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 464 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 466 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. 468 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. 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