INTERNATIONAL CODES

OF BUSINESS ETHICS

And Other Sources of Business Ethics

Edited by

LEONARD SWIDLER

Copyright © Leonard Swidler

1997

CONTENTS

INTRODUCTION

Leonard Swidler

I. THE CERES PRINCIPLES

SETTING

Brad Sperber

TEXT

II. AN INTERFAITH DECLARATION

A CODE OF ETHICS ON INTERNATIONAL BUSINESS

FOR CHRISTIANS, MUSLIMS AND JEWS

SETTING

Simon Webley

TEXT

III. KYOSEI

A CONCEPT THAT WILL LEAD THE 21ST CENTURY

SETTING

Keizo Yamaji

TEXT

IV. THE CAUX ROUND TABLE PRINCIPLES FOR BUSINESS

SETTING

Jean-Loup Dherse

TEXT

V. THE CRITICAL ROLE OF THE CORPORATION

IN A GLOBAL SOCIETY

A POSITION PAPER OF THE CAUX ROUND TABLE

VI. THE UNITED NATIONS GLOBAL COMPACT

VII. RESOURCE ORGANIZATIONS ON BUSINESS ETHICS

1.

BusinesSpirit Journal

2.

Business Ethics Quarterly

3.

Business Ethics Report

4.

Business for Social Responsibility

5.

Business & Social Responsibility: The Americas

6.

Center for Business Ethics

7.

Conscious Business Alliance

8.

Consciousness Unlimited

9.

Council for Ethics in Economics

10.

The Dialog Group

11.

Ethics Officer Association

12.

European Business Ethics Network

13.

Global Dialogue Institute

14.

International Business Ethics Institute

15.

International Society for Business, Economics, and Ethics

16.

The Institute for Global Ethics

17.

The Institute for Servant Stewardship

18.

The Minnesota Center for Corporate Responsibility

19.

Social Venture Network-Europe

20.

Social Venture Network-US

21.

Society for Business Ethics

22.

Woodstock Business Conference

23.

World Business Academy

INTRODUCTION

Leonard Swidler

Perhaps the most powerful institution for the promotion of change in the world today is the corporation. The corporations of the world control vastly more money than all the governments together. Have the changes engendered by corporations until now been mostly beneficial for the majority of women and men, or mostly deleterious (nothing of course will ever be unadulter­atedly positive or negative)? A relatively simple question, but one which would demand a very complicated, nuanced re­sponse-and one far beyond the focus of this small book.

Rather, this brief volume brings together in one place four quite extraordinary documents, all of which have appeared in the 90s-since the end of the Cold War-namely, four interna­tional codes of business ethics, each arrived at independently. There has also been a burgeoning of organizations devoted to various dimensions of ethics in business; information on the most prominent of them is likewise supplied herein. It is hoped that these documents, and the further information provided by contacting the various organizations listed here, will promote the project of making business world-wide increasingly more sensitive to all the needs of all people and the earth we inhabit-while producing a financial profit.

1. Business Ethics and Spirituality Movement

Recently a radically changing attitude toward ethics among business men and women has been growing, first in the West and now is beginning to spread throughout the world. In the past two decades there has developed what can be called a “Business Ethics and Spirituality Movement.” Before then, and still in many places in the world, the reaction to the term “business ethics” would be to laugh and say that business and ethics are two contradictory terms.

There are of course vast numbers of businesses West and East where this is still true. However, those business men and women who think first, last and always of profit, and are willing to make the “end justify the means,” however unethical, are like the dinosaurs of past ages: They are destructive now, but they are on the way to being extinct! Radical as it may sound, many observers are convinced that in the future the “capitalist robber baron” type will not be able to compete with ethically concerned and socially committed companies.

Corporate ethics in fact grow out of and depend upon the philosophy of the management team in charge. It is important to note at the same time, however, that the management philoso­phy and practice of the management team grow out of and depend on the system of personal values of those team members -and those personal values in turn are largely shaped by the prevailing values of the culture in which the corporation is located. However, it is also vital to be aware that there is a time lag between the emergence of new personal values in a culture and the changes in management philosophy and corporate ethics needed to reflect those new personal values in a culture.

Hence, in order to see the present economic and cor- poration situation more clearly-including properly appreciat­ing the four documents printed in this book-and catch a glimpse of what the immediate future holds in store, we need to glance backward. We need to review the values that have been domi­nant in Western civilization-which till now has been the major driving force in business management, though it is being increasingly joined by other cultural forces in wielding influ­ence-especially as they were reflected in economic activity.

The values which have historically influenced business management in the West have been largely taken from the “Protestant Ethic.” Its views about humanity were fundamentally pessimistic, coming as they did largely from Luther-Calvin, and far behind them, Augustine. (It is interesting that those Christian theologians who were more optimistic about human nature were excoriated as heretical: e.g., Pelagius by Augustine and Erasmus by Luther.) In that mode, the “father of scientific management,” Frederick Taylor, taught that employees are ineffi­cient, wasteful, lazy, economically self-interested, and peer competitive, and therefore needed tight controls and external motiva­tion.

The general view of the world in the West in early modern times was, thanks largely to Sir Isaac Newton, one of order, structure, stability; humans simply needed to learn the specifics of the unchanging laws of nature so as to master them. The same was also thought to be true in the management of human life, including that of homo economicus.

The classic management theory then assumed the need to minimize employee resistance to work, to support the Protestant Ethic and to assert autocratic rule. Since cause and effect flows in one direction, hierarchial assumptions of organi­zational structure required causes to be toward the top of corporations and effects towards the bottom, that is, cause and effect had to operate from the top downward. The bureaucratic management system thus was centered on structure, hierarchy, authority of position and rules and laws.

2. Teleocratic Management Philosophy

As belief and value systems in a culture shift, the styles of leadership in that culture likewise inevitably shift. Hence, as beliefs in Western culture have been shifting from the static worldviews to dynamic ones:

1)

Management philosophy has tended to shift away from statically structured bureaucratic systems and towards what Louis R. Mobley already in 1971¹ referred to as “teleocratic” systems, “goal-controlled,” systems.

2)

In philosophical circles in the early decades after World War II Existen­tialism and Zen Buddhism provided new insights. Their ever-present now became more signifi­cant and more important than the past and future.

3)

Humanity’s rewards or punishments shifted largely from beyond the grave to before death.

4)

Humanity was increasingly seen as basically good, or could become so.

5)

Humanity was viewed as in charge and as God’s respon­si­ble agent was to act so as to bring about chang­es.

6)

The Newtonian view was giving way to the idea that God who created the universe made women and men with free wills, and consequently they shared control with God.

Twentieth-century physical science has also been systematically destroying the old Newtonian mechanistic world view:

1)

Einstein’s relativity demonstrated that the observed and observer cannot be separated and still have meaning in the event.

2)

Heisenberg’s principle of indeterminacy pointed once again in the direction of the free will, which Luther had denied.

3)

Quantum mechanics deals with mass and energy inter­changeably, employing probabalistic mathematics where­by time, mass and space are united.

4)

Even the laws of thermodynamics-which earlier had been thought to be determined toward the inevitable “wearing down,” entropy, of the universe-now also had to include the realities of “life” which, tend to run in the opposite direction, that is, to expand, to complexify, to rise-not to sink into entropy.

5)

This ordering principle seemed to be at work along with the dis-ordering principle, leading to chaos theory in the physical sciences, so that change, complexification, dynamism, and directionality-a telos-appear to be at the heart of the universe.

The dynamic view of reality was also reflected in the philosophical thought from the beginning of the twentieth century onward with the process thought of Alfred North Whitehead, Maurice Blondel and Henri Bergson, among oth­ers-of course the German Romantic philosophers Fichte, Schelling and Hegel were proto-types of the dynamic view of reality already a hundred years earlier.

The same dynamism was likewise true at the beginning of the twentieth century in Christian theology, with Whitehead once again leading the way whereby a world of stability created at the beginning of time gives way to process theology geared to a world of change, continually being created, and in which humanity is an active creator. Whitehead was paralleled by the Catholic so-called “Modernists,” eventually preparing for the huge sea change of the Second Vatican Council (1962-65), which brought the Catholic Church as a whole to the forefront of the wave of dynamic change.

Perhaps the pinnacle of this dynamic view of humanity and the universe is reached in the thought of the French Jesuit paleontologist philosopher-theologian Pierre Teilhard de Chardin (d. 1955). As a paleontologist (literally “student of old beings”), Teilhard traced the long pattern of the evolution of the universe from the “big bang” fifteen billion years ago to the formation of the earth five billion years ago, to the emergence of life three hundred million years ago, to the rise of homo sapiens forty thousand years ago, to the contemporary coming into existence of the “global mind” which he calls the noosphere (the Greek nous, “mind,” plus sphere). All this time change occurred through a process leading to the development of an ever greater complexity in the universe. Teilhard saw an inherent continuity and directionality aiming at consciousness and freedom in this process, beginning from the simplest form of matter, which had at its very core its “within” (dedans). In traditional philosophical language this “within” was called spirit, meaning that it did not occupy space; in modern physics it would be called energy-which was seen to be convertible with matter.

Coming closer to the fields of business/management, we see that in the behavioral sciences a similar dynamism appeared. The observations of humanity eventually led to the growth of “humanistic psychology” and to new assumptions about men and women’s being which lies behind their observed behavior.

During the first half of the twentieth century, American psychology was dominated by two schools of thought: behavior­ism and psychoanalysis. Neither fully acknowledged the possibil­ity of studying values, intentions and meaning as elements in conscious existence. The “First Force” grew out of Ivan Pavlov’s work with the conditioned reflex (induced under rigid laboratory controls, empirically observable and quantifiable) which gave birth to an academic psychology in the United States led by John Watson, eventually called “the science of behavior,” or behavior­ism. The “Second Force” emerged out of Freudian psychoanaly­sis and the depth psychologies of Alfred Adler, Erik Erikson, Erich Fromm, Karen Horney, Carl Jung, Melanie Klein, Otto Rank, Harry Stack Sullivan and others. These theorists focused on the dynamic unconscious-the depths of the human psyche whose contents, they asserted, must be integrated with those of the conscious mind in order to produce a healthy human personality. The founders of the depth psychologies believed (with several variations) that human behavior is principally determined by what occurs in the unconscious mind.

So, where the behaviorists ignored consciousness because they felt that its essential privacy and subjectivity rendered it inaccessible to scientific study, the depth psycholo­gists tended to regard it as the relatively superficial expression of unconscious drives.

By the late 1950's a “Third Force” began to form. In 1957 and 1958, at the invitation of Abraham Maslow and Clark Moustak­as, two meetings were held among psycholo­gists who were interested in founding a professional association dedicated to a more humanistic vision. They discussed several themes-such as self, self-actualization, health, creativity, intrinsic nature, being, becoming, individuality, and mean­ing-which they believed likely to become central concerns of such an approach to psychology. In 1961, with the sponsorship of Brandeis Universi­ty, this movement was formally launched as the “Ameri­can Association for Humanistic Psychology” and the first issue of the Journal of Humanistic Psychology appeared that spring.

By this time the term “human psychol­ogy” was in general use. It reflected many of the values expressed by the Hebrews, the Greeks, the Renaissance Europeans, and others who have attempted to study those qualities unique to human life and which make possible such essentially human phenomena as love, self-consciousness, self-determination, personal freedom, greed, lust for power, cruelty, morality, art, philosophy, religion, literature, and science.

Abraham Maslow, Carl Rogers and Rollo May, who had participated in the original conferences, remained the move­ment’s most respected intellectual leaders for the decades that followed. Maslow developed a hierarchical theory of human motivation which asserted that when certain basic needs are provided for, higher motives toward self-actualization can emerge. Rogers introduced person-centered therapy, which promoted the intrinsic human tendency toward self-actualization. Thus Maslow and Rogers embraced self-actualization both as an empirical principle and an ethical idea. Rollo May represented the European currents of existentialism and phenomenology and emphasized the inherently tragic aspects of the human condition. His books provided a philosophical perspective and insight into questions involving the enduring presence of evil and suffering in the world, as well as the nature of creativity, art and mytholo­gy, and the value of the humanities as psychological resources.

While Christian theology was moving towards the Catholic “both-and” view of reality and away from Protestant “either-or” assumptions, science was discovering the important principle of feedback-that is, the idea that each of the variables in a system can interact with each of the other variables, and further, that such a continually interacting system is an accurate descrip­tion of reality. This idea has given rise to the whole new approach to problem analysis and solution called Systems Theory. Maslow’s “psychology of becoming” applies Systems Theory to the psychological health of a human being as well as to the process of interpersonal relations. In fact, feedback concepts between persons are now accepted as essential in interpersonal relations and group dynamics. This is the concept of synergy.

In sum, as noted: as belief systems in a culture shift, the styles of leadership in that culture must inevitably shift. Thus, as beliefs in Western culture have been shifting from static Newto­nian world views to dynamic White­headian views, management philosophy has tended to shift away from bureau­cratic systems and towards teleocratic systems. Today change is a more accurate description of the management world than stability. The social implications of this is that human purposes must continual­ly be determined and changed, and consequently, social order must be conceived in terms of process rather than structure. The individual may expect many careers in a lifetime rather than one. S/he must posses problem-solving and decision-making skills- including the ability to set goals for him/herself and others as purpose continually shifts. Leadership, thus, is increasingly described as the ability to state a goal and reach it. To do so in an organizational setting, however, requires that goals not only be set, but also communicated to the mem­bers of the organiza­tion whose help is needed to reach the goal. In brief, feedback, dialogue, are vital to contemporary management.

Implications not only for management but also for business ethics of the more dynamic view of the world generally and humans specifically should be immediately apparent: E.g., profits, like basic needs, are necessary human goals, but not the only ones. All the stakeholders of a business-workers, manage­ment, etc.-need to work not only for profit, but toward self-actualization as well. Hence, a more democratic, dialogue-directed atmosphere in the workplace is ethically warranted. If dynamism and change are at the heart of reality, then continued dialogue with all the stakeholders-customers, suppliers, stock­holders, communi­ty-is ethically required, and the management style must change accordingly.

3. Ethics in Business

An increasing number of recent studies shows clearly that people do in fact act unselfishly.² One Canadian researcher put it this way: “Most businesses (especially large multinational businesses) and the people who work within them prefer to behave ethically.”³ Two Austrian scholars, after thorough field research, concluded that “only a minority of business profession­als really think that ethics and economic success are contradicto­ry concepts.... The popular assumption of business theory...that only egoism guarantees economic success, turns out to be a mere academic, theoretical theory. In practice managers want to combine ethics and success and they see possibilities to do so.”⁴

Going hand in hand with this fact is another fact, namely, that “a number of studies suggest that people, especially those operating in international settings, want more ethics training.”⁵ Reflecting this desire, the Social Sciences and Humanities Research Council of Canada “identified the area of ethics as one of its ‘strategic’ areas requiring research.” Further, U.S. universities must now include business ethics in their business schools’ curriculum if they are to maintain their accreditation. A 1992 survey of academics concerning the social issues in management identified as the three top areas for research: business ethics, international social issues, and corpo­rate social responsibility.⁶ The ultimate commitment to the fostering of business ethics came from John Shar, former chair of the Securities and Exchange Commission, who made a $23 million donation to the Harvard Business School to create a curriculum and teaching materials which incorporated business ethics issues.

A move on the part of corporations themselves in this area of business ethics was the development of individual corporate codes of business ethics, which are self-regulatory devices providing behavioral guidance to employees and policy commitments to stakeholders. Although J.C. Penny, as one of the first to publish such a code, issued theirs in 1913, it was not until the early 1970s that the adoption of corporate codes of ethics became widespread. By now about 80% of Canadian firms and 97% (!) of U.S. firms have corporate codes of ethics. Their implementation, however, remains a key concern.

A model example of such a corporate code of ethics, and its implementa­tion, is that of Levi Strauss, the largest apparel maker in the world. According to an August 1, 1994 Business Week cover story, its CEO stated that “the corporation should be an ethical creature-an organism capable of both reaping profits and making the world a better place to live.” The Levi Strauss corporate credo spells out the details of its ethical commitments, which are indeed sufficiently far-reaching to make Business Week’s devoting a cover story to it understandable, especially given the importance of the company:

New Behaviors

Management must exemplify directness, openness to influence, commit­ment to the success of others, and willingness to acknowl­edge our own contributions to problems.

Diversity

Levi Strauss values a diverse work force (age, sex, ethnic group, etc.) at all levels of the organization.... Differing points of view will be sought; diversity will be valued and honestly rewarded.

Recognition

Levi Strauss will provide greater recog­nition-both financial and psychic-for individu­als and teams that contribute to our suc­cess... those who create and innovate and those who continually support day-to-day business require­ments.

Ethical Management Practices

Management should epitomize the stated standards of ethical behavior. We must provide clarity about our expectations and must enforce these standards throughout the corpora­tion.

Communications

Management must be clear about company, unit, and individual goals and perfor­mance. People must know what is expected of them and receive timely, honest feedback...

Empowerment

Management must increase the authori­ty and responsibil­ity of those closest to our products and customers. By actively pushing the responsibility, trust, and recognition into the organization, we can harness and release the capabilities of all our people.

Far from being just words, these ethical commitments are reflected in the following actions:

1.

The Board of Levi Strauss voted unanimously to pull out of China $40 million of business in protest to human rights violations.

2.

The company asked some 6,000 employees, including its diversity council, which represented minority interests, for input when it remade its product development and distribution systems.

3.

More than half of the company’s managers are women and the number of minority managers has been signifi­cantly increased.

4.

All employees are evaluated not only by superiors but also by peers and subordinates.

5.

The company does not employ children under fourteen in its overseas operations.

6.

The company plants are rated among the safest in the industry.⁷

Nevertheless, it is very difficult for an individual corporation or manager to “go it alone,” so that it is seen as extremely important that external organiza­tions help to provide the guidance and moral leadership needed. As one researcher focusing especially on international business put it: “A business cannot accomplish the task of creating a more ethical internation­al business climate alone. It needs the help and support of such transnational organizations as the OECD or Transparency International.” She went on to argue that, “it is through coopera­tion among these various institutions that the development of international standards can be developed. It is only in this way that there will be the creation of an international business climate that makes unethical behavior unacceptable.”⁸

That, of course, is precisely what the several documents in this volume and the organizations behind them are designed to do. Moreover, there are further organizations, such are also listed in this book, e.g., World Business Academy, Business for Social Responsibility, Social Venture Network, Ethics Officer Association, which aim at fulfilling the same purpose. Moreover, this proliferation of business ethics organizations is not limited to the Western world. For example, the first international Congress of the International Society for Business and Econom­ics Ethics was held in July, 1996, in Tokyo, and in November, 1997, the Institute for Understanding Islam (IKIM) in Kuala Lumpur, Malaysia held a conference on “Values Based Manage­ment as the Model for the Corporation of the 21st Century.”

Beyond that, the “most challenging of all is the need to identify a common set of rules and values upon which codes can be based.”⁹ In fact, there is a strong movement to develop a Universal Declaration of a Global Ethic.¹⁰ Clearly business ethics needs to be a critical part of such a Declaration. It is to be hoped that the business men and women who find the documents in this volume inspiring will also turn their energies to contribut­ing to the development of a Global Ethic.

THE CERES PRINCIPLES

SETTING

The Coalition for Environmentally Responsible Econo­mies (CERES) formed in 1989 out of the belief that a collaboration between institutional investors and environmental groups could have a significant positive impact on the environment. The founders wanted to design a far-reaching mechanism to open meaningful new dialogue with corporations about ways to protect the planet and give individu­als concerned with both environmen­tal and economic performance a way to make more informed investment decisions.

The CERES umbrella brings together major U.S. envi- ronmen­tal groups-including the Sierra Club, National Wildlife Federa­tion, Friends of the Earth, National Audubon Society, and Natural Re­sources Defense Council-as well as a wide array of institutions representing more than $150 billion in invested capital, including the New York City Employ­ees Retirement System, the California public pension system, and an assemblage of more than 200 Protes­tant denominations and Catholic orders called the Interfaith Center on Corporate Responsi­bility.

In September 1989, the board of CERES began to ask corporations to adopt a ten-point code of conduct in order to introduce environmental concerns more directly into business practice. The CERES Principles, originally titled the “Valdez Principles” commemorating the recent oil spill on the Alaskan coast, inspired public debate from Europe to Japan, corporate shareholder meetings to state legisla­tures, and environmen­tal and investment confer­ences to the editorial pages of the nation’s press. In short order, the Valdez Principles raised awareness of the ecological implications of business practices and became the first independent code of corporate envi­ronmen­tal responsibility in the United States. Over the next three years, CERES attracted a cluster of corpo­rate supporters like Ben & Jerry’s, Seventh Genera­tion, and Tom’s of Maine, many of whom already enjoyed strong reputations for environ­mental responsi­bility.

In 1993, after lengthy negotiations, Sun Compa­ny, Inc., a petroleum refiner, became the first major industrial corpora­tion to adopt the CERES Principles. Sun’s leadership triggered a new round of conversa­tions with other large companies, eventually leading to the participation of Polar­oid, H.B. Fuller, General Motors, Bethle­hem Steel, Arizona Public Service, Catholic Health­care West, Bank of America, ITT Industries, and others. Each of these companies deter­mined after intensive dialogue that participat­ing in CERES-­en­tering into a partner­ship with the member groups, and working to- ward the goals implicit in the CERES Prin­ci­ples-would help them expand or improve their environ­mental commit­ments.

Many firms adopting the CERES Principles have received positive responses from a variety of stakeholder groups. Employees feel empowered to ask different kinds of questions; new points of view and opportunities emerge. The resulting internal conversa­tion can affect everything from product design to marketing, from recruiting to training. Also, consumers interesting in minimizing their own negative impact on the environment-of whom there are tens of millions in the United States alone-suddenly have an easy way to differentiate positive­ly between firms which have committed to meaningful change and public account­ability, and those which have not.

Adopting the CERES Principles can reduce the likeli­hood that companies will find themselves in expensive court battles over environmental issues. Host communities with concerns about a firm’s environmen­tal practices are more apt to believe that they can make progress by entering into dialogue with a compa­ny based on these principles than by seeking immedi­ate refuge in lawsuits and legisla­tion. Regula­tors who must distribute scarce resources among enforcement efforts tend to be more willing to work collaboratively and creatively with firms that have publicly committed themselves to an independent code of environmental improvement.

Though the CERES Principles are only a few years old, they have begun to transform a few bold firms. Precious dollars and hours are conserved, companies seek the perspec­tives of external stakehold­ers more frequently, and concerns raised by community residents are more likely to receive serious attention. At least as importantly, the CERES Principles have had a ripple effect on industry in general as a growing number of U.S. companies perceive the value of making a public, principled commitment to lessening their negative ecologi­cal impact. Dozens of firms now boast environmental policies or codes of conduct modeled very closely after the CERES Principles.

There are many historical and structural reasons why the CERES Principles have gained widespread support and have inspired a host of imitators. There is, for example, the long-term trend towards the disclosure of standardized information about corporate practices and products in order to enhance the deci­sion-making capacity of investors, consum­ers, and residents of host communities. E.g., the required release of standard­ized financial informa­tion in the aftermath of the Great Depres­sion has allowed investors to make better informed judg­ments about a firm’s prospects, rather than responding to rumor and speculation. Similarly, requiring manu­facturers of food products to release certain kinds of informa­tion about ingredients and nutritional value has allowed customers to make smarter choices in the interest of their own well-being.

When undisclosed, a corporation’s substandard environ­mental practices can expose investors to massive long-term liabilities, foster a negative public image which takes decades to improve, and exercise an unchecked destructive effect on the physical envi­ronment and public health. Companies adopting the CERES Principles commit to inform­ing “everyone who may be affected by conditions caused by our company that might endanger health, safety, or the environment” (Principle 8), and to releasing each year standardized environmental performance data which goes beyond end-of-pipe compliance management solutions (Princi­ple 10). Given current realities and future probabilities in public sentiment, national regulation and interna­tional trade, these steps are simply good business.

As a project initially of the U.S. social invest­ment community, the CERES Principles naturally gained support first in the U.S. business community. The Principles can play an important role, however, in a global economy in which firms must operate in multiple regulatory and legal environ­ments. In such a confusing arena, voluntary codes can solve two problems at once: if widely accepted they help estab­lish common standards to ease global transactions (like the ISO 9000 and ISO 14000 standards for global trade), and they help provide a crucial self-policing mecha­nism for firms operating in countries which lack adequately rigorous environ­mental regulatory structures.

In the experience of many participating compa­nies, a commitment to the CERES Principles strongly and positively influences corporate culture, recasting expectations, mea­sure­ment­ systems, and even compen­sation schemes to focus more assidu­ously on overall impact on the environment and public health. This commitment by top management indicates that environ­mental excellence has taken its place among the stra- tegic objectives of the firm. For some companies, this action reinforces and makes public a preexisting environmen­tal policy or internal code of conduct. For many others, it is the first instance of a formal envi­ronmental statement of any kind, and indicates that a company is prepared to adopt a new way of doing business that is both accountable to and learns from a wide range of stakehol­ders, including those which have traditionally been adversarial. In either case, the CERES Principles are unique-among the various codes of conduct only the CERES Principles carry the imprimatur of a coalition of national, regional, and local environmental and social investment organi­za­tions.

As a result of their willingness to commit to a code of conduct that might on the surface seem to limit a company’s discretion, managers can unexpectedly find themselves enjoying greater credibility and greater freedom to explore innovative paths to improvement. Implementation of the CERES Principles can help firms resolve the tension between coordination and autonomy in daily decision-making-the problem of balancing the need for a firm to have well-coordinated policies with the need to push decision-making author­ity down the hierarchical ladder. Managers want employees to make more decisions, but they want those to be the right decisions. The conventional, elaborate managerial structure of command-and-control coupled with rigid rules is limited in its usefulness, particu­lar­ly with regard to stimulat­ing innovation and market response.

A code of conduct alone will not transform a firm’s environ­mental impact, but the CERES Principles constitute an essential mechanism for elevating aware­ness and promoting certain patterns of thought and behavior regarding the environ­ment,­ health and safety. The CERES Report, men­tioned in the tenth Principle, provides metrics that encourage goal-setting and bench marking, but making decisions and rewarding people solely on the basis of numbers can lead to bizarre economic and ethical decisions. The CERES Princi­ples provide a compass for steering in the direction of responsible corporate behavior: meaningful decision rules that are simple enough to be under­stood and remembered by everyone; broad enough to cover many situations; specific enough to offer real operational guidance; and ingrained enough to affect behav­ior.

Brad Sperber¹

THE CERES PRINCIPLES

By adopting these Principles, we publicly affirm our belief that corpora­tions have a responsibility for the environment, and must conduct all aspects of their business as responsible stewards of the environment in a manner that protects the Earth. We believe that corporations must not compro­mise the ability of future genera­tions to sustain themselves. We will update our practices constantly in light of advances in technology and new understandings in health and environmental science. In collabo­ration with CERES, we will promote a dynamic process to ensure that the Principles are interpreted in a way that accommodates changing technol­ogies and environmental realities. We intend to make consistent, measur­able progress in implementing these Principles and to apply them to all aspects of our operations throughout the world.

1. Protection of the biosphere

We will reduce and make continual progress towards eliminating the release of any substance that may cause environmental damage to the air, water, or the earth or its inhabitants. We will safeguard all habitats affected by our operations and will protect open spaces and wilderness, while preserving biodiversity.

2. Sustainable use of natural resources

We will make sustainable use of renewable natural resources, such as water, soils and forests. We will conserve non-renewable natural re­sources through efficient use and careful planning.

3. Reduction and disposal of wastes

We will reduce and where possible eliminate waste through source reduc­tion and recycling. All waste will be handled and disposed of through safe and responsible methods.

4. Energy conservation

We will conserve energy and improve the energy efficiency of our inter­nal operations and of the goods and services we sell. We will make every effort to use environmentally safe and sustain­able energy sources.

5. Risk reduction

We will strive to minimize the environmental, health and safety risks to our employees and the communities in which we operate through safe technologies, facilities and operating procedures, and by being prepared for emergencies.

6. Safe products and services

We will reduce and where possible eliminate the use, manufacture or sale of products and services that cause environmental damage or health or safety hazards. We will inform our customers of the environmental impacts of our products or services and try to correct unsafe use.

7. Environmental restoration

We will promptly and responsibly correct conditions we have caused that endanger health, safety or the environment. To the extent feasible, we will redress injuries we have caused to persons or damage we have caused to the environment and will restore the environment.

8. Informing the public

We will inform in a timely manner everyone who may be affected by condi­tions caused by our company that might endanger health, safety or the environment. We will regularly seek advice and counsel through dialogue with persons in communi- ties near our facilities. We will not take any action against employees for reporting dangerous incidents or condi­tions to management or to appropriate authorities.

9. Management commitment

We will implement these Principles and sustain a process that ensures that the Board of Directors and Chief Executive Officer are fully in­formed about pertinent environmental issues and are fully responsible for environmental policy. In selecting our Board of Directors, we will consider demonstrated environmental commitment as a factor.

10. Audits and reports

We will conduct an annual self-evaluation of our progress in implementing these Principles. We will support the timely creation of generally ac­cepted environmen­tal audit procedures. We will annually complete the CERES Report, which will be made available to the public.

11. Disclaimer

These Principles establish an environmental ethic with criteria by which investors and others can assess the environmental performance of companies. Companies that endorse these Principles pledge to go volun­tarily beyond the requirements of the law. The terms `may’ and `might’ in Principles one and eight are not meant to encompass every imaginable consequence, no matter how remote. Rather, these Principles obligate endorsers to behave as prudent persons who are not governed by con­flicting interests and who possess a strong commitment to environmental excellence and to human health and safety. These Principles are not intended to create new legal liabilities, expand existing rights or obliga­tions, waive legal defenses, or otherwise affect the legal position of any endorsing company and are not intended to be used against an en­dorser in any legal proceeding for any purpose.

AN INTERFAITH DECLARATION

A CODE OF ETHICS ON INTERNATIONAL BUSINESS

FOR CHRISTIANS, MUSLIMS AND JEWS

SETTING

The idea for a high level dialogue between Muslims and Christians, which resulted in the issuing of the Declara­tion, arose from a State Visit by the British Royal Family to Jordan in March 1984. One theme of their discussion there was to consider what might be done to counteract the tendency in their respective countries for the media and others to concentrate on the excesses of extrem­ism-not least, religious extremism. They felt that there was a need to encourage a refocusing on the values held in common by those who look to religion to guide their behavior. It was agreed that Jewish thought and experience had a relevant contribution to make to the subject and senior representatives were invited to the discussions.

After some preliminary discussions it was agreed that the basis for a dialogue would be the conviction that insights of the Scriptures and practice of Jews, Christians and Muslims had an important contribution to make to any discussions on values.

After exploring a number of topics which might produce worthwhile outcomes, the representatives of each faith selected business, behavior of ethics as a starting point. They were interested particularly in the implications of interna­tional business activity, in the form of trade and investment, for traditional business practices which were often quite different in countries with different religious traditions.

HRH Duke of Edinburgh, HRH Crown Prince El Hassan of Jordan and Sir Evelyn de Rothschild, invited a group of distinguished Jewish, Christian and Muslim thinkers and business leaders to see whether they could agree on some principles which might serve as guidelines for international business behavior. The group met four times and between meetings exchanged papers exploring in some depth the different ap­proaches to behavioral problems arising in business relationships and the basis for their resolution.

The participants at the consultations included royalty, theologians, businessmen, philosophers, bankers, and clerics. What they were attempting to discover was what values the three monotheistic faiths had in common concerning eco­nomic activity. In other words, what were the shared moral, ethical and spiritual values inherent in the Abrahamic tradition that are relevant in a business context?

The delegates were asked to express their ideas about the cross-cultural problems they discerned with current business behavior. They explained their different approaches to produc­tion, distribution, employment, money, materialism, spirituality, and wealth creation. The contributions were translated and circulated to participants. The Gulf War interrupted the process but it was considered worthwhile reconvening in 1992.

KEY CONCEPTS

The early discussions were somewhat laborious as many misconceptions and misrepresentations about both religion and business had to be addressed before there was any consensus about the variety of issues covered by the term business ethics.

The leaders of the consultations then asked the author to look at the material and see whether there was a basis for an agreement. Using techniques of content analysis, four key concepts that recur in the two Testaments of the Bible and the Qur’an in respect to economic transactions were distilled. These were: Justice, Mutual Respect, Stewardship and Honesty. A set of statements concerning the interaction of business with the community was then drawn up. The discussions were concluded at a meeting held in Amman, Jordan in Oct. 1993, with the acceptance of a set of guide­lines in an Interfaith Declaration reflecting the participants’ shared concerns for the four value concepts set out above as applied to international business transactions.

The meetings of the group and the resultant Declara­tion indicate that whatever their particular insight into Truth may be-and it is acknowledged that there are differenc­es-they nevertheless had a common heritage with a high degree of shared values. They also re-affirmed that in their opinion, there was a common moral basis derived from the Scriptures. For a number of reasons they felt it was well worthwhile trying to apply these to contemporary internation­al business issues.

One of the reasons was that there was general agree­ment­ that the growth in material prosperity in the industrial world was generating an alternative value system which they believe to be detrimental to the wholesome development of human beings: selfishness and dishonesty are tending to supplant generosity and integrity. They noted that there is evidence that morality and ethical standards are declining in their respective societies, as exemplified by the wide report­ing of dishonest and corrupt practices. Part of the problem they thought was an ambivalence concerning what is consid­ered right and wrong, and economic relationships had not escaped this influence. It was decided that a reiteration of shared ethical values in the form of a Declaration would make a contribution to sustaining and improving the stan­dards of international business behavior.

It was realized that the application of these principles may be more difficult to apply in some countries than in others because of the different degree of influence that religion has within a given society. Muslims and to a lesser extent Jews generally operate within a social atmosphere that is conducive to the influence of their religious precepts being heeded in their societies. It is normal for moral and ethical concerns to be discussed within a religious ethos.

With some exceptions, Christians are more dependent upon personal convictions, which often have to be stated in a secular social atmosphere that has little sympathy with them. While the influence of Islamic institutions is more open and obvious, and that of Judaism still strong, the influence of Christianity tends to be personal, in spite of the publication of some pertinent encyclicals from the Vatican addressed to the Roman Catholic Church and secular institutions.

All participants agreed that, in the final analysis, the application of ethical principles is a matter of person judge­ment rather than rules; codes can only set standards. It follows that the Declaration (or indeed any code of ethics) is not a substitute for corporate or individual morality; it is a set of guidelines for good practice. In isolation it will make little real difference; if used as part of a corporate program to raise ethical awareness and to be used as the basis of cross-cultural business, it is likely to have a lasting effect both by setting norms and by being used as a guide to best practice.

METHOD

The code drew on the experience of group members, a number of existing guidelines and codes, and conduct which has been adopted by international organiza­tions such as the International Chamber of Commerce. Individual company codes of ethics, too, were used where appropriate.

The distinction between three categories of ethical issues are recognized in the code.

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The morality of the econom­ic system in which business activ­ity takes place.

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The policies and strategies of organizations which engage in business.

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The behavior of individual employees in the context of their work.

It was also noted that while some ethical issues affect all types of industrial and commercial activity, there are others which are distinctive to a particular sector. The outstanding example is that of the provision of financial services. Practices in the banking sector differ significantly in different countries and cultures and have specific characteris­tics which can involve moral choice. For instance, it was accepted that it is especially important to Muslims that money is not treated merely as a commodity that can be bought or sold for a market price (riba). Jews explained that they treat money as a resource to be used to achieve good results but never to be used to exploit a fellow Jew who might be in temporary difficulties (usury). Christians indicated that they have allowed the use of money as a factor of production and use the discount rate as one measure of the viability of an enterprise. A rate of interest is therefore charged to borrowers and is paid to lenders, usually at an agreed rate. Exploitation of the weak by charging exorbitant rates is also considered reprehensible.

In practice, the importance of financial resources in the industrial process was recognized by those of all three religions. Muslim banks provide money for enterprises and pay close attention to how clients is performing. In this way they share in the risks and rewards. Although charging interest for borrowing money is forbidden in Muslim teach­ing, a fee for the services of a bank or a reward from a successful partnership with a business achieves the same moral purpose-namely, the enabling of a commercial enterprise to take place for the mutual benefit of everyone con­cerned.

It was also recognized that the legal framework in which business is conducted is not the same in all countries. For instance, the duties of company directors vary and employment law, e.g., legal notice of dismissal or redundan­cy, is hardly ever the same in any two countries. While recogniz­ing that national law applies to a company registered in that country (irrespective of the nationality of its owners and managers), and that it should be scrupulously followed, the laws on a particular matter may be less demanding in, say the country of the parent company. Some business practices which are covered by law in one country may be the subject of self-administered regulation or of voluntary codes of behavior in another. It follows that some subjects covered by the Declaration may already have the force of law in some countries.

The Interfaith Declaration was launched at St. James’s Palace, London, in May 1994. It has subsequently been widely circulated with translations into Arabic and German.

The Group responsible for its compilation wished to be used by business people, business organizations and those advising companies, perhaps by adopting it as the basis of their relationship with those involved in international busi­ness. It was also suggested that the topics included in the Declaration could be included in business training courses both by companies themselves and by colleges, universities and consultants who offer different types of business training throughout the world. The code reflects best practice and it is hoped that it will be seen as a useful means of addressing some of the cross-cultural problems which arise in the course of international business relationships.

Simon Webley¹

INTRODUCTION

A series of Interfaith consultations began in 1984 under the patronage of HRH Prince Philip, the Duke of Edinburgh, and HRH Crown Prince Hassan Bin Talal of Jordan. Followers of the three monotheistic faiths Christianity, Islam and Judaism took part, under the auspices of St. George’s House, Windsor and the Al Albait Foundation and the Arab Thought Forum in Amman. More recently Sir Evelyn de Rothschild has joined Their Royal Highnesses as a patron in this endeavor.

A group of distinguished members of the three religions convened perio- dically to deliberate on topics of common interest. Theologians, academics and prominent figures active in business and government were all involved. Conscious of and concerned about the effects of violent expressions of religious extremism not only in European and Muslim countries but throughout the world, the participants sought to highlight the importance of the shared moral, ethical and spiritual values inherent in the common Abrahamic tradition. Aware of the implicit danger of religious bigotry and the threats to the essential fabric of contemporary society, they placed a strong emphasis on the benefit of dialogue, forsaking stereotypical portrayal of each other. Constructive dialogue, difficult to conduct at the outset, developed as mutual confidence between the participants improved. A sense of purpose emerged as they recognised the need to overcome prevailing misconcep­tions and dispel longstanding misrepresentation. The consultations eventually culminated into consensus about a variety of topics including business ethics.

Recent consultations discussed an interfaith code of ethics for internation­al business, formulated in the light of the religious traditions of the three monotheistic faiths. Discussions of the terms of the code began in 1988, and were concluded at a meeting held in October 1993 in Amman. The provisions of the guidelines reflect the ethical basis indicated in the teaching of the three religions. The Declaration has been drawn up by a group of eminent scholars, clerics, and business people from the three religions following a comprehensive review of the teachings of their respective religions with regard to ethical issues in the conduct of business. They concluded that the Declaration should be based on the shared concern for justice, mutual respect, stewardship and honesty.

The Declaration illustrates, in a practical way, that people of very different cultures or beliefs often have more in common than is sometimes apparent. It is hoped that the sense of the Declaration will be incorporated into Statements of Purpose or Codes of Conduct. It is offered on the understanding that it will help to facilitate expanding international economic activity, which is beneficial for harmonious international relations and prosperity.

Although the code does not attempt to cover all aspects of business behavior, it incorporates the best of contemporary business practice, as well as indicating the modes of good practice as enjoined by divine injunctions. It is recommended to adherents of the three faiths; and commended to leaders of international business, as well as teachers of business management, whether followers of the three monotheistic faiths or not.

Special thanks go to Mr. Simon Webley of the British-North American Research Association, for his work on the text.

I. BACKGROUND

A. ORIGIN AND PURPOSE OF THE DECLARATION

The globalization of business is now well established and growing. For instance:

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The volume of world trade is accelerating rapidly again. In 1994 it increased by 9.5% over 1993 and is expected to grow a further 8% in 1995.²

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