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And We Wonder Why?

July 14, 2012

Fallen LeadersA recent survey of senior executives in Britain and the U.S.A. found 24% consider unethical or illegal conduct is needed for success in the financial world. The study also revealed that 30% felt pressure over salaries to compromise their ethics. 16% of executives said they’d commit insider trading if they “knew” they could get away with it. The study also found that 30% of respondents felt pressured by their big-buck salaries and bonuses to compromise their ethics or even break the law; this on the heels of the LIBOR scandal! While this survey was focused mainly on Wall Street business, surveys about businesses in general  (or government) aren’t much better.

It seems this topic never leaves us, and indeed some would say it’s always been with us. Others say that this behavior is simply “human nature.” People behaving badly, inexplicably so, is nothing new. I don’t know how much of this is nature versus nurture but I expect that like so much of the human character our behavior comprises a large component of both nature (the way we are “wired”) and nurture (environmental imprinting.) My hypothesis is that the wired part of our propensity toward “cheating” has to do with surviving in the wild and we’ve transferred the jungle developed adaptations to our present existence. Certainly no longer necessary; but evolution works on a much longer time scale than our technology does. The nurture component of this sad phenomenon is more difficult to “nail down.” But as I’ve pointed out elsewhere on this blog, the fact is that we seem to raise many of our children to be hyper-competitive while at the same time taking their part in any controversy whether they “did something wrong” or not. We teach our young people to keep score and more often than not we teach them that it’s winning that counts and how you play the game is only incidental. We enable the lack of accountability. Nice guys finish last, they are told, so go out there and do what it takes to win. And woe be to any coach that takes a talented kid out of a game to give someone else a chance to play. Coaches letting parents act badly are a big part of the nurture side of this sports issue. Likewise, boards and CEOs allowing executives to act badly are a big part of the corporate issue.

Between our animal instincts and the imprinting from our overly competitive and litigious society, why would we wonder at all the misdeeds and pain caused by these runaway executives? And why would we think that we could possibly have unbridled capitalism in our country? Let me hasten to add that in my view a large majority of business owners and executives are NOT participating in the nefarious activities that hit the news. Because it takes a great deal of political savvy and competitiveness to climb the ladder in larger public corporations, we will undoubtedly see more cutting corners on moral and ethical behavior than we would expect to see in the smaller private companies. And, like the (thankfully few) airplane accidents we endure, when greed drives the ship into the ground the large corporate failures claim many lives and make national news. Small businesses are not immune to ethical or moral lapses, it’s just that actions are often more visible and the “mob” smaller, so individuals behave better. When small businesses do go rogue and create pain, the scale is such that it isn’t newsworthy at a national scale. Such lapses do not usually result in legislation that affects all other business owners and employees.

It is well understood that groups (okay, you can say “mobs” if you want) more often than not act much differently than the individuals comprising the group would act on their own. Based on that line of reasoning, it is not hard to see why larger corporations have more extreme actions than smaller ones. It is also easy to see why we find the same lapses in moral and ethical standards in our government, why large sums of money flow from corporations through lobbyists into public officials either directly or indirectly through funding campaigns or supporting ads. It is also not hard to see why the average person, as an individual, will claim to abhor these activities yet continue to work in companies that they believe do things that are contrary to their moral values and/or vote for politicians who they know are “shady” because their congress person brings “good things” to the community. As one of my colleagues put it, “there is a lack of we” in our considerations.

Bottom Line for Me

My sense of things based on observation and on results is that our government doesn’t go to work each day trying to figure out clever regulations to foist upon unsuspecting people and businesses. Businesses do not spend multiple millions of dollars for lobbyists to influence congress to legislate laws and regulations that are in the consumers’ and nation’s best interests. They have their own best interests at heart and therefore cannot be trusted with the consumers’ or public’s interests. Congress is reactionary and, based on results, is largely focused on their own interests first and if what they do can also be seen as something good for their constituents and the nation as a whole, then so much the better. Congress will of course spin things that way just as the coal consortium will try to convince us that there is such a thing as “clean coal” and that it’s good for us; or the tobacco companies will fight to hide the fact that cigarettes are addictive and dangerous. Meanwhile, we citizens will continue to believe that our elected officials will do what’s right while we blindly go about our business without making ourselves aware of science, technology and the details of legislation on our companies and society. In a functioning democracy we get the government (and regulations) we deserve.

There seems to always be collateral damage and unexpected consequences when congress attempts to create regulations in response to the bad actors in the business sector or a perceived threat to constituents in the public sector. One thing that seems to always happen with respect to business is that the regulations cause pain to everyone because of the transgressions of a few. While this is certainly not desirable, I can’t come up with a better system within our regulated capitalism framework. We can of course tweak things, change emphasis, enforce regulations, hold people accountable and we can make these improvements reasonably quickly. So as business leaders, the best we can do is to make sure we and our organizations are not the ones violating the public trust and therefore becoming part of the problem. We can set the standard and make visible our demands for better behavior from our elected officials.

Is There Hope?

In reading over what I have written above (and elsewhere on this blog) I am aware of how cynical and negative these sentiments appear to be. Yet that is not how I really feel nor what I believe has to be. On the business front, I see many business owners who are ethical leaders who shape their company culture to ensure that their employees understand the decision process and what ethical values frame that process. I see many more companies taking a genuine interest in their communities, not for PR points, but true interest in being a good neighbor. More companies are adapting at least some of the Triple Bottom Line precepts as they evaluate how they are adding value to society. Leaders are taking interest in the thoughts around new business models in response to the changing world economy. A lot of new ideas and views for business models are found in the book Standing on the Sun. So I am actually very hopeful that we will find our way through to a new and better form of capitalism with the requisite change in our business models.

What are your thoughts?

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