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 / Summer 2003 / Issue 31(originally published by Booz & Company)


Lynn Sharp Paine: The Thought Leader Interview

PAINE: Yes. For example, a company convicted of wrongdoing that had programs in place to prevent and detect misconduct might get a lower fine than a company convicted of the same offense that did not have a preventive program. But whether you decide a particular company is culpable or not culpable, you are making a moral judgment. That’s what’s new.

S+B: Recognizing that every company has its own personality, there seems to be a fairly linear but irreversible progression toward standards that encourage corporations to become better at handling moral issues.

PAINE: If there’s one thing I hope the reader will take away from the book, it is an understanding of what I believe to be an emerging new standard for corporate performance that encompasses both moral and financial dimensions. From a broad historical perspective, the progression seems pretty steady, but there were certainly points along the way when the idea of the corporation as a moral actor was picked up and then dropped. A century ago, for instance, the legal scholar Frederick Maitland wrote about the corporation’s moral personality. But societal changes of this magnitude rarely unfold in a linear fashion.

S+B: Peter Drucker and Charles Handy, two giants of 20th-century management thinking, never waver in their writing on the idea that the fundamental purpose of business is to meet needs in society.

PAINE: Yes, there have been strong voices supporting corporate responsibility for some time. But now we are having that conversation much more frequently, and it has entered the mainstream.

In the period of my own research, the change in rhetoric has been dramatic. When I began working in this area, many people said, “Well, we can’t really go down that path because the company can’t be competitive, can’t be successful if it takes ethical considerations too seriously.” And yet today you’re much more likely to hear — at least in the United States and in the industrialized world — that ethics does pay, and there are many benefits to the organization.

S+B: More executives also seem more conscious of how values support productive behaviors and management.

PAINE: One of the most striking aspects of the research for the book was the extent to which we found people saying that values contributed to knowledge sharing, to people’s willingness to work together, and to creativity. Managers also talk a lot about corporate reputation and risk management.

No Promises

S+B: Your voice in the dialogue on corporate social responsibility is very distinctive because you don’t try to defend the position that “ethics pays” is an absolute. You say instead “ethics counts” — meaning you always need to examine the ethical dimensions of business decisions. Some will pay, but it is just as important to understand circumstances where the ethical decisions don’t pay financially.

PAINE: When I was first talking about this project, some people said I would never find a publisher unless the book promised that ethics would lead to profits. Others suggested that I would have better luck as a corporate critic. The message was clear: You could sell a lot of books by being a muckraker or a panderer. But the idea of actually having a nuanced discussion was the path to oblivion.

In a way, this comes back to the focus on cause and effect in business research. Here you see people wanting to prove that if you do this, it will cause that. I’m trying to deepen the conversation and make it more realistic. If you take a cold, hard look, you can easily see there isn’t a perfect correlation. There are plenty of companies that make lots of money through moral indifference, and there are companies that are quite concerned about ethics and social responsibility that aren’t big moneymakers.

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