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Devil's Advocate: Business ethics
It's no wonder CIOs and other executives are so cynical...

By Martin Brampton

Published: Tuesday 03 January 2006

As more and more regulations are put in place to crack down on corporate wrongdoings, Martin Brampton questions whether this will really bring about any changes in how we do business.

Is the phrase 'business ethics' an oxymoron? Two recent quotes from silicon.com's CIO Forum particularly made me wonder.

Speaking at the event last September, JP Rangaswami, global CIO at Dresdner Kleinwort Wasserstein, said: "We are used to CEOs being accountable and going to jail and the same for CFOs. What does a CIO do that is going to get him sent to jail? If you want to be a 'CxO' then you have to play with the big boys and be prepared to go to jail."

Why should it be considered part of the job for senior executives to see themselves at risk of jail sentences? And how do we connect this with the comment made at the CIO Forum by Luke Mellors, CIO at the Dorchester, who said: "If it comes to pass that people think the public sector is seen as more innovative, I think it will only be because they have stifled the private sector with regulation."

This is a curious juxtaposition. Although the context is different, one might almost suppose from Mellors' comment that executives are being jailed because of new forms of regulation. Yet many people have complained that the legal responsibility of company executives is far too weak. When it seems plain that people died in the Hatfield train crash through a mixture of cupidity and incompetence, that is hardly surprising.

In fact, to the limited extent to which executives are being jailed, it is under plain old-fashioned laws to do with basic honesty. In both the government and business sectors, the feeling is that the accountability of people at the top grows ever weaker. Leaders take credit for successes but blame the rank-and-file for most wrongdoing.

Business has shown every sign of adopting the ethics of the 'professional foul', knowingly breaking rules if commercial advantage can be gained. This is, of course, calculated to elicit ever more regulation. Notwithstanding their generally pusillanimous attitude to business, both the US and UK governments have had no alternative to bringing in ever more legislation to combat mounting abuses that undermine consumer confidence and indeed the economy.

We are told with chilling credibility that we face a pensions crisis. Yet the touted solution of us all investing more with the financial services industry is laughable. What financial organisation nowadays commands sufficient trust that we would want to rely on their integrity over a period of several decades? Seeing a tiny minority of executives disappearing to jail is little comfort to those whose pensions have vanished in a flash of creative accountancy.

In some ways, the cynical behaviour of businesses is not surprising. The main motivating factor is competitive pressure, not any absolute criterion. So if breaking rules gains a short-term advantage, later cancelled out by further regulation, that is no bad thing. For the regulation strikes equally at competitors, and the penalties have rarely been sufficient to offset the gains.

Moreover, skills relevant to the effective operation of companies are quite out of fashion. There was a time when at least some of the top executives of railway companies were engineers who knew how to build and maintain track and rolling stock. Nowadays, knowledge of that kind is despised, and to reach top positions, it is demanded that people thrust it into the background, lest they be accused of belonging to the despised tribe of 'techies'.

So does this suggest that the Dorchester's Mellors is right to fear that innovation may have shifted to the public sector? Plainly not, since government is absurdly aping the highly questionable values of business. We are reduced from being citizens with rights to supplicant 'customers' who may be lucky enough to receive some service if we behave ourselves.

We live in a time when much innovation is superficial, and so-called modernisation is based more on prejudice than evidence. But nothing will change while we have a range of political parties all more or less equally aligned to the credo of business and little else.