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Morality, Trust, and Integrity: The Foundations of Business Ethics

Luc Van Liedekerke

ETHICS AND MORALITY

Max Weber defined morality as the set of norms and values that dominate society at a certain moment in time/place. Ethics is far more limited, it is the rational study or debate on values and norms in society. Ethics is certainly not a science; it aims, however, to be as precise as possible in discussing norms and values.

A norm is the external face of a value. For example, ‘Thou shall not kill’ is a norm that reflects the value of life. Norms and values are internalized by individuals through a learning process that never ends, but is especially important during the first years of existence and this, remarkably, holds not only for individuals but for companies as well. Internalized values and norms carry our daily life, and determine our actions and reactions. They also structure interpersonal relations.

Law is a formal exteriorization of norms and values. Laws can be moral as well as immoral, there is no one-on-one relation between morality and law; in fact, there is a constant tension between the two.

Moral evolutions have a severe impact on a society in general and business in particular. The last decades have witnessed an extensive move in morality in Western as well as non-Western societies. This creates general uncertainty which translates itself into an increased safety concern and fundamentalistic reactions. A market society can be helped as well as handicapped by certain norms and values. Economic success is therefore correlated to the moral quality of a culture.

TRUST

When it comes to relations between stakeholders, trust is probably the central value for a market economy. Distrust increases transaction costs, and complete lack of trust makes doing business almost impossible.

We shall analyse the basic conceptual characteristics of trust here.

• The problem of trust is intimately connected to information asymmetries. The stronger the asymmetry, the stronger the trust problem.
• In a situation of strong information asymmetry (or a partner that is structurally weaker, for example, a small investor), misuse of information advantages will particularly damage the trust relation and might contain serious judicial risks.
• The trust problem also increases with the stake of the transaction (buying bread or a house).
• One-shot commercial interactions also rely more on trust than repeated interactions. Repeated interactions, combined with a long-term horizon can help reduce the trust problem.
• Trust is default in most communities; but not in all, and not at all times. If you ask the road to the station, you trust that the other will respond truthfully. If, however, you are walking trough a dark alley, on your way to the station, when all of a sudden there is a group of young men approaching you, distrust will be default. Trust is contextual.
• Context must be situated at the micro-, meso- as well as the macro-level. A change in the macrocontext was, for instance, September 11. Scandals like Enron, L&H or Ahold are likewise changes in the macro-context that influence default trust relations. Macroinstitutional reactions like the Sarbanes-Oxley act try to counter these sudden shifts in the trust horizon.
• At the mesolevel, we situate corporate culture. Sudden actions or changes at corporate level can seriously influence corporate culture and create a climate of distrust. A recent example is the relations at Ford Genk, where previous promises were turned around and resulted in a serious deterioration of company culture. At the other extreme, a corporate culture that is open and leaves room for honest dialogue can help increase trust levels and diminish the necessity for control.
• Symbolic elements also play their part in building a trust relationship. Suppose you are about to meet your financial consultant, who turns out to be a poorly dressed midget living in a slump, would that inspire trust? Looks, appearance, buildings, how you receive people, all these elements and many others carry symbolic weight and codetermine the trust relationship.
• The turn from trust to distrust or from distrust to trust do not follow the same pattern. The first switch is often momentary and has the appearance of a ‘gestalt switch’ (see the well-known duck-rabbit switch). When a switch takes place, this is accompanied with a re-interpretation of what happened in the past. One reconsiders past events and re-evaluates them. Building trust, however, is a long-term project.
• In order to build trust, you have to relax control. If you are not capable of giving in on control, you will never be able to build trust. Once trust is there, control becomes secondary.

TRUST AND INTEGRITY

How to deal with trust at the level of the individual? To answer this question, business ethicists often turn to another value: integrity. It is the honest person that inspires trust. But what exactly does integrity stand for? This is not an easy question to answer. Integrity is often associated with being incorruptible, having clear and sound principles, a straight back. It could also be connected to a sort of loyalty to who or what you are, a capability to stare at yourself in the mirror and not having to turn away. However, this last definition differs already from the first. One can change principles and still be able to look in the mirror. The straight back is not necessarily the first or foremost ingredient of integrity. What seems to matter more in a business surrounding is a willingness to defend your position, to be open about the motives for action. Integrity as per this approach is mainly a relational concept that characterizes the way you interact with others and the way you honour the explicit (contractual) or implicit obligations you have towards others (the stakeholders if you like). From this point of view, integrity will be attributed to someone who honours his explicit as well as implicit duties. At this point, one might translate integrity as keeping your customers happy. But keeping costumers happy is not necessarily the way to a culture of trust, much more is at stake. In fact, keeping customers happy might even lead you away from integrity. After all, customers can set strange demands; honour these demands and it might cost you a reputation. You need to stick to the rules of the game, even if that costs you. It is at this point that we find back the first meaning of integrity—the straight back.

DILEMMA TRAINING: A HELPING HAND ON THE WAY TO INTEGRITY

In the previous section, we stressed on the relational side of integrity. It has something to do with a willingness and capability to defend your choices. There is another reason why this way of defining integrity is important: it is often not clear what the morally best action is. Moral dilemmas are far more common than presupposed; only we rather not talk about them or do it in private. The main step in solving moral dilemmas is often a willingness and possibility to speak about it. Company culture can be very decisive in this respect. In an open culture, people will dare to speak about their uncertainties. Only then can we eliminate possible misunderstandings that might hurt company culture or customer relations. And although it is probably impossible to train people in ‘integrity’, it is possible to train them to develop a culture of dialogue in which moral problems can come to the fore and in which people learn to speak in a clear manner about them. It is at this point that we should situate dilemma training. Instead of waiting for the moment of hard choice to arrive, people are put together and asked to either define the most delicate (moral) problems in their job or are confronted with a few cases that represent moral dilemmas that might occur during work. In the calm atmosphere of a training exercise, people learn to see the crucial problems and learn to discuss them among each other. If induced in the right way, these kind of exercises can open the company culture to a dialogical approach to moral problems in which the individual does not have to solve everything by himself/herself. This will give the individual a serious back-up when she/he is confronted with the real thing.

As a final step, I would like to suggest a few questions that could guide a discussion on moral dilemmas:

• What is the nucleus of the moral dilemma? What values or norms are at stake?
• Who is involved?
• Whom can I consult on this?
• What information do I need?
• What are the arguments and counter-arguments?
• Can I reach a conclusion?
• How do I feel about this?

These are only tentative questions, some of which might be difficult to answer, but they help us on the road to a more considered opinion on moral dilemmas and when all goes well, create a culture of integrity and trust in business.