Business Ethics, Further Abstracted

Previously I wrote a little on business ethics. Not all of you are business people, and I apologize for boring you with more. Some of it might be interesting, though.

The previous piece dealt more with the ethical considerations of small businesses who were just starting out, or trying to get their feet under them. Although most behave like newborn horses trying to deal with the notion of having legs, it is in this formative period that ethical foundations are most firmly established. It is very difficult changing ethical foundations down the road, and the difficulty is not just a matter of old habits dying hard. The difficulty is, unethical behaviour becomes ingrained within the culture of business. And if the head of the business is unethical, in all likelihood the business will be, too, and so too the employees. In fact, if employees are not willing to compromise their ethics they will be labeled a non-team player and removed. Of course, not all non-team players are necessarily ethical.

Eventually a business owner is forced to bring in other forces besides himself to offer wider perspectives and a more diversified skill set. As businesses grow or decide to expand, the landscape of the directorship changes as the playing fields widen. Many owners experience great difficulty releasing their grip. Even owners who believe they do not have a firm grip, letting the company operate at a distance, find that the importance of maintaining tight control in the directorship is a difficult thing to relinquish to what they feel is pure speculation, through trust in other visions.

It is wise to be cautious, particularly where trust in another is concerned. It is an unfortunate truth that very few people, even those of us who consider ourselves absolutely trustworthy, actually are trustworthy. Nobody can claim they are trustworthy until they have been tested, and tested by fire. The wise business owners know this, even if they have not, themselves, been so tested.

Any person hired at a directorship level faces challenges. They may not know the business, yet they must claim to be completely at one with the company’s best interests. How they approach this conundrum is a telling thing about their character. Is it more truly that their own ego and best interests are dominant, or do they have the capacity to put their ego aside? If they do put their ego aside, are they willing to compromise their own ethical principles if they run against the company’s? Is the company better off, or worse off, if they do so?

Different owners will tell you different things. I believe that any company’s strength arises from the character of the people who comprise it. The unethical owner will be willing to remove any director that is not willing to compromise their principles for the good of the company, which really means, only the owner can say what is good for the company, and anyone unwilling to do as they are told, despite any ethical conflicts, is bad for the health of the company. And that translates once again into, you will do bad things if I tell you to.

On this level, however, business owners have become more saavy. Such things are never put in such gross terminology. Instead they will say, this is policy. Or, more subtly, this is fiduciary responsibility. And those things are like law. Interestingly, unethical business owners will use this pseudo-law in both ways, to keep things they do not want from happening, and also to justify something they want. However, the directorship level will not be able to make those determinations. Only the owner can interpret a given thing to be fiducially responsible, or the true meaning of a policy. And it is here that we see how whatever ethics the company began with begins to move out from the individual and into the very fabric of the organization, with the final level of interpretive power, at the top.

Directors, and through them, the employees, can either accept this, or reject this. More often than not, they will “work” it, much like an unethical owner themselves, to their own benefit rather than the company’s. And here we experience the next internal crisis stage of a growing business, the qualities of loyalty, not necesssarily to a person, but to an abstraction, pitted against a sense of personal honor and sometimes ego.

Owner might believe that once their business reaches this stage, very little can bring it down. But the ethics of the business, which is directly tied to employee happiness and loyalty, can very easily cause things to fly apart. In larger businesses such ethical considerations are mitigated by the sheer size of the workforce and departmental separation. But the medium-sized business has no such buffer.

It is also during this phase that businesses begin to develop real internal politics. Business owners, from the beginning, question why employees are being nice to them, or doing certain things. But as the business grows, political maneuvering for position, power and influence become real factors. It is a sad reality, and I have always worked against it, because people appear pathetic like this, and I cannot imagine their true strengths can shine in such an environment. But almost all businesses develop this. It stems from a lack of creativity and imagination.

This politics can become even more pronounced if influences outside the business proper are brought in. Consultants, normally imbued with great influence by owners, can cause havoc in political structures. So can new investors. But businesses who adopt a board of directors, which is a wonderful way to expand the scope and reach of any business, may find that it has a tranquilizing effect upon internal company politics, when the organizational size is small to medium. The employees will feel squelched down, not even considering the possibility of influence for themselves at a board level, and becoming more content within the sphere they inhabit. Larger businesses, however, have plenty of room for politics and the machinations that arise, beneath the board.

But I am more concerned with the ethical considerations that are an influence on the world external from the organzation, and not the internal. The board of directors is rife with such considerations, but we’ll hold off on that level of business for a while.

When there is not board of directors, the ethical heart of the business is a manifestation of the company’s owners own ethical hearts. Even when a business reach a size large enough to warrant subordinate directorships, it is a rare thing indeed that ethics originate from these directorships. But the heart of a business’s ethics will normally be occluded, even at medium size, by policy and procedure, and a formative notion of fiduciary responsibility. Unethical business owners will work to hide their true nature with a smiling veil of customer service, and claiming to orient all actions to the “good” of the customers, while at the same time doing things behind the scenes like using shoddy or misrepresented parts, taking shortcuts on offerings, or luring and trapping, all the while with a beneficent smile.

However, at the medium size, the business owner has be removed far enough away that only the employees are in contact with the customers. Their old tricks of feigning shock at a revalation the customer makes is no longer possible. Their hard line approach of blaming the customer with the customer’s own ignorance or lack of foresight is no longer possible. Instead, company policy, or law, takes it place. This has the effect of maintaining the viability of an unethical business while at the same time giving the front line employees an “out”. After all, they are just people, like the customer, donig their job by following the policies and procedures. This makes it much harder to question the ethics of a company. After all, policies posess an air of legitimacy.

How do you question the ethics of a law? Without breaking it? Barring an angry mob with pitchforks and torches, there are few ways. And here we see how business begin to rise up, away from the normal folk. For they are the game, and we are the willing participants.

Boards and strategic partnerships will be next. It’s where all the good meat is. For better, or worse.