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The Thin Veneer

July 28, 2010

We were talking, a friend and I, about ethics. He’s a young professional from one of the Gulf states. Idealistic, enthusiastic, with a strong moral code clearly derived from his family and his religion, yet a person who wears his morality lightly, laced with a fine sense of humor.

He was asking me whether I thought it was ethical for his company to break a contract with a supplier because they had received an offer from another supplier for goods at 20% of the price delivered by the current contractor. A tough one, said I. He felt that it would be wrong for his company to deal with the would-be supplier until their contract with the existing one expired. A deal is a deal – it’s about ethics, he said.

And of course he was right. But, as he pointed out, the people who were considering taking up the offer and junking their supplier were motivated by the good of the company. Would the fact that the company was prepared to break a contract and damage its reputation of fairness to suppliers ultimately be counterproductive? Probably not. This particular company has such economic power that it can effectively do what it wants without adverse consequences, particularly when it’s dealing with an entity with less power, such as an individual or a smaller supplier.

I shared a few tales from my own business life. Of the telecommunications manufacturer with whom my company had a long-term outsourcing deal worth many millions of dollars. In the early 2000s, during the dotcom collapse, they came to us and informed us – not asked, you will note – that with immediate effect our prices would be reduced by 5%. But we have a contract, we protested. And if you want to continue to have a contract, they replied, this is the way it will be. We complied of course, because the eventual loss of revenue resulting from their cancelling the contract would have left a catastrophic hole.

I told him of another extremely large customer which on numerous occasions would implement an unspoken moratorium on payments. Months would go by without any attempt to settle invoices which they were contractually obliged to pay within 45 days. Our increasingly angry protests were met with lame excuses. We knew they were lying. They knew we knew they were lying. Each time it happened, we felt a sense of weary outrage. We also felt sorry for employees who were being forced to tell untruths. Eventually they would pay up, having met their objective of conserving cash for few months. Effectively we had become their bankers, at a cost to ourselves of many thousands of dollars in interest.

Being young and relatively inexperienced, he was shocked, especially as these things had happened in Europe and the US, not in his home country. Why had they behaved this way? Because they could, I said.

When I read the dreary stuff many companies publish about their values, I laugh. Companies don’t have values. People do. And if companies are led by people with values that do not include fairness and honesty, most people within those companies, whatever their personal values, take their cue from their leaders and act accordingly. If the CEO of Trafigura had believed that it was wrong for his company to dump toxic waste in the Ivory Coast and poison thousands of people, you can be sure that they wouldn’t have done it. They just thought they would get away with it.

Even companies whose leaders espouse the best of values abandon them in extremis. Digital was a company that in the good times was respected as one of the best employers in the world. “Deccies” were proud to work for the company. As the hard times came, the company became embroiled in a miasma of back-biting, individual self-preservation and mistrust, before being acquired by Compaq, who were eventually swallwed up by HP.

It’s easy to go along with behavior which you know in your heart is wrong, especially if your personal wellbeing depends on it. Very few people have the courage to stand up and blow the whistle. Change does not come about because of a spontaneous uprising of people who simultaneously stand up and protest. It usually happens because one or two people are brave enough to risk everything to bring it about. The rest of us join in when we feel we have sufficient strength in numbers to guarantee the preservation of our jobs, families and way of life. Most of us just go with the flow, or worse still subordinate our values by actively taking part in the wrongdoing.

When Robert Maxwell’s UK publishing empire came crashing down, and it was revealed that he had plundered the Daily Mirror pension fund to keep the business afloat, many of his employees and associates rushed to condemn Maxwell as a cheating monster. Did they protest while they were taking his shilling, even though they knew that his business ethics were deeply flawed, to say the least?

It’s easy to take the moral high ground when we have nothing to lose by doing so. Daniel Goldhagen in his book “Hitler’s Willing Executioners” presented compelling evidence that the holocaust was not a crime perpetrated by a small group of Nazi fanatics. It was, he claimed, an event in which huge numbers of Germans enthusiastically participated. The victors in the Second World War were able to take that high ground (despite one of them, Stalin, being responsible for many more deaths in his own country than Hitler and his cronies managed in the countries they occupied) and execute the leading perpetrators at Nuremburg. The rest were left to live their lives. As People of the Book would have it, they would await their punishment from God.

Yet I suspect that if Britain had been defeated and occupied by Hitler, we would have been just as willing to participate in the holocaust as the the citizens of the counties defeated by the Nazis. Just as many in Rwanda, including Catholic priests, abandoned their values and participated in the slaughter there. Not to mention the Bosnian Serbs, the Cambodians, and, as I write this, the people of North Korea, Darfur and the Congo.

Billions of words have been written in the past century by people far wiser and more learned than me, chronicling, analyzing and explaining our ability as a species to descend into darkness. Perhaps another thousand or so from me serves no useful purpose and brings no new insight.

But it seems to me that the larger a company, and the larger a political movement, even the voices of well-intentioned leaders are drowned by the amorality of the organization as a whole. Did Ghandi and Jinnah condone the slaughter of millions of Muslims and Hindus in the aftermath of the partition of India in 1948? Of course not. Yet they were powerless to stop it.

Organizations whose leaders take no stance on moral issues are more likely perpetrate acts of questionable morality. It’s interesting to note that the two companies I referred to above with whom I had dealings both have values statements. Neither of them says a word about respecting their suppliers. I doubt if Union Carbide, the perpetrators of Bhopal, had much to say about its responsibilities to the communities in which it operated.

So my advice to my young friend would be this. Don’t be surprised when your company behaves in a way that doesn’t live up to your own moral standards. Companies are not moral entities. They are slaves to their shareholders, and it’s rare for a shareholder to stand up and say “not in my name.” If you believe strongly enough in your principles, try to bring about positive change through your personal behavior, and when you are in a position to influence others through your own leadership, stick to your principles and other will follow you. If they don’t, then you have a decision to make.

And I would ask him to consider that what most of us think of as morality and humanity is a thin veneer that can easily crack. After all, we’re only human.

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