everyone behaved this way, what kind of world would we have?”
Critics of this perspective argue that its universal view is too demanding—indeed, impossible for a businessperson to observe. For instance, the profit motive focuses on the manager’s duty to just one company. But N. E. Bowie responds, “Perhaps focusing on issues other than profits … will actually enhance the bottom line…. Perhaps we should view profits as a consequence of good business practices rather than as the goal of business.”11
“Right” and “Wrong” Defined by Virtues
Finally, a third tradition12 in philosophy argues that the debate over “values” is misplaced: The focus should be on virtues and the qualities of the actor. The attention to consequences or duty is fundamentally a focus on compliance. Instead, one should consider whether it is consistent with being a virtuous person. This view argues that personal happiness flows from being virtuous, and not merely from comfort (utility) or observance (duty). It acknowledges that vices are corrupting. And it focuses on personal pride: “If I take this action would I be proud of what I see in the mirror? If it were reported tomorrow in the newspaper, would I be proud of myself?” A journalist reported that this is the stance of Warren Buffett, CEO of Berkshire Hathaway and one of the most successful investors in modern history:
Every year, Buffett reminds his CEOs how important personal integrity is to him. “He sends out this letter, and the opening paragraph is always the same,” [manager Melvyn] Wolff says. “I’ve seen it enough times by now that I’ve got it memorized: ‘We can afford to lose money. We can afford to lose a lot of money. But we cannot afford to lose one shred of our reputation. Make sure everything you do can be reported on the front page of your local newspaper written by an unfriendly, but intelligent reporter.’ Those comments were written long before the recent corporate scandals.”13
In the gray areas of business ethics, rules can be faulty guides; one might gain clearer guidance from reasoning what a person of character would do.
Critics of virtue-based ethics raise two objections. First, a virtue to one person may be a vice to another. Solomon (1999) points out that Confucius and Friedrich Nietzsche, two other virtue ethicists, held radically different visions of virtue: Confucius extolled virtues such as respect and piety. In contrast, Nietzsche extolled risk taking, war making, and ingenuity. Thus, virtue ethics may be context-specific. Second, virtues can change over time. What may have been regarded as gentlemanly behavior (i.e., formal politeness) in the nineteenth century might have been seen by feminists in the late twentieth century as insincere and manipulative.
Discrete definition of “right” and “wrong” remains a subject of ongoing discourse. But the practical person can abstract from these and other perspectives useful guidelines toward ethical work:
How will my action affect others? What are the consequences?
What are my motives and my duty here? How does this decision affect them?
Does this action serve the best that I can be?
PROMOTING ETHICAL BEHAVIOR
The leadership of a team or organization entails shaping a high-performance culture that is ethical. Lynn Sharpe Paine (1999, 2003) has argued that ethical failure and success have their roots in the culture of an organization. The leader can take a number of steps to shape an ethical culture.
Adopt a Code of Ethics
One dimension of ethical behavior is to acknowledge some code by which one intends to live.
Personal. Various religious and secular traditions afford the basis for a personal code of ethics, the foundation for all ethical behavior. But ethical values vary from one person to the next, perhaps creating dissonance and ensuring that one person’s assumptions about his or her colleague’s values may not be valid. To focus only on personal ethics is inward looking and ignores values on which a team, company, or society might agree.
Corporate. Firms recognize the “problem of the commons” inherent in unethical behavior by one or a few employees. In 1909, the U.S. Supreme Court decided that a corporation could be held liable for the actions of its employees.14 Since then, companies have sought to set expectations for employee behavior, including codes of ethics.15 Exhibit 2.1 gives an example of one such code, from General Electric Company. These norms are merely the first page of a 32-page document outlining the code, to whom it applies, special responsibilities for employees and leaders, specific codes of conduct with respect to customers and suppliers, government business, competition, health, safety, employment, and protection of GE assets. Corporate codes are viewed by some critics as cynical efforts that seem merely to respond to executive liability that might arise from white-collar and other economic crimes. Companies and their executives may be held liable for employee behavior, even if the employee acted contrary to instructions. In 1991, the U.S. Sentencing Commission handed down seven mitigating factors16 that may reduce the likelihood of criminal prosecution of companies; among these is promulgating a code of behavior against which the firm should conduct internal investigations. Mere observance of guidelines in order to reduce liability is a legalistic approach to ethical behavior. In contrast, Lynn Sharpe Paine (1994) urges firms to adopt an “integrity strategy” that uses ethics as the driving force within a corporation. Deeply held values would become the foundation for decision making across the firm and would yield a frame of reference that would integrate functions and businesses. By this view, ethics defines what a firm stands for.
EXHIBIT 2.1 General Electric’s “Code of Conduct”Obey the applicable laws and regulations governing our business conduct worldwide.Be honest, fair, and trustworthy in all your GE activities and relationships.Avoid all conflicts of interest between work and personal affairs.Foster an atmosphere in which fair employment practices extend to every member of the diverse GE community.Strive to create a safe workplace and to protect the environment.Through leadership at all levels, sustain a culture where ethical conduct is recognized, valued, and exemplified by all employees.Source: “Integrity: The Spirit and Letter of Our Commitment,” General Electric Company, October 2000, page 3. A longer version of this resource is also available on the company’s web site at www.integrity.ge.com.
Professional or industry. Some professional groups organize codes of ethics. One example relevant for M&A professionals is the code of ethics of the Association for Investment Management and Research (AIMR), the group that confers the Chartered Financial Analyst (CFA) designation on professional securities analysts and portfolio managers. Excerpts from the AIMR Code of Ethics and AIMR Standards of Professional Conduct are given in Exhibit 2.2. In a public advertisement, AIMR wrote, “Just as each and every investment professional is hurt by the scandals, so must each and every one of us work to repair the damage to our professional and to the financial markets. It will not be enough simply to abide by all the requirements of
