Allan Lovell Ethics report.indd

161 Pages·2005·2.04 MB·English

ETHICS IN BUSINESS:
A LITERATURE REVIEW
BY
ALAN LOVELL
Published by
The Institute of Chartered Accountants of Scotland
CA House, 21 Haymarket Yards, Edinburgh EH12 5BH
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First Published 2005
The Institute of Chartered Accountants of Scotland
© 2005
ISBN 1 904574-16-5
This book is published for the Research Committee of
The Institute of Chartered Accountants of Scotland.
The views expressed in this report are those of the author
and do not necessarily represent the views of
the Council of the Institute or the Research Committee.
No responsibility for loss occasioned to any person acting
or refraining from action as a result of any material
in this publication can be accepted by the author or publisher.
All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted, in
any form or by any means, electronic, mechanical, photocopy,
recording or otherwise, without prior permission of the publisher.
Printed and bound in Great Britain
by T J International Ltd
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CONTENTS
Foreword .............................................................................. i
Executive Summary ............................................................... iii
PART A
A CONSIDERATION OF THE HISTORICAL ROOTS OF ETHICS
IN BUSINESS
1. HISTORICAL PERSPECTIVE ............................................. 1
Introduction .......................................................................... 1
Environmental issues .............................................................. 3
Business ethics ....................................................................... 6
Contrasting perspectives on ethics and values ......................... 8
Summary .............................................................................. 11
2. THE SIGNIFICANCE OF ‘THE MARKET’ WITHIN BUSINESS
ETHICS DEBATES ....................................................... 13
Introduction ......................................................................... 13
Objectivism .......................................................................... 14
Negative freedom ................................................................. 18
Distributive justice ............................................................... 20
Summary ............................................................................. 22
3. THE ROLE OF THE ‘INDIVIDUAL’ WITHIN BUSINESS ETHICS .. 25
Introduction ........................................................................ 25
Neo-classical economics ...................................................... 26
The community .................................................................. 27
The new economy ............................................................. 28
Cultural spheres .................................................................. 32
Summary ............................................................................ 39
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CONTENTS
4. THE SIGNIFICANCE OF VALUES AND VIRTUES WITHIN
BUSINESS ETHICS DEBATES ......................................... 41
Introduction ........................................................................ 41
Business as amoral ................................................................ 42
Freedom .............................................................................. 43
Summary ............................................................................. 54
5. RELIGIOUS VALUES AND PRINCIPLES IN THE
BUSINESS ETHICS DEBATE .......................................... 57
Summary ............................................................................ 61
PART B
CONTEMPORARY ISSUES IN ‘ETHICS IN BUSINESS’:
ATTEMPTS TO INFLUENCE THE POWER OF CORPORATIONS
6. CORPORATE SOCIAL RESPONSIBILITY ............................ 63
Attempts to improve ex-post accountability ........................ 72
Summary ............................................................................. 74
7. THE STAKEHOLDER AND SUSTAINABILITY ........................ 75
Stakeholding ........................................................................ 75
Sustainability ....................................................................... 79
Summary ............................................................................ 89
8. THE CORPORATION AS CITIZEN .................................. 91
Summary ............................................................................ 96
9. GOVERNMENT-BUSINESS RELATIONSHIPS ........................ 97
Globalisation ...................................................................... 101
Summary ........................................................................... 106
10. INTER-INSTITUTIONAL CODES OF ETHICS ...................... 107
The UN Global Compact .................................................. 114
Summary ........................................................................... 117
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CONTENTS
11. SOCIAL CONTRACT THEORY AND ITS POSSIBILITIES .......... 119
Hypernorms ...................................................................... 119
Consistent norms ............................................................... 120
Moral Free space ................................................................ 120
Summary ........................................................................... 123
12. CONCLUSION .......................................................... 125
A two-way social contract? ................................................. 127
REFERENCES ................................................................ 129
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FOREWORD
In October 2004 the Research Committee of ICAS published Taking
Ethics to Heart, an investigation into the ethical standing of accountants.
It examined a number of remedies to ensure that appropriate
mechanisms were in place to ensure ‘good’ decision making.
This literature review is the first in a series of three commissioned
literature reviews associated with Taking Ethics to Heart. This review
is published at a time when the ethical standing of accountants and
corporations in the eyes of the general public continues to be an issue
for the profession and the corporate world at large and when regulatory
and professional bodies continue to seek solutions to these problems.
The literature review considers ethics in business from both an
historical and contemporary perspective. The research considers
the impact of globalisation and the respective responsibilities of
corporations, consumers, communities and societies.
Part A of the literature review considers the historical development
of ethics in business covering different geographical philosophical
perspectives and identifies concepts central to an understanding of
business in modern society. These central concepts are considered in
turn and include the role of the market and the individual and the
often conflicting interests and demands of business and the individual.
These are considered in the light of changes in values and beliefs,
including religion, over time.
Part B builds upon this analysis by considering contemporary issues
in ethics in business. The report considers the concept and development
of corporate social responsibility and the vested interests of stakeholders.
The debate as to the extent corporations should be responsible for
the non-economic impacts of their activity continues. The literature
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ii FOREWORD
review then considers how this issue has been taken forward looking
at the corporation as a citizen and the interplay between government
and business. This reviews the power of multi-national corporations
to influence social and political systems and the various codes of ethics
that have been developed by corporations and other bodies.
The conclusions point to the need for business ethicists and
business practitioners to begin debating the issues together. The
issues to be debated include the interplay between possible changes
by corporations to reflect more sustainable practices, the possible
consequential need by consumers to accept higher prices and the role
of governments to equalise prices using taxation and other policies.
The Research Committee of The Institute of Chartered
Accountants of Scotland, through the auspices of the Scottish Chartered
Accountants Trust for Education, has been happy to sponsor this project
and is pleased that the literature review is becoming available at a time
when the subject matter is so topical. The Committee recognises that
the views expressed do not necessarily represent those of ICAS itself,
but hopes that this project will contribute to the current debate on
ethics in business.
David Spence
Convener
Research Committee
December 2005.
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EXECUTIVE SUMMARY
Ethics in business has been an issue for as long as trade and commerce
have taken place. The ‘field’ of business ethics is, however, of more
recent vintage, possibly from around 1920 onwards (De George,
1987).
There is a clear relationship between ‘ethics in business’ and
‘business ethics’ for the latter is at one and the same time, commentator,
critic, philosopher and prophet on the former. This literature review
employs the phrase ‘ethics in business’ in its title, but draws upon various
philosophical and empirical literature sources to identify and discuss
key issues within the field.
Business ethics, is informed by rich and multiple sources including
the literatures of philosophy (ethical, theological and legal), political
economy, psychology, business and economics, and, importantly, day-
to-day practice. The conjunction of philosophical arguments with
everyday human practice, often within fraught and contradictory
contexts, provides opportunities for new insights into the possibilities
for moral agency at a variety of levels. Just as conceptions concerning
the role and status of work have changed dramatically through time (as
discussed below), so arguments relating to the ‘virtuous life’, bounded
morality, the ethicality of competing economic and social systems, and
the possibilities and desirability of universal (global) ethics add, at the
very least, new contexts in which to debate classical ethical theories.
At best, they might even influence the way particular classical theories
are viewed. Business ethics embraces all of the theoretical perspectives
mentioned above:
while not being reducible to any of them … its object is the study of
the morality and immorality as well as the possible justification of
economic systems. (De George, 1987, p.204).
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iv EXECUTIVE SUMMARY
Part A of the literature review covers chapters one to five and these
provide the background and context of the developing field of business
ethics. The opening chapter considers how the literature base has
grown and the different levels of analysis adopted by American, British
and German writers, reflecting different philosophical perspectives.
Chapters two, three and four focus upon different elements of the
‘business ethics’ debates. Initially the significance of ‘the market’ is the
focus followed by the ‘individual’ and finally the role of ‘values and
virtues’. Chapter five concludes Part A, focusing upon the contribution
of religious values and principles to business ethics debates.
Part B focuses upon contemporary business issues. Each of the
chapters focuses upon different attempts and approaches to the ethical
issues raised by contemporary businesses practices. Each chapter
effectively deals with a different approach to trying to reduce, or
at least, influence the power and practices of business corporations.
Chapter six considers the concept of corporate social responsibility,
whilst chapters seven and eight focus upon ‘the stakeholder perspective’
and ‘the corporation as citizen’ respectively. Chapter nine focuses
upon government-business relationships, and the issues relating to
globalisation are considered in this chapter, reflecting that the economic-
social-political interplay is at its sharpest when globalisation issues are
being considered. Chapter ten considers the attempts that have been
made through corporate and intergovernmental organisations (IGO)-
developed codes of ethics.
The penultimate and last substantive chapter considers a relatively
new development in business ethics and the most robust attempt to-
date, to develop an overarching and practical approach to understanding
and developing coherent and inclusive business ethics policies and
practices. This is known as Integrative Social Contract Theory. The
final chapter provides a conclusion.
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PART A
A CONSIDERATION OF THE HISTORICAL ROOTS
OF ETHICS IN BUSINESS
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