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Journal of Business Ethics

Erschienen in:

26.10.2015

No Company is an Island. Sector-Related Responsibilities as Elements of Corporate Social Responsibility

verfasst von: Lisa Herzog

Erschienen in: Journal of Business Ethics | Ausgabe 1/2017

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Abstract

In this paper, I analyze the moral responsibilities that companies have with regard to the development of their sector, especially when there are path dependences that can lead sectors on more or less morally acceptable paths, e.g., with regard to market access for disadvantaged groups. The interdependencies between companies in a sector are underexplored in the literature on corporate social responsibility (CSR). Reflections on the normative status of profit-seeking and on the normative bases of CSR, however, provide us with reasons for seeing sector-related responsibilities as an important component of CSR. Based on a case study of a financial institution, I analyze various morally relevant ways in which the strategic decisions of companies relate to those of other companies in their sector. I argue that companies have a co-responsibility to contribute to the development of the moral dimensions of their sectors, especially when they deal with vulnerable customers.

Vorheriger Artikel Aligning Civic and Corporate Leadership with Human Dignity: Activism at the Intersection of Business and Government

Nächster Artikel Why Bad Things Happen to Good Organizations: The Link Between Governance and Asset Diversions in Public Charities

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I here use the term “sector” for describing groups of companies that offer identical or similar products and therefore compete for customers (rather than companies that offer complements, such as hardware and software companies that might both be described as belong to the “IT sector”). I am grateful to an anonymous reviewer for suggesting this terminology.

See for example Haufler 2001. Note, however, that Haufler focuses on global standard setting, rather than on local and national contexts.

Strictly speaking, BANK is a group of several legally independent banks, united in a holding. It has a public–private ownership structure that includes several development banks and foundations. The loans it handed out during its time as a microfinance company were typically in the ballpark of several hundred to several thousand US dollars.

I had the opportunity of studying the moral challenges this company faces during several field trips to Bulgaria, Macedonia, Ecuador, and Colombia, which took place in spring and summer of 2013. I discussed BANK’s business model and the moral challenges BANK faced with several senior executives from different countries. I also visited BANK’s “academies” where training courses for managers take place. Drafts of this paper have been discussed with a senior executive of BANK.

More technically speaking, the form of theory generation used in this paper can be described as “abduction” in the sense of Charles Sanders Peirce (cf. e.g., Locke et al. 2008). In an abduction, a surprising phenomenon is explained by looking for regularities of which it is an instance. The surprising phenomenon is that in conversations about the ethical dimensions of their business, employees of BANK often brought up the structural relations to other companies in their sector, in ways that I outline below. The regularities that explain this phenomenon, and of which the experiences of BANK employees are an instance, are analyzed in this paper.

The phenomena I explore are in some ways similar to what Brandenberger and Nalebuff describe by the term “co-opetition” (1996). Their focus, however, is on the concept of “complementors” who can together create a larger market. Their paradigm case is the relation between hardware and software companies, whereas I focus on the relation between companies that are direct competitors to one another, and yet have complex interrelations between them. Brandenberger and Nalebuff do not address the specific mechanisms I discuss below, and their perspective is purely profit-oriented. I would like to thank an anonymous reviewer for drawing my attention to this similarity.

Wempe discusses the responsibility of “limited organized collectives” such as sectors (2009). Based on “integrative social contract theory” (Donaldson and Dunfee 1999) and system theory, Wempe argues that sectors can be held collectively responsible. For example, the pharmaceutical sector can be held responsible for providing AIDS blockers for patients in Africa. For another discussion from the perspective of system theory see Heidbrink 2012, who argues that system theory can better capture phenomena such as fundamental uncertainty than competing theories. My approach in this paper is somewhat different (albeit compatible): I conceptualize responsibilities for sectors as deriving from more general responsibilities, and I analyze specific dilemmas with regard to their sectors that companies experience in their operations.

For example, Donaldson and Preston 1995, p. 69, list “Governments, Investors, Political Groups, Customers, Communities, Employees, Trade Associations, Suppliers.” The first empirical study on the relation between stakeholder management and financial results, Preston and Sapienza (1990), focused on shareholders, employees, customers, and the community.” See also Mitchell et al.’s reflections on how to define stakeholders. They focus on “salience”—which includes “power, legitimacy, and urgency” (1997, p. 873), which seems to include competitors—but they never explicitly mention them. See also Heath 2006, p. 547, on the neglect of competitors in stakeholder theory.

Steinmann and Loehr 1994, Ulrich 1997 and Scherer and Löhr 1999. This tradition builds on Habermas’ political thought (e.g., 1981, 1996).

Asslaender and Curbach describe this role as a “subsidiary co-responsibility in public rule-making and service provision” and a “co-responsibility to serve the well-being of the community“(2014, p. 546).

As they put it in one place, “By political we refer to activities in which people organize collectively to regulate or transform some aspects of their shared social conditions, along with the communicative activities in which they try to persuade one another to join such collective actions or decide what direction they wish to take” (Scherer et al. 2006, p. 507). Responsibilities within sectors are sometimes explicitly mentioned in republican theories (e.g., Ulrich 1997, p. 434; Scherer et al. 2006, pp. 515–516), but not discussed in detail.

For a reflection on the role of non-state actors, including transnational corporations, as “agents of justice” see also O’Neill (2001).

Here, my approach deviates somewhat from Pies et al. 2009, who focus on the possibility of creating win–win situations and on formal institutions. It may not always be possible to create win–win situations; sometimes, it may be morally required for companies to carry the costs of their moral responsibilities if they want to do business at all.

This does not mean that one could not also model them by help of the game-theoretical toolkit. But the verbal descriptions I provide should be sufficient to convey the structure of the problems.

Pies et al. (2009, p. 379ff.) discuss the “semantics” of their ordonomic approach, which may seem related to “sensemaking.” But their account remains limited to the distinction between a “win–win” versus a “win-lose” semantic, arguing that companies should interpret situations as win–win situations in which they can look for constructive solutions. They do not discuss the broader processes of sensemaking addressed here.

This was mentioned in several conversations I had with employees and managers of BANK. The effect seems to be particularly strong in countries that have only a handful of good universities, which are typically concentrated in the capital city, and which are the main recruitment bases for companies. In some countries, class affiliation also seems to play a role: employees in financial institutions tend to come from an aspiring lower middle class, the members of which often know one another. More systematic research would be needed, however, for exploring how class affiliation affects processes of sensemaking in sectors.

This claim is also supported by evidence from an interview the author conducted with the head of the supervisory board of an insurance company in a Western country. Mentioning a scandal that had tainted the reputation of a competitor, the interviewee claimed that many customers “think: ‘this happened to [company A], so it can always happen at [company B] as well.’ They are all ‘the insurance companies’ for them” (own interview, November 2012). The interviewee saw undifferentiated and emotionalized reporting by the media as one of the causes of this phenomenon.

One might, of course, ask whether the introduction of ATMs might lead to job losses for cashiers. In the case of BANK, this did not happen, because they were expanding at the time. Even if some jobs had been lost, however, these losses might be outweighed by the overall advantages of the new technology.

The costs for year-long course (consisting of several week-long courses) for an employee (including travel costs) were in the order of several ten thousand dollars. Costs for training at the academy of the holding, which was offered to more experienced employees, were even higher, partly because of the higher costs for intercontinental travel. A senior manager with whom I discussed this question estimated that around 30 % of the employees who went through this training ended up working for competitors.

Some skills may in fact be an asset for different sectors (e.g., language skills or computing skills). The positive externalities of education are often cited as an argument in favor of public education. Public education can overcome the “commons” problem discussed here, but it is underdeveloped in many countries, especially in the Global South.

On the “ethics of collateral hiring” see also Gardner et al. 2010, who discuss this topic in the context of questions about power and employee loyalty.

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Titel: No Company is an Island. Sector-Related Responsibilities as Elements of Corporate Social Responsibility
verfasst von: Lisa Herzog
Publikationsdatum: 26.10.2015
Verlag: Springer Netherlands
Erschienen in: Journal of Business Ethics / Ausgabe 1/2017
Print ISSN: 0167-4544
Elektronische ISSN: 1573-0697
DOI: https://doi.org/10.1007/s10551-015-2923-7

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