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Business Ethics in Flanders: A Review1

Johan Verstraeten

In Flanders business ethics has penetrated the business community as well as the academic world. In this contribution our Associate Editor, Professor dr. Verstraeten, presents some recent studies and initiatives that merit attention. He is based at the Katholieke Universiteit te Leuven, Sint-Michielstraat 6, B-3000 Leuven, Belgium.

oteworthy in the developing field of N business ethics in Flanders are two recent studies from the Centre for Economics and Ethics at the Catholic University, Leuven.

In Meer dun strategie? Sociale verantwoorde- lijkheid als bedrijfsstrategie [More Than Strategy: Social Responsibility as Corporate Philos- ophy12 L. Bouckaert and J. Vandenhove offer a description and a critique of current theories on social responsibility in business. They confront their theoretical insights with the results of an opinion survey conducted among business leaders on corporate re- sponsibility. The survey took the form of a questionnaire sent to 1,118 executives, 23% of whom responded.

After examining the merits of the different approaches to social responsibility, the authors opt for a dynamic concept of social responsiveness that relies less on strategy than on a value based decision making model as proposed by C. McCoy. In this context, J. Vandenhove notes that

“Finally, the notion of an amoral corpor- ation is intolerable for more than merely strategic reasons. Values are a strong mobilising force. Their integrity requires that they be endorsed by employees. They are a guide to the corporation’s purposes. The lack of an internal value structure forces a business to seek solutions to each problem as it arises. In this way a business becomes chaotic and subject to centrifugal forces that threaten its continuation”.

Empirical analysis confirms the multidimen- sional character of social responsibility in

(P. 59)

business. Flemish business executives are concerned with more than just the interests of their shareholders. They give priority to defending their corporation’s overarching interests. This often requires an adequate response to various external pressures (strat- egic responsibility). Although this study reveals that business executives have adapted to new social expectations, it also shows that, as professionals, they are not affected by social problems as such. They integrate in their responsible strategy only those social issues - such as environmental questions - that directly touch their business.

In his philosophical evaluation of the empirical data, L. Bouckaert explains that business executives are torn by a double perspective: their views as members of the business community, and their views as private citizens. In each case, they are moved by different value patterns. They are ‘post- modern’ in that they are fragmented accord- ing to the various social roles they must fill.

As decision makers, business executives confront four sets of conflicting values:

(1) Shareholders’ interests can conflict with those of other interested parties.

In commenting on Goodpaster‘s criticism of the concept of multifiduciary vested in- terests, Bouckaert shows that it is not enough to distinguish between a positive ‘fiduciary‘ responsibility to shareholders and a negative moral responsibility towards other stake- holders (avoiding injustice and harm). Em- pirical data indicate that strategic social responsiveness requires a more positive inter- pretation of ‘social responsibility’. Business

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self-employed

executives have more than a mere instru- mental relationship to outside vested in- terests. This relationship also involves com- munication, mutual confidence, membership and team-spirit. (2) There is a tension between consequential and a missionary conception of responsibility.

Business executives are responsible for more than the positive or negative economic consequences of their acts and decisions (economic rationality). They also bear the burden of realizing the corporation’s mission (value rationality). While in the sixties and seventies social responsibility took the form of correcting the negative external effects of corporate activities, today it is interpreted in more positive terms and in function of im- plementing a mission statement and a value framework. Value management and value formation have become crucial aspects of business strategy. (3) There is a further possible conflict be- tween social values and economic values.

Compared to other groups, business execu- tives attach greater importance to economic results. They often reduce social ends to instrumental ends. Nevertheless, there is a tendency to integrate social and economic values. Here, the concept of ’corporate citi- zenship’ opens interesting possibilities. (4) The tension between self-regulation and government regulation has led to a growing awareness that the free market alone cannot integrate economic and social ends. Govern- ment regulation and informal and formal negotiations are needed. While the study shows that Flemish business executives still accept the basic structure of the ’social market economy’, it also detects an important new element. There is a new insistence on indi- vidual responsibility and a direct dialogue with vested interests. There is a ’moral self- regulation’ that produces a coordination in- volving such values as integrity, mutual con- fidence, flexibility and shared responsibility.

A second noteworthy study from Leuven’s Centre for Economics and Ethics is Winst en waarden. Een ethische agenda VOOT zelfstandig ondernerners [Profit and Values: An Ethical Agenda for Self-Employed Entrepreneurs] . 3

Compared to other studies on the economic situation of the self-employed, this study is original in that it focuses on the value- consciousness of this social group. The ident- ity of self-employed people is not derived primarily from belonging to the middle class nor from the juridical description that ”they are people subfect to the social legislation with regard to the self-employed”. The con- cept that most accurately describes their self-

understanding, ‘decision autonomy’, has a clear ethical connotation. This concept is not necessarily linked to the possession of property.

An ethical understanding of the group of self-employed entrepreneurs is determined by the knowledge that they operate in small businesses where taking personal responsi- bility is much more significant than it is in complex business corporations.

Bouckaert and Schokkaert’s study is not solely descriptive. As its title suggests, it has a programmatic purpose. The authors want to stimulate moral self-regulation among independent entrepreneurs so that shared value-convictions and the quest for a just society, not the law, are the main reason behind the limits placed on the acquisition of maximum profit. At this point their study shows that independent entrepreneurs in- evitably confront conflicting values. A list includes:

- Independence and conviviality versus growth, productivity and functionality. Small can be beautiful, but a higher pro- duction capacity often demands a complex structure.

- Risk versus security - Independence versus cooperation - Quality versus financial profit - Commitment to the business versus family

responsibility

The inevitability of these value conflicts implies that for the self-employed, doing business is as much an ethical as an economic matter.

The University of Leuven has recently undertaken new initiatives in research on, and the teaching of, business ethics.

The Centre for Economics and Ethics is now integrated in a new interdepartmental and interdisciplinary superstructure: The Centre for Christian Ethics, which also includes the Centre for Bio-medical Ethics and Law, The Centre for Technology and Ethics and the Centre for Peace and Environ- mental Ethics. The coordinating Centre for Christian Ethics is also the basis for a network of Flemish and Dutch centres for ethics. Members are: The Centres for Ethics of the Universities of Brussels, Antwerp, Nijmegen and Tilburg. The purpose of this network is the promotion of a Christian contribution to practical ethics and the development of a broader European network of Christian centres of practical ethics. News and relevant articles from the Centre for Christian Ethics are available in English in the periodical Ethical Perspectives.4

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In the context of reaffirming the Christian contribution to practical ethics, the Centre for Christian Ethics organised a conference in February 1994 on Narrativity and Hermen- eutics in Applied Ethics. While the confer- ence focused on general aspects of practical ethics, its approach had indirect implications for business ethics. In my introduction to the conference I defended the thesis that even in practical ethics we cannot side-step meta- ethical frameworks based on narrative tra- ditions. They offer perspectives that surpass functional differentiation and professional deontology to reach a more radical responsi- bility for self (as moral subject with a nar- rative unity), for others and for the world. When applied ethics takes this dimension into account, it surpasses the technical or professionalistic approach and becomes an integral human ethic. In his remarkable lecture, the Dutch philosopher Paul Van Tongeren started from the idea that the ethicist’s duty is not to provide meticulously articulated rules and regulations but to re- establish an appreciation of the many lost and threatened meanings shunted aside by a technical approach in applied ethics. The ethicist, interpreting and investigating tra- ditional backgrounds, can contribute to the rediscovery of a vocabulary and of interpre- tations that enable people to delve into and articulate meaningful ethical experiences.5

In conjunction with the Centre for Christian Ethics, the Catholic University at Leuven has introduced a new Masters Degree in Applied Ethics. It offers a comp- lementary postgraduate education for experts in different fields. The program offers special courses and seminars in five areas of applied ethics: social and political problems, econ- omics and business, bio-medical and health care issues, family and partner relations and environmental and technological issues.6

A last innovation at the Catholic University at Leuven is the introduction of an English language course in Business Ethics. This course is original in that its students, origin- ating from 26 different countries on 6 conti- nents, come from a spectrum of programmes in theology, applied ethics, and business administration. The dialogue among students from so many different backgrounds and orientations is enriching in many ways, both for the students and the lecturer. T. Calgary set up an inquiry into the different moral attitudes of theology and MBA students towards concrete dilemmas.7 His study shows that the MBA students have more con- sistent opinions on how to act in a given situ- ation than do the theology students, but are significantly less consistent in their ethical

evaluation of these different situations. Theology students, while agreeing less often with one another, are more consistent, without being rigid, in their ethical evalu- ation of different situations. The two groups reach a consensus on rejecting misleading information, potential harm to consumers (where a third party is affected) and cashing in unused flight tickets (personal integrity). MBA students consistently accepted practices such as using competitors’ information to one’s own advantage and obtaining personal copies of software, while theology students were more hesitant. In one situation the two groups reflected distinctly different attitudes: the case where a CEO decides secretly not to bring an abortion pill on the market for moral reasons. Most MBA students challenged the decision, presumably because of a missed market opportunity, while the theology students’ opinions were divided. The study shows that the theology students have fewer standpoints reflecting deontological prin- ciples than could be expected, and that the MBA students are certainly not morally in- different.

A second centre that has recently produced study material is the Centre for Ethics at the UFSIA in Antwerp.

A project carried out in cooperation with the HBK Savings Bank resulted in a book entitled Een prijswaardige economie. Een ethische uisie [A Prize-Winning Economy: An Ethical Vision].* While its main thrust is to present the current state of ethics and economics, it also contains specific contributions on busi- ness ethics. Apart from two articles on par- ticipation (H. Opdebeeck, R. Stallaerts) and one on salary theory (S. Kbsenne), the book contains a stimulating reflection by Jef Van Gerwen on the moral and juridical status of business corporation^.^ Starting from a socio- logical interpretation of businesses as ’insti- tutions’, he demonstrates that both economic and legal theory need to reconsider the defi- nition of businesses’ moral status. Van Gerwen’s position approaches the ideas of his colleague F. Van Neste who introduced the concept ’social property’ as an alternative for collectivistic or individualistic definitions of businesses’ legal status. ’Social property‘ refers to the possession of certain goods in common, as is the case in businesses because of the specificity of their fundamental ends and their need to continue as institutions for the benefit of those having a vested interest in them. A business is the result of the con- verging claims and alliances of different people and groups united by the business‘ common end and thus by a common interest that cannot be reduced to the interest of one

an integral human ethic

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single party (shareholders). One conse- quence is that the different aspects of property can no longer be united in one single physical or legal person. They are divided over different persons and groups.

Van Gerwen’s redefinition of a business as a complex institution and as a social property is also relevant for the solution of the problem of liability for crimes and illegal behaviour. According to Van Gerwen, it must be poss- ible in cases where illegal behaviour cannot be reduced to the acts of individuals, that businesses as such are penalized. In Belgium, this would require a revision of the criminal law code.

Finally, but not least importantly, we note that in Flanders business ethics is not limited to academic discussion but has become an integral part of business life. An increasing number of businesses have adopted or are adapting a corporate code or mission state- ment. Banking now has sector codes such as the Ethical Code of Savings Banks and the Code of the Belgian Banking Association.

To stimulate a more ethical treatment of applicants, Talent - a supplement included with the periodicals Knack, Trends and the Financiele Economische Tijd - that specializes in personnel advertisements, has proposed an ethical code for the selection and recruitment of personnel. The main points of this code are:

Personnel selection should be based on correct information about the business and the vacancy. This will enable appli- cants to be objectively informed on the position offered and the business doing the hiring. The selection procedure should take place in an atmosphere of confidence where both the applicant and the busi- ness executive or hislher representative are committed to preserve the confiden- tiality of the information they exchange. Recruitment and selection should be objective, carried out in integrity and with respect for the individual without discrimination according to sex, ethnic origin or personal conviction. Normally selections are made by professionals using accepted scientific methods whose pur- poses should be explained to the appli- cant. The applicant should be informed of the results of hislher application within a reasonable time. An unsuccessful applicant should be informed, on request, of why hislher candidacy was not accepted.

(6) Application costs should be minimal. (7) The parties formally agree as of the

moment a contract has been signed.

Other significant indicators of the growing interest in business ethics include the inquiry launched by Trends, an influential business weekly, into ethics in business; the choice of Ethics and Business as the 1994 theme of the annual Securex Human Resources Trophy; and the 1993 conferral of the Strategies for Europe 2000 prize (Foundation Europe 2000) which is annually awarded to a study ”which has outstandingly contributed to a better understanding of the professional frame of the interlinked forces of the single market”, on J. Verstraeten and J. Van Gerwen for their book Business en Ethiek. Spelregels voor het ethische onderneming [Business and Ethics: Rules for an Ethical Corporation], now avail- able in a second revised edition. This book contains substantially new elements such as a chapter on ecological ethics, new cases and revised chapters on corporate ethics, market- ing ethics and shareholder responsibility.

Although business ethics is now recog- nized as an established field of study in Flanders, there is no question of resting on one‘s laurels. The agenda contains new challenges. As with many other European regions, Flanders faces the competition of- fered by the industrial rise of South East Asia. To remain competitive, more research is needed on the non-economic factors of the economic success in Japan, China, and the “little dragons” (Hong Kong, Singapore, Korea and Taiwan) and more recent arrivals. Put differently: we must urgently answer the question whether new developments are in- fluenced by the process of rationalisation and secularisation or by underlying religious and secular value systems and mentalities. What constitutes the ethos of East Asian Business? To answer these questions, the Leuven Centre for Christian Ethics will cooperate with East Asian centres.

This review contains no news on Business Ethics at the University of Gent. Prof. K. Raes could not be reached at the time this review was written. In a next review, a progress report on work done at this university will be included. L. BOUCKAERT and J. VANDENHOVE, Meer dan strategie? Sociale verantwoordelikjheid als bedrijbstrategie, Acco, LeuvenlAmersfoort, 1994. L. BOUCKAERT and E. SCHOKKAERT, Winst en waarden. Een ethische agenda voor zelfstandige ondememers, Acco, LeuvenlAmersfoort, 1992.

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4. More information on Ethical Perspectives can be obtained from the Centre for Christian Ethics, De Beriotstraat 26, 3OOO Leuven (Belgium), Tel: + 32 16.32.40.67., Fax: + 32 16.32.37.88.

5. See Ethical Perspectives, 1 (1994) 1. 6. More information on the Masters Program in

Applied Ethics is available from The Centre for Christian Ethics at the address in note 4.

7. T. CALGARY, A Sumey of M B A and Theology Students’ Choices in Business Situations with Ethical Dilemmas. Leuven, Unpublished Final

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Paper, 1993. This inquiry was based on V.E. HENDERSON’S questionnaire ”Ethical IQ Test” published in his book What’s Ethical in Business, McGraw-Hill Book Company, New York, 1992.

8. K. BOEY, T. VANDEVELDE and J. VAN GERWEN, Een prijswaardige economie. Een ethische visie. AntwerplGroot Bijgaarden, 1993.

9. J . VAN GERWEN, ‘Het statuut van de onder- neming. Een interdisciplinaire benadering’, in o.c., pp. 389-412.

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