MORAL IMAGINATION
Most are familiar with Nestlé, one of the world’s largest food producers, whose marketing slogan is: “Good food, Good life.” On its website, the corporation states that its three main ambitions are helping children live healthier lives, improving livelihoods in communities, and striving for zero environmental impact (Nestlé, n.d.). These are commendable goals that generated considerable positive publicity; however, recent allegations and court proceedings have suggested that the company may not actually be achieving those ambitions. Nestlé has been accused of using child labor in its cocoa supply chain in Western Africa, using forced slave labor in its seafood supply chains in Southeast Asia, and overusing diverted water from a national forest in drought-stricken California (Singh, 2021). These allegations illustrate that—even when companies adopt policies to promote ethical behavior—serious lapses can occur.
To prepare for this Discussion:
Review the article titled “Mental Models, Moral Imagination and System Thinking in the Age of Globalization” (located in this week’s Learning Resources) and think about how organizations apply these models.
Consider an organization with which you are familiar. This can be a current or former employer. Focus specifically on the organization’s ethics and sustainability policies, practices, and goals, and identify one issue you think the organization should improve upon with regard to its moral imagination and action.
Post a synthesis of how your selected organization could use a moral imagination framework to address issues and create positive social change. In your synthesis, do the following:
Briefly describe your selected organization and identify one issue the organization should improve upon with respect to its moral imagination and action. Provide a rationale.
Explain how Werhane’s moral imagination framework could be applied to the issue you identified to help create positive social change within the organization or its stakeholder context. Springer 2007
Journal of Business Ethics (2008) 78:463–474
DOI 10.1007/s10551-006-9338-4
Mental Models, Moral Imagination
and System Thinking in the Age
of Globalization
ABSTRACT. After experiments with various economic
systems, we appear to have conceded, to misquote
Winston Churchill that ‘‘free enterprise is the worst
economic system, except all the others that have been
tried.’’ Affirming that conclusion, I shall argue that in
todayÕs expanding global economy, we need to revisit our
mind-sets about corporate governance and leadership to
fit what will be new kinds of free enterprise. The aim is to
develop a values-based model for corporate governance in
this age of globalization that will be appropriate in a
variety of challenging cultural and economic settings. I
shall present an analysis of mental models from a social
constructivist perspective. I shall then develop the notion
of moral imagination as one way to revisit traditional
mind-sets about values-based corporate governance and
outline what I mean by systems thinking. I shall conclude
with examples for modeling corporate governance in
multi-cultural settings and draw tentative conclusions
about globalization.
KEY WORDS: corporate governance, free enterprise,
globalization, mental models, moral imagination
Patricia H. Werhane is the Wicklander Chair of Business Ethics
and Director of the Institute for Business and Professional
Ethics at DePaul University with a joint appointment as the
Peter and Adeline Ruffin Professor of Business Ethics in the
Darden School at the University of Virginia. Professor
Werhane has published numerous articles and is the author or
editor of twenty books including Persons, Rights and Corporations, Adam Smith and His Legacy for Modern Capitalism, Moral Imagination and Managerial Decision-Making
with Oxford University Press and Employment and Employee Rights (with Tara J. Radin and Norman Bowie) with
BlackwellÕs. She is the founder and former Editor-in-Chief of
Business Ethics Quarterly, the journal of the Society for
Business Ethics.
Patricia H. Werhane
Introduction1
After experiments with various economic systems,
we appear to have conceded, to misquote Winston
Churchill that ‘‘free enterprise is the worst economic system, except all the others that have been
tried.’’2 Affirming that conclusion, I shall argue
that in todayÕs expanding global economy, we
need to revisit our mind-sets about corporate
governance and leadership to fit what will be new
kinds of free enterprise. The aim is to develop a
values-based model for corporate governance in
this age of globalization that will be appropriate in
a variety of challenging cultural and economic
settings.
In what follows I shall begin with an analysis of
mental models from a social constructivist perspective. I shall then develop the notion of moral
imagination as one way to revisit traditional mindsets about values-based corporate governance and
outline what I mean by systems thinking. I shall
conclude with examples for modeling corporate
governance in multi-cultural settings and draw tentative conclusions about globalization.
Mental models, mind-sets, and social
constructivism
Although the term is not always clearly defined, the
term, ‘mental modelÕ or ‘mind-setÕ connotes the idea
that human beings have mental representations,
cognitive frames, or mental pictures of their experiences, representations that model the stimuli or
data with which they are interacting, and these
are frameworks that set up parameters though
which experience or a certain set of experiences, is
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Patricia H. Werhane
organized or filtered (Gentner and Whitley, 1997,
pp. 210–211; Gorman, 1992; Senge, 1990, Chapter
10; Werhane, 1999).
Mental models might be hypothetical constructs
of the experience in question or scientific theories,
they might be schema that frame the experience,
through which individuals process information,
conduct experiments, and formulate theories.
Mental models function as selective mechanisms and
filters for dealing with experience. In focussing,
framing, organizing, and ordering what we experience, mental models bracket and leave out data, and
emotional and motivational foci taint or color
experience. Nevertheless, because schema we employ are socially learned and altered through religion, socialization, culture, educational upbringing,
and other experiences, they are shared ways of
perceiving, organizing, and learning.
Due to of the variety and diversity of mental
models, none is complete, and ‘‘there are multiple
possible framings of any given situation’’ (Johnson,
1993; Werhane, 1999). By that we mean that each of
us can frame any situation, event, or phenomenon in
more than one way, and that same phenomenon can
also be socially constructed in a variety of ways. It
will turn out that the way one frames a situation is
critical to its outcome, because ‘‘[t]here are…different moral consequences depending on the way we
frame the situation,’’ (Johnson, 1993).
Our views of the world, of ourselves, of our
culture and traditions and even our values orientation are constructions – all experiences are framed
ordered and organized from particular points of
view. These points of view or mental models are
socially learned, they are incomplete, sometimes
distorted, narrow, single-framed. Since they are
learned they are changeable, revisable, etc. But all
experience is modeled – whatever our experiences
are about – their content – cannot be separated from
the ways we frame that content.
Mental models, as Peter Senge carefully reminds
us, (Senge, 1990) function on the organizational and
systemic levels as well as in individual cognition.
Sometimes, then, we are trapped within an organizational culture that creates mental habits that preclude creative thinking. Similarly a political
economy can be trapped in its vision of itself and the
world in ways that preclude change on this more
systemic level.3 Let me illustrate.
Mental models in the age of Wal-Mart: ‘‘The
Wal-Mart Paradox’’ (Waddock, 2006)
Wal-Mart is the largest retailer in the world. Last
year its revenues were 2.13 billion dollars, and it
employs 1.8 million people. Its stores are located
across the United States and now in many parts of
the world. Its mission is ‘‘Always low prices – ALWAYS.’’ It has enormous stores many of which now
include food supermarkets, it has extremely low
prices, often forcing competition out of business, it
has good quality merchandise and of course, there is
the unparalleled customer convenience of finding
almost everything at one location (Fishman, 2006).
The company is a publicly traded corporation. It
has been very successful and almost every pension
fund in America includes in its portfolio Wal-Mart
stock. It is the ‘darlingÕ of Wall Street and conservatives, according to a recent article in Business Week
(2004). Wal-Mart provides much-needed local jobs.
In a recent store opening on the South side of
Chicago, for example, 25,000 applications vied for
325 positions (Smith, 2006). It has recently instituted
health care coverage for long-term part-time
employees who can afford the $11/month. Unfortunately, however, most part-time employees cannot
afford the health care, and many Wal-Mart
employees, paid under the poverty level, are also on
Medicaid. The new CEO, Lee Scott, has developed
environmentally sustainable initiatives aimed at selling food that is organically grown, fish that are
reproducible, and the company is focussing on selling a variety of products that are in various ways
‘greenÕ.
Wal-Mart is well-known in other respects. Where
there are Wal-Mart stores, often small shops, who
ordinarily cannot compete with its low prices, are
forced out of business. Moreover, none of WalMartÕs stores are unionized; Wal-Mart forbids unions
in its stores, and works to prevent them in its supplier organizations. In the recent past it has had
problems with the treatment of some of its
employees, and in some locations employees have
been denied bathroom and lunch breaks and worked
over 80 hours per week. Most interesting, despite its
new focus on environmental sustainability, much of
Wal-MartÕs merchandise, and almost all its apparel, is
manufactured off-shore, by companies under contract with but not owned by Wal-Mart, often under
Mental Models, Moral Imagination and System Thinking
extremely horrifying sweatshop conditions. (By the
term ‘sweatshopÕ I meant a factory that does not
meet minimum working standards in the country in
which it is operating, e.g., by working employees
long hours without overtime pay, paying under
minimum wage, not following minimum standards
for ventilation, lunch rooms, restrooms, maternity
leave, days off, etc. as mandated in the country in
which the factory operates (Arnold and Hartman,
2005).4 Of course, Wal-Mart does not own any of
these operations (Fishman, 2006; Waddock, 2006).
Linking this description back to the analysis of
mental models, the way one approaches Wal-Mart
and measures it successes and/or failures frames oneÕs
conclusions about its moral successes and failures.
For example, if one concludes that customer satisfaction and shareholder value are primary then WalMart is a great success. If one approaches Wal-Mart
from an environmental point of view, its new push
to become ‘greenÕ is clearly a very admirable initiative. Examining Wal-Mart using a standard stakeholder map (Figure 1) one concludes that this
company creates value-added for a number of its
stakeholders, in fact, the majority: its executives,
customers, shareholders, and those in the community worried about the environment. Figure 1, as a
model for dealing with ethical issues, places the
corporation, in the middle of the graphic. Our
mental model is partly constructed by the graphic, so
that our focus is first on the company, only secondarily on its stakeholders, despite, from a stakeholder theory perspective, the claim that all
stakeholders, those who affect or are affected by the
company, have, or should have, equal claims on
value-added (Freeman, 2002).
W a l -M a r t
Executives
Suppliers and
F ra n c h ise s
E m p l o ye e s
W a l-M a r t
W a l- M a r t
Communities
C u sto m e r s
(you and me)
Sh a reh o lder s
(including
al l o f u s )
Figure 1. ‘‘Standard’’ stakeholder map (Freeman, 2002).
465
Wa l – Ma r t
Suppliers and
Franchises
Employees
Sweatshop
W o rk e rs
C u s to m e r s
(you and me)
Wal-Mart
Communities
Shareholders
(including
all of us )
Figure 2. Revised stakeholder map.
On the other hand, if one is interested in
employees and the employees of Wal-MartÕs suppliers, who after all are people as well, one becomes
much more critical of Wal-Mart. If Wal-Mart is
contributing to a culture of welfare, and/or if its
goods are made under less that minimum working
conditions, then moral questions arise. Is this company creating harms that are not counterbalanced by
its value added in price, convenience, and shareholder returns? Is the preoccupation with ‘‘always
low prices…ALWAYS’’ framing the companyÕs
decision-making in such as way that employment
issues do not surface or surface sufficiently to be
adequately addressed in all instances? And what
happens to our mental models if we redraw the
stakeholder map with employees in the middle, or,
say, sweatshop workers in the middle? (Figure 2)
Now one cannot ignore the existence of these
workers, they are no longer on the periphery of
oneÕs focus, even if there is still a preoccupation with
low prices. Moreover, while it is hard to wrap
oneÕs mental images around 1.8 million workers, if
I tweak the graphic further and place the picture of a
Bangladeshi sweatshop worker in the middle, her
concrete presence begins to affect our thinking
about Wal-MartÕs anti-union global practices.
In the Wal-Mart case, how we look at this situation, how we draw the maps, where we focus our
attention and preoccupations, our tradition and our
assumptions frame these scenarios. If I tweak the
maps, if I merely shift around the focus of the
stakeholder map and add a picture of a real person,
my frame is altered. Thus I have introduced
an element of moral imagination – looking at a
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Patricia H. Werhane
situation from a different and even more challenging
perspective.
Moral imagination and mental models
Moral imagination can be defined as ‘‘…the ability to
discover, evaluate and act upon possibilities not
merely determined by a particular circumstance, or
limited by a set of operating mental models, or
merely framed by a set of rules’’ (Werhane, 1999,
p. 93).
Thus moral imagination entails the ability to get
out of a particular mind-set or mental trap, and to
evaluate both that mind set or mental model and, in
some cases, its traps.
What, in detail does moral imagination include?
On the individual level, being morally imaginative
includes:
• Self-reflection about oneself and oneÕs situation.
• Disengaging from and becoming aware of
oneÕs situation, understanding the mental
model or script dominating that situation,
and envisioning possible moral conflicts
or dilemmas that might arise in that context or as outcomes of the dominating
scheme. Second,
• Moral imagination entails the ability to imagine new possibilities. These possibilities include those that are not context-dependent and
that might involve another mental model.
• Third, moral imagination requires that one
evaluate from a moral point of view both
the original context and its dominating mental models, and the new possibilities one has
envisioned (Werhane, 1999, 2002a).
But how do we engage in this analysis while at the
same time taking into account situational peculiarities, social context, and the system in which we are
embedded? How do we act in a morally reasonable
manner and trigger moral imagination? I think it is
possible to get at, understand, revise, and critique
our operative mental models, but only from another
perspective which itself is a set of mental models.
This shortcoming should not deter us, however,
since a critical perspective is essential if we are to get
out of our mental traps, in Wal-MartÕs case, the
driving force of its cost-driven mission.
Looking at Wal-Mart, one begins with that mission. Then one tries to disengage from that mission
and ask, ‘WhatÕs going on here?Õ How does that
mission affect all that we do and blind us to become
aware of other possibilities?
– What mental models are at play?
– What moral conflicts are operative?
– What is left out or ignored, e.g., employees and
the workers in their supplier factories?
– What are other, new possibilities?
Then one engages the productive imagination: What
are some alternatives that fit societal norms, corporate values, and personal ethics? Why do employees
matter? What is wrong with sweatshops in developing countries particularly in areas where there is
massive unemployment? Moreover, Wal-Mart does
not own any of these factories. So how could we
place responsibility for working conditions on
them? What are some alternatives that challenge the
status quo? Here again, redrawing oneÕs stakeholder
map is invaluable. What happens to oneÕs thinking
when I give a sweatshop worker a ‘name and
face?Õ (Benhabib, 1992; McVea and Freeman, 2005).
Figure 3 illustrates this kind of graphic. In the
center is a picture of a 14-year old Bangladeshi
sweatshop worker, whose average workweek is
80–100 hours, under sub-human working conditions
W a l -M a r t
Employees
Suppliers and
Franchises
Cu s to m e r s
(you and me)
Wal-Mart
Communities
Shareholders
(including all of us)
Figure 3. ‘‘Names and faces’’ (McVea and Freeman,
2005).
Mental Models, Moral Imagination and System Thinking
by Bangladesh legally mandated standards (National
Labor Committee, 2000, 2005).
Continuing the process of moral imagination, one
then engages in creative reflection and evaluation.
What are some other possibilities? What are other
values at stake besides low prices? How can we
change the operative mental models without losing
our focus on customer pricing and shareholder value?
Before we can use this model to present an
alternative to Wal-Mart thinking, we have to remind ourselves that all of these individuals and
organizations engaged in the Wal-Mart phenomenon are in interlocking networked relationships.
While it is true that moral imagination often
facilitates, rather than corrupts, moral judgment, the
temptation is to focus primarily on individuals and
individual moral judgments. But, I shall now suggest, this is an oversight. Taking the lead from Susan
WolfÕs (1999) and Linda EmanuelÕs (2000) work on
systems thinking, and developing ideas from work
on mental models and moral imagination, I shall
argue that what is often missing in organizational
decision-making is a morally imaginative systemic
approach. Moral imagination is not merely a function of the individual imagination. Rather, moral
imagination operates on organizational and systemic
levels as well, again as a facilitative mechanism that
may encourage sounder moral thinking and moral
judgment.
Moral imagination and systems thinking5
A system is a complex of interacting components
together with the networks of relationships among
them that identify an entity and/or a set of processes
(Laszlo and Krippner, 1998, p. 51).
A truly systemic view considers how a set of
individuals, institutions, and processes operates in a
system involving a complex network of interrelationships, an array of individual and institutional
actors with conflicting interests and goals, and a
number of feedback loops (Wolf, 1999).
A systems approach presupposes that most of our
thinking, experiencing, practices and institutions are
interrelated and interconnected. Almost everything
we can experience or think about is in a network of
interrelationships such that each element of a particular set of interrelationships affects some other
467
components of that set and the system itself, and
almost no phenomenon can be studied in isolation
from other relationships with at least some other
phenomenon.
Systems are connected in ways that may or may
not enhance the fulfillment of one or more goals or
purposes: they may be micro (small, self-contained
with few interconnections), mezzo (within healthcare organizations and corporations), or macro (large,
complex, consisting of a large number of interconnections). Corporations and healthcare organizations
are mezzo-systems embedded in larger political,
economic, legal, and cultural systems. Global corporations are embedded in many such systems. These
are all examples of ‘complex adaptive systemsÕ, a term
used to describe open interactive systems that are able
to change themselves and affect change in their
interactions with other systems, and as a result are
sometimes unpredictable (Plsek, 2001). What is
characteristic of all types of systems is that any
phenomenon or set of phenomena that are defined as
part of a system has properties or characteristics
that are, altered, lost or at best, obscured, when the
system is broken down into components. For
example, in studying corporations, if one focusses
simply on its organizational structure, or merely on
its mission statement, or only on its employees or
customers, one obscures if not distorts the interconnections and interrelationships that characterize and
affect that organization in its internal and external
relationships.
Since a system consists of networks of relationships between individuals, groups, and institutions,
how any system is construed and, how it operates,
affects and is affected by individuals. The character
and operations of a particular system or set of systems
affects those of us who come in contact with the
system, whether we are individuals, the community,
professionals, managers, companies, religious communities, or government agencies. An alteration of a
particular system or corporate operations within a
system (or globally, across systems) will often produce different kinds of outcomes. Thus part of moral
responsibility is incurred by the nature and characteristics of the system in which a company operates
(Emanuel, 2000). For example, how Wal-Mart
contracts with its suppliers affects those suppliers and
their employees, as well as Wal-MartÕs customers
and shareholders.
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Patricia H. Werhane
What companies and individuals functioning
within these systems focus on, their power and
influence, and the ways values and stakeholders are
prioritized affect their goals, procedures, and outcomes as well as affecting the system in question. On
every level, the way individuals and corporations
frame the goals, the procedures and what networks
they take into account makes a difference in what is
discovered or neglected. These framing mechanisms
will turn out to be important normative influences
of systems and systems thinking (Werhane, 2002a).
Adopting a systems approach Mitroff and Linstone in their book, The Unbounded Mind, argue that
any organizational action needs to be analyzed from
what they call a Multiple Perspective method. Such
a method postulates that any phenomenon, organization, or system or problems arising for or within
that phenomenon of system should be dealt with
from a variety of disparate perspectives, each of
which involves different world views where each
challenges the others in dynamic exchanges of
questions and ideas (Mitroff and Linstone, 1993,
Chapter 6). A multiple perspectives approach takes
into account the fact that each of us individually, or
as groups, organizations, or systems creates and
frames the world through a series of mental models,
each of which, by itself, is incomplete. While it is
probably never possible to take account all the networks of relationships involved in a particular system, and surely never so given these systems interact
over time, a multiple perspectives approach forces us
to think more broadly, and to look at particular
systems or problems from different points of view.
This is crucial in trying to address the Wal-Mart
paradox. Since each perspective usually ‘‘reveals insights…that are not obtainable in principle from
others’’ (Mitroff and Linstone, 1993, p. 98). It is also
invaluable in trying to understand other points of
view, even if, eventually one disagrees or takes another tactic (Werhane, 2002a). So a multiple perspectives approach is, in part, a multiple stakeholder
approach, but with many configurations and
accountability lines. It is also an attempt to shake up
our traditional mind-sets without at the same time
ascribing too much in the way of obligation to a
particular individual or organization.
A multiple perspectives approach also takes into
account the fact that each of us individually, or as
groups, organizations, or systems creates and frames
the world through a series of mental models, each of
which, by itself, is incomplete. While it is probably
never possible to take account all the networks of
relationships involved in a particular system, and
surely never so given these systems interact over
time, a multiple perspectives approach forces us to
think more broadly, and to look at particular systems
or problems from different points of view. This is
crucial in trying to avoid problems such as BangladeshÕs, because each perspective usually ‘‘reveals
insights…that are not obtainable in principle from
others’’ (Mitroff and Linstone, 1993, p. 98). It is also
invaluable in trying to understand other points of
view, even if, eventually one disagrees or agrees to
disagree. A Multiple Perspectives approach is
essential if, for example, as Wal-Mart thinks about
itself as a global company that affects and is affected
by its suppliers and their employees and the various
communities in which it contracts or operates. It is,
then, part of a network as depicted in Figure 4.
There is one more element to this approach. In
every stakeholder map we draw, we prioritize our
stakeholders, that is, we give them value. When
Wal-Mart prioritizes low prices it is prioritizing its
customers, particularly those who cannot afford
fancy stores and high-priced goods. This is terrific.
But these set of values, important as it is, needs to be
put in a matrix with basic minimum moral standards
for the treatment of every human being. If you sell
goods that have been produced at under basic
minimum human working conditions in the country
where these goods are produced, by underpaid workers
who at best, have 2 days leave a month (National
U. S.
E mp l o y ee s
C u st o m e r s
Local
Governments
and
Political
Systems
Wal-Mart
Franchises
OffShore
Wor k ers
Social
Norms and
C u s to m s
S u p p li e r s
H om e
Government
Ecosystem
Figure 4. Stakeholder network.
S h ar eh ol d er s
Communities
Mental Models, Moral Imagination and System Thinking
Labor Committee, 2005), one needs to rethink
whether the positive value of low prices in developed countries preempts this value degradation
where workers are frankly worse off than if they
were unemployed.
There is one more consideration, that of individual responsibility, the responsibilities of the politicians, professionals, managers, and of individual
citizens. A systems approach should not be confused
with some form of abdication of individual responsibility. As individuals we are not merely the sum of,
or identified with, these relationships and roles, we
can evaluate and change our relationships, roles, and
role obligations, and we are thus responsible for
them. That is, each of us is at once byproducts of,
characters in, and authors of, our own experiences.
We can comprehend, evaluate, and change our
mental models. Not to do so, is to misunderstand
how important human choice and responsibility is to
our lives (Werhane, 1999).
Globalization and other models
It would be unconscionable to criticize Wal-Mart
without presenting a viable model for corporate
governance that does not merely recommend closing
this company. Its focus on low prices and the job
opportunities if offers cannot be ignored. So let us
take the case of Nike. Nike makes nothing it sells,
nothing. All of its goods are produced by independent suppliers, most of whom are in developing
countries. Recently Nike made headlines by being
accused of buying goods from plans producing its
products under sweatshop conditions where allegedly at least in Indonesia, women workers were
beaten if they did not keep up their productivity.
(Hartman et al., 2003)
Nike, as Hartman, Arnold and Wokutch write
(2003) has had a similar sweatshop problem. Nike
owns almost no factories; rather it buys its goods
from numerous manufacturers around the world. So
it would appear that what these manufacturers do to
get Nike goods to market has nothing to do with
Nike. Often Nike had little knowledge of what
went on in the plants that produced its shoes and
other products. This changed, of course, when the
media began to focus on the working conditions,
pay, and safety in plants producing Nike products.
469
Still, why is Nike, rather than these plants responsible, and what is the extent of that? As a result of
public pressure Nike began to ‘look in the mirrorÕ at
its mission, corporate image, and challenged itself to
think about extending the scope of its responsibilities, engaging in what has become a consorted effort
to improve sweatshop conditions not merely in the
factories from which it buys but also with the suppliers to those factories. But Nike did not see this
problem as merely its problem; rather it has taken
what I called a systems perspective. That is, it sees its
responsibilities as extending beyond its own
employees to the system in which its products are
produced. It not merely developed a strong Code of
Conduct. It has expanded its influence, its employee
standards, and monitoring system to its franchises
and gradually, to their suppliers as well (Hartman
et al., 2003). In this sort of case one might think of
NikeÕs scope of responsibility in terms of gradually
widening concentric circles. Its first responsibility is
to its employees, customers, and shareholders; its
next circle is to its contracted suppliers, the third to
the suppliers of materials for those suppliers. Figure 5
depicts those relationships. Notice that this is a
model of relationships between stakeholders in a
global economy where the company, Nike, is not
the only focus, thus not in the center of the graphic.
It is a modification of the confusing global stakeholder networks map, that obviously has more
practical applications.
Other
Sports
Clothes Cos.
Media
N i ke
Alliance
Sub-
N ik e
Management
and
E mp l o y e e s
C o u n t ry ( s )
and Local
Traditions
Off-shore
workers
Co n t ra c t o r s
Franchises
Figure 5. NikeÕs alliance model (Model Courtesy of
Mary Ann Leeper, COO, Female Health Company).
470
Patricia H. Werhane
In other words, Nike put names and faces on its
suppliers and their workers. Moreover they formed
an alliance with their primary stakeholders using
their mission and code as the binding factor. Today
they are working to get commitments with their
sub-contractors, those companies that supply materials to the factories making Nike goods. Nike
cannot monitor everything; it is not and cannot be
responsible for everything that goes on in the
countries in which it has suppliers; but because of its
buying power it can leverage influence and affect
supplier conduct. Not to do so would be, from its
own perspective, avoiding its obligations (Hartman
et al., 2003). Wal-Mart might do well to heed
NikeÕs approach.
To illustrate that NikeÕs approach is not unique,
let us look at another company, Exxon-Mobil. The
first is ExxonMobilÕs exploration of oil in Chad and
the development of a pipeline through Cameroon.
Chad and Cameroon are two of the poorest and
most corrupt countries in the world (Transparency
International, 2005). For example, ExxonÕs 2001
revenues were $190 billion; ChadÕs yearly gross
domestic product was 1.4 billion. However, ExxonMobil, in partnership with ChevronTexaco and
Petron as is investing $3.5 billion in drilling in Chad
and in building a 600-mile pipeline through Cameroon. The project should generate $2 billion in
revenues for Chad and $500 million for Cameroon
over the 25-year projected drilling period. (World
Bank, 2000). Still, from ExxonMobilÕs perspective
carrying out this project is morally risky since, as
Fortune speculates, the president of Chad, Idriss
Déby, who ‘‘has a flair for human rights abuses, ….
could ‘pull a MobutuÕ’’ (Ussem, 2002).
ExxonMobil is a company created by the merger
of Exxon and Mobil, and prior to the merger, each
was a multi-billion dollar oil company. Exxon was
best known for the Exxon Valdez oil spill, and
Mobil, according to Forbes, in the early 1990s, became involved with a certain James Giffen, known as
a ‘fixerÕ. It is alleged, but not yet proven, that Giffen,
in collaboration with a Mobil executive, were engaged in a questionable payment scheme with the
Kazakh government in order to get access to
KazakhstanÕs oil fields (Fisher, 2003, p. 84). There is
a perception, at least partly true, that until very recently (and this still sometimes occurs) oil companies
simply went into a region with a team of expatriate
‘foreigners,Õ drilled, dug pipelines, pumped oil, and
left.
Given that perception and ExxonMobilÕs spotty
past, what is interesting about the Chad-Cameroon
project, is Exxon MobilÕs approach. ExxonMobil has
created an alliance with the Chad and Cameroon
governments, the World Bank, a number of NGOs,
and indigenous populations in the region. Before
approving the project the World Bank created a
series of provisos to ensure that there is sound fiscal
management of the revenues receive Chad and
Cameroon, it set up strict environmental and social
policies, and it consulted with a number of NGOs to
protect the rights and welfare of indigenous people
in these regions (World Bank, 2002).
By the middle of 2002 the project employed more
than 11,000 workers, of whom at least 85% are from
Chad or Cameroon. Of these local workers, more
than 3700 have received high-skills training in
construction, electrical and mechanical trades, and
5% of the local workers have supervisory positions.
In addition, local businesses have benefitted from the
project to a total of almost $100 million. The Bank
has developed micro lending projects accompanied
with fiscal and technical training. The aim is to
establish permanent micro lending banks in Chad
and Cameroon. In partnership with ExxonMobil the
World Bank have created new schools and health
clinics, provided HIV education and vaccines against
tuberculosis and medical staff to monitor the distribution, and distributed thousands of mosquito nets
for protection against malaria, and provided farm
implements and seeds to develop indigenous agriculture. NGOs have worked with local Pygmy and
Bantu tribes to alleviate disruption from the pipeline
installation. The Chad and Cameroon governments,
in turn, have pledged to use the profits they received
from the venture to improve the standard of living of
their citizens. (Ussem, 2002; World Bank, 2002) To
date Exxon/Mobil has not encouraged substantive
input from the various indigenous tribes in the region. Nevertheless it is an attempt to take the
interests of the Pygmy and Bantu tribes into account,
and that, surely is a positive step.6 (Mead et al.,
2002)
It would appear that, at least on the surface, ExxonMobil is attempting to apply a systems approach
to this drilling, with some success. Its approach then,
is holistic, envisioning the company as part of an
Mental Models, Moral Imagination and System Thinking
Exxon/
Environmental
Agencies
Mobil
W o rl d
Bank
Chevron/
Alliance
Texaco
Cha d
NGOs and
Social
Market
Or gs .
Cameroon
Petronas
Figure 6. ExxonMobilÕs alliance model (Model Courtesy
of Mary Ann Leeper, COO, Female Health Company).
alliance that takes into account and is responsible to
multiple stakeholders, not merely shareholders and
oil consumers (Figure 6). Note that there is no
individual, tribe, or institution in the center of the
graphic in Figure 6. The idea is that each of these
stakeholders (and there are others I have left out)
have a stake in this project; each is responsible – not
just ExxonMobil – for the outcomes of this project
and each is accountable.7 This involvement by all
stakeholders and their places in an alliance model
distinguishes this approach from some of the CSR
approaches that place the primary onus of responsibility on the corporation.
The global challenge
ExxonMobil has tried to rethink its approach to
drilling operations through an alliance model, and as
Nike has expanded its stakeholder accountability
relationships. Employing this model requires proactive corporate initiatives and the adoption of a systems approach to their operations.
Still, we must ask, why would any company engage in this program? These programs take a great
deal of time, effort, and ingenuity, and positive
outcomes are slow to be realized. Nike has not
‘convertedÕ all its suppliers to a gentler work environment. Worse, Exxon/Mobil has run into serious
problems in Chad. The Chad government, led by
its internationally recognized corrupt president, first
471
name Isriss Deby, has confiscated much of its royalty
monies and converted that currency into arms. Little
of nothing has been done to improve the economy
of Chad. Other companies who are engaging in
these processes are also finding that this enterprise is
enormously difficult. Why, then should ExxonMobil persist? Why not revert to an older model of
maximizing shareholder value by pumping as much
oil as possible out of Chad without taking into account Chad and Cameroon communities, economic
largess, environmental sustainability, etc. ExxonMobil, to their credit, has not reverted to this model,
but that takes a great deal of courage not to do so in
the deteriorating political environment in Chad.
There are a number of good reasons why a systems approach is worthwhile. First, and most obviously, with the globalization of capitalism, for better
or worse, corporations are now required to take into
account all their primary internal and external
stakeholders. Many companies have always done so.
The difference, using this model, is the adaptation of
multiple perspectives, trying to get at the mind-set of
each set of stakeholders from their points of view.
Second, from the point of view of rights and justice,
an alliance model brings into focus the responsibilities as well as rights of various stakeholders, not
merely the corporation, to the individuals who affect
and are affected by corporate actions.
Third, if Prahalad is correct, global marketing to
what he calls ‘the bottom of the pyramid,Õ the less
economically developed but most populous countries, is critical for the survival and well-being of
global markets Figure 7. (Prahalad, 2005; Ahmad
et al., 2004) Only a systemic approach will be
successful in those markets. A company like
The Challenge
75-100 million people
Tier 1
Ri c h e s t N a t i on s &
Shrinking Markets
Tier 2
1.5 to 2 billion people
Tier 3
Tier 4
Po or e s t N a t i o n s &
Largest Markets
4 billion people
Tier 5
Figure 7. The challenge: Poorest nations and largest
markets (from Prahalad, 2005, p. 4).
472
Patricia H. Werhane
Wal-Mart will defend itself in this regard, since by
ordering from factories in less developed countries,
they are thereby providing jobs and contributing to
the economic growth of that country. But let us
think about that claim, a claim commonly made by
global corporations. As we learned from Adam
Smith over 200 years ago, ‘‘by uniting, in some
measure, the most distant parts of the world, by
enabling them to relieve one anotherÕs wants, to
increase one anotherÕs enjoyments, and to encourage
one anotherÕs industry, their general tendency would
seem to be beneficial’’ (Smith, 1776; rpt. Sachs,
2005). If workers are paid minimum wages or below
minimum wage in the country where they live and
work, particularly in a less developed country where
these wages are very low,8 they are very unlikely to
have any funds left over after basic food and shelter.
So they have no economic purchasing power, thus
cannot contribute to increasing the demand curve
necessary for economic growth. What sweatshop
work does is actually take labor resources out of
LDCs without increasing purchasing power in those
countries. Thus economic development at the
‘bottom of the pyramidÕ is often not increased.
(Figure 7).
If a global economy depends on new markets and
if these are increasingly at the bottom of the pyramid
as Prahalad demonstrates, how should these markets
be developed? Jeffrey Sachs and others have argued
that the rich nations have not given enough in
various forms of focussed long-term foreign aid to
improve country transportation, agriculture development and land reform, water, sanitation, and other
macro development initiatives, health care
improvement, nutrition and education, and protection against natural disasters (Sachs, 2005). These
proposals depend on stable government/public-private partnerships and a developed rule of law. In
many countries of the world neither is possible.
In addition, Sachs recognizes the importance of
microfinancing and public/private partnerships on
the village or tribal level, particularly in countries
where the government is likely to be corrupt as we
saw with Chad. Thus all is not without hope.
Returning to our alliance model, this model has
been replicated with great success in Bangladesh, a
country with an unstable rule of law and lack of
financing to develop a decent infrastructure, a welfare system, transportation, etc. all the elements
necessary for foreign aid to have an impact. Nevertheless, in the last several years, Bangladeshi
economy has grown at over 5% per year (Sachs,
2005, p. 13). At least part of the reason for this
growth is due to two institutions: the Grameen Bank
of Bangladesh, a private banking institution, and
BRAC, the Bangladesh Rural Advancement Committee, a not-for profit internationally funded
organization. Their contributions that have contributed to economic growth can be found primarily
in their massive microfinancing projects throughout
the rural communities in this over populated extremely poor flood-infested country that Transparency International yearly ranks at the bottom of the
corruption index (Transparency International,
2005). Again, these are alliance projects, as illustrated
by the Grameen BankÕs lending microfinance initiatives, which to date has moved over two million
women and their families out of poverty. (Figure 8)
Conclusion
In a global world where companies are exploring as
well as exploiting new markets, such globalization
requires new ways of thinking, what I have described as systems thinking. The use of moral
imagination helps managers to question and revisit
their traditional and sometimes parochial models for
corporate governance and valuation, changing the
focus of attention from the company to its alliance
Grameen
Bank
G rameen
Industries
International
communities
Alliance
Competitors (e.g.,
B R A C, W o rl d
Bank)
Bangladesh
Government and
Culture
Communities
Grameen
Foundation
(Villages)
Gr a m een
M e mb e r s
Figure 8. The Grameen Bank model for poverty elimination in Bangladesh.
Mental Models, Moral Imagination and System Thinking
partners. While this way of thinking might appear
‘belieÕ profitability, with an unexploited market at
the ‘bottom of the pyramid,Õ companies engaged in
long-term strategies for survival and growth might
want to heed the possibilities in this market sector
(Amhad et al., 2004). But without recognizing the
value of worker contributions and the positive
market effects of paying workers living wages, this
exploration will merely be exploitation. As developed markets become saturated, this strategy is
bound to lead to corporate failure. At least, that is
my conclusion.
Notes
1
A version of this article originally presented at the
IESE Business School, University of Navarra, for the
14th International Symposium on Ethics, Business and
Society: ‘‘Towards a Comprehensive Integration of
Ethics Into Management: Problems and Prospects’’.
May 18–19, 2006.
2
Churchill is quoted as claiming, ‘‘It is said that
democracy is the worst form of government except all
those other forms that have been tried from time to
time’’ (Churchill, 1947).
3
This section on mental models derives from my earlier work on this topic. See Werhane, (1999, 2002a).
4
In Bangladesh, for example, where a number of
factories produce clothing for Wal-Mart the law specifies minimum wages of $20/month, the law requires
decent lunch and bathroom facilities, scheduled breaks,
pay for overtime, and maternity leaves. Yet many
factories in this country flout these regulations, and
unfortunately there is not enforcement of these
requirements.
5
This section on systems thinking is a revised version
of a previous publication. See Werhane (2002a, b).
6
This case is reproduced from Mead et al. (2002),
reprinted in a revised form with permission of Darden
Publishing.
7
This approach does not always guarantee moral success, however. A recent report cites ChadÕs government
as withdrawing from its agreement with the World
Bank to channel its oil revenues into poverty alleviation
(Polgreen, 2005, A15).
8
The counter example is the existence of foreign
workers in industrialized countries. Although often paid
poorly by those country standards, if these workers
come from poor countries they are able to save, living
by their native country standards.
473
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The Darden Business School,
University of Virginia,
100 Darden Boulevard,
Charlottesville, VA, 22903, USA
E-mail: PWERHANE@depaul.edu
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