In Business, a Tug of War Between Greed and Ethics

Never sell a lame horse as sound. Don’t exploit the simpleton by raising the price of goods. Only sell a thing that the buyer would wish to have, and for the amount it is worth. Never horde or speculate. And above all, don’t be greedy!

So go the teachings of Johannes Nider’s “On the Contracts of Merchants,” believed to be the first study of business ethics printed in the Western world.

“If everyone would be willing to live in accordance with his status and take profit according to his merit, everything would be so much the better,” Nider lamented in 1468.

The Dominican friar must be rolling in his grave.

In fundamental ways, Nider’s world of business values seems laughable. Nider obviously never sent away for the smiling sea monkeys pictured in comic books, only to find himself peering at a handful of dead brine shrimp when the package arrived in the mail.

The lessons of the medieval moralists bit the dust long ago. And they took their steepest dive when the Protestant ethic heartily sanctioned the profit motive. Ethical breaches have peppered history ever since. From the greed of the robber barons to the speculation-driven collapse of the gold market in 1869, the Lockheed overseas bribery scandal of the 1970s and the insider-trading debacles of the 1980s, the picture has been bleak.

Recent headlines show doubtful progress: A price-fixing scandal by the world’s leading vitamin makers. Evidence that the tobacco industry withheld information about smoking’s links to cancer. A jury verdict against General Motors for declining to repair potentially hazardous gas tanks.

The world of the workplace, too, has strayed from Nider’s ideal. Less than half of U.S. workers believe that their senior leaders are people of high integrity, according to a survey released in October by Walker Information, which researches the impact of business ethics on customer and employee loyalty. Nearly a third of those surveyed said they knew of or suspected ethical misconduct at their workplace. And 60% did not report it for fear of retaliation or apathy from bosses.

“I’m going to give the enterprises in our country about a ‘C,’ ” said Jeffrey Marr, vice president of the Indianapolis-based firm.

Globalization also poses challenges. The use of child labor. Collusion with dictatorships. Bribery of foreign officials. Dumping of hazardous products on the shores of poorer neighbors. It’s enough to make ethicists throw up their hands in despair.

Still, the last decade has seen an explosion in the field of business ethics, a term that not long ago elicited guffaws or perplexed looks.

“Even as recently as 1977, the business world was really having a chuckle as to combining business and ethics,” said W. Michael Hoffman, executive director of the Center for Business Ethics at Bentley College in Waltham, Mass., and a founder of the Ethics Officer Assn.

When Hoffman applied for a National Endowment for the Humanities grant in 1975 to launch interdisciplinary courses in business ethics, for example, he got a letter questioning whether such a thing existed.

Today, just about all big companies have written ethical codes and employ people to enforce them. And federal sentencing guidelines crack down on those that don’t, said Ethics Officer Assn. executive director Edward Petry. The group has grown to 650 members from 12 in 1991. Among 1999 additions: Harley-Davidson and the New York Stock Exchange.

But competitive pressures mean managers and their underlings are being asked to do more with less. And surveys show they are lying, lazing and stealing.

The pursuit of wealth has led to a perennial struggle to balance avarice and community responsibility. That battle of conscience has raged ever since a mercantile class was born. And ideas on religion, race and the very concept of what makes a person successful have fluctuated wildly along the way.

Nider may have been the first to print a book on the subject, but plenty before him had pondered it. The Bible is full of admonitions on how to comport oneself in business dealings. Deuteronomy warns merchants not to lean on the scale while weighing customers’ produce, for example. And the Code of Hammurabi offered Babylonian rules of business conduct in 2250 BC.

But the rise of capitalism, the power of the Protestant ethic and the individualist pressures of the American frontier pulled starry-eyed fortune seekers away from notions of fairness. Rigid European class structures were lifted. And all were free to scramble to the top in a mad pursuit of wealth (all white men, at least).

The unabashed pursuit of riches, once shunned by men of the cloth as dirty, received a stamp of approval from on high. Consider “The Book of Wealth; in Which It Is Proved From the Bible That It Is the Duty of Every Man to Become Rich,” written by the Rev. Thomas P. Hunt in 1836.

The race was on, and religious motives soon gave way to secular ideology, opening the curtain on the era of the robber barons and the glorification of excess. From Standard Oil’s John D. Rockefeller to steel magnate Andrew Carnegie, the quest for dominance was unbridled. Shipping and railroad baron Cornelius Vanderbilt summed it up when he proclaimed: “What do I care about the law? Haint I got the power?”

The love affair with wealth had ignited. In 1842, the first directory of rich Americans was published, a precursor to the Forbes magazine list published today.

Meanwhile, industrialization and the advent of the production line made life increasingly tough on workers. “I regard my employees as I do a machine, to be used to my advantage, and when they are old and of no further use I cast them in the street,” one late-19th century New England manufacturer once said.

Certain companies of that era fined women and children employees for singing, talking or showing up late. And Henry Ford sent in-house social workers to inspect the homes, marriage certificates and bank statements of employees to ensure they were wholesome, according to Peter Baida’s “Poor Richard’s Legacy, American Business Values from Benjamin Franklin to Donald Trump.”

Racism and sexism ruled the day in hiring practices. Whether an employer was seeking a strong-willed manager or malleable “hive worker,” choosing the man with the right constitution came down to “fundamental physical variables,” one “scientific” hiring guide proclaimed in 1921.

Driven by notions of Social Darwinism, the treatise promoted the “blond races” as aggressive, intelligent leaders and darker individuals as submissive and plodding. The shape of the forehead, nose, lips and chin were also key.

“If the man is a pronounced blond, then all positions requiring close application, sustained activity, slow, plodding, patient effort are eliminated,” reads “The Job, the Man, the Boss.”

“If the man is concave in form, then all those positions requiring aggressiveness, keenness, alertness, energy and a sense of the practical are scrapped from consideration,” it continues.

To a modern-day human resources specialist, such attitudes must seem shocking. But impersonal labor management relations in many ways live on today. To fans of the comic strip Dilbert, champion of the frustrated cubicle worker, that’s a big “duh.”

In fact, the top integrity violation reported in the Walker Information survey was “unfair treatment of employees.”

Workers, however, also have plenty to hide. Next on the list: lying on reports or falsifying records, lying to supervisors and stealing from employers.

Driving that trend are pressures both personal and professional. An Ethics Officer Assn. survey conducted with the American Society of Chartered Life Underwriters & Chartered Financial Consultants in 1997 found that 60% of workers felt a “substantial amount” of pressure on the job and more than a fourth found “a great deal” of pressure. More than a third said pressure had increased notably in the previous year. And more than half said they felt pressure to act illegally or unethically.

Cheating may be nothing new, but it was once shunned as a means of getting ahead.

Benjamin Franklin’s 18th century self-help book “The Way to Wealth” promoted industry, frugality and honest labor. In a similar vein, a flurry of Gilded Age success manuals between 1870 and 1910 promoted character as the key to success. Honesty, industry and loyalty would pay off, the manuals promised.

But that soon fell by the wayside, giving way to the often-false charms of personality. The schmoozing salesman promoted in Dale Carnegie’s 1936 bestseller “How To Win Friends and Influence People” underscored that shift in values.

By the 1970s, rabidly selfish behavior was openly hailed. Robert J. Ringer’s bestsellers, “Winning through Intimidation” and “Looking Out for Number One,” promoted theories such as the “Screwor-Screwee.”

“The screwor is always the other guy; the screwee is always you,” Ringer said.

Michael Korda’s 1975 bestseller, “Power: How to Get It and How to Use It,” presented it this way: “The object of the game is simple enough: to know what you want and get it. The moves of the game, by contrast, are infinite and complex, although they usually involve the manipulation of people and situations to your advantage.”

So, has anything really changed?

Ethicists offer a qualified yes. Bad people will always do bad things, they say. But today, consequences are more daunting and corporate awareness of ethical obligations more heightened than ever.

From the establishment of the Federal Reserve Board and the Securities and Exchange Commission earlier this century to more recent environmental, worker safety and consumer protection laws, government is playing its greatest role ever in policing the human urge to self-interest, said Ronald Duska, executive director of the Society for Business Ethics at the American College in Pennsylvania.

“Corporate laws at the beginning of the century were written to favor the expansion of profit-making and even court decisions would say the responsibility of any manager was to maximize shareholder wealth,” he said. “That came under question as the century moved on.”

The social consciousness movement of the 1960s and outrage over Watergate proved a turning point, Hoffman said. Defense industry excesses of the 1980s were a final straw.

Federal sentencing guidelines adopted by the U.S. Sentencing Commission in 1991 captured corporate attention like nothing before. Organizations big or small would face enhanced punishments when convicted of white-collar crimes if they had no written code of ethics in place. Between 300 and 400 companies are sentenced yearly under the guidelines, Petry said. Vitamin giants Hoffman-LaRoche and BASF of this year’s price-fixing scandal are among them.

Still, some scoff at the efforts as “a Band-Aid on a gaping wound.”

“As we move into the 21st century . . . corporations are increasingly unfettered as they move around the globe,” said Joshua Karliner, editorial coordinator of Corporate Watch, which mobilizes grass-roots opposition to corporate excess through its Web site: https://www.corpwatch.org.

“All the business ethics classes in the world and all the well-intentioned employees in the world don’t nearly measure up to the global dynamic that’s been unleashed by this process,” Karliner said. “Corporations are naturally seeking out the lowest wages, the least restrictive environmental controls . . . partnering with dictatorships and taking advantage of severe human rights violations to maximize their profits.”

But others say notions of corporate responsibility are indeed taking root, and not just among folksy companies like Tom’s of Maine or Ben & Jerry’s.

For example, Unilever, the world’s largest maker of household products, has since 1993 promoted a triple bottom line of profitability, social responsibility and environmental sustainability, each of them equal, said Pat Werhane, Ruffin professor of business ethics at University of Virginia’s Darden Graduate School and editor of Business Ethics Quarterly.

While the jury is out on whether the approach is effective, “managers are beginning to think seriously about future generations,” Werhane said. “I see progress. . . . There’s no hiding anything anymore, and I think that’s made a huge difference in the way companies act.”

In recent years a warmer, friendlier approach to business has also emerged through a blizzard of books on workplace spiritualism and corporate enterprise with a conscience.

“The New Bottom Line, Bringing Heart & Soul to Business,” published last year, for example, was hailed for capturing “a spiritual renaissance taking place in the business world today.”

“Without question it is only by aligning ourselves with a moral compass based on universal principles that we can continue to progress in a direction that will take us into the next century,” gushed Stephen Covey, author of “The 7 Habits of Highly Effective People.”

But business with a conscience will likely prevail only if it makes bottom-line sense, ethicists concede. If customers and shareholders demand ethical behavior, it just may come to pass, said Ethics Officer Assn.’s Petry. Asked whether they thought business and ethics should mix, 60% of respondents to the 1997 survey said yes.

“That’s a huge change from 10 years ago, when people laughed at the idea of business ethics and called it an oxymoron,” he said. “Now you’ve got the general public saying they expect business and ethics to mix. That puts tremendous pressure on the company.”