Business Ethics and the 21st Century Organization

263 Pages·2006·2.249 MB·263\263

by  Whates, Peter (Eds.)

Business Ethics
and the 21st Century
Organization
Edited by
Peter Whates
To Gem, Tris and Oli – for always starting with
unconditional love then going way past the extra mile.
(cid:1)
First published in the UK in 2006 by
BSI
389 Chiswick High Road
London W4 4AL
© British Standards Institution 2006
All rights reserved. Except as permitted under the Copyright,
Designs and Patents Act 1988, no part of this publication may
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Whilst every care has been taken in developing and compiling
this publication, BSI accepts no liability for any loss or damage
caused, arising directly or indirectly in connection with reliance
on its contents except to the extent that such liability may not
be excluded in law.
The right of Peter Whates to be identified as the author of this
Work has been asserted by him in accordance with sections 77
and 78 of the Copyright, Designs and Patents Act 1988.
Typeset in Sabon by
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Printed in Great Britain by
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British Library Cataloguing in Publication Data
A catalogue record for this book is available from
the British Library
ISBN 0 580 45465 7
Introduction
Peter Whates
Business ethics is a fascinating topic and not just for the subject matter
it covers, vital though this is for business, society and the individual.
To my mind, there is no other issue on the contemporary manage-
ment agenda with greater resonance and relevance, nor one with greater
capacity to both fascinate and bewilder in equal measure.
At the core of business ethics, after all, are deceptively simple, long-
standing notions such as ‘doing the right thing’ that no reasonable per-
son could possibly decry and no rational manager would wish to ignore.
Nor are the controversies sparked by how this is translated into the
policies and processes of an organization particularly new. Campaigns
on topics as diverse as the abolition of the slave trade and the adul-
teration of beer are rooted deep in the past.
What is different is the relatively recent emergence of a generalized
ethical consciousness, not to say conscience. Notions of ‘ethical busi-
ness behaviour’ are now embedded in the public consciousness and
vocabulary, with arguments just as likely in the pub bar as the company
boardroom.
While its form and character are undoubtedly still evolving, this new
ethical landscape has already manifested itself in recent years in ways
we now take for granted.
It has, for example, spawned a new breed of shareholder, the socially
responsible investor. According to a recent survey quoted in the
Independent on Sunday newspaper (Shaw, 2005), there are now more
than 60 funds to choose from in the UK alone. The same report
valued what they described as the ‘green or ethical product’ industry
at £24.7 billion.
A process generically described as ethical tourism has also emerged
to make travellers aware of the impact of their activities. This issue
broke further new ground in the aftermath of the devastating tsunami
xiv Introduction
in December 2004, when the focus switched away from the abstract
‘tourism’ product onto the tourist as an individual.
If the discomfort of individuals exposed to the unforeseen and not
always subtle probing of 24 hour news crews was not enough, the
‘ethics’ of both staying and travelling to affected areas was subject to
critical comment at different times and by different interests.
Some of this head-scratching confusion undoubtedly finds resonance
inside organizations seeking a simplistic solutions-based approach to
ethical issues. So undoubtedly does the more generally antagonistic view
of business ethics expressed by television critic Tim Dowling (2005)
with his self-penned characterization of the ‘seven ethical dwarfs’.
His re-branding of the famous fairy tale characters came in the
course of a review of a business reality TV show called The Apprentice
fronted by Sir Alan Sugar, a well-known entrepreneur and chairman
of major UK company Amstrad. Pouring scorn on the contestants,
Mr Dowling suggested that the group reminded him of the seven
ethical dwarfs ‘Shallow, Unctuous, Transparent, Self-important, Pushy,
Scheming and Smug’.
How ironic in the context of the general business ethics debate to
find transparency listed as a vice.
Purpose
From even these limited examples it is self-evident that business ethics
is a hot topic issue. But to make a valid contribution to the debate,
this book requires a distinct purpose and myself a clear vision of how
to deliver it.
The purpose is relatively simple. It is to ‘dig below the surface’ to
first identify and then better understand the unique and sometimes
perplexing conundrum that is business ethics and its impact on the
modern organization.
The book is not designed to provide a forensic examination of the
ethics process, however, so in the purest sense of the term is not a man-
agement textbook. Several widely and soundly researched theoretical
books already exist and there is simply no merit in merely cloning them.
It is also consciously structured to provoke thought and debate
rather than signpost seductive and at times illusory ready-made solu-
tions. It is therefore not purely a management workbook, either. Several
sources, including our own Institute of Business Ethics in the United
Kingdom, have well-produced publications available to meet that need.
Introduction xv
Perhaps, most importantly, the book is not a campaigning vehicle
to promote one specific point of view. It does have many strongly
expressed opinions and deeply held convictions, but these often reflect
conflicting points of view as part of the ebb and flow of the debate. It
also makes no attempt to promote any single sectional or business
interest, particularly with regard to the role of the British Standards
Institution as the National Standards body for the United Kingdom.
Personally, I have long held the belief that a robust system of inter-
national accreditation may provide a sensible compromise between
the largely discredited reliance on free market self-regulation and the
very real spectre of restrictive legislation that ultimately may damage
legitimate enterprise.
Accreditation could actually even prove to be a valuable resource
for the numerically huge mass of medium to small size enterprises that
currently have ethics ‘done to them’, as much by major multinational
companies as by any campaigning NGO. A respected system could also
deliver significant cost savings for multinational corporations forced to
devise their own monitoring and evaluation systems.
There was never a time when I intended to amplify on this personal
perspective here, not least because it is a narrower debate than the
broad scope I intend for this book. I am delighted to say there was
never a time when the publisher even remotely hinted that I should
reconsider.
Authors
The onus of delivering my vision for the book fell naturally on the
authors, both as individuals and as a part of the wider writing team.
As a team, I wanted them to provide a wide-ranging brief on the
nature of the interaction between the tenets of responsible business
behaviour, the organization and its stakeholders. I also wanted the
reader to gain an understanding of the different ways that business
ethics issues can arise to challenge the modern manager.
To achieve this I set out to recruit contributors who could communi-
cate lucidly and express views cogently without resorting to polemic.
I was also looking for people with distinct opinions, whether or not
they were fashionable.
As each individual contribution arrived, I considered it against a
simple ‘four Is’ test. I wanted to read informed opinions based on
experience, insights based on an ability to interpret events, the ability
xvi Introduction
to describe the impact of business ethics on an organization and the
skill to communicate this in a way that would interest the reader.
I also wanted an international dimension to be included wherever
relevant and appropriate, in keeping with the universal reach of the
subject across the globe.
One of the benefits of working in this area for many years is that I
knew the majority of people I hoped would contribute before making
the approach to them. In particular I had heard a number speak at two
excellent conferences on the subject organized by Wilton Park.
It is not for me to judge how successfully the contributions collec-
tively match the vision I had at the outset, although any gap between
the two clearly derives from my failings as editor. I can only confirm
that every author in the book was my identified choice.
Themes
Reading the contributions in this book has developed my general
thinking and crystallized my views in some specific areas of the debate
on responsible business behaviour. It made the editing job rewarding
in the widest sense.
I will not be imposing my interpretation on the reader by stating
the conclusions that I have drawn, however, for a reason rooted in my
undergraduate past.
As a cash-strapped student forced to rely extensively on the univer-
sity library, I grew to hate any prior reader who conveyed their
judgement of what was important by underlining or similarly defacing
the text.
In particular I grew to loathe the person who adopted a five star
grading system, always in dark green ink, especially as they appeared
to be the most diligent student on campus.
I intend instead to isolate four key themes that struck me as each
contribution arrived and then again when reading the whole manuscript
prior to submission.
The first concerns the future of regulation. The era of self-regulation
within the firm, probably within an industry and perhaps even within
an individual nation state, appears to be drawing inexorably to a
close. The debate is crystallizing instead around what system, or set of
mutually reinforcing systems, can best replace it and to whom can the
regulatory burden best be entrusted.
Introduction xvii
This is a dynamic and fluid process with contrasting approaches
already being taken at all levels including the individual firm, national
legislators and international trade bodies. It is also a process into which
external stakeholders including, but not limited to, NGOs have
demanded the right to be involved as full participants.
Multinational companies in particular, it seems to me, now have
little option other than to negotiate and then repeatedly renegotiate the
terms of the global responsible business ‘contract’ in the manner of
the annual wage round, only infinitely more frequently.
Agreeing the terms of the ethical licence to operate is a particularly
high stakes game in finance, which is why I have devoted two chapters
to it, but the outcome is growing in importance everywhere.
The second theme appears self-evident at first glance. Ethics is a
modern day issue with genuinely global reach that impacts on every
form of organization wherever it is domiciled, in whatever it trades and
to however many (or few) shareholders it remits its dividends.
What is less self-evident, yet of considerable contemporary signifi-
cance, is how deeply rooted and entwined are the bonds between the
economic and political structures of many countries. I believe that in
the UK, we often underestimate how much disruption the free market
economic system elsewhere in Western Europe has faced from oppres-
sive regimes, conflict and the like. The natural corollary is that we tend
to underestimate its impact elsewhere in the world too.
My purpose in focusing on Latin America was to shed light on an
often relatively neglected continent with both long and often complex
traditions and several globally significant economies. What I learnt is
that the ethics conundrum is just as flourishing, although in no sense
can that be a cause for rejoicing.
That same unfortunate universality is clearly also much in evidence
when looking at the impact of socio-political or pure militarily domi-
nated conflicts on human and other rights. This fact was more a
reconfirmation than a surprise to me, but none the less depressing for
being so.
This brings me to the third clear theme to emerge, the current paucity
of management education in responsible business behaviour of all
descriptions.
On the one hand, a growing number of organizations do appear to
have belatedly recognized that signing up to seductive mantras such as
‘every employee is a reputation manager for the company’ is the start
of the journey rather than the destination. It does not as yet seem to
be being translated into a systematic investment in programmes to equip
xviii Introduction
staff with the tools to better understand and then manage responsible
business behaviour, however, particularly something based on values
rather than compliance.
A strong clue as to why training remains generally undervalued
emerges in the shape of the current patchy international provision for
teaching responsible business behaviour in MBA courses. In this highly
competitive customer driven sector of education, a reluctance to deliver
‘what the customer ought to want’ is understandable. But if it is what
the customer actually needs, and evidence continues to mount that it
is, then the sooner the ‘big hitters’ of tomorrow see business ethics for
the hard discipline it is, the better for all of us with pensions invested
in under-prepared managers gambling with shareholder value.
The final theme snakes mostly silently through the book in the form
of a ready-to-be-primed string of unknown length connected to an
extremely destructive explosive charge. It concerns the emerging debate
on just what constitutes ‘responsible capitalism’, whether society has a
right to expect it and, perhaps most fundamentally, whether a profit-
driven system has the capacity to even deliver it.
I approached Sir Geoffrey Chandler to address these issues because
I knew he possessed the rare blend of experience, strategic vision and
clarity of purpose to place the debate on business ethics in its widest
context. It was a poignant moment, because 20 years ago, he had agreed
to write the foreword to my first handbook on corporate community
relations.
Fortunately he not only agreed, but placed only one, albeit telling,
condition on his contribution. He would gladly author ‘Towards a
responsible capitalism?’, but only if I removed the question mark from
the title.
I will leave the reader to decide whether this optimism is in any
sense misplaced. But relatively few business leaders seem willing as yet
to fully champion the responsible business behaviour message and drive
it deep into their corporate soul. Maybe they judge that with a market-
based economy in the global ascendant there is no imperative to pay
more than lip-service to the challenges posed by business ethics.
I hope this confidence survives the next global downturn when it
comes without provoking serious social conflict. Nobody cheered more
loudly when the Berlin Wall crumbled; indeed, I have a piece of it in
my office. But we urgently need robust and sustainable paradigms for
modern corporations that reach beyond merely seizing the profit-
making opportunities that arose in its wake.
Introduction xix
I would genuinely like to thank all the authors, who followed my
brief far more closely than I had a right to reasonably expect while
still delivering contributions of maximum interest that required minimal
editing. When I did suggest changes, they considered them always with
good humour and grace.
Finally, it’s back to my university days to briefly reflect how greatly
technology has lightened not only the editor’s load, but that too of the
previously long suffering colleague now spared laborious reams of
retyping.
For this book, however, I dreamt up a subtly different tyranny
instead, that of ‘second reader to a deadline’, to inflict on my long-
suffering partner, Zchina Dowlatshahi.
Not only did she give me an informed MBA perspective on several
chapters, but also managed to stay resolutely cheerful and read each
slightly different version of this piece as if it was totally new and fresh
to her. Her enthusiasm was both infectious and inspiring, even when
I ignored her sensible advice. Thanks so much.
References
Dowling, Tim (2005) The fools of the trade Guardian 31 March
Shaw, Esther (2005) Ethical funds hit the target with investors Independent on
Sunday 10 April
Contents
Notes on the Contributors vii
Introduction xiii
Peter Whates
1. The Role and Limits of Ethics Legislation –
The US Experience 1
Phil Rudolph
2. Beyond the Limitations of a Written Code of Ethics 21
Alyson Warhurst and Kevin Franklin
3. Recruiting Ethics – Citigroup, Corporate Governance
and the Institutionalization of Compliance 40
Justin O’Brien
4. The Role of NGOs in Creating an Ethical Climate
for International Business 57
John Sayer
5. Human Rights in Business: The Scope of Accountability –
A New Horizon 80
James Oury
6. Inter-governmental Initiatives in Support of Appropriate
Standards of Business Conduct – Are They Effective? 96
Kathryn Gordon