Main Learning Points from Sustainability and International Business Ethics Class

This is a learning diary produced at the end of the Sustainability and International Business Ethics class in April, 2015.
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The Sustainability and International Business Ethics class raised the important issues that have no easy, so-called “black and white” answers. The context of business raises numerous concerns requiring truly complex and multilateral approach. Business practice and work remuneration promises to create a context for the pursuit of happiness to those hardworking individuals that pursue it, meanwhile, creating the favorable environment for development of manipulation with truths and right-and-wrongs in the process of reaching the goals. This class successfully reveals the conflicting nature of business with many controversies between the various goals of stakeholders. The various goals create the opposing tensions that go beyond the reach of legal requirement and require ethical approach from businesses. Beyond all, I enjoyed not the answers that the presented material provides with numerous ethical approaches to the issues, solutions and perspectives but the questions that it raises leaving me to answer them for myself.

During the class, I have discovered a number of topics that broadened my perception of ethical issues a business faces. The other topics raised resistance and the need in deeper reflection. The concept of 1) sustainability and the sustainable development, 2) the components of sustainability from the triple bottom-line model, 3) the stakeholders’ theory of the firm (especially the broad version) and 4) the pragmatic ethical theory has widened the understanding about the ways businesses approach ethics. On the other hand, the cultural relatedness of the ethics especially in the context of developing the global code of ethics has puzzled me. Next, I will briefly cover on these points.

The goal of every firm is to create value for its stakeholders/shareholders – some do it responsibly but some not. In the course of the Master’s program in International Business study, I noticed that, unfortunately, with the raise of globalization and global mobility of firms and human resources, there raises the tendency to act opportunistically pursuing the short-term benefits. Most likely, our generation will pass this trend to the coming generations further on along with the dominating paradigm of capitalism in socioeconomics. The fundamental assumption of the capitalism is that the invisible hand of the market will eventually correct its irregularities in the medium- to long-run, which leaves the short-run for opportunism. From various studies, we see that decision-makers seldom behave according to theoretical suggestions (for example, Buckley, Devinney, & Louviere, 2007) about choosing the long-run perspective and given a chance of questionable profits, they will pursue them (as in the examples of Enron or the numerous questionable US banks loans, which led to the global economic crisis of 2009).

Luckily, there are those individuals and firms that are interested in bringing benefit beyond own interests with a prospect of long-term development. If the firm intends to remain in business for the longer period, the theories of sustainable development are here to help. As we discussed in class, the sustainable development is “the development that meets the needs of the present without compromising the ability of the future generations to meet their needs (World Commission on Environment and Development, 1987).” Sustainability, thus, refers to the long-term maintenance of systems according to environmental, economic and social considerations (Wurtz, 2015b). The mentioned three elements – environmental, economic and social aspects – are the elements of the triple bottom line theory. The underlying idea behind this perspective is that the firm needs to consider both positive and negative impact of its performance on wider spectrum of factors, which were summarized in those three mentioned above categories, and develop such performance that would benefit the involved parties – stakeholders.

The other main learning point, that comes out of the sustainability discussion is the stakeholder theory of the firm (Freeman, 1984). It arguments that the responsibility of the firm lies with stakeholders rather than with shareholders. Stakeholder, in this context, is any party affected in any way by the operation of a firm or any part of its operation (Artto, Martinsuo, & Kujala, 2011: 30; Freeman, 1984). It shows the difference between the traditional management model and the stakeholder oriented perspective. The traditional model originates in the classical economic theory. It takes into account the four stakeholders’ categories: shareholders, customers, employees and suppliers. The model arguments that a firm is responsible mainly towards the customers through value delivery and shareholders through profit generation. The suppliers and employees, on the other hand, own to the firm the delivery of the value, while shareholders are also responsible for supply of funds. All other parties, according to this model, are beyond the focus and scope of operation of the firm. The stakeholder theory of the firm acknowledges that an organization has mutual responsibilities towards multiple stakeholders. It recognizes the importance of all parties affected by the operation of a firm be they competitors, customers, employees, civil society, suppliers, shareholders or government. This approach assigns the different responsibilities for management. The traditional approach assigned the management the position of shareholders’ agents. The stakeholder approach attributes the new role of an arbiter that guarantees the stakeholder democracy. This approach considers the long-term interests of all parties and, by balancing various interest, supports the purpose of the sustainable organizational development. The shift of perspective from shareholders’ orientation towards stakeholders’, from the immediate return on investment orientation towards the multilateral long-term benefit removes many controversies in my perception I had prior to attending the class about the responsible way a business ought to act.

The other key material that has been new to me was the pragmatic ethical theory. It arguments that instead of taking one ethical dilemma and looking at it through the lens of a single ethical perspective (typical perspective), one needs to look at the dilemma from the prism of multiple ethical perspectives (pluralistic perspective). The outcome will be the list of various solutions for the situation. The decision-maker takes into account all of them. Although, this sounds democratic and considerate, this approach has a number of pitfalls. The first is that it significantly complicates the decision-making. The second is the vague selection process of the best solution. The decision-maker might just go for the preferred solution without the time-consuming pluralistic assessment process. The third is the choice of perspectives: will all perspectives be taken into account or some will be left out (religious ethics, for example, or agnosticism). What principle guides the selection? If there is that guiding principle, how to make sure that it is universal, fair and good? If all perspectives are taken into account, than the fourth challenge is the choice among the contradicting outcomes. I found that typical perspective on ethical dilemmas is rather straightforward; though pluralistic perspective provides a good body of ethical positions. Perhaps, the broad body of perspectives will help understand various positions but its applicability to a given situation still remains vaguely unclear and drives me to commit to an additional research in the area.

When talking about the class material that confused me and caused disagreement, I can mention the relation between the culture and ethics. I will present the reasons for my skepticism and based on those reasons will explain my understanding of the issue. The root of the disagreement lies in the underlying assumption of the ethical relativism that guides the content of the class. I understand relativism as a belief system. As such, it is just another “religion” with its supreme authorities (deities), perception of good and evil, explanations about the origins of existence and morale. Though the class material presents relativism as some better alternative, I see it as one approach among many and remain confident in the superiority of the ethical absolutism for its universal applicability. My choice between the ethical absolutism and ethical relativism tracks back to the origin of the ethical position about which I have briefly touched in the Business Ethics Challenge. I favor ethical absolutism because it provides me with more explanatory power and the clarity for the decision-making along with integrity. The ethical relativism, contrary, delivers me weak explanations, has flowed rational and vague ethical solutions. Additionally, relativism is widely promoted by group of Nordic thinkers, which is just one group among many. It establishes its superiority by disregarding other ethics. It claims that there are no universal moral principles, when it makes itself a universal moral principle – a contradiction in itself. I admit though that this perspective is convenient for questionable, quasi-ethical decisions because of its contextual relatedness, but it lacks integrity and its changing nature does not trigger my trust.

The main challenge of the ethical relativism comes from the practical implementation of the principle. This approach fails to provide the ground for the universal/global code of ethics (COE) (McDonald, 2010) because it “claims morality is context-dependent and subjective (Wurtz, 2015a).” One sentence can describe the relativistic global COE: “act according to the situation relying on own judgment.” Such COE would attract immediate negative attention. Inconsistently, the relativism favors localization and adaptation of its ethics to the situation, while claiming its universality. The absolutism promotes standardization and universality, thus, global applicability. By removing the universality of ethics, one cannot talk about the global application and sustainability. This said, I remain firm in the position that cultural context does not matter, when one decides on the good, the bad and the fair because ethical matters, being universal in its nature, are beyond the context. Perhaps, I will change my mind later, but Nordic relativism has not convinced me yet in the opposite.

Nevertheless, the involving class material with different perspectives triggered a lively interest in the topic of business ethics. Despite of my disagreement with the underlying assumptions of the class material about the way to form the code of ethics in a way that reaches the sustainability goal, I strongly support the need of serious consideration of sustainability and sustainable development within the business context since it affects many stakeholders as well as the business itself. The many presented perspectives with differing conclusions leave the ground to claim that there is more to say and learn in this area for me.

References

  • Artto, K., Martinsuo, M., & Kujala, J. (2011). Project business. Helsinki, Finland. Retrieved from http://pbgroup.tkk.fi/en/
  • Buckley, P. J., Devinney, T. M., & Louviere, J. J. (2007). Do Managers Behave the Way Theory Suggests? A Choice-Theoretic Examination of Foreign Direct Investment Location Decision-making. Journal of International Business Studies, 38(7), 1069–1094.
  • Freeman, R. E. (1984). Strategic Management: A Stakeholder Approach. Boston, M.A.: Pitnam.
  • McDonald, G. (2010). Ethical Relativism vs Absolutism: Research Implications. European Business Review, 22(4), 446–464.
  • World Commission on Environment and Development. (1987). Report of the World Commission on Environment and Development: Our Common Future (The Brundtland Report). Medicine, Conflict and Survival, 4(1), 300.
  • Wurtz, O. (2015a). “Making Decisions in Business Ethics.” Vaasa: University of Vaasa. Presented on 15-16.04.2015. Lecture.
  • Wurtz, O. (2015b). “Sustainability and International Business Ethics Course: Introduction.” Vaasa: University of Vaasa. Presented on 07.04.2015 and 15.04.2015. Lecture.

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