Page II of III  [Bottom of Page] [Previous Page] [Next Page] Ethos in Praxis : The Missing Elements in Ethical Investing - II 4. Developing Ethical Criteria If ethical guidelines are to be consistent, rigorous, and defensible, they cannot be borne in a theoretical vacuum. Instead, the guidelines must rest on a foundation of moral principles. The principles come out of a well-developed moral theory or they may be principles that have inter-subjective agreement. In this paper, I attempt to derive ethical guidelines using Kantian moral theory. I also review principles from the Caux Round Table and The Global Compact that derive from inter-subjective agreement and from which second order rules emerge. 4.1 Principles from Kant's Moral Theory The fundamental principle of Kantian ethics is the categorical imperative. There are three formulations of the imperative : Act only on maxims, which you can will to be universal laws of nature. Always treat the humanity in a person as an end, and never merely as a means. So act as if you were a member of an ideal kingdom of ends in which you were both subject and sovereign at the same time. The first formulation provides a test to see if a proposed action is moral. If the principle of an action becomes a universal law i.e. one that everyone acts on, is a world with this law possible? Kant's own example is one in which he asks if it is permissible to promise to return money that you borrow, knowing that you have no intention of ever returning the money. Can one make a lying promise? The answer is no. If a lying promise becomes universal law, no one would believe promises anymore and people would make lying promises to each other. Thus, Kant is saying "the very concept of lying promises, when adopted as a principle by everyone, is incoherent." The conclusion is that one should not make lying promises. The first formulation of the categorical imperative covers much of the negative injunctions to moral behavior, e.g., one should not lie, cheat, bribe, extort, steal, break contracts, coerce, oppress, and in general, cause harm to others. Thus, the criteria may look something like the following : Principle 1 : Does not harm people Does not discriminate Does not have unsafe working conditions Does not harm environment Does not lie to or cheat customers and other stakeholders Does not sell illicit goods or services Does not exploit employees Does not denigrate basic rights Does not engage in corrupt practices Does not engage in monopolistic practices Does not collude with competitors Does not renege on contracts These criteria fall under the same principle given by De George (does not harm people in section 3.3. In contrast to the first formulation of Kant's categorical imperative, the second formulation tells us what we should do. Kant believes that humans have dignity and a value beyond price. One human being cannot use another simply to satisfy her own interests. This is the essential insight behind Kant's second formulation. To understand this formulation, Bowie gives an important distinction between negative freedom and positive freedom. Negative freedom is freedom from coercion and deception. However, simply refraining from coercive and deceptive acts is not sufficient for respecting the humanity of a person. Additional requirements can be derived from Kant's view of positive freedom. Positive freedom is the freedom to develop one's human capacities. For Kant, that means developing one's rational and moral capacities. In interacting with others, we must not do anything to diminish or inhibit these unique human capacities. Therefore, with regard to the corporation, Kant's second formulation requires first, that people not be used (coerced or deceived) and, second that people's rational and moral capacities be encouraged and helped to develop. How does this requirement translate into corporate action? One clear example is for corporations to foster a working environment that is conducive to developing human capacities. Instead of peering over the shoulders of employees constantly and oppressing them with rules, regulations and policing, the corporation should allow greater work autonomy. Employees should be given greater independence and decision-making power. Another way for corporations to fulfill the second formulation is to subsidize further education in all fields, not just those related to specific jobs. Thus, Kant's second formulation prompts the following criteria for assessing corporate morality : [Top of Page]  [Bottom of Page] Principle 2: Does not coerce or deceive: Does not deceive stakeholders for corporation's own interest Does not force employees to act immorally Principle 3: Gives freedom to develop human capacities: Provides opportunities for workers to exercise autonomy on the job Supports the autonomy and rationality of human beings Provides opportunities for workers to develop their rational capacities Provides opportunities for workers to develop their moral capacities Once again, this list is not exhaustive, but the actions of a corporation should be measured against the general principles from which the criteria emerge. Kant's third formulation requires that we act as if we are all members of an ideal kingdom of ends, in which we are both subjects and sovereigns at the same time. Thus, organizations must treat people with dignity and respect. The rules that govern an organization must be those that are agreed upon by everyone in the organization. From the third formulation, the following principles emerge: Principle 4: Treat people with dignity and respect: Allow workers to participate in decisions about rules and policies Tell workers honestly the state of the corporation Allow honest discussion between management and workers on corporate issues The interests of one set of stakeholders should not be above others Kantian moral theory provides one set of principles and correlative criteria by which to assess corporate morality. The criteria can be fleshed out and detailed, but the Kantian principles give a broad guideline to corporate moral evaluation. 4.2 Caux Principles Other moral theories will give different sets of principles and criteria, and it is possible to combine moral theories to derive other (non-conflicting) principles. Indeed, the Caux Round Table and the United Nations have developed sets of principles for business. The principles envision world standards that can measure business behavior and towards which businesses should aspire. The Caux principles are the product of collaboration between business executives from Europe, Japan and the U.S.A. They produced the Principles for Business in 1994. The Caux principles attempt to combine Eastern and Western values. The principles are rooted in two ethical ideals: kyosei and human dignity. The former is a Japanese concept that means, "living and working together for the common good enabling cooperation and mutual prosperity to coexist with healthy and fair competition." Human dignity refers to "the sacredness and value of each person as an end, not simply as a means to the fulfillment of others' purposes or even majority prescription." This principle closely resembles Kant's Categorical Imperative. Thus, one principle values the community while the other values the individual (which, coincidentally, is the standard stereotype of Eastern and Western moral traditions.)  From these two ethical ideals, seven general principles are derived and a number of principles specific to stakeholders (customers, employees, owners/investors, and suppliers.) The General Principles, in less eloquent language than the original declaration, are: Principle1: Business has responsibilities to shareholders and stakeholders Principle 2: Business should work toward innovation, justice, and world community Principle 3: Business should be trustworthy Principle 4: Business should respect rules Principle 5: Business should support multilateral trade Principle 6: Business should respect the environment Principle 7: Business should avoid illicit operations Unfortunately, the declaration does not explain how the two ethical ideals actually generate these seven principles. Notably, the principles, particularly principle 2, require that business not just avoid doing wrong but also maximize the good. To aspire to the ethical ideals of kyosei and valuing human dignity requires criteria that not only protect community and individuals from harm but also enhance them. Otherwise, the writers of the Caux principles would not have labeled kyosei and human dignity as ideals. Another point of note is that the originators of the Caux document do not commit themselves to the view that corporations are moral agents. Instead, the document is addressed to business leaders with the implicit understanding that it is leaders who make the decisions that are then judged morally. The Caux founders offer the principles to "business leaders in search of business responsibility." Their affirmation of the necessity for "moral values in business decision making", implies that moral responsibility lies with the decision makers, further supporting the argument that the writers do not hold a view that the corporation is morally responsible, just the decision-makers i.e. business leaders. 4.3 The U.N. Global Compact The Caux Principles were formulated by business leaders for business leaders. In contrast, the Global Compact was written by the United Nations for the private sector and other social actors. It was launched in July 2000. The Compact is neither a binding set of regulations nor a code of conduct. It is the basis for dialogue, learning, and information sharing of good corporate practice. Any company may become a Compact member and theoretically must comply with a number of guidelines. There are nine principles listed under four areas: human rights labor environment anti-corruption. The human rights and labor principles (distilled from the Universal Declaration of Human Rights and the International Labor Organization) are grounded on the principles of rights. Based on the previous discussion it is therefore, possible to derive principles for evaluating the moral standing of corporations. Unfortunately, problems arise with the use of these principles in practice. [Top of Page] [Previous Page] [Next Page]