Business Ethics

A Critical Approach: Integrating Ethics Across the Business World

Patrick O'Sullivan, Mark Smith, Mark Esposito

• Publisher: Routledge
• Year: 2012
• ISBN:
  9781136312878
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Events such as Trafigura's illegal dumping of toxic waste in Côte d'Ivoire and BP's environmentally disastrous oil spill in the Gulf of Mexico have highlighted ethical issues in international business at a time when business leaders, academics and business schools were reflecting on their own responsibilities following the global financial crisis. The scope and scale of the global operations of multinational businesses means that decisions taken in different parts of the world have far reaching consequences beyond the national settings where employees are located or where firms are registered and as such, an awareness of these responsibilities needs to be integrated into all levels and all subjects.

Using four guiding principles – a critical multi-level approach rooted in the tradition of European social theory, a comparative and international perspective, a global rather than just a European or American stand point and engaging with subject-specific issues this book aims to 'mainstream' business ethics into the work of teachers and students in business schools. This comprehensive volume brings together contributions from a range of experts in different areas of business studies thereby facilitating and encouraging a move away from business ethics being a box to be ticked to being an integrated consideration across the business disciplines.

This impressive book brings ethical considerations back to the heart of the business curriculum and in doing so, provides a companion for the progressive business student throughout their university career.

PART I Introduction

Ethics as Social Critique

Patrick O’Sullivan, Mark Smith and Mark Esposito

DOI: 10.4324/9780203119013-1

The critical spirit of the age

It is autumn 2011; three years after the dramatic collapse of one of the iconic investment banks that epitomized an all-conquering financial capitalism, Lehman Brothers. By now we know that the case of Lehman Brothers was just the tip of an iceberg, even if no other big banks have been allowed to fail outright. Moreover, the fallout from the financial crisis and the associated over-indebtedness of consumers, businesses and governments, and the retrenchment of spending that is indispensable if that debt burden is to be reduced, have been translated into an ongoing economic depression from which few corners of the world have been spared and that has struck particularly violently in those advanced countries that were the pin-ups of the rampaging financial capitalism of the 1990s: the USA, Britain and Ireland, as well as in certain countries whose governments had persistently failed to master spiralling public sector debt (Greece, Portugal).¹

Not surprisingly, these dramatic economic events have led to a more deeply rooted questioning of the whole economic system and of the way in which businesses behave therein. On the one hand, there has been a real questioning of the moral acceptability of a whole range of business practices that have contributed to, or are associated with, the financial crisis: the manner, for example, in which subprime mortgages² were sold by brokers on placement commissions to individuals who realistically never stood a chance of successfully repaying the mortgages and so were in effect being set up for personal financial disaster; or the manner in which large bonuses were being paid to bank executives on the basis of positive short-term results and these bonuses continuing even after the crisis. On the other hand, the depression has prompted a more profound critical reflection on the merits of an untrammelled ultraliberal free market capitalism driven by the pursuit of profits above all else, priding itself on the self-regulatory capacity of markets and derisory of the state and its interventions in the economic system. It is no exaggeration to say that the period from 1990 to 2007 was characterized almost the world over by a stifling, almost universal, consensus around a politico-economic model of aggressive profits-driven finance-led free market capitalism in which regulation of business and state intervention in the economy were being dismantled with a quasi-religious fervour. This ‘religion’ had a name: the ‘Washington Consensus’.³

None of this consensus today seems so certain. It is in the context of this spirit of the age to ask some more searching questions regarding business practices and even of the system itself that we are presenting a new book on business ethics whose approach is openly and systematically critical in intent. At many points the shibboleths of the overweening 1990s’ consensus will be mercilessly called into question. We will be illustrating how the implications of this critical intent permeate right to the heart of the whole range of business disciplines; how the considerations of a truly critical approach to business ethics will challenge some of the central presumptions of strategic management theory, of financial management and corporate finance, of human resource management, of marketing and, of course, of political economy.

In addition to its challenge at a theoretical level across a whole range of disciplines traditionally taught in business schools, this more critical spirit of the contemporary age has also had a practical manifestation through the Global Compact of the United Nations. This Compact, dating from 2000, commits signatory businesses (and business schools) to implementation of a more ethical approach to business in practice (see Box 1.1 for details of the Compact). It is possible to be cynical about the degree of real impact that the Compact has had but its very existence is a sign of the times.

Methodology and levels of critique

Before embarking on this comprehensive critical tour it seemed important to stop to reflect in more detail on the methodological significance and imperatives of the approach we are proposing; this is also treated in Chapter 2_ of the book, which examines the possible levels of critique within business ethics and their logical significance and implications in more detail, so here we present just a brief outline.

Although business ethics has been recognized as a separate discipline, at least in business schools since the mid to late 1980s, it is surprising how little attention has been paid to its methodological characterization; this is all the more so because of the presence therein of certain methodological features not found in most of the other business disciplines. These methodological peculiarities are centred on the role of business ethics as a critical social discipline, a role that we have just seen is central to the spirit of the age.

It is true that business ethics could confine itself to a purely descriptive study of the norms and rules that are, or appear to be, adopted to guide various businesses in practice. In logical terms, such an approach to business ethics would consist entirely of positive discourse; that is to say, of propositions that describe facts or relationships among ideas. Business ethics would simply be a specialist branch of

Box 1.1 The Un Global Compact for Business

The UN Global Compact comprises ten principles in the areas of human rights, labour, the environment and anti-corruption. Drawing upon the Universal Declaration of Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development and the United Nations Convention Against Corruption, the Compact asks ‘companies to embrace, support and enact, within their sphere of influence, a set of core values in the areas of human rights, labour standards, the environment and anti-corruption’.

As active stakeholders in the business world, business schools across the world have also committed themselves to the Compact. In our view this commitment requires a proactive consideration of ethical issues across all disciplines and recognition that ethical challenges create tensions between stakeholders, nationally and internationally, that can be addressed by a critical perspective developed in volumes such as this one. The ten principles of the Compact follow.

Human rights

• Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and
• Principle 2: make sure that they are not complicit in human rights abuses.

Labour

• Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;
• Principle 4: the elimination of all forms of forced and compulsory labour;
• Principle 5: the effective abolition of child labour; and
• Principle 6: the elimination of discrimination in respect of employment and occupation.

Environment

• Principle 7: Businesses should support a precautionary approach to environmental challenges;
• Principle 8: undertake initiatives to promote greater environmental responsibility; and
• Principle 9: encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption

• Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

For further details see www.unglobalcompact.org/.

anthropology or comparative cultural studies, and would be thus methodologically straightforward.

However, such a purely descriptive business ethics would fall far short of the ambitions of most that have studied, or will study, the subject in the present age. For if a purpose of the subject is to conduct a social critique, and if that critique is to yield any practical fruit for the improvement of the world, it will have to issue, in the end, recommendations for modification, if not revolution, in practical actions for businesses (and many others in society). Hence, business ethics perforce will have a normative character; it will embody significant elements of what logicians classify as normative discourse. Normative discourse outlines not how the world is but rather how it ought ideally to be, and so it is a statement of ideals in effect. The full logical import of this distinction of normative from positive discourse will be elaborated in Chapter 2.

But if business ethics is going to be critical and so normative in character, we may actually identify a number of distinct ways or levels at which the critique may be carried out.

Level 1

This is the first step beyond a purely descriptive anthropological-type study where, in addition to simple description of the rules that govern (or appear to govern) business activity and managerial decisions, we begin to ask questions of a critical nature about those rules: are they, in the end, morally acceptable and, if not, what ought to be the rules that govern business? At this first stage or level, the role that a business plays in society is not per se called into question: it is simply taken for granted and the focus is very much on ethical rules within the company, always geared ultimately to fulfilling the conventionally presumed social role of the business.⁴ A corollary question is, of course, on what these normative assertions regarding how businesses and their managers are to behave are to be based? This will be discussed in more detail in Chapter 2 but for now let us note that the sources could be the conventional morality of a society (but what society?), religion or moral philosophy.

Level 2

Once we have embarked on a normative investigation as to the rules that govern how businesses and their managers ought to act and behave, an important distinction suggests itself. Normative business ethics could be concerned with the rules that ought to govern the activities of individuals within the business, and this was the main focus in the early years of business ethics and of American business ethics in particular. This we have in effect just defined as Level 1 critique. But one could also raise questions about the moral responsibilities of the company as a whole in relation to the society or societies in which it operates: this is the sphere of company social responsibility. If these reflections are truly critical in spirit they will involve calling into question conventional or orthodox views about the role that a company ought to, or should be expected to, play in a community where it operates. This brings us to a deeper level of critique whereby the role of the company in society, rather than being taken for granted or beyond question, is subjected to a searching critique, and so we find it useful to designate this as Level 2 of critique in business ethics. A whole host of interesting questions suggest themselves once we begin to question the social role and contribution of businesses and to probe the critical normative question of what that role ought ideally to be. Some idea of the breadth of this discussion (which goes right to the heart of political philosophy and political economy as well as of ethics) will be given in Chapter 2.

Level 3

There is a third type or level of critical moral reflection that we also think it useful to distinguish. Once we are dealing with moral issues in international business, whether at Level 1 (what country’s rules are to be applied within a company that is doing business in several states) or at Level 2 (differences in the essential view of the role of business in society in different countries/political philosophies), we will be forced to consider, at the very least, different moral codes; and where a multinational company makes a decision in these circumstances it will have, at least implicitly, decided to apply one or the other of the competing codes (or perhaps, less likely, some compromise between them). In effect therefore, whether implicitly or explicitly, the business or its relevant managers will have made a comparison of codes and decided that for whatever reason one is superior to another and so is to be applied. What we describe as Level 3 of critique would make this comparative evaluation of codes fully explicit. Level 3 consists in effect of conducting a metaethical evaluative comparison, a critical morality of moralities. Here, in the pursuit of a daunting endeavour to develop some universal rational moral principles, we seek to evaluate the various different codes with a view to giving rational guidance as to which code to apply when codes conflict, rather than letting that decision (because implicit decision at the very least there inevitably will be) be based on arbitrary unthinking prejudices. Given its metaethical character, it will be evident that Level 3 is the deepest level of critique within the subject.

The three levels of critique can be represented diagrammatically as in Figure 1.1.

Figure 1.1 The three levels of critique.

Business ethics and the tradition of Critical Social Theory

Having delineated this conception of the various levels at which the critiques of business ethics may be carried out, a parallel clearly suggests itself with the broader field of ‘Critical Social Theory’; and we would see this work as fitting easily within this field as one of its subdisciplines. Put very simply, Critical Social Theory refers to an approach to theorizing in the social sciences that is inherently critical in intent to the extent that it sees social structures and modes of interaction not simply as

given objective phenomena analogous to the natural objects and phenomena studied by the physical sciences but also as the carriers of, or as expressions of, deeply rooted human interests. As a result, it is never enough to understand social phenomena purely in objective terms because in so doing we will at best partially understand or at worst totally misunderstand them. We must at all times seek to unmask/discover the latent subjective dimension, the human interest or interests that they embody.⁵ This unmasking of underlying human interests, to the extent that it invariably also lays bare the intricate power relations among individuals and social groups, becomes in effect also a critique of social processes. In the hands of its evident intellectual forebears, Karl Marx and his followers in social theory and political economy, this critique becomes a ruthless unmasking of ideology and false consciousness, from the ideological harnessing of social relationships and modes of interaction to buttressing the narrow dominating interests of ruling classes. Furthermore, in Marx the critique must issue ultimately (and indeed for Marx inevitably) in a social revolution in which the dominant class and its ideologies are overthrown decisively and new modes of social interaction introduced. (The point after all is to change the world!⁶)

However, Marx and Marxism, while certainly being the ultimate fons et origo of the tradition of Critical Social Theory, can today be seen in effect as an extreme expression of the approach. Contemporary Critical Social Theory does not harbour quite the same apocalyptic revolutionary flavour as Marx. Nonetheless, Critical Social Theory does still embody, to a greater or lesser extent, what we may call the ‘transformational intent’ o...

Table of contents

• Cover Page
• Half Title Page
• Title Page
• Copyright Page
• Contents
• List of illustrations
• List of Contributors
• Acknowledgements
• PART I Introduction
• PART II Organizational strategy
• PART III Finance and economics
• PART IV Organizational behaviour
• PART V Marketing and innovation
• PART VI HRM and employee relations
• PART VII The ethical future?
• Index