An Ethic for the New Global Economy
STANFORD BUSINESS SCHOOLDecades after Milton Friedman framed the debate over the
social responsibility of business with an article in the New York Times Magazine,
the discussion continues. Should businesses concentrate on achieving socially desirable
outcomes? Can business be guided by the rule of law when governments are sometimes
corrupt? How does operating globally affect a company's behavior? These and other issues
were the focus of one of the sessions during the School's 75th anniversary celebration in
May. The participants included business leader Bowen "Buzz" McCoy, Stanford
Business School faculty members Kirk Hanson and David Brady, and Stanford economist Milton
Friedman. The following is an excerpt from that session.
The participants in the order of their presentations are:
Bowen McCoy, president, Buzz McCoy Associates, Inc. Iand a member
of the board of overseers of the Hoover Institution
Kirk O. Hanson, MBA 71, senior lecturer in business administration
and director of the Sloan Program
David W. Brady, Bowen H. and Janice Arthur McCoy Professor of
Political Science and Leadership Values
Milton Friedman, senior research fellow, Hoover Institution, and
Nobel laureate
Buzz McCoy
I was a successful and pretty aggressive investment banker for about 30 years. I became
general partner at Morgan Stanley in 1970, when it had 250 employees, 33 general partners,
and $10 million in capital, and we were a leading firm on Wall Street. I became one of a
group of people who helped Morgan Stanley transition from a narrowly based, private firm
to the global powerhouse it is today. Through all this I maintained a very active
connection to my church and to various philanthropic activities, including Stanford.
I was a boundary person, a Christian in business striving to be an aggressive
investment banker and still be in a relationship with God, and I've come to the view that
spirituality and morals, as I define them, are not enough, and that ethics is grounded
deeper than cultural norms. Cultural norms can inculcate bad practices. Ethics itself is a
result of religion and deeper feelings and of where we stop trading off. I often say
facetiously that I teach Christian ethics in business school and business ethics in the
church.
How do you live out your faith at work? First, be worldly. Be a worker, be an
investment banker or a real estate broker or a litigator or whatever you are, and if you
can't do that successfully, you're in the wrong job. Don't be afraid to take personal
risk. Be open. Tolerate questioning. Create a context. Don't burden your work too much
with church or outward signs of religion. I believe in Dietrich Bonhoeffer's "hidden
religion." Don't wear your heart on your sleeve: Be authentic. Understand that there
are covenants in any kind of an organization, both implicit and explicit. Managing change,
breaking covenants, setting up new ones is the hardest job a manager has to do.
Be very careful about whom you promote. We spent hours at Morgan Stanley on whom we
rewarded and promoted, and we never did it perfectly and were always changing the system.
Reward character and leadership and not just production. Manage greed. You have to have
rewards and punishments as well.
Leave room for personal philanthropy. I've always said if you spend 110 percent of your
time working, you're in the wrong job. You are competing against people who spend 80
percent and are successful. If you cannot be well balanced and still compete, you're in
trouble.
Build trust, even intimacy. I used to spend hours with my people setting goals, setting
standards. Display a certain amount of calmness. Be tolerant of ambiguity and paradox.
In this age of globalization we need a faith-based ethic. We need to understand that
the world and globalization of money and capital markets is really based on a
Judeo-Christian culture, because it's a British-U.S. system promulgated throughout the
world. And it runs head-on into other faiths and other systems.
We have to understand more about where ethics come from and where these feelings come
from. Culture is shaped by religion, by our deepest feelings about who we are and who we
want to become. I see a lot of theology in Peters and Waterman and in Peter Drucker, and a
lot of good management in something like the Rule of St. Benedictobviously a
boundary person.
We're all people of faith searching for ways to be good. In globalization we can come
closer together, but we still don't know one another. We can start up a new business fast,
but growing wise in the way of life takes a long time. It's never complete, never right,
and never perfect. An ethic is deeper than morality or custom. It comes out of our deepest
desire to make meaning out of our lives and hence resides in the areas of spirituality and
religion. The deepest and most meaningful relationships develop out of this level of
interaction. To have integrity is to bring deep meaning to bear in all aspects of one's
life. And to deal effectively in a global arena, one must have some notion of the deep
meaning imbedded in various cultures.
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Kirk Hanson
Milton [Friedman] has set the tone for the debate over business ethics and corporate
responsibility for the past 30 years with an article in 1970 that said the social
responsibility of business is to increase its profits. And so I want to talk a little
about what I see as the nature of this debate and where we go from here.
What has the last 30 years been like? We've had three different approaches to the role
of ethics in business. One is that ethics has really had no role in business and, while
Milton's name has been associated with that, I'm not sure he believes all that has been
attributed to him. This position holds that the role of business is to be profitable and
to be constrained only by the law. Second is the view of Jim Burke and Norman Lear, with
whom I worked for five years and who believe that ethics is good business. If you are
ethical, you will be a successful business person. I sometimes got a little uncomfortable
with how absolute they were in stating it. The third position is that whatever your belief
is, ethics is absolute and has to come before self-interest in business decisions. What do
we make of these? I fall into the camp that believes ethics is good business about 90
percent of the time, and that the other 10 percent you do have a very genuine conflict,
and there has to be some commitment to ethics as an absolute.
Today the debate over business ethics is being transformed by globalism. American
companies realized in the mid-eighties that they were global companies and had to operate
in multi-value, multi-ethic environments. Taking business ethics global, I have come to
believe in at least the following four propositions:
1. Doing ethics globally is possible. It is not all related to a particular culture. It
is not that the world is adopting the U.S. view on ethics. Rather, it is possible to
identify some globally accepted ethical norms.
2. Ethical behavior of companies does affect people throughout the world and does
enhance the bottom line. Ethical behavior affects not just people and stakeholders but
also the interests and long-term profitability of the firm.
3. You must be aware of and respect the differences in values in various societies.
American companies operating in Europe today would not succeed without a sensitivity to
Europe's interest in all the stakeholders of the firm. Monsanto clearly did not understand
many Europeans' sensitivity about genetically modified foods. Shell did not understand the
environmental sensitivity in the rest of continental Europe when Shell U.K. was disposing
of the Brent Spar oil platform in the North Sea. So while there are global ethical norms,
you also have to have a profound respect for different values.
4. Ethics and values therefore must be managed in the global corporation. It's a matter
of survival and self-interest. You must manage your ethics, your ethical norms, and values
of your enterprise like all other behaviors in your organization.
So where are we today? We still have these different approaches to business ethics as
we move into this millennium: one that ethics has no role in business; a second that good
ethics is good business; and a third that ethical behavior is an absolute even if it costs
you money. We certainly have enough examples that ignoring ethics can cost you moneyColumbia
Health Care, Coca-Cola, DoubleClick, and others that have not understood some ethical
issues facing business in a global society. A global ethic is emerging. Companies must
consider transparency, continual self-examination, communication of values, recognizing
the obligation to stakeholders, engaging in dialogue with all those stakeholders,
continually asking themselves if their actions are ethical. The future role of business
ethics in a global society is still uncharted at this point, but it's clear that it is a
topic we will be discussing extensively as the millennium develops.
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David Brady
For me, ethics is the application of moral principles to everyday life and business
problems. There are numerous ethical systems-religious systems, semi-religious systems
such as Confucianism, and the major secular systems: utilitarianism, Kantian rights,
distributive justice. What a true ethical system does is allow you to determine a course
of action consistent with the set of moral principles you're reasoning from.
I've always been a fan of Milton's article and views on corporate responsibility. It is
ethical, based on a specified axiom (utilitarianism), and is consistent with economic
science. What I like most is it clearly delineates the role of governmentgovernment
enforces contracts and sets the rules governing fair business behavior. It says that
managers are agents, that the principals are the shareholders, and that the rule governing
behavior is that the managers should maximize shareholder value. As such, it clearly
prescribes the course of action so that when a manager has a dilemma, he/she can determine
the appropriate course of action.
This reasoning applies in cases where measuring dollar loss can be complicated. For
example, in a case like Johnson & Johnson and the Tylenol tampering, the company can
calculate the costs of its actions and put it into a framework, and the cost of maximizing
profit or gaining credibility can be estimated and the rule applied.
A more popular view of corporate responsibility is that of the Business Roundtable in
the United States and its idea of stakeholders. Roughly, the idea is customers,
shareholders, suppliers, the government, etc. are all stakeholders in the company and as
such are all elements that management has a responsibility to. Managers love stakeholder
theory, because they can support any action on the basis of what stakeholders say they
want. You balance it off and say, "I couldn't possibly do 'x,' because this group
wants one thing and the other group wants the opposite." In addition, the statements
regarding the nature of responsibility are purposely vague, and such generalizations allow
managers to do what they wish and call it responsibility.
Now while I like what Milton's done, it does seem that globalization presents a bit of
a problem. Operating globally, you have local units that are self-sufficient. The center
is weak. Some firms focus on scale and uniformity; others use the supply chain model to
tap resources and capabilities anywhere. Nike is a classic example. It wanted the least
costly producer, so it went to Japan, then Korea, China, Vietnam, etc. They also were a
global brandthe No. 1 producer of athletic footwear and major producer of athletic
gear around the world. To do that they had to go local, like supporting soccer in Brazil.
This approach decentralizes management.
Now, what problems does that create? In the United States and also in Europe, Milton's
system works reasonably well. These governments set the rules of what constitutes fraud
and liability. But if you're a Nike manager and you're in Vietnam, you don't want to leave
the human rights of your workers up to the local government, because, frankly, that's a
government which has not been very concerned with human rights in general. This gives
managers in some countries different responsibilities. For example, every British
Petroleum manager in China is responsible on a biweekly basis for driving out to all the
road sites and rural power companies to check and make sure that they're not being built
by prison labor.
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Milton Friedman
Kirk said 90 percent of the time being ethical is consistent with being profitable. I
agree with about 90 percent of what everybody has said. Both David and Kirk have referred
to an article of mine 30 years ago, and that's how I got into this ethical business, which
is not my businessI'm an economist. But about 30 years ago I wrote an article for New
York Times Magazine on social responsibility of business ["The Social
Responsibility of Business Is To Increase Its Profits," September 13, 1970].
No article I've every written has yielded me so much money. Not a year goes by that I
don't get about $1,000 in fees to reprint it. And the reason is very simple: Business
ethics has been a growing subject in business schools. Every business school needs a set
of readings on business ethics. Each needs views from left to right, and very few
economists were willing to be as extreme as I was. So I had almost a monopoly on the
extreme side of the market. I went back and reread this article. I was not surprised that
I still agree with it. And I want to read to you both the beginning and the end. Let me
emphasize it deals with social responsibility of business, not ethics. Those are two very
different things. Here's the first paragraph:
"When I hear businessmen speak eloquently about the 'social responsibilities of
business in a free enterprise system,' I am reminded of the wonderful line about the
Frenchman who discovered at the age of 70 that he had been speaking prose all his life.
The businessmen believe that they are defending free enterprise when they declaim that
business is not concerned 'merely' with profit but also with promoting desirable 'social'
ends; that business has a 'social conscience'; and takes seriously its responsibilities
for providing employment, eliminating discrimination, avoiding pollution, and whatever
else may be the catchwords of the contemporary crop of reformers. In fact, they areor
would be if they or anyone else took them seriously [that sentence is no longer
true-people do take them seriously]preaching pure and unadulterated socialism.
Businessmen who talk this way are unwitting puppets of the intellectual forces that have
been undermining the basis of a free society these past decades."
The last paragraph says:
"That is why, in my book Capitalism and Freedom, I have called it [the notion of
social responsibility] 'a fundamentally subversive doctrine' in a free society [it is an
important point related to the globalization problem], and have said that in such a
society, there is one and only one social responsibility of businessto use its
resources and engage in activities designed to increase its profits so long as it stays
within the rules of the game, which is to say, engages in open and free competition
without deception or fraud."
That's the beginning and the end. And of course most of the difficulty is because no
one has read the in-between part. That's a discussion of the social responsibility of
business. It's not a discussion of what's ethical or not ethical. In my opinion, it's hard
to know what is meant by business ethics. Only people, not businesses, have ethics. Ethics
is me, the individual, as a person. I'm ethical or unethical. If I'm employed in a
business that I think is unethical, I have a clear choice. I can get out of that business
and find something else to do. It doesn't seem to me it's ethical for me to do unethical
things because the business can let me do it. One common example: Is it ethical to work in
a cigarette-producing company? Everybody knows smoking cigarettes is hazardous to your
health. So is riding in an automobile. So is skiing. So is swimming.
Is it unethical for me to be an employee in a factory producing cigarettes? No! But is
it unethical for me as a manager to make false statements in public? Yes! If people want
to smoke cigarettes, if someone decides the pleasure of smoking is worth the risk to his
health, that's no different than if he decides the pleasure he gets out of skiing is worth
the chance he'll go through a tree.
That's why it seems most of these difficult problems are not difficult in ethical
terms. They're difficult in practical terms. Difficult in knowing what the costs and
returns are. A corporation has an obligation to its owners and stockholders to make as
much profit as it can while not violating its owners' ethical concerns nor practicing
deception or fraud. What that requires will be very difficult to figure out in a place
like China. But there I wouldn't say British Petroleum is behaving ethically. I'd say it's
behaving responsibly in accordance with its statement it doesn't want to engage in
deception. It doesn't want to tell its stockholders, "Your money comes from prison
labor."
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McCoy
Saying a business is ethical or not is shorthand. Wouldn't you agree you could run
some diagnostic on company A, company B, Company C on the behavior of the individuals who
make up those companies and come to some kind of a conclusion of whether the people in A,
B, or C are more ethical?
Friedman
Take the cigarette case. So far as the ordinary workers working the machine, there's
nothing unethical about what they're doing. They may not like it and in fact you may have
to pay them more than you pay workers elsewhere.
McCoy
I teach a case on insider trading and I talk about ethics. The students say they
wouldn't want to have a firm working for them that doesn't have a fine reputation. I say
arguing a legal defense against insider trading allegations is very hard. Offense is a lot
easier. If you're the CEO and tell him you're going to lose your million dollar salary and
your Bohemian Grove and your Augusta and your airplane and you have a choice of hiring a
very ethical firm that won a fair amount of defensive cases or hiring a firm that cut a
few corners and was very aggressive and won more defensive cases, which firm would you
hire? The ground shifts underneath them.
Friedman
Insider trading is a made-up crime, but given it's the law, then people ought to obey
that law. I want to qualify that. Nobody really believes that it's an ethical precept that
you obey every law. If you obey a law that requires you to do something that is unethical
or amoral, I think everybody in the room would agree it's a proper human behavior to break
that law as long as you're willing to accept the responsibility for that. That was the
justification for conscientious objection during the war.
Hanson
I want to push you. It seems what we talk about when we say business ethics really is
a single ethic, and it applies to other areas of our lives. And when we talk about ethics
in organizations, we're talking first about what the individual manager or employee ought
to do. Critics of the tobacco companies try to say it is simply unethical to produce
cigarettes, therefore the individuals who work for this company ought to resign.
Friedman
You made a statement there that you don't mean. "It's unethical to produce
cigarettes."
Hanson
I believe it's unethical for me to produce cigarettes
Friedman
Maybe it's not unethical to produce cigarettes. If he's making it clear what the facts
are and the risks are, if it's unethical to produce cigarettes, then it's certainly
unethical to produce skis, automobiles, bullets, guns.
Hanson
I very much differ with you on the ethical obligation. I would argue my ethical
obligation is not to do things that directly harm others. I'm not going to make your
ethical decision for you. But I am saying the people making cigarettes for you ought not
to make them.
McCoy
In free society, if you want to smoke cigarettes, who are you to tell them they can't?
Hanson
I do make a distinction
Friedman
Who are you to tell me that I should not sacrifice my health for something I think is
pleasurable.
Hanson
I'm not going to make them for you. I'm also saying these other people making them for
you ought not to make them for you.
Friedman
That's their business, not yours.
Hanson
I'm going to continue the critique, the public ethical critique of everyone who
chooses to make them for you.
Friedman
That's where I say I think you've gone too far.
Brady
I served on the Stanford Committee for Socially Responsible Investing. The question of
whether Stanford should invest in R.J. Reynolds came up. The majority had Kirk's positionthat
we should sell the sharesand they came up with a moral principle that would allow us
to sell those shares. They said: You cannot have shares in any company where the sole
intention of the company is to harm people. I said, that's fine, and I'm sure Mr. Packard
will be delighted to know you're going to disinvest in Hewlett-Packard because HP makes
missile-guidance defense systems. That clearly is a product whose sole purpose is to bomb
people. They immediately backed up. The point is it's very hard to define what that set of
products is.
Hanson
Because it's hard don't stop trying to do it.
Brady
I'm willing to try but it's why I consistently come down on Milton's side in this
argument. Because in that system it's clear what I should do. Why didn't Stanford just
sell the shares? Harvard did, they dumped them on the market and got out. I don't
understand it. If you want to sell them, sell them. But don't try to set up a principle
because every time you try to figure out what that principle is you just spin your wheels.
It's hard to do. It's very hard and you can try, but the reason it's hard is it's fuzzy.
Hanson
If I believe it's unethical, I may try to legislate too. I may try to abolish
cigarettes or guns without locks. And isn't that my obligation as an individual?
Brady
Because you succeed in getting legislation passed doesn't make it moral. In South
Africa it was legislated that Blacks did not have rights, and in the United States of
America for an extremely long period there was legislation that discriminated against
women, Blacks, and Hispanics. That is the distinction between politics and ethics. In
politics, by building majorities for positions you favor, you can force your view on other
people. But the ethical judgment of whether legislation is moral or not is a separate
judgment.
McCoy
Kirk mentioned 90 percent of ethics and profits can be congruent. I'm not sure that's
true. In certainly many businesses where the ethical norms may be quite different. I'd say
ethical norms are what you are willing to lose for. If you link ethics up with winning 90
percent of the time you lose the trust of what ethics is all about. If you have to win all
the time to be ethical, that's not being ethical.
Hanson
I would say that most business ethicists in the United States spend their time trying
to convince people that being ethical actually will help you win in the long term.
Fulfilling Milton's dictum, we talk about the 90 percent of the time ethics is good for
businessdo the ethical thing if it is serving the shareholder and the bottom line in
the long term. I believe the public is very sensitive to the impact of larger and larger
global enterprises on people and the environment. And that's what ethics is about, the
impact of my behavior or my organization's behavior on people. My ethical commitment
includes both a free society and a set of ethical norms that may include human rights, the
protection of human life, etc. My set of values includes your free society.
Friedman
Let me take you back on that. Here's a company that does something in its own self
interest but instead of just writing a report and saying "this is in our own self
interest" they say in their report "we did this to exercise our social
responsibility." It's in their own self interest and it's in accord with what the
chattering class calls social responsibility. Now it's in their self interest to
misrepresent what they do. They can increase profits because the public at large gives
kudos to them for saying it. In the process, however, they're undermining the whole long
term basis for the preservation of a free market enterprise society. In a free market
enterprise society businesses do not have a social responsibility. What they're labeling
as a social responsibility is not that they're misrepresenting it. I would say they're
engaging in fraud or misrepresentation when they say "look the only reason we grow
forests is to have great wildernesses."
Hanson
"We built that oil platform to provide habitat for fish."
Friedman
Absolutely. Now in the process you will agree if you follow that to its logical end.
Profit is a very bad word. If you're doing something for profitif you at the same
time could have been making a habitat for fishhow do you reconcile that? How do you
put in the same scale the harm they're doing to the long run basis of a free society with
the good they're doing to their own bottom line?
Hanson
Because my ethical commitment includes both a free society and a set of ethical norms
that may include human rights, the protection of human life, etc. My set of values
includes the free society. It has a prominent role, but also has some other
Friedman
You can't include the free society there. Those of us who believe in the free society
believe in a free society and an organization in which individuals and enterprises are
seeking to promote their own self interest is the best way to achieve those rights. It's
not that those rights are something in addition to a free society. Its what a free society
is forto achieve those rights. By this damn nonsense of social responsibility what
you're doing is pandering in a way to the instincts that say profit is bad, business is
bad, everything has to be done through the government and for someone else it's a
philosophy you don't want to accept.
Hanson
I hope I'm not saying that. Let me tell you where I have the problem. The free society
where I say this works in a free society. Dave points up Vietnam and we say maybe Vietnam
is not a free society where this can work , and maybe there is a problem globally of
corporations having greater responsibility. My contention would be that no society is so
efficient as to translate all ethical concerns into law and therefore there is always a
residual problem. In Vietnam there may be the problem of corruptions, in the United States
there is a lag like the power of the NRA vs. the gun locks, women's issues, racial issues.
Clearly there was an obligation on the part of companies back in the '30s and '40 s to be
aware of race to be aware of the rights of women, and I think we cannot define that away
by saying we're a free society.
Friedman
I didn't claim that the United States today is a free society. At the moment we're
about 40 or 50 percent socialist (McCoy: And that 40 or 50 percent goes to state and local
government) right, and most of the laws are bad not good. I'm not arguing that we have to
depend on law to define our ethics.
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Question from the Audience
In my career I've seen situations where citizens group will show up and assert that
something should be done for socially responsible reasons. The CEO believes it would be
ethically immoral for him to give in and yet everything in company is designed to get him
to give in, go along with this everyone else does. I was wondering if you have suggestions
for the manager seeking to resist on ethical grounds when everything in the socially
responsible arena is pushing him the other way.
Brady
The question is how do you treat that? One of the things a company has to do is look
at its reputation. If everyone else in the society values that, if you stand out and say
"we're not doing that" and you go out of business, you're not maximizing profit.
I struggled for quite a while to see which of these ethical systems was best, at least
choose one that will tell you what to do. But I defy you to go to the Business Roundtable
or any of those who talk about stakeholders Milton's notion is that you can make that
decision, and you're making a calculation that says how much will this hurt the bottom
line? If it hurts the bottom line then we're not going to do it.
Question from the Audience
What about John Stuart Mill's self-regarding notion as a principal in business.
Brady
The self regarding notion fits perfectly. Mill was a utilitarian. Out of which comes
economic science. The self regarding and other regarding is as you build a corporation. We
used to ask MBAs: somebody builds an oil refinery in a country with some oil and no jobs
and the person employs 5000 people, pays above average rates, pays health care. Is that
person better off than some firm that claims to be socially responsible?
The self regarding action is if you're Bill Gates and you form a company and make
zillions. The other regarding part stems from a system in which the incentives are set up
right so you can employ 50,000 people, they have good jobs you've created lots of
millionaires, they have insurance and their families are better off than if you hadn't
created the company. So in that sense, when the incentives are aligned, self regarding and
other regarding work together. It doesn't always occur that way and as Milton and Kirk
have pointed out there are flaws in those systems. But theoretically there's not that much
distinction in Mill between self and other regarding principal.
Friedman
People pursuing self regarding activities have done far more to benefit the society as
a whole. I give you my pet exampleFord. Henry Ford did far more good for our society
by producing the model T and bringing transportation to the common person than the Ford
Foundation ever did with the money that he left.
Question from the Audience
The cigarette industry is an interesting one. Unlike other products, it's an addictive
one. We as society decided we're going to make illicit drugs illegal because of the
harmful affects on people. So it seems it would be nice to apply a clear philosophy. We
should apply no restrictions, let everyone do what they want. But the reality is that's
the way the world is, there are lines that are drawn. Its pretty possible to imagine where
to draw the line so cigarettes are outside the line.
Friedman
No doubt the most dangerous drug around is alcohol. There's a far better case for
prohibition of alcohol than current law that prohibits marijuana, heroin, and so on. I
would legalize all of them. I don't believe there's any case whatsoever for prohibiting
cigarettes. I believe much of the talk about outlawing cigarettes has been hypocritical in
the extreme. The government and states and federal government loves to talk about how bad
cigarettes are because then they can put on high taxes and those taxes wouldn't do any
good if their talk was effective.
Hanson
But you're argument is exactly why I wanted Dave to separate those who are addictive
or whose primary effect is one way or the other. We should note that Stanford in its great
moral certainty after it got all balled up in not being able to develop an ethical
practice, did a couple of years later in the middle of the night did sell all its tobacco
stock.
Question from the Audience
I am involved in company offering telecom services in Nigeria. Please speak more about
first world smaller companies acting in third world situations.
Hanson
You have very little leverage as a small firm. As Cocoa Cola coming in you may not be
able initially deal with the government of India but you can with most governments. A
smaller company may not have that kind of leverage and therefore may have to make go-no go
decisions more frequently than a large company can that has an ability to negotiate with
the local power structure. My sense when I talk to people from small businesses who lament
the problems in one country, is you may need to forego operating in that country because
there is no way to operate with minimum levels of integrity that you hold to be important.
McCoy
It's a slippery slope. I had a long talk once with a CPA in an international firm in
the Middle East who said as far as he knew they'd never paid off. Once you give an inkling
that you're ready to pay off you're sunk. That's an area where you really have to be
rigid.
Brady
Large companies while they can influence the government may face a more difficult
problem in the long run. They're much more susceptible to boycotts. One case we deal with
is the Conoco case. Conoco is dealing with a country and there are indigenous people
involved. The deal is set up, the indigenous people are in favor of it, and they finally
decide that they're not going to do the deal. They're not going to explore the field
because they're worried about the boycott of the Conoco brand.
So what happens is some little overnight companyan oil company going to sell on
the spot market with no brand namecomes in and they drill. Everyone is worse off.
The indigenous people are worse off, government is worse off, and Conoco stayed out
because subject to possibility of a boycott.
Whatever size company there are unique problems. Problems are very hard to reason out.
It ultimately comes down to how an individual is going to reason about this.
Hanson
There are specific market opportunities for low ethics companies.
Friedman
There are no low ethics companies, there are low ethics people.
Question from the Audience
If the role of the company is to maximize its own self interests while playing by the
rules of the game and the rules of the game are to not engage in any deceptive and
misleading conduct, not in anti-competitive conduct, where do those rules come from? Are
the rooted in personal ethics or do they come from somewhere else or is it a mixture?
Friedman
That goes back to the question Buzz is raising. How do you get individual ethics? They
don't come from the Bible. They may be in the Bible, but the interesting thing is that
ethical values that tend to be expressed by people have a great deal of commonality
worldwide whether you're in Christian country, or Muslim country. I believe this is part
of the kind of thing Frederich Hyatt talks about where you have an evolution over
thousands of years in which patterns evolve which are generally effective for the good of
the people. This is a biological evolution. And what survives are those values that
promote survival and development. It's not that any individual can set it down, not that
any religion can set it down, but that it's not fixed and final. It's development all the
time. It's developing now. You get those from that common set of values, natural laws what
some people refer to. But it's not natural law in that it's given and is forever the same.
It's a developing set of values, the role of the philosophers is really to figure out what
it is and to express verbally the content. Everyone believes its ethically wrong to kill
someone.
McCoy
There's a great protestant theological named Paul Tillich who has a book called the Courage
to Be and Milton just quoted Paul Tillich perhaps intentionally (MiltonNo, not
intentionally) he talks about the same thingthat you don't always have to obey the
rules, you don't always have to obey the 10 commandments because ethical decision making
is a highly creative and existential act. But if you do so in violation of these rules of
the last 7000 years you do so at great personal risk. There is the drama of Nicholas
Balhoffer. He did try to kill Hitler and he was hung by the Nazis in May of 1945 as a
theologian and priest.
Well, based on this discussion obviously ethics is alive and well in Stanford business
school and in this room. Thank's you've been a great audience. |