Ethics and the businessman

BUSINESS VIEWPOINT MICHAEL IVENS

Michael hens is director of the Industrial Educational and Research Foundation.

Hundreds of millions of pounds are spent annually by British companies on training their managers and employees to become more efficient. Training is becoming big business with a network of training councils and training boards to levy money, reward apprOved train- ing with rebates, initiate developments and (less usefully) take in each other's washing.

The creation of greater efficiency is a worth- while object. And yet, bearing in mind the powerful, intellectual opposition to business and the timid, uncertain response by many of the practitioners, one cannot help feeling that the rush to train has produced a one-sided development. The missing area is that of deal- ing with the important questions that face us concerning the role of private industry, its relations with Government, the community and its shareholders, the trade unions and cus- tomers; in other words the 'business philosophy.'

One theory that is popular at the moment is that of the manager as decision maker. The objectives, the principles, the ethics, so the theory goes, is laid down by top management; other ranks of management distinguish them- selves by their ability to take decisions in con- formity with the rules engraved on the organisation's tablets.

I have, elsewhere, termed this the Eichmann theory of management. Eichmann, at his trial in Jerusalem, based his defence to a great extent on the theory of the manager as a decision maker. Eichmann argued that his job was to administrate the non-production, distribution and processing of Jews. The objectives came from the organisation.

The same approach, at a much less tragic level, was displayed by some of the defenders in the trial in the United States of General Electric managers for breaking the anti-trust laws. A subtle but simple method of communi-

cation distinguished between the laws of the USA and those of GE.

When managers were instructed not to break the anti-trust laws by such acts as exchanging information on prices with competitors, the spoken words were accompanied by a more expressive symbol—a wink. Unhappily, one preoccupied manager failed to notice the wink. The closure of an eyelid that he did not notice played an important and sometimes hilarious part in the trial.

The need to examine and evaluate the why and not just the how of business is important if businessmen are to be intellectually coherent about their objectives and to fight back against their critics. If anti-Catholicism was the (pre- Kennedy) anti-semitism of the American intel- lectual, so anti-business is the British intellec- tual's equivalent reaction. And the need for counter-attack is just as strong in Britain as in the United States where much more thought is given to clarifying business objectives.

But more pressing problems than critics of business demand a clarification of the objectives of the organisation. What note should the com- pany take of Government policies? How far should they cooperate? Should they fight if they think Government policies are harmful? What principles should govern the allocation of profits—when there are enough of them to worry about? How responsible is a company for its impact on the environment and its amenities? Dr E. J. Mishan in 'The Costs of Economic Growth' has posed some sticky problems for industry on some of the conflicts between desires for greater productivity and for civilised amenities.

Finally, to whom is the company responsible? Its shareholders? Or should it lean to a balance of responsibilities: govern- ment, shareholders, customers, suppliers, em- ployees and community?

The latter solution is very much in accord with much influential American thinking. In the 'American Creed,' F. X. Sutton and his col- leagues stated that most leading American concerns had made the transition from 'classical' to 'managerial' objectives. They gave a high priority to profit and the shareholders' interests but not an exclusive one. Other interests—such as those of employees. cus. tomers, suppliers, local community and the national community in terms of price policy, defence and regional development, also had to be taken into account. However, as Pro. fessor Michael Fogarty put it in his PEP study, 'Wider Business Objectives,'. . . the priority given to these interests remained obscure.'

Early attempts to look at business objectives were generally conducted, in the United States, under the banner of 'Ethics.' For many reasons —particularly the fact that top level managers participating in the sessions tended to sit back and think that 'Ethics are for others'—this approach was not particularly successful. h has now been modified to the tough, pragmatic slant of Harvard's course on 'Planning in the Business Environment' and the Carnegie Insti- tute of Technology's more philosophic approach in their course on 'Ideas and the Changing Environment.'

These approaches have had their critics. Theodore Leavitt, in particular, has argued that American business leaders spend too much time worrying about their responsibilities and too little time making profits. Make profits is abundance, appears to be Leavitt's argument and all shall be given unto you. To which one might rejoin : all well and good, providing you look at all the evidence and then come up with an intellectually rigorous doctrine of profit maximisation. But most businessmen don't go all the way through with their thinking.

In Europe, the Germans have, in particular, taken the discussion of the objectives of busi- ness seriously. The Friedrich Naumann Stiftwtg combines political liberalism and the German concept of the social market economy. They do a great deal of missionary work on 'responsible capitalism' in Latin America and in Africa. In France, the Centre Liberal Spiritualiste Francais has a strong moral and cultural approach to business; it tends to be anti-dirigiste and not too enthusiastic about the General's approach to business. Norway has the

Opplysningsinstituttet, which for many years has been looking at business objectives with

Members of Parliament, teachers, trade unionists and housewives, as well as business- men. In Britain, the Industrial Educational and Research Foundation was set up two years ago to carry out educational and research work on business responsibilities and objectives. St George's House, Windsor (whose development owed a good deal to Prince Philip's interest and initiative), involves Christians, the uncommitted, businessmen and trade unionists in an examina- tion of some of industry's and society's moral and ethical problems.

Other organisations are also taking an interest in research. PEP are working on a study to examine how British boards balance all the claims on their resources; they are also re- viewing current thinking in Britain, the United States and Europe, on the future of companies and associations. Ireland, Spain and Holland have similar research programmes.

No doubt some businessmen hope that re- search and analysis will show that, as Bernard Shaw commented, it is a nice thing when virtue and expediency go together. But the prime motive for business will be 'what to practice., And better practising may also lead to better preaching.