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VIRTEU
ROUNDTABLE DISCUSSION SERIES
CSR, Business Ethics, and Human Rights in the area of Taxation (Transcripts)

Please find below the integral transcripts of the fourth session of the VIRTEU Roundtable Discussion Series, which focused on "CSR, Business Ethics, and Human Rights in the area of taxation," which was held on the 12th of February 2021. The event was organized by VIRTEU Special Adviser Prof. Diane Ring, who is Interim Dean and Professor of Law, Boston College Law School at Boston College Law School, and the project Principal Investigator, Dr. Costantino Grasso, who is Associate Professor of Law at Manchester Law School.

The event, which focused on corporate social responsibility (CSR) and business ethics in the area of taxation and aimed at exploring ways to fight tax fraud and related corrupt practices in the corporate world, enjoyed the participation of two leading experts in the area of CSR and Business Ethics, Prof. Ann E. Tenbrunsel, who is Professor of Business Ethics at the College of Business Administration, University of Notre Dame, and Prof. Kish Parella, who is Associate Professor of Law at Washington and Lee University. and VIRTEU Research Associate, Dr. Dawn Carpenter, who is Lecturer of Finance at the Catholic University of America, Host of the “What Does It Profit?” Podcast and Associate Editor for the United States for this Blog.

Transcripts edited by Benedetta Zanolla.

Suggested Citation

APA: [Speaker's surname, initial(s)] (2021, February 12). VIRTEU Roundtable "CSR, Business Ethics, and Human Rights in the area of taxation". Video recording at [00:00]. Retrieved from https://www.corporatecrime.co.uk/virteu-csr-business-ethics.

 

HARVARD: [Speaker's surname, initial(s)] (2021) VIRTEU Roundtable "CSR, Business Ethics, and Human Rights in the area of taxation"[Online]. Video recording at [00:00]. Available at: https://www.corporatecrime.co.uk/virteu-csr-business-ethics.

OSCOLA: [Speaker's name and surname] ‘VIRTEU Roundtable "CSR, Business Ethics, and Human Rights in the area of taxation"’. (Corporate Crime Observatory, 12 February 2021), Video recording at [00:00], <https://www.corporatecrime.co.uk/virteu-csr-business-ethics>.

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Costantino Grasso:

Welcome everybody. I’m Dr. Costantino Grasso, I’m Assistant Professor of Law at Coventry University and in my capacity as a Principal Investigator of VIRTEU, which is a new funded project aiming at exploring the interconnections between fraud and corrupt practices in the area of taxation, I have the honor of welcoming you and open this second roundtable discussion session entitled “The Corporate Social Responsibility, Business Ethics and Human Rights in the Area of Taxation”. First of all, please allow me to thank our distinguished guests Professor Ann Tenbrunsel and Professor Kish Perella, who are internationally renowned experts in the area of Business Ethics and CSR, it is a real honor to have you with us. Thank you also to our project expert in the area of Business Ethics, Dr. Dawn Carpenter, for participating in the discussion. I would also like to give a special thank you to our fantastic Special Advisor, Professor Diane Ring, who will share the roundtable session; to all the other members of VIRTEU research team, Dr. Lorenzo Pasculli, Mairi Laird and Engin Erkin and to Professor Panagiotis Andrikopoulos, who is Professor of Finance at Coventry Business School and Executive Director of the Center for Financial Corporate Integrity of Coventry University. Last but not least, I would like to thank all the members of the audience who have decided to stay with us today and be part of this fascinating discussion...

[...]

Costantino Grasso:

... It's now time to start our roundtable session, I’m delighted to give the floor to our Special Advisor Professor Diane Ring, who is Associate Dean of Faculty, Professor of Law and Dr. Thomas Carney Distinguished Scholar at Boston College Law. Professor Diane Ring will be the chair of our roundtable session, thank you very much.

Diane Ring:

Good afternoon, it's a pleasure to get us started. What I thought I would do first is introduce the panel a little bit more and then provide an outline for how we're going to proceed and then we'll dive in. So, our panel: first we have Dr. Dawn Carpenter, she is Lecturer of Finance at Catholic University and also a VIRTEU Research Associate in – not surprisingly – Business Ethics and her podcast “What Does It Profit?” explores how to envision the role of business in society and how business can be a force for good and what does it take to get there. Second, we have with us Kish Parella, she is Professor at Washington and Lee University School of Law; she teaches in a law school, but her research falls at the intersection of Law and Business – which is really perfect for today – and her focus in particular is on cross-border governance and CSR, Corporate Social Responsability; and some of her recent research has highlighted the role of reputational mechanisms as we try to improve corporate conduct in the global supply chain. And then, we also have with us Ann Tenbrunsel, she is the David E. Gallo Professor Business Ethics, Management and Organization at the University of Notre Dame Mendoza College of Business, her research focuses on the psychology of ethical decision-making and looking at why employers, leaders and students behave unethically despite their best intentions and desires not to do so; and her recent work focuses on the way in which framing of ethical issues makes a real difference in outcomes. One of the things I think you'll notice is all three of our guests today have distinct areas that they've been focusing on that really complement each other as we tackle this question, because it's really not a one-sided issue, there are many threads and I think that's going to be very useful as we explore some of the challenges. Before diving in, I just wanted to explain to our attendees the format. We will now be having our 40 minutes of roundtable discussion, that will be questions back and forth among the roundtable participants directly; that portion is being recorded now. Then, when we draw that to a close – around 12:20, 12:25 – we'll turn off the recording and then open it up to questions from you, the attendees. What I would suggest is if you have a question that occurs to you during the discussion, write that down at the moment and in fact, it probably would be best if you then put it in the chat and let us know you have a question you want to ask, so we can get a cue going. Once we turn to that portion – the Q&A portion – as I said we'll turn off the recording and I will start calling on those who have indicated they have a question and you'll have a chance to ask your question and one or more of the panelists group here will respond. We'll do this for about 30 minutes or so, then we'll draw that portion to a close, turn back on the recording and then we'll move to our summation. That's the plan. So, now I'd like to get us started. To begin, I thought I would start with a broad question, because really what we're doing today is twofold; we're trying to understand what are some of the biggest challenges, but also the biggest ideas we have in terms of understanding CSR, business ethics and human rights in the corporate business arena. So, that's one; just what's going on there, what's really the challenge? And then, how to think about bringing that into tax. Tax hasn't been traditionally the front piece of it, but how do we bring those ideas into tax? Why might it be a little bit different? How do we think about that? To get us started, I thought I’m going to ask a general question which is: as we are beginning to think about expanding CSR and business ethics and human rights ideas to our thinking about business taxation, what are some of the major issues and problems – just in those arenas themselves – that we should be thinking about? And I thought I'd just turn it over to the roundtable group and whoever might like to jump in first.

 

Dawn Carpenter:

I guess I’ll start, I had to remember to turn on my microphone. From where I sit, I had spent a career in the investment banking industry and then went back and did my ethics work; and the research that I do is in the broader domain – you referenced a podcast that I do – I bring ideas from the academy into dialogue with what's happening on the day to day. From my perspective, one of the most important things is really where we started with Panos in the introduction to this session, which is understanding that tax revenue is what makes the world work. It's been said that tax and taxes are the lifeblood of the social contract; and I think at its most basic, I would start there to say that to make the world work, we need to have resources that foster the institutions. Panos talked about infrastructure, roads, bridges the things that connect all of us, but also the public institution infrastructure that makes society function.

 

Ann Tenbrunsel:

I come at this from a complimentary – I totally agree with your assessment Diane – perspective to Dawn’s. I focus primarily on the individual level, the decision maker level – whether that's you or your clients, employees – and try to understand why is it that people behave in ways that are unethical. And key to that is they don't know that they are, but they actually are behaving in a way that deviates from their values; or perhaps, a more compelling question, why might you, your clients, your employees and ultimately, the organizations or firms that you work in, find yourself in deep trouble, but you don't realize it until it's too late? And I explore that from a variety and we can get into that if it's germane to the conversation, but some of the quick answers are we think we're more ethical than we really are, we think we're making good decisions – no need to reflect on them, no need to get better. One of the reasons is because we actually don't see many of the decisions that have an ethical component; I think Dawn just highlighted how tax and tax avoidance has an ethical component that can affect all of society. How do rewards and sanctions – either at the societal level or within a firm level – will affect that? How do we call things, where we label them? And then, why is it that we don't see not only our own unethical behavior, but the unethical behavior of others? And the answer is it's not always in our best interest to do so.

 

Kish Parella:

And I come at it from – I guess you would call – the default CSR or business and human rights perspective and I think one common thing to unpack is the issue of incentives, but the form of regulation that's going to really sharpen those incentives, either at the individual decision-making level or the firm level. A couple things to think about is how voluntary are these actions? What regulatory approach – is it information disclosure regime? Or is it a mandatory substantive requirement regime? And those are not mutually exclusive, there could be a blend of them, or you can see a progression. And what's common to all of that, is information. To what extent do these types of regulation incentivize information gathering by the target industry or individual agents within it? And then, as a second level, are there mechanisms for that information to be broadly disseminated to stakeholders and regulators that could give rise to a second generation of regulatory innovation that could take the form of prescriptive requirements? And that feeds into what Ann was talking about in terms of incentives, but really deals with where are we in the stage of regulating a particular area of corporate conduct.

 

Diane Ring:

A thread in my mind, listening to you all just as we get started, is how should we begin thinking about the role of some of the key players in the tax universe? And there are going to be parallels in the business context, but I’m thinking of tax advisors, legal advisors, accounting firms, financial advisors – how do we think about them and what kind of role do they play? And how much should our efforts at really expanding CSR and business ethics to encompass tax decision making? What role do they play?

 

Dawn Carpenter:

I don't know if we want to go in the same order again, but I guess I’ll give you a few thoughts. Well, I think first off, it's a mindset issue in my view; I think to make progress in this area we need to transcend this idea that if it's legal, it's okay. And then, the question is how do you assess that? And how do you put parameters on that? And that's often where ethics lies, is in the gray areas. I think we'll talk a little bit more about that going forward; so, I would say that. And I also think there are some built-in conflicts of interest in the relationships in these parties that need to be addressed – again, in my view – if we're to make change that has any significant broad meaning. Or I should say it in a different way, rather than having change on the margins, having change that's fundamental.

 

Diane Ring:

It's interesting you said if it's legal, it's okay; and I know in some of our own earlier discussions, we talked a little bit about both the image of tax, from outside of tax, but also some of the discussions we have inside of tax. And the tension if you think it is maybe legal, permissible to take that position in terms of your tax return, your taxes, are you as an advisor obligated to do that? And Dawn, that fits into what are your obligations? Your obligation to the client in that case; so, if it's legal, do I have to tell you can do it? And what flexibility do I have as an advisor to say, well, it may be technically probably okay, but? And that's the space; and I've been on some panels where we've had really interesting conversations about that without uniform views, about really where does the tax advisor stand in that gray space.

 

Ann Tenbrunsel:

I would say Diane that if it's legal, I don't know the law around what you have to tell your client, that's clearly not my level of expertise, but I would say one thing you would want to be cautious about is when you start to enter the gray area that Dawn talked about where it's potentially legal, but not ethical, you run the risk of starting down a slippery slope; so, it's not ethical, but it's okay. And we all know if you actually look at most of the scandals, nobody starts out embezzling 8 million from the beginning, it was a judgment call and it's probably legal and then the next one it's probably not legal, right? I’m sorry it's not legal, it's really not legal. And over time we take these little steps so almost indiscernible, that we don't realize we're taking steps down that slope of increasing violations, not only of ethicality, but often of legality. So, you have to just be careful, because it can start to put, as Dawn said, a mindset that this isn't an ethical decision – what we call ethical fading, when you don't see it through an ethical decision – but rather it's a different type of decision in changing that mindset or that frame or that schema, turns out to be quite difficult once you're used to viewing a decision in a certain way.

 

Diane Ring:

And actually, before we go off of that, I just wanted to come back, because I know that you have talked a bit in the past about framing choices as a business decision versus an ethical choice, say to do CSR; could you just say a little bit more about that in that context? Because I feel like you're getting there and I think it would be great to lay that out more explicitly.

 

Ann Tenbrunsel:

Sure. We find – and others do as well – in our research that, at least in the scenarios we're studying, two dominant frames are business and ethical frames, even when the decision is environmental, it's all about the environment and whether you should emit gas, they still see it as a business or an ethical and that those frames differ in substantial ways. If I gave Dawn and you, Diane, the same problem, but I somehow primed Diane to think as a business frame and Dawn to think as an ethical frame, Diane you would behave more unethically; same scenario, I just primed you to be in a business frame type mind. You would also be more focused on yourself and less on others, so you'd be less likely to mention the impact of your decision on others, you'd be more likely to engage in a cost-benefit analysis where you're weighing the pros and cons, which we consistently find leads to more unethical behavior; and you'd be looking at it really from what we call a low control, which is a focus on what makes sense for you in this moment, what we call feasibility concerns. Versus Dawn, who's more likely to mention others, who doesn't really engage in a cost-benefit analysis and is at a high level of control, which is really what kind of person do I desire to be? Very high-level values. And those differences are very substantial, significant. And one of the things to pick up on Kish's earlier comment is sanctions; if I put a sanction, I said if you behave unethically there's going to be this sanction, but it's actually a weak sanction – which we argue most sanctions become weak over time – you actually are more likely to see it through a business frame. So, there's contextual factors, things in the world and one of those actually are sanctions.

 

Diane Ring:

Kish, turning to that, I wanted to ask you a bit about some of your thoughts about disclosure, against this idea of either who we're trying to motivate, how they're going to be thinking about their role, how do you see disclosure design choices – maybe even cost-benefit analysis – fitting into this discussion?

 

Kish Parella:

Well, it's interesting. I think I was going to answer a little differently before we started this roundtable series of conversations, because I admit I hadn't really reflected as much on the framing or behavioral aspects that Ann was discussing. I think with a disclosure regime, two things to think about is A) who is your audience? And one assumption, is that the audience for this information is going to do something with it. And one of the things they could do is to produce, either independently or collectively, a series of incentives that is going to induce key decision makers within companies to make what we might call pro-social decisions. And just on that disclosure front, that story is dependent on a couple of things; A) some basis for information flowing from the company to one or more stakeholders, this could be part of some regulatory regime, it's information disclosure. Before that it could be voluntary, but the problem with voluntary is that is it going to be accurate? And is it going to be standardized? So, that external audience members can compare companies based on common metrics. Whatever form it's used, you would want the disclosure of information to be accompanied by things like, as I said, common metrics, the ability to compare across firms, you may also require information intermediaries. And then, there's this assumption that the audience member has leverage, or collectively, it has leverage to incentivize certain kinds of actions. Ann's comments are interesting, because part of the developing those sanctions or rewards, so the incentives – are they going to take the form of rewards or sanctions? And which are easier to create? And I’m not sure; and I haven't reflected enough on how disclosure regimes can create more of a reward structure, as opposed to a sanction structure. And that’s very interesting to think about in terms of inducing the kinds of conduct that we'd want.

 

Dawn Carpenter:

Yes, Kish, I think I would pick up on something that I’m hearing in your thinking on this that sparks real resonance with me, which is this idea of levers and which levers are going to be most powerful maybe broadly or in discrete ways? And we've been thinking about it from a policy lever, but we could also think about it in terms of the market lever; because in CSR, you look at the activity that's happened in the proxy process and that has been driven in the governance. So, if we talk in CSR of the three big letters – E environmental, S social and G governance – tax in my view is really in the governance category. And in the governance category, who has been filing proxy statements they've been these corporate gadflies over the years that have pushed corporate governance in one direction or another, but it has become – in my view – seen as a dispute between the gadflies and the companies. But in my view, it's really more a problem within the shareholder community – the gadflies who are shareholders – but then against the institutional shareholders. And the institutional shareholders, in my view, have a real conflict of interest, because they are managing funds of individuals; we were talking about individuals who support these companies through the investments that they make through their pension funds, but they don't have an individual voice, their voice is voted through institutional shareholders. So, when a company like BlackRock, or a company like Vanguard or these large institutional investors look to participate in the PRI, the UN's effort and the Sustainability Goals, they put their hands up and say yes, we are going to comply with these things and good governance is one of them. But then, when you look at how they vote, they don't vote that way. And the question is – and to me, this is the heart of the matter – the question is why don't they vote that way? And I have a suspicion that it may have something to do with the relationship that these investors have with the companies, because they want to manage the pension funds of those companies, so why would they vote against anything that would be in the interest of the companies? And if the interest of the companies is to maximize shareholder value at all expense, then there I see a disconnect. Kish, when you're talking about disclosure, I thought wow, how wonderful would it be if we lived in an environment where individual investors could have more power to express their desires to push corporate behavior. And this may be a totally different way of thinking about the lever, because we've been thinking about it just in the context of what could policymakers do, but I think their corporate governance policy can be achieved also using a different lever as well, or maybe in concert.

 

Diane Ring:

I was wondering, as we talk about actually all of those possible levers and asking about even the individual just pressing on individual good behavior inside business as well as policy and market, but I’m trying to think about how the ways in which tax might be a little bit different from some of the major areas in which we see these issues more publicly addressed? That's environmental – I can't remember who mentioned that – human rights and the conditions of laborers in the supply chain; those issues seem on the surface to have more obvious and more active constituencies. Yet, tax who's on the other side? You don't pay your tax – actually, I’m arguing with myself, like I sit here and argue with myself. In fact, you might say the past 10 years has seen a rise of multinationals being held up publicly for their failure to contribute to the tax system; and that is true. That said, I still wonder is there just not enough of an obvious loser on the other side to be motivated. I don't know Kish what that means, who's going to read disclosures in this area and act or if it's some other leader we're trying to push. Who's out there doing it? Or could we get motivated to do that? And I don't know if you all have thoughts on that.

 

Dawn Carpenter:

I guess where I have seen it has been with large religiously motivated investors, so there's an organization called the Interfaith Center for Corporate Responsibility and there are large funds that say we have an interest in knowing how our money is being invested so that it aligns with our values. And so, ICCR and As You Sow – is another organization – those two organizations have been very active int the last couple of decades and really been leading the charge in this area. So, that's where I see it.

 

Diane Ring:

I guess a little bit related, as you look at efforts at CSR that have been going on, why do they fail? I mean, that's intertwined with why we even have the problem to begin with, but I’m thinking about where you see efforts have been made? Whether it's on a national level, or some type of more coordinated global effort, or a company level – what tends to stall that? Why aren't they successful?

 

Ann Tenbrunsel:

There's some interesting research on CSR – to your earlier question I certainly think, because it's related to this research I’m going to talk about – employee activism is certainly another way in which we start to see this within a firm. And I was just in a meeting prior to this at Notre Dame and we're looking at ESG as an option for retirement funds and things like that and that came all from the faculty senate. But in terms of why might it fail, I think there's a few reasons, but one I can point to is again this framing – because that's the way that I look at the world – and what some research suggests is that, dependent on the CEO and the political party of the CEO, that your investment or your dedication or your commitment to CSR might be different. And what they have found actually in this research is CEOs that tend toward the more liberal side invest more in CSR on a consistent and committed basis, independent of how well that company is doing; and more conservative CEOs tend to invest a lot when times are good and pull back that investment when times aren't good. And that obviously would have some implications for how important this has really seen to employees, which in turn may decrease employee activism and other forms by which we might see more of this. And again I would interpret that research as saying that when you see it through a business frame, you're going to have this variable commitment that just depends on how good you're doing; and when you see it as this is just what I’m supposed to do – it's not for business, it's actually what I’m supposed to do – more of a stakeholder than a shareholder model, then you will see a more consistent commitment, which certainly signals not only to your employees, but your investors as well.

Kish Parella:

Just to add to that, a couple of things that we could think about is also when we say a lack of clarity regarding what it is that we mean by CSR and why we're doing it. So, two people can talk about CSR and one could mean something very specific regarding environment and somebody else could mean something very specific when it comes to governance or it comes to human rights. And I think part of it is when companies engage in CSR, just coming at a firm level, what their specific commitment to CSR looks like and also why they're doing it; and that can reveal institutional capacity issues that maybe they need if they're not executing in the way they could to the best of their ability, because they don't have the capacity or maybe it's done in collaboration with other types of actors. And then, this also goes back to motivation, go back to the framing issue that Ann identified, which is that why are you doing this? And that can reveal something about who needs to be invested in the organization, what the time frame of that commitment could be and maybe shifting it from one kind of motivation to a different kind of motivation.

 

Diane Ring:

This back and forth has made me think a bit about how this conversation, at least to date, and really even before bringing such a CSR business ethics perspective to the conversation, how tax lawyers talk about this. I referenced before being on these prior panels and the question being what do you do when you hit the line? If it's clearly not permissible, easy to tell your client not to do it; but what do you do when it is, but you don't like it, you think it's unethical? And whatever exactly that means. And one of the things that you constantly hear is lawyers say what you can and should do is try to come up with all the reasons it's going to be bad for the business, if they do this reporting, this tax practice, that we think probably is legal, but we're uncomfortable with; if they decide to do it, what are the parade of horrible that will happen? They'll be on the front page of the name the newspaper you most fear and it will be revealed and the fallout from that will be far worse than the tax savings that they got. As I said, that's a standard technique that lawyers discuss as a way to navigate the space of what they think of as ethics, they worry it might be personal ethics, as opposed to just baseline everyone should follow and they use this as a way to work through that. But in hearing this, it also makes it sound like does that tip it into a business calculus? And so, if it's a business frame and then if the company isn't doing well, I view it differently. It's been our go-to answer, just loosely in the tax world, to solve this borderline tension where we experience it, but I’m not sure I’m hearing that necessarily being the most effective big picture way to deal with the problem.

 

Ann Tenbrunsel:

Yes, I agree Diane. It might work in that situation, but your suggestion that it might cause future decisions to be viewed in that same frame and that might tip it a different way another time is a real concern. And so, I think what you want to be thinking about is how do you convince them from a moral perspective, rather than this calculus. I would say though, because of what we call motivated blindness – the tendency to not see the unethical behavior of others when it's not in our best interest to do so – that you should even further ask yourself what else am I ignoring that I haven't even coded as potentially problematic, because I'd rather not see that unethical behavior on their part. And there are lots of reasons why you may not see their behavior. There's research that shows they took auditors actually and they gave them financial statements – they took real auditors working at one of the Big Four and they gave them real financial statements – and they said tell us whether or not you think these are acceptable, if there are any errors; what they do in their normal job. And half the people they said hypothetically pretend you're an auditor of the firm and the other that you're an independent auditor; and auditors of the firm simply like being told, hypothetically in this very sterile environment, we're 30% more likely to say that the statements were okay than independent auditors. And the only thing that was different was one word the firm or independent – auditor of the firm or an independent auditor – and that substantially changed the way they viewed the identical piece of information and caused them to overlook it. So, I would say as a first step begin to think about what situations you aren't paying attention to that are on that border and that you're not even seeing.

 

Diane Ring:

Dawn, I didn't know if you were about to say something.

 

Dawn Carpenter:

Well, I was I was fascinated by Ann's discussion, because I agree with what she's saying. I guess what I would say from a broader view, rather than the individual view, is that when we look at ethics in finance, one of the things that we use as a measure – and perhaps Diane this is guidance for tax counsel – is that we really look to see are we serving our clients’ interests. And I think that's a lot of what you were describing, but we add a little caveat which is: are we serving our clients interest to the very best of our ability up to the point where we see our clients’ interest being extractive to the interests of society or the benefits of society? So, that's when the red flags go up and I think about classic examples – and I’m using these firms’ names just as proxies, not to call out their necessarily uniqueness – but I take someone like Goldman Sachs or JP Morgan, who advised the governments of Greece and Italy on how to deal with their debt crisis and how they presented their financials to the world. These are firms who have an expertise in financial engineering that's extraordinary and also in regulation. So, the question in my mind is did they serve their clients’ needs best by structuring a way to keep them underneath certain caps that allowed them to go on and have a little bit more freedom in the way they do their work? And yes, they did. But at what cost? It cost dearly those societies when the markets went the other way. And so, that's where I see perhaps an example of when you've maybe served your clients too well and not taken into account the broader impact on society.

 

Diane Ring:

This is a little bit of a shift, that's not quite as subtle of the gray area, but it's related – and it's something we've talked a little bit as a group in the past – which is to the extent that certain economic behavior endorse like tax reporting behaviors become a bit normalized, despite being in an area we think is not even gray – maybe really not appropriate – how do you undo that trend? How do you unnormalize an economic crime? How do you shift perspectives? Magical answers offered.

 

Dawn Carpenter:

Kish, let's give that one to you. Don't mean to put you on the spot.

 

Kish Parella:

Well, that's a hard one, I was looking at that. It's interesting, Diane, that you identified shifting those norms in this very specific context, because I think that's going on in so many different areas of CSR that there's this unlearning of certain norms that have gained saliency. I think my go-to answer is all this information, but information is irrelevant if it doesn't have an audience who is going to care about it. And I think that, maybe from my perspective as an educator, part of it is just what it is that we're doing when we're training professionals or these norms take ground, because whether it's in a business school or in a law school or whatever sub-discipline the part of the formative development of these professionals allows for certain norms to take hold. And maybe at that stage, if we start introducing our students and young professionals into a broader framework, that could be really helpful. And then, in opportunities to identify these norms for what they are and the sources of these norms, because often they're misattributed; they're attributed to say legal doctrine, when sometimes the legal doctrine does not support that idea, it's actually not legal, it's cultural or it's a social norm. And so, identify the sources, that would allow for the critical examination of both the norm itself, its consequences and I think that would be a good step forward. But I am curious to see what my co-panelists also would say about this challenge.

 

Dawn Carpenter:

Kish, I thought that was a very good answer. I put you on the spot for that one, but it also made me think just quickly about incentives; what is the incentive of the person who is called to make the decision? And if the incentive is a reward for maximizing client satisfaction, maybe that's not the right lever.

 

Ann Tenbrunsel:

I was also thinking, Kish – as you were talking, which was a great answer – is fundamentally you have to identify and name the norms; and that actually can often be quite difficult. I have a colleague who teaches at the University of Chicago and she'll ask people what's the norm for the classroom or what's the norm? And nobody really has any great ideas. And then she stands up on their desks and starts walking across them; and of course, everybody's horrified and surprised and she says why are you looking at me? And they said we are not supposed to do that. So, we often don't know what our norms are, it's often very hard to articulate until we see them as being broken. And I think taking a step back and understanding what are the norms that are preventing us would actually be quite fruitful.

 

Kish Parella:

Yes, just in terms of skill development – and again, I have the hat off of an educator – but just these skills of reflection; I love your expression of naming that norm, I think that this is something that's challenging in CSR when I have law students and we're talking the intersection long business, enabling that norm and just forcing students and then professionals to do that exercise, but that's really what we're talking about as a group, which is identify motivation. One of the earlier questions, Diane, I think was why does CSR sometimes stumble? And sometimes we all come at it with assumptions and we don't take the trouble of identifying the motivation; and that can be very productive. But it could also be productive just to do that so things don't just become this automatic response at an organizational level or an individual decision-making level. And that itself can be useful.

 

Diane Ring:

One of the things that we've seen, trends that we've seen really across countries in the past year – it's not just this year, but you can really see some marked examples – are businesses, large corporations, taking on various kinds of responsibilities or roles that maybe belong to government; they step in and fill some of those needs in society. My question is – and then again, we've touched on this before – this idea of the role of the corporation in society, which actually sounds lovely that they're really playing a very much as quasi-governmental role, that doesn't really guarantee they're going to be ethical, right? And pursuing CSR, business ethics. And I think the question I wanted to ask is what might we worry about in that – we might want them to be doing these things – but what do we worry about as well? And how do you balance that?

 

Ann Tenbrunsel:

I’m just going to respond quickly, because it's just an insight when you were discussing this and that is this notion that they're taking on government functions and yet, if you have a stakeholder theory of the corporation, they aren't government functions at all that in fact the community and everyone else around you is actually constituents that you have to pay attention to. So, going back to our earlier conversation, the notion that the government should take care of the community is a norm, or at least a potential assumption that we have. But many of the newer models of corporations as entities would suggest that that's too narrow.

 

Kish Parella:

I was going to say one thing. I worry about the first reaction is just the arbitrariness of it all. How hard or challenging is it to plan this division of labor? And I definitely appreciate Ann's point about, under stakeholder theory, whoever is either you could think a private public working collaboration or whatever it is, I would worry that it would become difficult to predict what kinds of functions these various corporations are going to do in the future, just because they happen to be doing it now. And without that predictability, it would have this consequence of what does that mean for government capacity to do those things? There needs to be some framework for us to understand that this is just not something of the moment, but it is part of the stakeholder model or something permanent going forward, before we can plan accordingly, I think.

 

Dawn Carpenter:

Yes, I think that we've identified something that is an important shift in dynamic, perhaps just in the power structure and how we organize our societies when we do start thinking about companies taking on what are otherwise thought of as social or political functions. I think about even something like a private prison do is that a function that a corporation should take on versus a society in general? That's a whole other set of research topics, but they are corporate entities. So, Kish, I think you and Ann are raising some important issues as it relates to thinking about whose role is which and have they morphed, are they complementary or are they in competition with one another?

 

Diane Ring:

And I was thinking about how this all fits with our discussion a little bit earlier about ethical framing. If the reason as a corporation I’m taking on any of these responsibilities, whether they're somewhat predictable or not, if it's not driven by an overarching ethical view of my relationship to society – back to your language Dawn – what I extract from society, but simply because I see a strategic relationship right now with government, maybe I get regulatory space or advantages by being so participatory and helpful now. If those are the reasons, not a deep-seated overarching ethical vision, then is it back in a business frame and a business calculus? And so yes, I did that and that certainly doesn't constrain me from doing something else good for business and in fact, maybe I feel good about myself that we did X, these past six months we did X in our community that I deserve a little space in my tax planning over in this other realm of my business life.

 

Ann Tenbrunsel:

Yes, a couple things. Business frames don't always result in unethical behavior, right? It's just that you're used to thinking about a decision in that way and that could have implications. We have found that of course, if you make the stick strong enough, the sanctions strong enough, people are going to behave how you want them to, because the calculation the cost benefit just says I'd be a fool not to. And I assume it’s the same thing with rewards – I personally haven't studied that – but I do think you need to think about likely we're all going to be in business, it's just the way we're used to. But we have found that, for example, if you prime people to think of the impact of their decisions on others – using very simple – that your ethical behavior in a business frame can be as ethical as in an ethical frame. I think it's really thinking about how do you impart interventions to try and bring the two frames potentially together. I understand, I think that point raises it'd be hard for government to plan if I am going to do this – I have no idea if this would be feasible – but some type of a five-year commitment, you're right to say this is what I’m going to do versus what this is what I did do, might be of use. I was part of a book and everybody investigated different companies and what they were doing in this space; and what you found is that companies did a lot with what worked in their strategic plan. So, if they were a company that had a lot of consumers that were women and their employees were mostly women – we looked at Sarah Lee – then, their CSR efforts tend to be focused in the women's space, which makes sense for them. There are strategic synergies that can occur that doesn't necessarily pit these at odds with profit or with a business; I mean, let's face it, businesses are in a business.

 

Dawn Carpenter:

Yes, Ann, I completely agree. I think of a company like Patagonia, who in their corporate DNA it is all about environmental sustainability and it's become – this is not a very precise way to say it – but almost like a cult-like following, a corporate loyalty around that bigger societal issue that's made that company very profitable.

 

Diane Ring:

Both of your last comments here exploring the strategic synergies that businesses might be able to find leads me to I think what will be probably our closing formal question for this part, which is: suppose this conversation is heard by policymakers around the world and you've got their attention and they want to take this seriously – the CSR, business ethics, moving it into tax – what might you offer as some initial recommendations? Some steps to take. They could be at different levels, different actors; but what would be these next steps? Who wants to go?

 

Dawn Carpenter:

All right, I’ll give it a try. This is difficult and I think if it was easy, we would have solved it already. And I think there are a lot of people who are recognizing that this is something that needs to be solved and you just look at the global problem that we have and moving money around so quickly with changes in the financial services industry, it makes transferring assets something that my teenager can do on her iPhone within certain domain. But the point is that flow of capital has just become so much easier. So, with that in mind, it makes it almost imperative to start thinking about frameworks and solutions that are not necessarily country-specific and that there can be some global consensus on standards or at least benchmarks for what is acceptable and unacceptable behavior.

 

Kish Parella:

I had two quick reactions, just for the broad question. Learning from the experience in business and human rights, I think there's a fair amount of clarity in this space regarding specifically what it is that NGOs and different types of actors and even companies themselves were talking about. Even with human rights, as broad as it is, the legislation tended to be sometimes narrow or specific and in terms of the kinds of behavior that are required of companies gain greater clarity with the United Nations guiding principles. So, I think that really helped orient the conversation among multiple stakeholders as to what it is that we're talking about, an identification of what is it that we want to see change and what is that consensus building regarding the next steps, even if it's not a finished product, so just the next stage. That's useful. And the other thing that I've noticed is drawing connections between different policy areas that could either be treated independently, so now there's a fair amount of conversation about the connections between corruption and human rights violations; and I think that is really important, just to build these connections between important areas of corporate misconduct that might otherwise be treated independently.

 

Ann Tenbrunsel:

And I would just bring it – because again, that’s where I come at it from – back to the individual level. And to me, next steps are always first understanding that you're probably not being as ethical or as in line with the values that you think that you are; understanding why that's the case. We know that we engage in forecasting errors – I predict that I’m going to behave better than I actually do in the moment. So, understanding that in those “in the moment” conversations, I’m likely to be deviating, even though I would never have said I would have not raised an issue or even said or did something that was against those values. I think we have to look at the role of euphemisms – that's the notion of financial engineering, Dawn, that you mentioned earlier – that's a language euphemism that makes what you were describing seem okay, because engineering seems sophisticated, but really what's behind that when we identify what we are doing as specifically what it is instead of trying to cover it up, I actually think we can be more in line with our values. And then, certainly understanding how to fix these conflicts of interest, this motivated blindness, big one that we use in my field is accounting firms and their clients as huge motivated blindness, because I want to keep them, because in the US I can choose them, I can fire them and I can also hire them to do my consulting, which ends up being more lucrative than the accounting income. So, you're just trying to “pass” on the accounting side to get to the other side and that certainly creates a huge problem. And there's been some interesting work where you pay people for – they did a study, I think it was in India – and you pay people from a common pool, so a firm doesn't pay their auditor, they get paid out of the pool and there are audits of the audits by this common pool. And both the auditor and the company pay a fine if their audits are not within 10% or whatever – this was actually on pollution emissions, so there were audits of that – and they found of course, that auditors became more accurate, because they were now going to be penalized and they weren't being directly paid by the client. But also, companies themselves just started reporting more pollution, because they knew the system wasn't rigged, they knew it was going to come out. So, there are structural changes, but again you have to identify what's underlying this that we take for granted, that companies can hire their own auditors – what does that mean down the road?

 

Diane Ring:

I was just thinking, as you all were walking through some ideas, how for example Kish, your point about building connections across areas – say tax and then something else we care about – how that fits in with how we use labels and words and motivate individuals. And I know previously we've talked about it's unpatriotic, pushing too hard at the boundaries of tax starts to get a word, it's unpatriotic, it's against the common good, taking from the fisk, there are ways in which maybe you can shift the mindset of the individual players and then maybe the individual actors, humans, and then maybe through those institutions as well. All right, I would go on and on, but we are now ready to turn to our Q&A, because we have quite a number coming from our attendees, which is no surprise – I just myself have so many more questions. What I’m going to do now is ask the recording to be turned off. And we are delighted for our summation to have Ololade Durodola with us; she is a Postgraduate Researcher at the Center for Financial and Corporate Integrity at Coventry University and as I said, she'll be providing our summation. So, Lola, over to you.

 

Ololade Durodola:

Thank you very much Professor Diane, it's great to be here with everybody. Thank you. I just want to give a special thanks to our fantastic roundtable panelists, it's been such a revelation at times within some of the thoughts that were brought onto the table and I really appreciate the energy and the passion that you have brought into the conversations. The panel started off with yourself, Professor Diane, introducing panelists as Professor Ann Tenbrunsel, Professor of Business Ethics University of Notre Dame; Professor Kish Parella, Assistant Professor of Law and Washington and Lee University; and our VIRTEU expert, Dr. Dawn Carpenter, Professional Fellow at Georgetown University, Kalmanovitz Initiative for Labor and the Working Poor, host of the Business Ethics podcast What Does It Profit? and Lecturer of Finance at The Catholic University of America. I realized that were in company of a very distinguished panel of experts, who work in – as you said, Professor Diane – in distinct yet very complementary areas of expertise. You started off on today's roundtable discussion about the biggest challenges that CSR, Business Ethics and Human Rights pose in the corporate world generally and how this can be brought along into the area of tax. Dr. Dawn stated that she'd worked in the financial industry and mentioned that there is the understanding that tax revenues are what actually makes the world work; I love that phrase, because she then raised these resources should be honest to foster public society infrastructure. Professor Ann was able to analyze why people behave in the ways that makes them deviate from their values and thereby, behaving unethically. She then queried why people and their corporations don't necessarily realize that they are in trouble and I guess in tax functions, until they discover that it's too late. Again, the reactive style, instead of being proactive in avoiding some of the issues that we see in the world today. Professor Kish contributed in the area of corporate conduct and she brought up issues about incentives being a decision making of firm levels, whether they were voluntary or in regulatory regimes and wondered to what extent regulations incentivize information gathering and how this information can be disseminated. There were also very important matters that were raised on if as long as issues were legal, then do we assume they are okay; and we talked about conflict of interest needing to be addressed and not just have imaginable fundamental changes as dominant in tax issues. And I think Professor Ann then raised about two dominance frames that are no different – the business frame mindset and the ethical framework sets – and analyze if incentives can take reward structures or sanctions structures to bring about changes on the new kind of regimes that we wanted to probably see in our tax world. We talked about the CSR, ESG, and talked about how fundamentally it was for us to talk on things as a market level, rather than just policy level; and we obviously had questions raised that were very interesting and opened the eyes of the panel also to different aspects of taxation, as one question raised was a concern that the scale was tilted a little bit towards the corporation responsibility angle, rather than the old school tax angle. And it was really interesting to hear some of the reflections of the panel on that and the other many questions. For me overall, it is obviously clear – and I know it would be to the panel – that tax issues are very hard to solve. I think there was a commentary about if they were really easy, then it would be solved already – of course they are hard to solve and that's why we're all here today. I know that tax illegality and immorality are subtle, but obviously they are very pervasive, we seek seriously obscure mechanisms that have global ramifications. And I thought that the panel did an excellent work to help us move the dial forward today in benefits to the VIRTEU project. And therefore, in my personal opinion, you have all met the aim of today's roundtable in analyzing Corporate Social Responsibility, Business Ethics and Human Rights in the area of taxation. Thank you very much for your contributions.

 

Diane Ring:

Well, Lola, thank you very much for pulling that together for us. I would love to thank our panelists today; it was just a delight to be part of this conversation. And of course, our attendees for joining us in this conversation and really raising the kinds of questions we're going to have to be able to address if we're going to move these issues forward. As a reminder, the next stage “Whistleblowers” will be Friday February 26th and we look forward to joining us for that session. Thank you again.

 

Costantino Grasso:

Thank you very much.

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