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P H I L O S O P H Y F O R B U S I N E S S ISSN 2043-0736
Issue number 18
16th May 2005
I. 'Organizational Direction in a Culture of Trust' by Ruel F. Pepa
II. 'Considerations on Corporate Social Responsibility' by John Ormerod
III. 'Questionnaire on the Ethics of Tax Evasion' by Robert McGee
A week from tomorrow, I will be flying to the Czech Republic for my Open
Lecture at Prague College on 'Social Responsibility and Ethical Dialogue'
(details http://www.praguecollege.cz/article.php?id=206). Anyone who has been
following my online notebook
(http://sophist.co.uk/glasshouse/index.html#notebook2) will have been
able to see my thoughts on Corporate Social Responsibility slowly taking shape.
I welcome any responses to the issues raised there. Below, you will find a
letter from Open University MBA lecturer John Ormerod which elegantly
encapsulates the key issues in the CSR debate.
Also in this issue is a provocative essay by Professor Ruel F. Pepa on the
radical change in nature of business leadership in the post-modern era. Ruel
Pepa describes something close to a reflexive relation between the culture of
trust and the new style of leadership through vision and example, where each
requires the other and also in some sense makes the other possible. Yet the
relation cannot be purely reflexive, for then we would be caught in a 'chicken
and egg' situation. Something to ponder.
Professor Robert McGee is conducting a survey on the ethics of tax evasion
whose results will be published in a future issue of Philosophy for Business.
All replies will be held in strict confidence.
I. 'ORGANIZATIONAL DIRECTION IN A CULTURE OF TRUST' BY RUEL F. PEPA
A paradigm of leadership in an era of post-modern realities
Our era is known in the intellectual circle as 'the post-modern age.' And the
zeitgeist of this age has encompassed practically almost all - if not all -
sectors of our life on this planet. The earth has 'shrunk' and we are literally
living in a small world. From the primitive past of traveling 'short' distances
in days - even months - through the 'crudest' means of transportation, we can
now encircle the globe in hours. From the days of pony express in the U.S.,
surface mail, par avion, and telegram, even communication has come of age in
this era of electronic mail (e-mail), 'chatting,' and teleconferencing through
the magic of information technology (IT). The second wave civilization or the
era of industrialism brought forth by the spirit of the age of modernism has
not only 'impersonalized' society but likewise 'depersonalized' humanity
through standardization and massification. But the paradigm shift from the
modern age to the post-modern has brought human relations to the commanding
heights of 'ultra-personalization' of society and 'super-personalization' of
humanity. In the language of the social critic Marshall McLuhan of The Medium
is the Message fame, ours is a 'global village.' This is the post-industrial
era; the stage of humanity's progress which the futuristic sociologist and
philosopher Alvin Toffler (1990) calls 'the third wave civilization.'
The Paradigm Shift
The spirit of this age has been seriously reckoned now as a strong influencing
factor that enlivens and 'reengineers' structures, organizations, and processes
in the political, civil, and corporate sectors of society. Old structures are
being collapsed, different paradigms are introduced which according to the
reengineering guru of the 21st century, Michael Hammer, is 'the fundamental
rethinking and radical redesign of processes to achieve dramatic improvements
in critical contemporary measures of performance' (Hammer and Champy, 1993).
Six major fronts (Beatty and Burkholder, 1996) have been observed as actual
events indicative of such a paradigm-shift in organizations:
1. Attention to the primacy of the constituency as the focus of service.
2. The drive to 'reengineer' processes.
3. More concise (or flatter) organizational structures and a widespread
use of self-managed teams.
4. Cross functional integration of activities.
5. An altered relationship between 'superiors' and 'subordinates.'
6. Greater emphasis on innovation.
This paper is an attempt to explore these events: discover the elan that
animates these events; and make known this elan in definitive and unequivocal
terms. For present purposes, this paper generally focuses on organizations of
the contemporary era as they are made to respond, adapt, invent, and innovate
in the context of post-modern climate, conditions, and processes. Specifically,
the organizational component of leadership, among other components, is the
highlight and concentration of this paper's discussion. This is organization
leadership in the context of the post-industrial, post-modern, third-wave era
of human civilization.
Leadership Styles in Flux: Toward a Culture of Trust
'Great leaders through out history have used a number of
styles: personal bravery (Alexander the Great), fear
(Attila the Hun), eloquence (Churchill), charisma (T.E.
Lawrence), coalition building (Franklin Roosevelt),
autocracy (Patton), and ideas (Martin Luther).' (Beatty
General George Patton, as a case in point, was a model of leadership considered
among the most effective, successful and admired in the annals of world military
exploits. Patton's significance for our present purposes lies in the fact that
he was not actually a born leader as there is very little evidence to back up
the claim that true leadership is an inherent quality, rather than acquired
through will and effort in the locus of experience. Certain accounts of this
great general's life inform us that Patton 'transformed himself from
soft-spoken, mild-mannered person, into the fiery dynamo whose name became
legend among his troops and his opponents. While he may have lacked a winning
personality, there is no denying his effectiveness as a military leader.'
(Beatty and Burkholder, p.48)
Patton's autocratic flair used to be the dominant model of effective leadership
in modern organizations. Such style of leadership aimed to direct people to
accomplish what had been determined by such leadership as a necessary end to
accomplish. It was configured in a setting where one individual issued orders
while others were deemed to follow such orders. That was autocratic leadership:
domineering, tenacious and unrelenting. Difference in view or opinion was
construed as an affront to authority. Leadership of this category is
preoccupied with the serious thought and effort of maintaining the distinct
boundaries between superiors and subordinates. Contrary views, dissimilar
opinions, departures from the rules and instances of clashing principles and
agenda are looked upon as ominous challenges to the established order and to
the authority of the powers that be. In technical terms, this type of
leadership, which is of military origin and character, is called bureaucratic
and hierarchical. The animating factor of this type of leadership is the spirit
of fear and selfishness in a culture of suspicion.
Now, in the age of post-modernism, the paradigm shift has effected a redefined
'The role is changing from the old autocratic model based on
fear to one proposed 2,500 years ago by Lao Tzu: 'To lead
the people, walk behind them.' Today, motivating factors
other than fear must be taken into consideration. People's
need for competency, for recognition, for meaning and
dignity have become overriding considerations. People today
have enlarged capacity to be self-motivated. It is up to
business leaders to develop and nurture this capacity for
self-direction, creativity and talent in their work force.
This model of leadership depends less on direction from the
top than on providing a vision for others to follow, and on
inspiring others to do their best in the pursuit of that
vision. It is a leadership model that is more in keeping
with non-hierarchical organizations of today than with the
command and control organizations of the past.' (Beatty and
The animating factor of this type of leadership is a spirit of vitality and
courage in a culture of trust. A leadership that perceives the need to empower
its constituency to maximize and optimize the 'capacity for self-direction,
creativity and talent of [its] work force' is operating within the confines of
a culture of trust. A leadership cannot share 'a caring, respectful, and
responsible attitude'; cannot have 'flexibility about people and organizational
structure'; cannot utilize 'a participative approach to management and the
willingness to share power' (Beatty and Burkholder) unless such leadership is
shaped by the instrumentalities of a culture of trust.
In his insightful discussion on the issue of the changing styles of leadership,
Harvard professor John Kotter observes in his powerful book A Force for Change:
How leadership differs from management that exceptional leaders make it a point
that an organization maintain a definite and meaningful path toward a desired
end goal by facilitating the communication of a vision to all levels and
sectors of the organization as an act of intensifying the people's sense of
meaning, responsibility and commitment. (Kotter in Gibson, ed., 1997) For a
leadership to accomplish a Herculean task like this, it is deemed that the
arena of its successful operationalization be permeated by the floodlights that
can only emanate from a culture of trust.
The prominent leadership guru, Warren Bennis, comments that the communication
of a vision requires more than words. He says:
'It's not a question of giving speeches, sending out memos,
and hanging laminated plaques in offices. It's about living
the vision, day in day out - embodying it - and empowering
every other person in the organization to implement and
execute that vision in everything they do. In other words,
you have to anchor it in organizational realities, so that
it becomes a template for decision making. If ever there
was truism, it's that action speaks louder than words.'
(Bennis in Gibson, ed.)
Bennis goes on to say that another significant aspect of vision communication
is generating trust:
'Leadership will have to be candid in their communications
and show that they care. They've got to be seen to be
trustworthy human beings. That's why I believe that most
communication has to be done eyeball to eyeball, rather
than in newsletters, on videos or via satellite broadcasts.
The leader will have to be able to generate and sustain
trust and that also means demonstrating competence and
constancy.' (Bennis in Gibson, ed.)
The logical source, therefore, from which the materials to construct a culture
of trust in an organization is its very leadership.
Reengineering guru Michael Hammer defines a leader,
'...not as someone who makes other people do what he or she
wants, but as someone who makes them want what he or she
wants. A leader doesn't coerce people into change that they
resist. A leader articulates a vision and persuades people
that they want to become part of it, so that they
willingly, even enthusiastically, accept the distress that
accompanies its realization.' (Hammer and Champy)
The realization of this view of leadership can only happen and thrive in an
organization whose working principles of leadership are firmly grounded on a
culture of trust.
The Dynamics of Leadership in a Culture of Trust
The essence of leadership in a culture of trust is a 'principle-centered
leadership.' This type of leadership transcends the 'human relations' and
'human resource' model whose main concern is treating people well and then
using them well. Principle-centered leadership goes beyond the said earlier
model because it is more focused on the issue of facilitating people to find
meaning and fulfillment in what they are doing. Inherent in this model is the
objective to create an empowered work force motivated by a shared sense of
meaning and vision within the confines of a value system that is grounded on
In the era of post-modern realities, efficiency and effectiveness, or
productivity and creativity cannot simply be realized if the leadership
paradigm is not located, nurtured, and enhanced in a culture of trust. It is
this very culture that fosters trustworthiness throughout the organization. And
trust can only emanate from principles.
The principles which are the focal point of this leadership model are actually
the basic universal principles useful and time-tested in all human
relationships and organizations; the likes of justice and fairness, honesty and
integrity, trustworthiness and impeccability. These principles operate like
natural laws, i.e., whether we obey them or not. They are principles with which
no one dares argue. Humanity's sense and understanding of them is universal.
The leadership and human relations authority, Stephen Covey comments:
'The great value of a high-trust culture is that it brings
together idealism and pragmatism. It becomes the basis for
both empowerment and quality. How are you going to get
people empowered if you don't have high trust? When there's
low trust you've got to use control. You can't empower
people in a culture like that, otherwise you'll have loose
cannons all over the place... They don't have a common
vision and a common set of values based on principles that
they all buy into. You also won't get quality, because
quality requires that everyone up and down the entire
process has quality in their heart and in their mind. They
have to really believe that "quality begins with me," and
they need to make their decisions based on the right
principles and values. So empowerment and quality are
totally integrated in a high-trust culture. Trustworthiness
precedes trust which precedes empowerment which precedes
quality.' (Covey in Gibson, ed.)
The paradigm shift discussed in this paper requires enormous patience for its
process has to work from inside out. Post-modern organization leadership
generates change right in the hearts and minds of people. The culture of trust
which provides the right climate for the leadership to grow is likewise
enhanced by the dynamics of that very type of leadership. Besides, it is
important for us to be constantly reminded that even a principle-centered
leadership is brought to its realization through the recognition of a trusting
people who have entrusted the well-being of their organization, their society,
to such leadership. Post-modern organization leadership in a culture of trust
is in itself a trust which is sacred and has to be protected and faithfully
Beatty, Richard H. and Nicholas C. Burkholder. The Executive Career Guide for
MBAs: Inside Advice on Getting to the Top from Today's Business Leaders.
New York: John Wiley & Sons, Inc. 1996.
Gibson, Rowan (ed.). Rethinking the Future. London: Nicholas Brealey Publishing.
Hammer, Michael and James Champy. Reengineering the Corporation: A Manifesto
for Business Revolution. New York: Harper Collins Publishers. 1993.
Toffler, Alvin. The Third Wave. New York. Bantam Books. 1990.
(c) Ruel F. Pepa 2005
II. 'CONSIDERATIONS ON CORPORATE SOCIAL RESPONSIBILITY' BY JOHN ORMEROD
From: John Ormerod
Subject: PHILOSOPHY FOR BUSINESS ISSUE 17
Date: Thu, 12 May 2005
We haven't corresponded before but as a new subscriber to Philosophy for
Business, I thought I would offer you some of my ideas/ concerns about CSR,
which might be helpful in your seminar in Prague. A few words about me are on
the attached, which I use for conferences etc. All my comments concern
companies with shareholders, either private or publicly quoted.
(1) The economic context for CSR
The issue is the fundamental one of why the firm exists and who it exists to
serve. There are three broad but over-lapping schools of thought:
(a) The shareholder view - views the firm essentially as a unit of production,
established by certain owners, who may or may not delegate to managers the
responsibility for the direction and conduct of operations. The market economy,
principally through the price mechanism, will provide both opportunities and
disciplines. The responsibility of the executive is to deploy the resources of
the company in accordance with the wishes of the owners, a concept rooted in
the ancient laws of master and servant. These could include objectives beyond
maximising owner value but as shareholders became separated from the operations
of the companies they invest in, then the more general aims of the stock market
take over, specifically the relation between perceived risk and expected
(b) The narrower stakeholder view - views firms as networked entities which
come into being because the market mechanism is not cost free and economies can
be made by organising activities within a firm rather than letting them be
organised by the price mechanism. This creates obligations to customers,
suppliers and employees in addition to shareholders, but the latter remain
pre-eminent in governance terms because of the special risks they carry.
(Oliver Williamson has written much of the theory on this).
(c) The wider stakeholder view - challenges the claim that shareholders have
saliency. Its adherents point out that the law has evolved to provide not only
additional safeguards for stakeholders in contract with the firm (employee
legislation and consumer protection for example) but also for those groups with
voluntary arrangements such as local communities. These safeguards have had the
effect of forcing managers to balance the interests of stakeholders in a
multilateral way. However they also distort the balance of power between
stakeholders and the firm in that firstly the costs of these safeguards are
largely exogenous to the firm and secondly that they provide a legal as opposed
to a bargaining based solution to the issue of what would be a 'fair' agreement
between stakeholders and the firm.
The 'Corporate Citizenship' school goes even further in arguing that in
addition to their legal and economic responsibilities, firms should be expected
to engage in a high standard of ethical behaviour and give back to society
These distinctions matter for two principal reasons. Firstly they determine how
much of the external world the business needs to take into account and secondly
the orientation of the firm towards its CSR activities.
(2) What is covered by CSR
Traditional 'Harvard Business School' strategy is predicated on the twin
assumptions that, (a) maximisation of some definable concept of value over the
short/ medium/ (long?) term is the overriding goal of the firm and, (b) that
managers' decisions make a difference (i.e. that strategy is broadly under the
control of the firm). To the extent that multiple objectives have to be
balanced and the influence of external factors in determining strategy
increases, then this paradigm of decision making starts to break down and
indeed, individual decisions by the firm become part of a wider social/
political framework. The result of this is that there is a clear divide between
the shareholder and stakeholder schools as to what is covered by CSR.
At the bottom of the heap is the view, articulated by Albert Carr in a 1968
Harvard Business Review article that business is essentially like a poker game,
conducted according to rules, but not such rules as would constitute ethical
behaviour between individual citizens. Few would subscribe to this nowadays,
but it has its parallels in political philosophy. The next stage up is
encapsulated in a famous article by the economist Milton Friedman in 1970, 'The
Social Responsibility of Business is to Increase its Profits'. This is broadly
the concept of enlightened self interest; obligations to stakeholders depend on
the value to the firm in maintaining the goodwill and continued cooperation of
customers, suppliers, employees, partners, local communities etc. The Economist
magazine in its recent survey of survey of CSR stands here, while acknowledging
that public opinion is elsewhere. A view common in the US is that it is not
appropriate for firms to engage in large scale philanthropy and social
redistribution on the grounds that shareholders have not consented to their
funds being used for such purposes. This is a job for philanthropic
foundations, where individual shareholders have made the decision to give back
all or part of the gains they have made through business and the purpose of the
foundation can be clearly defined in terms of its social objectives.
The big jump is to the wider stakeholder view which requires firms to engage in
global efforts in all aspects of sustainable development (economic, social and
environmental), with poverty reduction, international labour rights, reducing
bribery and corruption, furthering health and education etc. This is broadly
what is expected by public opinion, at least from the giant multinationals. The
essential issues are, (a) How does the firm decide what proportion of its
resources it should devote to these ends, (b) how is this to be justified to
shareholders and, (c) what is the role of the firm - a passive disburser of
support or a passionate advocate of change? These issues often require
coordination at an industry level and there is continuing pressure from NGO's
and the public to do more. The argument would be that the more an issue
featured on the public radar, then those firms closest to the issue either in
terms of the impact of their product or that of their activities (e.g.
production or advertising) should as an ethical obligation, engage with
government and civil society in the solution of whatever problems are
associated with the issue. This brings me to the final point.
(3) Proactive, defensive/ reactive or, 'it's just PR'
Underlying this decision is the issue of what it means to be ethical for a
firm. At minimum there is, 'obey the law' and a number of companies use that as
their main line of defence (especially in that industry). However above this is
the domain of ethics, where there are broadly two views (within the business
community), though I stray now from economics into philosophical territory with
some trepidation. The first stems from the shareholder view and asks what the
ethical imperative on firms should be and how that relates to economics
(markets and competition) and strategy (what the firm actually does to achieve
its objectives). This view is looking for pragmatic rules of general conduct to
apply in specific instances. The second takes the view that firms need to
incorporate a set of values or virtues, essentially those prevailing in and
generally not less than those expected of ethical behaviour between
individuals, governments and other institutions. The idea is that if these
values are entrenched then the firm will behave ethically as a matter of
course. This approach tends to be reflected in industry codes of conduct,
mission statements and the like. Somewhere in the mix there should be a
utilitarian view as well, but this is largely encapsulated in the value to
shareholders calculations, rather than forming an overall philosophy of what
business can actually contribute to the world's issues as opposed to the other
institutions of society.
Some firms will be active campaigners (Bodyshop for example), others will
proactively run with issues as they emerge (BP and the Extractive Industries
Transparency Initiative and carbon trading), some will defend/ deny and then
switch into conversion mode (Nike and sweatshop labour), but over all of these
approaches is the question of whether the fundamental purpose is to make the
world a better place, to protect the interests of the firm or just to cast a PR
smokescreen over the whole problem so that it looks as if the firm is actually
behaving in an ethical manner (Plato's 'ring of Gyges' story). Airlines such as
BA for example make a lot fuss about their collections on behalf of the world's
disadvantaged children but much less of their activities on controlling
emissions pollution and noise.
I hope this may be of interest to you. It has been useful for me to get some
thoughts down on paper and I look forward to seeing the debate develop.
Many years ago when I was with United Distillers, the HR department was doing a
roadshow on 'The UD Way', a sort of cultural blueprint for the organisation.
After listening carefully to all this, I asked the HR director why there was
nothing in 'The UD Way' about the ethical obligations to customers, staff and
society about the consequences of consumption of its products. I clearly
remember being told that this was a very good question, that the directors had
discussed it at length but that it was very difficult and complex so they had
decided to leave it out! Things have changed since then but I suspect that,
notwithstanding all the initiatives that now take place (largely in response to
public pressure) to address concerns over alcohol consumption, there is still no
better understanding of the underlying principles.
John Ormerod MA (Cantab.), FCA, MBA, FRSA
John Ormerod's career has covered a wide span including the public sector,
academia, a range of private sector industries and the accountancy profession.
Most recently he was Director, Strategy and Communications and a member of the
Management Board of the Export Credits Guarantee Department ('ECGD') where he
was responsible for public affairs and policy issues, international relations,
corporate and business strategy, corporate governance and ECGD's Business
Before joining ECGD John worked in the Corporate Strategy Group at British
Telecommunications plc ('BT') and prior to that was for 15 years at United
Distillers plc, latterly as Chief Economist and before that as External Affairs
Director - International and Business Development Director - Asia Pacific, where
he set up and served on the boards of joint ventures in Korea, India and
He has been a part-time lecturer in strategy and marketing on the MBA programme
at The Open University Business School since 1999 and is now extending his
interests in management education. He is a fellow of the St Andrews Management
Institute and the Royal Society of Arts.
John did his first degree in English Literature at Trinity College, Cambridge,
qualified as a Chartered Accountant in 1977 and took his MBA at City University
Business School in 1989. He is currently studying for an MA in philosophy with
the OU in order to underpin his interests in the foundations of strategy and
the ethical conduct of business. In the remaining hours he is an avid explorer
of the byways of classical music.
(c) John Ormerod 2005
III. 'QUESTIONNAIRE ON THE ETHICS OF TAX EVASION' BY ROBERT MCGEE
I have put together a questionnaire on the ethics of tax evasion that
summarizes 500 years of theological and philosophical debate on the issue. I
would appreciate it very much if you would give me your views on this topic.
The questionnaire may be found at
http://www.freewebs.com/robertmcgee/QUESTIONNAIRE.doc and is also reproduced
below. Please fill it out and return it to me, either by e-mail or post. All
replies will be held in strict confidence. Thank you for your participation.
The results of this survey will be published in a future issue.
Jesus said that we should give Caesar the things that are Caesar's and give God
the things that are God's, but he didn't say what Caesar is entitled to receive.
Tax evasion is defined as the illegal nonpayment of taxes, whereas tax avoidance
is the use of legal means to minimize taxes. Please answer the following
questions dealing with the ethics of tax evasion. All individual responses will
If you would like to receive a copy of the results of this survey, please send
an e-mail to Prof. Robert McGee email@example.com.
Please insert the appropriate number in the space provided for the
1._____Tax evasion is ethical if tax rates are too high.
2._____Tax evasion is ethical even if tax rates are not too high
because the government is not entitled to take as much as
it is taking from me.
3._____Tax evasion is ethical if the tax system is unfair.
4._____Tax evasion is ethical if a large portion of the money
collected is wasted.
5._____Tax evasion is ethical even if most of the money collected is
6._____Tax evasion is ethical if a large portion of the money
collected is spent on projects that I morally disapprove of.
7._____Tax evasion is ethical even if a large portion of the money
collected is spent on worthy projects.
8._____Tax evasion is ethical if a large portion of the money
collected is spent on projects that do not benefit me.
9._____Tax evasion is ethical even if a large portion of the money
collected is spent on projects that do benefit me.
10._____Tax evasion is ethical if everyone is doing it.
11._____Tax evasion is ethical if a significant portion of the money
collected winds up in the pockets of corrupt politicians or
their families and friends.
12._____Tax evasion is ethical if the probability of getting caught
13._____Tax evasion is ethical if some of the proceeds go to support
a war that I consider to be unjust.
14._____Tax evasion is ethical if I can't afford to pay.
15._____Tax evasion is ethical even if it means that if I pay less,
others will have to pay more.
16._____Tax evasion would be ethical if I were a Jew living in Nazi
Germany in 1940.
17._____ Tax evasion is ethical if the government discriminates
against me because of my religion, race or ethnic background.
18._____ Tax evasion is ethical if the government imprisons people
for their political opinions.
I am a(n): ___graduate student ___undergraduate student
___faculty member ___other____________________________________________
My main area of study is _____business/economics
I am ____male _____female
My primary ethnic background is (check all that apply):
___Non-Hispanic white ___Hispanic ____African ____Asian ____Other
My religious affiliation is:
(specify Orthodox, Conservative, Reform, etc.)_______________________
(Optional Comments) What are your views on the ethics of tax evasion?
What determines whether tax evasion is ethical or unethical?
Please return the completed questionnaire, either by post or e-mail
Prof. Robert W. McGee
Andreas School of Business
Miami Shores, FL 33161 USA