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Creating Corporate Accountability Foundational Principles to Make Corporate Citizenship Real

Creating Corporate Accountability Foundational Principles to Make Corporate Citizenship Real



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Published by: Ichbinleo on Apr 24, 2008
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ABSTRACT.This paper explores the growing arrayof initiatives aimed at creating corporate account-ability with the goal of attempting to uncover thefoundation principles that underlie them and createa “floor” below which practices are ethically ques-tionable. Using the Global Compact’s nine principlesand the work of Transparency International as guides,foundational principles seem to exist in the areas of human rights, labor standards, environment, andanti-corruption initiatives.
Many countries, global bodies, and companiesaround the world are struggling with how to turnfoundational principles articulated in a growingarray of principles, codes of conduct, and stan-dards from statements about what
to bedone in corporate practices into what
in themarketplace. Increasingly corporations’ figurativefeet are being held to the fire of social activismaimed at creating greater accountability on thepart of companies for the impacts that they have,not just with respect to investors, but on othersstakeholders as well. If these pressures are to effectreal change, they need to be underpinned bygenerally agreed foundation principles that areimplemented not just rhetorically in corporatecodes of conduct but in day-to-day operatingpractice. Before that day actually comes, however,there needs to be general agreement on thefundamental principles themselves. This paper will explore some of the growing array of ini-tiatives aimed at creating corporate accountabilitywith the goal of attempting to uncover founda-tion principles that are embedded in globalagreements and corporate practices.Global brands are often targets of exposésand activist pressures (e.g., Klein, 2000;Schoenberger, ca. 2000; Schlosser, 2000) aspublic attention shifts from topic to topic. Asearly as the 1960s and 1970s environmentalconcerns – and the company-produced chemi-cals causing them – became high on the publicagenda. The publication of Rachael Carson’s
Silent Spring 
in 1962 and the attention paid toecological issues on Earth Day #1 in 1970 weresignificant events in the U.S. raising publicawareness of corporate impacts on the naturalenvironment. Other social issues came to theforefront of public opinion during this period asgrowth of single-issue pressure groups such asGreenpeace and Amnesty International gainedmomentum. Among other incidents, theconsumer boycott of the Nestle Corporation for its sales of infant formula in developing nationsby religious groups began in the late 1970s andculminated in Nestle’s appointment of an internalinfant formula audit commission. Combinedwith a global boycott of products from com-panies operating in South Africa, these andsimilar forms of consumer activism vividlydemonstrated the usefulness of consumer move-ments to attempt to change corporate behavior and hold companies accountable through pub-licity, boycotts, and related forms of activism.Another source of increasing pressure for corporate accountability is the social or ethicalinvesting movement, which is now estimated bythe Social Investment Forum to include sometwo trillion dollars in the U.S. alone. Socialinvesting gained steady currency in the 1980s and1990s, with socially conscious investors initiallydemanding that companies withdraw from SouthAfrica. Although social investing is yet to become
Creating Corporate Accountability:Foundational Principles to MakeCorporate Citizenship Real
Sandra Waddock
 Journal of Business Ethics
: 313–327, 2004.© 2004
Kluwer Academic Publishers. Printed in the Netherlands.
fully mainstream, there is sufficient investor interest with about one of every eight dollarsinvested in equities
under some form of socialactivism that even major investment houses likeSmith Barney and large pension funds likeTIAA-CREF have begun to get into the act andcreate social funds. In the U.S., the Dow JonesSustainability Group Index focuses on fivecorporate sustainability principles: innovativetechnology, corporate governance, shareholder relations, industrial leadership, and social wellbeing, with the latter category explicitly empha-sizing positive corporate responsibility withrespect to society. In the United Kingdom, theFTSE4Good index, launched in July 2001,focuses on three areas: environmental sustain-ability, positive stakeholder relationships, andupholding and supporting universal humanrights. By the 1990s, corporate governanceactivists had also become sophisticated in their use of shareholder resolutions targeted at specificcorporate practices (e.g., Rivoli, 2003; Proffit,2000a, b; Graves et al., 2001). Shareholder activists annually submit hundreds of such reso-lutions, frequently aimed as negotiating tools togain management attention even when they werewithdrawn before voting.Inside companies, outsourcing, strategic andother alliances, and just-in-time inventory man-agement systems began to blur the boundariesbetween companies and their suppliers andcustomers during the 1980s and 1990s.Outsourcing created new global supply chains,often in developing nations, and human rights,labor, and environmental activists became con-cerned corporate practices in the increasinglylong supply chains of consumer goods, clothing,and toy companies, among others (Rivoli, 2003).Boundaries between multinational companiesand their suppliers, clear perhaps in the eyes of managers, were and are much less clear toactivists wanting to create corporate account-ability.In the 1990s the rise of the Internet fuelednew levels of activism and strengthened thecapacity of civil society’s non-governmentalorganizations (NGOs) to organize efforts fightingagainst sweatshop labor conditions, human rightsabuses, child labor, anti-democratic regimes,political infractions, and ecological damages.Anti-globalization activists continue to demon-strate these concerns when international bodiesfostering free trade, like the World Bank or World Trade Organization, attempt to meet.Legal developments, consumer requirements,technological innovation, and NGO activism areincreasingly geared towards sustainability guide-lines and the triple-bottom line of economic,social, and ecological assessment, measurement,and reporting criteria (Elkington, 1998;European Commission, 2001), rather than tradi-tional, more unidimensional financial reportingstandards.Finally, the work of Transparency International(TI), founded in 1995, has again and againpointed out the need to weed out corruption ingovernment and in business, receiving globalattention for its now annual country-based“corruption index” (see http://www.transparency.org/). In May 2002, TI issued the2002 Bribe Payers Index, as a means of deter-mining whether any progress is being made onthe anti-bribery front since the ratification bymany nations of the OECD’s Anti-BriberyConvention two years earlier. The conclusionsreached were hardly encouraging: awareness of the anti-bribery convention is generally low,while perceived bribery-paying (corruption)among companies in the 15 countries surveyedwas relatively high. According to a TIspokesperson the findings “signal the rejection bymultinational firms of the spirit of internationalanti-bribery conventions, while their actions leadto a huge misallocation of very scarce resourcesin developing countries.”
The gap between ideal and the real . . .
Demands for greater corporate transparency andaccountability, as well as anti-corruptionmeasures are fostering significant new account-ability, reporting, and transparency initiativesamong coalitions of business, labor, humanrights, investor, and governmental bodies.Indeed, a database created by the InternationalLabor Organization and available over theInternet lists nearly 450 websites of industry and314
Sandra Waddock
business associations, corporate, NGO andactivist groups, and consulting organizations thathave developed and are promulgating a widerange of relevant policy initiatives. These initia-tives include a mix of transparency and reportinginitiatives, codes of conduct, principles, and fair trade agreements.
Responses to these demandsare varied. Many companies, particularly thoseunder NGO and social activist pressures toreform labor and human rights abuses in their supply chains, have formulated their own codesof conduct. Notable among these companies areLevi Strauss, Nike, and Reebok, all significanttargets of activism.The proliferation of standards, principles,reporting initiatives, and codes threatens confu-sion and continued lack of implementation unlessthere is a common set of principles shared amongthem. Below we explore whether in theemerging proliferation of initiatives, there mightbe a common set of foundation principles or standards that could, if actually implemented,suggest standards of management practice. Thearray of emerging standards suggests that thereis a gap between growing public expectationsfrom a variety of stakeholders and actualcompany performance else this array of initiativeswould not occur. Pressures from a wide rangeof stakeholders appear to be pushing companiestoward a common set of guidelines of what
to be and away from the stark and not alwayspleasant realities of global competition (Frenkel,2001; O’Rourke, 1997, 2000; Greider, 1998).But this change is happening neither quickly nor systemically as of yet, nor is it entirely clear thatvoluntary standards alone will satisfy corporatecritics or develop what Goodpaster (2003) callscorporate conscience. As a starting point,however, one thing is clear: for standards to beeffective over the long term, agreement on fun-damental principles or foundational values mustbe found, and, as Sethi (2003) has argued, com-panies must be held accountable for their implementation.
The argument for foundation principles
Foundation principles, if they exist, wouldprovide a
below which it does not makeethical sense to go. As noted, however, suchprinciples or values make sense only if there issufficient global agreement about the standardsthat they create a level playing field for com-panies adhering to them. For example, corporatecritics ask whether a company that employed 180forced laborers yesterday and only 160 todaycould really be considered to be more respon-sible through this reduction. Yes, there is animprovement in practice, but most people wouldlikely agree that slavery is reprehensible under any circumstances. Fundamental or foundationprinciples would suggest where the “floor” butnot the “ceiling” of responsible practice lies.Such baseline level behaviors, practices, andvalues are foundation values.
Foundation values are  generally agreed standards that provide a floor of accept-able practice 
going below which is ethically andmanagerially problematic. Donaldson and Dunfee(1999) term such general principles or values‘hypernorms’ and suggest that relatively universalconsensus must exist for them to exist at all. Theydefine hypernorms to ‘entail principles so fun-damental to human existence that they serve asa guide in evaluating lower level moral norms’(1994, p. 265).General agreement (by businesses) on acommon set of foundational principles – abaseline or “moral minimum” (Donaldson andDunfee, 1999) for operating practice – would bean important development in providing a levelplaying field for companies. Schwartz (2002), for example, argues for a set of universal moralstandards, including trustworthiness, respect,responsibility, fairness, caring, and citizenship,which could underpin the development of codesand principles themselves. Agreement on foun-dation principles could help companies avoid theinformation overload and code mania that someare currently experiencing as the number andtypes of initiatives grow, as well as disparitiesbetween developed and developing nations (e.g.,Behrman, 2001).Donaldson and Dunfee (1999) provide aframework for core values, built upon the need
Creating Corporate Accountability

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