Don't lie, don't cheat, don't steal

In America, companies have a special incen­tive to pursue virtue: the desire to avoid legal penalties. The first attempts to build ethical principles into the corporate bureaucracy began in the defence industry in the mid-198os, a time when the business was awash with kickbacks and _$500 screwdriv­ers. The first corporate-ethics office was created in ₁₉₈₅ by General Dynamics, which was being investigated by the government for pricing scams. Under pressure from the Defence Department, a group of 6o or so defence companies then launched an initiative to set up guidelines and compliance programmes. In 1991, federal sentencing rules ex­tended the incentive to other industries: judges were empowered to reduce fines in cases involving companies that had rules in place to promote ethical behaviour, and to increase them for those that did not.

But the law is not the only motivator. Fear of embarrassment at the hands of NGOS

and the media has given business ethics an even bigger push. Companies have learnt the hard way that they live in a CNN world, in which bad behaviour in one country can be seized on by local campaigners and beamed on the evening television news to customers back home. People seem happier working for organisations they regard as ethical. In a booming jobs market, that can become a powerful incentive to do the right thing.

The quest for virtue

In America there is now a veritable ethics industry, complete with consultancies, conferences, journals and "corporate conscience" awards. Accountancy firms such as PricewaterhouseCoopers offer to "audit" the ethical performance of companies. Corporate-ethics officers, who barely existed a decade ago, have become de rigueur. at least for big companies.

For academic philosophers, once lonely and contemplative creatures, the business ethics boom has been a bonanza. They are employed by companies to run "ethics workshops" and are consulted on thorny moral questions. They also act as expert witnesses in civil lawsuits "where lawyers usually want to be able to tell the judge that their client's behaviour was reasonable. So you are usually working for the defendants. They want absolution," says Kirk Hanson, a professor at Stanford Business School.

Outside America, few companies have an ethics bureaucracy. To some extent, observes IMD’s Mr Steger, this reflects the fact that the state and organised labour both still play a bigger part in corporate life. In Germany, for example, workers' councils often deal with issues such as sexual equality, race relations and workers' rights, all of which might be seen as ethical issues in America.

In developing a formal ethics policy, companies usually begin by trying to sum up their philosophy in a code.

Not surprisingly, codes are often too broad to capture the ethical issues that actually confront companies, which range from handling their own staff to big global questions of policy on the environment, bribery and human rights.

The best corporate codes, says Robert Solomon of the University of Texas, are those that describe the way everybody in the company already behaves and feels. The worst are those where senior executives mandate a list of principles--especially if they then fail to "walk the talk" themselves. However, he says, "companies debate their values for many months, but they always turn out to have similar lists." There is usually something about integrity; something about respect for the individual; and something about honouring the customer.

The ethical issues that actually create most problems in companies often seem rather mundane to outsiders. Such as? "When an individual who is a wonderful producer and brings in multiple dollars doesn't adhere to the company's values," suggests Mr Gnazzo of United Technologies: in other words, when a company has to decide whether to sack an employee who is productive but naughty.

Issues such as trust and human relations become harder to handle as companies intrude into the lives of their employees.

Even more complicated are issues driven by conflicts of interest. Edward Petry, head of the Ethics Officer Association, says the most recent issue taxing his members comes from the fad for Internet flotations. If a company is spinning off a booming e-commerce division, which employees should be allowed on to the lucrative "friends-and-family" list of share buyers?

Indeed, the revolution in communications technologies has created all sorts of new ethical dilemmas—just as technological change in medicine spurred interest in medical ethics in the 1970s Because it is mainly businesses that develop and spread new technologies, businesses also tend to face the first questions about how to use them. So companies stumble into such questions as data protection and customer privacy. They know more than ever before about their customers' tastes, but few have a clear view on what uses of that knowledge are unethical.

 

Foreigners are different

Some of the most publicised debates about corporate ethics have been driven by globalisation. When companies operate abroad, they run up against all sorts of new moral issues. And one big problem is that ethical standards differ among countries.

Many companies first confronted the moral dilemmas of globalisation when they had to decide whether to meet only local environmental standards, even if these were lower than ones back home.

Most large multinationals now have global minimum standards for health, safety and the environment.

Bribery and corruption have also been thorny issues. American companies have been bound since 1977 by the Foreign Corrupt Practices Act. Now all OECD countries have agreed to a convention to end bribery. But many companies turn a blind eye when intermediaries make such payments. Only a few, such as Motorola, have accounting systems that try to spot kickbacks by noting differences between what the customer pays and what a vendor receives.

 

Rights and wrongs

Human rights are a newer and trickier problem. Shell has written a primer on the subject, in consultation with Amnesty international. It agonises over such issues as what companies should do if they have a large investment in a country where human rights deteriorate; and whether companies should operate in countries that forbid outsiders to scrutinise their record on human rights (yes, but only if the company takes no advantage of such secrecy and is a "force for good").

The force-for-good argument also crops up when companies are accused of underpaying workers in poor countries, or of using suppliers who underpay.

Stung by attacks on their behaviour in the past, companies such as Shell and Nike have begun to see it as part of their corporate mission to raise standards not just within their company, but in the countries where they work..

When, in the late 198os, companies devoted lots of effort to worrying about the environment, they told themselves that being clean and green was also a route to being profitable. In the same way, they now hope that virtue will bring financial, as well as spiritual, rewards. Environmental controls can, for instance, often be installed more cheaply than companies expect.

Most academic studies of the association between responsible corporate ethics and profitability suggest that the two will often go together. Researchers have managed to show that more ethically sensitive sales staff perform better (at least in America; the opposite appears to be the case in Taiwan); that share prices decline after reports of unethical conduct; and that companies which state an ethical commitment to stakeholders in their annual reports do better financially. But proving a causal link is well-nigh impossible.

And then there is the impact on employees. It may be true that they like working for ethically responsible companies. But, says Stanford's Mr Hanson, "I see a lot of my graduate students leaving jobs in not-for-profits to go and work for dot-coms." Few dot.coms would know a corporate ethics code if it fell on their heads. Small firms, in particular, pay far less attention than bigger rivals to normalising ethical issues and to worrying about their social responsibilities. Yet employment is growing in small companies and falling in big ones.

There may still be two good reasons for companies to worry about their ethical reputation. One is anticipation: bad behaviour, once it stirs up a public fuss, may provoke legislation that companies will find more irksome than self-restraint. The other, more crucial, is trust. A company that is not trusted by its employees, partners and customers will suffer. In an electronic world, where businesses are geographically far from their customers, a reputation for trust may become even more important. Ultimately, though,

companies may have to accept that virtue is sometimes its own reward. One of the eternal truths of morality has been that the bad do not always do badly and the good do not always do well.

The Economist

Notes:

 

1. jumbo shrimp -"jumbo" is anything very big; the word "shrimp", apart from meaning " a small sea creature with long legs and a fanlike tail"^, - креветка- means "any small, contemptible thing or person". Hence, the word combination "jumbo shrimp" is perceived as contradiction in terms.

2. kickback -a bribe, money received in return for a favour

3. Foreign Corrupt Practices Act (1997) – закон о запрете подкупа иностранцев. Запрещал представителям американских корпораций давать взятки за рубежом.

4. Amnesty International is a worldwide campaigning movement that works to promote all the human rights enshrined in the Universal Declaration of Human Rights and other international standards. It is impartial and independent of any government, political persuasion or religious creed. Amnesty International is financed largely by subscriptions and donations from its worldwide membership.

 

Vocabulary

 

1. pursuit of shareholder value стремление к максимизации акционерного

капитала

to pursue shareholder value

to pursue principles (virtue) придерживаться принципов (нравственных

принципов)

2. a clash between money and morality столкновение между меркантильными

интересами и моральными принципами

3. to do business by certain rules заниматься бизнесом, руководствуясь

определёнными правилами

4. to depart from past practices отказаться от практики ведения дел,

использовавшейся в прошлом

5.scrutiny тщательное изучение, исследование,

рассмотрение

to scrutinize критически изучать, тщательно проверять

6.to avoid legal penalties избежать юридических санкций

7.to set up guidelines определить ориентиры

8.compliance program программа соответствия

9.civil lawsuit гражданский иск

10.internet flotation выпуск акций интернет-компаний

 

Assignments

I. Suggest the Russian for:

1. to build ethical principals into the corporate bureaucracy

2. to walk the talk

3. mundane problems

4. naughty employee

5. an issue taxing the members of the Ethics Officer Association

6. “friends-and-family” list of shareholders

7. the force-for-good argument

8. being clean and green

9. ethical commitment to stakeholders

10. casual link

11. few dot.coms would know a corporate ethics code if it fell on their heads

12. once it (bad behavior) stirs up a public fuss…

13. virtue is sometimes its own reward.

 

II. Find the English for:

1. сталкиваться с вопросами, относящимися к морали

2. стандарты, касающиеся вопросов здоровья, безопасности, экологии

3. щекотливый вопрос

4. покончить со взяточничеством

5. не обращать внимания, игнорировать ч-л

6. обнаружить случаи взяточничества

7. тщательно изучать материалы (статистику), относящуюся к соблюдению прав человека

8. воспользоваться ч-л

9. ввести контроль за ч-л

10. неэтичное поведение

11. вечные истины.