The ethics of business: improving or deteriorating?

Business Horizons, Jan-Feb, 1995 by Gene R. Laczniak, Marvin W. Berkowitz, Russell G. Brooker, James P. Hale

"The only thing that corporations seem to be interested in is making money."

(An American consumer, 1992 Gallup Survey)

"There are a lot of people in top management who have created credos and other standards which... encourage their managers to put the public ahead of the bottom line."

(A corporate CEO, 1992 Gallup Survey)

It seems the U.S. public is far more pessimistic about the ethical climate of business these days than are members of top management. This chasm of perceptions may partly explain the heated debate about corporate ethics that regularly occurs in the media and public policy forums. Although CEOs and the public may agree about the unfortunate nature of specific business scandals--such as the fiscal irresponsibility shown by many S&L managers or the outright greed exhibited by Wall Street insider traders--chief executives tend to view such behavior as the "exception," whereas the public appears to consider it "the rule."

In the pages that follow, this analysis will:

* demarcate some of the major differences in the perceptions of the general public and CEOs concerning issues in business ethics;

* sketch some of the areas in which there is strong agreement concerning business ethics issues among these groups;

* discuss the possible causes of the existing cross-perceptions among consumers and business executives, along with the costs to corporations that such perceptions entail; and

* suggest what U.S. firms need to do to alleviate these differing perceptions.

The Role of Surveys and Polls in Judging Business Ethics

Public opinion polls and surveys of managers are one way of tapping into the attitudes and values individuals hold concerning the appropriateness of the economic actions being taken in society. By understanding values, society comes to know the principles that define acceptable behavior. These values constantly shift, albeit slowly, and any changes need to be monitored. For example, the attitudes of business regarding the physical environment that were prevalent in the 1950s are certainly not appropriate now.

Surveys of business executives concerning their perceptions of their ethical responsibilities have been one pragmatic method of tracking the propriety of business actions. One of the classic pieces of business ethics research involved a survey of executives conducted by Rev. Raymond Baumhart (1961). Among the findings of this research and its subsequent replications and extensions was the conclusion that executive respondents to such surveys typically considered themselves more ethical than the average manager, and that although ethical problems existed in business, management behavior was becoming more ethical (Brenner and Molander 1977). Thus, there is a history to support the position that business leaders are upbeat about their behavior.

Meanwhile, public opinion polls on business behaviors (and most any other topic) are commonplace and do not portray the same ethical propriety managers imply. For example, a 1985 New York Times poll found that 55 percent of the American public feel that U.S. corporate executives are not honest (Williams 1985). Similarly, a 1987 poll sponsored by Time magazine found that 76 percent of the American public saw a lack of ethics in business people as a factor contributing to the decline of U.S. moral standards (Bowen 1987). Other public opinion polls have regularly questioned the moral propriety of most business managers. To the extent that corporate executives and the general public disagree about the ethical performance of business, a fundamental tension has been created. This article reports on one recent poll that clearly highlights the nature of that tension. It then deals with the implications of these disparate views.

The Study and the Method

The information contained in this report is based on a national probability telephone poll of 1,053 adult U.S. consumers and a quota sample of 100 CEOs of large companies, using a comparable battery of questions. The poll was conducted by the Gallup Organization, Inc. and was supported and sponsored by the SOCAP (Society of Consumer Affairs Professionals) Foundation. The data discussed in this article represent one part of a larger study that also polled 50 consumer advocates and government regulators regarding their views on business ethics. Given the nature of the samples, the findings of this survey are projectable to the population of the respondent groups.

The findings of the survey are based on a 75-item questionnaire that is similar for each surveyed group (consumers, CEOs, and regulators) but adjusted for respondent category and various demographic information. The initial draft of the telephone survey instrument was developed by Gallup, Inc. based on 40 in-depth personal interviews with CEOs, consumer advocates, and corporate employees. It was refined and revised by SOCAP staff and two fellows of the Center for Ethics Studies (CES) at Marquette University. It was then pretested with 39 full-length interviews conducted by Gallup and further extensively revised by the CES fellows. The basic data set was input and recorded by Gallup, Inc. and further analyzed at the CES.