The Moral Compass nd understand moral theory. In fact, you have a moral philosophy – but you may not think of it that way. Every time you have a conversation about what someone “should” or “ought” to do, you doing moral philosophy. Your moral converations may be very personal – whether you should return the five dollars extra change the clerk gave you at the video store – or very broad – whether national security is more important than personal freedom. Whatever your moral conversations are about, it is likely there is a body of literature that would be useful in clarifying your thoughts on the issue. It may be a good idea for you to read a basic textbook on moral philosophy to review or familiarize yourself with the way philosophers have thought about some of the moral issues that almost everyone encounters. It is especially useful to be familiar with the terms and concepts of moral philosophy so you can express your views precisely and intelligently. Some of the major moral theories are briefly summarized in the Primer of Moral Theory that follows. You will find most of them are discussed in more detail in any basic moral philosophy text, although you may find them listed under slightly different titles. As you consider each theory, use the “Where Do I Stand” box to mark your position on it. Include a brief explanation of the reasons for your position. The purpose of this exercise is for you to decide for yourself what moral theories and standpoints make the most sense to you and to locate your own moral standpoint within the formal framework of established moral thought. As you continue thinking about moral theories, you may find that your standpoint changes. This is normal. Give yourself time to think reflectively and don’t be concerned if you have trouble identifying your own position in relation to every theory. You may also find it helpful to talk with a friend or colleague about the theories; as you ask each other questions and share examples you may find your position becoming clearer.

es) you in claiming responsibility for your freedom? Why?

What enables (or impedes) you in assuming full moral responsibility for yourself, your life, your choices and actions, and for the situations in which you find yourself?

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REFLECTIONS ON CHARACTER

Self-cultivation and authenticity
Sometimes people feel that some important decline has occurred during the last years or decades. . . The first source of worry is individualism. Of course, individualism also names what many people consider the finest achievement of modern civilization. We live in a world where people have a right to . . . determine the shape of their lives . . . And these rights are generally defended by our legal systems. In principle, people are no longer sacrificed to the demands of supposedly sacred orders that transcend them. Very few people want to go back on this achievement. Indeed, many think that it is still incomplete, that economic arrangements, or patterns of family life, or traditional notions of hierarchy still restrict too much our freedom to be ourselves. But many of us are also ambivalent. Modern freedom was won by our breaking loose from older moral horizons. People used to see themselves as part of a larger order. . . People were often locked into a given place. . . Modern freedom came about through the discrediting of such orders. . . [this has] been called the “disenchantment” of the world . . . things lost some of their magic. . . People no longer have a sense of a higher purpose . . . the dark side of individualism is a centering on the self, which both flattens and narrows our lives, makes them poorer in meaning, and less concerned with others or society. . . The disenchantment of the world is connected to another massively important phenomenon of the modern age . . . the primacy of instrumental reason . . . the kind of rationality we draw on when we calculate the most economical application of means to a given end. Maximum efficiency, the best cost-output ratio, is its measure of success. . . Once social arrangements and modes of action are no longer grounded in the order of things or the will of God, they are in a sense up for grabs. . . the creatures that surround us lose the significance that accrued to their place in the chain of being, they are open to being treated as raw materials or instruments for our projects. In one way this change has been liberating. But there is also a widespread unease that instrumental reason . . . threatens to take over our lives. . . that . . . the independent ends that ought to be guiding our lives will be eclipsed by the demand to maximize output. . . Charles Taylor, Three Malaises in The Ethics of Authenticity, 1991.

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Your Reflections
What is the difference between reflective self-cultivation and narcissistic selfabsorption?

What rituals and practices enable you to clarify and strengthen your authentic moral identity?

What rituals and practices strengthen your moral capabilities of virtue, character, discernment, and judgment?

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REFLECTIONS ON MORAL COMMUNITY

Civic Engagement
The society structured around instrumental reason can be seen as imposing a great loss of freedom on both individuals and the group . . . An individual lifestyle is hard to sustain against the grain. For instance, the whole design of some modern cities makes it hard to function without a car. . . But there is another loss of freedom . . . in which people end up as . . . individuals who are “enclosed in their own hearts” . . . where few will want to participate actively in self-government. . . This opens the danger of a new, specifically modern form of . . . “soft” despotism . . . Once participation declines, once the lateral associations that were its vehicles wither away, the individual citizen is left alone in the face of a vast bureaucratic state and feels, correctly, powerless. This demotivates the citizen even further, and the vicious cycle of soft despotism is joined. The joint operation of market and bureaucratic state has a tendency to weaken democratic initiative. . . The danger is not actual despotic control but fragmentation – that is, a people increasingly less capable of forming a common purpose and carrying it out. Fragmentation arises when people come to see themselves more and more atomistically, otherwise put, as less and less bound to their fellow citizens in common projects and allegiances. They may indeed feel linked in common projects with some others, but these come more to be partial groupings rather than the whole society: for instance, a local community, an ethnic minority, the adherents of some religion or ideology, the promoters of some special interest. The rule of law and the upholding of rights are seen as very much “the American way,” that is, as the objects of a strong common allegiance. The extraordinary reaction to the Watergate scandals . . . are a testimony to this. In keeping with this, two facts of political life take on greater and greater saliency:. . . [Judicial battles and advocacy politics]. . . At the same time . . . voter participation in national elections declines, and has recently hit 50 percent of the eligible population, far below that of other democratic societies. . . This style of politics makes issues harder to resolve. . . The penchant to settle things judicially, further polarized by rival special-interest campaigns, effectively cuts down the possibilities of compromise. . .An unbalanced system such as this both reflects and entrenches fragmentation. Its spirit is an adversarial one in which citizen efficacy consists of being able to get your rights, whatever the consequences for the whole. But judicial retrieval and single-issue politics operate from this stance and further strengthen it. A fragmented society is one whose members find it harder and harder to identify with their political society as a community. . . their sense of corporate belonging is transferred elsewhere or atrophies altogether. It is fed, too, by the experience of political powerlessness. A fading political identity makes it harder to mobilize effectively, and a sense of helplessness breeds alienation. . . a vicious circle, but it could also be a virtuous circle. Successful common action can bring as sense of empowerment and strengthen identification with the political community. Charles Taylor, Against Fragmentation in The Ethics of Authenticity, 1991

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Your Reflections
Who are the people with whom you share a commitment to integrity? How do you express this shared commitment?

When and how do you engage in moral conversations with friends, family, colleagues?

What is your understanding of civic and public morality?

How do you fulfill your personal and corporate obligations of citizenship?

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Moral Performance: Your Defining Moments
You probably have tapes stored somewhere in your memory that replay scenarios over and over again each time you are reminded of the events that created them. One of them is sure to be the “Guilt Tape” or the “If Only Tape” – a reply of what you could have done, said, or imagined to change a situation that you know you didn’t handle well. As you face more difficult and complex challenges, you will have more opportunities to create more tapes – and of course you would rather add another “I’m Proud Tape” or “Good Job Tape” to your collection.

Moral Performance is effective moral leadership in situations that test and reveal integrity.

In his book, Defining Moments, Joe Badaracco includes three case studies of defining moments: Steve Lewis, Peter Adario, and Edouard Sakiz. In each of these situations, the moral dilemma was a test of integrity revealed in behavior, illustrating that integrity is ultimately about performance. The cultivated moral vision, code, and fitness of a leader are tested in what s/he actually does. This section of the workbook guides you through a method for responding to and managing a moral dilemma. The Moral Compass Model for Ethical Discernment is a framework and worksheet for assessing a moral dilemma. It is suitable for either individual use or as a group process. Using the Moral Compass Model for Ethical Discernment You will usually use the Moral Compass Model for an individual discernment or as a peer dialogue with a trusted colleague or friend. It is appropriate as a group process when 1) there is a moral dilemma involving a number of people, or 2) there has been a visible or pervasive breech of moral conduct that must be addressed and there are conflicting or uncertain views about how to respond. Before conducting a moral discernment, it is good to define the value conflicts involved. Very often it may seem to be a “right versus right” situations. Some of these might be: • • • • • • Short term versus long term interests Individual versus community/organizational interests Integrity of rules versus integrity of relationships Majority versus minority interests Truth versus loyalty Justice versus mercy

For a discussion of right/right dilemmas see Rushworth Kidder’s book, Resolving the Dilemmas of Ethical Living. To find out more about Rushworth Kidder’s framing of moral dilemmas and to see Chapter One, go to www.globalethics.org/pub/touchchoices.html.

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Defining your Defining Moments Have you ever had an experience that keeps playing through your mind because you are not sure you handled the situation as well as you might have? This is your opportunity to replay that tape and give it a different script. One of the best ways to use the Moral Compass Model for Ethical Discernment is to apply it to one of your own defining moments. In the space below, briefly describe a moral dilemma from your own experience. Be sure to identify whether it was a personal, organizational, or external “issue” dilemma and describe its moral challenge in terms of its right/right competing claims.

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THE MORAL COMPASS ©
A Model for Ethical Discernment and Dialogue
Case Summary What is the immediate or urgent moral challenge?

What are the salient facts of the case?

How did the situation come about?

What is the key issue? Why do you consider the key issue a moral challenge? What are the associated risks, dangers, uncertainties, and/or opportunities?

Who are the key stakeholders? What are their roles? What is the potential impact of the moral challenge on key stakeholders?

Are the moral issues right/right or right/wrong? Are they personal (involving one or more individuals), organizational (involving many people or classes of people in the organization), or external (involving the role of the organization in the broader community)?

What parameters (time, resources, etc) constrain response to this situation?

Who are the key decision makers?

What other factors need to be considered?

What response options are available?

Other relevant thoughts or observations?

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Discerning the Ethics of the Corporate Citizenship How does the situation align with corporate integrity?

CODE What moral claims and obligations are suggested in the corporate mission and goals? What moral claims and obligations are established in the corporate code of ethics? What are the moral claims and obligations of: Duty? Rights and justice? Virtue? Relational integrity and care? Utility? Other ethical standpoints?

VISION What ideal worldview does the corporation mission project? What values are projected by the corporate branding, logo, and slogan? What values are projected by corporate media image and advertising? What is the character and reputation of the company among key stakeholders? What is the character and reputation of the company in the external community?

PERFORMANCE How is this moral challenge a “defining moment” for the company’s character and integrity? What is the short-term and long-term impact of this moral challenge on corporate value creation? How are key stakeholders involved in the decision process and its implementation? Who will be publicly responsible for the decision and its consequences? What story will people tell about this decision?

FITNESS What are the moral strengths and vulnerabilities of the company? How consistently does the company adhere to its values and principles? How does the company cultivate its moral strengths and minimize vulnerabilities? How does the company cultivate moral conscience among stakeholders? How does the company reward ethical conduct?

What are the most urgent moral claims and obligations of this case? What are the competing interests of moral claims and obligations?
(Are they short term/long term, minority/majority, rules/relationships, truth/loyalty, justice/mercy dilemmas?)

On what grounds will competing claims and obligations be assessed and prioritized? How do individuals, families, groups, and other corporate entities (business, government, civic, and nonprofits) share responsibility for honoring these claims and obligations?

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Notes What should be recorded to document the moral discernment process?

Participants Who participated in the moral discernment process?

Date, location, and time:

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Case Synthesis
What response option aligns best with corporate values and obligations of corporate citizenship? In view of learning from the critical discernment process, what is the best moral response to this situation?

How will the response be implemented?

Does the moral reasoning of this response need to be communicated to stakeholders? If so, how?

What is the potential negative collateral impact of this response? On whom? How will this be managed?

How will the outcomes of this decision be monitored and evaluated? By whom? Using what criteria? Communicated to whom?

Will it be possible to modify the decision? How? Under what circumstances?

Other thoughts to consider?

DECISION STATEMENT Write a statement that explains the decision clearly in one paragraph:

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Jot down your initial thoughts about each of the statements associated with the Moral Compass Model for Ethical Discernment and Dialogue, noting and giving reasons for anything you especially agree with, don’t understand, or would like to challenge.

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Using the Moral Compass Model for Dialogue and Discernment Can you think of a current situation in which using the Moral Compass might help you manage an ethical dilemma or make a difficult decision? Describe the situation and how you think using the Moral Compass might be helpful.

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Values and Global Value Creation
CORE LEARNING

Morality is embedded in the political economy; global free markets thrive on relationships of integrity, transparency, and trust among multiple stakeholders.

•

Human flourishing is the instrumental means and ultimate measure of value creation.

•

Freedom creates competition and choices among markets, ideas, and values.

•

Society legitimates wealth derived from sustained value creation.

•

Globalization has moral implications.

•

Stewardship of the social and material environment is the shared responsibility of multiple stakeholders: business, government, civil society, and individual citizens.

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As you reflect on the phrase “moral challenges of globalization,” what associations and ideas come to your mind?

Jot down your initial thoughts about each of the five statements associated with the moral challenges of globalization, noting and giving reasons for anything you especially agree with, don’t understand, or would like to challenge.

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values and global value creation

Ethics and Economics
What is the purpose of the economy? How do we know if it is achieving its purpose? You may answer these questions from your own frame of reference, assuming that if you are doing well, the economy is doing well. Or you may answer it theoretically from your academic knowledge of economics. As a leader, your frame of reference expands to include the people, organizations, and communities you lead. You understand that the economy is fundamentally a about people and relationships. An economic system is a structured network of people, institutions, resources, processes, and relationships that orders the production, exchange, distribution, and consumption of goods and services. An economic system is also a value system driven by rules and norms of economic practice that reflect the interests of the people and institutions who constitute it. While most economists do not consider themselves to be ethicists, they adopt an ethical standpoint, for instance, in the standard theoretical framing of the driving force of economic activity as rational self-interest. Rational choice theory posits a particular view of human nature and decision-making that privileges rationality in economic choices. Anyone who has paid dearly for that cool Fendi handbag or flat screen television knows the limits of rationality in determining human economic behavior. Setting aside the critique of rational choice theory, the economy is a creation of human agents whose economic decisions are shaped by their value judgments. In this sense, economics, as Adam Smith understood in his moral philosophy of economics, The Wealth of Nations, is inherently about ethics. The term “political economy” originated in the 18th century when Johns Locke, Adam Smith, and David Ricardo began analyzing and theorizing about the economic behavior of nation states. As educated men, they drew from their knowledge of classical Greek to create the conceptual language of intellectual discourse. Ricardo’s classic work, Principles of Political Economy and Taxation, systematized economic theory and introduced new theories of the value of labor and comparative advantage. The Greek term “polites” refers to nation states. The Greek term “oikonomikos” refers to the principles of managing a household. “Political economy” therefore refers to the way nation states plan and manage their resources. Economists now rarely use the term “political economy,” referring instead to the “economy” and ”economics.” In contemporary academic discourse, “political economy” refers to interdisciplinary approaches to understanding the dynamics of economic and political institutions and agents as well as to theories about the relationship between economic power and political power. The term “political economy” is often used in theories of ethical economy to emphasize the intersection of economic and political thought. Economic ethics is an emerging discipline that attempts to develop an integrated understanding of the ethical dimensions of economic systems and behavior. As Daniel Kahnemann and Amos Tversky have demonstrated, the calculus of human economic behavior is more complex than even the most powerful tools of mathematical modeling. Peter Koslowski identifies three reasons for a renewed interest in economic ethics:

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1) Growing awareness of the cultural and ecological externalities generated by economic behavior and a need for ethical accountability. For example, the technologies of gaspowered transportation vehicles and coal-powered electricity have generated enormous economic growth and human benefits. On the other hand, depleting oil reserves and global climate change have forced us all to reconsider our relationship to these technologies and the lifestyles they make possible. 2) A resurgence of humanism and respect for the human person with awareness that the empirical science of economics studies the human subject. Affirmation of the value of human life raises concomitant economic considerations of the quality and equality of human lives. While the strength of economic and financial modeling tools has dramatically increased the scale of global wealth creation, the benefits of this wealth have been reserved for proportionately few people. New legions of billionaires have used the power of these tools to amass fortunes far exceeding the wealth of many national economies while millions of human beings are unable to support themselves at even a subsistence level. Such inequities raise questions about how the economy should work and how it should be evaluated. 3) Increasing tension between competitive economic forces driving commodification and human needs for social cohesion that may confound rational principles of economic choice. The drive for “getting it cheaper” has revolutionized consumer behavior. Consumers in the industrialized world can shop online for French cheese, Chinese electronics, Italian shoes, and Argentine wine without the tedious inconvenience and expense of checkout lines, clerks, or parking lots. Meanwhile, researchers report that Americans are becoming more socially isolated with fewer friends, less involvement in social institutions, and little contact with neighbors. Young adults and adolescents in wealthier segments of societies may spend more time relating to people through technology -- online communities, TV and DVDs, and iPod musicians -- than in face-to-face interactions with family members or friends. How much should the economics of technological development determine the relational quality of human lives? Looking at the world we have built for ourselves, a growing number of us are asking, “Is this the world we want?” We are reminded of Aristotle’s observation that ethics is less about theory than about praxis – what we do. Whatever we might say or theorize about our values, our actual behavior expresses our values and priorities. So what happens when we think we are making one choice (cheap goods and services), but in making that choice we are also making another “invisible” choice (social disintegration)? In this situation, the second choice is embedded in the first choice. The full meaning of our choices is not apparent until we examine critically the pattern of choices and consequences to identify how certain primary choices are structured to entail secondary choices that may in fact carry unwelcome and enduring effects. The global economy is a framework of embedded choices. Consider “outsourcing.” A policy initiative to “fix” the problem of outsourcing by protecting American jobs may actually limit the flow of affordable goods and services to the very low-wage workers the initiative is intended to protect. Are the critics of outsourcing insensitive to the consequence of higher prices for American-made products? Or are they intentionally advocating a local, more costly economic community as a way of maintaining the social infrastructure of the local economy? The only way to understand the choice structure is to identify the embedded choices, compare and discuss them, and weigh the full cost and benefit of each.

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Think about some of the economic choices you have made in the last week. What have you bought or sold? Do you drive a car or take public transportation? Where were your clothes made? Where was your food grown? Whose jobs form the supply chain of your choices?

Can you identify some of the embedded choices in your economic decision?

Examine one embedded choice you have identified. How comfortable are you with the consequences of that choice? Explain your thoughts and feelings about this choice.

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Globalization
Globalization is controversial. The term itself is contested, with some preferring the term “internationalization” to emphasize the value of free international commerce within a political environment of stable nation states. In contrast, some observers of globalization foresee a future of diminishing importance in the role of the nation state. Others argue that globalization is nothing new – that it has been an evolving process of expanding markets dating back to earliest human societies. In this view, the unprecedented scale in globalization of cultures, commercial institutions, regulatory structures, and financial systems made possible by technology reflects a continuation of longstanding market dynamics. Whatever their views of globalization, most observers agree that it involves far more than economics and includes multiple dimensions: • Cultural: There is increasing traffic across national boundaries, bringing people and cultures into more regular and constant contact with one another. Worldwide trends and fads (e.g., entertainment, clothing, pop culture, and food) are commonplace. Political: The WHO, UN, and countless NGOs have emerged as vehicles for involving people of all national origins in the internal and international affairs of their own and other nations. Market structures and institutions: International organizations such as the EEC, WTO, NAFTA, and G8 increasingly frame the market dynamics of nations and companies. The international corporation, with assets and operations constantly shifting among many countries, has become the dominant structure for large-scale wealth creation. Financial systems: International organizations such as the WTO, IMF, and World Bank have emerged to play an increasing role in international financial transactions. Global telecommunications: The internet, satellites, fiber optics, and constantly emerging technologies provide the infrastructure to reduce and even eliminate barriers to international exchange and collaboration in all fields.

• •

• •

Most of the world has joined Americans in their love of free market capitalism and since the collapse of the Communist bloc there has been little evidence to challenge the global dominance of capital markets. While wealth inequality remains a serious concern, free market capitalism has succeeded in generating unprecedented levels of wealth distributed throughout the globe. When people are free to produce, consume, and exchange goods and services through their own choices rather than through the centralized decisions of their governments, the result is an economy that quickly responds to the changing dynamics of supply and demand. What sometimes goes unexamined is the foundation of trust on which free markets are built. When you buy a car, cross a bridge, get into an elevator, or eat a hamburger you are confident that the car meets the published specifications, the bridge will hold, the elevator will take you to the proper floor, and the hamburger won’t make you sick. On the rare, annoying occasions when your expectations are not met, you rightly expect some kind of compensation or at least an apology. Although incidents of cheating, corruption, and fraud make big news, they are relatively rare in an economy where confidence has to be earned. Anyone can be fooled once, but in a free economy, companies that cheat don’t usually rely on repeat business. The global passion for free markets has extended to areas of public policy traditionally reserved for government. Since the market works so effectively in delivering the products and services that people desire, and since consumers exert such powerful force in maintaining a market environment of trust and confidence, why not marketize everything? Health care, welfare, prison management, public schools – let’s put out contracts and let private enterprise bid for the highest quality at the most affordable price. Isn’t that the best way to assure that citizens and taxpayers receive the best value?

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In his recent book, The Shield of Achilles, Philip Bobbit contrasts the role of the emerging “market state” with the role of the nation state, observing that traditional nation state government applies the force of law and fiscal authority to ensure personal rights, freedoms, and protections for individual citizens. With increased globalization, nation states are less autonomous in managing their internal affairs, regulating their economies, and providing for the public good through law, policy, and programs. In the era of the market state, global corporations operating within and beyond the boundaries of nation states exercise a powerful influence on nation states by providing for many of the needs and wants of its citizens more effectively governments. Yet, it is not the work of business to care for people in old age, provide health care and housing for the poor, or protect the interests of children. These important endeavors may sometimes be profitable, but usually they are not. Free markets can serve many human needs and wants far better than government, but they cannot do everything. Furthermore, there are public interests that may not be well served by the promise of wealth or the forces of free and knowledgeable consumers. Think about the role of business and government in your life. What needs and wants do satisfy through reliance on business and your own economic power?

What needs and wants do you enjoy that cannot be effectively guaranteed by business and your own economic power?

How do you rely on government to protect and preserve your rights and freedoms? What does it cost you? Who shares the cost?

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The Moral Challenges of Globalization
Peter Singer explores the moral dimensions of globalization in his book, One World, framing the key moral challenge with stark simplicity in the first chapter:
The great empires of the past, whether Persian, Roman, Chinese, or British, were, as long as their power lasted, able to keep their major cities safe from threatening barbarians on the frontiers of their far-flung realms. In the twenty-first century the greatest superpower in history was unable to keep the self-appointed warriors of a different worldview from attacking both its greatest city and its capital. The thesis of this book is that how well we come through the era of globalization (perhaps whether we come through it at all) will depend on how we respond ethically to the idea that we live in one world. For the rich nations not to take a global ethical viewpoint has long been seriously morally wrong. Now it is also, in the long term, a danger to their security. SOURCE: Peter Singer, One World: The Ethics of Globalization, Yale University Press, 2002, 13.

In the remainder of One World, Singer echoes Peter Koslowski in identifying four moral challenges of globalization: Environmental degradation, economic injustice, violence, and indifference. All of these problems can be seen as byproducts of a global economic engine that is insensitive to the fragility of natural ecosystems and human communities. If we as humans want an economic system that is protective of people and the environment, then we must use our intelligence and imagination to embed the structural incentives to shape its functioning in that direction. One of the challenges of a global economy is that no one is “in charge.” To take charge of the economy and shape it in a way that is responsive to the needs of people and the planet would take the voluntary cooperation of corporations, governments, consumers, and citizen groups all over the world. Despite the formidable challenge, there is evidence that this is happening. One example is the Global Compact, an international initiative launched by businesses committed to responsible economic practices. You can examine the Global Compact at www.globalcompact.org What do you think of the Global Compact initiative?

What kind of response do you think you would get if you proposed to your company’s CEO and Board of Directors that it should join the Global Compact?

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Human Rights and Freedoms
Americans treasure the heritage freedom and equality expressed in the Declaration of Independence, the Constitution, and the Bill of Rights. These Charters of Freedom are enshrined in the National Archives in Washington, DC and are accessible online to anyone. This might be a good time to reflect again on the values represented by the Charters. Revisit the American Charters of Freedom enshrined in the National Archives at http://www.archives.gov/national-archives-experience/charters/charters.html. As you examine these documents, what would you define as essential American values?

John Rawls, the late Harvard political philosopher from Harvard outlines basic principles of freedom, equality, and justice shared by people of democratic nations:
1. 2. 3. 4. 5. 6. 7. 8. Peoples are free and independent, and their freedom and independence are to be respected by other peoples. Peoples are to observe treaties and undertakings. Peoples are equal and are parties to the agreements that bind them. Peoples are to observe a duty of non-intervention. Peoples have a right to self-defense but no right to instigate war for reasons other than self-defense. Peoples are to honor human rights. Peoples are to observe certain specified restrictions in the conduct of war. Peoples have a duty to assist other peoples living under unfavorable conditions that prevent their having a just or decent political and social regime.

SOURCE: John Rawls, The Law of Peoples, Harvard University Press, 1999, 37.

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What are your thoughts about Rawls’ principles of democratic and free nations?

How do these principles compare with your ideas about essential American values?

The principles of human rights and freedoms are familiar to the 192 member nations of the United Nations which promulgated the Universal Declaration of Human Rights in 1948 after thousands of drafts involving lengthy, detailed review and discussion of every word in the document. The Declaration represents a deep commitment to global peace and prosperity based on respect for the value of human persons. You can examine the Declaration for yourself by visiting the UN website at http://www.un.org/Overview/rights.html. What are your general reflections on the Universal Declaration of Human Rights?

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How do the Declaration principles compare with those of Johns Rawls and the United States Charters of Freedom?

What kind of global economic system would you envision based on the foundation of human rights and freedoms?

How effective do you think the current global economic system is in protecting and guaranteeing the rights and freedoms of the world’s people?

Ross Zucker examines the economic aspect of quality and justice in his recent book, Democratic Distributive Justice. Arguing on the basis of the supreme moral worth of human beings as social beings, Zucker extends the understanding of justice to encompass just distribution of economic resources as a defining characteristic of democracy by building a social theory of property rights. Americans have traditionally framed democracy in terms of political and civil rights without focusing on economic rights. Zucker, however, insists that a robust democracy includes economic justice. What do you think of the idea that democracy includes economic as well as political rights?

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What kind of economic rights do you think citizens should have in a democracy?

What difference does wealth make in the ability to exercise political and civil rights?

How do you think the values of human rights and freedoms apply to human beings who are not citizens of democratic societies?

What should be the role of the United States in protecting the values of freedom, equality, and justice for people beyond the borders of the United States?

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Reflections on the Value of Human Freedom
What is the value of freedom? In recent years, economists and political theorists have reexamined the relationship between ethics and economics with particular attention to the purpose and goals of economic development. Nobel economist, Amartya Sen, has developed a framework of economic development that uses human freedom as the measure of development effectiveness. The following excerpts from the preface of his book, Development as Freedom, outline five basic human capabilities that he identifies as both the end and the instrumental means of achieving human freedom.

We live in a world of unprecedented opulence of a kind that would have been hard even to imagine a century or two ago. There have also been remarkable changes beyond the economic sphere. The twentieth century has established democratic and participatory governance as the preeminent model of political organization. Concepts of human rights and political liberty are now very much a part of the prevailing rhetoric. People live much longer, on an average, than ever before. Also, the different regions of the globe are now more closely linked than they have ever been. This is so not only in the fields of trade, commerce and communication, but also in terms of interactive ideas and ideals. And yet we also live in a world with remarkable deprivation, destitution and oppression. There are many new problems as well as old ones, including persistence of poverty and unfulfilled elementary needs, occurrence of famines and widespread hunger, violation of elementary political freedoms as well as of basic liberties, extensive neglect of the interests and agency of women and worsening threats to our environment and to the sustainability of our economic and social lives. Many of these deprivations can be observed, in one form or another, in rich countries as well as poor ones. Overcoming these problems is a central part of the exercise of development. We have to recognize, it is argued here, the role of freedoms of different kinds in countering these afflictions. Indeed, individual agency is, ultimately, central to addressing these deprivations. On the other hand, the freedom of agency that we have individually is inescapably qualified and constrained by the social, political and economic opportunities that are available to us. There is a deep complementarity between individual agency and social arrangements. It is important to give simultaneous recognition to the centrality of individual freedom and to the force of social influences on the extent and reach of individual freedom. To counter the problems that we face, we have to see individual freedom as a social commitment. This is the basic approach that this work tries to explore and examine. Expansion of freedom is viewed, in this approach, both as the primary end and as the principal means of development. Development consists of the removal of various types of unfreedoms that leave people with little choice and little opportunity of exercising their reasoned agency. The removal of substantial unfreedoms, it is argued here, is constitutive of development. However, for a fuller understanding of the connection between development and freedom we have to go beyond that basic recognition (crucial as it is). The intrinsic importance of human freedom, in general, as the preeminent objective of development has to be distinguished from the instrumental effectiveness of freedoms of particular kinds to promote freedoms of other kinds. 1.

Political freedoms: The opportunities that people have to determine who should govern and on what principles; the possibility to scrutinize and criticize authorities, to have freedom of political expression and an uncensored press, to enjoy the freedom to choose between different political parties; political entitlements encompassing dialogue, dissent, and critique as well as voting rights and participatory selection of legislators and executives.

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2.

Economic facilities: Opportunities that individuals respectively enjoy to utilize economic resources for the purpose of consumption, production, or exchange. The economic entitlement that a person has will depend on the resources owned or available for use as well on conditions of exchange, such as relative prices and the working of markets. Insofar as the process of economic development increases the income and wealth of a country, they are reflected in corresponding enhancement of economic entitlements of the population. It should be obvious that in the relation between national income and wealth, on one hand, and the economic entitlements of individuals and families, on the other, distributional considerations are important, in addition to aggregative ones. The availability and access to finance can also be a crucial influence on economic entitlements. Social opportunities: Arrangements that society makes for education, health care, and so on, which influence the individual’s substantive freedom to live better. Transparency guarantees: The need for openness that people can expect as freedom to deal with one another under guarantees of disclosure and lucidity. These guarantees have a clear instrumental role in preventing corruption, financial irresponsibility, and underhanded dealings. Protective security: The social safety net for preventing affected populations from being reduced to abject misery, and in some cases even starvation and death. The domain of protective security includes fixed institutional arrangements such as unemployment benefits and statutory income supplements to the indigent as well as ad hoc arrangements such as famine relief or emergency public employment to generate income for destitutes.

3. 4.

5.

Each of these distinct types of rights and opportunities helps to advance the general capability of each person. They may also serve to complement each other. Public policy to foster human capabilities and substantive freedoms in general can work through the promotion of these distinct but interrelated instrumental freedoms.

If you could respond to Dr Sen’s ideas in a fifteen-minute conversation, what would you want to say to him? What questions would you have? How would you affirm or challenge him?

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Values and Global Value Creation
Some critics challenge the notion of economic ethics with the assertion that the goal of the economy is simply to create wealth. Ultimately, however, wealth is created when there is an exchange of value; buying and selling depends of a perception of value that can be highly subjective. Companies like McDonald’s and WalMart have learned that public perception can be highly volatile and that value is far more complex than buying products or services at a low price. Some economists concur with Oxford economist John Kay, arguing that the purpose of a market economy is the production of goods and services; profit is the means to it. Anthony Giddens, former director of the London School of Economics, describes an emerging view of global value creation in his recent book, The Progressive Manifesto, which reframes the economics of social democracy.
The social values of communities are the principle regulators of economic life, and communities (not markets) are the primary mechanisms through which we handle the risks we encounter in daily life. The most important institution in the modern economy is the large corporation, and the successful corporation is not necessarily a community: a community of shared, but not identical objectives. The politics of the corporation, like politics in society, operates best when it mediates these objectives into a common identity. If the corporation fails to achieve this it quickly ceases to be successful, losing both political legitimacy and economic effectiveness. Both markets and the state should be subject to overriding tests of the public interest. The ideological justification is not what “what works”, but how effective a given strategy is in promoting definable public goods. This position also implies subjective major areas of the state and markets to continuous scrutiny. I would compare the changing attitudes towards business today with what happened to perceptions of the state thirty years ago. Business is under a cloud not just because of corporate scandals and the problems of the world economy, but because it has overrun the limits of its own legitimacy. Just as in the case of the state, I don’t think things can go back to how they were before. Companies that don’t take their environmental and social obligations seriously will face increasingly serious resistance, both from consumers and NGOs. Traditional models of stakeholder value are inadequate to meet the challenge. They depend too much upon the corporation identifying its own stakeholders and defining its responsibilities towards them. I would suggest that a useful notion . . . might be that of the civil economy, a concept proposed by the business guru Stephen Davis. . . The civil economy is an analogue to civil society, and in part an extension of it, but focused upon the marketplace. Davis starts from the premise that . . . the business world is eroding its own mandate to operate. We need to build a civil economy in order to recover the legitimacy for business activity, but also to ensure that business acknowledges its wider social responsibilities. Government and the state need thorough-going reform, to make them faster moving, more effective, and responsive, and to reflect the need for greater transparency and diversity in a society where consumer choice has become a prime force. The state should become more of an enabler rather than a direct provider or producer. “Command and control” has visibly failed, not only in the Soviet Union, but also in its milder versions in Western societies, where it took the shape of nationalisation of the “commanding heights” of the economy. The emphasis of the state should now be upon helping people to help themselves. These ideas presume a new citizenship contract, based on responsibilities as well as rights. Anthony Giddens, The Progressive Manifesto, 36, 9, 11, 3

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If you could respond to Dr Giddens’ ideas in a fifteen-minute conversation, what would you want to say to him? What questions would you have? How would you affirm or challenge him?

Johns Hopkins political scientist, Francis Fukuyama, similarly assumes a political economy based on a foundation of human dignity and equality in asserting the integral role of values and ethics in the creation of global economic prosperity:
As modern technology unfolds, it shapes national economies in a coherent fashion, interlocking them in a vast global economy. The increased complexity and information intensity of modern life at the same time renders centralized economic planning extremely difficult. The enormous prosperity created by technology-driven capitalism, in turn, serves as an incubator for a liberal regime of universal and equal rights, in which the struggle for recognition of human dignity culminates. While may countries have had trouble creating the institutions of democracy and free markets, and others, especially in parts of the formerly communist world, have slid back into anarchy or fascism, the world’s advanced countries have no alternative model of political and economic organization other than democratic capitalism to which they can aspire. Today, having abandoned the promise of social engineering, virtually all observers understand that liberal political and economic institutions depend on a healthy and dynamic civil society for their well being. Civil society – a complex welter of intermediate institutions, including businesses, voluntary associations, educational institutions, clubs, unions, media, charities, and churches – builds, in turn, on the family, the primary instrument by which people are socialized into their culture and given the skills that allow them to live in a broader society and through which the values and knowledge of that society are transmitted across generations. A strong and stable family structure and durable social institutions cannot be legislated into existence the way a government can create a central bank or an army. A thriving civil society depends on a people’s habits, customs, and ethics – attributes that can be shaped only indirectly through conscious political action and must otherwise be nourished through an increased awareness and respect for culture. Francis Fukuyama, Trust: The Social Virtues and the Creation of Global Prosperity, 1995

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If you could respond to Dr Fukuyama’s ideas in a fifteen-minute conversation, what would you want to say to him? What questions would you have? How would you affirm or challenge him?

How would you compare the ideas and observations of Giddens and Fukuyama?

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Moral Reflections on the Economy

Who do you think owns the economy? How is ownership determined?

What values should drive the creation of wealth?

What values should drive the distribution and utilization of wealth?

What are the moral claims and responsibilities of human talents and capabilities on society? What is the economic obligation associated with these claims

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The Economy as a Moral System
If you were to outline your ideas about the global economy as a moral system, what would it look like? Using the following framework from the Moral Compass, jot down some of you ideas:

Your list of the values that drive the economy

Your vision or “mental model” of the economy

Your list of economic performance challenges and response strategies

Your list of practices that create a “fit” economy

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Reflective Dialogue
When you have finished this chapter of the Course Manual, compare your thoughts and reflections in a dialogue with a colleague, classmate, or friend. Plan to take some time for this conversation – have a cup of coffee or even share a meal together as you talk. Compare your representations of the economy as a moral system, taking note of the differences and similarities in your schemas. Make sure you try to understand each others points of view without resorting to highpressure arguments intended to “convert” each other or force a consensus that is not genuine. It is okay to disagree.

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corporate citizenship
CORE LEARNING

Corporations are moral agents with a social charter of value creation .
Corporate moral agency involves responsible citizenship and selfgovernance in the strategic creation of value.

•

•

Corporations model morality, foster moral climate, and make decisions involving the material/social environment in response to competing values and claims.

•

Corporations are accountable to society for the morality they model, the moral climate they create, and the moral quality of their decisions.

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As you reflect on the term, “corporate citizenship,” what associations and ideas come to your mind?

Jot down your initial thoughts about each of the statements associated with corporate citizenship, noting and giving reasons for anything you especially agree with, don’t understand, or would like to challenge.

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corporate citizenship

Corporate Citizenship and Social Responsibility
In its 2003-04 Major Issues Survey of North American companies, the Human Resources Institute found that ethics ranked among the top three critical business issues for workforce management. In a more recent study conducted jointly with the American Management Association, North American business leaders reported that concerns about business ethics centered around preserving corporate “brands reputations as well as maintaining consumer trust and investor confidence.” In the same report, business leaders stated that a major factor contributing ethical misconduct was the pressure to meet unreasonable deadlines or performance standards. Students of business ethics are often fascinated by the fact that Enron, the emblematic postercompany of corporate corruption had what was considered a model corporate code of conduct, illustrating that the “tone at the top” exerts far more influence on actual behavior than rules and policies in a book. While most business leaders and observers agree that the tighter regulatory environment spearheaded by Sarbanes-Oxley is necessary and good, the root of corruption and ethical misconduct is lack of integrity among a company’s key decision-makers and agents. The push for short-term profits can lead to a serious compromise of long-term value, not only for consumers and shareholders, but for the company itself. As noted in the previous chapter, our understanding of business and the purpose of the corporation has evolved in the past century. While most stakeholders might have been very comfortable a few years ago with defining a company’s purpose simply as a means for making money, we are now seeing a growing emphasis on the social purpose and accountability of business. While there might be no argument about the need for a company to generate a profit, there is debate about the centrality of profits as its purpose. The American Management Association’s report on ethical enterprise indicates that businesses see ethics as increasingly necessary in maintaining their competitive position in a dynamic global marketplace of products, services, and ideas. There is little suggestion that businesses find this fact onerous or that they would prefer to operate without the expectation of ethics and accountability. What do you think is the purpose of business? What role do you think ethics plays in fulfilling the purpose of business?

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You may be interested to learn more about how businesses see themselves and their ethical concerns as reflected in the 2005 publication, Ethical Enterprise. • • • • The number one reason for running an ethical business, today and in the future, is protecting a company’s reputation. Maintaining an ethical business environment has become more important and more challenging in today’s fast-changing global marketplace. The pressure to meet unrealistic business deadlines or objectives is the factor most likely to cause people to compromise ethical standards in companies. Business scandals have had a major impact on business ethics in recent years but, in the future, globalization and competition will be the top business drivers of ethics. Laws and regulations are, and will remain, the most influential external drivers of corporate ethics, but issues related to the environment are expected to become considerably more important in the next 10 years. As technologies grow ever more powerful and pervasive, they will raise difficult ethical questions with which companies will have to deal. Globalization brings many ethical challenges, especially in developing nations where issues related to forced labor, child labor, and working conditions are top concerns. Corporate culture is crucial to creating and maintaining an ethical environment, but culture is notoriously difficult to shape and change. Doing so requires a systems framework approach. Leaders who support and model ethical behavior and communicate such values are critical to a company’s ethics. Establishing codes of conduct and training programs are seen as the most important corporate practices for contributing toward an ethical culture. Also important are ombudsmen to provide confidential and informal guidance and helplines to officially report malfeasance. Having the right measurements and indicators is necessary to gauge the corporate ethics environment. The companies with best-in-class ethics practices will increasingly gear their strategies toward “external” stakeholders, such as customers, suppliers, business partners, investors, and communities. In terms of serving customers and investors, ensuring transparency is key. The best way of encouraging ethical conduct among suppliers is through codes of conduct and audits. In the near future, companies will seek ways to become more proactive in terms of dealing with problems that pose, or may soon pose, ethical challenges. The Ethical Enterprise, vi-vii American Management Association/Human Resource Institute What surprises or puzzles you about the findings of the Ethical Enterprise report?

•

• •

•

• •

• •

• • •

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A Stakeholder View of Value Creation
James E. Post, Lee E. Preston, and Sybille Sachs have outlined a stakeholder view of organizational wealth. Affirming the standard business view that the purpose of the corporation is to create value measured in wealth creation, they analyze how firms create value for their employees in the form of compensation, working conditions, and career opportunities; for their customers in the form of product and service benefits that are worth more than they pay for them; for investors, whether as shareholders or lenders; and for suppliers, communities, and governments. Fundamentally, they insist, a corporation creates value by increasing its capacity to generate such benefits over time. (Redefining the Corporation: Stakeholder Management and Organizational Wealth, 2002) Business is about relational assets. Carrie Leana and Denise Rousseau define relational wealth as “the economic advantage derived from keeping intact the relations businesses have with their workforce, suppliers, and communities,” (Relational Assets, 2000, 1) arguing that “work – and how it is carried out in organizations – is fundamentally about relationships: relationships between a firm and its employees; relationships of employees with one another; relationships between a firm and its investors, suppliers, partners, regulators, and customers.” (Relational Assets, 3) In the stakeholder view of the corporation, relationships and linkages with stakeholders, both internal and external, are important assets of the firm. These assets directly impact its capacity for generating future wealth. A successful business, therefore, will consciously value and invest in its relational assets as an integral part of its value creation strategy. Intangible Assets Relational assets are among the “intangible assets” represented by the accounting concept of goodwill. While business and economics have traditionally focused on easily measured forms of wealth such as the cost of labor or capital, this transactional view of assets fails to account for the value of ideas, reputation, loyalty, and values. Since a growing share of wealth is generated from enterprises trading in intangible assets, the role of intangibles in accounting and economics is increasingly important. For example the “balanced scorecard” concept developed by Kaplan and Norton (1966) was inspired by a belief that a company’s ability to leverage its intangible assets is a decisive competitive factor in its competitive success. Trust as and Intangible Asset Trust is an intangible asset. Francis Fukuyama (Trust: The Social Virtues and the Creation of Prosperity, 1995) emphasizes that trust is a kind of “social glue” that enables people to work together without reducing every interaction to explicit bargaining and formal contracting. In a similar vein, Harvard political scientist Robert Putnam (Bowling Alone: 2000) stresses the importance of “social capital” based upon trust that both facilitates and results from collaborative activities among individuals. Trust is viewed by many observers of the business world as a feature of “relational contracting,” a middle ground between the conventional alternatives of fully negotiated market exchange and complete integration within an organizational hierarchy. Ring and Van de Ven (1992, 1994) and Jeffries and Reed (2000)

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Intangible Assets and Organizational Wealth Organizational wealth is the long-term capacity of an organization to create benefits for its stakeholders. In addition to the market value of physical and financial assets, organizational wealth includes the value of discrete intangible assets such as: human intellectual capital, patents, and licenses; and the value of relational assets, both internal and external, involving stakeholder linkages, collaborations, processes, reputation, and branding.

The Social Charter of Value Creation
These views reflect what may be thought of as the “social charter” of the corporation. While some of the social charter is found in laws and regulations, the bulk of it is in the opinions, values, and behavior of people who constitute the social environment of business. Business, nonprofit, and government organizations operate under a “social charter” of community agreement about the value of their contributions to the good of society. The goods, services, and capital generated by business are the currency of their social charter – but so is the ethical branding and reputation. Think about the differences among the various brands of cars in the marketplace. A car is not just a car. Each car builds on the branding of a company’s unique mix of engineering, style, cost, promotion, target consumers, customer service, and a host of other factors. A generation ago, Chevrolets were “as American as apple pie” and General Motors was a solid manufacturing company; today, Americans aren’t driving Chevrolets and GM is in trouble. Many factors contribute to the changing dynamics of the automobile industry, but the power of consumers to make or break a company remains a key element of the social charter of value creation. To stay in business, companies must persuade people that what they provide is of sufficient value to part with their hardearned money. Think about the industry in which you currently work. What key factors drive the creation of value in your industry?

Think about your company. How does your company position itself in this industry? How does it use the industry value drivers to create comparative advantage?

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What is the role of ethics and values in this industry?

How does your company use ethics and values as part of its branding and positioning strategy for value creation?

Can you think of some other industries in which ethics and values are an important factor in determining value?

Can you think of an industry or company in which ethics and values have no role in value creation? What do you think is the reason for this?

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Models of Corporate Citizenship
In exchange for the privilege of doing business, companies are expected to be good institutional citizens of the societies that charter them. The social environment of business doesn’t just “happen” – it is the creation of the myriad thousands of small choices and habits of people and institutions constituting the stakeholder environment. A company may claim that it can’t control its environment or that it is just responding to consumer demand. That is partly true. But the vitality of the market environment depends on the conscientious participation of business stakeholders in creating real value for society. Corporate citizenship is increasingly seen by business leaders as a key factor in company effectiveness. Corporate citizenship may be understood primarily as the social contribution a company makes through its core business activities, but it also includes its social investment and philanthropy as well as its engagement in public policy. Many companies now consider corporate citizenship as part of their branding and display their philosophy and activities prominently on their websites. You can view some examples for yourself using the URLs below. You can also download the corporate citizenship reports for these companies from their websites.

Cisco strives to be a good citizen worldwide. Our culture drives us to set high standards for corporate integrity and to give back by using our resources for a positive global impact. We pursue a strong "triple bottom line" which we describe as profits, people and presence. Profits are one traditional and valuable metric which helps measure our financial performance. People are equally important. Strong, mutually beneficial relationships with partners, customers, shareholders and the people who work for, with and near us are essential to our business. The third bottom line – presence – measures our standing in, respect for and contribution to global and local communities. We believe companies with strong triple bottom lines are the most sustainable, responsible and successful. We hope the information in the pages of this web site demonstrates our commitment to a strong triple bottom line.

http://www.cisco.com/web/about/ac227/about_cisco_corporate_citizensh ip_home.html

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Today’s interdependent global economy is creating new opportunities for growth— and the corresponding challenges of managing that growth responsibly. In both instances, GE’s size is an advantage. GE is solving big needs for countries that need the broad range of infrastructure, financing and healthcare that economic growth demands. GE is also solving big needs on behalf of the challenges that face all of us—including access to clean water, limited natural resources and the need for more energyefficient products and services. GE is committed to being a good global citizen and leveraging its size to make a positive impact—by solving big needs.

http://www.ge.com/en/citizenship/index_b_flash.htm

Microsoft is committed to being a responsible industry partner, working with businesses, communities, and governments to help advance social and economic well-being and to enable people around the world to realize their full potential. Over the past three decades, we have expanded our business from the United States into more than 90 other countries, and we now employ nearly 60,000 people globally. While Microsoft, by many measures, could be considered the world's most successful software company, it is also a local company and a neighbor in every country and community where Microsoft employees live, work, and do business. As a successful global corporation, we have a responsibility to use our resources and influence to make a positive impact on the world and its people. At Microsoft, our passion to do well is matched by our desire to do good. We believe the best way to achieve those parallel goals is to align our business and global citizenship strategies. To achieve that goal, we consulted with our employees, and with people in government and industry from many parts of the world, because we wanted to create a citizenship framework that would both reflect and enhance the other aspects of our business.

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http://www.microsoft.com/about/corporatecitizenship/citizenship/default.mspx

At Anheuser-Busch, we take our role as a corporate citizen seriously. Whether it is through supporting community groups across the U.S., protecting the environment, observing the highest ethical standards in all our business dealings, a commitment to diversity in our hiring, or promoting the responsible use of our products by adults, Anheuser-Busch has always believed that doing good by the public and doing well as a company go hand-in-hand.

http://www.anheuser-busch.com/Citizenship/default.htm

What is your general impression of the way these companies frame and describe their corporate citizenship?

How does the concept of corporate citizenship contribute to an understanding of the role of corporations in society?

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Corporate Accountability
Marc Epstein and Bill Birchard believe that corporate citizenship has evolved in recent years to a point where social accountability is now seen as an important source of competitive advantage. They describe the ethical leadership Ed Woolard, Chairman of DuPont, in his public commitment to what were seen at the time as impossible goals: Cutting toxic air emissions by 60 percent, carcinogens by 90 percent, and hazardous waste by 35 percent. Ten years later DuPont was able to document impressive progress towards meeting these goals. Contrary to expectations of his critics, DuPont was able to showcase its corporate citizenship and social responsibility as a major element in its branding. (Counting What Counts: Turning Corporate Accountability to Competitive Advantage, 2000, 3) In their analysis of companies that practice corporate accountability as a strategy of competitive advantage, Epstein and Birchard identify four elements of corporate accountability: Governance, measurement, management systems, and reporting. (Epstein and Birchard, Counting What Counts, 8-12)

Corporate G overnance
Corporate governance involves the rights and responsibilities of a company’s management, its board, shareholders and various stakeholders. Good corporate governance is essential for companies to acquire capital and for countries to stimulate private sector investment. The enactment of Sarbanes-Oxley (SOX) has dramatically shaped the US understanding and practice of corporate governance. SOX legislation was more than a response to corporate scandals and malfeasance, reflecting a worldwide attention to corporate governance. For example, the Organization for Economic Cooperation and Development (OECD), formed be a coalition of European and North American countries in 1960, established principles of corporate governance endorsed by all member nations of the OECD, including the United States, in 1999. These principles were adopted to “promote transparent and efficient markets consistent with the rule of law to clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities,” with the primary goal of strengthening market performance, integrity, and incentives. The principles focused on four essential elements of governance: shareholder rights and responsibilities and their equitable treatment by corporate management; the role of stakeholders in corporate governance; practices of disclosure and transparence; and responsibilities of the Board of Directors. (http://www.oecd.org/faq/0,2583,en_2649_37439_31717413_1_1_1_37439,00.html)

M easurem ent of Perform ance and Strategic M anagem ent
Measurement of financial and managerial performance and linking both to strategic goals has proven to be one of the most challenging aspects of corporate governance. Companies have come to understand the paradoxical truth of Peter Drucker’s observation that a narrow focus on financial

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measures fails to reveal or explain all of the vital health indicators of a corporation. (Drucker, “We Need to Measure Not Count, The Wall Street Journal, 1993, 13) Recently developed performance methods integrate financial, operational, and social performance indicators, functioning as strategic management tools that link financial performance outcome metrics (such as profit, gross margin, return on investment, and revenue growth) with operational performance outcome metrics (such as leadership effectiveness, process efficiency, human resource development, customer relationships, product and service innovation, corporate ethics, risk management, and branding) and social performance outcome metrics (such as toxic emissions, supply chain integrity, and labor practices). Two examples of performance measurement systems that balance financial and nonfinancial elements are the Balanced Scorecard and Six Sigma. The Balanced Score Card Introduced in 1992 by Harvard Business School collaborators, Robert S. Kaplan and David Norton, the Balanced Score Card (BSC), was designed to measure a company's effectiveness in aligning its activities and processes with its vision and strategies to create a comprehensive view of its performance. The BSC is a strategic management system that balances a financial perspective with customer, internal process, and learning & growth perspectives. The BSC system consists of four processes: 1) Translating the vision into operational goals; 2) Communicating the vision and linking it to individual performance; 3) Business planning; and 4) Adjusting strategy in light of feedback. These four processes are measured from four key perspectives: 1) Financial perspectives measured by indicators such as cash flow, debt ration, or ROI; 2) Customer perspectives measured by indicators such as customer satisfaction, complaints, service processes, and competitive rankings; 3) Business processes measured by indicators such as sales prospecting time and process costs; and 4) Company learning curve measured by indicators such as volume of employee suggestions or hours of staff development. Companies using the BSC system adapt it to specific metrics appropriate to their industry and unique strategic goals. In their studies of applications of the BSC (“Using the Balanced Scorecard as a Strategic Management System, Harvard Business Review, 1996), Kaplan and Norton have found that the BSC is used effectively to • • • • • • Clarify and update strategy Communicate strategy throughout the company Align unit and individual goals with strategy Link strategic objectives to long term targets and annual budgets Identify and align strategic initiatives Conduct periodic performance reviews to learn about and improve strategy.

Six Sigma Pioneered in 1986 at Motorola, Six Sigma was designed to link measurement of key business and product design processes to company strategic goals. The term, Six Sigma, is derived from the statistical measurement of deviations from perfection. The two basic applications, DMAIC (to improve existing business processes) and DMADV (to create no product or process designs) are both geared to create more predictable, mature and defect free performance.

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The DMAIC application is an acronym for its five phases: • Define the process improvement goals consistent with customer demands and enterprise strategy. • Measure to define baseline measurements on current process for future comparison and continue to collect map and measure process data. • Analyze to verify relationship and causal factors. • Improve and optimize the process based on analysis • Control using pilot runs to establish process capability; continue ongoing process measurement with control mechanisms to correct variances before they result in defects. The DMADV application is also an acronym for five comparable phases: • Define the goals of the design activity consistent with customer demands and enterprise strategy. • Measure product capabilities, production process capability, risk assessment, etc. • Analyze design process to create high-level design alternatives and evaluate design capability to select the best design. • Design optimal design detail and plan for design verification with simulations as necessary. • Verify design, run pilots, implement production process, and hand it off to process owners. Six Sigma identifies five key roles for its successful implementation. • Executive Leaders are responsible for establishing a vision for Six Sigma implementation and empowering company members in their roles with the freedom and resources to explore new ideas for breakthrough improvements. • Champions are responsible for integrating Six Sigma implementation across the organization and mentoring Black Belts. • Master Black Belts, identified by champions, are expert internal coaches devoting their time totally to Six Sigma. They assist champions and guide Black Belts and Green Belts. • Black Belts operate under Master Black Belts to apply Six Sigma methodology to specific projects, devoting their time totally to Six Sigma with a primary focus on project execution. • Green Belts are employees who implement Six Sigma as part of their job responsibilities under the guidance of Black Belts. In addition to Motorola, General Electric is perhaps one of the best known examples of a major company that has adopted Six Sigma as its system for strategic performance management.

Reporting
One of the most revolutionary aspects of new trends in corporate accountability is in the reporting of company financial, operations, and social performance data. Rather than hide information that might be perceived as potentially damaging, forward-looking business leaders are learning to use it to their strategic advantage. Epstein and Birchard cite the example of William McGuire, head of United HealthCare, who decided to release “quality report cards” for each of its fourteen company health plans, divulging sensitive data to the public on customer satisfaction, quality of care, administrative efficiency, and cost reduction. (Counting What Counts, 115) McGuire’s decision to implement transparent reporting was the result of a long-term quality improvement initiative that had earned United HealthCare and enviable customer service rating of 94 (out of 100) in the health care industry with an average rating of 79.

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Rather than resist the reporting requirements of SOX, some companies are also finding that they can use transparency of financial reporting to build competitive advantage. One Maryland example is real estate development and property management giant, The Rouse Company. Long before SOX, Rouse Company executives voluntarily chose to disclose current-value accounting along with mandated cost-basis accounting of its properties through 1996. The stated goal in publishing both market values and mandated cost values was to ensure that shareholders were in a position to properly evaluate the actual financial position of the firm. Although Rouse altered its policy in 1997 for cost and demand reasons, it continues to release both sets of figures to financial-statement users who request them.

Corporate Accountability and Sarbanes-Oxley (SOX)
The Sarbanes-Oxley Act of 2002 (Pub. L. No. 107-204, 116 Stat. 745, the Public Company Accounting Reform and Investor Protection Act of 2002 was signed into law on July 30, 2002. Seen largely as a corrective response to corporate ethics scandals that destroyed both Enron and Anderson, SOX is considered by some observers to be one of the most sweeping regulatory initiatives in US business history. The first provision of the Act establishes a new agency, the Public Company Accounting Oversight Board, to oversee, regulate, monitor, and discipline accounting firms in their roles as auditors of public companies. SOX also covers issues such as auditor independence, corporate governance, and enhanced financial disclosure. For a detailed summary of SOX, go to http://www.soxtoolkit.com/sox-guide.htm. How would you define the essential corporate accountability demands of corporate citizenship?

After reviewing the provisions of the Sarbanes-Oxley Act, how effective do you think it is as a means of ensuring corporate accountability?

Search some of the recent business literature to identify critical perspectives on SOX and list the major objections to its provisions. From a perspective of ethical business, how would you respond to these criticisms?

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What do you think are the economic, political, and social advantages of a more conscientious and intentional business environment of corporate citizenship?

What might be some of the disadvantages?

Reflective Dialogue
Explore your thoughts, experiences, and reflections about corporate citizenship and social responsibility in a reflective dialogue with a colleague or classmate. Be mindful of both your points of agreement and difference. Based on your reflections and dialogue, write out your philosophy of corporate citizenship and social responsibility.

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Your Philosophy of Corporate Citizenship and Social Responsibility

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bibliography

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Greene, J., Sommerville, Bl, Nystrom, L., Darley, J., Cohern, J. Science. (2001). An fMRI Investigation of Emotional Engagement in Moral Judgment,. Science, 293, 2105-2108. Hamel, G. (2000). Leading the Revolution. Boston MA: Harvard Business School Press. Hawkens, P. (1994). The ecology of commerce: A declaration of sustainability. New York: Harper Collins. Jeffries, F. L., and Reed, Richard. (2000). Trust and adaptation in relational contracting. Academy of Management Review, 25(4), 873-882. Kaplan, R. S. a. N., David. (1996). Using the balanced scorecard as a strategic management system. Harvard Business Review, 75-85. Kertzer, D. I. (1988). Ritual, politics, and power. New Haven: Yale University Press. Kidder, R. (1996). How good people make tough choices: The ethical dilemmas of everyday living. New York: Simon and Schuster. Koslowsky, P. (2001). Principles of ethical economy (D. W. Lutz, Trans. Vol. Dordrecht, Boston, London): Kluwer Publishers. Kotter, J. P., & NetLibrary Inc. (1996). Leading change. from http://www.netLibrary.com/urlapi.asp?action=summary&v=1&bookid=35052 An electronic book accessible through the World Wide Web; click for information. Available to US Hopkins community. Kouzes, J. M., & Posner, B. Z. (1995). The leadership challenge: How to keep getting extraordinary things done in organizations (2nd ed.). San Francisco: Jossey-Bass. Leach, E. R. (1970). Political systems of Highland Burma; a study of Kachin social structure. [London]: Athlone Press. Leana, C. R., & Rousseau, D. M. (2000). Relational wealth: The advantages of stability in a changing economy. Oxford; New York: Oxford University Press. LeDoux, J. E. (2002). Synaptic self : how our brains become who we are. New York: Viking. Mayer, R. C., Davis, James H., Schoorman, F. David. (1995). An integrative model of organizational trust. Academy of Management Review, 20(3), 709-734. McLean, S. L., Schultz, D. A., & Steger, M. B. (2002). Social capital: Critical perspectives on community and "bowling alone". New York: New York University Press. Miller, D., & Walzer, M. (1995). Pluralism, justice, and equality. Oxford [England]; New York: Oxford University Press. Post, J. P., Lee; Sachs, Sybille. (2002). Redefining the corporation: Stakeholder management and organizational wealth. Stanford: Stanford University Press. Prahalad, C. K. (2005). The fortune at the bottom of the pyramid. Upper Saddle River, NJ: Wharton School Pub.

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Putnam, R. D. (2000). Bowling alone: The collapse and revival of american community. New York: Simon & Schuster. Rawls, J. (1999). The law of peoples. Camridge MA: Harvard Unviersity Press. Rawls, J. (2001). Justice as fairness: A restatement. Cambridge MA: Harvard University Press. Ricardo, D. (1988). On the principles of political economy, and taxation. Düsseldorf: Verlag Wirtschaft und Finanzen. Ring, P. S., van de Ven, Andrew H. (1992). Structuring cooperative relationship between organizations. Strategic Management Journal, 13, 483-498. Ring, P. S., van de Ven, Andrew H. (1994). Developmental processes of cooperative interorganizational relationships. Academy of Management Review, 19(1), 90-118. Rosen, C. (Su2006). A measure of success? Ethics after enron. Business Ethics, 20, 23-26. Rosenbach, W. E., & Taylor, R. L. (1993). Contemporary issues in leadership (3rd ed.). Boulder: Westview Press. Sen, A. (1999). Development as freedom. New York: Anchor Books. Singer, P. (2002). One world : the ethics of globalization. New Haven, Conn. London: Yale University Press. Smith, A., Cannan, E., & Teichgraeber, R. F. (1985). An inquiry into the nature and causes of the wealth of nations (1st ed.). New York, N.Y.: Random House. Thompson, L. (2004). Moral leadership in a postmodern world. Journal of Leadership and Organizational Studies, 11(1), 27-37. Toffler, A., and Toffler, Heidi. (2006). Revolutionary wealth: How it will be created and how it will change our lives: Knopf. Uchitelle, L. (2006). The disposable american: Layoffs and their consequences: Knopf. van Parijs, P. (1995). Real freedom for all: What (if anything) can justify capitalism? Oxford: Oxford University Press. Weiser, J. (2006). A trillion dollar opportunity. Business Ethics, 20, 28. Williams, B. A. O. (1985). Ethics and the limits of philosophy. Cambridge, Mass.: Harvard University Press. Wilson, E. O. (1998). Consilience: the unity of knowledge (1st ed.). New York: Knopf: Distributed by Random House. Yankelovich, D. (2006). Profit with honor: The new stage of market capitalism. New Haven: Yale University Press. Zucker, R. (2001). Democratic distributive justice. Cambridge: Cambridge University Press.

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moral leadership case lab

The Case Method
Case study learning is a method frequently used in business and professional schools to prepare students for situations they are likely to encounter as leaders in the world of business and enterprise. Developed at Harvard in the 1920s to bring “real life” experience into the classroom, the case method was designed to put students in a simulated situation calling for the same kinds of analysis, discernment, and judgment they will encounter as managers. The case method differs from what may be considered more conventional or traditional methods of learning in its focus on interactive peer learning among students, although you will probably the case method experience similar to some of your class projects and interactive learning assignments as an undergraduate. The case method begins with a case. A business case is a story – either true or hypothetical – about a situation in which a protagonist needs to make a decision or frame a course of action. The story is generally told from the protagonist’s point of view, with all the ambiguity, imperfect information, and dynamic variables that characterize a real situation in which a person might find herself. There is no “objective voice of omniscient truth” in a business case – there is only the voice of human being reflecting a narrative location with imperfect powers of observation and judgment. You and your classmates read the case and prepare yourselves for a rigorous analysis of the issues in order to make a decision. You are encouraged to explore background information, related readings, data sources, and anything else that would be part of your inquiry if the case were a real life situation. How you frame your analysis, support your recommendation, and respond to critical questioning from your student colleagues is totally up to you. There is not prescribed outcome for the case and no exact pathway of classroom discussion. What you learn from the case is directly dependent on the preparation you and your classmates bring to the case and how skilled you are in articulating your views and responding thoughtfully to other points of view. The faculty role in case learning is more of a coach than a sage. If you and your classmates are able to conduct an insightful and rigorous discussion, you may find the professor observing quietly on the sidelines for much of the discussion. Your professor may interject a question or suggestion that topples the assumptions you have been building about the case and challenges you to reframe your approach to it. Business leadership and management frequently involves the ability to frame problems with innovative and imaginative approaches, exercise initiative in tracking down relevant information and facts, organize and express your thoughts coherently with convincing command of the facts, and respond effectively to the challenges of alternative opinions and contradicting information. The case method is excellent practice for these challenges of leading people and managing complex situations. You will frequently be called upon in a case lab to lead a discussion, summarize the ideas and recommendations of others, or defend a point of view. You will practice thinking on your feet without the leisure of time to reflect. It can be stressful and even overwhelming to work a case if

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you are not prepared and no matter how well prepared you think you are, someone will throw you a curve ball in class and you will need to think fast in response.

Moral Leadership Learning and the Case Method
The case method is especially suitable for moral leadership learning because it enables you to explore the ethics of a situation from multiple perspectives in the process of making a decision. The Moral Compass Method for Moral Discernment incorporates the elements of a case study in laying the groundwork of for responding to a moral challenge. The brief scenarios in this workbook are case simulations designed for you to practice using the Moral Compass to work an ethics case. You are encouraged to develop your own scenarios based on your experience and observation and use the Moral Compass method to analyze them and conduct a moral discernment to determine the best ethical response to the situation. As you work through the questions and issues of the Moral Compass method, feel free to adapt it to the individual case you are working. Some questions may seem irrelevant or redundant to a particular case and there may be vital questions that you think you need to add. Use your best judgment in adapting the Moral Compass to your goal of building the strongest possible foundation of reasoned deliberation for a course of action that represents your best moral judgment.

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Sim ulation Exercise 1 Moral Leadership in Practice

VitaTech Values Scenario:
You are an engineer and the senior partner of VitaTech, a biotech company that has grown phenomenally in the past three years because of two patents that have really taken off. After years of high risk and hard work with a handful of colleagues you have known since college, you realize now that you barely know the twenty young engineers or the sixty sales, marketing, and operations staff hired during the growth spurt. They all seem like good people who are doing excellent work, but you and your partners feel that sometimes they don’t take the company or their role in it as seriously as you do. The partners are very proud of the conscientious, ethical way you have developed your company and its business practices as part of its branding. Now the company’s operations and its future are also in the hands of younger, less experienced people who don’t have as much at stake. In discussing the situation with your partners, you all decide that it’s time for a company retreat to get better acquainted and share some of the company’s founding values with its newer members. You have been elected to give the “VitaTech Values” speech and now, after an early round of golf, you are walking from the golf course to the conference center at the offsite facility where the staff has been gathered since last night. You are the next speaker on the agenda. Your topic: The moral purpose of biotechnology. Although you’ve been thinking about what you would say for several weeks, you haven’t put anything down on paper. In fifteen minutes, a hundred pairs of eyes will be focused on you.

Task
You have fifteen minutes to write talking points for your talk. You are expected to address the personal, corporate, and social dimensions of moral purpose and responsibility as well as be prepared for the open-ended Q&A following your talk. When you and your partners originally designed the day, it seemed like a good idea to put the values talk at the end of the morning session so the conversation could continue informally during lunch. You want to end your talk with a probing question that will keep the values conversation going into lunch and, hopefully, well into the future. What will you say?

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Simulation Exercise 2 Moral Leadership in Practice

Generation Gap Scenario:
You are a new supervisor of a young professional staff of recruiters and admissions counselors for the Bon Sante School of Nursing. Your boss, the Dean of Students, has been putting a great deal of pressure on you to present nursing as an attractive profession to young people who have finished college but are looking for a way to make a positive difference in the world. Your recruitment focus is on potential applicants for a new, intensive 18-month program that allow people with a college degree in any field to complete a baccalaureate degree in nursing. Your two new recruiters, Kendra and Jackson, are both recent college graduates from elite private universities. They understand the competitive admissions process very well and are very effective in projecting a positive image. In the short time they have been at Bon Sante, the two of them have formed a very high-powered team, with both inquiries and applications rising dramatically following their recruitment trips to various schools and academic fairs throughout the region. Both of them have proved to be resourceful and competent in managing the challenges of traveling, often alone, to recruitment fairs in remote cities with boxes of materials, flight delays, and barren hotel rooms. Everyone has noticed that their school tours are lively, interesting, and usually end with at least one or two potential applicants and even some current students hanging around the Admissions Office asking questions and talking with Kendra and Jackson long after the tours are completed. The quality of applicants has also improved in the last few months. While no one is directly attributing all of the recruitment results to Kendra and Jackson, there is a general feeling that they are signaling a new wave of high-performance students for Bon Sante. You have just returned from an unpleasant encounter with your supervisor, the Dean of Students. She has received complaints about the internet use of Kendra and Jackson from someone who had disliked what she had seen on their computer screens while walking by outside their windows. Unbeknown to you, a history audit was done on their computers and the Dean of Students is directing you to fire them both on the spot for inappropriate use of school computers – they both are spending hours at a time with their browsers open to blogs, social networking sites, and AIM. This is the first time you have heard about any of this and you are not sure what to do. You tell the Dean you want a few minutes to think about how to handle this and that you will come back with a recommendation.

Task
You have fifteen minutes to write talking points to make a recommendation to the Dean. What will you say?

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Sim ulation Exercise 3 Moral Leadership in Practice

Nonprofit Financial Transparency Scenario:
You have just been promoted to Assistant Director for Freedom Families, a nonprofit agency that provides long-term assistance to homeless families trying to recover and reposition themselves after a crisis such as job loss, bankruptcy, illness, or marital separation. Lauren, the former Assistant Director, has just taken a new position with an NGO based in Washington and she is already off directing a project in a remote area of Kenya where she is totally out of touch for weeks at a time. Lauren left you a fat file folder of tips for managing the internal operations of Freedom Families, including tips for managing your new boss, Jason, the Executive Director. Jason is the much younger brother of Freedom Family founder, Jeffrey Casper, who is now retired and living in Florida but continues his involvement with the agency as a member of the Board of Directors. One of your new responsibilities is the annual meeting of the Board of Directors, which is always held in January at Ocean Palms, a private resort community on the Florida Keys where the Casper family has a large home. In addition to the routine business meeting, the three-day annual meeting includes a video production of Freedom Family program highlights, the introduction and orientation of new board members, and popular social events to which board members invite friends, family, and business associates: golf and tennis tournaments, a gala dinner, and a deep sea fishing trip. Although fundraising is never mentioned outside the business portion of the annual meeting, it is not unusual for Freedom Families to return to Maryland with contributions from totaling $5 million or more. In reviewing Lauren’s budget folder for the annual meeting expenses, you notice that many of the expenses are not included. For instance, the budget includes itemized accounts for the video production, the meeting room rental, the board meeting luncheon, and travel expenses for some of the board members and for the handful of management and program staff, but there is no accounting of the fishing trip, tournaments, gala dinner, or room charges for board members. When you ask Jason about this, he tells you not to worry about it because some of the wealthy and generous board members have always paid their own expenses and have always paid for the social activities. He explains that when Freedom Families was a young and struggling organization, board members were very involved in getting it off the ground and continued to feel a very strong sense of commitment and financial responsibility for its ongoing vitality. You tell Jason you are uncomfortable with this arrangement and would like to propose a more transparent budget and accounting system for the annual meeting. Jason agrees to consider your ideas if you can give him something to read before he leaves for the airport.

Task
You have fifteen minutes to outline a proposal for Jason. What will you say?

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