Paul Sanders, École Supérieure de Commerce Bourgogne, Dijon, France
Purpose – The article aims to cast a novel light on the extended theoretical conceptualisation of corporate citizenship, in as far as it criticises the insufficient embedding of international corporate social responsibility (CSR), corporate social performance (CSP) and sustainability initiatives in the geopolitical reality and conflictuality of the global business environment.
Design/methodology/approach – The article offers a unique interdisciplinary take on relevant research in international CSR, political science, international relations and philosophy. Its methodology is based on a literature review of these different fields.
Findings – The article argues that the rules-based nature of international CSR is based on experience in the relatively benign market context of high-income economies. However, the transposition of the code-and-compliance approach to the more conflictual context of emerging markets leads to the failure of international CSR. Its insufficient catering to the particular pressures exerted on operation in these markets reveals an idealist bias. This explains the implicit endorsement of “end-of-history” scenarios and other neo-liberal assumptions in international CSR. The article argues that this disposition does not pay credit to the need to find adequate responses to the situation. Quite to the contrary, the firm entrenchment of (neo-)liberalism in the mental mapping of CSR blocks the way to an exploration of realist alternatives. The article concludes by suggesting a shift in the CSR research agenda, from rules to institutions and agency. It proposes historical material on leadership in emergency situations and a new reading of Machiavelli to illustrate possible avenues.
Research limitations/implications – The article is based on a qualitative review and discussion of the literature, which it presents in a new light. It does not present empirical or quantitative research data. It points to a conceptual abyss separating the theory and reality of international CSR. This is particularly problematic in the light of recent deliberative models positing a “new political role” for the corporation. While this article follows the new model in its criticism of the traditional separation of politics and business, it advocates that further research is necessary to elucidate how a more realistic apprehension of global conflict and its impact on business can be combined with the “arms reach principle”. Furthermore it urges that a new model must factor in the frequent “dirty hands” problems occurring in international business.
Practical implications – The article argues that, contrary to the dominant liberal discourse in business ethics and CSR, an increasing potential for Machiavellian behavior in the corporate sector is to be expected. This is due to the absence of arbitrages, in an environment experiencing a rapid expansion of global corporate activity. This renders “code-and-compliance” CSR ineffective. The article recommends the “reframing” of CSR, to specifically include “dirty hands” issues.
Social implications – One stumbling block to a correct understanding of the contemporary challenges impacting international business operations is the (neo-)liberal globalisation paradigm - a narrative in whose manufacture business schools and management scholars are complicit.
Originality/value – The article contributes to the discussion on “systemic CSR”. The fundamental nature of the critique, as well as its interdisciplinary orientation and original recommendations, make the contribution unique.
Corporate and social responsibility; Developing countries; Neo-liberalism; Globalization; Ethics; Critical thinking.
critical perspectives on international business
Emerald Group Publishing Limited
An increasing range of scholarly output on the genesis of the current global crisis points to the manifest immaturity of many businesses to stand their ethical ground in developed markets (indicatively Partnoy, 2003; Tett, 2009; Jain, 2009). In emerging markets the ethical imbroglio is even worse, as a cursory glance across the headlines of the financial and economic dailies will confirm1. This clashes with efforts to diffuse the corporate governance, corporate social responsibility (CSR) and sustainability agenda promoted in high-income economies into the global mainstream. In this context, a recent event of the Academy of Business in Society (EABIS) found that, while corporate governance did not fail “in structure”, it failed in “culture, value and processes” (Eabis, 2010). This is one interpretation. Another can be built on informal conversations with the “coalition of the willing”. These suggest that the proliferation of CSR, corporate governance and sustainability initiatives has achieved little as far as global business is concerned, and that the effort has often had to give way to other more pressing considerations2. Visser likens this to “bailing out the Titanic with a teaspoon” (Visser, 2010, p. 20). Management scholars have come in for particular criticism, considering that, between 1998 and 2007, a mere “fraction” of total CSR research output dealt with the context of emerging markets (Egri and Ralston, 2008). While it is misguided to argue that the field is “irrelevant” (Wood, 2000, cited in Dentchev, 2009, p. 11) – quite to the contrary, the field is of crucial importance to the future of mankind – a sobering sense of insufficiency would be hard to ignore3. To a certain extent then Manuel Velasquez' statement, made over a decade ago, that business ethics was “failing” international managers, continues to hold (Velasquez, 2000).
Getting a handle on the problem is rendered difficult by the fact that the literature dealing with the global and political implications of CSR routinely eschews international relations (IR), political science or history approaches. A similar thing applies to its non-adoption of the development studies literature (Michael, 2003, p. 126, quoted in Barkemeyer, 2009, p. 277; Blowfield, 2007). Some scholars argue that CSR limits itself to “certain topics”: while most initiatives “focus on social (and environmental) protection […] CSR practice associated with the realisation of rights lags well behind”. Particularly critical issues such as empowerment, redistribution (Utting, 2007), anti-corruption (Barkemeyer, 2009) and tax avoidance (Christensen and Murphy, 2004) are few and far between in CSR. It is for Blowfield (2005, p. 32) to conclude that CSR is more driven by de-contextualised debates about “tools” than “the much more useful debate […] about the relationship of business with wider society.”
This contribution inserts itself into a current of fundamental criticism of CSR – even of such “critical” CSR which may question the method, but fails to “go after” the underlying model. It joins those voices demanding nothing less than a paradigm shift, in the form of the adoption of a radically altered “systemic” CSR (indicatively Visser, 2010). The theoretical code-and-compliance underpinnings of prescriptive CSR, derived from Aristotelian, Kantian or Rawlsian frameworks, are the principal targets of such a fundamental criticism. Marc Jones describes “the bulk of current scholarship” in this area as coming from three perspectives: “consequentialism (and utilitarianism in particular), deontology, and virtue ethics” (Jones et al., 2005, in Hanlon, 2008, p. 158). Rather than being concerned with the world as it is, their concern is normative, i.e. with how the world ought to be. The standard operating model for normalising these principles into CSR practice is rules advocacy and rules following4. While this approach is quite adequate for the “tame” domestic environments of OECD or Triad markets, using the same templates in emerging markets, with their very different characteristics5, leads to failure (Idemudia and Ite, 2006; also Newell and Muro, 2006). Melody Kemp's article on CSR in Indonesia militates in this direction. Finding codes “fundamentally flawed”, she is doubtful as regards the utility and relevance of CSR in Indonesia, insisting instead on the need for structural reform, from which CSR, in fact, “may be a diversion” (Kemp, 2001, pp. v-vii)6. Barkemeyer (2009, p. 278) speaks of a “mismatch between the underlying CSR mainstream theory and the policy environment of developing countries” (see also Newell, 2005, p. 556). Particularly pernicious are duress situations without appropriate institutional arbitrages, a common feature of globalisation that is surprisingly underrepresented in the CSR literature (Palazzo and Scherer, 2008, p. 583). Duress causes normally quite well functioning moral compasses to go berserk in emerging markets. Examples are Google's brush with internet censorship in China, which led to a hair-raising betrayal of the company's values (BBC News, 2006). Foreign businesses in Russia are also known to have acted in sharp contrast to their own CSR rhetoric. One of the most high-profile cases in recent years was the role played by the investment bank Dresdner Kleinwort in the controversial liquidation of the Yukos oil company. Swedish retail giant IKEA also proved to be out of tune with its “zero tolerance” anti-corruption culture, when it was shaken by a recent scandal over kickbacks in Saint-Petersburg (Russland-Aktuell, 2010). One may conclude that the specific ethical challenges of these markets are only just beginning to register on corporate cognitive radars. This reality gap is embarrassing, as it clashes head-on with a staple of corporate discourse, the whole-hearted “embrace” of globalisation. It also goes against the grain, as emerging markets are where a decent measure of CSR is most needed; it is where the “arms” reach' principle generates a moral duty to act (Santoro, 2009). Amaeshi et al. (2008) also address this principle in an article on firm-supplier relationships, writing “that the more powerful in this relationship has a responsibility to exert some moral influence”.
That the international CSR literature stubbornly continues to focalise on rules-based normalisation, while limiting itself to “certain topics only”, is a clear indication of its privileged relationship with one particular strand of international relations theory, idealism/liberalism7. The dearth of imagination displayed by CSR's deep permeation with one type of market rationality points to the workings of a capitalist “control society”: not happy with mere acceptance, it demands nothing less than total internalisation, debilitating individuals to the point where they are incapable of visualising alternative scenarios (Fisher, 2009). One of the key assumptions of idealism in international relations (IR) has always been the presumptive determinacy of rules, legal norms and treaties. This stands in contrast to IR practice where realist thought – focusing on power and power relationships – has dominated since the failure of idealism in the interwar period (1918-1939). Warning of the dangers of idealism (or “utopianism” as he called it), the “father” of the modern discipline of international relations, E.H. Carr, wrote in his epochal The Twenty Years' Crisis (Carr, 1964):
In the first place, history is a sequence of cause and effect, whose course can be analysed and understood by intellectual effort, but not (as the utopians believe) directed by “imagination”. Secondly, theory does not (as the utopians assume) create practice, but practice theory. In Machiavelli's words, “good counsels, whencesoever they come, are born of the wisdom of the prince, and not the wisdom of the prince from good counsels”. Thirdly, politics are not (as the utopians pretend) a function of ethics, but ethics of politics. Men “are kept honest by constraint”. Machiavelli recognised the importance of morality, but thought that there could be no effective morality where there was no effective authority. Morality is the product of power (Carr, 1964, pp. 63-64).
This quote provides a primer to some of the key points that this article would like to raise: the future is uncertain, and no amount of premeditation can create the future we may desire; theory, or rules, must spring from practice (and not the other way around); and, finally, ethics do not free-fall from the sky, naturally imposing themselves on each and every thing, but are grounded in particular environments and constellations. The following pages will outline and critique some of the most common liberal assumptions that have been internalised by international CSR. They will conclude by tentatively suggesting some realist guiding principles that could increase the relevance of CSR in the global arena, thereby making a contribution to systemic CSR. The added interdisciplinary value of the article lies in the fact that it draws attention to IR-specific aspects that hitherto have not been sufficiently stressed in the CSR literature.
2. The liberal assumptions underpinning international CSR
2.1 “There is no alternative”, “end of history” and “civil society”
From which sources do idealism and rules-based normalisation draw their strength? The overall failure of CSR8 to properly address international issues is founded on the fact that this field of management study is deeply steeped in neo-liberal ideology. This framing, in turn, leads to significant empirical shortcomings. One scholar states that the literature suffers from “(p)oor description of reality, underdeveloped business logic, and questionable prescriptions” (Dentchev, 2009). Other deficiencies have been abundantly documented in the literature (indicatively Haigh and Jones, 2006; Haigh and Jones, 2007; Hanlon, 2008; Jones, 2009).
The ideological bias is evident in CSR's support of the current capitalist mainstream as well as its lack of interest in alternative models of economic organisation, thus echoing Thatcherite “There is No Alternative (TNO)”. While much ink has been spilt on the fact that first generation CSR modelisation relied on the outdated assumption of the functioning nation state (Palazzo and Scherer, 2007), considerably more objectionable is the fact that CSR adheres to a particular neo-Hegelian variant of globalisation, often subsumed under the “end of history” label (Fukuyama, 1992; critically Homann, 2007; Blowfield and Frynas, 2005, p. 510). Not only does this narrative negate the dislocation caused by globalisation (Gray, 1998; Jamali and Mirshak, 2010); its liberal rhetoric of global “inclusiveness” also minimises geopolitical conflict and issues of raw power in the international arena. As Kobrin (2008) writes, a “governance gap” separates Westphalian politics from post-national markets. The more appropriate IR model to follow in this situation is the “global anarchy” of the “English School” (Bull, 1977); with the notable difference, that the impact of globalisation has dissolved the informal global rules that once gave this “anarchy” a modicum of predictability. By contrast, the current absence of governance in the face of rapid global integration increases the potential for the emergence of Machiavellian responses. The effect is compounded by the Giga trends of resource competition, peak oil, climate change, genome revolution, global mega-slums and “surplus humanity” (Jones and Millar, 2010; also Barkemeyer, 2009, p. 277).
International CSR promotes liberal teleologies, such as the notion that the emerging global order will create social stability and economic prosperity, and that economic integration and emerging middle classes will drive unfree societies inexorably toward democratisation (Bhagwati, 2004, pp. 92-96). In reality, the bottom-line of globalisation is more of a mixed bag, despite its impressive results in poverty reduction9. A direct relationship between market and democracy has not been proven, and the culture and values of globalisation remain “essentially materialistic” (Bouchet, 2005, pp. 53; p. 346). Social and political emancipation effects are offset by a global interconnection that has enabled oppressive regimes to increase their stranglehold on captive societies, while, at the same time, benefiting from economic integration (Bueno de Mesquita and Downs, 2005, pp. 77-86; Köllner, 2008)10. Particularly successful in this respect are illiberal regimes, i.e. “soft” dictatorships which masquerade as democracies, endorsing a simulacrum of elections, party politics, civil society and public opinion (Diamond, 2008). The bottom-line for CSR is very similar to that for globalisation: for various reasons its link to poverty alleviation is tenuous (Blowfield and Frynas, 2005; Jenkins, 2005).
Another important pitfall is to over-emphasise the gatekeeper or watchdog role of NGOs (Homann, 2007). Interestingly the civil society myth not only affects liberals, but also its critics. One proponent, Crouch (2011) talks of “dragging the giant corporation fully into political controversy” and forcing “corporate social accountability” upon it, a task that can only be achieved by “the small, cash-strapped campaigning groups”11. The inordinate faith placed in civil society is an outgrowth of the dominance of stakeholder theory in CSR. Stakeholderism is another mature markets construct with a high potential for becoming distorted in the context of developing markets; one reason being that “groups whose issues are not taken up by civil society organisations may also be ignored by firms since they are not considered ‘primary stakeholders’” (Blowfield and Frynas, 2005, p. 508). Considering that the NGO movement in many emerging markets is weak, or subject to government pressure (indicatively Crotty, 2009), their ability to provide equitable stakeholder representation must be seriously called into question. At the same time the role of NGOs is “far more complex than much of the NGO literature would suggest, and calls for a more contextualised and less value-laden approach to the understanding of the political role of NGOs” (Mercer, 2002, abstract). What this means is that they can be a lot more “governmental” than the actual name suggests. In many cases their activities are an emanation of a continuation of politics by other means rather than of genuine “people power”12. Using the same line of reasoning, inclusivist strategic partnership alliances and global action networks uniting international organisations, corporate business, NGOs and civil society should be treated with scepticism (Glenn and Mendelson, 2002; also Prieto-Carron et al., 2006, p. 986).
“Civil society” merits a slight detour, as it already sketches a point upon which this contribution insists – the centrality of institutional environment and leadership. Both “people power” and “civil society” have become popular buzzwords in the past decades. The semantics are hardly ever questioned and even many scientists use both concepts as independent variables. Most of the current thought on the capacity of civil society to engineer social and political change is derived from the experience of 1989: according to the dominant historical narrative a combination of civil society militancy (the “dissidents”) and street protest brought down the Communist regimes in Eastern Europe. However, as historian Stephen Kotkin demonstrates the genuine trigger for the implosion of Eastern European Communism was fission from within (Kotkin, 2009). And the decisive contribution to this was made by the Soviet leader, Mikhail Gorbachev. What Gorbachev and his Politburo colleagues realised was that the survival of their country depended on an end to the arms race and better relations with the West. One of the consequences of this Soviet policy reorientation was the withdrawal of the costly unconditional backing to the Eastern European satellites, which then, inevitably, collapsed. What may we conclude from this historical example? Without a situation where the elites are weakened and divided, “people power” may amount to very little. The overestimation of its genuine reach and the simultaneous underestimation of the tenacity of client-patron relations and network effects, brought over from the Soviet period, is a miscalculation that has been the source of many Western policy errors in the region over the past two decades.
Similar mechanisms are at work in the Arab Spring of 2010-2011. An ambiguous role of the armed forces brought change in both Tunisia and Egypt; otherwise Arab civil society would have been easily crushed. Libya and Syria tell very different stories. In the former, where the entire state was built around one man and where the armed forces had no independence, outside intervention was necessary to guarantee the very survival of democratic aspirations13. Spillovers from the Arab Spring to other areas with serious democracy deficits – such as Central Asia or Burma – are nowhere to be seen, as streets protests were brutally suppressed only a few years back and as the popular movement did not lead to fission among the elite. Democratic windfalls in China, Saudi-Arabia, Iran or Russia are equally unlikely: regimes that distribute wealth and create a large class of economic beneficiaries retain more legitimacy (and public support) than regimes that fail to do so. After all, the soldiers manning the tanks in Tiananmen Square, in 1989, were a part of the new emerging Chinese middle class. Glamorising “people power” is also imprudent for another reason: even where the immediate objective, toppling a government, may have been attained, caution is necessary, as this is only the beginning of the story. Societies that are not disposed in particular ways offer no guarantee for outcomes consistent with a more peaceful and just order. The kind of “societal cement” holding together established democracies cannot be created overnight. Historians have always known that trust in any innate ability of “the people” to generate peaceful change is naive. This assumption has received a further pounding through a recent contribution on “extremely violent societies” (Gerlach, 2010). Studying multiple empirical case studies of twentieth century mass violence, it argues that the ability of civil society to act as a force for good is severely constricted by context. If social trust is deficient, then not much can be expected from a society in terms of managing and resolving conflict. Quite to the contrary, the grassroots of any population contain formidable reservoirs of potential violence, and these may unleash in crisis situations14.
2.2 The new global political role of the multinational corporation (MNC)
Similarly idealised in liberal CSR is the view of international MNC activity - what Dentchev (2009) refers to as the “underdeveloped business logic” (Dentchev, 2009). The problem finds illustration in the fact that “the vast majority of recent theoretical, normative and empirical research on CSR” assumes “enlightened self-interest” as the corporate norm (Jones, 2009, p. 340). International CSR research following in the footsteps of this instrumental trope bears the imprint of selective bias (Haigh and Jones, 2006); well-known organisational phenomena such as herding effects, bounded rationality or cognitive blinders are often framed out of theory building. One good example is the “values” versus “profit” dichotomy. Surveying the CSR literature, Haigh and Jones finds that management scholars base themselves on occasional or spurious examples in order to argue a profit-values convergence higher than it actually is. Thus, cases where “profit-making” and values overlap are over-emphasised, examples infirming this convergence ignored (Haigh and Jones, 2006). Similar omissions lead to other untenable assumptions on “rational choice” behaviour, often cited as the rationale for self-regulation (Homann, 2007).
Based on the untenability of the liberal private-public dichotomy, the most recent CSR literature has gone one step further, claiming that “failed” or “ineffective” states can be supplemented or even substituted by MNCs. It is these who will provide growing amounts of public goods. This new sophisticated direction in CSR formulation has focused on replacing states-centered normalisation with approaches focusing on a new “political role” of the corporation (Palazzo and Scherer, 2006). The second generation of these CSR footprints (such as “Habermas2”) advocates a republican (rather than a private) political model of corporate citizenship, where moral legitimacy is attained through communication (Baumann et al., 2006) and deliberative democracy (Baumann et al., 2006; Palazzo and Scherer, 2007). The public interest is viewed as the outcome of communication processes that help individuals form their preferences (Baumann et al., 2006).
Despite the obvious attractions of this perhaps most explicit acknowledgement of the inseparability of business and politics in the new global age, the approach has been heavily criticised. If “Habermas2” addresses the issue of the legitimacy of corporate political activity (Kobrin, 2008), it does not solve the problem of enforcement, monitoring and control. Another thing it lacks is a sophisticated analysis of power, in particular how power diffuses across institutional and actor networks, and through discursive practice (Banerjee, 2010). Next, the model relies on notions of public space or open society (Öffentlichkeit)15 which do not exist in emerging markets. Where such communication processes do exist, doubts can be raised as to whether these are authentic; or simply an example of “false” public space created by managed media and managed democracy. On the other hand, where there are authentic deliberative processes, Western frameworks often do not offer the tools to measure (or even identify) them, as these are principally gauged on the idea of electoral processes as attributes of democracy (Tsai, 2007). Equally unsound is the fact that the deliberative democracy model appears to assume one-way norms diffusion (“West-East”). As we can observe, engaging soft dictatorships, confronting corruption or utilising sweatshop economies can lead to value gaps that push corporations into a direction where they themselves no longer adhere to their CSR agenda elaborated in developed markets. This implies that norms diffusion and global convergence can also go in the opposite direction. Westerners are often complacent about exporting their ethical norms, when there is, in fact, evidence of reverse learning effects, such as the return of increasing numbers of business people hardened by exposure to emerging markets who feed-back emerging markets norms into developed markets contexts. Thus, the new deliberative turn does not fundamentally depart from the liberal matrix; it is dangerously “idealistic” (Dentchev, 2009); it is relatively unconcerned with environmental features and insufficiently embedded in the reality of the global political economy (Kobrin, 2009). Some scholars go much further in their criticism, dismissing deliberative ethics as without practical value in the “real world of globalised contexts” (Willke and Willke, 2008). The same authors also dismiss the concept of the “politicised corporation” as a “blueprint for paradise” (Willke and Willke, 2008, p. 34). According to them this departure betrays a serious misunderstanding of the functional differentiation and level of complexity of a modern democratic society. They see no use in replacing a “legitimacy of procedures” or “democratic procedural rationality” based on law with an outdated “legitimacy of morals”. In their view, complex maneuvers, such as CSR or sustainability, can only be procedure-, but never outcome-based (Willke and Willke, 2008, pp. 32-35).
Finally, focusing the criticism of the “new global political role of the MNC” on its legitimacy deficits or monitoring problems is a diversion from the real issue. What is really worrying is the reinforcement of the role of the state through the cooptation of corporate interests, something that is becoming increasingly common in the wake of the current crisis. Rather than being a standoffish phenomenon, MNCs often operate as the new levers of state power, and foreign policy tools in their own right (see also Prieto-Carron et al., 2006, p. 985). This is evident whenever conflict over access to natural resources and market share occurs. The result is the generalisation of the fusion of capital and state, to the point where they become “undistinguishable with regard to public policy making” (Chomsky, 1999, cited in Haigh and Jones, 2006, p. 6). A growing body of evidence points to this new geopolitical role of MNCs, and the interplay and fusion of corporate and state interests through the “privatisation of public interests”: Russia's energy diplomacy, US Middle East policy, the maneuvers in the Caspian “New Great Game”, the Chinese raw material scramble in Africa, or the battle for market share between global giants such as Airbus and Boeing, Siemens and Alstom are all good indicators of future trends. Cut-throat competition and international politicking is by no means limited to sectors where national and great power interests trump, such as in resource extraction, energy or aeronautics. The connivance or active participation of governments in international SME corruption was highlighted by a recent corruption case in Germany16. Another indicator of a globalisation resembling “warlike competition” (rather than the orderly process neo-liberals like to suggest) is the growing use of public relations warfare strategies in business (Harbulot and Lucas, 2007).
3. Re-situating CSR in global realities
3.1 What alternatives exist to the dominance of rules-based normalisation and code-and-compliance?
Despite its obvious shortcomings, we cannot afford to drop the CSR, CSP and sustainability agenda. Limiting oneself to a continued separation of politics and business is no longer an option, and the recommendation that business adhere to a “procedural” approach, i.e. “sit it out” and wait for governments to get a global act together (Willke and Willke, 2008) is squeamish and lacks ambition. A similar verdict should be attributed to the minimalist contention that we should not aim for more than “enlightened self-interest”, with the occasional overlap between a “business case” and desirable societal outcomes (Jones, 2009, pp. 339-342). Fact is that business's steadily increasing global capabilities go hand in hand with a responsibility to use the growing leverage for positive environmental impact (Santoro, 2009). The question is: how can the currently dominant liberal framing of international CSR be re-tooled? True to its liberal pedigree, the CSR movement has generally preferred a micro-approach to individuals and firms, framing “good business” as an emanation of cognitive or behavioural insights. In line with Homann (2007), it will be argued here that instead of relying on “insights”, international ethics needs to switch gear to “interests”.
Real-life interests are translated into practice via institutions. Therefore, rather than tampering with normative and prescriptive frameworks, the research agenda may want to upgrade the study and design of institutional or environmental enablers capable of promoting ethical outcomes. As Barkemeyer (2009, p. 278) writes, “(n)umerous failures of contemporary CSR initiatives can be traced back to the absence of an ‘enabling environment’”. The work of other management scholars also resonates with ideas about “conditioning, context and contingency” as a “critical component” in the capacity of corporate entities to act ethically (Bevan and Gitsham, 2009). For Prakash Sethi ethical business is not a matter of rules following or conditioning alone, but also calls for a conducive competitive environment (Sethi, 2003; Sethi, 2008). Taking a hard look at environmental enablers of ethical action may involve a reappraisal of some of the “sacred cows” of the current practice of capitalism. The issue is echoed in the question “why crucial economic issues […] are always excluded from the contents of CSR standards [and] whose interests are served when no mention is made of the right to invest and disinvest at will or the supremacy of the market as a determinant of price” (Blowfield and Frynas, 2005, p. 512). One randomly chosen example of a practice of shareholderism that may require reform is the pegging of pension systems to stock market performance. “Pressure to perform”, exerted in no small measure by pension funds, may coerce managers into endorsing unrealistic financial targets, thereby increasing the likelihood of corporate fraud and crisis. How little rigid rules can achieve in this type of dynamic is demonstrated through the fact that institutional factors not only condition the behaviour of firms and individual managers, but that the efficacy of mechanisms to prevent unethical behaviour varies in different institutional environments. Paradoxically, some attempts to control or prevent corporate wrongdoing may backfire because of unexpected effects in other areas (Chen, 2010).
Likewise international CSR, in order to be effective in differing environments, must be “localised and socially embedded” (Amaeshi et al., 2006). And again, the triple challenge of localisation, social embedding and responding to duress is not something rules frameworks can deliver. This requires social entrepreneurship (Visser, 2010, p. 15). It also calls for a shift of the discussion onto a second layer of analysis. Indeed, one may wonder whether the call for CSR to be more “people-based” (Prieto-Carron et al., 2006), a criticism initially targeted at the underrepresentation of disenfranchised groups, may open a window for other agency foci as well? One of these is leadership, which is key to dealing with one of the most feared characteristics of duress, “dilemmas”, i.e. situations where two outcomes are possible, but neither is positive. “One-rule-fits-all” frameworks as well as mechanistic “problem-solving” techniques offer no guidance in cracking the complex formulas of genuine moral dilemmas (Murphy, 2008, pp. 125-127). A solution hinges on weighing the utilitarian options, and determining and acting upon the “lesser evil”. Understanding the implications requires the recognition that, from a moral point of view, “lesser evil” dilemmas allow no clear-cut solutions: whatever the final decision, it will often be out of tune with common notions of morality. However, in the interest of a “superior moral good” or a “higher end” worth defending at all costs17, private scruples should be set aside18. The principle applies in particular to duress situations, which are characteristic of politics. It underscores the Machiavellian insight that “dubious decisions are not just accidental incidents in political life[, but] intrinsic to political action” (Ignatieff, 2004, p. 15)19. The interesting thing here is that moral “free-riding” is not an option, as it assigns the responsibility to act to others. “Fence-sitters” refusing to “get their hands dirty” when subjected to duress simply forfeit any claim to the moral higher ground:
Those acting on the presumption that the end does not justify the means open themselves to the suspicion of being obsessed with […] their own moral purity regardless of the cost to others (Alexandra, 2007, p. 2).
3.2 Mastering global conflictuality: readjusting CSR focus to environment, institutional framework and leadership
Models for dealing with “lesser evil” problems exist in political science. One recent example is Michael Ignatieff's appropriately titled The Lesser Evil: Political Ethics in an Age of Terror (Ignatieff, 2004). Using the backdrop of the “War on Terror”, it outlines the moral challenge of protecting democratic polities against global terrorism. This effort comes with a snag, as clamping down on terrorism often requires a full or partial suspension of those civil liberties – such as the right to assembly or the right to free speech – that work in favour of the terrorist enterprise. A focal concern is how far the state can go without betraying the values of liberty, which prevent the state from self-destruction. The danger is that “overkill” on the part of a state under threat can damage these civil rights beyond repair. Paradoxically, this serves the terrorists” purpose of destroying or severely damaging the democratic system. The situation is a double-bind: if the state does not react the terrorist will dismantle the system; if he does, and “overdoses”, then he will score an “own goal” and do the terrorist's work himself. Washington think-tanker Ivan Eland framed the dilemma in an interview after the January 2011 Moscow airport bombing:
There is a danger, and it applies to any government whether in the European Union, Russia or the United States […] sometimes terrorism is used to deliberately make the stronger party, the governments, overreact with Draconian measures and this only aggravates things. And, of course, this helps the terrorists because they get more funding, more support from whatever ethnic or sectarian group they represent, and this is the phenomenon terrorists use worldwide (Russia Today, 2011).
Dealing responsibly with duress requires phronesis, i.e. “the ability to make reasonable decisions in situations in which there is no right answer” (Desjardins, 1995, quoted in Maguire, 1997, p. 1,412). Phronesis enables leaders to navigate the “moral shadowlands” and not lose sight of the “light at the end of the tunnel”. Leaders do this by establishing a golden mean; by striking a balance between the action required by the exigencies of a specific situation, on the one hand, and moral necessity, on the other. As history tells us, genuine leaders have this particular mix of clairvoyance, ruthlessness, communication acumen and moral stature that allows them to make the necessary distinctions - without falling prey to cynicism, relativism or nihilism. It is the latter trio that is the real enemy, not the ability to have the “guts” to make tough and uncomfortable moral choices20. Phronesis relies on virtue – of a very particular type. In “political situations” an Aristotelian understanding of the term is inapplicable; political virtue must also include a measure of Machiavellian virtù, i.e. the ability to seize opportunities, use cunning and outwit antagonists. This might look like a license to immorality, but this is a misapprehension. Machiavelli insists that any viciousness is always a last resort; it is only permissible once all other options are exhausted21. Fact is that Machiavelli's infamous “the ends justify the means” comes attached with a fundamental proviso: the ends must bear a relation with the afore-mentioned “superior moral goods”. Therefore not all ends, not even most ends, justify the means. The application of virtù then requires a cognitive “reload” of a very different kind: the principal bone of contention cannot be the fact that one may have to “dirty one's hands” (Coady, 2011), the fact that in a world of conflict neither the “wholly good” nor the “wholly evil” can survive (Harris, 2010, p. 133) – this is beyond a shadow of a doubt. No, what genuinely matters is whether a non-relativist definition of “superior moral goods” is possible22. This author finds evidence of such a “superior moral good” in Visser's ontological category that it is a “complete misnomer to believe that the purpose of business is to be profitable, or to serve shareholders […] Ultimately the purpose of business is to serve society” (Visser, 2010, p. 20). The same orientation emerges from the statement that CSR is “a mechanism through which society seeks to accomplish certain ends” (Blowfield, 2005, p. 33) and from general efforts to move CSR beyond shareholders and stakeholders to a “society” perspective (Amaeshi and Adi, 2007, p. 6).
Illustration of the ethical nexus between institutions and leadership is provided by historical work on the Machiavellian context that existed in Nazi-occupied Western Europe during the Second World War (Sanders, 2010). Absolute trust in the rules-based legal frameworks that governed relations between the civilian authorities in these countries and the German occupier was undeserved, as the latter offered no safeguards against the incremental encroachment of collaboration and the subsequent implosion of moral integrity: one might save one's skin, but one would lose one's soul in the process.
The spectrum of options for action was widest in those countries where two conflicting sources of constitutional legitimacy existed, such as Norway, Holland, Belgium or the British Channel Islands: a legitimate government-in-exile (or other authority) out of German reach; and a local administration on the ground receiving orders from the occupier. If for the occupied it was generally preferable to see law and order maintained (rather than growing anomie and anarchy), then, on the other hand, they also had to be aware that “good government” benefited not only the civilians, but also the Nazi occupier. What was the magic formula that could limit collaboration to the strict minimum, cater to the legitimate disposition of the constituency of patriotic citizens who felt uneasy about collaboration, but also avoid anything endangering the safety of the whole of the civilian population? Countries that came closest to an ideal scenario owed this to two factors: strong democratic institutions; and leaders with a sense of social capital. The importance of social capital is owed to the fact that, under stress conditions, fear can tip societies in one destructive direction. Such a regression to a Hobbesian “state of nature”, where everybody is at everybody else's throat (bellum omnium contra omnes), is irreversibly damning. But societies can also “pull ranks” and survive the onslaught together. The critical factor is leaders who consolidate social trust and build a new consensus. Leadership - in a very political, ethical and strategic sense – is the “cement” for negotiating positive outcomes and best-case scenarios, and preventing societies from going down the route to perdition. Succeeding in this leadership task meant taking stock of the interests of the two constituencies in the islands: those unfavourably disposed to anything likely to irritate the Germans (and amenable to giving in to their demands); and the typically substantial minority who felt that a firm stance was advisable, as catering to German whims led to spirals of anticipatory, pre-emptive obedience that eroded social capital and led to a vicious circle of self-reinforcing collaboration: destroying public trust, reinforcing mutual surveillance, turning denunciation into a public virtue and providing a self-policing environment. The key here was to arbitrate between the two constituencies. And in doing so leaders could not afford to be too explicit; they had to discreetly point the way; they had to leave no ambiguity about legitimacy; and they had to take especially good care of not manoeuvring themselves into inextricable corners. The implicit social contract adopted in the island of Jersey, one of the two main self-governing entities of the British Channel Islands (which fell under German occupation in 1940), was well-suited to this: it was opportunistic (“live and let live”); resistance was never encouraged, but there was also little effort to proactively frustrate each and every move aimed against occupation government. While provoking the occupier was basically outlawed, islanders were nevertheless granted the freedom to decide for themselves. The signal given to the people was that those who got into trouble with the Germans could not rely on assistance from officials. However, the overall orientation was to neither encourage nor discourage passive resistance. This took into account the growing despondence among certain people, who might revert to desperate means, if they were not given a lid to let off steam.
All this may appear removed from the daily preoccupations of global business, but a parallel is at hand in a cause célèbre, the difficult questions facing foreign businesses who continued their operations in South Africa under Apartheid: how far should a business go in “collaborating” with the regime? Was remaining in South Africa justified? Did it improve things for the black majority and create a dynamic for change? Or was it preferable to not collaborate at all? The role played in this context by the Reverend Leon Sullivan (and the corporate “principles” carrying his name) points once more to the leadership nexus, not to rules formulation. A link to Machiavellian emergency ethics also emerges from the discussion on recalibrating CSR around the concept of “corporate social opportunity” (CSO). The latter functions as a tool to embed CSR in business purpose and strategy (Grayson and Hodges, 2005, p. 33); rather than treating it as an optional “add-on” to business operations that “sits in a public relations, marketing, corporate affairs or human resources department […] to improve brand equity or the company's reputation” (Visser, 2010, p. 10). What underpins CSO is “values-based leadership”, not normalisation. Wayne Visser expands on this theme in an article on “second generation” CSR (Visser, 2010), where he stresses the need for such things as “systemic CSR”, “age of responsibility” and “radical industrialists”. He argues that CSR needs more pragmatic dreamers, “business leaders who practice […] ‘pragmagic’” (Visser, 2010, pp. 9, 12-13). Good governance, key indicators of which, again, are leadership, transparency and ethical practices, is an integral part of the DNA model of systemic CSR (Visser, 2010, p. 19). Systemic CSR includes “lobbying for progressive national and international policies. [It] focuses on understanding the interconnections in the macro level system (society, communities, economies and ecosystems) and changing a company's strategy to optimise the outcomes for this larger human and ecological system” (Visser, 2010, p. 9). As this article has argued all along, none of this can be done without the intellectual honesty to genuinely comprehend the challenges of international business. In order to master “political situations”, we must learn from political ethics.
The article offers a novel take on the extended theoretical conceptualisation of corporate citizenship, as well as on the view that CSR is a social construct “through which society seeks to accomplish certain ends” (Blowfield, 2005, p. 33). It points to some of the research desiderata identified in Matten and Crane's seminal contribution (Crane and Matten, 2005, pp. 176-177), in drawing attention to the fact that current international CSR, CSP and sustainability initiatives do little to alert managers to the challenges of doing business in a global marketplace. The main reason for this is the liberal/idealist bias in how CSR frames global reality; this, in turn, informs its overwhelmingly prescriptive and normative stance. This situation calls for a serious reappraisal: the conceptual and theoretical delimitation of international CSR research problems cannot rely on idealism, but must integrate lines of realist thought. Dealing responsibly and ethically with duress situations is possible, but only if we take a hard look at ourselves23, and only if we factor in the reality of the global business environment. In a second move international CSR should re-emphasise the salience of the interface of ethics and institutions. This implies full recognition of the centrality of leadership to business ethics, and, accordingly, to CSR (Poff, 2010, p. 11). Business schools have a critical role to play here, as they are the ones mapping out the cognitive landscape of tomorrow's leaders. One of the primordial tasks at hand consists in cautioning future managers against the paucity of international CSR in its current form and providing them with an education in the geopolitical realities and political ethics that must inform lateral, systemic thinking and genuine long-term sustainability.
One example is Nokia's CSR stance on the sourcing of raw materials in Democratic Republic of Congo (DRC) (“Nokia does not source or buy metals directly”). This is, clearly, insufficient in the light of the seriousness of the human rights situation in DRC, see Nokia (2011).
Hollender and Breen (2010) quote Jeffrey Hollender, founder and CEO of Seventh Generation, as saying: “I believe that the vast majority of companies fail to be ‘good’ corporate citizens, Seventh Generation included. Most sustainability and corporate responsibility programs are about being less bad rather than good. They are about selective and compartmentalised ‘programs’ rather than holistic and systemic change” (Hollender and Breen, 2010, in Visser, 2010, p. 8).
John Morrison characterises this as the “let a thousand flowers bloom” approach, see “Operationalizing human rights: how hard are companies trying?”, Institute for Human Rights and Business, 29 September 2009, available at: www.institutehrb.org/blogs/staff/operationalizing_human_rights.html (accessed 23 March 2011).
The dominance of this direction in CSR shows when management scholars reflect on normalising whistle-blowing through formal rules, thereby “embedding” the practice as a standard process in business administration (Vandekerckhove and Tsahuridu, 2010). This suggestion disembodies the essence of whistle-blowing and neglects the experience of democratic progress, where the most effective and enduring checks-and-balances is a vigilant and vociferous public (kritische Öffentlichkeit) that remains unpredictable, incalculable, uncompromising, un-consensual, and, above all, not averse to confrontation. Only this is able to broker legitimate, but unrecognised claims. These vital tendencies cannot be embedded, but must often clash head-on with corporate interests, as these are, by their very essence, consensus-seeking, stability-driven and conflict-averse. Whistle-blowing is related to this democracy in practice and cannot be “managed” as a conflict-free status quo zone.
These include structural instability, shifting political constellations, informal institutional environments that resist normalisation; a tentative list of the specific challenges for which businesses need to find responses includes corruption, insider dealing, rent-seeking behavior, patrimonialism and patron-client relations.
A textbook example of such a tough new global market frontier is Russia, see Ledeneva, 2006. In Russia, the usual characteristics of an emerging market are specifically compounded by contested property rights, feeble rule of law, a social contract suffering from the lack of credible government commitment, insider expropriations and widespread corruption (Volkov, 2004; Zhuravskaya and Guriev, 2010). In the 2010 Ease of Doing Business Index, Russia ranked 123rd out of 183 nations polled, see “World Bank, doing business: measuring business regulations, Economic Rankings”, available at: www.doingbusiness.org/rankings (accessed 24 March 2011). Accordingly, the acceptance of market principles and investment security are a matter of serious conjecture. However, the lack of attraction of this unappealing business environment is offset by the rewards: pre-crisis Russia boasted the highest FDI profitability rates among BRIC markets, see Petridou (2008).
In IR “idealist” and “liberal” are synonymous; they will be used interchangeably.
The article follows a definition of CSR as a “field of study” (rather than a theory); and of sustainability as a specific topic within CSR, see Crane et al. (2008).
For a specific critique of global governance see Stiglitz (2002).
They do this by restricting access to strategic “coordination goods”, i.e. public goods such as media or higher education “that critically affect the ability of political opponents to coordinate, but that have relatively little impact on economic growth” (Bueno de Mesquita and Downs, 2005).
As stated above, civil society activism and political radicalism has a key role in democratic process. This is borne out by historical examples demonstrating that democratic agenda are often promoted outside political and economic power structures. However, the push from the grass-roots will fail, if it is not accompanied by a simultaneous pull on the corporate side. This has to be based on insights that can only be gained through the education of leaders (“opening their eyes”) with regard to their power and responsibility.
One good example is Freedom House, which receives a major part of its funding from the US government. The flawed methodology of its annual Freedom Report has done nothing to reduce the considerable attention it receives from media organisations and the general public: it exists, therefore it is widely recognised and cited.
The Arab Spring has puzzled many foreign observers. Their first reflex was to focus on the technological or procedural innovation (“Facebook generation”) to explain the sudden change. However, it was soon realised that revolutions do not occur on the basis of technological or procedural solutions, they require agency, see Barkawi (2011).
As the case studies demonstrate, mass violence of the sort often referred to by the term “genocide” is not carried out through unidirectional top-down initiatives, but diffuses through cumulative impulses originating in the grassroots of society. One excellent example for this is the deportation of almost half a million Hungarian Jews to Auschwitz, between May and July 1944. Accomplished in a mere seven weeks, this “eleventh hour” effort was the most effective of all the Nazi extermination campaigns. This speed would have been unrealisable without the active support of wide sections of Hungarian society, who sought to benefit from the removal of the Jews (Gerlach and Aly, 2004, 415 pp.).
These must underpin the creation and operation of “global action networks”, i.e. the new governance bodies based on multi-sector, multi-stakeholder processes (Waddell, 2003).
In an interview with Handelsblatt, German entrepreneur Eginhard Vietz stated that the international effort to stamp out bribery was “pure hypocrisy”. He accused several nations (among them the United States) of providing embassy support to companies bidding for lucrative public contracts in emerging markets. According to Vietz, “facilitating payments” are the norm and not the exception; embassy officials (and governments) are fully aware of this, see Iwersen (2010ab).
The key thinker in this context is Niccolo Machiavelli. His definition of superior moral goods is fairly straightforward. Based on his admiration for the Ancient Roman Republic, he specifies that no efforts should be spared to safeguard a strong republic that respects individual liberty and guarantees the wellbeing of its inhabitants, see Nederman (2009).
Ignatieff resumes chapter XV in Machiavelli's The Prince (Ignatieff, 1977) as follows: “to apply private scruples to the decisions that have to be taken when a republic's security is at stake might be to condemn the republic to disaster” (Ignatieff, 2004, p. 15).
This advocacy of Machiavelli may come as a surprise. The Conservative thinker Leo Strauss once referred to him as a “teacher of evil” (Strauss, 1978, p. 11) and the idée recue is that Machiavelli encourages leaders to act immorally (“the end justifies the means”). His The Prince is generally considered required reading for tyrants or power-hungry egotists, resulting in a negative or ambiguous connotation of the term “Machiavellian” (or “Machiavellistic)”, in the business literature and elsewhere (D'Andrade, 1993; Galie and Bopst, 2006). However, recent scholarship stresses that this traditional interpretation derives from an undue focus on The Prince, the author's most well-known work. In order to get a complete picture of his thought one also needs to consider his other major work, The Discourses on the First Decade of Livy. This clearly displays the thinker's republican and libertarian convictions. In addition, the Machiavelli reception of the past suffers from historical de-contextualisation. It omits that Machiavelli was very much a child of his troubled times, the anarchy of Renaissance Italy. This context had a marked influence on his negative assumptions about human nature; an outlook he shares with Thomas Hobbes. For Machiavelli “fear”, “depravity” and “dishonesty” are what characterise human behaviour. Using the Ancient Roman Republic as his benchmark, he therefore considered the prospect of a strong, but necessarily ruthless “Prince” less daunting and more beneficial to the common good than the anarchy he was surrounded by. Naturally, his assumptions are not generalisable; they do not hold for all historical contexts and they do not adequately describe a general human disposition. However, as “lesser evil” problems demonstrate, these shortcomings do not invalidate all his observations of politics and political behavior.
The morally acceptable solution suggested by Ignatieff lies in subjecting any divergence from “protocol” to the most rigorous public scrutiny and adversarial review, and returning to established practice as soon as the situation allows. In short, the safeguard against drift and irredeemable damage is that democratic polities will hold themselves accountable to the highest standards when contemplating limits to the lesser evils they are willing to accept, see Ignatieff (2004, p. viii).
The central tenet, that the wise prince does good if he can, but must be prepared to act in the opposite way if he must, is outlined in chapter XXVIII of The Prince (Machiavelli, 1977).
According to Skinner, Machiavelli and his contemporaries are in “complete agreement” as regards the definition of the goals that might qualify as “superior moral good’: “honour, glory and fame”; to “maintain the state”; to “achieve great things”. It is only in the “nature of the methods” where they diverge, see Skinner (1978, p. 134).
Quoting from Ray Anderson's Confessions of a Radical Industrialist (2009), Visser (2010, p. 12) writes that the latter is “able to see himself as a plunderer – not through malicious intent, or even greed, but by failing to question the true impacts of business on society and the environment”.
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About the author
Paul Sanders teaches international affairs and international ethics at ESC Bourgogne in Dijon, France. He has published across the disciplines of contemporary history, international relations and, more recently, management. His research interests cluster around two main themes: strategic leadership, ethics and negotiation in duress situations; narratives and the geopolitics of Eurasia. Paul Sanders can be contacted at: firstname.lastname@example.org