Life produces many difficult decisions and dilemmas, but many of the integrity related challenges faced by people occur within the sphere of the business organisation.
The vast majority of those engaged inbusiness would regard themselves as fundamentally honest. Yet with ever increasing competitive pressures it becomes more tempting to cross legal or ethical lines, particularly if the risk of exposure is presumed minimal.
Whilst this era of globalisation and improved communications has created many business opportunities, it has also been evidenced by exposure of much corporate wrongdoing.
THE EFFECT OF SCANDALS
Financial scandals have contributed to a general belief that white-collar or corporate crime pays. The perception seems to be:
- the risk of capture is slim
- guilt is extremely difficult to prove and
- the penalties appear slight, particularly compared with the significant rewards.
EROSION OF TRUST
One result of this has been an erosion in the whole business sector and thoseinvolved in it. Members of professions such as accountants and lawyers have not been above implication.
There is less respect for a legal system which appears to permit corporate dishonesty to be lightly punished, if at all.
Nor is it just the business sector that suffers. Belief in government and the public sector is damaged when positions of public trust are seen to be used for private advantage.
‘Ordinary’ crime is certainly more capable of being easily reported and may be of broader appeal to the public.
The risk of litigation means the media may have to be surer of their facts, requiring substantial research, before exposing corporate wrongdoing. One wonders whether corporate crime has increased or is just being reported by a more vigilant media?
BALANCED ATTITUDE TO SCANDALS
Scandals, or rather their exposure by the media, serve a useful purpose if they result in public pressure for an improvement in standards.
Yet the irony is that publicising the larger excesses may give the public the impression that corporate wrongdoing is the norm rather than the exception in business and is so widespread that nothing can be done about it. Neither are true.
Media coverage of scandals may offer greater scope for sensational reporting, yet business ethics are also about smaller scale acts of ‘dishonesty’ or ‘deception’ which receive little media attention. Indeed many wrongdoings in business would be too minor to warrant exposure in the media.
CASE I – FINANCIAL INSTITUTION
Consider the case reported in the media of dealers who knowingly sold loss-making “derivatives” to clients. (This was originally written in 1998 so maybe little changes?).
The financial institution in question apparently took the calculated decision to offload its losses to unsuspecting clients in the belief that few would sue and fewer still would win their cases.
The institution knew that taking a legal case would require clients to publicise the enormity of their losses thus effecting investor confidence and share price.
Many points arise from the unethical practices in this case, not least the following:
Success goals of our ‘modern’ society are increasingly based on financial gain with the result that conscience and moral values may be subordinated to financial success.
One author has commented:
“Failure seems to be regarded as the one unpardonable crime, success as the all-redeeming virtue, the acquisition of wealth as the single worthy aim of life. The hair-raising revelations of skullduggery and grandscale thievery merely incite others to surpass them by yet bolder outrages and more corrupt organisations”.
Yet Charles Francis Adams wrote this over a hundred years ago. ‘Derivatives’ maybe a recent phenomenon, but self-interest certainly isn’t!
TIP OF THE ICEBERG
Reported irregularities and frauds just the tip of the iceberg. Many are either never discovered or never reported because of the effect of adverse publicity.
WITHIN THE LAW
Whilst the act of selling the derivatives to their clients may have been unethical, it may or may not have been illegal.
This would seem to suggest thatactions in business can be:
- legal and ethical
- legal and unethical
- illegal and unethical
Remaining within the law may be no guarantee of ethical behaviour whilst dishonest acts in business may not be crimes at all.
As one wit remarked: “It’s strange that people should take up crime when there are so many legal ways to be dishonest”.
“EVERYONE IS DOING IT”
Does unacceptable behaviour becomemore acceptable (or less unacceptable!) just because it is becoming more prevalent?
Could the dealers’ behaviour be condoned just because they knew their competitors were also offloading loss making derivatives to their clients?
The ‘culture’ of the organisation can be very dominant. In some organisations the bottom-line result is the sole concern whilst in others the means of achieving the ends are also emphasised. The bottomline would appear to have been the sole criteria for ‘our’ derivatives institution. Long-term customer relationships and corporate reputation most certainly were not.
The culture of some organisations may even regard illegal conduct as sound commercial practice. The crime can appear not to have been the wrongdoing itself – but getting caught.
A corporation may be a separate legal entity, but decisions and actions are made by its management and staff.
Certain firms or even entire industries may get a bad name, but in reality corporate wrongdoing is perpetrated by the actions of individuals who work for the organisation. Maybe the problem lies with the ethics of the individuals themselves?
Would actions acceptable to someone in business be unacceptable in that same person’s private or family life?
If so, does the use of the term “business ethics” imply ethics in “business” are different from ethics outside business?
Or maybe it refers to the ethics of the individuals who happen to work in “business”, some of whom give others a bad name
The foundation for poor “business ethics” is likely to be doubtful “personal ethics”.
A common denominator in reading about disgraced high profile business people seems to be that they appear to have had little or no scruples.
It is difficult to trust someone’s commitment to ethics in business if one has reservations about their personal integrity.
Many corporate criminals may not believe they have done anything wrong. As the dealer imprisoned for insider dealing asked “what other kind is there?”
One could ask is it possible to be highly profitable and always honest? Those who not only behave ethically and legally but also strive to appear to be doing so may be at a commercial disadvantage.
Are extra profits earned by being ‘slightly’unethical? It seems many opportunities present themselves to those who are prepared to be at least a ‘little unethical’.
Perhaps people don’t become dishonest overnight – it may be a gradual process which involves being deceitful for corporate or self advancement.
Maybe the more often one crosses the ethical line, the more often wrong decisions are either ordered or carried out, the more the conscience becomes dimmed to ethical concerns.
It is easy to criticise others but be less critical about ourselves. How do we rationalise and accept our own wrong behaviour?
Perhaps we judge others by their words and deeds, but judge ourselves only on our intentions and aspirations, which may in turn differ from our actual words and deeds?
CASE II – DOING THE RIGHT THING
A company was nearing it’s final decision on whether or not to proceed with a multimillion euro matter.
Tom was preparing figures using a financial model for the Board of Directors and submitted them without discussing them with his colleagues. Dick, one of his team, then noticed a minor error in one of Tom’s spreadsheets. The error had a massive impact on the end result – the Board could conceivably take the opposite decision were it aware of the ‘real’ figures.
Dick drew the matter to Tom’s attention. Tom knew the error could cost the company millions but knew he would lose face if he mentioned it to the Board.
He decided not to lose face. Dick didn’t know whether to mention the matter to anyone else. He decided to remain loyal to Tom and say nothing when Tom refused to mention the error to his superiors.
Fortunately the Board decided not to proceed with the matter. Tom said he would involve Dick more so the situation would be less likely to arise again.
However, a few months later Tom’s superior, Harriet, was reviewing Tom’s figures for the Board on another matter and noticed some errors. Harriet asked Dick to amend the figures and in doing so he noticed even more errors than those spotted by Harriet.
Tom, however, insisted that Dick only amend the errors noticed by Harriet. He didn’t want to lose face with Harriet by admitting further errors so he told Dick his amendments were wrong and proceeded to knowingly submit wrong figures to the Board.
Dick again had a difficult decision to make. He had tried to reason with Tom on a number of occasions, but nothing had changed. Should he remain loyal to Tom? He previously had a great deal of respect for Tom and didn’t want to hurt him personally. But he had now seen too many instances where Tom had put himself first, without consideration for the interests of either his team or the company. Dick now doubted Tom’s personal integrity and no longer trusted his judgement.
Should the Board’s ultimate decision have any impact on Dick’s dilemma? Would his conscience be easier if he said nothing and the financial impact transpired to be insignificant? Or was it a point of principle irrespective of what the Board decided?
He felt a responsibility to do the right thing by the company. But how?
TURN TO WHOM?
Unfortunately most employees have few avenues to turn to for advice when faced with difficult ethical decisions or dilemmas. This can place considerable personal strain on the individuals and often their families. Many believe they cannot risk their jobs by objecting. Those who do object may find their promotional opportunities limited. Often they cannot turn to their boss for advice because frequently the request to do something wrong comes from their superior.
For many it is easier to go along with a wrong decision or action than report the wrongdoer. Society tends not to approve ofpeople who tell tales on others. Indeed, some of the greatest atrocities in history happened when no-one had the courage to speak out against the wrongdoing.
Does it make a difference if the wrongdoer is personally known or not? Or if the effect of the wrongdoing is minor rather than major?
Is it really worth putting one’s job in jeopardy? It may be easier to try and reason with the wrongdoer and hope a change indirection will result. If so there may be little need to report anything.
But to whom does ultimate loyalty lie? To boss, company, its owners or oneself? The dilemma seems to be a conflict between wanting to be loyal to someone and wanting to correct wrongdoing. It seems loyalty to the person frequently prevails.
CASE III – ETHICAL MANAGEMENT
Mutt and Jeff work for the same company. Mutt’s family and friends think he is a wonderful guy who has quickly risen through the ranks to senior management. Jeff is a bright young graduate who reports to Mutt.
Jeff thought highly of his boss but after a while realised that Mutt’s rapid rise to senior management level was achieved by:
- deliberately withholding information from colleagues
- taking credit for others’ work
- denying colleagues the opportunity to contribute
- over or understating facts and figures
- spreading rumours about colleagues
- rarely praising or encouraging his staff
- ignoring statf development
- putting down the performance of others ….. et al.
DIGNITY & RESPECT
In his youthful naivety Jeff had thought that being co-operative and trying to do the right thing for the organisation would be the secret to success. He thought that treating others with the dignity and respect with which he would like to be treated himself would be the way in business.
Mutt might have risen rapidly up the corporate ladder, yet he couldn’t understand why he wasn’t respected by his colleagues and staff.
Jeff now realised that those bosses in the firm who were respected by the staff weren’t just respected because they were the boss but rather because they warranted respect by being themselves considerate of their staffs’ interests and needs.
Now Jeff began to wonder if he wanted to get on in the organisation should he start doing the same as Mutt. He mightn’t have thought such practices right but it did seem to be the way to progress in business.
Business ethics may be viewed at differentlevels. Grand scale corporate wrongdoing may hit the national headlines but would still not be particularly prevalent in business.
The other end of the scale which would rarely be ‘exposed’ by the media is the less obvious deceit of colleagues, customers and competitors. Unlike large scale crime, these ‘minor’ examples of unethical behaviour unfortunately appear quite commonplace throughout the business world.
Although many may not realise it, business managers and executives have an inordinate influence not only on their employees’ lives but also on society’s moral values.
Practices such as those used by Mutt do little to improve either the values of the next generation of business people or the efficiency of the organisation.
Self-interest will always have a role to play in business, but hopefully in a more balanced, harnessed and constructive manner.
Those successful managers who devote enough of their time and energy to team building and staff development set the example for the next generation.
Whilst personal standards and opinions vary, most people would like to believe they are “honest”. Yet even the most honest people are capable of easily succumbing to self-interest.
Abraham Lincoln said that “human action can be modified to some extent but human nature cannot be changed”.
Fame, fortune, power, money, recognition, status and position are profoundly human desires. Indeed they are desires that are more easily satisfied in the business arena where conscience and moral values are more easily subordinated to financial success.
The very existence of a “grey area” between right and wrong is no excuse for dispensing with ethics. Much of the “greyness” can be taken out of ethical dilemmas by taking the time to weigh up a decision.
ETHICAL DECISION MAKING
Blanchard (‘One Minute Manager’) and Peale in their 1988 book ‘The Power of Ethical Management’ suggest most people basically know right from wrong but put themselves into stressful situations because they have knowingly made unethical decisions.
‘It is easy to charge ahead without thinking and then rationalise your behaviour after the event. But the fact of the matter is THERE IS NO RIGHT WAY TO DO A WRONG THING”.
Blanchard & Peale suggest an Ethics Check – answering three questions when faced with an ethical problem.
1. Is it legal? Will I be violating either civil law or company policy?
2. Is it balanced? Is it fair to all concerned in the short term as well as thelong term? Does it promote win-win relationships?
3. How will it make me feel about myself? Will it make me feel proud? Would I feel good if my decision was published in the newspaper? Would I feel good if my family knew about it? Would I feel good if my family knew about it?
PERSONAL ETHICS & CONSCIENCE
Perhaps the third question is the toughest!! Taking the right option requires a certain degree of inner strength and confidence.
Polonius from Shakespeare’s Hamlet advises his son prior to Laertes embarking on a boat to Paris:
This above all: to thine own self be true,
And it must follow, as the night the day,
Thou canst not then be false to any man.
Or as Erich Fromm put it more recently:
“Only the person who has faith in himself is able to be faithful to others”.
Many now believe that recent times have been characterised by a ‘get rich quick’ mentality. Once wealth was created for both businesses and individuals, the morality of the methods used was of little concern.
Fortunately there has been a backlash against unethical business practices. Perhaps, though, recent reflection on business practices may be particularly noticeable because of possible widespread neglect of business ethics in the past.
BUSINESS FIGHTS BACK
Many businesses are now trying to prove it really is possible to maximise profits and conduct business ethically. Institutions now offer Ethical Investment Funds. BusinessEthics units have been formed by larger companies, Corporate Codes of Conduct have been drawn up and internal websites provide employees with assistance on ethical decision making. Some companies not only have Mission Statements but ‘Corporate Values’ statements too.
Of course we need the necessary apparatusand resources to detect, expose and punish corporate wrongdoers.
More severe penalties and a greater chance of detection will undoubtedly produce greater compliance with the law. Yet additional legislation, rules and codes are only part of the solution – they alone will not produce more ethical business people.
Somehow, though, we need to educate and inculcate in those in business proper standards of commercial morality and business ethics. One of the best places to start is in the training of our new business people and professionals. The universities and colleges (and perhaps the schools) have a role to play, as do the professions.
WHAT IS NEEDED
Corporations of all sizes must also share the responsibility. Perhaps the basic principle of Northern Telecom’s business ethics function captures the essence of what is needed: “the primary aim of the business ethics [unit] is not to catch people doing something wrong, but to help people do what is right.”
SCRATCH THE SURFACE
No one website can pretend to do anything but scratch the surface of such a complex issue and cannot but hope to raise some issues and set the mind thinking.
It should not be forgotten that one factor contributing to the economic crash in the USA in 1929 was a loss of confidence in the corporate sector resulting from a variety of corporate and securities frauds.
If “business” has a bad name, only one body of people can rectify it. People in business have a responsibility not only to do the right thing but be seen to do theright thing.
Business people, not least members of professions, permeate society and its values more than any other group. If they don’t shoulder a greater responsibility for setting and maintaining society’s ethical standards, who will?
Perhaps Robert Louis Stevenson’s advice would be a good starting point: “To tell the truth, rightly understood, is not just to state the true facts, but to convey a true impression.”
Fortunately it appears that there is a gradually increasing focus on ethics in business. For this momentum to continue, many more people in business will need to publicly share newspaper president Cory Servant’s belief that “by and large, people of integrity succeed in business far more frequently than those who operate without ethics.”
This introduction to business ethics by the Chair of EBEN Ireland, was originally published as “Ethical Hypotheticals” by the ‘Accountancy Ireland’ journal in June 1998.
If we were to ask what has since changed, would there be much to report?
Perhaps we should be enquiring what can be done to ensure that the personal integrity of the vast majority of people in business has ample opportunity to come further to the fore in the practices of their businesses?
EBEN Ireland would like to help you. YOU can help us by joining and participating in whatever way you can. We need and welcome your advice and suggestions. Only by working together can we collectively ‘make a difference’.