Let's Not Fool Each Other with the Business Case
Sir Geoffrey Chandler
Reprinted with permission from the May 2002 edition (Volume 4, Issue 1) of Ethical Performance. For more information, please visit http://www.ethicalperformance.com
The moral argument for doing good should be reason enough for companies to behave responsibly, argues Sir Geoffrey Chandler
The 'business case' for ethical behaviour is now on every agenda. Given the restricted horizons of the typical boardroom, it may be a necessary tactical weapon to persuade companies to embrace the full range of their responsibilities. But in terms of strategy and principle it is fundamentally flawed.
That it is needed at all lies at the root of public mistrust of business, an activity whose trustworthiness is ranked in opinion surveys with that of journalists and politicians. It suggests that profit comes before principle, money before morality. It would be pleasant to think that ethical behaviour pays. But it is clear it doesn't necessarily do so.
More fundamentally, I don't believe ethical behaviour should depend on its paying. To suggest - as the business case essentially does - that doing right needs to be justified by its economic reward is amoral, a self-inflicted wound hugely damaging to corporate reputation.
Moreover, the business case, unlike principle, is an impossible guide to the many decisions a manager faces in real life. Bribery can and does pay if you can get away with it, which companies can and do. Until full disclosure is enforced and the market can punish bad behaviour, I suspect that as good a business case can be made for unethical as for ethical behaviour. The challenge to companies is to close the gap between their practices and the values of society, today enshrined in a range of international instruments of which the foremost is the United Nations Universal Declaration of Human Rights.
If there has to be a self-interested business case for ethical behaviour, it does not lie in bolstering the profitability of the individual company, but in ensuring the survival of the market economy. For good companies there is a real business case for law and regulation which ensure a level playing field and prevent undercutting by the unscrupulous. We need to see market forces - the most potent influence of all - brought to bear on company behaviour other than solely financial results. Disclosure and reporting of the triple bottom line are fundamental to enabling the market to work on a longer-term basis than is allowed by money alone.
Doing right because it is right, not because it pays, needs to be the foundation of business. If we are to preserve the most effective mechanism the world has known for the provision of goods and services - that is the market economy with the public limited company its main instrument - then it has to be underpinned by principle. Financial failure can destroy individual companies. Moral failure will destroy capitalism.
Sir Geoffrey Chandler was founder chair of Amnesty International Business Group between 1991 and 2001, and a senior executive with the Royal Dutch/Shell Group