Ridley Hall, Cambridge

Justice in Business by Clive Wright

Executive Summary

Writers frequently use the word 'just' without defining what they mean. Even if precise definitions of words elude us, there is sufficient common ground for a constructive discussion about what constitutes a just business to take place. Christians have a special responsibility to contribute to this. Drawing an analogy with the just war tradition and drawing on insights from the Bible and virtue ethics, six criteria for just business are suggested.

Three Contrasting Views of Justice

I shall begin by referring to three books.

In 1987 George Goyder, a distinguished businessman and a committed Christian, wrote a book entitled The Just Enterprise. It was a slim volume of just over 100 pages in which he sought to address the need for a new vision of business enterprise. Goyder made some innovative suggestions. First he attempted to change thinking about the purpose of the company, proposing that the memorandum of association should be focused upon securing the moral consent of employees, customers and those whom we now call stakeholders. He quoted William Temple in his Christianity and the Social Order to underline the interdependence between worker and consumer: " ...the reason why goods are produced is that men may satisfy their needs by consuming those goods. Production by its own natural law exists for consumption."¹ The company, Goyder argued, is a social enterprise and that should be reflected in its memorandum of association.

Goyder moved on to make several proposals based on that concept

• Equity shares should be regularly redeemed so that the company might eventually become a self-controlling and self-disciplining economic and social organism. The payment of interest in perpetuity in the form of dividends has become divorced from the risk inherent in setting up the company and is not appropriate.
• Directors under the concept proposed by Goyder would become trustees of the organisation
• The employees should become its shareholders
• The company should be subject to social audits.

Some of these suggestions have indeed materialised some 20 years later. Others have languished, been neglected and been rejected.

What I wish to point out is that the title of Goyder's book was the just enterprise. He took justice as his starting point. But interestingly he neither defined nor even referred to justice, save in his preface, where he considers justice as inherent in natural law. He simply assumed that a company should be grounded in justice.

The second book is Just Business: Business Ethics in Action, by Elaine Sternberg, published in 1994. This is a remorselessly logically argued book which bases its reasoning on the proposition that the defining purpose of business is the maximisation of owner value over the long term by selling goods or services. Business, says Sternberg, is not an association to promote social welfare, spiritual fulfilment or full employment. Such organisations are not businesses. From this definition of business she then argues that the principles of business ethics are those enjoining the basic values without which business as an activity would be impossible. These are defined by Sternberg as 'ordinary decency' and 'distributive justice.'²

I do not intend to discuss here the arguments that each of these books put forward, but simply to point out that their notions of the purpose of a business are pretty well diametrically opposed. Yet both authors use the adjective 'just' to describe the kind of company that is preferred. This suggests that the authors have different approaches to what constitutes justice.

The third book is Ethics and Excellence, by Robert Solomon. This contains a chapter entitled 'Justice: the Ultimate Virtue of Corporate Life.'. He says that not only is justice the basic virtue, as suggested by Aristotle and Plato, but that in the corporation it is an utter necessity. Solomon identifies three widely agreed convictions about justice. Justice is not a matter of strength (might is right); it should not be concerned with irrelevancies (e.g.factors of gender or race in how much people are paid; it insists on equal standards for all.

However, Solomon goes on to underline the complexities of the concept of justice. In relation to the issue of distributing bonus money he identifies no fewer than 14 different factors that might be taken into account in determining a just outcome: equality, merit (results), merit (effort), ability, need, rights, the public good, duties and responsibilities, market value, risk and uncertainty, seniority, loyalty, moral virtue, and corporate tradition. His conclusion is that 'justice is contextual, and it virtually always involves conflicting considerations, different dimensions of justice, any of which may also involve internal contradictions and conflicts'.³ The conclusion is typical of the post-modern dilemma. What do we mean when we use terms like justice?

These three books open up the question for before us because each has a very different approach to justice in the world of business. We are dealing with a very wide subject. My own contribution to this discussion should be taken as an exploration, rather than as a proposition or an argument for one point of view.

Dictionary and Biblical Understandings of Justice

Let us look at the Oxford English Dictionary definitions of justice. It is the quality of being just, morally just or righteous. It is conformity to moral right, reason and truth. It is the administration of the law. It is the observance of divine law. So how does the OED define 'just'? It means righteous, equitable and rightful, that which is morally right; upright, impartial in one's dealings and rendering everyone his due.

We encounter a barrage of terms that we think we understand, but which we would be hard put to define with precision. They all seem to be concerned with balance, fairness and equity. The quality of justice seems to be easier to perceive than to describe and it is difficult to distinguish it from moral excellence.

For the believer there is one particular definition of justice that rings a bell: the observance of divine law. There are many references to 'justice' in the Bible, particularly the Old Testament, and especially in the Psalms and Isaiah. "Righteousness and justice are the foundation of thy throne." (Ps 89.14). We find the same link to equity and to righteousness. It is clear that justice is an essential quality of the divine. The Lord loves justice and is the God of justice. He executes justice for the needy and the oppressed. He will proclaim justice to the Gentiles.

Scriptural teaching on justice is more narrative than it is philosophical. Justice is regarded as something to be done: it is relational or social. But above all justice is set within an eschatological frame - it is something not fully realised here and now. Earthly justice is provisional and relative. So mercy, forgiveness and reconciliation, which are at the heart of divine justice, provide a model for human justice. We aspire and strive to reach perfection in our pursuit of justice, but we know this is elusive. I have yet to see an evolutionist's explanation for this capacity that we possess. As a Christian, I believe this aspiration comes from the God who is alone truly just.

One of the OED definitions defines justice as conformity to reason. St Thomas Aquinas applied reason in his consideration of justice. For Aquinas, general justice is the principle of loving your neighbour as yourself. So the objective of general justice is the common good. One cannot respect or promote the common good without respecting or promoting rights. This concept is embodied in the term ius from which justice is derived. It is the right of persons to what is due to them, what is rightfully theirs. So the requirements of justice are identified by considering what will establish or preserve a reasonable relationship of equality between us. This leads to the second sense of ius - the sense of law. What justice requires is settled by law. The law can be moral law, natural law or civil law. Justice is concerned with all of them.

Virtue Ethics

Justice is one of the cardinal virtues. A virtue is a trait of character or intellect which is in some way praiseworthy, admirable or desirable. Virtue ethics offers one way out of the intellectual muddle into which post-modernity has led us - a world in which words have no meaning and where everything is subjective. We know that it is difficult, if not impossible, to produce definitions that command universal assent. My brief examination of 'justice' and 'just' has illustrated that. We can recognise justice more readily than we can define it. The same is true of any value statement.

Nevertheless, we can also recognise differences and distinctions. Virtue ethics identifies opposites for those laudable traits known as virtues. The opposites are called vices. We can distinguish between vices and virtues even though we cannot necessarily define them to our total satisfaction. Thus patience is a virtue. Its opposite is impatience. It may be difficult to define exactly the qualities of patience and impatience, but we know the difference when we see it. That difference is real and therein lies an adequate basis for making value statements. If two concepts are different and that difference can be perceived, then we can begin our discussion. There is a perceptible difference between justice and injustice, between just and unjust. It is on that premise that I want to approach the concept of 'just business'. The books by Goyder and Sternberg use the term 'just' about business but with little serious attempt to define what they mean. I hope to remedy that omission by offering some thoughts on the criteria that could underpin notions of the just business.

It is notable that in the difficult area of armed conflict and war, Christians have used the language of 'just' and 'justice' to formulate criteria for making moral judgments. The just war tradition developed guidelines for the conduct of war: just cause, legitimate authority, right intention, probability of success, last resort, proportionality, and non-combatant immunity. Applying these criteria is problematic, as the recent debate over the conflict in Iraq illustrates. The exercise of judgement in these matters remains crucial, and the just war criteria are not easy to interpret. But they offer a model that may help us. They show that the notion of justice can be implemented in a practical, constructive way.

In exploring the concept of a just business, I am seeking a distinctively Christian input to the process of wealth creation. The secularisation of the wealth creation process came about as the Industrial Revolution exploited our new-found ability to create wealth. One consequence of secularisation was a failure of the Christian community to engage with this activity. Too often Christian comment was of a political nature, looking at unfortunate outcomes such as inequality or social damage, and not much concerned with the process itself. We need to remedy that deficiency.

Virtue ethics is a strong Christian line of moral thinking and teaching. However, we have to recognise that Christianity is - like all religions and all philosophies - porous and open to other influences. It is therefore not likely that we can identify a uniquely Christian perspective based upon the virtues. The concept of the virtues goes back to the Ancient Greeks. That concept was further developed by reference to Scripture, to Jesus' teaching in particular and to reason, in order to establish a canon of virtues that might shape the character and guide the behaviour of the individual Christian. These virtues were at the root of the thinking of Saints Augustine and Thomas Aquinas as they developed the criteria for just war. It is my intention to tease out the relevance of the virtues as a basis for formulating criteria for the just business. Here are six criteria.

1. Service of Humanity

The foundation for a moral framework has to look to a vision or end purpose for humankind. Morality is not something that we dream up afresh each morning and write down on a sheet of blank paper. It demands a telos, or end point. For the Christian, that purpose is love - love of God and love of our fellow human beings. That is the commandment articulated by our Lord and is binding upon all Christians. From that starting point the Christian derives his or her moral framework. Can we take that commandment and - using the virtues that flow from our Christian understanding - establish a distinctive Christian input to the practice of business? An input that will satisfy the desire for justice that also lies at the heart of our faith?

If I had £5 for every definition of the purpose of business that I have ever heard, I would be seriously rich. These definitions usually centre around two assertions: the purpose of business is to make a profit; the purpose of business is to provide a return on investment to the shareholder. In practice, neither of these statements will do. Anyone engaged in business will know that only a modest percentage of discussion and effort in a company is directly related to securing a profit. Profit may be the means by which the effectiveness and efficiency of a business can be measured, but it is by no means the defining purpose of the activity. Similarly, in the capitalist system, the interest of the shareholder may be of fundamental importance but, as the stakeholder debate showed, there are other parties whose interest the business must take into account.

For the Christian there is a more fundamental purpose for business: service of our fellow human beings. Service is love in action and practice. It is the direct application of Jesus' commandment. This is not just a woolly statement of benevolent intent or a hopelessly impractical one. Any economist will tell us that wealth is created only when human needs or wants are satisfied. That is what wealth is - the satisfaction of needs or wants. I may construct the most elegant and technically advanced car in the world but if no one wants it I have not created wealth. The word 'wealth' is derived from the same root as 'well-being' - that feeling we experience when a need or a want is met. Service is not only a Christian ideal: it is a practical reality at the heart of business. If the supplier does not serve his customer he will not have a business for long.

2. Obedience to the Law

Obedience to the law has to be a sine qua non for the just business. In democracies such as ours, where the law derives authority from the common consent of the people and is designed to promote the common good, adherence to the law is relatively straightforward. If a person or an organisation finds the provisions of the law in a democracy unacceptable, then the way to change or modify the law is clear. There is a mechanism for doing so that is open to all, albeit with difficulties unless you are the Prime Minister! Failure to adhere to the law in a democratic society will earn sanction. Breaking the law is not acceptable: trying to change the law is permissible. So in these circumstances, observance of the law is barely a moral issue. It is something that the individual or the organisation is required and constrained to do.

In non-democratic societies (and, I suppose, very occasionally in democratic societies), the situation may be more complex. The law may itself be unjust. It may not serve the common good, but the good of the tyrant or the party. The apartheid laws in South Africa were a case in point. Laws that in certain countries discriminate against women or against minority groups pose a problem and the moral dilemma of whether obedience is appropriate. Such dilemmas have to be faced and require more than a simple injunction to 'obey the law of the land'.

Yet another complication for a company and sometimes for the individual is created in today's global economy Law now spills over from national to international jurisdictions, such as the European Union. In the EU the attempt is made to harmonise the laws of the different member states, but that process is imperfect, leaving tensions between different interpretations over such issues as human rights. Even less precise and authoritative are the codes set by the United Nations or the protocols of international bodies such as the WTO or the IEA. Companies may choose to subscribe to the codes of practice set by some international bodies but this is frequently a discretionary matter.

A further complication may arise when a business operates across more than one jurisdiction. I worked in the oil and chemical business, where issues of health, safety and protection of the environment are highly relevant. National requirements in these fields can vary widely. Should one apply different standards if the national laws differ - or should one regard matters of safety, health and protection of the natural environment as inalienable?

Jesus was very forceful on the subject of law. His teaching was to instruct his followers to follow the spirit rather than the letter of the law. This raises a further dimension: laws that are internal and which set the parameters for behaviour without necessary reference to some outside law. In my book The Business of Virtue⁴ I try to develop an analogy between the formation of the Christian conscience and the development of the corporate conscience. Both the individual and the company can internalise values and virtues, so that the resolution of dilemmas makes reference to those values. Adherence to a set of internal laws can materially assist towards the attainment of the just business. In the last resort the laws which justice asks us to follow are both the external and the internal ones. That is one of the profound truths that the Christian community has learned and taught over 2000 years.

3. Equity, balance andfairness

These concepts form a deep-rooted part of our understanding of justice. Fairness is a concept that is almost hard-wired into us. One of the first things a child comprehends is the notion of fairness and it is found even in the playground of an infants' school. Where does it come from? No doubt there is a deep evolutionary reason for our development of the concept of fairness and equity. One does not have to be a philosopher to comprehend that humankind, being a gregarious species, will live together in harmony more easily if these principles are observed in the community. None of us likes the free loader or the uneven distribution of benefits. Gross inequality affronts us and leads to dissent and discontent.

I am not a computer buff nor am I a mathematician. But I understand that very sophisticated computer models have been developed which simulate the contest between totally self-interested entities and those that are altruistic. One would think that the contest would have one outcome: the elimination of the altruistic units. But using tit-for-tat theory the models apparently show that eventually, after huge initial gains by the selfish units, some kind of stability is reached where the altruistic units survive. These models are perhaps demonstrating in a sophisticated way what we instinctively know, that there are limits in society to the pursuit of selfish ends. In other words the attributes inherent in justice are necessary to the survival of a community. Fairness and equity are part of the cement that holds us together as human beings.

4. Proportionality

'Remember this, that there is a proper value and proportion to be observed in the performance of every act.' (Marcus Aurelius Meditations )

One aspect of our sense of justice is the notion of due proportion. By 'proportionate' we mean a state of harmony where things are in due relation to one another. The OED tells us that to be in proportion is a state of balance, symmetry, agreement or harmony. We know when things are out of proportion. Something has gone wrong and due relationships are missing; balance and equity have been lost. Implicit in the cardinal virtue of moderation is a sense of balance, restraint from excess and conformity to some kind of norm.

In the world of business, it is not difficult to see where the principle of proportionality applies. Take, for example, the issue of executive pay. Many have been affronted by the excessive remuneration packages that some senior executives in business receive. These packages are sometimes disproportionate. The rewards are not in balance with either the effort put in by the executive nor with the contribution that one person can make to the success of an enterprise. They shock us because the top executive takes away from his day's work several hundred times more pay than the person at the lowest levels of the company. We feel that these huge differentials are disproportionate. They are not just.

You may ask 'what is proportionate in these instances?' and of course there is no clear answer. We are again at that point where the internalisation of values should guide our decisions. We can perceive the difference between what is proportionate and what is disproportionate. There is no mathematical formula that determines the right balance; but our innate sense of justice informed by reflection and reason can guide us. In some instances attempts have been made to set down what is proportionate in precise terms. The John Lewis partnership used to set a limit on top executive remuneration so that it did not exceed 25 times that of the lowest paid employee. I understand that the formula is no longer applied. In arguing for proportionality in this area I am not proposing a neat algorithm that will satisfy our sense of justice and fairness. Each case has to be considered on its merits. What I am arguing for is that when decisions about executive pay are taken, proportionality is one criterion that must be explicitly and openly addressed. That examination should be public and on the record.

Other examples where the principle of proportionality applies are not difficult to find in the world of business. We know full well today that many people are working very long and demanding hours. The question has to be asked whether this is in proportion to the importance of other aspects of their lives, such as family or health. For me perhaps the most important and critical area where the principle applies is in the field of environmental conservation. The catastrophic consequences of disregard for the environment are manifest. In business we have to address whether the damage caused is in proportion to the benefits obtained. Awareness of this issue is now considerable and in the boardrooms where I sat it was addressed with great seriousness. Nonetheless I believe the debate often takes too limited a perspective. It can give undue weight to the perceived benefits for the consumer or the producer, at the expense of such factors as protection of species diversity or conservation of valuable sites. The total balance is difficult to establish but again, an awareness of the principle of proportionality would greatly assist in concentrating minds.

5. Reciprocity

Business is full of reciprocal relationships. Supplier and customer; employer and employee; partner and partner; company and government. The application of justice in these relationships goes well beyond what the law prescribes. Take the example of supplier and customer. The principles of common justice require that equity and fairness should govern this relationship. This is recognised in law by regulations such as those limiting monopolies or the abuse of dominant position. But at the heart of the supplier-customer relationship lies a mutual dependence. Both sides in the deal are seeking to come out with benefits. It is not a winner-takes-all situation. Each party recognises that the other party has to derive benefit, and the principle of justice requires that there be balance in the deal. That reciprocal benefit is fundamental to the proper operation of the market economy.

The principle of reciprocity is a direct application of tit-for-tat theory. In common parlance there has to be something for everyone in the transaction. Unless there is, consent breaks down and the community suffers. I initiated our discussion of just business by reference to just war theory. War can sometimes be conducted with unconditional surrender as its aim. There is no reciprocity in unconditional surrender: winner takes all. But there can be no such outcome in business. Both sides in the business deal must derive something from it. Implicit in the concept of reciprocity is the principle of the Golden Rule : "So whatever you wish that men would do to you, so do to them." (Matt.7:12; Lk 6:31). That is a principle which applies most markedly in business activity.

6. Trustworthiness

The last criterion that I am proposing for the just business is trustworthiness. A few moments of reflection will serve to convince us that the whole of business is dependent upon trust. If I am a customer, I trust that the goods I buy are fit for use. The supplier trusts that he or she will receive payment for the goods sold. The employee trusts that he or she will be remunerated for the work done. The employer expects and trusts that the employee will do what he or she is paid to do. The element of trust is essential in all business and without it the processes break down. In the absence of trust, transaction costs become unsustainable. The matter of trust is a huge one.⁵

It is, nonetheless, worth noting which are some of the key virtues that sustain and build trust. I would mention three in particular which are at the very root of trust in business: honesty, accountability and transparency. Honesty is, of course, a recognised and basic virtue. The virtues of accountability and transparency are closely related to honesty but appear less often in any treatise on the virtues. But if we consider the opposing vices of irresponsibility or unaccountability, and secretiveness or evasiveness in matters of business, it is clear that we are identifying virtues basic to the conduct of any business. Without confidence the world of business starts to collapse, as the stock market demonstrates when events threaten disorder.

Why does it matter?

Finally, a few further reflections on why the concept of 'the just business matters.

First, as Christians I believe that we have a responsibility not only to participate in the world of business, but also to do so justly. The creation of wealth is fundamental to our wellbeing and there seems to be a synergy between our democratic freedoms and our ability to create wealth.⁶ If we are to participate in this activity honourablly, then we should tease out the virtues that will serve as guidelines for the just conduct of business.

Second, as Christians we have a special responsibility to consider how this basic activity may be conducted in accordance with a formed Christian conscience. The free market system evolved in our culture and that places a special responsibility upon us to seek ways in which it can be carried out in accordance with principles of justice.

Third, in the post-modern world we are in danger of acting as though all moral considerations are relative and subjective. Each person thus starts with a blank sheet and works it all out for him or herself. That way chaos lies. We have to reach some degree of common understanding. This is particularly necessary in establishing the codes of business ethics that are increasingly used by companies to set out their principles and standards. I believe that virtue ethics can offer a means to find that common ground.

Finally, our way of life is under threat from people who see it as evil. I do not see our way of life as evil. However, it is clearly very far from perfect and we should respond to the challenge of those who see it as seriously deficient. The use of the virtues to help us establish the criteria for the just business may be a step towards meeting that challenge.

Notes

1 George Goyder, The Just Enterprise, Andre Deutsch, 1987, p.56.

2 See Elaine Sternberg, Just Business: Business Ethics in Action, chs. 2 & 3.

3 Robert Solomon, Ethics and Excellence, OUP, 1992, p.240.

4 Published by SPCK in 2004.

5 See the fascinating book by Francis Fukuyama, Trust: The Social Virtues and the Creation of Prosperity, Penguin, 1995.

6 This is interestingly explored by Niall Ferguson in The Cash Nexus, Allen Lane, 2001.