2 or more paragraphs Discussion
Mental Models, Moral Imagination and System Thinking in the Age of Globalization Patricia H. Werhane

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

today?s 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

Introduction1

After experiments with various economic systems,

we appear to have conceded, to misquote Winston

Churchill that ‘‘free enterprise is the worst eco-

nomic system, except all the others that have been

tried.’’2 Affirming that conclusion, I shall argue

that in today?s 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 perspec-

tive. 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 ten-

tative conclusions about globalization.

Mental models, mind-sets, and social

constructivism

Although the term is not always clearly defined, the

term, ‘mental model? or ‘mind-set? connotes the idea that human beings have mental representations,

cognitive frames, or mental pictures of their expe-

riences, 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

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 Cor-

porations, Adam Smith and His Legacy for Modern Capi-

talism, Moral Imagination and Managerial Decision-Making

with Oxford University Press and Employment and Em-

ployee Rights (with Tara J. Radin and Norman Bowie) with

Blackwell?s. She is the founder and former Editor-in-Chief of Business Ethics Quarterly, the journal of the Society for

Business Ethics.

Journal of Business Ethics (2008) 78:463–474 ? Springer 2007 DOI 10.1007/s10551-006-9338-4

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 experi-

ence, mental models bracket and leave out data, and

emotional and motivational foci taint or color

experience. Nevertheless, because schema we em-

ploy are socially learned and altered through reli-

gion, 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…differ-

ent 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 orienta-

tion 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 organi-

zational culture that creates mental habits that pre-

clude 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 – AL-

WAYS.’’ 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 ‘darling? of Wall Street and conser- vatives, 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. Unfor-

tunately, 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 sell-

ing food that is organically grown, fish that are

reproducible, and the company is focussing on sell-

ing a variety of products that are in various ways

‘green?. 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 Wal-

Mart?s stores are unionized; Wal-Mart forbids unions in its stores, and works to prevent them in its sup-

plier 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-Mart?s merchandise, and almost all its apparel, is manufactured off-shore, by companies under con-

tract with but not owned by Wal-Mart, often under

464 Patricia H. Werhane

extremely horrifying sweatshop conditions. (By the

term ‘sweatshop? 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 one?s conclusions about its moral successes and failures.

For example, if one concludes that customer satis-

faction and shareholder value are primary then Wal-

Mart is a great success. If one approaches Wal-Mart

from an environmental point of view, its new push

to become ‘green? is clearly a very admirable initia- tive. Examining Wal-Mart using a standard stake-

holder 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 commu-

nity 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 sec-

ondarily on its stakeholders, despite, from a stake-

holder 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).

On the other hand, if one is interested in

employees and the employees of Wal-Mart?s sup- pliers, 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 com-

pany creating harms that are not counterbalanced by

its value added in price, convenience, and share-

holder returns? Is the preoccupation with ‘‘always

low prices…ALWAYS’’ framing the company?s 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

one?s focus, even if there is still a preoccupation with low prices. Moreover, while it is hard to wrap

one?s 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-Mart?s anti-union global practices. In the Wal-Mart case, how we look at this situ-

ation, 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

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traM-laW seitinummoC

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traM-laW

Figure 1. ‘‘Standard’’ stakeholder map (Freeman, 2002).

traM-laW

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Figure 2. Revised stakeholder map.

Mental Models, Moral Imagination and System Thinking 465

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 one?s situa- tion.

• Disengaging from and becoming aware of one?s situation, understanding the mental model or script dominating that situation, and envisioning possible moral conflicts or dilemmas that might arise in that con- text or as outcomes of the dominating scheme. Second,

• Moral imagination entails the ability to imag- ine new possibilities. These possibilities incl-

ude 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 men-

tal 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 peculiari-

ties, 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-Mart?s case, the driving force of its cost-driven mission.

Looking at Wal-Mart, one begins with that mis-

sion. Then one tries to disengage from that mission

and ask, ‘What?s going on here?? 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, corpo-

rate values, and personal ethics? Why do employees

matter? What is wrong with sweatshops in devel-

oping 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 one?s stakeholder map is invaluable. What happens to one?s thinking when I give a sweatshop worker a ‘name and

face?? (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

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dna sreilppuS sesihcnarFseeyolpmE

sremotsuC )em dna uoy(

sredloherahS )su fo lla gnidulcni(

Figure 3. ‘‘Names and faces’’ (McVea and Freeman,

2005).

466 Patricia H. Werhane

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 re-

mind ourselves that all of these individuals and

organizations engaged in the Wal-Mart phenome-

non 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 sug-

gest, this is an oversight. Taking the lead from Susan

Wolf?s (1999) and Linda Emanuel?s (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 func-

tion 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 interrela-

tionships, 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 par-

ticular set of interrelationships affects some other

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 health-

care organizations and corporations), or macro (large,

complex, consisting of a large number of intercon-

nections). Corporations and healthcare organizations

are mezzo-systems embedded in larger political,

economic, legal, and cultural systems. Global cor-

porations are embedded in many such systems. These

are all examples of ‘complex adaptive systems?, 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 intercon-

nections and interrelationships that characterize and

affect that organization in its internal and external

relationships.

Since a system consists of networks of relation-

ships 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 com-

munities, or government agencies. An alteration of a

particular system or corporate operations within a

system (or globally, across systems) will often pro-

duce different kinds of outcomes. Thus part of moral

responsibility is incurred by the nature and charac-

teristics 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-Mart?s customers and shareholders.

Mental Models, Moral Imagination and System Thinking 467

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 out-

comes 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 Lin-

stone 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, organi-

zation, 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 net-

works of relationships involved in a particular sys-

tem, 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 in-

sights…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 an-

other tactic (Werhane, 2002a). So a multiple per-

spectives 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 Bangla-

desh?s, 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

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Figure 4. Stakeholder network.

468 Patricia H. Werhane

Labor Committee, 2005), one needs to rethink

whether the positive value of low prices in devel-

oped countries preempts this value degradation

where workers are frankly worse off than if they

were unemployed.

There is one more consideration, that of indi-

vidual responsibility, the responsibilities of the pol-

iticians, professionals, managers, and of individual

citizens. A systems approach should not be confused

with some form of abdication of individual respon-

sibility. 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 indepen-

dent 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 alleg-

edly 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.

Still, why is Nike, rather than these plants respon-

sible, and what is the extent of that? As a result of

public pressure Nike began to ‘look in the mirror? at its mission, corporate image, and challenged itself to

think about extending the scope of its responsibili-

ties, 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 sup-

pliers 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

Nike?s 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 stake-

holder networks map, that obviously has more

practical applications.

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