Author: David Gebler

The issues surrounding Goldman Sachs highlight many of challenges facing the business ethics industry. There has been a public furor over the integrity of certain industries, such as finance, even though the leaders of those companies can state categorically that they acted legally, and ethically, within the guidelines they have worked within for some time.

However, our common sense notions of what is ethical and what is fair are determined by social norms. What then are the responsibilities of leaders in firms, and in industries whose ethics have been challenged, to acknowledge changes in how our society perceives them? Is it better to batten down the hatches and wait out the storm, or to develop the means to engage in an effective dialogue with these external stakeholders to maintain trust?

Much of the furor over Goldman Sachs rests in our collective ambivalence over Wall Street itself. Is there something inherently unethical about the entire trading industry?

The Senate hearings highlighted a mismatch in how Wall Street sees itself and how it is seen. Goldman’s witnesses said a market maker—someone who matches buyers and sellers—has an obligation to describe accurately the product being traded, but needn’t disclose his own position. Are we surprised that a trader can take the stand and simply say that we were doing what we’ve always been doing?

Maybe they have, and it’s us that are changing our expectations?

Does the nature of the federal bail-out change our definition of what is ethical?

While it may sound trite at first, this gets to the heart of the perceptions of trust and the commitments that were broken. Big boys on Wall Street can do what they have been doing for 200 years. Caveat Emptor.

But when Wall Street is financed by Main Street, new relationships are formed. Firms now have new sets of stakeholders, and they are required, if not by law, then by social convention, to maintain a relationship based on trust.

Trust requires a whole set of expectations that run counter to the caveat emptor trader culture: predictability, looking out for the other person’s interest, etc. It’s when these values clash with our independence and freedom values that drive our entrepreneurial trader side that we see the fireworks.

As opposed to offering opinions without having all of the background and knowledge, I thought it might be more helpful to start a discussion about the questions:

Many people have written that Toyota’s problem was that it sacrificed a core value of safety for profit. To frame the issue this generally is to miss the point of the real challenge Toyota was facing: not trading one value for the other, but how to effectively balance the two.

No company can sustain profits if it builds unsafe cars. So Toyota cannot jettison safety for profit. Similarly, there is always inherent risk in any product. Even the public assumes some degree of risk. Toyota, as well as any car manufacturer is not expected to make their product 100% safe. So how do they decide what is “safe enough”?

Now we can look at an ethics issue. The ethical dilemma is in how Toyota grappled with that decision. Who had information but didn’t report it up to senior leadership? Why not? Which stakeholders, internal and external, were not included in the decision-making process?

The public on both sides of the Pacific does not begrudge Toyota making a profit. But building complicated machinery that is sold to millions of people demands inclusion of many voices in multiple decision processes. If there is a lesson to be learned, it’s the role that transparency can play in making the tough decision.

Do companies care about the intent of one’s actions, or just the results? While we think that our intentions should matter, if an unethical action takes place, do we really care why?

Let me know what you would do in the following dilemma:

Alternative #1 –

You are taking care of a chatty 3-year old. While strolling past a market your companion sees her favorite food, a banana, in the window of the market. Your friend needs to have a banana…NOW. Unfortunately you have no cash on you, having left your wallet in the car 6 blocks back. The child is now making quite a scene. Would you go into the store and take a banana without paying for it? If so, how would you justify it?

Alternative #2 –

Your are shopping with your 3-year old companion inside the market. She is in the shopping cart. As you pass through the fruits and vegetable section you put a bunch of bananas in the cart. She of course wants one now. You give her a banana to eat while you shop, fully intending to tell the cashier at check-out that your child ate a banana. However, you are understandably distracted during the check-out process and only after getting the groceries in the car and “Precious” into her car seat do you realize that you didn’t mention, or pay for the banana. Do you go back into the store and pay for the now eaten banana? If not, how do you justify it?

The intent of the actions in the two alternatives seem quite different. One seems like shop lifting and the other seems like just another day of parenting. Yet the results are the same: the store is left with one unaccounted for banana.

An ethics issue? In the next post we’ll look at the ramifications inside a company for similar decisions.

What’s the difference between a code of conduct and a rulebook? A rulebook certainly sets outer parameters as what is unacceptable behavior. However, since most behavior is within those legal parameters, does (and should) a code of conduct dictate how employees should in fact conduct themselves at work?

Imagine if a supervisor asks an employee how things are going and the employee answers, “great. I have not violated any of the standards in our code today.” We certainly can aspire for more. For example:

• Should the code discuss how employees should conduct themselves at meetings in order to foster open dialog?
• Should the code detail how employees should keep commitments to others and what to do when they can’t meet a deadline or objective?

We would like to think that this type of behavior need not be reduced to writing. Shouldn’t the culture of the organization set norms that guide these types of actions? In fact, if this type of behavior was included in the code and it wasn’t part of the social fabric of the company, it wouldn’t be followed anyway.

The research shows that social norms inside organizations have a tremendous influence on employee behavior..for better and for worse. And yet, in our past-faced world, these social norms evolve quickly and often are not norms that leadership would like to see.

If our codes of conduct are not truly suited to be true “codes of conduct,” then what means are available to companies to set standards of expected behavior that are outside of the 10-20 standards and policies that fill most code documents?

What makes the field of business ethics so interesting and so challenging is that as a term, and as a concept,“business ethics” means so many different things to so many different constituencies.

However, many of these constituencies often don’t communicate well together. The academic side of business ethics is often not seen as a resource for the practitioners. Within companies, business ethics is more often seen as a branch of compliance and legal than it is a partner of organizational behavior. Everyone wants everyone do “the right thing” yet we are often at a loss to define what exactly that right thing to do is.

Another dimension is that the perception of business ethics in the US is different than the assumptions of ethics in many other countries.

How do we make sense of all of these varied elements?

One place to start is by looking at the definitions of “business ethics.”

Ethics is often defined as “that branch of philosophy dealing with values relating to human conduct, with respect to the rightness and wrongness of certain actions and to the goodness and badness of the motives and ends of such actions.” (dictionary.com)

However, the origin of the word “ethics” comes from the Greek word, “ethos,” which we define as “the fundamental character or spirit of a culture; the underlying sentiment that informs the beliefs, customs, or practices of a group or society; dominant assumptions of a people or period.” (dictionary.com).

In the business context it isn’t always helpful to see “ethics” as synonymous with “morality” or “goodness.” Instead, business ethics is more instructive if we look at it as a means to an ends: “the values relating to human conduct.”

In today’s business world, we are interested in understanding why people do what they do. Why do people do good things and why do seemingly good people do bad things.

From my 15 years of experience in helping companies address ethics issues, I see ethics as a function of behavior. Borrowing from the social psychologists, I see ethical behavior as a function of both the person and their environment.

When we look at the person, we look at how does that individual define what is the “right thing” to do. There is not a universal definition and I am hoping to encourage a dialog as to what in fact is the right thing to do and is it objective or conditional upon the circumstances?

The second determinant of ethical behavior is the environment that influences and shapes our perceptions. We will be actively discussing how the environment shapes behavior.

Our goal is to help practitioners be better equipped to create the kinds of cultures they want and need inside their organizations. Where should an organization be focusing its resources and attention in its attempts to influence employee behavior? On the person by reminding them of their ethical and legal obligations, or on the environment which shapes behavior of “ethical” and “unethical” people alike.

I am encouraging the readers and guest writers in this blog to open the dialog and be active participants in this exciting process.

I’m David Gebler and I’m the host of this blog. You can read more about me next to my picture in the sidebar. This blog will be about various aspects of business ethics, will focus especially on practical tips and tools, and will include posts from guest writers. You can learn more about this blog by clicking on the About link just under the header.

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