Successful Executive or Corporate Slave?Some thoughts on purpose and ethics in the business world

Tarek El DiwanyCambridge University27 February 2014

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Some Implications of our Choice of Value System

Career choice to accumulate wealth or to please God?

Environment to preserve the earth or maximise consumption?

Resource Allocation to manufacture cigarettes or build homes?

Legal System to favour elites or create a level playing field?

Welfare mutual support or survival of the fittest?

Education to produce robots or rounded human beings?

Regulation follow the letter of the law or the spirit of the law?

Conflicts with Workers

“In 1987, in the midst of a bitter two-month strike in Mexico, Ford Motor Company tore up its union contract, fired 3,400 workers, and cut wages by 45 percent. When the workers rallied around dissident labour leaders, gunmen hired by the official government-dominated union shot workers at random in the factory.”Source: Korten, D., When Corporations Rule the World, 2nd ed.

Conflicts with Communities

“According to Jim Rokakis, the County Treasurer for Cleveland's Cuyahoga County, ‘Wall Street strategies that made the cycle of no-money-down, no-questions-asked lending possible have sucked the life out of my city.’”BBC online, 5 November 2007

Conflicts with Nature

“In March 1998 genetics scored a new victory with the Terminator patent granted to the United States Department of Agriculture and a private company, Delta and Pine Land Co. The technique consists of introducing a killer ‘transgene’ that prevents the germ of the harvested grain from developing. The plant grows normally and produces a normal harvest but the grain is biologically sterile.”Berlan and Lewontin, Cashing in on Life, Operation Terminator, Le Monde diplomatique, December 1998.

Huntington on Western Values

“The West won the world not by the superiority of its ideas or values or religion but rather by its superiority in applying organized violence. Westerners often forget this fact, non-Westerners never do.”Samuel Huntington, Clash of Civilisations.

Galbraith on Academia

“The study of money, above all other fields in economics, is the one in which complexity is used to disguise truth or to evade truth, not to reveal it.”J. K. Galbraith, Money, Whence it Came, Where it Went.

Jackson and the Banking Lobby

“The distress and alarm which pervaded and agitated the whole country when the Bank of the United States waged war upon the people in order to compel them to submit to its demands cannot yet be forgotten. The ruthless and unsparing temper with which whole cities and communities were oppressed, individuals impoverished and ruined, and a scene of cheerful prosperity suddenly changed into one of gloom and despondency ought to be indelibly impressed on the memory of the people of the United States ... if you had not conquered, the government would have passed from the hands of the many to the few, and this organised money power, from its secret conclave, would have dictated the choice of your highest officials and compelled you to make peace or war, as best suited their own wishes.”Andrew Jackson, 4 March 1837, Richardson's Messages, vol. 4, p. 1532 .

Williams on Statistics

“As former Labor Secretary Bob Reich explained in his memoirs, the Clinton administration had found in its public polling that if the government inflated economic reporting, enough people would believe it to swing a close election. Accordingly, whatever integrity had survived in the economic reporting system disappeared during the Clinton years … As a result of the systemic manipulations, if the GDP methodology of 1980 were applied to today's data, the second quarter's annualized inflation-adjusted GDP growth of 3.0% would be roughly three percent lower (effectively netting to zero percent or below). In like manner, current annual CPI inflation is understated by about 2.7% against the pre-Clinton CPI methodology and the unemployment rate is understated by about 7% ...”John Williams, “Government Economic Reports: Things You've Suspected but Were Afraid to Ask!”, 2004.

Some Important Corporate Levers

Access to capital (small traders cannot borrow to the same extent)

Leveraged business models (quickly get new products to market)

Recognised market name (makes it hard for newcomers to compete)

Long established networks of influence (can create barriers to entry)

Centralised control (quickly directs resources to critical activities)

Deep support teams (small trader has to do everything himself)

The artificial person and self-perpetuation Self-selecting character types (like-minded people focus on a

goal)

The Corporate Players

New recruit Manager Director Shareholder Regulator Investment analyst Banker

Some Quandaries

Trader fiddles reference price .. to report or not? Reckless lending practices of bank management ... to report

or not? Steal medicine to treat wife’s illness? Bribe port official to save six months of delays? To be Machiavelli?

Normative Ethics

Pleasure-oriented ethics (Hedonism) e.g. Epicureans, Benthamites

Consequentialism– morality judged by its consequences,

Deontology– morality judged by the rulings or duties motivating the act

Virtue Ethics– morality judged by virtues of the agent not on the specific situation

Pragmatic ethics (John Dewey)– ethics evolve over time with society, hence social reform should take

precedence Post-modern ethics – (must consider narrative surrounding

each act) Kohlberg’s stages of cognitive development

What Would Make Us Act Unethically?

Desire for material reward (money, power, fame) Coercion/manipulation/instruction by legitimate authority identification with charismatic leader Desire to conform with other group members Rationalisation (“I was only following orders”) Cognitive dissonance (can’t change behaviour, so change

attitude) Anonymity Psychopathic tendencies Social consensus (e.g. bribery) Distance from consequences (e.g. victim not known, not

proximate) Low probability or concentration of effect

Anonymity in Car Theft

“Any environmental or societal conditions that contribute to some members of society feeling that they are anonymous – that no one knows or cares who they are, that no one recognises their individuality and thus their humanity - makes them potential assassins and vandals ...”P. Zimbardo, Social Psychology of Good and Evil, Guilford Press, 2004

The Investment Banker

“I had actually thought that the customer was going to make money ... how could anyone be so stupid as to trust a trader? The best thing I could do was to pretend to others ... that I had meant to screw the customer. People would respect that.”Michael Lewis, Liar’s Poker, 1989

Some Forms of Unethical Behaviour in Banking

Compose research to achieve prerequisite conclusions Leak inside information Preferential treatment for certain clients Plagiarism of third party IP Not telling the whole truth Front running Cherry picking trades prior to account allocation Hiding conflicts of interest Instructing subordinates incompletely to achieve buy-in Impression management

– remedy tactics (justify, excuse, apologise)– reputation tactics (association, ingratiation, claiming credit)

Why is Unethical Behaviour so Evident in Banking?

Large amounts of money involved (Willie Sutton) Principal-agent conflict (other people’s money) Concentration of shareholding (low or high) Incentives focus on quantitative measures Regulatory framework encourages a focus on what is legal Philosophy of wealth maximisation common among key

employees

Signs of Groupthink

Illusion of invulnerability (encourages excessive risk-taking) Collective efforts to rationalise (in order to discount warning

signs) Unquestioned belief in the group’s inherent morality (hence

ignore ethical consequences of decisions) Stereotyped views of rivals and enemies as too evil to

negotiate with, or too stupid to counter the group’s unethical behaviour

Direct pressure on any dissenting members of group to be loyal

Self-censorship of dissenting views among group members Shared illusion of unanimity, idea that silence implies

consent Emergence of self-appointed mind-guards, to protect group

from information that challenges its assumption of moralityJanis and Mann, Decision-Making: A Psychological Analysis, The Free Press, 1977

The Nature of Human Beings

The fitrah Man’s insatiable desire for wealth Rizq, destiny and its implications The concept of barakah The test of wealth Consequences of enlarged provision Taqwa and earnings Spurning wealth The Day of Judgement

Nature, Intellect, Free Will and Desires

“Man is distinguished from the rest of the creation because he has been endowed with intellect (‘aql) and free-will (iradah). The intellect enables him to discern right from wrong. He can use these faculties to complement his fitrah and to please Allah or to be untrue to it and displease Allâh ... Man is responsible for his actions and accountable to Allah for every atom of right and wrong that he does. It is this sense of accountability that guides man to act in accordance with the Divine will. It empowers him to struggle against the wrong-doing of his lower self (nafs) as well as the negative influences of the social circumstances.” Yasien Mohamed, abridged from Fitra: The Islamic Concept of Human Nature, 1996, Ta-Ha, London.

Corporate Governance or Human Governance?

Attribute Corporate Governance Human Governance

Nature of person Artificial person Natural person

Origin of law Man-made law Revelation and natural law

Legal Emphasis Letter of the law Spirit of the law

Governance Ethos Rules-based Values-based

Schema Outer-in Inner-out

Diagnosis Symptoms Root Causes

Salleh and Ahmad, Human Governance, 2008, MPN Publishing, Malaysia

Some Conclusions

Starting with ourselves ... Not everyone can be chief ... Don’t ask whether you are loved or successful ... Responsibilities and rights Establish proofs of concept (the “threat of a good example”). Be a role model for forthright discussion Beware thoughts of materialistic causation! Just make the call!