What Happened to Business Ethics and Responsibility?

Posted on 29. Jan, 2009 by in Business ethics

Mel Luigs asked:

I remember a “Business Ethics” seminar I took in college that confirmed everything my parents had taught me a child. I heard clearly that capitalism was not an easy way to steal money from others but a way to make as an honest living by providing a service or product to people who needed and wanted it. This secured my desire to become a businessman. During my career, I have held different positions in small, medium and even large Fortune 100 corporations. I have had the opportunity to work with great visionaries, empty “suits”, assembly workers, and, yes, those individuals who only wanted to get all they could while doing as little as they could.

The one constant I have always seen in the U. S. free market system is that a quality company with a quality product or service using quality employees always seems to do better over the long term than the snake oil vendor. Successful companies work hard to inject ethics and morals in everything they do and they take responsibility for their actions. Quality business leaders do not expect a “bailout” or feel they even deserve one. If they cannot assemble a team of enthusiastic employees who can achieve success, they clearly understand and believe they should fail and do something else. I have been involved with several business bankruptcies and none of the owners or employees of these companies felt anything but shame and failure for having left suppliers with debt, employees without a job and customers without a supplier. These leaders might have failed but many of them took their failure personally and worked as hard as they could to pay off all their debts and satisfy everyone who lost due to their bankruptcy. Those without ethics and morals merely started up a new corporation with a new name and immediately began to take advantage of others and repeat their failure.

I have been absolutely amazed at the automotive industry that very easily and arrogantly asked for taxpayer bailouts and are quick to blame the current economic crisis rather than themselves and their management teams. In our free enterprise system, a company that cannot manage its assets properly, has a product or service that the public wants to buy, and makes a profit for its shareholders goes out of business. Granted its employees, customers and suppliers lose money because of this situation but then they all find a replacement company and continue on with their futures.

Our free market concept is not extremely complex but must include ethics, morality and responsibility to achieve the highest of success and quality. The U. S. business model, for many years, was that ethical and quality concept the rest of the world not only envied but hoped to become. Even the Russians and Chinese, our fiercest Communist enemies for decades, are now embracing capitalism because we have become the world’s superpower with our ethical and quality business model.

Now here we stand about to enter 2009, and hopefully the last year of our largest economic downturn in the past 50 years, watching the CEO’s of the “Big Three” fail to admit their lengthy management failure which has allowed labor costs to be double any other auto manufacturer and provided exorbitant retiree pension and health care costs. For decades the “Big Three” bowed to their labor unions and were able to pass all the costs along to the consuming public with little or no competition to keep them honest. They fought and fought against every U. S. government agency that sought higher C.A.F.E. standards when oil was $25 a barrel but now believe they can retool and achieve amazing products and standards within the next two years if the US will only loan them a mere fifty billion dollars. This equates to $200 from every American man, woman and child living in the U. S. Our auto industry was, for several decades, the best in the world and an example of what innovation and technology could achieve. Many of us, in the business world, studied case after case on General Motors in business school and were impressed with the success and vision of the U. S. auto industry

While this is an astonishing and sad commentary on the ethics and morals of the management of these companies, I find something else even more disgusting. The media and many politicians are now discussing a “pre-packaged bankruptcy” as a possible answer to their management failure. While all of us have sometimes slipped from our ethical pedestal, this suggestion is the ultimate loss of ethics and responsibility in our society.

I always advise my clients that bankruptcy is a process to be avoided at all costs. It is the point of ultimate failure by every business entity. If a business is having severe problems, the company and its management should do the right thing and negotiate with all parties to solve its problems and do everything to stay out of bankruptcy. Bankruptcy is only good for lawyers and takes over complete control of a business. How many businesses run by lawyers and courts ever succeed? Bankruptcy, by definition, normally requires the vast majority of all parties lose money and should only be used as an absolute last step. Bankruptcy has no ethics or morals. It carries a stigma for many years and labels the company as being unable to negotiate, succeed or perform a valuable service for the public. What makes anyone want to buy a car from a manufacturer that entered bankruptcy because they could not properly manage their company?

The auto industry should take the responsible and ethical route to solve their problems. They should negotiate with their employees, unions, retirees, suppliers and customers to fix their issues. They should also immediately work to change their corporate culture and reinstate a sense of ethics, integrity and responsibility in their employees which probably entails changing senior management and the Board of Directors who have now demonstrated their inability to run their companies correctly.

I am not naive enough to believe that the unions, employees and some suppliers will do what is necessary to become part of the solution and bankruptcy could ultimately still be required to achieve the end goal of saving these companies. This would be a gross injustice to all concerned because the legal costs would be astronomical and the company culture would probably not see the change needed to again make the auto industry the best in the world. I would love to be able to discuss with my grandchildren their business college case studies on General Motors. I remain very optimistic that ethics, morals and responsibility will once again become a part of the U. S. business culture.

As to our politicians, I am not as optimistic since we have seen that many of our elected officials vote based upon constituent polls and campaign contributions from lobby groups. I agree with the vast majority of Americans who give the US Congress a very dismal approval rating. Their agenda is focused more on their next election than on ethical and responsible decisions for their constituents. It is also a sad commentary on America’s sense of ethics and responsibility when a convicted felon in Alaska came very close to winning reelection to the Senate. His Republican colleagues in the Senate are extremely happy he did not win because many of them would have had to take a new poll in their states before deciding whether to allow a felon to be seated in the next session of Congress.

A very positive note in this situation is that a review of American history reveals that ethics, morals and responsibility become more prevalent in the US after a serious financial recession. Religion and personal introspection seem to become more important to the American citizen when his or her savings and retirement accounts loose
half their value. Church attendance, volunteering at charitable operations, spending time with our children and even family dinners all see increases during recessions and I’m sure that will be the case when history is recorded on the 2008-2009 recession. Those politicians running for reelection in 2010 should be prepared for this moral shift.

Our current economic downturn is not the last we will see in our lifetime and the US will recover and be better afterwards as has been the case in the past. However, I do hope that we can say the same thing about our ethics, morals and business responsibility.

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