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The Editor's chair Should we teach business ethics?
The Editor's Chair
Should We Teach Business Ethics? Harvey C. Bunke
Harvey Bunke, assuming once again his "permanent" seat in the Editor' s Chair, says business ethics is vitally important but can it be taught? At the core of every moral code there's a picture of human nature, a map of the universe, a version of history. To human nature (of the sort conceived), in a universe (of the kind imagined), after history (so understood), the rules of the code apply.---Walter Lippmann
I t ' s good to be home! For some three years I have been away doing other things--away from my intellectual and academic home, away from m y calling. Yet I suppose in a way I never did quite leave m y spiritual home, if for no other reason than even as I did other things, worldly things, I continued to teach a seminar on leadership and ethics. With 20 bright pushy Indiana University seniors asking me childlike questions--How did it all begin? What is moral?---I was spared the luxury of teaching a comfortable, routine course far removed from the hurly-burly dynamics of our society with all its drama and dilemmas. At every turn, m y students confronted me with an explosion of ethical questions about such things as the Iran-Contra scandal, illegal shenanigans on Wall Street, and the seemingly endless series of peccadillos by politicians, T.V. evangelists, and business executives that make the daily headlines. Is it ethical, they asked, for Nestl4 to sell baby formula in an underdeveloped country if misuse, caused by ignorance, results in infant deaths; or for Aramco to continue to do business with the racist establishment in South Africa; or for General Motors to shift production offshore, closing American factories and making tens of thousands of American workers unemployed? And, they further inquired, is it ethical for our government to adopt policies almost certain to guarantee staggering budget and trade deficits that, while making present life more pleasant--especially for politicians--will place a heavy burden upon generations to come? Ethics, long buried in musty library tomes, is now fashionable. The public, always fascinated and sometimes angered by unseemly behavior in high places, has heeded the solemn and all too often righteous warnings of the media. Millions sat glued to their TV sets as the Iran-Contra hearings unfolded; public distrust of governmental officials was further strained as one after another of
Should We Teach Business Ethics?
President Reagan's lieutenants was charged with felonious behavior; and Congress, reflecting pressure from a multitude of well-organized groups, seemed paralyzed and too incompetent to reach agreement on even minor reductions in the federal budget. On Main Street the Wall Street scandals of Levine and Boesky (among others) were seen as just tips of icebergs, reaffirming the cynicism ordinary folks felt for the financial community, business in general, and big business in particular. Public concern is reflected in the universities. Business schools have hurriedly added courses in social responsibility, while parents of would-be students asked if the university "did" ethics. Ethics of all kinds are fashionable: legal ethics, accounting ethics, religious ethics, business ethics, as if each profession lived by its own unique set of ethics: the clergy by one, the businessman another, and the medical doctor by still another. People practicing different professions are of course confronted with very different problems, different moral dilemmas that try men's souls. Should the physician prescribe treatment that will prolong the suffering of a terminally ill person? Should an attorney take a case even though he believes the accused is guilty? Should a business executive move a manufacturing operation abroad knowing full well that such a move will destroy the very community to which the company owes its existence? Dilemmas go with the territory. Professions such as law, medicine, and accounting face unique sets of dilemmas requiring the balancing of one set of considerations against another. To make things less uncertain, or more tolerable, each profession develops its own canons, its own rules of conduct. But what are the canons of business? How do we assess economic behavior? Can we be both economically successful'and ethical? Is the mark of greed an inherent part of business success? How do we assess our own economic behavior? That of others? Do we judge the behavior of others by one standard? Ours by another? Is it perfectly proper for us to buy low and sell high? For others? Is there but one standard for all, applicable to us as well as others? BUSINESS AND HUMAN
NATURE
ur Western heritage tells us that man is by nature selfish. The ancient Greeks talked of hubris, man's desire to be God. Christianity tells of original sin, man's rebellion against God. Economists teach that we are maximizing creatures, be it in the pursuit of money, power, or sexual conquest. Psychiatrists see us as driven by a voracious, unreasoning libido that if left unchecked would consume the universe. In short, Western thought says that we are selfish. Indeed, our Founding Fathers, even with their great optimism, carefully drafted a constitution calling for a government of checks and balances designed to protect the people from man's innate proclivity to use power for personal advantage. Over the last millennium this inherent tendency toward selfishness has been a source of untold suffering and misery. The great religions of the world--Christianity, Judaism, Islam, Hinduism, Buddhism--all teach in one form or another the golden rule: "Do unto others as you would have them do unto you." History is a tale revealing man's limited success in applying this rule to restrain his own selfish nature. Then, one day, Adam Smith changed everything when he figuratively said: "Hold on there a minute. Sure, man's selfish. That's the way he is, that's the way he's always been, and that's the way he will always be. He isn't going to change; there is nothing we can do about it. So let's look on the bright side. When man pursues his own interest in the marketplace, he unknowingly and unconsciously furthers the welfare of his fellow man by doing what the market tells him to do. And the harder he pushes to further his own interest, the more he enriches society." By and large the West, and particularly America, listened to Smith; we built our economy on a system that Karl Marx labeled capitalism. A wag would say that the essence of capitalism is to buy low and sell high. It is that, of
O
"What are the canons of business? H o w do w e assess e c o n o m i c behavior? Can w e be both economically successful and ethical? Is the mark of greed an inherent part of business success?"
Business Horizons / July-August 1988 I
"Like a city council, a
governor, a senator, a president, or a legislature, the large corporation is politically accountable---accountable to use its power wisely and appropriately. But what is the appropriate use of power?" 4
course, but it is much more. Its most important aspect is that the market, reflecting an infinite number of changing and unknowable forces, sets the pace and direction of the economy; individuals may follow or ignore it at their peril. The market is cold, implacable, unforgiving; it rewards the strong and the lucky, showering with riches many w h o m we neither respect or admire for their nobility, charity, or demeanor. But as Adam Smith observed in 976 pages (Modern Library Edition) of 18th century prose, a market system makes for "The Wealth of Nations." So we Americans, be we sellers or buyers, go to the market and pursue our own self-interest with gusto. With nary a hint of guilt the farmer in selling his crops studies the market, hoping to maximize his returns. The investor in securities follows the market, subscribes to publications offering market tips, and seeks out advice of financial consultants in his quest for riches. Even the housewife studies the weekly ads so when she does her shopping she will get the best bargains by buying low. To strengthen our position in the market, to .get richer, is rational; to get weaker, to become poorer in the market, is irrational. More is better than less: as Mae West put it, "I've been rich and I've been poor. Rich is better." To America this comes naturally, without reference to any philosophical ideas or system. As we trade and barter, make and consume, we don't much think about whether we are doing right or doing good. As we work at our jobs---making cars or growing wheat or selling shirts we don't give much thought to starvation in Ethiopia, Alzheimer's disease, the plight of the homeless, the drug crisis, racial discrimination, the declining support for classical music, the tragic state of public education in the U.S., or the hundreds upon hundreds of other social problems that mankind faces with each passing day. And with good reason. We feel much like the child told to finish his spinach because there are millions of people starving in Ethiopia. The child, while not without sympathy, knows he can't do anything to help the starving, even as he knows he can, through an act of will, affect the fate of his spinach-which in his heart he knows is "pure poison." And so it is with all of us. Better that we make good cars, provide a needed service by selling insurance, or operate a restaurant, something we can do with some success that brings satisfaction to ourselves and to others, than fritter away our energies wringing our hands and wondering how we should run our business so we could help solve most of the world's pressing social problems. Like the child faced with the spinach, we act on those things on which we can make a difference. Capitalistic theory tells us that we "do good"--promote the best interest of society--by "doing well"--promoting ourselves. It is all so simple. Ethics in the marketplace are irrelevant. Indeed they can be a hindrance, for they can get in the way of our "doing good" by "doing well." Isn't it wonderful to know that if we follow our natural selfishness, the market will convert our efforts into a force beneficial to not only ourselves but also society at large? Because of this, we need not feel personally responsible for all the pain, suffering, and injustice from which our world suffers. If it were not for the doctrine of capitalism, how could we ever find tranquility or peaceful sleep? Would that the world were that innocent, so uncomplicated, that we could simply stop here. Unfortunately, it isn't that easy; there are complications, the most obvious of which is power. The rosy picture depicted by pure capitalistic theory assumes an absence of power. POWER
apitalistic theory assumes neither buyer nor seller can materially influence the market by limiting supply or fixing prices. The decision by an individual farmer, for example, to sell or withhold his product from the market will have no material effect on the price of wheat, just as the purchases of the single housewife have n o impact on prices in the su-
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Should We Teach Business Ethics? i
permarket. Such cannot be said for General Motors, however. It is possessed of power that it uses to influence prices, determine wages, and shape the characteristics of the cars we drive. To the extent that General Motors exercises power, it goes beyond being an economic creature and becomes a political entity. And as with all political entities, it will be expected by society to act responsibly, to behave ethically. Like a city council, a governor, a senator, a president, or a legislature, the large corporation is politically accountable-accountable to use its power wisely and appropriately. But what is the appropriate use of power? The political world is one of ups and downs: political fashions change, issues come and go. Should the corporation use its power to increase employee wages and benefits, fund cancer research, promote the arts, reduce racial discrimination, enhance our school systems, all of the above? If so, at what cost to investments designed to increase the corporation's efficiency? And how does the corporation determine what proportion of its resources should be given to which of the multitude of social causes that populate the landscape? The answer, of course, is that the corporation must use its power "appropriately," which means that it must respond to the prevailing climate of opinion. At one time it may be appropriate to work toward improving the environment, at another time to support education, and at still another to finance a crash program to advance technology. Just as with any other political entity, be it the president or Congress or the United Auto Workers, what may be the most appropriate way to use power at one tim~ may at another time be quite inappropriate. Hence the large corporation, as does any other political entity, must have a public relations arm that stays on top of things, both to help determine the appropriate use of power and to convince the public that the corporation is indeed using its p o w e r - - t h e very existence of which it must deny--wisely and effectively. But we are unconvinced. We are cynical. Taking a cue from our Founding Fathers, we believe that power is used for the benefit of those w h o wield it, Yet, although the corporation makes us uncomfortable and is the subject of ceaseless scrutiny and criticism, we still reluctantly believe that we need the efficiency and productivity that only the corporation can provide; and we fervently hope that over the long haul the market will impose a level of discipline precluding serious and prolonged exploitation. In short, we tolerate corporate power. But just to help things along we have a long antitrust tradition and a multitude of regulations ranging from environmental controls to fair labor standards, the purpose of which is to help the market do its job. Americans are realistic. In economic matters, while we may talk about ethics, we believe that it is unrealistic to expect people to be ethical. In the market we expect them to promote their own interest. LIFE B E Y O N D THE M A R K E T
'van Boesky, known on Wall Street as "Ivan the Terrible," and w h o in March began a three-year prison term for inside stock trading, observed .in a commencement address at the University of California at Berkeley that "greed is all r i g h t . . . I want you to know that. I think greed is healthy. You can be greedy and feel good about yourself." Graduates attending this prestigious university c o m m e n c e m e n t cheered Boesky, applauding and laughing. Dennis Levine, also convicted of inside stock trading, learned from his Professor at Bernard Baruch College (a Hoosier), "Greed is a nice religion, if you are really greedy, you are going to keep your shoes polished, you won't run around on your wife or get drunk. You will do what it takes to maximize your lifetime income, and that doesn't leave time for messing up." The thought is not original. Dr. Samuel Johnson, a contemporary of Adam Smith, observed, "There are few ways in which a man can be more innocently
"A wag would say that the essence of capitalism is to buy low and sell high. It is that, of course, but it is much more."
Business Horizons / July-August 1988 I
"Alas, how different our world might be if only Napoleon's genius had found expression through presiding over General Motors, Lenin's over General Dynamics, and Hitler's over McDonald's."
employed than in getting money." He further noted, "The great increase of commerce and manufacturing hurts the military spirit of the people, because it produces a competition for something else than martial honors---a competition of riches." Alas, h o w different our world might be if only Napoleon's genius had found expression through presiding over General Motors, Lenin's over General Dynamics, and Hitler's over McDonald's. Critics of the market system seem oblivious to the market's silent capacity to provide opportunities for ambitious men to diffuse their overpowering will without doing great sodal harm indeed, perhaps bringing great advantage to the rest of us. Blessedly, there is more to life than economics, than the market. And when we leave the market we enter a realm in which, while self-interest is never absent, morality and ethics are central. In this realm economics is mute; it has nothing to say, nothing to contribute. Our personal lives are guided by a set of values that are slowly assimilated, minute by minute, hour by hour, and day by day as over the years, through a process not unlike osmosis, they are absorbed from the rich experiences within family, school, neighborhood, and church. It is these values that shape our behavior, determining how we relate to our parents, our children, and our professional colleagues, h o w we prepare our income-tax returns, the dimensions and pursuit of our professional aspirations, and the kind of public-spirited citizens we are. Buddhism teaches, "Hurt not others with that which pains yourself." This is one form of the timeless golden rule upon which all great civilizations and our values rest. These values, we are told, are breaking down, causing the state of public and private morality to erode. The movie Wall Street, in which Michael Douglas plays a Mephistophelian financier, supposedly depicts the stereotype slick business-school graduate yuppie w h o fleeces the rest of us hard-working, God-fearing Americans. The media adds to this image by giving us Dennis Levine as a living, breathing illustration of the erosion of "business ethics." Levine, a spunky kid who grew up in a close-knit working-class Jewish family in Queens, New York, was the first to go to college, married his college sweetheart, and caught fire at Baruch College studying business. Upon receiving an MBA, he became an investment banker. Yearning to prove himself smarter than the numerous Ivy League types on Wall Street, he first opened a bank account in Geneva and one in the Bahamas, and then began trading in the stock market using inside information about impending unannounced corporate takeovers that he had wormed out of his contacts in the investmentbanking community. In five years Levine gained a reputation as a brilliant analyst of mergers and acquisitions, bought a fancy apartment on Park Avenue, was convicted of illegal inside trading that earned him $11 million, and was carried off to prison. The movie Wall Street would have us believe that Dennis Levine's only distinction is that he got caught, that the Dennis Levines of the world are just the tip of the iceberg, that Wall Street and indeed the whole business community is populated by greedy, calculating people bent on legally or illegally circumventing the system for private advantage at public expense. Whatever may be the state of ethics in general, and business ethics in particular, we would do well to take a hard look at the health of the institutions that are responsible for the inculcation of personal values: the family, the schools, the churches, and the subsidiary organizations, such as the Girl Scouts, the church choir, and the Boy's Club. Historically, these organizations have drilled into the individual a set of externally established standards---a superego the psychiatrists call it--that has taught the virtues of "being good." More recent studies--for example, Robert Bellah's Habits of the Heart---emphasize that as the focus of American society shifts from the community to the individual, Americans are less heedful of the traditional call to ''be good," and more and more harken to the call to "feel good." Gail Sheehy, in her influential bestseller Passages, captures the spirit of what Bellah calls our therapeutic society when she cries out, "Let go. Let it happen to you . . . . Let the feelings. Let the changes . . . . You are moving away. Away from insti-
Should We Teach Business Ethics? tutional claims and other people's agenda. Away from external valuations and accreditations, in search of inner validation. You are moving out of roles and into self . . . . Whatever counterfeits safely we hold from overinvestment in people and institutions must be given up . . . . No foreign power can direct our journey from now on. It is for each of us to find a course that is valid by our own reckoning." In a changing society in which the individual replaces the community as the central focus, the individual---ever more separate from family, religion, and profession as a source of duty, authority, and morality--must increasingly seek autonomously to work out his own form of action in the pursuit of happiness and satisfying wants: "feeling good." In a world where "feeling good"--being happy--rather than "being good"---living a moral life---becomes the guiding force, then the behavior of the Dennis Levines of this world is not only understandable, but really quite appropriate.
'f Levine is a living example of the stereotypical businessman, and the movie Wall Street is art imitating life in what BeUah refers to as our ther.apeutic society--where "feeling good" has replaced "being good" as the purpose in American life---then our personal behavior, not just in the business community but over the entire social landscape, surely must be a source of some despair. On this score the recordgives little comfort. Morality indicators--crime, divorce, venereal disease, alcoholism, and drug-abuse rates--all tell a story of a dramatically changing morality across the entire American spectrum. Shocked by tales of immorality, we are urged to offer academic work in business ethics, giving the young a code they can live by. The sentiments are genuine, the intentions good. On first blush, one is inclined to enthusiastically endorse a college course in business ethics. But on more serious reflection, one wonders what we can hope to accomplish in a college course beyond an exegesis of a catechism outlining the golden rule and the ten commandments directed at the business world. Codes of ethics seem pale and toothless. Despite requiring all employees to sign a compliance statement, Hertz Corporation overcharged its customers $13 million in two years. Can we change in a few classroom hours what students have, day by day over a long period of years, learned in real-life situations, in the intimate daily contact with caring friends and family, through hours upon hours of instruction in schools public and religious, from their peers, and from being immersed in the popular culture with its driving sensuous music, its value-laden movies, and of course its potpourri of television, sometimes excellent, sometimes cloyingly sentimental, too often violent? What can we teach them about resolving the dilemmas that are inherent in business, about balancing creativity with efficiency, discipline with mercy, today with tomorrow, personal with impersonal, justice with order, and private rights with public responsibility? What do we have to say that our students couldn't better learn by reading Plato's Crito, St. Augustine's Confessions, Shakespeare's Anthony and Cleopatra, Carl Becker's Heavenly City of the Eighteenth Century Philosophers, Arthur Koestler's Darkness at Noon, Walker Percy's The Movie Goer, Robert Perzig's Zen and the Art of Motorcycle Maintenance, Tom Wolfe's The Bonfire of the Vanities, or Watty Piper's The Little Engine that Could? • Little, I fear. And yet, maybe one small course unobtrusively tucked away in the folds of the MBA curriculum might be appropriate, if only to remind our technically trained and frighteningly ambitio~as students that our business system will endure only so long as it is solidly rooted in a meaningful idealism; that, in the end, the pursuit of m o n e y - - o r as taught in finance, maximizing profits--is legitimate as long as it is a form of scorekeeping on activities designed to "do good."
l
"We would do well to take a hard look at the health of the institutions that are responsible for the inculcation of personal values: the family, the schools, the churches, and the subsidiary organizations, such as the Girl Scouts, the church choir, and the Boy's Club."
Business Horizons / July-August 1988 I
"Maybe one small course unobtrusively tucked away in the folds of the MBA curriculum might be appropriate, if only to remind our technically trained and frighteningly ambitious students that our business system will endure only so long as it is solidly rooted in a meaningful idealism."
ne other thing. For the past three years Joseph Hartley, a colleague and friend, has been editor of Business Horizons. Joe is a generous, caring man possessing high ideals and a love for his fellow man. Business Horizons reflects his deep devotion to man and profound faith in mankind. As editor he has added a more humane dimension to Horizons---a dimension I will work to preserve. Blessed with many interests, Joe has opted to express his gifts in new ways. As he leaves Horizons better than when he came, I am reminded of Robert Frost's "The Road Not Taken," particularly the last verse:
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I shall be telling this with a sigh Somewhere ages and ages hence: Two roads diverged in a wood, and I--I took the one less traveled by, And that has made all the difference.
[]
Should We Teach Business Ethics? Harvey C. Bunke
Harvey Bunke, assuming once again his "permanent" seat in the Editor' s Chair, says business ethics is vitally important but can it be taught? At the core of every moral code there's a picture of human nature, a map of the universe, a version of history. To human nature (of the sort conceived), in a universe (of the kind imagined), after history (so understood), the rules of the code apply.---Walter Lippmann
I t ' s good to be home! For some three years I have been away doing other things--away from my intellectual and academic home, away from m y calling. Yet I suppose in a way I never did quite leave m y spiritual home, if for no other reason than even as I did other things, worldly things, I continued to teach a seminar on leadership and ethics. With 20 bright pushy Indiana University seniors asking me childlike questions--How did it all begin? What is moral?---I was spared the luxury of teaching a comfortable, routine course far removed from the hurly-burly dynamics of our society with all its drama and dilemmas. At every turn, m y students confronted me with an explosion of ethical questions about such things as the Iran-Contra scandal, illegal shenanigans on Wall Street, and the seemingly endless series of peccadillos by politicians, T.V. evangelists, and business executives that make the daily headlines. Is it ethical, they asked, for Nestl4 to sell baby formula in an underdeveloped country if misuse, caused by ignorance, results in infant deaths; or for Aramco to continue to do business with the racist establishment in South Africa; or for General Motors to shift production offshore, closing American factories and making tens of thousands of American workers unemployed? And, they further inquired, is it ethical for our government to adopt policies almost certain to guarantee staggering budget and trade deficits that, while making present life more pleasant--especially for politicians--will place a heavy burden upon generations to come? Ethics, long buried in musty library tomes, is now fashionable. The public, always fascinated and sometimes angered by unseemly behavior in high places, has heeded the solemn and all too often righteous warnings of the media. Millions sat glued to their TV sets as the Iran-Contra hearings unfolded; public distrust of governmental officials was further strained as one after another of
Should We Teach Business Ethics?
President Reagan's lieutenants was charged with felonious behavior; and Congress, reflecting pressure from a multitude of well-organized groups, seemed paralyzed and too incompetent to reach agreement on even minor reductions in the federal budget. On Main Street the Wall Street scandals of Levine and Boesky (among others) were seen as just tips of icebergs, reaffirming the cynicism ordinary folks felt for the financial community, business in general, and big business in particular. Public concern is reflected in the universities. Business schools have hurriedly added courses in social responsibility, while parents of would-be students asked if the university "did" ethics. Ethics of all kinds are fashionable: legal ethics, accounting ethics, religious ethics, business ethics, as if each profession lived by its own unique set of ethics: the clergy by one, the businessman another, and the medical doctor by still another. People practicing different professions are of course confronted with very different problems, different moral dilemmas that try men's souls. Should the physician prescribe treatment that will prolong the suffering of a terminally ill person? Should an attorney take a case even though he believes the accused is guilty? Should a business executive move a manufacturing operation abroad knowing full well that such a move will destroy the very community to which the company owes its existence? Dilemmas go with the territory. Professions such as law, medicine, and accounting face unique sets of dilemmas requiring the balancing of one set of considerations against another. To make things less uncertain, or more tolerable, each profession develops its own canons, its own rules of conduct. But what are the canons of business? How do we assess economic behavior? Can we be both economically successful'and ethical? Is the mark of greed an inherent part of business success? How do we assess our own economic behavior? That of others? Do we judge the behavior of others by one standard? Ours by another? Is it perfectly proper for us to buy low and sell high? For others? Is there but one standard for all, applicable to us as well as others? BUSINESS AND HUMAN
NATURE
ur Western heritage tells us that man is by nature selfish. The ancient Greeks talked of hubris, man's desire to be God. Christianity tells of original sin, man's rebellion against God. Economists teach that we are maximizing creatures, be it in the pursuit of money, power, or sexual conquest. Psychiatrists see us as driven by a voracious, unreasoning libido that if left unchecked would consume the universe. In short, Western thought says that we are selfish. Indeed, our Founding Fathers, even with their great optimism, carefully drafted a constitution calling for a government of checks and balances designed to protect the people from man's innate proclivity to use power for personal advantage. Over the last millennium this inherent tendency toward selfishness has been a source of untold suffering and misery. The great religions of the world--Christianity, Judaism, Islam, Hinduism, Buddhism--all teach in one form or another the golden rule: "Do unto others as you would have them do unto you." History is a tale revealing man's limited success in applying this rule to restrain his own selfish nature. Then, one day, Adam Smith changed everything when he figuratively said: "Hold on there a minute. Sure, man's selfish. That's the way he is, that's the way he's always been, and that's the way he will always be. He isn't going to change; there is nothing we can do about it. So let's look on the bright side. When man pursues his own interest in the marketplace, he unknowingly and unconsciously furthers the welfare of his fellow man by doing what the market tells him to do. And the harder he pushes to further his own interest, the more he enriches society." By and large the West, and particularly America, listened to Smith; we built our economy on a system that Karl Marx labeled capitalism. A wag would say that the essence of capitalism is to buy low and sell high. It is that, of
O
"What are the canons of business? H o w do w e assess e c o n o m i c behavior? Can w e be both economically successful and ethical? Is the mark of greed an inherent part of business success?"
Business Horizons / July-August 1988 I
"Like a city council, a
governor, a senator, a president, or a legislature, the large corporation is politically accountable---accountable to use its power wisely and appropriately. But what is the appropriate use of power?" 4
course, but it is much more. Its most important aspect is that the market, reflecting an infinite number of changing and unknowable forces, sets the pace and direction of the economy; individuals may follow or ignore it at their peril. The market is cold, implacable, unforgiving; it rewards the strong and the lucky, showering with riches many w h o m we neither respect or admire for their nobility, charity, or demeanor. But as Adam Smith observed in 976 pages (Modern Library Edition) of 18th century prose, a market system makes for "The Wealth of Nations." So we Americans, be we sellers or buyers, go to the market and pursue our own self-interest with gusto. With nary a hint of guilt the farmer in selling his crops studies the market, hoping to maximize his returns. The investor in securities follows the market, subscribes to publications offering market tips, and seeks out advice of financial consultants in his quest for riches. Even the housewife studies the weekly ads so when she does her shopping she will get the best bargains by buying low. To strengthen our position in the market, to .get richer, is rational; to get weaker, to become poorer in the market, is irrational. More is better than less: as Mae West put it, "I've been rich and I've been poor. Rich is better." To America this comes naturally, without reference to any philosophical ideas or system. As we trade and barter, make and consume, we don't much think about whether we are doing right or doing good. As we work at our jobs---making cars or growing wheat or selling shirts we don't give much thought to starvation in Ethiopia, Alzheimer's disease, the plight of the homeless, the drug crisis, racial discrimination, the declining support for classical music, the tragic state of public education in the U.S., or the hundreds upon hundreds of other social problems that mankind faces with each passing day. And with good reason. We feel much like the child told to finish his spinach because there are millions of people starving in Ethiopia. The child, while not without sympathy, knows he can't do anything to help the starving, even as he knows he can, through an act of will, affect the fate of his spinach-which in his heart he knows is "pure poison." And so it is with all of us. Better that we make good cars, provide a needed service by selling insurance, or operate a restaurant, something we can do with some success that brings satisfaction to ourselves and to others, than fritter away our energies wringing our hands and wondering how we should run our business so we could help solve most of the world's pressing social problems. Like the child faced with the spinach, we act on those things on which we can make a difference. Capitalistic theory tells us that we "do good"--promote the best interest of society--by "doing well"--promoting ourselves. It is all so simple. Ethics in the marketplace are irrelevant. Indeed they can be a hindrance, for they can get in the way of our "doing good" by "doing well." Isn't it wonderful to know that if we follow our natural selfishness, the market will convert our efforts into a force beneficial to not only ourselves but also society at large? Because of this, we need not feel personally responsible for all the pain, suffering, and injustice from which our world suffers. If it were not for the doctrine of capitalism, how could we ever find tranquility or peaceful sleep? Would that the world were that innocent, so uncomplicated, that we could simply stop here. Unfortunately, it isn't that easy; there are complications, the most obvious of which is power. The rosy picture depicted by pure capitalistic theory assumes an absence of power. POWER
apitalistic theory assumes neither buyer nor seller can materially influence the market by limiting supply or fixing prices. The decision by an individual farmer, for example, to sell or withhold his product from the market will have no material effect on the price of wheat, just as the purchases of the single housewife have n o impact on prices in the su-
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Should We Teach Business Ethics? i
permarket. Such cannot be said for General Motors, however. It is possessed of power that it uses to influence prices, determine wages, and shape the characteristics of the cars we drive. To the extent that General Motors exercises power, it goes beyond being an economic creature and becomes a political entity. And as with all political entities, it will be expected by society to act responsibly, to behave ethically. Like a city council, a governor, a senator, a president, or a legislature, the large corporation is politically accountable-accountable to use its power wisely and appropriately. But what is the appropriate use of power? The political world is one of ups and downs: political fashions change, issues come and go. Should the corporation use its power to increase employee wages and benefits, fund cancer research, promote the arts, reduce racial discrimination, enhance our school systems, all of the above? If so, at what cost to investments designed to increase the corporation's efficiency? And how does the corporation determine what proportion of its resources should be given to which of the multitude of social causes that populate the landscape? The answer, of course, is that the corporation must use its power "appropriately," which means that it must respond to the prevailing climate of opinion. At one time it may be appropriate to work toward improving the environment, at another time to support education, and at still another to finance a crash program to advance technology. Just as with any other political entity, be it the president or Congress or the United Auto Workers, what may be the most appropriate way to use power at one tim~ may at another time be quite inappropriate. Hence the large corporation, as does any other political entity, must have a public relations arm that stays on top of things, both to help determine the appropriate use of power and to convince the public that the corporation is indeed using its p o w e r - - t h e very existence of which it must deny--wisely and effectively. But we are unconvinced. We are cynical. Taking a cue from our Founding Fathers, we believe that power is used for the benefit of those w h o wield it, Yet, although the corporation makes us uncomfortable and is the subject of ceaseless scrutiny and criticism, we still reluctantly believe that we need the efficiency and productivity that only the corporation can provide; and we fervently hope that over the long haul the market will impose a level of discipline precluding serious and prolonged exploitation. In short, we tolerate corporate power. But just to help things along we have a long antitrust tradition and a multitude of regulations ranging from environmental controls to fair labor standards, the purpose of which is to help the market do its job. Americans are realistic. In economic matters, while we may talk about ethics, we believe that it is unrealistic to expect people to be ethical. In the market we expect them to promote their own interest. LIFE B E Y O N D THE M A R K E T
'van Boesky, known on Wall Street as "Ivan the Terrible," and w h o in March began a three-year prison term for inside stock trading, observed .in a commencement address at the University of California at Berkeley that "greed is all r i g h t . . . I want you to know that. I think greed is healthy. You can be greedy and feel good about yourself." Graduates attending this prestigious university c o m m e n c e m e n t cheered Boesky, applauding and laughing. Dennis Levine, also convicted of inside stock trading, learned from his Professor at Bernard Baruch College (a Hoosier), "Greed is a nice religion, if you are really greedy, you are going to keep your shoes polished, you won't run around on your wife or get drunk. You will do what it takes to maximize your lifetime income, and that doesn't leave time for messing up." The thought is not original. Dr. Samuel Johnson, a contemporary of Adam Smith, observed, "There are few ways in which a man can be more innocently
"A wag would say that the essence of capitalism is to buy low and sell high. It is that, of course, but it is much more."
Business Horizons / July-August 1988 I
"Alas, how different our world might be if only Napoleon's genius had found expression through presiding over General Motors, Lenin's over General Dynamics, and Hitler's over McDonald's."
employed than in getting money." He further noted, "The great increase of commerce and manufacturing hurts the military spirit of the people, because it produces a competition for something else than martial honors---a competition of riches." Alas, h o w different our world might be if only Napoleon's genius had found expression through presiding over General Motors, Lenin's over General Dynamics, and Hitler's over McDonald's. Critics of the market system seem oblivious to the market's silent capacity to provide opportunities for ambitious men to diffuse their overpowering will without doing great sodal harm indeed, perhaps bringing great advantage to the rest of us. Blessedly, there is more to life than economics, than the market. And when we leave the market we enter a realm in which, while self-interest is never absent, morality and ethics are central. In this realm economics is mute; it has nothing to say, nothing to contribute. Our personal lives are guided by a set of values that are slowly assimilated, minute by minute, hour by hour, and day by day as over the years, through a process not unlike osmosis, they are absorbed from the rich experiences within family, school, neighborhood, and church. It is these values that shape our behavior, determining how we relate to our parents, our children, and our professional colleagues, h o w we prepare our income-tax returns, the dimensions and pursuit of our professional aspirations, and the kind of public-spirited citizens we are. Buddhism teaches, "Hurt not others with that which pains yourself." This is one form of the timeless golden rule upon which all great civilizations and our values rest. These values, we are told, are breaking down, causing the state of public and private morality to erode. The movie Wall Street, in which Michael Douglas plays a Mephistophelian financier, supposedly depicts the stereotype slick business-school graduate yuppie w h o fleeces the rest of us hard-working, God-fearing Americans. The media adds to this image by giving us Dennis Levine as a living, breathing illustration of the erosion of "business ethics." Levine, a spunky kid who grew up in a close-knit working-class Jewish family in Queens, New York, was the first to go to college, married his college sweetheart, and caught fire at Baruch College studying business. Upon receiving an MBA, he became an investment banker. Yearning to prove himself smarter than the numerous Ivy League types on Wall Street, he first opened a bank account in Geneva and one in the Bahamas, and then began trading in the stock market using inside information about impending unannounced corporate takeovers that he had wormed out of his contacts in the investmentbanking community. In five years Levine gained a reputation as a brilliant analyst of mergers and acquisitions, bought a fancy apartment on Park Avenue, was convicted of illegal inside trading that earned him $11 million, and was carried off to prison. The movie Wall Street would have us believe that Dennis Levine's only distinction is that he got caught, that the Dennis Levines of the world are just the tip of the iceberg, that Wall Street and indeed the whole business community is populated by greedy, calculating people bent on legally or illegally circumventing the system for private advantage at public expense. Whatever may be the state of ethics in general, and business ethics in particular, we would do well to take a hard look at the health of the institutions that are responsible for the inculcation of personal values: the family, the schools, the churches, and the subsidiary organizations, such as the Girl Scouts, the church choir, and the Boy's Club. Historically, these organizations have drilled into the individual a set of externally established standards---a superego the psychiatrists call it--that has taught the virtues of "being good." More recent studies--for example, Robert Bellah's Habits of the Heart---emphasize that as the focus of American society shifts from the community to the individual, Americans are less heedful of the traditional call to ''be good," and more and more harken to the call to "feel good." Gail Sheehy, in her influential bestseller Passages, captures the spirit of what Bellah calls our therapeutic society when she cries out, "Let go. Let it happen to you . . . . Let the feelings. Let the changes . . . . You are moving away. Away from insti-
Should We Teach Business Ethics? tutional claims and other people's agenda. Away from external valuations and accreditations, in search of inner validation. You are moving out of roles and into self . . . . Whatever counterfeits safely we hold from overinvestment in people and institutions must be given up . . . . No foreign power can direct our journey from now on. It is for each of us to find a course that is valid by our own reckoning." In a changing society in which the individual replaces the community as the central focus, the individual---ever more separate from family, religion, and profession as a source of duty, authority, and morality--must increasingly seek autonomously to work out his own form of action in the pursuit of happiness and satisfying wants: "feeling good." In a world where "feeling good"--being happy--rather than "being good"---living a moral life---becomes the guiding force, then the behavior of the Dennis Levines of this world is not only understandable, but really quite appropriate.
'f Levine is a living example of the stereotypical businessman, and the movie Wall Street is art imitating life in what BeUah refers to as our ther.apeutic society--where "feeling good" has replaced "being good" as the purpose in American life---then our personal behavior, not just in the business community but over the entire social landscape, surely must be a source of some despair. On this score the recordgives little comfort. Morality indicators--crime, divorce, venereal disease, alcoholism, and drug-abuse rates--all tell a story of a dramatically changing morality across the entire American spectrum. Shocked by tales of immorality, we are urged to offer academic work in business ethics, giving the young a code they can live by. The sentiments are genuine, the intentions good. On first blush, one is inclined to enthusiastically endorse a college course in business ethics. But on more serious reflection, one wonders what we can hope to accomplish in a college course beyond an exegesis of a catechism outlining the golden rule and the ten commandments directed at the business world. Codes of ethics seem pale and toothless. Despite requiring all employees to sign a compliance statement, Hertz Corporation overcharged its customers $13 million in two years. Can we change in a few classroom hours what students have, day by day over a long period of years, learned in real-life situations, in the intimate daily contact with caring friends and family, through hours upon hours of instruction in schools public and religious, from their peers, and from being immersed in the popular culture with its driving sensuous music, its value-laden movies, and of course its potpourri of television, sometimes excellent, sometimes cloyingly sentimental, too often violent? What can we teach them about resolving the dilemmas that are inherent in business, about balancing creativity with efficiency, discipline with mercy, today with tomorrow, personal with impersonal, justice with order, and private rights with public responsibility? What do we have to say that our students couldn't better learn by reading Plato's Crito, St. Augustine's Confessions, Shakespeare's Anthony and Cleopatra, Carl Becker's Heavenly City of the Eighteenth Century Philosophers, Arthur Koestler's Darkness at Noon, Walker Percy's The Movie Goer, Robert Perzig's Zen and the Art of Motorcycle Maintenance, Tom Wolfe's The Bonfire of the Vanities, or Watty Piper's The Little Engine that Could? • Little, I fear. And yet, maybe one small course unobtrusively tucked away in the folds of the MBA curriculum might be appropriate, if only to remind our technically trained and frighteningly ambitio~as students that our business system will endure only so long as it is solidly rooted in a meaningful idealism; that, in the end, the pursuit of m o n e y - - o r as taught in finance, maximizing profits--is legitimate as long as it is a form of scorekeeping on activities designed to "do good."
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"We would do well to take a hard look at the health of the institutions that are responsible for the inculcation of personal values: the family, the schools, the churches, and the subsidiary organizations, such as the Girl Scouts, the church choir, and the Boy's Club."
Business Horizons / July-August 1988 I
"Maybe one small course unobtrusively tucked away in the folds of the MBA curriculum might be appropriate, if only to remind our technically trained and frighteningly ambitious students that our business system will endure only so long as it is solidly rooted in a meaningful idealism."
ne other thing. For the past three years Joseph Hartley, a colleague and friend, has been editor of Business Horizons. Joe is a generous, caring man possessing high ideals and a love for his fellow man. Business Horizons reflects his deep devotion to man and profound faith in mankind. As editor he has added a more humane dimension to Horizons---a dimension I will work to preserve. Blessed with many interests, Joe has opted to express his gifts in new ways. As he leaves Horizons better than when he came, I am reminded of Robert Frost's "The Road Not Taken," particularly the last verse:
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I shall be telling this with a sigh Somewhere ages and ages hence: Two roads diverged in a wood, and I--I took the one less traveled by, And that has made all the difference.
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