Business Ethics THE ISSUES Hollywood stars have a long tradition of using Oscar acceptance speeches not only to thank their agent, mother and dog but also to make a political point. Director Charles Ferguson made such a statement in his February speech accepting an Academy Award for his documentary “Inside Job,” which examined the causes and consequences of the 2008 global financial meltdown. “Forgive me,” he said, “but I must start by pointing out that three years after a horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail, and that’s wrong.” 1 In an age when corporate accounting scandals have toppled some of the nation’s biggest companies and unscrupulous mortgage dealings have helped spawn the worst economic crisis in 80 years, debates over business ethics are more heated than ever. 2 Do companies overpay their executives? Are whistleblowers fairly treated? Should businesses take more responsibility for the environment? Such questions relate to what Kirk O. Hanson, executive director of the Markkula Center for Applied Ethics at Santa Clara University in California, called “standards of business behavior which promote human welfare and ‘the common good.’ ” 3 The public has less than a lofty view of corporate behavior. Only 15 percent of respondents to a recent Gallup Poll rated business executives high or very high in honesty and ethical standards. That was below lawyers (17 percent) and just above a handful of other fields — state officeholders (12 percent), advertising practitioners (11 percent), members of Congress (9 percent) and car salespeople and lobbyists (each 7 percent). Nursing was the most highly rated field (81 percent). (See bar graph, p. 412.) 4 It’s easy to find examples of questionable business ethics. Before last year’s deadly Deepwater Horizon oil spill in the Gulf of Mexico, preventable problems on the rig went unreported and oil-industry regulators were seen as cozy with the companies they were supposed to be overseeing. 5 Wall Street investment adviser Bernard L. Madoff, once the chairman of the Nasdaq stock market, is serving a 150- year prison sentence for bilking clients out of an estimated $65 billion. IBM agreed to pay $10 million to settle charges that it bribed foreign officials to make business deals in South Korea and China. It’s not always clear, though, that seemingly outrageous business practices are, in fact, illegal. Numerous multinational companies, including General Electric, appear to use legal tax-law loopholes to pay little or nothing in U.S. federal taxes. 6 Raj Rajaratnam, a billionaire trader and former head of Galleon Group, a big hedge fund, went on trial this spring for allegedly making $63.8 million buying and selling securities based on illegal insider tips. But Rajaratnam’s view: He’s simply very good at picking investments. A new spate of scandals seems to surface every few years: In the 1970s it was misconduct in the defensecontracting industry. In the 1980s it was insider trading on Wall Street and recklessness in the savings and loan industry. 7 As the 2000s began, Enron and WorldCom grabbed headlines for financial-reporting frauds that resulted in prison sentences for culpable executives, cost the jobs of thousands of innocent employees and wiped out their investments in the companies’ stock. Congress responded by passing the Sarbanes-Oxley Act of 2002, which makes top executives personally responsible for certain corporate transgressions perpetrated by underlings. 8 And then came the subprime mortgage implosion and the financial crisis that followed. It remains a defining event in U.S. discussions of business ethics. In part, that’s because of what Treasury Secretary Timothy Geithner once described as a desire for “Old Testament justice” — a thirst for revenge. 9 Yet some consider Geithner BY MARYANN HAGGERTY Getty Images/U.S. Coast Guard The Deepwater Horizon oil rig blazes in the Gulf of Mexico in April 2010, setting off one of the nation’s worst environmental disasters as well as charges that problems on the rig went unreported and government safety inspectors were too cozy with the oil industry. 412 CQ Researcher himself partly culpable for the crash because in his previous post as president of the New York Federal Reserve Bank, he was one of the nation’s chief banking regulators. When something is “big and amorphous,” like the 2008 crisis, “it’s easy to avoid responsibility entirely, and with considerable success, because it’s no one person’s fault,” says Ronald Berenbeim, who teaches ethics at New York University’s Stern School of Business and is a senior fellow at the Conference Board, a business-policy group. Nevertheless, the lack of criminal convictions stemming from the crisis remains a focus of discussion and, sometimes, populist anger. In April, CNN commentator Elliot Spitzer began a series of reports on the crisis called “They Got Away With It.” Spitzer came to prominence in the early 2000s when, as attorney general of New York state, he prosecuted white-collar criminals, including Wall Street traders. He was elected governor in 2006 but resigned in disgrace in 2008 following a prostitution scandal. In introducing one report, he said, “I went after these guys” as attorney general “because for the capitalist system to work, everyone has to play by the rules. It’s inconceivable to me, in fact it’s obscene, that no big fish has been reeled in, that no one who matters has gone to jail.” Still, “ethics is not just about sending bad people to jail,” says Kenneth W. Goodman, co-director of the University of Miami’s ethics program. “It’s about thoughtful people making difficult decisions.” In one of the most influential articles in the field in recent years, Harvard Business School scholars Rakesh Khurana, Nitin Nohria and Daniel Penrice asked, “Is business management a profession?” 10 (Nohria was named dean of the school in 2010.) They noted that in medicine and law, society allows a certain degree of professional privilege and self-regulation in return for following a widely accepted ethical code. Business management, however, has no such accepted code, they pointed out, and thus no way managers can hold each other to universally accepted standards. Treating business management as a profession, with a code of ethics, “has merit as a way of suggesting how management as an institution might be reformed, other than through the blunt instruments of law and regulation on the one hand and well-meaning but ultimately toothless calls for greater individual integrity and ethics on the other,” they wrote. Partly in response to those arguments as well as the financial crisis and the ever-more-global nature of business, top business schools, including Harvard and the University of Pennsylvania’s Wharton School, have recently overhauled their curricula, adding requirements that focus on ethics, teamwork and international issues. 11 Yet training and ethics programs have had, at best, mixed results, argue the authors of a new book, Blind Spots: Why We Fail to Do What’s Right and What to Do About It. 12 BUSINESS ETHICS Business Executives Rank Low in Ethics Only 15 percent of Americans view the honesty and ethical standards of executives as high or very high. Nurses rank highest, while members of Congress, car salespeople and lobbyists are at the bottom. Source: “Honesty/Ethics in Professions,” Gallup, November 2010, www.gallup.com/poll/1654/honesty-ethics-professions.aspx Percentage of People who Consider the Honesty and Ethical Standards of Select Professions to be High or Very High, November 2010 0 20 40 60 80 100% Nurses Military officers Druggists or pharmacists Grade school teachers Medical doctors Police officers Clergy Judges Day care providers Auto mechanics Nursing home operators Bankers TV reporters Newspaper reporters Local officeholders Lawyers Business executives State officeholders Advertising practitioners Members of Congress Car salespeople Lobbyists 81% 73% 71% 67% 66% 57% 53% 47% 47% 28% 26% 23% 23% 22% 20% 17% 15% 12% 11% 9% 7% 7% www.cqresearcher.com May 6, 2011 413 “Could the financial crisis have been solved by giving all individuals involved more ethics training?” asked Max H. Bazerman, a professor of business administration at Harvard, and Ann E. Tenbrunsel, a professor of business ethics at the University of Notre Dame. “If the training resembled that which has historically and is currently being used, the answer to that question is no.” Simply teaching people to recognize an ethical dilemma isn’t sufficient, they said. Instead, people must learn to recognize the psychological blind spots that lead them to act unethically — behavior such as recognizing greed in others but not in themselves. One of the oldest philosophical debates is whether people will make correct decisions without fear of punishment — that is, whether people are by nature good or evil. That debate won’t end “at least until that mythical time when people are perfect,” says Chris MacDonald, a visiting scholar at the University of Toronto’s Clarkson Centre for Business Ethics and Board Effectiveness who writes the Business Ethics Blog. As the nation continues to struggle in the aftermath of the economic crisis, here are some questions ethics experts are asking: Do businesses have ethical obligations beyond what the law and shareholders require? Among the most frequently cited articles on business ethics is “The Social Responsibility of Business is to Increase Its Profits,” written in 1970 by Nobel Prize-winning economist Milton Friedman, a strong free-market advocate. 13 “In a free-enterprise, private-property system,” Friedman wrote, “a corporate executive is an employee of the owners of a business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of society, both those embodied in law and those embodied in ethical custom.” In this view, going beyond those basic requirements — for instance, as Friedman wrote, spending more to reduce pollution than “the amount that is in the best interests of the corporation or that is required by law” — amounts to improperly spending money that belongs to the shareholders. The U.S. concept of free-market capitalism is not, of course, universally accepted. Karl Marx, the intellectual father of communism, saw profit as the result of capitalist exploitation of workers. Socialist and communist systems assert that some or all of business profits rightfully belong to society. But among those who embrace capitalism, many say ethical obligations go well beyond simply making a profit. A survey of business executives from around the world by consulting firm McKinsey & Co. found that only a minority wholeheartedly embraced Friedman’s view. Sixteen percent of respondents agreed that business should “focus solely on providing the highest possible returns to investors while obeying all laws and regulations.” But 84 percent said the role of large corporations should be to “generate high returns to investors but balance [that] with contributions to the broader public good.” 14 “There’s always the prevailing responsibility to make sure that you’re creating shareholder value if you’re a publicly traded organization, or to be making high-quality products or delivering high-quality services,” says Patricia Harned, president of the Arlington, Va.- based Ethics Resource Center, which regularly convenes ethics experts from business, academia and elsewhere. “But most businesses that have very effective . . . ethics and compliance programs will also say we have an obligation to not just make money but to make sure that we’re doing it with the highest integrity.” Anti-Corruption Enforcement on the Rise Enforcement actions under the Foreign Corrupt Practices Act have risen sharply over the past seven years. The law bars companies from bribing foreign officials to obtain business. The Department of Justice and Securities and Exchange Commission (SEC) took action in a record 74 cases in 2010. Source: Benno Schwarz, et al., “Global-Anti Corruption Enforcement and Compliance: 2010 Year in Review,” Gibson Dunn, January 2011, www.gibsondunn.com/ publications/Documents/WebcastSlides-GlobalAnti-CorruptionEnforcementAnd Compliance-2010.pdf Enforcement Actions Under Foreign Corrupt Practices Act, 2004-2010 2 0 10 20 30 40 50 2004 2005 2006 2007 2008 2009 2010 Department of Justice actions SEC actions 3 7 5 7 8 18 20 20 13 26 14 48 26 414 CQ Researcher That means, she says, treating employees with respect, supporting customers and clients, not breaking the law or engaging in unethical behavior and “being as transparent as we can be about how we do our business. “It goes well beyond the minimum standard” of not breaking the law, Harned adds. One of the most widely taught approaches to business ethics holds that businesses have responsibilities not only to shareholders but also to “stakeholders” — employees, customers, suppliers, the surrounding community and others. “Stakeholder theory is the idea that each one of these groups is important to the success of a business, and figuring out where their interests go in the same direction is what the managerial task and the entrepreneurial task is all about,” said R. Edward Freeman, a professor of business administration at the University of Virginia’s Darden School of Business and a pioneer of the stakeholder discipline. “Stakeholder theory says if you just focus on financiers, you miss what makes capitalism tick,” he said. “What makes capitalism tick is that shareholders and financiers, customers, suppliers, employees, communities can together create something that no one of them can create alone.” 15 Since 2006, all students at the Thunderbird School of Global Management, a respected international business school in Glendale, Ariz., have been invited to voluntarily sign a Professional Oath of Honor. In part, it reads: “I will strive to act with honesty and integrity, I will respect the rights and dignity of all people, I will strive to create sustainable prosperity worldwide, I will oppose all forms of corruption and exploitation, and I will take responsibility for my actions.” A separate oath promoted to business students worldwide by leaders of Thunderbird and other top schools reads in part: “My purpose is to lead people and manage resources to create value that no single individual can create alone; my decisions affect the well-being of individuals inside and outside my enterprise, today and tomorrow.” The “Oath Project” is an effort to create a “sort of gold standard” on how professional managers should execute their responsibilities, says Gregory Unruh, director of the Lincoln Center for Ethics in Global Management at Thunderbird. Aside from being good people, corporate executives should look out for stakeholders — including non-shareholders — because it’s good for business, says New York University’s Berenbeim. “The sustainability of the business depends on a lot more than your earnings per share,” he says. It “depends on a high level of satisfaction of all the stakeholders.” After all, he says, a business with unhappy customers might not be profitable for long. Stakeholders can hold businesses accountable in a variety of ways. For instance, the University of Toronto’s MacDonald says, “the most straightforward” is with purchasing and investment decisions. Other “mechanisms of civil society,” such as protests and bad publicity on Twitter, also are available, he notes. Websites set up by customers complaining about companies are ubiquitous, as are government sites where customers can complain. SaferProducts.gov, which went live this spring, lets consumers contribute to a federal government database listing possibly dangerous products. Business groups, including the National Association of Manufacturers, complain that if the site is poorly monitored, it could unfairly damage companies’ reputations. 16 Such stakeholder pressure can make a difference, though. MacDonald notes that beginning about 20 years ago, Nike, the athletic-shoe maker, was increasingly criticized for its use of BUSINESS ETHICS Raj Rajaratnam, a billionaire trader and former head of a Wall Street hedge fund, is awaiting a jury verdict in his trial for allegedly using illegal insider tips to make more than $60 million buying and selling securities. The six-week federal trial grew out of a multiyear investigation into insider trading. About two dozen people were arrested, and 21 have pleaded guilty. Getty Images/Mario Tama www.cqresearcher.com May 6, 2011 415 overseas sweatshop labor. It gradually reformed its practices and now is regarded as an industry leader against abusive labor practices. Freeman acknowledged that his theories and Friedman’s may seem opposed, but really aren’t. “I actually think if Milton Friedman were alive today . . . , he would be a stakeholder theorist,” Freeman wrote. “He would understand that the only way to create value for shareholders in today’s world is to pay attention to customers, suppliers, employees, communities and shareholders at the same time. “What Friedman was against was the idea of social responsibility that doesn’t have anything to do with business. 17 I’m against that too. I think stakeholder theory is a theory about business, but community and civil society is absolutely central to business. We need corporate stakeholder responsibility. If we have that, there’s no conflict between shareholders and stakeholders.” 18 Do education and training improve business ethics? In a classic “Dilbert” cartoon, the pointy-haired boss approaches Dilbert in his cubicle and asks, “Have you taken the mandatory training for business ethics?” “No,” Dilbert replies, “but if you say I did then you’ll save some money on training, which you can spend to decorate your office.” “Luckily, I haven’t taken the training myself,” the boss says. Dilbert answers, “I hear it’s mostly common sense anyway.” 19 In recent decades, each time business scandals grabbed the headlines, calls have gone up for more businessethics education. By now, all major business schools require students to take ethics classes. Many corporations also require managers and other employees to go through ethics training. And yet, ethical lapses keep occurring. Does teaching people about ethics do any good? “I honestly think that it does,” says Brian Moriarty, director of the Business Roundtable Institute for Corporate Ethics, an independent research group established as a partnership between the University of Virginia’s Darden School of Business and the corporate-backed Roundtable. Many people, he says, will argue that ethics is something learned in childhood. “I think that’s sort of a false argument,” he says. Instead, ethics education for adults is “more about people building a framework” — that is, a way to make decisions in their workplace. Research has shown that adults do learn and change, says Mary Gentile, a senior research scholar at Babson College, a business school in Babson Park, Mass., and director of its Giving Voice to Values program, a crossdisciplinary business curriculum that aims to foster ethical values in the workplace. 20 Additionally, Gentile points out, while people may have learned as children not to steal, no one taught them as youngsters about the ethics of designing and selling subprime mortgages. Often, ethics decisions are not clear. They involve weighing conflicting interests and philosophies. Ethicists say education can help. “One of the core pieces of our course is helping our MBAs refine their judgment,” says Bidhan L. Parmar, who teaches ethics at the Darden School. “A lot of the business issues that the headlines come from, like the financial crisis and the BP oil spill, come from a place where managers are not necessarily breaking any laws, but they’re not using their best judgment very well. What we try to do is teach our MBAs to use their judgment” about principles, consequences and character. Gentile has watched ethics education evolve. “It’s kind of been a cyclical process,” she says. “Every time there’s a spate of scandals . . . there’s a reaction.” Workplace Misconduct Takes Many Forms Nearly one-fourth of American workers observed misuse of company resources in 2009, making it the most prevalent form of workplace misconduct. Other transgressions include lying to employees and misrepresenting company finances. Source: “2009 National Business Ethics Survey: Ethics in the Recession,” Ethics Resource Center, 2009, www. ethics.org/nbes/files/nbes-final.pdf Percentage of Workforce Observing Workplace Misconduct, 2009 Company resource abuse 23% Abusive behavior 22% Lying to employees 19% Email or Internet abuse 18% Conflicts of interest 16% Discrimination 14% Lying to outside stakeholders 12% Employee-benefit violations 11% Health or safety violations 11% Employee privacy breach 10% Improper hiring practices 10% Falsifying time or expenses 10% Poor product quality 9% Stealing 9% Sexual harassment 7% Substance abuse 7% Document alteration 6% Misuse of confidential info 6% Customer privacy breach 6% Environmental violations 4% Misrepresent financial records 4% Accept gifts or kickbacks 4% Use competitor’s info 2% Anti-competitive practices 2% Bribing public officials 1% Insider trading 1% Illegal political contributions 1% 416 CQ Researcher For instance, in 1987, amid a round of insider-trading scandals, John Shad, outgoing chairman of the Securities and Exchange Commission (SEC), raised $30 million — an estimated $20 million out of his own pocket — for the Harvard Business School to beef up its ethics program. “I’ve been very disturbed most recently with the large numbers of graduates of leading business and law schools who have become convicted felons,” he said at the time. 21 Gentile, who was teaching at Harvard then, was among those who redesigned the school’s ethics program in the wake of that gift. She has continued to study how to make ethics education effective. Primarily, she says, business schools focus on awareness of ethics issues. But, as she points out, “the issues that have caused the greatest consternation” have been those involving fraudulent behavior. Thus, she says, awareness that ethical issues exist is not sufficient, nor is learning how to analyze those issues and weigh competing models. She’s not alone in looking for different approaches. “There are a lot of business ethicists who wrestle with how practical the way we teach it is,” says Kirsten Martin, a management professor at The Catholic University of America in Washington. She recommends that staple courses such as accounting and finance include ethics education. Currently, she is writing a case study that combines the complex mechanics of synthetic derivatives — arcane securities that have been blamed for much of the financial crisis — with a discussion of the ethics of such instruments. She has also written a case study that explores the fairness of excessive executive compensation. (See sidebar, p. 420.) Gentile proposes augmenting awareness and analysis with action. In “Giving Voice to Values,” students learn to put ethical decisions into practice. For instance, rather than discussing whether it’s right to blow the whistle on a boss’s behavior, this approach begins by taking it as a given that the boss has behaved badly, then encourages people to ask, “What would I say and do if I were going to act on my values?” Such a program is “one way to avoid the Dilbert phenomenon,” especially in workplace ethics education, she says. “It’s not focused on generating rationalizations but on how to get [the desired action] done.” Can laws and regulations make businesses act more ethically? In the United States today, discussions about the role of laws and regulations in stopping bad business behavior can take on a distinctly partisan tinge. Both Democrats and Republicans say they are against crime. But Democrats tend to argue that tightening the rules on business will improve the situation and that deregulation was a cause of the financial crisis. Republicans tend to say that having too many rules will hurt businesses and make them less competitive — and thus hurt everyone. The Dodd-Frank Wall Street Reform and Consumer Protection Act, coBUSINESS ETHICS Whistle-blowers Often Face Reprisals More than 60 percent of employees who reported misconduct by another employee said supervisors subsequently excluded them from decision-making. Other forms of retaliation, such as verbal abuse and withholding of raises or promotions, also are common. Source: “2009 National Business Ethics Survey: Ethics in the Recession,” Ethics Resource Center, 2009, www.ethics.org/nbes/files/nbes-final.pdf Retaliation Experienced by Employees as a Result of Reporting Misconduct, 2009 (Percentage reporting retaliation) 0% 10 20 30 40 50 60 70 80 Physical harm to you or your property Demotion Other forms of retaliation Relocation or reassignment Verbal abuse from other employees Not given promotions or raises Near job loss Verbal abuse from managers Other employees give cold shoulder Supervisor excludes from decision-making 62% 60% 55% 48% 42% 43% 27% 20% 18% 4% (Type of retaliation) www.cqresearcher.com May 6, 2011 417 sponsored by former Sen. Christopher Dodd, D-Conn., and Rep. Barney Frank, D-Mass., is the major result of attempts to reform the financial system after the 2008 crisis. 22 The Senate passed it in 2010 by a vote of 60 to 39, with only three Republicans joining the Democratic majority and just one Democrat voting no. (Passage required 60 votes rather than a simple majority to prevent a filibuster.) Many of the law’s major provisions have not yet gone into effect, and last month House Republicans introduced legislation that would delay implementation of some rules under the new law, though the effort is widely seen as unlikely to succeed. From a more philosophical perspective, if laws could completely prevent unethical behavior, people wouldn’t commit any c rimes . As Wayne State University law professor Peter Henning points out, if you measure any law by whether it stops crime, then statutes against murder are useless. And even if laws were 100 percent effective, from the point of view of an ethicist, “It’s inconceivable that we can say that the law is the only thing that matters, any more than we can in our personal life,” says the University of Toronto’s MacDonald. Adds Martin of Catholic University, “Compliance isn’t the same thing as ethics. There’s a lot that’s legal that isn’t ethical.” Even for actions that are addressed by laws, those statutes are only the first step, New York University’s Berenbeim points out. Regulatory agencies then make rules under which the laws are carried out, and the rules must be enforced. “So can laws by themselves change ethical behavior?” Berenbeim asks. “Only to a limited degree. It depends on how the regulatory agency that has been delegated the authority interprets the law, and the success of efforts to enforce it.” Henning, who previously worked for the SEC and Justice Department prosecuting white-collar crime, says that in past circumstances, such as the savings and loan crisis, numerous high-profile “poster child” prosecutions occurred. “I don’t think we’re going to get any trophy cases out of” the latest financial crisis, he says. “What any number of businesses did was stupid, but stupidity is not yet a federal offense.” Dodd-Frank “may” prevent future ethical lapses, Henning says, but the law is limited by the fact that it focuses on misdeeds that have already occurred. “Like anything coming out of Congress,” he says, “it’s fighting the last war.” However, Henning believes the Sarbanes-Oxley Act, which passed in the wake of accounting scandals at Enron and other companies, “fought the last war and won.” In an attempt to reduce accounting fraud and clean up financial reports, the law required companies to improve their internal financial controls and to regularly assess the adequacy of those controls. That has had a “positive effect” even though “companies hate compliance — it costs money.” Making too many actions criminal can cause big problems, argues Brian W. Walsh, a senior legal fellow at the Heritage Foundation, a conservative think tank in Washington. Some acts — stealing, embezzling and the like — are inherently wrong, he points out. But others are wrong only because they are prohibited. “It’s not an exaggeration to say that category has increased exponentially,” he says. Heritage estimates that the number of criminal offenses in the U.S. Code rose from 3,000 in the early 1980s to more than 4,450 in 2008. 23 Walsh cites dozens of new criminal penalties included in Dodd-Frank, such as a provision that makes it a crime to disclose that the secretary of the Treasury has determined whether the failure of a specific company would pose a systemic risk to the financial system. With so many laws now, he says, “It’s not always clear in the financial industry which things are legal and which are illegal, which are ethical and which are unethical. I think we need to stay away from criminalizing things that are simply errors of judgment.” For instance, he says many The Securities and Exchange Commission announced in March that it had settled a case against IBM in which the company was accused of paying millions in bribes to do business in South Korea and China. IBM didn’t admit or deny guilt but agreed to pay $10 million and refrain from such actions in the future. Above, company headquarters in Seoul. Getty Images/Chung Sung-Jun 418 CQ Researcher BUSINESS ETHICS accounting lapses would better be addressed by a professional board taking away someone’s license than by a prosecutor sending the person to prison. Cases of “true fraud,” in which executives have intentionally misled investors or the public, are examples of “clear crime, and those things should be punished,” Walsh says. But plenty of laws already exist that make that sort of behavior criminal, he says.“There are already so many overlapping laws that it leads to inconsistencies in criminal justice,” Walsh says. Berenbeim says students in his business-ethics classes immediately reject any government involvement in regulating business. “They are, of course, very anti-law and regulation; they think of themselves as libertarians,” he says. “They think laws interfere with the ability of markets to operate in the most efficient way. You have to persuade them that laws don’t come to pass unless markets fail.” BACKGROUND Duty and Self-Control D iscussions of ethics in business often begin with Plato and Aristotle. But Joanne Ciulla, a University of Richmond professor of leadership and ethics who recently served as president of the Society for Business Ethics, puts the first such writings even earlier: between 2450 and 2300 B.C., in The Precepts of Ptah-hotep, written by an Egyptian official. “Ptah-hotep talks about a person’s responsibilities at work, which include adherence to duty, self-control and transparency or vigilance against those who want to bribe or make secret deals,” Ciulla said. “He even cautions against falling asleep on the job.” 24 For many people, religion provides the basis of an ethical code. “Thou shalt not steal” obviously applies in the workplace. But not all religions come to exactly the same conclusions about business practices, such as lending money. In the Middle Ages, some Christians frowned on it as usury. That meant that in European communities, where wealthy Christians could not publicly act as bankers, many lenders were Jewish — producing some of history’s most damaging anti-Semitic stereotypes. Today, banking is generally seen by Christians as perfectly acceptable. However, Muslims widely believe the Quran bans paying or charging interest. Spectacular cases grab attention, but for many people business ethics comes down to individual behavior. Do we take that “extra” food home from the restaurant kitchen? Do we juggle those quarterly results? Do we blow the whistle on our colleagues? Every two years, the Ethics Resource Center polls American workers on their views of ethics and compliance at work. The most recent survey, done in mid-2009, found that despite the weak economy the ethical climate had actually improved — something that researchers also have found in past economic downturns. Specifically, the center found that: • Fewer employees said they had witnessed misconduct on the job; the measure fell from 56 percent in 2007 to 49 percent in 2009. • More said they had reported misconduct when they observed it (63 percent in 2009, up from 58 percent in 2007). • More workers perceived the ethical culture in their workplaces as strong (62 percent in 2009 vs. 53 percent in 2007). • The proportion of respondents who perceived pressure to act unethically — to cut corners, or worse — declined from 10 percent in 2007 to 8 percent in 2009. 25 ‘Greed Is Good’ I n recent decades, a number of highprofile cases have fueled renewed interest in ethics. In the 1970s, revelations that defense contractor Lockheed for decades had paid millions of dollars in bribes around the world to obtain lucrative contracts led to congressional hearings. Hundreds of other U.S. firms also admitted to “questionable or illegal payments in excess of $300 million to foreign government officials, politicians and political parties,” according to the Department of Justice. 26 The ensuing uproar led to the passage in 1977 of the Foreign Corrupt Practices Act, which prohibits bribes by U.S. companies to foreign officials. Over the years, in response to complaints from businesses that American companies had to follow stricter rules than did their foreign competitors, the United States pushed other countries to enact similar laws. Many have done so, some adopting laws even tougher than the American version. However, in many places, say American business executives, a culture of bribery persists, putting U.S. companies at a competitive disadvantage. 27 In 1982, another company landed in the spotlight, but this time for what is generally regarded as a model of proper ethical business behavior. After cyanide-tainted Tylenol killed seven people, Johnson & Johnson ordered a total recall. The poison had been added to containers on a drug-store shelf in Chicago by an unknown saboteur. The company was widely praised for putting the safety of its customers ahead of short-term profit by recalling the product nationally, even though no evidence existed of any manufacturing problem or other lapse on the company’s part. When Tylenol came back on the market, it was in the sealed containers that have since become routine for many consumer products.