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Desperate Times, Unethical Measures

Here’s something every bit as troubling as a looming market crash: A new study commissioned by Ernst & Young found that 15 percent of 1,758 high-level managers from across the world think that an economic downturn is enough justification for using immoral and misleading business practices, a rise from 9 percent in 2010. Apparently almost one sixth of all high-level businessmen say that bribing clients and willfully misstating financial statements are valid forms of business in the name of recession survival.

More appalling are the responses from the CFOs included in the study: 47 percent of the 400 CFOs surveyed agreed that bribery and lying were sometimes necessary. Certainly these results are “a cause for alarm,” as the survey concluded. These are the men and women in full charge of a company’s financial reporting and strategic planning, and half of them are content to grow their company by immoral means.

Liberty depends upon virtue. Without strong personal ethics (which usually, though not invariably, are cultivated by faith in God) free markets crumble and free societies do not stay free. Unethical business puts companies at risk of collapse by legal means, if caught, and by the crushing weight of economic reality otherwise. It goads young businessmen into joining that culture if it remains widespread and unchecked.

Education needs to reconnect with both religion and morality, and tolerance of unethical personal and business behavior among the rich and the powerful needs to be recognized for what it is: a deadly threat to all we hold most dear. Helping your child cheat on the SAT to increase their chances of admission to a prestigious college, for example, goes against all of the business virtues that reward hard work and keep markets free and competitive within ethical bounds. The same principle holds true when CFOs hand out bribes to boost their company’s profits, or falsify financial statements to boost share price. This needs to change.

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  • Kris

    1. I fully agree.
    2. You can pass laws and regulations such as Sarbanes-Oxley or Dodd-Frank until the economy collapses under their weight; that won’t make people virtuous. In fact, they might achieve the opposite.
    3. Many people seem to think that “an economic downturn is enough justification” to simply expropriate some of these managers’ money. (Oh, who am I kidding? They don’t need any justification.)

  • Anthony

    “These are the men and women in full charge of a company’s financial reporting and strategic planning…”

    To paraphrase Thibaud, it’s not solely political but cultural (moral). Are we undermining the “civilizing process” tied to the humanitarian revolution?

  • Kenny

    Very good observation, Mr. Mead.

    And as America becomes more secularized, more de-Christianized, the country invariably become more corrupt — or to say it more gently, more prone to corruption.

  • Rand Millar

    Amen, Prof. Mead! If one gives himself unreservedly to Christ and truly puts Him at the center of his or her life, then ethical behavior must come as a matter of course – “WWJD?”. Followers of Christ are called to be IN this world, indeed, causing assets entrusted to us to be multiplied as best as we ethically can, but not OF this world.

  • thibaud

    Bribery is considered a line item (“Marketing expense”) in many countries’ legal systems.

    As to business ethics and religious belief, the financial crisis began in that most religious of advanced nations, the good ol’ USA.

    Despite our religion-soaked politics, we still, four years later, have not taken the most basic steps to reform our banking sector as those secular Swedes and Norwegians did fifteen years ago.

    Maybe there’s zero correlation between banking sector reform and religiosity?

  • Kansas Scott

    I know it was in the context of how to keep government from gaining too much power but Madison’s statement that “If men were angels, no government would be necessary” seems appropriate here.

    I think it has always been assumed that all humans fail the ethics test sometimes and a certain percentage of humans fail the ethics test all the time. This poll just reflects what we’ve always known about people.

    I am sort of surprised the percent is so small although I guess the truly unethical would not have answered this question truthfully.

  • thibaud

    Man, is this WRM post ever off the mark. There’s if anything a slightly NEGATIVE correlation between the degree of corruption in a country and the extent to which religion or religiosity influence that country’s politics.

    According to Transparency International, widely considered the gold standard for international comparisons of corruption, the nations with a “very clean” rating of 9 or better (scale of 1-10) are, every one of them, advanced secular nations that disdain any religious influence on their politics.

    Among advanced nations, the heavily religious countries such as the USA, Ireland and Israel all lag far behind their peers when it comes to corruption.

    Global Ranking Country Score

    1. New Zealand 9.5

    2. Denmark 9.4

    3. Finland 9.4

    4. Sweden 9.3

    6. Norway 9.0

    19. Ireland 7.5

    24. USA 7.1

    38. Israel 5.8

    Among the G7, the USA scores above Italy but far below Canada, Germany, and Japan, and ties with France:

    Worldwide Ranking Country Score
    10. Canada 8.7
    14. Germany 8.0
    14. Japan 8.0
    16. UK 7.8
    24. USA 7.1
    25. France 7.0
    69. Italy 3.9

    Even within the Anglosphere, the USA lags far behind its secular cousins. As I’ve pointed out before, our secular Canadian cousins (especially outside Quebec) have FAR less corruption in their politics, banking sector, pension fund management etc than we do.

    As with his “blue state” myth that state intervention to protect the weak and regulate banksters is somehow incompatible with higher-than-average GDP growth and economic health – if anything, it’s the opposite – Mead turns upside down the relationship between corruption and secularism.

  • thibaud

    correction to above: “there’s a slightly NEGATIVE correlation between the degree of _cleanliness_ in a country and the extent to which religion or religiosity influence that country’s politics.”

  • Luke Lea

    I wonder how much of this moral decay is due to our doing business with China, where honest dealing is not an option if you want to be in the game?

    BTW, did you know that the overwhelming majority — up to 80 percent — of the factory workers in China’s export sector have few if any legal rights? Not being legal citizens of the cities and towns where they work, their status is akin to that of illegal immigrants and guest workers in this country. I just learned that. Here is the source:

    Excerpts [for the benefit of WRM and his minions}:

    “”What is unique about migration in China is that the two aspects of internal migration (movement and citizenship) can be totally disparate; i.e., one can move to a new place (for example, because of a job change) but can be permanently barred access to community- membership-based services and welfare. People who have moved to a new place but do not possess local citizenship (hukou) are referred to as the non-hukou population, meaning that they are not de jure residents even though they are de facto residents. . . The situation of Chinese migrants without citizenship, of course, is not unique in the international con- text of migration. Many so-called “guest laborers” working in foreign countries, sometimes for years, without local citizenship, fall into this category. But few countries have applied such a system to their own citizens in modern times. In China, this group is commonly called the “floating population” or “mobile population” (liudong renkou). Its size has grown rapidly from a few million in the early 1980s to the present level of about 150 million (Chan, 2009a). . .

    “In the cities, in addition to the lack of access to many basic social ser-vices, these migrant workers also face many formal and informal obstacles to securing jobs other than low-skilled ones (Chan, 1997; Solinger, 1999; Li, 2003). The lack of local hukou for migrant workers, combined with other unfavorable conditions such as the plentiful sup-ply of labor and lack to access to legal information and support, has created a huge class of super-exploitable, yet highly mobile or flexible industrial workers for China’s new economy, now closely integrated into global trade networks (Lee, 1998; Alexander and Chan, 2004). The “China price,” mainly due to its low labor costs, was the lowest among major developing countries (Chan and Ross, 2003).24 Even the low wages promised are often not paid for months or years.25 Many of these workers are vulnerable, and often subject to exploitation and labor abuses (A. Chan, 2001). Their “temporary” nature and lack of local citizenship also make them easily expendable. The current global financial crisis has hit seriously China’s export sector, leading to unemployment of about 20 million migrant workers (Bradsher, 2009), which is widely believed to have contributed to a much larger volume of “Spring Movements” this year (2009 nian, 2009). . .

    “The new approach of “freeing” peasant labor has served very well China’s economic growth strategy of being the world’s low-cost producer. Effectively, this has helped defer the arrival of the critical “Lewis turning point”26 so that China can continue to draw labor from rural to urban areas and export-processing zones at rural-subsistence wage rates. Du Runsheng, one of the most respected and experienced central officials overseeing the rural economy, has remarked that for two decades since 1980, there has hardly been any real increase in the wages of rural migrant workers in the coastal areas, despite rapid economic growth (Sanyi, 2009).”

  • Randy

    “We laugh at virtue, and are shocked to find traitors in our midst.” – C.S. Lewis

  • Anthony

    WRM, Quick Take’s theme initiated reflection and previous instruction: “when wealth is honored in a state, and the wealthy, virtue and the good are less honored…thus, finally, …they become lovers of gain getting and of money…. As to democracy, the insatiate lust for wealth and the neglect of everything else for the sake of money-making were the cause of its undoing.” (Plato’s Republic)

    Quick Take title (desperate times and unethical measures) anticipates your implication of larger societal failures and the organizing role religious principles can play in the pursuit of commerce – Societal organization matters…

  • Corlyss

    I dunno about bribing clients. I dunno what purpose that would serve without context.

    But I fully support American businesses bribing foreign local officials to even the competitive playing field, esp. when we all know foreign businesses bribe their own officials for special status. To force American businesses to behave as they would in the US is simply utopian folly. We live in a real world and American businesses overseas should be allowed to concede the fact.

  • Corlyss

    @ Randy

    Great quote. Thanks for the Lewis citation.

  • MikeD

    Before going all postal on US businesses and business people wouldn’t you like to know what country/nation the 15% miscreants work in. Afterall, the post states 1,794 people across the world were interviewed and we all know many places where bribery et al is the accepted way of doing business.

  • Mark Michael

    Every traditional major religion in the world has the Golden Rule as its guide for daily living according to Harvard theologian, Karen Armstrong. (I heard her say that on Charley Rose’s interview show! I trust she had her facts right.)

    Some religions say it negatively, “Don’t do to others what you don’t want done to yourself.”

    It says that enlightened law should treat everyone as equals. It’s hard to say that’s a terrible guide for a nation to follow, since it’s “religion” and religion is so, so bad!

    In fact, some say that’s the guiding principle of the British common law which Americans inherited and adapted to our own uses over the years.

    Statues of lady liberty has her blindfolded holding a scale in which she weighs matters. The blindfold tells us that everyone is treated equally under the law, rich and poor, every race, both sexes, the political class and the private citizens.

    Our Founding Fathers heartily agreed with the sentiments that WRM expressed in this post. They passed the Northwest Ordinance in 1787. It gave permission to purchase federal land to establish colleges. It includes these words, Article 3:

    “Religion, morality, and knowledge, being necessary to good government and the happiness of mankind, schools and the means of education shall forever be encouraged.”

    At least two large, land-grant state universities have this saying engraved on their buildings. The U. of Michigan’s Angell Building has it engraved above a set of colonnades. The Ohio U. in Athens, Ohio, also has it engraved above its main administration building.

    Jesus quotes it in its positive form in Matt. 7:12 (NIV): “So in everything, do to others what you would have them do to you, for this sums up the Law and the Prophets.”

    In fact, the Ten Commandments, for sure the 2nd table of those commandments (“Love your neighbor as yourself” from which the Golden Rule derives – puts it into action in one’s daily life), was given because of man’s weak, perverse nature.

    Just going over those commandments, they’re easily derivable from the Golden Rule: You shall not commit murder. You shall not commit adultery. You shall not steal. You shall not bear false witness against your neighbor. You shall not covet your neighbor’s wife, his property, his job, his wealth, his nanny or pool boy, or other employees of his small business.

    The one positively-stated commandment includes a promise, “Honor your father and mother so that it may go well with you and you may live long on the earth.”

    Christians usually divide Christianity into Law and Gospel. The above is the Law. The Gospel, the Greek word for good news, is how one obtains forgiveness from the sins you commit. Is there an afterlife and how is it obtained?

    Religions also have a whole set of rituals, ceremonies, sacraments, sacred music, traditions that surround these “core” Law and Gospel precepts. They’re included to raise one spirits, help us remember and follow our core beliefs, and spiritually bind us to God and each other.

    I think it’s fair to say that when most objective people say that our government should not be based on any religion, they’re NOT thinking of the basic Law, the Golden Rule, but rather the Gospel and all of the surrounding rituals, sacraments, sacred music, etc. that all religions have.

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