Jeffrey Saltzman's Blog

Enhancing Organizational Performance

Aligning Morality and Profits

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“Tell me why you are crying, my son

Are you frightened like most everyone

Is it the thunder in the distance you hear

Will it help if I stay very near, I am here”

Day is Done, by Peter Yarrow

of Peter, Paul and Mary

There has been much written about the greed of Wall Street, the pay of CEOs, the off-shoring of jobs to enhance corporate profits while eliminating jobs locally, the evils of globalization, the increasingly powerful corporations doing as they feel, ignoring or bending national governments and political parties to their will. Over the years, other corporations have been shown to skimp on key issues such as safety, increasing risk for their employees, or adopting procedures or processes that put their customers or the general public at risk (minimally at risk of purchasing an inferior product, but rising up to and including the risk of death).

All you have to do is read the descriptions of the egg farms associated with the recent salmonella outbreak, with bird droppings so thick that doors could not open, rodents running rampant in the henhouses, dead birds lying around, and horrible conditions for the birds themselves, to be put off of eating eggs for a long time. You question the methods of the corporate world when explosions and oil spills, that seemingly should have been prevented, contaminate vast expanses of water, destroying communities and livelihoods. Option backdating, sales figure manipulations, kickbacks, bribes, corruption, and Ponzi schemes, the selling of smoke and mirrors, snake oil and other worthless products, market manipulations, false valuations, shell corporations, tax havens, shelters and evasions, and on and on. It can be a bit overwhelming, if you let it.

The Institute for Policy Studies recently conducted research that correlated CEO pay to layoffs. CEOs among “50 companies — “layoff leaders” in the study — that laid off the most employees took home an average pay of almost $12 million in 2009, 42 percent more than the average CEO pay. Most firms — 72 percent — announced mass layoffs during periods of profit, reflecting a growing trend in corporate America: tightening the workforce to increase profit and maintain high CEO salaries.” (CBS News) Corporations seem to be rewarding to a greater extent those CEOs that can layoff the largest number of people. If everyone is laid off though, just who do these corporations and CEOs think will be buying their products and services? The notion is one of passing the buck onto someone else, some other organization or government entity to worry about, as though organizations have no social responsibility, even when the evidence suggests that organizations that minimize or have no layoffs perform better in the long-term (Cascio). The logic in the CEO’s head seems to be that “I am just paid to worry about the health of my organization, not that of society” and boards, apparently in agreement, are rewarding CEOs accordingly. To worry about society, it would require the CEO and the organization to take a long-term view of their business, its overall long-term potential growth, and not be focused on simply the next quarter’s numbers.

Consider Afghanistan, the country and its government, as an organization. In a scathing review of the corruption that is rampant and part of the “normal” operations of the government, the New York Times describes sentiments from decision makers about the need to squash the corruption in the country that flies in the face of everything we know about how people behave – what they want from life, what they expect from the heads of the various organizations to which they belong, and how they are similar to, or differ from other people elsewhere. “Since 2001, one of the unquestioned premises of American and NATO policy has been that ordinary Afghans don’t view public corruption in quite the same way that Americans and others do in the West.” (New York Times) Those sentiments are intellectually shallow and inherently wrong. Those in power in Afghanistan may not view it quite the same way, or they may rationalize that the citizens view it differently, but I can guarantee you the citizens do in fact view it like people all around the world do. They may not feel they can do anything about it, they may be resigned to it, but they resent it as much as the citizens of the USA resent corruption in their own government. (I am sure there are some in the Afghan government who are honest civil servants). And this resentment opens them up to being influenced by those (read Taliban) who promise something better (even though they are likely as corrupt as the government).

The difference between the corrupt power brokers in Afghanistan and those in the USA is not that somehow our western culture is inherently more honest, or that somehow we possess a larger percentage of people with honesty traits. The difference is that with our free press and some regulatory oversight, those in the USA are more likely to get caught and punished, and hence reign in their corrupt instincts, and given the more open, transparent nature of our society, they may find it more difficult to rise to a position of power in the first place. I am not painting a picture of inherent dishonesty being rampant, rather that if you create opportunity for individuals to behave inappropriately, a portion of them will. One role of society is to eliminate the temptation and opportunity for dishonest behavior to the extent we can.

“So you ask why I’m sighing, my son

You must inherit what mankind has done

In this world full of sorrow and woe

If you ask me why this is so, I don’t know”

Peter Yarrow

All of this behavior is in pursuit of profit or personal gain. If one were to talk to a dispassionate outside observer, you could not blame them if they were to question whether there was a better way for societies to provide for their members than those currently in use. The outsider would observe, for instance, ample evidence of organizations and individuals doing their best to maximize their positioning vis-à-vis others as though they were in some kind of race, a race that promises profit, money and personal gain laying just across the finish line.

The underlying question is this: Is the pursuit of profit and personal gain antithetical to the best interests of society as a whole, does it tend to create amoral conditions or conditions in which the average person is not treated justly? Are the conditions generated by profit seeking entities, whether they are organizations or individuals cause them to be inherently in conflict to the best interests of society as a whole?

The short answer is “no”. But it takes some explanation as to why, when we see so much abuse of the profit motive around us. In fact it gets to the point, think of Enron or even the drug cartels in Mexico for instance, where the pursuit of personal profit, personal gain or profit for the organization is clearly detrimental to society at large. Capitalism and democracy is clearly the best mechanism that we humans have devised so far to create conditions which furthers the well-being for large segments of society. But it is too easy to turn to an approach that seemingly simply provides for the greatest good, neglecting individual rights, or alternatively an approach that we should not impinge on the freedom of others to do as they choose, emphasizing individual rights, even if what they choose to do imperils others.

John Rawls (1921-2002) provides a path forward, and in recognition of that he was awarded the National Humanities Medal in 1999 for helping Americans revive their faith in democracy itself. You see, the struggles we are facing on these issues are really nothing new. John Rawls was an exceptional American philosopher who worked in the space of morality and political science.

He allowed that people are born with differing natural abilities and with uneven opportunities being handed them, because of the economic status of their parents, ethnicity, religion etc. His thinking was that “the natural distribution is neither just nor unjust; nor is it unjust that persons are born into society at some particular position. These are simply natural facts. What is just and unjust is the way that institutions deal with these facts.” In other words, yes, people are different and have different opportunities due to circumstance, but that fairness or morality when applied to these differences means that organizations are required to provide equal opportunity regardless, in order to be just. His famous thought experiment describing the “veil of ignorance” illustrated his point. What is critical is that access to differing opportunities is not institutionalized, memorialized into law, or are available simply by social contracts or norms. In the veil of ignorance, the morality of a concept is determined by how it would be implemented in society if no one knew what opportunities they would personally receive under the concept.

The profit motive is moral and it has proven much more effective than the alternatives. It has lifted countless people out of poverty and has greatly improved the lives of billions. The abuse of the profit motive, that is, profit at any cost, to the detriment of an individual or society as a whole is not moral. What Rawls would argue is that regulatory oversight of how organizations and individuals achieve profit is proper to ensure that abuse does not occur. It is up to us as a society to strike the proper balance between oversight, checks and balances that limit opportunity for improper behavior and so much regulation that we choke off the vibrancy of capitalism.

Why are you smiling, my son

Is there a secret you can tell everyone

Do you know more than men that are wise

Can you see what we all must disguise, through your loving eyes

And if you take my hand, my son,

All will be well when the day is done

Peter Yarrow

© 2010 by Jeffrey M. Saltzman. All rights reserved.

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