Ethics Officer?

Many years ago when I was chair of the philosophy department we were gifted $25,000 as a result of a court case involving bid-rigging. The trial was held in a nearby county and as a result of the defendants being caught pretty much red-handed, they were fined $100,000.00. They settled out of court for $50,000.00 and the proviso was that the money should be split between two local colleges who were then directed to set up courses in business ethics. My department was one beneficiary.

Well, as it happens, we already had several courses in business ethics, including one in the Masters program in Business. I always enjoyed teaching that class because the students were older — often folks who had returned for their M.B.A. after deciding it would advance their careers a bit. They brought a fund of information and experience with them and we had some great discussions. And the business arena is a gold mine for those of us looking for ethical issues.

The problem was what to do with all that money when we already had those courses. I decided to set up a lecture series to supplement the business ethics courses and we brought to campus some very interesting people — including the founder of the Parnassus Fund in California which promised to invest only in ethical companies — companies that treated their employees well, didn’t produce cigarettes or liquor, etc. He was most interesting and gave an excellent talk and then went to a couple of business classes and interacted with the students.

We also brought to campus the “Ethics Officer” at Honeywell — a corporation in Minneapolis that bragged about the fact that they were ethically oriented as witnessed by the fact that they donated free computers to the schools and engaged in other charitable acts. In any event, the ethics officer was a lawyer(!) whose job it was to make sure the corporation didn’t take steps that would get them in a legal tangle and to help them out of those tangles if they slipped up. Hardly ethics! (As a footnote, I would add that when the company later ran into financial difficulties the first things they cut were their charitable works!). In any event, it was instructive to get a first-hand look at one corporation’s notion of what ethics is all about.

The problems, of course, is that the law is not always ethical and that, in fact, ethics and legality often conflict in the “real world.” I spent a good deal of time after the lawyer’s visit trying to make that point clear to my students. Something can be perfectly legal and yet replete with ethical conundrums. This would be the case, for example, in those companies that promote dishonest advertising in order to increase sales. The ads may stay within the perimeters of legal strictures and yet violate the principle of honesty. And it is not at all clear that major companies treat their employees with the respect that all persons deserve.

But in those years of teaching business ethics I learned that the publicly owned corporations care not a whit about ethics and focus almost exclusively on the bottom line. Honeywell we simply one of a host of companies that was dedicated to profits and regarded ethics as a bit of a pain in the ass.

This is not to say that all companies were unethical, though most of the publicly-owned companies have terrible track records. There are a number or quite remarkable stories about privately owned companies, however, that go out of their way to do the right thing by their employees and their customers. Malden Mills, a family-owned company in Massachusetts is a case in point. As a news story reported at the time,

[Aaron] Feuerstein, an Orthodox Jew whose grandfather had started Malden Mills in 1906, not only to decided to rebuild. He also resolved to continue paying the 1,400 workers left idle during the construction works their salaries for the next three months, and to cover their health insurance for 180 days.

Asked to explain his decision, he attributed it to the ethics he had learned from studying the Talmud.

“I have a responsibility to the worker, both blue-collar and white-collar,” he told Parade magazine. “It would have been unconscionable to put 3,000 people on the streets and deliver a deathblow to the cities of Lawrence and Methuen. Maybe on paper our company is worthless to Wall Street, but I can tell you it’s worth more.”

There are more such stories, but not as many as the horror stories about companies such as Johns Manville that know they were producing such things as cancer-causing asbestos long before they were forced to change their product by the government. Or the tobacco companies that knew many years before their customers that cigarettes cause lung cancer. Which is why we need governmental controls — contrary to what we hear abroad these days. They act as watch-dogs to try to keep the unethical companies in line.

It’s not a perfect system. But while the law is not always ethical, at times it’s all we have.

Business As Usual

I taught Business Ethics for many years at both the undergraduate and the graduate levels. In doing my research I discovered that, from a moral perspective, there are fundamental differences between publicly owned and privately owned companies. The former must answer to the stock holders and tend, on the whole, to be unprincipled in their treatment of the people they deal with and unconcerned about the world we all live in. The latter are much friendlier not only to the environment but also to their employees and those they serve.

An example of an excellent private company was Malden Mills in Lawrence, Massachusetts which made Polartec and Polarfleece. It was owned by Aaron Fererstein when it burned to the ground in 1995. The man decided to keep the mill in that town as he knew how much the relatively small town depended upon its presence. He also continued to pay his unemployed workers until they could find other employment, at a cost of $25 million. The factory was rebuilt and rehired many of its former employees, but fell on hard times and eventually had to file for bankruptcy. It was a sad ending to a wonderful story. One hopes it was not symptomatic as such stories are rare in the world of business — and virtually absent in the world of publicly owned companies. Indeed, it has become a textbook case of a “poor business decision.”

What is more typical in the world of publicly owned companies is the story in the current issue of Sierra Club magazine about the coal mining companies in West Virginia, such as Massey Energy, that are tearing away the mountains one at a time. The process releases particulates into the air that result in a variety of illnesses in nearby towns, including  a cancer rate double that of more distant towns. In the midst of the destruction at the top of one mountain sits a small cemetery consisting of 37 marked graves that has been around since the 1800s and which has so far been spared. But it is marked, along with a number of other cemeteries in the region, to be moved and “consolidated” elsewhere — away from the coal. The moves are being resisted by the descendants of those buried on the cemetery plots, of course, as the human remains cannot be moved, only the markers. But we have learned how those stories end. They do not end in bankruptcy, they end in misery and unhappiness for many in the name of profits for the stockholders.

When I proposed the course in business ethics to the faculty at my university years ago one of the faculty wags stood up and said there couldn’t be such a course because “business ethics” is a contradiction in terms. We laughed, and passed the course. But there is some truth in what the man said in that meeting: business has done more to raise the standard of living for more people than any other human endeavor, I dare to say. But at the same time, it has raised the specter of uncaring, ruthless, exploitation and has managed to trample on a great many human lives, not to mention the environment, while raising to outrageous heights the standard of living for a diminishing number of others — the now-famous 1% who control so much of the wealth in this country. And as I have mentioned in previous blogs, it has also altered the way we live in the world, substituting the notion of “life-style” for living a good life.

When we talk about “business,” however, we must be careful to specify whether we are talking about small businesses or large ones — private companies like Malden Mills that treat its employees well and do the right thing, at considerable risk to the bottom line, or the large, publicly owned companies that care about nothing else but the bottom line. It’s the latter that give business a bad name. And in most cases, if not all, it is well deserved.