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Ethics policies worthless where greed is a
virtue
Special to the Observer
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The Observer's Business Monday cover story,
"Set up an ethics code that works," (Feb. 18), listed seven tips for
making sure a business is protected from ethical breaches. They were as good as
you'll find, as far as legal protections of the CEO and senior executives are
concerned.
Unfortunately, they omit the most basic prerequisite for ethical
corporate behavior: a genuine commitment by the top brass to respect the rights
of all constituencies -- employees, the environment, customers, stockholders,
and, yes, even the government.
Ethical behaviors are more a result of corporate culture than of
bureaucratic systems.
I'm afraid our dominant corporate culture is following Milton
Friedman's famous maxim: "So the question is, do corporate executives,
provided they stay within the law, have responsibilities in their business
activities other than to make as much money for their stockholders as possible?
And my answer is, no they do not."
This is probably the most frequently quoted justification for
greed that today's corporate executives cite. If there is a profit in it, they
not only feel no responsibility for how their actions
and decisions affect average Americans or their country, they sanctimoniously
claim a moral superiority for holding such selfish values.
Corporate executives have transformed greed from vice to virtue.
Admittedly, a healthy self-interest is a virtue, essential to one's success and
beneficial to society. But greed, an excessive self-interest, leads to
behaviors that are devious, deceptive, manipulative, exploitative
and, in general, detrimental to society -- although profitable to holders. It
can even lead to behaviors that are legally fraudulent, as apparently happened
at Enron.
By now it has become obvious. In the interests of profits and
personal wealth, most modern corporations push all laws to their limits, and if
the penalties are not sure and severe, beyond their limits. This applies to
reporting income (tax avoidance), treatment of employees (pay, work conditions,
rights of collective bargaining), protection of the environment (conservation
costs money) and respect for customers (let the buyer beware).
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In pursuing unrealistically high profit objectives, the
sophisticated CEO can create pressures on subordinates to cut ethical
corners, yet retain deniability of any ethical or legal wrongdoing himself.
He may previously have proclaimed the very best behavioral standards,
including the usual "tools" of organizational development:
statements of corporate ethics, values, philosophy and mission. He may have
set up a bureaucratic system to monitor behaviors. But it's in his day-to-day business discussions where he
demonstrates the values and expectations that actually count. A chemical company president, for example, may meet with plant
managers and announce a 5 percent cut across the board, "because
competition demands it." But if a manager complains that the cost of
toxic waste removal is already at the bare minimum, he's told: "If you
can't do it, and do it legally, I'll find someone else who can." The message is clear: Those who keep their jobs or get promoted
are those who deliver -- and don't get caught. So the managers quickly figure
out they can use a fly-by-night toxic waste disposal company that will do the
job at a significant cost savings. The company's unidentifiable waste ends up
alongside a rural road, and senior managers have deniability of any willful
intent to violate environmental laws. Of course, the term "ethics" suggests that the issue
is much broader than adherence to law. It would also include doing what's
right by society's moral standards. Is it ethical to hire accounting and
legal consultants to skirt the obvious intent of tax laws? Is it ethical to
reduce employee head count beyond reason to realize a huge personal financial
gain? When profit is the only moral standard, lower-level executives
and managers are pressured to make cuts that adversely affect a company's
least powerful or least noticeable constituencies. It's all done to increase
the wealth of investors and top executives. That's usually legal, but it's
not fair, and can easily lead to illegal behavior as competition intensifies. The way top management goes about getting results, not
sanctimonious protestations of ethical commitment, determines the morality of
corporate behaviors. Charles M. Kelly is a
retired management consultant living in Tega Cay, S.C., and is the author of
The Destructive Achiever: Power and Ethics in the American Corporation
(Addison-Wesley, 1988). |
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