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Breach of trust: the naked truth

My friend and mentor Carlyle Marney, when he was a pastor of the First Baptist Church in Austin, Texas, would regularly go and speak at the annual Cowboy Camp Meeting in West Texas. He came to know and befriend a wiry cowboy in his early sixties named Joe. Joe had painstakingly saved from his earnings and then borrowed enough money to enable him to purchase his own herd of one hundred or so cattle. He planned to pasture and fatten them and make his first income from investment profit in more than forty years of riding herd. That early spring there came the worst blizzard in a hundred years in West Texas. Joe, along with many other cattlemen, lost his entire herd, frozen to death in the blizzard.

Marney went to see Joe and to offer his condolences and support. When he arrived at Joe’s house, Joe was in the bed clad only in his long-handle underwear. Marney said, “Joe, I’m real sorry about the loss of your cattle. How are you doin’?” Joe answered: “Marney, I’m doin’ okay. I’m going to be all-right. I figure I weigh as much naked as I do with my clothes on.” Joe spent the rest of his life paying back the indebtedness he incurred in that effort to become a capitalist.

A lot of us in the United States, and in many other countries, have experienced disaster in varying magnitudes resulting from the precipitous decline of the stock markets. It might be more comforting to be able to attribute the severe losses many have experienced in their pension plans and stock portfolios to an “act of God,” like Joe’s losses in the blizzard. Instead, we are victims of greed, market inflation and manipulation, corporate deception, and collaboration between CEOs and brokerage firms to fabricate false financial reports and overlook deceptive accounting practices.

This is one of those occasions where the vital significance of ethics in business and public life becomes starkly clear. Kenneth Lay and his co-leaders of Enron encouraged employees to continue holding their Enron stock right up to the end, while he and his top people sold their huge holdings of company shares for more than a year. Now we know that the tribe of corporate deceivers includes top officials of a number of the companies that our investment counselors had urged us to buy and hold. Reports are emerging of conscientious evaluators in brokerage firms who proposed lowering the ratings of Enron’s and other troubled companies’ stock, and who were punished or pushed into early retirement because of their attempts to act honestly.

Democratic capitalism urges competition and choice, entrepreneurship and investment. It generates significant profits, and involves the risk of significant loss. But its essential structure depends upon truth-telling and fiduciary trustworthiness. Democratic capitalism can too easily slide into what political scientist C.B. McPherson called “possessive individualism.” Possessive individualism emerges when three vital sources of healthy democracy and capitalism begin to erode:

• when trust in the fiduciary structures and processes of the economy are weakened,
• when confidence in the long-term future and viability of the political process becomes shaky, and
• when business and regulative leaders turn away from their commitments to maintain the structure of personal and public integrity that serve both the common good and the viability of corporations.

Under those circumstances persons and groups turn to efforts to accumulate capital quickly through unscrupulous means, without concern for the destabilizing impact their strategies may have on the fiduciary system that underlies markets. They suppress any sense of guilt or shame they may feel for the investors or employees and for the damaged credibility of the market that result from their exploitation. They give no thought to the structural undermining of a system of fiduciary transactions that enables the market and democracy to work.

The antidote to the corrosiveness of possessive individualism in this democracy lies in re-establishing the long-term foundations of legal and fiduciary relationships necessary to ensure care for the common good. It requires recommitment to the public and personal faithfulness that commits businesses and their leaders to the highest standards of honesty and integrity. It requires determination to work for sustainable viability of their corporate entities by providing stable employment for their workers, producing fair profits for stockholders, providing quality goods and services, and contributing to the long-term strengthening of the economy and of our democracy.

A focal concern of the Center for Ethics, this year—and for the future—lies in the challenge of helping students, faculty, and the public focus on these issues. A primary focus will be on helping today’s students and tomorrow’s business leaders grasp and commit themselves to ethics and the long-term moral practices that make democratic capitalism viable.

[ Posted by James Fowler at September 1, 2002 11:16 AM | More Opinion articles ]

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