“Business Ethics” and Other Corporate Contradictions

“Business Ethics” and Other Corporate Contradictions
By Dr. Kwame R. Charles

There used to be a joke in business school circles some time ago that went something like this: “What’s the smallest business book ever written?” And the answer would be the book on “Ethical Business Practices.”

Just in case you didn’t get it, the joke is supposed to suggest that there aren’t too many ethical business practices to write about! In fact, some people use the term “business ethics” as an example of an oxymoron – a contradiction in terms.

The question therefore arises: “Is there ethics in business?” Or, more precisely, “Can ethics and business go together?”

A lot of the discussion on the present global economic crisis has centred on the behaviour of “the markets” and “market forces”: the housing market, the stock market, the financial markets. All of these “markets” appear to have an existence of their own, without human intervention. But the markets don’t operate by themselves. It is people who operate the markets. So the discussion should really be about the human beings, the people and their behaviour that have created the market forces in the first place. When we get behind the markets, we realize that much of the present financial and economic situation has been created by what could be considered unethical business practices. Whether it is the untenable and unsustainable prime mortgages that precipitated the American meltdown or the hefty bonuses for AIG executives who basically ran the company into the ground, it is primarily unethical business practices that have brought the world economies to their knees.

Of course, we, in this part of the world, are not immune to the scourge of, let’s call them “questionable” business practices and decisions, as we can see from the CLICO and Stanford debacles.

One would have thought that the world would have learned from the excesses of Enron and WorldCom in the 90’s, or that we here would have benefited from our own experience with the collapse of the savings and loans institutions in the 80’s. But the demise of once towering giants in the financial world suggests that perhaps this is how business operates, and to expect otherwise is not to understand the nature of our economic system.

“Greed is good.” “More is better.” These seem to be the mantras of the business world. And it is reflected in the “violence” that pervades business language: “dominate or die;” “annihilate the competition;” “cut-throat competition;” “the war for talent.” Business is portrayed as a jungle, and only the fittest survive. You are either a shark or a sardine. Just look at Microsoft’s domination of the Internet browser market, its annihilation of Netscape and its attempt to stifle any competition that appears to threaten its dominance, constrained only by anti-trust laws.

Clearly, business is not for the faint of heart and the weak of spirit. It also seems clear that “ethics”, doing the right thing, may be severely compromised in a competitive business environment.

But what is “the right thing to do.” In some cultures, it is “the right thing” to favour your family, your friends, your ethnic group in business. In other cultures, these actions are given negative terms like “nepotism”, “cronyism” “racial discrimination,” and are frowned upon and even outlawed.

Some cultures encourage and reward “rugged individualism,” wealth generation, capital accumulation. These tend to be the cultures that produce the Bernard Madoffs and R. Allen Stanfords of the world. Other cultures put the good of the group or the society before that of the individual. Who’s “right” and who’s “wrong”?

This leads to a dilemma for business schools: Can ethics be taught? After the Enron and WorldCom scandals of the 90s, many business schools revisited their curricula and scrambled to include courses on business ethics. The present crisis could serve as an assessment of the effectiveness of those courses as every Wall Street MBA would have taken them at some point in their school career. It would seem like they didn’t get it.

But is it their fault?

Ethics is shaped by culture, religion, family, the social circumstances in which we find ourselves. A course or two at business school will not necessarily make future business leaders more ethical than before they did the course. This is not to say that ethics should not be part of the business school curriculum. On the contrary, ethics and corporate social responsibility should form part of all courses taught in business schools. They should form the basis of the business curriculum as they raise students’ awareness and help them improve their decision-making.

At the end of the day, it is our economic systems that wittingly or unwittingly encourage unethical business behaviour in the marketplace. Every time we reward the accumulation of wealth and the achievement of goals and targets, without taking account of the way the wealth is accumulated or the targets are met, we tacitly encourage unethical business behaviour. In the final analysis, the ends justify the means. What gets rewarded is what gets done.

I would ague that this is the basis of the present global economic crisis. The NASDAQ and the FTSE and the S&P 500 don’t operate on their own. Markets don’t make decisions. People do. And the decisions that they make impact the economy positively or negatively. Societies, therefore, have to manage the way their business people do business. Given the in-built pressures to behave otherwise, we cannot assume that businesses will behavior ethically. For the sake of the stability of the economy, business behaviour needs to be managed through regulation and legislation. This is what the present government and the Central Bank are now attempting to do here, and what the new Obama administration is attempting to do in the US. To a certain extent, it’s closing the barn door after the horse has bolted, but at least, it should stop other horses from bolting in the future.

Other checks on business excesses should include whistle-blower legislation that protects employees and citizens who bring unethical practices to the attention of the authorities; an “ethics hotline”, like the Crime Stoppers Hotline, that gives citizens the ability to provide anonymous tip-offs about unethical business conduct; and an enlightened citizenry that makes informed choices on the basis of the behaviour and practices of businesses, for example, not supporting a business that willfully pollutes the environment.

But perhaps the most important societal mechanisms for exposing unethical behaviour and practices in both the public and the private sectors are independent, free, unfettered, investigative media. The media have a critical role to play in ensuring adherence to ethical standards of behaviour among public officials and business persons, and should be allowed to, within the confines of the law.

Dr. Charles is a director of Quality Consultants Limited,
a business and management consulting firm.
email: kcharles@flowtrinidad.com