Prof. Peter Pruzan
1. Introduction
There is an apparent inconsistency in the way that most people - including social scientists and philosophers - refer to the competencies and capacities of collectivity of purposeful individuals, what I will refer to in the sequel as organisations. On the one hand, within the field of management parlance, it is common to speak of an organisation's visions, goals and responsibilities. These are everyday phrases employed by both organisational theorists and business practitioners. On the other hand, it is also common to attribute competencies for intentions, reflection, evaluation, learning and considered choice solely to individuals. We tend to say that these are distinguishing characteristics of human beings as opposed to other life forms. This suggests that the attribution of competencies ordinarily associated with consciousness to organisations is metaphorical rather than literal in nature.
A relevant example of this ambiguous usage of 'consciousness' is to be found in the literature dealing with the field of business ethics. On the one hand, the propensity to behave in accord with one's conscience and accepted moral codes is typically attributed to individuals. On the other hand, the field of business ethics employs concepts such as organisational (shared) values, codes of ethics and corporate social responsibility.
This terminological conflict or lack of clarity is evident if we refer in particular to what may be called a prototypical American approach to the teaching and practice of business ethics. The pedagogy employed in teaching business ethics in most Anglo-Saxon business schools is designed to motivate the individual to be aware of and capable of dealing with conflicts of interest arising from the desire to both promote economic efficiency and to behave in, what the individual experiences to be, an ethically acceptable manner. This is in contrast to a more European approach which tends to emphasise questions of justification and intersubjective agreement. [1]
The individual-oriented teaching method typically confronts the student with a series of case studies which place her/him in contexts characterised by a leader having to make choices when facing moral dilemmas (typically where economic rationality is challenged by ethical considerations). The underlying idea is, that by confronting the student with a series of virtual dilemmas, her/his ability to cope with such dilemmas in future 'real-world' situations will be improved. The emphasis is on decision-making - on the evaluations and decisions made by an individual leader, even though these of course may be strongly affected by the corporate (or even national) culture.
From this perspective, it might be argued that all talk of organisational values and ethics is metaphorical (perhaps even euphemistical!); although the management of an enterprise may refer to the corporation's values, virtues and visions, what they really refer to are their own emotive and evaluative bases. Using a combination of sticks and carrots, employees are cajoled and convinced that these constitute a legitimate basis for the establishment of behavioural norms. Similarly, public relations activities are designed to project to other stakeholders, including consumers, activists, regulators and the public at large, that these values, virtues and visions are indigenous to the company.
Briefly speaking, the implicit logic which underlies such an approach to the concept of consciousness appears to be as follows:
The paper provides a series of reflections on the acceptability, relevance and efficacy of such a perspective on terminology and reality. It will be argued that, if certain conditions are fulfilled, it is both meaningful and efficacious to ascribe the competency for conscious and intentional behaviour, including formulating and expressing values and visions to collectivities of individuals, to organisations. In addition the arguments will not only be hypothetical but also normative; it will be argued that not only can organisations acquire the ability for existential reflection and for self-assessment, but in addition the leaders of such collectivities should behave as to promote the development of these competencies, i.e. of a corporate consciousness. The arguments will be based upon a mixture of empirical observations, common sense and deductive reasoning. The paper is structured as follows:
Before commencing, a reservation is called for. When developing the exposition, it will not be possible to avoid employing just those terms the meaning of which are being investigated and defined. For example, in the case below, reference will be made to the participating managers' views on their enterprise's values before discussing whether it is relevant to attribute a competency for value formation to an organisation.
2. Why is it Important to Reflect on the Competencies of Organisations to Develop Consciousness?
The following story deals with the creation of a 'multinational monster'. In the early 1990's I was contacted by a large, European-based multinational manufacturing company (with no activities in my own country, Denmark) and asked to develop a seminar for 49 leaders of the company from eight western countries. The CEO had heard about the research going on at the Copenhagen Business School on values-based management, and about our development and implementation of Ethical Accounting in co-operation with a major Danish bank, Sbn Bank or Spar Nord as it is known in Denmark. The seminar was held at a lovely inn north of Copenhagen. It started out with lectures which led up to a group exercise. Each of the participants was given a list with roughly 50 'values' including such terms as success, love, trust, excitement, respect, wealth, freedom, good health, power, professional competency, peace, effectiveness, charity, progress, security, compassion, patience etc. I mentioned that these 'values' were simply labels, words for basic cognitive-emotive categories we tend to use to motivate our actions.
They were told to take a short walk by themselves in the autumn air and to reflect upon which of these - or any other values they might choose to add - were most important for them in their daily lives together with family, friends and themselves. Then they were to discuss their views on these values in groups (there were seven groups each with seven participants). If possible, the members of each group should agree as to which five (or anywhere from three to seven) were the most important values in their personal lives and write these down on flip-over paper. An hour was provided for these deliberations and discussions. Then, in a plenary session, each group was to present the personal values it had selected and to discuss their interpretation of these values, the process they went through in arriving at just these values, etc.
I must admit that I was a bit nervous as to the outcome. This was the first time that I had employed such a procedure. [2] Furthermore, the company was known for its high degree of hierarchical control and its very strong short-term, shareholder orientation (at the expense of a more inclusive orientation towards broader constituencies). However, the exercise appeared to generate considerable energy and enthusiasm; it turned out that this was the first time that it was legitimate for the managers, all of whom were recruited internally, to discuss such matters; this simply was not done and certainly not while at work!
In the afternoon, after another lecture and a 'happening' by an activist group which demonstrated against the company's high levels of pollution, the exercise was repeated. The only change was that this time, instead of focusing on the individual manager's personal values, the subject was the 'company's values'. Not those values which were espoused in glittering brochures describing the company and its products, but those values which could be said implicitly to underlie decisions made as to such matters as hiring and firing, new investments, entering/leaving markets, advertising, lobbying, etc. Otherwise the procedure was identical with the morning's exercise; take a walk and reflect on the values which appear to describe or underlie the company's actions, go into your group and try and reach agreement as to the five or so most important values which, using inductive reasoning, can be said to characterise the company's actions. Finally write these down on flip-over paper, hang the paper right next to the paper with the group's list of personal values from the morning session, and tell the other groups as to how and why those particular values were arrived at.
The result was shocking, to say the least. On a large wall hung seven pairs of flip-over papers; for each of the seven groups there was one sheet of paper with the most important personal values and one sheet with the most important corporate values. It was obvious to all that there was absolutely no correspondence between these two sets of values for any of the groups. For each of the groups not only were all the words different; they simply had what one might call strongly varying 'flavours'. While the personal values tended to include labels such as 'truthfulness', 'love', 'peace of mind' and 'justice', the list of organisational values tended to included terms such as 'success', 'efficiency', 'power', 'competitiveness' and 'productivity'. This led to a series of nervous discussions. Tension was in the air. I challenged them and said that if such listings had resulted from the workers it would be quite understandable. The workers could argue that it was natural that there was a large gap between their personal values and those of the company. No one listened to them or was interested in what was important for them. But in the case at hand, the 'workers' were the top management.
After an embarrassing period of silence, the CEO held a brief talk in which he announced that he would consider resigning. He said that it dawned upon him that he was active in the construction of a monster, a corporate Frankenstein.
He did not resign! But the rest of the program was modified so as to allow discussions on such matters as: "Is it important that there be a high degree of harmony between the personal values of the employees (including the management) and the values of the organisation as a whole?" "Should a company attempt to develop a code of corporate values - and if so, how - and how should it be interpreted and communicated?" "Should it be a 'top-down' expression of management's' expression of what the company should promote - or should it, for example, be based upon a consensus process involving major stakeholders, in particular the employees - or some combination of these?"
After this experience I developed a metaphorical picture of the modern, strongly shareholder-oriented manager who, before he (typically a 'he') crosses the doorstep leading to his executive office, hangs his fine coat on a hanger and, unknowingly, hangs up his personal values as well. After a long day of managing, deciding, steering, manipulating and controlling, he washes the last drops of blood off his rubber apron, crosses the doorstep once again, puts on his fine coat and his personal values, and returns home to his beautiful home, his lovely wife and family, to a fine dinner with good vintage wine, to friends, the faithful Fido, Beethoven, enchanting love-making and beautiful nature. [3] The picture is of a leader who unbeknownst to himself has developed a modern form of schizophrenia, where the gap between his personal values and the values he promotes in his company is so extreme that both his own health and that of the organisation threatened.
That organisational health can be threatened can be deduced from the observation that in the post-modern/information/knowledge/network society, successful enterprises will rely heavily on employees who are dedicated, creative, dynamic, independent, faithful and reliable. But considerable evidence [4] indicates that such employees seek not only traditional benefits such as good wages and opportunities for advancement, but also meaningful work in socially attractive environments in a company they can be proud of and where they feel that there exists a reasonable degree of harmony between their own values and those of the company.
That personal health can be threatened is not widely documented. However, the following story illustrates of the dangers of this new type of schizophrenia. A former friend of mine was for many years the director of personnel at SAS (Scandinavian Airline Systems). Over many years this major airline had developed a data base containing demographic statistics on the lives of a number of Scandinavian leaders in business and the public domain. One of the interesting, but highly depressing, statistics was that when a Scandinavian top manager leaves his or her job for any reason (ill health, gets fired, retirement etc.) the expected period of time that he/she has to live is on the order of one year! My friend lived pretty much up to his own statistics and died at the age of 63 after retiring at the age of 61. The hypothesis here is that business leaders find it stressing and difficult to live in a world of personal values when so much of their time and energy has been devoted to promoting values dealing with economic efficiency, growth, power and reputation.
It is common for people to speak about wanting to have a long life characterised by a high quality of life. Such figures of speech can be extended to the corporate level. It is postulated that the leaders of most companies would want their company to be characterised by a long and 'happy' life. If this is the case, evidence exists that just as it appears to be important for individuals to pay attention to existential questions, it is also vital for companies to pay attention to corporate existential matters such as: "Who are 'we'?" "What do we stand for?" "What are our core values?" "How should we reflect upon our identity?" "How should we measure, evaluate and report on our development and success?"
The authors of the book Built to Last: Successful Habits of Visionary Companies [5] researched a set of exceptional (almost exclusively American-based) companies that stood the test of time, the average founding date being 1897. They studied these companies over their entire histories and compared them to a set of companies that had the similar characteristics but did not attain the same stature as the truly visionary companies. They referred to the companies as visionary rather than successful or enduring because they distinguished themselves as a very elite brand of institutions - they are characterised by being more than successful and more than enduring. According to the authors, in most cases they are known as the best in their industries and have been so for decades. Many have served as role models for the practice of management. As regards this paper, a fundamental conclusion of the study of the visionary companies was that they articulated a core ideology defined by the authors as consisting of core values and purposes.
By 'core values', the authors referred to "the organisation's essential and enduring tenets - a small set of general guiding principles; not to be confused with specific cultural or operating practices: not to be compromised for financial gain or short term expediency". And by 'purpose' they referred to "the organisation's fundamental reasons for existence beyond just making money - a perpetual guiding star on the horizon: not to be confused with specific goals or business strategies".
What is important for our purposes is not what values and purposes characterised the individual companies, but rather the fact that the authors of this highly successful book speak so strongly of the corporate core values, which attain their importance by becoming shared values, and the corporate purposes. These values and purposes are described in such a way that they appear to have 'objective' character. They exist, can be identified, classified, etc. They are stable over long periods of time and do not depend on the presence of a charismatic leader; in fact, according to the authors, many of these companies have had leaders who are far less dominating public figures than the leaders of the (good, well known, but not nearly as successful) companies that the highly successful visionary companies were compared to.
What is equally important for our purposes is the fact that the companies they are compared to are, for the main characterised by the absence of such core/shared values and purposes. It is implicitly argued throughout that corporations have the potential competency and capability of developing existential qualities such as core values and purposes - just as applies for individuals!
A tentative conclusion is that collectivities such as organisations do appear to have a potential competency to 'have', or perhaps better yet, to 'choose to have', values, that these values can play a dominating role in the viability and success of the companies and that therefore there exist good, practical reasons for seeking to establish a theoretical framework for dealing with such notions as company goals, shared values, and, to be a bit provocative, what a former leader (Values Co-ordinator) at World Bank, Richard Barrett refers to as the "corporate soul". [6]
3. Theoretical Arguments: Under what Circumstances is it Reasonable to Ascribe to an Organisation the Competency to Develop Shared Values, Virtues and Visions - to Develop Corporate Consciousness'?
The presentation so far has argued that there may be good business reasons for the leaders of an organisation to attempt to promote the development of sound 'corporate values'. The stage is now set for considering the theoretical question as to when it is meaningful to ascribe to organisations the competency and the capacity to develop the existential qualities that we use to characterise 'consciousness'. Included are the ability to reflect on such existential matters as corporate identity (who are 'we'?), visions (what are our fundamental reasons for existing, our ideals?) and values (what are the standards we will employ to measure, evaluate and report on how well we live up to our ideals?) and to develop an identity based on this competency. In other words, we will consider the question: Under what circumstances can a collectivity develop a self-referential capacity for integrating cognitive and emotive expressions of purpose and ideals into its vocabulary and identity?
It is not reasonable to expect that everyone in a collectivity has the same values. Nevertheless it has become common to speak of 'shared values'. This terminology has intuitive appeal but is seldom made precise in the literature on organisational development and management philosophy. In a small, well-localised group, where the members know each other and have frequent contact, these are the values or standards that the group and its members agree (implicitly or explicitly) to use to evaluate whether the group's actions are acceptable. This is closely related to a concept of morality. The individual members of the group - be they a local chapter of Hell's Angels or the Boy/Girl Scouts, or a sewing club, develop [7] and employ shared standards for behaviour when functioning as a group. Often these values are not only confined to the group's activities, but flow over and become more or less integrated in the members' individual identities. This is certainly the case with members of Hells Angels - and is a fundamental aspiration underlying the Scout movement.
When we move from the context of a small, local group to that of a larger collectivity of individuals, what we refer to here as an 'organisation', shared values are the criteria and standards that the organisation and its stakeholders (these terms will be elaborated on shortly) agree to use to reflect on the organisation's identity and to evaluate whether the organisation's actions are acceptable.
That it is legitimate here to speak of shared values without referring to some aggregation of personal values has to do with the social nature and propensities of human beings. It is a common experience that when individuals, each with their own values, preferences and expectations, meet to decide on matters of importance to an organisation they belong to and for which they feel a sense of responsibility, a new, implicit - and shared - value can develop amongst the participants. This shared value which emerges in the group is to reinforce the shared identity, perspectives and sense of responsibility they have with respect to the organisation as a whole - and to arrive at decisions which are acceptable for all the participants.
There is no guarantee that this will happen. It is by no means certain that, for example, representatives from the sales and production departments of an enterprise who are meeting to co-ordinate plans, will be prepared to move their focus from their department's - and their own personal - interests, and develop a more inclusive or holistic frame of reference for their decisions. A minimal precondition for it to happen is the existence of a reasonable degree of mutual respect and shared perceptions and feelings as to organisational identity. These are a pre-condition for the development of a consensus-seeking dialogue where the participants are able to relate to what they jointly are willing to consider to be shared and efficacious.
3.1 On the Notions of 'Stakeholders' and 'the Organisation'.
Up until now the term 'organisation' has been used in an intuitive sense corresponding to its usage in daily language as well as in almost all literature on 'organisational theory', 'organisational development' and the like. In ordinary language we tend to refer to an organisation as a larger group of people who, for any of a wide variety of reasons, choose to adhere to a set of norms, rules and visions which they identify with a shared symbol, the organisation's name. There are many types of organisations; companies, clubs, institutions, local governments, associations are all 'organisations'. It is not a prerequisite for membership of an organisation that its members know or support the organisation's goals; it is not necessary that a worker at IBM works there to promote IBM's purposes and success. In fact s/he may consider her job primarily as a means of earning a livelihood and may feel a very limited identity and solidarity with the organisation. But at a minimum she must obey its rules and regulations if she is not to risk losing her job. And hopefully, both for her own sake and for the sake of the company, in her work and social intercourse with others at her place of work, she identifies with and supports the health and well-being of IBM.
In general people do not ask the question: 'What is an organisation?' It is common, for example, for students at a business school as well as for their role models, successful top managers, to speak of a company's goals, visions and values without reflecting over what they really mean by 'the company' and under which conditions it is meaningful to ascribe to an organisation the capacity to develop visions, to have values and to set goals which are agreed on collectively. It has become part of their language and culture and does not require further justification. Almost all textbooks on managerial economics implicitly equate 'the corporation's visions/values/goals' with top management's visions/values/goals - and implicitly or explicitly assume that a fundamental basis for these is an overall and overriding aspiration; to maximise the wealth of its owners (corporations' own nothing according to accounting theory).
However, it is argued here that if managers are to be able to preserve their personal integrity while dealing with the complexity characterising modern technology, markets, regulations, and production forms, it will be necessary for them to reconsider radically their concepts of an organisation and its competencies. For example, it is postulated that successful and viable enterprises no longer will be regarded primarily from the perspective of the owners or a small group of top managers. The shareholder orientation, which has dominated almost all literature on management, business administration, accounting and finance, is slowly but surely being supplemented by a stakeholder orientation. [8] Not because traditional economic criteria are irrelevant, but because the one-dimensional mapping of corporate effectiveness via profitability can lead to ineffectiveness seen from the perspective of its many constituencies - and therefore as well from the perspective of the enterprise's long term viability, economic efficacy and 'quality of life'.
This is not only relevant for commercial, private enterprises, but applies as well for hospitals, communities, and other forms of organisations within the public domain. Even though such not-for-profit organisations may lack a simple measure of economic success as is provided by the bottom line, their managers still tend to be dominated by economic rationale and steer via budgets and bureaucracies - and not by a stakeholder orientation. Without being able to reflect on and report on their success via a profit and loss statement, such organisations have an even greater need for the identity and legitimacy which can be created by a more holistic orientation towards the many stakeholders. In other words, an organisation must contribute to its stakeholder values if its own values are to be promoted.
From a systems theoretical vantage point an organisation can be considered to be a purposeful system with the following characteristics:
In other words, an organisation is here considered to be a social system with the ability to describe itself and reflect upon itself on the basis of its shared values.
An organisation's values are not just an aggregation of its stakeholder group's values, even though it is a condition for organisational success that the organisation's values respect and reflect its stakeholder groups' values. The organisation's shared values are those values which emerge from the organisation's reflective constitutive dialogue as to its identity, purpose and relationships to its stakeholders. In other words, these are not just any values, but those values which can take on a socially integrative function and can be employed to justify the establishment of organisational goals.
It would be detrimental for organisational effectiveness if its management had to refer to the values of its stakeholders whenever it had to make decisions. An organisation's experience and traditions are valuable because they permit management - and the organisation's stakeholders (with primary emphasis here of course on the employees) - to act without directly reflecting on or referring to the organisation's values.
Stakeholders are those parties who affect and/or are affected by an organisation's behaviour. They have a stake in the organisation. It is common to refer for example to a production company's employees, customers, owners, suppliers, competitors, local communities, financiers as major stakeholders. In the case of a city hospital, the stakeholders could be the doctors, nurses, porters, administrative personnel, patients, their families, the politicians providing the funding, etc. But the term 'stakeholder' does not refer (aside from rather extreme situations) to an individual worker, customer or patient.
From a systems theoretical perspective a stakeholder can be considered to be a group or subsystem which:
- is selected by and interacts with the organisation, and
- whose members, based on their own personal values, choose to participate in an existential discourse with themselves and with the organisation, which reflects on and constitutes the stakeholder group and the stakeholder group's shared values
The stakeholder group's shared values are not just an aggregation of the individual members' values, even though these underlie the group's values. The group's shared values are those socially integrative values which emerge from a values-based dialogue within the stakeholder group - a reflexive discourse based on the group's mapping of itself and its environment.
For example, the employees in an organisation can create a stakeholder group, the 'employees' if:
To avoid terminological confusion due to using 'employee' to refer both a stakeholder group and an individual in the employment of a firm, I will now refer to the latter as a 'worker', although this tends to be associated with terms like labourer. [9] An individual worker may have many values which are not 'employee values'. And if worker Smith leaves the firm and is replaced by worker Jones, it makes no sense to speak of a new stakeholder with a new set of values. The group is constituted based on its shared values and its self-reference. It would destroy its effectiveness, its ability to promote its shared values, if it had to appeal to all its members' private values each time it had to relate to itself. And it would be destructive for its effectiveness if it had to relate to its shared values whenever it had to relate to the organisation. The stakeholder group's experience and traditions are valuable because they permit co-ordinated action without directly relating to its values.
3.2 The Role of Management
The perspective presented above on the relationship between values, stakeholders and organisations has so far avoided introducing some of the complexities which arise, when considering that particular kind of employee, the manager or leader.
Most of the literature on stakeholder perspective on the firm side-steps the question as to whether management should be considered a stakeholder in its own right, i.e. one which is distinct from the stakeholder group 'employees'. This is a tricky question, particularly if we by 'management' refer to 'top management' since this group has special competencies, amongst these being the choice of which stakeholders the organisation will choose to relate to! Furthermore, since top management can act on the behalf of the organisation as a whole, it is confusing to speak of management's values with respect to the organisation's values - and to say that management's values are at odds with the organisation's values would be tantamount to criticising it for a lack of responsibility. Management has the responsibility for creating and maintaining the self-referential dialogue process which can elicit and co-ordinate the various stakeholder groups' values and thereby (re)create and co-ordinate the organisation's shared values. In turn, via their concrete actions and their formulation of the organisation's visions, strategies and goals, management affects the formation of the stakeholders' values. Finally, experience with Ethical Accounting indicates that managers have perceptions and values that tend to differ significantly from non-managerial employees.
For all of these reasons, it is difficult to justify categorising (top) management as either a stakeholder in its own right or as a member of the stakeholder group 'employees'.
In fact, it is a challenging question whether 'management' performs its functions from a platform within or outside of the organisation. It can be argued that the vantage point of management of necessity is external to the organisation; this permits it to observe and to steer the organisation as a whole. On the other hand, management's observations are observed by the employees and management can only perform its acts in a close symbiosis with the organisation's stakeholders, including the employees. [10]
On the other hand, managers clearly are employed by the judicial entity, the company, and are in many ways 'in the same boat' as the regular employees. They live up to the common definition of a stakeholder since they 'affect and/or are affected by' the organisation. The case referred to earlier demonstrates the complex nature of this question.
Without attempting to resolve the problems associated with the special nature of management in a values-based and stakeholder perspective on the organisation, I will consider one of management's major distinguishing characteristics and responsibilities as seen from such a perspective on organisational consciousness. Until now I have argued that organisations have the potential competency to develop values via an on-going, self-reflective dialogue process, and that, if this competency is realised, the shared values which emerge from this process can be said to be an expression of a collective consciousness. Management clearly plays a vital role in this process since it has not only the legal capacity to make binding decisions, but also has the potential competency to make legitimate decisions by acting on behalf of the organisation as a whole. [11] The question arises however as to what is required for these potential competencies to be realised and what can be said of the notion of 'corporate consciousness' if management does not live up to these demands.
Briefly, the perspective provided here is that management has the responsibility for promoting the values of all the organisation's stakeholders. In other words, management has a social responsibility which extends beyond maximising the profits accruing to the owners. Management is no longer to be seen as being responsible only to one stakeholder, the shareholders, and it is no longer legitimate to reflect upon organisational success based on one criterion alone, profitability. The perspective presented is that management has a responsibility to provide service to all the organisation's stakeholders and must relate to and promote the values of the various stakeholder groups in their interplay with the organisation. This leads to a more complex - and far more realistic - perspective on management and decision making than that provided by classical economic rationality. If concepts of organisational values, visions and virtues are to be more than just metaphors, management must develop and utilise a multi-stakeholder, multi-criteria concept of the enterprise. It must reflect on, measure, evaluate and communicate corporate identity and success via the employment of an expanded repertoire of explanations to justify its behaviour. This in turn presupposes the existence of a dialogue culture which maintains and develops the organisation via a self-reflective communication process with the stakeholders, each with their own shared values.[12]
4. Operational Arguments: Social and Ethical Accounting
The various distinctions employed so far are closely interrelated. If they are to be integrated into an organisation's structure, procedures and systems, it is necessary to develop a vocabulary and tools which can support the development of the organisation's self-referential capabilities. It is argued that in order to operationalise concepts of shared values, organisational consciousness and new perspectives on managerial competency and responsibility, there is a need for a reappraisal of what we mean by accountability and accounting.
At present the notion of accountability is delineated only with respect to a corporation's legal compliance and its financial reporting to shareholders and governmental authorities - and of late to a limited degree in connection with environmental reporting. While both financial and even environmental performance are increasingly 'auditable', many aspects of social impact remain unmeasured, many claims regarding ethical performance remain unverified, and many aspects of a company's social and ethical performance are unverifiable because to inadequate information systems.
Verifying claims as to corporate values is not simply a matter of 'ethical policing'. Rather, it opens up the possibility for constructive dialogue about what types of social responsibility are possible in different situations, and how they can best be achieved, evaluated and communicated. Accounting for the social and ethical dimensions of an organisation's values and activities may therefore be considered a pre-condition for the development of socially and ethically responsible business.
One such approach to working directly with organisational and stakeholder values is what was originally, in 1989, christened 'ethical accounting'. [13] Briefly stated, ethical accounting measures how well an organisation lives up to those stakeholder values it has committed itself to promote. But it encompasses more than just a snapshot at a particular point of time; its design, development and interpretation contribute to an on-going dialogue culture where values become vital for the organisation's re-production of its self-knowledge. Compared to traditional accounting statements, ethical accounting comprises more values, addresses more stakeholders, and is developed, interpreted and employed by all the stakeholders. Therefore it is not objective. Rather, it draws a rich and informative picture of how stakeholders perceive their relationships to the organisation and provides the basis for a learning process whereby values become integrated into the organisation.
At present it is estimated that roughly one hundred Danish organisations more or less regularly employ ethical accounting as an important tool for contributing to organisational development and to managerial effectiveness. It is interesting to note that the majority of these users are public sector organisations; hospitals, schools, homes for the aged, local communities, city governments and the like. In fact, ethical accounting has been implemented within such rather unique areas as the care of the senile (in the municipalities of Aarhus and Copenhagen, Denmark) and in animal husbandry (in Denmark and Norway).
However, while Danish industrial firms have been reluctant to implement ethical accounting, their interest has increased considerably in recent years. For example, the largest Danish employer's association 'Dansk Industri', in teamwork with the major industrial employee's association 'CO-Industri', has initiated a benchmarking project in 1998 to determine to what extent an organisation's implementation of ethical accounting can contribute to both organisational and personal development. [14]
However, what is perhaps the most interesting development is that which is taking place internationally - with a major influence from Denmark. This development began in 1994 at a meeting of a small group of people from the UK, Italy, the US and Denmark who were enthusiastic as to the possibility of developing a common framework for various approaches to what is now called the field of social and ethical accounting, auditing and reporting (SEAAR). Unknown to the Danes who had developed ethical accounting, there already existed a recent history of attempts in other parts of the world, particularly in the US and UK, to develop methods for measuring an organisation's social performance; the approach was, and still is, referred to in the Anglo-Saxon world as social auditing. And in the mid 1990's other people were developing methodologies similar to ethical accounting and with similar motivations. [15]
However, developing such an accounting process is not without challenges. It is one thing to count and sum up financial flows, but quite another to measure the extent to which an organisation promotes the values of its stakeholders. While a consensus on how to measure environmental impacts is slowly developing, views diverge on how to compute the ethical impacts of business activities. [16] This lack of accepted social and ethical accounting standards may, however, now be drawing to a close. The practices of the new generation of social and ethical accounting, auditing, and reporting that has emerged in the last five years are now converging towards a common approach that could form the foundation for global procedural standards in the future.
In recognition of this development, the Institute of Social and Ethical AccountAbility, referred to as AccountAbility, was established in London in 1996. An underlying motivation was to develop a consensus on standards that can form the basis for securing a recognisable and assessable level of quality in social and ethical accounting, auditing and reporting. According to its mission statement, "AccountAbility is an international professional body committed to strengthening the social responsibility and ethical behaviour of the business community and non-profit organisations. The institute will do this by promoting best practice social and ethical accounting, auditing and reporting and the development of standards and accreditation procedures for professionals in the field". [17] Recognition of both the growth of the field and its universality has resulted in a number of international meetings and conferences dealing with SEAAR. [18] At present, some of Europe's major corporations including Shell and British Telecom have committed themselves to implementing SEAAR while others are in the preparatory phases.
Widespread agreement about such standards would have radical implications for corporate reporting and behaviour more generally. It would enshrine in management and accounting practices the principle that businesses are socially and ethically accountable. It would bring to the 'business' community (including governmental organisations, voluntary and community groups and NGO's) a new era of openness, introducing practices of transparent decision making. This would in turn reflect and reinforce the values, expectations and needs of the stakeholders and the environment with which the organisations coexist. In particular, it would contribute to the personal and professional development of management by promoting increased harmony between managers' personal values and those values which permeate and characterise the organisations they lead, i.e. the organisation's values.
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