Corporate Citizenship Perspectives

Beyond Compliance: Corporate Citizenship and Moral Capitalism

Posted by John Spinnato on Jun 21, 2012 8:18:49 AM

In reflecting on recent “scandals” in the corporate world - from noisy financial crises and resignations, to bribery and corruption allegations at home and abroad - I wondered what is needed in the corporate world to adopt an ethic of “good” corporate behavior. These simple questions require complicated reasoning to resolve.

Paraphrasing Wikipedia, ethics is defined as moral philosophy that involves systematizing, defending, and recommending concepts of right and wrong behaviors. A distinction has been drawn in philosophy between ethics and morality with the focus on ethics being more based on duty, obligation, and conduct, with morals being related more to the notion of virtue. I believe we may have allowed our discussion of business ethics to be too focused on duty and obligation and may have lost an appropriate amount of emphasis on the moral dimensions of that code.

While some of our recent notable financial crises have been caused by actions that have been in compliance with laws or internal policies of the involved firms, in hindsight, not many would call them “good” in the moral sense. Compliance is the minimum required of a corporation but being compliant can create the impression that we are being ethical, which is not always the case. Our financial institutions may have been in compliance with the law in the repackaging of the risky loans which led to the financial crisis. Some of the correspondence uncovered after the fact indicates that there was at least debate about whether the passing-on of that risk was “right.” But were the players ethical in the moral sense of the word? Had the market not collapsed, they may have been considered financial geniuses as the hedge fund managers who shorted those instruments were, but in taking that enormous risk, were they acting morally?

The choice of the word “ethics” would imply a consideration of competing values and the weighing of the risks - a classic benefit/risk analysis. One could argue that their actions were ethical and normal as they may have considered the risks and decided that their actions fell within normative limits and would serve their obligation to drive profit for shareholders - a duty that their code of ethics compels. It could be argued that the fact that they miscalculated the risks was perhaps poor judgment but not unethical. An accidental oil spill or rupture of a well may happen despite compliance with laws and regulations, but actions leading up to the event might be considered unethical through another lens.

Is quality-cutting to reduce expenses to keep the price of a product low or to maximize value to the shareholder unethical or immoral in certain circumstances when the end result is catastrophic?

Bribery of governmental officials abroad by U.S. companies is certainly not compliant with U.S. laws. There has been a legitimate debate about applying local standards in order to evaluate the ethics of local business practices, a position I do not share but simply note. (Can American Companies Compete Without Bribing?)

This drives me to think that maybe “moral” is the right standard which we should strive for in the corporate world. “Moral” appeals to me as it suggests a Golden Rule approach for corporations that is the foundation of many religious beliefs.

Joe Nocera in an OpEd piece in the March 18 New York Times raises this notion and makes a case for “moral capitalism.” and also raises questions about how morals are valued. Should investors care about morals and ethics or just about the possible loss of business for the investment bank? Nocera strongly argues for a “yes to ethics and morals” response.

The idea of a corporate morality suggests that there is an obligation to do the right thing that considers the benefit and common good of society at least on par with economic consequences. Are there standards for companies beyond the pure legal obligations which regulate businesses which rise to the level of morality? (ISO 26000 provides a robust framework and that can serve as a guide for corporations as they confront and consider a range of issues material to their businesses that have ethical and moral dimensions.) The cover article of the magazine America, a national Catholic weekly) of May 21 talks about ethical executives and what ethical businesses should do. In short, they assert the following: meet the needs of the world; organize good and productive work; and create sustainable wealth and distribute it justly. These seem to be a good starting point for further thought and debate on the question of moral capitalism.

Companies can thrive and achieve enormous success while adhering to a higher calling of morality that goes beyond mere compliance with the law. The challenges facing our world must to be addressed by the business community and the debate must be grounded in a higher calling to the “greater good.” In order to achieve this objective, we are going to have to ask more frequently broader questions about the ethical implications of our business decisions. Defining moral capitalism remains a work in progress within which we who are in the field of corporate responsibility have a key role to play.

The views and opinions expressed in this article are those of the author, unless otherwise attributed, and do not necessarily represent the views of, and should not be attributed to, Sanofi or the Boston College Center for Corporate Citizenship.

Topics: Executive Interviews

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