Business Ethics, Business Philosophy & Corporate Philosophy 2nd draft, 15 June 2006

[English translation of chapter 5.6 of forestry ethics:]

5.6 Summary - and development of general business-ethics

This chapter is new (rest dates from September 2003) based and based on some intense correspondence with my colleague and friend Geoffrey Klempner in Sheffield:

• Pathways to Philosophy: http://www.philosophypathways.com  
• Philosophos Knowledge Base: http://www.philosophos.com &  
• International Society for Philosophers: http://www.isfp.co.uk

Basic ethical priciples of action, so of management, trade and business:

1. The aim of action must be honest, that means that action should not directly aim at bad effects.
2. The type of action has to be good and permitted
3. Negative side-effects of action do only happen accidentally, they are not used as means for certain ends.
4. The actor has a sufficiently serious reason for action

Comments:

Purpose of business:

• The purpose of an enterprise is, to make profits - so says the business
• The purpose of an enterprise is, from the point of view of employees, to offer good working places with decent salaries.
• The purpose of an enterprise is, from the point of view of the community or the state, where the enterprise is located, to create as many working places as possible and to produce as much direct and indirect tax-income as possible

Reason for business activities:

• Guarantee the existence: Everybody has to live from something ....
• Secure and multiply the capital investment: s. shareholder value
• The quest for power and prestige

Type of action:

• The scientific "Wertfreiheit" (there seems to be no fitting English translation) is neither for engineers, technicians nor business people possible
• Business is not a spiritual activity, but a struggle, somewhere in between war and game. So "truth" is rather secondary. At the first place are rather, as with war, games and love: Cunning and prank, strategy and tactics.

Ethics under the condition of modern market economy has to fulfill three conditions:

1. The ethical orientation towards principles has to be replaced by a problem-orientation
2. What's often overlooked is, that value-pluralism is creating often unbridgeable differences in values. So its built not on consensus but on dissent - and needs models to deal with those processes
3. The orientation at consequences of technological and economic action gets priority. With other words: Its turning into a question of character, to think in terms of ethical responsibility.

Problems:

1. Limitation to one target: The focus on one or a few functions - the limitation to the core competency - is almost always an advantage. (s. Cools/Van Prag) That is surely true - but causes a lot of problems for all important functions that are not of interest to the business:
   1. Even if the is no excessive exploitation, the economical valuing forces to discount future events, be they goods or damages.
2. Use of cunning and prank, strategy and tactics - instead of truth and convincing arguments
3. Player's ethics - not religious ethics!
4. The limited freedom of business: That is not only true for business, but for all people. Günther Ropohl's central thesis is: Complex and highly developed risk-societies limit man in his use of freedom so much, that only very small room for ethical engagement of individuals is left. Man is bereft of his capacity to act free and responsible. Ethical "though shoulds" would have to be preceded by a factual ability. That means that business-ethics can't demand the impossible from the companies.

Solutions:

1. Enlarge freedom, choice and chances for everyone

   Open dialogue on confronting values - transparent, so not "cunning" engagement  in the development of political and legal norms. The development of our society is the longer the more not shaped by people, not even by politics, but by economically induced factual forces [Sachzwänge] - and the expertocracy. Transparency, and, especially in democracies, a certain right of participation, is the first principle for business-ethics .

2. Duty to produce meaningful (technical) inventions and sustainable solutions - serving the public.
3. To be aware of interactions in and between technical, social, economic and ecological systems - and their effects on and in the future.

Avoid consequences of actions that lead to forced reactions and the limitation of self-responsible action.

Act so, that an optimal condition results under the given preconditions.

4. Orientation at principles of general moral responsibility and respect towards legal norms and rights
5. Engagement in education and raising of common knowledge on the economy
6. [Respect for truth] In brackets, as here it seems to demand to much from business, that is obviously dependent on cunning - in spite of the fact, that business demands precisely that as compulsory from journalists [... except a deviation is in its advantage]

Martin Herzog, Dipl. Ing. ETH. 14.6.06

5.6.1 The sluggish take off of corporate social responsibility (CSR):

Corporate Social Responsibility should regulate all matters, that don't find their place in accounting

Business ethics is not really a new topic, but flourishing (especially for consultants) since many years. Among the first that did not only demand profits and rents, but asked companies to assume their social responsibility, was the Swiss Banker Alfred Sarasin from Basle. The main reason for business to deal with that demand was the impression they make on the public. Companies are strongly observed by the public eye, especially what concerns quality, prices, customer services, fairness towards co-competitors, dealing with public expectations (working places, environmental protection, tax evasion, relation with countries that do not recognize human rights and workers rights).

Because CSR, opposite to the classical rules of business, does deal with things, that do not directly bring profits, because the realm of this things is boundless, philosophers should not demand the impossible from business and force them into a jacket, that does not leave them enough freedom to act, so that the will have to get rid of it.

That there is so little move into a positive direction is favored by the fact, that it is much cheaper to produce the right image by cunning communication officers -. than to change things. at the wef of 2002 80% of the participants taught first about image improvement, hearing the expression CSR. That is so, in spite of constant blabber of the responsible persons about the truth, reliability and integrity of their communication.

Besides the image, csr can really help to make real profits:

• The communication of values may attract leaders, what lowers the costs of personnel change for 2% (IBM-Manager Bob Willard)
• Applying eco-efficiency you may safe easily some 20% of water and energy costs
• Because customers prefer to buy from social enterprises, the turnaround might rise for at least 5 %
• So a total increase of profitability of 38%

Benchmarks for the success of sustainable enterprises are the FTSE4good (well, bad luck, this site is showing that self-commitment does not work, and how all those nice labels are used for cheating. Here the official website) and the dow jones sustainability index

Engaged in the promotion of social responsibility are e.g:

• fair trade (here CH, available for most countries, do:)- claro
• Philias
• Coop accepted for their textiles the 8 core demands of ILO:
  1. voluntary occupation - no compulsory work. Don't think immediately about China or children's work, but as well about the type of "community work" favored by many right wing politicians. Often this is done under massif exertion, in spite of the fact, that the targeted people can't be blamed for the fact, that the job market prefers to do without them.
  2. no discrimination
  3. prohibition of children's work
  4. payment of salaries that are sufficient to guarantee a decent existence
  5. no over-prolonged work
  6. obligatory tariff discussions
  7. humane working conditions
  8. regulated occupation conditions
• UN Principles for responsible investment: -  List of green social and ethical funds
• UN Global Compact: The ten commandments, sorry, principles

  1. Article 1. Universal declarations of human rights:

     All human beings are born free and equal in dignity and rights. They are endowed with reason and conscience and should act towards one another in a spirit of brotherhood.

• Global Reporting Initiative: GRI's vision is that reporting on economic, environmental, and social performance by all organizations is as routine and comparable as financial reporting.
• Social Accountability International
• http://www.accountability.org.uk/
• Actares, Shareholders for a sustainable economy
  • assistance to and propagation of actions of responsible stockholders
  • contributions to the development of an economy, that deals carefully with people and environment, as stipulated in the charta
• World Business Council for Sustainable Development
• csr Europe
• Netzwerk für Umwelt und Management - 300 Schweizer Unternehmen ((german)

  • OECD-Leitsätze für multinationale Unternehmen (german)

• More Links

Research in Switzerland

• ELDIS Database
• Institut für Wirtschaft und Oekologie St. Gallen
• Center for corporate responsibility and sustainability, Zurich
• Center for sustainability,
• Institut für nachhaltiges Management
• ...

Research elsewhere

• International Corporate Citizenship Research Network - with more links, worldwide
• International center for corporate social responsibility, Nottingham, offers things, that are most often neglected in European approaches, as community involvement
• http://www.corporate-citizenship.co.uk/ do: business impact, community relations
• ...

Critique of CSR

• Economist: Clive Crook, Dep. Editor: The good company:

In spite of being a crooked business paper and not the kind of paper I like to read, it mentions several problems of csr, that should be taken serious. If you tried a few of the links above, you will have noticed, that mountains of bits and papers have been created on that subject. But if you return to your newspaper, you too might ask yourself: Well - if so many people invest their time in that thing, why is the situation still as it is? The answer of Crook (not as crooked as it sounds), shows most of the problems of that concept:

Today corporate social responsibility, if it is nothing else, is the tribute that capitalism everywhere pays to virtue. ... Corporate social responsibility is now an industry in its own right, and a flourishing profession as well. Consultancies have sprung up to advise companies on how to do CSR, and how to let it be known that they are doing it.  ..The winners, oddly enough, are disappointed. They are starting to suspect that they have been conned. Civil-society advocates of CSR increasingly accuse firms of merely paying lip-service to the idea of good corporate citizenship. Firms are still mainly interested in making money. ... When commercial interests and broader social welfare collide, profit comes first. ...The 2004 Giving List, published by Britain's Guardian newspaper, showed that the charitable contributions of FTSE 100 companies (including gifts in kind, staff time devoted to charitable causes and related management costs) averaged just 0.97% of pre-tax profits. ...But for most conventionally organised public companies—which means almost all of the big ones—CSR is little more than a cosmetic treatment.

There is another danger too: namely, that CSR will distract attention from genuine problems of business ethics that do need to be addressed.

To improve capitalism, you first need to understand it. The thinking behind CSR does not meet that test.

Comments - and a step further to

6. Business Philosophy & Corporate Philosophy

We see immediately, in most cases probably not later than at point 2, that the old engineers ethics is defunct, gone, untenable: Meaningful inventions? Sustainable solutions? Serving the public? What a crap! We want to get money! That's why since some 15 years, probably longer, its most often not the engineers that are driving economic development, but strategic management, capital management, sales management, PR-management and so on - with the only target: increase sales, increase turnaround, increse markets, increase profits.

So, as practical philosophy (= Ethics) does not seem to work with business, what about trying some unpractical philosophy?

What is Philosophy?

Philosophy is trying to understand the whole, is looking for meaning and wisdom, not for progress or detailed knowlege. The fundamental law of philosophy is, that nothing, what is of any importance for the common strive for orientation, should evict the philosophical quest for reason and critique.

• Philosophy is theoretical politics  [after Merlau-Ponty]
• To do philosophy means to do politics  [nach Gramsci]
• Philosophy is the methodological tenacious trial, to bring reason into the world. [Horkheimer]

The quest for truth seems nowadays a bit high as aim, and even in the time of the Greek philosophers, truth was only attainable by gods. So two alternatives remained::

1. The academics (stoa) choose from contradictory opinions the one, that seemed most close to truth, that means the one, that looked most reasonable and could be sustained with the best arguments. But they would never declare that truth to THE truth.
2. The sceptics relied on customs and traditions of non-philosophers, what comes close to common sense.

We see clearly, that philosophy can't force anyone to accept a certain kind of truth, what makes it weaker than science .... but most probably more honest.

Where does philosophy (and the truth) come back into the system?

You can fool everybody some times.
You can fool somebody every time.
You can't fool everybody every time!

Here we find the clear limits of strategy and cunning. Both are targeted at precise, well known foes - or partners, in positive cases. The more people get involved, the less precise the focus and the homing of strategies and tactics. Lies and strategies do only work for a short term, until they are understood, their base revealed as futile, what often turns them against the creators (s. Bush and the weapons of mass destruction in Iraq). That ruse and stratagems, like lies, are not based on true knowledge comes out quite rapidly, when the clash on the market of strategies with neutralizing opposite strategies or, what might happen as well, with the truth - and dissolve with a loud "plopp", mostly leaving behind substantial costs.

The best perspective to optimize a whole system and to keep it running - is truth.

THE ideal strategy to create some sustainable consensus - is truth.

- and this are even two reasons, showing where philosophy, , comes back into the game.

... to be continued