Review

The authors have a track record of ethics consulting to large corporations which grounds their approach. There is a laudatory foreword by John Elkington of 'triple bottom line' fame. The book will be helpful to senior managers wishing to introduce ethics, but as I will suggest later, it has some theoretical weaknesses. Amongst these are the assumptions that one does well in business by doing good and society sets the moral standards we ought to follow. But first to the content and the strengths of the book - principally the need for consistency between personal, organisational, and social ethics, and the recognition of the claims of 'intergenerational' ethical considerations of sustainability at global level as a condition of good corporate citizenship.

The authors use a prism metaphor to suggest this consistency ideal at all levels. Just as the same light is in fact diffracted in all directions by the prism, so the unified corporate purpose, ethically nuanced, ought to be (ethically) transparent in all dealings of the corporation with its various interfacing stakeholders. The authors say that ethical standards as set by society as a whole and then reflected in organisations and persons (p 5). Four ethical 'frameworks' each urge a distinctive value or principle as prior in ethical deliberation-right, consequences, conscience and care. These emanate respectively from Kant, Bentham and Mill, Aristotle, and Carol Gilligan. They are illustrated in corporate case studies which describe practices driven by these four ideas. The corporation which is solely profit-driven is not going to act ethically. As the authors well say (p 25):

"Profit, like eating, is a requirement of ongoing vitality (of the business) but the company's purpose is about something more challenging and worthy of the amount of human endeavour devoted to it."

It is necessary to go beyond 'shareholder sovereignty' to look at the claims of other stakeholders and other dimensions of assessment than profit eg environmental impact, internal conflict resolution practices, accountability to the industry and societal standards. While accepting the 'stakeholder' is a word that is here to stay I believe that 'stakeholder management theory' and ethics are not yet as easy to reconcile as the authors presume. The word was introduced by R Edward Freeman in the 1980's at first to denote 'groups other than shareholders', but it has been 'under-theorised' since. Freeman originally had no ethical views in mind, but by 1990 he was talking about 'Kantian stake-holder capitalism' which would respect all persons as equals- a formula which is silent on who is to get what in the distribute justice disposition of profit and burdens. Suggested definitions of stakeholder over 25 years or so have included: 'anyone affected by the firm', those who benefit; those at risk from the corporation; morally relevant parties; enemies and threatening groups like competitors, those who seek or make contribution , those who take risks, and so on. A paper by P Grossi in 2005 listed 20 groups. So if Boards, as internal stakeholders, must be across 'impacts on stakeholders' (p 60) and so all these groups, they will need some way of prioritising their distribute justice claims other than looking at a list of equally recognised groups. In Chapter 3 (p 52) and later Chapter 6 (p 114) the authors do not define this important, but slippery term, but merely list some (contentious) examples of internal and external stakeholders. Customers lead the list of internal stakeholders. Boards are (ominously?) last. Suppliers are external, along with environmental and human rights groups.

The implications of the dethroning of shareholders and profit as absolute, and its replacement by a stakeholder account, are not however as ethically helpful and clear as it seems. Unless the stakeholder role-claims can be prioritised or graded in prima facie importance and centrality in relation to corporate survival and development, they cannot help. This might be done through use of the analogy with digestion/eating underpinning the quote above, and digestion's complex relation to other human capacities. In somewhat the way human capacities can be ranked in importance by virtuous judgement as prima face more or less worthwhile, with digestion and eating not exalted above our intellect and will, perhaps more focal stakeholders like boards should prevail over operatives, and they in turn over mere enablers.

KPMG's 'Ethical Qualitative Framework', set out on p 63 begins the task of ethical decision making. It is designed to assist managers to reflect on the congruence of their personal, organisational, and social values and recognise that they can come apart. Such things as personal use of organisational resources, the lack of coordinate of 'right and left hands' of the organisation, and poor responses to diverse stakeholders result from lack of reflection.

Chapter 4 suggests that senior managers are primarily responsible for setting examples of personal ethics which can 'cascade' down through the organisation to create organisational ethics (p 73). As organisational members, we will move towards the communal 'picture' which we create for ourselves as organisational 'self'-image: our values, attitudes, and beliefs.

A complaints mechanism for members using graduated or escalated steps is set out (p 89) and agreed positional job descriptions are encouraged which will assure the benefits of ethics (pp 91-93). An organisational ethics 'audit' is explained (p 96). Some ethics tests, like the Golden Rule or 'publicity' tests are outlined to assist in decision making, and three decision making models are set out. The first and third of these are close to Aristotle's, with the addition of a step where one considers 'Stakeholder perspectives' on the matter at hand in Model 1, and the explicit reference to 'organisational ethics' at step 5 of Model 3.

Chapter 6 develops 'ethical frameworks' for businesses as communities of people, such as extant corporate codes of the better companies,' invoking ethical principles, the UN Millennium Development Goals, and discussion of seven 'corporate protocols' which ethics codes should reflect (p 106), positive and negative. Six requirements for managing the Code's implementation (pp 111-113) are also set out.

It is here (pp 114 ff) that the use of 'stakeholder' re-appears, as before to somewhat cloud the issues. Identifying stakeholders and their needs is offered, as step 1 in implementing ethics through Boards. Yet we are not told what qualifies one as a stakeholder, or how they are to be prioritised, and so step 2 (developing ethical policies in response) directly inherits this unclarity. The recommended corporate governance strategies for Boards are very plausible - such things as consulting the Global Reporting Initiative, CAUX principles, and OECD, Guidelines, and industry specific codes, but the pathologies and remedies listed on pp 117 ff are often driven precisely by the fuzziness of the term stakeholder itself. The failures of the Enron board could be sheeted back to a lack of clarity about who their stakeholders were, and to the prime role of the Board itself to forbid or cancel 'off- balance sheet' activities of senior mangers. This chapter ends with a plug for the idea of 'the virtue corporation' with a sound ethical character (p 127). The book ends with a Chapter on Confucian ethics and doing business in China.

To close, I have four reservations:

1. Are moral standards 'set by society as a whole' (p 5)? How then can we explain slavery, imperialistic slaughter and religious persecution?. Society did not drive the reforms here, but prophetic individuals from Buddha, Socrates and Jesus to Wilberforce, Gandhi, and King.
2. Why are the four frameworks (pp 11, 17-18) selected over possible alternatives such as, e.g., Aquinas, Locke and Rawls?
3. Is good ethics always good business? Is bad ethics sometimes good business? Doesn't ethics have its own rationale, even if the highest dividends are often payed by ethically questionable companies? e.g., News Limited, PBL, James Hardie, British American Tobacco)
4. What is 'stakeholder capitalism'? Don't we need a way of grading stakeholder claims? How does stakeholder management theory help to understand distributive justice?

On point 4, a return to the quasi-personal model of the corporation might be a way to go. On this model, incumbents in Boards ( which can be two-tier or even compound, as Shann Turnbull suggests) and CEOs; managers and workers; shareholders and suppliers, play well-ordered, ethically differentiated roles, with descending responsibility, as directors, operators, and enablers respectively. This would parallel the role of personal capacities of intellect and will, sense and movement, and autonomic powers of digestion and circulation, thus giving more specific body to the 'virtue corporation' which the authors commend.

David Ardagh
Senior Lecturer, Charles Sturt University, Wagga Wagga, NSW