Saturday, December 02, 2020

Corporate Ethics . . . How Far Has Business Got with Reform?

Standards of ethics in business have not advanced much in decades, despite all the fine words and codes of practice. The public seems to have given up on expecting business leaders to display any greater honesty or integrity. Since this cannot be acceptable in a civilized country, we need a way to bring organizations and their leaders back into line. Only a rising tide of moral outrage will be capable of forcing politicians to take notice and use their powers to curb a stubborn culture of ethical expediency in business.

When it comes to corporate and business ethics, it’s questionable whether we have advanced very far over the years. That’s certainly the view of Mirko Bagaric, a professor at Deakin Law School, writing in the Australian newspaper “The Age:”
. . . the golden rule in business, so eloquently stated by Nobel Prize winning economist Milton Friedman, [is]: “The social responsibility of business is to maximize profits.” While this statement was made almost 40 years ago, corporate behavior has not moved beyond that mantra. The bottom line in business is still the profit line. Business has not taken a single step up the moral mountain.
James H. Quigley writing in “The Chicago Sun-Times,” takes a similar line:
There's no quick or easy fix for the erosion of public trust in much of corporate America. It's disturbing that a mere 16 percent of respondents in a recent Gallup Poll believed business executives had “high” or “very high” standards for ethics and honesty. While many of the significant events that put us in this predicament occurred several years ago, we’re all left with the stigma—and the responsibility to improve our ethical business culture.
Kathleen Kennedy Townsend, Maryland's first female lieutenant governor (and the oldest daughter of Robert F. Kennedy), speaking to an American audience about ethics and trust in the business world put the need for change this way:
It is important for businesses to build trust and integrity in the 21st century. To do this, we need to build a culture of trust within business.
The sheer power of business in these days of globalization has caused ethics to become more important than ever before. Sadly, while more people seem to be talking about ethics, there is precious little sign that any of the talk is turning into action.

What is happening? A recent survey found that fewer than half of the people around the average boardroom table are fully engaged or committed to their jobs. The study, covering six countries—the U.S.A., Great Britain, Australia, Denmark, Norway and Sweden—found that just 47 per cent of chief executives, managing directors and other board directors admitted to being “fully engaged.” And a British survey suggests that many managers in that country believe that their efforts are going largely unnoticed by their bosses. A two-year study by the Chartered Management Institute has found high degrees of cynicism among managers, many of whom believe that networking among “good old boys” and an obstructive organizational culture block their career progression.

Uncommitted top executives? Cynical, disappointed managers? A culture of "good old boys?" No wonder no one in business itself is taking much notice of the clamor from the public at large for higher ethical standards and fewer scandals. Nor has there been any significant progress on other matters of fairness and equality. Here’s a quote from Management Issues:
Nearly half of the 1,000 largest U.S firms have no women in the upper echelons of their senior management, and a fifth of the rest have only a symbolic presence, damning new research has revealed. The study by Tuck School of Business at Dartmouth found a complete absence of women executives in 48 per cent of the largest U.S. firms. . . The study, concluded the business school, clearly showed why women had not broken through the boardroom glass ceiling in greater numbers—and why they were unlikely to do so in the future.
This type of “business as usual” is the norm for far too many organizations, especially since it appears to mean ignoring the demands of equality and social justice, putting profit before principle, developing elastic ethical principles, and indulging the egos of those at the top; many of whom, as the research quoted above seems to show, have little loyalty or attachment to the very organization that pays their salaries and bonuses and hands out their stock options.

Ethics, whether in business or anywhere else, isn’t about fine words or lofty sentiments. It isn’t even about following set moral codes, let alone the kind of wishy-washy “codes of practice” beloved of politicians and corporate lawyers. Ethics is the application of reason and intelligence to issues of right and wrong. It’s working out what it is right to do in any given set of circumstances—then doing it, regardless of favor or criticism.

Maybe it’s the politicization of business that has undermined people’s ethical concerns. In the past, situations were closer to black and white. A good many nineteenth and early twentieth-century industrialists were what the English poet laureate John Betjeman memorably described as “a thumping crook.” There was little doubt about their dubious methods or their total lack of scruples. But at least they were honest about their dishonesty. Today, there are probably just as many crooks, but they’ve learned to hire spin-doctors and PR consultants to conceal their misdeeds behind a facade of fine words and meaningless platitudes—exactly like politicians. Larger-than-life monsters of the past, like J.P. Morgan, for example, were hated, but often secretly admired too. Today’s preening CEOs and fat cats, despite their predilection for manipulating stock options and claiming unearned bonuses, are actually rather a dull crowd: more shady accountants than crooked tycoons.

That’s maybe why it is harder to generate enough outrage in the public mind to force the natural allies of this kind of business leader, shady politicians, to bring them to heel. I gather there is now a move to water-down the enforcement of the Sarbanes-Oxley Act, in the cause of making U.S. capital markets “more competitive.” The weasels are busy and progress of stronger business ethics is once again coming in for stealthy, behind-the-scenes dilution.

Forget the speeches and declarations. Forget the codes of professional practice and compliance officers. What we need is more good, strong, moral outrage: the kind that gets politicians thrown out of office and forces dishonest business leaders to curb their greed and natural tendency to expediency in everything—or face some honest time to reflect . . . in jail.

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Pete Aldin said...

It may have to come to this kind of civil disruption before there is change.
Again, I lament the aboslute lack of choice we have even in so called 'market economies'. Where are the companies driven by honor, by altruism, by empowerment and empathy so that deserving employees and managers may move their employment over to them? Oh, there are some, but they are so few and far between...
Telling business to shape up and grow a conscience is like telling the media to do that. They are both so amoral that they don't even understand the words you have so eloquently BLOGGED today!
I blogged hard on dependency theory because I am so frustrated with the imbalance of power in the workplace which in Australia has just been tipped further in favour of the wealthy and elite, as if they needed that help.

Can you tell you touched a nerve? Grrrrrrrrrrrrrrrrrrrrrrrrr.....

I continue to love your blog.

3:43 AM  
Carmine Coyote said...

Don't despair, Pete.

There are good businesses out there—often smaller ones—and there are leaders who won't give in to the prevailing lack of ethics and conscience.

Human affairs often swing between extremes. The worse things get, and they are pretty bad now, the closer we come to the point where the pendulum will swing back in the other direction.

What it takes to change things is for the majority to refuse to play along. The "bad guys" are still few in number and cannot go it alone. They rely on others' apathy. Take that away, and they will be helpless.

Keep reading, my friend.

7:28 AM  
Aaron Kassover said...

Very well documented argument, and one that touches a nerve in me as well! I'm just not sure what the solution is - doing 'nothing' obviously won't work, but increased government regulation seems to remove accountability from business leaders.

10:34 AM  
Carmine Coyote said...

I'm not much of a believer in government regulation, Aaron. Sometimes it is necessary, but only in extreme cases.

The answer lies more in society: to ostracize and shame those who have no adequate sense of ethics, instead of glorifying them with TV shows and the like. Ethics depend on each one of us acting in the way we believe is correct. It also means not voting for corrupt polticians and making yourself fully aware of what is going on. Too many people are simply ignorant of events—and never seem interested enough to find out more.

Keep reading, my friend.

3:52 PM  

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