April 2008

EthixBiz News: Buy Book
Ask Dr. EthixBiz: Survival or Excellence?
EthixBiz Review: Making Globalization Work by Joseph E. Stiglitz
Gill's Benchmark Ethics: Takers, Inventors, & Helpers

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EthixBiz News

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Ask Dr. EthixBiz

" Externalizing Costs"

Dear Dr. EthixBiz:

There’s more than a little irony in the timing of the publication of your new book, It’s About Excellence: Building Ethically Healthy Organizations, as the value of some Wall Street firms tumbles amid uncertainties about hidden liabilities for investment products bearing risks that few understand.  Have you understated your arguments for ethics?  Should your book more appropriately be titled; "It’s About Survival: Building Ethically Healthy Organizations"?  Does your new book address ethics for the investment banking and insurance industries?

—Philip Keillor

Dear Philip

You certainly make a good point. Without some minimum level of trust and ethics we cannot conduct business. Most individuals and most organizations do operate ethically, most of the time. We would be utterly paralyzed in our human interactions if that wasn’t the case. The crooks take advantage of our assumption that they too will be honest and ethical. When they are well-dressed, respectable leaders, we are especially trusting and vulnerable. But we’ll only put up with it for so long. Persistently unethical businesses cannot survive over the long haul. Customers, investors, and good employees will go elsewhere; investigators, litigators, judges, and perhaps even jailors, will become a regular part of unethical organizations’ experiences.

The title of my book—It’s About Excellence—isn’t intended to imply that ethics is a kind of luxury item to get from good to great—rather than a foundational survival requirement. The contrast I intend is between ethics as "damage control"—i.e., organizations that only get interested in ethics as a response to bad things, as troubleshooting, as a negative, reactive strategy—and ethics as "mission control"—i.e., as a positive, holistic way of weaving core values into the organizational culture, as a strategy for pursuing success and excellence. The same concepts apply to investment banking and insurance companies as to manufacturers, retailers, sports franchises, churches, biotech firms, etc..

—Dr. EthixBiz

Remember: Everybody has a right to "Ask Dr. EthixBiz."
Send your questions and hard cases to ask@ethixbiz.com

The EthixBiz Review

Making Globalization Work by Joseph E. Stiglitz (W. W. Norton & Co., 2006)

Joseph E. Stiglitz is professor of finance and economics at Columbia University. He won the Nobel Prize in Economics in 2001. He served as chairman of President Clinton's Council of Economic Advisors and as chief economist at the World Bank. Among his previous books is Globalization and Its Discontents (2002).

Stiglitz is opposed to what he calls "market fundamentalism" (or the "Washington Consensus"), "the belief that markets by themselves lead to economic efficiency" (xiii). "Imperfect and limited information and imperfect competition" limit the efficiency of markets. "Without appropriate government regulation and intervention, markets do not lead to economic efficiency" (xiv). Stiglitz is not any kind of socialist or utopian idealist. He is firmly committed to economic development, world trade, and global business. But he sees the problems in our current situation, and foresees more ahead, if we don’t take steps to "make globalization work" for as many people and nations as possible.

"We can bring ethics back into business. Corporate governance can recognize the rights not only of shareholders but of others who are touched by the actions of the corporations" (xviii). "The problem is not with globalization itself but in the way globalization has been managed" (4). For the most part the rules are made by powerful corporate interests in the advanced industrial countries. Poverty has been growing even if "average wealth is rising"—because the wealthy and powerful are disproportionately benefiting. "If economic growth is not shared throughout society, then development has failed" (45).

Making Globalization Work gives a great tour of recent economic history and experience around our globe. It also gives lots of insight into the functioning and thinking of the World Trade Organization, World Bank, and International Monetary Fund. Stiglitz devotes chapters to trade policy and practice, patents and intellectual property issues (and impacts on drug availability to impoverished people, for example), the "resource curse" whereby tiny elites profit from selling their extracted natural resources to rich corporations, the environmental, ecological challenges of our globe, the structure and practice of multinational corporations, the burden of debt that holds down many "developing" countries, and the practices of the global financial reserve system.

Stiglitz is bold in identifying the problems and tearing away the veil behind which bad things are happening and people are being hurt. But in every chapter and on every topic he provides substantial counsel on how our institutions and practices can be reformed and improved. This is a handbook for how to make globalization work. Even more impressively, Stiglitz wants to make it work for all the stakeholders, for everyone impacted by global business and economics. He is especially concerned about the poorest around the world. His concern is genuine and humanitarian---and yet he also points out that a world of deep divisions and vast poverty is likely to be a world of violence in which the rich also will find it impossible to thrive.

It’s about ethics and values permeating our business leaders and institutions. It’s about democratization of our political institutions and using them to promote a fairer, more level, playing field so that free markets can do their work effectively. Economic oligarchs can restrict free markets just as much as political oligarchs.

We don’t have to agree with everything that Stiglitz argues but this is a wonderful study that forces us to confront the uglier side of globalization, and then offers lots of hope and specific proposals for making it better. I found it a refreshing approach compared to the extremes of the market fundamentalist "Amen Corner" and the "back to the woods" naïve idealists.

—David W. Gill

Gill's Benchmark Ethics

Takers, Inventors, & Helpers

Why are businesses formed? Why do we come and work together rather than staying home by ourselves to work? What is the basic reason our business exists? What is the basic thing we are trying to accomplish by working together?

The answer to this set of questions is our "mission," our "purpose," our "vision."

Taking Money for Me

Probably the first, most common answer to the questions "why does this business exist?" and "why am I working here?" has to do with making money, earning a living, paying off my debts, buying a house, etc.. A business is different from a charity. Businesses are "for profit" enterprises.

For a lot of us, of course, making money is not just about "Me"---but about my family. Part of it is also about making enough money to be able to support some of those charities. Nothing wrong with supporting yourself anyway; that’s much better than being a costly burden on the state or on your family.

Money can be a great motivator to hard work, good business, and good lives. Good compensation systems reward quality work (not just "showing up"). So far, so good.

The problems arise when money becomes the only thing we (or our company) care about, when we will do almost anything to get it, get more of it, and get it just for ourselves. When we get addicted and obsessed with money we call it greed. Healthy ambition turns into unhealthy greed. It’s sometimes hard to see when we actually cross the line from ambition to greed (just like other addictions, e.g., to alcohol, we often think we are in control long after it has taken control of us). Usually other people can see it better than we can.

The problem with making money and financial gain the only, dominating passion and mission of a company or leader is that we can begin to cut ethical corners and step on people who get in our way. Some thefts are perpetrated by drug addicts desperate to fund their next hit. Other thefts are perpetrated by money addicts desperate to fund their next bonus. The addiction overwhelms all other values.

If money and profit are the only mission and vision at a company, be prepared for some unpleasant values and behavior to emerge. Profit (by itself) doesn’t leverage great character and behavior in people.

Invent Something

Great companies and great individuals are often driven by a passion to create or invent some thing or some service that is useful and beautiful. It is embedded in our human nature to be builders and inventors. We feel a great sense of satisfaction when we take on a task and complete it, especially if we can have a part in shaping that product or service to make it better.

Birds build nests, beavers build dams, but people are the true "builders" in nature. We see a space and imagine what we could build there. We see a challenge and opportunity and love to use our minds and hands to meet it.

Our homeless, down-and-out, neighbors on skid row often need a handout to help them survive. But even more they need a job where they can do something productive, take on some responsibility and some project---and by so doing recover their dignity and humanity. Creating jobs is much more important than creating soup kitchens in the broad scheme of things.

The business lesson is simple: focus the mission and vision of your company on some aspect of coming together to invent and build something great. Give your employees the freedom and the challenge to be creative and innovative. Your employees will likely respond to this emphasis (if it is truly authentic) by wanting to get out of bed in the morning and get to work. They will likely bring their best self to work, inspired by this creativity challenge.

Help Somebody

The second great mission/vision theme is the counterpart to the invent/build theme. Instead of "build something great" the theme is "help somebody hurting" or "fix something broken ." Here again, this is an instinct embedded in human nature. Normally, most of the time, we feel better about ourselves when we help somebody or fix something broken or messed up. By nature, people are helpers and fixers. We feel good when we solve a problem or fix something broken or clean up some mess.

We feel our dignity as human beings more when we help someone else—than when we are the needy victim being helped. Even poor, broken, weak, or very young people need opportunities to help others if their own personalities and self-images are to be strong.

And think of how people (most people) flock to help out when there is an accident, a big fire or earthquake or flood or mudslide. We dig deep and give to help out. We are herd animals, social creatures. Sometimes we fight and compete. But there is a part of every person that responds to the challenge to help somebody.

The business lesson is this: focus the mission and vision of your company on some aspect of helping others (or problem solving, repairing, or fixing something broken)—and watch your employees come to work with their best self, on their best behavior. It’s embedded in our nature.

Thieves and Beggars? or Inspired Workers?

The only "businesses" that can truly say "our mission is simply and exclusively to relieve you of your money" are thieves and beggars. Their mission is to transfer your money to themselves. Period.

But we can’t really make "relieving our clients and customers of their money" our mission. Our mission has to be to deliver a good product or helpful service to our customers—in light of which they will pay us some of their money. If we don’t concentrate on delivering that product or service well, the customer may choose to give their money to someone else.

Business leaders need to keep their eyes on the ball: stay mission-focused—and make sure that their company mission taps into the grand, foundational human characteristics of (1) "create/invent/build something good and useful" and (2) "help somebody, fix something."

© 2008 David W. Gill.

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