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Corporate ethics: values and valuations

Investors who were waiting for the other shoe to drop after Enron must feel as if they’re in Imelda Marcos’ closet.

The ethical wasteland called Enron—a shell game that happened to be the Bush administration’s closest corporate ally—was one thing. But accounting irregularities began to seem pervasive when they were revealed at such huge employers as WorldCom and then Merck, named by Fortune magazine as America’s “most admired corporation” for seven consecutive years until 1993.

George W. Bush, the first MBA to be president, issued what he hoped would be a clarion call for character in a major speech this summer outlining a plan to halt the corporate trust meltdown. The market, which drifted down even as he spoke, seemed unimpressed. The Dow plummeted another 282 points the next day. Investors said they were worried about what would happen next. WorldCom, meanwhile, deliberated whether to declare the biggest Chapter 11 in history.

Why did President Bush’s call for exemplary character fall on deaf ears? Perhaps the average American is cynical about the messenger on this subject, even if we like many things about our president. Can you blame us? It could be that a detailed investigation of fraud at Harken Energy and at Enron would sink the president into a mire that would make Whitewater look like a mud puddle. Presidents, like Caesar’s wife, should be above reproach.

Americans are the sort to forgive and forget. But it’s diffcult to ignore the smell of Bush’s profitable insider sale of Harken Energy stock or Martha Stewart’s amazing timing with ImClone Systems. Hundreds of thousands of dollars may be chump change to George and Martha, but such sums are hardly insignificant to most of the people who work, pay taxes and elect presidents in this country. The thing is, most Americans would have neither the access nor the “I am special” ethics to participate in such deals.

Contempt, and a silver lining
Overseas in either direction, European and Asian investors are disgusted by these ethical lapses, particularly after some US leaders arrogantly lectured them to adopt the “American model” of accounting and CEO compensation, privately financed elections and self-regulation. What happens when foreign investors lose confidence in our markets? They sell their US stocks, and the US dollars they thus receive for them, to take their own currencies back home. Consequently, we have seen the recent sharp declines in the US dollar’s foreign value as well as in Nasdaq.

The only silver lining is that this unwinds what has likely been an overvaluation of the US dollar, and thus of US products, when the “American model” of accounting was admired globally. Now that model is derided as one that aided and abetted unparalleled greed, the dollar has fallen, especially against the euro and other currencies of Europe, a giant continent in world trade and investment.

The cheapened dollar will lower the relative price of US goods and services in the fierce competition with foreign products. This should eventually boost our exports and moderate our burgeoning import growth. Both impacts will provide some relief to our beleaguered manufacturing, agricultural and travel and tourism sectors.

Campus ethics lacking?
Greedy business and political leaders have earned a large share of the blame for the moral malaise. But what of us on the faculties of business and journalism schools? We professors train the business students who go to work for the Enrons and Arthur Andersens of the world. We also instruct the journalists who go forth and write fawning cover stories on avaricious CEOs—articles that seem to value the executive’s wealth, even if not cleanly earned, more than scruples and civic-minded actions.

In schools of business, journalism and law across the nation, we often pay lip service to ethics. At most, the subject is the focus of a required short course, or even relegated to elective status. However, even a major required course in professional ethics is not likely to be taken seriously, if we teach students how to stretch moral principles, if not the law, in the more “functional area” courses: finance, newsgathering and source-checking, and criminal or tax law.

The culture has devolved to “get ahead, at almost any cost.” How can we restore it to “virtue is its own reward, but it offers other rewards as well”?

First, we should “marbleize” our curricula. Every course should examine the social and ethical implications of various techniques and decisions. If we offer nineteen courses that train students in how to destroy the competition, and then tack on a twentieth course called “Professional Ethics,” how much impact will we have? The process of ethical decision-making, and the core values that inform it, cannot be ignored in those first nineteen classes. Ambitious students closely observe professors and practitioners of finance, accounting, tax law and TV journalism.

Industry role models
We need to present role models who succeed through sterling character, not greedy manipulation. Imagine if glossy magazines pictured virtuous leaders—those in all walks who treat folks right and share their success with the wider community—rather than lionizing selfish celebrities or grasping plutocrats.

To walk my own talk, I include such role models in my “Global Business Perspectives” course at Emory each semester. We are blessed in Georgia to have positive, principled people such as Andrew Young, Truett Cathy, Arthur Blank, Donald Keough, Jimmy Carter, Leo Mullin, Thurbert Baker, Jim Blanchard, Dan Amos, Bob Nardelli, Peter Bell, Tom Chapman, Mylle Mangum, Bernie Marcus and Johnnetta Cole. We are about to lose Cole to Bennett College in Greensboro, North Carolina, where she will inspire a new generation of college students.

These leaders and others like them can help us rebuild our civil society. They can demonstrate—in many cases, have demonstrated—how to create a corporate culture in which values are central and every employee counts.

In the boardroom, the classroom, the newsroom, we must reinforce the fundamental truth that people who do good will also do well.

Jeffrey Rosensweig, PhD, is associate dean at Goizueta Business School. He also chairs the Center for Ethics’ faculty advisory board. He is an international business and finance professor and author of Patriotic Economics: How to Thrive While Helping America. Reprinted from the July 14 Atlanta Journal-Constitution by permission of the author.

[ Posted by Jeffrey Rosensweig at September 1, 2002 08:59 AM | More Opinion articles ]

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