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Executive Times |
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2006 Book Reviews |
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Profit
with Honor: The New Stage of Market Capitalism by Daniel Yankelovich |
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Rating: |
**** |
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(Highly Recommended) |
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Click on
title or picture to buy from amazon.com |
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Stewardship In his new
book, Profit
With Honor, Daniel Yankelovich offers sound and
practical recommendations on how to turn recent business scandals to good
use. CEOs, senior executives, corporate directors, chief responsibility
officers and corporate governance gurus will all find something of interest
in this book, which is part of the Future of American Democracy Series from
Yale University Press. As both a social scientist of many years and a
corporate director, Yankelovich brings a unique
perspective to this topic, and his concepts and ideas are likely to be respected
by readers. Here’s an excerpt, from the beginning of Chapter 3, “Unenlightened Self-Interest,” pp.
45/48: The current climate of
mistrust poisons the atmosphere. It tempts observers to grow judgmental and
to blame the ethical scandals on an all-encompassing “culture of corruption.”
The tendency to resort to punitive legalism creates a mood in which it seems
natural to hold jury trials in which highly visible CEOs (yesterday’s culture
heroes) face the kind of stiff prison sentences that one ordinarily
associates with rape and armed robbery. L. Dennis
Kozlowski, the former CEO of Tyco, a giant conglomerate with 270,000
employees and $36 billion in annual sales, is believed to have stolen $170
million from the company. He is also accused of hiding unauthorized bonuses
to himself and his chief financial officer, lending himself money from the
company and then forgiving the loans so that they didn’t have to be repaid,
and lying to the public about the company’s finances in order to pump up the
price of the stock. Charged with grand larceny, falsifying business records,
conspiracy, and business law violations, he has received a long prison
sentence. Bernard Ebbers, former CEO of WorldCom, has been convicted of
pulling off an $11 billion fraud leading to the largest bankruptcy in
American history, with employees and investors as the main victims. The
charges against him include conspiracy, fraud, and filing false reports. He
received a twenty-five-year prison term. Richard Scrushy,
former CEO of HealthSouth, was accused of
“orchestrating a huge accounting fraud’ an accusation supported by no fewer
than five former CFOs at the company. He was tried in his hometown of Criminal indictments and
long prison sentences against former culture heroes may satisfy the public’s
craving for justice, but they are unlikely to raise the level of business
ethics. Legalistic solutions and jail terms are not enough to lead to
positive initiatives. A backlash is already setting in, with business groups
claiming that excessive regulation is counterproductive, producing
“unintended consequences that are having significant negative effects on our
economy.” My argument is that instead
of a primarily legalistic framework, we should adopt a primarily normative
one. We should view the scandals as signs of a weakened system of ethical
norms that happens to be particularly severe in the business world, but
which is not confined to business. Taking strong legal action against those
who wantonly break the law can reinforce ethical norms. But it cannot
substitute for them. One reason
for the decline of corporate ethical norms is that the temptations are so
huge. But other reasons are more compelling, such as the phenomenon that the
psychologist Irving Janis terms groupthink.
Groupthink is the tendency of people who live and work in isolated
subcultures to develop distorted views of the world because they talk mainly
with one another, cutting themselves off from the viewpoints of others. In
such isolation, misconceptions go unchallenged, blind spots go unnoticed, and
wishful thinking hardens into received wisdom. Groupthink
is not confined to the business world. It thrives virtually everywhere, even
(or especially) in places like universities that pride themselves on their
independent thinking. But the pressures of groupthink in corporate life are
particularly powerful. (This is one reason that the concept of “corporate
culture” has so much resonance in the business world: its inhabitants are all
too familiar with its workings.) Groupthink
forces people toward uniformity of norms, often at the expense of their own
personal values. We are all familiar with the seeming paradox of executives
who are warm and generous with their families and friends while behaving like
cutthroats in the workplace. They live in two different universes of
values—observing the cultural norms associated with loving families and
close bonds at home, then adopting the norms associated
with competitive success in the marketplace. Nor do they feel torn between
these conflicting values, since they see each as appropriate for its
particular settings and activities. In other
words, once a set of norms takes hold in the corporate world, groupthink
ensures that it will become widespread and influential. If the norms are
unethical (as seen through the lens of the larger society), they can
nonetheless exercise a compelling influence on people who see themselves as
highly ethical. This robs society of its two most powerful constraints on
keeping average law-abiding people on a straight and narrow path: shame and guilt. Shame and guilt are the powerful mechanisms that enforce
social norms—shame is imposed by one’s fellows, while guilt is the distress
that arises from violating an internalized code of conduct. As corporate
norms have shifted to condone behaviors that were once deemed unacceptable,
the kinds of behavior that would inspire shame and guilt have likewise
shifted. Yesterday’s executive might have suffered guilt from cooking the
books; today’s might feel shame at showing insufficient tough-mindedness in a
business deal. Which current business
norms lead an executive to commit outrageously unethical acts while
continuing to maintain a self-image free of shame or guilt? If we understand
what these destructive norms are and why they exert such a strong influence
on our culture, we will have taken the first step toward stopping the
scandals; we will have identified the norms that have to change. Yankelovich doesn’t shy away from the importance and
value of profit taking, unlike other social reformers. His call to
stewardship involves not compromising between a free market and a civil
society; we need both. Profit
With Honor will stimulate the thinking of all readers. Steve Hopkins,
October 25, 2006 |
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The recommendation rating for
this book appeared in the November 2006
issue of Executive Times URL for this review: http://www.hopkinsandcompany.com/Books/Profit
With Honor.htm For Reprint Permission,
Contact: Hopkins & Company, LLC • E-mail: books@hopkinsandcompany.com |
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