Corporate Ethics in the New Millennium

Why the subject of corporate ethics invariably induces a hardy yawn in the general population is hard to fathom. After all, the absence of ethics is a habitual precursor to fraudulent or injurious acts that subvert the democratic process, deprive Americans of their cash, and threaten their health or sometimes even their lives. Perhaps reactions are so muted not because the evidence of decay is invisible but because it is discernible everywhere.

Despite the level of public resignation, there is, as psychologist Nathaniel Branden cautions, no such thing as a small breach of integrity. Over time, modest fissures in ethical business conduct create an atmosphere of tolerance that invites tectonic shifts.

Consider IBM, involved in litigation in which the computer maker is accused of unsafe chemical exposures in its clean room operations. The situation, though troubling, is comparatively benign next to the executives from Du Pont, Monsanto, and Hercules who, as reported in the Multinational Monitor, negotiated as part of the General Agreement on Tariffs and Trade (GATT) a standard that allowed DDT residue on imported produce to be 33 to 50 times higher than U.S. law permits. Never mind that DDT is so toxic it is not even produced for domestic use. Yet, even that pales in consequence when compared to the actions of the European biotechnology companies that, according to author Richard Preston, equipped Iraq with the means to develop a biological weapons program.

For better or worse, corporations have become the dominant institutions on the planet, defining the economic, cultural, and political agendas for human beings and all other living things. Their pursuit of wealth and power has become a global obsession. With privilege, however, comes responsibility, which corporations shun as uncompetitive. Still, the commanding element in any system has an obligation to the whole; and, while corporations have fought to secure the maximum freedom to do as they choose, they accept minimal accountability for the consequences of their pursuits, which frequently sacrifice principle to competitive advantage.

Since we now fully depend on corporations for almost everything from jobs to entertainment, what can employees and managers do in their own modest enterprises when

they find themselves competing in an ethical sewer? The dilemma leads many to ask: “Why should I be honest when Gerber lies to babies about the content of its products and tobacco industry executives swear before God to tell the truth to Congress and their oath means nothing?”

The challenge is not an easy one. It is a heroic and sometimes lonely endeavor built on dozens of daily decisions. It starts with the personal commitment to high ethical standards that each individual brings to the workplace. It’s small things like taking a vacation day rather than a sick day if one is not sick, or buying office supplies for home use rather than taking them. It is one person saying “no” in the face of the collective “yes.” It is the realization that the character of a company is more valuable than any short-term rewards for its betrayal. It is speaking the truth unadorned by public relations, spin doctors, lobbyists, “cigarette scientists,” and greenwashing.

In the absence of ethics, image must supplant unpleasant realities; thus, manipulation of the truth, the media, the government, and, above all, public opinion has become a corporate survival strategy. IBM, like its corporate cousins, has legions of public relations specialists who could paint a happy face on the Antichrist and a cadre of lawyer/lobbyists who toil to procure government favor. There are encouraging signs, however, that the flagship of American enterprise is not resorting to the practice of greenwashing. In what might have been simply a public relations ploy, IBM Chairman and CEO Louis Gerstner declared: “The world’s environmental problems are too real and immediate—as well as long-term in their implications—for anything but total commitment on the part of those who have the capacity to do something about them.”

Gerstner’s statement was no ploy. The “something” turned out to be a substantive commitment of intellectual and financial capital—over $1 billion—to clean up and prevent environmental pollution.

True to the chairman’s word, by 1994, the company had reduced its releases of industrial chemicals reported under the U.S. Toxic Release Inventory requirements by 81 percent from 1987 levels. In Rochester, IBM recycles more than 70 percent of the waste generated from the development and manufacture of the AS/400. Rochester is among the first manufacturing facilities in the nation to assume full life-cycle responsibility for its product by establishing a center that accepts obsolete AS/400s. A full 98 percent of the recovered parts are either reconditioned and used as new, used by field personnel as replacement parts, or recycled.

Even with all its progress, the company still contributes millions of tons of waste to the 11.4 billion tons of hazardous effluent that corporations annually confer on the planet. Economists expediently call it an “externalized cost,” and it is this ability—the practice of transferring the costs and consequences of production to the public—that lies at the heart of many ethical transgressions.

The remedy, first voiced by Clifford Cobb, Ted Halstead, and Jonathan Rowe in an October 1995 Atlantic Monthly article, requires a change in the way we assess economic transactions.

Currently, the nation’s economic measuring system, the gross domestic product (GDP), adds but does not subtract. Any action that generates income, regardless of how damaging to the planet or its people, is counted as economically beneficial. Thus, an oil spill, overfishing of the oceans, the spraying of toxic chemicals on the food supply, the cutting of the last ancient forests, child labor, and even earthquakes or hurricanes are all viewed as good for the economy. But they are not necessarily good for people. For instance, the profit that a company can make from depleting a fishery today is poorly earned if it means people go hungry tomorrow.

When disaster is portrayed as gain, values are inverted: A safe food supply becomes less valuable than the earnings of Dow Chemical. The authors argue that, if we understood the full cost of economic activity, we would likely reject those that serve us poorly. Economics would become a means to an end, not an end in itself. A more useful

valuation would be an NDP—a net domestic product that would support ethical behavior by exposing the costs of harmful pursuits.

Such a change in the economic barometer will require a shift in the national consciousness, but what can one person do? A friend of mine who manages an IT consulting firm in Oregon told me he once turned down a major contract with a logging company because he objected to their practice of clearcutting thousands of acres of forest. A colleague in New Jersey refused to create a Web site for a customer when he discovered that the “dating service” trafficked in pornography. A manufacturing company in southern Oregon (see next month’s “Out of the Blue”) adopted as two of its corporate values “honesty and integrity.” The company has only one work rule for its employees: Live our values.

The history of corporate antisocial behavior dates back to the aftermath of the Civil War. Prior to that, corporations were chartered only for a limited time and a specific purpose—building a canal, for example. Corporate officers were fully liable for the actions of the corporation and could be prosecuted. When the project was finished, the charter was revoked, and the corporation disbanded. But the Civil War was fought largely on borrowed money; after the war, lending banks and corporations held positions of enormous influence and pushed to acquire the rights of a supercitizen.

In 1886, the Supreme Court declared in Santa Clara County v Southern Pacific Railroad that a private corporation was a natural person under the U.S. Constitution. With personhood came unprecedented capacities: unlimited life, unlimited size, unlimited power, and unlimited license. The differences between individual rights and corporate rights are striking. An individual, for example, cannot take a gun, fire into a crowd of 100,000, and kill ten people without consequence. A corporation can. According to the provisions of the Clean Water Act, oil, chemical, and steel companies are not liable for the deaths of up to 10 people per 100,000 in neighborhoods around their plants and refineries.

Revoking corporate personhood would restore accountability. Under the current system, not one Union Carbide executive served a single day in jail for killing 2,000 people and blinding thousands more in Bhopal, or for injuring 141 people in a toxic release in West Virginia just eight months later.

Rescinding personhood would also restore our most basic democratic values by delinking money from free speech. Corporations have virtually no limits on political spending and advertising and so can dominate political discourse. And when General Electric, Westinghouse, and Disney own the three major networks, the possibility of meaningful debate is even further limited: GE is unlikely to air a special on its 47 Superfund sites or its history of overcharging the government in military procurement scams. With $80 billion in annual revenues, IBM commands an overwhelming voice in the political arena. Should it have a collective voice greater than that of its individual employees?

If corporate ethics are to be restored, time is of the essence because new international trade agreements seek to raise the status of corporations to that of governments. Once corporations are allowed to escape the bonds of national loyalty to become truly stateless, to whom will they be accountable?

Today, corporate size and dominion exponentially multiply the impact of an ethical breach. Prevarication and manipulation now have the potential to do global damage and retard necessary changes in our collective behavior. Pulitzer Prize-winning journalist Ross Gelbstan documents that the gas and oil industry orchestrated a deliberate misinformation campaign designed—according to industry documents—to “reposition global warming from fact to theory,” and aimed its campaign at the poor and less educated.

The urgency for ethical reform can also be felt in the growing concentration of corporate power. Of the world’s 100 largest economies, 51 are corporations. (As of 1995, according to the Institute of Policy Studies, IBM was number 52 and GE number 55.)

If reform is to occur, it will start with the individual. Corporate ethics, after all, are essentially bundled individual ethics. By bringing awareness and accountability to business

transactions; adopting a clear vision that reveres principle above profit; calculating the full cost of production; eliminating waste; refusing to profit from the misery of others; speaking the truth; supporting other businesses that share like values—in the conduct of our business lives, in making decisions large and small, we have an opportunity to transform the way business is conducted and, in the process, discover who we are.

In 1864, at the close of the Civil War, Abraham Lincoln wrote a letter to Colonel William F. Elkins of the Union Army. “I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign until all wealth is aggregated in a few hands and the Republic is destroyed. I feel at this moment more anxiety for the safety of my country than ever before, even in the midst of war.”

It is my hope there is still time to prove Lincoln’s anxiety was misplaced.