Profit with honour
P.K. DORAISWAMY
Recent business scandals have sullied the image of not only the companies involved but also the private sector as a whole and the free market. Whenever something went wrong with companies, the public used to believe explanations like market fluctuations, labour unrest or incompetence. Today, no benefit of doubt is given and there is a presumption of dishonesty. ‘There will always be a few bad apples’ has given way to ‘this is only the tip of the iceberg&#
8217;.
Adam Smith, being a professor of moral philosophy, assumed that even the free pursuit of self-interest would be tempered with a basic sense of decency and honour. His ‘invisible hand’ was not the hand of the corporate pickpocket, insensate to shame and guilt.
Causes for this trend
One’s first response to scandals is that these are the result of greed, arrogance of power, contempt for the law and poor corporate governance. The phenomenon is really the convergent result of three trends: frenzied deregulation, a distorted concept of shareholder value and the ‘winning for oneself’ ethic. A rage for privatisation and deregulation has transformed traditional watchdogs like accountants, investment banks and regulators into enablers of ‘getting away with it’. Accounting and legal advisers forget that they have a duty to not only the CEO who pays them but also their own profession and the long-term interests of the company.
Enthroning shareholder wealth as the only thing that matters, distorting it to mean only the current share value and then linking the CEO’s compensation to it have resulted in the paradoxical simultaneity of bonuses and bankruptcy. The ethic of winning for oneself and at any cost has replaced the concept of ‘ do well by doing good ’ by ‘ do well and forget doing good’ creating a new management skill of ‘gaming the system’.
Corporate culture, making every employee follow the same values, is often touted as a miracle ingredient of great companies.
Without a good moral basis, it can easily promote group-think, making employees surrender their individual consciences to the contextual pressure to conform. The same employee can be a compassionate, warm person in private life but a commercial cut-throat in business.
Limits of law
Law can make it difficult to do something criminally improper but will it make people honest and decent? Law marks the boundary between criminal and non-criminal behaviour and can only be the floor. It is not a substitute for the superstructure of ethics — which marks the boundary between right and wrong irrespective of legality.
Corporate Social Responsibility emphasises more the social obligations of companies as an external concomitant to business activities than the internal concomitant of being above board, fair and decent in business. Without an inherent sense of honour, can we really prevent scandals?
Ethical norms should be a central part of the curriculum of all management courses. The Board of Directors should be an objective sounding-cum-screening board for the ideas of the CEO from whom it has a right to expect nothing less than total openness and trustworthiness.
At the entrance to every corporate headquarters should be inscribed the words ‘profit with honour’.
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