The leak of the Panama Papers has given unprecedented insight into how wealthy individuals and corporations have used shell companies in so-called ‘offshore tax havens’ to hide money and reduce their tax liabilities. But the Panama Papers are only the culmination of a series of revelations about companies, and individuals, that use elaborate tax structures in offshore tax havens to avoid paying their ‘fair share’ of tax; with big corporate names such as Amazon, Starbucks, Google and Facebook hitting the headlines in recent years.
While a number of activities in ‘tax havens’ are not technically breaking the law, they are increasingly perceived as unethical or immoral. They appear to be ‘unfair’ as they are only open to those individuals and corporations that are wealthy and powerful enough to make use of them. Furthermore, they inflict harm on societies as they reduce governments’ ability to fund schools, hospitals, and welfare payments to the low-paid, families, and vulnerable groups in society; an argument that carries particular weight in times of austerity.
The issue of tax avoidance poses a challenge to educators in business schools. It has long been argued that the predominance of the neo-liberal framework and its relentless emphasis on shareholder value and profit-maximisation (to the exclusion of everything else) in business and economics teaching has ‘freed’ students from any moral responsibility (Ghoshal 2005). In fact, it may reinforce students’ perception that alignment of their (monetary) self-interest with the profit-goals of their employers will be the only way to have a successful career in business (Roberts 2001). This may raise the question what guidance Business Schools, having created this moral-free space, are able to give to their graduates when they are faced with morally dubious practices in their workplace (my colleague Professor Chris Mabey asked similar questions following the VW emissions scandal). It is a question that may take on particular pertinence when graduates end up working in environments that actively champion aggressive tax planning practices, either in large corporations or in firms acting as intermediaries for wealthy clients.
Ethical theory counteracts the notion that pursuing one’s self-interest only is acceptable (and even encouraged) in business.
At the same time, the need to teach ethics and corporate social responsibility (CSR) to business students has also been recognised over the past few decades, not least for ‘legitimacy’ reasons, as the ability of companies to operate successfully also partly depends on how they and their actions are perceived by wider society. Even though CSR and ethics courses are still primarily taught as stand-alone subjects, they provide opportunity to raise awareness of ethical issues and the importance of ethical values in business, and equip students with critical thinking skills.
I have the privilege of teaching ethics to management students at Middlesex University Business School, both at undergraduate and MBA level. My aim in these classes is to introduce students to range of frameworks and concepts that help them to critically analyse ethical issues in business and work out possible solutions. A key set of frameworks I teach is ethical theory. Ethical theory counteracts the notion that pursuing one’s self-interest only is acceptable (and even encouraged) in business. Even though some students find the teaching of moral philosophy in a business course rather strange at first, they soon recognise the power of these ‘non-instrumental’ frameworks.
Kant’s categorical imperative with its notions of ‘consistency’, ‘universality’ and ‘respect for persons’; and virtue ethics, which focuses on character traits of persons or companies that should inform ethical behaviour, as well as on the notion of communal and individual ‘flourishing and well-being’, appear particularly powerful to students. I was delighted to see students apply these theories to the issue of Facebook’s tax avoidance in the UK in a recent assignment. Some students argued that tax avoidance is in clear violation of Kant’s consistency principle because, if everyone avoided tax, the whole idea of tax would be rendered meaningless. Other students applied virtue ethics, arguing that tax avoidance is not fair, not responsible and not respectful (as it does not respect the laws of the country), and that the practice only enhances ‘human flourishing and well-being’ for a small set of actors in society, but not for society as a whole.
Another aspect of my teaching is ‘techniques of neutralisation’, which focus on the language that people use to justify and rationalise their actions in business contexts and elsewhere. With MBA students in particular, I discuss how phrases such as ‘Everybody is doing it’, ‘No one will be harmed by it’ and ‘We do it for the shareholders’ – no doubt also heard whenever moral questions around aggressive tax planning have been raised – can be recognised as efforts to neutralise morally questionable actions and what effective responses can be made to these rationalisations.
At the very least, graduates who have been on my courses are no longer able to claim ignorance with regards to wider social consequences of corporate practices.
Finally, I encourage students to think of solutions to ethical issues such as tax avoidance, by thinking creatively about how the companies themselves could tackle the issue but also what the responsibilities of other stakeholders are. What would it require for companies to make ‘paying our fair share of tax’ a CSR commitment? What role have governments to play in tackling tax avoidance? How can consumers and the wider public build pressure to get business and government to respond? These are all examples of questions that I expect students to think through to come up with effective solutions.
I am aware that my teaching will only plant a seed in students’ minds and hearts. At the very least, graduates who have been on my courses are no longer able to claim ignorance with regards to wider social consequences of corporate practices. But occasionally I receive emails from graduates, in which they tell me how my teaching has made them more aware of the importance of corporate ethical values when choosing their future employer, or from MBA alumni who tell me about the relevance of the frameworks and concepts I taught them for their job roles. This gives me hope that my students may contribute, even if only in a small way, to a world in which the occurrence of the morally dubious behaviours that the Panama Papers uncovered will become a little bit less likely.
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