Balanced Scorecard Ethics Author(s): Chris Gardiner Source: Business & Professional Ethics Journal, Vol. 21, No.

3/4, Selected Papers from the 2001 Conference of the Australian Association for Professional and Applied Ethics (FallWinter 2002), pp. 129-150 Published by: Philosophy Documentation Center Stable URL: http://www.jstor.org/stable/27801293 . Accessed: 09/08/2011 09:00
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.

Philosophy Documentation Center is collaborating with JSTOR to digitize, preserve and extend access to Business & Professional Ethics Journal.

http://www.jstor.org

VOL. 21, NOS. 3&4 BUSINESS & PROFESSIONAL ETHICS JOURNAL,

Balanced
Chris Gardiner

Scorecard

Ethics

In his polemic on the question of the social responsibilities of business,1 Milton Friedman declared thatthe responsibility of a corporate executive "is to conduct thebusiness inaccordance with their [theowners of the business] desires, which generally will be tomake as much money as possible while

responsibilities." Whether he succeeded is debatable. What he did do, however, is leave us with the dilemma, in the passage quoted above, as to thenature and scope of the "basic rules of the society" in law and in "ethical custom" that executives need to follow.

conforming to thebasic rules of thesociety, both those embodied in law and those embodied in ethical custom"2 (emphasis added). Friedman sought to provide a simple rebuttal of the claim that corporations had "social

Iwant to suggest that a professional paradigm is emerging globally thatcan guide a manager or executive inher/hispractice ofmanagement by clarifying and addressing the issue of the basic social rules and ethics that Friedman acknowledges she/he should follow. The scope and content of this paradigm have to do with product and product impact;with employee relations, conditions and development; with processes of regulatory with is,

compliance and public accountability; andwith value creation?that Product, People, Process, and Profit. Recent Analyses of the Ethical and Social Responsibilities

of Business

A number of differentproposals have been developed over the last several years that seek to articulate and integrateethical and social accountabilities for businesses. Five such proposals are briefly outlined below. These are the Principles for Global Corporate Responsibility ^Principles")',

the

? Business and Professional Ethics Journal 2002. Correspondence should be sent toChris Gardiner, 151Valley Rd, Hazelbrook 2779, NSW Australia
or; via email: TheGardiners@msn.com.au

130

Business & Professional Ethics Journal

Guidelines and SA 8000 consist of toomany indicators and guidelines to be detailed in this paper. A summary by way of a guide to the conceptual The Principles for Global Corporate Responsibility were developed jointly by theTaskforce on theChurches and Corporate Responsibility in Canada, the Ecumenical Council for Corporate Responsibility in theUK, and the Interfaith Center of Corporate Responsibility in theUS. The stated for thePrinciples is "topromote positive corporate social responsi purpose bility consistentwith the responsibility to sustain thehuman community and all creation"4 by providing a set of "ethical standards ofmeasurement" for corporate social responsibility.5 The Principles, and related policy criteria and outcome benchmarks, are divided broadly in the two areas of corporate relationship, one that is described as the "Wider Community" and another described as the "Corporate Business Community." Ethical criteria and benchmarks are developed within the following conceptual groupings: The Wider Community: ecosystems, national communities, local communities, and indigenous communities; The Corporate Business Community: the employed (in termsof Conditions) and the employed (in terms of Persons, covering women, minority groups, persons with disabilities, child labor, and forced labor); suppliers; financial integrity; ethical integrity; shareholders;
customers and

the Social Sustainability Reporting Guidelines ("Guidelines"); Accountability 8000 Standard ("SA 8000"); Dalla Costa's universal principles and business ethics strategic planning process; and Wilson's seven categories of emerging social rules for business.3 The Principles,

structure is provided.

joint

ventures/partnerships/subsidiaries; and

consumers.

The Sustainability Reporting Guidelines have been developed by the Global Reporting Initiative (GR1), an undertaking supported by a number of non-government organizations and corporations(NGOs), and theUnited Nations Environment Program(UNEP). The GRI describes itselfas a long-term, multi-stakeholder, internationalundertakingwhose mission is to develop and disseminate globally applicable sustainability reporting guidelines for voluntary use by

Balanced

Scorecard Ethics

131

organizations reporting on the economic, environmental, and social dimensions of theiractivities, products and services.6 The Guidelines are meant to assist investors, management, and community stakeholders understand and compare the impact of corporate actions and products, through the use of external reporting principles that compliment

traditional financial reporting principles. They are also meant to highlight the linkages of the threebroad reporting areas, which are outlined as:7 Economic, including, for example, wages and benefits, labor productivity, job creation, expenditures on outsourcing, expendi tures on research and development, and investments in training and other forms of human capital. The economic includes, but is not limited to, financial information; element

Environmental:

including, for example, impacts of processes, and services on air, water, land, bio-diversity, and products, human health;

including, for example, workplace health and safety, employee retention, labor rights,human rights, and wages and working conditions at out-sourced operations. Social: The Social Accountability 8000 Standard (SA 8000)8 ismodeled on the InternationalOrganization for Standardizations ISO 9000 management system standard. It focuses on documentation ofmanagement policies and processes in the area of social standards, on processes of continuous

improvement for these policies and processes, and on independent external audit and certification by accredited auditors. It is promoted by Social Accountability International,with the support of an international advisory board that includes the global certification and audit firm SGS-ICS.9 SA 8000 bases itselfon theUN Declaration ofHuman Rights, theUN Convention on theRights of theChild, and on a range of InternationalLabor

Organization (ILO) conventions. It is divided into the following categories of standards: child labor; forced labor; health and safety; freedom of association and the right to collective bargaining; discrimination; disciplin

ary practices; working hours; compensation; and management systems.10 The Principles, the Guidelines and SA8000 are the product of collaborative effortsbyNGOs, internationalorganizations such as the ILO

132

Business & Professional Ethics Journal

Table 1 Central Question

Process Step

Ethical Assessment

an What ethicaltemptations challenge ethical orientation?

Ethical Factors Critical Identify

What are the"critical ethicalfactors" suc for an ethical orientation? cessfully maintaining are What skills, and procedures competencies and necessaryfor temptations deep resisting orientation? eningan ethical

Ethical Virtues Identify Corporate

of business Oriented ethical expression the Develop Ethically Strategy What isthe an thatintegrates ethical orientation? strategy Plans Oriented Develop Ethically What are the concrete steps forimplementing an andmeasuring ethical orientation?

and UNEP, andmultinational corporations. Two further effortsto articulate a comprehensive ethics and accountability framework for business, by in dividuals rather than coalitions of organizations, are comparable inpurpose
and scope.

Dalla Costa11 has proposed a model for organizational planning and review around six areas of organizational development and alignment: Board Guidance; CEO Example; Strategic Commitment; Cultural Supports; Group Dynamics; and Personal Commitment. He analyses theDeclaration of the Parliament of World

identifies six such principles: Strategic Clarity; Respect Dignity; Be Fair; Be Honest; Strive for Justice; and Honor theEnvironment.12

Religions, The InterfaithDeclaration (a document produced by theCanadian Interfaith Committee on Special Joint Canada's Constitution and Charter of Rights), and theCaux Principles, to identifyethical principles for a universal ethics frameworkforbusiness. He

Balanced Scorecard Ethics

133

is applied via a process Dalla Costa describes as "Strat Ethic"?strategic planning inorganizational ethics?involving five elements This model (Table l).13 More recently,Wilson has sought to identify evolving societal expectations thatorganizations must address if they are to be viable in the future.14He codifies what he sees as new social rules for business under seven headings:15 Legitimacy: To earn and retain social legitimacy, the corporation must define itsbasic mission in terms of the social purpose it is designed to serve rather than as themaximization of profit. Governance: The corporationmust be thoughtof,managed, and governed more as a community of stakeholders, and less as the property of investors. Equity: The corporationmust strive to achieve greater perceived fairness in the distribution of economic wealth and in its treat ment of all stakeholder interests. Environment: The corporation must integrate the practices of restorative economics and sustainable development into the mainstream of itbusiness strategy. Employment: The corporation must re-write the social contract ofwork to reflect the values of the new workforce and increase both the effectiveness and the loyalty of employees and the
corporation.

Public-Private Sector Relationships: To ensure the success of the power shift,corporations must work closely with governments to achieve a viable and publicly accepted redefinitionof the roles and responsibilities of the public and private sectors. Ethics: The corporation must elevate and monitor the level of ethical performance inall itsoperations inorder to build the trust that is the foundation of sound relationships with all stakeholder
groups.

In discussing ethics specifically,Wilson refers towork undertaken by Holland on emerging ethical standards. These are identified as: produce

134

Business & Professional Ethics Journal

liberties of others; respect human well-being; and respect the independence of all individuals.16 The Balanced Scorecard as an Approach to Strategic Planning

high quality products; respect the sanctityof contracts; create and preserve a sense of corporate integrity that makes the firm trustworthy;obey applicable laws; protect proprietary informationand respect confidentiality in business transactions; respect the environment; respect the rights and

developed by Norton and Kaplan, which they called "the Balanced Scorecard." Norton and Kaplan's work was the result of a KPMG research project on performance measures, and was first published in a series of Harvard Business Review articles in the early 1990s.17 They claimed to have developed a core management system from an identification of key

At the same time as these proposals were being developed to address the scope of ethical and social accountabilities in business, a framework for business strategic planning and performance management was being

performance measurements, and the cause and effect relationships between the business elements being measured. This system contained the elements and methodology to allow "competitive advantage" and "dramatically It was organized around four improved financial performance."18 customer, internal (processes), and learning and perspectives?financial, growth. It sought to balance short-and long-termobjectives, financial and non-financial measures, lagging and leading indicators, and external and internalperformance perspectives.19

The elements of each perspective examined by Norton and Kaplan were: revenue growth and mix, cost reduction and productivity improve ment, and asset utilization and investment strategy, under the financial perspective; product or service attributes, customer relationship, and image and reputation, under the customer perspective; innovation, operations and post-sale service, under the internal process perspective; and employee capabilities, informationsystems capabilities andmotivation, empowerment and alignment, under the learning and growth perspective.20

holders: employees, organization, customers, and investors."22 Leaders, they

Ulrich, Zenger and Smallwood developed the methodology further by applying theBalanced Scorecard approach to the area of business leader ship.21 They argue for an integrated view of the various elements of business leadership around four result areas "balanced across four stake

Balanced

Scorecard Ethics

135

argued, who excel in only one result area, are not "effective."23 They establish four overarching criteria to determinewhether leaders are focused on results in these areas: Desired They don't build success in one dimension by ignoring (or tolerating failure in) another. Desired results are strategic: theyultimately contribute to distinctiveness results are balanced.

whole, not just theirown group or area.24

and competitive advantage for theirorganization. Desired results are lasting: they won't sacrifice long-termsuccess for short term work to benefit the larger Desired results are selfless: they gains.

wood,

The work by Norton and Kaplan, and that by Ulrich, Zenger and Small does not address the area of ethical and social accountabilities. Indeed, they have a lot in common with Friedman in terms of what they believe to be the purpose of the corporation and the business executive. set the context for theBalanced Scorecard as follows: A Balanced Scorecard must retain a strong emphasis on out comes, especially financial ones like return-on-capital-employed or economic value-added. Many managers fail to linkprograms, such as total quality management, cycle time reduction, re

Norton and Kaplan

performance. In such organizations, the improvement programs have incorrectlybeen taken as theultimate objective. They have not been linked to specific targets for improving customer and,

engineering, and employee empowerment, to outcomes that directly influence customers and that deliver future financial

eventually, financial performance. The inevitable result is that such organizations eventually become disillusioned about the lack of tangible payoffsfrom theirchange programs. Ultimately, causal paths from all measures on a scorecard should be linked to financial objectives15 (Original emphasis).

Ulrich, Zenger and Smallwood state the responsibility of leadership in stark, terms and beg the same questions Friedman does: "One Friedmanesque an absolute focus on results is giving results priority over aspect of everything else, except adherence and values26" (emphasis added). to the organization's ethical standards

136

Business & Professional Ethics Journal

The Balanced

Scorecard

as an Ethical Tool

corporate performance. The corollary, Iwant to suggest, is the identification of a multi-level, integrated paradigm for the practice of management. Secondly, theBalanced Scorecard provides a simple,mainstream manage ment tool that, whilst focused on traditional business performance indica can also be used to incorporate the indicators or outcome data provided tors, by the application of thePrinciples, Guidelines or SA 8000. That is, itcan be used to incorporate and draw into themainstream of organizational planning the strategic planning and annual assessment of the ethical issues It can therefore bring into articulated relationship facing the business.

The connection Iwish tomake between work thebyNorton and Kaplan, by Ulrich, Zengler and Smallwood, and the Principles, Guidelines and SA 8000, is threefold. Firstly, all of these contributions articulate a multi-level, interdependent framework inwhich to understand the nature and scope of

with performance indicators for the "rules traditionalperformance indicators of society," or the "organization's standards and values," to quote Friedman and Ulrich, Zengler and Smallwood, respectively. Thirdly, and most interestingly,using the Balanced Scorecard to incorporate and order data from the Principles, Guidelines and SA8000 simplifies and highlights the generic ethical issues inherent in a manager's managers practice around a simple four-element professional paradigm for of Product, People, Process, and Profit: What
create or cause?

good or harm does this product, and its production and

What do I owe those I employ or work with? What are the processes and structures to be used to develop and communicate ethical business practice, and what account do I owe

promotion,

my community via such processes? What value is created through this business and my practice, and forwhom?

argue that the management paradigm that emerges from this structure constitutes and incorporates "balanced scorecard ethics" around moral purpose, moral (Kantian) duty,moral development, and moral value. For the purpose of this paper, however, Iwish simply to focus on the use of theBalanced Scorecard as a tool for integrating performance in the I would

Balanced

Scorecard Ethics

137

Table 2: Mergingof Balanced Scorecard and Global Reporting Initiative Product/

Cons umer

vision 5.11 GRI 3: organizational and strategy; ; identification relationships ofand with waterusage; 6.14-23: 6.1-11:energy material and 6.12-13: stakeholders; usage; waste and effluent; 6.24: transport e.g., kilometers 6.28-31 : emissions, data, traveled;

issues in 6.52: absoluteand net jobsprovided; environmental 6.53: service; product/ screens ininvestments; security 6.85: humanrights and donations; 6.90: philanthropy risk assessment in and humanrights 6.56: country assessmentand facility development; ofenvironmental of 6.92: of indicators; performance suppliersinterms social account ability.

nature and location outsourced of 6.25-27:performance suppliersinterms of operations;

People/ Learning & Inno vation

6.63: in mission/vision decision orientation; employee participationmanagement making; as 6.64: internal external and oforganization an employer; 6.65: jobsatisfaction; ranking health and safety 6.66: reportable lost 6.68: cases; 6.67: injury, days absentee rates; and injury investment workerinillness 6.69-71: per prevention; wages and benefits:

and GRI 6.44-45:human and 6.60: capital investment (training) research development; retention 6.61: jobsoffered acceptance ratios; to 6.62: evidence re.Employee rates;

6.82-84: freedom association; of 6.91: remuneration rehabilitation forcedlabor; and of of force actions employeevictims security
Proces ses

6.72-74:non-discrimination; 6.75-77: training/education: 6.78-79:child'labor: 6.80-81:

GR11-3:CEO statement of key content, data, identification organizational profile 5.1-10: regulatory standards and indicators; framework, framework, performance policy criteria contrac for structures, processes and systems, qualityimprovement reporting for of criteria selection infrastructure 6.55: number and selection, location; tor/supplier of with of national stan and international type incidences non-compliance prevailing

contracts suppliers, with sched dards;6.58: performance meeting payment including of and type number of ules; 6.85-86:humanrights monitoring organization practices, and 6.88-89:evidenceof indigenous non-compliance, evidenceof response: participa

of labor 6.36: incidences compliance of and monitoring contractors regarding conditions; and international national environmental standards penalties against Profit/ Financial GRI 7.37-42:profitability; intangible 6.34: and assets; 6.46-47:capital investment debt 6.48-49: 6.50: productivity; taxes;6.57: valueof 6.51: wage expenditure; equityratios;
goods and services outsourced

and and tionin decisions of 6.93-94: number type and of making, number type protests; re. incidences non-compliance humanrights of standards and frequency of supplier

to GlobalReporting Initative. item The to GRI table'GRI'refers the relates the number (Inthis content reporting guideline.)

138

Business & Professional Ethics Journal

area of ethicswith traditionalbusiness performance planning and evaluation. me give an example of how theBalanced Scorecard could be used to So let mainstream strategic and annual management of business ethics and accountability. At themost basic level itcan be used to provide a frame

work for structuringpolicy and practice, and to review performance data, based on thePrinciples, Guidelines and SA 8000, within a strategic review and planning process. All that is needed in this regard is a quick exercise to

show how the allocation of content and indicatorsfrom the Global Reporting Initiative can be structured in terms of the Balanced Scorecard. This is

can be incorporated into a standardmanagement methodology thatguides seniormanagers in their strategic and annual business planning. The strategic mapping and linkage approach suggested byNorton and can also be applied and adapted to integrate ethics into business Kaplan

Table 2. One of the weaknesses of any corporate ethics program provided in is itspotential to be "decoupled" and marginalized as an "add-on" to core which restswith a separate project business processes, the responsibility for team or specialist unit.27Table 2 is an example of how basic issues inethics

planning.28 In termsofmapping an ethics strategyusing this approach, the logic and utility of Balanced Scorecard ethics could be developed and communicated as set out in Diagram 1. The example provided is a firstdraft of Balanced Scorecard ethics undertakenwithin a health services organiza tion. It is also possible to articulate andmap the strategicbenefits, and cause and effect relationships, of a Balanced Scorecard ethics focus in terms of other strategic goals, as outlined in a preliminaryway in Diagram 2.29 Let me reiterate the linkage being made in this paper between

articulate integratedand interdependentbusiness elements and performance measurements. Managers are increasingly expected, in terms of this paradigm, to produce a balanced set of outcomes in four areas: customer outcomes, staff processes, development and organizational learning, internal and financial returnor value creation. To do this theyare expected to draw on bodies of knowledge and disciplines such as marketing, individual and

development of integratedethical frameworks forbusiness managers and the Balanced Scorecard methodology. The incorporation of an ethics element in Balanced Scorecard planning furthers the articulation of a practice paradigm formanagers, which emerges from thework through the 1990s to

social psychology, systems thinking,and accounting, inaddition towhatever body of knowledge is inherent in their product or service. As suggested

Balanced

Scorecard Ethics

139

above, use of theBalanced Scorecard to plan ethics ina business highlights the inherent ethical issues and themoral expectations managers need to address within the four elements of this paradigm and practice. These are themoral purpose, and harm or good, of theirproduct; the duties they owe to colleagues and employees; the nature ofmoral development in terms of systems development and improvement; and the ethics of value creation and

opportunity cost.

Two Ethical Challenges Having presented the case for using a popular business planning methodol ogy to integrate ethics into a manager's strategy and evaluation, it is important to also identify the parameters of the ethical obligations the managers should be expected to address. In developing Balanced Scorecard ethics,managers and executives will face two distinct ethical challenges: the ethical challenge to produce and manage responsibly, and the moral challenge to take on social responsibilities. I believe that they have an obligation only inregard to thefirstchallenge. Let me explain thedifference between these two challenges by reference to the Principles for Global

Corporate Responsibility. The principles are grounded in a clearly stated communitarian and environmental foundation. In the view of their authors, Mthecommunity

human activity is the totalityof creation," to sustain "all creation."31 Declared assumptions within the world view that informs the are that: Principles 1. Companies carry responsibility for the human and moral consequences of their economic decisions;32 2. The promotion and protection of human rightsareminimum

rather than the company is the starting point of economic life,"30 and sustainable community depends on recognition and respect for each of the various groups in the community. Corporations share with other groups a responsibility not just to sustain community, but, as "the context of all

standards for all social institutions;33 3. Institutions have a responsibility to work for a just society marked by love, compassion and peace, with justice requiring

evaluation of the allocation of income, wealth and power in termsof its impact on the poorest and most vulnerable.34

Respect Individual

Develop participative Developto linked processes.to management intake case systempreferred caseensure loadis and consent levels. quality

Community Build

Community Boards of Advice. Establish

discussions. Continue to family Family Be on hours leave in Award Develop Friendly policy favor after

Need Target

for funded fully Bid public forgaps. programs service Conduct Manage

in supervisors management performance of conduct issues. Educate

priority plan Develop for policy protocol and development based on riskassessment.

Staff Develop

Educate the staff on ethics, leaders. esp. level. benchmark drivers. in staff development Educate at business Fund staff

Promote
Life

pro-life

Regulations Meet

CQI audits

CQI audits Meet regulations

Community & Patient

Employees

Get Customer

into questions personal customer validation satisfaction surveys. Build

Feedback

Get Workplace Feedback

values performance assessments. Rate in annual Schedule business culture Create plaints/concern review. ethics process. com

budgets and accounts to stakeholders. Maintain open operational & planning Be Transparent

communicate values Manage & Develop Codes and

research oversight. Committee Ethics Establish Care for and statements. clinical ethics

Identify Costs Real

impact costs. control improve Map and as suchenvironmental costs real

Develop and

Benchmark OH&S

private, profitable, Balance public & Costs Add Control & Value marginal subsidised.

audits Regulations CQI Meet

CQI audits Regulations Meet

Processes Internal

Finances

Policies Family Friendly

Acquisition and costs Minimise Staff turnover

Transparent Accounting Triple Bottom Line Prevent costly regulation external

Accountability Social Audits Ethics and

dismissal Minimise harassment, risk/costs of negligence,litigation

Ethical Staff for Development

Due process in relations employee

fraud, stock Minimise internal loss

Growth & Learning Customer

Processes Internal

Financial

Balanced Scorecard Ethics

143

consent, it may even be unethical. My reasoning depends on understanding the contemporary use and meaning of the term "social responsibility." I take the term to refer to

(protects) human rights,but takes on a social responsibility if itpromotes human rights (by means other than simply respecting them). To act responsibly is an ethical obligation of a corporation, but to assume social from Christian moral theology, a supererog responsibilities is, to use a term I believe, with act (that is, not obligatory, but commendable).35 atory that if accepting "social responsibilities" involves the use of Friedman, owner or shareholder resources to assume the responsibilities without their

means to act responsibly It ispossible to distinguish in thePrinciples what it means to have "social responsibilities" (point one above) fromwhat it (point three above). The distinction is crucial (even if not recognized by the It is important in regard to point two above, in authors of thePrinciples). termsofwhether we can say thata corporation acts responsibly if itrespects

obligations, alleged to be held by corporate entities, by individuals or the community, thathave not been deemed significant enough to be made legal obligations but which are seen as morally compelling by some sections of the community.

Consider the claim, for example, thatbanks have "social responsibili ties" in terms of the thirdpoint above (from theworldview underlying the Principles), that is,a responsibility to address social disparities ofwealth and power. Take the claim, specifically, thata bank should not close a branch will lead to increased unemployment, and the in a small town, because it claim that the bank has a social responsibility tomaintain the branch further

as a result. The claim, Iwould suggest, is based on an assumed right,held by individuals (or families), to earn an income. Given the constraints of this ensure paper, let us accept thata person has a right to an earned income to access to the basics of life. The issue inquestion is about the placement, or to this person and possible displacement, of shared (i.e. social) obligations others in his/her position. The bank has an obligation to the unemployed because all those aware of the plight of the unemployed have such an The question is how we structure such shared or social obligation. obligations. Iwould suggest that thismoves us beyond management ethics intopolitical philosophy and political ethics (Friedman's original insight). Now, in the context of liberal democratic, welfare capitalist polity and

a society within which thispaper's discussion finds its meaning, the rights

144

Business & Professional Ethics Journal

and obligations issues we are considering have been cast in terms of a political settlement or contract, constituted as follows: 1. An individual has a number of inalienable rights, understood to mean that,by virtue of one's humanity and basic needs, he/she has a claim against others, both negative and positive, to have those

rightsprotected and/or honored, respectively. 2. These rights include a right to the basics of life such as food, means bywhich shelter,and good health, and, consequently, to the these can be obtained. 3. Where the means to obtain these basics is not available, an

individual has a claim against those aware of and capable of responding to his/herneeds and rights. 4. The multiplicity of needs and rights,and the volume of legitimate (i.e., rights-based) claims, has led to the development of a system of public provision of income support or direct services based on the taxation capacity/power of government. 5. The taxation system, and the political system that ensures the taxation system's legitimacy,are based on recognition thata claim must be based against another's possessions via the taxation system on legitimate rights' claims or on provision to meet common threatsor needs. Further, the taxation system is based on a shared burden of taxation and a shared control of the taxing authorities. The taxation system is,finally, based on a recognition of lesser and

greater capacity to contribute, and, therefore,on a scale of taxation linked to that capacity. 6. The political system is sensitive to the impact on wealth creation, and also to the capacity to fund provision for public need through the taxation of individual and group endeavors. Now, as I have suggested, the claim thata corporate entityhas social responsibilities beyond those responsibilities inherent in thedirect activities

group of individuals, rather than all those against whom a claim can be

threatened human rights. The problem with the claim, however, is that it fails to respect the balance of the various rights identifiedand respected in the political contract or settlement outlined above, by insisting that one

and relationships of itsbusiness draws its strength from the fact that the are based on legitimate claims about unmet needs and suggested obligations

Balanced

Scorecard Ethics

145

own legitimatelymade, discharge the shared responsibility out of its/their resources. It is asked to do so over and above what has been established as a fair system of taxation to share the costs of meeting just these kind of
claims.

In brief, the claim that a bank has a social responsibility to the unemployed and should use its shareholder's resources to address the issue goes beyond identifyingthose responsibilities inherent in the activity and relationships that constitute the business. The assertion of an additional 'social' responsibility seeks to place the onus of a universal obligation onto the shoulders of a sub-group of the broader group against whom the claim can be legitimately that itdoes so by going made. Iwould suggest, further, beyond the normal means of political allocation of obligation and consent through lawmaking, precisely because ithas failed tomake its case within

discrimination, environmental management and employment practices. A responsible company discharges its ethical obligations in the area of non itemploys or promotes people discrimination?it acts responsibly?when

thatprocess. What does thedistinction that I am suggesting between acting respon sibly and assuming social responsibilities mean inpractice? Let me address three areas of possible social accountability to develop the argument:

when

contribute to social rather than business goals. A responsible company discharges itsethical obligations in the area of environmental management

solely on the basis of their competence for the position. It accepts a social responsibility beyond thatminimal requirement to do no harm, when it adopts a policy and practice of positive or affirmative discrimination to

away from product development or sales towards community "greening" programs, for example. A responsible company discharges its ethical obligations in termsof employment practices when itfulfills contractual and workers. It accepts a social occupational health and safetyobligations to its

itdoes not pollute, or pollutes at levels deemed acceptable to the community and authorized by the community in terms of net social gains. It accepts a social responsibility for the environment beyond theminimal requirement to do no harm or tominimize harm,when itallocates resources

responsibility for employment levels beyond itsminimal duties to fulfill commitments and not treat humans as simply means to an end, when it carries or takes on employees at the expense of technological innovation and efficiency and profitability.

146

Business & Professional Ethics Journal

Further examples topical in Australia at the present time are the provision of branch services by banks, telephone services by communication companies, and insurance for policy holders of failed insurance companies by viable insurance companies. When a bank is asked to keep a branch open

asked to fund services thatall members of the community should fund. One group?company owners, shareholders, and customers?are being asked to assume what is in fact a responsibility of all citizens, taxpayers, or neigh bors. This, it seems tome, is the effect of calls for business to accept their "social responsibilities." I agree with Friedman that managers and executives have no ethical to accept such responsibilities in their corporate roles and on obligation

that is not profitable, or a telephone company is asked to subsidize services to regional communities, or one insurance company is asked to take up the liabilities of another, failed company, one part of the community is being

for behalf of the corporate entity which theyact. They may have, of course, an obligation to do so as individual citizens and taxpayers. And theymay, with the support of shareholders, choose to do good beyond the scope of their direct business activities. But I think the limitation of Friedman's polemic was itsfailure to articulate the implications of his acknowledgment thatpursuit of business goals, and profit inparticular, needs to be informed, and ifnecessary constrained, by some social rules and ethical customs. The

development of Balanced Scorecard ethicsmight be one way of integrating, but limitingappropriately, ethical customs and business related accountabili ties central to a business.

Let me briefly conclude by summarizing the two parts of this paper. Business managers and executives should not feel obliged to assume social responsibilities. They should, however, act responsibly?that is produce

responsibly,market responsibly, employ and terminateresponsibly, establish and manage developmental systems responsibly, create value responsibly, pay taxes responsibly, and reportfinances responsibly. Within thebalanced approach to organizational management and leadership expected of and manage contemporarymanagers and executives, theyneed to identify, strategically, the ethical and moral dimensions of the elements I have described as product, people, process and profit. To the extent that they fulfill theirown potential and provide a needed or desired product or service,

and employ and work with people, without doing harm; to the extent that they create wealth; to the extent that they use process management for

Balanced

Scorecard Ethics

147

continuous improvement and human and organizational development, they act responsibly. Tools such as the GRI and SA 8000 provide guides to responsible action in this regard. And the notion of Balanced Scorecard ethics provides a methodology to plan, manage strategically and fulfill the legitimate ethical accountabilities inherent in theiractivity and relationships.

Notes "The Social Responsibility of Business is to Increase 13 September 1970, reprinted in itsProfits," New York Times Magazine, Donaldson, T. and Werhane, P. (eds), Ethical Issues in Business: A Philosophical Approach, (PrenticeHall, Englewood Cliffs, 1983,2nd edition) pp 239-242. 2. Ibid, p. 79. 3. The Principles, Guidelines and SA 8000 consist of too many 1. Friedman, M. indicators and guidelines to be detailed in thispaper. A summary by way of a guide to the conceptual structure is provided. 4. Interfaith Center on Corporate Responsibility, Principles for Global Corporate Responsibility: Benchmarks forMeasuring Business Performance (InterfaithCenter on Corporate Responsibility, New York 1998), p. 1. 5. Ibid, p. 2. 6. Global Reporting Initiative, Sustainability Reporting Guidelines (Global reporting Initiative,Boston, 2000) p. 1 (accessed atwww.global

reporting.org). 7. Ibid
8. Accessed 9. For at www.sa-intl.org/sa8000.htm information access www.sa-intl.org/ and www.sgs.co.uk/

certification/social/. 11.Dalla Costa, J. The Ethical Imperative: WhyMoral Good for Business (Addison Wesley, Reading MA, 1998). 12. Ibid,pp. 143-174.
10. Op. cit. www.sa-intl.org/sa8000.htm.

Leadership

is

13. Ibid, pp. 240-262. 14.Wilson, I. The New Rules of Corporate Conduct: Rewriting the Social Charter (Quorum, Westport, 2000). 15. Ibid, p. 34. \6.Ibid,pp. 148-149.

148

Business & Professional Ethics Journal

17. See Kaplan

card?Measures That

and Norton's
Drive

articles

"The Balanced
Business

Score
Review

Performance,"

Harvard

(January-February 1992); "Putting the Balanced Scorecard to Work," Harvard Business Review (September-October 1993); "Using theBalanced Scorecard as a Strategic Management System," Harvard Business Review (January-February 1996); and "Having Trouble with Your Strategy? Then Map

Norton, The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in theNew Business Environment (Harvard Business

Harvard Business Review (September-October 2000). See thebook It," byKaplan, R. and D. Norton, The Balanced Scorecard: Translating Strategy into Action (Harvard Business School Press, Boston, 1996) from which quotes in this paper are sourced. See also the latestwork by Kaplan and

Linking People, Strategy, and Performance (Harvard Business School Press, Boston, 2001) and N. Olve, Royse J.andWetter, M., Performance Drivers: A Practical Guide toUsing theBalanced Scorecard (John Wiley & Sons, Chichester, 1999). \S.Ibid, (1996), p. ix. 19. Ibid, p. viii. 20. Ibid, pp. 47-62, 63-91, 92-125, and 126-146 respectively. 21. Ulrich, D., J.Zenger, andN. Smallwood. Results-Based Leader 1999).

See also the web-site for the Balanced School Press, Boston, 2000). Scorecard Collaboration, www.bscol.com and furtherapplication of the scorecard by Becker, B., Huselid M. and Ulrich, D., The HR Scorecard:

ship (Harvard Business School Press, Boston, 22. Ibid, p. 30. 23. Ibid.

programs, seeWeaver, G. et al, "Integrated and decoupled corporate social ethics practices," Academy ofManagement Journal, 42 (5), pp. 539-552, Oct. 1999. 28. Kaplan and Norton, Op. cit. 2000, pp. 167-176.
performance: Management commitments, external pressures, and corporate

24. Ibid p. 29. 25. Kaplan and Norton, Op. cit. 1996, pp. 150-151. 26. Ulrich, Zengler and Smallwood, Op. cit. p. 171 27. For a discussion of "decoupling" and integration of ethics

Balanced

Scorecard Ethics

149

more than eighty percent of itsbusiness, eighty-fivepercent of Million, lost itsshare price and two of itsdirectors after itbecame known thatpromotions McDonalds had been rigged over six years by one of Simon's employees. for

29. Diagram Two has "Reputation" as a key strategic focus in termsof cause and effect linkage. Jackson reported recently that the global promo tions firm Simon Worldwide, with revenues in 2000 of approx. US$800

worth?," The Good Reputation Index, SydneyMorning Herald, 22 October 2001, p. 2. Centre on Corporate Responsibility, Op. Cit. p. 2. 30. Interfaith 31. Ibid, p. 1. 32. Ibid. 33. Ibid. 34. Ibid.

It seems legitimate to link ethics, reputation and business outcomes and profitability,given such as case study. See Jackson, S., "McBunfight," The Australian, 11th September 2001, p. 32. Gettler has reported thatFord had a US$9.3 billion reduction in share value three weeks after it recalled potentially dangerous Firestone tyres. See Gettler, L., "What's a reputation

35. See the brief and simple definition "Supererogation, Works of in J., ed. A Dictionary of Christian Ethics (SCM Press, London, Macquarie,

1967) 337.

Bibliography Becker, M. ., Huseld, and D. Ulrich. The HR Scorecard: Linking People, Strategy, and Performance (Harvard Business School Press, Boston,

2001). Dalla Costa, J. The Ethical Imperative: WhyMoral Leadership isGoodfor Business (Addison Wesley, Reading MA, 1998). Global Reporting Initiative, Sustainability Reporting Guidelines (Global Reporting Initiative,Boston, 2000). Interfaith Center on Corporate Responsibility, Principles for Global Business Corporate Responsibility: Benchmarks for Measuring Center on Corporate Responsibility, New Performance (Interfaith

York 1998). Kaplan, R. and D. Norton. The Balanced Scorecard: Translating Strategy intoAction (Harvard Business School Press, Boston, 1996).

150

Business & Professional Ethics Journal

Kaplan, R. and D. Norton. The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in thenew Business Environ ment (Harvard Business School Press, Boston, 2001). Mclntosh, M. (ed). Visions ofEthical Business (Financial Times Prentice Hall, London, 2000). Olve, N., J.Roy, J. and M. Wetter. Guide to Using the Balanced Ulrich, D., Chichester, 1999). J. Zenger, and N. Performance Drivers: A Practical Scorecard (John Wiley & Sons, Results-Based

Leadership (Harvard Business School Press, Boston, 1999). Wilson, I. The New Rules of Corporate Conduct: Rewriting the Social Charter (Quorum, Westport, 2000).

Smallwood.