I incorporate a lot of ethics discussion in the finance classes I teach. In particular, the last assignment my finance graduate students have before completing the masters program is a lengthy paper that focuses on governance at a public company of their choosing.
So I found the column, “Ethics survey”, of interest (OGJ, Aug. 27, 2007, p. 17. Unfortunately, it raises more questions for me than it answers.
First, I have no idea what standards Ethisphere (the organization that conducted the survey) actually has. The closest I can come from the column is that the standards are (per Step 7) influenced heavily by “nearly two dozen nongovernmental organizations and socially responsible investment firms.” This criterion is weak and subjective, especially since we do not know the biases of the sampled group.
Let me use Wal-Mart to illustrate the problem with this standard. Most new stores the company opens have far more job applicants than positions available. Evidently, potential employees do not find the company’s employment practices exploitative.
Nonetheless, Wal-Mart is berated routinely as exploitative by various “nongovernmental organizations.” Are these groups among those in the Ethisphere sample? Arguably, these organizations have an axe to grind: unionizing the stores. In any event, the organizations’ views amount to saying that people who want to work at Wal-Mart under the company’s current policies would be better off unemployed.
My point isn’t to defend or promote Wal-Mart. Rather, it’s to argue that “nongovernmental organizations and socially responsible investment firms” have their own agendas; why should I (or anyone else) accept them unquestioningly as arbiters of my ethical views?
Let me address three other points in Ethisphere’s “Eight steps”: Steps 1 (litigation), 6 (governance), and 8 (programs and systems).
Step 1: Why should litigation be indicative of anything but the “deep pockets” of the party being sued? Filing lawsuits is essentially free in the US, which does not normally require the loser to pay legal and court costs. Litigation in countries such as the UK, which has a “loser pays” rule, might be more indicative of substantive issues.
Step 6: I have little idea what constitutes “governance” in this context. In terms of the rest of your column, I infer that that governance has to do with established written policies and procedures. If one believes that written policies establish the presumption of ethical behavior, however, I suggest that one read the constitutions of, say, Russia and China and compare the text with reports of actual actions. Closer to home, Fortune held Enron up as a model of corporate governance in, I believe, 2000, based on its explicit policies (including board membership).
Finally, Step 8 is out of this world. In essence, if a company chooses not to respond to Ethisphere, Ethisphere won’t consider it as highly ethical. Who is Ethisphere to insist on cooperation? And, if Ethisphere is entitled to insist on a response, how about the next hundred organizations that call? Who pays the costs of responding substantively to everybody who might come calling?
R. L. Promboin, PhD
Collegiate Professor
University of Maryland University College
Vienna, Va.