Answering an Ethical SOS
From the fall 2012 issue of OPEN, the McCombs School of Business alumni magazine.
From Wall Street to Main Street, waves of corporate scandals have continued to make headlines. Much of the malfeasance has involved good people who were swept up in an unethical tide and lacked the know-how to escape. A new series of ethics initiatives at McCombs may help students enter their careers better prepared.
By Robert S. Benchley
Photography by Matt Wright-Steel
When it filed for bankruptcy on Dec. 2, 2001, Enron, the once-high-flying energy conglomerate, still had a huge banner in its Houston headquarters listing the company’s four aspirational attributes: Respect, Integrity, Communication, Excellence. It gave out notepads with an inspirational Martin Luther King, Jr. quote printed on them: “Our lives begin to end the day we become silent about things that matter.” We all know how that turned out for Enron.
The company that employed 20,000 people, claimed nearly $101 billion in 2000 revenues and was named “America’s Most Innovative Company” for six years running by Fortune magazine, sank in a mire of fraud, corruption, and conspiracy charges that resulted in criminal prosecution for some of its top officers.
By contrast, Google’s “Don’t be evil” motto doesn’t hang in the lobby of the company’s headquarters, but it does appear on the Code of Conduct page in the Investor Relations section of its website. The section begins: “Googlers generally apply those words to how we serve our users. But ‘Don’t be evil’ is much more than that. Yes, it’s about providing our users unbiased access to information, focusing on their needs and giving them the best products and services that we can. But it’s also about doing the right thing more generally—following the law, acting honorably and treating each other with respect.” What follows is a lengthy set of guidelines covering everything from intellectual property and financial integrity to dating fellow employees and the Dog Policy (Dogs are welcome in the office, cats not so much).
The need for large companies to clarify their behavior policies—especially regarding actions that could harm the whole enterprise—is understandable. But doesn’t it seem a bit cynical not to exhort employable adults to be great, or at least better, but rather to tell them not to be bad? Given the unabated flow of scandals that continues to grace the front pages of newspapers and websites almost daily, neither encouraging goodness nor warning against badness seems to be all that effective.
Something must be missing.
It’s Not Just the Celebrities of Sin
When you think about ethical malfeasance in business, you probably tend to think of the celebrities of sin—the big-name companies (Enron, WorldCom) and big-name people (Bernie Madoff, Jack Abramoff) who have made big headlines. The truth is that most slips involve ordinary people with ordinary jobs.
The boss asks you to round something up a few dollars so the quarter will look better. Or to look the other way as some paperwork slides through because it will help a good client. Or you decide, all on your own, not to ask anyone about what went missing from the warehouse because your kid starts college next year and you need this job. You’re rarely a direct beneficiary of your actions.
Nonetheless, these small misdeeds, when added up across the economy, would dwarf those of the headline-makers. Without fanfare, they become part of doing “business as usual.” Pretty soon, you’re busy paving your own little section of the road to business hell, and you can’t quite remember who put the shovel in your hands.
Even the big-time baddies usually didn’t set out deliberately on a path to infamy. Take Abramoff, the disgraced Washington lobbyist who served 43 months in federal prison for fraud, conspiracy, and tax evasion. He’s now on a mea culpa book tour, telling his story and promoting his book, “Capitol Punishment: The Hard Truth about Washington Corruption from America’s Most Notorious Lobbyist.” He appeared on the Forty Acres on May 2 at an event titled “You Don’t Know Jack: A Conversation with Jack Abramoff.”
As part of the event, Abramoff was interviewed by Robert Prentice, chair of the Department of Business, Government and Society, and Meme Drumwright, associate professor of advertising in the College of Communication and chair of the Bridging Disciplines Program in Ethics and Leadership. During their questioning, Abramoff discussed the difference in Washington D.C. between what is moral and what is legal.
“I used everything that was ‘legal’ to build a lobbying empire, and it was an empire on behalf of clients to support their product,” Abramoff said. “The problem was that I wasn’t judging what I was doing morally. I was judging it legally, and there was a big difference.”
Of course, not everything was even legal, which is why he ended up doing time.
“When I meet these white collar criminals—and I’ve met a lot of them—they turn out to be much more like me or our students’ parents than the bad guys you see on TV or in the movies,” Prentice says. “They tend to be religious. They tend to be family guys. They tend to have neighbors who say, ‘Boy, there’s nobody nicer or more generous in our community than old Sam, who just went off to jail.’ So why did Sam go off to jail? Because he made the same types of decisions all of us are apt to make, if we’re not careful.”
Moving Beyond Aristotle
The traditional approach to teaching ethics, with its roots in philosophy, exposed students to Kant and Aristotle and John Stuart Mill, among other thinkers, and then had the students apply those teachings to hypothetical ethical dilemmas. Not exactly hard-hitting stuff.
“Even people who want to be good people mess up,” says Prentice, “and it’s not usually because they didn’t have enough Aristotle.” Instead, he says, “there are psychological errors we all make, and pressures we all face in organizations, that lead even good people to make bad decisions.”
Prentice is inspired by the renewed focus on ethics education for the real world.
“During the 1990s,” he says, “the economy was rocking along, and everybody wanted to get rich, and ethics really fell by the wayside. For those of us who taught ethics during that time, it was kind of depressing because it wasn’t at all unusual for students to stand up in class and say, ‘Look, I don’t want to go to jail, but I’ll do anything it takes to retire as a millionaire by the time I’m 30.’ Since Enron, we don’t hear that anymore. Students are much more receptive to messages about ethics than they used to be. I think parents are focusing more on their kids, and kids are listening a little bit better than they used to because they’ve seen the fallout.”
That propensity for good people to do bad things because they lack the tools or the training to deal with real-world situations is precisely the reason McCombs is launching several ethics-based initiatives. In addition to the speaker series, there will be a first-of-its-kind ethics video series launching this fall available free to anyone anywhere wishing to use it for ethics instruction.
The “Ethics Unwrapped” video series is a high-production-value offering designed to capture the attention of students who have grown up on YouTube. “Concepts Unwrapped,” a subset of the overall series, will deal, one at a time, with behavioral-ethics-related concepts such as “incrementalism,” a phenomenon where “you depart from your ethical code or the law just a little bit, but then it becomes just a little bit more, a little bit more, and you just get used to it,” Prentice explains. [See sidebar for more ethics lingo.] “Almost every securities fraud, almost every accounting fraud, started with a small number.”
Several additional videos deal with various aspects of corporate social responsibility, another hot area. Also on tap: a documentary on Abramoff’s visit that uses behavioral ethics concepts to deconstruct his downfall and “Cases Unwrapped,” a series of video case studies.
McCombs isn’t the only school reimagining ethics education. Dean Thomas Gilligan is part of an academic working group of leaders from several universities examining how ethics is taught to college and graduate students; McCombs hosted the second annual Partners in Business Ethics symposium in September 2011. And the university is revamping undergraduate education requirements to include “flags”—important academic skills and experiences, one of which is ethical decision making—that students will learn in the context of their own discipline and will be taught across the entire university curriculum.
But Can Ethics Be Taught?
All of this raises the question of whether people can be taught right from wrong if they haven’t already learned it by the time they are 18.
“I firmly reject that premise,” says Meme Drumwright, Prentice’s co-questioner at the Abramoff event and his successor as chair of the Ethics and Leadership Flag Committee. “If you think that you can’t, it really undercuts the power of education to begin with. It means you can’t change the way people think about things, to analyze them and put them into action.”
David Chandler, Ph.D. ’11, an assistant professor of management and co-director of the Managing for Sustainability Program at the University of Colorado Denver, believes a university’s role is to expose students to a range of scenarios and consequences.
“What we can do through the case-based method is put them in certain situations so they can think through the consequences of different actions. Then, later, if they find themselves in a similar situation, they will have a better understanding of the range of paths open to them. You give them a menu of options and show them what the possible consequences are of the various options. Then we’ve done our job. We can’t be there looking over their shoulder when they’re alone in their office,” Chandler says.
But to resist the pressure, “you have to really know who you are, what you stand for, and why you’re going to do something or not do something,” says Linda Treviño, professor of organizational behavior and ethics at Penn State’s Smeal College of Business. Treviño is a leading scholar in behavioral ethics and conducted seminal research that links psychological biases and corporate pressures with ethical missteps.
She points out a significant challenge: “There’s evidence that students’ attitudes shift in the wrong direction while they are in business school. They develop more interest in shareholders and the bottom line and less in other stakeholders.” Still, Treviño adds, “the more experience you have wrestling with the issues, considering the different stakeholders and the harm that might be caused, the more you advance in the way you think. I think of it as a fitness program—a muscle you have to work at.”
Prentice thinks developing “muscle memory” is an apt metaphor for the process of working through hypothetical dilemmas so a response will be instinctive if they spring up in high-pressure work situations. “There have been studies of people who are heroes,” he says, “who rushed into a burning building to bring someone out, or in a battle charged the enemy machine gun nest. When asked why they acted the way they did, they all tended to say the same thing—they had thought about the situation before and what they would do if it happened.
“We can help our students anticipate and thereby prepare for ethical challenges they may someday face in the workplace. My greatest chance to have a value-add for these students’ ethical lives is to help them live up to their own ethical standards in a world where there is a lot of pressure from the company to meet production standards and meet quotas and keep the share price up,” Prentice says.
Which brings us to Enron whistleblower Sherron Watkins, BBA ’81, MPA ’82. As a CPA with extensive accounting experience, she recognized that the books were being cooked, and she took her warning straight to the top: Ken Lay, the company’s CEO. But she was amazed at his response—or lack of response, really.
“People believe that if you deliver the truth it will win the day. I felt like I was warning the captain of the Titanic,” she says. “I had a vision of a pathway to success: Address the crisis and right the ship.” Watkins was amazed that the captain’s response was to do nothing. “It was like he was in denial,” she says. It wasn’t until later that she understood how impossible he found it to accept the fraud that had occurred on his watch.
That was back in 2002. Watkins makes her living these days traveling the lecture circuit. “I thought the Enron message would die out,” she says, “but people still want to hear it. My phone started ringing again after the Wall Street collapses of 2008. I attend a lot of conferences where people recognize that outlandish CEO compensation systems that ignore poor results are an issue, as are ethical problems and deficiencies in the capitalist system. But we don’t seem to have the will to fix it. CEOs still wreck companies and get rewarded.”
Watkins says students have no concept of the challenges that will come their way. “It’s an ugly world out there, and you have to be somewhat prepared,” she says. “What happens happens fast, and it’s usually over quickly, and you will be the deer in the headlights.” In terms of teaching ethics, “You’re not going to make a bad person good. You’re trying to give a tool kit to the good kids. The tragedy of the Martin Luther King quote is that people don’t realize what it means to stay silent, they don’t see their soul begin to erode. You don’t realize it until you look in your mirror at the end of your life and don’t like the life you have lived and can’t go back and change it.”
Ken Lay died of a heart attack in July 2006 prior to his sentencing. Somewhere in there is a message.
You Know What They Say About Moral Equilibrium…
Behavioral ethics comes with its own lingo, handy for identifying what misstep you may be about to take. Here are some of the terms being used in McCombs classes:
- Bounded Ethicality: The notion that it is difficult even for people who truly wish to act ethically to be completely ethical because various organizational pressures and psychological tendencies make it very difficult for anyone to always act ethically.
- Conformity Bias: The tendency people have to take their cues for proper behavior, including ethical behavior, from their peers rather than exercising their own independent ethical judgment.
- Ethical Fading: Occurs when people are so focused on other aspects of a pending decision that its ethical aspects fade from view.
- Framing: Refers to the fact that people’s judgments, including their ethical judgments, are affected by how a question is posed or viewed; for example, people prompted to think of an issue as an ethical issue will tend to make more ethical decisions than people prompted to think of that same issue as a “business” issue.
- Gaming Incentives: Figuring out a way to increase rewards for performance without actually improving performance.
- Incrementalism: The tendency people have to make a series of minor ethical missteps that can lead to major ethical errors; in other words, the slippery slope.
- Moral Agent: A person who is capable of acting with reference to right and wrong.
- Moral Equilibrium: The tendency people have to keep a running scoreboard in their heads that compares their self-image as ethical people to their actual behavior; people who realize they have not lived up to their own standards often seek opportunities to make up for those departures (“moral compensation”), while people who have done something good and are running a surplus in their ethical account sometimes grant themselves permission to not live up to their own standards (“moral license”).
- Overconfidence Bias: The tendency of people to be more confident than is objectively justified in their abilities and characteristics, including in their moral character and their ability to act ethically.
- Role Morality: The tendency many people have to use different moral standards as they play different “roles” in society—for example, to take ethically questionable actions in their role as loyal employees at work to advance their company’s profit goals that they would never take at home to put money in their own pocket.
- Self-Serving Bias: The tendency people have to gather, process, and even remember information not objectively, but in a way that serves to support their preexisting beliefs and their perceived self-interest.
This story has been edited to reflect the following corrections: "Ethics Unwrapped" is not a speaker series; and "Cases Unwrapped" is the name of the planned series of video case studies.