large volumes of MIC on site caused a public outcry, but the company ‘‘managed’’ the government and got it built. Pollution control measures and mandatory safety measures were not met as many departments of the governments failed in their duties. Legal action taken by the Supreme Court of India directed Union Carbide Corporation (UCC) and UCIL to pay a total of US$470 million in full settlement of all claims arising from the tragedy. The government, UCC and UCIL agreed and the two companies paid in full on 24 February 1989. Public action has included court cases, health surveys, protests at government establishments and parliament, targeted campaigns against company officials and government bodies, rallies, international showcasing, etc. Initial behaviour of company. The company attempted to conceal the nature of the damage by saying that the gas was just potent tear gas, and refused to release data on the gas mixture, thereby preventing proper diagnosis and treatment. After the Bhopal leak the company went against the advice of experts and reopened operations to use the 15 tons of MIC left in one tank. Around 400,000 people left the town and many stayed away for a month due to this dangerous action. Legal outcome. Because of government’s friendly attitude towards industry, legal processes have been only marginally effective. That the company made deals with government is known, but remains difficult to prove. Judgment was made without meaningful participation from the people affected, who were not party to the negotiated settlement between the government and the company. Later the Supreme Court, strangely, also issued an opinion explaining why the settlement was adequate, even though the obvious reality was starkly contradictory. Although the court allowed the criminal case to be reopened and directed the Government to purchase medical insurance for the 100,000 presently asymptomatic persons who may later develop symptoms, very little has actually been implemented on the ground. The courts passed pious orders that the government ignored. (Source: Greenpeace International, 2002) Case study 3: Coca-Cola Sitting at the factory gates, villagers from Plachimada in the Southern Indian state of Kerala wait patiently for a change of heart from the mighty multinational Coca-Cola as its delivery vehicles trundle back and forth. Through the crushing heat of the day and the oppressive dark of the night they sit, and have done for more than a year. Members of their community pass by, some stop to give support

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or food. The sitters sacrifice their vital working time and scant resources to keep hammering home their message: Coca-Cola, the factory’s owner, is depriving them of one of their most basic human rights – water. Mylama, a 55-year-old woman, leads the protest. She says that rainfall has been scarce for the past two years. ‘‘But the availability of water in the well has no relation to rain’’, she insists. ‘‘Even when we had less rain before the company came, we still had no shortage of water’’. Another protestor, 64-year-old Shahul Hameed, has been farming since he was born and his land runs up to the Coca-Cola factory confines. ‘‘According to my traditional measures, the water in my well used to be 22 mola deep. Now it’s only one mola deep’, he says. ‘‘I was able to run my pump for 14 hours every day. Now it will only run for 30 minutes. That shows you how my agriculture has suffered’’. The state government of Kerala challenged Coca-Cola’s right to extract water in Kerala in the Supreme Court of India in September 2005, stating that ‘‘poor villages are deprived of drinking water due to overuse of ground water by Coca-Cola plant at Plachimada to produce bottled drinks for sale to people who have purchasing capacity in different cities of the country’’. The action of the state government is extremely significant because it aligns the state government with the communities in Kerala, opposed to Coca-Cola. Notice was given by the Kerala State Pollution Control Board to the Coca-Cola company in August 2005 to ‘‘stop production of all kinds of products with immediate effect’’ because of the high levels of lead and cadmium found around the company’s bottling plant. The US Food and Drug Administration prevented Coca-Cola products made in India from entering the USA on at least ten occasions in the year 2005 alone, stating that ‘‘Coca-Cola products do not conform to US laws’’ and that they are ‘‘unsafe for the US public’’. This is in direct conflict with Coca-Cola’s position that their products use one global standard and are completely safe. Also of note is the suspicious death of village council president, Mr V. Kamsan, who had publicly opposed Coca-Cola’s proposed operations. Mr Kamsan’s wife has filed a petition in Chennai High Court, accusing Coca-Cola company officials of causing her husband’s death, and the Coca-Cola company is now the subject of an investigation in the matter. There is a continued use of violence by police against protesters challenging Coca-Cola and the introduction of trumped up charges against the protesters – all actions that the Coca-Cola company has been connected with. A damning report by the Central Ground Water Board of India has confirmed a water table level drop of ten metres since Coca-Cola started operations in Kala Dera, in Rajasthan. The situation in India is very different from what the briefing developed by NUSSL purports to be. In India, the water scarcity for communities living around Coca-Cola’s bottling plants continues to worsen. In addition, the water quality as a result of pollution also continues to worsen, severely affecting accessibility to water for literally tens of thousands of people in India, mostly farmers, indigenous people and lower castes. It is very clear that constructive engagement has produced no positive results on the part of the Coca-Cola Company’s practices in India. In fact, during the period of the constructive engagement, the water crisis has exacerbated for communities in India directly as a result of Coca-Cola’s operations. To communities in India, the constructive engagement pursued by NUSSL has led to the development of a heavily biased document that has failed completely to capture the reality of the situation in India. (Source: www.indiaresource.org/news/2006/1043.html)

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Conclusion Beyond the issue of assessing impact are broader questions of the incentives for companies to take action. In the language of economics, India’s markets continue to exhibit an unhealthy profusion of negative externalities where those who neither incur them nor are reflected in actual prices do not pay the costs of resource use, environmental degradation, or community disruption. For example, India is already ‘‘water stressed’’ and is on course to enter a situation of ‘‘water scarcity’’ in the coming decades. Yet, the current pricing of water is below its real economic value, giving little incentive for companies to reduce demand and conserve. Tragically, today’s economic framework gives little encouragement for companies to consider the long term – the essence of true sustainable development. Indeed, the pressure in financial markets is for an ever-more insistent focus on short-term shareholder value. Increasingly, it is becoming clear that the real CSR leadership is not just putting one’s own house in order, but advocating the right conditions to reward responsible practice.

References Action Aid (2005), Tea Break: A Crisis Brewing in India, May, Action Aid, London. Business World/Indica Research (1999), India’s Most Respected Companies, Business World/Indica Research, New Delhi. European Union (2001), India CSR: Comparative Analysis of Corporate Social Responsibility in India and Europe, Working Document, European Union, Brussels. Greenpeace International (2002), Corporate Crimes, August, Greenpeace International, London. Mohan, A. (2001), ‘‘Corporate citizenship: perspectives from India’’, Journal of Corporate Citizenship, No. 2, pp. 107-17. Swami Someswarananda (2000), Business Management Redefined: The Gita Way, Jaico Publishing House, Mumbai.

About the authors Aruna Das Gupta is a Research Scholar on corporate social responsibility, and has contributed papers on this issue to Indian and international journals. Aruna Das Gupta is the corresponding author and can be contacted at: [email protected] Ananda Das Gupta is an academician and scholar in human values in management, ethics in business and corporate social responsibility. He is the author of Ethics in Business (Rawat Publications), and the editor of India and Human Values in Management (Ashgate). He was the Guest Editor for a Special Issue on India of the International Journal of Social Economics, published in 2007.

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‘‘Me, myself & I’’: practical egoism, selfishness, self-interest and business ethics Jelena Debeljak and Kristijan Krkacˇ

Jelena Debeljak is a Teaching Assistant and Kristijan Krkacˇ is a Professor, both at the Zagreb School of Economics and Management, Zagreb, Croatia.

Abstract Purpose – This paper aims to elucidate some of the arguments against egoism in the current debate, as well as to create some new arguments, or rather objections (epistemological and ontological from the position of egoism as moral solipsism), and to explicate some arguments against egoism (descriptive, normative, and ideological) as being not so convincing. It also aims to explicate Jesus’s second commandment in a fashion similar to that of Adam Smith when he tried to combine self-love with sympathy. Design/methodology/approach – This paper is based on the premise that some foundational philosophies, worldviews, or paradigms exemplify at least one type of egoism/selfish strategy. In that light the analysis of egoism and the objections are formulated. Findings – They paper finds that present arguments in favour of egoism in business, and especially as certain ‘‘business ethics’’, are not acceptable, at least on the practical and theoretical grounds on which they are presented as sound arguments. Research limitations/implications – The paper implies that there is fundamental difference between theoretical and practical egoism, and that practical egoism sometimes uses the theoretical one as its ‘‘quasi-justification’’. Practical implications – The paper can be summarized in a series of general advices about an altruistic attitude and practices which in the long term show more benefits than costs for any group, and consequently for business organizations as well. Original/value – The paper presents ontological and epistemological interpretations and objections against egoism, emphasizing the somewhat neutral or at least bivalent position of Adam Smith regarding the matter in question, and introducing altruistic strategies as being compatible with the basic ideas of a free-market system. Keywords Altruism, Business ethics, Corporate social responsibility, Corporate image Paper type Conceptual paper

1. Basic problem of pure (and enlightened) type of egoism The term ‘‘egoism’’ is usually used to address exclusive concern with satisfying one’s own desires, getting what one wants. It is the phenomenon of acting in strict accordance with one’s own desires, wishes, and best interests in terms of self-preservation, or self-interest satisfaction, or preference satisfaction. So basically, egoism can be understood both as presupposing others and not.

The authors wish to thank David Crowther, Khosro S. Jahdi and Josip Lukin for valuable comments and suggestions.

DOI 10.1108/17471110810856974

` propos the first possibility, which seems to be implicit in the common notion of it, egoism A presupposes others – i.e. their desires, wishes, and interests – explicitly stating that one’s own desires, wishes, and interests are to be satisfied exclusively and explicitly contrary to the interests of others. So, a common understanding of egoism presupposes and excludes others at the same time (is it then paradoxical?). It presupposes others in the manner that it must presuppose others in order to be described as being contrary to others, i.e. in order to be identified as ‘‘(pure) self interest’’. At the same time it excludes others in order to be identified as ‘‘pure (self) interest’’. In other words, egoism must presuppose others in order

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to be identified as ‘‘self interest’’ and it must exclude others in order to be identified as ‘‘pure’’ self interest. Nevertheless, this does not exclude the possibility that an egoist can satisfy the interests of others as the by-product of the exclusive satisfaction of his/her own interests. But, as far as egoism as satisfaction of one’s own preferences includes others, it seems to be important whether others are egoists or non-egoists. Because, if egoism necessarily includes at least some use of others (in case of scarce resources) in order to satisfy one’s own preferences, it then seems that egoism is possible only if most of the people are not egoists, since if the opposite were the case, then egoist could not satisfy his/her preferences very easily. In fact, and in the case of scarce resources, if others are not egoists but, for example, altruists, utilitarians or pragmatists, an egoist would satisfy his/her preferences much more easily than in the case where others are egoists (see Table I). The second possibility is that egoism does not presuppose the existence of others, at least in some relevant sense, for example as autonomous, rational and free moral agents. This possibility will be discussed below. However, as mentioned, and from a logical point of view, it is not inconsistent that an egoist cannot satisfy the interests of others as a by-product of satisfying his/her own interests, because under ideal conditions it would be highly probable, very easy to achieve and eo ipso the only rational thing to do. Ideal conditions are such that the most or all people are egoists and that there is a sufficient amount of resources, skills, and motivation to use these resources in a way that every egoist can and in fact does satisfy his/her own preferences without preventing others doing so as well. But, since there are no ideal conditions, what we have here is a certain problem. So, we have two types of egoism: 1. in the first case we have ‘‘enlightened egoism’’ since others exist but they serve as mere means for the egoist’s ends; and 2. in the second case we have ‘‘pure egoism’’ which ontologically ends in solipsism since others do not exist in the same way as the egoist. If egoism is pure, then it implies solipsism, which can be refuted quite easily, at least from certain ontological and epistemological positions. On the other hand, if egoism is enlightened, then it faces an ethical objection which states (at least from the known Kantian perspective) that its consequence is that an egoist uses others as a means to his/her own ends, while he/she should treat others as ends in themselves. It is arguable that pure egoism is also morally wrong since it excludes others on the basis of some relevant features like autonomy, freedom, etc. But, is this common understanding (and its explication) of egoism correct, and above all acceptable (see Figure 1)?

Table I Satisfying preferences under scarce and non-scarce resources An egoist will satisfy his/her preferences in the case of:

Others: egoists

Others: non-egoists

Scarce resources Non-scarce resources

Hard Easy

Easy Easy

Figure 1 Pure and enlightened egoism

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2. Does pure egoism imply ‘‘moral solipsism’’? 2.1 Ontological objection The possibility of pure egoism will be examined here. Pure egoism is stating that one’s own interests are not just ‘‘more valuable’’ than the interests of others, but due to ‘‘exclusiveness’’ it also states, or at least implies, that mentioned interests are ‘‘the only valuable’’ interests, and if it states that the interests of others are not interests at all, then it seems to imply the ontological position known as solipsism. In short, does it imply that others exist at all, or does it imply a certain type of solipsism, say ‘‘ethical solipsism’’, something like ‘‘Others are not moral agents’’? If ‘‘being more valuable’’ is just jargon or the rhetoric of egoism, and if ‘‘exclusiveness’’ is taken seriously, then there is nothing to be excluded because there are no others (at least in terms of their interests, their moral status, or their moral agency), since they are used as mere means for the egoist’s ends. On the other hand, solipsism as a type of ontology has many difficult problems, and they apply to ‘‘moral solipsism’’ ceteris paribus. The problem then is not an ethical one – i.e. the problem of ‘‘others-regards’’ or ‘‘regarding of others’’ – but prior to this it is an ontological one, i.e. the problem of ‘‘inclusion of others’’, or in fact their exclusion from the moral perspective or moral horizon (this possibility will be discussed in some detail in section 5). For one thing solipsism cannot be stated consistently as Bertrand Russell quite clearly pointed out in Human Knowledge, Its Scope and Limits (Russell, 1994). Other objections are that solipsism is psychologically impossible to believe, and that if one pretends that one believes in solipsism, then one must be insincere (and if one states that he/she sincerely believes in solipsism, then one is either lying, or has some kind of disorder, or is just ‘‘bullshitting’’ in Frankfurt’s terms), and finally solipsism is just technical play with Descartes’ principle ‘‘Je pense, donc je suis’’. So, if it is possible to argue that egoism implies solipsism, or that in fact egoism is moral solipsism, then this argument would be a nice objection to the common understanding of it, but only, of course, if the common understanding implies ‘‘pure egoism’’. 2.2 Epistemological objection A somewhat different possibility of objection to egoism is not from the point of view of solipsism as ontological implication of egoism, but rather from the point of view of solipsism as its epistemological implication. Namely, the question is – how is egoism formulated? It seems to state ‘‘There is nothing beside my interests’’, and its final conclusion is ‘‘I don’t know anything besides my interest’’. But this is not precise because there is no sense in saying ‘‘I’’ and ‘‘my’’, since there are no others. Finally, there is something like ‘‘These are the interests’’, and what follows is the list of them or just ‘‘the list’’, since there can be only interests on the list. So egoism as moral solipsism becomes more senseless and unacceptable as it becomes more rigorous and logically consistent. However, solipsist-based objections presuppose that egoism implies solipsism as a radical denial of others not just as beings with interests, or generally speaking valuable, but more than that: if egoism is moral solipsism, then others are existent as moral agents of the same kind as an egoist, but only as beings of lesser value. The difference is not in level but in kind. As a result, these objections hold only if egoism implies solipsism and/or if egoism is ethical solipsism. Since it is not argued in the literature that it does not or that it is not, and more than that, it seems that common understanding confuses psychological, ethical, and so-called rational egoism, we must examine the distinction and these differences.

3. Types of egoism and a summary of some objections There are few types of egoism. First, we can differentiate between descriptive and normative egoism. Normative forms of egoism make claims about what one ought to do, rather than describe what one does do. Descriptive types are psychological, and as it were rational, and

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the most famous normative is ethical, but we can also construct aesthetical, cultural, religious, political, economical, and legal types of normative egoism. Economical egoism will be explicated and discussed in next section as the primary subject matter of this paper. Types of egoism can be classified as shown in Figure 2 (the distinctions are somewhat modified in comparison those commonly stated; see especially Wilbur, 1997; Shaver, 1999, 2002). The most frequent objections to psychological egoism are formulated in many cases of sacrifice where there is no obvious reason why we should count an action of sacrifice as an action of satisfaction of self-interest. However, in the opinion of the present authors, Kavka’s ‘‘predominant egoism’’ bypasses all of these and similar counterexamples (see Shaver, 2002), since there is vast difference between ‘‘pure’’ and ‘‘predominant’’ egoism. On the other hand, moral egoism differs greatly from other moral theories. This is because other moral theories, such as virtue ethics, Kantianism, utilitarianism, etc., give substantial weight to the interests of the others, and egoism does not. This distinction between self-regard and others-regard and between self-interest and interest of the self seems to be the core problem of egoism (as it will be discussed in section 5). This leads to many objections (prescriptiveness, universalisability, etc.) to moral egoism which show that it is theoretically unacceptable. But, the core problem is not that egoism is inconsistent or unjustified, but rather that it is practised, and further that it is used as an explication and justification of practice, especially in some spheres of human life. One such often emphasised sphere of life is business and commerce. Here of course, we differentiate between egoism as moral theory and egoism as practice since one who holds egoism as moral theory can be very rational and even altruistic in practical matters. But we are interested in the opposite possibility, namely the possibility in which one acts on the basis of selfish motives and tries to justify (in fact rationalise) one’s actions by appeal to egoism as moral theory, i.e. as psychological or moral egoism, which seems to be the case in business activities.

4. Business (ethics), self-interest and interest of the self Ethical egoism is often spelled out as the basic way of acting in business, i.e. ‘‘We ought to act in an egoist manner’’ is the basic idea. Adam Smith, who is often cited as the founder of economic egoism as moral theory, was obviously not so sure. For one thing he advanced only some kind of psychological egoism in his An Inquiry Into the Nature and Causes of the Wealth of Nations (1776), but defended different position in his earlier book The Theory of Moral Sentiments (1759). Egoism in such a jargon simply means an amoral position (for problems in Smith’s position or the so-called ‘‘Adam Smith problem’’, see Black, 2006). Figure 2 Types of egoism

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However, interpretations of Smith’s major ideas are somewhat divergent, but Black (2006) summarises them very precisely (see Table II). Besides such historical and/or quasi-theoretical explanations of egoism, businessmen often say that their morally good deeds are reserved for their private lives, not for their professions. So, contrary to Friedman’s idea that the only social responsibility of business is to make profit, the most stated idea is that there is ethics in business and that it is ‘‘egoistic business ethics’’. In fact business people do not speak of egoism, and of pursuit of self-interest, but rather of utility maximisation. So, in fact, business people are not simple egoists, but rather ‘‘enlightened egoists’’, since they believe that an egoist should not be ignorant regarding the interests of the others, but rather that an egoist should have ‘‘other-regarding’’ interests in a way that he/she should use others as an instruments for their own ends. But a nice objection has been formulated against ‘‘enlightened egoism’’, especially in business. Self-interest in business, as well as in other spheres of human activity, requires many things besides exclusively good consequences toward the self, namely freedom of choice, continuous concern, consistency, etc. So self-interest is possible only if these conditions are present and maintained. When an egoist maintains these conditions for him/herself, he/she maintains them for everyone, since they are the same for everyone (Wilbur, 1997, p. 577). And if this is so, then the ‘‘enlightened egoist’’ should believe that egoism is good for everybody, and in such a case, i.e. in a case where the most of people are egoists and resources are scarce, it would be quite hard, if not practically impossible, to achieve egoist goals. But, businessmen can answer to such objections in a manner holding the position of descriptive or psychological egoism, i.e. the fact that most people act egoistically, and that they should do so also. But, there are further objections to such position. First and foremost, and according to some views, this is a wrong conclusion from ‘‘is’’ to ‘‘ought’’. Second, it must be at least mentioned that, quite unfortunately for businessmen, some empirical investigations of ‘‘homo economicus’’ (at least in small-scale societies) show that there is no such human egoistic nature (Henrich et al., 2001, pp. 73-8). It can also be added that there is some evidence that ‘‘altruistic nature’’ is in fact what predominates. But the argument can also be formulated the other way around in order to be more obvious to economists. One of the best-selling textbooks in the USA says: The primary driving force of capitalism is self-interest. Each economic unit attempts to do what is best for itself. An entrepreneur . . . Workers . . . Consumers . . . In brief, capitalism presumes self-interest as the modus operandi for the various economic units as they express their free choices. The motive of self-interest gives direction and consistency to what might otherwise be an extremely chaotic economy. Pursuit of self-interest should not be confused with selfishness (McConnell and Brue, 1999, p. 63).

So, what we know about self-interest is in fact nothing. Since it is very important not to confuse it with selfishness, or even with egoism, as the textbooks often emphasise, we can presume that the formula is more complicated than it first seemed. That is, the entrepreneur, Table II Different interpretations of Smith WN

WN and TMS

Accepting only WN self-interest, Accepting both as ‘‘economic and rejecting TMS theory of realism’’ (Becker, 1989; altruism Rosenberg, 1990; Mini, 1972)

TMS

Accepting both as a sign of complete system (Heilbroner, 1982; West, 1969; Morrow, 1928; Rosenberg, 1960; Cropsey, 1975)

Accepting only TMS in favour of criticism of WN and affirmation of economic role of benevolence (Etzioni, 1988; Collard, 1978; Lutz and Lux, 1988)

Notes: WN, The Wealth of Nations; TMS, The Theory of Moral Sentiments. All references are cited in Black (2006)

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worker, or consumer can do something that is not selfish but still in their best self-interest. But, self-interest is always connected with maximization of profit, so there is not much of a choice here: in fact, the choice is between direct and indirect selfishness. But to choose between them, the entrepreneur, worker, or consumer must be rational in making the choice. So the formula goes something like this: Maximisation of profits þ rational choice þ direct or indirect selfishness ¼ economic self-interest (while the first and the second correct the third). But, some textbooks, besides defining self-interest, are also engaged in some kind of questioning of the formula: for example, are people fundamentally selfish? So, they come up with the conclusion that there are many exceptions to the outcomes predicted on the basis of the assumption that people are self-interested in the narrowest sense. A very realistic and critical approach to self-interest can be found in Sen’s work Rationality and Freedom (Sen, 2002), pp. 22-32, 46-8, 225-8). Of course, Sen is talking of ‘‘self-interest maximization’’ (Sen, 2002), pp. 22-6), which means that to behave rationally is to behave in such a way that maximises one’s self-interest. However, Sen is quite critical, especially from the moral point of view. But, and it seems important to mention, Sen takes into consideration realistic self-interest, rather than oversimplified concepts of romantic morality on one hand, and on the other, of self-interest as pure egoistic (or predatory) strategies. Moreover, it seems that he clearly rejects at least RTC-3 (rational choice theory 3) which says that ‘‘the self-interest of the person is narrowly self-centred and is unaffected by interests of others and about fairness of processes’’ (Sen, 2002), p. 31). At this point, we do not have in mind alternative solutions like a needs-based economy instead of a preferences-based economy. This nevertheless implies a certain ‘‘mixed economy’’, or as Doyal and Gough (1991) call it, ‘‘liberal democratic socialism’’ (p. 295). However, there is a certain distinction in the meaning of the term ‘‘mixed economy’’. Sometimes it refers to a mixture of economic and political values such as in ‘‘liberal democratic socialism’’ (Doyal and Gough, 1991), ‘‘participatory economics’’ (Albert, Hahnel), or in ‘‘real models’’ (Pope John Paul II in the Encyclical Letter ‘‘Centesimus annus’’). On the other hand, sometimes it refers to the strong influence of government, non-profit economy, and industrial democracy on capitalist procedures, values, and goals (in short it refers to the level of economic freedom and democratisation of the private economic sector at the same time). Every day, people walk away from profitable transactions whose terms they believe to be ‘‘unfair’’. Because there are many exceptions from self-interest (honesty, cooperation, altruistic strategies, etc.), we must be sceptical about this feature of capitalism. But there are clear results from cultural anthropology that show that self-interest (as action in one’s own best interest) is not so common among some societies and that there are different strategies like others-interests as the main motive (as action in the best interest of others, or of the majority, or of all, or of an oppressed minority or majority). Principal argument: so, if there are no empirical data that show that there is an egoistic human nature, especially in business activities and commerce, and if there is no consistent ethical theory that can justify ethical egoism as selfish practice, then egoism as selfishness in business is just a question of jargon and rhetoric of the modern and contemporary market economy and capitalist ideology, some kind of predatory mindset (maybe just a game, and maybe even a kind of disorder) which is not just an irrational thing to believe in but also morally unacceptable, at least as the practice of believing in it as a rational thing to do, and maybe as a justification of practice also. This leads us back to the first problem discussed at the beginning of the paper. But, besides all these objections we are in fact practical egoists from time to time, and we have certain rhetoric we use to explicate it, and after all we believe it is OK. Why is this so?

5. Self-interest and interest of the self: the question of moral perspective As far as we can see, there is an ethical theory of egoism, and also a psychological explanation of human actions in terms of egoism, and the dominant ‘‘business ethics in

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action’’, no matter how invalid, descriptively, ethically, or rationally, and financially successful on the other hand. But if we try to analyse the basic notion of egoism, especially regarding business, then we can surely differ between self-interest and interest of the self, and that seems to be the core of the problem. First and foremost every business is about profits. In a similar way, architecture is about buildings, and the medical profession is about curing disease and maintaining health, etc. However, if a bridge falls down due to unprofessional actions by an architect and builders, we would say that it was done unprofessionally and contrary to a code of ethics or conduct in these professions. On the other hand, if a business is managed profitably and at the same time with severe damage or harm to different stakeholders (as ‘‘externalising machine’’), it would be said that it is just business. Why is it unacceptable in the first case to say ‘‘It is just medicine’’ or ‘‘It is just architecture’’, and it seems to be acceptable in the second case to say ‘‘It is just business’’? There is no obvious reason. Or, stated the other way around, why is it acceptable in the first case to say ‘‘It is an obvious case of misconduct and immoral action’’, but this seems to be unacceptable in the second case? Once again, there is no obvious reason. But there is a certain distinction, since the principal motive, namely in business, is self-interest, and in other professions it seems to be an interest of the self/selves. The difference here is substantial and it concerns the difference in perspective (in function or in context, not in substance), since what an egoist lacks is just a perspective, and acceptance of certain naı¨ve consequence – there are others or other selves and they have their interest and goals in themselves as well as I do. There is also an even stronger consequence – there are selves and their sometimes common, sometimes unique interests that should be recognized for their own sake. In the words of the German philosopher H.G. Gadamer, the first insight is quite simple: [To] acquire a horizon means that one learns to look beyond what is close at hand – not in order to look away from it, but to see it better within a larger whole and a truer proportion (Gadamer, 1979, p. 305).

So what one who identifies interests of the self with self-interest really lacks is moral perspective. This moral perspective, on the other hand, is that which will lead him/her toward recognition and inclusion of the other. If businessmen are practically selfish and if this is the only way to be financially successful, then a business, if it is financially sustainable, must violate the human rights of the others; in other words, it is incompatible with the requirement of being environmentally friendly and socially responsible, as is suggested in the Green Paper of the European Commission, ‘‘Promoting a European framework for corporate social responsibility’’ (European Commission, 2001).

6. A note on Jesus’ second commandment According to gospels Jesus summarized the Ten Commandments in two. The second commandment is the commandment of love toward others with the measure of love for one’s self or self-love: ‘‘Thou shalt love thy neighbour as thyself’’ (Matthew 22: 39). According to classical interpretations of the text (by Catholics as well as by Reformed Christians), the text contains no affirmation of self-love at all. We can summarize this interpretation as follows: the question whether the text of the double commandment legitimates self-love in its directive to ‘‘love the neighbor as yourself’’ has been much debated. In our narcissistic culture impregnated with popular psychology, many have taken this as a command for self-love. But, according to the interpretation, the text does not command self-love; possibly it recognizes its existence, and at the very most it legitimises it. The measuring rod is not ‘‘self-love’’. Certainly ‘‘as yourself’’ does not include the command to love one’s self nor state that one should love one’s self. The comparison was not intended to recognise the legitimacy of self-love but to point to the power of self-assertion.

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Even if there is just recognition of the fact of self-love, and of the power of self-assertion, there is another possible and unorthodox interpretation. So, what he said seems to be that we should be altruist measured by our egoism. On one side, one who cannot love him/her-self surely cannot love others. On the other side, one can love him/her-self only by loving others. This kind of radical altruism seems strange, almost as radical egoism. In both cases a self is completely defined by others, in the first case by serving others, and in the second case by using others for egoistic purposes. But, the fact is that there are selves with their interests as a ‘‘self-assertion’’ even in the orthodox reading of the commandment. The fact is that each and every one of us loves him/her-self, and if it is so, then this seems to be a good measure for our love toward others in terms of proportionality. But this is not inconsistent with the fact that every average human being has self-regards and others-regards in certain proportion. In this way it seems to be a strong realistic position. The question is – which proportion is morally acceptable? As far as we can see, Jesus commands that 1:1 is an acceptable proportion. So if we have two scales from 1 to 10, where one scale is for egoism and the other is for altruism, with 1 being the lowest quantity and quality and 10 being the highest quantity and quality of self-love and others-love, then Jesus commands that proportions like 1:1, 5:5, and 10:10, for example, are morally acceptable, and proportions like 5:1, 1:5, 3:8, 7:4, etc., are morally unacceptable. However, it does not say that the 10:10 proportion is more acceptable than 5:5, for example. Radical egoism (5:1 for example) as well as radical altruism (1:5 for example) is excluded by the commandment according to our interpretation. In fact, this quantitative interpretation is probably, and also according to some commentators, what Smith’s idea regarding the rule was (Black, 2006, referring to West, 1969, p. 95). This interpretation can also be quite consistently connected to the ‘‘Golden Rule’’. Since the eighteenth century the ‘‘Golden Rule’’ has commonly designated the ethical maxim, ‘‘Do unto others as you would have others do unto you’’, attributed to Jesus by Matthew (7: 12) and Luke (6: 31). The descriptive terminology is thus quite modern, but it had an antecedent in the expression, ‘‘Golden Law’’ used of the maxim as early as 1674. So reciprocity is quite important, and why shouldn’t it be in the Second Commandment also? If it is, then they fit nicely together and explicate in which way egoism as self-regard should be understood, accepted and practised in its everyday context, private or public, business or otherwise.

7. Strong enough to care: cool guys don’t care, or is it the other way around?! Sometimes is seems people today are tending to become something like the ex-Enron leaders. Maybe because they seem really bold and daring . . . but this is not where their story stops; they were no Supermen (the reader will hear more about this character later). Weren’t they a perfect example of self-interest and egoism? They picked the path of unlimited greed (i.e. were deceived by the power of money) that led them towards a dead end. On the opposite sides of those very two powers that run a great part of the world – i.e. money and sex – stand love and care as the opposite choice in any context of unlimited sexual or material consumption. Thus, not caring, or not being able to express care/love, would be a sign of weakness or some apparent psychological deviation. And there are not many, especially not in such a macho-oriented kind of society as ours, who want to be weak. But this calls for a song line: ‘‘Where have all the good men gone/And where are all the gods? [. . .] It’s gonna take a superman to sweep me off my feet’’ (Bonny Tyler, I Need a Hero). And Superman cares. A lot. He would save everyone. He did care about his neighbour and others. He would even risk his own life (he was a fictional superhero so un-reciprocity on behalf of others is allowed). Jesus, one of the original authors of moral reciprocity theory, as described above, actually did die for all humanity once, saying something as that one time would do, so we can freely continue following the moral reciprocity and nobody has to die for anyone or anything. But He was God so He could step beyond the limits of moral reciprocity in behalf of all humankind. That was His excuse. (Also the chain that needed to be broken in the eternal war between Good and Evil asked for only one just man’s death. Jesus took that sacrifice.) As for the rest of us, to be just, we only need to care. It’s nice to have Superman to remind us of the

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moral strength a man has the potential to pose. This strength grows by each decision one makes in the part of the good. That takes courage. Ethics of care representative Nell Noddings differentiates two types of caring: 1. ‘‘caring for’’ (in direct encounters in which one person cares for another, refers to a special attribute of relations, and as such, theoretically stands above ‘‘caring about’’); and 2. ‘‘caring about’’ (more general, refers to care as a virtue and take us to a more public realm; may be foundation of justice). It’s important to notice that ‘‘care for’’ is about ‘‘closer’’ relationships because we ‘‘care for’’ in one-to-one relations: ‘‘It is physically impossible to ‘care for’ all of humanity, strangers who have not addressed us directly, or those unknown others at a great distance’’ (Noddings, ‘‘Two concepts of caring’’; cited in Debeljak et al., 2007). Those ‘‘unknown others’’ we can ‘‘care about’’: ‘‘Still, when we have acquired the attitude of care, we feel impelled to do something for any people who are suffering’’ (Noddings, ‘‘Two concepts of caring’’; cited in Debeljak et al., 2007). Although Noddings explains that the act of caring requires moving away from one’s self and standing for the reality of someone else’s life, she says that care ethics also includes self care – but in a nurturing, not self-maximising way (Debeljak et al., 2007). This sort of thinking can be linked with an interpretation of Jesus’s lesson in Luke 6, 41-45 (‘‘41 Why do you look at the speck of sawdust in your brother’s eye and pay no attention to the plank in your own eye? 42 How can you say to your brother, ‘Brother, let me take the speck out of your eye’, when you yourself fail to see the plank in your own eye? You hypocrite, first take the plank out of your eye, and then you will see clearly to remove the speck from your brother’s eye’’), meaning ‘‘How can you be truly interested and care about somebody else, if you don’t care about your own self first?!’’. And Mark 4, 24 as well (‘‘24 ‘Consider carefully what you hear’, he continued. ‘With the measure you use, it will be measured to you – and even more. 25 Whoever has will be given more; whoever does not have, even what he has will be taken from him’’’). This argues for the account of reciprocity between caring/loving one’s self and others. Altruism can be viewed as: B

Healthy altruism – self love, or self care, with the purpose of being able to love others, in line with Jesus’ first commandment of love and ethics of care way of understanding self care.

B

Unhealthy altruism – with the purpose of calming down one’s conscience, hidden self-interest or non-reciprocity (as explained above). Namely, we can ask – when legal persons are displaying, for example, philanthropy toward some neglected stakeholder-group, is it just to show off or a simple advertisement, since in most cases these very legal persons will one way or another make a profit out of it, or is it genuine care for this group (which was ‘‘their’’ stakeholder-group in the first place, which is often forgotten)? On the other hand, this seems to be a somewhat unfair question since there is no way to object to the explanation of such actions in a way that a legal person cares as their first goal, and only profit is only a by-product of this, maybe from advertising itself by advertising such caring actions (this is in fact application of the well known ‘‘double-effect theory’’). Comparing numbers regarding results of such care towards the neglected stakeholder group and regarding the legal person’s profits from it (directly or indirectly, regarding business culture and tax system; see Krkacˇ and Debeljak, 2006; Krkacˇ, 2007) will be not sufficient for conclusive argument perhaps, but quite illustrative nevertheless.

There is a string flowing among people in society making them hesitate to show that they care, as if it would be a sign of weakness. This sort of thinking, furthermore, also shows prejudice towards a traditionally typically female way of knowing, based on a certain blend of emotion, intuition and reason, on which care ethics is built. But, judging by what has been said previously, not caring is a great sign of weakness. In fact, (and following Walzer’s insight regarding the very nature of toleration; Walzer, 1997) it can be claimed that to care is at least a sign of power, and not to care is at least a sign of lack of power, maybe even a sign of fear or weakness.

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If one does not or cannot care about/love one’s neighbour (Jesus’s terminology) or the other (Noddings’s terminology), it means one does not love one’s self. Jesus included this in his first love commandment – we can love our neighbour only if we treat ourselves well first; and we can also understand Noddings’s differentiation between care for and care about in the way of supporting this argument. In addition, if one does not care/love, it means that one acts un-nicely – destructively (inwardly, outwardly), to a certain degree. If you do not love yourself, how can you be loved back by someone else? In order to avoid narcissism, it needs to be taken in respect that self love, or self care, is limited or surrounded by humbleness and appreciation of other people’s freedom. A young political science high school teacher, talking about freedoms, said: ‘‘My personal freedom reaches as far as my arms can reach – because that is the point where someone else’s freedom starts’’. Throughout this thinking we are just trying to argue that care requires the kind of strength not many possess; that so-called ‘‘soft’’ skills are not as soft as they sound, that it is advisable to look behind the curtains – i.e. things we take for granted because they ‘‘seem’’ to be one way. Care and love are somewhere at the core of the moral strength. As with any sort of strength, physical for example, in order to make it stronger and more solid, we need to practise making the ‘‘right’’ choices, in the sense of the good ones, in order to make the civilized world civilized, more human-like, and a step away from the primitive way of dealing with issues, which would be proposing aggressive solutions. To care, or simply caring, requires a certain moral strength. Or just requires strength! When one does not possess the strength to care, not even the ‘‘ þ zero number’’ of strength of finding the necessary real strength that potentially lies within each human being, it has been understood as taking the easy way out – this path can also lead towards certain forced, or conditioned, or fake altruism, or apparent care – through which it becomes possible to cover up one’s own restless consciousness, comfort oneself or try to justify oneself by doing something seemingly nice and worthy – which is not proposing a solution to restless consciousness. There is some good in each human being, just as there is bad. But the final decision between good or bad, in every moral dilemma, which as a result leads towards which of the two, good or bad, is going to prevail in an individual as a choice, and will therefore define him/her as a good or bad person. The growth of either good or bad within us depends on choices we make on the part of one or the other, consciously or not, in every particular moment. Care and love require the greatest strength of all. They are no soft skills – capturing this is gained best by exercising love and care in practice. Regarding this we can quote the following passage from Wittgenstein’s book of notes, Culture and Value: ‘‘It is not by any means clear to me that I wish for a continuation of my work by others, more than a change in a way we live, making all these questions superfluous’’ (Wittgenstein, 1947, p. 70).

References Black, R.A. (2006), ‘‘What did Adam Smith say about self-love?’’, Journal of Markets & Morality, Vol. 9 No. 1, available at: www.acton.org/publicat/m_and_m/new/article.php?article ¼ 25 Debeljak, J., Koricˇan, M., Krkacˇ, K. and Musˇura, A. (2007), ‘‘Caring principle and practices in corporate social responsibility’’, in Gomez, A.M.D. and Crowther, D. (Eds), Ethics, Psyche and Social Responsibility, Ashgate, London, pp. 129-43. European Commission (2001), ‘‘Promoting a European framework for corporate social responsibility’’, Green Paper of the European Commission, 18 July, European Commission, Brussels. Gadamer, H.G. (1979), Truth and Method, Sheed and Ward, New York, NY. Henrich, J., Boyd, R., Bowles, S., Camerer, C., Fehr, E., Gintis, H. and McElreath, R. (2001), ‘‘In search of Homo Economicus’’, American Economic Review, Vol. 91 No. 2, pp. 73-8. Krkacˇ, K. and Debeljak, J. (2006), ‘‘Influence of culture on European business ethics’’, in Njavro, Ð. and Krkacˇ, K. (Eds), Business Ethics and Corporate Social Responsibility, ZSEM International Conference Papers, MATE d.o.o., ZSEM, Zagreb, pp. 110-25.

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Krkacˇ, K. (Ed.) (2007), Uvod u poslovnu etiku i CSR, MATE d.o.o., ZSEM, Zagreb (in Croatian). McConnell, C.R. and Brue, S.L. (1999), Economics, Irwin McGraw-Hill, Homewood, IL. Russell, B. (1994), Human Knowledge: Its Scope and Limits, 2nd ed., Routledge, London. Sen, A. (2002), Rationality and Freedom, Harvard University Press, Cambridge, MA. Shaver, R. (1999), Rational Egoism, Cambridge University Press, Cambridge. Shaver, R. (2002), ‘‘Egoism’’, Stanford Encyclopedia of Philosophy, Stanford University, Stanford, CA, available at: http://plato.stanford.edu/entries/egoism/ Wilbur, J.B. (1997), ‘‘Self-interest’’, in Werhane, P.H. and Freeman, R.E. (Eds), Encyclopedic Dictionary of Business Ethics, Blackwell, Oxford, pp. 576-7. Walzer, M. (1997), On Toleration, Yale University Press, New Haven, CT/London. West, E.G. (1969), Adam Smith, New Rochelle, Arlington House, NY. Wittgenstein, L. (1947), Culture and Value, University of Chicago Press, Chicago, IL.

Further reading Baier, K. (1958), The Moral Point of View, Cornell University Press, Ithaca, NY. Brink, D. (1997), ‘‘Self-love and altruism’’, Social Philosophy and Policy, Vol. 14, pp. 122-57. Brink, D. (1992), ‘‘Sidgwick and the rationale for rational egoism’’, in Schultz, B. (Ed.), Essays on Henry Sidgwick, Cambridge University Press, Cambridge. Campbell, R. (1972), ‘‘A short refutation of ethical egoism’’, Canadian Journal of Philosophy, Vol. 2, pp. 249-54. Frankena, W.K. (1973), Ethics, Prentice-Hall, Englewood Cliffs, NJ. Hoffman, W.M., Frederick, R.M. and Schwartz, M.S. (1998), Business Ethics: Readings and Cases in Corporate Morality, 4th ed., McGraw-Hill Higher Education, New York, NY. Kagan, S. (1986), ‘‘The present-aim theory of rationality’’, Ethics, Vol. 96, pp. 746-59. Kalin, J. (1970), ‘‘In defense of egoism’’, in Gauthier, D. (Ed.), Morality and Rational Self-Interest, Prentice-Hall, Englewood Cliffs, NJ. Kavka, G. (1986), Hobbesian Moral and Political Theory, Princeton University Press, Princeton, NJ, pp. 35-44, 51-64. Machan, T.R. (1997), ‘‘Egoism’’, in Werhane, P.H. and Freeman, R.E. (Eds), Encyclopedic Dictionary of Business Ethics, Blackwell, Oxford, pp. 192-5. Moore, G.E. (1903), Principia Ethica, Cambridge University Press, Cambridge. Parfit, D. (1984), Reasons and Persons, Oxford University Press, Oxford. Parfit, D. (1986), ‘‘Reply to Kagan’’, Ethics, pp. 843-846, 868-869. Rand, A. (1964), The Virtue of Selfishness, New American Library, New York, NY. Slote, M.A. (1964), ‘‘An empirical basis for psychological egoism’’, Journal of Philosophy, Vol. 61, pp. 530-7.

Corresponding author Kristijan Krkacˇ can be contacted at: kristian.krkac@ gmail.com

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Fighting a smoky fire: an analysis of Philip Morris’s CEO speeches according to image restoration strategies Maria de Fatima Oliveira

Maria de Fatima Oliveira is a PhD student on the Mass Media and Communication Program, Temple University, Charlotte, North Carolina, USA.

Abstract Purpose – This paper seeks to investigate Philip Morris’s responses to a decade-long crisis through the analysis of its CEO’s speeches. It also aims to reveal the rich potential of corporate speeches as examples of crisis management strategies. Design/methodology/approach – In total, 67 speeches of Philip Morris’s CEO are analyzed using centering resonance analysis. The data are also cluster- and factor-analyzed. Combining quantitative and qualitative examination of the dataset provides a broader understanding of the organization’s rhetoric strategies. Findings – Philip Morris’s CEO crafted specific frames and image repair strategies to fit different stages of the crisis. The frames and restorations strategies used are, respectively: profitable multinational bolstering, minimization, and attack the accuser (1994-1996); litigation target, transcendence (1997-1998); and corporate good citizen, bolstering and transcendence (1999-2001). Research limitations/implications – The paper highlights the significance of corporate speeches as a fully controlled form of corporate discourse that reveals strategic frames and communication tactics. Future research should concentrate on comparing such messages with other important actors’ discourse. Practical implications – The paper draws attention to the role of lawyers and other actors in defining crisis management strategies as well as emphasizing that corporate values may not be accepted by the entire society, yet may meet the expectations of specific stakeholders. Originality/value – This paper combines qualitative and quantitative analysis to investigate a rich source of corporate communication: top management speeches. The study underscores how rhetoric strategies can play for time during crisis, but are limited in changing inherently bad products into socially acceptable ones. Keywords Corporate image, Corporate social responsibility, Critical management, Semantics, Strategic management Paper type Research paper

Organizational crisis is generally defined as an unpredicted event with overwhelmingly negative consequences for the organization and its stakeholders. It severely threatens the viability of the organization, while having an impact on profitability, reputation and legitimacy (Millar and Heath, 2004; Seeger et al., 2003; Simola, 2003). From this standpoint, the difficulties faced by the tobacco industry during the 1990s certainly characterize a decade-long crisis period. Crisis events may have lasting consequences on two valuable and vulnerable corporate assets: 1. reputation; and 2. image. As several scholars have pointed out, reputation is a mirror of an organization’s character and must take into account organizational values as well as the views of a company held by

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audiences, both internal and external (Deephouse, 2000; Nakra, 2000; Pruzan, 2001). Denotatively image is a mental conception held in common by members of a group (Webster’s Dictionary, n.d.). Benoit’s (1995) image restoration framework emphasized the contextual nature of image. He stated that image is ‘‘the perception of a person (or group or organization) held by the audiences, shaped by words and actions of that person, as well as by the discourse and behaviors of relevant actors’’ (p. 251). In terms of corporate actions, it is necessary to highlight the value of associating corporate practices with ethical values. Corporate responsibility and citizenship improve reputation and increase organizations’ chances to recover rapidly from crisis episodes (Anand, 2002; Hutton et al., 2001). The study of corporate crisis should focus on aspects that transcend economic and legal consequences. The impact of crisis events on stakeholders’ perceptions of a corporation and its procedures is a crucial factor to determine the organization’s odds of overcoming a crisis. Image restoration discourse offers a broad framework to investigate corporate communication reactions – discourses and attitudes – to crisis events. It assumes that communication is a goal-directed activity and good reputation is a key objective of corporate communication (Benoit, 1995). Therefore, the analysis of crisis events needs to consider how the agents involved – individuals, corporations, or governments – talk about these events and other corporate actions, studying the role of discourse as a strategic tool to overcome crises.

The anatomy of a crisis: Philip Morris during the 1990s During the 1990s, the tobacco industry was under constant attack, as evidenced by litigation cases, government regulatory efforts, and scandals about companies’ unethical and illegal practices. In 1998, tobacco industry executives testified before Congress that nicotine is addictive and cigarettes could cause cancer. Latter the same year, the Master Settlement Agreement was signed, making the 1990s a time of unparalleled crises in the tobacco industry’s history (Tobacco.Org, n.d.). Philip Morris was the biggest US tobacco company at that point, and as industry leader it offers a representative case of how the industry attempted to safeguard its image. Internal documents revealed that, for Philip Morris, credibility had become a major concern since the late 1980s (Smith and Malone, 2003). The company was aware of the relevance of reputation damage caused by litigation threats, legal restrictions, a shrinking domestic market, and anti-tobacco advocates’ actions. This study investigates Philip Morris’s image repair strategies during the 1990s, a highly controversial period for the tobacco industry, focusing on the strategies used by the organization’s CEO to frame the crisis and repair the company’s tarnished reputation. Especially during crisis, audiences connect organizations to their major leaders, who are in charge of keeping information flowing, defining and communicating organizational values and culture, and providing a vision of the future (Fairhurst and Sarr, 1996; Pan and Kosicki, 1993; Seeger and Ulmer, 2003; Smircich and Morgan, 1982). CEOs are generally the public face of a company, perceived as the ones in charge of the difficulties it faces. They epitomize the organization through their own actions, values, and communication strategies while attempting to shape favorably the external constituencies’ perceptions of the company (Park and Berger, 2004). CEOs’ speeches are a form of communication that is fully planned and controlled by a company that presumably mirror organizations’ strategies to explain and justify crisis events as well as to reframe them in a better light, aiming to influence stakeholders’ perceptions of a company positively. As Entman (1993) defined them, frames establish the interests that compete to dominate a situation. Framing theory emphasizes the ability of any entity – media, individuals or organizations – to delineate other people’s reality, highlighting one interpretation while cloaking a less favored one (Fairhurst and Sarr, 1996; Gitlin, 1980; McCombs and Ghanem, 2001).

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Geoffrey Bible was Philip Morris’s CEO during most of the 1990s and consequently his speeches presumably reflected the strategies adopted by the organization to frame the crisis and influence its reputational issues. Analyzing his speeches during the 1990s, this research examines the use of frames as image repair strategies adopted by Philip Morris to respond to its decade-long crisis.

Managing crises and reputation Crisis events are characterized by ambiguity of cause and effect, significant potential for destruction, and sense of urgency, implying that actions must be taken promptly in order to mitigate negative consequences. These events grow out of, and express, the comprehensive and dynamic system of a company’s overall identity and history, making reputation a significant portion of a corporation’s profile (Millar and Heath, 2004; Seeger et al., 2003). Several scholars have examined crises, dividing them into three main stages: 1. pre-crisis; 2. crisis; and 3. post-crisis (Coombs and Holladay, 2004; Seeger et al., 2003; Ulmer and Sellnow, 1997). Coombs (1999) explained that these stages involve three main categories of actions. First, during the pre-crisis stage, organizations concentrate on prevention and preparation, scanning the environment to find signs of potential crises and planning the appropriate procedures to avoid these situations. The second phase is the crisis stage, which focuses mainly on implementing a successful response by applying pre-planned strategies. Finally, the post-crisis stage involves evaluation of the corporation’s performance during the crisis and storage of useful lessons for future crises. Regardless of the crisis stage, corporate reputation can be greatly influenced by developing events. Furthermore, reputation is shaped by myriad facets, including organizational values and mission, corporate responsibility projects that intend to give back to communities, internal and external audiences’ perception of a company, and the firm’s responses to stakeholders’ opinions. Corporate reputation implies fulfilling the expectations of employees, investors, government, activist groups, and society as a whole (Deephouse, 2000; Gotsi and Wilson, 2001; Nakra, 2000; Pruzan, 2001). Dealing with such a multiplicity of audiences becomes even more complex during a crisis. Audiences expect more than impersonal responses to unexpected and threatening events. Stakeholders expect that crisis procedures will address not only the concrete consequences of the negative event, but also their fears and feelings towards the situation (Fombrun and Shanley, 1990; Park and Berger, 2004). In crisis situations, stakeholders generally test to what degree organizational values hold when economic losses are a potential outcome. Some corporations embrace corporate responsibility and citizenship as merely advertising maneuvers. During crisis episodes when economic and legal consequences are forthcoming, their supposed commitment to people, communities and the environment tend to disappear (Fombrun and Van Riel, 2003). This study aspires to observe whether the decade-long crisis confronted by Philip Morris unfolded via discrete crisis stages, and whether and how the organization’s use of image repair strategies varies throughout the stages of the crisis.

Repairing a tarnished reputation: image restoration discourse framework The choice of appropriate and effective messages during crisis periods is essential to manage a crisis and restore an organization’s reputation successfully. Benoit (1997b) developed a comprehensive framework of image repair strategies that expand previous corporate rhetoric perspectives. These strategies are based upon two components of a persuasive attack: 1. responsibility; and 2. perceived offensiveness.

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Benoit’s (1995, 1997b) image restoration strategies examined defensive tactics used by individuals or corporations at risk. His five broad self-defense strategies addressed both elements of a persuasive attack.

Image restoration strategies The first self-defense strategy, denial, aims to refuse responsibility and can be conducted under two variant forms: 1. simple denial of the offense; and 2. shifting the blame (or responsibility) to another person or organization (Benoit, 1995, 1997b). Second, evasion-of-responsibility strategies try to diminish the responsibility of the corporation for the offensive act, and use four versions of excuses: 1. a response to previous attacks or offensive acts; 2. a lack of control or information about the situation; 3. an accident that could not be expected or avoided; and 4. the statement of a company’s good intentions (Benoit, 1995, 1997b). The third strategy, reduction of offensiveness, seeks to mitigate the offensive content of the accusation or event. This strategy may take six different forms: 1. bolstering an organization’s strengths; 2. minimizing audiences’ negative feelings toward the situation; 3. highlighting other, much more offensive, acts; 4. directing audiences’ attention to other facts or to a company’s values and worthwhile projects; 5. attacking the accuser; and 6. reimbursing the victims (Benoit, 1995, 1997b). The final two self-defense strategies, corrective action and mortification, represent organizations’ attempts to correct the situation, prevent novel crises, and evaluate their responses. Corrective actions are the procedures taken to restore the previous state of affairs and prevent other offensive events, whereas mortification requires an organization’s genuine apology (Benoit, 1995, 1997b). Image restoration strategies have been studied extensively (see, for example, Benoit, 1997a; Benoit and Brinson, 1999a, b; Benoit and Czerwinski, 1997; Benoit and Hirson, 2001). However, these studies involved relatively short-term exigencies. The investigation of the long-term use of image restoration strategies was lacking and the tobacco industry crisis during the 1990s offered an excellent opportunity to such study. Whereas numerous industries and companies have faced challenging situations before, the amount, frequency, and intensity of disturbances confronted by the tobacco industry in the 1990s were unparalleled. Since Philip Morris was the industry leader at that point, the analysis of a fully controlled form of corporate communication – the company’s CEO’s speeches – can increase our understanding of long-term corporate strategies to cope with crises and repair reputation. Therefore, this study posits the following questions: RQ1. How did the frames adopted by Philip Morris’s CEO in his speeches portray image restoration strategies? RQ2. Did the image restoration strategies vary according to the public addressed? RQ3. Did these strategies alter over the decade-long crisis period?

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Method Speeches by Geoffrey Bible from 1994 to 2002, his tenure as Philip Morris’s CEO, were downloaded from the web site of the Legacy Tobacco Documents Library (n.d.). In order to locate additional speeches, Altria Group, Philip Morris USA, and Philip Morris International web sites, Philip Morris’s public relations and media relations departments were contacted (see www.altria.com/, http://philipmorrisusa.com, http://philipmorrisinternational.com). A LexisNexis search for material about Philip Morris and Geoffrey Bible during the period was conducted. Lastly, web sites about rhetoric, business speeches, and speeches in general were consulted. None of these attempts yielded additional speeches. This research dataset consisted of 67 speeches by Geoffrey Bible from 1994 to 2002[1]. These documents were transformed into .txt files. Each .txt file was analyzed using centering resonance analysis (CRA), a mode of computer-assisted network-based text analysis that represents the content of large sets of communication texts by identifying the most important words as potential centers that link other words in the network (Corman and Dooley, 2006a; Corman et al., 2002). To do so, centering resonance analysis calculates the words’ influence within texts, using their position in a network structure of other words making up the text (Dooley and Corman, 2002). This influence is based on word betweenness centrality, defined by Corman et al. (2002) as ‘‘the extent to which a particular centering word mediates chains of association in the CRA network’’ (p. 177). As Dooley and Corman (2002) stated, ‘‘words with high betweenness, and thus influence, add coherence to the text by connecting strings of words that otherwise would not be connected’’ (p. 123). The results of aggregating the possible centers or nodes (the most influential words) in a message denote the author’s intentional acts regarding word choice and message meaning. Centering resonance analysis makes it possible to compare networks in order to see the extent of similarities between two documents, highlighting the shared and unique words in each file. These similarities compose the concept of ‘‘resonance’’. As Corman et al. (2002) stated, ‘‘The more two texts frequently use the same words in influential positions, the more word resonance they have. The more word resonance they have, the more the communicators used the same words, and the more those words were prominent in structuring the text’s coherence’’ (p. 178). Thus, the extent to which two texts apply the same words in the same way shows the extent to which they ‘‘resonate’’ with each other. In this study, the application of centering resonance analysis made it possible to trace changes in frames used by Philip Morris’s CEO to depict the company to its internal and external publics over time. Working from the notion of frames as thematically reinforcing clusters of facts and ideas, the set of speeches was also subjected to cluster analysis to discern similarities among individual speeches’ themes and word choices. In addition, a principal components factor analysis, using SPSS, was applied in order to extract broad themes from the speeches.

Responses to the crisis by Philip Morris’s CEO Different actors had a voice during the tobacco crisis, including Philip Morris, its stockholders, its employees, other tobacco companies, the government, health activists, and consumers. Nevertheless, their influence on the crisis conditions varied significantly. This study focuses on one specific actor – Philip Morris. However, the influence of others on the organization’s discourse ought to be considered. Therefore, Geoffrey Bible’s speeches were grouped according to their major audience – internal or external publics. Speeches were considered internal when they specifically addressed employees, whereas external speeches mainly addressed the company’s investors, and some offered testimony before Congressional committees. In addition, speeches were grouped according to year written, reflecting different stages of the crisis[2]. Three separate analyses were conducted: by year, by audience, and the entire set of speeches as a whole. Figures 1 and 2 represent the network maps of internal public and external public groups, respectively.

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Figure 1 Internal public map

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Figure 2 External public map

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In these maps, the most influential words (with influence values or word betweeness centrality $ 0.2) have black boxes; words with slightly lesser influence (with influence values .0.05 and , 0.2) have gray boxes; and, finally, less influential words (with influence values .0.015 and # 0.05) are unboxed[3]. The lines in the maps indicate the associations between words; the darker the line, the stronger the link. The word’s position represents its centrality in the map, which should be read from left to right. Words at the extreme left of the map mediate a greater number of chains of association, and are therefore more influential in the network. This characteristic gradually decreases from left to the right. The maps in Figures 1 and 2 show differences between speeches delivered to internal and external publics during the entire period examined. In the internal public group, the word ‘‘people’’ plays a central role in the network. In addition, it is connected with ‘‘good’’, ‘‘team’’, ‘‘great’’, ‘‘company’’, and ‘‘Philip Morris’’. ‘‘Tobacco’’ stands in a middle position. The map configuration suggests an important frame, the ‘‘Philip Morris team’’, which recurs throughout the speeches. Although the specific topics of speeches addressing employees changed during the decade, the messages exemplify the image restoration strategy of transcendence, consistently appealing to employees’ commitment to the company even during difficult times. Despite the fact that challenges are being faced, the strong bonds between Philip Morris and its employees – the Philip Morris team – are able to overcome any obstacles. In a talk to mark the completion of a recall of eight billion cigarettes due to potential contamination with pesticides, Geoffrey Bible addressed his employees as a team of ‘‘heroes and heroines’’ able to overcome everything. He stated: ‘‘[W]e knew that everything was possible, we knew there was a solution and we had the people with the commitment and brain power to win’’ (September, 1995). In addition to the ‘‘Philip Morris team’’ frame, the analysis of the internal public group maps demonstrates a strong link among ‘‘market’’, ‘‘US’’, ‘‘world’’, and ‘‘cigarette’’. International expansion was thereby framed as a good solution to challenges facing Philip Morris. These words exemplify Philip Morris’s use of two image restoration strategies: 1. bolstering the company’s successful record as an organization in constant expansion; and 2. transcending the crisis, highlighting international growth. One of Bible’s first speeches as Philip Morris’ CEO illustrates both strategies. On July 26, 1994, talking to employees in a plant in North Carolina, he opened his speech saying: ‘‘We’ve got a great company, growing and in good shape. We can handle any legal, political, and public-policy challenges. And we are very excited about our company’s prospects, especially globally. Our first priority is to grow all of our business’’. The external public map examined the entire set of external speeches and shows ‘‘tobacco’’ in the second most preeminent position, far more important than it is in the internal public group map. The external group network emphasizes ‘‘business’’, ‘‘company’’, ‘‘new’’, ‘‘product’’, and ‘‘brand’’, illustrating the importance given by the company to profitability and growth. Those words also embody an image restoration strategy frequently used by Philip Morris – bolstering. As the company’s CEO, Geoffrey Bible, framed his messages in terms of bolstering the organization’s profitability, its brands’ values, and the increase in market share when talking to Philip Morris investors, who comprised the main audience for the speeches. Giving a speech on a conference sponsored by Philip Morris to its investors (June 14, 1995), Bible opened by indicating the relevance of profits and continuous growth to Philip Morris, saying: ‘‘The most remarkable thing about Philip Morris is not our size or the fact that we are the fifth most profitable company in the US. What is extraordinary is that we are continuing to grow rapidly’’. To detect broad similarities among the speeches and to find whether they reflected different stages of the crisis, the speeches were grouped by year and cluster-analyzed, based on the resonance values between the documents. As Corman et al. (2002) stated, high resonance values between texts show the extent to which texts apply the same words in the same prominent position within each text’s structure.

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The cluster analysis yielded three major clusters. The first is composed of speeches from 1994, 1995, and 1996, representing the company’s growth and international expansion. This set of speeches also characterizes the pre-crisis stage of crisis faced during the decade. Whereas some signs of the crisis to come were available, the most significant difficulties did not take place during these years. Litigation was seminal and the main foci of corporate discourse at that point were profitability, and internal and external growth. The second cluster includes speeches from 1997 and 1998 – the acute crisis stage, portraying the paramount importance of litigation issues and legal restrictions to the company during these years. During these two years, the tobacco industry was under constant attack. Litigation became unbearable; numerous scientific reports clarified the unhealthy consequences of smoking, connecting cigarettes to cancer, and state attorneys and legislators worked intensely to establish tobacco companies’ liability for heath issues, culminating in the Master Settlement Agreement in 1998. Lastly, the third cluster contains speeches from 1999, 2000, and 2001, presenting changes in the tobacco industry environment. The discourse during these last three years showed actions taken during the post-crisis stage, focusing mainly on evaluation of the period and further attempts to depict the organization’s acceptance of the changes and its commitment to society – an attempt to build an image of a corporately responsible organization that is proud to give back to several communities in many ways. In addition, in order to identify overall themes among all the speeches, a factor analysis using SPSS was done on the 100 most influential words (those with highest betweeness centrality in the network analysis of the 67 texts) that appeared in at least half of the documents. Following the recommendations of Dooley and Corman (2002, 2004), only factors with eigenvalues of at least 4.0 were considered and words with loadings below 0.60 were discarded, resulting in a final roster of 37 words. A principal components analysis yielded three distinct factors, explaining 81 percent of the variance. The Cronbach’s a values of these factors are 0.788, 0.861, and 0.622 for factors 1, 2, and 3, respectively, confirming the reliability of these factors. Table I describes factor loadings and Table II the major themes for each factor. A timeline (Figure 3) sets these factors, or speech themes, in the context of the temporal clusters and crisis stages described earlier. The factors represent the main themes extracted from the entire set of speeches, and match up with major events happening during specific crisis stages represented by the clusters. The clusters correspond to set of speeches that resonate highly with each other, showing the extent that these texts apply the same words in the same structural position. A close analysis of the clusters allows their comparison to each crisis stage – pre-crisis, crisis, and post-crisis. In addition, the chart shows the main image restoration strategies applied during each temporal cluster and its corresponding frames as presented to both internal and external audiences. Image restoration strategies adopted during different crisis stages A close textual analysis of each speech was conducted to identify the image restoration strategies applied, and to examine if they altered over the period and in accordance with the public addressed. Indeed, Philip Morris’s image repair efforts did vary during the decade, showing similar patterns during the specific years represented by each temporal cluster and crisis stage, as shown by the following chronological discussion. Cluster 1 (1994-1996): pre-crisis stage. Cluster 1 corresponds to the content represented by factor 1, which was labeled ‘‘national and international corporate success’’. The speeches composing this stage are from the first three years of Geoffrey Bible’s tenure as Philip Morris’s CEO (1994-1996). The period was still not extensively blemished by accusations against the industry, and litigation issues were seminal. Nevertheless, there was already smoke in the air, signaling a forthcoming fire. The CEO’s discourse concentrated on three image restoration strategies: (1) attempting to bolster the company’s profitability; (2) minimize potential threats; and (3) attack its accusers.

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Table I Factor loadings for all speeches for all years, 1994-2001

successful corporate kraft professor world country d-day engagement program united_states effort product brand issue own employee smoking right success director share fda income congress challenge virginia congressman position litigation increase miller market key change leader dollar result

1

Component 2

3

0.930 0.926 0.914 0.860 0.855 0.849 0.845 0.845 0.840 0.832 0.827 2 0.789 0.779 2 0.765 0.751 0.745 2 0.744 0.729 0.727 0.726 0.692 2 0.691 20.072 20.283 20.308 20.494 20.514 0.513 0.104 20.550 0.196 0.435 0.358 0.101 0.184 0.076 0.009

0.281 20.090 0.010 0.407 0.188 20.269 0.425 0.426 0.077 20.363 0.089 20.220 0.006 0.440 0.612 0.030 0.345 0.132 0.131 20.085 0.014 0.286 0.955 0.893 0.868 0.815 0.803 0.790 0.782 0.774 2 0.756 0.755 0.640 20.324 20.371 0.019 20.080

20.145 0.135 20.151 20.123 0.319 0.229 20.175 20.176 0.118 0.116 20.226 20.343 20.561 0.041 0.127 0.482 0.351 20.069 20.124 0.654 20.052 20.231 20.007 0.029 0.187 0.268 0.268 0.061 0.029 0.281 20.137 20.317 0.127 0.914 0.880 2 0.837 0.704

Note: Extraction method: principal component analysis

Table II Factors representing major themes in Geoffrey Bible’s speeches from 1994 to 2001 Factor

Representative words

National and international corporate success

Successful, corporate, Kraft, professora, world, country, d-dayb, engagement, program, United States, effort, product, brand, issue, own, employee, smoking, right, success, director, share, FDA

Litigation issues and legal restrictions

Income, Congress, challenge, Virginiac, congressman, position, litigation, increase, Millerd, market, key

Leading changes

Change, leader, dollar, result

a

Notes: Some words have to be understood in light of the kind of the texts analyzed – speeches. Several times, Philip Morris’s CEO introduced guest speakers during the company’s events. Thus, the word ‘‘professor’’ (the title of these guest speakers) recurs in his talks. b In his presentations, Geoffrey Bible also constantly applied the expression ‘‘D-day’’ to describe remarkable facts in the organization’s history. cSeveral Philip Morris meetings and conferences were held at Richmond, which explains the prominence of the word ‘‘Virginia’’. d The expansion of Miller beer was suggested by Philip Morris’s CEO throughout the set of speeches. It was considered appropriate and necessary to build the company’s profitability with other products than cigarettes

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Figure 3 Clusters, factors, image restoration strategies, and frames timeline: the frames presented to the company’s internal and external audiences are represented in the timeline by the most influential words in the network maps

Bolstering. According to image restoration literature, when facing a credible attack, individuals and organizations describe their positive qualities and past successes to strengthen audiences’ positive feelings toward them (Benoit, 1997b; Benoit and Brinson, 1999b). Geoffrey Bible’s discourse – as represented by the 1994 and 1995 maps[4] – clearly illustrates this tactic. Philip Morris’s CEO bolstered the company’s history of profitability, constant increases in market share, and continuous international growth, describing the organization in a positive light. ‘‘Tobacco’’ occupies a key position in speeches to both internal and external publics, implying that, during the first stage of the crisis, audiences’ expectations of the company’s responses were assumed to be the same. Moreover, in these years’ maps, business growth represented an important link in the messages to both publics and is illustrated by the words ‘‘market’’, ‘‘increase’’, ‘‘product’’, and ‘‘new’’. Bible’s statement during his first public speech as Philip Morris’s CEO at the Forum Club in November 11, 1994 illustrates this bolstering approach: ‘‘Well, the more things change . . . the more things stay the same. Today, tobacco continues at the core of our strength and has been the foundation on which we have built the largest consumer packaged goods company in the world’’. Bible’s remark at a press conference in March 1995 also exemplifies his bolstering efforts: ‘‘The sky is the limit of our growth’’. In 1996, Bible also chose bolstering when addressing Philip Morris’s external constituency. Opening a talk to the company’s investors, he stated: At Philip Morris – besides our fantastic people – there are three special ingredients that go into making us a champion, too. They are: powerful brands, marketing savvy, and unmatched channels of distribution. Quite simple. They are the qualities that define Philip Morris. They are our fundamental strengths. And they are fueling our perfectly extraordinary performance (February 18, 1996).

Thus, Bible met the initial challenges to the tobacco industry with a classic rhetorical strategy – bolstering. When facing an imminent threat, corporations and individuals tend to

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overstate their qualities and accomplishments, attempting to build a shield of positive feelings against potential attacks. However, as the situation unfolded, he augmented that basic strategy with frames that represented more hard-hitting rhetorical strategies – minimization and attack. Minimization. In the 1994 and 1995 maps, ‘‘FDA’’, ‘‘regulation’’, and ‘‘challenge’’ (mentioned externally) and ‘‘litigation’’ (mentioned internally) show the seminal stage of the company’s concerns about litigation issues and legal restrictions on the tobacco industry. Philip Morris’s CEO’s speeches embodied the organization’s tactics to cope with these matters through minimization, a rhetorical strategy aimed at diminishing the offensiveness of the act to alter audience perceptions of it (Benoit and Czerwinski, 1997). Bible repeatedly employed minimization to assuage audience concerns about burgeoning lawsuits. For example, talking to investors in November 1994, Philip Morris’s CEO openly disregarded litigation and FDA initiatives as intimidating. He stated: ‘‘We do not see, in any of the challenges on the radar screen – including FDA, legislation, and litigation – any significant threat to our business performance over the next several years’’. In February 1996, at an internal conference, he once more downgraded the significance of litigation and health issues, claiming these matters would not hamper Philip Morris’s growth, and the company’s main priority still was ‘‘[to] win the loyalty of smokers through superior marketing, and constant innovation to answer their demands’’. Attack accuser. Both internally and externally, 1996 maps show a transition to the second temporal cluster and crisis stage. During this time, litigation issues became serious matters. While the majority of Bible’s speeches (14 out of 20) were oriented to the organization’s external publics, the map of speeches to the internal publics clearly represents this transition. In the 1996 map, ‘‘litigation’’, ‘‘issue’’, ‘‘FDA’’, and ‘‘leadership’’ assume a central position. These words suggest the rhetorical strategy of attacking one’s own accusers, challenging their credibility and image. Assuming the victim’s position, Philip Morris challenged the accuracy of health activists’ accusations. Bible’s statement at the company’s management conference after commenting on media coverage of legal cases involving Philip Morris illustrates this strategy: We’re being vilified by the media. We’re also being targeted by a clique of misguided zealots who have appointed themselves the arbiters of the kinds of products the rest of America should – and shouldn’t – be allowed to use and enjoy (June 3, 1996).

This quotation illustrates a new frame that will be applied during the next stage of the crisis – the choice of smoking. The CEO’s statement describes anti-tobacco activists (misguided zealots) functioning as arbiters, never appointed for such position, who decide to take control of other people’s right to decide about their personal lifestyle. The same frame was later explored in the CEO’s messages using the technique of transcendence to portray Philip Morris as a guardian of personal liberties. The transitional year of 1996 also represents the first instance where different image repair messages were applied to internal and external publics. Internally, the strategy of attacking the accuser was generally applied; however, externally, Bible chose the strategy of bolstering the organization’s positive characteristics to reduce the gravity of potential litigation and legal restrictions. Both strategies seem to have the same final goal: to diminish the intimidating seriousness of legal issues and litigation. Nevertheless, the means applied differ significantly. To the company’s employees, Bible called into question the credibility of anti-tobacco arguments. However, the powerful yet limited tactic of attacking one’s accuser should be grounded on facts, otherwise it will fall short (Benoit, 1997b; Benoit and Hirson, 2001). Perhaps for this reason, when addressing Philip Morris’s investors, the CEO instead concentrated on bolstering the company’s profit-making capabilities. Cluster 2 (1997 and 1998): the crisis stage. Cluster 2 speeches match the frame represented by factor 2 – ‘‘litigation issues and legal restrictions’’. These speeches come from the most contentious years – 1997 and 1998 – and epitomize the most acute stage of the crisis. Reflecting the seriousness of the crisis faced by the company, the most representative words of this period are: ‘‘Congress’’, ‘‘Congressman’’, ‘‘challenge’’, and ‘‘litigation’’. The

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gravity of the challenges facing Philip Morris was also reflected in the use of transcendence as the main rhetorical strategy used in the speeches from this time period. Transcendence. Despite the looming crisis represented by the growing number and intensity of litigation and legal restrictions during 1997 and 1998, Philip Morris’s CEO’s discourse aimed at reframing the legal climate to focus on the high values of the company. Such rhetorical choice describes the strategy of transcendence, which tries to reframe the wrongdoing, putting it into a broader, more favorable context (Benoit, 1997b; Benoit and Brinson, 1999a). Bible both emphasized the importance of maintaining personal liberties and placed those individual behaviors within the context of the American society as a whole: a clear invocation of rhetorical transcendence. Bible’s speech to Philip Morris’s investors illustrates the tactic. His message first highlighted the organization’s values, then the importance of personal liberties, and finally, Philip Morris’s commitment to the greater good of society: One of the best things about working for Philip Morris is that I’ve had the opportunity to fight for principles I believe in and that I believe many of you share: individual liberty, freedom of choice, and a healthy skepticism of government bureaucracy and over-regulation. The proposed resolution represents an opportunity to replace decades of conflict and controversy by a compromise that respects the rights of adults who choose to smoke and attacks a national problem – underage use of tobacco products. I believe that on the whole the proposed tobacco resolution is good for our young people, good for our country, and good for everyone who makes their living from tobacco (February 14, 1997).

While the most relevant words in the maps from 1997 and 1998 maps correctly represent the main issues of this period – litigation and legal restrictions – they only partially describe the underlying image repair strategy of Philip Morris’s CEO. Transcendence involves reframing the situation, and the close analysis of Bible’s speeches shows that litigation and legal restrictions matters were redefined through appealing to individual liberties – the choice of smoking – and the greater good of society as a whole. Cluster 3 (1999-2001): the post-crisis stage. The years from 1999 to 2001 represent a less contentious period for Philip Morris and can be described as the post-crisis stage. After the Master Settlement Agreement in 1998, the next three years saw major steps in the organization’s efforts to rebuild its reputation. The organization’s discourse aimed to overcome the dark period, highlighting lessons learned and novel social initiatives sponsored by the company. These goals were stated and reinforced through bolstering and transcendence. Like the previous two clusters and factors, the frame represented by factor 3 primarily appeared during speeches within temporal cluster 3. ‘‘Change’’, ‘‘leader’’, ‘‘dollar’’, and ‘‘result’’ are the words comprising factor 3, which accordingly was named ‘‘leading changes’’. Philip Morris’s discourse, through the frames explored by its CEO’s speeches, depicted the organization playing a leadership role in the changing tobacco industry environment, primarily by returning to a bolstering strategy. Bolstering. The year 1999 is transitional. Litigation issues were still vividly present; nonetheless, important new themes began to take shape in Bible’s speeches. In the 1999 map, ‘‘outstanding’’, ‘‘American’’, ‘‘company’’, ‘‘good’’, and ‘‘community’’ occupy key positions. Philip Morris’s efforts to bolster the company’s investments in social programs exemplify the use of corporate responsibility as a strategic asset to recover from crises. At the UNCF Anniversary Dinner in April 1999, the organization’s CEO affirmed: When we think about how we live our lives, we think not just in terms of our jobs but also about what it means to be good neighbors, good citizens, and good parents. I am truly proud of my company’s record of support for worthy causes.

This bolstering trend solidified during 2000 and 2001, when the CEO’s speeches moved from a defensive attitude to a proactive position, transcending concrete matters related to litigation and depicting the company as a leader during times of change. Bolstering the company’s profitability, financial solidity and international growth was a recurrent theme during these years, as ‘‘company’’ and ‘‘business’’ – the most influential words in the 2000

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and 2001 network maps – represent. ‘‘People’’, ‘‘great’’, ‘‘leadership’’, ‘‘change’’, and ‘‘team’’ assume central positions as well. Bible’s speech at Philip Morris’s headquarters in Lausanne, Switzerland, in June 2001 illustrates the bolstering strategy. Praising the organization’s employees for their superior efforts and leadership, Philip Morris’s CEO emphasized ‘‘a remarkable rise on the company’s stock price: 91.3 percent in 2000’’. Bible also pointed out the relevance of Philip Morris International (PMI) on such recovery, stating: ‘‘PMI is one of the key reasons investors buy our stocks. They expect strong volume and income growth from PMI, and view you as the engine of superior growth for the future’’. The company’s ongoing profitability and expansion paved the road that, according to its CEO, conducted Philip Morris to a leadership position in the new environment taking shape. Transcendence. Bible sued the same combination of bolstering and transcendence to reach back and reframe the concerns of the mid-1990s in a vastly expanded context, replacing the relatively narrow concerns of marketing strategy and profitability with a clear characterization of the leadership qualities of the entire company. The abstract nature of this transcendent characterization also allowed the CEO to avoid specifics about profitability and ongoing litigation. Bible’s remarks at a business forum in February 2001 illustrate this strategy: ‘‘Where there is change, there is opportunity’’ is a sentence we have all heard many times during our careers. But our recent experiences have lent new meaning to the notion. Where before, we were catching up, we are now getting ahead of the curve, where before there was a resistance to change, now we are embracing it. And by embracing it, we are leading it and finding the opportunities that we might otherwise miss.

Responding to the demands of a completely transformed environment, Philip Morris’s CEO chose to bolster the company’s profitability as a guarantee of future success, even under novel conditions. Furthermore, Bible adopted transcendence as a second rhetorical strategy, avoiding concrete queries concerning litigation and depicting a ‘‘citizen’’ company committed to lead the changes needed to construct a better society.

Discussion: Philip Morris’s discourse – strategically planned or purely reaction? During critical periods one type of corporate discourse gains particular importance. CEOs personify organizations, putting a face on, and setting the tone of, corporate responses to crisis. Moreover, CEOs’ speeches are a fully controlled and planned form of corporate rhetoric, allowing a clear assessment of an organization’s frames and communication strategies. This research has studied the strategies of these messages over the long term, a decade-long crisis. The analysis of Geoffrey Bible’s speeches reveals one way in which organizations attempt to create a rhetorical defense against adverse experiences. The frames adopted by Philip Morris’s CEO represent a sophisticated match between external events and corresponding image restoration strategies. Regarding RQ1, the analysis of the speeches showed that the frames adopted by Philip Morris’s CEO represent different image restoration strategies, selected in response to each stage of the decade-long tobacco crisis. Responding to RQ2, these strategies varied in accordance with the public addressed only in 1996, when the external and internal strategies differed. With that unique exception, the company’s CEO consistently applied the same image repair discourse to the organization’s internal and external publics. However, as addressed by RQ3, the image restoration strategies varied considerably over the period. During the pre-crisis, the CEO focused on bolstering Philip Morris’s history of profitability and growth, minimizing the ominous threats represented by legal restrictions and litigation, and attacking the credibility of anti-tobacco activists’ arguments. In the most severe period of the crisis, his speeches concentrated solely on transcending the concrete accusations and equating the choice of smoking to other personal liberties enjoyed by Americans. The speeches from the post-crisis period were again examples of the use of bolstering and transcendence; nevertheless the foci of both image restoration strategies at this point were leading changes and the qualities required achieving such a task.

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Organizations in crisis should stay attuned to current news events and audiences’ perceptions of them. However, excessive flexibility in corporate responses to crises may instead indicate lack of commitment to organizational values and mission. Philip Morris’s discourse does not suggest a fit with a long-term reputation building plan. The image restoration strategies adopted by Philip Morris’s CEO in his speeches were appropriate for the immediate threat, yet dangerously narrow in terms of long-term reputation building. Based on the speeches, it seems that stakeholders were mostly exposed to bolstering messages, and arguments aiming at transcendence. In the seminal phase of the crisis (1994-1996), Bible’s speeches focused on bolstering the company’s core strengths, minimizing the gravity of the potential threats, and attacking the credibility of its accusers. In the second stage (1997-1998) – the most severe period of the crisis – Bible’s discourse concentrated solely on transcending the gravity of the accusations, attempting to reframe the tobacco crisis in terms of personal liberties. However, these techniques might not have been enough to assuage external audience’s concerns regarding the crisis or to foster a sense of loyalty and trust in the organization. As Benoit and Hirson (2001) argued, ignorance about an accusation may create the idea that the organization is indeed guilty of the charge. Therefore, ignoring the obviously growing number and intensity of litigation and legal restrictions during 1997 and 1998 might have undercut the company’s attempts to overcome the crisis, and in fact increased audiences’ perceptions of offensiveness and responsibility. During the last phase of the crisis (1999-2001), bolstering and transcendence were again the rhetorical choices; at this stage they depicted the organization’s leadership role in the changing global tobacco industry environment and emphasized the organization’s intrinsic commitment to society, using corporate responsibility as manipulative tactic. Despite the seriousness of the legal charges and the health consequences of the organization’s main product – topics never addressed during Philip Morris’s CEO’s speeches – he paradoxically expressed the company’s responsibility for society and commitment to worthy causes. Whereas social initiatives are beneficial to the entire society, such programs cannot simply erase the harms caused by Philip Morris’ main product – cigarettes – to smokers and, indirectly, to society as a whole. It is necessary to question the efficacy of such rhetorical strategies to divert audience attention from the unsolved social issues caused by smoking. The CEO preferred not to address directly the major charges confronting the organization. In this respect, Bible might have benefited from adopting a different strategy – mortification. As Benoit (1997a, b) and Benoit and Brinson (1999a) pointed out, mortification tends to increase an audience’s willingness to forgive a wrongdoing, as well as show that the accused has the courage to accept responsibility. Corroborating this position, Sellnow et al. (1998) affirmed that ‘‘taking some degree of responsibility for the crisis [. . .] can expedite the organization’s effort to rebuild its legitimacy’’ (p. 61). Nonetheless, the mortification strategy should be balanced against its risk of encouraging litigation, and would have represented a risky response in the atmosphere of litigation during the 1990s. Furthermore, Philip Morris’s strategies may have perfectly met stockholders’ expectations, avoiding any step that could have yielded even greater economic losses. Philip Morris’s absolute absence of apology therefore shows the influence of other actors who played a major role in the company’s strategic responses to the decade-long crisis – lawyers. Further research might examine the constraints imposed by corporate lawyers on strategic corporate discourse, with particular reference to the conflict between image restoration strategies and legal maneuvers. In addition, concentrating on bolstering the organization’s qualities, Bible neglected a major aspect of a crisis – fostering a sense of legitimacy. As Massey (2004) and Sellnow et al. (1998) affirmed, legitimacy goes beyond legality and means that a company is perceived by its stakeholders as a good company, one that has a right to continue operations. Bible’s image restoration discourse overlooked this aspect. In effect, concerns about public approval and consumers’ loyalty were not present on the CEO’s talks. In part, this absence may reflect a peculiar characteristic of Philip Morris’s main product – addiction. When consumers are attached to a product due to addiction, approval and loyalty may be less paramount considerations than simple physiological need.

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Conclusion: lessons to be learned Image restoration strategies offer a useful framework to investigate corporate discourse and communicative strategies to overcome crisis events. Specifically with reference to the analysis of CEOs’ messages, this framework helps to unfold carefully planned rhetorical choices. Yet it is important to note that these strategies can fail. Communication is key to overcome organizational exigencies, but it ought to reflect more than merely persuasive maneuvers (Millar and Heath, 2004). Companies’ values and beliefs underlie corporate messages and are the basis to build and repair reputation. If image restoration strategies are to be efficient tools, they must be orchestrated in accordance with organizations’ inner values. Rhetorical tactics can strengthen corporate reputation over the long term only if they are fulfilled with concrete actions. The tobacco company strategies throw into relief one particular characteristic of the image restoration framework: it does not tackle questions concerning moral and ethical issues. The rhetorical strategies exhibited by Philip Morris’s CEO may be based on his organizational inner values – such as profit and freedom of individual choice – and therefore, theoretically, aim at long-term reputational building efforts. However, some corporate values may not be accepted by some segments of society, or in extreme cases, by society as a whole. The tobacco industry, and specifically Philip Morris, may have adopted rhetorical responses to the decade-long crisis of the 1990s that intrinsically represented their values and mission. Whereas such values are widely accepted by the society is another aspect that ought to be considered in the study of corporate responses to crises. Moreover, the influence of these events on societies’ willingness to accept some corporate principles is, indeed, an area little researched as well. Critical events may have such strong consequences on communities that make people change their set of principles. Thus, organizations that operate under totally acceptable premises before an incident may be despised after that. In addition to the points just mentioned, the study of Philip Morris’s discourse, represented in this analysis by its CEO’s speeches during the decade-long tobacco crisis, raises other questions for future investigation. First, the frames chosen by the company varied according to crisis stages and external events; nevertheless, an in-depth analysis of the discourse of the other actors during the crisis may unfold interesting patterns of interaction and influence. Whereas in this study it seems that the company was reacting to attacks from activists and new regulation brought by state and national governments, the cycle of influence may be less linear. In one scenario anti-tobacco activists may, in fact, originate the accusations. In a second one, activist may solely expand initiatives originated by legislators. Finally, activists and industry may act and react intertwined. Furthermore, an investigation of Philip Morris’s other forms of communication, such as advertising and news releases, will certainly broaden the understanding of the organization’s image repair discourse, by extending further material addressing media audiences; a comparison with subsequent coverage could measure the success of rhetorical strategies aimed at these audiences. Finally, comparing the evolution of key rhetorical strategies to financial results may reveal which strategies were effective with that audience as well as the guiding values underlining corporate discourse.

Notes 1. The first LTDT search resulted in 205 entries; after discarding duplicate documents, the dataset totaled 67 different speeches. A list of the speeches’ dates, events, and main public addressed is available from the author. 2. Two speeches from 1994, 12 speeches from 1995, 20 speeches from 1996, five speeches from 1997, nine speeches from 1998, four speeches from 1999, five speeches from 2000, and ten speeches from 2001 were analyzed. 3. Word influence assesses the extent that a word connects concepts that otherwise would be disconnected, creating coherence in a text. The value determining the most influential words ($0.2) was defined by the researcher in order to sort out the most significant words from a large number of words. The values determining words with slightly lesser influence (.0.05 and ,0.2) and the less

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influential words (.0.015 and #0.05) followed the default parameters on the software used for the analysis (see Corman and Dooley, 2006b, p. 18). 4. Because of space restrictions, maps of all 67 speeches are summarized rather than represented graphically; however, they are available from the author.

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Corresponding author Maria de Fatima Oliveira can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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Back to basics: an Islamic perspective on business and work ethics Riham Ragab Rizk

Riham Ragab Rizk is a Teaching Fellow and Accounting and Finance Course Leader at Durham University Business School, Durham, UK.

Abstract Purpose – In the light of major corporate failures worldwide, business ethics have become an increasingly important area of managerial competence and responsibility. Most studies on business ethics in general and the work ethic in particular have been based on the experiences of Western nations, with a primary focus on the Protestant work ethic (PWE) as advanced by Max Weber. This paper aims primarily to explore the Islamic perspective to ethics, which follows the Judeo-Christian tradition as the last of the three great monotheistic religions. Design/methodology/approach – A range of relevant works published over the past two decades is compared with and heavily supplemented by extracts from the Islamic Holy Book, the Qur’an, in order to outline the Islamic approach to business and work ethics. Findings – The paper highlights that within the Holy Qur’an and other aspects of Shari’ah, there is much with which to construct an authentic Islamic approach to ethics. It also highlights the substantial need to examine the work ethic and other work-related attitudes, such as individualism in non-Western settings. Originality/value – The paper contributes to the body of knowledge in several ways. First, it is one of a very limited number of papers that does not use a research instrument created specifically to measure work orientations in a Western setting. Second, it provides a better understanding of cultural variations among nations, by examining the ethical beliefs of the fastest growing religion in the world. Keywords Islam, Business ethics, Literature Paper type Viewpoint

On the Day of Judgement, the honest Muslim merchant will stand side by side with the martyrs (Prophet Muhammed (pbuh)).

Introduction Business ethics, far from being a contradiction in terms, has become an increasingly important area of managerial competence and responsibility (Green, 1994). The reason for this is that lack of information can lead to poor decisions while moral reasoning skills can be powerful tools in long-range planning (Cooke, 1990). Most studies on business ethics in general, and the work ethic in particular, have been based on the experiences of Western nations. The focus has always been on the Protestant work ethic (PWE) as advanced by Max Weber, who prophesied a relationship between Protestantism and capitalism, a notion that has been repeatedly debated in philosophy, theology and economics (see, for example, Furnham, 1984, 1991; Congleton, 1991). Another work-related attitude that is gaining in importance is individualism, the study of which is essential for two reasons: 1. it provides a better understanding of cultural variations among nations (Hofstede, 1980; Triandis et al., 1988; Ali, 1995); and All Qur’anic quotations used in the text have been taken from Ali (1983).

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Like studies of the work ethic, research on individualism has flourished only in the West. Researchers who have performed the limited number of investigations in developing nations have used instruments created specifically to measure work orientations in Western societies. Thus, there is a substantial need to examine the work ethic and individualism in a non-Western setting. This paper aims to do just that. The first section of the paper clarifies the definitions used in the study. Section two outlines the aspects of Islamic Law, Shari’ah, that pertain to business and work ethics. Section three continues with the discussion of the process of internalisation of ethics. The paper concludes with suggestions for further research. Definition Ethics seeks to develop reasonable standards of moral conduct that are universal (Cooke, 1990). After general types of behaviour have been identified as intrinsically right or wrong, a right action can then be classified based on its conformance to the set of moral rules. This approach is called deontology; the word is derived from the Greek and places emphasis on duties. Deontologists base their judgements on a set of ‘‘moral rights’’ people are believed to possess; in other words, any individual has a right to be treated in ways that ensure his dignity, respect, and autonomy. Two operational models emerge: 1. the Golden Rule model, derived from the New Testament, which states that one should treat other people in the same way he/she would want to be treated; and 2. the rights driven or Kantian Model, named for Immanuel Kant, which rests on the assumption that every person has basic rights in a moral universe, and accordingly, an action is morally correct if it minimises the violation of the rights of all stakeholders. Neutral omni partial rule making (NORM) represents a third approach, proposed by Ronald Green, a prominent ethicist. According to Green, deeming an action morally right involves the judgment that it is a kind of conduct members of society would be aware of and would accept, i.e. moral principles should represent the result of free consensus. Within an Islamic context, the term most closely related to ethics in the Qur’an is khuluq. The Qur’an, however, also uses a whole array of terms to describe the concepts of morals or positive values: khayr (goodness), birr (righteousness), qist (equity), ‘adl (equilibrium and justice), haqq (truth and right), ma’ruf (known, approved), and taqwa (piety) (Beekun, 1997). The Islamic work ethic (IWE) is an orientation toward work. It implies that work is a virtue in light of man’s needs and a necessity to establish equilibrium in one’s individual and social life. The IWE stands not for life denial but for life fulfilment and holds business motives in the highest regard (Ahmad, 1976). The concept has its origins in the Qur’an, the sayings and practice of the Prophet Muhammad, who preached that hard work caused sins to be absolved, and in the legacy of the four rightly guided Caliphs who led the Islamic nation after the prophet’s death (Ali, 1995).

The ethical environment The ethics question warrants exploration on several levels: B

at the macro/professional level, which focuses on the ethical rightness of the system;

B

at the corporate level, with reference to its decisions that impact others; and most importantly

B

at the level of the individual within an entity.

While macro and entity conditions are regarded as important to the creation of a climate that nurtures and influences ethical decision-making, the person on the firing line is the individual responsible for a decision. In words attributed to former US president Harry Truman, ‘‘the buck stops here’’, i.e. with the individual. The hope is that people will ultimately have a sense of personal values transcending the laws and rules of institutionalised ethics (Gibbons, 1991).

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The macro picture In secular societies, legal interpretations are based upon contemporary and often transient values and standards. Many perceive that people in business are less ethical than they used to be. Gaps in professional rules exacerbate this perception. One noteworthy example involves the accounting profession. The Financial Accounting Standards Board (FASB), the top rule maker of the profession in the USA, issued a series of conceptual statements. These statements flow from the FASB’s theme of decision usefulness. Investors and creditors are presumed to be the primary decision makers. Although the premise was supported by only about one third of the profession, the FASB has diligently continued in the ‘‘new’’ direction. There has been no stakeholder approach that would have seen corporations as involved in a network of relationships and of mutual responsibility. Beyond this, critics of the profession have discerned a ten-year pattern of responding to an interest in ethics by passing regulations and then not paying any attention to them (Tillman, 1989). Green has discussed the views of some who have suggested that a manager’s responsibility to make money is constrained only by the need to obey the law, to keep the firm’s strategic interests in mind, and to respect a minimal set of ethical values. Yet, one would think that the limited liability of corporations imposes responsibilities. The stakeholder approach would require management to apply moral oversight decisions that may inflict harm on parties, often not directly involved in a company’s dealings. The company Adoption of a comprehensive corporate ethics program should begin at the top of the corporate structure and should be integrated with an organisation’s system of rewards and punishments. The accounting profession has promoted the idea of an ethical tone at the top of a corporation. Unfortunately, this emphasis is incomplete. Management must propagate awareness of ethics, at the top, middle, and bottom. All levels of management should see that awareness of fraud exists and should monitor transactions at levels below their own. By taking steps to monitor activities of those reporting to them, managers reduce their own exposure to legal actions and undesirable publicity. The creation of corporate codes of conduct received an important boost when the United States Sentencing Commission made the existence of a proactive antifraud program, including codes, an important mitigating circumstance when sentences of offenders are determined. The subjects covered by a code of conduct include compliance with laws, including those pertaining to political contributions, avoidance of conflicts of interest, fair dealing with customers, vendors, and employees, and control over executive bonuses. The announcement of a corporate code is only the beginning. Once people have been told what is expected, expectations must be reaffirmed time after time. For reinforcement, the code should be discussed at meetings of managers and key employees; interpretations or clarifications may also be desirable. When appropriate, policies should be updated, amended, clarified, or modified. Confirmation may need to be obtained from employees periodically, attesting that they understand the policy and have complied with its terms. It may also be desirable to seek evidence of compliance by appropriate tests and/or investigations (Pomeranz, 1997). Compliance with law does not represent an adequate ethical response by business, since the law prohibits only the most serious forms of harm, by attaching civil or criminal penalties. Mere legal compliance violates not only a community’s moral sensibilities, but also the law itself, as it changes to reflect them. While compliance with laws is part of ethics, ethical conduct far transcends compliance. The individual Individuals come to work with different values. Studies in ethics have identified the following as factors that may affect one’s ethical behaviour: stage of moral development, personal morals and values, family influences, peer influences, life experiences and situational factors. As Western influences and experiences differ greatly from those found in, for

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example, East Asian or Middle Eastern societies, it stands to reason that there is a substantial need to examine ethics in a non-Western setting.

The religious imperative Ethical teachings of most religions are largely compatible with each other and with secular views. Religious imperatives on ethics reflect a steady evolution: God revealed the truth of monotheism through Abraham, the Ten Commandments were revealed to Moses, Jesus taught that we are to love our neighbours as ourselves, and Muhammad explained how we were to love that neighbour. Jewish ethical teachings are codified in the Torah and the Talmud. The latter represents a compilation of Jewish oral teachings; it represents guidance to everyday conduct in the form of laws, homilies and anecdotes. Law, as well as ethics, was considered inseparable from religion; every offence represented an act against the name of God. The Torah’s Ten Commandments represent Judaism’s most significant contribution to ethics (Lewis, 2001). Christian writers generally supported the Judaic values, especially when related to the sanctity of the family and home and charity to all. The relationship to Judaism bears repetition. J.H. Yoder, a Mennonite theologian, has emphasised that the real Jesus is not to be discovered in discontinuity with Judaism, but in continuity with the extraordinarily diverse modes of life we now call Jewish (Novak, 1992). Arguably, had Jesus not been crucified in his early thirties, it is likely that he would have continued to focus on ethical teachings. Jesus may be regarded as a perfectionist who, primarily, as reported in Matthew, sought to enrich the faith. One teaching stands out as truly original and unique: His words about loving your enemy (Smith, 1986). Another example of Christian contribution is represented by St Thomas Aquinas, who viewed moral goodness and virtue as conduct conducive to the true end of man: to see God. Thus, faith, hope, and charity constitute the distinguishing morality of Christianity. The Qur’an represents a divine message conveyed to the Prophet Muhammad by the Archangel Gabriel. However, a new perspective was added. Muhammad was a successful businessman. Consequently, the Qur’an includes rules not only for manners and hygiene, and marriage and divorce, but also for commerce and politics, interest and debts, contracts and wills, and industry and finance. Islamic law, the Shar’ia, represents the sum of duties required by God of human beings with respect not only to God, but also to one’s fellows. It is the infusion of divine purpose into human relationships that distinguishes Islamic law from the secular jurisprudence found in most developed countries (Kennedy, 1993). Beliefs about the work ethic have varied over time and place. Islam, unlike Christianity, views man as free from primordial guilt and holds that engagement in economic activities is an obligation. An earlier Jewish belief viewed work as sinful activity, ‘‘If man does not find his food like animals and birds but must earn it, that is due to sin’’ (Novak, 1992). Later, however, both Christians and Jews shifted their attitudes toward work. It is this shift in orientation that has arguably paved the way for capital accumulation and the quest towards improved economic welfare (Ali, 1995). Attitudes toward work in Islamic societies are almost opposite to those in the West and stem from numerous sayings attributed to Prophet Muhammad such as ‘‘no one eats better food than that which he eats out of his work’’. Imam Ali, the fourth successor of the Prophet (598-661 AD ) is reported to have stated ‘‘Persist in your action with a noble end in mind [. . .] Failure to perfect your work is injustice to yourself’’. In a general sense, ethics is concerned with the development of reasonable and universal standards of human conduct. From the time of Muhammad, Muslims have summed up the essence of Islam as obedience to God and love of humanity. The origins and influences on the Shari’ah will now be explored.

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A Prophet arises in Arabia Muslims refer to the last phase of pre-Islamic Arabia as the time of ignorance ( jahiliyah). The Meccan tribe of Quraysh had become the era’s nouveau riche because it controlled access to Arabia’s most important shrine, the Ka’aba. The populace had become spiritually desolate and enjoyed little in the way of physical or social security. Their longing for a divine revelation was fulfilled in 610 AD when Muhammad, a respected merchant already so renowned for his personal integrity that he was known to all as al amin (the trustworthy), felt himself enveloped by a divine presence. All monotheistic religions assume that most individuals will be persuaded to adopt acceptable behaviour only by instilling within them the fear of God. However, Islam emphasises human along with divine relationships. Throughout his life, Muhammad is said to have allowed his actions to speak for themselves. For example, al Tin ilidhi, whose writings are an important source of Islamic law, tells the following story: The Prophet passed a pile of grain. He put his hand into its midst and felt moisture. He exclaimed: ‘‘Oh merchant, what is this?’’ The owner of the grain responded: ‘‘It has been damaged by the rain, oh Prophet Muhammad.’’ The Prophet asked: ‘‘If this is the case, why did you not put the damaged grain on top of the pile so that people can see it?’’ The Prophet concluded by making clear that ‘‘whoever practices fraud is not one of us’’.

The origins of the Shari’ah The Shari’ah, wherein Muslim ethics are anchored, has four sources: 1. the Qur’an, which expresses the work and will of God; 2. the Sunnah, which is the body of customs and practices based on the words and deeds of Muhammad and elaborated on by scholars; 3. Islamic law, which draws on the first two sources and is solidified by consensus; and 4. an individual’s own conscience when the path has not been clarified by the first three sources. As a result, the Shari’ah addresses all questions facing individuals in a dynamic society. Also, interpretive jurisprudence (ijtihad) and deduction by analogy (qiyas) provide mechanisms for meeting the challenges of different periods. The Qur’an, like the divine scriptures that preceded it, forbade lying, stealing, adultery, and murder. It also went one step further by providing a new perspective in the form of rules for such fundamental societal institutions as marriage, kinship, inheritance, warfare, and economic activity. It also focused on commerce and politics, interest and debts, contracts and wills, and industry and finance. Every act that would remove righteousness and bring evil, whether it benefits the perpetrator or not, is forbidden in Islam. The Qur’an is quite explicit in this regard: ‘‘it is immoral to acquire possession of income or wealth by stealing, cheating, dishonesty, or fraud’’ (Qu’ran 83: 1-4). The laws developed by the Islamic legists drew on the concrete obligations declared in the Qur’an and supplemented by the recorded recollections of the sayings (hadith) and deeds of the Prophet (sunna). The Shari’ah has remained unsurpassed as a statement of social justice and ethical principle (Bashir, 1993). Islam holds that man’s life is given significance by the promise of eternal bliss for those who have qualified for such a reward by having followed God’s commands (Endress, 1998). Muslims express their faith in life after death – a prior appointment on Judgment Day, but an eternal life in Paradise (Fisk, 1996). In other words, each soul will be judged for the moral and ethical choices made on earth by that individual; his/her happiness or misery in the hereafter depends on how well s/he has observed God’s laws (Smith, 1986) and exercised responsibility. The Qur’an designates the Muslim community as witness before God, as well as mankind, in regard to the espousal of justice:

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Ye who believe! Stand out firmly for justice, as witnesses to God. Even as against yourselves, or your parents or your kin, and whether it be (against) rich or poor: For God can best protect both (4: 135).

Just as the religion of Islam requires individuals to adore God, so too do the social system and the ethics of Islam regulate the corporate or organisational life of individuals: it is made clear that each person is responsible for his actions (Endress, 1998) and will be called to account for those actions. Although its importance is primarily spiritual and moral, some aspects of Shari’ah have been written into the civil law in numerous countries. Moreover, there is a current tendency to move toward an Islamic economic system in a large number of Islamic nations and to restore the Shari’ah as the basic source of legislation. There are currently over 40 Muslim states, four of which (Afghanistan, Iran, Saudi Arabia, and Sudan) have the Shari’ah as their primary law. In 24 other countries, the Shari’ah influences civil law, and in the remaining 13 it has no influence at all.

Economic crimes The record of economic crimes of the past decade alone is vast. Meaningful discussion of individual crimes is beyond the scope of this paper. However, a survey by Joseph Wells, a prominent US fraud auditor, estimates the value of the annual US gross national product attributable to fraud at a staggering US$400 billion (Pomeranz, 1997). This was well before the days of Enron and Parmalat. Certain types of fraud seem to be by-products of our late era of the industrial age. For example, consider such types of fraud as collusive bidding, paying for substandard work, or unneeded ‘‘change orders’’. As might be expected, the Qur’an deals with crime and potential crime in rather broad terms, and not in specifics. Nonetheless, the condemnations ring out loudly, clearly, and pertinently; thus, the Qur’anic injunctions refer to fraud and other violations of prescribed conduct vis-a`-vis contracts and trusts. Below, are a few samples of Qur’anic prescriptions, which can be applied to different categories of transgressions. On contracts: Ye who believe! When ye deal with each other, in transactions involving future obligations in a fixed period of time, reduce them to writing. Let a scribe write down faithfully as between the parties (2: 282).

On trusts: Allah doth command you to render back your trusts to those to whom they are due; And when ye judge between people that ye judge with justice (4: 58). Ye that believe! Betray not that trust of Allah and the Messenger, nor misappropriate knowingly things entrusted to you (8: 27).

On fraud: Woe to those that deal in fraud. Those who, when they have to receive by measure from men, exact full measure, but when they have to give by measure or weight to men, give less than due (83: 1-3).

Internalisation of ethics Ethical teachings should lead individuals to acquire the capacity for formulating a process that helps them arrive at their own decisions. With divine scripture as a guideline, individuals will be helped to take sequential steps toward higher moral reasoning. In terms of moral theory, ethics training should culminate in an individual internalised action-guided code. In time, such an endogenous concept may be expected to supplant the skin deep ethical rules that but slightly affect current business dealings. On the contrary, Islamic ethical principles will determine individual choices, based not only on profit maximisation, but also on the maximisation of social welfare (Pramanaik, 1994).

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Islamic-oriented management researchers have noted the beneficial effects of internalisation of ethics. For example, Ali (1995) has observed ‘‘the internalisation of Islamic concepts strengthened certain qualities: honesty, trust, solidarity, loyalty and flexibility. When Arabs internalised principles of Islam that strengthened cooperation and world view, their achievements were great’’. The former prime minister of Bosnia contrasted the number of accused Muslim war criminals (one) with the number of Serb and Croat defendants (50). He attributed the difference in the scale of war crimes to the internalisation of Islamic ethics by Muslim soldiers (Pomeranz, 1997). Sound moral judgments require knowledge of many types and many matters: command of evaluative languages, skills of recognition of situations and their morally relevant features, information about people and the world. Children tend to progress from a state in which they are subject to parental guidance to an autonomous state in which they can live up to their own ideals. Understanding requires the construction of a personal theory of what is to be understood; accordingly, students must build their own theories, and not simply parrot those of others (Davis and Ludvigson, 1995). Davis and Ludvigson (1995) have also suggested manipulating reinforcement contingencies, such as disciplinary procedures, and encouraging the learning of relevant rules. Students should create for themselves an internal dialogue that becomes part of their self-regulatory function. Their morality will be based on an Islamic-oriented decision making process, taught to them through examples, and firmed up through practice. Rahman (1996) focused on Islamic basics in the work place: One aspect is to recruit those who are most likely to have values and virtues. This dimension requires a stringent screening mechanism. The second aspect consists of continual on-the-job-education in the aforementioned values and virtues. One incentive mechanism is to keep an employee well-paid; another is to appoint an employee on a probationary basis, until the internalisation of the values and virtues in question have been demonstrated.

The internalisation of ethics involves knowledge of threats to an organisation’s people, facilities, and resources, awareness of those ethical principles which are to be transferred and internalised, expertise in the internalisation of ethics, and knowledge of relevant laws. Prophet Muhammad, it is argued, helped set the stage for the internalisation of Islamic ethics. It is written that when asked: ‘‘What is goodness?’’, He replied: ‘‘That you worship God as if you see Him, for if you see Him not, surely He sees you’’ (Rahman, 1996).

Conclusion The Shari’ah has echoed throughout the past 1,400 years as a doctrine of ethics. Its continuing vitality is illustrated in the words of the late Rafiq al Hariri, who served for several years as the businessman-prime minister of Lebanon. He attributed his successes as a businessman and a statesman to his observance of Islamic moral and ethical precepts: ‘‘I cannot imagine life without principle or law. Nothing can go on without a basis of religion, law, principles, and morals’’. Islam, in its purest form, is much more than a faith: it is an indivisible unit, a political system, a legal system, an economic system and a way of life. The economy, like other activities, is governed by moral rules and mechanisms designed to achieve progress through the ideal use of resources and the protection of human values. Although it is not easy to locate societies where Islamic values, morals and ethical principles are truly implemented in every sphere of life, as dictated by the Qur’an and Sunna, this does not nullify the validity of the model itself. The desire for such a model has always been, and will always exist in both Islamic and non-Islamic societies. Empirical studies investigating how far the affairs of businesses in Muslim majority societies actually fit with the prescribed model could be quite revealing and hence, worthy of pursuing. Like studies of the work ethic, research on individualism has flourished only in the West. Researchers performing the limited number of investigations in developing nations have used instruments created specifically to measure work orientations in Western societies. Thus, there is a substantial need to examine the work ethic and individualism in a non-Western setting.

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References Ahmad, K.U. (1976), ‘‘The economic development of Bangladesh’’, Book review, Economica, Vol. 43 No. 172, pp. 438-9. Ali, A.J. (1995), ‘‘Cultural discontinuity and Arab management thought’’, International Studies of Management & Organization, Vol. 35 No. 3, pp. 3-70. Bashir, A. (1993), ‘‘Ethics, individual rationality and economic gains: an Islamic perspective’’, Humanomics, Vol. 9 No. 3, pp. 66-73. Beekun, R.I. (1997), Islamic Business Ethics, International Institute of Islamic Thought, Herndon, VA. Chow, C.W., Sheilds, M.D. and Yoke, K.C. (1991), ‘‘The effects of management controls and national culture manufacturing performance: an experimental investigation’’, Accounting, Organizations & Society, Vol. 16 No. 3, April, pp. 209-26. Congleton, R.D. (1991), ‘‘Ideological conviction and persuasion in the rent-seeking society’’, Journal of Public Eonomics, Vol. 44 No. 1, February, pp. 64-87. Cooke, T.E. (1990), ‘‘An assessment of voluntary disclosures in the annual reports of Japanese corporations’’, The International Journal of Accounting, Vol. 26, pp. 174-89. Davis, S.F. and Ludvigson, H.W. (1995), ‘‘Additional data on academic dishonesty and a proposal for remediation’’, Teaching of Psychology, Vol. 22 No. 2, pp. 119-221. Endress, G. (1998), An Introduction to Islam, Columbia University Press, Irvington, NY. Fisk, R. (1996), ‘‘Between faith and fanaticism’’, The Independent, November 9, p. 20. Furnham, A. (1984), ‘‘Work values and beliefs in Britain’’, Journal of Occupational Behavior, Vol. 5 No. 4, October, pp. 281-91. Furnham, A. (1991), ‘‘The protestant work ethic in Barbados’’, Journal of Social Psychology, Vol. 131 No. 1, February, pp. 29-43. Gibbons, F. (1991), ‘‘Self-esteem, similarity and reactions to active versus passive downward comparison’’, Journal of Personality & Social Psychology, Vol. 60 No. 3, March, pp. 414-24. Green, F. (1994), ‘‘Centesimus annus: a critical Jewish perspective’’, Journal of Business Ethics, Vol. 13, pp. 945-54. Hennessy, J. (1990), ‘‘The interaction of peripheral cues and message arguments on cognitive responses’’, Advances in Consumer Research, Vol. 17 No. 1, pp. 237-43. Hofstede, G. (Ed.) (1980), Culture’s Consequences, Sage Publications, Thousand Oaks, CA. Kennedy, E. (1993), ‘‘Ethics and services marketing’’, Journal of Business Ethics, Vol. 12 No. 10, October, pp. 785-95. Lewis, M. (2001), ‘‘Islam and accounting’’, Accounting Forum, Vol. 25 No. 2, pp. 103-27. Novak, D. (1992), Jewish Social Ethics, Oxford University Press, New York, NY. Pomeranz, F. (1997), ‘‘The Accounting and Auditing Organization for Islamic Financial Institutions: an important regulatory debut’’, Journal of International Accounting, Auditing and Taxation, Vol. 6 No. 1, pp. 123-30. Pramanaik, A. (1994), ‘‘The role of family as an institution in materializing the ethico-economic aspects of human fulfilment’’, Humanomics, Vol. 10 No. 3, pp. 85-110. Rahman, A.R. (1996), ‘‘Administrative responsibility: an Islamic perspective’’, American Journal of Islamic Social Sciences, Vol. 3 No. 4, pp. 497-517. Smith, H. (1986), The Religions of Man, Perennial Library, New York, NY, pp. 295-334. Tillman, G. (1989), ‘‘Lender litigation: variable interest rates and negotiability’’, American Business Law Journal, Vol. 27 No. 1, Spring, pp. 121-30. Triandis, H., McCusker, C. and Hui, C.H. (1988), ‘‘Multimethod probes of individualism and collectivesm’’, Journal of Personality & Social Psychology, Vol. 59 No. 5, pp. 1006-20.

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Further reading Abdul-Rahman, A.R. and Goddard, A. (1998), ‘‘An interpretive inquiry of accounting practices in religious organizations’’, Financial Accountability and Management, Vol. 14 No. 3, pp. 183-201. Afshari, R. (1994), ‘‘An essay on Islamic cultural relativism in the discourse of human rights’’, Human Rights Quarterly, Vol. 16 No. 2, pp. 235-76. Alhabshi, S.O. (2001), Social Responsibility of the Corporate Sector, Institute of Islamic Understanding Malaysia, Kuala Lumpur, pp. 1-5. Ali, A.Y. (1983), The Holy Qur’an: Text, Translation, and Commentary, Amana Publications, Beltsville, MD. Badawi, J. (2001), ‘‘Toward a spirituality for the contemporary organization’’, paper presented at the conference Bridging the Gap Between Spirituality and Business, Santa Clara University, Santa Clara, CA, pp. 66-79. Baydoun, N. and Willet, R. (2000), ‘‘Islamic corporate reports’’, ABACUS, Vol. 36 No. 1, pp. 71-90. Beekun, R.I. and Badawi, J. (1999), Leadership: An Islamic Perspective, Amana Publications, Beltsville, MD. Cone, M. (2003), ‘‘Corporate citizenship: the role of commercial organizations in an Islamic society’’, Journal of Corporate Citizenship, Vol. 9, pp. 49-66. Cook, M. (2001), Forbidding Wrong in Islam, Cambridge University Press, Cambridge. Denny, F.M., Corrigan, J., Eire, C. and Jaffee, M. (1998a), Jews, Christians, Muslims: A Comparative Introduction to Monotheistic Religions, Prentice-Hall, Englewood Cliffs, NJ. Denny, F.M., Corrigan, J., Eire, C. and Jaffee, M. (1998b), Readings in Judaism, Christianity and Islam, Prentice-Hall, Upper Saddle River, NJ. Gibb, H.A.R. (1962), Studies on the Civilization of Islam, Princeton University Press, Princeton, NJ. Harahap, S.S. (2003), ‘‘The disclosure of Islamic values – annual report’’, Managerial Finance, Vol. 29 No. 7, pp. 70-89. Husted, B. (2003), ‘‘Governance choices for corporate social responsibility: to contribute, collaborate or internalize?’’, Long Range Planning, Vol. 36, pp. 481-98. Jaggi, B. and Low, P.Y. (2000), ‘‘Impact of culture, market forces and legal system on financial disclosures’’, The International Journal of Accounting, Vol. 35 No. 4, pp. 495-519. Mutahhari, M. (1985), Fundamentals of Islamic Thought, Mizan Press, Berkeley, CA. Roxas, M. and Stoneback, J. (1997), ‘‘An investigation of the ethical decision-making process across varying cultures’’, The International Journal of Accounting, Vol. 32 No. 4, pp. 503-35.

About the author Riham Ragab Rizk is a Teaching Fellow and Accounting and Finance and Programme Director for the Bachelor of Arts degree in Accounting and Finance at Durham Business School. Dr Rizk’s main areas of research include international disclosure practices, CSR, business ethics and the influence of religion on accounting. Riham Ragab Rizk can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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Call for papers Social Responsibility Journal Special issue on

Corporate social responsibility in transitional economies Guest Editor: Maria Aluchna, Warsaw School of Economics, Poland Corporate social responsibility is an important topic of international debate among academics and regulators as well as practitioners. The issues involved are of course challenging for all involved but become even more challenging in the case of transitional economies, with their attempts to develop a sound institutional framework and strong norms for corporate activity. However, transitional economies are characterized by weaker employee protection, lower level of citizen activity and NGOs experience. they are by definition therefore heavily exposed to the dangers of violating human and employee rights, corruption, environment damage under the pressure of foreign investors, scandals, frauds and exploitation. The aim of this special issue it to identify main problems and challenges of transitional economies, tracing their development and initiatives towards strengthening corporate social responsibility.

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Papers addressing any aspect of this theme are invited. Possible aspects include (but are not limited to): . Employee rights and codes of conduct.

All papers will be subject to the normal blind refereeing process. Authors wishing to discuss their paper prior to submission may contact the Guest Editor.

NGOs and citizens activism. . Environmental management and sustainable development.

Editing details

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CSR initiatives. CSR regulation at national, regional (e.g. EU) and international level.

Corporate philanthropy. . CSR and domestic entrepreneurs. . Ethics, value and corporate behavior. . Corporate governance and code of best practice. .

Protection of minority rights. . Corporate scandals and frauds. .

Corruption and ways to fight corruption

Submission details The special issue will be published in late 2008. The deadline for submission of full papers is 1 April 2008 but early submission is encouraged. Authors should submit their manuscripts electronically (preferably in Word format) to Maria at maria.aluchna@ sgh.waw.pl The length of submitted paper should not exceed 9,000 words including all references, tables, figures, author bios, abstract and keywords, although in some cases, involving mainly the reporting of qualitative data, longer manuscripts may be accepted.

The front page should contain the title of the work, list authors’ names, affiliations and contact details. . The abstract should contain no more than 300 words. . Please use 12pt Times New Roman, 1.5 spaced. .

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All other details can be found at the journal web site: http://www.emeraldinsight.com/info/journals/srj/ notes.jsp

Call for papers Social Responsibility Journal Special issue on

Globalization, sustainable development and socially responsible initiatives in developing countries Special Issue Guest Editor: Professor Ananda Das Gupta, Associate Professor (HRD area), Indian Institute of Plantation Management, Bangalore, India E-mail: [email protected] Year of issue: 2009 The global scenario The growing international and domestic interest in CSR stems largely from the concerns held by many in every society about the real and perceived effects of rapid globalization. The interest has been reflected in the expectation that globalization must proceed in a manner that supports sustainable development in all regions of the world. People insist that the activities of corporations should make a positive contribution not only to the economic development and stability of the countries in which they operate, but also to their social and environmental development. Failure to respond to such an agenda satisfactorily will contribute to increased social tensions, environmental degradation and political upheavals. Good corporate conduct makes an important contribution to sustainable development in any community and thus goes a long way toward responding to the concerns that globalization raises. Many companies and business associations have recognized the importance of CSR. Not very long ago, the dividing line between business and society appeared to be clearly drawn. According to the economist Milton Friedman, ‘‘There is one and only one social responsibility of business: to use its resources and engage in activities designed to increase its profits.’’ This view no longer prevails. The CSR agenda is a complex one, requiring co-operation among a wide variety of stakeholders to be

addressed effectively. Improved dialogue between the private and non-governmental sectors is one positive pattern emerging from recent corporate social responsibility trends. While early relationships were often characterized by mistrust and misunderstandings that fed a cycle of opposing actions and reactions, today stakeholders are increasingly recognizing the value of multi sector dialogue or partnerships to achieve substantive, long-term reform. Such a dialogue can facilitate a better understanding of the expectations and concerns of key stakeholders, and it can also act as a forum where debates over differences are more about identifying mutually acceptable solutions and practical implementation steps than reiterating entrenched, non-retractable positions. Forward-looking companies and NGOs are working with their stakeholders and, in the process, are benefiting from the expertise of all involved. Responsible development brings major challenges, and no one stakeholder is capable of adequately responding to them alone. The international community has policy tools to influence business activity within and between nations, and to help ensure that globalization proceeds in a way that benefits all. These tools include legislation and regulatory frameworks, voluntary compliance with an agreed set of standards monitored by a third party, or self-regulation by businesses, often in conformance with voluntary codes of conduct.

Call for papers Balancing corporate investment with community investment is the way of the future. With growing public interest and concern regarding the sustainability of communities as globalization deepens, it will be necessary to show that the nations are working together to ensure that the activities of the business community make a positive contribution to the communities in which they do business.

Authors should submit their manuscripts electronically (preferably in Word format) to Ananda, e-mail: adg_iipm@ >vsnl.net Their length should not exceed 9,000 words (including all references, tables, figures, author bios, abstracts and keywords), although in some cases, involving mainly the reporting of qualitative data, longer manuscripts may be accepted.

With these points in the backdrop, we wish to encourage empirical work as well as big-picture thinking on issues related to the roles that business can play in fostering a moral, equitable and ecologically sustainable world.

The front page should contain the title of the work, list authors’ names, affiliations and contacts. All papers will be subject to the normal refereeing process. Authors wishing to discuss their paper prior to submission may contact the Guest Editor.

Papers are invited which address the theme of this issue. The important aspects include: Ethics and corporate behaviour. . Human rights and corporate activity. . Sustainability and environmental issues. . Impact of ICT in social and economic development. .

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Environmental management and sustainability. Globalization and corporate activity.

Submission details The special issue will be published in late 2009. The deadline for submission of full papers is 15 December 2008, but early submission is encouraged.

Editing details The front page should contain the title of the work, list authors’ names, affiliations and contact details. . The abstract should contain no more than 300 words. . Please use 12pt Times New Roman, 1.5 spaced. . All other details can be found at the journal web site: www.emeraldinsight.com/info/journals/srj/notes.jsp .

Call for papers 7th International Conference on Corporate Social Responsibility 3-5 September 2008, University of Durham, UK For the 7th conference in this series we will be returning to the UK where the conference will be held in the historic city of Durham and hosted by the University of Durham Business School. It will be organized by the University of Durham in conjunction with the Social Responsibility Research Network. As usual the conference is intended to be interdisciplinary and welcomes contributions from anyone who has a perspective on this important issue. This time there will be a focus on the following theme:

SMEs and CSR Although much work has focused on large corporations there is a growing interest in the small and medium-sized enterprises (SMEs) and how it relates to CSR. We therefore consider that it is timely to look in greater detail at this sector, although papers addressing other areas of CSR are welcome. Thus papers are welcome on any topic related to this broad issue and suggested themes for papers include: . . . . . . .

Social and environmental accounting. Corporate sccountability. Social and environmental auditing. Social and environmental marketing. Globalization and corporate activity. Protests concerning corporate activity. Regulation of corporate social and environmental behaviour.

Governmental influences on corporate accountability. CSR and corporate governance. . CSR and stakeholders. . CSR and corporate risk. . .

Corporate responsibility and triple bottom line. . Socially responsible investment. . Social entrepreneurship. . NGOs and CSR. .

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Case studies and practical experiences.

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Microfinance.

Offers to run workshops, symposia, poster sessions, themed tracks or alternative events are especially welcome. Please contact Dr Aly Salama ([email protected]) with suggestions. Abstracts of 200-500 words should be sent by 31 May 2008 (preferably by e-mail to [email protected]) or by post to Professor David Crowther, Conference on Corporate Social Responsibility, De Montfort University, Leicester Business School, The Gateway, Leicester LE1 9BH, UK. Selected papers from this conference will be collected for publication in special issues of journals associated with the conference. It is also anticipated that an edited book will also be produced. Full details will be provided later.

Doctoral colloquium This year we will also be running a doctoral colloquium on the final day of the conference. The aim will be to give detailed feedback to doctoral researchers concerning their papers. Feedback will be specific to each person and their research, and will be given by an experienced academic in the field. The colloquium will be an integral part of the conference and all delegates will be expected to participate fully in the conference but the sessions will give extra time to presenters – to allow for discussion and formal feedback. This colloquium will be organized by Professor Dr Gu¨ler Aras and abstracts of 200-500 words should be sent by 31 May 2008 (preferably by e-mail to [email protected]). In order to allow detailed feedback full papers will be required in advance of the conference – full details will be given to participants upon acceptance. Following on from the example of the 6th Conference in KL, a Young Academician Award will be made during this colloquium.

Call for papers Venue of the conference The conference will be held in the Durham Business School. The conference fee has been set at £350, which will include accommodation (two nights), meals and conference materials. An optional sightseeing tour will be organized at the end of the conference, on 6 September; full details will be available later. We look forward to welcoming you to Durham in 2008 for the 7th conference in the series. Full and updated details can be found at the conference web site: www.davideacrowther.com/7csrhome.html

Aly Salama Conference Chair, University of Durham, Durham, UK ([email protected]) David Crowther Professor of CSR, De Montfort University, UK ([email protected]) Gu¨ler Ara Professor of Finance, Yildiz Technical, Turkey ([email protected])