GLOBAL COMMUNITY, BUSINESS ETHICS, AND SELF-INTEREST: Some Unanswered QuestionsAuthor(s): David C. SmithSource: Soundings: An Interdisciplinary Journal, Vol. 79, No. 1/2 (Spring/Summer 1996), pp.121-126Published by: Penn State University PressStable URL: http://www.jstor.org/stable/41178743 .

Accessed: 28/06/2014 16:46

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .http://www.jstor.org/page/info/about/policies/terms.jsp

.JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range ofcontent in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new formsof scholarship. For more information about JSTOR, please contact support@jstor.org.

.

Penn State University Press is collaborating with JSTOR to digitize, preserve and extend access to Soundings:An Interdisciplinary Journal.

http://www.jstor.org

This content downloaded from 91.238.114.202 on Sat, 28 Jun 2014 16:46:16 PMAll use subject to JSTOR Terms and Conditions

GLOBAL COMMUNITY, BUSINESS ETHICS, AND SELF-INTEREST: Some Unanswered Questions

David С Smith

JTor two centuries, large business enterprises have had power- ful influences upon human welfare, both positive and negative.

There have always been individual business leaders deeply com- mitted to high standards of ethics in relation to employees, cus- tomers, suppliers, and communities. Over more recent decades, corporate action has also been affected by the more systematic and self-conscious efforts of the business-ethics movement. Sparked by widely publicized incidents of blatantly unethical con- duct (and regularly reinvigorated by similar occurrences), the business-ethics movement has quietly compiled a record of accomplishment.

The movement has been marked by constant and fruitful inter- action between business people and scholars of applied ethics, management and organizational behavior, law, and the func- tional business disciplines. On the corporate side, the business- ethics movement has produced more systematic attention to eth- ics in corporate mission statements and planning, more concern with ethics in employee training, and stronger reporting struc- tures to ensure compliance with ethical and legal standards. On the academic side, the business-ethics movement has produced hundreds of courses and course modules for introducing ethics into business education, textbooks and case materials, specialized journals and societies for scholars, and other hallmarks of a well- defined area of inquiry. The hope is, of course, that these aca- demic endeavors will also affect actual business behavior in the

David C. Smith is President of the Council for Ethics in Economics in Colum- bus, Ohio.

Soundings 79.1-2 (Spring/Summer 1996). ISSN 0038-1861.

This content downloaded from 91.238.114.202 on Sat, 28 Jun 2014 16:46:16 PMAll use subject to JSTOR Terms and Conditions

122 SOUNDINGS David С. Smith

longer run, by preparing students to become principled, morally sensitive decision-makers when they get into the hurly-burly of economic life.

In the last three or four years, concern for ethics on the part of business leaders seems to be rising rapidly. The jump in the level of concern is, in part, the payoff of groundwork already laid by the business-ethics movement. The major underlying cause, how- ever, is the actual globalization of business, accelerated as it is by the shift to market economies in China, Russia, Central Europe, and several countries in South America.

Ethical issues take on new significance when seen in global perspective. For global businesses (some of which operate in more than 100 countries), responsibility for the environment re- quires not just concern for the health and safety of workers and communities where operations are located, but also immediate and direct choices that hold implications for the global ecosys- tem. Likewise, in global terms, bribery and corruption are no longer merely ethical challenges for individual managers and companies as they seek to do business under highly competitive conditions. High-level bribery and political corruption can be seen to siphon away billions of dollars annually from job crea- tion, investment in plants and equipment, and research. More- over, corruption works against the development of the trust that international commerce depends upon.

Ethical concern is also being globalized in regard to issues of employment. "Downsizing" and "re-engineering" in the United States, crushing levels of unemployment in Western Europe, and chronic underemployment in the developing world now appear to be facets of the same problem, a problem compounded by the mobility of capital in relation to labor. In Europe there is grow- ing corporate dialogue about these challenges of social "inclu- sion" and their diverse forms.

We come to the key issue: How will global companies use their power? Business leaders are giving increased attention to this question. At a 1995 international conference for business leaders on "Building the Ethics of Business in a Global Economy," Ry- uzaburo Kaku, chairman of Canon, Inc., remarked:

Up to now, addressing [imbalances in trade and problems of envi- ronmental preservation] has been seen as the responsibility of gov- ernment. However, I believe that business must play a role. I think

This content downloaded from 91.238.114.202 on Sat, 28 Jun 2014 16:46:16 PMAll use subject to JSTOR Terms and Conditions

Global Community, Business Ethics, and Self-Interest 123

that business is obliged to become involved in finding solutions to social problems and that corporations have the talent, skill, and resources to do so. ... Business can assist government and bureaucracy.

Raku is a member of the Steering Committee of the Caux Round Table, a group of "business leaders from Europe, Japan, and the United States committed to energizing the role of business and industry as a vital force for global change." The Caux Round Ta- ble has developed a set of "Principles for Business" that are cur- rently being widely disseminated in the business community.

At the same international conference, Dominic Tarantino, chairman of Price Waterhouse World Firm Limited, remarked:

Multinational firms have enormous economic clout. They can con- vert this economic clout into ethical clout if they agree to hold each other and host-country businesses and governments to de- fined standards of ethical conduct. . . . And no company can de- mand ethical conduct of others unless it can meet that demand itself.

Throughout the world there are exemplary businesses that have gone beyond mere compliance with local and national envi- ronmental regulations, or narrow calculations of prudence, to take responsibility for the impact of their operations on environ- ment and quality of life.1 The procedural side of the new trend is open dialogue with stakeholders. Similarly, some companies are taking creative approaches to plant closings and workforce re- ductions.2 We also see occasional examples of multinational cor- porations refusing to do business in countries having atrocious human rights records.3

To be sure, Milton Friedman's notion that "The Social Respon- sibility of Business Is to Increase Its Profits" is still alive and well in the United States.4 Even so, a fundamental rethinking of Friedman's view that the only objective of businesses should be to maximize profit (within the framework of the law) may be taking place. We find new developments in business self-regulation (e.g., in the chemical industry) where the exercise of self-re- straint in seeking profit takes into account the moral claims of stakeholders other than shareholders. Moreover, however warmly Friedman's very limited notion of business social respon- sibility is still affirmed by some business people and some politi- cians in the United States, it is rather parochial in the overall globed picture. In the mature economies of Europe and Asia, so-

This content downloaded from 91.238.114.202 on Sat, 28 Jun 2014 16:46:16 PMAll use subject to JSTOR Terms and Conditions

124 SOUNDINGS David С. Smith

ciai constraints and objectives give a different shape to business organizations and their objectives.5

Granted, it is not easy to sort out individual or organizational motivation in these many new efforts. Sheer prudence and legal liability rather than any pure ethical impulse are strong mo- tivators. The rush of large U.S. corporations to implement com- prehensive ethics programs is driven in part by the 1992 Federal Sentencing Guidelines that take such programs into account. The desire to avoid consumer displeasure is a critical factor at a time when more and more people are considering a firm's repu- tation and ethical/social responsibility record before purchas- ing.6 Even the actions of exemplary, "socially responsible" businesses come under suspicion. Are they motivated primarily by genuine concern for stakeholders and human welfare, or are they undertaken somewhat cynically to capture or maintain mar- ket share?

To take other examples, what mix of ethical and nonethical impulses come into play as a chemical company located in the suburbs "adopts" an inner-city school and provides students with a year-round program of tutoring and science enrichment? What blend of pragmatic needs and ethical intent is present as an in- surance company opens a day-care center for the children of em- ployees because government cannot or will not fund adequate alternatives? Are these actions undertaken for their public-rela- tions value or for simple economic necessity? Do they suggest a growing corporate moral imagination about organizational choices?

The problem of finding genuine ethical motivation is not made any easier by the tendency of many business people to as- sert that "good ethics is just good business." Sometimes this is asserted in a spirit of smug self-congratulation, and sometimes as a cautionary admonition against taking ethical shortcuts that are, in the long run, not the best policy. One can imagine the whirling in a certain Königsberg graveyard.

Ethical consequentialists as well as deontologists can feel dis- heartened by the appeal to sheer prudence. Yet I suspect that some of those who speak in this fashion mean something more, something that is lost as they invoke the usual business language of practical consequences. Many business leaders who speak of good ethics as good business recognize that acting ethically

This content downloaded from 91.238.114.202 on Sat, 28 Jun 2014 16:46:16 PMAll use subject to JSTOR Terms and Conditions

Global Community, Business Ethics, and Self-Interest 125

might demand some financial sacrifices. They sense the need to make economic choices within a broader, moral context of human concerns, as Heidi von Weltzien Hoivik argues elsewhere in this issue.

Perhaps the most important implication of the new willingness of business leaders to consider the ethical clout of business is that it involves embracing a set of moral claims based not on consid- erations of causal and role responsibility, but rather on capacity. The consequences of this shift are far-reaching. If we expect more from corporations than simply redress of harm they have done, what types of beneficence - and at what cost - shall we ask of business? If we expect corporations to contribute to society something more than promoting economic welfare narrowly conceived (e.g., by creating jobs, useful goods and services, and investment opportunities) , what will the new interplay of busi- ness be with other social institutions: state, education, religion, family?

What about the provision of ethical nurture itself? The old model of the interplay of social institutions was that family, church, or synagogue, and school should instill qualities of hon- esty, industry, and altruism in young people, who would then go on to exercise these virtues in work and civic life, thereby con- tributing both to profit for their employers and to the common good. Recent surveys of college students concerning their value priorities or their willingness to cheat on tests or lie on résumés suggest that one should not count too heavily on this traditional division of labor among social institutions for the accumulation of moral capital. The challenge today may be to rethink our model of moral development in terms of capacities and more fluid divisions of responsibility between business and other social institutions. Perhaps work relationships characterized by honesty, fairness, and respect for human dignity serve to build moral char- acter and to have spillover effects outside of the workplace. Fur- ther, as participation and teamwork gradually replace command and control as management strategies (in practice as they already have in theory) , they may have some effect also on fragile educa- tional, religious, and civic institutions.

Hoivik contends that "we are witnessing an interesting devel- opment away from thinking what ethics can do for economics to a surfacing of a different approach, namely to what economics or

This content downloaded from 91.238.114.202 on Sat, 28 Jun 2014 16:46:16 PMAll use subject to JSTOR Terms and Conditions

126 SOUNDINGS David С. Smith

businesses can and should do for ethics." Her perspective chal- lenges some common academic assumptions about the flow of moral influence. I hope that her thesis will spark reflection and fresh discussion in the academy about the interplay of ethics and economics.

NOTES

1. See cases prepared for the Second International Conference on Building the Ethics of Business in a Global Economy, especially Heidi von Weltzien Hoivik and Cato Stoll, "The Norwegian Aluminum Industry's Joint Stake- holder Learning Process," and O. Homer Erekson and Pamela Johnson, "Responsible Care and Worst-Case Scenarios in the Kanawha Valley, USA" (Columbus: Council for Ethics in Economics, 1995).

2. See case studies prepared for the Council for Ethics and Economics on these issues: Michael Boddington, Alan Brown, and Robin Heal, "British Petroleum and Economic Redevelopment in South Wales," and Marie Bohatá, "TONASO in the Czech Republic" (1995).

3. See the case prepared by Timothy Perkins, et al., "Levi Strauss & Co. and China" (Columbus: Council for Ethics in Economics, 1995) .

4. New York Times Magazine, 13 September 1970. 5. See, for example, Francis Fukuyama, Trust: The Social Virtues and the Creation

of Prosperity (New York: The Free Press, 1995). 6. John Drummond, Why Dealing with Ethics Might bave Your Company,

conference on Corporate Governance and Business Ethics, London, 1995.

This content downloaded from 91.238.114.202 on Sat, 28 Jun 2014 16:46:16 PMAll use subject to JSTOR Terms and Conditions