The only way is ethics

The scandal at VW (and potentially other carmakers) has put corporate ethics back on the front page.

The anti-capitalist critiques of Corbynite Labour have also led to public soul searching, nicely illustrated in this recent Today interview (at 7.19) with chairman of Lloyds of London, John Nelson. These debates have been around for a long time but are often shallow and unproductive. Three powers theory suggest why.

As my regular reader will know three powers theory is my reworking and application of a school of thought more commonly known as cultural theory.  It argues that the best organisations and solutions combine three foundational world views that all of us hold at different times: individualism, hierarchy and solidarity (nb there is a fourth view - fatalism - but by its nature it is not active nor, generally, a source of creative power).

Within a commercial organisation, individualism refers to the degree to which people can differentiate themselves from others and pursue their own goals; hierarchy is the degree to which the organisation can align behind leader-defined corporate goals; and solidarity the degree to which people bond with each other and adhere to a common set of values.

As this implies, the fount of ethical goals is solidarity; the idea that companies and the people in them should work for the common good. The call for a stronger ethical dimension for business can be seen as simply a demand to turn up the dial on solidarity. But for various reasons, things are not so simple.

For a start, outward-facing solidarity based on universal principles has to compete with other solidiaristic imperatives within an organisation. A classic example is provided by the school staffroom: is the primary form of solidarity the duty of teachers to pupils and to principles such as equity and accountability (in which case improvement is likely) or is it defensive loyalty towards underperforming colleagues threatened by management sanction (in which case decline is on the cards)?

Also, given that the theory argues that the best solution to complex problems is to mobilise all three powers, to be powerful and sustainable solidarity needs to combine productively with individualistic and hierarchical imperatives. But this is difficult for two main reasons.

First, each of the perspectives/powers is inherently in tension with the others. To an important degree, for example, individualism gets its dynamism from its critique of hierarchy as overbearing and solidarity as cloying or impractical. The rationale for communes (which almost always fail) lies less in the virtues of egalitarianism and more in the vices of ‘the system’ and of a societal culture of selfishness.

Second, even when the powers are successfully combined, changes in the organisation’s context will continually shift the balance, the most obvious example here being the way technology has gone from being a resource of hierarchy (the days of the main frame) to a resource primarily of individualism and, to a lesser extent, solidarity (the social web).

This schema suggest a number of success factors for ethical corporate policy, few of which are commonly identified either by the defenders or critics of big business.

While we tend to see ethical issues as coming down to clear choices, in fact being an ethical corporation is an inherently complex matter involving reconciling different imperatives. If solidarity is seen simply as a break on individualism and hierarchy, it is unlikely to be sustainable in a competitive context (one consequence of which is a gap between CSR rhetoric and boardroom and shop floor reality). As this implies, attempts to develop and reinforce ethical behaviours need to move beyond a focus on specific issues and risks to look at organisations a whole.

It is also vital to understand organisational culture from multiple perspectives. Ethical champions may think it is all about getting people to do the right thing but ‘doing the right thing’ means different things to different people at different times. An example of this is provided by the work on consumer behaviour by RSA Fellow Tim Devinney.

His research shows that the question we should ask is not whether people are willing to shop ethically but how concerns like the environment or world poverty stack up against other, potentially competing, ethical imperatives. For most household shoppers being frugal with a limited household budget is a stronger ethical imperative than saving the rainforests.

Finally, the approach to corporate ethics needs to be vigilant, dynamic and adaptive. Even if a high performing organisation does manage to get a creative balance between the three powers (captured neatly in Charlie Leadbeater’s phrase ‘creative communities with a cause’) the applecart could at any time be upset by one power becoming more or less powerful and/or a change in the environment. The most common form of the latter is the emergence of a threatening market competitor (something which is likely to lead to hierarchical imperatives coming to the fore which is why power hungry leaders are fond of citing external threats).

Pursuing an ethical approach to business is, it turns out, a lot more complicated than it is often portrayed, but the good news is that it’s also a lot more interesting.