The work presented in this guidebook is intended to acquaint managers with the tools to handle their ethical encounters on a global operational platform. It is not intended to address ethics per se and its presentation and discussion are best left to the vast libraries of thought penned by learned men throughout the annals of history. The subject matter, the ethical conduct of global commercial entities and their managers, cannot be placed in a logical mathematical equation and analyzed with precision to apply to every circumstance. There is no cookie-cutter system or one-size-fits-all formula. Therefore, ethics is about relative positioning within the context of a directed course, a process called ordered flexibility. The subject should be viewed as water, a basic element that changes but always reverts to and sustains its prime character. Water in a stream seeks the sea, but it flows through varying paths, in, around, and over obstacles, sometimes at a quick rate and at other times at a mere trickle. Water when heated changes into gas and when frozen becomes a solid substance, but when subject to cooling or left to melt it, returns again to its natural state. Universally applied ethical conduct is all about relative positioning but always retains its key objective. Its application is ordered flexibility, exemplified by a series of choices, when applied to the selection of operational tactics and terms of engagement in the face of an ethical dilemma.
The examples in the text are meant to stimulate rather than dictate the development of an ethical consideration in the global managerial decision-making process. Moral judgment involves mankind’s treatment of fellow human beings applied within the context of differences among them. Whether such divergence is cultural or sociological, based on theological teachings or philosophical references, or with a commercial environment subject to variances in economic development, global firms are encouraged to set a uniform policy. Integrating a universally acceptable code of conduct across a firm’s operations and activities around the world is not an easy task. At times, the ethical opportunities offered may require a leap of faith that not all are willing to take. But in the end, such strategic decisions will need to be faced in the real world. To paraphrase a quote attributed to Ludwig Wittgenstein, an Oxford philosopher, a business executive who is not taking part in discussions of ethics is like a boxer who never goes into the ring.
A code of conduct is merely a set of thoughts, a statement by a commercial entity of the guiding principles that its actions are founded upon. But “with our thoughts we make the world.”* As philosopher James Allen tells us, “Act is the blossom of thought,” so until one marries thought with action “there is no intelligent accomplishment.”1 Therefore, global companies are encouraged throughout the book not only to develop a code of conduct but also to see that it is enforced and to create a cadre to oversee its implementation.
The lyrics of an old country song recount the point that “if we don’t stand for something we’ll fall for anything.” Global firms are therefore prodded to at least construct a way of doing business around the world with some form of equitable vision. The author knowingly takes a proactive position throughout the book, gently urging commercial firms to get more involved in the understanding and appreciation of ethical and social responsibility considerations in the global business environment. The intent is not to push firms into a rush to judgment, but to ask them to engage their executive managerial staff and bring ethical issues to the forefront for discussion and comment.
The main thrust of this guidebook is to admonish global firms to focus at the strategic planning level on their anticipated external dealings with their worldwide labor force while considering the results of their actions on the environment around them. The issues presented are not directed at internal managerial decisions with respect to financial reporting such as the Enron matter, even though such matters certainly have an ethical component to them. The book does not target specific, individual executive moral actions that always impact the process but engages the entire corporate managerial staff, assuming such personal actions in the end reflect on the company as a whole. To indoctrinate the ever widening strategic planning process involving all levels of management requires an ethical imperative be instituted as guided by the establishment of a universal code of conduct for all global enterprises and their constituents. One doesn’t separate core human values from the strategic goals one seeks to achieve. They may be pursued side by side, both complementing and yet entwined with each other.
Within the context of educating future business managers and indoctrinating executives, a mandate to act with ethical judgment is therefore an inherent asset in all people and the commercial endeavors they favor. No man is an island unto himself as his actions always affect others. With decision making comes responsibility, and with responsibility a duty. That responsibility begins with the education of business students in an academic setting.
Professor Todd Henshaw of Columbia University argues that the issue of failed ethical leadership starts not when a chief executive officer takes control but when future executives are educated. He feels that business schools should orient their curriculums to produce strategically oriented leaders, as opposed to functional technicians who respond to problems instead of taking a proactive position by instituting critical ethical thinking into the planning matrix of companies. Henshaw further comments that shaping values is at the core of master of business administration (MBA) programs, but many institutions either integrate the subject into other courses or offer it as a meaningless elective or worse, a noncredit lecture or workshop and thereby signal the peripheral nature of ethical leadership to their students. His message is the following: business schools need to treat the subject as a dedicated matter worthy of singular directed instruction and approach on par with other business skills and disciplines of management.
Henshaw’s remarks have generated a number of comments. Most respondents tended to exhibit a biased, pessimistic attitude best summarized this way: “Why should they care, since ‘business’ and ‘ethics’ are an oxymoron when combined in a sentence?” Such sentiments seem to permeate general public opinion, thereby placing commercial institutional leaders, as they begin their stewardship, behind the proverbial eight ball on the issue. It is time to change that perception and allow for managerial education to get out front on the matter.
A similar theme is noted by N. Craig Smith, the chair of ethics and social responsibility at INSEAD in France. He admonishes B-schools (business schools) to move dual topics of ethics and corporate responsibility (CR) up the agenda in the scholastic curriculum hierarchy. He first argues that due to globalization and the Internet, multinational corporations (MNCs) are living and operating in a more condensed, interconnected world, where businesses are constantly exposed to scrutiny and their ethical-CR lapses are quickly made public by mass media. Firms need to be more transparent as their veils of secrecy are easily pierced. Given the hyperspeed echo chamber of global mass media outlets, the dissemination of public disapproval is rapidly achieved. On the other hand, Smith notes that there is mounting evidence suggesting good corporate citizenship pays dividends in terms of increased profitability while contributing to the enhancement of a firm’s global reputation, thereby adding value to the company.
To combat the negative and accent the positive, Smith proposes a three-tier ethics and CR approach in B-school curriculums. First, the subject should be taught as a stand-alone course, then embedded in core courses, and finally, offered in a comprehensive slate of electives addressing specific issues. Such full-blown indoctrination would be most beneficial to the business leadership of tomorrow.
Many MBA students and managers who read this book may decide that the discussion on ethical matters is within the purview of philosophy and therefore neither a practical nor functional subject. Some would suggest that is best left on the proverbial back burner and therefore it is neither an appropriate, burning issue nor part of the strategic platform in business. However, philosophy is a soft science that explores the relationships of man and the institutions he creates to the surrounding society and environment. As such, ethics is an appropriate field for managers to consider, as they need to appreciate a broader horizon when they strategize and make decisions. It should be noted that Adam Smith, the author of The Wealth of Nations, the intellectual platform for capitalism, was not an economist but a philosopher. He was, in fact, chairman of the Moral Philosophy Department at Glasgow University when the book was written, suggesting the premises that Smith envisioned were a new framework for interpreting how the world works. One could surmise that he envisioned a society of competing interests that would, he hoped, serve all of mankind. This was a presumption based on and influenced by his other noteworthy work, The Theory of Moral Sentiments, in which he hypothesized a commercial society where economic thought is inseparable from ethics, politics, and justice.
As this book was being finalized, the necessary reediting caused me to reflect on ethics as an academic inquiry in the study of business via the techniques of applied research. I came across comments by Jeanne Liedtka. She states,
The notions of ‘scientific’ detachment and objectivity in ethics research appear illusory at best…. Yet, if all truth is subjective and shared meanings are impossible, are we wasting our time as scholars, conducting studies to satisfy our own selfish pleasure in the discovery of the particular—with no hope of finding something of value to say to those who inhabit the world we examine? If that is the case, shouldn’t we perhaps move to a more productive line of work—writing fiction or making widgets?2
While Professor Liedtka’s contention—investigating ethics in the pursuit of knowledge—may be scholastically self-indulgent, it nevertheless has value in the real business world where missteps and errors in its application have positive and negative implications. This book is written not to engage in a philosophical discussion of the subject but to allow managers to appreciate the influence of ethics on their strategic determinations and their operational and administrative tactics. It is a discipline that must be considered especially in the era of modern globalization, and therefore it is a managerial skill to be acquired. While managers aim to boost their company’s influence around the world, businesspersons must recognize that their commercial conduct is part of global life and impacts not only their organization but also the lives and environment of all it touches—a reference to Adam Smith’s aforementioned contentions. Whether the term governance, social responsibility, or ethics is used to define managerial conduct, the subject has emerged as a leading-edge discipline in contemporary management studies.
The connection between business and society in general has always carried a stigma, an unethically stained label. Outside of the atrocities of war, a history of human rights abuses has cast a long shadow over the profit motivation of the commercial imperative. The dark side of humanity has been revealed in many of the global ventures that business enterprises have taken. Throughout time, trading initiatives have been riddled with practices and events that have saddled businesses with the scars of oppressive behavior in respect to their worldwide dealings. In domestic settings, the early use of apprentices to master craftsmen placed such individuals in a long-term, indentured-servant status. As the commercial process developed, the ill treatment of employees toiling under dangerous factory conditions or in harsh, repressive agricultural environments, with meager life-sustaining wages, plagued those caught in the lower echelons of commercial venturing. But as the process moved internationally in the search for new resources, the infliction of harm and the absence of respect for human rights intensified in scope and degree. Notwithstanding the great strides made in national laws coupled with an empathetic public awareness, the historic malfeasance of MNCs is a legacy that continues to fuel today’s discussions on the ethical behavior of commercial institutions and their social responsibility.
The greatest wholesale abuse of human rights occurred during the colonization of the Western Hemisphere by European powers. Tens of thousands of native Africans were sold into slavery and transported across the Atlantic. Placed in perpetual bondage, they labored just one step above domesticated animals on plantations in the American South and the Caribbean region. In South America, they supplemented indigenous populations in the mineral-extraction process, with both groups considered as savages and thus not worthy of human dignity and no better than the beasts of burden they replaced. As the world developed, remnants of this oppressive, commercially induced behavior were repeated all over the world. Historical records abound with horrific descriptions of the treatment of imported and local labor. David Grann in The Lost City of Z recounts a vivid portrayal of atrocities committed by the British-registered Peruvian Amazon Company in the extraction of rubber as verified by the 1904 UK government’s Casement Report. He recounts how genocide was used to control the native population. Public beheading was a common punishment, while rebellious Indians had gasoline poured on them and set on fire, or were simply drowned, or were fed alive to ravenous dogs. Further, they were castrated, physically mutilated, and starved to death. Company henchmen raped women and young girls, and smashed their infants’ heads on the ground. Similar vile actions have been attributed to commercial ventures for centuries. While thankfully not to the same degree and scope, less severe but just as reprehensible remnants of such despicable actions have been reported as some MNCs outsource to the sweatshops of today’s underdeveloped countries and directly or indirectly partner with repressive governments to limit and suppress human rights.
Many early philosophical and religious teachings decried the unscrupulous nature of merchants and the money lenders as taking unfair advantage of their clientele. The Latin phrase, and an often used legal principle, caveat emptor—“let the buyer beware”—comes to mind. In the modern era, the fraudulent dealings of financial firms with the investing public, as well as the use of false advertising and the production of knowingly harmful consumer products, has continued to contribute to this poor image. Damage to the environment by MNCs, both in the harvesting of resources and in the manufacturing process, continues to plague commercial institutions. The need to regain the trust and admiration, no less the goodwill, of the population at large is a burden that modern business enterprises carry with them. They are beginning to understand that their reputations are an intrinsic prime asset that can add continuing value if handled properly. But if their practices are judged unethical, then it can also subtract value.
A new era of applied capitalism has accompanied globalization and it is represented by a variety of terms. Deepak Chopra, professor of management at the Kellogg Business School at Northwestern University, uses the phrase conscience capitalism to describe the idea that commercial institutions must work to improve the quality of life on the planet for all stakeholders in a company as opposed to the narrow agenda of increasing shareholder value. John Dunning, emeritus professor of international business at the Universities of Reading and Rutgers University, refers to a new process in making globalization good (in his book of the same title) as the moral challenges of global capitalism. Neville Isabell, recently retired board chairman of Coca-Cola, calls the idea as connected capitalism. Whatever term is used, a fresh approach to the commercial initiative that includes a wider horizon of its defined mission is taking shape. It will shape the global advancement of MNCs as they incorporate into their strategic decision making the elements of acceptable ethical conduct and practical social responsibility as equal synergetic components alongside their historic charge: value creation. Global business institutions will not only remain results oriented but also will be held accountable for getting things done right, striving for a balance of all interested parties, and regaining the trust of the public. This book is dedicated to helping firms achieve such new goals.
The object of this book is to assist in the creation of a reasonable, workable floor of universal ethical standards and its collateral issue corporate social responsibility (CSR) while recognizing that the ceilings of a company code of conduct will vary according to the political, social, and economic environments of the firm’s headquarters country and those in which they operate abroad. As with all texts on the subject, only guideposts can be suggested and their rationales explained because in the end moral decision making is individualized, deeply influenced by the personal cultural-value determinants that one is exposed to in life. Therefore, not all will agree with the guideposts proposed, a point best illustrated by a quote from English poet William Blake (1757–1827): “Both read the bible every day and night, / but thou read’st black where I read white.”
It is enough therefore that the text promotes discussion and debate, as these are the starting points of illumination and the eventual engagement of ethical dilemmas.
Many of the book’s subjects are introduced with quotations to set the stage for what follows. The reason for such preparatory remarks is twofold. First, to show that moral empathy and ethical behavior are embedded in man’s history and are not the result of our modern-day reaction to globalization. And second, they are included as a tribute to my father, Irving Beer, who collected sayings of wise men and used them in my education. He taught me that one’s life is a reflection of one’s deeds. I remember him for his life and not his death.
The shortest and surest way to live with honor in the world is to be in reality what we would appear to be; all human virtues increase and strengthen themselves by the practice and experience of them.
—Socrates, Greek philosopher
My scholastic friends always remind me that for an attorney to write about ethics, especially in an academic text, is an oxymoron and that William Shakespeare’s line “The first thing we do, let’s kill all the lawyers” is the only way to ensure just sanity in the world and provide for moral clarity.3 The writings that follow, however, are not meant to promote the mandate of a few on the majority. They are intended to lay a foundation for informing those who decide the fate of others, for such is what ethical behavior is really about.
An honest man can feel no pleasure in the exercise of power over his fellow man.
—Thomas Jefferson, U.S. president and statesman
As readers move through the text they will notice that subjects are revisited or re-presented and expanded upon. This writing technique is deliberate because ethical decision making on a global scale is a complicated issue composed of numerous components. Each time a new ingredient is introduced into the ethical mix, with its collateral agent and social responsibility, the entire matrix must be restored, be reconstituted, to preserve a proper continuing universal blending of all elements.
The second edition of the book is intended to update and expand on the ever changing field of business ethics. Although published in early 2010 the original manuscript was constructed over a few years. It drew on the then historical and current state of affairs concerning strategic and tactical maneuvers for managers to navigate the exiting ethical environment. While the underlying principles remain intact in just a short period of time, the subject matter has exploded to the point of being a required skill for commercial leaders to master.
The evolution of ethics from its position as a hovering mechanism over business dealings to its important place in the planning and administration of organizations and their operational activities is due to a variety of interwoven issues. The revised edition highlights these factors. Ethics has become unabridged. Its traditional application in the business world has morphed into a full-fledged component of managing a successful enterprise. Contributing to its new positioning are:
•Duel public transparency. Firstly scandals, mistakes, and errors in judgment by corporations are not just reported but have become the subject of in-depth investigations. It is impossible to cover-up such events and the negative public impact has affected the performance of companies like never before. Secondly, firms themselves have been pressed to issue a periodic description of their socially beneficial activities as an adjunct to the financially oriented annual company report. Such information has become a new judgment mechanism while valuing a company’s success.
•Change in terminology. The term ethics has been replaced by a new lexicon that both incorporates and expands the traditionally accepted and applied definition of a moral conduct. CSR has exploded on the scene and its emotionally charged make-up has altered the competitive environment global companies operate in. It has transformed ethical philosophical principles into a real element in the marketing mix to promote the historic selling of products and services. Alongside this contemporary terminology has come the expression responsible leadership a newfangled take on how managers are evaluated that includes a wider determination of supervisory accountability.
•Ethics as an industry. The subject of ethics within the orbit of altruistic motivation has moved from being a moral imperative to an actual practical functional application in the business process. From business school courses to nongovernmental organizations and to professional training programs, managers are inundated with an array of guidelines on how to be ethical—be socially responsible and in the end be considered a responsible leader. A new recognition of corporate managerial performance has surfaced—the good corporate citizenship award. Books, articles, magazines, and a host of supplemental materials flood the marketplace with advice on how to be ethically savvy in the commercial sector. The personal initiative and discipline to act within a socially acceptable virtuous manner toward people and the environment is no longer an internally manifested imperative. It has to be taught, injected into commercial operations, and materially rewarded and worn as a badge of honor. Ethics no longer falls within the purview of an area of study, a branch of philosophy, dealing with behaviors adjudged as morally right or wrong. It is celebrated with social responsibility company and man of the year awards. Ethics is a business unto itself.
The aforementioned alterations in the ethical climate have altered the landscape that corporations and their managers need to contend with. The field of ethics within the context of commercial dealings has moved beyond the traditional constraints of moral turpitude and into the wider arena of social welfare. The noticeable transformation has taken ethics out of the closet. It is now akin to the proverbial elephant in the room and cannot be ignored. As such, today it occupies a greater presence in structuring the strategic and tactical approaches one must take to successfully compete in the globalized world.
A reflection on the changes in the societal landscape in respect to corporate responsibility and a challenge to the historical capitalistic view that shareholder needs are the prime obligation of management comes from the comments of Jack Ma, founder and CEO of Alibaba, the Chinese internet giant. When interviewed on “60 Minutes,” a USA TV show, following the company’s successful public debut on the New York stock exchange, he made the following statements.* “If you want to invest in us, we believe customer number one, employee number two, shareholder number three. If they don’t want to buy that, that’s fine. If they regret, they can sell us.” When further queried by Lara Logan, the program interviewer noting that, “In the U.S. the shareholder is usually first.” He replied, “And I think they were wrong. The shareholder, good. I respect them. But they’re third. Because if you’ve taken care of the customer, take care of the employees, shareholder will be taken care of.” Ma’s comments signal an unorthodox approach to traditionally accepted corporate objectives, with the focus on investors, and towards an emphasis on consumers and employees. It may be indicative of a new direction that the CSR initiative has produced; a move to a wider more inclusive social agenda driving corporate strategy. This rapidly emerging issue for executives is more extensively treated with practical tactical approaches in the second edition.
One of the hardest things to do when writing about ethics and its companion offshoots, social responsibility and responsible leaders is to keep away from personal beliefs, attitudes, and feelings. To offer inspection and commentary in a purely objective fashion is difficult to maintain, as there is a natural human tendency to exhibit some subjective judgments to the issues presented. We all have an internal moral compass that points us in a particular principled direction. A magical Jiminy Cricket (the character of conscience in the children’s tale of Pinocchio) that whispers what is right and what is wrong, delineating for us life’s good and bad. I ask the reader to appreciate this dilemma not only in the mind-set of the author but to recognize it in themselves.
While the manuscript was being typesetted, the American seasonal holiday period had begun and I found myself sitting with my grandchildren watching a recent movie. Directed primarily at children it was titled The Lego Movie. It featured a key bad guy called President Business, the unscrupulous CEO and president of the massive Octan Corporation intent on world domination via a company whose diverse operations touches consumers everywhere. He is referred to as Lord Business, the most evil of tyrants who oversees a robot militia attempting to take over the LEGO universe. The hero of the story is a Lego mini-figure prophesied to save the world from the wicked big business executive. While watching the movie, I reflected on a section of my new Chapter 4 which examines the public’s prejudicial view of the business and its principles as villainous personalities due to their portraits in theatrical and literary works. I was reminded that even young children, exposed to such fictional characters in fairytales, are programed to think of corporations as destructive elements, desirous of hurting people.
Also left out of the references in Chapter 4 of films characterizing businessmen as immoral individuals are two of the most famous iconic movie classics shown repeatedly on television during the holiday season. A Christmas Carol, a 1938 American film adaptation of Charles Dickens’ 1843 novelette by Chapman & Hall is built around the character called Ebenezer Scrooge. He is an elderly miser who learns the error of his ways on Christmas Eve when his past, present, and future are collectively revealed to him. Whereupon the mean old businessman undergoes a radical change of heart and awakens on Christmas morning a new man. The infamous Scrooge character has come to symbolize the greed of a capitalist whose obsession with earning money trumps all other virtues. Widely considered as a typical Christmas movie, It’s a Wonderful Life is a 1946 fantasy comedy-drama based on the short story The Greatest Gift by Philip Van Doren Stem written in 1939. The plot line features a personality called Henry Potter, a crabby old banker motivated by money and greed, whose actions lead to unpleasant repercussions for the financially struggling residents of a small town. Such fictional portrayals only add to the public’s indoctrination of the destructive nature of business concerns and their principles; devoid of ethics and lacking any social compassion.
This book is dedicated to my wife Karen, who always said if you have something to say that could benefit others, put it down on paper and find someone to publish it. Then let the reader decide.
Lawrence A. Beer
December 14, 2014
* From Dhammapada a compilation of the sayings of Buddha, attributed to the followers of Siddhartha Gautama over his lifetime, 563 BCE to 483 BCE. Numerous translations of this work have been published.
* Retrieved on October 22, 2014 from http://managment-quotes.net/author/Jack_Ma/quote/10116