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May 17, 2002
Two Perspectives on the Business Case for Ethical Corporate Behavior
by William Baue
Robert Monks defends the business case for corporate ethics against Sir Geoffrey Chandler's recent
editorial attacking the business case as amoral.
SocialFunds.com --
The May issue of Ethical
Performance, a UK-based online newsletter about socially responsible business, features a
guest column
by Sir Geoffrey Chandler, a former Shell senior executive who founded and chairs the Amnesty
International Business Group. Sir Geoffrey calls the business case for ethical corporate behavior
"fundamentally flawed," arguing that companies should act ethically as a matter of principle. The
business case seeks to persuade companies that good moral conduct pays. Ethical behavior, the case
goes, helps companies avoid such risks as lawsuits and reputation loss while at the same time
offering potential future savings through the implementation of sustainable practices.
 "To suggest--as the business case essentially
does--that doing right needs to be justified by its economic reward is amoral, a self-inflicted
wound hugely damaging to corporate reputation," wrote Sir Geoffrey, who pointed out that the public
already mistrusts business.
Corporate governance watchdog Robert A. G. Monks, who co-founded the Corporate Library,
advances the opposite of that perspective.
"I take the view that a properly functioning
corporation behaves well because it thereby adds value, and indeed I believe that's the only view
you can take," Mr. Monks told SocialFunds.com. "I've spent about the last 20 years trying to
effect a convergence between shareholder activism and socially responsible investing. You can only
get backing from institutional investors if you talk a commercial idiom."
Mr. Monks
posited the notion of an artificial divide that is linguistically based: socially responsible
investors and mainstream businesspeople simply don't speak the same language, even though they may
be promoting the exact same results.
"The real problem, as with everything in life, is
language," said Mr. Monks. "Virtually everyone who wishes to push corporate conduct in a positive
direction could live within the same tent, but there seems to be this tremendous tendency to define
distinctions that really don't have differences."
Social investors' language often adopts
a morally superior tone that requires their business-oriented counterparts to concede moral
inferiority if they actually implement the very actions social investors promote, according to Mr.
Monks.
"The great conceit of social investors is that they have some kind of
entitlement to make a determination as to what standard society should obey," said Mr. Monks.
Once capitalism has been acknowledged as essentially greed-based, Mr. Monks believes,then
it can be redirected toward more beneficial actions.
"Someone like Chandler gets upset
about it and says you can't really just say its all greed," said Mr. Monks. "Well hell, it
is all greed, but then you've got to be a little imaginative so that it has a more
accommodating connotation. Can we take this greed engine and adapt it to something that is more
congenial to human interest. That's really the challenge."
Social investors in the U.S.
have been taking that challenge going on 30 years now, and many would argue that change is not
happening fast enough. While Mr. Monks and Sir Geoffrey may take different viewpoints on the
justification for ethical corporate behavior, they have proposed essentially identical solutions
for realizing such behavior.
"Law is the only real legitimate source of authority on
corporate conduct, but that law must be based on full information and it must be uncoerced," Mr.
Monks told SocialFunds.com. "Therefore I would start by getting corporations out of politics.
Corporations would then be obligated to function as good citizens, and thereby disclose the impact
of their functioning on society and not corrupt government. At that point government becomes what
it's supposed to be, according to our political theory--a legitimate expression of the public will,
which we've all agreed to be bound by."
"For good companies there is a real business case
for law and regulation which ensure a level playing field and prevent undercutting by the
unscrupulous," wrote Sir Geoffrey. "We need to see market forces--the most potent influence of
all--brought to bear on company behaviour other than solely financial results."
©
SRI World Group, Inc. All Rights Reserved.
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