This is a good opinion piece on how ethics was the word-du-jour at the turn of the 21st century after the bankruptcies & crises of Enron, Tyco, WorldCom etc., but nowadays, it seems that the ship has not sailed much since then.
The corporate behaviour & corporate governance were supposed to improve & become much more ethically driven in the new century. However, that dream is not coming to fruition. Unscrupulous business leaders are abound & ethics & morality are out the window at most corporations around the world. Why is this so?
Here, the author of this opinion piece & I differ, as to the reasons of these unethical practices in the business world. Mr. Stern, the author of this opinion piece, takes the secular view that punishments have been feeble & lacking for those unethical business leaders, & if the punishments become stronger, then businesses would become much more ethical.
However, those punishments can only be made tougher by the judiciary branch of the government. Ironically, that branch is indirectly controlled by those same unscrupulous business leaders, who are supposed to be severely punished for their unethical practices. Business leaders make friends, lobby, & perhaps, fund the political leaders who they think will further their views & agendas in the political fields. Those political figures then pick & choose the judiciary, who are then supposed to be making new rules & punishments. Since, everyone is connected politically, nobody is going to stab anyone in the back.
Problem is that ethics & morality are arbitrarily measured in the secular world. Everyone has a different yardstick to measure them. One's ethics on a matter can be quite different from another's. This creates huge differences of opinion. For instance, one would think that a living wage for all employees should be ethically driven idea & every senior manager should lobby for it in its organization. However, that can reduce the net profits, which in turn, can affect the Earnings-Per-Share (EPS) firgures, which in turn, will reduce the value of the shares. I don't think that wealthy shareholders & institutional shareholders would be very happy with that.
Ethics & morality can only be same, when everyone, in a specific society, believes in a religion. Religion sets the same bar for ethics & morality for everyone in the society. Ethics & morality cannot exist without religion, regardless of what that religion is. Essentially, all religions preach the same basic values, so the same basic ethical guidelines would come to fruition when the society, & the business people, look to religion for their ethical compass, instead of human made laws.
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Respect, integrity, communication and excellence. Those were Enron’s core values, which, the energy company said, guided its behaviour as a “global corporate citizen”. We know how that story ended: bankruptcy, court cases and (unusually for the business world) custodial sentences. The once-mighty accountancy firm of Arthur Andersen was also brought down.
Over a decade later bad corporate behaviour – the stuff we find out about, anyway – continues to make front page news. That dependable, “clean diesel” Volkswagen turns out not to be so clean after all. Thomas Cook takes an age to come up with a decent and civilised response to human tragedy. And now Sports Direct is revealed to be conducting business in a brutal fashion. Boardroom practices at the company may be comically bizarre, but life in their Shirebrook warehouse is not funny at all.
The public have noticed. A survey (pdf) this week for the Institute of Business Ethics found that 39% of people think business is behaving unethically. The three biggest causes for concern are tax avoidance, executive pay and exploitative labour practices. Two-fifths of the public have given a vote of no confidence in British business. That is, potentially at least, a lot of customers.
Why, apart from the headline-grabbing scandals, is business seen in such a poor light? To some extent this represents a failure of the “corporate social responsibility” (CSR) movement. Bad CSR deserves to fail and be seen for what it is – a flimsy public relations exercise. Good companies don’t need CSR programmes. They think hard about their activities and the impact they have on the world. They worry about how they make their money. Good companies make sustainable profits, and don’t externalise the costs of doing business on to the world around them.
But why does bad corporate behaviour still exist? The chances of getting found out are much higher than in the past. Everyone carrying a smartphone is equipped with a vital tool of investigative journalism.
Fearlessness, or shamelessness, may have something to do with the “risk/reward relationship”, as it is called in the financial world. The rewards for breaking the rules can be high. But the punishments are often feeble – fines (merely another cost of doing business) and loss of reputation (cushioned by a healthy bank balance and lifetime financial security).
Very few business leaders have ended up behind bars on account of their actions. “You’re going to jail!” screamed angry protesters at Dick Fuld, the former chairman and CEO of Lehman Brothers, in 2008. But he isn’t going to jail. He is going to his midtown Manhattan office to work for his new business, Matrix Advisors.
Perhaps bad corporate behaviour is explained by the fact that, whether they realise it or not, some senior executives are still coming to terms with the post-financial-crisis world. Deep down they fear it could all go wrong again, any time. They are in a hurry and are cutting corners. They also seek extravagant pay packages to cushion their ultimate, inevitable fall.
So, yes, sanctions have to get tougher, and the fear of punishment for wrongdoing has to increase sharply. One encouraging sign is that some responsible business leaders have had enough of the opprobrium brought on their heads by others. Simon Walker, director general of the Institute of Directors, said this week: “IoD members share the public’s outrage… I urge people to remember that Sports Direct is categorically not a representative of British business.”
He is right about that. And we as customers cannot complain if we continue to shop with businesses that at other times we might denounce loudly as unethical. We are all in this together.
My friend Steven Gauge has written a lovely play about taking up rugby again in middle age, called (perhaps inevitably) My Life as a Hooker. In one scene he is nervously running out on to the pitch for the first time in decades, and confesses to a team-mate that he is probably a bit rusty about the rules. Don’t worry, his fellow paunchy sportsman tells him: “Just cheat until you get caught.” This would have made a more accurate mission statement for Enron. Sadly, it appears to be the guiding ethos for too many people in business today.
