All of us lie and cheat … at least a bit (The Honest Truth About Dishonesty, Dan Ariely) and more than we care to admit. And it seems the things people learn about lying and cheating prepares them well for business and government. A part of the trick is determining just how far we will go. Regardless, it should be no surprise then that the reflex position of business is, ‘Ethics cost money and are therefore optional’. And despite the rhetoric, leadership training, policy and values statements and a few optional ethics classes in business schools, it would be reasonable to suggest that the business status quo is not about to change soon. That doesn’t mean we should give up but we do need to understand it better and explore new ways to deal with it.
The Majority Aren’t Interested?
I recently got to ask an investment expert (lots of post-grad qualifications) about ethical and socially responsible investments. His response was instructive. Few investors knew about them, asked about them or were interested in them. Further, he posited that the funds themselves could not be expected to perform well because they would be eliminating otherwise very profitable business investments. His explanation suggested ethics inhibited business performance and there are significant financial incentives to maintain ‘unethical’ or less ‘socially responsible’ practices. He was very relaxed about this. To this, I pointed out the cost of some recent unethical and almost always illegal business practices and operations such as the VW emissions deceit, the BHP/Vale dam collapse in Argentina and the Commonwealth Bank investment scandal (I can now add the CBA insurance scandal). I didn’t get much more than a shrug and a sense that we should move on from the topic. Strangely I was beginning to feel like a naive do-gooder. That the ethical was irrational. Regardless, it was not a reflex to see unethical and potentially illegal behaviour as a significant risk to performance and to investment returns.
Economic Rubbish and the Role of Executives?
The investment advisors position fits with a business perspective that unethical or socially irresponsible behaviour is inevitable and the biggest mistake is being caught. Somehow the unethical bits that turn out badly, like Enron or the Subprime Loans and the GFC, have to be overwhelmed by the benefits of the unethical bits that work out profitably. If not then the whole Milton Friedman idea about business behaving rationally should be a load of economic rubbish.
This leads to at least a few ironies. The executives involved are considered to be educated and of high social status while their (unstated) default moral and ethical position is socially and often legally unacceptable. A second is an executive while prepared to take a morally or unethical position should be able to act and speak so as to appear morally and ethically acceptable. Further, they need to be skilled at PR and damage control when responding to being caught out. And much more skilled than with preventing poor behaviour in the first place. Preferably they will be already presenting a socially responsible face to the public. We’ve all seen the charming executive looking apologetic, reassuring us that problems are not systemic, that an independent review is underway, and this isolated ‘problem’ will be resolved with the interests of those affected being looked after. This is all done while carefully not admitting liability.
It seems the reflex position of the public should be to be suspicious of the executives of our companies, particularly as they get larger and the size of their social and ecological footprint grows. We also know that paying executives more and giving large bonuses will not lead to improved behaviour.
The Ethical Exception, Leadership and Cults
Now, this is not an anti-business rant, quite the contrary, the community benefits greatly from companies and there are companies that are considered exceptions. Further, I do not subscribe to the concept that if business behaved ethically then it would suddenly disappear along with all the benefits. That could be a good debating position but it is also absolute rubbish.
It should be instructive to look at these companies that have taken ethical or socially responsible positions and prospered (e.g. Interface Inc. the Ray Anderson period). The first thing in evidence is that being ethical requires a different mindset and effort because you will have to do things differently. The Interface story does show that it can be done. It doesn’t suggest that everything was done perfectly but that a structure could be put in place that helped to facilitate a better social, environmental and financial contract with the community. Regardless, many companies and industries have not followed.
What is instructive is what happens when these case studies are pointed out. They are often admired, spoken of with interest and curiosity however they are also treated as the exception. And as often as not they become viewed as dependent on a strong leader (“built on the cult of personality”, Collective Hub, April 2016 ) and the example as having limited or no application to others. So, the ethical position and the implementation of the business strategies could only be maintained by the force of a super talented and charismatic leader. This buys into the fascination business has with leadership. The choice of the word ‘cult’ for an ethical and socially conscious business entrepreneur is interesting. ‘Cult’ has negative religious overtones and isn’t what we expect in a rational business.
Certainly, it would be interesting to follow up companies with a reputation for ethical and socially responsible behaviour, such as Interface and Bodyshop, now that their entrepreneur (cult) leaders have passed away. It could be expected that each business has moved closer to the norm. In the Bodyshop’s case ownership has passed to another larger corporate owner L’Oreal. An investigation by Choice suggests they have moved towards the default setting. This is despite L’Oreal trying and the linked article by The Collective (see Collective Hub). After the Choice investigation, The Collective article starts to look more like good PR.
What Supports and Reproduces The Unethical Behaviour?
This unethical reflex of business and it’s widespread acceptance leads to lots of questions.
Is it possible that executives are prone to key shared personal and cognitive flaws that support an ability to both support and tolerate unethical behaviour. Dan Ariely’s work would suggest that’s possible while personality research reports a higher than average number of psychopaths in executive roles. The psychopath’s ability to operate outside social mores and ethics without shame or guilt also supports the proposition that unethical behaviour is good for your career … as long as you are not caught out!
Could it be when an ethical solution to a problem is harder or takes more effort, then an unethical pathway becomes easier to rationalise. The examples of Interface and others certainly suggests that you will have to break new ground and that it takes an effort. VW and others would actually have to design and build cleaner engines, not just fake it.
Is it easier for executives to convince themselves that they probably won’t get caught? It helps that many will never be at the scene of the crime and never have to deal directly with those hurt by their actions or that in all probability nobody challenged the ethics of the decision in the first place (or at least nobody in a senior executive role. A mere engineer or technician can be more readily ignored). They will be lauded and rewarded for their success and supported financially by the corporation should things go wrong. The more the person is separated from the consequences the easier the decision is to make.
Does the management role give the person permission to act in ways they wouldn’t consider in their private life? Role theory would suggest so.
This list of questions above is far from exhaustive. The factors influencing unethical outcomes is significant.
Here are just 8 contributing factors to unethical behaviour:
- Rational with benefits (in the short-term) – If it’s quicker, easier and the path of least resistance and the benefits are greater than the consequences of being caught.
- Mimicking others – doing what everybody else does implies less personal responsibility & risk.
- (Immoral) Moral relativism – within this industry/business these values and behaviours are presented as acceptable if not necessary to being competitive and for success. It’s only a little bit wrong.
- Group think – not stopping to sanction or challenge in-group thinking that is going wrong. Exspelling those who don’t think the same way.
- The Slippery Slope – a small deception grows into a big one with subsequent decisions. It is increasingly harder to back out.
- Character traits – low empathy or guilt, meaning fewer personal restraints. It has long been held that psychopathic behaviour is overrepresented in management.
- Permission – There is either implied or explicit permission from those in authority and peers. It’s not your fault.
- Remoteness – the distance between those responsible and the consequences of the actions.
What can you do?
It can be hard to walk a different path.
- Work to redefine the problems and solutions with ethics part of the central definition.
- Have Board members and executives get close to the actual work and consequences of their decisions.
- Accept that it is you who might have to break new ground.
- Find a supportive mentor.
- Be explicit about your values and what you are trying to achieve.
- Get people used to discussing the ethics of a situation e.g. who are the winners and losers and why.
- Recognise that everyone will get better at it with practice.
- Withdraw permission. Make it clear that unethical behaviour is not okay and give examples.
- Learn about how other companies are doing it better and find ways to mimic that.
- Make it easier to back out of a small mistake/lie than keeping going and making it worse.
- Be prepared to deal with the unintended consequences of decisions.
- Start with the proposition that ethics and profit can go together.
It starts to sound like ethical behaviour requires leadership and the courage to follow through. If that became the norm then ethics might move beyond ‘a cult of personality”.