Forster N. - Maximum performance (2005)(en)

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they left office, which they were later forced to return. At the time, many commentators argued that there was ample evidence to prosecute Clinton for violating federal criminal laws that covered the false statements he made under oath during the Monica Lewinsky hearings (AFP, 2002b). However, as we observed in Chapter 3, he is now earning good money on the world’s speaking circuit to help pay his legal bills, racking up about $US150 000 for each presentation.

There is also compelling evidence that several politicians, judges and police officers had been complicit in protecting the notorious Belgian paedophile murderer Mark Dutroux during the 1990s and early 2000s

– a case that took eight years to come to trial in March 2004. In early 1998, it was revealed that the mudslides that killed 300 people in Northern Italy had been caused by building houses on unsafe water run-off areas on hills. It was later proved in court that the local Mafia had been in control of the local building companies who built the houses. They also controlled the Local Government Planning Department, and regularly paid kickbacks to local police to overlook their criminal activities (cited in The Australian, 4 March 2001). In June 2003, the Italian Prime Minister Silvio Berlusconi was granted legal immunity from prosecution for bribing judges by Italy’s lower house, where his party had a parliamentary majority. Throughout the world, there have also been dozens of cases of corrupt and criminal activities amongst serving police officers in the USA, the UK, Europe and Australasia over the last 20 years.

Even those organizations one would expect to uphold high ethical standards were compromised during the 1990s and 2000s. For example, the Roman Catholic Church has been assailed by a series of financial and sexual scandals in recent years. Priests, bishops and even cardinals have been accused of child sexual abuse in many parts of the world. According to one survey conducted in 1999, in Kansas City, the death rate of Catholic priests from AIDS in the USA is at least four times greater than that of the general population (Kay, 2002). Towards the end of the 1980s, criminal prosecutors began to pursue aggressively these criminals and those responsible for the systematic cover-up of these abuses in the RC hierarchy for decades. According to one estimate, 4450 priests were accused of child sex abuse between 1950 and 2002 (ibid.). The large number of trials of priests, brothers and nuns accused of child abuse in the USA, Canada, Ireland, France and Australia threatened to bankrupt some local churches. A case in Texas cost just one diocese $US75 million in damages for an-out-of court settlement with the plaintiffs (The Weekend Australian, 18–19 March 2000). Between January and April 2002, at least 70 priests in the USA, including one bishop, were suspended in cases of sexual abuse. In

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September 2002, 86 victims of the paedophile priest John Geoghan agreed a $US10 million settlement with the Catholic archdiocese of Boston. Geoghan had been sentenced to ten years’ jail for fondling a child, and faced another trial that year, stemming from allegations that he had had molested some 130 children over a 30-year period while he was a priest (Reuters, 2002a). Geoghan was killed in prison by another inmate in July 2003. In late August 2003, the archdiocese finally agreed to pay out $US129 million to settle 542 lawsuits involving sexual abuse by their priests over a 40-year period.

In Australia, there were also numerous cases involving the Catholic Church and the systematic sexual abuse of hundreds of children in their orphanages from the 1960s onwards. According to Bernard Barret of the ‘Broken Rites’ support group, ‘at least’ 44 priests and 27 religious brothers have been sentenced in Australian courts for sexual crimes against children since 1993. In terms of professional groups, this makes the Catholic Church the single worst offender of this kind in Australia. Despite this, the Vatican announced that all accusations of child sexual abuse would be dealt with internally in future, by Church authorities, although after a huge public outcry it was forced to back down from this position (Crawford, 2002).

There have also been some truly strange and funny examples of unethical and corrupt behaviour in recent times.

The Northern Indian state, the Punjab, ran a competition in January 1998 to find and reward ‘the most honest government employee’. After several months, the competition organisers announced that they were unable to find a single example of this, but they did uncover 300 corrupt ones (The Australian, 18 March 1999). Perhaps in response to this revelation, Indian Assembly candidate Narendra Singh Bhadauria later promised to fill his cabinet with ‘turncoats, Mafia dons and criminals’ if he was elected, in protest at endemic corruption in the Indian political system.

(Time, 18 February 2002)

The Australian Electoral Commission, examining electoral fraud in New South Wales and Queensland in the early 1990s, revealed that ‘at least’ 71 dead people had voted in state elections. One ‘Curacao Fisher Cat’, who was indeed a moggy, had voted in an election in Macquairie (Sydney) in 1993. This scam was only uncovered when the elected Federal MP, Alisdair Webster, had a letter he had sent to a ‘Ms. Catt’ returned to him as ‘unknown at this address’.

(The Australian, 17 November 2000)

On June 15th 2000, the Sri Lankan Cricket Authority elected a new president, Mr. Thilanga Sumathipala. What was the problem with this? His occupation was described as ‘bookmaker’.

(The Australian, 16 June 2000; at the time, the cricketing world had been under siege over allegations of illegal gambling and match fixing amongst international players.)

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two-thirds of the 500 largest corporations in the USA had been involved in some form of illegal or unethical behaviour between 1980 and 1999 (Singleton, 1999: 18). Melvyn Weiss, whose law firm Milberg, Weiss, Bershad, Hynes and Lynch specializes in suing corrupt executives and companies in the USA, had 325 current cases listed on their website on 30 August 2004. The business magazine Fortune ran an article on 6 June 2002 entitled, ‘Business failure: corporate America has lost its way’. This suggested that fraud and corruption were becoming the rule, rather than the exception, in corporate America, and argued for an overhaul of corporate governance in the USA. An earlier article, on 25 March, ‘It’s time to stop coddling white-collar crooks: send them to jail’, revealed that, between 1992 and 2001, just over 5000 cases of white-collar crime (fraud, insider dealing and corruption) were investigated by the Securities and Exchange Commission. Just 187 (under 5 per cent) came before the US courts. Of these, 147 people were found guilty and 83 were sent to prison. Another report indicated that the average length of prison sentences for white-collar criminals, in nice open ‘hotel’ jails, was just 15 months (Australian Broadcasting Corporation radio report, 26 June 2002). California’s former Attorney General, Bill Lockyer, was so disgusted with the behaviour of executives at Enron that he commented, ‘I would love to personally escort [Ken] Lay to an eight by ten cell that he could share with a tattooed dude who says, “Hi, my name is Spike, honey” ’ (cited by McLean and Elkind, 2003: 281–2).

A 2001 survey by KPMG found that, despite greater lip service being paid to ethics, ‘there remains a disturbingly high instance of unethical behaviour in the workplace’. KPMG reported that three-quarters of the employees they surveyed had witnessed ‘a high level of illegal or unethical conduct in the past twelve months’ (The Weekend Australian, 9–10 June 2001). Another KPMG survey found that, of 2000 Australian and New Zealand companies surveyed, only 60 per cent had systematic fraud control strategies in place, even though more than a third believed that fraudulent employee behaviour was ‘a problem’ (Hughes, 2002). Another survey of 98 large companies in Australia found that being a good corporate citizen was not generally seen as being a core business concern or important to the way their businesses were managed. This echoes the findings of a survey in 2000, by CCRU Research, which found that only 37 of Australia’s top 500 companies regarded corporate citizenship as being a major factor in their strategic planning (Wallace, 2002). Corporate espionage too is on the increase, with one-quarter of American, British and Australian companies admitting that they are involved in ‘competitive intelligence gathering’, some of which sails very close to the boundaries of legality (Dearne, 2002).

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In spite of this dismal account, ethical issues are becoming more of an issue for organizations around the world, if only for the pragmatic reason that dishonest and unethical behaviour can cost companies a huge amount of money in litigation payouts. They can also seriously affect corporate performance, reduce employee morale, increase labour turnover, alienate customers and clients and lead to a loss of consumer confidence. As we’ve already seen, they can also destroy the lives of those who are employed by, or who have a financial stake in, those companies that collapse because of unethical or illegal business practices.

The business case for ethical leadership and management

These examples of the nefarious, unethical and illegal activities of individuals, corporations and countries in recent years might indicate that unethical business practices are commonplace. However, it’s important to emphasize that most leaders and managers in industrialized, democratic countries do conduct themselves within the law and, for the most part, operate within moral and ethical frameworks of some description. Having said this, we also like to believe that we are basically ‘good’, so it is only dishonest people who should be concerned about ethical values and principles. Consequently, we may believe that it is enough to proceed according to our own moral instincts, and we become masters at justifying and rationalizing these. So, in this section we are going to look at our personal value systems and beliefs about the role of ethics in business. With this in mind, please complete the next self-development exercise.

Exercise 12.1

Personal values and business ethics

Have you:

Ever ‘creatively accounted’ your tax returns to avoid paying tax to state or federal governments?

Ever exploited someone else for personal or financial gain?

Ever been ‘economical with the truth’ in order to gain an advantage over a colleague or a business rival?

Ever used your sexuality to influence someone at work?

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Ever stolen ideas or information from other people and claimed them as your own?

Ever kept back information that you knew would benefit yourself at the expense of a colleague or subordinate?

Ever used anything owned by your employers for personal use without their permission (for example, email, the Internet, telephone, stationery, company car and so on)?

Ever used ‘insider’ information for personal benefit when buying/selling stocks and shares?

Ever discriminated against anyone because of their gender, race, culture, religious beliefs or sexual orientation?

Ever, knowingly, condoned or ignored illegal or unethical practices in organizations that you’ve worked for (even if you were ordered to do this by a senior manager)?

Ever fiddled your expenses?

Ever bought products made in sweatshops employing children in East Asia (this would include many products made by Gap or Nike)?

Ever bought anything made in military-owned sweatshops in China? This includes many consumer goods, particularly clothing.

Ever accepted or given a bribe during the course of your business activities?

Ever done business with dictatorships, corrupt governments or countries regarded as having poor records on human rights? This would include many of the countries on the Transparency International ranking of the world’s ‘most corrupt’ countries.

This exercise highlights several important facts about ethics. First, if you answered ‘Yes’ to any of these questions, it means that you are, at least in some people’s eyes, unethical in your business, leadership and management practices. Second, whether we judge that any of these are unethical or not can be a very subjective process, shaped by personal value systems that have evolved over many years. Third, it highlights why it is not that surprising when some people go off the straight and narrow, because there are so many temptations that we might succumb to when engaged in business, particularly if these involve making a lot of money. Fourth, it is significant that these are temptations that almost all leaders and managers will encounter at some point during their working lives. These can include accepting bribes or sexual favours, creative accounting, lying, misleading product or service claims, taking undeclared cash payments, discrimination, bullying or humiliating people at work, obeying orders even if we know that these are illegal or immoral, price-fixing, violating health and safety regulations to cut costs, suppressing basic human

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rights, hyping up stock prices for personal gain, failing to speak up when unethical practices occur, polluting the environment, and so forth. Fifth, we also know that most individuals who are convicted of business malpractice did not deliberately set out to commit unethical or illegal acts. They succumbed to the temptations, sexual and/or financial, that were on offer, and soon found themselves on a slippery downward spiral from which there was no escape. Having said this, a few people do seem to be attracted to the dangers of unethical conduct like moths to lights, as this next story illustrates.

‘A double whammy’

A Wall Street banker was charged this week with insider trading that allowed him and two accomplices to make $US170 000 in illegal profits. James McDermott, 48, the former chairman and CEO of investment bank Keefe, Bruyette and Woods faces up to 15 years in jail and a $US1.25 million fine if found guilty. He is accused of stealing confidential information from KBW clients and passing it on to his lover, Kathryn Gannon, 30, a model and ‘adult’ film actor also known as Marilyn Star. On her Web page, Gannon challenges viewers to join her club and win a chance at appearing in her next episode of ‘Marilyn Does Miami’. ‘Think of it as a VIP pass to experience my extraordinary sex skills,’ she writes. McDermott was charged with taking insider information on six banks that were either KBW clients, or being eyed by KBW clients for merger or acquisition and passing it on to Gannon. McDermott was forced to resign last year after a SEC probe into the affair. KBW had been about to make an IPO of its stock and was expected to raise $US85 million. It promptly cancelled. In 2001, McDermott received a five-month prison sentence for his misdemeanors, and Gannon was sentenced to three months in October 2002.

(Abridged from Reuters, 2002b; AFP, 1999)

Even our choice of occupation can have a bearing on the ethical values and principles that we are likely to encounter at work, as well as the perceptions that others might have about us and the jobs we do (Table 12.1).

So, are morality, ethics and business mutually exclusive? Many people complain about the decline in ethical and moral standards in public life, amongst politicians, government officials, the judiciary, the police and even amongst the clergy these days. Yet, when it comes to business, it has often been seen as acceptable to ignore morality and ethics, so long as we play within the rules of the game of the company we work for, or the country we are doing business in. However, it is important to consider these issues because the law cannot govern all behaviour and, as we saw in the opening section of this chapter, the ‘bottom-line’ cannot ever be the sole rationale underpinning the operation of businesses. When this philosophy is allowed to flourish, fraud, corruption and illegal practices inevitably follow.

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Table 12.1 Perceptions of occupations’ ethical standards

Nurses – 90%

Pharmacists – 89%

Doctors – 80%

Schoolteachers – 79%

Dentists – 67%

State/Supreme Court judges – 66%

University lecturers – 66%

High court judges – 65%

Police – 65%

Engineers – 59%

Accountants – 48%

Ministers of religion – 48%

Lawyers – 45%

Public opinion pollsters – 29%

Bank managers – 29%

TV reporters – 18%

Business executives – 17%

Talkback radio announcers – 17%

Directors of public companies – 16%

Federal politicians – 14%

Stockbrokers – 14%

Union leaders – 11%

Newspaper journalists – 10%

Estate/realty agents – 8%

Car salesmen – 3%

Note: Percentage of respondents rating each occupation as having ‘very high’ or ‘high’ ethical standards.

Source: www.roymorgan.org, 20 December 2003.

There are three reasons why we may be reluctant to engage with ethical issues in business. First, as noted earlier, we all like to believe we are basically ‘good’, so only dishonest or ‘bad’ people should be concerned about ethics. Therefore we may believe that it is enough to proceed according to our own moral instincts, those of the people we work with or the organizations we work for. However, a serious engagement with ethics requires a different approach, particularly not an unquestioning attitude towards custom and practice, or ‘the way we do things around here’. Just because ‘everyone does it in this company’ or ‘that’s just the way to do business in this country’, doesn’t make it acceptable. A real engagement with business ethics requires an adherence to an agreed set of moral and ethical principles that transcend individual self-interest and a self-serving moral relativism that justifies

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Other reliable evidence that SRI investments work comes from the Dow Jones Sustainability Index (DJSI). The DJSI tracks the top 10 per cent of companies in 68 countries in 21 industry sectors. In the five years to August 2000, the DJSI outperformed the Dow Jones Global Index (DJGI), with an annualized return of 15.8 per cent compared with 12.5 per cent for the DJGI. Francis Grey, the research coordinator of the Zurich-based company Sustainable Asset Management, commented, ‘If you had to touch on a single issue that is at the heart of this era, it is whether you can make money and be ethical at the same time. The world is hostage to people who think you’ve got to make money and everything else is an impediment. On the other hand, there is this broad sense that being ethical will not make you money. Now, the Sustainable Research Investment industry has tested that and shown that you can get equal or better returns than the mainstream’ (cited by Wallace, 2002). Perhaps this is something worth thinking about when deciding where to place your personal investments, or your company’s money, in the future?3 Another report, describing a meta-analysis of more than 52 studies of the relationship between corporate social responsibility and financial performance over a 30year period, concluded that socially responsible corporate behaviour had a direct correlation with improvements in the bottom line, helped improve a firm’s bottom line and drove up shareholder value by improving its reputation (Hoare, 2002).

Pressure groups have become much more effective in the way they communicate their concerns about corporate behaviour to the general public, and so consumers are now much more aware of the unethical or illegal activities of organizations. At the same time, customers and shareholders are becoming more vocal about unethical business practices, and the underhand activities of a few greedy and unscrupulous business leaders. Shareholders too are becoming increasingly vociferous about the salaries of incompetent, overpaid ‘fat-cat’ CEOs and the business activities of companies in industrializing countries with poor records on human rights. A growing number of companies now employ triple bottom line reporting, where companies report on their social and environmental activities, in addition to their financial performance and profits. Corporate governance is also becoming a more important part of the operational thinking of many companies. In the 1990s, several countries also introduced new laws to protect whis- tle-blowers from harassment and persecution by large corporations when reporting on their dangerous, illegal or underhand activities (De Maria, 1999).

Clearly, ethics can be a ‘smart’ or a ‘knowledge’ tool for leaders and managers. If your organization has a reputation for being a straight