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
by Sir Geoffrey Chandler, a former Shell senior executive who founded and chairs the Amnesty
International Business Group. Sir Geoffrey calls the business case for ethical corporate behavior
"fundamentally flawed," arguing that companies should act ethically as a matter of principle. The
business case seeks to persuade companies that good moral conduct pays. Ethical behavior, the case
goes, helps companies avoid such risks as lawsuits and reputation loss while at the same time
offering potential future savings through the implementation of sustainable practices.
"To suggest--as the business case essentially does--that doing right needs to be
justified by its economic reward is amoral, a self-inflicted wound hugely damaging to corporate
reputation," wrote Sir Geoffrey, who pointed out that the public already mistrusts business.
Corporate governance watchdog Robert A.
G. Monks, who co-founded the Corporate Library, advances the opposite of that perspective.
"I take the view that a properly functioning corporation behaves well because it thereby
adds value, and indeed I believe that's the only view you can take," Mr. Monks told
SocialFunds.com. "I've spent about the last 20 years trying to effect a convergence between
shareholder activism and socially responsible investing. You can only get backing from
institutional investors if you talk a commercial idiom."
Mr. Monks posited the notion of
an artificial divide that is linguistically based: socially responsible investors and mainstream
businesspeople simply don't speak the same language, even though they may be promoting the exact
"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.
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.
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.
the only real legitimate source of authority on corporate conduct, but that law must be based on
full information and it must be uncoerced," Mr. Monks told SocialFunds.com. "Therefore I would
start by getting corporations out of politics. Corporations would then be obligated to function as
good citizens, and thereby disclose the impact of their functioning on society and not corrupt
government. At that point government becomes what it's supposed to be, according to our political
theory--a legitimate expression of the public will, which we've all agreed to be bound by."
"For good companies there is a real business case for law and regulation which ensure a level
playing field and prevent undercutting by the unscrupulous," wrote Sir Geoffrey. "We need to see
market forces--the most potent influence of all--brought to bear on company behaviour other than
solely financial results."