Business Ethics: A European Review

cis of a communicative A pre theory of the rm

Jeffery D. Smithn
Introduction
Over the last two decades there have been noteworthy attempts to apply normative moral and political theory to the conduct of business rms. These applications draw upon the work of Aristotle, Immanuel Kant, John Rawls, various gures of the social contract tradition, and the writings of the so-called communitarians (see Keeley 1988, Solomon 1993, Etzioni 1998, Donaldson & Dunfee 1999, Bowie 1999, Phillips 2003). A body of literature that has received substantially less attention by business ethicists, however, is the work of European theorists who advocate an approach termed discourse, or communicative ethics. This paper proceeds under the assumption that there is room to develop a communicative theory of the modern business rm that can provide a perspective from which to evaluate an array of normative issues in business ethics, e.g. corporate social responsibilities, stakeholder entitlements and obligations, managerial decision making, and corporate governance. This task, however, is quite complex and cannot be completed in its entirety here; as a result, the purpose of this analysis will be to provide a preview of a more comprehensive application of communicative ethics. My focus will center on the rst step of such an application; that is, whether it is reasonable to conceive of the relationships between business stakeholders as part of the communicative, i.e. consensus-building fabric of modern society, or whether such relationships are merely strategic in a way that emphasizes the satisfaction of private over collective interest. Although the answer to this general question remains open within the communicative ethics literature, I take an approach that maintains that economic organizations are not only partly communicative in nature but it is indeed appropriate that the ideals set forth by communicative action structure the terms of cooperation between their members. Business actors, while strategically motivated in basic ways, cannot be exclusively strategic without jeopardizing the successful attainment of their shared interests. I also hold that communicative action is only enabled through a complicated network of social institutions. If businesses shape and affect the possibility of consensual social action in other spheres of modern society, then they too are partly subject to the normative constraints provided by the ideal of communicative interaction. In what follows, I will develop this position with exclusive focus on the philosophical work of arguably the most prominent communicative ethicist, Juergen Habermas (1990: 43115, 1996a). Since I do not purport to provide an interpretation of Habermas as much as an extension of some of his insights, I assume large, controversial features of his work without defense. The motive behind this exploration is a curiosity in uncovering what entitlements and responsibilities corporate stakeholders assume when they are engaged in the mutually benecial acceptance of risk and reward that constitutes business activity. Broadly speaking, I am

Assistant Professor and Director of the Center for Business, Ethics and Society, School of Business, University of Redlands, Redlands, CA, USA.

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interested in what moral principles are implied from the fact that business organizations are composed of differently situated and differently interested groups of individuals who sometimes hold competing and mutually exclusive ends. How can their diverse economic interests be justly addressed given that these differences stand in contrast to the shared interests they have in the success of the rm? Although I will provide no denitive answers to these questions in this paper, I will begin the process of constructing a communicative perspective from which these questions can be asked.

Communicative and strategic action

Juergen Habermas maintains that moral principles are justied, and ultimately conferred validity, when they meet with the acceptance of individuals engaged in an argumentative discourse about the principles ability to satisfy the needs and interests of all affected parties. His communicative ethics provides a procedure designed to provide an examination of the principles that can govern the interaction and cooperation of a plurality of groups that have disparate value orientations, interests, and conceptions of the good. Institutionalizing argumentative discourse enables a type of coordination of interests by uncovering an insight into the interests of other individuals. This, in turn, builds solidarity between those who reach collective agreement about how to regulate the terms of their social lives. Communicative ethics, unlike other contemporary work in ethical theory, maintains that moral norms governing social interaction are the result of reasoned, dialogical exchanges between differently situated individuals. In this respect, communicative ethics is centrally procedural in that it does not recommend substantive moral norms but, instead, proposes that they result from institutionalized discourses where those affected jointly arrive at well-reasoned principles. Importance is placed on establishing reliable mechanisms for discursive interaction where different constituencies and groups can address competing interest claims on the basis of mutually recogniz-

able needs and solutions. The promise of communicative ethics for business ethicists is that it can provide a procedural vantage point from which the relationships that characterize the modern corporation can be normatively assessed and managed. Habermas limits his normative theory to an exploration of the moral principles that can be rationally justied in the face of the persistent disagreement that characterizes modern, pluralistic societies. He begins this account with the assumption that moral claims have the feature of being made with the anticipation and expectation that there are good reasons to support the validity of the claim that every listener can, in principle, acknowledge. Moral claims, thus, are a species of what I have been calling communicative action, or consent-oriented action (Habermas 1984: 286, Baynes 1992: 80). Communicative action is social activity with the primary aim of bringing about mutual understanding, rational agreement, or consent. Since communicative action is typically mediated by language, Habermas focuses his attention on moral claims and their purported end of enabling the recognition of certain reasons as warranted grounds upon which to accept a normative, action-oriented claim about what ought to be done. Moral assertions are distinctive in that they specify universally valid human interests that are capable of obliging individuals whatever their specic value orientations or limited set of interests. Linguistically mediated moral action, then, is pragmatically based on the presupposition that moral claims can lead to a mutual recognition of the claim through intersubjectively acceptable reasons. In this light, Habermas work can be broadly viewed as an attempt to redeem the Kantian project of uncovering a universal basis for moral principles without appealing to an overly formal conception of practical reason or otherwise controversial metaphysical assumptions about human autonomy. The possibility of universal moral principles rests, instead, on the pragmatic necessity of individuals to coordinate their activities amongst each other on the basis of shared reasons. Habermas maintains that the reasons that support the universal validity of moral claims

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can be uncovered through a process of dialogic interaction among participants who may have very different interests or conceptions of the good life; hence, by identifying principles that express universal interests, he takes seriously the liberal notion that certain human interests can be recognized by all individuals whatever their concrete world views or particular ends. A society that is able to coordinate its activities must rely on claims that everyone can, even if only implicitly, offer their assent. In Habermas terms (1984: 286 287; 1990: 102), the restoration of communicative action, oriented toward consensus, is necessary for the basic processes of socialization, social integration, and shared cultural reproduction. Although much of our day-to-day interaction proceeds in a communicative fashion i.e., we act and speak in ways that implicitly rely on agreement Habermas admits that communicative action often breaks down because of the inability of certain claims to generate consensus. The inability of individuals to act in consensual fashion runs the risk of leading to what Habermas (1990: 58) calls rationalpurposive action action that is not oriented toward rational understanding and mutual consent but premised on the attainment of certain ends not tied to consensus as such. Rationalpurposive actions come in two forms: instrumental actions that are goal-oriented interventions in the physical world, and strategic actions that are attempts to inuence the thoughts and behavior of others for the purpose of achieving private ends. Although there is an overlapping area between instrumental and strategic action, strategic action is particularly worrisome for Habermas because it is social interaction that subordinates, or perhaps purposely avoids, mutual understanding in order to achieve other ends like power, economic efciency, or other egocentric aims. Breakdowns in communicative action can naturally lead to strategic action because coordination needs to take place even without consensus. Strategic acts such as deception, coercion, manipulation, and instrumental purpose can be avoided if breaks in the fabric of communicative consensus are repaired through a discursive process of argumentation; that is to say, action

oriented toward mutual understanding and consensus can be preserved in the face of ongoing disagreement when those who disagree thematize contested validity claims and attempt to vindicate or criticize them through arguments (Habermas 1984: 18). For the special case of moral claims, the efforts to preserve rational consensus through a process of argumentative discourse presuppose a number of rules. Indeed, Habermas (1990: 8693) explains that these rules are inescapable assumptions behind the very effort to engage in communicative action. As long as you are a participant using language to make claims that are designed to secure recognition from listeners, you presuppose that there can be reasons uncovered that support your assertion. The ideal process of presenting and reconstructing this search for reasons just is the pragmatic expression of the very rules that guide Habermasian discourse. These rules include the equal rights of all affected parties to participate in the process of argumentation, an absence of coercive actions, consistency in the use of language, the right of everyone to offer any relevant objection, the truthfulness of all participants, and the right of everyone to express their needs and interests (cf. Baynes 1992: 80). Through a complex maneuver, Habermas concludes that from these necessary presuppositions of argumentative discourse and the idea that moral claims are justied only if they can generate consensus to coordinate social action between individuals, there is one basic rule that all moral norms must meet in order to carry the force of reason (Habermas 1990: 5768; Rehg 1994: 5684). He labels this rule (U) because, like Immanuel Kants Categorical Imperative, it stipulates that all justiable principles must be universalizable. In Habermas case, however, universalizability is not a formal requirement of maxims of action, but a requirement concerning the acceptability of a proposed principle within argumentative discourse.
(U): a moral principle is justied just in case all affected can freely accept the consequences and side effects that the general observance of the principle can be expected to have for the satisfaction of the interests of each individual (Habermas 1990: 93)

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(U) summarizes the basic procedural logic behind moral argumentation and the discovery of acceptable reasons to support a proposed principle: a principle is rationally justied only on the condition that all others who are affected by the principle are rationally convinced of its validity. So the consensus required by (U) is signicant because it identies moral principles that participants in discourse arrive at together by looking for reasons that every other participant can endorse (Rehg 1994: 77, 78). Before exploring the applications of this approach to themes in business ethics, it is worth reiterating some important limitations to Habermas theory. Moral discourse is a process whereby individuals who are communicatively oriented attempt to restore consensus on issues that have temporarily resulted in disagreement. Habermas is careful to stress that his theory itself does not offer any substantive principles; rather, his theory is purely procedural in that such principles can only be determined through actual discourses. Moral claims that are redeemed through discourse represent values that are generalizable because claims that survive the process of moral discourse are those that can be recognized by everyone. Moral reasons, thus, can be understood as discursive reasons, i.e., reasons that can be recognized as acceptable warrants by participants within discourse. The domain of the moral is clearly limited by Habermas to those normative issues that are capable of expressing generalizable interests. Ethical matters concerning individual or group identity, value-oriented assessment of personal ends, or questions of the good life are important to be sure; however, discourses concerning these questions are not geared toward the mutually expectable values discovered within moral discourse. Habermas envisions his communicative ethics as providing the conceptual framework needed to develop a theory of justice that articulates the basic elements of a stable system of public morality. Although he is reluctant to specify the content of this system, the demands of public recognition through individual rights, liberties, formal opportunities, guarantees to a life consistent with ones lifeworld commitments, and

distributive schemes that acknowledge the importance of economic resources in the attainment of these entitlements are likely candidates for universalizable moral principles.

Communicative ethics and business

There are two general ways in which communicative ethics is relevant to business. First, as an institution that affects the distribution of rights, responsibilities, benets, and burdens in modern society, businesses and their agents have responsibilities to uphold the principles that are identied and justied through public moral discourse. Insofar as consensus emerges about the appropriate ways to encourage and regulate business activity there are norms to which businesses ought to adhere. In other words, businesses, at a minimum, need to further the interests of all who are affected by their activity. Second, corporations, despite being largely private associations, are stable and successful only when it is recognized that the relationships between their stakeholders are communicative, and not merely strategic in nature. This fact yields the interesting result that discourse is not simply a mechanism to regulate business at the level Rawls refers to as the basic structure of society, but is also germane to the negotiation and management of moral concerns between consociates within organizations. I will take up each of these applications in turn (Rawls 1971: 7). Public morality, law, and business Habermas discourse ethics is a theory of social morality that governs the entire scope of public interpersonal and institutional relations. To the extent that businesses are units of civil society that impact such core human interests as self-determination, opportunity, and welfare, there are welldened responsibilities to the general interest of citizens. Reed (1999a, b), for example, has argued that business activity functions in the general interest only when three conditions are met. First, individual prot seeking through cooperative modes of production is justied only when the rm intends to provide gains in economic

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welfare to its stakeholders and that these gains are appropriately distributed to everyone who has contributed to the rms productive activities. Second, because of specic failures of the market to deliver such gains in welfare, there are generally recognizable reasons to prefer regulatory structures that ensure the protection of the natural environment, public safety, and competition in order that the public benets of individual prot seeking are realized. Finally, business activity upholds the general interest as long as it does not invade other realms that should be governed by non-economic ends. Reed is particularly concerned with the ways in which businesses have been able to supplant reective individual choice by contributing to the creation of a consumer culture and how the ends of business have distorted the communicative aims of other institutions, e.g., political parties and administrative agencies. Another way that the norms of public morality are brought to bear on business is through the creation of relevant laws by legislative, administrative, or judicial means. This issue receives extensive treatment within Habermas (1996b) theory of law in Between Facts and Norms. There he develops a principle of democratic law formation whereby formal political institutions have a central (although not exclusive) role to play in the maintenance of legitimate law. According to his so-called principle of democracy, Habermas (1996b: 110) maintains that statutes can claim legitimacy only when they meet with the assent (Zustimmung) of all citizens in a discursive process of legislation that . . . has been legally constituted. Laws consistent with this principle reect a kind of popular autonomy among the citizenry to reectively endorse the laws to which they are to be subjected (Habermas 1988, 1996b: 118131; Reed 1999b: 26). Habermas (1996b: 107) draws an indirect, but important, connection between (U) and the principle of democracy. Indeed Habermas holds that both principles are co-original in the sense that the normative realms of morality and legitimacy are derived from the same core principle, (D), expressed in the very idea of communicative action, i.e., that an action norm is valid only on the condition that all of those who are possibly affected by it could nd reason to

accept its role in regulating social life. The key difference for the domains of morality and legitimacy rests in the fact that legal discourses encompass moral, ethical and pragmatic reasons in the course of examining the validity of a proposed law. The creation of law characteristically takes into consideration a wider array of functional questions and aims (e.g., assessments of efcient means and strategies), focuses, at times, on negotiation and bargaining processes, and tends to be concerned with concrete problems and policies rather than the mere implementation of abstract moral insights (Rehg 1994: 219; Habermas 1996b: 453). Still, the fact that Habermas (Habermas 1988: 243244) argues that legality can produce legitimacy only to the extent that . . . legal discourses are institutionalized in ways made pervious to moral argumentation exposes the deep linkage between legitimacy and morality that Habermas derives from the ideal of communicative action. Law, in a fundamental sense, is a mechanism for the integration of moral interests into norms that are implemented and enforced through positive means. In this light, corporate agents can be said to act illegitimately when their actions either (a) contravene the established provisions of existing legitimate law or (b) undermine the conditions necessary for the ongoing development of legitimate law (cf. Reed 1999b: 27). The former requirement needs little explanation beyond the fact that businesses are legal agents subject to the constraints endorsed through a discursively structured legislative process. The latter provision is more complicated, but no less important. Habermas stresses that modern society must be understood as a self-legislating legal community that seeks to organize its common life on the basis of laws that receive the assent of all affected individuals. The ideal of a self-legislating polity necessitates the legal recognition of certain rights, all of which are necessary to maintain a society constituted on the basis of law, so construed (Habermas 1996b: 121126). Accordingly, basic rights of private autonomy are necessary to preserve the freedom of speech, conscience, movement, and association necessary to engage in public discourse. Habermas also outlines rights to

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legal protection and due process under the law so as to prevent capricious penalties against those who express dissent or who are otherwise subject to the authority of other, more powerful institutions. Finally, he argues for two broad categories of legal rights that protect individuals entitlement to direct and indirect participation in legislative processes as well as the welfare conditions necessary for the exercise of all other rights (Baynes 1994: 210212). It is therefore incumbent upon corporations to refrain from activities that undermine these rights because they serve as necessary conditions for the development of legitimate laws. Such expectations may include, for instance, prohibitions on penalizing employees who are interested in organizing labor unions, respect for the privacy of employees in the workplace, an employer provision of due process before dismissals, and the responsibility not to engage in political activities that undermine the ability of individuals and communities to effect legislative change. With this said, we should resist the temptation to conceive of corporate responsibility as arising merely from the external constraints of public morality discussed thus far. Viewing the rm as simply one of many regulated institutions fails to address the special divisions and relationships that characterize life within the rm. As a number of contemporary stakeholder theorists have argued, the unique nature of commercial relationships, and their associated risks and rewards, generates special moral considerations beyond mere obedience to politically endorsed regulations (Phillips & Margolis 1999). Moral matters in business are characteristically matters about how agents within the organization are to exercise moral discretion and balance the interests of individuals who make contributions to the success of rm. Such issues are not exclusively a function of how the institutions goals t within the larger aims of civil society or how the outcomes of business need to be adjusted to suit norms that take into account other socially endorsed principles. Letting moral obligations trickle down to business merely from the prior demands of the law similarly neglects the observation made by others that business is itself a union of individuals with shared, yet simultaneously distinct interests. Opting for a denition

of corporate responsibility that stipulates that businesses have responsibilities only as members of civil society ignores this complexity and leaves businesses qua businesses immune from direct moral scrutiny. It is fruitful to understand how corporate responsibilities t within the politico-legal recognition of universal moral norms; however, businesses, as organizations, are signicant in their own right in helping to shape the possibilities of communicative action. Corporations are successful to a large extent when their stakeholders can identify and share interests that enable efcient coordination of their efforts. The prevalence of work, expansion of private enterprise into areas formerly managed by public entities, and the dependence of local communities on corporations for development, underscore how the interests of all corporate stakeholders are intimately connected with one another. Thus, in approaching the application of communicative ethics to business, I contend that we must be attentive to both the need for corporations to internalize moral responsibilities as well as identify and apply such responsibilities via moral discourse at the organizational level. I will take up some challenges to this contention in the following section and then move to a more systematic review of the communicative dimensions of stakeholder relationships. Communicative action within organization The normative authority of Habermas procedure of moral discourse originates from the practical commitment of individuals to engage in communicative action. There is no a priori or otherwise metaphysically controversial foundation for communicative ethics; its foundation rests simply in the analysis of the normative presuppositions behind actions oriented toward reaching mutual understanding. This point is crucial; for if businesses, as social institutions, are thought to further communicative ends, we should expect business relationships to exhibit this pragmatic characteristic. Upon rst blush, however, this seems dubious; there is a rehearsed history of argument in business ethics that speaks to the inherent strategies that lurk

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behind the motives of business agents. The fact that stakeholders often enter into business relationships with doubts about trust, solidarity, and the extent to which other stakeholders may employ strategies that compromise their interests suggests that business relationships are inherently strategic rather than communicative. More to the point: business actors take their relationships with other stakeholders as strategic in the sense that they expect stakeholders to employ tactics that further some specied goal (often a self-interested goal) at the expense of mutual understanding and consensus-building (French & Allbright 1998). Would not this speak strongly against the institutional application of communicative ethics in the way that his being suggested? This question can be cast more precisely by examining three distinct types of rationalpurposive action in business that may, sometimes, be rhetorically confused with communicative action. First, competing stakeholder interests may converge through happenstance. In this situation there is little, if any, noticeable conict between the interests of stakeholders but it is nonetheless accurate to assert that stakeholders are primarily motivated by egocentric goals. Take, for instance, the convergence of strategic interests that results from technological innovation in product development. Innovation often results in market position, brand name recognition, and growth in revenue for managers and shareholders. At the same time, consumers often receive strategic benets from the development of products that better suit their needs and preferences. Here the motives behind manufacturer and consumer decisions are not oriented toward the mutual recognition of each others interests, i.e., through respect and recognition of their interest claims, but, rather, on the calculated satisfaction of selforiented aims. In this regard, the action exhibited in this category of rationalpurposive action is instrumental in Habermass sense of the term because while managers, shareholders and consumers can be said to share the end of technological innovation, their reasons in favor of innovation are completely self-interested. Second, consider the category of cases where there is a convergence of stakeholder interests not

through happenstance but through negotiated collective action. The most obvious examples of such forms of strategic action are negotiated labor disputes. If we assume that a negotiated dispute is strategic in character, then, again, the convergence of assent between employees and managers does not have its roots in mutual recognition of some asserted interest, or a shared rationale as to why the settlement is preferable, but simply an agreement that relies on the contingent, overlapping aims of each party. A similar strategic analysis might be offered for manufacturers and suppliers who compromise in good faith about the terms and conditions of a long-term contract only in the name of their private accomplishments. Finally, there are undoubtedly situations where a stakeholding group asserts their interests by attempting to subordinate or suppress the satisfaction of another groups interests. Call this kind of strategic action intentional control of interest satisfaction. Acts of manipulation, deceit, and coercion are likely to be placed in this category. A neglect of long-term shareholder wealth by intentionally misleading investors through inaccurate nancial statements or overt attempts to deceive through crafty advertising schemes may serve as instances of the intention to control interest satisfaction. We should expect interesting cases of strategic action under all of these headings. But notice that while we can uncover examples, this, by itself, leaves the question of whether agents implicitly or explicitly engage in communicative action largely unanswered. Habermas speaks of strategic action as following the rules of rational choice so as to efciently inuence the decisions of an opponent. It is, in his terms, an attempt to purposefully change the behavior of others to accomplish an end to which you have committed yourself. Individual success, dened by the attainment of egocentric ends, is denitive of strategic action (Habermas 1984: 286). It would certainly seem as if the latter two categories of rationalpurposive action, i.e., convergence through negotiation and intentional control of interest, exhibit features of this sort of action. Yet the fact that business is characterized by strategy need not imply that its individual relationships are exclusively structured

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by strategic motives; nor need it imply that communicative purposes are absent from the motives of stakeholders. It is a mistake, in short, to point to instances of strategy and infer from those instances that strategy is constitutive of any business relationship whatsoever. It is one thing to notice the presence of strategic action. It is quite another to infer that its presence normatively structures what we expect of actors. Moreover, strategic and communicative motives hardly seem mutually exclusive in the way suggested by these general categories. The reasons that a labor union may have to support a negotiated settlement can be simultaneously selfdirected and take account of the interests of other stakeholders.1 A process of negotiation often involves what is casually referred to as a giveand-take process. A prior demand or condition is sometimes given up by one party in order that other, more pressing concerns are addressed in a would-be settlement. Stakeholders take what they nd most important, in part, because of a recognition of what other parties may legitimately nd objectionable. The motive in such a process may be self-interested in the sense that each party is motivated to negotiate on the basis of what serves their interests; however, this would not exclude the possibility that the interests of others provide acceptable limits on what sort of settlement is eventually endorsed. Communicative action can, in short, drive a process of searching for norms of social coordination that are nonetheless shaped by each partys own interest in discussing the norms in the rst place. It is also mistaken to assume from the fact that stakeholders often compete for entitlements or the satisfaction of interests that such competition is preferably resolved through mere strategic means. This comment is issued from the perspective of stakeholders themselves. Political philosophers often refer to situations characterized by a competition for resources and entitlements as exhibiting circumstances of justice (Sandel 1982: 28). It is fair to say that, in many situations, stakeholders are involved in circumstances of justice where they, in effect, offer competing claims for consideration and interest satisfaction. The fact, however, that such circumstances are

characteristic of modern business life should not deter us from noting that resolutions to such conict need not take the form of rational purposive attempts to assert ones interests over the interests of an opponent. Strategy, as a species of rationalpurposive action, is characteristically a way that individuals respond to situations of conict and competition; however, it is unlikely that stakeholders conceive of conict resolution purely in terms of asserting their interests at the expense of others preferences. Work in the area of multi-stakeholder dialogues and the interaction between corporate constituencies, especially between non-governmental organizations and high-level management, has shown how dialogic processes facilitate the shared goals of interest group consideration, trust, exibility, access to information, and agendasetting power (Bendell 2003: 6768). Stakeholders typically have shared goals about the long-term success of the rm and the fact that they seek very broad-based outcomes in common serves as an impetus to address coordination problems in ways that improve the chances of reaching these goals. Stakeholders are thus likely to engage in cooperative behavior at the level of conict resolution and policy creation; for a lack of such procedural cooperation tends to undermine the satisfaction of shared interests (Cohen 2003). This underscores the extent to which the distinction between strategic and communicative action within economic organizations is not to be taken as an unquestioned dualism, but two interlocking pieces of coordinated social action.2

The communicative dimensions of business

To make these points more plausible it will be argued in this section that there are four important reasons to suppose that business actors proceed with communicative, rather than exclusively rationalpurposive, intentions. These reasons include the shared purposes of stakeholders, the collaborative nature of decision making in organizations, the tendency to seek mutual recognition, and the need of communicative

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action to sustain the coordination necessary for the rm to achieve its economic goals. Shared purposes and collaboration Business stakeholders have a number of interests that not only coincide but, in a stronger sense, are shared. These shared interests express an underlying sense of purpose that circumscribes the expectations and shared intentions of each corporate stakeholder. First and foremost, each stakeholder implicitly recognizes the importance of economic ends like market share, growth, innovation, cost minimization, return on investment, and meritocratic rewards. This is an obvious truism for the most immediate stakeholders such as employees, nanciers, and suppliers. Customers too tend to have an interest in such goals because the increased price competitiveness of goods and product innovation tend toward preference satisfaction. Even communities that often have little input in the eventual location of businesses typically come to recognize the importance of a relationship with a competitive, stable corporate partner. Second, it is arguable that many stakeholders share interests to the extent that their identities are tied to the rms operations as a persistent and purposeful community (cf. Bowie 1999: 82119). Employees that have long-standing relationships with management teams, for instance, understand themselves and their cohort as part of a larger network of individuals with similar histories, problems, and experiences. Indeed, a corporations mission statement, code of conduct, and organizational structures will often implicitly dene itself as a social union based on a shared identity because of the commitment and concern stakeholders have for the success of the rm. This observation highlights Habermass point that different groups often share a core set of interests that naturally leads them to coordinate their activities to further what they perceive to have in common. Many times this coordination operates in the background without examination; at other times, common purposes need to be brought to the fore in the context of discourse in order to articulate generalizable solutions to

identiable conicts between stakeholder interests. In either case, however, the fact that stakeholder relationships are measured by this ideal of mutuality indicates that the pragmatic foundation behind communicative ethics has relevance to economic organizations. Moreover, the fact that stakeholders have core interests in common will often provide the basis for ongoing interest exploration that yields co-created meanings that tends to enhance problem identication, conict resolution, and managerial responsiveness within organizations (Crane & Livesey 2003: 4849). Consider, for instance, the experimentation with the so-called farm out committees in industries dependent upon highly technical maintenance and production. A ne example of such a committee was established by Northwest Airlines (NWA) as part of negotiated labor settlement where technicians gave up wage increases in exchange for stock ownership and control over sourcing decisions (Smith 1998). These committees disseminate information to labor unions who wish to competitively bid on work that would otherwise be outsourced. The ability of labor unions to compete for work that would normally be sent to other rms creates a sense of accomplishment, tangible recognition of their achievement, savings on maintenance costs and, of course, job stability. In a real sense, management and labor both discover, through a process of exchanging information and creative problem solving with the other party, that their shared interests in cost minimization and information sharing are mutually recognizable from the others perspective. A similar sort of linkage between shared organizational ends and communicatively oriented action is illustrated by other well-known cases of collaboration between employers, managers, and suppliers. The Saturn Corporation, for instance, responded to customer complaints during the late 1980s by developing a relational employment contract that stipulated how labor and management team members should strive to have joint decision-making responsibility at all levels of the organization (Calton & Lad 1995: 15). Inspired in part by Japanese management models, Saturn encouraged critical exchanges

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among labor and management as a means to generate more widely recognized solutions to problems faced in the automobile industry. A special committee was formed that made the union, the United Auto Workers, an institutional partner in participating in consensus-based decision-making from the shop oor to the levels of senior management (Kochan 1999: 1). The union and its membership were integral members of the decision rings established throughout departments and production facilities that helped to make strategic decisions regarding supplier contracts, product development, implementation of technology, and marketing (Calton & Lad 1995: 15; Kochan & Rubinstein 2000). Grounding this effort was the commitment that all stakeholders had something to gain by becoming more aware of the interests of customers and creating efcient production and supply chain policies. Collaboration of the sort being described by NWAs outsourcing committee and Saturns management committee are noteworthy because there is a presumption in both cases that mutual consent is a large part of how strategic problems are resolved. Solutions are not sought that merely look for a convergence of stakeholder interests in proposing policies and decision-making procedures although this is certainly part of the motivation. The entire explanation behind these avenues of organizational policy making rests on the fact that collaborative decision making is a way to fully understand organizational problems and solutions. This commitment is prior to the advantages provided by mere negotiation; it recognizes that negotiation is more fruitful and sustainable when decisions are sought which integrate interests, objections and proposals of different stakeholders. So, like Habermass procedural rule of moral discourse (U), participants in such collaborative techniques view solutions as justied only after seeking the assent of others who are critically engaged and take seriously the multiple stakes of a proposed course of action. Mutual recognition A second observation relevant to the communicative dimensions of business activity concerns

what business actors expect of others: stakeholders naturally seek to meaningfully address moral conicts through an implied exchange of reasons. It is clearly true that stakeholders disagree about how interests should be balanced in difcult circumstances. This disagreement, however, is meaningful and important to resolve only because stakeholders tend to acknowledge that their needs and interests are most effectively satised through a sort of joint resolution that enables a continuation of the productive activities of the rm. This point is subtle but important: any self-interest a stakeholder may have in resolving a conict in a particular way is preempted by the realization that sustainable conict resolution is a matter of uncovering consensus through shared value orientations and reasonable expectations of other stakeholders. The particular interests of any one stakeholder are best serviced when that stakeholder engages in activities where there is consensus about what corporate decisions have a rationale endorsed by all affected stakeholders. This communicative feature of business also explains why the demands of stakeholders are typically voiced as claims concerning the unwarranted exclusion of interests from corporate decision making. To see this, reect upon the second category of strategic action from above. In that situation, it was suggested that some labor union disputes proceed only because both parties are strategically motivated to achieve some selfinterested aims and they can effectively inuence and change the behavior of their negotiating partners. This picture of negotiated settlement, however, fails to acknowledge the kinds of claims made by stakeholders in labor disputes. For instance, the recent claims made by members of the United Food and Commercial Workers Union (UFCW) in Los Angeles were, quite explicitly, demands for recognition and fair treatment. They asserted that managements plan to require grocery store employees to shoulder a greater share of health insurance costs was unjust in light of the continued growth in net income of Safeway and its subsidiaries (Greenhouse 2003: A10). UFCW members were not merely making a strategic claim cloaked in the language of distributive justice; rather, they were intending

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to make a claim that other stakeholders could recognize and nd reasons to support. If this is correct, then the claims made by stakeholders are intended to secure uptake or generate assent among those involved in negotiation. There were reasons that could, in principle, be recognized by other individuals and groups despite their particular stakeholder afliation. The intention of the UFCW certainly does not guarantee that other stakeholders would accept the reasons voiced. Nonetheless, it does indicate an orientation toward recognition rather than mere strategic play. Coordination and strategic advantage Third, business problems are inherently intraorganizational. By this I mean that problems, and their corresponding solutions, are nuanced, complicated and involve multiple stakeholders. This observation has led stakeholder theorists, such as Freeman & Evan (1990), to speak of stakeholder contracting as a kind of multilateral interdependence, and Aram (1989) to claim that organizational management is premised on viewing decisions as systemic, i.e., as managing interdependent relations. In the midst of such complexity it is rarely the case, if at all, that organizational challenges can be addressed by simple, one-time, dyadic solutions arrived at through a one-on-one negotiation between stakeholders (Calton & Lad 1995: 7). The more interdependent problems and solutions become, the more likely multiple parties are needed to identify solutions that can address the separate stakeholder interests that are jeopardized by any one problem. Hence, an individualized assessment of the interests of each stakeholder fails to recognize that each stakeholders interests are implicated in a web of mutually supportive and sometimes mutually detrimental organizational arrangements. Shared problems, in short, demand collectively rendered solutions not simply because it is valuable to have the input of all affected stakeholders, but because collective solutions to problems tend toward outcomes that would otherwise not be identied on a stakeholder-by-stakeholder basis. The NWA and Saturn cases illustrate how product development,

human resource management, and customer satisfaction are not challenges to be addressed through straightforward agreements but, instead, issues that render effective, long-term solutions only when multiple stakeholders arrive at solutions together (Calton & Lad 1995: 7). To understand the collective dimension of organizational decisions, recall that Habermass interest in communicative action can be recast in terms of an interest in social action; that is, how is collective social action possible? How is it that differently situated individuals, with distinct interests, can come together and sustainably work to achieve common ends? The possibility of such social action relies, in part, upon the ability of individuals within civil societys institutions to coordinate their activities and move together with a sense of mutuality. Identifying business as a purely private entity where decisions are reduced to individuated calculations of self-interest has the effect of obscuring the interdependent complexity of organizational decision making from view. As Sen (1993) aptly points out, a rms shared productive activities are themselves a public good; they play an essential role in satisfying interests for distinct groups while simultaneously representing a unied rather than merely convergent interest in organizational life. This point has implications, as well, for a rms economic performance. Successful attainment of strategic ends is unlikely when actions are motivated purely by strategic end-seeking. This seemingly counter-intuitive conclusion is analogous to a position made famous by Robert Frank and applied more directly by Norman Bowie (Frank 1988, Bowie 1991, Frank 2002). Frank and Bowie assert that the satisfaction of egocentric interests, whether individual or corporate, is only possible in business settings when the conscious pursuit of self-interest is limited by an individual commitment to morality. Self-interest is achieved, in short, only when it is appropriately subordinated (from time to time) to the demands of morality; furthermore, acting morally pays selfinterested dividends only insofar as individuals adhere to the requirements of morality for its own sake not because morality turns out to maximally satisfy other non-moral private aims.

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Similarly, it seems implausible to think that the ends set forth by mere strategic action could be achieved without a cohesive and stable organizational climate in which individual purposes become public and consensus is the norm. Iterated strategic actions are far less effective in achieving ones private ends than action that expresses a commitment to share the experiences, values, and reasons held by other stakeholders. Without a serious commitment to the interests of others, and the interests you share with them, the ends that motivate strategic action could not be realized. Conict resolution based upon the face-to-face interaction of stakeholders exposes motives that might otherwise remain hidden behind the maneuvering of mediators, attorneys, and other representatives. Stakeholders are more likely to engage in agreement and explore mutually benecial alternatives when genuine dialogue is sought, i.e., dialogue that demonstrates an openness to revise or place on hold ones preferred action in light of objections leveled by others (Payne & Calton 2003: 123126). The collective approach to the assessment of organizational objectives and participatory decision making discussed thus far is essential to generating high levels of trust. Trust, in turn, is a prerequisite to long-term interest satisfaction. There have been a number of studies that emphasize the relationship between the costs of production and corporate efforts that weave trustbuilding initiatives into the fabric of their business culture. Social environments where, for instance, genuine trust between management and suppliers is measured at high levels seem to have lower moments of doubt when engaging in new ventures with tangible risk (Bromiley and Cummings 1995). Trust generates consistency, stability, and ongoing condence in business relationships; if suppliers thought that the trustworthiness of management was only as strong as managements perceived regulatory obligations, they may question the viability of their continued agreements. Accordingly, some have argued that unlike weaker forms of trust that are motivated simply by the avoidance of costly non-compliance, cultivating genuine trust within and between businesses tends to cost less than a system where

organizations must pay for the protections that accompany feelings of distrust.
When two or more strong form trustworthy individuals or rms engage in an exchange, they can all be assured that any vulnerabilities that might exist in this exchange will not be exploited by their partners. This assurance comes with no additional investment in social or economic forms of governance . . . . Exchanges . . . between strong form trustworthy rms are burdened neither by the high cost of governance nor any residual threat of opportunism. Strong form trustworthy rms will be able to pursue these valuable. . .exchanges while [other] rms will not . . . . This may represent a source of competitive advantage for strong form trustworthy exchange partners (Barney & Hansen 1994: 186).

Organizational climates where honesty and trust are heartfelt tend to produce higher levels of job satisfaction and productivity that result in lower labor costs (Chami & Fullenkamp 2002). Similarly, others, like Lynn S. Paine (2000), have highlighted the ways in which moral commitments produce monitoring and coordination advantages. The costs of intra-organizational cooperation are lowered when subordinates view directors decisions as legitimate. When fairness motivates managers, the tendency to engender conict is minimized. Moral commitment facilitates a more complete understanding of situational contexts, an ability to mobilize human resources, and communicate with others regarding solutions. In environments where mangers take seriously the spirit of loyalty and delity, agreements are more exible and creative. Even in situations where certain stakeholders shoulder a greater proportion of costs associated with a particular decision, it is likely to meet with acceptance when those affected can trust that decision makers have acted with their interests in mind. Consider various accounts of how CadburySchweppes has approached downsizing decisions (Phillips 2003: 113115). Since the company was founded upon a belief in decision making by consensus, a now famous move to consolidate its packaging facilities was done only after consulting with a team of managers, engineers, and shop stewards. The consolidation

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resulted in the displacement of workers; however, the stakeholders who participated in the working party not only recognized that there were good reasons to consolidate on the basis of Cadburys commitment to its workforce as a whole, but the workers who were displaced recognized that the decision was not made in ignorance of their particular interests. Managers sought out their voice as part of the decision-making process; as a result, Cadbury engaged in a process of cooperative learning that cultivated a sense of trust even among those whose positions were eliminated. All of this, it seems, would be extremely difcult to imagine if it were not for an allegiance on the part of all organizational members to corporate objectives that everyone found reasonable to endorse. Once stakeholders, in particular shareholders, engage in business activity, they enter into an arrangement that requires them to consider how their efforts impact those who are also instrumental in achieving the end of accumulating wealth. Without this orientation, the nexus of social relationships that characterize the modern rm are only as strong as the contingent, and merely strategic, interests adopted by stakeholders at a particular moment in time. Communicative relationships, thus, are what can sustain the existence of business organization without continual breakdowns in collective action. Individual stakeholders acquire and sustain their identities and interests by belonging to corporations, appropriating the culture of the organization, and taking part in interactions that expressed shared values (Habermas 1990: 102). The choice to pursue mere strategic action is, perhaps, possible in any one case; but it is untenable in the longterm if stakeholders intend to further their own interests in an environment where their satisfaction is dependent upon the joint activity of others.

Conclusion
Modern society is a vast array of institutions in which multiple forums for discourse overlap (Baynes 1992: 167181); Habermas himself emphasizes that moral discourse can occur in more or less informal movements and associations in

civil society where solidarities are formed. This is the core reason to take seriously the need for discourse within rms. In A Theory of Communicative Action, Habermas stresses that modern society can be analyzed from two different perspectives (Habermas 1987). The rst, following Max Weber and others, emphasizes society as a system of practices and institutions with distinct forms of rationalization and social hierarchies. Administrative elements of the state and corporations, for example, are part of society as a complicated network of subsystems with seemingly disparate goals, rules, and bureaucratic forms of social control. Society, however, is also a lifeworld in the sense that individuals are members of institutions that foster shared need interpretations, mutual understanding, and consensus. From this second perspective, society is composed of practices that are communicative and thereby focus our attention on regulating society for the attainment of shared interests. Habermas is deeply concerned with the extent to which the maintenance of social subsystems interferes with or otherwise distorts the communicative activities of society as lifeworld. The private ends of business colonize spheres of life that are premised on consensus and discourse (Habermas 1987: 355). A natural way to end this disruption is to expect economic organizations to internalize the ends of communicative action broadly construed. This means that corporations acknowledge their role and inuence in the maintenance of communicative action and take appropriate steps to engage in the process of uncovering modes of social life and principles that express the general interest. This is what leads Daryl Reed to conclude that, all things considered, businesses should include decision-making processes that are participatory unless stakeholders voluntarily accept less participatory schemes for the sake of improvements that they can reectively endorse (Reed 1999b: 30). The remarks offered in the preceding sections are an attempt to provide a conceptual framework for a communicative theory of business. Businesses are not merely bound by moral constraints in virtue of being institutions subject to the demands of public morality through legitimate law; rms are

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also moral communities in which communicative action explains their ability to enhance the interests of all members. The intersection of communicative ethics and the modern business rm is an area ripe for additional exploration. In this discussion I have not addressed a number of obvious concerns with a complete extension of this approach. One noteworthy problem centers on the extent to which the demand for consensus (as expressed in Habermas principle (U)) within business is a realistic and/or conceptually appropriate goal. Indeed there is a case to be made, it seems, that being oriented toward consensus need not imply that consensus serve as a normative standard for right action (McMahon 2000). Another issue concerns how, exactly, discourse is to be institutionalized within organizations. I have given cursory examples of such practices but others naturally surface, e.g., formal stakeholder board representation, management teams, problem-solving committees and strategic collaboration between different units within an organization. Still others will be skeptical that discourse can be maintained in the face of numerous examples of short-term, strategically minded attempts to assert private over-shared interests. While I am sympathetic to this worry (in light of the great conicts that have surfaced between shareholders, managers, and employees), it is important to remember that breakdowns in communicative action do not justify the inference that communicative aims are wholly misplaced in business. The same concern could easily be raised within spheres of modern society where consensus is accepted as a norm; democratic politics, for example, is ripe for strategic maneuvering and, despite this, communicative assessments of democratic procedures is nonetheless appropriate. All of these issues warrant further investigation and shape the research questions for the future development of communicative ethics in organizational contexts.

2. I owe this point to an anonymous reviewer from this journal and a reviewer for the Society for Business Ethics.

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Notes
1. I owe this point to an anonymous reviewer for the Society for Business Ethics.

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