Wednesday, July 25, 2012

Tales from the “Real World” – how much ethics can the world of business tolerate?
In my last blog post I described a concrete example of a moral dilemma that I faced while I worked in the international business arena (and I use the word “arena” for a reason…). I posed the question as to what realistic options are available to business leaders should they like to take the moral high road. The answer hinges upon, I think, how we should like to define “realistic”.

Would it have been “realistic” for me to go sign up the fledgling start-up as our distributor in Tunisia, foregoing engaging the established Dutch firm? As much as I am loath to admit it, I think not. The company I worked for was operating in a highly competitive industry where thin profit margins provided for very little largesse in choices that were not tightly aligned to short-term profitability. In another industry, with a pioneering product with no immediate competitors, or in a domestic market artificially shielded by high entry level costs or tariffs, there might have been more room to maneuver. But when one was competing tooth and nail for survival, this was not a viable option.
Prior to working in the low profit margin apparel industry, however, I worked in a radically different industry for a medical laser manufacturer where profit margins hovered around 60%. While obviously also a competitive industry (after all, everybody was scrambling at getting a piece these dream margins…), there certainly was more room for maneuver from a moral point of view. Regrettably, this option was not always exercised. A case in point: over the course of several years I had the pleasure – and it was indeed a pleasure – to nurture a start-up firm in Russia to be our distributor in this promising market. They were highly motivated and worked endless hours. Even though they had very limited resources, they sent one of their engineers over to the United States for a one week product training program we offered to our distributors. After two years of major investments and working the market, the company was finally poised to make some important sales. This was, however, also the point in time when the medical laser company I worked for was bought by another medical device company and consequently overnight we had two distributors in virtually all of our markets.

Our new owners insisted on using their own distributors in all of the countries where they themselves were present or alternatively forced our distributors to become sub-distributors, which for our distributors essentially meant giving up all control of the business and taking a major cut in their earnings. I remember being on the phone with a manager at our new parent company and him telling me to terminate the sales agreement we had with our Russian partner. When I explained to him that our Russian partner had worked for two years to build up the necessary relations in a market that had very long decision making procedures, he told me that “first cut him, bring him to his knees and then we renegotiate our terms with him from a position of strength.” So the basic strategy was to first make him desperate (he would lose two years worth of investments!) and then try to squeeze the max out of him so that he could salvage at least a pittance of what he had invested. Hardly a win-win strategy.
While many people sincerely tried to do their best to remain “humane” in an essentially a-moral system and things seem – at least in public discourse - to be changing somewhat these days, many of the things I saw and heard while in the business world were diametrically opposed to a human centered, win-win, stakeholder approach. A few of the ones I still remember I wish to share with you here (some are paraphrased by me, their essence is however retained):

·         “There is no ethics in the business world”

·         “If we don’t do it, somebody else will”

·         “No matter how much you may like somebody and how close you get to them in your work dealings, never make the mistake to think that they are your friends”

·          “The [neo-liberal] economic system as it is today reflects a deeper reality that is inherent in all of nature and therefore cannot be changed: just look at Communism!"

·         “Survival of the fittest”

·          “Markets always know best”

·          “If you can’t beat them, join them”

·         “The corporate world is essentially one of war without weapons”

·         “Money is success and success is no coincidence”

·         “Make money first, then do good”

·         “Too much ethics is a weakness and we have no place for weak people in our management team”

·         “The business world is the only real world and we who actually operate in it have nothing much to learn from researchers and intellectuals as they live – at best - in a naive utopian, imaginary one”
What all these quotes reveal is that, at the end of the day, there was a widely prevalent attitude (even if not voiced thus publically) that ethics, a humane stakeholder approach and the competitive business world simply don’t mix. Regrettably, the way our current economic system is set up and the widespread normative mantra of “profit and shareholder value maximization” inculcated into students, employees and managers, this has become in many ways a self-fulfilling prophecy.

In my next blog posts, we shall take a look at these proclamations and how they fit or don’t fit into a sustainable economic system.
Manuel Heer Dawson

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