Cosmopolitan Business Ethics

Towards a Global Ethos of Management

Jacob Dahl Rendtorff

• Publisher: Taylor & Francis
• Year: 2017
• Print ISBN: 9781472447081
• eBook ISBN: 9781317159124
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

In Cosmopolitan Business Ethics: Towards a Global Ethos of Management, Jacob Dahl Rendtorff maps the concept of global business ethics, related to sustainability and corporate governance, via an examination of the major theories of business ethics and the philosophy of management.

The book is based on the philosophy of Immanuel Kant and the European tradition, which is applied as the foundation for the analysis of the contemporary European and Anglo-American debate on business ethics in order to formulate an up-to-date theory of global business ethics. The book will compare the different schools of business ethics, corporate citizenship, and the philosophy of management and will address the modern-day issues of sustainability, business and human rights, corporate social responsibility, stakeholder management, and corporate governance, offering insights on how to deal with these international challenges of global economics, the development and protection of human rights, and the environment.

This book proposes a decision-making model for cosmopolitan business ethics as the foundation of management and leadership in dealing with the complexities of globalization. The case studies will address the efforts of businesses to work with global and cosmopolitan business ethics at the levels of maintaining corporate integrity. Both the theoretical argument and case studies presented in the book are based on exchanges with notable business ethicists, philosophers of management, business managers, and public policy-makers.

1 What is cosmopolitan business ethics?

Cosmopolitan business ethics aims at finding responsible principles and values that should guide the actions and strategies of public and private business corporations and organizations. Cosmopolitanism suggests that business ethics must be global. This must be realized in the social responsibility and engagement of business corporations. Now, we shall see why business ethics has become so important in contemporary society, discuss the possibilities to realize ethics and values in practice, and treat the question whether ethics can give the business corporation economic gain and competitive advantage.

Business ethics in private and public organizations

Today, business ethics, corporate social responsibility, values-driven management, and values in organizations have become the central focus of organization and management (Pedersen 2015). This is the case for both private and public organizations (Pedersen and Rendtorff 2010). There is an ever-growing understanding that organization theory should include the values and stakeholders of the business as a basis for organizational development, business improvement, and organizational culture and identity (McAlister, Ferrell, and Ferrell 2005; D’Anselmi 2011). This is the concern for both private and public businesses. This debate about business ethics originated at the beginning of the 20th century, and during the 1950s, 60s, and 70s social responsibility became important in the discussions of the aim of business in the US and Europe. A number of economic scandals in the 1980s and 90s made it clear that it was necessary with ethical guidelines for private and public organizations. During the early 21st century, culminating with the global financial crisis in 2007 and 2008 and onwards, this need for global business ethics became even more important (Bruin 2015; Ims and Pedersen 2015).

We can distinguish between different definitions of business ethics and CSR that circulate around notions of good corporate citizenship, global citizenship, stakeholder management, sustainability and the triple bottom line, corporate social performance, social engagement, and ability to respond to social issues. These approaches to business ethics have a different focus, and they emphasize different dimensions, for example profits, international relations, societal expectations, corporate communications and public relations, voluntary self-regulation of businesses as good citizens, and their good relations with stakeholders. These different dimensions should not be conceived as oppositional, but rather as approaches that mutually supplement and develop each other. Ethics also includes economic, ecological, and social aspects of the organization’s relations with the environment, including those with stakeholders and partnerships in civil society. The increased focus on business ethics is not least focused on the bad reputation that business corporations have had in the contemporary global community (Aras and Crowther 2009).

If one asks a randomly selected person in the street about the aims of businesses and corporations, one is likely to get the answer that they never focus on ethics or shared values, but always on making as much profit as possible. Some even describe businesses as psychopaths, who, because their owners, the shareholders, have limited liability and economic responsibility in reality do not have any kind of moral responsibility or social obligation (Bakan 2004: 16). Businesses cannot be responsible, because only human beings and not organizations or things can have a moral responsibility. Therefore, businesses function as psychopaths who are characterized by a sick denial of their responsibility and lack of concern for morality and ethics in their actions. The ordinary conception of business therefore is that corporations only exist for profit and that this aim excludes any morality in these organizations. In addition to this the power of businesses has today become so big that it is stated that no one any longer really has control of their actions and activities in society. According to critical analysts the greed of business corporations is unlimited and their power is growing in the international community because of the decrease of state power (Korton 1995). This is confirmed by the fact that the biggest corporations in the world, i.e. WalMart, Exxon or General Motors, have annual turnovers that are bigger than the national products of many African countries or even of Scandinavian countries like Denmark or Norway (Ferrell, Fraedrich, and Ferrell 2005: 228) without any increase in engagement in society of these businesses.

The conclusion of this skeptical opinion is that the combination of business ethics and social responsibility should be considered as an oxymoron, i.e. a concept that represents a contradiction that can never be overcome. The consequence of this lack of focus on the connection between business and social responsibility is considered by the critical public as threatening and even fatal to the coherence of society. When businesses in the private market economy cannot contribute to the common good in society, then the economy cannot improve public goods, which is necessary to improve and develop society. By omitting certain social and environmental concerns, businesses risk becoming an expensive cost to society.

The tight interest of business in economic gain in a free market leads to the consequence that they are only concerned about their own economic costs without assuming responsibility for the social and environmental consequences of their production and other activities (Martin and Schumann 1998). Accordingly, there is a risk of externalization, which means making society take care of the social and environmental costs, whereby society becomes responsible for the payment of the human costs of employees and of the pollution of the environment. At the global level we can observe that such externalities are exported from developed to developing countries, for example traders selling garbage from the rich countries for disposal in poor countries. Global capitalism risks implying less responsibility and greater inequality, because businesses are not based on the laws of the nation states, but freely can move production from one country to another. The bad reputation of businesses and their potential psychopathic conception of morality and ethics is the basis for the international criticism of their lack of social responsibility. The Canadian journalist and writer Naomi Klein summarized the criticism in the book No Logo. Taking Aim at the Brand Bullies (2000) as a criticism of the big businesses that only care about protecting their brand value. This criticism was continued in Klein’s work on neoliberal capitalism as the shock doctrine of modern society and on climate change as an ultimate challenge to disaster capitalism (Klein 2000, 2007, 2014). Law professor Joel Bakan continues this critical perspective in the book The Corporation. The Pathological Pursuit of Profit and Power (2004), followed by the documentary movie The Corporation that Bakan produced together with Mark Achbar and Jennifer Abbott. Bakan attacks the doctrine of limited liability of business corporations (i.e. the fact that owners and investors, although they may lose the money they have invested, do not have responsibility for the activities of businesses) as a clear expression of the psychotic situation of business corporations in modern society. The opinions can also be found to be held by many critical non-governmental organizations (NGOs) attacking the lack of social responsibility of businesses, like Greenpeace, which has made different manifestations against the pollution of the environment by corporations. Other critical NGOs that attack the global businesses for lack of social engagement have in the public sphere created greater focus on the global and cosmopolitan dimension of the social responsibility of business corporations (Crane and Matten 2004: 345). From time to time we face political consumers who critically direct their anger against specific corporations. Critical media with their global news stream have also implied that businesses cannot hide from the public sphere. Moreover, employees have become more critical and caring about the values of the companies they work for. They do not only want to work and earn money, but they will work for a business corporation that they think is good and gives their lives meaning in a moral sense.

Cosmopolitan business ethics and creation of trust

Creating trust and trustworthiness (Govier 1997; Rendtorff 2017) is a part of the ethics and values of corporations that need to be institutionalized with cosmopolitan business ethics in order to create social acceptance and legitimacy of business firms. High levels of trust within organizational cultures are important for coherence of interactions in the firm. These internalizations of common norms establish reciprocity and bounded solidarity in the firm, which will be the basis for enlarging the institutional network of the firm in confident relations with its stakeholders. Accordingly we can argue that trust and accountability is important for the process of dynamic establishment of good corporate citizenship as an embedded factor of civic relations in society, responding to social expectations of consumers and citizens.

Our focus on cosmopolitan business ethics demonstrates the need to see trustworthy business practices from the process perspective of creating good corporate citizenship and legitimacy with business ethics as the basis for trust and trustworthiness (DiPiazza Jr. and Eccles 2002; Rendtorff 2017). When we analyze trust as a process of reduction of complexity in the social world we say that business ethics is important for the creation of system trust as a necessary reduction of complexity in business institutions of the modern world. Here we say that the ethical culture of corporations creates good corporate citizenship that makes the business organization trustworthy. Trust is needed for institutional coherence both externally and internally in organizations. Trustworthiness and trust contributes to a process of reduction of complexity through sense-making by measures of ethical governance, values-driven management, and corporate reporting. As a dynamic movement of accountability and responsibility, creating trust through trustworthiness becomes an instrument for dealing with problems and complexity in business firms and organizations.

By communicating trustworthiness through corporate citizenship, corporations respond to social expectations and contribute to seeing themselves as good corporate citizens. Here, a firm creates trust and becomes trustworthy by responding to ethical norms and values (Bidault et al. 1997; Rendtorff 2017). This is the dynamic movement of ethical accountability, integrity, and responsibility where this relation is constitutive of authentic trust. This emergence of integrity contributes to the definition of trustworthiness as the result of the sense-making process in organization where organizational integrity emerges as a result of the efforts of making the corporation trustworthy. Social capital is created, since the business corporation becomes trustworthy through business ethics performance that becomes an essential element and condition of trust in complex business systems.

Accordingly, from the ethical perspective, trust, trusting, and trustworthiness are an integrated part of business ethics in institutions that functions as an effort to improve the social legitimacy of business corporations. Business ethics activities create trust and trustworthiness because the sense-making of the process of ethics includes focus on accountability, integrity, and responsibility, which in general makes the corporation a trustworthy and legitimate institution and organization according to social expectations of society.

Focus on global social responsibility

The requirement of corporate social responsibility is not only advocated by critical voices among consumers, media, and the organizations of civil society. In the 1990s and 2000s corporate ethics and responsibility were put on the agenda by governments in the US and Europe, and this agenda also became an important dimension of the efforts of the UN to improve the ethics and responsibility of transnational corporations in order to ensure social responsibility among developed and developing countries in the processes of globalization (Blowfield and Murray 2011). The basis of the demand by governments of CSR must be found in the process of globalization, where it becomes more and more difficult for nation states to manage the development and the activities of businesses. Therefore companies are encouraged to self-regulation. The US government enacted in 1991 the so-called Federal Sentencing Guidelines for Organizations that asked large corporations to have ethics programs as a part of their efforts to become good corporate citizens (Kaplan, Murphy, and Swenson 1993). After the Enron scandal of 2001–2, which implied that the large idealized company Enron had falsified accounts to make it appear that the company was in constant growth, congress enacted the Sarbanes–Oxley Act, which increased demands on good corporate governance in boards and rules of transparency for the accounts and reporting procedures of corporations. The European Union worked in the 1990s and 2000s toward improving the contributions of businesses to combat exclusion and ensure coherence in the European societies. This led in 2001 to a European Union Green Paper which was later followed up by communications about CSR, which asked European corporations to be greatly involved in the work of CSR (European Commission 2001).

The UN drafted, on initiative from Kofi Annan after the economic summit in Davos in 1999, the so-called Global Compact principles that constitute a foundation for ethical regulation of international businesses and that are based on sustainable development and respect for human rights. In Denmark this agenda of social responsibility was in particular developed in the 1990s, and later in the 2000s the Ministry of Employment did a lot to improve the social responsibility of employees in the form of private and public partnerships (Hardis 2004; Morsing and Thyssen 2003). In addition we can mention various efforts to develop different projects in order to improve attention to social integration of employees and the good life in the labor market (Copenhagen Centre 1998 and later). Today this has been extended to imply greater focus on the relation between social responsibility and globalization, where it is required that Danish companies operating in foreign countries are aware of their ethical and moral obligations.

Social responsibility in Scandinavia: The inclusive labor market

The Scandinavian and in particular the Danish model of social responsibility should be considered from the perspective of the future of the welfare state and its emergent change toward a neoliberal competition state (Rendtorff 2011a). There has been a movement from welfare to workfare, i.e. from passive economic support to active labor support and efforts to integrate people into the labor market. From the beginning of the 1990s, social policy in the welfare state has been changing from being rights-based subsistence support policy to be an activation-based employment policy, and today this is a major characteristic of the welfare state, which is moving toward the competition state. One can say that social responsibility was likely to emerge in a Scandinavian welfare state, combined with a stable and well-functioning labor market, characterized by a flexible-security model, where employees easily can be fired, but at the same time are captured by a social-security net. The social democratic government in Denmark at the beginning of the 1990s had an understanding of the role that social responsibility of business could play in such a redefinition of social policy to become labor policy. In connection with the development of the inclusive labor market, partnerships between private and public authorities have been decisive in order to create greater social dynamics between private interests and greater social concerns, where businesses work together with a common social goal. The Copenhagen Center for Corporate Social Responsibility was created in the 1990s with support from the government as a think-tank that should work to the improvement of social partnerships between public institutions, NGOs, and private businesses. Government supported this by channeling social support over the labor market by contributing economic support to different programs of flexible-security jobs in order to keep the weakest citizens in the labor market. Enabling the employment of the elderly or people with disabilities with up to half of their salary in state support has been a success and has made corporations assume a social responsibility and contribute to an “inclusive labor market.” Accordingly, social responsibility in a late modern flexible society has gained positive acceptance from unions and employers. The creation of the human labor market can be combined with economic growth, which is one of the effects of satisfied employees. Social responsibility has become a part of a new employee policy founded on basic social values that aims at integrating private life and work life and avoiding human tragedies arising from work and working conditions. This policy implies creating better and secure working conditions, reducing sick leave and taking care of the ill, giving children’s families more flexible possibilities, having a senior policy, creating learning and development at the work place and having a human resource policy that is based on personal development, diversity, integration, satisfaction, welfare, and wellbeing among employees (Mølvadgaard and Nielsen 2006a, 2006b...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of figures
• List of tables
• About the author
• Preface
• Acknowledgments
• Introduction
• 1 What is cosmopolitan business ethics?
• 2 Business ethics in the age of globalization
• 3 What are values?
• 4 Values-driven management in practice
• 5 Theories and principles of business ethics
• 6 Historical foundations of cosmopolitan business ethics
• 7 The citizen of the world and education of humanity for world citizenship
• 8 Responsibility, ethical economy, and order ethics in globalization
• 9 Republicanism, integrative economic ethics, and global governance
• 10 What is corporate social responsibility?
• 11 Sustainability, social responsibility, and corporate governance
• 12 Business ethics as stakeholder management
• 13 Shareholders, management, and employees
• 14 Consumers, public relations, and ethical accounting reports
• 15 Cosmopolitanism, religion, and legitimacy
• 16 Cosmopolitan business ethics as global corporate citizenship
• 17 Decision-making model for cosmopolitan business ethics
• 18 Strategy for cosmopolitan business ethics
• Bibliography
• Index