ECONOMICS AND ETHICS

By Thomas Beschorner

[While concepts of “economic ethics” mainly deal with the constitutional framework of an economy (“the rules of the game”), “business ethics” focuses on the actions of particular firms. Against the background of economics and ethical theories, some aspects related to the social responsibility of businesses in modern societies will be discussed. Concepts such as a defensive management of values will be criticized for not bringing adequate solutions to current problems. We need, it is argued, a proactive and socially responsible entrepreneurship.]

[Thomas Beschorner teaches at the University of Oldenberg. His article is translated from the German on the World Wide Web,  http://www.uni-oldenburg.de/presse/einblicke/38/6beschorner.]

The comedian Karl Valentin once said: “What, you want to study economic ethics? You should decide for one discipline, either economics or ethics…” What the Munich comic saw humorously has a serious background for businesses. If they want to be future-friendly, they must give answers to ethical questions. This requires a manager type who includes social and ecological aspects in strategic planning.

ECONOMIC ETHICS AS A SCIENTIFIC DISCIPLINE

Whoever tackles questions of economic ethics and business ethics today enters into a heterogeneous and very interesting discussion in which “interdisciplinarity” is not an empty slogan. Participants in this discourse come from different disciplines like management, economics, sociology, philosophy and theology.

Despite these different approaches to economic ethics and business ethics, agreement exists on distinguishing economic ethics and business ethics. While the exponents of economic ethics concentrate on the organization of framing conditions and the rules of the game – for example, an ecological tax reform -, business ethicists question the moves of the actors themselves and develop strategies for the economic conduct of businesses.

A conception covering both areas is often urged. However such a uniting “theory of economic ethics and business ethics” does not presently exist.

NEGATIVE ATTENTION

On the backdrop of an increasingly globalized world, the classical nation state has lost influence regarding the regulation of business activities. The players (especially international businesses) can evade part of the rules of the game (of the state) in times of globalization. Thus, according to one current opinion, a social-ecological market economy is annulled since the framing order can no longer exercise its regulatory power. However there is a reverse side of this neoliberal coin: the activities of businesses are increasingly accompanied by a more critical public. The controversy around the “Brent Spar” oil platform several years ago can serve as a classic example for this “power” of the public. Incidentally the pollution claimed by Greenpeace was not as great as first announced. The “negative attention” given to the Shell corporation all over Europe was much more important since the public saw the sinking of the oil platform as an unacceptable practice and threatened the corporation with considerable sales losses.

CLAIMS OF SOCIETY

This example illustrates that the social position of businesses cannot be reduced only to the principle of profit maximization. Impelled by the “business ethics movement” from the US, the insight is increasingly accepted in Germany that more complex models of problems describe the relations of businesses to their social environment. The so-called “claimant group model” and “stakeholder model” prove to be more appropriate instruments. Businesses are bound in a relational structure of different claimant groups. These groups also include a critical public alongside the traditional economic actors – the customers, suppliers and competitors. Claimant groups, as the name implies, are groups that can make claims against businesses. These claims are social, ecological and political and not only economic.

Two business ethics arguments can be distinguished on the basis of the approach that considers all relevant groups: the ”strategic” and the “normative-critical” arguments.

The “strategic stakeholder argument” considers the claims of non-market actors as for example the “Brent Spar”. Constructive impulses for business developments can be derived and implemented unlike a purely defensive attitude of businesses where the interests of the general public are only included to avoid “negative attention”. Thus the attention that a business attracts in its environment and the influence that the environment has on a business can be used productively to strengthen its adaptability and future viability and need not be negative.

The close interlocking of legitimation and economic conduct is central. Market structures could lead to possible innovations beyond a defensive strategy in which the interests of non-market actors are only included to avoid “negative attention”. Businesses can assure their “survival” in a rapidly changing environment by constructively pursuing impulses from the business environment and increasing their adaptability.

On the other hand, the normative-critical argument of the stakeholder model asks from a moral standpoint who should raise legitimate claims against businesses. What is involved is an “argumentative understanding” between the business and its stakeholders beyond economic consideration, not “negotiated solutions” in strategic management. This perspective explicitly considers social realities that are not empirically graspable and hearkens back to ethical theories to offer an orientation on action to the actors (businesses and their stakeholders).
A praxis-relevant and ethically-oriented business leadership must consider both principles of the strategic argument and the normative-critical stakeholder argument. In any case, the credibility of businesses depends on how intensively they involve their claimant groups in developments. This means conducting an actual dialogue between all interest groups and allowing participation, not a one-sided notification. Thus business ethics must be more than a defensive asset management to avoid “negative attention”. At the same time, business ethics may not morally overstrain praxis if it should be effective.

CONCRETE BUSINESS ETHICS

Only persons can act ethically. Organizations, for example businesses, “merely” coordinate the individual actions of persons.

What instruments are conceivable in the in-house organization for promoting ethical conduct of co-workers? A modern business ethic merely appealing to the goodness in people in not enough (virtue ethics). Rather creating institutional arrangements in the organization and concrete forms in which moral conduct can occur (institution ethics) is necessary.

How can business ethics be realized in practice? Firstly, company structures and decision-making processes must be opened and made transparent to facilitate and institutionalize a free discourse about responsibilities and exactions. Secondly, organization must protect against ethically undesirable conduct – for example corruption – by making internal procedures transparent. Some concrete proposals aim at standardization processes in businesses. An assets management system should be installed that includes declared values for all co-workers and excludes non-ethical conduct. Other concepts aim at a cultural development within the business through a common entrepreneurial model by means of workshops. Other proposals urge the establishment of a governing board for businesses composed of business representatives and external claimant groups.

BUSINESS ETHICS IN ACADEMIC EDUCATION

Business ethics has gained significance for company praxis in the last years. This trend will continue in the future as an important element of modern business leadership, not only as a new “management style”.

Two prognoses could be made. Firstly, the developments could lead to new occupational fields. The development of ethics-management systems is still in its infancy in Germany…

Secondly, more can be expected from a new generation of leaders. The core competencies of the new management cannot be reduced to only analyzing balance sheets or developing incentive systems. Future leaders must reflect ethically on the place of businesses in society and initiate proper measures to encourage more responsible conduct.

The new chairs for economic ethics and business ethics at the universities of Kassel and Halle-Wittenberg emphasize conditions of the economy and ethics as an essential element of university education.

An economic ethics contribution to university education is made by the study group “Social Learning and Sustainability” at the University of Oldenburg. Praxis-oriented seminars for students aiming at ethical reflection and practical possibilities for management systems occur alongside theoretically-oriented programs. A “consulting program” on the theme values and environmental management will be carried out. The students will discuss sustainable business leadership with practitioners and scholars and test and deepen their knowledge practically in the areas of ethical business consultation and leadership. These programs and meetings will continue in the coming years.