More ethics necessary in business

First published: September 04, 2008

“It is only business.”

This familiar phrase is used far too often when businesspeople decide to act unethically. Yet, it is becoming a tired excuse.

When the $1.15 billion fine against Imperial Tobacco and Rothmans’ Benson & Hedges was announced last week, it was a paltry sum compared to the companies’ actions. For five years, between 1989 and 1994, the two Canadian companies were shipping tobacco and finished cigarettes south of the border. These would be smuggled as cheap cigarettes back through the First Nation Reserve in Akwesasne, in Quebec, and another point near Cornwall, in Ontario.

It is not the first time cigarette manufacturers were caught in this kind of scheme. The Montreal Gazette ran stories in 1998 and 2000 about RJR Macdonald and its efforts to smuggle illegal cigarettes using Canadian tobacco. The company was fined $15 million in the United States. The Canadian government tried to sue for $1 billion, but was unsuccessful.

At the time of the series, both Imperial and Rothmans denied any role.

Beyond the losses in tax revenues to the federal government and two provinces, this is another in a long line of questionable activity by the tobacco industry. This is a well-recorded by authors and journalists, including Philip J. Hilts’ book Smoke Screen, Richard Kluger’s book Ashes to Ashes, David Kessler’s book A Question of Intent and popular movies like The Insider. There is also the powerful documentary Pack of Lies: The Advertising of Tobacco, which reveals the deception of tobacco industry when it comes to marketing to children.

Some non-smoking groups were happy with the final agreement between Imperial, Rothmans and officials, but several were displeased with the lack of jail time for individual executives involved with the incident. Meanwhile, National Revenue Minister Gordon O’Connor said it was the best deal government and police investigators could make with the companies. This gap in perception is disturbing.

In discussing business ethics, what we are really talking about is trust. The relationship between business and ethics must not be passed off lightly. Succeeding in business is mainly about advancing private interests (or corporate/shareholder interests, when it comes to publicly traded firms) through aggressive competition.

By contrast, an ethical life is driven by our duty to others and we are asked to treat others with dignity and respect.

There are those who would say that being scrupulously honest and caring in business is impossible and, in fact, would cost sales, deals, money and promotions.

Socrates said, “Vice harms the doer”. Even if no one ever finds out and we can get away with doing something wrong, the act hurts us more than it hurts the victims.

But in a cynical world, Socrates appears to be talking into the wind. No one pays attention to this kind of thinking any more. Since Gordon Gekko announced in the film Wall Street, “Greed is good. Greed works”, a generation of MBA students felt they had a license to do whatever it takes to make money.

And, this is the heart of the problem. When people lose trust in business, business loses even more. When we think every time a corporation sends out a press release, it is full of lies. When a salesperson tries to help us, we ignore them or shoo them away because we fear their only motivation is to make commission, not help us find the product or service we need. The art of salesmanship is dead.

The two tobacco companies got away with a slap on the wrist. The money is peanuts compared to the billions these companies make. And, the smuggling of cigarettes is hardly subsiding. Last Friday, Akwesane Mohawk Police, Cornwall RCMP and the Canadian Border Security Agency announced it seized 750,000 of illegal cigarettes, 402 kg. of fine cut tobacco and four vehicles worth over $134,000. It was one of numerous arrests made by officers on a weekly basis.

But tobacco is not alone. Tyco, Enron, Adelphia, Global Crossing, ImClone Systems Inc. Qwest, WorldCom are among the larger cases covered by the media. Individually, there is Martha Stewart and Conrad Black, who have faced jail time for improper business practices.

In these cases, the lack of ethics is pretty clear. And, it is far to simple to bash away at these big businesses demanding stiffer fines and harsher laws, along with jail time for everyone involved at the most senior levels.

Yes, all this should be done and more.

Businesses need to take this issue of trust more seriously. It is true; one bad apple spoils the barrel. Not only does it undermine the fundamental economics of the 21st century, but it also deepens the pervasive cynicism, which is a trademark of our world. This distrust spreads like a cancer through all aspects of our lives.

If there is a way out, it will not be legislated. Morals cannot be successfully turned into laws. It is only through the actions of individuals of conscience that will make this change possible. It is going to take a massive change of heart. Sadly, it is hard to see how that will happen.

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