It might be argued that a rigorous study in the field of business and management theory could not adopt a pure philosophical perspective. By contrast, the peculiar effort of this book is precisely to present scholars perspectives useful for academic research in the areas of business theory and philosophy of management, without dealing with specific topics of these fields.
This paper presents the concept of ethical economy (Wirtschaftsethik) and the relation between ethics and economics on the basis of the work of the German ethical economist Peter Koslowski. The concept of ethical economy includes three levels: micro, meso and macro levels; and it also deals with the philosophical analysis of the ethical foundations of the economy. After the discussion of these elements of the ethical economy, the paper presents some possible research topics for a research agenda about economic ethics or ethical economy.
My focus here will be on the university. I do not so much have the Danish Copenhagen Business School (CBS) or MIT in Boston in mind as other big universities, both in Denmark and abroad. It is perhaps precisely because the universities called business schools have business as their main focus that they have been able to integrate humanistic disciplines without severe criticism from outside. In Denmark, for example, the threat against the humanities is much stronger in universities such as Copenhagen University, Aarhus University and the University of Southern Denmark than at CBS. Abroad we witness attacks on philosophy similar to the one we witnessed at the Danish School of Education at Aarhus University in 2010, only the attacks are worse. In Hungary, for example, in the fall of 2010, the new director of the philosophical institute of the Hungarian Academy of Sciences, nominated by the new conservative government that also tried to enslave the press, has dismissed four philosophers and disqualified 15 out of 23 colleagues as “professionally unsuitable” (in German translation: fachlich ungeeignet). In addition, a police investigation has been initiated against the famous philosopher Agnes Heller and the vice-president of the Philosophical Society, Mihaly Vajda, for having received financial support from the former government. In England, a Centre for European Philosophy at the University of Middlesex in London was closed in the spring of 2010, and later on transferred to Kingston University. Moreover, in the spring of 2011, the Philosophy department at the university of Keele was threatened to be closed, but was prolonged for the next year after strong international protests.
For sure, this is only the top of the iceberg. Programs in the humanities disappear or are reduced in many universities today, and there is a worldwide serious threat to the humanities in the universities and scientific academies. In addition, many universities are increasingly turning into management institutions. In light of these tendencies, a fundamental question arises: What is a good university? Since a university is an institution, let us first consider the even more fundamental question: What is a good institution?
2. The ideas of an institution
Paul Ricœur defines the idea of an institution in his book Oneself as Another as “the good life with and for others, in just institutions.”1 What does he mean by “just institutions”? For Ricœur just institutions are neither about face-to-face relationships, nor about being submitted to domination. Rather, they allude to communities where everybody in principle is on an equal footing with everyone else. Justice consists in the fact that we recognize each other’s equal rights. Here Ricœur refers to the distinction elaborated by Hannah Arendt between power-in-common and domination. The latter goes back to Max Weber’s idea in Economy and Society that the relation of domination, Herrschaft, distinguishes the political institution of the State from all other institutions. Characteristic for this relation is that it separates the governing from the governed, and is based on a monopoly of violence. However, according to Arendt, the power-in-common is different. As she says in her most famous work, The Human Condition, power-in-common stems directly from the category of action and is “the only activity that goes on directly between men without the intermediary of things and matter” and so “correspond[s] to the human condition of plurality”.2
To Ricœur this concept of plurality is important if we want to understand the just institution, because it “suggests the extension of interhuman relations to all those who are left outside of the face-to-face encounter of an “I” and a “you” and remain third parties”3. This third party is always “the inclusive middle term within the plurality that constitutes power”, and will never be face in the sense of Emanuel Levinas: the other whom I encounter. It is anonymous in the literal sense of the term, having no name. While its power is fragile, “since it exists only as long as people act together and vanishes when they disperse”4, this fragility “is not the raw and naked vulnerability of mortals as such but the second order fragility of institutions and of all the human affairs gravitating around them.”5
However, Ricœur agrees with Arendt that this action in concert is invisible, “because it is so extensively covered over by relations of domination, and that it is brought to light only when it is about to be destroyed, laying the field open for violence”.6 Moreover, “this is why this constitutive element can be discerned only in its discontinuous irruptions onto the public stage when history is its most tumultuous.”7 Here Ricœur might think of what happened when the Youth revolt broke out in ‘68. Nevertheless, he seems convinced that however weak it may be “it is power, as wanting to live and acting together, that brings to the ethical aim the point of application of its indispensable third dimension: justice”.
The idea of justice is here both a vision of the good life and a demand for a social order, a distributive operation that is not only economic, but also concerns the apportionment of roles, task and advantages and disadvantages. What is just is “between the good and the legal”.8 In other words, “a consideration of the institution is part of the ethical aim in its full scope”.9
Another keyword here is equality. As Ricœur declares, “equality, however it is modulated, is to life in institutions what solicitude is in interpersonal relations”.10 He concludes: “Because of this, the sense of justice takes nothing away from solicitude; the sense of justice presupposes it, to the extent that it holds persons to be irreplaceable. Justice in turn adds to solicitude, to the extent that the field of application of equality is all of humanity”.11
I believe Arendt and Ricœur are right in claiming that we must distinguish between domination built on violence, on the one hand, and power of common action built on a ordered plurality, on the other. A system of domination is not simply identical to a just institution, the latter of which is action-in-concert according to common rules. It follows that although in practice there is no pure action-in-common without its inclusion in a system of domination, a criticism of an institution for being purely repressive and unjust must rely on the impossibility of the members of the institution to find a minimum (or too little) of themselves acting therein. It must rely on the impossibility of recognizing in them their own participation in a common action. Thus, in this regard we can say that an institution in which we cannot find ourselves or too little of ourselves is an unjust institution.
3. The University crises in ‘68 and now
As examples of institutions, Ricœur mentions “people, nation, region and so forth”,12 (p. 194), but according to Arendt, they comprise much more. Institutions are what she calls “political bodies”, and must include every action in concert inside a people, a nation and the like.13 Consequently, every educational body in a society is an institution. From this perspective, when Ricœur writes about the university in the sixties, he writes about an institution, and the critique he directs at the French university system is precisely that it can no longer fulfil the condition of an institution where its members can see themselves as acting in common.
In the preface to a book on Concepts of the University, Ricœur> describes the sociological background of the youth revolt in ‘68 at the universities.14 He mentions the fact that universities at the time had developed into enormous institutions that had to educate a mass of students, which was very expensive for the society at large. On the one hand, the state could not spend money on students without demanding useful results in return. On the other, students could not accept to spend their time in these institutions without demanding personal development. In other words, the political power wanted to gain some goods for society by their investment in the universities, whereas the students wanted to act in common with teachers and each other in order to obtain both knowledge and culture for their personal and social life. Ricœur sees in this conflict a contradiction between two demands placed on a modern university. It should be a liberal university, i.e., an institution of research allowing criticism and testing of new ideas, something that would be impossible if governing authorities would prescribe the goals of the research. And, it should prepare the students for the qualifications that the society needs for its production and administration.
This contradiction, which in the sixties brought the universities into a deep crisis, is not very different from the contradiction that we experience today, in the society in general and the universities in particular. It is a contradiction between the demand of the universities to explore the material and social reality and ‘tell the truth’, on the one side, and the demand that they through research and education help to qualify researchers and students for the competition on the world market, on the other. Indeed, in light of the similarities of the two situations, we might learn something by considering what Ricœur has to say about the aforementioned contradiction. He proposes three measures for overcoming the crisis:
First, Ricœur proposes a reform of the universities that avoids both the constraints of pure utility and the destructive rejection of organizations. This renewed liberal university shall both permit free research and integrate researchers in the society, so that they can participate in a responsible way in the scientific, cultural, technological and spiritual adventure of our time.
Second, he imagines a reform that can give the students access to participation in the governance of the universities. Professors, assistants and students should be able to share their activities in discussions about the orientation, development and sanction of studies. Ricœur knew that such an educational relationship would be difficult because of its asymmetrical character, viz. because its aim is to apply the competence and experience of the teacher in the learning process. However, he believed that “the student brings something: talents and tastes, acquired knowledge and parallel knowledge, and particularly a wish of personal accomplishment that only partly can be satisfied by instruction, job training and the acquisition of a culture for leisure.15 Thus, by his or her partial contribution to the student’s project of accomplishment, the teacher still learns. According to Ricœur, he is “really taught by his students and receives from them the opportunity and the permission to realize his own desire for cognition and knowledge. This is the reason why one must even say – to paraphrase Aristotle – that education is the shared act of the master and the student.”16 Moreover, convinced of the idea that the university is the only institution in the modern society in which the most critical thinking can be expressed, Ricœur even imagines that this shared action, if it becomes successful in the universities, might be a model for the society as a whole. It may assist in demolishing its authoritarian institutions.
Third, he pictures a reform accommodating what he calls “zones of transparency between the university institution and the extra-university world”, which are self-governing, creating a connection between the university culture and the non-university culture. Indeed, universities face a non-university culture in the form of everything from advertising, songs in different media and movies, to pure propaganda. This culture is what most people live by in the leisure-time permitted by modern industrial work. Therefore, it is the task of researchers not only to be critical in their own domain of research, but also of the cultural activities outside the world of research. By the same token, criticism should not be one-way communication, according to Ricœur. Rather, universities should also be listening to criticism from non-university, such as from artists and businesspeople, etc.
Ricœur saw in many ways the youth revolt in the universities as a legitimate revolt against an unjust institution in which the students cannot find themselves. Thus, he sees it as a “cultural revolution” against a system of domination, i.e. a system without space for action-in-common. First, it is a revolt against capitalism, not only because it fails in creating social justice, but because it has succeeded all too well in seducing people by its inhuman project of quantitative well-being. Secondly, it is a revolt against the bureaucracy, not only because it is heavy and ineffective, but because it transforms people into slaves to powers, structures and hierarchical relationships. Finally, Ricœur sees it as a revolt against the “nihilism of a society that, like a cancerous tissue has no other goal than growth; a revolt facing a society of non-sense”.17 Simultaneously, however, it is a revolt that “intended to promote creation of goods, ideas and values rather than their consummation”.18
This is the background to Ricœur’s famous declaration that “it is necessary to remain revolutionary when making reform”.19 And in the seventies, many universities were in fact reformed more or less according to the ideas that Ricœur had formulated so clearly. However, perhaps because there was in the youth of that time too little understanding of the necessity of universities as stable institutions extreme individualism and anarchism often brought the reforms to fail.20
Today we are back in a situation where universities suffer from a contradiction between search for academic freedom for researchers, teachers and students, on the one hand, and political domination through the demand for market utility, on the other. Moreover, today it is not so much the mass of students that destabilize the universities as the mass of bureaucrats, the latter of which transfer the university system into a colossus with feet of clay. Therefore, when students and teachers in our days cannot find themselves in their universities it is because they are often confronted with mega-schools in the form of top-governed management institutions. While they could find themselves in a liberal university, where students and professors in learning and research could experience participation in common action, they cannot find themselves in the management system of domination and repression into which our universities are now increasingly transformed.
4. The Humboldt model
We should recall that the idea of the university, which exists under so bad conditions today, is more than two hundred years old. In 1798, Immanuel Kant described in his book The Conflict of the Faculties, the relationship between the four faculties belonging to university in his time, including that of theology, law, medicine and philosophy. He describes the first three of these as “the higher faculties”. They are considered very useful for the government, but not free. The only entirely free faculty is “the lower faculty” of philosophy (later called the faculty of humanities). Kant believes that although there will always be a conflict between the faculties that are considered useful for the government and the faculty of philosophy which aims at truth, the higher faculties and the lower faculty may in the end move closer to each other. He concludes by saying that “it could well happen that the last would someday become the first (the lower faculty would be the higher) – not indeed in authority, but in counselling the authority (the government). For the government may find the freedom of the philosophy faculty, and the increased insight gained from its freedom, a better means for achieving its ends than its own absolute authority.”21
Interestingly, this was exactly what happened a few years later. In 1810, the linguist Wilhelm von Humboldt as minister of education in Prussia created a new university in Berlin and reformed the whole educational system. In the new university, the faculty of philosophy became the higher faculty and a philosopher, J.G. Fichte, became its first rector in 1811, later on to be replaced by another philosopher, G.W.F. Hegel. Its goal was the general cultivation, allgemeine Bildung, of the individual. Objective knowledge was from now on to be combined with subjective formation (Bildung) of each individual and, as Humboldt said, with “the moral culture of the nation” (die moralische Kultur der Nation).22 The Humboldt model expressed the idea of the humanities, and in particular of philosophy, as the leading sciences. It is this idea that today is seriously challenged by the notion of the management university.
The question is what we can do to oppose this pseudo-university. First, we can analyse its condition, which apparently justifies the end of the Humboldt era. Thereafter, we can show how the inner contradiction of the management university sooner or later must raise a demand for another university, which, according to the dream of Kant, is both allowed to telling the truth and being highly useful for society.
5. Analyses of the condition
The condition for the establishment of the management university was already exposed by Jean-François Lyotard in 1979. In his book The postmodern Condition: A Report on Knowledge (translated into English in 1984), he described the developed societies of his time in terms of ‘the postmodern condition’. This postmodernism does not imply a new cultivation integrating the sciences in a new way while still preserving the humanities as an essential part of the whole, but rather opposes the very focus on cultivation in order to replace it by what Lyotard calls ‘performativity’. Lyotard’s diagnosis was that more and more research and education would be justified by their performativity.23 The term ‘performativity’ was new both in French and in English when the book was published, but it relates to ‘performance’ and means efficiency in the performance.
Lyotard’s analysis is, I would claim, more true today than when he presented it. In the beginning of the 21st century we witness how the educational systems, first in the United States and later in many other countries, are increasingly turned into one single end, that of performativity. Nowadays it is common to speak about efficiency, a goal which is possible to measure by tests, including national and public tests in schools, and stimulate by means of competition between classes and schools.
6. The inner contradiction of the Competition State
Now, if you ask the question ‘why performativity?’, the answer is ‘because of the necessary competition on the world market’. The Danish political scientist Ove Kaj Pedersen is right in claiming that today the idea of the welfare state is increasingly replaced by the idea of ‘the state of competition’. In his view, the welfare state, in which everybody should be respected as an irreplaceable individual, could not be realized because it was too expensive. Further, it was not able to prevent the weakest from being dominated by the strongest and, consequently, could not assure that everybody was protected by the same rights within a democratic system. Instead, it has become necessary to accept that everybody is an egoist, because this egoism is useful in the competition that has become the condition of all social life.24
What follows from this is that the task of the educational systems in schools and universities is redefined. It is less an education to democracy and social justice and more an education to national and international competition. Moreover, schools and universities are now obliged to enter into competition with each other and with other agents on the market to which they “sell knowledge”. In this competition, human sciences, and in particular philosophy, have apparently no raison d’être. Human sciences and critical philosophy more than any other discipline is considered useless and even dangerous for competition. For this reason, the state of competition suffers from an inner contradiction that is no less serious than the inner contradiction of the welfare state, namely, that it undermines by itself the social cohesion that is supposed to make it acceptable to everybody. In this state, people do not believe in the democratic education of citizens and do not feel responsible for the common good. Everybody can follow his or her interest within the frames defined by those in charge. In addition, belonging to this ideology is the presumption that great leaders are able to disregard their personal interests and establish the social coherence by their control of every common activity. It follows that only they have the task of thinking and acting for the common good. But the question is: how can such altruistic leaders be found amongst the people who have only learnt to think of their own interests and not about the common good? It seems unimaginable.
This is the contradiction: the state of competition, which is supposed to work without people being educated to take care of the common good and mutually recognize the rights of each other, nevertheless needs such an education in order to find good leaders amongst them and justify the destitution of bad leaders. Moreover, it must establish democratic elections and control of the leaders. In other words, the state of competition simultaneously rejects democracy and needs it. The criticism we can and must insist upon is therefore that no society that needs a social and moral coherence can do without education in democracy, and that society therefore must submit the competition to a democratic co-determination.
7. Democracy and cosmopolitanism
This insight is stressed by Martha C. Nussbaum in her recent book Not for profit: Why democracy needs humanities. She calls for a fight against the growing contempt for the humanities in universities and school systems. Nussbaum argues that this contempt results in the youth acquiring less and less knowledge about the ideas that are necessary in order to develop into democrats, i.e. autonomous and critical but also realistic citizens who recognize the values of a life together with others – not only national fellow citizens, but also foreigners from other parts of the world. This is exactly what they do not learn, Nussbaum argues, if they only learn how to get material profit and how to be most efficient on the world market. Instead, they have to learn that “a strong economy is a means to human ends, not an end in itself”, since “most of us would not choose to live in a prosperous nation, that had ceased to be democratic.”25 They have to learn to be responsible persons and to respect others as having equal rights independently of colour, religion, sex, and so on, and to assess what is good and bad for one’s own country as a whole as well as the kind of role it may play jointly with other countries and people in an increasingly complex globalized world.
Nussbaum advocates an education for cosmopolitan citizenship and points in a chapter entitled “Citizens of the World” to the fact that “we live in a world in which people face one another across gulfs of geography, language and nationality. More than at anytime in the past, she says, we all depend on people we have never seen, and they depend on us. The problems we need to solve – economic, environmental, religious and political – are global in their scope.”26 But if we shall handle them, we must involve “the contributions of history, geography, the interdisciplinary studies of culture, the history of law and political systems, and the study of religion – all interacting with one another.”27
According to Lyotard, grand narratives no longer work in the justification or understanding of society. However, this is no longer true. It might be true when it comes to grand stories that were used to legitimize authoritarian regimes such as the narratives of Nazism and Stalinism. However, Nussbaum is right when claiming that today “we need world history and global understanding for reasons that go beyond what is required to understand our own nation.”28 In other words, we need a cosmopolitan story of our world as basis of our universities.
1 Oneself as Another, The University of Chicago Press, 1992, p. 172, The English translator has put brackets round ‘good life’, because Ricœur puts brackets round “la vie bonne” in the French text in order to indicate that it does not mean “la bonne vie” which is ‘the pleasant life’, but that is an ethical and more precisely an Aristotelian philosophical concept. In English it is common to use the term as a philosophical expression so it does not need to be put in brackets.
2 Hannah Arendt: The human Condition, The University of Chicago Press, Chicago, 1958, p. 7.
3 Oneself as Another, p. 195.
4 Ibid., p. 196
6 Ibid., p. 197.
8 Paul Ricœur: « Le juste entre le légal et le bon » in Lectures 1, 1991, Seuil, Paris, pp. 176 – 195 (not translated into English).
9 Oneself as Another, p. 201.
10 Ibid., p. 202.
12 Ibid., p. 9.
13 The Human Condition, p. 9.
14 Paul Ricœur : ”Trois ripostes à la crise universitaire”, in Conceptions de l’Université, eds. Jacques Drèze et Jean Debelle, Editions Universitaires, Paris, 1969; published in Le Monde 17.1.1969
15 Lectures 1, p. 382.
18 Paul Ricœur: ”Réforme et révolution dans l’Université”, Lectures 1, p.380.
19 Paul Ricœur: ”Réforme et révolution dans l’Université”, Lectures 1, p. 381.
20 Ricœur himself was very disappointed by this development in France, and he never again wrote about a reform of universities, see P. Kemp: “Ricoeur and education: Ricoeur’s implied philosophy of education” in Ricoeur across the disciplines, ed. by Scott Davidson. Continuum, New York, 2010, p. 181-194.
21 Immanuel Kant: The conflict of the Faculties/ Der Sreit der Fakultäten [bilingual edition], translated by Mary J. Gregor, University of Nebraska Press, Lincoln and London, 1979, p. 59.
22 Wilhelm von Humboldt: Über die innere und äussere Organisation der höheren wissenschaftlichen Anstalten in Berlin” in Schriften zur Politik und zum Bildungswesen, Wissenschaftlische Buchgesellschaft, Darmstandt, 1964, p. 255.
23 Jean-François Lyotard: La condition postmoderne, Rapport sur le savoir, Les Editions de Minuit, Paris, 1979, Chapters 11 and 12 (English translation: The Postmodern Condition, Report on Knowledge, Manchester University Press, Manchesater, 1984, chapter 11 and 12).
24 Ove K. Pedersen : Konkurrence Staten, Hans Reitzels forlag, Copenhagen, 2011.
25 Martha C. Nussbaum: Not for profit. Why democracy needs humanities, Princeton University Press, Princeton and Oxford, p. 10-11.
26 Ibid., p. 79-80.
27 Ibid., p. 86-87.
28 Ibid. . p. 81-82.
The current, tense “post-crisis” situation is considered by many intellectuals, politicians and citizens to be a simultaneous aggravation of much older financial, political and environmental crises that have been challenging the international community. At the same time, it has also been described as a perhaps unexpected hope for the emergence of a real cosmopolitanism based on a genuine possibility of emancipation and dialogue about world problems in the international community.
We will begin by discussing briefly the causalities of the recent financial crisis, which can be seen as a crisis of neo-liberal capitalism following the original mortgage crisis in the USA and the following economic depression in many countries. In this context we can also mention political elements of the crisis and further explore its threatening relation to the environment. Finally, the same crisis can be considered as a crisis for cosmopolitanism. Some pundits have interpreted the crisis as a crisis of cosmopolitanism of human rights, where it has not been possible to create a new world order of strong international governance.
On the basis of these causalities the paper will discuss whether we can see a potential “new beginning” or qualitative shift towards a new regime of a social ethics including: (1) the emergence of a community economy, e.g. state intervention and civil society responsibility in connection with corporate citizenship and business ethics; (2) the emergence of a new ethical cosmopolitanism including a paradigm shift towards a renewed conception of justice as concerns the common good in the world community.
2. Crisis causalities
What happened? Why did this world crisis come around and how should we explain the crisis causalities? There have been many arguments or diagnoses trying to explain the worldwide financial crisis. I can mention the following, very different, but mutually dependent explanations:
1. The crisis is due to neo-liberal capitalism.
This explanation focuses on the financial breakdown based on the American mortgage crisis and the following depression in many countries. It was the neo-liberal processes of globalization (e.g. privatizations, liberalizations, financializations) that led to the development of risky financial products and the resulting credit crunch, for they were based upon the dogma of the neo-liberal economic system, whereby the paramount goal is quite simply to increase economic gains in the business at all costs. This model for risky business did not only concern banking and economic investments. The most important factor that played a pivotal part in the economic crisis was the emergence of the use of houses for sales and risky mortgages of houses, so that houses became primary objects of investment. The dominant narrative in this explanation is neo-liberal “greed”, as exemplified by Madoff’s pyramid Ponzi scheme, which resulted in his imprisonment and so well symbolizes the basis for this kind of explanation of the crisis. The narrative of “greed” involves that the crisis is due to a brutish conception of human nature as a kind of profit-maximizing individual, who lives only or mostly according to his or her own narrowest self-interest. This explanation is based upon taking into account the fact that neo-liberalism was the dominant economic ideology after the end of the cold war. With this explanation of the crisis we have an explanation that is conceived exclusively in economic terms, and primarily as a breakdown of the international financial system.
2. The crisis is due to changed relations between major powers in the world.
This explanation focuses on the relation between the US and other countries, notably China. In this context the crisis may be considered as a shift in world powerhouses. We may argue that such a shift is the real reason of the credit crunch and the ensuing economic depression. It can be argued that the Chinese, after the massive economic crises in the east of Asia in the 1990s, realized that they would have to build up a strong financial system. After longer than a decade, the savings of China were so large that the country was able to resist the 2008 financial crisis, which showed instead the real vulnerability of the US and Europe. In addition, the crisis can be explained as a result of the economic problems of the US after the Asian wars in Iraq and Afghanistan since the early 2000s. It can be argued that the result of the wars was the weakening of the US as a superpower and that the credit crunch was just a symptom of this changed situation of the West in relation to the East in economic terms, where China is emerging as the main power in the world. With this explanation of the crisis we move from a purely economic explanation towards an explanation in terms of international politics too.
3. The crisis arises from a clash of civilizations.
Here we can focus on the confrontation between world cultures, in particular the tensions between radical Islam and the West, leading to the wars of Iraq and Afghanistan. How can we interpret the crisis in terms of the “clash of civilizations” described by Samuel Huntington? Since 2001 and 9/11 in particular, the confrontation between civilizations has been very present in international politics. The concept of the clash of civilization was developed as a response to Francis Fukuyama’s idea of the end of history, i.e. the end of the struggle of recognition, when the liberal world order has been victorious. We may say that the clash of civilizations is a response to this situation, where the end of the struggle for recognition is not ending in dialogue, but exactly in a clash between civilizations. In fact we may say that a challenge for a post-crisis situation would be to develop a kind of intercultural philosophy building upon a dialogue between civilizations, as opposed to the clash of civilizations. The clash of civilizations is in particular a challenge to the belief in the universality of the Western values of democracy and human rights. We can argue then that the recent crisis is a crisis of these values, following the events of 9/11 and of the wars in Iraq and Afghanistan.
4. The crisis is a crisis in the policies to respond to an environmental crisis.
We can argue that the recent crisis was a crisis of the realization itself of the climate problem. The question is: have recent agreements led to hope for environmental justice or do we only experience new inequalities between developed and developing countries? In the neo-liberal paradigm before 2008 the climate issue was dealt with as a matter of utility and sustainable use of resources. It can be argued that the recent crisis is a crisis for the utility-based conception of the environment, for it appears that CO2 reduction is more than utility, but something that is fundamental with regard to the possibility of life in the world. We can argue that the crisis is a crisis for a civilization that has no understanding of the climate issue as fundamental for human survival. The Danish environmental sceptic Bjørn Lomborg may be considered as a representative of this view. In fact it can be argued that the opposite view of Al Gore, who stresses that the climate issue is about the continuation of the human species, represents an alternative to the view of Bjørn Lomborg, which emerges out of the crisis of the neo-liberal conception of the environment as utility: rather than admitting defeat in front of overwhelming evidence, blind denial is preferred.
5. The crisis is a crisis for cosmopolitanism.
Some have interpreted the recent crisis as a crisis of cosmopolitanism of human rights, where it has not been possible to create a new world order of strong international governance. In fact, it can be argued that the dream of the neo-liberal position was a world order with universal governance. As described by Michael Walzer, we can say that we need a new world order where we have to find the right balance between world government and total anarchy. It may be argued that the concept of the world order as a universal order with a world government is in crisis with the global crisis. What is needed is a new conception of the global order that is both beyond state sovereignty, but also beyond the idea of a world government. We may argue that we have to look for models of cosmopolitanism that deal with world politics without referring to a concept of a global world government as the basis for international politics.
3. The cultural and social background of the crisis
On the basis of the five causalities described above, the issue may be addressed as follows: how really should we define the recent crisis? What does the crisis imply and what does it relate to?
From a phenomenological point of view, we meet the crisis in our own lives when our family, ourselves or our friends lose their job or have to go from their houses because the mortgage rent is too high. In fact, the pre-crisis atmosphere in the Western world was marked by a strong narrative of greed and of spending, in particular a raise of luxury spending. We can then use the concept of hyper-modernity in experience economy, as proposed by the French sociologist and philosopher Gilles Lipovetsky, to take into account this pre-crisis, but indeed also the crisis atmosphere.
Hyper-modernity or hyper-modern society is conceived as an escalation of modernity, i.e. a kind of creative construction of experience where the creativity of human beings as makers of metaphors and symbols moves in the forefront of capitalist production. We are searching for more than maximization of pleasure preferences in the cultural industry. We want to become new human beings when we eat at restaurants, travel, go to the theatre, read magazines or books, or even when we buy ordinary products in the grocery store or in the supermarket. We want to experience happiness and authenticity in all aspects of our lives as consumers. Consumption shall help us to construct our identities. I shop therefore I am. It is the creativity of the producers and designers of experiences that is needed to fulfil this search for meaning in the experience economy. The conditions of possibility of the experience economy are based on the historic changes of the meaning of creativitiy in human societies. Today, with a hyper-modern society of creativity, creativity means something else than it was the case earlier in history. What is essential is that creativity no longer is based on a higher divine reality, but instead it refers to the entrepreneurial genius of the human creative spirit. With no divine meaning left, it is therefore the job of the creative class to fill the empty space of the loss of meaning in post-modernity or hypermodernity, and because there is no pre-given meaning dependent on a metaphysical reality, also the consumer must be creative and create meaning through experiences. Human beings are now primarily defined as hyper-consumers and their appearance as citizens is derived from this condition of consumption.
Hyper-modernity expresses a metamorphosis of liberal culture. We live in a consumer society that has become global and international. In the hyper-modern society we can talk about a new system of consumption that has become universalized. What characterizes hyper-modern society is the development of a world culture of consumption. We can talk about universalization of the brand market economy: the West, Asia and China, South America and Africa. The global market culture is a culture of global media and of global commercial culture. Hyper-modern society is made possible with the neo-liberal ideology of the free market and private happiness through consumption, and it was accelerated with the global revolution of information technologies.
In his 2006 work on hyper-modernity Le Bonheur paradoxal (Paris: Gallimard), Lipovetsky describes the three phases of the development of hyper-modern consumer society:
1. the period from 1880 to the second world war
2. the period from the 1950s to the 1970s
3. The time starting with the 1970s-80s (where we really see that consumer society fully developed).
We have been facing hyper-modern society since at least the 1980s. This is a society where consumption is democratized and made available to nearly everyone. Whereas the first phase of industrial society is signaled by the the emergence of industrial society for an elite, the second phase is marked by the increased generalization of consumer society as well as by increased individualization of consumption, for example by the generalization of luxury products like perfumes, media appliances, etc. However, it is only with the emergence of hyper-modern society that we really face the individualization of products.
In this individualist society we see how individuals are able to organize their space and time on the basis of their individuality. Accordingly, we can argue that with the individualization of consumption, combined with the focus on individual experience, makes immaterial experience and pleasure the focus of product promotion and product content. This new society of hyper-consumption is marked by a break with the conformities of class society. Although the class differences still exist, there is no specific class culture. In this sense, the consuming individual is utterly liberated from the traditional institutions and from the cultural bonds of society. We can say that the consumer of the experience economy is a “turbo-consumer”, a capitalist consumer who is no longer regulated by strong ethics and who is free to consume as much as he or she wants.
A very good example of this “Turbo-consumer” in hyper-modernity is the consumer of great international brands. The brands are expressing the global logic of hyper-consumption. Through global marketing brands appeal to the dreams of having authentic experiences. Consumers of hyper-society are not particularly loyal to one particular brand, but they are loyal to the promise of happiness in the brand economy that activates their dreams and emotions. The global brand economy expresses the logic of experience as emotional rather than bound to the materiality of the products. Hyper-consumption is a continuing renewal of the sensations. It is travel in experience. The turbo-consumer wants the most intense experience and in order to get this experience the turbo-consumer overcomes traditional limits of time and space that are taken over by the commercial logic. There is a close link between the brand economy and the search for happiness as the ultimate imperative of hyper-consumption society.
Together with Jean Serroy in La culture-monde. Réponse à une société désorienté (Paris: Gallimard, 2008), Lipovetsky discusses globalization of culture in the perspective of hyper-modernity. We can mention fashion, advertisements, tourism, art, the star-system from Hollywood as aspects of a world culture that has become dominating in hyper-modernity and manifests itself as a cultural hyper-modernity aiming at satisfying the search for satisfaction of experiences by consumers in hyper-modern society. But at the same time this globalization of culture in the framework of an experience economy is marked by the paradoxes of increased complexity and increased collective and individual disorientation.
The capitalist market experience economy is supposed to respond to the dark sides of increased individualization and narcissism. Because of individualist mass society with less common references to give a sense of meaning and community, the world culture of brand consumption is supposed to be the compensatory device that can give individuals meaning and fullness in their individual lives, which are increasingly devoid of meaning. World culture promoted through experience economy is the only tool left to give meaning and sense to individual lives, yet it is far from certain that it is succeeding in its task.
4. Towards a new beginning: Emergence of a new cosmopolitanism
With an economic crisis in the middle of hyper-modern consumer society, we can see how the whole foundation of this society is shaken. Therefore it is also interesting to ask the question about what happens after the crisis. Can we see a “new beginning” or qualitative shift towards a new regime of social ethics of responsibility as a kind of new event emerging out of the crisis, or should we just say that the crisis is nothing more than a confirmation of the logic of hyper-modernity, or alternatively is it possible to argue that the crisis opens for new meanings that help us to move beyond hyper-modern society? What does it mean to speak about paradoxes of a post-crisis situation that challenge the pre-crisis relations? We can observe the following aspects of a post-crisis situation that helps to mark qualitative breaks with the pre-crisis situation.
1. The emergence of a community economy
State intervention and civil society responsibility in connection with corporate citizenship and business ethics signal the emergence of a community economy. We can argue that the business ethics movement based on corporate responsibility and corporate social responsibility replaces within this context the confrontation from the cold war between communism and capitalism. Moreover, the end of neo-liberalism shows that we need a better relation to the economy and a better conception of the content of the economy. Business ethics and corporate social responsibility represent a response to the situation of crisis of business organizations in the sense that it is a new way to deal with the capitalist system.
Business ethics deals not only with ethical responsibilities of corporations but also with a responsible way to deal with economic and legal activities. Therefore we can talk about the economic, legal and ethical responsibilities of a corporation. The different responsibilities must be integrated into the strategy of the corporation, according to the new paradigm of corporate social responsibility and in close coherence with the strategy of the corporation. Business ethics can be considered in close interaction with the idea of hyper-modern society because in hyper-modern society ethics and corporate social responsibility are integrated into the experience economy. This means that ethics is considered as a virtue that is closely related to the self-construction of the individual. Accordingly, the individuals in the business corporation want to have a meaningful work and they want to be accountable and trustworthy as a part of their personal identity. Therefore business ethics is not in contrast to hyper-modernity, but rather a consequence of the culture of this kind of society. So the post-crisis scenario of intensified business ethics and corporate social responsibility is not necessarily in contrast to the culture of globalized hyper-modernity.
In this context we can argue for a movement towards an ethical cosmopolitanism within the field of business, as I have argued in my book Responsibility, Ethics and Legitimacy of Corporations (Copenhagen Business School Press, 2009), which the reader can find reviewed in the present issue of Nordicum-Mediterraneum. An important aspect of this movement is the idea of republican business ethics, defined as involvement of corporations in and for the common good, the res publica, which are expressed in the concept of corporate citizenship with integrity and responsibility. Integrity matters as the self-imposed norms of international corporations can ensure accountability and trust. Integrity is analyzed as a function of the business ethics of corporations, especially in the normative guidelines for international business.
With this cosmopolitan approach I have argued that the corporation can contribute qua world citizen to solve the important problems of hyper-modernity. This can be viewed as the application of the important concepts of the virtues of responsibility and cosmopolitanism. As actors at the global level in a time of interstate interdependence with regard to world ecological, economical and political problems, it is a challenge of the corporation to contribute to building up an international community of virtue and protection of basic rights. We can define this vision of universal corporate citizenship as the World ethos of business ethics. The corporations shall not only protect universal human rights, but they shall also give those rights meaning in relation to the particular cultures in the countries where they operate.
2. Cooperation replaces conflict.
We may ask the question whether the post-crisis scenario is opening for a new era of cooperation that is in contrast with the idea of conflict that was dominating in the cold war times and in the times immediately after the cold war. An argument from globalization is that the financial crisis has been a reminder of how we now really live in “one world” in economic, cultural, social and political terms. In this sense it can be argued that we need scenarios of cooperation with new interactions between major powers in the international community, which is establishing a regime of problem solving rather than confrontation.
With Hannah Arendt, we can argue that we are searching for a political conception of international relations that move beyond the legalistic conception of the international community. Hannah Arendt’s work after the second world war presents a critical discussion of Kantian cosmopolitanism. She offers novel views on human rights and the rights of citizens and she discusses the possibility of an international tribunal to deal with crimes against humanity. Also, her philosophy implies a critical reply to a naive “juridification” of international relations as marked by legal structures alone. Arendt proposes a solution for the reintegration in the political community after the fight with the wrongdoers. The international political community needs a dimension of civil society, as proposed by Arendt, to find a possible mediation of the double edge of cosmopolitanism. We can argue that Hannah Arendt understood the importance of a political foundation of the respect for the naked human being beyond the political relations of the nation state. This is what Arendt argued for when she coined her famous term of the foundation of human rights as the “right to have rights”.
In her 2006 book Another Cosmopolitanism (Oxford: Oxford University Press), Seyla Benhabib seems to propose a new version of Arendt’s older position. According to Benhabib, modern cosmopolitanism is not only about hospitality but also about the political and legal institutions to govern our world in order to deal with circulation of persons, capital, commerce, pollution, information, labor, goods, viruses, etc. Cosmopolitanism is about building political relations at the international level, so that people can enjoy the right to have rights in the international community. In particular, Benhabib defines human rights as universal ethical obligations that go beyond national sovereignty and are formulated within a form of law.
Benhabib argues that the challenge we face today is the construction of a jurisprudential theory that is able to reconcile the universality of human rights with the partiality of positive law. She deals with the problem, as Hannah Arendt also did, by focusing upon the rights of persons who reside within a state but who are excluded from its polity, i.e. legal and illegal aliens. Thus, Benhabib takes up the challenge of the double edge of cosmopolitanism by arguing for the search of a legal foundation of cosmopolitan citizenship beyond positive law alone.
When Benhabib deals with the double edge of cosmopolitanism she answers this question by drawing on Kant’s doctrine of cosmopolitan rights, which she attributes to Kant’s thesis that ”The law of world citizenship shall be limited to conditions of universal hospitality” – hospitality covering the relationship between states and strangers. With Benhabib we can argue that the double edge of cosmopolitanism lies within the confrontation between republican national law and international relations, because the law of hospitality intersects with the positive law of the state. Specifically, Benhabib focuses upon the point of intersection between these two dimensions. On the one hand we have the Republican opening towards the international community in the republican public sphere; on the other hand we have the mediation between the cosmopolitan norms and the republican community.
Benhabib argues that we can propose a solution to the tension of the double edge of cosmopolitanism by means of a cosmopolitan law that emerges from increasingly conscious public debates in democracies, where the norms of cosmopolitanism are accepted as basic human rights into the positive constitutions of republic societies. In this sense universal norms are mediated into the will formation of democratic societies, so that cosmopolitan norms are becoming integrated into the republican framework of democracy.
An illustration of this kind of democratic development of the cosmopolitan norms and of the “democratic iteration” is for example the European Union, where citizenship is expanded in a cosmopolitan direction. However, the contradiction between the universality of ethics and the particularity of law can never fully be overcome and there is always room for national sovereignty where laws are made.
When we talk about a civil justification for the emergence of cosmopolitan norms, we can argue that this justification of cosmopolitan hospitality emerges within the framework of democratic community because people are becoming more and more acquainted with others beyond their national borders and cultures with norms of reciprocity and respect. In this perspective there is a genuine hope that cosmopolitan norms are internalized in local cultures, democracies and populations. However, this is not enough according to legal theorist Seyla Benhabib. Cosmopolitan norms must also be based on a legal framework. In Another Cosmopolitanism, for example, Benhabib discusses the case of European citizenship as a token of the increased movement towards the development of such cosmopolitan norms.
Still, there remains the danger of a cosmopolitan stateless future. Benhabib argues that we should imagine a future where ”civil, social and some political rights” are not related to national belonging. In this context, universal cosmopolitanism is situated between law and ethics, universality and particularism, nation and international community. When we search for a philosophical foundation of these cosmopolitan norms, we can look back at the philosophy of Hannah Arendt who argued, as we have already said, that the most important thing is the right ” to have rights”.
We can say that Hannah Arendt’s book about the Eichmann trial — Eichmann in Jerusalem. Essay on the Banality of Evil (London: Penguin Books 1964/1981) — was fundamentally a book about cosmopolitanism and international law. This is true in particular when Arendt deals with crimes against humanity, where genocide is conceptualized as the crime against humanity, or rather the crime against humanness or the right to be human. The issue of the cosmopolitan double edge, i.e. how to mediate between national legal structures and moral universalism, can be answered by reference to the Eichmann trial. This trial marks the beginning of cosmopolitan norms. It is a trial for crimes against humanity that goes beyond the traditional boundaries of legal positivism.
If we look more closely at Arendt’s book about Eichmann and follow Seyla Benhabib at the same time, we can argue that cosmopolitanism is not only the Kantian horizon that as we may infer from Arendt’s letters to Karl Jaspers — Jaspers being himself a Kantian cosmopolitan — but an ideal of civic republicanism combined with a vision of political self-determination as the foundation of true hospitality in cosmopolitanism. So the emergence of global civil society as the movement from international to cosmopolitan norms of justice can only be accomplished as long as it draws with it principles of civic republicanism.
Concepts such as ”the right to universal hospitality” and ”the right to have rights” are certainly Arendt’s legacy of Kantian cosmopolitanism. Yet she adds a normative force that can emerge only within a republican, democratic framework of legal norms. These concepts, in other words, should have a binding power. The idea is that the ”right to have rights” indicates rights of universal hospitality that triumphs over positive law, but can also be within positive law, because it is founded on republican self-governance and autonomy.
We need more than the formal political construction of the cosmopolitan norms of human rights. The international human rights regime, crimes against humanity, humanitarian interventions and transnational migration norms should all be based on civic republican recognition of the right to have rights. So cosmopolitan justice must be based on a kind of nationally sanctioned international law of peoples, where the tension between sovereignty and hospitality is overcome through the act of self-legislation as an act of self-constitution under a cosmopolitan perspective.
Benhabib says that ”Liberal democracies must learn to negotiate these paradoxes between the spread of cosmopolitan norms and the boundedness of democratic communities”: according to her, the development of cosmopolitan norms is characterized by democratic Iterations between the local, the national and the global.
Following Hannah Arendt and Benhabib, we can argue that cosmopolitanism emerges as the power of democratic forces within a global civil society and this helps to a construction of international norms that goes beyond the tension between cosmopolitanism and national sovereignty. What is characteristic of the new cosmopolitanism, at least according to this view, is that citizenship and political membership are no longer based on culture and collective identity. As exemplified by the case of the European Union, the conflict between sovereignty and hospitality is no longer so important. Accordingly, a new discussion of politics implies the search for new forms of political agency in cosmopolitan times, where we recognize what Benhabib calls the “democratic iterations” of the concept of democracy and citizenship. And this recognition will help to develop new foundations of democracy in international politics.
Moreover, by protecting universal rights that are dependent on the charter and declarations of the United Nations, corporations can act for good international relations that go beyond the interests of particular communities of republics and nations. By doing this, corporations, when they really want to appear as good citizens, can help to build a world community that implies the universalization of the procedural virtues of liberal society. Corporations can at the same time be cosmopolitan and situated in particular societies, in the sense that they foster universal principles while making those principles work in concrete practice. In this sense, the post-crisis scenarios can be a development of a new cosmopolitanism in both international politics and in the activities by corporations and other organizations and institutions helping to build up an international civil society.
The global development described above has led to a situation where companies that are rooted in the social values and ethics of western society, often do not require the same social standards to be followed at the remote end of their operations, namely in the developing world. While pursuing the main goal of business – high profit – they do not respect the values they are based upon domestically.
This situation has become unsustainable. Consumers as well as governments and non-governmental organizations have started to criticize this behavior as they have learnt about it from media. The public has clearly expressed its concerns about breaching the accepted social rules, although in a distant country, where social ethics may be however substantially different. This has created a new pressure on the business community. Suddenly, companies were expected to ensure respect for their social values also within the international supply chain in order to satisfy consumers’ and the society’s expectations. In other words they were asked, even though they had no formal legal responsibility to do so, to act as international regulators and in this function replace states that have no available legal means to internationally enforce social and environmental concerns.
First, this paper examines the voluntary (ethical) v. mandatory (legal) basis of corporate social responsibility (CSR). Second, it examines the relationship between CSR, law and business ethics. Third, it tries to answer the question if there is a need for a hard legal regulation of CSR within international supply relationships or if ethical norms, e.g. expressed in the form of self-regulation, may better serve the purpose. And finally, it suggests possible ways for the future development of suitable regulatory methods for enhancing social standards within international supply chains. The questions are approached solely from the perspectives of legal theory and socio-legal analysis.
Voluntary v. mandatory character of CSR
The corporate social responsibility is usually characterized as a set of voluntary measures of companies under which they accept the effects that their behavior has on the environment and society. This approach, however, has been stated to be inaccurate and even deceptive. The discussion whether CSR is of voluntary or mandatory character has divided both the public and the academia. Advocates of voluntary based CSR claim that a descriptive regulation would hinder the wide stakeholder dialogue as a base for this concept and would erase innovation forced by the competition within this area. On the other hand, mandatory based CSR is supported by those claiming that competition and business driven CSR is not sufficient and does not ensure an adequate protection to the relevant social values. They are concerned that the voluntary approach would allow the business community to dictate CSR standards instead of responding to stakeholders’ needs. In order to take a position in the discussion over the binding power of CSR, it is necessary to delimitate what the term covers.
It is often suggested, that CSR includes only behavior beyond the law. If this is the truth then the voluntary v. mandatory discussion is pointless, since every activity would be either a mandatory legal obligation (law) or a voluntary action (CSR). Hence the question would not be whether CSR is voluntary or mandatory, but rather what issues are so crucial that they should be excluded from the CSR concept and regulated by law. This position would make it even more difficult to speak about CSR on the international level, since the scope of CSR would differ in each jurisdiction.
The approach that CSR covers only non-legal activities is certainly not a general standpoint. The summary of the EU Green paper on corporate social responsibility, for example, states: “Being socially responsible means not only fulfilling the applicable legal obligations, but also going beyond compliance …”. Another example may be found in companies’ codes of conduct where legal compliance is usually in the first place among the CSR requirements. Based on these and other similar examples, it may be argued that the CSR concept includes not only behavior beyond the law but also the relevant legal obligations, primarily within the area of labor and environmental law. In such case, the CSR activities are of a mixed character, partly voluntary and partly mandatory. This drives me to the conclusion that law and CSR are interconnected and cannot be separated; in other words, the law influences voluntary CSR initiatives and vice versa. CSR is founded in both legal (mandatory) and ethical (voluntary) rules.
But this is not the only argument to claim that the discussion over the voluntary v. mandatory character of CSR is unnecessary and incorrect. The discussion further overlooks the fact that except for direct legal liability, the obligation to socially responsible behavior is often derived from indirect legal obligations and economic and social drivers which lead companies to act against their primary short-term objective, i.e. striving for the highest possible profit. An example of an indirect legal regulation is an obligation of selected type of companies to report on their CSR activities in certain jurisdictions and the threat of listing their name in a list of poor performers. The economic drivers include for example conditioned export credit guarantees by compliance with social and/or environmental standards, the development of the socially responsible investment strategy, or the increasing number of institutional investors claiming CSR in target companies. The social drivers are primarily represented by the pressure of consumers, NGOs, media and national governments, who themselves, unable and/or unwilling to interfere, use their power to at least influence corporate behavior.
Given the partly legally based and partly economically and socially driven nature of CSR, companies are in fact forced to adopt environmentally and socially oriented procedures into their operation. Thus, it seems rather illusory to speak about CSR as a merely voluntary concept.
Relation between CSR, law and ethics
As it was argued above, law is an inherent part of CSR. CSR and its regulation emerge from ethical norms of society and a common understanding of morality. As the theory of integrative social contract asserts, consent without coercion is the determining factor to claim that a norm or a value is universal. But is it possible to delimitate the content of a common morality in the contemporary international society? Globalization, on the one hand, enables frequent and intensive international business interaction. On the other hand, the new pluralistic society faces uncertainty regarding the consensus over the fundamental business related ethical norms. The cultural and geographical variety of the globalized society makes it difficult, if not impossible, to agree on the common underlying moral values. The conflicting and constantly changing social values in pluralistic society thus hinder development of an operational definition of the CSR concept. The ethical ambiguity may be overruled by means of positive law. But here a question arises, i.e. if using law to delimit ethics is the right way to go. And is it possible to develop a universally applicable and observed legal regulation of CSR without agreement on the underlying values?
To summarize this part, CSR, law and ethics are tightly interrelated. Even though ethical and legal norms are not the same, these two normative systems are inseparable in the CSR area. Ethics serve as a source of law, especially in “soft” fields as CSR, and as a ground for its legality and normative force. There is no clear distinction between law and ethics within the CSR concept and its regulation. The ethical foundation is called upon constantly and referred to by all kinds of legal regulations. The legal regulation has mostly form of a soft law instrument; there is almost no hard regulation of sustainability concerns within supply chains. The state is not relied upon in case of breach, sanctions are based in the ethical values of society and take usually form of a public damnation. From these facts it can be concluded that CSR regulation behaves as an informal law. But does this situation, which is mixing ethical and legal norms, ensure efficient safeguarding of social concerns?
Effectiveness of legal and ethical normative systems in regulating CSR among supply chains
Although CSR is to a certain extent governed by law and, as argued before, is further enforced by non-legal measures of governments, society and investors, some claim that it is not sufficient. Several NGOs have called for stricter legal regulation and enforcement of CSR activities within international supply chains. But more regulation can be justified only if it actually brings wider observance and protection of social standards.
There are several arguments for leaving the area of CSR to be governed solely by business ethics. The already mentioned promotion of innovation and competition is one of them. However, as practice shows, ethics have failed to ensure that businesses will live up to their moral undertakings, especially in host states. The reason may be sought in the vagueness of ethical rules without possibility to gain an authoritative interpretation and without institutionalized ways of their enforcement. Even though legal rules may be formulated imprecisely, there is always higher certainty regarding their content and possibility to eventually ask a court or another competent body to give an authoritative interpretation. Given the failure of ethical rules, the morality argument underlying the CSR concept that the benefits of globalization are not fairly distributed among society, in other words that the western society benefits to the prejudice of the developing countries, now becomes a ground for legal regulation of the responsibility of businesses for the cross-border effects of their environmental and social performance. Further, the vagueness of ethical rules may cause companies to be reluctant in going beyond legal requirements, because they may fear the litigious risks of their CSR statements.
Another argument for enacting CSR obligations is the claim that positive law has transformed into the ethical standard of the contemporary society. It is difficult to support this view in general, but easier to agree that this claim may be valid in relation to the business community. It is the nature of business existence to strive for profit in the framework given by the legal order. Any action going beyond legal requirements is usually costly and as such must be justified to the shareholders of a company. In case that such an action does not bring profit, e.g. as a good name or competitive advantage, it is not natural for a business to perform it. The positive law thus serves as the ethical ceiling of business operations. In such a situation, institutionalization of the obligation by law supplements the motivational force of the underlying moral norm and serves as an explanation to the shareholders.
The third argument states that the legal form of obligation supports acceptance of its underlying value. Although this may be true, it does not ensure wider observance of the rule. On the opposite, as it was noted by some academics, highly regulated areas often experience high levels of infringement. In this relation the threat of creative compliance in connection with CSR regulation should be mentioned. Companies search ways of circumventing the objective of a certain law, without technically breaching it. It is thus important to foster compliance in line with the spirit of the laws instead of the mere letter of law.
The failure of ethical norms in effective regulation of CSR, the positive law being the ceiling of business ethics rather than the floor, and the wider acceptance of moral value when enacted may, even though with the mentioned reservations, speak for legal regulation of the corporate responsibility.
To the contrary, the danger of over-regulation supports the thought of minimal governmental regulatory intervention expressed in libertarian legal theory. The tendency to regulate all aspects of companies’ behavior goes hand in hand with the transformation of positive law into the “ethical ceiling” of business. The endeavor to govern all business activities by specific rules raises the possibility of creative compliance. Possibility of circumvention may be decreased by enacting principle-based regulation. But rules based on principles do not constitute an optimal solution either, especially when being criticized for legal uncertainty and for offering too broad a space for interpretation.
A shift in the attention from the underlying moral objective to the process of how to achieve it may be another argument against broad legislation within CSR. An example can be found in reporting obligations. Companies seem to concentrate more on the procedure of reporting than on the subject of it.
On the one hand, the practice has shown that a merely ethical normative system is not able to secure business compliance with social and ethical standards, especially in foreign countries. On the other hand, broad legal regulation does not seem to solve the situation either. Therefore, there is a need to develop new regulatory forms and their combinations that will establish a balance between the ethical and the legal foundation of CSR.
Outline for future use and development of suitable regulation
Experiencing the failure of ethical rules proved that a legal regulation is to a certain level necessary. But threats connected with overregulation and preclusion of innovation by strict limits given to the business behavior lead to a development of new regulatory techniques in the area of CSR. Regulation is understood in a broader sense than as a prescriptive hard law. The following definition used by Zerk seems appropriate: “regulation…encompasses any form of social control or influence, regardless of its source…”. Regulatory techniques vary from hard legal regulation of “command and control” nature on one side of the spectrum, through soft-law and economic and legislative incentives, such as guidelines of international organizations, model regulations or tax reliefs, in the middle, to diverse means of self-regulation, in the form of codes of conduct and contract regulation, on the other side of the spectrum. Further, under the broad understanding of regulation the notion of law has undergone a substantial shift. It is difficult to classify regulatory types that are mutually overlapping without having distinctive borders. A soft-law may have effects of a hard-law if enforced by a court or if compliance is demanded by a state-made legal regulation. Also, state-made legal regulation can become looser and principle-based, so its hard legal effects are limited. Thus the borders of law are unclear and subject to continuous change. Although all regulatory forms are having partly useful effects in international matters, the problem resides in uncertainty about their mutual relation, lack of international obligatory force, and thus difficulties with their cross-border enforcement.
Academic literature has touched upon this issue and offered some solutions. The often suggested model is a wider use of so-called meta-regulation. The objective of meta-regulation in the CSR area is forming corporate conscience; to motivate companies to do what they ought to do under ethical rules. Meta-regulation is therefore not a direct regulatory means; it rather motivates than prescribes responsible corporate behavior. The motivation usually takes the form of a financial or market-based incentive. The US Foreign Corrupt Practice Act may serve as an example; assuring lower fines when a corruption practice is found in a company that has a code of conduct and anti-corruption procedures in place. But also this approach is criticized for possible misunderstanding between regulators and regulated persons about the objective of such a norm, and for its concentration on procedures rather than the substance of social concerns.
However, we may find positives and negatives in each regulatory form. What seems more important now is the ability of a norm to actually influence corporate behavior. The observance ratio is usually higher, if the regulated subjects’ values identify with the underlying moral imperative of the norm. The identification is then higher if the regulated subjects take part in the norm’s creation. This leads us to the possible application of the theory of discourse ethics as developed by Jürgen Habermas to the rule-making process. The drawbacks of the application of discourse ethics in the area of CSR lie in the power imbalance between the stakeholders and the lack of procedural rules for conducting a discourse among them.
Given that there is currently no global understanding of substantive content of the CSR concept, there is a plurality in regulatory techniques on global, local as well as corporate levels, and given that externally imposed obligations do not support wider adoption of the social responsible behavior among businesses, a solution may be sought in developing hard law procedural norms on conducting discourse among stakeholders which would allow adopting specified legal or extra-legal norms on global (e.g. global private initiatives), local (e.g. national laws) and corporate level (e.g. codes of conduct or business contracts). This idea needs to be examined and tested by future research.
From the previous discussion it is obvious that the question is not whether the regulation of CSR so far is binding or not, but rather what type of regulation can best influence the actual behavior of companies within their supply chains.
Neither ethical rules nor hard legal rules seem to be satisfactory when being the only regulatory force. Thus, new types of regulation and their combination must be discovered and tested.
A solution to the problem of low compliance and problems with enforcement of CSR rules in cross-border relationships may be found by developing regulation while using the process described in the theory of discourse ethics. However, given frequent power imbalances, strict procedural rules would be needed to ensure contemplated effects. Further, the differences in perception of social ethics based on a geographic location make it necessary to conduct discourse separately on the global, local and corporate levels, in order to ensure that the differences will be reflected in the final substantive rules.
 Buhmann, Corporate Governance: The International Journal of Effective Board Performance 2006, p. 190.
 For the purpose of this paper, the definition of hard law introduced by Abbott and Snidal is adopted. Under this definition “hard” law “refers to legally binding obligations that are precise (or can be made precise through adjudication or the issuance of detailed regulations) and that delegate authority for interpreting and implementing the law.”Abbott og Snidal, International Organization 2000, p. 421.. For further discussion on definition of hard and soft law and their relation see Shaffer og Pollack, Minnesota Law Review 2010, p. 706-799..
McBarnet, Doreen, “Corporate Social Responsibility Beyond Law, Through Law, for Law” in McBarnet; Voiculescu ogCampbell, The new corporate accountability: Corporate social responsibility and the law, p. 585., Ward, Legal Issues in Corporate Citizenship, , Sobczak, Business Ethics Quarterly 2006, p. 168.
 Zerk, Multinationals and corporate social responsibility: limitations and opportunities in international law, p. 32 et seq.
 The advocates of mandatory approach to CSR are led by NGOs and other human rights and environmental groups and trade unions. For example in UK these subjects have joined in the Corporate Responsibility (CORE) Coalition, fighting for changes in law and judicial practice to enhance higher responsibility of UK business for their activities abroad. For further information about CORE see http://corporate-responsibility.org/. Some of their proposals on changes in law may be found in Watson, 18 June 2007,. The governmental interference into regulation of CSR within supply chains was supported also by UN Special Representative for Business and Human Rights, John Ruggie, see Ruggie,.
 Monaghan, Accountability Quarterly 2003, p. 1.
 Green Paper – Promoting a European framework for Corporate Social Responsibility, COM(2001) 366 – Summary, available at http://europa.eu/legislation_summaries/employment_and_social_policy/employment_rights_and_work_organisation/n26039_en.htm; highlighting added
 Zerk, Multinationals and corporate social responsibility: limitations and opportunities in international law, p. 35.
 Ward, Legal Issues in Corporate Citizenship, p. 5.
 McBarnet, Doreen, “Corporate Social Responsibility Beyond Law, Through Law, for Law”, p. 4, in McBarnet; Voiculescu ogCampbell, The new corporate accountability: Corporate social responsibility and the law, p. 585.; It must be stated that acting in socially responsible way leads arguably to long-term and more sustainable profits.
 E.g. France and Denmark.
 E.G. UK Environmental Agency.
 Financial guarantee provided by a government or a financial institution enabling companies to export goods and services in situations where payment for them may be delayed or subject to risk.
 Applicable e.g. in the Netherlands and Sweden.
 Wherever the term “law” or “legal” is used in this section, it refers to hard law or hard legal regulation. When other types of legal regulation are used, the terms are specified: “soft law”, “self-regulation” etc.
 Ruud og Ruud, Proceedings of the Business, Society & Government Consortium of the Midwest Business Administration Association 2010, p. 52.
 Frederiksen, J, Bus, Ethics 2010, p. 369.
 Integrative Social Contracts Theory is a theory of business ethics developed by Thomas Donaldson and Thomas Dunfee. It is based on the theory of social contract of political philosophers including Thomas Hobbes, John Locke, Jean-Jacques Rousseau and John Rawls. The Integrative Social Contracts Theory provides a framework under which business decisions are made with respect to their effects on the relevant communities and taking into account the ethical norms and universal moral standards.
 Gilbert og Rasche, Business Ethics Quarterly 2007, p. 190.Human Rights Council, Clarifying the Concepts of “Sphere of influence” and “Complicity”.
 Ruud og Ruud, Proceedings of the Business, Society & Government Consortium of the Midwest Business Administration Association 2010, p. 52.
 Fisher, J, Bus, Ethics 2000, p. 115.
 McCarty, J, Bus, Ethics 1988, p. 886.
 California Transparency in Supply Chains Act coming into effect on January 1, 2012 is one of the few. http://info.sen.ca.gov/pub/09-10/bill/sen/sb_0651-0700/sb_657_bill_20100930_chaptered.html
 Buhmann, Corporate Governance: The International Journal of Effective Board Performance 2006, p. 190.. ”Informal law is a set of normative ideas and patterns of behavior and action that are not based on sharp distinction between law and morals, or between law and fact. It is not formulated by a central, state or national authority. …Its sanctions are of a moral or practical character.”
 Constantly growing number of companies named in relation to insufficient protection of their employees and environment is a proof of that. For some examples see e.g. http://www.laborrights.org/creating-a-sweatfree-world/sweatshops/resources/12211.
 Michael, Corporate Social Responsibility Initiative Working Parer No. 19. Cambridge MA: John F. Kennedy School of Government, Harvard University. 2006, p. 24.
 Zerk, Multinationals and corporate social responsibility: limitations and opportunities in international law, p. 46, 47.
 Monaghan, Accountability Quarterly 2003, p. 8.
 Example of litigation based on CSR statements is US case Nike v. Kasky.
 Fisher, J, Bus, Ethics 2000, p. 115-127.. Di Lorenzo, J, Bus, Ethics 2007, p. 275-299..
 Apel, American Journal of Economics & Sociology 2007, p. 54.
 Stuntz, Harvard Law Review 2003, p. 1701-1747.. “One might suppose that where law is largely absent, behavior is pretty bad. Yet it turns out to be nearly the other way around. The two areas where law is arguably the largest presence in ordinary life – driving cars and paying taxes – are probably the two areas where there is the largest amount of self-conscious cheating.”
 This concern shall be related and considered in the area of CSR reporting.
 McBarnet, After Enron, Corporate Governance, Creative compliance and the uses of Corporate Social Responsibility, 2005.
 Represented e.g. by Friedrich Hayek.
 Fisher, Bus, Horiz, 1990, p. 30.
McBarnet, Doreen, “Corporate Social Responsibility Beyond Law, Through Law, for Law” in McBarnet; Voiculescu ogCampbell, The new corporate accountability: Corporate social responsibility and the law, p. 585.
 Michael, Corporate Social Responsibility Initiative Working Parer No. 19. Cambridge MA: John F. Kennedy School of Government, Harvard University. 2006, p. 12.
 Zerk, Multinationals and corporate social responsibility: limitations and opportunities in international law, p. 42.
 An example may be found in the section 1 of the Danish Marketing Practices Act. “Section 1. Traders subject to this Act shall exercise good marketing practice with reference to consumers, other traders and public interests.” If non-complying, companies risk the possibility to be fined.
 Parker, Christine, “Meta-Regulation: Legal Accountability for Corporate Social Responsibility?”, in McBarnet; Voiculescu ogCampbell, The new corporate accountability: Corporate social responsibility and the law, p. 585..
 Gilbert og Rasche, Business Ethics Quarterly 2007, p. 187-216.; Apel, American Journal of Economics & Sociology 2007, p. 49-70.; Unerman og Bennett, Accounting, Organizations & Society 2004, p. 685-707.
 Gilbert og Rasche, Business Ethics Quarterly 2007, p. 202.