Business ethics have come a long way since it was said of the 19th Century capitalist Jay Gould, "When he is speaking he is lyin. When he is silent he is stealing."
The practice of "rising above principle" is neither new nor confined to business, as any observer of diplomacy or politics will attest. There is some reason, however, to believe that business ethics, while not in perfect condition, really are in better shape today than they have been for a long time.
Most businessmen view ethics as a part of the rules of the business game, a bit like the rules of football. Most businessmen believe they play the game hard and well but fair. Their real ethical problems come when the rules of the game change as they have done recently on hiring, environmental, safety and product liability issues.
Until a decade ago, environmental concerns were only a minor element in business ethics. The executives of a company that for decades discharged its waste into a nearby river probably considered the practice unpleasant but still moral and acceptable. As a result of the upsurge of morality over environmental issues, however, what used to be an acceptable practice is now both immoral and illegal.
Such a change in the rules of the business game requires not just an expensive change in corporate practice, but also a major change in executives thinking. It is difficult for any adult to make a major change in his or her thinking, particularly for older executives in whom a hardening of the categories accompanies a hardening of the arteries. Even for the great majority who want to do the right thing, it is difficult and confusing when the definition of the right thing is in a state of flux.
Fortunately, the rate of change in corporate morality has slowed, particularly in the environmental and work safety areas. This allows business practice and thinking to catch up with and adjust to the newly defined standards of ethics. The ethics of product liability are still in flux, however, as the prevailing rule seems to be shifting from caveat emptor to full corporate responsibility.
Wall Streeths ethics have undergone a renaissance even though its people have not become notably more virtuous. The enormous flow of loose money caused by the bull market of the 1960s combined with lax controls on where that money went to create a maximum of both incentive and opportunity for corrupt practices. The situation is the reverse today as a long bear market and a cut in brokerage rates have reduced the flow of money to Wall Street and increased the vigilance over where it goes.
Wall Street illustrates the cyclical nature of ethics in practice. During boom times, money is abundant and vigilance is low, precisely the condition that maximizes temptation. During periods of recession or fear of it, money is scarce and hard-nosed financial controllers become more powerful. There is always an inventory of undiscovered crooked practices, but the size of that inventory is not constant. It expands during good times and contracts during bad ones.
Watergate and the rise in moral concern associated with it made their contribution to business ethics, too. When the nation's chief executive can lose his job because of unethical practices, any execuive can. The fact that Lockheed's chief executive lost his job over the issue of bribery was a lesson not lost on his peers.
Morality is always more effective when sanctions are attached, a situation Congress intended with recent legislation such as the Corrupt Practice Act. The threat of substantial penalties such as unemployment and prison terms helps deter men of marginal morality from being faithless to their principles.
Although legal sanctions fro corporate morality are desirable to some degree, massive legislation and regulation make for problems of their own. There are so many laws and rules that even the most moral executive is likely to break a few occasionally. The sheer frustration of trying to cope with so many laws and rules led Sears to file suit againt the federal government. After a prolonged investigation by the Securities and Exchange Commission that resulted in a small fine over a minor item, one intelligent, but honest businessman sighed, "When a traffic cop follows you for 250 miles, you know you are going to get a ticket for something."
The foreign operations of U.S. companies represent a particularly difficult ethical problem. In some countries, the moral standards are quite different than ours, particularly on the issue of taxes. In some countries, tax evasion is a national sport rather than an immoral act. U.S. companies are at a distinct disadvantage when faced with foreign competition that is more willing to grease the appropriate palms with bribes. It is particularly galling to compete against someone else who plays the game under a different and looser set of rules.
Because there are few saints found outside monasteries, there always will be some unethical business practice if the situation permits. Although objective measurement is impossible, it appears the situation today is much less permissive toward unethical practice than it was a decade ago. In business as in other walks of life, howeve, there always will be men who follow the old maxim, "When in trouble, abandon principle and do what is right."