Business ethics in Australia

By Simon Longstaff

A version of this article was first published: As the inaugural address presented by Simon Longstaff in his new role as Executive Director of St James Ethics Centre delivered to National Goals and Directions Inc - 17 August 1991

May I begin by issuing something of a warning. I am afraid that I am not a social scientist with a rigorous appreciation of how the community views business. To make things worse, I have to confess that I have only been back in Australia for six weeks and consequently my knowledge of current conditions is less than perfect.

That was the good news.

The bad news is that all of my most recent education has been as a philosopher. Mention that at a social gathering and it is normally a real conversation killer. Its import at this gathering is that I will be unable merely to report on how the community views business. Rather, I will find myself subject to the philosopher's curse which is to ask an endless stream of questions without necessarily providing any answers.

One doesn't need to go much past the screaming headlines in the daily papers to get a fairly crude sense of how the community views business. As one thumbs through the papers and encounters column after column of facts and opinion, it is tempting to think that the relationship between business and the community has hit an all time low. What follows are the sort of things I have in mind. I quote:

... the profiteers insolently and covertly attack the public welfare ... They charge extortionate prices for merchandise, not just fourfold or eightfold, but on such a scale that human speech cannot find words to characterise their profit and practices.

Or again,

... those I abhore are the unprincipled men who ... use unethical means to obtain undue profits ... they hoard currency or commodities to force the value up, or they dominate the markets to rob the commoners of their profit, or they encroach on others' land destroying the livelihood of the orphan or the weak, or they wander from one government office to another to look for profits to be made ... I will have nothing to do with such people.

Apart from some archaic terms, the language is vaguely familiar. Yet, each of these pieces is drawn from the fourth century AD. The first forms part of the Roman Emperor Diocletian's decree of AD 301.

The second extract is from the pen of the Chinese scholar, Ko Hung, who wrote those words in the first half of the fourth century.

I have drawn attention to these pieces of writing for two reasons. Firstly, the similarities to present public opinion are striking enough to warrant comment. Some things change but never change. But more importantly, they may help to illustrate an analogy that I hope to develop at a later point.

But before launching myself into some unavoidable speculation, I really ought to turn to the specifics of the topic at hand.

How does the community view business?

In trying to answer this question for you this morning, I must acknowledge the primary source of my information. In March 1990, Hugh Mackay published one of his reports on the topic of corporate ethics. In this study, Mackay Research sought to investigate current attitudes towards the perceived morality of business, and the connections between corporate ethics and the morality of the broader community.

The following are sub-headings drawn from the report:

• In business, ethics may be 'incidental'.
• The underlying problem is community standards.
• When survival is the issue, ethics may be 'suspended'.
• Is greed good, bad or 'natural'?
• The quality of personal relationships (with customers and employees) is regarded as a symptom of corporate ethics.
• The person at the top is crucial.
• Corporate ethics have a direct impact on our lives.

Now clearly this is just a list of headings. But perhaps in exploring community attitudes, it may be helpful to quote directly some of the views expressed during the interviews which form the basis for the report.

Probably most companies operate in a situation where they don't actually have to be unscrupulous, yet they wouldn't necessarily do the right thing by you. They are there to make a dollar.

There are no morals in business. Corruption is part and parcel of it.

Mackay reports that underlying all such discussion is the recurring theme that money is a means to an end for individuals, but an end in itself for business.

That's what the whole business world comes down to – making money. With some people, morals comes into it, but some other people don't really care.

In response to this, Mackay finds that many Australians would hold to the view that,

... since corporate behaviour is unlikely to be spontaneously ethical, the matter of corporate ethics should be taken out of the hands of corporations and enshrined in laws and regulations which control their behaviour.

This is a point I will come back to.

Despite a degree of cynicism with regard to the ethics of business, Mackay finds that there is a widespread view that many individual companies may behave in a highly ethical way:

The problem is knowing how to identify those companies and, at a deeper level, the problem is knowing whether one visible sign of morality might be offset by other, invisible, unethical practices.

In this there appears to be a basic concern that image is everything. Listen to the voice of one person:

Most supermarkets have made some effort to take account of the environment, but they are just doing as much as they have to, so they will look good to their customers.

Or:

Virtue isn't necessarily rewarded in business is it? The bad guys often seem to win. Then they try to clean up their act, so it looks all right.

Despite this somewhat cynical view, Mackay finds that the criticisms which are directed against business are recognised as being just as applicable to individuals. Those interviewed generally believed that personal ethics and personal morality have been in steady decline.

You get so cynical about big business. Wouldn't it be nice to find that it wasn't as bad as you think? But they are probably no worse than the rest of us.

I could go on giving examples drawn from the Mackay Report. However I suspect that much I would have to say is either already well known because of published research or through an intuitive grasp of the situation in Australia. So it may be helpful to give my impressions of some of the developments which have taken place overseas.

Questions relating to business ethics have been debated since the earliest times, usually concentrating on the question of usury. But in the 1920s, in America, a whole new range of questions began to emerge. For four or five decades the discussion of these questions was largely confined to an exchange of views between academics and one or two rare but committed individuals who, through their philanthropy, sought to realise the highest ideals.

Two world wars and the experiences in Korea and Vietnam meant for the most part the world of business was relegated to the background of modern life. Yet all the time, the power and influence of the commercial sector was growing to such an extent that there are now some American-based multinational companies with a GDP larger than many countries with seats in the United Nations.

For many, this period of phenomenal growth culminated in the excesses of the 1980s. The liberation of the sixties had been transformed into the materialistic acquisitiveness that made Ivan Boesky and Michael Milken into 'Masters of the Universe'. With the end of the party, Boesky and Milken found themselves in goal and Americans could at least salve their collective conscience with a feeling that retribution had been just if not swift.

As is the way with these things, the same revision of values is taking place in the United Kingdom. Big Bang in the City of London brought unprecedented opportunities for bright young things in red flannel braces to earn record amounts. The shake-out is still occurring. The people of Britain are casting around for someone to blame and the finger of suspicion is pointing at traditional bogeymen such as the banks.

So in general there is a similar level of concern being expressed in the domestic economies of Britain and America. Yet it is instructive to note that while these countries seek to put their houses in order, they look at Australia with a somewhat jaundiced eye.

John Braithwaite in The Sydney Morning Herald reports on some of the jokes which are doing the rounds about Australia:

Q: What do you have when half a dozen Aussie entrepreneurs are buried up to their necks in sand?

A: Not enough sand.

Q: How many Aussie entrepreneurs does it take to change a light bulb?

A: Fifteen. Five to put in the fix, four to borrow the capital offshore, three to organise tax minimisation, two to oversee the operation and one qualified tradesman from the Australian Electricians Union.

It's not that the people who make these jokes feel that their businesses work to higher ethical standards. It's only that they can take some comfort from the fact that their regulatory authorities have real teeth and sufficient resources to do their job.

But let me qualify the view that increased regulation is the answer to the community's criticisms of business. Part of this qualification proceeds from an understanding of what it is that may have happened to shape the community's perception of business and beyond this, why it is that an examination of business practice has come to the fore.

The excesses of the '80s and the onset of recession is not sufficient explanation. Perhaps I can offer a somewhat fanciful analogy that compares the place of business within the community to developments in urban transport.

In the beginning goods and persons were transported about the city in horse-drawn vehicles. These vehicles usually travelled within the boundaries of a local community. People knew the driver, they could pat the horse, everything moved at an easy pace. Indeed, in many cases the form of transport was an integral part of the social fabric. In the same sort of way, many businesses operated on a human scale depending for their success on integration into the surrounding community.

Next came the tram. It was bigger It was bigger, it was faster and it was noisier. There was less chance of knowing the driver, but at least you knew where it was coming from and where it was going to. And, with a little bit of luck, there was time to get out of the way.

We live in the age of the motor car. The range of its operations has extended to such a degree that it falls beyond the bounds of any one community. It is swift, powerful and relatively silent in its manoeuvres. And it is significant that the silence is a feature of the driver's world and its accompanying sense of isolation. But, more importantly, it can travel in any direction that the driver chooses to steer.

In a sense I think that this sort of evolution is similar to that which has occurred in the community's perception of business. With the advent of transnational and multinational companies capable of ranging over great distances and operating at tremendous speed, it has been difficult for the community to keep track of developments in the commercial world.

From the point of view of business, this has meant that it has been able to enjoy a considerable degree of freedom. In exercising this freedom of movement there have been one or two drivers at the wheel who have been more than a little careless when navigating from point A to point B. The roll-call of casualties is well known and includes such notables as the environment, employee health and safety, shareholders rights and the welfare of the community at large. Very few would disagree with the proposition that it is an essential function of business to generate profits. However, few would openly subscribe to the view that profits maximised at any cost.

A casual acquaintance with the historical conditions experienced by our Roman and Chinese correspondents from the fourth century reveals a pattern which is not dissimilar to that which has just been outlined. Diocletian and Kung Ho confronted social institutions (albeit from vastly different positions) which had grown beyond the control of the communities which helped to create them.

However, something quite remarkable seems to have occurred in the latter part of the 1980s and on into the 1990s. This is that there has been a sudden realisation by those who are driving, by those who are passengers and by those who have been dodging the oncoming traffic that the whole network is interdependent.

The drivers now realise that the rules of the road are set by the community, and beyond this, that their vehicles are licensed and even constructed by the general populace. Likewise, members of the community have come to realise that in many respects they are the creators of the runaway vehicle and that if blame is to be apportioned then they must accept their share of it. This is to make the point noted by High Mackay that:

Australians seem to be becoming rather self-conscious about their own blatant and rampant materialism, and they seem to be wanting to tone down some of the more strident messages of the so-called Me Generation.

Business is not a machine, it is a human endeavour. One of the confusing issues for the community is the seeming impersonality of many businesses when deep down the community know that it is people just like them who are running the show.

This is to brig us back to the point about regulation. Whilst it may be true that the regulative authorities in Australia lack the teeth that are occasionally bared by their cousins across the water, there is a growing realisation that a framework of regulation, no matter how tough, is not in itself sufficient if the task at hand is to improve the ethical conduct of business.

Rather, it is likely that lasting change will only be effected when community standards have evolved to such a degree that unethical behaviour is not only questionable but also unthinkable.

All of this is to realise what I suspect most members of the community already know. Namely, that the vast majority of individuals working in the world of business share the community standards. Very few believe that commercial enterprises are peopled by especially greedy and rapacious individuals. Indeed, the feeling is that those working in business are as much victims of circumstances that have grown beyond their control as they are the perpetrators of generally perceived wrongs.

So, in conclusion, I want to suggest that when the community views business it inevitably focuses its gaze upon itself. Just as there are many individuals in the workforce who feel uneasy when confronted by the many dilemmas that mark the ethical landscape, so it is that the community at large has grown uneasy.

For both groups, or is there after all only one group, this difficult situation is compounded by the fact that the language of ethics has largely disappeared from the vocabulary of our everyday discourse. So it is that the 'quick fix' of regulation appears an attractive option. Even an incomplete sentence seems to be an achievement worth applauding when struggling for words. Yes, there is some need for further regulation, but the research to which I have referred seems to suggest that Australian society is ready for, and desirous of, a more lasting and deep-rooted solution.

In all of this there is an opportunity for our leaders to engage in the task of answering Socrates' question, "What ought one to do?". This is especially so for our business leaders who collectively find themselves at the wheel of an immensely powerful vehicle built by the community but more or less out of its control. It is a clich', but nonetheless a plausible assertion, that power should be wed to responsibility. It is in the interests of both the community and business that our leaders reacquaint themselves with the language of ethics.

But beyond this, society as a whole will only develop sound and defensible policies when all are able to contribute to the debate about what ought to be done to reconcile the community's view of what business is, with what the community, including business, would have it be.