One of the recent revelations in the wave of corporate scandals in the US involves none other than Jack Welch, who retired from GE last year as one of the most admired and celebrated CEOs in the world. Why, many ask, would a man said to be worth $900 million have his $15 million apartment, opera tickets and much more picked up by the company where he retired from and now works at as a part-time consultant? Widely cited as an example of "Greed and Excess," this is yet another unwelcome surprise in a string of corporate malfeasance. It took yet another bite out of American corporate credibility.
In their 1993 book "Credibility, How Leaders Gain and Loose it, Why People Demand it", famed behavioral and management savants James Kouzes and Barry Posner coined the view that credibility is the cornerstone of leadership. In that book they provided philosophical and practical guidance for business executives to put credibility at the core of effective leadership. After nine years since the book was first published, the corporate America’s burgeoning credibility crisis has torn apart the fabric of trust, and has once again put capitalism under the scrutiny of morality’s test.
Commenting on this crisis, Rudy Dorubusch, Ford professor of economics at MIT and a former chief economic adviser to both the World Bank and the IMF recently wrote in an article: "Socialism collapsed a decade ago because it became discredited in the eyes of the people who lived under it. Now capitalism is receiving severe rebukes, with its critics given powerful evidence that they are right in seeing it as a system that works for insiders and their cronies. After all, isn’t Enron’s bankruptcy a crystal-clear example of inmates controlling their guards?"
The pendulum has indeed swung from the failure of socialism to the excesses of classic capitalism where "Enronites" stand to represent slippages of monstrous proportions in the system of free enterprise. Enron, WorldCom, Tyco and the like are about masking the truth and making self serving empires. When the truth ultimately prevailed, once soaring corporations and corporate captains crashed to earth in a crude display of excessive deception. It is an inevitable evolution of greedy, "what-is-in-it-for-me" culture. Now elaborate rituals are underway to exorcise the heart and soul of corporations to restore the trust that is lost, and the credibility that has collapsed.
What is at the center of the issue is morality of a community of people and systems that shape human character and behavior. Corporations are not only institutions that produce goods, but also a community that shapes the morality of their members.
In an article published in 1995, James Q. Wilson, professor of management and public policy at UCLA, said: "Corporations are systems of human action that cannot for long command the loyalty of their members if their standards of collective action are materially lower than those of their individual members." He concluded: "Capitalists should recognize that while free markets will ruthlessly eliminate inefficient firms, the moral sentiments of man will only gradually and uncertainly penalize immoral ones. But, while the quick destruction of inefficient corporations threatens only individual firms, the slow anger at immoral ones threatens capitalism, and thus freedom itself."
For Wilson, the compelling reason for corporations to behave morally is "to evoke the trust and loyalty of their employees and the respect of the larger society, all to the end of ensuring the long-term viability of the enterprise and ultimately of capitalism." This is consistent with the teachings of paid management gurus and famed management schools.
In a 1996 guest lecture given at Northwestern University, Elmer W. Johnson, president of the Aspen Institute and a former executive vice president of General Motors Corporation took a larger view of the morality issue. He asked: "Should the corporation serve not simply for the efficient production of high quality goods and services, but also as a moral community that shapes human character and behavior?" He answered his own question with a resounding "yes."
For Johnson, the compelling reasons for morality are "requirements that take precedence over all other modes of guiding conduct. These requirements are central to any conception of (the good work), the good life, and the good society. Thus, economic systems (including corporations) should be judged by the qualities of character they tend to produce or help sustain. Nothing else matters very much if the work environment is such that people cannot thrive as moral human beings and aspire toward their higher spiritual ends."
"But where can we find a corporation where we can discover employees led by managers who are motivated much less by money and much more by the pride of product and by the joy of unleashing the employees’ talents and energies and tapping their potential for personal growth?" Johnson asks.
The answer lies in cultivating the corporation as a community of people where people thrive on a better alignment between personal and organizational values that create credibility, which for all individuals means being trustworthy, competent and inspiring. But when the heart of a man is desperately deceitful, when we don’t stick to a set of core values such as honesty and integrity espoused by holy books, what other basic motivation is there for us to maintain moral behavior and build a moral community?
(The author is an employee of Saudi Aramco based in Dhahran)
— 28 October 2002
