Chapter 8 Managing ethically Robin Stanley Snell Questions about business ethics 1 2 3 4 5 6 7 8 9 Does ethics have anything to do with business? Should business decisions be governed by profitability alone? Does there always have to be a conflict for business between serving the needs of staff members (that is, personal gain) and pursuing corporate profitability (that is, the interests of the shareholders)? Should managers conform to local rules, customs and etiquette, or are there universal standards to follow? What are the options for managers facing moral dilemmas? What aspects of an organization’s culture help managers to make ethical decisions? How valuable are codes of ethical conduct in business? To whom should managers look for moral leadership? Is it possible to change a manager’s ethical predisposition? SIMON’S STORY My boss regularly asks me to act as translator (English–Chinese) in meetings with other Chinese staff. He can speak only Japanese and English, whereas the junior staff can only speak Cantonese. It was very difficult for me at one meeting, because my boss was going to dismiss a cleaning lady who had worked for the company for 20 years. I understood that the staff member was the breadwinner of her family, and that such a decision would surely be a shock to the staff member. Therefore, during the translation, I changed the tone and the content of my boss’s remarks a little bit. I also tried to add some further beautiful explanations. Instead of letting her know that she was to be fired because of her age, I told her that the company wanted her to take her retirement a little earlier. Despite my efforts, she felt very distressed and surprised at the management’s decision. To behave professionally, I understood that my duty was to translate exactly what the boss told me. However, I could not do that, as it would have hurt the staff member. In addition, I was myself ambivalent about the decision. In the company’s interest, it was better to dismiss the staff member as she was quite old and she was not physically strong enough to complete all the cleaning jobs here. Therefore, in the end, I didn’t discuss the decision with other staff. In fact, I was not sure whether that would secure any better arrangement for the dismissed staff member. However, I kept on thinking that this company does not care very much. She had worked so long for the company. However, I didn’t take any action to voice my feelings and did not disclose the decision to others. Consider the above case from a Hong Kong-based research project (Snell et al. 1996). It concerns an ethical dilemma faced by Simon, who was at the time a 35-year-old deputy accounting manager with eight years’ service at ‘Sunny’, a Japanese-owned trading company with a branch in Hong Kong. 1 Sunny was managed by expatriate Japanese, but employed mainly local Hong Kong Chinese staff – Simon was one of the latter. The dilemma focuses on the plight of a longserving local member of staff. Also relevant to the case is that Sunny, along with a great many other companies operating in Hong Kong, had no pension scheme for their local staff, and that it was not until December 2000 that the Hong Kong government introduced a mandatory provident fund (MPF), funded by monthly contributions by individual employees and their respective employers. Even now, expert opinion indicates that the MPF could not provide adequate financial protection for most workers, especially those who were already nearing retirement when the MPF was introduced (see Chow and Chou 2005). QUESTIONS ABOUT THE CASE Before proceeding with the rest of the chapter, ponder or ask yourself the following: 1 What else might Simon do, and why might or should he do it? 2 What would you, the reader, do in a similar situation? 3 What would your actions reveal about your ethical behaviour or predisposition? Introduction Simon’s story illustrates the type of moral dilemma for which there is no single, final answer, but where we can identify some solutions that are better than others. It is also typical of the type of situation we might all face in the workplace, irrespective of the cultural context. However, before I go any further, I want to explore what it might mean to have an ethical and moral dilemma. Many texts use the terms ethics and morality interchangeably, and I shall also do so here, as when referring to ‘moral development’ and ‘ethical development’. Lack of clear differentiation between ethics and morality is built into our language. Nonetheless, it is possible to differentiate between the two terms. ‘Moral/morality’ comes from the Latin more, meaning ‘custom’, referring to personal and/or social values about what is good/bad about an action or within a life space. Morals/morality refer to phenomena that are more embedded in wider social structures, traditions, or social norms. Ethics comes from the Greek ethos, which also means ‘custom’. However, possibly because the Greeks were somewhat philosophically inclined, the term ‘ethics’ often refers to ‘moral philosophy’, the critical or analytical study of morals/morality, or stances derived from or bound up with such analytical/critical study. So ethics has come to acquire more of a technical, specialist, perhaps even ‘objective’ flavour, the individual agent working out what to do, and we talk about ‘legal ethics’, ‘medical ethics’ and even ‘corporate codes of ethics’ rather than ‘legal morality’, ‘medical morality’ or ‘corporate codes of morality’. In this chapter, among the themes that I will consider are some major objections to business ethics. As one writer has noted, a common view in the community is that business ethics is an ‘oxymoron’ (McKenna 1999: 138), meaning the idea that it is contradictory and incongruous to speak of business and ethics in the same breath. Richard McKenna (1999) goes on to say that our everyday experiences of business might well confirm this negative view, but that a more objective and academic study of the subject is likely to convince us otherwise. A good starting point for developing a more objective view is to examine the bases of modern business ethics and the major ethical systems that have developed which might inform business practices. 2 As you will see, there is a wide range of discourses about ethics in general. For example, while ethics is sometimes represented as a set of duties and responsibilities that should be performed for collective benefit, ethics can also be cast as a set of basic rights that others are required to respect. This variety is reflected in a wide range of perspectives on business ethics, which together consider how people, organizations and communities might best go about accommodating to one another’s needs, interests and concerns in business contexts. The many discourses of business ethics comprise a potentially valuable resource for managers, such as Simon, who face dilemmas but do not know how to frame, voice or implement ethically defendable solutions. However, no single perspective on business ethics has been established as the impartial source of absolute, final, conclusive ‘answers’. Every perspective involves assumptions and beliefs that may be challenged as arbitrary, partial and limited, and a close and critical inspection can reveal inadequacies. The dominant discourses on business ethics (the ones that are most popular in the most influential circles) are not necessarily the most robustly argued and justified. For example, as pointed out elsewhere in this textbook, the privileging of individualism is part of the dominant discourse of modern management in Western societies (see also McKenna 1999: 141), and this is reflected in a tendency for business ethics to focus on the moral rights, duties and reasoning of individuals rather than on the complex dynamics of moral communities. This bias toward individual reasoning may limit the helpfulness of some models to managers like Simon, who need to bridge between two of more distinct moral communities, which in his case included the Japanese senior management on one side and the local Chinese workforce on the other. Another contemporary bias in business ethics may be a tendency for predominant theoretical models of ethical reasoning to be based on situations that have preoccupied elite males or ‘philosopher kings’, when passing judgement from positions of high status. Such models may not be so readily applicable for people who are not ‘top dogs’ in terms of power relationships, who may need to use lateral relational networks as a source of influence, and who may be preoccupied with deep obligations to particular others, such as spouses, children and loyal staff.. The implication of potential biases in theories of ethical reasoning is that while readers are strongly encouraged to draw on existing theories as a source of ideas and inspiration, they should recognize that the various theories, even in combination, can only provide an outline sketch of relevant things to think about and consider doing. Managers such as Simon must complete the picture themselves, and to do this they need to listen with their heart, think outside the box, and then act carefully, even bravely. I explore the implications of this more fully in my discussion about the moral development of the manager. In the global context, business ethics raises many disturbing and perplexing issues that can be extremely difficult to resolve. For example, a great many breaches of ethical behaviour reported in the media entail examples of corruption, and deal with such things as bribes, commissions and gifts and, to a lesser extent, nepotism. In a cross-cultural context, deals and propositions that might, for a Westerner, constitute a bribe, commission or gift can be difficult to understand and deal with. Some commentators, who subscribe to what is termed cultural relativism, argue that one should respect other cultures and go along with how businesses operate in the ‘host’ culture. Their argument implies that where bribes are a part of doing business, then colluding with bribery is not really being corrupt, but merely accepting and entering into another set of local cultural norms. However, critics of cultural relativism argue that no one society’s norms and practices can alone determine what should be accepted as the benchmark for what is ethically right or wrong. Furthermore, one can even question whether any one modern society is so monolithic as to have a single, uncontested set of norms. 3 It follows that the various moral claims and arguments within the manager’s home culture as well as those within the host culture should all be examined critically, with reference to a more widely-considered set of ethical criteria. Later, I will discuss how these differing points of view might be evaluated, and explain how accepting bribes, commissions and gifts can cause businesses untold problems. Other global issues are also impacting on how we treat the topic of business ethics. Human rights issues and violations, especially in the newly industrializing economies (NIEs), such as Asia and Southeast Asia, the Middle East, Africa, Latin America and parts of Eastern Europe, are becoming problematical for many multinationals, especially in marketing their products. The perceived exploitation of workforces in the NIE’s, popularized in the notion of sweatshops, is a strong, vivid and repulsive image that managers will have to deal with. However, as I show in this chapter, the notion of the sweatshop is not confined to the NIEs, but is also a feature in Western businesses, raising serious concerns about the conduct of managers in advanced industrial economies, especially in terms of how they breach human rights, and exploit loopholes in, or seek to overturn labour laws in the name of profit. I also consider ethical dilemmas associated with ‘green’ issues (i.e., regarding the environment), a theme that has been taken up in more detail in Chapter 5. In the remainder of the chapter, I examine how managers can improve their own moral behaviour, review their own moral motivations, and evaluate the ethical standards and practices within their own organizations. My approach to moral development draws, with reservations, on the work of Lawrence Kolhberg and his model of the stages of moral reasoning. Through this, I encourage managers to develop and deepen their powers of ethical reasoning, by examining dilemma cases and asking ‘If this happened to me, what should I do, and why? Of course, this model has its limitations, and responding to feminist critiques of it, I emphasize that moral behaviour is about more than the deep intellectual self-interrogation that Kohlberg initially envisaged, although I do encourage managers also to look long and hard at themselves and reflect on how morally credible or trustworthy they are in the eyes of others. Accordingly, I acknowledge also that moral development is bound up with questions about personal character (‘what sort of person should I be?’) and the balancing of ‘ethics of justice’ with ‘ethics of care’ (see also Maclagan 1998; Pataki 2000). In other words, moral behaviour is as much about ‘character virtue’ and the understanding of human relationships as it is about learning to use abstract principles to make ethical decisions. Therefore, as well as practising ethical reasoning, character virtue also emphasizes the importance of developing moral sensitivity and intuition so that managers can act morally in a variety of settings and circumstances. I also argue that organizations, as moral communities, have to take responsibility for the moral behaviour of their members. I describe what happens when organizations fail to do this by discussing the phenomenon of whistle-blowing. I conclude the chapter by offering ideas for how managers such as Simon might draw upon everyday experience as a source of moral development. Objections to business ethics The five main objections to business ethics are: psychological egotism; Machiavellian; legal-moral; agency arguments; and cultural relativism. These are summarized in Exhibit 8.1. Cultural relativism will be covered later in the chapter as it directly impacts on discussions relating to corruption, human rights and ‘green issues’. 4 Psychological egotism The first objection to business ethics is that urging managers to take other people’s best interests into account runs contrary to the spirit of human enterprise. For example, Ivan Boesky’s maxim that ‘greed is good’ became established in the acquisitive business climate that developed in the 1980s (Walker 1992). The objection thus stems from the world view of psychological egotism, which holds that people only ever follow their own immediate interest, looking out for ‘number one’ (Beauchamp 1988: 16), and pursuing ‘self-interested, outcome-oriented individualism’ (Mitchell and Scott 1990: 23). Mangan (2002) quotes a professor of finance at a North American business school: The whole notion of business is about profit and competition and trying to defeat your opponent… Ethics implies that there’s some social good at stake. If you worry about social good, you’ll end up being clobbered by the competition. There are at least three fundamental problems with the psychological egotism view of ethical behaviour. Firstly, psychological egoism is refuted by any action of genuine altruism, benevolence, service or citizenship by a successful businessperson (Kanungo and Conger 1993). Secondly, if some adults are permanently locked into this mentality, then according to cognitive sociomoral development theory (for example Kohlberg 1981, 1984, 1986; Kohlberg et al. 1983) they belong to a minority who are ‘retarded’ in their moral development. This is not to deny that certain strong feelings such as anger, fear, guilt or passion can, in particular contexts or situations, drive otherwise altruistic or ethically sensitive people to ‘look out’ only for ‘number one’ (Flam 1993: 59, citing Frank 1988: 53– 4). Thus a person, who has been repeatedly overlooked for promotion for reasons that are unjust, such as on racist or sexist grounds, might well decide that looking out for ‘number one’ is the best possible thing to do under the circumstances, until perhaps a new job is found. The implication is that while egotism is a typical response to injustice, it may not help to build fairer business communities. Thirdly, societies are built on the assumption that common interests unite people and organizations. There are a great many ways of expressing such unitary views. For example, in Japan, moralogy, which derives from the work of Chikuro Hiroike (1866-1938), and which has guided many small and medium-sized Japanese companies, involves principles that include self-renunciation, benevolence, duty, enlightenment, and salvation (Taka and Dunfee, 1997) Exhibit 8.1 Five main objections to business ethics □ Psychological egotism: acting morally is only justified if it promotes the manager’s or organization’s best interest; taking other people’s interest into account runs contrary to good business □ Machiavellian concerns: ‘the means justify the ends’, even if you have to be the arch ‘political animal’ to avoid being a corporate or organizational ‘loser’. □ Legal–moral: this implies that if it is legal, then that’s all you have to worry about and the rest will look after itself. So long as you comply with the ‘spirit of the law’, organizations do not need to worry about ethical codes and so on. 5 □ □ Agency arguments: profit maximization is the rule of business and the ‘market is the key arbitrator’ of what is ‘right’ or ‘good’ for business. Just keep shareholders happy, make sure that the stock market and management interests are looked after and the rest will look after itself. Social responsibility for business is an oxymoron. Cultural relativism: we should respect other cultures and go along with how businesses operate in the ‘host’ culture Machiavellian concerns The second objection to business ethics derives from the political analyses of Niccolò Machiavelli (1469-1527), who, in provocative and influential works such as The Prince and The Discourses, argued that it was necessary for leaders to maintain a virtuous public image, while at the same time being ready to deceive others and act ruthlessly in order to acquire and maintain power. The psychological construct of Machiavellianism is based on these ideas; high Machiavellians are believed to be emotionally distant from other people, to be prone to manipulate others, and to have a cynical and unflattering opinion of human nature (see Taven et al. 2006). A typical Machiavellian view would be that rising to the top of the organization necessitates games of manipulation, blaming and attacking rivals, controlling and massaging information, lobbying, image building, ingratiation, ‘bootlicking’, forming coalitions and allies, creating obligations and indebtedness among followers, and gaining control of scarce resources. From this set of beliefs, it would evidently follow that adhering to business ethics means surrendering these potent power tactics and resources, thereby in all probability condemning oneself to a ‘loser’s life’ among the lower echelons of the organization. Another version of this line of argument is that business has its special brand of ethics, rather like those applying to the card game called poker (Carr 1993). However, while the office and the boardroom may sometimes resemble a poker table in terms of intellectual puzzles and psychological complexities, the Machiavellian perspective is problematic, both in terms of its impact on ourselves and its impact on others. Consider that unethical workplaces are likely to be a source of stress and job dissatisfaction (Bird and Waters 1989, Mendel 1993), and that work involves a multitude of issues and meanings with repercussions that extend far beyond a single location at one point in time. Because business has a major impact on all other human (and animal) activity, how it is carried out is a matter of wider ethical concern. To simply say that it is OK for businesses to develop their own (less ethical) brand of ethics – Machiavellian or otherwise – implies that business has no impact on wider society. Legal–moral The third objection is that business ethics is unnecessary since ‘if it’s legal, then it’s morally OK’ (Bowie 1988). It implies belief (whether naive or pragmatic) that the letter of the law is an adequate and complete substitute for ethical sensitivity and moral reasoning. As I shall mention again in the section on ‘Moral reasoning, moral motivations and care’, seeing beyond the limits, however reassuring they may be, of ‘law and order mentality’, reveals laws to be human artefacts, not divine truths. How laws are formulated and interpreted by authorities falls inescapably short of complete objectivity and justice. 6 Granted, there is an emerging East–West consensus that the rule of law tends to help economic development and reduce corruption, and is an essential foundation for ethical conduct in modern market economies (Hao 1999). Where the legal system is relatively undeveloped, as in the former Soviet bloc (Bohatá 1997), what is permissible may depend on the self-serving collusion of corrupt officials or on the opportunism of Mafia-like groups (Filatov 1994). However, while the law may provide a necessary foundation for an ethical business climate, it is not a substitute for it. There are at least four reasons for this. First, many ethical issues and dilemmas in management remain out of the law’s reach. Much can go on at work that is questionable, such as unjustly pressurizing, intimidating or reprimanding subordinates and ‘padding’ or ‘fiddling’ expense accounts, but is not normally under legal scrutiny (Boatright 1993: 13–14). Second, some limitations in the law result from the choices made by lawmakers, who may decide not to enact comprehensive legislation on topics such as product safety, race or sex discrimination, and share dealing, preferring the subsidiarity of self-regulation and voluntary codes of practice, perhaps even seeking to protect friends in the business world. Indeed, in many countries, powerful vested interests in the business world strive to prevent particular laws from being enacted or changed, by directly or indirectly lobbying governments and sponsoring political campaigns. Third, abiding by the law can become a game of minimal conformity, with companies hiring lawyers to fight their cause on technical grounds, as has occurred within the tobacco industry for many years. Fourth, legislation may not keep up with fresh moral challenges revealed and produced by advances in science and technology, such as genetic engineering, environmental protection and data privacy. It follows from all this that the domain of ethics covers large and inevitable gaps between legal compliance, on the one hand, and what is thought and felt to be morally right, socially beneficial, fair, just and compassionate, on the other. Agency arguments The fourth objection is the agency argument of Milton Friedman (1970), who condemns what he calls ‘the doctrine of social responsibility’. From this perspective, a corporate executive is legally the agent of the firm’s owners or principals, and is thus contractually obliged to serve only their interests, while keeping within the law and avoiding deliberate deception. Friedman claims that using corporate resources for anything other than profit maximization amounts to stealing from the principals. It would follow from his argument that managers should invest no more in serving the wider community interest than can be justified by the payoffs in corporate image, consumer loyalty, less governmental interference and healthy share prices. Larue Hosmer (1987: 34–48) offers a succinct analysis of the microeconomic theory behind the agency argument. In an ideal economy, goods and services are distributed by competitive markets so effectively that it would be impossible to make anyone better off without harming someone else. Hosmer exposes the flaws of this argument: the exclusion of segments of society (for example the poor and unskilled); its self-serving ideological nature; and its low regard for the worth of human beings (Hosmer 1987: 51). When a company is sued for damages, or goes broke, shareholders stand to lose only the value of their shares because they enjoy the privilege of limited liability. Others affected may lose their livelihood. If business decisions can inflict harm or loss on individuals or communities which have no legal means of redress, other than claiming government compensation or benefits, it follows that managers need to take account of wider community interests, not just the needs of the shareholders. 7 This point justifies the stakeholder approach discussed later in this chapter, although the law in many countries has not caught up with this point yet (see also Hosmer 1987: 51) and, in any case, as argued above, would not yield a complete solution. Charles Handy (1995: 15) reminds us that Adam Smith, the founding father of free-market economic theory, argued in A Theory of Moral Sentiments that a stable society depends on everyone’s moral duty to have regard and sympathy for fellow human beings. This principle is absent from microeconomic theory but without it, Smith’s ‘invisible hand’, promoting the ends of society as a whole (Smith 1937: 423), cannot work to the benefit of all. The fifth objection, that of cultural relativism, which suggests that there is no universal measure of ‘the good’, only culturally sustained ‘local agreements’ on such matters, will be considered in more detail later in the chapter. Modern business ethics This part of the chapter sketches out five bodies of thought which represent much of the substance of modern ethical thought and argument. These are: utilitarianism, deontology, justice, stakeholder and character virtue perspectives, as summarized in Exhibit 8.2. Exhibit 8.2 Foundations of modern business ethics □ Utilitarianism: basically means going along with those actions that give the greatest net benefit for the greatest number of people or meet intrinsic human needs. □ Deontology: has two rather powerful ethical precepts built around the notion of the ‘categorical imperative’: ‘do unto others as you would have done unto yourself’ and, never treat others as a means to an end. □ Justice: this assumes notions of rights and principles of fairness and while overlapping with deontology, has a much stronger emotional basis and the view of positive rights. □ The stakeholder view of justice: debunks the agency argument saying that businesses have a wide constituency of interests to look after and protect other than shareholders. □ Character virtue: shifts emphasis away from the content of decision making to a focus on the manager’s conduct and his/her credibility and trustworthiness. Utilitarianism Utilitarianism is a system of ethics based on the ideas of the English philosophers Jeremy Bentham (1748–1832) and John Stuart Mill (1806–73). It weighs the worth of all that is achieved, produced, delivered or dumped. Bentham assumed that the most ethical policy or course of action was what gave rise to ‘the greatest good for the greatest number’ of those affected. Mill (1998: 28) similarly advocated the ‘greatest happiness principle’, which holds that ‘actions are right in proportion as they tend to promote happiness; wrong as they tend to produce the reverse of happiness’. However, while Bentham held that all pleasures were equivalent, Mill argued that the ‘higher pleasures’ arising from ‘healthy pursuits’ were qualitatively superior to mere ‘sensual indulgences’. Mill claimed that the capacity to enjoy the former distinguishes people from beasts, and that ‘the general cultivation of nobleness of character’ was the best foundation for a good society, where the greatest happiness would arise from one another’s mutually uplifting presence and noble deeds (Mill 1998: 31). 8 Rule utilitarianism or rule consequentialism, an approach that commentators attribute to Mill, seeks to identify a small set of relatively straightforward rules of behavioural conduct which, if everyone followed them, would in theory lead to the greatest good for the greatest number affected (Hooker 2003). The Chinese Communist Party appears to have followed rule utilitarianism in a series of propaganda campaigns for ‘socialist spiritual civilization construction’ (Dirlik 1989: 35–6; Ding 1999). However, this project seems to have become increasingly forlorn as the masses have become spellbound by material civilization. The latest campaign began in March 2006, and was based on President Hu Jintao’s code of eight ‘honours and disgraces’ or ‘dos and don’ts’, which featured prominently in China’s media, and was reproduced in a poster issued by the People’s Publishing House. We list four of the items here: ‘The honour of industrious labour; the disgrace of indolence. The honour of togetherness and cooperation; the disgrace of profiting at the expense of others. The honour of honesty and keeping one's word; the disgrace of abandoning morality for profit. The honour of striving arduously; the disgrace of wallowing in luxury’. Commentators have expressed scepticism regarding the likely effectiveness of this campaign (Swerdloff 2006, Xiao 2006), possibly because many party officials have been role modelling the disgraces. Case Example Ford Pinto In the 1970s, the Ford Motor Company in the US performed cost–benefit analysis (for example one life = $200,725, of which $10,000 represented the victim’s pain and suffering) to determine whether to change the design of the Ford Pinto, which located the fuel tank behind the rear axle, a position vulnerable to rear-end collision. There had already been fatal collisions in which the fuel tank had punctured and the car’s interior had burst into flames, but the company, after deliberation, decided not to proceed with design changes that would have cost $11 per model (total costs = $137 million, total benefits $49.5 million). The case outraged many commentators (see Hartman 1998: 340–55). Ford might have arrived at a more socially acceptable assessment had they drawn upon prospect theory (Whysall 2000: 26), which weighs pains, dissatisfactions and distresses more heavily than pleasures and satisfactions in utilitarian assessments. Utilitarian thought in the developed capitalist world has tended to follow Bentham rather than Mill, perhaps because it is easier to calculate the ‘greater good’ if all pleasures are reduced to a single unit. Thus, according to Manuel Velasquez (1992), utilitarianism judges the moral worth of actions by the utility (surfeit or excess of benefits over costs) of their foreseeable consequences for each and every person affected by a certain set of actions. Manufacturers of vacuum cleaners (helping to keep houses cleaner by their labour-saving devices) would probably do better in a Benthamite moral assessment than manufacturers of landmines (which were maiming and killing civilians in Cambodia long after hostilities ceased). Markets, for all their imperfections, sometimes serve up reasonable utilitarian assessments: a company that is seen to deliver little or nothing of value to anyone is likely to go bust. In contemporary utilitarian cost–benefit analysis, a legacy of Bentham, the impact of policy decisions on national economies, labour markets, healthcare systems and so on are translated into dollar (pound, euro, etc.) values, a convenient aggregate proxy measure of human pain and gain. Such assessments, however, often require some tough-minded and controversial valuations of human life, a fact that can make the existence and operation of such systems appear extremely problematic. The short case study on the Ford Pinto illustrates this point. 9 However, as Alasdair MacIntyre (1977) points out, cost-benefit analysis leaves several questions unanswered. These include: What is the range of alternatives to be considered? Who decides what counts as the benefits and costs that are to be measured? How can we arrive at standard measures of incommensurable items (for example apples and oranges, profits and human lives)? What counts as a consequence? How far into the future should we calculate consequences and repercussions? On the surface, the evident cold-heartedness of the Ford Pinto case makes it appear exceptional, yet the weighing of safety and well-being risks against cost, inconvenience and profit are endemic in industries such as energy, transportation, drugs, construction, agriculture and insurance. Indeed, it is difficult to imagine an industry where utilitarian assessments are not pervasive. Buddhism as one alternative to utilitarianism There are many alternatives to utilitarianism. Among these is Buddhism, which predates utilitarianism by two millennia. Damien Keown (1996) explains that a central principle in Buddhism is that of karma. This principle holds that all actions for which we are morally accountable and which we do intentionally have consequences (for us) in accordance with the quality and character of these intentions, with some consequences manifest in our current life, and others manifest in subsequent life. Superficially interpreted, the principle of karma may suggest a form of utilitarianism, but Keown (1996) argues that there are at least two key differences between Buddhism and utilitarianism. Firstly, in utilitarianism the emphasis is usually on the overall net impact of action on the world at large. By contrast, in Buddhism the focus is on the impact of moral action on the personal circumstances of the agent, in particular, on his or her state of enlightenment. Secondly, in utilitarianism, motives count for nothing. By contrast, in Buddhism, intentions are all-important, to the extent that even ‘sins in the heart’ that are not accompanied by any physical actions are also believed to have an impact on one’s future well-being. Buddhism holds that the seeds of unhappiness reside within ourselves – pain, suffering, unhappiness and dissatisfaction stem from unwholesome desires, temptations, materialistic illusions and obsessions. We might attain profound inner peace by learning to remove these unwanted ‘needs’ through the quiet practice of meditation (Lim 1994). Discussing the application of Buddhism to the workplace, Stephen Gould (1995) suggests some exercises that can be practised daily. The first is to treat those around us with the kind of respect that we have normally reserved for those (such as good parents) who have provided special care for us, thereby learning how to extend empathy and compassion to all people. The second is to acknowledge the positive actions of others that make our work situation and lifestyle possible. The third is to take responsibility for one’s actions and avoid blaming others. The fourth is to learn to relax and cool-down, by taking momentary opportunities to reflect on one’s current throughts, feelings and actions. Simon might practice these exercises as he contemplates what to do regarding the cleaning lady. Deontology Deontology, or duty-based ethics, is based on the idea that we are morally obliged to follow fundamental rules and principles regardless of the consequences (Frankena 1963). It focuses on the manner and spirit in which we interact with other individuals, groups, organizations and collectives. While utilitarians are preoccupied with actual results and outcomes, for deontologists, correct intentions and means of going about one’s activities are all-important. 10 The German philosopher Immanuel Kant (1724–1804) proposed a basic set of deontological ‘categorical imperatives’, that is, moral obligations or commandments, which he claimed we must always follow, regardless of our own feelings, special needs or circumstances. He expressed these imperatives as the following three axioms (Raphael 1994: 56; Maclagan 1998: 27; McCormick 2000): 1. Act as if, through your actions, you were making universal law for everyone to follow. This formula instructs us only to do the things that we would tolerate anyone else doing, and not to give ourselves special privileges or excuses. When applied, it could mean, for example, resisting the temptation to spy on competitors, bribe contractors, delay payment to suppliers or mislead customers, if we do not wish these practices to become the norm. 2. Always treat any human being (self included) as an end in himself or herself, never merely as a means to an end. This may mean, for example, not taking advantage of others’ gullibility, incapacity, naiveté, oversight or lack of information; not exploiting, scapegoating, victimizing, or objectifying people (treating them as ‘things’); and respecting the safety and dignity of employees and customers 3. Act as if you were a member of a community of fellow moral legislators who are ends in themselves (for example, don’t force your will upon another). It follows from these principles that the acid test of our personal integrity is whether we are willing to do the right thing –that could serve as a maxim for everybody’s acting – even when it is not exclusively in our self-interest to do so (Micewski and Troy 2007). Kenneth Goodpaster (1984) considered how such deontological ethics would apply to business and management, arguing that businesspeople are morally obliged to keep to the following, not quite complete, list of general ‘common-sense’ (but, taken together, utopian) principles: 1. 2. 3. 4. 5. 6. 7. 8. Avoid and prevent harming others Help those in need Do not lie or cheat Respect the rights of others Keep promises or contracts Obey the law Be fair Encourage others to follow these principles. In similar vein, Micewsky and Troy (2007) emphasize the following: keeping promises, protecting justly acquired property, appropriately administering company assets and ownership rights and reporting financial results fairly and faithfully. Deontology, in prescribing how we should do things (the means), complements utilitarianism, which focuses on what we actually bring about (the ends). There is, however, an overlap. Deontology is rule-based, and its prescriptions correspond with those of rule utilitarianism, mentioned earlier. Arguably, if everyone held to the principles of deontology, the world, overall, would be a better place overall. To see the correspondence, imagine that Goodpaster’s moral obligations had already ‘come true’, that is, had been established as standard, everyday norms of behaviour, both in business and in other public conduct. Leading economies might, in relation to Goodpaster’s first principle, have cooperated promptly to prevent further radioactive leaks at the Chernobyl nuclear reactor site in the USSR. In 1986 the reactor caused the world’s greatest nuclear accident, killing all near it and damaging food and crops worldwide. Furthermore, there would be no worries about what is known today as ‘terrorism’, since no one would contemplate harming innocent passers-by or passengers, whatever one’s political cause, and therefore there would be no need for the costly and tiresome checks and limitations that are routinely imposed at airports 11 In relation to the second principle, the education, prophylactics and medications now provided in relation to HIV and AIDS in wealthier Western countries might have been made more quickly and widely available and affordable in AIDS-ravaged Eastern Europe, Africa and Asia than was (and still is) the case. In relation to the third principle, had the business world become a lie-free and fraud-free zone, we could transact business freely on the Internet without fear of fraud. If the fourth and fifth principles were consistently adopted and applied, less time and money would be spent on litigation. And so on. From this perspective, consistently following Goodpaster’s principles would result in much good. But are we sufficiently self-aware and morally sensitive to know whether or not we are following them? I find a tension within deontology between aspirations for pure, absolute logicality and concern to respect people’s feelings and dignity. While many readings of Kant emphasize our supposed duty to conform to absolutely logical moral rules, a grain of subjectivity that rubs against this rational fortress may (pace Kant) also be an important ingredient. Justice, in its many forms Another great school of ethical thought and practice, once again rule-based, relates to justice, which in modern Western societies assumes the notion of rights and the principle of fairness (note the overlaps with deontology). Compared with deontology, the underlying emotional basis of justice ethics is much stronger and is potentially explosive and perhaps implosive. People typically become distraught by perceived injustice (Batson et al. 2000). To appreciate this, think back to the last time you felt that your rights were violated. An assertive or aggressive response to injustice entails attempting to eliminate distress by revenge, or redress. A passive response allows the hurt inside to fester. What might ethical analysis offer? At least six kinds of justice, often inter-related, may be identified:     human rights compensatory: atoning for prior harm or breaches of promise or contracts retributive or punitive: punishment for bad deeds, for example, corporate theft procedural: establishing mechanisms, protocols and rules for developing agreements, for example, grievance procedures  distributive: handing out benefits and burdens, for example, compensation packages, salary packages, recruitment policies  interactional: quality of face-to-face interaction and how far decisions are seen to be justly made and executed. Justice as a human right, human rights as basic justice The English philosopher John Locke (1632–1704) argued for justice in his Second Treatise of Government, claiming that the basis of our natural rights was that ‘no one ought to harm another in his life, health, liberty, or possessions’ (1986). More recent ideas recognize ‘positive’ human rights (or entitlements) to basic necessities such as food, clothing, shelter and emergency medical treatment, and ‘negative’ human rights to free movement and noninterference. To those, one can add the positive right to equal opportunity and the negative right to anti-discrimination and fair treatment. 12 The Universal Declaration of Human Rights (see United Nations, 1998), adopted on 10 December, 1948 by the General Assembly of the United Nations, sought to bring about ‘minimal levels of decent and respectful treatment’ for all people, but, so far, even this fairly minimal standard has not been realized. Andrew Fagan (2006) of the Human Rights Centre at the University of Essex, attributes this failure to the reluctance of the most affluent and powerful nation-states to provide sufficient assistance to those countries currently incapable of adequately protecting the basic human rights of their own citizens. Fagan thus points out that human rights, by definition, apply everywhere. Unlike some political leaders and their appointees, he appears to emphasise the need for the West to sponsor the fulfilment of human rights through material generosity, rather than through further use of military might. I shall return to discuss human rights in more detail in a later section. Compensatory justice This concerns the making good of violations of rights and, related to this, the rectification of violations of legal contracts or psychological contracts. A customer has a right to a product or service that works in the manner implied or promised, meets safety requirements and is delivered in a timely manner. Typically, customers buying consumer durable goods in Western Europe expect to return faulty goods within a reasonable time period and receive a replacement or their money back. Further compensation, in proportion to additional consequential losses, may also be warranted. The following case example illustrates the complexities of extracting compensatory justice. Case Example Someone buys a hammer from a DIY store. The next day, after a few minutes usage, the hammer head flies off and breaks the glass of a picture frame. The customer brings the glassless picture frame to the store, along with the broken hammer, and perhaps succeeds in negotiating a free replacement piece of glass as well as a new hammer (or money back for the old one). Much would depend on the experience of the store manager and on whether she or he believes the customer’s story. If instead the customer demands £2000 damages or threatens to use connections to get a critical story published in the local press or TV station, the demand would probably be seen as extortionate, rather than a sincere attempt to obtain justice. At that point, the store manager might employ emotional intelligence to help the customer calm down and try to resolve the problem in an amicable manner. (Most wars are fought in the name of justice, but, as Zygmunt Bauman (1993: 228) observes, ‘injustice tends to be compensated for by injustice with role-reversal’.) As a final recourse, the store manager may advise the customer to contact the company’s legal department. Retributive justice This entails punishment for inflicting harm, wrongdoing, indeed for any form of perceived injustice, including unfair prior retribution. 13 Occasions for retribution typically invoke primal emotions. The ancient maxim ‘a life for an eye, two lives for one’, represents escalated retribution (Batson et al. 2000: 36), more severe even than the Old Testament’s ‘eye for eye, tooth for tooth, hand for hand’ (Exodus 21: 24), which advocates matched retribution. The right to retribution, therefore, may best be restricted to formally constituted legal or professional authorities, on condition that they mete out punishments less severe than the initial offence, de-escalating violence (Batson et al. 2000: 36), and thus serving the utilitarian greatest good for the greatest number. Except perhaps in the case of wars, which could be regarded as state-sponsored cruelty (Bauman 1993), an orderly system of retributive justice is better than having angry individuals or gangs taking the law into their own hands, engaging in spirals of violent retaliation, fuelled by self-serving or ego-defensive bias. In mainland China, however, where there is no tradition of human rights, managements have eagerly claimed the ‘right’ (as in ‘might is right’) to administer arbitrary fines and penalties as instruments for work discipline (Lee 1999). Several cases of the violation of workers’ rights through ‘rough justice’, even corporal punishment, administered by management have been reported (Chan and Senser 1997; Boje 1998; Chan 1998). In societies where workers’ rights have strong legal support, managers may be less inclined to administer retributive justice themselves. As noted earlier, however, the law does not replace ethics, so the responsibility for dealing with many cases of alleged employee misconduct at work tends to remain within companies rather than being passed to the courts. Management’s moral responsibility entails administering compensatory, rather than retributive justice, in a fair and even-handed manner, in accordance with procedural justice and interactional justice (see below), so that cases are considered on the basis of sound evidence and the relationship between misdeeds and punishments remains consistent. It is important that justice is seen to be done. The hurt feelings of being unfairly sacked or laid off, too harshly disciplined or even unfairly criticized can trigger verbal or physical retributive violence by aggrieved employees or former employees (Allen and Lucero 1998). The ready availability of firearms in the USA has permitted fatal shootings of former superiors (Allen and Lucero 1996). Procedural justice This requires that decision makers operate decision procedures fairly, consistently and transparently, with reference to clearly agreed and relevant decisional criteria, and in accordance with due process, consulting those affected without bending to the distorting influence of private self-interest and prejudice, for such matters as job appointments, promotions, competitive tendering and disciplinary cases (Dolan et al. 2007). Procedural justice is its own justification, but rule utilitarianism lends support to it. For example, procedural fairness in recruitment and selection is likely to achieve a better match between people and positions, to the ultimate benefit of the great majority. Goodpaster (1984) and other contemporary deontologists would be eager to stamp out such threats to procedural justice, along with bribery, intimidation, harassment, favouritism, nepotism and unfair discrimination on the grounds of ethnicity, gender, family status, sexual preference and age, some of which are discussed later in this chapter. In many jurisdictions, such as Hong Kong, Australia and the UK, Equal Opportunity Commissions support the adoption and implementation of codes of practice promoting anti-discrimination and antiharassment at work 14 However, much unfair discrimination in organizations arises unconsciously and unintentionally, and is perpetuated by systemic arrangements rather than by deliberate actions and decisions (see Maclagan 1998: 90–4). Patrick Maclagan (1998) gives the example of rigid 9 to 5 working hours, which can exclude those with particular domestic circumstances and family obligations. ‘Macho’ norms for turning up at the office on Saturdays and Sundays are similarly discriminatory. Becoming aware of threats to procedural justice requires that managers critically examine and question everyday organizational norms and practices. Distributive justice This concerns the handing out of benefits and burdens (De George 1995: 105). John Rawls (1971), addressing both procedural and distributive justice, argued that the architects of an imagined society would, under the ‘veil of ignorance’, that is, not knowing what position they themselves would occupy in that society, resolve to establish basic equality of human rights, opportunity and dignity. If every leader took the view that he or she might wake up tomorrow in the shoes of the lowliest clerk or cleaner, there might be more emphasis on procedural and distributive justice at work. Inequalities of wealth, income, influence and prestige would be allowed, only to the extent that the least advantaged group would ultimately become better off as a result, and would not be left impossibly far behind. In other words, ‘any inequalities in a social system must benefit the least well off under conditions of equal opportunity for all’ (Maclagan 1998: 97). Arguably, if merit-based systems of salary and bonus determination were carefully designed to reflect the dynamics of wide-open labour markets and real value-added by a person’s work, while motivating high-level performance in the future, then the relatively high remuneration received at the top end would be morally justified. What people get would then be based both on their real needs and equity – the effort put in and the merit of their contribution (Steidlmeier 1992: 69–70). Another important principle in distributive justice is that of ‘equal pay for work of equal value’. Once again, typical practice appears not to accord with the principle, so that in the USA, jobs held predominantly by men pay significantly more than those held predominantly by women (Ehrenberg 1989; Hartman 1998: 415), a situation also reflected in the UK (Storey 1999: 7) and across the rest of Europe (Plantenga and Hansen 1999). Pincus (1998) argues that the ‘free’ labour market has arrived at this pattern of salary differentials, because women players have tended to settle for it: it’s up to individual women to bargain for more! Against this individualistic argument, I would point out that the market makers for the labour market are those at the strategic apex (traditionally male), whose decisions govern the anchor point for labour price (Hultin and Szulkin 1999). In these circles, there may, among predominately male decision-makers, be considerable inertia and an inclination to benchmark with, and perhaps be nostalgic about, a past epoch when women were thought to belong at home. Collective political action may be required in order to rectify such injustices. In the UK, for example, the mainly female speech therapy profession has acted collectively in pursuit of the rectification of pay inequality in relation to other, male-dominated professions within the National Health Service (Overell 1998). 15 Interactional justice This refers to the quality of face-to-face treatment received from a decision maker, and how far formal decision procedures are seen to be properly applied by those who have to implement them (Bies and Moag 1986). Administering justice as a manager thus requires all-round political skill: self-awareness and control of one’s own feelings and biases; sensitivity to the feelings of others; and the ability to demonstrate to others that justice is being done. Simon Baddeley and Kim James (1987) note that ethically inclined managers need to use political skill in order to continue to operate justly, while, of course, some other managers may employ political skill for egotistic ends. Stakeholder approaches The idea that it is appropriate for businesses to serve stakeholders and not only shareholders (Weiss 1994) goes against the notion of business as a self-contained ‘game’ (see Carr 1993), and against Friedman’s maxim that social responsibility equals profit maximization plus legal compliance. Stakeholder perspectives hold that corporations must evaluate and balance the far-reaching economic, political, environmental and ethical consequences of their decisions for those individuals, groups and institutions upon whom a company depends for its survival and success. According to Freeman (1998), the company is morally bound by a set of implicit social contracts with each of these stakeholder groups, and is thus governed by distributive justice, under which the interests and welfare of all stakeholder groups are coordinated and balanced, so that no single group (such as the shareholders) is consistently favoured over the others, and no group is persistently neglected. Distributive justice thus ‘trumps’ utilitarianism which, by pursuing only majority needs, might neglect minority interests. Under a stakeholder approach, shareholders, bondholders and lenders would nevertheless get fair returns on their financial investment. The nature of other social contracts in and around the stakeholder organization is sketched out below. Suppliers, who may tailor many of their systems to the focal company’s needs, offer special help in servicing peaks of demand, join in a cooperative relationship with the focal company and work to reduce and resolve supply problems, would expect loyalty in return. They would feel betrayed if opportunistically discarded in favour of a competing supplier, promising a cheaper deal, having benchmarked services and systems on the original supplier. Customers who are not respected or cared about will take their custom elsewhere. Neighbourhood communities and government agencies provide infrastructure (roads, networking forums, police protection, waste disposal and so on) and in return expect employment openings for local residents, prompt tax or rates payments and cooperation with environmental protection laws and codes of practice. As the ‘new economy’ comes to emphasize knowledge generation and enhancement, the social contract between companies and their employees becomes oriented towards learning and development (Hall and Moss 1998). Employees are expected to engage in lifelong individual learning so as to avoid obsolescence, share individual know-how, contribute to collective knowledge development, and to invest psychological energy in balancing the competing claims of the various stakeholders. In return for all this, the stakeholder-oriented company, also a learning organization, allows time for, and supports, employee growth and competence enhancement, gives access to environments rich in know-how, information and learning support, and encourages developmental relationships and networks. 16 On some definitions, there is a wider set of stakeholder relationships than this, involving all those who affect or are affected by an organization’s decisions and actions. One might, accordingly, add further stakeholder groups to this already very complex picture. Communities of practice extending beyond the formal boundaries of the organization, competitor organizations, trade associations, regulatory bodies, environmental pressure groups, schools, universities and healthcare agencies each make contributions, and each have corresponding needs. Then there are still more stakeholders, such as unborn generations and wider ecological systems, who have rights because they are affected in some way by a company’s operations. Balancing stakeholder interests In balancing stakeholder interests, an ideal is to build and maintain relationships of trust and cooperation among all the stakeholders of a business, not just some of them (Green 1994). Kantian deontology would command a company to treat every human stakeholder entity as an end in itself, never merely as a resource to use or obstacle to remove. One type of stakeholder imbalance is the neglect of social contracts with, or moral obligations to, particular stakeholder groups. That exposes a company to the risk of losing moral legitimacy, something that may have happened to Microsoft in 2001 with the anticompetitive case in 2000 brought against it by the American Justice Department, exposing some extremely coercive company practices. Another type of stakeholder imbalance is the overemphasis of particular relationships, for example cartel conspiracy, over-close cooperation (for example price-fixing) with competitors. These may also lead to governmental intervention and/or legal action. Some companies conduct social audits of their performance in relation to their various stakeholders (Weiss 1994). John Burgoyne (1994) notes, however, that understanding and balancing contrasting motives, perceptions, feelings and values among different stakeholder groups is not an exact science, but requires critical political sensitivity and analysis, and respect for qualitative differences, such as those arising from diverse ethnic and social class backgrounds. Hosmer (1991) recognizes the difficulty and complexity of the stakeholder approach, but argues that it should have a central place in business education. Most stakeholder theorists fall into two mutually supporting camps (see Donaldson 1999). The first camp justifies a stakeholder approach on the grounds of instrumental reasons, that is, that stakeholder-oriented companies perform better financially in the long run than other companies – an assertion that has received substantial empirical support (Jones 1995). The second camp emphasizes the normative aspects, that is, that it is ‘right’ for companies to adopt the stakeholder approach, period. Both camps reject psychological egotism and the agency arguments of Friedman, and express concern for others’ needs and welfare. Both camps assume that capitalism is compatible with ethical principles, and that it works more effectively when decision makers embrace morality of a reasonably high standard. If, in future, empirical evidence were to turn the other way, that is, if it were evident that stakeholder-oriented companies achieve consistently worse financial results than non-stakeholder-oriented companies, then the comfortable and largely implicit consensus among stakeholder theorists would break down, and there would likely be very challenging consequences. Not only would stakeholderoriented companies face immediate crises, but there might also be an intensification of longer-term questioning of the value of law-based economic systems. 17 Stakeholder enabling Jerry Carlton and Nancy Kurland (1996) argue that stakeholder approaches place the manager at the centre of the nexus of stakeholders, adjudicating between stakeholder differences by exercising their discretion within a fairly defined and constrained organizational space. They suggest a form of stakeholder enabling as a means of giving greater voice to stakeholders, stressing firm and stakeholder mutual interdependence. They argue that their model replaces privileged managerial monologues with multilateral stakeholder dialogues, and takes a more postmodern view of stakeholder ethics and social responsibility. Carlton and Kurland argue that multilateral models depend on the creation and building of trust, which they achieve via communication and collective action in ‘collaborative governance’. In the process, they recast managerial discretion, as exercised in judging between stakeholder differences, with management as moral agency, taking part in dialogues without having the ‘casting vote’. The model thus moves away from individualism as the core of ethics to an ‘ethics of care’ position that is also found in feminist critiques of Kohlberg’s work, which we shall consider later. Ten Bos (1997) makes a similar critique of individualism, arguing that business ethicists, consultants and managers who claim to be able to do the moral thinking on behalf of others need to reconsider the moral autonomy of those who work in organizations. In a voice which echoes Richard Sennett’s arguments about the corrosion of character, he argues that as far as business ethics ‘proffers a rationalized and rule-governed ethics, it may very well undermine the moral nature of people working in organizations’ (Ten Bos 1997: 997). For each of these postmodern commentators then, moral agency is important, and stakeholder dialogue significant in re-empowering individual organizational members in the processes of organizational governance. Character virtue The fifth approach to business ethics shifts attention away from the content of ethical decision making, towards a manager’s social manner and conduct; the ideal ethical manager being someone of good character and sound personal integrity. Virtue ethics has a long history in both East and West. Confucius (c. 551–479 bc) and a long line of subsequent Chinese philosophers advocated a self-disciplined approach to life that emphasized traditional etiquette, the honouring of properly developed and diligently maintained social ties and obligations, humility, moderation, self-restraint, respect for others and moral self-cultivation (Ivanhoe 2000). Five traditional cardinal (key) virtues for cultivated Confucian gentlemen (and, presumably, ladies also) are benevolence (ren), filial conduct or honouring one’s parents (xiao), trustworthiness (xin), loyalty (zhong), and righteousness (yi). My former student and colleague Doreen Tan found that these virtues were still salient for some Chinese managers in contemporary Singapore, but that in general they were over-ridden by Western forms of rule-based reasoning (Tan and Snell 2002). The Greek philosopher Aristotle (384–322 bc) emphasized a not-dissimilar set of qualities of good leaders, including ‘honesty, reasonableness, kindness, hopefulness, love of home and of friends and comrades and guests, and of one’s fellow-men, and love of what is noble’ (Aristotle 1952). Tom Morris (1997) notes that ‘magnificence’ was a key Aristotelian virtue, charisma that made a leader stand out. 18 Morris (1997) also suggests that contemporary team players be loyal, sincere, reliable, trustworthy, benevolent, sensitive, helpful, empathic, modest, open, tolerant, faithful, committed, dignified and self-disciplined. No single set of characteristics, however, defines the ‘good person’. Character adjectives are less useful than role models, something that Mao Zedong, in lionizing model workers, realized (Mao 1990; Ebrey 1993). Virtue ethics may nevertheless help to counterbalance psychological egotism. While partners, close friends, colleagues and perhaps even loyal, special and close subordinates will remind us of our unique faults, we can also cultivate our own virtues. As I noted above in the sub-section on Buddhism, there are several everyday opportunities for ongoing moral self-development. These also include handling adversity, detecting and avoiding hubris (overconfidence and arrogance) and noticing and appreciating others’ virtue (see Snell 1993: 222–8). I will take up this theme again, in the section on ‘Lifelong learning and business ethics’. However, the character virtue argument raises one of the most important questions in ethics: who is responsible for injustices, oppressions and unfairness – the system or the individual? As noted above, Buddhism holds individuals to account for their moral thoughts as well as their actual behaviour. Among Western theorists, Patrick Maclagan (1998), who is one of the strongest proponents of the character virtue approach, would also argue that making a difference between wrongdoing and sound action is the manager’s responsibility because he or she always has leeway to act and make choices. He contends that managers are the moral agents of an organization and not vice versa. What Maclagan (1998: 48) believes organizations need to do is develop a dialogic mode of dealing with ethical dilemmas, in which dilemmas are shared and dealt with by proceeding in a judgmental mode, collectively. This argument assumes that moral character will prevail because people have the potential for critical reflection and deliberation and will act responsibly or rise to the occasion (Pataki 2000: 839). The problem with this view is that it fails to address the need for organizations to deal with system problems, as in the case of healthcare, where medical errors that cause deaths can be prevented, not by pressuring doctors to take greater care and responsibility, but by altering how, for example, certain drugs are administered (Herman 2000). In other words, there are areas in which institutional responsibility for certain risks and adverse events requires protocols, routines and standards of care, and should not be left to ‘moral heroes’ to right such wrongs (Pataki 2000: 839). I will return to these arguments in the sections on ‘Whistle-blowing’ and Corporate codes of conduct. Cultural relativism, global ethics or dialogue? There remains a fifth objection to business ethics, to which I now turn. It stems from the discovery that predominant business customs and moral standards vary from culture to culture, as do feelings and perceptions about what is fair and just (Leung 1988). Cultural relativism assumes that such variations mean that moral obligations stem from the customs, mores, laws and rules of a particular culture or society and that conduct is ethically appropriate and legitimate if it conforms to prevailing local norms and practices (Frederick 1995; Williams 1992: 14–16). A related claim would be that family upbringing and wider socialization through formal and informal education combine to form the moral principles which ‘good citizens’ within a particular culture share. It would follow from these assumptions that we should operate as ‘cogs’ in whatever moral machinery we happen to find ourselves caught up in. 19 The crux of the cultural relativist argument – that there are no a priori and ‘culture-free’ moral values and therefore supposedly ‘universal’ standards may in reality merely be ‘might is right’ impositions by the powerful – may appear difficult categorically to refute, but it can be refuted because of its consequences. For example, cultural relativism offers no satisfactory answer when moral opinions in society are divided (see also Wellman 1963). It can be used to excuse questionable practices, while failing to provide guidance on the production of ‘better’ ones. Thus it would deny that there could ever be moral progress in a society where child labour or slavery is commonplace, because the elimination of such practices would violate existing norms in that society and would thus be deemed unethical (see Beckwith 2007: 10-1). It thereby discourages critical thinking and considered moral judgement (Midgley 1984: 71; Hauserman 1999: 215). Beckwith (2007: 10) shows also that moral relativism is self-refuting, in that its implications contradict its own assumptions: The supporter of cultural relativism maintains that there are no objective and universal moral norms and for that reason everyone ought follow the moral norms of his or her own culture. But the cultural relativist is making an absolute and universal moral claim, namely, that everyone is morally obligated to follow the moral norms of his or her own culture. So, if this moral norm is absolute and universal, then cultural relativism is false. But if this moral norm is neither absolute nor universal, then cultural relativism is still false, for in that case I would not have a moral obligation to follow the moral norms of my culture. Morality in any one locality is rarely monolithic, as even ‘strong’ corporate cultures allow organizationally committed managers to have their own private reservations and antagonisms (Höpfl 1992; Chapter 3). Mutually contradictory moral traditions coexist in Western countries (MacIntyre 1988), and a different set, also characterized by eclectic richness and inconsistency, operates in China (Hua 1995: 33–4). Some ‘customs’, such as bribery (see below) and nepotism (see below) by officials to those connected to them by family or gift-giving ties, known as guanxi in China (Steidlmeier 1999), may represent the entanglements of traditions that have become corrupted as modernity has outflanked them, and serve narrow, special interests only. Or they may be expedient ways, tolerated but not welcomed by most local citizens, of coping with distributive injustice. In polar opposition to cultural relativism, the idea that there is a single set of universal or objective standards for judging moral conduct has gained momentum. Peter Singer (1991) predicts that moral traditions around the world are likely to converge. Such ideas are encouraged by the discovery that every major religion (Judaism, Christianity, Confucianism, Hinduism, Buddhism and Islam) teaches the golden rule: do as you would be done by (see Allinson 1995: 30; Treviño and Nelson 1995: 277; Marcic 1997). A global code of business conduct was developed in 1994 at a conference centre in Caux, a small village in Switzerland, by senior business leaders from Europe, Japan and North America, and is available from the Caux Round Table (2003). Such codes are potentially helpful guides, but, as noted above, care needs to be taken to reduce the risk of the values of the strong being unilaterally imposed onto the weak, similar to the way the International Monetary Fund (IMF) and the World Bank have been stamping economic rationalism onto developing nations. Integrative social contracts theory (ISCT). What should people, businesses, other institutions and nations do, if they face common problems but have starkly different opinions and ideologies regarding how such problems should be understood and how solutions to these problems should be formulated and evaluated? 20 Georges Enderle (1997) argues that in such cases, for example, when facing the prospect of the destruction of the biosphere that sustains all life, it is necessary for adherents of diverse moral traditions, with all their different preoccupations, somehow to find common ground. Although a committed Christian, he argues against attempting to impose his Christian faith in order to achieve a single, unifying ethic. How else can conflicts between different cultural or philosophical norms be resolved? The ISCT (Donaldson and Dunfee 1999) is a partial attempt to steer a course between, on one side, the ‘reef of relativism’, where everyone is free to rationalize what they do, using expedient ideology and rhetoric, and, on the other side, the ‘reef of colonial morality’ posing as universalism, where difficulties are ‘solved’ by the use of force and power. ISCT assumes that there is a broad cross-cultural consensus on some ‘hypernorms’, such as the right to subsistence, physical security and well-being, but leaves ‘moral free space’ within which local economic communities can determine their own local norms. In relation to finance, for example, the strict Islamic law of Shariah prohibits gambling, the charging of interest on loans, and contracts that fail to specify in tangible detail the services or goods that are to be sold (Esty 2000). According to ISTC, where two or more economic communities are in contact and find that some local norms clash, value conflicts are resolved by applying priority rules, paraphrased below:  Let transactions and practices that are located within a single community, and have no significant negative impact on outside stakeholders, be governed by local community norms  The more extensive or more global the community, the greater priority should be given to its norms  Norms that are necessary to maintain the local economic environment should be prioritized over norms that may damage it  If there are multiple conflicting norms, patterns of consistency provide the basis for prioritization  Well-defined norms have priority over less precise norms. While these rules leave some room for dialogue, between the lines there are strong hints of pro-Western bias. One may argue, for example, that the economic power of the Western industrial nations has enabled their constituent corporations to penetrate the markets of the less developed nations, to dominate the norms of international trade and investment communities, to prescribe what is good for local economies, and to define what are ‘normal’ business and managerial practices, and that ISTC therefore merely provides legitimization for cultural imperialism by the West. Jürgen Habermas (1984, 1987), the contemporary German philosopher born in 1929, advocates critical modern ethics, and suggests an alternative perspective, envisaging morality that allows, encourages and arises from the ‘ideal speech situation’, in which people make themselves understood without fear, coercion, defensiveness or distortion. While Habermas regards ideal speech as the medium in which universal ethics emerges, we need not assume that. If dialogue gives rise to agreement on norms that are more just, less damaging and so on in the circumstances, this will do. The next time, we might arrive at something better or different, as circumstances change. Moral traditions at both organizational and societal levels are alive and in flux, with constant room for reform and revision. According to Boston College’s Richard Nielsen (1996), who derives much of his thought from postmodern philosophy, tradition building and organizational learning proceeds through dialogue and self-questioning, and if the dominant parties are ready, dialogue can serve to reconstruct traditions and disentangle them from that which is revealed to be corrupt and unjust. 21 Bribes, commissions and gifts Anti-bribery probably qualifies as a hypernorm, in ISCT, because bribery is widely acknowledged to be procedurally and distributively unjust. The narrow expediency of bribe giving involves ‘role distortion for the firm’ (Waters 1988: 183), in other words, it gives an unfair advantage to one firm over its competitors, while bribe taking is likely to benefit the agent who takes the bribe at the expense of his/her employer. The practice of bribery fares poorly in utilitarian assessments, because it has extremely damaging, even devastating, social and economic consequences (Andrews 1988; Klitgaard 2000). Host governments in every corner of the globe have made bribery illegal on their own soil (Wambold 1977; Alpern 1993: 57). Despite strong opposition from European business lobbies, the OECD’s ‘Convention on Combating Bribery of Foreign Public Officials’ was signed by 34 countries on 17 December, 1997, and came into force on 15 February 1999 (see OECD 2000). Furthermore, International Chamber of Commerce rules, which represent voluntary self-regulation, prohibit international bribery within the private sector, which the OECD convention does not address (see ICC 2005). Nonetheless, bribery remains widespread because, like other forms of crime, it is concealed and/or tolerated, sometimes by the very people who have made it illegal. During the 1990s and 2000s, allegations of corruption in high places precipitated the fall of governments in Canada, Japan, India, Italy, Indonesia, Peru, the Philippines, South Korea, and Thailand, and threatened to topple governments in Brazil and Taiwan (to name but a few). ‘Sleaze’, defined by Allwords.com as low moral standards in public life, became a political issue in the 1997 UK general election, highlighted by the campaign of independent candidate Martin Bell, who won a very safe seat from the outgoing Conservative government. Accusations of sleaze then dogged the subsequent New Labour government, culminating in a bribery scandal involving claims that the government had obstructed justice by halting an enquiry by the Serious Fraud Office into allegations that arms manufacturer BAE Systems had persistently bribed Prince Bandar and officials of the Saudi Arabian government in order to win contracts. This scandal marred Tony Blair’s credibility during the final stages of his premiership, but defending the government’s decision, Labour peer Lord Gilbert, a former minister for defence procurement, was quoted by the British Broadcasting Corporation (2006) as saying, ‘It's a very very difficult area, one man’s bribe is another man’s commission payment. You get this sort of ambiguity in the world of commerce very frequently.’ In June 2007, shortly after BAE Systems launched a takeover of a USA-based armoured vehicle manufacturer, as reported by the International Herald Tribune (2007), the U.S. Department of Justice began its own investigation. Transparency International (TI) publishes two league tables annually. The 2006 Bribe Payers Index (TI 2007a) ranks 30 leading exporting nations, according to their corporations’ propensity to bribe senior public officials, based on assessments by over 8,000 business people in 125 countries, polled in the World Economic Forum’s Executive Opinion Survey in 2006. The ‘cleanest’ businesspeople operating abroad were perceived to be those from Switzerland, Sweden, Australia and Austria, while those perceived to be most inclined to offer bribes were from India (the worst), China, Turkey and Russia. In terms of bribegiving, businesspeople from Italy were seen as the least ‘clean’ of the Western Europeans. Transparency International’s 2006 Corruption Perceptions Index (TI 2007b, 2007c) was based on 12 polls, carried out during 2005 and 2006. These involved a total of more than 30,000 international businesspeople and commentators rating various countries. This index focuses on the perceived incidence of bribe-taking within the borders of particular countries. 22 Among 159 jurisdictions ranked in the 2006 league table, Finland, Iceland and New Zealand were perceived as least corrupt (that is, ranked equal first), and Bangladesh, Chad, Democratic Republic of Congo and Sudan were regarded as the most corrupt (that is, ranked equal 156th). Among European countries, Scandinavian countries tend to be perceived as less corrupt. Not surprisingly, perceived corruption tends to be highest where poverty is at its most extreme. In between, there were countries and cultures where gift giving may go hand in hand with developing business relationships, such as in China (ranked equal 70th) and South Korea (ranked equal 42nd), where according to Confucian tradition, it is a sign of respect and trust building rather than an instrumental means to personal advantage. Given the difficulty, however, of drawing a line between gifts and bribes, as evident in the mediocre rankings of these gift-giving countries, companies doing business there, and indeed anywhere, are advised to develop codes of practice specifying limits to what may be given and received, and requiring all gifts to be reported (Snell and Tseng 2001). Nepotism Nepotism entails a particular type of favouritism, through which a decision maker’s relatives or close friends, or those of an influential stakeholder, are appointed to core positions of influence or perhaps sinecures (token positions to which attractive benefits are attached). Nepotism is normally associated with inefficiency and bureau-pathology. For example, in mainland China, private businesses (Wank 1995: 166–7) and even Westerninvested joint venture companies (Snell and Tseng 2000) are routinely pressurized to appoint the relatives of government officials to attractive positions, simply in order to be allowed to grow without bureaucratic harassment. The problem of nepotism is by no means confined to developing or transitional economies. All 20 commissioners of the European Commission resigned after a special audit committee uncovered six cases of ‘fraud, mismanagement and nepotism’. Among these was a scandal involving Edith Cresson, then head of the European Union’s science, research and development directorate. She was accused of having improperly appointed and remunerated her septuagenarian dentist friend Ron Berthelot from the same home town as a ‘special advisor’ on research priorities into AIDS, cancer and technological innovation (see Bates 1999; Serbanescu 2000). One month into the contract, during which Berthelot’s work output comprised a single three-line document, he became seriously ill and could not continue. He received ten months’ salary, on Cresson’s insistence. Berthelot did have various medical and legal qualifications beyond his dentistry specialism, but as a member of the European Parliament’s research committee commented: ‘There’s nothing wrong with awarding a contract to someone you know who is qualified, but if it is a personal friend, then it is a different matter. It looks like cronyism’ (Williams 1998: 215). That procedures are seen to be scrupulously followed and operators of the system are seen to be above suspicion, are essential attributes of procedural justice. There are, however, special contexts where nepotism could perhaps be defended. For example, overseas Chinese small businesses are typically run by an inner circle of family members, a practice that they may justify on the grounds of ensured loyalty through Confucian bonds of obligation (Redding 1990; Tu 1998). Nepotism is, however, becoming less acceptable among Chinese managers in Taiwan (Hempel and Chang 2002) and Singapore (Tan and Snell 2002). 23 Ethics and human rights It is natural and understandable for employers to be concerned about the work ethics of employees, and for them to expect that the workforce will meet basic standards of punctuality, accuracy, truth telling and respect for company property. Annual losses due to employee theft in the USA are estimated to be around $200 billion (Niehoff and Paul 2000), potentially a massive distributive injustice, although it is possible that these figures could also represent a myriad of egotistic reactions to and attempted idiosyncratic and anarchic corrections of pre-existing distributive injustice, that is, perceived exploitation of the workforce. There are, accordingly, employers who violate employees’ rights. Anita Chan (1998) notes that workers in China and elsewhere in the developing world suffer rights abuse, and calls for international agreements on occupational health and safety, maximum working hours, rest periods and banning workplace corporal punishment (as mentioned above, a problem of taking retributive justice into one’s own hands). Another problem entails the violation of employee rights by other employees, as in sexual harassment. Coercion and extortion of labour need not involve the use of physical force. When employees feel economically vulnerable (for example face ‘negative equity’ on home mortgages), fear loss of livelihood, and lack union protection, employers merely need to insist that employees meet targets by a certain deadline, and keep up with the workflow. A survey of 400 companies, between them employing more than eight million employees in 17 European countries, revealed that job security declined substantially between 1985 and 1995 (ISR 1995). Looking back at the 1990s, Cary Cooper (1999: 115) characterizes the early part by such weasel words as ‘downsizing’, ‘delayering’, ‘flattening’ and ‘rightsizing’: ‘the hard reality experienced by many was year-on-year redundancy, constant restructuring and substantial organisational change’. The legacy of this has been ‘fewer people doing more and feeling much less secure’. Managers and other professionals have not been spared. Cooper (1999) notes that a 1997 survey of UK managers found that more than three quarters regularly exceeded weekly contracted hours, more than half reported working every evening, and more than a third regularly worked at weekends. He also reports a 1998 survey, which revealed that a majority of managers regarded such excessive working hours to have adversely affected morale, productivity, health and family relationships. The 3000-hour year and the 60-hour week are now common in the West (Handy 1995: 179). On the surface, this phenomenon may appear to reflect contemporary ‘reality’, that is, objective necessity. Logic calls for it. If competitors re-engineer and downsize, so must we. If their managerial and professional staff work unofficial 60+, 70+, 80+ hour weeks, so must we, otherwise we lose competitiveness, market share, our jobs. There may even be indirect coercion to use one’s own time to enrol in ‘post-compulsory’ qualification programmes (MacFarlane 2000), so as not to fall behind. Some ‘high-fliers’ might enjoy this life but, in the struggle, many others risk losing the time needed to ‘get a life’ of their choosing. Hence my earlier point, when discussing stakeholder approaches, that learning organizations would provide time off for training programmes. Matts Alvesson and Hugh Willmott (1996) point out that colonization of the life world by managerial rationality is addressable and perhaps containable through political processes, which themselves are open to democratic influence. While collective corrective action is being taken to reduce official working hours to 48 hours per week in European countries (Walsh 1998), the problem of unofficial working hours’ escalation may remain a problem that only open, intimate dialogue between individuals and ‘close ones’ can begin to address. 24 Bjørn Kjonstad and Hugh Willmott (1995) consider a cognate case dilemma example (a husband attracted by a proposed job posting overseas, a wife with misgivings about relocation), and argue that engaging in dialogue, by drawing on the higher Kohlberg stages of moral reasoning (which I discuss later in the chapter), allows partners (perhaps also their children) to develop their relationship while facing up to such dilemmas. Ethics and ‘green’ concerns There are several arguments for and against deliberate measures to protect our physical environment by restricting economic development (Donaldson and Werhane 1993: 379–80). The arguments against include:  There should be no constraints on economic growth, for it enhances human life by providing us with more of what we want  Third World economies must be given room to develop, and not be held back  new technologies will inevitably be developed to repair earlier damage  if recycled products, national parks, a clean environment, and so on are such important preferences, then consumers will choose to pay for them directly. Arguments in favour include:  we face the disaster of wiping out our natural resources  future generations of human beings have the right to a livable environment  clean air and water are essentials to maintain the health of the population  the preservation of rare animal species and virgin forests and so on are valued by us as non-market resources despite their economic costs  the ‘environment’ itself has intrinsic moral standing as part of the natural order. When weighing these arguments, consider the case of Hong Kong, where air pollution has reached serious levels, carried by prevailing winds from the neighbouring Pearl River Delta region in mainland China, which has become a major ‘workshop of the world’. Some time ago, Jo Leinen, former vice-president of the European Environmental Office in Brussels, warned that further environmental deterioration may deter investors from locating regional offices in Hong Kong (Wan 2000). A survey by consultancy firm Hudson (2006) indicated that many foreign multinational firms found it difficult to persuade talented staff to relocate to Hong Kong, as a direct result of pollution. There have been calls on the Special Administrative Region (SAR) government to promote ecotourism (Ng 2000), but would tourists (and local residents) be willing to pay fees to enter Hong Kong’s countryside parks, as a source of funds to compensate various industries located in Hong Kong and the Perl River Delta for the extra costs associated with the use of air filters, low-pollution fuels, etc? Ethical dilemmas and organizational dynamics So far, in illustrating the conceptual application of business ethics principles, with the exception of Simon’s story the chapter has analysed a small selection of issues from an ‘armchair critic’ perspective. It is appropriate now to consider the practical challenges involved in facing organizational pressures and solving ethical dilemmas arising in day-today managerial work. 25 Ethical dilemmas and moral responsibility Middle managers’ everyday ethical dilemmas are typically much ‘greyer’ than the headlinegrabbing issues discussed above (Toffler 1986). Maclagan (1995: 174) quotes from Chapter Five of John Steinbeck’s novel The Grapes of Wrath in which the spokesmen of a bank, which owned land, have the following dialogue with the tenant farmers whom they have been sent to evict: ‘We’re sorry. It’s not us. It’s the monster. The bank isn’t like a man.’ ‘Yes, but the bank is only made of men.’ ‘No you’re wrong there – quite wrong there. The bank is something else than men. It happens that every man in the bank hates what the bank does, and yet the bank does it. The bank is something more than men. I tell you. It’s the monster. Men made it, but they can’t control it.’ Maclagan (1995: 174) poses a number of questions about the case: Who is responsible? Can we identify individuals? Most importantly, can we criticize those sent to evict the farmers? Here we can recognize the conflict between … those who gave the orders to oust the tenants … and their spokesmen. But is the reaction of the latter based on reasoned thought, or is it emotive? Does it reflect a concern for justice, or a sympathetic reaction to the plight of particular people in a personal encounter? Similar questions, suitably adapted for the context, would apply to most managerial ethical dilemmas, but perhaps the central theme in the case of the eviction of the farmers is the apparent mightiness of embedded systems that, on the surface at least, seem to override the will and judgement of individual functionaries, who feel dwarfed, yet somehow responsible. The implied, and niggling, sense of guilt, the very need to offer excuses, suggests a shadowy recognition that while we cannot be purely independent, rational, sovereign actors, we are rarely, if ever, forced by transcendent structural arrangements. Rather, we are trapped by the webs of meaning that we ourselves have been spinning in collaboration with others (Barnes 1988). Table 8.1 Sources of dilemmas reported by interviewees Sources of dilemma % Incidence Subordinates’ perceived deceit, incompetence or disobedience Policy, or request by superior, that is mistaken Policy, or request by superior, that is ethically suspicious, exploitative or unfair Improper, suspicious or unfair request from client, supplier or colleague Conflicting instructions, decisions or directives from above Caught in the middle in a direct conflict between other parties Direct dispute with another party Aware of other’s misconduct, neglect or unfairness, but not directly responsible Other 18 25 13 6 9 5 6 8 10 Source: Adapted from Robin Snell, Almaz Chak and Keith Taylor (1996) ‘The impact of moral ethos on how ethical dilemmas are experienced and resolved in six Hong Kong companies’, Management Research News, 19(9), p. 81. 26 Barbara Toffler (1986), in her interview study of US managers’ dilemmas, found that these were difficult to encapsulate, and involved many contrasting and possibly competing values, along with a variety of organizational pressures and demands. She also found that the managers usually wanted to do ‘the right thing’, but were uncertain of their responsibilities, unsure about what to do and often felt unable to put their preferred solutions into practice. Two-thirds of the dilemmas reported to Toffler related to the management of relationships. Another study found that 36 per cent of dilemmas concerned line employees, and 6 per cent concerned peers or superiors, while 22 per cent involved customers and 19 per cent suppliers (Waters et al. 1986). Analysing the source of 126 dilemmas reported by 39 managers in six Hong Kong companies, Snell et al. (1996) found that they typically stemmed from being asked to do something that was wrong or mistaken, or from noticing behaviour that was wrong or incompetent (see Table 8.1). The five bodies of ethical thought introduced in the first half of this chapter are reference points to help managers to appraise ethical problems from various angles, but they may often not yield unequivocal solutions. Turning them into action tends to be the most difficult aspect of typical middle managerial dilemmas such as the one faced by Steinbeck’s bank spokesmen, and by Simon in our opening case. Richard Nielsen (1987, 1989) of Boston College has identified and given actual examples of around 16 options for subordinate managers when they observe or are involved in wrongdoing: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Don’t think about it. Quietly, but knowingly, get on with it, conform. Do it under protest, reluctantly comply. Quietly refrain from doing it Conscientiously object, refuse to play an active part in the action Stating to those contemplating the action that one might not or would not help to coverup the action. Quit the job. Secretly (anonymously) blow the whistle inside the organization Quietly blow the whistle inside the organization (inform a responsible senior manager) Secretly threaten the offender with blowing the whistle. Secretly threaten a responsible manager (e.g., the CEO) with blowing the whistle outside the organization. Publicly (i.e., in person) threaten a responsible manager with blowing the whistle. Secretly blow the whistle outside the organization (report it to the press, the police and so on). Publicly blow the whistle outside the organization. Sabotage the implementation of the unethical behaviour (make the action impossible). Lead ethical change: negotiate and build consensus for change in the behaviour or policy. Nielsen (1989) relates most of these options to the ideas of Lutheran clergyman and philosopher Paul Tillich (1886-1965), who, in the book The Courage to Be, drew on theological principles to identify two general approaches for tackling ethical dilemmas faced in everyday life: being as an individual and being as a part of a group. Both general approaches involve standing up against unethical behaviour, involve the risk of decidedly unpleasant consequences for the individual (such as the loss of one’s livelihood), and therefore require great courage. 27 While Nielsen’s options 1 and 2 appear to fall short of taking a courageous stand against unethical behaviour, options 4-15 (and possibly also option 3) appear to entail being as an individual, that is, according to Tillich, having the courage to follow one’s conscience and defy authorities who may be both unethical and unreasonable. Nielsen (1987, 1989) argues that there are important limitations attached to each of the being as an individual options, and that they entail taking action acting against others, and therefore may be perceived as divisive. For example, option 13 (anonymous external whistleblowing) may lead to a climate of distrust and suspicion, as well as a sense of betrayal, and may thus have a damaging effect on organizational relationships and morale. Nielsen (1987, 1989) warns also that this and option 14 (public external whistleblowing) may encourage employers to retaliate with a ‘might is right’ strategy, and his warning has been bourne out by research in which Gerald Vinten (1992) found that whistleblowing tended to provoke dire retribution from employers, and could result in bankruptcy and even imprisonment for the whistle-blower. Generally, it has been shown that most whistleblowers face retaliation unless their organizations (perhaps as a result of an earlier incident) have set in place internal mechanisms to take account of a whistle-blower’s allegations, and view a whistle-blower not as a dissident but as a reformer (Frith, 1994). What of being as a part of a group? Tillich argues that this approach requires the courage to accept guilt along with punishment and other consequences, as part of the group or on behalf of organization, even when one has not been directly responsible for the wrongdoing, along with the courage to take responsibility for developing and improving the moral tradition of the collective. Only one of Nielsen’s 16 options entails the ethical use of being as a part of a group, and that is Option 16. Nielsen (1989) recommends that this option should be taken wherever and whenever one is confident about taking a leadership role, believes that there is time for discussion and consensus-building about the ethical issue, believes that the relevant authorities would respond reasonably to reasoned arguments, and that the organization could benefit from an ethical solution. He points out, however, that the courageous person acts without the certainty of knowing whether his or her leadership will successfully bring about an ethical solution. Referring back to Simon’s story at the beginning of this chapter, consider the questions of how appropriate it is for Simon to take option 16 in an oriental context? (Strong hint: it must be done unobtrusively, behind the scenes, and it must not be seen to subvert those in authority). Most of Nielsen’s 16 options appear to entail dissent, and as such may be most viable in countries where there are stronger aspirations to egalitarianism, flat hierarchies and individual human rights (for example some Western democracies). Even so, Robert Jackall (1988) found, in three US companies, that disagreeing with the boss was said to be tantamount to ‘putting your head between your legs and kissing your ass goodbye’. The prospect of dissent may be even more daunting in societies characterized by high power distance (see Hofstede 1980; Chapter 3), where it is taken for granted that power is distributed and used unequally, and by high collectivism, where consensus is valued more than self-expression, and conformity provided in exchange for protection. In a special study of eight dilemmas reported by Hong Kong Chinese managers, arising from requests by a boss or supervisor to do something they knew to be wrong, the following four options were discovered (Snell 1999a): 1. ‘Little potato’ obedience (quiet, fearful, humble, deferential conformity). 2. Token obedience (following orders half-heartedly and semi-incompetently). 3. Covert or undercover disobedience (only pretending to obey, and keeping disobedience hidden). 4. Open disobedience (conscientious objection). 28 In line with Jackall’s finding, open disobedience was chosen only in the two cases where there was either an explicit and official right to dissent or where line authority was not direct, that is, the manager in question was not dissenting or disobeying an immediate ‘supervisor’. The reasons why this might be so are revealed next, as we look in greater detail at the phenomenon of whistle-blowing. More on Whistle-blowing Marcia Miceli and Janet Near (1991) regard the act of whistle-blowing as a practice that directly challenges managerial authority and power. A review of whistle-blower case studies (Perrucci et al. 1980; Near and Jensen 1983; Near and Miceli 1987; Glazer and Glazer 1989; Miceli and Near 1991) suggests that whistle-blowing and retaliation are not a discrete pair of stimulus–response events, but tend to involve a sequence of episodes triggered by an initial event. The triggering event is usually associated with an awareness of initial wrongdoing with regard to illegal, immoral or illegitimate organizational processes and practices. After pre-whistle-blowing decision-making processes have occurred, the actor reviews the choice of actions (or no action) available (see Nielsen’s 16 options, above). Near and Jensen (1983) also argue that a whistle-blower who stands alone without support is seen as powerless in the organization and can expect the strongest retaliation from the organization. This could be someone who has no or very few power resources, has strong power dependency relationships and who is easily replaceable (Mechanic 1962; Kanter 1979; Conger and Kanungo, 1988; Luthans et al. 1988). Conversely, Near and Jensen argue that a whistle-blower who has many power resources, such as being regarded as irreplaceable, having others dependent on him or her, having influential networks, and presenting a strong case regarding the claims of wrongdoing that is seen as likely to generate public support, might be less vulnerable to retaliation from the organization. However, reinforcing the point that whistle blowing requires courage in the face of uncertainty, they go on to argue, ‘that there is a possibility that the organization’s pattern of retaliation against whistle-blowers is simply random.’ (Near and Jensen 1983: 8). In the UK, the Public Interest Disclosure Act, designed to protect whistle-blowers, came into force in July 1999. Key questions are whether this has reduced the number of cases of injustice to whistle-blowers, and whether it has helped to improve moral standards at work (Weale 2000). The initial signs were promising. For example, on 10 July, 2000, Toni Fernandes, former accountant at Netcom Consultants, of Reading, who had been dismissed after reporting to the board that the company’s chief executive had made £371,000 in false claims, was awarded £293,441 compensation (Shaw et al. 2000). However, after five years in legal implementation in the UK, a review by David Lewis and Stephen Homewood (2004), identified 12 points on which either the law should be reformed or associated legal institutions should be strengthened, in order to offer adequate protection to whistle-blowers. ‘Fiddling’ As Sims et al. (1993: 59–60) argue, many organizations, indeed probably every organization, has a ‘hidden economy’ in which it is accepted that individuals can ‘profit’ and engage in some form of fiddling – bending rules, pilfering (for example taking extra pens, short-changing or overcharging, making unauthorized phone calls and so on). Fiddlers often see their fiddling as an added ‘perk’ or ‘entitlement’ of the job and as something that others do as well. In effect, many organizations develop a ‘zone of indifference’ with regard to fiddling, and might even cost these ‘activities’ into their operational expenses. 29 In other words, it becomes a part of embedded practice, is taken for granted, and is usually more costly to police than to eradicate. Fiddling rarely gives rise to whistle-blowing, for the wrongdoing that triggers whistle blowing by middle managers such as Toni Fernandes is normally of a magnitude that brings into much starker relief the conflict and contrast between the brand of morality practised in the organization versus the public image the organization tries to present to the outside world and the moral standards that the whistle blower tries to live by outside the organization (Sims et al. 1993: 60). Fiddling and other distortions can get out of hand, however, as revealed in Westley’s (1990) study of the ‘lying, stealing, cheating culture’ at an automobile factory. GrossSchaefer et al. (2000: 91) warn that ‘a totally lax attitude [to fiddling] will signal that employee theft is acceptable, which is absolutely the wrong message’. They argue (p. 94) that, rather than emphasizing controls and surveillance, a more effective anti-theft strategy would aim to build a moral climate within which justice is seen to be done and where rewards are seen to be fair. Edward Sieh (1987) showed that petty theft at a garment factory was often triggered by episodes of perceived injustice on the part of management. If those at the top are not corrupt, and can demonstrate an open and constructive attitude in relation to justice, they may lead Nielsen’s option 16, in relation to ‘fiddling’, and support corporate training that encourages ethical sensitivity and self-restraint, in relation to ‘fiddling’. Moral reasoning, moral motivations and care No critical account of business ethics is complete without examining the influential but controversial model of stages of moral reasoning development proposed by Lawrence Kohlberg (1927–87). Kohlberg’s attempt to represent the deep structures behind critical reasoning is of special relevance to critical management studies, since conceptual ‘tools’, as described in the foundations of business ethics (see Table 8.2) are of little use unless people possess the competence to use them. Kohlberg explored the conditions under which the ability to engage in critical moral reasoning may grow and develop. Kohlberg’s own intellectual concern with moral issues was fuelled by a passion for social justice, as he saw it. He was active in educational reforms, for example playing a leading role in school democracy projects in Germany (Lind 1997) and the USA (Kohlberg 1985). These aimed to foster capabilities for critical thinking through open dialogue conducted in the spirit of equality, rather than through didactic instruction. In his 1958 doctoral dissertation, Kohlberg investigated how schoolboys explained their reasons for judging ‘right’ and ‘wrong’ decisions in a series of hypothetical ethical dilemmas that involved issues of justice, fairness and welfare. He rejected the cultural relativist notion, popular at the time, that moral behaviour was exclusively a matter of conformity to social norms, and claimed to have discovered a parallel between the boys’ moral development and psychologist Jean Piaget’s theory of intellectual development. Piaget assumed that children develop through stages by constructing progressively more complex cognitive structures as they interact with their environment (Crain 1992: 103). Kohlberg assumed, similarly, that the development of moral thought entailed progression through a fixed sequence of stages and proceeds by exposure to the cognitive challenges posed by moral dilemmas, rather than through socialization into particular moral values. Kohlberg died in 1987, and his final formulation of the model, published posthumously, is summarized in Table 8.2. 30 According to proponents of the Kohlberg model, at stages one and two, morality is confined to the preconventional. Typically, the individual operates from pure self-interest and expediency, and is concerned only about personal gain or loss: ‘What’s in it for me?’ ‘Why should I bother to help?’ ‘Who’s in charge?’ Social norms and conventions are obeyed only if there is a direct payoff. Stages three and four represent conventional morality, where conformity is valued for its own sake. At stage three, the concern is to please close friends, family and associates by meeting their expectations. At stage four, professional integrity and lawful pursuit of corporate-minded goals becomes an important end in itself. Morality at stage five and beyond is postconventional. At this level, rules or goals are seen to be invalid unless founded on a concern for social justice and collective well-being. Another way of describing the moral motive at stage five, for example, is ‘striving to be reasonable, consistent and purposeful in pursuit of principles that are good for the community’ (Snell 1997: 189). Stage five is counter to mainstream culture in all societies. Kohlbergian researchers claim to have found that less than one-fifth of adults reach stage five (Hersh et al. 1979; Treviño 1986; Treviño and Youngblood, 1990; Weber 1990), and stages six and seven are rare (Colby et al. 1983: 60) A common misconception of the Kohlberg stages model concerns what happens when progressing through the moral stages. It is sometimes claimed that Kohlberg believed that as a person progressed to higher stages, they were no longer influenced by the earlier stages. Not so! Kohlberg regarded the stages hierarchy as a model of the development of moral reasoning capability, thereby implying that if a manager becomes able to reason at, say, stage four, she or he still retains the ability to assess a situation from the point of view of stages zero, one, two and three, and may respond to a moral situation primarily from the lower stages (Elm and Weber 1994: 343). Kohlbergian analysis still entertains the possibility that certain situations, such as those involving distorted perception (Bersoff 1999), temptation, stress and ‘bad mood’, can alter people’s moral predispositions. It follows, according to the model, that corruption spreads not only among people deemed to be ‘retarded’ in their moral development and who are thus incapable of stage four or above, but can also involve those who, for whatever reason, fail to apply their full moral reasoning capability. Gendering ethics Kohlberg identified Martin Luther King (1929–68) and Mahatma Gandhi (1869–1948) as role models of postconventional moral reasoning, perhaps adding fuel to criticism (see Gilligan 1982) that the original 100 per cent male sample cut a theoretical groove exclusively oriented towards social justice. King led non-violent campaigns against the injustices suffered by black communities in the USA, a ‘crime’ for which he was gaoled (Turiel 1996). Gandhi envisioned that India could free itself of colonial rule without taking up arms against its rulers. His wisdom was grounded in the principles of his Hindu religious tradition, and while he was committed to securing human rights for all, he linked this to the need for civic duty and social responsibility, arguing that only if all the people were empowered would they be able to perform their duties adequately for society and for the world (Dalton, 1998). He was widely seen as a role model who put into practice the qualities that he identified below (Gandhi, 1954: 295): Sincere in himself, bears no malice, exploits no one and always acts with a pure mind. 31 Against a backdrop of social movements for justice and human rights in American society during the 1970s, which despite the legacy of Gandhi and King became associated with violence and aggression, Carol Gilligan, a former student of Kohlberg, sought to correct Kohlberg’s relative neglect of care-based morality, which she advocated as a powerful moral force. A central claim which Gilligan and other feminist theorists have made regarding Kohlberg’s work is that women’s moral experiences arising from their particular social roles should have been taken into account when the theory was being developed, and not just incorporated as an afterthought. All Kohlberg could do, however, was to modify his model rather than build a new one in response to Gilligan’s criticisms, and in a final work (Kohlberg and Ryncarz 1990) he elaborated and widened his definitions of postconventional morality, especially at the seventh stage, moving towards Gilligan in an attempt to encapsulate the capacity for mercy, compassion, empathy and care, extending to all humanity and beyond. However, several controversies remain regarding Kohlberg’s theory, and similar developmental theories, which Gilligan’s criticism initiated, and Kohlberg’s response is regarded, particularly by feminists, as inadequate. The criticisms could be summarized as follows. The need to include more than just the moral ideals of male Westerners about elites Not only was Kohlberg’s original sample entirely male, but this was a characteristic of much of the other empirical work on which the early development and testing of the stages model was based, which gave it its basic shape. Accordingly, the model of developmental stages seems to embed an assumption that people follow a path of development which involves increasing differentiation of the self from the other, until finally the autonomous self stands alone to exercise impartial moral judgement, independently of the influence of others and free of contextual influences. This conception of the self, however, stems from a body of experience that is distinctly male and Western and may be neither gender-sensitive nor cross-culturally aware. Until recently, because of women’s relative absence from public life historically, and contemporary barriers such as the ‘glass ceiling’, they tend to have accumulated relatively less experience than men of handling moral problems relating to governing nations, leading corporations, exercising institutional power over others and managing military conflicts. Conversely, owing to traditional role stereotyping, men tend to have had relatively little experience of managing the moral problems of family life, such as the relations between adults and children, and the demands of motherhood and nurturance. Thus it is plausible that the higher stages represent a male idealization of the moral reasoning required in what might be termed ‘ruling court’ positions (senior officials, lawmakers, policy-makers, philanthropists, etc.), which to this day remain almost exclusively occupied by men. Kohlberg’s advocacy of the higher stages of his developmental model is (to me) very powerful and persuasive when it is applied to policy-making and policy negotiation about institutional arrangements governing social and economic policies at national and international levels. However, the relevance of the model for understanding the full range of moral development in and for the spheres of life that are outside the ruling courts of governmental and inter-governmental bodies or corporate head offices may be called into question. 32 For example, by relegating the ethics of care to stage three, Kohlberg seems to be encouraging the implication that the moral reasoning required of care-givers, typically women, is at a relatively low level, but that those in care-giving roles might develop higherlevel moral capability if freed from the bonds of their roles, and given more challenging work to do. As a somewhat unusual argument for equal opportunity, this implication resembles the stance of classical Greek philosopher Plato (428/427 BC – 348/347 BC), who held that although women were typically inferior to men, the best people of either gender should be eligible to become philosopher monarchs (see Raphals, 2002: 418). So are women generally less developed than men in terms of ethical reasoning? Clearly not, even when measured against the Kohlberg model! A recent study of 131 final year undergraduate business students in Canada failed to find any significant differences between male and female students (Lan et al, 2007). Forte (2004) found, likewise, that gender did not have a significant relationship with the moral reasoning ability of individual managers. These findings are consistent with prior research conducted by Rest (1979, 1988), Derry (1989), and Harris (1990). Robin Derry (1989: 859) suggests that a lack of gender differences may reflect corporate cultures and education systems that train members to think as corporate (i.e., male) members, regardless of physical gender. Regarding Western cultural bias, it is important to note that the moral agenda of key global institutions in Kohlberg’s time was dominated by the West, and despite the rise of Asian economies and the ongoing prominence of conflicts in the Middle East, this state of affairs persists today. Although he was impressed by Gandhi, Kohlberg described the higher stages of moral reasoning in ways that seem to fall short of capturing the essence of Gandhi’s principled ideas, grounded in Hindu traditions, regarding the deep interrelationship and interdependence between the duty to serve those in need, the importance of suffering alongside them, the need for ongoing self development and the need for human rights. So is the Kohlberg model culture-fair? The discussion of Mahatma Gandhi suggests that there is room for improvement in this respect. Snarey (1985) reviewed a large body of cross-cultural research, and concluded that the sequence of the first four stages proposed by Kohlberg is invariant, but that the postconventional stages as conceived in the model might not be found in all cultures. The need to correct the bias toward differentiation as opposed to connectedness The Kohlberg model presented above was developed on the basis of studies of individual moral reasoning applied to hypothetical dilemmas, and hence it portrays the individual ‘self’ developing in relation to universal standards, regardless of special situational factors, even at stage seven. However, as Virginia Held (1997) points out, the holistic experiences of people in making moral choices about their own moral dilemmas are important in shaping the kind of judgements they make and the criteria they use for making them. In order to gain a more complete understanding of everyone’s moral development (i.e., including those of Western men), it may be necessary to consider non-Western and feminist conceptions of the self. Since there are a great many of these alternative conceptions, what we present here represents only a small (but hopefully not token) ‘dip’ into what is a vast array of available resources. 33 Table 8.2 Stages in Moral Development Stage Orientation Moral motives Principles of what is ‘right’ Typical social concerns Zero Impulsive and amoral None None at all One Obedient; punishmentavoiding Irrational dread of punishment; fear of those in authority Two Personal benefits and rewards; getting a good deal for oneself How to get the most pleasure and gain for oneself; calculating the personal risks and pay-offs of an action Right is whatever I want at any time, regardless of the consequences People in authority, and the rules that they set, must be obeyed exactly, so that punishment or disaster is avoided It is human nature to want to get the best for oneself, making deals with other people if necessary Three Conforming to social expectations; gaining approval Avoiding disapproval by associates and close ones; wanting to be praised, liked and admired, rather than shamed One must be nice to others and not hurt their feelings, be loyal to partners, and live up to others’ expectations Four Protecting law and order; maintaining the existing system of official social arrangements Promoting justice and welfare within the wider community, as defined in open and reasonable debate Performing formal duties and responsibilities. Meeting official standards, working for the best interests of an institution Following principles that serve the best interests of the great majority. Striving to be reasonable, just and purposeful in one’s actions Six Defending everyone’s right to justice and welfare, universally applied Applying well-thought-out principles, being ready to share and debate these openly and non-defensively with others One must perform one’s duty to society by upholding its law and order, and by contributing to the good of the social institutions operating within it For the betterment of society as a whole, the underlying spirit of basic democratic and contractual rights must be acknowledged and upheld, even if existing institutions do not protect them Everyone’s basic human rights must be respected without exception; everyone has basic moral responsibilities from which no one is exempted Seven Respecting the cosmos as an integral whole, a oneness extending well beyond humanity Respecting the intrinsic value of the cosmos, with its wider harmonies and paradoxes Five Rights extend beyond what is immediately useful or interesting to humanity, e.g. to animal species and ecological systems regardless of their social utility Self-preservation is all-important. One is preoccupied with what those in power want, and with how to avoid causing them anger Dealings are governed purely by self-interest. If cooperation with others is an absolute necessity, it is done through ‘give and take’ bargaining. If cooperation is not necessary, then other people’s needs are ignored The capacity for empathy with the feelings of those in one’s immediate circle is developed. Approval and liking by others comes to be valued for its own sake, and affects self-image. Shared commitments come to be more important than narrow self-interest Special effort is made to act consistently with official roles, duties and standards, and with properly laid down rules and procedures. One aims to serve the needs and goals of the institution as a whole Over and above institutional needs, concern develops for the ‘greater good’, the wider public interest. Principles of basic justice and human rights are followed, rather than only what is laid down by existing laws or by formal roles and rules There is principled concern and respect for other persons because they are ends in themselves, and not mere instruments to meet others’ purposes. One adopts a reflexive, self-critical approach in ethical decision making, so that the consistency of one’s decisions is constantly under review The integrity of ‘the environment’, and of other systems making up the universe, regardless of their immediate importance for Homo sapiens, is valued for its own sake Model adapted from Lawrence Kohlberg (1981), Essays on Moral Development, Volume One: The Philosophy of Moral Development, San Francisco: Harper and Row, pp. 121–2, 128 and 409–12, and from Lawrence Kohlberg and Robert Ryncarz (1990), ‘Beyond justice reasoning: Moral development and consideration of a seventh stage’, in C.N. Alexander, and E.J. Langer, (eds), Higher Stages of Human Development, Oxford: Oxford University Press, pp. 193–5 34 In East Asia, moral selves have traditionally been regarded as closely connected to other moral selves, rather than being independent, such that relations with particular others give the self its defining characteristics and shapes its decisions. For example, Boardman and Kato (2003) explain the concept of kyosei, a philosophy derived from Confucianism that gains its meaning (cooperative living) from two Japanese characters, kyo (working together) and sei (life). They elucidate how kyosei has sought to reconcile the activities of business with Confucian thought (which in ancient times tended to be anti-business), and how it teaches that people (and corporations) ‘do not exist in isolation; we are part of a larger and more complex family (literally and figuratively), where harmony can be achieved by acting appropriately with one another’ (Boardman and Kato 2003: 320). The principles of kyosei include: ‘trade must benefit all parties’; ‘we should respect a gentleman of virtue from another country as if he were our own father or teacher’; and ‘it behoves us to rescue those in trouble’ (Boardman and Kato 2003: 320-3). Companies which practise kyosei seek to establish harmonious relations, both with their various stakeholders, and with the physical environment, and accordingly, the philosophy of the Japanese company Canon includes the principle that ‘every act of work should be performed whole-heartedly and with consideration for others’, while one of the principles of Matsushita Electric is that the business should ‘relieve poverty and create wealth, not only for shareholders, but for society’ (Boardman and Kato 2003: 327). This resonates strongly with concepts of corporate social responsibility, and Goodpaster (1996) suggests that kyosei provides an alternative form of postconventional ethical reasoning. We shall consider a feminist perspective next. The need to rediscover the emotional self Owen Flanagan and Jonathan Adler (1983, cited in Held 1997: 636) have criticized the ‘adequacy thesis’ of Kohlberg’s model, which assumes that the more a moral decision is based on formal rationality, the better it is. Since the time of the Greeks, rationality was favoured over other modes of response to the world, and this was traditionally seen as the preserve of men working in public life. As argued above, historically long-held male assumptions were reproduced in the Kohlberg model’s preference for the use of rational and formal criteria in moral choices – such as enlightened self-interest or respect for abstract ethical principles, rather than situational and particularistic factors such as care, compassion, altruism, mutual suffering, empathy, and a sense of having one’s fate bound up with those of close others. Indeed, certain apparent differences between the sexes, believed by some to be rooted in biology, have been held to define women as ‘more emotional’ than men and hence less capable of making higher moral judgements. For example, according to Raphals (2002: 419-20), Plato, despite advocating equal opportunity, regarded women as inferior, because he saw them as being at the mercy of their emotions, and along with children, slaves and the ‘base rabble’, preoccupied with appetites, pleasure and pain. But we may turn this issue around and ask whether it is possible for someone to engage in sound ethical reasoning unless he or she has appropriate emotional presence within a situation, which would be reflected in motivation to care, feelings of compassion and empathy. 35 According to Aristotle, someone whose motivations were not based on virtue, would be unable to distinguish what is good from what is bad, and hence would not be unable to reason excellently (Richardson, 2003). Although Aristotle did not particularly emphasize caring among his key virtues, we may consider caring important today, as in care for children, elderly care, customer care, care for the environment, care for the sick, care for the poor, etc. Kohlberg leaves the caring dimension plateaued at stage three until he reintroduces it at stage seven, but at this highest level, it is a universal and diffuse version of caring that is presented, and not intimate and highly intensive caring. But why not consider the possibility that there might be a pathway of care-based reasoning through all the higher stages? Donna Ladkin (2006) argues that the principles of deontology and utilitarianism, which Kohlberg emphasizes at the higher stages, may be of limited relevance for leaders or managers, when faced with ethical dilemmas involving the livelihoods of neighbouring individuals or groups with whom they are closely linked. She suggests that typical care-based dilemma situations might include: handling a request for special consideration from a long-serving employee undergoing severe personal distress; discovering that colleagues or subordinates are engaged in wrongdoing, the public admission of which would not only harm the guilty parties but would also harm innocent ones; or knowing the contents of confidential strategic plans that will immediately effect the career choices and personal plans of subordinates. Drawing also on ideas from the philosopher Martin Heidegger (1889-1976), Ladkin holds that how we resolve such dilemmas reflects and reveals the manner in which we ‘dwell’ with others, how we cohabit a life-space with them, and what sort of neighbour and leader we are. In such situations, giving due emphasis to the ethics of care would involve a kind of holistic receptivity to everything that makes a situation unique and special, and would require the manager to listen attentively to what the various affected parties have to say about their feelings and concerns, and to seek to understand the whole picture from various angles and fresh perspectives. The need to consider the rise of peer communities Kohlberg attempted to adapt his model to study social processes associated with the development of moral reasoning and moral norms in organizational settings, such as prisons and schools (Kohlberg et al. 1972, Kohlberg and Higgins 1987). Although he facilitated the development of protected zones of democratic decision making in prisons and schools, he could not have foreseen the rise of more embedded non-hierarchical organizational structures such as communities of practice, or the advent of networked knowledge communities such as Wikipedia, where lateral relationships, exchange of skills and expertise, peer review, and mutual help appear to have emerged as important factors of sustainability, and where there appears to be relatively less obsession with traditional incentives, imposed rules, top-down lines of authority, and profit making. Time will tell whether moral development theories can accommodate a wider range of human experiences and perhaps portray multiple pathways of moral development. Corporate culture and moral ethos In this section, I will examine the impact on moral reasoning of corporate culture or moral ethos: implicit, unwritten, informal codes of conduct within organizations. In the subsequent section, I shall go on to discuss the possible merits and limitations of official, written company codes of conduct. 36 Moral ethos may be defined as the force field of tacit norms, values, beliefs, expectations and prohibitions, which influence ethical conduct in work settings. This set of pressures and inducements may differ from those in other walks of life. As Treviño (1992: 450) observed, ‘individuals play highly differentiated roles that allow them to accept different values, norms and behaviours in different life domains (for example work and home)’. Commentators argue that moral ethos at work matters, and that it may either be ‘good’ or ‘bad’. Some assume that the typical moral ethos predisposes individuals to act amorally: ‘Organization culture may influence perceptions of instrumentalities for motivation to engage in unethical behaviours’ (Knouse and Giacalone 1992: 373); ‘There is no cause for optimism in the idea that a solitary individual may withstand the organization’s blandishments and maintain a strong moral sense. For, while some rare individuals will do so, many will not’ (Schwartz 1990: 44). Others argue that ‘company tradition’ (Ryan 1994) or ‘corporate culture’ (Schlegelmilch and Houston 1990) can be a force for high ethical standards. One obvious explanation for such divergent viewpoints is that moral ethos varies considerably from one organization to the next (and even between different parts of the same company). Some theorists (Lavoie and Culbert 1978; Petrick and Wagley,1992) have speculated that a moral ethos is located at one or other of the Kohlberg moral reasoning stages. Initially, I shared that view (see Snell 1993), but more recently (Snell 2000: 276) I have argued that moral ethos is better characterized by a profile, indicating the relative strength of the various Kohlberg stages (but with the model modified, so that caring is not confined to stage 3!), and with the mode or peak representing the most prevalent and powerful stage within the moral ethos. A further point about the Kohlberg stages in moral ethos is that, unlike at the individual level of analysis, they represent powerful emotions, not only ways of reasoning. Moral ‘stages’ (a term that can be misleading when applied to individual adults, and which is an unfortunate misnomer at the organizational level of analysis) involved in moral ethos may nevertheless be heuristically described as:  stage one: fear, coercion and punishment  stage two: greed, instrumentality and manipulation  stage three: conformity to ‘inner-circle’ group norms and prejudices  stage four: dutiful accountability to quasi-legal standards set by higher authority  stage five: passionate stewardship, social responsibility, democratic standards addressing stakeholder needs  stage six: compassionate community of moral enquiry seeking to balance competing moral principles. The dynamics of moral ethos are complex and emotion-laden, and may be influenced by leadership, organizational systems adopted to develop and enforce standards of conduct, the extent to which authority resides in domination or trust, whether a stakeholder approach is embraced at strategic levels, and whether critical self-reflection is discouraged or encouraged (Snell 2000). The character of one’s immediate ‘boss’ may mediate the influence of wider moral ethos. While the relationship between moral ethos and an individual employee’s actual ethical conduct is complex, moral ethos is likely to have a substantial impact on how employees, such as Simon, experience their working environment and how they construe and tackle moral dilemmas there. For example, if Simon is expected to defer to his boss, his scope for independent moral thought and action is limited. 37 Stephen Fineman (1997: 19) points out that ethical judgements are influenced by emotions such as shame, guilt, embarrassment and fear. Emotions are socially defined and are important for exerting social control in society. Organizations mirror elements of wider forms of emotional control, but in their moral ethos they define for members what is ‘right’ and acceptable, and give emotional charge to this. In a moral ethos oriented toward Kohlbergian moral ethos stages 1–3 (remembering that as I see it, some caring could be at stages higher than 3), moral behaviour may be influenced more by punitive emotions such as fear of dismissal, humiliation or public disapproval, than by higher moral ideals or concern for the social good. It follows that emotions and social pressures in the moral ethos can affect ethical judgements, and might well explain lapses in moral behaviour. Explicit and formal organization-based approaches to improving business ethics Three possible means for improving ethical conduct within organizations have emerged in the literature: corporate codes of conduct, ‘moral leadership’ from the top, and ethical democracy. Corporate codes of conduct These are written documents, ranging from a single paragraph to more than 50 pages, stating explicitly what is espoused as being desired by a corporation regarding employee behaviour (Stevens 1994). The great majority of large US companies have such codes and their popularity has spread to Europe (Weaver 1993). In Hong Kong, within little more than one year of Governor Chris Patten lamenting that only 20 out of 182 listed companies had codes of conduct (ICAC 1994), a majority of companies had formally adopted their various versions (ICAC 1995). Early studies of typical themes in codes of conduct (Chatov 1980; White and Montgomery 1980; Sanderson and Warner 1984) identified the following common topics:        dealing with extortion or kickbacks conflicts of interest between employee and employer the use of insider information by employees for personal advantage the accuracy of accounting records the misuse of company assets moonlighting fraud and deception. The general character of the most common topics in corporate codes has not changed significantly over the years. Singh (2006), in a study of Canadian companies between 1992 and 2003, found that there had been only minor changes in code content, such as more emphasis on the prohibition of bribe giving and less emphasis on the prohibition of bribe taking. Critics have noted that the motivation behind the inclusion of code items tends to be mainly concerned with maintaining profits (Cressey and Moore 1983) and protecting the company itself against legal liability (Warren 1993; Stevens 1994), rather than with the pursuit of wider social responsibilities and values. This is not to say that these items are ethically unimportant – much depends upon the spirit in which the codes are applied. According to Simon Webley (1993), areas that codes tended to neglect up to the early 1990s included the following: 38         the needs and rights of suppliers environmental protection and related green issues avoiding discrimination against and harassment of minority groups duties to local communities labour relations safety for employees and customers fair remuneration due process in enforcing and monitoring the code itself. The picture is changing, however, and many of these topics have become less neglected in recent years. For example, in a recent study of indigenous Irish companies, O’Dwyer and Madden (2006) found that health and safety, sexual harassment, racial harassment, religious harassment, and equal opportunity were mentioned in a majority of codes, and that environmental issues were mentioned in nearly half the codes. Environmental protection, fair remuneration and duties to local communities, are now being subsumed under ‘corporate social responsibility’ initiatives, through which some corporations are seeking to demonstrate their commitment to charity (help to those in need) and stewardship (concern to respect the moral rights both of market stakeholders and nonmarket stakeholders). Some libertarian-minded theorists (for example Donaldson 1989) are very sceptical about the whole idea of codes of conduct and regard them as an imposition that does not respect employees’ ability to engage in autonomous moral reasoning. A forbidding legalistic or parental ‘don’t, don’t, don’t, must, must, must’ style may foster preconventional, riskaversive ethical reasoning (Warren 1993). Top-down, imposed codes may overlook real concerns at the grass roots, and may neglect the needs of the least powerful stakeholders. Some codes may even represent ‘conspiracies against the layman’, smokescreens which boost the image of a profession, without actually improving its practices (Mitchell et al. 1994). Against this, as part of a business ethics development programme, codes of conduct may represent an important first rung of a ladder. In the run-up to transition of sovereignty in 1997, many Hong Kong-based organizations introduced codes of conduct, in response to a government-sponsored campaign to prevent corruption. Many of these codes were imposed top-down, without consultation, and with a bare minimum of training and development. A study of 17 companies suggested that, as might be expected, the mere introduction of codes did not improve the balance of stages in the moral ethos, but they may have helped to prevent a decline in moral conduct (Snell and Herndon 2000). Codes that are based on, based on ordinary employees’ ideas and concerns, rather than on the imposition of rules from above, and supported by training and development, may be more effective in guiding their behaviour, and fostering a stakeholder-oriented approach. The Business Roundtable (Keough 1988), a US-based association founded in 1972 to advise on corporate responsibility and ethics, prescribes a participative code development procedure, which ideally entails the following. Staff at all levels are interviewed by senior managers about ethical matters. Ethics programmes, reflecting top management commitment, then ‘cascade’ from the top. Related development programmes are run in order to build greater openness and trust. There is as much emphasis on education as on regulation. An ethics committee is set up, and compiles, clarifies, monitors, updates, disseminates and promulgates the corporate code of ethics, and investigates and mediates in ethical problem cases. Related alleged ‘good practices’ include confidential ethical dilemma telephone hotlines or counselling services, and specialist ethical ombudsman posts. 39 Such arrangements are fairly common in US corporations (Edwards 1995), and industrial chaplains have performed similar duties among paternalistic companies in the UK. In other countries, however, such code-supporting arrangements may be less well established, as has been shown in studies in Sweden (Svensson et al. 2006) and Ireland (O’Dwyer and Madden 2006). Conflict of interest One topic, conflict of interest, is particularly important in relation to procedural justice, and may require some explanation. Michael McDonald (1995) defines conflict of interest as ‘a situation in which a person, such as a public official, an employee, or a professional, has a private or personal interest sufficient to appear to influence the objective exercise of his or her official duties’. Although McDonald takes an appropriately wide view of what this phenomenon can entail, it can refer, specifically, to those situations in which an employee has, or is closely associated with, outside commercial interests that directly impinge upon his or her employer’s interests. For example, in the case example that began this chapter, Simon’s boss may be a partner in a private side business (independent of Sunny) that provides cleaning services for office buildings. Dismissing the ‘quite old’ cleaning lady from Sunny may present an opportunity for Simon’s boss to expand his private side business. If that were the case, his primary, and possibly concealed, motive would be to serve his own extramural business interests, rather than consider those of Sunny, his own employer. In a variation on this conflict of interest scenario, Simon’s boss might, as landlord, own a flat that is rented by the cleaning lady, and perhaps there has been a prior dispute between them about the state of repair of the internal fabric of the flat, or the state of maintenance of the appliances. The dismissal may be prompted more by his anger about this extramural dispute, than by the cleaning lady’s work performance at Sunny. To identify when such conflicts of interest are likely to distort managerial decisions, McDonald (1995) suggests the ‘trust test’: ‘Would relevant others [my employer, my clients, professional colleagues, or the general public] trust my judgment if they knew I was in this situation?’ He advises managers to ‘get out of the situation, or, if you can’t, make known to all affected parties your private interest’. One ‘escape’ option for Simon’s boss would be to delegate the decision about whether to continue employing the old woman to Simon, but if Simon knows about the conflict of interest, would that remove its influence? Moral leadership and democracy Whatever the outside pressure on a company to ‘clean up its act’, significant improvement is unlikely to take place in the absence of moral leadership from within. Open meetings to discuss moral issues of concern to the company, and encouragement for transparency in all decisions, are likely to enhance the moral conduct of an organization (Treviño and McCabe 1994). The ‘philosopher ruler’, who ensures employees’ civil liberties and freedom of speech, builds trust and sets up high-quality dialogue, may provide excellent facilitation for such activities (Starkey 1998: 544). If leaders are not quite at the very highest developmental stages, an attitude of servant leadership (Greenleaf 1977) may suffice. The qualities of leadership that foster the development of virtuous organizations may match those required to build learning organizations (see Kofman and Senge 1993; Snell 2001) – but beware: building learning organizations, despite all the hyperbole, is a formidable and perhaps impossible challenge. 40 At the other end of the spectrum, some types of leaders, who appeal to calculative selfinterest (stage two) or fearful obedience (stage one) may reduce the scope for virtuous action (Graham 1995). As Lichtenstein et al. (1995: 102–3) note, leaders who do not make use of moral reasoning beyond the preconventional stages are likely to create a sour, defensive and treacherous atmosphere. Many leaders, in developmental terms, are probably somewhere in between these benchmark points, and whatever their shortcomings, can still, in their own ways, help to improve moral ethos, and thus indirectly contribute to there being less pollution, less corruption, safer products, less exploitative advertising, more charitable giving and so on (Snell 2000). The benevolent and paternalistic despot, who lays down the moral law somewhat unilaterally and idiosyncratically, might, in the eyes of a majority of employees, be convincing in his or her advocacy and role modelling of ethical values such as hard work, honesty and fairness. Leaders who are charismatic or benevolently autocratic, rather than democratic, can learn from adversity and turn adversity into moral lessons. While adversity might strengthen them, it is also likely to teach them that they are not infallible, as the two following example illustrates. Dame Anita Roddick, who founded The Body Shop in 1976, served as its CEO for well over two decades and was honoured for her contributions to retailing, charity and the environment. She was, at least in her own view, a charismatic, somewhat abrasive, liberalminded female role model (Roddick 1991). According to Judi Marshall (2007), Roddick is one of a number of women leaders who are ‘un-moderated radicals’, bringing necessary emotional connection and openness to multiple ways of knowing to the field of CSR. As Marshall notes, Roddick has been both hailed and hounded. The extent to which The Body Shop was actually practising the deontological principles of basic honesty, unexploitative sourcing, and distributive justice in trade, was questioned during 1994–95 by maverick critic and journalist John Entine. Entine (1994, 1995) claimed that the company’s products and human resource policies were not all that they seemed. After some initial defensiveness, Roddick, and The Body Shop, responded positively to at least some of the criticisms by initiating a social, environmental and animal protection audit (Hanson 1995) and a values report (The Body Shop 1997). Such openness in re-examining its values and their application in the areas of social responsibility, environmental sustainability and animal protection, helped the company to survive the attack. The Body Shop subsequently won a court case against Channel 4 for libel and damages in respect of its core values, and Roddick has chronicled various attempts falsely to discredit her company (Roddick 2000: 215–32). What has been happening at The Body Shop in terms of ethical policies and practices since February 2002, when Anita Roddick and her husband Gordon stepped down from their co-chair positions and become non-executive directors, and in particular since March 2006, when the company was taken over by cosmetics giant L’Oreal, is an indication of the strength of the moral tradition that was established under her leadership. After a gap of 8 years, The Body Shop (2005, 2007) published Values Report 2005 and Values Report 2007. The latter included a statement from Jean Paul Agon, CEO of L’Oreal, in which, on behalf of the new parent company, he promised that The Body Shop would retain its integrity and identity as a separate business unit. The report also contained a commentary by a stakeholder panel which offered a rather stern appraisal of The Body Shop’s recent performance on core ethical themes. For example, the panel called on the company to campaign more strongly against animal testing, to re-gain a position of moral leadership regarding community trade, to expand and take more seriously its work on self-esteem advocacy and diversity management, to extend its monitoring of human rights protection further down the supply chain, and to think more critically and innovatively about its agenda for environmental protection. 41 It is perhaps because of exposure to criticism of this kind rather than in spite of it, that The Body Shop was voted the top green brand in the UK and the eighth greenest brand in the USA, in an independent market research survey conducted in April 2007 by three subsidiaries of WPP (Landor 2007). Lifelong learning and business ethics The various ideas discussed in this chapter do not provide absolute and correct answers or truths, even when that might be claimed or implied by their originators. Accordingly, in this chapter, I have argued in favour of there being moral dialogue informed by ongoing moral judgement rather than the handing down of imposed moral judgement, however ‘expert’ or ‘authoritative’ this may be presented as. As Stephen Linstead and Andrew Chan (1994) demonstrate, with reference to Elias Canetti (1987), commands, however ‘morally justified’, which are imposed by authorities over subordinates, set up the potentiality for a ‘sting’, a deferred act of vengeance motivated by resentment, lying in wait for a suitable ‘payback’ opportunity. Business ethics may be more usefully regarded as a humble, ongoing, mutual learning process, than as a set of technologies for arriving at zero-defect moral decisions. I have already mentioned some exercises (inspired by Buddhism) suggested by Stephen Gould (1995). Elsewhere, I have described a number of secular self-development strategies in relation to ethics (see Snell 1993: 222–8). One of these is about how to counterbalance hubris, the fatal delusion that ‘my way is always the only right way’. Invite friendly but constructive criticism of your ideas and actions, look for disconfirmation, admit when your plans are not working, respect other points of view and entertain possible futures rather than a single dream. CONCLUSION It is time to return to the introductory questions, along with the initial case about Simon’s ethical dilemma. Answers to questions about business ethics 1. Does ethics have anything to do with business? I strongly believe so. Many managers besides Simon have faced workplace ethical dilemmas. They are an inherent aspect of business; lives are affected by managerial decisions and sometimes livelihoods are at stake in them. Livelihoods do not have to be sacrificed. People do not have to be treated as expendable items. 42 2. Should business decisions be governed by profitability alone? I don’t think so. The previous answer advises managers to be sensitive to ethical considerations. In Simon’s case, the dismissal of the cleaning woman may breach some ethical principles. From a utilitarian perspective, the sacking brings little apparent benefit to anyone, unless Simon’s boss has a private agenda, a ‘conflict of interest’, which should not be allowed to interfere with the decision here. Prospect theory would suggest that minutely small gains for the shareholders (if any) are outweighed by great misery for the woman and her dependents. Treating the woman as if she is merely an exhausted resource, to be discarded because she no longer serves the interests of ‘the company’, is also questionable from the point of view of deontology, which is founded upon respect for persons, their dignity and their human rights. Simon may believe that the woman is too physically weak to complete all the job tasks, but might procedural justice be better served by making some alterations to the facilities, so as to help to overcome whatever physical disability or handicap she may have? Such alterations might better honour the spirit of the Universal Declaration of Human Rights, and help others who are working at or visiting the premises. To Simon, his boss’s tone and manner may appear ‘highhanded’, and he tries to convey a more acceptable image of intentional justice. However, his care for and about the cleaning lady is limited to Kohlbergian stage three. If he really cared, he might draw upon postconventional moral reasoning when discussing the case in the company. 3. Is there a ‘third way’, between serving the needs of staff and corporate profitability? Simon’s boss might argue that replacing an old woman with a younger, stronger cleaning worker may lead to a healthier working environment, better for the workforce, using money more effectively. A genuine ‘third way’ would, however, involve doing a thorough stakeholder analysis, asking about who is affected by the decision and considering what they want and need. This enquiry would, of course, include discussing the situation with the woman herself. She has had no opportunity to discuss the situation, and how to resolve any problem amicably, with her dependents, whose needs have been completely ignored. Colleagues may not have been consulted. After 20 years, it is likely that she would be seen as part of the surroundings, there would be sympathy for her, and perhaps support for the idea of employing an extra parttimer to tackle the heavier tasks. The additional cost would be small, and may have a payback in better workplace morale and increased activation of the ethics of care, and interactional justice, within the office moral ethos. 43 4. Should managers conform to local rules, customs and etiquette, or are there universal ethical standards to follow? A cultural relativist solution to the problem would be to ‘do what the Hong Kong employers tend to do’. Part of the problem of taking such an approach here is the considerable diversity in Hong Kong practice. In some traditional Chinese companies, there is a social contract of (literal) lifelong employment in return for loyalty. In one chain of jewellery shops that I have studied, for example, staff who are well past their sixties continue selling, or generally stay around HQ or in the shops and help out some ways. Such arrangements compensate for the relative absence of formal social security and benefits entitlements in Hong Kong. On the other hand, Hong Kong employment law tends not to protect employees’ rights as fully as do laws in the European Community. Employers have relative freedom to hire and fire at will, and some take advantage of this, as many new mothers discover. In Hong Kong, as in Japan, the cleaning lady may be considered by many employers to be a ‘peripheral worker’. Thus, if Simon were to consider applying integrative social contracts theory, the cleaning woman’s fate hinges on whether hypernorms favour her retention. They might well do in this case. The right to subsistence of the woman and her dependents is under threat. Simon could probably tell if he is responsible for doing something about this by looking the woman in the eye and asking himself whether he is responsible. Maclagan would argue that Simon remains a moral agent of the organization, and is therefore responsible for handling the situation. Being responsible, Simon cannot shrug it off and blame it on his boss. 5. What are the options for managers facing moral dilemmas? Simon’s actual conduct was a hybrid of little potato obedience and undercover disobedience. According to ‘Nielsen’s list’ of 16 options, the one he has taken so far resembles option 2 (conform). Simon could still consider other alternatives, but if he has thought about even a fraction of the issues covered in this chapter, he would hardly be able to ‘not think about it’ (option 1). It is probably too late now for options 3-5: Simon might have expressed his reservations in English to the boss during the meeting with the cleaning lady (option 3); he might have left the room apologetically in the middle of the meeting, pretending to be sick (option 4); he might have stormed out of the meeting angrily (option 5). Probably, none of these options would have had much impact on the decision. What can Simon do next? He can hardly secretly blow the whistle or secretly threaten to do so (options 8, 10, 11, or 13), for if he did so, he would readily be identified. Public whistleblowing outside the organization (option 14) is unlikely to have the desired effect, since newspapers might not be interested in such a ‘kitchen-sink’ affair. This would rule out option 12. A similar argument would apply if Simon threatens to refuse to cover-up the situation, i.e., ‘so what?’ (option 6). He might try sabotage by writing an extremely offputting job advertisement and then saying, ‘we have to re-employ her, for no one else will take the job’ (option 15). Quitting the job himself would not help the cleaning lady (option 7). Simon might get closer to a satisfactory resolution by raising the issue with his boss’s boss in a quiet manner (option 9). This might entail expressing his concerns openly and non-aggressively, and trying to invoke a sense of compassion. If Simon knows about the concept of kyosei, this could be a great time to discuss it with a senior manager who is Japanese! He could also try to buy time, suggesting, for example, that he (Simon) could volunteer to investigate the case further and make further proposals. This might be the first step for Simon in leading ethical change (option 16), a longer process of negotiating and building consensus. He might then arrive, after discussion with the woman and with colleagues, at ways around the problem. Given the complexity of ethical problems, buying time is sometimes necessary. 44 6. What aspects of an organization’s culture help managers to make the best ethical decisions? While there is room to manoeuvre in most circumstances, Simon would have more chance of arriving at a just and caring outcome, if his superiors were not to assume that their word was law, and that the questioning of managerial decisions was not construed as mutiny. I believe (perhaps at the risk of tautology) that a moral ethos characterized by critical enquiry, care, compassion, due process and other attributes that might be included in a substantially widened conception of the higher Kohlberg stages is more conducive to good quality ethical decisions, than one that is dominated by fear, coercion, punishment, greed, instrumentality and manipulation and ‘inner-circle’ prejudice. 7. How valuable are codes of ethical conduct in business? The usefulness of a code of conduct depends on its content and coverage, the manner in which it is developed and the extent to which it is supported by training and development and appropriate grievance and disciplinary procedures. Many codes of conduct are imposed top-down and serve to protect the narrow company interest in a somewhat one-sided manner. Codes that are developed consensually, and after much refection and dialogue across various organizational levels, represent organizational learning and stakeholder considerations, and may provide support for good quality ethical decisions in cases such as the one that Simon is facing. 8. To whom should managers look for moral leadership? Ideally, there are moral leaders at all levels in an organization. Many managers like Simon, do not, however, find themselves in that ideal situation. Simon is responsible, but perhaps he is alone as a potential moral leader, with no leaders at other levels. In moral terms, not only is it Simon’s right to lead, but it is his inescapable duty to lead — if he can do so in the circumstances. If he feels he cannot do so, Simon can try to build his strength for the next time. 9. Is it possible to change a manager’s ethical predisposition? Moral development, both in terms of character and moral reasoning, can continue well into adulthood; indeed there is no reason to regard it as anything less than a lifelong process. Ethical sensitivity can, I believe, be fostered through feedback and ‘consciousness raising’. However, just as managers are realizing that corporate cultures uncontrollably unfold, stagnate, twist and fragment according to their own unique histories, so may the ethical predispositions (one could say ‘biases’) of the individual manager follow their own course. A concerned senior manager may try to enhance junior staff members’ moral development through mentoring, counselling, careful exposure, and opportunities to reflect on and talk about problems and experiences, but people, in the end, decide for themselves. Kohlberg believed that there was a tendency, at the higher stages, for people’s moral judgements to converge, but this may not always be the case. 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