Ethical Confusion

Some years ago, a group of colleagues at Washington University published a collection of articles and essays on Ethics and Standards in American Business.[1] Although most of the contributors taught in the business school, one was a distinguished philosopher, Albert William Levi. Levi wrote about "ethical confusion in the business community," and in the process talked at length with a number of business executives. He summarized the views that he gleaned from those conversations in these paradigm statements:

A. Ethics is ethics and business is business. Profits are one thing and moral squeamishness is another. You have to make a choice.

B. I'm a businessman and I try to be ethical, but when others in my field cut corners morally, I don't see how I can stay in business if I don't follow suit.

C. Morality is terribly vague, it seems to me. The churches say one thing, the bosses of my company another, and I guess the government even something different. Who's right?

D. Business as a whole is ethical. Of course you'll always find a few crooks, but they're built that way. They'd cheat whatever they worked at.

E. If a man follows the Gospel he can't go wrong. Too many business executives have let the basic religious truths out of their sight. That's the trouble.

Levi then summarizes these positions:

A says: Ethics and business are by nature incompatible. B says: In competitive activity the morally lowest necessarily sets the standard. C says: Morality is a matter of "knowledge," and with plural answers, there is no way to choose between them. D says: Immorality is a defect of personal character. It will always exist. E says: Morality means following the rule of religion.

Levi concluded that these statements "indicate the doubts and uncertainties, the confusions and inconsistencies which pervade the thinking" of the business community on ethical matters.

A similar ethical confusion seems to characterize corporate grantmaking. Grantmakers confess to "doubts and uncertainties," and some indicate that ethical matters arise more frequently than in the past.

Corporate grantmakers, if interviewed by a philosopher working on an essay on the ethics of corporate grantmaking, might well show a pattern similar to that sketched out by A. W. Levi.

A. The first question to answer is, What's in it for us if we make the grant?

B. The second question is, Do we have to make the grant? What's the competition doing? Will they make us look bad?

C. The whole process of grantmaking is so arbitrary, anyway. You can make a case for almost any grant.

D. The average of corporate grantmaking is quite high—higher than the average of business practice in other functional areas, probably. The exceptions prove the rule.

E. The underlying thrust of corporate philanthropy derives from Judeo-Christian ethics. That's the tradition we have to keep turning back to, and those are the values that should guide our grantmaking.

Part of the confusion results, I think, from what various writers refer to (including Peter Drucker, who has shown an unerring instinct for emergent trends in business) as the turbulence of the marketplace. When conditions are turbulent, it is difficult to know the direction of events.

In the case of corporate grantmaking, things have suddenly become unstable, after a decade and a half of relative calm and moderate growth (roughly from 1970 to the mid-1980s). It is possible to offer three plausible interpretations about what is taking place in the environment of corporate philanthropy:

• This is a period of slump; corporations are readjusting to new competitive factors, severe reorganization and restructuring, and downward pressures on earnings and profits. Grantmaking is bound to reflect cost-cutting and staff reductions elsewhere in the corporation. As things settle down again and begin to improve, corporate philanthropy will recover, too.

• This is a period of rethinking philanthropy along with everything else. Grantmaking has to serve corporate purposes first. As Jerry Welsh of American Express argued several years ago, the future is in cause-related marketing; "checkbook philanthropy" is a thing of the past.

• This is the first stage of a long period of decline. Business social philosophy has changed. Competitive forces no longer permit management to turn its attention to an array of social problems that don't directly affect business performance. A greatly diminished core will remain, but it will be the least that corporations can get away with.

There is, in other words, some reason for doubt and uncertainty about trends in corporate grantmaking. In general, it is not yet clear whether American business will come forward with a statement of a new philosophical consensus, as it did forty years ago, or whether echoes of an abandoned philosophy will continue to be heard while a new way of doing business takes over in fact. I don't often these days hear statements like this one from corporate leaders:

During the forty years of my business career, I have observed a slow but steady transition in the attitude of corporate management from one of more or less exclusive preoccupation with self-interest, to one of self-interest tempered with a broadening sense of social consciousness. (Frank W. Abrams, former chairman of Standard Oil Company of New Jersey, in his testimony in the A. P. Smith case, 1952.)[2]

When we hear such statements now, we doubt that it reflects a consensus of business leadership as it did in Abrams' time.

In fact, most people believe that there has been a rapid shift backwards, towards a "more or less exclusive preoccupation with self-interest." Many of those charged with grantmaking are thus reshaping their work to this narrowing sense of social consciousness. The rationale for corporate philanthropy has always been presented in terms of "enlightened self-interest," a self-interest that justifies grantmaking in terms of long-range and indirect benefits. During the first several decades of corporate grantmaking—say, from 1870 until World War 1—insistence on direct benefit excluded corporate grants for public purposes; the argument for indirect benefits over the long term carried the day—it even became part of corporate law.

Corporate law does not require corporate philanthropy, of course. Corporate philanthropy is still a voluntary decision of management, influenced by tradition and peer pressure but not controlled by them. Rather than abandon philanthropy altogether, the emphasis is on increasing the corporate benefits from making grants. Philanthropic budgets decrease in size, and grantmaking priorities are reordered.

During a period of corporate affluence, the nonprofit sector can expect to share the gain; in a period of cost-cutting and layoffs, the nonprofit sector can expect to share the pain.

It is not surprising that grantmaking executives appear to be uncertain about how to behave. Hedging is as popular in grantmaking as it is in the stock market. It is a climate in which ethical uncertainty is bound to increase—and ethical performance is likely to deteriorate unless there is a conscious effort to rectify the balance. Business ethics courses become popular, as do books on business ethics, when news stories and editorials on ethical failures in business become more frequent. Such has been the case in the recent past. (The major capital campaign to endow ethical studies at Harvard Business School is not in celebration of high ethical standards in the marketplace.)[3] Although the stock market has taken the worst of it, large corporations have been ethically embarrassed as well. Corporate training programs are beginning to add courses and seminars in ethics. Bristol-Myers has a new program at Dartmouth, for example.[4] The current wave of interest is just beginning.

When people are unable to follow a clearly drawn path of behavior, some show an innate sense of direction and others stray or wander about in confusion. If their past behavior has been that of following instructions rather than understanding how the map was drawn, such people may find themselves quickly lost. They won't know which instruction to follow, which one to abandon, which new direction to explore.

Others, those who show that "innate sense of direction, " may have achieved an understanding of map making. Take their map away from them, and they know how to read the stars and the angle of leaves and the moss on trees and all those other skills and arts that the Boy Scouts tried to instill.

The difference between map reading and map making, between following instructions and exercising your judgment, may be the simplest way to bring out an important distinction between "morality" and "ethics." Moral behavior can be thought of as the behavior imposed on us by our parents and the other influences charged with domesticating us. We are expected to follow the rules whether we understand them or not. Ethical behavior, by contrast, means the capacity to make judgments, to apply principles in specific situations, to interpret rather than imitate. A person of very limited intelligence can follow clear and explicit rules. It requires a higher form of intelligence to exercise judgment and autonomy.

I agree with those who believe that ethical maturity begins in childhood. Moral values are best taught at that time. Some philosophers and psychologists contend that many of the abstractions of ethics can be reduced to simple situations that children can deal with and even begin to understand. Require a child to make his bed in the morning. It becomes a habit, if repeated often enough. Explain why: "On balance, neatness is better than disorder, and over time you will find that a remade bed is more comfortable to sleep in." That suggests that good behavior pays, and that a modest investment of energy now will be repaid with a modest benefit of comfort later on. More important, the child may begin to learn that if he makes the bed his mother won't have to. (It is in such modest ways that consideration of others begins.)[5]

To believe that morality is best acquired in childhood raises a question of the utility of ethical education later in life. Many people believe that college is too late—that courses in business ethics at the level of the professional school come too late to make a difference. If that view is correct, why bother with corporate training in ethics?