Corporate Social Responsibility and Danley
Danley contends that approaches to the issue of corporate social responsibility based on the stakeholder approach are vague and unclear, fail to “specify the content, scope, or force the responsibilities” (1994: 117), and that “the claims concerning social responsibility and professionalism are largely vacuous” (1994: 171). Is there a counter argument?
Among their panoply of divinities, the ancient Greeks identified “two personified emotions esteemed highest of all feelings in Homer and Hesiod: Nemesis, usually translated as righteous anger, and Aidos, a difficult Word to translate, but in common use to the Greeks. It means reverence and the shame that holds men back from wrongdoing, but it also means the feeling a prosperous man should have in the presence of the unfortunate – not compassion, but a sense that the difference between him and those poor wretches is deserved…
…Hesiod says that only when men become completely wicked will Nemesis and Adios, their beautiful faces veiled in raiment, leave the wide- wayed and depart to the company of the immortals. (Hamilton, 1969; pp37-8)
My experiences of the contemporary corporate business world suggest that Lady Adios has veiled herself and has departed without her companion. All that is left is the faint memory etched in the paintings of the Dutch masters who depicted the embarrassment of riches of their patrons . The counter argument I shall frame asks; now what? How do we recall Lady Adios to walk again in our midst?
This assignment will set out arguments that counter Danley’s Contention that the issue is corporate social responsibility based on the stakeholder approach are vague and unclear, fail to “specify the content, scope, content, scope or force of the responsibilities” (1994: 177), and that “the claims concerning social responsibility and professionalism are largely vacuous” (1994:171).
In his book Danley just two basic approaches to the question of the purpose of the corporation; Classic liberals, who use a variety of approaches such as social contracts, natural rights and utilitarianism on the one hand, and Managerialsts, whom he divides into micro-managerialsts who focus on the corporation and corporate social investment, and Macro- managerialsts, who focus on the broader economy using a variety of approaches such as Keynesianism, externalisation of costs and market failure as core concepts on the other hand.
It must be stated clearly here that Danley is not critical of corporate social responsibility and the stakeholder approach because he supports what he describes as the Classical liberal framework. Indeed Danley observes, “the results of the investigation are disturbing, if not alarming. In spite of the recent revival of interest, there are compelling reasons to conclude that the Classical framework is inadequate.” (1994; p 5)
Danley is critical of both the Classical liberal framework and the managerialsts. However the assignment asks that I find a counter argument to Danley’s Critical comments about corporate social responsibility and stakeholder approaches.
To this end I have traced the outline of what a counter argument may be, based upon a critique of Danley. Such a counter argument would stand on four legs:
1. Stakeholder approaches must be understood in context as strategic gambits to counter the hegemony of shareholder dominant approaches.
2. That Danley’s arguments about the professionalism of management and what he refers to as the “managerialst” thesis are dated and conceptually rigid without granting the use-value of eclectic and “fuzzy” approaches to content, clarity, scope and force of responsibilities.
3. That Danley’s methodology is flawed in three vital respects;
a. Theoretically in so far it confuses normative/non-normative ethics with the demands of inductive logic.
b. Technically, in that Danley’s “second moment” is problematic as it forecloses too soon in the research process, which leads to an oversimplification.
4. That Danley methodological flaws have consequences, leading him to for example, to deny the validity of the corporate social citizenship argument by questioning the moral agency of business entities while assuming that corporations can, ought to, and do act morally. That is, Danley uses the concept of moral agency both as a topic and a resource in his argumentation, which generates an essentially sterile, ironic and failed narrative.
This paper will set out on these critiques in sequence and then conclude by showing how these points may be deployed as lessons to trace the outline of any counter argument to Danley’s contentions with respect to the stakeholder approach and corporate responsibility. I will introduce, as an example, contributions from the tradition of Catholic Social Thought, which point a way beyond a stakeholder/stockholder debate
Arguments from context
In Danley’s critique of “managerialism”, he identifies the stakeholder approach and the rationales for corporate responsibility. (1994; p 188 and p 193) These “new” ideas, he in turn, links to Keynesianism and Pluralist Liberalism among other roots. (ibid; p235) Danley goes on at length with detailed critiques of the stakeholder “argument” which he repeatedly concludes as being “empty”. (ibid; p 171, 177, 192 and p 193)
Solomon on the other hand suggests that the “ideas captured in the punlike notion of the stakeholder” represent a “broadening conception of the corporate constituency that includes a variety of affected (and effective) groups and all sorts of obligations and responsibilities. The term stakeholder has become something of a cover-all term, and so what considerable advantages it has provided in terms of breadth are to some extent now compromised by the uncritical use of the word.” (1999; p 46).
Danley’s less generous description is that, “of the contemporary arguments, the most familiar and the most important is the “multiple constituency argument” or the “stakeholder argument”. The argument notes that the large, modern corporation involves complicated relationships with a number of different constituencies (stakeholders) – stockholders, potential investors, employees (Present, past), potential employees, consumers, suppliers and the general public, including relevant governmental agencies as well as communities. Beyond this rather innocuous claim, it is difficult to discern an argument …(perhaps). because what is required is obvious and uncontroversial. (1994; p 189)
Danley however argues that “the nature of the hidden moral purpose of the stakeholder argument is not obvious and stands in need of development and defence. The key to this argument seems to lie not in the idea that stakeholder interests must be considered, but in the idea that the various stakeholder interests are to be weighed and balanced…” (1994; p 190)
It seems that Danley’s approach blinds him to the core of the any stakeholder analysis. Yet he comes to the very cusp of an understanding when he states; “… the stakeholder argument is, in reality, no argument at all.” (Ibid; p 193)
Danley is correct in seeing that the Stakeholder approach is not an argument. It is better described as a strategic gambit. He is correct in suggesting that the stakeholder approach is something akin to the Trojan horse in business ethics. (1984; p 4) That is why it is core stance that “the corporation involves complicated relationships with a number of different constituencies (stakeholders)…is obvious and uncontroversial. (1994; p 189) It is a stance that anyone can agree upon, but its implications must then be attended-to by those who lead these organizations.
These stakeholder approaches are diverse and “fuzzy” as Solomon points out (ibid), but such fuzziness serves a distinct purpose in the development of contemporary business ethics.
Danley has consistently misconstrued the nature of these approaches as comprising “an argument” when they are better described as the “moves” in the strategic pull and push of real-world business strategy. The persistent of what Danley terms “Classical Liberalism” which champions shareholder dominance is being contested by the presence of approaches loosely grouped as stakeholder approaches.
The sheer variety and scope of these approaches reminds one of Protestant church politics. This, I would propose is a deliberate strategic gambit designed to open up debate and thinking beyond the comparatively sterile and airless confines of deductive thinking.
Thus I would contend that Danley misconstrues the nature of the approaches classified as the stakeholder approaches because they are more like strategic gambits in the ceaseless process of making sense of business and not formal arguments for a particular position.
Arguments from currency
This assignment quotes Danley on a publication that today is over 12 years old. Much has happened since Danley wrote those words. In South Africa we have had the King 2 report published in 2002 that despite its eclectic use of various materials, could be said to promote a practical and reasoned stakeholder approach. The Global Compact was founded in 1999 and promotes the 10 principals for ethical business among transnational corporations. “Transparency international, a global non-governmental organization, has since 1995 issued a annual corruptions perceptions index (CPI); it also publishes an annual Global Corruption Report, a Global Corruption Barometer and a Bribe payers index.”
These and many other initiatives have gradually clarified and specified the content, scope and force of the responsibilities. Such initiatives offer a range of detailed, practical resources, tools and measures that support stakeholder approaches to large corporations.
Danley clearly misjudged the energy, determination and resourcefulness of those proponents of the various approaches to corporate governance, which he has lumped together as “managerialst”. This point may be a small one problem endemic to his general approach to the topic.
I noted earlier that Danley makes repeated comments that managerialism lacks any serious argument. He seems to be making a general complaint that the positions adopted by Managerialsts writers are vague and without substance.
There is however sound philosophical precedent for such “fuzzy” logic. Austin (1962) has proposed that philosophical notions need to be “forgiving” by which he meant they need to allow for imprecision because this creates an inferential frame for thinking about a topic. Business ethics, would propose, needs to allow for an inductive logic where correlations and trends can be observed rather than the more rigid, positivist deductive logic that Danley seems to insist upon.
Danley assumes that deductive logic is the primary “Modus vivendi” in these arguments. Most of the literature that I have read in this field indicates that inductive logic is the norm rather than the more exacting demands of deductive reasoning.
Thus I would argue that Danley’s critique is somewhat dated but that this is not simply a matter of the progress of history. Indeed Danley’s approach dates him. He seems to be hankering after time when things were simpler and when logical positivist assumptions about truth seemed to apply.
Levinson characterizes what is suspect is Danley’s bias; ‘…in the 1930’s there flourished what can now be safely treated as a philosophical excess, namely the doctrine of logical positivism, a central tenet of which was that unless a sentence, can, at least in principle, be verified (i.e. tested for its truth or falsity), it was strictly speaking meaningless. Of course it followed that most ethical, aesthetic and literary discourses, not to mention most everyday utterances, were simply meaningless. But rather than being seen as reductio ad absurdum, such a conclusion was reviewed by proponents of logical positivism as a positively delightful result… the doctrine was pervasive in philosophical circles at the time.” (Levinson, 1983;p 227)
Given our post-modern times, such an approach to business ethics and an understanding the purpose of business will inevitably be outmoded, dated and increasingly irrelevant
Arguments from methodology
Normative confusion
Danley introduces into his discussion on his methodology, a critique of what he calls “business and society literature”. (1994; p 21) He suggests that there are “serious limitations in the literature concerning the question of the corporate role” (ibid: p 5) and lists “three important features of the question (that) have not been consistently appreciated.” (ibid; p 6)
I would like to examine more closely Danley’s second “feature”, where he asserts that the question of the corporate role is “normative”. Danley suggests, first that “Nonnormative Language” is descriptive, functioning to describe the world. This is the language of the “is” as in “snow is white” and “The GDP is down 2 percent from last year.”
Danley then proceeds to explain That “Normative Language” functions on the other hand, evaluatively or prescriptively. “Evaluative language” – assigning a value to things, as in “That is a good car” or “He is a good person” – is the language of value, invoking what is good, bad or evil. :Prescriptive Language” prescribes behaviour, as in “One ought not to hold a golf club that way,” or “One ought not to kill the innocent.” This is the language of ought, of obligation, of duty of what should or should not be done.
Danley completes his exposition by warning that “one should take care not to confuse the world of “is” with the world of “good” or “ought”. He then goes on to assert that “the fundamental question, then, seeks a normative response about the role that the modern corporation should play in a free society, about the corporation’s obligations, duties, and responsibilities, if any….any proposed answer to the question of corporate role must invoke not merely descriptive premises…but also normative premises. Prescriptions move beyond mere issues of the “way the world is,” to issues of the way the world should be, or toward issues of what is good or evil.” (Ibid; pp 7-9)
It is a well-worn (and tired?) philosophical chestnut first developed by Hume if memory serves me correctly , that it is illogical to infer an “ought” from an “is”. Danley by insisting on his point, reveals his bias for deductive reasoning and the English rationalists. Indeed Danley elsewhere details Hume’s exposition of the naturalistic fallacy and refers to goodpaster’s critique of this problem in much of the business ethics literature. (ibid; pp 21-24)
I would suggest that deductive reasoning and English rationalist tradition of philosophical thought that goes with it, may not be the most appropriate approach to business ethics. Indeed such “rigorous” thinking has been largely rejected in philosophical thought since the late Wittgenstein and seems out of place in the “applied” field of business ethics.
Danley elsewhere identifies the Harvard business review as “a major form for the new managerial philosophy” (1994; p 188), which he criticises for, among many other things, failing “to come to grips the nature and importance of the fundamental question” (ibid; p 6); what is the appropriate role of the modern corporation in a free society?” (ibid; p 2)
A reading of some articles from the Harvard Business Review on Corporate responsibility (2003) may help us to reflect upon Danley’s complaint that the managerialsts do not deploy deductive reasoning.
The articles I have surveyed all focus their discourse on marrying social responsibility with profitability;
Prahalad and Hammond argue that “by stimulating commerce and development at the bottom of the economic pyramid, multinationals could radically improve the lives of billions of people and help create a more stable less dangerous world. Achieving this goal does not require MNC’s to spearhead global social-development initiatives for charitable purposes. They need only act in their self-interest.” (Harvard Business Review, 2003; p1)
Porter and Kramer suggest that “corporations can use their charitable efforts to improve their competitive context-the quality of the business environment in the locations where they operate” (ibid; p 82)
Handy argues that “doing good does not necessarily rule out making a reasonable profit. You can, for example, make money by serving the poor and the rich.” (ibid; p 82)
“.. Roger Martin introduces the virtue matrix-a tool to help executives analyse
corporate responsibility by viewing it as a product or service” (ibid; p 83)
Ryuzaburo Kaku, honorary chairman of canon… suggests that companies consider kyosei, a bussiness credo thet he defines as a “spirit of cooperation” in which individuals and organizations work together for the common good.’ (Ibid; p 105)
Goodpaster and Mathews point out that “when making a profit conflicts with respecting the welfare of the community, corporations do not always choose profit as their only goal… That is why the authors say that conscience can reside in the organization.” (ibid; p 131)
Smith identifies “an approach that ties corporate giving directly to strategy… philanthropic and business units have joined forces to develop philanthropic strategies that give companies a powerful competitive edge.”(ibid; p 157)
Kanter finds that increasingly “companies are viewing community need as opportunities to develop ideas and demonstrate business technologies, find and serve new markets; and solve long –standing business problems.” (ibid; p 190)
Each article I have read contains no appreciable deductive reasoning. They all seem overwhelmingly inductive in their approach to their topics. That is they provide good evidence based upon experience for their conclusions. These
Articles, as Danley complains are clearly all “pushing an agenda; that social responsibility and profits can work together. We may agree or disagree with the thrust of these articles but none of them reach conclusions that reach outside the bounds of simple inductive reasoning.
Thus I would argue that Danley’s complaints about the vacuity of the stakeholder and corporate social responsibility approaches are based, in part, upon his overly narrow consistence that they conform to the standard of strict deductive reasoning based on the separation of normative and descriptive narratives.
Faulty method
If Danley’s unexamined philosophical rationalism was the only problem with his methodology, it would be a minor problem of bias in his analysis. However, there lies a more serious flaw in his method which combines with his dated philosophical bias to undermine much of his work.
His method he terms “philosophical analysis”, which he assures is “nothing esoteric, mysterious, or exclusively analytic. In the broadest sense… philosophical analysis involves four moments. The first stage consists in the clarification of the issue and the relevant concepts… The second moment consists in the identification and clarification of the positions taken in respect to the issue… The third moment consists of the identification of the arguments which are or can be deployed in defence of the positions… the fourth and final stage of philosophical analysis consists of the evaluation of the reconstructed arguments. (Danley, 1994; pp 2-4)
In less than two pages Danley sets out his method. This alone should warn us that what follows in not methodologically strong but rather more intuitive. And driven by a plethora of unexamined assumptions.
Let us set aside for now more radical critiques of the structure of his four “moments” accepting that these four moments do indeed represent a valid approach to philosophical analysis, and reflect in more detail about Danley’s method of philosophical analysis. It becomes clear that there is a problem with the treatment of the second “moment” in his method. It would seem to me that he arrives to hastily at defining the two contrasting positions; “the classical and the managerial business ideologies. (ibid; p 3)
Given that Danley’s entire book is based on this fundamental bifurcation, I would suggest that he has not done enough to live up to his own standard of deductive reasoning to warrant these two contrasting positions as the only managerial business ideologies, or even that they are the most relevant of many.
Danley rather weakly contends that “philosophers in the field of business ethics, business school faculty involved in the field of business and society or social issues in Management, as well as practising managers, social critics, commentators, and reformers all seem to function within one framework or the other.” (ibid)
The weakness in these contentions lies in that Danley is proposing two and only two managerial ideologies because “everyone agrees” or at least everyone that matters agrees. This is poor reasoning from Danley’s own standards of deductive logic and a very weak base from witch to develop any analysis, let alone one that is deeply critical if the positions taken by other thinkers in the field.
Arguments from responsibility
The above arguments about flaws in Danley’s methodology have implications that weaken his analysis. If we take as an example, Danley’s approach to corporate citizenship I, like Danley, remain undecided with regards to the various arguments for and against what he describes as “Moral Personhood Arguments”. “Peter French, for example, has argued that corporations are entities which satisfy the conditions under which it is possible to ascribe moral agency. Quite simply, French beliefs, corporations can meaningfully be said to act intentionally… If corporations are moral agents, then French beliefs that all rights, privileges, duties and responsibilities of full fledged moral persons should be ascribed to them.” (ibid; p 196)
The concern is that Danley’s untested assumptions lead him to doubt the veracity of moral personhood arguments, while assuming that corporations do indeed, and, here’s the rub, ought to, act morally; “unless transnational corporations within the international marketplace agree to attain the strictest standards, competition will make ‘being responsible” self destructive.” (ibid; p 286)
This is a narrative irony in which Danley uses the topic of corporate moral agency as the resource to attack those who support corporate moral agency. It is compounded by his insistence that either way, the arguments, while important, make little difference to his analysis. The problem with such ironization is that it fails to account fully for the contexts in which corporations exist.
The idea that corporations ought to act as good corporate citizens is generally treated in the corporate literature as propaganda10, not philosophical truth. In reality corporations and the various thinkers in the field tend to hold hybridised views on corporate citizenship.
The King 2 report, for example uses a hybrid version that straddles the shareholder dominant and the stakeholder approaches. This is done by making a distinction between accountability and responsibility: “one is liable to render account when one is accountable and one is liable to be called to account when one is accountable and one is liable to be called to account when one is responsible…The stakeholder concept of being accountable to all legitimate stakeholders must be rejected for the simple reason that to ask boards to be accountable to every one would result in their being accountable to no one. The modern approach is for a board to identify the company’s stakeholders, including its shareowners and to agree policies as to how the relationships with those stakeholders should be advanced and managed in the interests of the company (King 2, 2002;p 7, paragraph 5.1 p 5)
In Danley’s analysis, King 2 opts for a strong micro-managerialst approach. This however, would not be the full picture because the King 2 report, as in those articles I read in the Harvard Business Review, all seek a hybrid approach which attempts to encourage corporations to maximize profits while acting as good citizens. Danley’s over-hasty bifurcation of managerial business ideologies have lead him to oversimplification, irony and poor argumentation using his own standards of rationalist deduction.
Developing a counter argument
From Danley we have extracted a number of lessons which may trace a counter argument to his “contention that approaches to the issue of corporate social responsibility based on the stakeholder approach are vague and unclear, fail to “specify the content, scope or force of the responsibilities” (1994; 177), and that “the claims concerning social responsibility and professionalism are largely vacuous”(1994:171).
These lessons would include the point that the stakeholder approaches and corporate social responsibility do not resemble a set of arguments with propositions and proofs as much as a gambit in the push and pull of corporate strategic thinking. The idea that a corporation ought to act as a good corporate citizen, that it ought to consider stakeholders and not merely shareholders, can be seen as a way-station in a process of redefining and reinventing the nature of business as these entities adapt to the variety of contexts in which they operate.
The lesson about how Danley’s analysis is dated suggests that things never are fixed and reflections about the nature of such complex things as corporations must be in continual flux with contending versions of reality or lose the ability to innovate. A rationalist deductive logic inevitably seeks to narrow things down to “the truth” about any particular corporation or economic process and is out of place in environments where a plethora of contending versions, values and voices are needed to retain the vitality and creativity of entities such as a corporation.
There is a lesson to be learned from our critique of Danley’s insistence on business ethics being an essentially normative as opposed to descriptive activity. Danley, 1994; p 12). Clark describes this as “a totally false dichotomy, and has been recognised as such by methodologists for some time… Theories and models help us to categorize reality, but these categories are humanly created and always based on value judgements. This is not a radical point, and most, if not all philosophers and historians of science would readily accept it. Only economists seem, as a group, to reject this fact.” (Clark, 2006; p 3)
The dichotomy must be regarded as unworkable but unlike Clark, this does not mean simply replacing one ideology theory with another. If the idea of a normative/descriptive dichotomy is false, simply replacing a favoured normative ideology actually serves to bolster the dichotomy. What is required is an approach that transcends this dichotomy, a recognition that all theories, values and facts use common sense stocks of knowledge to make their various positions, theories, values and assertions “pass” recognizably competent positions, theories, values and assertions.
The lesson learned from Danley’s faulty method is essentially one of patience.
Hastily setting the terms of a debate as between two contending ideologies with little or no exploration leads to an oversimplification which Jan Jans explained is not proper ethics.
Danley’s hasty bifurcation of the debate into merely two approaches to the purpose of the corporation ignores other approaches such as that found in catholic social thought. Alford and Naughton develop an approach to the purpose of business which is critical of both the shareholder and the stakeholder approaches. Alford and Naughton identify four types of good; Excellent and Fundamental, Common and particular. They go on to argue that these goods need to be placed in a proper order, an order defined by the distinction between “’as’ opposed to ‘apparent’ goods” (Alford and Naughton, 2006;p 3)
Alford and Naughton offer a powerful alternative approach to the purpose of business that goes beyond both the shareholder and the stakeholder approaches. The implementing managers I have worked with, treat the stakeholders in much the same fashion as shareholder.
This Alford and Naughton identify in their treatment of particular goods “the stakeholder model can only conceive of ‘particular goods’ because it is founded on an individualistic view of the human person. According to the stakeholder model, the individual wealth maximizer described above in the shareholder model can become more ‘human’ if the person understands his interests in more enlightened ways (‘enlightened self-interest’). If individuals peruse their own particular goods (self interest), while avoiding the violation of the particular goods of other individuals (enlightened), then everyone’s particular goods will be met without having to be concerned with common goods. (Alford and Naughton, 2006; p 12)
The perspective of those applying the stakeholder model is as limited as those proponents of the shareholder approach “because the stakeholder model views the organization as a group of autonomous individuals who affect or are affected by the organization, it starts off with what the person has, that is some stake in the company; whereas the common good model begins with who the person is… Because the stakeholder model begins with having not being, its view of the corporation tends to be utilitarian, attempting to protect
The material interests of the various stakeholders… it is insufficient for building a community where people grow in virtue…” (ibid)
It could be said that those proponents of the stakeholder approach to business treat all stakeholders, including shareholders as if they are simply signifiers or signs, agglomerations of duties prepared and parcelled for attention. Thus we witness the emphasis on compliance in corporations and the relentless insistence that small, medium and micro enterprises “formalize” by which is meant become come complaint with many laws, regulations and policies that various legislative and regulatory bodies publish. As Gilligan’s complaint suggests; the value of justice without the value of care is unjust and unworkable.
The need to balance a variety of values, to place them in their proper order is a distinctive feature of Catholic Social Thought. Catholic Social Thought is not some peculiar little backwater of little significance. Oliver Williams suggests that “with the demise of the Marxist alternative to capitalism, catholic social teaching could emerge as a major international voice, challenging free enterprise to be more humane” (Williams, 1998; p2)
Williams introduces the notion of a “moral compass” where the good society is encircled by the values of Liberty Efficiency, Equality and Community. There seems to be a curious resonance between these four values and Baudrillard’s post-modern, post-marxist exposition of the object value system;
Conclusion
In brief, there is in my view, a number of counter arguments to Danley’s contentions regarding corporate social investment and the stakeholder approach. These counter arguments all seem to bring the good Lady Aidos back into our midst by creating the space for her in our corporate and economic environments. The stakeholder approach is merely one stage in the process of “making space” for her presence in our lives. We have lost the signifier that can allow us to feel ashamed when we make obscene profits amidst structural poverty and degradation. The system of signification in corporate life needs to find space for Aidos.
The preceding section has extracted a number of lessons from Danley which serve to outline the basis for any counter argument to his contention that the stakeholder approach and corporate social investment is vacuous, vague and unclear, lacking scope, force of responsibilities or content. I also introduced the neglected approach to the purpose of business from a Catholic Social Thought tradition as exemplified by Alford and Naughton as well as Oliver Williams. This approach points beyond the stakeholder model to a concept of business that’s resonates with other, post-modern thinkers in the project to develop organizational ideologies that are able to deal with the changing and diverse contexts in which co
Among their panoply of divinities, the ancient Greeks identified “two personified emotions esteemed highest of all feelings in Homer and Hesiod: Nemesis, usually translated as righteous anger, and Aidos, a difficult Word to translate, but in common use to the Greeks. It means reverence and the shame that holds men back from wrongdoing, but it also means the feeling a prosperous man should have in the presence of the unfortunate – not compassion, but a sense that the difference between him and those poor wretches is deserved…
…Hesiod says that only when men become completely wicked will Nemesis and Adios, their beautiful faces veiled in raiment, leave the wide- wayed and depart to the company of the immortals. (Hamilton, 1969; pp37-8)
My experiences of the contemporary corporate business world suggest that Lady Adios has veiled herself and has departed without her companion. All that is left is the faint memory etched in the paintings of the Dutch masters who depicted the embarrassment of riches of their patrons . The counter argument I shall frame asks; now what? How do we recall Lady Adios to walk again in our midst?
This assignment will set out arguments that counter Danley’s Contention that the issue is corporate social responsibility based on the stakeholder approach are vague and unclear, fail to “specify the content, scope, content, scope or force of the responsibilities” (1994: 177), and that “the claims concerning social responsibility and professionalism are largely vacuous” (1994:171).
In his book Danley just two basic approaches to the question of the purpose of the corporation; Classic liberals, who use a variety of approaches such as social contracts, natural rights and utilitarianism on the one hand, and Managerialsts, whom he divides into micro-managerialsts who focus on the corporation and corporate social investment, and Macro- managerialsts, who focus on the broader economy using a variety of approaches such as Keynesianism, externalisation of costs and market failure as core concepts on the other hand.
It must be stated clearly here that Danley is not critical of corporate social responsibility and the stakeholder approach because he supports what he describes as the Classical liberal framework. Indeed Danley observes, “the results of the investigation are disturbing, if not alarming. In spite of the recent revival of interest, there are compelling reasons to conclude that the Classical framework is inadequate.” (1994; p 5)
Danley is critical of both the Classical liberal framework and the managerialsts. However the assignment asks that I find a counter argument to Danley’s Critical comments about corporate social responsibility and stakeholder approaches.
To this end I have traced the outline of what a counter argument may be, based upon a critique of Danley. Such a counter argument would stand on four legs:
1. Stakeholder approaches must be understood in context as strategic gambits to counter the hegemony of shareholder dominant approaches.
2. That Danley’s arguments about the professionalism of management and what he refers to as the “managerialst” thesis are dated and conceptually rigid without granting the use-value of eclectic and “fuzzy” approaches to content, clarity, scope and force of responsibilities.
3. That Danley’s methodology is flawed in three vital respects;
a. Theoretically in so far it confuses normative/non-normative ethics with the demands of inductive logic.
b. Technically, in that Danley’s “second moment” is problematic as it forecloses too soon in the research process, which leads to an oversimplification.
4. That Danley methodological flaws have consequences, leading him to for example, to deny the validity of the corporate social citizenship argument by questioning the moral agency of business entities while assuming that corporations can, ought to, and do act morally. That is, Danley uses the concept of moral agency both as a topic and a resource in his argumentation, which generates an essentially sterile, ironic and failed narrative.
This paper will set out on these critiques in sequence and then conclude by showing how these points may be deployed as lessons to trace the outline of any counter argument to Danley’s contentions with respect to the stakeholder approach and corporate responsibility. I will introduce, as an example, contributions from the tradition of Catholic Social Thought, which point a way beyond a stakeholder/stockholder debate
Arguments from context
In Danley’s critique of “managerialism”, he identifies the stakeholder approach and the rationales for corporate responsibility. (1994; p 188 and p 193) These “new” ideas, he in turn, links to Keynesianism and Pluralist Liberalism among other roots. (ibid; p235) Danley goes on at length with detailed critiques of the stakeholder “argument” which he repeatedly concludes as being “empty”. (ibid; p 171, 177, 192 and p 193)
Solomon on the other hand suggests that the “ideas captured in the punlike notion of the stakeholder” represent a “broadening conception of the corporate constituency that includes a variety of affected (and effective) groups and all sorts of obligations and responsibilities. The term stakeholder has become something of a cover-all term, and so what considerable advantages it has provided in terms of breadth are to some extent now compromised by the uncritical use of the word.” (1999; p 46).
Danley’s less generous description is that, “of the contemporary arguments, the most familiar and the most important is the “multiple constituency argument” or the “stakeholder argument”. The argument notes that the large, modern corporation involves complicated relationships with a number of different constituencies (stakeholders) – stockholders, potential investors, employees (Present, past), potential employees, consumers, suppliers and the general public, including relevant governmental agencies as well as communities. Beyond this rather innocuous claim, it is difficult to discern an argument …(perhaps). because what is required is obvious and uncontroversial. (1994; p 189)
Danley however argues that “the nature of the hidden moral purpose of the stakeholder argument is not obvious and stands in need of development and defence. The key to this argument seems to lie not in the idea that stakeholder interests must be considered, but in the idea that the various stakeholder interests are to be weighed and balanced…” (1994; p 190)
It seems that Danley’s approach blinds him to the core of the any stakeholder analysis. Yet he comes to the very cusp of an understanding when he states; “… the stakeholder argument is, in reality, no argument at all.” (Ibid; p 193)
Danley is correct in seeing that the Stakeholder approach is not an argument. It is better described as a strategic gambit. He is correct in suggesting that the stakeholder approach is something akin to the Trojan horse in business ethics. (1984; p 4) That is why it is core stance that “the corporation involves complicated relationships with a number of different constituencies (stakeholders)…is obvious and uncontroversial. (1994; p 189) It is a stance that anyone can agree upon, but its implications must then be attended-to by those who lead these organizations.
These stakeholder approaches are diverse and “fuzzy” as Solomon points out (ibid), but such fuzziness serves a distinct purpose in the development of contemporary business ethics.
Danley has consistently misconstrued the nature of these approaches as comprising “an argument” when they are better described as the “moves” in the strategic pull and push of real-world business strategy. The persistent of what Danley terms “Classical Liberalism” which champions shareholder dominance is being contested by the presence of approaches loosely grouped as stakeholder approaches.
The sheer variety and scope of these approaches reminds one of Protestant church politics. This, I would propose is a deliberate strategic gambit designed to open up debate and thinking beyond the comparatively sterile and airless confines of deductive thinking.
Thus I would contend that Danley misconstrues the nature of the approaches classified as the stakeholder approaches because they are more like strategic gambits in the ceaseless process of making sense of business and not formal arguments for a particular position.
Arguments from currency
This assignment quotes Danley on a publication that today is over 12 years old. Much has happened since Danley wrote those words. In South Africa we have had the King 2 report published in 2002 that despite its eclectic use of various materials, could be said to promote a practical and reasoned stakeholder approach. The Global Compact was founded in 1999 and promotes the 10 principals for ethical business among transnational corporations. “Transparency international, a global non-governmental organization, has since 1995 issued a annual corruptions perceptions index (CPI); it also publishes an annual Global Corruption Report, a Global Corruption Barometer and a Bribe payers index.”
These and many other initiatives have gradually clarified and specified the content, scope and force of the responsibilities. Such initiatives offer a range of detailed, practical resources, tools and measures that support stakeholder approaches to large corporations.
Danley clearly misjudged the energy, determination and resourcefulness of those proponents of the various approaches to corporate governance, which he has lumped together as “managerialst”. This point may be a small one problem endemic to his general approach to the topic.
I noted earlier that Danley makes repeated comments that managerialism lacks any serious argument. He seems to be making a general complaint that the positions adopted by Managerialsts writers are vague and without substance.
There is however sound philosophical precedent for such “fuzzy” logic. Austin (1962) has proposed that philosophical notions need to be “forgiving” by which he meant they need to allow for imprecision because this creates an inferential frame for thinking about a topic. Business ethics, would propose, needs to allow for an inductive logic where correlations and trends can be observed rather than the more rigid, positivist deductive logic that Danley seems to insist upon.
Danley assumes that deductive logic is the primary “Modus vivendi” in these arguments. Most of the literature that I have read in this field indicates that inductive logic is the norm rather than the more exacting demands of deductive reasoning.
Thus I would argue that Danley’s critique is somewhat dated but that this is not simply a matter of the progress of history. Indeed Danley’s approach dates him. He seems to be hankering after time when things were simpler and when logical positivist assumptions about truth seemed to apply.
Levinson characterizes what is suspect is Danley’s bias; ‘…in the 1930’s there flourished what can now be safely treated as a philosophical excess, namely the doctrine of logical positivism, a central tenet of which was that unless a sentence, can, at least in principle, be verified (i.e. tested for its truth or falsity), it was strictly speaking meaningless. Of course it followed that most ethical, aesthetic and literary discourses, not to mention most everyday utterances, were simply meaningless. But rather than being seen as reductio ad absurdum, such a conclusion was reviewed by proponents of logical positivism as a positively delightful result… the doctrine was pervasive in philosophical circles at the time.” (Levinson, 1983;p 227)
Given our post-modern times, such an approach to business ethics and an understanding the purpose of business will inevitably be outmoded, dated and increasingly irrelevant
Arguments from methodology
Normative confusion
Danley introduces into his discussion on his methodology, a critique of what he calls “business and society literature”. (1994; p 21) He suggests that there are “serious limitations in the literature concerning the question of the corporate role” (ibid: p 5) and lists “three important features of the question (that) have not been consistently appreciated.” (ibid; p 6)
I would like to examine more closely Danley’s second “feature”, where he asserts that the question of the corporate role is “normative”. Danley suggests, first that “Nonnormative Language” is descriptive, functioning to describe the world. This is the language of the “is” as in “snow is white” and “The GDP is down 2 percent from last year.”
Danley then proceeds to explain That “Normative Language” functions on the other hand, evaluatively or prescriptively. “Evaluative language” – assigning a value to things, as in “That is a good car” or “He is a good person” – is the language of value, invoking what is good, bad or evil. :Prescriptive Language” prescribes behaviour, as in “One ought not to hold a golf club that way,” or “One ought not to kill the innocent.” This is the language of ought, of obligation, of duty of what should or should not be done.
Danley completes his exposition by warning that “one should take care not to confuse the world of “is” with the world of “good” or “ought”. He then goes on to assert that “the fundamental question, then, seeks a normative response about the role that the modern corporation should play in a free society, about the corporation’s obligations, duties, and responsibilities, if any….any proposed answer to the question of corporate role must invoke not merely descriptive premises…but also normative premises. Prescriptions move beyond mere issues of the “way the world is,” to issues of the way the world should be, or toward issues of what is good or evil.” (Ibid; pp 7-9)
It is a well-worn (and tired?) philosophical chestnut first developed by Hume if memory serves me correctly , that it is illogical to infer an “ought” from an “is”. Danley by insisting on his point, reveals his bias for deductive reasoning and the English rationalists. Indeed Danley elsewhere details Hume’s exposition of the naturalistic fallacy and refers to goodpaster’s critique of this problem in much of the business ethics literature. (ibid; pp 21-24)
I would suggest that deductive reasoning and English rationalist tradition of philosophical thought that goes with it, may not be the most appropriate approach to business ethics. Indeed such “rigorous” thinking has been largely rejected in philosophical thought since the late Wittgenstein and seems out of place in the “applied” field of business ethics.
Danley elsewhere identifies the Harvard business review as “a major form for the new managerial philosophy” (1994; p 188), which he criticises for, among many other things, failing “to come to grips the nature and importance of the fundamental question” (ibid; p 6); what is the appropriate role of the modern corporation in a free society?” (ibid; p 2)
A reading of some articles from the Harvard Business Review on Corporate responsibility (2003) may help us to reflect upon Danley’s complaint that the managerialsts do not deploy deductive reasoning.
The articles I have surveyed all focus their discourse on marrying social responsibility with profitability;
Prahalad and Hammond argue that “by stimulating commerce and development at the bottom of the economic pyramid, multinationals could radically improve the lives of billions of people and help create a more stable less dangerous world. Achieving this goal does not require MNC’s to spearhead global social-development initiatives for charitable purposes. They need only act in their self-interest.” (Harvard Business Review, 2003; p1)
Porter and Kramer suggest that “corporations can use their charitable efforts to improve their competitive context-the quality of the business environment in the locations where they operate” (ibid; p 82)
Handy argues that “doing good does not necessarily rule out making a reasonable profit. You can, for example, make money by serving the poor and the rich.” (ibid; p 82)
“.. Roger Martin introduces the virtue matrix-a tool to help executives analyse
corporate responsibility by viewing it as a product or service” (ibid; p 83)
Ryuzaburo Kaku, honorary chairman of canon… suggests that companies consider kyosei, a bussiness credo thet he defines as a “spirit of cooperation” in which individuals and organizations work together for the common good.’ (Ibid; p 105)
Goodpaster and Mathews point out that “when making a profit conflicts with respecting the welfare of the community, corporations do not always choose profit as their only goal… That is why the authors say that conscience can reside in the organization.” (ibid; p 131)
Smith identifies “an approach that ties corporate giving directly to strategy… philanthropic and business units have joined forces to develop philanthropic strategies that give companies a powerful competitive edge.”(ibid; p 157)
Kanter finds that increasingly “companies are viewing community need as opportunities to develop ideas and demonstrate business technologies, find and serve new markets; and solve long –standing business problems.” (ibid; p 190)
Each article I have read contains no appreciable deductive reasoning. They all seem overwhelmingly inductive in their approach to their topics. That is they provide good evidence based upon experience for their conclusions. These
Articles, as Danley complains are clearly all “pushing an agenda; that social responsibility and profits can work together. We may agree or disagree with the thrust of these articles but none of them reach conclusions that reach outside the bounds of simple inductive reasoning.
Thus I would argue that Danley’s complaints about the vacuity of the stakeholder and corporate social responsibility approaches are based, in part, upon his overly narrow consistence that they conform to the standard of strict deductive reasoning based on the separation of normative and descriptive narratives.
Faulty method
If Danley’s unexamined philosophical rationalism was the only problem with his methodology, it would be a minor problem of bias in his analysis. However, there lies a more serious flaw in his method which combines with his dated philosophical bias to undermine much of his work.
His method he terms “philosophical analysis”, which he assures is “nothing esoteric, mysterious, or exclusively analytic. In the broadest sense… philosophical analysis involves four moments. The first stage consists in the clarification of the issue and the relevant concepts… The second moment consists in the identification and clarification of the positions taken in respect to the issue… The third moment consists of the identification of the arguments which are or can be deployed in defence of the positions… the fourth and final stage of philosophical analysis consists of the evaluation of the reconstructed arguments. (Danley, 1994; pp 2-4)
In less than two pages Danley sets out his method. This alone should warn us that what follows in not methodologically strong but rather more intuitive. And driven by a plethora of unexamined assumptions.
Let us set aside for now more radical critiques of the structure of his four “moments” accepting that these four moments do indeed represent a valid approach to philosophical analysis, and reflect in more detail about Danley’s method of philosophical analysis. It becomes clear that there is a problem with the treatment of the second “moment” in his method. It would seem to me that he arrives to hastily at defining the two contrasting positions; “the classical and the managerial business ideologies. (ibid; p 3)
Given that Danley’s entire book is based on this fundamental bifurcation, I would suggest that he has not done enough to live up to his own standard of deductive reasoning to warrant these two contrasting positions as the only managerial business ideologies, or even that they are the most relevant of many.
Danley rather weakly contends that “philosophers in the field of business ethics, business school faculty involved in the field of business and society or social issues in Management, as well as practising managers, social critics, commentators, and reformers all seem to function within one framework or the other.” (ibid)
The weakness in these contentions lies in that Danley is proposing two and only two managerial ideologies because “everyone agrees” or at least everyone that matters agrees. This is poor reasoning from Danley’s own standards of deductive logic and a very weak base from witch to develop any analysis, let alone one that is deeply critical if the positions taken by other thinkers in the field.
Arguments from responsibility
The above arguments about flaws in Danley’s methodology have implications that weaken his analysis. If we take as an example, Danley’s approach to corporate citizenship I, like Danley, remain undecided with regards to the various arguments for and against what he describes as “Moral Personhood Arguments”. “Peter French, for example, has argued that corporations are entities which satisfy the conditions under which it is possible to ascribe moral agency. Quite simply, French beliefs, corporations can meaningfully be said to act intentionally… If corporations are moral agents, then French beliefs that all rights, privileges, duties and responsibilities of full fledged moral persons should be ascribed to them.” (ibid; p 196)
The concern is that Danley’s untested assumptions lead him to doubt the veracity of moral personhood arguments, while assuming that corporations do indeed, and, here’s the rub, ought to, act morally; “unless transnational corporations within the international marketplace agree to attain the strictest standards, competition will make ‘being responsible” self destructive.” (ibid; p 286)
This is a narrative irony in which Danley uses the topic of corporate moral agency as the resource to attack those who support corporate moral agency. It is compounded by his insistence that either way, the arguments, while important, make little difference to his analysis. The problem with such ironization is that it fails to account fully for the contexts in which corporations exist.
The idea that corporations ought to act as good corporate citizens is generally treated in the corporate literature as propaganda10, not philosophical truth. In reality corporations and the various thinkers in the field tend to hold hybridised views on corporate citizenship.
The King 2 report, for example uses a hybrid version that straddles the shareholder dominant and the stakeholder approaches. This is done by making a distinction between accountability and responsibility: “one is liable to render account when one is accountable and one is liable to be called to account when one is accountable and one is liable to be called to account when one is responsible…The stakeholder concept of being accountable to all legitimate stakeholders must be rejected for the simple reason that to ask boards to be accountable to every one would result in their being accountable to no one. The modern approach is for a board to identify the company’s stakeholders, including its shareowners and to agree policies as to how the relationships with those stakeholders should be advanced and managed in the interests of the company (King 2, 2002;p 7, paragraph 5.1 p 5)
In Danley’s analysis, King 2 opts for a strong micro-managerialst approach. This however, would not be the full picture because the King 2 report, as in those articles I read in the Harvard Business Review, all seek a hybrid approach which attempts to encourage corporations to maximize profits while acting as good citizens. Danley’s over-hasty bifurcation of managerial business ideologies have lead him to oversimplification, irony and poor argumentation using his own standards of rationalist deduction.
Developing a counter argument
From Danley we have extracted a number of lessons which may trace a counter argument to his “contention that approaches to the issue of corporate social responsibility based on the stakeholder approach are vague and unclear, fail to “specify the content, scope or force of the responsibilities” (1994; 177), and that “the claims concerning social responsibility and professionalism are largely vacuous”(1994:171).
These lessons would include the point that the stakeholder approaches and corporate social responsibility do not resemble a set of arguments with propositions and proofs as much as a gambit in the push and pull of corporate strategic thinking. The idea that a corporation ought to act as a good corporate citizen, that it ought to consider stakeholders and not merely shareholders, can be seen as a way-station in a process of redefining and reinventing the nature of business as these entities adapt to the variety of contexts in which they operate.
The lesson about how Danley’s analysis is dated suggests that things never are fixed and reflections about the nature of such complex things as corporations must be in continual flux with contending versions of reality or lose the ability to innovate. A rationalist deductive logic inevitably seeks to narrow things down to “the truth” about any particular corporation or economic process and is out of place in environments where a plethora of contending versions, values and voices are needed to retain the vitality and creativity of entities such as a corporation.
There is a lesson to be learned from our critique of Danley’s insistence on business ethics being an essentially normative as opposed to descriptive activity. Danley, 1994; p 12). Clark describes this as “a totally false dichotomy, and has been recognised as such by methodologists for some time… Theories and models help us to categorize reality, but these categories are humanly created and always based on value judgements. This is not a radical point, and most, if not all philosophers and historians of science would readily accept it. Only economists seem, as a group, to reject this fact.” (Clark, 2006; p 3)
The dichotomy must be regarded as unworkable but unlike Clark, this does not mean simply replacing one ideology theory with another. If the idea of a normative/descriptive dichotomy is false, simply replacing a favoured normative ideology actually serves to bolster the dichotomy. What is required is an approach that transcends this dichotomy, a recognition that all theories, values and facts use common sense stocks of knowledge to make their various positions, theories, values and assertions “pass” recognizably competent positions, theories, values and assertions.
The lesson learned from Danley’s faulty method is essentially one of patience.
Hastily setting the terms of a debate as between two contending ideologies with little or no exploration leads to an oversimplification which Jan Jans explained is not proper ethics.
Danley’s hasty bifurcation of the debate into merely two approaches to the purpose of the corporation ignores other approaches such as that found in catholic social thought. Alford and Naughton develop an approach to the purpose of business which is critical of both the shareholder and the stakeholder approaches. Alford and Naughton identify four types of good; Excellent and Fundamental, Common and particular. They go on to argue that these goods need to be placed in a proper order, an order defined by the distinction between “’as’ opposed to ‘apparent’ goods” (Alford and Naughton, 2006;p 3)
Alford and Naughton offer a powerful alternative approach to the purpose of business that goes beyond both the shareholder and the stakeholder approaches. The implementing managers I have worked with, treat the stakeholders in much the same fashion as shareholder.
This Alford and Naughton identify in their treatment of particular goods “the stakeholder model can only conceive of ‘particular goods’ because it is founded on an individualistic view of the human person. According to the stakeholder model, the individual wealth maximizer described above in the shareholder model can become more ‘human’ if the person understands his interests in more enlightened ways (‘enlightened self-interest’). If individuals peruse their own particular goods (self interest), while avoiding the violation of the particular goods of other individuals (enlightened), then everyone’s particular goods will be met without having to be concerned with common goods. (Alford and Naughton, 2006; p 12)
The perspective of those applying the stakeholder model is as limited as those proponents of the shareholder approach “because the stakeholder model views the organization as a group of autonomous individuals who affect or are affected by the organization, it starts off with what the person has, that is some stake in the company; whereas the common good model begins with who the person is… Because the stakeholder model begins with having not being, its view of the corporation tends to be utilitarian, attempting to protect
The material interests of the various stakeholders… it is insufficient for building a community where people grow in virtue…” (ibid)
It could be said that those proponents of the stakeholder approach to business treat all stakeholders, including shareholders as if they are simply signifiers or signs, agglomerations of duties prepared and parcelled for attention. Thus we witness the emphasis on compliance in corporations and the relentless insistence that small, medium and micro enterprises “formalize” by which is meant become come complaint with many laws, regulations and policies that various legislative and regulatory bodies publish. As Gilligan’s complaint suggests; the value of justice without the value of care is unjust and unworkable.
The need to balance a variety of values, to place them in their proper order is a distinctive feature of Catholic Social Thought. Catholic Social Thought is not some peculiar little backwater of little significance. Oliver Williams suggests that “with the demise of the Marxist alternative to capitalism, catholic social teaching could emerge as a major international voice, challenging free enterprise to be more humane” (Williams, 1998; p2)
Williams introduces the notion of a “moral compass” where the good society is encircled by the values of Liberty Efficiency, Equality and Community. There seems to be a curious resonance between these four values and Baudrillard’s post-modern, post-marxist exposition of the object value system;
Conclusion
In brief, there is in my view, a number of counter arguments to Danley’s contentions regarding corporate social investment and the stakeholder approach. These counter arguments all seem to bring the good Lady Aidos back into our midst by creating the space for her in our corporate and economic environments. The stakeholder approach is merely one stage in the process of “making space” for her presence in our lives. We have lost the signifier that can allow us to feel ashamed when we make obscene profits amidst structural poverty and degradation. The system of signification in corporate life needs to find space for Aidos.
The preceding section has extracted a number of lessons from Danley which serve to outline the basis for any counter argument to his contention that the stakeholder approach and corporate social investment is vacuous, vague and unclear, lacking scope, force of responsibilities or content. I also introduced the neglected approach to the purpose of business from a Catholic Social Thought tradition as exemplified by Alford and Naughton as well as Oliver Williams. This approach points beyond the stakeholder model to a concept of business that’s resonates with other, post-modern thinkers in the project to develop organizational ideologies that are able to deal with the changing and diverse contexts in which co
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