Do ethics matter in business? The obvious (and correct) answer is: "Of course they do." A good follow-up question, then, is: "What are ethics?" An article in the journal Issues in Ethics, developed by Manuel Velasquez, Claire Andre, Thomas Shanks, S.J., and Michael J. Meyer, reports that "some years ago, sociologist Raymond Baumhart asked business people, 'What does ethics mean to you?'" ["What is Ethics?" IIE V1 N1, Fall 1987, Revised 2010] Their responses are probably similar to responses you would receive if you polled a number of business executives today. "Among their replies were the following":
"'Ethics has to do with what my feelings tell me is right or wrong.'
"'Ethics has to do with my religious beliefs.'
"'Being ethical is doing what the law requires.'
"'Ethics consists of the standards of behavior our society accepts.'
"'I don't know what the word means.'"
The authors note, "These replies might be typical of our own. The meaning of 'ethics' is hard to pin down, and the views many people have about ethics are shaky." If we want people to act ethically (in business, politics, or any other sector of human activity), we don't want them to have "shaky" views on the subject. The problem, according to Velasquez and his colleagues, is that "many people tend to equate ethics with their feelings." They insist, "Being ethical is clearly not a matter of following one's feelings. A person following his or her feelings may recoil from doing what is right. In fact, feelings frequently deviate from what is ethical." This assertion is one I will return to later.
Velasquez and his colleagues go on to explain a few other things that ethics are not. For example, they are not based in religion. Atheists need to be as ethical as believers. Ethics are not the same "as following the law." People can do some pretty unethical things while staying within the letter of the law (they point out, for example, that slavery was once legal). They continue:
"Finally, being ethical is not the same as doing 'whatever society accepts.' In any society, most people accept standards that are, in fact, ethical. But standards of behavior in society can deviate from what is ethical. An entire society can become ethically corrupt. Nazi Germany is a good example of a morally corrupt society. Moreover, if being ethical were doing 'whatever society accepts,' then to find out what is ethical, one would have to find out what society accepts. ... But no one ever tries to decide an ethical issue by doing a survey. Further, the lack of social consensus on many issues makes it impossible to equate ethics with whatever society accepts. ... If being ethical were doing whatever society accepts, one would have to find an agreement on issues which does not, in fact, exist."
Of course, explaining what ethics are not gets us no closer to explaining what ethics are. Fortunately, Velasquez and his colleagues do not leave us hanging. They continue:
"Ethics is two things. First, ethics refers to well-founded standards of right and wrong that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues. Ethics, for example, refers to those standards that impose the reasonable obligations to refrain from rape, stealing, murder, assault, slander, and fraud. Ethical standards also include those that enjoin virtues of honesty, compassion, and loyalty. And, ethical standards include standards relating to rights, such as the right to life, the right to freedom from injury, and the right to privacy. Such standards are adequate standards of ethics because they are supported by consistent and well-founded reasons. Secondly, ethics refers to the study and development of one's ethical standards. As mentioned above, feelings, laws, and social norms can deviate from what is ethical. So it is necessary to constantly examine one's standards to ensure that they are reasonable and well-founded. Ethics also means, then, the continuous effort of studying our own moral beliefs and our moral conduct, and striving to ensure that we, and the institutions we help to shape, live up to standards that are reasonable and solidly-based."
Since this is a corporate blog, I want to discuss ethics in the business setting. Professor Mary Gentile, director of the Giving Voice To Values curriculum at Babson College, indicates that she once wondered whether there was such a thing as business ethics. ["Ethics teaching asks the wrong questions," Financial Times, 13 September 2010] She writes:
"A few years ago, I suffered a crisis of faith. After working in the field of business ethics at Harvard Business School and later as a consultant on global MBA education, I began to wonder if it was even ethical to try to teach the subject. I laboured to persuade faculty to raise the topic, but then, the conversation typically went as follows: some students argued we should all 'do the right thing'. These individuals typically broke into two groups: those who were saying what they thought was expected and those who really wanted to believe they could be ethical business people. And then there was another group who felt the class was an exercise in political correctness. What did it have to do with learning how to be successful? They were cynical and sometimes slightly resentful; what right did a business school have to be preaching at them? Given this particular recipe, coupled with faculty who understandably did not want to argue that students behave in a naively self-destructive fashion, the ethics discussion was less than empowering. Classes were typically based on thorny ethical dilemmas: the ones we termed 'right versus right' discussions, although they often amounted to more of a search for the lesser evil. Students who argued for 'ethical' positions would often appear to be less sophisticated; the way to demonstrate you were worldly wise was to argue that the competitive marketplace did not allow for self-serving morality, or even more cleverly, that it was wrong to behave in such a selfish way, putting one's own conscience over the good of the enterprise and shareholders. It seemed that despite faculty's good intentions, these conversations were something of a charade and I questioned the whole endeavour."
It is easy to see how one could start questioning the value of ethics if all you ever focus on are "right versus right" discussions. Searching for the lesser evil in morally ambivalent situations is never going to give students a sense of what is right and what is wrong. Armed with some basic standards, I suspect that most people will do their best to work through the tough cases. Without such standards, they appeared to be unprepared to deal with situations where clear ethical breaches are being made. Gentile continues:
"I realised that the MBA graduates pictured in handcuffs were typically those who had been engaged in more clear-cut offences; rather than right versus right scenarios, their offences were not only unethical but illegal. And I wondered if our focus on distinguishing right from wrong was actually creating a kind of 'school for scandal'. Students were practising the very rationalisations that led them to question whether values-driven behaviour was even possible or right in the first place. It was this kind of thinking that later led some of their number into such deep litigious waters. Were we asking the wrong questions? Shouldn't we invite students to think about how to do what was ethical and legal, rather than whether it was possible (or profitable) to do so? What if we looked at what had worked in the past for those individuals who had found ways to voice their values in the workplace? And what if we asked students to develop action plans and 'scripts' for what they would say and do when they encountered the very predictable pressures to behave unethically?"
All parents eventually learn that the best thing they can do for their children is teach them correct principles and then hope they use them to guide their behavior throughout the rest of their lives. Gentile eventually came to the realization that a similar direction was also the best one for educators to take with their students as well. She concludes:
"We could then tell them to practice these scripts with each other – not as adversarial role play but as peer coaching exercises. Students would prove their sophistication with the most feasible arguments and methods to do the seemingly impossible, that is behave in accordance with their highest values in the workplace. Just think what might have happened at BP if individuals there not only knew what the right thing to do was (we know there was more than one engineer who tried to speak up about safety violations), but also knew how to do so effectively. This idea is not rocket science. It amounts to educators asking students and business leaders asking employees to bring their insights, their critical thinking and innovative ideas to the task of getting the right thing done. We know that the heroes of business history comprise individuals who made 'do-able' what previously seemed impossible. Let's invite students to apply that same passion and entrepreneurial spirit to building a values-driven economy."
If all business schools would take this approach to teaching ethics, a generation or two from now we might find a more ethical global business climate. To learn more about today's global business climate, read my post entitled Corruption Around the World. Since the Corruption Perceptions Index was published last year, not much has changed. The Organization for Economic Cooperation and Development recently reported "that only five of the 38 nations that have committed to stamp out bribery of foreign officials imposed penalties during 2010." ["Few Nations Are Punishing Bribery," by Paul Hannon, The Wall Street Journal, 21 April 2011] Will the business world ever be ethically perfect -- of course not. Even business people with sterling reputations like Warren Buffet can find themselves unwittingly caught in ethical dilemmas ["Stumbling Into Bad Behavior," by Max H. Bazerman and Ann E. Tenbrunsel, The New York Times, 20 April 2011]. Bazerman, a professor of business administration at Harvard, and Tenbrunsel, a professor of management at the University of Notre Dame, write:
"It's easy to look at big names like Warren E. Buffett, and big companies like Ernst and Young, and be judgmental. Of course they overlooked ethical lapses. Why wouldn't they? That's business. Regulators, prosecutors and journalists tend to focus on corruption caused by willful actions or ignorance. But in our research, and in the work of other scholars who study the psychology of behavioral ethics, we have found that much unethical conduct that goes on, whether in social life or work life, happens because people are unconsciously fooling themselves. They overlook transgressions — bending a rule to help a colleague, overlooking information that might damage the reputation of a client — because it is in their interest to do so."
Do such ethical transgressions make a person evil? Do people committing them see themselves as unethical? Bazerman and Tenbrunsel assert, "When we fail to notice that a decision has an ethical component, we are able to behave unethically while maintaining a positive self-image. No wonder, then, that our research shows that people consistently believe themselves to be more ethical than they are." They appear to be agreeing with Gentile that helping make people more aware of what constitutes ethical behavior in a positive way could help create a less corrupt business environment. Unfortunately, I'm not holding my breath that it will happen any time soon. Bazerman and Tenbrunsel believe that conflicts of interest are behind most of the business world's "unintentional" as well as "intentional" acts of unethical behavior. They conclude:
"Our legal system often focuses on whether unethical behavior represents 'willful misconduct' or 'gross negligence.' Typically people are only held accountable if their unethical decisions appear to have been intentional — and of course, if they consciously make such decisions, they should be. But unintentional influences on unethical behavior can have equally damaging outcomes. Our confidence in our own integrity is frequently overrated. Good people unknowingly contribute to unethical actions, so reforms need to address the often hidden influences on our behavior. Auditors should only audit; they should not be allowed to sell other services or profit from pleasing their customers. Similarly, if we want credit-rating agencies to be objective, they need to keep an appropriate distance from the issuers of the securities they assess. True reform needs to go beyond fines and disclosures; if we are to truly eliminate conflicts of interest we must understand the psychology behind them."
Philosophers and theologians will forever debate whether humankind's nature is basically bad or good. My suspicion is that where you sit in that debate determines much of your thinking about how ethics are taught (or even if it is an appropriate subject for business schools). As an optimist, I fall into the camp that says people need to be exposed to the subject. I like Professor Gentile's approach. On the other hand, as a realist, I want legislators to enact and regulators to enforce laws dealing with unethical behavior. We need both carrots and sticks in order to protect society as a whole. The late Nobel Prize laureate Albert Camus once said, "A man without ethics is a wild beast loosed upon this world." It's time to tame the beast.
