BUSINESS ETHICS

Why discuss business and ethics? Some may say business has nothing to do with ethics. Businessmen don't care about this: bottom line is a major consideration. Capitalism is basically without morals because it is based on selfish interest.

The point I'll try to make is that there is definitely a concern for ethics in business that businesses that are successful have a

commitment to ethical standards. The fact that I am here this morning in response to requests for this lecture illustrates that more and more corporations are interested in developing their employees sensitivity to

ethics and to the role of ethics in their business decisions.

Is this concern for ethics something new? I don't think so. But what is new is an apparent increasing suggestion that some of the high achievers in the business and financial world may have a blind disregard for ethics. specifically, the case of Dennis Levine, who blatantly disregarded the law and used inside information illegally to further, his own financial gain. Another case is that of Ivan Bolsky caught in illegal, insider trading that ultimately pilfered funds from countless thousands of ordinary investors.

A recent article in the November December issue of Public Opinion asks "Have Yuppies become Corrupies?" The December issue of fortune has an article entitled "The Decline and Fall of Business Ethics " and asks whether "Profit at any Price" is spreading through investment banking and reaching into other industries as well. Clearly activities such as these in the high stakes world of financial maneuvering are viewed with increasing uneasiness by those committed to preserving the free enterprise system. This system, depends on fair play. One wonders whether we are beginning to see a lack of ethical standards and a lack of institutional, organizational and social morality. Have we, as General Omar Bradley once said., "Achieved brilliance without conscience." Has rapid technological advance outstripped our ability to make decisions within the confines of ethical behavior?

These are major concerns today - and a major reason why companies such as yours are raising the issue of ethics - so that ethics and morality will continue to influence decisions at every level of industry, particularly in those fields currently experiencing increasing technological progress.

Now to begin. What is ethics? -Ethics first and foremost means operating within the law; but it goes beyond that. It means operating according to a set of standards that provides for fairness, respect and concern for the welfare of others.

How do we decide what is ethical? Greater minds than my own have defined this already

1) One concept is that what is ethical is "what provides the greatest good to the greatest number of people". John Stuart Mill came up with this in the 19^th century.

One example would be that if in a lifeboat, there were too many people and the boat was sinking, a utilitarian would believe that throwing some people overboard would be OK, since some people surviving are better than none surviving.

2) Another model of ethics called ,Perfectionism is based on Greek teaching. They believe that ethical behavior arises from the development of personal virtue such as truthfulness, fairness, courage, etc. If we teach our children these virtues they will act morally and ethically. If a person tries to be a good and virtuous person in his decision-making, he will make ethically sound decisions.

3) A third model is that ethics is based on rules. Most people who follow this feel that these rules come from God and they learn these rules in their religious education. The Ten Commandments would be such an example, or "Do unto others as you would have them do unto you".

For others, the rules they live by don't necessarily come from religion, but follow from reason itself. Immanuel Kant wrote about this in the 18th century. He believed there is a moral law in the universe that can lead to universal rules of conduct that people can arrive at simply by reason: these are the rules against lying, stealing, killing, etc.

Here we have 3 different systems of what people call ethics. There is some variation between them: A person who believes for instance that ethical behavior is what provides the greatest good for the greatest number of people my be willing to be more flexible that the person who believes in strict rules, i.e. "Thou shalt not kill" -particularly when you think of the example in the lifeboat.

The point I want to make here is not to convert you to believing in one system of ethics over another. Each has it's own merit, and I'm not an expert on the finer distinctions of each.

The point to be made is that a concern for ethics, based on any one or a combination of the above should be an essential and integral part of every decision.

Individuals who are concerned about ethics in their personal and family lives, seem to feel that the only basic rule and guideline for business decisions is the law -or what is legal and allowed by law. There are those who feel they -can go beyond the law; those who feel that the limit of the law is the limit of their business practice, would be the one who would not, for instance, demonstrate care and concern for the welfare and future of employees or the welfare of stockholders - except to the extent that they are protected by law: ,to these people the major issue is the short term gain, the bottom line, the other ethical concerns are forgotten - or are felt to have no place in the process of making business decisions.

It is a big mistake and poor business sense to fail to consider ethics in business decisions. The book In Search of Excellence illustrates the fact that companies that do well financially are often companies that placed a high value on ethical behavior as well as on making a profit. That is why corporate culture is so important. All corporations have basic values within their organization, values sometimes explicitly stated, and sometimes not. The importance

of this corporate culture is that it's the way companies reinforce certain values. If a person within a corporation has a strong sense of ethics and the corporate culture is compatible with it, what will reinforce the person to make the right decision. Corporations today are much more aware that they do have moral and ethical values, way. beyond those defined by law, and they want strengthen and promote those values within their organization.

One such corporation is Levi Strauss Corporation. A memo was sent out saying that if anyone saw any infraction of ethics, they should report it to the Executive Offices. One manager who did that was rewarded with a promotion. A similar internal report in another company may have resulted in an unfavorable action to that employee - so the message a company gives is very important.

Another example in which a strong concern for ethics was ingrained in the corporate culture was Johnson & Johnson in 1982. When it was discovered that some packages of Tylenol had Cyanide in them, the company

immediately pulled the product off the shelves and absorbed the loss. In fact, it suffered tremendous losses. There was a question as to whether Tylenol would ever again be a major competitor in the market place for pain medication. Johnson & Johnson is a company with a strong sense of ethical and social obligation. They have a corporate credo and have had one for 40 years. It commits the company to consider the effects of it's decisions first on consumers, employees, the community, and then stockholders. That credo is considered every time that company has to make a major decision - and with time - the employees have absorbed and reflected this credo -incorporated within their corporate culture. Another example is Abbott Labs. In the 1970's some felt that by distributing infant formula to nursing mothers in the 3rd world some companies were causing the deaths of these infants. Abbott took the lead in developing a code for marketing infant formula in developing countries. They . demonstrated their concern for consumers.. They tried to get other manufactures to adopt those principles.

Nestle refused to stop marketing infant formula in the 3rd world and became the subject of 'a boycott... another example of the presence or absence of a strong sense of ethics in corporate cultures which influences

decisions. Reflections of the corporate concern for ethics can be found at every level of, the organization. Organizations which, for instance, allow input from the ground up; have an open door policy regarding gripes or suggestions, allow employees to point out areas where unfairness may have occurred are much more likely to be perceived as being concerned with ethics than those companies without these policies.

Once a premium on ethical behavior becomes ingrained, it sifts down to other aspects of behavior, i.e., fairness in productivity, loyalty to the company, fairness in interpersonal relationships, between departments and employees.

As we have all learned in the study of organizations, with time the entire organization reflects who is on top.

Demonstrating, at the top levels of management, of a firm commitment to ethical behavior, based on respect for the individual, respect for the consumers, for the stockholders, for colleagues, for subordinates, will in time be reflected in the philosophy and behavior of the entire organization; it will become part of the corporate culture.

Reflections of the corporate concern for ethics can be found at every level of the organization. Organizations which, for instance, allow input from the ground up; have an open door policy regarding gripes or suggestions, allow employees to point out areas where unfairness may have occurred are much more likely to be perceived as being concerned with ethics than those companies without these policies.

As we have all learned in the study of organizations, with time the entire organization reflects who is on top.

Not only the success, but the very survival of the free enterprise system may well rest and may be dependent on the preservation ...of ethics as an integral part of our business system.