Corporate Social Responsibilty and Branding

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Business ethics from a post-traditional perspective: a research design for a holistic brand theory Presented at the

Business as an Agent of World Benefit Management Knowledge Leading Positive Change A Global Forum October 22-25, 2006 Cleveland, Ohio - USA

Conveners Academy of Management United Nations Global Compact Case Weatherhaed School of Management


Business ethics from a post-traditional perspective: a research design for a holistic brand theory Manuel Demetz and Prof. Oswin Maurer

Abstract The ongoing discussion about business ethics, synthesized by the paradigm of corporate social responsibility, represents a substantial domain to consider further research for a holistic brand theory. From a management perspective, a theory of business ethics is mainly concerned about the evaluation and legitimization of corporate strategies and thus corporate behaviour. In business ethics, the construct of the »corporative actor« is used to describe the ethical aspects of corporate behaviour. The aim of this paper is to introduce the construct of »brand« into business ethics. Brand can be considered as a »posttraditional subject« for describing the ethical behaviour of corporations and are highly correlated to the identity of corporations. The paper shows that the concept of brand as a »post-traditional subject« leads to a culturalistic perception of the ethical problem, whereas the creation of identities plays a fundamental role. Accordingly identities play an important role in CSR theory because identities follow a kind of meaning transfer approach. Thus – prior to the traditional view of ethics as a rational coordination problem – a post-traditional perspective in ethics is concerned about the input factors of identities.

The call for integration of business in society demands an improvement of the quality of strategic management decisions by focusing on both, economic and social issues. This creates a more complex decision framework for managers. This paper tries to identify relevant issues allowing to proceed towards a positive theory of corporate social responsibility. The paper is indented to provide an interdisciplinary

Manuel Demetz and Oswin Maurer: Business ethics from a post-traditional perspective, page 2


overview about relevant factors that may improve convergence of the paradigms of corporate social responsibility and branding.

Authors

Manuel Demetz (30) is contract researcher at the School of Economics and Management, Free University of Bozen-Bolzano (Italy) for Corporate Social Responsibility and Strategic Advisor for Total Identity bv, an international design and consulting agency for corporate identity management and corporate design. After his degree in Economics at the Free University in Bozen-Bolzano he specializes in CSR research. His main interest is in finding systematic linkages between general philosophical aspect of ethics, organizational behaviour and communications. Manuel Demetz has international consulting experiences and works actually as a PhD researcher to obtain professorial dissertation. Languages: German, Italian and English. Email: mademetz75@gmail.com

Oswin Maurer (48) is professor of Marketing at the School of Economics and Management and Dean of the Faculty at the Free University of Bozen-Bolzano. After his PhD in Economics at the University of Resources Sciences, Vienna he worked as a professor in Europe and Australia. Oswin Maurer is referee for international journals, external PhD examiner and editorial board member. Further he works as an advisor to governments and government agencies in Europe and Australia on international competitiveness and competition (mergers, anti-trust) and advisor to Business Schools and Universities in Europe on MBA and Exec-MBA programme development, international programme accreditation and programme implementation. As a consultant he worked for international companies on international Manuel Demetz and Oswin Maurer: Business ethics from a post-traditional perspective, page 3


market entry strategies, strategy implementation and sustainability in global business. Languages: German, English. Email: omaurer@unibz.it

Manuel Demetz and Oswin Maurer: Business ethics from a post-traditional perspective, page 4


Introduction

The establishment of normative principles for managerial decisionmaking can be considered as one of the most important aspects for advancements in developing a positive corporate social responsibility (CSR) theory (Habisch, 2006). Under these circumstances, the ethical question characterises one of the fundamental issues in research. According to the analysis of Lockett, Moon and Visser (2006) business ethics is one of the four focal points in the actual corporate social responsibility discussion1.

Next to the actual corporate social responsibility discussion, the phenomenon of brand poses an interesting paradigm to draw new ideas for creating methodical contexts towards an interdisciplinary oriented management-research. Fan (2005) remarks that the notion of brand has not yet been considered in the established business ethics literature. On the other hand, the leading branding literature omits the evidence of ethical aspects, despite the paradoxical situation, that the more successful a brand, the more important ethical issues become for management.

The argumentation in this paper follows a sociological based understanding of the ethical problem that leads, compared to a formalrational analysis of the ethical problem in decision-making, to a more culturalistic dimension. From a managerial perspective, brand could be considered as a fundamental topic of analysis within CSR.

1

In addition to business ethics, the main discussions within a corporate social responsibility framework are ecology, social responsibility and stakeholder theory (Lockett, Moon and Visser, 2006) Manuel Demetz and Oswin Maurer: Business ethics from a post-traditional perspective, page 5


In recent discussions about business ethics there is common consent about the fact that moral problems of business practice are the primary impetus of the evolvement of business ethics as an independent science (König, 2005). On the basis of a culturalistic understanding of morality it is essential, next to the construct of the »corporative actor«, to establish brand as »post-traditional subject« into CSR theory.

Brand as a subject and source of identity

There are different indications that social functions can be attributed to the brand (Hellmann, 2003; Tropp, 2004; Fan, 2005; Demetz, 2005). This perception results in a new understanding of the construct »brand« in different scientific disciplines. From the traditional role of brands – to only mark products – to branding theories oriented towards the personality-principle, there has been a constant evolution in the role and understanding of brands. Nowadays, the actual communication imperative and the social implications2 characterize an up-to-date understanding of brands. Some research approaches assign systemic aspects to the brand, whereas communication and reputation – as specific form of communication – characterize the systemic denotation. Otte [1993] defines the brand as a social being, which is, as an integral system, in continuous interexchange with the environment. This system has the need for self-preservation and expansion as well and it is able to homogenize the behaviour of all concerned. Brand takes a position between the social and economic dimension and, as a socio-economic construct, influences behaviour. Finally, brand as the expressive output of an organisation becomes a relevant factor to analyze the behaviour of an organisation3, with a focus on communicative aspects. The 2

The social function of brands is characterized by the fact not only communication about brands exists, but also communication through brands (Hellmann, 2003).

3

According to Habermas’ Theory of Communicative Acting (1995) communication and behaviour are highly correlated and fundamental for the analysis of social behaviour. Manuel Demetz and Oswin Maurer: Business ethics from a post-traditional perspective, page 6


perception of brands in advertisements is following a meaning-transferapproach which perpetually shows »how to think, how to be and how to live our lives« and it has become a widely accepted dogma (Hellmann, 2003). The fact that CSR cannot be reduced to advertisements only does not diminish the importance of the brand; in fact it is an indicator for the increasing complexity of communication and interaction of the brand at the corporate level.

With regard to CSR, the focal point is not the marketing aspect of brands, but the brand as a »symbolic code« that reflects corporate behaviour and provides for a source of identity. The concept of building identity can be viewed as a continuing process of meaning-construction, based on cultural attributes, whereas in this process cultural attributes have a higher priority than other sources of meaning. Identities are powerful and construct interests, values and projects and provide for a strong nexus to culture, nature, geography and history as well (Castells, 2003). According to Castells, the power of identities is based on the underlying information-codes and the pictographic production.

From managerial point of view, this expressive function can be attributed to the brand and it often absorbs the identity of an organisation (Olins, 2000). Furthermore, the Brand can be considered as a collective social actor and a »subject« for identity. This is used as a starting point for analyzing how brand as a subject of identity can methodologically be fitted into CSR.

CSR, the normative challenge and the role of identity

Lockett, Moon and Visser (2006) point at ethics playing a central role in CSR. The basic question is how to design a decision-making framework for strategic management that, based on the tradition of ethical Manuel Demetz and Oswin Maurer: Business ethics from a post-traditional perspective, page 7


reasoning, focuses on normative principles. The challenge in developing a combined theory of brand and CSR is not only to support management decisions, but also in gaining legitimisation for corporate behaviour (Brink, 2000). Problems of legitimisation always reflect the normative acceptance of strategies and regularities (Ulrich, 1999) and require a qualitative oriented evaluation method.

According to economic theory, the criteria for incentives and for the evaluation of decision-making processes should be based on efficiency. This perception is in contrast to the concept of ethics where criteria primarily reflect moral principles. An interpretation of efficiency, maximising self-interest and applying the principle of functionalrationality4 does not correspond with the ethical tradition, neither to theories of Kant nor to Utilitarianism (Gesang, 2003).

The emergence of criticism against a purely quantitative model for strategic decision-making based on rational-economic5 principles is prominently represented by Mintzberg [1984], Simon [1987] and Stacey [1993]. Extensive critique of a pure rational-economic decision making frameworks is prevalent in Europe. The idea that corporate acting has to follow social relevant rules and cannot be reduced to efficiency criteria only represents the common statement of European scholars (Brooks,

4

Functional-rationality is the key-issue for analyzing the complex concept of rationality (concept of practical-rationality). Max Weber introduced the aspect of technique for describing the rationality of behaviour with technique describing the well-regulated use of certain instruments in abstractive forms. Weber has designed a concept of rationality based on the aspects of instruments, preference-setting and value-orientation, with the instrumental-rationality of behaviour describing the effectiveness of planning by given preferences, and the rationality of choice valuing the accuracy of utility-calculation by given instruments and given exogenous factors. Furthermore, the normative-rationality of behaviour indicates the unifying and systematising power and penetrance of the value-principles that form the range of desirable preferences. Actions that fulfil the aspects of instrumental-rationality and rationality of choice are denoted as functional-rational (Habermas, 1995).

5

In economic theory this critique is summarized by the concept of bounded-rationality. The hypothesis expressly states the fact that the process of decision-making is characterised by limited cognitive capabilities of human beings and thus only restricted or bounded rational (Bourgoine, 2004). Manuel Demetz and Oswin Maurer: Business ethics from a post-traditional perspective, page 8


2005). Therefore, the main challenge in CSR is to strengthen normative analysis between established shareholder and stakeholder positions6.

Brooks (2005) analyses different definitions for corporate social responsibility and finally defines CSR “as the obligation for an organization to be a contributing member to society by maximizing the positive impacts and minimizing the negative effects.� Furthermore this obligation has to address the long-term desires and needs of society. The maximisation of positive impacts of an organisation on society as a strategic target for management emphasizes the importance of ethical aspects in decision-making.

According to the inherent rationale of the corporate social responsibility paradigm, research-approaches need to follow a more holistic perspective. Consequently, any research should be concerned with the strategic importance of CSR to achieve sustainable competitive advantages for the overall organisation (Brooks, 2005).

A similar argumentation also holds for the notion of identity in an organisational context. The criterion of sustainable competitive advantage for CSR is strongly correlated to the criterion of rareness of identity. Asforth and Mael [1996] define the identity of an organisation as a scheme that is closely related to core competencies, which reflects the central, differentiable and enduring aspects of an organisation and it enables management to identify opportunities for growth and innovation. But, it also creates a trade-off, since options that are outside the range of the identity cannot be realized. To be able to create economic value in such a situation, the value of the realized opportunities has to be greater than the value of forgone opportunities.

6

See also Schmidt, 2002; Brink, 2000; Sihler, 2000

Manuel Demetz and Oswin Maurer: Business ethics from a post-traditional perspective, page 9


If this condition does not hold, identity does not provide for a positive contribution to the organization.

Applying the criteria of sustainable competitive advantage and holistic orientation from identity management to the concept of brand, the traditional market7 oriented approach does not work efficiently (Barney and Stewart, 2000). Thus, the concept of identity has a more internally oriented strategic focus and can rather be attributed to the resourcebased-view than to the traditional marketing view.

From a managerial perspective, there is not much evidence on the inputfactors of organisational identity. Birkigt, Stadler and Funck (2003) refer to it as a black box with the main input-factors behaviour, corporate design and communication. Their approach partly also reflects the aspect of symbolism8, which Castells (2003) terms to be central for identities.

A CSR oriented management approach could only result in the expected positive reputation when effective brand communication takes place. At the time, only corporations with brands enjoying high brand awareness become targets of public concern and moral appeals (Coulter and de Man, 2005). According to this positive correlation between brand and social responsibility it seems to be reasonable to bring both paradigms together in order to get closer to the objective of the CSR discussion: to improve the linkages between business and society. The concept of identity allows to create a methodologically link between brand and CSR from an organisational point of view, providing for a way to show

7

A speeding-up of market dynamics with an ongoing concentration of markets would eventually not fulfil the criterion of endurance.

8

According to Castells (2003) the instances that induce identities and hence change the actual cultural codes have to mobilize symbols. Manuel Demetz and Oswin Maurer: Business ethics from a post-traditional perspective, page 10


how identity may fit into positive theory and how it may fulfil the normative aspects claimed by CSR.

CSR, ethics and morality

In contrast to the natural-rights-theory economists have developed a decision-making system that is primarily based on functions and not on normative aspects. Economics, as a political science, is concerned with the problems of society in an overall context by focusing on the question of how the dynamics of an economic system are related to normative regularities in society. With the evolvement of economics as a special branch of science this relationship between economy and society was lost (Habermas, 1995).

The ethical tradition in economics goes back to the Aristotelian theory of ethics. Ethics and engineering9 historically provided for the pillars of economic theory, whereas in modern economic theory the issue of ethics has lost in importance. In recent economic analysis an explicit normative analysis has been strictly avoided (Sen, 1987). A capitalistic and market oriented economy does not neutralize the normative problem, which still does exist, but the system is organized in a way that the problem solving exercise is transferred to the individual (Koslowski, 1996).

The numerous contributions to the ethical problem, summarized by the concept of CSR and corporate citizenship in the last years, could be identified as an attempt to revitalize the normative discussion to achieve an appropriate integration of the economic system in society. The 9

The notion of engineering refers to the approach that is primarily characterized by logistics issues rather than ultimate ends. This engineering approach has come from different directions and is especially connected with the functioning of markets (Sen, 1987) Manuel Demetz and Oswin Maurer: Business ethics from a post-traditional perspective, page 11


emerging need of normative integration is related to the constant decline of social structures that fulfilled those normative functions. Functional differentiation in modern society is one of the most eminent factors causing this decline10. In return, the economization of different spheres of human life can be considered as a continuing process at a global scale. According to Homann, economic theory may become a kind of supra-theory for explaining decision-making process and thus completely absorb the role of traditional ethics (Koslowski, 2001).

One of the main concerns of ethics in decision-making processes is morality, which in a broader sense is a social concept and, similar to the legal system of society, describes a complex system of collective, individual and group-specific beliefs and attitudes that regulate behaviour. Initially, individuals assume this system to be something strictly objective and they get familiar with it during the process of socialisation and interaction. Individuals perceive the normative function of moral principles as something that is exogenous and, in contrast to the legal system, the fact of subjective impression is more important (Birnbacher, 2003). Morality is an inter-subjective necessity and the justification of moral principles becomes relevant in those historical moments, when moral convictions loose the value having been attributed to them in the underlying social and cultural context (Tugendhat, 1984).

White (2004) and Sen (1977) assume agents to may follow various hierarchies of preferences. Moral aspects are characterizing the set of individual preferences for decision-making, as well as suggested by the utility maximising theory of rational-choice. From an analytical 10

According to Luhmann, it is likely for morality to become a more and more marginal aspect in a modern, functional-differentiated society. Presently, there are still various attempts to introduce the principle of morality to assure continuity of the single functional systems in society. But compared to

Manuel Demetz and Oswin Maurer: Business ethics from a post-traditional perspective, page 12


perspective, the identification of moral aspects raises a lot of difficulties because moral specific terms, sanctions and emotions can only be described through the same concept of morality. Representatives of the universalistic concept of morality tend to use the criteria of actionrelated, categorical principle, generality and universality as the main parameters for describing morality (Birnbacher, 2003).

Identity and communicative aspects of morality

Although in sociology the ethical discussion has never been a dominant issue, important innovations in ethical thinking have emerged from the influence of social theorists and social philosophers11. According to Reckwitz (2001), a reflection of social aspects cannot be fruitful if it does not include concerns about the meaning of morality and the relative social practice. The erosion of morality in modern society is the outcome of formal rationalization, according to Max Weber’s theory and the ongoing process of functional differentiation12. Morality has lost its function of creating social cohesion (Reckwitz, 2001).

Starting from this one-way view, there has been a growing interest in introducing an »alternative« concept of morality, which has to be comprehensible in philosophical terms and fit sociological analysis as well. As an alternative to the predominant Utilitarian and Kantian conception of morality, this so-called “third” definition of morality focuses on a culturalistic definition of the moral problem in contrast to

the situation in stratified societies, morality has lost its importance. Nowadays, morality is socially parasitic (Reckwitz, 2001).

11

e.g. Theory of Justice [Rawls], Discoursive Ethics [Habermas], Political Philosophy [Nozick], Communitarism [Nussbaum and Walzer], Neopragmatism [Rorty] and the late-work of Foucault, Derrida and Bauman (Reckwitz, 2001)

12

Prominent representatives are the sociologists Durkheim, Parson, Luhmann (Rechwitz, 2001)

Manuel Demetz and Oswin Maurer: Business ethics from a post-traditional perspective, page 13


the formal-rational oriented analysis13. Ultimately, morality is linked to the problem of collective and individual identity (Reckwitz, 2001).

Morality does not only care about general rules concerning the do’s and don’ts in society, it focuses on the valuable sources of meaning that shape the common patterns of lifestyle in society. Furthermore, morality describes the cultural specific dimension of »what is good«, which creates the background for the apparently neutral principle of justice (Reckwitz, 2001).

Moral questions become relevant, when actors try to give a meaning to their life and consequently behave in a way so that they can succeed in creating an identity by making use of symbolic and valuable codes. Moral problems are problems of individual and collective identity and thus are prior to all problems of rational action-coordination. The problem emerges when actors ask themselves to which kind of lifestyle their self-image may correspond (Rechwitz, 2001).

The problem of morality is closly related to the problem of communication: morality is not a pure abstract and a rational notion, but a social interexchange. Thus, ethical analysis is not only normative thinking, but also normative rhetoric (Jensen, 2001). Moral communication differentiates between what is admissible and what is not admissible. In contrast to the rationalisation strategies in economics, it is the claim of moral communication to create a common awareness on how situations of advantage/disadvantage could be avoided. In the end, situations demanding negotiations of to the Coase-Teorem type would not be relevant. A common objection against a rationalisation of 13

Utilitarianism and Kant’s ethic appear to be contradictionary traditions of ethics in first instance, but both ethical concept assume that the problem of morality is a problem of action-coordination of free individuals (Reckwitz, 2001). This perception corresponds with the Coase-Teorem that is concerned with the negative externalities as an effect of different preference-settings (Priddat, 2000). Manuel Demetz and Oswin Maurer: Business ethics from a post-traditional perspective, page 14


morality is based on the fact that moral behaviour can evoke further moral behaviour. Thus, the relationship between morality and economies should not be taken as a behavioural restriction, but as a production process that enables organisations to create new moral insights. The claim for explicit communication of moral behaviour is the main difference to rationalisation strategies14 and the expressive aspect of morality can be considered as a source of innovation (Priddat, 2000).

From this perspective, the expressive output of morality can be attributed to the brand15. Since brand is an interface between the identity of the organization16 and the identity of the market17 (Hellmann 2003), the expressive function of brand determines the moral aspects. Furthermore, Hellmann (2003) argues that this model of structural linkage finds a significant echo in brand research. In this context, the identity of an organisation constitutes an interesting factor with regard to the normative problem of managerial practice. However, an ethical theory concerned with identity has to be able to conceptualize morality primarily as a parameter of distinctiveness and consequently identity, and not with normative aspects based on traditional ethics (Corsi, 1997).

14

In the context of this analysis it is not possible to deepen this argument. However, it would be interesting to confront the ÂŤTheory of Communicative ActingÂŤ of Habermas with the Coase-Teorem to obtain new insights into communication and rationalisation within an organisational framework.

15 16

See also Gustafsson (2000)

According to Castells (2003) the primary sources of meaning for social actors are formed by collective identities.

17

For the corporate brand the market is represented by all stakeholder: customers, management, employees, financial markets, etc. Manuel Demetz and Oswin Maurer: Business ethics from a post-traditional perspective, page 15


Conclusion

What is the importance of identity, code and expressive function of morality as a productive output for CSR? Going back to the starting point, the problem of ethics, and consequently morality, is one of the central issues in CSR. In business ethics the concept of the »collective actor« is used for describing the ethical behaviour of organisations, whereas the »collective actor« is embedded in the context of market competition (Suchanek, 2001; Haase, 2006). However, this construct shows fundamental deficiencies in its ability to describe moral behaviour, since it is possible to attribute action but not behavioural consciousness to »collectives« (Birnbacher, 2003).

The extension of the idea of brand as a »post-traditional subject« allows for a different perception of moral problems in business practice. Ethics itself has to be refocused: from a formal-rational oriented analysis to an identity, cultural-oriented approach. This allows for integration of brand into the CSR paradigm and allows to evolve towards the development of positive theory. The term post-traditional is used due to the fact that the problem of ethics is primarily identity based and not normative as suggested in traditional ethics.

In sociological studies a growing interest for the ideas of identity and en-/decoding is prevalent. Particularly new evolvements in systemtheory provide important contributions for further research. The main background for actual discussions builds on the theories of Luhmann. The methodical discourse in system-theory itself is highly abstract and it has not been developed properly in a managerial context. Further research efforts could be very fruitful, since communication plays a central role in system-theory and it would allow to create a link to brand and identity aspects as well. Furthermore, the idea of autopoiesis as a Manuel Demetz and Oswin Maurer: Business ethics from a post-traditional perspective, page 16


central paradigm in system-theory could be linked to evolutionarytheories18 in management and economics.

Finally, more research into the post-traditional aspect of brand is needed, whereas the primary focus should be on the definition of basic cultural and economic concepts from a managerial perspective. In this context, CSR research may need to focus more on identity, encoding/decoding, communication and symbolism and not only on normative aspects. The system-theoretical framework could be an interesting perspective for developing an integrative and holistic view of CSR theory.

In addition, the dynamics stemming from the CSR discussion should be beneficial for overall cultural and societal development. Thus, the problem of ethics and its practical aspects should not lead to a one-way street. In a ÂťnewÂŤ society also an old problem like morality needs methods and instruments that are more than a renaissance of the established theories of Utilitarianism and Kant.

18

As admitted representatives of the evolutionary concept in management is Malik (St. Gallener School) and in economics are Nelson and Winter. Manuel Demetz and Oswin Maurer: Business ethics from a post-traditional perspective, page 17


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