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A precis of a communicative theory of the firm A precis of a communicative theory of the firm Document Transcript

  • Business Ethics: A European Review ´A precis of a communicativetheory of the firmJeffery D. SmithnIntroduction stakeholders as part of the communicative, i.e. consensus-building fabric of modern society, orOver the last two decades there have been whether such relationships are merely strategic innoteworthy attempts to apply normative moral a way that emphasizes the satisfaction of privateand political theory to the conduct of business over collective interest. Although the answer tofirms. These applications draw upon the work of this general question remains open within theAristotle, Immanuel Kant, John Rawls, various communicative ethics literature, I take an ap-figures of the social contract tradition, and the proach that maintains that economic organiza-writings of the so-called communitarians (see tions are not only partly communicative in natureKeeley 1988, Solomon 1993, Etzioni 1998, Do- but it is indeed appropriate that the ideals setnaldson & Dunfee 1999, Bowie 1999, Phillips forth by communicative action structure the terms2003). A body of literature that has received of cooperation between their members. Businesssubstantially less attention by business ethicists, actors, while strategically motivated in basic ways,however, is the work of European theorists who cannot be exclusively strategic without jeopardiz-advocate an approach termed discourse, or com- ing the successful attainment of their sharedmunicative ethics. interests. I also hold that communicative action This paper proceeds under the assumption that is only enabled through a complicated network ofthere is room to develop a communicative theory social institutions. If businesses shape and affectof the modern business firm that can provide a the possibility of consensual social action in otherperspective from which to evaluate an array of spheres of modern society, then they too arenormative issues in business ethics, e.g. corporate partly subject to the normative constraints pro-social responsibilities, stakeholder entitlements vided by the ideal of communicative interaction.and obligations, managerial decision making, In what follows, I will develop this position withand corporate governance. This task, however, is exclusive focus on the philosophical work ofquite complex and cannot be completed in its arguably the most prominent communicativeentirety here; as a result, the purpose of this ethicist, Juergen Habermas (1990: 43–115,analysis will be to provide a preview of a more com- 1996a). Since I do not purport to provide anprehensive application of communicative ethics. interpretation of Habermas as much as an My focus will center on the first step of such an extension of some of his insights, I assume large,application; that is, whether it is reasonable to controversial features of his work without de-conceive of the relationships between business fense. The motive behind this exploration is a curiosity in uncovering what entitlements and responsibilities corporate stakeholders assume when they are engaged in the mutually benefi-n Assistant Professor and Director of the Center for Business, Ethicsand Society, School of Business, University of Redlands, Redlands, cial acceptance of risk and reward that consti-CA, USA. tutes business activity. Broadly speaking, I amr Blackwell Publishing Ltd. 2004, 9600 Garsington Road, Oxford OX4 2DQ, UKand 350 Main St, Malden, MA 02148, USA. 317
  • Volume 13 Number 4 October 2004interested in what moral principles are implied able needs and solutions. The promise of com-from the fact that business organizations are municative ethics for business ethicists is that itcomposed of differently situated and differently can provide a procedural vantage point frominterested groups of individuals who sometimes which the relationships that characterize thehold competing and mutually exclusive ends. modern corporation can be normatively assessedHow can their diverse economic interests be justly and managed.addressed given that these differences stand Habermas limits his normative theory to anin contrast to the shared interests they have in exploration of the moral principles that can bethe success of the firm? Although I will provide rationally justified in the face of the persistentno definitive answers to these questions in disagreement that characterizes modern, pluralis-this paper, I will begin the process of constructing tic societies. He begins this account with thea communicative perspective from which these assumption that moral claims have the feature ofquestions can be asked. being made with the anticipation and expectation that there are good reasons to support the validity of the claim that every listener can, in principle,Communicative and strategic action acknowledge. Moral claims, thus, are a species of what I have been calling communicative action, orJuergen Habermas maintains that moral princi- consent-oriented action (Habermas 1984: 286,ples are justified, and ultimately conferred valid- Baynes 1992: 80). Communicative action is sociality, when they meet with the acceptance of activity with the primary aim of bringing aboutindividuals engaged in an argumentative discourse mutual understanding, rational agreement, orabout the principle’s ability to satisfy the needs consent. Since communicative action is typicallyand interests of all affected parties. His commu- mediated by language, Habermas focuses hisnicative ethics provides a procedure designed to attention on moral claims and their purportedprovide an examination of the principles that can end of enabling the recognition of certain reasonsgovern the interaction and cooperation of a as warranted grounds upon which to accept aplurality of groups that have disparate value normative, action-oriented claim about whatorientations, interests, and conceptions of the ought to be done. Moral assertions are distinctivegood. Institutionalizing argumentative discourse in that they specify universally valid humanenables a type of coordination of interests by interests that are capable of obliging individualsuncovering an insight into the interests of other whatever their specific value orientations orindividuals. This, in turn, builds solidarity be- limited set of interests. Linguistically mediatedtween those who reach collective agreement about moral action, then, is pragmatically based on thehow to regulate the terms of their social lives. presupposition that moral claims can lead to a Communicative ethics, unlike other contempor- mutual recognition of the claim through inter-ary work in ethical theory, maintains that moral subjectively acceptable reasons.norms governing social interaction are the result In this light, Habermas’ work can be broadlyof reasoned, dialogical exchanges between differ- viewed as an attempt to redeem the Kantianently situated individuals. In this respect, com- project of uncovering a universal basis for moralmunicative ethics is centrally procedural in that it principles without appealing to an overly formaldoes not recommend substantive moral norms conception of practical reason or otherwisebut, instead, proposes that they result from controversial metaphysical assumptions aboutinstitutionalized discourses where those affected human autonomy. The possibility of universaljointly arrive at well-reasoned principles. Impor- moral principles rests, instead, on the pragmatictance is placed on establishing reliable mechan- necessity of individuals to coordinate their activ-isms for discursive interaction where different ities amongst each other on the basis of sharedconstituencies and groups can address competing reasons. Habermas maintains that the reasonsinterest claims on the basis of mutually recogniz- that support the universal validity of moral claims318 r Blackwell Publishing Ltd. 2004
  • Business Ethics: A European Reviewcan be uncovered through a process of dialogic oriented toward mutual understanding and con-interaction among participants who may have sensus can be preserved in the face of ongoingvery different interests or conceptions of the good disagreement when those who disagree ‘thematizelife; hence, by identifying principles that express contested validity claims and attempt to vindicateuniversal interests, he takes seriously the liberal or criticize them through arguments’ (Habermasnotion that certain human interests can be 1984: 18). For the special case of moral claims, therecognized by all individuals whatever their efforts to preserve rational consensus through aconcrete world views or particular ends. A society process of argumentative discourse presuppose athat is able to coordinate its activities must rely on number of rules. Indeed, Habermas (1990: 86–93)claims that everyone can, even if only implicitly, explains that these rules are inescapable assump-offer their assent. In Habermas’ terms (1984: 286– tions behind the very effort to engage in commu-287; 1990: 102), the restoration of communicative nicative action. As long as you are a participantaction, oriented toward consensus, is necessary using language to make claims that are designedfor the basic processes of socialization, social to secure recognition from listeners, you presup-integration, and shared cultural reproduction. pose that there can be reasons uncovered that Although much of our day-to-day interaction support your assertion. The ideal process ofproceeds in a communicative fashion – i.e., we presenting and reconstructing this search foract and speak in ways that implicitly rely on reasons just is the pragmatic expression of theagreement – Habermas admits that communica- very rules that guide Habermasian discourse.tive action often breaks down because of the These rules include the equal rights of all affectedinability of certain claims to generate consensus. parties to participate in the process of argumenta-The inability of individuals to act in consensual tion, an absence of coercive actions, consistency infashion runs the risk of leading to what Habermas the use of language, the right of everyone to offer(1990: 58) calls rational–purposive action – action any relevant objection, the truthfulness of allthat is not oriented toward rational understanding participants, and the right of everyone to expressand mutual consent but premised on the attain- their needs and interests (cf. Baynes 1992: 80).ment of certain ends not tied to consensus as such. Through a complex maneuver, Habermas con-Rational–purposive actions come in two forms: cludes that from these necessary presuppositionsinstrumental actions that are goal-oriented inter- of argumentative discourse and the idea thatventions in the physical world, and strategic moral claims are justified only if they can generateactions that are attempts to influence the thoughts consensus to coordinate social action betweenand behavior of others for the purpose of individuals, there is one basic rule that all moralachieving private ends. Although there is an norms must meet in order to carry the forceoverlapping area between instrumental and stra- of reason (Habermas 1990: 57–68; Rehg 1994:tegic action, strategic action is particularly worri- 56–84). He labels this rule (U) because, likesome for Habermas because it is social interaction Immanuel Kant’s Categorical Imperative, it sti-that subordinates, or perhaps purposely avoids, pulates that all justifiable principles must bemutual understanding in order to achieve other universalizable. In Habermas’ case, however,ends like power, economic efficiency, or other universalizability is not a formal requirement ofegocentric aims. Breakdowns in communicative maxims of action, but a requirement concerningaction can naturally lead to strategic action the acceptability of a proposed principle withinbecause coordination needs to take place even argumentative discourse.without consensus. (U): a moral principle is justified just in case all Strategic acts such as deception, coercion, affected can freely accept the consequences andmanipulation, and instrumental purpose can be side effects that the general observance of theavoided if breaks in the fabric of communicative principle can be expected to have for the satisfac-consensus are repaired through a discursive tion of the interests of each individual (Habermasprocess of argumentation; that is to say, action 1990: 93)r Blackwell Publishing Ltd. 2004 319
  • Volume 13 Number 4 October 2004(U) summarizes the basic procedural logic behind distributive schemes that acknowledge the impor-moral argumentation and the discovery of accep- tance of economic resources in the attainment oftable reasons to support a proposed principle: a these entitlements are likely candidates for uni-principle is rationally justified only on the versalizable moral principles.condition that all others who are affected by theprinciple are rationally convinced of its validity.So the consensus required by (U) is significant Communicative ethics and businessbecause it identifies moral principles that partici-pants in discourse ‘arrive at together’ by looking There are two general ways in which commu-for reasons that every other participant can nicative ethics is relevant to business. First, as anendorse (Rehg 1994: 77, 78). institution that affects the distribution of rights, Before exploring the applications of this responsibilities, benefits, and burdens in modernapproach to themes in business ethics, it is worth society, businesses and their agents have respon-reiterating some important limitations to Haber- sibilities to uphold the principles that are identi-mas’ theory. Moral discourse is a process whereby fied and justified through public moral discourse.individuals who are communicatively oriented Insofar as consensus emerges about the appro-attempt to restore consensus on issues that have priate ways to encourage and regulate businesstemporarily resulted in disagreement. Habermas activity there are norms to which businesses oughtis careful to stress that his theory itself does to adhere. In other words, businesses, at anot offer any substantive principles; rather, his minimum, need to further the interests of alltheory is purely procedural in that such principles who are affected by their activity. Second,can only be determined through actual discourses. corporations, despite being largely private asso-Moral claims that are redeemed through dis- ciations, are stable and successful only when it iscourse represent values that are generalizable recognized that the relationships between theirbecause claims that survive the process of moral stakeholders are communicative, and not merelydiscourse are those that can be recognized by strategic in nature. This fact yields the interestingeveryone. Moral reasons, thus, can be understood result that discourse is not simply a mechanism toas discursive reasons, i.e., reasons that can be regulate business at the level Rawls refers to as therecognized as acceptable warrants by participants ‘basic structure of society’, but is also germane towithin discourse. the negotiation and management of moral con- The domain of the moral is clearly limited by cerns between consociates within organizations. IHabermas to those normative issues that are will take up each of these applications in turncapable of expressing generalizable interests. (Rawls 1971: 7).Ethical matters concerning individual or groupidentity, value-oriented assessment of personal Public morality, law, and businessends, or questions of the good life are important Habermas’ discourse ethics is a theory of socialto be sure; however, discourses concerning these morality that governs the entire scope of publicquestions are not geared toward the ‘mutually interpersonal and institutional relations. To theexpectable values’ discovered within moral dis- extent that businesses are units of civil society thatcourse. Habermas envisions his communicative impact such core human interests as self-determi-ethics as providing the conceptual framework nation, opportunity, and welfare, there are well-needed to develop a theory of justice that defined responsibilities to the general interest ofarticulates the basic elements of a stable system citizens. Reed (1999a, b), for example, has arguedof public morality. Although he is reluctant to that business activity functions in the generalspecify the content of this system, the demands interest only when three conditions are met. First,of public recognition through individual rights, individual profit seeking through cooperativeliberties, formal opportunities, guarantees to a life modes of production is justified only whenconsistent with one’s lifeworld commitments, and the firm intends to provide gains in economic320 r Blackwell Publishing Ltd. 2004
  • Business Ethics: A European Reviewwelfare to its stakeholders and that these gains are accept its role in regulating social life. The keyappropriately distributed to everyone who has difference for the domains of morality andcontributed to the firm’s productive activities. legitimacy rests in the fact that legal discoursesSecond, because of specific failures of the market encompass moral, ethical and pragmatic reasonsto deliver such gains in welfare, there are generally in the course of examining the validity of arecognizable reasons to prefer regulatory struc- proposed law. The creation of law characteristi-tures that ensure the protection of the natural cally takes into consideration a wider array ofenvironment, public safety, and competition in functional questions and aims (e.g., assessmentsorder that the public benefits of individual profit of efficient means and strategies), focuses, atseeking are realized. Finally, business activity times, on negotiation and bargaining processes,upholds the general interest as long as it does not and tends to be concerned with concrete problems‘invade other realms’ that should be governed by and policies rather than the mere implementationnon-economic ends. Reed is particularly con- of abstract moral insights (Rehg 1994: 219;cerned with the ways in which businesses have Habermas 1996b: 453). Still, the fact that Haber-been able to supplant reflective individual choice mas (Habermas 1988: 243–244) argues thatby contributing to the creation of a ‘consumer cul- ‘legality can produce legitimacy only to the extentture’ and how the ends of business have distorted that . . . legal discourses are institutionalized inthe communicative aims of other institutions, e.g., ways made pervious to moral argumentation’political parties and administrative agencies. exposes the deep linkage between legitimacy and Another way that the norms of public morality morality that Habermas derives from the ideal ofare brought to bear on business is through the communicative action. Law, in a fundamentalcreation of relevant laws by legislative, adminis- sense, is a mechanism for the integration of moraltrative, or judicial means. This issue receives interests into norms that are implemented andextensive treatment within Habermas’ (1996b) enforced through positive means.theory of law in Between Facts and Norms. There In this light, corporate agents can be said to acthe develops a principle of democratic law forma- illegitimately when their actions either (a) contra-tion whereby formal political institutions have a vene the established provisions of existing legit-central (although not exclusive) role to play in the imate law or (b) undermine the conditionsmaintenance of legitimate law. According to his necessary for the ongoing development of legit-so-called principle of democracy, Habermas imate law (cf. Reed 1999b: 27). The former(1996b: 110) maintains that statutes can claim requirement needs little explanation beyond thelegitimacy only when they meet ‘with the assent fact that businesses are legal agents subject to the(Zustimmung) of all citizens in a discursive process constraints endorsed through a discursively struc-of legislation that . . . has been legally constituted’. tured legislative process. The latter provision isLaws consistent with this principle reflect a kind more complicated, but no less important. Haber-of popular autonomy among the citizenry to mas stresses that modern society must be under-reflectively endorse the laws to which they are to stood as a ‘self-legislating’ legal community thatbe subjected (Habermas 1988, 1996b: 118–131; seeks to organize its common life on the basisReed 1999b: 26). Habermas (1996b: 107) draws an of laws that receive the assent of all affectedindirect, but important, connection between (U) individuals. The ideal of a self-legislating polityand the principle of democracy. Indeed Habermas necessitates the legal recognition of certain rights,holds that both principles are ‘co-original’ in the all of which are necessary to maintain a societysense that the normative realms of morality and constituted on the basis of law, so construedlegitimacy are derived from the same core (Habermas 1996b: 121–126). Accordingly, basicprinciple, (D), expressed in the very idea of rights of private autonomy are necessary tocommunicative action, i.e., that an action norm preserve the freedom of speech, conscience, move-is valid only on the condition that all of those who ment, and association necessary to engage inare possibly affected by it could find reason to public discourse. Habermas also outlines rights tor Blackwell Publishing Ltd. 2004 321
  • Volume 13 Number 4 October 2004legal protection and due process under the law so of corporate responsibility that stipulates thatas to prevent capricious penalties against those businesses have responsibilities only as memberswho express dissent or who are otherwise subject of civil society ignores this complexity and leavesto the authority of other, more powerful institu- businesses qua businesses immune from directtions. Finally, he argues for two broad categories moral scrutiny.of legal rights that protect individuals’ entitlement It is fruitful to understand how corporateto direct and indirect participation in legislative responsibilities fit within the politico-legal recog-processes as well as the welfare conditions nece- nition of universal moral norms; however, busi-ssary for the exercise of all other rights (Baynes nesses, as organizations, are significant in their1994: 210–212). It is therefore incumbent upon own right in helping to shape the possibilities ofcorporations to refrain from activities that under- communicative action. Corporations are success-mine these rights because they serve as necessary ful to a large extent when their stakeholders canconditions for the development of legitimate laws. identify and share interests that enable efficientSuch expectations may include, for instance, coordination of their efforts. The prevalence ofprohibitions on penalizing employees who are work, expansion of private enterprise into areasinterested in organizing labor unions, respect for formerly managed by public entities, and thethe privacy of employees in the workplace, an em- dependence of local communities on corporationsployer provision of due process before dismissals, for development, underscore how the interests ofand the responsibility not to engage in political all corporate stakeholders are intimately con-activities that undermine the ability of individuals nected with one another. Thus, in approachingand communities to effect legislative change. the application of communicative ethics to busi- With this said, we should resist the temptation ness, I contend that we must be attentive to bothto conceive of corporate responsibility as arising the need for corporations to internalize moralmerely from the external constraints of public responsibilities as well as identify and apply suchmorality discussed thus far. Viewing the firm as responsibilities via moral discourse at the organi-simply one of many regulated institutions fails to zational level. I will take up some challenges toaddress the special divisions and relationships that this contention in the following section and thencharacterize life within the firm. As a number of move to a more systematic review of the commu-contemporary stakeholder theorists have argued, nicative dimensions of stakeholder relationships.the unique nature of commercial relationships,and their associated risks and rewards, generatesspecial moral considerations beyond mere obedi- Communicative action within organizationence to politically endorsed regulations (Phillips & The normative authority of Habermas’ procedureMargolis 1999). Moral matters in business are of moral discourse originates from the practicalcharacteristically matters about how agents within commitment of individuals to engage in commu-the organization are to exercise moral discretion nicative action. There is no a priori or otherwiseand balance the interests of individuals who make metaphysically controversial foundation for com-contributions to the success of firm. Such issues municative ethics; its foundation rests simply inare not exclusively a function of how the insti- the analysis of the normative presuppositionstution’s goals fit within the larger aims of civil behind actions oriented toward reaching mutualsociety or how the outcomes of business need to understanding.be adjusted to suit norms that take into account This point is crucial; for if businesses, as socialother socially endorsed principles. Letting moral institutions, are thought to further communicativeobligations trickle down to business merely from ends, we should expect business relationships tothe prior demands of the law similarly neglects the exhibit this pragmatic characteristic. Upon firstobservation made by others that business is itself blush, however, this seems dubious; there is aa union of individuals with shared, yet simulta- rehearsed history of argument in business ethicsneously distinct interests. Opting for a definition that speaks to the inherent strategies that lurk322 r Blackwell Publishing Ltd. 2004
  • Business Ethics: A European Reviewbehind the motives of business agents. The fact through happenstance but through negotiatedthat stakeholders often enter into business rela- collective action. The most obvious examples oftionships with doubts about trust, solidarity, and such forms of strategic action are negotiated laborthe extent to which other stakeholders may disputes. If we assume that a negotiated dispute isemploy strategies that compromise their interests strategic in character, then, again, the conver-suggests that business relationships are inherently gence of assent between employees and managersstrategic rather than communicative. More to the does not have its roots in mutual recognition ofpoint: business actors take their relationships with some asserted interest, or a shared rationale as toother stakeholders as strategic in the sense that why the settlement is preferable, but simply anthey expect stakeholders to employ tactics that agreement that relies on the contingent, over-further some specified goal (often a self-interested lapping aims of each party. A similar strategicgoal) at the expense of mutual understanding and analysis might be offered for manufacturers andconsensus-building (French & Allbright 1998). suppliers who compromise in good faith about theWould not this speak strongly against the insti- terms and conditions of a long-term contract onlytutional application of communicative ethics in in the name of their private accomplishments.the way that his being suggested? Finally, there are undoubtedly situations where This question can be cast more precisely by a stakeholding group asserts their interests byexamining three distinct types of rational–purpo- attempting to subordinate or suppress the satis-sive action in business that may, sometimes, be faction of another group’s interests. Call this kindrhetorically confused with communicative action. of strategic action intentional control of interestFirst, competing stakeholder interests may con- satisfaction. Acts of manipulation, deceit, andverge through happenstance. In this situation there coercion are likely to be placed in this category.is little, if any, noticeable conflict between the A neglect of long-term shareholder wealth byinterests of stakeholders but it is nonetheless intentionally misleading investors through inac-accurate to assert that stakeholders are primarily curate financial statements or overt attempts tomotivated by egocentric goals. Take, for instance, deceive through crafty advertising schemes maythe convergence of strategic interests that results serve as instances of the intention to controlfrom technological innovation in product devel- interest satisfaction.opment. Innovation often results in market We should expect interesting cases of strategicposition, brand name recognition, and growth in action under all of these headings. But notice thatrevenue for managers and shareholders. At the while we can uncover examples, this, by itself,same time, consumers often receive strategic leaves the question of whether agents implicitly orbenefits from the development of products that explicitly engage in communicative action largelybetter suit their needs and preferences. Here the unanswered. Habermas speaks of strategic actionmotives behind manufacturer and consumer as following the rules of rational choice so as todecisions are not oriented toward the mutual efficiently influence the decisions of an opponent.recognition of each others’ interests, i.e., through It is, in his terms, an attempt to purposefullyrespect and recognition of their interest claims, change the behavior of others to accomplish anbut, rather, on the calculated satisfaction of self- end to which you have committed yourself.oriented aims. In this regard, the action exhibited Individual success, defined by the attainment ofin this category of rational–purposive action is egocentric ends, is definitive of strategic actioninstrumental in Habermas’s sense of the term (Habermas 1984: 286). It would certainly seem asbecause while managers, shareholders and con- if the latter two categories of rational–purposivesumers can be said to share the end of techno- action, i.e., convergence through negotiation andlogical innovation, their reasons in favor of intentional control of interest, exhibit features ofinnovation are completely self-interested. this sort of action. Yet the fact that business is Second, consider the category of cases where characterized by strategy need not imply that itsthere is a convergence of stakeholder interests not individual relationships are exclusively structuredr Blackwell Publishing Ltd. 2004 323
  • Volume 13 Number 4 October 2004by strategic motives; nor need it imply that characteristic of modern business life should notcommunicative purposes are absent from the deter us from noting that resolutions to suchmotives of stakeholders. It is a mistake, in short, conflict need not take the form of rational–to point to instances of strategy and infer from purposive attempts to assert one’s interests overthose instances that strategy is constitutive of any the interests of an opponent. Strategy, as a speciesbusiness relationship whatsoever. It is one thing of rational–purposive action, is characteristicallyto notice the presence of strategic action. It is a way that individuals respond to situations ofquite another to infer that its presence norma- conflict and competition; however, it is unlikelytively structures what we expect of actors. that stakeholders conceive of conflict resolution Moreover, strategic and communicative mo- purely in terms of asserting their interests at thetives hardly seem mutually exclusive in the way expense of others’ preferences.suggested by these general categories. The reasons Work in the area of multi-stakeholder dialoguesthat a labor union may have to support a and the interaction between corporate constitu-negotiated settlement can be simultaneously self- encies, especially between non-governmental or-directed and take account of the interests of other ganizations and high-level management, hasstakeholders.1 A process of negotiation often shown how dialogic processes facilitate the sharedinvolves what is casually referred to as a give- goals of interest group consideration, trust,and-take process. A prior demand or condition is flexibility, access to information, and agenda-sometimes given up by one party in order that setting power (Bendell 2003: 67–68). Stakeholdersother, more pressing concerns are addressed typically have shared goals about the long-termin a would-be settlement. Stakeholders take what success of the firm and the fact that they seek verythey find most important, in part, because of a broad-based outcomes in common serves as anrecognition of what other parties may legitimately impetus to address coordination problems in waysfind objectionable. The motive in such a process that improve the chances of reaching these goals.may be self-interested in the sense that each party Stakeholders are thus likely to engage in co-is motivated to negotiate on the basis of what operative behavior at the level of conflict resolu-serves their interests; however, this would not tion and policy creation; for a lack of suchexclude the possibility that the interests of others procedural cooperation tends to undermine theprovide acceptable limits on what sort of settle- satisfaction of shared interests (Cohen 2003). Thisment is eventually endorsed. Communicative underscores the extent to which the distinctionaction can, in short, drive a process of searching between strategic and communicative action with-for norms of social coordination that are none- in economic organizations is not to be taken as antheless shaped by each party’s own interest in unquestioned dualism, but two interlocking piecesdiscussing the norms in the first place. of coordinated social action.2 It is also mistaken to assume from the fact thatstakeholders often compete for entitlements or thesatisfaction of interests that such competition is The communicative dimensions ofpreferably resolved through mere strategic means. businessThis comment is issued from the perspective ofstakeholders themselves. Political philosophers To make these points more plausible it willoften refer to situations characterized by a be argued in this section that there are fourcompetition for resources and entitlements as important reasons to suppose that business actorsexhibiting ‘circumstances of justice’ (Sandel 1982: proceed with communicative, rather than exclu-28). It is fair to say that, in many situations, sively rational–purposive, intentions. These rea-stakeholders are involved in circumstances of sons include the shared purposes of stakeholders,justice where they, in effect, offer competing the collaborative nature of decision makingclaims for consideration and interest satisfaction. in organizations, the tendency to seek mutualThe fact, however, that such circumstances are recognition, and the need of communicative324 r Blackwell Publishing Ltd. 2004
  • Business Ethics: A European Reviewaction to sustain the coordination necessary for identifiable conflicts between stakeholder inter-the firm to achieve its economic goals. ests. In either case, however, the fact that stakeholder relationships are measured by this ideal of mutuality indicates that the pragmaticShared purposes and collaboration foundation behind communicative ethics hasBusiness stakeholders have a number of interests relevance to economic organizations. Moreover,that not only coincide but, in a stronger sense, are the fact that stakeholders have core interests inshared. These shared interests express an under- common will often provide the basis for ongoinglying sense of purpose that circumscribes the interest exploration that yields ‘co-created mean-expectations and shared intentions of each corpo- ings’ that tends to enhance problem identification,rate stakeholder. First and foremost, each stake- conflict resolution, and managerial responsivenessholder implicitly recognizes the importance of within organizations (Crane & Livesey 2003:economic ends like market share, growth, innova- 48–49). Consider, for instance, the experimenta-tion, cost minimization, return on investment, and tion with the so-called ‘farm out committees’ inmeritocratic rewards. This is an obvious truism industries dependent upon highly technical main-for the most immediate stakeholders such as tenance and production. A fine example of such aemployees, financiers, and suppliers. Customers committee was established by Northwest Airlinestoo tend to have an interest in such goals because (NWA) as part of negotiated labor settlementthe increased price competitiveness of goods and where technicians gave up wage increases inproduct innovation tend toward preference satis- exchange for stock ownership and control overfaction. Even communities that often have little sourcing decisions (Smith 1998). These commit-input in the eventual location of businesses tees disseminate information to labor unions whotypically come to recognize the importance of a wish to competitively bid on work that wouldrelationship with a competitive, stable corporate otherwise be outsourced. The ability of laborpartner. Second, it is arguable that many stake- unions to compete for work that would normallyholders share interests to the extent that their be sent to other firms creates a sense ofidentities are tied to the firm’s operations as a accomplishment, tangible recognition of theirpersistent and purposeful community (cf. Bowie achievement, savings on maintenance costs and,1999: 82–119). Employees that have long-standing of course, job stability. In a real sense, manage-relationships with management teams, for in- ment and labor both discover, through a processstance, understand themselves and their cohort of exchanging information and creative problemas part of a larger network of individuals with solving with the other party, that their sharedsimilar histories, problems, and experiences. interests in cost minimization and informationIndeed, a corporation’s mission statement, code sharing are mutually recognizable from theof conduct, and organizational structures will others’ perspective.often implicitly define itself as a social union A similar sort of linkage between sharedbased on a shared identity because of the organizational ends and communicatively or-commitment and concern stakeholders have for iented action is illustrated by other well-knownthe success of the firm. cases of collaboration between employers, man- This observation highlights Habermas’s point agers, and suppliers. The Saturn Corporation,that different groups often share a core set of for instance, responded to customer complaintsinterests that naturally leads them to coordinate during the late 1980s by developing a ‘relationaltheir activities to further what they perceive to employment contract’ that stipulated how laborhave in common. Many times this coordination and management ‘team members’ should strive tooperates in the background without examination; have joint decision-making responsibility at allat other times, common purposes need to be levels of the organization (Calton & Lad 1995:brought to the fore in the context of discourse in 15). Inspired in part by Japanese managementorder to articulate generalizable solutions to models, Saturn encouraged critical exchangesr Blackwell Publishing Ltd. 2004 325
  • Volume 13 Number 4 October 2004among labor and management as a means to what business actors expect of others: stake-generate more widely recognized solutions to holders naturally seek to meaningfully addressproblems faced in the automobile industry. A moral conflicts through an implied exchange ofspecial committee was formed that made the reasons. It is clearly true that stakeholdersunion, the United Auto Workers, an institutional disagree about how interests should be balancedpartner in participating in ‘consensus-based deci- in difficult circumstances. This disagreement,sion-making from the shop floor to the levels of however, is meaningful and important to resolvesenior management’ (Kochan 1999: 1). The union only because stakeholders tend to acknowledgeand its membership were integral members of the that their needs and interests are most effectively‘decision rings’ established throughout depart- satisfied through a sort of joint resolution thatments and production facilities that helped to enables a continuation of the productive activitiesmake strategic decisions regarding supplier con- of the firm. This point is subtle but important: anytracts, product development, implementation of self-interest a stakeholder may have in resolving atechnology, and marketing (Calton & Lad 1995: conflict in a particular way is preempted by the15; Kochan & Rubinstein 2000). Grounding this realization that sustainable conflict resolution is aeffort was the commitment that all stakeholders matter of uncovering consensus through sharedhad something to gain by becoming more aware value orientations and reasonable expectations ofof the interests of customers and creating efficient other stakeholders. The particular interests of anyproduction and supply chain policies. one stakeholder are best serviced when that Collaboration of the sort being described by stakeholder engages in activities where there isNWA’s outsourcing committee and Saturn’s consensus about what corporate decisions have amanagement committee are noteworthy because rationale endorsed by all affected stakeholders.there is a presumption in both cases that mutual This communicative feature of business alsoconsent is a large part of how strategic problems explains why the demands of stakeholders areare resolved. Solutions are not sought that merely typically voiced as claims concerning the unwar-look for a convergence of stakeholder interests in ranted exclusion of interests from corporateproposing policies and decision-making proce- decision making. To see this, reflect upon thedures – although this is certainly part of the second category of strategic action from above. Inmotivation. The entire explanation behind these that situation, it was suggested that some laboravenues of organizational policy making rests on union disputes proceed only because both partiesthe fact that collaborative decision making is a are strategically motivated to achieve some self-way to fully understand organizational problems interested aims and they can effectively influenceand solutions. This commitment is prior to the and change the behavior of their negotiatingadvantages provided by mere negotiation; it partners. This picture of negotiated settlement,recognizes that negotiation is more fruitful and however, fails to acknowledge the kinds of claimssustainable when decisions are sought which made by stakeholders in labor disputes. Forintegrate interests, objections and proposals of instance, the recent claims made by members ofdifferent stakeholders. So, like Habermas’s pro- the United Food and Commercial Workers Unioncedural rule of moral discourse (U), participants (UFCW) in Los Angeles were, quite explicitly,in such collaborative techniques view solutions as demands for recognition and fair treatment. Theyjustified only after seeking the assent of others asserted that management’s plan to requirewho are critically engaged and take seriously the grocery store employees to shoulder a greatermultiple stakes of a proposed course of action. share of health insurance costs was unjust in light of the continued growth in net income of Safeway and its subsidiaries (Greenhouse 2003: A10).Mutual recognition UFCW members were not merely making aA second observation relevant to the commu- strategic claim cloaked in the language ofnicative dimensions of business activity concerns distributive justice; rather, they were intending326 r Blackwell Publishing Ltd. 2004
  • Business Ethics: A European Reviewto make a claim that other stakeholders could human resource management, and customerrecognize and find reasons to support. If this is satisfaction are not challenges to be addressedcorrect, then the claims made by stakeholders are through straightforward agreements but, instead,intended to ‘secure uptake’ or generate assent issues that render effective, long-term solutionsamong those involved in negotiation. There were only when multiple stakeholders arrive at solu-reasons that could, in principle, be recognized by tions together (Calton & Lad 1995: 7).other individuals and groups despite their parti- To understand the collective dimension ofcular stakeholder affiliation. The intention of the organizational decisions, recall that Habermas’sUFCW certainly does not guarantee that other interest in communicative action can be recast instakeholders would accept the reasons voiced. terms of an interest in social action; that is, how isNonetheless, it does indicate an orientation to- collective social action possible? How is it thatward recognition rather than mere strategic play. differently situated individuals, with distinct interests, can come together and sustainably work to achieve common ends? The possibility of suchCoordination and strategic advantage social action relies, in part, upon the ability ofThird, business problems are inherently intra- individuals within civil society’s institutions toorganizational. By this I mean that problems, and coordinate their activities and move together withtheir corresponding solutions, are nuanced, com- a sense of mutuality. Identifying business as aplicated and involve multiple stakeholders. This purely private entity where decisions are reducedobservation has led stakeholder theorists, such as to individuated calculations of self-interest has theFreeman & Evan (1990), to speak of stakeholder effect of obscuring the interdependent complexitycontracting as a kind of ‘multilateral interdepen- of organizational decision making from view. Asdence,’ and Aram (1989) to claim that organiza- Sen (1993) aptly points out, a firm’s sharedtional management is premised on viewing productive activities are themselves a public good;decisions as systemic, i.e., as managing ‘inter- they play an essential role in satisfying interestsdependent relations.’ In the midst of such com- for distinct groups while simultaneously repre-plexity it is rarely the case, if at all, that senting a unified rather than merely convergentorganizational challenges can be addressed by interest in organizational life.‘simple, one-time, dyadic solutions’ arrived at This point has implications, as well, for a firm’sthrough a one-on-one negotiation between stake- economic performance. Successful attainment ofholders (Calton & Lad 1995: 7). The more strategic ends is unlikely when actions areinterdependent problems and solutions become, motivated purely by strategic end-seeking. Thisthe more likely multiple parties are needed to seemingly counter-intuitive conclusion is analo-identify solutions that can address the separate gous to a position made famous by Robert Frankstakeholder interests that are jeopardized by any and applied more directly by Norman Bowieone problem. Hence, an individualized assessment (Frank 1988, Bowie 1991, Frank 2002). Frankof the interests of each stakeholder fails to and Bowie assert that the satisfaction of ego-recognize that each stakeholder’s interests are centric interests, whether individual or corporate,implicated in a web of mutually supportive and is only possible in business settings when thesometimes mutually detrimental organizational conscious pursuit of self-interest is limited by anarrangements. Shared problems, in short, demand individual commitment to morality. Self-interestcollectively rendered solutions – not simply is achieved, in short, only when it is appropriatelybecause it is valuable to have the input of all subordinated (from time to time) to the demandsaffected stakeholders, but because collective solu- of morality; furthermore, acting morally pays self-tions to problems tend toward outcomes that interested dividends only insofar as individualswould otherwise not be identified on a stake- adhere to the requirements of morality for itsholder-by-stakeholder basis. The NWA and own sake – not because morality turns out toSaturn cases illustrate how product development, maximally satisfy other non-moral private aims.r Blackwell Publishing Ltd. 2004 327
  • Volume 13 Number 4 October 2004Similarly, it seems implausible to think that the organizations must pay for the protections thatends set forth by mere strategic action could be accompany feelings of distrust.achieved without a cohesive and stable organiza- When two or more strong form trustworthytional climate in which individual purposes individuals or firms engage in an exchange, theybecome public and consensus is the norm. Iterated can all be assured that any vulnerabilities thatstrategic actions are far less effective in achieving might exist in this exchange will not be exploitedone’s private ends than action that expresses a by their partners. This assurance comes with nocommitment to share the experiences, values, and additional investment in social or economic formsreasons held by other stakeholders. Without a of governance . . . . Exchanges . . . between strongserious commitment to the interests of others, and form trustworthy firms are burdened neither by thethe interests you share with them, the ends that high cost of governance nor any residual threat ofmotivate strategic action could not be realized. opportunism. Strong form trustworthy firms willConflict resolution based upon the face-to-face be able to pursue these valuable. . .exchanges while [other] firms will not . . . . This may represent ainteraction of stakeholders exposes motives that source of competitive advantage for strong formmight otherwise remain hidden behind the man- trustworthy exchange partners (Barney & Hanseneuvering of mediators, attorneys, and other 1994: 186).representatives. Stakeholders are more likely toengage in agreement and explore mutually bene- Organizational climates where honesty and trustficial alternatives when genuine dialogue is are heartfelt tend to produce higher levels of jobsought, i.e., dialogue that demonstrates an open- satisfaction and productivity that result in lowerness to revise or place on hold one’s preferred labor costs (Chami & Fullenkamp 2002).action in light of objections leveled by others Similarly, others, like Lynn S. Paine (2000),(Payne & Calton 2003: 123–126). have highlighted the ways in which moral The collective approach to the assessment of commitments produce monitoring and coordina-organizational objectives and participatory deci- tion advantages. The costs of intra-organizationalsion making discussed thus far is essential to cooperation are lowered when subordinates viewgenerating high levels of trust. Trust, in turn, is a directors’ decisions as legitimate. When fairnessprerequisite to long-term interest satisfaction. motivates managers, the tendency to engenderThere have been a number of studies that conflict is minimized. Moral commitment facil-emphasize the relationship between the costs of itates a more complete understanding of situa-production and corporate efforts that weave trust- tional contexts, an ability to mobilize humanbuilding initiatives into the fabric of their business resources, and communicate with others regard-culture. Social environments where, for instance, ing solutions. In environments where mangersgenuine trust between management and suppliers take seriously the spirit of loyalty and fidelity,is measured at high levels seem to have lower agreements are more flexible and creative.moments of doubt when engaging in new ventures Even in situations where certain stakeholderswith tangible risk (Bromiley and Cummings shoulder a greater proportion of costs associated1995). Trust generates consistency, stability, and with a particular decision, it is likely to meet withongoing confidence in business relationships; if acceptance when those affected can trust thatsuppliers thought that the trustworthiness of decision makers have acted with their interests inmanagement was only as strong as management’s mind. Consider various accounts of how Cad-perceived regulatory obligations, they may ques- bury–Schweppes has approached downsizingtion the viability of their continued agreements. decisions (Phillips 2003: 113–115). Since theAccordingly, some have argued that unlike company was founded upon a belief in decisionweaker forms of trust that are motivated simply making by consensus, a now famous move toby the avoidance of costly non-compliance, consolidate its packaging facilities was donecultivating genuine trust within and between only after consulting with a team of managers,businesses tends to cost less than a system where engineers, and shop stewards. The consolidation328 r Blackwell Publishing Ltd. 2004
  • Business Ethics: A European Reviewresulted in the displacement of workers; however, civil society where solidarities are formed. This isthe stakeholders who participated in the ‘working the core reason to take seriously the need forparty’ not only recognized that there were good discourse within firms. In A Theory of Commu-reasons to consolidate on the basis of Cadbury’s nicative Action, Habermas stresses that moderncommitment to its workforce as a whole, but the society can be analyzed from two differentworkers who were displaced recognized that the perspectives (Habermas 1987). The first, followingdecision was not made in ignorance of their Max Weber and others, emphasizes society as aparticular interests. Managers sought out their system of practices and institutions with distinctvoice as part of the decision-making process; as a forms of rationalization and social hierarchies.result, Cadbury engaged in a process of coopera- Administrative elements of the state and corpo-tive learning that cultivated a sense of trust – even rations, for example, are part of society as aamong those whose positions were eliminated. All complicated network of subsystems with see-of this, it seems, would be extremely difficult to mingly disparate goals, rules, and bureaucraticimagine if it were not for an allegiance on the part forms of social control. Society, however, is also aof all organizational members to corporate objec- lifeworld in the sense that individuals are memberstives that everyone found reasonable to endorse. of institutions that foster shared need interpreta- Once stakeholders, in particular shareholders, tions, mutual understanding, and consensus.engage in business activity, they enter into an From this second perspective, society is composedarrangement that requires them to consider how of practices that are communicative and therebytheir efforts impact those who are also instru- focus our attention on regulating society for themental in achieving the end of accumulating attainment of shared interests.wealth. Without this orientation, the nexus of Habermas is deeply concerned with the extentsocial relationships that characterize the modern to which the maintenance of social subsystemsfirm are only as strong as the contingent, and interferes with or otherwise distorts the commu-merely strategic, interests adopted by stakeholders nicative activities of society as lifeworld. Theat a particular moment in time. Communicative private ends of business ‘colonize’ spheres of liferelationships, thus, are what can sustain the that are premised on consensus and discourseexistence of business organization without con- (Habermas 1987: 355). A natural way to end thistinual breakdowns in collective action. Individual disruption is to expect economic organizations tostakeholders acquire and sustain their identities internalize the ends of communicative actionand interests by belonging to corporations, appro- broadly construed. This means that corporationspriating the culture of the organization, and acknowledge their role and influence in thetaking part in interactions that expressed shared maintenance of communicative action and takevalues (Habermas 1990: 102). The choice to appropriate steps to engage in the process ofpursue mere strategic action is, perhaps, possible uncovering modes of social life and principles thatin any one case; but it is untenable in the long- express the general interest. This is what leadsterm if stakeholders intend to further their own Daryl Reed to conclude that, all things consid-interests in an environment where their satisfac- ered, businesses should include decision-makingtion is dependent upon the joint activity of others. processes that are ‘participatory’ unless stake- holders voluntarily accept less participatory schemes for the sake of improvements that theyConclusion can reflectively endorse (Reed 1999b: 30). The remarks offered in the preceding sections are anModern society is a vast array of institutions in attempt to provide a conceptual framework for awhich multiple forums for discourse overlap communicative theory of business. Businesses are(Baynes 1992: 167–181); Habermas himself em- not merely bound by moral constraints in virtuephasizes that moral discourse can occur in more of being institutions subject to the demands ofor less informal movements and associations in public morality through legitimate law; firms arer Blackwell Publishing Ltd. 2004 329
  • Volume 13 Number 4 October 2004also moral communities in which communicative 2. I owe this point to an anonymous reviewer fromaction explains their ability to enhance the inter- this journal and a reviewer for the Society forests of all members. Business Ethics. The intersection of communicative ethics andthe modern business firm is an area ripe for Referencesadditional exploration. In this discussion I havenot addressed a number of obvious concerns with Aram, J. 1989. ‘The paradox of interdependenta complete extension of this approach. One relations in the field of social issues in management’.noteworthy problem centers on the extent to Academy of Management Journal, 14:2, 266–283.which the demand for consensus (as expressed in Barney, J. and Hansen, M. 1994. ‘Trustworthiness as aHabermas’ principle (U)) within business is a source of competitive advantage’. Strategic Manage-realistic and/or conceptually appropriate goal. ment Journal, 15:2, 175–190.Indeed there is a case to be made, it seems, that Baynes, K. 1992. The Normative Grounds of Socialbeing oriented toward consensus need not imply Criticism: Kant, Rawls, and Habermas. Albany:that consensus serve as a normative standard for SUNY Press. Baynes, K. 1994. ‘Democracy and the Rechtsstaat:right action (McMahon 2000). Another issue Habermas’s >Faktizitaet und Geltung’. In White,concerns how, exactly, discourse is to be institu- S.K. (Ed.), The Cambridge Companion to Habermas:tionalized within organizations. I have given 201–232. Cambridge: Cambridge University Press.cursory examples of such practices but others Bendell, J. 2003. ‘Talking for change?: reflections onnaturally surface, e.g., formal stakeholder board effective stakeholder dialogue’. In Andriof, J. andrepresentation, management teams, problem-sol- Waddock, S. (Eds.), Unfolding Stakeholder Think-ving committees and strategic collaboration be- ing, Vol. 2: 53–69. Sheffield: Greenleaf Publishing.tween different units within an organization. Still Bowie, N. 1991. ‘New directions in corporate socialothers will be skeptical that discourse can be responsibility’. Business Horizons, 34, 56–65.maintained in the face of numerous examples of Bowie, N. 1999. Business Ethics: A Kantian Interpreta-short-term, strategically minded attempts to assert tion. Oxford: Blackwell.private over-shared interests. While I am sympa- Bromiley, P. and Cummings, L. 1995. ‘Organizationsthetic to this worry (in light of the great conflicts with trust’. In Bies, R. Lewicki, R., and Sheppard, B. (Eds.), Research in Negotiation: 219–247, 5th edn,that have surfaced between shareholders, man- Greenwich, CN: JAI Press.agers, and employees), it is important to remem- Calton, J. and Lad, L. 1995. ‘Social contracting as aber that breakdowns in communicative action do trust building process of network governance’.not justify the inference that communicative aims Business Ethics Quarterly, 5:2, 271–295.are wholly misplaced in business. The same Chami, R. and Fullenkamp, C. 2002. ‘Trust andconcern could easily be raised within spheres of efficiency’. Journal of Banking and Finance, 26:9,modern society where consensus is accepted 1785–1809.as a norm; democratic politics, for example, is Cohen, J. 2003. ‘State of the union: NGO-businessripe for strategic maneuvering and, despite partnership stakeholders’. In Andriof, J. and Wad-this, communicative assessments of democratic dock, S. (Eds.), Unfolding Stakeholder Thinking,procedures is nonetheless appropriate. All of Vol. 2: 106–127. Sheffield: Greenleaf Publishing.these issues warrant further investigation and Crane, A. and Livesey, S. 2003. ‘Are you talking to me?: stakeholder communication and the risks andshape the research questions for the future rewards of dialogue’. In Andriof, J. and Waddock,development of communicative ethics in organi- S. (Eds.), Unfolding Stakeholder Thinking, Vol. 2:zational contexts. 39–52. Sheffield: Greenleaf Publishing. Donaldson, T. and Dunfee, T. 1999. Ties that Bind: ANotes Social Contracts Approach to Business Ethics. Cam- bridge, MA: Harvard Business School Press. 1. I owe this point to an anonymous reviewer for the Etzioni, A. 1998. ‘A communitarian note on stakehol- Society for Business Ethics. der theory’. Business Ethics Quarterly, 8:4, 679–691.330 r Blackwell Publishing Ltd. 2004
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