Understanding the Critical Perspective of Civic Leadership Theory (CLT) for Dr. Rocal

CALIFORNIA MANAGEMENT REVIEW Volume XXVIII, Number 2, Winter 1986 © 1986, The Regents of the University of California

The Study of Social Issues in Management: A Critical Appraisal David Vogel

Competing Frameworks

The academic field of Social Issues in Management is now two decades old. Over this period, research in this area has primarily fallen into one of two broad categories: it has either been concerned with the relationship of business and society or with the interaction of business and government.

The first research framework dates from the 1960s. It was originally associated with the concept of corporate social responsibility. The premise of this concept is that society's legitimate expectations of business extended beyond the making of profits. It held that in addition to their economic responsibility to stockholders, managers of the corporation also had an obligation to consider the impacts of their decisions on other diverse con- stituencies. Among the most important of these constituencies was the urban poor, whose exclusion from the mainstream of the American econ- omy represented the most pressing domestic policy issue of that decade. The unit of analysis of this research framework was the corporation, which was conceived of as a social as well as an economic institution. Scholarly writing sought both to describe and evaluate how managers were adjusting to the public's changed expectations of their role.

The business and society framework assumed that managers enjoyed substantial discretion in balancing the demands of "society" with those of their more traditional constituencies, i.e., stockholders, suppliers, custom- ers, and lenders. However, by the early 1970s, this assumption had become much less valid. The dramatic expansion in the scope of government regulation during the late 1960s and early 1970s drastically narrowed the boundaries of managerial discretion. By the mid-1970s, for a corporation to make its products safe, reduce its emissions, hire women and minorities, and design a safer workplace did not constitute evidence that the managers were behaving responsibly; it simply meant that they were obeying the

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law. In effect, many of the social demands previously made on business became politicized: corporate social policy was now being formulated not at board meetings, but at congressional committees, regulatory agencies, and judicial proceedings. "Society" had thus become collapsed into "govem- ment. " As a result, in many companies the management of corporate social policy became a component of corporate public affairs.

This shift in the political environment of the firm did not mean that scholars ceased to be interested in the relationship between business and society. The former supplemented the later, it did not supplant it. The continued salience of the business-society framework was reflected in studies of subjects such as the corporate social audit, corporate codes of conduct, shareholder activism, the relationship of corporate social perform- ance to corporate profitability, corporate govemance, and business ideol- ogy. In many respects, the recent revival of interest in business ethics— with its emphasis on the ethical responsibilities of managers—demon- strates the continued viability of this way of approaching the study of the corporation. (Significantly, the two most extensively studied topics in busi- ness ethics, namely corporate involvement in South Africa and the market- ing practices of the manufacturers of infant formulas overseas, both repre- sent areas in which corporate conduct is not constrained by American law.)

However, research in the Social Issues in Management field has become increasingly dominated by studies of the relationship between business and govemment. The latter encompasses govemment regulation—its for- mulation and its implementation—as well as corporate political strategies— including campaign contributions, lobbying, coalition building, grass-roots organizing, and corporate public affairs and the role of public interest and other advocacy groups. In contrast to the study of business and society, which was primarily topic oriented, much of this research has a strong disciplinary orientation—primarily derived from political science or eco- nomics, or in the case of political economy, from both. Its analytical focus is not so much the corporation as the interaction of business and govemment.

Notwithstanding the growing volume of research generated by both frameworks, the issues they address have diminished in importance over the last five years. Twenty years ago, one could argue persuasively that coming to grips with changing public expectations of corporate social per- formance was the most pressing challenge confronting American manage- ment. A decade ago, a similar assessment could be made of the importance of govemment regulation. Neither remains t m e . The issues traditionally addressed by those who study Social Issues in Management are no longer at the cutting edge of management practice. Both the political and social environments of business are now more stable, more predictable and man- ageable than at any time over the past two decades. Thanks in part to economic de-regulation and increased foreign competition, it is now the economic environment of business that constitutes the major area of uncer- tainty for the managers of most companies.

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This is not to suggest that business no longer faces political or social challenges; it certainly does and will always do so. New regulatory issues, such as those involving the safety of chemical plants and the most effective way of cleaning-up toxic wastes, continue to emerge. Rather it is to argue that given the current political climate, these challenges are much less threatening to corporate profits and prerogatives than was the case when our field originally emerged. The major legislative, administrative, and judicial battles over the direction and scope of government regulation are over: the contemporary politics of regulation primarily focus on implemen- tation.

The most obvious index of this development is the recent cutback in corporate resources devoted to public affairs. A number of corporations have made major reductions in both the size of their Washington offices and in their headquarters staffs responsible for monitoring the external environment. Compared to the situation in the 1970s, relatively few of the new CEOs of the 1980s have been chosen because of their skills at external relations; rather, their background is more likely to be a technical or scientific one. Even more dramatic is the virtual atrophy of the Business Roundtable, the clearest symbol of the heightened politicization of manage- ment that occurred in the 1970s. The Roundtable still exists, but its political role is much less important than it was five years ago.

From another perspective, our field is the victim of its own sucess. Is there any competent manager of an American corporation who still needs to be persuaded that social and political forces can have as much impact on the bottom line as the decisions of his or her competitors? While such a perspective was novel 10-15 years ago, now it has become part of the conventional wisdom of the business community.

Significantly, while there have been a growing number of indictments of management education, it is noteworthy that no one claims that business schools are not adequately preparing future managers to cope with the external political environment. Rather, critics have focused on the exces- sive emphasis on quantitative skills and the lack of sufficient coursework in production management and international business. There is no shortage of explanations for the competitive failures of American industry, but the inadequacy of the political skills of America managers is conspicuously not among them. It is thus problematic whether business schools will commit additional resources to the business-govemment-society field. They are more likely to place increased emphasis on international business, corporate strategy, and production management.

New Directions

What then is the likely future of our field? In fact, the process of building from these two frameworks has already begun. As I survey our field, it appears to be moving in two somewhat different but equally promising

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directions. The first focuses on the study of intemational business and global competition and the second emphasizes corporate strategy.

The growing importance of intemational competition to the future of American business scarcely requires elaboration. Imports and exports as a percentage of GNP doubled in the United States between 1970 and 1980; 70% of all domestic markets now face foreign competition. Intemational competition is to the 1980s what government regulation was to the 1970s. Japanese companies have replaced American regulatory agencies as the most important challenge to the future of the modem corporation. The most critical problem for GM is no longer whether it can comply with EPA; it is whether it will survive the competitive challenge from Toyota.

Research in Social Issues in Management has always had an intemational dimension, but in the past this has largely focused on the social and political behavior of American multinationals overseas. However, "intemational business" no longer happens exclusively outside the United States. On the contrary, issues of intemational competition now dominate the domestic political agents; during the 1980s, the impact of public policy on the inter- national competitiveness of American industry emerged as the central issue of business-government relations in the United States. As the issue of plant closings illustrates, it has even spilled over into the study of business and society.

It is important that we significantly expand our research in the intema- tional area. We need to train, recmit, and develop intellectual and institu- tional ties with area specialists as well as with scholars in intemational management. In addition, we need studies that describe how different capitalist nations have addressed issues such as plants closings, the regu- lation of dangerous substances, corporate political power, the rights of whistle-blowers, and the assessment of technological risks. These are subjects which, for the most part, scholars in our field have studied with exclusive reference to the United States. By giving our analysis of the relationship among business, government, and society a comparative di- mension, we will not only enrich our knowledge of the global environment within which American industry must now operate, but also sharpen our understanding of our own political and social system.

The second promising direction in which our field has begun to move involves the integration of the management of the extemal environment with corporate strategy. The links between business policy and Social Issues in Management have always been strong. Indeed, in many schools, the latter is taught under the rubric of the former. Moreover, many of the recent texts in our field and much recent research on corporate political activity emphasizes the strategic dimension of corporate public affairs. Clearly, research into business-government relations is becoming more "managerially" oriented. We are slowly beginning to understand that a corporation's choice of political strategy is shaped by the same kinds of factors that govem its investment decisions.

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But we need to move a step further. We need to study the interrelation- ship of a corporation's economic and political decisions, i.e., the way in which a firm's investment decisions are shaped by its political options and the way in which a firm's political strategies are infiuenced by its market position. We need studies of corporate political activity that are explicitly informed by an understanding of how the firm tries to compete in the marketplace. Unlike the 1970s, when corporate public affairs primarily involved defending the firm from challenges from non-business interest groups, government relations has increasingly become a vehicle by which firms seek to enhance their firm's competitive position, both domestically and internationally. The recent demands of a number of industries for trade restrictions as well as the extensive intra-industry battles over the pace of economic deregulation illustrate this shift. Moreover, the links between corporate public affairs and corporate strategy are particularly important in the area of international business, where public policy plays such a critical role in the shaping of the competitive position of plants, divisions, firms, and industries.

In addition, there is a potential for increased intellectual exchange be- tween students of corporate strategy and business ethics. The develop- ment of business ethics over the last five years has been disappointing, a subject to which I will return in the next section of this article. But in one respect, it is extremely promising. Though their language may differ, there is a striking similarity between the descriptions of "well-managed" firms offered by students of management and that of "socially responsible" cor- porations offered by students of corporate social performance. Peters and Waterman's description of how a well-run corporation treats its employees, customers, and suppliers bears a remarkable resemblance to the portraits others have offered of socially responsible companies. A more recent book in this genre. Vanguard Management by James O'Toole, makes this rela- tionship explicit. Throughout his book, O'Toole argues that a sense of ethics is a critical component of a "Vanguard Management." More gener- ally, many of same structures and values that characterize a well-run firm also appear to characterize an ethically managed firm. At the same time, a firm's value system can be seen as an integral component of its "corporate culture."

By moving in one or both of the two directions outlined above, our field will both become more relevant to the practice of management and reduce its isolation from the other components of management education. The study of either area requires a better understanding of how a corporation performs its central mission, i.e., mobilizing capital and labor to create additional wealth. We have long argued that those who study management need to better appreciate the political and social dimensions of business. But the opposite is now true as well. Those who write about business- govemment-society relations urgently need to enrich their understanding of management.

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The Politics of Teaching and Research

My second observation about the direction of research in SIM concems business ethics and social responsibility. I am concemed that we have inadvertently allowed our writing about these topics to become politicized. Too often the way we treat these subjects remains rooted in the conven- tional wisdom of 1970s liberalism. The problem is not that members of our field have allowed their research and teaching to be shaped by their political and social values. Such a perspective is both unobjectionable and unavoidable. It is rather that they have confused the realms of ethical and political discourse. Instead of justifying their political preferences in their own terms, they have tended to equate them with "corporate responsibil- ity." Let me provide a few examples.

Recently, a number of corporations have begun to provide financial aid to the rebel forces in Nicaragua. Given our conventional definition of cor- porate social responsibility, these contributions would appear to provide a perfect illustration of this phenomena. Not only are companies attempting to compensate for a reduction in govemment funding, but the corporations involved in this effort will only benefit indirectly from their commitment. Rather, their motivation is presumably similar to those companies that have ratified the Sullivan principles. In both cases, firms are using their economic resources to change the political system of another country so that it more closely reflects their vision of a decent and just society. But while scholars in our field have published numerous analyses of the respon- sibility of corporations to end racial injustice in South Africa, not a word has been written—or is ever likely to be written—on the responsibility of companies to stop the spread of forces hostile to private property and political pluralism in Latin America. Why not? What is the difference? Is a company only acting "responsibly" when it seeks political outcomes that fall on one side of the political spectrum?

More generally, there is a remarkable dearth of literature on the ethical and social implications of corporate investment and trade with communist countries. For example, in Africa, the Govemment of Angola is engaged in a civil war against pro-Westem forces that now control one-third of the countryside. The former's military expenses are largely financed by reve- nues generated by Chevron, and Cuban troops defend the region in which the company's refinery is located. When the Portugese ruled Angola, there was extensive discussion of Chevron's role in perpetuating colonialism and a number of articles examined its responsibilities to the people of Angola. The current govemment of Angola is at least as oppressive as the Por- tugese colonial administration. Yet the same scholars who now write about the responsibilities of American corporations in South Africa are strangely silent about the ethical responsibilities of Chevron to the people of Angola.

To take another example, I have yet to read a single article or case-study analyzing the moral or social responsibility of corporations seeking to in-

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crease their sales to the Soviet Union by pressuring the Department of Commerce to relax its regulations governing the export of advanced tech- nology. Does not East-West trade also involve moral issues? And why is it that those who have written about the way Western firms market infant formulas in the third world have ignored the marketing practices of state-run firms in socialist countries?

One finds a similar political bias in the analysis of domestic political and social issues. For example, those who have written about the social dimen- sions of plant closings invariably equate keeping a plant open with being "responsible," and closing it with being "irresponsible." Yet one could just as persuasively argue that a company that keeps an unprofitable plant open is delaying the adjustment of the American economy to a rapidly changing and highly competitive international environment in order to avoid public criticism. Such a policy may be in the immediate interests of the residents of the community in which the plant operates. But in the long-run its decision may make all Americans somewhat poorer. Yet this latter analysis —which strikes me as no more nor less ethically informed than the former—has been remarkably absent from the literature on plant closings.

Most of the cases on personal ethics used in business and society courses deal with a conflict in values between the corporation and those who work for it. Almost invariably, the subordinate's values are being challenged by his or her superior, who is generally assumed to be acting in the interests of the corporation and its stockholders. That such conflicts occur with considerable frequency cannot be doubted, and surely we have a respon- sibility to prepare our students for them. But there is another kind of ethical conflict which also occurs in the real world, namely the tension between a manager and a government official. The literature on government regulation is replete with examples of corporate executives being pressured by regulators to comply with rules and regulations that offend their profes- sional training and personal values. Yet, somehow, this particular sort of ethical dilemma is absent from the literature on business ethics.

Why is it that unethical behavior on the part of government officials is invariably defined as caving in to corporate political pressures, and never as their attempt to impose unreasonable demands on business? We have numerous descriptions of supervisors coercing engineers to cut comers on product or worker safety, but not one case detailing the tribulation of an environmental engineer under pressure from EPA to install a scrubber that he believes is unreliable and ineffective. We have many cases describ- ing company efforts to resist the efforts of regulatory officials to remove unsafe products, but not one chronicling the dilemma of a corporate scientist who sincerely believes that a particular product he or she has designed and tested is safe and effective according to his or her scientific standards, but is unable to secure permission to market it due to the uninformed or politically motivated opposition of a regulatory official.

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If we can accept the fact that a corporation can act irresponsibly, even though its behavior is legal, is it also not conceivable that there might be occasions when a corporation could violate a particular regulation, but still be acting responsibly? More fundamentally, how should we teach our students to respond to unreasonable government demands? For example, do we wish to recognize the phenomenon of "corporate civil disobedience" —the intentional violation of a law by a company on the grounds that it is illegitimate? These are important issues, but those who write our textbooks on business ethics have ignored them.

Moreover, too much of current writing and teaching on business ethics tends to echo uncritically the conventional wisdom of the media. How many of those who teach about the irresponsibility of Hooker Chemical Company with respect to its toxic waste disposal practices in Love Canal are aware of a subsequent study that found that there was no increase in abnormalities among residents who lived near the former Hooker Chemical site and that therefore their physical relocation by EPA was entirely unwar- ranted—and therefore irresponsible. More recently, the Reagan Adminis- tration has been strongly criticized for its lack of commitment to the enforcement of health, safety, and amenity regulations. But how many scholars working in the business and society field have sought to measure the actual impact of the Administration's regulatory policies on public health, safety, and environmental quality in the United States?

My reading of the literature on business ethics and corporate social responsibility suggests that far too often these terms are used simply as expressions of the personal values of their writers. That this process is often unconscious does not make it any the less invidious. Too many of those who write in our field dress up their political preferences in the language of business ethics and assume a consensus on what constitutes "right" and "wrong," "responsible" and "irresponsible," when in fact, there is often none. It is far more likely to be the case that the same decision can fall into either category, depending on the assumptions of the individual scholar making the assessment.

There is a place for the analysis of business decisions and dilemmas in terms of the categories of ethical theory. But these categories must be employed with considerable care and discipline. In fact, the standards of ethical discourse are far more rigorous than those of political discourse. Ethical judgements cannot be made on an ad hoc basis. They must be rooted in a clearly specified set of principles and applied consistently.

Consider the current controversy surrounding the role of American corporations in the Republic of South Africa. As a citizen, one is entitled to espouse whatever position on this issue one choses. But if one wishes to make an ethical argument as a scholar, one must both clearly specify the broader principles that underlie one judgment and be prepared to apply them on a universal basis. What, after all, makes investing in South Africa

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wrong? If it is because it is ruled by a repressive minority, then one is obligated to condemn corporate trade and investment in much of the world, including virtually all of the rest of Africa and East Europe. Now South Afinca is distinctive in that it is the only government in which political representation is based on race. But why is elite rule based on race any worse than oppression based on religion (as in much of the Muslim world), tribe (as in much of Africa), caste (as in India), or on membership status in the Communist Party?

My point is not to defend the Government of South Africa or justify the presence of American corporations there. It is rather to argue that as scholars, we cannot simply echo the chants of students for disinvestment and divestment outside our classrooms. If we are going to use the language of moral discourse, we must do so honestly and consistently, however much that serves to complicate the problems we address. Nor do I mean to suggest that the answers to the questions I raise are self-evident. It may well be the case that trading with the Soviet Union is morally preferable to investing in the Republic of South Africa or that aiding the Contras is an example of corporate irresponsibility. But those who wish to make these distinctions owe us an explanation as to how they reached their conclusions.

The political bias of much of the thinking about business and society among members of the SIM division is also apparent in the treatment accorded to recent conservative writers. Over the last five years, the most exciting and innovative writing on the central issues surrounding the study of business and society—questions such as the moral and intellectual status of capitalism, private property, and marketplace exchange—have come from the right. One may or may not find the arguments of Wealth and Poverty by George Gilder or The Spirit of Capitalism by Michael Novack persuasive, but the issues they address are surely critical to any contemporary discussion of the social and political role of the corporation. Yet I would venture to suggest that those teaching in our field are far more familiar with the work of someone like Charles Lindbloom, whose book. Politics and Markets, is highly critical of market-based polities. Whether or not they agree with Lindblooms' conclusion, virtually everyone in our field knows his argument and can critically evaluate it. I doubt if much the same could be said of the writings of people like Gilder and Novack. Ironically, our field, which has prided itself on being the cutting edge of the ever-changing social and political environment of business, has yet to take this conservative intellectual renaissance seriously.

I think that the politics of SIM are only in part due to the personal political views of the members of our division. They also refiect the origin of the field in the liberal social and political climate of the 1960s and 1970s. The contemporary resurgence of interest in corporate responsibility and business ethics both emerged during a period when the corporation found

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itself under considerable pressure to re-assess its relationship to the society of which it was a part. The political and intellectual pendulum has shifted dramatically over the last five years. While I am not suggesting that we substitute a right of center orthodoxy for a left of center one, our field would benefit considerably if the views of those who contributed to it reflected a greater political diversity than they do at present. Most impor- tantly, as scholars, we have a social responsibility to be more self-conscious about the ideological assumptions that inform our research and teaching.