10 1 1 739 4536

Case Histories in Business Ethics
Is business ethics relevant to business?

How can studying business ethics change behaviour in business?
What’s the connection between business ethics (or applied ethics generally)
and ethical theory?
Case Histories in Business Ethics reflects upon, illustrates and extends the
role of case histories (summaries of real cases) and case studies (which may
be wholly or partly imaginary stories) in the teaching and studying of busi-
ness ethics.
This volume features contributions from Lord Borrie, Sir Adrian
Cadbury, Jon Entine and John Edmonds. It explores the role of case
histories in developing and generating argument in business ethics, and
shows that both better understanding and better practice in business ethics
require attention to ethical theory as well as to case histories.
Also addressed is the use of case histories in engaging the widest range
of student capacities, affective as well as cognitive, which directly affect
the development of character. The connections between virtue theory and
possible uses for case histories are also explained, as well as the potential
use of new ways of developing case studies, such as through the use of
information technologies, in the acquisition of virtues and transferable
skills.
Dr Chris Megone is Senior Lecturer in Philosophy at the University of

Leeds, where he teaches Ethics, Applied Ethics and Ancient Philosophy.
Revd Dr Simon J. Robinson is Senior Anglican Chaplain to the University

of Leeds and Lecturer in Theology.
Case Histories in
Business Ethics
Edited by Chris Megone

and Simon J. Robinson
London and New York

First published 2002 by Routledge
11 New Fetter Lane, London EC4P 4EE
Simultaneously published in the USA and Canada
by Routledge
29 West 35th Street, New York, NY 10001
Routledge is an imprint of the Taylor & Francis Group
This edition published in the Taylor & Francis e-Library, 2003.
© 2002 Editorial matter and selection, Chris Megone and Simon J.
Robinson; individual chapters, the contributors, except Chapters 4
and 5 © Public Concern at Work
All rights reserved. No part of this book may be reprinted or

reproduced or utilized in any form or by any electronic,
mechanical, or other means, now known or hereafter
invented, including photocopying and recording, or in any
information storage or retrieval system, without permission in
writing from the publishers.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from
the British Library
Library of Congress Cataloging in Publication Data
Megone, C. (Christopher)
Case histories in business ethics / Chris Megone & Simon J.
Robinson.
p. cm.
Includes bibliographical references and index.
1. Business ethics–Case studies. I. Robinson, Simon J., 1951– II.
Title.
HF5387 .M435 2002
174'.4–dc21
2001048451
ISBN 0-203-36120-2 Master e-book ISBN
ISBN 0-203-37376-6 (Adobe eReader Format)

ISBN 0–415–23143–4 (hbk)
ISBN 0–415–23144–2 (pbk)
Contents
Notes on contributors vii

Acknowledgements ix
Introduction 1
CHRIS MEGONE AND SIMON ROBINSON
PART I
Theoretical approaches to business ethics 7
1 Business dilemmas: ethical decision-making in business 9
S I R A D R I A N C A D B U RY
2 Two Aristotelian approaches to business ethics 23

CHRIS MEGONE
PART II
Topics and case histories 57
3 Shell, Greenpeace and Brent Spar: the politics of dialogue 59
JON ENTINE
4 Whistleblowing: the new perspective 96

GORDON BORRIE AND GUY DEHN
5 The Rick and Bianca case history 106

6 Challenger Flight 51-L: a case history in whistleblowing 108
SIMON ROBINSON
vi Contents
7 Pain and partnership 123

JOHN EDMONDS
8 John Lewis Partnership: a case history 131

SIMON ROBINSON
9 Nestlé baby milk substitute and international marketing:

a case history 141
SIMON ROBINSON
PART III
The role of case histories in business ethics 159
10 The use of case histories in business ethics 161
CHRIS MEGONE
Index 175
Contributors
Lord (Gordon) Borrie is the Chairman of the Advertising Standards

Authority and a Labour peer. Previously he was the founding chairman
of Public Concern at Work and the Director-General of Fair Trading.
Sir Adrian Cadbury studied Economics at Cambridge University and
joined Cadbury Ltd in 1952. He retired as Chairman of Cadbury
Schweppes in 1989. He was a director of the Bank of England 1970–94,
and chairman of the Committee on Financial Aspects of Corporate
Governance 1991–5. He is President of the Birmingham Centre for
Business Ethics and Chancellor of the University of Aston.
Guy Dehn is the founding director of Public Concern at Work and a prac-
tising barrister. He was previously legal officer to the National
Consumer Council.
John Edmonds is the General Secretary of GMB, Britain’s General Union.
He is a member of the TUC Executive and the principal trade union
spokesperson on European Affairs. He has been a member of the
Council of ACAS and of the government’s Skills Task Force. He is
currently a member of the New Deal Task Force and a Trustee of
NSPCC. GMB is affiliated to the Labour Party and John Edmonds is a
member of the Labour Party Policy Forum.
Jon Entine is a writer and Emmy-award-winning television news reporter
and producer who specialises in business ethics. He won a National
Press Club (US) award in 1995 for ‘Shattered image: is The Body Shop
too good to be true?’, published in Business Ethics magazine. He has
contributed to several business and management books, most recently
in W. Hoffman, R. Frederick, M. Schwartz (eds) Business Ethics:
Reading and Cases in Corporate Morality (2001).
Dr Chris Megone is Senior Lecturer in Philosophy at the University of
Leeds, where he teaches Ethics, Applied Ethics and Ancient Philosophy.
Recent publications include ‘Aristotelian ethics’ in R Chadwick (ed.)
Encyclopaedia of Applied Ethics (Academic Press of America, San
viii Contributors
Diego, 1997), ‘Persons and potentialities: an Aristotelian approach’, in

M. Kuczewski and R. Polansky (eds) Bioethics: Ancient Themes in
Contemporary Issues (MIT Press, Cambridge, 2000) and S. Mason and
C. Megone (eds) European Neonatal Research: Consent, Ethics
Committees, and Law (Ashgate, Aldershot, 2001).
Revd Dr Simon J. Robinson is Senior Anglican Chaplain to the University
of Leeds and Lecturer in Theology. Previous publications include Serving
Society: The Social Responsibility of Business (1992) and The Decision
Makers: Ethics and Engineers (1999).
Dr Elaine Sternberg is the author of many works on business ethics and
corporate governance including Just Business: Business Ethics in Action
(2000), Corporate Governance: Accountability in the Marketplace, and
The Stakeholder Concept: A Mistaken Doctrine (1999). A former
investment banker, she is Principal of Analytical Solutions, a London
consultancy firm specialising in business ethics and corporate gover-
nance, and a Research Fellow in Philosophy at the University of Leeds.
Acknowledgements
This book is derived in part from a lecture series held at the University of
Leeds in the autumn of 1995 under the auspices of the Centre for Business
and Professional Ethics. Lord (Gordon) Borrie, Sir Adrian Cadbury, John
Edmonds and Elaine Sternberg were amongst the contributors to that series
and we are most grateful to them, both for the original lectures, and for all
the work that they have done since to revise those lectures so as to bring
them up to date for publication now. We are also indebted to Elida Gibbs
plc, Barclays Bank plc and Yorkshire Electricity plc (as it then was) for the
sponsorship which enabled that very successful lecture series to go ahead.
In working on the Nestlé case we have been helped by David Smith at
the Council for Ethics and Economics in America, who has worked very
hard on developing the internet and CD-Rom versions of that case history.
We have been encouraged by several editors at Routledge (now part of
Taylor & Francis), including Stuart Hay, Michelle Gallagher and Gavin
Cullen. But we would especially like to thank Francesca Lumsden for her
energy in seeing the project to a close. Finally, we should like to thank our
families for their support, especially in the final stages of this work.
The authors and publishers would like to thank the following for
granting permission to reproduce material in this work:
The Biologist journal and Martin Angel for the reproduction of Angel,
Martin V. (1995) ‘Brent Spar: no hiding place’, Biologist 42(4) in Chapter 3.
Shell UK Limited for the reproduction of the Brent Spar Timeline in
Appendix 3 of Chapter 3.
Public Concern at Work for the reproduction of Chapter 4 and Chapter 5.
Chapter 4 is a revised version of a document originally published under
the title Whistleblowing to Combat Corruption, PAC/AFF/LMP (2000)1.
Copyright OECD, 2000.
Every effort has been made to contact copyright holders for their
permission to reprint material in this book. The publishers would be
grateful to hear from any copyright holder who is not here acknowledged
and will undertake to rectify any errors or omissions in future editions of
this book.
Chris Megone and Simon Robinson
Leeds, June 2001
Introduction
Chris Megone and Simon Robinson
In the last thirty years there has been a dramatic increase in the study both
of applied ethics quite generally, and of business ethics in particular.
Business ethics is certainly a branch of philosophy even if, as an inter-
disciplinary subject, it may also be seen as a branch of other disciplines
such as business studies or management. Thus this increase has brought a
different sort of student to the study of ethics, often students who are
studying ethics as a small part of a business or management course,
although there have also been some students, usually by far the minority,
who take business ethics courses as part of a philosophy degree. One result
of this growth in students of ethics from a different academic background
has been the introduction of different tools for the study of the subject. As
opposed to simply reading book-length studies of ethics, or learned arti-
cles, students have often been presented with case histories (accounts of
real cases) or case studies (which may be wholly or partly imaginary
stories) as a substantial component of their courses in business ethics.
(Hereafter, case histories alone will be referred to, for brevity.)
One main reason for this has been that students on a management or
business course have not always found it obvious that ethics should be a
required component in their studies. In response to this worry, it has been
thought that case histories can at least demonstrate the way in which
ethical concerns are so often integral to business decisions. At the same
time, the case history has also had a prominent role in other aspects of
business education, so it may have seemed natural to extend its use into
this new area. However, not a great deal of further thought has been given
to exactly how case histories are to play a role in business ethics curricula.
In particular two issues arise. First of all, many business students, once
satisfied that ethics has a role in business, are likely to see a course in
ethics as something that should help their practice, help them to reach
better decisions and conduct themselves better in the business context. So
one question is how, if at all, the use of case histories can contribute to the
achievement of that goal. Second, it is not entirely clear how the study of
ethics through case histories is supposed to be connected to the study
2 Chris Megone and Simon Robinson
of ethical theories and ethical concepts, which is often supposed to have

constituted the central part of the traditional philosophical study of ethics.
Thus the question arises as to whether the student of business ethics can
learn anything about such matters through the use of case histories, and
indeed whether the student with a business background needs to make use
of ethical theories or principles, or the analysis of concepts, in their study
of business ethics.
This latter question has also arisen for philosophers, who may approach
business ethics (or applied ethics in general) from the perspective of a
study of ethical theory. Philosophers working in ethics often distinguish
three branches of ethics: metaethics, normative ethics and applied ethics.
Metaethics is taken to focus on the question of the reality or objectivity of
ethical values, judgements or decisions. Normative ethics is taken to focus
on the study of ethical theories such as consequentialism, deontology or
virtue ethics, or of ethical concepts such as courage, justice or goodness.
Applied ethics is then taken to address specific ethical problems such as
whistleblowing or the requirement for truth-telling in business.
Given this division, two assumptions may then sometimes be made by
such philosophers. The first is that these three branches of ethics are quite
separate, and thus results in one do not impinge on any other. The second,
which is really a consequence of the first, is that the traditional concerns of
philosophical ethics really have no bearing on applied ethics. (Attributing
these latter assumptions makes possible one explanation as to why applied
ethics has had something of a Cinderella status within traditional philos-
ophy departments.)
This has therefore left a challenge for those who have found it odd that
the study of ethics can be so sharply compartmentalized,1 and in particular
that ethical theory could be thought so clearly distinct from the question of
what it is right, or at least permissible, to do on particular occasions. The
challenge has been to explain how the three branches of ethics bear on
each other, and in particular how the study of ethical theories and concepts
can help with decisions over practical problems. In the present context,
that challenge presents itself in the form of a question as to how the study
of such theories and concepts is to be related to the study of case
histories.2
Against this background, the most general aim of the present book is to
explore the links between ethical theory and ethical practice in the business
arena. In one way, this very general aim has been achieved by bringing
together the perspectives of those actively involved in business practice,
directly or indirectly, such as Borrie/Dehn, Cadbury, Edmonds and Entine,
and those of theorists such as Megone, Robinson and Sternberg.
However, this very general aim is achieved primarily through the focus
of the book on case histories. The specific and central aim of the book is to
reflect upon, illustrate and extend the role of case histories (and case
Introduction 3
studies) in the teaching and studying of business ethics. It explores and

illustrates the role of case histories, first in developing and generating argu-
ment in business ethics and, second, in engaging the widest range of
student capacities, affective as well as cognitive, and thus directly affecting
the development of character.
In addressing the first role, the book examines the way in which case
histories can be used for the purposes of both understanding and assessing
competing theoretical perspectives in business ethics. At the same time, this
approach also helps to show how both better understanding and better
practice in business ethics require attention to ethical theory as well as to
case histories. In addressing the second role – the engagement of affective
as well as cognitive capacities – the book explains the connections between
Aristotelian virtue theory and possible uses for case histories.
Furthermore, the book also draws attention to the potential contribu-
tion of new ways of developing case histories and examines their role in
the acquisition of virtues and transferable skills. The particular focus here
is on the development of case histories on CD-Roms and the internet. The
book contains a chapter on the Nestlé baby milk controversy which has
now been running for nearly thirty years. This chapter also points to both
CD-Rom and internet versions of this case history. These have been devel-
oped by an independent academic, Lisa Newton, for the US-based Council
for Ethics in Economics.
What is available, using these electronic resources, is an interactive case
history including data from many different sources covering the whole 25-
year history of the debate. The sources include documents and
contributions from all parties to the debate, so a student can click onto
paper documents, video interviews and taped contributions. The wealth of
material available and the possibility for interactive use of both CD-Roms
and the internet may enhance the opportunity for using case histories in
the ways discussed in this book. There are, of course, dangers with such
new materials. Students may be simply overwhelmed with the range of
materials presented, so lose sight of the principles they are seeking to
examine, or fail to engage imaginatively with different possible perspec-
tives. Thus development of case histories via these new technologies will
require care.
In order to explain the suggested roles for case histories, the book is
divided into three sections. In the first section a number of theoretical
approaches to business ethics are outlined. In the first chapter, Sir Adrian
Cadbury, who chaired the committee that reported to the UK government
on the Financial Aspects of Corporate Governance in 1995, indicates the
broad theoretical outlines of his approach to ethical dilemmas in business.
In so doing, he comments on the limitations of codes of ethics, some quali-
fications required of any ‘stakeholder’ theory and the fundamental
importance of confidence and trust. In the second chapter, Megone
4 Chris Megone and Simon Robinson
presents two Aristotelian approaches with somewhat different emphases.

First, there is an extended account of Sternberg’s ethical decision model,
which she has defended at length elsewhere.3 In the second half of the
chapter, Megone outlines Aristotelian virtue ethics and argues that this
provides a theoretical framework, both for ethical decision-making in busi-
ness and for understanding the role of case histories in business ethics.
Against this theoretical background, the second section presents four
extended case histories, as well as a briefer one, each of which illustrates a
particular area of business in which ethical issues arise. Each case is
presented together with analysis of the ethical problem raised, analysis
incorporated within the chapter or presented in a distinct chapter. Entine
introduces reflection on business ethics and environmental concerns
through an analysis and account of the Shell Brent Spar case. Dehn/Borrie’s
chapter discusses business ethics and whistleblowing, and Robinson both
outlines and discusses a case which highlights this issue – the Challenger
launch disaster. In addition, Dehn offers the briefer Rick and Bianca case
which is related to the same topic. Edmonds contributes a chapter on busi-
ness ethics and employment, which is then explored further through
Robinson’s account of the John Lewis case. In the final chapter of this
section the Nestlé baby milk controversy is recorded by Robinson as an
example of the ethical problems that can be raised by international
marketing.
The first two sections can therefore be used together in a number of
ways. The reader can consider in the abstract both how the theoretical
perspectives on particular problems, defended by contributors to the
second section, cohere with the more general theoretical approaches in the
first section. But the case histories themselves can also be used to examine
either the more specific or the more general theoretical approaches.
However, the final section addresses specifically the question of the use of
case histories with a chapter which argues that Aristotelian virtue ethics
shows how case histories can be used in three distinct ways, and thus
develop a student’s affective capacities as well as his cognitive capacities
when studying business ethics.
The present book differs somewhat therefore from other texts in busi-
ness ethics. Typically, case histories are used to illustrate assertions or
arguments in business ethics, or to stimulate debate about an issue in busi-
ness ethics. This book examines that role, illustrating the link between case
histories and more general theoretical approaches in business ethics; but it
also explores the link between this role and more novel uses in improving
students’ development in business ethics. It argues that whilst case histories
can be used for reflection on ethical theories, they can also be used to en-
hance skills in moral decision-making. Using cases for developing
decision-making skills has been addressed narrowly in professional
training and development for many years, but insufficient attention has
Introduction 5
been given to this ethical dimension and how the ethical virtues relate to
such decision-making. As indicated, the final chapter brings together
Aristotelian insights on the moral psychology of virtue and the nature of
virtue acquisition so as to explain how case histories can have a role here.
In sum the text will address both the more traditional question of the
relation between case histories and ethical theories, and that of a novel
way in which the study of business ethics can be affective and not merely
cognitive, and show how the use of case histories can be developed to link
these two aspects. The case histories in the text should serve as exemplars
for both cognitive and affective roles. The book also indicates how the
interactive opportunities offered by the CD-Rom and internet website
associated with cases like the Nestlé case may take this approach further.
Notes
1 One reason for finding it odd is that it was not a compartmentalization made
by the great Greek ethicists, Socrates, Plato and Aristotle.
2 Even if it is admitted that there are connections between the three branches of
ethics, a slightly weaker assumption might also be made: namely, that applied
ethics is simply derivative from, or dependent upon, the other branches, so that
students of these other branches can learn nothing from the study of applied
ethics itself. This would leave the challenge as one of having to show how the
study of case histories can have any bearing on the study of normative ethics or
metaethics.
3 E. Sternberg (2000) Just Business: Business Ethics in Action, 2nd edn, Oxford:
Oxford University Press.
Part I
Theoretical approaches
to business ethics
Chapter 1
Business dilemmas
Ethical decision-making in business
Sir Adrian Cadbury
Why should it be that issues of company conduct and personal conduct in

business seem now to be higher on the public agenda? Is it because our
behaviour is now worse than it used to be? Well, in due course I will give
you an interesting example of nineteenth-century behaviour which, in my
view, is very similar to the sort of behaviour found today. So I doubt
behaviour has changed that much. It seems to me that there are a number
of strands to be identified in answer to this first question.
First of all, business has become more international and, by becoming
more international, it is seen, I suspect, to be less accountable. Since it is
spread across the world and no longer rooted in a single community, it is
held to be responsible to no single jurisdiction. When, by contrast, I joined
the Cadbury business, it had its main factory at Bournville and was very
much part of that local community, which in turn was part of the city of
Birmingham. There were very strong local pressures, providing instant
feedback, more or less, on the actions and decisions taken by the company.
So, in a sense, you had a force for governance operating on the spot, which
doesn’t really exist now when companies have their centres spread all
round the world. However, the importance of accountability, the need
particularly for large international corporations to be answerable, is quite
undiminished. The ten largest corporations in the world directly employ
between them 4.3 million people, and of course many more indirectly,
probably at least twice that number, so the way they conduct their affairs
does have considerable social and economic importance.
A second reason why governance has risen up the agenda has been the
occurrence of disasters. The Exxon Valdez tragedy, Bophal, Maxwell,
corporate collapses – all of these highlight this question of accountability.
Take the case of Bophal, for example. Who actually was responsible? How
do we try to ensure that that kind of disaster does not happen again?
Third, there is undoubtedly more interest shown by shareholder groups,
and by governments themselves, in ethical and environmental issues. For
example, we have had in the United States the passing of the Foreign and
Corrupt Practices Act. (I always rather like that because it suggests to me
the idea that corruption is something that is only foreign. Well, I doubt
10 Sir Adrian Cadbury
that is true!) But the very fact that governments felt that they had to inter-
vene in what was essentially a matter of how far a business should go in
buying business (a question to which we will return to a bit later on) – that
is, I think, something new. Such intervention raises the problem for
governments of trying to define limits on conduct, of settling what is
acceptable and what is not acceptable, in a world where transactions are
moving faster and becoming more complex all the time. It is very difficult
for them to keep up.
Fourth, there are issues raised by deregulation of the utilities, as well as
the increased public expectations of business, and growing media interest.
All of these have pushed the questions of conduct, both company and indi-
vidual, more to the fore. In the face of these levels of concern, there is, I
would suggest, a lack of general agreement as to what the rules of conduct
should be, both for companies and for individuals. On the individual side,
for example, life is very competitive and pay is related to winning. We may
possibly be seeing changing attitudes towards what is right and wrong in
this kind of area. Consider a well-known quote from Ivan Boesky, ‘Greed
is alright, I want you to know that. I think greed is healthy. You can be
greedy and feel good about yourself.’ The interesting thing about that
quote is perhaps not just that he said it, but that he said it at the
commencement address for UCLA, to all those bright new students coming
up to the university, prior to making their way in life. The message they
got was that. That does make one think.
Well, if these are the reasons that have brought corporate governance to
the fore, what should be the determinants of conduct? My object in this
chapter is to look at the ways in which we should set about making those
ethical choices. How are we to come to decisions in business in conditions,
if you like, of ethical uncertainty?
By virtue of being Chairman of the Committee on the Financial Aspects
of Corporate Governance for four years, I had the opportunity to become
involved in matters of corporate conduct, both at the national and the
company level, and both in this country and abroad (where there is very
great interest in these matters). In particular, as a committee we had the
task of drawing-up the Code of Best Practice which we addressed to the
boards of companies in this country and, in the first instance, to those
listed on the London Stock Exchange. One very proper question, therefore,
is how useful are such codes? Does the production of a code of best prac-
tice actually help boards in their task of directing and controlling
companies? And at the company level, what guidance can company codes
give to managers who are faced with decisions which require some degree
of ethical judgement?
The sort of company I always had in my mind was one widely spread
overseas, where the manager in some outpost in the Far East or in Africa
was faced on the spot with a decision which they had to take with nobody
Ethical decision-making in business 11
to turn to. What help were the sort of rules that we drew up within the
company going to be to such a person? Thus my interest lies really in the
interpretation of rules and their practical use as much as in the precise
nature of the rules themselves.
It is worth noting that the majority of business decisions do have an
ethical content. (Incidentally, there has always seemed to me a problem
over how you fit this subject of business ethics into a business course,
because there should not be a separate compartment for an ethics options
that you can take or disregard, treating it as quite unrelated to everything
else that is happening within the business course. It is really a thread which
runs through all the functions and all the aspects of a business. For
example, financial decisions might seem the most securely based on arith-
metic and rules. Yet financial decisions very often require you to make
some decision as between profit now and profit in the future, and to do
that you have to give some weighting to the interests involved here and
now, and to those in the future, so you end up with an ethical dimension
to the decision. So it seems to me that, at the end of the day, there are very
few business decisions which can be made on the basis of mathematics
alone.)
One kind of decision to which I will refer has to be made in situations
where there seem to be competing values, not cases where one course is
clearly right, the other wrong. You may decide to do the wrong thing.
That is entirely another matter, but in that case there need be no query in
your own mind as to which course is right and which course is wrong. The
difficulties come when in fact both courses seem right and we have to
decide which of them is going to prevail.
Another difficulty for decision-making arises from uncertainty as to
what the rules mean. We may have some rules, but we don’t actually know
how to interpret them in the particular case which confronts us. Another
problem may stem from conflicting orders. We are actually being asked to
do two conflicting things at the same time and we have to choose between
them. The final kind of problem I’ll address arises when there is a complex
decision to be made. I will come to a clear example of a complex decision
later on, where a number of interests are affected and you have the
problem of how you are going to decide which of those interests count
most and should therefore have the major say in the final decision.
This business of different shades of right and wrong takes me back to
my grandfather.1 He was deeply opposed to the Boer War and he bought
the only paper in this country which, at that stage, was promoting the
cause of peace and was against the war. He bought it to make sure that it
was able to continue its good work. After buying it, he discovered that a
great deal of the paper was taken up with racing tips and betting news and
this worried him because, in addition to being opposed to the Boer War, he
was actually opposed to gambling as well. So for a period he drastically
cut this side of the paper’s activities. The results on the circulation were
disastrous and, no doubt to the enormous relief of those working on the
paper and I suppose to that of the readers, he decided in the end that to
promote a journal which was going to speak out against the Boer War was
actually more important than giving some mild support to gambling. So he
put the news back in and all went well.
Now, my question is, when we are faced with an ethical decision such
as one of those above, how do we set about resolving it? I should perhaps
at this point explain what I mean by ethics. I use the word to mean the
guidelines or rules of conduct by which we aim to live. To reiterate, then,
what should be the determinants of conduct?
Both companies and individuals work within frameworks. The
company framework is set by the law and by regulations, which are not
quite the same thing as the law, but which we have to abide by although
they are not necessarily statutory. Thus companies are subject to control
by the Board, and to the forces of shareholder opinion through the
General Meeting. There are also pressures from peer standards and public
opinion. In the case of individuals, obviously some of those determinants
just mentioned also apply, but there is also the personal code of the indi-
vidual concerned.
But who sets these rules and who enforces them? What we find is, if we
look at different countries, thinking on the corporate level now, that in
fact the frameworks are different in different countries. In Germany, for
example, the Board would have a greater degree of control over conduct
than it probably would have in the UK. In the US the law and regulation
would have a greater role to play than it does in the UK, and so on. So we
are all subject to certain rules, but the particular mix of those rules is
different and they change. They change as expectations change. Of course,
regulation is pretty straightforward. That is clear. What is less clear is how
what we come to regard as accepted standards of conduct are established
and maintained. So let’s look at codes.
There are really four levels of code. There are international codes,
national codes and company codes and, perhaps in between these, there
are trade or professional codes. International codes constitute an inter-
esting development and one that is relatively new. Recently there has been
an Inter-Faith Declaration, a code of ethics on international business for
Christians, Muslims and Jews.2 This is something at the international level
very much to be welcomed. There are others. There is a body called the
Caux Round Table. There are the Minnesota Principles set out by a group
in the United States entitled ‘Toward an Ethical Basis for Global Business’.
There is a relatively new organization called Transparency International
which states:
Transparency International (TI), the coalition against corruption in

international business transactions is at present working on a special
project dealing with the compilation of different corporate codes of
conduct from multi-national enterprises and those published by insti-
tutions such as the Caux Round Table, ICC, and so on, as we believe
these to be essential in the implementation of strategies against corrup-
tion.3
So, there are certain guidelines being produced at the international level
that we can look towards. A second source of guidance is to be found at
the national level. The Code of Best Practice, which our committee
produced, is an obvious example.4 I mentioned that it was addressed to
UK companies, and we did indeed at the beginning of the report say that
we hoped that all companies, whatever their size, whether public or not,
would pay attention to the principles which we had set out there. But, in
the first instance, that code was addressed to listed public companies –
companies quoted on the stock exchange.
Third, it seems to me, there are the trade and professional codes. These
are obviously very important in the professions and have been there for a
long time. But there are others as well which are quite interesting. For
example, there is an advertising code under which Benneton had one of its
advertisements banned. We might not think of it as a professional code,
but it is still a code.
Then, fourth and finally, there are company codes, each company
drawing up its own particular code in different forms and, one hopes,
discussing it so as to ensure that it is not just a top–down process, but that
it does actually have some basis in the way people in the company think
and behave. The Cadbury committee Code of Best Practice was not specifi-
cally dealing with ethical matters, but nevertheless there was an ethical
content and, I felt, it was quite an achievement to get the committee to
agree on the significance of this point. We said it was important that all
employees should know what standards of conduct were expected of
them.5 We regarded it as good practice for boards of directors to draw up
Codes of Ethics or Statements of Business Practice and to publish them
both internally and externally.6 We stressed the principles of openness,
integrity and accountability. They go together. Openness on the part of
companies within the limits set by their competitive position is the basis
for the confidence which needs to exist between business and all those who
have a stake in its success. So company codes should reflect this.
Returning to the Cadbury code for a moment, one of the other points
we dealt with was the need for independent members of a board. We
defined what we meant by independence in this particular context and
what we were referring to was independence of judgement. We made this
suggestion in order to help boards resolve conflicts between the interests of
the executive directors and the interests of the company. This led to a
misunderstanding, in my view, that somehow we were implying that
outside independent directors were more ethical than executive directors.
That was not the point. They can all be equally ethical. What we were
saying was that the outsider has less direct interest in the business, is more
disinterested, more objective. Thus on issues like take-overs, management
buy-outs, directors’ pay, top management succession – all things in which
the executive directors have an interest – then the outsiders have a particu-
larly valuable role to play. This is not a question of their personal virtue. It
is a question of their objectivity.
In general, the response to the Cadbury report was very encouraging
and two general points were established, quite apart from whether or not
companies followed our recommendations. First, public companies now
have to make a statement about their compliance with governance require-
ments and all have in fact to review the structure of their governance
processes, and that in itself seems salutary. I also believe that we have
helped to clarify responsibilities in an area where we found there was a
good deal of confusion, namely, that between directors and auditors.
So, codes are one determinant of conduct, but I suggested that a second
way in which standards of conduct were set was by peer pressure, and
this can be seen if you look at the UK financial sector which, as a conve-
nient shorthand, I will refer to as the City, although that is a
simplification. The City was an example in the past largely of self-
regulation, regulation through peer pressure. That regulation came about
by the wide acceptance of those who worked in the City of what might be
called the rules of the ‘Club’. Of course confidence has a special impor-
tance in the financial sector – it is very much the basis of business there,
not least because money can be made through breach of confidence, as
with insider trading. So membership of the Club involved acceptance of
the rules and code of the Club, and if individuals transgressed that code
there was a very effective form of punishment, which could well involve
exclusion from the Club, thus depriving them of their business. So there
are certain advantages to this club-type of approach to setting out rules of
conduct. First of all, the rules are known, certainly by the insiders, by
those to whom they apply. They are certain and that reduces the ground
for dilemmas. Second, such an approach is cheap, effective and adaptable.
One of the problems with any formal form of regulation is that it will
usually be behind the game. With self-regulation, the Club rules, the
moment that a new issue appears the Club can almost immediately
provide a rule to deal with it.
However, there is a danger to this approach, and that is that the rules
may be one-sided in that they are based on the interests of members of the
Club and not on the interests of those whom the Club is there to serve. I
said at the outset I would give an instance of nineteenth-century behaviour,
and there is a very interesting case relevant here called the Steam Loop
affair. The Steam Loop was an invention which was designed to secure
savings for users of steam via economies of fuel, water and power. A
company was formed in 1890 to exploit it and Slaughter and May were
the solicitors, both to the company and to one of its promoters. Now the
promoters rigged the market for the issue of shares to ensure that they got
a successful launch – apparently in those days this was a regular occur-
rence. To get the new issue off to a good start, you created an artificial
premium on the opening transactions and that was what was done with
the Steam Loop shares. Unfortunately, though, the promoters then fell out
with each other and there was an argument about who in fact owned some
of the shares. So this whole performance was brought before a judge.
Slaughter and May did not really think anything of this, since it was
accepted as the normal system by which you launched new issues. So they
assumed there would be no problem in going before the law. As one of the
defendants declared: ‘you only have to ask anyone about new companies if
it [that is, creating a false premium] is not a necessity’. The judge, however,
took a remarkably different view, and what he said was:
I do say that if persons, for their own purposes of speculation, create

an artificial price in the market by transactions which are not real, but
are made at a nominal premium merely for the purpose of inducing
the public to take shares, they are as guilty of as gross a fraud as has
ever been committed.
Slaughter and May were shocked and thought the poor judge simply out
of touch with what went on in the City, so went to Appeal. It went to their
Lordships and their Lordships thunderingly upheld the judgement. And
William May later referred to the case as ‘a magnificent miscarriage of
justice’. Sadly, poor William actually went to his deathbed believing that
he had been very hardly done by.7
Now I think that case is interesting in a number of ways. First of all, it
shows a clash between two different sorts of rules. The rules of the Club in
this case clash with the rule of Law and, interestingly, this time it was the
rules of the Club which had actually got out of kilter with legal opinion as
to what was right. Of course, the rules of the Club are based on what is
acceptable to the members, to the insiders, not to those who are outsiders.
So, in this particular case, what was in effect happening was that, in order
to provide an efficient capital market for the flotation of shares, it was a
regular practice for those inside the market to rig it. This was of course
done to protect what they regarded as their interests – their own interests,
and also the interest of having an efficient capital market, outweighing the
fact that poor unfortunate outsiders not in the know paid over the odds
for the shares. It was that inability to see that there was a conflict of
interest between the members of the Club and the world whom the Club
was there to serve that seems to me one of the problems about Club rules.
That limitation apart, this kind of approach, certainly within the City of
London, broke down for other reasons. It broke down because with the
Big Bang you had a very rapid expansion of numbers employed in this
particular field. The smaller finance houses had been run pretty much on a
partnership basis, with considerable personal influence lying with the part-
ners at the top who took people on, talked to them and discussed practice
with them. They in fact set the tone. When you had this rapid expansion
of numbers, that system of standards completely broke down and there
was nothing to put in its place. A second reason was that the boundaries
between different types of finance activity were swept away and with that
some of the Club rules went as well. Then, third, you had an influx of
newcomers who did not share the same attitudes, the same values, the
same aims and constraints as had applied previously. As I say, we are in a
much more competitive world where winning at all costs may be the
motto. A final reason was internationalization. Into that Club came banks
from very widely different backgrounds who didn’t share precisely the
same values. So the Club approach may have some good points, but it
does depend on there being a coherent group with shared values, and even
then such a coherent group can get out of touch with the wider commu-
nity.
Now I turn to specific examples of difficult managerial decisions, with a
view to examining the role of rules and codes in such decision-making. It
seems to me that the first of these dilemmas occurs when managers find
themselves under conflicting pressures arising from what we may perceive
as the role of business in society. The manager may be involved in cutting
costs in his particular business, and also being asked to ensure that the unit
he is responsible for continues to play its part in the community. He may
be having to get rid of staff and, at the same time, being told that he needs
to take up a certain number of trainees who are just leaving school or
college. So you get these pressures and, if one thinks in terms of rules, the
difficulty for the manager is to know exactly which rule to turn to. This
can be expressed in terms of responsibilities. For example, Tom Clarke
suggests three levels of responsibilities of business in society.8 The first
level is that of a company meeting its material obligations, to shareholders,
to employees, customers, suppliers, creditors, paying its taxes and meeting
its statutory duties. That level of responsibility of a company to society is
clear-cut, easily defined. The next level up from that suggests that a
company has an obligation to take account of the consequences of its
actions – for example: that it must be prepared to go beyond minimum
standards to ensure that it is making the most of its human resources; that
it is not damaging the environment; that it is actually assisting the environ-
ment, and so on. We then come to a third level of obligation, which is
much less clearly defined. This refers to the responsibilities companies have
for the relationship between business and society in a wider sense. At this
level, the question arises as to how far a business has a responsibility for
maintaining the framework of the society of which it is a part and in
which it operates. That seems to me to be a difficult area. These supposed
levels of responsibility raise important but difficult questions for managers
in large businesses, managers who are unclear how to apply company
policy in the individual instances they are faced with. For example, should
they employ this disabled person or not? What help are the rules then?
And this sort of problem applies also to the small business. How far
should the owner/manager become involved in activities outside of just
running the shop? The latter is a problem the individual has to face alone.
In the former case, the company still leaves the judgement to be made by
the individual, but obviously the clearer we can make our statements of
company policy the easier it is for managers to make those decisions. The
responsibility here lies with boards of directors – the responsibility to set
policies in relation, for example, to recruitment, to redundancy, to the
company’s relationship with the community. But there is a danger here –
namely, that boards will make statements and rules on such matters, which
are duly minuted and passed down the line, and as far as the board is
concerned it will have done its job.
It will not have done so in two ways. First of all, there is a duty if you
set out policy, to follow it up and make sure that it is actually applied in
practice. Discrimination in employment may not happen very often at
board level but it certainly happens at the factory gate. So it is a job for the
board to follow this through and see whether their policy is actually oper-
ating. The second duty is to ensure that policies are backed up by the
system of rewards and discipline within the company, because the people
in the company know perfectly well what is going on in practice. So if in
fact it is the person who makes his or her budget who gets promoted,
whereas the person who has followed the apparent directive from the top
to do all kinds of other good things like training, is left where he is, every-
body draws their own conclusion. The rule may state that training is just
as important as profit, but if the ‘budget-meeter’ is promoted, and the
trainer is not, at the end of the day it is by the actions of the company that
the rules are judged.
One area where I think there are difficult managerial decisions to be
made is where a decision is required as to what to do in this kind of situa-
tion in relation to major policy issues. The difficulty is the possible conflict
between the obligations that arise at different levels. A second difficulty
has just been indicated, though it is in its own way more straightforward.
This is where there is confusion down the line as to whether a company
means what it says. I have a very good example here. It goes back a bit
and concerns a court action involving the General Electric Company in the
United States. It has been reported as follows:
For the past eight years or so, General Electric had had a company
rule called Directive Policy 20.5, which read in part ‘no employee shall
enter into any understanding, agreement, plan or scheme, expressed or
implied, formal or informal, with any competitor with regard to
prices.’ … The trouble, at least during the period covered by the Court
action and apparently for a long time before that as well, was that
some people at General Electric, including some of those who regu-
larly signed 20.5, simply did not believe it was to be taken seriously.
They assumed that it was window dressing: that it was on the books
solely to provide legal protection for the company and for the higher
ups; that meeting illegally with competitors was recognized and
accepted as standard practice; and that often when a ranking executive
ordered a subordinate executive to comply with 20.5, he was actually
ordering him to violate it. Illogical as it might seem this last assump-
tion becomes comprehensible in the light of the fact that, for a time,
when some executives orally conveyed, or re-conveyed, the order, they
were apparently in the habit of accompanying it with an unmistakable
wink. … [Thus it was that when] asked by Senator Kefauver how long
he had been aware that orders issued in General Electric were some-
times accompanied by winks, Robert Paxton, an upper level G.E.
executive replied [as follows]. He had first observed the practice way
back in 1935 when his boss had given him an instruction along with a
wink or its equivalent, and that when sometime later the significance
of the gesture dawned on him, he had become so incensed that he had
with difficulty restrained himself from jeopardizing his career by
punching the boss in the nose. Paxton went on to say that his objec-
tion to the practice of winking had been so strong as to earn him a
reputation in the company for being an anti-wink man. But he for his
part had never winked.9
Now, that is a comical story, but, as a result, senior executives went to

jail, and the interesting point about this to me is that I suspect that, in a
milder sense, this is all too commonly a managerial dilemma. Managers
may know the rule but be unsure as to whether the bosses really mean it,
or, as in this case, perhaps the managers are given two rules: meet your
budget, sell those transformers; on the other hand, don’t go entering into
any collusion. In such a case a manager may be left to choose one or the
other. This does seem to be something that can be avoided, so long as
direction from the top and practical implementation are coherent.
A third dilemma is one on which I have touched already, namely, how
far one should go in buying business. What inducement is it legitimate for
an employee to offer to make a sale, or to complete a deal, and, on the

other side of the same coin, what gift is it legitimate for me as an employee
to receive? I think this area provides a good example of the limitations of
codes when someone is faced with a decision here and now. Virtually every
code I have ever seen outlaws bribery and corruption. But, of course, the
whole point is what is a bribe? How do you define a bribe? When is a gift,
given or received, a bribe? The situation which I have in mind has certainly
happened within my own company around the world. It occurs when it is
made perfectly clear to you by the official concerned that if a planning
application or a production licence is to go through, then a certain
payment to them is a condition of agreement. What are you to do?
Well, what I suggested within my former company were two rules of
thumb. I said that (a) any payment made should always appear on the face
of the invoice, that is to say it should be open and declared, and (b) any
individual receiving a gift should be content to see that written up in the
company newspaper. The object of this was to provide, what one might
refer to as, culture free rules. When operating in Africa and parts of the
Far East, the Middle East, and so on, the rules in these matters are
different, and it seems to me (a) arrogant and (b) actually impractical to
believe that one can impose a set of rules from here all around the world.
Thus the two tests were really quite simple. The first test was to ensure
that all payments went through the books in some form and one hopes
were audited and could be accounted for. Indeed, I can certainly think of
one case, which seemed to me anyway from the outside to involve bribing
the police force, that went through the books and was audited and
accounted for. By contrast, once people are paying cash, then the whole
situation is out of control, so requiring that payments be detailed on the
invoice is one way of keeping a check on things even though some of the
payments may not be exactly to your liking. That is another matter. The
second test determines whether an individual feels compromised by the gift
they have received. Now it might be that the threshold of concern, of
compromise, can vary somewhat between individuals. A case of whisky is
of absolutely no interest to me because I don’t like whisky. I don’t like gin
either, so that’s no good. That would have no effect at all in bribing me,
but it might be very effective for somebody else. So this test will determine
whether in fact an individual has been put under an obligation by the gift.
The company newspaper test relies simply on the point that, if the thought
that all your friends know you have received this gift doesn’t worry you at
all, then its receipt is acceptable.
The point therefore is that rules or codes will not settle what is to be
done in cases like these. What may help are some simple tests to help
determine how the relevant rule is to be interpreted in each particular case.
The reasoning behind the tests suggested here, as a way of resolving this
third problem of decision-making, really depends on the very simple idea
that on the whole openness and ethical behaviour go together. Certainly

the reverse is true, that actions are unethical if they will not stand the light
of day. Thus open decisions, openly arrived at, may not necessarily be
ethical, but they are at least open to debate, and the responsibility for them
is clear.
Now the fourth dilemma concerns how far businesses have a responsi-
bility for jobs, for the number of people they employ? This dilemma arises,
for example, if a company has a branch factory running at a loss.
Assuming that every effort has been made to stem the loss, the decision
facing the company is to close the branch unit. Whose interests are going
to be affected by a decision to close, and in what way? What weight
should be given to each of those interests in coming to a conclusion, both
as to the closure itself and the manner of it?
If the company has shareholders, then they will expect the business to
be run efficiently and profitably. They expect a return on their investment
and so their interest is in seeing the profit leak plugged as soon as possible.
The people most directly and most disadvantageously affected will be
the employees who are going to lose their jobs, those who are working in
that particular branch. Their interests must carry a high weighting in
coming to any decision. However, when you consider other employees
working elsewhere in the company, their interest is in stopping the loss.
Their security of employment will be greater if the company’s financial
position is strengthened through the closure. The employee interest does
not end there – what about future employees? Clearly, it is in the interests
of future employees that the company should succeed, survive and be able
to take on more workpeople at a later date.
When it comes to suppliers, they are likely to be disadvantaged by
closure. Equally, the local community will be adversely affected by the job
losses themselves and the reduction in local purchasing power. The inter-
ests of the wider community lie in the opposite direction. A loss-making
business is a drain on society and so society in its broadest sense gains
from the improvement in profitability consequent on closure. In addition,
a closed factory unit is likely to attract some other kind of business taking
advantage of a forced sale and so the loss of jobs may only be partial and
temporary.
Weighing up whose interests will be affected, if it is decided to close a
branch factory, is a necessary part of the decision-making process.
Businesses cannot be responsible for creating employment. Their task is to
serve their customers efficiently and profitably; jobs are a consequence of
businesses carrying out that task. What destroys jobs certainly and perma-
nently is the failure to be competitive. Analysing who is affected by a
decision to close is a pointer to the ethical dimension in the closure deci-
sion, which lies in the way in which it is carried out.
Here, the interests of those who will lose their jobs is what matters and
their interests are best served by giving as long a period of notice as is

commercially feasible, providing training and counselling to assist those
displaced to find alternative work, and helping to find a new occupier for
the vacated premises. Corporate social responsibility is expressed in the
manner in which the closure is managed, not in failing to face up to the
decision itself if it becomes inevitable. I emphasize this because my concern
is that pressures which are put on companies by well-meaning people in
the name of ethics may have the effect of influencing us as managers
simply to put off making disagreeable decisions.
Decisions can be more or less ethical in themselves and in the way they
are executed, but our job as managers is to take them as best we can.
Shelving difficult decisions is probably the least ethical course of all. Yet,
somehow in this country, that is the direction which pressure groups take.
I have seen companies which simply failed to grapple with their problems.
They slid inexorably downwards and when they failed, the verdict often
was that they were victims of bad luck and that they had done their best in
the face of difficulties. But when a company actually tackles its problems,
grasps the nettle and closes a plant, the bishops and community represen-
tatives descend and those in charge are in deep trouble. As managers, we
are there to face trouble and to resist the temptation to postpone disagree-
able decisions in the hope that something may turn up. It is not in society’s
interests that tough decisions should be evaded because of public clamour.
The final point I want to touch on is this. Does a company’s ethical
approach matter if all that shareholders are thought to care about is
profit? First, thinking shareholders care about the company’s reputation,
because profit in the future may well be linked to reputation. Reputation is
a valuable asset which takes time to build up and needs to be jealously
guarded. More fundamentally, business ethics matters to society because
distrust is a real barrier to the flow of information and of trade.
Confidence is important as a basis for business, and so society as a whole
is impoverished if business standards slide. If that slide results in increased
regulation, then that is a costly and often inefficient alternative.
The ethical standards of companies matter to them on three grounds.
First, if unethical practices are condoned or ignored within a company, no
one then knows where the line between acceptable and unacceptable
conduct is to be drawn and there will almost inevitably be a downward
slide in standards, which is cumulative and may lead to disaster – as we
have seen in one or two cases in the financial world.
The second reason is that I do not believe that businesses will be able to
recruit first-class competent people of ability and integrity unless their
standards of conduct are seen as being acceptable to those people and as
high as those set by competing careers. Unless the standards within busi-
ness are perceived to be the equal of standards elsewhere in society,
businesses will not get recruits of the quality they need. That will not only
be bad for business, it will be bad for society.
There is a final reason, which was highlighted by the Barings disaster.
The danger is that the failure of Barings will be seen as a failure of
controls. The answer to fraudulent or reckless trading will be thought to
lie in a tightening of controls. What went wrong was that the financial
controls were not tight enough, it will be said, so screw down the controls.
Some tightening of controls was clearly necessary in that case, and if there
is not a proper system of control in a business, or if people do not under-
stand the control system, then the business has to be at risk.
But we must recognise the limitations of the control approach. The
speed of information technology and the complexity of international trans-
actions require controls, but they have a supporting not a primary role.
You cannot keep pace with the gyrations of international currency markets
through control systems. The standards of honesty, integrity and prudence
of the people who are put in charge of dealings like those on the foreign
exchanges must be the primary safeguard. The Barings’ failure was more a
failure in selection, training and mentoring than anything else. Companies
need to recruit and train people in whom they have confidence and whom
they can trust. It is confidence and trust that are real safeguards against
fraud and disaster, and they can only be fostered and instilled on a sound
ethical base.
Notes
1 I also referred to this in ‘Ethical managers make their own rules’, Sir Adrian
Cadbury, Harvard Business Review, 1987, p. 69.
2 This was distributed as an inter-faith declaration entitled ‘A Code of Ethics on
International Business for Christians, Muslims and Jews’ in the mid-1990s.
3 Private communication from TI to the author.
4 Report of the Committee on the Financial Aspects of Corporate Governance,
London, 1992.
5 Ibid., section 4.29.
6 Ibid., section 3.2.
7 Laurie Dennet, Slaughter and May, A Century in the City, Cambridge: Granta
Editions, 1989, pp. 98ff.
8 Tom Clarke, private circular distributed at original lecture.
9 Reported in John Brooks, The Fate of Edsel and Other Adventures, London:
Victor Gollancz, 1964, pp. 146–8.
Chapter 2
Two Aristotelian approaches

to business ethics
Chris Megone
In a volume concerned with teaching using cases, James Allen writes
Humanistic education has to do not simply with states of mind or

feeling, or scientific truth, or bodies of knowledge. It has to do with
action. For by virtue of its subject matter, which is human experience
… it implicitly addresses the questions that underlie action: ‘How
should one act?’ ‘How should one live?1
As he goes on to observe, this raises the question whether right action can
be taught. As if in response to this, a slightly earlier Hastings Centre report
on the Teaching of Ethics in higher education includes the following claim:
One goal frequently proposed for courses in ethics is missing from our
list: that of changing student behaviour … We have concluded that
this is not an appropriate goal for a course in ethics.2
Whilst it would not be surprising to find writers on theoretical ethics in the

latter half of the twentieth century disowning any goal of changing student
behaviour, it is striking that a centre concerned with applied ethics should
have taken such a view. For undoubtedly many of those who come to
study applied ethics are practising professionals in various fields who are
concerned about how to behave, not merely about a theoretical under-
standing of the ethical problems they face. In any case, in the history of
philosophy the ancient philosophers, Socrates, Plato, and Aristotle, would
have been surprised at the idea that the study of ethics was not concerned
with behaviour. Thus Socrates states in the Republic that the purpose of
his inquiry is to determine how one should live,3 and Aristotle asserts at
the outset of his Nicomachean Ethics that the aim of an inquiry into ethics
is not knowledge but action.4
In the light of this debate between some moderns and the ancients, the
aim of the present chapter is to present two approaches to business ethics
which address, in different ways, the issue of the practical nature of
24 Chris Megone
applied ethics. They also provide a theoretical framework for reflecting on

the use of case histories or case studies in working on business ethics. Both
theories can be contrasted with Cadbury’s views presented in the first
chapter, and also considered in relation to the comments of Borrie and
Edmonds on specific areas of business practice.
Both of these approaches can be seen as, to a greater or lesser degree,
Aristotelian. One adopts certain Aristotelian ideas in its methodology,
whilst the other is an explicitly Aristotelian account of virtue theory and
its application to business ethics. They can be seen to address the question
of the relation between ethical reflection and changes in behaviour in
distinct ways. If the question of changing someone’s behaviour is raised,
one might at first think of two ways of achieving this. On the one hand, an
agent’s behaviour will be affected by his decisions, so one way to change it
will be by changing those decisions. An ethical theory can bear on this by
presenting a decision procedure, a method for working out the right thing
to do. Utilitarianism might be thought of as, in part, offering something of
this sort, and Sternberg’s approach, the first that will be presented here,
also offers a distinctive (but not Utilitarian) decision procedure. On the
other hand, behaviour may also depend on motivation, and Aristotelian
virtue theory addresses the way in which motivation may be acquired, or
change, and thus alter behaviour, as well as the matter of practical judge-
ment. Such a virtue theory may also be of further interest in suggesting
that these two factors affecting behaviour, desire and judgement are not as
sharply distinct as we might first think.
Sternberg’s approach to business ethics

Sternberg’s approach to business ethics, one of the most prominent and
theoretically rich in the field, provides a clear and carefully defended deci-
sion procedure for reaching ethical judgements in business practice. What
follows is a summary account of central aspects of her position, presented
here so far as is possible in her own words.5 In this presentation Sternberg
both outlines her theory and explains how it applies to a particular
problem, the controversial issue of executive pay. She also argues against a
competing approach to business ethics.
As a preamble to putting forward her substantive position, Sternberg
first disposes of ‘the belief that there is no such thing as business ethics,
that business ethics is either theoretically meaningless or impossible in
practice’. She concedes that
sometimes, of course, that criticism is wholly justified. [Thus if] ‘busi-

ness ethics’ is taken to denote a separate business ethic, a set of ethical
rules that apply exclusively in business and nowhere else, then there is
indeed no such thing. Equally, most of the sanctimonious criticisms of
Two Aristotelian approaches to business ethics 25
business that pass as business ethics fully deserve to be dismissed. But

that is because much of what masquerades as business ethics is
nothing of the sort, having little to do with either business or with
ethics.
By contrast, she argues, when properly understood,
‘business ethics’ is not an oxymoron. The notion that ‘business ethics’

is a contradiction in terms is, however, often espoused, both by those
who are hostile to business, and those who would defend it. Critics of
business typically point to examples of bad business behaviour; they
imagine that since some business people are unethical, ethical conduct
and business are incompatible. But that conclusion is unjustified. Just
as the moral failings of individual sportsmen do not prove that sport is
immoral, nor can the misdeeds of particular businesses or business
people prove that business is necessarily unethical.
The other common basis for doubting the possibility of business
ethics is equally flawed. It is the belief that being ethical in business
means pursuing some social welfare or environmental or religious end
in place of owner value. According to this widely held view, the way
for a business to be moral is to devote its resources to fulfilling ‘social
responsibilities’ rather than to pursuing profits. Since, however, the
essence of business is maximising owner value by selling goods or
services, this view of business ethics is literally absurd: it makes
refraining from business the condition of being ethical in business.
This view is indeed oxymoronic, and cannot be right.
Sternberg is in a position to address this latter point more fully once she
has presented her substantive view of a proper understanding of business
ethics.
Central to this view is her claim that, ‘properly understood, business
ethics is about what business must do to be ethical. It is therefore impor-
tant to be clear about exactly what business is.’ It is this point that marks a
central Aristotelian aspect of her position. Sternberg describes her
approach as teleological, and in this connection she takes from Aristotle’s
work two main thoughts. First of all there is the idea that a definition of a
human activity should be given in terms of its purpose. As she says ‘One of
the most distinctive features of this approach is that it identifies and
explains human activities by reference to their ends/aims/goals/objectives/
purposes.’6 The reason this is important depends on a second Aristotelian
idea, namely, that we can assess the goodness of behaviour by reference to
the defining purpose of that activity. As she says, ‘Purposes are essential
for evaluating goodness. Because of their very different purposes, the
criteria of a good pillow are necessarily different from the criteria of a
26 Chris Megone
good knife.’ Applying this to activities ‘If the purpose of writing is to

inform, then what counts as good writing will be different than if the
purpose is to confuse or amuse.’ Thus ‘It is a central theme [of this
approach] that what constitutes ethical conduct in business depends criti-
cally on business’s definitive purpose.’7
Against this Aristotelian background, she now states her view of the
purpose of business.
The specific objective which is unique to business, and which distin-

guishes business from everything else, is maximizing owner value over
the long term by selling goods or services. Actual commercial enter-
prises, of course, often do much else: they collect taxes and support
charities and constitute social environments. But it is only in virtue of
maximizing long-term owner value that they can be recognized as
businesses. It is the objective of maximizing long-term owner value
that differentiates a business from a village fête or a family, a govern-
ment or a game, a hobby or a club.
The principles of business ethics are those which must be respected
for the purpose of business – maximizing long-term owner value – to
be possible. Since long-term views require confidence in a future, and
confidence requires trust, the conditions of trust must be observed.
Equally, owner value presupposes ownership and therefore respect for
property rights. In order not to be ultimately self-defeating, business
must therefore be conducted with honesty, fairness, the absence of
physical violence and coercion, and a presumption in favour of
legality. Collectively, these constraints embody what may be called
‘ordinary decency’.
Furthermore, since business is more likely to achieve its definitive
purpose when it encourages contributions to that purpose, and not to
some other, classical ‘distributive justice’ is also essential.8 Just as
‘ordinary decency’ is distinct from vague notions of ‘niceness’, this
concept of justice has nothing to do with modern attempts to redis-
tribute income on political grounds. What distributive justice requires
is simply that within an organization, contributions to the organiza-
tional objective be the basis for distributing organizational rewards.
Though the term ‘distributive justice’ may be unfamiliar, the under-
lying concept is widely recognized. It is implicit in the commonly
accepted view that productive workers deserve more than shirkers;
when properly structured, both performance-related pay and promo-
tion on merit are expressions of distributive justice.
The key to business ethics is very simple: business is ethical when it
maximizes long-term owner value subject to distributive justice and
ordinary decency. If an organization is not directed at maximizing
long-term owner value, it is not a business; if it does not pursue that
definitive business purpose with distributive justice and ordinary

decency, it is not ethical.
Having laid out the essence of her position, Sternberg is now able to claim
that
Understanding business and business ethics in this way helps to over-

come one of the fundamental obstacles to business ethics: the mistaken
notion that business ethics is necessarily inimical to business. It does
so in three ways. First, when business ethics is properly understood, it
becomes clear that it has nothing to do with unproductive ‘do-
gooding’. Quite the contrary: business ethics positively requires that
owner value be maximized, subject only to respecting distributive
justice and ordinary decency. Those values, in turn, are not incompat-
ible with business operations, but are necessary for business’s existence
as an activity. Finally, what business has to maximize is not current
period accounting profits but long-term owner value. Unlike short-
term profits, owner value necessarily reflects the indirect, distant, and
qualitative effects of a business’s actions. When, therefore, business is
understood as maximizing long-term owner value, it becomes entirely
plausible that business performance should be enhanced by ethical
conduct.
Having noted this connection between ethical conduct and good business,
she adds a caveat.
While it is generally true that ‘good ethics is good business’, it is

important to highlight the limitations of that slogan. It does not mean
that ethical conduct is the same thing as business success, or that the
one guarantees the other. If a lucrative but illegal contract has to be
refused, or honesty costs the business an important deal, acting ethi-
cally can lead to business losses; doing the right thing can sometimes
cost dear. Business success does not follow automatically from acting
ethically. Conversely, business success is no guarantee of ethical
conduct. At least in the short run, spectacular rewards can sometimes
result from doing the wrong thing, in business as elsewhere. But while
it may be disturbing to see the wicked prosper, their doing so does not
undermine the moral basis of business ethics; that relies neither on the
ability of ethical conduct to generate business success, nor on a cost-
benefit analysis. ‘Good ethics is good business’ is an observation about
business ethics, not a moral justification of it.
Sternberg then addresses a second obstacle preventing business ethics being

taken seriously:
28 Chris Megone
[This] is the notion that business ethics is an optional extra, a bit of

fashionable trimming irrelevant to most businesses. But this is a
mistake: business ethics cannot be safely ignored by any business.
Business ethics is vital not because it is trendy – though business can ill
afford to ignore anything, however silly, which seriously influences the
markets in which it operates. Rather, business ethics is necessary
because ethical choices are unavoidable.
Ethical questions do not just arise when an organization faces catas-
trophic disasters or when it contemplates philanthropy. Rather, ethical
issues permeate businesses’ everyday, ordinary, routine activities.
Hiring and firing, choosing suppliers, setting prices; establishing objec-
tives, allocating resources, determining dividends … ethical
judgements are fundamental to them all. The choice facing business is
not whether, but how, to address ethical issues. The challenge is simply
to make the ethical component of business decision-making explicit so
as to make it better.
Having noted the prevalence of ethical issues in business activity, Sternberg

highlights the importance of improving ethical decision-making:
Failure to recognize and properly address ethical problems can lead to

very substantial charges, both legal and financial; being unethical can
cost a business its very life. Many of the most dramatic business fail-
ures and the most significant business losses of the last decade were
the result of unethical conduct: consider the fates of Barings and
BCCI, Polly Peck and the Robert Maxwell group. Normally, ‘bad
ethics is bad business’: the short-term gains which may be won by
unethical conduct seldom pay in the end.
And that is because a business that ignores the demands of business
ethics, or gets them wrong, is unlikely to maximize long-term owner
value. In a free market, the most productive staff, the finest suppliers
and the cheapest and most flexible sources of finance can do better
than to stay with a business that cheats or treats them unfairly.
Equally, discerning customers are unlikely to be loyal to a business
that offers dangerous or unreliable products or grudging, unhelpful
service. In the long run, unethical business is less likely to succeed.
Even in the short run, businesses whose conduct is unethical, or
who do not understand the requirements of business ethics, can
operate at a distinct disadvantage. Many standard business problems
have unsuspected ethical elements, which businesses without a proper
moral framework typically fail to recognize. High fault levels, high
‘shrinkage’, high turnover of staff and suppliers, employee illness,
anxiety and absenteeism, low productivity and low repeat business are
among the many business difficulties that typically result from uneth-
ical business conduct; unsatisfactory behaviour by stakeholders often

results from unethical treatment of them. When the underlying ethical
questions are ignored, it is usually not the problems, but the business
that goes away.
She then goes on to argue that if the ethical component of business decision-
making is not correctly addressed, which occurs when the principles of
business ethics are not properly understood or are ignored, then
even attempts to be ethical can be bad for the business. Business is

constantly entreated to support all sorts of charitable causes, and to
foster social welfare in all its many guises. But though such demands
are frequently made in the name of business ethics, they parade under
false pretences. If a business’s attempts to do good are not to be self-
defeating, a proper understanding of business ethics is essential.
That is because when business ethics is properly understood, it
becomes clear that it has nothing to do with fulfilling ‘social responsi-
bilities’. Business is ethical, not hypocritical, if it only pursues ‘social
responsibilities’ when they maximize long-term owner value. This does
not mean that a business cannot or should not behave in socially
responsible or environmentally friendly ways. It may well be that
selling ‘green’ products will help attract ‘green’ consumers and
investors and lenders, and that saving energy will save money. And to
the extent that such actions do help maximize long-term owner value,
they are wholly compatible with business. If, however, a ‘socially
responsible’ act does not contribute to the business objective, then it is
wrong – ethically as well as financially – for a business to perform it.
It may well be protested that this is a strange conclusion; it may
indeed seem like the very antithesis of an ethical position. But that is
so only when business ethics is interpreted oxymoronically, when
being ethical in business is deemed to require sacrificing business to
other ends. There are, however, several reasons why it is wrong for
business to pursue ‘social responsibilities’ independent of their effect
on owner value.
The main reason is that using business resources for non-business
purposes is a kind of theft: it is an unjustified appropriation of the
owners’ property. Despite what might be called the ‘Robin Hood
Syndrome’, taking assets from business owners to give to others is
simply stealing. That the diverted resources are applied to ends which
are commonly regarded as laudable, or as ‘social responsibilities’, does
not make the act of diverting them any less larcenous. However
worthy the charity being helped, if employees use company time and
telephones to solicit contributions rather than to do business, they are
cheating the business’s owners. So are business managers when they
30 Chris Megone
use business funds for ‘socially responsible’ but unauthorized non-

business purposes.
They are also guilty of an offence akin to prostitution. Just as pros-
titution occurs when sex is proffered for money rather than love, so it
exists when business pursues love – or ‘social responsibility’ – rather
than money. Business managers who eschew maximizing long-term
owner value, and direct their firms to any other goal, are as much
prostitutes as artists or sportsmen who sell out for financial gain. In
each case, the activity is perverted, and the ‘right, true end’ is
neglected in favour of some other, extraneous objective.
But there is another, equally serious objection to the ‘social respon-
sibility’ approach to business ethics. Not only does it divert resources
from business achievement, but it diverts attention from the need to
conduct business ethically. If business ethics is gauged by business
support for worthy ‘causes’, then the focus shifts away from the way
that business behaves in its own everyday, ordinary activities. The
‘social responsibility’ doctrine puts saving the whale ahead of treating
employees fairly or customers honestly. But making charitable dona-
tions, however large, is no substitute for ensuring that all the
business’s stakeholders are treated with distributive justice and ordi-
nary decency: everywhere, every time, by everyone in the business.
At this point Sternberg turns to a response to her argument which rests on

an appeal to ‘stakeholder theory’.
It may now be protested that much of this criticism of the ‘social

responsibility’ doctrine is misguided. Once upon a time it might have
been assumed that the purpose of business was maximising long-term
owner value, but that is true no longer. Now, corporations are
normally expected to be pursuing a myriad of objectives, social and
psychological, political and economic; doing so can therefore hardly
be considered a misappropriation of investors’ funds. And this is
partly true. Corporate purposes are properly determined by the corpo-
rate shareholders, and need not include business at all. To the extent
that the corporations’ owners have authorized their agents to pursue
ends other than maximizing long-term owner value, those agents are
wholly entitled to do so. But shareholders are seldom consulted.
Instead, ‘stakeholder theory’ has just become the new orthodoxy.9
The stakeholder view maintains that business should be run not for
the financial gain of its owners, but for the benefit of all who have a
stake in the operations of business: for its employees and customers,
its suppliers and its lenders, the community and the government.
Stakeholder theory typically holds that business is accountable to all
its stakeholders, and that the role of management is to balance their

competing interests.
However Sternberg now provides reasons to reject this alternative theory.
There are many things to be said against this view, but the first is that
whatever else it may be, it cannot be an explanation of business. To
understand why, consider an enthusiastic environmentalist who, crit-
ical of the pollution and waste caused by the motorcar, endeavours to
remove from his own vehicle those properties that he finds most offen-
sive. Being a handy sort of chap, he reduces the cumbersome passenger
compartment to an open air slimline seat; he replaces the noisy engine
with a silent chain drive; he eschews expensive, polluting petrol in
favour of sustainable human energy. His contrivance is elegant and
efficient, and better than a motorcar for many purposes. But whatever
its merits, the one thing the new vehicle emphatically is not, is an
improved motorcar: it is not a motorcar at all. By stripping away the
essential features of a motorcar, the enthusiast has transformed what
was once a car into something else altogether; he has, in fact, re-
invented the bicycle.
In like fashion, an organization whose objective is anything but
maximising long-term owner value is not – cannot be – a business,
because it lacks the definitive feature of a business. What qualifies an
organization to be a business is just the objective of maximizing long-
term owner value; however valuable organizations seeking other ends
may be, they are not businesses but something else.
It may be objected that this is playing with words. But it is not.
What matters is not what the activity of maximizing long-term owner
value is called, but what it is. If people prefer to reserve the word
‘business’ for mixed-purpose commercial organizations and their
composite doings, so be it; maximizing long-term owner value will just
have to be given a different name. Whatever it is called, however, the
activity of maximizing long-term owner value is a vital part of modern
life, which needs both to be understood and to be conducted ethically.
And it is that indispensable activity which is the subject here.
So whatever stakeholder theorists are offering, it is not an improved
form of business. But perhaps it is something different and better, a
superior form of corporate governance, for instance. Unfortunately, it
is not that either: what stakeholder theory recommends does not even
make sense. However widely accepted it is, and however useful the
term ‘stakeholder’ may be as a collective name for those whom the
business needs to take into account in its deliberations, the stakeholder
approach is fatally, fundamentally, flawed.
32 Chris Megone
First, it is based on a mistake. Starting from the fact that business is

affected by and affects certain groups, stakeholder theory concludes
that business should be accountable to them. But this cannot be right.
Business is affected by gravity and by terrorists, and it affects the
Gross National Product, but it is not, and logically could not be,
accountable to them. That business must take many factors into
account, does not give them any right to hold it to account. Nor does
the fact that various groups are affected by business give them any
right to control it. In asserting otherwise, the stakeholder approach
undermines both the property rights that owners have in their assets,
and the duty that agents (business employees) owe to principals (the
business owners). As the property of its owners, a business is properly
accountable only to them.
A second fundamental defect of the stakeholder approach is that it
destroys accountability. This is a particularly ironic failing in a theory
intended to promote ethical conduct. But by replacing direct answer-
ability to owners with a notional trusteeship on behalf of competing
stakeholders, the stakeholder approach makes accountability so
diffuse as to be effectively non-existent.
Accountability to multiple masters can function only if everyone
involved accepts a common purpose which can be used for ordering
priorities. But the stakeholder approach to business conspicuously
lacks such a criterion. By substituting a vague notion of ‘balancing
interests’ for a measurable standard of financial performance, stake-
holder theory provides no basis for ranking or reconciling the
normally conflicting interests of stakeholders. Are their interests all
strictly equal? Are some more important than others? If so, which are
they? And when, and by how much, and why? Since stakeholder
theory offers no substantive business purpose, it provides no guidance
at all as to how such conflicts are to be resolved or how decisions are
to be made.
And consequently, it also provides no effective standard against
which businesses or business managers can be judged. When maxi-
mizing owner value is abandoned in favour of balancing ill-defined
stakeholder interests, business managers are left free to pursue their
own arbitrary ends. Stakeholder theory encourages arrogant and unre-
sponsive managements, and fosters extravagance re salaries, perks and
premises. Stakeholder theory permits resistance to takeover bids that
would benefit shareholders, and promotes the pursuit of empire-
building takeover bids that make little financial sense. Stakeholder
theory indulges exploitation by lenders, and inferior performance by
employees and by suppliers. So it is highly unlikely that the stake-
holder approach would improve moral conduct.
Why then is it so popular? Because it appeals to those who believe

that it is possible to get something from nothing. Specifically it appeals
to those who would like to enjoy the benefits of business without the
discipline of business. Many of the most prominent advocates of
stakeholder theory have indeed been those with most to gain from
avoiding accountability: business managers10 who would like to have
the power and prestige and perks of office without the responsibility.
Stakeholder theory also appeals to the promoters of worthy ‘causes’
who believe they would be the beneficiaries if business profits were
diverted from business owners.
But they are wrong: nothing comes from nothing. The wealth that
they want from business will not be available if the essential business
objective of maximising long-term owner value is forsaken. In the
spurious expectation of achieving business behaviour that would in
some vague way be ‘nicer’, the stakeholder view sacrifices not only
property rights, and accountability, but also the wealth-creating capa-
bilities of business strictly understood.
Having addressed ‘stakeholder theory’, Sternberg now returns to the

ethical decision model she is proposing. She notes how her model is
supposed to aid employees who already have their own character and
moral outlook.
The relation between an ethical decision model and individuals’ moral

judgements is rather like that between a map and a sense of direction.
However good one’s sense of direction may be, simply knowing where
north is cannot indicate where the terrain will be rocky or where the
bridges are or what the best route is in unfamiliar territory. But
equally, without a sense of direction, the information provided by a
map will be of less use. Just as a map adds to rather than detracts
from the value of a sense of direction, so an ethical decision model
builds upon individual moral commitment. The purpose of a business
ethical decision model is to provide information about what consti-
tutes acceptable conduct in business; it clarifies the right way to
handle ethical issues when they arise in the context of business activi-
ties.
In a similar way, she argues, the ethical decision model is a valuable tool
for management.
A business ethical decision model can help employees do the right

thing when acting in their business capacities. In helping business to
make informed decisions, business ethics is rather like risk manage-
ment, or management accounting. Of course, businesses can and do
34 Chris Megone
operate without such tools. Small businesses often dispense with

formal accounting systems altogether, and even large firms can
survive in favourable circumstances ignorant of exactly where their
costs arise, or which of their activities are profitable. But a business
without management accounts suffers from a serious handicap: it
lacks a fundamental management tool, as basic to directing business
as a compass or a map is to navigation. Operating without such aids
may be more adventurous, but is unlikely to be as effective: it is
easier to hit a target whose location and identity are known. Like
management accounting, business ethics provides greater awareness
of what is important in business activities, and can therefore improve
business performance. Properly understood, business ethics is not an
extraneous anti-business option, but a rigorous, analytical business
tool.
And that is because the ethical decision model identifies which pro-
blems businessmen actually need to address in their business capacities,
and offers a way to resolve them. The Model indicates what information
is relevant to ethical decision-making; it organizes that information so
that it will be more productive in leading to a decision; and it specifies
the ethical principles to be employed in deciding what is right. The
Model introduces conceptual clarity and structure to matters which
are too often clouded by emotion and moral fervour. It thereby
provides a way of managing and resolving ethical problems in
business.
A model cannot, of course, eliminate ethical problems or the
complexity of real situations. A decision-making framework can,
however, promote consistency of decisions over time and place and
individual decision-maker, and can encourage learning from experi-
ence. Furthermore, it can help to overcome ‘moral muteness’. Having
little practice in dealing with specifically moral matters in business,
and lacking an accepted vocabulary for doing so, many business
people feel uncomfortable with ethical issues, and are reluctant to take
a stand. By providing the necessary concepts, and legitimizing the
discussion of relevant moral issues, an agreed ethical framework can
eliminate the time-consuming and destructive need for second-guessing
management.
But what does the Ethical Decision Model look like? Sternberg now argues
that the model she proposes, which is built on her analysis of the nature of
business, consists of five straightforward steps. She illustrates these steps
by applying the model to the issue of executive pay.
The critically important first step in tackling all issues of business

ethics is clarifying exactly what is at issue. In the forms in which they
are commonly posed – by the media, by demanding interest groups, by

disgruntled stakeholders – ethical questions often seem perplexing,
either trivial or intractable. But one reason why the answers frequently
seem so elusive is because, in many cases, the questions themselves are
fatally flawed. Like ‘When did you stop beating your wife?’, many
questions of business ethics need to be unpacked before they can be
sensibly answered.
Consider the media favourite, ‘What should top executives be
paid?’. As stated, the question potentially raises any number of issues
– of psychology and public policy as much as of morality. The popular
dispute may, indeed, not even be about pay at all, but about political
ambition or economic redistribution or psychological motivation.
Such questions are interesting and important, but they are not ques-
tions of business ethics. Failure to recognize the specific matter at issue
is a major source of confusion in resolving ethical questions, both in
business and elsewhere.
Broad rhetorical questions must therefore be analysed to determine
exactly what is being asked. A useful start can sometimes be made by
considering what the solutions are assumed to be. If, for example, as is
often the case with respect to executive pay, the alternatives are
different forms of regulation, then the issues are ones of ethics and
public policy, not of business ethics. In contrast, the questions that
actual businesses need to resolve are normally very limited and specific
ones, which must be considered with a view to practical action.
Though obscured in the general form, the questions ‘Should Smith be
paid more than Jones?’ and ‘Does Bloggs deserve a rise?’ are not only
more directly relevant to real businesses and much easier to answer,
but may well not give rise to any particular ethical perplexity.
The first step, then, in addressing any question of business ethics, is
simply to identify what is actually being asked. And that may be made
clearer by determining: Who is asking? What has prompted the issue?
What precisely is at stake? Who will be affected by the outcome?
What sort of decision or action might be called for? Why are there
differing views? Over what period – short, medium or long term – is
the decision to apply? Who is responsible for taking, implementing,
reviewing the decision? How long is available for making it? What
objective is being sought?
Having analysed the question, the second step is to determine
whether it actually is a problem for this business; if it isn’t, then there
is no business ethics issue for this business to resolve. The inquiry has
three parts: Is the issue relevant to business? Is it relevant to this busi-
ness? And is it a problem for this business?
The first question is the most basic: does the issue relate to maxi-
mizing long-term owner value? Unless it does, there is no business
36 Chris Megone
concern at issue, and nothing to be evaluated in terms of distributive

justice and ordinary decency. When, for example, questions arise as to
how or in what way business should pursue such goals as social
welfare, environmental activism or personal development – or indeed
any objective other than maximizing long-term owner value – the way
to handle them is clear. The proper response is not to agonize over the
proposals’ individual ethical merits, but simply to point out that such
activities are not legitimate for business as business. They can only be
justified for business to the extent that they contribute to maximizing
long-term owner value.
If an issue is relevant to business, however, the question still arises
as to whether it actually is an issue for any particular firm. A sole
trader without any employees does not have to agonize over the
comparative merits of complicated remuneration schemes. Even if a
concern is relevant to a particular firm, it remains to be determined
whether it represents a problem. The matter may, for example, be
easily soluble through the application of ordinary business criteria: if
the business is making losses, it may be that no one gets a rise. Or the
ethical issue may not be problematical simply because it is subject to
legal or regulatory constraints. When there is a statutory wage ceiling,
a law-abiding firm is bound by its limits.
Once the question has been established, the next (third) step is to
identify the constraints which may limit solutions. Business decisions
are constrained not only by law and regulation, but also by contrac-
tual, cultural, economic, physical and technical considerations. Even
though the principles of ethical conduct are constant over time and
place and industry, what businesses actually can do is crucially
affected by their individual circumstances.
Contractual commitments represent a fundamental constraint on
business conduct because contracts, like laws, should never be broken
lightly. Indeed, so critically important is trust to business, that business
should normally respect legitimate expectations whether they are
based on formal contracts or promises or less stringent forms of
unwritten understanding. If, therefore, a business has contractually
committed to award its senior executives discounted share options, it
cannot unilaterally shift to a more politically acceptable scheme until
the contracts expire.
The [fourth] step is to see how alternative solutions measure up
against the three key conditions of maximizing long-term owner value
and respecting distributive justice and ordinary decency.
Assessing a proposal’s potential effect on long-term owner value is a
straightforward business calculation. All the potential costs and conse-
quences, including those which are distant and delayed and indirect,
must be weighed against all the potential benefits. The judgements of
distributive justice and ordinary decency which a business must make

are, in comparison, reasonably simple; unlike assessments of owner
value, they are not normally ones of degree or extent.11 Alternatives
either do, or do not, satisfy the conditions; those which do not are not
ethical for the business.
Executive remuneration will satisfy ordinary decency if it has been
determined fairly, represented honestly, involved no physical violence
or coercion, and complied with the law. And it will satisfy distributive
justice, if the remuneration is proportional to the executive’s contribu-
tion to maximizing long-term owner value. If those two conditions are
met, then the remuneration is ethical, no matter how large the abso-
lute amount may be. This is a point which both critics and defenders
of high pay have failed to grasp. High pay is not unethical because it
excites envy or satisfies greed; the ‘going rate’ and differentials, mate-
riality and executive motivation are equally irrelevant to the moral
status of business rewards.
It is important to remember that business remuneration is not a
gauge of human dignity, or a reward for moral character. It is simply a
payment for services rendered. What determines what those services
are worth to a business, and accordingly how much it should pay for
them, is the contribution that the services make to owner value. That
in turn depends on both the quality of the employee’s actual perfor-
mance and the firm’s specific circumstances. For a shirker, £5000 a
year can be too much pay; £5 million can be too little for an innovator
who has added many times that amount to owner value.
Differentials, as they are traditionally understood in Britain, are
irrelevant. If widening differentials in pay reflect widening differentials
in the contributions made to owner value, they are justified ethically
as well as economically. High pay rises can even be perfectly compat-
ible with redundancies. When traditional functions are no longer
useful, and managing change requires increasingly sophisticated
management skills, it will be right to pay top executives more while
shedding unnecessary staff.
Another widespread error concerning executive pay, is that it is
immoral because it rewards executive greed. But employees’ motives
affect the ethics of remuneration only insofar as they affect owner
value. Whether executives are motivated by greed, or indeed by things
other than money – by intrinsic interest in the job or, more commonly
and more dangerously, by lust for power – their motivation has no
bearing on what constitutes just remuneration.
References to the ‘going rate’ are equally irrelevant. The ‘going rate’
is simply the market price of a category of worker. Whether or not it
should be paid requires comparing that price with the contributions to
owner value expected from the worker. Unless the contributions
38 Chris Megone
exceed the cost, paying it will not be justified – ethically or finan-

cially.
Sadly, the essential importance of distributive justice and ordinary
decency has also been missed by the defenders of high pay. Executive
remuneration cannot be justified by the fact that it represents only a
small part of total expenditure. Although when compared to turnover,
pay is often immaterial, this does not mean that it is necessarily
merited. And if profits are the basis for judging materiality, then any
positive remuneration will be ruled out when the business is losing
money. What makes remuneration just is not how it compares to sales
or current period accounting profits, or how much it leaves over to
pay other workers: what matters is whether it properly reflects the
employee’s contribution to owner value.
And on that basis, sadly, much executive pay is indefensible. The
executive whose compensation increases while the value of the
company he manages declines, is indeed being rewarded unfairly. Some
of the discrepancies arise from time-lagged compensation, and the
exercise of (irrevocable, unconditional, one way and often subse-
quently adjusted) options awarded in palmier times. All too often,
however, the measures used even for performance-related pay are
simply too ‘loser friendly’. But that is a matter for business owners to
correct.
This leads Sternberg to the fifth and concluding step in her model: identi-
fying the right course of action for the business.
Once the relevant question and constraints have been identified, and
alternative proposals have been assessed, the ethical answer should be
clear. The business should choose that alternative which is likely to
contribute most to long-term owner value, so long as it satisfies
distributive justice and ordinary decency. If either of those conditions
is not met, then even if the proposal appears to maximize long-term
owner value, it should not be adopted. But equally, satisfying distribu-
tive justice and ordinary decency is not enough. The morally right
course of action for the business must satisfy all three conditions: it is
that which aims at maximizing long-term owner value while
respecting distributive justice and ordinary decency.
Typically, the hardest part of ethical decision-making is not
applying the principles of distributive justice and ordinary decency, but
determining which action will actually maximize long-term owner
value. But however difficult it may be to project outcomes, estimating
long-term owner value cannot be avoided: it is the core not just of
ethical decision-making, but of business as such.
As has been indicated, Sternberg’s account is Aristotelian in specifying the

definition of business in terms of its purpose, and in then determining the
proper conduct of business by reference to that definitive purpose. As has
also been noted, on this sort of account the effect of studying business
ethics on behaviour will depend on the way in which attention to the deci-
sion model guides an agent’s decisions.
In the second half of this chapter an alternative Aristotelian approach to
business ethics will be presented, one which addresses the issue of the prac-
tical nature of applied ethics in a different way, and one which also
provides a distinct theoretical framework within which to consider the use
of case histories in applied ethics. This second approach is an Aristotelian
virtue theory. It differs from Sternberg’s analysis in giving virtues, rather
than a decision model, a central role in the theory. One result of this is that
the approach focuses on motivation, and its acquisition, as well as judge-
ment or decision-making. Both the account of the acquisition of virtue and
the discussion of practical judgement have implications for the role of case
histories in the study of business ethics. These will be explained in the final
chapter of this book. A second result of considering business ethics from
the perspective of virtue theory may be a slightly different view of the
purpose of business from that put forward by Sternberg, one in which the
goals of business are constrained by Aristotle’s conception of a worthwhile
life, namely, a life of virtue.
Aristotelian virtue theory and business ethics

There are many fuller treatments of Aristotelian ethics than that which
follows.12 Likewise what follows is far from a complete account of the
repercussions for business ethics of such a virtue theory. The primary aim
of the present outline is to state enough about the theory, as interpreted
here, to indicate both the thrust of its recommendations for ethical decision-
making in business and the basis it provides for reflection on the use of
case histories in the study of business ethics.
Once the account has been laid out, three main claims will be made
regarding its significance. First of all, it will be suggested that, on this sort
of approach, business ethics is simply a branch of virtue ethics as a whole,
but that nonetheless it is relevant to know the purpose of the activity of
business in order to clarify how some of the virtues apply in that area.
Second, it will be argued that this account of virtue ethics may itself have a
bearing on what the internal goal of business is. Third, it will be suggested
that this account provides a useful framework for consideration of the way
in which virtue is acquired. It is here that the account is relevant to the use
of case histories in business ethics.
40 Chris Megone
Two key questions

Aristotelian virtue theory focuses on two key questions. The first is: ‘What
kind of life should one live?’, or in Aristotle’s terms ‘What is the eudaimon
life, the happy life?’ The second is, ‘Does virtue pay?’, or in Aristotle’s
terms ‘What, if anything, is the connection between a life of virtue and
eudaimonia, or happiness?’ In taking up these questions as central to any
ethical theory, Aristotle was following his predecessors, Socrates and Plato,
but they remain crucial questions today.13
In order to show that the virtuous life is at least a necessary condition
for achieving eudaimonia, or happiness,14 if not a sufficient condition,
Aristotle needs to give an account both of eudaimonia and of virtue which
is adequate to explain the role of virtue in the eudaimon life. Thus in
investigating his two main questions, Aristotle will need to provide deeper
understandings of both virtue and eudaimonia. It might be asked, in the
present context, why an account of Aristotle’s approach to virtue need
focus on what he says about eudaimonia. The latter discussion is impor-
tant in that for Aristotle it is a constraint on an account of virtue that it
vindicate, so far as is possible, the view that virtue pays, in his terms the
view that virtue has a role in the eudaimon life. To appreciate the strength
of the Aristotelian account of virtue, it is necessary to understand the rela-
tion it bears to his view of eudaimonia. In addition, the relation between
virtue and eudaimonia also has a bearing on Aristotle’s view of the
purpose of business. Since eudaimonia is the ultimate goal of human life,
whatever goal business has which distinguishes it from other activities, the
pursuit of that goal must be consistent with the pursuit of eudaimonia.
The effect of this point will be clearer once the relation between virtue and
eudaimonia is clarified.
The nature of eudaimonia

In the Nicomachean Ethics (NE), Aristotle begins with an investigation of
eudaimonia. Starting from the idea that in all (rational) actions agents aim
at some good,15 he argues that it is at least worth investigating whether
there is not an ultimate good of all an agent’s actions. He then points out
that there is in fact widespread agreement that there is such an ultimate
good, as all call it eudaimonia. But this appearance of agreement is
misleading. It is in fact a purely verbal agreement, since people then
disagree about what eudaimonia consists in. These differing views provide
the basis for further investigation of what eudaimonia is.16 Thus, some
think it wealth, others a life of pleasure, others a life of honour or public
esteem, others still that it is an active life of ethical virtue or, lastly, the life
of contemplation.17 Whilst he does not rule out the possibility that each of
these factors, or lifestyles, may make some contribution to eudaimonia, he
does think that, as an answer to the question ‘What is eudaimonia?’, some

of the suggestions can be dismissed.18
Eudaimonia cannot be the life of wealth, since eudaimonia is an ulti-
mate good, but wealth is simply a means to an end. It is worth having for
what it can be used to acquire, not for its own sake. Nor is eudaimonia the
life of pleasure; pleasure may be an ingredient of a worthwhile life, but to
pursue pleasure alone is to live the life of a beast, to ignore crucial aspects
of our human nature. Here Aristotle relies on the idea that what is good for
a thing depends on the kind of thing it is (an idea seen above in Sternberg’s
remarks about good pillows and good knives). Nor can it be the life of
honour or public esteem. One reason for this is that honour is not worth
having in itself. It is only worth having if the bestower is a good judge.
This leaves the possibility that eudaimonia is the active life of ethical
virtue or the life of contemplation. There has not, of course, as yet, been
any positive argument that either of these possibilities is in fact correct. All
Aristotle has done so far is rule out certain rival possibilities.
In NE I, 7, Aristotle pursues the investigation further by suggesting that
attention to the function, or characteristic activity, of a human being may
help clarify the nature of eudaimonia. In effect, Aristotle’s argument here
rests on the idea that what is good for a thing depends on the kind of thing
it is, the point already implicitly appealed to in ruling out the life of plea-
sure. Aristotle is suggesting that in determining the ultimate human good,
it will be helpful to attend to human nature. It may at first be thought odd
to suggest that human nature has anything to do with a function or char-
acteristic activity. Aristotle makes the comparison with flute-players or
sculptors, who clearly have the function, or purpose, of playing the flute,
or sculpting. In these cases it is plausible that a good flautist is one who
does this well and that what is good for a flautist, qua flautist, is what
enables him to play the flute well.19 But it may be thought that humans, as
such, lack any characteristic function or purpose.
In broad outline, Aristotle’s response here depends on the idea that not
merely artefacts or artificial categories of activity, but all natural kinds,
including humans, have functions or purposes.20 This response rests on his
idea that in the case of any natural species one can distinguish between
changes that their members undergo which are the changes that good
members of the kind exhibit, and those which defective members manifest.
Clearly acorns, for example, can change in many ways, but a good acorn
will, when in appropriate light, soil and climate, develop into a sapling and
then a medium-sized tree, and finally a fully grown oak. Such a fully
grown tree will, in turn, be capable of producing many more acorns and
thus optimally contributing to the persistence of the species and the recur-
rence of the cycle. This approach (according to which some changes in
natural kind members are open to teleological explanation) accords with
common-sense ways of thinking.21 When we buy plants from a garden
42 Chris Megone
centre, we believe that if we put them in the advised conditions, and the
plant itself is not defective, then they will develop in certain characteristic
or normal ways, the ways good members of the kind develop. The same
sort of beliefs are still widely held with regard to animals and, finally, to
humans. It is widely accepted, for example, that there are norms (of an
evaluative kind) regarding the times at which humans should develop the
capacity to read, write and manage certain arithmetic calculations, as well
as regarding human physical development.
Aristotle’s view can be put in terms of potentials. Instead of thinking of
a member of a natural kind as a medium-sized object, an acorn, or a
sapling, say, one can think of it as a bundle of potentials. But out of all the
potentials to change that are in that bundle, there is a subset of changes
which a good member of the kind manifests, or actualizes. His further
claim is that these potentialities are the essential properties of the kind, the
potentialities that make an entity the kind of thing that it is. This is the
thing’s nature. So in the human case, human nature is that set of essential
potentialities which good members of the kind realize. When a human
being realizes those potentials he is realising his function or characteristic
activity. So, Aristotle suggests, just as what is good for an acorn, qua
acorn, is that which enables it to realize its essential potential, what
enables it to become a fully developed oak, so what is good for a human is
the realization of his essential potential.
Aristotle’s further suggestion, in this same short passage in NE I, 7, is
that human nature is constituted by the potential for a fully rational life.22
It is that (large) subset of potentialities, the set which is realized in the fully
rational life, that constitutes the human essence. On this view, then, the
human good, the eudaimon life, will be one in which an agent fully realizes
all those capacities which contribute to a maximally rational life. The
concept of rationality should not be understood narrowly here. For the
Aristotelian, rationality is not simply a matter of intellectual prowess. The
rational life takes in both practical and theoretical rationality. Desires and
emotions are subject to rational development as well as beliefs. Thus a
very complex set of potentials, including those for language, for imagina-
tion, for relationships with others, as well as for such things as drawing
conclusions from evidence or from premises, all these and more are part of
a fully rational life.
On the basis of this line of argument, therefore, Aristotle, reaches the
conclusion that the eudaimon life is the fully rational life. If, therefore, he
is to establish any connection between such a life and the life of ethical
virtue, or that of contemplation, he needs to show that the ethically
virtuous life is indeed fully rational. (For present purposes the life of
contemplation can be set to one side.) To understand his position it is
necessary to turn now to his discussion of ethical virtue.
The nature of virtue

In NE II, 6, Aristotle offers a definition of ethical virtue: ‘Virtue is a state
of character concerned with choice, lying in a mean, i.e. the mean relative
to us, this being determined by a rational principle, and by that principle by
which the man of practical wisdom would determine it.’23 This definition
has five key components. First, virtue is a state of character. Second, it is
concerned with choice (preferential choice – Aristotle is using a technical
term, prohairesis, here). Third, it lies in a mean. Fourth, that mean is
determined by a rational principle, and, fifth, that rational principle is the
principle of a practically wise man (phronimos). Prior to introducing the
definition, Aristotle has also discussed the way in which ethical virtue is
acquired. An explanation of his views on acquisition, and of the five
components of his definition, will illuminate his analysis.
Aristotle’s account of the acquisition of virtue informs his proposed
definition. He notes that virtues do not exist by nature. His key point in
making this claim is that they are not necessary human properties, since
clearly we can also acquire vices.24 However, we are adapted by nature to
receive them; in other words, the potential for virtue is a necessary prop-
erty, and that potential is realized as a result of habituation or practice.25
The role of habituation or practice is a crucial insight within Aristotle’s
account of the acquisition of virtue. He compares the acquisition of virtue
to learning to be a builder or a musician. ‘Men become builders by
building … so too we become just by doing just acts.’26 How exactly is
virtue acquired through practice? Once again only an outline of the idea
will be possible here. Part of Aristotle’s point is that habituation or prac-
tice has a cognitive role.27 This is connected to the fact that there is a
difference between doing just acts, and doing just acts as the just agent
does them.28 A child will first behave justly because he is told to do so
(‘share your sweets with your friends!’). In this case the child knows this is
the just thing to do only in the sense that he has been told by someone that
it is just. In a certain sense the child has purely external knowledge at this
point. He does not yet ‘see’ the point of sharing the sweets.
Aristotle’s claim is that such internal knowledge can only come through
practising just acts. It cannot be learnt except through action. Burnyeat has
suggested a parallel with skiing. If I am told by a friend that it is worth
going skiing, then I may know that skiing is worthwhile in an external
sense because I treat my friend as a reliable judge. But I cannot acquire the
internalized knowledge that skiing has a point without doing it. There may
indeed be several stages to the internal knowledge that is acquired through
practice. For example, in the first instance, after actually doing it, I may
know that skiing has a point only in the rather vague sense that I enjoy the
activity, without having any clear idea what I enjoy about it. Through
more practice, more skiing, I may become able to articulate more precisely
what it is that makes it worthwhile. In the same way, after at first being
44 Chris Megone
guided to share sweets, a child may in time come to enjoy doing so

without yet being able to articulate exactly what makes it enjoyable. Such
articulation may become possible only after more practice (and, perhaps,
also some reflection). At the end of this process of practice (together, in the
later stages, with reflection), the agent will have internalized knowledge of
the sort that is necessary to do just acts as the just agent does them – to the
right people, at the right time, in the right way, for the right reason.
However, the key point at present is to note that such knowledge can only
be acquired through practice (practice is a necessary condition of its acqui-
sition).
Practice also has another role in the acquisition of virtue. Virtuous
action requires that the agent have the right desires. These are acquired
and reinforced through practice. Consider the child sharing sweets. In the
first instance, when guided by a parent, the child may want to share the
sweets only in the sense that he wants to do what his parents tell him. In
due course that child may want to share the sweets because he sees this
sharing as having a point, perhaps because he values the shared activity,
say. The child now has a different desire, a different motive for the action.
But acting on such a desire also comes to reinforce it, to strengthen its
motivational force, and thus to make it a more stable part of the agent’s
character. (This is an idea perhaps reflected in the modern ‘psychologist’s
“law of effect”: positive reinforcement of an action raises its probability of
occurrence in the future’.)29
This discussion of the acquisition of virtue casts light on the definition
Aristotle offers. Aristotle asserts that to do a just act justly – that is, as a
just person does it (as contrasted with a small child, say, doing a just act
because it is told to do it) – certain conditions must hold. ‘The agent must
also be in a certain condition when he does [it]: in the first place he must
have knowledge, secondly he must choose the acts and choose them for
their own sakes, and thirdly his action must proceed from a firm and
unchangeable character.’30 He goes on to claim that these latter two condi-
tions are achieved through practice.
This brings us then to the first two features of his definition. Virtue is a
state of character (hexis). This is a settled disposition of the mind. (Not all
such dispositions are unchangeable, in the sense of fixed. In his remark
above Aristotle is only referring to the state of character of a perfectly
virtuous agent). A disposition of the mind is (roughly) a settled tendency to
believe certain things and desire certain things. It is in virtue of this that
when an agent has a character it is possible, to some degree, to predict his
behaviour. And it has just been indicated, above, how repetitive practice
contributes to such stability. Second, virtue involves preferential choice
(prohairesis); a virtuous agent chooses the relevant acts for their own
sakes. In order to choose an act in this way, the agent must not simply
want the object of choice. A small child may want a drink, driven by
thirst. By contrast to choose a drink, in this Aristotelian sense, the agent

must see some point, something worthwhile, in the drink, and choose it for
that reason. As has just been seen, in order to want something in this way
an agent must have acquired knowledge through practice.
So virtue, for Aristotle, is (thus far) a settled disposition of desires and
beliefs, but the agent must have desires and beliefs of a certain sort, the
sort necessary for choice. Roughly, he must believe that certain objectives
are worthwhile and he must desire those objectives because they are
worthwhile. (In the simple case of drinking just described, the agent must
want a drink because of its health-giving properties, for example, and
desire it because of those properties.) The remaining three aspects of
Aristotle’s definition now fill out this account.
First, the virtuous agent’s choices must lie in a mean. Aristotle’s doctrine
of the mean is another complex matter, but in outline his claim here is that
the agent’s motivations and actions must be appropriate. In order to be
appropriate they must lie between extremes. Most important here are
the agent’s desires (which motivate). In the case of courage, for example, the
agent’s desires associated with fear must be appropriate. The agent must
neither desire to flee danger too much (associated with cowardice) or too
little (associated with rashness). If the agent has appropriate desires (and
connected appropriate beliefs), he will be motivated to perform appro-
priate actions.
In general, then, the doctrine of the mean suggests therefore two things.
First, there are certain actions and feelings which the virtuous person does
and feels at the right time, to the right extent, for the right reasons, and so
on. Second, there are two ways to go wrong here: namely, not to do those
actions and feel those feelings when one should, or to the extent one
should, and so on; and to do those actions and feel those feelings when
one shouldn’t, or to an extent one shouldn’t, and so on.31
Choices and actions in a mean will be guided by a rational principle.
This fourth feature of the definition is important for Aristotle since it is, in
effect, here that his claim is made that virtues are indeed characteristics of
the fully rational agent. How does rationality enter into his account? In
brief, rationality begins to come into practice once an agent has reached
the stage of ‘seeing’ the point of an activity, or objective. At that point the
agent does not simply desire that activity, or objective, but desires it for a
reason. The development of practical rationality then has two aspects. One
involves reflection, first as to exactly what the point of objectives or activi-
ties is. As noted above, it is possible to enjoy an activity without quite
knowing why. Then there is the need to reflect, or reason, as to how
worthwhile one objective is as against another. A fully virtuous agent will
have an all-things-considered grasp of what is valuable which enables him
to judge exactly what is worth doing in the circumstances. But there is also
a further aspect to practical rationality. Practical reason also requires that
46 Chris Megone
the agent’s desires are guided by reason in the sense, crudely, that their
strength matches the agent’s view of the value of their objective. The fully
rational agent will not have rogue desires motivating him to pursue objec-
tives of lesser worth, or value, than others he could pursue.
Finally, Aristotle notes that the rational principle, which determines the
mean (or appropriate) action, is the principle a man of practical wisdom
would use to guide his action. Once again a lot could be said here. For the
purposes of outlining the Aristotelian position it may be enough to say
that practical wisdom is an intellectual virtue. It is the intellectual virtue
that enables the agent to form the appropriate judgements as to what is, all
things considered, worth pursuing, and also to determine the appropriate
means to achieve that objective. However, since a rational agent’s desires
are for objectives that are desired because of the point which that agent
sees in them, this intellectual virtue also interacts with the virtuous agent’s
desires. A little more will be said about practical wisdom in the final
chapter of this book.
In sum then, on Aristotle’s account, virtue is a stable disposition of the
agent’s beliefs and desires, where the beliefs include a fully rational
conception of what is worth pursuing, and the desires are formed so as to
pursue just such an objective. The motivations, preferential choices and
actions of such an agent will thus lie in a mean, a mean which reflects
rationality in the sense just explained.
To reinforce the plausibility of this account, Aristotle goes on to argue
that it applies satisfactorily to those states of character most would
consider to be ethical virtues. For example, he argues that courage fits this
definition. It is a stable disposition of the mind which gives the agent a
tendency to choose and act courageously. It lies in a mean between
cowardice on the one hand and rashness on the other, and this can be
further explained in terms of the wayward beliefs and desires held by those
in these vicious states. Likewise temperance might be held to be a state of
character lying between self-indulgence and asceticism, generosity one that
lies between meanness and prodigality.
Rather than explore the details of this approach further, it is time to
consider its application to business ethics. What this complex account of
the nature of virtue has done thus far is to explain the relationship
between virtue and eudaimonia, and thus vindicate the belief that virtue
pays. Aristotle has shown that the ethically virtuous agent will be fully
rational and, thus, that the ethically virtuous life is (at least) a constituent
of the eudaimon life, since the eudaimon life is the fully rational life. This
is an important achievement methodologically, since establishing the truth
of this widely held connection serves, for Aristotle, to support the plausi-
bility of both the account of virtue and that of eudaimonia. The
establishment of the connection also has implications for the application of
the theory to business ethics.
Aristotelian virtue theory and business ethics

What then are the implications of an Aristotelian virtue theory for business
ethics? In what follows, three main implications will be outlined. First, the
general nature of such a virtue theory’s outlook for ethical questions in
business will be explained. Second, the bearing of such a theory on the
purposes of business will be indicated. Third, the importance of the
remarks regarding the acquisition of virtue will be highlighted.
A virtue theory of the sort presented applies in the same way to all areas
of life. The right action on any occasion will be that act which the virtuous
agent would do, the act which involves the exercise of the relevant virtue
in the circumstances. To that extent, business ethics is not distinct, from
this perspective, from any other area of ethics. However, it is certainly
possible, within this perspective, to acknowledge Sternberg’s claim that to
act virtuously it is important to know the purpose of the activity one is
engaged in. This is not because, within this theory, the analysis of the
virtue of justice differs from one activity to another. 32 It will always have
a specific definition conforming to the generic definition of virtue
discussed. However, its application will depend on the nature of the
activity. For example, nursing is concerned with improving the health of
patients, so a just nurse will need to be aware of that purpose in order to
determine what justice requires in this area. Behaving justly as a nurse will
require that agent to attend to the medical needs of patients (among other
things, perhaps), in order to determine how to allocate care. By contrast,
just treatment of those engaged in business requires attention to the
purpose of business. If, for example, the purpose of business is to maxi-
mize long-term owner value by selling goods and services, as Sternberg
maintains, then a just agent will need to attend to the contribution
employees make towards that goal in allocating rewards. For this reason,
too, that is, because specific activities have specific goals, particular virtues
may be more prominent in some activities than in others. The virtue of
courage may be more prominent in the life of a soldier or a policeman,
the virtue of self-control more important to an athlete (in virtue of the
demanding training and diet athletes normally follow). Nonetheless, the
virtue theorist, especially one committed to the unity of the virtues, like
Aristotle, will hold that the key to appropriate action in any area, and thus
in business, will be the acquisition and relevant display of all the virtues.
The nature of business will, then, have a role in determining which
virtues are likely to be most prominent for those engaged in this activity,
even if Sternberg’s suggested goal is not accepted as absolutely correct.
Thus, given the purpose of business involves the production of value (for
the owners) by selling goods and services, in Aristotelian terms the virtues
of ‘friendliness’ (concerned with keeping contracts and similar obligations
to others), truthfulness and justice will, as Sternberg implies, be prominent.
As Sternberg argues above, business needs to be conducted with honesty
48 Chris Megone
and fairness. And justice is the virtue which governs the allocation of
rewards and burdens in relation to the employee’s contribution to the
achievement of the goal of business. But other virtues may be relevant too.
A virtue such as courage may be required in negotiating a contract, or in
whistleblowing on injustice. Temperance (self-control) may also be
required of an employee to ensure he adopts a lifestyle that enables him to
contribute optimally to his work (for example an employee whose contri-
bution of physical effort to an enterprise is crucial for the success of the
whole). It may be a marginal issue whether this latter is considered a
matter of business ethics, or ethics conceived more broadly, but, as has
been indicated, within virtue ethics such sharp distinctions are not easily
made.
It is sometimes objected to a virtue account of the sort given that it is of
very little practical use.33 The advice to do that act which exercises the
relevant virtue in the circumstances leaves open the question which virtue
is relevant, and also what is required in order to exercise that virtue on this
occasion. But the Aristotelian theory does provide more resources. It gives
an account of the nature of specific virtues which indicates the kind of
considerations that one who has that virtue will attend to. It also gives an
account of what virtue is, and how it is acquired, which indicates that part
of acquiring the virtue of justice, say, will involve coming to have relevant
beliefs such that the agent can identify when it is in question. For example,
the child will learn that it is a matter of proportionate distribution and
start to learn the sorts of consideration that bear on appropriate propor-
tion (who made the cake, whose cake it is, who was invited to the party,
and the like).
Furthermore in NE IX, 2 Aristotle has a long discussion of rules in
connection with the topic of friendship. In this passage he does seem to
suggest both the possibility of discerning many general rules that govern
what is owed to different classes of people, and thus make more explicit
the nature of justice. He also appears to emphasize the importance of that
task. Having noted that it may be laborious, he adds ‘Yet we must not on
that account shrink from the task, but decide the question as best we
can.’34
Aristotle specifically denies that it is possible to produce precise guide-
lines in matters of conduct:
But this must be agreed upon beforehand, that the whole account of
matters of conduct must be given in outline, and not precisely …
matters concerned with conduct and questions of what is good for us
have no fixity, any more than matters of health. The general account
being of this nature, the account of particular cases is yet more lacking
in exactness.35
If, for example, justice in allocating rewards in business should be propor-

tionate to the contribution to the goal of the business, it may be difficult to
determine exactly how to compare the contribution of the inventors of a
medicine, those in the patenting department and those who market it. So
the Aristotelian theory has the resources to give fairly detailed practical
advice without specifying a mathematically precise formula by which to
determine solutions to ethical questions. Further suggestions will be made
in the last chapter concerning the development of judgement on such
matters.
Virtue theory and the goal of business

The second important feature of this Aristotelian approach to note here is
the bearing it has on the internal purpose or goal of business. For this
theory holds that there is an ultimate good, eudaimonia, which is (at least
partially) constituted by the life of virtue, and which should be the goal of
all other activities. This idea is hinted at in NE I, 7 when Aristotle argues
that it would not make sense for carpentry or shoemaking to have a goal,
if human life as such had none.36 The thought here seems to be that,
although clearly the internal goal of carpentry is woodwork, and of
tanners shoemaking, these goals cannot be thought of as ultimate ends. So
the pursuit of these ends only makes real sense in so far as they contribute
to some further end, the goal of human life as a whole. Thus, by the same
token, although business clearly has an internal goal which distinguishes it
from other activities, that goal has to be made sense of, and partially deter-
mined, by the contribution of that activity to the ultimate goal,
eudaimonia.
This same idea can be seen in Aristotle’s Politics I, 8–10, when he
comes to discuss commercial activity directly. In the earlier part of this
book of the Politics, Aristotle has elaborated further his ideas about
human nature, touched on above. He has argued here that to fully realize
that nature, and thus achieve eudaimonia, a human being must live in a
state or community, and take an active part in the life of that state.37 It has
already been noted that, for Aristotle, wealth is a means, not an ultimate
end. Putting these thoughts together, it can now be seen that material
goods are necessary, as a means, if an agent is to live a eudaimon life. Not
only do material goods provide the necessaries for survival, they also
provide humans with the leisure, the freedom from other concerns, needed
to develop so as to live a fully virtuous life.
So the acquisition of material goods via commercial activity is neces-
sary, but Aristotle now distinguishes two types of commercial activity.
So one type of the art of acquiring property is by nature a part of the

art of household management, in that either there must be available,
50 Chris Megone
or it must contrive itself that there is available, a supply of those

things which go to make up a store of goods which are essential for
life and useful for the association of state or household.38
This commercial activity is contrasted with another type which has no

definite limit regarding the amount of wealth it can produce, while the
skill of acquiring wealth within household management has a definite
limit.39 Of these two Aristotle goes on to say:
There are two sorts of wealth getting, as I have said; one is a part of
household management, the other is retail trade: the former is neces-
sary and honourable, while that which consists in exchange is justly
censured: for it is unnatural.40
Once again it is only possible in the present context to be brief about the
ideas here.
Aristotle is distinguishing two possible types of commercial activity.
Both are concerned with the acquisition of wealth, but one has a limit and
the other does not. But he appears to be arguing that to undertake the
activity of business for the purpose of maximizing wealth, without limit, is
a mistake since it is contrary to what is needed for the proper development
of human nature. (This is what is meant by ‘unnatural’ here.) On the other
hand, it is perfectly compatible with such proper development (the devel-
opment of virtue) to sell goods and services for the purpose of acquiring
that quantity of wealth that is needed to lead a virtuous life. (This means
that when undertaking the activity of business the proper aim is not just to
sustain the business, but to produce what is required to allow those
engaging in the business the leisure for the virtuous life, and the where-
withal for such virtues as generosity.)
In other words, Aristotle presents an argument here which appears to
challenge Sternberg’s view that the proper purpose of business is to maxi-
mize long-term owner value by selling goods and services. The internal aim
or goal of business should be to seek to produce sufficient value for those
engaged in the activity, by selling goods and services, to enable those
people to lead a virtuous life. Since there is an ultimate end, eudaimonia,
to which other activities are subordinate, the internal goal or purpose,
when engaged in business activity, must be constrained by that ultimate
end.
One possible reply here might suggest that Aristotle’s remarks are not
concerned to show that the internal goal of business itself contains a limit,
but to point out that the time devoted to business activity must depend on
the role of such activity within a eudaimon life. On this view, when an
agent is engaged in business the internal aim for all the time he is so
engaged should be to maximize long-term owner value, but a proper
conception of eudaimonia will limit the time spent in business activity as

opposed to other pursuits – relaxation, socializing with friends, or family
life, for example. Thus, it might be said, the activity of flute-playing has as
its internal goal making high quality flute music, and this goal as such sets
no limit to the quality or quantity of flute-playing the agent engages in.
But the amount of flute-playing the agent actually pursues should nonethe-
less be limited in proportion to the contribution that this activity makes,
within the particular agent’s life, to eudaimonia, the ultimate end.
But in the case of business, Aristotle can be seen as suggesting that the
internal goal of the activity has a limit built into it for two reasons. First of
all, as has been noted, Aristotle appears to distinguish two possible
commercial activities with wealth as an internal goal, and to argue that
only one has the appropriate wealth-making goal. To undertake the
activity of business with the internal aim of maximizing wealth (long-term
owner value), in other words in pursuit of wealth without limit, is contrary
to human flourishing, and so not to be engaged in. To pursue the activity
of business with the internal aim of producing sufficient owner value for
human flourishing, in other words in pursuit of wealth with a limit, is
necessary for human flourishing. Aristotle could be construed, on this
interpretation, as suggesting that one commercial activity should be
pursued, but another, business, should not be pursued at all. It seems more
plausible to see him as advocating that business should be engaged in
when it is undertaken with its internal goal properly understood, namely,
with the internal goal of producing sufficient owner value for flourishing.
The second reason in favour of this interpretation is that Aristotle
specifically contrasts wealth, as a goal of an activity, with health as the
goal of medicine, by noting that health has no built-in limit when under-
stood as such a goal. ‘For the art of medicine aims at unlimited health.’41
Health is worth having for its own sake, it is not a means to an end, so as
such there is no limit to the extent it is worth pursuing when engaged in
medicine. (This will be true of anything that is worth having for its own
sake, so might apply also to the quality flute music which is the goal of
flute-playing.) By contrast, wealth is a means to an end, so is only valuable
to the extent that it is necessary for the ends that are constitutive of eudai-
monia. Thus, it is possible, in principle, to attain sufficient wealth; and
that is therefore the limit on the goal of business.42
Why does the internal goal of maximizing wealth, when undertaking
business, threaten a virtuous life, it might be asked, since undertaking com-
mercial activity with the internal aim of this objective is at least compatible
with producing what is needed for a virtuous life? First, if an agent aims,
when undertaking business, to maximize wealth, that threatens his ability
to recognize that wealth is a means to eudaimonia, not an end in itself.
The agent needs to recognize that the value of wealth is limited by its
contribution to eudaimonia, so unlimited quantities are not worth
52 Chris Megone
pursuing. In a similar vein, pursuit of unlimited wealth threatens the virtue

of temperance, since it is liable to give the agent the capacity to indulge in
immoderate and unnecessary sensual pleasures (food, drink, sex, etc). It
threatens also the virtue of generosity, since it may encourage the agent to
care too much about wealth (the vice of meanness), or too little, encour-
aging the agent to waste his wealth (prodigality).43 Finally, the pursuit, in
business, of maximizing wealth may, by encouraging the agent to consider
it as an end in itself, also lead him to devote undue time and energy to this
activity, rather than seeking the necessary leisure time for the development
of virtue, and of eudaimonia.44
Business ethics and the acquisition of virtue

The third point to highlight about this virtue theory as an approach to
business ethics is that it does not focus only on providing a decision proce-
dure. The account of virtue also emphasizes the importance of appropriate
desires and emotions if an agent is to be capable of fully virtuous action.
Furthermore, Aristotle draws attention to the significance of practice in the
acquisition of the appropriate desires and emotions, and thus of virtue.
For those who come to study business ethics (or any area of applied
ethics) with a view to improving their behaviour, the first of these points is
of great significance. Aristotle drew attention to the fact that in order to
behave virtuously it is not enough to make the correct decisions, or judge-
ments, by pointing out that apart from the states of character which we
term virtue and vice, there are also others, including encrateia and
acrasia.45 In the immediate context, the acratic agent is the most relevant
case. For an acratic is someone who reaches the correct decision as to what
to do, but fails to do it. A typical example is the person who finds himself
still at work late, decides the best thing to do now is to go home and spend
important time with the family, but finds himself still at his desk writing
one more memo and missing the train that gets him in before the children
are asleep. Once the case of the acratic is recognized, it is clear that in
order to change behaviour it may not be enough to give an agent the right
decision procedure.
The Aristotelian account of virtue indicates that the virtuous agent is
distinct from the acratic because he has the appropriate desires and
emotions as well. Aristotle is well aware, though, that even though desires
are in his view subject to reason, in a way quite comparable to that in
which beliefs are, their acquisition differs in a significant way from the
acquisition of belief. While beliefs may usually (if not invariably) whither
away once the believer realises that their content is false, an agent’s desires
will not immediately whither once the agent comes to believe their object
is of little value. This is one of the important aspects of Aristotle’s work on
the acquisition of virtue. His insight is that desires change over time
through practice. Thus, a student of business ethics who wishes to change

his behaviour will have to recognize the importance of practice in
achieving that.
This last point about the significance of an Aristotelian virtue theory as
an approach to business ethics can be explored further in the context of
reflecting on the value of case histories in that study. Thus it too will be
addressed further in the final chapter of this book.46
Notes
1 James Allen, ‘The Use and Abuse of Humanistic Education’, in C.R.
Christensen and A.J. Hansen (eds) Teaching and the Case Method (Harvard
Business School, Boston, 1989), p. 51.
2 The Teaching of Ethics in Higher Education (The Hastings Centre, Hastings on
Hudson, New York, 1980).
3 Plato, Republic, 352 d1.
4 Aristotle, Nicomachean Ethics, I, 3, 1095 a4.
5 This account draws directly on Sternberg’s contribution to the Leeds lecture
series. For contractual reasons the essence of this lecture has had to be
presented, with the author’s agreement, within the body of this chapter through
quotation by the editor rather than directly. All quotations from Sternberg are
from the Leeds lecture unless otherwise specified. A full account of Sternberg’s
position is available in her Just Business: Business Ethics in Action (2nd
edition, Oxford University Press, Oxford, 2000; 1st edition: Little, Brown &
Co. London, 1994 Warner paperback 1995; ‘Introduction: What Makes This
Book Distinctive’ available online at http://ssrn.com).
6 E. Sternberg, Just Business: Business Ethics in Action (1st edition, Little Brown
& Company, London, 1994; subsequently ‘JB1’), p. 4.
7 E. Sternberg, JB1, p. 4.
8 This is the third Aristotelian aspect of Sternberg’s approach since she cites his
account of distributive justice, see E. Sternberg, JB1, p. 80.
9 For a much fuller discussion of stakeholder theory, and criticism of arguments
that supposedly support it, see Elaine Sternberg, The Stakeholder Concept: A
Mistaken Doctrine, The Foundation for Business Responsibilities, 1999; avail-
able online from the Social Sciences Research Network on http://ssrn.com.
10 Cf. ‘The Business Roundtable’, Corporate Governance and American Competi-
tiveness, March 1990, p. 13 (though they repudiated it in 1997); available from
The Business Roundtable, 200 Park Ave, NYC 10016.
11 It is only in the unlikely case that all the alternatives both satisfy distributive
justice and ordinary decency, and are projected to have equal effects on maxi-
mizing long-term owner value, that degrees of distributive justice or ordinary
decency might be taken into account.
12 I have presented the account put forward here in more detail in my
‘Aristotelian Ethics’ in Ruth Chadwick (ed.) The Encyclopaedia of Applied
Ethics (Academic Press of America, San Diego, 1997) Vol. 1, pp. 209–31.
13 It is still pertinent to investigate whether there is at least a common shape to a
life worth living. And it is still important to consider why we should be moral,
and whether the moral or virtuous life has any part in such a worthwhile life.
Thus it is still generally assumed that if an act can be shown to be unjust or
unfair it should not be undertaken; but the question ‘What’s the point of being
just?’ can still be raised. And if it cannot be satisfactorily answered, then it
54 Chris Megone
might at least seem questionable whether an act’s being just gives sufficient
reason for doing it, or an act’s being unjust rules out doing it.
14 In what follows I retain the Greek term eudaimonia. Whilst ‘happiness’ is often
given as a translation, modern readers need to be aware that the term may have
some misleading connotations, at least in so far as it is taken to connote a mere
feeling. If we think of the notion of true happiness, as contrasted with some
passing feeling, that might give a better sense of what Aristotle has in mind.
15 Aristotle, NE, I, 1 1094 a2. (All quotations from the Nichomachean Ethics in
this chapter are from Sir David Ross’s translation, Oxford University Press,
Oxford, 1925.) For example, when a rational agent eats an apple he does so
because of the good (or apparent good) he sees in doing so. This good might be
the apple’s flavour, or the health he will gain through eating it, to mention just
two possibilities.
16 Aristotle assumes that, at least provisionally, widely held views or the views of
wise predecessors can be supposed to have some truth in them. See, for
example, NE, VII, 1 1145 b2–7.
17 I use the term ethical virtue to pick out characteristics such as courage, justice,
temperance, which would normally be thought of as virtues nowadays, and
which are manifest in courageous, just, temperate (and so on) acts. Aristotle’s
term for virtue, arete, is applied to any human excellence, including intellectual
excellences, so that for him ethical virtues are a subset of all the virtues.
18 The arguments that follow are given in NE I, 5 1095 b17ff.
19 NE, 1, 7 1097 b27–30.
20 The interpretation of this passage is a disputed matter, and the account given
here, which takes his ethics to rest in a significant way on his metaphysics can
only be asserted, rather than fully defended, in the present context.
21 A fuller account of these ideas is given in C. Megone, ‘Aristotle on Essentialism
and natural kinds: Physics II:1’, in Revue de Philosophe Ancienne, (1987) Vol.
6, 2.
22 NE, I, 7 1098 a4ff.
23 NE, II, 6 1106 b36ff.
24 I understand by nature properties to be essential properties and take it that
essential properties are not merely necessary properties, but also properties that
play an explanatory role, but in the present context it is the fact that an actual-
ized virtue is not a necessary property that matters. See Megone, op. cit., fn. 21.
25 NE, II, 1 1103 a26–8.
26 NE, II, 1 1103 a36.
27 This and other features of Aristotle’s view have been well discussed in M.
Burnyeat, ‘Aristotle on learning to be good’, in A. Rorty (ed.) Essays on
Aristotle’s Ethics (University of California Press, Berkeley, 1980).
28 NE, II, 4 1105 b5–8.
29 See R. Nozick, The Nature of Rationality (Princeton University Press, New
Jersey, 1993), p. 19.
30 NE, II, 4 1105 a33–5. Aristotle need not think that all characters are
unchangeable, even if he is understood here as saying that a virtuous character
must be unchangeable, rather than simply settled. It may be that the fully
virtuous character would be one from which the virtuous agent would have no
inclination to change.
31 I am grateful to Roger Crisp for suggesting this way of explaining the doctrine.
32 As, indeed, Sternberg agrees: she states explicitly that the values involved in
business ethics apply to the whole of the moral life: there is no separate ‘busi-
ness ethic’.
33 This is another large issue. For further discussion, see C. Megone, ‘Aristotelian
Ethics’, op. cit., pp. 228 ff.
34 NE, IX, 2 1165 a35–6. I owe this point to Roger Crisp.
35 NE, II, 2 1104 a1–5.
36 NE, I, 7 1097 b30.
37 Politics I, 1–3. Aristotle’s idea here is that the development of rationality
requires upbringing in a community. This idea requires a good deal of
unpacking, but it includes thoughts such as that language acquisition cannot be
achieved alone, and that the acquisition of virtue requires guided upbringing.
There are many ways in which the development of the capacities that
contribute to a fully rational life requires interaction with others.
38 Politics I, 8 1256 b26–30.
39 Politics I, 9 1257 b23–31.
40 Politics I, 10 1258 a39–b3.
41 Politics I, 9 1257 b25.
42 I am grateful to Elaine Sternberg for discussion of these matters. The points
made here may not be conclusive, and the relevant passages of Politics, book I,
are worthy of a paper-long treatment in themselves.
43 NE, IV, 1 1119 b24–9.
44 For some remarks on the importance of leisure, slightly contrasting in tone, see
NE, X, 7 and Politics II, 9 1269 a35, II, 11 1273 a35 ff.
45 NE, VII, 1 1145 a17ff. Aristotle’s classic discussion of acrasia follows in subse-
quent chapters of book VII.
46 I am most grateful to Roger Crisp, Simon Robinson, Nick Seel and Elaine
Sternberg for very helpful discussions of some of the material in this chapter.
Part II
Topics and case histories

Chapter 3
Shell, Greenpeace and

Brent Spar
The politics of dialogue
Jon Entine
There exist more than 6,500 offshore oil and gas installations around the
world, many of which provide a facility for tankers to load oil into their
holds. The North Sea is home to a majority of the world’s heavy deep-
water steel platforms. Of the approximately 600 rigs, operating in the
North Sea and North Atlantic, about fifty will reach the end of their useful
life by 2006. Because some of the equipment and the sludge contained
within could pose serious environmental consequences, plans to decommis-
sion these rigs raise ongoing and conflicting economic and environmental
concerns.
These issues came to a head in 1995 with Greenpeace’s guerrilla
campaign against Shell UK Limited and its attempt to sink Shell’s floating
storage buoy, the Brent Spar. Like the Exxon Valdez incident, it brought
into focus some of the imposing problems mankind faces as the world
population (and its tonnage of industrial by-products) continues to soar.
Given the media interest, the nature of the scientific controversies involved,
and the likelihood of future conflict, the Brent Spar incident has been cited
as a classic lesson in stakeholder management and the importance of
dialogue in crisis management. On close examination, however, the lessons
of Brent Spar are far less clear. Provocative questions remain about what
groups were legitimate stakeholders, what constitutes dialogue, and
whether dialogue is the appropriate management strategy when the ethical
divide remains so wide. This ambiguity is magnified by ongoing disputes
over the factual record of the Brent Spar incident. Competing factions
continue to spin the media record and the complicated scientific issues.
The only clear result is that the brouhaha has scarred the reputations of
many of those involved, including Shell, Greenpeace, the scientific commu-
nity, various European governments and the media. The controversy raises
archetypal issues often found in contemporary controversies that pit
corporations against social activists. Among them:
• The contested use of science: risk assessment/cost–benefit analysis,

‘junk’ science, environmental politics;
• The role of the media;
60 Jon Entine
• Stakeholder reputation management and ‘greenwashing’ by corpora-

tions and social activist groups;
• Academic and popular historical revisionism;
• The problematic role of ‘dialogue’ in stakeholder conflict resolution.
Background
The North Sea and North East Atlantic have been the site of significant
industrial activity since the 1960s. Just over 25 years ago, on 18 June
1975, UK North Sea oil was first brought to land after six years of explor-
ation and development. It was shipped from the small Argyll Field and
brought ashore by tanker to BP’s Isle of Grain refinery in Kent. Since
1975, over 2 billion tonnes of oil and 1,381 billion cubic metres of gas
have come ashore. Today, there are over 200 fields in production on the
UK Continental Shelf – and production is at record levels. In 1998, 132.6
million tonnes of oil and 95 billion cubic metres of gas were produced.
Shell built and in 1976 put online an offshore facility, the Brent Spar,
which stood between the coasts of Scotland and Norway in the Brent field
in the northern North Sea. Brent Spar was installed to allow early produc-
tion from the Brent field in advance of the pipeline to Sullom Voe,
Shetland Islands, Scotland, being installed and commissioned. But even
after the pipeline came into use, the Spar was retained as an alternative
offloading facility and as back-up to the pipeline in times of shutdown.
Brent Spar remained in full use for 15 years, finally ceasing operation in
1991. After the completion of an oil pipeline to the mainland at Sullom
Voe in the late 1970s, and after three years of operation, Shell put the Spar
storage buoy into standby status but maintained it in the event that prob-
lems developed with the pipeline. Over time, Shell (and the rest of the
hydrocarbon industry) concluded that the costs of such precautions
outweighed the benefits, although it had not yet resolved the best environ-
mental and economical way of handling redundant platforms.
The Brent Spar was unlike most other installations in the North Sea.
Under regulatory guidelines, all but the largest rigs were to be decommis-
sioned by being brought to shore and dismantled for reuse or recycling.
However, very large steel and concrete structures, such as the Brent Spar,
are considered difficult or even dangerous to remove. Like an iceberg,
most of the Spar’s bulk – six huge storage tanks – lay beneath the water’s
surface. As a result, these leviathans are handled on an individual basis,
although there remains a general presumption of total removal when
possible (some 80 per cent of structures are completely removed). (Note:
In July 1998, at the OSPAR Ministerial meeting in Portugal, the section of
the Convention governing the disposal of offshore installations was
reviewed and a new regulatory framework – Decision 98/3 – was instituted
which bans any disposal at sea of offshore structures.)
Shell, Greenpeace and Brent Spar 61
Disposing of a North Sea platform that was 40 stories high and

weighed over 14,000 tons was not a simple problem. Shell perceived the
challenge as getting Spar out of the water or even just raising it higher
without posing undue risk to humans or the environment. As the Spar was
originally designed, it was built on its side, and then floated over deep
water where it was ballasted so that it turned upright. When this was
done, some of the tanks, essential for its mechanical strength, were over-
stressed during installation, which could have made it unsafe to ‘reverse
engineer’ the installation process to get the buoy out of the water. Then
later, during operation, the tanks fractured. While this did not threaten its
safety when it was floating vertically, it was feared that if the process were
reversed it would fail structurally. (Indeed, when it was eventually disman-
tled, it was cut off in sections while still being held vertically.)
In seeking to decommission Spar, Shell invoked the 1958 Geneva
Convention on the Continental Shelf, which includes within its geographic
scope the North Sea. Article 5 (5) states that ‘any installations which are
abandoned or disused must be entirely removed’. Consultative guidelines
developed by the British government then in effect required Shell to
prepare a formal plan for the dismantling and ultimate disposal that
included the views of ‘those interested parties … who may be affected by
the abandonment programme’.
Shell commissioned an Impact Hypothesis document and a Best
Practicable Environmental Option document produced by Rudall
Blanchard Associates. Overall, it undertook some 30 studies to determine
what to do with the giant buoy, eventually refining the options to:
1 Continue to maintain the rig at a cost of $9 million a year;

2 Refurbish and then reuse the buoy which would cost $135 million
over three years;
3 Dispose of the rig in the oil field, which Shell had already ruled out;
4 Sink the rig in deep water for $18 million, the most economical
choice;
5 Dismantle the rig vertically (which would require a deepwater disman-
tling area) and dispose of it on shore, or;
6 Dismantle the rig horizontally (which would require shallower water
than the prior option) and dispose of it on shore for $69 million.
Shell was at least somewhat aware of the public-relations-related concerns

that would accompany its decision to become the first company to decom-
mission one of its rigs. Shell had long prided itself (and indeed was thought
of by many environmentalists) as being among the most environmentally
sensitive natural resource companies. After four years of thorough investi-
gation, and in consultation with many scientists, Shell chose what it
concluded was the most environmentally responsible and economical
62 Jon Entine
disposal option: tow the Spar from the North Sea to sink it in a deep water
channel in the North East Atlantic. Some scientists, such as Martin V.
Angel at the Southampton Oceanography Centre (UK), believed that the
criteria of evaluation did not address the right questions, since strong
emphasis was placed on the structural integrity of the seabed rather than
its direct environmental impact. This was an operating ‘ethic’ for hydro-
carbon companies who were far more fearful of causing a geological
disaster than an environmental one.
As it turned out, Shell and the government acted with little public
consultation or disclosure and did not solicit the opinions of critical
‘public interest’ groups that had been monitoring the decommission debate
for some years. Although Shell had historically demonstrated sensitivity to
environmental issues, it rejected liberal stakeholder theory canon that the
‘natural environment’ held status as a stakeholder in company operations
and fortunes. It also vociferously resisted the idea that public interest
groups, who were publicly hostile to the natural resource industry as a
matter of course, had a right to be involved in the review process.
Greenpeace, the world’s largest environmental lobby, had been
campaigning for years against ocean dumping of any kind. As a conse-
quence, Shell did not consider Greenpeace and other radical groups
representative stakeholders and, therefore, did not include their (unso-
licited) comments in the list of consultees, which was stipulated by the
then UK government.
Shell asked the British government to approve its plans in September
1992. After scrutiny by government scientists and following extensive
consultations, the UK’s Department of Trade and Industry (DTI), which
clearly saw Brent Spar as a test run for future decommissionings, endorsed
the plans in December 1994. Shell was issued with a deep-sea licence to
dispose the Brent Spar to a site 2,300 metres under the surface, about 240
kilometres north-west of the Hebrides on the North Feni Ridge.
Meanwhile, under the Oslo Convention, all other appropriate European
governments were notified and none objected. The UK government
announced its approval on 17 February 1995.
The announced support by the British government of Shell’s application
attracted little media interest until Greenpeace, accompanied by a number
of German and UK journalists, boarded the Spar for the first time on 30
April 1995. The occupation fired an immediate public debate pitting Shell
and the UK government against Greenpeace. The environmental group,
which had first become involved in an ocean dumping issue when its ship
Rainbow Warrior intercepted a radioactive waste dumping vessel in the
Atlantic in the summer of 1978, was on record as being opposed to any
ocean disposal as unethical. (Ironically, years ago, Greenpeace disposed of
the wreck of the Rainbow Warrior at sea to form an artificial reef for
marine wildlife.)
Greenpeace complained that its perspective had not been included in the
decision-making process – indeed the DTI refused to accept its written
protests. Shell defended its lack of consultation with Greenpeace on the
grounds that Greenpeace had definitely admitted that its goal was to
reverse the disposal choice, not to participate in risk–benefit environmental
and economic analysis. Greenpeace escalated its allegations, charging that
Spar was a ‘toxic time bomb’ of drilling mud, oil residues and radioactive
waste that could seriously damage the marine environment – an allegation
disputed by Shell and questioned by most independent scientists and
oceanographers. Greenpeace also asserted that allowing the use of the
ocean as a free repository would signal that it was acceptable for compa-
nies to pass on the externalities of its operations. Its proposed alternative:
onshore dismantling of Brent Spar.
The occupation
Greenpeace, noted for its confrontational tactics, sprung into action,
helped along by a Shell misstep. Because of a narrow weather window,
Shell chose to scuttle the Spar just before the Inter-ministerial meeting on
the North Sea. This handed Greenpeace, whose membership had gone into
decline, a golden opportunity for a high profile campaign. Greenpeace
invoked broad ethical principles as well as specific environmental objec-
tions in launching a vigorous international campaign against Shell and its
plan. Greenpeace initiated boycotts of Shell products in several European
countries. In Germany, for example, where Shell’s sales fell by between 20
and 30 per cent in the area around Hamburg during the crisis, protestors
threatened to damage 200 Shell sites. Fifty were subsequently damaged:
two firebombed and one raked with bullets.
Just before midday on 30 April 1995 activists, accompanied by a
number of journalists, occupied the rusting and deserted platform. The
audacity of the occupation, carried out at sea, attracted immediate media
attention. Greenpeace claimed an impending ecological disaster. Daily
postings on a special Internet website were enhanced after the second week
by satellite phone/fax/e-mail equipment that enabled the occupants to talk
directly to journalists. However, the main story did not break until 22 May
when, after a failed night-time attempt, police and security men began
evicting the activists under injunctions granted by Scottish courts.
Greenpeace began offering direct television feeds to broadcasters around
the world.
Shell evicted the protestors and began blasting high-powered cannons to
fend off reoccupation by Greenpeace. Videotaped by Greenpeace vessels
nearby, scenes of what appeared to be water cannons directed at
Greenpeace helicopters were flashed around the world, making headline
news. The drama was captured on video arranged by Greenpeace, and
64 Jon Entine
distributed by satellite. (According to Shell, independent eyewitness

accounts suggest that the Greenpeace helicopter deliberately dipped into
the water spray for the benefit of the Greenpeace camera.) The confronta-
tion incited more protests including the firebombing of Shell stations
already mentioned.
In the coming weeks, even as Shell began towing the Brent Spar out to
sea, the media continued to cover the stand-off. BBC aired live interviews
on board the Greenpeace ship Altair reporting on the ‘daring’ exploits of
the protestors. Each report deepened the perception that Europe’s largest
company was using highly aggressive tactics against a dedicated band of
highly moral men and women.
Although it had historically placed a strong emphasis on the environ-
ment in its public relations strategy and was deeply concerned about the
long-term impact on its reputation, Shell was unable to counter the nega-
tive made-for-TV images manufactured by Greenpeace. With feelings
running high, Shell’s attempt to gain public support by arguing the scien-
tific merits of its position largely through the print media, lost ground.
The confrontation brought to the surface simmering tensions between
environmental organizations and the mainstream science community,
which had remained supportive of Shell’s plans throughout. In contrast,
activist groups throughout Europe rallied by the German chapter of
Greenpeace elicited the support of left-leaning European politicians and
journalists. Worker representatives on Shell’s advisory board in Germany
wrote to Greenpeace to express their ‘concern and outrage’ at Shell’s plans
to ‘turn the sea into a trash pit’. The company’s situation was not helped
by the fact that different country managers took a variety of stances.
Under considerable local pressure, the head of Shell Germany said the first
he knew about the disposal plans was from the media, while the head of
Shell Austria pronounced the plan ‘intolerable’. The Danish environment
minister was the first to support the Greenpeace stance. When the German
Chancellor, Helmut Kohl, protested to the British prime minister at the
June G7 Summit, it was evident that the issue was spiralling out of Shell’s
control; Greenpeace was setting the public agenda on this issue.
After a nine-day trip, on 19 June, as the Brent Spar reached its final
destination, two further activists were dropped onto Brent Spar to disrupt
the sinking. Greenpeace simultaneously released to the press the written
pronouncement by a prominent scientist that the disposal of Brent Spar
could bring about local damage to marine life. That afternoon, British
Prime Minister John Major addressed the House of Commons: ‘ I under-
stand that many people seem deeply upset about the decision to dispose of
Brent Spar in deep water,’ he said. ‘I believe that it is the right way to
dispose of it. … Shell has my full support to dispose of it in deep water.’
The Conservative government was firmly convinced that it was legally and
scientifically on solid ground.
To Major’s dismay and embarrassment, within a few hours, Shell issued

a terse press release rescinding its decision and began towing Brent Spar
back towards the UK. Under siege, experiencing a public relations night-
mare, and with eroding support from European governments, Shell
believed it had no choice. The embarrassed UK government accepted this
course of action and helped Shell obtain a licence from Norwegian author-
ities that allowed Spar to be anchored in the deep waters of Erfjord
pending re-evaluation of all options. The UK government, perhaps as a
display of pique, would not pay an increase in the subsidy of 75 per cent
of the original decommissioning costs, as it had promised. Greenpeace
claimed total victory.
The controversy
Greenpeace’s decision to elevate its moral stance over scientific claims gave
it an initial tactical advantage in the court of public opinion. The news
media found the controversy difficult to manage. It did not yield to the
customary technique of instant verification used in news journalism, where
complex conflicts are frequently reduced to two opposing views with the
‘right answer’ arrived at by finding an ‘independent expert’. During much
of the crisis, large segments of the media presented the controversy as a
moral saga with ‘white hat’ Greenpeace environmentalists (forces of
caution) fighting ‘black hat’ Shell (new icon of multinational corporate
expediency) which was being secretly aided by Britain’s Conservative-led
government (symbol of governmental complicity). Shell’s appeal to science
and ‘rationality’ contrasted with Greenpeace’s ethical arguments and the
belief by many environmentalists that Shell had tried to engineer the most
financially advantageous, not the most environmentally responsible
disposal option.
That simplistic ethical paradigm held sway so long as the public
believed Greenpeace’s analysis of the toxic potential of the sludge still on
the rig. Greenpeace had dismissed Shell’s commissioned study which indi-
cated that some 53 tonnes of oil remained onboard. It publicized tests
from samples drawn by its guerrilla-occupiers that claimed there was more
than one hundred times as much – 5,550 tonnes. According to newspaper
accounts and Greenpeace press releases, it was further claimed that the rig
contained ‘14,500 tonnes of toxic rubbish’ and ‘over 100 tonnes of toxic
sludge’. Shell officials continued to insist that their figures were accurate,
which sparked widespread and well-publicized ridicule by activists.
But within a month of Shell’s surrender, public perceptions turned
abruptly when it became clear that Greenpeace had wildly exaggerated or
at least distorted (deliberately or innocently is still at issue) the potential
hazards of Shell’s disposal plans. The press first uncovered that
Greenpeace’s claim that marine life was threatened referred to a disposal
66 Jon Entine
option in shallow waters which Shell had explicitly rejected. In the most
damaging disclosure, several independent companies coordinated by Det
Norske Veritas undertook a new inventory examination. This comprehen-
sive study indicated that between 74 and 103 tonnes of oil remained on
the buoy, most of which could now be easily removed. That was very close
to the Shell estimate and far less than Greenpeace’s assertion that the buoy
contained 5,000 tonnes. Only 30 tonnes was low-level radioactive waste, a
level not considered dangerous and less than occurred naturally in areas
where there are granite rocks. The radioactivity originated in the stored oil
that was absorbed into the internal pipework. (Note: Another irony is that
bringing this radioactive lining ashore, as Greenpeace proposed, would
have been a violation of the UN convention against transferring contami-
nation from one environment to another.)
By late August, interviews with scientists and evidence uncovered
during the independent inspection revealed that the scuttling of the plat-
form was far less environmentally problematic than Greenpeace had
intimated. It turned out that Greenpeace took its sludge samples through
the top of the vent pipes on the uppermost deck, and not from the storage
tanks proper. These samples would have been predominantly oil that had
floated to the top of these pipes.
The media turned, particularly the more conservative press. ‘Minor
Mistake Which Tipped The Balance’, headlined the Daily Mail (6
September 1995). The Express ran a story entitled ‘Dark side of
Greenpeace do-gooders’ under the heading ‘D AILY E XPRESS – Asking The
Straight Questions’ (6 September 1995). Even the Guardian, which posi-
tioned itself as an ally of Greenpeace throughout the controversy, noted
almost apologetically that
almost all independent experts contacted by reporters regarded the

proposed burial at sea as the best – or least bad – solution for the
Brent Spar. It was not going to be sunk in shallow water but towed
150 miles out to West of the Hebrides. There, according to the
majority of marine experts, the floating tank could be sunk without
anything like the damage which would be caused by dismantling the
structure disposed of on land.
(Guardian, 7 September 1995)
In a dramatic turnaround, and just a few days before the results of an

independent inventory assessment would have made their error public,
Greenpeace officials issued a public apology to Shell. Greenpeace, which
had been aware of the embarrassing findings for weeks, asserted it had
mistakenly, yet innocently, exaggerated oil levels and toxic dangers. A few
liberal stalwarts praised Greenpeace for its confession, but the damage
was done. Some critics (including some environmentalists and former
Greenpeace officers) emerged to argue that Greenpeace’s tactics had less to

do with protecting the environment and more to do with invigorating
financial support and reversing membership declines. According to detrac-
tors, Greenpeace and its supporters were casting around for a cause
célèbre when the Brent Spar issue came to a head and Shell provided a
near-perfect target. In response to these stories, the BBC publicly flagel-
lated itself for being manipulated. The New York Times and Wall Street
Journal, among others, raised questions as to whether Greenpeace officials
might have massaged the story for less than honourable reasons.
With the political landscape now dramatically altered, an international
consensus began to emerge, as most member countries at the Oslo and
Paris Commission meeting in 1995 agreed to a moratorium on the seabed
disposal of decommissioned offshore installations, pending further devel-
opment of international standards. In the uncertain political climate that
prevailed, no European government and few natural resource corporations
would be willing to risk the kind of negative publicity that had swamped
Shell over Brent Spar. Although Shell’s pre-incident analysis was largely
reconfirmed by post-crisis scientific studies, and Greenpeace suffered
damage to its reputation, it was widely perceived that Greenpeace had
‘won’ the battle over Brent Spar.
In the two years following the incident, Shell sought and publicized
input from a variety of sources it considered stakeholders: investors,
governmental agencies, environmental experts from industry and academia
and a range of environmental groups, including vocal critics such as
Greenpeace. It embarked on a costly ‘public involvement’ campaign, which
was initially designed to recover some of its reputation while repairing its
relations with British ministers under the Major government.
Subsequently, this campaign took on something of a life of its own with
everything from an Internet web site established by Shell specifically for
this purpose, to CDs for schools and journalists, to dialogue sessions for
environmentalists around Europe. It is not clear whether this represented a
philosophical shift in company perspective or a tactical change reflecting
the new political reality. Greenpeace maintained its own site during the
process, frequently disagreeing with Shell’s interpretation of the ongoing
dialogue.
Shell gradually winnowed the list of options, eventually announcing
their choice of solutions in January 1998: a ‘one-off’ re-use as a
Norwegian Ro/Ro ferry quay. The UK government announced its approval
in August and the decommissioning was completed by the following
summer. Cut and cleaned ring sections of the buoy’s hull were placed on
the seabed at Mekjarvik, near Stavanger, to form the base of a new quay.
Taking into account expenditures related to the initial aborted deep-sea
disposal of Spar, the costs totalled close to $96 million.
68 Jon Entine
Scientific and ethical issues

Each side used science and appeals to rational prudence to justify its posi-
tion. Shell also injected financial considerations into the debate while
Greenpeace positioned itself as a steward for the environment. Ultimately,
the conflict between two sets of scientific authorities eclipsed the issue over
which disposal method was preferable and precipitated a fierce debate
about the nature of scientific fact.
The scientific conflict itself appeared relatively straightforward. The
Spar contained four main types of contaminants: heavy metals, traces of
hydrocarbons, synthetic organic compounds and enhanced levels of
radioactivity concentrated in the internal piping. There were two main
schools of thought about the potential environmental impact: (1)
Greenpeace and the Norwegian government voiced the belief that ocean
disposal posed an unacceptable pollution hazard and therefore under no
circumstance should any remnants of these structures be left at sea (Pearce
1995a), and; (2) Those who argued that Shell ‘was right’ (Rice 1996b)
because deep-sea disposal is an environmentally reasonable option and the
huge costs of removal were ‘out of all proportion to the risks’ (Gray, cited
in Pearce 1995a). There was little debate over the environmental conse-
quences to inshore and terrestrial environments that would have ensued if
the Spar had been towed ashore for dismantling. Greenpeace and its
supporters invoked a mystical belief, rather than citing scientific evidence,
that the risks from land disposal were acceptable and the pristine sea
should not be despoiled.
Shell, its consultants, and the British government concluded that such
disposal would have had ‘a negligible impact on living resources, human
health, marine activities, amenity value and water quality’. Greenpeace
argued that introducing these contaminants would reduce water quality
and biodiversity, the greatest danger arising from the contaminants
entering the food chain. Greenpeace argued that landfill must be the
preferred option because only there could the impact be monitored and
controlled. Although Greenpeace said at first that land disposal was the
safer choice over a deep-sea burial on strictly environmental grounds, it
mostly argued the ‘slippery slope’ theory: allowing the Brent Spar to be
sunk risked opening the door to future disposals whose collective damage
could turn the ocean into a pollution sink hole.
So, what impact might the contaminants in the Spar have had in the
North Atlantic as compared to decommissioning on land? Each side
attempted to frame its position as the most scientifically responsible.
Greenpeace had successfully closed off dumping for radioactive waste at
sea and for industrial wastes (campaigns started in 1978 and 1980 respec-
tively, with both ending in 1993). These campaigns resulted in some types
of dumping being banned worldwide. With the Brent Spar, Greenpeace
was trying to avoid opening up an ocean dumping route for other types of
waste as the older oilfields became progressively redundant, claiming that

the potential hazards were too risky. To bolster its position, it consistently
invoked the ‘precautionary principle’ (i.e. one should avoid actions that
involve significant unknown risk), which focuses on the possibility that
technologies or policies could pose unique, extreme or unmanageable
risks. In this instance, however, appeals to a precautionary principle
offered no guidance, for no matter what option was chosen there would be
some unpredictable deleterious effects.
Some scientists disputed Greenpeace’s short- and long-term projections
of likely disaster. It was widely believed that monitoring of the deep ocean
is perfectly feasible technically. Dr Angel (1995) noted that deep-sea moni-
toring is also, in practice, easier than in shallow seas where instruments
deployed long-term in situ are constantly being trawled. Fear arises partly
from the mistaken belief that the oceans are pristine and that we lack
enough understanding about how they function to take such a risk. ‘It is a
question of choosing the lesser evil’, Angel wrote, echoing scientists on
both sides of the issue (see Appendix 2).
Most scientists (many independent of Shell) expressed their belief that
the natural resource company and the British government had chosen the
Best Practicable Environmental Option for disposal. Among other experts
siding with Shell’s perspective:
• Sir John Vane, winner of a Nobel Prize for medicine, wrote ‘in the
clamour (made by Greenpeace) … the quiet, logical voice of science,
and of common sense … drowned. Reason said that the Brent Spar
should be buried. Emotion and irrationality have dictated otherwise’
(Daily Mail, 22 June 1995);
• University of London professors Euan Nisbet and Mary Fowler
suggested, ‘The environmental damage from the disposal of the Brent
Spar in (the Atlantic) would probably be minimal. … By concentrating
on and sensationalising relatively small problems, we risk making
poor judgments and neglecting more serious issues facing the environ-
ment’ (Nature, June 1995);
• Emeritus Professor Jack Pridham, also of the University of London,
claimed that the ‘toxic contents of this platform would have been a
biological pin-prick in this immense volume of water’ (letter to The
Times, 23 June 1995);
• Dr Martin Angel noted, ‘Every day more metal is pumped into the
oceans from volcanic vents of the seabed than is produced from mines
on land. The sea copes with this quite effectively. Brent Spar would
not have changed a thing’ (letter to the Observer, 2 June 1995);
• Aberdeen University professor, Alastair McIntyre, who was privy to
the AURIS research promoted by Greenpeace, opined that Greenpeace
had mistakenly claimed that onshore disposal was the preferable
70 Jon Entine
option noting, ‘Once ashore the many operations involved in disman-

tling could produce a diversity of pollution problems – terrestrial,
aquatic and atmospheric. The risk to the workforce from all these
operations would be considerably greater than that posed by the more
straightforward deep-sea disposal’ (letter to The Times, 26 May
1995).
Greenpeace published its own scientific study, the conclusions of which

contradicted those of some of the scientists who had previously given
advice to Shell. The Scottish Association for Marine Science (SAMS),
which had been studying the proposed disposal area for the Brent Spar, the
Rockall Trough, contested claims that fishing grounds would not be
adversely impacted by a deep-sea burial. SAMS also dismissed the belief
that seabed currents were not strong enough to disperse any radioactive
wastes that might be released at that depth. Citing this study, Greenpeace
claimed that disposing of Brent Spar in the North Atlantic would precipi-
tate long-term damage to the marine environment and ultimately affect the
food chain, chiefly from leakage of the toxic sludge that remained within
the structure. As a matter of perspective, it is worth noting that a single
floundering vessel (of which there are dozens each year) puts as much if
not more contaminants into the ocean than sinking the Brent Spar.
Greenpeace also cited the UK Offshore Operators Association
(UKOOA) study, ‘Options for Oil and Gas Structures in the North Sea’,
commissioned by the Aberdeen University group AURIS. UKOOA is the
representative organization for the UK offshore oil and gas industry whose
35 company members are licensed by the government to explore for and
produce oil and gas in UK waters. Their report concluded that, on balance,
the on-land disposal and recycling of oil rigs is preferable to sea dumping
on environmental grounds.
The study would not have influenced the handling of Brent Spar,
however, since it reaffirmed that the decommissioning of large structures,
such as the Spar, were still to be assessed on an individual basis. These
views were incorporated in the international convention known as
OSPAR, drawn up in 1992, which came into force in March 1998. After
the Brent Spar affair, a moratorium was issued on all disposals at sea of
offshore structures (although not signed-up to by the UK and Norway).
Perhaps recognizing a minority of scientists held its scientific position,
Greenpeace framed much of its argument in symbolic rather than scientific
terms. It argued that deep-sea disposal of oil rigs was wrong in principle,
invoking broad ethical terms such as the stakeholder ‘rights’ of the natural
environment. ‘It is wrong in principle to dump oil installations at sea’,
Greenpeace argued on its web site.
To dump structures, such as the Brent Spar, in areas of high marine

biodiversity with poorly understood ecology infringes the precau-
tionary principle and presents unknown environmental risks. To do so
would set dangerous precedents for future dumping of wastes at sea. It
ignores the impact of many similar decisions that would be taken in
isolation without consideration of their cumulative effect. It amounts to
a reversal of promises made when development of North Sea oil began.
The availability of the ‘quick and dirty’ dumping option reduces the
incentive to pursue innovative decommissioning and recycling options.
Further, it flies in the face of growing international political and public
consensus not to use the sea as a dump for wastes.
Although positioning itself as taking the ethical and scientific high road,
Greenpeace never made a persuasive case. Greenpeace did not provide
substantial risk–benefit analysis to support their view that land disposal
was the environmentally superior choice. All actions, and even inaction,
entail some degree of risk, some identifiable and some not. Greenpeace’s
campaign rested on a visceral belief that deep-sea disposal would disrupt
‘nature’ more than land decommissioning. By the time Shell officials had
authorized the burial of the Spar, the risks were widely documented (and
generally considered less severe than the land disposal option). It’s clear
that Shell did not flaunt the ‘precautionary principle.’
Initial media reports were far more sympathetic to Greenpeace than to
Shell. That may have reflected the lack of scientific sophistication of many
reporters, a general disdain for risk–benefit analysis, and a suspicion of
corporate greenwashing. Yet, in the months and years since the contro-
versy, numerous independent reports have reaffirmed Shell’s scientific
analysis that deep-sea disposal was environmentally and economically the
best disposal option. Greenpeace’s original claims, on which they justified
their guerrilla actions, appeared increasingly far-fetched. One of the most
authoritative independent analyses, by the National Environmental Re-
search Council (NERC 1996), was commissioned by the UK Department
of Trade and Industry. It concluded that despite the presence of ‘glaring
errors’ in Shell’s original BPEO, the global impact of the deep-sea disposal
of Spar would have been very small (Rice 1996a).
The NERC assessment stated, ‘In reaching decisions about disposal
options … factors including social, ethical, aesthetic, legal and economic
factors must be considered in addition to the scientific evidence.’ It exam-
ined a range of disposal options and their potential effects, negative and
positive, on the environment:
Deep-sea disposal
• Destruction of organisms through physical impact of the structure
and associated smothering by disturbed bottom sediments; and
72 Jon Entine
through poisoning by the toxic materials contained within the

structure or metals released as the frame itself degrades.
• Risk of toxins entering food chains, and even reaching humans, as
deep-sea fishing of depths down to 1,800 metres increases (Pearce
1995b).
• Threat to safety of navigation.
• Sunken structures may act as artificial reefs, ‘creating or
improving the habitat and, therefore, increasing productivity and
harvests of desirable species’ (Bombace 1989). Most artificial reefs
are deployed in shallow water (depth < 30 m), but they may also
be beneficial in the deep sea (Picken and McIntyre 1989).
• Risk of conflict of use would be far less in the deep sea than in
shallower water.
• The high dispersal rates of the toxic materials in deep sea would
pose less threat to the environment than disposal on land.
• Deep-sea disposal would not add to the problem of diminishing
space for waste disposal sites on land.
Alternative decommissioning options included:
• Disposal to landfill and disposal in shallower seas.
• Recycling: The structures could be brought ashore and the broken
up scrap could be recycled. This would remove the bulk of the
demand for land disposal space, but the installations would need
to be thoroughly cleaned first which would produce waste. The
demand in energy used in transporting the installations and in the
recycling processes must also be taken into account.
• Re-use: The structures, or parts of them, could be reused for
production elsewhere or for new uses such as artificial reefs, light-
houses, harbour walls, marine research centres, or even offshore
casinos.
The NERC concluded that each disposal option resulted in deleterious

effects and competing ‘principles’. It noted that there might be cases where
deep-sea disposal (to well-researched sites, chosen for their low physical
disturbance and relatively low abundance of life) is the best environmental
option. If there is no potential to reuse the installation, and the implica-
tions of the high-energy requirements needed to transport the structure to
its recycling site outweigh the disadvantages of deep-sea disposal, then the
latter would seem to be acceptable. In this case, only a small localized area
would be affected and the estimated recovery period would be between
two and ten years. NERC endorsed the scientific consensus that even for
cases like the Spar with significantly higher content of hazardous materials
than most offshore structures, ‘the global impact of deep-sea disposal of
large structures such as the Brent Spar would be very small’ (Rice 1996a).
Conclusions/lessons
Nobody came out of the Brent Spar battle well. By any measure, Shell
sought an objective assessment of the various Brent Spar disposal options.
Yet it sought to keep its original scuttle plans secret. That can be seen as a
display of arrogance or a prudent decision, considering the absolute oppo-
sition by Greenpeace and (initially) sections of the media to the option that
the scientists suggested was scientifically and financially most responsible.
Greenpeace consistently made its moral opposition to deep-sea dumping
loud and clear. Yet it compromised its appeal to the moral high ground by
exaggerating the dangers posed by the ocean disposal of Brent Spar.
Moreover, it grounded its campaign on a radical interpretation of the
precautionary principle, which allowed it to justify a scientifically ques-
tionable claim of imminent danger.
Neither side had clean hands, which is usually the case when ethical
principles are so ambiguous. Greenpeace saw its reputation for integrity
eroded among the international press corps, although the UK government
and Shell faired worse with the general public. In 1996, Bob Worcester,
chairman of the polling firm MORI (Market & Opinion Research
International), in a paper ‘Business and the environment: in the aftermath
of Brent Spar and BSE’ concluded that ‘Greenpeace won the battle by ten
to one in the eyes of the British public’ but its ‘scientific methods were
flawed’. The UK government lost credibility and its ‘confidence [hubris?]
in its own infallibility’ was ‘unshared by the public’, while ‘Shell lost some
of its most precious asset, its reputation’. It was, Worcester concluded, ‘a
turning point in British attitudes to companies, to government and to envi-
ronmental groups’.
As a consequence of the backlash, British officials became far more
cautious in dealing with the decommissioning issue as they recalculated
trade-offs between industry and government and assessed the political
fallout. However, a major shift in policy did not occur until May 1997
when Britain elected a new Labour government, which declared in autumn
1997 that it would operate a presumption against ocean disposal.
Brent Spar was also a wake-up call to the press, which has traditionally
assumed as its default predilection that corporations lie and activists’
groups tell the truth. It underscores the reality that the media are never
impartial, although they can strive for reasonable disclosure of their own
biases and for basic fairness. They must become more vigilant and scep-
tical when it comes to choosing sources. Greenpeace had long boasted in
its publications of its skill in manipulating the media. At the Edinburgh
International Television Festival in August 1995, the BBC, ITN and
Channel 4 led reflections on the way the media had portrayed a one-sided
view of the Brent Spar debacle. As it turned out, Greenpeace had spent
more than $(US)500,000 for TV equipment to beam back the deep-sea
battle scene. David Lloyd of Channel 4 acknowledged that his news organ-
74 Jon Entine
ization had relied too much on Greenpeace news releases. ‘Greenpeace was
pulling us by the nose’, added an embarrassed Richard Sambrook, head of
newsgathering at the BBC. During the public brouhaha, the BBC had let its
enthusiasm for good pictures trump its responsibility for integrity by will-
ingly airing whatever exciting video beamed its way. In referring to
Greenpeace, Sambrook noted, ‘This particular David was not armed with
a slingshot so much as an AK-47’ (6 September 1995).
With the passage of time, certain journalists have engaged in what can
only be called historical revisionism. In one prominent example, New
Scientist gave Greenpeace UK executive director Peter Melchett two pages
of free advertising in the guise of an annual update to make the case that
Brent Spar was actually a ‘defining (positive) moment for the environmental
movement’. While admitting that ‘Greenpeace made mistakes too’,
Melchett excused its actions with the claim that this was only because ‘we
allowed ourselves to follow the agenda set by the [Department of Trade and
Industry], Shell and the media – too often getting into arguments about the
potential toxicity of the Spar’ (New Scientist, 23 December 1995). In other
words, Greenpeace erred in so far as it let the issue turn on the particulars
of this case rather than on the slippery slope argument that this dumping
would open the way to massive dumping and irreparable pollution.
Greenpeace’s actions during and since Brent Spar have emboldened
those who assert that pressure groups need to be held more accountable
and that exaggerating environmental hazards weakens the credibility of the
entire environmental movement. ‘Deep-sea disposal seemed the least
harmful option’, concluded Robert Sangeorge, a spokesman for the
Switzerland-based Worldwide Fund for Nature. Brent Spar ‘was a circus
and sideshow that distracted from the big environmental issues affecting
the world’ (Wall Street Journal, 7 July 1995). One overriding lesson of
Brent Spar is usually lost on both sides: beware of all spin-doctors, in suits
and even those dressed in green. Although government agencies and corpo-
rations have long charged that environmental activists exaggerate hazards,
engage in scare tactics and stoke media controversies through the use of
out-of-context anecdotes, rarely have the stakes been so high. In this media-
driven age, clever ‘green’ and ‘progressive’ companies and ‘public interest’
groups sometimes act like the old hard-line corporations they ridicule.
According to the common wisdom, Brent Spar radically altered corpo-
rate environmental management strategy. ‘Shell did everything by the
book’, wrote the environment-business magazine Tomorrow, ‘It’s just that
the Brent Spar changed the book.’ Shell postponed its annual Better Britain
environmental awards due to the ‘inappropriate’ atmosphere. The high-
profile Greenpeace campaign also had an effect on other major companies
who were struggling to balance increased financial demands from investors
with the public’s newly inflamed environmental concerns. In an effort to
help this process, the UK oil and gas industry recently set up the North Sea
Decommissioning Group (NSDG). The group brings together representa-

tives from the oil industry, government, marine contracting companies,
and Norwegian groups. The main aims of the new group are to encourage
the development of new technologies, create a mood for co-operation,
identify areas of synergy between the operators and contractors, and to
promote good communication between all parties.
A number of commentators have argued that the primary lesson is the
value of ‘dialogue’. In what became a familiar refrain, offered without
empirical support, one analyst wrote that ‘Failure to engage in an ethical
dialogue led to damaged reputations for both Shell-UK and Greenpeace
because they failed to build effective relationships with their stakeholders’
(Wood 1996). According to John Elkington, chairman of the British
consultancy SustainAbility Ltd, this incident has introduced three new
factors into corporate decision-making: (1) ‘Producer responsibility: Life
Cycle Analysis is clearly going to be essential in future large scale indus-
trial undertakings. No structure the size of an oil platform or with a
similar function should ever be designed without built-in disassembly
plans’; (2) ‘Stakeholder responsibility: permission from regulators is obvi-
ously no longer sufficient’; and (3) ‘Shared responsibility’ – two frequently
hostile factions, radical environmentalists and multinational corporations,
would now have to actively dialogue, if not agree. The post-Brent Spar
discussion, wrote Elkington, has opened the way for Shell and other multi-
nationals that must ‘succeed in laying the ghost of Brent Spar …
signal[ling] the beginning of a new era of stakeholder capitalism’
(Elkington 1997).
During and since the Brent Spar affair, environmental activists invoked
a ‘new era of stakeholder capitalism’, which they claim requires protection
of the ‘natural environment’. This view reflects the tenets of a new genera-
tion of eco-economists and corporate social responsibility academicians
who have expanded the notion of stakeholder responsibility to include
relationships with customers, employees, franchisees, trading partners, the
local community and even society at large (Freeman and Reed 1983;
Jennings and Entine 1998). These views contrast with the narrow concep-
tion of corporate responsibility enumerated by conservative economists
such as Milton Friedman who wrote:
The only entities who can have responsibilities are individuals … A

business cannot have responsibilities. So the question is, do corporate
executives, provided they stay within the law, have responsibilities in
their business activities other than to make as much money for their
stockholders as possible? And my answer to that is, no, they do not.
(Friedman 1984)
76 Jon Entine
Friedman concluded that businesses that act in the best interest of share-
holders maximize the benefits to all stakeholders. ‘There is one and only
one social responsibility of business – to use its resources and engage in
activities designed to increase its profits so long as it stays within the rules
of the game, which is to say, engages in open and free competition,
without deception or fraud’ (ibid.).
By traditional standards, Shell’s decision to commission risk/benefit
analysis of the various disposal options demonstrated that it took its social
responsibilities seriously. Shell officials believed they were carefully
weighing investor expectations and their stewardship responsibilities for
the environment. The key problem, according to more liberal stakeholder
theory, is that these ethical calculations were made by Shell officials alone
and only included other potential stakeholder perspectives at Shell’s
behest. Although the company sought input from a variety of sources that
it considered stakeholders, it acted with little public consultation and
certainly against the wishes of some environmental groups that, rightly or
wrongly, believed that they better represented the interests of the natural
environment.
The issue over who deserves a place at the negotiating table as legiti-
mate stakeholder (or stakeholder representatives, as Greenpeace saw itself)
haunted the Brent Spar controversy throughout. Dialogue can only work
when the participants are perceived as legitimate.
Publicly, Shell appeared to embrace the broader conception of stake-
holder responsibility, asserting that it would make ‘openness’ the
watchword for the future (BBC 1996). Heinz Rothermund, managing
director of Shell Exploration UK said the Spar had set a precedent in how
Shell treated the public. ‘Brent Spar will enter history as the symbol of our
failure to establish our position and connect in a meaningful way with a
wider audience’ (Scotsman, 16 April 1997). However, it is reasonable to
suspect that Shell’s post-crisis confessions of myopia and calls for dialogue
were more reactive and tactical than defining. Most corporations, Shell
included, have long recognized that they operate at a disadvantage in the
court of public opinion because of deep concerns about their motives,
which Greenpeace exploited. This incident made them more sensitive to
public opinion, which Shell believed was not always rational. ‘We hadn’t
taken into account hearts and emotions, you know, where people are
coming from, which is in part today’s debate’, noted Chris Fay, chairman
of Shell UK (BBC 1995).
In retrospect, the lessons appear ambiguous and contradictory. Dr
Angel, for one, has expressed his ‘enormous frustration’ at the lack of
sophistication displayed by all sides over the scientific issues, even by Shell
and the British government. Dr Angel writes:
One example of this was when we were trying to put some informa-
tion about biodiversity in the public domain. There had been a[n
erroneous] comment made in the media that disposal of the Spar off
Rosemary Bank would result in the extinction of several species. We
argued that while dumping the Spar would undoubtedly kill one or
two million worms, similar numbers would be killed by dumping the
waste in landfill. The problem was that Tim Eggar proceeded to put
out a statement in which he left out the ‘million’ [he wrote: ‘one or
two worms’] and proceeded to argue that the deep-sea is a low diver-
sity environment. We [Angel’s research group] were then pilloried for
this obvious untruth. Greenpeace showed a remarkable facility for
selective deafness.
(Angel 2001)
Greenpeace consistently ridiculed any option other than land decommis-

sioning, frequently accusing independent scientists of being tools of Shell
or corporate spokespersons, charges repeated endlessly and sometimes
uncritically in the media. Without any scientific evidence, Greenpeace
placed a far higher value on marine environments than on terrestrial or
even atmospheric environments. They refused to consider the impact of
their favoured solution, insisting they were taking the most ‘ethical’ posi-
tion. Such righteousness nonetheless took a toll on Shell and the
government’s position. MORI’ s data from before and after the incident
(1993, 1995 and 1996) indicate that confidence in ‘scientists working in
industry’ and ‘scientists working for government’ was significantly lower
than those ‘working for environmental groups’. Another MORI survey
commissioned by the industry itself showed that the public’s approval
rating of the offshore oil and gas industry slipped from 72 per cent in the
1970s to 32 per cent by 1996 (Elkington 1997).
However, predictions by activist groups that Shell would replace Exxon
as a corporate symbol of the absence of corporate responsibility have not
materialized. The scientific situation was far more ambiguous in this inci-
dent when compared to Valdez; and Shell’s moral culpability was never
fully established, partly as a result of missteps by Greenpeace. In fact,
according to the MORI surveys, Greenpeace suffered a severe blow to its
image that persists to this day. The incident underscores the plasticity of
public opinion when it comes to hot button issues with complex, if not
murky, scientific issues at stake.
Is there a process which could have resulted in scientific consensus and
a possible Greenpeace–Shell rapprochement? Despite public embraces by
both sides of the need for stakeholder dialogue, intractable practical reali-
ties confound an easy solution. As a consequence, the Brent Spar incident
has triggered many prickly ethical questions:
78 Jon Entine
• Was dialogue ever really possible considering Greenpeace’s absolute

opposition to risk–benefit analysis based on its invocation of a
distorted ‘precautionary principle’?
• Is classic risk–benefit analysis, which weighs both environmental and
financial factors, appropriate, considering Greenpeace’s insistence that
the environment stands as the premier stakeholder, eclipsing the rights
of investors, workers, vendors and the broad public who consumes
Shell’s products?
• What changes if Greenpeace’s assessment of what is most environmen-
tally appropriate is superficially attractive but scientifically flawed, as
Shell claimed?
• Once the conflict erupted, could Shell or Greenpeace have handled
their respective situations differently to attain a goal that both publicly
embraced: the most environmentally sensitive solution to a complex
and expensive project?
Faced with the level of disingenuity displayed by Greenpeace, Shell may

never have overcome the hearsay and misinformation that marked this
incident. It is also far from certain that Greenpeace could have got a
hearing on its perspective without the use of extreme tactics. Considering
the circumstances of this case, the suggestion that more dialogue or open-
ness could have short-circuited this confrontation is simplistic, for it
assumes that the dispute was rational.
As the decommissioner at Shell-UK noted, in the search for publicly
acceptable, but environmentally questionable, solutions, scientific and
engineering logic and rigour might be cast aside completely (BBC 1996).
Capitulation, not negotiation, was always Greenpeace’s stated goal. It was
wedded to an a priori conviction that even minimal pollution from Shell’s
decommissioned oil rig was environmentally unacceptable. Therefore,
dumping under any circumstances crossed an ethical line. Asked what
would happen if Shell did not abandon its plans, Jochen Vorfelder, the
Greenpeace spokesman in Germany, stated that the protests would
continue and escalate. ‘If you call that blackmail, that’s okay with me’, he
said (BBC 1995).
Only in the aftermath of the blow to its reputation has Greenpeace
pledged, at least for public consumption, its willingness to engage in
dialogue. ‘Industry is now the main player in society’, noted Thilo Bode,
manager of Greenpeace Germany, who took over as the executive
director of Greenpeace International in the wake of the Spar incident.
‘That’s why we need to talk to them.’ Bode added that Greenpeace itself
needs to open itself and repair its image for being ‘bureaucratic, secretive,
even untrustworthy’(FinancialTimes,10January1996).Bodetold Time that
Greenpeace might even abandon its long-time reliance on guerilla tactics.
‘The campaign against Shell’s plans to dump the Brent Spar oil rig at sea
started what we call ‘the post-Brent Spar effect,’ he commented that same
summer. ‘Now we’re seeing that as soon as we announce a campaign,
companies back down. This happened most recently with Unilever. The
company said it would stop using products obtained by industrial fishing
in the North Sea before we could even launch our campaign actions. But
perhaps the most important lesson was the realization of what we can do
with market forces. It wasn’t Greenpeace’s strength that made Shell back
down; it was the consumer boycotts’ (Time International, 10 June 1996).
It is not clear whether dialogue would benefit the causes Greenpeace
has historically supported. As Paul Horsman, the Greenpeace leader of the
Brent Spar campaign said, ‘With the environmental movement, there’s a
sleeping giant that can be awakened very, very easily and very, very
quickly’ with such tactics (Wall Street Journal, 7 July 1995). It is arguable
that in the face of enormous corporate resources (Shell), and a less than
receptive government (UK Conservative Party), anything short of a shrill,
high-profile campaign in which violence was a threat would have resulted
in public debate. In other words, the anti-rational, emotive campaigns that
Greenpeace now claim they may eschew may yet remain its most effective
tactic considering the natural imbalance of power when public interest
groups square off against multinational corporations or conservative
governments.
Incident-driven development of international standards in a politically
charged atmosphere raises complicated business and ethical concerns. In
retrospect, managing public perception, rather than the need for more
dialogue and scientific rigour are the most important lessons from Brent
Spar. Brent Spar reaffirms that the simplistic distinction between ‘progres-
sive’ activist groups that purportedly fight for the little guy and so-called
‘evil’ corporations is a caricature that disguises a more textured reality.
Does this conclusion suggest that future conflicts are inevitable? Not
necessarily. There are encouraging, though limited, signs that dialogue
outside of the crisis framework that prevailed in Brent Spar might offer
some relief. As The Economist noted, the incident encouraged a ‘growing
universe’ of corporate behaviour to which ‘standards of correctness are
being applied’, so that ‘good firms will have to listen hard and explain
even harder’ (10 May 1997). Shell, like many companies during the
nineties that faced challenges about their environmental practices, estab-
lished a Social Accountability Team to review corporate practices.
Is this a sincere effort or strategic corporate greenwashing designed to
inoculate Shell against protests that are more virulent? Undoubtedly, it’s a
little of both. In the short term, Shell is determined to resuscitate its public
image. More than two years after the affair, in April 1998, Shell issued a
social accountability report, ‘Profits and Principles – Does There Have to
be a Choice?’ At Shell’s invitation, John Elkington prepared a ‘triple
bottom line’ analysis that was incorporated in the report assessing
80 Jon Entine
economic, environmental and social bottom line impacts of Shell’s interna-

tional operations. ‘The sustainable development community … must
develop its toolkit for triple bottom line accountability and management’,
Elkington wrote in explaining his decision to collaborate with Shell.
If sustainable development is to become a global reality rather than

remain a seductive mirage, governments, communities, companies and
individuals must work together to improve their ‘triple bottom line’
(economic, social and environmental) performance. To this end, we
not only need new forms of accountability but also new forms of
accounting.
This does not mean that every aspect of a company’s performance
can – or should – be reduced to a ‘common currency’ of money values.
But if we are to manage a given company’s performance effectively we
also need to be able to measure it. We must find accurate, useful and
credible indicators of progress in terms of economic prosperity, envi-
ronmental quality and social justice.
Of most significance, Elkington broke from the Greenpeace model of

perpetual confrontation, which rendered dialogue impossible. ‘Companies
exist to create wealth’, he wrote, ‘so the most direct contribution they can
make to sustainable development is to create long-term value on an
economically, socially and environmentally sustainable basis. A key
twenty-first century challenge, in short, will be “sustainable value. …
Happily, the evidence suggests no fundamental conflict between sustain-
able value creation and long-term shareholder value added”.’
Empirical research provides only ambiguous support for Elkington’s
‘happy’ belief that there is ‘no fundamental conflict between sustainable
value creation and long-term shareholder value added.’ Although it is intu-
itively likely that proactive environmental corporate policies, including
expensive outlays for new technology, could lead to some efficiencies and
reduced exposure to regulation or negative publicity, thus yielding a net
gain for the corporation, empirical evidence to support this intuition is
very sparse. While several studies have shown that better pollution perfor-
mance improved profitability (Bragdon and Marlin 1972) and reduced
risks (Spicer 1978), others have shown no significant link between
measures of environmental performance and profitability (Fogler and Nutt
1975; Rockness, Schlachter and Rockness 1986). Historically, in a world
with varying regulatory standards, multinational corporations are in a
position to externalize and therefore bury environmental mistakes.
Consequently, many corporations rationally expect to avoid paying a price
(e.g. lost efficiencies, negative publicity, regulatory compliance costs), for
environmental cost cutting. As a result, corporations face frequent tempta-
tions to place shareholder financial interests over ‘sustainable value

creation’.
As controversies in the early 1990s that damaged the reputation and
profitability of the Body Shop and Ben & Jerry’s have demonstrated, firms
whose environmental practices do not meet industry standards or a corpo-
ration’s marketing persona can experience significant damage when
stakeholders believe they have been betrayed (Entine 1994, 1995).
It is far too early in this experiment to determine if a commitment to
greater dialogue will prove attractive to either environmentalists or corpo-
rations after the initial honeymoon ends and conflicts arise. A major
problem is that the theoretical appeal to the value of dialogue, which
underpins this working agreement, presupposes that it is clear who is enti-
tled to participate and be listened to. Key members of the environmental
activist community, Greenpeace in particular, do not embrace the
Sustainability–Shell co-operative model, which is based on the notion that
‘companies exist to create wealth’. As it now stands, Greenpeace, which
provoked the Brent Spar affair, is a guest at its own wedding. Another
factor is that dialogue only works when common interests overlap. ‘The
difficulty of dialogue is that the two sides must be in communication – i.e.
listening to each other – and should be looking for practical solutions’,
notes Dr Angel. ‘There also have to be agreed criteria on how to make the
final decisions. The Greenpeace attitude that any solution involving marine
disposal was out was a bit like Henry Ford’s comment that “you can have
a car of any color you want so long as it is black” ’ (Angel 2001).
This central paradox of Brent Spar – a confusion of the identity and
legitimacy of stakeholders – suggests that dialogue may prove an illusive
goal when grounds for compromise do not exist. The privileged dialogue
model now encouraged by Sustainability and Shell, which leaves the most
vocal activists as sideline observers, remains a problematic tool for
resolving fractious environmental disputes in which sharply coloured
ideology, rather than risk assessment, is the basis for discussion.
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Suggestions for further reading

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Appendix 1
Extracts from selected Greenpeace news releases
Greenpeace occupies scrapped North Sea oil platform before it’s

dumped at sea (30 April 1995)
Greenpeace today scaled and took up residence on an old North Sea oil
platform to stop its owner, Shell, from dumping the rusting hulk and its
highly toxic contents to the sea bed.
Four climbers used ropes and winches to scale the Brent Spar, which is
the first of 400 North Sea oil platforms to be dumped at sea. The climbers
have food and supplies for what is expected to be a long occupation. The
Moby Dick is standing by as a safety vessel. The activists first climbed the
steel ladders on the installation, then scaled the outer part of the rig, 28
metres high above the waterline.
After Moby Dick captain Pelle Pettersson notified the five other rig
support vessels in the area, stating that Greenpeace was protesting the
dumping of the Brent Spar, a Shell standby vessel then sailed very close to
the Moby Dick and the inflatables, harassing them.
The Brent Spar contains over 100 tonnes of toxic sludge – including oil,
arsenic, cadmium, PCBs and lead – including more than 30 tonnes of
radioactive waste …
A Greenpeace report released today, ‘No Grounds for Dumping: The
decommissioning and abandonment of off-shore oil and gas platforms’ …
concludes that total removal is not only the best environmental option but
also the most cost-effective, feasible and job-saving.
Dumping oil platforms ‘should be stopped’ says EU Commissioner
for the Environment (13 May 1995)
International support for Greenpeace action to prevent the sea dumping of
toxic laden North Sea oil platforms continues to grow.
Quotes translated from Danish TV:
Actually, I think most countries in the EU think this is dirty and that it
should be stopped … [I]t is good that Greenpeace is around to ensure
these things do not go on secretly.
Ritt Bjerregaard, EU Commissioner for the Environment
There are many problems in the North Sea. Many of the platforms out
there are about to reach the time when they will have to be scrapped.
This has to be done in a safe manner and the only way this can be
done is on land.
Svend Auken, Danish Minister for Environment and Energy
It is quite simply a catastrophe. For the environment, for the fish-

ermen, for all of us … if a permit is given now, what is to be expected
for the 400+ other installations out there.
Peter Sand Mortensen, Chair of Fishermen’s Sector, International
Transport Federation (ITF)
Greenpeace welcomes important decisions at North Sea confer-
ence (9 June 1995)
[M]ost North Sea States have agreed that it is totally unacceptable to
dump offshore installations at sea and recommend the decommissioning of
rigs on land. The only objections to this recommendation came from the
UK, France and Norway.
Greenpeace response to the UK Government proposal that
dumping the Brent Spar remains an option (20 July 1995)
The opposition to dumping the Brent Spar was based on the following
facts:
(i) There has been no formal inventory of the Brent Spar’s contents, so
the environmental impacts could not possibly be properly assessed.
(ii) There is a lack of understanding of the deep sea environment, and it is
currently impossible to predict the effects of the proposed dumping on
deep sea ecosystems.
(iii) The documents which supported Shell’s licence application are highly
conjectural in nature. They contain numerous unsubstantiated
assumptions, minimal data and extrapolations from unnamed studies.
(iv) Dumping the Brent Spar would create a precedent for dumping other
contaminated structures in the sea and would undermine current inter-
national agreements. The environmental effects of further dumping
would be cumulative.
(v) Dismantling of the Brent Spar is technically feasible and offshore engi-
neering firms believe they can do it safely and effectively. The necessary
facilities are already routinely in use and decommissioning of many other
oil installations has already been carried out elsewhere in the world.
(vi) To protect the environment, the principle of minimising the generation
of wastes should be upheld and harmful materials always recycled,
treated or contained.
Greenpeace believes Shell UK were right in not dumping the Brent Spar.
This view is supported by most governments in Europe and a vast majority
of the public. There will always be scientific debate, but in the arena of
this debate the principle of precautionary action is applied and the benefit
of the doubt given to the environment.
86 Jon Entine
Letter to Shell UK (from Peter Melchett, Executive Director,

Greenpeace UK, to Dr Christopher Fay, Chairman and Chief
Executive, Shell UK Ltd, dated 4 September 1995)
As you know, we were concerned that no full analysis had been done of
the contents of the Brent Spar prior to your decision to dump it.
Greenpeace therefore took some samples from a storage tank on the Brent
Spar during our occupation … We thought samples had been successfully
taken from storage tank 1, but we have realised in the last few days that
when the samples were taken the sampling device was still in the pipe
leading to the storage tanks, rather than in the tank itself.
In many references to our sampling, we stressed that the results were
not definitive, but I’m afraid that in writing to you and your colleagues on
the Shell UK Board on 19 June, I said that our sampling showed a partic-
ular quantity of oil on the Brent Spar. That was wrong, and I apologise to
you and your colleagues for this.
As I’ve said, our main concern was that there should be a full and inde-
pendent inventory of the contents of the Brent Spar, and Greenpeace is
delighted that, following your decision not to dump the Brent Spar at sea,
such an inventory is being compiled by the independent analysts DNV.
As you also know from my letter to you of 16 August, since your deci-
sion not to dump the Brent Spar, scientists have now made it clear that
there were fundamental flaws in the scientific arguments that Shell UK put
forward to the public and to UK Government Ministers, justifying your
decision to dump, in particular, concerning the ecology of the area where
you proposed to dump the Brent Spar. I hope that is something, now you
have the evidence for this, that Shell UK will be prepared to admit publicly.
In any event, as you know, the basic argument between Greenpeace and
the European governments that supported our position on the one hand,
and Shell UK and the UK Government on the other, was not about the
contents of the Brent Spar, nor the physical characteristics of the proposed
dump site. The argument was about whether it was right to dump indus-
trial waste of any sort in the deep oceans, whether dumping the Brent Spar
would be a precedent for dumping other oil installations, and indeed other
waste in the oceans, and, fundamentally, over whether we should dump
wastes into any part of the environment, as opposed to reducing waste, and
recycling, treating or containing harmful materials. Our view remains that
the division between us on the Brent Spar depends on how deeply we value
our environment, and what damage and precedents we find unacceptable.
Brent Spar meeting between Greenpeace and Shell (8 September
1995)
Shell UK are now studying 200 different options for onshore disposal or
re-use of the Brent Spar. Greenpeace welcomes this following a construc-
tive meeting with the Chairman of Shell UK.
North Sea oilfields must be dismantled on land: Greenpeace (5

February 1996)
Greenpeace today called on the UK Government to rule out dumping at
sea for all oil installations and abandon the so-called ‘case-by-case’
approach.
‘The issue at stake here is whether we live in a throwaway society’ says
Greenpeace Campaign Director Chris Rose. ‘The public knows it is wrong
to dump old cars in the village pond – and it’s wrong for the Government
to let the oil industry treat the sea as its rubbish dump. The UK
Government must rule out dumping at sea and abandon the so-called case-
by-case approach.
Greenpeace also pointed out that in December 1995 a report for the oil
industry group UKOOA (UK Offshore Operators Association) noted that
the ‘best environmental option’ for decommissioned steel installations is to
bring them ashore.
Greenpeace welcomes scientists’ report on Brent Spar (22 May
1996)
Greenpeace today welcomed the report by international scientists brought
together by UK Energy Minister Tim Eggar.
Working under the auspices of the Natural Environment Research
Council (NERC) and chaired by Professor John Shepherd of Southampton
Oceanography Centre, the scientists concluded:
• The UK Government should not assess each installation purely on a

‘case by case’ basis. It should also take into account the cumulative
impact of all disposals of waste at sea.
• The decision making process before licensing the dumping of the Brent
Spar should have included factors such as the need to conserve energy
and resources by reducing, re-using and recycling waste. Other factors
such as public acceptability should also be taken into account in
future.
• Any problems with disposing of the Brent Spar on shore are no more
difficult than have already been overcome with other installations.
‘This report clearly shows that scientific opinion does not back Govern-
ment policy’, said Dr Helen Wallace of Greenpeace UK. Energy Minister
Mr Tim Eggar ‘should stop using science as an excuse to ignore public
concern about the environment’.
Greenpeace said today’s report gave a strong backing to the decision
made by the Oslo Paris Commission last year to agree a moratorium on
the disposal at sea of decommissioned offshore installations. The UK and
Norwegian governments have expressed reservations to the moratorium.
Appendix 2
Martin V. Angel (1995) ‘Brent Spar: no hiding

place’, Biologist 42(4): 192
Mass media coverage and a vigorous campaign by Greenpeace, waged
mainly at the petrol pumps in Germany, caused Shell to cancel plans to
sink the Brent Spar. But was this decision the correct one?
The Brent Spar disposal issue has opened a Pandora’s Box, bringing into
focus some of the gargantuan problems of waste management that will
face mankind as its population doubles in the next 50 years or so. Life-
styles in industrially developed countries are very wasteful. But even if the
amount of waste we produce can be reduced, it can never be completely
eliminated. More should be recycled, but recycling demands energy and
often has its own inherent environmental problems. In Britain, our
customary solution has been to bury it in land-fill, but this also causes
problems. So why not use the oceans deeper than 2000 m, which cover
65% of the earth’s surface, for waste disposal?
The Greenpeace view is that any such use of the deep oceans is uneth-
ical – end of argument. But why is the contamination of land or
atmosphere not just as unethical? This attitude arises partly from the
mistaken belief that the oceans are pristine and that we lack enough under-
standing about how they function to take such a risk. Arguments about
ethics and stewardship are very important but need to be discussed coolly,
free from the passions roused during a fevered campaign. Leaving the
question of ethics aside, what were the main arguments produced by
Greenpeace against the deep ocean disposal?
The Spar contains four main types of contaminants: heavy metals,
traces of hydrocarbons, synthetic organic compounds and enhanced levels
of radioactivity concentrated in the drilling fluids. Shell, in being granted a
licence for disposal in the deep ocean through the International Maritime
Organization, must have demonstrated to the satisfaction of the
Department of Trade and Industry (admittedly not the most environmen-
tally aware branch of Government!) that such disposal would have had ‘a
negligible impact on living resources, human health, marine activities,
amenity value and water quality’. Greenpeace argued that introducing
these contaminants would reduce water quality and biodiversity, the
greatest danger arising from the contaminants entering the food chain and
becoming bio-accumulated. Land-fill must be the preferred option,
Greenpeace argued misleadingly, because only there could the impact be
monitored and controlled. Monitoring of the deep ocean is perfectly
feasible technically, and also, in practice, easier than in shallow seas where
instruments deployed long-term in situ are constantly being trawled. So
what impact might the contaminants in the Spar have had in the North
Atlantic? The first point to make is that no matter what option is chosen
there will be deleterious effects. It is a question of choosing the lesser evil.
The quantity of heavy metals now left in Brent Spar after decommis-
sioning is probably less than that in any large ship. Since hydrothermal
vents expel heavy metals into the deep ocean in quantities that rival the
output of the world’s mining industry, many deep ocean inhabitants are
well adapted to cope with a metal-rich environment. The site chosen was
in 2000 m of water in a hollow, southwest of Rosemary Bank, through
which swirls one of the outflows of cold Norwegian Sea water. This
swirling flow would have rapidly dispersed any contaminants leaking from
the rig. This deep dense water takes at least 250 years to return back to the
surface, by which time the relatively small amounts of heavy metal would
have been stripped out by the sedimentary rain of material from the
surface and redeposited onto the bottom, and gradually incorporated into
the geological record.
It is most improbable that bio-accumulation within the food-web would
have been a problem. At depths of 2000 m the standing crop of organisms
is less than a fiftieth of those in shallow water. Consequently, there are no
potential living resources at such depths, and there are very few biological
pathways along which contaminants might move back up to the surface.
Similarly, the residual hydrocarbons pose no serious environmental
threat – hydrocarbons occur naturally in the deep ocean. Where there are
natural seeps, large communities of animals use them as a source of
organic material. Nor would the enhanced radioactivity in the stored drill
cuttings pose much of a risk. The radioactivity is at such a low level that
even on land it would pose no more radiological threat than living in a
granite building in Aberdeen.
There is less certainty about the persistent synthetic organic
compounds; we know so little about how they might move in deep ocean
communities. However, since the ultimate fate of all such materials is to
become incorporated into deep ocean sediments, discharging them at the
bottom of the deep ocean is likely to be a short-cut.
Questions of biodiversity are complex. The sediment faunas of macro-
and meio-benthos at 2000 m in the deep ocean appear to be as species rich
as some of the most diverse terrestrial habitats. We know that larger
species inhabiting the sea-floor have enormous geographical ranges, and it
seems reasonable to assume that the smaller organisms will be similarly
widely distributed. One habitat type that is in short supply in the deep
ocean is provided by hard surfaces, so in that sense the rig would have
enhanced the diversity of habitat.
The aspect that Shell was most concerned about was whether the rig
would trigger a mass wasting event when it landed on the bottom, and this
was one reason for their having selected a hollow in the sea-bed. In the
North Atlantic, the geological record contains evidence of repeated
90 Jon Entine
underwater landslides involving hundreds of cubic kilometres of sediment

which have slipped from the continental slopes into deep water. However,
compared with the millions of square kilometres of the world’s deep-ocean
floor, the few thousand square metres impacted by the Spar would have
been insignificant.
‘by him all things were created’ – Colossians 1.16
Ever since mankind started to cross the oceans in ships, the ocean bed has
been littered with his debris, ranging from sunken wrecks to clinker and
other rubbish. During the last World War, millions of tonnes of shipping
were sunk, each wreck representing a source of contamination comparable
to the Spar. Are the impacts of these tragedies yet another environmental
time-bomb ticking away, or are they serendipitous experiments that we can
use to evaluate the safety of deep ocean disposal? The deep ocean is poten-
tially a safe repository for many types of waste, so long as it is properly
managed, monitored and controlled. However, there is a general distrust in
the ability and willingness of Industry and Government adequately to
manage such disposal, and this will sway many into supporting the
Greenpeace view. Yet we cannot afford to discard the option of using the
deep ocean without full and proper environmental audit of the costs
entailed. Was this a victory for the environment? Personally, I doubt it, but
now that Pandora’s Box is open, how are we to close it?
Appendix 3
Brent Spar Timeline
June 1976
Brent Spar installed in Brent Field, a unique design for oil storage and
tanker loading. Two of six tanks later damaged in operation. Structure
also later found to have been stressed during installation making major
difficulties in reversing procedure to raise from water.
September 1991
Brent Spar ceases operating.
1991–1993
Detailed decommissioning studies carried out by Shell and independent
external organizations and contractors to assess options. Two compared
in detail – horizontal onshore dismantling and deep-sea disposal with
deep sea emerging with six times lower safety risks, four times less cost
and minimal environmental impact.
1994
February
Independent Aberdeen University study (AURIS) endorses choice of
deep-sea disposal. Formal consultations with conservation bodies and
fishing interests. Draft Abandonment Plan submitted.
December
Shell submits final Abandonment Plan to UK Government Department
of Trade and Industry and receives approval.
1995
February
UK Government announces approval for deep-sea disposal and notifies
13 other contracting parties (12 nations and EC), signatories to the
Oslo Convention covering protection of the marine environment. No
objections raised within normal time limit. Shell announces deep-sea
disposal plan.
30 April
Greenpeace activists occupy Spar, wrongly alleging Spar is ‘a toxic time-
bomb’; ‘14,500 tonnes of toxic rubbish’; or contains ‘over 100 tonnes
of toxic sludge’. Over next months they say Spar will be ‘dumped in the
North Sea’ rather than disposed of at a carefully selected site in the deep
Atlantic and suggest ‘more than 400 oil rigs in the North Sea’ might
also be ‘dumped’. They say Spar contains 5,550 tonnes of oil.
92 Jon Entine
5 May
UK Government grants disposal licence to Shell UK.
9 May
German Ministry of the Environment protests against disposal plan.
13 May
Independent UK scientists begin stating support for deep-sea disposal
for Brent Spar.
23 May
Activists removed from Spar. Greenpeace calls for Shell boycott in
continental Europe.
8–9 June
Fourth North Sea Conference at Esbjerg, Denmark. Several European
countries now call for onshore disposal for all oil installations. UK and
Norway, the countries with the largest, heaviest, and most difficult
deep-water structures, argue for ‘case-by-case’.
11 June
Shell UK begins to tow Spar to deep Atlantic disposal site.
15–17 June
Public opinion in continental northern Europe strongly opposed.
Chancellor Kohl protests to UK Prime Minister John Major at G7 summit.
14–20 June
Protesters in Germany threaten to damage 200 Shell service stations. 50
are subsequently damaged, two fire-bombed and one raked with bullets.
20 June
Several continental northern European governments now indicate oppo-
sition. Shell UK decides to halt disposal plan in view of untenable
position caused by European political shifts, increased safety risks from
violence and need for more reasoned discussion.
Late June
UK scientific debate intensifies, with growing support for Shell approach
to environmental decision-making based on reason and sound science.
26–30 June
Eleven states call for a moratorium on sea disposal of decommissioned
offshore installations at meeting of Oslo and Paris Commissions.
Opposed by Britain and Norway.
7 July
Norway grants permission to moor Spar in Erfjord while Shell recon-
siders options.
12 July
Shell UK commissions independent Norwegian foundation Det Norske
Veritas (DNV) to conduct another audit of Spar’s contents and investi-
gate Greenpeace allegations.
12–18 July
UK Government makes clear that any new plan for which Shell UK
seeks approval, must be at least as good or better than deep-sea disposal
on the Best Practicable Environmental Option criteria.
26 August
UK television executives admit to lack of objectivity and balance in
coverage of the Spar story, and to using dramatic film footage from
Greenpeace which eclipsed the facts.
5 September
Greenpeace admits inaccurate claims that Spar contains 5,550 tonnes of
oil and apologises to Shell.
8 September
After a meeting between Dr Chris Fay, Chairman and Chief Executive
of Shell UK and Peter Melchett, Executive Director of Greenpeace UK,
Greenpeace says it recognizes that Shell UK must work within the legal
framework of UK Government policy and the BPEO.
11 September
UK scientists reiterate support for rational, science-based environmental
decisions at British Association for the Advancement of Science.
June–October
Shell receives more than 200 proposals for onshore disposal or re-use of
Spar.
11 October
Shell Expro outlines new ‘Way Forward’ to find a solution for Spar
disposal or re-use. Notice placed in the Official Journal of the European
Communities inviting expressions of interest from major contractors.
Their submissions, with the 200 unsolicited proposals, to be analysed to
produce a ‘Long List’ of 20 to 30 organizations then to be asked to
meet pre-qualification criteria.
18 October
Det Norske Veritas (DNV) presents results of its independent audit,
endorsing the thoroughness and professional competence with which
Shell and its consultants prepared the original Spar inventory. DNV
confirms that the amount of oil claimed by Greenpeace to be in the Spar
was ‘grossly overestimated’.
30 November
DNV further report no PCBs (polychlorinated biphenyls) on Brent Spar.
1996
22 March
Shell Expro launch original Brent Spar web site.
94 Jon Entine
22 May
‘Scientific Group on Decommissioning Offshore Structures’ report
published by the Natural Environment Research Council confirming
earlier Shell studies that environmental effects of deep-sea disposal of
Spar would have been very small and localized.
3 July
Shell announces ‘Long List’ – 21 leading contractors from eight nations
on the challenge to find the BPEO for Brent Spar. Competitors given
four weeks to develop outline concepts.
New structural analysis confirms that reversing Spar’s original instal-
lation procedure to raise it out of the sea for dismantling would be far
from straightforward.
Shell outlines how the new Spar Dialogue will help Shell identify a
solution by gathering a wide range of views and values.
31 July
Thirty outline proposals for Brent Spar disposal submitted by Long List
contractors.
15 August
Shell publishes Long List outline proposals.
1 November
First Brent Spar Dialogue Seminar in London – organised for Shell by
the Environment Council, an independent charity which helps different
interest groups work together to find common ground.
1997
13 January
Shell announces ‘Short List’ – six leading international contractors and
consortia to develop in detail 11 different ideas for re-using or scrap-
ping Spar.
Short List contractors given four months to complete studies and
make detailed commercial bids.
20 February
DNV commissioned to carry out independent evaluation of proposals
to ensure technical, safety and environmental aspects of each bid can be
compared on a like-for-like basis.
11 March
Brent Spar Dialogue Seminar in Denmark.
9 April
Short List contractors’ deadline extended by a month to beginning June.
14–18 April
Brent Spar and the Way Forward a major feature of the British Pavilion
at the Hanover Fair in Germany.
30 May
Brent Spar Dialogue Seminar in Rotterdam.
2 June
Six Short List contractors submit nine detailed proposals.
17 June
Shell publishes CD-Rom of proposals with computer animation, inter-
active maps and video sequences.
13 October
Shell announces Way Forward final stages and DNV publishes indepen-
dent findings together with contractors’ bid prices.
15–28 October
More Brent Spar Dialogue seminars in London, Copenhagen, Rotter-
dam and Hamburg.
November–January 1998
Shell carries out its final BPEO evaluation.
1998
29 January
Shell announces its choice of solution for Spar – a ‘one-off’ re-use as a
Norwegian Ro/Ro ferry quay.
Decommissioning Plan submitted to UK Government – the first step in
gaining approval.
26 August
UK Government announces its approval of Shell Exploration and
Production’s choice of solution.
25 November
Spar topsides are successfully removed.
1999
10 July
The project is effectively completed when cut and cleaned ring sections
of Spar’s hull are placed on the seabed at Mekjarvik to form the base of
a new quay. Taking into account expenditures related to the initial
aborted deep-sea disposal of the spar, the costs total close to $96
million.
1 September
Shell Expro hosts a feedback seminar in London for interested parties
and stakeholders providing details of Spar’s decommissioning.
Copyright Shell UK Limited, November 1998
Chapter 4
Whistleblowing
The new perspective
Gordon Borrie and Guy Dehn 1
Whistleblowing – [a] Bringing an activity to a sharp conclusion as if

by the blast of a whistle (Oxford English Dictionary); [b] Raising a
concern about malpractice within an organization or through an
independent structure associated with it (UK Committee on
Standards in Public Life); [c] Giving information (usually to the
authorities) about illegal or underhand practices (Chambers
Dictionary); [d] Exposing to the press a malpractice or cover-up in a
business or government office (US, Brewer’s Dictionary); [e] (origins)
Police officer summoning public help to apprehend a criminal;
referee stopping play after a foul in football.
Introduction
Whistleblowing is relevant to all organizations and all people, not just
those few who are corrupt or criminal. This is because every business and
every public body faces the risk of things going wrong or of unknowingly
harbouring a corrupt individual. Where such a risk arises, usually the first
people to realize or suspect the wrongdoing will be those who work in or
with the organization. Yet these people, who are best placed to sound the
alarm or blow the whistle, often fear they have most to lose if they do.
Unless culture, practice and the law indicate that it is safe and accepted
for them to raise a genuine concern about corruption or illegality, workers
will assume that they risk victimization, losing their job or damaging their
career. Firms and companies aware that a bribe has been solicited will fear
not only that they will lose the contract if they do not pay, but that if they
blow the whistle their future economic interests will be damaged and their
staff will be harassed.
In considering this issue, it may be helpful to bear in mind the approach
taken with a criminal who decides to testify in criminal proceedings
against his or her former accomplices or colleagues. The authorities in all
nation states value such collaborators and will often offer them protection
Whistleblowing: the new perspective 97
and rewards. This is explained by their role in providing the necessary

evidence that helps the police and authorities to secure convictions.
However, where a responsible worker or a law-abiding firm blows the
whistle on corruption, the best they can hope for seems to be isolation and
disapproval. The effect (albeit unintentional) is that someone who informs
on corruption which he has participated in will receive more protection
and help from the authorities than an innocent colleague or competitor
who blows the whistle on the wrongdoing.
In the context of bribery this situation has particular relevance. Unless
people are enabled and encouraged to blow the whistle, when a bribe is
solicited from them, it is not clear how far the fight against corruption can
succeed. Without information from firms about the solicitation of bribes
or from workers about corrupt colleagues, the authorities will have to rely
on evidence from either the bribe-payer or the bribe-recipient. As these
two people will have effectively conspired against the public good, it may
be rather optimistic to rely on one of them to ‘see the light’ and to provide
the evidence which will allow the law to be enforced.
The consequence of this culture is that it discourages the great majority
of normal, decent people from raising concerns about serious wrongdoing.
It also encourages unscrupulous people to use the information for their
own advantage and at a time of their own choosing. In this way this
culture actually increases the risk of abuse. Malicious workers and
aggrieved competitors do already make damaging disclosures. Put simply,
they are able to exploit the absence of clear signals about how to blow the
whistle properly. Because there is neither a safe procedure nor an accepted
way to blow the whistle, they may also maintain that they are justified in
communicating false information to the authorities or the media anony-
mously. With nothing more than anonymous but interesting allegations to
go on, the authorities may start investigations and the media are likely to
report damaging rumours.
The dilemma
In practical terms, if someone is concerned about corruption or serious
wrongdoing in or by an organization, they have three options. These are
• to stay silent;
• to blow the whistle internally or with the responsible person;
• to blow the whistle outside to the authorities or the media;
Silence
Silence is the option of least risk both for the individual worker and for a
responsible firm which comes across corruption. It will be attractive for
98 Gordon Borrie and Guy Dehn
many reasons. The whistleblower will realize that his or her facts could be
mistaken or that there may be an innocent explanation. Where colleagues
or competitors are also aware of the suspect conduct but stay silent, the
whistleblower will wonder why he or she should speak out. In organiza-
tions where labour relations are adversarial, and in cultures where
corruption is common, the whistleblower is likely to assume that he or she
will be expected to prove that the corrupt practice is occurring, rather than
see those in authority investigate and deal with the matter. Even though he
or she has no control over it, the whistleblower may feel responsibility for
any action that may be taken against the wrongdoer. Finally, unless the
whistleblower believes there is a good chance that something will be done
to address the wrongdoing, it is almost inevitable that he or she will stay
silent.
Even if he or she thinks the alarm should be sounded, the whistleblower
will want to consider his or her private interests before taking action.
Without reassurance to the contrary, the whistleblower will fear reprisals –
be it harassment or dismissal. The whistleblower may also suspect (rightly
or wrongly) that the corruption involves, implicates or is condoned by
more senior people in or outside the organization, in which case he or she
will fear the matter will be covered up. Even where these obstacles are
overcome or reduced, the whistleblower will fear that he or she will be
labelled as disloyal by the generality of colleagues whose respect and trust
the whistleblower may want or need in future.
The results of this culture of silence are that:
• responsible employers are denied the opportunity to protect their

interests;
• unscrupulous competitors, managers or workers are given reason to
believe that ‘anything goes’;
• society focuses more on compensation and punishment than on
prevention and deterrence.
Blowing the whistle internally

Addressing the effects of this culture in the public sector, the UK
Committee on Standards in Public Life commented:
Placing staff in a position where they feel driven to approach the

media to ventilate concerns is unsatisfactory both for the staff member
and the organization. We observed in our first report that it was far
better for systems to be put in place which encouraged staff to raise
worries within the organization, yet allowed recourse to the parent
department where necessary. An effective internal system for the

raising of concerns should include:
• a clear statement that malpractice is taken seriously in the organi-

zation and an indication of the sorts of matters regarded as
malpractice;
• respect for the confidentiality of staff raising concerns if they wish,
and an opportunity to raise concerns outside the line management
structure;
• penalties for making false and malicious allegations;
• an indication of the proper way in which concerns may be raised
outside the organization if necessary.2
In formulating these recommendations, the committee took account of

good practice in the private sector where there has been considerable expe-
rience (particularly in the finance industry and in food retail) of providing
failsafe reporting channels to senior management. These initiatives started
in more competitive markets where there was little doubt that the early
reporting of suspected wrongdoing was in the organization’s self-interest.
The following analogy may be drawn here. Competitive sectors were also
the first to gather information from their consumers about how a product
or service operates in use. This practice has now been adopted through
much of the public sector.
However, the approach many organizations now take to information
from workers is similar to the attitude taken towards consumers thirty
years ago (that they were troublesome, untrustworthy complainants). This
is a mistake since, not only is information from the workforce readily
accessible and free to collect, but it enables the organization to put a
potential problem right before it causes any real damage to it, its reputa-
tion or its stakeholders. The self-interest of the organization in whistle-
blowing is now being recognized and, recently, a few large firms have
begun to use outside advice lines to encourage and reassure staff to raise
concerns about wrongdoing. These developments have been given added
impetus – particularly in the USA – by legal requirements to demonstrate
due diligence, where safety, competition, finance and certain criminal laws
have been breached.
Organizations are now beginning to realize the importance of providing
an alternative to (but not a substitute for) line management since, without
it their managers will have a monopolistic control over the information
which goes to those higher up. As with any monopoly, one weak link – be
it a corrupt, lazy, sick or incompetent person – will break the communica-
tion chain and stop those in charge receiving information which could be
critical to the organization.
Blowing the whistle outside

If, however, it is not safe and accepted for people to blow the whistle inter-
nally, then we need to turn to the options which exist for those people who
consider some action is warranted when they come across corruption.
Without a safe internal route, the only option is for them to disclose the
matter outside – be it to the authorities or more widely. This is an increas-
ingly important matter since the opportunities for such wider disclosure
particularly to the media and public interest groups are likely to be
increased with new technology. A relevant example to consider in the
context of any anti-corruption measure is where a worker or an audit firm
discovers, or reasonably believes, that account books or entries may
conceal bribes. If they feel unwilling or unable to blow the whistle inter-
nally, the only options they will have are to blow the whistle outside, or to
stay silent.
Such outside disclosures raise ethical and legal issues of confidentiality
and business secrecy. They also influence the balance of relationships
between business, the state and the media. An outside disclosure will
involve at the least some regulatory intervention and inconvenience and, at
worst, unjustified adverse publicity. This will cause unnecessary damage
and disruption to a responsible organization which would have dealt with
the matter properly had it been aware of it. As shown above, a culture
where – in the absence of safe alternatives – it can be argued that media
disclosures are a legitimate first port of call is an open invitation to an
aggrieved or malicious person to cause damage, rather than raise the issue
responsibly.
In most legal systems, there is no protection for a worker who makes an
outside disclosure – even if it is in good faith, justified and reasonable.
Accordingly, such disclosures are often made anonymously. This raises a
number of issues. Anonymity will be the cloak preferred by a malicious
person. It also makes the concern difficult to investigate and even impos-
sible to remedy. Finally, in any event, anonymity is no guarantee that the
source of the information will not be deduced. Where the person is identi-
fied, the fact that they acted anonymously will often be seen as a sign of
bad faith, jeopardizing their position. In the worst cases, such people
forfeit their careers. Their plight then attracts media attention, which can
only discourage others from sounding the alarm.
The near certainty that an outside disclosure will lead to serious
reprisals means that often the matter is not raised until the worker is
leaving the organization or the firm has lost the contract. By then the
problem may be much worse (indeed the disaster may have happened), the
evidence will be old, and the motives of the whistleblower may allow the
wrongdoer to distract attention from the corruption. In some cases this
delay may also allow the information to be used to damage or even black-
mail the organization.
The consequences of the current culture

The implications of the current culture of silence can be far-reaching:
• The failure of officials in the European Commission to respond to the

internal whistleblowing of an auditor caused him to disclose his
concerns of financial misconduct to the European Parliament. This led
to the resignation of the College of Commissioners, and a crisis in
confidence in the European Unions.
• The Bingham Inquiry into the corruption at the Bank of Credit and
Commerce International found that there was an autocratic environ-
ment where neither workers nor firms were willing to voice concerns.
This led to new rules in the UK on the duties of auditors and other
firms to report suspected irregularities;
• The victims of HIV-contaminated blood products in France com-
plained that the ministers and officials had known of the problem but
had said nothing and done nothing. This led to criminal prosecutions
against ministers and the resulting public scepticism about attitudes to
safety influenced the position the French Government took on the
dispute about UK beef imports;
• Two years before Robert Maxwell stole almost $1 billion pension
funds, he sacked a union official who had challenged what he was
doing with the pension money at a Scottish newspaper. Maxwell, a
powerful businessman, was able to ensure that the man could not get
another job in the industry, so destroying his career;
• A major leak at the nuclear power station near Tokyo happened
because no one questioned poor safety practices based on an unautho-
rized manual drawn up by a key contractor.3
Time and again similar messages come out of official inquiries into major
scandals and disasters. They reveal that people who worked in or with the
organization had seen the problem but had either been too scared to sound
the alarm or had raised the matter in the wrong way or with the wrong
person. Quite apart from the tragic human costs and enormous financial
damage caused in these cases, they undermine public confidence not only
in the organization concerned but also in business and governments more
generally. These wider implications are serious. In a changing competitive
world, the very success of business, public bodies and new technologies
relies on public confidence in their openness and probity.
Whenever there is a scandal or major disaster that could have been
averted, there is pressure for new regulatory controls. Although these are
aimed at the reckless, they often impose burdens on responsible organiza-
tions in the sector, thereby damaging competition. Each disaster also calls
into question the mechanisms by which law and society oversee the
conduct of private and public bodies. And each successive scandal renews
mistrust and scepticism about the role and work of governments and busi-
ness. The resignation of the European Commission in March 1999 is a
case in point. The Committee of Independent Experts remarked that the
facts demonstrated ‘the value of officials whose conscience persuades them
of the need to expose wrongdoings encountered in the course of their
duties. They also show how the reaction of superiors failed to live up to
legitimate expectations.’4
The aims of a whistleblowing culture

The primary aim of a whistleblowing culture is that concerns about corrup-
tion and wrongdoing should be properly raised and addressed in the
workplace or with the person responsible. Crucially, it sees the whistle-
blower as a witness, not as a complainant. Where communication channels
in organizations are designed for grievances and complaints, that is how
they are used by the workforce. In the context of concerns about abuse, it is
important to bear in mind that malicious and aggrieved people do already
make damaging disclosures when there is no recognized whistleblowing
scheme. Recognizing this, a whistleblowing culture should be concerned
with the silent majority who think it is not in their interests to blow the
whistle on corruption or serious wrongdoing. Drawing on the theory of
efficient markets (that competitive forces begin to operate once one-quarter
of consumers will consider switching suppliers), a whistleblowing scheme
will help organizations and societies deter corruption and wrongdoing
where a significant minority of those who now stay silent can be encour-
aged to see internal whistleblowing as a viable, safe and accepted option.
The main beneficiaries of a culture which disapproves of, and penalizes,
people who blow the whistle in good faith are those few corrupt firms and
individuals. Knowing that the alarm will not be sounded, they are confi-
dent that their wrongdoing (especially if it is corruption or bribery) will go
undetected and unpunished. (In any case, when the successful investigation
and prosecution of criminal activity outside of the workplace depends
overwhelmingly on the information the police receive, it is not clear why
the communication of information about wrongdoing in organizations is
generally assumed to be undesirable.) Quite apart from people with a
predisposed criminal intent, the current culture adversely affects the
conduct of the great majority of people. For them the strongest deterrent is
the fear of being caught and the shame and embarrassment that goes with
it. Where a culture of secrecy and silence exists, some people may be
tempted to engage in malpractice because they believe that they will not be
caught. Equally, if such a culture exists in a society, then otherwise respon-
sible organizations may feel that they will be at a competitive disadvantage
if they do not also pay bribes or engage in illegal practices.
The essentials of a whistleblowing culture

A whistleblowing culture cannot succeed without a strong and clear signal
from the very top of the organization that it is against corruption and is
resolved to go about its business lawfully. Such a culture will provide
assurances against reprisals for whistleblowing on wrongdoing. These will
apply even where the whistleblower is mistaken, provided he or she acted
honestly and reasonably. In terms of disclosures, such a culture will direct
the worker toward seeking impartial advice (be it from unions, lawyers,
professional bodies or a designated ethics service) and/or to blowing the
whistle internally or with the person responsible. This will help ensure that
even if the whistleblower is mistaken, no unwarranted damage is done to
the organization or to individuals within it. Critically, it provides a safe
and viable alternative to silence.
To be effective, such a system will also provide that where there is good
evidence to support the concern, whistleblowing to a designated authority
will be protected. This will greatly encourage the organization to reassure
the whistleblower that the matter can safely be raised internally. One
recent example demonstrates the value of such a provision. When an inter-
national bank ‘road-tested’ a new compliance culture, employees in all
cultures said that they did not believe the assurances that they would be
protected. The bank then introduced new whistleblowing mechanisms and
declared that it would rather concerns were raised with regulators than left
unreported.
Such a clear provision will also encourage managers to be receptive to
concerns about corruption and to deal with them properly. As importantly,
it will reassure those in charge that managers will address the matter prop-
erly. It will give a clear indication to the authorities that the organization is
seeking to operate responsibly and this will influence the conduct of any
investigation that may prove necessary (whether prompted by a whistle-
blower or not). It will also enable the authorities to readily distinguish
reputable organizations from reckless ones. The practical consequences of
this provision will be that an organization with a whistleblowing culture
will be able to demonstrate that it is fit to regulate itself. Furthermore, it
will itself be well placed to notify the authorities of any proven wrong-
doing a whistleblower has raised with it.
If such a culture is to maintain the confidence of the wider community,
any scheme must also address the particular circumstances in which a
wider disclosure may be justified. Essentially this should be an option of
last resort and, where reasonable, may include a disclosure to the media.
An example of such circumstances would be a flagrant cover-up or the
failure by the authorities to deal effectively with a serious issue such as the
sexual abuse of children in a care home or the payment of bribes to a
senior official or politician. One way forward is to introduce a carefully
weighted four-step structure: (1) impartial advice; (2) internal whistle-

blowing; (3) whistleblowing to the authorities; (4) wider whistleblowing
(where appropriate, to the police, victims, shareholders, politicians or the
media). Such a structure should also influence the actions of a malicious
person as he or she will for the first time have reason not to go direct to
the media. If he or she does, society will have good reason to expect the
media to look into his or her motives.
Winds of change
For all the above reasons there is growing acceptance of the case for a new
approach to whistleblowing. With the changing nature of employment,
globalization and the increased flow of information, there is also a recog-
nition that the traditional approach of trust and confidentiality in the
workplace cannot be relied upon to operate as it did through the twentieth
century. While trust and confidence is of critical importance in any
community or organization, to be effective it cannot be blind or unques-
tioning. Whistleblowing cultures which emphasize internal reporting are a
means by which the abuse of trust and confidence can be checked and by
which asymmetrical accountabilities of those within the workplace can be
understood and developed. If the organization is prepared to promote and
implement such a culture, any risk of it being hijacked by petty vendettas
will be minimized, if not removed.
This approach sees whistleblowing as a means to deter wrongdoing,
promote transparency and good governance, underpin self-regulation and
maintain public confidence. It is the approach which has been put on a
legislative footing in the UK and in South Africa in recent years.5 These
laws differ somewhat from the protection offered in the USA, which has
had whistleblowing legislation for over a century offering substantial
rewards to employees. While other provisions in the USA are rooted in the
concepts of freedom of expression, and those in Australia and New
Zealand are concerned with ethics in the public sector, these recent devel-
opments in the UK and South Africa address the issue of accountability
across all institutions.
Essentially, the new approach sees whistleblowing as a means to deliver
good management, to maintain public confidence and to promote organi-
zational accountability. These help everyone identify who is accountable
for what and to whom. While this has secured strong support from busi-
ness, unions and professional interests, it would be misleading to suggest
that the underlying principles are anything new. Based on ethical provi-
sions recognized by many religions, the principles were adopted and
developed into a balanced and practical approach in jurisprudence. Such
judge-made laws recognize both the public interest in maintaining confi-
dences and the particular circumstances where whistleblowing disclosures
outside can be justified. Like race and sex discrimination laws, the pre-
eminent aim of the UK initiatives has been to declare a change in culture.
The resulting legislation was commended by one of the most senior UK
judges for ‘so skilfully achieving the essential but delicate balance between
the public interest and the interest of employers’.6 It seeks to embed a
system where, in the words of independent experts called in by the
European Union, ‘the duty of loyalty and discretion should not become an
empty concept, but neither must it be used to install a conspiracy of
silence’.7 This UK approach has also been commended by both manage-
ment and labour interests at the OECD, who have recommended that it is
fed into the forthcoming revisions to the Anti-Bribery Convention.8
Notes
1 Gordon (now Lord) Borrie and Guy Dehn were, respectively, the founding
chairman and director of Public Concern at Work, an independent UK charity
which addresses ethics, accountability and whistleblowing. More information
about the charity’s activities (including details of the UK legislation and Third
Report, July 1997, p. 49) are available on its website at www.pcaw.co.uk.
2 UK Committee on Standards in Public Life, Second Report, May 1996, p. 22.
3 Asia Week, 19 November 1999, commented that Japanese culture deprecates
whistleblowing yet seems to condone the resignation or even suicide of top
executives when unchecked wrongdoing leads to major disaster.
4 The Committee of Independent Experts, Second Report, para. 7.6.9.
5 The Public Interest Disclosure Act, 1998, provides protection against reprisals
for good faith whistleblowing on wrongdoing. It directs the worker toward
seeking confidential advice and to blowing the whistle internally or with the
person responsible. Provided there is good evidence to support the concern, it
also protects (a) whistleblowing to designated authorities and (b) wider
whistleblowing where both the circumstances justify it (cover-up, victimization
or failure to address the matter) and the particular disclosure is reasonable
(having regard to the recipient of the disclosure, seriousness, risk, obligations
of confidence and the employer’s whistleblowing culture). The Protected
Disclosures Act, 2000, creates a similar regime in South Africa.
6 Lord Nolan, who had also chaired the Committee on Standards in Public Life.
7 See note 8, para 7.6.10. The European Commission’s proposals were published
in Feb 2000.
8 See OECD Labour/Management Programme – PAC/AFF/LMP(2000)1. This
chapter is a revised version of the discussion paper set out in that report, origi-
nally published under the title ‘Whistleblowing to combat corruption’,
PAC/AFF/LMP (2000)1, copyright OECD, 2000.
It can also be found at www.whistleblower.org/www/oecdreport.htm.
Chapter 5
The Rick and Bianca

case history 1
Rick and Bianca work in a regional accounts office of a major company,

which supplies services to businesses throughout the UK. A year ago
Bianca noticed what she considered to be a flaw in the calculation and
billing process. She checked this with Rick, a colleague, who agreed that
customers were being routinely overcharged.
Once they had collected the data they met with the regional manager,
David. He did not seem too concerned, though he said he would look at
the evidence. He knew that Rick had a long history of complaining about
everything and that few of his colleagues liked working with him. He
couldn’t understand why the company had not got rid of him.
Rick and Bianca left the meeting disheartened and annoyed. They were
not confident that the issue would be taken seriously and Rick said that
they couldn’t trust David because, if the overcharging was corrected, he
and the other senior managers would lose their performance-related
bonuses.
Whilst the matter was being looked into, Rick and Bianca were
suddenly transferred to two different offices. Bianca accepted the move.
Rick was livid. He made an appointment with the Chief Executive of the
company, Adrian, who reacted swiftly to the allegation and asked the Head
of Internal Audit to make an investigation. Within a week his report
showed that the problem existed nationally and urgent plans were made to
develop a new billing system.
When Rick and Bianca learned of the changes from the Chief Executive,
Rick demanded that they should be returned to their previous post and
rewarded, and that David should be disciplined. The company responded,
saying that Jan, Head of Personnel, would review their posting, that they
did not give rewards and that, if they took any disciplinary action against
David, it was a private matter and did not concern Rick and Bianca.
During Jan’s review of their postings, Rick commented that if the
company did not do right by him it wouldn’t be the last they heard about
the matter. However, Jan decided that Rick and Bianca should stay where
they were – she knew it would be a disaster if they went back to work with
The Rick and Bianca case history 107
David. She gave assurances that they would not be victimized and that
their careers would not suffer in any way. Bianca was unhappy with the
company’s responses, but she didn’t want to take things further. However,
Rick thought their attitude was unacceptable. He then wrote to Adrian
asking if the company would refund all of its customers who had been
overcharged. Adrian’s reply simply said that the company had taken
appropriate action and that it did not have to answer to Rick. Rick, who
estimates that the company has wrongly profited by about £1 million, has
told Bianca that they should warn the company that unless things are
sorted out they will go to the press.
Notes
1 This case history has been contributed by Public Concern at Work.
Chapter 6
Challenger Flight 51-L

A case history in whistleblowing
Simon Robinson
For a successful technology, reality must take precedence over public

relations, for nature cannot be fooled.
(R.P. Feynman, member of the Presidential Commission
on the Challenger Disaster)
Challenger flight 51-L was the tenth launch of the Challenger series, the
first launch from Cape Kennedy Launch Complex 39-B. Though this case
history focuses on the Challenger flight which ended tragically some 73
seconds into its flight on 28 January 1986, it is more to do with the whole
National Space Transportation System – the 24 launches prior to this one
and the ones scheduled after it. The Challenger was simply part of a
programme that summed up the technological capacity of the United
States. The programme as a whole was built on a series of myths, social,
technical and managerial, which sustained the national and political
interest and made management as well as politicians believe that over-
ambitious targets were feasible. In fact the whole programme remained
essentially experimental, with many threats to safety involved. Hence,
safety should have been at a premium. The safety programme, however,
was gradually eroded in the face of the many economic and political pres-
sures, and the management structure did not encourage managers or
engineers to state or press their concerns about safety. At various points
these concerns were expressed, but their implications were not taken seri-
ously by the management, and the critical issues were never addressed.
This case history will first outline the facts of the case. Then it will
examine the various points at which the whistle might have been blown,
drawing out the different perspectives of the people involved and also the
implications for the practice of whistleblowing. Finally, it will note the
conclusions of the Presidential Commission, with recommendations for a
more transparent management system which would encourage whistle-
blowing.
Challenger Flight 51-L 109
The space shuttle: National Space

Transport System
On 9 August 1972 authority was given to proceed with the orbiter space
shuttle project. The delta wing space shuttles Columbia, Challenger and
Discovery had originally been given a sleek design. This was replaced to
accommodate a huge payload bay for the needs of the US Air Force, which
had been ordered to use the shuttle, instead of its own expendable rockets,
for launching satellites.
In 1972 Morton-Thiokol Industries (MTI) were awarded the contract
to build the solid rocket boosters for the shuttle, and in 1974 NASA
accepted their design, a larger version of the successful Titan missile. The
solid rocket booster (SRB) provided the thrust that was critical to taking
the shuttle out of the earth’s gravitational pull. Solid fuel of this kind
produces more thrust per pound than liquid counterparts. The drawback
of such power, however, is that, once engaged, it cannot be turned off or
even controlled, hence the need for careful design.
One booster was attached to each side of the external fuel tank. They
were 149 feet long and 12 feet in diameter. Each weighed two million
pounds before lift-off. The rocket fuel was cast into separate segments of
the SRB at the MTI plant in Utah and transported to Kennedy Space
Center where the complete SRB was assembled. The joints where the
different segments were brought together were known as field joints and
these were critical to the safety of the booster. They consisted of two
elements, the tang and the clevis. These were held together by clevis pins
and each was sealed by two rubber O-rings, the primary (bottom) and the
secondary (top). A second O-ring was a modification from the Titan
missiles design because humans would be going into orbit in the shuttle.
The point of O-rings was to prevent the escape of hot combustion gases
from the rocket. To secure this, a heat-resistant putty was applied to the
inner section of the joint. To ensure that the gap between tang and clevis
was minimized, and thus to ensure compression on the O-ring, shims were
inserted between the outer part of the clevis and tang.
Engineering design problems

The size of any gap in the field joint was determined by many possible
things including:
• the ambient temperature;

• the diameter of the O-rings;
• the thickness of the shims;
• loads on the segment.
110 Simon Robinson
When the SRB was ignited the zinc chromate putty, which was above the
O-rings, was displaced. This had the effect of compressing the air between
the putty and the primary O-ring. The O-ring was then forced by the air
into the gap between tang and clevis. However, it was discovered that the
pressure then caused the walls of the cylinder to bulge slightly, which
caused a gap to open, increasing the risk of the gases escaping at the joint.
This was known as joint rotation.
In discussion with NASA, MTI set about altering the design so as to
increase the O-ring compression and thus decrease the joint rotation effect.
This led to three things: tightening the metal joints; increasing the O-ring
diameter and tightening its tolerance; and the use of shims, as noted above.
After the flight of the second Challenger mission (November 1981) a
further problem occurred. The O-rings were eroding during the flight, due
to the hot gases escaping past the putty. The solution was found in
providing different kinds of putty.
Of greater concern was a third problem, found in the shuttle flight 51-C
(24 January 1985). This flight was launched in extreme cold. Examination
of the SRB joints after this flight showed black soot and grease on the
outside of the casing, caused by the gas blowing through. This led to the
development of the Seal Erosion Task Team to study the compression and
reliability of the O-ring in low temperatures. In July of that year a new
design for the joint was being developed, and MTI ordered new steel
billets which would be used in the redesigning. The process of making
these billets was a long one and by 26 January 1986, the launch of the
Challenger 51-L, they were not ready.
Launch delays to Challenger 51-L

There were several initial delays to the Challenger 51-L mission. The first
three arose because of the possibility of rain and low temperatures. The US
Vice President was also expected at one launch attempt and it was deter-
mined that he should not be invited unnecessarily, not least because he was
an important ally for the project and NASA were concerned to maintain
goodwill.
A further launch attempt was delayed because of a defective
microswitch in the hatch locking mechanism and difficulties in using the
hatch handle. Once that problem was solved, winds had become too high,
and record low temperatures were expected in the Florida area.
The social context of the Challenger launch

The delays in the launch had made NASA all the more keen to launch the
Challenger as soon as possible. There were other pressing and significant
reasons:
1 NASA had experienced unexpected competition from the European

Space Agency. This meant that the Space Transportation System’s
commercial viability and cost effectiveness needed to be firmly estab-
lished. NASA’s response was to schedule a record number of missions
for 1986 to make a case for the project’s budget.
2 NASA needed a speedy launch so that they could refurbish the launch
pad for their next mission, a probe to examine Halley’s comet. If this
was launched on time then it would have gathered data before a
similar Russian attempt.
3 There may also have been pressure to ensure that the Challenger was
in orbit when President Reagan gave his State of the Union speech.
One of the major topics was to be education and he was going to
mention the first civilian in space, teacher Christa McAuliffe, who was
one of the Challenger’s crew. McAuliffe had become a significant
celebrity, with Americans able to identify with the first ‘ordinary hero
in space’.
As we shall see, other factors emerged in the discussion before the launch.
The night before launch: the teleconference

The temperature for the rescheduled launch date was forecast as the low
20sºF. This led Alan McDonald, the management representative of MTI at
Kennedy Space Center, to direct his engineers to make a presentation on
the effects of low temperature on the performance of the SRB. A telecon-
ference was arranged to discuss this. It was held between management and
engineers from the Kennedy Space Center, the Marshall Space Flight
Center in Alabama (responsible for the propulsion system) and MTI in
Utah.
Roger Boisjoly and Arnie Thompson, two of the engineers at MTI who
had been involved in the Seal Erosion Task Team, had only a short time to
prepare their presentation but saw this as an opportunity to put across
their concerns about the SRB O-rings. In their hour-long presentation, they
concluded that the expected low temperatures would aggravate the prob-
lems of joint rotation and the O-rings. The lowest temperature previously
experienced by the O-rings had been 53ºF in the January 1985 flight. The
predicted ambient temperature was 26ºF, placing the estimated tempera-
ture of the O-rings at 29ºF.
The Engineering Vice President of MTI (Utah), Bob Lund, then summed
up the conclusions and recommendations. He stressed that there was no
empirical evidence about the effect of temperatures below 53ºF. They
could not prove that it was unsafe to launch the Challenger at lower
temperatures. However, given that the predicted temperature was outside
112 Simon Robinson
their database, he recommended a delay of the launch until the ambient

temperature had risen to 53ºF.
The presentation and recommendations confused NASA managers and
engineers. They believed that the design specifications allowed for opera-
tion of the SRB in temperatures as low as 31ºF (as will be seen, it was later
to emerge that MTI believed that the 31ºF limit was for storage and not
operation).
Larry Mulloy, Marshall’s Solid Rocket Booster Project Manager, then
challenged the engineers’ reasoning, arguing that the data was not conclu-
sive. After several minutes of heated debate, Mulloy turned to Joe
Kilminster, MTI Vice President for booster rockets. Mulloy said that he
was looking for a management decision, without specifying what this
meant. Kilminster stood by his engineers’ recommendations. Several of the
managers at Marshall expressed their doubts. At this point Kilminster
called for a meeting with his MTI colleagues, away from the teleconfer-
ence, to review the data.
At this separate meeting, Boisjoly and Thompson argued that they
should stick with their original recommendations. Jerald Mason, a senior
executive of MTI, argued that a management decision was required. The
managers concluded from the given data that the O-rings could be eroded
by up to a third of their diameter and still operate. Mason finally turned to
Lund and said, ‘take your engineering hat off and put on your manage-
ment hat’.1
The result was that a new recommendation was then presented to the
reconvened teleconference. This stated that the cold was still a concern for
safety, but that they had found the original evidence to be inconclusive and
that their ‘engineering assessment’ was that the launch should go ahead.
This recommendation was presented even though the engineers had no
part in rewriting it and refused to sign it. Surprised at this volte-face, Alan
McDonald, the MTI representative at NASA in this conference, appealed
to the NASA management not to launch. However, they decided to
approve the SRBs for launch, even though the predicted temperature was
below even their original operational specifications.
The launch
That night temperatures were even lower than forecast, at 8ºF. To keep the
water pipes on the launch pad from freezing, safety showers and fire hoses
were turned on. Some of this water accumulated, forming ice over the plat-
form. The ice inspection team feared that this might break away from the
platform and damage the heat-resistant tiles of the shuttle. A further
worrying and uncertain factor was the possibility of ice forming in the O-
ring grooves. The Challenger, the SRBs and the external fuel tank had all
been on the launch pad for 38 days, and, up to the freeze, seven inches of
rain had fallen. Nonetheless, the launch director decided to go ahead. Key
personnel, who did not know about the teleconference or the fears of the
MTI engineers, waived safety limitations on low temperatures.
When the launch came, the impact of ignition caused a shower of ice
from the platform. Some of this made contact with the left-hand SRB and
some was sucked into its nozzle. Shortly before lift-off, 0.678 seconds into
the flight, photographs clearly show a burst of grey smoke emerging from
the area of the aft field joint on the SRB, the area which faced the external
fuel tank. This already showed that there was ‘not complete sealing action
within the joint’.2 The putty which protected the O-rings had collapsed.
The cold had made it too stiff, allowing gases from the ignited solid fuel,
with temperatures of over 5,000ºF, to blow past both O-rings. Between
0.836 and 2.500 seconds into the flight there were eight more distinctive
bursts of smoke. The black colour and dense composition of the smoke
seemed to confirm that the grease joint insulation and O-rings were being
burned. Soon after the tower had been cleared the smoke stopped, indi-
cating that the oxides produced by the propellant had temporarily sealed
the field-joint gap before flames could escape.
At 37 seconds the Challenger was hit by the first of several high altitude
wind shears (winds of different speeds and directions close together which
lead to severe stress on aircraft). The steering mechanisms responded to
the buffeting, leading eventually to an increase in the SRB thrust. The first
small flame at the field joint was shown at 58.788 seconds, indicating a
breakdown of the temporary seal. At 59 seconds the most violent wind
shear of any shuttle mission was experienced. At 59.26 the small flame
grew into well-defined plumes and the breakdown of the seal was
confirmed when telemetry showed a pressure differential between chamber
pressures in the right- and left-hand SRBs. As the flame increased in size it
was deflected directly on to the external fuel tank. At 64.660 seconds the
colour and shape of the flame changed markedly, indicating that it was
mixing with hydrogen leaking from the tank.
Within 45 milliseconds a bright glow developed on the underside of the
Challenger itself. At 72.20 seconds the lower strut which linked the
Challenger’s SRB and the external fuel tank gave way and the right SRB
began to rotate around the upper strut. At 73.126 seconds, the after-dome
of the fuel tank gave way, releasing huge amounts of liquid hydrogen. The
subsequent forward thrust pushed the tank up into the lower part of the
liquid oxygen tank, leading to ‘structural failure’. At 73.137 there was an
explosive burn of hydrogen and oxygen that enveloped the Challenger.
The effect on the American nation was profound and the President
immediately ordered a commission, chaired by Senator Rogers, to investi-
gate the technical and other contributing causes of the accident, and to
make recommendations.
114 Simon Robinson
Analysis
Different managers and engineers at different points were presented with
key moments when the safety programme of the shuttle might have been
challenged:
• at the very beginning of the programme, when priorities were being

established;
• during the work of the Seal Erosion Task Team;
• during the teleconference on the eve of the launch;
• after the teleconference and before the launch.
The safety programme

The shuttle’s field joints were one of 700 items on board of criticality 1.
This means that there was no back-up for them, and thus that any failure
could lead to loss of life. The project was by definition experimental.
NASA historian Alex Roland sums this up well:
The American taxpayer bet about $14 billion dollars on the shuttle.
NASA bet its reputation. The Air Force bet its reconnaissance capa-
bility. The astronauts bet their lives. We all took a chance. When John
Young and Robert Crippen climbed aboard the orbiter Columbia on
April 12, 1981 for the first shuttle launches, they took a bigger chance
than any astronaut before them. Never had Americans been asked to
go on a launch vehicle’s maiden voyage. Never had astronauts ridden
solid propellant rockets. Never had Americans depended on an engine
untested in flight.3
Hence, safety had to be a paramount concern for the project. However,

from the word go, safety was not seen as the highest priority. Initial work
on the shuttle itself, for instance, had involved consideration of the possi-
bility of an escape mechanism for the astronauts should the mission be
aborted soon after take-off, the time of greatest risk. It was decided against
this because the payload of the shuttle needed to be maximized. How
should engineers or managers have responded to this early statement of
priorities?
The low priority of safety was also reflected in the lack of an indepen-
dent safety system and procedures which could be appealed to in the face
of the drive to launch. There had been an extensive safety programme for
the lunar project, but this had been downgraded, leading to reductions in
safety and quality assurance work in Marshall and NASA headquarters.
Indeed safety work was placed under the supervision of the very organiza-
tions that had to be checked. Requirements for reporting problems were
not clear or concise and failed to get critical information to the appro-
priate levels of management at NASA.
In this specific case, the weather-related problems, such as the ice
formation before the Challenger launch, were increasingly ignored, and
protocols about constraints to launch, or waivers of such constraints, were
not taken seriously. Whilst the ice on the platform was not thought to
contribute to the 51-L disaster itself, it could have compromised safety, not
least if the launch had been aborted before take-off, requiring the astro-
nauts to escape via the platform.
Once the problems with the O-rings emerged, the response was not well
documented or worked through. For instance, no significant trend analysis
was performed on the O-ring erosion and other joint problems. Five weeks
after the 51-L accident itself, the issues to do with the field joint were still
not properly documented in the reporting system at Marshall.
In fact, no one spoke out about the lack of attention to safety or the
erosion of the safety standards that were in place. The overriding pressure
to keep up with the shuttle programme dominated management thinking.
Another reason why there was no clear whistleblowing at this early stage
was the lack of transparency in management. As we shall see, no person or
group in the project was able to see the whole safety picture, even at the
top of management. A further reason, perhaps, was simply that no crises
had occurred, thus lulling the management into a sense of false safety. The
51-L disaster was the first real setback.
The Seal Erosion Task Team

Faced with some clear problems, not least the fact that eight out of ten of
the Challenger SRBs had suffered a problem with their O-rings, Boisjoly
and his engineering colleagues were the first to raise the issue of safety in a
significant way. In 1985 Boisjoly had written in one memo that the result
of neglecting this problem ‘would be a catastrophe of the highest order –
loss of human life’ ( memo to Vice President, Engineering, 31 July 1985).4
The memo had a limited distribution. Nonetheless, it resulted in NASA
asking for a breakdown of the problems and in the setting up of the Seal
Erosion Task Team, headed up by Boisjoly and another MTI engineer, Bob
Ebeling.
The team, however, did not work well. Far from providing a speedy
resolution to the problem, it led to further delays. Ebeling wrote in one
memo ‘HELP! The seal task force is constantly being delayed by every
possible means … This is a red flag.’5 Boisjoly wrote of the team experi-
encing ‘business as usual from the supporting organizations’.6 By this he
meant that management as a whole did not understand the importance of
the task team’s project, and that bureaucracy was leading to constant
delays. At one point, requests for spare parts had to go through eight
116 Simon Robinson
different offices. The last report sent by Boisjoly, highlighting the delays,
received no reply from management.
Boisjoly did many of the things recommended to whistleblowers. He
kept good records of his interaction with management, and was clear
about the possible consequences of ignoring the O-ring problem. He
ensured that all memos were circulated to his direct superiors. However, he
and his colleagues were not ready for the less than positive response from
management. When there was no feedback towards the end of the team’s
work they did not press the point or seek to clarify if their managers or
NASA had understood. This may have reflected a concern for their own
careers or a belief that the ultimate responsibility for dealing with the
erosion problem was not theirs but their superiors.
Underlying the work of the Seal Erosion Task Team and the problems
about delays was the more fundamental issue that the team was dealing
with a design fault and that such a fault should have led to the recommen-
dation that the shuttle programme be suspended until it was dealt with.
NASA engineers realized that there was a problem and for a time worked
with the task team. However, the problem was still defined in terms of the
need to speed up the delivery of the new design rather than as an essential
matter of safety. One of the difficulties was that the response of the NASA
engineers seemed to indicate that NASA had heard Boisjoly’s complaints.
In fact, the presence of the NASA engineers did not mean that the issues
were being communicated to NASA managers. Indeed, the essential matter
of safety remained unacknowledged by NASA management, who even
claimed to the Presidential Commission that they were not aware of the
problems.
In all of this the MTI engineers remained firmly within their own
system relying on their managers to communicate any problems to NASA.
This in itself may have led to unclear communication. At no point were
they encouraged by their organization either to go beyond their line
managers within MTI or to go outside to key personnel in NASA. Equally,
they had nowhere that they could go to discuss the implications of the
problem, or to discuss the engineering data and consider what other
evidence might be needed. For their part, there was no attempt by NASA
to see matters globally, or to check out thoroughly the nature of the
complaints that were emerging from the MTI engineers.
What more could the MTI engineers have done at this point? How
might the MTI management have best handled the material coming from
them? How could NASA have best kept itself better informed about this
aspect of the project safety?
The problem in the flow of information meant that the case which the
engineers had to make was never fully communicated, indeed was never
fully made, something which came to the fore in the teleconference itself.
The teleconference
All involved in the shuttle programme were aware of its high profile and
the consequent pressure to achieve targets. There was also economic pres-
sure, with some in the Reagan administration suggesting that turning the
operation over to an airline would make it more efficient. NASA had to
ensure that the programme was successful and also that it could pay for
itself. In turn, this put pressure on Rockwell (the firm responsible for the
development and maintenance of the shuttle itself) and on MTI. The result
was a strong incentive for managers to think and plan unrealistically. As
far back as 1982 NASA had begun a planned acceleration of the launch
schedule. An early plan looked to an eventual launch rate of one per week.
In 1985 this had been reduced to a projected annual rate of 24 by 1990.
Even this modified goal was over-ambitious, leading to difficulties,
including:
• a critical shortage of spare parts;

• a strain on the IT production system which meant that it would not
have been able to deliver crew training software for scheduled flights
by due date. This in turn would have meant inadequate time for crew
training;
• no enforcement of cargo manifest policies, leading to numerous
payload changes at the last minute.
The Presidential Commission underlined how this had affected attention to

safety:
When flights come in rapid succession, current requirements do not

ensure that critical anomalies occurring in one flight are identified and
addressed appropriately before the next flight.7
It was precisely this tension which came to a head in the teleconference.

Up to that point the engineers had communicated largely through internal
memos to their direct superiors. However, the reality of the design fault
and the need, as the Presidential Commission noted, to stop the shuttle
programme until the safety factors had been resolved, were not really
heard or believed at any level of management. MTI did not accept the
implication of early tests that noted ‘a serious and unanticipated design
flaw’.8 NASA did not accept the view of its engineers that the design was
unacceptable. NASA minimized the field-joint problems in their briefings
and reports. MTI’s position was that ‘ the condition is not desirable but is
acceptable’.9
The result was, in the words of Commission member Feynman, a ‘kind
of Russian roulette’ in which standards of safety were gradually lowered.
118 Simon Robinson
The shuttle flies with O-ring erosion and nothing happens, ‘Then it is
suggested that the risk is no longer so high for the next flights.’10
None of this was based on thoroughly researched evidence. On the
contrary, as the Presidential Commission found, prior to the accident
neither NASA, MTI managers nor engineers fully understood the mecha-
nism by which the field joint was sealed. The Commission also discovered
a massive discrepancy between the engineers’ and management’s view of
safety margins. Engineers estimated a shuttle failure rate of 1 in 100
launches. NASA management had figures of 1 in 100,000. When the
NASA figures were questioned by the Commission, the response of their
chief engineer was ‘We did not use them as a management tool. We knew
that the possibility of failure was always sitting there.’11 This leaves the
unanswered question as to how their figure was arrived at. As to the use of
such figures, it seems that they were submitted in response to a risk analysis
for the Department of Energy, the aim of which was to calculate the safety
of the use of small atomic reactors as power sources for deep-space probes,
which the shuttle could carry into space. The next mission of the
Challenger was scheduled to carry the Galileo probe, with 47.6 pounds of
plutonium-238.
The NASA figures were, in Feynman’s words, exaggerated ‘to the point
of fantasy’, and were part of a dynamic which led to a reversal of the usual
view of safety. NASA management even argued that the fact that a third of
the O-rings had been eroded and yet the shuttle had still flown, demon-
strated a ‘safety factor of three’. No one involved in the Commission could
understand what this phrase meant, given that erosion of a seal indicates a
diminution of safety by a third, not a safety margin of three.
This confusion was carried through into the teleconference. Though
there was a correlation between O-ring damage and low temperature
neither NASA nor MTI had carried out extensive tests in temperatures
below 53ºF. The engineers had not had the time or resources to prove
conclusively that it would be unsafe to fly the shuttle precisely because this
would have needed the shuttle programme to be suspended. Hence, NASA
and MTI were not fully prepared to evaluate the risks of the launch in
conditions more severe than they had experienced before. Boisjoly,
Thompson and McDonald could all have argued strongly, on the basis of
the initial correlation, that the flight should be delayed. But they did not
have a case tested at all temperatures.
The response of the NASA and Marshall managers and engineers to
Boisjoly’s presentation was fourfold. First, there was hostility, doubtless
because of a series of delays, and because of the pressure they were experi-
encing, not least in virtue of the State of the Union speech planned for that
day. Second, they questioned the engineers’ figures. NASA engineers ques-
tioned the temperature figures, believing that the original design
specification was for temperatures as low as 31ºF. The extent of confusion
was to emerge later when MTI argued that the temperature of 31ºF was
the limit for storage and not operation. Either way the actual temperature
at the time of launch was below this. Third, along the same lines, the
NASA managers focused on the lack of absolute evidence over safety, and
on the fact that previous O-rings had already been eroded by a third,
without compromising safety. Finally, it was later argued that the MTI
engineers were not unanimous in their findings.
Thus the MTI engineers found themselves suddenly having to prove
that the Challenger was unsafe to fly at low temperatures. As Lund in his
testimony to the Commission noted:
We have dealt with Marshall for a long time and have always been in
the position of defending our position to make sure that we were
ready to fly, and I guess I did not realize until after that meeting and
after several days that we had absolutely changed our position … And
so we got ourselves into the thought process, we were trying to find
some way to prove to them it wouldn’t work, and we were unable to
do that.12
So the MTI engineers had been sucked into a situation in which the discus-
sion was focusing purely on the feasibility of the launch and not upon the
issue of safety procedures per se. This meant that they had to defend their
judgement in a limited area with inadequate data, rather than approaching
management with a concern which would then have had to be investigated
and tested. Hence, there was no one to stand out for the principle of
‘safety first’, something all the more remarkable given that the American
Board for Engineering and Technology Code states that the ‘safety, health,
and welfare of the public shall be paramount’.13
This raises major questions about responsibility, which in turn point to
differences in the roles of engineers and management. Lund was both an
engineer and manager and when the manager Mason invited him to wear
his ‘management hat’ this implied very different responsibilities. Harris et
al. suggest that engineers are more traditionally concerned with risk–
benefit analysis and management with cost–benefit analysis.14 Mason
appears to have taken this further when he invited Lund to discount the
questions of risk raised by the MTI engineers, and to think primarily of
cost–benefit.
From the management perspective, another consideration might have
been the fact that MTI’s contract with NASA was up for renewal. The
Presidential Commission was more direct, concluding that MTI had
altered its original decision ‘to accommodate a major customer’.15
Whatever the final judgement on that point, it is clear that managers
and engineers had come to a critical point in decision-making without
reaching any agreement, not only on safety procedures but also on the
120 Simon Robinson
criteria of standards for safety in the first place. By being drawn into the
particular issue of the launch, the engineers allowed themselves to be
deflected from a defence of the key principle – above all do no harm.
Without a clear focus on that fundamental issue any attempt to blow the
whistle could have had little success.
Once this responsibility divide was crossed, the decision was taken
away from the engineers. Whose responsibility then was it to maintain
safety? What could the MTI engineers have done at the point where they
and MTI management were discussing the matter away from the telecon-
ference? Was their disagreement fully communicated to NASA? Is it
morally acceptable for an engineer or another employee to make a case
about safety and then pass the responsibility for outcome to the manage-
ment involved?
Before the launch

The impression given in this case is that once the teleconference had ended
the die was cast. However, this was far from the case. Both managers and
engineers could have blown the whistle up to the point of the final minutes
of countdown. Initially, this might have involved going to the MTI board.
But a simpler route would have been to communicate directly with Arnold
Aldrich of NASA, who had ultimate responsibility for deciding to launch.
He expressly encouraged any key personnel to contact him at any time
before the launch.
So what more could the MTI engineers in Utah and the MTI manage-
ment representatives at NASA have done to communicate their unease?
The basic problem appears to have been that the management system
worked against such open communication. The decision-making process
was very complex and fragmented, with different sites and different levels
of decision-making. Lawrence Mulloy, for instance, represented Marshall
Space Flight Center at the Kennedy Space Center. He therefore acted as the
conduit for information about the SRBs to NASA launch staff. However,
he did not tell Arnold Aldrich about the details of the teleconference
because he was at level III and Aldrich at level II of decision-making.
This system encouraged those at level III to solve problems and make
decisions, without sharing the full discussion behind their reasoning with
those at levels II and I. Hence, the Presidential Commission was troubled
‘by what appears to be a propensity of management at Marshall to contain
potentially serious problems and to attempt to resolve them internally
rather than communicate them forward’.16 This propensity was ‘altogether
at odds with the need for Marshall to function as part of a system working
towards successful flights missions, interfacing and communicating with
the other parts of that system which work to that end’.17 In effect, the
management system encouraged both narrow thinking, concentrating
purely on a limited area of responsibility and not seeing the broader

connections, and also secretive thinking, not sharing difficulties which
might cause problems, or require major work, for the next level of
management. This, in turn, led to a lack of transparency, and with it to
lack of concern about critical safety procedures which higher management
were not kept abreast of. Hence, for instance, there was no system that
ensured that launch constraints and waivers of launch constraints should
be considered at all levels of management. As noted earlier, this led to six
launch constraints (including adverse weather) being waived before the
launch of 51-L, with no record being held of either the constraints or the
waivers.
Not only did the system of management for the Challenger clearly
discourage whistleblowing, but it was also at the root of most of the prob-
lems. The system encouraged unrealistic planning, and with that the
growth of myths about what was possible and yet consistent with safety
being maintained. Greater transparency, with proper checks and balances,
would have tested these views.
The case history also raises the issue of perceptions of responsibility.
The fragmentation of decision-making led to different parts of the organi-
zation focusing purely on their areas of responsibility, and thus not feeling
responsible for safety as a whole. The Presidential Commission, and subse-
quent reports, stressed that all levels of management should feel
responsibility for safety, and not simply leave it to one designated group.
At the same time, they argued for a change in system and ethos that would
ensure transparency and encourage whistleblowing. The Commission
concluded that safety would have to have greater priority and that this
required that an independent safety group be set up. This would deal with
safety organization and hazard analysis. The Commission also recom-
mended greater oversight from the project manager, with all parts of the
project accountable to him and not simply to particular centre managers.
In addition there is now an anonymous reporting scheme for employees on
the NASA project.
What this case history draws attention to is the irony that, in a situation
that was under so much scrutiny from the public, scrutiny actually under-
mined safety. This was because the management structure in the key
organizations was fragmented and divisive, leading to crucial safety data
not being collected or properly appreciated. That, in turn, underlines the
critical importance of seeing the question of whistleblowing as not simply
a matter to be addressed in terms of individual dilemmas. The question of
whistleblowing is something that organizations as a whole should take
responsibility for.
122 Simon Robinson
Notes
1 Cited in C. Harris, M. Pritchard and M. Rabins (1995) Engineering Ethics:
Concepts and Cases, New York: Wadsworth, p. 72.
2 Report of the Presidential Commission on the Space Shuttle Challenger
Accident (PCP) (1986), Washington, DC: US Government Printing Office, p. 3.
3 Cited in Martin, M. and Schinzinger, R. (1989) Ethics in Engineering, New
York: McGraw–Hill, p. 79.
4 Boisjoly, R. The Challenger Disaster (wysiwwyg://41/http://onlineethics.org/
moral/boisjoly/RB-intro.html).
5 Cited in Martin and Shinzinger (1989), op cit., p. 86.
6 Internal report 4 October 1985.
7 PCP, 14.
8 Ibid.
9 Cited in PCP, 12.
10 PCP, Appendix E 3.
11 Cited in Martin and Schinzinger (1989), op. cit., p. 83.
12 Cited in Harris et al. (1995), op. cit., pp. 285–6.
13 Robinson, S. and Dixon, R. (1997) ‘The professional engineer: virtues and
learning’, Science and Engineering Ethics 3(3): 340.
14 Harris et al. (1995), op. cit., pp. 274 ff.
15 PCP, 11.
16 Ibid.
17 Ibid.
Chapter 7
Pain and partnership

John Edmonds
Human beings have an amazing ability, which is sometimes admirable and

sometimes depressing, to focus on a single objective to the exclusion of all
other thoughts and feelings. A group of volunteers were recruited to take
part in a research project apparently to establish how people react to elec-
tric shocks. Behind a screen were the victims, who jumped as the volunteers
administered each successive shock. The volunteers were told that the
voltage levels should be steadily increased during the course of the project.
In fact, the ‘victims’ were not receiving electric shocks at all. The real
aim of the experiment was to establish the point at which volunteers
would say, ‘I have had enough. I do not believe that I should be causing
this pain.’ In the event, the volunteers continued with their task in
committed fashion. Whatever the apparent level of suffering, the volun-
teers followed their instructions and kept throwing the switches.1
I was interested in this experiment because there are many parallels
with what is going on throughout British industry. Perfectly ordinary
people, acting as managers, are able to suspend the operation of their
consciences to administer policies which are extremely unpleasant. The
difference is that in real life there is no pretence. The pain is real.
Global competition
In British industry, the received wisdom is that companies face intense
global competition and that only the best will survive. To be the best, a
company needs low costs; the ability to adapt very rapidly to change; and
a workforce which is highly flexible. In this environment, the theory goes,
high levels of job security are unthinkable and the labour market must be
deregulated so that managers have the ability to make whatever changes
are necessary to improve competitiveness. The disadvantage suffered by
employees is regretted but is essentially irrelevant; improved performance
within the terms of the system is the overriding objective.
Once the threat of global competition is accepted, low pay can be justi-
fied by reference to pressure from competitors in low-wage countries.
124 John Edmonds
Redundancies can be justified on the same basis. People with bad sickness
records must be eased out because companies cannot carry passengers.
Extensive training arrangements impose an unacceptable cost which
should be avoided. Equal opportunities cannot be taken too seriously
because, at various times during their working life, women are allegedly
more expensive to employ than men. And, of course, companies cannot
waste time consulting the workforce for fear that the lead time for making
a decision will lengthen to the point where the business will be paralysed.
The social consequences of these policies are undesirable. Britain has 4
million people being paid less than £5 an hour. Claims for unfair dismissal
have increased year by year. A third of British workers have received no
training whatsoever from their current employers. The gap between the
pay of women and men has scarcely narrowed in the past ten years. Even
the Labour government responds to this business agenda. Tony Blair tells
us that we need a lightly regulated labour market and Labour ministers
oppose the European Draft Directive guaranteeing information and
consultation rights to British workers.
From time to time, the unpleasant effects of this agenda can cause
managers some embarrassment. Then the hand-wringing begins.
Redundancies are ‘unfortunate’. Low pay is ‘regrettable’, but better than
having no job at all. Consultation arrangements are always ‘desirable’, but
should not be allowed to compromise management’s right to manage.
What managers rarely wish to discuss is the precise nature of this global
competition which is producing such unfortunate effects on fellow citizens.
There is no doubt that many parts of the manufacturing industry face
considerable competition from abroad. However, the manufacturing sector
employs less than 5 million people out of a workforce of over 28 million
people. Elsewhere, claims about the pressure of global competition seem
spurious. Employees of water companies were surprised, after privatiza-
tion, to be told that they were facing redundancies because of this global
competition. There was still only one pipe supplying the water and only
one set of reservoirs and only one sewerage system. When the arguments
were unravelled, we found that global competition was being used as
shorthand to describe the process whereby a company which does not
produce a particular return on capital will find that its share price is
pressed down to a level where the company will be taken over. Of course it
is a matter of public policy whether we allow our water utilities to be
taken over by other companies. Moreover, if a company is taken over, it is
also a matter of public policy whether we allow the terms and conditions
of workers in that utility to be worsened. The global competition argu-
ment has to be stretched very thin indeed before it reaches many
companies in the United Kingdom.
Pain and partnership 125
Choice
Throughout parts of the public sector a new kind of employment competi-
tiveness has actually been introduced by government decision. In the civil
service, where there is no obvious market and certainly no global competi-
tion, the Conservative government introduced a system called market
testing. In local authorities and the health service, the Conservatives intro-
duced the process of compulsory competitive tendering by which public
service work is packaged up and put out to tender. The Labour govern-
ment has modified these procedures, but has maintained a similar pressure
on the workforce. In place of compulsory competitive tendering, we now
have the ‘Best Value’ initiative. In place of market testing, we have value-
for-money examinations. In place of the Public Finance Initiative we have
Public–Private Partnerships. These are entirely artificial devices. They are
not introduced because competition is global. They are introduced because
government has decided that competition in the public sector is desirable
to improve efficiency. Stripped of the high-sounding rhetoric, these policies
are based on the value judgement that employees need to feel a certain
degree of insecurity if they are to perform at a level which is good for the
economy.
So what about the trading sector? Is the pain inevitable there or do
employers and governments have some discretion in the policies that they
adopt? Certainly many continental countries think so. Throughout the
European Union, workers have much greater protection than in Britain. In
Holland, for example, it is really difficult to employ someone on a tempo-
rary contract. In Germany, it is more difficult to sack people than it is in
Britain. In France, Germany and Italy, every worker has a much greater
right to be consulted about changes in the company than is the case in the
UK. Marks & Spencer reduce their workforce in Britain without great
difficulty, but their attempt to close their major store in Paris gets the
company into a legal tangle because the workforce has not been properly
consulted.
Some business leaders have argued that continental countries have not
faced up to the problems of global competition and that their economies
are suffering as a result. The evidence for this is sparse. Throughout
Northern Europe, production is significantly higher than in the UK and
living standards are noticeably better. Sometimes these advantages are
taken in terms of extra income and sometimes in extra leisure time. UK
employees have to work about 40 per cent longer to achieve the same
salary levels that are typically paid in France.
The British approach seems to be that commercial success can be
achieved on the basis of low wage rates. The full implications of this night-
marish policy are rarely revealed. In Bangladesh, the average weekly wage
of a textile worker is about £5 for 60 hours. In Haiti, the figure is about
£7 for 50 hours. Comparisons are more difficult with the People’s
126 John Edmonds
Republic of China, but it appears that wage rates are less than 10 per cent
of UK levels. So if we compete on wage levels with Bangladesh and Haiti
and China, we have to contemplate a society in Britain where disposable
income is reduced to a level which we have not seen for a hundred years.
In reality, the British response to global competition is neither inevitable
nor even rational. Other countries with different political ideologies have
taken different approaches. They have saved their workforce considerable
pain and do not seem to have suffered significant economic disadvantage.
So perhaps the best way of responding to global competition is not to say,
‘The competition is so severe that we must cut pay and conditions’.
Perhaps a more intelligent approach might be to say, ‘We have to make the
most of our advantages.’ Certainly, Western countries seem to find it easier
to compete if their people are highly skilled and if they use equipment
which is modern and effective.
Aspirations
A good place to start in developing a new policy is to talk to managers and
employees. When managers are asked what they want from their work-
force, they will normally use two words: commitment and flexibility.
However, if managers are asked what their employees want from manage-
ment, the managers are often thrown into confusion. Unfortunately,
British managers do not spend a great deal of time looking at things from
the viewpoint of their employees. Nevertheless, the evidence is readily
available.
Every three years, GMB uses MORI to survey people at work. MORI
asks, ‘What do you want from your employment?’ To prompt an answer, a
list of over twenty possible replies is given, including higher pay, a job to
be proud of, better fringe benefits, managerial respect, and so on. MORI
asks working people to pick out their top five aspirations in order of
importance. The results are always the same. Since the early 1980s, the top
two responses have been, ‘a job which is satisfying and interesting’ and
‘job security’. Then there is a large gap until we get to the third aspiration,
which is ‘a feeling of accomplishing something worthwhile at work’, and
then the fourth, which is more predictable – better pay.
GMB also surveys new members to discuss whether the two topmost
aspirations are being achieved. First, ‘Do you strongly agree that your
work is interesting and satisfying?’ Only one person in four replies, ‘Yes’.
Second, ‘Do you strongly believe that your job is secure?’ Only one person
in sixteen believes that their job is secure. The obvious conclusion is that
there is a massive gap between what people say they want from work and
what people are actually getting.
These results open up a productive line of thought. Perhaps the best way
for managers to get the commitment and loyalty which they require is for
managers to offer their employees the interesting work and job security
which the employees say they want. Trade unionists always think in terms
of negotiated agreements, but surely a deal by which managers and other
employees secure their topmost objectives is a more worthwhile way
forward than the pressure–pain model which we seem to operate at present.
A change of direction
Would this psychological deal lead to economic success? There are encour-
aging signs that it might. Some interesting research by Professor Michael
West at Aston Business School has demonstrated that the best way to fore-
cast whether a company will succeed or fail is to study how that company
treats its workforce. In Britain, we tend to believe that heavy investment in
new equipment, good design and effective marketing provides the key to
success. According to Professor West, these important contributors are
dwarfed by the importance of the people-treatment factor.2 Of course,
some of the indicators of good treatment also have direct economic bene-
fits. Providing training will make the workforce feel valued and will also
produce a direct improvement in productivity. Nevertheless, the results are
an interesting corrective to the views expressed by British company direc-
tors and British ministers throughout the last twenty years.
Interestingly, a change of direction would resolve some of the tensions
in the Labour government’s industrial relations policy. Two examples
stand out. First, the ‘Fairness at Work’ White Paper which led to the
Employment Relations Act was said to be based on the principle of part-
nership. However, in the introduction to the White Paper, Tony Blair was
keen to remind us all that the British labour market is the most lightly
regulated in Europe. The fiasco at Rover, the neglectful behaviour of Coats
Viyella and the arrogance of Corus have persuaded the Labour govern-
ment to deplore the British managers’ failure to consult their workers. Yet
the government has drawn back from the obvious solution of giving
British workers rights to information and consultation which are normal
elsewhere. Second, the introduction of the National Minimum Wage was
an obvious challenge to management’s right to compete on the basis of
wage rates, but the rhetoric of government ministers continues to suggest
that a rapid increase in the National Minimum Wage would damage
employment prospects in the UK. All governments want to ride a variety
of ideological horses, but increasingly the difference between the pain
approach and the partnership approach is requiring rhetorical skills which
are even beyond the accomplishment of Tony Blair.
A change of direction must start with a lead from government.
Government speeches should spend less time focusing on the flexibility of
the labour market and more on the obligation of employers to provide
work fit for the twenty-first century. An important symbol would be
128 John Edmonds
increased protection against unfair dismissal. In Britain, a person can be

dismissed during the first year of employment for entirely unfair reasons
and this is perfectly legal. Foreigners gasp at this anomaly. Government
should also spend less time emphasizing the need for public service
managers to imitate the behaviour of the private sector and more time
celebrating the public service ethos which used to be such a strength of
British society. Third, the government could end its opposition to the
Information and Consultation Draft Directive of the European Union and
give British workers the same rights to consultation as workers on the
Continent.
Training
In many ways, Britain’s attitude to training is the touchstone of industrial
policy. Training can develop and sustain satisfying work. Training is a very
good way of delivering the message to people that they are valued. And, of
course, training can substantially improve economic performance. At
present, Britain’s training record is appalling. The government’s Skills Task
Force reported in April 2000 that we suffer considerable deficiencies in
basic and generic skills, in craft training and particularly in mathematical
skills. The examples of inadequate performance are extensive. Twenty-
three per cent of the adult population in Britain have such serious literacy
problems that they cannot find the section on plumbing in the Yellow
Pages. Over a third of the British workforce are not qualified to NVQ
Level 2. In particular, Britain seems to distinguish itself from other indus-
trialized countries by the very large number of companies who provide no
training of any sort.
In order to change the culture of British workplaces, we have to lay an
obligation on employers to provide training for all employees. This obliga-
tion could be enforced by a training levy or by tax incentives and penalties
or by simply giving every worker an entitlement to a particular level of
training. In 1995, the CBI surveyed member companies to ask whether the
voluntary system of employee training in Britain was actually working.
Nearly half of CBI companies admitted that the voluntary system was not
producing adequate results. Unfortunately, there has been no CBI survey in
the last six years, but personal experience would suggest that the level of
dissatisfaction has grown. Nevertheless, CBI leaders continue to insist that
compulsory training is wrong and will only lead to bureaucracy and extra
costs. Inadequate training means damaged economic prospects and
blighted lives. A change of approach is urgently needed.
Most social issues in Britain seem to lead back to questions of class. The
curious assumption in Britain that wisdom in an organization resides
solely in senior management contrasts sharply with the outlook of
managers in Scandinavia, where management is by consent and where
problems are solved as far as possible on the basis of consensus. A

company which structures itself so that management decides all of the
strategic matters in isolation from the workforce is destined for conflict
and failure. Research carried out for ACAS by Purcell and Kessler demon-
strates that problems in a company are best resolved by bringing together
a group of people from all levels with the task of finding a solution.3 Not
only does this problem-solving approach produce a solution to over 90 per
cent of the problems, but the process also improves the trust between
managers and employees.
Perceptions of failure
Finally, and most important of all, management should accept a change in
their priorities. In most companies, to cut the dividend is an admission of
failure. Indeed, it is so traumatic that it usually produces resignations
amongst senior managers. By contrast, reaching for the P45 and making
people redundant is often seen as an acceptable tactic to deflect criticism
from the City of London. Employees are not stupid. They understand that
within this value system they are less important than shareholders. If we
saw a change of priorities so that redundancy was regarded as manage-
ment failure, the commitment of people to their company could improve
dramatically. This is not just theory. There have been many examples in
Guinness, in Blue Circle Cement and elsewhere, of the way in which
employment relations are transformed once a guarantee of employment
security is put on the table. Flexibility becomes more possible because
people know they can contribute their ideas without threatening the
employment prospects for themselves and their colleagues. For managers
to accept that employees are the most important stakeholders in a business
will no doubt require a conversion of Pauline proportions, but it is the
essential requirement of long-term economic success.
My conclusion is that Britain has been fundamentally wrong about the
needs of a modern industrial economy. Many managers and politicians act
as if a deregulated economy with low pay and low levels of job security is
the only route to high economic performance. In fact, this approach is
producing great pain and demoralization. The analysis is economically
counter-productive because the pressure–pain model ensures that people
will not deliver their talent and will not produce of their best. Success in a
modern economy can only come by valuing people, motivating them and
training them effectively. They will contribute more enthusiastically if they
have a reasonable say in the development of their organization. The aim is
to produce a synthesis between modern management and human dignity.
Managers ought to take a more sensible view of the best interests of each
enterprise. Failure is guaranteed when the workforce regards itself as
130 John Edmonds
disposable; success is a real possibility when every employee feels valued

and informed.
Notes
1 Milgram, Stanley (1974) Obedience to Authority: An Experimental View,
London: Tavistock.
2 West, Michael and Patterson, Malcolm (1999) ‘The workforce and produc-
tivity’, New Economy 6(March): 22–7.
3 Purcell, J. and Kessler, I. (1995) ‘Joint problem solving: does it work? An
Evaluation of ACAS Advisory Mediation’, Occasional Paper no. 55, London:
ACAS.
Chapter 8
John Lewis Partnership

A case history
Simon Robinson
The Partnership’s supreme purpose is to secure the fairest possible

sharing by all its members of the advantages of ownership – gain,
knowledge and power; that is to say their happiness in the broadest
sense of the word so far as happiness depends on gainful occupation.
(John Spedan Lewis)
John Edmonds, in his chapter, contrasts the world of global competition

and the need for tight financial discipline with the needs of the workforce.
He asks why the demands of global competition should be used as a
reason for not attending to the needs of the workforce. He claims that not
all businesses are subject to this competition and that where they are it
does not provide grounds for ignoring these needs. Underlying this is a
fundamental point about ethics and moral psychology, highlighted by the
Milgram experiments, which purport to show how easy it is for the most
reasonable of people to deny their responsibility to others.1 Is it possible,
though, to balance responsibility towards the workforce with the need to
respond to the pressures of the free market? The John Lewis Partnership
(JLP) is one of the most remarkable examples in Britain of awareness of,
and attention to, the work community, embodying respect for the work-
force and corporate integrity. At the same time it succeeds in the market
place.
Case history
The first John Lewis shop, a drapers, was set up in Oxford Street, London,
in 1864. In 1905 Lewis bought the Peter Jones store in Sloane Square, and
by 1914 his son Spedan was made owner and manager. It was at this point
that Spedan began to experiment with reform and the sharing of power.
He had three guiding principles:
• The company should deal fairly with all stakeholders, principally

customers, suppliers and employees. At the core of that was a simple
132 Simon Robinson
concern for the inequality which existed between the employees and
the owners. When Lewis first joined the firm, the combined income of
its 300 employees was equal to that of the three owners. In the vein of
R.H. Tawney, he argued that too great an inequality was not only
inequitable but also damaging both to the rich and the less well off.2
• Employees should feel that they own the company, participating as far
as possible in decision-making.
• The company should be able to compete successfully in the market
place and attract the best in the profession into management. It was
clear to Lewis that this required two things. First, all employees should
feel that they were responsible for the success of the business and that
therefore any benefits which they accrued would be directly connected
to the standard of service. Second, aware of the failures in previous co-
operative approaches, he demanded tight commercial discipline.
This led to three initiatives: Committees for Communication, a house

journal, and a staff bonus. The Committees for Communication were just
that, aiming to ensure communication between management and workers,
‘to bridge the gulf that in large scale businesses develops between, on the
one side, the workers, … the people who have no authority over others
and, on the other side, the Principal Management, the people who have the
ultimate authority, the real control of the whole business’.3 The commit-
tees have survived to this day and are made up of ‘rank-and-file’ members,
i.e. they involve no managers. The committees are not a system for formal
representation but rather a means of airing and responding to grievances.
Work here is characterized by speed of response and the appropriate
director has to reply within three weeks.
The in-house journal, the Gazette, was first published in 1918. A
weekly production, it ensures that all members are aware of the results of
the previous week’s trading in each branch, and in the business as a whole.
Every operating unit, store or warehouse, also has its own journal, the
Chronicle. These are also a means of communicating criticisms to the
management, anonymously, through the correspondence columns. Like the
Committees of Communication, the relevant manager has to respond
within three weeks.
Both these initiatives were essentially about ensuring transparency and
the free flow of knowledge in the company. For Lewis, the development of
well-informed ‘public opinion’ was an important element in any business.
The third initiative, a staff bonus, was paid at Peter Jones in the form of
managing directors’ IOUs. These later became the cash bonuses paid out
by the John Lewis Partnership.
John Lewis Partnership 133
The Partnership
John Lewis died in 1928 and in the following year Spedan formally moved
the firm into partnership, at the same time joining the Oxford Street store
with his Peter Jones enterprise. He sold his shares to the John Lewis
Partnership Trust Ltd, which controls the Partnership’s principal holding
company, John Lewis Partnership plc. From this, Lewis developed a
Constitution which was based on three elements: the Central Council; the
Central Board; and the Chairman.
The Central Council is a representative body composed of elected rank-

and-file and management appointees. The Chairman and other senior
managers are obliged to give an account of their stewardship annually to
the Council. The particular responsibility of the Council is for the non-
commercial aspects of company life, from social activities through to
charitable giving. Nonetheless, it also has a watchdog function and has the
power to discuss ‘any matter whatsoever’.
The Central Board is responsible for managing the commercial enterprise.

It has twelve members: the Chairman and deputy Chairman, together with
five directors appointed by the Chairman and five elected by the Central
Council. Hence, there is a direct link into the community structure of the
firm.
The Chairman is also the Chief Executive Officer and is responsible for
maintaining profit and fulfilling the aims of the Constitution. The
Chairman has great power and can even name his successor. However, ulti-
mately the Central Council can dismiss the Chairman if he does not fulfil
his role in the terms of the Constitution. He is thus ultimately subordinate
to the Constitution.
Lewis was aware that over time, despite these checks and balances,
designed to keep the company focused on its organizational values and
principles, these principles could be eroded. Hence, he set down that two
directors should have as their only function the protection of the integrity
of the Partnership Principles. The first, the Chief Registrar, ensures that
the principles and democratic system are maintained. The second, the
Partners’ Counsellor acts as an ombudsman, receiving any complaints and
ensuring that the rights of Partners are fully respected. The Counsellor has
the function of ensuring that the Partnership is ‘influenced properly by
considerations of humanity’. Lewis saw these as dealing with the ‘critical
side’ of the firm as distinct from the executive. Each operational unit of the
Partnership has its own Counsellor and Registrar.
134 Simon Robinson
Principles of the John Lewis Partnership
Purpose: The Partnership’s ultimate purpose is the happiness of all its

members, through their worthwhile and satisfying employment in a
successful business. Because the Partnership is owned in trust for its
members, they share the responsibilities of ownership as well as its
rewards – profit, knowledge and power.
Power: Power in the Partnership is shared between three governing

authorities, the Central Council, the Central Board and the Chairman.
Profit: The Partnership aims to make sufficient profit from its trading
operations to sustain its commercial vitality, to finance its continued devel-
opment and to distribute a share of the profits each year to its members,
and to enable it to undertake other activities consistent with its ultimate
purpose.
Members: The Partnership aims to employ people of ability and integrity

who are committed to working together and supporting its Principles.
Relationships are based on mutual respect and courtesy, with as much
equality between its members as differences of responsibility permit. The
Partnership aims to recognize their individual contributions and reward
them fairly.
Customers: The Partnership aims to deal honestly with its customers and
secure their loyalty and trust by providing outstanding choice, value and
service.
Business relationships: The Partnership aims to conduct its business rela-

tionships with integrity and courtesy, and scrupulously to honour every
business agreement.
The community: The Partnership aims to obey the spirit as well as the
letter of the law and to contribute to the well-being of the communities
where it operates.
Since 1928, the Partnership has continued to grow. Numbers of partners

have increased from 1,500 to over 54,000. Up to 1955, the major increase
in productivity had been via the acquisition of new companies, including
Waitrose (1937) and Selfridges (1940). From this base, growth has been
organic, leading to some 28 stores and 136 supermarkets by 2001. The
Partnership is now moving into Internet trading through the acquisition, in
February 2001, of buy.com (UK), the leading online retailer of technology,
software and office products. Links with buy.com (USA) will be main-
tained.
Since 1971, employment has risen steadily and sales have grown at an
annual average of 6 per cent. In 2000, the sales for department stores were
over £1,997 million, and for supermarkets over £2,095 million, with a
turnover of over £4 billion, up by 10 per cent on the previous year.
Analysis
Although the writings of John Spedan Lewis tend to be discursive, they
reveal a passionate concern for both the well-being of his workforce and
right relationships with suppliers, customers and community. An account
of well-being can be summed up in the industrial psychology of R.H.
Tawney, and in particular in the work of contemporary psychologist P.
Warr. In what follows, I use Warr’s analysis of work, and the needs it
fulfils, to examine the JLP approach to its workforce.4
Warr argues from a psychological perspective that work is necessary for
the well-being of persons. He argues that there are basic human needs
fulfilled in work, and fulfilling these needs gives content to respect for the
workforce. The majority of these needs are fulfilled by JLP:
• Opportunity for control: This includes control over the content,

procedure and pacing of the individual’s work as well as the opportu-
nity to influence the policy of the company. In the case of JLP, policy
can be influenced both through the Committees and the Council.
• Opportunity for skill use: This includes opportunity to use skills and
to acquire new ones. In JLP this occurs in a variety of ways. Support is
provided for those who want to enter continuing or higher education –
for example, by taking courses through the Open University. Many of
the stores have Learning Centres where the staff can take vocational
or non-vocational courses. Those who have been there for 25 years
have the opportunity for a six-month paid sabbatical, either to pursue
learning or simply to take time out.
• Environmental clarity: This involves feedback from staff and
management on practice and progress, and sharing information on
aims, objectives and future developments. All this is achieved in JLP
through the councils, journals and committees.
• Physical security: This includes both an acceptable physical environ-
ment and satisfactory arrangements for health and safety at work. JLP
extends the basic provisions of this in several ways. There is a well-
staffed occupational health service, and the provision of pension and
life assurance schemes.
• Financial security: As Edmonds noted in the previous chapter, this is
often not perceived by employees as the primary need. Nonetheless, it
136 Simon Robinson
is a critical need to fulfil if the employee is to feel valued and perform

to their best. In addition to their salary, Partners share in the profits of
JLP. Profit is dealt with prudently, taking into account the needs of the
company. After that, the profits are shared equitably, with all members
receiving the same percentage of their salary. The concern for financial
security also extends to Partners who experience particular hardship,
with the facility of a loan or grant available.
• Opportunity for interpersonal contact: This is provided not only by
the various organs of democracy but also by the immense variety of
opportunities that there are for leisure and for contact with groups
outside work hours. This ranges from various country clubs, which
can cater for holidays, to sporting and cultural activities. The Partner-
ship has a strong musical side with work-based performing groups,
and there is also encouragement to make use of general cultural
opportunities through ticket subsidies.
• Valued social position: There is a basic need to feel that work
involves a function which is valued in society. Often this has been
confined to the professions. In JLP the very fact of being one of the
Partners provides recognition of value. The Partnership does not,
however, focus on value as status. Instead it focuses on value which is
derived from being part of a larger enterprise, and also the values
found in the practice of skills and the offering of service. Ultimately,
though, Spedan Lewis saw value as attached to purpose:
The Partnership was meant to enable people to feel that they might
be making a contribution of real value to the ceaseless experimenta-
tion that is necessary to human progress. It was meant for people
who need not only something to live by but also something to live
for.5
At the heart of this approach to managing the business and personnel there
is an emphasis on the need for a strong sense of responsibility amongst the
managers. This is seen in a ‘commitment to the organization and a concern
for the welfare of its members’. Whilst management style may differ
between different branches, there is a ‘general awareness that decisions
have to be defended on rational grounds’.6 Freedom to criticize is main-
tained throughout the organization and thus keeps management attention
focused on both the workforce, and the basis for any decision-making.
Equally, because each Partner is involved so deeply in the company,
there is a sense in which every employee feels responsibility for the whole
company. This leads to the reduction of psychological distance between
the different parts of the organization, something reinforced by the
communication of knowledge. That, in turn, tends to encourage the devel-
opment of proactive responsibility, responsibility more in the sense of a
civic virtue, as distinct from responsibility simply for a task.7 Hence, Lewis
stressed a sense of responsibility which should go ‘beyond the letter of the
law’, which he summed up in the idea of good citizenship applied to the
workplace.
As a whole this gives members a sense of identity and purpose. The
scope of this purpose is not simply confined to the production and sale of
goods, and maintaining the well-being of the workforce, but looks to the
higher purpose of contributing to and maintaining the well-being of the
wider community in a variety of ways. This is exemplified in a number of
different relationships:
• Suppliers: The Partnership aims to do business with firms who share

the same values. This extends to global trading. The company aims to
support open and free world trade, which works to the benefit of all
countries. At the same time Waitrose endeavours to maintain the
option of dealing with smaller local suppliers.
• Community: Concern for the community is shown in the planning
stages of new developments. The design of new buildings takes into
account how they will enhance the local community and environment
and what the wishes and concerns of the local community are. The
Partnership also supports broader campaigns which affect the local
community such as the Focus on Food campaign (Royal Society of
Arts). This aims to increase awareness amongst parents, families and
schools of the need for proper nutrition in early life. The Partnership is
also concerned with need in the community, from educational to
social. In 1999, for instance, £1.5 million was donated to several
different causes. There is now a £5 million Charitable Trust Fund and
several examples of operational centres supporting their own local
projects. Importantly, all Partners are encouraged to get involved with
such projects.
• Environment: There is also a concern for the environment, which is
manifest at various points in the decision-making process. Waitrose,
for instance, is at the forefront of organic food retail. This includes
support for new organic farmers through the Waitrose Organic
Assistance Scheme. They also guarantee a market for produce where a
farmer is converting to organic produce. In John Lewis Furnishings,
the wood used for furniture comes from renewable sources.
In these latter factors, issues arise of both responsibility and a sense of

purpose which extends beyond the workplace. Both have a bearing on
well-being in the workplace.
138 Simon Robinson
Conclusions and questions

There may be may be a point about corporate integrity at the centre of the
John Lewis case study. As Robert Solomons notes, integrity is perhaps
more a collection of virtues than a single virtue.8 Integrity can be taken,
first of all, to involve integration, unified thinking which explicitly brings
together the principles and practice of the corporation. The whole system
of JLP is designed to ensure that practice is measured against the founding
principles. Close to this holistic approach is the idea of harmony, much
beloved by Spedan Lewis. Richard Higginson notes the Jewish concept of
Shalom – health, harmony, right relationships – as being a corporate form
of integrity.9 Second, integrity involves consistency of behaviour in
different areas of operation, and different relationships. Flanders et al.
note consistency and coherence as two key features of the Partnership.10
Third, the development of such coherence and consistency is a function of
long-term commitment, something critical to the growth of JLP. Finally,
absolute integrity is an ideal, an aim which can never be fully achieved.
Hence, central to its development has to be the capacity to learn, both for
the individual and the organization. Again, written into the Partnership
and its organization is the capacity to test out values and to learn. The
Learning Centres provide individual learning. The system of Committees
and Councils, along with the Registrar and Counsellor, provide a trans-
parency which enables the organization to learn. Having two directors
whose task is to stand apart from corporate decision-making, in order to
provide an external perspective, is also an important part of the reflective
process.
As Peter Hawkins notes, a learning organization does not simply focus
on learning and developing skills and organizational process. It also
demands that the purpose and meaning of the organization be reviewed.11
Once again this is central to the Partnership. Moreover, JLP does not see
itself as simply a retail company whose purpose is to make wealth. On the
contrary, it sees the accumulation of wealth in the context of a higher
purpose to do with contributing to the well-being of the community,
including the workforce.
In the light of such a view of purpose, this case shows how a firm can
operate a policy which makes concern for its employees the highest
priority and still operate successfully in the free market. Evidence for
success is that in the late 1980s and early 1990s JLP consistently outper-
formed much bigger companies such as Tesco, Sainsburys and Marks &
Spencer.12 Bernard Miller suggests that this success was due to confidence
in the workforce that ‘the enterprise is being operated in the interest of all
who work in it’.13 In turn, he argues that confidence gives to management
‘the authority to manage subject to full accountability of the managed’.
Whilst all this reinforces the sense of good psychology being applied,
many are still sceptical as to whether there are clear empirical connections
between this and the success of the company. Robert Oakeshott suggests
several pieces of evidence which do provide a connection. First, in the mid-
1990s absenteeism was running at the low rate of 3.5 per cent. Second, the
labour turnover is low – 7.1 per cent in 1984–5 compared to 30 per cent
in the retail sector as a whole.14 Third, there is anecdotal evidence that
‘stock shrinkage’, petty pilfering and so on, is low. These factors would
indicate a settled workforce.
Nonetheless, there remain major questions regarding the effectiveness of
the Partnership. As Flanders et al. note, the much-lauded industrial democ-
racy is not as remarkable as some would argue. Decisions still rest with the
CEO, who selects the deputy chairman as well as five other members of
the Central Board. The Communications Committees rarely influence
policy. Moreover, Flanders et al. argue that the strong stress on the basic
principles, virtually unchanged since the Partnership began, smacks of
paternalism.15 Though acceptance of the underlying ideology is not a crite-
rion for job selection, workers do have to work within this value system.
Moreover, the company does not accept unions and may sound harsh at
points. Regulation 186 of the Constitution, for instance, notes that if a
Partner has been absent, for whatever reason, for three separate times in a
period of six months the Registrar should refer this to the Staff Manager
to determine if there is need for medical consultation, or ‘consideration of
his continued membership of the Partnership’. Is this paternalism or
reasonable discipline born of mutual accountability?
The other questions are about how far this kind of system could be
replicated outside the retail sector, and to what extent the success of this
project is dependent on freedom from external investors. How far, also, is
the system ultimately dependent upon the underlying principles and an
acceptance of them? The Registrar and Counsellor, for instance, are not
there simply as ethical consultants to help members work through ethical
problems. Their task is driven by the ideology of the company and is to
ensure that its principles are applied in the areas of human resources and
decision-making.
This leads to a fundamental question championed by Friedman and
Sternberg as to whether such principles should be imposed upon a
company. They would not argue against the Lewis approach per se but
rather that no such approach should be imposed on another company.
The JLP case, however, invites a more fundamental question about a
business’s awareness of the humanity of the workforce and the develop-
ment of systems that will enable that awareness to remain in place. If this
is fundamental, as Edmonds suggests, then how can it be applied in
different contexts? How might the ‘critical’ and reflective side of a
company be developed and the human needs of the workforce be attended
to? How might the learning dimension be introduced and how might it
140 Simon Robinson
relate to the success of the business?16 As West and Patterson note, if the
rallying call, ‘People are our most important asset’, is not to be just a
management platitude then these issues have to be addressed in practice.17
Notes
1 Zygmunt Bauman develops this theme in Modernity and the Holocaust (1989),
Polity: London, and Postmodern Ethics (1995) Oxford: Blackwell.
2 R.H. Tawney (1930) Equality, London: Allen & Unwin.
3 J. Lewis (1948) Partnership for All, London: Kerr-Cross.
4 P. Warr (1987) Work, Unemployment and Mental Health, Oxford: Oxford
University Press.
5 J. S. Lewis (1948) Partnership for All, London: Kerr-Cross.
6 A. Flanders, R. Pomeranz and J. Woodward (1968) Experiment in Industrial
Democracy, London: Faber & Faber.
7 C. Harris, M. Pritchard and M. Robins (1995) Engineering Ethics: Concepts
and Cases, New York: Wadsworth.
8 R. Solomons (1992) Ethics and Excellence, Oxford: Oxford University Press.
9 R. Higginson (1996) Transforming Leadership, London: SPCK.
10 A. Flanders et al., op. cit., p. 184.
11 P. Hawkins (1991) ‘The spiritual dimension of the learning organization’,
Management Education and Development 22(3): 172–87.
12 K. Bradley and S. Estrin (1986) ‘The Success Story of the John Lewis
Partnership: A Study of Comparative Performance’, London: Partnership
Research.
13 R. Oakeshott (2000) Jobs and Fairness, Norwich: Michael Russell, p. 225.
14 Oakeshott, op. cit., p. 226.
15 Flanders et al., op. cit., p. 193.
16 Unipart, for instance, have developed an in-house university which is integral
to its business. Employees pass through this every day and courses apply
directly to their work, increasing their efficiency and developing greater control
and confidence. See J. Kinghorn (1999) ‘U Turn at UNIPART’, Knowledge
Directions, Fall: 6–17.
17 M. West and M. Patterson (1999) ‘The workforce and productivity’, New
Economy 6(March): 22–7.
Chapter 9
Nestlé baby milk substitute

and international marketing
A case history
Simon Robinson
Can a product which requires clean water, good sanitation, adequate

family income and a literate parent to follow printed instructions be
properly and safely used in areas where water is contaminated, sewage
runs in the streets, poverty is severe and illiteracy is high?’
(Senator Edward Kennedy, Senate Hearings on Infant Formula, 1978)
The so-called ‘Nestlé Case’ has been ongoing since the 1960s. The case
focuses on the work of multinational corporations (MNCs), and in partic-
ular Nestlé, and how they market their products in the Third World. Key
issues which emerge are:
• How far do MNCs influence cultures, governments and health organi-

zations, through advertising and free gifts? This raises the question as
to how far an MNC should adapt its approach to advertising, in the
light of local needs.
• To what degree are MNCs responsible for the use made of their prod-
ucts not directed by them?
• Should MNCs be concerned about matters of justice? The attempt to
market breast milk substitute is seen by many to be in itself unjust. On
this view, not only is the MNC using those in poverty to try to further
its own profits, but its marketing approach also leads to suffering and
possibly the death of the babies involved. The plausibility of this view
depends on the plausibility of competing views of justice, and this
view questions the morality of simply operating in a free market orien-
tation. Closely connected to this is the defensibility of a global view of
child health. The medical judgement is that, where available, breast-
feeding is best for the baby, whatever the nation.
This case history presents a heady mixture of issues: questionable

marketing practices, injustice and poverty, as well as matters concerning
health. Analysis of the case will raise these issues in the context of different
142 Simon Robinson
ethical positions, specifically relating the issues to those positions outlined

in the first two chapters.
The case also raises the issue of ethical dialogue and how different
participants in a confrontation can begin to communicate, including how
codes of practice can be interpreted.
The development of infant formula

and its marketing
Whilst the case had come to the attention of the public in the 1970s, the
history begins much earlier. Where mothers are unable to breastfeed there
has always been the need for alternative nutrition. In 1867, Henri Nestlé
developed a formula which aimed to be suitable for infants, ‘fulfilling all
the conditions sought for by physicians’.1
In the twentieth century, breast milk alternatives were increasingly
commonly used and in the US in particular hit a sales peak in the 1950s. In
the 1960s, there was a decline in the birth rate leading to a major fall in
sales. Throughout this time, there was intense competition between five
major companies: Mead Johnson, Ross Laboratories, Wyeth Laboratories,
Nestlé and Borden. Mead Johnson and Ross Laboratories had cornered 90
per cent of the American market, but Nestlé were the world leaders with
over 50 per cent of the global market.
The developing nations

With the birth rate in the developed countries beginning to decline, the
companies began to search for markets elsewhere and focused on the
developing countries where the birth rate was soaring. In moving into this
market, the companies began to cross the divide between commercial and
pharmaceutical industries that existed in the developed world. There, food
companies tended to advertise directly to the consumer, while pharma-
ceutical companies promoted their goods primarily to the health
professionals. The formula companies marketing in the developing nations
targeted both health professionals and consumers. Marketing strategy
included:
Babyfood booklets: All the companies produced booklets that gave advice
for pre- and post-natal care. They used pictures to show correct feeding
methods and made a variety of recommendations for ‘mixed feeding’,
including the use of a bottle where there was insufficient or poor quality
breast milk. All of this gave the impression of informed and careful advice,
while at the same time managing to extol the quality of their own product.
The booklets were careful not to denigrate breastfeeding, but some early
versions did not actually mention it.
Nestlé and international marketing 143
Advertising: Sustained radio advertising, posters, and information and

pictures on cans again gave the impression of the importance of breast
milk alternatives without initially mentioning breastfeeding.
Free samples and gifts: One widespread promotional technique was to

offer potential users free samples of the formula. Free samples were also
supplied to hospitals, a promotional technique known as ‘dumping’.
Promotion through the medical profession: Given that consumers would

be sensitive to the ‘medical nature’ of the product and have a desire to do
the best for their baby, working through the health professional was a
logical focus for the MNCs. The formula industry employed milk nurses to
advise mothers on children’s nutrition. These were mostly employed in
hospitals but some did visit mothers in their homes.
Milk banks: In addition, milk banks were set up in some areas to sell
formula at reduced prices to poor mothers, at a discount of between 33
per cent and 40 per cent.
Criticisms of these methods

First, not only did the initial advertising and booklets not mention breast-
feeding, but they also gave the impression that the use of breast milk
substitute would be the best option. The adverts implied that they would
give the baby strength, energy and power, and pictures of plump, smiling
babies on posters and cans reinforced this.
Second, the potential consumers were particularly sensitive to this kind
of advertising. A new mother wants the very best for her baby and is open
to being influenced at this time. The very best was, by implication, not
simply a healthy baby, but also one who shared the prosperity of the West
– the babies in the adverts were often white.
Third, promotion of formula was making use of threefold changes in
the developing countries:
• increased urbanization. With increased urbanization the poorer

mothers could see the wealthier families making use of the formula
and would associate this with wealth and prosperity;
• a growth in medical services;
• an increase in live births in health centres and hospitals.
The coincidence of these factors enabled the companies to take advantage

of social and economic change, and focus on limited areas to reach a wide
and captive audience.
Fourth, the use of health professionals in the work of education led to
144 Simon Robinson
what D.B. Jelliffe described as ‘endorsement by association’ and ‘manipu-

lation by assistance’.2 In some cases, the health worker might be
influenced by the promotion to accept the claims of bottle-feeding. In
others, the simple fact that posters and cans were on display in the hospital
gave the impression that the product was being endorsed by the medical
staff. The use of milk nurses, in particular, was a controversial approach.
The companies claimed that they were there for educational purposes,
precisely to ensure the correct use of formula. They were, however, in a
unique position to influence the mothers, especially if they were on
commission for formula sales. At the very least, the practice raised a
conflict of interest.
Fifth, promotional techniques ignored three critical factors in the Third
World: poverty, hygiene and illiteracy. The mother left hospital with a
limited amount of free formula and continued to use it, leading to her milk
drying up. Those who were illiterate did not always mix the formula
correctly, leading to use of unsterilized water and the baby suffering diar-
rhoea. The diarrhoea meant that the baby was unable to absorb the
nutrients in the formula. The free sample, of course, began to run out and
formula was thus thinned out to make it last, often with contaminated
water, due to the lack of sanitation. This resulted in the death of the baby
from malnutrition and dehydration. Finally, milk banks were not a solu-
tion to the problem, as the poor could not afford even these prices.
Criticisms such as these come together in the work of D.B. Jelliffe. He
proposed the term commerciogenic malnutrition to sum up the effects of
the marketing practice of infant formula companies in developing
nations.3 An expert in child nutrition, Jelliffe argued that the increase in
infant mortality rate in the Third World and the decrease in breastfeeding
were directly connected.
Jelliffe’s testimony led the United Nations Protein Advisory Group to
recommend that three major stakeholders take responsibility for ensuring
that this situation was addressed. The formula industry was urged to
encourage breastfeeding in new mothers; to avoid promotion in hospital;
and to ensure that the directions for use on the cans were clear, not least
about the need for hygiene.
Paediatricians were encouraged to stay in discussion with the formula
industry, particularly about the needs of those on low income; and to keep
up to date with developments in research on breastfeeding and the use of
processed foods.
Governments, especially in the Third World, were encouraged to make
use of the media for education on breastfeeding, and on the respon-
sible use of formula products, and to consider financial help to the most
vulnerable groups for infant and weaning foods.
The global debate

Up to this point the debate was confined to the health care professions. In
March 1974, the debate became global through Mike Muller’s pamphlet
The Baby Killer. This was a broad restatement of an article which had
appeared in the August 1973 edition of the New Internationalist. That
article, by R. Hendricks and David Morely, focused on cases where bottle-
feeding was not appropriate, accepting that there were cases where it was.
Muller’s article focused less on appropriate uses and a subsequent transla-
tion by a German group (ADW, Third World Working Group) put aside
any qualifications and gave it the title Nestlé Kills Babies. Nestlé’s
response was to sue ADW, leading to a two-year court case, which they
won. Nestlé, however, lost the publicity battle. They had given the impres-
sion of a global giant trying to stamp out the protests of ordinary decent
people.
Instead of dampening down the global concern, there was increased
collaboration between international health organizations and concerned
groups, including the churches and NGOs, which led directly to a world-
wide boycott of Nestlé goods in June 1977. In response to this, Nestlé was
greatly concerned for its ethical integrity and reputation, and wanted to
assert that to the public. This involved a fourfold approach.
First, in evidence to a US Senate hearing, Oswald Ballarin (head of
Nestlé Brazil) characterized those responsible for the boycott as ‘a world
wide church organization with the stated purpose of undermining the free
enterprise system’. These allegations of conspiracy were never withdrawn
by Nestlé. Second, key professionals were targeted, including 300,000
clergy and community leaders, trying to refute the allegations directly.
Third, after a meeting between WHO, UNICEF and the formula
companies, some initial guidelines on practice were developed with the
declared intention of devising a full code of practice for marketing. Nestlé
argued that they were already following these guidelines. This was a
change in approach, urged by new PR consultants, aiming to avoid
confrontation. Finally, Nestlé tried to align itself with, and fund, ‘indepen-
dent’ research into child nutrition. At the same time, Nestlé worked with
an industry council to try to develop self-regulation.
The WHO Code

The World Health Organization Code on marketing took until May 1981
to be ratified. Prior to this point, there were difficulties in communication
between some governments represented at the World Health Assembly.
Members of the formula industry themselves did not always see eye to eye
and several companies, including Heinz, Kraft and Gerber, signalled that
they would not be bound by the Code. Arguments still raged about basic
data on formula use in the developing world. Several companies were
146 Simon Robinson
adamant, for instance, that the Jelliffe thesis was focusing on a single issue
without taking account of many other social and economic factors that
accounted for the figures on morbidity and mortality.
Nonetheless the Code was passed, was accepted by Nestlé, and formed
the basis of marketing practice. The Code directives included:
• All direct advertising and sampling to consumers should be stopped.

• Labels should carry the advice that breast is best, and there should be
no text or picture that idealized the formula.
• Marketing should continue but only if it did not undermine breast-
feeding.
• Health authorities in member states should educate health workers on
the benefits of breastfeeding.
• Donations could be made to health care workers but not as sales
inducements.
• Employment of milk nurses was to be stopped and industry personnel
were not to receive any reward for the volume of formula sold.
• The responsibility of enforcing the code, and of passing whatever
legislation resulted from it in any particular country, was to be left to
individual governments.
• All those with an interest, especially the industry and non-govern-
mental organizations, were encouraged to raise awareness of the Code
and to report any infractions they saw.
End of the boycott

At this time Nestlé began to widen its non-adversarial approach. It entered
into dialogue with the Methodist Task Force, which the American
Methodist Church had charged to take a detailed look at this issue. It set
up the Nestlé Coordination Center for Nutrition (NCCN), headed up by
Rafael Pagan. This was intended to serve as an information centre for key
issues in nutrition, and to act as receiver of information that might help
Nestlé in meeting new demands and achieving organizational change in
relation to the matter.
By May 1982, the continuing dialogue led to the development of the
Nestlé Infant Formula Audit Commission, an independent monitoring
agency chaired by Senator Edmund Muskie, former US Secretary of State.
Nestlé’s practice was seen as increasingly transparent and in line with the
Code. Hence, support for the boycott of Nestlé products began to wane,
with high-level commentators such as the editor of the Washington Post,
and several activists, including Douglas Johnson (head of Infant Formula
Action Coalition) accepting the company’s response. The boycott was then
officially suspended in October 1984.
The second front

On the face of it the issues had been sorted out through the Code and the
various forums set up to develop dialogue. This led to the gradual scaling
down of the NCCN, and eventually of the Muskie Commission. However,
opposition still remained in certain quarters. The boycott, backed by the
General Synod of the Church of England, had not yet been suspended in
the UK.
Activists were now concerned that Nestlé was trying to find ways of
getting round the Code. One key area was the supply of free formula to
hospitals. This remained important for the companies, not least because
where a mother had to use formula, and used a particular brand in
hospital, she would tend to continue with that brand after her stay. Hence,
competition was intense. In addition, bad practice was developing in some
hospitals where, rather than bringing the baby to the mother for breast-
feeding, the staff were using the free supplies of formula to feed the babies,
purely for their own convenience.
Despite the fact that this practice of supplying free formula to the health
centres was neither banned by the Code nor illegal, Nestlé remained
committed to end all such supplies in developing countries, except for the
limited number of babies who needed it. Nonetheless, conflict continued
over the interpretation of the Code in several areas, including the matter of
which language should be used for the packaging of formula. Despite this,
the Church of England suspended its support of the boycott in 1994,
though clearly signalling that if it became aware of any attempt to circum-
vent the Code then it would soon return to support of the boycott.
The early 1990s also saw important moves towards a goal of universal
breastfeeding, driven by WHO and UNICEF, including the Baby Friendly
Hospital Initiative. This led to further pressure on Nestlé, especially from
UNICEF. In July 1993, UNICEF issued a document, An End to
Ambiguities. This reflected a frustration with the difficulties in the inter-
pretation of the Code. In an attempt to end those ambiguities, UNICEF
expanded the Code without consulting either WHO or the industry. The
first response from Nestlé was to argue that this went against the Code.
Hence, far from resolving ambiguities, these changes led to further wran-
gles.
In May 1995, Carol Bellamy took over as the head of UNICEF and
showed immediate concern about the formula industries. Initial requests
for dialogue by Nestlé were turned down. In 1996 Bellamy suggested that
UNICEF and the formula companies meet and that they all discuss their
sales policy and practice, country by country. For Bellamy this was the
only way in which transparency could be achieved and the ambiguities
resolved. For the company lawyers there was the major constraint of US
148 Simon Robinson
anti-trust laws. To reveal company policy and practice could lead to viola-
tion of those laws.
Meanwhile, a new activist coalition was formed, the Interagency Group
on Breastfeeding Monitoring (IGBM). This claimed independence from the
many different activist groups but had overlapping membership with
many. Without fully consulting the formula industry, IGBM issued a size-
able document called The Code Handbook. This sought to provide the
definitive approach to interpreting the Code and even provided a model
law for countries to adopt. The pressure from this organization, supported
by UNICEF, then led to a document called Cracking the Code (1997). The
document aimed to present independent research into the controversy. In
the event, Nestlé and the researchers could not agree over the methodology
employed or conclusions. The report asserted that companies were system-
atically violating the Code and that the whole marketing policy should be
altered. Nestlé responded with detailed questioning of methodology, and
noted that, even if the methodology were accepted, the report included few
details of Nestlé transgressing the code. Once more then, common under-
standing, even about data collection, proved to be elusive.
UNICEF continued with its policy of not talking with the formula
industry, and even extended this to criticizing the International Paediatric
Association for its discussions with the industry. In 1997, Carol Bellamy
did meet with the new Nestlé CEO Peter Brabeck. Despite hope for a
continued and open dialogue, Bellamy declined further contact.
The way ahead?

The way ahead for the Nestlé case is perhaps even less clear with the dawn
of the twenty-first century. Attempts to resolve ambiguities become even
more difficult with the spectre of AIDS in the developing countries. The
proportion of mothers who had become HIV-positive in developing coun-
tries varied, according to different areas, between 30 and 70 per cent.4
Though the research on this is continuing, the possibility of vertical trans-
mission of AIDS through breast milk has become a real danger. In a
conference in June 1998, organized by WHO and UNICEF, it was
concluded that there needed to be a change in policy, with the UN issuing
recommendations discouraging mothers who have AIDs from breast-
feeding. This threatens to conflict directly with the global concern to
encourage breastfeeding.
Nestlé, in the meantime, has continued to attempt to get its case across,
especially in key areas such as universities, where many student unions
continue to ban Nestlé products. In terms of presenting its case, the HE
sector is important for two reasons. First, over 45 per cent of school
leavers enter higher and further education each year in the UK, and these
will be the opinion formers of the future. Second, academic support would
lend credibility to Nestlé’s arguments.
Even this approach has had its problems. Denied the chance to set out
their case in the Oxford students’ newspaper, Nestlé UK decided to place
an advertisement in the local free paper. One of several claims in this was
that ‘even before the WHO International Code for Marketing Breast Milk
Substitutes was introduced in 1981, Nestlé marketed infant formula ethi-
cally and responsibly, and has done ever since’. The response from Baby
Milk Action was to take these claims to the Advertising Standards
Authority. Here was an arbitrator who might be able to judge the case.
In the event the ASA ruled against the adverts on the basis that they
contained implications that could not be easily substantiated. The response
of Baby Milk Action was to claim that the ruling finally showed that
Nestlé were unethical.5
Of course, the ASA was not saying that Nestlé was unethical. It was
simply making a ruling on the narrow claims that were in the advertise-
ment. The implication of the ruling was that if the advertisement had been
reframed then it might have been permitted. Moreover, the ASA were
clearly uneasy about having to make judgements on matters of ethics.
So the Nestlé case continues. At critical points it raises major questions
as to how Nestlé might best have handled the issues, and beyond this
further questions about the different ethical views that might be applied to
the case.
Analysis
This case history illustrates the very different ethical positions which can
be taken to marketing in the Third World. For Nestlé this has led to major
changes in marketing strategies. With each major challenge to their ethi-
cal reputation, Nestlé developed a response which moved to a different
ethical position. These positions are summed up by Sethi and Post in an
analysis of a previous case which concerned the whole formula industry.
They name the positions as follows: social obligation; social responsibility;
and social responsiveness.6 As each of these approaches is outlined in turn
this will raise questions about what other options there might have been
both for Nestlé and for others involved in the case.
Social obligation
The initial ethical standard of Nestlé in the Third World was one of social
obligation, summed up as ‘reasonable responsibility’. It determined first to
operate within the law of the countries involved, and second, to ensure
product safety. For Nestlé this included commitment to research both the
need for breast milk substitute and the quality of the formula. It also
150 Simon Robinson
accepted the need for truthful marketing: advertising should not make
claims for a product which are inaccurate or misleading. Finally, it was
concerned to identify and answer the consumers’ needs.
In all this, Nestlé believed themselves to be perfectly ethical, precisely
because they did not believe that they had any responsibility beyond the
manufacture and proper marketing of the goods. As such they viewed the
whole project from the perspective that the Third World is part of a global
free market where there is great competition from other formula compa-
nies, and within which the company was only obliged to fulfil the legal
and economic criteria governing its operation. This position is close to
Sternberg’s view noted in chapter 2.
The case, however, raises questions about that view when applied to
corporate behaviour in the developing countries. First of all, this view led
to myopia in the Nestlé approach involving:
• a lack of awareness of the broad issues of Third World poverty;

• a lack of critical awareness of the global/medical issues surrounding
baby milk substitute.
Neither of these considerations was part of their decision-making process.

These considerations make much broader demands than the simpler
requirement to be aware of the legal and ethical norms in the different
countries in which an MNC might operate. Moreover, the combination of
these two further requirements is a potent one, regardless of any ethical
judgement about Nestlé’s practices per se. For these are the sort of consid-
erations that can have an effect both on the company’s standing in the
world and upon their operations in general, as was shown by the subse-
quent boycott of Nestlé products.
Second, the social obligation position puts too much ethical weight on
the concept of the free market, simply assuming its acceptability in the
Third as well as the First World. However, even those who support the free
market accept that the idea presupposes freedom and equality of choice,
and a government that would provide a framework for this.7 These are
conditions that do not necessarily apply in developing countries.
Third, the New Internationalist and Muller articles introduced a very
different ethical view, raising major issues of justice from a global perspec-
tive. They were concerned about inequality, and in particular the impact
which the use of formula appeared to be having on the poor. The actions
of the MNCs, they claimed, were exacerbating the already massive prob-
lems of Third World poverty and health inequity. They also raised the issue
of how far Nestlé was creating need through its advertising campaigns,
rather than responding to need. Developing nations would be susceptible
to marketing campaigns that promised a Western view of well-being.
Finally, this critique introduced the critical question of the power of the
MNCs and of their global interconnectedness. MNCs have more financial

power than certain governments and are part of the global economic
system that many believe has directly contributed to Third World poverty.
Business in this context can influence politics. All these points lead to ques-
tions about the responsible use of great power.
At their most basic, these arguments support the need for practical
wisdom and social and political awareness when entering a marketplace
which is politically and culturally different from that of First World
nations. Nestlé, however, was not ready for such a debate, and certainly
not one which introduced different views of justice.8 In answer to the
activists’ critique, they initially stuck firmly to the social obligation posi-
tion. They simply asserted their view against an opposition whom they
categorized as Marxist. The result was that a key moment of decision-
making about how to handle the ethical debate was lost, and there built up
a momentum which moved the discussion away from careful ethical argu-
ment to argument ad hominem, encouraging mutual demonization on the
part of Nestlé and the NGOs.
Faced by the activist challenge, how might Nestlé have responded? How
might Nestlé have ensured that it was better prepared? Alongside any
social audit, could it also have set out an ethical audit, one which would
look not simply at the effects of marketing but the values behind it, and
the possibly conflicting values of those who considered themselves stake-
holders, and who therefore might raise objections? How would such an
audit have been carried out? Was Nestlé fully prepared to argue for its role
as providing an important medical service, thus offering a very different
ethical perspective? Is it possible to combine such a role with a free market
approach? The answer may have been yes, providing supply was directly
linked to medical need and did not involve attempts to persuade the
consumer. How far does such an argument sit with Sternberg’s view that
business should stick to its purpose of increasing long-term owner value
within the limits of justice and ordinary decency?
Social responsibility and the WHO Code

Though the debate has remained polarized to this day, Nestlé later tried to
adopt a different ethical position, that of social responsibility. This ethical
position argues that MNCs are responsible for the effects which they have
on society and on different cultures. This therefore requires companies to
raise their awareness of how they affect differing groups through, for
instance, social audits, which assess the effect of marketing (for example)
on a society, and seek to mitigate any bad effects.
For Nestlé this meant moving to a less aggressive marketing strategy,
which not only avoided any misleading pictures or words but also made
sure that the importance of breastfeeding was stressed. In all this it
152 Simon Robinson
accepted that there might be second-order impacts from the sale of its
goods. The impacts were on the babies who were not part of the
company–consumer relationship, yet might in the end have died partly
because of the sale of the formula. In accepting such a second-order impact
the company was not accepting full responsibility for the death of the
babies, but was accepting that it shared in responsibility for possible nega-
tive impact on the babies.
This concept of the shared or mutual responsibility of different stake-
holders is what led to the WHO Code. In many respects, the WHO Code
sums up a particular view of stakeholding in business ethics. The term
stakeholder can mean anything from a group or person who has a finan-
cial stake in the business to the inclusive view of anyone who affects or is
affected by the business in question.9 The WHO Code embodies a view of
stakeholding somewhere between the two. It was able to identify stake-
holders who shared a particular concern for the well-being of newborn
babies in the Third World. The stakeholders in this sense included: the
formula industry; national governments; local health services; NGOs such
as UNICEF and WHO. The shared concern was not focused on the busi-
ness, but rather on the consumers and the wider effects of marketing.
Moreover, this view of stakeholder theory was not about balancing
competing interests so much as sharing responsibility. This meant deter-
mining together what the different responsibilities of the stakeholders were
to the mothers and babies. Responsibility was roughly apportioned along
these lines:
• The MNCs would be responsible for maintaining standards in

marketing.
• The health services would be responsible for the distribution of the
formula, according to need.
• The MNCs and NGOs would be responsible for monitoring practice.
• The national governments would be responsible for policing practice
and ensuring that bad practice was effectively dealt with. They were
encouraged to bring in specific laws to cover this.
The Code itself provided the criteria for good practice, and alongside this,
acting as arbitrator, there was the Muskie Commission. For a time this
provided the means whereby any allegations of Code-breaking could be
discovered and dealt with. However, the Code had its problems:
• Like any code it could not be applied in an absolute way. It required

interpretation.
• The fact that it was an international code meant that interpretation
became ever more complex. Demands that the instructions on packs of
formula be written in the local language may be hard to fulfil if, for
instance, it is not clear what the local language is.10
• The monitoring of the Code was down to the national government
involved. This was difficult when some did not see this as a priority
and others had significant but occasionally conflicting legislation. In
India, for example, two different laws, brought into force in 1993, laid
down different conditions about wording and language. Nestlé filed a
petition to the High Court in October 1995, not to contest either law
but to clarify the position. The complexity of the case made it difficult
to determine the truth. Evidence from patients, health workers and
health establishments, and local NGOs often conflicted. As a result,
suspicions often re-emerged about the integrity of witnesses.
• The implementation of the Code had at its heart major ambiguities for
the formula industry. The sales force on the ground was in danger of
receiving ambiguous messages – the importance of increasing sales of
the product, but also the importance of encouraging the potential
consumer to use a different ‘product’. It was not surprising that local
sales forces might have found this hard to deal with.
• The Muskie Commission had its critics amongst the NGOs but did at
least provide a mechanism for receiving allegations about the breaking
of the Code and attempting to ensure that they were dealt with. Nestlé
allowed this group to disband in the 1990s and did not attempt to
replace it. In effect this produced a power vacuum with the return to
polarization and both ‘sides’ insisting that they had the support of
independent groups.
The Code then was important in providing a framework of meaning but

was not sufficient. It required a system of arbitration which was accepted
by all sides, and which could facilitate interpretation of the Code. The
infant formula manufacturers had an ombudsman but such a post was no
more objective than the various NGOs or IGBM. Could Nestlé have
explored more carefully the possibilities of the different groups working
together in monitoring? This was a second critical moment of decision-
making for Nestlé. In fact, allowing the Muskie Commission to stand
down altered the delicate balance of stakeholders, and the NGOs in partic-
ular began to take over responsibility for both data-gathering and
judgement. Hence, the Baby Food Action Network in Breaking the Rules
1994 bypassed an immediate referral to governments and the formula
industry by collecting 455 allegations over the period of a year, and then
releasing these to the public.11 Similarly, UNICEF’s document, Cracking
the Code,12 sought to review practice using criteria which had not been
agreed on by the other stakeholders. Nestlé interpreted this as a further
direct attack on its reputation. However, the problem here could equally
154 Simon Robinson
be seen as arising from frustration with a system which no longer had a

proper framework for arbitration.
In the light of this, was it sufficient for Nestlé simply to accept the
demise of the Muskie Commission or of their own NCCN? What could
they have done to develop an alternative? This stage of the case also raises
questions about the stakeholder position in international marketing. Is it
possible to sustain the collaboration of stakeholders without an agreed
global code which is well policed? This would have to include agreement
on criteria for the common good. In the first chapter, Cadbury suggests
that not all stakeholder views should be given the same weight. In partic-
ular, he argues that single-issue groups outside companies do not have to
take responsibility for solving problems. How far would this point apply
to the NGOs in this case? As we have seen, they have often taken on too
much responsibility and are not publicly accountable. It is not clear,
however, that NGOs can be lightly dismissed. They would argue for a
broader view of accountability, based on the claim that they fight for the
rights and well-being of persons and groups who are powerless. Under-
lying this claim is once more a different view of justice. But to whom
exactly does this make them accountable? They would also argue that they
are prepared to share the responsibility for solving the problem.
How far does this move the ethical debate in this case away from simply
the pros and cons of stakeholding theory towards the perspective of some
form of virtue ethics, and the need to establish what is the higher purpose
of business in this case and to develop collaboration to that end?
Social responsiveness
Faced by the most recent attacks of the NGOs, Nestlé began to change its
ethical position from that of social obligation to one of social responsive-
ness. This involves a more proactive approach, which seeks to anticipate
and prevent ethical problems from arising. Nestlé, for instance, proactively
stopped the provision of free milk supplies in some forty countries, other
than when it is provided under the direction of the local health services. It
put more money into research on breastfeeding and offered to increase
collaboration with the other stakeholders. Despite this, Nestlé’s response
has, at times, been ambiguous. It is clear that its practices have changed
radically, particularly when compared to those of the 1960s. It is equally
clear that its commitment to dialogue is genuine. However, in its dealings
with the ASA, Nestlé appeared to be claiming that it had always worked
according to the social responsibility model. This, in turn, was interpreted
as an attempt to gain the moral high ground. In terms of tactics in the
debate, this simply encouraged the return of the old polarized dynamic.
Attempts to increase dialogue and collaboration with UNICEF initially
foundered because of UNICEF’s suspicion of Nestlé’s motives and because

of the constraint of US anti-trust laws. Further attempts at dialogue would
need to break through these. Cadbury has noted a different approach to
codes which might have something to add to the debate. The Caux Round
Table Principles were developed by a number of MNCs in 1997. At the
root of these principles are the concepts of kyosei (harmony) and human
dignity. These are then developed in a series of principles applied to
different areas of work:
• Economic survival. The company has to prosper if the enterprise is to

exist.
• Cooperating with labour. All parts of the company should recognize
their mutual responsibility and so work together for the common
good.
• Cooperating with external groups. Strikingly these were held to extend
beyond suppliers and consumers to competitors and community
groups.
• Attention to global concerns. In particular the principles note imbal-
ances in wealth, trade and environment, and suggest ways in which
MNCs can affect these.13
Such principles are important for several reasons. First, they suggest the
possibility of pursuing at one and the same time several different purposes,
including profit and concern for well-being and justice. Second, they set
out a moral minimum in working in other countries.14 Third, they provide
a basis for trust.
In the light of such principles, the problems posed by AIDs may well
cause the different parties in this case history to begin to explore very
different ways of operating. Are there ways, for instance, of achieving co-
operation with UNICEF without having to violate anti-trust laws? This
would mean serious examination of how closer cooperation with the
formula companies could be achieved.
Those who argue against stakeholder theory might suggest that no clear
limit to stakeholders and their influence can be drawn. Thus this kind of
approach threatens to lead to a significant diminution in the autonomy of
companies and thence possibly to the complete transformation of the free
market. However, this case might be taken to show that the capacity to
make effective decisions in international business is dependent upon
working with different groups with very different ethical views. The
autonomy of the company can only be understood in that context.15
156 Simon Robinson
Conclusions
This case has highlighted a number of different ethical positions that can
be held in relation to international marketing, ranging from social obliga-
tion to social responsiveness. Considering the case from these perspectives
provides a way of testing basic theories about stakeholding and the social
responsibility of business. At the same time, the case could be seen as
showing the practical difficulties which emerge in attempting to resolve
complex ethical issues and the need to work at communication and collab-
oration.
Underlying all this is the fundamental question as to whether Nestlé
should have responded in the way it did. Should the company have taken
the initial challenge from the NGOs so seriously? Should an MNC be
responsible for the actions of its customers? Is it not more important to
simply respect the autonomy of the customer, and not to pursue avenues
that are the responsibility of local health services? It could be argued that
the global campaign to ensure universal breastfeeding is more than simply
a matter of providing information. It could be interpreted as aggressive
and paternalistic in that it does not respect the autonomy of the consumer,
the mother. Indeed it assumes that the mother is incapable of deciding for
herself.16 However, this is not an argument for avoiding the social respon-
siveness model. On the contrary, autonomy is a complex notion which
depends in practice on the person developing the skills and virtues of decision-
making. It is hard to develop these without dialogue and collaboration.
The mother, for instance, needs to know the facts, options, constraints and
underlying objectives of formula milk in order to make a choice about its
use. The key question then is who should be enabling the mother to make
that choice? This case might suggest that, in a situation where many of the
stakeholders are powerless or are not convinced where their responsibility
lies, such responsibility has to be shared. The work of the formula industry
in research for, and in support of, health services, for instance, can enable
those services to fulfil their responsibilities. The work of NGOs could
enable national governments to fulfil their responsibilities in relation to the
WHO Code. Would this view of stakeholding as collaboration fit into
Sternberg’s position or would it demand that there be recognition of
shared purpose to begin with, so moving into more of a virtue ethics posi-
tion? How might Nestlé begin to develop such a virtue ethics approach?
Finally, two further points might be suggested as worth considering in
this case history. First, Nestlé cannot avoid the debate. Ethical reputation
is of paramount importance to a multinational corporation. Second,
without dialogue and collaboration the ground for ethical debate is lost:
data are eroded; values and principles are distorted; and the range of
possible options is diminished.
Notes
1 H. Nestlé, (1869) Memorial on the Nutrition of Infants, Vevey: Loertscher,
p. 1.
2 D.B. Jelliffe (1971)‘Commerciogenic Malnutrition? Time for a Dialogue’, Food
Technology 15: 55–6.
3 D.B. Jelliffe (1971) op. cit.
4 New York Times, 26 July 26 1998, cited in L. Newton case study (1999).
5 Marketing Week, 4 February 1999.
6 S. Sethi and J. Post (1989) ‘Public consequences of private action: the
marketing of infant formula in less developed countries’, in P. Iannone (ed.)
Contemporary Moral Controversy in Business, Oxford: Oxford University
Press, pp. 474–87.
7 M. Novak (1993) ‘Eight arguments about the morality of the marketplace’, in
J. Davies, God and the Marketplace, London: IEA.
8 De George notes that debates about justice are a key feature in international
business ethics, see R. De George (1999) ‘International business ethics’, in R.
Frederick (ed.) A Companion to Business Ethics, Oxford: Blackwell, pp.
233–42.
9 E. Sternberg (1970) ‘Stakeholder theory: the defective state it’s in’, in W.
Hutton, Stakeholding and Its Critics, London: IEA, pp. 70–85.
10 S. Robinson (1994) ‘Modern business ethics and prophecy’, Crucible
Oct.–Dec.: 189–203.
11 Baby Food Action Network (1994) Breaking the Rules 1994, London: IBFAN.
12 UNICEF (1997) Cracking the Code, London: IGBM.
13 L. Newton (1999) ‘Corporate codes from Borg Warner to the Caux Principles’,
in R. Frederick (ed.) A Companion to Business Ethics, Oxford: Blackwell, pp.
374–85.
14 T. Donaldson (1989) The Ethics of International Business, New York: Oxford
University Press.
15 A quite separate area which could be explored within a complex case history of
this sort is that of whistleblowing in MNCs. If it is part of the responsibility of
the formula industry to monitor its own practice, how can it ensure that prac-
tice is sufficiently transparent to be monitored across so many fields of
operation? Moreover, how can a positive climate for whistleblowing be devel-
oped when an increase in sales seems to be the highest priority?
16 L. Newton (1998) The Controversy over the Marketing of Breast Milk
Substitutes, Columbus, OH: Council for Ethics and Economics 2(I): 7 (www.i-
case.com).
Appendix I
Bibliographical and other resources

A great deal of material has been written about the Nestlé case over three
decades, including three major books:
Dobbing, J. (ed.) (1988) Infant Feeding: Anatomy of a Controversy

1973–1984, London: Springer-Verlag.
Falkner, F. (1991) Infant and Child Nutrition Worldwide: Issues and
Perspectives, Boca Raton: CRC Press.
Sethi, S. (1994) Multinational Corporations and the Impact of Public
Advocacy on Corporate Strategy: Nestlé and the Infant Formula
Controversy, Boston: Kluwer.
Much of this material focuses on the consequences of not taking seriously

the challenges from NGOs. This case history is now distinguished by being
one of the first to be found on the world wide web:
Newton, L.H. (1998) The Infant Feeding Controversy, Columbus, Ohio:

Council for Ethics in Economics.
This is available online from www.i-case.com or as a CD-ROM.

This history attempts to provide a broader perspective on the case. It is
interactive, offering both a history and analysis, and text and audio/visual
resources. This radically develops the idea of the case history, encouraging
students to move beyond the normal case boundaries and to develop their
own views of the situation and of the ethical arguments, based on the
many different source materials on offer. Ironically, when the study was
being developed it became itself part of the case history, with Baby Milk
Action suggesting that those involved in the writing of the case were
strongly influenced by Nestlé and that the case was rewriting history
(Boycott News, November 1995). However, whilst Newton’s finished case
has challenging things to say about NGOs, it also challenges Nestlé, and
provides a comprehensive web link to all the major NGOs, including Baby
Milk Action. Hence, it is an essential resource for those who wish to
follow up the various strands of this case, and to explore further the uses
of case histories discussed in the final chapter of this book.
Newton has also published an article, ‘Truth is the daughter of time: the
real story of the Nestlé Case’ (1999) Business and Society Review 104(4):
367–95.
Part III
The role of case histories

in business ethics
Chapter 10
The use of case histories

in business ethics
Chris Megone
As was noted in chapter 2 of this book, a key question in ethics, and in

applied ethics in particular, is ‘what is the purpose of the study of ethics?’.
Is the goal only to understand ethical questions more deeply, or should the
study of ethics also be concerned with changing the students’ behaviour,1
developing their characters? In that same chapter it was argued that
Aristotelian virtue theory explicitly addresses the question of character
development. Aristotle’s account emphasizes the importance of practice (or
habituation) in the acquisition of virtue, but also gives a definition of
virtue according to which virtuous acting is guided by rational principle.
This suggests that the sort of reflection on ethics Aristotle engages in may
also have a bearing on the acquisition of virtue as well as on practice. So
what is the upshot of this regarding the goal of ethical study? Aristotle’s
account clearly gives advice as to how to acquire virtue, even if such acqui-
sition may not occur in the lecture room. But is there any way in which
study can directly affect behaviour? As has just been said, the relevance of
rational principle to virtue may give study a direct input, but can any more
be added?
In the present chapter the aim is to consider this question further by
addressing the issue of the role of case histories in the study of business
ethics. Three ways in which case histories might be used will be consid-
ered. But in particular it will be argued that case histories can play a role
not merely in enabling students to achieve understanding of ethical issues,
but in changing or developing their behaviour.
One way of using cases, it will be suggested, is indeed theoretical,
namely, for the purpose of understanding different general approaches to
business ethics. What is involved in using case histories for such under-
standing will be explained. It will then be argued that two other possible
uses of case histories bear on the development of behaviour. In explaining
these uses it will be shown that, in order to see these roles clearly, it is
helpful to have in mind the account of virtue acquisition developed within
the Aristotelian virtue ethics discussed in chapter 2.2
This discussion of the role of case histories will help to draw together
the strands of the first two sections of the book. It will indicate the relation
162 Chris Megone
between the case histories presented in part II and the analyses offered
both there and in the first part. And it will thereby point to a way of
comparing analyses of key ethical issues arising in particular areas of busi-
ness with the quite general theories outlined in the first part. As has just
been indicated, it will also show the relation between a particular ethical
theory and an understanding of the value of case histories.
Case histories and theories in business ethics

One approach to case histories would be to use them for the theoretical
purpose of comparing both proposed ethical theories and the implications
of those theories for ethical decision-making. What is going on here is a
comparison of what ethical theories would mean, or come to, when
applied. There are at least three aspects to such a comparison. They
concern understanding the ethical theory, understanding the situations
described in the case history, and assessing the theory. In practice, these
three aspects need not come sharply apart. Thus assessment of the plausi-
bility of a theory will clearly be affected by an understanding of what the
theory really means and what it suggests should be done in the situations
that case histories describe.
The first aspect of this use, then, concerns understanding an ethical
theory. The suggestion here is that a proper understanding of an ethi-
cal theory cannot be achieved simply through a wholly abstract grasp of
the principles of the theory. It requires appreciation of what these princi-
ples come to in concrete situations. This may be very clear if we consider
the Aristotelian virtue of distributive justice, which is clearly a key virtue
within the Aristotelian virtue theory outlined, and also has a role within
Sternberg’s theory of business ethics, though that is not explicitly a virtue
theory overall. This virtue requires that distributions of goods be made in
accordance with proportion. Aristotle does have a little more to say as to
the relevant notions of proportion.3 But the point here is that even then,
when that theoretical amplification is understood, to appreciate fully what
such distribution in proportion means, requires considering what it would
demand in concrete situations. We understand the concept more fully by
considering what it means in the case of the distribution of cake at a
birthday party, or what it might suggest about profit-sharing within a
particular business (though in the latter case a broader theory will prob-
ably be needed to make its concrete meaning determinate in that specific
context). The virtue of justice may be a particularly complex abstract
notion, but the claim would be that the understanding of even less
complex concepts such as that of maximizing long-term owner value, or
that of the stakeholder, for example, also requires appreciating the applica-
tion of the concept to particular cases.
What is required here, therefore, is both an analysis of what principles
Case history use in business ethics 163
from a given theory apply to the case history provided, and a grasp of
what those principles then mean in the specific context given. This, then,
will lead to a better understanding of the theory within which these princi-
ples operate, and thus a better basis for comparing that theory with rivals.
But a second feature of such a comparison will be to compare what the
case history comes to from the point of view of distinct theoretical
approaches. If the theoretical approaches are genuinely distinct they will
identify distinct considerations as salient when it comes to considering
what was ethically permissible or required at different stages in a case
history. If a theory requires that a business agent maximize long-term
owner value within the bounds of distributive justice and ordinary
decency, then the analysis of any case history in those terms requires that
at any particular stage in the case the agent consider the effects of possible
actions on owner value. On the other hand if a theory requires that the
agent be accountable to stakeholders, then any decision within a case
understood from that perspective needs to be assessed solely in terms of
obligations to relevant stakeholders.
One effect of reading a case history in the light of an ethical theory may
be to indicate that the history lacks certain information which, from the
point of view of the theory in question, is needed for appropriate decision-
making. That need not undermine the value of the case, as an important
skill in actual decision-making will be identifying whether the information
already available is what is needed to make an appropriate decision. (Of
course, time considerations may sometimes require the agent to proceed on
the basis of what is known to be insufficient information.)
The third feature involved in using case studies for the comparison of
theories is the assessment of the theories in terms both of what they pick
out as salient, and in terms of the practical prescriptions that appear to
follow from them. The factors identified as salient, and the practical
prescriptions following from them according to the theory, will normally
need to be assessed in relation to the case user’s pre-theoretical convic-
tions. (These are the beliefs (if any) that the case user holds about the case
before attempting to examine it from any theoretical perspective.) For
example, an application of stakeholder theory to a particular case history
would identify which stakeholders an agent owed obligations to in specific
circumstances. This then raises the question whether that approach to the
notion of obligation coheres with pre-theoretical beliefs about obligations
in that particular case, or indeed with the pre-existing notion of obligation
itself. Is it plausible that the decision-maker really does owe obligations to
all those apparently picked out by stakeholder theory? If not, then this
may either tell against the theory or, if the theory seems to cohere with
many ordinary beliefs but conflict with a few, this may lead the user to
reconsider some of the pre-theoretical beliefs.
To take a second example, one might consider what a utilitarian theory
164 Chris Megone
would require agents to do in a case of possible whistleblowing, or in a

case where the agent is offered an inducement. On a simple utilitarian
theory the right thing to do would be that which maximized overall utility
(however that is cashed out). Suppose, for the sake of argument, that
whistleblowing would achieve most utility, or that accepting the induce-
ment would be required by the theory in the second case. These prescriptions
could then be compared with pre-theoretical beliefs. Once again, on the
face of it, conflicts with pre-theoretical beliefs would tell against the
theory, and thus inform an understanding of its plausibility. But, again,
sometimes the theory can put some of the agent’s pre-theoretical beliefs
under pressure, if most of his beliefs are supported by the theory yet some
are not.
As well as enabling a theory to be confronted directly with pre-theoretical
beliefs, a case history may also provide a useful basis for reflecting on
more theoretical objections to the theory. Thus, for example, Sternberg
objects to stakeholder theory, among other reasons, because it gives rise to
obligations of indeterminate force and gives no clear account of how to
weigh them, thus making it quite unclear how conflicting obligations
should be resolved into a final (all things considered) obligation. One way
to assess stakeholder theory in the light of this is to consider what
conflicting obligations it seems to demand attention to at any relevant
point within a case, such as the Brent Spar case or the Challenger case, and
whether it is at all clear how, from the point of view of some plausible
version of this theory, such obligations are to be resolved.
Although it is possible to separate out in analysis at least these three
aspects of the use of a case history in understanding a general theoretical
approach to business ethics, it may well be that they are not sharply
distinct. For example, it may be that part of fully understanding the
meaning of the abstract principles of a theory is appreciating exactly what
weight those principles have in contributing to a particular practical deci-
sion at a given point in a case. Nonetheless, the emphasis so far has been
on understanding theories, not on affecting the user’s behaviour. It is now
appropriate to turn to this latter possibility.
Behavioural change and the use of case histories

In order to explain the remaining two possible uses of case histories, it will
be helpful to recall aspects of the Aristotelian virtue theory outlined in the
second chapter. As noted there, on the Aristotelian account of virtue, to be
fully virtuous an agent must both be capable of judgements in accord with
the principles that a practically wise person would use, and have appro-
priate desires and emotions. It was also a feature of this theory that the
account of the nature of virtue was developed in conjunction with an account
of the acquisition of virtue. Thus the acquisition of virtue involves the
acquisition both of a disposition to make correct judgements, and of

appropriate desires and emotions.
This overall picture has a number of implications. First of all, changes
in behaviour may require changes either in the agent’s judgements, or in
his motivations, his desires and emotions, or in both. Thus a student of
business ethics concerned with action may need to attend to both these
influences on behaviour. Second, therefore, any account of the Aristotelian
approach to these matters needs to attend both to the way in which correct
judgement is acquired, and to how appropriate desires are formed. As was
made clear in the second chapter, Aristotle lays some emphasis on the role
of practice, or habituation, in the acquisition of virtue, and for present
purposes this will be the focus of attention. For the aim now is to show
how, against this background, case histories can have a role both in the
acquisition of a capacity for correct judgement and in the formation of
desires.
Case histories and the acquisition of phronesis

First, then, consider the role of case histories in the acquisition of good
judgement. In order to appreciate this, it is necessary to understand
Aristotle’s account of good judgement. His view is that to do virtuous acts
as the virtuous person does them requires phronesis, or practical wisdom,
so as to act in accord with the relevant rational principles (those the practi-
cally wise person would act on). Thus his account of the decision
procedure in the light of which correct judgements can be made appears to
make essential reference to the phronimos, or practically wise person. A
good judgement is the judgement that a phronimos would make.
But this leaves two worries. First, if there is no independently specifiable
decision procedure and one must seek to do what a practically wise person
(phronimos) would do, does this suggestion have any clear content? For it
might seem that all one can do now is to identify a practically wise person
as guide. But will it be possible to identify a practically wise agent without
already knowing the sort of acts such a person will do (which have them-
selves been defined by reference to the practically wise person)? Second, if
practically wise judgement is not a matter of following a definite decision
procedure, how can one acquire it? On views of correct judgement in
which there is a decision procedure, acquisition seems quite simple – it is
simply a matter of understanding the decision procedure. That is all that is
needed in order to learn how to use it. But if there is not such a procedure
it is less obvious how the capacity for correct judgement can be acquired.
However, it is in just this context that case histories can be seen to have
a role in its acquisition. If correct judgement were, by contrast, a matter of
following a decision procedure, applying a utilitarian calculus for example,
the sole practical use for the case history would be for practice in the use
166 Chris Megone
of the procedure. It would be a question of determining, by reference to

the calculus, what agents should have done at various points in the story.
In these circumstances the case history would have no role in the acquisi-
tion of the capacity for correct judgement, no role in this aspect of
improving the agent’s character. To understand its role in the acquisition of
correct judgement, it is necessary to revisit the Aristotelian framework,
and in particular Aristotle’s account of phronesis (for he does have more to
say about it and thus more to give aid in its acquisition).4
One place to begin is with some relatively obscure remarks that
Aristotle makes in discussing phronesis, practical wisdom. The important
point about this passage here is what it states about the relation between
practical wisdom and intellectual perception.
It is obvious that practical wisdom is not deductive scientific under-

standing. For it is of the ultimate and particular, as has been said – for
the matter of action is like this. It is the analogue of theoretical insight:
for nous is of the ultimately simple principles, for which there is no
external justification; and practical wisdom is of the ultimate and
particular of which there is no scientific understanding but a kind of
perception – not I mean ordinary sense perception of the proper
objects of each sense, but the sort of perception by which we grasp
that a certain figure is composed in a certain way out of triangles.5
For present purposes, then, Aristotle’s key point here is that practical
wisdom about what to do in a particular circumstance requires some intel-
lectual capacity (a perception distinct from sense-perception) to appreciate
the nature of that particular situation.
These ideas can be further understood in connection with one of his
remarks on the imprecision of ethics already alluded to:
matters concerned with conduct and questions of what is good for us

have no fixity, any more than matters of health. The general account
being of this nature, the account of particular cases is yet more lacking
in exactness; for they do not fall under any art or precept, but the
agents themselves must in each case consider what is appropriate to
the occasion, as happens also in the art of medicine or of navigation.6
Thus this capacity for intellectual perception, nous, is necessary because of

the nature of particular cases. This is emphasized at the end of NE book II,
when he is discussing the difficulty of hitting upon the mean, in other
words the difficulty of doing what the principles of practical wisdom
require.
But up to what point and to what extent a man must deviate [from
goodness] before he becomes blameworthy it is not easy to determine
by reasoning, any more than anything else that is perceived by the
senses; such things depend on particular facts, and the decision rests
with perception.7
As Nussbaum suggests, Aristotle may have in mind three features of the

particular encountered in action: first, that it has a lack of fixity in the
sense of a capacity to present ever new situations; second, that there is a
corresponding variety in those situations, and, third, an unrepeatability.8
Features of circumstances we encounter, whether in business or in other
aspects of life, may repeat many times. We may find people tell the truth,
or lie on numerous occasions. But the overall combination of features that
make up a complex situation may never repeat themselves. Given this
variety, unrepeatability and lack of fixity, Aristotle argues, we need a
capacity of intellectual perception (nous) to determine both what the rele-
vant features of a new situation are, and to determine their relative
importance in each specific circumstance. On Nussbaum’s account, such
an intellectual perception is ‘the ability to recognise, acknowledge, respond
to, pick out the salient features of a complex situation’.9 It is this capacity
(nous), then, that is required for correct ethical judgement in business.
Nussbaum then notes the next important point for present purposes,
namely Aristotle’s view of how such nous is acquired. It is gained only
through experience.
Young people can become mathematicians and geometers and wise in

things of that sort; but they do not appear to become people of prac-
tical wisdom. The reason is that practical wisdom is of the particular,
which becomes graspable through experience, but a young person is
not experienced. For a quantity of time is required for experience.10
It may be helpful to summarize the position thus far. Ethical or virtuous

behaviour requires, among other things, that the agent make correct judge-
ments about what to do. In Aristotle’s view the lack of fixity, the variety
and the unrepeatability of particular actions means that in order to make
such judgements on each occasion the agent must have a capacity of intel-
lectual perception which will enable him to recognize, pick out and
respond to the salient ethical features before him. This capacity is thus
crucial if one is to make correct judgements. This is a capacity whose
acquisition requires experience.
This last point may raise a worry. For if this capacity can only be
acquired through experience, and if it is not inevitably acquired through
experience, it seems that it will not be possible to avoid actual wrong-
doing along the way to its acquisition. Clearly it would therefore be
168 Chris Megone
desirable if there were further resources for facilitating its acquisition other
than real experience. Obviously actual experience will continue to play a
role in the acquisition of the capacity, but such further resources would
make it possible to achieve at least some of the development without
moral wrongdoing. To explore this possibility it is necessary now to indi-
cate how exactly experience does lead to the acquisition of such
intellectual perception, perception of the sort that enables the agent to
make correct ethical judgements
The role of experience here can be explained by reference to Aristotle’s
remarks on the role of habituation, or practice, in the acquisition of virtue,
outlined in chapter 2. ‘Men become builders by building … so too we
become just by doing just acts.’11 As was explained, part of Aristotle’s
point is that habituation or practice has a cognitive role. At first a child
will have to be guided towards just acts. It will do the right act because
told to do so by a parent or teacher. At that point the child only believes
that the act is just because told so by someone he trusts. This is purely
‘external’ knowledge. In time the child comes to see that the just act has a
point, and then further to see that it has a point as just. At this further
stage the child has some grasp of the concept of justice, and relates the
point it sees in the action to this embryonic conception of justice. Then the
child is internalizing the knowledge. This internalization can only be
achieved through experience. This process is what is involved in the acqui-
sition of nous, or intellectual perception.
To see that a just act, a certain sharing of a cake, for example, has a
point the child must appreciate what features are relevant to that cake’s
being shared, who made it, to whom it belongs, who was invited to the
party, and so on. In doing this, the child is recognizing salient features of
the situation. But the child must also appreciate the relevance of these
features, that these are features that need to be attended to in dividing up
the cake. This is acknowledging these features. In doing these things the
child is starting to acquire nous. And Aristotle’s claim is that these achieve-
ments can only come through experience.
But why does Aristotle emphasize the need for long experience? Here
the point about the particularity of action is relevant. A concept like justice
is complex. A child has to internalize not just the relevance of these
features in this cake situation, and in time that these are concerns of
justice. The child also has to internalize that other similar considerations
are also concerns of justice, though found in other situations. The child
has to see that, say, the hard work and intelligence that are relevant to the
appraisal of homework are comparable with the features of justice in the
cake sharing, to see that this feature here is (comparable with) that feature
there. Developing a capacity to perceive considerations of justice in all the
variety of situations where it might arise requires long experience.
Furthermore, in addition to appreciating that a consideration is relevant,
that it has a point, the child also has to internalize the relative weighting of
different considerations. Again Aristotle might plausibly hold that such
internalization requires experience of how different considerations weigh
against one another in different circumstances. This requires both, again,
comparing this situation with previous like circumstances, and appreciating
the novelty of the new situation. Thus, too, determining the right thing to
do in the light of this weighting, and perhaps also seeing that it is right,
that it accords with some ill-formed conception of what is right overall,
may also be aspects of intellectual perception that require experience.
Of necessity, then, this internalized knowledge is not something that can
be acquired without actually being in relevant situations, having experi-
ence. Of necessity also, given the huge variety of circumstances that can be
encountered, this is knowledge that can only be acquired with long experi-
ence.12 The capacity for the intellectual perception to make judgements as
to what virtue requires, comes with this knowledge. For it is a capacity
which involves appreciating the considerations that are salient, in a partic-
ular situation, from the point of view of a relevant virtue, and weighing
them appropriately. Its acquisition, therefore, requires long experience (a
breadth and variety of relevant experiences).
Given this outline of the role of experience in the acquisition of nous, it
is now possible to see that case histories may be able to make a contribu-
tion to that process, and thus, too, that actual experience may not be the
only resource that can enable such an acquisition. One way to use a case
history is as a presentation of experience to the student. In the business
context, it can present the student with novel experiences, situations he has
never in fact experienced. Furthermore, a case history such as the
Challenger, or the Nestlé case, can present the reader with a variety of
possible perspectives on the same situation, a range of ways of experi-
encing it.
Clearly, like any literature, a case history is a ‘quasi-experience’. For the
agent to have something like the experience of a real situation, he needs to
be engaged in the situation. This may require imagination. But it is
certainly possible for a case history to engage readers and to enable them
to have the experience of appreciating the salient points of the situation,
and weighing them; and also, as just noted, to differ from life in allowing
the agent to internalize how the situation is experienced from a range of
situations, not just his own. This allows the agent to appreciate that
different features might seem salient from different perspectives, broad-
ening his previous experience in still another way.
This use of case histories has a number of implications. First of all, as
has been seen, the acquisition of nous is a long process and initially the
process must be guided by someone external to the agent who already has
it, or at least has a much more developed capacity, for example, a parent.
Without such guidance the child cannot appreciate that a situation is to be
170 Chris Megone
thought of as a matter of justice (for example) at all. The child may also
require guidance, at first, as to what it is about the situation that is a
matter of justice (‘it’s her Easter egg too!’). Thus, in order to use a case
history for the further development of nous, a student must already have
gone beyond the initial stage in the development of nous, and no longer
require such guidance, or at least not require it to the same extent. (This
cannot be taken for granted, because it is not simply a matter of achieving
a certain age; as Aristotle remarks, some remain childlike.13) The agent
who can use case histories for the further development of nous, must
already have, from past (guided) experience, sufficient grasp of salient
features in relevant circumstances, and an embryonic conception of the
concepts of the virtues to which they relate. These are prerequisites that
will enable him to make intelligible comparisons with that past experience
in appreciating the novel experiences he faces in the case history.
Second, case histories can vary considerably in length and depth. At one
end of the spectrum are fairly short case histories like the Rick and Bianca
case presented in this book. At the other is the Nestlé case history to be
found here and in much more detail on CD-Rom and the Internet. There
are reasons why the Nestlé case, as it stands, will be more suited to the
kind of use currently being discussed. The case needs to be presented with
considerable detail so that the student is in a position to discriminate what
is salient. The case also needs to engage the student’s imagination if it is to
have the quasi-experiential character required for the student to internalize
knowledge. Obviously apart from the depth and detail, the engagement of
the reader can be affected by the quality of the writing. Some case histories
are written in more engaging styles than others.
Even though it lacks the depth and detail of longer case histories, it
might be suggested that a brief history like the Rick and Bianca case could
be used as the basis for a role play in which students imaginatively develop
the case. Just as the engagement of the imagination is important if longer
case histories are to give students the necessary quasi-experience, so here,
when successful, such creative imagination will help in the student’s expe-
riencing the situation from a participant’s perspective. Used in that sort of
way, therefore, such a case history could also contribute to the acquisition
of nous.
All these factors, then, bear on the extent to which a case history actu-
ally serves to develop the student’s nous. For the sorts of reasons just
given, brief case histories like the Rick and Bianca case may need to be
used in a particular way, or else they will be more suited to the theoretical
uses that I outlined first. The main point here, however, is that case histo-
ries can, in principle, serve in the acquisition of nous, the intellectual
perception that is crucial to phronesis or practical wisdom. Enormously
developed and rich cases like those of Nestlé or Brent Spar or Challenger
can clearly serve this purpose.
Furthermore, this role for case histories is extremely important since it

provides a way in which the user can acquire the experience necessary to
develop nous without having to have real experiences in which mistaken
judgements can lead to wrong action. In using the case history the student
can explain his perception of the salient factors to others and hope to learn
from their responses as to whether or not he is or is not seeing all the
salient factors in the situation, or weighing them correctly. Even if he is
engaging in solitary study of the case history, he may develop nous simply
through the process of reflection on what might seem salient from the
different perspectives presented.
At that stage of reflection, the student might also bring to bear the way
in which the case looks from the point of view of different ethical theories,
the first way of using a case considered above. This may indicate how the
development of nous may also be affected by such theoretical under-
standing; how there is a link between character formation and ethical
understanding. If that were right, the possible role of case histories in char-
acter formation would be more central still.
Case histories and the acquisition of

virtuous motivation
So case histories can play a role in the acquisition of the capacity for
correct judgement. But virtuous behaviour requires not merely correct
judgements, but appropriate motivations. The third claim here is that case
histories can also play a role in their acquisition.
Once again, the Aristotelian account of the acquisition of virtue
provides a context within which this claim can be explained. As noted in
the second chapter, the acquisition of the appropriate desires and emotions
for virtuous action is also a matter of experience, in that it too depends on
practice or habituation. In general, in the first instance a child’s desires for
virtuous action will be guided. The child will desire to be brave, or self-
controlled, or just, for example, because a parent or teacher (say) advises it
to act in that way. At this stage the child will want to do the brave act as
the act his parent advises, but not because he (the child) sees anything
intrinsically worthwhile in it. In due course, as a result of coming to see
some point in the activity, the child may develop a different kind of desire
for such an act, namely a desire for a worthwhile act of that sort because it
is perceived to have some point. Such a development is only possible as a
result of practice, since it is only through practice that the child can come
to the internalized knowledge that the act has some point, as already
discussed.
The child may then, as a result of further practice, come to desire an act
of that sort as a courageous act. He may desire it for its own sake, because
it is courageous. In this further development the child comes to see the
172 Chris Megone
perceived point as associated with his embryonic conception of courage.

This further development of desire also depends on practice since it also
depends on the child coming to see the act as courageous. This involves
seeing the points of different activities as linked to a common concept.
This is only possible along with the acquisition of nous which depends on
practice.
However there is also a second way in which the agent’s desires develop
with practice. The effect of acting on a desire is to reinforce the motiva-
tional strength of that desire. For the motivational strength of an agent’s
desire can become detached from the agent’s view of the importance of
that desire and not develop to the same extent; this is what occurs in the
weak-willed (acratic) agent. Acting on desires is, therefore, important in
developing them in this second, motivational aspect.
In the light of this account it should be clear that case histories can also
contribute to the development of an agent’s motivational states. If the
discussion already presented is correct, then nous can be developed
through working with a case history. Thus a student can come to an
internal appreciation of the ethical point of an action through the quasi-
experiential engagement that is possible in a richly detailed and
well-written case history, or perhaps through using a briefer case as the
basis for creative and imaginative role play.
It follows that such a student’s desires can also develop as a result of
such study. Thus a reader might come to adopt the perspective of Lewis in
the John Lewis case study. If he thereby comes to see the point of devel-
oping employees as John Lewis do, and perhaps to see that as part of
distributive justice, the agent can come to desire that kind of distribution
as just. This will involve a development of his conception of justice, but
associated with that will be a development of desire, from simply desiring
such behaviour as the way he himself would wish to be treated as an
employee, to desiring it because it is just. This is quite a complex example.
But the simple point is that since case histories can enable the agent to
come to see a consideration as important, they can be instrumental in
bringing about a corresponding change in his desire.
Can the study of a case history affect the motivational force of the
student’s desire? This will depend on the extent to which the case history
encourages the reader to engage imaginatively with its protagonists.
Clearly, this will once again be affected by two features of the case history.
First, there is the degree of detail that is provided, and perhaps also the
extent to which the subject matter draws the student in. And, second,
there will again be the quality of the writing. The plausibility of the impor-
tance of such features of style and content can be appreciated by
considering their role in literature. By the same token, the notion that
imaginative engagement with a case can affect the strength of desire is also
made plausible by considering the effect that a fictional story can have in
that regard.14
In sum, a case history can affect the motivational force of a student’s
desires if the student comes to sympathize imaginatively with a personality,
or perhaps even with an abstract perspective in the case. The effect may be
to reinforce an already existing desire, which is perhaps most plausible
since that may itself have some causative effect on the agent’s sympathy.
However, the quasi-experience might even be sufficient to give motiva-
tional strength to a novel desire. In the latter case, the student would not
only come to see the point of some activity for the first time, but also
acquire, also for the first time, a corresponding feeling of motivation.
Imagine, for example, that a student comes to feel justified anger (justified
as he sees it, at least) that the Challenger was allowed to launch. He might
never have been in a situation like any of the engineers in that case but
now, for the first time, feel motivated to do something about safety impli-
cations if and when in relevantly similar circumstances.
Conclusion
Case histories can be used in a number of roles in ethical education. They
can have a theoretical role, and can be used to enhance a student’s under-
standing of a theory. But they can also be used in a way which will affect
the character development of the student. Thus, if the Aristotelian account
of moral psychology is broadly correct, and if case histories can teach busi-
ness ethics (or applied ethics quite generally), then it is foolish to think that
courses in business ethics (or applied ethics quite generally) cannot or
should not affect a student’s behaviour.
Notes
1 The term ‘behaviour’, here and throughout, is meant in its sense of conduct,
not simply physical movement.
2 One other way in which case histories can be used will not be analyzed here, so
it will be mentioned only to be put to one side. It is often suggested that, when
teaching applied ethics to students with no general background in philosophy,
it is useful to begin with case histories since beginning with actual historical
practice brings ethics closer to where the students are. Roughly speaking, the
thought here must be that such students are free of any ethical theory, and that
for such students the case can work as a stimulus, or introduction, to ethical
thought. Whether a student capable of studying ethics really can be entirely
free of ethical theory, and thus exactly what role the case history thus used has
in the development of ethical thought, will be left aside here. There are further
complex methodological issues as to the study of ethics here, on which
Aristotelian ethical theory for one has something to say. See, for example, my
‘Aristotelian Ethics’ in R. Chadwick (ed.), The Encyclopaedia of Applied Ethics
(Academic Press of America, San Diego, CA, 1997) vol. 1, pp. 212–13.
3 NE, V, 3–4, 1131 a10–1132 b14.
174 Chris Megone
4 Aristotle’s main discussion in NE is in Book VI, esp. chs 5–9 and 12–13. In
what follows I am also indebted to M. Nussbaum, The Fragility of Goodness,
(Cambridge University Press, Cambridge, 1986) pp. 298–306, though my
concern here is not with the relevance of rules to Aristotle’s understanding of
practical wisdom, which is Nussbaum’s focus there.
5 NE, VI, 8 1142 a23–9, in Nussbaum’s translation, op. cit., p. 305.
6 NE, II, 2 1104 a2–10.
7 NE, II, 9 1109 b20–23.
8 M. Nussbaum, op.cit., pp. 302–4.
9 M. Nussbaum, op. cit., p. 305. As noted, Nussbaum presents this view in the
context of arguing that Aristotle is a moral particularist. Whether that is right
or not, this account gives some flavour of the nature of nous, intellectual
perception.
10 NE, VI, 8 1142 a12–16. Nussbaum, op. cit., p. 306, also notes a similar
passage at NE, VI,11 1143 a25–b14.
11 NE, II, 1 1103 a36.
12 The variety of circumstances that can be encountered, and of considerations of
importance in those circumstances, is one of the main reasons why ethics is
such a hard subject.
13 NE, I, 3 1095 a6. Such childlikeness will be a reflection of bad upbringing,
lack of good guidance.
14 This is not to say that a case history need only be used like a work of literature.
There may be other ways in which it may be used in teaching, as was suggested
with reference to the Rick and Bianca case, for example. It is only to make
plausible the fact that it can affect the force of an agent’s motivations.
Index
absenteeism 139 wisdom) 46, 165–71; potential for

ACAS (Advisory, Conciliation and virtue 43; practice (habituation)
Arbitration Service) 129 43–5, 52–3, 168, 171–2; prohairesis
accountability 13, 32, 33, 104 43, 44–5; rationality 42, 43, 45–6;
advertising 13, 142, 149, 150; in Third rules of friendship 48; temperance
World 141, 143, 146 48, 52
Advertising Standards Authority 149, Aristotle: as basis for Sternberg’s
154 theories 4, 25–6, 38–9, 41; on
advice lines 99 imprecision of ethics 166–7; on
ADW (Third World Working Group) purpose of ethics 23; on purposes of
145 human activities 25–6
agent, weak-willed 172 Aston Business School 127
AIDS 148, 155 Atlantic Ocean 59, 60
Aldrich, Arnold 120 auditors 14, 101
Allen, James 23 Auken, Svend 84
Altair (Greenpeace ship) 64 AURIS 69, 70
American Board for Engineering and Australia 104
Technology Code 119 autonomy 156
Angel, Martin V. 62, 69, 76–7, 81;
‘Brent Spar: no hiding place’ 88–90 Baby Food Action Network 153
Anti-Bribery Convention 105 Baby Friendly Hospital Initiative 147
applied ethics 2, 23–4, 161; see also Baby Killer, The (Muller) 145
business ethics, study of Baby Milk Action 149, 158
Aristotelian virtue theory 3, 4, 5, 24, baby milk substitute see infant formula
39–53, 161, 162, 164–73; milk substitute
acquisition of virtue 44, 52–3, Ballarin, Oswald 145
171–3; acrasia and encrateia 52; Bangladesh 125–6
courage 45, 46, 47, 48, 172; Bank of Credit and Commerce
definition of virtue 43; desire 44, 45, International 28, 101
46, 52, 171–3; doctrine of the mean banks, international 16
45, 46; eudaimonia 40–2, 46, 49, Barings 22, 28
50–2; experience 167–70, 171; and BBC (British Broadcasting Corporation)
goal of business 49–52; good 64, 67, 73, 74
judgement 165–6; hexis 44; human BCCI see Bank of Credit and
nature 42, 49, 50; implications for Commerce International
business ethics 47–9; justice 48–9, behaviour 23–4, 25
162; key questions of 40; nature of behavioural change 164–5
virtue 43–6, 48; nous 166, 167, 168, Bellamy, Carol 147–8
169–71, 172; phronesis (practical Ben & Jerry’s 81
176 Index
Benetton 13 Burnyeat, M. 43
Big Bang (City) 16 business ethics, study of 1–5, 11,
Bingham Inquiry 101 161–74; applying theories to case
Biologist 88–90 histories 163; understanding theories
Bjerregaard, Ritt 84 162–3, 164; using case studies for
blackmail 100 comparison of theories 163–4; see
Blair, Tony 124, 127 also Aristotelian virtue theory; case
Blue Circle Cement 129 histories; ethics; Sternberg, E.
boards 12; independent members buy.com 134–5
13–14; of John Lewis 133; policy
setting and enforcing 17 Cadbury, Sir Adrian 3, 24, 154, 155
Bode, Thilo 78–9 Cadbury Limited 9
Body Shop 81 Cadbury Report see Code of Best
Boer War 11–12 Practice
Boesky, Ivan 10 Cape Kennedy Launch Complex 39-B
Boisjoly, Roger 111, 112, 115–16, 118 108
Bophal 9 case histories 1–5, 161–74; and
Borden 142 acquisition of phronesis and nous
Borrie, Gordon 24 165–71; and acquisition of virtuous
BP 60 motivation (link with desire) 171–3;
Brabeck, Peter 148 and behavioural change 164–5;
Breaking the Rules 1994 153 imaginative engagement with 172–3;
breastfeeding 142–3, 144, 146, 147, quality of the writing 170, 172;
148, 156; and AIDS 148; research theoretical purpose 162–4; varied
into 154 length and depth 170, 172
Brent Spar controversy 59–95; Caux Round Table Principles 12, 155
chronological sequence of events CBI (Confederation of British Industry)
91–5; cost of decommissioning 67; 128
decommissioning decision and lack CD-Roms 3, 5
of consultation 60–3; dialogue issue Challenger Flight 51-C 110
75–81; effect on industry 74–5; Challenger Flight 51-L disaster 108–22;
Greenpeace news releases 84–7; as case history 173; confusion over
Greenpeace occupies rig 63–5, 84; temperature specifications 112,
Greenpeace’s exaggeration of oil 118–19; design problems of solid
volume and radioactivity 65–7; rocket booster (SRB) 109–10, 111;
public opinion 73, 76, 77, 79–80; inadequacy of lines of commun-
recycling and re-use possibilities 72; ication 120–1; initial launch delays
re-use as Ro/Ro ferry quay 67; risks 110–11; launch and causes of
of land disposal 68, 70; role of explosion 112–13; possible last-
media 63–4, 65–6, 67, 73–4, 77; minute actions during countdown
scientific and ethical arguments 120–1; pre-launch teleconference
68–72, 87, 88–90; Shell’s efforts to 111–12; Presidential Commission on
restore reputation 67; Shell’s reversal 108, 116, 117–18, 119, 120, 121;
of decision 65; social accountability problems of bureaucracy 115–16;
analysis 79–80; types of reasons for hurried launch 110–11;
contaminants present 68; see also safety programme 114–15; Seal
Greenpeace; oil rigs, Erosion Task Team 110, 111, 112,
decommissioning of; Shell UK 115–16, 118, 119–20
Limited Channel 4 73
bribery: problem of defining 18–19; charity 29–30, 137
whistleblowing and 97, 100, 102–3, China, People’s Republic of 125–6
104, 105 Church 145, 147; see also religion
Index 177
City of London 14, 16, 129 Crippen, Robert 114

civil service 125
Clarke, Tom 16–17 Daily Express 66
class prejudice 128–9 Daily Mail 66, 69
Coats Viyella 127 decision-making 11–12, 16–21;
Code of Best Practice (Cadbury Report) avoidance 21; in ethical theory 163;
10, 13–14 complex 11; effect of Brent Spar
codes 10–11, 155; four levels of 12; controversy 75; NASA and 120–1;
international 12–13, 154; national see also ethical decision model;
13; personal 12; self-regulation phronesis
14–16; trade and professional 13; Denmark: supports Greenpeace 64, 84
see also company codes Department of Trade and Industry (UK)
Columbia space shuttle 109, 114 62, 63, 71, 88
‘commerciogenic malnutrition’ 144 deregulation 129; of utilities 10
Committee of Independent Experts desire 44, 45, 46, 52, 171–3
(EC) 102, 105 Det Norske Veritas (DNV) 66
communication channels 99, 102, 116, dialogue 59, 60, 156; lessons of Brent
132, 133, 135 Spar controversy 75–81
community, concern for 137 dignity, principle of 155
companies: duties to employees 20–1; directors: relationship with auditors 14;
duties to suppliers 20; environmental see also boards
policies after Brent Spar 74; disasters 9, 101; see also Challenger
framework of laws and regulations Flight 51-L disaster
12; three levels of responsibility Discovery space shuttle 109
16–17; see also employment policies discrimination 17
company codes 13; conflict of interests dismissal, unfair 124, 128
17–22; Shell’s social accountability distributive justice 26, 35–8, 162, 172
analysis 79–80 DNV see Det Norske Veritas
competition: global 123–4; in public ‘dumping’ 143
sector 125
complaints procedures 102, 132, 133; Ebeling, Bob 115
see also whistleblowing Economist, The 79
confidence 14, 21–2, 104, 138; public Edinburgh International Television
101 Festival (1995) 73
confidentiality 100, 104 Edmonds, John 24, 131, 139
Conservative government: and Brent education: humanistic 23; John Lewis
Spar controversy 62, 64–5, 67, 68, and 135
69, 70, 76, 77, 79, 87 efficient markets, theory of 102
consultation: of workforce 124, 125, Eggar, Tim 77, 87
127, 128–9 electric shock experiments 123
consumer choice: paternalism 156 Elkington, John 75, 79–80
consumer research 99 employment policies 28–9; bonuses
contracts 36, 48 132; communication channels 99,
controls 22 102, 116, 132, 133, 135;
cooperation 155 consultation 124, 125, 127, 128–9;
corporate collapses 9 in EU 124, 125, 128; evidence of
corporate responsibility, narrow effect on company performance 127;
perception of 75–6 global competition as excuse for
corruption see bribery; whistleblowing inadequacies 123–4, 125; health and
Corus 127 safety 135; importance of quality of
Council for Ethics in Economics 3 staff 22; job losses 20–1; job
courage 45, 46, 47, 48, 172 insecurities and inadequate
178 Index
conditions 123–4, 125, 126–7; of Foreign and Corrupt Practices Act

John Lewis 131–40; leisure pursuits (USA) 9–10
136; low pay 123–4, 125–6, 129; Fowler, Mary 69
positive effect of security and good France: HIV-contaminated blood
morale 129–30; profit-sharing 136; scandal 101; workers’ rights 125
redundancies 37, 124, 129; training free market 28, 150
124, 127, 128–9, 135; in UK 124, free samples 143
125–30; views of managers and Friedman, Milton 75–6, 139
employees on 126–7; Warr’s
psychological perspective 135–6 Galileo probe 118
Employment Relations Act (UK) 127 General Electric Company 18
Engineering Ethics (Harris, Pritchard General Synod of the Church of
and Rabins) 119 England 147
environmental issues 29, 80–1, 137; see Geneva Convention on the Continental
also Brent Spar controversy Shelf 61
equal opportunities 124 Gerber 145
Erfjord 65 Germany: protests against Shell 63, 64,
ethical audit 151 78; role of Board 12; workers’ rights
ethical decision model 33–8 125
ethics: applied 2, 23–4, 161; and global code 12–13, 154
behaviour 23; definition of 12; global competition: as excuse for job
imprecision of 166–7; normative 2; insecurities and poor conditions
purpose of 23; teaching of 23; see 123–4, 125, 126
also Aristotelian virtue theory; global market 137, 141, 150–1
business ethics, study of; metaethics GMB 126
eudaimonia 40–2, 46, 49, 50–2 goals 49–52
European Commission: financial governments 9–10; monitoring role
misconduct crisis 101, 102, 105 153; policing role 152; see also
European Space Agency 111 Conservative government; Labour
European Union: and workers’ rights government
124, 125, 128 Greenpeace 59, 62–71, 73–81, 84–91;
apologises to Shell 66–7; and
experience 169–70, 171
decision to decommission Brent Spar
Experiment in Industrial Democracy
59, 62–3; emphasis on moral stance
(Flanders, Pomeranz and Robins)
65; ethical arguments 70–1, 73; loss
138, 139
of reputation after release of
Exxon Valdez 9, 59, 77
incorrect figures 65–7, 73, 75, 77,
78, 85–6; manipulation of media
‘Fairness at Work’ (White Paper) 127 73–4; membership decline 63, 67;
Fay, Chris 76 news releases 84–7; occupation of
Feynman, R.P. 108, 117–18 Brent Spar and protests against Shell
finance industry: whistleblowing 63–5, 78; opposition to
procedures 99 Sustainability-Shell model 81;
Financial Aspects of Corporate possibility of dialogue with 78; post-
Governance, Committee on the 3, Brent Spar policy 78–9;
10, 13–14 ‘precautionary principle’ 69, 71, 73;
Financial Times 78 and public opinion 73, 77;
Focus on Food campaign 137 radioactivity and industrial wastes
food industry: marketing 142; campaigns 68; and scientific
whistleblowing procedures 99; see arguments 68–70, 71, 77, 87, 88–9;
also Waitrose as stakeholder representative 76; see
Ford, Henry 81 also Brent Spar controversy
Index 179
Greenpeace Germany 63, 64, 78 Italy 125

Guardian 66 ITN (Independent Television News) 73
Guinness 129
Japan: nuclear leak 101
habituation see practice Jelliffe, D.B. 144, 146
Haiti 125–6 jobs see employment policies
Halley’s comet 111 John Lewis Furnishings 137
harmony 138, 155 John Lewis Partnership plc 131–40;
Hawkins, Peter 138 attitude to suppliers 137; as case
health 51; see also safety history 172; Charitable Trust Fund
health professionals 47, 156; education 137; communication channels 132,
of 146; marketing to 142, 143–4, 133, 135; concern for community
146; use of free samples 147 137; constitution and management
Heinz 145 structure 133; and education 135;
Hendricks, R. 145 emphasis on responsibility 136–7;
hexis 44 fulfils Warr’s criteria for satisfied
Higginson, Richard 138 workforce 135–6; growth and
Holland 125 performance 134–5, 138–9; history
Horsman, Paul 79 131–3; in-house journal 132; and
human nature 42, 49, 50 integrity and harmony 138;
Learning Centres 135, 138; low
IGBM see Interagency Group on absenteeism, labour turnover and
Breastfeeding Monitoring pilferage 139; negative aspects of
imagination 170, 172–3 system 139; paternalism 139;
India 153 principles 131–2, 134–5, 136, 138,
infant formula milk substitute 141–58; 139; staff bonus 132
conflicting evidence 153; confusion John Lewis Partnership Trust Ltd 133
of local sales forces 153; dangers of Johnson, Douglas 146
and infant mortality 144; debate, judgement, good 165–6
boycotts and development of justice 48–9, 141, 151, 154, 168, 172;
guidelines 145; end of boycotts 147; distributive 26, 35–8, 162, 172
inadequacy of social obligation
approach 149–51; language on Kennedy, Edward 141
packets 152–3; marketing strategies Kennedy Space Center 109, 111, 120
in Third World 142–4, 145–6; milk Kilminster, Joe 112
banks 143, 144; milk nurses 143, Kohl, Helmut 64
144, 146; social responsibility Kraft 145
approach 151–4; UNICEF and 145, kyosei see harmony
147–8, 152, 153, 154–5; WHO
Code on marketing 145–6, 147, Labour government: and ocean disposal
148, 149, 152–3, 156; see also 73; and workers’ rights 124, 127–8
Nestlé ‘law of effect’ 44
integrity 13, 138 Lewis, John Spedan 131–2, 133, 135,
Interagency Group on Breastfeeding 136, 137, 138; see also John Lewis
Monitoring 148, 153 Partnership plc
Inter-Faith Declaration 12 literacy 128; in Third World 144
international codes 12–13, 154 Lloyd, David 73–4
International Paediatric Association Lund, Bob 111–12, 119
148
internet 3, 5; Greenpeace and 63, 67; McAuliffe, Christa 111
John Lewis and 134–5; Shell and 67 McDonald, Alan 111, 112, 118
Isle of Grain refinery 60 McIntyre, Alastair 69–70
180 Index
Major, John 64–5, 67 MTI see Morton-Thiokol Industries

management: as block to Muller, Mike 145, 150
communication chain 99; Mulloy, Lawrence 112, 120
contrasting attitudes in Britain and multinational corporations 9, 10–11;
Scandinavia 128–9; at John Lewis and Caux Round Table Principles
136; lack of knowledge of wishes of 155; global financial power 150–1;
employees 126; perceptions of importance of reputation 156; social
failure 129–30; see also boards; responsibility of 151, 152, 156; and
employment policies Third World marketing 141, 142–4,
market testing 125 150; see also Nestlé
marketing: by MNCs (in Third World) Muskie, Edmund 146
141, 142–4, 146; WHO code on Muskie Commission see Nestlé Infant
145–6, 147, 148, 149, 152–3, 156 Formula Audit Commission
Marks & Spencer 125, 138
Marshall Space Flight Center 111, 112, NASA (National Aeronautics and Space
114, 115, 118, 119; criticism of Administration) 109, 110; confusion
120–1 over SRB’s temperature
Mason, Jerald 112, 119 specifications 112, 118–19;
mathematical skills 128 inadequacy of decision-making and
Maxwell, Robert 9, 28, 101 communication processes 120–1;
May, William 115 involvement of its own engineers in
Mead Johnson 142 Challenger disaster 116, 118–19;
mean, doctrine of the 45, 46 pressures on 110–11, 117, 118;
media 10; role in Brent Spar reaction to concerns of engineers
controversy 59, 63–4, 65–6, 67, 112, 116; safety programme
73–4, 77; whistleblowing to 98, 114–15, 117–18, 119; see also
100, 103–4, 107 Challenger Flight 51-L disaster
medical profession see health National Environmental Research
professionals Council 71–2, 87
Melchett, Peter 74, 85–6 National Space Transportation System
metaethics 2 108; competition to 111; orbiter
Methodist Task Force 146 space shuttle project 109; see also
Milgram experiments 131 Challenger Flight 51-L disaster
Miller, Bernard 138 natural world 41–2
Minimum Wage, National 127 Nature 69
Minnesota Principles 12 NCCN see Nestlé Coordination Center
MNCs see multinational corporations for Nutrition
Morely, David 145 NERC see National Environmental
MORI surveys 77, 126 Research Council
Mortensen, Peter Sand 84–5 Nestlé 141–57; ASA ruling against 149;
Morton-Thiokol Industries (MTI) boycott of products leading to
109–10, 111–12; bureaucracy of conspiracy allegations by company
115–16; and confusion over SRB’s 145; as case history 170;
temperature specifications 112, development of infant formula 142;
118–19; contact with NASA 119; inadequacy of social obligation
inadequacies of decision-making approach 149–51; marketing
process 120–1; inadequacies of risk strategies in Third World 142–4;
evaluation 118; pressures on 117; neglects to replace Muskie
Seal Erosion Task Team 110, 111, Commission 153, 154; new policy
112, 115–16, 118, 119–20; see also on free milk supplies 154; obtains
Challenger Flight 51-L disaster clarification of law on packeting
motivation, virtuous 171–3 language 153; removal of boycott
Index 181
against 146, 147; role of dialogue Lewis and 138; NASA and 121;
156; social responsibility approach Nestlé and 147; Shell and 73, 76, 78
151–4; social responsiveness ‘ordinary decency’ 26, 35–8
approach 154–5; sues ADW 145; organic food 137
tries to enlist academic support Oslo and Paris Commission 67, 87
148–9; tries to improve PR 145, Oslo Convention 62
146; and UNICEF 147–8; WHO OSPAR 60, 70
code accepted by 146, 147; see also Oxford University 149
infant formula milk substitute
Nestlé, Henri 142 Pagan, Rafael 146
Nestlé Coordination Center for paternalism 139
Nutrition 146, 147, 154 pay: executive 34–5, 37–8; ‘going rate’
Nestlé Infant Formula Audit 37–8; low 123–4, 125–6, 129;
Commission (Muskie Commission) statutory limits 36, 127
146, 147, 152, 153, 154 peer pressure see self-regulation
Nestlé UK 149 Peter Jones 131, 132, 133
New Internationalist 145, 150 Pettersson, Pelle 84
New Scientist 74 pharmaceutical industry 49, 142
New Zealand 104 phronesis (practical wisdom) 46,
Newton, Lisa 3 165–71
NGOs (non-governmental phronimos 43, 165
organizations) 145, 151, 152, 153, Plato 23, 40
156; accountability 154 Politics (Aristotle) 49
Nicomachean Ethics (Aristotle) 23, 40, Polly Peck 28
41–2, 43, 48, 49, 162, 165–9 practice (habituation) 43–5, 52–3, 168,
Nisbet, Euan 69 171–2
normative ethics 2 Presidential Commission on the
Challenger Disaster 108, 116,
North Feni Ridge 62
117–18, 119, 120, 121
North Sea 59, 60; industrial fishing 79;
pressure groups 74
see also Brent Spar controversy
Pridham, Jack 69
North Sea Decommissioning Group 75
private sector: as initiator of good
Norway: and Brent Spar 65, 67, 68, 70, practice 99
75; Det Norske Veritas 66 problem-solving: by consensus 129
nous 166, 167, 168, 169–71, 172 professional codes 13
Nussbaum, M. 167, 174 profit-sharing 136
NVQs (National Vocational ‘Profits and Principles – Does There
Qualifications) 128 Have to be a Choice’ (Shell) 79–80
prohairesis 43, 44–5
Oakeshott, Robert 139 ‘Public consequences of private action’
obligation 163, 164 (Sethi and Post) 149
Observer 69 Public Finance Initiative 125
OECD (Organization for Economic Public Interest Disclosure Act (UK,
Cooperation and Development) 105 1998) 105
oil rigs, decommissioning of 59; Brent public opinion: and Brent Spar
Spar as test run 62; Labour controversy 73, 76, 77, 79–80
government’s policy on 73; Public–Private Partnerships 125
moratorium on seabed disposal 67, public services 128; tendering for 125
70, 87; oil and gas industry sets up Purcell and Kessler 129
discussion group 74–5; regulations purpose of business 25–7, 47, 49–52
60; see also Brent Spar controversy
openness 13, 19–20, 101, 104; John radioactivity 66, 68
182 Index
Rainbow Warrior 62 Accountability Team 79–80; tries to

rationality 42, 43, 45–6 restore its reputation 67; see also
Reagan, Ronald 111, 113 Brent Spar controversy
redundancies 37, 124, 129 Shepherd, John 87
religion 12, 104, 145, 146, 147 Skills Task Force 128
reputation 21 Slaughter and May 15
revisionism, historical 60, 74 small businesses 17
risk-benefit analysis 76, 78 social accountability 79–80
Rockall Trough 70 social audit 151
Rockwell 117 social obligation 149–51
Rogers, William Pierce 113 social responsibility 29–30, 151–4, 156
Roland, Alex 114 social responsiveness 154–5, 156
Rose, Chris 87 Socrates 23, 40
Ross Laboratories 142 Solomons, Robert 138
Rothermund, Heinz 76 South Africa: Protected Disclosures Act
Rover 127 (2000) 104
Rudall Blanchard Associates 61 stakeholder theory 30–3, 156, 163,
164; definition 152; employees 129;
safety 135; see also Challenger Flight and environmental issues 59, 60, 62,
51-L disaster 67, 75–6, 77, 78, 81; and
Sainsburys 138 international marketing 154; mutual
Sambrook, Richard 74 responsibility concept 152; problem
Sangeorge, Robert 74 of defining limits 155, 164
scandals 101–2 Statements of Business Practice 13
Scandinavia 128–9; see also Denmark; Steam Loop affair 15–16
Norway Sternberg, E. 24–39, 139, 150, 151,
science: and Brent Spar controversy 59, 156, 164; Aristotelian approach 4,
64, 65, 66, 67, 68–72, 77, 87, 25–6, 38–9, 41; on distributive
88–90; contested use of 59 justice 26, 35–8, 162; ethical
Scottish Association for Marine Science decision model 33–8; on executive
70 pay 34–5, 37–8; on inevitability of
seabed: geological structure 62 business ethics 28–9; objections to
self-regulation 14–16 social responsibility approach
Selfridges 134 29–30; on ordinary decency 26,
Shalom 138 35–8; on purpose of business 25–7,
shareholders 12, 20, 21, 30, 32, 76 47, 50; on relationship of ethics with
Shell Austria 64 business success 27, 28–9; on
Shell Germany 64 stakeholder theory 30–3; on validity
Shell UK Limited 59; decision to of business ethics 24–7
decommission Brent Spar 61–3; students: as opinion formers 148–9
estimated levels of contaminants Sullom Voe pipeline 60
65–6, 71; failure to consult 62, 63, suppliers 20, 137
75; good environmental reputation SustainAbility 75, 81
61, 62, 64, 76; postpones Better
Britain awards 74; and privileged Tawney, R.H. 132, 135
dialogue model 81; protests against ‘Teaching of Ethics in Higher
63, 64; and public opinion 73, 77, Education’ (Hastings Centre) 23
79–80; reaction to Greenpeace temperance 48, 52
occupation 63–5; reverses ocean tendering 125
disposal decision 65; and scientific Tesco 138
arguments 65–6, 67, 68, 71; secrecy Third World: AIDS 148; birth rate 142,
and openness 73, 76, 78; Social 143; breastfeeding 142–3, 144, 146,
Index 183
147, 148, 154, 156; health Vorfelder, Jochen 78

professionals 142, 143–4, 146, 147;
hygiene 144; illiteracy 144; infant Waitrose 134; Organic Assistance
mortality rate 144; marketing by Scheme 137; and small suppliers 137
MNCs 141, 142–4, 145–6; poverty
Wall Street Journal 67, 74, 79
144; suitability of free market
concept in 150–1; urbanization 143; Wallace, Helen 87
see also infant formula milk Warr, P. 135
substitute Washington Post 146
Thompson, Arnie 111, 112, 118 water companies 124
Time International 78–9 West, Michael 127
Times, The 69, 70 whistleblowing 48, 96–122, 164; aims
Titan missiles 109 of a good system 102–3; anonymity
Tomorrow 74 100; bribery and 97, 100, 102–3,
trade codes 13 104, 105; case histories 106–7,
trade unions 104, 127 108–22; consequences of current
training 124, 127, 128–9, 135
culture 101–2; definitions 96;
transparency see openness
Transparency International 12–13 external 100, 103–4, 107;
‘triple bottom line’ 79–80 importance of keeping records 116;
trust 22, 36, 104 internal 98–9, 102–3, 104–5, 106–7;
legal position 100; legislation on 99,
UK: employment conditions and 104–5; negative attitudes of
policies 124, 125–30; Nestlé boycott organizations 99; providing an
in 147; rules on duties of auditors effective system 103–4; as
101; whistleblowing legislation 104, responsibility of whole organization
105; see also Conservative 121; risks and perceptions of 96–7,
government; Department of Trade 98; silence option 97–8, 102–3
and Industry; Labour government WHO see World Health Organization
UK Committee on Standards in Public
wisdom, practical see phronesis
Life 98–9
UK Offshore Operators Association 70, Worcester, Bob 73
87 workforce see employment policies
UNICEF 145, 147–8, 152, 154–5; ‘workforce and productivity, The’ (West
Cracking the Code 148, 153 and Patterson) 140
Unilever 79 World Health Assembly 145
United Nations Protein Advisory Group World Health Organization 145, 147;
144 Code on marketing 145–6, 147,
US Air Force 109, 114 148, 149, 152–3, 156; and
USA: anti-trust laws 148, 155; role of transmission of AIDS through
law and regulation 12; whistle- breast milk 148
blowing legislation 99, 104
Worldwide Fund for Nature 74
utilitarianism 24, 163–4
Wyeth Laboratories 142
Vane, Sir John 69
virtue ethics 154, 156; see also Young, John 114
Aristotelian virtue theory

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Case Histories in Business Ethics

Is business ethics relevant to business?

Dr Chris Megone is Senior Lecturer in Philosophy at the University of

Revd Dr Simon J. Robinson is Senior Anglican Chaplain to the University

Edited by Chris Megone

London and New York

All rights reserved. No part of this book may be reprinted or

ISBN 0-203-36120-2 Master e-book ISBN

ISBN 0-203-37376-6 (Adobe eReader Format)

Notes on contributors vii

2 Two Aristotelian approaches to business ethics 23

4 Whistleblowing: the new perspective 96

5 The Rick and Bianca case history 106

7 Pain and partnership 123

8 John Lewis Partnership: a case history 131

9 Nestlé baby milk substitute and international marketing:

Lord (Gordon) Borrie is the Chairman of the Advertising Standards

Diego, 1997), ‘Persons and potentialities: an Aristotelian approach’, in

of ethical theories and ethical concepts, which is often supposed to have

studies) in the teaching and studying of business ethics. It explores and

presents two Aristotelian approaches with somewhat different emphases.

Why should it be that issues of company conduct and personal conduct in

Transparency International (TI), the coalition against corruption in

I do say that if persons, for their own purposes of speculation, create

Now, that is a comical story, but, as a result, senior executives went to

an employee to offer to make a sale, or to complete a deal, and, on the

that on the whole openness and ethical behaviour go together. Certainly

their interests are best served by giving as long a period of notice as is

Two Aristotelian approaches

In a volume concerned with teaching using cases, James Allen writes

Humanistic education has to do not simply with states of mind or

Whilst it would not be surprising to find writers on theoretical ethics in the

applied ethics. They also provide a theoretical framework for reflecting on

Sternberg’s approach to business ethics

sometimes, of course, that criticism is wholly justified. [Thus if] ‘busi-

business that pass as business ethics fully deserve to be dismissed. But

By contrast, she argues, when properly understood,

‘business ethics’ is not an oxymoron. The notion that ‘business ethics’

good knife.’ Applying this to activities ‘If the purpose of writing is to

The specific objective which is unique to business, and which distin-

definitive business purpose with distributive justice and ordinary

Understanding business and business ethics in this way helps to over-

While it is generally true that ‘good ethics is good business’, it is

Sternberg then addresses a second obstacle preventing business ethics being

[This] is the notion that business ethics is an optional extra, a bit of

Having noted the prevalence of ethical issues in business activity, Sternberg

Failure to recognize and properly address ethical problems can lead to

ical business conduct; unsatisfactory behaviour by stakeholders often

even attempts to be ethical can be bad for the business. Business is

use business funds for ‘socially responsible’ but unauthorized non-

At this point Sternberg turns to a response to her argument which rests on

It may now be protested that much of this criticism of the ‘social

its stakeholders, and that the role of management is to balance their

However Sternberg now provides reasons to reject this alternative theory.

First, it is based on a mistake. Starting from the fact that business is

Why then is it so popular? Because it appeals to those who believe

Having addressed ‘stakeholder theory’, Sternberg now returns to the

The relation between an ethical decision model and individuals’ moral

A business ethical decision model can help employees do the right