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A model of business ethics

  1. 1. Journal of Business Ethics (2008) 77:303–322 Ó Springer 2007DOI 10.1007/s10551-007-9351-2A Model of Business ¨ Goran SvenssonEthics Greg WoodABSTRACT. It appears that in the 30 years that business (i.e. expectations, perceptions and evaluations) that areethics has been a discipline in its own right a model of interconnected by five sub-components (i.e. societybusiness ethics has not been proffered. No one appears to expects; organizational values, norms and beliefs; out-have tried to explain the phenomenon known as ‘business comes; society evaluates; and reconnection). The intro-ethicsÕ and the ways that we as a society interact with the duced model makes a contribution to the creation of aconcept, therefore, the authors have addressed this gap in conceptual framework for business ethics. A few tentativethe literature by proposing a model of business ethics that conclusions may be drawn from the introduced model ofthe authors hope will stimulate debate. The business business ethics. The model aspires to be highly dynamic.ethics model consists of three principal components The ultimate outcome is dependent upon the evolution of time and contexts. It is also dependent upon and provides reference to the behaviours and perceptions of ¨Goran Svensson is a Professor at the Osla School of Man- people. The model proposes business ethics to be a agement in Norway. He holds a Ph.D. at the School of continuous and an iterative process. There is no actual ¨ Economics and Commerical Law, Goteborg University, end of the process, but a constant reconnection to the Sweden. He is the editor of European Business Review initiation of successive process iterations of the business (Emerald) and the regional editor for Europe of Manage- ethics model. The principals and sub-components of the ment Decision (Emerald). He is also a member of numerous model construct the dynamics of this continuous process. editorial boards of other academic journals. During the They provide guidance on what and how to explore our 1980s he was an entrepreneur in South America. He has common efforts to understand the phenomenon known published in areas such as Business Ethics, Business Lo- as business ethics. The model provides opportunities for gistics, Supply Chain Management, Services Marketing, further research in the field of business ethics. Industrial Marketing, Leadership, Quality Management, Human Resource Management, Public Sector Management, KEY WORDS: model of business ethics, conceptual Higher Education, History of Management/Marketing, framework Academic Publishing/Journals, Cause Related Marketing and General Management.Greg Wood is an Associate Professor in the Bowater School of Management and Marketing at Deakin University, in Introduction Warrnambool, Australia. He holds a Ph.D. from Deakin University in the area of Management. His thesis was in The newspapers around the world are littered with the field of Business Ethics. His work experience has been the names of corporations and their high profile in Business and in Education. In the 1980s, he worked for senior executives who have fallen foul of the law. a large multinational energy and resources company in na- Companies such as Enron, WorldCom, Tyco tional and international roles. These roles included com- International, Arthur Andersen, Qwest, Global mercial marketing management, national marketing training Crossing, Parmalat, Barings Bank, Systembolaget and general management of an international green fields operation. His main focus for research is in the field of and Skandia (Carroll and Meeks, 1999; Davies, Business Ethics. He has published also in the area of 2001; Flanagan, 2003; Heath and Norman, 2004; Services Marketing, Leadership, Human Resource Man- Rosthorn, 2000; Wallace, 2004) have all come to agement, Public Sector Management, Higher Education, prominence for the wrong reasons. Across the Academic Publishing/Journals, Cause Related Marketing world, we have seen these people, their advisors and and General Management. even a spouse face courts and the wrath of their
  2. 2. 304 ¨ Goran Svensson and Greg Woodsocieties: societies, which have been made worse off nation Australia examined a number of excesses inby their unscrupulous practices. These behaviours business practices that were revealed in the aftermathshake the confidence of governments, shareholders of the crash. Milton-Smith (1995, p. 683) believesand we all bear the brunt of such bullish behaviour that before the crash in Australia:(Wood and Callaghan, 2003). These examples of malpractice however are not ‘‘High profile entrepreneurs became folk heroes and,new. Richardson (2001, p. 237) says that, one suspects, the most influential business role models for the community. When the bubble finally burst and ‘‘In medieval England, judicial authorities prohibited the crash came, it soon became clear how corrupt and the manipulation of markets and vigorously enforced leaderless the Australian system had become ... In the laws against forestalling, engrossing, and regrating, wake of corporate collapses, ... many questions have which were the legal ancestors of the anti-trust legis- been raised about the integrity of business and gov- lation that exists today.’’ ernment leaders.’’In Victorian society in the UK (1837–1901), exec- Warren and Tweedale (2002) contend that businessutive crime and bankruptcy was rife (Warren and ethics as an academic discipline in its own right inTweedale, 2002). The term ‘White collar crimeÕ was the USA began in 1974 as the result of a conferencecoined in the 1940s by American sociologist, Edwin that was held at the University of Kansas. In 1974,Sutherland (Piety, 2004). Cragg (2000, p. 210) has Australia was just passing legislation to enshrine forlabeled the 1980s as ‘‘a decade of greed in North the first time a Trade Practices Act designed toAmerica’’ that inevitably ‘‘led to a damaging reces- perform many of the functions of legislation that hadsion from which many communities in the indus- been in place in the USA since the 1890s. Thetrialised world began to recover only after almost a concept of business ethics in Australia did notdecade of steady economic growth.’’ become a consideration of academic concern until The stock market crash of 1987 affected Australia the late 1980s to early 1990s when the revelationsas it had other developed economies. While described by Milton-Smith (1995) became painfullyacknowledging the global impact of the crash, as a obvious to the Australian community. A Model of Business Ethics Expectations Perceptions Evaluations G o ve r n me n t •L e a d e r s h i p •Economic L e g i s la t i o n R e l at i ons h ips O u tc o m e s Lobby Groups St af f •Lawful I nstit utio nal R e l a t i o n s h i ps Beh a vi our Responsibilities S h a re h ol de r Better Corporate •Increased Re l at i on sh ips C i t i ze ns Ed uca tion Organiza ti onal Societ y Value s , •E x t e r n a l Pay Appropriate Society Pow er of Media Outcomes E va l u a t es Expects Norm s an d S take ho lder T a xe s S oc iall y Beliefs R elationships Responsible •Environmentally M an a ge rs •Supplier Fr iendly Relationsh ips •Professional •Employees As s o c i a ti o n s •C u s t o m e r R e ta i ne d R elationships •C o m p e t i t i o n •Services Retained •International C omp et it or B u s i n e ss w i t h R e l a t i o n sh i ps •Products Int eg r i ty A c c ep t a b l e Reconnection Figure 1. A model of business ethics
  3. 3. Model of Business Ethics 305 In the UK, the rise to prominence of business less important element than other elements, butethics corresponded to the Australian situation and that not to be cognizant of lobby groups and in-its own financial troubles as a result of the 1987 clude them in the process of an examination ofcrash (Maclagan, 1992; Mahoney, 1990). The high business ethics would be errant, as they do affectprofile scandals such as Barings Bank, BCCI, the expectations of the society. It may be up toGuinness, Pfizer have kept the interest in business others to moralize as to what extent this evaluationethics at the forefront of British society (Pearson, should occur, but such a moral evaluation is not2000). In Sweden, business ethics has only been on within the scope of this paper.the agenda since the early days of the new millen- The business ethics model consists of threenium, and even then the interest in business ethics principal components (i.e. expectations, percep-was as a response to the happenings elsewhere in the tions and evaluations) that are interconnected byworld rather than perceived deficiencies at home five sub-components (i.e. society expects; orga-(Svensson et al., 2004), however, in the last two nizational values, norms and beliefs; outcomes;years Sweden has been awoken to its own corporate society evaluates; and reconnection). The modelscandals, which have shaken its corporate founda- is described in the following sections andtions (Wallace, 2004). paragraphs. If one searches the literature, it appears that in thethirty years that business ethics has been a disciplinein its own right a model of business ethics has not Society expectsbeen proffered. This paper attempts to address thisgap in the literature by proposing a model of Society has expectations of all of its citizens. Ancientbusiness ethics that the authors hope will stimulate Athenian society, as described by Aristotle, sawdebate (see Figure 1). certain values as being important for the times. Some This model is one that is predicated on the te- of these virtues were courage in battle, pride in oneÕsnets of developed countries operating within a own worth, friendliness, good temper, truthfulnesscapitalist paradigm. Certain preconditions are as- about oneself, wittiness, feeling shame about dis-sumed for the society and certain rights should have honour, a sense of justice for all (Solomon andbeen entrenched in these democracies. The rights Martin, 2004). These virtues shaped behaviour andof freedom of speech, freedom of assembly, free- fostered an esprit de corps of what it meant to bedom of worship, freedom of political organization Greek. AristotleÕs moral virtues were predicated onand the identification of universal human rights as ‘‘finding a mean between an excess and a defi-enshrined in the United Nations Declaration of ciency’’ (Hadreas, 2002, p. 361). This concept ofHuman Rights (Solomon and Martin, 2004) are balance in oneÕs actions translates easily into modernprecursors to an examination of the model in business practices. The general consensus appears notsocieties that proffer these values as fundamental to to lambaste wealth derived from business practices,their national identity. but its excesses and the means of achieving such This paper is not intended to be a moral treatise, excesses are always under consideration as are thenor even positioned as advice for managers, but it means of achieving large losses.should be seen as an attempt to explain the concept Society is predicated upon behaviour that itof ‘business ethicsÕ. The elements of the model are expects will advance itself. It is not interested inincluded because of the authorsÕ perceptions that behaviour that will force the society to regress.they are integral to the way that we interact as a Business is established and allowed to exist becausesociety with business ethics. There is no underlying in capitalist societies it is deemed to have a centralapproval and/or disapproval of certain elements of and pivotal role in the betterment of society (Joy-the model as against other elements contained ner and Payne, 2002; Lea, 1999; Spiller, 2000;within the model. There is only recognition that Wood, 1991).each one forms a part of the amorphous whole. For When members of a society view this role as notexample, one is not saying that organizations must being fulfilled then individuals in the extreme dis-take notice of lobby groups or that it is a more or rupt business forums to protest against the ideologies
  4. 4. 306 ¨ Goran Svensson and Greg Woodbeing touted, such as in the case of globalization. economic, legal, moral, social and physical elementsCitizens take to the streets to voice their genuine of the environment when making decisions.’’concerns (McMurtry, 2002). Concerns that are most (Joyner and Payne, 2002, p. 301). BarnardÕs workdefinitely not shared or supported by all, but con- was built on by Simon, who in 1945 recognizedcerns nonetheless that need to be addressed. The that executives of businesses were looking at com-rights of freedom of speech and of assembly must be munity responsibilities that exceeded their legallauded because they are an integral part of a group of obligations (Joyner and Payne, 2002). Wood (1991,rights that defines who we are. Such rights allow us p. 695) highlighted DavisÕs work of 1973 in whichas a society to be self-critical and to re-examine the Davis said,precepts upon which we claim to be civilized. Also, society does have expectations of business ‘‘Society grants legitimacy and power to business. In theand of its business leaders. The economic size of long run, those who do not use power in a mannersome corporations today rivals or surpasses many which society considers responsible will tend to lose it. (Davis, 1973, p. 314).’’countries of the world (Cragg, 2000). Of the top 100financial entities in the world in 2001, 51 were Robin and Reidenbach (1987) suggest that a ‘socialcompanies not countries (Chang and Ha, 2001). In contractÕ exists between the organization and the1999, each of the top 10 companies in the world had society in which it operates. This social contract isan annual turnover in excess of the gross national predicated on the implicit contract between theproduct of the then 150 out of 185 (81%) member society and business that allows businesses the rightcountries of the United Nations (Tullberg, 2004). to exist in return for the society partaking in theAn example of this comparative size is that ‘‘ShellÕs benefits of such an involvement (Moore, 1999).revenue is 98% of the Swedish GNP’’ (Tullberg, Business is seen as an ‘‘essential part of the social2004, p. 327). fabric’’ (Thomas et al., 2004, p. 56). Its true purpose Companies, unlike countries, hopefully, do not go should be for corporations, ‘‘to make society betterto war in the sense of a physical conflagration, but off, and to create societal wealth, not just createthey engage in extremely strong positioning and wealth for shareholders.’’ (Cohan, 2002, p. 291).alignment of their resources in order to achieve theiraims with a minimum of collateral damage tothemselves or their targets. War is hell, but often itstops. Business can be pure hell, because it is relentless Government legislationin the pursuit of its goals: goals that need to be alignedwith those of the society to whom it is responsible All societies have laws that govern the expectedand to whom it should have allegiance and to whom behaviour of their citizenry. Business as one facet ofit should ultimately seek to be subservient. These a capitalist society is treated no differently. In fact, asexpectations of ethical behaviour in business lead to a business is so pervasive in capitalist societies, laws areset of antecedents that frame the business environ- targeted at it to ensure that the expectations ofment in which corporations seek to exist. society are met. The claim by business that self- regulation through limited governmental legislative intervention is an option appears not to haveExpectations brought the rewards to the society that it should have (Piety, 2004). The reason for this position is as aEach one of these antecedents is important for they result of the actions of business itself (Carson, 2003).shape the ways in which a society comes to view its Davies (2001, p. 281) sums it up well in respect tocorporations and their subsequent performances. financial services in the UK when he says that,These antecedents all conspire independently and ‘‘What self-regulation was not good at doing wascollectively to foster behaviours that are seen as raising standards in the market as a whole, or dealingacceptable by their society. These discussions of the with a problem where there was a need for therole of organizations within society are not new. whole industry to change.’’ In respect to the issue ofBarnard in 1938, ‘‘addressed the need to analyze the tobacco advertising, WHO chief Brundtland has
  5. 5. Model of Business Ethics 307argued that there has been no evidence that would Lobby groupssupport that tobacco companies are able to becapable of self-regulation (Rondinelli, 2003, p. 20). Modern day lobby groups emerged in western Governments have had to enact legislation to democracies in the 1960s and into the 1970s. Theprovide the floor for business behaviour that is Viet Nam War precipitated an awakening aroundacceptable within the society. Laws that protect the western world that organized groups of peopleshareholders and other stakeholder interests prolif- could be mobilized to challenge the reigning statuserate in capitalist societies, as do laws that protect the quo. Consciousness amongst individuals has pro-consumers of business practices (Hoffman et al., duced the recognition of the power of these groups.2003). The notion of ‘fair competitionÕ is at the In times of extreme danger or repression, thesecentre of government legislation. Governments are organizations can gather large groups of individualscharged by the citizenry with the responsibility of to engage in civil disobedience. The anti-Viet Namensuring that the game of business is played by a set War movement, the Sorbonne student uprisings, theof rules that in principle should be fair for all and people power of the Philippines, are all examples ofapplied consistently to all. mass discord within capitalist economies that led to These laws have been enacted as a direct result of changes in attitude and the awakening of ideasthe indiscretions of business at a certain point in hitherto often only whispered about, let alonetime. In the USA, the stock market crash of 1929 led publicly enunciated.to the formation of the SEC (Securities Exchange The 1960s and 1970s spawned a rash of organi-Commission) in order to regulate the stock market, zations that sprung to the defence of issues andwhilst the environmental disasters of the 1960s led to groups that needed a champion. These issues rangedthe establishment of Environmental Protection from the environment, to wildlife protection, toAgencies; the Lockheed scandal resulted in the human rights, health issues, gender issues andForeign Corrupt Practices Act of 1977 and the latest movements around the world for the recognition ofcorporate scandals involving Enron and notable the rights of indigenous people. The United Nationsothers have led to the Sarbanes-Oxley Act (Thomas has instituted its own standing committees in manyet al., 2004). The US Sentencing Guidelines of 1991 of these areas. Companies need to be cognizant of allmitigate penalties dependent upon the ethical pro- of these groups because not only do they monitorcesses and procedures that corporations have in place corporate performance, but also they challengeto attempt to ensure that the company maintains corporations to reach new levels of interaction inethical business practices (McKendall et al., 2002). these areas of concern. Governments also have set up watchdogs to The example of Greenpeace and the way that itmonitor the practices of business. In Australia these foiled ShellÕs attempts in 1995 to sink the Brent Sparregulators include, but are not limited to, the Aus- platform into the North Sea is just one example oftralian Competition and Consumer Commission the power that lobby groups have (Whawell, 1998).(ACCC), Australian Prudential Regulatory Greenpeace mobilized its forces and in the end,Authority (APRA), Australian Securities and European consumers were voicing their concerns toInvestment Commission (ASIC), all of which are the company directly whilst the European ministersnational bodies, whilst in the Australian states such for foreign affairs, the environment and trade con-statutory bodies as an Environmental Protection demned in no uncertain terms the British govern-Agency (EPA) have been established. These gov- ment for allowing the dumping of the Spar (Grit,ernment instrumentalities are charged with ensuring 2004; Rosthorn, 2000; Zyglidopoulos, 2002). Athat no stakeholders are disadvantaged by the actions point of interest in this issue is that after the event,of others, and that everyone is operating within the the media was bemoaning that they had been misledspirit and the intent of the legislation. They set the by Greenpeace. Misled or not, the damage wasground rules for the pursuit of business practice as already done for Shell (Whawell, 1998).business itself appears not to have the confidence of Transparency International annually publishesthe lawmakers and the community that it can self- a Corruption Perception Index (CPI) and a Bribe-regulate. Payers Index (BPI). These indices list those countries
  6. 6. 308 ¨ Goran Svensson and Greg Woodin which corruption is most prevalent and list those demand more of its business sector. This issue is onecountries whose firms are more likely to pay bribes that has caused debate for decades.to ensure business (Pacini et al., 2002). These lists Eminent scholars, such as Drucker (1981) andcan be used by investors to examine the possible Friedman (1962), challenge the need for the conceptareas of the world in which the companies in which of business ethics and the role of the corporation tothey intend to invest may be subject to suspect even consider it.business dealings. Friedman (1962, p. 133) contended that, Lobby groups are a part of the societal landscapeand they can play a significant part in shaping the ‘‘... there is one and only one social responsibility ofthought patterns of individuals and societies. They business – to use its resources and engage in activitieshave the power to disseminate information, to rally designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in opendisaffected individuals and as one saw in the Brent and free competition, without deception or fraud.Spar case they can wield large influence even whenthe veracity of that information may be questionable. Few trends could so thoroughly undermine the veryOne, therefore, needs to be cognizant of them in a foundations of our free society as the acceptance bystudy of the dynamic that is business ethics. corporate officials of a social responsibility other than to make as much money for their stockholders asInstitutional responsibilities possible.’’Organizations should not only be just economic This argument implies either that profit seekingagents, but also agents of environmental and social behaviour is ethically neutral (pragmatic) or that it ischange. Organizations are expected by society to ethically valid or good. Litzinger and Schaefer (1987)look past their own economic well being and to claim that FriedmanÕs position rejects ‘business eth-consider their role as broader agents of change. icsÕ as a misnomer that has nothing to do with the Handelman (2000, p. 350) suggests that compa- real precepts of business. Either one conducts oneÕsnies face institutional expectations from the society business in a pragmatic manner or one ceases toin terms of ‘‘the unwritten and social rules of ‘proper conduct it. According to the ideas of Friedman,organizational conductÕ’’. With globalization, institutions such as corporations should only be heldgovernments are becoming less influential and large responsible to the law.corporations are filling the void. The focus of Friedman (1962) has his critics. Grant (1991)expectation by citizens is upon the corporation believes that the Friedman belief is rooted inbeing successful economically, but at the same time empirical errors. He suggests that Friedman (1962) iscontributing to the environmental and social well incorrect to assume that business is an economicbeing of the society. activity that is autonomous. Grant (1991) also chal- Handelman (2000, p. 350) suggests that organizations lenges FriedmanÕs (1962) notion that business man-that do accept this challenge are rewarded by constitu- agers act in the complete interest of shareholders andents with ‘‘political support, avoidance of boycott at the same time against their own self-interest. Thepressures, community involvement in the well-being of theory may appear to be acceptable, but Grantthe company and the attention of top employees’’. (1991) believes that in reality human behaviour doesCompanies can adopt these ideas in a number of ways not approximate this total subservience.ranging from ‘passive acquiescenceÕ to a proactive The final area that Grant attacks is the Friedmaninvolvement. These institutional expectations frame for philosophy that greed yields good. Grant (1991)the organization its expectations from the society for its suggests that short term economic expediency willactions (Handelman and Arnold, 1999). not always lead to the best possible scenario. He cites Economic success on its own may no longer be the environmental damage that has been perpetratedenough, nor may it be a satisfactory measure of in western industrialised nations as a stark remindersuccess. The society appears to expect more and to that greed is not always beneficial to society. Short
  7. 7. Model of Business Ethics 309term gain economically may lead to long term pain professions. Some Law graduates did not contem-for the society. plate a career at the bar, but became advocates for Grant (1991) goes on to point out that business the rights of the less fortunate. Along with eco-does not operate in a vacuum isolated from the other nomics, general arts and commerce graduates, theyareas of life. It should not be viewed in terms of joined trade union movements. Unions were rep-being different in character and responsibilities to resented by university graduates who not only sharedother societal activities. Critics of Friedman and their social conscience, but who also knew theDrucker tend to agree that business ethics exist be- intricacies of the ways that the other side thought, ascause ‘businessÕ is an activity permitted by society they had been schooled in the nuances of theirand that the values (or ethics) of that wider society profession.must therefore influence the way business is con- As the general population became more edu-ducted or profits sought. Corporations ignore busi- cated and as education was valued as a vehicle forness ethics responsibilities at their own peril. social mobility, then graduates also started to question the roles in society that they saw around them. Business was put under the spotlight asIncreased education questionable practices were challenged and com- mentary was made about the inadequacies of someThe 1960s and 1970s heralded the acknowledge- of the practices inherent within the business genrement that oneÕs intellect rather than oneÕs economic (Sørensen, 2002).status would be the delineator of oneÕs ability to Increased levels of education, we contend, wereaccess university education. Socio-economic status central to the rise in all of the social justice move-was no longer the arbiter of oneÕs educational ments of the latter decades of the 20th Century inopportunity. Education became valued not only for developed industrialized societies. These graduatesthe career that it could provide, but also for its had been taught to question, to evaluate and toability to broaden the thought processes of its adjudicate in their minds the issues of importance tograduates. them and their society (Shor, 1980). They would Universities began to admit individuals from not meekly accept the status quo and they subse-groups that had previously not been traditional quently pushed the parameters of expectation anduniversity goers. The case of James Meredith was a acceptability towards new frontiers.watershed in the USA. In other countries, young Increased education was a pre-eminent anteced-women were given opportunities often denied to ent for changes in expectations because it wastheir mothers. The children of blue collar workers through education that people challenged, debatedwere able to envision a life exclusive of hard and rationalized the issues. They asked why and whyphysical labour. These individuals upon graduation not, and they pushed governments to legislate andbrought with them a better-developed sense of organizations to conform to these new behaviouralsocial justice than many of their university graduate norms. They provided the individuals that staffedpredecessors. They not only discussed societyÕs lobby groups. The value of education is that itinjustices, but also many of them had lived them. liberates the members of a society to liberate them-Now, education was their passport to a society that selves and in turn to develop and to liberate theirwould need to take notice of their attitudes and society (Freire, 1972).views: views that they had been encouraged intheir undergraduate years to ponder, discuss andupon which they had opinions. Power of the media These individuals developed in their own chil-dren a love for education and the realization that The media has always occupied a vital position ineducation opened the door to opportunities that had modern society. As the disseminator of informa-been denied their grandparents. Whilst they had tion, it can make or break individuals and or cor-tertiary qualifications, not all of these graduates felt porations through its coverage alone. With the risean affinity with the dominant social mores of their of the computer age and the resultant technology,
  8. 8. 310 ¨ Goran Svensson and Greg Woodthe power of the media has become all pervasive. Socially responsible managersSince the Viet Nam War, we have been able towatch wars live on television. In Gulf War 2, from Our societal institutions are predicated on the faiththe comfort of our armchairs, we were able to ride and the hope of the human condition that ‘goodÕinto battle with frontline units. These same tech- must outweigh ‘evilÕ, otherwise the result is chaosnologies have also been focussed upon business and/or anarchy and a loss of belief in what makes uspractices. Problems faced by corporations in any human. Unfortunately, miscreant individuals willindustrialized economy, some real and others sur- trade on societyÕs sincerity in order to benefitmised by analysts, are no longer exclusive to their themselves, yet, in many cases these individuals arelocal situational context. found out. The Enron case is just one such example The media brings to us ‘‘persuasive images of (Sims and Brinkmann, 2003). Skilling and Fastowpowerful governments and huge multi-national have now been convicted for their part in the Enroncompanies holding poorer countries and local debacle and Arthur Andersen no longer exists. Suchinterests to ransom as they trample on human rights perpetrators against the good of the society, seem toand traditional modes of cultural and economic eventually become case studies in business schoolsexistence.’’ (Collier, 2000, p. 71). Companies such around the world as exemplars of how ‘not toÕas Nike, Nestle, Union Carbide, have all had to conduct business.justify to first world consumers their practices in Socially responsible managers do the right thingdeveloping nations: practices that today would not because it is the right thing to do. It is the correctbe tolerated if perpetrated in first world economies. action to take and an action that society expects.ShellÕs activities in Nigeria flared up for the company Executives should ‘‘act ethically not out of fear ofas a major issue: ‘‘The media were happy to report being caught when doing wrong. Rather, theyon the anger of the communities and the acute should embrace ethical behaviour in business becausediscomfort of Shell’’ (Wheeler et al., 2002, p. 301). of the freedom, self-confirmation, and success that it The rise of the public relations profession and the brings’’ (Thomas et al., 2004, p. 64). It is often dif-use of ‘spin doctorsÕ reinforce for us all the impor- ficult to do the wrong thing, because oneÕs inner selftance to corporations of the need to be cognizant of rails against it, but it is sometimes even harder to dothe power of the media. The media can destroy the right thing. Often one needs to go against con-reputations in the blink of an eye. They also can serve ventional wisdom and push the consciousness ofto raise the awareness of society to unsavoury practices others to consider new and challenging ideas, whichof which they consider the society needs to be aware. may take them to places in their mind to which theyIn many senses, they become a moral barometer for did not want to go. Still it must be done if onethe society, because they judge the mood of the believes it to be the right course of action. Ansociety, the intensity of the issue at hand, its sales value excellent example of this type of challenge to oneÕsand then they make a commercial judgement to pro- values in a business context is that of the Cadburyceed or not to proceed with the issue. family during the Boer War (1899–1902). The media would argue that it fulfils a self-ap- What does a Quaker, who practices pacifism, dopointed ‘social conscienceÕ role within the society. when his business is offered a commission by HerWe are all influenced to varying degrees by the MajestyÕs Government to supply chocolates to themedia. The emphasis that they put on items that they troops in South Africa during the Boer War? Theconsider newsworthy can change opinion and move solution was fascinating because all of the stake-support behind hitherto unknown and unheralded holders needed to be considered: the troops, thecauses. The media in many ways reflects the domi- stockholders, the employees and the management.nant societal mores of the day and so they act as the The Cadbury business needed the order to keep its‘deputy sheriffÕ to the government in policing mis- staff going in a time of depressed economic condi-creant behaviour. The media creates expectations of tions, yet he was, as a Quaker, on principle againstbusiness for us as a society by choosing, which issues the war. This stance made him unpopular in Eng-to highlight for our consumption and which issues to land. The solution was that Cadbury would supplydownplay or even ignore. the chocolates at cost price to Her Majesty, Queen
  9. 9. Model of Business Ethics 311VictoriaÕs Government. By choosing this course of ethics that binds all members. As in the days of theaction, he kept his workforce from retrenchments; guild, these codes are meant to ensure that thethe soldiers received their chocolates and he made members meet the highest standards of behaviour.no profit, therefore not profiteering from the war People have certain expectations of the roles of(Cadbury, 1987). Some will argue that he never- businesses in the society and the tenets of the asso-theless profited because his business was kept in tact. ciation are predicated on the membersÕ belief of howUnfortunately, what the genuine person will see as their profession fits into the world of business.visionary, the cynic will see as opportunistic. If individuals in organizations are performing Socially responsible managers are needed to force according to the rules of their association, then theus to confront new areas of thought, to challenge, to organizations for whom they work should be theinspire, to mentor, to lead. Some companies are recipients of their professional behaviour, however,fortunate because these people exist in their midst. if the behavior of the organization as witnessed byThose companies that do not possess, recruit or the professional association member is not as thefoster managers with well-developed ideals for social member believes that it should be, then the memberresponsibility leave themselves open to potential usually has the right to seek advice from their pro-dilemmas orchestrated on their behalf by a staff fessional association. Businesses are under scrutinywhose perspectives may be far from socially from their employees who project not only theirresponsible. Errant actions may not come to light own personal expectations upon the organization,immediately, but when they do the downside to the but also that of their professional association. Asso-corporation can be its own annihilation. As Cragg ciations have expectations, members of these asso-says (2000, p. 213) ‘‘commerce without conscience ciations have expectations and organizations areis a formula for human exploitation, not human comprised of these members, therefore, they candevelopment’’. bring pressure to bear upon the organization to conform to these social mores. Organizations should not bring pressure to bear on their employees toProfessional associations violate their professional obligations (Carson, 2003).From medieval times professions have had their ownassociations. The rise of the guild was there to Competitionprovide an umbrella for the craft around which itwas formed and to regulate the marketplace in The capitalist system is predicated upon competi-respect to competition (Richardson, 2001). Mem- tion. Corporations unless they are in a monopolisticbers of the guild were expected to perform in pre- position in the marketplace face competition notscribed ways and to uphold the standards of their only from their own genre of goods or services, butcraft. The guild would admit members, police them also they face competition from substitute products.and represent them to the society in general. Companies expect competition and are geared up to As industrialized economies have moved ostensi- meet it, however when this competition is having ably away from a pure manufacturing and agrarian deleterious effect on the organization then it canbase to now becoming dependent on service force individuals into situations that may lead themindustries, guilds have been transformed into pro- to compromise their values and ideals (Fraedrich,fessional associations. Virtually every industry in 1992; Sethi, 2003). McKendall et al. (2002, p. 368)which oneÕs vocation claims to be based on profes- list a number of studies dating back as far as 1953sional standards, and behaviour has endeavored to that, ‘‘found that illegal action is more likely to occurestablish its own professional association. in firms operating in economically depressed In fact for all white-collar workers, there is industries and firms experiencing individual profitprobably at least one and in some cases more than problems...’’. Cradozo referred to the ‘‘the morals ofone professional association, to which they can be- the market place that are different from everydaylong. These associations have rules for membership morality outside the business world’’ (Cohan, 2002,and the values of many are underpinned by a code of p. 288). This differentiation is no excuse for being
  10. 10. 312 ¨ Goran Svensson and Greg Woodmorally blinkered in our business dealings (Cohan, Our values collectively have moved past the USA2002). As Sethi (2003, p. 24) says, ‘‘Although Foreign Corrupt Practices Act of 1977. Bribery andcompetition makes business efficient, it does not corruption, whilst still important issues of concern,make it virtuous.’’ are not the only ones on the minds of the new Within capitalist societies consumers expect international consumer. Labour practices, such asindividual companies to compete fairly and honestly. working hours, remuneration, the use of children,As consumers, individuals expect societal rules to have taken this concern to a new level of ethicalcome into play. They expect to be able to place trust expectancy (McMurtry, 2002; Rondinelli, 2003;in the relationship (Swift, 2001) and are not Rosthorn, 2000). Organizations such as the ILO, theexpecting to encounter collusion against them. OECD, the EU and the UN have put forward The health of the capitalist system depends upon recommendations to outline the minimum standardsthe existence of free, open and honest competition. of behaviour that should be expected from multi-Within the US and other business cultures, it is national corporations (Lozana and Boni, 2002).enshrined as ‘a catechism of conductÕ that competi- Canada has developed a code of conduct for inter-tion must be open and honest for the health of the national business (Cragg, 2000).capitalist system rests upon it. Society has expecta- Environmental preservation of the country fromtions of the ways in which organizations should which the product is sourced is now a major issuecompete and legislation is put in place to enshrine of concern. Collier (2000) has suggested that wethese practices. The first US law that enshrined fair may need universal legislation in the developedcompetition in the marketplace was the Sherman world that enforces labour and environmental lawsAntitrust Act of 1890, so these concepts are not new that prosecute corporations that tolerate different(Hemphill, 2004). standards from those ones that are outlawed in their own countries with their own citizens. Cragg (2000, p. 209) believes that corporations ‘‘are nowInternational business with integrity free to seek out those environments in which the laws in place provide the most favourable condi-As globalization becomes the by-word for economic tions for maximizing profits.’’ Texaco enacted thisdevelopment, companies are facing greater scrutiny defence in Ecuador where its environmental prac-of their behaviour committed outside of their home tices were brought into question. They said thatcountry. As economic borders become seamless, they were in compliance with Ecuadorean law andthen corporations will need to recognize the rise of acted with the compliance of the governmentthe international consumer. As corporations seek to (Arnold, 2003; Olsen, 2001). This level of scrutinysource their products from the least expensive sup- is now being placed upon corporations. Citizens ofpliers, they will need to examine more so than they first world societies expect their corporations tomay have done in the past more issues than just the display integrity in their international businessprice of the product and its financial contributions to dealings.the organizationÕs bottom line. With the awakening of globalization has come arealization in first world economies that there are Organizational values, norms and beliefscorporations who appear to have diverse sets ofbehavioural standards depending upon the country Organizations are impacted upon by the generalin which they find themselves at the time environment of the society in which they operate.(McMurtry, 2002). As consumers have in the past, The criteria discussed in the previous section ofthe new international consumer expects to receive antecedents influence the organization and the waysquality and value for their money, however, many of that it can practice its business. In many ways, theythem now insist that the product that they have contribute both directly and indirectly to impactpurchased has not degraded the life of the people upon its culture.and/or the environment of the country from which Organizational culture has been seen as being ofit was sourced (McMurtry, 2002; Sørensen, 2002). paramount importance to the corporation. Serpa
  11. 11. Model of Business Ethics 313(1985, p. 426) contends that it can be called, ‘‘‘‘the employees. The ethical orientation of the CEO is asocial glue holding a company together’’. This critical issue (Hood, 2003). Leaders must not be seen‘‘social glue’’ has evolved over time and been shaped by their employees to be benefiting unduly from theby internal as well as external factors ... each culture organization. CEO compensation needs to be in lineis a product of its unique values, beliefs and rules of with the rest of their workforce, however in the USbehaviour.’’ Each company has a particular culture this is one area where positive leadership has notand a set of belief systems. These belief systems are been shown because ‘‘...in 1980, the average CEO‘‘shared ways of interpreting a companyÕs environ- made 42 times the average hourly workerÕs pay. Byment, its past, and its future prospects’’ (Cohan, 1990, the CEO made 85 times as much. By 2000, it2002, p. 287). was 531 times what an hourly worker makes.’’ An organization cannot act in isolation in the (Flanagan, 2003, p. 16). Leaders must be seen tomarketplace. The way that an organization conducts make choices that support the organizationÕs valuesits business impacts upon a raft of stakeholders, both regardless of the difficulty of that choice (Thomasinternal and external to the organization (Freeman, et al., 2004).1984). Benson (1989) and Fraedrich (1992) believethat an organization needs to address its relationshipswith customers, competitors, and the general com- Staff relationshipsmunity. The need for organizations to consider theimpact of their business practices on these stake- If employees feel connected to their organizationholders is considered in the next section of the they will subsume its ethos. Joyner and Payne (2002,model. p. 298) report on the 1997 Walker Information survey that, ‘‘revealed that 86% of the employees surveyed who felt their firmÕs ethics were positive,Perceptions were strongly committed to their organizations...’’. Employees should feel positive about their organi-The way that the organization interacts or does not zations. They should feel proud to work there andinteract with the expectations of the society in not see work as a burdensome chore. In an organi-respect to ethical behaviour provides its own con- zation that does not engage satisfactorily with itssequences. Organizations need to be cognizant of employees, staff will be less than satisfied. Companiestheir impacts in a number of areas, for their impact need to ensure that they and their staff are movingin these areas of business will have an impact on their towards the same goals and this includes the mannercontinued success in business (Wiley, 1995). by which these goals are achieved. Staff members need to be active participants in the organization (Crane et al., 2004). Employees should not have toLeadership relationships compromise their ethical standards to fulfil the organizationÕs requirements (Lovell, 2002). SatisfiedRushton (2002) has suggested that progress towards staff members do not feel the need to becomean ethical organization that is meaningful and real whistleblowers.can only be achieved when the leaders of firms bringabout these changes. It has been also suggested thatleaders must become models for positive learning by Shareholder relationshipsothers (Graham, 1995; Miller, 2002; Paine, 1994;Rushton, 2002; Thomas et al., 2004). As Sims and Shareholders are the lifeblood of the corporation forBrinkmann (2003, p. 249) contend, ‘‘Employees they invest in the organization because they perceiveoften emulate leadersÕ behaviour and look to the that the organization has a positive future. Too oftenleaders for cues to appropriate behaviour.’’ This we have seen shareholders beguiled by smoothleadership behaviour needs to be in concert with the talking executives who end up collapsing their cor-espoused views of the organization as if it is not it porations and absconding with their ill gotten gain.leads to corporate dissonance amongst the other In some cases they do so by going outside of the
  12. 12. 314 ¨ Goran Svensson and Greg Woodlegal jurisdiction of their own countries to areas of treated as an equal in the venture, and accordedthe world from which their own country can not respect. They should be seen as partners in a mutuallyextradite them. Shareholders deserve corporations inclusive mission to create value in the marketplacethat realise that the shareholders are entitled to a for everyone in the business relationship. It isreturn on investment at market rates or better. If advisable to get suppliers to embrace and contributesuch returns are not forthcoming, then open and to the companyÕs values and ethical viewpoints.early disclosure is required to enable shareholders to Organizations should consult with suppliers sincebe able to assess their own positions. Good corpo- they can contribute to the business in ways that mayrations do this for all shareholders. They do not be surprising. Suppliers see the corporation from adifferentiate between institutional shareholders and different perspective than the employee and/or aother shareholders. The welfare of all shareholders consumer, and they can often provide insights thatshould be treated equally regardless of the size of the can benefit both parties (Wood, 2002).parcel of shares that they hold. If companies ignoretheir shareholders then inevitably this will lead toshareholder activism (Crane et al., 2004; Sparkes, Customer relationships2001). In recent years, concepts like Relationship Market- ing have become a part of business parlanceExternal stakeholder relationships (e.g. Gronroos, 2004; Gummesson, 1994). Theorists ¨ have endeavored to try to bring our attention to theThe sentiments and views of stakeholders are inescapable truth that companies need repeat cus-important to any company as they are affected by the tomers in order to thrive and prosper (e.g. Gronroos, ¨success and failure of the company (Heath and 1994; Gummesson, 2004). Companies, therefore,Norman, 2004). Whilst stakeholders can be far need to focus upon their actions and those of theirremoved from the day to day operations of the agents and employees to make sure that they actcompany, they can nonetheless impact on the rep- ethically and consider customersÕ views in all mattersutation of the company. What one seeks is to ensure (Wood, 2002). Customers and other stakeholdersthat stakeholders view the company as a positive should be seen as partners in the process of devel-force for the society and that they deem the orga- oping company wealth, not as the means by whichnization to be an acceptable purveyor of its products. one develops it (Metcalfe, 1998).Not to include stakeholders in oneÕs thinking is aninvitation for trouble in the future: to ignore them isa recipe for disaster. Competitor relationships Our capitalist system is predicated on competition.Supplier relationships For over two decades, Porter (1980) has espoused his five forces model that is based on the contest be-Many suppliers rely extensively on the continued tween competitors. The intensity of industry rivalrygoodwill of the organization. The power in the amongst competitors is at the centre of the model.relationship usually resides with the company. In Organizations analyze the relative power of themost industries, a range of alternate suppliers can be other constituent parts of the industry, and thensourced. This company flexibility places pressure pursue the industry opportunities that maximizeupon the incumbent supplier to abide by the rules of their ability to emasculate their rivals and outperformthe employing company (Crane et al., 2004). Whilst them. As a society, we extol individuals to win andsuppliers should observe company protocols, they underscore that by doing so they will be serving theshould not be viewed as subservient in the relation- greater good of their corporation however, we needship. A relationship that relegates suppliers to a sub- to have cognizance of the ramifications of ourordinate position should not be tolerated in ethical actions on competitors. Competitors should beinter-company relationships. The suppliers should be treated with respect and empathy too, because not to
  13. 13. Model of Business Ethics 315do so lessens the corporationÕs commitment to eth- Economic outcomesical behaviour (Wood, 2002). The society examines the economic outcomes of the actions of the corporation. Profit should be theOutcomes natural outcome of a corporationÕs business endeavours (Lea, 1999). Profit is the way that theThe interaction of societal expectations and the corporation keeps score as to its success or otherwise.ways that a corporation interprets and reacts to In capitalist economies the pursuit of profit is notthese pressures produces outcomes. These out- seen as counter productive, but as an essential featurecomes manifest themselves in a number of ways. of the ethos of the economic underpinnings of theTheorists such as Levitt (1958) and Friedman systems that we have in place. As Le Menestrel(1962) would contend that the only outcome (2002, p. 158) says, ‘‘...there is no necessary con-worthy of examination is whether the company tradiction between ethics and profits.’’ Share marketsmade a profit or a loss and how its activities in the rise and fall on profit forecasts and companies aremarketplace have impacted upon its shareholders. cognizant of the need to continually return profits.Terms such as triple bottom line, corporate gov- The yearly declaration of a companyÕs profit and theernance, corporate social responsibility, balanced distribution of this profit are eagerly awaited by bothscorecard (Carroll, 1979; Heath and Norman, shareholders and the market. Profits by their very2004; Joyner and Payne, 2002; Lovell, 2002; Spil- nature allow the corporation to reinvest in futureler, 2000) highlight a definite paradigm shift from growth, to enable it to expand the business and alsothis perspective that business is there only to make to diversify and even acquire other companies.a profit. In the halcyon days of post World War 2, Whether the outcome be a profit or a loss thewhere demand outstripped supply, the society had company should be placed under scrutiny.not considered corporations as being much more Some in society may think that if a companythan the suppliers of goods. This perspective has declares a profit then that in itself is the end of theevolved. Today, making a profit is not enough as story for profit was the goal and once that goal hasmembers of the society evaluate how that company been attained in a legal manner as Friedman (1962)has impacted the society through its actions or its contends, then the corporation should be allowed toinactions. proceed ahead relatively unchecked. This view may well be a simplistic one. Today it would appear that the members of first world economies look moreEvaluations deeply at such profit declarations. The declaration of a profit or a loss is only the first of a set of criteriaThere are a number of criteria that members of upon which society evaluates the performance of thesociety use to judge the performance of organiza- company.tions. In many cases, this assessment is not a con-scious one, but one that develops as one is madeaware of incongruities and inconsistencies in the Lawful behaviourways in which for example the corporationÕs profithas been achieved. The questions at the centre of Profits should always be made lawfully. This maythese issues include: What have been the economic sound obvious and trite, but current history hasoutcomes of their actions?; Has their behaviour required that this statement be made as many cor-been lawful?; Are they better corporate citizens porate executives around the world seem to havethan they were?; Have they paid the appropriate missed this salient feature of doing business: betaxes?; Has the company been environmentally ethical or at worst, be lawful.friendly?; Have they retained employees?; Have These types of behaviours do force legislators toservices to customers been retained?; Are their re-examine the current legislation and consider itsproducts acceptable to us from a health and safety adequacy. One such example was in Australia inperspective? 1997, when the Australian Federal Government
  14. 14. 316 ¨ Goran Svensson and Greg Woodsubstantially strengthened the Trade Practices Act of charity (Carringer, 1994; Ptacek and Salazar, 1997).1974, in order to curb the excesses that were wit- CRM relies on the purchase of a product from anessed in the franchising industry. Some franchisors for-profit company and for some of the moneywere acting in ways that were contrary to the health from the purchase price of that product to be thenof their industry, and especially to the well-being of channeled from that sale to the cause with whichunsuspecting franchisees. Debate raged in the Aus- the product is linked (Davidson, 1997). Everyonetralian Federal Parliament for months about the appears to benefit: consumers feel that they arecourse of action to be taken. Eventually, a bipartisan making a significant contribution; companies feelapproach was achieved, because it was obvious that that they are giving a significant contribution andthe franchisees were being harmed by some charities appear to be getting a significant contri-unscrupulous franchisors that were unable to be bution. It is a win–win–win relationship. Citizenscontrolled by the current legislation (Wood, 2002). expect corporations to contribute to the well beingLegislation will never be the panacea, but at least it is of the society, just as the citizenry is implored anda way of signaling to all that the bar has been raised expected to do so.on what constitutes lawful behaviour and that thoseindividuals and corporations that do not abide by thenew laws may face some time behind bars. Pay appropriate taxes Governments establish taxation regimes that inBetter corporate citizens essence are designed to ensure that businesses con- tribute equitably to the maintenance of the society ofConsumers are no longer happy just to judge cor- which they are a part (Solomon and Martin, 2004).porations on their profit alone. They expect more. The dilemma that faces many government taxationThe ‘premum non nocereÕ doctrine of ‘knowingly collection agencies around the world is the accepteddo no harmÕ is now anachronistic in todayÕs modern practice of tax minimization by the players withinworld of business. Corporations must ensure that the system. Tax minimization practices are touted bythey do no harm and not knowing is no longer an individuals who achieve their own remuneration byadequate enough defence. The motto of the 21st devising means of reducing the liabilities of others toCentury perhaps should be ‘knowingly do goodÕ as the society through reducing their customersÕconsumers expect the corporation to contribute to apparent tax responsibilities. These schemes have ledthe society. in many western economies to goods and services As more individuals became investors in corpo- taxes in an attempt to capture some of this lostrations, either directly or as a part of an institutional revenue. Society expects each individual and cor-investment in superannuation funds, their view of poration to make their fair contribution to thecorporations changed. As the social conscience of maintenance of the society. Not to do so is anmany in the developed world became more acute in abrogation of oneÕs responsibilities and one is lam-the latter years of the 20th century, then so too was basted for it.there a corresponding rise in the expectations ofcorporations to be better corporate citizens and toinvest to make the society a better place (Campbell Environmentally friendlyet al., 2002; Rodgers and Gago, 2004; Rondinelli,2003). Corporations themselves began to realize Companies are scrutinised as to their performance inthat, ‘‘they could earn higher profits if they were their use and/or abuse of the environment. Envi-good citizens of the community’’ (Rodgers and ronmental concerns are not new (Hoffman, 1991).Gago, 2004, p. 359). Since the rise of Greenpeace and other organizations One such example was the development of cause of similar ilk, developed countries have beenrelated marketing, where corporations formed alli- showing a growing interest in their use of theances with charitable organizations for the better- environment. Westra (1995, p. 661) contends that,ment of the people who were supported by the ‘‘Environmentalism...is now one of the few causes
  15. 15. Model of Business Ethics 317that moves and unites almost everyone in the country in particular come in for strong condem-world.’’ nation. In Australia, the largest Telco has outsourced Corporations are compelled today by legislation some of its operations to India. The reaction to thisto ensure that their operations in developed coun- decision was one of derision by many. As theirtries are above and beyond reproach. For many business is 51% government owned, this initiativecitizens, however, this ideal is not enough as the has sparked a more rabid response from trade unionsglobalization of business can lead to a degradation of and others who like many people were mystifiedthe environment in jurisdictions that do not have in that one would contemplate doing such a thing toplace legislation to protect their environment (As- oneÕs own workers.gary and Mitschow, 2002; Olsen, 2001). The cases After announcing another record profit last yearof Union Carbide and Bhopal, Shell in Nigeria and and the fact that it is on track this year for an evenExxon and Alaska are exemplars that highlight the greater profit AustraliaÕs largest airline carrier anddegree of animosity that can be brought to bear on deemed as the worldÕs most profitable airline iscompanies that do not actively protect the envi- looking to outsource 7000 jobs off shore and to axeronment. The Kyoto Protocols highlight to all 3000 jobs. As a union representative was quick tocountries and their companies that they need to be point out, the corporate slogan is the ‘Spirit ofcognizant of the importance to their societies of AustraliaÕ and that this action was not in the bestresponsible environmental management. Unfortu- interests of the Australian community (Creedy,nately, some countries have not embraced the 2005). People in the society become sceptical of theprinciples as perhaps they should have (Rondinelli, motives of these companies.2003). Services retainedEmployees retained This phenomenon is a recent one within theIn the late 1980s, companies discovered the buzz Australian marketplace. The prime example iswords of ‘downsizingÕ and ‘outsourcingÕ. These within the banking industry. Since the late 1980s,words were sanitized labels for companies to be able the Australian banking industry has been a deregu-to reduce the size of their workforces in the name of lated industry. Whilst this move has led to newefficiency (Piety, 2004) which in itself is a pseudo- players in the marketplace, essentially the business isnym for ‘increased profitsÕ. still controlled by four main banks. Shortly after it Layoffs are never in the best interests of employees declared a record profit, the largest bank announcedand their families and their communities (McCall, the closure of branches in some country areas that2002; Piety, 2004). The sad situation is when one according to them did not warrant being left opensees a company declare a profit, but under the guise (Cornell and Mellish, 2002). The volume of businessof the improved use of technology, employees are was deemed to be too small. Customers werenot still retained. Within society we contend that directed to move their accounts to larger regionalthere appears to be a growing disquiet with this centres where the facilities there could adequatelypractice. There are companies that change their handle their needs. The uproar from countrysuppliers from country to country chasing cheaper Australia was enormous, but it really was ‘a fleasourcing of their products or as McMurtry (2002, p. trying to bite an elephantÕ. AustraliaÕs population is204) terms them, ‘‘lowest-cost zones’’. Even though geocentric to its coastline and particularly its easternthese companies made profits in the previous seaboard cities and hence the bank rolled oncountry, they still move their preferred supplier regardless even though the campaign against thestatus to less expensive sources and factories that bank did manage to garner some support in city areashave supplied them in the past are left to languish as well.with all of the social dislocation that comes from The profits of major banks in Australia continuesuch a decision. Companies that move aspects of to grow, but they too have fallen victim to thetheir business base off shore from their home ‘technology leads to profitÕ syndrome. Banking
  16. 16. 318 ¨ Goran Svensson and Greg Woodservices are becoming depersonalised as people are Society evaluatesencouraged to use the technology to obviate anydifficulties that waiting in line at the bank may cause. While as a society we laud profit, we detest a loss andIf one is not literate with the new technology and in such cases the society watchdogs swoop down onconnected to the world through technology, then errant companies in order to investigate their par-the chances are that you will be disenfranchised from ticular situation, yet, profit does not guarantee thatsome of the services that you once took for granted. the actions taken by corporations to achieve thisWith an ageing population in the western world and profit were in the best interests of the society.with many of them not being technology literate, Society goes through a set of checks and balances tothese issues will grow in prominence. ensure that the profit declared by the corporation has been earned in ways that do not compromise the integrity of the corporation, the shareholders, theProducts acceptable stakeholders and the society in general.Citizens in developed societies are now examiningmore and more the downsides of some of the Reconnectionproducts that for years we have purchased andconsumed without due regard for the consequences Once the evaluation criteria have been examined,to our own health. Tobacco companies have been in then the model returns to the beginning as newthe spotlight now for nearly twenty years as infor- levels of expectation in respect to behaviour becomemation at first tumbled and then cascaded out about the foundation upon which to judge subsequentthe damage that their products can do to their cus- organizational performance. The introduction oftomers. Even that advertising icon of the late 1980s new legislation sets higher barriers to being unlawfuland early 1990s, Joe Camel is no more. Smith and and unethical. As time evolves, then the behaviourWesson has complied with US regulatorsÕ requests in of individuals in business evolves to new levels ofrespect to its products, so that it could stave off ethical behaviour. The model may appear to beimminent legal action (Post et al., 2002). discontinuous during periods of history in which the We are crossing into new realms of focus when business world appears to be stable, but in essencewe have legal products such as tobacco, firearms and society continues to move forward and to developalcohol being subjected to expectations that constrict more expectations of the behaviour of business. Thethe freedoms of their manufacturers to configure process never stops and one hopes never regresses.their products as they see fit to meet their marketneeds. The fast food industry is coming under moreintense pressures from consumers concerned about Conclusions and suggestions for furtherthe nutritional value of its products. The US ham- researchburger laws have given sanctuary from prosecutionto these fast food giants. In response, McDonalds has The introduced model makes a contribution to therun advertising campaigns that attempt to convince creation of a conceptual framework for businessthe consumer of the nutritional value of their ethics. We intended to fill a gap in the area ofproducts and now they have progressed to a new business ethics research.generation of products that are based upon the The proposed model of business ethics rests uponprinciples of healthy eating. the challenge of combining past, present and future Producing a legal product appears not to be expectations, perceptions and evaluations. Hope-enough any more. Litigation is brought against fully, the past and the present ones are known, butproducers of legal products for the misuse of their those of the future are unforeseen. Repeatedly, theproducts and the fact that the product can be det- corporate reality of events and behaviour turns out torimental to the health of the consumer. Consumers be unpredictable. What were the expectations, per-want and expect products that do not harm them in ceptions and evaluations of the past – and the currentany way. ones of the present – may or will differ from those of
  17. 17. Model of Business Ethics 319the future, therefore, the model of business ethics dynamic and continuous process without an end.should be seen as a transformative process. The past A process, however, that is predicated on thehas given the present but the future is shaped in interrelationship between business and society wheretransformations taking place continuously and itera- each one is interdependent and responsible togethertively over time and across contexts in the present. It for the outcomes. Hoffman and Moore (1982) sug-is a simultaneous process of co-creation between the gest that the pre-eminence of business ethics is be-expectations, perceptions and evaluations tied cause of a perceived failing, by the generaltogether by the interactive features of society expects; community, of business to act for the general goodorganization values, norms and beliefs; outcomes; of the society. They, therefore, suggest that theevaluations and reconnection. The model provides mutual obligations of business to the community andan integrated approach of the complexity of business the community to business need to be restated. Asethics. Future research may look to test the model. Sir Adrian Cadbury (1987, p. 73) said,For example, such research may indicate whether thefocus is on the components, the sub-components or a ‘‘Business has to take account of its responsibilities tocombination of both. The complexity of the model is society in coming to its decisions, but society has torequired in order to provide a debatable point of accept its responsibilities for setting the standards against which those decisions are made.’’reference in academia. The fact is that there is nosuch overall model in literature. We have made anattempt to fill this knowledge gap. References A few tentative conclusions may be drawn fromthe introduced model of business ethics. In the first Arnold, D. G.: 2003, ÔLibertarian Theories of the Cor-place, the model aspires to be highly dynamic. The poration and Global CapitalismÕ, Journal of Businessultimate outcome is dependent upon the evolution Ethics 48, 155–173.of time and contexts. It is also dependent upon and Asgary, N. and M. C. Mitschow: 2002, ÔToward a Modelprovides reference to the behaviours and perceptions for International Business EthicsÕ, Journal of Businessof people. The model proposes business ethics to be Ethics 36, 239–246.a continuous and an iterative process. There is no Benson, G. C. S.: 1989, ÔCodes of EthicsÕ, Journal ofactual end of the process, but a constant reconnec- Business Ethics 8, 305–319.tion to the initiation of successive process iterations Cadbury, A.: 1987, ‘Ethical managers make their ownof the business ethics model. In the second place, the rulesÕ, Harvard Business Review September–October, 69–73.principals and sub-components of the model con- Campbell, D., G. Moore and M. Metzger: 2002, ÔCor-struct the dynamics of this continuous process. They porate Philanthropy in the U.K. 1985–2000: Someprovide guidance on what and how to explore our Empirical FindingsÕ, Journal of Business Ethics 39, 29–41.common efforts to understand the phenomenon Carringer, P.T.: 1994, ÔNot Just a Worthy Cause: Cause-known as business ethics. related Marketing Delivers the Goods and the GoodÕ, SocietyÕs expectations initiate or trigger the pro- American Advertising 10(1), 16–19.cess by determining the issues to be addressed in Carroll, A. B.: 1979, ÔA Three-Dimensional Conceptualcorporate business activities. The organizational Model of Corporate PerformanceÕ, Academy of Man-values, norms and beliefs considered in operational, agement Review 4(4), 497–505.tactical and strategic business activities should match Carroll, A. B. and M. D. Meeks: 1999, ÔModels ofthese expectations. Once the business activities are Management Morality: European Applications andperformed, they will be the fundament of internal ImplicationsÕ, Business Ethics: A European Review 8(2), 108–116.and external perceptions that will be connected to Carson, T. L.: 2003, ÔSelf-Interest and Business Ethics:the organizational outcomes achieved. In turn, these Some Lessons of the Recent Corporate ScandalsÕ,perceptions underpin the evaluations that the society Journal of Business Ethics 43, 389–394.subsequently will undertake. At this stage the process Chang, S. J. and D. Ha: 2001, ÔCorporate Governance instarts again and is reconnected to the start of a new the Twenty-first Century: New Managerial Conceptsiteration of the business ethics phenomenon, there- for Supranational CorporationsÕ, American Businessfore, it is important to see business ethics as a highly Review 19(2), 32–44.
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