The Operationalisation of Ethical Theory and Corporate Responsibility - Example

The operationalisation of ethical theory and corporate responsibility Introduction BHP Billiton is one of the largest global companies that specialises in oil, gas and mining. The company is not only known for its success in mining operations around the world but also for its strong work ethics charactised by integrity, commitment and respect. In its operations around the world, the company endeavours to work with integrity by making the right decisions and doing things in the right way. In order to realise this goal, the company has outlined a set of code of business conduct commonly referred to as the “BHP Billiton Code of Business Conduct.” These codes of business conduct comprise of a set of ethical standards that offer guidance to the people working on behalf of BHP Billiton on how they should conduct their businesses (BHP Billiton 2011). One of the key goals of these codes of conduct is to help employees in BHP Billiton to establish trust with the company’s clients and stakeholders by upholding high ethical standards. The BHP Billiton Code of Business Conduct offer guidance on health and safety, working with communities and the government and the protection of BHP resources (BHP Billiton 2011). This paper seeks to discuss how BHP Billiton embeds ethical theory and corporate responsibility into its polices, business operations and practices. Some of the ethical theories that will be discussed in this paper include, Kantian deontology, ethical relativism, utilitarianism, justice (Rawls and Nozick), rights and corporate responsibility. Utilitarianism Utilitarianism as an ethical theory is consequential in nature. As a consequentialist theory, utilitarianism determines the moral worth or the “good” of an action by its outcomes or consequences (Jones et al 2007). Utilitarian ethical theory implies that the moral worth of an action is not derived from its intended purpose or good will but from maximizing the net positive value of its consequences to all parties involved. BHP Billiton’s Business Code of Conduct, according to utilitarian ethical theory, would be ethical so long as the consequences of adhering to the code would maximize utility or minimize negative utility. In this case, the code would maximize the happiness or satisfaction while minimizing the pain or negative consequences of utility the employees, shareholders, suppliers, customers, local communities and even the competition (Jones et al 2007). Utilitarianism is pegged on cost benefit analysis. Therefore, even if the motivation or the intent behind an action is not borne out of good will, its moral worth will be determined by its ability to maximize the utility (or happiness, satisfaction or preferences) of as many parties as is possible. Utilitarianism is deeply embedded throughout BHP Billiton’s Code of Business Conduct. Its Zero Harm policies on health and safety are by their very definition utilitarian in nature. Zero Harm is the organization’s aspirational goal to minimize harm to people, communities and the environment which is utilitarian (BHP Billiton 2011). For instance, the organization’s health and safety practices, governed by mandatory policies, standards and procedures, are designed to ensure the safety of not just the company’s employees but also its assets. While it may be argued that these safety practices are well meaning and intended to safeguard the employees’ welfare, the underlying implication is that the organization is willing to invest in these procedures to ultimately minimize instances of accidents and injuries which would translate to higher medical costs and damage to its assets or equipment (BHP Billiton 2011). It’s prohibition of alcohol and drug abuse at the workplace and zero tolerance to harassment are also utilitarian objectives. As stated in the second chapter of the code on harassment, the impact of harassment on the organization may include reduced productivity and legal proceedings which are negative consequences. Therefore, it can be argued that the guidelines in the code are not exclusively for the protection and welfare of the employees but also to minimize losses or costs incurred by the organization. Evidence of the application of utilitarian ethical theory can be seen from BHP Billiton’s introduction of Employment Equity Policy in South Africa (IFC 2006). The company aimed to improve labour access for black people, women and people with disabilities designed to redress previous demographic imbalances in the South African mining sector. Therefore, this not only serves the interests of these minority groups but also enhances the company’s standing as achieving equality in employment consistent with chapter 2 of its Business Code of Conduct. This practice was rooted in consideration of the favorable outcomes for both the company and trade unions. On the contrary, it has been proven that BHP has at times applied its code selectively such as releasing positive social and environmental information as a response to unfavorable media coverage (Deegan et al 2002). This only serves to benefit the company and not the collective communities. Kantian Deontology Unlike utilitarianism, Kantian deontology places emphasis on the motives of the person carrying out an action and not the consequences. According to Kant, nothing is unconditionally good except good will (Jones et al 2007). Kant’s categorical imperatives or unconditional requirements for acting ethically are that one should act only on a maxim which they would will to become universal law, that they would treat humanity not as a means but as an end in itself and that by acting through the said maxims the person assumes they were a “law-making member of a kingdom of ends” (Jones et al 2007). A commonly given example of Kantian deontological ethics is promises. If breaking promises were universal, they would have no meaning. Therefore, Kantian deontology would evaluate the moral worth of BHP Billiton’s Business Code of Conduct based on the motivations behind the business practices, policies or operations and not whether they have maximized positive net benefits. Kantian deontological ethics mainly focuses on rules, principles or maxims and not circumstances or consequences. This implies that BHP’s code of conduct would be qualified as ethical or morally justified only if the intention of the policies and practices were grounded in good will for all parties involved. A major criticism of this theory is that sometimes, negative consequences may arise from good intentions. BHP’s entire Business Code of Conduct is replete with Kantian deontology. The CEO’s (Michael Klopper) foreword to the Business Code of Conduct advises employees not to capitulate to instincts such as winning or retaining business at the expense of the company’s commitment to working with integrity (BHP Billiton 2011). For instance, its Zero Harm health and safety practices are grounded in the need to minimize risk and injury to its employees. It also outlines strict guidelines on political contributions or activities which prohibit company participation in political activities. This is inspired by the maxim or principle not to interfere in political activity regardless of the potential benefit for the company or the community. The section also holds as a maxim that the company employees should not conduct business with suppliers who violate environmental or safety standards (BHP Billiton 2011). However, the code has some deontological contradictions such as chapter 4 regarding bribery and corruption. While the company discourages making facilitation payments or essentially bribes, it is not firm on the maxim (BHP Billiton 2007). The code allows employees to make such payments if they are in harm’s way or in countries which allow such practice. Pure Kantian deontology would not legitimize exceptions to the rule and the code would have simply forbid any such practices regardless of the consequences. The company has upheld Kantian deontology in its operations to a large extent. In April 2010, BHP uncovered corrupt dealings between its employees and government officials, reported this to the Securities and Exchange Commission (SEC) and pledged to cooperate with the subsequent investigation consistent with its Kantian anti corruption maxim (The Epoch Times 2010). However, as earlier pointed out, the company’s selective release of positive social and environmental information is not consistent with its environmental policies and principles (Deegan et al 2002). Justice Theories (By Rawls and Nozick) In his Theory of Justice John Rawls argues that the only way principles of justice can be arrived at is if individuals make choices behind a “veil of ignorance” (Jones et al 2002). This veil would blind all parties of their own characteristics such as advantages and disadvantages and thus eliminate the possibility of making choices which only favor their strengths and compensate their weaknesses. The outcome would be a just distributive system characterised by fairness. As an ethical theory, justice therefore places emphasis on firms making decisions regarding distribution of economic benefits as well as burdens (Jones et al 2002). Rober Nozick challenges Rawls’ basis of fairness and argues that something can only be considered just as long as society accepts it based on their freedom to exercise their natural rights. According to the ethical theories of justice therefore, BHP Billiton’s code of conduct should ensure the fair distribution of the economic benefits of its operations as well as the burden. BHP’s policies or operations would only be considered just if they ensure fairness in distribution and maximize welfare (Jones et al 2002). In BHP’s Code of Business conduct for example, justice is embedded in the code’s guidelines concerning health and safety, environment and in dealing with communities. For instance, employees are cautioned against working when they are not fully physically fit and urged to report injuries for treatment. The code also places obligations on employees to report accidents that may have environmental impacts such as oil spills in timely fashion (BHP Billiton 2007). This reflects willingness by the company to not only conduct profitable operations but also to bear the cost of some of the undesirable consequences of its actions. As demonstrated by Jones et al (2002), BHP also promotes justice by ensuring equal employment opportunities in areas such as South Africa where blacks, people with disabilities and women have been marginalized (IFC 2006). However, despite promoting justice in the distribution of economic burdens, BHP does not clearly outline the same for distribution of benefits. For instance, the code prohibits employees from sharing the intellectual property of BHP Billiton with other parties (BHP Billiton 2011). This may affect distributive justice as the information or data collected may benefit other parties outside BHP. Rights Rights can be considered as ethical principles of entitlement and freedom, rights can also be considered as part of the fundamental normative rules that depict what is owed to people and what is allowed of people. Rights form the cornerstone of any civilized society, rights particularly those entitled to all human are considered as human rights. These rights are accorded to all people by virtue of them being human beings (Donnelly 2003). Over time, a number of theoretical explanations have been developed in a bid to explain the underlying concept of human rights and why or how upholding human rights are part of social expectations. For instance the interest and will theory are some of the dominant theories revolving around contemporary human rights perceptions. The interest theory accentuates that the key functions of human rights is to promote and protect the essential interests of people. On the other hand, the will theory justifies the validity of human rights on the basis of the exclusive human capacity of freedom (Kramer, Simmonds & Steiner 2000). The BHP Billiton Code of Business Conduct provides clear guidelines on the essentials of upholding human rights and other rights in general in the course of its operations. For instance, in line with the company’s commitment of providing a safe and healthy work environment, the BHP Billiton Code of Business Conduct depict that employees should be able to portray an acceptable level of performance that is not impaired by use of drugs or alcohol. Furthermore, with regards to the Harassment Code, the BHP Billiton Code of Business Conduct provides that employees should never engage in any acts of bullying or harassments. The interest theory is embedded in these provisions, since these codes protects and promotes the interests of people with regards to health and safety. Chapter 3 of BHP Billiton business conduct, “Engaging with our communities”, also considers the plight of the community. The code acknowledges the fact that the company’s operations can sometimes impact the local communities. Therefore, the company works with the relevant stakeholders particularly those that have been affected by its operations in order to identify and address the concerns and expectations of the community (BHP Billiton 2011). Chapter 3 (p. 30) depicts that the company values the perspectives of the local community thus all its operations sites require a register that records and follows-up on the ways in which the concerns of the community are being addressed. This code is embedded on the will theory which accentuates on the exclusive human capacity of freedom (BHP Billiton 2011). It is evident that the BHP Billiton Code of Business Conduct embeds on the human rights and the rights of people in general into its practices and business operations since most of its projects must have informed consent and support from the community. All of the companies’ operations are often required to have risk-based human rights assessment that are carried out by independent professions who identity and record the potential human rights risks and exposures. In sites where risks have been identified the company develops risk management plans that ensure contractors and other employees are trained to facilitate their compliance to the set safety measures and BHP Billiton's commitment to uphold human rights. For example, during the 2009 financial year, 32 sites were reported to have carried out human rights training. In cases whereby resettlement is unavoidable, the company develops and implements a resettlement plan that is in line with the World Bank Operational Directive on Involuntary Resettlement, the relevant and the displaced community (BHP Billiton 2011b). Ethical relativism in BHP Billiton Code of Business Conduct According to Lafollette (1991), ethical relativism is a doctrine that accentuates that there is no absolute moral standard in ethics and that moral judgement or ethical principles vary from person to person, culture to culture or from society to society. In the BHP Billiton Code of Business Conduct, there are certain evidence of ethical relativism in application. For example, Chapter 3(p.42)” on “Gifts and Hospitality” illustrates that employees should exercise their utmost care and discretion when accepting or offering gifts so as to protect the reputation of the company. Accepting or offering gifts or any acts of hospitality should be done based on the local business practices or laws of that particular locality. In occasions, localities or settings whereby the exchange of gift is customary, employees are to inform their supervisors and only offer or give modest gifts. Determining what comprise of a modest gift is a matter of personal judgment and one should consider the local practices and practices. Based on these guidelines, it is evident that the BHP Billiton Code of Business conduct employs ethical relativism. In this case, the guidelines leave room for personal judgment or discretion based on the occasion customs and practices of the locality of work. There is no absolute or uniform mode of conduct in this case since BHP Billiton is global company that has its base in different countries, culture, societies and ethnicities. These guidelines consider that what maybe acceptable in one society may be a taboo to the other and vice versa (BHP Billiton 2011, p42). Corporate Responsibility Corporate responsibility can be defined as the obligation of a company or an organization to be sensitive in all its operations to the needs of its stakeholders and the society in general (Blowfield et al 2008). Corporate responsibility is a philosophy that is largely embedded in the BHP Billiton Code of Business conduct. One of the key ways that BHP Billiton upholds corporate responsibility is through environmental stewardship. For example, Chapter 3 of BHP Billiton Code of Business conduct (p.30), depicts that BHP Billiton is committed to environmental responsibility. The company endeavors to ensure the efficient use of resources and the enhancement of biodiversity by evaluating land use and ecological value in all its operations. Furthermore, the company endeavors to prevent and minimize pollution and ensure that the effects linked to its operation are managed, minimized and prevented (BHP Billiton 2011, p34). In the 2006/2007 financial year the company embarked on research geared towards investigating new forms of engineering technology that minimise exposure to chemicals alleged to cause cancer. The company developed a Diesel Particulate Initiative that minimizes the exposure of diesel exhaust fuel to the environment (BHP Billiton 2007). Moreover, BHP Billiton upholds corporate responsibility by supporting community investments programs in localities where the company operates. For instance during the 2006/2007 financial year the company issued a total of US$103.4 million to community initiatives at the local, provincial, regional , national and global level. Based on these findings it is evident that corporate responsibility is embedded in BHP Billiton Code of Business conduct (BHP Billiton 2007). Conclusion BHP Billiton Code of Business Conduct comprise of a set of ethical standards that offer guidance to the people working on behalf of BHP Billiton on how they should conduct the company’s businesses. These codes of business conduct to a great extent embed on the philosophy of corporate responsibility and ethical theories such as Kantian deontology, ethical relativism, utilitarianism, justice (Rawls and Nozick) and rights. For example Utilitarianism is deeply embedded throughout BHP Billiton’s Code of Business Conduct. Its Zero Harm policies on health and safety are by their very definition utilitarian in nature. However, in practicality some of the BHP Billiton codes of business conduct are rooted in consideration of the favorable outcomes for the company and trade unions. It is also apparent that BHP has at times applied its code selectively such as releasing positive social and environmental information as a response to unfavorable media coverage (Deegan et al 2002). It is therefore safe to conclude that in as much as BHP Billiton has well stipulated ethical standards in its Code of Business Conduct, there is still room for improvement on the practicality of these codes of business conduct. Bibliography BHP Billiton, 2007, Sustainability Report Full Report 2007, Retrieved on March 30, 2011 from BHP Billiton, 2011, Codes of Business Conduct, Retrieved on March 30, 2011 from < http://www.bhp.com.au/bb/aboutUs/codeOfBusinessConduct.jsp> BHP Billiton, 2011b, Human rights, Retrieved on March 30, 2011 from Blowfield, M., Blowfield, M. & Murray, A., 2008, Corporate responsibility: a critical introduction, Oxford University Press, UK. Deegan, C., Rankin, M., & Tobin, J., 2002, An Examination of the Corporate Social and Environmental Disclosures of BHP from 1983-1997: A Test of Legitimacy Theory, Accounting, Auditing & Accountability Journal. 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