I have been a corporate business ethics officer, investigated
complaints from the confidential hot line, conducted many classes,
and helped design and implement a culture change effort based on
company values. In my experience, the key to effective business
practices is to specify and agree on the behavior that is
permissible and the behavior that is not, to keep those rules at a
minimum, and to apply them consistently over time through effective
Why this focus? Because it is insufficient to depend on pledges of
good intent even when those pledges are sincere - as most are;
different people will apply the same principle in very different
ways. More importantly, it is essential to recognize that there are
some fundamentals that simply do not change just because we want
them to. There really is no free lunch. The stock market moves down
as well as up.
Unfortunately, it takes a crisis like the current one to restore
credence to such things. But while moral turpitude may have
contributed to the current situation (Bernie Madoff), it is
important to remember that ethical behavior and management
incompetence are not mutually exclusive. We ought to consider
carefully whether ethics should be the primary focus.
Dictionary.com defines ethics as "that branch of philosophy dealing
with values relating to human conduct, with respect to the
rightness and wrongness of certain actions and to the goodness and
badness of the motives and ends of such actions." This highlights
at least three broad reasons to question a focus on ethics:
- The definition conflates the individual and the
organization or group of which the individual is a member.
Of course, individuals ultimately decide what to do and what not to
do. But often individuals are part of larger groups and
organizations. And groups or organizations "decide" to do things an
individual might not. For example, most individuals probably would
not believe that 40:1 leverage of their own personal assets is wise
or safe. And yet they worked for organizations that promoted this
behavior. But this is not any more unrealistic than the belief
during the dot-com boom that there really was a new economy and it
was immune to business cycles (except for the up part).
- People might know what they want to accomplish when they
take an action, but that doesn't guarantee the actual
result. For example, many believe deregulation is, by
definition, a good thing. So is enabling people to realize the
American dream and own a home. But the actions that flowed from
these beliefs have had some very negative unintended consequences
for the global economy. Of course the bankers and others could have
chosen not to make the loans. But then those individuals might have
lost their jobs. Being "right" does not guarantee financial
survival or success.
- The definition assumes we are conscious of our
motives. This seems overly optimistic. In my experience,
motives often are recast after the results are in. It is at that
point that many make sense of an action and its consequences and
within that context, attribute clear motives: that executive was
good; and that one was bad. Whether this attribution is accurate -
or the individual was even aware of his motives - often is beside
the point, especially if the results were negative and the public
wants to demonize someone.
We can call people good or bad, but that misses the point. In my
experience, most people say and believe they have positive intent.
Unfortunately, positive intent by itself does not guarantee a
"good" outcome. Why else, to take one example, are people -
reportedly many organizations' most valuable resource - often
treated so poorly, especially when they are laid-off?
What leads to a "good" outcome? A cooperative external environment
certainly helps. But what matters most is effective management of
yourself and the organization - knowing where you're going,
thinking through the details, and planning and implementing
effectively: the fundamentals. Many "bad" results come from
incompetent management - people who ignore the boring details or
don't bother with implications because they are so infatuated with
the desired outcome - like getting rich through financial
instruments they do not understand or refinancing yet again with a
mortgage that soon will adjust to predatory rates.
Going beyond individual ethics
Whether we should view the current environment from an ethics
perspective is debatable. Acting honestly and with positive intent
is the right thing to do. But that is not enough.
To avoid crises like the one we are in now, ethical behavior must
be combined with effective management, and that includes
remembering that most fundamentals do not change - that is why they
are fundamental. Unfortunately, in the current environment, it is
clear that individual ethics and effectiveness are not enough. We
all are connected. Organizations also must perform ethically and