Public relations professionals don’t really do philosophy: we’re in the people business, and sound-bites suit us better than Immanuel Kant’s Fundamental Principles of the Metaphysic of Morals (1785). As for our clients, well, we’re bound to note their lust for the latest guru-speak getting lift-off from an airport bookshop.
Yet how our clients juggle individual moral rights, social roles and social conventions cuts to the heart of what PRs communicate. As Martin Sandbu, economics leader writer at the FT, says in his new and accessible book, Just Business – Arguments in Business Ethics, philosophical thought can illuminate how these processes are managed.
Sandbu begins by ripping to pieces the two dominant, and conflicting, management mantras that guide business decision making today: Milton Friedman’s shareholder primacy theory and stakeholder doctrine. He then uses Kant’s methodology to put forward what I consider to have the makings of a superior alternative.
First, he interrogates Milton Friedman’s managing-for-shareholders mantra and finds inconsistencies inherent in the theory, which casts doubt on its usefulness as a guide to action:
“Friedman himself admits to qualifications on shareholder primacy. He says that mangers’ responsibility is to conduct the business in accordance with [shareholders’] desires, which generally will be to make as much money as possible while conforming to the basic rules of society, both those embodied in law and those embodied in ethical custom. But this is as unhelpful as it is eloquent. What is a manager to do if shareholders do not particularly care for ‘conforming to the basic rules of society’ – whether those of the law or those of ethical custom? …..
“…if by ethical custom we mean the morality conventionally believed by a majority in society, it could conceivably be the case that conventional moral beliefs require society to be ‘socially responsible’, even against the desires of shareholders. If so, conforming to ethical custom would bind managers to pursing ‘socially responsibility’ to the detriment of shareholder profit, which is surely the opposite of what was intended.” Page 20
I have to agree with Sandbu. There is a contradiction, though we both agree there’s also much to admire, at the heart of Friedman’s position, not least when it comes to property and shareholder rights.
However, while Sandbu is tough on Friedman, he reserves most of his wrath for the incoherencies inherent in stakeholder theory. He observes:
“The imperialist nature of the stakeholder concept – its tendency to include an ever wider range of groups within the orbit of ‘managing for stakeholders’ – is part of what is wrong with stakeholder theory. For the more groups count as stakeholders, the less plausible it becomes to claim that managers either can or should run their business in the interest of all of them. Even if we set aside the difficulty of identifying who is and who is not a stakeholder, without which the admonition to ‘manage for stakeholders’ is rather unhelpful, there remains the problem of what exactly it means to manage in their interest. For, obviously, different groups have different interests, and sometimes those interests conflict. If we think of stakeholder theory as saying that managers should maximize the benefits of stakeholder groups – much as shareholding primacy says they should maximize the return for shareholders – we are hampered by the inconvenient mathematical truth that it is impossible to maximize two or more objectives simultaneously. If, alternatively, we think of the theory as saying that managers are the agents of stakeholders – much as shareholder primacy make managers the agents of the shareholders – we shall quickly find managers stymied by duties that conflict with one another. Shareholder primacy does not suffer from those problems. Even though it is mistaken in claiming managers’ duty is to maximize profit, there is at least no incoherence in what that duty, if it is actually applied, would consist of.” Pages 25/26
The real problem with stakeholder theory, according to Sandbu, is that it lacks a coherent (logical) normative core that answers the question for whom business should be managed. Stakeholder doctrine cannot identify those stakeholders with an intrinsic moral importance (shareholders) from those with an instrumental moral value. Moreover, as R Edward Freeman, the guru of stakeholder theory, puts it, there are a number of stakeholder theories each with their very own normative cores. Sandbu remarks:
“If there is no one definitive stakeholder theory that specifies the moral status of stakeholder groups and the duties of management, all that stakeholder approach per se does is to underline that such a specification is necessary.” Page 28
Amusingly, Sandbu concludes that stakeholder theory is not a theory at all but merely an acknowledgement that business is a moralized activity:
“Since that is something we already knew, we do best by simply leaving the term ‘stakeholder theory’ behind.” Page 28
So, having shown how the existing “philosophical” and theoretical frameworks are deficient, let’s look at Martin Sandbu’s proposed alternative. He suggests, and I tend to concur, that a social contract approach, which draws heavily but not uncritically on the work of John Rawls, provides a more durable framework for corporate image-building. Here, in Martin Sandbu’s words, is why the social contract approach to business and reputation management is so compelling:
“Once we acknowledge that business behavior must be morally justified and that mere social convention about norms cannot provide that justification, we recognize the need for principles, external to socially defined norms, that can adjudicate the truth and falsity of the claims those norms imply about what business ought to do. The metaphor of contract, the archetypal form of human intercourse in the economic realm, should be particularly congenial to those seeking an appeal of offering a general method for thinking about specific problems by focusing on what rational persons in an appropriate contracting situation would endorse. This is also its moral appeal: Unlike utilitarianism, social contract theory formalizes the need to justify morality’s commands to all affected individuals.” Page 179
So, how realistic would it be to adopt a social contract approach based on Kantian morality? Sandbu says:
“…the reasoning must be done in the face of the concrete challenges one may face. The true test of the social contract approach, or any other theory of business ethics, is whether it can help business people move from denial or confusion that recognitions of moral dilemmas often trigger, toward a more stable reflective equilibrium.” Page 195
To give us a guide into how Kantian logic could be applied to real-life corporate dilemmas, he uses it forensically to examine some classic PR case studies. He pores over Texaco’s oil spills in Ecuador, Enron’s fraud, Guidant keeping quiet about its faulty defibrillators, Google’s support for state censorship in China, LeviStrauss’s child labour scandal, executive pay and remuneration, and sub-prime mortgages, to name a few among many.
Turning to the practicalities of his approach, he says that the normative conventions of corporate cultures of, say, Microsoft and Google, might well require different moral codes of behaviours for their internal and external communication (variety will remain powerful differentiators).
Indeed, it strikes me that my Ryanair case study – perhaps not as Sandbu might like – highlights a robust and social contract-type approach to a firm’s staff, customers and suppliers. Arguably, Ryanair has re-educated a whole industry in a whole new set of normative conventions, ones that have become accepted as the price of low-cost flights and commercial success. It also strikes me that the banks are in dire need right now of a social contract, though perhaps one that is nothing like Ryanair’s (though don’t get me wrong, I’m a big fan of the airline).
But Sandbu reminds us – as perhaps Michael O’Leary never would – that profit is not everything:
“…there are a host of management theories that say that it is good for business to respect workers as rationally autonomous beings. In contrast, Kantian ethical theory argues that respecting autonomy is morally required, whether or not it helps the bottom line.” Page 153
Martin Sandbu is on to something. What he writes about is very much a PR’s concern; it addresses what PRs do and what value they add to business and modern institutions.
His work suggests (at any rate I infer from it) that firms (and our clients in general) need to apply quite tough and honest rules to the contract they are seeking to strike with the outside world. When the contract is more self-interested than obviously aspirational, the underpinning of their case can be both moral and pragmatic. PRs should be skilled in helping clients develop that contract, with its curious blend of the selfish and the virtuous. PRs, of course, need to become especially skilled at framing narratives that are not full of the flaws that Sandbu exposes.
At the very least, I hope that corporate ethics, conflict resolution and reputation management will increasingly be influenced by the ideas Martin Sandbu explores in Just Business.
Just Business: Arguments in Business Ethics
Martin Sandbu, Wharton School, University of Pennsylvania
ISBN-10: 0205697755 ISBN-13: 9780205697755