Viewpoint: on being an ethical executive

Ivey Business Journal Online, Sept-Oct, 2008 by John S. McCallum

A good executive is an ethical executive. The problem with shoddy executive behaviour is that it inevitably comes to light in the goldfish bowl of customers, employees, investors, lenders, suppliers and regulators in which a business operates. When that happens, sustaining a good business becomes impossible. People just will not deal indefinitely with a business whose management exemplifies bad ethics. This is especially the case in the post-Enron world. Good ethics are not an option for business success; they are an essential.

How do you teach ethical executive behaviour? Thirty-five years and counting of teaching in a graduate school of business tells me that you can do a good job teaching functional knowledge like accounting, finance, marketing and production and a passable job teaching skills like decision-making, analysis, communications and leadership. However, there is considerable catching up to do in ethics instruction. Not engaging ethics instruction on the grounds that you are either born ethical or not, or that teaching ethics is a family responsibility, does not cut it in either business school or in the business world. Herewith, some thoughts on being an ethical executive.

I had four years of college with the Jesuits. We were required to take six full courses in philosophy and theology, with two of those courses in ethics. I remember enough of those ethics courses to have serious doubts about whether such courses have much chance of affecting executive behaviour.

Executives need practical application and the right context when it comes to learning ethics. Formal philosophy-based ethics courses are too theoretical and abstract. The material is both interesting and intellectually challenging, but a trip through Socrates, Hume and Kant, parsing issues of absolute versus relative good and bad, for example, is unlikely to impact executive behaviour. The literature is mind-numbingly complex, the applicability too obtuse for the casual reader and the payoff to time-invested ratio unlikely to carry the day for executives pressed for time from all sides.

The key to ethical executive behaviour is getting executives to think about right and wrong every time they do something, making correct judgments and having the courage to follow through in the decision and execution phases. Thomas J. Watson, the founder of IBM, was so obsessed with the power of thought that he insisted on having the block- lettered word "THINK" on desk paperweights and walls all over IBM.

According to Watson, "Thought has been the father of every advance since time began. 'I didn't think' has cost the world millions of dollars." Watson was a man of the 1930s; his millions are easily today's billions.

A short aside: Watson's notion of "THINK" is what got me going on this subject of executive ethics in the first place. A few years ago, a friend was telling me about the obviously unethical behaviour of a young person not many years out of business school. In exasperation over a possibly ruined career, my friend said, "Don't you teach anything about ethics at business school? If all you did was to get people to just think for a few seconds about right and wrong before they acted, it would be a real contribution to both the people and their organizations". And here we are!

Persuading executives to think about and do the right thing on the grounds that right is its own reward and will bring some kind of transcendental satisfaction is probably a tough sell for executives trying to survive from one day to another in a global marketplace full of ruthless competitors. After a trip through Aristotle's Nicomachean Ethics, one wonders if he ever faced off against someone wanting to put him out of business by taking a big piece of his market share and willing to do anything to do it.

T. S. Eliot, in Murder in the Cathedral, called doing the right thing for the wrong reason the highest form of treason. Margaret Mead wondered whether any behaviour based on fear of eternal punishment could be regarded as ethical.

All well and good. But for executives, if behaving ethically because it is right does not encourage doing right, then thinking about the consequences of not behaving properly might. Before executives act, they should give serious thought to the personal and corporate consequences of what they do. The hard fact is that unethical executive behaviour can wreck careers, reputations, families and businesses, and can involve penalties that range from embarrassment, reprimand and termination to fines and even prison.

Forgiveness and a fresh start can be impossible, so give some thought to the ethics of what you do before you do it. Fear is one of life's most powerful motivators and there is nothing wrong with a fear of getting caught and its consequences in making you do the right thing.

I recall an episode of the TV show Law and Order in which District Attorney Adam Schiff says there is no supreme court of ethics. Indeed, but executives have to make choices and so I offer a checklist that provides some ethical guidance. If an act is on the wrong side of even one or two of these, reconsideration is recommended. What is ethical is not really all that complicated.