Abstract: I write about hubris and ethical problems in business, and I attempt to figure out why CEOs escaped unharmed as the companies they led sunk into ruin. I map roughly what causes most institutional problems, and I attempt to dissect the ethics of major corporations and lower management. I also attempt to explain how my generation may avoid making such mistakes.Wal*Mart is being sued by 1.6 million current and former employees for sex discrimination; Apple is storing unencrypted long-term exact location data on iOS 4; BP is applying for a license to resume drilling in the Gulf of Mexico; Food giant Monsanto is going to be allowed to police itself1; the Consumer Financial Protection Agency is about to lose a massive fight because the debate over consumer financial regulation has left the mainstream2; and Sony has failed to inform that their customers' financial data is in the hands of cyber thieves3 & 4.
Combined with what I have said previously about corporate America--especially with the financial collapse and tobacco companies--it would appear that the jobs we all have are, while providing us with a decent living--are contributing to harsher costs elsewhere.
I've begun reading one of my father's old university economics textbooks (from 1979), and the author (APA citation at the end of the essay5), George C Sawyer wrote the textbook as a project in part because there is--as he said--very little literature providing a framework in which businesses can act ethically. Thirty-two years later, it seems, this same thing could be written again.
After 9/11, George W Bush diverted FBI personnel from white-collar crime investigations to counter-terrorism, at a time when white-collar crime was rampant6.
As the recession devoured people's lives and livelihoods, the entire business structure underwent immense changes: take-overs, shut-downs, and massive layoffs. While this is normal in business and is not generally frowned-upon, the constant adrenaline rush at the workplace and the subsequent focus on simply the bottom line eradicated any kind of ethical framework in the workplace. If you were a part of an organization that valued a relationship with its clients or the society in which it operated, and were taken over by someone else and everyone who enforced and adhered to that ethical standard were upended, ethics are not going to appear to be immediately important.
What I am trying to get across is that in business, long-term ethical ideals are not immediately valued unless they are proven to be profitable. However, there is a problem with this idea, because as history as far back as we can tell, has proven to us consistently that to cover up a destructive act and to ignore it creates a much bigger problem than to admit it and do something about it when it happens. The lie is usually worse than the crime. People will find out, and will no longer trust you. This is the ultimate answer Socrates gave to Thrasymachus in The Republic when he supposed that to be unjust is more profitable than to be just.
What is amazing about businesspeople then, is that for the sheer number of occurrences of this same thing happening over and over again, they keep making the same mistakes. But I also don't want to categorically say that there aren't businesspeople who do see the errors of their neighbors, but these are usually smaller business people, if only because they think that they cannot afford it.
On Easter, I was talking with my aunt's boyfriend and his brother about business ethics, and we were trying to figure out why these CEOs are making an exorbitant amount of money when their companies were in ruins. "Aren't they beholden to an executive board of directors who ultimately have to decide how much the CEOs are paid, and whose primary interest is the existence of the company?" There is a very interesting dynamic between them, and while we do not immediately know why this would happen, my own hypotheses would be this: (1) The Board of Directors could be operating under groupthink, in that the CEO wants to tell them that the company is doing just fine and therefore he should get a raise. The reality may be that corporate offices or outlets may be closing across the country, but the CEO and the Board of Directors are willfully complicit in supplanting factual reality with delusions of prosperity; any admission of possible failure is deemed heresy. This is what happened to the Bush Administration. (2) The CEO takes full command of the company and buys off the Board of Directors (this is an example my dad suggested). Any kind of collective entity could break down because of threats or coercion. Bush's cabinet denied problems in Iraq or Afghanistan out of nothing more than blind faith and ambition. The Catholic Church vociferously denied allegations of sexual misconduct with children, even after the presentation of overwhelming evidence. This same instance can appear anywhere and has nothing to do with economics; it has to do with psychology and the dynamics of hierarchical power and the blind belief in the invulnerability of the existence of the institution. Remember "Too Big to Fail"?
Most institutions--especially corporate institutions--are not democratic. Whatever equality we enjoy as citizens is lost for the bulk of our lives. This means that we are beholden to people who may not understand ethics generally, or not really have an interest in the success of an organization or its employees beyond his or her own petty satisfaction. S/He may even decide he hates you. You certainly say "Cest la vie", but I think that would be a mistake. There are hundreds of books on how to deal with a [an ethically] corrupt manager or supervisor, but I see very few books about how to be an effective and ethical manager. This, too, is not economics, but psychology and philosophy. Because of the power dynamic reminiscent of the Master/Slave dichotomy humanity has always been cursed with by its own avarice, most business leaders with whom one deals with in everyday life--the supervisor at a grocery store, the owner of a restaurant--do not have the kind of ethical or educational upbringing that would lift them out of it. Even a little power corrupts absolutely. Good managers are very difficult to come by, but most of them are so hard-hearted because the system itself demands a certain output. This output, however, under a corrupt manager, is often thrust upon a few individuals, a fraction of the total workforce. This is called favoritism, or bullying.
Let's say you have 100 people working for you, and you need something done over the weekend every weekend. Out of your 100 employees, there are 10 people who are capable of doing this project. The ideal would be to fairly rotate the weekly workload. So far so good. But what would you do? Let's say that there is one person out of that 10 you really hate, and one you simply don't know that well--maybe because you never see them at your religious service--and 2 people you really like. So what do you do? You organize the workload so that the people on the bottom do a disproportionately higher percentage of the work than the people at the top. In fact, you game the system so that the top two people--maybe they're really sexy brunettes who wear low-cut jackets, push-up bras, and high skirts--never do any extra work (you'd also be committing sex discrimination, but you wouldn't care about that, and quite frankly neither would they).
Let's say you REALLY hate one person. He just annoys the crap out of you; he's constantly contradicting every idea you have, and his arguments are generally very compelling, but you can't get rid of him because your supervisors value his input. So to show your dissatisfaction, you make him come in over the weekend every two weeks, and you insult him at every turn.
The work still gets done, but at what cost? You have paid a price you didn't really need to pay: The work was done, but you've alienated many of your employees. You have also made yourself vulnerable if they know that the two sexy ladies who should be in the pool are not, and decide to report the problem to your boss. If these 10 people communicate, and one of them records the frequency and distribution of the work in a given time frame, it would be incontestable evidence that you are corrupt. I think most people are in this category of managers who succumb to these base notions and take unnecessary personal and social risk.
It is this same risk that is committed on a much grander scale. Sony perhaps believed that it could get away with not sharing critical information with its customers; maybe Apple never thought two tech geeks would find their long-term location data on an iPhone and be able to map it; Nobody thought the housing market bubble would burst; and few people understand that gold is historically a volatile commodity. Tobacco companies probably never figured people would be able to trace their products to a smorgasbord of medical complications. Wal*Mart never figured that 1.6 million employees would be suing them for sex discrimination; BP never thought that the consequences of being cheap on critical parts for their Deepwater Horizon rig would manifest themselves in a massive fireball killing 11 workers and dumping millions of barrels of oil into the ocean. And yet we see this all the time.
This is a complicated problem, and it has to do with more than simply ethics. It is easy to charge that these executives were complacent and morally dubious, but the truth might be something less overtly malevolent. It might be that instead of (or, in Wal*Mart's case, aside from) being callous bastards, they might not have correctly calculated the probabilities of failure. The person or team in charge of calculating disaster risk at BP may have--either of his own volition or coercion by management--artificially reduced the calculated risk they were taking by using faulty equipment in order to save money in the short term. But I see now that this is a solipsism in that in the example I entertained the possibility that upper management may have pressured our person in charge of risk management at BP into presenting fabricated data in order to at least present the illusion of security. But it would be equally wrong to pin everything upon an ethical bankruptcy. It may also be a hubris in that an institution may falsely believe that it is above the law, its customers, its clients, or its employees.
Most corporations, when faced with an accusation of wrongdoing, or evidence of negative social impact, immediately deny or cover up said allegations. This is the start of collapse, and embodies Jean-Paul Sartre's Bad Faith: What happened to the Catholic Church in the child molestation crisis is that they categorically denied everything beyond the point at which the evidence against them was irrefutable: A letter signed by Cardinal Ratzinger--now Pope Benedict XVI--urged the institution to protect those priests who have been accused from the law. It became a game: The only people they were even trying to convince were themselves. They blamed everyone else for their problems, but no one believed them.
How do we fix these problems? They seem insurmountable because changing the nature of institutions and how they work as a class from the outside is impossible. If we truly want our institutions to change, we must educate people in such a way that they both understand and internalize the values they would need to succeed: Social good and responsibility, respect for those around them, etc, and give them the freedom within the institutions they join to do what is right. This last condition may be the most difficult to meet because of the attitudes ingrained within CEOs and Boards of Directors may be contrary to factual reality, especially if they operate like the Bush Administration. But an even greater problem exists: How do we guarantee that those who manage to do all of this do not fall into the same traps as their predecessors? This is the most incredible and seeming insurmountable problem in human history generally. The generation that protested Vietnam brought us into Iraq and Afghanistan. It is up to my generation to solve it.
1) http://www.organicconsumers.org/articles/article_23097.cfm
2) http://www.thedailyshow.com/watch/tue-april-26-2011/elizabeth-warren
3) http://gamrfeed.vgchartz.com/story/85812/sony-your-psn-personal-info-was-stolen-nine-days-ago/
4) http://www.techi.com/2011/04/playstation-hacked-credit-card-data/
5) Sawyer, George C. Business and Society Houghton Miffin Company. (C) 1979. New York, NY
6) Moore, Michael, Capitalism: A Love Story Documentary. 2009. Overture Films. United States.
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