Can you force somebody into being ethical?

Nowadays, remoteness is not sufficient to guarantee immunity. In 1972, it took a bunch of crazy ecologists willing to risk their lives by sailing thousands of kilometres into the French nuclear test zone to draw the attention of the world to the question. Back then, these Greenpeace visionaries discovered the power of media attention on governments. Public opinion influence was soon extended from governments to multinationals corporations. In this day and age media seems to be everywhere. Nobody has to risk his or her life to be able to witness a misdeed performed on the other side of the earth. This increased interaction around the globe is part of the process of globalisation. No event can take part in complete isolation and everything seems to be linked together: a mere economic issue such as the bankruptcy of an American company (eg. Enron) can have social consequences in remote parts of the world. Similarly, new managerial principles, such as cost reduction in shipping companies, can lead to environmental disasters in Spain, as the dramatic example of the Prestige oil tanker disaster recently showed us. Everything is linked together, and what’s more, everybody can see it!

Responding to public pressure, Nike became one of the most child-labour aware companies in the apparel business. Does this mean that it is now more ethical than others? Or did Nike simply understand that its economic interests required social involvement? And if ethic decisions are based on economical principles, are they still ethical?

Definition of ethics

So what is ethics, actually? Obviously, when applied to business, people automatically think about ‘taking care of your employees’, ‘respecting regulations’, ‘not polluting’… But how do we justify that respecting these norms is better than finding all possible ways to become as wealthy as possible, for the well-being of directors and shareholders? And indeed, there remain a few die-hard liberals who believe that as long as the rich become richer, they create wealth and that part of this wealth is redistributed to the poorest (the traditional ‘invisible hand’ concept defined by Adam Smith). But few are ready to believe this doctrine anymore, for the same reason explained above: we can see everywhere and everything is linked together. Media is everywhere and consequences of unrestrained quest for profit rears its ugly head. Western corporations were happy exploiting colonies at the beginning of the previous century. But their good conscience based on a belief that this wealth creation was ‘redistributed’ magically by an invisible hand has long been lost. There was no redistribution back then. There is very little redistribution now. Profit creation is done at the cost of others: it’s not an independent event.

People realised that corporations are also part of the human community. They are independent entities and, as such, they have their share of responsibility. And with responsibility comes ethics. Ethics doesn’t exist in the absolute of a perfect world: ethics is about living together in a community.

Ethics as apprenticeship

For example, you don’t blame a little child for not being ethical. You blame a child for not having learnt his or her lesson. You blame a child for not understanding what is wrong with his or her behaviour. And you explain. What is wrong? Why? Children ask questions, and there is a good reason for that: they are learning the norms and values that will define their ethical universe. Every ethical norm is the result of such an apprenticeship. As a consequence there is not one absolute ethical truth everybody must follow, but only individual perceptions. These individual perceptions are, in turn, officialised in dogmas that apply more or less uniformly in different regions. Radicals within these regions try to turn them into universal dogmas (take for example religions in their most inflexible expressions). The sad reality of never-ending conflicts between these so-called universal dogmas should be a reminder of the subjectivity of these theories for all of us.

Ethics applied to business

As entities, as individual parts of the community, companies have to learn to identify their boundaries: they have to be taught their own norms. They have to be explained what is good and what is bad. If they are entities in so much as individuals are entities, then they have to learn what they can or cannot do within the community. Unfortunately, this is the point where a lot of researchers have been breaking their necks: on the definition of the norms companies have to follow. Think about multinational companies: which norms do they have to follow, those from their home country or from a host country. Take for example a Swedish, very egalitarian, company with a branch in Saudi Arabia. The internal Swedish norms will state the equality of treatment for men and women on the work floor. Obviously, Saudi employees will expect otherwise. What is the ‘right’ norm and where does it apply in this case?

Business ethics is never as obvious as in cases of international business, which explains why most studies concentrate on this field. Macro-ethics, in a way, seem to precede micro-norms. Moving from a descriptive ethics (basically, identifying the fact that there are different norms around the world), most theorists are now concerned with normative ethics, concerned with determining what constitutes the right behaviour in examples such as the one above. Between the traditional Kantian approach of categorical imperative (internal assimilation of the rules, deemed inapplicable) and the neo-Hobbesian movement in favour of a powerful international organisation to impose norms on otherwise unrestricted companies, a middle-way seems to be in favour among big corporations. It is based on reflections from T. Donaldson and is generally understood under the term of social-contract based ethics. This author first developed a Rousseauist version of the social contract for businesses in a 1982 book called Corporations and Morality[i]. Pleading for a balance between micro-norms and macro rules (hyper rules), this ethics guru has refined his theories with several following articles[ii]. The thesis exposed in this article is still under discussion. Many researchers are criticizing his ideas, refuting some or all of the presuppositions at the base of this theory. In other words: business ethics is still a very new field in the history of social sciences. Although the questions re old, we are currently in the process of finding new answers for new situations.

As interesting as all these studies might be, they are still missing one crucial point, as far as we are concerned: the actual goal of corporations is never raised. It is taken for granted that companies are here for the greatest good of the human species as wealth creators. They are building wealth and more or less appropriately redistributing it (according to the researcher’s position on the political spectrum). The actual human motives behind the creation of these entities are then ignored: power, wealth, privileges, etc… Knowing what your norms are and acting as they require is the work of conscience. Conscience alone places a subject in an ethical position. Like in a good detective story, we have to look for the motive: we have to find out what prods corporations into action.

Conscience

It is thus established that ethics is not related to an absolute (god, reason, nothing…) but only exists in relation to a conscience. It is then only fair to say that business conscience, in the capitalist world, as we know it, has just come to light. A result of booming 50s, troubled 60s, settling 70s and liberal 80s, our world of worldwide multinationals has long been too busy getting globalised to bother with conscience. The frenzy and thoughtlessness of the 80s is now gone. We have lived through a few cracks and crises during the 90s, and the business world has started a reflective process, bound to create a form of consciousness, the premises of ethics.

The beginning of an apprenticeship

This conscience is based on the evolution of radical environmentalist thought into pragmatic business rules. In fact environmentalists were the first ones to think about business ethics because they could easily foresee the consequences of ‘business as usual’. Simple facts motivated the creation of a movement for environmental protection. For example: “The global average temperature increased between 0.4°C and 0.8°C over the past century, with most of the warming occurring prior to 1940 and over the past 25 years. Likewise, global average sea level rose about 0.1 to 0.2 meters over the past 100 years[iii]”. Regardless of skeptic opinions from more or less credible scientists, these facts created awareness for environmental issues around the world. The consequent urge to pull the emergency stop on business development was unfortunately too drastic to be taken seriously. It was ignored. This urge slowly transformed in an attempt to revise business models. Sustainable Development was born.

Here comes Sustainable Development

As a consequence of media globalisation and an emergent sense of responsibility, companies have started to look more carefully at the influence of their actions on society at large. This is especially true for listed companies, whose value is very dependent on public opinion. The recent accounting scandal in one of the American subsidiaries of the Dutch based retailer Ahold, cost the company a lot of money and organizational struggles (the CEO and CFO had to resign and the board is facing possible trial). Multinational corporations are becoming careful and they all suddenly seem very concerned with social and environmental issues on top of their traditional economical concerns. Most of them added entire chapters to their annual reports and signed all sorts of unilateral declarations of good intention. A consequence of globalisation is thus the appearance of a new type of economical conscience, generally understood under the umbrella of Sustainable Development.

What is Sustainable Development?

Sustainable Development as defined by the World Commission on Environment and Development (WCED)[iv] is "development that meets the needs of the present without compromising the ability of future generations to meet their own needs". At a business level, Sustainable Development concepts can be used differently. The World Business Council for Sustainable Development understands Sustainable Development as follows: “For the business enterprise, sustainable development means adopting business strategies and activities that meet the needs of the enterprise and its stakeholders today while protecting, sustaining and enhancing the human and natural resources that will be needed in the future” [v].

Put more simply, it is very often described as paying attention to ‘3 Ps’, People, Planet and Profit, instead of the traditional profit orientation. In fact researches have shown that companies are more or less forced to be environmentally aware: if a company doesn’t at least pretend to adhere to Sustainable Development principles it will most likely be in trouble in the near future. ExxonMobil has made the painful experience during its last shareholders meeting during which good intentioned minority shareholders requested the company to take a more environmentally friendly attitude, following the likes of Shell or British Petroleum (BP). This trend shows that, even though some companies might have a good dose of honest concern for the environment, their ‘bottom line’, as taught in the best business schools, is and remains Profit. Ironically, the reason why companies are showing concern for People and Planet is still mainly due to the quest for Profit.

The limits of Sustainable Development - Corporate Social Responsibility

Sustainable Development happens to be a very convenient concept for companies: they only need to proclaim that adhere to ‘Sustainable’ principles to be acclaimed. BP’s image, for example, is currently very environment friendly, while the company is still a leader in one of the most polluting industries in the world. Sustainable Development has been a marketing and business wonder for this company.

Environmentally conscious measures advocated by the Sustainable Development movement, mild and controllable, were to good to be true for traditional businesses. Even those without clear environmental issues are now using this notion and transposing it to other lines of businesses. This is known as Corporate Social Responsibility (CSR).

CSR is the extension of Sustainable Development notions to other issues (the stakeholders, in good business language): employees, customers, suppliers, etc… Once again, full of good intentions, this concept is hardly put into practice. Companies seem to think that talking about CSR will solve their social problems, as much as putting a flower in its logo turned BP into a protector of the environment.

We are nevertheless at a crossroad. One the one hand natural borders of our planet block further economical development (there’s only so far you can go to find cheap labour, resources and new markets). The planet is round and multinationals are starting to return to their starting points. The other path of the crossroad is one of raising consciousness. People are starting to ask questions that are shaking the system. The questions are no more about ‘how to make it work’, but about ‘what does it have to work for’? In other word, the central place of the economy is questioned. The Tobin tax, in favour of a very limited taxation of monetary transactions in order to create a fund to help the poor, is a good example of an idea that has recently received strong support by opinions all around the world. This theory from a recognised American economist is at the onset of an "international movement for democratic control of financial markets and their institutions"[vi].

The latest financial scandals touched a nerve in the western opinion. People saw how Enron left their core business to enter financial speculation. Its profits increased and inflated to the point where the company exploded. It went to show that finance for the sole purpose of monetary profits is an empty shell. It works for some, but doesn’t create the redistributed wealth advertised by Adam Smith & Co. All over the western world, elites reacted to these scandals by drafting pseudo regulations (non-compulsory in several cases): the Sarbanes-Oxley Act in the U.S has counterparts in several other countries, such as the Bouton Report[vii] in France or the Tabaksblat Code in the Netherlands.

Legislations are not ethical principles. On the ethical field, they merely show what is the accepted norm. In this case, they show the beginning of awareness in the business world that something is not correct. They just don’t seem to be able to put their finger on the cause of the problem.

The Business ethic illusion

Sustainable Development and CSR are limiting, redirecting, and legislating existing processes. The mildness of this concept explains its wide acceptance in the business world. The main reason it became popular enough to justify the organisation of a UN worldwide conference[viii] is that business is driving it. In the USA most multinationals are ahead of the legislation on Sustainable Development issues. Is it because they changed and now place people, and planet at the centre of their policies? Or is it because being part of the Sustainable movement buys them some time, while keeping making profit as usual? Is the goal to keep the existing model while pretending to care? Is CSR the ultimate capitalist trick?

In a world where image is everywhere, we would be naïve not to consider this last option. Reminiscent of Platon confronted to Sophists controlling public opinion, our plight is a world manipulated by marketing and communication specialists. Marketing is a recognised pillar of business strategies. Why wouldn’t it be the founding pillar of Sustainable Development? The only way to find out is to make use of ethics: the conscious representation of companies’ norms. The simple following question should therefore be at the centre of all business questions: why are we doing it? Economic and financial profit should thereby be questioned. Not through fad concepts à la CSR, but with sound analysis. Eventually, it all comes down to the ‘purpose’ of companies. Pushing the analysis, we will find that corporate ethics is only possible if profit is a redistribution medium and economy serves people, not the other way around.