Proactive Versus Reactive Business Ethics Performance: A Conceptual Framework of Pro®le Analysis and Case Illustrations
Proactive Versus Reactive Business Ethics Performance: A Conceptual Framework of Pro®le Analysis and Case Illustrations
Proactive Versus Reactive Business Ethics Performance: A Conceptual Framework of Pro®le Analysis and Case Illustrations
Goran Svensson is an Associate Abstract The topic of this paper focuses on proactive versus reactive business ethics perform-
Professor at the School of ance in the marketplace. The internal perception of a corporation and the external perception
Business and Engineering, of the same corporation are used as generic determinants of business ethics performance.
Halmstad University, Sweden. In turn, they are underpinned by evolutionary and contextual issues in the marketplace. The
Tel: 4635167100, E-mail: authors provide a generic conceptual framework of proactive and reactive business ethics
[email protected] performance. Case illustrations underpin the positives and negatives of proactive and reactive
Greg Wood is at Bowater School business ethics in the marketplace. A pro®le analysis process of proactive and reactive business
of Management and Marketing, ethics performance is also outlined. The gap between the internal and external perceptions of a
Deakin University, Victoria,
corporation's actions becomes crucial to achieve successful business ethics performance in
Australia. Tel: (61) 03 55 633 538,
the marketplace. Therefore, a corporation's current business ethics performance should always
Fax: (61) 03 55 633 320, E-mail:
be regarded as an on-the-spot-account that is either proactive or reactive. An important insight
[email protected]
of this research is that business ethics performance requires the ongoing re-connection with
reality by corporations.
Keywords Business ethics, Business performance
Introduction
The revelations of transgression by high pro®le corporations has once again led society to focus
on the practices of its major corporate entities. The activities of these famous companies have
now led to them becoming infamous. The list reads like a who's who of US business: Enron,
Worldcom, Arthur Andersen, Xerox, Merrill Lynch.
In each one of these situations, the point of interest focuses on the incredulity of society at the
unethical and in some cases illegal behavior that has been revealed. In many of these cases, we
have seen impassioned and eloquent defenses of the corporation's behavior: behavior that to
many others has been reprehensible. The main perpetrators appear to be less than contrite in
their acceptance of responsibility for their actions and that of their corporations.
How could these business executives have perpetrated these acts of deceit with such an
apparent disregard for those individuals that they would affect? How is it that their business
ethics performance could be so far wide of acceptable business conduct? How could they
have so misread the mood of the society as to the severity of their behavior? These questions
perplex and confound us, as we continue to witness, from generation to generation, the same
indiscretions wrapped in different circumstances with different actors, but no less recognizable
as the same unacceptable business conduct. How can business executives and the actions
they perpetrate in the names of their companies be so wide of the mark in respect to societal
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expectations of business behavior? While this paper does not attempt to answer these
conundrums, it does focus upon the need for business executives to consider that there are
two perspectives that must be considered in all situations: the corporation's view and the
society's view. Not to consider the perspective of both groups is an omission of the highest
order and invariably sets the scene that leads to the inevitable dereliction of duty and self-
centered decision making that in the end unravels for the corporation and the society and leads
to the inevitable reality that all parties lose.
In this article, the authors examine this ``gap in business ethics performance''. This gap can be
expressed as the internal perception of the employees of a corporation concerning an ethical
scenario in the marketplace, as compared to the external perception of the same corporation's
performance in respect to the same scenario by the marketplace and by the society in general.
We contend that one needs to consider both evolutionary and contextual issues to form a
comprehensive picture of the situation. Consequently, the outcome of business ethics per-
formance is based upon two generic determinants, namely one internal determinant (i.e. the
internal perception of a corporation) and one external determinant (i.e. the external perception
of a corporation). These determinants are generally applicable across companies and across
different industries. Therefore, there is a genuine justi®cation to examine and develop a generic
conceptual framework surrounding them in the marketplace.
The objective of this article is to conceptualize and describe the business ethics performance
of corporations based upon the internal and external perceptions of corporate actions in
the marketplace by considering different contextual and evolutionary issues. The dichotomy
of internal and external perceptions is the source of proactive and reactive business ethics
performance. Proactive business ethics refers to a ``step-ahead'' performance of the internal
perception in relation to the external perception, while reactive business ethics refers to a ``step-
behind'' performance, where the corporation lags behind accepted societal expectations in a
given situation requiring ethical behavior.
Frame of reference
Townsend and Gebhardt (1997) write that the way that corporations go about their business
activities, with particular respect to business ethics performance, is increasingly important
to their customers. Customers in the marketplace are becoming increasingly aware of, and
increasingly discriminating against, corporations that fail to meet the customers' criteria of
acceptable versus unacceptable ethical business activities and management principles. We
would contend that this concern does not just apply to customers, but to all stakeholders of the
corporation and the society in general. Therefore, the topic of business ethics performance and
the gap between the internal and external perceptions of the corporation is an important issue
to discuss and for which to develop a generic conceptual framework. The frame of reference is
divided into contextual and evolutionary issues.
Business Ethics
Performance
business, since an individual's culture and perceived context in¯uences their business ethics
decision making. The study reveals some signi®cant differences between the national contexts
examined. Failures to address these differences between contextual issues even within one's
own culture may affect one's business ethics performance in the marketplace.
Fisher et al. (2001) examine the stances of Indian and UK managers towards ethical issues at
work. Eight ethical stances were de®ned. These stances were based upon two dimensions:
1. degree of ethical integrity; and
2. dialectic of ethical purpose.
The tentative ®ndings are that the Indian managers' ethical stances are similar to those
of Western managers, but they are more likely to experience ethical tension between their
personal, espoused stances and those they take at work.
Bucar et al. (2002) develop a conceptual framework for the examination of cross-cultural
differences in ethical attitudes of business people based upon the assumptions of integrative
social contract theory. The study reveals the relevant cultural and economic norms that are
predictive of the level of the ethical attitudes among societies and at the same time they point
out the more subtle impact of social institutions on ethical attitudes of different groups within a
society. Sen (1997) examines the role of cultures in in¯uencing norms of business behavior
and argues for the need to recognize the complex structures of business principles and the
extensive reach of moral sentiments.
Vinten (1998) argues that business ethics has the potential to become a signi®cant aspect of
corporate strategy and culture. Business ethics has to be considered internally and externally in
the ethical audit for it places the corporation's value system in its cultural and societal context.
This idea needs to be explored further. We contend that the reasons for the malpractice that we
continue to see in the corporate world are centered upon the self-indulgent, introspective and
myopic perspectives of companies that are not able to transform their thoughts to consider
all possible perceptions and rami®cations of their actions: thoughts that are trans®xed on
corporate and/or personal self-interest to the exclusion of other possible options.
The frame of reference has suggested the managerial importance of considering the impact on
business ethics performance in the marketplace of contextual issues. In particular, business
ethics performance may therefore be seen as an inter-personal, intra-corporational, and inter-
corporational on-the-spot-account based upon the gap between the internal and external
perceptions affected by contextual issues.
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Business ethics performance ± evolutionary issues
Business ethics performance is also surrounded by evolutionary issues (Figure 2). A generic
contextual issue of business ethics performance in the society is time (Svensson and Wood,
2003). Another one is change. The only constant is change. The contextual issues such as the
actors, the activities and the resources in the marketplace are in¯uenced by the evolutionary
issues. Furthermore, the environment, the atmosphere and the interaction are also affected on
a corporate level. The evolution of contextual issues in the business environment certainly will
affect what are acceptable and unacceptable business activities and management principles in
the marketplace. The impact of evolutionary issues on business ethics performance is more or
less implicit or explicit in a managerial setting.
Kilcullen and Kooistra (1999) focus on the changing role of business ethics and corporate
social responsibility in the business environment. The study indicates that there appears to be a
change occurring among corporations that is seeing them move from unacceptable conduct
towards acceptable ethical business activities and management principles. Unfortunately, there
are other corporations that still continue to behave unacceptably in the marketplace. They do
not read the signs or do not wish to read the signs that are happening in the general society
and/or the marketplace. They make this omission at their own peril.
Giacalone and Knouse (1997) argue that businesses should use a holistic approach to business
ethics. In order for a corporation to be fully committed to business ethics, its leadership must
foresee what potential problems might occur and then act in a way to prevent such problems
from occurring by implementing three sub-processes:
1. corporational;
2. job related; and
3. cultural.
Yamaji (1997) states that business ethics should not just be a corporate code, but implemented
in the line of business as a corporate philosophy and he attempts to show that these activities
are ahead of the times resulting in greater prosperity for the corporation that uses them.
McDonald and Zepp (1989) also write that evolutionary corporate strategies can in¯uence the
ethical behavior of employees, in respect to such areas as code of ethics, ethical policy
statements, leadership, ethical ombudsperson, ethics committees, realistic performance and
reward plans, and an ethical culture. A growing number of corporations are devoting attention
to evolutionary issues in business ethics. These companies are trying to move themselves
towards an ethical business philosophy in the expectation that ethical behavior by their
employees will result.
Business Ethics
Performance
Internal External
Business Ethics
Perception Perception
Performance
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Consequently, reigning values, norms, and beliefs in the marketplace shape business ethics
performance. Therefore, business ethics performance should be seen as an on-the-spot-
account of the continuous gap between the internal and external perceptions of that which is
viewed as ethical in the marketplace.
Acceptable Unacceptable
The Gap of
Internal External
Business Ethics
Perception Perception
Performance
Reactive
Proactive
Weakness Threat
Strength Opportunity
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dependent upon the contextual and evolutionary issues surrounding the external perception
of threats and opportunities in the marketplace. Therefore, the accurate internal analysis of
weaknesses and strengths of the corporation's business ethics performance is crucial to the
external analysis of threats and opportunities.
Contextual/Evolutionary Issues
Consequences Consequences
(Weakness/Strength) (Threat/Opportunity)
Performance Performance
(Acceptable/Unacceptable) (Acceptable/Unacceptable)
Contingency Planning
(Ethical Evaluation)
Proactive Reactive
(Ahead of Expectations) (Lagging Behind Expectations)
Case illustrations
The generic conceptual framework of proactive and reactive business ethics performance
introduced in the previous section is supported in this section by a number of real-life cases.
These cases illustrate the in¯uence that proactive and reactive business ethics performance has
on corporate actors, activities and resources in the marketplace.
The Joe Camel case (Jennings, 1993) between 1913-1997 centers on the use of a cartoon
character in order to position cigarettes as an acceptable product of choice for the youth
market. The Joe Camel advertising campaign re-launched by RJ Reynolds in the late 1980s
was so successful that it lifted the Camel brand name in sales from 2.7 percent to 3.1 percent
market share.
At the same time, the corporation also attracted the ire of the US Surgeon General who was
opposed to what appeared to be a blatant attempt to make Joe Camel ``cool'' and thus appeal
to the youth market. In three US studies, as reported in the Journal of the American Medical
Association, as many children aged six recognized Joe Camel as recognized Mickey Mouse. At
the time of the Joe Camel campaign more damning evidence of the health concerns of cigarette
smoking was coming to the fore.
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more than usual pressure to deliver a successful mission. On the night before the ¯ight, Roger
Boisjoly of Morton Thiokol once again expressed his concerns and abject reservations about
launching the shuttle in the weather conditions that were to prevail on the day of the launch.
Under extreme pressure he was asked to compromise his professional judgement and to think
subsequently from a management perspective which in itself was code for everyone's self
centered need to think ®rst of the ``commercial good'' of the venture. He relented and gave the
all clear for the ¯ight.
The CEO of Exxon, Lawrence Rawl, reacted inappropriately when he did not comment on the
spill for nearly six days nor did he appear at the scene of the disaster. He had misread the mood
of the nation and the power of the environmental lobby. The ecology of the area was severely
damaged as were the livelihoods of the communities that depended on the pristine sound.
The corporation agreed to a clean up plan that was seen by many as inadequate. As the
investigation into the disaster unfolded, it was discovered that the safety equipment supposedly
in place to contain spills was inadequate and costs had been saved in this area over the years
by not maintaining the safety plan and the condition necessary of the equipment that should
have been there.
Prior to its launch in the marketplace Ford was aware of this problem. The corporation
conducted a cost bene®t analysis based on the cost of recall versus the cost of indemnifying
victims for the damages that would result when inevitably the cars would catch on ®re.
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hence, would dilute it; and/or they did not have the proper sanitary conditions to prepare the
product. By the time that the mothers had discovered a problem their own milk had dried off
leaving their children often in desperate need.
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has established a reputation for safety that in its obvious extension means a concern for their
customers (i.e. opportunity). This focus has bene®ted the corporation since its inception. This
concern led Volvo to implement safety features that not only challenged the market, but that
established a positive business ethics gap performance with consumers (i.e. proactive). The
public trusts Volvo and its products to deliver as safe a motoring as is possible (Svensson and
Wood, 2003).
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