All of the recent attention paid to street crime lacks an important perspective, one that is relevant to the business community.
Other than violent crimes against persons, of which the human costs cannot be measured, white-collar crime in the United States makes everyday street crime look like petty larceny.
Estimates vary somewhat, but the congressional Joint Economic Committee has figured the cost at $44 billion a year in embezzlements, bribery, stock manipulations and antitrust violations -- or 10 times as much as overall robberies, burglaries and street larceny.
In terms of large business firms alone, 1,451 federal actions were filed against 223 Fortune-500-level manufacturing corporations in 1975 and 1976, with 339 monetary penalties assessed and 61 executives convicted.
Three years ago, the Colgate Darden Graduate School of Business Administration at the University of Virginia called attention to this issue through a study by its Center for the Study of Applied Ethics. At the time, it was noted that should the free enterprise system become subject to widespread dishonesty, it would have a difficult time surviving.
The bad news -- included in a new report from the Charlottesville business school, generally regarded as one of the 10 best in the nation -- is that "nothing has happened since to lessen this warning."
To the contrary, said ethics center director Henry Tullock and business professor W. Scott Bauman, "the increasing regulation of American business, the political demagoguery about 'obscene' and 'windfall' profits, boycotts of particular firms, consumerism, bribery, the movements that castigate business as dishonest and self-serving -- these and more such crusades continue to grow. aAnd instances of dishonesty, both real and alleged, add to the ammunition of those who castigate business."
Tullock and Bauman have been studying this problem in the context of business codes of ethics, corporate guideposts that many firms have spelled out on paper for the first time in the wake of a business crime wave in the last decade. The major problem now, they have found, is that implementing or enforcing codes is seldom a routine concern of top executives.
"Only rarely does the status of business conduct throughout the firm occupy a regular or major place on the agendas of senior management meetings . . . .Standards of business conduct simply to not have a high priority for regular management review as compared with more traditional economic matters," they concluded after two years of interviews with corporate executives, studies of such documents as annual reports and reviews of speeches by business people.
For most top-level managers, monitoring company codes of ethics has become important only after a violation has come to light. "The zeal for implementation [of a code] is proportional to past disaster," one executive told the University of Virginia researchers.
Going beyond a mere recounting of how serious is the problem of business crime and the lack of attention to existing codes of conduct, Tullock and Bauman have produced a new monograph that offers guidelines for expanding and shoring up the management of ethics. Codes of conduct must offer more than a list of warnings against illegal actions; these codes should emphasize a manager's responsibility to consumers, the government and to the general public as well as stockholders, they stated.
For example, business managers should address such issues as protecting the environment, upholding product quality and maintaining stable employment in a recession. Tulloch and Bauman made 10 specific recommendations, including the appointment of "conduct managers" to monitor ethical practices and a control system that anticipates new types of conflict of interest.
These are elements of what the business school authors see as a company's "integrity quotient," of IQ. A firm's IQ hinges on its relationships with some two dozen key public groups that include employes, unions, dealers, environmentalists, creditors, customers and stockholders and the new monograph details more than 80 guidelines for assessing company relations with these various segments of society.
"It is these groups of beholders, collectively, that ultimately determine whether the management is really acting with integrity and whether the company is the 'good corporate citizen' it professes to be," they stated.