Wednesday, February 9, 2011

Ethical business : 10 field marks

In a speech to the U.S. Chamber of Commerce two days ago, President Obama appealed to some 200 business leaders to act responsibly. "I want to be clear, even as we make America the best place on earth to do business," he said,  "businesses also have a responsibility to America."
Now, I understand the challenges you face [the president said]. I understand that you're under incredible pressure to cut costs and keep your margins up. I understand the significance of your obligations to your shareholders. I get it. But as we work with you to make America a better place to do business, ask yourselves what you can do for America. Ask yourselves what you can do to hire American workers, to support the American economy, and to invest in this nation. 
A blogging friend of mine - a man who automatically opposes or is cynical about anything Mr. Obama says - responded predictably: "Amazing. The president (apparently hearkening back to JFK) tells these CEOs to ask what they can do for their country, as if providing jobs, goods, and services in a very uncertain economy is not enough. What an insult!"

My friend does not really believe that providing jobs, goods, and services is all a business needs to do, of course. He does not support pimps or drug pushers, for example, even though they provide jobs and goods or services; and I suspect that he's not fond of gambling casinos or abortion clinics either, even if they are entirely legal.

His comment, though, got me thinking, and for that I thank him. What, exactly, does an ethical business do beyond providing jobs, goods, and services? Here are some preliminary thoughts - please improve on them.

An ethical business ...
  1. exists to provide life-sustaining jobs and useful goods and services.
  2. makes a profit so that it can continue providing jobs, goods, and services; but rather than sitting on excessive earnings or turning them into fat bonuses, creates new products or hires more workers or increases overall employee compensation.
  3. manages its affairs so that not just executives and shareholders but also rank-and-file employees are adequately compensated.
  4. keeps honest and transparent accounts so that its directors, contractors, shareholders, and employees can make informed decisions.
  5. markets its products honestly, not making misleading claims or delivering shoddy merchandise or poor service.
  6. assures healthy working conditions for all of its employees at home and abroad, refusing to outsource to anyone who uses child labor, sweatshops, toxic working environments, or slave labor.
  7. makes sure that its methods and materials preserve the environment for future generations at home and abroad, and takes responsibility to clean up any environmental disasters it inadvertently causes.
  8. does not attempt to profit through taking advantage of consumers' ignorance, addictions, or desperation.
  9. does not lobby or bribe lawmakers so as to be excused from ethical behavior in any of the above areas, or so as to gain an advantage over other companies.
  10. gives back to the community not only through creating jobs, goods, and services; but also, whenever possible, by providing funding for community projects, rewarding employees who engage in community service, and supporting legislation that fosters the common good.
When President Kennedy challenged us to ask what we could do for our country, none of us took it as an insult. Rather, his words were an affirmation that we could, with vision and hard work, make the world a better place. I take President Obama's words to the U.S. Chamber of Commerce in the same way. Ethical businesses are a tremendous force for good, and the world needs them now more than ever.
For further reading: Bill George, professor of management practice at Harvard Business School and a director of ExxonMobil and Goldman Sachs, has written an interesting op-ed piece listing over a dozen concrete actions President Obama has recently taken in support of the business community. Check out "President Obama's Challenge to Business: 'It's Time to Invest in America.' "


David Neff said...

Here's item 11, if you will: An ethical business does not design its workplace and workflow in ways that alienate laborers from their work. Instead, ethical business finds ways to encourage pride in what is produced, to stimulate and reward creativity among workers, and to build positive social networks among employees. All of these things are important if work is to be a blessing and not a curse.

JohnM said...

Some people object to President Kennedy's question because it implies citizens exist to sustain the state. Those who object 1) believe their existence is for a better purpose than to serve the state or 2)insist the state exists to serve the citizens, not vice versa or 3)feel they're not particularly obligated to justify their existence to anyone.
Now, if you can convince me by "your country" you mean something other than the government or something so abstract as the state... ;-)

As for ethical business, I think what you have in mind here is a medium to large corporation, and that's understandable. However if I operated my own small business (I don't) I'd say it exists to provide an honest living for me and my family. That'd be my obligation and it would frankly be no one else's business to decide other reasons why I ought to be in business. Operating ethically would mean # 5 & #8 foremost and without question and also #'s 7 & 9if these were some way applicable to my business.

Some of the other items you list I would agree are ethical obligations for companies big enough to incur such obligations. Number 10 though is just a nice thing to do.

LaVonne Neff said...

Good point, JohnM - most of the points do apply to larger businesses. I still say, though, that #1 applies to all businesses. It's not OK to be a pimp or a drug runner, even if your motivation is to support your family and the only job you're providing is your own. Ethical businesses don't provide unethical goods or services.

As for JFK's words (or Ted Sorensen's, who was his speechwriter - though TS claimed JFK wrote the famous words himself), I see them as reflecting Catholic social teaching about our responsibility toward the common good and our solidarity with one another (you can see a summary of Catholic social teaching here: ). JFK was not a statist. Earlier in his speech he said that "the rights of man come not from the generosity of the state, but from the hand of God." His call was not to serve the state, but to use government as a tool to serve one another.

carol dechant said...

Most American business is small business, though books and articles about ethics focus on corporations because they're easier to study, (often furnishing researchers with self-serving data).
Ben & Jerry of ice cream fame wrote a book (now out of print) called "Home Made Capitalism," which is an inspiring guide to how small businesses
can serve ethically.
All ethical work begin in the heart, with intentions
to do good and do no harm. B&J started in their own workplace. They pledged that the highest paid person(s) at the company never earned more than seven times what the lowest paid persons made. Compare that to corporate pay scales! (These were the old days before B&J was sold to a corporation)
I would add that ethical businesses treat their vendors with integrity & prompt payment, even including deserving vendors at bonus time.
B&J then spread their good works to the community where they lived and worked, a small town in Vermont.
Anyone who has ever tried to solicit businesses in their town to support a local cause (in my case, a Hunger Walk to support our town's food pantry) learns quickly that the small mom/pop stores are usually more welcoming than the chains. Chain HQs usually decree that their stores not post signs for local fund raising events: all pro-bono activity emanates on the national level, to be brand-reinforcing, deductible, social, and usually political.
B&J then spread their good works into other communities (renovating a NY subway station, etc.) and into the world (helping protect the rain forest, etc.).
There are corporate exceptions to this portrayal, but the fact remains that most ethical business decisions (or lack of them) take place in much small firm: in the offices of your dentist, doctor, CPA, in dry cleaning shops, health clubs, with your handyman and plubmer, your condo management firm, etc.
It's easy to see that as soon as you earn money as a kid, from babysitting to dog walking to shoveling snow, you begin making ethical decisions, if you are brought up to think that way. If not, it's not gonna happen at MBA programs at Harvard or Yale, though they are currently inaugurating ethics courses to deal with the crises caused by unethical banks, brokerage firms, oil companies, etc.