In Chapter 8 (“Symphony of Soft Law”), I argue that corporate governance must focus on the role of soft law in today's global environment. Soft law is a novel mechanism for constraining corporate behavior. In reconciling financial and social imperatives, firms must consider its impact on reputation capital. I analyze the emergence of the corporate social responsibility (CSR) paradigm and its connection to global corporate governance. By examining its history, I first illustrate how the CSR movement has rendered firms' reputations accountable to the movement's demands, and then I trace the conceptual expansion of CSR to the related notions of “corporate social responsiveness” and “corporate social performance.” I examine alternative conceptual models of global corporate governance including the “monophonic” model, the “polyphonic” model, the “integrative social contracts” model, and finally, the “reputational capital” model. I also examine specific types of global civil regulations in detail, and I discuss the bases for why global corporations accept the emerging soft-law regime. After highlighting the chief characteristics of civil regulations in light of the underlying regulatory aim to bind firms and markets to worldwide norms, I discuss the dominant forms of civil regulation within the triad of voluntary self-regulation, interfirm and cross-industry initiatives, and coregulation and multistakeholder partnerships. I then build on these discussions to analyze the role that reputation-accountability mechanisms play in securing firms' compliance with global civil regulations. After distinguishing reputation accountability from legal accountability, I explain the operational components of reputation accountability, the process by which key constituents of transnational firms enforce the “rule of reputation,” and the strategic and operational implications firms face as a result of such enforcement. Finally, I take on arguments in opposition to the emerging paradigm of global civil regulation.
There are serious questions concerning what endures morally. Assuming that there is merit to the philosophical accounts of human nature about rationality, freedom, creativity, and sociability—and therefore about virtuosity as well—we are faced with significant challenges going forward. What sort of position are we in to evaluate the possible future cultures and political and economic arrangements into which we are evolving without knowing what it will be like to live in them? It is hard enough to figure out what tradition teaches us for today. It is far harder to figure out what valuable lessons tradition has for tomorrow. So Chapter 9 (“Theme and Variations”) and the Conclusion wrap up the book's performance with a discussion of economic culture and the transgressive influence it has on market ecology, in an attempt to take these interpretive challenges into account.
Thus, I offer Virtuosity in Business as a means to highlight the significance of emerging expectations for industries, corporations, and other market participants, even as it qualifies such expectations. While predicated on moral objectivity, Virtuosity in Business recognizes variety in individual and cultural values and preferences. The challenge is to find the right balance between a conception of virtue as universal and global, while recognizing the relevance of local cultural moral understandings and practices. Once again, the music analogy is helpful. Although music is often described as a “universal language,” which we find “spoken” in all cultures, significant differences exist among the types of music that cultures create and the variant modes through which they perform it.
Many of the same qualities that sanctify the performance of a virtuoso musician on the stage turn out to sanctify the ostensibly much different kind of performance of a virtuoso businessperson or business enterprise. Remaining mindful of the many aspects in which musical and business performances remain (appropriately) dissimilar, however, should not deter us from reflecting on some of the striking points of similarity. One of the chief reasons for undertaking this kind of comparison is that it helps us to envision businesses and businesspeople in a new light, something sorely needed in these times of profound disillusionment with economic institutions and actors. It would be a stretch to suggest that the more mundane aspects of doing business, say, running a convenience store, are tantamount to delivering an aria at the Met. To think this way, however, is to miss the point, and those too quick to dismiss the value of positing a virtuoso metaphor for economic life, perhaps deeming business to be utterly irredeemable, pass up an opportunity to gain deeper insight into what business might be if we changed our thinking about it and began to see it as a human endeavor ordained to the common good, instead of as the ruthless profit-maximizing war of all against all that business is often taken to be.
Putting the doubts of detractors aside for a moment, what points of comparison can we make between the art of music and the art of business? In both instances we can discern a pursuit of excellence in the face of fierce competition, the need for discipline, the self-governing spirit that eludes capture by any excessively legalistic regime of rules, the heavy dependence on reputation; qualities such as these are characteristic of successful musical flourishing (indeed, enduring artistic achievement in general), and they are intricately woven throughout the business world as well. These are the components of what I call virtuosity, which provides the warp and woof of economic life. Turning our attention to these human-centered features promises to provide a fresh dose of inspiration that, given the current unease about business within contemporary culture, we cannot afford to miss. It is my wish that not only business ethicists but market participants of all kinds, from rank-and-file employees to managers and executives, who are working within any firm, industry, or national economy will benefit from the reflections provided here.
This, then, is the “invisible law” that guides the “invisible hand” of business in a free-market economy.
Chapter 1
Virtue and Character
Man looks in the abyss, there's nothing staring back at him. At that moment, man finds his character. And that is what keeps him out of the abyss.
—Wall Street (20th Century Fox, 1987)
APART FROM PROFOUNDLY disrupting the functioning of the economic system, the financial crisis has soured the reputation of the free-market economy and called into question the moral standing of business enterprises and the character of the people