Dare to be ethical?

Reading the book “Giving Voice to Values” by Mary Gentile corroborated a longstanding assumption of mine that acting out our sense of right and wrong is something that can be directly promoted by rehearsal. Her observation is that most “business ethics” courses tend to focus either on abstract ethical theory or then the analysis of specific cases, but neglect any sort of concrete training as to how, precisely, we would like to behave and what we should say in a specific situation where we intuitively feel that something is amiss. Knowing does not automatically lead to doing, much less to effective doing. And knowing without conviction can even lead to misuse and skillful self-justification. Indeed, she gives examples where managers whom she had interviewed expertly elaborated and adroitly rationalized their morally questionable behavior on the basis of ethical theories that they had previously been taught at University. Thus they simply picked and chose the ethical theory that best supported their particular behavior and prerogatives at that time and context, no matter how self-serving or cynical.

By rehearsing just how we would – in words and deeds – respond to something amiss, we simply do what any athlete does when training for the time when it really matters: flex the muscles and hone in their coordination in such a way so as to make their execution all but automatic during an athletic event. As to how to convince highly competitive individuals of the merits of revisiting their basic moral assumptions, she proposes that even they can be brought into the fold by a re-framing of their objectives as being “daring to be ethical”.

I am inspired by Ms. Gentile’s approach because I have personally witnessed with myself that I have on a good number of occasions failed to uphold my own deeper convictions when it mattered. Looking back, my failures had their root less in my believing myself to be powerless to change things on my own, than in having to decide on the spot and being unable to come up with a suitable alternative fast enough or being so caught up by my own social and cultural conditioning, that it was very difficult to change my “bad habits”. As individuals, organization and as a civilization we are all captive to some extent to the ingrained routines, traditions and culture we have been part of since childhood. Consequently, even if we rebelled on a number of occasions, we often find ourselves back in our previous, familiar path-dependent behavioral track, especially when we are intricately embedded in this social status-quo with all its rules, assumptions and subtle (or not so subtle!) peer pressure. We yearn for our place in this social context and thus we often inadvertently undermine our own best efforts at reform.

Concretely, what is to be done then? Whereas there is certainly some validity to the bromides that one can only change oneself or that all change begins with ourselves, the above analysis makes it clear that more is required. Individuals need to be supported in their efforts for change and this support includes creating concrete training grounds to hone in our abilities to deal with the wider social challenges we all face. Business Schools, as the premier forging grounds for future leaders in our economic institutions, are clearly indispensible in this respect.

Manuel Heer Dawson

Sustainability Reporting Today

Sustainability Reporting Today:

 With the advent of sustainability reporting, various indicators and standards have been developed to measure and evaluate sustainability and to anchor it in corporate reporting on value creation. A sustainable commitment to stakeholder relations on an economic, social and ecological level has a proven positive impact on value creation and ultimately also on the strategic success of a company. To make this transparent, the following principles for an integrated sustainability reporting - which are to a certain degree also part of standards such as the Global Reporting Initiative, Integrated Reporting and the European Foundation for Quality Management (EFQM) - can lead the way:

 

-         Strategic Focus: Sustainability should be embedded in a company’s purpose, in its derived vision and in its strategic objectives. This forms an essential basis for a periodic corporate sustainability reporting at a strategic level.

-         Embeddedness: Not only singular projects, but the entire strategy development and revision should be communicated comprehensively to make the company’s attractiveness visible for current and future partners. It is deliberately not about retaining information to calm down stakeholders and to secure competitive advantages over competitors, but about gaining strategic stakeholders for a mutual corporate value creation process.

-         Inclusion: When different stakeholders contribute to value creation, it is crucial to also recognize these stakeholders as owners of their contributed values. This is based on an extended understanding of ownership. Here, the concept of ownership refers not only to material goods or financial resources, but also to intangible issues such as knowledge and experience. With their knowledge and experience, stakeholders provide property for a company in a broader sense. Like the financial owners, they have therefore the right to be adequately involved in processes regarding their property and to be informed accordingly.

-         Commitment: In a purely economic view, profit distribution (residual profit) primarily targets shareholders. This is also predominantly reported on. Especially because the management has to make discretionary decisions about the shareholders’ compensations, e.g. how much of the profit is being distributed and how much is being retained (pay-out-ratio). When other stakeholders, in the sense of a broader concept of ownership, contribute significantly to the corporate value creation process, these stakeholders should also be a compulsory part of the distribution of tangible and intangible values as well as receive information accordingly.

 A sustainability reporting based on these principles suggests that companies can create more values with and for stakeholders.

 Sybille Sachs

 

Personal thoughts on a keynote speech on social business

Last week I attended the Social Business Conference 2013 organized by the Swiss-based think tank ‘Social Business Earth’ in Lugano. The keynote speaker was none other than Muhammad Yunus, pioneer behind the microcredit movement and the idea of social business as well as Nobel Peace Prize Laureate in 2006 for his achievements in this context.

I have been told that the economics professor from Bangladesh is renowned for his vivid, inciting and authentic narrative speeches about the early days of microcredit. And indeed, Yunus first told the enthralling personal story of how it all began and how he came across the idea to grant a few dollars to a group of women in his hometown in the mid 1970s. At the center of his keynote speech were, however, a few more general arguments that sounded very familiar to me as a stakeholder theorist. Therefore, I would like to reflect on three basic thoughts raised by Yunus in this blog post, which I believe are universally valid and very much in line with the underlying aspiration of our ‘people for people’-initiative.

First, Yunus mentioned that it was a live-changing moment for these women to be able to lend money at reasonable interest rates in order to engage in income-generating activities. In this way, they became independent from loan-sharks and felt as equal business partners, respected and formally credit-worthy. According to him, their appreciation in return was the most rewarding part. This made me think; isn’t it essentially much more rewarding to make people or the natural environment a bit better off at the end of the day, rather than dedicating your time to the sole pursuit of money?

Against this background, the second central question raised by Yunus was about the purpose of business in principle. To put it simply, does society serve economy or does economy serve society? In this regard, I agree with Yunus that everyone needs to ask themselves the fundamental question of whether they want to work for a profit-maximizing company or engage in a business that is committed to solve a social or environmental issue, but like any other business is run financially sustainable. In simplified terms, the bottom line of this dilemma is the personal preference between worshiping financial enrichment versus social wealth. Having said that, attention needs to be drawn to the fact that most of the world’s population is not in a position to have this personal choice.

Finally, a crucial aspect with a look into the future is how we can promote the infiltration of the social business rationale in today’s economic system. Yunus argued that the vision should be to set up a social business sector parallel to the established, and currently transforming, capitalistic system, so that people are able to make their choice. However, I argue that the ultimate goal should be an economic system, which is based on a dual value proposition, insofar as it combines profit-seeking business with a positive impact on society and the natural environment.

Marc Moser

 Capitalism in Question

The Academy of Management (AOM) is a professional organization that strives to further the scholarship of management. It comprises twenty-five professional divisions and interest groups focussing on management problems. Examples of these divisions are „Business Policy and Strategy“, “Entrepreneurship“, “Human Resources“, or „Social Issues in Management“. Every year, the AOM carries out an Annual Meeting. Last year, more than 10,000 participants – primarily university professors – took part from all over the world. In numerous events, such as the Professional Development Workshops, Paper-Sessions, Panels and All Academy Symposia, the newest research and teaching methods were discussed. Also Switzerland was well represented, coming in at 10^th place with respect to the number of participants.

For each of the AOM annual meetings a theme is selected. For this year’s meeting that takes place between the 9^th and 13^th August in Orlando, Florida, the theme will be “Capitalism in Question”.  Indeed, following the financial crisis of 2008, the business schools are challenged to review the foundations and assumptions upon which their research and teaching are based on. Currently, this is the neo-liberal economic theory and the corresponding theory of the firm. Questions and problems that the organizers have put in the center are for example:

·        While it is recognized that the market competition during the last decades brought great benefits, material prosperity and much innovation, it has also become clear that there are serious down sides: economic, social and ecological “costs”.

 

·        Research questions are called for that deal with the question if and how the capitalistic economic system can and should be further developed.

·        In need are also contributions that elucidate what alternatives there are to the current system and what would subsequently change in a social, economic and ecological context.

·        Connected with the above is also the question of by what social and ecological components the objective of shareholder value maximization by firms need be complemented and what this means for the role and self-conception of managers and leaders.

·        Also the question how true innovation can be upheld in firms – as for example via a shift of focus from rivalry to cooperation with stakeholders – has been included in the call for papers.

It will be interesting to see what an event of this size and scientific reputation will bring forth in terms of insights and impulses for the academic research and teaching in the area of management. I hope to be able to report some of these interesting news in a later blog post.

Edwin Rühli

The first of May: Power, Legitimacy and Urgency

It’s the first of May and I am sitting in my office even though we have the day off. To get into my building I had to step over several union banners laying on the ground, ready to be taken to the official annual rally. I felt something like pride when I saw these committed people waiting to start announcing their demands. They could have just stayed at home and had a lazy morning, drinking coffee but they decided to put themselves out there. And I did feel a bit bad that I was ignoring this “Labor Day” and going to work but I am just not the rallying type. Apart from all the vandalism and violence that usually co-occurs on this day, I think it is good that workers use this day to say what they think they are entitled to. For at least one day a year it gives total legitimacy and power to the stakeholder employee and the “worker” in general. I think it is also a kind of celebration of the rights we do have here: Right of unions, freedom of association, right to strike, freedom of speech and so on.

 

When glancing over to Bangladesh, globally there is still an extremely long way to go. The claims workers have in Dhaka are not only legitimate but also very urgent. When a house is actually built on sand, shows obvious cracks, workers knowing about this danger but still going to work because they are worried to lose their job they are so dependent on, the disastrous absence of their power is evident. Yesterday the people of Dhaka went out on the street to demonstrate their anger. Demonstration and strike is their only means to counteract on their lack of power in hope to find leverage of their claims through other parties.

Looking out of the window I can see all the different concerns the people have. The concerns are not just about work, but about people living together as a society in general. Even though I don’t share all of the opinions and many demands are much too extreme for my taste, I want to go along. Here is my demonstration: People should take responsibility for what they do. Businesses should take responsibility for what they do. Not only power and urgency, but also legitimacy of claims should guide the way. Only by respecting and treating others as human beings and not as abstract figures in a long value chain can we work together to mutually create value for people.

Vanessa McSorley

On Being an Academic

What differentiates academics from other professions? In some form or another, academics are associated with knowledge and expertise in a more or less narrow field of research. There exists the popular stereotype of academics being pure theoreticians, not being aware of or connected to people’s everyday life and problems. The metaphor of the ivory tower usually comes up at this point. I won’t make any judgment about this clearly untruthful perception, but will try to give my personal view of how we academics sustain this stereotype.

Starting with the notion that every person (this includes academics!) strives for a positive self-concept, I assume that academics define a good part of their self-concept by drawing on their expertise. To convince others of their knowledgeability, academics tend to give sustained analyses and normative advice when it comes to a discussion related to their field of research. In my case this is stakeholder theory and often leads me to act like a real know-it-all followed by a deadlock in a heated discussion. Let me give you two illustrations:

 

The first example is an argument I had with a bank manager about value creation of Swiss banks for society at large. Trying to present myself as a knowledgeable person regarding this issue, I was arguing that Swiss banks are destroying societal trust by engaging in ethically questionable business practices. The result of this reasoning was, of course, making my counterpart an advocate of the Swiss banks. My striving to present myself as a competent person ended up by the bank manager explaining me with a wagging finger how the banking business really works and that my perspective is a pure academic one.

The second example is related to a discussion about maximizing profits with a friend of mine who works as an electrician. Although my friend started the conversation with the words “You as a theoretician…”, I had no reason to strengthen my self-concept by taking the role of an academic. The discussion ended with me having learned quite a bit about how business works for electricians, and him becoming acquainted with another perspective on maximizing profits.

Having a lot of experience in the types of interactions given in the first example, I am now trying hard to establish more discourse-oriented discussions when it comes to an issue related to my field of research. This is somewhat threatening my positive self-concept, because I have to drop my own stereotype of academics. Two things are helping me: First, the quote by Socrates “The only true wisdom is in knowing you know nothing” and, second, the knowing that in the end, academics are always right.

Tom Schneider

Of American “Libertarians” and European “Common Good Economizers”

Which type of economic (and political) system one favors is largely dependent upon what kind of a notion one has of what it means to be human, more specifically, a ‘successful’ or ‘good’ human being - and by extension also a “successful” and “good” society. Yet if our prevailing economic system ought to reflect our collective values of what it means to be successful or good human beings, then it is striking just how unsatisfied we are with the status quo. According to a study by the Bertelsmann foundation, roughly 90% of all Germans and Austrians pine for a new economic system (this figure is likely to be even more striking in economically weaker countries such as those of southern Europe). While the current economic system still tends to find more champions in America than Europe, also the citizens of this largest of capitalistic nations are ripe with frustration, disillusionment and cynicism. The colloquial expression “Corporate America” has long since become synonymous with some large, deceitful bureaucratic machinery that is not governed by the principles of merit, honesty or creativity, but by its own aloof and singular logic of marketing (products and the self, as in Me, Inc.) and Washington DC lobby power.

Yet while Europeans are inclined to seek reform via a notion of human nature based on caring empathy, collective cooperation and sharing of wealth, Americans tend to look towards human success through the prism of healthy competition, individual freedom and merit-based creativity. Never mind that creativity, freedom and caring mean different things for different people, as also to most Europeans and Americans. The point, and difference, between the predominant American versus European stance to fundamental reform is in where in the hierarchy of daily self-awareness these rather ill-defined notions figure. Permit me a brief, although clearly simplified, analysis.

The American is apt to become emotionally roused by anything that threatens his or her “individual freedom” or obstructs the reaping of “merit based fruits of hard work” (both often linked to property rights). This is why Americans, even if they are among the majority of citizens who are demonstratively increasingly among the losers of the current economic system, still tend to extol laissez-faire “free markets” (note the catch word “free”) while scoffing at European notions of statism and “socialism”, which for many is nothing more than the ante-chamber to full-blown totalitarian communism. Thus, a creative, typically American response to the current problems has been in the form of “libertarianism” (See for example the “Libertarian Party” (https://www.lp.org/, or the partially aligned Tea Party movement (http://www.teaparty.org/).

The European, on the other hand, is prone to get emotionally worked up about anything that threatens his or her sense of fairness and material equity, which is looked upon as the direct result of cooperation, sharing and caring. This is why Europeans, even if they are among the relative winners of the current system, tend to still prefer an economic system that constrains wide income disparities and distributes wealth, despite state-coffers that are neigh bankruptcy, and are suspicious of “markets always know best” and are repelled by the winner-takes-all ethos so prevalent in the USA. Hence, a contemporary innovative, typically European solution to the current malaise has been in the form of an “economy of the common good” (see for example, the GWÖ http://snipurl.com/26rosb9).

While an adequate elucidation of what “libertarianism” and “common wealth economy” designate is beyond the scope of this brief analysis (the reader is encouraged to read more on it!), it is once again telling to simply look at the etymological roots of the involved wording. In as much as all words are reflections of the reality we human beings are conscious of, it is the words – and associated stories – we are personally and culturally exposed to, that create our notions of “good” and “successful”. Hence the cultural narrative of “the land of the free and home of the brave” as per the American anthem can easily be understood as freedom from governmental interference and brave, merit based self-determination, while a common European narrative as in the French motto “liberté, egalité, fraternité”, not just enjoins freedom, but notably stresses equality and brotherhood.

At the end of the day, our political leanings and thus our economic preferences are more of a function of our emotions than any rational analysis. They are formed by our personal histories as much as by the histories and stories of the countries and cultures we are part of. A fundamental question that this raises is where and to what extent an international consensus is required and even possible in creating a global economy that is socially and environmentally sustainable in the long-run. Clear is that the effective stewardship of our world economy simply requires domains where all stakeholders are not only involved but also sign on to. The process must be along the lines of libertarianism in as much as any directives cannot be imposed upon individual countries, but the results need to transcend particular interests and be more along the lines of a common good.

Manuel Dawson