Business & Society and Business Ethics: Two Distinct Fields of Business

As a field of business, business and society (which includes the topic of corporate social responsibility (CSR)) can be viewed as falling within the rubric of the environment of business. Business and government can as well. Indeed, the environment goes beyond stakeholders. Although sometimes deemed as falling within this rubric, business ethics actually does not, as it is internal to a business even as unethical policies and decisions can impact stakeholders. In fact, business ethics and business and society are two distinct fields, even though they share a common border and are often fused as if they were one seamless country.

That some of the CSR literature applies ethical principles to CSR does not mean that describing or analyzing differences between the norms, values, and cultural attitudes and practices of a culture and those of a business involves ethical reasoning from ethical principles. As David Hume pointed out, you can’t get should from is. Going from a current state of affairs to what should be involves ethical reasoning. To obviate such reasoning based on ethical principles and simply say that something that exists should exist is to fall prey to the naturalistic fallacy.

So to claim that a corporation’s culture should be more in line with the society’s overall culture requires more than describing the two cultures and how they differ, as well as analyzing how the differences impact business as well as the wider society and providing suggestions as to how a corporation can move closer to societal norms, values, and mores. To go on to how things should be, reasoning a priori from ethical principles is necessary. That is, once the question of whether an extant, descriptive difference should exist is brought up, the business field of business & society is left behind and the philosophy field of ethics and the business field of business ethics are entered. 

Specifically, the philosophical field applies to ethical questions that go beyond the business side of the equation, whereas business ethics applies to whether a management or corporation should change to be more in line with societal norms, values, and/or mores. This question lies beyond the field of business and society because ethical principles rather than sociological, anthropological, or management theory are necessary. Organizational and societal norms, values and mores fall within the basic (not applied) disciplines and sociology and anthropology. Ethical principles and ethical reasoning fall within philosophy. Sociology and anthropology are social sciences, whereas philosophy is in the humanities. Treating the field of business and society as if it were synonymous with business ethics conflates two social sciences with a field in the humanities.

What is the basis of Business & Society?

Scholars and practitioners alike in the field of business & society tend view it as being synonymous with corporate social responsibility. It is easy to do. Another error concerns the conflation of CSR and business ethics. In fact, the very name of the topic, corporate social responsibility, is problematic. Straightening all this out could result in more topics in business & society even as the field ceases to overstep into business ethics and the nature of CSR becomes more transparent in business as well as society. 
First, corporate social responsibility is a topic in business & society; CSR is not a field in itself. Business & society contains several topics, one of which being CSR. The study or practice of how business and societal norms converge or diverge does not reduce to how to design and implement a CSR program even though such programs are typically marketed as helping society in some way under the veneer of business-altruism. The managers of a business are aware that even just projecting this patina of a warm glow into the business environment can help even the bottom-line, not to mention reputational capital, a long-term intangible asset. Not that the managers of most companies believe that the business actually has a responsibility beyond making or selling a good product.

Stepping away from CSR within business & society, much material can be studied as well as be used by companies. For example, the field extends to the macro (i.e., above the firm-level) level. CSR folks typically miss this point completely. The business sector itself being within a culture or society is also a matter of study in the field from the standpoint of values and basic beliefs. 
Business culture in a given society may stress, for instance, getting as much as possible out of external stakeholders, whereas in society people may look disparagingly on self-seeking, manipulative people. In the business sector of course, a focus on the firm's interest is not viewed as selfish, and interactions with people outside the firm are not characterized as manipulative. Yet from the standpoint of societal norms, those people outside the firm may perceive the business mentality as such. 
Another area of study in business & society concerns whether the business sector dominates such that even societal norms have been swayed in that direction. In contrasting the E.U. and U.S., for example, American values are arguably more pro-business. The Americans have even made a de-facto holiday out of first shopping day after Thanksgiving! 
Also, industrial titans in the late 19th century believed that they owned America. What then of democratic values, it was asked, if the Congress was indeed bought and paid for? The U.S. Presidential election of 1896 showed that the barons could sway, likely by payoffs, their workers into voting for the pro-business party rather than that whose platform for a more economically egalitarian distribution was more in the workers' economic interests. In terms of business & society, the issue here is the hegemony of business values and norms over those of society such that its own reflect those of business. The question of whether the hegemony is right, or ethical, is exogenous to business and society, as ethical reasoning is instead in the field of business ethics, which draws on two other fields: management and philosophy. 
Should is an ethical term, so answering the question of whether businesses should be socially responsible is properly done in the business-ethics field, whereas business & society is descriptive, being about norms and values. What are the respective values/norms in business and society, and what are the costs to both businesses and societies of divergence and the benefits for both of congruence? Asking furthermore whether business values and norms are hegemonic in American society is different than asking whether they should be. The latter requires justification by reasoning and ethical principles, whereas description does not. The European philosopher, David Hume, claimed in the eighteenth century that we cannot get from a descriptive statement to a normative statement. To say, for example, that I am hungry is not to say that I should be hungry (or not be hungry). That the respective values (and consequent norms) of business and society differ, this is not in itself enough to claim that they should differ. The should statement requires rational justification by ethical principles or theories. 
It follows that the third theoretical movement of corporate social responsibility, "CSR3," is an oxymoron in that it conflates CSR with ethical justification. The latter is the method of ethics in philosophy, which, with management, is an underlying discipline of business ethics but not of business & society, which deals with extant rather than ethically justifiable values and norms in capitalism as well as the societies in which markets and businesses operate. 
I contend that the term, responsibility, in CSR is inherently ethical and thus properly exogenous to both CSR and moreover business & society. In other words, corporate social responsibility suffers from the inherently-moral term, responsibility. The misnomer represents a category mistake (confusing business ethics and business & society). CSR takes it as a given, at least in its label, that businesses are responsible for societal problems and thus are obligated to take part in solving them. In other words, the question of whether businesses should be held to be responsible for societal ills has essentially already been answered in the label of CSR. In other words, the title begs the question and answers it before a person enters into the topic. Debating the question within the topic and even the title itself, such as I did in William C. Frederick's doctoral seminar at the University of Pittsburgh, is an uphill battle from the start, for the playing field is severely slanted from the start (i.e., the label, CSR). 
Interesting, Bill and I were both sickened by the marketing exploitation of CSR by corporations (although, admittedly, some social good results even if as a by-product). I turned to the field of business ethics while Bill, whose doctorate had been in anthropology and economics at Texas, took up the study of applying genetics, evolution, thermodynamics and other natural sciences to business organization. My first two years in college had been in a biology/botany major, and from those classes in science I took quite well to Bill's work. Finally Bill and I were on the same page academically, years after I had graduated. We had both rejected CSR as it had evolved and went to basic theory as a foundation. I went on to ethics in philosophy and religious studies, yet while picking up Bill's approach to business & society. He was more my professor then than when I had been his doctoral student. The arguments I had made against CSR are in this essay, yet the arguments I believe have matured (as have I). 
Going beyond my criticism of the incorporation (and basis) of the term, responsibility, I can now go on to proffer a basis for the field of business & society. CSR is not this basis; as a topic in the field, CSR is further out--a middle planet in the solar system rather than the sun.
Rather than being based on ethical justification, the basis of the field of business & society can be said to be how people working at a company and external actors relate with each other. At the interpersonal level, finding common ground in how we relate is the core chore of the field. Business and non-business people alike, and even managers/employees and their external stakeholders, unwittingly or intentionally clutch at their respective roles. These can belie the common humanity that naturally exists as a common denominator between people as we interact. Business & society is essentially about transcending these roles to relate on a human level interpersonally. Simply calling into a company's customer-service call-center can illustrate how a rigid role can snuff out human interaction, which is ultimately in a business's best interest because  more can be accomplished with mutual understanding and flexibility that with talking at the other person. From a business's standpoint, more can be accomplished with a customer who is not shouting at the employee. Business & society is ultimately about the persons on both sides getting past their respective roles (and stereotypes of the other) so common ground on an operative value and norm can be realized in a way that business can be done in society. Borrowing from Bill Frederick's application of natural science, I submit that we are all of the same species, homo sapiens, so common ground in terms of values and norms, or at least being able to transcend clashing values and norms, must be possible. In fact, given our common DNA (as well as basic socialization, such as being raised by adults), the common ground is more natural than are the differing values (and related norms). 
From the business end, employees (including managers) can let go of the jargon-crutch and rigidity that come from a policy-oriented, top-down management system, while people outside a given company or the business sector itself can compromise too in attempting to interact rationally rather than emotionally--meeting business halfway. Those people can also realize that employees are being paid to economize their time rather than listen to stories about relatives or pets. The interpersonal dynamic that is typical between call-center employees and customers is in great need of this fundamental task in business & society. Like Buddha's "middle way" and Aristotle's doctrine of the golden mean, the people in both business and society can (here, not should!) go halfway to relate as humans. 
Corporate programs in social responsibility not only do not adopt a middle standpoint, but also can keep a business's management from attending to where business & society can really change how a business interacts with people including customers. Even in assuming that people in society self-identify mainly as customers or even consumers has too much of the business-perspective in it. People in society may view the ways of business, and especially its self-oriented profit- or advancement-mentality as different and even strange. 
In short, norms of business and society can be aligned at a basic, human level, meaning in how people relate to each other. Employees can say hello in having even brief contact with people outside the company who are of no use to it--that is, not being so purpose-driven--while the people can put any anti-business fervor aside and relate as individuals.  The relating itself is fundamental to business and society. It should be done at the middle between the extremes of business-culture and society so both business and societal norms/values can be invoked and related. Studying Mars from the Earth does not do Mars justice; hence, NASA has sent craft to the red planet. I take this to be the basis of the field, with matters of institutional programs such as CSR being relatively artificial and thus not human enough to be central to the nature of business & society. 
A program with policies and functionalities (i.e., offices) is an extension of how businesses are organized and function. People in our daily lives do not organize as such, and thus recognize CSR programs as being on the business rather than society side of the field. It might be interesting to imagine how CSR could be established and done from the middle standpoint. 
In short, a CSR program reflects the ways of business, and is thus not far enough out on the business plank to fundamentally touch the societal end. Whereas the field is by definition business and society, CSR is mostly on the business side. It is no wonder that many businesses use CSR as "window-dressing" designed to make the company look good so more people will buy goods or services there. Of course, CSR programs do benefit societies, and this point can be argued to justify the central marketing use by business. Nevertheless, meeting societal norms means going half-way even in the approach that a business uses. 

Connecting the Dots: Zuckerberg's Facebook Stock

Why did Mark Zuckerberg unload $2.3 billion of his Facebook stock? The complete answer likely involves more than meets the eye, at least relative to what business reporters and editors had to say publicly in 2013. What was not said is itself a story worth publishing. Beyond Zuckerberg’s stratagem, what the media didn't say might be more significant than what made it through the filters.
Part of the answer concerning Zuckerberg’s sell-off involves his need for cash at the time to pay taxes that would be due from his exercising an option to purchase 60 million Class B shares in 2013. This move likely implies a belief that Facebook stock would not go much higher. Had Zuckerberg strongly believed at the time that Facebook was yet to cash in on advertising revenue beyond that which the market had already factored into the company’s stock price, the CEO would not have exercised the options in expectation of a wider spread. Even with the taxes coming due, the billionaire could probably have found an alternative way to come up with the cash. 
Like a deer frozen in an oncoming car’s headlights, the media did not analyze Zuckerberg’s motives beyond his public statements. Instead, the herd animals let themselves be led along, prancing in the tracks of positive correlation, which is does not in itself connote causation. That two things tend to occur together does not necessarily mean that one caused the other to act some way. For instance, we see umbrellas on rainy days. This does not mean that umbrellas cause rain, or that rain rather than manufacturing causes umbrellas. To assume causation from two things tending to occur at the same time is to commit what David Hume calls the naturalistic fallacy. 
So the media’s report that Zuckerberg’s stock sale and exercise came as the CEO was donating $1 billion worth of shares to the Silicon Valley Community Foundation to “boost his philanthropic efforts in education,” and Facebook was selling 27 million shares to raise an expected $1.46 billion for general purposes all count only as positive correlation; causation cannot be assumed.[1] In other words, we cannot conclude that Zuckerberg decided to sell off a chunk of his stock and exercise an option because he had decided to donate some stock and Facebook was raising more capital. In other words, the additional information conveniently provided does not get us any closer to a full answer. Worse still, Zuckerberg and his PR staff might have been throwing the media a tantalizing, diverting bone. This would have been in keeping with claims that Facebook's management was unethical.
One reporter took the bait, writing that with cash and marketable securities of $9.3 billion as of September 30, 2013, Facebook may not have needed another $1.46 billion.[2] Off reporter’s radar screen was the possibility that Zuckerberg had designed his philanthropy and the company’s additional stock offering as luring camouflage that would use even criticism of his company to keep the eye off his own trades and especially what they imply about his view of the company’s future. That shares of Facebook dropped only 1% to $55.05 in trading on the news suggests that investors were swallowing what Zuckerberg and the media were serving as dessert.
What of the market insiders? Were they also biting? As John Shinal puts it, “More important, insiders have detailed knowledge of a public company’s near-term prospects and thus are in a better position to know when to sell.”[3] I suspect that “people in the know” may have connected the dots. Two months earlier, a poll revealed that as the most important social media site for teenagers, Facebook fell from 42% in the autumn of 2012 to 23% a year later.[4] Can we suppose this poll somehow missed Zuckerberg’s attention? The media certainly did not connect the dots.
The theory behind my analysis is not financial; rather, I consider Mintzberg’s theory of the organizational life-cycle to be more revealing in this particular case. The theory suggests that just as empires rise and fall, so too do companies. Once past their peak, a “hardening of the arteries” sets in.

The organizational lifecycle. When Zuckerberg decided to sell a block of shares and exercise options, he already had a picture of Facebook already on the downward slope without much chance of revitalization. Image Source: www.sourcingideas.blogspot.com

The aging (i.e., a decreasing willingness or ability to adapt to a changing environment, and increasing dead weight internally) can be delayed as the downward slope bides its time; but like entropy as a final destination, the end is inevitable for humans and our organizational artifices. I suspect that Zuckerberg had come to view his company as past its prime, given the leading indicator shown in the poll. If I am right, the game has already changed to keeping the illusion alive long enough for the Facebook insiders to get out under the black shimmering cover of the Styx.

---

Sources:

1. Scott Martin, “Zuckerberg’s in Mood to Sell,” USA Today, December 20, 2013; John Shinal, “Facebook Shares May Underperform,” USA Today, December 20, 2013.

2. John Shinal, “Facebook Shares May Underperform,” USA Today, December 20, 2013.

3.Ibid.

4. Bianca Bosker, “Facebook’s Rapidly Declining Popularity with Teens in 1 Chart,” The Huffington Post, October 23, 2013.

Does Opportunity Justify Economic Inequality?

From 1993 to 2010, the incomes of the richest 1 percent of Americans grew 58 percent while the rest had a 6.4 percent increase.  In 2010, the first year of an economic recovery, the top 1 percent of Americans captured 93% of the income gains. Beyond the danger to the American republics in there being an economic elite so far removed from the vast majority of the population is the question of whether the trend is baleful, economically speaking. It is not clear that even such an income gain being snagged by so few registered in the minds of the general populous as a problem. The key to any concern would seem to be whether opportunity for the many is compromised as a result of extreme economic inequality.

In 2011, inequality was not exactly the top priority of American voters: only 17 percent thought it is extremely important for the government to try to reduce income and wealth inequality, according to a Gallup survey. That is about half the percent who said reigniting economic growth was crucial. However, 29 percent said it was extremely important for the government to increase equality of opportunity. More significant, 41 percent said that there was not much opportunity in America, up from 17 percent in 1998. The question is whether the concurrent increase in economic inequality was viewed as causing the decrease in opportunity. According to David Hume’s naturalist fallacy, a correlation does not itself mean a causal relationship exists. The fact that economic inequality was increasing as opportunity was decreasing does not in itself mean that the increasing inequality was reducing opportunity. There might be a causal relationship, but more is needed to support it than a correlation.

According to the New York Times, comparisons across countries “suggest a fairly strong, negative link between the level of inequality and the odds of advancement across the generations. The link makes sense: a big income gap is likely to open up other social breaches that make it tougher for those lower down the rungs to get ahead. And that is exactly what appears to be happening in the United States, where a narrow elite is peeling off from the rest of society by a chasm of wealth, power and experience.” Additionally, that elite can use its wealth as power to reserve the opportunities itself. For instance, donations to universities (and lobbying government officials) could be used to keep financial-aid-based admissions down to a certain level such that there are plenty of spots available for children of the well-off. Appeals seemingly in the interest of the masses can even be utilized, as in wanting to reduce subsidized student loan programs because students are suffering from too much debt.

In my view, the business-government dynamic is crucial to why increasing economic inequality is harmful both politically and economically. Minimizing the harm to reduced opportunity ignores the injustice that comes with the inequality itself. Wealth can easily be made into power, which in turn can be used in political, economic and societal realms in self-serving ways. The primacy of opportunity assumes that anyone can be rich if he or she just works hard enough. Both on account of the way the system is designed and the differences between people, not everyone will succeed even if given the opportunity.

Furthermore, conditioning one’s objection to economic inequality in society on whether one’s opportunity is affected can be viewed as self-centered as well as rather narrow because one is indifferent to the negative effects of the inequality on others apart from any decreased opportunity as long as one believes that one’s own opportunity is not adversely affected. Put another way, too many Americans are willing to look the other way on how the elite can unfairly use their advantage aside from restricting opportunity. The right of the elite to so much wealth is tacitly acknowledged as long as opportunity is still thought to exist.  As long as it does, society has no right to take from the rich even if they compromise the republics themselves. This is a very minimalist notion of social contract—one that the 1% benefit from. This is hardly an accident—political ideology established in society being in the interest of the relatively few beneficiaries of the vast majority of income gain.

Therefore, whether increasing economic inequality causes less opportunity for the masses is a question that can be relegated to the more important question of whether the inequality itself is inherently unfair and/or a threat to the republics, the economy, and even society. How the wealth has been and is gained as well as used are relevant to the ethical question of fairness, and thus to whether the concentration of wealth is legitimate. Crucially, a focus on opportunity misses this point. Besides its ethical dimension, absolute or relative economic inequality could be harmful in building up pressure of resentment and even revolution, as evinced in the Occupy Wall Street Movement (which has been safely marginalized—with its own complicity). As the interests of the elite and the masses diverge and the elite (e.g., Goldman Sachs) gains more and more power, the strangling of the lower and lower-middle classes may ensue—a development that could not be good for a society’s stability. A focus on opportunity recalibrated in terms of being promoted to manage a McDonalds’ restaurant misses this point. In short, we are missing the iceberg coming up in front of our ship because we are satisfied if we can still get a deck chair.

Source:

Eduardo Porter, “Inequality Undermines Democracy,” The New York Times, March 21, 2012. 

Christianity and “Social Capitalism”

The SEC charged Ephren Taylor with a fraudulent $11 million Ponzi scheme in April 2012. According to Reuters, “Taylor fraudulently sold $7 million of notes said to bear 12 percent to 20 percent annual interest rates, to fund small businesses such as laundries, juice bars and gas stations.” He “had conducted a multi-city ‘Building Wealth Tour’ in which he spoke to congregations” on the importance of “giving back.” He called himself a “social capitalist.” In actuality, he used the money on himself and his wife’s attempt to become a singer.

The congregants’ susceptibility to Taylor can be understand from grasping the larger historical trend within Christianity wherein the prosperity gospel—in which it is believed that God rewards “true believers” with material wealth—had replaced the anti-wealth view wherein being rich and saved is like a camel getting through the eye of a needle. In other words, the shift in historical Christian thought from a close coupling of wealth and greed to an outright rejection of such a linkage made it more likely that the lay Christians would view investing in “social capitalism” as sufficient to justify having wealth beyond subsistence living.

Secondly, Taylor’s assumed conflation or mixing of Christianity and social performance in business enabled the congregants to open their wallets presumably for religious purposes in line with a social conscience. It is worth pointing out that camel is not given a pass for using wealth in a socially responsible manner. In other words, if simply having wealth is indicative of underlying greed, how one uses the wealth is not sufficient to undo the linkage and justify having the wealth in the first place.

Moreover, fidelity to a social norm such as corporate social responsibility is not religious. Even though Unitarians maintain that certain social structures are the object of their faith, the religious domain contains a transcendent referent.  That is, faith in a religious sense is oriented to an object that lies beyond the limits of human cognition and perception.  Specific social structures do not qualify because they are in our human domain.

In fact, to advocate a particular social norm is not to justify ethically with ethical reasons.  That is to say, corporate social responsibility is not business ethics.  The difference can be explained by referring to David Hume’s naturalist fallacy, which holds that what “is” the case cannot justify what “should” be. In other words, you can’t get ought out of a melon. You need ethical reasons, such as “it is fair because x,” to justify what one should do. To advocate a social norm is not to provide an ethical reason; more would be needed to provide support for why a certain norm that can exist should exist.

Therefore, I question Taylor’s linking “social capitalism” to religion (and Christianity in particular). The application cannot even be justified under the rubric of religious ethics. In addition, the congregants were too gullible because they had applied or bent Christianity too far from its native turf.

See: God's Gold, available in print and as an ebook at Amazon.

Source:

Jonathan Stempel, “SEC Charges Ephren Taylor II ForAllegedly Bilking Churchgoers In $11 Million Ponzi Scheme,” The Huffington Post, April 12, 2012.

Conflicts of Interest: A Kantian Explanation

In a conflict of interest, either two duties conflict or a duty conflicts with self-interest—whether the “self” be an individual or an association of individuals (e.g., a department or an organization). Where two duties conflict, that which corresponds with the wider “constituency” is presumed to be ethically superior to that which is relatively narrow. For instance, a duty to society is typically thought (admittedly by the public) to ethically supersede a fiduciary duty to stockholders. This assumption is problematic because property rights are not charged with putting society first. Therefore the question of which duty is superior ethically-speaking may come down to one’s vantage-point. To be sure, the duty that is further from one’s self-interest can be said to be superior in most ethical theories with the notable exception of egoism. That theory defeats the typical ethical take on conflicts of interest even where a duty is pitted against self-interest itself.


The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.