Globalisation and Business Ethics

Karl Homann, Peter Koslowski, Karl Homann, Peter Koslowski, Christoph Luetge

• Publisher: Routledge
• Year: 2016
• eBook ISBN: 9781317127208
• Topic: Politics & International Relations
• Subtopic: Law Theory & Practice
• Index: Politics & International Relations

Globalization has become a common phenomenon, yet one that many people experience as a threat not only to their economic existence, but also to their cultural and moral self-image. This volume takes an interdisciplinary approach to provide a theoretical overview of how business ethics deals with the phenomenon of globalization. The authors first examine the origins and development of globalization and its interaction with business ethics, before discussing the impact on and role of national and multinational corporations. The book goes on to examine the relationship between industrialized and developing countries, and explores the place of ethics in globalized markets.

PART I

GLOBALISATION: CONCEPTS AND PROBLEMS

Chapter 1

Globalisation from a Business Ethics Point of View

Karl Homann

It can be safely said that, despite all differences in detail, one important result of the ongoing discussion about business ethics is that the framework of both formal and informal rules is very important for the ethics of individual actors. The rules of a society have great impact on its members’ behaviour. However, it is still a very controversial question how actors can be led to act in moral ways under conditions of competition.

The first part of this chapter will give an overview of the challenges that globalisation holds for the framework and for the implementation of ethical norms. The second part will deal with the role of corporations in the development of a framework of governance for the global society. The third part discusses the question of implementation of ethical norms.

The Problem Situation

Globalisation must now be regarded as a fact. But for business ethics, this fact poses a severe problem: a legal framework that would be able to govern the interactions within the global society in both an efficient and ethical way is only beginning to be developed. At best, first steps to this can be made out, namely the UN Charter, the World Trade Organization (WTO), the International Labour Organization (ILO), the International Chamber of Commerce (ICC), the Kyoto Protocol and others. In many parts of the earth, even these first steps have yet to be acknowledged or accepted.

At the same time, competition is becoming more and more intense. How can individuals act ethically under these conditions? It is beyond dispute that the social framework or social order is important for acting ethically, yet this question can be rephrased under conditions of globalisation in the following way: Who is going to develop the social framework for the global society? The nation states and their organisations of cooperation are mainly hindered by the fact that these states compete against each other, e.g., for investment and for the masterminds. Thus, the problem of competition and ethics recurs among states.

In trying to find a solution for this problem, a prominent school of philosophers has been referring to the thought of Immanuel Kant, who already saw the problem of defection, of free riding very clearly.1 These philosophers propose either to commit the actor categorically to what is ‘her duty to do,’ independent of what other actors do, or to use the state’s power to enforce what is the law. Regarding duty, Kant himself left the question of implementation of duties open, and he saw this himself.2 Regarding the law, it has to be acknowledged that under conditions of globalisation there is as yet no institution that could enforce the law on a global scale by sovereign means.

Do we thus need a ‘global state’? How can the less developed countries be integrated into the global society? Is the theoretical model according to which we have to identify what is right or just and then enforce it via the law, adequate to the current problem situation? Has this model ever been adequate at all? Or do all cognitivist conceptions of ethics leave the problem of implementation unresolved?

Corporations and Global Governance

The process of globalisation leads to a decrease in the nation states’ capability for governance. The main reasons for this are the rapid increase in the sheer number of interactions, the interdependencies resulting from this and the competition among states which leaves the actors with greater alternatives for evading a state’s power. In both regards, no great changes can be expected for the future. While the differentiation of society into subsystems already caused the political system to lose a considerable amount of capacity for governance, this process is further accelerated by the emergence of a global society.3

New players enter into this vacuum. The two most important are non-governmental organisations (NGOs) and multinational corporations (MNCs). This chapter will focus on the role of corporations in designing the new social order for the global society. Which are the factors that force the MNCs — explicitly, in part, but in any case implicitly — into a political role?

With his ‘Global Compact’ initiative, UN Secretary General Kofi Annan has called on the MNCs to cooperate in the realisation and promotion of human rights, better working conditions and protection of the environment: It is clear that for Kofi Annan the community of nation states cannot do these jobs on their own. Thus he implicitly recognises the competence of corporations for efficient governing global processes of coordination. And he implicitly recognises too that to initiate a good development, it is futile to accuse MNCs of ‘only’ maximising shareholder value. By contrast, the three big players, governments, NGOs and MNCs, even today continue to each define themselves mostly in opposition to the other two, and the resulting self-perception leads them to act accordingly. But currently, the MNCs are probably the only ones to have the resources necessary to integrate those four billion people into the global society that are more or less still excluded today. Development aid provided by government and administration has, to a large extent, failed. The industrialised countries come nowhere near the promised 0.7% of the GNP for development aid, and their financial situation is not improving.

However, the MNCs still hesitate or even refuse to accept their new political role. From experience, I can speak of four reasons:

1. The call to take on political responsibility is often phrased in a semantics that forces MNCs into the role of opponents. ‘Sacrifices’ and ‘taming of capitalism’ are called for. But corporations cannot make sacrifices, and to tame self-interest is diametrically opposed to how the market economy works. And even morally sensitive CEOs have to abandon their attempts if the process of integrating developing countries is criticised in terms of normative redistribution theory. This semantics sees corporations as opponents, not as partners.

2. There is a growing number of corporations that have accepted their new public role and actively pursue it. But these activities are mostly of a regional nature (e.g., regional job opportunities), and in most cases, there is no coordination among the different corporations. As no corporation can initiate global development processes and social orders on its own, corporations do not really fully exploit their potential for governance. Corporations can bear this responsibility for the framework of governance only together. They seem not to be used to cooperating with other corporations in the area of global politics — in mutual interest — while still remaining rivals in markets.

3. Many politicians and NGOs make it harder for corporations to enter into their political role by reproaching them of having no democratic legitimacy. Two things can be said in response to this: First, practically none of the NGOs can be said to be legitimised democratically in this sense. Second, it is necessary to rethink the core concept of ‘democracy’. Of course, corporations are not elected in a democratic way, but the people, by way of constitution, has given them an active role in fulfilling entrepreneurial tasks, because corporations can fulfil this role better than other actors. The same can be said of NGOs. So corporations should not let themselves be put off by this argument, but should rather develop and communicate a sustainable conception of democracy.

4. Transparency and communication are two central elements of democracy. Corporations are at the moment only beginning to live up to these elements. And chief executives are usually not trained for this task. In Germany, there are still only very few departments of economics which teach competence in business ethics.

Corporations have thus rather stumbled into bearing responsibility for the social order of global society. But why should they accept this task, which is laden with so many difficulties? Maybe they should rather resist this task, because it has to be fulfilled by other actors?

The Question of Implementation

In philosophy there have, since Greek antiquity, always been two paradigmatic answers to the question of how to implement normative claims: Insight and interests. Both these answers recur in the ethical discussion about globalisation, mostly in certain mixtures, but sometimes also in ‘pure’ form:

1. If insight is to be the key to implementation, this can be called a cognitivist position, broadly speaking. This view has been held by Plato and Kant, and in contemporary theory by J. Rawls, J. Habermas, H. Jonas – and, with regard to globalisation, by Höffe (1999). In Höffe’s argument, this view recurs with exceptional clarity:

For Höffe, human beings enter society with certain fundamental, pre-social rights, i.e. human rights. Human rights need to be guaranteed by the state with its monopoly on the use of force. In a second step, the state is characterised as a ‘qualified democracy,’ which implies social policy. As the problems on the level of global society retain the same structure as those within the nation state, i.e. a prisoners’ dilemma structure, a ‘global state’ (‘Weltstaat’) must be erected. This global state has – in Höffe’s words – to be so powerful as to be able to stand up to multinational corporations and their strategic alliances as well as against the national interests of great powers, even superpowers.4

Höffe calls this global state a ‘legal-moral commitment’ (‘rechtsmoralische Verpflichtung’). The question of a state’s interests is neglected. Rather, Höffe, reminding us of J.-J. Rousseau and the ‘sober moralist’ Kant, categorically states that an ‘ought without compromise’ like justice is ‘not spoilt by bad reality’. Rather, reality has to justify itself before the ought, and not the ought before reality.5

This model is made up of the following central elements:

• What is legal, can be known in advance, in theory (cognitivism).

• However, unlike others, Höffe does not lapse into moralising at this point.

• Rather, he calls for the state, notably the global state, as an external power to enforce what has been identified as just.

• His key aim is to ‘tame’ interests by means of government power, and not to find a way how interests may cooperate.

These elements, plus the common moralising rhetoric which Höffe avoids, can be found in all conceptions of cognitivist ethics, in one mixture or another. The common idea is to have philosophy find out what is right and what is just, and then enforce this against interests, either by appealing to insight or by calling for legal power.

2. As opposed to Höffe, an order ethics approach tries to implement ethical norms by means of interests. Actors comply with norms from self-interest. Their interests face up to scarce resources, and they conflict many times, of course. But still, actors also share common interests: They are interested in a social order. This problem can be modelled as a dilemma structure which can only be resolved by establishing a social order. This is the classic argument of social contract theory from Hobbes to Buchanan, which refrains from formulating normative prerequisites for a social order. Rather, social contract theory analyses the systematic conditions for complying with rules, and these conditions can only be non-normative, individual expectations of advantages and benefits. In other words: the process of choosing rules for global society cannot be seen within a framework of a) how to comply with rules, and especially not of b) pre-established norms, as those cognitivist approaches try.

But why might corporations be interested – or develop an interest in – the shaping of a social order for global society?

Corporations cannot be expected to make ‘sacrifices,’ but they can invest – in real or human capital, but also in the social order as a prerequisite of long-run benefit. At the moment, the lack of an adequate social order for global society still keeps two-thirds of humanity, four billion people, outside of productive interactions. An economist regards these four billion people as assets, as factors which can bring about wealth and prosperity, if conditions are set adequately. At the moment, these four billion people are regarded rather as a threat to the prosperity of the industrial nations. This way of thinking is clearly based in a zero sum paradigm, and it leads to political reactions which eventually make those people threats. It is in the corporations’ vital interest to develop this potential, not by making ‘sacrifices,’ but by investing in the fundamental conditions of sustainable profits: the social order. This is a mutually beneficial activity, for the ‘poor’ as well as for the ‘rich,’ thus also for the corporations themselves.

It is therefore in the interest of corporations to open up potentials which currently lie idle. Managers are not only assigned to make profits on already existing markets, but in particular to open up new markets, to develop them, even to create them. Those who do not jump in now will have to make much greater efforts later to break into those markets. And these strategies can be argued for from the shareholders’ view, as they can be expected to eventually lead to higher profits. Via stock prices, these expectations can already be capitalised now.

From a philosophical standpoint, the structure of this approach is quite interesting: There is no call for sacrifice, for redistribution or for taming the corporations’ striving for profits. Rather, this striving for profits is to be unleashed. What is to be overcome, is the latent Manichaeism inherent in many conceptions of ethics and business ethics, which invariably condemns the striving for profits as the root of all evil. In the conception advocated here, the social order constrains the options for action not by external authorities, but from self-interest itself: Constraining the options for action produces more and better options in interactions for each individual, i.e. more individual freedom.

One major weakness of the Global Compact, in current opinion, is that the cooperation of corporations is voluntary and not enforced by the state. However, I would like to argue in favour of voluntary measures, by including in my argument the third major international player: NGOs.

Keeping measures voluntary guarantees that each player has to take into account the interests of other players, if he wants to realise his own ones. A voluntary process tends to safeguard the consideration of everyone’s interest. Of course, no group will cooperate for any price, but only, if their vital and publicly justifiable interests are being accepted. The political authorities must respect the interests of corporations and NGOs, the NGOs must develop an understanding for governments and corporations, and the corporations themselves must be sensitised for political processes and the social and ecological consequences of their decisions.

This ‘must’ might be misinterpreted: However, it is not a moral ‘must,’ but a ‘must’ derived from the sustainable, long-run interests of the three players. For all three, there are in...

Table of contents

• Cover Page
• Half Title page
• Law, Ethics and Economics
• Title Page
• Copyright Page
• Contents
• List of Contributors
• Part I Globalisation: Concepts and Problems
• Part II Globalisation, Business and Corporate Governance
• Part III Global Justice
• Part IV Globalisation, Philosophy and Culture
• Name Index
• Subject Index