“We’re here to make money”
That remains the over-arching driving force behind most businesses, and in some ways it’s right. A commercial business making no profit is either going broke, or is some kind of welfare case.
But while making a profit is important, this can never be the sole rationale behind a successful business.
Several companies that proudly practised shareholder-value maximisation famously went up in flames: Enron, Arthur Andersen and WorldCom, among others. Much later Jack Welch, GE’s former boss and a poster boy of the “business of business is business” approach, famously dismissed maximising shareholder value as “the dumbest idea ever”.
When companies get it wrong
Stage 1: The Hubris of Success. Things are going well and the company acquires a sense of entitlement for that success. “We deserve this success because we’re so good!” or “This ship is unsinkable.”
Stage 2: Undisciplined Pursuit of More. Companies in Stage 2 stray from the disciplined creativity that led them to greatness in the first place, making undisciplined leaps into areas where they cannot be great or growing faster than they can achieve with excellence—or both. Did Toyota go through this in the last 5-7 years?
Stage 3: Denial of Risk and Peril. There are warning signs of over-reaching, that things are not going to go this way forever. Leaders discount negative data, amplify positive data, and put a positive spin on ambiguous data. Those in power start to blame external factors for setbacks rather than accept responsibility
Stage 4: Grasping for Salvation. The cumulative peril from risks gone bad of Stage 3 assert themselves.The leadership starts looking for how to get out of the mess, having ignored all the warning signs till now. They fail to see that leaders atop companies in the late stages of decline need to get back to a calm, clear-headed, and focused approach
Stage Five? Capitulation to Irrelevance or Death. In simple terms the boat sinks.
Adapted from: J. Collins, How The Mighty Fall: And Why Some Companies Never Give In
In contrast, a significant number of the world’s best firms, such as Bosch, Carlsberg, Bertelsmann and Tata, are owned by foundations that are pledged to pursue the public good. Most recently the pharmaceutical giant GSK has claimed it wants to make it easier for manufacturers in the world’s poorest countries to copy its medicines.
GSK’s CEO Sir Andrew Witty wants to take a “graduated” approach to the company’s “intellectual property” based on the wealth of nations around the globe. Experts have described the plans as “brave and positive”.
Of the hardy individuals who actually launch companies, few seem driven entirely by the money urge. Invariably, they’re usually inspired to do something new, different or to contribute to society in some practical and profitable way.
As for established enterprises, if making money is indeed the primary aim that company will almost certainly be underperforming. Employees of such profit obsessed organisations seldom feel fully engaged with such a narrow, self-interested goal.
“In business studies the share price is taught as ‘the bottom line’. You are taught to value this over all else. Business studies is missing an integrated approach to business ethics.”
Promoting Cultures of Integrity: Six Ethical Issues for Business Education, Institute for Global Ethics UK Trust, June 2011
In a company fixated on just making money, the younger the employees the more they’re likely to move on—and sooner rather than later. A steady attrition of talent eventually takes its toll, showing up in numerous ways, from poor customer service to weak quality control.
“Our schools teach reading, writing and math, but they fail to teach ethics. It seems like a missed opportunity that will continue to haunt society,”Linda Biek, Director, Compliance at Hong Kong Institute of Certified Public Accountants.
Echoing this, Peter Tait headmaster of Sherborne Preparatory School, says this applies just as much to UK schools as in Linda’s Hong Kong.
“Before talking of grit and resilience, we should be challenging our children with the fundamental questions about how they live their lives.”
Even the least interested schoolchild has probably heard about badly behaved bankers, tax avoiding businesses, or owners like the present head of Sports Direct, who appears to have little social conscience, or even bigger companies who have cheated and been brutally exposed like VW.
As far as business is concerned, promoting the values of democracy, the rule of law, individual liberty and mutual respect may seem almost irrelevant to some. Yet we urgently need to do more than make these a passing reference in our schools and in our companies.
We need children growing up with a genuine sense of right and wrong, and what it means to be authentic, to show integrity and character. Only a basic introduction to morals and ethics can provide the sort of learning needed. It is not just about freedom, it’s about people exercising free will in the absence of a moral framework.
Religion once provided such a reassuring structure, warped though much of it has been by being more about power and control than a real concern with right and wrong.
In New South Wales, Australia, classes on secular ethics have been offered to some students as an alternative to religious studies since 2010. A programme called ‘Primary Ethics’ is now taught to around 20,000 students in more than 300 schools. It introduces discussion of moral issues in a systematic way and provides an educational experience for students who were previously not provided with a taught alternative.
A Norwegian school is using the popular Walking Dead video game to teach students ethics. Tobias Staaby, the teacher who started the initiative at the school, has included the game in his religious studies curriculum. He believes that it will help spark discussion about morality and ethical choices.
“The Walking Dead presents some dilemmas the students would not have thought of otherwise,” Staaby explains.
“That makes their answers to a greater extent their own.”
In England all schools must promote SMSC; spiritual, moral, social and cultural development. In particular the moral dimension is about students learning to recognise right and wrong; respect the law; understand consequences; investigate moral and ethical issues; and offer reasoned views.
Why bother to teach ethics?
Even when they don’t know they’re doing so, everyone in business is constantly making moral or ethical choices,. We therefore need to ensure newcomers arrive with a solid sense of “doing what’s right”–rather than a common tendency to assume ‘if it is legal and if you can get away with it, then it’s acceptable.’
When we leave school we seldom need to solve another quadratic equation, or remember the details of cell biology. But we will all face moral decisions, every day.
We seldom even think about it. Yet ethics is everywhere. In the products we buy, the careers we choose, and how we interact with others.
REASON 1: The first reason to teach ethics is therefore to help us reflect on the moral dimensions of the decisions we make—to recognise that something may, and often does have a moral dimension.
REASON 2: The second reason for teaching ethics is that moral choices are difficult. They’re often amongst the most important ones in our life. To make them we al most entirely depend on our own capacities. We can’t escape the ultimate responsibility for what we choose, and even when we can seek the advice of those we trust, we may receive competing advice.
REASON 3: Finally, there’s is a public interest in teaching ethics. The ability to reason morally is a fundamental requirement of good citizenship, and ‘civics education’ should be broadly seen as important. Citizens need to know how laws are made, and how decisions can be challenged.
But a robust democracy requires even more. It demands citizens who can reflect on how their country ought to be.
Issues as diverse as taxation and inequality, the limits to free speech, and the claims of future generations, all have a moral dimension. Citizens need to be able to spot flaws in arguments and weigh competing considerations if they’re to exercise ‘self government’ in the fullest sense. Teaching ethics in schools and universities should therefore involve at least five elements
- Help students to think about ethical issues, not what to think about them
- Encourage students’ personal development
- Build self-confidence to decide what’s right and wrong
- Prepare a student for employment of any kind
- Taught across all subject disciplines.
For these to happen teachers need to be equipped to do this kind teaching. Those involved in the humanities are more likely to be able to explain issues from an ethical perspective. That is, they’re used to weighing arguments using ethical concepts. Yet they’re often seriously lacking in substantial knowledge of a particular field of endeavour such as teaching the sciences.
Nor is the need to teach ethics confined just to schools. The Institute of Business Ethics for example, argues the importance of such education in the business school curriculum. It has questioned in particular, whether business schools are doing enough to promote cultures of integrity in business.
“Business ethics needs to be fully integrated into business courses. It should not be an optional module or a ‘few slides at the end of the course’
Institute for Global Ethics UK Trust .
The NASBA Center for the Public Trust has launched online ethics certification programs for university students as well as the professional community. Participants proceed through modules designed to not only make them aware of ethics but also to become ethical leaders where they work.
However there is no strong evidence that teaching ethics rarely affects actual behaviour. What matters is not so much telling people about ethics, but giving them a memorable and visceral experience which engages their emotions about ethics.
Crisis, what crisis?
Towards the end of the last century the celebrated American pollster, George Gallup, declared his country was facing a moral and ethical crisis of the first dimension. He cited as examples of the moral decline: widespread cheating on taxes which cost the government about $100 billion a year, pilferage costing department stores more than $4 billion a year, defaulting on federal education loans by one student in seven, sexual promiscuity and extra-marital affairs of epidemic proportions.
Since then many would argue the situation has worsened, epitomised by endless stories of previously well thought of companies falling short on ethical standards, bankers widely regarded as morally irresponsible along with a general sense of moral decay.
Historians though may claim previous centuries were even more corrupt and morally bankrupt. Whatever the truth, there’s now widespread recognition that more attention needs to be paid to the pursuit of ethics in society and it starts in schools.
There is also growing pressure on businesses to adopt an ethical corporate culture. Even state regulators are getting in on the act, starting to demand those they oversee to show how they are modifying their culture and promoting ethical values. The outline of best practice is now clearly in sight and consists of at least three essential steps:
Making ethics matter
1 Identify and promote core ethical values: regardless of firm size, core values must be infused throughout policies, processes and practices of the organisation
2 Implement a comprehensive ethics program: no one should be immune to the training and there should be a designated ethics officer responsible for the mechanics of promoting ethics from from codes through to training, from setting the right tone at the top, to working with all managers so they talk about and promote ethical behaviours.
3 Show ethical leadership: promote the systems and processes that encourage ethical awareness on a continuous basis, give emphasis to the the long term over the short term, set the right tone at the top and show by example what it means to be ethical.
How far companies should be profit driven remains an open question There’s a constant process of negotiation between managers and investors over strategy and time horizons. Companies like Shell, Intel and Nestle often invest taking a long term view without a murmur from fund managers.
New economy companies like Google, Facebook and especially Amazon, have found no problem in persuading investors to sacrifice short-term returns in exchange for long-term rewards.
Teaching children the basics of what it means to be ethical is neither a luxury nor an irrelevance.