Citizens United Decreases Governance Effectiveness in Both Government and Business

The challenge with Citizens United vs the Federal Election Commission (Library, 2010) is how to approach it. One can view it through the lens of ethics (Silver, 2014), through which it is a terrible decision. You could examine it from an empirical standpoint and, even given the limited time since it was decided, there’s already sufficient evidence to suggest it is (further) corrupting the electoral process in the United States (Spencer & Wood, 2014). One could also view it from a governance standpoint, examining whether it will increase or decrease the efficacy of boards over their corporations (Coates IV, 2012). Since the narrow definition of the role of the board it to increase corporate value, it is fairly straightforward to measure the effects of Citizen’s United and, according to Coates, it has been surprisingly negative.
The lens through which I want to address Citizens United is that of electoral and governance accountability: Does Citizens United increase or decrease the ability to hold our elected officials and our corporations accountable for their actions? I think, in spite of some commentators claims to the contrary (Bedford, 2010; Meyer, 2012), Citizens United exacerbated the already existing problem of what Monks calls “Drone Corporations,” (Monks, 2013) those in which ownership is too diffuse to apply any power over the Board and, consequently, instilling more power in the managerial class. By giving corporate executives even more unrestrained power to lobby, bribe, hire, and otherwise influence political decision-making, it allows them to continue to tip the scales away from workers and toward themselves, and takes away more of the influence of the electorate and puts it squarely in the hands of deep-pocketed business interests.
First, electoral accountability.  Citizens United essentially takes the previous legal fiction of corporate personhood and makes it a both metaphysical and legal fact. The decision gives corporations the power to anonymously spend unlimited amounts of money influencing the electoral process based on the First Amendment’s free speech guarantees.  The managerial class has done a very effective job of increasing the amount of money that goes into their pockets and decreasing worker pay over the last 30 years (McCall & Percheski, 2010). Through their destruction of/decrease in participation in unions and conducting race-to-the-bottom labor arbitrage, the rich have become richer and the poor, poorer. While money does not determine elections, in competitive, non-incumbency races, campaign contributions have a significant effect on a candidate’s chances of winning (Erikson & Palfrey, 1998) and it buys influence and access. Thus, with corporations having significantly more money than individuals, they will be able to significantly affect elections and elected representatives will feel most accountable to them for their continued support. Thus, Citizens United takes power away from actual people and decreases electoral accountability.
Nearly as concerning is the effect it has on accountability in corporate governance. While the problems of drone boards, interlocking directorates, powerful chairmen and passive/diffused investors, all of which serve to decrease the power of the shareholder and increase the power of the managerial class existed before Citizens United, the decision gives managers increased powers in the halls of government (Monks, 1913). An excellent example of the way this effects governance is through the activity of the Business Roundtable, an organization of CEOs of large (mostly drone) corporations in fighting all “say-on-pay” provisions of the Dodd-Frank act, as toothless and merely advisory as those provisions are. Thus, by giving managers even more power, effective governance becomes ever more difficult. The managerialism that has increased in the U.S. for the past three decades (Locke & Spender, 2011) seems likely to significantly increase as a result of Citizens United. Thus, both corporations and the government move further out of our democratic control.

References
Bedford, K. (2010). Citizens United v. FEC: The Constitutional Right That Big Corporations Should Have But Do Not Want. Harvard Journal of Law & Public Policy, 34(2), p639–661.
Coates IV, J. C. (2012). Corporate Politics, Governance, and Value Before and After Citizens United. Journal of Empirical Legal Studies, 9(4), 657–696. doi:10.1111/j.1740-1461.2012.01265.x
Erikson, R. S., & Palfrey, T. R. (1998). Campaign Spending and Incumbency: An Alternative Simultaneous Equations Approach. The Journal of Politics, 60(02), 355–373. doi:10.2307/2647913
Library, H. O. U. S. S. C. Citizens United v Federal Election Commission (2010).
Locke, R., & Spender, J.-C. (2011). Confronting Managerialism: How the Business Elite and Their Schools Threw Our Lives Out of Balance (Economic Controversies). London: Zed Books.
McCall, L., & Percheski, C. (2010). Income Inequality: New Trends and Research Directions. Annual Review of Sociology, 36(1), 329–347. doi:10.1146/annurev.soc.012809.102541
Meyer, J. M. (2012). The Real Error in Citizens United. Washington and Lee Law Review, 69(4), 2171–2232.
Monks, R. A. G. (2013). Citizens DisUnited: Passive Investors, Drone CEOs, and the Corporate Capture of the American Dream. Miniver Press.
Silver, D. (2014). Business Ethics After Citizens United: A Contractualist Analysis. Journal of Business Ethics, 127(January 2014), 385–397. doi:10.1007/s10551-013-2046-y
Spencer, D., & Wood, A. (2014). Citizens United, States Divided: An Empirical Analysis of Independent Political Spending. Indiana Law Journal, 89(1), 315–372.

My Philosophy regarding Business Ethics, the short version

I’ve left this for posteriority.  My views have changed substantially since I wrote this nearly a decade ago. If you must read it, please do so with generosity.

The Essential Challenge of Ethical Business

Being ethical in today’s world isn’t easy. There are a host of systemic, structural, political, and cognitive factors in the business context that make discerning the right thing to do and then acting on it more challenging than ever before. Despite this, another set of developments has created a world where acting ethically in all areas of business is perhaps the most imperative driver of business success. Business ethics has undergone a change from regulatory requirement or inconvenient distraction to a necessity for the global marketplace and source of competitive advantage.
We humans are meaning-making beings. More than reason, the ability to use tools, or the ability to create complex social systems, what sets us apart from other species is the ability to ask ourselves “why?” and consider the answer important. Philosophers from Aristotle in the 4th century BC to 20th century philosophers like Paul Tillich and Jean-Paul Sartre have pointed out that it is the ability, in fact the indispensability, of answering questions of existential import that defines humanity. Our responses to the questions of “why” and “how” go a long way to defining who we are. How we spend our lives, whom we choose to love and why, and what we find ourselves called to do in our careers are the central questions of value that make us who we are.
Paradoxically, the economic system we live under has no such values. Capitalism, in its pure form, is amoral. Although many libertarians argue that there is an implicit moral code to capitalism, it is inchoate and partial at best. Whereas we human beings choose what we will do based a variety of existential and practical factors, capital responds only to cash flows. Notwithstanding recent trends toward socially responsible investing, the vast majority of investment decisions are made not in terms of what makes the world a better place but strictly on the basis of risk-adjusted net present value. Milton Friedman, in his famous 1970 New York Times Magazine article, argued that the only responsibility of a firm is to increase profits and to consider any social impacts was in fact unethical.
Beyond lacking a moral compass, there are several factors within modern market-oriented capitalism that actually militate against ethical and socially responsible decision-making. Friedman felt that as long as something was legal, it was permissible. However, the structure of western democracies allow large corporations a voice in making the laws, thereby encouraging all sorts of externalities and, in some cases, outright fraud. The recent “Citizens United” decision by the U.S. Supreme Court has given corporations an even greater role in governmental policy, and the quarterly reporting structure of the capital markets encourages short-term thinking without consideration for the long-term impacts of meeting each period’s earnings estimates.
Beyond these structural and political factors, there are also cognitive and social factors that make consistently good ethical decision-making challenging. Recent academic and popular works by authors Dan Ariely, Max Bazerman, Zoe Chance, and Francesca Gino (among others) have focused on the ways our minds and our social situations influence our ethical decision-making, usually without our even knowing it. A successor to behavioural economics, this nascent field of “behavioural business ethics” was the sole topic of the most recent British Journal of Management, one of the most respected academic journals in study of business. What Ariely, et al, have done is shown how even people with the best intentions and motivations can be led astray in their decision-making by mental blind spots and distortions like anchoring, overestimating the ethical behaviour of both ourselves and those in our social group, and underestimating the creative and technical contributions of others. Whereas ethical behaviour has historically been considered a simple issue of character and will, these scholars have shown it to be the result of a complex interplay of factors that make context and corporate culture almost as important as moral fibre.

The New World of Consumer and Employee Power

Even if the combination of the amorality of capitalism, the systemic challenges of capital-driven corporate performance, and the emerging understanding of the complexity of ethical decision-making were the totality of why principled business performance was important, it would still be one of the most important aspects of business one could study and, hopefully, effect. These factors are, however, only half the story. In spite of all these challenges to effective ethical decision-making, a series of cultural, social, and technological innovations in recent past have elevated the significance of business ethics to what should be the highest place among the concerns of management.
Corporations were previously able to craft their image to control information and perceptions of themselves and used command-and-control, hierarchical governance structures to insure employee performance. These methods no longer function. Customers and employees now demand that the firms they buy from and work for are in alignment with their values and the ways they make meaning in their lives. Even though many of the factors discussed in the first section traced from the dawn of industrial capitalism, both employees and consumers couldn’t do (and, in many cases, didn’t want to do) anything to change them. There was a dearth of information about the ways companies did business and what information was available was carefully managed. Companies had extensive marketing operations that were aimed at instilling a specific set of ideas, associations, and feelings about the firms. Very little was left to chance and what customers knew about a company and operations was what the company wanted them to know.
With the advent of the collaborative Internet, where anyone can express any opinion and share any information, this way of doing business is rapidly going the way of the buggy-whip. Blogs, forums, easy to set-up protest web sites like bankofamericasucks.com, and, most recently, Wikileaks, are creating a totally transparent (if not always accurate) world where nothing about a firm can be hidden from the public. The corporate communications department is no longer primarily a shaper of perceptions but is instead focused on engaging the public in co-developing brands. Due to this information chaos, whatever a company does will eventually come to light. No longer can a firm engage in ethically suspect behaviour presuming it is the manager of public perception. With this new transparency, and with the increasing engagement of customers as intentional consumers, the need for proactive transparency has become paramount.
It’s not just consumers who require that companies align with their values, but employees, as well. In the past two decades, we’ve seen a wholesale shift from industrial work to knowledge work and consequentially a shift in how employees see themselves and their relationship to their employers. As Peter Drucker noted, knowledge workers don’t exist thrive within the traditional industrial command-and-control framework but instead are co-creators of value and, as such, are responsible for managing themselves. They therefore have come to demand more meaningful work, more meaningful participation in governance, and closer alignment of their work to their values. And, as with consumers, they are increasingly able to determine whether the work they do indeed matches their higher aspirations. Nothing will cause an exodus of the very knowledge workers who are essential for business success faster than internal politics and hierarchical governance systems, except for perhaps outright unethical business practices.

Principled Business Culture = Winning Competitive Strategy

The shift from marketing and branding to transparency for consumers and the shift from command-and-control industrial governance to participative knowledge work for employees have combined to exponentially magnify the importance of ethical and sustainable business practices. Business ethics is no longer something limited to the compliance department so that it can check the appropriate boxes to stay out of trouble with regulators and enforcement agencies. It’s a critical aspect of competitive advantage. And as such it’s something that has to be part of everything a company does, in its DNA, its corporate culture.
This, I think, is the crux of the matter regarding ethical business and principled performance. It goes far beyond training and risk management where it’s traditionally lived and is instead a vital part of a company’s strategy. A principled corporate culture can’t be duplicated easily, if at all. In a business world where innovation and continuous improvement are the necessary conditions for success, the value of an engaged and passionate workforce can’t be overstated.
Unanimity is rare in academic literature, but the closest I’ve ever seen is the consensus that corporate culture is the primary determinant of ethical behaviour. My own experience bears this out, as well. When I worked for Washington Mutual’s corporate technology group, the ethical standards were very high and it was assumed that one owed a primary allegiance to the truth. In the rare cases when ethical dilemmas presented themselves (such as accepting gifts from vendors), there was, once acculturated, no question of what the right thing to do was, nor was there really any question of not doing it. Conversely, when I worked for Long Beach Mortgage Company (the sub-prime business unit of the same corporation), a business unit that had been acquired and which had an entirely different culture, it was very difficult to raise these ethical issues. It was, in fact, the realisation of how easy it is for good people to make bad decisions when influenced by corporate culture that inspired me to change careers back to one that was more aligned with my ultimate values.  There were times when I should have spoken up, to question the investment bankers and the corporate leadership, but because I was new in my position and the culture inhibited that sort of dialogue, I remained silent. Though I’m not so self-centred as to believe that I could have averted the sub-prime crisis (see the fantastic The Big Short http://www.amazon.com/Big-Short-Inside-Doomsday-Machine/dp/0393072231, Michael Lewis’s newest book, for more reasons why) , I might have at least cushioned the blow for WaMu and left with a clear conscience.
Since then I’ve done quite a bit of time reflecting on these issues, and I’ve concluded that, for the reasons above and given my experience as a consultant, teacher, and researcher, helping businesses achieve principled performance is the best possible path for my career. There are many people who can do business strategy consulting, many others that can do technology strategy consulting. In trying to figure out my unique value in the world of business, I realised that there are very few people with the business and technology background I have who are also deeply committed, interested, and sophisticated about business ethics. As a strategist, you help companies determine what their unique capabilities are and how they can bring those to the market. In the past two years, I’ve turned my strategist lens on myself and realised that working for a company whose mission is helping companies deliver principled performance would be the best use of not only my skills and experience, but my passion and my sense of what’s ultimately important. It’s this pursuit of significance, of existential as well as commercial success, that has driven me to explore the possibility of working with try to find a position with a firm that specialises in ethics and compliance.
 

A Yellow Card for the "In-Group Regarding Instinct"

I’m a big fan of game theory, especially when looking at strategic or ethical questions. By stripping away extraneous information and formalizing interactions among actors, interesting and sometimes surprising consequences emerge. I find this particularly interesting when looking a possible responses by competitors to my clients’ strategic initiatives. Lately, though, I’ve been thinking about what actual games can tell us about how people view themselves, others, and third parties in the context of business ethics. My experience of refereeing soccer matches has led me to conclude that there are some substantial barriers to effective ethical decision making that need to be taken into account when designing systems to increase the likelihood of ethical behaviour.

For the past several years, in addition to coaching my kids’ teams and playing the occasional match myself, my son and I have traveled throughout our area as hired referees for leagues and tournaments. Since my son is young we usually work with younger players (U12 and under) but I’ve occasionally worked up through the adult leagues.  It’s a difficult job that requires a knowledge of the game as well as quick reflexes, a degree of fitness, and a thick skin.  Over the years, I noticed what can only be called a failure in perception on the part of coaches, parents, and players.  It is simply this: no one ever thinks the referee is biased toward their team.  Of the 100+ matches I’ve been the centre ref for, in perhaps half of them I’ve been accused by both sides of being biased against them. Now this might be just a thing that soccer parents and coaches say, but if it is something these people believe (and I think they do) I think it tells us something important about human nature which has important consequences for how we teach people about business ethics.

If you look at this issue formally, we’d say that for every match, there are three possible cases regarding the referee’s bias: he/she is unbiased, biased for the home team, or biased toward the away team. Leaving aside the fact that no referee I know cares at all who wins the matches they officiate, if we allow for the possibility of referee bias we have only those possibilities. To be biased against both teams would be nonsensical. Therefore, if the perception of the fans is accurate (and assuming a random, symmetrical distribution of bias), on average you would find that of the times when fans thought the referee was biased, half the time it would be against your team, half the time against the other team. And yet anyone who spends any time around soccer (and I’m assuming other sports) knows that this is not true.  As above, almost no one ever says “boy, that referee was certainly biased in favour of our team”.

It might be tempting to write this off as something that is purely the domain of recreational supporters of sports teams, but I don’t believe it is.  I think it tells us something very important about the way people view the members of their in-groups (in this case, members of the team they support) and how they privilege those members with an assumption of moral superiority.  People imagine or assume that people belonging to their in-group (whether it is a sports team, company, church, etc.) have good intentions and that any transgressions are the result of a mistake, a misinterpretation, or ignorance.  Instead of judging the actions by both in-group and out-group members by the same ethical/behavioral yardstick, we adjudge the wayward actions of the other team or the other company to be the result of malice or intentional wrongdoing.

The philosopher and theologian Reinhold Niebuhr wrote about this same tendency in individuals calling it the “self-regarding instinct.” He thought it was universal and believed that it was the basis for much of what passes for institutional evil in the world. What I’m suggesting is that we often do the same thing in terms of groups we belong to and that much of what we allow in our companies that is clearly not ethical to an outsider falls under this same distortion of perception. When a fellow employee bends the rules or falls a little short in their compliance duties, because he or she is a member of our team, we are likely to see it as unintentional, unavoidable, or not his or her fault. There is a sort of “reality distortion field” around members of our own team/group/company.

I’m not suggesting that we should never understand the context of our own and other’s actions as a mitigating factor in ethical judgments. I’m actually suggesting two things: that we design systems that take this perceptual distortion into account when we are looking at our own firms and that we keep try to contextualise the behaviour of people in other firms.

I’m not naive enough to think soccer moms and dads are going to take time to reflect about how they favour their own kids’ teams and therefor give me a break when I’m officiating their matches on Saturday mornings. I do hope one day they, as a group, will become a little more balanced in their expectations (see http://www.youtube.com/watch?v=r0qGeADPzAs for more), but part of the fun is really in rooting for your team. In the business world, however, the “in-group regarding instinct” can lead to the excusing of clearly unethical behaviour in one’s firm and the assumption of guilt in others.  While clearly more research needs to be done in this area (and please, if you have any references on similar research, I’d really appreciate them), just the knowledge of this perceptual shift may be enough to mitigate some of the worst of the resulting transgressions.

Why (or When) Do People Comply? Ethics v. Compliance part I

On the Society for Corporate Compliance and Ethics web site forum, I came across this post. Though personally I’m very distressed (perhaps overly so) by people who cut lines, don’t use their turn signals, etc., I don’t think that the original author’s point (whose name I’ve omitted) is supported by his argument. People, by and large, only follow rules if:

  • (a) They are rules against something morally wrong and/or
  • (b) The overal negative consequences of the act are high.
My response is a bit roundabout, but I do think it makes the point:

——————————————

Original Message:

Sent: 06-28-2010 11:41

Subject: Ethics Without Compliance


This message has been cross posted to the following eGroups: Ethics Forum and Chief Compliance Ethics Officer Network .

——————————————-

On Friday I saw some behavior that made me wonder if a faith in ethics is worth having, absent a strong compliance regime.


I was on a plane and, after the doors closed, the flight attendants made the usual announcement about turning off all electronic devices until ten minutes after take off.  It’s a rule that is announced on every flight, but as every frequent flyer knows, it is poorly enforced.  The flight attendants often don’t notice people breaking it, and many hide their use of the devices.  Plus, some people honestly forget and leave their phones on the entire flight.

Such was the case on the flight I took on Friday.  After the announcement was made many people pretended not to hear it and went on tapping away at keyboards.  When the flight attendant spotted them and told them to turn their devices off immediately, some did, but my seatmate only pretended to.  As we were taxiing out to the runway, I saw her checking Facebook statuses on her iPhone.  All I could think was “I know your iPhone is highly unlikely to cause the plane to crash, but is it really worth taking a risk on the safety of a couple of hundred passengers just to read that Cindy is psyched for the weekend?”

Bottom line is, she didn’t believe in the rule, knew no one would be monitoring it effectively, and chucked any ethical considerations.

She wasn’t alone.  Within seconds of the plane’s liftoff I was amazed at the number of iPads, iPods and other devices that were up and running.  I seemed to be the only one waiting to hear the double chimes indicating it was now safe to use approved electronic devices.

Why did they do it?  There was a rule that they didn’t believe was worth following, it got in the way of what they wanted to do, and there was no real effort at compliance.  And what about the ethical considerations about potentially putting others at risk?  They made a calculus and, not surprisingly, found in their own interest.

It’s no different, as I’ve written before, at the ten item or less line at the supermarket, another weak compliance environment.  It’s exceedingly rare for a clerk to turn anyone away for having too many items.  So, a significant percentage of the population will try and sneak in with as many items as they can.

All this makes me wonder:  can we talk seriously about business ethics without their first being regular and strict compliance?  To be fair, not everyone cheats on the 10 item or less line or turns on their phone when they shouldn’t, but the numbers are high enough to make me wonder about the potential mayhem it would create in a business setting.

Ethics is often discussed as being useful for navigating the gray areas, but that assumes someone is policing the line between black and white. 

There are many who argue that we should put ethics first and compliance second.  I’m starting to think it would be a disaster. 

Am I onto something or should I stop flying so much?

My response:

It coincidental that I’ve just been working on a blog post on this very topic, that is the way the terms “ethics”, “compliance”, “social responsibility”, etc., get used.  And beyond that, like you I sometimes despair at the fact that people so flagrantly ignore rules which are based solely on the fact that their universal compliance would mean a safer and/or more convenient world for everyone. However, Steve, I think your analysis of the situation goes in the wrong direction because you assume that people only follow rules because they are explicit and, therefore, what chance do ethical strictures, which are not, have? Especially since, as you point out, people often do not follow the explicit rules.
I think there are several different categories of judgement for of rules of behaviour.  On one hand, we have the purely utilitarian view: does this behaviour affect people (myself included) in a positive or negative way. On the other, we have the purely ethical/moral dimension, which philosophers call deontological judgement and which is usually segregated from the utilitarian judgement. I actually think that people use a calculus in which they weigh the two against each other before deciding just how permissible an act is. You see, I think that, beyond the utilitarian aspect of compliance (I’ll have a negative effect if I get caught), compliance is actually not a significant motivating factor in the examples you suggested.

I think of it like an x/y graph, with ethics on one axis and utility on the other.   We judge each other, and ourselves, by the combination of these factors. If we think something (even if it is against certain rules or regulations) has no negative effect on anyone else and there is no moral prohibition against doing it, rules will not stop many people from doing it. Cell phone usage on the plane is the best example I can think of. No one believes that there is any chance that their 3G iPad is going to bring a plane down so, crew member instructions or not, people will do it if they can get away with it.

Move up the utility scale a bit to the grocery 10 items and under line and more people start to judge others badly. There is a real (if minor) effect on other people if you get into the 10 items line and count your 6 gallons of milk as one item (it’s the same item!): they have to wait longer to get their items checked out.  And while there is not a universal moral code against getting in the wrong line at the supermarket, we do tend to think badly of people who don’t care enough about others to follow these kinds of rules.
Further still up the utility scale is a particular peeve of mine: people that don’t use their turn signals at intersections. I’m not sure why, but the neighborhood I live in (Belmont Shore in Long Beach, CA) has an incredibly high ratio of people who think using their turn signal at intersections is optional. On one hand, it inconveniences people in the same way supermarket line libertine does: by not signalling, others have to wait before making their turns, thereby delaying them. Even more seriously, though, it creates a real danger for intersection vehicle accidents. I have to admit a certain sense of schadenfreude when I see the daily non-injury accidents on 2nd Street, assuming as I do that at least one of the people involved didn’t use his or her turn signal. But I think we would rate the lack of turn signals as more morally suspect than the people in the supermarket lines because it does put real people in real danger, in addition to being a time-wasting nuisance.   
On the other axis, most people rate dishonesty, especially when in pursuit of money, as being ethically indefensible. We know that the entire edifice of enterprise depends on a certain amount of veracity so we can do business. Without a degree of trust, no one would ever buy or sell anything. Additionally (perhaps more importantly for this post), lying is something that is fairly universally considered wrong. There are certain exceptions to that, of course (when a greater evil would be prevented by lying, for example), but that’s not the case in sales, however.  On the other hand, since the total effect of a salesman’s dishonest tends to be pretty limited, although we judge him as having done the wrong thing, the severity of the judgement isn’t as great as it might be. We expect a certain amount of, shall we say, imaginative truth-construction among sales people, so the fact we anticipate the dishonesty of the used car salesman lessens our judgement of him/her.
The people we reserve the most severe judgement are those who both do the wrong thing (from an ethical perspective) and whose actions have a large effect on people’s well-being (utility). People who have perpetrated large accounting frauds or who have gamed the capital markets are two particularly relevant recent examples. Those who brought down Enron, WorldCom, etc., both lied and destroyed peoples lives. Similarly, the investment bankers who both created secondary mortgage instruments that they knew were bad, sold them to their customers, and then bet against them, causing the global financial meltdown and bringing on the worst depression since the 30s, are generally judged very harshly.  
This may seem like a long way around to my point, but it’s important. I don’t think you can draw any conclusions about whether ethics in the absence of a compliance motive would result in chaos based on your examples. If a rule is neither useful nor ethically motivated, many people will ignore it as officious, and why not? The supermarket example is more interesting, but not much because it is still pretty low on both axes.  I contend that if we educated people on both the ethical dimension *and* the utility of their actions, the compliance motive would far less necessary.  The compliance aspect is a part of utility (I’ll lose my job if I get caught) but that is quite a low bar to hit. What we want is people acting better than just barely compliant and if you focus on compliance, I think, you only get the bare minimum. Ultimately I think compliance is a necessary but not sufficient condition for ethical behaviour in most companies. It’s necessary to keep people out of the very worst behaviour but I think you need ethics training and/or motivation to inspire them to their best.

Ethics, Metaphysics, and Religion

Any discussion of ethics, whether in the business domain or elsewhere, runs the risk of devolving into an argument over religious beliefs. This is at least partially because the distinction between the two isn’t well appreciated by many. A recent exchange on a LinkedIn Business Ethics group illustrates this, and my response was meant to somewhat gently point out that ethics and religion, though related, can’t be identical if civil discussions of ethical matters are to succeed.

Sheila wrote:

My thoughts are that I feel I am subjected to tolerate and forced to watch all sorts of lifestyles and belief systems that are very different from mine both on TV and in public but yet when I speak up and share my lifestyle of Christian faith and the biblical ethics I struggle to uphold, I am made to feel like I am doing something socially wrong…??? I can’t understand where that is acceptance? I feel that if a school system can have events that discuss alternate beliefs and lifestyles that are not biblical in nature and expose our children to things that we do not feel are the way God wants us to live, why can they not also hold youth bible studies as well.. And the funniest part is that all the things that society feels are good character and leadership traits, are all taught and displayed in the bible as well. So why would we not want our future generations to be exposed to that as well? It seems to me that Christians are now the ones being persecuted and segregated to me. But what is there to do, just be silent and not share the good news out of fear? Is that what God wants us to do? Hasn’t it always been this way and God tells us to not be silent no matter the cost?

-Just trying to find my real purpose and determine what example I need to be setting for my children and others….

My response to her:

Sheila,

As a former pastor (though of a pretty progressive bent), I understand how you might feel that your views are dismissed, but I suspect this is a mis-perception. You should try to understand the dismissal of your views in terms of what Bellah, et. al., called “civil religion”. Nearly everyone is happy to discuss any ethical proposition based on shared beliefs, but not so much a religious one. For example:

Person a: I think that the only ethical thing to do is to protect children from violent imagery because it desensitizes them to real violence, and that leads to a society in which violence is more likely to be tolerated.

Notice that this person is making an argument based on a shared set of values (violence is not a good thing). According to Bellah, there’s a relatively limited set of propositions that the vast majority of people in the west agree on regardless (and this is the important bit) of what the underlying religious, spiritual, or metaphysical basis for those beliefs might be. You can hold any religious or spiritual beliefs that you want, but the basis of our ability to discuss ethical principles in public is the fact that we agree on this set of ethical principles (e.g., theft is wrong, violence is bad, using people for your own gains is wrong, altruism is, generally, good, etc.) regardless of our religious (or lack thereof) commitments.

My guess is that two issues factor into your feeling of discomfort. First, rather than sticking to that abstracted “civil religion”, you advocate for your ethical beliefs based on their religious and metaphysical underpinnings. This immediately puts people off because they feel that if they don’t share your religion, they can’t/shouldn’t agree with your ethical view. If you think about it, instead of making your argument stronger, relying on your Christianity actually weakens it by restricting the number of people who are going to be sympathetic to it. The best you can hope for from non-Christians is indifference to that line of reasoning, which you’ll agree is not really a strong rhetorical position.

The second issue is that often when religious people (Christians and Muslims, particularly) feel they are not being treated respectfully is when they are arguing ethical propositions that are outside that set of civil religious propositions. I notice these frequently being in the realm of sexual morality or economic justice. These are ethical positions that are not at all universally held, and often, as above, the people advocating for these positions use their religious beliefs as justification, e.g. “we shouldn’t allow pornography to be available because it isn’t in keeping with Biblical values” or “the Christian tradition of marriage is of one man and one woman, etc.”. Again, rhetorically, that’s just going to alienate people who don’t share your view of the Bible.

I guess I’m saying that if you want to make ethical arguments about how people should conduct themselves, it’s most likely to be effective and least likely to offend people if you don’t couch it in religious terms and if you express your positions in terms that don’t alienate people. The sense that you are “doing something wrong” is probably just people who have different religious views from you objecting to the use of religious language in an ethical discussion.

(N.B. I know there is an argument that you can’t divorce the religious from the ethical but I myself, having held various, evolving metaphysical/religious beliefs throughout my life with more or less constant ethical/moral views, find that argument unconvincing).

Finally, and as an example of what I’m saying, I don’t think the fact that other people live their lives as they wish equates to you being “subjected to tolerate and forced to watch all sorts of lifestyles that are different from mine”. Right there you’ve made those who differ from you seem as if they are intentionally trying to offend you. Again, you that’s where you might want to look for for the social pressure against your views that you are feeling.

Powerful People Are Better Liars

A recent article in Harvard Business Review looks at a study by Professor Dana Carney that concludes that Powerful People are Better Liars. This is one more nail in the coffin of the idea of the charismatic CEO (I’ll post other references to this problem when I get a chance to look them up). Relying on a single charismatic leader, combined with several social cognitive biases, can add up to very dodgy ethical behaviour. If anyone has any contrary opinions on this, I’d be interested to hear it because all the evidence seems to be pointing in one direction. On the other hand, a charismatic leader is sometimes what’s needed to really motivate people to sacrifice for a cause, so it’s a bit of a catch-22. Comments?

Timelines, Risk, and Right: The ethical danger of short-term rewards

An editorial in yesterday’s New York Times addresses a deservedly sensitive issue in the world of business ethics: compensation. Of specific interest to me, this editorial homes in on most important question: the relationship between risk and reward with regard to pay. While the Times editorial focuses primarily on the legislative approach to this problem (which is some time in the future) the more basic ethical/decision-making issue is how well we judge risk in the short term vs. the long term and how we are likely to behave when we are rewarded for one kind of risk when the ethical thing to do is focus on the other. In short, are these traders going to make better or worse ethical decisions when they are rewarded for short-term risk taking?

First, the practical considerations. It’s been widely and accurately claimed that much of the market behaviour that led to the debt-based asset bubble was driven by short-term rewards. In fact, if you examine the mortgage value chain, each of the players received rewards and passed the longer-term risk on to the next player. The borrower passed it to the broker, the broker to the bank, the bank to the investment bankers, the investment bankers to the investors. Ultimately, when the risk aggregated with the investors in the longer-term, the system melted down and the effect has been, in large part, the global financial crises.

What the current bankers and traders are doing is much the same. They are paid quarterly or annually for returns on their investments from that period. The previous quarter or year’s transactions aren’t tracked from a compensation perspective. Since most people, lacking a compelling reason, practical, ethical, or otherwise, will act in a way that rewards them, the bankers and traders will continue to focus on short-term gains.

This wouldn’t be a problem if these short-term gains added up to long-terms gains but frequently they don’t. The bailout of the financial system, which has cost the taxpayers of the United States more than a trillion dollars, is the paradigm case of this. What ends up happening, therefore, is that the short-term rewards are expressed privately in the huge (by any measure) bonuses in the financial services industry while the long-term risks are socialized and/or passed on to the investors. Thus we, as an investor nation, end up paying twice: once for the bailout, and again as our 401ks bite the dust. The traders and bankers only get paid.

And herein lies the fundamental ethical question. Is it right to transfer risk from the people who stand to gain from it to people who can only lose? In other words, it’s a question of upside, downside, and time horizon. What the current system does is reward the long-term upside rewards to those who only have short-term risk, the traders and investment bankers. It also places this downside risk mostly with the long-term investors/tax-payers. So, contrary to the mythology of free-market fundamentalists, the risk-takers aren’t truly rewarded, and those who are rewarded aren’t truly taking on risk. I think this could be unpacked much further, but I think what I’m trying to say is clear: by transferring downside risk from those who get for it (Wall Street) to others (investors and taxpayers), the system encourages the traders to act unethically because it rewards them for doing so. Because people are so bad at estimating long-term risk, they end up acting unethically without even knowing it.

I know that there’s a lot more to be explored here. In fact, probably a book’s worth. For example, what about the upside rewards for investors? If the traders are acting in a way that they are supposed to (at least institutionally), how can they be said to be acting unethically. These questions can be answered but they’re out of scope here. The point I’m trying to make is that the system is currently broken, from the perspective of risk, reward, and ethics. The Times is therefore right in thinking it needs to be reformed, probably through legislation and regulation. But it’s also important to understand how it’s broken in order to fix it correctly and this is what I don’t see much discussed in the current debate. I hope my little blog post adds something positive to the discussion.

The Malia/Racist Situation: The basic questions

When a friend sent me the link to the story (http://www.mediaite.com/online/conservative-blog-commenters-target-malia-obama-with-racial-slurs/), I asked her at first if she’d be offended if I didn’t read it. I could see from the title that it wasn’t going to improve my day or my feeling of solidarity with the human race. A day later, in a “car-crash-you-can’t-avert-your-gaze-from” sort of way, I read the story and followed up on some of the surrounding context. While it didn’t improve my attitude any, it did get me thinking. How can people, who live around me and probably seem like decent people most of the time, think that it is OK to write hateful, racist things about an eleven year-old girl? How can anyone ever think that’s an ethically acceptable thing to do? There are (at least) two answers to that question, one contextual and the other a matter of reflection (or lack thereof).

The contextual answer has always been both the explanation and the excuse for racism and hate that have their roots in social and economic alienation. People who are economically and socially alienated, especially those who have not always been thus, particularly those without fairly sophisticated critical thinking skills, tend toward extreme small-c conservatism. This is to say that change, since it brings us farther away from a situation that was perceived to be better for the group or class that the perceiver belongs to, is by nature bad.

In this case, white working-class men (and increasingly some women) look back to a period when it was possible for a working class man to support his family and have a comfortable lifestyle whilst working a blue-collar job. As was the experience in my own family, a sheet-metal worker in the fifties through early nineties could support a family, send his kids to college, and retire at 60 to a comfortable lifestyle. The combination of global socioeconomic shifts (outsourcing, labour arbitrage, industrial base being exported to the Far East/Pacific Rim) and current deep recession have made that all but impossible. While to some degree the conservative worship of the 50s as the golden moment of US history is the result of some retrospective rose-coloured glasses, it is certainly true that there are far fewer opportunities for those without advanced education and that the world of Ward and June is gone, not to return.

When this sort of alienation occurs, those so alienated frequently view any change at all as a cause of their alienation. I think much of the outright hate of Barack Obama has its genesis in exactly this dynamic. On any objective measure, President Obama would be a hard man to hate. You could hate his politics, for sure, but he seems like an awfully nice person. And an eleven year-old girl? Who could possibly have hateful things to say about her (except her parents…I have an eleven year old myself). What these people hate is not really President Obama or Malia. What they hate is the fact that the world is changing and it has eliminated the privilege white working- and middle-class men have had (or felt they have had) for some time. Even though President Obama is only a symptom of that change, their animus falls on him and now, reprehensibly, his daughter.

I don’t think my analysis so far is new or particularly novel. It’s only a slightly updated version of the traditional sociological understanding of racism among poor whites. What is new is the way the hatred has been generalized in one sense and made more specific in another. The important thing to realize here is that while this explains what’s behind the actions of people who call an 11 year-old girl who goes to one of the best schools in the country “ghetto[sic] trash”, it does not excuse it. Additionally, I think it is incomplete because there is something missing from the personal decision-making process of someone who could write something like that.

I remember once whilst in high school driving around with a bunch of friends. Putting aside the fact that four seventeen year-old boys are the dimmest creatures on the planet (when young men travel together their IQs are divisional rather than average, i.e. 5 boys with an average IQ of 125 actually act like they have an IQ of 25), I remember that we did something like steal a mailbox or something like that (I don’t remember exactly these decades later) but I remember thinking to myself “I just acted like an idiot. I was just playing the part of stupid frat guy in a John Hughes movie”. It was years later, in a philosophy class, that I found out that this is an essential reflection that can lead people to act as their best selves.

This reflection is central to what is called “virtue ethics”. It’s one of the primary ethical traditions in the west, one that was first explained by Aristotle. Rather than ask “is what I’m about to do right” (deontological ethics), or “does the society in which I live think this is the right thing to do” (social ethics), the virtue ethicist asks “would a virtuous person do this?”. My “16 Candles” moment was of just this variety and I think it is one of the main things missing from people who can despicable things around an 11 year-old girl that they don’t know. I’m pretty sure that people who do such things haven’t stopped to asked themselves “would a person who I consider virtuous call the President’s daughter ‘ghetto trash’”. It’s a version of “What Would Jesus Do?”. I think it’s safe to say that almost no one would think that Jesus or any other virtuous person would do these things. Further, anyone who reflects on this would see this too.

This is why I suspect that, along with sociological and economic alienations, there’s not a lot of ethical reflection happening as some of these people are writing their blog comments. It’s probably something we could all use with a little more of.