Wallowing in the mire of degraded business ethics

B. Herry-Priyono, Researcher, Alumnus, London School of Economics, herryprb@lse.ac.uk

The story of corruption usually goes like this. A group of state bureaucrats have stolen or lost tens of billions, or trillions, of rupiah through juicy fraud, cheating, embezzlement or epic miscalculations. Then the attack-dog commentators of the right-wing press outdo themselves in the excoriation of all things to do with the state sector. From there, they demand more privatization and deregulation.

Enter the scandals of Enron, Tyco International, Adelphia, Global Crossing, Xerox, WorldCom, Walt Disney, ImClone System and Merck. Be prepared for the next series of business storms. The business world has become busy with the issue of ethics.

Business ethics may be said to belong to the wider republic of social ethics. To risk oversimplification, the heart of social ethics boils down to the following idea.

Every form of power whose working has far-reaching implications for the lives of the wider population is by definition inseparable from public accountability. This applies to government power as much as to that of business and military power, as well as to the power of other realms, such as religion, science and technology.

Since the working of these powers explains the nature and type of problems in society, to the holders of such powers are ascribed public responsibility. In short, an attribution of power is at the same time an attribution of responsibility.

This principle has been applied to government power, no matter how imperfect. Democracy is a form ethics. Why not apply it to business power? Indeed, if anything, the latest series of business scandals have forced us to think that the question of business ethics has never been more urgent than today. But in this age of neoliberalism, the obstacles are forever mounting.

With or without ethics, the working of business is best formulated by one of the staunch proponents of economic neoliberalism, Theodore Levitt, who wrote in 1958: "Business must fight as if it were at war; and, like a good war, it should be fought gallantly, daringly, and, above all, not morally".

What is business morality then? In 1962, Milton Friedman, the high priest of neoliberalism, declared: "There is one and only one social responsibility of business -- to use its resources and engage in activities designed to increase its profits."

The strength of such a precept is its boldness. The problem with it lies not in its profit-seeking nature but in divorcing "power" from "public accountability". The implication is clear. Since business ethics as social ethics stand upon the inseparable link between power and responsibility, the sundering of the two can only mean the removal of responsibility from the working of business power. Idea has its incarnate force.

In Keynes' famous words, "practical men [sic.], who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." Through such encroachment of ideas, morality is then deemed irrelevant for business practices.

On the state of business practices in this neoliberal conception, George Soros, that insider and pundit of the financial world, gives the following verdict in his new book, On Globalization (2002): "The distinguishing feature of market fundamentalism is that [it is] amoral -- morality does not enter into the calculations; that is one of the reasons why [it has been] so successful."

This may be too strong a verdict, but like many other practices involving power and property, business is clearly morally ambivalent. There is nothing intrinsically "good" or "bad" in business and profit as such.

The moral ambivalence lies in the issue of whether business power and the narcissism of profit have direct or indirect causal links with the type of societal problems we are facing today, such as market corruption, tax fraud, environmental degradation, the looting of people's money, etc.

Seen from this angle, it is impeccably clear that the two are causally related in a direct manner. This is also what has been besieging us in Indonesia. For example, in the 1999/2000 fiscal year, the 100 cases of tax evasion uncovered involved state losses of Rp 4 trillion, of which Rp 1 trillion arose from frauds perpetrated by two prominent businessmen, ST and DD, according to the office of the coordinating minister for the economy, finance, and industry in 2000.

Also, the fiasco of the 1.7 million hectares of wetland that were to be turned over to agriculture in Central Kalimantan turned out to involve, among others, two tycoons, Tay Juhana and Bob Hasan, who respectively grabbed US$206.5 million and US$161.7 million from the national reforestation fund and the state budget (Tempo weekly, 1999). To these could be added the looting of Bank Indonesia Liquidity Support (BLBI) funds.

No doubt these cases are simply ripples in the surface of a morass of business malpractices. That is why we should be more careful when we hear investors, corporate directors and managers preach in self-congratulatory tones that "our duty to this country is to create jobs".

One does business to pursue profits. The fact that this pursuit requires jobs is the unintended consequence.

It is precisely because many social problems arise as the consequence of the working of business power that, as Barrington Moore Jr (1998) put it, "it would probably be an error to regard business activity as somehow a blessed and moral service to humanity."

The crux of business ethics, like that of social ethics, is not about financial power or the pursuit of profit. Rather, it is about explicitly linking the working of the octopus-like reach of business with the common good of a society.

Between the private interests of business power and public responsibility is a group of actors: CEOs, managers, lawyers and accountants. All corporate scandals involve the malpractice of these corporate actors.

It comes as no surprise then that in the wake of these scandals, Larry Ellison, Oracle CEO, told a company conference in Copenhagen on June 26: "There are crooks out in the street who will take your purse, and there are crooks in the boardroom" -- to which John Boggle, founder of mutual-fund company Vanguard Group, added: "If we sent [those] white-collar criminals to Attica [a prison in upstate New York], I don't think we'd have another white-collar crime in this generation" (Business Week, July 15).

The latter statement may be an exaggeration, but it does show how the publicly unaccountable power of business has now become the new Leviathan.