The key to maintaining leadership in the economy and the technologies that are emerging is likely to be the social position of the knowledge professionals and social acceptance of their values. Today, however, we are trying to straddle the fence—to maintain the traditional mind-set, in which capital is the key resource and the financier is the boss, while bribing knowledge workers to be content to remain employees by giving them bonuses and stock options. But this, if it can work at all, can work only as long as the emerging industries enjoy a stock-market boom, as did the Internet companies.
The management of knowledge workers is a “marketing job.” And in marketing one does not begin with the question: “What do we want?” One begins with the questions: “What does the other party want? What are its values? What are its goals? What does it consider results?” What motivates knowledge workers is what motivates volunteers. Volunteers have to get more satisfaction from their work than paid employees, precisely because they don’t get a paycheck. They need, above all, challenges.
Insecurity permeates the entire industrial situation.
Insecurity—not economic but psychological insecurity—permeates the entire industrial situation. It creates fear; and since it is fear of the unknown and the unpredictable, it leads to a search for scapegoats and culprits. Only if we restore the worker’s belief in the rationality and predictability of the forces that control his job, can we expect any policies in the industrial enterprise to be effective. In no other area can we hope to achieve so much so fast. All the basic forces—the objective requirements of society, the objective requirements of the enterprise, and the objective needs and requirements of the individual—work in the direction of making the industrial enterprise a functioning institution.
The first responsibility of a professional was spelled out clearly, 2,500 years ago, in the Hipprocratic oath of the Greek physician: primum non nocere, “above all, not knowingly to do harm.” No professional, be she doctor, lawyer, or manager, can promise that she will indeed do good for her client. All she can do is try. But she can promise that she will not knowingly do harm. And the client, in turn, must be able to trust the professional no knowingly to do the client harm. Otherwise he cannot trust her at all. And primum non nocere, “not knowingly to do harm,” is the basic rule of professional ethics, the basic rule of an ethics of public responsibility.
What is business ethics? “It’s casuistry,” the historian of Western philosophy would answer. Casuistry asserted that rulers, because of their responsibility, have to strike a balance between the ordinary demands of ethics that apply to them as individuals and their social responsibility to their kingdom. But this implies that the rules that decide what is ethical for ordinary people do not apply equally, if at all, to those with social responsibility. Ethics for them is instead a cost-benefit calculation involving the demands of individual conscience and the demands of position—and that means that the rulers are exempt for the demands of ethics, if only their behavior can be argued to confer benefits on other people.
A great horror story of business ethics would, to the casuist, appear as an example of business virtue if not of unselfish business martyrdom. In the “electrical apparatus conspiracy” of the late 1950s, several high-ranking General Electric executives were sent to jail. They were found guilty of a criminal conspiracy in violation of antitrust because orders for heavy generating equipment, such as turbines, were parceled out among the three electrical apparatus manufacturers in the United States—General Electric, Westinghouse, and Allis Chalmers. The purpose of the cartel was the protection of the weakest and most dependent of the companies, Allis Chalmers. As soon as government action destroyed the cartel, Allis Chalmers had to go out of the turbine business and had to lay off several thousand people.
Business ethics assumes that for some reason the ordinary rules of ethics do not apply to business.
The fundamental axiom on which the Western tradition of ethics has always been based is: There is only one code of ethics, that of individual behavior, for prince and pauper, for rich and poor, for the mighty and the meek alike. Ethics, in the Judeo-Christian tradition, is the affirmation that all men and women are alike creatures—whether the Creator be called God, Nature, or Society. There is only one ethics, one set of rules of morality, one code, that of individual behavior in which the same rules apply to everyone alike. And this fundamental axiom business ethics denies. Business ethics, in other words, is not ethics at all, as the term has commonly been used by Western philosophers and Western theologians. Business ethics assumes that for some reason the ordinary rules of ethics do not apply to business. What is business ethics then?
It is easy to look good in a boom. But also, every boom—and I have lived and worked through four or five—puts crooks in at the top. In January 1930, my first assignment as a young journalist was to cover the trial of the top management of what had been Europe’s biggest and proudest insurance company, who had systematically plundered their company—and so it goes after every boom. The only thing new is that the last boom considerably increased the temptation to fake the books—the exclusive emphasis on quarterly figures, the overemphasis on the stock price, the well-meant but idiotic belief that executives should have major financial stakes in the company, the stock options (which I have always considered an open invitation to mismanagement), and so on. Otherwise there’s no difference.
Authority without responsibility is illegitimate; but so is responsibility without authority.
“Public” responsibility was to Alfred Sloan worse than unprofessional; it was irresponsible, a usurpation of power. “We have a responsibility toward higher education,” a chief executive of a major American corporation once said at a meeting both Sloan and I attended. “Do we in business have any authority over higher education?” Sloan asked. “Should we have any?” “Of course not,” was the answer. “Then let’s not talk about ‘responsibility,'” said Sloan with asperity. “You are a senior executive in a big company and you know the first rule: authority and responsibility must be congruent and commensurate to each other. If you don’t want authority and shouldn’t have it, don’t talk about responsibility. And if you don’t want responsibility and shouldn’t have it, don’t talk about authority.”
Sloan based this on management principles. But of course it is the first lesson of political theory and political history. Authority without responsibility is illegitimate; but so is responsibility without authority. Both lead to tyranny. Sloan wanted a great deal of authority for his professional manager, and was ready to take high responsibility. But for that reason he insisted on limiting authority to the areas of professional competence, and refused to assert or admit responsibility in areas outside them.
Good intentions are not always socially responsible.
A business that does not show a profit at least equal to its cost of capital is irresponsible; it wastes society’s resources. Economic profit performance is the base without which business cannot discharge any other responsibilities, cannot be a good employer, a good citizen, a good neighbor. But economic performance is not the only responsibility of a business any more than educational performance is the only responsibility of a school or health care the only responsibility of a hospital.
Every organization must assume responsibility for its impact on employees, the environment, customers, and whomever and whatever it touches. That is social responsibility. But we also know that society will increasingly look to major organizations, for-profit and nonprofit alike, to tackle major social ills. And there we had better be watchful, because good intentions are not always socially responsible. It is irresponsible for an organization to accept—let alone to pursue—responsibilities that would impede its capacity to perform its main task and mission or to act where it has no competence.
