Chapter 2: Is American Business Becoming More Ethical?
Business Ethics: An Overview
About the author: Lisa Genasci is a reporter for the Associated Press news service.
Bath Iron Works Corp. was in a quandary. A major customer had asked the boat builder to participate in an under-the-boards investigation of one of its suppliers. Although the customer was key to Bath’s survival, purchasing manager Patrick Thomas wasn’t sure how to handle the request. So he went to the company’s ethics officer, who in turn took the problem to the chief executive.
Within 12 hours the Maine company had established its position: It would not participate in the investigation unless the supplier was notified about what was going on. Eventually, the customer accepted Bath’s stand.
The Beginnings of a Change?
Business ethics may sound like an oxymoron, with seemingly endless news reports about bad behavior at a spectrum of companies. . . .
Wall Street in the 1980s was rife with insider trading. The defense industry has seen some of the most egregious examples of impropriety, with companies such as United Technologies Corp. and Loral Corp. pleading guilty to charges from Pentagon procurement scandals.
But partly in response to hefty fines and other government action—and also because it makes business sense—some companies are introducing ethics into their corporate culture in a big way.
They are rethinking or formalizing codes of conduct,...
(The entire section is 1126 words.)
About the author: Betsy Reed is the coeditor of Real World International and a former coeditor of Dollars and Sense, a bimonthly magazine concerning economic issues.
Late in the fall of 1997, some 600 business leaders—including CEOs, marketing directors, and investors in some of the nation’s largest corporations— gathered at the Sheraton Grande, a giant nonunion conference center in downtown L.A., for the fifth annual meeting of an organization called Business for Social Responsibility. BSR started out as a small network of profit-minded liberals in the Ben-and-Jerry’s mold, eager to prove that you can save the planet, help the poor, and make money at the same time. But in the last few years the organization has welcomed hundreds of mainstream companies into its ranks, such as Dayton Hudson (owner of the Target stores), Phillips-Van Heusen, The Gap, Levi Strauss, Mitsubishi,Wal-Mart, Monsanto, Reebok, and Nike.
Ethics as a Marketing Strategy
At the conference, even the more straitlaced business types could not get enough of the feel-good stuff. Participants were especially keen on the concepts of cause-related marketing (attaching a brand name to a charity to sell products) and strategic philanthropy (making charitable contributions with corporate interests in mind). Session after jam-packed session examined innovative means of making good works pay off. At one, a bright young...
(The entire section is 1172 words.)
American Workers Are Becoming Less Ethical
About the author: Society is a bimonthly periodical that focuses on issues concerning social science.
Nearly half, 48 percent, of U.S. workers admit to unethical or illegal acts during 1996. Those include one or more from a list of 25 actions, including cheating on an expense account, discriminating against coworkers, paying or accepting kickbacks, secretly forging signatures, trading sex for sales and looking the other way when environmental laws are violated.
The survey of 1,324 randomly selected workers, managers, and executives in multiple industries was sponsored by the Ethics Officer Association and the American Society of Chartered Life Underwriters & Chartered Financial Consultants. The 236-page report is especially sobering because workers were asked only to list violations that they attributed to “pressure” due to such things as long hours, sales quotas, job insecurity, balancing work and family, and personal debt. It didn’t ask about unethical or illegal action for other reasons such as greed, revenge, and blind ambition. The survey’s margin of error is plus or minus 3 percentage points.
Also sobering is that workers say it’s getting worse. Fifty-seven percent say they feel more pressure to be unethical than five years ago and 40 percent say it’s gotten worse over the last year.
Many workers might consider some of the 25...
(The entire section is 1015 words.)
Business Students Are Increasingly Unethical
About the author: Marianne M. Jennings is a professor of legal and ethical studies in the business college at Arizona State University. She is also the director of the university’s Lincoln Center for Applied Ethics.
One day in the mid-1980s, the dean of the business school where I teach called me in and declared that we should begin teaching ethics courses. Why? I asked. We had been sending students to the philosophy department for that.
“We’re losing majors,” the dean explained. “They come back from their ethics course believing capitalism is a tool of the devil, and they’re changing their major to liberal arts.” So we began a course in ethics, designed to guide business students through the importance of honesty and fairness in a capitalist system.
Alas, my M.B.A. students arrive already trained in fashionable academic socialism. “Capitalism is the source of all poverty,” wrote one student. And another: “Most people in business are in it for money.” Well, I hope so—but he meant it disparagingly. After reading Michael Novak’s book Business as a Calling, one student remarked: “It’s a stretch to say that capitalism and democracy go together and have religious origins.” Another averred that “there’s too much of a gap between the rich and poor for his premise to be true.”
It’s always a challenge to teach business to Marxists and it strikes me...
(The entire section is 968 words.)
Executives Are Greedy
About the author: Ellen Goodman is the associate editor of The Boston Globe and a nationally syndicated columnist.
It’s not that I envy the corporate titans. It’s just that I have a small failure of imagination.
Every time I try to envision myself as Disney CEO Michael Eisner, I get stuck at the same place. There I am in front of the mirror saying to myself, “Let’s see, I earned $575 million last year. Yeah, that seems about right. I’m worth that.”
I’m pleased that he doesn’t suffer from low self-esteem, but how does he get his mind around those numbers? For that matter, go figure the worth of Sanford I. Weill, the head of Citigroup that runs those nifty ads on the Golf Channel saying, “How Money Works Now.” This is how money works now for Weill: He got paid $166 million in 1998.
Then of course, there’s GE’s John F. Welch Jr. His executive compensation— the word compensation sounds as if he’s been working in the coal mines—rang in at $83 million.
How do they measure their value? Ho hum, another day, another quartermillion dollars?
What brings on this particular rant are the annual Wall Street Journal and Business Week reports on executive pay. We are again invited to gawk at the most garish CEO blossoms on the nation’s money tree.
There was a time when J.P. Morgan was...
(The entire section is 825 words.)
Businesses Are Increasingly Promoting Ethical Behavior
About the author: John Davidson is a writer based in Austin, Texas.
For those of us who experienced the moral climate of the corporate world in the ’80s, it’s a shock to discover that ethics has become an industry—a billiondollar growth industry. Ten years ago, ethics programs in companies were rare; the business world was exultantly Darwinian, a dog-eat-dog, corporationdevour- corporation kind of place. The marketplace was by definition amoral, but we celebrated it nonetheless.
Today, 45 percent of companies with 500 or more employees have ethics programs. The Ethics Officer Association, founded in 1991, has more than 400 members, many employed by Fortune 500 companies, and there are 75 to 100 centers for business ethics scattered around the country. Not only are corporations concerned with internal conduct, they’re also sponsoring ethics training in public schools. In the ultimate case of privatization, some companies contend that they are taking over the role of government in teaching values and citizenship.
The relationship between today’s ethics boom and the moral squalor of the “greed is good” ’80s is not coincidental. It began in 1986, when the Reagan administration appointed a congressional commission to investigate the scandalplagued defense industry. The commission threatened the industry with federal policing if it didn’t clean up its act. Leading defense companies...
(The entire section is 1226 words.)
Ethical Practices Benefit Corporations
About the author: Stephen Butler is the chief executive officer of KPMG Peat Marwick, a financial services firm.
Because of the very nature of what KPMG [Peat Marwick] does and its stature as one of the Big Six [accounting firms], we have access to and knowledge of the best practices of many world-class companies. That inside look has taught me many things, not the least of which is: good ethics means good business. One way you as business leaders can protect your position is to install, enforce and re-enforce a culture and standard of ethical conduct within your organization that can’t be challenged.
Ethics and Self-Interest
Now some of you may be thinking it’s unusual for me to stand up here and promote higher ethical standards in corporate America, especially since I am a CEO that is strongly focused on the bottom line! Or you may be thinking that I’m doing this to infer that KPMG wears the white hats and our competitors, black ones. . . . Not so. Neither of these reasons are valid or are driving my comments today.
And I’m not a tree hugger either. I do want to be able to look myself in the mirror each morning and respect the person I see. I want to know that my 13- year-old son, John, can and does admire me, and that my mother does too.
But I want to stress at the outset that the strongest argument for raising the ethics bar boils down to self-interest. I believe...
(The entire section is 2335 words.)
Executives Are Not Overcompensated
About the author: Holman W. Jenkins Jr. is a business reporter and columnist for The Wall Street Journal.
Since the takeover battles of the 1980s, the media has befuddled itself over the emergence of ever-fatter CEO salaries, golden parachutes and other large individual payments, which have become the norm in corporate restructuring dramas. These are seen as evidence of market failure—i.e., CEOs are looting—or as proof that the rich are only getting richer, while everybody else gets laid off.
A Way to Balance Powerful Egos
It seems to have occurred to only a few eccentric economists that, in the field of human conflict, money’s growing role as the universal solvent actually represents progress. If golden parachutes had existed in Shakespeare’s day, the bard would have had fewer regicides, parricides and fratricides to dramatize.
By contrast, where in centuries past they might have solved their problems by slaughtering each other, the feuding barons of Time Warner were handed checks totaling an estimated $120 million to take themselves out of the picture so King Gerald [CEO Gerald Levin] could assert some mastery over the flailing entertainment giant. Or consider a counterexample: the scuttled merger between two big California HMOs, Wellpoint and Health Systems, a deal that Wall Street professed to love. Neither side’s management could agree on who would be in charge and...
(The entire section is 1155 words.)