Everyones business

IN the wake of the global financial crisis and the exposes of many corporate frauds in recent times, there is a renewed interest in the practice of ethics. Quite rightly, people identify corporate greed as responsible for this sad state of affairs and suggest a number of regulatory measures. Some of these regulations are internal and have come up from the corporate world. Companies realise that when they focus only on maximising profit, without paying attention to how they achieve profit and what direct or indirect harm their businesses have on the environment and society, they short-circuit their own reputation and long-term growth.

Also, external regulations and monitoring by government and independent agencies are thought to be essential since uncontrolled market forces tend to favour the strong and the rich rather than the weak and the poor. Yet, everyone realises that mere regulations, without the accompaniment of personal integrity, will not take us very far. Governance and control will work effectively when individuals are guided by values and convictions. Selfish and dishonest individuals will look for ways to undermine the system for personal advantages.

The corporate worlds enthusiasm for ethics is a cause for some optimism. But if we take a close look at the direction it is taking and the intention that is driving most of these efforts to align ethics and business practices, there is a need to pause, introspect and question. Where does the new allegiance to ethics come from? Why are companies now interested in projecting themselves as ethical organisations? Is it social pressure? Is it because investors, employees and customers have become ethically conscious and are closely watching? Or, does it originate from a more fundamental ethical vision that all economic and business activities should contribute to the quality of life of every citizen?

Understandably, academic circles have also realised the importance of moral education, and therefore, many leading universities, business schools and management institutes in India and abroad have incorporated, partially or fully, subjects such as Business Ethics, Corporate Governance and Corporate Social Responsibility into executive training and the MBA curriculum. The idea behind this is that although values are often nurtured in the family and imbibed through proper upbringing, a systematic treatment of ethical issues in the business environment will enable future leaders to make morally better decisions.

Simultaneously, there is also a vast amount of new literature generated in the areas of business ethics. Representative examples of such books are Leigh Hafreys The Story of Success: Five Steps to Mastering Ethics in Business and Wes Cantrell and James Lucas High-Performance Ethics: 10 Timeless Principles for Next-Generation Leadership. These and other similar books highlight the empirical connection between ethical behaviour and business success and how it can be put to work to rejuvenate companies and careers. Following from this premise, these pragmatic and result-oriented writings tell managers in the actual field of business how to make ethical decisions that lead to highly successful business practices. They provide tips and techniques on how to lead with integrity and to resist the pressure to compromise ethical standards.

Again, what comes out in most of these is an air of managerialism a belief that moral sentiments can be harnessed and optimised by applying general managerial skills and techniques. A managerial mindset assumes that what is fundamental to a business organisation is profit maximisation, and ethics are instrumentally useful inasmuch as they contribute to this goal. For example, Cantrell and Lucas write: So lets get right down to it: What can something as intangible and hard to measure as ethics possibly to do with something as real-world and relentlessly measured as high performance? Sure, ethics might make you a kinder, gentler leader, but how can they make any difference in the performance and results you are expected to deliver in a hard-boiled world?

Furthermore, managerialism in many instances advocates charity ethics for the reason that companies should give part of their profit (typically around 1 per cent or less in most companies) to charitable purposes. But this is often done on the basis of a strict separation between profit-making and profit-spending. While profit maximisation continues to be the driving force for profit-making, the concern of doing something ethical comes as an after-thought, only at the subsequent stage of profit-spending.

Peter Ulrichs Integrative Economic Ethics, the English translation of the original German work currently in its fourth edition, is a different work in economic and business ethics. It resists the lure of instrumentalism, and refuses to ask the banal question that others are so prompt in asking: Does ethics pay and contribute to the bottom line of business? In fact, it stands out among the rest of the literature in contemporary business ethics discussions at least for three reasons.

First, it starts from a moral view point and upholds the primacy of ethics over economic rationality. Integrative economic ethics, says Ulrich, wishes to subject the entire normative structure of the understanding of rational economic activity to an unconditional ethical reflection. Ulrich therefore calls for the evaluation of all economic and business activities by their capacity to contribute to human well-being and advancement. Hence, economics that does not positively serve life for every citizen cannot be justified. He says: Economic activity based on division of labour is a societal process designed to satisfy the human need to preserve and sustain the quality of life. It seems to lie in the nature of things that a rational social form of economic activity must be oriented towards the service of life, if it is to be meaningful.

As a result, Ulrichs integrative economic ethics provide a strong critique of what he calls economism that manifests itself in the development of a self-sufficient economic rationality, the representation of cost-benefit thinking as autonomous and absolute, and the elevation of the market logic to normative primacy. As ethical commitments are integral to individual choices of economic actors, Ulrich points out that the moral point of view requires the affirmation of a different socio-economic rationality and the rejection of self-sufficient economic rationality.

Second, Ulrich puts forth a convincing case for civilising the market economy. The motivation for civilising the market comes from the negative social consequences that market and market institutions generate. As Ulrich notes, the way in which the market forces operate in the current scenario condemns some people to unemployment and subjects others who are still in the labour market to increasingly hard pressure to perform at work. In this way it incessantly improves productivity or what we regard as productivity, yet it still fails to provide everyone with what is minimally necessary for a life worthy of a human being at a national, let alone at a global, level. This does not mean that the market economy needs to be abandoned, but rather it must be regulated and purified in order to make it work in favour of human advancement.

Questioning the acceptability of this development, says Ulrich, by no means implies a rejection of the market economy but only of its exaggeration towards a total market society. Not markets but citizens finally deserve to be free in modern society. The market economy must, therefore, be civilised in a literal sense.

Third, while the standard approaches treat economic and business ethics as independent, for Ulrich they are only a subset of a larger domain of political legitimacy. It is one of the distinctive marks of the integrative approach that it understands economic ethics as part of a political ethics which embeds a civilised market economy in a well-ordered society of free citizens. In contrast, a great part of the international literature on business and economic ethics pays scant attention to the advanced and exciting political-philosophical discussion on foundational issues and even undercuts it simultaneously.

Consequently, individuals and collective economic actors such as companies and business enterprises should not be thought of as private actors seeking to further their narrow self-interest. Instead, all economic actors are always part of a larger social and political arrangement. They must be answerable and held responsible for the decisions and practices that help or hamper the creation and preservation of the public goods of a well-ordered society.

On the basis of these fundamental insights, Ulrich develops the treatise systematically into four parts, one leading to another in succession. Part I concentrates on the foundations of the moral point of view. It relies and elaborates on the universal phenomenon of human morality embodied in the belief that all human beings of reasonably sound personality are capable of moral judgments and direct their lives according to moral dictates even though they do not practice that at every instance and in every situation.

Part II provides a critique of the common view that economic life necessarily and inherently requires competition among various economic actors. It explains in detail how such economic determinism is a product of complex developments in Western social history rather than having any normative basis. Moreover, there is no obligation to adopt this view uncritically since it provides only a partial picture of human beings and human behaviour. Human beings who compete are also capable of cooperating and committing themselves to other-oriented goals.

Part III focusses on the question of meaning and legitimation. The question of meaning concerns the purpose of economic activity. While economic determinism reduces this purpose to market value and maximisation of profit, Ulrichs integrative approach insists on the larger purpose of serving life and improving its quality. The question of legitimation, on the other hand, emphasises the need to justify economic agents and their activities in the context of a social and political community. Here, Ulrich deploys German philosopher Jurgen Habermas idea of modern society as a lifeworld, where life is lived according to publicly deliberated norms that everyone recognises as legitimate. This stands in contrast to the instrumentalist view of modern society where society is a network of subsystems designed to accomplish functional goals.

Part IV is dedicated to the institutionalisation of integrative ethics. For this purpose, citizens, states regulatory bodies and corporations are identified as the appropriate sites (topos). As political and economic actors, citizens should be guaranteed certain rights of equal standing in order to carry out their life plans and engage in deliberation with others about the legitimacy of social arrangements. At the same time, they have responsibilities as employees, consumers and investors to make decisions that are in coherence with the commonly agreed social norms. Through legal frameworks and regulatory bodies, respect for morality in economic life is enforced so as to make people answerable to the values identified by citizens as a collective body. Companies and business enterprises should facilitate the realisation of publicly deliberated moral norms by devising their own strategies to adhere to moral standards while pursuing profit.

As Ulrichs book is rather lengthy and encyclopaedic, and is written by a specialist intended for specialists in the field, it may not be an easy reading for those who are not familiar with the authors, arguments and discussions in contemporary continental Europe. Wherever possible, the author attempts to give parallel references from Anglo-Saxon literature, but this does not change very much its predominantly continental character. Nevertheless, the real merit of the book lies in daring to think differently and propound an approach that challenges the hegemony of the instrumentalist approach so prevalent in todays academic and business world. For some time to come, the book will exert a considerable influence on the future direction of study and research for attempting to ground business ethics, not just on the economic rationality of market value and profit-making but on a more solid foundation of public goods, regulated market, civic rationality and political legitimacy.

To make it more transparent and relevant, Ulrichs admirable treatise perhaps requires a critical extension and deepening. Is it not more appropriate to say that a managerial and instrumentalist outlook towards values and ethics is symptomatic of a deeper malaise not just in the business community but also in society as a whole? It is actually a disorientation that happens when people mix up the ends and means. People pursue and accumulate wealth as if it is the end of human life, while it is only a means. Already in the fourth century B.C., Aristotle, in Nicomachean Ethics, points this out: As for the life of the businessman, it does not give him much freedom of action. Besides, wealth is obviously not the good we are seeking, because it serves only as a means for getting something else.

Wealth or income is obviously useful in getting many things we might want in life, but unfortunately it cannot get all things that matter. Moreover, there are also goods in life such as friendship, respect, excellence, integrity and happiness, in matters relating to which wealth or income plays very little role. It is in this context that Ulrichs plea to revive the original purpose of business in service of life needs to be taken seriously. Any business enterprise that has its eye only on maximising wealth and profit for its shareholders and in the bargain turns a blind eye to its responsibility of contributing to peoples quality of life loses its moral and social legitimacy to exist and operate.

Mahatma Gandhis principle of trusteeship embodies this larger purpose of business. The principle of trusteeship insists that we are not owners of wealth, whether we have acquired it by legacy or by trade and industry; we are merely its caretakers and administrators for the welfare of the community. On April 7, 1931, speaking at the fourth annual session of the Federation of Indian Chambers of Commerce and Industry, Gandhi said: I cannot forget the services rendered by the commercial class, but I want you to make Congress your own and we would willingly surrender the reins to you. The work can be better done by you. But if you decide to assume the reins, you can do so only on one condition. You should regard yourselves as trustees and servants of the poor. Your commerce must be regulated for the benefit of the toiling millions.

Also, the six key ideas that circumscribe the concept of trusteeship as articulated by Gandhi envisage a wider vision and a deeper bond between business and society: (i) trusteeship provides a means of transforming the present capitalist order of society into an egalitarian one; (ii) trusteeship does not recognise any right of private ownership of property except so far as it may be permitted by society for its own welfare; (iii) trusteeship allows for legislative regulation of the ownership and use of wealth; (iv) under state-regulated trusteeship, an individual will not be free to hold or use his wealth for selfish satisfaction or in disregard of the interests of society; (v) society should not only fix the decent minimum living wage but also put a limit for the maximum income; and (vi) under the trusteeship regime, the character of production will be determined by social necessity and not by personal whim or greed.

Even a modest attempt to realise some of these ideas will go a long way in building up a more humane and just society. It will also refine the moral sentiments of citizens, particularly the future generations, towards a more community-oriented living.

With globalisation, global market and many global communication networks, there is one important problem, though, that lurks behind any attempt to ground business ethics in civic rationality, public goods and political legitimation. The process of accountability, social consensus and political legitimacy of economic actors typically operate within the circumscription of a political community of citizens belonging to a particular country. But if we consider the multinational companies, they conduct their operations not just in their home country but in many countries across the globe. Moreover, the amount of economic power and political clout they wield are enormous and can in many cases even manipulate and take over the political process in many countries. When this happens, neither the citizens nor their governments regulatory bodies have sufficient power to hold these global actors accountable.

Well, global problems need global solutions, we may say. Hence, we may go about resolving this by extending the legitimation process to the global level. People in the world are not just citizens of their respective countries Indians, Americans, Swiss or Sudanese but are also global citizens of a globalised world.

This recognition calls for a global international community to which multinational companies need to justify their existence and operation. We may also think of the already existing mechanisms and resources such as the human rights movement and the United Nations Global Compact programme which serve as some measure to evaluate the environmental and social impact of multinational corporations.

But the reality until now has been that these resources are laudable initiatives and goals which continue to remain in the moral domain. We can hope for more progress only when these moral resources are also translated into a matching global legal framework and global political institutions that will exercise effective power and regulation.