Categories: CSR reality check / Opinion research / Political spin

7 January 2014


The suspect ethics of ethical watchdogs

When a leading global provider of research on corporate environmental, social and governance (ESG) positions ethical banking as a feel good investment package, we should push back. Ethics is about what we ought to do. It is not about what’s expedient and driven by self-interest.

But it would seem that the advisers to the corporate world on best ethical practice lack an understanding of what they are discussing. A recent press release from corporate governance specialists EIRIS proclaims that its research reveals:

Although ethical banks currently have a small market share, these findings indicate that there is plenty of market potential. There is need for greater consumer awareness of ethical finance offerings and the accompanying need for more and visible marketing by these [retail] banks.”

 [Ethical banking – a big opportunity for Britain’s retail banks, EIRIS survey reveals]

EIRIS is seeking to capture the imagination of corporate leaders by claiming it can help them boost their bottom and top lines. Now, I’ve nothing against economic growth, increasing profits and market share. But for things to be kept ethical we need bifurcation.

Ethics does not ask or solve business issues such as how to increase sales. That’s what marketing does. It does not address perception issues. Neither does it help build relationships with others. That’s what PR does. It is not even governed by legal compliance. Not least because those are rules we must obey.

In contradistinction, ethics is about what people in business ought to do when they confront dilemmas: whenever choices are available. It is about the standards of behaviours that ought to govern how we do business from a moral perspective.

In other words, ethics is a discipline rooted in intrinsically normative criteria, which determines what we should do. Whereas in purely business terms, the normative criteria that govern our behaviour are determined by instrumental considerations.

Once we start mixing the two up, we run into some dodgy ethical dilemmas.

For instance, what happens to good behaviour if being “ethical” proves unprofitable because, say, it decreases market share?

When corporate ethics is driven by instrumental motivations it suggests we will abandon our so-called principles when they no longer serve our purpose. That provides no grounds for building public trust beyond a contract.

The problem, I think, is that what EIRIS calls ethical practice is actually something completely different. Like the disgraced Co-op Bank, it sees ethics through the prism of pandering to popular prejudices to boost sales. The IERIS press release states:

43% of people would trust their bank less if there was media coverage of allegations that their bank’s lending may have breached ethical, social or environmental standards.


38% would trust their bank more if it asked customers for their opinion on what ethical, social and environmental issues it should consider when banking with businesses.

Moreover, supposedly:

46% of people would trust their bank more if their bank made available to the public details of how their ethical, social or environmental lending policy works and the difference it makes in practice.

But you cannot outsource ethical and moral responsibility to the riptides of opinion. That works for marketing, but not ethics. Though for a while it worked for the Co-op Bank: see Co-op: the real fraud is ‘ethical banking’.

Ethics is an open-ended challenge that requires effort, experience and moral reasoning. For good reason, it is not a well defined discipline. At its most ambitious it insists on self denial and even martyrdom, whilst at its most limited it is barely more than a law abiding decency.

Anyway, if the alignment between ethical behaviour and profitable business was an easy-to-figure win-win, firms wouldn’t need much advice from anybody to do the right thing.

I say firms ought to aim for being frank and fair. That means at very least they ought not to dress up their marketing as ethics. If firms merely aimed for growth, competence and probity they might do much better. Then perhaps we would have been spared the banking and oil spill disasters.

EIRIS of course have a vested interest in muddying the waters, aligning eco, social and governance issues into their very own business opportunity. But they shouldn’t be allowed to call it ethics.

4 responses to “The suspect ethics of ethical watchdogs”

  1. Paul – interesting post. As I read it, you are arguing that being ethical is about doing what should be done based on a moral or ethical position within an organisation. But are you questioning whether that is possible when organisations have responsibilities or goals for growth, etc? Is it okay for growth to be a consequence of being ethical then, but not to be the purpose of being ethical?

    Also, it seems that you are saying the parameters of what is ethical should not be driven by customers or politicians/legislation. So who decides what is normative behaviour? Surely what is moral or ethical can be situational in time and place? Organisations need to be mindful of what is acceptable instrumentally and according to societal ideas. Don’t we expect out of date practices and beliefs to be changed?

    I tend to relate ethics always to human behaviour (as organisations in themselves are more inert). For me, it is about integrity – and not putting on a facade or only being good because it will make me popular. Being driven by values and morals can be difficult and may not be a path to success in reality. But also, being pig-headed and selfish seems equally unacceptable behaviour for individuals and organisations.

    The motives of watchdogs of course are often less than ethically pure as you’ve identified.

  2. Paul Seaman says:

    Heather, ethics come into play whenever there are moral choices to be made. Hence, I’m saying that, in the main, one has to obey the law. Therefore one cannot claim that doing so presents a firm with a moral dilemma. Because it is a given obligation, and it varies from place to place.

    Firms cannot base their morals and ethics on public opinion surveys either.

    Firms have to indulge in moral reasoning to derive a set of values that have a robust consistency that guides their behaviour, which firms can defend in public.

    Nevertheless, that reasoning has to be based on normative criteria, because morality is not something that springs from outside the human social world of values and opinions. But it is not acceptable, however, to say that if most people think A is ok and B is not, so do we.

    To take an extreme example, in Saudi Arabia beheading criminals, chopping off their hands and banning women from driving might well have popular support. I don’t know. But regardless, an opinion poll shouldn’t become the basis for forming an ethical stance on such issues, even if it informs it (and even if when in Rome we have to accept Roman law as given).

    Neither should a firm’s objectives – profit making – and instrumental needs form the motivational basis for making ethical choices. Hence we need bifurcation.

    How this works in practice is that the problem presents itself as a tension in a specific circumstance: is it ethical to miss-sell insurance products to maximize sales? The reason to say it is unacceptable should have nothing to do with defending the firm’s reputation, or with legal compliance (after all laws can be bent legally; laws and regulations are full of loopholes). The decision about what to do should not be determined by business criteria either. The argument against miss-selling products (and how to sell them ethically) must rest on its own merits on the difference between right and wrong and what one ought to do: making it an intrinsically moral decision, as opposed to an instrumental one.

    EIRIS has a motivational rat in its pack of arguments; as do most of the arguments in favour of CSR. Moreover, its survey was contrived to get the answers it sought: the win win. That’s why I say such an approach sucks. And it produces outcomes nobody can trust.

    The bigger issue here is that banks and firms and CEOs cannot claim the moral high ground until they get a grip on what ethics is about.

    And my last point is that the discipline of ethics is not one that can easily be taught – it is a practical moral challenge that one learns to manage through experience. But it helps to understand ethics conceptually so that one can apply one’s understanding of this grey (as opposed to black and white) discipline soundly. That’s why I take an interest in Aristotle and Kant.

  3. Dear Paul,
    You know I love this stuff and your take on it….

    I like your idea of bifurcation between the instrumental and ethical. (It is tricky, because in a way “ethics” is already a sort of real-world business, in contradistinction to “morals”, but let’s take them to be co-terminous for now, as perhaps most people do anyway.)

    I think you steer us in the right direction… we should get firms to say that as corporate entities everything they do is instrumental. (And this is so even though they contain people who as persons would like to be ethical, moral, decent… and others who care much less.) By this yardstick, the firm will do what is legal and successful. But it may well define its route to success in terms of the ethical views of its employees, owners, customers, neighbours, its regulators, its media environment.

    But the core of it is this: As PRs, one might well want to avoid corporate, institutionalised hypocrisy. One might want to be robustly frank where possible partly because one thinks that behaviour conduces to corporate success in the long run, and partly because it ought to be an instinct – professional if not ethical – to align messaging with truthfulness where possible, and certainly to know and understand when and how the two diverge.

    A raft of recent examples support a happy synergy of truthfulness and corporate success – of the instrumental merit of not falling for windy “ethics”. Big Banking, and Big Oil are both rich in case histories which should reinforce the message of tough, canny, truth-loving PRs (that’s you, Paul) when they say that – other things being equal – lofty images and messages are not only horribly infantile, they also have habit (is it heavenly retribution?) of back-firing.

    Of course, the case is impossible to prove, being a matter of proving a negative: BP, perhaps Shell, certainly the banks… in varying degrees they were less competent and honest than we would have liked. That doesn’t prove they would have been paragons of competence if they had been less interested in CSR messaging. But they would have been less absurd, for sure.

  4. Paul Seaman says:

    Richard, I agree with much of what you say. But I disagree that corporates should be encouraged to say “everything they do is instrumental”.

    I think instrumentalism has become way too dominant within firms to the detriment of moral and ethical considerations and to progress.

    Take research and development. That now only gets well-funded if it can demonstrate in advance its benefit to the business. But cutting-edge research that results in real innovation comes from investing in risk-taking R&D for its own sake (where the outcome is as uncertain as the use value, if any, of the discoveries, if any, made).

    For Big Oil, the trend toward instrumentally-led R&D has meant massively reduced R&D budgets, which has resulted in a dearth of innovation. Big Pharma is going the same way as it tries to justify all expenditure according to instrumental criteria (growing top and bottom lines).

    Also: I also think, as I think you do, that the core moral and ethical flaw in most CSR is that it is entirely instrumentally premised rather than morally and ethically determined. Hence mostly it has no moral value and, worse, it is sold dishonestly to the public as if it does.

    I guess I’m saying that I do think business needs to be moral and ethical and not entirely driven by bottom and top-lines. But it needs to be so in a realistic, most likely modest, and definitely honest manner. And it strikes me that being honest is a very tough call for most businesses (which is why they get caught short so often)

    I also think that firms can (and should) do more than just obey the law when it comes to deciding the difference between right and wrong and what they ought to do. However, there’s no one standard by which to calibrate what this means in practice when it comes to aligning a firm’s brand persona (character and values) and codes of operation (for example: Ryanair versus Singapore Airlines) and location (say: Switzerland versus Nigeria).

    What upsets me most is that firms find it so hard to speak honestly and confidently about real world challenges. But their failure to do so, I’m sure, is the main reason why they are not trusted. Yes: spin is counterproductive. It’s time to get real and toughen up how we communicate.