Wednesday, October 18, 2020

Ends and Means

Last week, I noticed a newspaper report about a CEO who netted a considerable amount of cash for himself and a favored cadre by changing issue dates on stock options and awarding some to nonexistent employees, so he could later transfer them to himself and his friends. In the same paper, there was an article pointing out that a number of the executives involved in recent corporate scandals, including Enron, were graduates of some of the nation’s most prestigious MBA programs. It seems that these programs are now falling over themselves to introduce compulsory courses on business ethics as a result. Then, a few days later, a comment on a post to this site directed me to this great article that uses the analogy of scar tissue to account for how organizations become rigid and weighed down by bureaucracy, simply by responding to corporate mistakes the way those MBA programs are dealing with alumni with felony convictions: by setting up a mechanistic, compliance-based response.

I love it when disparate ideas come together for me with a very loud clang! Linking these notions led me to write this article. Here is the sequence of thoughts I followed.

If this is so, and it is at least an interesting line of thought to follow, we need to deal with the possibility that most of the people now vilified as corporate criminals did not think what they were doing was wrong.
I’m quite ready to concede that some criminal types manage to achieve executive positions in major corporations, but I cannot believe that it is at all common. I’m sure there must be far quicker and easier ways for smart, ambitious criminals to make money. Nor do I find it any easier to follow the saying that all power corrupts to the conclusion that even honest people who get to the top are automatically corrupted in the process. Again, there are probably instances where that is true, but my own experience has been that most top executives I’ve dealt with are no less (but no more) honest than the average person. Certainly they see themselves as basically moral people. I cannot be sure about those who are now behind prison bars, but I suspect they were no different. If this is so, and it is at least an interesting line of thought to follow, we need to deal with the possibility that most of the people now vilified as corporate criminals did not think what they were doing was wrong.

Let’s assume they thought it was—what? Clever? Really neat business thinking? Perhaps they saw their actions as sharp, the way that negotiating a deal that nets your organization megabucks while screwing the other guy is sharp: not exactly behavior you would want to talk about too openly, but certainly something you would happily acknowledge among your own coterie of equally “sharp” colleagues. Not perhaps as ethical as some would want, but not really dishonest . . . not criminal.

If we follow this line of thought a little further, and bring in the fact that most of them were highly educated alumni from some of the best business schools around (plus they typically had outsized egos), here’s what results.

Let the other dummies play by the old rules and see where that gets them. We are the smart guys, so we find new ways to play this game of business.
You have a number of corporations run by clever, ambitious, arrogant people. Part of their arrogance is the view that they’re way smarter than your average Joe, even the average Joe in the boardroom. Someone among them comes us with an unusual way to make gazillions of dollars. It’s really, really neat. Yes, it is just a bit beyond what those dull folk who cling to old-fashioned notions of business practice might see as ethical, but that gives it some added spice. After all, who takes any notice of them? In the circle of those in the know, the ones with modern ideas, business practices like these are applauded. Let the other dummies play by the old rules and see where that gets them. We are the smart guys, so we find new ways to play this game of business.

Based on widespread reports, and the fact that several settled with the government by paying large fines, even major financial institutions went along with these “new and unusual” approaches to business thinking, to the extent of funding them with huge amounts of cash and sharing in the profit bonanza that followed. So, the thinking maybe went, if the serious money men are on board, it must be alright. We’re not dishonest. We’re simply ahead of the rest of the business world in our ideas and methods.

You can see where this line of thinking takes you: to that well-known position that the ends justify the means. I suspect that the prospect of massive rewards, personally and organizationally, coupled with the idea that there was no actual rule that said it was all wrong, went a long way to help such people justify what they were doing as clever and even innovative.

The ends justify the means. That’s the thinking behind most of today’s conventional, macho, grab-and-go management styles. We need profit, because that is what business is for. More profit is bound to be better than less. So whatever leads to more profit—unless it is specifically forbidden—is surely good business practice. Never mind if:
  • People must be coerced into working ever longer hours.

  • More people suffer work-related stress and burnout.

  • It becomes necessary to lay-off large numbers of loyal people, or outsource their jobs to somewhere we can get the work done for far less money.

  • We have to sacrifice quality and cut corners everywhere.

  • Work becomes a miserable place for most people except us.
The ends justify the means . . . don’t they?

That article I mentioned earlier adds the final point to this train of thinking. In the wake of all the scandals and losses, people rushed to institute policies to make sure, as the saying goes, “this kind of thing can never happen again.” Maybe that isn’t the best answer. If my suppositions about how these scandals arose are anywhere near correct, policies won’t stop the process. After all, if the major driving force is the belief that ends justify means, the secondary motivation is a belief that you, and those like you, are plenty smart enough to find ways around such old-fashioned restraints as policies and rules. Isn’t that what lawyers are for? To find ways of re-interpreting the rules to your advantage?

. . . a good story sticks in the mind, where rules are forgotten faster than they can be written down. And, for the record, the ends have never, and will never, justify the means in a civilized society. . .
As I wrote at the start, I don’t believe most executives are any less, or more, honest than anyone else. But they do have highly developed instincts for self-preservation. Perhaps the best way to prevent—or, at least, severely limit—corporate wrongdoing in the future is to spend enough time telling the stories and reflecting on the flawed thinking that brought smart people down tot he level of common criminals. After all, a good story sticks in the mind, where rules are forgotten faster than they can be written down. And, for the record, the ends have never, and will never, justify the means in a civilized society, whatever smart ideas are produced to weasel a way around that fact.

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Marianne said...

That is so awesome! Tell the stories. That's it, exactly! And I'm on the side of the explanation being that they thought it was okay. Because I believe that before anyone does anything, they first convince themselves that it's right, or at least justified.

11:54 AM  
Carmine Coyote said...

I agree with you, Marianne. I strongly suspect they convinced themselves that what they were doing was at least acceptable.

The more we can keep the stories current, the more people in the future may at least pause before getting themselves in over their heads.

Thanks for your comment, as always.

2:54 PM  
Ronald said...

It seems to me that a very common attitude amongst both business and political leaders now is that "whatever you get away with is ok".

That seems to flush a certain type of people to the top who sanitize this as "taking risks" or "expanding their boundaries", and look down on the people suffering from their actions because they just "don't get it" or "don't go for it", i.e. are not willing to "do what it takes" and are thus just losers and whingers who deserve no better.

They may well think that what they are doing is ok, but many of them have quite a different idea about ethics, if they grasp the term - basically if it is to their advantage it's ok and if it isn't, it should be.

I think that, unfortunately, the only way to keep this tendency in check is to establish and enforce clear rules about what is acceptable and what is not - not the usual legislation of every little detail but nonetheless a clearly defined framework of ethical behaviour. Problem is that the same mechanisms are at work in politics and that, for example, many politicians find it "ok" to do a favour to some big benefactor of the party, so this whole phenomenon becomes self-reenforcing.

I'm not sure how to turn the wheel back but guess the best thing "normal" people like you and me can do is to try and keep the upper charges honest by keeping them accountable, trying to be informed on what's going on, voting not only with our political vote but also with our feet and our wallet rather than going for whatever seems most convenient at the moment, and blowing the whistle if we see something that's not ok.

In any case keep up the great work - I have been enjoying your blog which provides an island in the mainstream.

4:10 PM  
Carmine Coyote said...

Thanks for your comment, Ronald, and your support. Please keep reading.

My concern with using rules to deal with ethical issues is that people seem to have a natural tendency to try to find ways around rules. They also take rules literally and use this literal interpretation to argue that certain behaviors are okay because they are not specifically banned. Perhaps that's the effect of seeing what lawyers do on TV.

My thinking about using social pressures is based on the simple belief that most executives would be horrified to be ostracized at their golf club for being an unacceptable person to be seen around. And their spouses or partners would give them hell if they started to be excluded from the "right' social groups because of what the executives had done at work.

Sometimes, social pressures are the strongest deterrents to the kinds of bad behavior that those "in the know" otherwise rate as acceptable.

4:37 PM  
JKB said...

Few take the huge leap but rather by small compromises. It seems that the baseline shifts with these compromises. Take a risk or push a rule in a specific case and that becomes the new norm. Getting away with it, moves the starting point for the next time. Why not it worked last time. But few realize that you can justify yourself into anything if you take small enough steps. This behavior is rewarded by profit or promotion.

It is an old story, the young up and comer finds new ways to make money. Ways overlooked by the oldtimers. It all works in good times, no one looks to close when your making a profit but as we've seen when things get tough, the microscopes come out. It turns out the new ways weren't overlooked they are illegal or immoral.

It takes courage and self-discipline to drive at a safe speed all the while being passed by the new drivers. Inexperienced with the dangers of the past, the new drivers fail to see the storm ahead and the accidents awaiting them when the roads become slick with rain.

8:14 PM  
Carmine Coyote said...

Great comment, JKB. You are so right about slipping almost imperceptibly into greater and greater departures from good sense.

Keep reading, my friend.

8:19 PM  
Charles H. Green said...

Sorry I came to this late; it is an important topic, and I believe you correctly highlight two central points: a. the "evil-doers" don't see themselves as particularly evil; b. the power of stories is apropos as a counterbalance.

I attended my 30th reunion at Harvard Business School a month ago (I was in the class one year behind George W. Bush, and two years ahead of Jeffrey Skilling--i.e. an "interesting" time). And I was surprised at how many of my classmates share the same concerns that I do, and that you do. There was a strong sense of "enough."
To your first point: the "evil" is insidious. When my second child was born on the way into the emergency room, the labor room doctor submitted a bill nonetheless--"what do you care, it's covered by insurance," was his explanation. The real evil here was shared, as I didn't fight him on it.
I don't know how many well-meaning people I know still fudge on their taxes, pay cash "under the table" for certain services, and so on. It's not a far road to backdating options grants.

Story-telling is hugely powerful. As humans, we resist receiving advice. Thus the wisdom of 12-step programs who proscribe "cross-talk," and insist simply on the telling of one's own personal story. "YOu never took advice, why should anyone take yours?" is the idea, and it's right. Listeners are likewise admonished to "compare, not contrast."
Stories are public, not private; we can all find a grip on them, regardless of their source. But because their source is private, they form bonding. Which is about people linking. Which is about treating other people as ends, not means.
These are just a few thoughts why your wisdom on this issue runs deep.

8:53 PM  
Carmine Coyote said...

Late or not, Charles, your comment is extremely powerful and I am very grateful for it.

By telling the stories, I hope that it is possible to stimulate more ethical thinking. Well . . . not so much more ethical, as more thinking. I suspect that part of the problem is the ease with which we human beings quieten our minds and shut away our unease.

The more people tell and share their stories on this issue, the harder it becomes for each of us to close down our own concerns about behavior we feel uneasy about in our lives.

Thank you again for commenting . . . and, please, keep reading.

7:28 AM  

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