The soul of society

Het schandaal rond Volkswagen laat voor de zoveelste keer zien waar het in het bedrijfsleven in de kern aan schort: ethiek. Columniste Roxane van Iperen interviewde eerder dit jaar professor Maurice Punch. Het werd een gesprek over ethisch zakendoen, leiderschap, het verschil tussen individuele en collectieve moraliteit en over de excessen van het neoliberale business model. Het interview is actueler dan ooit (tekst in het Engels).

For her research on Corporate Responsibility and Business Ethics in Neoliberal Society, Roxane van Iperen had the opportunity to meet an authority on the matter: Professor Maurice Punch of the London School of Economics and Political Science, and King’s College London, former professor at Nyenrode. Specialised in corporate crime and ethics as well as corruption and reform of police organisations, he has been doing research since the 1970’s and wrote numerous books on both topics (Dirty Business: exploring corporate misconduct, Rethinking Corporate Crime, Shoot to Kill: Police, Firearms and Fatal Force.). 

In your book Dirty Business: exploring corporate misconduct, written in 1996, you discuss cases of corporate deviance. That was before the financial crisis hit worldwide. Has the situation changed since then?

'Yes. The business scandals that I deal with in my book occurred within a corporation, within a branch of business or in a specific country. But what we’ve seen in the last fifteen years is entire economies almost being destroyed. I can give you an example, which is Ireland. There is a very interesting book written by a journalist called O’Toole: Ship of Fools: How Stupidity and Corruption Sank the Celtic Tiger. It is the analysis of Ireland's economic debacle, with a lot of data on how the elite - the business elite, the political elite and the regulatory elite - all work together to rip society off. It’s kind of predatory, and what are the stakes?

The stakes are no longer: you have manipulated the market, but: you are destroying the environment

The stakes are no longer: you have manipulated the market. No, the stakes are: you are destroying the environment. The stakes are: you are using unethical methods to test drugs in third world countries; you are buying your way into markets through corruption. It’s about this almost destructive nature of capitalism. Look at the risks and dangers of neoliberal governments, with deregulation, with global markets. Look at what’s happening to society, how societies are being undermined in a way. There is no work for people, the way the environment is being used, the way China is everywhere buying all minerals and resources. So I think the stakes are much higher now and the consequences much deeper.'   The time has come that people have to step back and also think about what the consequences are for companies. For example: Shell having to give compensation in Nigeria for environmental damage. They are not admitting guilt, but they are forced to rethink.

At the same time you see parts of the media and the press are being quite aggressive, depending on the society and how far they are willing to go. What you see in the UK and the US, is, besides much of the media controlled by one man like Murdoch, there are usually one or two pioneering papers like The Guardian and The Observer, and a few of those really investigatory journalists. So fortunately you still have that, but the stakes are now so much higher that it is essential for people in society to ask the right questions about the responsibility of companies. Look at how our medical services are being dictated by the insurance companies and pharmaceutical industries. They are saying which pills you can have, what hospitals you can go to, whether you can have your choice of doctor or not. The power of these people, these companies, is becoming immense. And they are being supported by the governments.

A lot of business people I work with believe there is a conflict between making large profits and being ethical. How do you explain there shouldn’t have to be a conflict?

'I think some businesspeople are rather like the Tea Party in America, who live in the eighteenth century, where they think there should be no rules and where they should be given maximum freedom, which is completely unrealistic. And you can even argue: So you want to break the rules? Are you then going to pay 774 million euros because you manipulated the Libor rents? And that was Rabobank, which was the primary ethical bank in the Netherlands. Actually, enlightened self-interest would have saved you 774 million euros and your reputation.

Corporations have a lot of arguments to not behave ethical

Corporations have a lot of arguments to not behave ethical. They say: it’s a highly competitive market. They say: if the water is dirty, you have to swim in it. They use all of these metaphors, but there is a border where you are destroying the environment, destroying society, where you are producing bad medicine using all these arguments about competition and having to invest in the production costs and so on. But there is something pernicious[1] about what’s going on in business at the moment and in the long term it is not in the advantage of companies at all. It is not in the advantage of customers and not in the advantage of society. So even if you are not being listened to, you have to say it. There have to be people out there being the countervailing force. The government should be one, but isn’t because they are very much controlled and influenced by large corporations. You used to have fairly enlightened left-wing governments, such as when Tony Blair came in and everyone thought it would be different. But they have sold out to the right parties because they want to stay in power and be re-elected. So there is really not much difference between political parties now, left and right. They have all gone down this neoliberal road, which I think is fundamentally wrong.'

If I would replace the word ‘ethics’ by ‘justice’ when addressing these issues, would part of the resentment go away?

'Ethics is about morals, and they don’t like you suggesting they are not moral people. We all consider ourselves to be moral people whereas what we do in our companies might be very immoral; but managers don’t like to think in that way. We have the same thing in policing, where we talk about corruption but police don’t like that. The police call it ‘professional standards’, so it is reframed to state that you have or have not met professional standards, which also covers wider things than just corruption. It might be useful to find another vocabulary to get off ethics, into things like: professional standards which people, businesses set for themselves. What are your individual standards, what are your company’s and watchdogs’ standards? It is true that as soon as you talk about integrity, ethics, people get offended. They may be moral individuals, but look at behaviour in World War II, look at research on how people behave in social situations, experiments in laboratories when good people do nasty things.'

Paul Verhaeghe wrote an interesting article in The Guardian, “Neoliberalism brings out the worst in us’, on how an economic system that rewards psychopathic personality traits has changed our ethics and our personalities. Do you agree? '

The climate now is a bit like: if you are poor, it is your own fault.

The climate now is a bit like: if you are poor, it is your own fault
Prof. dr. Maurice Punch

Prof. dr. Maurice Punch

It is justifying all this rip-off capitalism and bottom line service, which is – again - pernicious. It is what you see at the moment in policing in the UK, cutting back on front-line policing while the police has a very important social task, dealing with the mentally ill and people on the streets, including creating social trust and so on. What you get is complete demoralization and you see it in education, you see it in the health services, in nursing homes. It is almost self-defeating, but they don’t see it and they don’t want to see it and they don’t want to hear the evidence. So it is your task, as academics, as journalists, to shove it under their nose. Is it capitalism? Is it structure? Is it culture? Is it in the nature of leadership of the people who get to the top in business? What are the explanations? And if you are an enlightened company, how do you deal with it?'

Doesn’t a lot of it come down to leadership?

'Exactly. It often goes back to strong leaders, many times the founding leaders. Of course you have to be competitive, of course you have to have shareholder value, of course you have to have continuity. However, they should not be excuses for all sorts of negative practices that not only damage the economy and environment, but are also damaging your reputation, which makes it more difficult for you to do business.

Reputation is everything

Reputation is everything. I think that a lot of clean companies have had, for various reasons, moral leaders or enlightened leaders who saw that there was a good way to do business. Take the Enron scandal (2001, a highly dysfunctional corporate culture combined with the biggest audit failure in history, RvI), where everybody is ripping off the company and the consumers, and there is no counterbalance. So it is very interesting to go back to leadership, and say: where and who are the enlightened entrepreneurs? It is all about how people behave in organisations. And if somewhere in the organisation there is not some sort of moral compass, which leads to policies and a healthy reward structure, then you will go down into a slippery slope.'

A good start would be to have companies look at how they are facilitating this kind of behaviour, and at the structure of the system we work in.

'Yes. If you go back to various explanations like the structure of the industries, for example if you are in America: they work with quarterly returns. Every quarter they look at your short-term work and successive performance; it is wise to look at those kinds of structural features. Then if you look at managers and why they go down this road, you get into collective behaviour. When they are caught with their pants down, they regret their behaviour, say: “I wish I hadn’t done that, but it was because of this and that…” So you go back to their individual responsibility and conscience.'

We can do things at our jobs that we do not consider unethical, until we see it outside the business environment, as individuals. People attacking Bono for tax avoidance, when all the businesses I work with invest a lot of money in tax optimization.

'Exactly. There is a big difference between ethics for an individual and ethics for an organisation and people, leaders, should be aware of that. I used to teach at Nyenrode for 16 years. I presented the MBA students with a moral problem and asked them: what would you do? These students opted for the moral choice because they were approaching it at as individuals. They operate totally different when they go into a social environment. One of the great books on this area is Moral Mazes by Robert Jackall. He did research in American companies and speaks about how western societies are driven by this protestant ethic: if you work hard you will get rewarded. When you go into a corporation, you discover what your boss wants and what your company wants and then, he uses the expression: ‘you leave your conscience at home’. This means you could be a moral person outside, literally, by going to church, doing good things, etcetera. But when you are in the corporation - the same in the military, the same in intelligence services -, you do what the organization asks you to do.'

Or you do not speak up when you see unethical business taking place. You transfer your personal conscious to the organisation.

'Yes, you live in these separate moral compartments, when you walk into the company and do what the company wants you to do.'

We saw it in The Netherlands with the housing corporations.

'And why is it that the housing corporations are different than they used to be? There may have been some double bookkeeping going on in the past, but they used to have an ethic of public service. What neoliberalism has done is opening up Pandora’s box and say ‘the sky is the limit’. You have people in universities in England for example, driven by huge sponsorships from Asia and the Middle East, really big money, as with business schools and law schools, so funding, production and status become dominant. The top person gets around 200.000 pounds a year, but the person who has a business background and comes to rebrand the university gets 350.000 pounds a year. So you see what I mean?

In the Netherlands self-enrichment has become this kind of ideal

In the Netherlands self-enrichment has become this kind of ideal. So all of a sudden it is huge salaries, it is bonuses, it is bringing your friends over as consultants to restructure the reorganisation, it is leasing an expensive car. It has gone beyond self-enrichment. You see it with police chiefs as well: they have started to mirror themselves on people in industry because they rub shoulders with them. So they start to want big cars, wanting to travel expensively. And behind it, they are losing their public ethic, because neoliberalism is always mocking the public services. It is always arguing that private business companies are superior. But look at the past ten years and all the mess they got themselves into: is that really our role model? And isn’t it about time that we got back into an ethic of public service? The housing corporations were for people with low incomes and you are driving a Maserati, aren’t you ashamed of yourself? And it wasn’t just that they were bending every rule in the book to the point of absurdity, but none of the governance controls functioned adequately. How often has the Tweede Kamer, your Parliament, intervened proactively in any scandal in the last 20 years? They are always too late.'

We have gone through this period of so-called ‘toughening up governance’, with the Code Tabaksblat, breaking up the old boys network, more attention for supervisory bodies, etcetera, but nothing has changed because they do not get to the heart of the problem.

'It is always circular: you could argue there should be more governance, but there is no effective governance at the moment because they are freeing up everything. At some point regulations have to be enforced and there has to be more control of business. Genuine supervisory boards and not just friends of friends, limitations to bonuses and salaries. You have to really spell out what is going wrong, because the consequences of their mistakes are so high. It is about the quality of our nursing homes, about the universities, about the environment which we live in and where society is going. It has gone beyond incidental deviance, to institutionalised deviance. The government used to be a powerful instrument, but it isn’t anymore. The corporates have so much power, so they should be the first ones to address.'   'The world really started to change with globalization, deregulation and the rise of new economies. All the BRIC countries (Brazil, Russia, India and China, RvI) have three things in common: they don’t care about environment, they don’t care about human rights and they are all massively corrupt. We are looking at them as the new booming economies, but if you look at them as societies, they are morally empty. Putin spent millions on the Olympic winter games while people were sitting without electricity. Half the Dutch were petrified about MH17 because they were doing business with Russia. Who are you in bed with?'

We are handing over our conscious and our soul?

'Yes. This is about the soul of society; we are regressing. We are not learning from the past, we have got to get back our moral compass. There are good companies out there, and good leaders. And in some situations you have got to do what you have got to do, but it doesn’t make it right. You may be a lonely voice, but it is important to have one.'