"Of course, honesty is one of tbe better policies.
79 Ethicswithout the sermon Plain speaking aboutan often obscure subject in the form of 12 questions to ask Laura L Nash when making a business decision "Like some Tiiassic leptile, the theoietical As if via a network TV program on theview of ethics lumbers along in the jar -past of Sunday telecommunications satellite, declarations such asSchool and Philosophy i, while the reality of practical these are being broadcast throughout the land:business concerns is constantly measuring a wide range Scene 1. Annual meeting, Anyprod-of competing claims on time and resources against the ucts Inc.; John Q. Moneypockets, chairman andunrelenting and objective marketplace." So writes theauthor of this article as she introduces a pioceduie to test CEO, speaking: "Our responsibility to the publicpragmatically the ethical content and human fallout of has always come first at our company, and we con-everyday decisions in business and other organizational tinue to strive toward serving our public in the bestsettings. First you have to define the problem as you see way possible in the belief that good ethics is goodit, then (insofar as possible) examine it as outsiders might business.... Despite our forecast of a continued re-see it. You explore where your loyalties lie and consider cession in the industry through 1982, we are pleasedboth your intentions in making the decision and whom to announce that 1981s earnings per share were upyour action might affeet. You proceed to the consequences for the twenty-sixth year in a row."of disclosing your action to those you report to or re- Scene 2. Corporate headquarters, Any-spect, and then analyze the symbolic meaning to all products Inc.; Linda Diesinker, group vice president,affected. In her conclusion the author attacks the sticky speaking: "Of course were concerned about minor-question of the proper moral standpoint of the organiza-tion as a whole. ity development and the plight of the inner cities. But the best place for our new plant would be Horse- Laura Nash is assistant professor ofbusiness administration at the Harvard Business School pasture, Minnesota. We need a lot of space for ourwhere she teaches business policy. Formerly a teacher of operations and a skilled labor force, and the demo-classics at Brown, Brandeis, and Harvard universities, she graphics and tax incentives in Horsepasture arerecently spent a year and a half at the Harvard Business perfect."School doing research on business and ethics. Scene 3. Interview with a financial writer; Rafe Shortstop, president, Anyproducts Inc., speaking: "Were very concerned about the state of Illustrations by Saxon; American business and our ability to compete with diawing 3 facing page C foreign companies.... No, I dont think we have The Nev Yoikes Magazin any real ethical problems. We dont bribe people or anything like that."
Harvard Business Review November-December 1981 Scene 4. Jud McFisticuff, taxi driver, radically different ways. The academician pondersspeaking: "Anyproducts? Youve got to be kidding! the intangible, savors the paradoxical, and embracesI wouldnt buy their stuff for anything. The last the peculiar; he or she speaks in a special languagething of theirs I bought fell apart in six months. of categorical imperatives and deontological view-And did you see how they were dumping wastes in points that must be taken into consideration beforethe Roxburg water system?" a statement about honesty is agreed to have any Scene 5. Leslie Matriculant, MBA 82, meaning.speaking: "Join Anyproducts? I dont want to risk Like some Triassic reptile, the theo-my reputation working for a company like that. retical view of ethics lumbers along in the far pastThey recently acquired a business that turned out of Sunday School and Philosophy i, while the re-to have ten class-action discrimination suits against ality of practical business concerns is constantlyit. And when Anyproducts tried to settle the whole measuring a wide range of competing claims onthing out of court, the president had his picture in time and resources against the unrelenting and ob-Business Week with the caption, His secretary still jective marketplace.serves him coffee." Not surprisingly, the two groups are somewhat hostile. The jokes of the liberal intelli- Whether you regard it as an un- gentsia are rampant and weary: "Ethics and Busi-checked epidemic or as the first blast of Gabriels ness—the shortest book in the world." "Business andhorn, the trend toward focusing on the social im- ethics-a subject confined to the preface of businesspact of the corporation is an inescapable reality that books." Accusations from the corporate cadre aremust be factored into todays managerial decision delivered with an assurance that rests more on anmaking. But for the executive who asks, "How do intuition of social climate than on a certainty ofwe as a corporation examine our ethical concerns?" fact: "You do-gooders are ruining Americas abilitythe theoretical insights currently available may be to compete in the world." "Of course, the cancer re-more frustrating than helpful. ports on [choose from a long listl were ter- As the first scene in this article im- ribly exaggerated."plies, many executives firmly believe that corporate What is needed is a process of ethicaloperations and corporate values are dynamically in- inquiry that is immediately comprehensihle to atertwined. For the purposes of analysis, however, group of executives and not predisposed to the Uto-the executive needs to uncoil the business-ethics pian, and sometimes anticapitalistic, bias markinghelix and examine both strands closely. much of the work in applied business philosophy Unfortunately, the ethics strand has today. So I suggest, as a preliminary solution, a setremained largely inaccessible, for business has not of II questions that draw on traditional philosoph-yet developed a workable process by which cor- ical frameworks but that avoid the level of ab-porate values can be articulated. If ethics and busi- straction normally associated with formal moralness are part of the same double helix, perhaps we reasoning.can develop a microscope capable of enlarging our I offer the questions as a first step inperception of both aspects of business administra- a very new discipline. As such, they form a tenta-tion—what we do and who we are. tive model that will certainly undergo modifications after its parts are given some exercise. The Exhibit on page 81 poses the r2 questions. To illustrate the application of the questions, I will draw especially on a program at Sidestepping Lex Service Group, Ltd., whose top management prepared a statement of financial objectives and Triassic reptiles moral values as a part of its strategic planning pro- cess.^ Lex is a British company witb operations in Philosophy has been sorting out is- the United Kingdom and the United States. Its salessues of fairness, injury, empathy, self-saerifice, and total about $1.2 billion. In 1978 its structure wasso on for more than 2,000 years. In seeking to ex-amine the ethics of business, therefore, businesslogically assumes it will be best served by a "con- 1. The process is modeled after ideas in Kenneth R. Andtewsssultant" in philosophy who is already familiar with hook The Concept of Corporatethe formal discipline of ethics. Strotegy (Hoinewood, iU.i Richard As the philosopher begins to speak, and in Richard F. Vancils articlehowever, a difficulty immediately arises; corporate "Strategy Forniulatioii in ComplGZexecutives and philosophers approach problems in Review, Winter 1976, p. 4.
Ethics without the sertnotipartially decentralized, and in 1979 the chairmans Exhibit Twelve questions for examining the ethicspolicy group began a strategic planning process. The of a business decisionintent, according to its statement of values andobjectives, was "to make explicit the sort of com- 1 Have you defined the problem acourately?pany Lex was, or wished to be." Neither a paralegal code nor a gen- How did this situation occur in the first piace?eralized philosophy, the statement consisted of aseries of general policies regarding financial strate- To whom and to what do you gtve your ioyaity as a person and as a member of tile corporatioh?gy as well as such aspects of the companys charac- What is your intention ih maicing this decision?ter as customer service, employee-shareholder re-sponsibility, and quality of management. Its eon- How does this intention oompare with the probabie resuitstent largely reflected the personal values of Lexs Whom couid your decision or action iniure?chairman and CEO, Trevor Chinn, whose private Can you discuss the problem with the affected partiesphilanthropy is well known and whose concern for before you make your decision?social welfare has long been echoed in the com- Are you confident that your position wiii be as valid over apanys personnel policies. long period of time as it seems now? In the past, pressure on senior man- Could you disclose without quaim your decision or action to your boss, your CEO, the board ot directors, youragers for high profit performance had obscured some famiiy, society as a wtiole?of these ideals in practice, and the statement of What ts the symbolic potentiai of your action ifstrategy was a way of radically realigning various understood? if misunderstood?competing moral claims with the financial obiec- Uhder what conditions would you allow exceptions totives of the company. As one senior manager re- your stand?marked to me, "The values seem obvious, and ifwe hadnt been so gross in the past we wouldnthave needed the statement." Despite a predictable earlier predominance of other diseases in these na-variance among Lexs top executives as to the de- tions. Such a fact does not decide the ethical com-sirability of the values outlined in the statement, plexities of this marketing problem, but it does addit was adopted with general agreement to comply a crucial perspective in the assignment of moraland was scheduled for reassessment at a senior man- priorities by defining precisely the injury that to-agers meeting one year after implementation. bacco 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- The 12 questions porting death," as has been charged. Moreover, the substantial and immediate eeonomic benefits at- taehed to tobacco may be providing food and health 1 Have you defined the problem ac- care in these countries. Nevertheless, as life expec- curately? tancy and the standards of living rise, a higher inci- How one assembles the facts weights dence of cigarette-related diseases appears likely toan issue before the moral examination ever begins, develop in these nations. Therefore, cultivation ofand a definition is rarely accurate if it articulates the nicotine habit may be deemed detrimental toones loyalties rather than the facts. The impor- the long-term welfare of these nations.tance of factual neutrality is readily seen, for ex- According to one supposedly infal-ample, in assessing the moral implications of pro- lible truth of modernism, technology is so complexducing a chemical agent for use in warfare. Depend- that its results will never be fully eomprehensibleing on ones loyalties, the decision to make the sub- or predictable. Part of the executives frustration instance can be described as serving ones country, de- responding to question 1 is the real possibility thatveloping products, or killing babies. All of the the "experts" will find no grounds for agreementabove may be factual statements, but none is neu- about the facts.tral or accurate if viewed in isolation. As a first step, however, defining fully Similarly, the recent controversy the factual implications of a decision determines toover marketing U.S.-made cigarettes in Third World a large degree the quality of ones suhsequent moralcountries rarely noted that the incidence of lung position. Pericles definition of true courage rejectedeancer in underdeveloped nations is quite low (from the Spartans blind obedience in war in preferenceone-tenth to one-twentieth the rate for U.S. males) to the courage of the Athenian citizen who, hedue primarily to the lower life expectancies and said, was able to make a decision to proceed in full
Harvard Business Review November-December i981knowledge of the probable danger. A truly moral to choose the expedient over the most responsibledecision is an informed decision. A decision that is course of aetion.based on blind or convenient ignorance is hardly de- Abstraet generalities about the bene-fensible. fits of the profit motive and the free market system One simple test of the initial defini- are, for some, legitimate and ultimate justifications,tion is the question: but when unadorned with alternative viewpoints, such arguments also tend to promote the compla- 2 How would you define the problem if cency, carelessness, and impersonality that have you stood on the othei side of the characterized some of the more injurious actions of fenee? corporations. The advocates of these arguments are The contemplated construction of a like the reformers in Nathaniel Hawthornes shortplant for Division X is touted at the finance com- story "Hall of Fantasy" who "had got possession ofmittee meeting as an absolute necessity for expan- some crystal fragment of truth, the brightness ofsion at a cost saving of at least 25%. With plans whieh so dazzled them that they eould see nothingdrawn up for an energy-efficient building and an else in the whole universe."option already secured on a 99-year lease in a new In the example of Division Xs newindustrial park in Chippewa County^ the commit- plant, it was a simple matter to define the alternatetee is likely to feel comfortable in approving the re- faets; the process rested largely on an assumptionquest for funds in a matter of minutes. that eertain values were commonly shared [no one The facts of the matter are that the likes a traffic jam, landscaping pleases more than ancompany will expand in an appropriate market, unadorned building, and so forth). But the alterna-allocate its resources sensibly, create new jobs, in- tive definition often underseores an inherent dis-crease Chippewa Countys tax base, and most like- parity in values or language. To some, the employ-ly increase its returns to the shareholders. To the ment of illegal aliens is a criminal act (fact #1); toresidents of Chippewa County, however, the plant others, it is a solution to the 60% unemploymentmay mean the destruction of a customary recrea- rate of a neighboring country (fact #2|. One coun-tion spot, the onset of severe traffic jams, and the trys bribe is another countrys redistribution oferection of an architectural eyesore. These are also sales commissions.facts of the situation, and certainly more immediate When there are cultural or linguistieto the eounty than utilitarian justifications of profit disparities, it is easy to get the faets wrong or toperformance and rights of ownership from an im- invoke a pluralistic toleranee as an excuse to actpersonal corporation whose headquarters are r,ooo in ones own self-interest: "Thats the way they domiles from Chippewa County and whose executives things over there. Who are we to question their be-have plenty of acreage for their own recreation. liefs?" This kind of reasoning can be both factually The purpose of articulating the other inaccurate (many generalizations about bribery restside, whose needs are understandably less proximate on hearsay and do not represent the complexities ofthan operational considerations, is to allow some a culture) and philosophically inconsistent |theremechanism whereby calculations of self-interest (or are plenty of beliefs, such as those of the environ-even of a projects ultimate general beneficence) mentalist, which the same generalizers do not hesi- can be interrupted by a compelling empathy for tate to question).those wbo might suffer immediate injury or mereannoyance as a result of a corporations decisions. 3 How did this situation oecur in the Such empathy is a necessary prerequisite for shoul- fiist place? dering voluntarily some responsibility for the social Lex Motor Company, a subsidiary of consequences of corporate operations, and it may Lex Serviee Group Ltd., bad been losing share at a be the only solution to todays overly litigious and 20% rate in a declining market; and Depot Bs per- anarchic world. formanee was the worst of all. Two nearby Lex There is a power in self-examination: depots could easily absorb Bs business, and closing with an exploration of the likely consequences of it down seemed the only sound financial decision. a proposal, taken from the viewpoint of those who Lexs chairman, Trevor Chinn, hesitated to approve do not immediately benefit, comes a discomfort or the closure, however, on the grounds that putting an embarrassment that rises in proportion to tbe de- 100 people out of work was not right when the cor- gree of the likely injury and its articulation. Like poration itself was not really jeopardized by Bs ex- Socrates as gadfly, who stung his fellow citizens into istenee. Moreover, seven department managers, who a eritical examination of their conduct when they were all within five years of retirement and had had became complacent, tbe discomfort of the alterna- 25 or more years of service at Lex, were scheduled tive definition is meant to prompt a disinclination to be made redundant.