Friday, March 26, 2010

Business ethics in 2010

Well it's been in gestation for a while, but we're pleased to announce that the 3rd edition of our business ethics textbook has been published today by Oxford University Press. Once more subtitled 'Managing corporate citizenship and sustainability in the age of globalization' it's a continuation of our efforts to provide an integrated approach to the subject of business ethics and corporate responsibility ... and this time we've gone for a fully international perspective. Or as we nicknamed it during development, a "rest-of-the-world perspective"  - i.e. one that offers a real alternative to a subject still dominated by parochial US textbooks.

This is the pre-publication proof of the front cover, showing an Angolan fruit seller supported by a microfinance scheme in Luanda. We thought it not only helped to highlight this global orientation but also worked well with a new case on microfinance we feature in the text titled "Targeting the poor with microfinance: hype or hope for poverty reduction?" It's a positive picture about an exciting development in business ethics ... but as you'd expect from Crane and Matten, the case itself eschews any easy answers.

Along with microfinance, we've got quite a bit of new content on social enterprise in general, and specifically on the ethical challenges of poverty reduction, affordable water access, and other development issues. Also new to the edition is extended analysis of the financial crisis, including new sections on the ethics of rating agencies and hedge fund ethics. No great surprises there we suppose, given the timing, but it was fun to put together a book that managed to include the intricacies of the ethics of finance along with content on ethcial sex shops, ethics in modelling, and the search for a treatment for "female sexual dysfunction" among others. As you might imagine we enjoyed researching some of these new parts.

There's also a whole lot of other new stuff in there, which you can read about on the publisher website and on the book's online resource centre which will be launched any day now. The biggest change in format though, apart from the extension of our international perspective, is a new feature called "Ethics online". This talks about some of the ways that digital technologies and new social media are reshaping business ethics practice, for example through CSR blogs, on-line diversity forums, ethical consumption sites, and web-based tools to assess your carbon footprint. This is something that nine years ago, when we started writing the first edition, we didn't even consider remarking on as a phenomenon in itself, but which now is pretty much a central part of the business ethics world.

Well anyway, that's probably enough from us talking about the new book (like all new parents, we can get a little over indulgent in praising our perfect little baby). But if you have any comments about it, good or bad, do let us know. Feedback of all kinds, is always welcome. And who knows, before we know it, we'll probably be worrying about all its little imperfections and planning a fourth edition. Roll on 2013!

Thursday, March 18, 2010

Corporate social entrepreneurship

Today we have another in our occasional series of guest bloggers. This time up its Christine Hemingway, a visiting fellow at the International Centre for Corporate Social Responsibility, Nottingham University. Here she is talking about what she calls corporate social entrepreneurship

In the wake of the global economic crisis caused by financial irregularities and lapses in corporate governance and personal integrity, part of the fall-out has been a big kick up the backside for business ethics. There is renewed vigour which has boosted momentum behind the growing CSR movement and the need for ethical business, with the clarion call: “How can we prevent this from happening again?” So I was really interested to see the idea of the B companies in the last post: a practical approach to positioning the corporation as social enterprise, which involves stakeholder governance, backed by legal certification.

This looks like a great step forward. But there isn’t a magic solution and so we cannot expect a ‘one size fits all’ systemic answer in our attempts to prevent corporate irresponsibility. I’m sure the folks at B-Lab would be quick to agree that it’s the people as well as the systems that are important. It’s people who take their decisions when going about their daily activities at work - some with potentially harmful consequences. And even with the most efficient, slickest of systems, you cannot legislate for the individual actions and decisions made by all the employees who work across the supply chain. And as Crane and Matten pointed out [re the Toyota case]: whilst failings in corporate governance continue to happen, they’re not perpetrated by a band of Machiavellian Dr Evils out to screw the innocent consumer.

Many of the cases of bad management we keep hearing about are perpetrated by people who feel that they ought not to speak up, because ultimately it’s not their responsibility (surely the boss knows best?). Or, by people who think that a small deception is maybe all part of the ‘game’ of business, which is to maximise profitability. I’m talking about the very many people at work for whom business ethics is simply just not on their radar. Even if they have heard of it, it might be a nice idea “but it’s just not applicable here.” Hence we might say that it’s not highly valued by them, because they don’t see it as necessary. So we continue to see these lapses and it’s a continuing cycle.

Yet, there are other employees who do value CSR. Like the sustainability managers that were interviewed and discussed in the Visser and Crane paper on change agents: “devoting their time and energies to addressing social, environmental and ethical issues.” What’s more, in another recent study that I conducted within the confines of a major FTSE100 listed firm, some employees were found also engaging in these issues – acting as Corporate Social Entrepreneurs - and some of these didn’t even have CSR as part of their formal job role. Eh? Let me explain.

As an ex-corporate manager turned business ethics academic, I felt that there was an imbalance between all the research into the bad decisions and not enough on the socially responsible decisions. I felt that if we could learn more about the personal values underlying CSR, then this would be an excellent starting point from which to build a socially responsible corporate culture. My own experience in business tallied also with some of the academic papers I had read about champions of CSR, and whilst social psychologists have been studying the effects of our personal values on our behaviour for decades, it seemed to me that we needed to know much more about the personal values of corporate employees in order to give us greater insights into CSR.

This was going to be tricky, because the psychologists tell us that we all generally share the same values, such as safety; family and friendships. The difference between us, though, is the different emphasis that we place behind these common values, which results in a more nuanced picture of our different priorities. So, what emerged from this research, were four very general ‘types’ of people.

The ACTIVE Corporate Social Entrepreneurs (CSEs); highly principled moral leaders, who enlarge their own role to encompass a socially responsible agenda at work. They demonstrate both awareness of ethical issues and involvement in them and the courage to speak out at work. They are characterised by ‘collectivistic’ values, e.g., helpfulness; caring for others’ welfare; of equality and treating people fairly. They are also characterised by the independence and risk-taking commonly associated with entrepreneurship.

A second group, the CONCEALED Corporate Social Entrepreneurs – in common with the ACTIVES - express their passionate belief in their personal, moral obligation to society. However, the difference between these two types of CSE is their perception of a supportive corporate culture and the ensuing limits regarding the extent of their SR activity at work. This results in some activities being confined to outside of work and also produces frustrations and some degree of job dissatisfaction.

In contrast,I also found CONFORMIST and DISASSOCIATED corporate employees, who support the prevailing stereotype of ethics not being on the radar. The key distinction with the previous two groups, however, is that these informants place greatest emphasis on their ‘individualistic’ values regarding their own capability and career ambition and the importance of their families and home life. And whilst the DISASSOCIATED dismiss the strategic relevance of CSR to the firm’s success: a number of CONFORMISTS have formal SR job roles and express the benefits of their SR activity as good for their career (because it was encouraged by the company) and also the personal satisfaction associated with SR activity.

All this helps add a psychological perspective to the study of business ethics in practice. For some it may be reminiscent of the eminent psychologist, Abraham Maslow. He is well-known to students of business and management as the guru who invented the ‘Hierarchy of Needs’, but he also wrote about our personal values. This, in a roundabout way brings us back to the ‘B’ companies. In their context, the ‘B’ stands for ‘Benefit’. Yet it echoes Maslow’s ideas regarding what he called people with ‘B-Cognitions’ (the B stood for ‘being’ as opposed to ‘having’), i.e. motivation regarding the welfare of others in order to become, as one book reviewer put it, “the best version of yourself” (see ‘The Farther Reaches of Human Nature’ 1975). So, too, these B companies striving to be the best by ‘doing the right thing’ and achieving true sustainability, in the fully inclusive sense. Consequently, we’re reminded that it’s personal responsibility that has to underpin the governance systems in order to develop CSR.

Photo by punk_drizzle. Reproduced under Creative Commons license

Thursday, March 11, 2010

Institutionalizing CSR through B Corporations

Spied over at CSRwire today was this interesting little video from CNN on the B Corporation phenomenon. For those who haven't run into this before (and we have to admit that included us until recently), B Corporations are, in the words of their inventors, "a new type of corporation which uses the power of business to solve social and environmental problems."

Hmmm, doesn't sound very new to us. Sounds suspiciously like CSR, or maybe social enterprise, or social business as Muhammad Yunus likes to call it. Well yes, in a way B Corporations are pretty much like these existing forms, except there are a couple of new twists. And it's these new features which account for some of the interest - both good and bad - that B Corps are beginning to stir up.

The first big difference is that B-Corporations are certified. As a company. To a single set of standards. Not a ranking. Not a product or site certification. A full company certification. Yes, you heard it right. This is a certification that once and for all seeks to distinguish the good companies from the bad. Or as the B Corporation website puts it, to "distinguish good companies from good marketing" 

Second, and this is where things start to get really interesting, B Corps are required to "amend [their] corporate governing documents to incorporate the interests of employees, community and the environment." Shareholder primacy out. Stakeholder governance in:

"The B Corporation legal framework specifically expands the responsibilities of the corporation to include these stakeholder interests.  By redefining the legal purpose of the company this framework makes it easier for good businesses to make decisions that support their social or environmental missions.  The framework also allows them to attract mission-aligned capital and maintain mission as they grow, scale, and even plan succession.  We believe that by creating B Corporations within existing corporate law we are providing a market-driven solution today for good businesses."
This is a novel idea. Working within the legal framework of corporate law to redefine the purpose of a company on an individual basis. So, the logic goes, even if the company draws in outside investment in order to grow, the founding ideals can be institutionalised and protected. Well that's the plan. As far as we know, the legal status hasn't been tested yet in the courts, but with an amended charter, signed off by the board, and approved by shareholders/members/partners, it looks pretty compelling.

B Lab, the nonprofit behind the initiative is lobbying for fuller legal recognition of B Corporations and has pushed for legislative changes in a number of US states, with votes on the proposals coming up sometime this year in several jurisdictions. The purpose is to establish some legal recognition for an enterprise that stands somewhere between a company and a nonprofit. Yes, a social enterprise, if you will.

From our point of view, the initiative is a much needed one - especially in a country like the US which, as with many others, doesn't yet have formal recognition for alternative organizations of this type. B Lab's rating system, though, however good it might be, is bound to have its critics. In our view, it is just too ambitious to try and rank a whole company in this way. A more focused approach that simply started with whether the product or service had a net social benefit would have been better. However, the legal twist is an exciting development for the CSR movement which too often gets bogged down in the shareholder-stakeholder battle. No surprise then that more than 285 US companies acrosss 30 or so industries have already joined the initiative and changed their articles of incorporation or partnership/membership agreement. We'll be watching closely to see how the courts respond. And if you want to hear more about the companies involved, here's another short video from the Little Films group on B Corporations.