CORPORATE AND STAKEHOLDER RESPONSIBILITY: MAKING BUSINESS ETHICS A TWO-WAY CONVERSATION Jerry D. Goodstein and Andrew C. Wicks Abstract: In this article we revisit the notion of stakeholder responsibility as a way to highlight the role that stakeholders have in creating an ethical business context. We argue for modifying the prevailing focus on corporate responsibility to stakeholders, and giving more serious attention to the importance of stakeholder responsibility—to firms, and to other stakeholders who are part of the collective enterprise. We elaborate why stakeholder responsibility matters, and suggest how making stakeholder responsibility a central focus of academics and practitioners can redefine the interaction between firms and stakeholders and ultimately enhance business excellence. We want to turn the tables in this article on the usual conversations academics and practitioners have when it comes to the topic of business ethics. For a long time we have been talking and writing about corporate responsibility—and with good reason.' Corporations have become the most powerful institutions on the planet, the engines of human welfare and progress, so it only makes sense that we talk about the responsibility that they (or their agents) have to other stakeholders. But, as important as it is, this has become a one-way conversation, one that makes business ethics focus primarily on corporate responsibility. It is time we make business ethics a two-way conversation and start putting greater emphasis on stakeholder responsibility and the role stakeholders such as employees play within the firm, and the role customers, investors, suppliers, and public and nongovernmental organizations play, along with corporations, in fostering ethical business practices and business excellence.^ To develop a richer understanding of stakeholder responsibihty, we move through a series of discussions that addresses how we are defining stakeholder responsibility and why we beheve stakeholder responsibility matters for academics and practitioners. We close our paper by presenting an agenda for integrating those ideas into future research and managerial practice. What is Stakeholder Responsibility? There has been a lack of attention to the fundamental question of whether stakeholders have moral responsibilities to firms, and, if so, what the nature of those © 2007. Business Ethics Quarterly, Volume 17, Issue 3. ISSN 1052-150X. pp. 375-398 BUSINESS ETHICS QUARTERLY responsibilities is. That is not to say that the topic of stakeholder responsibility has been completely ignored by business ethics writers. Bowie^ argued that by virtue of the reciprocal nature of moral relations, it is important to consider the obligations of various stakeholders, to the firm, and to each other. Without making explicit reference to the notion of stakeholder responsibility, Bowie noted that a richer theory of corporate social responsibility required a complementary focus on "determining the appropriate reciprocal duties that exist among corporate stakeholders.'"* A series of articles and books was subsequently published that attempted to establish a conceptual foundation for stakeholder responsibility.' That work emphasized the importance of having stakeholders assume responsibility for negative outcomes associated with their demands, and emphasized active engagement of stakeholders and firms, particularly in relation to environmental issues.*" The definition of responsibility that we are emphasizing in relation to stakeholder- firm and stakeholder-stakeholder relationships encompasses three different but complementary conceptions of stakeholder responsibihty: fulfilling responsibilities as a function of reciprocity (SR-R), fulfilling responsibilities as a function of interdependence (SR-I), and fulfilling responsibilities as a function of accountabihty (SR-A). We will discuss each of those conceptions of stakeholder responsibility in greater detail below. As Bowie' points out, moral relations are reciprocal, and hence to the extent that firms are responsible for fulfilling duties to stakeholders, stakeholders in turn are responsible for fulfilling duties to firms. Our responsibilities identify things that we should attend to, many of which arise out of the obligations we take on.* But reciprocity goes beyond the fulfillment of duties. There is a responsibility to others that emerges as a function of stakeholders reciprocating benefits received from firms and other stakeholders. Viewed from that perspective, reciprocity and fairness become crucial underlying principles central to a rich understanding of stakeholder responsibihty. As Phillips argues, there are principles of fairness that apply tofirm-stakeholder relationships: Whenever persons or groups of persons voluntarily accept the benefits of a mutually beneficial scheme of co-operation requiring sacrifice or contribution on the parts of the participants and there exists the possibility of free-riding, obligations of fairness are created among the participants in the co-operative scheme in proportion to the benefits accepted.'" Phillips argues that this principle of fairness significantly extends stakeholder theory by providing a normative foundation for determining whetherfirms have responsi bilities to stakeholders (Does the firm receive benefits from the stakeholder?), and which stakeholders firms should give primary attention to (How significant are the benefits received from a particular stakeholder?). Phillips's discussion and extension of Rawls's work emphasizes the importance of reciprocity and fairness in identifying relevant responsibilities, not only for firms, but for stakeholders as well. Employees, customers, suppliers, investors, and other stakeholders benefit in a variety of ways from their relationships with firms and MAKING BUSINESS ETHICS A TWO-WAY CONVERSATION each other. Employees gain in tangible (e.g., wages) and intangible ways (e.g., organizational commitment) from their relationships withfirms. Customers may come to appreciate the high-quality products a firm offers, and value as well the service employees provide in purchasing those products. In drawing attention to the benefits stakeholders gain from specific relationships with firms and other stakeholders, considerations of fairness and reciprocity encourage among stakeholders an other- oriented perspective grounded in "the recognition of the aspirations and interests of others to be realized by their joint activity.'"° Thus, to the extent that fairness arguments like this one are successful in showing thatfirms have responsibilities to firms, they also show that responsibility flows in the opposite direction as well. A second way of conceiving stakeholder responsibility emerges from the interdependence between stakeholders andfirms, as well as among stakeholders and the broad society. Tracing the term back to its Latin roots (respondere), responsibility literally means to "pledge back" and involves a continuous commitment on the part of agents to the wider good." In contrast to some of the more contemporary notions of responsibility that focus on an externally imposed obligation, this form emphasizes the idea of people and organizations sharing a common fate and choosing to pledge things to each other so as to foster cooperation and enhance the welfare of society. Fundamental to this understanding of stakeholder responsibility is the recognition of the firm as (among other things) a web of relationships among stakeholders.'^ Within any relationship, parties have certain responsibilities to each other, particularly if their aim is to be mutually beneficial and sustainable over time.'^ It is crucial to recognize that in interdependent relationships, responsibilities between firms and stakeholders work both ways, rather than in one direction. Indeed, even in the more contractual and structured interpretation of the firm (e.g., as a nexus of contracts), responsibility is assumed and essential. In some cases the responsibilities of stakeholders in those interdependent relationships are made explicit and formalized, for example, when firms employ supplier selection guidelines in contracting with key suppliers for goods and services. In other instances, the responsibilities of interdependent stakeholders andfirms are reinforced through more implicit norms based on trust, for example. A third way of understanding responsibility in relation to stakeholders is connected to notions of accountability. Returning to the Latin root of "responsibility," among the most important ways stakeholders can honor their pledges is through "making morally acceptable decisions and being held accountable for actions and impacts."'" As Goodin'^ points out, a central issue in determining responsibility is whether a person, firm, or stakeholder has "the capacity to produce consequences that matter to another." That conception of responsibility as a function of accountability, extends what it means to be a stakeholder beyond the traditional definition of stakeholders as individuals, groups, or organizations potentially affected by the actions and policies of an organization.'^ Indeed, we claim that stakeholders are not only the recipients of organizational actions, but also actors with the power to BUSINESS ETHICS QUARTERLY impact others and responsibility for the implications of their actions (or lack of actions) in relation tofirms and other stakeholders. '^ In the same way that responsible corporations are held accountable for acting with integrity and considering how specific actions and policies might harm stakeholders, especially those who are in highly dependent and potentially vulnerable positions,'* stakeholders bear reciprocal responsibilities as well for holding themselves accountable for acting with integrity and taking into account potential harms to firms and other stakeholders." Below we advance a series of arguments about why stakeholder responsibility matters and suggest its promise for reinvigorating the discussion and practice of business ethics. We will specify the particular meaning of stakeholder responsibility (e.g., SR-R, SR-I, or SR-A), where appropriate in our discussion, to clarify the different conceptions of stakeholder responsibility and how they relate to the overall importance of this construct. Why Does Stakeholder Responsibility Matter? We presentfive major arguments for why stakeholder responsibility matters and the possibilities illuminated by shining the business ethics spotlight on both firms and stakeholders. We draw on an array of examples to demonstrate how stakeholder responsibility can be made practicable in ways that make employees, customers, suppliers, investors, nongovernmental organizations, as well as corporations, true stakeholders in creating great organizations and a more ethical business context. A New Way to Characterize Business Ethics In the same way that discussions of corporate responsibility have brought together the practices of business and ethics, stakeholder responsibility can give us another conceptual vehicle to connect business and ethics. With a dual focus on corporate and stakeholder responsibility, ethics gets built into the very fabric of relationships between stakeholders and firms, and both firms and stakeholders are held accountable for their actions. Academics and practitioners have used the language of corporate responsibility to motivatefirms to make ethics an integral practice. The language of stakeholder responsibility offers a way to speak directly to stakeholders about the importance of the role they play in fostering an ethical business climate and the costs associated with opportunistic stakeholder behavior. Those costs are high. Employee theft and fraud was estimated at $600 billion in 2002, approximately 6 percent of GDR^° Although a large proportion of that amount is due to white-collar crime, there is still a considerable amount of theft and fraud occurring at lower levels in the organization. There are other kinds of thefts, frauds, and abuses carried out by consumers and the pubhc—cable television theft, auto insurance fraud, and abuse of customer return policies. The cost of those forms of irresponsible stakeholder behavior runs into the billions of dollars and is compounded by the intangible cost associated with corrupting the ethical context of business. When firms act responsibly, and stakeholders act responsibly as well. MAKING BUSINESS ETHICS A TWO-WAY CONVERSATION those tangible and intangible costs are reduced and there is less likelihood of seeing the kinds of breakdowns in business ethics that we are seeing today.^' Further, stakeholder responsibility provides a theoretical umbrella that is distinctive because it is framed fundamentally from the perspective of stakeholders, rather than the firm. It is comprehensive in that it encompasses a wide range of what happens in and around business and it underscores the idea that all parties involved are motivated (as well as constrained by) moral duties. Although stakeholder responsibility overlaps with a range of different theories about organizations, such as organizational citizenship behaviors, corporate social responsibility, ethics, stakeholder theory, and others,^^ it has a distinct focus and orientation that is largely absent from our conversations and the existing literature: it emphasizes the interaction of stakeholders with other stakeholders and the firm rather than vice versa. Stakeholder responsibility can take insights from those theories and build on them as part of a larger and more comprehensive way of thinking about organizations, one that reminds academics and managers that we need to be spending as much time worrying about what stakeholders do and why as we do on what corporations do. That stakeholder-based vantage point may be critical for how we look at and think about business. To that extent, stakeholder responsibility offers an important and useful reorientation. From the standpoint of the manager, it may also provide a powerful rhetorical device to engage stakeholders and engender cooperative and practical solutions to problems. We are all too familiar with the language of corporate responsibility and how it is used, often with good reason, for persuading (or shaming)firms into taking action. There has neither been widespread attention to the reverse notion, however, nor is there a common language for expressing it. Stakeholder responsibility, with its underlying emphasis on reciprocity, interdependence, and accountability, gives us a way to articulate that while corporations have responsibilities, they are not alone. Stakeholders have moral duties as well, and managers can and should use this language to forge richer relationships with a variety of stakeholders inside and outside the firm. It can offer an invitation as well as an entreaty or implied threat, to get stakeholders to come to the table and make things right. Finally, stakeholder responsibility provides a normative benchmark for excellence, as well as for despicable conduct, in a practical setting. It can help us sort out the better companies and stakeholders from the poorer ones and give us a reference point for why we think so. At the same time, while it has an explicitly normative dimension, stakeholder responsibility has a practical bent in that it is focused on concrete behavior and actions. As a construct, it helps us maintain the tension between the more theoretical and normative interests of business ethicists and the practical orientation of managers. Stakeholder responsibility pushes us to think about both simultaneously in the context of business, rather than fashioning a theory from either business or ethics and then applying it to the other realm. BUSINESS ETHICS QUARTERLY Explaining Moral Failures in Corporations In terms of the second area we want to highlight, we think stakeholder responsibility can help us think more critically and comprehensively about why organizational failure happens—especially business ethics disasters of the WorldCom, Enron, Parmalat, and Arthur Andersen variety. A focus on stakeholder responsibility reminds us that in thinking about why those breakdowns occur, we need to start by looking at the interactions among key stakeholders if we want to really understand what happened and why. What is disturbing is how many of those scandals depended on breakdowns in stakeholder responsibility across a wide variety of stakeholders, firms, and systems. From the vantage point of stakeholder responsibility, companies (and communities) work well because of a wide array of shared values and understandings that allow us all to get along and live well.^^ Especially in organizations, we develop standard operating procedures, practices, and understandings of what we are responsible for, which create checks against mistakes, abuses, shirking, and other forms of opportunism. We want to call that system of shared norms, understandings and practices, "regimes of responsibility"—formal and informal ways that networks of individuals work together (both within and across organizations) to get things done and avoid ethical breakdowns. Those regimes of responsibility represent distributions of responsibility that allow one to map "who must account, how far and for what, to whom."^"* Well designed regimes of responsibility are set up such that responsibilities are fairly divided, tasks are completed in an efficient and functional way, and people fulfill their roles and avoid moral breakdowns. There are many different kinds of regimes of responsibility. Some are more legalistic or contractual in nature (e.g., real estate transactions among parties, or employees hired on a specific contractual basis) while other regimes of responsibility rely on explicit, but more normative standards not formally grounded in law (e.g., expectations for suppliers that are formalized in supplier codes of conduct, or professional codes of ethics that define the roles and responsibilities of professionals such as accountants or engineers). At the other end of the spectrum of regimes of responsibility are those that are more implicit in nature (e.g., the expectations employees have that are communicated through the culture of an organization). Taking the perspective of stakeholder responsibility pushes us to look at organizational failure as a chance to scrutinize stakeholders and the regimes of responsibility that were in place at the time of moral failure, so that we can see where breakdowns occurred and how the irresponsible actions of stakeholders contributed to the larger mess that was made. If we look closely at Enron, it is clear that breakdowns in stakeholder responsibility were deep, widespread, and grew throughout the organization over time.^^ Massive fraud was perpetrated by top management at the company to the tune of several billion dollars.^** Lower-level employees, following top management's lead, knowingly manipulated energy prices in California and openly joked about the practice with their peers. What is more striking is that they got away with it for so long. Engaging in that unethical and MAKING BUSINESS ETHICS A TWO-WAY CONVERSATION illegal behavior required that many other stakeholders—whether accountants or investment banks or the thousands of lower-level employees who were complicit in the harms being done to the shareholders, who in turn only saw great returns and didn't ask hard questions about why—either actively or passively participated in allowing the fraud to happen. Without that perversion of reciprocity (SR-R) and interdependence (SR-I) between Enron and its stakeholders ("I'll scratch your back if you scratch mine"), and failure to hold themselves accountable (SR-A), both individually and collectively, Enron might have either never happened or would have been uncovered long ago. It took massive lapses in the system of stakeholder responsibility within stakeholder networks and regimes of responsibility for these events to unfold. All of this suggests that the existing elements of the regimes of responsibility—that is, the threat of legal sanctions, professionalism, individual integrity, organizational culture, interorganizational checks and balances—were problematic and not robust. Stakeholder responsibility tells us that a fruitful path for understanding why Enron-like failures happen—whether one is an academic or a manager—is to figure out where the regimes of responsibility broke down. As these cases suggest, the answer is complicated and messy. But spending time figuring out the answer will be critical if we want to truly understand and address the root causes of these ethical breakdowns, rather than just make personnel changes, generate some good PR, and get back to business with the hope that it won't happen again. Making Organizational Moral Failure Rare The third main area we want to highlight builds off that last discussion point. Stakeholder responsibility can help us in our thinking about how to create organizations where ethical disasters and failures are rare. Particularly if we take the time to understand the interlocking systems of stakeholder responsibility that exist to prevent, detect, and address breakdowns within an organization, and why they fail, we will be in a much better position to think about how they can be fixed or changed. The law and market incentives certainly provide powerful ways to align stakeholders' interests with their legal and moral responsibilities, but they are expensive, imperfect, and can send potentially dysfunctional signals about stakeholder responsibility. Much of the current debate in the media about corporate scandals has focused on changing the system of corporate governance at the top—executive compensation, board composition, and relationships with management, and legislation to make executives and corporate boards more accountable. We think those are all worthwhile and important conversations to have and, if the changes are done well, they can help make things better. What these conversations and initiatives tend to obscure is that the situation is much more complex, and that getting responsible behavior in corporations depends on a wide array of stakeholder interactions and perceptions of what it means to act responsibly. A critical place to look, particularly in light of the constitutive role they play as stakeholders working within an organization, is to employees, including those BUSINESS ETHICS QUARTERLY working within firms at the center of the corporate scandals. People like Cynthia Cooper and Sherron Watkins are heroes partly because of how rare they are. How is it that an employee of Enron could consider it a responsible act, let alone a good thing for the company, to knowingly manipulate energy prices? Perhaps even more disturbing, how is it that other employees and other stakeholders who know such activity is going on elect to not use their voices—either within the firm or outside it—if they face resistance from their superiors?^' If exit and blind loyalty to the firm are the only viable options to exercise stakeholder responsibility, we will continue to see major problems with corporate corruption.^* Something about our notions of loyalty and excellence has gone very wrong for this scene to unfold. Improving how companies (and stakeholders) perform requires that we think about rebuilding organizations—from the bottom up, the outside in, and from the top down—and creating regimes of responsibility that are robust and durable. Each of the three dimensions of stakeholder responsibility noted above—reciprocity, interdependence, and accountability—have been integral to the success of one of the best-known Internet-based companies in the world, eBay.^' The vision of eBay is to be the world's largest online person-to-person trading conamunity. The success of eBay is dependent on the ability of the company to create a kind of online community among many of its key stakeholders including employees, buyers, and sellers. eBay has worked hard to develop a variety of practices that build community and reinforce reciprocal responsibility among stakeholders (SR-R). There are bulletin boards for eBay users to provide customer support to each other, chat rooms, and newsletters as well. A particularly important and relevant feature of the eBay community is the Feedback Forum, where other users evaluate registered buyers and sellers. The Feedback Forum provides users (buyers and sellers) with the ability to comment on their experiences with another individual. A user profile is created that follows the user everywhere on eBay, providing important benefits to both buyers and sellers who may interact with that user. That practice facilitates mutual accountability and trust within the eBay community and its value is dependent on eBay users recognizing that they are part of an interdependent community and embracing that responsibility. In that sense, eBay has been able to create regimes of responsibility among users that highlight their interdependence (SR-I) and their mutual accountability to prevent and weed out opportunism (SR-A). Through the Feedback Forum and other practices, eBay sustains a community that is robust and effectively draws upon its user base to assume responsibility for protecting the site and other users.'" By drawing upon their energies and their loyalty to the eBay community, the company has developed a powerful self-regulating system that, with other forms of governance, allows an incredibly diverse and dispersed set of users to buy and sell most anything via the Internet. By participating in the activities of the firm and being attentive to the interests of the firm and other stakeholders, stakeholders such as those at eBay find through their cooperative activity a sense of connection to shared purposes and values, inspiration, and MAKING BUSINESS ETHICS A TWO-WAY CONVERSATION mutual responsibility. That, in turn, gives firms and stakeholders a reason to come together and sustain their commitment to the business relationship beyond simple financial gain.'' It is to such innovative regimes of responsibility where many stakeholders take on different and complementary responsibilities that we ought to turn our attention in thinking about running better organizations. Part of what is remarkable about that regime of responsibility is that eBay got stakeholders to voluntarily take on responsibility and be accountable, creating a highly efficient and low-cost way of getting things done. Indeed, one can make the case that that regime of responsibility is a key part of what has made eBay so successful in the marketplace, and so difficult for its rivals to imitate. We need to better understand what factors help determine whether stakeholders act responsibly or not, and use that knowledge to come up with better approaches to designing, managing, and sustaining organizations. We can learn a lot by looking at companies such as eBay and using them to think about what works, what doesn't, and why. At the same time, there is much to learn from mistakes and breakdowns in firm and stakeholder responsibilities, such as the collapse of Enron. Creating Organizational Excellence and Outstanding Performance A focus on stakeholder responsibility opens up an exciting array of possibilities for creating excellent organizations that are outstanding in realizing their objectives. Here the focus is less on the fear of dropping the ball or failing, and more on what it means to run a great company. We think that stakeholder responsibility is already an implicit part of how many companies think about and create outstanding performance. More and more companies have to win over the minds and hearts of key stakeholders if they are going to achieve excellence. They have to get stakeholders to become passionate about the organization and its practices if they want to keep their best employees, generate quality products, maintain customer loyalty, and get suppliers to help control costs and introduce innovation. All of that activity entails that stakeholders do more than meet contractual duties or specific pay for performance incentives. They need to feel a sense of commitment and loyalty to the mission and values of the firm. It is important to note that their sense of responsibility must extend beyond the general, big-picture mission and values and connect to particular tasks, practices, and ways of cooperating with other stakeholders to achieve specific objectives. A company that depends greatly on stakeholder responsibility for achieving its performance goals and meeting its mission and core values is Starbucks. Starbucks strives to develop long-term mutually beneficial relationships with its key stakeholders— employees, customers, suppliers, and alliance partners. In particular, the elements of reciprocity, interdependence, and accountability play a significant role at Starbucks in relation to the responsibilities of employees and suppliers.'^ For Starbucks, realizing the company's mission requires getting employees (partners) to embrace responsibility for creating the "Starbucks experience" among BUSINESS ETHICS QUARTERLY customers, and for making a difference in the connmunity. The emphasis on building the company by tapping into the passion and values of employees and stakeholders comes across in the vision of the CEO, Howard Schultz. According to Schultz, Starbucks, as it is today, is actually the child of two parents. One is the original Starbucks, founded in 1971; a company passionately committed to world-class coffee and dedicated to educating its customers, one on one, about what great coffee can be. The other is the vision and values I brought to the company: the combination of competitive drive and a profound desire to make sure everyone on the organization could win together. I wanted to blend coffee with romance, to dare to achieve what others said was impossible, to defy the odds with innovative ideas, and to do all this with elegance and style.... Ultimately, Starbucks can't flourish and win customers' hearts without the passionate devotion of our employees. In business, that passion comes from ownership, trust and loyalty. If you undermine any of those, employees will view their work as just another job... . [Employee] passion is our number-one competitive advantage." An excellent example of how Starbucks extends that passion and sense of stakeholder responsibility beyond employees is in its relationships with suppliers.^'' Starbucks created in 2001 a Preferred Suppher Program with its coffee suppliers. The guidelines for the program were refined in 2004 and the program was renamed C.A.F.E. (Coffee and Farmer Equity). Suppliers are rated in terms of how well they fulfill their responsibilities in meeting Starbucks's mission-driven guidelines in the areas of environmental impacts, social conditions, and economic issues. Starbucks has worked with a wide range of stakeholders—vendors, growers, NGOs—to develop criteria that can be used for independent verification of those suppliers. Suppliers that actively take responsibility in terms of their accountabihty for meeting the C.A.E.E. practices (SR-A) are given purchase priority over other coffee suppliers and they receive a price premium and better contract terms as well. In fiscal year 2005 Starbucks purchased 76.8 million pounds of coffee from C.A.EE. certified fanners, representing 24.6 percent of total coffee purchases." Einally, customers are invited to share in reinforcing Starbucks's commitment to environmental responsibility. In order to encourage the use of organic gardening practices while avoiding waste, Starbucks provides customers with free coffee grounds to use as compost. The company even offers economic incentives in the form of price reductions to encourage customers to buy coffee in reusable mugs rather than disposable cups (SR-R). That passion, their values, and stakeholder engagement have been integral to the Starbucks brand and the firm's success, and are important reasons why employees, as well as other stakeholders such as suppliers and customers, have aligned themselves with the company. Stakeholder responsibility is fundamental to this type of firm-stakeholder relationship. The allegiance of stakeholders to Starbucks's ideals, its practices, and its products and services motivates the stakeholders to uphold and protect the integrity of those very ideals, practices, products, and services (SR-A). In that sense, taking responsibility is what makes someone a stakeholder. MAKING BUSINESS ETHICS A TWO-WAY CONVERSATION Southwest Airlines is another highly regarded organization where stakeholders play an important role in sustaining the passion and commitment that are central to the company's success. For example, in a profile on Southwest Airlines, GittelP^ notes that employees see a strong responsibility (SR-R) to help Southwest Airlines achieve its goals. That responsibihty connects to the tangible and intangible benefits employees receive from working within a culture that emphasizes mutual respect, and that allows employees to integrate their work and family lives. As one employee explicitly noted, "I have a responsibility for a family, a house, and for this company. The idea is to keep customers coming back. The goal is for you to come back and fly on Southwest."" Some of the customers at Southwest assume important responsibilities through their involvement in the employee selection process at Southwest. Southwest invites some of its most senior frequent fliers to interview prospective new employees.'** Creating an organization where people would want to take on the responsibilities of being affiliated with the firm is integral to creating an outstanding business. The notion of stakeholders coming together to make themselves and each other better off also is fundamental to our idea of an ethical business context. The mutual recognidon of responsibilities between firms and stakeholders helps to align self-interest with the interests of others, and provides direction to channel their energies in productive and sustainable ways. While that focus on stakeholder responsibility is important for firms that use a strategy of active stakeholder engagement, we would argue it is important for all companies. Even for firms that rely extensively on markets and arm's-length transactions, stakeholder responsibility is a relevant consideration and may be important both at the system and individual firm level. At the system level, it matters because examples of stakeholder irresponsibility (i.e., breakdowns in SR-A), whether it be customer abuse of product return policies, the rapid buying and selling of securities ("share-flipping") by investors,'' or other systemwide practices, can be cases where inefficiencies are created and the costs of doing business go up. For example, the Recording Industry Association of America hadfiled nearly 2,000 lawsuits by March 2004 associated with the illegal downloading of music, and a report by Forrester Research indicated that the illegal downloading of music had reduced recording industry revenues by at least $700 million.'"' At the firm level, stakeholder responsibility matters in that even arm's-length transactions require some level of trust. The example of eBay is of particular relevance here. Precisely because eBay's Web site creates a viable market for reputation and signaling information about past behavior, a large number of people are willing to engage in cyberspace transactions with total strangers that they would otherwise never consider. By highlighting past stakeholder responsibility, and creating a community of buyers and sellers that supports and rewards responsible behavior, and punishes irresponsible behavior, eBay makes capitalism have far greater reach than it would otherwise. It helps provide an avenue to address challenges that businesses have long confronted with regard to how to "share the risks and rewards of their activities.'"" It also underscores how stakeholder responsibility plays a role in the BUSINESS ETHICS QUARTERLY activity of all firms, even those that don't think about stakeholder responsibility as a source of competitive advantage. It matters to how managers structure organizations, deal with transaction costs, and think about creating value. Conceptualizing and Working through Novel Business Challenges The fifth and final area where we see great potential for leveraging stakeholder responsibility is in tackling business challenges in ways that rely increasingly on corporations and stakeholders taking joint responsibility. More and more, the demands on corporations are increasing, as are the expectations for their ability to respond to stakeholder activism.*^ Nongovernmental organizations (NGOs) have played a particularly important role in recent years as activists who have taken responsibility for challenging unethical practices of corporations, whether in relation to bribery, sexual harassment, supporting corrupt governments, product safety, harm to the environment, or labor conditions. What is interesting is how a number of companies have opted to face those challenges and use the nofion of stakeholder responsibility—either explicitly or implicitly—to engage stakeholders and come up with cooperadve solutions to these novel challenges. We present a number of examples below. The importance of interdependence and shared responsibility between firms and stakeholders is evidenced in a recent collaboration between Hewlett-Packard (HP) and Office Depot. Both companies have explicit commitments to a model of business success that is grounded in corporate citizenship and an active engagement with a wide range of stakeholders. A major area of focus for HP and Office Depot is environmental stewardship. Both companies recently developed a partnership to help address the issue of the recycling of old electronic products (e-waste).'*' HP and Office Depot recognized their shared supply-chain roles and responsibilities in addressing e-waste—HP as a manufacturer, and Office Depot as a retailer (SR-I). The CEOs of Office Depot and HP understood that the problem of e-waste was too large and expensive for them to tackle on their own. Rather than fix the problem themselves or wait for the government to begin forcing them to do so, they decided to collaborate and engage a range of stakeholders to work with them to begin addressing the problem and develop a solution that worked for all. Over an eight-week period extending from July through early September 2004, Office Depot agreed to open up its 901 domestic stores for customer drop-offs of old electronic equipment (not necessarily HP products). Many customers took advantage of that free program and rather than throwing their old equipment away, they dropped them off at Office Depot. Office Depot collected more than 325,000 products weighing more than 10.5 million pounds, including monitors, PCs, printers, scanners, cell phones, TVs, and a host of other products (many not manufactured by HP). Office Depot then shipped those products to HP—the two companies shared the cost—which then recycled those products at their national facilities in California and Tennessee. By building on shared values and showing their own commitment to the issues, HP and Office MAKING BUSINESS ETHICS A TWO-WAY CONVERSATION Depot were able to assume key mutual responsibilities and make a meaningful dent in the problem. The Rethink Initiative launched in January 2005, builds on those efforts by bringing together industry (e.g., HP, Intel, IBM, Apple), government (e.g., EPA), and environmental organizations (e.g., Silicon Valley Toxics Coalition)."" The Rethink Initiative is a coUaboradve undertaking among those stakeholders with the goal of addressing the challenge of disposing of e-waste. eBay is coordinating providing education and information about private, public, and not-for-profit recycling options on its Web site to its member community (125 miUion computer users). What is unique about that inifiative is the way in which it draws on multiple stakeholder groups—corporations, government agencies, and NGOs—to create regimes of responsibility for developing solutions to e-waste, rather than relying solely on the efforts of any one of these stakeholder groups (SR-I). The efforts of companies such as HP and Office Depot, as well as the organizations involved in the Rethink Initiative, can be even more successful when consumers recognize and uphold their shared responsibilities through making the effort to recycle old electronic products, rather than dumping them in the trash. Consumers can play a major role in addressing the business challenge of e-waste by actively seeking out and taking advantage of opportunities to recycle electronic products. Nike also faced challenges regarding labor issues. Initially, Nike was the subject of intense media scrufiny and cridcism from a wide array of groups for not doing enough to ensure that factories where its products were made had decent working condifions, paid decent wages, and did not utilize child labor. All of those charges stung—not only for the bad pubhcity, harm to the brand, and potendal lost sales, but also for the pride and self-respect of many who worked at the firm and who were as troubled as many of the protesters about the charges. Though it took some dme to take shape, Nike and several other companies developed a voluntary inidadve, the Fair Labor Associadon (FLA), to tackle this novel challenge and establish a viable regime of responsibility to enhance the accountability of these organizadons (SR-A). The FLA set standards that Nike embraced, and which would meet the demands of most of its critics. FLA created a protocol for inspecdng factories and checking with them about working condidons. That provided a considerable measure of transparency regarding what was going on in factories, and it offered a mechanism to put pressure on factory owners to change their practices to fall in line with FLA standards. A key part of what has made this inidadve successful and earned Nike the sup port of many who were previously cddcs—including the World Resources Council, one of its chief detractors—is its willingness to engage a variety of stakeholders. That engagement includes hiring and acdvely coUaboradng with those who were critics of the company on the issue, and getdng them to help fashion regimes of responsibility that address the relevant problems in a construcdve and proacdve fashion. The FLA, for example, has launched a special project in Central America BUSINESS ETHICS QUARTERLY to address workplace issues. That project is jointly funded by the FLA and U.S. State Department, and brings together corporations (Nike, Adidas-Salomon, Eddie Bauer, Gildan, Liz Claibome, Philhps-Van Heusen, and Reebok), trade associations in the region, and the ministries of labor in Guatemala and Honduras, so that those stakeholders share in the responsibility for developing guidelines regarding issues such as workplace discrimination, harassment and abuse, and freedom of association, and for monitoring compliance with these guidelines (SR-A)."^ Starbucks found itself in a similar position to Nike, challenged by NGOs (specifically. Global Exchange), regarding the fairness of its practices with coffee growers."* Though initially Starbucks had contentious relationships with Global Exchange around the issue of providing Eair-Trade coffee, the company was able to work closely with other stakeholders such as Oxfam American, the Oaxacan State Coffee Producers Network, and the Eord Foundation to develop a set of practices and mutual responsibilities (C.A.F.E. practices) that supports coffee farmers with a fair price and ensures a supply of high-quality coffee.'" The experiences of Nike, HP and Home Depot, eBay, Starbucks, and their stakeholders demonstrate how stakeholder responsibility can become a platform for creating engagement, sharing responsibilities, generating novel forms of cooperation across a wide array of stakeholders, and finding mutually beneficial solutions to issues that matter to all. In table 1, we draw together each of thefive core arguments regarding why stakeholder responsibility matters, and we summarize the broad implications that follow fi'om those core arguments and the examples we have included in our discussion. We have argued for how a focus on stakeholder responsibility reorients how one Table 1 Core Stakeholder Responsibility Arguments Practical Implications Stakeholder responsibility provides a powerful re- Firms and stakeholders share in the responsibility for orientation in how to think and talk about business creating and sustaining an ethical business context, ethics. Stakeholder responsibility is useful in helping ex- Stakeholder opportunism and/or indifference can plain moral failures in corporations, assigning blame be an important determinant of unethical business to various stakeholders. behavior. Stakeholder responsibility may prompt new think- Firms and stakeholders can work together to create ing about how to create organizations where moral regimes of responsibility that limit moral failures failures are rare. and promote ethical behavior. Stakeholder responsibility can be a vehicle that Business success depends on developing firm and aids our thinking about how we create organiza- stakeholder relationships that foster both responsive- tions that are noted for excellence and outstanding ness and responsibility, performance. Stakeholder responsibility gives us a language for Firms can look to stakeholders as mutual partners in determining how we can conceptualize and work striving for responsible business excellence, through novel business challenges. MAKING BUSINESS ETHICS A TWO-WAY CONVERSATION thinks and talks about business ethics. However, while it is important to "think" and "talk" the language of stakeholder responsibility, as our examples above suggest, it is through the practice of stakeholder responsibility and "walking the talk," that firms and stakeholders truly create an ethical business context. That is ultimately a responsibility that firms and stakeholders share. And while the majority of attention in relation to moral failures has been on corporations failing to fulfill their responsibilities to stakeholders and the broader society, we have tried to point out how opportunistic and irresponsible behavior by stakeholders also undermines ethical business practice. The final three core arguments we have developed complement one another in highlighting the promise of emphasizing stakeholder responsibility, through promoting the creation of regimes of responsibility that support ethical behavior and fostering firm-stakeholder relationships that lead to ethical business practices and business excellence. Stakeholder Responsibility: Developing Theory, Research, and Practice We have outlined five core arguments built around the stakeholder responsibility concept and discussed them in ways that should be of interest to both academics and practitioners. Our hope is that work can proceed that will be interesting and relevant to both academic and practitioner audiences, and will draw on the skills and expertise of business ethicists, social scientists, and managers. We see this work as an important extension of stakeholder theory that may help us speak more directly to the sources of ethical failures and the constructive possibilities that lie within business, as well as within business ethics and management theory. Directing our attention first to the business ethics literature, scholars might consider the relationship between stakeholder rights and stakeholder responsibilities, and how claims of stakeholder rights might give rise to associated responsibilities that depend on the degree of reciprocity, interdependence, and accountability involved in the relationship. Bowie raises a relevant example in his discussion of stakeholder responsibility and the firm-employee relationship."*^ Despite the legality of the practice of employment-at-will (which supports termination of employees without advance notice), employees claim an important right to receive advance notice and an expectation of corporate responsibility in relation to policies regarding employee termination. That claim is framed in terms of the right to be treated with respect and dignity, to have employee loyalty honored, and to acknowledge the burden employees bear when they are terminated with little advance notice. When adopting a stakeholder responsibility perspective, one can argue that employees have a responsibility as well to provide advance notice to employers, especially from those employees who have benefited (SR-R) from significant firm investments (e.g., training) and upon whom the firm might be especially dependent (SR-I). Similar arguments regarding the relationship between stakeholder claims for rights and relevant responsibilities associated with those rights could be extended to other critical stakeholders (e.g., suppliers, customers), and represent a fruitful area of attention for business ethics scholars. BUSINESS ETHICS QUARTERLY The lens of stakeholder responsibility can also motivate empirical research that looks at the myriad forces that shape individual and group behavior within organizations and influence broader systems, or regimes of responsibility that support responsible stakeholder behavior. Business is increasingly being conducted through networks and alliances of firms and stakeholders. The literature on network theory and organizational design (particularly around the idea of "fit") may be of particular relevance to the development of regimes of responsibility. Researchers can draw on network theory to examine in greater depth how relationships function and the conditions under which stakeholders in various networks do (or do not) take on certain responsibilities.''' That kind of research can provide a foundation for thinking about how firms might design better systems and, in particular, adopt regimes of responsibihty that lay out specific forms of firm and stakeholder responsibilities (e.g., contracts, norms), which appear optimal given the specific issue at hand. We also need to examine the implications of whenfirms and stakeholders fulfill critical mutual responsibilities. It is possible that the expression of mutual responsibilities, and their ongoing fulfillment among stakeholders, may provide critical resources to propel outstanding performance and enable key forms of cooperation that benefit thefirm. As critical stakeholders such as employees and supphers, for example, fulfill those responsibilities, does stakeholder commitment grow, and in turn provide a foundation for innovation and mutual adaptation in response to environmental changes? Or, does such fulfillment end there, and not spill over into the larger social network and the commitment of these stakeholders to each other and their ongoing cooperation? Euture research could develop specific theoretical propositions linking an array of related theory constructs—for example, stakeholder responsibility, network structure, trust, stakeholder commitment—and subject them to rigorous empirical testing. Such research could do a great deal to bring the claims of this article under critical scrutiny as well as enable us to better understand how stakeholder responsibility can be structured to foster outstanding performance. Considerable research exists to give credence to the idea that stakeholder responsibility matters to performance and to creating successful organizations. Pfeffer's and Huselid's work on high performance management systems suggests that the fulfillment of mutual obligations and responsibilities reinforces norms of reciprocity and is a powerful determinant of employee commitment and long-term organizational performance.^" Research by Wicks suggests that TQM and various quality initiatives are critically dependent on workers and suppliers taking on key responsibilities that enable these new production systems to provide critical productivity and quality improvements.^' The literature on supply-chain management offers additional support to the idea that it is through stakeholders cooperating—and specifically taking on responsibihties that extend beyond specific contracts and monetary incentives—that firms are able to create competitive advantage.^^ Similar support can be found in the research on trust in (and between) organizations as well as the literature on employee empowerment." There are many opportunities to see the importance of this construct, but little work that brings it all together to suggest MAKING BUSINESS ETHICS A TWO-WAY CONVERSATION the power of stakeholder responsibility as a lens for thinking about organizations and what makes them succeed or fail. Making these linkages more concrete and putting them under the umbrella of stakeholder responsibility allows us to create new research which can explore the connections among these literatures in a way that puts ethics at the center of the conversation (via stakeholder responsibility). Erom the practitioner side, we need to look at best practices and benchmark organizations that tend to have few legal and ethical problems, especially within industries or locales wherein their peers tend to have significant problems. In particular, we need to look at organizations that are noted for being exemplary in taking their missions and values seriously and using them to shape operations throughout the organization every day. How do those firms draw on their missions and values to articulate and communicate stakeholder responsibilities in relation to the firm and its relationships with stakeholders? What practices and structures help facilitate that process of communication and facilitate stakeholders in upholding critical responsibilities? How do those organizations work with stakeholders to estabhsh regimes of responsibility that build on the elements of stakeholder responsibility—reciprocity, interdependence, and accountability—we have emphasized throughout our paper? We have had an opportunity to speak with a variety of executives as part of our research on stakeholder responsibility. Part of what has been gratifying in our conversations with companies is how implicit the notion of stakeholder responsibility is. Though many did not explicitly use the term responsibility, it is clear that the companies with whom we spoke were striving to create the kind of stakeholder engagement and commitment that is captured in the language of stakeholder responsibihty. As we tried to make such linkages more transparent and systematic, we found that managers were not only receptive to stakeholder responsibility, but saw it as a useful way to recast and connect what they were up to. As this article has made explicit, there are a variety of ways in which the language of stakeholder responsibility may do important work for companies—to clarify expectations, to signal active concern and integrity, to foster ongoing cooperation and mutual adaptation, and to serve as a device that may limit critical breakdowns that could destroy corporate reputation. A place for leadership and stakeholders to begin in trying to put these ideas about stakeholder responsibility into practice is to ask a series of basic questions related to the firm and its stakeholders: What does it mean to be a responsible customer? A responsible supplier? A responsible owner? In table 2, we suggest some broad ways that stakeholders can demonstrate responsible behavior in relation to the firm's and other stakeholders' interests. One way to see how such responsibilities might be brought together in a practical context is to return to our discussion of HP and Office Depot. Those organizations recognized their responsibihties as supply-chain partners for contributing to the management of e-waste and initiated a partnership to collect and process e-waste. The success of that endeavor was dependent on customers' recognizing their role in ad BUSINESS ETHICS QUARTERLY Table 2 Stakeholders Responsibilities Owners Exercise patient capital; be informed investors by utilizing the information provided by firms to investors; direct investment resources to firms that act responsibly. Employees Enact the mission and values of the firm in daily behaviors; exercise voice in responsible ways; reciprocate firm efforts to build trust and commitment through contributing skills, knowledge, and flexibility. Suppliers Go beyond basic requirements of codes of conduct and look for innovative ways to enhance the goals and interests of the firm and other stakeholders in key areas such as the environment or human rights. Customers Make responsible product and service choices, rewarding firms that are responsible corporate actors; avoid opportunistic behavior such as consumer fraud and abuse of product returns; follow up with firms that have taken the responsibility to recall unsafe products. Nongovernmental Work with firms in a spirit of cooperation and engagement; respect Organizations the interests and needs of the firm and other stakeholders potentially influenced by NGO actions. dressing the broad responsibility of addressing e-waste and taking responsibility for delivering their electronic equipment to the HP and Office Depot drop-off sites. That regime of responsibility can be expanded to other stakeholders. One might look to the current shareholders of HP and Office Depot, as well as other potential investors, who can exercise their responsibilities through investing in those organizations (and others that are undertaking similar sustainability initiatives). NGOs with a particular emphasis on environmental issues can publicly praise and point to those kinds of efforts as models of what firms and stakeholders can do to address the problem of e-waste in society. That way of fulfiUing responsibility runs counter to a more adversarial approach taken by some NGOs and avoids the kind of opportunistic behavior Argenti^** points out, "While it may seem counterintuitive, truly socially responsible companies are actually more likely to be attacked by activist NGOs than those that are not. . . . Some NGOs will use a socially responsible company as a platform for its own message." A stakeholder responsibihty perspective challenges NGOs not only to hold firms and stakeholders accountable, but also to hold themselves accountable for their actions in relation to those firms and stakeholders. Euture research might take up such questions of stakeholder responsibility systematically— for example, using Phillips's notion of fairness, one might derive a set of responsibilities for each stakeholder group. Other theories such as Goodin's principle of vulnerability may also enable us to craft different accounts of stakeholder responsibility that can serve as useful foundations for Unking this broad construct back to more specific behaviors and expectations. At the practitioner level, the focus would be reflecting on the particular kinds of responsibilities a given firm wants or needs given its unique challenges and the ways it wants to do business. While the work of academic authors may provide a useful backdrop, practitioners will want to think through the specific ways in which stakeholders need to behave in order for a firm to create outstanding performance and avoid critical breakdowns. They will MAKING BUSINESS ETHICS A TWO-WAY CONVERSATION need to get down to specific regimes of responsibility that fit their company and context—as, for example, eBay developed some unique regimes of responsibiUty to engage their stakeholders and create a highly complex and efficient business model. Clearly the role that a given stakeholder (e.g., an employee) plays for Starbucks may be very different than the role the stakeholder plays for Wal-Mart, and the kinds of responsibilities an employee, for example, may need to take on will also likely vary across organizational context. Once managers have confronted those questions and determined relevant responsibilities, they will need to translate those responsibilities into expectations for stakeholders, taking into account differences in stakeholder relationships and the degree of reciprocity, interdependence, and accountability within those relationships. A place to begin is to look at the firm's existing practices for managing stakeholder relationships. Waddock" has identified a variety of different best practices for managing stakeholder relationships, for example, providing investors with timely and transparent information, implementing high-performance human resource management (HRM) systems that build employee trust, loyalty, and commitment, and building customer relationships through enhancing the quality of products and services and avoiding taking advantage of customers. In providing investors with that information, firms can discuss the importance of shareholder responsibility and accountability (SR-A) in regard to carefully reading that information and understanding the goals and values of the organization and its strategies for achieving performance. Eirms that extend trust to their customers and offer a "no questions asked" policy regarding store returns might communicate how much they depend on the integrity of customers to sustain that practice by fair and honest customer behavior (SR-A). An example of a company utilizing its HRM system to emphasize the importance of employee responsibilities for ethical behavior is Citigroup. On March 1, 2005, Citigroup launched a corporatewide initiative to address ethics issues that had undermined the reputation of Citigroup. Citigroup CEO Chuck Prince emphasized the interdependence between Citigroup, its employees, and its stakeholders (SR-I), and the importance of leadership and employee accountability (SR-A), in asking the 260,000 employees within Citigroup "to spend some time reflecting on our company, its history, the great legacy handed down to us and on our shared responsibihties to build on this legacy."'*" As part of that initiative, employees were shown a twenty-five-minute documentary and asked to "attest that they have seen the film and understand the shared responsibilities .. . to our clients, each other, and to our franchise."" In addition, 30,000 managers and all employees were sent on "annual franchise training" and spent a full day reviewing what they could do to live up to their "shared responsibilities."^* That initiative by Citigroup, meant to be revisited each year, highlights the importance of managers (and researchers) thinking about the connections across ethics, strategy, human resource management, and operations (among others), and developing regimes of responsibility that allow the firm to excel. BUSINESS ETHICS QUARTERLY The key is to determine whether those practices serve as effective vehicles for communicating those responsibilities to stakeholders and motivating stakeholders to act responsibly in meeting the interests of firms and other stakeholders. In the same way that stakeholders have made their expectations a critical foundation for corporate responsibility, firms have to communicate their expectations regarding responsible behavior to stakeholders. There may be a variety of ways for managers to reward stakeholders for fulfilling responsibihties, such as providing incentives for customers to recycle products, renewing contracts with exemplary suppliers, and making employee enactment of the firm's values a component of performance evaluations and rewards. Although those efforts will take managerial time and the devotion of resources, there are potentially great rewards for firms. Eostering stakeholder responsibility can lead to greater trust and a stronger foundation of shared values and purposes between firms and stakeholders, leading to greater stakeholder commitment. That focus on commitment and responsibility is especially relevant in the current business environment. Asfirms shift toward closer relationships with fewer stakeholders and flatten corporate hierarchies by pushing responsibility (and specifically decision- making authority) toward stakeholders on the front lines, and as public pressure for greater corporate responsibility intensifies, both commitment and responsibility become potentially critical variables for corporate success. In such an environment, firms must rely even more on stakeholders to give their best efforts, beyond specific inducements andfinancial incentives. And iffirms are invested in relationships with stakeholders (rather than just arm's-length transactions), then commitment and responsibility become key leverage points for both enabling key firm capabilities (e.g., outstanding service, complex coordination, efficient problem-solving) and avoiding firm and stakeholder opportunism. This is an agenda that calls on business ethicists, managers, and social scientists to work together. Business ethicists can signal the importance and relevance of emphasizing stakeholder responsibilities.^' Practitioners can contribute their knowledge and experience in managingfirm-stakeholder relationships.*' Organizational researchers can contribute their research-based knowledge regarding how responsibilities are institutionalized through various mechanisms and processes.*"' Moving ahead with the stakeholder responsibility agenda will require academics, in particular business ethicists and management researchers, to communicate directly to audiences outside the academy and outsidefirm boundaries—customers, suppliers, investors, NGOs, and others. In arguing for why and how stakeholder responsibility matters, academics will need to find ways to reach stakeholders so they are aware of the role they play in fostering business ethics. That will not be easy. Academics are used to communicating primarily to other academics and managerial audiences—through academic journals, classroom settings, workshops, and so on. Although those settings may be important channels for delivering the message of stakeholder responsibility, academics will have to look to alternative forums, for example, organizations and professional associations that are pursuing related MAKING BUSINESS ETHICS A TWO-WAY CONVERSATION 395 work—investors (Investor Responsibility Research Center), customers (consumer responsibility groups), suppliers (various associations), employees (Society for Human Resource Management), and NGOs. As academics and practitioners work together to better understand the dynamics of life in organizations from the standpoint of key stakeholders—particularly how it is that stakeholders distance themselves from responsibihty, how existing regimes of responsibihty break down, and how we can benchmark and design better systems of responsibility among stakeholders—we will be in a better position to combat business corruption. Without some vibrant notion of stakeholder responsibility, business doesn't work. It is in forms of corporate and stakeholder cooperation where all parties pursue their interests and commitments and fulfill their responsibilities to each other that we will find outstanding performance and notions of business excellence that deserve our attention. By developing robust notions of stakeholder responsibility and efficient and intelligent systems that reinforce such notions of responsibility, we will be that much closer to creating excellent companies and excellent markets. In the end, ethics will become everybody's business. Notes We appreciate the financial support of the Batten Institute, the Darden School, University of Virginia, in developing these ideas. We also thank BEQ Associate Editor Norm Bowie and the three anonymous BEQ reviewers for their helpful comments and suggestions, as well as Shawn Berman, Ming-Jer Chen, Rob Phillips, Dave Whetten, and faculty in the Department of Business at Washington State University, Vancouver, who provided important feedback on earlier drafts of this paper. 1. R. Edward Freeman, Strategic Management: A Stakeholder Approach (Boston: Pitman, 1984); Thomas Donaldson and Lee E. Preston, 'The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications," Academy of Management Review 20 (1995): 65-91; Thomas M. Jones, "Instrumental Stakeholder Theory: A Synthesis of Ethics and Economics," Academy of Management Review 20 (1995): 92-117; Thomas M. Jones, Andrew C. Wicks, and R. Edward Freeman, "Stakeholder Theory: The State of the Art," in Blackwell Guide to Business Ethics, ed. Norman E. Bowie (Maiden, Mass.: Blackwell, 2002), 19-37; Lynn S. Paine, Value Shift (New York: McGraw-Hill, 2003); Sandra A. Waddock, Leading Corporate Citizens: Vision, Values, Value Added (Boston: McGraw-Hill, 2002); Sandra Waddock, Charles Bodwell, and Samuel B. Graves, "Responsibility: The New Business Imperative," Academy of Management Executive 16(2) (May 2002): 132-48; Sandra Waddock and Charles Bodwell, "Managing Responsibility: What Can Be Learned from the Quality Movement," California Management Review 47( 1) (Fall 2004): 25-36. 2. Jorg Andrioff, Sandra Waddock, Bryan Husted, and Sandra Sutherland Rahman, eds.. Unfolding Stakeholder Thinking, vol. 1 (Sheffield, UK: Greenleaf Pubhshing, 2002); Jorg Andrioff, Sandra Waddock, Bryan Husted, and Sandra Sutherland Rahman, eds.. Unfolding Stakeholder Thinking, vol. 2 (Sheffield, UK; Greenleaf Publishing, 2003). 3. Norman Bowie, "New Directions in Corporate Social Responsibility," Business Horizons (July-August 1991): 56-65. 4. Ibid., 63. BUSINESS ETHICS QUARTERLY 5. Gretchen E. Hund, Jill A. Engel-Cox, Kimberly Fowler, and Howard Klee, "Two-Way Responsibility: The Role of Industry and its Stakeholders in Working towards Sustainable Development," 217-31; Anne T. Lawrence, "The Drivers of Stakeholder Engagement: Reflections on the Case of Royal Dutch/Shell," 185-200; Dennis A. Rondelli and Ted London, "Stakeholder and Corporate Responsibilities in Cross-Sectoral Environmental Collaborations: Building Value, Legitimacy, and Trust," 201-17, all in Unfolding Stakeholder Thinking, vol. 1, ed. Andrioff et al.; Bruce W. Clemens and Scott R. Gallagher, "Stakeholders for Environmental Strategies: The Case of the Emerging Industry in Radioactive Scrap Metal Treatment," in Unfolding Stakeholder Thinking, vol. 2, ed. Andrioff et al., 128-44. 6. Waddock and Bodwell, "Managing Responsibility." 7. Bowie, "New Directions." 8. R. A. Duff, Concise Routtedge Encyclopedia of Philosophy (London: Routledge, 1997); Patricia H. Werhane and R. Edward Freeman, eds.. Encyclopedic Dictionary of Business Ethics (Maiden, Mass: Blackwell Publishers, 1997), 557-58; Waddock and Bodwell, "Managing Responsibility." 9. Robert A. Phillips, "Stakeholder Theory and a Principle of Fairness," Business Ethics Quarterly 7(1) (1997): 51-66, 57. 10. John Rawls. Justice as Fairness: A Restatement, ed. Erin Kelly (Cambridge, Mass.: Harvard University Press, 2001), 211. lL Hans Jonas, The Imperative of Responsibitity (Chicago: University of Chicago Press, 1984), 8-9. We thank one of the BEQ reviewers for alerting us to the relevance of the work of Jonas. 12. Waddock, Leading Corporate Citizens, Andrew C. Wicks, Daniel R. Gilbert Jr., and R. Edward Freeman, "A Feminist Reinterpretation of the Stakeholder Concept," Business Ethics Quarterly 4(4) (1994): 475-97. 13. Margaret Urban Walker, Moral Understandings (New York: Routledge, 1998). 14. Waddock and Bodwell, "Managing Responsibility." 15. Robert E. Goodin, Protecting the Vulnerable (Chicago: University of Chicago Press, 1985). 16. Freeman, Strategic Management. 17. Jonas, The Imperative of Responsibility (see especially pp. 79-130); Duane Windsor, "Stakeholder Responsibilities: Lessons for Managers," in Unfolding Stakeholder Thinking, vol. 1, ed. Andrioff et al., 137-54. 18. Goodin, Protecting the Vulnerable; Waddock, Leading Corporate Citizens. 19. Jeff Frooman, "Stakeholder Influence Strategies," Academy of Management Review 24(2) (1999): 191-205. 20. David Callahan, The Cheating Culture (Orlando: Harcourt, Inc., 2004), 180. 21. Jerald Greenberg, "Employee Theft as a Reaction to Underpayment Inequity: The Hidden Cost of Pay Cuts," Journal of Applied Psychology 75(5) (1990): 561-68. 22. Waddock, Leading Corporate Citizens. 23. Philip Selznick, The Moral Commonwealth (Berkeley: University of California Press 1992). 24. Walker, Moral Understandings, 94. 25. Sherron S. Watkins, "Ethical Conflicts at Enron: Moral Responsibility in Corporate Capitalism," California Management Review 45(4) (Summer 2003): 6-19. 26. Ibid. 27. Ibid. MAKING BUSINESS ETHICS A TWO-WAY CONVERSATION 28. Albert O. Hirschman, Exit, Voice, and Loyalty (Cambridge, Mass.: Harvard University Press, 1970). 29. Nicole Tempest, Meg Whitman at eBay Inc. (A) (Boston: Harvard Business School Publishing, 1999). 30. Ibid. 31. Susanne G. Scott and Vicki R. Lane, "A Stakeholder Approach to Organizational Identity," Academy of Management Review 25(1) (2000): 43-62. 32. Ranjay Gulati, Sarah Huffman, and Gary Nelson, "The Badsta Principle: Starbucks and the Rise of Relational Capital," strategy + business (3rd quarter 2002): 1-12. 33. Howard Schultz and Dori Jones Yang, Pour Your Heart Into It (New York: Hyperion, 1997), 11, 138. 34. Elliot J. Schrage, "Promoting International Worker Rights Through Private Voluntary Itiitiatives: Public Relations or Public Policy?" Report to U.S. Department of State on behalf of The University of Iowa Center for Humati Rights, January 2004. 35. http://www.starbucks.com/aboutus/FY05_CSR_Products.pdf. 36. Jody H. Gittell, The Southwest Airlines Way (New York: McGraw-Hill, 2003). 37. Ibid., 119. 38. We thank the BEQ reviewer who brought this practice of Southwest Airlines to our attention. 39. Jim Collins, Good to Great (New York: HarperCollins, Inc., 2001). 40. Norman E. Bowie, "Digital Rights and Wrongs: Intellectual Property in the Information Age," Visiting Professorship in Business Ethics and Information Technology, Center for Business Ethics, Bentley College, March 29, 2004. 41. Johti Micklethwait and Adrian Woolridge, The Company (New York: Modem Library, 2003.) 42. Waddock, Leading Corporate Citizens. 43. Information and data on the HP and Home Depot collaboration were provided by Tyler Elm, Director of Environmental Affairs for Home Depot during discussions held in October and November 2004. 44. http://www.rethink.ebay.com. 45. http://www.fairlabor.org/2005report/special projects/index/html. 46. Paul A. Argenti, "Collaborating with Activists: How Starbucks Works with NGO's," California Management Review 47(1) (Fall 2004): 91-116. 47. Ibid. 48. Bowie, "New Directions"; Patricia H. Werhane, Persons, Rights, and Corporations (Englewood Cliffs, N.J.: Prentice Hall, 1985.) 49. Guatam Ahuja, "Collaborative Networks, Structural Holes, and Innovation: A Longitudinal Study," Administrative Science Quarterly 45(3) (2000): 425-56; Steve Farkas, Ann Duffet, Jean Johnson, and Beth Syat, "A Few Bad Apples: Ati Exploratory Look at What Typical Americans Think About Business Ethics Today," Report for The Kettering Foundation from Public Agenda, (January 2004); Janine Nahapiet and Sumatra Ghoshal, "Social Capital, Intellectual Capital, and Organizational Advantage"Academy of Management Review 23(2) (1998): 242-66; Timothy J. Rowley, "Managing Beyond Network Ties: A Network Theory of Stakeholder Influences," Academy of Management Review 22(4) (1997): 887-910. 50. Mark A. Huselid, "The Impact of Human Resource Practices on Turnover, Productivity, and Corporate Financial Performance," Academy of Management Journal 38(3) (1995): 635-72; Jeffrey Pfeffer, The Human Equation (Cambridge, Mass.: Harvard University Press, 1998). BUSINESS ETHICS QUARTERLY 51. Andrew C. Wicks, "The Value Dynamics of Total Quality Management: Ethics and the Foundation of TQM," Business Ethics Quarterly 11(3) (2001): 501-36. 52. Edward W. Davis and Robert E. Spekman, The Extended Enterprise:Gaining Competitive Advantage Through Collaborative Supply Chains (Upper Saddle River, N.J.: Financial Times Prentice Hall, 2004). 53. Two recent journal special issues were devoted to the topic of trust. See Academy of Management Review 20(3) (1998); and Organization Science 14(1) (2003). On employee empowerment see Wicks, "Value Dynamics." 54. Argenti, "Collaborating with Activists," 36. 55. Waddock, Leading Corporate Citizens. 56. Jill Treanor, "Citigroup Chief Preaches Ethics in the Counting House," The Guardian Unlimited (February 17, 2005). 57. Ibid. 58. Ibid. 59. Bowie, "Digital Rights and Wrongs." 60. Waddock, Bodell, and Graves, "Responsibility"; Waddock and Bodell, "Managing Responsibility." 61. W. Richard Scott, Institutions and Organizations (2nd edition) (Thousand Oaks, Calif.: Sage Publications, 2000).