The Reasons Behind Non-Ethical Behaviour in Business and Entrepreneurship

Despite the recent increase in interest in corporate social responsibility and the propagation of corporate governance in both business and academic literature, from observations of actual practice, the author has seen at all company levels, in everyday operations, instances of non-ethical behaviour vis-à-vis the whole gamut of stakeholders. This state of affairs is linked with: pressure from stakeholders, short-term tactics, hegemony of financial considerations, ‘juridisation’ of business, the tyranny of communications and the media and the difficulties in translating strategy into practical implementation. The paper scrutinises the motivation and the psychology of entrepreneurs and business people, and their behaviour is compared to other professional groups and confronted with the decline in ethics in society as described by some important observers. The conclusion drawn is that the recent positive evolutions do not provide sufficient ethical guidelines for the day-to-day activities of middle managers and entrepreneurs in the present competitive environment. Managers will always be confronted by difficult choices with ethical dilemmas. There will always be a tension between theory and pragmatism, but progress can be made with the effective implementation of the ethical discourse in companies. To achieve this, ethical management should not be confined to the large strategic issues but also applied to the small practical matters of everyday business life. Ethics in business and entrepreneurship requires more than corporate governance and corporate social responsibility (CSR).     

Ethics in Business: Answering the Call

What might happen if business leaders across the globe viewed their work as a sacred calling in a religious sense? Might not the world be a far better place? This paper is an effort to stimulate debate and discussion on this topic. Concepts addressed include: (a) ethics in business, (b) ethical standards in business settings, (c) the role of law, (d) levels of corporate responsibility, (e) the role of religion in business ethics, (f) the idea of business as a calling in a religious sense, (g) the elements of modern corporate culture, (h) creating an ethical corporate culture, (i) demonstrating corporate social responsibility, and (j) providing servant leadership. The introduction to the paper shows how these concepts interrelate; its conclusion offers a challenge to business leaders to answer their call to business in the truest sense.     

Corporate Governance and Ethics: A Feminist Perspective

The mainstream literature on corporate governance is based on the premise of conflicts of interest in a competitive game played by variously defined stakeholders and thus builds explicitly and/or implicitly on masculinist ethical theories. This article argues that insights from feminist ethics, and in particular ethics of care, can provide a different, yet relevant, lens through which to study corporate governance. Based on feminist ethical theories, the article conceptualises a governance model that is different from the current normative orthodoxy.     

Undivided Corporate Responsibility: Towards a Theory of Corporate Integrity

In the years since Enron corporate social responsibility, or “CSR,” has become a ubiquitous phenomenon in both research and business practice. CSR is used as an umbrella term to describe much of what is done in terms of ethics-related activities in firms around the globe to such an extent that some consider it a “tortured concept” (Godfrey and Hatch 2007, Journal of Business Ethics 70, 87–98). Addressing this skepticism, I argue in this article that the focus on CSR is indeed problematic for three main reasons: (1) the term carries a lot of historical baggage – baggage that is not necessarily conducive to the clarity of the concept; (2) it is the object of increasing ethical instrumentalism; and (3) given the multiple ethical challenges that corporations face, and given the fact that the “social” responsibilities of business are but one set of corporate responsibilities, a suitable term would have to be more inclusive and integrative. I therefore suggests moving instead toward a sound definition of corporate integrity and aim in this article to develop a working definition by fleshing out “7 Cs” of integrity: commitment, conduct, content, context, consistency, coherence, and continuity. I then discuss how these 7 Cs impact our understanding of CSR or, more broadly, corporate responsibility in general.

“Minding Our Business”: What the United States Government has done and can do to Ensure that U.S. Multinationals Act Responsibly in Foreign Markets

The United States Government does not mandate that US based firms follow US social and environmental law in foreign markets. However, because many developing countries do not have strong human rights, labor, and environmental laws, many multinationals have adopted voluntary corporate responsibility initiatives to self-regulate their overseas social and environmental practices. This article argues that voluntary actions, while important, are insufficient to address the magnitude of problems companies confront as they operate in developing countries where governance is often inadequate. The United States can do more to ensure that its multinationals act responsibly everywhere they operate. First, policymakers should define the social and environmental responsibilities of global companies. They must consistently make their expectations for global business clear – and underscore that this objective can often be accomplished without mandates. Second, the US should closely examine the policies that undermine global Corporate Social Responsibility (CSR) and address the many conflicting signals sent by policymakers. Third, the President should make the US government a CSR model by examining how to use its purchasing power to promote human rights. Finally, the US government should require pension funds to report on the social and environmental consequences of their investments. In these ways, Americans can mind our business – and thus make sure that US based firms do not undermine social and environmental progress when they operate in the developing world. Susan Aaronson is Senior Fellow and Director of Globalization Studies at the Kenan Institute Washington Center, an arm of the Kenan-Flagler Business School, University of North Carolina Chapel Hill. Her scholarly research focuses on international investment and social responsibility issues. Aaronson devised and directed a study, funded by the Ford, UN and Levi Strauss Foundations, that examined how U.S. public policies can promote or undermine global corporate social responsibility. She is now beginning a Levi-Strauss funded project on trade and human rights. Aaronson is a frequent speaker on public understanding of globalization issues and the author of four books on globalization including, Taking Trade to the Streets: The Lost History of Public Efforts to Shape Globalization (Michigan: 2001).     

Philanthropy, Integration or Innovation? Exploring the Financial and Societal Outcomes of Different Types of Corporate Responsibility

This article argues that previous research on the outcomes of corporate responsibility should be refined in two ways. First, although there is abundant research that addresses the link between corporate responsibility (CR) and financial performance, hardly any studies scrutinize whether the type of corporate responsibility makes a difference to this link. Second, while the majority of CR research conducted within business studies concentrates on the financial outcomes for the firm, the societal outcomes of CR are left largely unexplored. To tackle these two deficiencies, this article extends the different conceptualizations of corporate responsibility and elaborates both the financial and the societal outcomes of different types of CR.     

The Missing Dynamic: Corporations, Individuals and Contracts

In this article we discuss whether it pays to invest ethically. Our aim is to examine corporate social responsibility from philosophical, moral and practical points of views. We focus on two main issues related to ethical investments. Firstly we discuss the moral dilemma of how capitalism has changed its shape in today’s world and from ‘blaming the business’ there is a general attempt to use the markets to promote ethics values and corporate social responsibility. Secondly, we analyze the growth of ethical investment funds in the UK today, and their performance, and highlight some of the institutional investors involved in the management of ethical funds. We discuss whether ethical investments really succeed in reducing the conflict between profit-making and social responsibility as they promise or whether they use commercial rhetoric and market mechanism to merely sell us our own perceived values back. We conclude that the paper has a key contribution in setting the scene for future research in an area that is evolving and of fundamental importance to companies, investors and various stakeholder groups.     

Non-Governmental Organizations, Shareholder Activism, and Socially Responsible Investments: Ethical, Strategic, and Governance Implications

In this article, we document the growing influence of non-governmental organizations (NGOs) in the realm of socially responsible investing (SRI). Drawing from ethical and economic perspectives on stakeholder management and agency theory, we develop a framework to understand how and when NGOs will be most influential in shaping the ethical and social responsibility orientations of business using the emergence of SRI as the primary influencing vehicle. We find that NGOs have opportunities to influence corporate conduct via direct, indirect, and interactive influences on the investment community, and that the overall influence of NGOs as major actors in socially responsible investment is growing, with attendant consequences for corporate strategy, governance, and social performance.     

Exploring the Ethical Identity of Islamic Banks via Communication in Annual Reports

Islamic Banks (IBs) are considered as having ethical identity, since the foundation of their business philosophy is closely tied to religion. In this article, we explore whether any discrepancy exists between the communicated (based on information disclosed in the annual reports) and ideal (disclosure of information deemed vital based on the Islamic ethical business framework) ethical identities and we measure this by what we have termed the Ethical Identity Index (EII). Our longitudinal survey results over a 3-year period indicate the overall mean EII of only one IB out of seven surveyed to be above average. The remaining six IBs suffer from disparity between the communicated and ideal ethical identities. We further found the largest incongruence to be related to four dimensions: commitments to society; disclosure of corporate vision and mission; contribution to and management of zakah, charity and benevolent loans; and information regarding top management. The results have important implications for communication management if IBs are to enhance their image and reputation in society as well as to remain competitive. Roszaini Haniffa is a Senior Lecturer and Head of Accounting and Finance at the Bradford University School of Management. She holds a PhD from Exeter University and has published papers in Abacus, Journal of Accounting and Public Policy, Journal of Business Finance and Accounting and other journals. Her research interests focus on social responsibility reporting, corporate governance, international accounting and the Islamic perspective of accounting. Ros has reviewed papers and is a member on the editorial board of several journals. Mohammad Hudaib is a Lecturer in Accounting at the Bradford University School of Management and holds a PhD from Essex University. He has previously taught at Exeter University and prior to his teaching career, was an auditor in Saudi Arabia. He has published papers on auditing and corporate governance in Journal of Business Finance and Accounting. His current research interests include auditing, Islamic perspective of accounting, accounting theory and ethics.     

Effect of Business Education on Women and Men Students’ Attitudes on Corporate Responsibility in Society

This article describes a survey among Finnish business students to find answers to the following questions: How do business students define a well-run company? What are their attitudes on the responsibilities of business in society? Do the attitudes of women students differ from those of men? What is the influence of business education on these attitudes? Our sample comprised 217 students pursuing a master’s degree in business studies at two Finnish universities. The results show that, as a whole, students valued the stakeholder model of the company more than the shareholder model. However, attitudes differed according to gender: women students were more in favor of the stakeholder model and placed more weight on corporate ethical, environmental, and societal responsibilities than their men counterparts – both at the beginning and at the end of their studies. Thus, no gender socialization effect of business school education could be observed in this sense. Business school education was found to shape women and men students’ attitudes in two ways. Firstly, valuation of the shareholder model increased and, secondly, the importance of equal-opportunity employment decreased in the course of education. This raises the question whether the educational context is creating an undesirable tendency among future business professionals. The results further suggest that the sociocultural context can make a difference in how corporate social responsibility is perceived. The article also discusses possible ways to influence the attitudes of business students.     

Is It Ethical to Use Ethics as Strategy?

Increasingly research in the field of business and society suggests that ethics and corporate social responsibility can be profitable. Yet this work raises a troubling question: Is it ethical to use ethics and social responsibility in a strategic way? Is it possible to be ethical or socially responsible for the wrong reason? In this article, we define a strategy concept in order to situate the different approaches to the strategic use of ethics and social responsibility found in the current literature. We then analyze the ethics of such approaches using both utilitarianism and deontology and end by defining limits to the strategic use of ethics.     

The Multinational Corporation and Global Governance: Modelling Global Public Policy Networks

Globalization has increased the economic power of the multinational corporation (MNC), engendering calls for greater corporate social responsibility (CSR) from these companies. However, the current mechanisms of global governance are inadequate to codify and enforce recognized CSR standards. One method by which companies can impact positively on global governance is through the mechanism of Global Public Policy Networks (GPPN). These networks build on the individual strength of MNCs, domestic governments, and non-governmental organizations to create expected standards of behaviour in such areas as labour rights, environmental standards, and working conditions. This article models GPPN in the issue area of CSR. The potential benefits of GPPN include better overall coordination among industry and government in establishing what social expectations the modern MNC will be expected to fill. David Detomasi is an assistant professor of international business at the School of Business, Queen’s University, Kingston, Ontario Canada. His research areas include corporate governance, corporate social responsibility, and business and society.     

Tone at the Top: An Ethics Code for Directors?

Recent corporate scandals have focused the attention of a broad set of constituencies on reforming corporate governance. Boards of directors play a leading role in corporate governance and any significant reforms must encompass their role. To date, most reform proposals have targeted the legal, rather than the ethical obligations of directors. Legal reforms without proper attention to ethical obligations will likely prove ineffectual. The ethical role of directors is critical. Directors have overall responsibility for the ethics and compliance programs of the corporation. The tone at the top that they set by example and action is central to the overall ethical environment of their firms. This role is reinforced by their legal responsibilities to provide oversight of the financial performance of the firm. Underlying this analysis is the critical assumption that ethical behavior, especially on the part of corporate leaders, leads to the best long-term interests of the corporation. We describe key components of a framework for a code of ethics for corporate boards and individual directors. The proposed code framework is based on six universal core ethical values: (1) honesty; (2) integrity; (3) loyalty; (4) responsibility; (5) fairness; and (6) citizenship. The paper concludes by suggesting critical issues that need to be dealt with in firm-based codes of ethics for directors.     

Corporate governance or governance by corporates? Testing governmentality in the context of China's national oil and petrochemical business groups

Like other industrial sectors with significant – ‘pillar’ – importance in China's overall economy and development, oil and petrochemicals are governed by state-owned business groups. In this context, ‘corporate governance’ of these groups is of fundamental interest. This study probes corporate governance of 31 national oil and petrochemical business groups by examining their structure, development and business activities in the period from 2007 to 2011. The post-1998 restructuring of China's qiyejituan business groups, their related party transactions and related party corporate finance all yield insight into how property rights are decisive in how corporate governance based on governmentality – or the interrelation of corporate, state and social relations – is structured. This study sheds light on how China's big business policy and governance of the state-business interface progresses in a socialist market economy. It has clear implications international trade and investment as well as multinational corporations doing business with China.     

The Study of the Relations among Ethical Considerations, Family Management and Organizational Performance in Corporate Governance

Corporate governance is increasingly becoming an issue of global concern, not least because we are more and more living in a corporate world that transcends international boundaries. The main purpose and motivation of this study is to determine how the international community should motivate businesses in fostering exemplary corporate governance, therefore eliminating obstacles to ethically exemplary behavior. The empirical approach utilized here has been applied to 161 businesses, both listed and over-the-counter (OTC) companies, with the results indicating that ethical considerations, corporate governance and organizational performance are inextricably linked and, to an extent, demonstrably proportional. This study also indicates a major finding that family management is a significant mediating variable of the ethical considerations of corporate governance and organizational performance. Finally, this study has developed an operational model of ethical considerations of corporate governance as a consultancy aid for businesses that wish to implement and/or boost their performance in respect to corporate governance.     

Professional Ethical Standards,Corporate Social Responsibility,and the Perceived Role of Ethics and Social Responsibility

This study explored several proposed relationships among professional ethical standards, corporate social responsibility, and the perceived role of ethics and social responsibility. Data were collected from 313 business managers registered with a large professional research association with a mailed self-report questionnaire. Mediated regression analysis indicated that perceptions of corporate social responsibility partially mediated the positive relationship between perceived professional ethical standards and the believed importance of ethics and social responsibility. Perceptions of corporate social responsibility also fully mediated the negative relationship between perceived professional ethical standards and the subordination of ethics and social responsibility. The results suggested that professions should develop ethical standards to encourage social responsibility, since these actions are associated with enhanced employee ethical attitudes. Sean Valentine (D.B.A., Louisiana Tech University) is an Associate Professor of Management in the College of Business at the University of Wyoming. His research interests include ethical decision making, organizational culture, and job attitudes. His research has appeared in journals such as Human Relations, Behavioral Research in Accounting, Journal of Personal Selling & Sales Management, and Journal of Business Research. Gary Fleischman (Ph.D., Texas Tech University) is an Associate Professor of Accounting and the McGee Hearne and Paiz Faculty Scholar in Accounting at the University of Wyoming. His teaching expertise is in accounting and entrepreneurship, and his research interests are in business ethics and behavioral business research. He has published in journals such as Behavioral Research in Accounting, The International Journal of Accounting, and Journal of Business Ethics.     

Mining, Corporate Social Responsibility and the "Community": The Case of Rio Tinto, Richards Bay Minerals and the Mbonambi

Mining companies have long had a questionable reputation for social responsibility, especially in developing countries. In recent years, mining companies operating in developing countries have come under increased pressure as opponents have placed them under greater public scrutiny. Mining companies have responded by developing global corporate social responsibility strategies as part of their larger global business strategies. In these strategies, a prominent place is given to their relationship with local communities. For business ethics, one basic issue is whether such an approach to corporate responsibility is likely to effectively address the development concerns of local communities in developing countries. This paper addresses this question by investigating how the corporate social responsibility agenda of a major minor company has been implemented by one of its subsidiaries in South Africa.     

Corporate Governance and Institutional Transparency in Emerging Markets

This paper posits that differences in corporate governance structure partly result from differences in institutional arrangements linked to business systems. We developed a new international triad of business systems: the Anglo-American, the Communitarian and the Emerging system, building on the frameworks of Choi et al. (British Academy of Management (Kynoch Birmingham) 1996, Management International Review 39, 257–279, 1999). A common factor determining the success of a corporate governance structure is the extent to which it is transparent to market forces. Such transparency is more than pure financial transparency; as it can also be based on factors such as governmental, banking and other types of institutional transparency mechanism. There may also be a choice for firms to adopt voluntary corporate disclosure in situations where mandatory disclosure is not established. The Asian financial crisis of 1997–1999 and the more recent corporate governance scandals such as Enron, Andersen and Worldcom in the United States and Ahold and Parmalat in Europe show that corporate governance and business ethics issues exist throughout the world. As an illustration we focus on Asia’s emerging¹ markets, as, both in view of the pressure of globalization and taking into account the institutional arrangements peculiar to the emerging business system, these issues are important there. Particularly for those who have to find an accommodation between the corporate governance structures and disclosure standards of the Emerging system and those of the Anglo-American and Communitarian systems.     

Striking a Balance Between Rules and Principles-based Approaches for Effective Governance: A Risks-based Approach

Several recent studies and initiatives have emphasized the importance of a strong ethical organizational DNA (ODNA) to create and promote an effective corporate governance culture of trust, integrity and intellectual honesty. This paper highlights the drawbacks of an excessively heavy reliance on rules-based approaches that increase the cost of doing business, overshadow essential elements of good corporate governance, create a culture of dependency, and can result in legal absolutism. The paper makes the case that the way forward for effective corporate governance is to strike an optimal balance between rules-based and principles-based approaches. The recent corporate scandals have demonstrated that the ethical ODNA is critical to the driving force and basis of legal and regulatory requirements. Effective governance means adhering to ethical principles, not merely complying with rules, and is a crucial guardian of a firm’s reputation and integrity. It is through an effective corporate governance program (that is, one that optimally captures and integrates the appropriate aspects of rules-based and principles-based approaches, and identifies and assesses the related risks) that an organization can reconfigure its ODNA for improved performance. Focusing on the ethical ODNA as the basis of new governance measures provides an opportunity to develop a competitive advantage as it represents a potential source of differentiation, strengthens the relationship with all stakeholders of the organization by building a culture of trust and integrity, and re-instills investor confidence. This paper employs dialectical reasoning that links the ODNA through principles-driven rules in developing a risks-based approach. A comparison from a risk assessment perspective between rules-based and principles-based approaches is presented. Although there have been few applications employing dialectical reasoning in business research, this methodology can be extremely useful in isolating ethical issues and integrating them into the business process. The risks-based approach captures the benefits of both rules-based and principles-based approaches, and incorporates trust-based principles such␣as solidarity, subsidiarity and covenantal relationships.Sundera Arjoon is a Senior Lecturer in Ethics at the Department of Management Studies, The University of the West Indies, Trinidad, He has served as Head of Department (2002–2005) and as Deputy Dean of the Faculty of Social Sciences (1996–2002). His publications have appeared in the Journal of Business Ethics, Journal of Markets and Morality, Global Development Studies, Social and Economic Studies, Applied Financial Economics, and the Journal of Eastern Carribean Studies. His current teaching and research interests include ethical decision-making, corporate governance, virtue ethics and familial ethics.