Some thoughts on purpose and ethics in the business world Tarek El Diwany Cambridge University 27 February 2014 Speaker notes are included in this version Choose View gtgt Notes Page Some Implications of our Choice of Value System ID: 315815
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Slide1
Successful Executive or Corporate Slave?Some thoughts on purpose and ethics in the business world
Tarek El DiwanyCambridge University27 February 2014
Speaker notes are included in this version. Choose View >> Notes PageSlide2
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?Slide3
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.Slide4
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 2007Slide5
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.Slide6
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.Slide7
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.Slide8
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 . Slide9
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.Slide10
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)Slide11
The Corporate Players
New recruitManagerDirectorShareholderRegulatorInvestment analystBankerSlide12
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?Slide13
Normative EthicsPleasure-oriented ethics (Hedonism) e.g. Epicureans, Benthamites
Consequentialismmorality judged by its consequences,Deontologymorality judged by the rulings or duties motivating the actVirtue Ethicsmorality 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 developmentSlide14
What Would Make Us Act Unethically?
Desire for material reward (money, power, fame)Coercion/manipulation/instruction by legitimate authorityidentification with charismatic leaderDesire to conform with other group membersRationalisation (“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 effectSlide15
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, 2004Slide16
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, 1989Slide17
Some Forms of Unethical Behaviour in Banking
Compose research to achieve prerequisite conclusionsLeak inside informationPreferential treatment for certain clientsPlagiarism of third party IPNot telling the whole truthFront 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)Slide18
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 measuresRegulatory framework encourages a focus on what is legal
Philosophy of wealth maximisation common among key employeesSlide19
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 behaviourDirect 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 morality
Janis and Mann,
Decision-Making: A Psychological Analysis
, The Free Press, 1977Slide20
The Nature of Human Beings
The fitrahMan’s insatiable desire for wealthRizq, destiny and its implicationsThe concept of barakahThe test of wealthConsequences of enlarged provision
Taqwa and earnings
Spurning wealth
The Day of JudgementSlide21
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.Slide22
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, MalaysiaSlide23
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!