In the industrial era, organizations have created untenable problems for moral experts by becoming bothersome illustrations of the dynamic social processes that defy attempts to apply traditional moral theory and detached philosophical wisdom. Kaufman (1973) observed that bureaucratic managers often privately approve of behavior that they acknowledge publicly as illegal or unethical. Expectations for loyalty to the organization and for obedience to managerial direction set the a priori guidelines for moral conduct, and a given organization can develop and impose its own form of influence on the individual with an organizationally specific moral order that can seem to pre-empt external social order. Organization members can defy common social or religious morality when they are acting on behalf of the organization and feel justified in doing so because their behavior is judged within the context of the organization (Jackall, 1988). Yet, employees rarely exhibit unacceptable behavior in society that is acceptable inside the organization’s boundaries. Society holds the organization accountable as a rational actor, but rarely are the individuals actually responsible for creating organizational outcomes entailed in that accountability.
Modern understanding of ethics emphasizes the behavioral aspects to the extent that the words ethics and morals are commonly used interchangeably by philosophers to refer to behavioral standards, codes of conduct or principles upon which these standards and codes are based. But, the different words imply different things. According to Bauman, “ethics is something more than a mere description of what people do; more even than a description of what they believe they ought to be doing in order to be decent, just, good – or, more generally, ‘in the right’” (1994: 1).
All organization members make decisions, the collective manifestations of which fall into certain patterns that result in more or less consistent outcomes. The exploration of these patterns can be conducted using political frameworks. Deetz has asserted that “organizations make most decisions regarding the use of resources, the development of technologies, the products available, and the working relations among people” (1992: 3). While it can be argued that a substantial portion of industrial technology is developed at the behest of the military, it is clear that organizations have taken on many roles heretofore expected of government. Deetz further suggested that the state’s power is restricted to crude guidance through taxation and regulation.
Discussion of Situational Factors
Ethics are sources of identity and motivation for mature individuals, representing some sense of prevailing telos. A person develops an ethic by learning cultural convention and then modifies what has been learned according to insight and personal experience. The point is often taken for granted; a good deal of that which influences the development of an ethic is not likely to be grasped consciously by the individual. Ethics establish states of existence for individuals that make them, for example, more or less predisposed to accept or reject authority and supervision of their activities. Ethics induce people to seek out the association of others who share similar ethics.
Organizations, to varying degrees, represent political associations and opportunities for political activity that cannot otherwise be experienced or constructed by individuals within the greater society. While conventional knowledge holds that organizations are narrowly purposeful and rationally managed entities, research reveals processes that can best be explained as political activity (Barker, 1994; Jackall, 1988): (a) functional groups compete for ascendancy of ideas, influence and resources, which is characterized by conflict; (b) the level of power and influence of any one manager depends upon that individual prevailing in conflicts regularly; (c) the corporate and bureaucratic structures are set up by and for those with the most controlling power; (d) success or failure of managers has little to do with actual accomplishments, but rather with arbitrary perceptions of one’s ability by others and with supportive alliances (that is, success and failure are socially defined, not empirically measured); (e) truth is socially constructed and the organization mobilizes to support manufactured reality promoted by those in power; (f) uncertainty in the organization and in management processes facilitates redefinition of organizational reality; and therefore, (g) decisions are based in political agreement, and agreement is based in comparative power and influence.
Jackall (1988) found that the moral system for managers in bureaucratic organizations includes some of the following principles: (a) striving for success is a moral imperative; (b) rising stars serve to validate the moral system; (c) criteria for success are bounded by the system and can be based in illusion rather than in reality – success is often the result of taking credit for the good and avoiding blame for the bad; (d) self-control, and not necessarily rule-following behavior, is a moral imperative; (e) morality is determined by flexibility and adaptability to changing political realities, and not by strong convictions; (f) bad things must be covered up or reframed in order to protect the system; and, (g) morality is a matter of survival and gaining advantage. For the citizen of this polis, morality has different implications than it does for those we may call employees. While all employees may be initiated as organizational members, only a select few will undergo extensive initiation to achieve the status of citizen.
In the General Dynamics study, employees at lower levels of the organization expected their quality of life to improve as a result of the Ethics Program (Barker, 1993). The failure of their expectations to be realized was commonly attributed by them to immoral behavior on the part of managers. These employees had not been indoctrinated into citizenship. Most never would be. Consequently, they understood the basic customs that govern the masses, but not the protocol of the political elite. Middle and senior level managers at General Dynamics, who were citizens, commonly viewed the Ethics Program as simply another political obligation. Instead of an opportunity for improvement, most managers experienced the program as yet another uncertainty to be managed in their quest to succeed. Their conformance to the rules established by the program was established by the constitution, and their experience of justice was directly related to which of their behaviors were measured and rewarded by the polis. Supervisors were citizens-in-training, and were caught between their understanding of the desires of employees for improved quality of life and their realization that the political goal of the program was to improve customer relations with the Navy in particular and with the Pentagon in general – that is, to improve the quality of life for citizens and not necessarily for the masses. The decisions of the polis were governed by the need to survive and to protect territory. The welfare of the masses was secondary to this goal, and was considered ultimately irrelevant should the polis fail.
Example of Merck Pharmaceutical Company
Merck ; Co. Inc. – maker of Vioxx, Zocor, and other popular drugs – could itself be called a model for corporate-citizenship programs. The $40 billion company, while locked in an ongoing research-and-development battle in the highly competitive pharmaceutical market, also is known as a company that caress. It has received numerous awards for corporate philanthropy and employee- and community-related programs, but more importantly – from a strategic point of view – the company has woven goodwill into its corporate identity (Logsdon ; Wood, 2003:301). The company’s philanthropic programs support two directives: advance scientific knowledge and education and improve health care. In addition to giving away Mectizan and other drugs, the company annually gives millions of dollars to education and programs that support business ethics, environmental awareness, science, and community arts and culture. In May 2002 the Conference Board, New York, a business research and support group, named Merck a winner of the Ron Brown Award for Corporate Leadership for the company’s long-term commitment to science education through the Merck Institute for Science Education. The program provides educational materials and other forms of support to further science education.
Although Merck company had developed a proud image of the most transparent and ethical company in the pharmaceutical industry, which has been admitted by numerous investigators and analytics (Blumenthal, 2005:14), now the company’s reputation is facing serious challenges due to adverse consequences caused with its preparation Vioxx. The study commissioned by FDA found more than 140,000 excess cases of serious coronary heart disease among US population caused primarily with Vioxx. Being aware of the danger, Merck chose not to pull the painkiller out of the market and instead initiated another round of negotiations with FDA. From the email corporate correspondence and negotiations with FDA, it is evident that company has been aware and most probably allegedly covered up defects with its Vioxx. Only when the Vioxx turmoil became a really pressing public issue and accompanied with Carol Ernst’s first Vioxx-related lawsuit filed against Merck, the company removed its product from the market in September 2004. The situation with Merck Company accurately corresponds to points developed by Jackall and Barker, defined in the previous part of the paper, particularly those stressing that in contemporary business environment “criteria for success are bounded by the system and can be based in illusion rather than in reality – success is often the result of taking credit for the good and avoiding blame for the bad” and “morality is a matter of survival and gaining advantage.”
Mechanisms for Ethical Management
The most effective action an organization can take toward a basic moral reference point is to build ethical values into its decision-making systems. Once unethical practices are subordinated to an ethical value system and the priority of ethics is instititutionalized, nonethical action loses any incentive it may have had. Organizations with a high degree of cohesion and commitment are wrapped around creeds. It is interesting to note that congregations that currently enjoy dramatic or consistent growth are those whose members have a clear and unambiguous understanding of who they are and where they are going. Mr. J.C. Penny began his first store with a policy to abide by the Golden Rule. In order to do unto his customers as he would have them do unto him, he accepted without question the return of any merchandise with which the customer was displeased. The J.C Penny creed included a commitment “to serve the public, as nearly as we can, to its complete satisfaction; to expect for the service we render a fair remuneration and not all the market will bear; to do all in our power to pack the customer’s dollar full of value, quality, and satisfaction; to test our every policy, method, and act in this wise: Does it square with what is right and just?”(Ward, 1997:204) IBM’s founder, Tom Watson, also believed that any great organization “owes its resiliency not to its form of organization or administrative skills but to the power of what we call beliefs and the appeal these beliefs have for its people.” Watson states as his creed: “I firmly believe that any organization, in order to survive and achieve success, must have a sound set of beliefs on which it premises all its policies and actions. Next, I believe that the most important single factor in corporate success is faithful adherence to those beliefs” (Watson, 1963:264).
However, in contemporary business environment, even informal creeds are in short supply. A study of the values of personnel at different organizational levels found considerable uncertainty about organizational values (Schmidt ; Posner, 1982:29). Almost 40 percent of supervisors were not confident they understood the values of their superiors. The further up managers moved in the organizational hierarchy, the more unsure they were of their subordinates’ values. This study suggests the importance of a clear statement of values and better communication of these values throughout the organization.
Initial and periodic audit
An initial ethical audit should be conducted by a competent, disinterested party. Someone with perspective, whom insiders trust as knowledgeable and concerned with the overall welfare of the organization’s ethical health, might then evaluate the results of the audit. Such a thorough comprehensive initial self-study should precipitate constructive policy modifications and may encourage the implementation of internal programs and processes. It will set a pattern which might then be repeated periodically and inexpensively by a committee of the board or with the oversight of a panel of objective outsiders. Ethical audits would be an appropriate function of an association or of a central office in auditing its chapters. There must be a prior commitment to honestly communicate to all people involved. The process may be more important than the report, since everyone involved will become more ethically aware and attuned. Standardized audit procedure includes a study of internal policy statements, board minutes, and memos; interviews with a broad sample of people at all levels, including former employees; and an extensive use of questionnaires designed to determine the organization’s posture on various ethical norms. As Independent Sector explains, such an audit and review insures “that the board, staff members, and volunteers are taking actions that are consistent with the organization’s values and with changing social or demographic factors.”(Independent Sector, 1993:16)
The work-culture of some organizations encourages employees to so departmentalize their lives that they leave their ethics at home with the family dog. The organizational goals are so single-mindedly simplistic that employees would feel “square” using words like “right and wrong.” As Schmidt and Posner suggest, “We need values to provide a sense of direction amid conflicting and confusing pressures. In managing others, we need values to serve as guidelines for decision making and for clear and effective communication.”(Schmidt & Posner, 1982:32) After a scandal, near-scandal, or other precipitating event, an organization often decides to crack down on unethical practices. It is much better to maintain an ethical awareness program prior to a crisis. The management can always call in a consultant to conduct a program for them. While there is much to be said for such an approach, an internally evolved program might be less expensive and carry a greater commitment on the part of the board and top management.
Code of Ethics
Robert Payton has indicated several important moments in the area of ethics and decision making. In particular, making decisions ethically involves the process as well as the result. Almost every decision is made in the context of uncertainty about the facts and the consequences (Payton, 1988:37). On the other hand, a code can be an effective tool. An association executive notes that “some code, any code, is better than none. Codes are very dangerous to enforce, but I wouldn’t be without one. They at least give the executive director the strength to go to a member and say, ‘Look, here’s the code. There are some things you need to clean up” (Walters, 1989:61). Organizations who have prepared a tentative creed and conducted an ethical audit will find that a code will evolve smoothly as part of a continuum. A procedure specifically used in assisting organizations includes discussing such questions as the following:
– What is most important to company and to a better future?
– Do any of competitors engage in practices which company would consider unacceptable for our people?
– Has management done things which its competitors have described as improper?
– Has company abstained from acts which have cost money or other benefits on the basis of a principle?
– For what ethical breaches has management fired or reprimanded employees or phased out volunteers?
The most effective action an organization can take toward a basic moral reference point is to build ethical values into its decision-making systems. Once management subordinates unethical practices to an ethical value system and institutionalizes the priority of ethics, nonethical action loses any incentive it may have had. Ethical action will become normative.
Barker, R.A. 1993. “An evaluation of the Ethics Program at General Dynamics.” Journal of Business Ethics, 12, 165-77
Barker, R.A. 1994. “Relative utility of culture and climate analysis to an organizational change agent: An analysis of General Dynamics/Electronics Division.” The International Journal of Organizational Analysis, 2, 67-86
Bauman, Z. 1994. “Morality without ethics.” Theory, Culture & Society, 11, 1-34
Blumenthal R.G. 2005. “Merck: More Side Effects”. Barron’s. New York, N.Y., 85(35)
Deetz, S.A. 1992. Democracy in an age of corporate colonization. Albany: SUNY Press
Jackall, R. 1988. Moral mazes: The world of corporate managers. New York: Oxford University Press
Independent Sector. 1993. Obedience to the Unenforceable: Ethics and the Nation’s Voluntary Community. Draft statement, Washington, D.C.
Kaufman, H. 1973. Administrative feedback in monitoring subordinates’ behavior. Washington, DC: Brookings Institution
Logsdon, J. M., & Wood, D. J. 2003. “Business citizenship: From domestic to global level of analysis.” Business Ethics Quarterly
Payton, Robert L. 1988. Philanthropy, New York, Macmillan Publishing Co.
Schmidt, Warren H., Barry A. Posner. 1982. Managerial Values and Expectations, AMA survey report, New York: American Management Association.
Walters, J. 1989. “Can an Association Uphold a Code of Ethics?” Association Management, October
Ward, J. 1997. Keeping the Family Business Healthy, San Francisco, Jossey-Bass Publishers.
Watson, Thomas J. 1963. A Business and Its Beliefs: The Ideas that Helped Build IBM, New York, McGraw Hill