Gao (2008) - An Ethical Framework for Corporate Political Actions (j Public Affairs)

An ethical judgment framework forcorporate political actionsYongqiang Gao*School of Management, Huazhong University of Science and Technology (HUST), Wuhan,

P.R. China

� Despite the popularity of businesses’ involvement in politics, little discussion has been

conducted on the ethics of corporate political actions (CPAs) in the business, corporate

social responsibility, business ethics and ‘business and society’ literatures. The sporadic

studies on ethics of CPAmainly focus on one or two aspects of the CPA in judging its ethics,

such as its goal or means or consequences, very little has been done in a systematic way to

analyse and articulate ethical standards for those corporations and industries who

proactively seek to influence government officials. This study attempts to make up this

gap. By applying three basic ethical principles including Utilitarian theory, theory of

rights and theory of justice into the CPAs, I propose an ethical judgment framework for

CPAs. The ethical judgment framework focuses on and judged by four issues/attributes of

a CPA, including the goals/purposes of the CPA, the means taken to achieve the goals, the

consequences resulted from the CPA, and the process of the CPA. The ‘means’ and

‘consequences’ are the core criteria in the framework, but ‘goals’ and ‘process’ also

contribute to the ethical judgment of a CPA.

Copyright # 2008 John Wiley & Sons, Ltd.

Introduction

Corporate political actions (CPAs) are almostsuspected since their appearance. Some havesuggested that corporate political actioncommittees (PACs) are deleterious to society(Lindblom, 1977), arguing that PACs havecorrupted the political system. Most businessactivities in the political realm are perceived tobe greedy and self-interested attempts toextend the influence of the board room intogovernmental policy making at all levels

(Hamilton and Hoch, 1997). Banthin andStelzer (1986) expressed the view that ‘thePACs’ ability to raise large amounts of moneyfor favoured political candidates in the form ofcampaign contributions is awesome’ and theauthors worried that the corporate PACs haveundue influence on public policies.In fact, there is a significant body of opinion

in the United States today that ‘specialinterests’ exercise an undue influence in thepolitical processes at the federal, state andlocal levels. These special interests, especiallycorporations and labour unions, exercise theirinfluence largely through lobbying publicofficials, through campaign contributions tocandidates for public office, and through theirability to dominate the agenda (Weber, 1997).

Journal of Public AffairsJ. Public Affairs 8: 153–163 (2008)Published online in Wiley InterScience(www.interscience.wiley.com) DOI: 10.1002/pa.289

*Correspondence to: Yongqiang Gao, School of Manage-ment, Huazhong University of Science and Technology(HUST), Wuhan City, Hubei Province 430074, P.R. China.E-mail: [email protected]; [email protected]

Copyright # 2008 John Wiley & Sons, Ltd. Journal of Public Affairs, August 2008

DOI: 10.1002/pa

As a result, instead of popular will, thegovernment now responds more often tonarrow webs of power – the interests of majoreconomic organizations and concentratedwealth and the influential elites surroundingthem (Weber, 1996). Well-financed businesslobbying has captured the political process andprevented other legitimate voices from beingheard in the debate on public issues (Birn-baum, 1993). Various reforms have beenproposed to correct the situation.Tillman Act of 1907 prohibits campaign

contributions from corporations to candidatesfor federal office. In the post-Vietnam andWatergate era, disclosure was pronounced thekey to control. As a result, The Federal ElectionCampaign Act of 1971 permitted corporatepolitical contributions within defined dollarlimits and public disclosure. Corporationsbegan to establish PACs for the purpose ofcollecting money and channelling it into theelectoral process. Down this way, LobbyingDisclosure Act of 1995 streamlines lobbyistdisclosure requirements and requires thatprofessional lobbyists register and file regularreports identifying their clients, the issues onwhich they lobby, and the amount of theircompensation. The Bipartisan CampaignReform Act of 2002 prohibits national politicalparty committees from raising or spending anyfunds not subject to federal limits, andprohibits any ‘electioneering communication’advertisement paid for by a corporation or paidfor by an unincorporated entity using anycorporate or union funds.What is and is not appropriate practice

when corporations seek to influence publicpolicy? Despite the regulation of legal system,the business and corporate social responsi-bility literature contains little discussion of theethics of business efforts to influence publicpolicy decisions. Business ethics texts andanthologies typically do not include the topicat all; ‘business and society’ texts typically doinclude a discussion of corporate politicalactivity, but without an analysis of ethicalstandards separate from legal restraints(Weber, 1997). While much attention in thepast has focused on ethical principles and

standards for those actually in governmentservice, very little has been done in asystematic way to analyse and articulateethical standards for those corporations andindustries themselves who proactively seek toinfluence government officials (Grimaldi,1998). More recently, Oberman (2004)attacked the topic by taking ‘contestability ofpolitics’ as the supreme criterion in evaluatingthe ethics of CPA. However, to evaluate theethics of CPA merely from its consequences(here, the contestability of politics) is far fromsufficiency.

This study advances the previous studies byproviding a more comprehensive frameworkfor ethical judgment of CPA. The paper isorganized as follows. The following section isthe literature review on ethics of CPA. Thenwediscuss four issues or aspects of a CPA thatshould be considered in ethical judgment of aCPA. In The Basic Ethical Principles Section,we introduce three basic ethical principlesinclude Utilitarian theory, theory of rights andtheory of justice. In Applying the Basic EthicalPrinciples to CPA Section, we apply the threebasic ethical principles into CPA and results inan ethical judgment framework for CPA.Finally a conclusion is presented.

Literature review on ethics ofCPA

The ethics of CPAs has been concerned bysome scholars recently (e.g. Hamilton andHoch, 1997; Keffer and Hill, 1997; Oberman,2004; Spiegel, 1993; Weber, 1996, 1997).Weber (1997) argued that the agenda for amore fully developed understanding of theethics of corporate political activity in the USincludes (at least) three general issues: (1) theappropriate goals for corporate politicalactivity; (2) the appropriate means to be usedto achieve political goals and (3) the issue ofvoluntary restraints on self-interested beha-viour in a competitive environment.

What are the appropriate goals or purposesof business political activity? A competingpoint of view is that, when a business seeks to


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affect public policy through political activity, itinvolves itself in the public arena and that goalsappropriate for private sector commercialactivity are no longer suitable (Weber,1997). Weber (1996) suggested that corporatepolitical activity ‘. . .should, perhaps, be under-stood as a different type of activity, . . .to begoverned by different goals and standards’.But Hamilton and Hoch (1997) contended

that, in discussing corporate political involve-ment, it is necessary to dispel the belief thatsuch activity is inherently unethical because itpromotes self-interest through concentratedcorporate power, and to abandon the view thatethical corporations should passively acceptlaws passed by ‘the will of the people’ throughdemocratically elected representatives. Just asindividuals may legitimately act as consumersto promote their private good or as citizens topromote the public good (Sagoff, 1986), sobusinesses can legitimately promote theirprivate goods and the public good (Hamiltonand Hoch, 1997).Go a further step, Hamilton and Hoch (1997)

distinguished three kinds of interests: publicinterest, legitimate self-interest and illegitimateor selfish self-interest. The public interestinvolves the good of the whole of society,including all interest-bearing or intrinsicallyvaluable entities such as persons, trees andendangered species, and including the good offuture generations as well as the present. Muchof business lobbying, rather than being in thepublic interest, is ‘special interest’ lobbyingwhich seeks to gain an advantage for aparticular business or industry group or itsstakeholders. The fact that this political activityis self-interested does not make it inherentlywrong. Special advantages for one business donot necessarily come at the expense of othersor at the expense of the general welfare andmay in fact promote the interests of others andof the common good. Self-interested lobbyingbecomes illegitimate when the objectives ortactics allow corporations or industry groupsto profit at the expense of others or at theexpense of the general good without dueconsideration for the benefits and costs to andrights of others.

Moreover, what constitutes the publicinterest, how it should be distributed amongthe various interest-bearing entities, and whichof the entities have intrinsic as well asinstrumental value are matters that are subjectto different interpretations (Hoch, 1995). Inother words, what constitutes the publicinterest may either be combined with argu-ments for self-interest or difficult to distinguishfrom the promotion of self-interest (Hamiltonand Hoch, 1997).The voluntary restraints on self-interested

behaviour require corporations to take actionsvoluntarily limit their unethical behaviours inpolitical arena. Although the voluntaryrestraints on self-interested CPA in a competi-tive environment are considered to be good ifeveryone else accept such restraints, it is verydifficult to be realized. As Weber (1997)pointed out, for an organization to limit itsoptions without any assurance that others willdo the same, it is often argued, is like‘Unilateral disarmament’, it places the con-scientious organization at a competitive dis-advantage. Therefore, the voluntary restraintsin a competitive environment cannot berealized if there is lack of external pressuresfrom government, stockholders and otherstakeholders.However, both the appropriate goals and

the voluntary restraints are not the core ofethical attention from CPA scholars. As Weber(1997) pointed out, much of the concernraised about corporate political activity is notfocused on the goals of the corporations thatengage in this activity. It is focused, rather, onthe concern that certain moneyed interestshave an undue influence on public policy. Inother words, the ethical questions underlyinglobbying or CPA primarily surround the meanswhich are employed (Grimaldi, 1998). Effortsto identify and articulate ethical standards forcorporate political activity should be focusedon providing practical guidelines regardingwhich behaviours should be avoided, eventhough legal (Weber, 1997).But what are the appropriate or ethical

means and activities of CPA? Maclntyre’s(1981) argument is that ethical behaviour


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An ethical judgment framework for CPA 155

requires an understanding of one’s role withinthe society and the carrying out of that role in amanner which will benefit society (Horvath,1995). Spiegel (1993) discussed ethics ofcorporate political activities from a viewpointof legitimacy. Legitimacy is defined in terms ofthe degree of conformity of the organization’sgoals, actions and outcomes to societal normsand expectations (Parsons, 1960; Weaveret al., 1994). Spiegel (1993) suggested thatlegitimacy concerns be recognized as arisingfrom four organizational ‘domains’: legal,economic, political and ethical. She states that‘ethical legitimacy requires that an organiz-ation act in accordance with the prevailingnorms, values and mores of society’, whilepolitical legitimacy allows corporate activity ifno ‘unfair advantage in the political arena’results from that activity (Spiegel, 1993: 118).In the Spiegel’s (1993) argument, not onlyactivity is an important issue in ethicaljudgment, but also the consequences of theactivity. An appropriate consequence shouldbe ‘no unfair advantage in the political arena’results from the political activity.Keffer and Hill (1997) proposed a framework

to classify lobbying activities of business intothree types: ‘good’, ‘bad’ and ‘problem’ basedon Communitarianism. Those actions that arelegal and do not inflict undue harm onmembersof the community are categorized as ‘good’.Those activities that fall under the ‘bad’classification are considered illegal and havethe potential to seriously injure parties outsideof the lobbying process. Finally, ‘problem’ areasinclude those activities which, if abused, havethe potential for illegality or grievous harm.Based on Mitnick’s (1993) ‘political contest-

ability’ and Western thought of ethics, Ober-man (2004) also proposed a framework forevaluating the ethics of a political action.Oberman used three ethical thoughts (con-sequences for representation, rights andduties, justice in a contestable system) toevaluate the ethics of a political action fromthree aspects of the action: access, legitimacy,influence/exploitation, he thus got a 3� 3matrix of ethical evaluation. He concluded thatif the CPA does not affect the system contest-

ability of politics, it is ethical. However, as theauthor pointed out, the framework can onlydraw attention to the ethical questionsinvolved in business involvement in politicsin representative democracy — it cannot pro-vide definitive guidelines.

Moreover, some ethical principles or stan-dards have also been proposed both inacademia and in business circle. In anendeavour to discuss and formulate ethicalprinciples for CPAs, Cavanagh et al. (1981)proposed a decision tree (analytical structure)for evaluating political behaviour decisionsbased on three basic kinds of moral theoriesinclude: utilitarian theories (which evaluatebehaviour in terms of its social consequences),theories of rights (which emphasize theentitlements of individuals), and theories ofjustice (which focus on the distributionaleffects of actions or policies). Hamilton andHoch (1997) contended that given appropriatetranslation, utilitarianism, Kant’s three prin-ciples, rights and justice considerations, socialcontract theories and character ethics could allbe utilized to evaluate the objectives andtactics of business lobbying. Then the authorsproposed eight ethical principles for businesslobbying: (1) Maximize good and minimizeharm for those affected, (2) don’t makeexceptions for yourself, (3) let othersmake their own choices, (4) use the publicitytest, (5) respect human rights, (6) insure a fairdistribution of benefits and burdens, (7)honour the social contract, (8) act in accord-ance with your character and the company’sreputation.

Besides the ethical principles of CPAs inacademia, Weber (1997) also provided cases ofethical principles of CPAs proposed bybusinesses. One is the international group ofbusiness leaders known as the Caux RoundTable issued their ‘Principles for Business’ in1994 (Caux, 1994). These principles adopt astakeholder understanding of the role ofbusiness in society. The other case is LeviStrauss & Co. who developed a set ofguidelines for selecting business partners(contractors and subcontractors) and identify-ing countries where they will do business.


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Highlight

Although many studies have discussed theethics of CPA, there are still many topics thatfar from talking about or touched little. Amongothers, scholars have not provided a uniformand consistent framework or ethical principlesto judge the ethics of a CPA.

Four ethical issues of CPA

This study contends that four issues/aspects ofa CPA are important in its ethical judgment. Allthese four ethical issues originate from thepresent literature and legislation about CPAs.According to the Principle of Proportionality

(Garrett, 1966), a given behaviour is ethical ornot should be judged synthetically by itsgoal(s) or purpose(s), the means it used andthe consequences it resulted in. In otherwords, an ethically acceptable guanxi orguanxi action should pursue appropriate goalsor purposes by appropriate means, and resultin appropriate consequences. This frameworkcan be applied in examining CPA. In fact,Garrett (1966) proposed three ethical issues ofa CPA that are supported by previous studieson the ethics of CPA.Weber (1997) also argued that (1) the

appropriate goals, and (2) the appropriatemeans, are the general issues about the ethicsof corporate political activity in theUS. Althoughhe also mentioned that ‘the voluntary restraintson self-interested behaviour’ as one of generalissues, it can be excluded in this discussion sinceour intent of the study is to provide an ethicaljudgment framework for CPAs.Besides, the consequences of a CPA are also

taken as an important ethical issue in examin-ing the ethics of CPA in previous studies. Forexample, in the decision tree (analyticalstructure) for evaluating political behaviourdecisions proposed by Cavanagh et al. (1981),the authors took the consequences of a CPA asa very important criterion in judgingwhether itis ethical or not. Similarly, in the discussion onorganizational legitimacy, Spiegel (1993: 118)suggested a politically legitimate corporateactivity should not result in ‘unfair advantagein the political arena’. Obviously, an appro-

priate consequence is the premise that a CPA isethical in Spiegel’s (1993) discussion. Similarly,Keffer and Hill (1997) argued ‘good’ actionsare those that are legal and do not inflict undueharm on members of the community, whileOberman (2004) argued that an ethical CPAshould not affect the system contestability ofpolitics. It is obviously that Keffer and Hill(1997) and Oberman (2004) ethically judgedthe CPA in terms of its consequences.Based on the above discussion, three

important ethical issue of CPA are: (i) thegoals of the CPA; (ii) the means that acorporation taking to achieve the goals and(iii) the consequences of the CPA.Another important ethical issue of CPA

originates from the U.S. Lobbying DisclosureAct of 1995. The Lobbying Disclosure Act of1995 streamlines lobbyist disclosure require-ments and requires that professional lobbyistsregister and file regular reports identifyingtheir clients, the issues on which they lobby,and the amount of their compensation. Animplicit assumption of the Lobbying Disclos-ure Act is that disclosure of political activitywill force corporations to self-restraint, andthus the CPA should be more possibly ethical.From the legislation of US we can see, (iv) theprocess of a CPA should be an important issuein the ethical judgment of the CPA.In summary, to judge a CPA or activity is

ethical or not depends on the answers to fourimportant issues: (i) the appropriate goals; (ii)the appropriate means to achieve the goals;(iii) the appropriate consequences and (iv) theappropriate process.However, what are the ‘appropriate’ goals,

means, consequences, and process? In thesocial legitimacy literature, ‘appropriate’ issomewhat like ‘legitimacy’. Legitimacy can beunderstood as the conformation with socialnorms, values and expectations (Oliver, 1996).The ‘appropriate’ here also means the actionsare desirable and proper within some sociallyconstructed system of norms, values, beliefsand definitions (Suchman, 1995). It is judgedby the ethical theories or principles in a givensociety. Therefore, I turn to discuss the basicethical principles in the following section.


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The basic ethical principles

Cavanagh et al. (1981) gave the argument thatwork in the field of normative ethics hasevolved from three basic kinds of moraltheories: Utilitarian theories (which evaluatebehaviour in terms of its social consequences),theories of rights (which emphasize theentitlements of individuals), and theories ofjustice (which focus on the distributionaleffects of actions or policies). Utilitarian theorywas precisely formulated in the 18th century(Bentham, 1789; Mill, 1863; Sidgwick, 1874).Formulations of rights theories appeared in the17th century (Hobbes, 1651; Kant, 1780;Locke, 1690). Aristotle and Plato first formu-lated theories of justice in the 5th century B.C.(Cavanagh et al., 1981).

Utilitarian theory

Utilitarianism holds that actions and plansshould be judged by their consequences(Sidgwick, 1874; Smart, 1973). In its classicalformulation, utilitarianism claims that beha-viours that are moral produce the greatestgood for the greatest number (Mill, 1863).Decision makers are required to estimate theeffect of each alternative on all the paritiesconcerned and to select the one that optimizesthe satisfactions of the greatest number(Cavanagh et al., 1981).The modern use of utilitarian theory is

cost-benefit analysis of business behaviour(Post et al., 1999: 130). These costs andbenefits can be economic (expressed in dollaramounts), social (the effect on society at large)or human (usually a psychological oremotional impact). If the benefits outweighthe costs, then the action is ethical because itproduces the greatest good for the greatestnumber of people in society. If the net costsare larger than the net benefits, then it isprobably unethical because more harm thangood is produced (Post et al., 1999: 130).Themain drawbacks of utilitarian theory are:

(1) The difficulty of accurately measuring bothcosts and benefits and (2) the majority mayoverride the rights of those in the minority

(Post et al., 1999: 130). Since utilitarian theoryis primarily concerned with the end results ofan action, managers using this reasoningprocess often fail to consider the means takento reach the end (Post et al., 1999: 130).

Theory of rights

A theory of moral rights asserts that humanbeings have certain fundamental rights thatshould be respected in all decisions (Cavanaghet al., 1981). A right means that a person orgroup is entitled to something or is entitled tobe treated in a certain way. The most basichuman rights are those entitlements thatenable a person to survive, to make freechoice, and to realize his or her potential as ahuman being (Post et al., 1999: 130).

The main limitation of using rights as a basisof ethical reasoning is the difficulty ofbalancing conflicting rights (Post et al.,1999: 130). For example, employees ask forhigher salary and more welfare, but share-holders tend to share more dividend. Thesetwo interests are not easy to balance. Indiscussion of what constitutes a public inter-est, Hamilton and Hoch (1997) provided a casewhich can also illustrate the situation. Envir-onmentalists may see the public interest asrequiring more wildlife refuges and less energyproduction or more redwoods and fewer ordifferent jobs for loggers and mill hands.Businesses and their stakeholder constituentson the other hand may see the public interestas including responsible access to energyreserves and less pristine wilderness or asfewer redwoods and more jobs for loggers andmillworkers (Hamilton and Hoch, 1997).Whose claim should be protected and howto balance the conflicting rights?

Theory of justice

A theory of justice requires decision makers tobe guided by equity, fairness and impartiality.Canons of justice may specify three typesof moral prescriptions: distributive rules,


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principles of administering rules and compen-sation norms (Cavanagh et al., 1981).

Distributive rules

The basic rule of distributive justice is thatdifferentiated treatment of individuals shouldnot be based on arbitrary characteristics:individuals who are similar in the relevantrespects should be treated similarly, andindividuals who differ in a relevant respectshould be treated differently in a proportion tothe differences between them (Perelman,1963). A second distributive rule is that theattributes and positions that command differ-ential treatment should have a clear anddefensible relationship to goals and tasks(Daniels, 1978).

Principles of administering rules

Justice requires that rules should be adminis-tered fairly (Feinberg, 1973; Fuller, 1964).Rules should be clearly stated and expresslypromulgated. They should be consistently andimpartially enforced. They should excuseindividuals who act in ignorance, under duressor involuntarily (Rawls, 1971).

Compensation norms

A theory of justice also delineates guidelinesregarding the responsibility for injuries(Brandt, 1959). First, individuals should notbe held responsible for matters over whichthey have no control. Second, individualsshould be compensated for the cost of theirinjuries by the party responsible for thoseinjuries (Cavanagh et al., 1981).The strengths and weaknesses of these three

ethical theories used in judging corporatepolitical behaviour decisions are listed inTable 1.It is also worthy to point out that each of

these ethical theories has its shortcoming andin some cases they are inter-conflicts. Utilitar-ian theory cannot adequately account forrights and claims of justice (Lyons, 1965).

Rights theories proved deficient in dealingwith social welfare issues (Singer, 1978). Andtheories of justice have been criticized for bothviolating rights (Nozick, 1974) and diminishingincentives to produce goods and services(Okum, 1975).

Applying the basic ethicalprinciples to CPA

When applying the basic ethical principles(Utilitarian theories, theories of rights andtheories of justice) to the four ethical issues ofCPA (the goals, means, consequences andprocess), it results in the following ethicaljudgment framework for CPA (see Table 2).

The appropriate goals

What goals of a CPA are appropriate? Accord-ing to the Utilitarian theory, an ethical CPAshould pursue ‘the greatest good for thegreatest number’ (Mill, 1863), or for ‘publicinterest’ (Weber, 1997). But just as discussedpreviously, what constitutes a public interest isnot clear and consistent among differentparties. Obviously, different parties havedifferent or even conflicting claims on whatconstitutes the public interest. It is also verydifficult to distinguish the public interest fromself-interest (Hamilton and Hoch, 1997). As aresult, goals are not enough to ethically judge aCPA solely. But if the public interest thatpursued by a corporate political activity can beidentified easily, then the goal of ‘publicinterest’ may reinforce the ethical sense ofthe activity.

The appropriate means

What means of CPAs are appropriate? Weber(1997) said that ‘efforts to identify andarticulate ethical standards for corporatepolitical activity should, I think, be focusedon providing practical guidelines regardingwhich behaviours should be avoided, eventhough legal’. But Weber did not provide anysuch guideline. Based on the ethical theory of


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rights and theory of justice, we contend thatan ethical means or behaviour should meetfour criteria: (1) legal, (2) do not violate anybasic human rights, (3) do not do harms toothers deliberately and (4) if do harms toothers unconsciously, give correspondingcompensation.

The appropriate consequences

What are the appropriate consequences of aCPA? According to the Utilitarian theory, a CPAcan be judged as ethical if benefits of the CPAexceed costs, or net benefits are positive.Moreover, according to the theory of rights,

Table 2. An ethical judgment framework for CPA

Ethical issues A CPA is ethical if Ethical principles

Goal (1) For public interest or Utilitarian theory(2) For the greatest number

Means (1) Legal (1) Theory of rights(2) Do not violate any basic human rights (2) Theory of justice(3) Do not do harms to others deliberately(4) If do harms to others unconsciously, give

corresponding compensationConsequences (1) Benefits exceed costs, or net benefits are positive (1) Utilitarian theory

(2) Do not do undue harm on others (2) Theory of rights(3) Do not preclude others’ participating in politics

Process (1) Transparent or (1) Theory of rights(2) Disclose information enough for insiders and outsiders

to make ethical judgment

Table 1. Ethical theories relevant to judging political behaviour decisions

Theory Strengths as an ethical guide Weaknesses as an ethical guide

Utilitarianism(Bentham,Ricardo, Smith)

(1) Facilitates calculative shortcuts(e.g. owing loyalty to an individual,coalition or organization)

(1) Virtually impossible to assess theeffects of a political behaviour alternativeon the satisfaction of all affected parities

(2) Promotes the view that theinterests accounted for shouldnot be solely particularistic exceptunder unusual circumstances(e.g. perfect competition)

(2) Can result in an unjust allocation ofresources, particularly when someindividuals or groups lack representationor ‘voice’

(3) Can result in abridging some persons’ rights(3) Can encourage entrepreneurship,

innovation and productivityto accommodate utilitarian outcomes

Theory of Rights(Kant, Locke)

(1) Specifies minimal levels ofsatisfaction for all individuals

(1) Can encourage individualistic, selfishbehaviour — which, taken to an extreme,may result in anarchy

(2) Establishes standards of socialbehaviour that are independentof outcomes

(2) Reduces political prerogatives that may benecessary to bring about just or utilitarianoutcomes

Theory ofJustice (Aristotle,Rawls)

(1) Ensures that allocations ofresources are determined fairly

(1) Can encourage a sense of entitlement thatreduces entrepreneurship, innovation andproductivity

(2) Protects the interests of thosewho may be underrepresentedin organizations beyondaccording them minimal rights

(2) Can result in abridging some persons’ rightsto accommodate the canons of justice

Source: Cavanagh et al. (1981).


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the consequences that an ethical CPA resultedin should (1) not do undue harm on others and(2) do not preclude others’ participating inpolitics. ‘Consequences’ is a good ethicalcriterion since people often pay much atten-tion to the ultimate results of a behaviour. Butit may be very hard to measure the benefits andcosts when the CPA results in social effectsother than economic effects. In these cases,the measurement of consequences has todepend heavily on the subjective judgmentof relevant individuals or groups. Moreover,‘consequences’ may relate to the ‘means’.Somemay argue that an appropriatemeanswillresult in appropriate consequences by nomeans. But it is not always the case. Inap-propriate means may in some cases result inappropriate consequences, or in reverse,appropriate means may result in inappropriateconsequences. Therefore, consequences andmeans complement each other.

The appropriate process

What is an appropriate process of CPA? Fromthe transparent rule originates from theory ofrights, an appropriate process of CPA shouldbe transparent, or disclose information enoughfor insiders and outsiders of the corporation tomake ethical judgment on its political activi-ties. The issue of appropriate process hasseldom been discussed in CPA and businessethics literature. But from the direction of CPAlegislation (especially the Lobbying DisclosureAct of 1995) and the discussion of Hamiltonand Hoch (1997) on ‘ethical dialogue’, processof a CPA, or in other words, the informationdisclosure of the CPA, becomesmore andmoreimportant in ethical judgment of CPA. Hamil-ton and Hoch (1997) argued that if share-holders and employees within a company andthe public outside the company can getsufficient information about the company’spolitical activities, unethical activities tend toimpossible. Because pressures from respon-sible shareholders and employees and out-siders will force the company to self restrain.Therefore, ‘transparency’ can act as an import-

ant ethical criterion in judging businessbehaviours.In ethical judgment of a CPA, the ‘means’

and ‘consequences’ act as superior criteria andshould be put in a core position. One can saythat a CPA is ethical if the corporation takesappropriate means and results in appropriateconsequences. But when the means andconsequences of a CPA are hard to be ethicallyjudged, the other two criteria — the goals andprocess — help to make an ethical judgment.

Conclusion

To propose ethical principles or standards forbusiness conduct (includes CPAs) is always achallengeable task. Every effort is expected tocontribute to the field. This paper integratesthree basic ethical principles with four issues ofa CPA and thus proposes an ethical judgmentframework for any CPA. The basic ethicalprinciples are: Utilitarian theory, theory of rightsand theory of justice, while the four issues of aCPA include: the goals of the CPA, the meansused to achieve the goals, the consequences ofthe CPA, and the process of the CPA.Based on the ethical framework I proposed

in this study, if a CPA pursues appropriategoals, takes appropriate means and appropri-ate process, and results in appropriate con-sequences, the CPA is absolutely ethical.However, an ethical CPA does notnecessarily meet all the four criteria. In fact,the ‘means’ and ‘consequences’ can beconsidered as superior factors. A CPA is ethicalif it meets the appropriate means and appro-priate consequences criteria simultaneously.However, when the ‘means’ and ‘con-sequences’ are hard to measure, or the ‘goals’and ‘process’ is easy to identify, then theappropriate goals and appropriate processhelp us to make ethical judgment on the CPA.The framework proposed in this study helps

businesses to make ethical decisions in takingCPAs. In fact, today’s businesses are oftenchallenged by the public for their wrongdoingor unethical conducts in political arena. Somebusinesses have suffered a loss of legitimacy


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and public image after those unethical con-ducts. Businesses are urged to take ethicalbehaviours by the public. However, ‘whatbehaviours are ethical’ is a challenge forbusinesses. The framework I proposed in thisstudy may be taken as an answer to thequestion ‘what behaviours are ethical’. Anethical behaviour does not exclude the pursu-ing of self-interest, but should in an appro-priate manner and result in appropriate con-sequences. In other words, an ethical CPAshould be legal, should not violate any basichuman rights, should do no harms on otherdeliberately, or if do harm to others, givingcorresponding compensation. An ethical CPAshould also have net positive effect on society(net benefits are positive), should do no undueharm on others and should do not precludeothers’ participating in politics.This study also helps government to govern

unethical CPA. In governing unethical CPA,government should pay more attention to themeans, process and consequences of a CPA.Firstly, government should evaluate if a givenCPA has positive contribution to the society(goodness exceeds badness). Secondly, gov-ernment should ensure that the CPA is legaland does not violate any basic human right.Thirdly, government should ensure thatbusinesses share their responsibility by givingthe injured corresponding compensation.Finally, government should drive businessesto self-restraint by urging them to disclose therelevant information about the CPA.

Acknowledgements

This paper was financially supported by theNational Social Science Foundation of China(no. 07CZZ023) and Science Foundation ofHuazhong University of Science and Technol-ogy (HUST; no. 2006Q031B).

Biographical notes

Dr. Yongqiang Gao is an associate professorat School of Management, Huazhong Univer-sity of Science and Technology (HUST),

Wuhan, P.R. China. He got his doctorate atHUST in 2004. His recent researching interestsare strategic management, business ethics andcross-cultural management.

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Gao (2008) - An Ethical Framework for Corporate Political Actions (j Public Affairs)