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The seeds of folly?

Redefining the ethical landscape

by Simon Longstaff

Serious students of history are likely to have been stimulated by Barbara Tuchman's excellent and provocative book, The March of Folly. Tuchman advances the thesis that history is replete with notable cases of large-scale and avoidable acts of folly.

Indeed, an act of folly is defined by her as the wilful pursuit of a course of action, even though there is unambiguous, contemporary advice that to proceed is against self-interest and when a realistic alternative is available. In other words, the relevant act was seen to be folly at the time, and not just with the benefit of hind-sight.

Set against this definition, Tuchman points to archetypical acts of folly including: the decision by the Trojans to take the wooden horse within their walls (despite the advice of Laocoon), the Renaissance Popes' provocation of the Protestant secession, British decisions, strategies and tactics leading to the loss of the North American colonies, and the USA's prosecution of the war in Vietnam - leading as it did to defeat. In each and every case, avoidable errors led to a disastrous outcome that could have been prevented.

I want to suggest that Australia, and business in particular, is perched on the edge of a precipice beyond which folly lies. It will seem curious to some that such a comment is made at a time when there are so many signs of renewed economic vigour, when employment statistics are improving, when exports are up and when company profits are mounting to record highs.

On reading further, many will think that I have missed an opportunity to concentrate attention on the really pressing matters of the day; issues such as: the international trading scene, micro-economic reform, labour market reform, unemployment, the emerging 'under-class', Mabo, the debate about the republic and so on.

So what do I offer in their stead? Nothing more and nothing less than a concern that corporate Australia is about to squander a golden opportunity to make a distinctive response to the challenge of redefining the ethical landscape in which we live.

Hugh Mackay's research indicates that many Australians think that when it comes to business, ethics is an optional extra. I want to suggest that if ever this was true, then we can no longer afford for it to be so. This is because our capacity to respond to the big issues of the day ultimately depends on our ability to address the fundamental issue of ethics with a degree of seriousness that matches the size of the challenge before us.

On a positive note, it should be acknowledged that 1993 has seen an increase in interest about ethics. Yet some commentators have described this growing concern as nothing more than a passing 'fad'. Others have labelled talk about ethics as a predictable and somewhat guilty, response to the so-called 'decade of greed'. An element of cynicism may be at work in both positions. However, they point to a real danger; namely, that the debate about ethics is in the process of being hijacked by latter day intellectual pirates, the 'trend surfers'.

'Trend surfers' are people who achieve a sense of satisfaction (and recognition) by riding the surface of the latest wave to strike the shores of our island continent. They offer a sense of certainty and guru-like, profess an appealing answer to each of life's more complex mysteries. Above all else, 'trend surfers' value the mastery of technique. Providing that they can strike a confident pose as they glide down the surface of an issue, then they will be content to leave the exploration of the depths to others.

The management community is especially vulnerable to the trend surfers' seductive line. This is because it promises a 'quick fix' for every problem and cheap access to every opportunity. And when it comes to quick, cheap solutions to issues that arise in the field of ethics, then the trend surfers offer a grab-bag of scarcely understood programmes for change.

In this respect, there are few better tools of the trade than the trusty Code of Ethics or Code of Practice. Putting it bluntly, even well-intentioned people are fooled into developing codes as an alternative to the active and creative management of an organisation's culture. This is an act of folly. Yet, it is not uncommon for the following process to unfold:

1. Refer the matter to Corporate Counsel, Human Resources or a consultant,
2. Have the appointed individual draft an appropriate document (usually based on earlier attempts by others),
3. Publish the Code (occasionally with a 'sign off' requirement),
4. Activate the internal monitoring / enforcement regime,
5. Sit back and relax (because "now we're ethical' ).

This is, of course, something of a caricature. However, it is my common experience that when it comes to addressing the problem of ethics, most companies are looking for a cheap 'off the shelf' solution to their problems.

It is also my common experience (and that of most others working in this field) that although these types of solution appear to be efficient - they are almost totally ineffective.

It is not that there is anything inherently wrong with the Codes. Rather, the problem arises whenever they are mistakenly applied as a complete solution when, in fact, they were only ever intended to form one part of a more comprehensive response.

Now, it should be obvious to the reader that I am less than impressed by the typical response made by business to the challenge of ethics. I am not suggesting that the fault lies with insincere people. On the contrary, I believe that most people in business would prefer to be able to do the right thing as a matter of course.

But the ethical landscape is a confusing place coloured in grey tones. It is a place which all of us recognise - a place in which we can feel drawn in more than one direction at a time, where we frequently feel uncomfortable as, instead of being surrounded by certainty, we experience genuine dilemmas in which cherished principles of equal importance and validity can be seen to compete in a forum that does not admit absolute winners. Trend surfers cannot magick the landscape into blacks and whites. Nor can they fashion certainty out the fabric of a genuine dilemma. Those who promise such tricks are either genuinely ignorant or deliberately dishonest.

So where does this leave people in business (and the rest of us for that matter)? The first step in coming to terms with this aspect of its environment is to understand that the ethical dimension is an inescapable element in the human condition. It is not an optional extra at all, and to think so is to be deluded.

Ethics is ultimately about two things. It is about answering the practical question, “What should one do?”, and it is about relationships. Every time a person faces a decision then he or she is in the ethical dimension. And every decision is likely to affect some type of relationship.

The relevance of this to business should, I hope, immediately be evident. If business has learnt anything in recent years, it is that decision-making is an inescapable feature of a world in which change is a constant, and that business (like life) is about relationships.

In some respects it has always been so. However, we seem to have passed through a time in which the ethical dimension has been submerged beneath a tide of opinion that all relationships could be reduced to transactions in the economic dimension. We have discovered, at some cost, that in setting a price on everything, we risk losing sight of its real value.

Those days are over for the simple reason that the community is sick and tired of being treated as if it were nothing more than a market. In the same vein, individuals are beyond accepting that they are human resources to be deployed as if part of some giant commodity exchange (a factor that many employers and unions are yet to comprehend).

The lessons learned are going to be reinforced in coming years. Improved communications technology means that an increasing number of people will be involved in decision-making, over shorter cycles and with much more immediate effect on our operating climate. The need for efficient and flexible business practice will result in an almost inevitable devolution of authority throughout the enterprise. In turn, this will increase the extent to which business will be vulnerable to poor decision-making by individuals or groups exercising delegated authority. Hence the need to ensure that solid relationships, based on trust and mutual respect, are in place as the underpinning for successful management strategies.

At the same time, there is likely to be a significant increase in the level of trans-national accountability. Further integration of national economies is but one product of freer trading conditions. Although markets shun control and absolute certainty, they relish the existence of an underlying and stable structure. Hence, there is likely to be pressure for greater predictability in the conduct of international business.

As trading systems interact, it will not be possible to rely on familiar, formal mechanisms for regulating conduct and adjudicating disputes. It is therefore likely that a competitive advantage will flow to those who can establish a framework of relationships based on trust and reliability.

Without wanting to seem too naive, I believe that the future will be delivered in to the hands of those who can develop and sustain a reputation for virtuous conduct in business.

Lest this seem too improbable, it should be observed supportive evidence is already at hand. Earlier this year, John Gough spoke of the difficulties encountered by Australian businesses seeking to raise funds offshore. Hampered by a reputation for untrustworthiness, he reported that many found that the funds were only available to companies prepared to pay a premium or, and this is the important part, to those led by people who have a personal reputation for honesty and reliability.

Such a reputation was no alternative to having a fundamentally sound business. But it did make a difference to the bottom line! It didn't really matter that our critics were invariably being hypocritical or that our reputation was sullied by the well-publicised actions of a few individuals. The word was out, and however unfair, even the innocent were affected.

Likewise, rising consumer activism in the United States and Europe is starting to force companies to examine practices that could, at an earlier time, be 'exported' off-shore. Today, companies are faced with the reality that their production and employment practices can be brought to light with relative ease. The end result is that consumers, in major markets, are now choosing to apply new forms of pressure through the power of the market place. Interestingly enough, the simple price mechanism is being modified as purchasers begin to make their own calculation about the real cost of 'externals' such as: the impact on the environment, exploitation of labour, co-operation with corrupt regimes, and so on.

Finally, there is growing evidence that charges of corrupt or unethical practice will be deployed as an effective political weapon in both the domestic and international arena. Corporations that compromise their principles are a prime target for allegations of misbehaviour and will be liable for sometimes indiscriminate punishment as a convenient scape-goat. It is difficult to see shareholders and institutional investors accepting huge losses brought about because of avoidable errors of judgement.

The capacity to deal with each of these factors depends on a prior decision to tackle issues of ethics in a comprehensive and sophisticated manner. Otherwise companies will just 'muddle through', and this is a recipe for disaster in a rapidly changing world of stiff competition.

Yet, the point that I really want to stress is that the importance of addressing the ethical dimension goes well beyond the need to seize a commercial opportunity. Of much greater significance is the chance to address fundamental questions about the nature of our society, to test ideas about who we wish to be as a people, to re-constitute the dominant relationships which define our identity.

We can choose to be ethical because it is profitable in the long run, but paradoxically we can only achieve this objective if we make a deeper commitment and choose to be ethical because it is right and proper to do so.

A commitment to leading the ethical life will throw up more questions than immediate answers. Yet, in time, I believe that we will be better off for having taken the risk that comes with asking difficult questions and sustaining a tense debate. If we are to face such questions, then we will need to exercise a kind of moral courage and sincerity that is not always evident in our public debates. And this in turn calls for something more than the skills of trend surfers.

I am optimistic about our capacity to look to the long term and treat these questions with the seriousness that they deserve. This is a task for all of us and not just for politicians. In particular, I would welcome more general contributions from our business folk. I am sure that their concerns, as citizens, go beyond issues of economics, profits and losses, cash flows and the like. It has been said that "the business of business is business". True, but business is about a lot more than most people allow.

Business does not exist on an island of commerce. It is situated within society which provides all of the infrastructure on which business depends. In turn society benefits from the productive activities of the business sector - at best, a truly symbiotic relationship.

It is true that there are uncertainties and challenges in the ethical dimension. But there are also tremendous opportunities. Business people frequently find themselves at the leading edge of issues laden with profound ethical significance. As such they must resist the siren call of the trend surfers. And so must we all. For to fail to do so would be the ultimate act of folly.

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