Dare to be ethical?

Reading the book “Giving Voice to Values” by Mary Gentile corroborated a longstanding assumption of mine that acting out our sense of right and wrong is something that can be directly promoted by rehearsal. Her observation is that most “business ethics” courses tend to focus either on abstract ethical theory or then the analysis of specific cases, but neglect any sort of concrete training as to how, precisely, we would like to behave and what we should say in a specific situation where we intuitively feel that something is amiss. Knowing does not automatically lead to doing, much less to effective doing. And knowing without conviction can even lead to misuse and skillful self-justification. Indeed, she gives examples where managers whom she had interviewed expertly elaborated and adroitly rationalized their morally questionable behavior on the basis of ethical theories that they had previously been taught at University. Thus they simply picked and chose the ethical theory that best supported their particular behavior and prerogatives at that time and context, no matter how self-serving or cynical.

By rehearsing just how we would – in words and deeds – respond to something amiss, we simply do what any athlete does when training for the time when it really matters: flex the muscles and hone in their coordination in such a way so as to make their execution all but automatic during an athletic event. As to how to convince highly competitive individuals of the merits of revisiting their basic moral assumptions, she proposes that even they can be brought into the fold by a re-framing of their objectives as being “daring to be ethical”.

I am inspired by Ms. Gentile’s approach because I have personally witnessed with myself that I have on a good number of occasions failed to uphold my own deeper convictions when it mattered. Looking back, my failures had their root less in my believing myself to be powerless to change things on my own, than in having to decide on the spot and being unable to come up with a suitable alternative fast enough or being so caught up by my own social and cultural conditioning, that it was very difficult to change my “bad habits”. As individuals, organization and as a civilization we are all captive to some extent to the ingrained routines, traditions and culture we have been part of since childhood. Consequently, even if we rebelled on a number of occasions, we often find ourselves back in our previous, familiar path-dependent behavioral track, especially when we are intricately embedded in this social status-quo with all its rules, assumptions and subtle (or not so subtle!) peer pressure. We yearn for our place in this social context and thus we often inadvertently undermine our own best efforts at reform.

Concretely, what is to be done then? Whereas there is certainly some validity to the bromides that one can only change oneself or that all change begins with ourselves, the above analysis makes it clear that more is required. Individuals need to be supported in their efforts for change and this support includes creating concrete training grounds to hone in our abilities to deal with the wider social challenges we all face. Business Schools, as the premier forging grounds for future leaders in our economic institutions, are clearly indispensible in this respect.

Manuel Heer Dawson

Ethics in a Bottle

In my last blog I listed a number of statements and underlying attitudes I encountered while working in the business world. Here I would like to take a closer look at one of them and evaluate its veracity and possible transformation.

The assertion that “there is no ethics in the business world” is both an observation as also an assumption. As an observation it reflects a simple “is”: personal experiences I shared with you in past postings revealed that human needs are indeed frequently placed behind the short-term imperative of a corporation to post profits and maximize shareholder wealth. In a world where organizational survival is dictated by the mere string of numbers that are published on a monthly or quarterly basis and not by the reality of the personal stories of the involved stakeholders, it is only logical that there will – push come to shove – be an inherent bias and managerial recompense to sacrifice human “ethics” for the sake of the ethic of maximizing profitability. Therefore, there is a certain amount of veracity to this statement as an observation, provided one defines “ethics” as placing the well-being of human beings in the center of our moral considerations.

As an assumption, on the other hand, this statement implies a normative “should”: there should not be any ethical considerations that impede the profitability and shareholder wealth. An individual who once shared this view with me in an unabashed manner revealed also that he made a clear cut distinction between how he valued, and consequently then treated, people in his private circles such as friends and family, and how he did so in his work dealings. This type of an attitude I have come to label “ethics in a bottle”: it is a form of moral compartmentalization where at times radically different standards apply in different types of social contexts. Now, it is naïve to think that we as human beings can ever completely transcend moral compartmentalization (for example, we will continue to be more inclined to help a personal friend in distress, rather than an anonymous individual at the other end of the world, all other things being equivalent). Nonetheless, it is legitimate to question if such a strict demarcation line should be drawn between the personal and professional worlds.

The problem with moral compartmentalization in our economic dealings is that under the guise of “professionalism” almost anything can be justified. Professional organizations and corporations, particularly publically traded ones subject to short-term shareholder wealth maximization, have gone to great lengths to legitimize their institutionalized norms to conform to the prerogatives of profitability or the stock markets. Under the guise of “accreditations”, “codes of professional conduct”, “best practices” and the likes, professional organizations and corporations have created sophisticated constructs to make employees, clients and the public think and feel as if they were upholding the highest of moral standards.

For the professional, the rationale then is often, “if it meets the highest standards of professional codes of conduct, well, than it must be ok for me to do.”

Well, no. Simply because something meets the standards or regulations of a certain corporation, industry or profession, does not make it morally palatable in a larger context. For example, nowhere in the Certified Financial Advisors (CFA) Code of Ethics (http://tinyurl.com/9wxs38) is there any mention or consideration of the secondary ramifications of certain investment tools or choices. Yes, we find the statement that the advisors must “Place the integrity of the investment profession and the interests of clients above their own personal interests.” (As recent scandals, however, illustrate that this rule was nevertheless frequently ignored.). But what about the fact, for example, that speculating in mercantile exchanges can abruptly drive up the price of certain commodities like corn, wheat or rice beyond the capacity of people in third world countries to pay for? Or take the code of conduct in private banking, for example, of Singapore (http://tinyurl.com/bu8m8yl). The transfer of large amounts of wealth of high net worth individuals from poor, developing countries into international tax havens such as Singapore, the Cayman Islands or Switzerland, while certainly in the interests of the client, deprives these countries of these sorely needed resources. While there is mention of money laundering and terrorism, nowhere in its code of conduct is there any consideration of this wider moral dimension of the professional’s actions.

However, since a financial advisor’s or private banker’s circle of professional responsibility is defined only in a very narrow manner driven by the client’s (and the advisor’s or bank’s) interests, both the financial professional and their clients indirectly partake in the creation of human poverty, and that with a clear conscience, extracted as they are of further responsibility by the professional code of conduct they are adhering to (and often also legitimized by Milton Freedman’s position that these ethical consideration is not the purview of the business community, but of the regulatory agencies of countries). This divorce of responsibility of one’s personal, professional activities and the wider social ramifications represents one of the major challenges facing our current status quo in how we structure and manage our economic activities.

What we consequently have is “ethics in a bottle” and by extension, if you will, a form of the “banality of evil”. It’s time for professionals to take the ethics out of the bottle and permit it to imbue all domains of human lives, not just the ones of one’s family, friends, corporation or business clients.

Manuel Heer Dawson