So long as human beings run organizations, whether profit, non-profit or government organizations, and those organizations have goals and tasks, there will be pressures and those pressures produce ethical lapses whether the accounting focuses on ROE or sources and uses. (Marianne Jennings, 2012, p. 525)
Possession of power is a great temptation for abusing it. This is a universal phenomenon among even the most well-intentioned humans and organizations. Indeed, the problem is an ancient one; Plato depicts it in the account of Gyges’ ring in The Republic. The American Founding Fathers were well aware of the danger posed by lack of constraints on the powerful.
One contemporary example is the exorbitant and increasing level of top executive compensation. This imbalance is especially noticeable in a time of economic recession and high unemployment. In corporations, it is the CEO and the Board of Directors (who either work for the CEO or are his buddies, often together on multiple boards) who set executive pay. Some boards hire executive compensation firms for guidance. Being well aware, however, that they need to furnish recommendations that will please their clients, these paid consultants may actually contribute to executive pay inflation. In effect, the CEO has undue influence over his or her own pay and compensation—truly objective checks and balances are too often missing.
Worker unions were established to offset the power of owners and managements and their control over the distribution of the fruits of their labor. One result is that “unions have been respected in America forever, and public-employee unions have reaped that respect” (Noonan, 2011). The two reasons are that unions always stood for the little guy and that Americans like balance, such as management being balanced by a union. However, journalist Peggy Noonan now laments:
“But with public-employee unions, the balance has been off for decades. When union leaders negotiate with a politician, they’re negotiating with someone they can hire and fire. Public unions have numbers and money, and politicians need both. And politicians fear strikes because the public hates them. When governors negotiate with unions, it’s not collective bargaining, it’s more like collusion. Someone said last week that taxpayers aren’t at the table. The taxpayers aren’t even in the room.” (Noonan, 2011)
“Currently, the unions are not perceived to be looking out for the little guy—the public school pupil, the beleaguered administrator, or the private-sector worker who doesn’t have a good health-care plan, who barely has a pension, who lacks job security, and who is paying everyone else’s bills.” (Ibid.)
The solution of America’s Founders to such issues was a structural one. They believed that men are imperfect and that their power and the temptation to use it for self-interest need to be checked and balanced, for the public welfare. They thus built checks and balances into the Constitution, hoping to establish the ethical principle of balanced structures into American government and the national ethos. But in the postmodern world, this principle seems to have faded from public attention and organizational practice. Morals have declined while the importance of power and autonomous will have gained stature.
An egregious example is the Federal Government’s new Consumer Financial Protection Bureau created as part of the 2010 Dodd-Frank financial reform (The Wall Street Journal, 2011). According to The Wall Street Journal’s March 16, 2011 editorial, “President Warren’s Empire,” CFPB is an “independent bureau” that is not subject to annual Congressional appropriations. Headed by a White House appointed czar, not needing Senate confirmation, it was to have jurisdiction and independent rule-making authority over most of the country’s financial institutions, without being required to incorporate the views of other banking regulators. Constitutional checks and balances appear to be missing. Is financial tyranny the logical outcome?
Business ethics has emerged and started to mature as an academic discipline and a publicized business concern. But to date it has produced relatively little documented success (Stark, 1993), amid a torrent of ethical scandals throughout organizations and industries as well as in government. Corporate CEOs and other organizational leaders tout their ethics codes, but they have not overcome human nature and competitive pressures; studies have not found measureable benefit from such codes. Ethics officers and observers now do not generally have the respect of CEOs or the higher levels of unions, since they are either co-opted in the corporate organization or considered peripheral to actual business practice. Clearly communicating and implementing deeper, more serious structural precautions might prove more effective.
Marianne Jennings (2004, 2012) suggests ten fixes that are required to create a culture of virtue in a government (really, in any) organization. These include starting with making sure that those in the organization understand that its goals and other measured results must be achieved within the parameters of pre-established and absolute values–such as honesty, not giving false impressions, avoiding conflicts of interest, and fairness in application of rules and in following procedures. Decisions at every level must be tested by absolute ethical standards, not by circumstances and not due to social pressure. Legal compliance is the minimum, not the maximum standard of behavior. Every employee, starting with the CEO, should be expected to challenge his own decisions. He or she is to ask, “Should I do this?”—not merely “Could I do this?”
An ethical culture must be maintained through structural means, such as hotlines, allowing, even encouraging, organizational members to express their ethical concerns. Investigation needs to be objective, thorough, and uniformly applied at every level of the organization, from the very top to all agents, activities, and locations. Discipline needs to be consistent, sure, and just. If not, even the well-intentioned code and ethics program will at best be window dressing.
But the cultural environment and future outlook, while depressing, need not be hopeless for those committed to ethics. Members of the ethics profession, including both academics and ethics officers, can focus more on moral character development and the promotion of ethical cultures. It is not enough to engage in philosophical debate (often abstractly focused on the most difficult and rare dilemmas) or to relegate ethics education to the realm of employee compliance training. Instead, ethicists need to become committed leaders with greater impact on actual management and government practice. Perhaps the ethics professionals and associations should promote the acceptance or even the legislation of greater balance in the structure of organizations, ones that are redesigned to seek virtuous purposes ethically. The solution is not to give more power to the bosses nor is it to transfer power to the people. Instead, concentrate on constraining power imbalances–and possible tyranny–by promoting the influence and recognizing the contributions, worth, and dignity of every player and every role. And recognizing the reality of human nature, the structural principle of checks and balances needs to be woven into the fabric of the organization so that ethics becomes its heart.
Dr. J. Thomas Whetstone
Purchase:http://bookstore.westbowpress.com/Products/SKU-000641049/Leadership-Ethics–Spirituality.aspx
References
Jennings, Marianne M. (2004). Preventing organizational ethical collapse. Journal of Government Financial Management. 53:1, 12-21.
Jennings, Marianne M. (2012). The fish bowl existence of government. Business Ethics: Case studies and selected readings, 7th ed. Mason, OH: South-Western Cengage Learning, 525-527.
Noonan, P. (2011). Public unions get too “friendly.” The Wall Street Journal. (March 5-6), p. A15.
President Warren’s empire. (2011). The Wall Street Journal. (March 16), A18.
Stark, A. (1993). What’s the matter with business ethics? Harvard Business Review. 71:3, 38-48.
Leadership Ethics and Spirituality 