2. expect to be rewarded
for ethical behaviour by grateful stakeholders, whether they be
customers,
employees, suppliers or the government. However, making a
decision about
the ethical content of corporate behaviour is by no means
straightforward, and
depends entirely on the viewpoint of the observer. Three
different viewpoints are
provided, those of the Philosopher, the Executive and the
Marketer. The nature of
the relationship between the corporate conscience and the
personal conscience
of stakeholders is also addressed.
Keywords Ethics, Corporate conscience
*Correspondence details and a biography for the author are
located at the end of the article.
INTRODUCTION
In recent years, there has been a great deal of public concern
about the ethical (or
unethical) behaviour of large businesses. Not unnaturally, when
there is an economic
downturn people will look around for someone to blame, and
will often attribute
blame not on the basis of incompetence or error, but on the
basis of deliberate
deception or skullduggery. The financial sector in particular has
been accused of
deliberate deception, as is evidenced by the huge rise in claims
for mis-selling of
3. financial products, from payment protection insurance through
to “value-added”
bank accounts.
In view of the equally rapid growth in corporate mission
statements, most or all
of which include an ethical stance, there appears to be a
dichotomy between the view
corporations have of themselves and the image they have with
the public. This of
course presupposes that the mission statement has any relevance
to what happens
within the firm on a day to day basis; in some cases one might
suppose that the
mission statement bears little relationship to actual behaviour,
whether the behaviour
itself is ethical or not.
Judging whether behaviour is ethical or not is at the heart of the
problem, since
corporations will be judged by their ethics and (apparently)
expect to be rewarded for
ethical behaviour by grateful stakeholders, whether they be
customers, employees,
suppliers or the government. However, making a decision about
the ethical content
of corporate behaviour is by no means straightforward, and
depends entirely on the
viewpoint of the observer.
THE PHILOSOPHER’S VIEWPOINT
Ethical thinking divides into two main schools of thought: the
deontological (in
which acts can be defined as ethical or unethical regardless of
the outcome) and the
4. teleological (in which acts can be defined as ethical or unethical
according to the
outcome). The teleological approach implies that the means
justifies the ends, and
that the greatest good of the greatest number will determine
whether an action is
ethical or not.
The deontological approach really just pushes the problem back
to the questioner:
how do we decide what is ethical and what is not? Kant’s
Categorical Imperative
(Kant, 1785/1993) offers a yardstick for judging actions. Kant
suggests that actions
are ethical if the actor would be happy for everybody to be
bound by the same rule
of behaviour, in other words one should act only if one would
be prepared for others
to act in exactly the same way in similar circumstances. This is
not quite the same
as the Golden Rule (do unto others as you would have them do
unto you), since it
covers a much wider spectrum of behaviour. For example, the
execution of a serial
killer might be regarded as perfectly ethical under the
Categorical Imperative since
the judge, jury and executioner would all be accepting of the
idea that other serial
killers should be treated in the same way. Under the Golden
Rule, though, none of
the three categories of actor would be willing to accept that the
serial killer should
do unto them what they are doing unto him, so the execution
would be unethical.
Kant has been criticised on several grounds. Benjamin Constant
5. pointed out that
the Categorical Imperative would presumably make lying
unethical, in which case
one should be prepared to give a murderer information about the
location of his
Social Business, Volume 4 246
victim. Kant was still alive at the time, and wrote an essay
agreeing that it would
be unethical to lie to the murderer, a stance with which most of
us might tend to
disagree. Another criticism came from Schopenhauer, on the
basis that people are
unlikely to be as rigorous in applying the Categorical
Imperative to themselves as
they would be to others, a practical rather than a philosophical
objection. Since Adolf
Eichmann invoked the Categorical Imperative as part of his
defence during his trial
as architect of the Holocaust, one tends to side with
Schopenhauer on this one.
Kant, of course, lived in a very specific time and culture. The
problem in the
modern age is that ethical rules generated by his Categorical
Imperative might
produce one set of answers in one culture, and a different set of
answers in another;
given the global nature of business, the Categorical Imperative
might not be quite so
useful as it once was.
Teleology allows us to get around this by considering acts to be
6. ethical if they lead
to the greatest good for the greatest number. Almost anything
can be justified this
way, so it is a very practical philosophy for commercial
organisations, since they can
always argue that the needs of shareholders, customers,
employees and so forth come
ahead of (for example) a few suppliers in the developing world.
For the teleological
thinker, exploiting child labour or poor farmers is justified by
the tremendous good
created for fashionistas and food consumers. Rather like Kant’s
agreement with
Constant that one should not lie in order to achieve a benevolent
outcome, the idea
that the powerless are ripe for exploitation does not sit well
with most of us.
For practical purposes, then, philosophers (however eminent)
are not much help
to us in deciding what we have to do on Monday morning.
THE EXECUTIVE VIEWPOINT
Most business people have separate codes of practice for their
behaviour in work and
their behaviour outside work (Fraedrich, 1988), so corporations
develop their own
internal schemes of ethics. Obviously there will be less tension
in the workplace if
the company’s ethical stance is close to the employee’s personal
ethical stance, and
equally obviously this happy agreement will not always cross
international borders
(or rather, cultural borders). For example, McDonald’s have
expended considerable
7. money in establishing Ronald McDonald Houses, a charitable
endeavour by which
accommodation is provided near children’s hospitals in order
that families can stay
near their sick children. These houses have been established in
most countries in
which McDonald’s operates, but when the company tried to
establish one in Norway
the action was perceived as an insidious way of raising
McDonald’s profile in the
country. Politicians, academics and the general public banded
together to prevent
McDonald’s from establishing the house, with the result that the
firm backed down
and abandoned the project (Brønn, 2006).
Even within the same culture, ethical behaviour can vary from
one corporate
environment to another. For example, Richer Sounds has a
recruitment policy of
hiring friends and relatives of existing employees (Richer,
1995), in order to foster a
“family” working environment. If a government department or
local authority were
to implement the same policy, it would quickly fall foul of the
equal opportunities
legislation. Apart from the legal position, though, many people
would feel quite happy
that Richer Sounds continues with its overtly nepotistic
approach to recruitment,
while deploring a “jobs for the boys” policy in government.
Blythe The philosophy of ethics and the corporate conscience
247
8. From this we can see that carrying out good deeds does not
guarantee customer
approval, let alone any improvement in the company’s image,
profits or sales.
Customers may be suspicious of corporate motives, especially if
there is a poor fit
between the company’s image and the cause it promotes
(Becker-Olsen & Cudmore,
2004). The situation becomes even more complex in the
negative. If a company is
perceived to have acted badly, this may have a negative impact
on the corporate
image among the general public, but have little or no impact on
its image with its
most important stakeholders. In some cases stakeholders, such
as shareholders or
corporate customers may be secretly approving of a company
with a reputation for
ruthlessness.
For example, Rio Tinto has frequently been criticised for its
environmental record.
The Norwegian Government divested itself of shares in the
company and banned any
further development within Norway (Norwegian Ministry of
Finance, 2008) due to
Rio Tinto’s activities in Indonesia. The charity War on Want
also attacked Rio Tinto
for its alleged human rights violations in Papua New Guinea and
Indonesia, and in
2010 the company locked out workers at its plant in Boron,
California (Curtis, 2007;
Gorman, 2010). None of this seems to have hurt Rio Tinto’s
sales, which went from
$9.2 bn in 2003 to $52.1bn in 20131. Net profit rose almost
9. exactly in line with these
figures, which of course happened across a period of
international financial crisis of
unprecedented proportions.
However, this is not always the case. Union Carbide’s
involvement in the Bhopal
tragedy in India did hurt the corporate bottom line. Just to recap
the main events, in
1984 a cloud of poisonous gas was released from the Union
Carbide chemical plant
in Bhopal, killing between 3800 and 8000 local inhabitants
(estimates vary, since
some deaths might have been attributable to other causes).
Hundreds of thousands
of locals have suffered ill health during the intervening thirty
years, including birth
defects and cancers. US courts have placed the blame firmly in
India, and in fact
seven former employees of Union Carbide (all Indians) were
convicted of criminal
negligence; despite this, and the fact that Union Carbide India
was majority owned
by the Indian Government, the parent company was vilified by
environmentalists
and other campaigners, often being accused of corporate racism
(e.g. RT.com, 2010).
Union Carbide’s stock market valuation dropped by two-thirds
(presumably on fears
of a major lawsuit and compensation pay-out) and the company
faced financial
difficulties for some years afterwards, until it merged with Dow
Chemical in 2001.
The ethical environment for business is therefore complex, but
susceptible to
10. analysis. Breaking down the environment into suitable chunks is
one useful thing
to do; Terpstra and David (1991) did this, categorising the
elements as cultural,
physical, industrial, corporate, and societal. Each element
brings its own problems;
in a multicultural society such as the UK there are clear ethical
problems in dealing
across cultures, especially around religious practices and
beliefs. Cultural problems
are greatly increased in global trade because language also
becomes an issue, as well
as some major differences in business practices. In much of
Africa, gifts are given
at the opening of trade negotiations, but these are not
necessarily considered to be
bribes while in much of the Far East, gifts are exchanged at the
close of negotiations.
In Europe and the United States gift-giving in a business
context is generally regarded
as suspect at best, corrupt at worst. Any US firm offering bribes
or even gifts is liable
to find itself in trouble under the Foreign Corrupt Practices Act
of 19772, which
1 http://www. riotinto.com/reportingcentre
2 http://www.justice.gov/criminal/fraud/fcpa/docs/fcpa-
english.pdf
248 Social Business, Volume 4
provides for fines of up to $2 M for corporations and $100,000
plus a prison term
11. of five years for officers, directors, stockholders, employees
and agents who commit
bribery.
Ethical behaviour in the physical environment is largely
concerned with
environmental issues, and most companies are at considerable
pains to establish their
environmentalist credentials. Much of this sterling effort is
directed at appeasing
pressure groups; green activists can create a great deal of
adverse publicity, and of
course employees prefer to feel that they are working for an
ethical company. The
difficulty for companies is often that environmental awareness
comes at a cost, and
competitors may not be quite so fastidious; maintaining
competitive advantage is
likely to take precedence over ensuring the continued survival
of a species of water-
snail.
Another aspect of the physical environment is the control of raw
materials. This
can have a knock-on effect on other ethical considerations.
During the apartheid era
in South Africa, economic sanctions applied by the rest of the
world were somewhat
muted in part due to the fact that South Africa was producing
78% of the world’s
platinum and 100% of its chromium. This led the then South
African trade minister
to say that South Africa could withstand trade sanctions, but if
South Africa imposed
sanctions on the rest of the world, the world would be in trouble
(Sun Sentinel,
12. 1985). South Africa and Russia are also the main sources of
diamonds in the world,
and therefore control the prices between them by restricting
supply. This pattern
is repeated endlessly - OPEC countries control the supply and
price of oil, Russia
controls the natural gas supply of much of Eastern Europe, the
United States controls
the supply of helium gas, and so forth. The ethics of so doing is
dubious to say the
least, since neither the deontological nor the teleological
schools would accept any of
these uses of power as being ethical, yet countries continue to
use these controls as a
way of establishing empires, retaining oppressive practices
within their own borders,
and even rallying political support against their enemies.
Societal ethics also presents many problems, for marketers in
particular. Marketing
is widely supposed (by non-marketers) to be about manipulating
attitudes. Marketers
hotly deny this, but in fact there is a great deal of persuasion,
manipulation,
misdirection, and (occasionally) flat-out lying in marketing
communications. Stephen
Brown (2003) even suggests ignoring the customers altogether,
denying them the
products they so desperately crave. Brown goes on to admit that
“the purpose of
marketing is to sell stuff”. Naturally, this raises substantial
ethical issues: encouraging
people to eat more increases the obesity epidemic, encouraging
people to drink
alcohol is clearly bad for their health, encouraging the use of
high-performance cars
13. and motorcycles is bad for road safety, and so forth, yet,
marketers are charged with
the task of doing exactly that.
Despite the idea of societal marketing (Kotler, Armstrong,
Saunders, & Wong,
2008), in which marketers are exhorted to consider the needs of
society as a whole,
most marketing practitioners are constrained by corporate
imperatives to aim for
sales now and goodwill later. Societal marketing considers
long-term sustainability,
but for a brand manager with a career to build, the long term is
really not part of
the day-to-day working landscape; although there is a clear link
between customer
approval and shareholder value (Anderson, Fornell, &
Mazvancheryl, 2004), few
boards of directors see the world that way.
Blythe The philosophy of ethics and the corporate conscience
249
THE MARKETER’S VIEWPOINT
Three basic views of corporate ethical stances have been
identified (Goodpaster &
Matthews, 1982). These are:
1 The invisible hand;
2 The hand of government;
3 The hand of management.
14. The invisible hand view is that companies will be punished by
the market for unethical
behaviour, and should therefore focus only on creating value for
shareholders.
Marketers may have a problem with this view, since they are
(supposedly) focusing
on consumers not on shareholders, but that particular conflict is
easily resolved by
the consideration that we are not looking after the consumers
because we love them,
but rather because it is the best way of getting them to give us
their money. The
invisible hand idea is very helpful for the “what do we do on
Monday morning”
question because it provides a single yardstick - will what we
are doing create greater
shareholder value, or will it not? This viewpoint was very ably
outlined by Peter
Doyle (2008). Doyle argued that marketing, and indeed all
company activity, is
aimed at increasing shareholder value rather than increasing
profit or increasing
consumer welfare. Free-market forces will take care of the rest,
although how one is
to know whether one’s actions will trigger a negative market
response or not remains
unexplained by the theory.
In practice, many marketing initiatives have resulted in an
unexpected backlash,
some of which have been extremely hard to contain. The Hoover
free-flights debacle,
in which Hoover offered free flights to anyone buying a Hoover
product, has been
well-documented. The idea was to offer free flights (at a time
15. when airlines had
serious over-capacity) as a sales promotion. The offer was
heavily over-subscribed,
leading to a shortage of product for sale and a huge backlog of
people who could
not be given their flights: apart from the PR implications, the
financial effects meant
that Hoover’s UK operation had to be bailed out by the US
parent company (Chan,
2004). This was actually less serious than many other well-
meaning attempts at
pleasing people, showing that relying on the invisible hand is
rather like the bird that
flew backwards - it’s easy to see where you’ve been, but rather
harder to navigate
effectively.
The hand of government also allows the practical marketer to
abdicate
responsibility. Here, the company needs merely to stay within
the law - the
government sets up any necessary ethical barriers by passing
legislation to control
firms. This has the great advantage of ensuring that one’s
competitors are equally
constrained in what they can and cannot do - the famous level
playing field - but
has the downside of stifling creativity. A further downside is
that every law seems to
contain at least three loopholes, so the truly creative competitor
can usually evade
restrictions. Furthermore, governments only legislate within
their own borders - in a
world where instant intercontinental communications are
possible by telephone and
internet, governments have little power to control marketers.
16. Both these philosophies assume that controls have to be placed
on companies from
the outside, in other words that companies will not of
themselves behave ethically.
This may be somewhat harsh - after all, companies have no real
existence, they are
merely groups of people who have come together in mutual self-
interest, and they
250 Social Business, Volume 4
therefore carry the ethical values of their members at least to
some extent. This is
where the third ethical stance - the hand of management - comes
into play. In this
view, companies set their own morality, in a formal structure
that lays down the
ethical stance of the organisation. Executives and other
employees are not expected
to work out their own ethical stances on particular issues, but
are instead shown the
way by the company’s senior management, who outline the
ethical and moral rules
of the firm in a specific statement.
Typically, firms will have a mission statement or a vision
statement which contains
the company’s ethical standpoint. This is likely to include noble
statements about
caring for customers, employees, the environment and all
stakeholders. It may include
statements about quality control, statements about fair trade,
statements about
17. honesty and transparency, and so forth but of course there is
likely to be something
of a gap between what is in the statement and what actually
happens in practice.
In some cases, companies have been founded purely on ethical
grounds.
Rowntree’s was founded to espouse Quaker principles, Body
Shop was started as a
counter to large cosmetic companies on environmentally-sound
lines, and the John
Lewis Partnership was created as a response to oppressive
employment practices.
This is perhaps the ultimate example of the hand of management
approach to ethical
behavior.
In fact, companies will (in general) adopt aspects of all three
ethical stances: they
will be affected by the invisible hand of the market, they will
have to operate within
the law, and they will also develop their own internal ethical
positions. Whether these
positions follow a deontological or a teleological bent will
depend largely on the
beliefs of the members of those organisations, but it is a fairly
safe bet that relatively
few of those members will have heard of either deontology or
teleology.
Corporate social responsibility, although heavily bound up with
ethics, is actually
somewhat simpler to deal with since it merely means caring for
the welfare of the
organisation’s stakeholders. The only real problems arise from
conflicts of interest.
18. Caring for employees might conflict with caring for customers
(for example, opening
a retail store on a Sunday might be wonderful for its customers,
but be damaging
to the family lives of its employees). Likewise, giving
customers exceptionally good
value for money might impact on the firm’s profitability in the
short term, affecting
shareholder welfare.
CONCLUSION
From the foregoing it appears that ethics is a slippery subject.
Even relatively simple
yardsticks such as the Golden Rule have complications attached
to them, and certainly
the philosophical positions of deontology and teleology create
more questions than
they answer. Ethical behaviour is therefore not an absolute; it
relies on the views of
the majority of people living within a cultural milieu, and can
therefore change over
time and certainly over distance.
For individuals, ethical behaviour means conforming to the
diktats of conscience -
the internal parent that tells us what is right and what is wrong.
Organisations lacking
parents also lack a natural conscience except that which is
collectively held by their
members. This means that the corporate conscience needs to be
created artificially in
the form of a mission statement, vision statement, or (in some
cases) an overt ethics
statement. The design of this statement is likely to be based on
the consciences of the
19. 251Blythe The philosophy of ethics and the corporate
conscience
senior management of the company, and in the case of a vision
statement is likely to
reflect the conscience and values of the company’s founder.
Whether this results in behaviour that others would regard as
ethical is another
matter. Sir Alan Sugar is reputed to have said that the Amstrad
mission statement
could be summed up as “We want your money!”3 Refreshingly
honest as this is, it
may not be a statement that would endear Sir Alan to his
customers.
The corporate conscience will also be influenced strongly by the
culture within
which the firm operates, in some cases within the national
culture of the firm’s
founders, and in some cases within the industry culture. For
example, in the mining
industry, a certain amount of environmental damage is expected
as part of the process
of extracting minerals, and most firms in the industry would
therefore have a flexible
attitude to the environment which would not be present in (say)
a major supermarket
chain.
The corporate conscience can, and will, influence the daily
behaviour of employees,
however. Because people can hold entirely separate ethical
20. codes between work and
home, the corporate conscience can operate independently of
the personal conscience.
Of course, if the two consciences are greatly in conflict, the
individual might feel
considerable internal dissonance and may end up leaving the
company, but this will
not affect the corporate conscience much. The same might be
true of customers, of
course - if the corporate conscience is wildly at odds with the
customer’s personal
view of ethical behaviour, the customer will take his or her
business elsewhere. This
may lead companies to have two separate consciences - the
public and the private - in
much the same way as individuals can have public and private
attitudes on almost any
topic. At the very least, it may lead companies to issue
statements which consist of
little more than a collection of noble words with no substance
behind them.
Finally, the corporate conscience might just as easily justify
itself through
deontology as through teleology, but will probably require no
internal justification.
Like the consciences of individuals, the corporate conscience is
just there, complete
and whole, needing only to be fed with the warm glow of
compliance. Whether
having a conscience at all is a prerequisite for a ticket of
admission to corporate
heaven will depend, as always, upon the responses of customers.
REFERENCES
21. Anderson, E.W., Fornell, C., & Mazvancheryl, S.K. (2004).
Customer satisfaction and
shareholder value. Journal of Marketing, 68(4), 172-185. doi:
10.1509/jmkg.68.4.172.42723
Becker-Olsen, K., & Cudmore, B.A. (2004). When good deeds
dilute your equity. Advances in
Consumer Research, 31(1), 78-79.
Brønn, P.S. (2006). Building corporate brands through
community involvement: Is it
exportable? The case of the Ronald McDonald House in
Norway. Journal of Marketing
Communications, 12(4), 309-320. doi:
10.1080/13527260600950643
Brown, S. (2003). Free Gift Inside! Chichester: Capstone.
Chan, A. (2004, May 13). Hoover’s free flights fiasco recalled.
BBC News. Retreived from
http://news.bbc.co.uk/1/hi/business/3704669.stm
Curtis, M. (2007). Fanning the Flames: The Role of British
Mining Companies in Conflict
and the Violation of Human Rights. War on Want, London.
Retrieved 10 April 2009 from
http://www.waronwant.org/attachments/Fanning the Flames.pdf
3 http://www.nytimes.com/1987/09/26/business/amstrad-plots-
a-us-invasion.html
252 Social Business, Volume 4
Doyle, P. (2008). Value-based Marketing: Marketing Strategies
22. for Corporate Growth and
Shareholder Value, 2nd edition. London: Wiley.
Fraedrich, J. (1988). Philosophy type interaction in the ethical
decision making process of
retailers. PhD dissertation, A&M University, Texas.
Goodpaster, K.E., & Matthews, J.B., Jr. (1982). Can a
corporation have a conscience? Harvard
Business Review, 60(1), 132-141.
Gorman, S. (2010, February 24). Locked-out Rio Tinto borax
miners in U.S. get support.
Reuters. Retrieved 3rd June 2014 from
http://www.reuters.com/article/2010/02/25/us-usa-
mine-lockout-idUSTRE61O0CV20100225
Kotler, P., Armstrong, G., Saunders, J., & Wong, V. (2008).
Principles of Marketing, 5th
European edition. Harlow: FT Prentice Hall.
Kant, I. (1785). Grounding for the Metaphysics of Morals: with,
On a supposed right to lie
because of philanthropic concerns, 3rd edition (J.W. Ellington,
Trans., 1993). Indianapolis:
Hackett.
Norwegian Ministry of Finance (2008, September 9). The
Government Pension Fund divests its
holdings in mining company. [Press release] Retrieved from
http://www.regjeringen.no/en/
archive/Stoltenbergs-2nd-Government/Ministry-of-
Finance/Nyheter-og-pressemeldinger/
pressemeldinger/2008/the-government-pension-fund-divests-its-
.html?id=526030
24. posted to a listserv without first
obtaining the copyright holder's express written permission.
However, users may print,
download, or e-mail articles for individual, non-commercial use
only. This article has been
reproduced by EBSCO under license from Westburn Publishers
Ltd.