Given many people's belief that the term business ethics" is an oxymoron, the natural response to the question is "no." However, Amartya Sen argues otherwise in an essay titled "Does Business Ethics Make Economic Sense?" It's ironic really that we think business ethics does not make economic sense because many feel this was inspired by the father of classical economics, Adam Smith. However, it is often forgotten that before Smith wrote Wealth of Nations, he published a rather large tome on ethics titled The Theory of Moral Sentiments. Ethics was a central concern to Smith not only in everyday life but also in economics. As Sen points out, Smith says in The Theory of Moral Sentiments that "humanity, justice, generosity, and public spirit, are the qualities most useful to others."

But still, Smith is seen as the great exponent of self interest in economics thus making business ethics unnecessary. The main passage in Wealth of Nations that is responsible for this is the passage about the butcher, the brewer, and the baker. "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard for their own self interest."

Sen maintains that Smith stresses the importance of self interest in motivating exchange but that there are other factors at work in making exchange possible. Additionally, economics is also concerned with production and distribution which cannot be adequately explained by self interest alone. In the example of the butcher, the brewer, and the baker self interest certainly does provide a reason for their desire to enter into an exchange but more is needed in order to make the exchange successful. That more is a set of ethical institutions. For example, trust is needed for an exchange to work. Think about credit for a moment. You go into a store and want to purchase some merchandise but instead of paying with cash you put it on your credit card. Now, in order for a merchant to accept this there has to be some trust in place. This is because in essence you are simply promising to pay for the merchandise at a future time instead of right now. When you sign the credit receipt you are entering into an agreement with the merchant. Now, you might say that this has nothing to do with ethics since you are obligated to pay the money or else you'll end up being punished. But, think about what punishment is in this case. It is simply a consequence of your failure to hold up your end of this trust agreement. It is important not to confuse the consequences of your failure to uphold an ethical standard with the ethical standard itself. And this is part of Sen's point.

Ethics is also important in the realm of production. The two issues where non-profit motives become particularly important in economics are public goods and externalities. A recurring question in capitalist economics is how can public goods be provided since there seems to be little profit motive to do so? In order to see the problem we should distinguish a public good from a private good. Private goods are things that individuals consume and this consumption excludes another person from consuming the same product. An example Sen uses is a toothbrush. My using the toothbrush precludes your use of it. But public goods don't work this way. For example, street lighting. My use of street lighting does not preclude your using them as well. The question is what economic incentive is there to produce such public goods since it is hard to see how anyone could make a profit from them? We'll see in a later lecture another example of a public good

which was thought to be unprofitable, namely the lighthouse. But the question remains. In order to produce public goods something else must be at work other than economic self interest. This something else must be other ethical considerations.

The problem of externalities involves costs that are passed on without an easy way to compensate for them. Sen's example is pollution. If I live next to a factory I have to deal with the pollution from that factory and have no easy way to pass those costs back to the factory owner. So, what incentive do factory owners have to curtail their pollution if they are not paying the direct costs? The point of this example is that business without ethics not only provides no incentive to address this problem but that without ethics we run into the problem in the first place! So, we are much worse off as a community. But the point of an economic arrangement is to make us better off not only individually but also as a community. So, in order to do this other ethical considerations besides self interest must come into play. Business ethics does make economic sense!

Finally, the area of distribution also benefits from business ethics. One could make the argument that here the market dictates how much of a product is produced and how the product is priced and distributed. But the question arises whether

this produces the optimal distribution. In economics there is something called the Pareto Optimum (named for the economist Vilfredo Pareto). Basically the idea here is that a given distribution of goods reaches the Pareto Optimum when any further change in the arrangement will make everyone worse off. Obviously, most arrangements of distribution are not optimum because some change would make some involved better off. In an economic arrangement motivated ONLY by self interest the Pareto optimum cannot easily, if at all, be reached. Whereas in an arrangement where other ethical considerations are in play, the arrangement is often improved, though it may still fall short of optimality.

So, it does seem that business ethics makes economic sense. But some might argue that whether it makes economic sense or not business ethics should be practiced. As Thomas Sowell puts it in his book Basic Economics there are some who argue for "non-economic values" saying "economics is all very well, but there are also non-economic values to consider." Sowell calls this a fallacy since "of course there are non-economic values. In fact, there are only non-economic values. Economics is not a value in and of itself. It is only a way of weighing one value against another. Economics does not say that you should make the most money possible." This may come as a great surprise to many including business and economics majors.

This relates to the point of Sen's article since it does seem to be a common misconception that economics dictates that one should make as much money as possible no matter what. This is simply untrue. Economics does not say that one should rob a bank, for example. No, what economics does is simply provide us with a way of calculating the costs of one action over another. Other factors must be involved in making the decision. Likely as not those other factors are ethical considerations.

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Amartya Sen's Public And Private Goods

In the following paper I will discuss Amartya Sen’s views from his published work “Does Business Ethics Make Economic sense”. First, I will begin with comparing and contrasting the distinctions between private and public goods. Next, I will discuss the two important issues involving organization and performance of production intertwined with Amartya Sen’s views on these   topics.A private good described by Sen is a good that is “compete and be exclusive.” For example a pair of shoes is a good that we both could use but not together. Therefore if I use the pair of shoes you cannot, making it a private good.   A public good is the contrast of a private good. Therefore if a single individual was to use or consume the good, it does not stop the consumption of the good from others. For example, Sen said a bacteria free environment is an example of a public good because we all can benefit from fresh air.Lastly, Sen’s conclusion tells us that the failures involving production and organization with public goods are irrelevant. Firstly, the failures of assigning available resources (resource allocation) with “public goods or involving strong externalities” are irrelevant because public goods are still present. Furthermore, the issues involving production having many costs that may be unfeasible. Also the workers that have contributed to the success of the whole business may not be reflected, yet there can be important public goods. From the success of the business everyone benefits. Therefore Sen believes the success of a business can be seen as a public good.

I read with great interest the brilliant piece on Amartya Sen ("Freedom as Progress,"

September 2004). As an Indian economist from Santiniketan where Professor Sen

studied, I take a great interest in what he says and does. While I am an ardent admirer

of Professor Sen, no portrayal should be adulation only. There is always a flip side--

imperfection is part of any man or woman! So let me suggest a contrarian view.

While it is true that Professor Sen conducted pioneering research on poverty and

hunger, he was not the first to argue that it was an ineffective entitlement system rather

than a decline in food availability that triggered famines. Jawaharlal Nehru and Mahatma

Gandhi both expressed similar ideas back in the 1920s. Professor Sen's recipe of

democracy, freedom, and a free press as insurance against famine in poor countries is

utopian, since it doesn't recognize the fact that in most, if not all, developing countries

democracy is obtained in form and not in fact, that freedom erodes into license, and that

the press tends to be partisan and unethical despite some honorable exceptions. In

many poor countries, politics is a conflict between the short-term interests of self-serving

politicians and the long-term interests of peaceful, sustainable development.

Professor Sen points to the social achievements of the state of Kerala as exemplary, but

he has offered little or no policy advice to resolve the current Kerala model muddle

(massive unemployment, highly educated yet unemployable youth, high mortality rates,

self-defeating consumerism, an alarming occupational shift away from the farming

sector, "Dutch disease," and a widening rich-poor divide).

Although Professor Sen has stressed the importance of land reforms in India, he has not

said that the overriding need is a democratization of access to, and ownership of,

assets--as was achieved in China.

Finally, it is incorrect to suggest that Professor Sen has founded an innovative science of

human development. He has merely shifted his stance from time to time among

mainstream economics, Marxian economics, and humanistic economics, not owing

steadfast allegiance to any of them.

THE ROLE OF CORPORATE ETHICS IN A MARKET ECONOMY AND CIVIL SOCIETY

GEORGES ENDERLE

Business enterprises with their objectives, strategies, struc-tures, cultures and performances are of paramount importance in con-temporary societies. They can either be powerful engines for, or bulwarks against, the well-being and freedom of human beings and the conservation of nature. In order to determine their realms of res-ponsibility, this paper argues for the consideration of both business conditions and business opportunities. Both issues involve choices and thus are ethically relevant, i.e., the choices of constraints imposed on companies and the choices made by companies within these constraints. In the post Cold War era, these constraints are charac-terized as "civil societies" and "market economies" in many countries, and it is likely that their number will increase even more in the years to come. Therefore, the role of corporate ethics should be discussed with a clear understanding of these business conditions which, in turn, are subject to ethical examination.

Section 1 briefly addresses the emergence and ambiguities of civil societies, while holding nevertheless that the phenomena of a civil society represents an important societal development in recent years. More specifically, advocating a tripartite structural model of society that distinguishes "civil society" from both state and economy, this sec-tion explores the relevance of civil society to understanding business and corporate ethics. In contemporary societies, the structural dif-ferentiation between the political, economic and socio-cultural sys-tems is pervasive, but, at the same time, there are considerable over-lapping areas; hence both differences and overlaps should be taken into account. From this perspective, business and corporate ethics can be seen as a learning process that needs both the internal com-mitment of the economic actors and an external critique and support by non-economic actors.

Section 2 discusses the basic conceptual issues of economic systems in general and of market economies in particular. Although these issues do not directly involve normative-ethical norms, they greatly matter for the ethics of economic systems and market econo-mies; if such issues (e.g., distribution) are omitted or misconceived the ethics of the economy is incomplete

and misleading, and corporate ethics is negatively affected as well. In addition, I point to two other fun-damental questions: first, what informational basis is appropriate for the ethical evaluation of markets, and second whether or not ethics can be avoided in "social choices" in economics.

After these conceptual clarifications concerning "civil society" and "market economy," Section 3 turns to conceptual issues of cor-porate ethics. The term "responsibility," a key notion of contemporary moral sensitivity, is used to express the ethics of the company in-cluding economic, social and environmental responsibilities. These three realms of responsibility are different, yet partially overlap and in-volve three kinds of ethical requirements: minimal ethical demands, positive obligations beyond the minimum and aspirations for ethical ideals. As in Section 2 with regard to the economic system and market economy, these conceptual considerations should help delineate and clarify ethical issues of corporate conduct. But they cannot, and are not meant to, substitute for normative-ethical reasoning. Perspectives for such guidance may be the goal-rights-system approach, a morality of inclusion, and a morality of good neighborhood, which I have dis-cussed elsewhere (Enderle 1996 and 1994b).

CIVIL SOCIETY

In their seminal work Civil Society and Political Theory (1992), Jean L. Cohen and Andrew Arato highlight "the importance in East Europe and Latin America, as well as in the advanced capitalist demo-cracies, of the struggle for rights and their expansion, of the establish-ment of grass roots associations and initiatives and of the ever re-newed construction of institutions and forums of critical publics" (p. 2). They "are convinced that the recent reemergence of the `discourse of civil society’ is at the heart of a sea change in contemporary political culture" (p. 3). However, the concept of civil society is currently used by intellectuals in, or close to, a number of social and political move-ments in heterogeneous ways, four of which are presented as ideal typical discourses: Polish (the democratic opposition), French (the "second left"), German (the realist Greens) and Latin American (the new democratic left).

From a very different, global point of view, the report Our Global Neighborhood by the Commission on Global Governance (1995) states that:

Among the important changes of the past half-century has been the emergence of a vigorous global civil society, assisted by the communications advances (just described), which have facilitated interaction around the world. This term covers a multitude of ins-titutions, voluntary associations, and networks--wo-men’s groups, trade unions, chambers of commerce, farming or housing co-operatives, neighborhood watch associations, religion-based organizations, and so on. Such groups channel the interests and energies of many communities outside government, from business and the professions to individuals working for the welfare of children or a healthier planet." (p. 32)

Civil society organizations have grown dramatically not only in in-dustrial countries with high living standards and democratic systems, but also in developing countries and in former Communist countries in Europe (see also the special chapter on non-governmental organiza-tions in the UNDP’s Human Development Report 1993). Therefore, the report concludes that the United Nations must take greater account of the emergence of global civil society by establishing "a place within the UN system for individuals and organizations to petition for action to redress wrongs that could imperil people’s security" (pp. 253-263).

Is it possible to develop a consistent concept of civil society that goes beyond the category of early modern political philosophy and is re-\levant to the contemporary world? Adam B. Seligman is rather skeptical (Seligman 1992, 199-206). When the idea of civil society is used

as a political slogan of different movements and parties in order to criticize certain government policies, it "should not detain us too long" (p. 201). As a philosophically normative concept, an ethical ideal, and a vision of the social order that overcomes the tension between in-dividualism and community, between particular and universal in-terests, "civil society," he contends, cannot cope with the contra-dictions of modern existence. Moreover, the analytical aspects of civil society as a sociological concept cannot help either to bring us any nearer to their resolution because its concept adds little to existing ideas of democracy or of citizenship and ignores precisely the problem of liberal-individualist ideology, that is, how to constitute a sense of community among and between social actors who are conceived of in terms of autonomous individuals (pp. 203-204).

In contrast, Cohen and Arato argue that the concept of civil society articulates a contested terrain in the West that could become a primary locus for the expansion of democracy and rights. They con-cede that inadequate versions of the concept have been unreflectively revived in the discussion so far: Struggles against communist and military dictatorships that penetrate and control both the economy and the various domains of independent social life have too often focused on the confrontation of "civil society versus the state" without suf-ficiently differentiating between the task of establishing viable market economies, on the one hand, and strengthening civil society vis-à-vis the state and liberated market forces, on the other hand; in Western liberal democracies, often the concept of civil society either lost its critical potential because its norms--individual rights, privacy, volun-tary association, formal legality, plurality, publicity, free enterprise--were supposed to be already achieved, or it has become, as an early form of political philosophy, irrelevant to today’s complex societies.

Cohen and Arato suggest the following working definition:

We understand ‘civil society’ as a sphere of social interaction between the economy and state, com-posed above all of the intimate sphere (especially the family), the sphere of associations (especially volun-tary associations), social movements, and forms of public communication. Modern civil society is created through forms of self-constitution and self-mobilization. It is institutionalized and generalized through laws, and especially subjective rights, that stabilize social differentiation. While the self-creative and insti-tutionalized dimensions can exist separately, in the long term both independent action and institutionalization are necessary for the reproduction of civil society (Cohen et al. 1992, ix).

Note that this definition, first, does not identify civil society with all of social life outside the administrative state and economic pro-cesses in the narrow sense; rather, civil society is distinct from a poli-tical society of parties, political organizations and political publics (in particular, parliaments), as well as from an economic society com-posed of organizations of production and distribution, usually firms, cooperatives, partnerships and so on. Second, civil society does not include the whole socio-cultural lifeworld, but only its structures of socialization, association and organized forms of communication to the extent that these are institutionalized or are in the process of being institutionalized. Third, civil society is not seen in opposition to the eco-nomy and state by definition; rather, they are conceived as mediating spheres through which civil society can gain influence over political-administrative and economic processes. Only if these mediations fail, will the relationship of civil society, or its actors, to the economy and the state become antagonistic.

In my view, the crucial contribution of Cohen and Arato is the tripartite structural model of society in which "civil society" as a "third realm" is differentiated from the economic and political (sub-) systems. (This is also the case in Gramsci’s and Parson’s approaches, but not in the Hegelian and many contemporary concepts including the one used by the Commission on Global Governance). The economic and political systems are characterized by the modern functional require-ments (hence the insufficiency of early modern and utopian concepts which dismiss these

demands) and they are, at the same time, mediating spheres (in the Hegelian sense). However, their rela-tionship is not overly functionalist (in the sense of Gramsci or Parson); it allows for tensions and conflicts and can be constructive. "Civic cul-ture" which is most appropriate to a modern society is not based on civil privatism and political apathy. The involvement in one’s family, private clubs, voluntary associations and the like does not deflect from political participation or activism on the part of citizens. Rather, social movements are a key feature of a vital, modern, civil society and an important form of citizen participation in public life; they can and should supplement, but should not aim to replace, competitive party systems.

This concept of civil society appears to capture a number of essential features of contemporary societies. In my opinion, it does not need the normative foundations of Habermas’ discourse ethics pro-posed by Cohen and Arato, but it should address explicitly the pervasive ecological embeddedness of society. Moreover, like the two authors addressing the relationship between civil society and the political system, scholars should also explore systematically its rela-tionship with the economic system, which is little scrutinized, yet of crucial importance. In what follows I attempt to emphasize three basic aspects.

First of all, business and the economy can exist only if they are widely accepted by society in general and the civil society in particular. The more articulated civil society becomes, the more business and the economy depend on it. Reputation and trust are precious assets; and cynicism about business seeking exclusively its own interests hurts business inescapably (as is the case with cynicism about govern-ment). Examples of U.S. publications monitoring and critically sup-porting corporations are Ethikos (since 1987), Business Ethics (since 1987), and the Research Report (since 1988) of the Council on Econo-mic Priorities, New York.

On the other hand, civil society too depends heavily on business and the economy and cannot exist without the minimal economic security of its citizens. This, however, does not mean that civil society could flourish only in countries with high living standards. As the intern-ational reports mentioned above clearly show, there is an enormous increase of non-governmental organizations in developing countries. Still it remains true that:

Empowerment depends on people’s ability to provide for themselves, for poverty translates into a lack of options for the individual. Economic security is es-sential if people are to have the autonomy and means to exercise power. While the number of productive jobs world-wide has multiplied, particularly through the growth of the small-scale private sector, prac-tically all societies are affected by debilitating unem-ployment. And the situation seems to be worsening, with marginalization eating away at communities. No empowerment will be sustained if people lack a stable income" (Our Global Neighborhood 1995, 36).

Finally, the interactions between civil society and business and the economy are of paramount importance for the business ethics movement understood as a "learning process." It would be naive to assume that improvement business conditions and business conduct could occur without sustained pressures from outside business. In conjunction with government and legal regulation, business needs external critique and support from civil society. At the same time, internal commitment to business ethics by companies and business leaders is necessary if such a learning process is to succeed. Merely reactive behavior to external circumstances and incentive structures cannot meet the ethical challenges business and economies face today. It would be interesting to illustrate this double perspective with the current controversy about "The Body Shop" (see Business Ethics 1994, and other documentation).

According to the three-level conception of business ethics that includes the economic system, economic organizations and indivi-duals, the relationship between civil society and the economy should be discussed with regard to all three interrelated levels. However, in the

following I will address conceptual issues at the macro- (Section 2 Market Economy) and meso-levels (Section 3 Coporate Ethics), but not at the micro-level.

MARKET ECONOMY

A proper understanding of the role of corporate ethics requires a proper understanding as well of the economic system in the broader societal context. The need explicitly to address and include this macro-perspective becomes particularly obvious when one examines the question of corporate responsibility in other countries. For example, in China this question must take into account the markedly different business conditions to which state-owned enterprises, rural enter-prises in townships and villages, joint-ventures, foreign-owned firms and other company types are exposed (see Enderle 1994b). The busi-ness context of a "social market economy" as in Germany significantly differs from that of the United States; correspondingly, this affects differently the role of corporate ethics (see Enderle 1995). None-theless, the inclusion of the macro-context often is disregarded, es-pecially in North America; and even if it is discussed--as in The Role of the Modern Corporation in a Free Society by John R. Danley (1994)--this is only in a rather rudimentary way: Danley understands the "pol-itical economy" only as the relationship between government and the economy, has no clear concept of the economic system, and uses a vague notion of "free society."

What Constitutes an Economic System?

In the modern theory of economic systems, the prevailing view is that economic systems should be characterized by several basic criteria because one single criterium leads to a fundamental miscon-ception of what an economic system is and how it works (Kromphardt 1993). Thus to concentrate on the ownership of the means of produc-tion (Karl Marx) is as equally misleading as to concentrate on the es-tablishment of economic plans (Walter Eucken). Nowadays three dis-tinct sets of criteria with different reasons are suggested:

Criteria of ownership and control: Who participates in the pro-cesses of economic planning, decision making and control over pro-duction, distribution and consumption?

Criteria of information and coordination: With the help of what systems of information are the individual decisions coordinated?

Criteria of motivation: What motives cause economic actors to set up and pursue their goals?

Concerning the first criteria, ownership with its various forms is still an essential feature of an economic system. The dramatic privati-zation campaigns in Eastern Germany and the Czech Republic were conspicuous signs of transition from the socialist to the capitalist re-gime. However, many contemporaries mistakenly took this to be the only decisive change (using one single, Marxian criterium). On the other hand, the very slow process of privatization in China justifies to some extent the term "socialist market economy," because public enterprises still widely predominate there. Nonetheless, following the concern of A. A. Berle and G. C. Means (1932), juristic ownership should be distinguished from the effective control of resources. The more recent property rights literature, emphasizing that ownership matters, cites three parts of the rights of ownership of an asset: the right to use the asset the right to appropriate returns from the asset, and the right to change the form and/or the substance of an asset. In contemporary economies of a socialist as well as a capitalist nature, property rights often are delegated to the board of directors and other forms of governance. This involves numerous issues commonly dealt with as the "principal-agent" problem and discussed, from a business-ethical perspective, in Ethics and Agency Theory: An Introduction (Bowie et al. 1992). Moreover, the distribution of property rights is more complex and more economically relevant than the distribution of juristic

ownership. Both distributions characterize to a considerable degree the economic system and the conditions under which business enterprises must operate. Hence, they are subject to ethical evalu-ation at the macro-level and, at the same time, determine some limits to the role of corporate ethics at the meso-level.

Not infrequently the second set of criteria (information and coor-dination) is used to highlight the special feature of "market" economies which supposedly operate through decentralized coordination of a my-riad of economic plans (see, for instance, Rich 1990). Without doubt, this feature is of paramount importance in understanding the func-tioning and the ethics of market economies. However, besides the risk of disregarding the equal relevance of the first and third sets of criteria, the second set too needs more qualification, concerning not only the coordination of economic plans, but also the type of information which the economic planners can and should use.

Basically, the coordination is effected through both markets and "hierarchies" that exist in private enterprises as well as public administrations (see Williamson 1975 and 1985). In order to be effi-cient and avoid waste and failure, hierarchical coordination must know the potentials of performance at all layers of the organization. How-ever, there is a risk of the actual potentials being misreported to the coordinators with the intention of negotiating stronger bargaining positions: as numerous examples show, premiums for overfulfilling economic plans in socialist economies tend to increase this risk even more. In addition, while hierarchical organizations can function fairly efficiently and effectively, they normally do not pioneer and develop new products and production procedures, which is also a problem from the viewpoint of corporate ethics advocating a proactive stand (see Section 3).

When economic plans are coordinated via markets, a number of conditions must be fulfilled for a smooth functioning to achieve certain objectives such as economic growth, creating jobs, fighting poverty, and sustainable development. Each "decentralized" economic plan-ner must interpret the "market signals" and know on its own what pro-ducts in what quantity and at what price are to be supplied. This obviously depends on how complete the knowledge is (which normally is highly incomplete because of many uncertainties), on offerings by competitors and on the development of demand. Furthermore, enter-prises are supposed to be small without influencing the prices; econo-mies of scale through mass production are excluded in order to pre-serve competition; there are no "externalities," i.e., non-market inter-dependencies; and, if there is no perfect foresight, a central coor-dinator (like an auctioneer at the stock exchange) would know all demand and supply curves of all economic actors and calculate the optimal market prices.

Because these assumptions of the perfect market equilibrium model are unrealistic, the claim that market economies guarantee the optimal use of existing potentials of performance ("resources" in various senses) is unrealistic too: a case in point being the high figures of unvoluntary unemployment. However, it remains true that the decisive advantage of market coordination lies in the dynamic expan-sion of those potentials, due to competition. Competition brings about the risk for each single supplier of being removed from the market if it rests too long on its present successes, while its competitors offer new and more attractive products and increase productivity. The pressures of competition that increasingly become international do not stop at the gates of the enterprises, but strongly affect them at all layers; they are an enormous challenge not only for the ethics of economic systems, but also for corporate ethics.

With regard to the third criteria, discussions about economic systems often disregard the question of motivation. If economic be-havior is understood in a mechanistic sense, there is no role for the more complex psychological and cultural reality of motivations be-cause they can influence economic behavior, at best, from "outside" (as, for instance, culture impacts on engineering). Crucial problems in radical transition from socialist to capitalistic economies and in gradual transitions as in China are motivational ones which cannot be changed over night. (The

motivational conditions for such changes have been investigated much less than for changes in the other direction, namely, from a capitalistic to a socialist and communitarian regime.) Therefore, it makes no sense to "uncouple" and disconnect motivations from eco-nomic behavior, and it would be too simple to take self-interest as the only driving force of modern capitalistic economies. Nor can such a narrow view be based on Adam Smith’s legacy which is much more differentiated (see, for instance, Werhane 1991).

Motivations strongly influence exchange, production and dis-tribution, albeit in different forms and ways. While the motive of self-in-terest is important for exchange (according to Smith’s famous remark about the butcher, the brewer and the baker), it is insufficient to pro-duce "public goods" (in both economies and companies) and to ad-dress distributional problems (see Sen 1993a). Moreover, the forms and ways of exchange, production and distribution impact on the moti-vations of economic actors. Fair exchange relations may strengthen the motives to more trade, while exploitative relations (if they can be avoided) may weaken the interest of the exploited part to continue to trade. The successful fight against unemployment and inflation will reinforce the motivation to produce. Different patterns of income dis-tribution send different motivational signals to producers; for ins-tance, a lack of motivation to produce efficiently can be induced by either a very "flat" or a very unequal distribution pattern.

In addition, the question of motivation is closely linked to, but not identical with, the question of the goals and meaning of economic behavior. Goals such as building up a national economy after the Second World War in Germany and Japan, and now in East Asian countries, can strongly motivate people for individual and collective actions (see, for instance, Enderle 1994a). Generally speaking, the goals can be the same, but the motivations may differ; or there might be common motivations leading to different goals. (Regarding the im-portance of discussing goals, see Enderle 1996.) In sum, the inter-relationship between motivations and goals, on the one hand, and ex-change, production and distribution, on the other hand, is crucial for the understanding and ethical evaluation of the long-term and dynamic aspects of economic systems.

Ethical Questions of a Market Economy

In discussing the essential components of an economic system, some important aspects of the "market economy" already have been addressed, to which I now add a few complementary remarks. Com-monly "market economies" are defined as "economic systems (or orders) in which voluntary economic transactions between market par-tners cover a large part of business and economic life" (see Watrin 1993). The principle of free market transactions means that the state in a market economy does not have the task of comprehensively se-curing the livelihood of all citizens, but has only limited responsibilities. It is not up to the state to organize the production of goods and ser-vices, nor the distribution of these products. Rather, the participants of the market decide what, how much, where and by whom goods are produced, and who receives the incomes. Consequently, the tasks of the state concern only the provision of "public goods."

So far this definition is straightforward. However, there is a wide range of interpretations of what "public goods" involve; consequently, various and significantly different forms of "market economies" should be distinguished (see, for instance, Albert 1991). "Public goods" may include just the legal provisions, above all the protection of private property rights, that are necessary for the very functioning of market processes and the division of labor (see libertarian conceptions). Towards the other end of the spectrum, "public goods" also involve, besides competition and antitrust laws, social security, employment, basic education and health care, income redistribution, environment protection, international trade and investment policies, ets. (see, e.g., the "social market economy" in Germany). The definition of "public goods" is not only a question to be solved by the political process. It also has an important economic aspect in the sense that "public", as opposed to "private", are characterized by nonexcludibility and non-rivalrous consumption and cannot by definition be provided by market processes, although these are

clearly economic issues (see the dis-cussion about market failure, e.g., in Enderle 1991). Moreover, the definition of "public goods" is a normative issue to be addressed by moral and political philosophy.

On the basis of the three sets of criteria of any economic system and the specific features of market economies, there are a number of fundamental questions with which an ethics of the market economy should deal: First of all, in face of the ecological, economic and social challenges of "sustainable development" (World Commission on Envi-ronment and Development 1987, 8), the purpose and meaning of the market economy is a central and inescapable question that profoundly influences the motivations of economic behavior. Motivations such as self-interest, group loyalty, and the search for the common good are driving forces for exchange, production, distribution and consumption, and are relevant to the provision of both "private" and "public" goods; hence, an exclusive set of motives which concerns the production, distribution and consumption of solely "private" or "public" goods has disastrous consequences for the economy.

Second, the scarcity of resources is an unavoidable condition of human existence today and will not ease in the future. Therefore, in business and economic life, too, priorities must be set and decisions made. Scarcity implies the imperative to use the resources efficiently in every aspect of the economy, i.e., not only in exchange and pro-duction, but also in distribution and consumption. Competition, which is not an end in itself, is often a powerful means, yet no panacea, for efficiency.

Third, exchange relations between market partners should be "fair" and follow the imperative of "commutative justice." This means that those who acquire an advantage should give an "equivalent" in ex-change. This imperative concerns any price issue such as market prices for goods and services, wages, interest rates, international commodity prices and exchange rates.

Fourth, to understand the economy as a process of merely pro-duction and exchange dismisses the fact that each economic tran-saction necessarily involves also a distributive aspect. By paying a higher wage or a higher rent, more income goes respectively to the worker or to the landlord. The question of distribution and thus the im-perative of "distributive justice" arise not only at the "end" of the economic process when "re-distribution" by the state is at stake. Rather, distributive issues are already involved at the "beginning" concerning the initial endowments which the economic actors pos-sess, such as juristic ownership, property rights and human capital; and they pervade the market processes up to the market outcomes (see Enderle 1993b).

Finally, it goes without saying that the concepts "purpose," "meaning," "efficiency," "commutative justice," and "distributive justice" are very general and controversial, and their application causes a great number of difficulties. The problems are aggravated even more if one takes into account that, already from a functional point of view, exchange, production, distribution and consumption are interrelated in many ways. Hence, it is too simple to direct the ethical examination exclusively, say, to production or distribution or to both of them, as if they were two separate entities.

Evaluating Market Economies

from the Perspective of Individual Freedom

Market economies often are vigorously defended in terms of "freedom." However, what "freedom" means beyond its language and rhetoric needs closer examination. According to Amartya Sen, "The economic theory of market allocation has tended to be firmly linked with a `welfarist’ normative framework. The successes and failures of competitive markets are judged

entirely by achievements of individual welfare (for example, in terms of utility-based Pareto optimality), rather than by accomplishments in promoting individual freedom." (Sen 1993, 519) To elaborate this important topic does not lie in the scope of this paper; yet some remarks, following Sen’s ideas, seem to be in place.

A comprehensive assessment of freedom should take into account both irreducible features: "the opportunity aspect" and "the process aspect." Freedom gives individuals the opportunity to achieve their objectives--things that they have reason to value. The oppor-tunity aspect of freedom is, thus, concerned with the individual’s actual capability to achieve these things (no matter what the process is through which that achievement comes about). On the other hand, the process aspect of freedom relates to the procedure of free decision by the individuals themselves--having the levers of control in their own hands (no matter whether this enhances the actual opportunities of achieving their objectives).

To start with the second view, the process aspect includes autonomy of decisions and immunity from encroachment; this is par-ticularly advocated by such libertarian philosophers as Robert Nozick (1974). According to them, because the rights to exchange and act freely are to be protected, market activities must be permitted without let or hindrance by others (including the state). These antecedent rights basically justify the markets, regardless of their welfare-gene-rating or welfare-weakening effects. However, this unqualified and un-complicated defence of markets is questionable on the ground that this reasoning cannot be really independent of results and is subject to ethical examination. Nevertheless, it remains true that decisional au-tonomy as well as immunity from encroachment are constitutive of the competitive market functionings, provided that no externalities exist.

The opportunity aspect of freedom has been emphasized by many writers--individuals as diverse as Aristotle, Adam Smith, Karl Marx, Mahatma Gandhi and Franklin Roosevelt--who have been much concerned not just with procedures and processes, but with the substance of freedom and the actual opportunities had by people. How can the performance of markets be evaluated in terms of opportunity-freedom? The "performance of markets" includes the questions of effi-ciency and unequal outcome; the "opportunity-freedom" relates to the set of achievements from which a person can choose, which also in-volves two questions, namely: in terms of what criteria is such a set of achievements to be evaluated? and in what evaluative `space’ are achievements to be considered?

Sen proposes to evaluate opportunity-freedom not in the space of commodities, that is, that whoever holds more commodities has more freedom; but rather in the space of relevant capabilities and fun-ctionings such as being adequately nourished, living the way one would like, etc. (see his extensive discussion of the capability ap-proach in Inequality Reexamined 1992). On this ground, he concludes that "competitive market equilibria are weakly efficient in opportunity-freedom in terms of capabilities as well as commodity holdings" (Sen 1993, 535), whereas a "weakly efficient" state of affairs means that there is no alternative feasible state in which everyone’s opportunity-freedom is surely unworsened and at least one person’s opportunity-freedom is surely expanded (532). Moreover, as for the outcome of market processes, problems of inequality are no less possible in the space of capabilities and opportunity-freedoms than in that of com-modities and welfare. In fact, they may be even accentuated due to the "coupling" of the income-earning ability and the income-using ability. (That means, for instance, that a disabled person takes less advan-tage from a certain income than a healthy person.)

Of course, in order to evaluate market economies, many more questions are to be discussed, that transcend the scope of this paper (see, e.g., Amartya Sen’s presidential address on "Rationality and Social Choice," Sen 1995). Still, before discussing and applying ethi-cal criteria, it appears to be of paramount importance to pay due atten-tion to the informational basis of market evaluation and to enrich this basis in terms of functionings and capabilities, which is also crucial for understanding the role of corporate ethics (see Enderle 1994b).

CORPORATE ETHICS WITH A BALANCED CONCEPT OF

THE FIRM

A proper conception of corporate ethics takes into account the conditions set by the market economy, political regime and civil society. At the same time, these conditions at the macro-level pre-supposedly cannot determine entirely the conduct of companies and other economic organizations at the meso-level. Therefore, corporate ethics explores the spaces of freedom companies enjoy and should enjoy, and attempts to develop normative-ethical guidance. Needless to say, in this endeavor the concept of the firm plays a pivotal role.

A balanced concept of the firm captures a number of essential aspects: the firm as a moral actor, having economic, social and en-vironmental responsibilities, being related with other actors at various levels, and operating in a horizon of uncertainty and change. It is assumed that all these aspects constitute the firm, are interrelated and might be articulated in various degrees. None of them must be ex-cluded; and all are to be taken into account in a "balanced" way.

Figure 1 illustrates the conceptual framework in which the con-cept of the firm is located. The front side of the cube indicates major domains of human activity, i.e., the economic, political and socio-cultural, all of which are embedded in "nature" (environmental dimen-sion). It also includes various ways the national sphere can be linked to the international spheres. The third dimension of the cube ex-presses different levels of human actors: individuals at the micro-level, organizations at the meso-level and systems at the macro-level. An example may help explain the working of the cube. A given point at the intersection of the economic domain, the interconnection type and the meso-level represents a multinational company with business units world-wide that significantly influence each other. The firm at this point is linked with other points: in the same intersection (i.e., with com-peting multinationals) and in other intersections (i.e., with the Euro-pean Union, Greenpeace, etc.).

The Firm as Moral Actor

The first question concerns the nature of the firm. From the ethical perspective the question can be articulated in terms of res-ponsibilities. "Responsibility", a key notion of contemporary moral sensitivity, appears quite appropriate to express the ethical dimension of human action by including both practical and theoretical notions (see, e.g., Fischer 1986, Zimmerman 1992, Nunner-Winkler 1993, Rendtorff 1993). Responsibility basically involves three components: the subject who bears responsibility that cannot be completely deter-mined by rules and laws; for what the subject is responsible (the realms of responsibility); and the authority to whom the subject is accountable.

The beginning is who is responsible. Is the firm essentially a production function, a legal entity, a business leader or the team of top managers, the sum of all individuals in the company--managers and employees--or something else? It is our assumption that the firm has its own identity, mission and conduct, however, these be specified. This identity, mission and conduct of the firm as an organization is qualitatively different from those of both individuals and entities such as countries. Because the firm makes decisions and takes actions, often through complex and opaque processes, it can be qualified as an actor in its own right. Being an actor entails moral responsibility. The firm is thus understood as a moral actor, meaning that it is capable of moral behavior (which is not necessarily correct moral behavior). Hence, the specification "corporate" in the term "corporate res-ponsibility" refers to the firm or corporation as subject and moral actor (and not to a specific--for instance, economic--realm of responsibility) in the same way as "personal" responsibility relates to the person as moral actor.

The firm is exposed to varieties of changing circumstances and, therefore, has to strive for consistency and flexibility over space and time in order to maintain and develop its own identity and mission. From the ethical perspective this means that the firm has to meet the challenges for corporate, ethically responsible conduct.

Mapping Corporate Responsibilities

To map corporate responsibilities more concretely and to iden-tify the realms for which the firm is responsible depends on how the role and purpose of the firm is conceived in relation to society. If so-ciety is divided in distinct and separable domains such as the eco-nomic, political and socio-cultural, the role of the firm can be seen in purely economic terms, and the responsibility of the corporation is limited to its economic purpose. In reality, the various domains, while retaining a certain autonomy, are interconnected. They overlap to some degree and, in addition, are embedded inevitably in "nature." Accordingly, the concept of the firm should reflect this more complex understanding of society. Since at the societal level numerous chal-lenges include economic, political, socio-cultural and environmental dimensions which cannot be separated from one another, the com-panies are affected by these "mixed" challenges and can hardly act as pure economic organizations. Rather, as moral actors they may attempt to meet those challenges translated to the corporate level.

According to the societal domains the following realms of corporate responsibility can be identified: economic, political, socio-cultural and environmental. Each one has a certain autonomy which means that it cannot be entirely instrumentalized in favor of another realm. For instance, to assume environmental or socio-cultural res-ponsibility cannot be justified by fulfilling economic responsibility alone. Alternatively, to live up to economic responsibility is not achieved solely by taking seriously corporate responsibility in the other realms. It follows that a strictly hierarchical concept of the firm which takes all non-economic activities as mere means to achieve economic goals ignores the multi-purpose reality of society and its relevance for corporate responsibility, and should be replaced by a circular inter-relationship of these various responsibilities. This concept of the firm is well expressed in Ciba’s mission statement: "We strive to achieve sustainable growth by balancing our economic, social and envi-ronmental responsibilities", and by the fact that Ciba now publishes, along with the summary report and financial review, environmental and social reports (Ciba 1993, 1994a, 1994b).

The realms of corporate responsibility, listed in Figure 1, can be characterized as follows:

(a) The economic realm includes numerous items in accordance with the characteristically economic purpose of the firm. Like each economic activity this realm involves both productive and distributive aspects, which in addition are interrelated. This means, for instance, that the production process implies a certain distributional pattern of resources which, in turn, impacts on this process; or the distribution of salaries within the firm may reflect the roles and productivities of the employees and, at the same time, influence them positively or nega-tively. Thus both productive and distributive aspects are relevant for understanding the following items which are listed, for the time being, without any particular order and priority:

- Make/maximize profit:

in the short term

in the long term

- Improve productivity:

quality of production factors

quality of production processes

quality of products and services

- Preserve/increase the wealth of shareholders

- Be consistent and fair with suppliers

- Regarding employees:

Preserve/create jobs

Pay fair wages, provide social benefits

(Re-)educate and empower employees

- Serve customers.

To establish a ranking of priority among these items is up to the firm as far as it is an autonomous actor. At the same time the ranking is also strongly influenced by the economic system in which the firm is operating. Thus, in the Japanese economic system, for example, the employees rank significantly higher than in the North American system and also differ from their position in the market economies in Germany and France. Moreover, the political and sociocultural system of the firm’s environment, too, have an undeniable impact on the ranking.

(b) The political and sociocultural realm of corporate respon-sibility can be combined as the "social" realm. "Social responsibility" in this sense refers to what the firm is responsible for in the political and sociocultural system of society. Essential items are:

- Respect the spirit and letter of laws and regulations

- Respect social customs and cultural heritage

- Engage selectively in cultural and political life.

The first two items require that the firm accepts the legal and socio-cultural standards of a given society, e.g., the tax laws, the gender relationship or the role of the family (which may be "extended" as in China). This acceptance, in principle, should be both external and internal. But under numerous circumstances, the internal acceptance might be difficult or even impossible when, for instance, the cultural norms of the host country and the multinational deeply conflict; the ex-ternal acceptance, too, can be questionable, if the standards violate basic ethical principles as was the case in the apartheid system of South Africa.

The third item presents a more active role, though only through selected activities, in the political and sociocultural systems. This includes active participation by the firm in setting up the legal frame-work of business and in solving public policy problems; it can also imply engaging in philanthropy, educational initiatives, etc.

(c) The environmental realm reflects the fact that society in general and the firm in particular are intrinsically and unescapably embedded in nature. Whatever decision the firm makes and whatever action it takes is related to the "environment" and impacts in terms of both consuming natural resources (as "inputs" of the firm’s production process, like raw materials, energy, etc.) and burdening the envi-ronment (as "outputs" such as waste and pollution of various types). The now widely accepted general standard of environmental sound-ness is "sustainability"

which was defined by the World Commission on Environment and Development (1987, 8) as "to meet the needs of the present without compromising the ability of the future generations to meet their own needs." With regard to corporate responsibility in the environmental realm the relevant item can be generally stated as follows:

- Be committed to "sustainable development":

- Consume less natural resources

- Burden less the environment with effluents.

Analogous to the broad societal level, these various realms partly overlap and interrelate with each other at the corporate level. Consequently, by assuming economic responsibility the firm may act in a socially responsible manner as well, when, e.g., it preserves jobs or promotes female managers and employees to positions in which they can better use their productivity. Or the company may fulfil economic and environmental responsibilities simultaneously by inven-ting more "sustainable" processes and products which are of higher productivity and lower costs. Hence a great deal of corporate activities can be justified in both economic and non-economic terms and thus have a broader theoretical foundation and more practical stability than if it were justified from solely an economic or a non-economic point of view.

Figure 2. Realms of Corporate Responsibilities

 

Economic realm with interrelated productive and distributive aspects:

- Make/maximize profit:

in the short term

in the long term

- Improve productivity:

quality of production factors

quality of production processes

quality of products and services

- Preserve/increase the wealth of shareholders

- Be consistent and fair with suppliers

- Regarding employees:

Preserve/create jobs

Pay fair wages, provide social benefits

(Re-) educate and empower employees

- Serve customers

 

Social realm:

- Respect the spirit and letter of laws and regulations

- Respect social customs and cultural heritage

- Engage selectively in cultural and political life

 

Environmental realm:

- Be committed to "sustainable development":

Consume fewer natural resources

Burden less the environment with effluents

However, the overlapping of different realms of corporate responsibility is only partial. Social and environmental responsibilities cannot be assumed entirely by taking solely economic responsibilities, since economic responsibilities cannot be fully replaced by social and environmental responsibilities. Conceptually speaking, there are tradeoffs where one type of responsibility has to be balanced against another type, and economic responsibility must not always override other responsibilities. The question is on what basis these decisions are to be made and how they are to be concretized. (These issues of overlaps and tradeoffs are discussed in more detail in Enderle and Tavis 1995.)

To understand the firm as moral actor having economic, social and environmental responsibilities implies an approach to business that is not value-free. Business actors and activities are not only value-oriented and regulated from outside by political, educational and other institutions and persons, but also have their own moral motivations and purposes. In other words, as distinct from the "engineering ap-proach", the "ethics-related approach", which Amartya Sen (1987) relates to economics in general, is here applied to the corporate level. Note that recognizing an ethical dimension in corporate life does not involve any particular set of ethical values and norms. It means only that such a dimension exists and has to be taken into account. This "ethics-related" approach is relevant for theory as well as practice.

It is crucial to distinguish three kinds of ethical challenges (or responsibilities) and to link them to the three realms discussed above (see Figure 3). To talk about "ethics" in very general terms, to demand "ethical" conduct from companies or to blame them for unethical be-havior can be confusing unless a distinction is made between minimal ethical requirements, positive obligations beyond the minimum and aspirations for ethical ideals (see this distinction in De George 1993, especially 184-193). The first kind includes basic ethical norms such as not to kill (e.g., competitors), not to deceive (e.g., customers), not to rob (e.g., shareholders), not to exploit (e.g., employees). Of course, the contents of these basic norms have to be specified at a more concrete level, which is where most difficulties arise. As for these minimal requirements it is fair to

assume that consensus can be attained even in a pluralistic society: if it be not achieved in a society, business cannot survive.

Positive obligations beyond the minimum, the second kind of ethical challenges, are to create and maintain trust relationships with the stakeholders, to help employees in need, to recompensate the community for the damage unintentionally done by the firm, to engage for fair market conditions, etc. Here it is certainly more difficult to find consensus than in the first case. Still, a certain set of positive obligations of the firms is necessary for the effective and thriving fun-ctioning of the economy.

Thirdly, moral actors--individuals as well as companies--are characterized by aspiring to ethical ideals, if they are to overcome purely re-active behavior and take a pro-active stance. These as-pirations are able to mobilize a great deal of motivation and energy in the economic, social and environmental realms (see, e.g., Merck’s policy to develop, produce and distribute Mectizan, a drug that helps prevent river blindness). Still, to a large extent, these aspirations create the very specific identities and missions of companies. To reach a consensus for these positive aspirations in a pluralistic society is not possible. Indeed consensus at this level of idealism is not desirable.

Applying the three kinds of ethical challenges to the three realms of responsibility covers a wide range of possible, ethically res-ponsible corporate policies (see Figure 4). Firm A may aspire for high economic responsibilities (e.g., by substantially increasing its pro-ductivity), fulfill its social obligations beyond the minimum (e.g., to provide health care insurance for all employees) and meet minimal environmental standards. Firm B excels in its environmental record (e.g., by producing biodegradable detergents), preserves the jobs at a reasonable profit margin and helps employees to engage in com-munity work. Firm C is committed to its human rights policy world-wide as it lives up to this standard within the company; it is fairly competitive in international business and participates in setting up environmental laws in various countries without being a "green pioneer."

In conclusion, all three firms strike a balance between eco-nomic, social and environmental responsibilities, but they do so in different ways, which depend on both their own mission and their busi-ness environment. There are, of course, numerous other pos-sibilities where companies do not assume one or more of those respon-sibilities even at the minimum level and, consequently, fail to strike a balance.

Responsible to What Authority?

As outlined above, the concept of responsibility includes three components, i.e., the moral actor, the realms of responsibilities and the question to what higher authority one is accountable and respon-sible. As the term indicates the moral actor is supposed to be res-ponding to a request, demand, requirement or invitation. What is this higher authority? It can be one’s own conscience, other human beings, one’s superior, the society, a court of law, life, nature, God. Because this question cannot be discussed in this paper, it suffices to em-phasize that this third component of the concept of responsibility should not be confused with the second one, as so often occurs in daily life as well as in academic discussions. Consequently, what is meant by "social responsibility" should be made clear. Does "social" relate to the specific realm discussed above? Or does it pinpoint the authority of other human beings or society in general to whom one is assumedly responsible? The term "profit responsibility," too is ambiguous. It can signify the responsibility to make profit, i.e., to the realm of respon-sibility. Or it can mean that profit itself becomes the authority to which the manager is accountable. In such a case, the means have been perverted into the ends.

Context-related Decision Making

So far the emphasis has been placed upon what the firm as moral actor with its own identity and mission can do and how it can use its spaces of freedom (or discretion). The reason for this emphasis is that this view often tends to be neglected or ignored by overem-phasizing all kinds of constraints with which the firm has to struggle. Nevertheless the constraints impose factual and normative require-ments on corporate decision making and acting. For example, "facts" such as global competition impose exogenous constraints on the range of activities available to the corporations, and factual sets of values in a given society to some extent condition their spaces of free-dom. They must be taken seriously for the sake of the very under-standing of responsibility. "Ought implies can"; one cannot be held res-ponsible for what one cannot control. Therefore, the art of business ethics consists in identifying both the spaces of freedom and their constraints, using these spaces responsibly and, for the time being, accepting their limits.

The context of corporate decision making can be characterized by a framework that includes multiple actors at different levels and in various types of domestic and international spheres. Summarized in Figure 1, it has been developed in more detail elsewhere (Enderle 1991, 1993a and 1995b). The basic idea is to elaborate both a com-prehensive and sufficiently differentiated conception of business ethics that helps perceive as concretely as possible the links between decision making, acting and responsibility. This perception is crucial for each moral actor, including the firm, since no single actor can escape responsibility and push off his or her responsibility to other actors. At the same time, it is also important for the actor to know clearly that for which he or she is not responsible.

The distinction between the micro-, meso- and macro-level of acting highlights the decisive, qualitative differences between per-sons, organizations and (whole) systems (which, in business ethics, are related to economic activities). Hence corporate responsibility must be confused neither with personal responsibility nor with the res-ponsibility of the economy represented by its authorities. With regard to international relations, the differentiation of four types (i.e., "foreign country", "empire", "interconnection", and "globalization") attempts to clarify the widely nebulous usage of the terms "international" and "global" and how these types impact on, and qualify, domestic rela-tions in different ways, be it at the micro-, meso- or macro-level.

Horizon of Decision Making: Uncertainty and Change

In addition to being context-related, the concept of the firm should take into account the "horizon" of corporate decision making and acting which is relevant to understanding and evaluating the firm’s long-term planning and performance from both the empirical and the (normative) ethical points of view. In contrast with mechanistic and biological analogies, corporate decision making in modern business is future-related and deeply exposed to uncertainty and change. This implies that the firm has limited knowledge and control of the future. What is really going to happen after the commitment is made is uncer-tain and may change. Therefore, corporate responsibility must come to grips with uncertainty and change. (This is somewhat ironical in so far as "responsibility" emphasizing the importance of consequences cannot adequately grasp them). The problem is to be consistent and flexible at the same time; in ethical terms, to abide by generally accepted standards and to use moral imagination. A balanced concept of the firm will account for this horizon characteristic of modern business.

RELINKING CORPORATE ETHICS WITH BUSINESS AND

SOCIAL ETHICS

The main motive of this section has been to explore corporate ethics in terms of responsibilities, on the assumption that business enterprises have more or less large spaces of freedom and should use them responsibly. However, having highlighted the important role of

corporate ethics, I do not want to conclude without recalling that com-panies are confronted with numerous ethical conflicts which demand too much from them and can be solved only at the macro-level by reshaping the economic system, and perhaps even the political and sociocultural systems. In other words, corporate ethics needs to be "re-linked" to, and integrated into, business and social ethics. North American approaches to business ethics often emphasize the free-dom and the corresponding responsibility of decision making and acting, with a tendency to overlook its limits. On the other hand, Euro-pean approaches frequently underline the importance of business conditions which should be shaped in an ethically responsible way, with the inclination not to use fully the existing spaces of freedom (see Enderle 1995a). A more balanced approach to business and corporate ethics attempts to address both the ethical choices within constraints and the ethical choices of constraints.

Note Dame University

South Bend, Indiana

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DISCUSSION

The methodological question can be very significant in ap-proaching corporate studies in civil society. This is manifest in the very concept of civil society and in its reemergence as a topic of urgent interest in our day.

In the concluding pages of their work on the subject, Cohen and Arato note that they have essentially depended on the theory of communicative action of Habermas which they have attempted to enrich by elements from Rawls. In so doing they take particularly en-lightened representatives of the two sides of the Cold War and attempt to make incremental progress thereupon. This could make sense if one supposes that we are now in another stage of modernity. If, how-ever, the Cold War manifested the radical insufficiency of modernity, and we are now in a post-modern period, then such an approach is essentially anachronistic and will not do.

The character of this change could be studied in many terms, such as the emerging awareness of the inadequacy of the exclusions implied by Descartes’ Enlightenment requirement

of clarity and distinctness or its elaboration by technical or instrumental reason. But it can be seen as well in terms of the ethical implications of civil society for business enterprises and their interchange. At the structural level, Habermas’ study of communicative action promises significant contri-butions, but its Kantian restriction to the level of formal requirements limits it to identifying some prerequisites for civil interaction such as equal access. It impedes taking up the essential issues of the goals of such interaction or the nature of the participants, based upon which ethics could provide normative guidance. The same would seem to be the case for Rawls. Thomas Bridges, The Culture of Citizenship: In-venting Postmodern Civil Society, however, suggests an interesting opening in the recognition by J. Rawls’ Political Liberalism of the poli-tical origin of the norms of democratic practice, not as Platonic ideas but as the result of political decision making. This Aristotelian turn if extended to a sense of the common good after the fashion of Amitya Sen and Marth Nusabaum, and to a recognition of the existential cha-racter of the exercise of political freedom, could open the way to a much richer and more adaptive sense of civil society with normative implications for the economic and political orders.

There is, however, another issue of method which is in need of consideration. Modern rationality employs an analytic approach to all issues. Nothing is considered adequate if it is not broken down into components which can be described in universal terms and then reassembled in a way that provides for a clear definition. This has two effects on the present issue. First of all civil society loses the spon-taneity and free creativity of conscious and free persons and groups; it can be treated as a set of abstract structures, but not as a living entity which can claim recognition for itself and found moral obligations.

Moreover the analytic approach of separating components tends to emphasize contrasts and conflicts, whereas a synthetic ap-proach requires an integrating and holistic vision in order to appreciate the congruences and convergences required for civil society.

This is reflected as well in the division of civil society from the political and the economic orders. In an analytic mode, it is important to speak of each in its own right and delineate what for each is most characteristic. But if, as here, the horizon is human persons not as material atoms but as fully human beings--both body and spirit, both unique and socially engaged--then the ethical issues of corporations as well as of civil society consist rather in their interaction than in their isolation.

This is true as well of the political order as reflected in the experience of the United Nations. This began 50 years ago as a group of nations, each represented by their political delegate. The inter-vening experience, however, has shown the increasing ineffectuality of this body when restricted to political power interests. Hence, the United Nations has increasingly turned to the NGOs (non-govern-mental organizations) for effective representation and negotiation of the deepest human concerns for family, education, culture and envi-ronment; indeed its 50th anniversary conference was devoted to the role of NGOs. This suggests that just as military matters are commonly said to be too important to be left to the military, political and economic matters respectively are too important to be left to separate political or economic norms alone. This implies, in turn, the need for a strong civil society and a strong interaction between it and these other two dimen-sions of social life.

Two other elements were noted, one was the need for cor-porations to show that they really mean the ethical regulations they propose. Employees look not only at the words which are written in corporate ethics statements, but at the actions which back them up in setting policies and evaluating--and even censuring--their adherence. As the two major 1995 disasters in corporate trading in Singapore and Japan show, it is quite possible for employees in business to draw disastrously short-sighted conclusions that company declarations of ethical principles can be bypassed as long as economic results are obtained. These recent disasters show that ethics is not a matter of formal laws or ideals separated from the concrete, but of the proper exercise of

freedom in concrete life: hence that there is no substitute for ethics and for responsible oversight in that regard.

These cannot be successful, however, without a moral cor-porate culture set within a moral civil society. It is in the latter that the employees of a business are born and bred and in the former that they form there actual business practice. Further, only a people as a whole through its expectations are broad enough to hold a company to ethical practices, for it is a matter of the character and quality of the life of a people. For this reason an ethical civil society is essential to the ethical character of its business community.