姝 Academy of Management Executive, 2004, Vol. 18, No. 2
........................................................................................................................................................................
Managing ethically with global
stakeholders: A present and
future challenge
Archie B. Carroll
In the early 2000s, the era of corporate fraud and
corruption defined by the ethical wrongdoing of
Enron, WorldCom, Tyco, Arthur Andersen, and
HealthSouth captured the world’s attention as
never before. It soon became clear, however, that
the U. S. had not cornered the market on questionable ethics. The Dutch firm Ahold and Italy’s Parmalat quickly shared center stage with scandals of
their own. Domestic business ethics will continue
to be a top priority. But global business ethics will
demand cutting-edge thinking and practice as
companies strive to expand their products, services, sales, and operations throughout the world.
Regardless of what is happening in individual
countries, whether at home or abroad, the primary
venue for ethical debates in the future will more
and more be the world stage.
shows that of the 100 largest “economies” in the
world, only 47 of them are nation states. The other
53 are MNCs. Exxon Mobil Corporation, for example, has annual revenues that exceed the GDP of
all but 20 of the world’s 220 nations.1 Clearly, then,
the MNCs’ operations throughout the world will
constitute a primary arena for business ethics
thinking and applications.
The focus in this discussion will be on how businesses and managers can deal with the topic of
business ethics vis-à-vis their global stakeholders.
As Princeton professor of bioethics Peter Singer
recently said, “How well we come through the era
of globalization will depend on how we respond
ethically to the idea that we live in one world.”2
Business’s major stakeholders include consumers, employees, owners, the community, government, competitors, and the natural environment.
There are many others, but we will focus primarily
on the community and government. In the context
of global ethics, the community is the community
of host nations in which the firm is doing business,
and the government represents all the separate
sovereign nations that serve as “hosts” to investing MNCs. This makes for a much more complex
situation than, for example, a U.S. MNC doing business in the U. S. It also represents a most-likely
scenario in world affairs that doing business in
others’ countries will become more of the norm. It is
estimated, for example, that while the economies
of China and India are much smaller than that of
the U. S. now, China is likely to overtake and India
to equal the U.S. economy in size by 2050. The
world’s economic center of gravity is shifting toward Asia, and U.S. preeminence will undoubtedly
diminish though its participation in the global
economy is expected to grow. The current controversy over the outsourcing of U. S. jobs is one of the
latest debate points in the trend.
The primary venue for ethical debates in
the future will more and more be the
world stage.
Globalization characterizes the international
setting of business transactions in which U. S.
and world multinational corporations (MNCs) will
increasingly participate over the next several
decades. Despite setbacks such as the attacks
upon the World Trade Center in 2001 and the antiglobalization backlash that continues to be seen at
major international meetings of the World Trade
Organization, International Monetary Fund, and
global summits such as the G8 summits, the global
economy is irresistible to MNCs, and little will
impede the trend toward global capitalism.
The explosive growth of MNCs has set the stage
for global business ethics to be one of the highest
priorities over the coming decades. Recent data
114
2004
Carroll
Some Current Knowledge about Global Ethics
We know so little for sure about global business
ethics. Even so, a number of experts testify to its
importance. Tichy and McGill declare that “it is
difficult to think of a more important basic business ethical commitment than to be a good citizen
in the world of your business—with real involvement of your people, as well as your money.”3 As a
practical matter, Sir Philip Watts, the chairman of
Royal Dutch/Shell, recently has worked hard to
recast his once reviled company as a compassionate corporate citizen.4
We do know that there is a pressing need for
more empirical research on global business ethics,
but most of the work to date has been quite contingent. Much business ethics research depends
upon many factors, including the ubiquitous issue
of culture. The extension of business ethics concepts and thinking to the global arena has probably raised more questions than it has answered.
Though textbooks have been available for years on
the subject of international business ethics,5 we
are still in the formative stages of providing conceptual models and applications that readily
translate into effective practices for business
executives.
There is a pressing need for more
empirical research on global business
ethics.
In global ethics decision-making, so much focus
is on the extent to which the manager uses homecountry ethical standards versus host-country ethical standards in making decisions and shaping
practices. One typology of global types that has
been helpful is that of Georges Enderle. He has
observed and categorized at least four different
types of global firms with respect to their use of
home-country versus host-country ethical standards. Enderle’s purpose in this typology is to identify and illustrate the various mixtures or combinations of home- and host-country standards that
a business operating in the global sphere might
adopt.6
Through description and example, Enderle helps
us to understand different options available and
their consequences. He would likely reject the
“Foreign Country Type,” which simply conforms to
local customs and ethics, as being too relativistic.
At the other extreme, the “Global Type” strives to
abstract from all regional differences and seek
ethical principles that would be more globally ac-
115
ceptable. In between these two extremes, he presents the “Empire Type” that applies home-country
ethics without any attempt at cultural adaptation
and the “Interconnection Type” that blurs national
identities and seeks a posture that transcends international boundaries but “connects” with selected clusters, such as the European Union or
NAFTA. Though Enderle stops short of offering prescriptive guidelines, the Global model seems preferable to the Foreign Country model as companies
seek exemplars.
Another major contribution has been Tom
Donaldson and Thomas Dunfee’s Integrative Social Contracts Theory (ISCT) as an approach to
navigating cross-national cultural differences.7
Their model is depicted as a series of concentric
circles representing various ethical norms that
might be held by corporations, industries, or economic cultures. At the center of the circles are
hypernorms, which represent desired transcultural
values. These might include fundamental human
rights common to most cultures and countries.
Moving out from the center, one would next find
consistent norms. These are more culturally specific but are consistent with hypernorms. The next
circle is moral free space. Here, one finds norms
that are inconsistent with at least some other
legitimate norms existing in other economic
cultures. These represent strongly held cultural
beliefs in particular countries. Thus, Buddhist
communities may develop norms that reflect their
cultures, and Koreans might develop norms regarding work behavior that reflect their culture.8
Finally, in the outer circle are illegitimate norms,
which are norms that are incompatible with hypernorms. An example of these might be the practice
of exposing workers to unacceptable levels of carcinogens.
In short, ISCT uses the principles of moral free
space and adherence to hypernorms as positions
that need to be balanced in navigating global international waters. While honoring hypernorms,
companies do not have to simply adopt a “do in
Rome as the Romans do” philosophy. However,
they do need to be sensitive to the transcultural
value implications of their actions. In turn, the
concept of moral free space makes them ever vigilant of the need to precede judgment with an attempt to understand the local host-country culture.
The result is the reality that moral tensions will be
an everyday part of doing business in the global
sphere.9 ISCT is a contingency model of ethical
decision-making as are most constructs that might
be useful in global applications.
116
Academy of Management Executive
The Timeliness of Corporate Social
Responsibility and Ethics
Executives want a useful framework for thinking
about global business ethics, and the concept of
corporate social responsibility, a concept that has
endured for decades in the U.S. and is growing
exponentially in Europe, fills the bill. This is because companies in diverse industries are conclusively seeing that the public insists that they balance profits with corporate citizenship. According
to The Economist, the corporate social responsibility (CSR) movement flowered in the decade of the
1990s and is carrying forward into the 2000s. As
recently as the World Economic Forum that gathered in Davos, Switzerland in January 2004, the
corporate chieftains in attendance were expressing the conviction that global corporate responsibility and citizenship were the order of the day.10
The literature of CSR has produced many definitions and many concepts over the past half century
since its emergence and formalization on the business scene.11 In terms of thinking about a concept
or model of CSR that would have global applicability, I began considering how the CSR framework
earlier developed12 and then reformulated into a
Pyramid of CSR13 would stand up in application to
global CSR and business ethics. The basic defini-
May
tion of CSR is as follows: “The social responsibility
of business encompasses the economic, legal, ethical, and discretionary (philanthropic) expectations that society has of organizations at a given
point in time.”14 This notion of CSR is both a stakeholder model and a contingency model. It is a
stakeholder model in the sense that various stakeholder groups each send expectations to management about what they expect the organization to do
under the banner of economics (profits), law, ethics, and philanthropy. It is a contingency model in
several respects, but the most important is that
society’s views or expectations of business performance change and evolve over time. The expectation that firms will be good corporate citizens in
the global sphere is one of the latest mandates of
CSR.
A Pyramid of Global CSR as a Framework
Having a framework and context for business’s
social and ethical responsibilities to global stakeholders is an initial best practice. The Pyramid of
Global Corporate Social Responsibility (see Figure
1) is presented as a helpful way to graphically
depict the four kinds of social responsibility that
business has with respect to global business
FIGURE 1
Pyramid of Global Corporate Social Responsibility and Performance
2004
Carroll
stakeholders. The pyramid portrays the four components of global CSR, beginning with the basic
building block of economic performance. At the
same time, business is expected to obey the law
because law is every country’s codification of acceptable and unacceptable practices. Business
also is expected to be ethical. At its most basic
level, this is the obligation to do what is right, just,
and fair and to avoid or minimize harm to stakeholders. Finally, business is expected to be a good
corporate citizen through its philanthropy. Firms
today are expected to contribute financial and human resources to the global community and to
“give back” so that the quality of life may be enhanced and sustained.
No metaphor is perfect, and the Global Pyramid
of CSR is no exception. It is intended to illustrate
that the global social responsibility of business is
composed of four definite components that, when
taken together, define what business should be
doing in the international sphere. These four components are not mutually exclusive. They are
treated separately for discussion purposes and are
overlapping to some extent and in frequent tension
with one another. A brief explanation of each CSR
component is appropriate because these categories dictate corporate actions.
The economic responsibilities of the firm,
whether domestic or global, remain the bedrock
foundation for business. Global companies are expected to produce goods and services and sell
them at a profit. Sound strategic management offers guidelines as to how and where this may be
achieved in a global setting. At this level, consensus is easy to reach about the economic expectations of business firms. What may vary by country
or region of the world is the question of what constitutes an acceptable rate of return or growth rate.
Companies functioning in hypercompetitive conditions might look upon this question differently
than those operating in developing countries.
Therefore, this aspect of the framework is contingent upon local and regional expectations found in
financial markets but remains foundational to survival and growth.
Legal responsibilities of management and MNCs
also are vital. Just as countries have sanctioned
economic systems, they also sanction legal systems. The social contract between business firms
and host countries varies by country and, thus,
legal systems and expectations vary as well. At
this level, we observe significant differences in
legal systems and responsibilities by countries
and regions of the world. For example, we know
that Chinese labor laws often are not enforced15
and that foreign investors are finding that China’s
117
legal system resolves few disputes.16 We also
know that the absence of a legal system is inhibiting foreign investment in post-war Iraq.17 One
thing is clear, however: The legal responsibility
does exist and is found in developed, developing,
and less developed countries alike.
Ethical responsibilities are essential because
laws are not adequate and companies and executives care deeply about their reputations, as well
as about “doing the right thing.” As long as publications such as Multinational Monitor publish
their annual lists of the “ten worst corporations” in
global business, executives will find justifiable
and practical reasons to care about ethics.18 Ethical responsibilities embrace those activities and
practices that are expected or prohibited by society
even though they may not be codified into law.
Ethical responsibilities encompass the full scope
of norms, standards, and expectations that reflect
a belief in what employees, consumers, shareholders, and the global community regard as fair, just,
and consistent with the respect for and protection
of stakeholders’ moral rights. Superimposed on the
host country’s expectations of ethics are the implied levels of ethical performance suggested by a
consideration of the great ethical principles of
moral philosophy, such as justice, rights, and utilitarianism.
Ethical responsibilities embrace those
activities and practices that are expected
or prohibited by society even though they
may not be codified into law.
The ethical category is where divergent views
traceable to different cultures are likely to be most
significant. In a real sense, global business ethics
is about the reconciliation of home- and hostcountry ethical standards and the identification of
norms that will satisfy both. The practice of moral
relativism, wherein companies simply adapt to local norms, creates an often untenable situation
because many countries, especially developing
ones, do not have articulated ethical standards
that protect vulnerable stakeholders. Bowie recommends moral universalism as a principle that
would create a moral standard that is accepted by
all cultures.19 Moral universalism is the identification of ethical standards that would have broad,
international support, such as the U.N. Global
Compact or the Global Reporting Initiative.
Philanthropic responsibilities reflect global society’s expectations that business will engage in
social activities that are not mandated by law nor
118
Academy of Management Executive
generally expected of business in an ethical sense.
Though sometimes imbued with an ethical thread
of rationale, philanthropy today is more often than
not strategic in nature, with business expected to
play an active role in global corporate citizenship.
As in the case of law and ethics, philanthropic
expectations vary widely by country of the world,
and the wise executive will carefully research expectations of the host countries in this category.
While presenting this idea in Helsinki, Finland, for
example, I found that the Finns do not regard philanthropy highly because in their system, high
taxes are thought by business to more than take
care of these kinds of citizenship expectations.
The Global Pyramid of CSR provides a conceptual framework for thinking through the multitude
of expectations that may fall on the MNC or global
manager. It is intended to illustrate the total social
responsibility of global businesses. Although the
component parts have been separated for discussion, they are not mutually exclusive and are not to
be filled in this sequence. The pyramid intends to
suggest the building-block relationship of the four
responsibilities with economic at the base, because without it the others are beside the point.
The pyramid depicts the full range of responsibilities that global firms and managers are expected
to fulfill simultaneously.
Stated in more practical and performance-oriented terms, the Global CSR Pyramid suggests
that the MNC should strive to:
▪ Make a profit consistent with expectations for
international businesses;
▪ Obey the law of host countries as well as international law;
▪ Be ethical in its practices, taking host-country
and global standards into consideration;
▪ Be a good corporate citizen, especially as defined by the host country’s expectations.
The Global Pyramid of CSR and Performance
will help managers think through in a systematic
way the different stakeholder expectations placed
on their organizations. It should be recognized that
responsibility implies performance. Previous research does support the contention that managers
see the importance of their responsibilities as following this sequence of priorities: economic, legal,
ethical, and philanthropic.20
Other Best Practices for Global Ethics
Having a useful model for framing responsibilities
to global stakeholders is a first, and necessary,
best practice. What are some other practices that
global managers and organizations can best adopt
to be responsive to the pressures and demands of
May
international stakeholders? How can managers respond to the ethical responsibility depicted in the
Global Pyramid of CSR?
Many global business ethics issues dominate
the news today. It has been argued that the ethical
issues surrounding MNCs or transnational corporations fall into at least eight major categories:
bribery and sensitive payments, employment issues, marketing practices, impact on the economy
and development of host countries, effects on the
natural environment, cultural impacts of operations, relations with host governments, and relations with home countries.21
Flowing from a desire to address these eight
categories of issues by fulfilling the responsibilities emanating from the Global Pyramid of CSR or
another popular concept, the “triple bottom line”
(which is a less detailed version in that it categorizes issues into economic, social, and environmental),22 companies may pursue several major
strategies. At a strategic level, companies should
develop both global corporate codes of conduct
and subscribe to global codes that have been developed by independent international bodies.
Well-thought-out corporate codes are illustrated
by those developed and adopted by Mattel and
Caterpillar Tractor. Examples of respected independent global codes developed by international
organizations include the UN Global Compact, the
Global Reporting Initiative, OECD Guidelines for
Multinational Enterprises, the Caux Principles,
and the Principles for Global Corporate Responsibility developed by the Interfaith Center on Corporations.23
Companies should develop both global
corporate codes of conduct and
subscribe to global codes that have
been developed by independent
international bodies.
In a similar vein, the integration of ethical principles into strategic decision-making is another
best practice. In this connection, the embracing of
a set of fundamental international rights, such as
those articulated by Tom Donaldson, will allow the
corporation to integrate business ethics into its
corporate strategy. Examples of his ten fundamental human rights include rights that should be
given to employees and other stakeholders such as
freedom from torture, a fair trial, physical security,
speech and association, and subsistence. These
rights are regarded as moral minimums for all
international economic agents.24
2004
Carroll
A strong complement to these international rights
are Richard DeGeorge’s seven moral guidelines for
firms operating globally. According to DeGeorge,
MNCs should do no intentional, direct harm; produce
more good than bad for the host country; contribute
to the host country’s development; respect human
rights; pay their fair share of taxes; respect the local
culture; and cooperate with the host government in
developing ethical background institutions (e.g.,
health and safety standards).25
A company striving to develop universal ethical
standards for its operations in 66 countries is ING,
the multinational Dutch financial group. In an
elaborate program based upon getting input from
its 250 top international managers, ING has developed a global ethics code and is training its 83,000
worldwide staff via an interactive CD-ROM linked
to the Internet to apply the company’s ethics principles consistently around the globe. ING’s vicechair of the executive board, Ewald Kist, has said,
“This is supposed to be common ground that all
our cultures can live with.”26
With respect to the natural environment of host
countries, the concept of “sustainable strategic
management” sets the standard high. According to
W. Edward Stead and Jean Garner Stead, this refers to strategic management processes that seek
competitive advantages consistent with a core
value of environmental sustainability. With this
enterprise-level strategy, firms base their corporate strategies on an analysis of the ecological
issues they face, the values they hold that support
sustainability, and the ecological interests of their
stakeholders.27 The Paris-based oil company Total,
the world’s fourth largest oil company, is striving
to embrace ethics and environmentalism in its sustainability quest. To establish credibility with its
stakeholders, Total created a high-level ethics
committee. Two of its European rivals, Shell and
BP, are also making ethics a focal point of their
environmental practices.28
Toward the Future: Much Research Is Needed
Much research is needed in global business ethics.
If there is need for research in one particular area,
it is in the reconciliation of home-country and hostcountry ethical standards such that international
business ethics moves toward universal ethical
standards or norms. Global stakeholders will best
be served, as national borders fall, by the creation,
implementation, and sustainability of a set of universal ethical guidelines that the developed economies of the world can use in transactions with
119
each other and with the developing economies.
The best practices described above will move
MNCs toward this goal.
Endnotes
1
Melloan, G. Feeling the muscles of the multinationals. Wall
Street Journal, 6 January 2004.
2
Singer, P. Navigating the ethics of globalization. The Chronicle of Higher Education, 11 October 2002, B8.
3
Tichy, N. M., & McGill, A. R. Corporate global citizenship:
The ethical path for business,” in Tichy, N. M., & McGill, A. R.,
The ethical challenge: How to lead with unyielding integrity.
San Francisco: Jossey-Bass, 2003, 248.
4
Becker, E. At Shell, grades for citizenship. New York Times,
30 November 2003, 2BU.
5
DeGeorge, R. Competing with integrity in international
business. New York: Oxford University Press, 1993; Donaldson,
T. The ethics of international business. New York: Oxford University Press, 1989.
6
Enderle, G. What is international? A typology of international spheres and its relevance for business ethics. Paper
presented at the International Association for Business and
Society, Vienna, Austria, 1995.
7
Donaldson, T., and Dunfee, T. 1999. When ethics travel: The
promise and perils of global business ethics. California Management Review, 41 (4): 48 – 49.
8
Fritzsche, D. J. 2004. Business ethics: A global and managerial perspective. New York: McGraw-Hill, 56 –57.
9
Ibid.
10
Two-faced capitalism. The Economist, 22 January 2004.
11
Carroll, A. B. 1999. Corporate social responsibility: Evolution of a definitional construct. Business and Society, 38 (3):
268 –295.
12
Carroll, A. B. 1979. A three-dimensional conceptual model
of corporate social performance. Academy of Management Review, 4: 497–505.
13
Carroll, A. B. 1991. The pyramid of corporate social responsibility: Towards the moral management of organizational
stakeholders. Business Horizons, July-August: 42. An alternative
to the pyramid is a Venn-diagram model presented in M. S.
Schwartz & A. B. Carroll. 2003. Corporate social responsibility: A
three-domain approach. Business Ethics Quarterly, 13(4): 503–
530.
14
Carroll, 1979.
15
Pan, P. P. Worked to death: Chinese labor laws are rarely
enforced. The Washington Post National Weekly Edition, 17–23
June 2002, 15.
16
Dolven, B. Foreign investors find that China’s legal system
resolves few disputes. Wall Street Journal, 8 April 2003, A14.
17
King, N., Jr. Iraq’s business elite gropes in the dark. Wall
Street Journal, 25 June 2003, A4.
18
Mokhiber, R., & Weissman, R. 2003. Multiple corporate personality disorder: The 10 worst corporations of 2003. Multinational Monitor, December: 9 –20.
19
Bowie, N. 1987. The moral obligations of multinational corporations. In S. Luper-Foy (ed.), Problems of International Justice. New York: Westview Press, 97–113.
20
Aupperle, K. E., Carroll, A. B., & Hatfield, J. D. 1985. An
empirical examination of the relationship between corporate
social responsibility and profitability. Academy of Management Journal, 28(2): 446 – 463; Pinkston, T. S., & Carroll, A. B. 1994.
Corporate citizenship perspectives and foreign direct investment in the U.S. Journal of Business Ethics, 13: 157–169.
120
Academy of Management Executive
21
Donaldson, T. 1997. International business ethics. In P. H.
Werhane & R. E. Freeman (eds.), The Blackwell Dictionary of
Business Ethics. Malden, MA: Blackwell Publishers, 346 –348.
22
http://www.sustainability.com/philosophy/triple-bottom/tblintro.asp.
23
Comparison of Selected CSR Standards. San Francisco:
Business for Social Responsibility, November 2000: 10 –11.
24
Donaldson, 1989, 81.
25
DeGeorge, 1993.
26
Maitland, A. Common principles in a diverse world. Financial Times, 26 August 1999.
27
Stead, W. E., & Stead, J. G. 2004. Sustainable strategic
management. Armonk, NY: M. E. Sharpe.
28
Gumbel, P. Total clean up. Time, 26 January 2004, A10 –
A12.
May
Archie B. Carroll holds the Robert W. Scherer Chair of Management in the Terry College of
Business, University of Georgia,
where he also serves as director of the Nonprofit Management & Community Service Program. He is co-author of Business & Society: Ethics &
Stakeholder Management, 5th
Edition, 2003. His interests span
global business ethics, stakeholder management, and business-and-society. He received
his doctorate in management
from The Florida State University. Contact: acarroll@terry.
uga.edu.