Education Wellness in Healthcare Assignment

78

'Of course, honesty is one of the better policies."

79

Ethics without

the sermon

Plain speaking about

an often obscure subject in the form of 12 questions to ask when making a business decision

Laura L Nash

"Like some Triassic reptile, the theoretica} view of etbics lumbers along in the far past of Sunday School and Philosophy i, wbile the reality of practical business concerns is constantly measuring a wide range of competing claims on time and iesouices against tbe unrelenting and objective marketplace." So writes the author 0/ this article as she introduces a procedure to test pragmatically tbe etbical content and human fallout of everyday decisions in business and otber organizational settings. First you have to define the problem as you see it, then (insofar as possihle) examine it as outsiders might see it. You explore where your loyalties lie and consider both your intentions in making the decision and whom your action might affect. You proceed to the consequences of disclosing your action to those you report to or re- spect, and then analyze tbe symbolic meaning to all affected. In her conclusion the autbor attacks the sticky question of the proper moral standpoint of tbe organiza- tion as a whole.

Laura Nash is assistant professor of business administration at tbe Harvard Business School, wheie she teaches business policy. Formerly a teacher of classics at Brown, Brandeis, and Harvard universities, she recently spent a year and a half at the Harvard Business School doing research on business and ethics.

Illustrations by Saxon.; drawins on jacing page © 19S1. Tbe New Yoikcr Miig.axinc. lac.

As if via a network TV program on the telecommunications satellite, declarations such as these are being broadcast throughout the land:

Scene t. Annual meeting, Anyprod- ucts Inc.; John Q. Moneypockets, chairman and CEO, speaking; "Our responsibility to the public has always come first at our company, and we con- tinue to strive toward serving our pubhc in the best way possible in the belief that good ethics is good business.... Despite our forecast of a continued re- cession in the industry through 1982, we are pleased to announce that rpSi's earnings per share were up for the twenty-sixth year in a row."

Scene 2. Corporate headquarters, Any- products Inc.; Linda Diesinker, group vice president, speaking: "Of course we're concerned about minor- ity development and the plight of the inner cities. But the best place for our new plant would be Horse- pasture, Minnesota. We need a lot of space for our operations and a skilled labor force, and the demo- graphics and tax incentives in Horsepasture are perfect."

Scene 3. Interview with a financial writer; Rafe Shortstop, president, Anyproducts Inc., speaking: "We're very concerned about the state of American business and our ability to compete with foreign companies.... No, I don't think we have any real ethical problems. We don't bribe people or anything like that."

80 Harvard Business Review November-December 1981

Scene 4. Jud McFisticuff, taxi driver, speaking: "Anyproducts? You've got to be kidding! I wouldn't buy their stuff for anything. The last thing of theirs I bought fell apart in six months. And did you see how they were dumping wastes in the Roxhurg water system?"

Scene 5. Leslie Matriculant, MBA '82, speaking: "Join Anyproducts? I don't want to risk my reputation working for a company like that. They recently acquired a husiness that turned out to have ten class-action discrimination suits against it. And when Anyproducts tried to settle the whole thing out of court, the president had his picture in Business Week with the caption, 'His secretary still serves him coffee'."

Whether you regard it as an un- checked epidemic or as the first blast of Gabriel's horn, the trend toward focusing on the social im- pact of the corporation is an inescapable reality that must be factored into today's managerial decision making. But for the executive who asks, "How do we as a corporation examine our ethical concerns?" the theoretical insights currently available may be more frustrating than helpful.

As the first scene in this article im- plies, many executives firmly believe that corporate operations and corporate values are dynamically in- tertwined. For the purposes of analysis, however, the executive needs to uncoil the business-ethics helix and examine both strands closely.

Unfortunately, the ethics strand has remained largely inaccessible, for business has not yet developed a workable process by which cor- porate values can be articulated. If ethics and busi- ness are part of the same double helix, perhaps we can develop a microscope capable of enlarging our perception of both aspects of business administra- tion—what we do and who we are.

Sidestepping Triassie reptiles

Philosophy has been sorting out is- sues of fairness, injury, empathy, self-sacrifice, and so on for more than 2,000 years. In seeking to ex- amine the ethics of business, therefore, business logically assumes it will be best served by a "con- sultant" in philosophy who is already familiar with the formal discipline of ethics.

As the philosopher begins to speak, however, a difficulty immediately arises; corporate executives and philosophers approach problems in

radically different ways. The academician ponders the intangible, savors the paradoxical, and embraces the peculiar; he or she speaks in a special language of categorical imperatives and deontological view- points that must be taken into consideration before a statement about honesty is agreed to have any meaning.

Like some Triassie reptile, the theo- retical view of ethics lumbers along in the far past of Sunday School and Philosophy i, while the re- ality of practical business concerns is constantly measuring a wide range of competing claims on time and resources against the unrelenting and ob- jective marketplace.

Not surprisingly, the two groups are somewhat hostile. The jokes of the liberal intelli- gentsia are rampant and weary: "Ethics and Busi- ness~the shortest book in the world." "Business and ethics—a subject confined to the preface of business books." Accusations from the corporate cadre are delivered with an assurance that rests more on an intuition of social climate than on a certainty of fact: "You do-gooders are ruining America's ability to compete in the world." "Of course, the cancer re- ports on [choose from a long list] were ter- ribly exaggerated."

What is needed is a process of ethical inquiry that is immediately comprehensible to a group of executives and not predisposed to the Uto- pian, and sometimes anticapitalistic, bias marking much of the work in applied business philosophy today. So I suggest, as a preliminary solution, a set of 12 questions that draw on traditional philosoph- ical frameworks but that avoid the level of ab- straction normally associated with formal moral reasoning.

I ofTer the questions as a first step in a very new discipline. As such, they form a tenta- tive model that will certainly undergo modifications after its parts are given some exercise. The Exhibit on page 81 poses the 12 questions.

To illustrate the application of the questions, I will draw especially on a program at Lex Service Group, Ltd., whose top management prepared a statement of financial objectives and moral values as a part of its strategic planning pro- cess.̂ Lex is a British company with operations in the United Kingdom and the United States. Its sales total about $1.2 billion. In 1978 its structure was

1. The process is modeled aitei ideas in Kenneth R. Andtews's book The Concept of CoTporate Strategy (Homcwood, 111.: Richard D. IrwJn, 1980, revised ediiion) and in Richard F. Vancil's article "Strategy formulation in Complex Organizations," Sloan Management Review, Winter 1976, p. 4.

Ethics without the sermon 81

partially decentralized, and in 1979 tbe chairman's policy group began a strategic planning process. The intent, according to its statement of values and objectives, was "to make explicit the sort of com- pany Lex was, or wished to be."

Neitber a paralegal code nor a gen- eralized philosophy, the statement consisted of a series of general policies regarding financial strate- gy as well as sueh aspects of the company's charac- ter as customer serviee, employee-shareholder re- sponsibility, and quality of management. Its con- tent largely reflected tbe personal values of Lex's chairman and CEO, Trevor Cbinn, whose private philantiiropy is well known and whose concern for social welfare has long been echoed in the com- pany's personnel policies.

In the past, pressure on senior man- agers for high profit performance had obscured some of tbesc ideals in practice, and the statement of strategy was a way of radically realigning various competing moral claims witb tbe financial objec- tives of the company. As one senior manager re- marked to me, "The values seem obvious, and if we hiidn't been so gross in tbe past we wouldn't bave needed tbe statement." Despite a predietable variance among Lex's top executives as to the de- sirability of tbe values outlined in the statement, it was adopted with general agreement to eomply aiul was scheduled for reassessment at a senior man- agers' meeting one year after implementation.

The 12 questions

I Have you defined the problem ac- curately? How one assembles the faets weights

an issue before the moral examination ever begins, and a definition is rarely accurate if it articulates one's loyalties rather than tbe faets. Tbe impor- tanee of faetual neutraUty is readily seen, for ex- ample, in assessing the moral implieations of pro- ducing a chemical agent for use in warfare. Depend- ing on one's loyalties, the decision to make the sub- stance can be described as serving one's country, de- veloping products, or kiUing babies. All of tbe above may be factual statements, but none is neu- tral or aecurate if viewed in isolation.

Similarly, tbe recent controversy over marketing U.S.-made cigarettes in Tbird World countries rarely noted that the ineidence of lung cancer in underdeveloped nations is quite low (from one-tenth to one-twentieth the rate for U.S. males) due primarily to the lower hfe expectancies and

Exhibit Twelve questions for examining the ethics of a business decision

1 Have you deftned the problem accurately?

2 How would you define the problem il you stood on the other side ot ihe fence?

3 How did this situation occur in the first place?

4 To whom and to what do you give your loyalty as a person and as a member of the corporation?

5 What is your intention in making this decision?

6 How does this intention compare with the probable results?

7 Whom could your decision or action injure?

8 Can you discuss the problem with the affected parties before you make your decision?

9 Are you confident that your position will be as valid over a long period of time as it seems now?

10 Could you disclose without qualm your decision or action to your boss, your CEO. the board of directors, your family, society as a whole?

11 What is the symbolic potential of your action if understood? if misunderstood?

12 Under what conditions would you allow exceptions to your stand?

earlier predominance of other diseases in these na- tions. Sueh a fact does not deeide the ethieal eom- plexities of this marketing problem, but it does add a erueial perspective in the assignment of moral priorities by defining preeisely tbe injury that to- baceo exports may cause.

Extensive fact gathering may also help defuse the emotionalism of an issue. For in- stance, local statistics on lung cancer incidence re- veal that the U.S. tobacco industry is not now "ex- porting death," as has been charged. Moreover, tbe substantial and immediate economic benefits at- tached to tobaeco may be providing food and health care in these eountries. Nevertheless, as life expec- tancy and the standards of living rise, a higher inei- dence of eigarette-related diseases appears likely to develop in these nations. Therefore, cultivation of the nicotine babit may be deemed detrimental to the long-term welfare of these nations.

According to one supposedly infal- lible truth of modernism, technology is so complex that its results will never be fully comprebensible or predietable. Part of the exeeutive's frustration in responding to question 1 is the real possibility that the "experts" will find no grounds for agreement about the facts.

As a first step, however, defining fully tbe factual implications of a decision determines to a large degree tbe quality of one's subsequent moral position. Pericles' definition of true courage rejected tbe Spartans' blind obedience in war in preferenee to tbe courage of tbe Athenian eitizen who, he said, was able to make a decision to proceed in full

Harvard Business Review November-December 1981

knowledge of the probable danger. A truly moral decision is an informed decision. A decision that is based on blind or convenient ignorance is hardly de- fensible.

One simple test of the initial defini- tion is the question:

2 How would you define the problem if you stood on the other side of the fence? The contemplated construction of a

plant for Division X is touted at the finanee com- mittee meeting as an absolute necessity for expan- sion at a cost saving of at least 25%. With plans drawn up for an energy-efficient building and an option already secured on a 99-year lease in a new industrial park in Chippewa County, the commit- tee is likely to feel comfortable in approving the re- quest for funds in a matter of minutes.

The faets of the matter are that the eompany will expand in an appropriate market, allocate its resources sensibly, create new jobs, in- crease Chippewa County's tax base, and most like- ly increase its returns to tbe sbarebolders. To the residents of Chippewa County, however, the plant may mean the destruction of a eustomary reerea- tion spot, the onset of severe traffie jams, and the erection of an architeetural eyesore. These are also facts of the situation, and certainly more immediate to the county than utilitarian justifications of profit performance and rights of ownership from an im- personal corporation whose headquarters are 1,000 miles from Chippewa County and whose executives have plenty of aereage for their own recreation.

Tbe purpose of articulating the other side, whose needs are understandably less proximate than operational eonsiderations, is to allow some mechanism whereby calculations of self-interest [or even of a projeet's ultimate general beneficenee} can be interrupted by a compelling empathy for those who might suffer immediate injury or mere annoyance as a result of a eorporation's deeisions. Such empathy is a neeessary prerequisite for shoul- dering voluntarily some responsibility for tbe social consequences of corporate operations, and it may be the only solution to today's overly litigious and anarchic world.

There is a power in self-examination: with an exploration of the likely consequences of a proposal, taken from the viewpoint of those who do not immediately benefit, comes a diseomfort or an embarrassment that rises in proportion to the de- gree of the likely injury and its articulation. Like Socrates as gadfiy, who stung his fellow citizens into a eritical examination of their conduct when they became complacent, the discomfort of the alterna- tive definition is meant to prompt a disinclination

to ehoose the expedient over the most responsible eourse of action.

Abstract generalities about the bene- fits of the profit motive and the free market system are, for some, legitimate and ultimate justifications, but wben unadorned with alternative viewpoints, such arguments also tend to promote the compla- cency, carelessness, and impersonality that have characterized some of the more injurious actions of corporations. The advoeates of these arguments are like the reformers in Nathaniel Hawthorne's short story "Hall of Fantasy" who "had got possession of some erystal fragment of truth, the brightness of which so dazzled them that they could see nothing else in the whole universe."

In the example of Division X's new plant, it was a simple matter to define the alternate factS; the process rested largely on an assumption that certain values were commonly shared [no one likes a traffic jam, landscaping pleases more than an unadorned building, and so forth). But the alterna- tive definition often underscores an inherent dis- parity in values or language. To some, the employ- ment of illegal ahens is a eriminal act [fact #1); to others, it is a solution to the 60% unemployment rate of a neighboring country [fact #2). One coun- try's bribe is anotber eountry's redistribution of sales commissions.

When there are eultural or linguistic disparities, it is easy to get the faets wrong or to invoke a pluralistic tolerance as an excuse to act in one's own self-interest: "That's the way they do things over there. Who are we to question their be- liefs?" Tbis kind of reasoning ean be both factually inaccurate [many generalizations about bribery rest on hearsay and do not represent the complexities of a culture) and philosophically inconsistent [there are plenty of beliefs, sueh as those of the environ- mentalist, whieh the same generalizers do not hesi- tate to question).

3 How did this situation occur in the first place? Lex Motor Company, a subsidiary of

Lex Service Group Ltd., had been losing share at a 2o7c rate in a dechning market; and Depot B's per- formance was the worst of all. Two nearby Lex depots could easily absorb B's business, and closing it down seemed the only sound financial decision. Lex's chairman, Trevor Chinn, hesitated to approve the closure, however, on the grounds that putting 100 people out of work was not right when the eor- poration itself was not really jeopardized by B's ex- istence. Moreover, seven department managers, who were all within five years of retirement and had had 25 or more years of service at Lex, were seheduled to be made redundant.

Ethics without the sermon 83

Aristotle Contemplation is the best activity. It is also the most continuous since we can contemplate truth more continuously than we can perform any action.

The values statement provided no au- tomatic solution, for it placed value on both em- ployees' security and shareholders' interest. Should they close Depot B- At first Chinn thought not: Why should the little guys suffer disproportionately when the company was not performing well? Why not close a more recently aequired business where employee service was not so large a factor? Or why not wait out the short term and reduce head count through natural attrition?

As important as deciding the ethies of the situation was the inquiry into its history. In- deed, the history gave a clue to solving the dilemma: Lex's traditional emphasis on employee security and high financial performance had led to a precipitate series of acquisitions and subsequent divestitures when the company had failed to meet its overall objectives. After eaeh rationalization, the people serving the longest had been retained and placed at Depot B, so that by 1980 the facility had more man- agers than it needed and a very high proportion of long-service employees.

So the very factors that had created the performance problems were making the closure decision difficult, and the very solution that Lex was inclined to favor again would exacerbate the situation further!

In deciding the ethics of a situation it is important to distinguish the symptoms from the disease. Great profit pressures with no sensitivity to the eycles in a particular industry, for example, may force division managers to be ruthless with employ- ees, to short-weight customers, or even to fiddle with cash flow reports in order to meet headquar- ters' performance eriteria.

Dealing with the immediate ease of lying, quality discrepancy, or strained labor rela- tions-when the problem is finally discovered-is only a temporary solution. A full examination of how the situation occurred and what the traditional solutions have been may reveal a more serious dis- crepancy of values and pressures, and this will il- luminate the real significance and ethics of the problem. It will also reveal recurring patterns of events that in isolation appear trivial but that as a whole point up a serious situation.

Such a mechanism is particularly im- portant because very few executives are outright scoundrels. Rather, violations of corporate and so- cial values usually oceur inadvertently beeause no one recognizes that a problem exists until it be- comes a crisis. This tendeney toward initial triviali- zation seems to be the biggest ethical problem in business today. Articulating answers to my first three questions is a way of reversing that process.

HaiTard Business Review November-December 1981

4 To whom and what do you give your loyalties as a person and as a mem- ber of the corporation? Every executive faces conflicts of

loyalty. The most familiar occasions pit private con- science and sense of duty against corporate policy, but equally frequent are the situations in which one's close colleagues demand participation (tacit or explicit) in an operation or a decision that runs counter to company policy. To whom or what is the greater loyalty—to one's corporation? superior? family? society? self? race? sex?

The good news about conflicts of loyalty is that their identification is a workable way of smoking out the ethics of a situation and of dis- covering the absolute values inherent in it. As one executive in a discussion of a Harvard case study put it, "My corporate brain says this action is O.K., but my noncorporate brain keeps flashing these warning lights."

The bad news about conflicts of loyal- ty is that there are few automatic answers for plac- ing priorities on them. "To thine own self be true" is a murky quagmire when the self takes on a vari- ety of roles, as it does so often in this complex mod- ern world.

Supposedly, today's young managers are giving more weight to individual than to corpo- rate identity, and some older executives see this tendeney as being ultimately subversive. At the same time, most of them believe individual integrity is essential to a company's reputation.

The U.S. securities industry, for ex- ample, is one of the most rigorous industries in America in its requirements of honesty and dis- closure. Yet in the end, all its systematic preeau- tions prove inadequate unless the people involved also have a strong sense of integrity that puts loyal- ty to these prineiples above personal gain.

A system, however, must permit the time and foster the motivation to allow personal in- tegrity to surface in a particular situation. An ex- amination of loyalties is one way to bring this about. Such an examination may strengthen reputations but also may result in blowing the whistle (freedom of thought carries with it the risk of revolution). But a sorting out of loyalties can also bridge the gulf between policy and implementation or among various interest groups whose affiliations may mask a common devotion to an aspect of a problem—a devotion on whieh consensus can be built.

How does one probe into one's own loyalties and their implications? A useful method is simply to play various roles out loud, to call on one's loyalty to family and community (for ex- ample) by asking, "What will I say when my child asks me why I did that?" If the answer is "That's

the way the world works," then your loyalties are clear and moral passivity inevitable. But if the ques- tion presents real problems, you have begun a de- modulation of signals from your conscience that can only enhance corporate responsibility.

5 What is your intention in making this decision?

6 How does this intention compare with the likely results? These two questions are asked to-

gether because their content often bears close re- semblance and, by most calculations, both color the ethics of a situation.

Corporation Buglcbloom decides to build a new plant in an underdeveloped minority- populated district where the city has heen trying with little success to encourage industrial develop- ment. The media approve and Buglebloom adds an- other star to its good reputation. Is Buglebloom a civic leader and a supporter of minorities or a can- ny investor about to take advantage of the disad- vantaged? The possibilities of Buglcbloom's inten- tions are endless and probably unfathomable to the public; Buglcbloom may be both canny investor and friend of minority groups.

I argue that despite their complexity and elusivcness, a company's intentions do matter. The "purity" of Buglehloom's motives (purely profit-seeking or purely altruistic) will have wide- reaching effects inside and outside the corporation —on attitudes toward minority employees in other parts of the company, on the wages paid at the new plant, and on the number of other investors in the same area-that will legitimize a certain ethos in the corporation and the eommunity.

Sociologist Max Weber called this an "ethics of attitude" and contrasted it with an "ethics of absolute ends." An ethics of attitude sets a standard to ensure a ecrtain action. A firm policy at headquarters of not cheating customers, for ex- ample, may also deter salespeople from succumbing to a tendency to lie by omission or purehasers from eontinuing to patronize a high-priced suppher when the costs are automatically passed on in the selling price.

What about the ethics of result? Two years later, Buglebloom wishes it had never begun Project Minority Plant. Every good intention has been lost in the realities of doing business in an un- familiar area, and Buglebloom now has dirty hands: some of those payoffs were absolutely unavoidable if the plant was to open, operations have been plagued with vandalism and language problems, and local resentment at the industrialization of the neighborhood has risen as charges of discrimination

Ethics without the sermon 85

have surfaced. No one seems to be benefiting from the project.

The goodness of intent pales some- what before results that perpetrate great injury or simply do little good. Common sense demands that the "responsible" corporation try to align the two more closely, to identify the probable consequences and also the limitations of knowledge that might lead tt) more harm than good. Two things to re- member in comparing intention and results are that knowledge of the future is always inadequate and that overconfidcnce often precedes a disastrous mistake.

These two precepts, cribbed from an- cient Greece, may help the corporation keep the disparities hetween intent and result a fearsome reality to consider continuously. The next two ques- tions explore two ways of redueing the moral risks of being wrong.

7 Whom could your decision or action injure? The question presses whether injury

is intentional or not. Given the limits of knowledge about a new product or policy, who and how many will come into eontact with it? Could its inadequate disposal affect an entire community? two employ- ees? yourself? How might your product be used if it happened to be acquired by a terrorist radical group or a terrorist military police force* Has your distribution system or disposal plan ensured against such injury? Could it ever?

If not, there may be a compelling moral justification for stopping production. In an integrated society where business and government share certain values, possible injury is an even more important consideration than potential henefit. hi policymaking, a much likelier ground for agreement than benefit is avoidance of injury through those "universal nos"—such as no mass death, no total- itarianism, no hunger or malnutrition, no harm to children.

To exelude at the outset any poliey or decision that might have such results is to re- shape the way modern business examines its own morality. So often business formulates questions of injury only after the fact in the form of liability suits.

8 Can you engage the affected parties in a discussion of the problem before you make your decision? If the calculus of injury is one way

of responding to limitations of knowledge about the probable results of a particular business decision, the participation of afTected parties is one of the best ways of informing that consideration. Civil

rights groups often complain that corporations fail to invite participation from local leaders during the planning stages of community development proj- ects and charitable programs. The corporate founda- tion that builds a tennis complex for disadvantaged youth is throwing away precious resources if most children in the neighhorhood suffer from chronic malnutrition.

In the Lex depot closure case I have mentioned, senior executives agonized over whether the employees would choose redundancy over job transfer and which course would ultimately be more beneficial to them. The managers, however, did not consult the employees. There were more than 20O projected job transfers to another town. But all the affected employees, held by local ties and uneasy about possibly lower housing subsidies, refused relocation offers. Had the employees heen allowed to participate in the redundancy discus- sions, the eompany might have wasted less time on reloeation plans or might have uncovered and re- solved tbe fears about relocating.

The issue of participation affeets everyone. [How many executives feel that someone else should decide what is in their best interest?) And yet it is a principle often forgotten because of the pressure of time or the inconvenience of call- ing people together and facing predictably hostile questions.

9 Are you confident that your position will be as valid over a long period of time as it seems now? As anyone knows who bas had to

consider long-range plans and short-term budgets simultaneously, a dit-fcrenco in time frame can change the meaning of a problem as much as spring and autumn change the colors of a tree. The ethical coloring of a business deeision is no exception to this generational aspect of decision making. Time alters circumstances, and few corporate value sys- tems are immune to shifts in finaneial status, ex- ternal political pressure, and personnel. (One sur- vey now places the average U.S. CEO's tenure in offiee at five years.)

At Lex, for example, the humanitar- ianism of the statement of objectives and values de- pended on financial prosperity. The values did not fully anticipate tbe extent to which tbe U.K. econ- omy would undergo a recession, and the resulting changes had to be examined, reeonciled, and fought if the company's values were to have any meaning. At the Lex annual review, the managers asked themselves repeatedly whether hard times were the ultimate test of the statement or a clear indication that a corporation had to be able to "afford" ethical positions.

86 Harvard Business Review November-December 1981

Ideally, a company's articulation of its values should anticipate changes of fortune. As the hearings for the passage of the Foreign Corrupt Practices Act of 1977 demonstrated, doing what you ean get away with today may not be a seeure moral standard, but short-term discomfort for long-term sainthood may require irrational courage or a ra- tional reasoning system or, more likely, botb. Tbese 12 questions attempt to elicit a rational system. Courage, of eourse, depends on personal integrity.

Another aspect of the ethical time frame stretehes beyond the boundaries of question 9 but deserves speeial attention, and that is the timing of the ethical inquiry. When and where will it be made?

We do not normally invoke moral principles in our everyday conduct. Some time ago the partieipants in a national business ethics con- ferenee had worked late into the night preparing the final ease for the meeting, and they were very anxious the next morning to get the class under way. Just before the session began, bowever, some- one suggested tbat they all donate a dollar apieee as a gratuity for the dining hall help at the institute.

Then just as everyone automatically reached into his or her pocket, another person ques- tioned the direetion of the gift. Why tip the person bebind the counter but not the cook in the kitchen? Should tbe money be given to eacb person in pro- portion to salary or divided equally among all? Tbe partieipants laughed uneasily-or groaned-as they thought of the diversion of precious time from the case. A decision had to be made.

Witb tbe sure instincts of efficient managers, tbe group cbose to forgo further discus- sion of distributive justice and, yes, appoint a com- mittee. The committee doled out the money with- out further group eonsideration, and no formal feed- back on the donation was asked for or given.

The questions offered here do not solve the problem of making time for tbe inquiry. For suggestions about ereating favorable conditions for examining corporate values, drawn from my field researeh, see the ruled insert on page 89.

10 Could you disclose without qualm your decision or action to your boss, your CEO, the board of directors, your family, or society as a whole? The old question, "Would you want

your decision to appear on the front page of the New York TimesV still holds. A eorporation may maintain that there's really no problem, but a sur- vey of bow many "trivial" actions it is reluctant to disclose migbt be interesting. Disclosure is a way of sounding those submarine depths of conscience and of searching out loyalties.

Kant Nothing can possibly he conceived in the world, or even out of it, which can be called good without qualification, except a Good Will

Ethics without the sermon 87

It is also a way of keeping a corporate character cohesive. The Lex group, for example, was once faced with a very sticky problem concern- ing a small but profitable site with unpleasant (though in no way illegal) working conditions, where two men with 30 years' service worked. I wrote up the case for a Lex senior managers' meet- ing on the promise to disguise it heavily because the executive who supervised the plant was con- vinced that, if the chairman and the personnel di- reetor knew the plant's true location, they would close it down immediately.

At the meeting, however, as everyone became involved in the discussion and the chair- man himself showed sensitivity to the dilemma, the executive disclosed the location and spoke of his own feelings about the situation. The level of mutual confidence was apparent to all, and by other reports it was the most open discussion the group had ever had.

The meeting also fostered understand- of the company's values and their implementation. When the discussion finally flagged, the chairman spoke up. Basing his views on a full knowledge of the group's understanding of the problem, he set the company's priorities. "Jobs over fancy condi- tions, health over jobs," Chinn said, "but we always must disclose." The group decided to keep the plant open, at least for the time being.

Disclosure does not, however, auto- matically bring universal sympathy. In the early 1970s, a large food store chain that repeatedly found itself embroiled in the United Farm Workers (UFW) disputes with the Teamsters over California grape and lettuce contracts took very seriously the moral implications of a decision whether to stop selling these products. The company endlessly researched the issues, talked to all sides, and made itself avail- able to public representatives of various interest groups to explain its position and to hear out every- one else.

When the controversy started, the company decided to support the UFW boycott, but three years later top management reversed its posi- tion. Most of the people who wrote to the company or asked it to send representatives to their local UFW support meetings, however, continued to condemn the chain even after hearing its views, and the general puhlic apparently never became aware of the company's side of the story.

11 What is the sytnholic potential of your action if understood? if misun- derstood? [ones Inc., a diversified multinational

corporation with assets of $5 hillion, has a paper manufaeturing operation that happens to be the

only major industry in Stirville, and the factory has been polluting the river on whieh it is located. Local and national conservation groups have filed suit against Jones Inc. for past damages, and the company is defending itself. Meanwhile, the cor- poration has adopted plans for a new waste-effieient plant. The legal battle is extended and local resent- ment against Jones Inc. gets bitter.

As a settlement is being reached, Jones Inc. announces that, as a civic-minded gesture, it will make 400 acres of Stirville woodland it owns available to the residents for conservation and rec- reation purposes. Jones's intention is to offer a peace pipe to the people of Stirville, and the company sees the gift as a symbol of its own belief in conservation and a way of signaling that value to Stirville resi- dents and national conservation groups. Should Jones Inc. give the land away? Is the symbolism sig- nificant?

If the symbohc value of the land is understood as Jones Inc. intends, the gift may pateh up the company's relations with Stirville and stave off further disaffection with potential employees as the new plant is being built. It may also signal to employees throughout the corporation that Jones Inc. plaees a premium on conservation efforts and community relations.

If the symbolic value is misunder- stood, however, or if eompletion of the plant is de- layed and the old one has to be put back in use—or if another Jones operation is discovered to be pollut- ing another community and becomes a target of the press—the gift could be interpreted as nothing more than a cheap effort to pay off the people of Stirville and hasten settlement of the lawsuit.

The Greek root of our word symbol means both signal and contract. A business decision —whether it is the use of an expense account or a corporate donation—has a symbolie value in signal- ing what is acceptable behavior within the corpo- rate culture and in making a tacit contract with em- ployees and the community about the rules of the game. How the symbol is actually perceived (or mis- perceived) is as important as how you intend it to be perceived.

12 Under what conditions would you allow exceptions to your stand? If we accept the idea that every busi-

ness decision has an important symbolic value and a contractual nature, then the need for consistency is obvious. At the same time, it is also important to ask under what conditions the rules of the game may be changed. What conflicting principles, eir- cumstanees, or time constraints would provide a morally aeceptable basis for making an exception to one's normal institutional ethos? For instance,

Harvard Business Review November-December 1981

how does the cost of the strategy to develop man- agers from minority groups over the long term fit in with short-term hurdle rates? Also to be consid- ered is wbat would mitigate a clear case of employ- ee dishonesty.

Questions of consisteney—if you would do X, would you also do Y?-are yet another way of eliciting the ethics of the company and of oneself, and can be a final test of the strength, ideal- ism, or practicahty of those values. A last example from the experience of Lex illustrates this point and gives temporary eredence to the platitude that good ethics is good business. An artiele in tbe Sunday paper about a eompany tbat had run a series of raey ads, with pietures of half-dressed women and promises of free mercbandise to promote tbe sale of a very mundane product, sparked an extended examination at Lex of its policies on corporate inducements.

One area of concern was boliday giv- ing. What was the aceeptable limit for a gift-a bot- tle of wbiskey? a case? Did it matter only that the eompany did not intend the gift to be an induee- ment, or did the mere possibility of indueenient taint the gift; Was the cut-ofT point absolute? The group could agree on no halfway point for allow- ing some gifts and not others, so a new value was added to the formal statement that prohibited the offering or receiving of inducements.

The next holiday season Chinn sent a letter to friends and colleagues who had received gifts of appreeiation in the past. In it he ex- plained that, as a result of Lex's coneem with "the very complex area of business ethics," management had decided that the company would no longer send any gifts, nor would it be appropriate for its employees to reeeive any. Although the letter did not explain Lex's reasoning bebind the deeision, apparently there was a large untapped eonsensus about sueh gift giving: by return mail Chinn re- ceived at least 20 letters from directors, general managers, and chairmen of companies with which Lex had done business congratulating him for his decision, agreeing with the new policy, and thank- ing bini for bis boliday wisbes.

The 'good puppy' theory

Tbe 12 questions are a way to articu- late an idea of the responsibilities involved and to lay them open for examination. Whether a deci- sive policy is also generated or not, there are eom- pelling reasons for holding sueh discussions:

D The process faeilitates talk as a group about a subject that has traditionally been reserved for the privacy of one's conscience. Moreover, for those whose consciences twiteh but don't speak in full sentenees, tbe questions help sort out their own pereeptions of the problem and various ways of tbinking about it.

• The proeess builds a cohesiveness of managerial character as points of consensus emerge and people from vastly different operations discover that they share eommon problems. It is one way of determining tbe values and goals of the eompany, and that is a key element in determining eorporate strategy.

• It aets as an information resource. Senior managers learn about other parts of the eom- pany with whieh they may have little contact.

n It helps uncover ethical ineonsisten- eies in the artieulated values of the corporation or between these vahies and the finaneial strategy.

• It helps uneover sometimes dramatic differences between the values and the practicality of their implementation.

• It helps the CEO understand how the senior managers think, how they handle a problem, and bow willing and able tbey are to deal with eomplexity. It reveals how they may be drawing on the private self to the enhancement of corporate ae- tivity.

n 111 drawing out tbe private self in eonneetion with business and in exploring tbe sig- nificance of the corporation's aetivities, the process derives meaning from an environment that is often eharaeterized as meaningless.

• It helps improve the nature and range of alternatives.

O It is cathartic.

The proeess is also reduetive in that it hmits the level of inquiry. For example, the 12 questions ask wbat injury might result from a de- cision and what good is intended, but tbey do not ask tbe meaning of good or wbether the result is "just."

Soerates asked how a person eould talk of pursuing the good before knowing what the good is; and the analysis he visualized entailed a lifelong process of learning and examination. Do the 12 short questions, with their explicit goal of sim- plifying the ethical examination, bastardize the Socratie ideal? To answer this, we must distinguish between personal philosophy and participation as a eorporate member in the examination of a corpo- rate ethos, for the 12 questions assume some differ- ence between private and eorporate "goodness."

Tbis distinction is crucial to any evaluation of my suggested process for conducting

Ethics without the sermon 89

Shared conditions of some successful ethical inquiries

Fixed time Understanding and identifying moral issues takes lime Credo frame and causes ferment, and the executive needs an uninter-

rupted biock ot time lo ponder Ihe problems.

Unconventional Religious groups, boards of directors, and professional location associations have long recognized Ihe value of the

retreat as a way of stimulating tresh approaches to regu- lar activities If the group is going to transcend normal corporate hierarchies, it should hold the discussion on neutral territory so that all may participate with the same Homegrown degree of freedom. topics

Resource The advantage of bringing in an outsider is not that person he or she will impose some preconceived notion ot right

and wrong on management but that he will serve as a midwife for bringing the values already present in ihe institution out into the open. He can generate closer examination of the discrepancies between values and practice and draw on a wider knowledge of instances and Resolution intellectual frameworks than the group can. The resource person may also take the important role of arbitrator-to ensure that one person does nol dominate the session with his or her own values and that the dialogue does not become impossibly emotional.

Participation of In most corporations the chief executive still commands CEO an exlra degree of authority for Ihe intangible we call cor-

porate culture, and the discussion needs the perspective of and legitimizatton by that authority if it is to have any seriousness of purpose and consequence. One of the most interesting experiments in examining corporate pol- icy I Jiave observed lacked the CEO s support, and within a year it died on the vine.

Articulating the corporation's values and objectives pro- vides a reference point for group inquiry and implementa- tion. Ethical codes, however, when drawn up by the legal department, do not always offer a realistic and full repre- sentation of management's beliefs. The most important ethical inquiry tor management may be the very (ormula- tion of such a statement, for the process of articulation Is as useful as the values agreed on.

In isolating an ethical issue, drawing on your own experi- ence is important. Philosophical business ethics has tended to reflect national social controversies, which though relevant to the corporation may not always be as relevanl - not to mention as easily resolved - as some internal issues that are shaping Ihe character of the com- pany to a much greater degree. Executives are also more likely to be informed on these issues,

In all the programs I observed except one, there was a point at which the inquiry was slated to have some reso- lution: either a vote on the issue, the adoption of a new policy, a timetable for implementation, or the formulation of a specific statement of values, The one program observed that had no such decision-making structure was organized simply to gather information aboul the company's activities through extfahierarchical channels. Because the program had no tangible goals or clearly articulated results, its benefits were impossible to

iin etbical inquiry and needs to be explained. Wbat exactly do we expect of the "ethieal," or "good," corporation? Three examples of goodness represent prevailing soeial opinions, from that of the moral philosopher to the strict Friedmaniae.

1 The most rigorous moral analogy to tbe good corporation would be tbe "good man." An abstract, philosophical ideal having highly moral connotations, the good man encompasses an intri- cate relation of abstractions such as Plato's four virtues (courage, godliness or philosophical wisdom, righteousness, and prudence). The activities of this kind of good eorporation imply a heavy responsibil- ity to collectively know the good and to resolve to achieve it.

2 Next, there is the purely amoral def- inition of good, as in a "good martini"—an amoral fulfillment of a largely inanimate and functional purpose. Under this definition, eorporate goodness would be best achieved by the unadorned aecrual of profits with no regard for tbe social implications of the means whereby profits are made.

3 Halfway between these two views lies the good as in "good puppy"—here goodness consists

primarily of the fulfillment of a social contract tbat centers on avoiding soeial injury. Moral capacity is pereeived as present, but its potential is limited. A moral evaluation of tbe good puppy is possible but exists largely in concrete terms; we do not need to identify the puppy's intentions as utilitarian to un- derstand and agree that its "ethieal" fulfillment of the social contract consists of not soiling the carpet or biting the baby.

It seems to me tbat business ethics operates most appropriately for corporate man when it seeks to define and explore corporate morality at the level of the good puppy. The good eorporation is expected to avoid perpetrating irretrievable social injury [and to assume the costs wben it uninten- tionally does injury) while focusing on its purpose as a profit-making organization. Its moral eapaeity does not extend, however, to determining by itself what will improve the general soeial welfare.

The good puppy inquiry operates largely in eoncrete experience; just as the 12 ques- tions impose a limit on our moral expectations, so too they impose a limit (welcome, to some) on our use of abstraction to get at the problem.

90 Harvard Business Review November-December 1981

Tbe situations for testing business morality remain complex. But by avoiding theoret- ical inquiry and limiting the expectations of cor- porate goodness to a few rules for social behavior that are based on common sense, we can develop an etbie that is appropriate to the language, ideol- ogy, and institutional dynamics of business decision making and consensus. This ethic can also offer managers a practical way of exploring those occa- sions when their corporate brains are getting warn- ing Hashes from their noncorporate brains. V

The rabbit and the goat A Goat once approached a peanut stand that was kept by a Rabbit, pur- chased five cents worth of peanuts, laid down a dime, and received a punched nickel in change. In a few days the Goat came back, called for another ptnt of peanuts, and offered the same nickel in payment; but in Ihe meantime had stopped the hole in it with a peg.

'I can'ttake that nickel,'said the Rabbit.

"This is the very nickel you gave me in change a few days ago," replied the Goat.

I know it J5," continued the Rabbit, 'but I made no atlempt to deceive you about it. When you took the coin the hole was wide open, and you could see It for yourself, h working that mutilated coin off on you I sim-

ply showed my business sagacity: but now you bring it back with the hole stopped up and try to pass it, with a clear intent to deceive. That is fraud. My dear Goat, I'm afraid the grand jury will get after you if you are not more careful about little things of this sort."

Moral: This Fable teaches that the moral quality of a business transaction often depends upon the view you take of it.

From The Habbil and the Goat."

in Ute, Octobers, I8a5,p.208. Reprinted with the permission ot the copyright owners.

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