Amendment I: Congress shall make no law respecting anestablishment of religion, or prohibiting the free exercise thereof; orabridging the freedom of speech, or of the press; or the right of the peoplepeaceably to assemble, and to petition the government for a redress ofgrievances.
Source: U.S. Constitution, via FindLaw.
Special to Ethics Newsline from IGE fellow Dr. Jonathan Ingbar
Here in the summer of 2005, now several years down the road from Enron, we remain awash in news of corporate wrongdoing. Courtrooms — not boardrooms — are the stage for much of our business news. Bernard Ebbers of Worldcom has been sentenced to prison for securities fraud, conspiracy, and falsifying regulatory filings. Dennis Kozlowski of Tyco International is on trial for purloining $150 million from his former company. American International Group, once admired for its stature and vision, sinks in disrepute as its alleged accounting improprieties and the reported misdeeds of former CEO Maurice Greenberg come to light.
While each of these men was undoubtedly powerful, we cannot help but ask where were the countervailing forces that should have held them in check: Where was the board of directors? Where were the auditors? Where was corporate counsel? Where were other senior executives willing to stand up for their company? Where were the shareholders? Where were the regulators? Where was the investigative business press?
To address these questions, the venerable American Academy of Arts and Sciences launched a project on corporate responsibility. Restoring Trust in American Business is its initial statement of where things stand and of what must be done to begin to right the course of business behavior.
The Academy brought together esteemed individuals from academia, law, Wall Street, and journalism to comment on the state of corporate America. In fifteen papers and commentaries, the contributors spell out how each party — management itself, boards, lawyers, auditors, regulators, shareholders, and journalists — participated in creating the present state of affairs.
Of these analyses, a few stand out. The opening chapter by Mark J. Roe, professor of corporate law at Harvard Law School, succinctly argues that “the core fissue in American corporate governance is the separation of ownership from control … a separation that creates both great efficiencies and recurring breakdowns” (page 9). The diffusion of ownership across millions of stockholders, coupled with the concentration of money, power, and influence in the hands of management has, in Roe’s view, been the dynamic fueling every corporate crisis over the past fifty years, and he makes a cogent case for it. He writes, “With our porous system of regulation, the core regulated group — the managers — can induce regulators to weaken the direct oversight that they face, can influence Congress to deny the regulators enough funding to be effective, can deter good regulation, and can thereby render some gatekeepers ineffectual in checking managers” (page 11).
Among those ineffectual gatekeepers are corporate lawyers, say William T. Allen and Geoffrey Miller of New York University. They limn the gradual erosion of independence of lawyers — whether within or outside the corporation — from the exigencies of purely business concerns. Lawyers who formerly held to “the discernible spirit animating the law” (page 118) now are instruments in service to management.
Geneva Overholser of the University of Missouri holds the feet of business journalists and their media bosses to the fire as well. “In the go-go climate of 1999-2000,” she writes, “journalists were as irrationally exuberant as anyone. No longer critics, they became players — even cheerleaders” (page 149). Much as other employees of large corporations, journalists became indoctrinated with a market mentality that blinded them to the excesses all around.
The book concludes with a report from the Academy’s Corporate Responsibility Steering Committee which, while practical, clear, and concise, provides recommendations that will seem familiar to anyone with a passing interest in the topic: Emphasize the oversight role of boards with respect to business practices and to ethics, compliance, and compensation; strengthen the roles and independence of regulators, such as the U.S. Securities and Exchange Commission; move toward stronger professional standards and more independence for auditors, lawyers, investment bankers, and journalists.
This is useful stuff, to be sure, but lacking a detailed examination of why and how we, individually and collectively, undermine our ethical intentions, it remains incomplete at its core. One contributor, Margaret M. Blair, begins to get at this, but does not go far enough.
If ethics is, to paraphrase Lord Moulton of Bank, obedience to the unenforceable, then we can’t enforce our way to ethics. Surely, the networks of boards, auditors, lawyers, managers, regulators, and the press are essential. But the question of just how we go about creating organizations that manifest the ethical values we hold so central remains largely unasked and unanswered in this work.
 | The Ethical Imperative: Why Moral Leadership is Good Business Perseus Books Book review by Earl H. Hess |
Drawing from what this reviewer sees as a unique combination of skills and perspectives in the areas of economics, business leadership, theology, and the social sciences, John Dalla Costa laments a global economic system that seems focused on short-term, bottom-line profitability with disregard for the long-term damage being imposed on the quality of human life.
This book is no easy read. Rather than dealing in only gut feeling and anecdotal evidence, Dalla Costa documents his positions very thoroughly. He does not hesitate to deal with specific situations in which the failure of companies to build a culture that supported moral as well as financial integrity led to gross ethical misconduct. Conversely, he also cites those whose “ethical maturity” parallels their economic savvy.
In an early chapter, Dalla Costa documents the cost to our global economy of fraudulent and unethical practices, putting dollar amounts onto such areas as healthcare fraud, fines and damages to companies because of mistreatment of employees, and violations of environmental regulations. The sum total is indeed staggering.
He proceeds to document the urgency of a global ethic integrated into our global economy, an ethic built around simple core values such as honesty, dignity, fairness, justice, and honoring the environment, and then describes the benefits not just to the business but to all of society.
In the later chapters of The Ethical Imperative, his emphasis is on the “how to” of implementing ethics. He uses the term “Strat-Ethic” to emphasize the importance of integrating ethical elements (the company’s core values and culture) into its strategic plan, and identifies key roles of governing boards and CEOs in setting the tone for a company’s commitment to high ethical standards and practice.
The reviewer, having a keen interest in the role that religion can play in creating an ethical society, finds Dalla Costa’s perspective extremely enlightening. He brings together the basic ethical teachings of the world’s great religions and finds them strikingly consistent, as exemplified by a statement from the Parliament of World Religions in 1995. Further, he insists that religion plays a key role in providing the moral undergirding of a global ethic, but decries the divisiveness inflicted on us by narrow sectarianism.
As mentioned earlier, this book is not an easy read, but it will prove immensely worthwhile to those of usespecially in the business worldwho long for a way of integrating our lives to include both its personal and business dimensions.
