A Response To Pru Goward's Views On Ethics And Philanthropy

[On 13 June 2001, Pru Goward published an article commenting on the new ethics in business. Her thesis was that the business of business is business, and that business should not be concerned with social welfare issues or philanthropy, and that it should be guided more by what is lawful than what is right]

In its broad sweep and resonant phrases, Pru Goward’s article (The Age 13 June) about business ethics is a brilliant example of the politics of complacency. If enough of our business leaders take its message to heart, Goward may have succeeded in turning back the ethical clock by a hundred years.

Goward’s argument rests on 3 propositions, all neatly argued and all profoundly wrong.

First she argues that the call for business philanthropy is part of a “long-running campaign against free-enterprise”. Other features of this campaign were the environmental movement and human rights legislation. Really! It is a rare treat these days to see this quaint old argument brought out of history’s attic and polished up for new guests.

Let’s be clear about it: Goward is saying that the environmental movement and human rights legislation were part of a campaign against business, which business almost did not survive. With the benefit of hindsight, we can see that the environmental movement has improved the odds that the human race will survive; with the benefit of hindsight, we can see that human rights legislation has made some progress in improving the dignity of individual human beings, although a lot remains to be done. Blind to these matters, Goward sees only the threat, narrowly averted, that free enterprise might have been slowed in its depredations by these campaigns. It is a matter of record that the same argument was deployed by those who opposed the abolition of the slave trade. The same argument was deployed to oppose the installation of public sanitation in 19th century London. The same arguments are deployed still by some oil companies whose exploitation of indigenous workers has been universally condemned by civilized countries.

Goward’s second argument characterizes the new ethics as “envy disguised as moral repugnance”. This completely fails to understand the nature of ethics and ethical codes. Goward argues that if we prevail on directors to return huge bonuses which were taken legally, then we are on our way back to the Inquisition. Even allowing for hyperbole, and historical ignorance, the argument is disturbingly foolish. The difference between behaving as the law requires or allows, and behaving as human decency requires is the territory of ethics. There is rarely an ethical question about whether to comply with the law; there is rarely an ethical doubt about whether breaking the law is wrong. On the other hand, there can be great ethical questions about whether an advantage, lawfully gained, should be surrendered out of a sense of fairness, decency, propriety or tact. And, as in many business decisions there is even room here for the calculus of self-interest.

But Goward does not seem to get the point. She asks why the directors of One.Tel should give back their bonuses, taken at a time of record losses, so that employees can be paid their ordinary wages and entitlements. Let me suggest a couple of reasons: ethical, not legal.

First, the directors of One.Tel have managed to lose vast amounts of money. Whilst they may be legally entitled to the bonuses, it is hard to see that they earned them in any meaningful sense. On the other hand, the employees undoubtedly earned their wages and entitlements. If there is a contest for the money, they should have it who earned it.

Looking at the matter in utilitarian terms, the hardship to the directors of giving up their bonuses is much smaller than the cumulative hardship to the employees who will otherwise be unpaid as well as unemployed.

There is a sense of right and wrong which we all recognize from an early age. Goward has forgotten what we all learn in the playground: if you own all the toys, you should share them with the other kids, even if there is no law about it. It offends that instinct for decent behaviour that the directors should keep the bonuses so long as the employees are unpaid.

Goward’s related argument is that “it is not clear why governments have ethical obligations to bail out some, but not all, of the creditors”. Good point. But the government introduced the legislation which makes it possible for companies to organize themselves in a way which leaves employees peculiarly vulnerable; and employees are already the most vulnerable creditors of a company in any event. Furthermore, the present government originally jumped into this territory in order to bail out the Prime Minister’s brother: family loyalty is often the source of ethical obligation.

Goward’s third proposition is that business philanthropy is a form of “moral atonement”. She develops this theme with the “sad” fact that some businesses “voluntarily sacrifice profit to demonstrate their moral leadership”. To get this in perspective, the fact is that only a few businesses are true corporate philanthropists. Corporate sponsorship – that part of “modern marketing” which Goward grudgingly approves of – is a different matter. Sponsorship provides the sponsor with a commercial benefit commensurate with its support. It is a business transaction.

Corporate philanthropy is, as Goward fears, an example of moral leadership. What is not at all clear is why moral leadership is a bad thing. True, it is not fashionable with the present government, but the government makes laws, not ethics. Even at the height of the laissez-faire economies, those members of Society who had grown rich on the needs and exertions of others were inclined to give some of it back. They supported charities; they endowed schools and universities; they supported artists, writers and inventors; they gave to the Church. They led by example. Some were motivated by a sense of what is right; by a recognition that after a certain point, inequality of circumstances cannot be condoned whatever the cause. Some were motivated, no doubt, by the uncomfortable fact that great material success is less easily enjoyed in sight of the misery of others.

In the USA, corporate philanthropy is embedded in the ethical framework of business culture. In Australia we have a few outstanding examples, notably Sidney Myer whose business justly prospered in recognition of his ethical standards, which were expressed as much in the way he did business as in his philanthropy.

Goward argues that “Most of us would prefer companies to admit it was good branding or staff retention practice than to pretend it was the fabled ‘giving back’.” I doubt that very much. As a general proposition, a person’s ethical position tends to be uniform: honesty, decency, fairness are ideals which a person either values or not. If they value those ideals in one sphere of activity, they are likely to value them in every aspect of their lives: they are part of what marks the person out as distinct from others. So it is with businesses. A business which shows a genuine sense of moral obligation to Society is unlikely to deal unethically with its employees; on the other hand, a company which acts unethically by dumping toxic waste or fudging its tax return is unlikely to be reliable in business dealings.

Everyone who deals with a company – creditors and employees alike – should be encouraged when they see the company acting ethically as a good citizen and, where possible, showing moral leadership.

Julian Burnside