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May 17, 2002
Two Perspectives on the Business Case for Ethical Corporate Behavior
    by William Baue

Robert Monks defends the business case for corporate ethics against Sir Geoffrey Chandler's recent editorial attacking the business case as amoral.

The May issue of Ethical Performance, a UK-based online newsletter about socially responsible business, features a guest column by Sir Geoffrey Chandler, a former Shell senior executive who founded and chairs the Amnesty International Business Group. Sir Geoffrey calls the business case for ethical corporate behavior "fundamentally flawed," arguing that companies should act ethically as a matter of principle. The business case seeks to persuade companies that good moral conduct pays. Ethical behavior, the case goes, helps companies avoid such risks as lawsuits and reputation loss while at the same time offering potential future savings through the implementation of sustainable practices.

"To suggest--as the business case essentially does--that doing right needs to be justified by its economic reward is amoral, a self-inflicted wound hugely damaging to corporate reputation," wrote Sir Geoffrey, who pointed out that the public already mistrusts business.

Corporate governance watchdog Robert A. G. Monks, who co-founded the Corporate Library, advances the opposite of that perspective.

"I take the view that a properly functioning corporation behaves well because it thereby adds value, and indeed I believe that's the only view you can take," Mr. Monks told "I've spent about the last 20 years trying to effect a convergence between shareholder activism and socially responsible investing. You can only get backing from institutional investors if you talk a commercial idiom."

Mr. Monks posited the notion of an artificial divide that is linguistically based: socially responsible investors and mainstream businesspeople simply don't speak the same language, even though they may be promoting the exact same results.

"The real problem, as with everything in life, is language," said Mr. Monks. "Virtually everyone who wishes to push corporate conduct in a positive direction could live within the same tent, but there seems to be this tremendous tendency to define distinctions that really don't have differences."

Social investors' language often adopts a morally superior tone that requires their business-oriented counterparts to concede moral inferiority if they actually implement the very actions social investors promote, according to Mr. Monks.

"The great conceit of social investors is that they have some kind of entitlement to make a determination as to what standard society should obey," said Mr. Monks.

Once capitalism has been acknowledged as essentially greed-based, Mr. Monks believes,then it can be redirected toward more beneficial actions.

"Someone like Chandler gets upset about it and says you can't really just say its all greed," said Mr. Monks. "Well hell, it is all greed, but then you've got to be a little imaginative so that it has a more accommodating connotation. Can we take this greed engine and adapt it to something that is more congenial to human interest. That's really the challenge."

Social investors in the U.S. have been taking that challenge going on 30 years now, and many would argue that change is not happening fast enough. While Mr. Monks and Sir Geoffrey may take different viewpoints on the justification for ethical corporate behavior, they have proposed essentially identical solutions for realizing such behavior.

"Law is the only real legitimate source of authority on corporate conduct, but that law must be based on full information and it must be uncoerced," Mr. Monks told "Therefore I would start by getting corporations out of politics. Corporations would then be obligated to function as good citizens, and thereby disclose the impact of their functioning on society and not corrupt government. At that point government becomes what it's supposed to be, according to our political theory--a legitimate expression of the public will, which we've all agreed to be bound by."

"For good companies there is a real business case for law and regulation which ensure a level playing field and prevent undercutting by the unscrupulous," wrote Sir Geoffrey. "We need to see market forces--the most potent influence of all--brought to bear on company behaviour other than solely financial results."


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