MEMO:
TO: The Troops
FROM: The Boss
Accounting says we`ll go broke if we put pollution scrubbers on all the smokestacks. Our foreign distributor will lose a big sale unless she offers–a generous bribe. One of our scientists reports that the new line of gaskets bursts into flame at room temperature, but we can`t afford a recall. The toxic waste dump used by Factory No. 6 would make Love Canal look like a north woods trout stream.
It appears that the folks in our Ethics Department face a crowded agenda today.
HE IMAGINARY missive above does exaggerate, of course. Seldom does a well-run company encounter so many ethical crises all at once, and only about 20 firms across the country actually house the Corporate Conscience in a suite of offices.
A swelling number of businesses, however, do seek out the regular counsel of ministers, philosophers and other right thinkers. Increasingly, headquarters buildings reverberate with serious talk about the integrity of the ”corporate culture,” while written codes of behavior hurtle through the house mail.
Experts in the growing field of business ethics saw the trend begin in earnest shortly after the revelations of Watergate and Koreagate, when prominent captains of commerce illegally filled President Richard Nixon`s campaign treasury and greased their foreign sales by issuing bribes.
Those scandals–plus the mounting list of environmental atrocities and dangerous products uncovered by the new breed of post-Watergate muckrakers
–cost Big Business a great portion of its public esteem.
The clouds of suspicion that descended upon Union Carbide when a disastrous gas leak killed about 2,500 residents of Bhopal, India,
demonstrated once again how fragile a corporation`s reputation can be. And similar public doubts about integrity and honor now cast a shadow over the Emery Mining Co. after its tragic fire in the coal fields of Orangeville, Utah, killed 27 workers and executives.
ALL THROUGH the seamy 1970s, business leaders were discovering that an
”image” of integrity no longer would suffice. A company had to be honest, really honest, in its dealings, or face the possibility that stiff
regulations, class-action suits and general consumer distrust would drive it into bankruptcy.
”I`d call it a trend toward enlightened self-interest,” says Willys H. Monroe, a Chicago management consultant who also serves as a director of Pillsbury, the Minneapolis food products concern. Monroe has been active on the Pillsbury board`s ”public responsibilities” committee, which has been encouraging exemplary behavior since 1966 and therefore can claim to be among those who built the bandwagon so many companies now climb upon.
”The company has to stand for something, and our activities are a kind of social fingerprint of the company,” Monroe says. ”We never thought of that as pioneering. We just thought it had to be done. We`re very much interested in the truth of our advertising content, truth in labeling and all the safety aspects.”
Other prominent examples now fill the files of the new business ethicists.
— Allied Corp., the New Jersey chemical giant, conducts three-day ethics seminars five times a year, where clergy, philosophers and managers crunch through case studies and ponder their implications.
— Polaroid holds regular conferences to deal with ”the unease of contemporary employees with rigid rules; the trend toward self-regulation; and the moral questions raised by new technologies.”
— The Institute on Ethics in Management, a Cambridge, Mass., consulting firm, hosts an annual 10-day seminar that draws executives from more than a dozen major national firms.
— In 1982, when seven victims died after taking cyanide-laced Tylenol, Johnson & Johnson, manufacturer of the analgesic, spent scores of millions of dollars pulling the product from inventory and installing tamper-proof packaging. All the while, J&J cooperated fully with law enforcement officers and the news media. Chairman James E. Burke told Industry Week magazine this fall that the firm`s long-standing ethics code (instituted in 1947 and revised in 1979) ”played the single most important role in our decision-making”
during the crisis.
The pattern of righteousness can be traced in surveys, too. A 1964 Conference Board study indicated that only 40 percent of American companies had formal standards of conduct. By 1979, a follow-up revealed that more than 73 percent of the nation`s largest corporations had adopted written ethics codes.
THOSE CODES MAY reflect good intentions, but companies in recent years have discovered that putting a credo in writing is not quite the same thing as imbuing the entire staff with feelings of propriety and honor.
Instead of merely issuing a list of generalized policies, some firms began instituting ethics training programs and calling in ethicists–usually members of the clergy or philosophers from academe–to advise managers on a regular basis. A few companies have formed departments or hired individuals devoted to nothing else.
”The interest in written standards of conduct peaked around 1979,” says Gary Edwards, executive director of the Ethics Resource Center, a nonprofit organization based in Washington and supported by private industry. ”Now leaders are looking at the internal life of the corporation, particularly conflicts between the changing values of workers and managers and the operating values of the company. These institutional and personal value conflicts can`t be handled simply by generating another document, another ethics code.”
Instead of providing mere inspiration and moral uplift, the consultants from theology and philosophy deal with specific questions that can snag the moral fiber of even the most sincere corporation.
CUMMINS ENGINE, a concern with a long reputation for fair play, has employed staff ethicists for the last 15 years. At headquarters in Columbus, Ind., managers gather frequently to discuss cases and develop thinking processes that will give ethical weight to their decisions.
An example frequently discussed at Cummins concerned a loyal and trusted supplier. In a 1982 recession cutback, Cummins felt compelled to cancel a large order that had been promised, unofficially, to that vendor. Such a severe loss of business would have threatened the supplier`s very survival. At some companies, management might have said, with a shrug, ”Well, that`s life in the industrial jungle.”
Things don`t work that way at Cummins. Corporate responsibility director Michael Rion was asked to arrange a day-long discussion and help the purchasing department clarify its thinking: Did the supplier really depend on Cummins for its existence? Did the supplier`s long record of dependability justify phasing it out over a longer period, instead of cutting it off abruptly? Could other orders be shifted to the firm and soften the impact of a cancellation?
Rion, 38, now the director of Hartford Seminary in Connecticut, had been hired to institute an ethics training program for Cummins personnel. A Congregationalist, Rion holds a doctorate in ethics from Yale Divinity School, and although he chose to remain a layman and work in religion-related administration, he represents the growing number of advisers with theological backgrounds who now slip in and out of the commercial marketplace.
LIKE MOST SUCH advisers, Rion is reluctant to describe specific issues he dealt with at Cummins (his successor could not be reached after several attempts), but Rion is willing to talk about some of typical issues.
”Many companies, for example, are now forced to consider what constitutes a bribe,” Rion says. ”The Foreign Trade Practices Act rules out bribes but allows `facilitating payments.` The legal side is clear, but all kinds of complicated specifics come into play. An executive must ask, `Am I paying out this money to influence the placing of a future order, or am I just trying to facilitate getting a shipment sent through?`
”Another question: A company makes a component that goes into something else. How far can you reach to influence the end use? Will it be used in a country whose policies we don`t like? If you`re making the coating for a film that will be used for spying to enforce apartheid in South Africa, do you withdraw the product from that customer? That sort of question comes up in day-to-day marketing. I would argue that it would depend on the product. Something essential to people, such as medical supplies, might be okay. Selling guns to the police of a repressive government might not be.
”And how does a company want to be in a foreign country? Manufacturing, licensing, selling? Some companies say, `We follow the market. We go where the United States says we can go.` ”
On occasion, Rion continues, a firm might feel justified in selling products below cost in another country, ”dumping” its goods in an effort to establish a foothold and drive out competition. Rion feels uncomfortable with the idea.
”Our government provides the parameters, defines the legality, but the company still has its own responsibility to consider,” he says. ”What`s relevant? One person`s `dumping` is another person`s `competitive edge.` ”
RION SAYS a company wishing to act in good conscience stands a better chance of succeeding if the firm has had a long history of community concern. Cummins, one of the world`s largest manufacturers of diesel engines, has operated with that attitude since its founding by J. Irwin Miller, whose many philanthropies over the years set an example for social-welfare activity that continues to this day.
Other helpful ingredients, according to Rion: A written code of ethics to set the stage, widespread staff support, a continuing management development program with an emphasis on ethical behavior and, finally, a policy of consistent management backing, so that honest employees know their leaders do not appreciate coverups.
”Whistle-blowing is the most critical example of that last criterion,”
says Rion, pointing out that if employees fear they`ll be fired for revealing defective products or harmful practices, a company soon could become a hotbed of deceit and paranoia.
”Of course, whistle-blowing already indicates a failure of management ethics,” Rion observes. ”If someone has to blow the whistle, there`s some failure already.”
At Rexnord Inc., a Milwaukee-based machinery manufacturer, 300 top managers must regularly sign a questionnaire to affirm that they are unaware of any ethics code violations. Robert Krikorian, chairman of the board, chief executive officer and a national leader of the business-ethics movement, affixes the last signature before the document moves on to the board`s audit committee. That way, says Krikorian, everyone down the line knows that the top man considers ethics a major priority.
IN A 15-MINUTE videotape shown to all Rexnord employees, Krikorian declares: ”We will walk away from business if it requires doing something illegal or unethical. I don`t care how big the deal is.”
Bert Kister, senior counselor in Rexnord`s office of corporate relations, says such efforts have all but eliminated large ethical crises. ”Generally, the problems we`ve had have been outside the United States,” Kister says.
”Now we avoid those countries where it`s common to give bribes. That does involve some financial sacrifice, but I couldn`t put a dollar figure on it.” The lack of dollar figures may be the whole point of the new business ethics. Leaders in the field no longer demand a specific bottom-line justification for programs designed to strengthen the corporate soul.
”Whenever you`re a nice person, your reputation improves,” reasons David Freudberg, a Cambridge producer of educational materials in the ethics field. ”Few corporations are going to be selfless. The No. 1 priority is still going to be a handsome return for the shareholders. But companies are learning that if they conduct themselves in an altruistic way, everybody benefits.”
In fact the profit potential may be more evident in the fields of the advisers themselves. Robert Cooke, the philosophy professor who directs De Paul University`s Institute for Business Ethics, cheerfully concedes that part of the motivation for bringing managers and philosophers together is to provide a new career field for the philosophers.
”I`d be less than candid if I didn`t say yes to that,” Cooke says.
”Many liberal arts students are coming into business because they want a job. They want individual freedom and economic freedom as well. And with a liberal arts background, they seem naturally to show concern for ethical issues.”
COOKE SAYS even hard-core business majors now demonstrate more interest in ethics than they did when he first combined business and philosophy courses seven years ago. As a result, DePaul recently began offering a combined master of arts-philosophy degree program combined with a master of business administration.
When he worked at Cummins Engine, Michael Rion noticed that eagerness, too.
”One of the components of my management seminars,” he recalls, ”was a section called `Why Management Ethics?` I had quotations from all the great philosophers ready in case someone should ask. But the question never came up. The people already took it for granted that we should act ethically. Their only question was, `How do we do it better?` ”
