The return of business ethics

Today the market globalization and internationalization involve new responsibilities for the economic subjects, with the consequent revaluation of ethical principles.

Numerous signals, still weak by anyway significant, let us glimpse a trend inspired again by business ethics and sustainability in enterprises’ management.

Roberto Papeschi

For the first time in Europe, after over half century of constant development and of growing wealth, the economic system shows signs of slowdown, with heavy repercussions on the employment, especially in the Southern Countries of the Community. In this context, work returns central in the society and we look again at the enterprise as the most important element of which Countries can make use for the creation and the distribution of wealth, as well as for the promotion of the social cohesion.
From many points of view, what is happening is a revaluation of individuals’ basic needs that just few years ago were given for granted in comparison with requirements deemed higher. These were the conclusions reached by western sociologists according to the concepts of “hierarchy of needs” developed from 1943 to 1954 by the American psychologist Abraham Maslow and divulged in 1954 with the essay “Motivation and Personality”. In the opinion of Maslow, in fact, the individual fulfils himself by passing through five successive different levels of needs, from the simple survival need to the higher ones like prestige, social success and self-esteem.
Considering the level of richness that we thought by now consolidated in Western nations, the scholars of business organization and the managers themselves of companies, for the whole second half of the last century were committed to develop initiatives aimed at favouring their collaborators’ participation in business activities and at their identification with the corporate values. These goals were especially pursued by personnel training initiatives, including those concerning business ethics, to which numerous companies, among the most socially advanced, have paid attention starting from the Eighties.
In this context it was also processed a whole of regulations regarding the corporate social responsibility, comparable to ISO directives, which concern also the respect of human rights, the respect of workers’ rights, the protection against the exploitation of children and the safety and healthiness warranties on the workplace. In this same ambit it was then created an international certification system, called SA 8000, where SA stands for Social Accountability, aimed at certifying the company in relation to the correctness of business management methods, with the double purpose of defending the work conditions and of allowing a verification of the relationships among enterprises in the international market.

The hierarchy of needs, according to the psychologist Abraham Maslow, provides for five successive levels that go from the satisfaction of the physiological needs to the self-fulfilment and self-esteem.

Business ethics
The relation between ethics and economy already existed in the ancient world and in particular in the Greek culture. Some hints to this relation appear in fact in the work “Nicomachean Ethics” by Aristotle where, starting from various common opinions of that age, the guidelines for a moral behaviour are traced. Nevertheless the modern Business Ethics, as it is conceived today in the sense of an organic relationship between ethics and economy, is a relatively young discipline, being born in the United States from the end of the Sixties to the early Seventies.
The first who treated this matter, in fact, was the American Raymond Baumhart who, from 1961 to 1968, published the results of his studies, which were afterwards thoroughly analysed by other authors starting from the Seventies, also because of the economic crisis that affected the United States in that period and of a series of financial scandals that had invested Wall Street. Therefore, after that in November 1974 the first conference about business ethics entitled “Ethics, Free Enterprise and Public Policy” was held in a Kansas University, starting from the Eighties the teaching of this new subject was introduced in the University Economics Programmes of various American Business Schools and some years later it diffused in Europe, too.
Around the half of the Eighties, in fact, the debate concerning business ethics that had started in the United States reached Western Europe. In 1984 the first chair dedicated to this subject was created in Holland and afterwards various initiatives of scholars flourished on the same theme also in other Countries, having the main goal of contextualizing the new discipline in the economic and political reality of the Old Continent. Today, the teaching of business ethics is diffused in the main European Countries, in particular in the United Kingdom, in the Netherlands, in Switzerland and in France, as well as in Italy where its diffusion in the academic world was however more difficult.
On the other hand it is true that the Italian academic world had treated this theme already in 1968, when the economist Giancarlo Pallavicini had affirmed, in the essay “Strutture integrate nel sistema distributivo italiano”, (Structures integrated into the Italian distribution system) that the corporate activity, even if oriented to profit, should have taken into account a whole of instances inside and outside the enterprise, also of socio-economic nature. Concepts that can be previously found in other authors like Gino Zappa and Bruno de Finetti.
In general terms, business ethics includes elements that refer to numerous disciplines, such as the international law, the civil and the work legislation, the business theory, the political economics and the moral philosophy, investing three application levels, which are respectively:
The rules for the fair exchange among individuals
The socio-economic behaviour of enterprises
The cultural and institutional rules of trade inside the whole society.
Even if lots of questions that are included in the ambit of the discipline concern the behaviour and the responsibilities of workers, of managers and entrepreneurs, up to comprising finally the evaluation of governments and of public policies regarding the national and international market, the majority of the studies has been mainly dedicated to enterprises, together with several analyses carried out in the last thirty years by the academic world about the relations between ethics and economic activities.

Starting from the second half of the last century, numerous economics scholars have indicated business ethics as the mandatory way for a sustainable development.

The reference to the Protestant ethics
The fact that the relations between ethics and economic activities initially aroused the interest of the American academic world and that immediately after they involved the scholars of North Europe Countries is not casual because those relations have found fertile ground for further developments in the Protestant culture and more in particular in the Calvinist culture, which is shared by those two same geographical areas. The spirit of that culture is mainly expressed by the thought of the economist Max Weber (1864-1920) who from 1904 to 1905 had published two essays, then unified under a single work entitled “L’etica protestante e lo spirito del capitalismo” (Protestant ethics and spirit of Capitalism).
Although Weber does not intend to argue that an economic phenomenon like the modern capitalism can be directly caused by a religious phenomenon, he however argues that the Calvinist religious mentality was a cultural prerequisite useful to the formation of the capitalistic spirit. In the opinion of Weber, in fact, it is the Calvinist tradition that induces the capitalist to correct the spontaneous thirst for profit, then investing a part of the profits to generate economic initiatives that result in a benefit for the community.
Concerning this, Weber also underlines that the Calvinist Countries where the Reform successfully spread, from the Netherlands to the England of Cromwell and to Scotland, have historically anticipated the Capitalism in comparison with catholic nations such as Italy, Spain and Portugal. Man, in fact, in the protestant culture is pushed to a personal commitment in the world and to a vocation that should not be lived in the religious dimension only but also in everyday life and most of all at work. The examples of such commitment have been numerous also in the contemporaneous age and, concerning this, it is sufficient to mention the names of some personages who for this reason were awarded with the Nobel Prize, from Albert Schweitzer and Martin Luther King to Nelson Mandela and Desmond Tutu.
According to Calvino, in fact, the work should be meant as a vocation and not only as a paid working activity. From this point of view, the work is “a form of productive and socially beneficial prayer”. From this consideration derives an incentive, which is particularly present in the Calvinists of first generation, to work well and to commit themselves in depth to the activities accomplished, because in them and through them the believer is confirmed in the certainty of the divine election. Moreover, to the ends of an acceptable behaviour from the moral point of view, other typical aspects of Calvinism must be considered, like the austerity of life, the frugality and the attentive use of time.
But it is also important to consider how Calvinism knocked down the religious barriers that hindered the economic development. About this matter it is sufficient to remind what stated about the interest loan, which until that time had been equated to usury. Calvino, in fact, was the first theologian who made a distinction between usury and interest loan, being the latter considered licit to the extent of an interest limited to 5%. Also from this information we can understand the influence that the Protestant ethics has had for the construction and the economic development of the society.

Business ethics, according to academic scholars, includes the rules for a fair economic exchange among individuals, among enterprises and, more in general, among different subjects inside the whole society.

The ethical role of the enterprise
Most part of the literature existing today in the business ethics ambit is dedicated to the enterprise analysis. From this point of view business ethics can be defined as the study of the behaviour of individuals and companies, as well as of the practices adopted in the ambit of the economic activities of the enterprise (Werhane and Freeman – 2005). Concerning this, two essays constitute the theoretical foundations of the investigations concerning the enterprise as ethical subject. The first of these essays is “Corporation and Morality” by Donaldson while the second, which is entitled “Persons, Right and Corporations”, was written by Patricia Werhane. In both these works enterprises are the focus of the ethical investigation and for the first time some problems are faced, still today under discussion, concerning the “moral status” of the enterprise and of the involved players: shareholders, managers and employees.
As a matter of fact, it is not accepted, yet, by all the scholars of the matter the fact that an enterprise can be considered a moral agent even if, since it has a juridical personality that is independent from that ascribable to the individuals who are part of it, it should be considered as an autonomous entity from the moral point of view, too. Finally, concerning the enterprise responsibility for the actions done in its name, the common opinion is that such aspect should be considered in terms of “social contract”. In the opinion of Donaldson and Dunfee (Integrative Social Contract Theory) there are some moral standards of general character, which may be integrated by stricter social contracts, which rule the economic relationships at “macro” level, and to their respect are bound the various economic players including enterprises.
The business internationalization and the market globalization have made the definition of business ethics more complex, to the extent of creating a new ambit of this discipline (International Business Ethics). The main issue that has been raised about this matter is constituted by the cultural relativism existing in the globalized world. As a matter of fact, since the principles and the ethical practices strongly differ in the various Countries, we wonder how it is possible to establish an international moral code to which all the market players must conform, irrespective of the Country where they operate.
Today the majority of scholars, however, agree about the existence of a minimum whole of moral rules universally accepted, in general recognizable in the Universal Declaration of Human Rights in 1948. A step forward has been recently taken with the “Global Compact”, backed by the United Nations, by proposing an appropriate conduct code to be kept in the international market ambit. Among the principles espoused by the “Global Compact” there are the prohibition of being accomplices in the cases of violation of human rights, the support to the freedom of association and negotiation, the prohibition of exploiting the child labour and the elimination of all forms of discrimination at work (Marcoux – 2008).

At economic-organizational level, the business optimization should be searched through the optimization of the ethical needs with the profit ones.

CSR: corporate social responsibility
While the first steps of business ethics, from the second half of last century until the first years of the second millennium, were prevailingly made according to moralistic principles, in a certain sense, in the course of the last ten years a turning point that can be defined systemic occurred, oriented to focus the discussion on business ethics on the aspects of the corporate social responsibility. According to this point of view, the enterprise is considered integral part of the society and of the territory of which it is part and for this reason it is expected to contribute in its own economic development and of its partners’, in the collective wellbeing and in the environment protection.
In the concept of CSR-Corporate Social Responsibility, the enterprise is responsible for its decisions and its actions towards its “stakeholders” or “subjects concerned for various reasons”, among which, besides shareholders, stand out also employees, suppliers, customers and banks, up to including local and national institutions, too. From the simply “ethical” behaviour of the enterprise we pass then to the wider “responsible” behaviour whose regulations, together with the standard principles of business ethics that are by now taken for granted, are nowadays extended to new aspects.

More recently business ethics has evolved towards a more enlarged criterion of economic, social and environmental needs, assuming the features of the CSR or “Corporative Social Responsibility”.

Among these aspects, particular relevance assume those concerning the knowledge development and the product innovation, deemed necessary to grant the profit and the enterprise’s competitiveness and then the continuity of the same social subject to the advantage of “stakeholders”. But equally important, for the community of which the company is part, are the aspects that concern the environment protection, the energy saving and the intelligent use of resources. In this way the CSR overcomes the strict ambit of a fundamentally moralistic “particular ethics, restricted and from certain points of view obscurantist as it was meant by Max Weber, to take the characteristics of a modern and laic conduct code, aimed at the realization of a “shared social model”.
Through the application of the rules indicated by the CSR, we essentially believe that the enterprise can operate in compliance with the guidelines and the common rights acknowledged by ONU, OCSE and EC, to improve the life quality of the existing populations and most of all of the future generations. In comparison with the liberal capitalism by Weber, with the CSR the society takes an essential step forwards towards the realization of a business model where profit is not a goal in itself but it rather constitutes the necessary condition to generate and to accumulate resources to the advantage of the community and in the respect of the common good.