events and rules: the search for missing links

1. EVENTS AND RULES: THE SEARCH FOR MISSING LINKS Stewart R. Clegg 1

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3. The explosion of ethics The discourse on ethics has exploded into contemporary spaces, politics and organizations: ENRON, Vivendi, Parmalat, carbon footprints, and the war in Iraq, to name just a few, have all been widely discussed in terms of the ethics of those responsible for the actions that made these newsworthy themes. The present contagion of market failures results in part, as we all know, from an ethical code of �light regulation� coupled with a view that markets �know best� and are autopietic systems. Trillions of dollars lost later, as well as hundreds of thousands of jobs and homes, we should know better. 3

4. Research issues The central question of the paper is to theorize the dynamics of event situations in relation to the dynamics of interpretive frameworks. While business ethics are often seen as a key stabilizing force in business because they provide a stable and assured interpretive framework, events throw up situations that, in practice, challenge interpretive frameworks. Clearly, in event situations such as the financial crisis of 2008 onwards, existing interpretive frameworks did not provide models for mimesis. 4

5. Approach The paper will develop a theory of events which is missing in institutional perspectives and links this theory of events with the institutional evolution of business ethics. When singularity upstages mundane repetition we refer to it as an event. We focus on the relationship�between unfamiliar events and existing structures. De-institutionalization starts from the interaction of weak links and unanticipated events: An event disrupts the illusion of an ideology of control and repetition such as is perceptible in both organizational sciences and the practice of organizations. At the same time, the event integrates in its singularity the structural regularities in which it is embedded and that it comes to deform in order to reach the status of being an event. Thus, the event relates to both difference and repetition. 5

6. Argument In practice events pose a particular problem for normal organizational approaches to business ethics, which are heavily founded on repetition reproduced through the application and calling to account of action according to rules. We need to ask how ethical interpretive frameworks become institutionalized by describing the macro dimensions of ethics at an epistemological and practical level. We need to address the micro dimensions of the intersubjective reception of events that transform ethical interpretive frameworks and engender their dynamics: Any event deemed critical will be a combination of macro and micro causes and will always point up the impossibility of mastering all the connections between these causes. In the world of organizations and institutions, individuals are the locations where the connection between macro and micro causes takes place and their effects are registered in changes in sensemaking. 6

7. Contingent ethics and the dynamics of events Ethics imply decisions that have to be founded on sometimes conflicting values. These values are situated in identities: between those held by managers� and those promoted by the organizations in which they work. Organizational ethics are necessarily incomplete in respect to the conditions of their application. Individual�s affirm ethics through the decisions they make with respect to event situations that are genuine unanticipated contingencies and thus not routine. 7

8. Institutionalization of ethics Individuals make events meaningful when they assert their identity through political choices and exploit holes between social networks (Burt, 1992) or suddenly relax the controls of dense networks. Individuals make events consequential when they actualize some element of virtuality contained in organizations (Linstead & Thanem, 2007). Their political and ethical choices unfold social networks in unpredictable ways, making them evolve. Such events intertwine with the structural order of the organization as the basis of a pragmatic, dynamic and realist micro-politics as creativity and personal ethical values come into play 8

9. Events Any event is not a priori �good� or �bad� from an ethical point of view.� The existence of untoward events that cannot be encompassed within the repetitions of institutionalized ethical behavior�initiates uncertainty about the appropriate reference frames of values. Ethics come into play when rules do not close off judgment. Any event is not a priori �good� or �bad� from an ethical point of view.� The existence of untoward events that cannot be encompassed within the repetitions of institutionalized ethical behavior�initiates uncertainty about the appropriate reference frames of values. Ethics come into play when rules do not close off judgment 9

10. Ethics and identity Ethics are an affirmation of identity in as much as they establish relationships between things (vegetarianism versus carnivorism, for instance). That we have a capacity to know and understand why we act as we do makes action ethical. We act out affirmations of our identity; indeed, we know our identity through those acts we do. 10

11. Normal organization science and ethics The �normal science� approach to ethics and organizations is one in which ethics are regarded as a contingency variable whose control ensures the optimization of performance (Donaldson 2008). Thus, ethics can be fitted in a theoretical and administrative current that is already well-known. Business school academics have sought to integrate ethics within a functionalist framework through the organizational design of innovating firms (Westerman, Mc Farlan and Iasanti 2006), the exercise of leadership in different systems of governance (Hambrick and Canella 2004), or the reduction of ethics to a contingency utilitarianism (Donaldson 2008). In the philosophical sense of contingency (as an unforeseen event) one of the remarkable properties of the contingency school in organization theory is precisely to make contingency disappear (Deroy, 2007) behind the interest of management in controlling risk and managing uncertainty. 11

12. Ethicization of organizations Organizations that seek to structure and completely control the process of business �ethicization� tend to regard ethics as a new tool of legitimation. Only in the science fiction of a perfect organizational world where no untoward events occur, would such a strategy of ethicization actually work. Nevertheless, even though it is quite unrealistic to assert that top management believes that it has such an extensive and absolute moral power over employee� behaviours, it is realistic to assume that that implementation of ethics will be routinized by the privileging of contingent variables. Ethical dynamics disappear behind the design of a static ethics defined by top management as an interpretive framework with which contingent risk and uncertainty management unfolds. 12

13. Ethics in practice � Ethics occur in practice as interpretive frameworks used by unpredictable actors dealing with dynamic unfolding events in insecure contexts. As all action involves reflection, by definition, interpretive anchoring will always be incomplete as no rule can ever specify the conditions of its own application � only interpretive judgment can do that (Wittgenstein 1972). The automatic application of rules cannot be assumed to ground ethics in practice. It is impossible for every context and every actor�s play to be completely regulated a priori, (a fact that explains why deontological codes are more often a framework of appropriate behaviour founded on general moral values than a precise lexicon about what ethical behaviour should be in given circumstances). 13

14. �meet unexpected events Events will always occur that create organizational surprises and in such contexts, actors inescapably refer to personal metaphysical values and emotional feelings (Nielsen, 1988) to affirm their practical ethical choice. Sometimes events will be like a tsunami sweeping away everything that seemed grounded in a mess of destruction; other times the organizations that are encountered have the capacity to absorb events as �organizational jolts� (Meyer 1982; Sine and David 2003). Events are necessarily problematic. 14

15. Bringing in Deleuze � The occurrence of unanticipated events creates the possibility of new forms of structured understanding. Events are an occasion for the unfolding of new practices: through their actions agents unfold the potential of the organization as much as they express their identity through the sense that they make. According to Tarde, �great constant forces . . . are given direction by small, accidental, new forces, which, by being grafted on the ?rst ones, set into motion a new kind of periodic reproduction�. Knowledge finds form as knowing and when a critical event occurs that cannot be made sense of in institutionalized ways of knowing innovation potentially occurs because events multiply crises for which familiar responses do not work. History is what happens, but the event is what we make of what happens through that infinite interpretive movement �which it gives consistency� (Deleuze and Guattari, 1994, p. 156). 15

16. Deleuzian ethics Deleuze sees events as implying uncertainty in ethical choices since, they substitute a principle of association for the principle of causality (Deleuze, 1969: 200; 207). They are phenomena that, by virtue of their unpredictable and unanticipated nature exist before being represented by institutionalized discourses. Hence, they challenge the institutionalized and determinist order of organization ethics and other, similar interpretive frameworks. Deleuze draws very strict boundaries between the�notions of repetition and generality. The latter�resembles institutions more than repetition does. Repetitions are the patterns available to agentic perception that�might very well stay out of institutional generalizations.� Therefore, repetition has a capacity to break down institutions, introducing derailments, infamies, becomingness and heterogeneity into that which represents itself as stable, eternal, identical and constant (Deleuze and Guattari, 1987, p. 361). 16

17. Towards a theory of events The dynamics put in motion by Deleuzian accounts of events would explain the evolution of the organization and of its values without recourse to structure/agency dualisms (Delanda, Protevi, and Thanem, 2005). The organizational implications are evident: some events will be more predictable and monitored by the organization � mainly the case of events�embedded in tightly coupled, usually confined networks ��while others are more unpredictable, where the events are located in loosely coupled extensive networks. The existence of unpredictable events conditions the existence of free choice and affirmations of managerial ethics, even though the scope of this free choice is constrained by its embeddedness within the social structural network. In �event situations� managers take decisions according to their subjective representation of the practical ethics entailed in their interpretive frameworks. In enacting events, managers� identity shifts ethical interpretive frameworks from a sphere of metaphysical indeterminacy to organizationally pragmatic political sensemaking; managers, with their bounded rationalities, seek to drill and instil repetition into action, making it behaviour (Schutz 1967). 17

18. Events and interpretive frameworks The unfolding of events always starts with their enactment and events, typically, are encoded in terms of variations from structure, a composition of difference and repetition. During the unfolding of events individuals and their choices are determined (repetition of the institution embodied in every individual through their commitment to a shared interpretive framework) and potentially determining (by establishing that difference which makes their identity unique and separate from that assigned by the structures). Organizationally local deontological codes are the institutionalized result of past micro-processing located in the unfolding of specific events in which, recursively, such codes� structural content influences further institutionalization. Institutionalization�results from learning from past events that become integrated in organizational routines so that repetition may be asserted. 18

19. A theory of the event What is institutionalized as a result of past events can be destabilized by future events. Any approach to institutionalization must integrate a �theory of the event� interacting with a given interpretive framework of ethical codification, planning and management. On the one hand, events pose indetermination and undecidability; on the other, institutions provide determination and decision. In the middle, between these pressures, stand individuals� identities, constituted within those various circuits of power within which the person is inscribed (Clegg 1989). These circuits are many, varied and their effects indeterminate, and events always threaten to destabilize and refix the circuitry. 19

20. Why ethics are not rules Organizationally local deontological codes are the institutionalized result of past micro-processing located in the unfolding of specific events in which, recursively, such codes� structural content influences further institutionalization. Institutionalization�results from learning from past events that become integrated in organizational routines so that repetition may be asserted. However, what is institutionalized as a result of past events can be destabilized by future events. Any approach to institutionalization must integrate a �theory of the event� interacting with a given interpretive framework of ethical codification, planning and management. On the one hand, events pose indetermination and undecidability; on the other, institutions provide determination and decision. In the middle, between these pressures, stand individuals� identities, constituted within those various circuits of power within which the person is inscribed (Clegg 1989). These circuits are many, varied and their effects indeterminate, and events always threaten to destabilize and refix the circuitry. 20

21. Events as shocks While research frequently considers either the structural level of business ethics production, or its individual level, or the interaction of both it rarely considers the dynamic interaction between individual and organization ethics or the linkage between these dynamics and the process of de/institutionalization of ethics within organizations. We propose that these dynamic interactions occur through the sensemaking that is embedded and disrupted in loosely coupled networks: events function as system shocks that can cause perturbations and irruptions to the sense of a shared and known in common sense. Significant events invariably disrupt social networks, even when registered initially as individual effects, simply because, if they are significant, they will have systemic effects. E.g. Soci�t� G�n�rale employee Jerome Kerviel 21

22. New economic sociology (NES) The notion of embedding has been taken up by what is referred to as the new economic sociology (NES), whose explanations, condensed in the concept of embeddedness, a concept developed initially by Polanyi (1944), are driven by two logics. The first stipulates that the economic choices of actors depend on the socio-cultural characteristics of the networks in which they evolve. Second, the identity construction process of actors takes place through relatively autonomous decisions which, in turn, define the architecture of the social network in its socio-economic and cultural dimensions. The embeddedness of actors does not exclude disembeddedness occurring; when it does occur actors tend to see it as a temporary state, quite rare, and necessarily incomplete. Individual decisions are seen as substantively interpersonal and identity based, thus socialised and socialising. 22

23. Strong and weak ties in the NES Strong structuralism conditions individuals embedded in dense networks, whereas weak links have a capacity for innovation because their decisions are not a priori regulated and tightly controlled (Granovetter, 2005). Weak structuralism provides an opportunity for relatively autonomous ethical decisions when individuals use their own values to modify social networks through rational choices made as a bridge between different networks, defining a weak tie. Weak�ties are relatively loosely-regulated, so they are the most likely�candidate for innovation. If one is deeply�embedded, one will not easily change and if one happens to be loosely�coupled, one is likely to be a part of the movement toward change,�disseminating into highly-embedded structures. A highly embedded actor might be a source of innovation thanks to�powerful access to a variety of peripherals, just as a�structural-hole broker holds access to multiple domains of�knowledge. 23

24. Weak ties and innovation Contrary to strong links, weak ties tend to favour the emergence of interpretive frameworks that are potentially innovative because they are formed situationally through action and reflection fused in events. Weak links allow bridges to be built between existing networks whose functioning has been progressively institutionalized by strong link density. Establishing weak links translates marginal individual behaviour into action more readily than occurs in institutionalized strong network links. Where the strategic choice of an individual (or small group) relies on a weak link, it becomes possible for these actors to build a new system of relations that escape from the controlling determinism of the strong structuralism characteristic of institutionalized and routinized links. 24

25. Weak ties in financial markets Where discrepancies in procedures appear in dense networks that are weakly tied, such as those that developed in US financial markets in the wake of the Nobel Laureates Merton (1973) and Black and Scholes (1973), and their algorithmic innovations concerning derivatives, the capability for producing network density in the complex transactions made possible resulted in these exceeding the capacity of key managers to judge, interpret and make sense of the networked complexity that was occasioned. The density of the networks was an effect of their high degree of fragmentation and the extensive but weak coupling between organizations. The work of Black, Merton, and Scholes created the possibility of a far more complex and dense network of tightly coupled transactions. Investment banks and insurers took mortgages, packaging and repackaging them into complex securities, topping them off with derivatives. 25

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27. Deontology not the answer It is often assumed that individual ethical choices will be controlled by the organization through surveillance and reportage that can then compare actions with the rule of a deontological code. Such a version of ethics remains too static (Stahl, 2007) because it neglects the complex process of de/institutionalization which makes organizational ethics evolve. The notion of ethical vitality is a means of registering the ways that ethical responsibility comes alive in organizations when people take, and are in a position to take, a reflexive responsibility for their conduct (Rhodes, Clegg, and Anandakumar 2008): The absence of firm ethical norms and rules in organizations, on a monological model for interpretive frameworks, under certain conditions, might actually make people in organizations more rather than less ethically responsible. However, while this may well be the case in complex highly professionalized organizations such as hospitals, with their multiple professionalized logics of actions, it is much less likely to occur in organizations that are characterized by singular logics, such as profit-seeking. 27

28. Abandon deontology OT characterized by dystopian dreams of an ordered, predictable and certain world. Attempts to institutionalize ethics for all organizational occasions in systems of codes, values or statements often prove to be a form of wishful and wistful thinking, because such codes are vague, of necessity, and cannot easily be enforced in everyday practice. Issues, problems and choices must be oversimplified to be codified; to be codified at all it must be assumed that the organization knows both what problems are likely to be thrown up by events and what the solutions to these are. Organizationally, it has to be assumed that ethical objectives and the means by which they may be achieved are clear and non-contentious; such clarity of definition and universality in interpretation is hardly likely to occur. 28

29. Events always threaten order Realistically, and with a necessary humanism, we must appreciate that ethical choices means, analytically, that one must engage in the understanding of cognitive, affective, anthropological, and social mechanisms associated with the dynamics of ethics to capture the relationship between ethical systems and the �surge� of events. Hence, the presence of events as occasions for ethical judgment suggests that researchers as well as managers need to explore multidisciplinary fields of knowledge to better understand the dialectical relation between the emergence and management of events and the embeddedness of this recognition in institutions. 29

30. In conclusion We find ourselves, perhaps surprisingly, in agreement with Donaldson (2008) when he writes that �Ethics education in management schools is of doubtful efficacy in that there are grounds for holding that ethics education may not make managers more ethical.� However, unlike Donaldson, we do not think that the answer to the problems of ethical efficacy lies in redefining ethics in terms of contingency theory. Any code of ethics that is useful must have a capacity to be corrected by events; such correction requires error, and while error may not be managerially desirable it is a necessary part of the human condition, one that surely prevails even for contingency theorists of an extreme determinist bent. 30